Ivory Act 2018 (Meaning of “Ivory” and Miscellaneous Amendments) Regulations 2024
Baroness Hayman of Ullock Excerpts(2 weeks, 4 days ago)
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Baroness Hayman of Ullock
That the Grand Committee do consider the Ivory Act 2018 (Meaning of “Ivory” and Miscellaneous Amendments) Regulations 2024.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lords, this instrument amends the Ivory Act 2018 to extend the prohibition on dealing in ivory from an elephant to include ivory from the following four magnificent species: common hippopotamus, killer whale, narwhal and sperm whale. Walrus was included in the original consultation. However, the SI does not include walrus as it will continue to be protected under existing regulations on trade in seal products.
The UK is committed to protecting these species, whose conservation status may be threatened by the trade in their ivory. All four species are listed under the Convention on International Trade in Endangered Species of Wild Fauna and Flora, which regulates their trade internationally. Hippopotamus and sperm whale are listed as vulnerable on the International Union for the Conservation of Nature red list.
The objective of this instrument is to help conserve populations of the four additional species. The Act will prohibit commercial activities concerning trade in their ivories in the UK. This will prevent transactions involving items made of ivory from these species contributing to markets, which then create a demand for ivory, driving poaching and the illegal trade.
Extending the ban to these species will also make compliance and enforcement of the Act simpler and more effective, and will reduce opportunities for laundering ivory. It sends a strong signal that ivory should not be seen as a commodity for financial gain or as a status symbol.
This instrument also amends the Schedule to the Ivory Prohibitions (Exemptions) (Process and Procedure) Regulations 2022 on prescribed institutions to correct the names of some of the institutions prescribed under the Act. Lastly, it amends the Ivory Prohibition (Civil Sanctions) Regulations 2022 to make consistent the references to service of notices relating to civil sanctions. I beg to move.
The Earl of Effingham (Con)
My Lords, His Majesty’s Official Opposition are in favour of any measures to preserve the rich tapestry of species on this planet, particularly those threatened with extinction. However, we have some concerns, not with the objective of this SI and the Ivory Act more broadly, but with some of the consequences of its drafting.
The SI extends the definition of ivory to include whale teeth and narwhal tusks. Although we agree with the banning of selling of modern items manufactured from these sources, there is no modern market for whale teeth or narwhal tusks. Old pieces of art, such as inscribed sailor’s knives or mounted narwhal tusks, will fall foul of these regulations and will have to be landfilled.
As we have heard already from my noble friends Lady Rawlings and Lord Carrington, there is virtually no import or export trade in whale teeth or narwhal tusks. In 2022, there were no commercial imports of sperm whale teeth, and just two teeth were exported. Narwhals are not on the International Union for Conservation of Nature’s endangered list.
While it could be argued that this legislation is an important aspect of our soft power, it is debatable whether this soft power has worked. It has not had much influence on the EU, which bans the import and export of ivory but allows it to be traded within the EU. Will the Minister please clarify to the Committee what outcomes she foresees from this decision? Will she outline why these measures have been implemented and say whether she can see that they may have unforeseen and unintended consequences?
Baroness Hayman of Ullock (Lab)
My Lords, I thank all noble Lords for their contributions to the debate and for raising important points. As described earlier, extending the Act to these four species demonstrates UK leadership in support of international conservation efforts, setting an example at home to encourage similar actions globally. It makes the existing ban more effective and adds protections to four species that will complement those already in place internationally under the Convention on International Trade in Endangered Species.
I was involved with this the first time around, back in 2018, and, as the noble Baroness, Lady Bakewell of Hardington Mandeville, said, it seems to have taken an awful long time to get here. I wonder whether, like me, she had a stuffed narwhal on her desk—which my grandchildren have now chosen to play with. From our perspective, it is good to see these regulations in front of us.
This measure is part of a comprehensive package of UK leadership to tackle the illegal wildlife trade and reduce poverty, including through our Illegal Wildlife Trade Challenge Fund, which has allocated £57 million to 173 projects across 60 countries. These projects are reducing demand for illegal wildlife products, strengthening law enforcement, establishing effective legal frameworks and promoting sustainable livelihoods.
I turn to answer some of the questions, and hope that we do not have another vote in the middle this time. I will look first at the consultation and stakeholder engagement that took place ahead of this. There was a call for evidence in 2019 and a public consultation from 17 July to 11 September 2021 on extending the Act to other species. The consultation received 997 responses and a clear majority supported an extension to these species. The previous Government published their response to the consultation in May last year.
There is a conservation risk to each species as exhaustible natural resources, which includes the trade in their ivory, both legal and illegal, and how this relates to their conservation status and other threats that they face. There was a clear demonstration in the proportion of respondents who supported this option and the comments submitted that commercial exploitation of species that are endangered or accepted as being in need of protection from the threat posed by trade in their parts violates public morality. So that was the consultation and its outcomes.
The noble Lord, Lord Carrington, asked specific questions around the effectiveness of the Act. One was how many elephants had been saved to date. This is a cross-cutting policy, so it is not possible to say what impact the Ivory Act alone has had. For example, the Illegal Wildlife Trade Challenge Fund is a grant scheme that funds actions to tackle illegal wildlife and poverty reduction in developing countries. These projects contribute to reducing the demand for illegal wildlife products, strengthening enforcement and establishing effective legal frameworks, and promoting sustainable livelihoods through innovative approaches, partnerships and evidence-based interventions that protect endangered species, including elephants. So I cannot be specific, but it does play a role.
The noble Baroness, Lady Bakewell, asked for more information about why we are not extending it to walrus. As I said, walrus were included in the original consultation but are not now, because they continue to be protected under existing regulations on the trade in seal products. Under these regulations, seal products, including walrus ivory, can be imported and placed on the UK market for sale only in very limited circumstances and subject to strict conditions. You can bring seal products to Great Britain and sell them only if they qualify under the Inuit and other indigenous communities exemption and have a seal catch certificate. This is an attestation document that proves that the item is exempt and that the seal products are certified as coming from a traditional hunt carried out by the Inuit or other indigenous communities. The hunt must be carried out for and contribute to the subsistence of the community, and must consider the welfare of the animal. I hope that goes some way towards answering the question from the noble Baroness, Lady Rawlings, around the fact that we work with indigenous communities on these pieces of legislation.
Further questions from the noble Lord, Lord Carrington, were to do with trade and why we decided to add these species. The main problem is that international trade in these species needs to be regulated to ensure that it does not threaten the species’ survival. The UK is also a net exporter of ivory from these species, and we are concerned that it fuels global demand and the market for these ivories.
Lord Carrington of Fulham (Con)
The Minister is, I think, getting slightly confused about what I asked. I was not asking whether ivory is being exported; clearly, it is not now, because it is banned. But narwhal tusks are not banned and there is no evidence that they are being exported or imported. Also, the evidence we have is that, in 2022, no sperm whale teeth were imported and two were exported. What I am saying is that, distinct from the ivory market—we can probably dispute that—the products covered specifically by this SI are exported or imported in such small quantities as to have no effect on international trade at all.
Baroness Hayman of Ullock (Lab)
I thank the noble Lord for his comments. I still think that there are issues around the fact that these species are endangered. We should be covering them in existing legislation that could have an impact on them in future. It is important that that is covered.
The noble Lord asked about exemptions, so let me come on to them. If an item is 100% ivory, it can be kept or follow the exemptions in Section 2 of the Act, of which I am sure he is very aware. Several other countries have closed their domestic ivory markets so, again, it is not just the UK looking at this as an action.
I should say that I have some information about narwhal ivory, which has just come through—apologies. In the 10 years between 2009 and 2019, commercial imports and exports of narwhal ivory totalled 33 items, while those of sperm whale ivory totalled 203 items. I hope that helps clarify the matter.
It might be helpful, as this issue came up a bit, for me to remind noble Lords what the exemptions to the ivory ban are. There are five exemptions, which will apply to all species once this instrument has gone through: musical instruments made before 1975 with less than 20% ivory by volume; items made before 3 March 1947 with less than 10% ivory by volume; portrait miniatures made before 1918 with a total surface area of no more than 320 square centimetres—and we have another vote.
Baroness Hayman of Ullock (Lab)
My Lords, I was just going through the exemptions to the Ivory Act and had just finished talking about portrait miniatures. Also exempt are items a qualifying museum intends to buy or hire and items made before 1918 that are of outstandingly high artistic, cultural or historical value. I mention that because it has come up quite a lot during the debate, and for clarification because it is some years since the Act came into play.
The noble Lord, Lord Trees, asked a specific question about people going on holiday, small items and so on. This fits with the question from the noble Baroness, Lady Rawlings, about indigenous peoples. To be clear, the Act bans imports for the purposes of dealing. Individuals who are visiting communities outside the UK can purchase items from them directly and bring them into the UK as personal possessions as long as they meet the requirements under CITES. That provides clarification on that point.
With that, I hope I have answered most questions; I will check and come back to noble Lords if I have not.
The Earl of Effingham (Con)
I think the Minister said that narwhals are an endangered species, but we believe that they are not endangered; there are around 80,000 mature adults in their population. If the Minister could come back to us at some point, it would be much appreciated.
Baroness Hayman of Ullock (Lab)
I clarify that all four species being added to the Act are listed under the Convention on International Trade in Endangered Species of Wild Fauna and Flora. I hope that helps to answer the noble Earl’s question.
Water (Special Measures) Bill [HL]
Baroness Hayman of Ullock ExcerptsMonday 4th November 2024
(2 weeks, 5 days ago)
Lords ChamberRead Full debate Water (Special Measures) Bill [HL] 2024-26 View all Water (Special Measures) Bill [HL] 2024-26 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 17-III Third marshalled list for Committee - (31 Oct 2024)
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lords, I thank the noble Lord, Lord Roborough, for raising this important issue and tabling Amendment 70, which speaks to the administration of fines. I too welcome the noble Baroness, Lady Bakewell of Hardington Mandeville, back to her rightful place. I hope that she is now completely recovered, but I also congratulate the noble Earl, Lord Russell, on doing such a sterling job in her absence.
I emphasise that the money from civil penalties imposed by the Environment Agency and fines issued by the court go to the Government’s Consolidated Fund. This is in line with other enforcement regimes under the Regulatory Enforcement and Sanctions Act 2008. On the use of penalty funds, the water restoration fund, which launched in April this year, is reinvesting water companies’ environmental fines and penalties into projects to improve the water environment. Up to £11 million of funding from fines and penalties accrued since 2022 was made available on a competitive basis to support a range of water restoration projects. Defra is continuing to work with His Majesty’s Treasury regarding the reinvestment of water company penalties and fines, because while the Budget has of course now been announced, decisions have not yet been taken on all departmental spending.
I assure noble Lords that there are existing procedures in place to ensure that customers are reimbursed for poor performance. As the economic regulator, Ofwat sets specific performance targets for water companies and, where these are not met, companies must reimburse customers through lower water bills in the next financial year. I will give an example: as a result of Ofwat’s annual performance assessment process, it is requiring 13 companies to return £157 million to customers for underperformance in the financial year 2023-24.
Ofwat also has powers which ensure that companies return money to customers for failings related to specific breaches. For example, in 2019 Southern Water returned £123 million to its customers as a result of an Ofwat enforcement case. I hope that the noble Lord is therefore content that this amendment is not necessary, as we believe it would duplicate existing protections.
Lord Roborough (Con)
My Lords, I am grateful for the comments from the Minister. It is perhaps not the fullest reassurance that I was looking for about the future destination for fines and penalties. Amendment 70 is, by its nature, a probing amendment and I look forward to further discussions with the Minister.
“(11) Section 5(6) also applies for the purposes of this section.”Member’s explanatory statement
This amendment provides that Clause 6 applies to water supply and sewerage licensees only in relation to their licensed activities.
Lord Roborough (Con)
My Lords, I shall speak to Amendment 73, moved by the noble Earl, Lord Russell. I thank the noble Earl, the noble Lord, Lord Sikka, and the noble Baroness, Lady Jones of Moulsecoomb, for their contributions.
On these Benches, we have grave concerns about these amendments. While it is important that the water sector operates with integrity, we fear the amendments may have unintended consequences that could destabilise the industry and ultimately be detrimental to the public and the environment.
On Amendment 73, the power to revoke a water company’s licence is one of great consequence and must be exercised judiciously. An abrupt removal of a licence, without sufficient consideration of the ramifications for infrastructure and service continuity, could leave customers vulnerable and lead to service interruptions. It would also be a very substantial barrier to private sector investment. Investors must be able to have confidence that they will be able to enjoy returns on their investments without elevated risk of loss of licence. Should such an amendment be included in this Bill, it would lead to a much higher cost of capital for the industry and higher consumer bills as a consequence. While we appreciate the intent to hold companies accountable, we suggest exploring whether there are more balanced approaches to achieving compliance, without risking instability.
Amendment 97 raises further concerns. The possibility of cancelling debt in the event of special administration proceedings could create moral hazard. This amendment, while aiming to protect consumers from the fallout of financial mismanagement, might inadvertently incentivise risky financial behaviour by companies under the impression that their debts could be forgiven in times of crisis. The bankruptcy route already allows debt to be repaid in part or renegotiated in an orderly manner, respecting the contractual rights of all creditors. This would not be desirable.
As for Amendment 98, this is a matter of significant complexity. We must not overlook the potential costs and operational challenges associated with such transfers. The water industry requires immense resources, infrastructure investment and technical expertise. A shift to public ownership would strain government resources and create operational challenges. We support the Government in not wishing to see a return to public ownership of the industry.
I wish to address Amendments 99 and 102. These amendments would empower the Government to put companies into special administration if they breached certain environmental conditions or held criminal convictions. While we wholeheartedly support stringent environmental standards and rigorous compliance, it is essential that these mechanisms do not inadvertently undermine the ability of water companies to continue their core operations. The amendments could place companies in special administration for relatively minor infractions, which may not warrant such a severe response.
We must be careful not to adopt measures that could disproportionately impact employees, customers and investors who depend on the water industry. I thank noble Lords for tabling these amendments and regret that we cannot support them—and could not even before the noble Baroness, Lady Jones, gave her views on my party.
Baroness Hayman of Ullock (Lab)
I thank noble Lords for the suggested amendment in relation to water company ownership.
I come first to Amendment 73, in the name of the noble Earl, Lord Russell. The intention of the amendment is to provide Ofwat with the power to remove a water supply or sewerage licence with six months’ notice. I want to emphasise that the Government’s priority is to ensure that customers have a safe and stable supply of water. We are concerned that the proposed amendment could jeopardise this.
There are already established measures to replace an existing sewerage undertaker, by way of licence removal, under certain scenarios. For example, while it is true that an undertaker’s appointment is made for a period of at least 25 years, I can reassure noble Lords that it is not true that appointments cannot be terminated until 25 years have passed. If an undertaker cannot carry out its functions, Ofwat has powers to terminate the appointment, provided that a replacement can be identified and that the undertaker consents.
Baroness Jones of Moulsecoomb (GP)
Before the Minister sits down, I had better clarify: I want another Labour Government only if I cannot have a Green Government. On the issue about having monopolies where market forces do not operate, can she see that there are inherent problems in having monopolies on something such as water—or any public service that we all need?
Baroness Hayman of Ullock (Lab)
I completely get the noble Baroness’s point. I would hope that, when we do the review, we look completely across all the issues to do with a water company, including the way it behaves because of the way it is set up, and that that should be part of any consideration. By the time we have reported, I am sure the noble Baroness will be very happy to have another Labour Government.
Earl Russell (LD)
I thank the Minister for her responses on this group. Mine was a probing amendment and I appreciate her response. I fully recognise that there would be issues with six months as a period, but I think it is important that we have a discussion about the power of revoking licences. I appreciate that the Government are keeping that under review. On Amendment 97, I appreciate what she says about the courts and their powers in all this: that was a welcome response. On Amendment 98 on the public ownership of water companies, I think her response to the noble Lord, Lord Sikka, giving those figures and calculations, was useful in moving that debate forward. Obviously, there are costs involved in that and in the Government supporting failing water companies as well. I know that these are difficult matters. Of course, on our Benches we want to have public ownership of water companies, and we will continue to support that, but I thank the Minister for her inclusive responses and I beg leave to withdraw the amendment.
(a) it is held by a water undertaker or sewerage undertaker, or(b) it is held by a water supply licensee or sewerage licensee, within the meaning of the Water Industry Act 1991, for the purposes of the activities to which its water supply licence or sewerage licence relates;”Member's explanatory statement
This amendment provides that Clause 7 applies to water supply and sewerage licensees only in relation to their licensed activities.
“but, in relation to water supply licensees and sewerage licensees, includes those functions only so far as performed in respect of the activities to which their licences relate.””Member’s explanatory statement
This amendment provides that Clause 8 applies to water supply and sewerage licensees only in relation to their licensed activities.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, it is a while since I have taken part in proceedings where a stand part debate has been used to try to remove clauses of a Bill. On our Benches, our departed colleague Lord Greaves was very fond of this measure to enable him to make detailed speeches railing against the Government of the day’s proposed legislation.
The noble Lord, Lord Roborough, has set out his case eloquently for why he believes that Clauses 10 and 11 should be removed from the Bill. Clause 10 refers to England, and Clause 11 offers the same powers to Welsh Ministers. Both clauses are complex and deal with the recovery of losses. I respect the motives of the noble Lord, who appears to be on the side of the water industry and the bill payers at the same time. However, when 15,000 people from around the country are prepared to give up their Sunday to come to London to join a protest against the action of the water companies, I fear that he may have misjudged the mood of the water company bill payers. The public are rightly furious that, while their water and sewage bills have increased, the infrastructure has not been improved, but directors’ bonuses and shareholders’ dividends have not reflected the poor service that some water companies have given. I say “some” water companies, because some are performing well and do meet their targets; unfortunately, it is the ones that do not do so that we hear about on a continual basis.
Removing from the Bill the two clauses, which would have seen some balance being provided to enable costs to be recovered from those water companies that have failed to deliver on their Ofwat targets, is to give a signal to bill payers that the poor service that they have received is acceptable. If Clauses 10 and 11 are removed from the Bill, there would be no clarity on what is happening or how recompense would be achieved. I am therefore afraid that, on the Lib Dem Benches, we are unable to oppose these clauses standing part of the Bill.
Baroness Hayman of Ullock (Lab)
My Lords, I thank the noble Lord, Lord Roborough, for his interest in Clauses 10 and 11 and also thank the noble Baroness, Lady Bakewell, for her support for them standing part. A special administration regime—or SAR—enables a company that provides vital public services to be put into administration in certain circumstances to ensure that the public service will continue to be provided pending rescue or transfer to new owners. An SAR would be required only when there is evidence that a company is insolvent or in serious breach of its statutory duties. It is the ultimate enforcement tool in Ofwat’s regulatory toolkit and, as such, as I said in the last debate, the bar is set high.
Although government has had the powers to place water companies into special administration for over three decades, it is important that we regularly update legislation to reflect modernisation of law and experiences in other sectors. If a SAR occurs, government funding would be required to cover the costs of a special administration, including both operational and capital expenditure—for example, ensuring that statutory environmental obligations were met, as well as for paying the cost of the special administrator.
In the unlikely event that the proceeds of a sale or the repayments agreed as part of a rescue at the end of a SAR are insufficient to cover repaying government funding, there is a risk of a funding shortfall. Clauses 10 and 11 introduce a flexible power, allowing the Secretary of State and Welsh Ministers to recover any shortfall in funding in a manner that is appropriate to the circumstances. They allow for modification of water company licences to recover any shortfall in financial assistance provided in a water industry SAR. These clauses will align the water industry SAR regime with the energy sector. Without this power, there is a risk that taxpayers will foot the bill for the water industry SAR.
The Secretary of State and Welsh Ministers will be able to decide whether or not they should use this power and the rate at which the shortfall should be recovered from customers. This will include which group of customers it should be recovered from—for example, all water company customers, a subset of the sector, or only customers whose water company went into a SAR.
Although the power is flexible, the design of a recovery mechanism will be subject to consultation with all relevant sector stakeholders. The Government must consider these views and explain our approach accordingly. If a SAR occurs and this power is ever required, this will allow a decision to be made, and be consulted upon, on what the fairest cost recovery option is, based on the evidence and circumstances at the time.
I reiterate that the shortfall recovery mechanism does not mean that customers end up paying for water companies’ failures. Any intervention that would increase customer bills would be considered very seriously and as a last resort. In the first instance, the Government would seek to recoup all the funds spent on financing the SAR through the sale or rescue of the water company after the administrators’ conclusion. This new power would be utilised only if it were not possible to recover what the Government spent funding the administration. If there was a shortfall, Ministers would then decide whether they felt that it was appropriate to exercise this power.
This power would allow the Secretary of State to decide, subject to consultation, the rate at which the shortfall should be recovered from customers and which group of customers it should be recovered from, as I just mentioned. This will ensure that the shortfall recovery mechanism is always implemented in a way that ensures that costs are recovered fairly. I hope that noble Lords agree that this power is essential to protect taxpayers’ money in the event of a SAR, and that these clauses should stand part of the Bill.
Lord Roborough (Con)
My Lords, the noble Baroness, Lady Bakewell of Hardington Mandeville, may have misunderstood me. Far from speaking in favour of the water industry, I am seeking additional protection for the consumer and companies that have not fallen into a SAR.
The Minister has not fully reassured me that the powers in this clause are necessary. The Government perhaps should stand as guarantor, not the innocent. That this measure is very unlikely to be used is not in itself reassuring to me, but at this stage I will not press my opposition to the clauses standing part.
Water (Special Measures) Bill [HL]
Baroness Hayman of Ullock ExcerptsWednesday 30th October 2024
(3 weeks, 3 days ago)
Lords ChamberRead Full debate Water (Special Measures) Bill [HL] 2024-26 View all Water (Special Measures) Bill [HL] 2024-26 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 17-II Second marshalled list for Committee - (29 Oct 2024)
Lord Blencathra (Con)
My Lords, on behalf of my noble friend Lord Bethell, I am pleased to move Amendment 52 in his place. This amendment seeks to increase and improve the monitoring undertaken by water companies after an emergency overflow.
The amendment is quite straightforward. It makes the case that, where there is a discharge from an emergency overflow, the undertaker must regularly assess the environmental health of that inland water within 500 metres downstream of the overflow. My noble friend then suggests that the methods used to make assessments under that subsection must include the use of fish counters or other methods of accurately monitoring the fish population. I accept that there may be a weakness here because, unless one knows what the fish count was before the overflow happened, it may be difficult to come to a conclusion as to the number of fish which should be in the river after the overflow has taken place. The undertaker must also prepare a report on the results of these assessments on a quarterly basis and submit it to the authority, and, after having done so, the undertaker must publish the report within 30 days. In addition, in accordance with everything else which has been said in debates tonight, the information must be in a form which helps the public to readily understand it, be published in a way which makes it readily accessible to the public, and be published in the undertaker’s name.
For those reasons, we on these Benches want to protect our rivers and restore the health of those rivers that have been seriously affected by pollution. Thanks to our efforts in government to drive up monitoring, 100% of emergency overflows are now monitored, and as such, we are able to access information about all emergency overflows that occur. This was a seriously transformative step forward compared with the situation we inherited in 2010 but we accept the need to go further, and we support better monitoring of both overflows and of the overall health of rivers themselves.
With the level of monitoring achieved under the Conservatives, it is now possible to learn far more about these incidents and therefore to take action to prevent them happening again. However, this does not mean that water companies are now taking enough responsibility to publish the results of this monitoring and to report their findings so that they can be held to account.
This amendment focuses on an area that the Bill does not address and ensures that the health of our rivers, not just the extent of pollution incidents, is a central component of the Bill. The inclusion of monitoring 500 metres down the river will give a real insight into the impact that an overflow is having on the overall health of a river over time. This monitoring will ensure that water companies cannot downplay the damage and leave the natural area to be ruined; instead, they will have to take a responsibility for a wider area that these emergency overflows can impact.
We on these Benches support this amendment in its intention to ensure that regular reporting is done so that the public are able to access up-to-date information on the overall health of our rivers beyond the immediate aftermath of any emergency overflow.
I know that many amendments in the previous group were related to monitoring of emergency overflows, and, although this amendment specifically relates to river health, I am sure there will be cross-party support for much of the previous group and for this amendment to ensure that water companies can be held publicly accountable for their action after emergency overflows.
I hope the Minister will take the concerns of my noble friend Lord Bethell as expressed in this amendment seriously and will consider it. Once again, we feel this is a timely opportunity to deliver a positive reform in the Bill today rather than waiting for the wider reform which the Government have proposed. I beg to move.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lords, I thank the noble Lord, Lord Bethell, for raising this important issue and tabling Amendment 52, and the noble Lord, Lord Blencathra, for moving it in his absence. I start by reassuring him that I always take the concerns expressed in this House very seriously. I think that we agree that understanding the impact of sewage discharges on the environmental health of rivers is vital.
Clause 3 requires water companies to provide information on the frequency and duration of discharges from emergency overflows. These measurements will enable regulators and the public to see, in near real time, when a discharge from an emergency overflow has occurred, and how long it lasted for. This will, in turn, enable resource to be directed to investigate the cause as well as the impact of a discharge, and will enable the regulators to take enforcement action if it is required.
However, this is just one measure that the Government will use to better understand the impact of sewage entering our waterways. New continuous water quality monitors will be installed at storm overflows from 2025 to continuously measure the impact of sewage discharges on the receiving watercourse. The information gathered from these monitors will be key in supporting fish populations. Requiring the installation of additional fish counters downstream of emergency overflows may require additional structures in the watercourse and may impose additional costs on water companies and their customers.
This does not appear to be proportionate, given that emergency overflows should be used on only very limited occasions. The Government will therefore not accept this amendment. However, I hope that I have been able to reassure the noble Lord that the Government are using this Bill to enable quicker action to be taken to investigate discharges from emergency overflows.
Lord Blencathra (Con)
I thank the Minister for that response. I regret that she is not accepting the amendment but, if we accept her assurances that the monitoring of overflows will be thorough, that may negate the need for further monitoring downstream. I like to think that we will check the water further downstream than just within a short distance of the storm overflows, because what happens downstream is terribly important. I recall when the creamery at Appleby burst and flooded the River Eden. The damage was considerable for a couple of miles downstream. Checking what happens right beside the factory or the storm overflow is one thing, but it is important that we check downstream when the money allows. I beg leave to withdraw the amendment.
Lord Sandhurst (Con)
My Lords, my Amendments 105 and 106 were commencement blocks when laid that sought to ensure that the Government published an assessment of the justice impact of the Bill before it could come into effect. I thank the Government for publishing their impact assessment, which makes it clear that there will be a small additional burden on our already strained prison estate as a result of the custodial sentences included in the Bill. I am satisfied that the Government’s impact assessment covers the justice impacts of the Bill, so I will not press my amendments.
That said, this is a good opportunity to raise the question of the Government’s priorities. We know the burden on our prisons will be small but is it not the wrong priority to sentence water executives to up to two years’ imprisonment at a time when the Government are releasing violent criminals early? Equally, there is the question of necessity. The Government’s own impact assessment states:
“Defra assumes there could be one case every two years with the maximum sentence of a two-year imprisonment based on the fact there has been four historic cases”.
So is this provision truly necessary? I hope that the Minister will be able to respond to these concerns in her reply.
Baroness Hayman of Ullock (Lab)
My Lords, I thank the noble Lord, Lord Roborough, for introducing this small group of amendments, and the noble Lord, Lord Sandhurst, for his amendments on the issue of justice. I thank both noble Lords for their interest in ensuring that the Government are fully considering all the impacts of the Bill, on both the environment and the justice system.
Amendment 57, tabled by the noble Lord, Lord Roborough, relates to the reporting of impacts on environmental pollution. This Government share the noble Lord’s concerns that the number of water company pollution incidents has not reduced in the last few years. It remains unacceptably high. That is why the Bill seeks to increase accountability for water companies and their executives where they pollute the environment.
The Bill will enable automatic and severe fines for certain pollution offences, making it possible for the regulators to take swift action where it is clear that an offence has been committed. The Bill will increase transparency around pollution incidents by enabling the public and regulators to see where and how often emergency overflows are discharging and, as discussed in previous groups, by requiring water companies to publish pollution incident reduction plans on an annual basis. As I set out on our first day in Committee, the Bill provides Ofwat with legal powers to ban bonuses where companies fail to meet standards on environmental performance, financial resilience, customer outcomes or criminal liability. Collectively, these measures will strengthen enforcement and disincentivise pollution incidents.
Lord Sandhurst (Con)
My Lords, this is a group of five amendments. Amendment 60 would reduce the maximum custodial sentence to 12 months. Amendment 61 would remove the word “connivance” in respect of a possible offence. Amendment 62 would prevent liability for those purporting to be officers of water companies. Amendment 65 would prevent individuals who impede investigations receiving custodial sentences, and Amendment 66 would reduce the maximum custodial sentence to 12 months.
We on these Benches have been clear that we support tougher measures in order to hold water companies to account. However, to put water executives in prison during a time that the Government have admitted is a time of crisis for prisons because of overcrowding is to us the wrong priority. I am concerned, as I am sure so many are across the Committee, that dangerous individuals are being released from prison having served less than half their sentence. I draw attention to the fact that this Government appear more focused on putting water executives in prison than on keeping violent offenders in, and that seems to be a wrong priority.
In the latest release, 1,100 prisoners were released, and although the scheme claims that none of those offenders are guilty of serious violence, sex crimes or terrorism, this is true only of their primary conviction. An additional 1,800 were released earlier in September. Some mistakes were made, as offenders were released who were not supposed to be. That is the context.
Amendments 60 and 66 in my name seek to reduce the maximum custodial sentence that a water executive can receive from two years down to 12 months. As it stands, prison resources are seriously overstretched, and it seems to be the case that the Government in this Bill are wrongly prioritising those resources. While I do not think that custodial sentences are the right way forward, if the Government insist upon them then can they at least reduce the maximum custodial sentence to 12 months to prevent further overstretching? That would have the added advantage of ensuring that these cases would not need to be heard in the Crown Court under the new provisions, which would prevent further strain on our court backlogs.
The Government’s own impact assessment admits that this measure will put a further burden on our prison services. While it is certainly necessary to hold water executives to account, I believe my other amendments address more appropriate penalties. There is no doubt that the pollution of our rivers is a serious issue. Measures to ensure that those who break the rules are dealt with, and that those who work for water companies do so properly, are necessary. However, these measures appear to be too severe at a time when prisons cannot handle further pressure. Can the Minister set out the Government’s position on releasing domestic abusers, only to put individuals who work on the boards of water companies into the same cells?
In the same vein, Amendment 65 seeks to prevent a custodial sentence from being placed on an individual who has impeded an investigation. While that is indeed a serious issue, our prisons cannot handle further pressure.
Amendment 61 in my name seeks to remove “connivance” as an offence in the Bill. We have tabled the amendment to probe the use of the word “connivance” in this Bill specifically. We understand the use of that word, which exists in other legislation, such as the Theft Act 1968 and, more recently, the Bribery Act 2010. However, we pose the question to the Government as to why they have used it in this scenario. Under what circumstances do they envisage using it? Can they provide the Committee with real-world examples of situations where it will be used?
Amendment 62 seeks to remove the offence in respect of individuals who purport to be executives. This simple amendment would ensure that only those who were actually acting in executive roles could be held responsible for the mistakes of the water company.
Baroness Hayman of Ullock (Lab)
I thank the noble Lord, Lord Sandhurst, for his interest in sentencing powers for obstruction investigations and for all the suggested amendments covered in this group.
Amendments 60 and 66, tabled by the noble Lord, both look to reduce the maximum custodial sentence available for those convicted. The obstruction of investigations by the regulators is already an offence, but that has not stopped companies from blocking the regulators’ investigations. For example, in 2019 the Environment Agency prosecuted a number of individuals at Southern Water for removing evidence from the possession of officers. I am sure the noble Lord will agree that such behaviour is unacceptable.
The aim of the two-year maximum custodial sentence is to deter future obstruction. That should support more effective investigations, which should ultimately enable stronger enforcement action against both companies and individuals. I am pleased to confirm for the noble Lord that this sentence is consistent with other provisions in the Environment Act 1995 and the Environmental Permitting (England and Wales) Regulations 2016.
I highlight to the noble Lord that the two-year sentence is the maximum limit. Sentencing will ultimately be decided by the courts, factoring in the specifics of each case and the relevant sentencing guidelines. While I cannot comment on Home Office procedure on prisoner release, I would be interested if the noble Lord could provide some information as to why our prisons became so overcrowded in the first place.
Amendments 61 and 62, also in the name of the noble Lord, Lord Sandhurst, speak to senior leader liability. I hope the noble Lord will agree it is unacceptable under current law that, if water company senior leaders encourage or allow obstruction of Environment Agency or Natural Resources Wales investigations, they cannot be held liable for this wrongdoing. In contrast, senior leaders can be held liable for other environmental offences, as well as obstruction offences in other sectors: for example, the Building Safety Act 2022.
This clause will remedy this gap by bringing the offence of obstructing the Environment Agency and Natural Resources Wales in line with other environmental offences, as well as offences in other sectors. I hope the noble Lord will agree that, in doing so, it should mirror the conventions and language of existing “consent, connivance and neglect” clauses. These make connivance by senior leaders a potential ground for liability and ensure that, where a person “purports to be” a relevant officer, they should also be held liable for wrongdoing. I hope the noble Lord is therefore content that these amendments are unnecessary.
Finally, I turn to Amendment 65, also in the name of the noble Lord, Lord Sandhurst, which proposes to remove increasing the sentence for offences of impeding Drinking Water Inspectorate investigations from the scope of the Bill. As I mentioned earlier, the Yale Environmental Performance Index ranks the drinking water in England and Wales as the best in the world, alongside just 10 other countries. This is in part thanks to the effectiveness of the Drinking Water Inspectorate. To accept this amendment would be to imply that the regulations enforced by the Drinking Water Inspectorate are not as serious as those enforced by the Environment Agency and Natural Resources Wales.
This cannot be right. There are grave public health risks if the DWI does not have the power or the authority to ensure that water supplies in England and Wales are safe and of the right quality. While I accept that this may not be the intention behind the noble Lord’s amendment, it would certainly be its effect. The quality of our drinking water is one of the enduring strengths of the current model and one that the Government want to protect. I once again thank the noble Lord for his contributions and hope my response has reassured him.
Lord Sandhurst (Con)
I thank the Minister for her response and for the care with which she delivered it. My amendments were there to ensure that the already overburdened prison sector is not put under further pressure. I hope the Government will bear them in mind and take them on board before Report. We will seek to work with the Government to ensure that the Bill ensures appropriate punishment for water executives. I beg leave to withdraw the amendment.
Baroness Hayman of Ullock (Lab)
My Lords, I thank the noble Lord, Lord Roborough, for speaking to the amendments proposed by the noble Lord, Lord Bethell, in his absence. Amendments 63 and 64 relate to guidance and mandatory training for water company employees on obstruction offences.
One thing that it is important to emphasise on this matter is that Clause 4 amends only existing offences. It does not create any new obligations on companies, so employees should already have some understanding of that in the first place. To be clear, the existing offences are obstruction of investigations of the Environment Agency, Natural Resources Wales and the Drinking Water Inspectorate. Prosecutions have already been brought against companies and individuals under Section 110 of the Environment Act 1995. On that basis, we believe that companies should already be very well aware of their obligations under that section of the 1995 Act, and of the obligations to their staff to ensure that they are properly trained to engage in this area.
I reassure the noble Lord that the obligations of companies are set out as well in the Environment Agency’s enforcement and sanctions policy, so it should be very clear. I hope he understands why we do not think it proportionate to put this into legislation.
Lord Roborough (Con)
My Lords, I am most grateful for the reply from the Minister. I am not sure that I am necessarily entirely satisfied with it, but—as I have not yet had a chance to say it today—I am most grateful to the Minister for the constructive engagement that she has had with us, as well as all parties in this House. That will continue and perhaps we can discuss it then. I beg leave to withdraw the amendment.
Baroness Hayman of Ullock (Lab)
I thank noble Lords for their contributions on this aspect of the Bill on fines and penalties. Amendment 67 was tabled by the noble Lord, Lord Sandhurst, whom I thank for his points on variable monetary penalties. Currently, there is no limit on the maximum variable penalty for water industry offences, whether the case is tried summarily in the magistrates’ courts or in the Crown Court. This amendment would not provide additional protection or assurance. However, we recognise that there are concerns about ensuring that there are robust protections for civil sanctions. So the Government will consult on the offences for which the civil standard of proof may be used and on the cap for new civil standard variable monetary penalties. This cap will not be limited to offences triable only in a particular court—we believe this is a proportionate safeguard. The House will also have the opportunity to debate and vote on secondary legislation containing the cap before any changes are finally made.
I reiterate that unlimited penalties issued to the criminal standard will still be available to the Environment Agency, along with all its other existing enforcement tools. Existing legal protections, including the right to appeal, will also be maintained. There are proportionate safeguards and legal protections for the use of those penalties, which will strengthen the enforcement of minor to moderate offences. Therefore, we do not believe this amendment to be necessary, and I hope that the noble Lord agrees.
“(6) But an offence is to be regarded for the purposes of this section as committed by a water supply licensee or sewerage licensee only if it is committed by such a licensee in the course of the activities to which its licence relates.”Member’s explanatory statement
This amendment provides that Clause 5 applies to water supply and sewerage licensees only in relation to their licensed activities.
Baroness Hayman of Ullock (Lab)
My Lords, I turn now to the amendments that we are making to Clauses 5 to 8. Government Amendments 68, 71, 76, 77 and 83 are minor and technical amendments to clarify who is within scope of the measures in Clauses 5 to 8. The inclusion of water and sewerage undertakers remains unchanged by these amendments.
Ofwat issues water supply and sewerage licences, which give the holder rights to provide water or sewerage retail services—for example, billing—or certain services using the public water and wastewater networks. In this remit, businesses are operating as water companies. The amendments make it clear that the measures relating to penalties and the recovery of enforcement costs apply to licensees only in relation to their water supply and sewerage licensed activities. This clarification means that companies can be subject to these measures where this is relevant to their licensed activity.
As businesses with these licences often operate in other sectors alongside the water industry, wider business activities unrelated to the licensing regime should not be brought within scope of Clauses 5 to 8. These amendments ensure that this is the case. For example, a food manufacturer may hold a water supply licence that is issued by Ofwat and permits them to provide billing and metering water services only. Unrelated permitted or licensed activity, regulated by the Environment Agency and undertaken by this business, such as abstraction of water for food manufacturing, would not be in scope of the Bill measures. This is because these activities, which are already regulated and enforced, are not relevant to the company’s operations as a water company.
These amendments minimise impacts on wider businesses and their regulation and ensure that enforcement regimes are consistent within sectors, while still ensuring that water companies are better held to account where they have failed to deliver for the environment. I commend these amendments to the House.
Lord Roborough (Con)
My Lords, I thank the Minister for introducing this group. It is essential that the way that this Bill applies to the activities of licensees is clearly laid out, and we are satisfied that the amendments brought by the Minister are necessary to achieve this.
Water (Special Measures) Bill [HL]
Baroness Hayman of Ullock ExcerptsWednesday 30th October 2024
(3 weeks, 3 days ago)
Lords ChamberRead Full debate Water (Special Measures) Bill [HL] 2024-26 View all Water (Special Measures) Bill [HL] 2024-26 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 17-II Second marshalled list for Committee - (29 Oct 2024)
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lords, I thank everyone who has taken part in today’s first debate in Committee for their valuable contributions and for the amendments suggested regarding the duties and the running of the water regulators. The Government agree that strong and effective regulation is essential if we are to turn around the performance of the water industry. That is why the Bill contains the largest increase in enforcement powers for the water industry’s regulators in a decade.
I start by addressing Amendment 81 in the name of the noble Earl, Lord Russell, and Amendments 79 and 80 in the name of the noble Baroness, Lady Bakewell of Hardington Mandeville, which speak to the duties of Ofwat. As I have previously noted, the Bill is intended to drive improvements in the performance and culture of the water industry by strengthening the powers of the regulators to hold companies accountable. However, this Bill will not and cannot fix all the water sector’s problems.
There were a few particular issues. The noble Earl, Lord Russell, asked about drinking water. It is worth noting that Yale’s Environmental Performance Index ranks the drinking water in England and Wales as the best in the world, alongside 10 other countries—we are all on the same level—so we should celebrate that fact about our water industry.
The independent commission that was launched last week, which we heard a lot about on Monday and will, I am sure, continue to hear a lot about, is intended to facilitate the further development of what we need to do to sort out the water industry. As I have mentioned previously, it will be chaired by Sir Jon Cunliffe, who as a former deputy governor of the Bank of England has decades of experience in regulation and finance. The terms of reference for the commission have been published, clarifying its scope and objectives. It will be broad-ranging and make recommendations in line with eight objectives, such as ensuring that
“the water industry has clear objectives for future outcomes and a long-term vision to support best value delivery of environmental, public health, customer and economic outcomes”.
The commission will bring in expertise from a wide range of areas, including the environment, public health, investors, consumers, engineering and economics. I hope the Committee will be pleased that its scope explicitly covers the regulators’ purpose, structure, powers and responsibilities. As the noble Earl, Lord Russell, said, it is really important that the review is able to consider a wide range of suggestions on the future of regulation, so it is right that the commission, rather than this Bill, is the vehicle for considering the water regulators’ roles and responsibilities. We absolutely need to ensure that regulators are fit for purpose to clean up the mess we found ourselves in, with our water systems and lack of investment, if we are to end the appalling pollution that we have witnessed over recent years. I hope this reassures the Committee that, while the Government are not accepting these amendments, we are absolutely committed to strengthening the water industry’s regulatory system through the review.
I move on to Amendment 56 in the name of the noble Baroness, Lady Bakewell of Hardington Mandeville, which relates to the review of environmental permits. The water industry regulators take a risk-based approach to managing permits. This is because there are over 21,000 of them. This risk-based approach ensures that regulator resource is managed effectively and allows regulators to focus their efforts on reviewing permits that pose the highest risk of environmental harm.
If we create a duty on regulators to review all water company permits every five years, it could have the adverse effect of preventing them reviewing the higher-risk permits in a timely manner. It would also create significant resource pressure and detract from work to provide wider oversight of water companies. That could result in the conditions of high-risk permits not being updated quickly when issues are identified, potentially increasing the risk of environmental harm. I hope that I have explained clearly why, although the amendment has good intentions, in practical or pragmatic use it would not be effective.
I turn to Amendment 78 in the name of the noble Baroness, Lady Parminter, and Amendment 85 in the name of the noble Baroness, Lady Jones of Moulsecoomb. These amendments both speak to the environmental duties of Ofwat and, as the noble Baroness, Lady Parminter, said, we discussed this a bit on Monday on the amendments of the noble Baroness, Lady Willis.
Ofwat has a range of primary duties. These include duties to protect the interests of consumers, to secure that companies properly carry out their functions, to ensure that companies are adequately financed, and to ensure that companies deliver their statutory obligations, including environmental obligations.
On Amendment 78, tabled by the noble Baroness, Lady Parminter, as part of its draft determinations, Ofwat proposed the largest environmental investment programmes in the sector’s history and will hold companies to account against a wide range of environmental performance commitments. In all, the sector should invest £20 billion to reduce pollution, reduce harm from storm overflows, improve river water quality and increase biodiversity. This includes an expansion in nature-based solutions.
In addition, Ofwat is undertaking its most significant sector-wide enforcement action to date. It has issued draft penalties totalling £168 million and enforcement orders against three companies for failing to manage their wastewater treatment works and networks. I would also like to stress that the duties outlined in paragraph 21 relating to customers and the environment are set out in Sections 2 and 3 of the Water Industry Act 1991. We also know that there is still enforcement action going on for other wastewater companies.
I absolutely agree with the noble Baroness and others that we need to move rapidly on our environmental improvement targets. These are challenging targets, as the noble Baroness knows. Meeting environmental targets and turning around the issues we have with biodiversity in this country is not just about what is in the review or in this Bill; it is also about why we have not been delivering on these targets. This is why the Government have decided to do a rapid review of the environmental improvement performance requirements. It is one way we can start to work much more quickly on how we improve our environment. That is really important. If we constantly wait for the next piece of legislation when we already have things in place, we are not doing justice to what we have already said we will do.
I am sure the noble Baroness, Lady Parminter, knows that I am really committed to improving the environment; it is very close to my heart. She made some very good points, and I suggest it might be useful for us to meet and discuss this between Committee and Report to see how we can bottom out improving our environment, not just through this Bill but in other ways.
We are clear that companies need to deliver on obligations to customers and the environment, but we also need to make sure that Ofwat is properly financed to do this. Again, this is where the review comes in; we need to make sure we can achieve what we want to achieve. There are existing duties which can deliver better, and we need to look at how we push this forward.
We have worked to secure agreements with companies to update their articles of association to ensure that customers and the environment are placed at the heart of business decisions. That is an important move forward.
Under Amendment 84, tabled by the noble Baroness, Lady Jones of Moulsecoomb, the EA and Ofwat would not be subject to the regulators code or the growth duty. The economy relies on a secure supply of water, and water is a key factor in ensuring sustainable growth in the UK. It is therefore important that Ofwat and the Environment Agency consider the implications of their actions on growth, and that they create a stable regulatory environment.
It is, however, also the responsibility of the regulators to appropriately balance their growth duty alongside all other duties. In line with this, the independent commission will consider both the roles and responsibilities of the water industry regulators and how to ensure that the water industry regulatory framework maintains resilient finances and contributes to economic growth. I am sure that the noble Baroness, Lady Jones, will understand that, now we have the commission and the review, we do not want to pre-empt the outcomes. We therefore cannot accept the amendment, but this is the kind of thing to feed into the review, so that we can look at how to take these concerns forward.
Amendment 29, in the name of my noble friend Lord Sikka, speaks to possible conflicts of interest. We believe it would be disproportionate to prevent all Defra and Ofwat employees from being able to accept employment in a water company. However, both Defra and Ofwat take the handling of actual or potential conflicts of interest very seriously, including when either staff or board members leave the organisation. Staff in both organisations are bound by the Civil Service business appointment rules, and any requirements with respect to future employment or business relationships are managed appropriately and proportionately in accordance with these rules.
Baroness Hayman of Ullock (Lab)
My Lords, once again I thank noble Lords for their amendments and for taking part in this debate. I start by emphasising that we expect all water companies to reduce all pollution incidents, in line with their legal duties.
I turn first to Amendment 30, tabled by the noble Baroness, Lady Bakewell of Hardington Mandeville, which seeks to apply the duty to produce pollution incident reduction plans to water-only companies. Initially, it might be useful to explain why our focus has been on water and sewerage companies only. This is because most pollution incidents arise from sewage incidents, not water supply incidents. We were concerned that, by widening the scope, we could end up diluting the focus of the plans, so that actions were not tailored to the most serious pollution incidents. That is the thinking: the Government want to keep the focus of these plans on sewage incidents, which is why we are not accepting the amendment. Having said that, there have been some very interesting comments around this and I would be very interested to hear some wider thoughts on Amendment 30. Clearly, the noble Baroness is unwell at the moment and is not in her place, but I hope that other noble Lords will go back to her and see whether she would be happy to meet to discuss this further: I think it is something we could pick up, following Committee.
I move now to Amendments 31 and 36, also tabled by the noble Baroness, Lady Bakewell of Hardington Mandeville, and Amendments 32, 39 and 40, tabled by the noble Baroness, Lady Parminter, which speak to the implementation of measures identified in pollution incident reduction plans. I thank the noble Baroness for her clear introduction and the noble Duke, the Duke of Wellington, and my noble friend Lady Young of Old Scone for their comments on this amendment.
Clearly, it is really important that we ensure water companies are taking decisive action to reduce pollution incidents. I want to highlight that the provision already requires water companies to report each year on progress made in implementing pollution incident reduction measures. This will create an unparalleled level of transparency that will further enable both regulators and the general public to hold water companies to account. Where pollution incident reduction plans do not meet the statutory criteria set out by legislation, the Environment Agency will be able to take enforcement action. This will include ensuring compliance with the duty for the plan to provide an assessment of progress in implementing the measures.
The noble Baroness, Lady Parminter, was trying to understand why this was not something that we accepted. I can reassure her that it has nothing to do with it being used as a bargaining chip—absolutely not. The big concern is that, if we introduce a duty to implement the measures in the pollution incident reduction plans, this could imply an unusual sub-delegation of powers to the water companies, whereby they would effectively be able to create enforceable duties on themselves. We are concerned that this would then have the perverse outcome of incentivising companies to produce less ambitious plans to mitigate the risk of enforcement action. That is one of the fundamental concerns in a nutshell, and it is why we are not going to accept these amendments. If the noble Baroness has any suggestions, I would be very happy to hear them.
I turn now to Amendment 34A, tabled by the noble Baroness, Lady Bakewell of Hardington Mandeville, which speaks to the important matter of waterways in national parks. The Government agree that national parks form a vital part of our environmental heritage. In line with this, the Government will seek to use the powers in the Levelling-Up and Regeneration Act 2023 —I still have the scars on my back—to ensure that relevant authorities, including water companies, deliver better outcomes in protected landscapes. We are in the preliminary stages of developing those regulations, to ensure that authorities deliver the better outcomes that we need. The idea is that they will provide a more holistic approach, conserving and enhancing the purposes and special qualities of our protected landscapes.
We have also set an expectation that Ofwat should challenge water companies to prioritise improvements in national parks. We are expecting considerable investment over the next price review period, to improve water and sewerage assets discharging into national parks. This, of course, will include the iconic Lake Windermere, which we have heard much about. United Utilities was mentioned in relation to this. Noble Lords might be interested to know that I met with a representative of UU last week and discussed issues around the environment and improving nature—so there is work going on with the water companies behind the scenes in this specific area.
However, the Government consider it important that pollution incident reduction plans should identify actions to address pollution incidents right across England and Wales; the noble Lord, Lord Roborough, made exactly this point. A statutory hierarchy of priority areas risks deprioritising pollution incident reduction plans in other areas, so we have to be very careful that we do not do that, because that bathing waters, for example, in other areas could be impacted. For this reason, the Government will not be accepting this amendment, but clearly I want to stress we do take our protected landscapes very seriously.
I turn now to Amendment 35 tabled by the noble Baroness, Lady Bakewell of Hardington Mandeville. I fully recognise her desire to ensure that we see a reduction in the environmental risk posed by pollution incidents. This is why Clause 2 already requires water companies to address environmental risks in their pollution incident reduction plans. The clause requires water companies to set out the measures they will take to reduce the frequency and seriousness of pollution incidents.
Risk to the environment is already used, among other important factors, to determine the seriousness of a pollution incident in the Environment Agency’s incident categorisation process. This is the framework that water companies are required to refer to when they develop their plans. Therefore, by requiring water companies to report on plans to reduce the seriousness of pollution incidents, we are already requiring them to report on and develop measures to reduce the risk to the environment. While we understand the noble Baroness’s intention, the Government believe that because of the reasons I have just set out the amendment is not necessary.
Finally, I turn to Amendments 41 and 42 tabled by the noble Lord, Lord Roborough, which seek to impose requirements around reporting against pollution incident reduction plans. I reassure him that Clause 2 already requires water companies to publish an assessment of their progress in implementing previous plans. Requiring more frequent reporting would be unlikely to allow water companies sufficient time to implement the lessons learned from previous pollution incidents.
I also reiterate that we expect water companies to be fully accountable when developing their plans and implementing the proposals in them. If a plan does not adequately address the statutory provisions required by the Bill or by broader legal requirements, the Environment Agency will take appropriate enforcement action. The Government therefore do not propose to accept these amendments, but I thank the noble Lord for his suggestion.
I will clarify the strategic policy statement. The key point is that it is directed to Ofwat, not to the water companies. The Government’s strategic priorities for Ofwat include the need for companies to prioritise actions to reduce pollution and considerably improve their environmental performance. The SPS sets general strategic requirements for Ofwat and does not create specific measures, as we expect, under the pollution incident reduction plans.
I thank noble Lords for their input into this discussion and for their suggested amendments.
The Duke of Wellington (CB)
As the noble Baroness sits down, I must say that I did not find her arguments for not accepting a duty to implement to be very convincing. I therefore wonder if she would at least be prepared to meet the noble Baroness, Lady Parminter, and me between now and Report to see if, between us, we can put together some amendment that might be acceptable to the Government.
Baroness Hayman of Ullock (Lab)
I completely understand. This is not a straightforward area, and I would be absolutely delighted to meet the noble Lords to see if we can find a way forward.
Baroness Parminter (LD)
I thank the Minister for her responses to the numerous amendments in this group on pollution incident reduction plans, which I think everyone in this Committee believes is one of the really valuable steps in the Bill. I will pass on her comments about a meeting to the noble Baroness, Lady Bakewell of Hardington Mandeville. Water-only companies are responsible for a number of pollution incidents, particularly around drinking water treatment, but I will leave that for that later discussion.
Like the noble Duke, the Duke of Wellington, I just did not find the Minister’s comments very convincing, but it was not just that. I am not a lawyer, so I did not really understand what a sub-delegation of powers was; I am humble theologian, so I will have to go away and think about that and take some advice from people who know about it. However, the offer made to talk about this further is an important step forward. She will have noticed that everyone across the Committee believes that these are important steps we need to take to ensure that the ambitions that the Government rightly have in this regard are carried out as fully as they need to be.
In making that point, I particularly thank the noble Lord, Lord Roborough, for his comments. His phrase—that the Bill in this area does not ask enough of water companies to deliver on the ambition of pollution incident reduction plans—was absolutely spot on, so I thank him for that.
I hope that my noble friend Lady Bakewell of Hardington Mandeville will be reassured by the Minister’s comments about the Government taking pollution seriously in national parks. I am sure that if she has any further matters to discuss with the Minister when she is well—next week, I hope—she will be in a position to come to the Minister’s door, which we all know is an open door, and we thank her for that. I beg leave to withdraw the amendment.
Baroness Hayman of Ullock (Lab)
My Lords, I thank all those who have taken part for their interest in the important topic of sustainable water usage and sewerage infrastructure. I shall start by speaking to Amendments 34 and 38, proposed by the noble Baroness, Lady McIntosh of Pickering, and spoken to by other noble Lords. The noble Baroness, Lady Pinnock, gave some examples around this. The Government agree that nature-based solutions, including natural flood prevention solutions, are a useful tool for tackling the root causes of sewage pollution while delivering wide ecological benefits.
Noble Lords who took part in the progress of the levelling-up Act will remember that this was debated in Committee on that Bill and that I spoke against the proposals that preferred the cheapest option because we were concerned about the amount of concrete that this could lead to rather than the best solutions for the environment.
The Government’s strategic policy statement includes Ofwat’s proposal to allow more than £2 billion of investment in nature-based solutions at its draft determinations for price review 24. This includes £1.6 billion to reduce storm overflow spills through catchments and nature-based solutions, and further funding is proposed for nature-based solutions such as reedbeds and wetlands for nutrient removal. The Government have supported water companies trialling nature-based solutions for groundwater-induced storm overflows. This is, of course, subject to the final determinations to be made in December but, if approved, will allow for greater understanding around effectiveness and suitability and enable greater uptake at future price reviews.
Nature-based solutions may feature in pollution incident reduction plans, but we believe it would be inappropriate to mandate their inclusion because they may not necessarily be effective in every circumstance. These plans are intended to ensure that water companies implement mitigations to reduce pollution incidents. Each year, the single biggest source of pollution incidents is issues such as blockages or mechanical failures within the foul sewer water system. These issues are best addressed via monitoring and maintenance measures, such as the detection of bursts, checking pumps and relining sewers. This is important work that needs to take place alongside. It is for these reasons that the Government are not supporting these amendments. However, I reassure the noble Baroness and other noble Lords that the Government remain extremely supportive of using nature-based solutions to tackle the underlying causes of pollution incidents, and I look forward to discussing this topic with her further alongside colleagues from MHCLG in the coming weeks.
I turn to Amendment 51, tabled by the noble Duke, the Duke of Wellington, about the use of back-up generators at emergency overflows. The Government agree that measures should be put in place to reduce discharges from emergency overflows caused by electrical power failures. However, water companies are already required to implement measures to reduce the likelihood of a discharge occurring due to an electrical power failure through conditions in their environmental permits. In particular, water companies must demonstrate that they have back-up systems in place, such as generators or alternative power supplies, to secure the emergency overflow permit. Ultimately, emergency overflows may still be required to operate as a last resort to protect the sewerage infrastructure and prevent upstream properties flooding.
The near real-time reporting of information required by Clause 3 will enable increased transparency around the use of emergency overflows and will better enable resource to be quickly directed to investigate and address any cause of such a discharge. I thank the noble Duke for meeting me previously to discuss his concerns and his amendment. I am not sure that he will be reassured, but those are the reasons we do not believe an amendment in this space is necessary.
Amendment 53 from the noble Baroness, Lady McIntosh of Pickering, is on the important issue of SUDS, which we also discussed on Monday, and to which my noble friend Lady Young of Old Scone and the noble Baroness, Lady Pinnock, also spoke. As I have noted and discussed with the noble Baroness, this Government are strongly committed to requiring standardised sustainable drainage systems in new developments. We are actively considering whether improvements in the delivery of SUDS, which we all wish to see—14 years is far too long to wait for the implementation of legislation—may be better achieved through mechanisms other than Schedule 3 to the Flood and Water Management Act 2010.
I say to the noble Baroness that I have never had a catchphrase before. I was rather hoping for something a little more exciting—suggestions on a postcard. I am sorry to disappoint, but I am not going to use that catchphrase now. I look forward to meeting the noble Baroness alongside my colleagues in MHCLG. There are certain things that we need to discuss to see how we can move things on in this area.
On Amendment 54, I agree with the noble Baroness, Lady Browning, about the importance of having a drainage and sewerage system that can meet current and future demand. I always appreciate her enthusiasm on these matters.
As part of the Environment Act 2021, a duty has been created for water and sewerage companies in England to produce drainage and wastewater management plans. These plans set out how a company intends to improve their drainage and wastewater systems over the next 25 years, accounting for factors including a growing population and changing environmental circumstances. Taking a strategic approach to drainage and wastewater management will help to identify and mitigate issues related to insufficient network capacity.
The Environment Agency has a role as a statutory consultee for local planning authority decisions for certain types of developments that are made under Part III of the Town and Country Planning Act 1990 to help ensure that matters of wastewater and treatment, work capacity and water resource matters are considered as part of key planning decisions.
The Government appreciate the intent behind the amendment but have concerns about how it could operate in practice. That is because it could potentially give sewerage undertakers the right to refuse connections based on their own predictions of capacity without reference to agreed standards. Furthermore, legislation already permits undertakers to refuse connections where they would be prejudicial to their sewerage systems. Where disputes arise, the matter can and should be referred to the independent regulator, which in this case is Ofwat. However, I am happy to look more closely at capacity issues, as the noble Baroness suggests.
On Amendment 88, also from the noble Baroness, Lady Browning, the Government recognise the importance of ensuring the availability of sustainable water supplies to help meet our target of delivering 1 million new homes in this Parliament while protecting the environment. Under existing powers, water companies should ensure that they have sufficient water resources available to supply new homes, in line with the water resources planning guidance. In addition, Natural England and the Environment Agency are required to assess the impact of water company plans on protected sites.
Amendment 93, in the name of the noble Baroness, Lady McIntosh of Pickering, follows on from those amendments. I agree with the noble Baroness and understand the need for increased water efficiency and water reuse. Looking at all these amendments as a whole, I have to say it is completely bonkers that in this country we use drinking water to flush our toilets. That does not happen elsewhere. For that reason, we are already reviewing the relevant regulations. We intend to publish in the new year a consultation on how we could revise those regulations, with the aim of increasing water reuse.
The reuse of water through rainwater harvesting and grey water reuse may have important benefits for the environment because it is part of reducing our reliance on water abstraction. Water reuse systems have a wide range of benefits, such as reduced demand on water infrastructure, reduced carbon emissions and flood protection.
On the noble Baroness’s particular question about the mandatory water efficiency labels that we are introducing, we are completely committed to that but we have not yet made a decision on the minimum standards.
I hope this reassures the noble Baroness that the proposed new clause will not be needed as we are already taking significant steps in this space. I once again thank noble Lords for their important contributions and suggested amendments around sustainable water usage and sewerage infrastructure.
Baroness McIntosh of Pickering (Con)
My Lords, I am grateful to the Minister and others who have spoken in this debate. I am a little concerned, because I understood the Minister to say that they may seek to achieve sustainable drains through other means than Schedule 3.
Baroness Hayman of Ullock (Lab)
To clarify, we are not suggesting that we do not do that, but we want to look at all the different options so that we can look at how we can practically move forward.
Baroness McIntosh of Pickering (Con)
I just say that I am extremely disappointed. I know this is not necessarily within the gift of the Minister but, as we heard from the noble Baroness, Lady Pinnock, this was meant to be the year that we implemented Schedule 3, and there are only two months left. While I welcome the fact that we are going to meet before Report, I will look to bring something like that back.
I am grateful to my noble friend Lady Browning, who, in mentioning capacity, has underlined the need to end the automatic right to connect and to establish water companies as statutory consultees in all future planning applications. If there is no capacity, I do not see how we can expect water companies to make false connections that will lead to further sewage spills in future.
Baroness Hayman of Ullock (Lab)
My Lords, I thank noble Lords for their amendments and for a very interesting discussion. Clearly, it is very passionately felt as well. I thank the noble Baroness, Lady Jones, for introducing her Amendment 37. I would also like to discuss Amendment 104 tabled by the noble Lord Gascoigne, because they are both about nature-based solutions.
As I mentioned on the previous group, the Government agree that nature-based solutions are an important tool for tackling the root causes of sewage pollution and addressing flood risk, while delivering wide ecological benefits. In line with this, I am pleased that Ofwat has proposed an allowance of over £2 billion for investments in nature-based solutions in PR24. I was pleased that the amendment from the noble Lord, Lord Gascoigne, refers to catchments, because catchment and nature-based solutions are part of that £2 billion investment, and £1.6 billion is looking to reduce storm overflow spills through those solutions.
Ofwat has made it clear in its guidance for PR24 that it expects water companies to adopt more nature-based solutions. The noble Baroness, Lady Jones, mentioned reed beds, and it is important to say that the further funding includes money for reed beds and wetlands for nutrient removal. The Government are also supporting water companies with trialling different nature-based solutions. As I mentioned, this is obviously subject to the final determinations in December, but we hope to move forward in these areas.
At the same time, we need to recognise that nature-based solutions may not always be the most appropriate or effective means of improving water quality or flood risk. We need to ensure that water companies and Ofwat have sufficient flexibility to develop the right solution to deliver the best outcomes for customers and the environment. In a similar vein, although nature-based solutions may feature in pollution incident reduction plans, it is important to recognise that these may not be the most effective or available response to pollution incidents in every circumstance.
Having said that, we will not support the amendments, but I reassure the noble Baroness and the noble Lord that we take this seriously. I am happy to have further discussions on this particular amendment, if that is helpful.
I turn to Amendment 55, tabled by the noble Baroness, Lady Bakewell of Hardington-Mandeville. It is important to draw our attention to the impact of sewage pollution in our national parks. The Government agree that our national parks—Lake Windermere in the Lake District and the Broads have had particular attention regarding this matter—are a vital part of our environmental heritage, and everyone agrees that they must be protected better. For this reason, the Government will seek to use the powers in the Levelling-up and Regeneration Act to ensure that relevant authorities, including water companies, deliver better outcomes in protected landscapes.
I reassure noble Lords that existing plans are in place to protect high-priority sites from sewage pollution, including the Storm Overflows Discharge Reduction Plan. As part of that reduction plan, we expect water companies to tackle overflows discharging to high-priority sites by 2035. These sites include designated bathing waters, SSSIs, special areas of conservation and chalk streams. However, completely eradicating sewage discharges is not possible without a costly redesign of the whole sewerage system.
Similar issues may arise in relation to the proposed requirement for all water bodies in national parks to achieve “high” ecological status. Under the Water Environment (Water Framework Directive) (England and Wales) Regulations, most surface water bodies have an objective to reach “good” ecological status, except where it is technically infeasible or disproportionately costly. I stress that “good” ecological status is a very high standard to achieve, and represents a thriving aquatic environment with only minor disturbance from natural conditions. In this way, it supports a diverse group of aquatic invertebrates, fish, mammals and birds.
“High” ecological status equates to water almost entirely undisturbed from its natural conditions, with almost no impact from human activity. Requiring this very high status would have wide-ranging impacts on any future planning developments and human interaction with national parks—that would include farming and fishing. The requirement would place achieving this demanding objective on only water companies, regardless of the pressures and sectors that are actually impacting on water bodies within the protected landscapes. It would also not allow for the consideration of costs, which would ultimately be borne by water bill payers, and any technical feasibility around this.
It is clearly important to reduce phosphorus levels— I have seen the damage that phosphorus can cause in the lakes near where I live. A reduction of phosphorus levels by 90% by 2028 goes significantly beyond the Environment Act target to reduce phosphorus loading by 80% by 2038—that is assuming that the baseline is at 2020 levels. This would require an extremely expensive and immediate increase to the number of phosphorus improvement schemes planned in the price review of 2024. We are concerned that that is a big jump, with a big extra investment that would immediately be passed on to bill payers. We do not want to risk the delivery of any wider environmental improvements through the price review of 2024.
Amendment 74 was tabled by the noble Earl, Lord Russell. I confirm that the Government are absolutely committed to the protection and restoration of our cherished chalk streams. We recognise that these unique water bodies are not just vital ecosystems but a symbol of our national heritage: we in this country have by far the majority of chalk streams. This requirement would have significant implications for existing legal frameworks’ operational delivery, and would not necessarily result in environmental improvement for chalk streams. As discussed in relation to Amendment 55, requiring “high” ecological status would have the wide-ranging impacts that I mentioned.
The levelling-up Act brought in some protections for chalk streams. The independent water commission on the water sector regulatory system, already announced by the Secretary of State, is the appropriate vehicle for considering broader reforms, including to the current water system and overarching targets for the water sector. In the previous group we talked about better use of water and grey water. If we move forward with that through our review, that will reduce abstraction, which will help to support chalk streams better.
I hope the noble Earl therefore understands why the Government will not accept his amendment. However, he requested a meeting to discuss Blue Flag status as a possible way forward, and I am more than happy to offer him one.
Amendment 90 was tabled by the noble Baroness, Lady Browning. I am grateful to her for this amendment. We are clear that water companies must improve on their delivery of water resources management plans. The independent commission will help to transform how our water system works and will inform further legislation. It would be more appropriate at the moment to consider how we make improvements to the water resources management planning process as part of the independent commission. I note that there are already requirements for the review process in Section 37A of the Water Industry Act 1991. Water companies must also report to the Secretary of State on their reviews annually. Defra works closely with the EA and Ofwat to review water companies’ delivery of their plans, and the EA recently published a summary of assessments of water company delivery and the actions that they must take to deliver their plans.
We are concerned that, in practice, a duty on water companies to deliver all measures simply would not work. Many measures, such as new reservoirs, need further permissions, for example, before they can proceed, and a water company cannot guarantee that it will get those permissions. That is why we will not support that particular amendment. I thank noble Lords again for this interesting and helpful debate.
Baroness Jones of Moulsecoomb (GP)
I thank the Minister for her reply. I do not think anyone in the Committee doubts her sincerity or her concern for nature—that is a given. I am afraid it is the Government I do not trust. I did not trust the last Government and I do not trust this one either—it must be something in my nature.
I supported two other amendments: Amendment 74 in the names of the noble Earl, Lord Russell, and the noble Baroness, Lady Browning, and Amendment 104 in the names of the noble Lords, Lord Gascoigne and Lord Roborough. Chalk streams, for example, are incredibly important; they are so rare. We have the most in the world and we trash them. The amendment of the noble Lord, Lord Gascoigne, goes much further than my modest amendment. The noble Lord, Lord Cromwell, has never called anything I have ever done modest, so I look forward to his signing this same amendment on Report to show that he is sincere.
The noble Baroness, Lady Boycott, talked about local engagement. Just this week, I hosted a group of 30 or 40 people from the Bengali community who are working on recovering mangrove forests in Sundarbans. They do it because they care about the local; they are losing culture, opportunities and so on. I really see that local activity is incredibly important, but the Government have to make that easy. This is the thing about the nature recovery schemes. They are obviously not the only way; they can be extremely effective, and sometimes quite cheap as well. It definitely engages the local community. I was up at Lake Windermere recently, and the local support there for cleaning up the lake was quite astonishingly broad.
Lord Blencathra (Con)
My Lords, I first declare my interest as on the register. Since it seems to be de rigueur in the Committee tonight, I declare my wholehearted support for the controlled reintroduction of beavers into appropriate locations.
I thank the noble Earl, Lord Russell, for leading this group of amendments on improved monitoring and publication of data and I rise to speak to Amendment 48 in my name. First, I was rather impressed by the points on telemetry made by the noble Lord, Lord Cameron of Dillington. We find in Natural England that the use of modern technology can replace hundreds of people on the ground trying to carry out inspections, and this sort of technology has to be the way to proceed.
It is important that the nature of emergency discharges is collected by water companies and is made available to the public and Parliament in an easily accessible format and location, as has been said by every noble Lord tonight. The damage of pollution caused by emergency overflows has become an issue of increasing concern to the public in recent years, and they deserve more information on how water companies are performing. It is sensible to require water companies to publish the extent of emergency discharges, as this data is indicative of the strain on our water sector and will provide valuable information as to what kind of infrastructure development is necessary to prevent overflows in the future.
We support the Government’s intention in this part of the Bill, but we feel the Government can go slightly further to ensure that the monitoring data is available to the public on the water company’s website. My Amendment 48 is a modest little amendment that would deliver that change. We on these Benches feel that this relatively small amendment would do a great deal of good in ensuring that consumers can access this information easily on the website of their own provider.
A number of noble Lords have moved amendments on monitoring and reporting. We are broadly satisfied with the Government’s measures to improve monitoring and reporting in the Bill, but we are also keen to see some movement from the Government in the direction of making this information more readily accessible to the public and have taken on board many of the points raised by other noble Lords tonight.
Baroness Hayman of Ullock (Lab)
My Lords, I thank all noble Lords for the interest they have taken in this debate. I turn first to Amendment 43, tabled by the noble Earl, Lord Russell, Amendments 44 and 46, tabled by the noble Lord, Lord Cromwell, and Amendment 59, tabled by the noble Lord, Lord Cameron of Dillington. The Government agree that it is vital to understand the causes and impact of sewage discharges, and agree with the noble Lord, Lord Cromwell, that this needs to be timely and accessible.
Clause 3 requires water companies to provide information on the frequency and duration of discharges from emergency overflows. This information will enable regulators and the public to see, in near real time, when a discharge from an emergency overflow has occurred, and how long it lasted for. This will enable resource to be directed to investigate the cause as well as the impact of a discharge, with a view to resolving any issues.
While the Government agree with the intention behind the amendments seeking to require companies to specify the volume of discharges in their publications, we do not see the value in doing so, as this would not provide the meaningful insights that we need about the actual impact a discharge has had. Monitors required to measure volume as well as concentration are also very costly to install and could delay the rollout of other monitors.
The volume from sewage discharges is measured through flow monitoring, and the installation of flow monitors would likely require construction projects to install them at the majority of emergency overflows, hence the large cost. This is because the pipework in emergency overflows would require modification for flow monitors to be able to record accurate measures of volume. Therefore, the Government do not believe the expected high costs are proportionate to the information we would get. With respect to the cause of discharges, it is not possible for companies to provide this information in near real time. This is because an investigation and site visit are often required to validate the cause.
Lord Cromwell (CB)
I would like clarification on a point. The Minister mentioned that there will be a map of overflows across the country. How near to real time will it be? She said that it will be accessible to the regulator. Will it be accessible to the public?
Baroness Hayman of Ullock (Lab)
I do not have that detailed information. I will write to the noble Lord and place a copy of the letter in the Library so it is available to everybody ahead of Report.
Amendment 50 was tabled by my noble friend Lady Young of Old Scone. The Government fully agree that emergency overflows should be monitored. However, we do not support the removal of the delegated power for Ministers to make exceptions to the Clause 3 duty. We believe that this power is necessary to allow for scenarios where it is not feasible to monitor emergency overflows, such as where an overflow is due to be decommissioned. Removing this power may inadvertently lead to delays in commencing this duty, if issues arose that we could not resolve without this power. Any exception to the monitoring duty would need to be agreed by Parliament using the affirmative statutory instrument procedure.
On Amendment 58, tabled by my noble friend Lady Young of Old Scone, water companies should bear the cost of understanding the impact of their discharges on water quality. Installing and maintaining continuous water quality monitors requires regular access to water company sites. Water companies can do this much more easily than can the Environment Agency. Defra has issued guidance on the expected standards of these monitors, and in future all monitors will be expected to become independently certified under the Environment Agency’s certification scheme. Water quality data that will be made available will then be scrutinised by the independent regulator. Regulators will continue to work with water companies to ensure that the data is of high quality. I hope that this reassures my noble friend and that she feels able not to press her amendments.
Amendment 75 was tabled by the noble Baroness, Lady McIntosh of Pickering, and I thank her for raising this issue. Misusing sewers to dispose of materials such as wet wipes and cooking oils contributes to major issues, such as blockages in the sewerage system. The noble Lord, Lord Deben, asked whether I have gone down a sewer. I have, and it is just disgusting; it is quite extraordinary what can happen there. Sewer blockages cost the water industry £200 million a year to fix and are responsible for 40% of pollution incidents.
Many people are not aware that the actions they take in their own homes can have such damaging impacts. Small but significant steps, such as not pouring fats and oils down the plug hole, can prevent blockages. The Government work to encourage all householders and businesses to play their part, and fully support water industry campaigns to address this issue, including Water UK’s “Bin the Wipe” campaign. I completely understand where the noble Baroness, Lady McIntosh of Pickering, is coming from. I will take this away and look at whether there is any more we can do to draw attention to this fact.
Having said that, we do not believe that water companies should be exempt from sanctions when using emergency overflows following blockages caused by sewer misuse. Water companies should take every reasonable measure to prevent the use of emergency overflows, including measures to prevent blockages. Some blockages caused by sewer misuse can often be mitigated by good maintenance; for example, by detecting blockages before they become significant issues and with preventive cleaning. The intent of this Bill is to strengthen water companies’ accountability for pollution incidents and not to diminish it. That is why Clause 2 will require water companies to publish the pollution incident reduction plans that we debated earlier.
I was interested in the suggestion from the noble Lord, Lord Deben, to look at how Canda deals with this issue. My brother-in-law lives in Canada, so my family and I go there. It is a really interesting suggestion.
I turn to Amendment 87, tabled by the noble Baroness, Lady Boycott. Proactive data publication is vital for transparency and to enable the public to scrutinise water companies. While we support the principle of transparency and are taking action to increase transparency through Clauses 2 and 3, we are concerned that the noble Baroness’s specific proposals duplicate pre-existing provisions and would create practical difficulties. Case law and the Information Commissioner’s Office have been clear: water companies are public bodies for the purpose of the Environmental Information Regulations, and water companies already provide information under these regulations.
The Information Commissioner’s Office is clear that water companies must be transparent, and it is taking several actions to enforce that. In May of this year, the ICO released decision notices for six water companies, instructing them to disclose the start and stop times of sewage discharges. In July, it wrote to water companies to encourage them to proactively publish information on sewage monthly. In October, it published a practice recommendation to United Utilities to address the specific issues that it had identified.
I turn to Amendment 89, tabled by the noble Baroness, Lady Browning. The Government acknowledge that it is important that there is more transparency about the abstraction of water by water companies. However, any new requirements must be both practical and proportionate. Clause 7 already provides the necessary flexibility for the Secretary of State and Welsh Ministers to impose conditions or general rules for abstraction licences. We believe that secondary legislation is the more appropriate vehicle to address these technical matters effectively. However, having listened to the noble Baroness carefully, we will consult on the use of Clause 7 powers to ensure that the conditions introduced are appropriate and achievable.
Finally—I am sure we all want our dinner—I turn to Amendment 94, tabled by the noble Earl, Lord Russell. I am supportive of greater involvement of the public in this sector. He made the very important point that bringing in the public is vital, including through citizen science. However, this amendment is not needed, as we believe that the provisions in the Bill will already increase transparency and the provision of data in this sector, which are critical to informing and engaging the public going forward.
I hope that I have set out sufficient detail on Clause 3 to reassure all noble Lords of its intended purpose and effect. I sent out a fact sheet on the definition of emergency overflows and storm overflows to try to make sure that everybody is clear on the difference, but I am sure that we will come back to these issues in future. I hope that noble Lords will not press their amendments and enjoy their dinner break.
Earl Russell (LD)
My Lords, I thank the Minister for her detailed response; that was a lot of amendments to respond to in one go.
I take the point about volumetric flow monitoring. I will go away and think about that but I am aware that there might have been costs associated with it. It is welcome that that has been confirmed.
I take the point also about a number of amendments on the website, access to data and one data point. I hear what the Government say—that one does not want to pin that down, limit it and find that what is written in the Bill is yesterday’s technology, or that there are other, better ways of making sure that it is accessible. I welcome the response there as well.
I also welcome the response of the Minister about the plans of the Government to publish live maps in one place. That seems sensible.
In relation to my amendment on citizen science, I welcome what the Minister said. Let us go away, think about it and explore it. I am pleased that the Government acknowledge the importance of that matter, the work that has been done and the work going forward.
This has been an interesting group of amendments. I thank the noble Baroness, Lady Young of Old Scone, for what she said, and the Minister’s response on the emerging threats was important. I am particularly concerned about microplastics because we do not know what those are doing. They are in our brains and various parts of our body where they should not be. I encourage the Government, outside the Bill, to do more research and work on that.
I thank also the noble Lord, Lord Cromwell, for his interesting comments on telemetry monitoring, and the noble Lord, Lord Deben, for his contribution.
This was an interesting debate. I am getting in the way of everyone’s dinner, so I thank noble Lords. I beg leave to withdraw my amendment.
Independent Water Commission
Baroness Hayman of Ullock Excerpts(3 weeks, 4 days ago)
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Earl Russell (LD)
My Lords, I declare my interests as set out in the register and thank the Minister for this Statement updating the House on the launch of the independent water commission. There is much that we on these Benches welcome, most importantly that this Government, through the Water (Special Measures) Bill presently being considered by this House and the launch of the water commission, have given a clear signal that they are determined to try to fix our broken water system. The intent is a welcome step change, and I am thankful for it.
That said, there is a time for reviews and commissions and a time for calm, direct and decisive government action to fix systems that have been broken for far too long. The Government talk proudly about their longer-term approach, when the electorate is keen for more radical and immediate action. My friendly warning to the Labour Government is that the people who voted for them did so with the expectation that real action would be taken to resolve this mess, at scale and at pace. Labour has had many years in opposition; quite frankly, we expected the Government to be better prepared and to have come up with the necessary plans and answers by now that are urgently needed to fix these problems.
The water industry is a mess, and the sewage scandal was a critical issue at the last general election. The Liberal Democrats are determined to put the protection of our precious natural environment at the heart of everything we do. In 2023, water companies dumped 54% more sewage into our lakes, rivers and coastal areas than they did in the previous year. This amounts to 464,000 incidents and 3.6 million hours of untreated sewage discharges in England alone, damaging our freshwater ecosystems. Meanwhile, water bills are set to rise by some 40%. We are clear that we would abolish Ofwat, create a new, unified and far more powerful clean water authority and replace the failed private water companies with public benefit companies.
The Government have taken a different policy direction. My worry is that the magic trick of making Ofwat fit for purpose, securing investment while keeping consumer water bills low and protecting our environment lies way beyond the measures contained in the Water (Special Measures) Bill and that, when further legislation finally arrives, it will be too late. I welcome the Minister’s engagement, but I call on the Government to work with all sides to make the measures in the Water (Special Measures) Bill more radical and robust. Our environment cannot wait while Labour decides on the real systemic reforms that are the only solutions to this crisis.
Only 14% of our rivers and streams are in good ecological health. With the commission taking at least a year to consider evidence and report back to government, and with further legislation only then to be prepared and debated in Parliament, the radical change required appears unlikely to be implemented before 2028-29 at the earliest. I hope that the Minister can acknowledge a growing sense of concern on all sides of the House that the measures in the Water (Special Measures) Bill are not enough to fix the problem and that further legislation derived from the conclusions of the water commission will just not arrive in the urgent timescales required.
The 30% by 2030 target for protection of nature is coming up urgently. How will this review help support that process? My understanding is that the water review will not report until 2025, which leaves a short timeframe for making the necessary changes and requirements to meet our targets. Further, if we find after the Water (Special Measures) Bill is passed that problems in the water industry persist and we are still in the gap before the water commission finishes its work and is ready, are the Government prepared to put forward additional urgent legislation to help fix any remaining problems?
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lords, I thank both noble Lords for their questions on the Statement made in the other place recently. Both noble Lords mentioned the fact that we had been in Opposition for 14 years— I would suggest that is probably one of the reasons why the water industry is in such a mess. It is a little bit rich of the Opposition to say that we should have sorted it out when we were in Opposition.
In answer to a few questions, the review will be reporting in the first half of next year. It is not that long until next year; it is only a few months away. The idea is that the review will develop new legislation that will make water companies and our water infrastructure fit for purpose for the future.
I thank the noble Earl, Lord Russell, for his broad support. He talked about urgency. It is important to point out that we came into government at the beginning of July. On 11 July, my honourable friend the Secretary of State made a Statement to the House on the agreement he had already reached with water companies and Ofwat to ring-fence money earmarked for investment so it could not be diverted to shareholder payments. On 9 September, we introduced the Water (Special Measures) Bill that we are considering in the House. Yesterday, the review was announced—so we are pretty well cracking on with this as an urgent action going forward.
Lord Cromwell (CB)
Does the Minister agree with me that the failures in the UK water industry derive from extractive financial engineering, which in turn led to poor investment in infrastructure, which in turn led to the environmental failures that have become so publicly known? All these things should have been picked up by the regulators far sooner and acted on. Will the commission focus on that aspect?
Baroness Hayman of Ullock (Lab)
The commission will focus on regulation, among other things, and I urge noble Lords to input into that part. Clearly, regulation is an area of particular concern. We need to look at how it was possible for water companies to have managed to get into such appalling debt; the commission will want to look at that very carefully.
The Duke of Wellington (CB)
My Lords, I said yesterday in Committee on the Water Bill that I very much welcome this review and congratulate the Government on having instituted it. Perhaps I could probe the Minister on a particular point about the structure of regulation. In the other place last week, the Secretary of State said:
“The Commission will conduct a root-and-branch review of the water sector’s regulatory system”.—[Official Report, Commons, 23/10/24; col. 280.]
However, in the press release, among the listed objectives of the commission are:
“Better regulation: rationalising and clarifying requirements for companies … Empowered regulators: ensuring regulators are effective in holding water companies accountable”.
I hope that within the scope of the commission is the question of whether the structure of regulation is correct, in that it is divided principally between Ofwat and the Environment Agency, and whether it would not be more appropriate to have a single regulator for such an important group of monopoly companies.
Baroness Hayman of Ullock (Lab)
My understanding is that the whole structure of the regulator and anything around how effectively it has been working will be open for the commission to discuss. My understanding is also that we are not committed to any particular structure going forward and that the commission will look at the whole thing right across the board.
Baroness Young of Old Scone (Lab)
Can the Minister reassure the House on the scope and delivery of the commission? I very much appreciate that this commission is being established and that it has got such a wide remit. It very specifically says in the account of the scope and delivery that the commission will be asked to work within the framework of the UK carbon budgets and the targets of the Climate Change Act, but it does not give a concomitant assurance that it will also have to meet the requirements of the Environment Act, including the legally binding biodiversity targets in particular. Can the noble Baroness reassure us on that matter—that it will be part of the remit?
Baroness Hayman of Ullock (Lab)
The noble Baroness is right that it specifically refers to the UK carbon budget framework and the Climate Change Act. We discussed this very briefly in the Water (Special Measures) Bill yesterday during the environment amendments. The biodiversity targets set within the Environment Act are certainly ways to deliver the changes that we need and I suggest that anything that is currently in law is something that the commission would be discussing.
Baroness Parminter (LD)
My Lords, I will pick up the point that the noble Duke, the Duke of Wellington, made about regulators. While we welcome very much the independent water commission and what it will look at in its scope, last week the Secretary of State introduced another review by Dan Corry of the Defra regulatory framework, which will report before the independent water commission. I did not want to think that that might preclude any of the broader structural issues that we know need to be addressed in the water industry. Therefore, I ask the Minister: what relationship will there be between the Dan Corry review of Defra’s regulatory framework and the independent water commission?
Baroness Hayman of Ullock (Lab)
That is a really good question. I have met with Dan Corry and spoken with him about this. He is doing a very broad overview of everything; it is not limited to the water industry. His review is entirely separate from any work that the commission is doing. If there is any overlap on the effectiveness of the water industry regulators, I am sure that it will be fed into the commission as part of its discussions.
Lord Sikka (Lab)
My Lords, the water commission’s terms of reference are full of motherhood and apple pie statements. They promise to protect customers and the environment, but matters such as flooding, agriculture, waste, the pricing formula, profiteering and the failures of privatisation are beyond the scope of the inquiry. Such constraints mean that the review will not be comprehensive. Can the Minister explain why the Government have handicapped the commission from the outset?
Baroness Hayman of Ullock (Lab)
The Government have not handicapped the commission; they have given the commission a clear target, overview and scope. Where housing, planning, agriculture and drainage interlink with strategic planning for the water system, they are in scope. In some circumstances, that could include, for example, agricultural run-off or housing development—it just has to be within that scope. Having said that, just because the other areas that my noble friend referred to are not in scope of the commission, that does not mean that the Government are not taking them very seriously or not continuing to do further work on these issues.
Baroness Falkner of Margravine (CB)
My Lords, I welcome the review and, in particular, the appointment of Sir Jon Cunliffe, who, in his time regulating financial services at the Bank of England, proved his thorough understanding of regulatory frameworks. My point is about scope and timing. We are told that an advisory group will be established to inform him and that he will refer to, and consult with, expert stakeholders. After that, the commission will also publish a general call for evidence to bring in a broad range of other views, which I assume is the public part—I see the Minister nodding, so presumably there will be a public consultation. My question therefore is: does she sincerely believe that six months is adequate? This review is profoundly important and pulls together so many different strands, as others have mentioned, so it is more important to get it right than to get it on the record quick.
Baroness Hayman of Ullock (Lab)
As the noble Baroness said, Sir Jon Cunliffe is an excellent choice as chair, and we are very pleased to have him. He is already looking at who could be part of the advisory group—that is taking place—and who the broader advisers will be. We want to have it open to the public and consumers, because it is important that they too have their say. Now that we have the chair appointed, we are, as a matter of urgency, getting the other members of the advisory group in place and getting the other people involved who need to be involved, including the public, as quickly as possible.
Baroness Pinnock (LD)
My Lords, I am sure that the Minister will agree that the pollution through sewage overflows into our waterways is abhorrent and needs to be dealt with urgently. Here is the problem: the water companies have their price review—their five-year plan, if you like—to be agreed at the end of this year for the next five years. So, unless the Government are able to influence the scope and size of the agreement of investment in our wastewater pipes and treatment works, nothing will happen—well, not enough will happen —in the next five years. The danger is that the Government are putting this off until 2030. That is not acceptable. Can the Minister reassure me and many others that this will not be the case?
Baroness Hayman of Ullock (Lab)
As the noble Baroness is aware, the commission will not do anything that will impact on PR24—the price review that is due to report at the end of this year. I point out that this price review is £88 billion, as Ofwat has proposed. That is the largest investment that we have ever seen going into infrastructure. The Government were very keen that we had a really good infrastructure deal for PR24 so that we can start putting right some of the things that so badly need attention at this very early stage.
Baroness Boycott (CB)
My Lords, like everybody, I very much welcome this report. However, point 12 says that the Government are specifically ruling out looking at agriculture at the moment. Given that the public really worry about pollution and, particularly in the west of England, that so much pollution in our rivers and reservoirs comes from agriculture, when will the Government look at this? Will any further legislation come through separately from Defra to look at the waste that comes from chicken farms that affects the River Wye?
Baroness Hayman of Ullock (Lab)
The situation in the River Wye is the most dreadful example of what can happen when you get too much run-off from agriculture. We are looking at what needs to be done around the River Wye in particular, but we are looking more broadly at how we manage pollution from agriculture. I met my colleague Daniel Zeichner, the Minister for Farming, only earlier today, and we discuss these issues on a regular basis. Although agriculture is in scope only where it interacts with water regulation, that does not mean that we are not serious about tackling the problem. It is a huge part of this; I think that over 40% of pollution in our rivers comes from agriculture. It is very much high on the Government’s agenda.
Lord Cromwell (CB)
I urge that the commission takes a serious and practical look at resourcing. The Environment Agency has had its budget halved in the last decade, and it is pointless producing complicated recommendations if they are not going to be resourced—something which we as legislators do far too often.
Baroness Hayman of Ullock (Lab)
The noble Lord makes an extremely good point. Resources and enforcement are a crucial part of ensuring that any legislation is delivered.
The Earl of Devon (CB)
My Lords, the Minister has indicated how quickly the Government have sought to address this issue, but they very quickly announced the intention to develop 1.5 million new homes across the country. We are all aware that there are development deserts across the country, particularly catchments affected by the nutrient neutrality rules on phosphates and nitrates. I have also heard that the Environment Agency has declined a number of major developments, including around Oxford and Cambridge, due to lack of available water to supply those new developments, as well as lack of suitable sewerage to remove waste. Will the commission focus, and how quickly will it be able to do so, on the limitations that the poor performance of our water companies is placing on the Government’s ambitious agenda for economic and housing development?
Baroness Hayman of Ullock (Lab)
As the noble Earl heard, the commission has a very wide remit. I ask him to feed in anything like this that he feels it should be giving attention to. On housing and nutrient neutrality, we have ambitious housing targets, and Defra and the MHCLG are working together on how we can protect the environment and look at what needs to be done in the area of drainage. On water shortages, one of our manifesto pledges, and something we are very keen to work on, is the introduction of new reservoirs. We have not had new reservoirs for over 40 years in this country, and it is absolutely critical that we move forward on that.
Water (Special Measures) Bill [HL]
Baroness Hayman of Ullock ExcerptsMonday 28th October 2024
(3 weeks, 5 days ago)
Lords ChamberRead Full debate Water (Special Measures) Bill [HL] 2024-26 View all Water (Special Measures) Bill [HL] 2024-26 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 17-I(b) Amendments for Committee (Supplementary to the Marshalled List) - (28 Oct 2024)
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lords, I thank all noble Lords who have put forward amendments relating to the financial management of water companies. I will start with Amendment 10, tabled by the noble Lord, Lord Cromwell.
Ofwat has a core duty under Section 2 of the Water Industry Act 1991 to ensure that companies can finance the proper carrying out of their statutory obligations. Ofwat already monitors the financial position of water companies and can take action when companies need to strengthen their long-term financial resilience. However, we recognise that some companies will need to take further steps to strengthen that financial resilience. Ofwat has required further assurance from these companies about their financial resilience into 2025 to 2030 and beyond, and the annual monitoring financial resilience report is due to be published this autumn and will provide a publicly available assessment of the financial resilience of each water company. I say to the noble Lord, Lord Cromwell, that we met and discussed these concerns previously. Clearly, the commission that we have talked about a lot today will look at performance and resilience, but I am very happy to discuss this with him further as we move forward through the Bill.
Turning to Amendment 86, tabled by the noble Lord, Lord Remnant, I emphasise that there is a high bar for the introduction of a special administration regime and the Government do not expect to have to use this power. A special administration regime will be required only when there is evidence that a company is insolvent or in serious breach of its statutory duties. The noble Lord’s amendment is to Clause 10, and Clauses 10 and 11 are designed to introduce new powers for the Secretary of State and Welsh Ministers to modify water company licences to cover any shortfall that results from a SAR. Government funding may of course be required to cover the costs of a special administration, and these clauses mean that the Government will be able to recoup any taxpayer money spent during a SAR that cannot be covered upon exit from the SAR, either by rescue or by transfer. I wanted to make that clear. Of course, in the unlikely event that the power in the Bill is used, it allows the Secretary of State or Welsh Ministers to decide, subject to consultation, the rate at which the shortfall is recovered. I hope the noble Lord is therefore reassured that any intervention would be considered very seriously and as a last resort.
I turn now to Amendment 92, tabled by the noble Lord, Lord Roborough. Water companies are allowed to raise debt to fund the delivery of their services and it is for companies to decide their financial structure. At sensible levels—that is the key point—debt can be an appropriate way to fund essential investment. Sustained investment in the water industry will continue only if the shareholders of companies can expect a fair return. This amendment may therefore threaten the ability of companies to attract investment if limits on borrowing are imposed.
I reassure the noble Lord that Ofwat already has appropriate powers to prevent dividends where they would threaten financial resilience. I appreciate that the noble Lord has extensive experience in this area, but I hope he understands why we cannot accept this amendment, because it is vital that we ensure companies are able to finance their functions. If he would like to send in more information about this, I would be very happy to receive it and have a look.
Finally, I once again highlight that the new independent water commission, led by Sir Jon Cunliffe, the former Deputy Governor of the Bank of England, will review the current water industry regulatory framework to ensure that it attracts investment and supports financial resilience for water companies. I once again thank noble Lords for their suggestions and input into this discussion on the financial management of water companies.
Lord Cromwell (CB)
I thank everyone who has participated in this. I think we are all concerned about financial engineering of one sort or another. It is not only borrowing, but that is clearly an important part of it. I am sorry that the amendments have not passed muster, but I look forward very much to further discussions with the Minister, as she offered. I beg leave to withdraw the amendment.
Baroness Hayman of Ullock (Lab)
My Lords, I thank the noble Baroness, Lady McIntosh of Pickering, for her amendments relating to Ofwat’s duties. I will take Amendments 11 and 12 together.
As I have previously noted, public trust in the water sector has been severely damaged, and the number of serious pollution incidents is increasing, yet companies are still paying out millions in bonuses. To rebuild public trust, we are creating a new framework to support accountability, including the new rules relating to remuneration and governance. As the independent economic regulator of the water industry, Ofwat will be responsible for developing these rules.
However, the Government are clear that environmental standards are a vital component of performance. As such, the Bill requires the forthcoming rules to include standards that relate to the environment. The noble Lord, Lord Blencathra, has mentioned the devastation that flooding can bring; I reassure him and other noble Lords that I completely understand why it is so important for us to tackle flooding. I live in a house that has been flooded—living in Cumbria, you are always aware of these issues.
With regard to the Flood and Water Management Act 2010 specifically, while the Act includes provisions relating to sustainable drainage, it does not prescribe or define any environmental standards capable of being applied in this context. It would therefore not be appropriate to include reference to standards in this legislation within Ofwat’s rules, as Ofwat does not have any functions or expertise in relation to the technical requirements prescribed under the Flood and Water Management Act 2010.
The noble Baroness, Lady McIntosh, suggested that Defra should take ownership of delivering this. The issue we have is that it also impacts directly on development and developers, which is why the Government are currently working with the Ministry of Housing, Communities and Local Government to assess how best to implement their ambitions on sustainable drainage, while also being mindful of the cumulative impact of the new regulatory burdens on the development sector. At this stage, I do not want to pre-empt the outcome of that process.
On this basis, the Government do not accept either of the amendments from the noble Baroness. However, I would like to say that the noble Baroness knows that I am very sympathetic to her concerns. As she said, we have discussed this previously. If she is willing, I suggest that we look to arrange a meeting between herself, myself and MHCLG, in order to discuss this further, where she can clearly explain her concerns to both departments—Defra and MHCLG—that have responsibility for moving forward on this.
Baroness McIntosh of Pickering (Con)
My Lords, I am most grateful to all who have spoken, and in particular for the support of the noble Baroness, Lady Pinnock, and, from a sedentary position, the noble Baroness, Lady Parminter, as well as my noble friend Lord Blencathra. He referred to the flooding. I was actually a candidate—at a very early age—for Workington in 1987. I went back and visited as a shadow Minister during the severe floods of 2007 and 2009, so I am well acquainted with the pressures faced by Carlisle, Keswick and Cockermouth. It was very sad to see that many of the residents felt that they could not afford to take out insurance in those floods.
I will add that it is not just flooding that concerns me; it is the surface water going into the combined sewers taking the sewage from the new developments that do not have mandatory SUDS that is causing the problem.
I would like to take up the Minister’s offer. It would be good to have the meeting before Report, because I would be prepared to come back with these amendments then. Alternatively, if the department wish to come forward with even better amendments that achieve the same end, that would be very welcome.
Lord Remnant (Con)
My Lords, I am delighted that Amendment 26 in my name falls into the same grouping as those in the name of my noble friends Lord Roborough and Lord Blencathra. Although I very much regret that your Lordships’ time is having to be spent on potentially amending proposed legislation that has retrospective effect, it gives me the opportunity very much to support the arguments advanced by my noble friend Lord Roborough in support of Amendments 14 and 15.
It cannot be right retrospectively to override contract law with respect to employment contracts freely entered into by company and individual in line with relevant legislation and regulations in force at the time. Similarly, to the extent that, today, pay can be recovered from senior individuals under malus and clawback provisions in listed companies’ remuneration policies, such a draconian power can rightly be exercised only in extremely limited circumstances known in advance by the individual. The proposed exercise of the pay prohibition in the Bill retroactively goes way beyond accepted remuneration practice, and unacceptably so.
On my own amendment, I will not repeat the general arguments made by my noble friend against the principle of retroactive or retrospective legislation. I am no lawyer, so I hope that your Lordships will forgive me if I perhaps erroneously use the terms interchangeably. The offending principle, though, remains the same. The general rule in this country, and indeed in most modern legal systems, is that legislative changes apply prospectively. If we do something today, we feel that the law applying to it should be the law in force today, not tomorrow’s backward adjustment of it.
The Bill proposes that the provisions about performance-related pay apply from the financial year beginning 1 April 2024. We are currently some seven months into that financial year, and the Bill will not be enacted for some months hence. In effect we are talking about backdating the provisions for the best part of a year. The remuneration arrangements entered into between senior individuals and their employer will have been agreed under remuneration policies agreed by shareholders well before April for them to take effect from 1 April 2024. It surely cannot be right, whatever the merits of the Bill, for its provisions subsequently to alter those arrangements and the remuneration paid, or to be paid, under them.
Few things concern investors more than retrospective legislation, and listed companies will need to consult with and seek approval from shareholders on changes to remuneration policies at their AGM. Requiring retrospective changes risks companies breaching shareholder-approved remuneration policies. More fundamentally, it will undermine investor confidence at a time when they are being asked to fund a record investment programme.
My amendment would simply change the date from which the performance-related pay provisions come into effect from a historic 1 April 2024 to a mildly prospective 1 April 2025. Is that really too much to ask, to avoid breaching a fundamental legal principle? I do not think so and I hope that the Minister will agree with me.
Baroness Hayman of Ullock (Lab)
My Lords, I thank all noble Lords who have stuck with us this evening and carried on the debate. We know that the public have been clear that they want to see change and that where performance is poor, executives should not receive large salaries or bonuses.
I will start with Amendments 14 and 15, tabled by the noble Lord, Lord Roborough. The conditions of existing employment contracts may not align with Ofwat’s new rules. Our concern is that Amendment 14 may prevent Ofwat being able to apply its rules even when performance has not met the required standards. On Amendment 15, it is also right that where companies breach Ofwat’s rules on performance-related pay, Ofwat should be able, if it considers it appropriate, to require the company to recover any payment made in breach of the rules. Linking pay to performance should incentivise decision-making, resulting in improved outcomes for customers in the environment. I reiterate what I said earlier: should companies meet their performance expectations, executives can still be rewarded. So I hope that the noble Lord will understand why we will not accept his amendments.
I turn to Amendment 26, tabled by the noble Lord, Lord Remnant. This legislation will ensure that Ofwat is able to implement rules on performance-related pay in the current financial year. However, I listened really carefully to the speech that the noble Lord just made introducing his amendment. I would really like to understand his concerns better, so I wonder whether he would welcome further discussion on this matter so that we can look at it in more detail. I would very much appreciate it if the noble Lord was prepared to do that. But currently we are not going to accept the amendments as we feel that they would prevent meaningful implementation of the rules.
Lord Roborough (Con)
My Lords, I am grateful for the Minister’s reply. We respect that this is an election manifesto commitment and therefore needs to be in the Bill in some form, but my noble friend Lord Remnant and I would both like to discuss further with the Minister, if possible, how we can help to improve this part of the Bill. In the meantime, I beg leave to withdraw my amendment.
Baroness Hayman of Ullock (Lab)
My Lords, how nice to have a quick last group. I thank the noble Lord, Lord Roborough, for introducing the last group of today with his Amendment 19, which seeks to specify the criteria to be covered by the rules on fitness and propriety, ensuring that senior leaders meet the public’s expectations.
I have mentioned Ofwat’s consultation on remuneration and governance before, and I would just like to confirm to the noble Lord that this consultation references similar criteria to those proposed by his amendment. Ofwat’s consultation seeks views on whether it would be appropriate to include a concept of “ability” in the new test, defined as an individual having adequate knowledge and understanding of the duties of the undertaker. Ofwat has stated its intention to design a fit and proper person test with criteria that will improve public trust and company culture in the water sector, having considered how other sectors are regulated around these same principles. I hope this captures the noble Lord’s concern that standards of fitness and propriety will need to be relevant and encompass concepts of knowledge and understanding. Of course, we feel that Ofwat’s independence is an important part of the trust that companies have in the regulatory regime.
The noble Lord asked why we felt Ofwat should be setting these criteria. We think it is right that Ofwat has the opportunity to consult on these criteria and that companies then have the opportunity to respond and perhaps propose different criteria. It needs to be a situation where Ofwat can then tailor these fitness and propriety standards to the water industry, rather than having prescriptive standards set out within the primary legislation. It is important that Ofwat’s independence is clearly upheld, because it will support its ability to hold senior officials to account for their actions.
Ofwat also notes in its consultation that the 16 largest water companies have a licence condition that requires them to meet the four objectives of its board, which are leadership, transparency and the governance principles. These objectives include the requirement for boards and board committees to have the appropriate balance of skills, experience, independence and knowledge. I hope the noble Lord is content that this is already being looked at; I hope that he will look at the consultation and therefore see that his amendment is no longer necessary.
Lord Roborough (Con)
My Lords, I am grateful for the Minister’s reply, and it is certainly very helpful. Perhaps something I could have brought out more in my initial comments were the concerns over accountability. When I look at the FCA’s senior manager regime, and the fit and proper tests, none of that is here—nowhere is there any accountability to Parliament. We will take the Minister’s comments away and give this further thought. I beg leave to withdraw the amendment.
Water (Special Measures) Bill [HL]
Baroness Hayman of Ullock ExcerptsMonday 28th October 2024
(3 weeks, 5 days ago)
Lords ChamberRead Full debate Water (Special Measures) Bill [HL] 2024-26 View all Water (Special Measures) Bill [HL] 2024-26 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 17-I(b) Amendments for Committee (Supplementary to the Marshalled List) - (28 Oct 2024)
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lords, I thank the noble Baroness, Lady Willis of Summertown, for her interest in and general support for the Bill. I am sure that, despite missing Second Reading, she will make a very valuable contribution to Committee.
As I set out at Second Reading, the purpose of this Bill is deliberately narrow in order to improve water industry performance as an urgent priority. On her Amendment 1, I agree with the noble Baroness that addressing the wider issue of river pollution arising from water and sewerage companies’ operations is of critical importance, as of course is meeting our biodiversity targets. The noble Baroness, Lady Parminter, said that she hoped I was not going to just refer to the review, and I am sure she will be delighted to know that I am not.
The noble Baroness, Lady McIntosh of Pickering, made the important point that we already have commitments in law on this; we already have targets that we need to be meeting on biodiversity and the wider environment. It is important to stress that we must have regard to the Climate Change Act in this space. The Government are already required to meet the legally binding targets under the Environment Act 2021 and the Climate Change Act 2008, and to set out their plans to adapt to the impacts of the changing climate.
As the noble Lord, Lord Blencathra, just mentioned, we are doing a rapid review of the environmental improvement plan. This is because we are serious about meeting the Environment Act’s biodiversity targets. We did not feel that it was fit for purpose to meet those targets, which is why we are doing this review—to protect and restore our natural environment and come up with a delivery focus to help meet very ambitious targets.
Ofwat—I think the noble Baroness, Lady McIntosh, mentioned this—has a core duty under Section 2A of the Water Industry Act 1991 to work towards strengthening resilience. This duty ensures that Ofwat is already required to promote long-term planning for water companies to adapt to environmental pressures, including climate change. I take on board the comments of my noble friend Lady Young of Old Scone, who felt that Ofwat at some point lost the plot. This is why we need to look at the role of regulators through the review—I am afraid I will be mentioning the review from time to time today.
I hope that the noble Baroness, Lady Willis, is reassured that the Government share her ambition to tackle the wider issues of river pollution, biodiversity and climate change. I hope she understands that, because we feel we are already acting in this space through legislation that is in place, we will not accept Amendment 1.
Amendment 91 was also tabled by the noble Baroness, Lady Willis. In addition to the duty under Section 2A, Ofwat has a core duty under the Water Industry Act to work to ensure the long-term resilience of water companies’ supply and sewerage systems. Furthermore, on 23 October the Government announced the independent commission into the water sector and its regulation. This is intended to be the largest review of the industry since it was privatised, and part of the development of further legislation, not just a review. We want it to have a positive end in tackling the problems we see in our water industry. The objectives of this independent commission will include ensuring that the water industry regulatory framework delivers long-term stability to restore our rivers, lakes and seas to good health, to meet the challenges of the future and drive economic growth.
I hope the disappointment of the noble Lord, Lord Blencathra, will be replaced with excitement when he sees that these will form the basis of this further legislation to attract long-term investment and set out recommendations to deliver a collaborative, strategic and, importantly, catchment approach to managing water, tackling pollution and restoring nature.
The noble Baroness, Lady McIntosh, made a specific point about the impact assessment. I do not have the assessment in front of me, so I am not entirely sure what section she was referring to. I hope she and I can catch up following Committee and discuss this, so I can answer her questions in more detail.
The commission’s terms of reference do include environmental aspects. The commission’s objectives include to “support best value delivery” of environmental outcomes, and to:
“Rationalise and clarify requirements on water companies”
to achieve better environmental outcomes. Furthermore, under “approach and deliverables”, it says that the chair
“will invite views from an advisory group of nominated experts, covering areas including the environment”,
and
“will also seek views from wider groups of stakeholders, including environmental campaigners”.
Therefore, we are trying to make sure that, as well as meeting the targets already in legislation, we put the environment at the heart of what we are doing.
I hope that the noble Baroness, Lady Willis, is reassured that these two new Clauses are unnecessary as they overlap with existing government requirements, Ofwat’s core duties and our ambitions for the future. I hope she will take an active part in what we are trying to achieve with the commission, and I thank noble Lords for their engagement on these important matters.
Baroness Willis of Summertown (CB)
I thank the Minister and everybody else who has contributed to this discussion on my amendment. I am not going to repeat the valid and important points that have been made, but I will respond to the noble Baroness, Lady McIntosh, on the term “caution on costs”. There is a lot of debate about costs, and nature-based solutions can often be much cheaper while also elevating biodiversity. For the last 20 years we have been told to be cautious about costs and on-costs, and as a result our species targets have gone down and down. The time has come to redress that balance, and I look forward to debating this another time.
On the commission, I appreciate the Minister’s comment that we already have commitments to the environment in the Environment Act and the Climate Change Act. However, I was shocked when I discovered over the weekend that, according to the list of protected species that we want to stop the decline of by 2030—not 2035—25% of plants and birds and 100% of freshwater invertebrate species rely on clean rivers. Therefore, while I am delighted about the commission and will absolutely get behind it and join in, it is going to be too slow and too late to achieve the biodiversity targets we set out in the Environment Act. I look forward to picking up this issue on Report, but for now I beg leave to withdraw the amendment.
Baroness Hayman of Ullock (Lab)
My Lords, clearly, public trust in the water sector has been severely damaged and the number of serious pollution incidents is increasing, as we heard very clearly from my noble friend Lord Sikka when he introduced his amendments. At the same time, companies have been paying out millions in bonuses. To rebuild public trust, the Bill enables Ofwat to issue new rules on remuneration and governance to ensure that companies and executives are subject to robust oversight and held accountable for failure. I thank the noble Lords who have tabled amendments relating to the application of these rules.
I will start with Amendment 2, tabled by the noble Baroness, Lady Bakewell of Hardington Mandeville. I thank the noble Earl, Lord Russell, for introducing it on the noble Baroness’s behalf and wish her all the best from these Benches. I also listened with interest to the suggestions made by the noble Duke, the Duke of Wellington. Clearly, he and the noble Earl, Lord Russell, had different opinions on the wording. Our approach is intended to strike a balance between the approaches suggested by the noble Lords, to give Ofwat some flexibility while ensuring that it issues rules in relation to our priority areas.
However, I emphasise that the provisions in the Bill state that Ofwat must exercise its power to set rules in relation to performance-related pay, fitness and propriety, and customer representation. Ofwat may also make rules about other remuneration and governance arrangements at its discretion, but it must take action regarding the specific matters referred to in the Bill. We are pleased that Ofwat is already taking action to implement these rules through the publication of its consultation announced on 22 October. This was referred to by number of noble Lords, including the noble Lord, Lord Remnant. I hope the noble Earl will tell the noble Baroness that we hope that this has reassured her that her amendment is unnecessary.
I turn to Amendment 3, tabled by the noble Lord, Lord Remnant. Ofwat has a range of primary duties, including acting to protect the interests of consumers, ensuring that companies properly carry out their functions, and securing that companies are able to finance the delivery of their statutory obligations. I assure the noble Lord that Defra has worked to assure agreement with companies to update their articles of association to place customers and the environment at the heart of business decisions which impact on consumers.
The noble Lord is correct that I am going to say that Ofwat’s existing duties are already consistent with the outcomes that this amendment aims to ensure. This includes ensuring due consideration of the human and capital needs of the sector. He also raised concerns about influencing Ofwat. The current consultation that I have referred to is an initial policy consultation which has been launched with the express purpose of inviting views early. This will be followed up with further statutory consultations, which will also take into account the views shared through this initial policy consultation.
I thank the noble Lord for bringing his knowledge and experience to the development of this legislation. It is very valuable to hear his contributions. However, I hope that he is reassured that, in setting the rules about remuneration and governance, Ofwat will continue to act in accordance with its core duties and understands that it is for this reason that the Government will not accept the amendment.
Amendment 25, tabled by my noble friend Lord Sikka, and Amendment 27, tabled by the noble Lord, Lord Roborough, relate to the timing and process for setting the rules for remuneration and governance. My noble friend took the opportunity to lay out clearly the many concerns around the behaviour of water companies and the ability of regulators to hold them to account. Ofwat is required to undertake statutory consultation with the relevant persons, which includes the Secretary of State, before any rules are finalised. Allowing Ofwat to set rules in this way, rather than through legislation, will enable those standards to be more easily amended, subject to the relevant procedural requirements, where it is appropriate to do so in the future. The Government and Ofwat agree that the rules should be in place as soon as possible after Royal Assent, and Ofwat intends to implement them following its statutory consultation, which, as I previously mentioned, has already been launched. I hope the noble Lords are therefore reassured their amendments are not necessary.
Finally, Amendment 101, tabled by my noble friend Lord Sikka, relates to dividend payments. Sustained investment in the water industry will continue only if the shareholders of companies can expect a fair return. Ofwat already has the power to stop the payment of dividends if they would risk the company’s financial resilience and to take enforcement action if companies do not link dividends to performance for consumers and the environment. The amendment risks deterring much needed investment in the sector. I highlight that the Government’s new independent water commission will look at how we can improve the regulatory framework to attract investment and support financial resilience for water companies. I hope this is helpful in explaining to my noble friend why the Government will not accept his amendment.
A few noble Lords talked about the importance of investor confidence and the impact that we could have on this and talent in the water industry. While we believe it is right that companies and their executives are held to account for basic and fundamental performance requirements, it is important that, should companies meet their performance expectations, executives can still be rewarded. The proposed £88 billion in investment under PR24 is the largest ever in the water sector and has the potential to create up to 30,000 new jobs. It is crucial that the sector can recruit the talent it needs to deliver the PR24 proposals, because improving the performance of the water industry will help the industry attract and retain talent. Private sector investment is also at the core of how we grow the economy, and the Bill is designed to deliver a clear and consistent regulatory framework for the water industry and its investors. Noble Lords may be interested to know that on 10 September Defra and Treasury Ministers held a round table with investors where they outlined how the Government will work in partnership to attract the billions of pounds in private sector investment that are desperately needed if we are going to clean up Britain’s rivers, lakes and seas.
Finally, I assure the noble Lord, Lord Roborough, that I always try to get on well and work constructively with everybody, including Ofwat. I once again thank the noble Lords for their suggestions and input to this discussion on the general application of the rules for remuneration and governance.
Earl Russell (LD)
My Lords, I thank the Minister for her comments. The noble Duke, the Duke of Wellington, put forward an interesting idea on issuing guidance, and it is one that I will take back to my noble friend for further consideration. The noble Lord, Lord Remnant, talked about the lack of ability to scrutinise the rules, the need to attract talent and the carrot and stick approach. The noble Lord, Lord Sikka, talked about broken trust, the poverty of regulations and the level of convictions in the water industry. His Amendment 101 would curb excessive dividends, financial engineering practices and practices inflating the worth of companies. The noble Lord, Lord Roborough, n his amendment said that rules must be published within six months and he talked about the powers of Ofwat being unchecked.
Baroness Hayman of Ullock (Lab)
I thank noble Lords for their interest in the rules relating to performance-related pay. The public have been clear that they expect to see change in the performance of the water industry and, where performance is poor, that executives should not receive bonuses.
I turn to the amendments in this group: Amendment 4 from my noble friend Lord Sikka and Amendment 18 from the noble Lord, Lord Remnant. I thank them for their introductions and their unexpected agreement. I also thank the noble Baroness, Lady Pinnock, for sharing her experience of working with Yorkshire Water; these shared experiences are important as we develop the legislation going forward.
In line with the general principles of regulatory independence, Ofwat will rightly be responsible for developing and enforcing the rules on remuneration in governance, including determining the individuals in scope. As I mentioned in the previous group, Ofwat published its policy consultation on 22 October, and this will run through to 19 November. This consultation is to design the rules that are outlined in the Bill.
In response to the noble Lord, Lord Roborough, I will say that the consultation sets out Ofwat’s intention to apply rules on performance-related pay only to executive directors who are members of the regulated company board and receive performance-related pay. Ofwat has also stated in its policy consultation that it intends for the rules relating to fitness and propriety to apply in the first instance to chief executives and individuals appointed as directors to the board, and that would include both executive and non-executive directors. But Ofwat may consider extending the rules to other senior management roles in the future.
Allowing Ofwat to set out in the rules the performance metrics to be applied will also enable those standards to be more easily amended, subject to the relevant procedural requirements, where or when it is appropriate to do so in the future. Ofwat will of course need to consult with the relevant persons, and this will include the Secretary of State, Welsh Ministers, the Consumer Council for Water and other stakeholders, before these rules are finalised.
In conclusion, the Government will therefore not be accepting these amendments, because we need to ensure that Ofwat can retain the flexibility to expand the group of persons covered by the rules in future if appropriate.
Lord Sikka (Lab)
My Lords, I thank all noble Lords for their contributions to this debate and I am sure that some of the issues will return. Perhaps I may just clarify a point. The Bill also holds out the possibility of criminal sanctions against directors. Are we to assume that non-executive directors will never be charged with anything? The Post Office scandal shows that non-executive directors were culpable, so there appears to be a case for including them in some of these considerations. I am sure I will read Hansard with considerable interest and possibly return next time. For the time being, I beg leave to withdraw the amendment.
Baroness Hayman of Ullock (Lab)
My Lords, I am grateful to noble Lords for their suggestions regarding matters we need to be considering in the rules for performance-related pay. As I previously noted, to rebuild public trust we are creating a new framework for supporting accountability. As part of this, Ofwat will be issuing new rules on bonuses, including standards relating to environmental performance.
I turn to Amendment 5, tabled by my noble friend Lord Sikka. In recent years, public concern has been focused on water company bonuses, particularly in the instances where performance has been poor. Companies must work to regain their customers’ trust, including by holding those in senior roles accountable so that their remuneration better reflects the service that customers rightly expect. We are giving Ofwat new powers to issue rules on remuneration and governance to ensure that companies and executives are held accountable for failure and to drive improvements in performance. We are requiring Ofwat to exercise these powers to prioritise making rules to prohibit bonuses for underperforming companies.
Ofwat already sets expectations on executives’ performance-related pay. This measure will strengthen its existing powers to ensure that bonuses are not paid in any financial year in which standards are not met. Ofwat’s rules on remuneration will cover both financial bonuses and bonuses in kind, limiting any potential loopholes in the policy. We believe that performance-related pay can be an effective tool within the overall remuneration package and will incentivise leaders to focus on improvements that can transform performance. Remuneration committees for each water company independently determine the appropriate level of remuneration for their executives. We therefore do not propose to amend the requirement on Ofwat to make rules to cover total remuneration.
Amendments 6 and 28 were tabled by the noble Baroness, Lady Bakewell of Hardington Mandeville, and ably introduced by the noble Earl, Lord Russell. These relate to the consideration of environmental standards in the rules for remuneration and governance. In line with the general principles of regulatory independence, Ofwat will rightly be responsible for developing and enforcing these rules. However, the Government are clear that environmental standards are a vital component. Ofwat must, following consultation, provide that environmental standards have to be met by companies if performance-related pay is to be given to persons holding senior roles. Ofwat’s policy consultation, which we have previously discussed, proposes that bonuses will be prohibited if a company has had a serious category 1 or 2 pollution incident in the preceding calendar year.
The noble Lord, Earl Russell, asked for some figures. I can tell him that, since 2015, enforcement action by the EA and Ofwat has resulted in over £400 million in fines to water companies or money back for customers. I hope that noble Earl is therefore reassured that this new clause is unnecessary, noting that Ofwat must already include environmental criteria when designing the rules in relation to performance-related pay.
Lord Blencathra (Con)
My Lords, I thank my noble friend Lady McIntosh of Pickering for moving this important amendment, which has caused a little bit of welcome excitement in the Committee. Both Amendments 7 and 8 seek to ensure that senior executives do not receive a financial penalty for failures that were not their fault or within their control, and we on these Benches feel that the noble Baroness’s amendments merit consideration by Ministers. The intervention by the noble Lord, Lord Cromwell, at the end also merits some consideration.
It is right that the Government should take steps to ensure that, when a water company fails to meet the standards set by Ofwat, the responsible executive is held to account. While it is right that company directors take responsibility for the successes and failures of a business, under the Bill, other senior officers, who may not be members of the board of directors, could be penalised under these rules. The argument that the relevant senior executive is held responsible, rather than an officer of the company who was not responsible for the decision, is a simple one. Rather than applying financial penalties to all senior executives, including those below board level, these rules should penalise only those who are responsible for the company’s conduct.
It is quite a long time since I last worked in industry, but I do not think that much has changed to this day. Who is responsible depends on the level of direct supervision by a more senior officer. At lower levels of a company, it is quite straightforward: the supervisor or the foreman has minute-by-minute relationships with the team under him or her, so they could be held responsible for faulty work or bad behaviour by their workers. But that is at the lower level. As you get higher up a company, the whole ethos changes. Executives are supposed to set objectives and delegate to their other officers how it is done. The CEO, or directors, tell officers under their command, “Here are your legal duties and these are the company objectives. Here are your own personal targets and objectives—report to me weekly, monthly or whatever on how you are progressing. Now, just get on with it”.
There is no direct day-to-day supervision, and the CEO has to trust that the senior officers below him or her obey the law, behave properly and do not cause the breaches that we are concerned about. It would be wrong to blame and reduce the pay of CEOs or directors based on a mistake by a person under him or her where they have no direct control. Of course, the exception would be in the extraordinary circumstances in which the CEO or executive director gave instructions to the worker to break the law or not to care about the rules. That would be a different matter.
Without these amendments, we are concerned that it may prove difficult to find professionals willing to take on senior roles at water companies if there is a risk they will suffer an unfair loss of performance-related earnings through no fault of their own. It is a basic principle of performance-based pay for employees below board level that it should be tied to their performance as an employee within a team. It would not be an effective incentive scheme if one individual or team were deprived of their performance-related benefits because of the behaviours of failures of another individual below board level. As we discussed at Second Reading, arbitrary punishment will not improve performance; it will only encourage people to seek employment outside the water sector.
If we are to deliver the improvements to the water sector that the British people rightly expect, we must attract more talent to the sector through a fair incentives and penalties regime. The Bill is a bit too broad and could permit rules to be applied to the sector by Ofwat that are unfair and ineffective. Furthermore, when a current bonus scheme, or contractual bonus, provides for the bonus to be payable on the achievement of certain performance conditions, and the performance conditions have been met, an employer is, in effect, obliged to award the bonus. In cases where an employer may grant discretionary bonuses, employers are required to exercise this discretion honestly and in good faith, not to exercise it in an arbitrary, capricious or irrational way, and not to breach the implied term of trust and confidence.
It concerns me that, should the Government choose not to include these amendments in the Bill, and individuals’ performance-related pay was docked for actions or responsibilities beyond their control or remit, it would put the employer in a position of complying with the requirements of rules created by Ofwat under this Bill but then acting contrary to these common-law and contractual requirements. That leads to a concern that this scenario could result in costly and time-consuming litigation, thus diverting funds which would otherwise be better spent improving our water and sewage systems. Therefore, I encourage the Government to accept these amendments so that, should a water company fail to meet the standards set by Ofwat, only the relevant executives are held responsible. However, if the Government are unwilling to put this on a statutory footing, we hope that Ofwat would be willing to enact these principles under its rules, which could be overseen by the House under Amendment 27 as an affirmative instrument.
I want to comment on the points made by my noble friend Lady McIntosh of Pickering on surface water. I put it this way: if we were starting again from scratch a couple of hundred years ago, we would have designed a system whereby we never had rainwater from gutters or car parks running off into Mr Bazalgette’s sewage system—but we are where we are now. In an ideal world, two pipes would come into every house and, as the noble Lord suggested earlier, one would have clean water for drinking and the other water for flushing the toilet or for hose pipes. We cannot go back and do that now—but what we can do is look at new developments, and I hope that the Government will consider the suggestion from the noble Lord, Lord Cromwell, in that regard.
I understood that it is possible if one is building a car park, before one puts in the hardcore, to lay a whole series of ooze pipes and then collect all the rainwater run-off, so it replenishes the underground stream by putting the water back into the subsoil. That should be possible. Whatever it is, we need to look at new developments to ensure that surface water is not unnecessarily going into our sewage system. I hope that the Minister will carefully consider what my noble friend Lady McIntosh of Pickering has said.
Baroness Hayman of Ullock (Lab)
My Lords, through provisions introduced by Clause 1, Ofwat will be able to issue new rules on remuneration and governance to ensure that companies and executives are subject to robust oversight and held accountable for failure. Among other things, these rules will ensure that executives will no longer be able to take bonuses where companies fail to meet standards on environmental performance, financial resilience, customer outcomes or criminal liability.
Amendments 7 and 8, introduced by the noble Baroness, Lady McIntosh of Pickering, seek to ensure that these rules apply only in instances where the failure to meet the required standards is due to a failing by that individual and not another person. I start by reassuring the noble Baroness that, should companies meet their performance expectations, executives will rightly be rewarded. However, the changes proposed through Amendment 7, in particular, would make it more difficult for Ofwat to implement the rules on remuneration and governance in a meaningful way. This is because it would introduce an additional test to be met before the bonus ban could be applied, where a link between the specific actions of an individual senior leader and the performance failings of a company as a whole might be difficult to demonstrate.
Senior executives are also collectively responsible for the actions of the company and therefore should be held responsible for poor performance. However, having said that, Ofwat has stated, in the policy consultation it published last week, that, while it intends for the rules to apply to most performance-related pay decisions by water companies,
“there may be … exceptional circumstances where a payment should not be prohibited”.
For example, if an incident leading to a rule breach was clearly and demonstrably beyond the control of the company, this could be grounds for an exemption from the ban.
Considering the changes proposed by Amendment 8, we also consider it unlikely that individuals in senior roles will fail to meet Ofwat’s future standards of “fitness and propriety” due to a failing on the part of another person. The potential criteria proposed by Ofwat in its consultation to measure “fitness and propriety” include character, previous conduct, and knowledge. These criteria are specific to the individual, rather than the performance of the company, and do not obviously relate to acts by other persons.
I just want to mention an issue that the debate moved on to, around drainage and SUDS. We are going to be discussing SUDS further in group 8, so we shall talk about that then, but I want to assure the noble Baroness that we are engaging with officials in MHCLG, because it is really important that we have a proper discussion around planning and drainage as we move forward with development. I am very aware of the problems that surface water can cause in new development if it is not thought through properly.
The noble Lord, Lord Cromwell, drew the Committee’s notice to the commission and asked whether it would be discussed there. I will draw the Committee’s attention, for interest, to part of the scope of the commission:
“Where housing, planning, agriculture and drainage interlink with strategic planning for the water system, these are in scope. ... The commission should have regard to how the water sector regulatory system provides the certainty around the provision of water infrastructure needed to underpin development plans, housing growth and sustainable development, while strategically protecting and enhancing the environment. This should include how regulation and planning for water infrastructure and for residential and commercial development can work together more effectively to anticipate and invest to provide for future growth, to quickly resolve and prevent issues where water and wastewater capacity constraints may otherwise inhibit necessary development (such as through their impact on requirements for water and nutrient neutrality)”.
So, although it is not entirely dealing with the issue around SUDS, I think it is something we need to explore further with the housing department, for example, and with local government. There is an opportunity to look at development and water within the scope of the commission. I hope that is helpful for noble Lords to understand.
I hope I have reassured the noble Baroness that the rules will be applied to individuals in a proportionate manner, and made clear why the Government consider these amendments to be unnecessary.
Baroness McIntosh of Pickering (Con)
My Lords, I am grateful for the opportunity to debate in some depth these two amendments. I just clarify that the automatic right to connect is very different from SUDS and I do not think the noble Baroness addressed that point. I still have reservations, because I believe it is inappropriate in terms of Clause 2 to speak about pollution incident reduction plans when so many of the sewage discharges can self-evidently be found not to be the responsibility of water companies at all. As the noble Lord, Lord Cromwell, so eloquently and appropriately recorded, these incidents are only going to increase as we see the number of major new developments of four-bedroom and five-bedroom houses increase.
Lord Roborough (Con)
My Lords, I thank the noble Earl, Lord Russell, for moving the amendment. I want to speak in support of Amendment 22, from my noble friend Lord Remnant, as well as Amendments 21 and 23 tabled by the noble Duke, the Duke of Wellington.
My noble friend is right to note that the decision whether to be on a board, panel or committee is the job of the company rather than any kind of external regulator. By allowing the company to make that decision, it can decide based on its own business needs. If this was left to Ofwat, not only could it lead to a situation where the board, panel or committee did not fit well into the company structure but it might harm relationships between those forums and the board of the company.
It seems unlikely that a regulator would ever have access to all the information needed to make decisions on how a company’s decision-making systems should be structured, and it is surely the responsibility of the company itself to ensure that it has the right processes in place to make the correct decisions according to its needs. Indeed, as we have heard from many noble Lords, it is clear that the regulator has failed to get important decisions right in the past, to the detriment not only of companies but of the environment. Yes, of course, the regulator should have its role in holding companies to account for their decisions, but the moment regulators are involved in decision-making, it surely takes some responsibility for those choices too.
We are concerned that having consumer representatives on the board or their being involved in any decision-making within the company creates a blurring of responsibility. There is already the risk of some confusion, given the role of regulators, but they are at least experts in the industry and well informed about their roles, acting within well-defined parameters.
I agree with the noble Duke, the Duke of Wellington, on sectional interests and the effective working of a board. Consumer representatives on a board lay themselves open to the responsibilities of being a company director and in some cases a director of a listed company. Do the Government really want such consumer directors to be open to fines or prosecution for failing to deliver accounts on time, trading while insolvent or even insider dealing? It is not clear to me as the Bill is drafted that those consumer representatives could not also be subject to fines or prosecution by the regulator. If a consumer representative proposed an action that led to penalties from the regulator, how could they not be responsible?
Turning this around to the perspective of the existing board and management, if consumers are part of decision-making, then it is conceivable that they could cause or prevent an action by the company that created regulatory breaches and punitive action. How would this coexist with the responsibilities and liabilities of professional managers and board directors? How could this not create liability for the consumer representative?
My comments about consumer representation apply equally, if not more, to the environmental experts proposed in Amendment 9 by the noble Earl, Lord Russell. I understand and applaud the sentiment behind the amendment, of environmental representatives representing the stakeholder that has no natural voice, the environment. However, environmental campaigners already have a strong voice. There are obligations already present for companies, and others may be imposed through amendments to the Bill. I also agree with the noble Duke, the Duke of Wellington, that environmental representatives, alongside consumer representatives, should be limited to panels.
Allowing the company to decide the forum in which such representatives take part would benefit both sides of the agreement. If the company has taken this decision, then it becomes clear that the company, its managers and employees remain jointly responsible for decisions. I am not clear from the Bill exactly how the Government intend that its proposals should work. Both my noble friend Lord Remnant’s Amendment 22 and Amendments 21 and 23 from the noble Duke, the Duke of Wellington, have considerable merit. While there is a contradiction inherent between them, both are good solutions to creating the involvement of consumers that the Government want.
I thank all noble Lords for their involvement in this spirited debate. I ask the Minister to explain exactly how she sees consumer involvement working in practice under the Bill. I also ask that she give serious thought before Report to the amendments that I have addressed.
Baroness Hayman of Ullock (Lab)
My Lords, I thank noble Lords who have taken part in this debate. It has come across clearly that there is no agreement about who should sit on the boards. We want to rebuild trust in the water sector, and to do that we are giving Ofwat new powers to issue new rules on remuneration and governance.
I turn first to Amendment 9 in the name of the noble Earl, Lord Russell, and Amendment 21 in the name of the noble Duke, the Duke of Wellington. The powers on remuneration and governance outline a requirement for Ofwat to set rules on companies for including consumers in decision-making. We feel that it is appropriate for Ofwat, as the independent regulator, to determine how this is implemented. Water companies have a range of legal environmental obligations that they are required to meet, and actions related to these obligations will already be informed by specialists in the company.
We believe that introducing requirements to include environmental experts on company boards would take the focus away from involving consumers in water company decisions, which do not have the same level of legal requirements as the environment does. Environmental issues should already be a key consideration in water company decision-making. Importantly, my officials in Defra have worked to secure agreement with companies to update their articles of association, to place both customers and the environment at the heart of business decisions. I hope that this clarifies to noble Lords that the Bill ensures the prioritisation of consumer representation on company boards and that they feel able not to press their amendments.
Waste: Incineration
Baroness Hayman of Ullock Excerpts(1 month ago)
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Baroness Jones of Moulsecoomb
To ask His Majesty’s Government whether they plan to implement the Climate Change Committee’s recommendation to pause permission for new incineration plants to allow for a review of the treatment of residual waste.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lords, the Government are committed to transitioning to a circular economy. We are considering the role of energy from waste in the context of circularity, economic growth and reaching net zero. As part of this, we are giving consideration to the Climate Change Committee’s recommendation. This year, Defra will publish an analysis of energy-from-waste capacity in England to inform future policy. We continue work to implement packaging reforms, drive up recycling rates and take material out of incineration.
Baroness Jones of Moulsecoomb (GP)
I thank the Minister, but I am deeply dissatisfied. This Government, in whom I had a lot of trust, have made the deeply irresponsible decision to allow the Portland incinerator to go ahead. I declare an interest as a resident of Dorset, although nowhere near Portland. Incineration and energy from waste is not a practical way forward; it is very damaging both in terms of public health and environmentally. I beg the Minister to speak to her department and suggest getting better advice on energy?
Baroness Hayman of Ullock (Lab)
My Lords, it does say in the Companion that you should not thank a noble Member for their Question—so, on this occasion, I will not. The environmental permitting regulations prevent the incineration of separately collected paper, metal, glass or plastic waste, unless it has gone through some sort of treatment process first. Following that treatment, incineration is seen to be the best environmental outcome. We know that the recycling rate is too low, that we burn too much waste and that, for too long, recycling rates in England have plateaued. The way forward is to look at the whole big picture and our circular economy ambitions are designed to address this.
Baroness McIntosh of Pickering (Con)
Will the noble Baroness commit to looking not just at incinerators but at anaerobic digesters and accept that they have a powerful role to play not just in getting rid of residual waste, particularly household waste, which is a very vexatious challenge, but in heating people’s homes at a reduced rate? Will the Government keep an open mind on energy from waste, including anaerobic digestion?
Baroness Hayman of Ullock (Lab)
As I just mentioned, we are looking to do a review right across the piece on this, so anaerobic waste will certainly be part of that.
Lord Krebs (CB)
My Lords, it is all very well to incinerate waste, but does the Minister agree that a real priority should be to reduce the amount of waste that we produce as a country? The real way to deal with this problem is just to produce less waste.
Baroness Hayman of Ullock (Lab)
It is a really important point that the noble Lord makes. If we are moving to a more circular economy, as this Government want, we have to see less residual waste being generated —in fact, less waste as a whole. There is a statutory target to effectively halve residual waste by 2042 from 2019 levels, but there still will be an estimated 17.6 million tonnes of residual waste to manage in 2042. Therefore, we have to look at the bigger picture. How do we actually reduce waste overall?
Lord Lilley (Con)
My Lords, is not the biggest incinerator in the country the Drax power station? It receives eye-watering subsidies for burning wood that has been transported across the oceans, creating emissions, which has had to be dried and cut into chips, also making emissions, and which emits, on being burned, more CO2 than coal. This is justified on the grounds that, over the next half-century to a century, trees replanted in those forests will absorb CO2. If we can take this leisurely approach to reducing CO2, is there really a climate emergency?
Baroness Hayman of Ullock (Lab)
I do not consider the Government to be taking a leisurely approach on this aspect. What is really important is that we look at how we decarbonise our energy from waste facilities going forward. We have consulted on expanding the UK Emissions Trading Scheme to waste incineration and energy from waste, and we are taking on board the responses to that and will bring forward detailed final policy in due course. We plan to include energy from waste under decarbonisation readiness requirements.
Baroness Boycott (CB)
Currently, we are incinerating over a million tonnes of food waste a year, as well as 64,000 tonnes of potentially edible food that gets sent to anaerobic digesters; the latter in particular is a clear violation of the WRAP food hierarchy. What will the Government do to re-energise the WRAP campaign around food waste, which, for a while, seemed to work really well but now is very much on the back burner, and food waste is going up. As a redistribution charity, we could really do with that food.
Baroness Hayman of Ullock (Lab)
The noble Baroness makes a very good point around food waste: it is a real challenge. I know from talking to my counterparts in the department that, as part of our review of how we manage waste going forward, looking at food waste is critical, because there are so many different complex aspects to it, such as what is included, what is not included, and how we work with supermarkets and with local government. She is absolutely right to raise that issue and I will be discussing it further with my department.
Lord Roborough (Con)
My Lords, in line with the Government’s climate commitments and, given energy from incineration is now our most CO2-intensive generation, will the Government consider prioritising incineration plants for their £21.7 billion package of carbon capture and storage funding? Is it not better to fix an existing problem than create new problems around hydrogen production to fix?
Baroness Hayman of Ullock (Lab)
Obviously, the noble Lord knows that we have the new CCS—carbon capture and storage—facilities open. We see that as a critical funding decision that we need to be working on to move forward in this area. It is also important to think about how we regulate in this area going forward and how we recover the energy from this. It a very big picture that DESNZ is working on to ensure that we have sufficient energy capacity in the future, particularly around industry, and that that energy capacity is produced in a way that fits in with the circular economy and decarbonisation, so that we can meet our climate change targets.
Baroness Humphreys (LD)
My Lords, when Conwy County Borough Council in North Wales switched to four-weekly collections of residual waste, this led to an 11% spike in the tonnage of recyclables collected and a reduction of 12% of residual waste. The council’s cabinet member put this down to residents being incredibly motivated to recycle and understanding the local and global benefits of recycling. How are the Government working with local authorities to improve awareness of personal responsibility in this area?
Baroness Hayman of Ullock (Lab)
We are working very closely with local authorities but also with devolved Administrations. One thing we see as a high priority is building constructive working relationships with the devolved Administrations and different tiers of government. It is only by working together and sharing best practice that you achieve the kind of results that the noble Baroness is talking about.
Lord Grade of Yarmouth (Non-Afl)
My Lords, I draw attention to my registered interests. In the race to net zero, and given the importance of reducing carbon footprints, how excited are this Government about our world-leading advances in small modular reactors—SMR nuclear?
Baroness Hayman of Ullock (Lab)
This Government, as I am sure the noble Lord is aware, have pledged great support for nuclear energy going forward. We need it as part of our future energy security, and small modular reactors are clearly a part of that nuclear journey.
Baroness Meacher (CB)
My Lords, plastic waste is a major problem for the planet, yet plastic is eminently reusable. What action are the Government taking to improve and increase the level of reuse of plastic?
Baroness Hayman of Ullock (Lab)
That is a very good point: we talk about recycling a lot but we do not talk enough about reuse. That has to be a critical part of reducing the amount of waste that we have as a country. This is very much part of the discussions with local authorities, because they have a key role to play in this. Also, encouraging people on behaviour change is difficult and the Government definitely have a role to play in that.
Lord Kamall (Con)
My Lords, considering that we are being nerdy, I wonder whether the Minister can share with the House the technologies that are being looked at to clean up the emissions from waste incineration plants.
Baroness Hayman of Ullock (Lab)
Unfortunately, I am not nerdy, so I am unable to answer the noble Lord’s question, but I am sure that we can get back to him in writing.
Lord Watts (Lab)
My Lords, some people do not like nuclear power and will not support it, and some do not seem to like any sort of generated energy proposals. But, after 13 years of neglect, it is right that the Government take a view that they will look to reduce pollution in the environment but also keep the lights on.
Baroness Hayman of Ullock (Lab)
My noble friend is absolutely right. It is critical that we drive forward our energy policy as a matter of urgency. The last thing we want is not only to have power cuts and insufficient energy but to become too reliant on other countries for our energy all the time. We need to manage our own energy in this country, build the kinds of energy plants we want, work on CCC and nuclear and invest in the future for our long-term energy security.
Environmental Targets (Public Authorities) Bill [HL]
Baroness Hayman of Ullock ExcerptsFriday 18th October 2024
(1 month ago)
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The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lords, I thank the noble Lord, Lord Krebs, and congratulate him on securing this debate on his Private Member’s Bill this afternoon. I thank all Members who have stayed behind on a Friday afternoon to take part. It has been important to continue to highlight the intertwined issues of environmental decline and climate change. There are, of course, vital issues which this House must continue to highlight and help find solutions to.
The intention of the Bill to drive and strengthen local and other public authority action towards meeting national environmental and climate targets and objectives is important. Indeed, the noble Lord and I have discussed the need to ensure that such action is appropriately and proportionately considered, supported and delivered. This is clear from the Government’s commitment to the 13 legally binding environmental targets set out under the Environment Act, which have been discussed during this debate. These include targets on water, biodiversity, resource efficiency, and tree and woodland cover. We intend to share more delivery information about this in the future to help ensure that we get on track to meet these statutory targets.
The Government have wasted no time—it was one of the Secretary of State’s first actions—in announcing a rapid review of the statutory environmental improvement plan, the EIP, to make sure that it is fit for purpose. After our rapid review of the EIP, we will publish a revised version. This revised plan will focus on cleaning up our waterways, reducing waste across the economy, looking at the numbers of trees we will need to plant, improving air quality and, importantly, halting the decline in species by 2030. Ensuring nature’s recovery is a key priority and is fundamental to the Government’s approach to economic growth. We will develop the new plan working closely with representatives of the public, private and third sectors, and I would hope that that would include noble Members of this House.
Throughout this time, action to deliver against existing commitments will continue at pace. This includes action on regulatory and policy measures intended to deliver the kinds of action that this Bill sets out to ensure, notably those under the Climate Change Act 2008, including our targets in the net zero strategy to reduce direct emissions from public sector buildings by 75% by 2037, and the Environment Act 2021. The noble Baroness, Lady Bennett, asked about the land use framework. I said in a debate earlier this week that we were looking to publish a Green Paper by the end of the year. This will be for consultation as part of the development of the framework as we go forward.
I want to mention local nature recovery strategies. They are an important tool that we can use while we take action to deliver against our existing commitments. They will set the strategic priorities for nature recovery in a particular area and identify the best locations for land management actions to deliver these priorities. Forty-eight responsible authorities across the country are currently preparing nature recovery strategies for their area and we expect to see publication from March next year. They will be delivered through a combination of funding streams, such as biodiversity net gain, other green finance initiatives and public funding pots and, crucially, through an Environment Act requirement for public authorities to have regard to carrying out these activities.
This requirement, which is the biodiversity duty under Section 40 of the Natural Environment and Rural Communities Act, was strengthened through the Environment Act. Noble Lords who took part in that will remember our debates on this. It came into force in January of last year. Under the duty, all public authorities must consider the actions they can take to conserve and enhance biodiversity in England and, where actions are identified, set policies and objectives as soon as practicable to deliver actions and then take that action. In making their considerations and taking such action, all public authorities must have regard to any relevant LNRSs as well as to any relevant species conservation strategies or protected sites strategies prepared by Natural England.
Local authorities and local planning authorities must also publish five-yearly reports setting out the action they have taken under the duty. The first reports have to be published by 1 January 2026. We expect this strengthened duty to ensure that public authorities make the conservation and enhancement of biodiversity a core part of the delivery of their functions.
I want to make it very clear that this Government are fully committed to protecting 30% of land and sea for nature by 2030. We intend to take immediate action to realise the urgent step change needed to deliver 30 by 30 on land. We are currently in the process of reviewing our approach, and later this year we hope to confirm the criteria for land counting towards 30 by 30 in England. This will set a clear, ambitious standard to ensure that only areas that are effectively conserved and managed can contribute towards this commitment.
The noble Baroness, Lady Willis, the noble Earl, Lord Russell, and the noble Lord, Lord Blencathra, all mentioned protected landscapes. As the noble Lord, Lord Blencathra, said, we both understand the challenges that the Lake District National Park particularly faces. The Government are actively considering further options to ensure that our protected landscapes have the tools and powers they need to deliver for people and nature, including through regulation and guidance. Relevant authorities must now seek to further the purposes of protected landscapes to deliver better outcomes for nature, people, climate and place. The noble Baroness, Lady Willis, also asked about marine protected environments. The Government have taken significant steps to protect this environment. At the moment, there are 181 NPAs, including three highly protected marine areas. They cover about 38% of UK seas. Our priority now is to ensure that those areas are properly protected.
The Bill from the noble Lord, Lord Krebs, rightly recognises the crucial role for climate adaptation. England’s third national adaptation programme summarises the collective actions that the UK Government are taking to address risks and opportunities from climate change and to ensure that adaptation is incorporated into government programmes. As the noble Lord, Lord Krebs, said in his introduction, this is a legal requirement under the Climate Change Act 2008 and government departments are required to respond to the risks and opportunities raised in the most recent climate change risk assessment report.
The Climate Change Committee monitors and evaluates the performance of governmental organisations that have actions to address climate risks, as set out in this national adaptation programme. It publishes its findings in a biannual progress report on climate adaptation. The last report was published in March 2023; the next will be in 2025. We will then review the CCC’s recommendations from that report.
I recognise the importance of the proposed Bill’s ambition and principles. However, there are measures in place seeking to realise this ambition. Some, I know, will need time to take form, but we are fully committed to this and are closely monitoring progress. Furthermore, the review and revision of our environmental improvement plan provides the ideal vehicle to consider the Bill’s principles and their practical implications, in the manner they deserve and in collaboration across society.
I turn briefly to the question of access, which was mentioned by the noble Earl, Lord Russell. This is part of my portfolio and something that I am keen to work on in a proactive way. I am currently looking at our existing access to blue and green spaces, so that we can build on our manifesto commitment to create new river walks, and further access, going forward.
I finish by saying that, although time is not on nature’s side—the noble Baroness, Lady Bennett, made that very clear—by working hand in hand across sectors on these vital issues, I am confident that we can use the opportunity of the Bill in front of us today to discuss and collectively agree on a way to deliver what sits at the heart of the vision of the noble Lord, Lord Krebs: to reduce and adapt to the impacts of climate change and restore and improve our natural environment.
I thank the noble Lord again for bringing this Bill to the House and enabling this debate. I have been very pleased to have discussions on this with him and with other noble Lords. I look forward to working with him and other noble Lords who take a keen interest in this area as we review and revise our environmental improvement plan. I assure noble Lords that this Government are firmly committed to working collaboratively as we move forward to improve the natural environment.
Rural Communities
Baroness Hayman of Ullock Excerpts(1 month, 1 week ago)
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The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lords, I start by congratulating the noble Baroness, Lady McIntosh of Pickering, on securing this debate. It has been an important discussion and I welcome the opportunity to respond. I also congratulate the noble Lord, Lord Elliott, on his maiden speech and give him a warm welcome to this House. I very much look forward to working with him as we go forward on these issues.
I just want to look at the actual Question, which was:
“To ask His Majesty’s Government what are their priorities for rural communities over the next two years”.
I think this debate has gone much more broadly than that. Many of the issues that we have discussed are going to take more than two years to resolve, so I think much of what I am going to be talking about is also going to be long term as well as short term.
The Government are committed to improving the quality of life for people living and working in rural areas, so that the full potential of rural businesses and communities can be realised. To do this, we need to ensure that the needs of people in rural areas are right at the heart of policy-making and I think that has come across very strongly during this debate. I also reiterate that I genuinely value rural communities. They are my communities. I have always lived in a rural community and I will continue to be a strong voice for rural communities in the department.
Farming, forestry and other traditional land sectors are essential for delivering so much of what we value in our countryside. However, businesses found in rural areas are just as diverse as those in urban areas. We know that around 80% operate outside agriculture and related sectors. In addition, more people in rural areas are employed in microbusinesses than in urban areas and yet, as the right reverend Prelate the Bishop of St Albans so clearly explained, there is significant potential for economic growth, with average productivity in rural areas being 86% of the England average. This was mentioned by the noble Earl, Lord Caithness.
Our manifesto was clear: sustained economic growth is the only route to improving the prosperity of our country and the living standards of working people. Our approach to delivering this growth right across the country will focus on three pillars: stability, investment and reform. We have already started to deliver on our commitment to restore stability for farmers by continuing the rollout of the sustainable farming incentive. We will go further by optimising our schemes and grants, ensuring that they produce the right outcomes for farmers, and that includes small, grassland, upland and tenanted farms, while delivering food security and nature recovery in a just and equitable way.
We have recognised the specific challenges and opportunities that make rural economies distinctive, acknowledging the importance of funds such as the £110 million rural England prosperity fund, which provides targeted support to rural businesses and communities. We also know that a prosperous rural economy will need to be underpinned by improvements in rural connectivity—both transport and digital—the availability of affordable housing and energy, and access to a diverse range of community services.
The noble Lord, Lord Cameron, was particularly concerned about housing and I thank him for his support of our ambitions in this area. Home ownership is out of reach for too many—too few homes have been built and very few are genuinely affordable, as the noble Baroness, Lady Pinnock, said. Our housing shortage drives high rents and high prices. We are committed to improving the quality of life for people living and working in rural areas and part of addressing this is going to be through the biggest increase in social and affordable housebuilding in a generation. We want to work with councils and housing associations to build the capacity to ensure we deliver the homes that people need.
We will reform planning laws so we can build the homes our rural communities desperately need, while protecting our green spaces and the natural environment. Noble Lords mentioned the National Planning Policy Framework. We have launched a consultation to reform this and as part of that we will consider how to build more homes in the best way and introduce a wider set of growth-focused interventions that will build them in the places that people want to live in, supported by the correct infrastructure. A number of noble Lords asked about the land use framework. We intend to publish this later this year as a Green Paper.
The Government are also committed to tackling fuel poverty. It is our ambition that the warm homes plan will transform homes across the country by making them cheaper and cleaner to run, including the many households in rural areas that are not connected to the gas grid. That includes me. Decarbonising off-grid properties will reduce our reliance on fossil fuels and build our energy independence. It will protect customers from high and volatile energy prices, keep us on track for net zero and, at the same time, improve air quality.
The noble Baroness, Lady McIntosh, talked about the fact that a lot of the energy projects will have little value for local communities. I make the point that nationally significant infrastructure projects, NSIPs— that includes large grid connections—have community benefit programmes as part of the process that they have to go through, and work very closely with local communities. We will also be setting up Great British Energy. It will support local and combined authorities and community energy groups to roll out small and medium-scale renewable energy projects in their areas.
The Government recognise that people living in rural areas often have greater distances to travel to access essential services, such as employment, education and training, and other social and recreational activities. That has come across clearly in this debate. We understand that it is much more costly and time-consuming when you have to travel great distances and the travel connectivity is not good. The noble Baroness, Lady Humphreys, talked about some of the transport challenges and gave examples in her area. One thing we are determined to do is to deliver better bus services, and we have set out a plan of how we can achieve this. It is based on giving local leaders the tools they need to ensure that bus services reflect their needs. I am sure we would all agree that one size does not fit all when it comes to transport services.
Digitisation is at the heart of the Government’s agenda. We are committed to ensuring that rural communities, many of which are still reliant, as we have heard, on 3G, are not left behind as part of the switch off. In rural areas, 4G coverage is increasing thanks to the shared rural network, which the Government will continue to invest in to ensure coverage where currently no major mobile network operators provide 4G coverage.
While I am on the topic of digital, the noble Earl, Lord Caithness, asked about Project Gigabit. I think it covers 85% of UK premises at present; the idea is to have nation-wide coverage by 2030. I am very sorry, but I cannot confirm—I am going to keep saying this—the continuation of things and funding until we have gone through the spending review; unfortunately, I just cannot do that. It does not mean that it is not happening, but I cannot confirm anything.
The noble Lord, Lord de Clifford, asked about mobile coverage. He will be interested to know that the Minister of State for Data Protection and Telecoms recently wrote to Ofcom, on 28 August, asking it to update him on the steps it will be taking to improve its reporting of mobile coverage, including timescales for this work, by the end of October.
Opportunity can also be a challenge. Too many young people and children are defined by their background. It should not matter who you are or where you come from. The Government are committed to supporting rural schools in order to break the link between young people’s backgrounds and their success. As part of this, we will be recruiting 6,500 new teachers in key subjects.
We intend to boost rural and agricultural skills by reforming the apprenticeships levy into a growth and skills levy, to give businesses the freedom and flexibility to upskill their workforce, and by opening new specialist technical excellence colleges, to give rural communities the chance to fit skills to the needs of their local economies and empower rural business to play a bigger role in the skills revolution.
The noble Lord, Lord Cameron, talked about health, as did others. As we have heard, the delivery of and access to health services such as GPs, dentistry—which we have not heard about today but which is critical—and women’s health services is a particular challenge in rural areas, especially as it takes longer to access services due to longer travel times. At the time people are most likely to need care—namely, when they are getting older—they increasingly live in areas where it is most difficult to provide that care. In England, integrated care systems will have a key role to play in designing services that meet the needs of local people. To do this, they will need to work with clinicians and local communities right down at neighbourhood level.
We are doing more to use the transformative power of technology, such as virtual wards. I have seen virtual meetings with GPs and patients where I am in Cumbria. This allows care to be delivered into people’s own homes and in areas with a shortage of GPs or healthcare staff. Because of that, areas where rurality can be a barrier can benefit disproportionately.
Mental health is also a big issue. We want to make sure that mental health care is delivered in the community, close to people’s homes, through new models of care and support, so that fewer people need to go into hospital. We are setting up a young futures mental health hub for under-25s in every rural community. In addition, we are supporting charities that focus on farmers’ mental health and well-being through grant funding. This is helping them to offer support to farmers and their families, as well as helping to build resilience in farming communities.
The noble Lord, Lord Harlech, asked about crime. We will tackle rural crime through a cross-government approach—for example, by increasing police patrols in rural towns and lanes, and by punishing anti-social behaviour, agricultural crime and county lines, with stronger laws to crack down on farm equipment theft and fly-tipping. We are also actively looking at ways to better tackle livestock worrying.
A couple of noble Lords asked about vets. We are very aware of the challenges around veterinary services but, on a positive note, we have been doing farm visits with vets and have had a really positive response.
My noble friend Lady Ritchie asked about collaborative working—in fact, I met Mr Muir this morning. Collaborative working across the devolved Governments, through cross-departmental work and into communities is critical to the work we are carrying out.
I would be happy to have the right reverend Prelate the Bishops of St Albans’s recently published report, which we will take back to the department. He might be interested to know that on Thursday, Daniel Zeichner, the Rural Minister, will host a rural round table that will include the Rural Coalition.
I have run out of time, so I shall say that we recognise the importance of rural communities and businesses and continue to do everything in our power to ensure a prosperous future.