Pollution in Rivers and Regulation of Private Water Companies

Baroness McIntosh of Pickering Excerpts

Thursday 29th February 2024 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

My Lords, I declare my interests as set out in the register. I co-chair the All-Party Parliamentary Group on Water, and last year I chaired a study organised by the Chartered Institution of Water and Environmental Management into bioresources strategy. I also worked with the water regulator for Scotland, the Water Industry Commission, between 2015 and 2018.

At the outset, I congratulate the noble Baroness, Lady Bakewell, on securing this timely debate on river pollution and the case for the regulation of private water companies. I, for one, recognise that privatisation has permitted the massive investment required to move UK water from being one of the dirtiest in Europe to upgrading our drinking water, rivers and bathing waters to infinitely better quality than they were in the 1980s. We can always improve regulation, although some might say that there is already a wealth of regulators for private water companies: Ofwat, the Environment Agency, the Drinking Water Inspectorate, and now the Office for Environmental Protection.

Let us examine the causes of the pollution of our rivers. A recent phenomenon has been surface water flooding, which was first recognised in 2007, with run-off from our roads spilling into combined sewers. Does my noble friend the Minister, whom I welcome to his place today, think it right that national highway authorities are not held accountable for surface water run-off? There is also the case of inappropriate developments, whereby water companies are required to connect wastewater—sewage—to antiquated infrastructure, causing further spills when mixed with flood water entering the combined sewers.

[Lord Framlingham (Con)]

Will my noble friend give way?

[Baroness McIntosh of Pickering (Con)]

We are on a timer, so I will take advice on whether we are permitted to take interventions. Does the Clock stop if I take an intervention?

[Lord Harlech (Con)]

No.

[Baroness McIntosh of Pickering (Con)]

I am afraid that I cannot give way.

Large-scale developments built in inappropriate places, such as zone B flood plains, compound that with poor connections. We must tackle the problems of sewage at source, before it enters the rivers and sea. While the Government make the case for building on flood plains in certain circumstances, that should not be encouraged. In any event, such homes will not be insured under the Flood Re scheme if built after 2009.

I will also raise the vexed issue of misconnections. The Government made two commitments under the storm overflows discharge reduction plan that could help to address the issue: to give water companies the right to repair defective drains on private property, and to give water companies the right to alter drainage systems on private property to reduce impermeable areas connected to the combined sewer network. An important part of tackling misconnections is getting to the drains on private land, so that water companies can take action, as the majority of misconnections are on private land. Will the Government also allow water companies access to government-owned land, such as hospitals and schools, to make the necessary repair work and to repair drainage separation work where required? That measure alone would prevent excess water entering combined sewers.

Having examined the causes of pollution in our rivers, is there a case for further regulation of private water companies? Water companies have a positive role to play in areas such as creating natural flood defences—as the noble Baroness, Lady Bakewell, pointed out—particularly by working with farmers and others. I pay tribute to the work of Yorkshire Water and United Utilities in that area. Defra should encourage other private sector players to contribute to that. What plans does my noble friend the Minister and his department have to do so? The Slowing the Flow scheme in Pickering, with which I was associated, is a good example of a natural flood defence combined with a small reservoir—not an overengineered project, such as those to which the noble Baroness, Lady Bakewell, objected—although all those involved were from the public sector. I urge the Government to lever more private sector funding into that. If we are to follow through with linking renumeration to performance, I invite my noble friend the Minister and his department to look at the corollary of that by giving water companies the tools to do the job.

The Government promised in this place and the other place that Schedule 3 to the Flood and Water Management Act 2010 will be implemented as it has been in Wales. Will my noble friend confirm that this will happen in England before the election? It is extremely important that we stop the automatic right to connect, whereby water companies are expected to connect pipes from three, four or five-bedroomed homes to antiquated Victorian pipes that simply cannot take the amount of wastewater and sewage coming out of these new builds. The Government must insist on mandatory SUDS—sustainable drainage systems—for all new builds. I hope they will also commit to an ambitious programme of retrofitting to existing developments, where appropriate. Obviously, that raises the question of who will maintain the SUDS, which is an open question at the moment.

Will the Government look favourably on rewarding farmers for storing water on flood land? According to the NFU, over half the most fertile farmland in Britain is on flood plains. The farming community and landowners are performing a public good by preventing communities downstream from flooding. However, there is great uncertainty as to how farmers can benefit from public funds. Often this flooding will include sewage. Can my noble friend clarify who will be eligible to apply for both the flood recovery framework and the farming recovery fund, and what level of damages can be recovered? Equally, will Defra recognise that the role farmers play in storing floodwater is a public good? Will the Government look positively at a whole-catchment area approach, and more slow-the-flow schemes such as those successfully implemented in Pickering and elsewhere protecting downstream communities from flooding?

I applaud the action that the Government have taken on holding directors to account, particularly the instruction they have given to Ofwat and the work Ofwat has done on executive pay. Ofwat has been very clear that companies need to demonstrate that performance-related executive remuneration is linked to performance for customers and the environment. In June last year, Ofwat confirmed that where companies do not demonstrate that executive pay is linked to performance, it will stop companies recovering the cost of bonuses from consumers.

I welcome the level of investment announced in the five-year business plan that Ofwat has yet to approve. It will factor in £96 billion in the next investment period 2025 to 2030, of which £11 billion will be allocated to reduce overflow spills. The noble Baroness, Lady Bakewell, identified an area which has only been recognised for spend—innovation—since 2014. I hope that Ofwat will go much further, recognising the natural flood defences to which the noble Baroness referred as innovative projects under the spending review. I think this will help many of the issues the noble Baroness identified. We do not want overengineered projects, we want natural flood defences—and these schemes have to be approved as part of the price review.

Finally, the NAO report in November 2023 made a number of very apt recommendations to increase resilience to future flood events, such as reprofiling capital spend, maximising long-term value for money and ensuring flexibility to switch money from capital spend to asset management. My preference is to establish a single budget for all flood spending.

Finally, will my noble friend look favourably on the use of SUDS and natural defences to ensure no overspill of raw sewage into combined sewers, so that it will not enter the rivers. Will he look favourably at a whole-catchment area management approach, to make highways authorities responsible for water run-off of pollution from these surfaces into combined sewers? Will he address the issue of missed connections and permit water companies to enter private land and government property in schools and hospitals? Will he look at giving water companies the right to alter drainage systems, consider the recommendation from CIWEM for a comprehensive independent review of water management, inform the public of the importance of water efficiency and address all the recommendations of the NAO report of November last year?

Animal Welfare (Primate Licences) (England) Regulations 2023

Baroness McIntosh of Pickering Excerpts

Tuesday 27th February 2024 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

My Lords, I want to take this opportunity to put a couple of questions to the Minister, as she was kind enough to invite us to do. I declare my interest that I am an associate of the British Veterinary Association. It did not issue a briefing, but I have looked at its website and it supports the original thrust of the consultation, which was for a ban. As recently as December last year, when it posted its position on its website, it was in favour of a ban. Why have the Government and the department moved away from a ban to licensing, as in the regulations today?

Is the Minister in a position to say exactly how many primates are kept as pets? The noble Lord, Lord Trees, referred to a figure of 5,000, but I do not know whether that is an authoritative figure or a guesstimate.

The thrust of the regulations looks very much at licensing becoming the responsibility of local authorities. I entirely endorse what the noble Lord, Lord Trees, said about the difficulty of identifying which professional would be best placed to make sure that the conditions in which the primate was to be kept were appropriate. The Minister will be as aware as I am of the severe constraints under which local authorities are operating at this time, so I wondered what the thinking was behind putting in place a licensing scheme rather than a ban—and it would be helpful to know the total number of primates that we are talking about.

Lastly, when I chaired the EFRA Committee in the other place, we took a lot of evidence on the import of illegal dogs, dog smuggling and boiler-room breeding of dogs. I wondered why we have before us a very worthy statutory instrument on animal welfare and keeping primates as pets, but we do not seem to have tackled those other issues, which are a source of great concern and anxiety to the British public, of illegal dog smuggling and boiler-room breeding, often in inappropriate sheds, in people’s homes.

[Lord Hope of Craighead (CB)]

My Lords, I want to follow the point made by the noble Lord, Lord Trees, about the possibility of exportation to Scotland when the licensing scheme is set up, as it will be, in England. It is quite a serious issue, as we have seen with XL bully dogs. I wonder whether the Minister’s department has been in touch with the authorities in Scotland to draw their attention to what is going on so that they are fully aware and can make their own assessment of the risk.

Some primates are kept as pets in Scotland, and I happen to have met two of them on separate occasions when they were being taken for walks. It is not as if it is an entirely English practice; there are certainly some instances north of the border, although I do not know how many there are. It is important that the two jurisdictions work together on this system without the disparity that is apparently coming because the regulations apply only to England.

Peatlands

Baroness McIntosh of Pickering Excerpts

Thursday 22nd February 2024 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

My Lords, given the role that peatlands play in flood defences, as the noble Baroness said, will the Minister pay tribute to all those involved in the Slowing the Flow pilot scheme in Pickering? Will he ensure that more private sector funding, either from water companies or others, can also be factored in to speed up the programme to which he refers?

[Lord Douglas-Miller (Con)]

My noble friend makes a very good point on the involvement of private companies. It is one of the Government’s aims to involve them more and get a bigger response from them shortly.

Water and Sewage Companies: Directors’ Remuneration

Baroness McIntosh of Pickering Excerpts

Thursday 22nd February 2024 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

My Lords, I start with my declaration of interests, as on the register. I am co-chair of the All-Party Parliamentary Water Group. Last year, I undertook to chair a study organised by CIWEM, the Chartered Institution of Water and Environmental Management, into bioresources strategy. For a number of years, I worked with the water regulator for Scotland, the Water Industry Commission.

At the outset, I congratulate the noble Lord, Lord Sikka, on securing this debate, and on his forensic examination of the subject. I, for one, think that privatisation has been a success. We can always improve upon it, and that is the purpose of today’s debate. It has delivered benefits, but there is always cause to look at the regulation.

I applaud the Government for the action they have taken on holding directors to account, particularly the instruction they have given to Ofwat and the work Ofwat has done on executive pay. It has been very clear that companies need to demonstrate that performance-related executive renumeration is linked to performance for customers and the environment. In June last year, Ofwat confirmed that, where companies do not so demonstrate that executive pay is linked to performance, it will stop companies recovering the cost of bonuses from customers. So, one of the points the noble Lord raised has already been addressed by both the Government and Ofwat. I look forward to hearing from my noble friend the Minister about what further action is envisaged.

Water companies have a public role to play in other areas, such as flood defences, particularly by working with farmers and others. I will spend some time outlining how that work could be done. If we are to follow through the thrust of the title of this debate and link renumeration to performance, I hope that my noble friend the Minister and his department will look at the corollary of that: giving water companies the tools to do the job. The Government promised in this place and the other place that Schedule 3 to the Flood and Water Management Act 2010 will be implemented, as it has been implemented in Wales. Will my noble friend tell us today, or in writing after the debate, what the programme is for that?

It is extremely important that we stop the automatic right to connect, whereby water companies are expected to connect pipes from three, four or five-bedroom homes to antiquated Victorian pipes that simply cannot take the amount of wastewater and sewage coming out of new-build houses. The Government must insist on mandatory SUDS—sustainable drainage systems—for all new builds, and I hope they will also commit to an ambitious programme of retrofitting sustainable drains to existing developments. Obviously, that raises the difficult question of who will maintain the SUDS, and I can well imagine that that might be the cause of the delay we are suffering in implementing Schedule 3. If my noble friend could report back on that, that would be immensely helpful.

The Government also need to attack the vexatious problem of building on inappropriate places such as flood plains. Building on flood plains is increasingly having the undesirable effect of mixing sewage with floodwater in combined sewers, which then pollutes existing developments. That has very negative public health consequences, causing people living there to leave. Will the Government also look carefully at making national highway authorities, not local authorities, responsible for water run-off from the major highways, which mixes with the combined sewers and is an additional source of flooding?

Will the Government also look favourably on rewarding farmers for storing water on flood land? According to the NFU, over half the best, most fertile farmland in Britain is flood plains. The farming community and landowners are performing a public good by preventing communities downstream flooding. However, there is great uncertainty as to how farmers can benefit from public funds. The NFU is seeking urgent clarification from Defra as to who will be eligible to apply for both the flood recovery framework and the farming recovery fund, and what level of damages can be recovered. Equally, there should be a simple recognition of the public good that farmers deliver in that regard.

I am very keen on and excited by the prospect of introducing more private sector funding from both farmers and water companies. Will my noble friend the Minister and his department look at that? That could include a whole-catchment area approach, and more Slowing the Flow schemes such as those successfully implemented in Pickering, protecting downstream communities from flooding.

I welcome the level of investment announced in the five-year business plan that Ofwat has yet to approve. It will factor in £96 billion in the next investment period, 2025-30, of which £11 billion will be allocated to reduce overflow spills. That is very welcome indeed.

Animal Welfare (Livestock Exports) Bill

Baroness McIntosh of Pickering Excerpts

2nd reading
Wednesday 21st February 2024 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

My Lords, I am delighted to follow the right reverend Prelate and to participate at Second Reading of this Bill. My interests are that I chaired the Environment, Food and Rural Affairs Committee in the other place and served as an MEP for 10 years.

I am extremely proud of the high animal welfare conditions met by livestock producers in this country. Yet, as we have heard, there are no EU border posts currently in place, so it is impossible for our livestock producers to export, even for legitimate breeding purposes. While we admit breeding stock from the EU, with health checks conducted at the farm of destination, there are no reciprocal arrangements in place for British breeding stock going to the EU other than through Ireland, as we have heard. The Bill therefore seems to address a problem that does not exist—the live export of animals for fattening and slaughter—but fails to solve one that does, that of failure to export breeding stock. Can my noble friend the Minister say when the Government will address this? In the view of the National Sheep Association, it is a matter of utmost urgency.

I am grateful to my noble friend the Minister for taking on this Bill as his first Bill and for his briefing with us on 30 January and subsequent letter, which I received today. I have some personal history with this issue. I was the Member of the European Parliament for the constituency which contained Brightlingsea, and exports came through that port when the Port of Dover stopped the movement of live animals in 1992. A vigorous campaign was mounted by a rather unknown organisation at that time, run by a mother and daughter, the embryo of Compassion in World Farming. The manager of the Port of Brightlingsea suffered attacks to his home and the town was overrun by visitors protesting about the transport of live animals on the ferries. I made a point of going to visit and board a ferry for myself, to see at first hand the comfortable conditions in which those sheep were transported— they were, frankly, superior to those enjoyed by foot passengers on many cross-channel ferries at that time.

It is important to note, however, that the live export of animals has always been a very limited and heavily regulated trade, as the maximum hours that animals can travel between resting periods, and feeding and watering intervals, are heavily regulated throughout the EU. Live exports of sheep and cattle—particularly sheep—were economically important to livestock producers in the north of England and Scotland for the same reasons as my noble friend and other cited regarding poultry exports, which will continue. They are of high value and meet the highest animal welfare standards, which is why our live exports of sheep were so welcome, particularly in France. The impact assessment gives the 2020 figures for exports of all livestock as 6,272 sheep for slaughter and 38,111 for fattening, with four goats for fattening—those four goats must have been very important.

The Bill raises a number of questions. Why is the ban not on a reciprocal basis? Why does it impact only producers in Great Britain? Why does it discriminate against our own producers in favour of EU exporters, in particular of breeding stock? I presume that some livestock comes from the EU to this country for fattening and slaughter purposes, no matter how small the trade —I ask my noble friend to confirm that. I would like to see an amendment from the Government to make this Bill work on the basis of reciprocity. Why is poultry excluded? The same welfare conditions should surely apply to poultry as to other livestock, such as sheep and cattle, particularly in view of the fact that they do not travel as well as other livestock such as sheep.

As we have heard from a number of speakers, the Bill contains a glaring loophole, referred to in particular by the noble Lords, Lord Trees and Lord Dodds. Livestock movement between Great Britain and Northern Ireland will be permitted, which means that, under the provisions of the ban in the Bill, any animal could be exported from Great Britain to Northern Ireland and through the Republic of Ireland for onward export to other parts of the EU, entailing a much longer journey that undermines the key animal welfare provisions of the Bill. I understand that that route is currently the only one available for breeding stock.

The noble Baroness, Lady Ritchie of Downpatrick, very eloquently described the importance of the agri-food industry to Northern Ireland. I would echo that: it is an extremely important industry to the whole of the United Kingdom. Given the fact that basic payments are reducing and the ELMS criteria are still extremely fuzzy, yet we face a rising need for food security, what is the government action plan for beleaguered livestock farmers, particularly in the upland areas of England, which were the source of much of the live trade in the past? Again, I understand that the figures quoted showed that, for every live animal exported, seven were in carcass form—so the vast majority of this trade will continue, but in carcass form.

A further problem that I ask the Government to address is the lack of a phytosanitary agreement with the European Union. There is a chapter in the EU-UK Trade and Cooperation Agreement on sanitary and phytosanitary standards that has never come into effect. Does my noble friend not agree that it is extremely important, as others have stated this afternoon, that any import, whether from the EU or a third country coming via the EU, must match the same high standards that are applied in this country? This gap in regulatory agreement, together with the new controls at UK border posts, is causing grave concerns to farmers and consumer groups alike.

I understand that the new BTOM regulations that are coming into effect are moving the checkpoint some 20 miles from those envisaged in the port of Dover to Sevington. I would argue that that is a hostage to fortune and not conducive to effective checks on entry to this country on plant and animal health. Let us pause and remember the recent cases of ash tree dieback and horsemeat fraud, which should serve as a wake-up call for greater vigilance on imported foods, whether they are live animals for breeding purposes or plants and food products coming in through the checkpoint at Sevington. There is also concern about the reliance at sale and production points on environmental health and trading standards officers at a time when local authority budgets are under severe constraint.

I conclude by saying that no farmer has willingly exported a live animal for fattening or slaughter in recent times. I pay tribute—and I hope that my noble friend and the House will join me—to the very high standards that our farmers meet, as expected by UK consumers. I hope that the beleaguered livestock industry in this country will soon have some good news from the Government, and certainty as to what their future will be.

--- Later in debate ---

[Lord Douglas-Miller (Con)]

The noble Baroness makes a very good point. Once animals have passed into the Republic of Ireland, that is outwith the jurisdiction of the Bill. That is the current position.

I would like to address the issues eloquently described by the noble Lord, Lord Dodds, and the noble Baroness, Lady Hoey, concerning Northern Ireland and the Bill. I hope they will appreciate that I am somewhat constrained in this respect. Perhaps I might write to them separately on the issues they have raised.

The noble Lord, Lord Dodds, raised the question of negotiations with the EU on veterinary medicines going into Northern Ireland. The Government are committed to seeing a long-term, sustainable solution ahead of December 2025 that will properly support the flow of veterinary medicines into Northern Ireland from Great Britain on an enduring basis. It remains our priority to find a solution, through technical talks with the EU, that removes the barriers to supply of veterinary medicines into Northern Ireland. The Government are very clear that, in all scenarios, it is imperative to safeguard the supply of veterinary medicines into Northern Ireland. If necessary, we will deploy all available flexibilities in line with our legal obligations.

The noble Lord, Lord Carrington, and the noble Baroness, Lady Hayman, asked about the impact of this legislation on farmers and businesses. The current position is that we expect the ban to have minimal impact. We published an impact assessment in 2021, which can be accessed via the Bill’s Explanatory Notes. We estimated the direct cost to businesses of ending live exports to be around £5.2 million across the 10-year appraisal period, or around £500,000 per year. As there have been no exports for this purpose since 2020, the impact will have further decreased.

My noble friend Lady McIntosh, the noble Baroness, Lady Young, and the noble Lord, Lord Carrington, also asked about border control posts on the northern coast of France. EU border control posts can be operated only with the approval of the competent authority in the relevant EU member state. The majority of BCPs are privately operated, and the main barrier to date for the establishment of a BCP for livestock is the commercial viability of such a site. We have encouraged our counterparts in France to do more to support commercial efforts to construct and operate a BCP for livestock, and we continue to engage with them to try to resolve this issue.

[Baroness McIntosh of Pickering (Con)]

My Lords, may I press my noble friend on that point? Across the European Union, most ports are owned by the state. Is there any wriggle room whereby my noble friend and the Government could ask the Government of France to look into providing some sort of help? It looks like a rather protectionist measure as it stands.

[Lord Douglas-Miller (Con)]

I understand my noble friend’s point. I assure her that our officials are working very hard on this issue, but it is not going at pace at the moment.

My noble friend Lady McIntosh also asked why the Bill had been brought forward, given that there are other issues facing our farming sector. It is important that we put a permanent end to this unnecessary trade. Although there have been no exports of livestock for slaughter recently, given that there is demand from the EU for sheep from Great Britain, we would expect that trade to restart in the future if we did not legislate to ban live exports now. She also asked whether there were any plans to introduce a corresponding ban on animals imported for slaughter and fattening. There has never been a particularly significant import trade for either: for example, in 2019, only 91 cattle and 178 sheep were imported for slaughter or fattening from mainland Europe.

The noble Baronesses, Lady Bakewell and Lady Hayman, reflected on the Government’s broader animal welfare commitments. I take this opportunity to reassure them that we remain committed to our other animal welfare manifesto commitments, which are to crack down on illegal puppy smuggling, ban the keeping of primates as pets, and prevent livestock worrying.

On the question that the noble Baroness, Lady Hayman, raised on poultry, when we consulted on banning live exports for slaughter or fattening, we were clear that we were not proposing to extend the ban to poultry. There have been no exports of adult poultry for slaughter in recent years. I appreciate that the poultry industry and breeding companies export around 25 million day-old chicks every year, but no welfare concerns have been identified with this practice.

I once again thank all those who have spoken for their thoughtful and valuable comments. It has been hugely encouraging to hear the broad consensus throughout the debate on the importance of protecting and enhancing the welfare of the animals in our care. It is also clear that we can agree on the core aims of the Bill.

Environment Agency: Flood Defence Expenditure

Baroness McIntosh of Pickering Excerpts

Tuesday 20th February 2024 Lords Chamber

Asked by

[Baroness McIntosh of Pickering]

To ask His Majesty’s Government what assessment they have made of the adequacy of expenditure by the Environment Agency on maintaining flood defences.

[Baroness McIntosh of Pickering (Con)]

I beg leave to ask the Question standing in my name on the Order Paper and declare my interest as co-chairman of the All-Party Parliamentary Group on Water.

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Douglas-Miller) (Con)]

My Lords, I declare my interests as set out in the register. In the 2021 spending review, the Government increased funding for flood defence maintenance by £22 million annually, bringing the total investment to more than £200 million a year. Additionally, the Government switched £25 million from the capital programme to use on maintenance this financial year. As a result, 93.3% of flood defences are at the required condition, protecting over 240,000 properties in recent storms.

[Baroness McIntosh of Pickering (Con)]

My Lords, given the constraints on flood spending, does my noble friend agree that resources could be spent differently, possibly better? Does he recognise the importance of regular maintenance and dredging of watercourses and the role of farmers and drainage boards in performing them? Will he agree to look at the possibility of merging the flood spending budget into one total budget, instead of artificially dividing capital and operational expenditure? That one measure alone would prevent arguments taking place during a flood about what constitutes capital or operational expenditure, meaning that the funding could be achieved quicker.

[Lord Douglas-Miller (Con)]

My noble friend raises a good point. With over £200 million per year spent on maintenance, and a £5.2 billion capital investment for the 2021-27 years, flood defences are well resourced. There is a degree of flexibility between the two pots. By way of an example, last autumn the Government switched, as I said, £25 million from the capital programme to use on maintenance, given the severity of the storms. Resource funding to maintain existing flood defences is prioritised and allocated on a risk basis, focusing on assets protecting the greatest number of people and property. My noble friend also asked why we have a maintenance and a capital budget allocation. There are two separate budgets here: one for annual maintenance and one for flood defences. This approach is not specific to flood expenditure, but relates to how the Government account for public expenditure based on the Treasury guidelines.

Water Industry (Special Administration) Regulations 2024

Baroness McIntosh of Pickering Excerpts

Monday 19th February 2024 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Douglas-Miller) (Con)]

My Lords, these regulations and the Water Industry Act 1991 (Amendment) Order are part of a package that updates the water industry special administration regime legislation. The package is made up of two commencement orders and three statutory instruments. The first commencement order was made on 11 January and the two affirmative statutory instruments being debated today were laid in draft on 15 January. The second commencement order and the negative resolution statutory instrument will follow shortly after the affirmatives are debated.

The purpose of these statutory instruments is to enable the Government to facilitate a more effective water industry special administration regime. They apply to England and Wales, and ministerial consent has been secured where necessary. The Government already have powers in the Water Industry Act 1991 to apply to the High Court for a special administration order. However, updates are required as the current legislative regime is outdated and modelled largely on the Insolvency Act 1986, which has since been modernised. The most notable legislative updates were the Enterprise Act 2002; the Small Business, Enterprise and Employment Act 2015; and the Insolvency (England and Wales) Rules 2016. These updates to insolvency legislation are not automatically applied to the legislative framework of the water industry special administration regime. Instead, the Government must assess how to adapt these insolvency law changes to each industry’s specific special administration regime. Legislation relating to special administration regimes is laid periodically; recent examples of this are the Payment and Electronic Money Institution Insolvency (England and Wales) Rules 2021 and the Energy Act 2023.

It is vital that the Government are prepared for a range of scenarios, particularly regarding the continued provision of public services. This is why an updated water industry special administration regime is so important. I want to make it clear that the two main grounds on which a water company can enter special administration are unchanged by this legislation. They are insolvency, where a company may be unable to pay its debts or its liabilities are greater than its assets; and performance, where the company has failed to carry out its statutory functions or licensed activities to such an extent that it is inappropriate for the company to continue to hold its appointment or licence. During a special administration regime, customers’ water and wastewater services will continue to be provided.

The first statutory instrument for noble Lords’ consideration is the draft Water Industry Act 1991 (Amendment) Order 2024. This order implements hive down provisions through amending Schedule 2 to the Water Industry Act, which makes provision about transfer schemes upon the termination of an appointment or the transfer of a licence for a water industry company and is amended by this order to include provisions about transfer schemes in cases where there is a transfer by hive down. This amendment is necessary to ensure that the hive down provisions commenced last month by the Flood and Water Industry Act 2010 (Commencement Order 10) Order 2024 are fully operable. Hive down is a common commercial restructuring practice to ring-fence value and attract potential buyers. This amendment allows the administrator to hive down the regulated business to a subsidiary in order to protect its business and facilitate a sale process that may be more attractive to a potential buyer.

The second statutory instrument that I ask the Committee to consider today is the Water Industry (Special Administration) Regulations 2024. This instrument will apply, disapply and modify general insolvency provisions as they apply in relation to water companies, including licensed infrastructure providers, and special administration orders made in respect of those water companies under the Water Industry Act 1991.

These regulations make general modifications to the Insolvency Act 1986 and other enactments about insolvency provisions, alongside specific modifications to Schedule B1 to that Act. The amendments adapt Parts 26 and 26A of the Companies Act 2006 via specific modifications for the purpose of the water industry special administration regime and amend Section 26 of the Water Industry Act, and Schedule 1 to the Water Industry (Specified Infrastructure Projects) (English Undertakers) Regulations 2013. In addition, this set of regulations will give government the power to lay a negative statutory instrument in the coming weeks, which will revoke the Water Industry (Special Administration) Rules 2009, replacing them with updated special administration rules for water companies, based on the 2016 general insolvency rules.

These statutory instruments update the water industry special administration regime legislation to ensure that, should a water company ever be required to go into special administration, a modern, efficient water industry special administration can be implemented. I am grateful for the support of the Committee and am happy to take questions, which I will endeavour to answer in my closing speech.

[Baroness McIntosh of Pickering (Con)]

My Lords, I am most grateful to my noble friend Lord Douglas-Miller for setting out the content of the SIs before us. I am in great support of them and have just a couple of questions to press my noble friend on.

When my noble friend set out the circumstances behind these instruments, he seemed to indicate that we are just putting into effect existing legislation here and updating it. I would just query the timing of this, which was also queried in the House of Commons when these measures were debated there. At the moment, there are additional investments that we are, rightly, asking water companies to make and which are of a very high order: £60 billion of capital investment over 25 years for storm overflows and other investments such as the self-monitoring programme, which was embarked on under the Labour Government and which we vigorously and enthusiastically pursued. Might these additional responsibilities on water companies be causing the Government some concern, or is it literally about putting in and updating the background, as my noble friend set out? Obviously, we all want to ensure that the water companies are fulfilling the legitimate investment that we have asked them to make.

I have a rather cheeky question. My noble friend knows of my interest in Schedule 3 to the 2010 water Act. Why has Schedule 5 been preferred to be implemented before us in these instruments, and when might we get the orders implementing Schedule 3 to the same 2010 Act? That would put into place the sustainable drainage systems and end the automatic right to connect, which has been called for since the Pitt review and surface water flooding of 2007. That is my rather cheeky interjection, which my noble friend might either want to respond to today or write to me on.

Parallels have been drawn in the report before us with energy companies. When energy companies have failed over the last two or three years, the existing customers of a company which was asked to take on the customers of a failed energy company have found, regrettably, that their tariffs and charges have gone up. This is obviously a matter for Ofwat, but can the Government give any undertaking to customers in the event of a water company failing—which, heaven forfend, we would not wish to see—so that, essentially, what happens in the water sector will not be what we saw happen in the energy sector?

--- Later in debate ---

[Lord Douglas-Miller (Con)]

I thank noble Lords for all their questions, which I will now endeavour to have a go at, and for their very welcome support for these instruments. As I mentioned in my opening speech, these statutory instruments will enable the Government to facilitate a more effective, efficient water industry special administration regime, ensuring that we are prepared for all eventualities to ensure the uninterrupted provision of vital services. A number of noble Baronesses touched on that today.

I will start with the several questions asked by the noble Baroness, Lady McIntosh of Pickering. I might have three out of four answers for her; the second one probably eluded us all.

Everyone will be aware that there has been some recent instability and speculation around the financial resilience of some of our companies in the water sector. This has led Defra to carry out due diligence work on our water industry special administration regime legislation. This exercise identified unmodernised provisions in the current legislative framework. These statutory instruments update water industry special administration regime legislation to ensure that it reflects modern insolvency practices, as is the case for special administration regime legislation for other public services. Ensuring that legislation on special administration takes account of modern insolvency and business practices is important, regardless of the financial resilience of the sector, to ensure proper preparedness.

The noble Baroness, Lady McIntosh, also asked whether customers will be paying for water companies’ failures. I think that was the gist of her question, which cropped up in a number of noble Lords’ concerns. I want to make it clear that we will always act to protect consumers as a priority. Any intervention that puts pressure on the public purse will be considered very seriously and only as a last resort. The purpose of being able to utilise a more efficient insolvency practice is to protect consumers and ensure not only that they do not pay for those mistakes but, more importantly in the short term—a point raised by the noble Baroness, Lady Hayman—that we can provide that service. We can have an argument later about who paid for what and whether somebody needs some money back, but it is crucial that that service—water and wastewater—is delivered for everybody. That would be critical if we had to go through an insolvency, so I reassure the Committee on that front.

The final question that I can answer from the noble Baroness, Lady McIntosh, is whether the public would end up paying to bail out a company in special administration. I again make it clear that we will always act to protect consumers as a priority and that, as I have said, any intervention that puts pressure on the public purse would be considered very seriously and as a last resort.

The noble Baroness, Lady Bakewell, asked a lot of questions. I am not sure that I will get to all of them but I will reflect on the ones I have missed and make sure that she gets a written response. The first question was about the Government’s position on Thames Water. As the noble Baroness is probably aware, water companies are commercial entities; it is not appropriate for me or any member of the Government to comment on the position of a specific company. It is for the company and its investors to manage the company’s financial resilience in the context of its licence and broader statutory obligations.

The second question was about why no companies are listed in Ofwat’s leading category, or how many are failing—I think that was the gist of the noble Baroness’s question. It is clear from Ofwat’s performance report that there has been a marked decline in the performance of a number of water companies over the past year or so. This has been driven by company-specific factors but also by the effects of extreme weather, including an unusually hot, dry summer and a winter that brought multiple freeze-thaw events in 2022 and 2023. There are also live enforcement cases against six companies, which precludes a leading rating where an enforcement case is under way. Specifically, there was a question on how many companies we think are going to fail; I am not aware of any companies that are about to fail. I do not have any information on that at all.

The third question was about why the hive down provisions have been introduced. Without them, only a direct sale of assets would be possible. This is likely to be much more expensive and complex to implement from a tax perspective as you would not benefit from the no-gain, no-loss treatment on transfer. It is probably also important to recognise that, if you get to the point of insolvency, the quickest route to providing the services that are absolutely critical is to package up what the company has to deliver in that hive down and get it back into the hands of somebody who can operate the business in the most effective way. Tying it up, with all the debt and the other complications that go with an insolvency, will just complicate and delay the issue.

I turn to the question from the noble Baroness, Lady Bakewell, about breaching environmental standards. As I stated in my opening speech, a water company can be placed into special administration on performance grounds where there is either a serious breach of their principles or statutory duties or an enforcement order that it is no longer appropriate for it to continue to hold its licence. One of the principal statutory duties held by a water company is under Section 94 of the Water Industry Act 1991, which says that a water company has a duty to deal with the contents of sewers effectually and provide the necessary infrastructure for that purpose, including meeting the requirements of the Urban Waste Water Treatment (England and Wales) Regulations 1994. This is key as, without treatment, urban wastewater has significant adverse impacts on our water environment.

Finally, the noble Baroness, Lady Hayman, asked a number of questions. I think I have touched on a few of them as I have gone through here. One of the issues that she focused on specifically was how Ofwat will regulate underperformance. Following the publication of its performance report in November 2023, Ofwat published the financial penalties and payments for all water companies. Ofwat required 13 companies to return £193 million to customers for underperformance in 2022-23. This money will be returned to customers through bills over the 2024-25 year. On the action that the Government are taking on underperformance, industry performance is below the level that the Government and regulators expect and the Government are taking action, alongside Ofwat, as we progress.

[Baroness McIntosh of Pickering (Con)]

Both the noble Baroness, Lady Bakewell, and I asked about the unusual position in which we will find ourselves, where a subsidiary company can be set up, meaning that the company is not competitive or living up to its responsibilities financially. I drew the parallel with chapter 11. Is this the first time that we have done this in the UK or is there another parallel? My noble friend could write to me on this.

[Lord Douglas-Miller (Con)]

It might be easier if I wrote specifically on that. Is my noble friend referring to the special administrator’s duties?

[Baroness McIntosh of Pickering (Con)]

If I have understood correctly, if a subsidiary company is set up for the purposes of the company continuing to act, does that mean, as with chapter 11, that it does not need to pay off its creditors or debtors? Is this the first time that it has happened in this country?

[Lord Douglas-Miller (Con)]

I am a little unsure on that, so perhaps the best thing for me to do is write.

I think we have covered the questions for which I have answers, and I will write to the noble Baronesses on a number of other questions. With that, I commend these instruments to the Committee.

Met Office: 2023 Temperatures

Baroness McIntosh of Pickering Excerpts

Tuesday 6th February 2024 Lords Chamber

[Lord Douglas-Miller (Con)]

I believe that it is a Defra responsibility.

[Baroness McIntosh of Pickering (Con)]

My Lords, does my noble friend the Minister agree that, with the changes in weather patterns—intense heat followed by very short, sharp but intense showers—surface water has been identified as an increasing problem since 2007? Will he address the issue of highways authorities not having responsibility for surface water run off? This is one of the greatest causes of pollution in our rivers and it needs to be addressed where it joins with combined sewers and enters people’s homes and our rivers.

[Lord Douglas-Miller (Con)]

It would probably be best if I wrote to my noble friend about this. She has raised a range of issues which I do not have time to go into today. I will write to her in due course.

Water Pollution

Baroness McIntosh of Pickering Excerpts

Tuesday 16th January 2024 Lords Chamber

[Lord Douglas-Miller (Con)]

I thank the noble Baroness for her Question. The Government do not believe that there is any collusion. The role of the Environment Agency, as the environmental regulator for water companies, is to provide guidance to help water companies with their water resource management and to ensure that they are complying with the regulations. On FoI and environmental information regulations, water companies are only subject to the Environmental Information Regulations 2004 and not the Freedom of Information Act 2000. For the purposes of the environmental information regulations, water companies are their own legal entity, which means that it is for the organisation itself to tell you why it cannot provide all, or some of, the information requested.

[Baroness McIntosh of Pickering (Con)]

My Lords, I welcome my noble friend to this House and congratulate him on his new appointment. Possibly the best way of preventing sewage entering the watercourses is to ensure the end of the automatic right to connect major new developments with inadequate, inappropriate piping. Will he look into when the consultation will be brought forward to implement Schedule 3 to the Flood and Water Management Act 2010 to ensure that there will be no automatic connections in these circumstances and a better use of SUDS and natural flood defences?

[Lord Douglas-Miller (Con)]

I thank my noble friend for her kind words, which are greatly appreciated. We will be implementing Schedule 3 to the water management Act, as previously announced. I hope that that addresses my noble friend’s question.

Storm Babet: Flooding

Baroness McIntosh of Pickering Excerpts

Wednesday 25th October 2023 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

My Lords, I thank my noble friend for bringing forward this Statement. My thoughts are with the victims—those who died and lost their lives, and all those who were flooded in such extreme circumstances. During the debate on the levelling-up Bill, regarding the amendments on increasing flood protection, we established—and my noble friend will recall this because at the time we were on the shadow team for the precursor to Flood Re—that any house built after 2009 is not insured if it is built on a flood plain. Through the course of the debate on the amendment, we understood that mapping the divisions between zones 3a and 3b, which determine which flood plains can or cannot be built on, is the responsibility of local authorities. Will my noble friend explore to what extent this mapping is taking place so that planning authorities know where these houses can or cannot be built, and will he use his best offices to tackle surface water flooding? We are awaiting the implementation of Schedule 3 to the 2010 Act.

[Lord Benyon (Con)]

I thank my noble friend for her continued interest in this matter. She has reminded me that I did not respond to the point that the noble Baroness asked about building on flood plains. If we said that no more properties were to be built on flood plains—I know that this is not what she or my noble friend would say—we would be saying that there should be no more houses built in York, Leeds or even London and a great many other communities. What we want to see is flood-resilient homes being built, and there are plenty of examples in this country and around the world where you can build, in certain circumstances, flood-resistant housing on flood plains. But, by and large, we do not want to see this. The National Planning Policy Framework is very clear about this, and we have underpinned that recently.

My noble friend is right that Flood Re relates to houses built before that date, and that is one of the levers we are trying to apply to prevent the wrong kind of houses being built in the wrong place, but I will certainly look at the point she raises. Prior to Flood Re, 9% of policyholders with a prior flood claim could obtain flood insurance quotes from two or more insurers, and no one could get quotes from five or more. Following the scheme’s launch, most customers can now get more than 10 quotes. It has been a resounding success in supporting people for whom the fear of floods was dramatic; we would all like to see it extended. I point out that the Build Back Better scheme gives an added value of £10,000 to a household not just to restore a house after flooding but to make sure that it does not flood again. I note her point about Schedule 3, which she constantly raises. She knows that we are consulting on it, and the Government have given a clear commitment to bringing that into force.