Water (Special Measures) Bill [HL]

Baroness Pinnock Excerpts

Committee stage
Wednesday 30th October 2024 Lords Chamber

[Baroness Young of Old Scone (Lab)]

My Lords, I support Amendment 53 in the name of the noble Baroness, Lady McIntosh of Pickering. It gives the Secretary of State six months to report on the implementation of Schedule 3 to the Flood and Water Management Act 2010, which covers sustainable drainage. The Act is what it says on the tin: enacted in 2010—but, if I understand it correctly, Schedule 3, which we slaved over in your Lordships’ House, has never been formally commenced. There is no point in legislating if it is not brought into effect. What is the point of us being here if the legislation we meticulously pore over and pass is never implemented?

This is an important issue of sustainable drainage. The noble Baroness has already outlined how it impacts on housing development and other developments. It has a big impact on river and water body quality, so I look forward to hearing how the Government intend to deal with this issue.

[Baroness Pinnock (LD)]

My Lords, the amendments from the noble Baronesses, Lady McIntosh of Pickering and Lady Browning, and the noble Duke, the Duke of Wellington, are, in their varied ways, interesting.

The amendment of the noble Baroness, Lady McIntosh, urges the Government to give greater consideration to encouraging water companies to use nature to slow down excessive water flows, particularly in rivers, because that would reduce the impact on combined sewers, which take both sewage and rainfall through the sewerage system. The noble Baroness gave the example of Pickering, which was discussed when I was on the board of Yorkshire Water some years ago. I was very pleased to hear that that approach has worked so well.

There is another interesting example, in Somerset. A group of environmentalists—not a water company—encouraged a river to return from a driven channel to its natural meandering state. That has benefited nature in many ways, but it has also reduced the speed of the water flow, thereby bringing about the benefits the noble Baroness described. The Government could encourage such approaches—not much more is needed. The Pickering scheme was supported by the board of Yorkshire Water because it was a lot less expensive and had many environmental pluses, among which was the reduced carbon cost of not having to use huge amounts of concrete, adopting a nature-driven approach instead.

I hope the Minister will take on board what has been said. The water companies, with a bit of oomph behind them, could be encouraged to experiment and use these ways to reduce water flows and therefore flooding, to reduce excessive water in the system, and to reduce storm water overflow pollution incidents. This would have a huge benefit.

The next issue, which we discussed on Monday, is the failure to implement SUDS. That was supposed to happen this year and has not, but it ought to. On the plus side, although the Government have not implemented it, in my experience planning authorities are already insisting on new planning applications having a SUDS scheme, because of the capacity issues raised by the noble Baroness, Lady Browning. In any major housing development scheme, the sewerage undertaker is required to commentate on the scheme and may say, “Guess what? There’s not enough capacity in the system”. A SUDS scheme is then applied, which reduces the highways rainfall flow so that it goes not into the sewerage system but, via attenuation tanks, into a neighbouring water course.

In some ways these things are already happening, but I agree with the noble Baroness, Lady Browning, about the importance of considering the capacity of the sewerage system and water resource availability. We know that in some parts of the country, particularly the south-east, housing developments do not happen because there is insufficient water supply. I heard what the Minister said earlier—that in the price review to be signed off by the end of this year, sufficient capital was agreed for nine new reservoirs. That is important, but we also need to think about using water more efficiently, as was said earlier. The volume of water that each of us uses compared to even 10 years ago is quite concerning. We need to think carefully about water efficiency, so that we use what is a precious resource more carefully.

I urge the Government to think again about a national water grid. Water is connected across the country, but the water resources are owned by individual water companies. There is quite a lot of water in the north and not anywhere near enough in the south of the country. Water is currently pushed from one part of a company’s resources to the neighbouring water company. For instance, Yorkshire Water regularly pushes water to whatever the neighbouring authority is in the Midlands. The Government should think about using the water in the north—I am sure that we who live in Yorkshire would be willing to sell it at a good price to those of you in the south who do not have enough.

On that basis, we support what has been proposed by the noble Baronesses, Lady McIntosh and Lady Browning, and we look forward to the Minister’s response to those concerns.

Independent Water Commission

Baroness Pinnock Excerpts

Tuesday 29th October 2024 Lords Chamber

[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.

Water (Special Measures) Bill [HL]

Baroness Pinnock Excerpts

Committee stage
Monday 28th October 2024 Lords Chamber

[Lord Remnant (Con)]

My Lords, I must admit to having experienced a degree of trepidation on discovering that I was to share a group of amendments with the noble Lord, Lord Sikka, and with him alone. Having listened to his views on the Bill in general, so eloquently expressed at Second Reading, I feared that we would find little common ground when debating particular aspects of it. Imagine my surprise, therefore, when I compared his Amendment 4, to which he has just spoken, with my Amendment 18, to which I am about to speak, to discover that we might have more in common than I had thought.

I think that some of the rationale behind Amendment 4 is misplaced. While I agree with the noble Lord that all members of the board under company law are held to account, performance-related pay is in practice paid only to executives, while non-executives are remunerated by way of fixed fee. Given that the provision to which Amendment 4 relates is in respect of performance-related pay, the inclusion of non-executive directors is of no practical importance. Notwithstanding this, Amendments 4 and 18 effectively would achieve the same practical impact in respect of the individuals to whom these remuneration rules apply. Amendment 4 would remove the reference to senior roles and replace it with a reference to directors of the company, while Amendment 18 would retain the concept of senior roles but effectively define them as directors of the company.

I do not believe that it is right for Ofwat to extend the rules to

“such other description of role”

as it specifies. Not only would such an extension be wider in scope than the current disclosure requirements of Section 35A of the Water Industry Act 1991 but it would be difficult to implement in practice, as different water companies will have individuals described differently by title and role. Nor would such an extension be consistent with the general remuneration and corporate governance rules for listed companies, which do not extend to individuals below board level.

I hope the Minister agrees that, through the adoption of my amendment, this additional power conferred on Ofwat by the Bill should be removed. If we wish to attract and support the next generation of leaders in this vital industry from middle management, this will not be achieved by extending these restrictive remuneration practices to them.

[Baroness Pinnock (LD)]

My Lords, I start by reminding the Committee that I have an experience, rather than an interest, as I was a non-executive director for a number of years on the board of Yorkshire Water. I reassure the noble Lord, Lord Sikka, that I never had a bonus during that time, for the reasons that the noble Lord, Lord Remnant, has explained.

This group of amendments follows on neatly from the previous discussion about performance-related pay and the remuneration of senior directors of water and wastewater companies, so I thought it was worthwhile to draw out a bit more of the debate around this issue. The fundamental problem lies in the fact that water and wastewater companies are regulated by a number of different institutions. Ofwat is the economic regulator and, because of the way that the water Act was written, is primarily looking at the financial performance of the water companies. That inevitably leads to a disregard for the environmental outcomes of water companies as a priority. Consumers, who see that their rivers, lakes and coasts are being heavily polluted by these water companies, are astounded to see the same water companies giving huge bonuses to their directors. That is because the two issues are not related in the mind of Ofwat. That is why my party wants a single regulator for water companies, so that all the issues that are the responsibility of water and wastewater companies are taken into account. Part of that debate was reflected in the first group of amendments, discussed earlier.

We need to remind ourselves that remuneration in companies is decided by boards of directors. They will look at the financial objectives of the company and the outcome of the price review agreed by Ofwat and come to conclusions, whether or not objectives have been achieved or considerable benefit to the company accrued by the actions of directors.

That is part of the problem. As the noble Lord, Lord Sikka, has attempted to describe, the price review is a tussle of words and figures between the companies on the one hand and Ofwat on the other. I remember the discussions. If you are in a company and you want to make sure there is a good outcome for your owners and shareholders, you make sure that the submissions you make in a price review to Ofwat enable profits to be made. That is the whole purpose of a private company. It is at the heart of all the discussions we are having about water companies, their performance and their remuneration and bonuses. The 1991 Act was designed for them to be private companies with shareholders, who were going to receive dividends as a consequence. If that is the prime duty, and the main regulator oversees that prime duty, the other issues that water companies ought to be taking into account—the environmental issues in particular, as we heard earlier—become less important.

I hope that, when we come to Report and discuss these issues more closely, the Minister will think about a government amendment that strengthens the duties of water companies, and of Ofwat as the regulator, to take into account these other issues. For me, that is at the heart of the discussions we have had on this group and the previous group. I agree with the amendment from the noble Lord, Lord Remnant. You cannot try to control pay awards further down the company; those often very talented people need to be attracted into water companies if we are to improve what is a sad state of affairs.

[The Duke of Wellington (CB)]

My Lords, I support Amendment 18 in the name of the noble Lord, Lord Remnant, which simply deletes new subsection (5)(c) on page 2. It seems to me that we cannot allow the authority—whatever it may be in the future, after the review, or even from now on—to start getting involved in the remuneration of those below board level. That really becomes too much intrusion into the way a company is run.

The noble Lord, Lord Sikka, is entirely correct that, in the end, a director of a company is a director, whether executive or non-executive, as covered by the Bill; it mentions “a director” of the company. It seems to me that, while senior role remuneration should have some guidance from the authority, that should be restricted to the chief executive and other executive board members. There is no point entering into a discussion about non-executive directors, who clearly do not participate in performance-related pay or bonuses or anything like that. I think the noble Lord, Lord Remnant, is right; it would be appropriate to delete new subsection (5)(c) and include in this clause only the chief executive and any other executive director.

--- Later in debate ---

[Baroness McIntosh of Pickering (Con)]

My Lords, I will speak also to Amendment 8 in my name. These amendments are in a group looking at exemptions from the rules under Clause 1. My particular concern relates to the obligations being imposed by Clause 1, and indeed the rest of the Bill, on water companies where they may not and could not possibly be held responsible for the activities they are undertaking because the fault lies with others who are not currently within the remit of the Bill.

The purpose of these amendments is to reflect the fact that water companies should be held responsible under the terms of the Bill, in particular Clause 1, only for those activities within their specific responsibility. Clearly, for example, where there are missed connections between wastewater pipes and major developments, water companies should not be held responsible if they are obliged to fit these new connections into inadequate, antiquated pipes that simply cannot take the amount of waste coming.

The background to this very simple measure follows from the Pitt review—the noble Baroness will recall that I raised this at Second Reading—following the severe floods of 2007. I think it is worthy of note that Sir Michael Pitt is from East Yorkshire, which is more vulnerable to coastal flooding than just about any other part of the country. His 2007 review identified, for the first time, surface water flooding as well.

In connection with surface water flooding, the two most consequential amendments set out that mandatory construction of sustainable drainage systems in major developments should take place so as to contain floodwater and prevent it mixing with sewage through overflows into the combined sewers.

Further, and this is where the developers should have a responsibility and not the water companies, I ask the Minister to look favourably at ending the automatic right to connect, which has so far never happened. That one measure alone would mean that misconnections—whereby the existing infrastructure is deemed to fit the amount of wastewater coming from major new developments—would simply not happen in the future. Most of these developments are made up of four or five-bedroom homes with, dare I say, four or five times the amount of sewage coming out of them into inadequate Victorian pipes. Currently, under the planning rules, developers and local authorities deem those connections to be safe and refuse to put in appropriate infrastructure to ensure that a safe connection can be made. Were the water companies to be recognised in the planning application process as statutory consultees, on the same basis as the Environment Agency comparatively recently has been, those misconnections could be averted. The simple measure of making water companies statutory consultees, on the same basis as the Environment Agency, would help in that regard.

When she looks at these amendments in summing up, would the Minister agree to obliging developers to have sustainable drains fitted to take excess rainwater into a soakaway, pond or culvert to prevent it mixing with sewage water in combined sewers, which is currently leading to sewage overflows? It is not fair to make the water companies responsible for that. Were they to be statutory consultees, they would probably argue that the wastewater will not fit the pipes currently in place.

This has led to some very perverse sewage spills. I remember when I was in the other place there was a school in Filey that suffered £1 million-worth of damage to its swimming pool and, I think, the maths department. Existing developments had to be evacuated for six to nine months because of the public health aspect of sewage coming in. Precisely because a small development of only 30 houses was pumping out so much sewage, the rainwater when mixed with it had nowhere else to go and it went into the school and the existing developments. I am sure noble Lords could give other examples of this.

I ask the Minister to review the way in which highways currently contribute to pollution through rainwater running off the road surface, taking with it oil, brake fluid and other pollutants. When this combines with floodwater, it enters the combined sewers and then often goes into homes, causing huge damage and a public health disaster.

I hope the Minister will agree that water companies should be held responsible for those activities within their control but cannot be held responsible for circumstances which are outwith their control. These two small, tightly-drawn amendments would fit that purpose.

I conclude by asking the Minister this. If these amendments are not added to the Bill, what mechanism do the Government intend to use to ensure that water companies will be held responsible under the Bill only for activities under their direct control and not those under the control of others, such as developers and highways authorities, which are currently excluded from the remit of the Bill? I beg to move.

[Baroness Pinnock (LD)]

My Lords, I broadly agree with the amendments in the name of the noble Baroness, Lady McIntosh. She raised some important issues, about, first of all, the way that surface water drainage is treated. As the Minister will know, surface water is combined with sewage water in the same pipes in many of our towns and cities, and increasing rainfall and development is putting pressure on that combined drainage system.

The other issue to consider, which the noble Baroness raised, is the pressure put on local authority planning services to agree to housing developments where the existing infrastructure is not appropriate to support them, with developers reluctant to fork out huge sums of money to pay for the additional drainage systems needed. The answer lies in empowering local authorities’ planning services to put conditions on planning consent which specifically require developers to build the appropriate infrastructure to support the development that they wish to build.

There is a related point. I am a local councillor; in my experience, where there is an issue of surface water, the planning services require underwater attenuation tanks to be built to hold that water until it can be released to the natural drainage systems, such as streams. However, the developers are very reluctant to do that, and are seeking to get around it in other ways. Surface water drainage issues and local authorities’ inability to enforce this is something that the Minister may wish to raise with her colleagues in local government when it comes to reforms of the planning system, as it will affect the Minister’s environment responsibilities. I agree with the amendments tabled by the noble Baroness, Lady McIntosh.

[Lord Whitty (Lab)]

My Lords, I was not planning to speak this evening, and indeed I have to go shortly, but this debate raises broader issues.

I agree with the noble Baroness, Lady McIntosh, that water companies should not be pursued by the authority for things which are not their fault and which they are unable to do anything about. However, this underlines the need to ensure that the new authority, whatever it is, is a very powerful authority.

As noble Lords may recall, the noble Duke, the Duke of Wellington, and I suggested that we should have a combined regulator. That has been rejected so far, but we need a regulator that can take steps against not only the water companies but other bodies which make the water companies’ tasks impossible or extremely difficult, and which are themselves primarily responsible for the pollution, flooding or other damage caused by the water.

That applies not only to developers, although I think that developers are probably explicitly the worst in this context, but, as the noble Baroness has just said, to highways authorities and to discharges from agriculture. If there is a water authority that has to deal with the far end of the effects of these discharges or the inadequacy of the piping, that authority should have the ability to take such steps. At the moment, it is either the local authority that does that in terms of planning permission, or it is the highways authority, which pays no attention whatever to water run-off, frankly, or it is the various bits of agriculture regulation. But if we are concerned about making sure that we have less sullied water and no threat of flooding, which may well be caused by people other than the water companies, I would argue that at some stage the Government will have to consider giving powers to the new authority that cover those companies, or particular actions by those companies, as well as the water companies.

Water (Special Measures) Bill [HL]

Baroness Pinnock Excerpts

Committee stage
Monday 28th October 2024 Lords Chamber

[Lord Remnant (Con)]

My Lords, I am delighted that Clause 10 does not appear to envisage a role for Ofwat. The amendments in this group are not really related to each other. As such, I shall confine my remarks to Amendment 86 in my name and I shall be brief.

Under the “Special administration orders” section of the Bill relating to the insolvency of water companies, Clause 10 gives the Secretary of State the power to modify a water company licence in order to recover any shortfall in costs for the Government from its consumers. New subsection (4) extends this recourse to all other companies in the sector.

I hope the Minister will tell me that I am mistaken in my interpretation of what this new subsection is designed to achieve. Does it not force good companies and their blameless customers to bail out failed companies? Can this possibly be justified? It has been a recurring theme of this debate, supported by the comments of many noble Lords, that the sector is in critical need of substantial investment to raise standards across the board and deliver the service that consumers and the general public so rightly expect. Any suggestion of collective punishment for the financial woes of others is to be resisted.

The consequence of imposing an unquantified and unquantifiable potential liability on the sector will at best push up the returns required by investors to inject capital into the water companies, inevitably increasing costs to consumers. At worst, it risks making the sector uninvestable. That is surely not the intention of new subsection (4), but it may be the consequence. My amendment would remove that risk, and I hope the Minister will support it.

[Baroness Pinnock (LD)]

My Lords, I will address my comments to the amendment in the name of the noble Lord, Lord Cromwell. I agree with him that financial restructuring of companies has led us to where we are now, with Thames Water potentially on the brink of collapse—who knows who is going to have to fund the huge injection of capital that has apparently now been agreed. Other water companies are heavily indebted. Ofwat, which is after all the economic regulator, did not query, question or challenge those decisions made in the early years of water company privatisation.

The consequence is that anything the Government now attempt to do is basically closing the stable door after the horse has bolted—and raced to the other side of the world—because the companies are where they are. Although I agree with the noble Lord, Lord Cromwell, that any future restructuring ought to be put under the microscope of the economic regulator, the current situation is leading us to a potentially very grave position, which the Government are trying to address with the other financial clauses in the Bill. I read the clause referenced by the noble Lord, Lord Remnant, as being directed pointedly at a particular water company.

I support the amendment moved by the noble Lord, Lord Cromwell. I suppose it is better to change the situation now than leave it as it is, but what has happened already is unfortunate.

[Lord Roborough (Con)]

My Lords, Amendment 92 is very simple. Had it been in place when the water companies were privatised, it would have prevented the aggressive financial engineering that has led to the financial distress we see regularly reported in the press, which has provoked much anger in this House and elsewhere over the years.

Before I address Amendment 92, I will briefly comment on Amendment 10 moved by the noble Lord, Lord Cromwell. It coexists neatly with my amendment, allowing regulators to be better informed on issues with the financial structures of the companies they regulate, and to be aware of future problems. I am pleased that the noble Lord has moved this amendment, and I broadly agree that the regulator should have better information about the financial structuring of water companies in the interests of protecting their viability and preventing circumstances in which they become overleveraged.

I will speak to the dangers of overleveraging and the problems we have as a result of the weakness of the regulator, but we on this side of the Committee are interested in the amendment moved by the noble Lord, Lord Cromwell, which takes a fairly moderate step towards having a better-informed regulator. That said, it may be possible to go further, either by reforming the way the regulator works in the water sector or, as I propose in Amendment 92, by implementing statutory rules on borrowing for water companies and taking effective steps to prevent capital being taken out of companies that are overleveraged. We need to make the water sector attractive to investors so that they bring more capital into it to fund investment in cleaner and better water infrastructure.

I add my whole-hearted support to the amendment proposed by my noble friend Lord Remnant. It seems grossly unfair that a company that has behaved responsibly should be penalised by the actions of another in the sector. I am aware of precedent in the financial services sector, but that is to protect the integrity of the financial system, which is in all participants’ interests. In this case, each water company is a unique entity whose actions have little or no impact on others. Without this amendment, one bad actor could contaminate the industry.

I add my concerns about the wording that my noble friend Lord Remnant seeks to remove from the Bill. This new subsection as drafted applies the duty to render “relevant financial assistance” to any other company that holds, or held, an appointment under this chapter. This seems to me yet another example of retroactive effects that are littered throughout the Bill and which we will discuss in later groups. Could the Minister explain to the Committee what the Government’s intention is with this retroactive element in the Bill? Will there be a maximum period of time since the relevant company held an appointment for this duty to apply to it? This seems to us to be a concerning power, and we would seek clarifications from the Minister on both the unfairness at the core of this subsection and its retroactive element. I thank my noble friend Lord Remnant for introducing his amendment, and hope that he continues to make progress on this unfairness which exists in the Bill as drafted.

--- Later in debate ---

I press the Minister to make a commitment this evening to implement Schedule 3 to the Flood and Water Management Act without delay and perhaps set out a timetable. This legislation is the right place to do so, because it relates entirely to the environmental standards that the Bill sets out. It is one of the key environmental standards set out in new Section 35B, so I make a plea to the Minister to use her good offices to implement it as part of the Bill. I beg to move.

[Baroness Pinnock (LD)]

My Lords, I do not know whether the noble Baroness, Lady McIntosh, is right to try to urge the adoption of Schedule 3 to the Flood and Water Management Act through this Bill, but she is right that there was an expectation that it would be implemented this year. Given the new Government’s determination to expand the construction of housing as quickly as possible across the country, this schedule is pertinent and relates to the water services Act. We ought to try to address it, through this Act or not. The Minister’s heart is in the right place on this one, so now she has the levers of power I am sure that she will pull the right one.

[Lord Blencathra (Con)]

My Lords, I thank my noble friend Lady McIntosh of Pickering for tabling these amendments, which rightly seek to tackle the issues of flooding and drainage. The Flood and Water Management Act 2010 set out standards for water companies regarding the reduction of flood risks and created more power for local authorities to be able to take action to protect their local areas.

When in government, we tightened restrictions on water companies to protect our countryside, and we are pleased that this work is being continued. Since 2010, under the Conservatives, government investment has better protected more than 600,000 properties from flooding and coastal erosion. Since 2015, Conservative investment has protected over 900,000 acres of farmland, rightly putting the needs of rural communities first.

In 2020, we built on this further and announced a doubling of capital funding into flood defences in England, to a record £5.6 billion from 2021 to 2027. As the Committee will understand from these steps, we had a strong record of investment in flood defences and water management. It would be helpful to hear from the Minister what plans the Government have to improve on those Conservative measures to protect communities across the UK from the harms of flooding.

Much of our debate on the Bill has so far focused on the corporate structures and financial management of companies in our water industry. It is right that we consider these issues in depth and seek to put the right incentives in place to deliver better outcomes for the key groups and interests that we should be aiming to protect under the Bill; namely, consumers, employees of water companies and the protection of our environment.

While the majority of the public debate around our water sector focuses on the damage that sewage overflows do to our waterways, my noble friend Lady McIntosh is absolutely right to take this opportunity to consider the dangers of flooding and to seek to ensure that water companies put this issue front and centre. We on these Benches certainly understand the issues of sewage contamination in our rivers across the country and would like to solve this issue to preserve the nature and wildlife that this has serious impacts on. We also recognise the horrendous impact that floods have on many communities because those water companies have not done enough in terms of flood management.

The first impact most people experience when water management is poor is flooding on roads and on other key transport links. However, in serious cases—such as the 2007 summer floods and the floods of 2015-16—this can result in threats to lives and livelihoods, enormous costs to the economy and massive devastation for the people affected. I am not sure if the Minister is politically old enough to remember the terrible Carlisle floods a few years ago, but it was horrendous to drive through Carlisle and see thousands of homes with abandoned furniture outside, which was soaked through. In my own constituency, just south of Penrith, at Eamont Bridge, houses had been flooded to a depth of about three inches, but with osmosis, the water had been sucked right up the walls and everything had been destroyed. So, flooding seriously impacts people’s lives.

Reporting on those two exceptional examples together, the Office for Budget Responsibility estimated that the 2007 summer floods cost the UK economy £3.2 billion, while the 2015-16 winter floods cost the economy roughly half of that, at £1.6 billion. These examples alone demonstrate the importance of improving water management to protect our communities from flooding.

That said, it is not only the extreme examples that demonstrate the importance of managing flood risks. As anyone who is involved in farming or other rural affairs will tell you, 2024 has been a very wet year, with many communities facing difficult challenges with flooding. In April 2024, England as a whole received 150% of the long-term average rainfall for the time of year and the north-west was particularly wet—as the noble Baroness and I will testify—with, as my notes say, the wettest April since records began in 1871. I can also tell noble Lords that it was also the wettest August, with one dry day this year.

This is a good opportunity to remind ourselves that it is not just people’s homes that rely on a good water system but our food supply—people’s livelihoods rely on it too. That is why my noble friend Lady McIntosh of Pickering is right to bring this point forward for debate as the Bill makes progress.

When flooding and poor water management affect our rural communities, invariably this has a knock-on effect on agriculture and, in turn, consumer costs. Earlier this month, the Guardian reported that fresh food inflation increased to 1.5% from 1% just in August as the wet weather affected British production of salads and soft fruits, while storms in the Atlantic delayed imports of more exotic fruits, driving up prices.

No Government can control the weather—thank goodness; farmers would like to control it of course, but each would want to control it differently—and no water company can entirely mitigate the impacts of wet periods on our agricultural output. However, good water management is very important when we are faced with unusually poor conditions.

I am grateful to my noble friend Lady McIntosh of Pickering for tabling these amendments to the Bill. I know many farmers will be pleased to hear their concerns about the impacts of poor water management are being discussed in your Lordships’ House tonight. While the Government may not be inclined to accept these amendments, we on this side of the House see this as an important opportunity to ask the Government to please keep the issue of flooding and water management high on the agenda, in light of the very serious impacts it has on people across the country, in both direct damage to their homes and communities and the secondary impact it can have on food prices for all of us.

I would therefore be interested to hear whether the Minister might consider bringing tougher flood mitigation duties for water companies into the Bill. As we have heard constantly, the Government intend to bring forward much wider reforms in the coming year, but, as we approach winter, many families up and down the country will have concerns in the backs of their minds about the risks of flood, in light of the continued failures in our water sector.

Will the Minister take this forward and look at possible improvements that can be made to the Bill now? I hope the Government will listen to the important points raised by my noble friend tonight and consider these carefully before Report.

Rural Communities

Baroness Pinnock Excerpts

Tuesday 15th October 2024 Lords Chamber

[Baroness Pinnock (LD)]

My Lords, this has been a wide-ranging debate as a consequence of the initiative taken by the noble Baroness, Lady McIntosh of Pickering. When we think about rural communities, those of us in England usually have in mind the Yorkshire Dales, the Cotswolds or the West Country. In our minds, settlements in these areas comprise small towns and villages, and small, often isolated, hamlets and farmhouses. However, rural communities also exist on the fringes of large urban areas. For example, in West Yorkshire, where I live, the five councils together serve 2.5 million people who predominantly live in cities and towns, but there is a significant rural hinterland. In my council, small villages and isolated farmhouses high up in the Pennines share the challenges of rural communities everywhere. I beg that, when we think about rural communities, we include those rural communities as well—they too need to be in our thinking.

A huge number of issues have been raised in the debate but I want to focus on just two: the first is housing and the second is local government funding for councils that serve rural communities. The lack of appropriate housing exists in all our communities. However, rural communities have, in addition, their own particular challenges. A recent report by the CPRE highlighted a problem that has resulted in a 40% increase in homelessness over a five-year period and literally a lifetime’s wait for a home with a social rent. This report concurs with the policy solutions proposed by my party, the Liberal Democrats, and the urgent need to set an ambitious target for building housing with a social rent within a council’s local plan. To be effective, this will need to be supported as a policy by the Government and the independent Planning Inspectorate. To have a long-term benefit, new social housing has to be removed from right-to-buy legislation, otherwise the financial model is simply not viable. At this point, I shall make my usual comment that, in many cases, affordable housing is simply not affordable and so we need to think about housing for social rent.

As noble Lords have said, house prices in the countryside have increased at almost twice the rate of those in urban areas for the past five years, while rural wages have largely stagnated. The consequence is that young people are being forced to leave rural communities as a result of the housing crisis. This has a knock-on effect through the skills lost, a reduction in economic activity and vital public services being deprived of talent. An additional issue is the increasing number of second homes and short-term lets, which drive up rental prices and restrict supply. Control of the proportion of second homes and short-term lets in an area is essential to enable stable communities to survive.

That leads me neatly to consideration of the funding that the Government supply in support of rural communities. The Rural Services Network has long campaigned for a fairer allocation of funding to rural local authorities. In 2024-25, urban councils received 36% more in government funding spending power per head compared to rural councils. As a result of years of underfunding, rural councils have had to increase council tax, leading to a situation where rural residents pay, on average, 20% more per head than their urban counterparts. Rural residents receive less government funding, pay more in council tax and receive fewer services than those in urban areas. One of the ways that councils are partially bridging the funding gap is by making service provision contracts with parish councils that are able to raise income to fund basic services—for example, parks and play areas.

The question was what priorities we want to see for the next two years. For me, we must use the planning process to allocate more land for social housing, and see improved and fair funding for councils serving rural communities. I make a plea that we do not divide our communities by defining rural and urban as if they are totally separate.

Water (Special Measures) Bill [HL]

Baroness Pinnock Excerpts

2nd reading
Wednesday 9th October 2024 Lords Chamber

[Baroness Pinnock (LD)]

My Lords, as many have said, this Bill makes the first tentative steps in the right direction toward reforming the water industry, and it was good to hear the Minister recognise that this is just a start. There are many challenges facing the water industry such as the impact of climate change, which is expected to result in serious water shortages in some parts of the country; the requirement to meet the needs of a growing population, and the consequences for our environment. One of the strategic questions facing the industry and the Government is whether those challenges are better met by requiring the 11 water and wastewater companies, along with the further five water-only companies, to work more closely together in the interests of all of us as customers.

So far in this debate there has been a danger of treating water companies as if they are all behaving in the same way—something we ought to resist. Some companies are efficient and effective both in their operations and in their wider concern for the environment, but some are far from fulfilling the needs of their customers, let alone the needs of the environment. The thrust of this Bill is to force significant improvement of those companies in the latter category. I support what the Government are attempting to do; I am not saying that it is perfect, but it is in the right direction.

Privatised water companies provide an essential public service, which means that there is a delicate balance of responsibilities for each of them to achieve. On the one hand are the shareholders and investors wanting a return, rightly, on their investment, and on the other are customers wanting affordable bills and the environment to be protected and enhanced. It is this balance that, in some cases, has got considerably out of control. As many noble Lords have remarked, the righteous national outrage at the flagrant breaches of the use of storm overflows is just one indicator of an industry that has lost sight of its fundamental purpose.

The rot for some, but not all, companies started with the financial models adopted in the years following privatisation, where owners were able to extract value from the assets but leave the water company with a significant debt ratio—the total debt of the water companies currently exceeds £68 billion. Latterly, Ofwat has recognised that water companies have been too debt-laden and has forced a reduction of the debt ratio at each price review. However, that has been at the margins and has left companies—notably Thames Water—forced to concentrate their business on paying debt interest, perhaps paying down debt, at the expense of the basic public service of the company. This fundamental failure of governance and regulation has resulted in the various unacceptable behaviours that many noble Lords have cited. Clause 1 seeks to address some of those issues.

At this point, I declare that I was a non-executive member of Yorkshire Water for 10 years, fulfilling the role which the Bill identifies as being a voice for communities and customers. That this is a role which all boards should include is welcome, although I accept the argument made by the noble Lord, Lord Remnant, that it is not one we should define as is indicated in the Bill—that will not work.

Aside from the financial models, the problem is Ofwat. As the prime regulator—though not the only regulator—it needs to be abolished and replaced with a body that has more powers. Some of those powers are set out in the Bill, but fundamentally there needs to be a different regulator. As was previously said, we have a revolving-door syndrome whereby executives of water companies become executives of Ofwat, and sometimes back again. That is a malaise that has to be stopped; it reinforces bad behaviours and no new thinking comes into the sector. Perhaps as a result, Ofwat has failed to regulate the sometimes overly high profits to shareholders and bonuses to executives. Furthermore, as other noble Lords have mentioned, Ofwat has no powers to force water companies to improve environmental water quality, which includes preventing storm overflows being used as a cost-saving measure.

One of the inherent challenges in reforming wastewater treatment is that the public sewer system also takes the flows of surface water from the road network—something that the noble Baroness, Lady Browning, spoke about. The Government in their drive for more housing need to ensure that sustainable urban drainage is a part of any new housing development, and that, if need be, surface water attenuation tanks or ponds are part of preventing water surge into the public sewer system.

Finally, I urge the Government to consider ownership as well as financial models of water companies in developing a better approach to this essential public service. As part of that thinking, I urge them to develop the concept of a national water grid. It is surprising that areas where there is perhaps too much water are not used to push water down the systems of various companies to help those who are increasingly going to be short of water.

The system, as it is, is not doing its best; some say it is failing the customers and failing the environment. Some companies, in the drive for profits and investment, have lost sight of their sole purpose, which is to provide an absolutely essential public service. This Bill makes small steps in the right direction, but fundamental changes in approach are still needed, and I look forward to the Minister solving all those problems.

Pollution in Rivers and Regulation of Private Water Companies

Baroness Pinnock Excerpts

Thursday 29th February 2024 Lords Chamber

[Baroness Pinnock (LD)]

My Lords, I thank my noble friend Lady Bakewell of Hardington Mandeville for tabling this very important topic for debate. She has described the consequences for our rivers of discharging raw sewage from storm overflows; the health problems that follow can be very serious, but I will start with some history.

Nearly 170 years ago, sewage was discharged into the rivers that served our great cities. In London, it was the Thames, and one hot summer in 1858 the smell that resulted from the raw effluent was dubbed the Great Stink. It affected Parliament to such an extent that the curtains were soaked in chloride of lime in a vain attempt to reduce the overpowering smell. The failure to deal with a long-running discharge of raw sewage into the Thames had literally got up the noses of MPs and Peers; something had to be done, of course, and it was.

The great Joseph Bazalgette was a civil engineer who then set to work and created the sewage system for central London, including for Parliament. Standards for sewage systems for the whole country followed in 1875, when a Conservative Prime Minister, Benjamin Disraeli, overcame the laissez-faire attitude of his party and passed the Public Health Act, which required local authorities to create or repair sewers at significant cost to ratepayers. It is salutary to think that, over 150 years later, that investment in the sewerage infrastructure has been so neglected that, today, communities across the country face a modern equivalent of the Great Stink.

In Yorkshire, where I am happy to live, the rivers create a beautiful environment, as well as providing water for habitats and a focus for recreation but also water abstraction for domestic consumption. Sadly, too often, these great rivers are also used to carry sewage from storm overflows. I hasten to add that, despite all else that pollutes our rivers, the water companies and the Drinking Water Inspectorate ensure a very high quality of drinking water.

These are some of the more recent incidents. Over 2020 and 2021, two Yorkshire rivers, the River Nidd and the River Wharfe, received almost approximately 1.4 billion litres of untreated wastewater—for “wastewater”, read “raw sewage”. The River Nidd saw 870 sewage dump incidents in 2022, according to Environment Agency figures. Testing of water pollution in the River Nidd at the time showed that the harmful bacteria E. coli was at “concerningly high” levels.

In 2016, the Environment Agency received a report of pollution in Hookstone Beck in Harrogate. Investigating officers traced it to the nearby overflow, which had blocked. The investigation found that almost 1,500 fish had been killed and that water quality was affected for 2.5 kilometres downstream. A series of further blockages and discharges took place in the following months.

These are just some of the pollution incidents relating to the discharging of raw sewage in our great Yorkshire rivers. The question for the Minister is this: why have these pollution incidents been permitted without earlier intervention by the regulators and the Government?

The EU water framework directive has been retained by the Government as retained EU law. Prior to 2019, the water framework directive was a key driver to very significant capital investment by water companies in their wastewater treatment works and sewage systems. In Yorkshire, there were some very large schemes to improve wastewater treatment facilities and the system attached to them. The Environmental Improvement Plan 2023 only requires

“water companies to have eliminated all adverse ecological impact from sewage discharges at all sensitive sites by 2035, and at all other overflows by 2050”.

The Government are apparently satisfied that raw sewage discharges can continue for a further 25 years. What is worse is that these aims in the plan are not even legally binding.

Further, the Government’s Storm Overflows Discharge Reduction Plan of 2022 set a target for 75% of overflows close to high-priority sites such as SSSIs and so on by 2035. This is a considerable dilution of the water framework directive, which set a date to restore all surface water bodies—rivers, streams et cetera—to good ecological status by December 2027. Yet the Government are apparently okaying 2035 for the most sensitive areas.

One hundred and fifty years ago, a Government were able to accept, first, that they had a responsibility and, secondly, that taking responsibility meant having a duty to act. The situation we suffer today is that Conservative Governments have been keen to outsource these critical responsibilities of providing clean drinking water and treating sewage so that the end-result can be discharged to rivers or the sea without causing pollution.

It is time for the Government to appreciate that discharging raw sewage into watercourses is not acceptable. It is a public health scandal. But, of course, public health is underfunded, as is the Environment Agency, to tackle these health challenges. Disraeli understood that his Government would be judged by the approach to public health. That same challenge exists today, and we are yet to see the Conservative Government rising effectively and with determination to that challenge.

Hunting Trophies

Baroness Pinnock Excerpts

Tuesday 22nd February 2022 Lords Chamber

[Lord Benyon (Con)]

My noble friend’s question suggests that she has the advantage on me and a greater understanding of the pre-legislative discussions that are going ahead. As far as I am concerned, what was in the manifesto will be brought forward in a Bill in the near future.

[Baroness Pinnock (LD)]

My Lords, it was reported in the media over the weekend—I think this is what the noble Baroness was referring to—that the Government are doing an about-turn on imports of fur and foie gras, both of which are abominable for those of us who have animal rights at the forefront of how we treat the natural world. Would the Minister care to comment on why there has been this about-turn?

[Lord Benyon (Con)]

I have read some of the speculation in the press, but this is not something that has come to me in my department as part of these discussions. We will see in the near future whether the noble Baroness is right or wrong when this legislation is published and pre-legislative discussions have taken place.

Flood Response

Baroness Pinnock Excerpts

Monday 10th February 2020 Lords Chamber

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank the Minister for repeating the Statement and I join with him in paying tribute to the emergency services and the Environment Agency for their prompt response to the threat of flooding in so many communities around the country. We echo the thoughts for the family of the man who died and send our condolences.

Yesterday, storm Ciara brought the most severe winds and heavy rain seen by many parts of the country for several years. It is heartbreaking to see local communities which endured so much in previous floods having to relive the experience. As the noble Lord said, a number of communities in the north of England were hit again, including Appleby, Bury and the Calder Valley, and there were further incidents in Scotland and Wales as well. There will be more frequent occurrences as we battle the extreme weather incidents that arise from the climate emergency. Once again, this is a huge wake-up call to the Government to act more quickly and decisively to stop global warming and the havoc caused by warmer, wetter winters and warmer, dryer summers, both of which increase the likelihood of intense rainfall events and flooding.

This is why we are critical of the Government’s net zero emissions target of 2050, when urgent action is needed now, not in the future. According to the Committee on Climate Change, there are 1.8 million homes at significant flood risk in England, and the number will rise unless we hit net zero in the next 10 years. Can the Minister confirm that the UK plan to be put before COP 26 in Glasgow will be more ambitious than the current plan and have more ambitious timelines? Does he accept that, as well as being more proactive on halting rising temperatures, the Government should also be more proactive on the practical mitigation of flood risk?

Sadly, action to prevent flooding has been hit by years of Conservative cuts to the Environment Agency, emergency services and local authorities, which all play a significant role in managing and responding to flood risk. The Minister will know that only last year the Environment Agency said it needed an extra £1 billion a year to provide an effective response to flood risk. Can he clarify whether that money has now been made available? Can he explain what extra funding is being provided—in addition to funding for specific flood barriers, which is very welcome—to emergency services on the ground? Can he explain why the money provided to South Yorkshire after the floods last November was made on the basis of match funding? Is there not a danger that that will penalise poorer communities even more? Will he clarify whether the same principle is going to be applied to any assistance provided after these storms?

This is about more than erecting higher barriers. As people said on the news last night, water will always find a way around those barriers. There is a great deal more that can be done through habitat restoration and better use of flood plains. Does the Minister accept that there is a need for a more comprehensive rethink of land use combined with a comprehensive plan for flooding that crosses communities and authorities? Where do environmental land management schemes fit with this? What are the Government’s plans for the co-ordination of schemes if they will be the basis of flood relief in future?

We welcomed the Flood Re scheme introduced in 2016 to provide flood insurance for those in high-risk areas, but there are still many businesses that cannot get insurance. This was again highlighted on the news last night. If we cannot help those businesses out, they will be forced to close and that will create ghost towns where there were once thriving communities. Can the Minister clarify what support is being given to small businesses to ensure that they continue to be economic and to keep their neighbourhoods alive? I hope when the Minister replies he will be able to assure this House that, for once, the Government have a comprehensive response to the rising tide of floods together with an urgent action plan to turn the tide of global warming that lies at the heart of the problem.

[Baroness Pinnock (LD)]

My Lords, I thank the Minister for repeating the Statement and draw the attention of the House to my interests as set out in the register, which include being a councillor in Kirklees in West Yorkshire.

Yesterday I spent several hours visiting flood-affected neighbourhoods in my town. Businesses, which are often located on the flatter land that is close to watercourses, found torrents of water rushing through their premises. Anxious residents were out in the appalling weather watching the levels rise, fearful that flooded cellars would lead to something even worse. In the face of the overwhelming nature of what happened, local emergency services were able to help only the very worst affected, and I thank them and all those in the local authorities, the Environment Agency and the energy supply companies who sought to keep people safe.

The towns affected by flooding yesterday were also the ones that were hit hard previously. Flooding does long-term damage to homes and businesses that can be very difficult to overcome. The immediate concern is the cost of the clear-up and the damage to homes and businesses. As the Minister said, the Government have activated the Bellwin scheme, which enables local authorities to claim some of the costs of the flooding. However, the scheme’s criteria state that a local authority has to fund the first 0.2% of its revenue budget before qualifying. No doubt that appeared generous when the scheme was drawn up before the 40% cuts to local government funding were imposed. Now with council budgets so squeezed, it is not approaching anywhere near generous. It puts enormous pressure on local authorities. On top of that, the same councils have had to fund clear-up costs from earlier flooding events, which, when they occur year-on-year, as they do, take a toll on council reserves set aside for such risks. Will the Government consider changes to the criteria to take these factors into account so that local authorities can have a more generous Bellwin scheme for areas that are affected time and again?

Obviously, insurance costs for residents and businesses often become prohibitive, especially for residents who already struggle to fund such costs. In my area, lower-value homes are often those most likely to flood; their owners or tenants are also the ones who struggle to pay for insurance costs. Can the Minister provide any comfort to such people and offer a more generous contribution towards these insurance costs?

One factor that constantly rises to the surface following flooding is that of drainage. One difficulty is that several different organisations are responsible for effective water drainage: the local authority, riparian owners, the water company and the Environment Agency. Can the Minister tell us whether the Government are thinking about how drainage systems can be better co-ordinated so that management and responsibility become more transparent?

Finally, there is the question of the consequences of ill-thought-through development. The Government are keen to accelerate planning application decisions and even, perhaps, to remove some of the detailed responsibilities of local planning authorities. This approach could well result in worsening the flood risk for a neighbourhood, with all the long-term consequences that follow. Will the Minister, through national planning guidance, consider putting a requirement on planning authorities to fully consider flooding risk, its mitigations and the responsibility of developers to fully fund such mitigations? Further mitigations could be made, for example, via the requirement of developers to restrict hard, impermeable surfaces and to set aside sufficient land for tree planting.

Of course, there is much more that can and should be done, such as, in my area, restoring the capacity of the peat uplands—something that in Yorkshire the water company is already beginning to do. I appreciate that I have asked a number of questions which may be outside the scope of the Minister’s portfolio. If that is the case, will he undertake to provide a written response?

[Lord Gardiner of Kimble]

My Lords, I am most grateful to the noble Baronesses for posing a number of questions. If any further details are needed on any of the questions, I will write to them.

I open by saying that, between 2010 and 2015, £1.7 billion was spent on flood defences. Between 2015 and 2021, that figure will be £2.6 billion. That is a record amount, and the manifesto commitment of my party is £4 billion for five years from 2020. I can say that this Government, and indeed the coalition Government before, invested very considerable sums, but it is clear that we will need to do ever more. I agree with the noble Baronesses that we will have to use a mix of conventional flood defences and natural capital; that is clearly the way to work on this, particularly in the uplands.

When we come to deliberations on the Agriculture Bill, one element of Clause 1—if I remember rightly; I cannot remember the number—refers to financial assistance and, indeed, the importance of tree planting. This is not a partisan matter—although we might vie for the number of trees we would plant—but a matter that we need to move forward. I say to the noble Baroness, Lady Jones of Whitchurch, that, on both mitigation and adaptation, we are fully seized that global warming must be addressed, not only in this country but across the world. We are the world leader on this and the G7 economy that has been decarbonising the fastest. We absolutely recognise the importance of this issue; that is why I am looking to great success for our country and its reputation at COP in Glasgow, with all of us working together.

I am also very conscious, having visited flood victims in Swaledale last year, of what it must be like not only to have been flooded, but to have been flooded again. Having seen what people endured, I am sure that all your Lordships will agree that it is impossible to ask people to withstand that. This is why I said what I said about the emergency services and our gratitude to them, and why I take seriously the accusations made about resources. I will take away the points that have been made about Bellwin. However, under this long-standing scheme for emergencies, we have said that we will reimburse 100% of the eligible costs incurred by local authorities, precisely to deal with this storm. This has been announced in what is probably record time because we understand the severity of the situation.

On Flood Re, it was very important that—as was said in the Statement—the Secretary of State announced a review of insurance cover at the end of last year following the November 2019 flooding. I am very conscious that, in many instances, Flood Re has been remarkably successful. It has meant that many property owners have been able to go to a number of insurance companies for their insurance cover; that has been successful. However, we recognise that, as some noble Lords have raised before, there are other areas that this review should look into; it will investigate these areas to help identify any implications for future flood events and see what more can be done. I should say that Defra officials have been in touch with the Association of British Insurers to ensure that insurers are doing all they can to support those affected.

I come to sustainable drainage. I understand that we will have to build more houses for our growing population. Sustainable drainage presupposes that we need to build them in a manner that allows the reuse of water—grey water. We need to work on all this; I have taken back what the noble Baronesses have said. I agree, for instance, particularly in relation to rainfall in the uplands, that we need to look at how we work with hill farmers, landowners and managers to ensure that we can retain water. This is, once again, part of what we will discuss in both the Environment Bill and the Agriculture Bill. Working with the deep grain of our contours, how do we plant trees in the right places?

I am most grateful to the noble Baronesses. I agree that we need to review Flood Re, and that is taking place. I accept that there is damage to communities. That is why I have outlined, and the Statement outlines, some of the schemes already in place following the investments over the last decade relating to those parts, particularly in the north, that have traditionally had very high rainfall and are now experiencing even more. All of that is why our energies in this new phase are about getting the balance right between hard defences and natural capital. I remember being told the rainfall in Cumbria at the time of the last floods. We would have had to have walls going through some towns there that were so high that it was almost impossible. It is unrealistic to have barriers of that sort going through towns. We need to look at how we slow the flow and at any means to assist people who, I am afraid, are going through great difficulty at the moment.

Water Supply Disruption

Baroness Pinnock Excerpts

Tuesday 6th March 2018 Lords Chamber

[Lord Gardiner of Kimble]

My Lords, again, so many of the noble Lord’s comments are in line with what I said and what the Secretary of State was very clear about last week. Some water authorities are, in my candid view, better than others. I have a list of some of the many projects that certain water companies are undertaking, whether investment or dramatically improving water on beaches. There are some very good examples of where that investment of £140 billion since privatisation has undoubtedly borne fruit, whether it is in sewers, flooding, pollution or reduction in nitrates. But there is no doubt that the game needs to be upped, and that improvements in certain water companies need to be considered.

As I said, Ofwat has already given Thames Water a substantial fine for missing leakage targets. When one thinks of water shortages in the south-east and other places with large populations, it is imperative to bear down on continuing leaks very strongly. We need to ensure that water companies are investing properly. In fairness, I have to say that leakage levels are down by a third since privatisation and bills since 1994 are but 3% higher—but there is room for considerable improvement. That is what my right honourable friend the Secretary of State is looking for. We are clear that if Ofwat needs any further powers, we will actively look at them.

[Baroness Pinnock (LD)]

My Lords, I draw attention to my entry in the register of interests as a non-executive director on the board of Yorkshire Water until September last year.

My understanding is that water companies have to agree a five-year plan for investment in water infrastructure with Ofwat, which is a balance between investment, priorities for improvement such as those to which the Minister referred—sewage systems, clean bathing water, the freshwater river directive and all the rest of it—and cost to the consumer. That is the balance that has to be reached, and those plans are agreed with Ofwat. I am not saying that there ought not to be significant improvements, because there always ought to be, but we need to look at the reality, which is that it is a three-way balance between national government priorities, consumer cost and Ofwat agreeing to the cost of capital.

When I was on the board of Yorkshire Water, I was always going on about leakage, on which I think it is now one of the better companies at about 19%. Water is actually quite cheap—it costs about a penny a litre out of the tap—so the cost of repairing Victorian pipes in many of our towns and across the country is not economic for the water saved, certainly in the north of England where we have plenty of water. It is probably different in the south. Perhaps the Minister could comment on that.

[Lord Gardiner of Kimble]

I am tempted to say that Yorkshire Water is planting millions of trees to help reduce the risk of flooding and control surges in the flow of water. On leakage, the target was 297 million litres per day, which sounds a lot, but the actual was 295 million, so Yorkshire Water, under the previous custodianship of the noble Baroness, is obviously working extremely hard on some of the issues that she rightly outlined as a balance with other work, working with natural capital and so forth, that water companies are doing.

The first thing to say on the five-year business plans agreed with Ofwat is that they have tough performance commitments, and we agree that they should balance resilience and affordability in the priorities in the strategic policy statement .

On the point about leakage and the cost of the leakage, the noble Baroness may be right that water is cheap, but it is also very precious. I am thinking about the ways in which I would feel very uncomfortable about taking the foot off the pedal in bearing down on leakages and the targets, as we all ought to be doing—and, indeed, upgrading our infrastructure. In previous years, all the streets of London were up because Victorian main drains were being replaced, and so forth. The investment of £140 billion since privatisation has gone on upgrading the infrastructure, and we undoubtedly need to do more.