Independent Water Commission

Earl Russell Excerpts

Tuesday 29th October 2024 Lords Chamber

[Lord Roborough (Con)]

My Lords, we on these Benches welcome the independent commission led by such a respected figure as Sir Jon Cunliffe. However, after 14 years of criticising our government policy in this area, why did the new Government not have clear ideas of their own to fix this industry by the time they took office?

As has been discussed at Second Reading and in Committee on the Water (Special Measures) Bill, there is concern over the timetable for bringing forward legislation for a full reform of the water industry after this review is complete. Will the Minister make commitments on the timing of that legislation for noble Lords’ consideration when deciding whether to press their amendments that might increase the breadth of the Bill’s impact? The Secretary of State has given a commitment that the review will not make recommendations that affect the 2024 price review. In another place, it has been suggested that the review would not, therefore, lead to legislation that takes effect before 2029. Does the Minister agree?

It is reassuring to see the Government adopt our own previous policy of removing rights to bonuses for water company directors; however, will the Minister inform the House of the total amount of performance-related pay within the sector since privatisation and what percentage of total investment that is? Taking away bonuses will not change the finances of the water industry. It is most pressing to ensure that the industry is properly capitalised to undertake the investment programme that this country needs to deliver clean water at an affordable price. How much has been ring-fenced for that in the agreement between the Secretary of State, the industry and Ofwat announced on 11 July?

It was disappointing that only the last of the terms of reference addressed financial resilience at all. It is critical, given the parlous state of some companies in the sector and the need for investment to deliver clean rivers, lakes and beaches, that this issue is addressed quickly and effectively. My own amendment to the Water (Special Measures) Bill limiting water company leverage was not much liked by the Minister. What other measures are the Government taking to restore financial stability in the short term? It has also been reported that the Government will consider forcing the sale of water companies in England to firms that would run them as not-for-profits. Can the Minister confirm whether this is part of the Government’s review, and is she willing to give the House some examples of this kind of approach working elsewhere? For example, does she consider Welsh Water’s record in Labour-run Wales to be a good one?

It has been a source of much frustration to this House that there is a lack of accountability to this House for the actions and inaction of the regulators. We welcome the terms of the review to clarify regulators’ relationships with Parliament. Does the Minister agree that, when she is speaking at the Dispatch Box on behalf of the regulators, it might be desirable that they were more accountable to her and to this House?

[Earl Russell (LD)]

My Lords, I declare my interests as set out in the register and thank the Minister for this Statement updating the House on the launch of the independent water commission. There is much that we on these Benches welcome, most importantly that this Government, through the Water (Special Measures) Bill presently being considered by this House and the launch of the water commission, have given a clear signal that they are determined to try to fix our broken water system. The intent is a welcome step change, and I am thankful for it.

That said, there is a time for reviews and commissions and a time for calm, direct and decisive government action to fix systems that have been broken for far too long. The Government talk proudly about their longer-term approach, when the electorate is keen for more radical and immediate action. My friendly warning to the Labour Government is that the people who voted for them did so with the expectation that real action would be taken to resolve this mess, at scale and at pace. Labour has had many years in opposition; quite frankly, we expected the Government to be better prepared and to have come up with the necessary plans and answers by now that are urgently needed to fix these problems.

The water industry is a mess, and the sewage scandal was a critical issue at the last general election. The Liberal Democrats are determined to put the protection of our precious natural environment at the heart of everything we do. In 2023, water companies dumped 54% more sewage into our lakes, rivers and coastal areas than they did in the previous year. This amounts to 464,000 incidents and 3.6 million hours of untreated sewage discharges in England alone, damaging our freshwater ecosystems. Meanwhile, water bills are set to rise by some 40%. We are clear that we would abolish Ofwat, create a new, unified and far more powerful clean water authority and replace the failed private water companies with public benefit companies.

The Government have taken a different policy direction. My worry is that the magic trick of making Ofwat fit for purpose, securing investment while keeping consumer water bills low and protecting our environment lies way beyond the measures contained in the Water (Special Measures) Bill and that, when further legislation finally arrives, it will be too late. I welcome the Minister’s engagement, but I call on the Government to work with all sides to make the measures in the Water (Special Measures) Bill more radical and robust. Our environment cannot wait while Labour decides on the real systemic reforms that are the only solutions to this crisis.

Only 14% of our rivers and streams are in good ecological health. With the commission taking at least a year to consider evidence and report back to government, and with further legislation only then to be prepared and debated in Parliament, the radical change required appears unlikely to be implemented before 2028-29 at the earliest. I hope that the Minister can acknowledge a growing sense of concern on all sides of the House that the measures in the Water (Special Measures) Bill are not enough to fix the problem and that further legislation derived from the conclusions of the water commission will just not arrive in the urgent timescales required.

The 30% by 2030 target for protection of nature is coming up urgently. How will this review help support that process? My understanding is that the water review will not report until 2025, which leaves a short timeframe for making the necessary changes and requirements to meet our targets. Further, if we find after the Water (Special Measures) Bill is passed that problems in the water industry persist and we are still in the gap before the water commission finishes its work and is ready, are the Government prepared to put forward additional urgent legislation to help fix any remaining problems?

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)]

My Lords, I thank both noble Lords for their questions on the Statement made in the other place recently. Both noble Lords mentioned the fact that we had been in Opposition for 14 years— I would suggest that is probably one of the reasons why the water industry is in such a mess. It is a little bit rich of the Opposition to say that we should have sorted it out when we were in Opposition.

In answer to a few questions, the review will be reporting in the first half of next year. It is not that long until next year; it is only a few months away. The idea is that the review will develop new legislation that will make water companies and our water infrastructure fit for purpose for the future.

I thank the noble Earl, Lord Russell, for his broad support. He talked about urgency. It is important to point out that we came into government at the beginning of July. On 11 July, my honourable friend the Secretary of State made a Statement to the House on the agreement he had already reached with water companies and Ofwat to ring-fence money earmarked for investment so it could not be diverted to shareholder payments. On 9 September, we introduced the Water (Special Measures) Bill that we are considering in the House. Yesterday, the review was announced—so we are pretty well cracking on with this as an urgent action going forward.