Water (Special Measures) Bill [ Lords ] (Fourth sitting)

Emma Hardy Excerpts

Committee stage
Tuesday 14th January 2025 Public Bill Committees

Question again proposed.

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Emma Hardy)]

I thank the hon. Member for Epping Forest for tabling new clause 3, which would require a water company to reduce customer bills by an equivalent amount to the total monetary penalties paid in the previous year by that company. I will start by clarifying that we expect the cost of the penalties to be borne by the companies, not by the customers. However, I would also like to reassure the hon. Member that there are existing procedures in place to ensure that customers are reimbursed for a water company’s poor performance.

As the independent economic regulator of the water industry, Ofwat is best placed to ensure that customers are reimbursed appropriately if water companies perform poorly. Ofwat already sets specific performance targets for water companies in the five-yearly price review. Those performance commitments hold water companies to account for the outcomes that customers pay for. Where they are not met, companies must reimburse customers through lower water bills in the next financial year.

Those performance targets take a holistic view of water company performance and consider wider factors beyond companies receiving penalties. Performance targets include customer-facing commitments, such as water supply interruptions; environmental commitments, such as pollution incidents, storm overflows and bathing water quality; and commitments related to asset health, such as repairs to burst mains. As a result of underperformance in the last financial year, Ofwat is currently requiring 13 companies to return £157 million to customers.

The hon. Member’s new clause is therefore not appropriate for this Bill, given that it would overlap with existing procedures. However, there is simply not enough improvement in performance across the water industry. That is why we have launched the independent commission, which will look at issues, including performance, and make recommendations on how to transform the water sector.

I hope that the hon. Member for Epping Forest is reassured about how customers will be reimbursed for poor performance, and about the steps that we are taking to improve performance. On that basis, I ask him to withdraw his new clause.

[Dr Neil Hudson (Epping Forest) (Con)]

I thank the Minister for her comments. I am afraid that I am not fully reassured, and we would like to see provision in the Bill for any fines imposed on water companies to have a concomitant effect—a direct effect—on customer bills. This well-intended measure has been tabled to create a link between the two, so although I hear the Minister’s comments, we would still like to press new clause 3 to a vote.

Question put, That the clause be read a Second time.

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[Dr Hudson]

I beg to move, That the clause be read a Second time.

New clause 4 amends the Water Industry Act 1991 to insert new rules regarding the limits to the amount of money that can be borrowed by a water company, which the Secretary of State for the Department for Environment, Food and Rural Affairs would be able to enact by means of statutory instrument. Although we have discussed statutory instruments in Committee, the Opposition hope that the Government will recognise that this proposed statutory instrument power needs to be made.

New clause 4 ensures that water companies are not excessively borrowing money, as that is ultimately bad for bill payers. At the heart of our concern about financial resilience is the borrowing in the industry and the over-leveraging because of that borrowing. It is clear that there is a direct link between financial resilience, problems connected to borrowing and the very survivability of the water firms. That should be of huge concern to all of us.

Consumers are concerned that the provision of their water is at risk, and we as legislators must work out how to deal with the issues, including the financial implications, relating to the risk of nationalising the water companies that have no other way of providing services. That can reverberate back to the consumers again, who may face increased costs because of the financial support that the Government have to provide to keep water companies afloat. In other words, tackling the choices that water companies may have made, and will make in the future, including borrowing choices, is an issue that we are required to correct for the very future of our water industry.

I reiterate my profound respect for the way that both the Minister and Baroness Hayman have conducted themselves in this debate. I note that Baroness Hayman expressed concern in the other place that putting a fixed percentage limit on borrowing could be a risk to investment at a crucial time for financial resilience and investment in the water industry. That is why my Conservative colleague, Lord Roborough, revised his amendment on that in the other place to give the Secretary of State the power to set limits by means of a statutory instrument. I pay tribute to my colleague and friend Lord Roborough for working so hard to raise the issue of financial resilience in the other place through this amendment.

We are not saying that a hard limit has to be set on borrowing levels, but merely giving the Secretary of State the option to do so if they feel it necessary to protect consumers from the negative effects of the water industry. I come back to the point I made in previous sittings: giving the powers to the Secretary of State, a democratically elected Minister in His Majesty’s Government, through statutory instrument, improves democracy and accountability for the water companies. I do not think the Labour Government need to shy away from this constructive amendment, which gives the Secretary of State the ability to hold the water companies to account, as we all want to do.

If the Minister does not see the need for the amendment —I am not pre-empting her, but I imagine that is how her response will go—can she clarify how much borrowing the Government consider acceptable for a water company, and what they will do to reduce the impact on the consumer of excessive borrowing and spending? The new clause also limits the amount of dividends that can be paid out to shareholders if the water company has exceeded the borrowing limit. Should a limit be set, it would therefore make water companies fairer in their practices to bill payers, as when a company borrows it will have less of an impact on consumer bills.

While in government, the Conservatives gave Ofwat the powers to link performance to payouts to shareholders and water company management. New clause 4 further aims to protect consumers from companies that are failing to prioritise their customers. Considering those points, the Opposition believe that the Government could move a bit on this, and enact democratic accountability with the statutory instrument. We hope that they will look on new clause 4 favourably.

[Emma Hardy]

I thank the hon. Member for Epping Forest for tabling the new clause, which would implement a limit on borrowing by water companies. I note that Baroness Hayman had multiple discussions with Lord Roborough on the similar amendment that he put forward in the House of Lords, and that Lord Roborough was satisfied with our reasoning for not introducing restrictions on borrowing in the Bill.

Debt has been rising in companies since privatisation, and it of course accelerated under the previous Administration. In some instances, levels of debt have reached a point at which the financial resilience of companies could be threatened. We have been clear that Ofwat must continue to have a strong focus on company financial resilience to secure efficient long-term investment and deliver long-term value for money for customers and the environment.

I assure the Committee that Ofwat is already taking steps to closely monitor debt levels as part of its annual monitoring financial resilience report, and it will take action where the financial resilience of a company is threatened. Ofwat published its final determinations for the 2024 price review in December, which included a confirmed £104 billion upgrade for the water sector. Investment in the water sector is financed up front by investors, and repaid by customers over time to smooth the impact on bills. Borrowing is therefore a key part of the process.

[David Reed (Exmouth and Exeter East) (Con)]

I agree with many of the points raised by my hon. Friend the Member for Epping Forest on debt. He raised the serious question of how much debt is too much. Does Ofwat have a firm number on how much companies should be borrowing, and at what point it should intervene?

[Emma Hardy]

I thank the hon. Member for his helpful intervention to look at what the borrowing and debt limits should be. We think that placing new borrowing limits on companies at this late stage in the price review process would disrupt business planning. However, taking on board the points that have been made and the concerns about companies’ levels of debt, I refer Members to the fact that we have announced an independent water commission, which will be a more appropriate vehicle for considering longer-term reform options such as the proposals from the hon. Member for Epping Forest. Company financial structures are one of a number of areas that could be explored under the commission, and we do not want to pre-empt the outcome of the commission through this new clause.

[Charlie Maynard (Witney) (LD)]

With respect, I feel that we are living in parallel universes. I will take Thames Water as an example, whose debt is 14 times the level of its cash flows. The Minister is saying that financial resilience could be threatened, but I spent 25 years in finance, and that ratio is very threatening. Is Ofwat closely monitoring that? Moody’s and Standard & Poor’s have put Thames Water into junk bond ratings—seven ratings under the investment grade—and we are pedalling on regardless. Could the Minister give a view on Thames Water’s levels of debt, and whether they are threatening to the company?

[Emma Hardy]

I hope that the hon. Gentleman has not misunderstood. There is certainly no desire from me to keep pedalling. Instead, what we want to do is look at the entire financial situation of companies—he knows that we have had that conversation outside this room. We need to look at some of the longer-term reform options for how companies are structured financially, which is why we have the deputy governor of the Bank of England leading our review, and using his knowledge and expertise to look at how companies are structured.

I do not think that the new clause is the appropriate place to pre-empt the outcome of the commission before it has had an opportunity to report, or even to listen to the hon. Member for Epping Forest through the call for evidence that is yet to be announced. I want to stress that I support sentiment of the hon. Member for Witney, but I express caution around the risks of putting through changes of this magnitude without giving full and proper consideration. We believe that the commission is the appropriate way to do that.

[Jerome Mayhew (Broadland and Fakenham) (Con)]

Okay, perhaps the Minister is right—perhaps the detail of what percentage of debt or what multiple of revenue is appropriate should be established by the commission and the wider review—but surely the principle can be established now. From any investigation in this area, we can say that the principle will be that debt will need to be capped or managed, or have some oversight, because we have seen what happens—particularly with Thames Water—when there is no cap or oversight. Does the Minister not agree that the new clause just sets out the principle, and the amount would be set out by an SI?

[Emma Hardy]

I respect the hon. Gentleman’s contributions on matters of finance, and I recognise his knowledge in this area. However, I think he would probably acknowledge—even if not publicly—that using a new clause to determine the level of debt that we think is appropriate is not the best way to make legislation for our country, or for the financial resilience of the water sector. I am entirely confident that the best way to look at this seriously, taking contributions and recommendations from all the wider stakeholders, is through the water commission. The commission might draw similar conclusions but it is not for us to pre-empt them now, without having first taken on board the opinions of many other stakeholders. I trust that the hon. Member for Epping Forest is reassured by the steps being taken by the Government, and by Ofwat, and I ask him to withdraw the clause.

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[Dr Hudson]

I beg to move, That the clause be read a Second time.

New clause 6 is a fair and reasonable request to strengthen the Bill. Quite simply, it would do what it says on the tin by requiring the Government to report on the impact that they expect the Bill to have on water pollution and on the actual and verifiable effects that the Bill, when it becomes an Act, will have on our water quality.

It is completely agreed that accountability for addressing the quality of our water system should be at the heart of how we tackle water pollution and related issues. That should be true of every actor involved: not just the water companies, but the Government whose regulation they are expected to abide by. We cannot rightly say on the one hand that water companies should be expected to meet criteria to restore public trust, while suggesting on the other hand that the Government should not likewise work to be accountable and to uphold public trust on the issue.

Furthermore, the new clause feeds into the basic fact that ensuring that our water systems are being improved is not a one-time event that can be magically resolved with a single piece of legislation every now and then. It must be a consistent focus for the Department for Environment, Food and Rural Affairs and for all the agencies under whose remit the issue falls.

The work of agencies such as the Environment Agency is vital. I pay tribute to its hard work, not least when flooding hits, as we have discussed. We should not underestimate those on the frontline who do so much to keep people safe, to make sure that the environment is protected and to ensure that the quality of people’s water is safe and suitable.

To improve our water systems, however, the buck must stop not with the EA, but higher up: with DEFRA and the Government. The new clause would help to provide that accountability. As in our earlier discussions regarding the online publication of implementation reports, if the measures set out in the Government’s approach do not meet their targets, for legitimate reasons, the Government would have a chance to lay out exactly why not and to give a justification for their findings on the Act’s impact. Our new clause would provide a natural mechanism to ensure that long-term planning and reviews of the Act are taking place and that the Government are looking at water pollution and the actions that the water industry has taken or needs to take to further improve the situation.

We should not shy away from the fact that the new clause would build on the previous Government’s efforts to look at that point. Our plan for water set out a 25-year plan to ensure that our water companies were investing in our water system for the long term, not just while the issue was in the headlines. Again, that is why our new clause matters: because it would ensure the continued focus of Governments of all parties on the protection of our waters. That matters all the time, not just when it becomes a political or media issue.

We must also consider the evolving factors that affect the water industry and its ability to reduce water pollution. The flooding that we have seen in the past weeks has highlighted once again that our country is facing more regular extreme flooding events. In simple terms, more flooding means more excess groundwater and surface water that can enter the network, which creates more of a risk that sewerage overflows will be required to maintain our water systems.

With such events becoming more unpredictable in their timing and yet more commonplace because of extreme weather events and the effects of climate change, looking at the evolution of issues such as this will be crucial to ensuring that any measures to improve overflows and water quality are successful in the long term. We need to make decisions now that have an impact in the future, because in the long term we all want water quality to improve and to be protected for future generations. To achieve that, we need long-term and consistent attention and reflection on the policies being enacted and their effects. The new clause would help to facilitate that.

Once again, transparency is not a hindrance; it helps everybody involved in managing the quality of our water system. Trust can be maintained only if everyone tries to do what is right and the Government, of whichever political party, are no exception. We need to be trying to do the right thing. Given that, His Majesty’s Opposition believe the new clause to be a highly reasonable and fair amendment to the Bill, and we hope that the Minister might support it.

[Emma Hardy]

I will quickly note the constructive and nice way in which the hon. Member for Epping Forest is taking part in these debates. I also want to come up with more dentistry analogies, so I will be thinking of those as we keep going.

The Bill will drive meaningful improvements in the performance and culture of the water industry. In line with that, it will introduce many measures to disincentivise pollution. For example, it will provide Ofwat with legal powers to ban bonuses where companies fail to meet standards on environmental performance, financial resilience, customer outcomes or criminal liability. The Bill will also enable automatic and severe fines, allowing regulators to take swift action. It will enable the public to hold companies to account through a new requirement for water companies to produce annual reports on pollution incident reduction. Collectively, these measures will strengthen enforcement, improve transparency and disincentivise water company pollution.

The Committee and the wider public are able to see a more detailed assessment of the expected impact of the Bill via the published impact assessment. I reassure the Committee that my Department is committed to post-legislative scrutiny of primary legislation. The Department for Environment, Food and Rural Affairs will work with the cross-party Select Committee on Environment, Food and Rural Affairs to assess the impacts of the Act three to five years after Royal Assent as part of the standard practice for all new legislation. I welcome that scrutiny.

The Government therefore cannot accept new clause 6. Although we agree on the importance of understanding the impact of the Bill on environmental pollution, adding further reporting requirements to the Bill would be duplicative and unnecessary.

[Dr Hudson]

I thank the Minister for her constructive response, but the Opposition still feel that this is an important new clause in relation to the impact on water pollution, so we would like to proceed again to a formal vote.

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[Dr Hudson]

As we have gone through the Bill, there has been a lot of cross-party consensus on trying to get measures in place. I respect the efforts of the hon. Member for Westmorland and Lonsdale and the third party in trying to improve the situation, not least in such matters as nature-based solutions. From the official Opposition’s perspective, however, the hon. Member’s new clause 7 is perhaps an overly eager response. Throwing out Ofwat completely at this juncture when we want it to do its regulatory job would create more problems than he wants, whatever the intention of the new clause.

I know that the Liberal Democrats have argued that steps should be taken to set up a new regulator in some way. New clause 7 does not really introduce a specific requirement or measures to enable a transition from Ofwat to the purported new regulator. If we were to proceed with the new clause, we would simply be left in limbo and in the lurch with regard to regulation of the industry. It is not that we believe that the situation is perfect: we have debated the powers of the Environment Agency and Ofwat, and we have agreed that things are not perfect with the water industry and regulators. We have all heard at first hand about issues that we are not happy with, such as executives moving into higher-paid roles within water regulators, of which we heard evidence in the EFRA Committee in the last Parliament.

The hon. Member for Westmorland and Lonsdale generously shouted out the people who work in Ofwat and the Environment Agency, but although he will not push new clause 7 to a vote, he still talks about abolishing Ofwat. In doing that, we would be left with a vacuum while a new regulator was set up—something we can ill afford when we all agree that there is so much work to be done. A new regulator could not be established overnight; it could take months or even years while structures were being established, the personnel needed to do its everyday work were appointed and the like. Let us be honest that making such a move would not come without financial cost.

Even if that money could be raised through Government resources—ultimately, that means taxpayers’ money—we would be using it to establish a completely new infrastructure for the water regulator, rather than trying to enhance and give more power to the regulator we already have. In addition, we have to remember that its role as a regulator affects consumer bills, too. While none of us wants to see water bills rise for any of our constituents, particularly in difficult economic times, bills would have only been higher if a regulator had not been there at all. If we are left with a vacuum until a replacement mechanism is put in place, and if that takes a lot of time, do we really want to run the risk of unregulated companies raising prices even further in the meantime?

We are in agreement that the status quo has not been good enough when it comes to water companies, but progress has been made and continues to be made in that seismic task. Water companies are starting to face the financial penalties for their failures to both people and our precious environment. For example, back in November, Wessex Water was ordered to pay £500,000 for the loss of thousands of fish because of a sewage pumping failure. That very same month, Thames Water was fined over £18 million for its failure to obey rules introduced on the spending of dividends. Those incidents are not good news stories, and we should never say that they are, but they are signs that the mechanism is working. Ofwat is holding the companies to account and trying to act—it is trying to use the teeth that are there.

There are early signs that giving the regulator those teeth—which we have heard a lot about in this Committee —means that there are clear consequences for the water companies that break the rules that have been implemented. That is not the end of the story, but it is the start of the journey, as we try to hold those water companies to account. As I have also mentioned, the pathway for inspections into water company activity is increasing. It is the whole approach—from incident, to investigation, to penalty—that needs to be examined and reviewed in order to drive change, and that is what has been done and what this legislation is trying to take forward.

Although things are not perfect, we need to allow the existing legislation, as well as this new legislation, to take effect so that the regulator can get on and do its job. We should not put things in jeopardy by completely abolishing things. I note that the Liberal Democrats have tabled this new clause, and they are not pushing it to a vote, but I want to put on record the Opposition’s reservations about what they are suggesting.

[Emma Hardy]

I thank the hon. Member for Westmorland and Lonsdale once again for his thorough consideration of the Bill. I will turn first to new clause 7, which was tabled in his name and which proposes the abolition of Ofwat. As the hon. Member will be aware, and as he already mentioned in October ’24, the UK and Welsh Governments launched the independent commission to fundamentally transform how our water system works. The commission, led by Sir Jon Cunliffe, will be broad-ranging and will make recommendations in line with eight objectives, which include specific objectives considering the role, structures, responsibilities and powers of the regulator.

It is right that the commission, rather than this Water (Special Measures) Bill, is the vehicle for considering the water regulator’s roles and responsibilities. This Bill focuses on strengthening the powers of the regulators to drive improvements in performance. The Bill will not, and cannot, fix all the sector’s problems. The commission is the right place to consider the long-term future of the regulatory system and the role of the regulator. Indeed, I would argue that the Labour Government want to move away from sticking-plaster politics to fundamentally reset and transform the problems facing our country for good. I hope therefore that the hon. Member for Westmorland and Lonsdale is content that this new clause is unnecessary.

New clause 20 was also tabled by the hon. Member for Westmorland and Lonsdale. It sets out requirements for a water review that is undertaken by the Secretary of State. I think we are all agreed that we have seen years of water company underperformance, and we all agree that there is a clear need to fundamentally reset the water sector. Although I understand that the hon. Member is seeking to ensure that any review of the water sector is sufficiently thorough, the Government are confident that the commission’s scope is broad and comprehensive. Sir Jon will be supported by a range of experts from the regulatory, environment, health, engineering, customer, investor and economic sectors to effectively examine this sector as a whole, including the regulatory framework.

By setting out considerations for a water review in primary legislation, we risk prejudicing or pre-empting the outcome of the current commission, as well as its independence. The sector is facing complex challenges that require the support of customers, environment groups, investors and companies alike to address. An independent review is best placed to find solutions to those challenges, and it is critical that its independence is preserved. The commission will report its findings in summer 2025, and the Government will consider them in full before outlining the next steps. I therefore hope that the hon. Member for Westmorland and Lonsdale understands that to avoid duplication and, importantly, maintain the independence of the commission, the Government will not accept the new clause.

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[The Chair]

The Clerk keeps reminding me that—I think because we have a lot of new Members in the room; Tim Farron is not guilty of this—people keep saying “you”, which is a cardinal sin. You have to say “the hon. Member”, because “you” is me, and I am not doing anything except sitting here saying the “Unlock the doors” stuff.

[Emma Hardy]

May I say—often said, not always meant—that it is indeed a pleasure to serve under your chairwomanship, Dr Huq? I thank the hon. Member for Westmorland and Lonsdale for the intention behind new clause 8. Ofwat has a range of primary duties, including protecting the interests of consumers, ensuring that companies properly carry out their functions and ensuring that companies can finance the delivery of their statutory duties. Removing Ofwat’s duty to ensure that companies are appropriately financed would put at risk companies’ ability to deliver for customers and the environment. The new clause also seems to contradict the others tabled by the hon. Member. For example, new clauses 19 and 23 seek to increase regulation around water company financial resilience, but new clause 8 seems to aim to reduce it.

Ofwat must continue to ensure that water companies can finance the proper carrying out of their statutory obligations, in line with the outcome the new clause seeks. Ofwat already has a primary duty to seek to ensure that companies deliver their statutory obligations, including environmental obligations. Ofwat’s existing duties, combined with the strengthened power for regulators provided by the Bill, will therefore drive the desired outcome sought by the new clause and ensure that the environment is at the heart of water companies’ activities. That is something on which we all agree.

In addition, the independent commission on the water sector will look at wider long-term reform of the water sector, including considering and clarifying the role of regulators, and we do not wish to prejudice the outcome of the commission by implementing the new clause. I hope that the hon. Member is reassured that Ofwat’s existing core duties capture the intent behind it, and that the independent commission will consider the duties of Ofwat more broadly. For those reasons, we will not accept the new clause.

[Tim Farron]

I thank the Minister for her response. The new clause aims not to replace the business side of Ofwat’s regulatory framework and powers, but to supplement it. As I said earlier, it is odd that in the broadest sense—I know that this is not entirely true—Ofwat looks at the business side of the water industry and the EA looks at the environmental side. They are clearly one and the same, or they ought to be. We are simply trying to draw these things together. This is not about reducing Ofwat’s powers on one side in order to beef them up on the other; this is about additionality. We think it is entirely consistent.

I hear the Minister—if I were at that crease, my straight bat would be “Sir Jon Cunliffe” every single time. I get that, but surely, there has to be some point to this water Bill, and we are trying to push the Government to strengthen the regulators. We debated earlier the extent to which Ofwat should exist or not, but if we take it that the Government have a majority and therefore that Ofwat is likely to overcome my time on this Committee, what can we do to make it a more holistic regulator with more power and scope? We therefore think there is a very strong case for new clause 8.

Question put, That the clause be read a Second time.

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[Tim Farron]

I beg to move, That the clause be read a Second time.

The Environment Agency will have more powers as a consequence of the Bill. There will be greater regulation and there will be an impact on the Environment Agency as an organisation. It is my privilege to represent large chunks of the English Lake district. We have an agency full of really good people—dedicated and qualified professionals, many of whom are from and love the area, and yet they already find themselves overwhelmed with their responsibilities. I made an allusion earlier, but it might help to give a sense of how the organisation copes with its challenges.

We are still in the process of having walls built around the River Kent to protect the town of Kendal and its businesses from a repeat of the devastation in December 2015, when something like 6,000 of my residents lost their homes and we saw just under 1,000 businesses devastated. The Environment Agency is looking after that, and just up the road are Windermere, Coniston, Ullswater and the other lakes, rivers and coastal areas of our beautiful part of the world. We are already stretching the capacity of those people, to say the least, and we are beginning to see that in real time, as we try to deal with sewage spills in the tributaries that lead into Windermere. We see many such failures, and although the Environment Agency is trying to find the time to regulate, observe and scrutinise them, it is understandably distracted by the huge civil engineering project that it is overseeing in Kendal to protect the town from flooding.

This is about paying tribute to people in the EA, but also recognising that they are already under enormous pressure. The Minister has said that there will be 500 new members of staff at the Environment Agency. That is one answer to the question. We are trying to recognise that that is still only one person per English constituency. We need to therefore test the extent to which the Environment Agency has the capacity to do its job, because part of the problem is insufficient regulatory powers, and the other is agencies without the resource to police the powers that they already have. This aims to be a helpful new clause. It recognises that the Government seek to and will do good through the Bill, but we need to ensure that the agencies there to deliver that good have the capability to do so.

[Emma Hardy]

I thank the hon. Member for suggesting new clause 10 and agree it is important to understand the impacts of the Bill on the Environment Agency. I echo remarks made by all Members on the wonderful work that the Environment Agency does, particularly those who are working in the frontline and those who were working on new year’s day trying to support communities that had been flooded. I also pay tribute to the Wildlife and Countryside Link and to all the environmental groups, organisations and charities that have shown an interest in the Bill. Their tireless campaigning is probably what has led to many of us being here to discuss it today.

I reassure the hon. Member for Westmorland and Lonsdale that the current provisions in the Bill are sufficient to do what he wants. Through clause 10, the Environment Agency will be able to recover costs for the full extent of their water company enforcement activities, including for new provisions in the Bill. This will allow the Environment Agency to fully fund their water industry enforcement functions and meet the requirements of the Act, ensuring that polluters can be held to account for breaches of their obligations.

Environment Agency funding will continue to be closely monitored by DEFRA as a sponsoring Department, ensuring that the regulator is fully equipped to carry out its duties and functions effectively and to deliver for the public and the environment. The Environment Agency is already recruiting up to 500 additional staff for inspections, enforcement and stronger regulation of the water industry, increasing compliance checks and quadrupling the number of water company inspections by March. This increased capacity is funded by £55 million a year through increased grant in aid funding from DEFRA and additional funding from water quality permit charges levied on water companies.

I hope the hon. Gentleman is reassured that these measures will ensure that the Environment Agency consistently has the resources it needs to fund its regulatory activities. As such, the proposed new clause is unnecessary and therefore I ask him to withdraw it.

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[Charlie Maynard]

I beg to move, That the clause be read a Second time.

This is a very nuts and bolts thing. I believe we are here to try to make a better water sector. I will rattle through the clause, which would mean that each relevant undertaker

“must publish a map of its sewage catchment networks”,

and that maps published under the provision

“must illustrate…pumping stations, pipes and other works constituting part of the undertaker’s sewerage network…must be published within 12 months of the passing of this Act…must be made publicly accessible on the undertaker’s website.”

I am a district councillor as well as an MP and in my ward of Standlake Aston and Stanton Harcourt, parish councillors, members of the public and campaigners have grappled for information and failed to find it. Many people do not know how to do a freedom of information request. This means that people do not know where the sewage is going from and to, and that leads to confusion and means that the problems are further away from us.

Putting these maps in the public domain, making them easily accessible and making sure that not only the pumping stations and the treatment works but the pipes connecting them all—which are not automatically clear —are always in the public domain and always easily accessible means that we are getting to a solution quicker. That is all this new clause is about. I am probably going to get a response saying, “We have to wait for the water commission”, in which case I would express some disappointment, because these things do not cost any money and they mean we move quicker to solve problems. I would really like a culture of, “If that’s a good idea, let’s do it”.

[Emma Hardy]

I understand the intent of new clause 11. The location and health of a water company’s assets is key to ensuring their maintenance and improvement. Under section 199 of the Water Industry Act, companies are required to keep records of the locations of many of their sewers, natural drains or disposal mains. Members of the public are able to request this information from water and sewerage companies in map form. Furthermore, the Environment Agency hosts a public register of information relating to all sites and assets permitted under the environmental permitting regulations. As of 1 January—this month—all water companies are required to publish discharge data from their storm overflows. Water UK’s centralised map shows that near real-time data for water companies across England in a publicly accessible format.

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[Tim Farron]

I do not think it is unrealistic—we need to be ambitious—but I absolutely accept that there are multiple sources of pollution.

I promise to be brief in talking about my patch, which is not of interest to everybody. It is key to point out that pollution in Windermere generally comes from three sources. It is true that agricultural run-off is an issue but, sadly, the policies of this Government and the previous one, over a period of time, have effectively destocked the fells, meaning run-off has a massively reducing impact on Windermere and the broader catchment.

The bigger two problems are the 14 assets that United Utilities has either on or around the lake or its tributaries. There is also the best part of 2,000 septic tanks around the lake or its tributaries. Unlike septic tanks and, indeed, package treatment works in many rural communities, these are not scattered all over in the middle of nowhere; they are in a ring around the lake, most of them within yards of a mainline sewer. It is, then, entirely possible for the water companies, while gaining significant income benefit as a consequence, to mainline a massive proportion of the sources of sewage spillage into the lake, via the septic tanks and the package treatment works being brought into the system.

The new clause is of course slightly selfish, but it is really important that we seek to maintain national parks right across the country at the highest possible bar, and therefore make sure they set an example for others to follow. We will seek to press new clause 27 to a vote.

[Emma Hardy]

I thank the hon. Member for Westmorland and Lonsdale for tabling the new clauses. It is always nice to have a conversation about the beautiful chalk streams and national parks in our country.

New clause 12 would have significant implications for existing legal frameworks and operational delivery, and would not necessarily result in environmental improvements for chalk streams, for which there are already established objectives to conserve and restore their ecological health. Under the water environment regulations, the default objective is to achieve good ecological status for all chalk streams in England. Good ecological status is a high standard that represents a thriving aquatic environment with only minor disturbances from natural conditions.

High ecological status equates to water that is almost entirely undisturbed from its natural conditions. If we set high ecological status as the objective for all chalk streams, overriding cost-benefit assessments, it would have wide-ranging impacts on future planning developments and human interaction with chalk streams, including by restricting farming and fishing. Any planning for housing developments that would have even a minor impact on the water quality of chalk streams would be restricted without impractical and disproportionately costly mitigation measures. The new clause would place achieving that demanding objective on water companies only, as the hon. Member for Broadland and Fakenham highlighted, regardless of the pressures that are actually impacting chalk streams. This would not allow for the consideration of technical feasibility or costs, which would ultimately be borne by water bill payers. The new clause would necessitate amendments to the water environment regulations and habitat regulations, creating complexity and difficult delivery implications.

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[Jerome Mayhew]

I would like the Minister’s comments on the issue that we have, and I am focusing primarily on the Norfolk broads, of which I represent a good chunk. There is the requirement to make a mandatory obligation on the water undertaker to ensure “high ecological status”, which is above “good ecological status”—that is the point the Minister is making. Does she agree that, while they are a primary input into the quality of the water in the Norfolk broads, they are not the only influencer? While the intention to create and encourage high ecological status in the broads is a very good one, and it is one that I share, does the Minister agree that the drafting of this new clause is not appropriate?

[Emma Hardy]

The hon. Gentleman is right to highlight that the pollution caused in the Norfolk broads and in many other areas does not come from water companies alone. As has been discussed, it comes from the environment, road run-off and various other places. “High ecological status”, as we have stated, could involve not being able to fish in those waters at all, which I know is a recreational activity in his area. It may also restrict planning for housing developments with any minor effects on the water quality of water bodies in national parks. The Government therefore cannot accept either new clause, although I recognise the intention behind them. I hope that the hon. Gentleman feels able not to press both.

[Tim Farron]

In short, I am happy not to push new clause 12 to a vote now, nor will I seek to push new clause 27 to a vote when we get to that stage. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 13

Guidance on poly- and perfluorinated alkyl substances

“After section 86ZA of the Water Industry Act 1991, insert—

‘86ZB Guidance on poly- and perfluorinated alkyl substances

(1) The Secretary of State must by regulations made by statutory instrument make provision for the regulation of poly- and perfluorinated alkyl substances in drinking water based on guidance issued by the Drinking Water Inspectorate.

(2) Until the Secretary of State makes provision for the regulation of poly- and perfluorinated alkyl substances, water and sewerage companies must implement any relevant guidance issued by the Drinking Water Inspectorate.

(3) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.’”—(Tim Farron.)

This new clause would require the Secretary of State to make regulations relating to the presence of poly- and perfluorinated alkyl substances in drinking water based on guidance issued by the Drinking Water Inspectorate, and require water companies to follow the Inspectorate’s guidance in the interim.

Brought up, and read the First time.

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[Tim Farron]

Thank you—I do not want to detain the Committee any longer than I need to. The new clauses are about a vexing and serious issue: the presence of polyfluorinated and perfluorinated alkyl substances in our waterways and in our drinking water, in particular. I pay tribute to my hon. Friend the Member for Twickenham (Munira Wilson) for championing this issue in this place and outside it.

The new clause attempts to raise the existing guidance from the Drinking Water Inspectorate on PFAS levels in drinking water to a statutory level; that is the key point. The Bill seeks to increase regulatory power over water companies, and the new clause will increase the Drinking Water Inspectorate’s power to enforce the guidance regarding PFAS. There is currently no legal limit on the amount of PFAS present in our drinking water. There is only guidance, even though the Environment Agency and the Health and Safety Executive have both recommended that there should be a legal limit.

New clause 13 would require water companies to prioritise and take a proactive stance on limiting PFAS in drinking water. Currently, if a water company were to breach PFAS guidance, its regulatory compliance score would not be affected as it would if, for example, lead was found in its water. This would encourage them to invest in treating water to remove PFAS. This is an important first step in prompting the Government to create a fully-fledged chemical strategy to deal with chemical pollutions of all kinds, starting with the most direct threat to human health, which is the direct consumption of PFAS through drinking water. PFAS are toxic, they are forever and they are very pervasive. Links have been found between PFAS chemicals and a host of health issues, such as, but not limited to, cancer, thyroid disease, fertility issues, lowered birth weight, weakened bones in children and immune resistance to vaccinations.

New clause 14 would put the duty on the water companies to take responsibility for the reduction and prevention of PFAS chemicals in water systems, ensuring that each water company is responsible.

[Emma Hardy]

I thank the hon. Member for proposing new clauses 13 and 14 on this incredibly important issue, and for highlighting the importance of PFAS monitoring. I want to reassure everybody that the quality of drinking water in England is exceptionally high and among the best in the world. It is important to me that it remains that way.

Across Government, we are working to assess PFAS levels occurring in the environment, as well as their sources and potential risks, to inform future policy and regulatory approaches, safeguard the current high drinking water quality and ensure our regulations remain fit for purpose. Water companies have a statutory obligation under the Water Supply (Water Quality) Regulations 2016 to carry out risk assessments to identify anything that could pose a risk to health or cause the water supplier to be unwholesome. That includes the risk of PFAS.

I will explain which PFAS are tested for in drinking water. The Drinking Water Inspectorate issued a series of information letters to water companies to set out a risk-assessment methodology and associated monitoring strategies for up to 48 individual PFAS compounds. The guideline values of PFOS, or perfluorooctane sulfonic acid, and PFOA, or perfluorooctanoic acid, are agreed with the UK Health Security Agency, and have been applied to 48 individual PFAS. The DWI guidance will be reviewed and updated where necessary.

The Drinking Water Inspectorate has provided guidance on PFAS to water companies since 2007 and, as I explained, that is regularly updated as new research emerges. In July 2024, DEFRA announced a rapid review of the environmental improvement plan to deliver on our legally binding targets to save nature. That includes how best to manage chemicals, including the risks posed by PFAS, and we are working closely with the DWI on all matters, including PFAS.

I reassure the hon. Member for Westmorland and Lonsdale that the Water Industry Act 1991 already provides the necessary powers to amend existing regulations to deal expressly with PFAS, should the Government wish to do so. I will have a meeting with his hon. Friend, the hon. Member for Twickenham (Munira Wilson), on this issue. I hope that the hon. Gentleman is reassured that this new clause is not suitable for the Bill, so I ask him to withdraw it.

New clause 14 focuses on chemical contaminants entering our waterways. I agree with the hon. Member for Westmorland and Lonsdale about the importance of the issue, which is why, as I announced, we will have the rapid review of the environmental improvement plan to deliver on our targets to restore nature. That includes looking carefully at the risks posed by PFAS. The review will consider and set out effective measures to mitigate harmful chemical substances entering our water through the environment. Through the chemical investigations programme, we are working with the water industry to understand how levels of contaminants in treated waste water affect our water environment. The programme will provide valuable information to understand the effectiveness of different measures to tackle chemical contamination of our rivers.

Significant costs are associated with end-of-pipe technologies at sewage treatment works to manage the more challenging chemicals, such as PFAS. We therefore need to prevent contaminants entering the water system in the first place, before they get to the waste water treatment works, where the cost for treatment will be unfairly borne by water customers, rather than the polluters. Work continues across Government to help us to assess the levels of PFAS occurring in the environment, their sources and the potential risks, so that those can inform future policy and regulatory approaches to safeguard our high drinking water quality and to ensure that regulations remain fit for purpose.

The DWI expects water companies to plan to reduce PFAS concentrations in treated water progressively by implementing a reactive and systematic risk-reduction strategy. That is why we need to need to prevent them entering the water in the first place. I hope that the hon. Member is reassured by the actions that we are taking and will not press new clause 14.

[Tim Farron]

I am substantially reassured that the Minister is taking this issue seriously, and I am grateful that she is to meet my hon. Friend the Member for Twickenham, who has championed it so well. All the same, while I do not agree, I accept the Minister’s point about the way in which we are doing this—which, I guess, is contained in new clause 14, so I will not press that to a vote—but new clause 13 simply says what the Health and Safety Executive and the Environment Agency are already saying, which is that those chemicals are deeply dangerous and that the restrictions on them should therefore be moved from guidance to a statutory level. That ought to be a no-brainer, so we will press that new clause to a vote.

Question put, That the clause be read a Second time.

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[Tim Farron]

I beg to move, That the clause be read a Second time.

I will try to be brief, I promise. The new clause is based on the fact that we seriously approve of the Government’s approach to monitoring. We want the regulatory bodies to be well equipped and resourced to be able to hold water companies and other potential polluters to account. But the Government have made a clear decision, of which I totally approve, to lionise and put front and centre citizen science and voluntary groups around the country—groups such as Windrush Against Sewage Pollution, Save Windermere in my constituency, the Clean River Kent group and the Rivers Trusts in Eden and South Lakeland. These are wonderful people, pretty much all of them acting in a voluntary capacity. The groups contain lots of incredibly clever, bright people who are passionate about our environment.

The Government are doing something we approve of by seeking to deploy and mobilise people in their communities. The new clause is about trying to make sure that we equip them, underpin what they do and provide resource to support them, and that the Government use some resource to proactively look to fill in the gaps. We are simply saying that we approve of the mobilisation of citizen science across the country to hold water companies to account through use of the real-time database and a variety of other tools. But if we are going to rely on a group of people, let us support them. We will seek to push this to a vote, because we think it is a central part of what the Bill should aim to achieve.

[Emma Hardy]

I thank the hon. Gentleman for tabling new clause 15. We fully support greater involvement of citizen science to hold water companies to account. I thank them for all the work that they have done in this area up and down our country. Local people know their rivers best, and their campaigns on pollution issues have been crucial in bringing the scale of the issues to light.

The Bill already includes several amendments to support transparency to make it easier to scrutinise water companies. Clause 2 will enable the public to scrutinise the measures that water companies are taking to reduce pollution incidents. Clause 3 will make information on discharges from emergency overflows available in near real time. This data, in addition to the near real-time information already available on storm overflow discharges, will be provided in a way that will enable citizens to identify trends and key issues. That will supplement the significant information that the Environment Agency already publishes.

The Environment Agency also operates a 24-hour environmental incident hotline to enable the public to report incidents that they observe in their local area. The Environment Agency shares the enthusiasm and values the expertise and local knowledge of citizen scientists. It has recently funded an internal project supporting citizen science, which will run until March 2025.

I welcome the hon. Gentleman’s approval of the Government’s work on this issue. The question is whether we require primary legislation to continue doing something we are already doing successfully. This project, along with many others that are being supported by the Government or the Environment Agency, is considering how to facilitate better engagement with citizen scientists. The Government believe that the existing measures are more effective for supporting citizen science than creating a fixed legislative duty on the Secretary of State. We are already doing work in this area, so we will not support the new clause.

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[Tim Farron]

I beg to move, That the clause be read a Second time.

Water bill poverty is a reality, and many people will require greater water use because of disability, age or health conditions. Although WaterSure benefits exist, they are patchy and are something of a postcode lottery. Which benefits a person may receive under WaterSure depends on supplier and catchment, and whether someone qualifies depends on which water company they get water from. That is not right. There should be a single social tariff that is applicable and understandable for everyone. A postcode lottery should not dictate whether a person gets the support they may need, and which water company someone lives under should not dictate whether they can afford their bills.

Some water companies require three or four pieces of evidence and some just a quick assessment of finances, and the savings range from 15% to 90% off a bill. We would bring that under one simple tariff. We have certainly heard Government Members regularly talk about the value and importance of such a measure, and we simply want to put it on the face of the Bill. A unified and universal social tariff is about basic social justice. It would help those people for whom paying water bills is most difficult, for a variety of reasons—health and disability reasons, as well as financial ones. This is something that the Government should accept, or else we will seek to press it to a vote.

[Emma Hardy]

I thank the hon. Member for tabling new clause 17. It is clear that consumers are concerned about their bills, and this Government want to do everything they can to help and support people who are struggling, particularly given that water bills are due to rise following Ofwat’s final determinations. Although this Government do not consider it suitable to adopt the new clause at this time, we will continue to consider all measures available to best support vulnerable customers, and we are exploring options to improve social tariff arrangements and improve fairness and consistency in who is eligible for support and in the levels of assistance provided.

There are already customer assistance schemes in place. WaterSure caps water and sewerage bills for vulnerable customers who have the higher essential water use requirement for family or health reasons. Under the scheme, £66 million of support was provided to 230,000 households in ’23-24, with an average bill discount of £286. That sits alongside debt measures, water efficiency measures and company social tariffs, which are all targeted at supporting customers who are struggling to pay. Company social tariffs, which water companies design themselves and offer to customers who are struggling to afford their water bills, are forecast to provide an average of £640 million a year in support between 2025 and 2030.

Prior to the introduction of any new support scheme, in-depth research and analysis must be completed to ensure a properly designed policy. Therefore, the Government are continuing to work with the water industry to explore options to improve affordability arrangements, including by holding the sector accountable for its public commitment to end water poverty by 2030. For that reason, I ask the hon. Member for Westmorland and Lonsdale to withdraw new clause 17.

[Tim Farron]

In-depth analysis is not going to tell us anything other than that there is massive inconsistency across the country. Of course, WaterSure provides benefits, but it is different depending on where someone lives. The benefits received by someone living in a Yorkshire Water area, United Utilities or Northumbrian Water area will differ, as will the qualifying criteria. That means that some people in poverty, and some people with serious disabilities or health needs, who therefore have higher water usage requirements, will be hit by higher bills simply because of the lack of a single social tariff. We think that the new clause is important to ensuring social justice and helping those most in need in our communities, and therefore that it is very important to put it to the vote.

Question put, That the clause be read a Second time.

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[Charlie Maynard]

I have the name of one here: Thames Water Utilities Cayman Finance Holdings Ltd. Why Cayman? If I say “Cayman”, people say “tax haven”. That is why it is there. We should be doing our best to stop that. Last I looked, London was still a financial capital, and equity and debt could still be raised in this country, and I sincerely hope that remains the case. So I do not see a good reason to have holding companies offshore. Hon. Members might be happy to hear that that was all I wanted to say on new clause 19.

New clause 23 is also being considered in this tranche, and I will highlight proposed new subsection (2DZB)(b), which refers to

“a process for agreeing capital expenditure necessary for service improvements, bill increases, and changes to operating costs while the undertaker is subject to the Special Administration Regime”.

We have to spend a huge amount of money on our water utility companies, because they have not been spending enough over the last decade or two. When a special administrator is appointed in such instances, the goal is to ensure that the special administrator takes that future spend into account in considering how much debt needs to be cut. We do not want to come out of special administration with debt that is still high, which will prevent the investments from being made that will be required over the next. That is the goal of the new clause.

[Emma Hardy]

I thank the hon. Member for Westmorland and Lonsdale for the intent behind new clause 19. As highlighted, it seems in parts to contradict new clause 18, which was also tabled in his name.

It is important to highlight that Ofwat already has a core duty under section 2 of the Water Industry Act 1991 to ensure that water companies are able to finance the proper carrying out of their statutory obligations. Ofwat already monitors information it receives about companies and their financial positions on an ongoing basis. That includes carrying out a detailed review of the financial information published by companies in annual performance reports, statutory accounts, interim accounts, investor reports and other sources. Ofwat also directly engages with companies where it sees an increased level of risk. Additionally, Ofwat has recently updated water company licences to require companies to take account of service delivery for customers and the environment, as well as financial resilience when deciding whether to pay a dividend.

More broadly, the independent commission into the water industry will look at long-term, wider reform of the water sector, as I have mentioned. Company financial structures are one of a number of areas that could be explored under the commission, and we do not want to pre-empt the outcome of the commission through this new clause. The former deputy governor of the Bank of England, Sir Jon Cunliffe, chairs the commission. As mentioned, he has decades of financial, investor and regulatory experience. His appointment demonstrates the Government’s ambition to fix the foundations of the industry. As I have mentioned previously, there will be a call for evidence, and the hon. Member will be able to make his points to Sir Jon Cunliffe and the commission. Given the existing monitoring of the financial resilience of the sector and the forthcoming recommendations of the independent commission, we do not believe that the new clause is appropriate, and I ask the hon. Member to withdraw it.

Turning to new clause 23, which was also tabled by the hon. Member for Westmorland and Lonsdale, a special administration regime enables a company that provides vital public services—water, energy or rail—to be put into administration in certain circumstances to ensure that the public service will continue to be provided pending rescue, via a means such as debt restructuring or transfer, via a sale, to new owners. There is no need for a company exiting a SAR to be placed under an enhanced regime regarding its debt levels. Water companies are allowed to raise debt to fund the delivery of their services, and it is for companies to decide their financial structures. I will resist the urge to repeat my previous comments about the water commission looking at the financial structures of all the water companies, and I hope the hon. Member will take what I outlined previously as read.

In relation to capital expenditure during a SAR, it is not necessary to establish a statutory process for agreeing that expenditure, as that would be agreed under a court-appointed special administrator in the lead-up to a SAR. The Government can provide funding support to a special administrator. Any company under a SAR will still be subjected to the same regulatory regime and expected to meet its statutory obligations.

I hope the hon. Member understands why we cannot accept his new clauses, but I repeat the offer made: he will be able to talk to Sir Jon Cunliffe and present to him the evidence he has just presented to the Committee, so that he can consider it as part of the wider evidence gathering. I therefore ask the hon. Member not to press his new clauses.

[Charlie Maynard]

It is very kind of the Minister to have so much faith in, and be so charitable towards, Ofwat, given its record over the last decade or two, particularly with regard to its management of water companies’ financials. We will not press new clause 23, but would like to call a vote on new clause 19.

Question put, That the clause be read a Second time.

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[Charlie Maynard]

I will be brief. We just want to highlight the five-year price review and the shoehorning in of that time period. It might have worked for Lenin—maybe not—but we do not think it works well in the water sector, so we want to see whether we can release ourselves from it. We will come to new clause 35 later, but in certain situations we will all be better off if we look over a longer time period. We have some really big problems and we need to think about reducing them not just over the next five years, but over a 10 or 15-year period. We need to work towards some really big fixes over a longer period. If we are always locked into these five-year cycles, we are not serving ourselves well. That is the point of new clause 21.

New clause 29 states that

“the Authority must have regard to the performance of the relevant undertaker or undertakers against pollution targets across the previous five years.”

At the moment, how companies do is not very well linked to their reward. Most of the time, with water companies, everybody is thinking about sticks—I certainly am—but we ought to think a little about carrots as well. Let us say that ultimately we do good things such as setting pollution reduction targets. If companies beat those targets, we should work towards a solution whereby they do well out of that. They could have a carrot as a reward for doing well, as opposed to endlessly being given the stick. That is the point of new clause 29. We will not push either new clause to a vote.

[Emma Hardy]

I thank the hon. Members for Witney and for Westmorland and Lonsdale for the intention behind their new clauses. The water sector is facing multiple challenges and growing pressures. Resolving them will require transformational change.

The Government agree that it is crucial to conduct a fundamental review of the water industry regulatory system. We want to ensure that we have a system that supports strategic planning and investment, with fairness to customers and environmental improvement at its core. I reassure the hon. Member for Witney that such a review is already under way—I might have mentioned this once or twice before—through the independent commission, led by Sir Jon Cunliffe. That comprehensive review is addressing the three elements that the new clause raises: planning, financing and investment. It is taking a holistic approach to assessing the system, and it will make recommendations to ensure that the water sector is better equipped to ensure clean rivers, lakes and seas and a sustainable water supply for the future.

The commission will report to the Government by the second quarter of 2025, ahead of the timeframe recommended in the new clause. I trust that the hon. Member for Witney is reassured that the requirements of the new clause are already being addressed through the work of the independent commission.

On new clause 29, which was also tabled by the hon. Members for Westmorland and Lonsdale and for Witney, I reassure them that the Government are fully aware of the scale of damage that pollution is causing to our waterways. We are committed to working with the water industry regulators to address that.

As a regulator, Ofwat has a range of primary duties, including ensuring that companies properly carry out their functions and can finance the delivery of their statutory obligations, including environmental obligations. Ofwat sets the total spending envelope for companies through its price review process and it reviews company business plans to ensure compliance with statutory obligations. I am pleased to inform the Committee that Ofwat published its final determinations for the 2024 price review on 19 December, which included confirmation of £104 billion-worth of expenditure over the next five years. That is the highest level of investment in the water sector since privatisation and will fund reducing the number of spills from storm overflows by 45% through upgrading 2,800 storm overflows.

In addition, companies will improve river water quality by improving more than 1,700 waste water treatment works. Furthermore, Ofwat has increased the number of outcome delivery incentives against which companies must deliver, including targets on reducing serious pollution incidents, such as a reduction in storm overflows and operational greenhouse gas emissions. That means that serious pollution incidents will lead to clear and robust financial penalties for companies. I trust that the hon. Member for Witney is reassured that his new clause is not required, as pollution targets are already closely factored into the current price review model, and I ask him not to press it.

[Charlie Maynard]

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 22

Prohibition on bail-out of water company shareholders and creditors

“(1) The Secretary of State and His Majesty’s Treasury must not directly or indirectly discharge, assume, or guarantee any debts of legal entities in any water company group subject to proceedings under section 24 of the Water Industry Act 1991 (special administration orders made on special petitions), except in accordance with subsection (2).

(2) The special administrator of a water company may reduce the debts owed by the regulated entity to its creditors by up to 100 per cent, taking into account the future forecast expenditure over the short, medium and long term and subject to the administrator’s confidence in the company’s ability to accommodate this spending.

(3) The prohibition set out in subsection (1) and the reduction of debts set out in subsection (2) must not include pension, wage and other obligations owed to employees, excluding any past or current member of a board of directors, within the water company group.”—(Charlie Maynard.)

This new clause aims to allow up to 100% of debts to be cancelled in the event of special administration proceedings, taking into account the scale of investment required to hit the future targets established by the Authority.

Brought up, and read the First time.

[Charlie Maynard]

I beg to move, That the clause be read a Second time.

We have covered this already, so I will be brief. I highlight subsection (2):

“The special administrator of a water company may reduce the debts owed by the regulated entity to its creditors by up to 100 per cent, taking into account the future forecast expenditure over the short, medium and long term and subject to the administrator’s confidence in the company’s ability to accommodate this spending.”

We have already discussed this. I am not going to go through it further, and I am not going to push it to a vote, so I will leave it at that.

[Emma Hardy]

I thank the hon. Members for Westmorland and Lonsdale and for Witney for tabling new clause 22. As the hon. Member for Witney says, we have already had a debate on this issue. I hoped that we had made the situation quite clear about what the special administration regime is and what it is not, but here we go again.

I must reject the new clause, because it would jeopardise the main purpose of the water special administration regime: the continued provision of vital public services. The role of a special administrator does not include a power to cancel debt, and the purpose of the administration is not to bail out water company creditors or shareholders. The new clause is therefore unnecessary. It would divert from long-established insolvency principles of treating creditors equally according to their rights as commercial entities. When a water company enters special administration, creditors are unable to enforce their debt repayments unless they seek leave of the court or receive permission from the special administrator. When a water company exits from special administration either by rescue, such as debt restructuring, or by transfer, such as a sale, the special administrator determines the level of repayment to credits. That will be calculated according to the statutory order of priority.

It is very unlikely that all debt would be repaid at the end of a special administration, because of the order in which payments are required to be made. Debts can be cancelled only according to a restructuring plan or under court supervision. The Government do not directly or indirectly make any decisions relating to the exact quantity of debt recouped by creditors or equity recouped by shareholders.

I must reject the new clause, because the changes that we are making align the water industry special administration regime with regimes in other sectors. We do not intend to alter the regime’s relationship with the existing framework of insolvency legislation.

[Charlie Maynard]

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 26

Rules about performance-related pay

“(1) The Water Industry Act 1991 is amended as follows.

(2) After section 35D (inserted by section 1 of this Act) insert—

‘35E Rules about performance-related pay

(1) The Authority must issue rules prohibiting a relevant undertaker from giving to persons holding senior roles performance-related pay in respect of any financial year in which the undertaker has failed to prevent all sewage discharges, spills, or leaks.

(2) The rules issued under subsection (1) must include—

(a) provision designed to secure that performance-related pay which, if given by a relevant undertaker, would contravene the pay prohibition on the part of the undertaker, is not given by another person;

(b) that any provision of an agreement (whether made before or after the issuing of the rules) is void to the extent that it contravenes the pay prohibition;

(c) provision for a relevant undertaker to recover any payment made, or other property transferred, in breach of the pay prohibition.

(3) For the purposes of subsection (1)—

(a) “performance-related pay” means any payment, consideration or other benefit (including pension benefit) the giving of which results from the meeting of any targets or performance standards on the part of the relevant undertaker or the person to whom such payment, consideration or benefit is given;

(b) a person holds a “senior role” with a relevant undertaker if the person—

(i) is a chief executive of the undertaker,

(ii) is a director of the undertaker, or

(iii) holds such other description of role with the undertaker as may be specified.’”—(Tim Farron.)

This new clause creates a new section in the Water Industry Act 1991 to require Ofwat to ban bonuses for water company bosses if they fail to prevent sewage discharges, spills, or leaks.

Brought up, and read the First time.

[Tim Farron]

I beg to move, That the clause be read a Second time.

I do not really want to press this new clause to a vote, but we tabled it because my noble Friend Lady Bakewell withdrew it in the Lords after being given assurances by the noble Baroness, Lady Hayman, for whom I have enormous respect and of whom I think very highly. It seeks to ban bonuses for senior company executives who have been found guilty of a category 1 or 2 discharge. It would prevent any loopholes such as pay rises and share options that might enable bonuses to be paid under those circumstances.

From the Dispatch Box in the other place, Baroness Hayman said:

“However, we are very aware that water companies need to attract investment so, as outlined in Ofwat’s consultation, the circumstances under which performance-related pay bans are being proposed represent very serious failures by a company. I reassure the noble Baroness, Lady Bakewell of Hardington Mandeville, that this includes instances of criminal convictions, credit ratings falling below investment grade and Ofwat’s proposed metric for bonuses to be prohibited if a company has had a serious category 1 or 2 pollution incident in the preceding calendar year…I would like to be clear with all noble Lords that we are not asking companies to meet any higher or new standard than that which is already expected of them.”—[Official Report, House of Lords, 20 November 2024; Vol. 841, c. 247.]

We were grateful for that assurance, but nothing of that sort has appeared in the Bill since. Will the Minister give me some reassurance as to why we should not press the new clause to a vote? I do not see anything in writing that gives us confidence, other than the words of the noble Baroness.

[Emma Hardy]

I thank the hon. Gentleman for tabling new clause 26. The Government agree that we need to rebuild trust in the water sector and that executives should be firmly held to account for companies’ serious failures to meet environmental standards. That is why clause 1 will give Ofwat new powers to issue rules on remuneration and governance. The legislation requires Ofwat to set rules that make the payment of bonuses contingent on companies achieving high environmental standards. It is more appropriate for Ofwat, as the independent regulator, to determine the performance metrics to be applied when setting the rules for performance-related pay.

As outlined in the initial policy consultation, Ofwat is currently considering prohibiting bonuses where companies have had a serious category 1 or 2 pollution incident in the preceding calendar year. That is not on the face of the Bill, but it is very clearly in Ofwat’s consultation. It is looking to consult on prohibiting bonuses after a category 1 or 2 pollution incident, as my noble Friend outlined. That provides an early indication of the direction of travel on the environment metric.

Ofwat would be able to use its direction-giving power and wider enforcement framework to hold companies to account where it has reason to believe that they are in breach of the rules. However, banning bonuses, even in cases of unwanted but legal spills, would effectively ban bonuses for all companies. That could unnecessarily threaten the sector’s ability to attract and retain talent. I refer the hon. Member for Westmorland and Lonsdale to the consultation that Ofwat has launched so that he can see for himself the pollution metric that I have mentioned. On that basis, I hope that he feels able to withdraw new clause 26.

[Tim Farron]

I am reassured to a large degree by what the Minister says, but I am concerned that it is not on the face of the Bill. Simply handing this over to Ofwat, given its track record, does not fill me with confidence. We will reserve our position on this one—we may potentially talk about it further on Report—but we will not press new clause 26 to a vote. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Ordered, That further consideration be now adjourned. —(Jeff Smith.)

Water (Special Measures) Bill [ Lords ] (Third sitting)

Emma Hardy Excerpts

Committee stage
Tuesday 14th January 2025 Public Bill Committees

[The Chair]

I remind Members that they should send their speaking notes by email to hansardnotes @parliament.uk. Electronic devices should be switched to silent. Tea and coffee are not allowed during sittings but there is water—blue is still, silver is fizzy.

Clause 7

Automatic penalties for certain offences

Question proposed, That the clause stand part of the Bill.

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Emma Hardy)]

It is lovely to see everybody again and it is a pleasure to serve under your chairwomanship, Dr Huq.

Clause 7 will give the environmental regulators new powers to impose automatic penalties for specified offences. The current process for imposing fixed monetary penalties for minor to moderate offending can be time and cost-intensive. To impose a penalty, the regulators must evidence beyond reasonable doubt—the criminal standard of proof—that an offence has been committed. In addition, the fixed monetary penalty amount that regulators can currently impose for certain water industry offences to that standard of proof is set at just £300. That means it is generally not cost-effective for the regulators to impose financial penalties for frequent minor to moderate offending. Clause 7 introduces automatic penalties for specified offences, which will enable the regulators to impose penalties more quickly without having to direct significant resources to lengthy investigations.

I reassure hon. Members that we will consult on the specific offences that will be in scope for the new automatic penalties and on the value of the penalties. The proposed offences will cover information requests and reporting offences, pollution offences and water resource offences. The House will also have the opportunity to debate and vote on secondary legislation before any changes are made. I hope the Committee agrees that this measure is essential for improving compliance across the water sector.

[Dr Neil Hudson (Epping Forest) (Con)]

It is a privilege to serve under your chairship today, Dr Huq. We have no formal objection to clause 7, which imposes a duty on environmental regulators to impose penalties for offences by water company that the clause specifies. Offences have of course increased, and water bosses have been banned from receiving bonuses if a company has committed serious criminal breaches. Regulators have more powers than they used to in being able to impose larger fines for polluters without needing to go to court. The clause focuses on exactly the same principle and we therefore have no formal objections.

I raised in an earlier Bill Committee sitting—this is relevant here—that there has been an increase in the number of inspections that water companies can expect, from 4,000 a year by April this year to 10,000 a year by April of next year. In other words, what has been addressed in the past is not just regulation, but the whole pathway of the enforcement of regulations, so that regulations are not merely blunt instruments but active ones that water companies can expect to have to deal with if they do not act responsibly to their customers, the environment and the wider public.

On that last point, will the Minister clarify and ensure that these offences are and will be enforced and commit to making further amendments to the law, not only regarding the offences themselves, but also on their enforcement, if the Government believe that things need to be tightened up moving forward? Aside from those clarifications, we have no formal objections to the clause.

[Tim Farron (Westmorland and Lonsdale) (LD)]

It is a great privilege to serve under your guidance this morning, Dr Huq. We also have no objection to the clause and, in fact, we consider automatic penalties to be a positive move.

My concern is that we see water companies not paying the fines that are levied against them. We talk about minor to moderate offences, but water companies wriggle out of paying fines for much larger offences, too. I just want to probe the extent to which the automatic penalties might stretch to what are considered more serious breaches.

I mentioned an example last week in Committee. In November 2021, Ofwat launched an inquiry into sewage discharges and how water companies manage their treatment centres and networks. It found three water companies in particular to be in breach: Thames, Northumbrian and Yorkshire. It imposed fines on those three companies—a £17 million fine against Northumbrian Water, a £47.15 million fine against Yorkshire Water and a £104.5 million fine against Thames Water—but as of autumn last year, not a single penny of that has been collected. It is understood that Ofwat allocated a grand total of eight and a half people to pursuing that particular line of inquiry.

Large fines, which there is no doubt that these companies rightly face, make no difference if they are never collected. That underpins the failure of our regulatory framework—water companies clearly feel they can just run rings around Ofwat and the other regulators. We very much welcome the automatic penalties, but we remain a bit concerned and would like the Minister to clarify whether those automatic penalties would have covered fines of that size as well. Otherwise, we are very supportive of the clause.

[Emma Hardy]

It is good to start the day off with a bit of unity in the Committee Room and everyone agreeing. In terms of which offences the automatic penalties will apply to, we are looking at targeting minor to moderate offending. The purpose behind the clause, and much of the Bill, is to change the culture of the water industry.

As I said in my opening remarks, one of the concerns about how the water industry operates at the moment is that the standard of proof needed to impose fines for minor to moderate offending is often seen as not being worth the cost. Companies are therefore getting away with minor to moderate offences because of the cost of trying to prosecute them. These penalties will apply to those offences. If the offence turns out to be more significant—not minor to moderate, but more of a major pollution incident—obviously, penalties will apply in the usual way.

For an offence to be suitable for an automatic penalty, we consider that the Environment Agency must be able to quickly identify and impose the penalty and the offence must cause no or limited environmental harm. I describe it to colleagues as similar to speeding ticket offences. Everybody knows that if they go over 30 mph in a 30 mph zone where there is a camera, they will get caught and fined. That is the idea behind the fixed penalty notice. If someone commits an offence that they are not meant to do, they are automatically fined.

The proposed offences will cover information requests. The details will be dealt with in secondary legislation, on which colleagues across the House will vote. My thinking on information requests is that a situation where someone has to comply with a request for information and is given a timeframe, but does not deal with it in the timeframe, is the kind of thing we are looking at for automatic fines. As for reporting offences, pollution offences and water resource offences, we will consult on where the penalties can be used, and Parliament will debate and vote on them before any changes are made.

The Regulatory Enforcement and Sanctions Act 2008 provides for the enforcement of penalties if a company refuses to pay a penalty. That includes allowing regulators to use the same enforcement mechanisms available to a court. The Act also allows for interest charges in the event of late payment. Parliament will debate and vote on the details in secondary legislation.

I thank all hon. Members for their invaluable contributions to the debate on clause 7. The clause will fundamentally drive improved compliance across the water sector through introducing automatic penalties for specific offences, allowing the regulators to impose penalties more quickly.

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.

Clause 8

Abstraction and impounding: power to impose general conditions

Question proposed, That the clause stand part of the Bill.

[Emma Hardy]

Clause 8 grants the Secretary of State and Welsh Ministers the power to introduce conditions or general rules subject to which water industry abstraction and impounding licences will have effect. This provision is needed to ensure that automatic penalties under clause 7 can be applied to abstraction and impounding offences under the Water Resources Act 1991. Existing licences have been issued since the 1960s and have inconsistent conditions, making the use of automatic penalties nearly impossible.

More broadly, clause 8 allows for the harmonisation of requirements in relation to abstraction and impounding activities so that the sector operates under consistent and modern standards. A delegated power to introduce conditions or general rules through regulations is crucial in this context, because water resource management is dynamic and must be responsive to emerging challenges. I hope that hon. Members will agree that this power is needed to improve the water industry’s regulatory framework.

[Dr Hudson]

Clause 8 seeks to grant the Secretary of State and Welsh Ministers additional powers to impose conditions or general rules on water industry licences relating to abstraction and impoundment activity. His Majesty’s loyal Opposition do not have any formal objections to the clause, but I would suggest that it reinforces some of my comments on clause 6 about the need to make the Government have the powers they need to regulate as necessary a more consistent principle across the Bill.

[Emma Hardy]

I thank the hon. Gentleman for his comments. Modifying the licences individually is both expensive and time consuming, which is why we are hoping to modernise and harmonise the process under this clause. It is crucial that automatic penalties under clause 7 can be applied to abstraction and impounding offences, so this power is needed to improve the water industry’s regulatory framework. For that reason, I commend the clause to the Committee.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Clause 9

Requirement for Ofwat to have regard to climate change etc

[Tim Farron]

I beg to move amendment 27, in clause 9, page 14, line 11, leave out from duties to end of line 13.

--- Later in debate ---

[Dr Hudson]

Clause 9 would introduce a new requirement for Ofwat to consider, as part of its regulatory decision making and the exercise of its powers and duties as given by the Water Industry Act 1991, the section 1 duty confirmed the Climate Change Act and section 5 of the Environment Act 2021. We have no formal objections to raise to that basic principle and no amendments that we wish to make to clause 9.

Can the Minister provide some clarity on the line that amendment 27 from the Liberal Democrats seeks to remove from the Bill? It states that Ofwat’s duty to have regard to the Secretary of State’s duty to meet environmental targets applies

“where the Authority considers that exercise or performance to be relevant to the making of such a contribution.”

Will the Minister assure the Committee that she and the Government will work with Ofwat so that it has clear guidance on when these environmental targets would be relevant, so that there are no grey areas in Ofwat’s work as it looks to enforce those targets? Can she assure the Committee that the Government will also work with Ofwat to ensure that with regard to its powers and duties in the spirit of clause 9, consumers are protected should there be any subsequent financial costs to water companies, so that we get both environmental protection and the value for money that the tax-paying consumer deserves?

I would be grateful if the Minister provided clarification on some of those questions. However, his Majesty’s loyal Opposition have no formal objections to clause 9.

[Emma Hardy]

As I am sure the hon. Member for Westmorland and Lonsdale will agree, the Government heard the strong support in the other place for adding a further environmental duty to Ofwat’s core duties to support the Government in making progress against our environmental targets. I pay tribute to Baroness Hayman for her work on this.

We understand that there are concerns around the current core environmental performance of the water industry and around the role and responsibilities of the water industry regulators. It is for this reason that the Government tabled an amendment in the other place that will require Ofwat to have regard to the need to contribute to achieving targets set under the Environment Act 2021 and Climate Change Act 2008 when carrying out its functions.

This amendment will further ensure that Ofwat’s work to contribute to the achievement of environmental targets complements the work of Government, who are ultimately responsible for the 2021 Act and the 2008 Act targets. It is important to note that the independent commission announced by the Government will take a full view of the roles and responsibilities of the water industry regulators. Any changes made now to Ofwat’s duties may therefore be superseded by the outcomes of the commission. I hope the Committee agrees that this power is needed to ensure that the environment is considered in regulatory decision making.

Amendment 27 seeks to remove Ofwat’s discretion to exercise its duty to have regard to environmental targets where it feels this as relevant. It will be for Ofwat as the independent regulator to determine how it applies the Government’s new obligation to its regulatory decision making, and how this new duty will not take precedence over other duties. It is for this reason that flexibility has been built into the drafting of this duty, ensuring that Ofwat has discretion to exercise the duty where it feels it is relevant.

Mechanically applying a duty in circumstances where it is not relevant to a particular matter would be a waste of resource. That discretion is in line with similar duties for other regulators. For example, the Financial Services and Markets Act 2000 was recently amended to provide an environmental duty for the financial regulators. It is right that as the independent regulator, Ofwat has the discretion to balance its duties and determine when it is appropriate that they are applied. The new duty introduced by the Government can be only a stopgap before more fundamental reforms are brought forward. For those reasons, we will not accept the amendment from the hon. Member for Westmorland and Lonsdale, and I hope he feels able to withdraw it.

[Tim Farron]

I am not reassured that removing this discretion means that a mechanical duty is placed upon Ofwat. I think that removing discretion is actually very important. It will only be applied where it is relevant by definition. I feel that by building in wriggle room, we are creating vagueness in the process. Nevertheless, we will not seek to push this amendment to a vote today. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 9 ordered to stand part of the Bill.

Clause 10

Charges in respect of Environment Agency and NRBW functions

Question proposed, That the clause stand part of the Bill.

[Emma Hardy]

Thank you, Dr Huq, for giving me the opportunity to speak on clause 10, which is one of my favourites. The costs for Environment Agency and Natural Resources Wales enforcement activities are paid by the taxpayer via grant in aid. The clause broadens existing charge-making powers, allowing the Environment Agency and Natural Resources Wales to recover costs for enforcement from water companies instead of taxpayers. Failure to introduce the clause would result in the burden of funding water industry enforcement continuing to fall on the taxpayer. It could also result in the regulators being unable to scale up their water industry enforcement activities due to wider budgetary pressures.

The Secretary of State, or the Welsh Minister in Wales, and HM Treasury are required to approve charging schemes in consultation with affected parties. Those safeguards ensure that environmental regulatory powers are proportionate and support sustained improvements in environmental performance in the water industry. I hope the Committee agrees that this power is essential for environmental regulators to become more self-sufficient and less reliant on the taxpayer. I commend the clause to the Committee.

[Dr Hudson]

Clause 10 amends the Environment Act 1995 to allow the Environment Agency and Natural Resources Wales the power to make charging schemes to recover costs from water companies. While the Opposition wish to raise no formal objections to the clause, we would be grateful for clarification on a couple of points from the Minister.

First, can the Minister explain whether the changes in this clause to the Environment Act 1995 that allow costs to be recovered from water companies could impact consumers in any way? Although it is already possible, we must be mindful that consumers may face extra costs, which I will discuss later regarding issues with the special administration orders that the Government have laid out in clauses 12 and 13, to be debated shortly. Consumers have already been informed by Ofwat that they should expect to see bills rise—the complete opposite of what the Government had said they intended to deliver. Therefore, do the Government feel confident that they can avoid contributing to the problem of a rising trajectory of bills, at a time when trust in the industry, as we have been debating in Committee, remains low due to financial mismanagement from some water companies and, too often, consumers receive poor quality from these services?

A further question, which I would be grateful if the Minister could clarify, is what modelling have the Government done to ensure that all the costs recovered will always be to the benefit of the taxpayer and the consumer? While we all share the desire that water companies that do the wrong thing must pay to put it right, we must ensure that, when we punish those water companies, we do not hurt the end consumer, who very much deserves to be protected. I would be grateful for the Minister’s thoughts on this, but again, we have no formal, explicit objections to the clause.

[Emma Hardy]

Clause 10 requires payment by water companies. It is fair and reasonable that the regulator should recover costs associated with its regulatory functions. Ofwat will consider the regulator’s proposals to determine which costs are appropriate to be passed on. The impact assessment, which I have mentioned in previous debates, details exactly how much all of the Bill will cost the customer. All the details are in there, and I refer the hon. Member for Epping Forest to look at that if he wants the specifics on the exact numbers that each measure will take.

I thank all hon. Members who have contributed their views on clause 10. I remain of the view that clause 10 will empower environmental regulators to become self-sufficient, reducing the burden on the taxpayer to fund water industry enforcement activities. Therefore, I commend the clause to the Committee.

Question put and agreed to.

Clause 10 accordingly ordered to stand part of the Bill.

Clause 11

Drinking Water Inspectorate: functions and fees

Question proposed, That the clause stand part of the Bill.

[Emma Hardy]

We are making excellent progress on the Bill this morning. I am grateful for the opportunity to speak on the importance of clause 11. I would like to mention the unsung hero of water regulation: the Drinking Water Inspectorate.

The clause enables the Drinking Water Inspectorate to fully recover the costs for the security and emergency regulatory work that it provides to companies. I think one of the reasons that it is an unsung hero is because it does its job so well; that is why not many people have heard of it. The responsibility for security and emergencies was delegated to the Drinking Water Inspectorate in 2022, but since then it has been unable to fully recharge for that work. This clause, subject to amendments to the Water Quality and Supply (Fees) Order 2016, will ensure that the inspectorate can fully recover all costs related to security and emergencies, enabling it to scale up its enforcement activities and enhance its capacity to conduct security and emergencies checks with water suppliers.

The clause will give the DWI greater flexibility in how it structures the fees it charges water companies. It will allow the DWI to introduce new charging models that more equitably share the financial burden of regulation in the water sector. I hope the Committee agrees that the clause rightly remunerates the DWI for its security and emergencies work and allows it to design a more equitable fee structure.

[Dr Hudson]

Clause 11 extends the purposes for which water quality inspectors may be appointed to include functions relating to national security directions under section 208 of the Water Industry Act 1991, and it provides flexibility for the charging of fees for regulatory work. This is a straightforward clause to which we raise no formal objection, but once again we would be grateful for a couple of clarification points from the Minister. How will the Government increase the Drinking Water Inspectorate’s ability to monitor and audit water supplies? Does the Minister feel that the clause will improve the inspectorate’s functions? Will the Minister please explain how the Government intend to support the powers of the Drinking Water Inspectorate, beyond this clause? She praised the inspectorate, and I echo that praise, but how do the Government intend to support its capabilities?

Once again, we wish to raise no formal objections to the clause. I would be grateful for clarity on the points I have highlighted.

--- Later in debate ---

[Emma Hardy]

I am pleased that hon. Members have echoed my support for the DWI. This clause is specifically about how it can recover some of its costs. It is estimated that the increased cost to householders will be only 2p a year, so it is very good value for money.

The wider issue of regulation and regulators will be covered by the water commission, which is looking at the entirety of regulation. That is out of the scope of this Bill, although the hon. Member for Westmorland and Lonsdale has made those points a number of times, and I have heard them each time.

This measure will cost customers about 2p a year. This is a much-needed clause. The Government maintain that it is important that the Drinking Water Inspectorate is remunerated for its security and emergencies work and is able to design a more equitable fee structure. I therefore commend the clause to the Committee.

Question put and agreed to.

Clause 11 accordingly ordered to stand part of the Bill.

Clause 12

Modification by Secretary of State of water company’s appointment conditions etc to recover losses

[Charlie Maynard (Witney) (LD)]

I beg to move amendment 11, in clause 12, page 16, line 11, leave out from “to” to “such” in line 13 and insert “recover from its creditors”.

--- Later in debate ---

[Tim Farron]

I back my hon. Friend the Member for Witney, who has made an excellent case for our amendment to clauses 12 and 13. We are deeply concerned about the issue. There are two aspects to the public’s reaction to the scandal in our water industry. First, there is revulsion about sewage being dumped in our lakes, rivers, streams and coastal areas, which is obviously appalling. Secondly, there is a deep sense of injustice that people are making vast amounts of money while not providing basic services.

For a day or two last week, the coldest place in the country was Shap, in my constituency. I had the pleasure of being there over the weekend. All water was frozen. However, that is not always the case. Last year alone, at Shap pumping station, 1,000 hours’ worth of sewage was pumped into Docker beck. Just along the way at Askham waste water treatment works, 414 hours’ worth of sewage were dumped into the beautiful River Lowther just last year. I make that point because the water bill payers who have to deal with that know that of every £9 they spend on their water bills, £1 is going to serve United Utilities’ debt. That is at the low end of the scale: until the change announced just before Christmas, 46% from Thames Water’s bills was used to service debt.

Over the lifetime of our privatised system in this country, the water companies have collectively racked up £70 billion of debt. That means that all bill payers are paying between 11% and 46% of their bills simply to service those companies’ debt. Our amendment would simply tackle the fact that if investors choose to take risks, hoping to make gains, but fail, they should accept the consequences of those risks, which they chose to take, rather than passing on the cost to my constituents and everybody else’s. It is not for the public to carry the can for corporate failure.

[Emma Hardy]

I will speak to amendments 11 and 12, both of which were tabled by the hon. Member for Westmorland and Lonsdale. I welcome the opportunity to bust some myths and add some facts to the debate. Speaking of facts, following the debate that we had at our last sitting, we have produced a fact sheet relating to storm and other overflows, which has been circulated to all members of the Committee. I recognise that we are not discussing that now, but I thought I might mention that my promise to provide the evidence has been fulfilled. For this debate, perhaps it would be helpful to produce a fact sheet that explains exactly what this is and what it is not, because there has been an awful lot of confusion already.

On the subject of facts, I am not quite sure where the shadow Minister’s number on average bill increases of over £80 a year comes from. The fact is that the average bill increase is £31 a year.

--- Later in debate ---

[Charlie Maynard]

Will the Minister give way?

[Emma Hardy]

If the hon. Member does not mind, I would like to finish my remarks, and then I am sure we will hear from him again.

Although I have outlined some of the merits of clauses 12 and 13, I would like to stress again the importance of including them in the Bill. A SAR will ensure the continued provision of essential public services and is the ultimate tool in Ofwat’s regulatory toolkit. There is therefore a high bar for the use of a SAR. A water company can be placed into special administration either on insolvency grounds, where it is unable to pay its debts, or on performance grounds, where it is in such serious breach of its principal statutory duties on enforcement order that it is inappropriate for the company to retain its licence. That includes consideration of a company’s environmental and financial performance. Although the Government have had the powers to place water companies into special administration for more than three decades, it is important that we regularly update legislation to reflect the modernisation of law and experience in other sectors.

Clauses 12 and 13 are essential because if a SAR occurs, Government funding could be provided to cover the cost of special administration. In the unlikely event that the proceeds of a sale or a repayment agreed as part of the rescue at the end of a SAR are insufficient to cover repaying Government funding, there is risk of a funding shortfall. I really am at a loss to understand how this has suddenly become about the Government using customer money to bail out creditors. I am confused about how that started.

The money will be used to cover the cost of repaying Government funding in the risk of a funding shortfall. The DEFRA Secretary of State and the Welsh Ministers do not currently have the power to require this shortfall to be repaid. The shortfall, of course, is the money that the Government may have to provide in the event of a SAR. This is unlike other sectors such as energy, in which the relevant Secretary of State has flexible powers to recover a shortfall in funding. Without this power, there is a risk that taxpayers will foot the bill for costs usually contained within the water sector. Again, that has nothing to do with creditors; it has to do with the costs that the Government could have to pay for the SAR.

Clauses 12 and 13 will therefore introduce a new power for the Secretary of State and the Welsh Ministers to modify water company licence conditions to allocate costs appropriately should there be a shortfall in financial assistance provided in a water industry SAR. The power is designed to be flexible, allowing the Secretary of State or the Welsh Ministers to recover any shortfall in funding in a manner appropriate to the circumstances. The use of the power is also subject to public consultation.

The Secretary of State will be able to decide whether or not to use the power, and to decide the rates at which the shortfall should be recovered from customers. The shortfall that we are talking about is any cost that the Government could have during the time the company is in a SAR; it has nothing to do with shareholders and creditors. The decision will include the group of customers from which it should be recovered. For example, it could be recovered from all water companies’ customers—that is, those in England—or a subset of the sector, or only customers whose water company went into a SAR.

It is possible that a decision could be taken to spread the cost of a SAR across multiple companies, such as where spending benefits are coupled in another region due to shared infrastructure. There is a well-established practice of socialising costs in the energy sector. If a SAR occurs and this power is ever required, it will allow a decision to be made and consulted on as to what the fairest cost recovery option is, based on the evidence and the circumstances at the time.

[Charlie Maynard]

I think the Minister is confirming that consumers will pay for that shortfall. We are advocating that the creditors should pay. We are not looking to rewrite the Insolvency Act. Whatever the special administrator decides in terms of the hierarchy, fine—that is up to the special administrator. I think the Minister has just confirmed what paragraph 69 in DEFRA’s explanatory notes says, which is that a company is required to

“raise amounts of money determined by the Secretary of State from its consumers”

—that is, the bill payers—for that shortfall, rather than the creditors. That is the bit that we are getting at. We think that the special administrator should take into account that hit that the Government have taken and take it out of the creditor’s pocket rather than the customer’s.

[Emma Hardy]

The hon. Gentleman has failed to acknowledge that, as I have just remarked, there is a hierarchy under the Insolvency Act when it comes to debt being repaid. The people he suggests that we take the money from might be people who, in fact, do not receive any money back. As I have already mentioned, the exact quantity of debt recouped by creditors or equity recouped by shareholders is a matter for the SAR. It is unlikely that all debt will be repaid at the end of special administration, and Government funding provided during a SAR takes priority over most creditors. In the event that there was a cost unable to be recovered from the sale of the company or from reprioritising its debt, the Government would receive their money back first and, therefore, this cost recovery mechanism for customers might not be provided before we reach some of the other creditors, and of course that is determined under the Insolvency Act. I am therefore at a loss to understand the hon. Member’s point. It would make sense if there were people who received their debt repayment before the Government, but that is not the case. There seems to be a lot of confusion about what is happening.

All that the Government are doing are providing that, in the unlikely event of the Government’s being unable to recoup costs that they could have paid during the time that a company is under a SAR, there are various mechanisms to have that repaid, all of which would be consulted upon. At the moment, as we know, that would come from the taxpayer. We are instead providing that, yes, we could still use the taxpayer to recoup that debt, or we could use the customers of that particular water company, of neighbouring water companies, or of all of England—and that would be consulted upon.

I think that the hon. Member’s confusion emanates from his being under the impression that, at the exiting of the SAR, creditors would skip off into the sunset with all the money and the Government would take money from customers. That is not the point I am making because, as I have already said, it is unlikely that all debt will be repaid at the end of a SAR and there is a specific order of priority for repayment. I will make the offer—as I did last time and made good on—to provide a fact sheet on exactly how a SAR would work so that there is no further confusion as we progress through the Bill.

I hope that the Committee agrees that the power is essential to protect taxpayers’ money in the event of a SAR.

[Charlie Maynard]

We are going backwards and forwards. I have made my point. The note here is clear—the Secretary of State is looking for moneys from the customers. I think the special administrator should follow the insolvency rules, but that the hit should come from the creditors, not the customers. I will park it there. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn. 

Question put, That the clause stand part of the Bill.

--- Later in debate ---

Question proposed, That the clause stand part of the Bill.

[Emma Hardy]

I hope this clause will be a little less fractious than the last one—it is pretty straightforward. If a water or waste water company is about to go insolvent, it can make a winding-up petition to court, as may its creditors. If the court is satisfied that the company is insolvent, it must make a special administration order, triggering a water industry special administration regime, or SAR.

Unlike in normal administration, in a SAR the administrator must prioritise the public interest ahead of creditors. In this case, that means ensuring that water and waste water services continue. However, there is no statutory requirement for creditors or the court to notify the Government or Ofwat that a winding-up petition has been made. In addition, neither the Government nor Ofwat have guaranteed rights to be heard at the subsequent court hearings. This creates the risk that a SAR could be triggered without Government involvement. Given the essential nature of water and waste water services, a SAR presents significant risk to public safety if it is not conducted appropriately. It would be vital, in the event of an imminent SAR, for the Government to be quickly made aware of important developments and to be involved in the arrangements for how the SAR is run. Creditors are unlikely to protect the public interest as comprehensively as a Government and may exercise undue influence over a SAR if a Government are unable to make their views heard.

This clause prohibits a court from making an SAO without the Government and Ofwat being notified, and it gives both parties guaranteed rights to be heard at the subsequent court hearings. That provides a vital safeguard against the risks of a SAR being triggered without Government involvement and the potential dilution of the public interests that that could entail. This also updates the water industry’s SAR to bring it into line with more recently introduced regimes, such as energy, where these rights are standard practice. I hope the Committee agrees that these rights are essential to safeguard the public interest and modernise the water industry’s special administration regime. I commend the clause to the Committee.

[Dr Hudson]

The Opposition note that clause 14 attempts to make amendments to previous legislation so that a court may not exercise powers that it currently has with regard to an application for winding up an undertaker without providing advance notice of the petition to the Secretary of State, Welsh Ministers—as appropriate—and Ofwat, and without a period of 14 days having elapsed, as outlined in subsection (2). We also note that the clause likewise grants a further power for the Secretary of State, Welsh Ministers and Ofwat to be entitled to be heard at a winding-up petition’s hearing and any other hearing that relates to part 4 of the Insolvency Act 1986.

Again, we do not wish to raise any formal objections to this particular clause, but we ask for a couple of clarifications from the Minister, if she will indulge us. First, we would like to hear the Minister articulate what benefits this particular clause brings to the Bill. I was not fully clear from her introductory remarks about the actual benefits. Secondly, does she believe that this change to winding up a water company or any other relevant undertaker will provide a fairer winding-up process?

While we are focusing on water companies and the processes for them, we all want to ensure that the clause provides, again, protection for the consumers, who, as we agree across the Committee, have for too long faced unsatisfactory levels of service from the water industry and the practices of some water companies, so could the Minister please explain whether consumers were considered when this clause was drafted? I and others have outlined in Committee that the performance of water companies in financial resilience, as well as many other matters, has not been satisfactory and has been very upsetting for the British public. Therefore could the Minister please respond and assure the Committee that there can be no unforeseen repercussions for consumers from this clause? That is a recurrent theme as we go through line-by-line scrutiny of the Bill: are there any unintended consequences whereby the taxpayer and the end point consumer will be unfairly penalised by the legislative changes? With that in mind, we have no formal objections to this clause but again we seek clarification that the end point consumer will not inadvertently suffer detriment from this legislation.

[Emma Hardy]

To be clear, this is literally just a point of process. The provision, which is not currently available in law, says that in the event of an application to the court for a SAR, the Government will be notified at the same time. The reason, as I outlined in my opening remarks, is that we do not believe that creditors are likely to protect the public interest as comprehensively as the Government. It is a mere process clause that provides that in the event of an application to the court for special administration, the Government and Ofwat need to be informed at the same time. The Government maintain the importance of ensuring that the Government and Ofwat are notified in the event of a winding-up petition. For that reason, I urge that the clause stand part of the Bill.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Clause 15

Extent, commencement, transitional provision and short title

[Tim Farron]

I beg to move amendment 20, in clause 15, page 21, line 22, leave out subsections (2) to (8) and insert—

“(2) The provisions of this Act come into force on the day on which this Act is passed.”

--- Later in debate ---

[Dr Hudson]

I support Government amendment 5, as it is a privilege amendment in accordance with the procedure for the passage of Bills between the other place and this place. We wish to raise no formal objections to this and we have no opposition to the amendment.

[Emma Hardy]

I thank all hon. Members for their contributions. Amendment 20, tabled by the hon. Member for Westmorland and Lonsdale, seeks to make all provisions in the Bill come into force on the day it receives Royal Assent. I share his urge to get on with things, which is why I am a little confused by the desire elsewhere for another water review, but we will get to that when we get to it. First and foremost, I would like to reassure the hon. Member that the Government have carefully considered the appropriate method and timing for the commencement of each clause and have made provision accordingly in clause 15. A one-size-fits-all approach cannot be justified.

For example, the emergency overflows provision will be implemented over the course of two price review periods to protect bill payers from sudden cost increases. Therefore, the commencement provision for clause 3 has been designed to allow for a staged implementation where it is needed. The Government have already committed in clause 15 to the immediate commencement of the civil penalties provisions on Royal Assent. I assure the Committee that the Government and the water industry regulators are dedicated to ensuring that all measures in the Bill are commenced and implemented as soon as possible and appropriate, to drive rapid improvements in the performance and culture of the water industry.

The hon. Member for Westmorland and Lonsdale tempts me to read through a list of every provision and when they will be enacted, but I am going to save that treat for another time and instead list the clauses, rather than going through them in detail. The provisions in clauses 5 to 8, and in 10 to 15, will all come into force automatically either on Royal Assent or two months later. Clauses 1 to 4 and clause 9 will not commence immediately after Royal Assent and will require secondary legislation to come into force, which is due to the need for regulations required to commence the powers. I am sure that the hon. Member will have thoughts to share on those provisions involving statutory instruments after Royal Assent.

I trust that the hon. Member for Westmorland and Lonsdale is reassured by the Government’s careful consideration of the commencement of each clause, which has the best interests of bill payers in mind and recognises the need to debate and discuss some of the exact details under secondary legislation. I therefore ask the hon. Member to withdraw his amendment.

Government amendment 5 removes the privilege amendment made in the other place. I like this amendment, because one of the quirks of how British politics has evolved is that we have the amendment in the Bill—I found it quite amusing. The privilege amendment is a declaration from the other place that nothing in the Bill involves a charge on the people or on public funds. It is because the Bill started in the Lords that we have to have the amendment to remove that. It recognises the primacy of the Commons, and I think it is quite fun. It is standard process for that text to be removed from the Bill through an amendment at Committee Stage.

Clause 15 sets out the extent of the Bill, when and how its provisions are to be commenced and its short title. The Bill extends to England and Wales only. As set out in the clause, the provisions of the Bill will variously come into force on Royal Assent, two months following Royal Assent, or in accordance with regulations made by the Secretary of State or Welsh Ministers. The clause makes specific provisions, such as that the commencement of clause 3 may make reference to matters to be determined by the environmental regulators.

[Tim Farron]

I am happy to accept many of the assurances that the Minister gave, particularly on the role of Government amendment 5—I learn something new every day. The Liberal Democrats retain concerns about the delay in implementation of some of the good things in the Bill. All the same, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: 5, in clause 15, page 22, line 40, leave out subsection (11).—(Emma Hardy.)

This amendment reverses the “privilege amendment” made in the Lords.

Clause 15, as amended, ordered to stand part of the Bill.

New Clause 1

Special administration for breach of environmental and other obligations

“(1) Section 24 of the Water Industry Act 1991 (special administration orders made on special petitions) is amended as follows.

(2) After subsection (2)(a) insert—

“(aa) that there have been failures resulting in enforcement action from the Authority or the Environment Agency on three or more occasions to—

(i) maintain efficient and economical water supply,

(ii) improve mains for the flow of clean water,

(iii) provide sewerage systems that are effectually drained,

(iv) comply with the terms of its licence, or

(v) abide by anti-pollution duties in the Environmental Protection Act 1990, Water Resources Act 1991, or the Environmental Permitting (England and Wales) Regulations 2016 (SI 2016/1154);”

(3) After subsection (2) insert—

“(2A) In support of an application made by virtue of subsection (1)(a) in relation to subsection (2)(aa), the Secretary of State must compile and present to the High Court records of—

(a) water pipe leaks,

(b) sewage spilled into waterways, bathing waters, and private properties, and

(c) falling below international standards of effective water management.”—(Adrian Ramsay.)

This new clause aims to require the Secretary of State to place a water company into special administration arrangements if they breach certain environmental or other conditions.

Brought up, and read the First time.

--- Later in debate ---

[Charlie Maynard]

New clause 31 would make the process of putting a company into special administration much easier and clearer. There are two steps in the provision: making it easier to apply for special administration and giving more guidance to judges on whether to grant special administration.

Proposed new section 24(1B) of the Water Industry Act 1991 states:

“Where a company which is a qualifying water supply licensee or qualifying sewerage licensee…is required, as a condition of its licence, to maintain two Issuer Credit Ratings which are Investment Grade Ratings from two different Credit Rating Agencies, and…fails to comply with that requirement, the Secretary of State must make an application to the High Court by petition under this section.”

That states that if a company does not have investment grade credit ratings, the Secretary of State will apply for special administration.

Proposed new section 24(2)(ca) of the 1991 Act states that special administration may be granted if a company

“is required, as a condition of its licence, to maintain two Issuer Credit Ratings which are Investment Grade Ratings from two different Credit Rating Agencies, and…has failed to comply with that requirement.”

That gives guidance to the judge. It says, “You’ve got to have those credit ratings. If you don’t, special administration is much more likely to be granted.”

At the moment, we have some bizarre situations. Thames Water, which I will use as my standard example, has £17 billion of debt and cash flows of £1.2 billion; its debt is 14 times higher than the cash flow it generates every year. By financial standards, that is somewhere between ludicrous and ridiculous. In an unregulated sector, the company would have gone bankrupt long ago. I believe—people may contest this—that our Government are keeping it alive because they are worried about being sued by the bondholders if they put it into special administration, because the criteria are not very clear.

If we are serious about fixing our rivers, we have to deal with the debt. We cannot spend the money our rivers require if we do not fix the debt, but we are still digging. Thames Water’s proposed £3 billion of special restructuring is going through the courts right now, so we are adding even more debt—an even bigger millstone around that company’s shoulders. Its debt will go from £17 billion to £20 billion. The Government have the opportunity to say, “That is the last Administration’s trick. We are going to do something different,” but at the moment they are not saying that. I really hope that we will change course. If we do not, all we will do is add more debt on to these companies; that will keep them alive for another 12 or 18 months, but we will be back in the same place again. Customers in Witney and in every constituency are paying through the nose just to cover the interest expenses.

Ofwat has just thrown Thames Water the great big juicy bone of a 35% price increase. That is great news for lenders, but not such great news for customers. It means that instead of 46% of my bill covering the lenders’ interest expenses, it will be only 38%, but I will be paying 35% more. I do not believe that is helping, so the purpose of the new clause is to make it easier to get water companies into special administration.

[Emma Hardy]

I emphasise to Committee members that special administration is the ultimate regulatory enforcement tool; as such, the bar is set high.

To respond to new clause 1, tabled by the hon. Member for Waveney Valley, and new clause 31, tabled by the hon. Members for Witney and for Westmorland and Lonsdale, a water company can already be placed into special administration on performance grounds where it is, or is likely to be, in serious breach of its principal statutory duties or an enforcement order—in other words, where it is inappropriate for the company to retain its licence—as set out in section 24 of the Water Industry Act 1991.

The Secretary of State and Ofwat will consider all aspects of a company’s performance and enforcement record, including environmental and financial performance, when considering whether to pursue an SAR on performance grounds. Licence breaches, such as the loss of an investment-grade credit rating, are considered as part of that holistic review of a company’s performance. Ofwat will consider the circumstances around any loss of an investment-grade credit rating to identify the actions that the company must take to address associated licence breaches.

Regulators have a range of enforcement mechanisms to ensure the delivery of performance, including environmental performance. Water companies can also be required to make clear plans to address failures. I gently point out that this Bill does an awful lot to give more powers to address environmental performance. As we have discussed, our pollution reduction implementation plans address some problems relating to pollution.

Special administration must be a last resort, as it has significant consequences for a company’s investors. If special administration could be triggered without allowing a company to rectify performance issues and licence breaches, investors would have low confidence and would not provide the necessary funding. That could create instability in the market, potentially affecting the entire sector.

Although we recognise the concern behind these new clauses and others tabled by the hon. Gentlemen that highlight concerns that the system is not working, they address the symptoms rather than the underlying causes. In October 2024, the Government announced an independent commission that would be the largest review of the water sector since privatisation. That commission has a broad scope and will consult experts in areas such as the environment, public health, engineering, customers, investors and economics.

The governance of companies and regulatory measures to support financial resilience will be covered, including the operation of existing tools, such as the special administration regime. The review will report by quarter two in 2025. The UK and the Welsh Governments will respond and consult on proposals they intend to take forward. We expect those to form the basis of future legislation to tackle the systematic issues to transform the water sector fundamentally. On that basis, I hope that the hon. Member is content to withdraw the proposed new clause.

[Adrian Ramsay]

I thank the Minister for her response. I appreciate that special administration would only happen in extreme cases. We have, however, repeated failures and neglect, including on environmental performance, from a number of water companies. That is why I wanted to make the provision explicit in the Bill that environmental neglect could be a reason for special administration. I take her point that there are reviews and wider plans underway. Although I am happy not to push this to a vote at this stage, I will take a close interest in how the situation progresses. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 2

Establishment of Water Restoration Fund

(1) The Secretary of State must, within 60 days of the passing of this Act, make provision for the establishment, operation and management of a Water Restoration Fund.

(2) A Water Restoration Fund is a fund—

(a) into which any monetary penalties imposed on water companies for specified offences must be paid, and

(b) out of which payments must be made for expenditure on measures—

(i) to help water bodies, including chalk streams, achieve good ecological status, and improve ecological potential and chemical status;

(ii) to prevent further deterioration of the ecological status, ecological potential or chemical status of water bodies, including chalk streams;

(iii) to enable water-dependent habitats to return to, or remain at, favourable condition;

(iv) to restore other water-dependent habitats and species, especially where action supports restoration of associated protected sites or water bodies.

(3) The Secretary of State must, by regulations, list the specified offences for the purposes of this section, which must include—

(a) any relevant provisions of the Water Resources Act 1991, including—

(i) section 24(4) (unlicensed abstraction or related works or contravening abstraction licence);

(ii) section 25(2) (unlicensed impounding works or contravening impounding licence);

(iii) section 25C(1) (contravening abstraction or impounding enforcement notice);

(iv) section 80 (contravening drought order or permit);

(v) section 201(3) (contravening water resources information notice);

(b) any relevant regulations under section 2 of the Pollution Prevention and Control Act 1999 (regulation of polluting activities etc) related to water pollution;

(c) regulations under section 61 of the Water Act 2014 (regulation of water resources etc).

(4) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.

(5) The provisions in this section replace any existing provision for the sums received for specified offences, including in section 22A(9) of the Water Industry Act 1991 (penalties).—(Dr Hudson.)

Brought up, and read the First time.

--- Later in debate ---

[Dr Hudson]

Yes, I was aware of that. I am acutely aware of it now and congratulate my hon. Friend on securing it. It highlights the fact that there is a lot of agreement. I am sure that his debate will demonstrate cross-party consensus on the use of nature-based solutions. We debated flood mitigation in Committee last week, but the water restoration fund is pivotal to trying to improve the situation at the local level and at the local catchment level as well.

Since being introduced by the previous Government, the water restoration fund has provided £11 million for communities to repair their local waterways and restore them to the quality that they should be at—the quality to which local communities should be entitled. At the heart of the proposal is simply this: those who are at fault for the damage done to our waterways must make restoration for it. Given the facts, I find it disappointing that, despite the cross-party efforts in the other place to enact such measures, they were not listened to by the Government. I hope that in a spirit of consensus the Government will look at that in this Session.

The arguments made by the Government in the other place were not satisfactory. They objected to the principle of ringfencing the funding and to the need for the Treasury to have flexibility in how it spends the money, but in this specific case the argument does not quite stack up. Where money comes from taxation, ringfencing is not always the most reliable way to ensure the Treasury has the spending power it needs to deliver public spending, but we are talking about something completely different. Fines are much more uncertain and provide less guarantee regarding the amount of money that they will bring in. To rely on funds such as these for day-to-day broad Treasury spending simply does not make sense.

Ringfencing penalties for the water restoration fund is a much more sensible measure that allows Governments to guarantee that they can meet a specific need. In other words, those who are at fault for harming the quality of our rivers, seas, coasts and lakes make restoration for the damage caused by their action—or inaction. Given all that we have outlined, there cannot be a more justified way of directly making restoration for damage to our previous water system than the mechanism laid out by the water restoration fund. Water companies pay the fines for the damage that they have done, and local communities that are affected are empowered to restore the precious waterways that they live near.

A finer detail of the amendment that should not be ignored is the fact that we will improve chalk streams. It is unfortunately clear that, despite the Government’s pitch to the British public that they would do better than the previous Government in protecting our waterways, their actions on chalk streams do not bear that out. It was very disappointing that over the Christmas period it was revealed that plans from the Conservatives to recover our chalk streams have been laid to one side by the Government. Given that England is home to over 80% of the world’s chalk streams, the failure to act on this issue is neglect of a vital duty to protect a not only a key part of the UK’s environment, but a feature in the environment of the world. They are a precious resource that very few countries are lucky to have access to. Members across this House represent areas with chalk streams. It is a dereliction of duty to ignore that category in the UK environment.

The plans that the previous Government proposed would have given chalk streams a new status of protection. Special consideration would have been given to watercourses in road guidance, and supporting the physical restoration of the streams as key pillars of our plan would have put chalk streams back on the road to the recovery that is needed. As the deviser of the plans has said publicly, although the Government may want to focus on chalk streams in national parks and landscapes, they risk ignoring chalk streams in most need of recovery across the country. Can the Minister explain why this vital plan of action, which was ready to go, has not been fulfilled? I hope that this decision was not based on politics. We need to look at this in terms of evidence and what is best for our environment.

[Emma Hardy]

I wonder whether there has been some confusion, given that the debate on chalk streams comes later on.

[Dr Hudson]

It is actually part of our amendment.

[Emma Hardy]

Well, have a go again then.

[Dr Hudson]

Good. We are all for talking about and raising the issue of chalk streams, but it is clear that we wanted to include that in our amendment. Our amendment will therefore be a chance to give chalk streams the attention they need from this Government. The previous Government were ready to deliver that and hand the baton over to the new Government, so that they could follow through on the explicit requirement that chalk streams be considered.

The amendment is a chance for the Government to reconsider their stance on the water restoration fund. I would be grateful for clarity from the Minister about what they are planning to do. If they are serious about improving our waterways and if the money from penalised water companies is allowed to go back into the local area to improve those waterways, we could agree about that. If the Government do not face up to this, that might be a negation of the various promises they made to the electorate when in opposition and send a message that their words are merely soundbites. I hope that the Minister will consider the points I have made and support this amendment to restore the water restoration fund—for the sake of not only our waters, but the democratic and local accountability on which they rely. We will seek to push new clause 2 to a vote.

[Tim Farron]

I rise briefly to support the new clause. Among many other reasons, it bears great similarity to one proposed by my noble Friend Baroness Bakewell. We consider everything in it to be right. As the hon. Member for Epping Forest has said, we should be deeply concerned about the Treasury seeking to hang on to money that, if there is any justice, ought to be invested back into the waterways that have been polluted by those who have been fined for that very offence.

I talked earlier about the deep sense of injustice felt across the country about those who pollute, who are getting away with polluting and who even—far from being found guilty—are getting benefits from that pollution. The measure would simply codify a move towards the establishment of a water restoration fund, supported, at least in part, by the fines gathered from those guilty in the first place. There would be a great sense of justice being done for folks concerned about how Windermere is cleaned up, how we make sure that Coniston’s bathing water standards remain high and how we deal with some of the issues I mentioned earlier on the River Lowther, River Eden and River Kent.

The water restoration fund should in part be supported by funds gained from those who are guilty: that is basic justice. We strongly support the new clause and will be voting for it if it is put to a vote.

[Emma Hardy]

I thank the hon. Member for Epping Forest for tabling new clause 2, which seeks to establish a water restoration fund in legislation. I accept his invitation to do better than the previous Government when it comes to pollution in the waterways, and welcome the low bar that they have set me.

A water restoration fund is already being established to direct water company fines into water environment improvement projects. This arrangement does not require legislation, because it exists. Defining a water restoration fund in legislation would create an inflexible and rigid funding mechanism, with the amendment requiring specific detail on the scope, operation and management of fines and money. We need to maintain flexibility in how water company fines are spent, to ensure that Government spending is delivering value for money.

The hon. Member can already see from the Bill and the discussions we have had that the cost recovery powers that we have introduced for the Environment Agency are an example of how we can ensure that water companies pay for enforcement. It is continuing to work with His Majesty’s Treasury regarding continued reinvestment of water company fines and penalties, and water environment improvement. A final decision on that will be made when the spending review concludes later this year. On that basis, I ask the hon. Member to withdraw his amendment.

Water (Special Measures) Bill [ Lords ] (Second sitting)

Emma Hardy Excerpts

Committee stage
Thursday 9th January 2025 Public Bill Committees

[The Chair]

No one was trying to catch my eye before we broke for lunch, so I call the Minister to respond.

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Emma Hardy)]

Before I start my response to this group, I just want to note that there has been considerable discussion on the monitoring of the volume of discharges during this debate. In the interests of time, I will respond to those points when we debate amendment 13 next week, if that is agreeable to everyone. I thank hon. Members for tabling the amendments relating to pollution incident reduction plans.

On amendments 23 and 25, tabled by the hon. Member for Westmorland and Lonsdale, we agree that companies should seek to reduce the impact of pollution incidents in their pollution incident reduction plans. That, of course, is the core purpose of the plans. That is why the clause requires water companies to set out the measures they will take to reduce the frequency and seriousness of the pollution incidents and their causes. The impact of a pollution incident on people and the environment will be taken into account when the undertaker determines how serious it is, as required in the pollution incident reduction plan. In fact, it would be impossible to determine whether something was serious without looking at the impact the pollution was having. These amendments are therefore not needed, and I ask the hon. Member not to press them.

I thank the hon. Member for Epping Forest for tabling amendment 9. The Government agree that national parks form a vital part of our environmental heritage and must be protected. For that reason, the Government have committed to strengthening the statutory purpose of national landscapes and national parks to give them a clear mandate to recover nature. We will also strengthen through new regulation the role that public bodies, including water companies, must play in delivering better outcomes for nature, water, climate and access to nature in these special places.

Ofwat made significant funding available to water companies in the price review for 2024 to support work to reduce pollution in national parks. As an example, Ofwat approved four storm overflow schemes related to improvements in the Windermere catchment, with potential to include 12 additional schemes via the large scheme gated process. We do not believe it is necessary to include a specific reference to national parks in clause 2. All sites, including national parks, are already in scope of the duty. Creating a statutory hierarchy of priority sites risks deprioritising other important areas such as bathing and shellfish waters. For those reasons, the Government will not support the amendment.

I thank the hon. Member for Westmorland and Lonsdale for tabling amendment 24. The Government agree that nature-based solutions are an essential tool for tackling the root cause of sewage pollution, while also delivering significant ecological benefits. That is why, in line with the Government’s strategic policy statement, Ofwat has allowed companies to increase the use of nature-based solutions with £3 billion-worth of green schemes in water companies’ final determinations for price review ’24. Although the benefits of nature-based solutions are clear, we believe their use is better supported through drainage and sewerage management plans than through pollution incident reduction plans.

Pollution incident reduction plans are intended to set out the steps that companies intend to take to reduce the frequency and severity of pollution incidents. These issues are often best addressed by monitoring and maintenance measures such as burst pipe detection, checking pumps and re-lining sewers. Drainage and sewerage management plans are intended to address the resilience of the whole sewerage network over a long period of time. That is why the Government have introduced a duty through the Bill for sewerage undertakers to consider nature-based solutions in their drainage and sewerage management plans. That will ensure that nature-based solutions are considered at the very start of the investment planning, increasing their development and potential future delivery. The amendment is therefore not needed, and I ask the hon. Member not to press it.

Regarding amendment 6, which was tabled by the hon. Member for Epping Forest, I agree that improving transparency and accountability is key to the success of pollution incident reduction plans. That is why clause 2 already requires water companies to publish the implementation report alongside the pollution incident reduction plan. Details of where and how to publish the plan and the implementation report, and in which format, may change over the years as technology and best practice evolve, so that is best addressed in the guidance that the Environment Agency is producing about how to fulfil the duty.

[Jerome Mayhew (Broadland and Fakenham) (Con)]

I am grateful to the Minister for giving way; she is being generous with her time. The problem with the position she is taking now is that it is at variance with the Government’s position and with section 81 of the Environment Act 2021. If she is right about the efficacy of leaving it to the Environment Agency to publish such information, buried in its website or its regulations, should she not also amend section 81 of the Environment Act so as to have consistency?

[Emma Hardy]

I understand the point that the hon. Gentleman is making, which is that people need to have access, clearly and simply, to as much information as possible. My point is that if we put such details into law in the Bill, the way in which we want people to access such information may change—technology or best practice may evolve—and we will have to resort to altering legislation using statutory instruments. That is why I think it is better that we look to the guidance produced by the Environment Agency as the best way to present that information, while continually evaluating how we do so. I completely understand the essence of what the hon. Gentleman is saying, however, because we all want information to be transparent and clear for everyone, and certainly not buried on a website.

To conclude, I will briefly speak to why clause 2 should stand part of the Bill. The occurrence of pollution incidents is unacceptably high and has not reduced in the last four years. Water companies must reduce pollution incidents as a matter of urgency. Currently, sewage companies in England produce pollution incident reduction plans on a non-statutory basis. These plans vary in standard, content and frequency, and that makes them hard to scrutinise. It is particularly difficult to identify the progress that companies have made on the actions that they committed to in these plans. More transparency and greater accountability are needed.

That is why the clause will require both water supply companies and sewerage companies in England and Wales to publish annual pollution incident reduction plans to address matters such as the seriousness of pollution incidents and their causes. These plans will need to set out the actions that the water companies intend to take to reduce pollution incidents, and an assessment of the impact that those actions will have.

In addition, the Secretary of State will be able to direct water companies to include other matters in the plans as needed. Moreover, companies will be required to produce an accompanying implementation report detailing the progress they have made with the measures to which they committed in the previous year. Companies must clearly explain the reason for any failure to implement their plans and set out the steps they are taking to avoid similar failure in the future. This will create a high level of transparency, enabling the public and regulators to hold water companies accountable for making the improvements that they have committed to.

Chief executives will be personally liable for the production of these plans and must approve them before publication. If a company fails to publish a compliant plan and implementation report by the deadline each year, the company or the chief executive could be prosecuted for the offence. That could result in a fine and a criminal record. This emphasises that taking action to minimise pollution incidents should be at the core of the chief executive’s role.

We believe that this provision will ensure that the right people, with the right incentives, lead water companies through the changes necessary to drive down pollution incidents. Furthermore, regulators will be required to take companies’ compliance records in relation to implementation reports into account when carrying out their enforcement duties.

I hope that all hon. Members agree with me about the importance of clause 2, and I commend it to the Committee.

[Tim Farron (Westmorland and Lonsdale) (LD)]

There are no further comments from us, and we do not seek to press to a vote any of the amendments that we have tabled. We are concerned that there is not enough detail in the Bill about the impact of pollution incidents on the wider environment, much as I am grateful to the Minister for many of the comments she has made. All the same, we will not seek to trouble the Committee with a vote at this stage, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

--- Later in debate ---

[Jerome Mayhew]

I now rise to talk about amendment 16. My primary objection here is the overarching one: I am not convinced that this is the right technical approach, for the reasons set out in the report of the Environmental Audit Committee, and also in the Environment Act 2021. However, if I am wrong on that, I am happy to support this amendment as a probing amendment and look forward to the answer that the Minister gives; but if it were to be taken to a vote, without further information about the practicality of being able to obtain the required tens of thousands of these machines, install them and have them operational and reporting in a 12-month period, I am not sure that I, as a responsible legislator, could support amendment 16. I would need further information on whether that was a practical option.

[Emma Hardy]

I thank all hon. Members for their thoughts on this set of amendments. I would also like to pay tribute to all of the citizen scientists—in fact, many Members have paid tribute to them—and the incredible work that they do as volunteers, going out there to discover the true state of many of our rivers, lakes and seas. I think we can all agree that it is vital to understand the scale and the impact of sewage discharges by ensuring that water companies install monitors on emergency overflows as soon as possible and by encouraging public access to emergency-overflow discharge statements. As the hon. Member for Broadland and Fakenham said, I think this is about us all trying to move in the same direction.

Just before I turn to the amendments, I think there may be some confusion in the debate today about the different types of monitors and the different types of discharges being discussed. There is a big difference between fully treated waste water being released from treatment outlets and the discharge of untreated sewage from an emergency or storm overflow. I am therefore very happy to share a factsheet detailing the differences in the different types of emergency and storm overflows to help inform future debates.

On amendments 13 and 14, tabled by the hon. Member for Westmorland and Lonsdale, clause 3 requires water companies to provide information on the frequency and duration of discharges from emergency overflows in near-real time. Combined with the equivalent duty for storm overflows, which has just come into force, that will ensure that all sewage overflows on the network are monitored. That will enable regulators and the public to see, in near-real time, when a discharge from any overflow has occurred, and how long it has lasted for. Water companies will use that information to prioritise investment to mitigate the impact of the most polluting overflows, as guided by the regulator.

However, the monitors required to measure volume are much more difficult and costly to install compared with those used to monitor discharge duration. By comparing that with the cost of installing flow monitors at waste water treatment works, we estimate the cost of installing flow monitors on all 18,000 storm and emergency overflow sites in England to be up to £6 billion. Network overflows are not set up for flow monitors to be installed, which means that the majority of overflows would require complex works, such as pipework modifications, in order for monitors to record volume accurately. We do not think this added cost is proportionate to the additional value that volume information would provide, especially given that volume information alone does not provide a comprehensive account of the impact of a discharge. For example, a very small volume of very concentrated foul water could enter our rivers, which would be very damaging, or a large volume of diluted rainwater overflow. Volume cannot give an accurate assessment of impact. The measurement of water quality, as the hon. Member for Broadland and Fakenham has said, is required.

[Charlie Maynard]

Would the Minister be willing to give information on the breakdown of that £6 billion? That would be very helpful. Also, I think we are all in agreement and of course we want to know the quality. As has been said, if that is the case, surely the plan is to go there. By all means, have flow meters with the quality meters installed, rather than not going there. I think the Minister was proposing not putting in flow meters and not putting in any quality meters either, or is she planning on putting in flow and quality meters? If so, when and how?

[Emma Hardy]

I am very happy to give a breakdown of the numbers that we have worked out. To reiterate the point I made before the intervention, that is why the Government believe that it is the measurement of water quality that is required. Water companies have been instructed to begin installing continuous water quality monitors for storm overflows and waste water treatment works from April 2025 onwards, so they have been told to put in those water quality monitors from April 2025. That will provide further information on the impact of sewage discharges on water quality. On that basis, I hope that the hon. Member for Westmorland and Lonsdale will see that amendment 13 is not needed and feels able to withdraw it.

[Charlie Maynard]

The Minister said from 2025, which is great, but over what timeline? Is that the Library’s 10 years, or is that another timeline?

[Emma Hardy]

I want to make sure that I am not giving the hon. Gentleman inaccurate information, so I will find out the answer to his question and return to it, if that is okay. I do not want to give him the wrong information. The main point we are making is that it is not the volume that is having the impact; it is the toxicity. We think that, by focusing on measuring water quality, we can accurately see the damage being done to our environment by what is being discharged, and I think that is the point. If we are choosing where to put the monitors, we think that focusing on water quality and how damaging it can be is more important than focusing on how much there is.

[David Reed (Exmouth and Exeter East) (Con)]

We talk about citizen scientists and the hard work they have to do to uncover what is going on within the data. We are talking about putting lots of different monitors on lots of infrastructure up and down the country, which is going to spew out lots of different information that is going to be quite hard to dig into. Could the Minister give a view on whether there will be an approach to the standardisation of data, to make it easier to view for people?

[Emma Hardy]

The hon. Member is pre-empting my responses to the next amendments on transparency, which I am just about to turn to. Before we move on from volume, I re-emphasise the point. This is something that I looked at seriously because a number of colleagues have spoken to me about it, so I really do not want hon. Members to feel like it has been dismissed out of hand—I did look at this seriously. One of the other points made to me was about lots of the pipes being different sizes. If we are going to be able to calculate the volume, we have to be able to calculate the size of the pipe, which might require standardising the size of all pipes to work out the volume coming through them, so we can measure how much is coming out at one moment.

That is where we get to the £6 billion figure; it is not just the cost of putting the monitors on but ensuring that, if we are measuring the amount of sewage flowing past something, we can understand the size of it. The hon. Member for Witney is looking at me and I can see that I have work to do to convince him of this. I am probably doing a complete injustice to the person who explained this all to me, but I will ensure that the hon. Member gets a proper explanation. The upshot of the conversation was that this is going to be really expensive, and what we all want to know is: how damaging is what is coming out of those pipes to our environment? That is why we are focusing on water quality. [Interruption.] I have had inspiration from behind me and an answer to the question of when continuous water quality monitoring will be rolled out. They have requested to begin installing continuous water quality monitors at 25% of storm overflows and sewage treatment works outlets at price review 2024. The sites selected for the first stage of roll-out have been prioritised to include sensitive sites such as chalk streams.

[Jerome Mayhew]

I do not want to steal the thunder of the hon. Member for Witney, but he has a good point on the speed of roll-out of the installation of water quality monitors. The 2024 price period is for five years, I believe. That suggests installation in 25% of the monitoring areas over a five-year period. If I am wrong on that, I would be very grateful if the Minister could correct me. What I am really interested in is how quickly the full network will be installed and what is preventing that from happening faster.

[Emma Hardy]

I feel as though we are comparing apples and pears here. The point I was making about the 25% at the next price review was around water quality monitors. The hon. Gentleman was talking about the monitoring on emergency overflows, and he was referring to the data on the speed at which they would be installed.

[Jerome Mayhew]

The Minister may be right, but it is important that we get to the bottom of this. From my perspective, the important data is the upstream and downstream of a discharge pipe water quality monitor being installed and activated. I would be very grateful if the Minister could set out during the course of the next hour and a quarter, either because she knows it off the top of her head or because her officials can give her the answer, the timeframe for those installations and the reasons why it is not happening faster.

[Emma Hardy]

I think the hon. Gentleman is probably moving on to amendment 16 with his point about the speed at which these were being rolled out. We were discussing amendments 13 and 14. That is where the confusion lies in this conversation. I will address the points about speed when we move on to amendment 16 —it is all to come.

I turn now to amendments 3 and 15, which were tabled by the hon. Member for Beaconsfield and the hon. Member for Westmorland and Lonsdale respectively. Clause 3 already requires companies to publish information on discharges in a readily accessible and understandable format. That includes information on the occurrence, location and start time of the discharges, which must be published within an hour of the discharge starting. To meet this requirement, water companies will install monitors that have telemetry technology to communicate discharges as they occur. To the point the hon. Member for Broadland and Fakenham made, that information cannot be falsified. It is not based on someone coming; it is automatic communication.

Those requirements are the same as those for publishing storm overflow discharges, which is now a statutory duty enforced by Ofwat. Water companies have already published individual maps for their regions to show storm overflow discharges in near real time. In addition, Water UK launched a national storm overflow hub in November last year to centralise all discharge information from water companies on a single national map. We expect that a similar approach will be taken for emergency overflows. If further direction for companies on how to approach the duty is needed, that can be more appropriately addressed through guidance. Furthermore, validated historical information on discharges from emergency overflows will be available through annual returns published by the Environment Agency. Those will allow for long-term trends in annual data to be analysed. If there are any specific requests from groups or organisations about how they would like to see information, they are of course welcome to communicate that to me.

[Charlie Maynard]

We are here for another week or so. I take the point about apples and pears, but if the information is already in DEFRA’s hands, would it be helpful, if DEFRA can move fast enough—I do not know whether that is possible—to have a little grid circulated to Committee members about storm and emergency installation periods, whether that is quality, flow or EDM? With that data we could talk about it decently and honestly.

[Emma Hardy]

I think that might be really helpful. It has been an interesting but slightly muddled conversation. We were going to produce a factsheet to explain the difference between emergency and storm. Maybe we can include as much information as we can for Committee members by the end of Committee or before Report, if that does not put too much on my hard-working officials.

On the annual data being analysed, the proposed amendments are unnecessary and I ask hon. Members not to press their amendments. On amendment 16, which was also tabled by the hon. Member for Westmorland and Lonsdale, and which is about the speed of delivery, the need to deliver the installation of monitors on emergency overflows must be balanced with practical constraints and with due consideration for the cost of rolling out so many monitors, especially as those costs are ultimately passed to consumers through water bills.

Water companies have been instructed to install monitors at 50% of emergency overflows by 2030. This represents a doubling of the previous Conservative Government’s target of 25% of emergency overflows monitored by 2030. The Environment Agency will agree with water companies which emergency overflows will have monitors installed over the next five years based on priority areas, such as those that impact designated bathing and shellfish waters. As set out in the impact assessment, we expect the roll-out of monitors at emergency overflows to cost £533 million over a 10-year period. We believe that pace of roll-out strikes the right balance of recognising the urgency—this Government are doing double what the previous Government promised—while ensuring that companies have the capacity to progress other improvements and balancing customer bill impacts.

To speak frankly, it is very important to monitor, but it is also very important to fix the causes of some of the problems that we see. There is always a balance between monitoring and fixing the problem, and we believe that we have got that balance right.

Requiring a faster roll-out of monitors could undermine the delivery of other improvements that water companies must make in price review 24—I would not want to be in a situation at the end of the price review where we monitor everything and fix nothing. That includes upgrades to wastewater treatment works and sewerage networks to reduce sewage discharges from storm overflows. Where companies can move further and faster to achieve the roll-out of monitors at emergency overflows, they will of course be encouraged to do so, but we cannot accept this amendment to require water companies to install all monitors within 12 months. I therefore ask the hon. Member to withdraw it.

[Tim Farron]

I am grateful to my hon. Friend the Member for Witney for his detailed points and for the Minister’s replies to them. We will not seek to press the majority of the amendments to the vote. Nevertheless, we stand by all that we have said and we do wish to press amendment 13 to a vote. The reality is that duration monitors only do so much good. Asking for volume to be added to duration is not to the exclusion of quality. In fact, it is part of an attempt to try to get to the bottom of it. Again, off the top of my head, earlier last year there was a sewage overflow into Coniston Water from 22 August, which lasted just over a week, and a sewage overflow around Easter time in Windermere, which lasted a matter of hours. The former was more of a trickle—still unacceptable—and the latter was a deluge. The difference in terms of quality was significant as well as in terms of volume. We therefore ask that the Committee considers amendment 13, which we seek to press to a vote.

Question put, That the amendment be made.

--- Later in debate ---

The previous Government gave stronger powers of enforcement to Ofwat and the Environment Agency, including removing limits on the amount that water companies could be fined for violating water pollution laws and creating new powers that ban big bonuses and payouts to chief executives of water companies that have failed to do the right thing. We also drove through an increase in the number of inspections that water companies can expect to see—from 4,000 a year by April this year to 10,000 a year by April next year. Introducing a criminal offence for violation of emergency overflow reporting duties will enable us to expand upon that exact approach, which creates positive change in water quality. I commend the amendment to the Government and the Committee.

[Emma Hardy]

I thank the hon. Member for Beaconsfield for tabling amendment 4, which seeks to make a failure to publish discharge data from emergency overflows in near-real time a criminal offence.

I wholeheartedly agree that it is vital that regulators have a clear means of ensuring that water companies comply with this duty. However, clause 3 already ensures that the duty is enforceable by Ofwat under section 18 of the Water Industry Act 1991, which provides a range of tools—including significant fines—for Ofwat to bring companies into compliance. Changing the provision to a criminal offence might slow down enforcement, because criminal prosecution is typically slower than enforcement by section 18 of the 1991 Act.

In addition, we do not believe that in this case it would be proportionate to create direct criminal liability for a chief executive, particularly the potential sanction of imprisonment, because the large number of emergency overflows operated by companies, with each company operating in a different situational context, means that it is unreasonable to hold a single person to account for full compliance with the duty. By making changes such as introducing bonus bans and provisions to support prosecuting executives for obstructing the regulator, the Bill already strengthens provisions to hold executives to account for wrongdoing.

[Dr Hudson]

I thank the Minister for her comments. I can confirm that we will not push the amendment to a vote. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Dr Hudson]

I beg to move amendment 10, in clause 3, page 9, line 38, at end insert—

“141H Restriction on the use of emergency overflows in areas used for aquatic sports

(1) A sewerage undertaker must not permit a discharge from an emergency overflow in an area used for aquatic sports.

(2) In this section, an ‘area used for aquatic sports’ is a section of any body of water connected to and within a one mile radius of—

(a) the clubhouse of a rowing club affiliated with British Rowing,

(b) a Royal Yacht association training centre or the clubhouse of an affiliate member, and

(c) the properties or facilities used by any organisation that the Secretary of State deems to provides water-based sporting activities for the purpose of teaching, training or leisure.

(3) If a relevant undertaker fails to comply with its duties under section (1)—

(a) the undertaker commits an offence, and

(b) the chief executive of the undertaker commits an offence, subject to subsection (5).

(4) It is a defence for the chief executive to prove that they took all reasonable steps to avoid the failure.

(5) A person who commits an offence under this section is liable, on summary conviction or conviction on indictment, to imprisonment for a term not exceeding 5 years or an unlimited fine, or both.”

This amendment creates an offence for a sewerage undertaker to use an emergency overflow in an area used for aquatic sports.

I will try not to mention teeth in this part of our proceedings, but I cannot promise. It is with great pleasure that I rise to speak in favour of amendment 10, on behalf of my hon. Friend the Member for Beaconsfield —this is sounding like “Groundhog Day”, isn’t it? The amendment has a simple principle: that waters used for aquatic sports should be subject to the same protections as those used for bathing. It establishes that there should be clear consequences for water companies and their chief executives when they fail to comply with a clear duty to protect the waters in which people practise aquatic sports.

Aquatic sports are an important part of our sporting heritage in this country, but the impact of overflow discharges into our waterways and rivers is potentially creating an existential risk to some sports clubs up and down the country. We have heard reports of increased incidences of illness among participants as a direct and indirect consequence of exposure to pathogens and bacteria from sewage outflows in the waterways where they practise their water sports. That is a significant cause for concern for our rowing, sailing, canoeing and other aquatic sports clubs.

Many clubs take their duty of care very seriously indeed. They are having to put in place their own monitoring systems to protect their participating members. Training sessions, competitions and regattas are all facing potential cancellation, and participation in those sports risks becoming less attractive and less available to people. We can all agree that actively participating in sport and physical exercise is so good for not only our physical health, but our mental health. Any deterrents discouraging people from being involved in some sports are deeply regrettable.

The amendment is trying to put the safety of the waters used for aquatic sports on the same basis as those where people bathe. It is time for water companies to take responsibility for ensuring that those waters are safe to use. The amendment sets out a reasonable expectation that a water company must not discharge from an emergency overflow within a one-mile radius of an area used for aquatic sports. The definition of such an area is clearly outlined, and further discretion is provided for the Secretary of State to determine such areas where needed. The consequences for water companies and their chief executives for failure to comply with this duty are set out clearly and are consistent with amendment 4, also tabled by my hon. Friend the Member for Beaconsfield.

[Emma Hardy]

I thank the hon. Member for Beaconsfield for proposing amendment 10, which seeks to make it an offence for sewage undertakers to use an emergency overflow in areas used for aquatic sports. I will mention how much I enjoyed meeting the Clean Water Sports Alliance just last week to hear about its fantastic work to get us all up, out and active, although I have so far resisted the temptation to don a wetsuit and join in.

I agree that it is vital for us to reduce the impact of sewage pollution, so that our children and their children can make the memories that we did enjoying our waterways. However, we do not believe that the amendment is necessary. It risks duplicating existing requirements to limit pollution for emergency overflows, as well as protections for bathers that are already in place. Emergency overflow discharges are permitted only in very strict circumstances and as a last resort, such as in the event of mechanical breakdown or a downstream blockage. That factsheet on the different circumstances might help.

Should an emergency overflow discharge occur outside permit conditions, the Environment Agency is able to take robust enforcement action, including fines and criminal prosecution. The measures in the Bill will increase transparency around emergency overflow discharges, shining a light on where they should not be happening.

[Tim Farron]

I want to point out something that is probably blindingly obvious, because I want to support the hon. Members for Epping Forest and for Beaconsfield. When emergency overflows happen in rivers near places where people may engage in aquatic sports, that is one thing and it is unacceptable, but it is worth bearing the lakes in mind—I will pick Windermere for an example. A drop of water that enters the north end of the lake takes nine months to pass through the River Leven and out into Morecambe bay. The consequences of an overflow in a lake—in the Lake district or elsewhere—are so much greater than in other waterways. I also have 30 outdoor education centres in my constituency, many of them on lakes. They are much more affected by overflows than any other form of spillage, which is why I think the amendment is worth pursuing.

--- Later in debate ---

[Emma Hardy]

As I say, I wholeheartedly agree with the intention behind the amendment, but I note that later on we will be discussing the importance of chalk streams as well. The amendment would create a hierarchy between what is important and what is not. My argument is that emergency overflows are a problem wherever they are, and they should not be used unless it is, as the Bill says, an absolute emergency.

Measures in the Bill will increase transparency around emergency overflow discharges, shining a light on where they are happening. Although emergency overflow discharge should occur only very rarely—when it says on the tin; it should be an emergency—it is not possible to eliminate them altogether, as they are important safety valves to protect businesses and home in time of emergency. Removing or blocking emergency overflow outlets could lead to excess effluent waste water being released elsewhere, including through manholes. That would have significant safety implications.

Significant protections are in place for designated bathing waters both inland and on the coast. The Government consult on and designate our bathing waters. The Environment Agency monitors them to ensure that the health of bathers is protected, and to assess what action is needed to improve water quality. Once designated, water companies are required to investigate and improve bathing water sites, including with upgrades and improvements to overflows where needed. As part of the storm overflow discharge plan—those are obviously different from emergency overflows—by 2035 water companies will have improved all storm overflows that are discharging near every designated bathing water. We have also recently consulted on reforms to the Bathing Water Regulations 2013, including expanding the definition of “bathers” to include other water users.

A Government response to the consultation will be issued in due course, and if reforms are taken forward in future, that could mean that more bathing sites, including those used by aquatic sport users, will be subject to improvements. As such, we do not believe that the amendment is required.

[Dr Hudson]

I thank the Minister for her comments and for acknowledging the importance of the safety of the waters in which people practise water sports. I also thank the hon. Member for Westmorland and Lonsdale for supporting that concept—we must try to keep these waters safe. I confirm, happily, that we will not be pushing the amendment to a vote.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to consider new clause 25— Duty on sewerage undertakers to monitor overflows at sewage treatment works, pumping stations and on the sewer network—

‘(1) The Water Industry Act 1991 is amended as follows.

(2) In section 94—

(a) after subsection (1)(b) insert—

“(c) to make provision for the accurate collection of data relating to its performance in fulfilling its duties under paragraphs (a) and (b).”

(b) after subsection (2) insert—

“(2A) In performing its duties under subsection (1)(c), a sewerage undertaker must—

(a) install volume flow meters in all locations where sewage overflows occur, including sewage treatment works, pumping stations and on the sewer network for which it is responsible;

(b) establish appropriate required capacities for each sewage treatment works and pumping station;

(c) publish information on the data and calculations used to establish such required capacities; and

(d) install all required monitoring tools within 12 months of the passing of this Act.”’

[Emma Hardy]

Thank you, Mr Vickers, for the opportunity to speak about the importance of clause 3. Monitoring and reporting on discharges from sewage outlets provides important transparency around the frequency and duration of sewage discharges, to support enforcement action and policy development and to direct investment to reduce discharges. English water companies have installed monitors at 100% of storm overflows. Near real-time information on storm overflow discharges in England is available on company websites and the national storm overflow hub, which provides a national map of all storm overflows. However, emergency overflows are currently not fully monitored, and data from emergency overflows is not published in near real-time.

There are 7,000 emergency overflows in England, and it is vital that we better understand the frequency and duration of those discharges so that action can be taken to reduce the harm they cause to the environment. The clause will close the monitoring gap across sewage outlets by requiring that discharges from emergency overflows be published within an hour. The near real-time information on discharges from emergency overflows will be independently scrutinised by the regulators, making it easier and quicker to investigate and punish wrongdoing. That information must also be published in a format that is both accessible and understandable to the public. If there are any specific requirements regarding that information, we can of course pass that to the Environment Agency.

To support implementation of this measure, we have instructed English water companies to install monitors at 50% of emergency overflows by 2030, and 100% by 2035. During implementation, monitors will also be independently certified to ensure that they are correctly installed and maintained at emergency overflows. I hope the Committee agrees that that duty is essential to meet our manifesto commitment of ensuring independent monitoring of every sewage outlet.

I turn to new clause 25, tabled by the hon. Member for Westmorland and Lonsdale. We agree that it is vital to understand the scale and impact of sewage discharges. That is why clause 3 requires water companies to provide information on the frequency and duration of discharges from emergency overflows in real time. I look forward to hearing what the hon. Member has to say about the issue. I will respond to and provide reassurances about the amendment in detail in my closing speech.

--- Later in debate ---

[Darren Paffey]

I share my hon. Friend’s shock and disgust at not only what people are suffering, but the entirely avoidable reasons why people are becoming ill. There are so many benefits to what the clause and the wider Bill can achieve, not just on the issues that Members on both sides of the House have mentioned in relation to trust in our water companies and the use of public money, but for public health. How much more public health benefit could people across all our constituencies experience if they were able to engage with aquatic sports or just enjoy the park areas that surround so many of our rivers, beaches and waterways? I entirely agree with my hon. Friend and am grateful that her point adds even more weight to why this clause is absolutely necessary.

[Emma Hardy]

I thank all Members for their contributions to the debate on clause 3. I reiterate my promise to provide a factsheet and information about the numbers we have used. We have had an interesting debate about the different types of monitors. To clarify, we have emergency overflows, storm overflows, water quality monitors, event duration monitors and volume monitors, which we have discussed. We will make sure that the factsheet provides clarification so that we are all on the same page and understand the debate clearly.

Putting all that to one side, I think we ultimately all agree that it is important to better understand the frequency and duration of discharges from all the emergency overflows. We all think we need to improve transparency and inform investigations by the regulators into potential non-compliance.

Combined with the equivalent duty for storm overflows, which has just come into force, clause 3 will ensure that all sewage overflows on the network are monitored. That will enable regulators and, importantly, the public to see, in near real time, when a discharge from any overflow has occurred and how long it lasted. Water companies will use that information to prioritise investment to mitigate the impact of the most polluting overflows, as guided by the regulators. We have discussed our concerns about volume monitors being more difficult and costly to install. I gave a rather garbled explanation of the difficulty owing to the pipework in the majority of overflows requiring modification. As I said, I will provide further information on those numbers.

Such a large programme of work would take much longer than 12 months. We do not think that this added cost is proportionate to the additional value that volume information would provide, especially given that volume information alone does not provide a comprehensive account of the impact of a discharge—measurement of the water quality is required for that. To repeat a point, I do not want to be a Minister in a few years’ time who has perfected the art of monitoring and done nothing to deal with the causes. That is why the water companies will begin installing continuous water quality monitors for storm overflows, as set out in the price review ’24, to provide further information on the impact of sewage discharges on water quality.

New clause 25, tabled by the hon. Member for Westmorland and Lonsdale, would require capacities for each sewage treatment works and pumping station to be calculated. That is unnecessary because that information is already included in environmental permits and available from the Environment Agency’s public register. The new clause also proposes a general duty for water companies to collect data relating to their performance operating a sewerage system. We do not believe that that broad duty adds any meaningful requirement on water companies beyond their existing duties through the environmental information regulations.

On that basis, I commend clause 3 to the Committee and ask the hon. Gentleman not to press his new clause.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Clause 4

Nature-based solutions

[Tim Farron]

I beg to move amendment 26, in clause 4, page 10, line 4, leave out—

“use that is to be made of”

and insert—

“priority that is to be given to”.

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Even more so, proposed new section 17FC(2) of the Water Industry Act 1991 explicitly states that Ofwat cannot take any steps that discourage any water company from investment in nature-based solutions. By making such an explicit statement, we are ensuring that the regulator does all that it can to advance the nature-based solutions that can make a real difference. Given all that, we encourage the Government to look at the new clause closely, and if they are not keen to support it, to explain why not and what they are going to do with nature-based solutions. We feel that this particular constructive amendment is complementary to the clause. We would like to hear from the Minister, but notwithstanding that, we will be likely to take this to a vote.

[Emma Hardy]

I thank all hon. Members for their thoughtful contributions during this debate and the careful consideration of the amendments tabled to clause 4. We are in danger of having a bit of a love-in with so much agreement in this room.

I turn first to amendment 26, which was tabled by the hon. Member for Westmorland and Lonsdale. I was genuinely really pleased to see clause 4 added on Report in the Lords, as a result of the collaborative cross-party approach to strengthening the Bill so that it further encourages greater use of nature-based solutions by water companies, and I appreciate the kind comments from the Opposition spokesperson, the hon. Member for Epping Forest. This is why clause 4 requires sewerage undertakers to address, in their drainage and sewerage management plans, the use that is to be made of nature-based solutions in their networks.

Sewerage undertakers already have existing obligations under section 94A of the Water Industry Act to address the sequence and timing for the implementation of measures proposed in their drainage and sewerage management plans. We believe that these obligations sufficiently require sewerage undertakers to address the relative prioritisation of the proposed measures in their plans. Nature-based solutions are one of a diverse range of potential solutions to complex drainage and sewerage issues. Clause 4 will ensure that sewerage undertakers highlight the proposed role of nature-based solutions within their network. It is right that undertakers have due flexibility to consider the full range of solutions available to them and to work with stakeholders to identify the right solutions.

As much as I love nature-based solutions—and so does everyone in the room, it appears—I am sure we all accept that it is not appropriate to prioritise nature-based solutions ahead of other available options in every circumstance. We believe, however, that the provisions in clause 4 will have sufficient positive effect in supporting greater exploration and development of nature-based solutions without posing operational challenges for the sewerage undertakers. On that basis, I ask the hon. Member for Westmorland and Lonsdale to withdraw his amendment.

Moving to new clause 5, which the hon. Member for Epping Forest tabled, I take this opportunity again to agree and emphasise that the Government think that nature-based solutions are critical to ensuring that we have a resilient and sustainable sewerage system. I am therefore delighted to inform the House that we have recently seen the regulator doing just that. In its final determinations for the 2024 price review, Ofwat has set out an allowance of £3 billion for water company investment in nature-based solutions and biodiversity. That includes £2.5 billion to reduce storm overflow spills through green solutions.

However, the Government have noted the concerns and amendments in the other place, which is why we introduced our amendment to place a new requirement on sewerage undertakers to support the greater use of nature-based solutions, which now forms clause 4. Clause 4 will ensure that nature-based solutions are considered from the start of investment planning and decision making as a solution across multiple risks, including pollution, flooding and drainage. I trust that the hon. Member is therefore reassured that his new clause has already been provided for. On that basis, I ask him not to push his new clause to a vote.

Although I have outlined some of the merits of clause 4, I will briefly reiterate why this Government consider the clause to be an essential part of the Bill. Nature-based solutions are vital to protecting the environment and the wider water system, as well as delivering co-benefits including protection from flooding for the public and enhancing the natural environment. I concur with the comments made about flooding by the Opposition spokesperson. Clause 4 will drive further exploration and development of nature-based solutions, and will require undertakers to be transparent as to how they have deployed, or propose to deploy, nature-based solutions within their drainage and sewerage networks. Compliance with that duty will be monitored by Government and regulators.

Sewerage undertakers will also be required to conduct public consultations on their drainage and sewerage management plans, which will allow the public to scrutinise the plans and propose changes. Therefore, to help realise the Government’s desire to see further development of nature-based solutions by sewerage undertakers, I commend clause 4 to the Committee.

[Tim Farron]

I will add to the words I have already said, but not by very many, I promise. The simple bottom line of our proposal is that nature-based solutions offer great value for dealing with sewage. As has been mentioned on both sides of the Committee, they also have a significant impact on flood prevention. I am bound to crowbar this in, but it is a reminder that among the things that we should be enormously grateful to those who work our uplands—our hill farmers—for is that their work, if we support them properly, prevents people who live in towns, villages and cities from being flooded.

Another part of the Department for Environment, Food and Rural Affairs brief is the environmental land management scheme, and how we can look to further support those working in the uplands—our land managers and our upland farmers, both tenants and owners—to be able to deliver those nature-based solutions to protect millions of homes and avoid billions of pounds of damage, as well as being part of the solution to dealing with sewage.

We will not seek to press the Committee to a Division. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4 ordered to stand part of the Bill.

Clause 5

Impeding investigations: sentencing and liability

Question proposed, That the clause stand part of the Bill.

[Emma Hardy]

Thank you, Mr Vickers, for the opportunity to speak on the importance of clause 5. The clause strengthens the penalty for obstructing the investigations of the Environment Agency, Natural Resources Wales and the Drinking Water Inspectorate. Obstruction of investigations by the regulators is already an offence, but that has not stopped companies blocking the regulators’ investigations.

In 2019, the Environment Agency prosecuted a number of individuals at Southern Water for removing evidence from the possession of officers. I am sure Members will agree that such behaviour is unacceptable. Currently, the offence of obstructing the Environment Agency and Natural Resources Wales’s investigatory powers—under section 108 of the Environment Act 1995—is punishable only by a fine, and can only be heard in the magistrates court. There is also no mechanism for prosecuting executives where obstruction of those powers occurs under their guidance.

The offence of obstructing the Drinking Water Inspectorate is already triable in the Crown court. That too, however, only carries a maximum penalty of a fine. I am sure Members will agree that it should never be preferable to accept a fine rather than face the full consequences of lawbreaking, and where lawbreaking occurs with their involvement, executives should be held accountable. Clause 5 makes the offence of obstructing the Environment Agency and Natural Resources Wales’s powers under section 108 of the 1995 Act triable in the Crown court. It expands the maximum penalty for obstructing Environment Agency, Natural Resources Wales and Drinking Water Inspectorate investigations to be up to two years’ imprisonment for conviction on indictment.

Clause 5 will address a notable justice gap and further deter the offence of obstruction. In turn, it should better enable our regulators to carry out their investigations uninhibited and hold water companies to account accordingly.

[Jerome Mayhew]

Will the Minister give way?

[Emma Hardy]

I am just about to finish. On the basis of what I have said, I hope that clause the clause can stand part of the Bill.

[Jerome Mayhew]

I think this is technically now a speech rather than an intervention. I am supportive of the content of the clause, but I have one technical question: if we choose to move a penalty from a fine to imprisonment, there has to be a person to apply that penalty to, rather than a body corporate. The question that obviously arises out of that is: is it the intention of the Government to apply the penalty to the controlling mind, or to a member of an organisation who may be several layers below that of the controlling mind? Who is it intended that the criminal offence should be applied to, and how will the Government ensure that there is no misunderstanding and uncertainty based on the current drafting? It is not at all clear.

[The Chair]

We will assume that that was an intervention, and I will give the Minister a chance to respond.

[Emma Hardy]

Individuals can already be prosecuted, under section 110 of the Environment Act 1995, for obstructing Environment Agency investigations. However, that legislation does not allow executives to be prosecuted where obstruction has occurred with their consent or connivance or is attributable to their neglect. The Bill will remedy that omission by adding a consent, connivance or neglect provision to the Act, meaning that executives or other relevant officers may face imprisonment if obstruction occurs as a consequence of their actions.

[Dr Hudson]

The Opposition have no formal objections to the clause, but I do have a couple of clarifying questions. I realise I am getting into territory with which I have no familiarity. I am not a lawyer; I am a veterinary surgeon. When we are changing offences to make them more criminal, there are implications for the courts and for individuals. Although expanding the options available to the court when sentencing offenders who have not followed the rules is welcome, how have the Government ensured that the offences are clear, so that those who commit them face the full punishment if and when required?

In terms of modelling the potential impact downstream, what work have the Government done to look at the situation retrospectively? If this provision had been law over the last few years, how many offenders would have been caught by it and potentially imprisoned? I realise that that is quite a technical question, but I wonder if the Government have looked at that at all. When we bring in laws, we need to ensure that we are aware of their implications and know how the legal and judicial system can exercise them. However, we have no formal opposition to the clause.

[David Reed]

I want to raise one minor point. Public confidence in us restoring our water systems is the reason we are here, scrutinising this Bill. Feargal Sharkey—a main campaigner who many people up and down the country listen to—recently wrote an article saying that no water boss would ever go to prison as a result of this legislation. Will the Minister comment on that to give confidence to people watching this proceeding?

[Emma Hardy]

I am obviously a bit of a fangirl of Feargal Sharkey, not least because of his musical career before entering the field of environmental campaigning.

We do not expect this measure to materially impact on court case numbers. The intention is to deter offending. Not all cases will go to the Crown court, but it is right that that is a possibility. Obstruction of the Environment Agency’s emergency powers, under section 108 of the Environment Act 1995, is already triable in the Crown court. The EA will consult on updating the enforcement sanctions policy to ensure that that is absolutely clear. Although this is not a new offence, we are talking about changing the maximum penalty because of the justice gap that I have mentioned. Previously, it was punishable only by fine and heard only in the magistrates court, and we are moving it to be punishable in the Crown court and including a prison sentence.

I am pleased that there is lots of agreement on the importance of the clause. We are talking about something very serious: obstructing the Environment Agency or the Drinking Water Inspectorate in going about and collecting the evidence that they require. This is a serious matter, and it deserves a serious penalty. I thank hon. Members for their views on the clause, but nothing that has been said detracts from the importance of addressing the justice gap. I am pleased that there is agreement, which has, on occasion, has been exploited by water companies. I commend the clause to the Committee.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Clause 6

Civil penalties: modification of standard of proof

Question proposed, That the clause stand part of the Bill.

[Emma Hardy]

Regulators can currently impose civil penalties where they are satisfied beyond reasonable doubt that an offence has been committed. The civil penalties are imposed by the regulators, rather than through the courts. The criminal standard of proof is appropriate for severe offences—for example, where there is a major impact on human health, on quality of life or on the environment. A high investigatory burden is not proportionate for minor to moderate offences that have a lower impact. Clause 6 will allow these offences to be enforced more quickly, cost-effectively and proportionately by enabling penalties to be imposed using the civil standard of proof, which is

“on the balance of probabilities”.

The penalties will be in addition to existing enforcement options that can be imposed only using the criminal standard of proof, including prosecution and unlimited variable monetary penalties, which will remain unchanged. Of course, the most serious cases will still require criminal proceedings. The Government will consult on the specific offences for which the civil standard of proof may be used and on the cap for the new lower standard of proof for variable monetary penalties. There are no plans to remove unlimited penalties for severe offences. Parliament will then debate and vote on secondary legislation before any changes are made.

The clause will strengthen the power of the water industry regulators, driving improved performance in the sector, and I commend it to the Committee.

[Dr Hudson]

I note that clause 6 would grant the Secretary of State and Welsh Ministers the power to introduce secondary legislation concerning fixed and variable monetary penalties, as confirmed by the Regulatory Enforcement and Sanctions Act 2008. It would likewise change the condition of imposing these penalties from “beyond reasonable doubt” to

“on the balance of probabilities”.

Although His Majesty’s Opposition have no problems with the clause, we believe it would be beneficial for the Minister to make some clarifications to aid the reading of the clause in the future. First, how often does the Minister think that secondary legislation may be required for the fixed monetary penalties? During the last Government’s period in office, we knew that sometimes penalties needed to be adapted to get regulation of our water industries right. As I discussed in previous debates, the Conservative Government saw fit to amend the amount that water companies could be fined for violating the water quality rules.

As was also mentioned earlier, Baroness Hayman in the other place highlighted the importance of flexibility in changing rules on the water industry. The Opposition agree that flexibility is important, but for there to be flexibility, there also needs to be consistency, and awareness and monitoring of the issue so that we know exactly what flexibility is needed. Could the Minister therefore comment, now or in due course, on whether the Government will be continuously updating and monitoring to ensure that monetary penalties are having the desired outcome, that they remain aware of any potential issues and that they can determine whether they need to modulate and change things?

Does the Minister support the use of secondary legislation to increase scrutiny? As we have already discussed, the Government have sought to avoid the responsibility of accountability at ministerial and Government level by using statutory instruments for things like Ofwat’s remuneration and governance guidance. Can they not see that a bit of a discrepancy remains? If they are willing to use available powers to make change but not enhance powers, they might need to do that on other issues that we have discussed. Barring those comments and clarifying questions, we have no formal objections that we wish to raise.

[Emma Hardy]

I thank the hon. Member for Epping Forest for his contribution to the debate. I think the point my hon. Friend, and friend, Baroness Hayman made in the Lords is that we do need some flexibility, and that it would be inappropriate to set out the details of implementing these powers in the Bill, because that would result in a fixed power that would not be adaptable to the industry’s circumstances. We would like to be able to continue to adapt it.

I think the shadow Minister is trying to make sure that we set things in the right way and at the right level. That is why Ofwat will be doing a consultation. We want the level to be a deterrent rather than something that water companies can easily dismiss, but it needs to be set at the right level. It is important that that is done properly and through consultation.

I am grateful that everybody supports the clause. By strengthening the powers of the water industry regulators, we will drive improved performance in the sector.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Jeff Smith.)

Water (Special Measures) Bill [ Lords ] (First sitting)

Emma Hardy Excerpts

Committee stage
Thursday 9th January 2025 Public Bill Committees

[Tom Hayes]

I thank my hon. Friend for his important intervention. It is great to see him championing his constituency, and it goes to show why Labour won in so many seaside and coastal towns. The people of those towns and cities trusted Labour to bring forward a Bill such as this as quickly as we have done, and this is just the start of change. As we have heard, more legislation will come forward, but so that we do not delay and wait for the full package, the Minister is bringing forward this action rapidly to respond to the urgent case that is being made on doorsteps all around our country, particularly in our seaside towns.

I have constituents who are livid about the fact that while infrastructure has crumbled, no investment has gone in, and money has gone out the door in bonuses and shareholder payment dividends, bills are rising. That is not just water bills—bills on a whole host of things contribute to the significant cost of living crisis that so many in our country have felt. I welcome the efforts of this Government, and I congratulate the Minister on all the hard work that she and her officials have been undertaking. I very much look forward to seeing further development of our programme of investment.

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Emma Hardy)]

It is a pleasure to serve under your chairmanship, Mr Vickers, and if I may I will start by wishing everyone a happy new year. I thank members of the Committee for the engagement with the Bill they have shown, and I also thank all the environmental groups, everyone who submitted evidence, and Members in the other place for the work they did on the Bill.

I am pleased to be back debating this vital piece of legislation. As I set out on Second Reading, the Bill will drive meaningful improvements in the performance and culture of the water industry as part of wider efforts to ensure that water companies deliver for both customers and the environment and, as has been mentioned in the debate so far, act on the real anger and mistrust we feel towards our water sector at the moment.

However, the Bill is one part of the Government’s ambitious and long-term approach to fundamentally transforming the water sector. As Members will be aware, in October 2024 the Government announced an independent commission, which will be the largest review of the water sector since privatisation. The commission has a broad scope and will consult experts in areas such as the environment, public health, engineering and economics, as well as customers and investors. It will look closely at financial resilience as one of its key areas—I know we all care about that.

I reassure members of the Committee on the timeline; the commission will report to the Government by quarter 2 of 2025. The UK Government and the Welsh Government will then respond and consult on proposals that they intend to take forward, and we expect those to form the basis of future legislation.

[Charlie Maynard]

Does that mean the beginning or the end of Q2?

[Emma Hardy]

We expect the commission to report to the Government in June. I reassure the hon. Member that when I respond at the end of every session, I will go through each and every amendment in turn.

I turn to Government amendments 1 and 2 to clause 1. The Government have carefully considered all non-Government amendments made in the other place and how they fit within the wider plans for reform of the water sector, including the amendments tabled by Lord Roborough and Lord Cromwell. I thank them, and indeed the other place, for their careful consideration of the Bill, particularly for the constructive way in which they worked with the Government during the Bill’s passage through the Lords. That collaborative approach enabled the Bill to be strengthened, for example, through the introduction of new requirements relating to the implementation of measures in pollution incident reduction plans. However, the Government have determined that the amendments from Lord Roborough and Lord Cromwell are not necessary and should be removed from the Bill.

Government amendment 1 concerns financial reporting. During the Bill’s passage through the other place, it was amended in such a way that required rules made by Ofwat under clause 1 to include reporting requirements on company finances. The Government strongly agree with the need to ensure water company finances are closely monitored, especially given the current financial issues experienced by some companies. However, having considered the Lords amendment in detail and having had further discussions with Lord Cromwell about the intent behind his amendment, we feel that it is duplicative of existing processes as well as conditions in water company licences.

Ofwat already has processes in place to monitor where a company may be heading towards financial difficulties. It is already a condition of water company licences that companies are required in their annual report to publish by a set date financial performance metrics, including interest on their borrowing, financial flows and analysis of their debt. Based on those reports, Ofwat sets out its observations on financial resilience across the sector in its “Monitoring financial resilience” report. Ofwat is also alive to the potential for financial engineering to occur outside of regulated companies and is thoroughly monitoring the financial position of all water companies. The Lords amendment would therefore duplicate existing requirements, with the potential to create confusion in what is already a complex regulatory landscape. This is important: we also retain concern about the potential for the Lords amendment to pre-empt forthcoming reforms following the independent commission led by Sir Jon Cunliffe. On that basis, the Government have tabled Government amendment 1 to remove Lord Cromwell’s amendment from the Bill.

[Helena Dollimore]

During the debate, we have heard a lot of words from the Opposition parties, but we had very little action during their 14 years in Government. We on the Government Benches have raised clear examples pointed out by Ofwat where it has not had the necessary tools to ban bonuses when it wanted to do so with Southern Water. While we are on that topic, I express my surprise that the hon. Member for Waveney Valley has not turned up to this sitting of the Committee.

[Emma Hardy]

I have to say that it is slightly disappointing that we do not have a full contingent for such an important Bill Committee, which matters so much to people up and down the country. There could be personal reasons, so let us reserve judgment, but it is a little surprising to me too.

[Dr Hudson]

The Minister said that she worries that the amendment from Lord Cromwell would duplicate things. Actually, it is quite a simple amendment that achieved a lot of cross-party support in the other place. If it duplicates things, a bit of repetition is not a bad thing to ensure annual financial reporting by water companies. It would not create confusion: repeating this important matter on the face of the Bill would just create clarity, so we urge the Government to reconsider.

[The Chair]

Just for the record, I am advised by the Clerk that Adrian Ramsay has sent his apologies, as he is ill.

[Emma Hardy]

I am pleased that we have that on the record. This is an important Bill, and I encourage everyone to attend.

I believe, first, that the Lords amendment is duplicative of the work that Ofwat is already doing and, secondly, that it will pre-empt any forthcoming reforms from the water commission.

[David Reed]

We have heard repeatedly that this is just the start of the legislative process to bring our water companies back to heel. Will the Minister please explain what she thinks the Bill lacks and what she hopes to do in the future to strengthen and add to it?

[Emma Hardy]

The hon. Gentleman tempts me to look into the future before we have had the water commission. To clarify—just so there is no misunderstanding—the commission will not amend this Bill but will produce another piece of legislation that looks at everything.

[Jayne Kirkham (Truro and Falmouth) (Lab/Co-op)]

The review will be very wide ranging. We are talking in great detail about the regulators’ powers, and there are four regulators. I assume—I think the Government have made this clear—that the review will look at how water is regulated, right down to how many regulators there are and how they operate, so that is completely up for grabs. We are prejudging what may be in that review, but that will be for Sir Jon to work out for himself. I feel like this is something that may be covered in the review, but will the Minister please confirm that regulation is all up for grabs?

[Emma Hardy]

My hon. Friend is absolutely right. Information will be coming out shortly about how each and every Member across the House can contribute to that review.

Government amendment 2 seeks to remove the amendment that requires rules made by Ofwat under clause 1 to be brought into force by statutory instrument within six months of the Act’s coming into force. Alongside my amendment, I will also address amendment 21—I thank the hon. Member for Westmorland and Lonsdale for tabling it—which is largely in line with the intention behind mine.

Although the Government understand the need to ensure the rules relating to remuneration and governance are subject to efficient scrutiny, this additional process risks compromising Ofwat’s independence, which must be protected. The necessary secondary legislation would be prepared by the Government, and therefore would represent significant Government interference in the independent regulatory process. That kind of interference has the potential to have adverse effects on investor confidence. The consultation requirement in clause 1 already provides the Secretary of State and other interested parties with the opportunity to raise major concerns with the regulator on the content of the rules. We are confident that Ofwat will continue to work constructively with the Government and other stakeholders to determine a robust and appropriate set of rules.

[Charlie Maynard]

Will the Minister give way?

[Emma Hardy]

I will finish what I am saying. I might answer the hon. Gentleman’s question in my upcoming remarks—who knows?

The additional requirement for the rules to be confirmed for affirmative resolution statutory instruments could also risk delaying the introduction of the first set of rules. That is counter to the other aspects of Lord Roborough’s amendment, which requires Ofwat to publish the first set of rules within six months of Royal Assent. I reiterate that the Government expect Ofwat to have the rules in place as soon as possible. Indeed, Ofwat has already concluded its initial policy consultation on the rules, demonstrating its commitment to meeting the Government’s expectations. I highlight the fact that Ofwat today submitted to the Committee written evidence of its statutory consultation on the proposed timelines for introduction of the rules, demonstrating its commitment to getting this done as quickly as possible. I urge all hon. Members to have a look at that evidence.

--- Later in debate ---

[Charlie Maynard]

I will just express disappointment. The Bill currently sets a deadline of six months, which is not exactly a moment in time; six months is a long time to get something done. I respect what the new Government are doing by trying to go after the bonuses and hold people to account, but to take a step back and say, “Actually, we are going to weaken the Bill”, which is what amendment 2 is doing—the Government are taking out the deadline—is retrograde and a real mistake.

[Emma Hardy]

I strongly disagree that this amendment weakens the Bill or is retrograde. Instead, it is doing things effectively. If we were to put a six-month deadline in the Bill and rush to get the rules done in that period of time and there were complications, we would risk leaving a loophole that could be exploited by companies that have exploited loopholes for an incredibly long time and become rather apt at doing so. With respect, I would rather do it properly.

[Dr Hudson]

The Minister says that she would like to do this properly. We all agree around this House on the scale of the problem, the public outrage at some of the things that have happened with water companies and the fact that we are trying to address and improve our water quality. I am therefore curious why both the Government and the third party are shying away from giving the Secretary of State and the Department the democratic powers and accountability to pass statutory instruments, which, as we all know, can be done very quickly. We have talked about dental analogies. I am an equine vet; I have rasped many teeth in my time. It would help ministerial oversight to see that the dental work is being done properly.

[Emma Hardy]

I am desperately searching for a dental analogy. I have already outlined to the hon. Gentleman that we tabled this amendment to protect the independence of Ofwat, protect investor confidence and ensure that rules under clause 1 are effective and in place as soon as possible. It is therefore necessary to remove Lord Roborough’s amendment. I again urge hon. Members to look at the written evidence supplied by Ofwat today. On that basis, and considering the arguments I have put forward for removing the six-month deadline for the rules to be published, I ask the hon. Member for Westmorland and Lonsdale not to press amendment 21.

Turning to amendment 22, also tabled by the hon. Member for Westmorland and Lonsdale, public trust in the water sector has been severely damaged and the number of serious pollution incidents is increasing. At the same time, companies are paying out millions in bonuses. I therefore fully support the intention behind the amendment and agree on the importance of ensuring that customers and the environment are put at the heart of companies’ objectives. That is why the Secretary of State announced immediate action to improve the performance of the water industry in his first week in office. That included an agreement that companies would update their articles of association to make the interests of customers and the environment a primary objective. I am pleased to inform the House that a number of companies have already made that change, and DEFRA is working to ensure that all companies implement it as soon as possible.

This is a Government of service, focused on improving people’s lives, and it is important that consumer interests are represented at the heart of decision making. That is why, under clause 1 of the Bill, Ofwat must make rules requiring consumer involvement in corporate decision making. Companies will be required to put in place arrangements to involve consumers in decisions that have a material effect on consumer interests. I trust therefore that the hon. Member for Westmorland and Lonsdale is reassured by the steps being taken by Government and he feels able to withdraw amendment 22.

[David Reed]

There is a lot of additional work being pushed towards Ofwat. Could the Minister confirm whether Ofwat has the internal capacity to meet that workload? If not, is there a ringfenced budget in DEFRA to allow Ofwat to employ more people?

[Emma Hardy]

I thank the hon. Gentleman for his helpful question. Yes, we obviously have regular conversations with Ofwat to ensure that it is capable of delivering everything here. There is an impact assessment on the table in the room, if the hon. Member would like to look at exactly how that all works out.

Amendment 18, also tabled by the hon. Member for Westmorland and Lonsdale, speaks to the representation of customer views and those of wider groups. The Government are clear on the importance of elevating the voice of consumers in water company governance and decision making. That is why—as I have mentioned—under the Bill, Ofwat will set rules requiring water companies to have arrangements in place for including consumers in company decision making.

In October last year, Ofwat published a public consultation on the rules on remuneration and governance and how they will apply. The proposed options put forward by Ofwat include giving a non-executive director the responsibility for oversight of consumer interests on the board and providing opportunities for consumer panel representatives to meet with the CEO on a regular basis. Furthermore, companies already have a range of environmental obligations that they should be meeting, and experts in water and sewage policy should already be considering those obligations to inform board-level decision making. I trust the hon. Member for Westmorland and Lonsdale is therefore reassured by the Government and Ofwat’s approach and is content that amendment 18 is not needed.

I will now take a little time to discuss clause 1 itself and the importance of it standing part of the Bill. As hon. Members know, clause 1 provides Ofwat with new powers to set rules on pay and governance in the water sector and requires that Ofwat make rules on four topics. I have already spoken about one of these, consumer representation. The legislation also provides Ofwat with new powers to issue rules on remuneration and governance, and requires that Ofwat set rules that make the payment of bonuses contingent on companies achieving high environmental standards. As the independent regulator, it is more appropriate for Ofwat to determine the performance metrics to be applied when setting the rules for performance-related pay.

In addition, Ofwat must also make rules covering the fitness and propriety of chief executives and directors. That means that it will be required to set standards of fitness and propriety that chief executives and directors must meet in order to be appointed by water companies or stay in post. People holding those senior roles will be held accountable against those standards and, if they fail to meet them, companies may need to take corrective action or ultimately remove executives from post if necessary. Ofwat’s initial policy consultation outlined some proposed standards of fitness and propriety that included ensuring that individuals have sufficient knowledge of the duties of water companies, are financially sound and have not been the subject of regulatory investigation. Collectively, those rules on remuneration and governance will help to drive meaningful improvements in the performance and culture of the water industry and form a central part of the Bill.

To pick up on the point made by my hon. Friend the Member for Hastings and Rye about whether the rules go further than the previous Government’s, the short answer is yes. The legislation will provide Ofwat with legal powers to ban bonuses, whereas currently it can only set expectations, and it will require Ofwat to set rules prohibiting the payment of bonuses in certain circumstances. Executives will no longer be able to take home eye-watering bonuses where companies fail to meet standards on environmental performance, financial resilience, customer outcomes or criminal liability. We will go further by requiring Ofwat to set rules requiring water companies to ensure that directors and executives meet the highest standards of fitness and propriety, and that customers are involved in company decision making that impacts consumers.

Finally, turning to amendment 19, also tabled by the hon. Member for Westmorland and Lonsdale, I would like to reassure the hon. Member that both the Government and Ofwat take the handling of actual or potential conflicts of interest very seriously. Ofwat employees are already bound by a range of robust rules and processes that support the management of conflicts of interest, including when leaving the organisation. Failure to comply can result in disciplinary action. That includes the civil service business appointment rules, duties of confidentiality and the Official Secrets Acts.

[Tim Farron]

The underlying issue here is a cultural one—I do not think I am alleging corruption. For example, one can look at fines outstanding. Ofwat set fines for, I think, four water companies; at the last check just before Christmas, many months later on, not a penny of the fines had actually been collected. There is a sense of a lack of urgency and a lack of understanding of the anger felt towards the water industry. When we have this revolving door, there may be no corruption at all, but there is a kind of watering down—no pun intended—of the culture of being a watchdog. There is a level of compliance, and it is apparent.

[Emma Hardy]

I understand the hon. Gentleman’s intention, which fits within the bigger picture of how we change the culture and improve trust in the industry. On these specific points, there is already legislation in place. However, I take his wider point that there is no trust and a lot of anger, and we need to do something around the culture of how these organisations work.

Given that existing measures are already place and Ofwat’s forthcoming fit and proper person rules should encompass conflicts of interest, the amendment is unnecessary. I ask the hon. Member to withdraw it. I hope that hon. Members will support the Government’s amendments and that all members of the Committee are satisfied that clause 1 should stand part.

[Tim Farron]

We would be content not to press any of the amendments bar amendment 18, which we will seek to push to a vote. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 18, in clause 1, page 2, line 3, at end insert—

“(ca) requiring the management board of a relevant undertaker to include at least one representative of each of the following—

(i) groups for the benefit and interests of consumers;

(ii) groups for the benefit and interests of residents of the areas in which the undertaker is operational;

(iii) experts in water and sewerage policy and management; and

(iv) environmental interest groups.”.—(Tim Farron.)

Question put, That the amendment be made.

Neonicotinoid Pesticides

Emma Hardy Excerpts

Monday 6th January 2025 Written Statements

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Emma Hardy)]

The UK Government are setting out their plans to deliver their commitment to end the use in England of toxic neonicotinoid pesticides that threaten vital pollinators.

Bees and other insects are critical pollinators. They play a key role in food production, with the economic benefits of pollination to crop production in the UK estimated at £500 million each year. Pollinators also support the wider environment and the beauty of our rural and urban spaces. Pollinators face many pressures —including loss of habitat, pests and pathogens and climate change—and their numbers and diversity have declined as a result. It is our responsibility to act now to reverse this trend.

One of the pressures on pollinators is the use of certain pesticides. Three specific neonicotinoid pesticides —clothianidin, imidacloprid and thiamethoxam—have already been removed from general use because of evidence that their use can harm pollinators. Even at doses that are not directly fatal to bees they can cause cognitive problems, impacting foraging abilities and the productivity of colonies.

Despite this, the last Government continued to allow the use of a neonicotinoid (thiamethoxam) seed treatment on sugar beet crops in England under emergency authorisation arrangements. Emergency authorisations are temporary measures intended to protect crops in exceptional circumstances. We do not consider that they should be used to perpetuate the use of neonicotinoids that can have a long-term effect on biodiversity.

We will break free from this cycle. We will identify and assess potential changes to legislation that would stop the use of emergency authorisations for products containing clothianidin, imidacloprid or thiamethoxam.

We will also review and update the approach to decisions on applications for emergency authorisations in England. The revised approach will be set out in published guidance which will clearly state how future decisions on emergency authorisation will take full account of the importance of pollinators and of the risks they may face if emergency authorisation is granted.

These commitments are made by the UK Government in respect of the position in England only, because pesticide policy and regulation is devolved. A common approach to delivering on this issue is, however, highly desirable. The UK Government will therefore look to work with the devolved Governments in Northern Ireland—recognising the provisions of the Windsor framework—Scotland and Wales to seek a consistent way forward across the UK.

These measures come ahead of the publication of a new UK national action plan (NAP), which will set how pesticides can be used sustainably. The Government are committed to supporting farmers to protect their crops in more sustainable ways. This includes funding for research into precision breeding for virus-resistant varieties of sugar beet.

The plans are outlined in more detail in a document entitled “A new approach to the use of certain neonicotinoids on crops grown in England” which the Government are placing today in the Libraries of both Houses. The document is also available on www.gov.uk.

[HCWS352]

Flooding

Emma Hardy Excerpts

Monday 6th January 2025 Commons Chamber

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Emma Hardy)]

Happy new year to everybody in the House. I would like to update the House on the flooding situation in England, and I start by extending my heartfelt sympathy to all the people and businesses affected. Having your home or place of work flooded at any time is a horrendous experience, but it is particularly dreadful at a time of hope and celebration for individuals and communities, and I hope that those affected will be able to rebuild in the days ahead.

The latest set of flood events come in what has already been a challenging autumn and winter storm season. A combination of heavy rain, snow and high winds has affected England since 30 December, with the worst rain arriving on 1 January. Many new year’s eve celebrations were cancelled, and people in the north-west and central England woke up in the new year to find rivers at record levels, and roads, car parks, businesses and, unfortunately, dozens of homes flooded. Last night saw further heavy rain and flooding, affecting transport infrastructure and other services. The Environment Agency’s areas of most concern today are focused in the midlands, Warwickshire, Lincolnshire and Nottinghamshire. In Leicestershire, the fire and rescue service has declared a major incident.

There remains extensive floodwater in rivers and other bodies of water, and a lot of the ground is saturated. The news and social media have shown the flooding of fields and our transport infrastructure, and the impact that water has on our communities. As hon. and right hon. Members will appreciate, this is an ongoing and dynamic situation, but I wanted to come here and provide the latest and most detailed updates possible on what is happening and how we are responding.

On new year’s eve, the Met Office issued rainfall warnings across most of England, including an amber rain warning for large areas of the north-west, and 164 flood warnings and 154 flood alerts were issued by the Environment Agency between new year’s eve and new year’s day. During that period, rain fell across large parts of England; the worst impacted areas were in the north-west, including Cheshire, Greater Manchester, Lancashire and parts of Yorkshire. The highest-ever levels on the River Mersey were recorded. Environment Agency teams operated flood basins at Catterall, Garstang and Croston in Lancashire, and at Lilford, Sale and Didsbury in Greater Manchester.

Cheshire was a specific area of concern. A major incident was declared, with over 100 families in the Warrington area needing evacuation. A large section of the Bridgewater canal’s embankment collapsed, with water draining on to farmland and inundating a waste water treatment works owned by United Utilities. The owner of the canal, Peel Holdings, took emergency action to stop the flow of water and, although the treatment works were inaccessible for a time, United Utilities has assured us that the plant is back up and running. A number of evacuations were needed, even where properties were not flooded, including for 400 residents of the Britannia hotel in Didsbury.

Although some of the heavy rain had passed by 2 January, subsequent cold weather impacted much of the same areas, hampering recovery efforts and adding further misery for those whose homes had flooded. Environment Agency staff continued their work across the country and brought in mutual aid from unaffected areas to help efforts in the worst-hit areas. They were also operating defences, supporting emergency response partners in managing live incidents, and continuing to issue flood warnings to warn and advise communities at risk.

Late yesterday evening there was further heavy rainfall across parts of England, leading to a combination of river and surface water flooding. The Environment Agency is continuing to respond in affected areas, including Leicestershire, Derbyshire, Birmingham, Nuneaton, Loughborough and the Rivers Trent, Avon and Idle in the midlands. The Environment Agency reports that at least 350 properties have flooded and more than 21,000 properties have been protected since new year’s eve. Over the next 24 to 36 hours, as water moves to lower reaches and slower-responding catchments, there is likely to be some localised flooding across multiple smaller areas.

Climate change will inevitably lead to more severe weather of the kind we have seen this weekend, but I reassure the House that flooding is a personal priority for me and a top-five priority for the Department for Environment, Food and Rural Affairs. This Government inherited flood defences in the worst condition on record, following years of under-investment. Due to the impacts of inflation, an ageing asset base and the previous Government making no additional funding available to repair storm damage, flood defence integrity is at its lowest level since 2009-10, with approximately 60,000 properties less well protected than if flood defences were at optimal condition. That is why we are investing £2.4 billion over the next two years to build and maintain flood defences.

We have set up a new flood resilience taskforce to ensure better co-ordination between central Government and frontline agencies on the ground and throughout the country. The taskforce brings together organisations including the Association of Drainage Authorities, the National Farmers Union, local resilience forums and emergency responders. The taskforce is key to strengthening resilience in the face of floods, and it met for the first time in September and will meet later this month. We have also provided £60 million to help farmers affected by the unprecedented flooding last winter, and an additional £50 million will be distributed to internal drainage boards to manage water levels to protect the environment and agriculture.

To make the most of our flood funding, we will refresh our approach to funding flood defences, including through a review of the existing flood funding formula to ensure that the challenges facing businesses and rural and coastal communities are taken into account in the delivery of flood protection. We will consult on this new approach in the new year, and I will inform all Members when the consultation goes live. We aim to bring in the new approach from April 2026.

The Environment Agency’s community and field teams are out today to assess and report on the impacts of the last 24 hours. I am sure the whole House will join me in thanking the emergency services, the local authorities, the Environment Agency and the volunteers for their work in keeping communities, properties and businesses safe.

I also recognise the work done by many local MPs—including Jo Platt, the MP for Leigh and Atherton—and their constituents. Residents of Lilford, in Leigh, have been impacted by flooding twice in recent years, which is proof that resilience measures and investment need to be reassessed constantly, and we as a Government are committed to supporting residents to do that. I know that many more MPs wanted to be here but, because of the flooding, are out supporting their constituents. I thank them all, and I specifically mention James Naish in Rushcliffe, who is out supporting constituents right now.

I held a call on Friday to update MPs, and I am grateful that the shadow Minister was able to join. I will continue to communicate with Members as they raise issues. Flooding is such an important issue, and I will work tirelessly to make our communities more resilient. I commend this statement to the House.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I remind Members that it is protocol to reference Members of Parliament by their constituency, not by their name. I call the shadow Minister.

[Dr Neil Hudson (Epping Forest) (Con)]

I thank the Minister for advance sight of her statement. I put on the record my gratitude to the Minister and her whole team for hosting a constructive and helpful cross-party meeting on Friday, together with officials from DEFRA, the Environment Agency, the Met Office and the Ministry of Housing, Communities and Local Government.

On behalf of His Majesty’s Opposition, I pay tribute to the emergency services, local authorities and the Environment Agency for their efforts, over the challenging festive period and the ongoing start of the working year, to help people quickly, often in dangerous circumstances. I thank members of the public, volunteer groups and our amazing farmers, who have once again stepped in to help their neighbours and local communities in difficult times.

The current flooding, snow and rain have had, and continue to have, hugely detrimental impacts across the United Kingdom. Today, roads are closed, many schools have been unable to reopen on what should have been the first day of term, rail services have been suspended, and airports have experienced extreme delays. Furthermore, as the Minister said, as a result of the extreme weather Leicestershire Fire and Rescue Service has declared a major incident across Leicester, Leicestershire and Rutland. Our thoughts are with all those whose homes and businesses have been damaged, and with all those who continue to be affected.

Many of those people will be distressed, angry and completely exhausted as they begin the new year with the process of restoring and rebuilding their homes and businesses. I sound a bit like a broken record, but I reiterate that we must not underestimate the mental health impacts of flooding on communities, in respect of both the anxiety of being flooded and the trauma when flooding hits. It is essential that practical support is provided as quickly as possible and remains in place after the waters have subsided and the blue lights have departed. Will the Minister update us on the action the Government are taking to get schools open as soon as possible? What steps are her Department taking to ensure that insurance claims can be processed as quickly as possible, so that those affected can return to their homes as soon as they can?

In addition, what steps are the Government taking to review and potentially expand the vital Flood Re scheme, so that insurance cover is expanded in terms of the age of building eligibility and to include businesses? We discussed that issue at the cross-party meeting on Friday. While in government, the Conservatives ringfenced £100 million to help communities threatened by repeated flooding. Will the Minister commit to that funding, and will those affected by flooding again, in the latest period of bad weather, be eligible to apply?

Furthermore, will the Minister provide assurances that discretionary funding, such as the flood recovery framework or the Bellwin scheme, will be implemented to alleviate the effects of flooding? Even if the thresholds for the numbers of properties affected are sometimes not met, will the Minister and her colleagues across Government commit to a compassionate, pragmatic and case-by-case approach to awarding that vital discretionary funding?

Additionally, the previous Conservative Government established the farming recovery fund to support farmers recovering from uninsurable damage. Will the Minister confirm whether the Government will renew that Conservative initiative and provide new funding for this winter’s storms?

Finally, the Secretary of State has set up a flood resilience taskforce to improve flood preparedness that has met only once. What work did the taskforce do ahead of the latest bad weather? Should it not meet more regularly—certainly before the end of this month, as the Minister stated—to learn any lessons and to respond to the ever-dynamic weather events we have seen in recent weeks? With many warnings for flooding still in place, I know that many people will be experiencing huge anxiety and uncertainty, so I conclude by wishing every community, and the services and people supporting them, a safe period moving forward.

[Emma Hardy]

I will try to answer as many of the hon. Gentleman’s questions as I can. I share his concern about the impact of flooding on people’s mental health, which cannot be exaggerated. Someone losing their home, or seeing it damaged, and having to move out over the winter has a devastating impact on them. I agree that farmers have done a great job in supporting communities at risk of flooding.

On Flood Re, we do not currently have plans to extend the scope; however, we regularly review all policies. If any hon. Member wants to contact me with specific suggestions on Flood Re, I am open to receiving them.

On the different pockets of funding that the previous Government announced, we will look at how the flood funding formula works as a whole. I mentioned the review of the formula, and I will let the hon. Gentleman know as soon as it goes live so that he can join in the consultation.

We will hopefully be able to announce the schemes that are being funded by next month. I know that people have been impatient to receive that information. We have worked as quickly as we can. There is a formula for when Bellwin is activated—a local authority has to hit a certain level of expenditure. We have been really pleased that money from the farming recovery fund has already arrived in farmers’ bank accounts. We have been getting that money out the door to the people who need it the most.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call Tim Roca, member of the Environment, Food and Rural Affairs Committee.

[Tim Roca (Macclesfield) (Lab)]

I join both Front-Benchers in paying tribute to the communities, volunteers and neighbours who helped each other with the floods over recent days. Communities affected in my part of the world, particularly in Poynton and Bollington, all pulled together. The A555 road runs through a number of constituencies, and poor engineering has been raised several times as a reason why it floods, affecting local residents. Will the Minister join me in speaking with the Department for Transport and local authorities to try to get to the bottom of why it repeatedly ends up failing our residents?

[Emma Hardy]

I thank my hon. Friend for his work to support his community at this difficult time. If I can be of assistance in talking to the Department for Transport, of course I will be.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

I call the Liberal Democrat spokesperson.

[Sarah Dyke (Glastonbury and Somerton) (LD)]

Extreme weather events are becoming more frequent. New Environment Agency modelling shows that one in four properties in England, including an additional 39,000 homes in the south-west, could be at risk of flooding by 2050.

Like many across Glastonbury and Somerton, I watch this happen in real time. Residents are on high alert, they are anxious and their mental health is suffering. Knole is a small hamlet between Langport and Somerton that previously never flooded, but last winter nine homes flooded every month. With just 40 houses in the hamlet, such incidents have a huge impact on the local community. One affected resident told me they had to watch the ingress of water through every wall in their house. Another said they were unable to return home until mid-summer after last year’s winter flooding. Their experiences and those of many residents across Somerset, and those set out in the national flood risk assessment, show that heavier rainfall and rising sea levels already threaten 2.4 million properties, so will the Minister commit to ensuring that agencies such as Natural England and the Environment Agency are properly funded to deal with flooding and future flooding?

[Emma Hardy]

The hon. Lady is right to point out the impact on people’s mental health. I urge her to invite communities that experience repeated flooding to look at the Build Back Better scheme. They could be able to access an extra £10,000 to make their homes more resilient to flooding. As I said, this is something that I care deeply about, as does the Department, which is why we are investing £2.4 billion in delivering, improving and maintaining flood defences.

[Jo White (Bassetlaw) (Lab)]

Mr Wilson of Blackstope Lane in Retford contacted me this morning, worried that water was once again coming close to his property. He has been flooded out many times, but today I thank the Minister for the work of the Environment Agency; staff were on site with their pumps from the early hours of this morning. They tell me that the clearance work on local culverts has made a difference and the water has been kept at bay. Mr Wilson’s hope is that that will continue.

[Emma Hardy]

I share my hon. Friend’s thanks to the Environment Agency. It does an incredible job and was out there working new year’s eve and new year’s day—not celebrating like many of us, but out helping and supporting. I am pleased to hear that positive story from her constituency.

[Lincoln Jopp (Spelthorne) (Con)]

The people of Spelthorne have been holding their breath during this flood season. Obviously, prevention is better than cure. Can the Minister update us on the River Thames scheme and on when a decision about whether it will go ahead and when will be taken?

[Emma Hardy]

I just mentioned in response to the shadow Minister that we should be able to announce which schemes have been successful by next month at the latest. If the hon. Gentleman writes to me with more information, I can give him a more detailed response on the scheme he mentions, but I recognise how important many of the schemes are to so many people.

[Ms Julie Minns (Carlisle) (Lab)]

I have been personally affected by flooding. In 1985, our family home was flooded when the River Caldew in Carlisle burst its banks. I can testify, as we have already heard, to the terror and powerlessness that people feel when their home is invaded by water. Although over the past few weeks we have escaped flooding in Carlisle, tomorrow marks 20 years since Carlisle was flooded and three residents, Margaret Threlkeld, Margaret Porter and Michael Scott, lost their lives. At that point, the Labour Government commissioned and completed flood defences, but they proved insufficient to hold back the River Eden in 2015, and the city was flooded again. Flood defences were commissioned but not completed by the last Government. Does the Minister agree that it is unacceptable that the residents of Carlisle have been left unprotected as a result of the last Government’s inaction?

[Emma Hardy]

Hearing the news that anybody has lost their life in a flood event is truly devastating, and my sympathies are with the family and loved ones of those victims. My hon. Friend is right to point out the importance of delivering on the promise to build flood defences and to highlight that poor maintenance of flood defences puts an additional 60,000 homes at risk of flooding. She has already proven herself to be a fantastic champion by getting hold of me at every available opportunity to advocate for her constituency, and long may she continue to do so.

[Esther McVey (Tatton) (Con)]

A number of my constituents have been affected by flooding and in a variety of ways. The Minister mentioned in her opening statement the breach of the Bridgewater canal, the damage that that has caused in Cheshire, and the immediate repair work that needs to be done by Peel. What is being done to ensure that local authorities clear blocked drains, because that is the root of most of the flooding?

[Emma Hardy]

The right hon. Lady is right that we need a combination of things to deal with flooding. There is a concern around the canal, which I am aware of and am grateful for her mentioning it, but it is important to look at lots of different things, including clearing out culverts and drains where appropriate. Many things need to be done together to ensure that we build resilience to flooding. We cannot put all our eggs in one basket, but certainly taking more of those smaller actions will have a cumulative effect and help the situation.

[Dr Jeevun Sandher (Loughborough) (Lab)]

Over the past 24 hours, heavy rainfall has led to flooding in my constituency in Loughborough, Quorn and Hathern. A year ago, the Prime Minister visited Loughborough when that bout of flooding ruined homes—we were both deeply moved. The Secretary of State, my right hon. Friend the Member for Streatham and Croydon North (Steve Reed), has also visited those homes. I am grateful that the Minister has strengthened flood defences since she was appointed. I am incredibly grateful that this time the flood has left less damage, but heavier rainfall will come due to climate change. Will the Minister set out how this Government will protect homes in my community, and will she meet me to discuss how we can do everything we can to protect our homes?

[Emma Hardy]

Again, my hon. Friend is right to point out how devastating flooding is. I would of course be happy to meet him and discuss the situation in his constituency, but just to reassure him, we will spend £2.4 billion in the next two years to strengthen, improve and maintain our flood defences.

[John Glen (Salisbury) (Con)]

The £13 million investment in the Salisbury river park scheme is a fantastic intervention, but I urge the Minister to continue working with the Environment Agency to find mechanisms with which parishes can work collaboratively with it to develop smaller schemes. Beyond the crisis management that she and the Environment Agency are working on at the moment, does she recognise that there is concern about inadequate scrutiny of the increased flood risk around new developments? If we are to reassure our constituents when more housing is put into the mix, it is important that there be proper consideration of the effect on flood risk. Many people in Salisbury remain concerned about those outcomes.

[Emma Hardy]

The right hon. Gentleman is always welcome to urge me to do many things. His proposal on how the Environment Agency works with local parishes is an interesting one, and I would be happy to hear more of his thoughts on it. To reassure people about new homes, we have committed to building more high-quality, well-designed and sustainable homes, and to ensuring that they do not increase flood risk and are not at risk of flooding. If alternative sites are not available and developments need to be in locations where there is a risk of flooding, they must be flood resilient and resistant for their lifetimes, and must not increase overall flood risk.

[Rachael Maskell (York Central) (Lab/Co-op)]

I put on record my thanks to City of York council workers, as well as to the Environment Agency, for protecting our city over the new year period. Many businesses in my city flood periodically. Will the Minister think again about a review of the insurance system for businesses, so that they have resilience and confidence moving forward?

[Emma Hardy]

I thank my hon. Friend for her question and for joining the call that we held with all the different organisations on the Friday. I anticipated that I might be pushed on that question, and I have to admire her persistence on it. Of course, I understand the importance of Flood Re and of businesses having insurance. The Flood Re scheme was originally designed in a very specific way, but I am always happy to take further representations from my hon. Friend.

[Layla Moran (Oxford West and Abingdon) (LD)]

I received an email from Laura, a constituent in Abingdon. She lives in an area that has been flooded three times in the past year—in fact, there is a flood warning for the River Ock again today. She says that the flooding means she cannot sell her house—nor can any of her neighbours —as estate agents say that it must be five years dry before they will even consider it. As a result, my constituents stand to lose millions between them and some have lost jobs because they cannot move. What work is the Department doing with estate agents and the building industry to ensure that newly built houses are built well, and that houses that need to be sold can be sold?

[Emma Hardy]

As I outlined earlier, we will ensure that any new homes are resistant to flooding and, importantly, do not contribute to more flooding in other areas—that is incredibly important. I do not know the details of the area and the constituents the hon. Lady mentions—such as whether a flood scheme is ready to be developed there or they have thought about property flood resilience measures—but if she gives me more information, I will happily look at it.

[Adam Jogee (Newcastle-under-Lyme) (Lab)]

I thank the Minister for the call on Friday. I welcome her commitment to supporting my constituents and improving our flood defences. As well as maintaining defences, it is very much about maintaining existing infrastructure, and ensuring in particular that our drains are unblocked, to reiterate the point made by the right hon. Member for Tatton (Esther McVey). Staffordshire county council has an important role to play in that in Newcastle-under-Lyme, but it is very much missing in action. What engagement has the Minister had with local government, and will she meet me to discuss the specific flooding challenges faced by constituents in Madeley, Silverdale, Cross Heath, Alsagers Bank, and those using the subways in town?

[Emma Hardy]

Part of the reason that we wanted to set up the flood resilience taskforce was to end the siloed working between different Government organisations. It is jointly chaired by me and a Minister from the Ministry of Housing, Communities and Local Government so that we can look at where issues overlap. How can I turn down an invitation to meet my hon. Friend?

[Sarah Bool (South Northamptonshire) (Con)]

Across my constituency, be it in Grendon or Bugbrooke, flood warnings come hours after the flood events have occurred. What action will the Minister take to ensure that flood warnings are timely and accurate?

[Emma Hardy]

That is a really important question, and I am grateful that the hon. Lady has raised it. Of course, in the majority of situations in which flood warnings went out, people were given timely notice—again, I ask all Members to please encourage their constituents to sign up for flood warnings—but I am now looking at situations in which those warnings were not received in time with the Met Office and the Environment Agency, to understand why that has happened and how we can improve it in the future. We need to ensure that people are getting those warnings as quickly as possible so that they can take the actions needed.

[John Slinger (Rugby) (Lab)]

I visited the village of Wolston in my constituency this morning. I met the council emergency teams and members of the flood action group. I saw the community spirit in action, with refreshments being supplied by volunteers at the Baptist church. Most importantly, I visited residents who have been suffering. One of the issues raised with me was the property flood resilience grant and its operation. Residents mentioned that they need to find £800 for a survey, and that contractors ask for £300 before they give a quote. They talked about major delays, and I saw the consequences of those delays, because some of the houses that were flooded would have benefited from the preventive measures. Will the Minister take a look at that mechanism and write to me about it?

[Emma Hardy]

Of course, where schemes are not working as effectively as they should—where there is room for improvement—this Government will make sure they do everything they can to improve things and make them better. I am happy to receive that communication.

[Ellie Chowns (North Herefordshire) (Green)]

Like the shadow Minister, I feel like a bit of a stuck record on the topic of flooding. This is the fourth month running in which I have spoken on it in the House, because it is the fourth month running in which my constituency has been flooded. Today, yet again, roads are inundated, trains are cancelled and homes are taking in water.

In her statement, the Minister mentioned the fact that climate change means that these incidents will become more frequent and severe, but there was no explicit mention of climate adaptation in the measures she set out. In our response to this issue, we surely have to take the challenge of climate adaptation seriously as a whole-of-Government challenge. The chair of the Climate Change Committee has said that the UK is “not ready”, so what is the Minister doing with colleagues across Government to ensure we take the challenge of climate adaptation as seriously as possible? Otherwise, we will be back here month after month.

[Emma Hardy]

I cannot speak for all of Government, but I can certainly speak for what we are doing about property flood resilience—how we make our homes more resilient to flooding. We know that flooding is going to become more frequent because of changes to the climate, so climate adaptation is an area I am very keen on. That is why I met with all the insurance companies last year, bringing them all together, because I want every single insurance company to offer build back better, making more homes flood resilient. Of course, it is important that we look not only at retrofitting what we already have, but at what is happening with new builds.

[Amanda Martin (Portsmouth North) (Lab)]

I echo the Minister’s heartfelt sympathies for those feeling the impact of flooding and those who are in fear of future flooding. I also echo her thanks to the services and communities who have helped those victims. In Drayton and Farlington in my constituency, groundwater floods up through the drains into houses, drives, gardens and businesses. Despite being contacted by residents and by myself, Southern Water has not acted, because it is not sewage. I would like to see DEFRA working with water companies and local government to ensure that type of flooding is also taken seriously, to make sure that residents and businesses are listened to, and to improve resilience in our drainage systems.

[Emma Hardy]

I share my hon. Friend’s upset about the fact that this issue is not being taken seriously enough by Southern Water, but having known her for a very long time, I have no doubt that if there is someone who will make that company listen, it is her. I am happy to support her with that.

[Lewis Cocking (Broxbourne) (Con)]

I draw Members’ attention to my entry in the Register of Members’ Financial Interests, and I thank everyone who has been out helping over the past few days. Every time there is heavy rainfall or a storm, roads all across Broxbourne flood, from Stanstead Abbotts to Waltham Cross. What action will the Minister’s Department take to decrease flooding events in built-up areas? We in Broxbourne have not always seen the good side of the Environment Agency, so what can we do to increase its accountability as well?

[Emma Hardy]

I thank the hon. Gentleman for his question, and I am sorry to hear that the experience of the Environment Agency has not been what he expects. I would be more than happy to put him in touch with the EA area director, so that they can have a conversation and work out how to improve the situation. Urban flooding is one of the reasons we want to look at what are called SUDS—sustainable urban drainage systems—and how we can integrate more of those into our communities to help deal with some of the problems with surface water flooding.

[Mr Luke Charters (York Outer) (Lab)]

I thank my hon. Friend the Minister for and congratulate her on how she has engaged with Members of this House, and how she has supported me and my constituents in delivering a pump at Hartrigg Oaks. May I invite her to support another scheme in the Fordlands Road area in Fulford, which would dramatically reduce the risk of flooding there?

[Emma Hardy]

My hon. Friend is very charming, which always makes it harder to say no. I would be happy to look into the scheme in more detail for him.

[Vikki Slade (Mid Dorset and North Poole) (LD)]

Every time we have a major storm or sustained rainfall, the Bakers Arms roundabout on the A35 becomes impassable, trapping the people of the Purbecks and the town of Wareham on, ironically, the Isle of Purbeck. What is the Minister doing to bring together the Department for Transport, the Environment Agency, Highways England and local authorities to plan for main routes to be prioritised for permanent flooding solutions?

[Emma Hardy]

I thank the hon. Lady for her question. That is a really important question because, particularly today and in the past couple of days, many of our highways have been impacted. Indeed, as has been mentioned, the railways have also been impacted. I found it more difficult to get here, as I know have other hon. Members. She is quite right that we should look at working together, and that may be one of the actions we look at in the flood resilience taskforce.

[Ashley Dalton (West Lancashire) (Lab)]

I also echo the words of many across the House about the work of the statutory services, particularly all those who worked in West Lancashire. Our community spirit has been exceptional; I particularly note the work of my constituent Laura Caunce from the Ormskirk community group, who has co-ordinated volunteers on the ground, and has run a crowdfunder and raised over £5,000 already to support local people affected by floods.

I welcome the Minister’s statement and many of the announcements, particularly the £50 million for internal drainage boards. My hon. Friend will be aware that there are some parts of the country, such as mine in West Lancashire, that cannot get an IDB, because legislation prevents the creation of a new one. What timeline are we looking at for bringing forward legislation so that we can really move forward on flood prevention and water management in West Lancashire?

[Emma Hardy]

I thank my hon. Friend and congratulate her constituent who has managed to raise £5,000, which is incredible. I am at heart an optimist and always see the bright side. The silver lining in the clouds has definitely been seeing communities coming together and people working together despite the horrible situations they have been facing. I am working on the issue of creating more internal drainage boards at the moment. I am sorry that I cannot give an exact timeline, but I can tell her I am working on it right now.

[Harriet Cross (Gordon and Buchan) (Con)]

It is widely known that the more impermeable the land—pavements, roads and housing developments, for example—the more likely we are to see flooding. With this in mind, and also bearing in mind the Minister’s response earlier about ensuring that new housing developments are not at risk of flooding, what assessment have the Government made of the downstream impacts of a development and what is happening with flooding further down the valley?

[Emma Hardy]

That is an important question. Without going into this in too much detail, one of the important things when looking at sustainable urban drainage solutions is how they are going to work in communities, because we cannot solve a problem in one area and say we are dealing with flooding there if it creates a problem somewhere else. Part of the calculation that needs to be made if we are to use SUDS in new developments is exactly to make sure that it is not going to impact on or increase the likelihood of flooding somewhere else. Otherwise, the system is not working effectively. It is a really important issue, and I am grateful that the hon. Member has raised it.

[Amanda Hack (North West Leicestershire) (Lab)]

I thank the Minister for her statement. As a major incident has been declared in Leicestershire, I want to thank our emergency responders, our local government and the Environment Agency, but I also want to thank and honour the amazing work of our flood volunteers. I spoke to one this morning, who was exhausted having been up all night. I pay tribute to her. Could the Minister confirm how local communities such as mine in Measham, Packington and Long Whatton will be supported in the long term to recover from repeated flood events? At what point will we see a stop to these events in our communities?

[Emma Hardy]

I thank my hon. Friend. I am sure her constituent has done an incredible job—the flood groups have done an amazing job—and I understand why she must be feeling so exhausted. We have mentioned the impact that flood events have on people’s mental health. We want to look at areas at risk of repeated flooding in the flooding formula review to make sure that those areas are getting the support they need. The immediate post-flood situation is of course for MHCLG, but if I can help in any way she needs only to contact me.

[Charlie Maynard (Witney) (LD)]

Many of us recognise that our drainage network is in disrepair in many places. Much of that stems from the Environment Agency’s main river designation; an enormous amount of bureaucracy is required in order to get permission to unblock what is nominally called a main river but to almost all of us is a ditch. These ditch networks are very broad; in Northmoor and Bablock Hythe in my constituency, virtually every ditch is a main river, which means that in one case we required about three years to get a permit from the EA. That makes things extremely difficult and nothing ever gets done. We have had five permits in five years from the EA throughout the West Oxfordshire district. Will the Minister please consider doing two things: making it easier to de-designate main rivers to ordinary watercourses; and simplifying the EA’s permit procedure, which is incredibly byzantine, so that people can apply for permits and be able to unblock their ditches?

[Emma Hardy]

I am incredibly interested in what the hon. Gentleman has had to say, because the last thing we want is it taking five years to deal with a problem when there is a simple solution for it. If unwanted bureaucracy is causing a problem, I would like to try and help. I ask the hon. Member please to send me all the information. I am happy to have that conversation with the EA, and let us see what can be done.

[Patrick Spencer (Central Suffolk and North Ipswich) (Con)]

There are loads of landowners in Suffolk who want to take steps to mitigate flooding. The problem is they need a flood risk assessment permit, but FRAPs are expensive and hard to come by, so what can the Department do to make them easier to access and cheaper? That would make a real difference.

--- Later in debate ---

[Emma Hardy]

I thank the hon. Gentleman; that was another interesting and thoughtful question. I am happy to look into this in more detail for him, because if there are rules and regulations that are not working, as a new Government we do not need to keep them. If they are not working, let us change things and make things better. The hon. Member should send me the information and I can have a proper look at it.

[Claire Young (Thornbury and Yate) (LD)]

Returning to the issue of wider infrastructure in surface water flooding, recent examples in my constituency include a householder who has been affected by water running from an incomplete major housing development who has been told nothing can be enforced until the development is finished, and another where a road safety scheme is funnelling water into their property. What action will the Government take to ensure that infrastructure is being designed with surface water flooding in mind and to ensure that developers have to provide appropriate drainage right the way through the build-out of major developments?

[Emma Hardy]

I am really sorry to hear about the hon. Lady’s constituents facing such an incredibly unfair situation for anybody to have to deal with. That is why the fact that sustainable drainage systems and schedule 3 to the Flood and Water Management Act 2010 that we brought in were never enacted is so important, and that is why we are looking at that now, because there need to be adequate drainage systems in new designs. That should have been in place since 2010, but the previous Government did not enact it. This Government are serious about getting on with it.

[Mr Andrew Snowden (Fylde) (Con)]

I echo the comments of my hon. Friend the Member for Broxbourne (Lewis Cocking): although I am incredibly grateful to a lot of frontline workers from the Environment Agency and elsewhere for the work they have done to keep houses and businesses safe, we have not always seen the best of the EA as an organisation. Councillor Tommy Threlfall, our cabinet member, and other community members and business owners were desperately trying to get hold of someone at the Environment Agency while all the fields around Main Drain were flooding and not one of the pumps at Lytham pumping station was active, as there was about to be a high tide into the low, flat lands the Minister referred to, which are at the tail end of the risk of flooding as the water moves downstream. What is the Minister going to do to help local communities better engage with agencies such as the EA in the midst of flooding, to get real-time information into the organisation and, most importantly, to get it acted upon to keep businesses and residences safe?

[Emma Hardy]

If the hon. Gentleman has not had the experience he needs with the Environment Agency, I am happy to take up that issue. An hon. Friend mentioned a good idea on the call last Friday: issuing an emergency flood pack to MPs containing all the details and information of who to contact and when. Members would then have that information when they needed it and be able to get hold of people exactly at the point they needed to do so. That issue has come out, especially with it happening over new year’s eve. People and the EA were out there working, but we have to make sure we have that communication. That is so incredibly important. I am thinking through different ways I can improve communication, but I will make sure that the area manager gets in contact with the hon. Gentleman.

[Chris Coghlan (Dorking and Horley) (LD)]

Many of my constituents have been affected by flooding overnight, but it has been particularly bad in Horley, where for the second time in recent months people’s homes have been flooded by raw sewage. Will the Minister meet me to discuss what can be done to hold Thames Water to account in operating its sewage works—particularly in the light of several new housing developments in the area, which will make the problem even worse—and to stop it dumping raw sewage in my residents’ homes?

[Emma Hardy]

That is a horrific experience, and I am so sorry that those people have had to deal with that. I will meet the hon. Gentleman. It is so important we have that £88 billion of investment to improve infrastructure and to upgrade the water system, so that we do not keep having horrific incidents, such as the one he mentions.

[Shockat Adam (Leicester South) (Ind)]

As Members from all parts of the House have already mentioned, one of the major causes of flooding is the blockage of our drainage systems and gulleys. Unfortunately, many councils nationally have reduced the frequency of cleaning gulleys due to budgetary pressures. Areas such as my landlocked constituency are seeing flooding like never before; my local Victoria Park health centre is flooded as we speak. Will the Minister commit to providing more funding for councils to assist our larger agencies, such as the Environment Agency?

[Emma Hardy]

I thank the hon. Gentleman for highlighting the impact that flooding has, not just on homes but on medical facilities. It is important, but we need to look in the round at what makes the most difference in improving flood resilience within a community. One of the things I have mentioned to many other Members is the build back better scheme, under which there can be an extra £10,000 to make properties more flood resilient. It might be good to have a conversation about that in terms of other houses in the local area, so that we can improve property flood resilience. Flooding will not be solved by one thing; we need to look at as many different things as we can and accumulate them to make the biggest impact.

[Jim Shannon (Strangford) (DUP)]

I thank the Minister for her statement and for her clear energy and commitment to trying to make lives better across the United Kingdom. The rain of the last few weeks explains the significant flooding—some would say it is of biblical proportions—and it has led to many roads being closed and air travel being affected for many. Disruption is extensive across the middle and north-east of England and in other parts of the United Kingdom, so what is being done to minimise travel disruption for so many going back to work and others going back to school this week?

[Emma Hardy]

I am delighted that the hon. Gentleman has asked the last question on my first statement. In terms of what can be done, we need to continue to work with other Departments through the flood resilience taskforce to look at how we can improve resilience and ensure that people get back to work. As he knows, flooding and water is a devolved matter in Northern Ireland, but it is always good to get him in at the end.

Oral Answers to Questions

Emma Hardy Excerpts

Thursday 19th December 2024 Commons Chamber

[Richard Burgon (Leeds East) (Ind)]

5. What reforms he has made to funding for flood protection.

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Emma Hardy)]

Mr Speaker, merry Christmas to you and all your staff. I put on the record my sympathy with everyone affected by water outages in Southampton; I discussed the matter with the chief executive officer yesterday.

We will have a public consultation in the new year on the formula that allocates flood defence funding, to ensure that the challenges facing businesses in rural and coastal communities are adequately taken into account. Protecting communities from flooding is a top priority, and later today I will have a winter flood preparedness meeting. I thank everyone who will be on duty over the Christmas period.

[Dr Gardner]

My constituency of Stoke-on-Trent South has many farmers, some of whom are personal friends. On their behalf, I ask the Minister to update the House on the funds that the Government are making available via the farming recovery fund to support farmers impacted by last year’s severe weather.

[Emma Hardy]

The Government recognise the awful impact that flooding has had on the farming community. We are releasing £60 million via the farming recovery fund to support farmers impacted by last year’s severe weather—£10 million more than was planned by the previous Government—and £55.7 million has been paid out to over 12,700 farm businesses.

[Richard Burgon]

While the far right and shamefully even some MPs in this House are busy denying climate change and trying to turn it into the latest culture war, people in our communities are paying the price. More and more severe floods are devastating people’s lives, as we have seen again in recent weeks, and I am afraid it will only get worse. Does the Minister agree that it is an absolute disgrace that the last Government left our flood defences in the worst state on record, and that fixing that has to be a national priority and a key part of preparing for climate change?

[Emma Hardy]

My hon. Friend is absolutely right. The previous Government left flood defences in a state of disrepair—the worst state on record—leaving 60,000 homes exposed. That is why this Government will invest £2.4 billion into defences over the next two years.

[Mr Andrew Snowden (Fylde) (Con)]

In Fylde, a number of new housing developments over the years have been constructed in flood areas where the developers knew that the construction sites had flooded, yet they still sold properties without disclosing that to buyers, and in some circumstances they had not constructed the flood defence requirements—the mitigations on site—to spec. Both residents and councils have felt powerless to get developers to correct what they should have got right in the first place, and a number of properties have flooded several times since people purchased them. What plans does the Minister have to give residents and councils more power to hold developers to account when they do not properly construct developments or disclose information about flooding?

[Emma Hardy]

I share the hon. Gentleman’s upset about the rules on housing and flooding not being implemented by the previous Government. We need more sustainable urban drainage in more developments, and it is important that it is built into planning applications to begin with. If he would like to contact me, I can look into the matter in more detail for him.

[Ben Obese-Jecty (Huntingdon) (Con)]

Across Huntingdon, flooding continues to be an issue that impacts a huge number of constituents, with flooding almost inevitable every time it rains. Alconbury flood group is a leading flood group in the constituency, and Charles Dalleywater has been a driving force in implementing flood mitigation measures, such as the recently opened alderman’s retention pond at Sallows farm that was planned by the flood group after funding was provided by Anglian Water, Huntingdonshire district council and Cambridgeshire county council. What funding is available from the Government to facilitate the construction of further retention ponds?

[Emma Hardy]

I thank all flood action groups around the country for doing incredible work for their communities. That sounds like a brilliant example. As I mentioned, we are investing £2.4 billion over the next couple of years. I hope to be able to give more detail in the new year.

[Rebecca Smith (South West Devon) (Con)]

2. What recent assessment he has made of the potential merits of extending the rural England prosperity fund.

--- Later in debate ---

[Munira Wilson (Twickenham) (LD)]

4. Whether he has made an assessment of the potential merits of putting the Drinking Water Inspectorate’s guidance on per- and polyfluoroalkyl substances on a statutory footing.

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Emma Hardy)]

I thank the hon. Lady for raising this important issue. The Drinking Water Inspectorate requires water companies to monitor, assess and report on the risks from PFAS. We are aware of concerns relating to that, and officials are working on it.

[Munira Wilson]

Happy Christmas, Mr Speaker.

I thank the Minister for her answer and for offering me a meeting on this topic earlier this week—I look forward to pursuing it with her. Given the wealth of authoritative evidence on the harmful impact on human health of PFAS in our drinking water, and that Scotland, the European Union and the United States have all put PFAS guidance on a statutory footing, why do this Government appear to have no plans to do the same for England and Wales? Will the Minister consider amending the Water (Special Measures) Bill to that end?

[Emma Hardy]

As I have mentioned, this is an important issue, and I look forward to discussing it in more detail. Work to assess the risks of PFAS, and to inform policy and regulatory approaches—including banning or highly restricting certain chemicals and addressing issues caused by their historical use—is continuing. The nature of PFAS chemicals and their persistence once in the environment means that there are no quick fixes, but this is a global challenge. Innovation in suitable PFAS alternatives is needed, and we are working to harness industry leadership in the transition away from PFAS. I assure the hon. Lady that work on this issue is ongoing.

[Wera Hobhouse (Bath) (LD)]

6. What his planned timetable is for the introduction of legislation to ban imports of hunting trophies.

--- Later in debate ---

[Richard Tice (Boston and Skegness) (Reform)]

9. What steps his Department is taking to improve the dredging of rivers.

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Emma Hardy)]

Dredging can be a useful option for managing flood risk, usually as part of a wider approach, where it is technically effective, cost- effective and does not significantly increase flood risk for others. Of course, we need to adopt the best solution for each place.

[Richard Tice]

I wish a merry Christmas to one and all.

My constituents in Boston and Skegness are very concerned that the Environment Agency is unable to properly maintain riverbanks and properly dredge rivers in order to protect homes and livelihoods because of the very demanding requirements of Natural England regarding the protection of badgers and water voles, which means that the priorities are wrong. Will the Minister meet me and senior people at the Environment Agency to ensure that we get these priorities correct?

[Emma Hardy]

Dredging used to be commonplace, but some evidence shows that it can speed up flow and potentially increase the risk of flooding downstream. There are currently no plans for any further dredging in Boston and Skegness, but I am happy to meet the hon. Gentleman and the EA area manager to discuss this further.

[Blake Stephenson (Mid Bedfordshire) (Con)]

10. What assessment he has made with Cabinet colleagues of the potential merits of safeguarding high-grade agricultural land.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Emma Hardy)]

I would be delighted to work with my hon. Friend on this important issue. The Association of Drainage Authorities is on the flood resilience taskforce, and the statutory instrument will be laid as soon as parliamentary time allows.

[John Milne (Horsham) (LD)]

T2. A farmer in my constituency tells me that even in a good year he is lucky to see much beyond £20,000 in profit. With margins as wafer thin as that, regular farming barely qualifies as investable at all. The risk of losing a huge slice of that farm to inheritance tax at random intervals would not only go to putting this generation out of business, but go a long way towards ensuring that they can never be replaced. Does the Minister agree that this measure—

--- Later in debate ---

[Sarah Edwards (Tamworth) (Lab)]

Merry Christmas to you, Mr Speaker, and to your team and to colleagues across the House. My constituents have long felt the impacts of flooding, and many residents have been isolated in rural areas after a storm. I have recently produced a flooding report. Will the Minister meet me to discuss it, so that I can support the work of the Department?

[Emma Hardy]

There is a very easy and short answer to that: I would be delighted to meet my hon. Friend.

[Ben Maguire (North Cornwall) (LD)]

T4. North Cornwall has world-class beaches and rivers, but Santa swims have been cancelled due to the constant dumping of raw sewage. Meanwhile, water companies receive millions from bill payers, but then the very next day, they give it away to their shareholders. Does the Secretary of State agree that the best gift he could give my constituents this Christmas would be a total ban on water bill rises until South West Water bosses finally end this scandal?

--- Later in debate ---

[Jenny Riddell-Carpenter (Suffolk Coastal) (Lab)]

I recently met the Alde and Ore Estuary Trust, which has long been campaigning and fundraising to refurbish and secure flood defences on the Alde and Ore estuary. Will the Minister meet me to discuss the trust’s projects and the barriers to progress?

[Emma Hardy]

Each time I come here for questions, I promise that I will not arrange to meet as many Members, and each time I fail. I would of course be happy to meet my hon. Friend.

Water (Special Measures) Bill [Lords]

Emma Hardy Excerpts

2nd reading
Monday 16th December 2024 Commons Chamber

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Emma Hardy)]

I thank all Members who have participated in today’s debate; it has been a privilege to listen to the thoughtful and varied contributions made by colleagues across the House. I am sorry that, because there were just so many of them, I will be unable to refer to each one individually. However, I add my thanks to the citizen scientists in many constituencies who have been mentioned. I thank the school eco clubs, which have also had a mention, all the workers out there and the regulators. I state my recognition of the impact that sewage pollution has not just on the environment, but on tourism and local businesses. May I say how impressed I am by the number of Members who go wild swimming? I add my mum to the list of people who love doing that.

I must confess that, with nine days to Christmas, my love of Christmas may shine through in these closing remarks. I believe I might even have detected just a sprinkling of Christmas magic in the air, because what other explanation can there possibly be for all the unity we have heard across the Chamber? Nobody is telling us that they want the status quo, everybody thinks the situation has got worse, and through the many conversations I have had as Minister, I know that those opinions are shared by investors, environmental groups, the general public and even the water companies themselves.

I know, like all Members here, that all I want for Christmas are cleaner rivers, lakes and seas. In fact, as I think back to last Christmas, I believe that the public had almost given up hope. Our rivers, lakes and seas were polluted, bonuses were being awarded to polluting water bosses, wrongdoing was often going unpunished, and overseeing that failure were a tired Government who had run out of ideas. Then, something great happened: the wonderful people of our country elected a Labour Government. That Labour Government immediately got to work drafting this Water (Special Measures) Bill, along with a water commission to fundamentally transform our water sector for decades to come. It will prove that we did not need a Christmas miracle to clean up our rivers, lakes and seas; we just needed a Labour Government. The Bill will drive meaningful improvements in the performance and culture of the water industry as part of a wider effort to ensure that water companies deliver for customers and the environment.

During the debate, I have been making a list, checking it twice, and I would like to respond to some of the main points made. On the scope of the Bill, reform and wider issues, Members across the House have spoken about the need for more radical reform and raised concerns about wider quality issues. This Bill is intentionally narrow. We are focused on improving the performance and culture of the water industry as an urgent priority, ahead of the forthcoming £88 billion of investment in the 2024 price review. Many Members spoke about the need to hold companies to account, and the measures in the Bill do just that.

However, we know that this Bill alone will not be enough to fix our water system; we know that we need to go further. That is why we have launched the independent commission, which will look at the roles and responsibilities of the regulator among many other fundamental aspects of the water sector. All Members are invited to participate in the call for evidence in the new year. Many Members have also spoken about our precious chalk streams. The Government are committed to the protection and restoration of our cherished chalk streams, and the best way to achieve that is by fixing the framework for managing our water system, as we are doing through the commission.

Some Members expressed concerns about the timing of the commission. I reassure the House that the commission will publish a report in quarter 2 of 2025, with recommendations for actionable solutions to the sector’s problems, which will inform further legislation to transform our water industry.

A few hon. Members mentioned that nationalisation was not in the Bill’s scope. To give the short answer, that would be complex and time-consuming, would halt the investment needed—we would lose £88 billion of private investment—and would do nothing to stop sewage pollution.

Many hon. Members have spoken about the need for our regulator to be properly equipped to make use of the new powers in the Bill. As the hon. Member for Westmorland and Lonsdale (Tim Farron) mentioned, the Environment Agency is already recruiting up to 500 additional staff for inspections, enforcement and stronger regulation of the water industry, increasing compliance checks and quadrupling the number of water company inspections by March. However, the measures in the Bill go further and will better enable the regulators to ensure that companies are held to account. The new cost recovery power in the Bill will enable the Environment Agency to fully recover the costs of its water company enforcement activities.

In addition, new automatic penalties will allow the regulators to enforce minor to moderate offences more quickly and proportionately. Collectively, these measures will complement each other to enable the regulators to address widespread water industry underperformance. We are currently looking at the water restoration fund.

On protecting customers, many hon. Members rightly pointed out that companies have not delivered for their customers. I reassure all hon. Members that the Government are clear that customers should be placed at the heart of water company operations. That is why we will bring forward secondary legislation to introduce new and increased compensation—double the previous amount or more—which will be compulsory for water companies to pay customers for poor service, underscoring our commitment to hold companies to account and stand up for customers. That work, together with measures in the Bill that elevate the voices of consumers, will ensure that water companies deliver for their customers as a priority.

On the importance of transparency, we are better equipping customers to hold water companies to account. Clause 3 will close the current monitoring gap. However, monitoring volume and concentration is much more complex, leading to significant costs and a longer roll-out time. Such additional monitoring would not be proportionate for emergency overflows because they should be used only on very limited occasions.

Before we go—I have just a couple more—driving home for Christmas, I will conclude. The Bill will deliver the most significant increase in enforcement powers for water industry regulators in a decade, including strengthening regulation to ensure that water bosses face personal criminal liability for serious lawbreaking and new powers to ban bonuses from being paid if environmental standards are not met. The Bill is not just about policy; it is about protecting consumers, safeguarding our environment and ensuring that water companies operate transparently and responsibly.

I am confident that with the collective expertise and dedication of this House, we can pass this legislation and make a real impact. That is what we promised in our manifesto, and we know how important it is to keep our promises, especially at Christmas. So, in the spirit of Christmas and the season of good will to all, I thank everyone again for their contributions and welcome the opportunity to work collaboratively with all hon. Friends and Members across the House to ensure that we get the changes needed to give the gift of clean water to future generations. Finally, on behalf of the DEFRA Bill team, we wish you a merry Christmas and a happy new year. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Water (Special Measures) Bill [Lords] (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Water (Special Measures) Bill [Lords]:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be broughht to a conclusion on Thursday 16 January 2025.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Proceedings on Consideration and Third Reading .

(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

(7) Any other proceedings on the Bill may be programmed.—(Christian Wakeford.)

Question agreed to.

Water (Special Measures) Bill [Lords] (Ways and Means)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Water (Special Measures) Bill [Lords], it is expedient to authorise:

(1) any increase attributable to the Act in charges or fees payable under any other Act; and

(2) the payment of sums into the Consolidated Fund.—(Christian Wakeford.)

Question agreed to.

Financial Inclusion: Rural Areas

Emma Hardy Excerpts

Wednesday 11th December 2024 Westminster Hall

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Emma Hardy)]

I congratulate the hon. Member for Frome and East Somerset (Anna Sabine) on securing her first Westminster Hall debate on such an important topic. Debates like this are very conversational; it is always nice when lots of people agree on the same thing. It is heartening when lots of people intervene and everybody agrees, so I thank the hon. Member for drawing attention to these important issues that really matter to the lives of all our constituents.

Ensuring that individuals have access to the appropriate financial services and products that they need, when they need them, is a key priority for the Government. It is an essential part of improving household financial wellbeing and ensuring that everyone is able to participate in the economy and benefit from the Government’s inclusive growth agenda. I recognise that tackling financial inclusion issues is particularly important for residents living in rural areas who face specific geographical challenges in accessing financial services. In today’s debate, we have had good examples of the particular challenges that people face.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

We tend to think of the issue as being principally about people having access to cash, but in communities like mine, where a lot of cruise ships come in the summer, tour guides get tipped in dollars, euros and other currency. For that, they need access to a bureau de change, which in our case is effectively the post office. Having a full range of post office services is particularly important so that they can pay their money in. When the Minister talks to her colleagues in the Department for Business and Trade about the future of Crown post offices, will she remember the range of potential impacts on local communities?

[Emma Hardy]

The right hon. Gentleman has made a good pitch for a cruise ship to visit his constituency. It was a good advertisement, and he made an important point about the role and importance of the post office. I am sure that it will be noted by the Department.

I know that many rural constituencies are concerned about the availability of cash, especially when they rely on it to pay for essential goods and services. We recognise how important that is for many vulnerable people. Arguments have been made by some—not by the Government—that people are using digital more and more, so there is less need for cash. However, we recognise that for some people it is the only way of paying bills and accessing funds. It is important that we continue to have it, because many rely on it for essential goods and services.

Although it is positive that data from the Financial Conduct Authority shows that over 98% of people in rural areas are within three miles of free-to-use withdrawal facilities, I understand the importance of ensuring that cash remains available for those who need it. The Financial Conduct Authority introduced its regulatory rules to protect access to cash on 18 September. In fact, under a previous Government I was on a Bill Committee debating that very issue, so I am pleased that we mandated access to cash.

The rules require the UK’s largest banks and building societies to assess the impact of the closure of a relevant cash access facility and put into place a new service if necessary. That ensures appropriate access to cash for those who need or choose to use it.

Lots of people asked about banking hubs. I should probably declare that I am getting a banking hub in my own constituency soon, which is very exciting. How do people get a banking hub in their constituency? I completely agree about face-to-face banking services. It is not just about accessing cash; it has a wider role to play. If someone is accessing banking facilities, it can be a way to spot financial crime and financial coercion as well, so it is important to have that.

The locations are independently determined by Link, the largest provider of the ATM network. When a cash service such as a bank branch closes, or Link receives a request directly from a community, Link assesses a community’s access to cash needs. A couple of people mentioned how they were not successful in their appeal for a banking hub. If people have already made a community request to Link and it has decided that no banking hub is needed, they can ask Link to review the decision within 28 days of the original assessment, stressing their concerns and evidence. I urge people to take advantage of that appeal process.

[David Chadwick]

Can the Minister clarify whether Link is covered by the growth duty, which requires regulators to consider the economic consequences of their actions? A point has been made a couple of times about the impact of these closures on local businesses.

[Emma Hardy]

Absolutely. Link is covered by the Financial Conduct Authority, which has a duty to promote growth. The criteria on which it bases its decision include whether there is a bank branch remaining, the population size, the number of shops on the high street, the distance to the nearest bank branch, the public transport links and the vulnerability of the population. I urge Members to appeal if they find themselves unsuccessful the first time around.

Alongside access to cash, I know that constituents are concerned about challenges in accessing in-person banking. As has been highlighted in this debate, that is particularly an issue for individuals living in rural areas, where in-person services are less easily accessed than in urban areas.

[Matt Rodda]

Does the Minister agree that an important point is that disabled and vulnerable people want to speak to another person? Getting advice and guidance from a qualified person who represents the bank and can help them with their banking is something that particularly concerns my constituents. It can also apply to small businesses, many of which want the ability to engage with bank staff to discuss their own financial matters.

[Emma Hardy]

I absolutely agree that that is important. On the issue of vulnerability, sometimes in-person services are a way in which financial coercion can be identified, which is always a huge concern. That is why the banking hubs are so important and the Government are committed to rolling them out. It is completely in character for my hon. Friend to highlight the need to support vulnerable people in his constituency.

My hon. Friend the Economic Secretary to the Treasury is working closely with the industry to roll out 350 banking hubs across the UK, which will provide individuals who need face-to-face support with critical banking services. As I say, I am personally hugely supportive of the banking hubs.

We are taking further steps to ensure that individuals can access the financial services and products that they need. Last week—I was very excited about this—the Government announced a financial inclusion strategy to further tackle the problems of financial inclusion. The strategy will be supported by a committee that the Economic Secretary convened for the first time last week. The committee brings together consumer groups and the financial sector to consider a range of barriers to inclusion for excluded groups, focusing on key policy areas such as access to banking, insurance and affordable credit, another huge problem for vulnerable people.

It is clear that there are significant challenges that need addressing. A quarter of adults have less than £100 in savings. Over a million adults are unbanked. There is a reported £2 billion of unmet need for credit, and over 8 million people are struggling with financial debt. Under the financial inclusion strategy, the committee will be working with consumer groups and industry to develop a strategy, considering a range of barriers.

To tackle the long-term issues effectively, we need to listen to the voice of experts. That is why we have convened this group, which will be tasked with drawing on relevant expertise across the sector and on lived experience. We will also be listening to people on the ground, because this will require a joined-up approach across Government, the financial services sector and frontline organisations. We will be engaging widely on this agenda to ensure that the strategy considers a wide range of frontline perspectives.

The strategy will be published next year, following extensive work by the Financial Inclusion Committee to consider the barriers to access and solutions to address them. It is important that we take the time to get this right and seek input from those who are most affected by the issue of financial exclusion. That is why the Government have made clear our commitment to going further in tackling it. While that work is in its early stages, I know that the Economic Secretary recognises its importance to our constituents and will keep the House updated as it progresses.

I thank the hon. Member for Frome and East Somerset again. It has been a pleasure to participate in her first Westminster Hall debate, and I thank all hon. Members for participating. There is a lot of support in this room for banking services, and a recognition of the importance of face-to-face services and access to cash. It is crucial for everybody in our society to have access to the financial services they need, regardless of where they live.

Question put and agreed to.

Draft Movement of Goods (Northern Ireland to Great Britain) (Animals, Feed and Food, Plant Health etc.) (Transitory Provision and Miscellaneous Amendments) Regulations 2024

Emma Hardy Excerpts

Tuesday 3rd December 2024 General Committees

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Emma Hardy)]

I beg to move,

That the Committee has considered the draft Movement of Goods (Northern Ireland to Great Britain) (Animals, Feed and Food, Plant Health etc.) (Transitory Provision and Miscellaneous Amendments) Regulations 2024.

It is a pleasure to serve under your chairmanship, Mr Twigg. The draft regulations, which were laid before the House on 28 October, form part of the Government’s commitment to implementing the border target operating model by ensuring that sanitary and phytosanitary controls are applied to European Union and rest-of-world goods entering Great Britain through Northern Ireland. These controls are essential to maintaining the United Kingdom’s biosecurity and food safety, as well as focusing the benefits of unfettered access arrangements on qualifying Northern Ireland goods.

The draft instrument, which uses powers conferred by the European Union (Withdrawal) Act 2018, has two main purposes. The first is to apply pre-notification and sanitary and phytosanitary certification requirements to goods that are not qualifying Northern Ireland goods and that are entering Great Britain through Northern Ireland. These requirements are consistent with those already applied to certain European economic area goods and those entering Great Britain from Switzerland, Liechtenstein, the Faroe Islands and Greenland under the transitional staging period. This will mean that European Union and rest-of-world goods entering Great Britain through Northern Ireland are treated the same as such goods entering Great Britain through Ireland.

The second purpose of the draft instrument as to make consequential amendments to various pieces of sanitary and phytosanitary legislation. The definition of qualifying Northern Ireland goods was amended earlier this year for food and feed goods. The consequential amendments in the draft instrument will ensure that the updated definition is reflected consistently across the regulatory framework.

Let me emphasise from the outset that the Government remain fully committed to ensuring unfettered access for qualifying Northern Ireland goods to the rest of the UK market. The Windsor framework Command Paper, which was published by the previous Government in February 2023, and the border target operating model, which was published in August 2023, clearly state that Northern Ireland businesses will have unfettered access when moving qualifying Northern Ireland goods into Great Britain. The border target operating model also states that European Union and rest-of-world goods will be subject to sanitary and phytosanitary controls when moving from Northern Ireland into Great Britain. The approach adopted in this legislation is consistent with these commitments.

The draft regulations will not make any changes to the arrangements for moving qualifying Northern Ireland goods into Great Britain. Qualifying Northern Ireland goods will not be required to undergo any of the controls implemented by this legislation and will continue to move freely within the UK internal market. Indeed, by applying controls to European Union and rest-of-world goods entering Great Britain through Northern Ireland, these measures will more closely focus the benefits of unfettered market access on Northern Ireland traders moving qualifying Northern Ireland goods. This will sharpen their competitive advantage.

The sanitary and phytosanitary controls applied to European Union and rest-of-world goods entering Great Britain through Northern Ireland under the draft instrument are temporary. We will revoke the instrument when the transitional staging period, which allows for easements in the performance of official controls, ends. This is currently set at 1 July 2025.

[Tom Collins (Worcester) (Lab)]

I note that the long-term approach to NI-GB movements is still being developed. Should that programme of work extend beyond the end of the current transitional staging period on 1 July, will we then perform an impact assessment for the draft regulations, given that an impact assessment has not been prepared for them because of the short period for which they are to have effect?

[Emma Hardy]

We will absolutely be looking at all options. I cannot predict what will have happened by 1 July 2025; the legislation currently states that that is when the transitional staging period will end, but as my hon. Friend notes, work is ongoing.

A longer-term approach for further controls on European Union and rest-of-world goods entering Great Britain from the island of Ireland is yet to be implemented. The temporary nature of the draft instrument allows for biosecurity controls to be in place for those goods entering Great Britain from Northern Ireland ahead of that, although of course that is without prejudice to unfettered access protections granted to qualifying Northern Ireland goods. I must also highlight the fact that the draft instrument extends to England, Wales and Scotland.

I reaffirm the Government’s steadfast commitment to supporting the businesses and communities of Northern Ireland while safeguarding the integrity of the UK internal market. I commend the draft instrument to the Committee and look forward to hon. Members’ contributions.

--- Later in debate ---

[Emma Hardy]

I recognise the significant strength of feeling and the concerns that hon. Members hold about the draft regulations. I have been scribbling away and will do my best to answer as many questions as I can, but if Members are not satisfied with the level of detail that I am able to give, I commit to ensuring that my officials answer any other detailed questions in writing; I put that on the record. I am a little surprised, however, that the official Opposition are raising criticisms, considering that the regulations are a consequence of the Windsor framework, which was negotiated by the previous Government. If they had had concerns, that might have been the point at which to raise them. I will do my best to answer the questions of Northern Irish colleagues, but if they feel that I have not given them the detail that they require, I commit to ensuring that we follow up.

The full and constructive points that have been raised reflect the importance of the legislation and the principles that it upholds of maintaining our biosecurity, supporting the smooth functioning of the United Kingdom internal market and honouring the commitments made and negotiated under the Windsor framework. The draft instrument will deliver the necessary provisions to ensure that Great Britain’s responsibilities on biosecurity and food safety are upheld, which will safeguard the health of our people, animals and plants. I strongly reaffirm and strengthen the Government’s unwavering commitment to unfettered access for qualifying Northern Ireland goods to ensure that businesses in Northern Ireland continue to enjoy a unique position within the UK internal market.

I will cover as many as I can get through of the points that have been raised. I was asked about non-qualifying Northern Ireland goods. Non-qualifying Northern Ireland goods are any goods that fall outside the qualifying Northern Ireland goods definition, such as European Union and rest-of-world goods. For example, if goods have been moved into Northern Ireland from outside the UK, and one of the main purposes of that movement is to gain qualifying Northern Ireland goods status, in any subsequent move to Great Britain the goods are not qualifying Northern Ireland goods. Such goods do not benefit from unfettered market access. The draft instrument will ensure that they are subject to the relevant SPS and other controls on entering Great Britain through Northern Ireland. That will ensure that the benefits of unfettered access are targeted on Northern Ireland, rather than on EU and rest-of-world goods.

[Sammy Wilson]

Since those checks do not cover the goods when they come into Northern Ireland, but only when they go into GB, what assurances can the Minister give to people in Northern Ireland that they will not be subject to dangers or disadvantages that the rest of the United Kingdom will not face?

[Emma Hardy]

My understanding of the situation is that that is a consequence of the Windsor framework and the desire not to have a hard border within the island of Ireland, but if I am incorrect I will get the right hon. Gentleman a proper answer.

I was asked why the instrument is temporary. It will be revoked when the transitional staging period expires; as we have said, it is currently scheduled to end on 1 July 2025. The timeline for the implementation of further controls on non-qualifying goods entering Great Britain from the island of Ireland has not yet been announced. We will provide a further update on that in summer 2025. I repeat my commitment to inform and keep up to date all Northern Irish Members of Parliament especially, so that they know exactly what is happening and when.

[Sammy Wilson]

The move towards the border control operating model started under the last Government. As several hon. Members have already indicated, it was chaotic: no one could give any answers about how it would operate. I am sure that we have all met traders in our constituencies, especially hauliers, who could not get answers from His Majesty’s Revenue and Customs or any other Department. Will the Minister make sure not only that Northern Ireland Members are informed, but more importantly that businesses, which know the difficulties of operating under that model, are informed and have discussions with her?

[Emma Hardy]

The right hon. Gentleman makes a very valid point. We will absolutely do our best to make sure that all businesses and Members of Parliament are fully updated.

The temporary nature of the draft instrument allows the Government to apply biosecurity controls to European Union and rest-of-world goods entering Great Britain from Northern Ireland ahead of a longer-term approach.

I was asked about the long-term approach for the treatment of non-qualifying Northern Ireland goods. The border target operating model outlines that the SPS import controls on European Union and rest-of-world goods entering Great Britain from the island of Ireland will progress on a separate timeline. Further to the right hon. Gentleman’s point about businesses, we will continue to collaborate with the devolved Governments and all border stakeholders. We will support implementation readiness across vital points of entry to better protect UK biosecurity. We will communicate any additional updates well in advance to give traders time to prepare.

The UK Government will work closely with the devolved Governments to develop plans for the delivery of a long-term approach for the treatment of European Union and rest-of-world goods entering Great Britain from the island of Ireland. These plans will continue to preserve the unfettered movement of qualifying Northern Ireland goods into Great Britain, whether those goods are moving directly from Northern Ireland to Great Britain or from Great Britain to Northern Ireland via Ireland.

I was asked whether the measure will give effect to an Irish sea border. The short answer is no, because the legislation applies only to sanitary and phytosanitary controls on European Union and rest-of-world goods entering Great Britain from Northern Ireland. Qualifying Northern Ireland goods are not required to undergo any of the sanitary or phytosanitary controls implemented by this legislation and will continue to move freely within the internal market. This sharpens the competitive advantage of Northern Ireland traders moving qualifying Northern Ireland goods by more closely focusing the benefits of unfettered access on them. I reassure the hon. Member for Upper Bann that guidance will be provided with a sufficient lead-in time for traders; there was a similar concern about businesses.

The benefit of the regulations is that they will strengthen Great Britain’s biosecurity by delivering alignment in the treatment of European Union and rest-of-world goods entering Great Britain from the island of Ireland. It is right that goods from the European Union and the rest of the world are treated differently from goods moving within the UK’s internal market. Additionally, the consequential amendments to the definition of qualifying Northern Ireland goods in existing legislation will ensure that the updated definition, which focuses the benefits of unfettered access more squarely on Northern Ireland traders, applies to the direct and indirect movement of such goods into Great Britain. I thank all hon. Members for their contributions.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Movement of Goods (Northern Ireland to Great Britain) (Animals, Feed and Food, Plant Health etc.) (Transitory Provision and Miscellaneous Amendments) Regulations 2024.