Water (Special Measures) Bill [HL]

Lord Sandhurst Excerpts

2nd reading
Wednesday 9th October 2024 Lords Chamber

[Lord Sandhurst (Con)]

My Lords, I welcome the Minister to her place.

It is interesting that this Bill should have its Second Reading just the day after we debated the Product Regulation and Metrology Bill. This Bill is not so remarkable as was that Bill for the unbridled power given to Ministers, but it is still noteworthy. As my noble friend Lord Blencathra explained in his important and dispassionate analysis, it has a number of problems. Like other noble Lords, I agree that the water industry needs sorting out. We need increased investment as well as straightforward and conscientious management, but I am anxious about aspects of the methodology embodied in the Bill. I am also anxious that we have no draft guidance and secondary legislation, as the noble Baroness, Lady Young of Old Scone, has just pointed out. We do not know where exactly the Bill is going. We have a general direction of travel, but we really need more detail, and that was my complaint yesterday. We cannot have more Bills like this coming forward, please.

If we are to take this draconian approach, which is embodied, as my noble friend Lord Blencathra said, in the proposal to change the burden of proof and the powers to impose automatic fines, it should be only because there is plain evidence that this should be effective. Why is there no impact assessment? Others have asked for that too. We do not have one; we did not have one yesterday either. These are big Bills in practice, on big topics, where there is so much unknown. A lot of people know a lot about the topic, but it is the detail that matters when drafting legislation.

Why should we take it on trust that what is proposed will have the intended outcome? Has any assessment been carried out? If it has, why has it not been transformed into a proper measured impact assessment to assist all those with an interest in getting things right? Long experience—I have been a lawyer of far too long experience—has shown that this is the wrong way to make legislation, because it results in unintended and unhelpful consequences. I agree with other noble Lords that we should look at this carefully. As my noble friend Lord Blencathra and others have pointed out, we have the proposed powers to set rules about fit and proper persons, we have their interaction with the Company Directors Disqualification Act, and there will also be the Financial Conduct Authority’s rules. This risks a minefield in which the only winners will be the lawyers.

I turn to two or three specific points, the first being the modification of the standard of proof in Clause 5. I acknowledge that this lower standard of proof is used elsewhere, but it is important to note that the original intention of the legislation that we are amending in this clause was to deliver a more consistent penalty regime across sectors. That was following recommendation 8 of the Hampton report. This change, on the face of things, undermines the original function of the 2008 Act. Again, we lack an impact assessment. We do not know the rationale so, before we debate the Bill in Committee, the Government should set out a proper detailed case showing why specifically the standard of proof needs changing in this sector but not in other sectors. How many times is it anticipated that this power will be used?

I turn to the companies’ right to appeal fines imposed by the regulator. This is covered by Clause 6(7), in particular the right of appeal. This provision appears to create the possibility of the regulator imposing an automatic penalty. The company that is the subject of the penalty will not be able to appeal a decision by the regulator to the effect that there were no exceptional circumstances to mitigate the culpability of the company for what is otherwise a strict offence.

In other words, an event has happened which the company rightly or wrongly says made it impossible or very difficult to take reasonable steps to prevent an otherwise unlawful discharge. That discharge will on its face be unlawful but, as matters stand at the moment, the company can escape or mitigate that penalty if, but only if, it can show there are exceptional circumstances.

This Bill would give that decision simply to the regulator, but those words “exceptional circumstances” are important. The courts understand them well; as they have said repeatedly, they do not admit of detailed exegesis—they mean what they say. It is the context that matters. The burden is on the person who asserts exceptional circumstances to make his case. In practice, that is a heavy burden, because it has to be exceptional. If it is not made out, an appeal to the courts is dismissed with costs. What is wrong with that? Where is the evidence that this provision has been misapplied by the courts?

If there is an extraordinarily heavy rainfall or other event that may or may not be an exceptional circumstance, the water company would still have to show that it could not have anticipated that event—and we know that rain does fall in this country—and could not reasonably have taken suitable preventive measures. But why, if the company believes that exceptional circumstances have obtained and is prepared to risk the costs of an appeal, should it be deprived of challenging the regulators’ decision to the contrary? Where is the evidence that this provision is not working appropriately at present? The Government, through the regulator, surely have the details of cases, and the number of cases, where decisions on exceptional circumstances have been appealed, and details of the outcomes. They are all there—the regulator must know. They can point then to the misuse of the provision and failure by the courts. I suggest that may be hard to establish.

Generally, let us have proper information and an impact assessment, then we can make a fair and sensible decision. At present, it does not look right. Adopting a clumsy and over-penal approach will drive up costs and put at risk the very investment that we all want.

I have a final point on legal advice on compatibility with the European Convention on Human Rights. I have highlighted two provisions in particular, Clause 5 and 6, although I do not limit it to that. The Minister has declared on the face of the Bill that the provisions in the Bill are compatible with convention rights. In respect to those two provisions, and others, I am not sure that that is right. We would be greatly assisted if the Minister would provide a copy of the advice. If she is minded to fall back on the argument that the advice is privileged, there is another route. Will she set out in writing, without reference to the advice itself, the legal reasoning that underlies that conclusion in respect of those two clauses? If she does not cite the advice itself, what she sets out is not privileged, and she has not opened up disclosure of the advice. What could be the problem with that? It would put my concerns, and I suspect those of others, to rest.