Water and Sewage Regulation (Industry and Regulators Committee Report)

Viscount Chandos Excerpts

Monday 16th October 2023 Lords Chamber

[Viscount Chandos (Lab)]

My Lords, as a newly appointed member of the Industry and Regulators Committee, I am privileged to have my name attached to this report, although I did not participate in the earlier evidence session. As chair, my noble friend Lord Hollick skilfully led the committee to its unanimous and deeply but constructively critical conclusions and has delivered a compelling introduction this afternoon. I pay tribute to him, the other committee members and the staff, who did the really hard work. Coincidentally, important work was done by the committee in pushing the boundaries on parliamentary language and the titling of reports, as should be the case with a former tabloid proprietor as chair.

I strongly endorse the report as a whole and will speak briefly on a couple of themes. I declare my interests as a trustee of the Esmée Fairbairn Foundation, a major funder of freshwater causes in the UK and, through its endowment, an investor in the Robeco sustainable water equities fund, and as a trustee of the Ernest Kleinwort Charitable Trust, a funder of the Chichester Harbour Trust.

I start with that last organisation, about which its chair, John Nelson, wrote in the Observer in July:

“one of the most beautiful and important natural harbours in the UK, I witness on a daily basis its now-rapid destruction, caused in large part by an extraordinary deterioration in water quality—thanks largely, in our case, to Southern Water”.

Mr Nelson is not a diehard environmental campaigner but an experienced former investment banker and, for full disclosure, a friend and erstwhile colleague of mine. He worked on the privatisation of utilities in the 1980s and 1990s. I may disagree with his contention that, even as originally devised, the privatisation of the water industry had anything to recommend it, but his analysis of the disaster arising from the combination of aggressive capital structuring by private equity and infrastructure owners that acquired many water companies, weak regulation and complacent government policy is devastating. He wrote:

“we now have a water industry that is probably 15 to 20 years behind in terms of infrastructure investment … We can all, of course, blame the water companies, but at the heart of this is the failure by the government to recognise the long-term issues, and to act”.

My noble friend Lord Sikka and I do not agree entirely about private equity’s impact on the general economy, but if in this case its behaviour has been unacceptably aggressive, government policy and regulatory enforcement should be and have been robust enough to counter this. The Government and Ofwat have prioritised holding down consumer prices over the maintenance and enhancement of quality. The consumer interest is not solely about price. Swimming in rivers and by beaches that are not polluted by sewage or other toxic substances should, for instance, be a universal right. Recognising that many families, most of all those on lower incomes, are hurting from the cost of living crisis, it is all the more regrettable, as other noble Lords have noted, that the Government have not honoured their promise to introduce a single social tariff rather than the postcode lottery under which support can vary between £70 and more than £250 per household.

I strongly endorse the report’s advocacy of nature-based solutions as a cost-effective and environmentally friendly form of delivery. Ofwat must act to make these easier to adopt.

I end with one of the most depressing pieces of evidence given in our follow-up sessions this summer, by David Black, chief executive of Ofwat. As the noble Lord, Lord Hollick, wrote in his letter to the Secretary of State,

“David Black raised a different concern around water companies’ capacity to deliver major projects … the sector … has … little experience in taking major projects forward and has low public standing”.

What an abject failure Conservative government policies over 40 years have been, starting with the doctrinaire privatisation of the industry. How feeble Ofwat’s regulation of the sector has been, even within those failed policies.