Water (Special Measures) Bill [HL]

Baroness Bakewell of Hardington Mandeville Excerpts

2nd reading
Wednesday 9th October 2024 Lords Chamber

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I congratulate the Minister on her introduction to this Bill. The issue of continual sewage overflows and the failure of water companies to deal with this effectively has been the subject of many debates in this Chamber. It is also a subject of great concern to the public, who have to suffer the consequences of raw sewage in their waterways and lakes, and often in their back gardens. The noble Lord, Lord Lipsey, and others have referred to public involvement in this issue.

This is a hot political issue, which featured in manifestos during the recent general election. I know that the Minister is keen to deal with this problem, and I am pleased that this Bill is one of the first pieces of legislation that the new Government have decided to start in this Chamber—especially since we have had so many debates and Questions on the subject. Every noble Lord this afternoon has welcomed this Bill. The performance of the water companies and their regulators is an especially important part of our everyday lives. Industry through to domestic householders rely on an efficient water system and have been badly let down in the past. I concur completely with the comments of the noble Duke, the Duke of Wellington.

The Bill is only part of an overall programme of reform needed for the water industry. The Government are promising a review. This is urgently needed, and we all look forward to it being holistic and in-depth, and setting out a clear programme of action to provide the country with an efficient water and sewage industry that will be fit for purpose. My noble friend Lord Russell has referred to this.

The Bill itself has 13 clauses and three main sections: remuneration and governance; pollution incident reduction plans; and sanctions. Remuneration and governance are in desperate need of reform. Since privatisation, CEOs, directors and shareholders have enjoyed payouts that do not reflect the appalling performance of the industry. At privatisation, the water companies were debt free. Since then, they have borrowed money on a large scale, not to invest in infrastructure but to reward themselves. No new reservoirs have been built since 1992, and sewage works are crumbling and out of date. Infrastructure needs addressing urgently.

Solutions so far have been concrete construction-based, which has a high carbon footprint. Nature-based solutions, which are more carbon friendly, have been rejected. Only 2% of Ofwat’s budget is allocated to nature recovery solutions. Bill payers have had an extremely poor deal, while the shareholders and directors have been rewarded. It is time that this trend was reversed. There will be amendments in Committee to ensure that this happens efficiently—and we have heard a lot about the amendments that may be coming forward.

It is absurd that Ofwat is unable to rescind the licence of a poorly performing company without giving 25 years’ notice. My noble friend Lord Russell referred to that. I wonder what planet those who drafted that legislation were living on when they drew up that guidance.

Pollution incident reduction plans should help to concentrate the minds of those managers running the sewerage systems. The plans should include reporting on the state of the sewerage infrastructure, alongside the action being proposed to remedy this within a reasonable time limit. Monitoring each sewage discharge within the hour of occurrence is to be welcomed but, once the spillages have been recorded, are they to be published in a way that can be readily accessible to the public and those directly affected? Transparency is strongly recommended by the Information Commissioner’s Office.

I note that the regulations under this section will be made only after the Minister has consulted such persons as the Minister considers fit. That could be anyone—the CEO of the water company concerned, Ofwat, the Environment Agency or some other person. I am sure that this is something that will come forward in Committee. If the regulations are to be meaningful and effective, the regulator has to have teeth and be up for the job. Currently, there is little confidence in the ability of either Ofwat or the Environment Agency to deal with the scale of the problem, which is endemic within the water industry.

This leads me on to sanctions. It is going to be extremely difficult to identify who is the guilty party responsible for a breach of the regulations regarding sewage discharges, as well as dealing with water leakages. The noble Baroness, Lady Jones of Moulsecoomb, raised the issue of leakages. I welcome that the sanctions are to be stricter and toughened up. The Bill gives the job of monitoring and implementing this section to the Environment Agency.

During the passage of both the Agriculture Act and the Environment Act, the woeful reduction in funding for the Environment Agency was a cause for concern to your Lordships across all sections of the Chamber. This funding situation has not improved. It seems unlikely that the Environment Agency will be able to conduct its role in this Bill effectively.

The system of fines laid out in the Bill may be levied and go into a consolidation fund. Those fines will recompense the EA for the cost of the work that it has conducted in imposing fines, but it will be retrospective. Surely any fines levied should go into a fund for remedial action to ensure that a problem does not occur again and be returned to bill payers, who have, after all, suffered as a result of loss of water supply and incursions of sewage into their homes and business premises.

One of the Environment Act’s tenets is that the polluter pays. That has to happen. The noble Lord, Lord Lipsey, gave a graphic description of pollution in the River Wye—and we have heard that before. My noble friend Lady Parminter referred to yesterday’s news that Ofwat had fined water companies £158 million, with Thames Water having the largest share. I received an email from David Black, CEO of Ofwat, yesterday morning informing me of this, and giving me some detail. Later, I listened on the radio to David Henderson, the CEO of the water industry’s union, Water UK, saying the problem was lack of investment due to Ofwat preventing the industry raising consumers’ bills and preventing borrowing for investment. There was no mention that the water companies were set up debt free; nor that some of their assets had been sold off to increase shareholders’ dividends; nor that salaries and bonuses of CEOs and directors had been increased to what an ordinary bill payer would consider an obscene level.

The water industry as a whole is in a dire state. The regulators are ineffective and too close to those they are supposed to be bringing to book. My noble friend Lady Pinnock and the noble Baroness, Lady Browning, raised the issue of ex-water board members being on the regulatory boards—hardly impartial. The noble Lord, Lord Sikka, gave detail of Ofwat’s poor performance. Neither Ofwat nor the Environment Agency are going to change their modus operandi in the way in which the Government envisage. The EA has been chronically underfunded for years. Ofwat already has powers which, if they had been exercised continually since inauguration, would have prevented some of the excesses and failure of service from which the country is suffering. It is no secret that on these Liberal Democrat Benches we would have abandoned the current system and replaced it with a clean water authority to take on the relevant environmental and regulatory powers, including river health, as my noble friend Lord Russell indicated.

We have heard some excellent contributions from all sides of the Chamber. Many have suggested how they would improve the Bill. My noble friend Lady Parminter referred to public interest being essential for Ofwat. The noble Lords, Lord Remnant and Lord Douglas-Miller, and my noble friend Lady Pinnock warned about a broad-brush approach that lumps all water companies together. Your Lordships are exercised about the state of the water and sewage industry, quite rightly so. I am grateful to all those organisations which have provided briefings for this debate, many of which have suggested amendments for Committee. I agree completely with the need for impact assessments and statutory instruments to be prepared.

I look forward to the Minister’s response to the debate and to working with her during future stages of the Bill to ensure that we have a Bill that is effective into the future and dovetails into subsequent legislation which the Government intend to bring forward following the review of the water industry. As all noble Lords have said, this is not going to be an easy task—quite the opposite.

Water (Special Measures) Bill [HL]

Baroness Bakewell of Hardington Mandeville Excerpts

Committee stage
Monday 4th November 2024 Lords Chamber

[Lord Roborough (Con)]

My Lords, I welcome the noble Baroness, Lady Bakewell of Hardington Mandeville, back to her place. Her contributions have been missed on earlier days in Committee.

The main focus of the Bill is on improving the health of our rivers, and that aim will likely lead to a larger number of punishable offences. In its manifesto, Labour set out its plans to impose severe fines on water companies that failed to meet the expected standards, but it did not establish what would be done with that additional income. Amendment 70 seeks to put in place a system whereby the fines imposed on water companies and their employees—by this Government, the devolved Governments or, in fact, any other relevant authorities—are collected. Then, once a year, the income from these fines could be used to reduce customer bills.

In government we created the water restoration fund, which sees the money collected by the Treasury from fines and penalties and then channelled into improving the water environment. However, we sit here today with consumers facing pressure on their water bills as part of the inflationary environment that has created the cost of living crisis, as well as the cost of investing to improve water quality. It seems appropriate that fines and penalties should be returned to those consumers and identified by a separate line in their bills, making it clear that the regulator is taking action to punish wrongdoing and that money is returned to the consumer as a consequence.

An amendment such as this would benefit so many individuals and resolve how additional income from stricter fines is applied. It is not a subject that the Bill adequately addresses, as the noble Baroness, Lady Bakewell of Hardington Mandeville, has recognised in other amendments. Does the Minister agree that the money from the fines should be used to benefit the consumer through mechanisms such as the water restoration fund that we implemented when in government or by using the sum to reduce customer Bills, as this amendment suggests? As such, will the Minister confirm that the penalties will not return to the Treasury under this Government? I beg to move.

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I apologise to the Committee and the Minister for my absence on the first and second days in Committee. I regret that an attack of Covid meant that I was confined to quarters and unable to travel to London. I did, however, watch the debate on both days on parliamentlive.tv and was therefore able to hear the nuances of the contributions, which you do not always get by reading Hansard. I thank the noble Lord, Lord Roborough, for his comments.

A seminar of all the devolved Administrations once a year, to discuss how to return all fines to the relevant customers, will do nothing to fix the problems of inadequate investment in crumbling and inadequate infrastructure. I am sympathetic to the need to keep customers’ bills to an acceptable level. Consumers should not have to pay for the inadequacies of the water boards to ensure that problems are fixed. I do not see why an annual gathering of the devolved Administrations or other authorities will be sufficient to refund bill payers in a timely fashion.

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[Baroness Jones of Moulsecoomb (GP)]

My Lords, I will speak to three amendments in this group: Amendments 97, 98 and 99. This weekend saw tens of thousands of people marching for clean water in London. It was the most amazing event. It was a chance for me to speak to people who agree with me—as opposed to being here in your Lordships’ House, where not many people agree with me.

[Baroness Bakewell of Hardington Mandeville (LD)]

Oh!

[Baroness Parminter (LD)]

That is not true.

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[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, it is a while since I have taken part in proceedings where a stand part debate has been used to try to remove clauses of a Bill. On our Benches, our departed colleague Lord Greaves was very fond of this measure to enable him to make detailed speeches railing against the Government of the day’s proposed legislation.

The noble Lord, Lord Roborough, has set out his case eloquently for why he believes that Clauses 10 and 11 should be removed from the Bill. Clause 10 refers to England, and Clause 11 offers the same powers to Welsh Ministers. Both clauses are complex and deal with the recovery of losses. I respect the motives of the noble Lord, who appears to be on the side of the water industry and the bill payers at the same time. However, when 15,000 people from around the country are prepared to give up their Sunday to come to London to join a protest against the action of the water companies, I fear that he may have misjudged the mood of the water company bill payers. The public are rightly furious that, while their water and sewage bills have increased, the infrastructure has not been improved, but directors’ bonuses and shareholders’ dividends have not reflected the poor service that some water companies have given. I say “some” water companies, because some are performing well and do meet their targets; unfortunately, it is the ones that do not do so that we hear about on a continual basis.

Removing from the Bill the two clauses, which would have seen some balance being provided to enable costs to be recovered from those water companies that have failed to deliver on their Ofwat targets, is to give a signal to bill payers that the poor service that they have received is acceptable. If Clauses 10 and 11 are removed from the Bill, there would be no clarity on what is happening or how recompense would be achieved. I am therefore afraid that, on the Lib Dem Benches, we are unable to oppose these clauses standing part of the Bill.

[Baroness Hayman of Ullock (Lab)]

My Lords, I thank the noble Lord, Lord Roborough, for his interest in Clauses 10 and 11 and also thank the noble Baroness, Lady Bakewell, for her support for them standing part. A special administration regime—or SAR—enables a company that provides vital public services to be put into administration in certain circumstances to ensure that the public service will continue to be provided pending rescue or transfer to new owners. An SAR would be required only when there is evidence that a company is insolvent or in serious breach of its statutory duties. It is the ultimate enforcement tool in Ofwat’s regulatory toolkit and, as such, as I said in the last debate, the bar is set high.

Although government has had the powers to place water companies into special administration for over three decades, it is important that we regularly update legislation to reflect modernisation of law and experiences in other sectors. If a SAR occurs, government funding would be required to cover the costs of a special administration, including both operational and capital expenditure—for example, ensuring that statutory environmental obligations were met, as well as for paying the cost of the special administrator.

In the unlikely event that the proceeds of a sale or the repayments agreed as part of a rescue at the end of a SAR are insufficient to cover repaying government funding, there is a risk of a funding shortfall. Clauses 10 and 11 introduce a flexible power, allowing the Secretary of State and Welsh Ministers to recover any shortfall in funding in a manner that is appropriate to the circumstances. They allow for modification of water company licences to recover any shortfall in financial assistance provided in a water industry SAR. These clauses will align the water industry SAR regime with the energy sector. Without this power, there is a risk that taxpayers will foot the bill for the water industry SAR.

The Secretary of State and Welsh Ministers will be able to decide whether or not they should use this power and the rate at which the shortfall should be recovered from customers. This will include which group of customers it should be recovered from—for example, all water company customers, a subset of the sector, or only customers whose water company went into a SAR.

Although the power is flexible, the design of a recovery mechanism will be subject to consultation with all relevant sector stakeholders. The Government must consider these views and explain our approach accordingly. If a SAR occurs and this power is ever required, this will allow a decision to be made, and be consulted upon, on what the fairest cost recovery option is, based on the evidence and circumstances at the time.

I reiterate that the shortfall recovery mechanism does not mean that customers end up paying for water companies’ failures. Any intervention that would increase customer bills would be considered very seriously and as a last resort. In the first instance, the Government would seek to recoup all the funds spent on financing the SAR through the sale or rescue of the water company after the administrators’ conclusion. This new power would be utilised only if it were not possible to recover what the Government spent funding the administration. If there was a shortfall, Ministers would then decide whether they felt that it was appropriate to exercise this power.

This power would allow the Secretary of State to decide, subject to consultation, the rate at which the shortfall should be recovered from customers and which group of customers it should be recovered from, as I just mentioned. This will ensure that the shortfall recovery mechanism is always implemented in a way that ensures that costs are recovered fairly. I hope that noble Lords agree that this power is essential to protect taxpayers’ money in the event of a SAR, and that these clauses should stand part of the Bill.

Water (Special Measures) Bill [HL]

Baroness Bakewell of Hardington Mandeville Excerpts

Report stage
Wednesday 20th November 2024 Lords Chamber

This amendment would not put civil society on the board of water companies; it is the authority that has to interact with them. They would not, therefore, interfere in any way with the running of the water companies themselves. It would simply ensure that there was regular and documented discussion between the authority and civil society. The lesson from the post-privatisation experience is that this was inadequate: it needs fixing. This amendment would do that. Although I have not given earlier notice of it, I must now add—in the light of what I have heard about other amendments, which may be voted on—that I may now also wish to test the opinion of the House in respect of Amendment 8.

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I thank the Minister for her time over the period between Committee and now. I shall speak first to my Amendment 9, which deals with performance-related pay and, more specifically, with bonuses paid to CEOs and directors of water companies. Performance-related pay should be related specifically to how well the water company has carried out its functions, having regard to the environmental targets it has been set. These are likely to relate to the number of illegal sewage spills that have occurred in the preceding 12 months.

During the last year—and especially during the general election campaign—the issue of sewage overflows was in the news almost daily. We saw the outrage of local residents at the state of their streams, rivers and lakes due to sewage spills—many occurred when there had not been any heavy rain. I will not go through the arguments, which have been well rehearsed in this Chamber. What I and my colleagues on these Benches are looking for is a reassurance from the Minister that where a category 1 and/or a category 2 pollution incident has occurred, the management of the offending water company—including the CEO, directors and senior officers involved in decisions in respect of controlling pollution—will be prevented from receiving any bonus or other performance-related pay enhancement to their basic salaries. It is unacceptable to the public for those in a very senior position in sewage and water companies to be rewarded over and above their normal salary for allowing sewage and other pollution to take place and not to have taken any steps to rectify the situation in a reasonable timeframe.

On Amendments 1 and 5 in the name of the noble Duke, the Duke of Wellington, environment groups have expertise to give to the water industry, but they should sit on boards. Consumers would also have a voice on boards. On our Benches are Peers who have in the past sat on water boards and contributed positively to their debates. This is a good and positive way forward. We support environmental groups and consumers being on boards and not being sidelined.

Amendments 2 and 8 from the noble Lord, Lord Cromwell, are about reporting. Amendment 2 would set up annual reporting on financial restructuring, including debt levels. This would seem a sensible way to ensure that the sewage and water company was aware of its business. However, Amendment 8 would involve others in the work of the authority, which is likely to become a bureaucratic nightmare. I have in a previous life sat on such bodies and found them to be unproductive and ineffective—I am sorry. Expectations of the civil society representatives will be high, sometimes with little understanding or knowledge of just how long it can take to implement what may often seem like a trivial matter.

Amendments 4, 7 and 10, from the noble Lord, Lord Remnant, do not align with our Amendment 9 and therefore we do not support them. However, I am conscious that whatever penalties the Bill hands out to directors and CEOs of water companies, they have to be proportionate, or it will be difficult to recruit people with the necessary expertise to sit on the boards of sewage and water companies.

Amendments 11 and 58 from the noble Lord, Lord Roborough, would introduce an SI into the legal framework. SIs are a favourite tool of Governments to get the detail of legislation in place. They tend to get somewhat divorced from the original Act that they refer to, but the timeline proposed here should mean that the original Act will still be fresh in peoples’ minds.

Amendment 57 from the noble Lord, Lord Sikka, is, I fear, unworkable. I know from previous debates that he and the noble Baroness, Lady Jones of Moulsecoomb, would prefer to be debating the renationalisation of water and sewage companies.

[Baroness Jones of Moulsecoomb (GP)]

True.

[Baroness Bakewell of Hardington Mandeville (LD)]

The Government have indicated that this is not going to happen. The amendment is an attempt to bring forward a different model of governance. The proposal is for 25% of board members to be chosen by local authorities. Local authorities are struggling with social care, looked-after children, education and people with learning disabilities. They certainly do not need this added to their “to do” list.

I look forward to the Minister’s response to this group of amendments, particularly Amendment 9.

[Lord Sikka (Lab)]

My Lords, Amendment 57 is highly workable, because it advances democracy and public accountability of the regulatory bodies. As we have it now, the regulators of the water industry have failed the people, mainly because they are too close to the very interests that they need to regulate and far removed from the welfare of employees, customers and citizens, who bear the ultimate cost of regulatory failure. I am pretty sure that the Government will soon be asking customers to chip in more money to restructure water companies and taxpayers to pay more to reconstruct them. That is just one part of the cost which people will bear.

All regulatory bodies need to be guided by effective watchdogs and guide dogs, but Ofwat has neither any watchdog nor any guide dog; it just seems to be running loose and doing whatever it wishes. There is no mechanism for preventing capture of water regulators. The executives of Ofwat pass through revolving doors and join the water companies with dizzying speed and great regularity, undermining the independence of the regulatory bodies. Regulatory bodies must be seen to be independent rather than just claim that they are independent. At the moment, a director of Ofwat, a former Conservative Minister, is spearheading a campaign that would make it harder for consumers to sue water companies that breach legal sewage limits. Should a regulator be doing that—or should it be more even-handed between the regulated and consumers?

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[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, Amendments 39 and 40 in the name of the noble Lord, Lord Cromwell, relate to the publication of data on sewage overflows in a form that is readily accessible to the public. The public are concerned about sewage spills, and they want to know when and where they are occurring. They also want to know what is being done about preventing further spills in their area. The amendments help to redress the current balance on availability of information.

Amendment 41 in the name of the noble Duke, the Duke of Wellington, relates to the failure of electricity supply which affects a sewage overflow outlet. I agree completely with the noble Duke. If an overflow outlet is reliant on an inefficient electricity supply, it is up to the undertaker to work with the electricity company to ensure that it is fit for purpose. The electricity supplier, similarly, will know when there is going to be a planned outage and should notify the undertaker in advance so that alternative arrangements can be made. If the electricity supply which serves an overflow outlet is inclined to break down, the undertaker should plan to have a generator on standby, as the noble Duke said, to take over when the electricity supply is down. This is common sense, and I look forward to the Minister’s comments.

[Lord Roborough (Con)]

My Lords, first an apology: in my excitement in the last group on the government amendments, I forgot to refer to my register of interests, including as a landowner across a number of river catchments and an investor in several natural capital-related technology companies.

I thank the noble Lord, Lord Cromwell, for moving his amendment. I recognise how hard he has worked to improve the Bill, in consultation with the Government. We agree with the spirit of his Amendments 39 and 40 in that we also want more transparency from water companies on pollution incidents. This is an important principle that runs through the Bill, and I hope that the Government will listen to the noble Lord’s argument and seek to strengthen transparency in the water sector where this is appropriate.

I also thank the noble Duke, the Duke of Wellington, for his Amendment 41. While we do not agree with it, we do agree that water companies should take some and more responsibility for the resilience of their power supplies. I would be interested to hear what the Minister can offer in reassurance.

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I think the current rule is that fines levied by Ofwat go to the Treasury and fines levied by the Environment Agency stay within the Environment Agency. That is what I am seeking to change and I think the noble Baroness, Lady Bakewell, has a similar intent. I hope the Minister, although she will, of course, be told by the Treasury that it wants to keep the money—I am sure it will always do that—might be prepared to try to persuade the Treasury to allow these funds to be devoted, as both the noble Baroness, Lady Bakewell, and I have said in a slightly different way, to measures to improve the quality of the freshwater environment in England and Wales. I think that is obviously what most Members of this House would want and I hope the Minister might be able to make a move in that direction. That is the essence of the purpose of these two amendments which, as I said earlier, are similar to the intent of the noble Baroness, Lady Bakewell. I hope the Minister will consider very carefully these three amendments.

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, the noble Duke, the Duke of Wellington, has set out the case for this group of amendments with his usual clarity and passion for sorting out the obligations which Ofwat needs to impose.

The money collected from fines from sewerage and water companies needs more clarity over its destination. At the moment, it would appear that the money from fines imposed by Ofwat does not go back into ensuring that investment occurs to correct the defects which allowed sewage spills in the first place. Much of the money from fines goes into the Treasury coffers and supports other government departments. This is not what the public want. They want the money from fines to go into making good inadequate and out of date sewerage systems and helping to create new reservoirs. A transparent and obvious way to achieve this is to set up a water restoration fund. This group of amendments requires all fines for environmental offences to be ring-fenced for this fund.

I understand that the Treasury is not in favour of this as it is hypothecation. I understand where it is coming from. However, it is necessary, due to the appalling performance of the water industry, for the public to be able to see just where the money from fines is going and how it is being used to improve the service they are paying for in their water and sewerage bills. We are, therefore, very keen to see such a fund set up without delay. There are undoubtedly going to be large fines coming down the line which water companies will have to pay. These fines cannot just evaporate into the ether so that customers cannot see what is being done with the money. Restoring public confidence in the water and sewerage industry is key to moving forward and a water restoration fund is a vital element of achieving this.

[Lord Roborough (Con)]

My Lords, I thank the noble Duke, the Duke of Wellington, for introducing this group. I also take the opportunity to thank him for his tireless commitment to clearing up the water industry. I have no doubt that the fact that we are considering this Bill in this Chamber at this time owes much to his hard work.

In government, we made progress on work to ensure that fines charged to water companies would be reinvested into the infrastructure of the water sector to reduce pollution and tackle flood risks. Given the very clear concern of the public about the health of our rivers, lakes and beaches and the impact of pollution, it seems only right that the proceeds of fines levied on water companies should be invested in tackling pollution, so we support the spirit of Amendments 46 and 47 in principle.

While there is clearly disagreement on how best to achieve the goal of reinvesting the funds raised through fines on water companies, we hope the Minister will listen to the concerns of the noble Baroness, Lady Bakewell of Hardington Mandeville, and the noble Duke, the Duke of Wellington, and ensure that proceeds from water company fines are reinvested in the sector.

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[Baroness Anderson of Stoke-on-Trent (Lab)]

I am so sorry, but we have reached time. Thank you.

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, this is the last group of amendments. The noble Lord, Lord Remnant, has introduced Amendment 50 on recovering costs from water companies. The noble Lord, Lord Roborough, has Amendments 51 and 52 to leave out Clauses 10 and 11. We did not support these amendments in Committee and have not reconsidered our view.

The noble Baroness, Lady Jones of Moulsecoomb, has spoken to Amendments 53, 54 and 59, dealing with water companies that have been taken into special administration. Under Amendment 53, 50% to 100% of the debts of the company would be cancelled. Under Amendment 54, the Secretary of State would place a water company into special measures for breach of environmental conditions. Amendment 59 requires an assessment of costs to bring water companies back into public ownership. Although the noble Baroness, Lady Jones, is very articulate and passionate, I am afraid we are not able to support these amendments.

Amendment 56 in the name of Lord Sikka, to which he has spoken very eloquently, seeks to prevent companies from operating where they have criminal convictions in a five-year period. I have listened to the noble Lord’s arguments on this amendment and will listen carefully to the Minister’s response, but at the moment I am not convinced of the efficacy of Amendment 56.

[Lord Roborough (Con)]

My Lords, I shall speak to my Amendments 51 and 52, which seek to leave out Clauses 10 and 11 from this Bill. These would also have the effect of rendering unnecessary Amendment 50 of my noble friend Lord Remnant.

Our concern on these Benches is that the consumers are left as the providers of funding of last resort to the water industry. In the event of a company going into special administration and there being losses incurred by the Government, these clauses allow the Secretary of State to recover those losses by putting consumer bills up above the levels that have been determined by Ofwat—not just customers of that undertaker but also of others.

This does not seem fair or just. Surely the ultimate responsibility resides with the Government who created the system of regulation that must have failed in this scenario. I intend to test the opinion of the House on my amendment; we do not believe that the Government should grant themselves this power.

I would also like to briefly address Amendment 53 in the name of the noble Baroness, Lady Jones of Moulsecoomb. We on these Benches agree with her that a bailout of creditors or shareholders by the Government would be completely wrong. It is not for the Government to make professional or retail investors whole when their investments have gone wrong. However, we are unconvinced that this amendment needs to be in the Bill, given that there does not appear to be any mechanism where the Government could be called on to bail out investors. Perhaps the Minister can reassure the House that this is the case.

Water (Special Measures) Bill [HL]

Baroness Bakewell of Hardington Mandeville Excerpts

3rd reading
Tuesday 26th November 2024 Lords Chamber

[Baroness Hayman of Ullock (Lab)]

My Lords, I would like to say that it has been a great privilege to be responsible for the passage of the Bill through this House. I thank all noble Lords for their careful scrutiny of its provisions and the constructive suggestions and contributions made at each stage. While we may not have ended up agreeing on everything, I know we agree on the importance of the Bill and the need to drive meaningful improvement in the performance of the water industry as an urgent priority.

The public expect and deserve transformative change across the water sector, and the Bill is a crucial first step towards meaningful reform. The new provisions brought forward by the Bill will strengthen the regulation of water and sewerage companies while giving our regulators the most significant increase in enforcement powers in a decade.

The Bill will ensure that water company executives are held to high standards, reflecting the importance of their role in overseeing the operation of vital water and sewerage services. Crucially, the Bill will increase transparency around water company operations and pollution incidents, ensuring that the public, as well as the regulators, are well equipped to hold water companies to account.

With the passage of the Bill in this House, we have made inroads into turning around the performance of the water industry, and made clear our expectations for water companies in advance of the most ambitious investment period that the water industry has seen.

This Government are committed to working closely with counterparts in Scotland, Wales and Northern Ireland to address the shared challenges facing our water environment. Our waterways and some of our water companies cross our shared borders, so the importance of working together to improve the water environment cannot be underestimated.

Of particular relevance to the Bill are the challenges faced across the privatised water sector in England and Wales. In line with this, my officials have worked constructively with Welsh counterparts throughout the passage of the Bill through this House, so I am also delighted that the UK Government and Welsh Government have together launched the independent commission to fundamentally transform how our water system works. The independent commission will provide the lasting change that England and Wales need to deliver much-needed reforms in the water sector, which I know all Members of this House are eager to see. We look forward to continued and long-term collaboration with the Welsh Government on the Bill and the independent commission.

In conclusion, I thank all noble Lords who have offered their expertise to enhance and strengthen the Bill in this House. The discussions have been truly collaborative. The Government carefully considered the important points raised during the Bill’s passage and, in consequence, tabled the amendments that we discussed on Report. I believe that the provisions of the Bill leave this House even stronger as a result.

Many of the wider points raised by noble Lords will be addressed by the independent commission, which, as we have discussed, will review the entire water sector regulatory system. I look forward to further collaboration with noble Lords during the course of the independent commission, and on future legislation, as we continue to work towards the shared goal of restoring and protecting our precious water environment.

Just before I finish, I record my special thanks to officials, particularly the wonderful Bill team, who worked so hard and gave me exemplary support throughout the passage of the Bill in this House.

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I thank my noble friends Lord Russell, Lady Parminter and Lady Pinnock for standing in for me when I was off with Covid. I am very grateful to them.

The Bill is essential, and it was essential that it began its journey in this Chamber. It is only one piece of the jigsaw that the Government will bring forward to deal with the problems of the water industry, but it is a vital one.

I thank the Minister and her officials for their time in listening to those of us across the Chamber who were concerned about some aspects of the Bill. She was extremely patient and receptive to the arguments we put forward, and we are grateful for the movement that the Government were able to make on the pollution incident reduction plans and the performance-related pay issues. Ofwat has been strengthened by measures in the Bill and it is to be hoped that, overall, the discharges of sewage will reduce quickly and the quality of water in our streams, rivers and lakes will improve as a consequence.

It is now up to the other place to take on the Bill, which has been much improved by the debates and changes made in this Chamber. For our part, we welcome the review of the water industry as a whole and look forward to seeing how the Bill will fit into the overall picture. It has been a pleasure to work with the Minister and her Bill team on this essential piece of legislation.

[Lord Roborough (Con)]

My Lords, the core objectives of the Bill were, of course, supported by all sides of your Lordships’ House. The water and sewerage industry has betrayed consumers, and the regulators have consistently failed to bring these companies to book for many years. It is not so much to ask that we should all be able to enjoy clean and healthy rivers, lakes and beaches. On our Benches, we proposed tough action on the companies and executives responsible, and we are pleased that the Bill now places greater responsibility on the industry to clean itself up, while granting greater powers to regulators to enforce those rules.

This Bill is only a short-term move to impose special measures on the industry while we await the results of the commission, which will report next year. Special measures are, by definition, temporary, and the Government must bring forward the next stage of reform urgently. We look forward to reading and debating those reports and engaging fully with the Government to ensure that the right medium to longer-term reforms are put in place to ensure that all stakeholders’ interests are properly recognised and balanced.

I am most grateful to the Minister for listening to the concerns of the House in constructive engagements in this Chamber and in private meetings with her and her excellent officials. Those engagements were always courteous and helpful in airing the issues around each topic of discussion or debate. The best traditions of the House may be frequently mentioned, but this is a very good example, and, in this case, the Bill is much improved as a result.

The House owes thanks to the Minister for the excellent amendments that the Government brought forward. In particular, the pollution incident reporting plans now have teeth and will be a valuable tool in pushing the industry to do better. I also highlight amendments that place much more weight on using nature-based solutions as an alternative to more traditional investment in infrastructure. These amendments will have a measurable impact on nature recovery efforts in this country.

Although this House amended the Bill to improve accountability on debt levels and financial structuring, thanks in particular to the noble Lord, Lord Cromwell, as well as on the accountability of the Government on the rules being set, it was a little disappointing that the Government would not accept our amendments to protect the consumer in the event of an SAO, nor to enable the Secretary of State to limit water companies’ debt levels when necessary.

Finally, I thank all noble Lords from all Benches of this House who engaged in debates on the Bill and with whom I had many constructive discussions.