Water and Sewage Companies: Directors’ Remuneration

Baroness Hayman of Ullock Excerpts

Thursday 22nd February 2024 Lords Chamber

[Baroness Hayman of Ullock (Lab)]

My Lords, I start by thanking my noble friend Lord Sikka for bringing this important debate to your Lordships’ House today.

I wanted first to comment on the figures he gave on the sheer number of times that water companies have been sanctioned, because those figures are simply appalling. They also clearly demonstrate that, to date, fines have not been acting as a deterrent or changing the behaviour of the water companies in the way that sewage has been dumped into our waterways. As my noble friend Lady Warwick said, we need to have fines and penalties that cannot be ignored in the way they have been to date.

As my noble friend Lord Sikka rightly asks, what have the bonuses been paid for? I hope we will hear some clarification from the Minister around recent government announcements on bonus payments and also how the remit of powers that Ofwat has will be able to curb these excesses. I know the noble Baroness, Lady McIntosh of Pickering, mentioned the directive that has been given to Ofwat regarding this. While we clearly welcome that, it is also important to understand how this will practically operate within the existing priorities that the regulator has. For example, the noble Baroness, Lady Bakewell, talked about the amounts being paid in dividends; how will this actually work in practice, and are the Government intending to review it after a certain amount of time to make sure it is actually making a difference?

The noble Baroness, Lady McIntosh of Pickering, also asked some important questions around the environment, flooding and the impacts of our continued planning policies on long-term flooding. This is not just about now; it is also about the future. I would be interested in the Minister’s response to that.

My noble friend Lord Brooke of Alverthorpe talked about the meeting that Labour Peers had with a shadow Secretary of State from the other place and why strong action needs to be taken regarding the water industry and its regulations. I listened very carefully to my noble friend—and I am sure that our shadow Minister in the other place listened very carefully when he spoke to him at that meeting—to the suggestions that he has and how we can improve the current situation.

Let us have a look at what we actually proposed, and also at why our proposals are so urgently needed. For a start, as my noble friend Lord Stansgate said, the country has simply run out of patience on this matter. As he also said, a Labour Government will take decisive action on this matter. To briefly look at our proposals, we have carried out some analysis that shows that water company bosses have awarded themselves over £25 million in bonuses and incentives since the last election, despite repeatedly breaking the law with illegal sewage discharges. The analysis also found that nine water chief executives were paid a staggering £10 million in bonuses, £14 million in incentives—we have had a lot of talk about bonuses; we must not forget about incentives—and over £600,000 in further benefits since 2019, at the same time as customer bills were planned to go up by an extra £156 a year to plug the financial gap. As other noble Lords have said, it is not the customer who should be paying for this failure.

We believe that the water regulator should be given new powers to ban the payment of bonuses. Again, we welcome the Government finally deciding to adopt our plan on this. By expanding Ofwat’s regulatory powers, water companies that fail to meet environmental standards on sewage pollution will face tough sanctions to ensure that they cannot profit from this. When I met with the head of Ofwat some time ago, there was some concern about responsibility between Ofwat and the Environment Agency; it is really important that everyone is clear about who has responsibility for enforcing these things.

Other things we want to plan are to end self-monitoring—this has been mentioned—and to force all companies to monitor every single water outlet, so that sewage dumping can longer be covered up. It is important that all those monitoring stations are actually working, because that has also been a problem in the past.

We also feel that water bosses should face personal criminal liability if this persistent law-breaking is extreme and continues time and again, and if the fines and other sanctions are not making any difference. A BBC “Panorama” investigation found evidence of a water company covering up illegal sewage discharges, making sewage pollution disappear from its official figures. This is really not acceptable. It is important that we bring in more sanctions than the Government are currently proposing. It is time for the polluter to pay, not the public. Will the Minister encourage his Government to go further and back Labour’s whole plan to clean up our rivers and ensure that executives responsible for repeated illegal sewage dumping face criminal charges?