Water White Paper

Baroness Hayman of Ullock Excerpts

Monday 26th January 2026 Lords Chamber

[Baroness Grender (LD)]

My Lords, I thank the Minister for the Statement repeat this evening. Some proposals in this White paper are indeed most welcome, including the scrapping of Ofwat—something we have long called for—but it falls short of the fundamental reforms water customers are so desperately in need of. True reform demands root-and-branch change within the water companies themselves, because until profit is no longer their driving force, shareholder payouts will continue to be prioritised over investment and the urgent need to end the scandal of sewage in our rivers and seas. We therefore advocate a move towards mutuality, not the costly nationalisation that others propose but a shift to public benefit companies, a model that has proved so successful elsewhere, particularly in the United States.

I have a few questions. How can the Government claim there will be nowhere to hide when the White Paper rules out structural reform, including changes to ownership and profit extraction? What action is being taken to stop water companies evading the bonus ban, given evidence to the Public Accounts Committee only recently that they have reclassified such payments as “retention incentives”, even in the past year?

If this is truly the biggest overhaul since privatisation, why does it fail to confront the broken ownership model which has enabled pollution, underinvestment and profiteering for decades? Did the Government consider alternative models, such as mutuality, and, if not, why not at this stage, when the current funding system so clearly prioritises shareholders over customers, in turn using huge debts to fund dividends?

What guarantees can Ministers give that a new regulator, potentially more than a year from being operational, will be able to deliver immediate improvements, rather than the risk of extended regulatory failure? What assessment has been made of the cumulative impact of historic underinvestment and excessive dividends in today’s water bills, and how will this White Paper address that inequity? How will the Government work with farmers to tackle agricultural pollution in genuine partnership with them, rather than the slight blame culture that currently exists? Will Ministers commit to ending the sewage cover-up by requiring full publication of sewage volume data, not just the spill duration, as is the current system and the one we had under the last Government? Given record sewage dumping and rising bills, what measurable standards will define this White Paper as a success if river and coastal water quality, for instance, continues to decline?

Finally, and no great surprise from me, when will we see the necessary legislation on our precious chalk streams, which have a very welcome inclusion in this White Paper but which were promised urgent action when we were discussing the Planning and Infrastructure Bill? There continues to be a danger that it will be too late for the chalk streams.

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)]

My Lords, I thank noble Lords for their interest and their questions on the water White Paper, which we published and laid in Parliament on 20 January. The White Paper outlines how we will work together with water companies, investors, communities and the environment to transform our water system for good, because we need to ensure a sustainable water system for future generations.

The noble Earl, Lord Courtown, asked why it had taken so long and when we were going to see change. As noble Lords know, we have already taken action. We brought in the Water (Special Measures) Act and took action to ring-fence water company investment. The transition plan will be published later this year, which will provide a road map for implementing the changes. We will bring forward a new water reform Bill during this Parliament, alongside which we will make progress with reforms that do not require primary legislation. That will include a shift to a supervisory approach to regulation, with dedicated teams with an understanding of how each company operates. There will be the piloting of regional planning approaches across the country. The water reform Bill will be a priority for the department going forward.

The noble Earl, Lord Courtown, mentioned the extension of environmental permitting to cattle. As the White Paper sets out, we are considering extending environmental permitting beyond pig and poultry to cattle, because cattle are a significant source of water pollution. However, we are working closely with the NFU and others, because we need to take a balanced approach to that issue.

The noble Baroness, Lady Grender, and the noble Earl, Lord Courtown, mentioned Ofwat and regulation. We have already done something on this, with the Water (Special Measures) Act, which shifted the burden of proof from the regulators to the water companies in order to enable automatic fines. The new regulator that will be set up will require us to change legislation. We feel it is really important to make sure that we get this right. The existing regulators will in the interim retain the powers they have until we have the new regulator in place.

The Environment Agency is carrying out record levels of funding and inspections, and is currently on track to deliver 10,000 inspections in the year 2025-26. We are going to issue interim strategic policy statements to the regulator as part of the transition plan, which will provide legally binding instructions on what the regulator’s priorities should be and how they should act during the transition period. We will reform the approach to the strategic policy statements and issue wider strategic guidance to provide long-term direction to the entire water system, alongside specific, measurable directions to the new water regulator.

The noble Earl asked when we are going to make appointments to the regulator and when it will be set up. We intend to make formal appointments to the board of the new water regulator at the earliest opportunity. We believe that providing early leadership will help the new regulator begin to develop its internal strategy, to build a new culture, which is very important, and to deliver the industry-wide approach from the start. As I said, during that transition the existing regulators will retain their full powers and responsibilities. We are considering the funding arrangements that will be needed. The new regulator will have the power to deliver its responsibilities in full and will balance the interests of customers, investors and the environment.

The noble Earl asked about accountability. Clear oversight and accountability will be an important design principle of the new regulator, and we anticipate that the regulator will be accountable to Ministers, and by extension to Parliament, in the way that it carries out its functions. We will consider how parliamentary accountability is handled through the legislation, any sponsorship arrangements and the framework agreement. We recognise the importance of appropriate independence, particularly for economic regulation, in supporting the credibility of the new regime and investor confidence, so we will ensure that there are mechanisms in place, including within the legislation itself, to protect regulatory independence. We will look at other relevant public bodies as we draw that up.

The noble Earl asked specifically about the water restoration fund. We are doubling our funding for catchment partnerships in order to bring together farmers and stakeholders to tackle agricultural problems. I am not in a position yet to say whether we will be continuing with the water restoration fund.

The noble Baroness, Lady Grender, asked about bonuses, which I think everyone feels strongly about, particularly in the light of what has been happening recently with South East Water. We introduced criminality for water bosses who cover up illegal sewage spills and the power to ban unfair bonuses. Some £4 million in bonuses for 10 water bosses was blocked last summer. We absolutely expect water companies to follow both the letter and the spirit of the law, and Ofwat is considering what further action can be taken to ensure that companies are held to account. The water White Paper goes further in order to ensure that water companies have nowhere to hide on poor performance. That includes a new supervisory scheme, which will ensure that the regulator has a stronger grip on exactly what is going on in each company.

The noble Baroness, Lady Grender, asked about mutuality and models of ownership. Mutual or co-operative ownership is not something that we are opposed to in principle. The White Paper says that, if a company’s owners propose changes to the ownership model, the new regulator will assess any proposals carefully against transparent criteria. But to take a company into mutual or co-operative ownership, either the current owners would need to propose this or the company would need to be bought first. We would therefore need to think carefully about how that transition would actually take place. We are not opposed to it in principle, but any mandatory changes in ownership would be costly and complicated, and would not deliver the material benefit. That is why it is important that it is the company’s owners who are proposing any such changes.

The noble Baroness also asked how the White Paper was addressing pollution; we talked about a number of issues there. As we have set out in the White Paper, there are several measures that we are taking to tackle pollution. Importantly, we are looking to strengthen collaboration in planning at catchment and regional level. This will help to identify lower-cost, higher-impact solutions to tackle pollution and include opportunities for farmers—which the noble Earl, Lord Courtown, was asking about—water companies and other stakeholders to work in partnership to ensure that the action taken is effective. We are also developing a new and strengthened approach to monitoring, because we do not want companies marking their own homework, as they have been doing for years. We are looking at how we can strengthen that.

We are shifting the emphasis towards tackling the root causes of sewage pollution by reducing the volume of rainwater and pollutants that enter the sewerage system in the first place and freeing up sewerage capacity for development and growth. I will give some examples of how we are doing that. We are building on the ban on wet wipes, which contain plastic, to stop sewers from getting clogged up so much. We have introduced a national standard for sustainable drainage systems which will help to improve drainage quality. That will be a requirement for all new developments and will have drainage implications beyond that through the National Planning Policy Framework. We are also committed to ensuring that funding looks at how to improve nature and the environment more broadly. This was mentioned when we talked about the PIB.

Overall, we need to improve transparency and ensure that the public can see what is happening in their local waters. That is important if we are to get back consumer confidence and boost protection for customers. We want people to see that this is serious action that we are taking to improve the water systems.

[The Duke of Wellington (CB)]

My Lords, I very much welcome the Statement and the White Paper, as the Minister knows, and I am particularly pleased that the Statement refers in its opening paragraph to

“putting consumers and the environment first”.

We had a discussion in this House at the time of the Water (Special Measures) Bill on whether the environment was given a voice equal to that of consumers. I was always in favour of giving more voice to the environment, so I am pleased that the Secretary of State has recognised that.

I have mentioned many times in your Lordships’ House the necessity of a single, strong regulator, and I welcome this. That involves abolishing Ofwat and taking over parts of the work of the Environment Agency and other regulators. We must recognise that Ofwat over many years allowed the balance sheets of the water companies to be transformed by private equity-increased leverage. That was agreed by Ofwat without any regard to the consequences for the environment. Despite the Environment Agency always claiming that it does not have enough resources, it has considerable resources. The problem is that it never gave sufficient priority to controlling pollution in rivers and on beaches.

I have some questions for the Minister. Of course, we are all anxious to see all this put into effect. The White Paper was delayed. The Minister said that there should be some guidance later this year. I hope that there will be a new water Bill in the next Session of Parliament. Can she confirm that? Fundamentally, when can we expect to see the new regulator in operation? That is what we are all looking forward to and what the public now expect.

The Whip is making a face at me, but I think that I am allowed to ask a second question. Will the new regulator have sufficient budget to fulfil its very considerable responsibilities? We all want to see a favourable outcome to this policy in development.

[Baroness Hayman of Ullock (Lab)]

I thank the noble Duke for his broad support for the White Paper. He has been a champion of improving the situation with our water systems.

He asked about the new regulator. We intend to make formal appointments to the board of the new water regulator at the earliest opportunity. We want to get cracking with this. I am not in a position to say whether the Bill will be in the next Session or when it will come, but I reassure the noble Duke that this is a top priority for Defra. We are working very hard to bring this forward as soon as we can.

We are considering the funding arrangements that we will need, but I assure the noble Duke that the new regulator will have the power to deliver its responsibilities in full. We want to make sure that any new regulator is able to do the job and do it well.

[Lord Liddle (Lab)]

My Lords, I congratulate the Government on producing this White Paper and on putting into effect the excellent work that Sir Jon Cunliffe did in his review.

The water industry has been an example of the worst of the capitalist system—not value creation but value extraction in a major way. Obviously, a major concern of any Government is keeping down the cost of living. My fear is that we will create a situation where the Government and the regulator are under pressure from the companies to allow environmental standards to be further weakened to make the finances add up and to save them from bankruptcy. Can my noble friend assure me that we will not tolerate any of that nonsense?

[Baroness Hayman of Ullock (Lab)]

Absolutely; water companies have done an extremely good job of trashing the environment and causing pollution. This White Paper and the water Bill that we will be bringing forward are designed to stop that, to have a water system that people can trust and to have water companies that behave as we would expect them to behave. They have a responsibility for the environment. They should take that responsibility much more seriously.

[Lord Teverson (LD)]

My Lords, one of the areas that the White Paper does not even mention is the voluntary sector, particularly citizen science, which has been fundamental in calling water companies to account—in the Wye valley and other areas. As well as not mentioning citizen science, the White Paper does not mention either science or citizens, which is perhaps more worrying. What are the plans of the Government to keep this whole area of citizen science, which has been so positive in putting pressure on the water companies regarding water pollution and in motivating them to continue their work, and to somehow include this in the future? It is a resource that is wide, large, educated, willing and desperate to make sure that we have a better future.

Also, why is artesian water not mentioned in the report? In terms of long-term assets, it is one of the most important that we have. Although it is okay at the moment, it will be severely challenged in the future.

[Baroness Hayman of Ullock (Lab)]

I think that much of what the noble Lord has talked about is what I need to feed back to the department. Obviously, this is a White Paper; it is not the final version of what any Bill must look like. The noble Lord makes some very important points, particularly on citizen science. I have a personal interest in this because before I ever came to this place, I was part of the Consultation Institute, which has worked in citizen science, so I appreciate what he is saying.

We have talked about working regionally. We have talked about working with stakeholders. We have talked about the importance of that local connection if we are to succeed in making the changes that we want. Citizen science—the noble Lord is absolutely right—can play a role in that.

[Baroness Bennett of Manor Castle (GP)]

My Lords, in responding to the Front-Bench questions, the Minister said the Government are not opposed “in principle” to mutual or co-operative ownership. I am sure that will be delightful news to the Co-operative Party, which of course has been in an electoral partnership with the Labour Party since 1927.

That question of ownership is one we keep coming back to. The Minister also said that we will get a regulator with a tighter grip. But will that grip not be resisted and see coming against it the force of the damage of private ownership that the noble Lord opposite just referred to? The legal responsibility for the managers of private companies is to maximise returns to shareholders. That is going to come up against, as the Statement says, this reform being for customers and the environment, but those are set in opposition to the profit motive. Surely the only way we are going to get a water system that does indeed work for customers and the environment is if we have a public organisation managed for the public good.

[Baroness Hayman of Ullock (Lab)]

The noble Lord, Lord Teverson, talked about science and there not being a lot of it. One thing we are going to do is bring in a new chief engineer to bring more technical scientific expertise to the new regulator, which, just to come back on his point, is important.

On the modelling, the difficulty in moving away is how you are going to do it, because any new model needs to work. The evidence has shown that where there have been problems around the globe, the model has not been the problem; it has been the way that the owners have managed and dealt with the company and any problems that arise from that. I do not think we can just blame the model. We can blame the behaviour of the companies, the fact that there was not enough done to stop that behaviour sooner, and the way that the regulator has been set up—these are the problems we now want to tackle. Rather than just focusing on the model, we should focus on how we can restore confidence to consumers, how we can improve the environment and how we can set up a new system that makes sure this kind of behaviour can never happen again.

[Lord Inglewood (CB)]

My Lords, I am sure there is agreement around the whole House that the state of the water industry in this country at present is very far from satisfactory. In her remarks about the White Paper, the Minister referred to a whole number of possible initiatives and changes and regulations. Does she agree that, at the last resort, we as a society have to generate enough resources focused on these specific problems to actually bring about change? Is she confident that society will be able to generate those resources, because if not, various things are simply not going to happen?

[Baroness Hayman of Ullock (Lab)]

I thank the noble Lord for his comments. It would be useful for me to perhaps have a cup of tea with him and understand specifically which resources he is referring to, because it could be very wide-ranging.

As I have said, we want to ensure that the new regulator is set up with the sufficient funding and resources to ensure that the water companies deliver what they are supposed to be delivering—what their contracts expect them to deliver.

As the noble Duke, the Duke of Wellington, pointed out, this is about a balance between proper consumer support, decent water and the environment, because consumers have been treated very badly by water companies over the years, as has the environment. We need to get that that right, and if those are the resources the noble Lord is talking about, that is absolutely what we are fixed on delivering.

[Baroness Bennett of Manor Castle (GP)]

My Lords, since there is time, following on from the question from the noble Lord, Lord Teverson, about science and citizen science, one thing that some of that sampling is starting to expose is the level of contamination from new areas of concern, such as PFAS, pesticide contamination and microplastics and nanoplastics. My reading of this report is that it does not seem to focus on the way in which new science is uncovering new concerns for public health and environmental health from those kinds of contamination. Is that something the Government are going to look at as they go forward with the new plans?

[Baroness Hayman of Ullock (Lab)]

I can completely assure the noble Baroness that these issues are being looked at outwith these proposals. These are concerns that we are taking very seriously in the department.

[The Duke of Wellington (CB)]

My Lords, as there is still time, I will ask one further question, if the Whip will allow me. The White Paper mentions cutting leakage. The previous Government had a target of reducing leaks by 50% by 2050. It seemed to me—I asked a question in the House of the then Minister, the noble Lord, Lord Benyon—that surely that was not ambitious enough. Do this Government have an intention to change the target to something more ambitious than a 50% reduction by 2050?

--- Later in debate ---

[Baroness Hayman of Ullock (Lab)]

The problem with targets is that half the time they are not met. With the water White Paper, we are looking at ways in which we can improve the infrastructure and get proper funding into it that is also for the long term, because there is no point in putting a plaster on it if it explodes later on, which is what has been happening all the time. We need proper investment to ensure that we do not have continued leakage. That is why we are bringing the new MoT checks on water infrastructure; that is, health checks on assets such as pipes, pumps and treatment works to stop them just being left to crumble. It is about getting ahead of problems before they come into place. That is the way we resolve issues such as leaks. Up to now, water companies have mended them as cheaply as possible by just doing a mend. We had it where we live in our village; they mended it, and then it started leaking somewhere else, and so it continued—you do not resolve the problem. It is really important that we are bringing in these MoT checks and a new performance improvement regime, so that if the water companies do not do what they have agreed to do, we can really crack down on them, because this is the way we need to move forward.