Water and Sewage Regulation (Industry and Regulators Committee Report)

Baroness Taylor of Bolton Excerpts

Monday 16th October 2023 Lords Chamber

[Baroness Taylor of Bolton (Lab)]

My Lords, it is a pleasure to follow the noble Lord, Lord Agnew, who in the committee gave us many examples of practical things that could be done. I am glad he has had the opportunity to raise them in the House today.

To say that the investigation into the water companies was timely is a great understatement. There has been a great deal of public concern about the performance of the industry, the profits taken out and the state of our rivers and beaches. The early response to our report shows the great contribution that House of Lords committees can make to debates on wider issues. The immediate response from the press—from the Times to Feargal Sharkey and experts—has been very positive in welcoming the recommendations in the report. The water companies seem to have regarded it slightly as a wake-up call and to have understood that they cannot get away with the kind of approach they had in the past—although part of their approach was to give an apology and say, “But it wasn’t really us; it was all the people who went before us”.

On the other hand, the Government’s response, as my noble friend said, was curt and dismissive. The Secretary of State, in particular, thinks she has immunity to every problem that has ever arisen in her department.

I have to admit that I never wanted privatisation in the first place, and I was part of the Front-Bench team in the Commons opposing it. I recently saw the figures I used during the wind-up there, which showed that the Labour Government from 1974 to 1979 invested £1,254 million in the water industry per year, but that from 1979 onwards, when the Conservatives came in, there was a sudden drop. Investment went down to £926 million, then £899 million, then £818 million. In other words, there was deliberate underinvestment to try to make a case for privatisation, because we were told that was the only way the investment would come.

We had big promises from the water companies—they were going to solve the problems of leaking pipes and everything else—and we were promised that Ofwat would be the great guardian of the consumer and the taxpayer. It has been very different in reality. Investors have done very well; the rest of us have had serious problems and been left with a situation in which we now need many critical improvements, because those promises were not fulfilled. The water companies have done well, but everybody else, as my noble friend pointed out, has been left with considerable problems. This industry has not invested, and very big figures are needed in investment for the future.

We have seen the dividends taken out of water companies and the big salaries paid to many executives working there. While the companies may say that they recognise the problems, there is no guarantee that they will be easily able to provide the investment that is now needed. Therefore, we now face a very significant and serious dilemma.

Investment is needed—my noble friend pointed out the scale—but who will pay for it? Those who ripped us off are long gone. Many of those companies have been sold on and assets have changed. Water companies maximised their returns but many debt issues remain. We as consumers and taxpayers will not get the money back from the investments that were promised; we paid our water rates and so on. The big question still remains as to how these issues will be dealt with and who is to pay.

There is another very big issue: the nature of regulation. Is Ofwat fit for purpose? It has been too weak. Has it not had enough powers? Has it chosen not to use those powers? Has it lacked government support, or has it just been outsmarted by the water companies? Whatever the fact of how this has happened, we are in a situation where regulation of the water industry, and probably a whole range of industries, needs to be completely overhauled. These companies, and the people regulating them, need to act in a totally different way in future.