Water (Special Measures) Bill [Lords]

Caroline Nokes Excerpts

Tuesday 11th February 2025 Commons Chamber

Consideration of Lords message

[Madam Deputy Speaker (Caroline Nokes)]

I confirm that nothing in the Lords message engages Commons financial privilege.

Clause 1

Rules about remuneration and governance

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Emma Hardy)]

I beg to move,

That this House insists on Commons Amendment 1 to which the Lords have disagreed, disagrees to Lords Amendment 1B, to the words restored to the Bill by the Lords’ disagreement to Commons Amendment 1, and proposes Amendments (a) and (b) to the Bill in lieu of the words left out by Commons Amendment 1.

[Madam Deputy Speaker (Caroline Nokes)]

With this, it will be convenient to consider the following Government motion:

That this House insists on Commons Amendment 2 to which the Lords have disagreed, and proposes Amendment (a) in lieu of the words so left out.

[Emma Hardy]

I am delighted to have another opportunity to debate this transformative Bill in this Chamber. I thank all Members for continuing to take an interest in this important piece of legislation, which demonstrates our shared commitment to improving the water sector. Today, this House will consider amendments made in the other place.

I recognise that there is huge interest across this House in wider issues relating to water. Though our debate today is solely focused on the changes made to the Water (Special Measures) Bill in the other place during the Lords’ consideration of Commons amendments on 5 February, I look forward to future opportunities to discuss wider concerns and actions, for example through work relating to the independent commission.

I turn first to the changes made in the other place that would require water companies to regularly report to Ofwat on their financial structure, and to ensure that that information could be readily accessed and understood by the public. It is important to highlight that water companies are already required under their licences to publish by a set date financial performance metrics within their annual performance reports. That includes the interest on their borrowings, their financial flows and an analysis of their debt. If water companies do not comply with these licence conditions, Ofwat can take enforcement action, including issuing fines.

However, the Government recognise that there is an opportunity to make financial data more accessible for members of the public. The Government have therefore worked at pace with Lord Cromwell and Ofwat to develop a way to achieve our shared objective of improving the transparency and accessibility of reporting on key financial metrics. The insertion of a new section 35E into the Water Industry Act 1991 will make it clear that water companies should provide an intelligible overview of their financial position at least once a year. That overview should include a summary of the significant changes that have taken place over the past 12 months, and will cover key aspects of water companies’ financial position, such as their share capital and debt.

--- Later in debate ---

[Dr Neil Hudson (Epping Forest) (Con)]

It is a great pleasure to speak in this final stage of the Bill. Before I start my remarks, I will respond to the pertinent question about levels of borrowing for water companies asked by my friend and former colleague on the Environment, Food and Rural Affairs Committee, the hon. Member for Brent West (Barry Gardiner). The Minister is right that Government amendment (a) is about reporting rather than the levels of borrowing. It is regrettable that the Government chose to reject the Conservative amendment in Committee that would have allowed the Secretary of State to set the amounts of borrowing for water companies. I hope that, as we move towards Cunliffe review, the Government may look at that again so that we can have tighter control on the water companies and their levels of debt.

Before I make my remarks on the Lords messages, I will say that getting to the Bill to this stage has been the result of much hard work across this House and the other place. I thank everyone, both front of house and behind the scenes, who has worked hard to get us here. That includes: the Minister for her willingness to listen to those across the House throughout the Bill’s passage; similarly, her counterpart in the other place, Baroness Hayman; those who have worked to draft the Bill and amendments; the Bill Committee; parliamentary staff from the Department for Environment, Food and Rural Affairs; and campaign groups and stakeholders who provided their insights to the Committee to help make the Bill even stronger, not least the Conservative Environment Network, the Angling Trust, and the Wildlife and Countryside Link.

Sadly, however, as the Opposition have stressed throughout the Bill’s passage in this House and the other place, this final stage of the Bill risks being yet another missed opportunity to act holistically on this important issue. It is unfortunate that the Government have been unwilling to go much further than their copy-and-paste approach, rebooting measures that the Conservatives took in government to address this issue.

We heard in previous stages how the bans on bonuses for water company chief executives and ensuring that 100% of storm overflows are monitored—up from 7% under Labour—were introduced by the previous Conservative Government. None the less, ever the optimist, I came to the Chamber hoping that the Government might be willing to reconsider their position on the issues of the amendments and the reasoning from the other place, which cover familiar ground. We debated these issues in the previous stages, not only in this House but in the other place.

At the heart of the Lords amendments is a theme that His Majesty’s most loyal Opposition have emphasised throughout the Bill’s passage: accountability. The previous lack of accountability for water companies created many of the issues that the water industry has faced. The Conservatives in government and now this Government have attempted to try and address that. This is another chance for the Government to go even further and inject some of what is really needed into their approach.

I turn to Lords amendment 1B, which reverses the Government’s decision to remove measures from the Bill that would require financial reporting to be collected by Ofwat for its remuneration guidance. We know that one of the most worrying aspects of our water industry has been its financial resilience, as Ofwat’s “Monitoring financial resilience” report back in November made clear, with 10 companies at need of increased monitoring and three in the highest category of risk, with closer monitoring required at a more senior level with Ofwat.

We all know, too, the cases involving specific water companies and the real risk that financial mismanagement brings for the survival of those companies and the water provision that their consumers rely on. It is disappointing, therefore, that the Government have been unwilling throughout the Bill’s passage to accept Conservative amendments, or Cross-Bench amendments such as this one by Lord Cromwell, offered in a constructive spirit, which may have gone some way to address the issue. None the less, the Opposition truly want to see better financial resilience. Therefore, on financial reporting in particular, we want the Government to accept this as a reasonable step to regain accountability on financial resilience.

The Lords amendment to clause 1 would quite simply mean that, when it comes to financial reporting, there would be nowhere to hide for water companies and the decisions they make in this area. I note that, following the Lords’ rejection of Commons amendment 1, the Government have tabled amendment (a) to Lords amendment 1B, which will go some way to improving the financial transparency of water companies, as a formal concession to Lords amendment 1B.

Subsection (4) of Government amendment (a) states that what water companies must publish should be decided “from time to time”. I hope the Minister can see that such vagueness might be a problem moving forward, as “from time to time” could allow the regulator not to review when the need arises, because it had done so a few years prior or even longer ago, and justify that by arguing that it was doing so “from time to time”, as the law outlines. Even if nothing or little would need changing from year to year, or every few years, surely it would be better to require this at least to be reviewed at precise regular intervals so that the most valuable information is provided in the best possible format.

That aside, however, His Majesty’s most loyal Opposition acknowledge the Government’s concession on financial transparency, and indeed public access, including characteristics of capital and debt. We are pleased to see that addition to the Bill.

In the same spirit, I move on to Lords reason 2A to disagree with Commons amendment 2, which urges this House to consider again the requirement that any rules under clause 1 be brought into force by means of a statutory instrument from the Secretary of State. Again, this amendment is familiar territory that we have debated at many stages, having been a measure consistently called for by His Majesty’s Opposition in the other place and in this House, both in the Chamber and in Committee. We have maintained throughout that accountability is needed to deliver and enforce change in the water industry, but that must include the Government of the day, no matter which party they are.

It is odd that, on the one hand, this Government have claimed that they want a tight grip on water companies, while on the other, they consistently oppose a measure that would allow them to do exactly that. It is odd, too, that in Committee, the Liberal Democrats sought to amend the same part of the Bill that would have that effect. Their intentions were to bring in guidance as soon as possible, but there is a distinction between intent and effect. Removing some of the same lines would have had the same exact effect in ridding the Bill of the statutory instrument requirement that this amendment seeks to maintain.

The Government have argued—as the Minister has again today—that they fear that Ofwat’s flexibility to adapt their rules as necessary could be impeded in some way. But statutory instruments remain a timely measure to introduce any changes if needed. So once again, the Government’s argument does not stack up. It is only right that we, as parliamentarians elected by the British public to represent their interests with our voices and votes, are able to look at the proposed rules and exercise our ability to voice concerns if they risk falling short of protecting the public’s interests. Why deny the public and Members of this House the ability to uphold accountability of the water industry, which has been missing for too long? As such, once again we have urged the Government to accept what we believe is a reasonable set of amendments in the name of accountability.

Now, at the 11th hour, the Government have tabled Government amendment (a) in lieu of Lords reason 2A that disagrees with Commons amendment 2, the amendments tabled and argued for by my Conservative friends in the other place the noble Lord Roborough and Lord Blencathra, and add that the remuneration and governance rules may not be not be enacted until they have been provided in draft to the Secretary of State. There is a move towards some Government accountability, but sadly, not what the Opposition had wanted: a statutory instrument laid by the Secretary of State and approved by both Houses.

None the less, I am grateful that the Government have listened to Lord Roborough, me and the other Conservative colleagues who have argued for more accountability, and that they have moved a little towards us with this amendment. However, I am still unclear why the Government appear scared of full accountability. Sadly, I fear that some of these last-minute concessions, which we would like to go further, look like the Government trying to avoid double insistence and the Bill failing. We do not wish the Bill to fail, as we all want the same thing: to see our waters improve and for the Government to continue with the measures that the Conservatives set in train in the last Parliament. In that spirit, we will not stand in the way of the Government’s amendments.

There has been many a chance for the Government to grab opportunities to bolster the Bill with both hands. Many chances have been missed throughout its passage, not least by the Government continually rejecting our water restoration fund to ringfence fines to restore local waterways, rather than to balance the Treasury’s books. They did not accept our sensible proposals to go further with nature-based solutions to flood risk. They rejected our proposals for fines on water companies to result in equivalent reductions in customers’ bills, and our sensible proposals to allow the Secretary of State to place limits on the amount that water companies can borrow. They blocked our proposals to protect consumers in different parts of the country from paying for failing water companies that do not supply them.

As the Bill progresses and the Cunliffe review begins, I again urge the Government, for the sake of our water, environment, constituents, communities and, indeed, fairness, not to let political pride and dogma stand in the way of doing the right thing and making water legislation the best it can be. We wish the Bill well as it ends its journey in this House.

[Madam Deputy Speaker (Caroline Nokes)]

I call the Liberal Democrat spokesperson.

--- Later in debate ---

[Emma Hardy]

I thank the hon. Gentleman. As I have said throughout, he will have to wait and see, but to imply that legislation is required for the fund would be dishonest. I am sure the hon. Gentleman does not want his honesty to be questioned. The implication that legislation is required for the water restoration fund is simply not true.

As I outlined in my opening speech, I recognise that there remains a strong interest in issues wider than the scope of today’s debate. I reiterate that the Bill is not the limit of our ambition. The Government will continue to work with hon. Members across the House to discuss and make progress in addressing the fundamental issues facing our water sector.

The hon. Gentleman mentions the words “time to time”. The wording has been specifically designed to allow Ofwat to review requirements as and when appropriate, and adapt quickly where needed. We do not want to pre-empt how often this kind of review might need to take place. To reassure him, that was discussed at length in the other place.

On parliamentary scrutiny, the Government worked with Ofwat to offer peers and MPs an opportunity to raise questions on Ofwat’s rules in a parliamentary drop-in session, providing further insight on the rules. However, that proposal was not accepted by hon. Members’ colleagues in the other place, which feels like a shame.

It has always been our intention to bring about, through the Bill, meaningful change in the performance and culture of the water sector. The amendments tabled by the Government are in keeping with that objective. I hope the House will support the Government amendments, which will ensure that the public can easily access an overview of water company financial information, and will give Ofwat a duty to issue rules on financial transparency that will commence on Royal Assent. Together, the amendments will enable the Government to take another positive step forward in restoring public trust in the water sector, which has sadly been destroyed over the past 14 years.

Similarly, I hope the House will support the Government in bringing forward amendments to ensure that Ofwat’s rules are brought forward promptly and that its independence is protected. The Government acknowledge the intention behind the changes made in the other place, but we cannot accept the risk that they create in delaying the introduction of Ofwat’s rules. I therefore hope that Members across the House will also support the Government in ensuring that these vital rules are brought forward without delay.

[Madam Deputy Speaker (Caroline Nokes)]

I am sure the Minister did not meant to imply that the shadow Minister was in any way dishonest, and she might perhaps seek to correct the record to say she felt that he was mistaken or incorrect.

[Emma Hardy]

I am very happy to issue that correction.

Question put.

A Division was called.

[Madam Deputy Speaker (Caroline Nokes)]

Division off.

Question agreed to.

Resolved,

That this House insists on Commons Amendment 1 to which the Lords have disagreed, disagrees to Lords Amendment 1B to the words restored to the Bill by the Lords’ disagreement to Commons Amendment 1, and proposes amendments (a) and (b) to the Bill in lieu of the words left out by Commons Amendment 1.

Motion made, and Question put,

That this House insists on Commons Amendment 2 to which the Lords have disagreed, and proposes amendment (a) in lieu of the words so left out.—(Keir Mather.)