Water (Special Measures) Bill [HL]

Earl Russell Excerpts

2nd reading
Wednesday 9th October 2024 Lords Chamber

[Earl Russell (LD)]

My Lords, I declare my interests as set out in the register. There is much to welcome in the Bill. There is much that we on these Benches will support. Equally, we call on Labour to be braver and bolder and to act with greater urgency. The environment cannot wait while Labour decides on the real systemic reforms that are the only solutions to this crisis.

The most positive thing in the Bill is the acknowledgment of the scale of the problem and the signal from Government that further, more fundamental measures, beyond this Bill, will be tabled in this Parliament. I give Labour my thanks for this. With this we finally have a potential starting point for change. The Bill is a welcome first step, but the Bill alone is far from a comprehensive solution. It is a list of useful measures, but if the Government think that simply blocking the payment of bonuses to poorly performing water company executives and a few other measures will resolve the sewerage crisis, there are real grounds for further thought.

Since privatisation 35 years ago, we have witnessed one of the worst environmental crises in the UK, with unabated and unprecedented pollution. Just 14% of England’s rivers and streams are in good ecological health. In 2023, there were some 3.6 million hours of untreated sewage discharges in England alone. Water, water everywhere, and not a drop of it unpolluted.

Meanwhile, water companies have paid at least £78 billion in dividends, while failing to invest adequately in the infrastructure required. At the same time, they have piled on £64 billion net in debt, when the water companies had been debt-free at the point of privatisation. The regulatory system is broken and has failed to hold companies to account. When researching this speech, I was astonished to find that Ofwat has to give 25 years’ notice to revoke a water licence.

Measures such as monitoring outflows, banning bonuses, automatic fines, lowering the burden of proof, and possible jail terms for obstruction of investigations are all welcome. The reality is that the Bill is just a list of useful, but ultimately nothing more than stopgap, measures. The real change needed is a radical and complete systematic overhaul of the whole system. Feargal Sharkey called the Bill inadequate. He rightly said:

“We want an end to pollution, clean rivers and seas. We wanted transformative action and these small steps do not satisfy that goal”.


Similarly, Charles Watson of River Action said:

“What we’ve got today is a long list of measures that will cost the government nothing and is really not going to fix anything because it’s the system that’s broken”.


The review of water health is welcome. Is the Minister able to confirm that the review will be independent of government, with an independent chair? When will it start work, and when is it expected to complete? Steve Reed has said that a “full review” of the water sector will take place over the course of this Parliament. I hope that Labour has the courage to be brave. It also needs to find its own policies and grasp the reform nettle. Why is more comprehensive legislation not yet ready, after some 100 days, on such a fundamental issue?

The broken system and the consequences of light-touch regulation were all issues at the general election. Our rivers, streams and lakes have been polluted to the point of ecosystem collapse in some cases. I am proud that my party has led the campaign on these issues, which cut through to people on all sides of the political spectrum. The broken system saw the polluter paid time and again, instead of the “polluter pays” principle ever being applied.

My warning to Labour is that the people who voted for it did so with an expectation that real action would be taken to resolve this mess, and that it would be undertaken at scale and pace. The Liberal Democrat position is clear: out-of-control water companies must be forced to put the interests of the environment before profits. They must be held to account for their corporate failings. Our policies include plans to abolish Ofwat and install a clean water authority—a regulator with real powers. We would turn private water firms into public benefit companies—the quickest and least costly method of resolving this mess. England remains the only country in the world to have privatised its entire water system, and for good reason.

The hard part about scrutinising the Bill is that the important parts of the puzzle are not in it at all. They are yet to come, and we do not know exactly when they will arrive and what they will say. I remain to be convinced that, even with further legislation, Labour can keep private water companies and the existing regulation architecture, including Ofwat, in place, and pull off the magic trick of protecting the environment, making regulation fit for purpose, securing the billions of investment and protecting bill payers in the midst of a cost of living crisis.

Can the Minister reaffirm that, where water companies systematically use overflows to dispose of untreated sewage in dry conditions, it is the Government’s intention to swiftly prosecute them? Enforcement powers exist already—water industry bosses can be sent to prison under certain circumstances—but these powers have hardly ever been used. Since 2001, the DWI has brought only three prosecutions and given two cautions. Are the Government clear that the regulators will have a firm touch and prosecute breaches?

It is welcome that the Environment Agency will be able to levy automatic fines and recover costs, but cost recovery is retrospective and does not pay for the enforcement today. The Environment Agency had its budget cut almost in half between 2009 and 2019. Will this Government properly fund enforcement? Laws cannot be enforced without effective regulators. We need fundamental regulatory reform. The Bill could be strengthened through the inclusion of environmental and clean-water duties on Ofwat. Companies that persistently breach obligations should face the prospect of special administration. We need much larger fines that are a real deterrent. We need legislation which ensures that funds from fines will be invested in environmental projects through the water restoration fund. Enforcement is still based solely on ecological impact, with no requirement to restore areas that have been severely polluted in the past. We need more investment in mechanisms and processes that work with nature—so-called nature-based solutions. All water companies should be required to implement pollution reduction plans. Ofwat should have a statutory duty applied to contribute to meeting our climate and nature targets.

The Bill has many measures coming in at different times and subject to different consultation processes by associated regulators and the need for many measures to be approved by statutory instruments. When does the Minister envisage that all the measures contained in the Bill will be enacted? Will the Minister agree to work with your Lordships’ House to ensure that measures in statutory instruments are able to be debated on the Floor of the Chamber as far as is possible? Finally, I worry that the villain of the piece is the lack of funding for enforcement measures. Only real reform, determination and hard cash will ever change this.