Water (Special Measures) Bill [Lords]

Emma Hardy Excerpts

Report stage
Tuesday 28th January 2025 Commons Chamber

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

I beg to move, That the clause be read a Second time.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

With this it will be convenient to discuss the following:

New clause 1—Water Restoration Fund—

“(1) No more than 60 days after the day on which this Act is passed, the Secretary of State must by regulations make provision for the establishment, operation and management of a Water Restoration Fund.

(2) A Water Restoration Fund is a fund—

(a) into which any monetary penalties imposed for specified offences must be paid, and

(b) out of which payments must be made for expenditure on measures to improve the quality of the freshwater environment in England.

(3) The Secretary of State must by regulations list the specified offences for the purpose of this section, which must include—

(a) any relevant provisions of the Water Resources Act 1991, including—

(i) section 24(4) (unlicensed abstraction or related works or contravening abstraction licence); 22 Water (Special Measures) Bill [HL];

(ii) section 25(2) (unlicensed impounding works or contravening impounding licence);

(iii) section 25C(1) (contravening abstraction or impounding enforcement notice);

(iv) section 80 (contravening drought order or permit);

(v) section 201(3) (contravening water resources information notice);

(b) regulations under section 2 of the Pollution Prevention and Control Act 1999 (regulation of polluting activities etc);

(c) regulations under section 61 of the Water Act 2014 (regulation of water resources etc).

(4) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.

(5) The Secretary of State may by regulations made by statutory instrument add to the list of offences specified in subsection (3).

(6) The provisions in this section replace any existing provision for the sums received for specified offences, including in section 22A(9) of the Water Industry Act 1991 (penalties).”

This new clause would require all funds from fines on water companies for environmental offences to be ringfenced for the Water Restoration Fund, for spending on freshwater recovery.

New clause 2—Abolition of the Water Services Regulation Authority—

“(1) The Water Industry Act 1991 is amended as follows.

(2) For section 1A (Water Services Regulation Authority) substitute the following—

‘1A Abolition of the Water Services Regulation Authority

(1) The body corporate known as the Water Services Regulation Authority (in this Act referred to as “the Authority”) is abolished.

(2) All references to the duties and functions of the Authority in this Act or any other enactment are null and void.’

(3) Omit Schedule 1A (The Water Services Regulation Authority).”

This new clause abolishes Ofwat.

New clause 3—Impact of the Act on the Environment Agency—

“The Secretary of State must, within 12 months of the passing of this Act—

(a) review the impact of this Act on the Environment Agency;

(b) consider whether the Environment Agency requires any additional resources to meet the additional requirements placed upon it by this Act.”

New clause 4—Duty to publish maps of sewage catchment networks—

“After section 205 of the Water Industry Act 1991 insert—

‘205ZA Duty to publish maps of sewage catchment networks

(1) Each relevant undertaker must publish a map of its sewage catchment network.

(2) A map published under this section must illustrate any relevant pumping stations, pipes, and other works constituting part of the undertaker’s sewerage network.

(3) Maps published under this section must be published within 12 months of the passing of this Act, and must be updated whenever changes are made to the sewage catchment network or the components listed in subsection (2).

(4) Maps published under this section must be made publicly accessible on the undertaker’s website.’”

New clause 5—Duty to prevent chemical pollutants entering the water environment—

“After section 68 of the Water Industry Act 1991 (Duties of water undertakers and water supply licensees with respect to water quality), insert—

‘68A Duty to prevent chemical pollutants entering the water environment

(1) It shall be the duty of a water undertaker to take such steps as are necessary to reduce and prevent chemical pollutants, including but not limited to poly- and perfluorinated alkyl substances, entering the water environment.

(2) In fulfilling its duty under subsection (1), a relevant undertaker must publish a strategy outlining how it intends to reduce and prevent chemical pollutants entering the water environment.

(3) In developing a strategy under subsection (2), a relevant undertaker must consult with appropriate agencies, including but not limited to—

(a) the relevant Government department;

(b) the Authority;

(c) the Environment Agency; and

(d) the Drinking Water Inspectorate.

(4) A strategy under subsection (2) must include consideration of how the costs of reducing and preventing chemical pollutants entering the water environment are to be borne or recovered, where such consideration must prevent such cost recovery from resulting in additional charges being made upon consumers.’”

New clause 6—Licence conditions about nature recovery—

“In the Water Industry Act 1991, after section 17FB insert—

‘17FC Nature recovery

(1) reducing flood risk and pollution incidents, improving water quality and benefiting nature restoration in their catchment area.

(2) The Authority must not take any action that discourages or prevents a relevant undertaker from making an investment in accordance with subsection (1).’”

This new clause would make it a condition of all water companies’ licences to consider nature-based solutions to flood risk, improving water quality and benefiting nature restoration in their catchment area, and prevent the regulator from discouraging or stopping such investments.

New clause 7—Review of price review process—

“In section 2 of the Water Industry Act 1991, after subsection (2B) insert—

‘(2BA) In furthering its objectives and purposes under subsection (2A), the Authority must, within 12 months of the passing of the Water (Special Measures) Act 2025, review its practices as to reviewing price limits.

(2BB) A review under subsection (2BA) must consider—

(a) whether the current practice of price reviews every five years should be replaced with an annual, or otherwise more frequent, system;

(b) how changes to inflation and other financial or economic changes could or should be reflected in prices charged by water companies;

(c) how any future system of price reviews could better support undertakers in planning and delivering investments beyond a single asset management plan period.’”

New clause 8—Prohibition on bail-out of water company shareholders and creditors—

“(1) The Secretary of State and His Majesty’s Treasury must not directly or indirectly discharge, assume, or guarantee any debts of legal entities in any water company group subject to proceedings under section 24 of the Water Industry Act 1991 (special administration orders made on special petitions), except in accordance with subsection (2).

(2) The special administrator of a water company may reduce the debts owed by the regulated entity to its creditors by up to 100 per cent, taking into account the future forecast expenditure over the short, medium and long term and subject to the administrator’s confidence in the company’s ability to accommodate this spending.

(3) The prohibition set out in subsection (1) and the reduction of debts set out in subsection (2) must not include pension, wage and other obligations owed to employees, excluding any past or current member of a board of directors, within the water company group.”

This new clause aims to allow up to 100% of debts to be cancelled in the event of special administration proceedings, taking into account the scale of investment required to hit the future targets established by the Authority.

New clause 9—Ofwat to publish guidance on debt levels after administration—

“In section 2 of the Water Industry Act 1991, after subsection (2D) insert—

‘(2DZA) For the purposes of ensuring that relevant undertakers are able to finance the proper carrying out of their functions under subsection (2A)(c), the Authority must establish guidelines to be followed by relevant undertakers who have been in special administration.

(2DZB) Guidelines produced under subsection (2DZA) must—

(a) set out a maximum level of debt which can be accrued by the undertaker;

(b) set out a process for agreeing capital expenditure necessary for service improvements, bill increases, and changes to operating costs while the undertaker is subject to the Special Administration Regime;

(c) state the penalties which will be imposed for breaches of such guidelines, which may include—

(i) financial penalties;

(ii) prohibitions on the payment of dividends or other bonuses; or

(iii) such other special measures as the Authority deems appropriate.’”

New clause 11—Duty on sewerage undertakers to monitor overflows at sewage treatment works, pumping stations and on the sewer network—

“(1) The Water Industry Act 1991 is amended as follows.

(2) In section 94—

(a) after subsection (1)(b) insert—

‘(c) to make provision for the accurate collection of data relating to its performance in fulfilling its duties under paragraphs (a) and (b).’

(b) after subsection (2) insert—

‘(2A) In performing its duties under subsection (1)(c), a sewerage undertaker must—

(a) install volume flow meters in all locations where sewage overflows occur, including sewage treatment works, pumping stations and on the sewer network for which it is responsible;

(b) establish appropriate required capacities for each sewage treatment works and pumping station;

(c) publish information on the data and calculations used to establish such required capacities; and

(d) install all required monitoring tools within 12 months of the passing of this Act.’”

New clause 12—Rules about performance-related pay—

“(1) The Water Industry Act 1991 is amended as follows.

(2) After section 35D (inserted by section 1 of this Act) insert—

‘35E Rules about performance-related pay

(1) The Authority must issue rules prohibiting a relevant undertaker from giving to persons holding senior roles performance-related pay in respect of any financial year in which the undertaker has failed to prevent all sewage discharges, spills, or leaks.

(2) The rules issued under subsection (1) must include—

(a) provision designed to secure that performance-related pay which, if given by a relevant undertaker, would contravene the pay prohibition on the part of the undertaker, is not given by another person;

(b) that any provision of an agreement (whether made before or after the issuing of the rules) is void to the extent that it contravenes the pay prohibition;

(c) provision for a relevant undertaker to recover any payment made, or other property transferred, in breach of the pay prohibition.

(3) For the purposes of subsection (1)—

(a) “performance-related pay” means any payment, consideration or other benefit (including pension benefit) the giving of which results from the meeting of any targets or performance standards on the part of the relevant undertaker or the person to whom such payment, consideration or benefit is given;

(b) a person holds a “senior role” with a relevant undertaker if the person—

(i) is a chief executive of the undertaker,

(ii) is a director of the undertaker, or

(iii) holds such other description of role with the undertaker as may be specified.’”

This new clause creates a new section in the Water Industry Act 1991 to require Ofwat to ban bonuses for water company bosses if they fail to prevent sewage discharges, spills, or leaks.

New clause 13—Rules about competitive procurement in water infrastructure—

“(1) The Water Industry Act 1991 is amended as follows.

(2) After section 35A insert—

‘Rules about competitive procurement in water infrastructure

(1) The Authority must issue rules requiring relevant undertakers to use competitive procurement processes in respect of procurement relating to water infrastructure.

(2) If the Authority considers that a relevant undertaker is contravening the rules, the Authority may give the undertaker a direction to do, or not to do, a particular thing specified in the direction.

(3) It is the duty of a relevant undertaker to comply with a direction given under subsection (2), and this duty is enforceable by the Authority under section 18.

(4) Rules under this section may—

(a) make different provision for different relevant undertakers or descriptions of undertakers;

(b) make different provision for different purposes;

(c) make provision subject to exceptions.

(3) The Authority may from time to time—

(a) revise rules issued under this section, and

(b) issue the revised rules.’”

New clause 14—Ofwat consideration of pollution targets for price reviews—

“(1) The Water Industry Act 2011 is amended as follows.

(2) After section 17I insert—

‘“17IA Duty to have regard to pollution targets in carrying out price reviews

When carrying out a periodic review for the purpose of setting a Price Control in respect of one or more relevant undertakers, the Authority must have regard to the performance of the relevant undertaker or undertakers against pollution targets across the previous five years.’”

New clause 15—Database of performance of sewerage undertakers—

“(1) The Water Industry Act 1991 is amended as follows.

(2) In Chapter 3 of Part II (Protection of customers etc), after section 27ZA (Power to require information for purpose of monitoring) insert—

‘27ZB Duty to establish database

(1) It shall be the duty of the Authority to establish and maintain a database containing information relating to the performance of sewerage undertakers.

(2) The database must—

(a) be publicly and freely accessible;

(b) enable uploaded information to be updated in live-time;

(c) contain such data or information as the Authority thinks is necessary for the purposes of public transparency as to the performance of sewerage undertakers; and

(d) contain—

(i) current and historic data; and

(ii) data and information which has been independently collected or analysed including—

(a) the start time, end time and duration of all sewage spill events,

(b) flow data from flow monitors,

(c) the location of each flow meter from which flow data is provided.

(3) The Authority may make rules about the provision of data and information under this section.

(4) Rules under subsection (3) must include rules relating to information provided about the location of flow meters.

(5) The Authority may impose penalties on undertakers who fail to provide such information as is required by this section.’”

New clause 16—Establishment of Water Restoration Fund—

“(1) The Secretary of State must, within 60 days of the passing of this Act, make provision for the establishment, operation and management of a Water Restoration Fund.

(2) A Water Restoration Fund is a fund—

(a) into which any monetary penalties imposed on water companies for specified offences must be paid, and

(b) out of which payments must be made for expenditure on measures—

(i) to help water bodies, including chalk streams, achieve good ecological status, and improve ecological potential and chemical status;

(ii) to prevent further deterioration of the ecological status, ecological potential or chemical status of water bodies, including chalk streams;

(iii) to enable water-dependent habitats to return to, or remain at, favourable condition;

(iv) to restore other water-dependent habitats and species, especially where action supports restoration of associated protected sites or water bodies.

(3) The Secretary of State must, by regulations, list the specified offences for the purposes of this section, which must include—

(a) any relevant provisions of the Water Resources Act 1991, including—

(i) section 24(4) (unlicensed abstraction or related works or contravening abstraction licence);

(ii) section 25(2) (unlicensed impounding works or contravening impounding licence);

(iii) section 25C(1) (contravening abstraction or impounding enforcement notice);

(iv) section 80 (contravening drought order or permit);

(v) section 201(3) (contravening water resources information notice);

(b) any relevant regulations under section 2 of the Pollution Prevention and Control Act 1999 (regulation of polluting activities etc) related to water pollution;

(c) regulations under section 61 of the Water Act 2014 (regulation of water resources etc).

(4) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.

(5) The provisions in this section replace any existing provision for the sums received for specified offences, including in section 22A(9) of the Water Industry Act 1991 (penalties).”

New clause 17—Rules about borrowing—

“After section 154B of the Water Industry Act 1991 (financial assistance for major works) insert—

‘Chapter III

Rules about borrowing for undertakers

154C Restrictions on undertakers relating to borrowing

(1) The Secretary of State may by regulations made by statutory instrument implement a limit on borrowing by a relevant undertaker.

(2) Where a relevant undertaker has total borrowing exceeding the limit set by regulations made under subsection (1), the relevant undertaker may not make a payment of dividends, capital, assets, or interest to shareholders or controlling entities.

(3) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.’”

This new clause would enable limits to be placed on the amount of money that can be borrowed by a water or sewerage undertaker, and prevent an undertaker who has exceeded such limits from being able to pay dividends to shareholders.

New clause 19—Civil penalties: equivalent reduction to customer bills—

“(1) The Secretary of State must make provision for any monetary penalties imposed on a water company to result in equivalent reductions to the amounts charged to customers by the relevant water company.

(2) In fulfilling its duties under subsection (1), the Secretary of State must arrange, annually—

(a) for the total amount of monetary penalties imposed on a water company in the previous year to be calculated;

(b) for that total to be divided by the number of customers of the water company;

(c) for each customer’s next bill from the water company to be reduced by that figure.

(3) Any reduction applied under this section must be indicated on a customer’s statement of account.

(4) In this section, ‘water company’ has the meaning given by section 6(5).”

This new clause would provide for any fines imposed on water companies to result in equivalent reductions to customers’ bills.

New clause 20—Principles of best regulatory practice—

“In section 2 of the Water Industry Act 1991, after subsection (4) insert —

(4A) For the purposes of having regard to the principles of best regulatory practice, the Authority shall not employ any individual who has been employed by a relevant undertaker in the preceding three years.”

New clause 21—Environmental duties with respect to protected landscapes—

“After section 4 of the Water Industry Act 1991 insert—

‘4A Environmental duties with respect to protected landscapes

(1) Where a relevant undertaker operates, or has any effect, on land within protected landscapes, that undertaker must—

(a) Secure and maintain “high ecological status” in the water in these areas by 2028;

(b) further the conservation and enhancement of wildlife and natural beauty;

(c) improve every storm overflow that discharges within these areas by 2028;

(d) reduce the load of total phosphorus discharged into freshwaters within these areas from relevant discharges by 2028 to at least 90% lower than the baseline as defined in Regulation 13(1) of the Waste Water Targets set under the Environment Targets (Water) (England) Regulations 2023.

(2) A relevant undertaker must be put into special administration, and not be eligible for a further licence, if it fails to—

(a) demonstrate adequate progress each year;

(b) meet the targets in subsection (1).

(3) Within one year of the day on which the Water (Special Measures) Act 2025 is passed, the Secretary of State must lay a report on the undertakers’ implementation of the environmental duties in subsections (1) and (2) before Parliament.

(4) Following the first report being published under subsection (3), a progress report on implementation must be included in the annual environment improvement plan, issued under section 8 of the Environment Act 2021.

(5) The Secretary of State must by regulations make provision requiring an undertaker to achieve bespoke objectives for specific iconic and the most culturally and ecologically significant waterways, including, where appropriate, complete removal of sewage discharge from the undertaker’s infrastructure.

(6) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.

(7) In this section—

“protected landscapes” includes national parks, national landscapes and national trails;

”land” includes rivers, lakes, streams, estuarine and other waterways;

”High Ecological Status” means the classification of water bodies defined in Regulation 6 of The Water Environment (Water Framework Directive) (England and Wales) Regulations 2017.’”

New clause 22—Consultation on public ownership of water companies—

“(1) The Secretary of State must within three months of this Act coming into force, publish a public consultation on making provision for the transfer of ownership of undertakers to public ownership.

(2) The consultation must consider—

(a) the process of transferring private water companies to public ownership;

(b) the circumstances in which water companies will be transferred to public ownership;

(c) the establishment of new public bodies to manage water services;

(d) transition arrangements for employees, contracts, and ongoing operations;

(e) governance structures for publicly-owned water services, including provisions for local democratic control and accountability.

(3) The Secretary of State must, within twelve months of the passing of this Act, lay before both Houses of Parliament a report on this consultation.”

New clause 23—Special administration for breach of environmental and other obligations—

“(1) Section 24 of the Water Industry Act 1991 (special administration orders made on special petitions) is amended as follows.

(2) After subsection (2)(a), insert—

‘(aa) that there have been failures resulting in enforcement action from the Authority or the Environment Agency on three or more occasions to—

(i) maintain efficient and economical water supply,

(ii) improve mains for the flow of clean water,

(iii) provide sewerage systems that are effectually drained,

(iv) comply with the terms of its licence, or

(v) abide by anti-pollution duties in the Environmental Protection Act 1990, Water Resources Act 1991, or the Environmental Permitting (England and Wales) Regulations 2016 (SI 2016/1154);’

(3) After subsection (2), insert—

‘(2A) In support of an application made by virtue of subsection (1)(a) in relation to subsection (2)(aa), the Secretary of State must compile and present to the High Court records of—

(a) water pipe leaks

(b) sewage spilled into waterways, bathing waters, and private properties, and

(c) falling below international standards of effective water management.’”

This new clause aims to require the Secretary of State to place a water company into special administration arrangements if they breach certain environmental or other conditions.

New clause 24—Special administration: criminal convictions—

“After subsection (2)(e) of section 24 of the Water Industry Act 1991 insert—

‘(f) that has been the recipient of two or more criminal convictions in the last five years.’”

This new clause aims to exert pressure on companies to operate within the law by preventing water companies with numerous criminal convictions from remaining in business.

New clause 25—Companies to be placed in special measures for missing pollution targets—

“In section 2 of the Water Industry Act 1991, after subsection (2D) insert—

‘(2DZA) For the purposes of ensuring that the functions of water and sewerage undertakers are properly carried out, the Authority must establish—

(a) annual, and

(b) rolling five-year average pollution targets which must be met by water and sewerage undertakers, and the penalties to be imposed for failure to meet such targets.

(2DZB) The performance of a water or sewerage undertaker against such targets must be measured through independent analysis of monitoring data.

(2DZC) A timetable produced under subsection (2DZA)(b) must require the following reductions in the duration of sewage spill events, using the annual total hours’ duration of all sewage spill events recorded by Event Duration Monitors, based on an average from the last five years, as a baseline—

(a) a 25% reduction within five years;

(b) a 60% reduction within ten years;

(c) an 85% reduction within fifteen years; and

(d) a 99% reduction within twenty years.

(2DZD) A water or sewerage undertaker which fails to meet pollution targets set out by the Authority will be subject to such special measures as the Authority deems appropriate, which may include—

(a) being required to work on improvement projects with or take instruction from the Authority, the relevant Government department, or such other bodies or authorities as the Authority deems appropriate; and

(b) financial penalties.’”

New clause 26—Independent review: companies exiting a special administration regime—

“(1) The Secretary of State must, within six months of the passing of this Act, either—

(a) commission an independent review, or

(b) take steps to extend the terms of reference of any existing independent review or commission,

to consider the merits of changing the law to provide that a water company exiting a special administration regime becomes a company mutually owned by its customers.

(2) A review under subsection (1) must consider—

(a) the general merits of mutual ownership of water companies in such circumstances, and

(b) what model of mutual ownership would be most suitable.

(3) The Secretary of State must, as soon as practicable after receiving a report of a review under subsection (1), lay before both Houses of Parliament—

(a) a copy of the report, and

(b) a statement setting out the Secretary of State’s response to that report.”

This new clause would require the Secretary of State to commission an independent review of the potential merits of changing the law so that a water company exiting a special administration regime becomes a company mutually owned by its customers.

Amendment 23, in clause 1, page 1, line 11, at end insert—

“(1A) The Authority must use its power under subsection (1) to issue rules which require—

(a) the interests of customers, and

(b) the environment,

to be listed as primary objectives in a relevant undertaker’s Articles of Association.”

Amendment 15, in clause 1, page 2, line 3, at end insert—

“(d) requiring the management board of a relevant undertaker to include at least one representative of each of the following—

(i) groups for the benefit and interests of consumers;

(ii) groups for the benefit and interests of residents of the areas in which the undertaker is operational;

(iii) experts in water and sewerage policy and management; and

(iv) environmental interest groups.”

Amendment 16, in clause 1, page 2, line 3, at end insert—

“(d) preventing a relevant undertaker from employing any individual who has been employed by the Authority in the preceding three years.”

Amendment 17, in clause 2, page 4, line 34, after “occurrence” insert “and impact”. Amendment 19, in clause 2, page 5, line 15, after “occurrence” insert “and impact”.

Amendment 18, in clause 2, page 5, line 17, at end insert—

“(ea) the use the undertaker plans to make of nature-based solutions for reducing the occurrence and impact of pollution incidents,”.

Amendment 11, in clause 3, page 7, line 35, at end insert—

“(e) the volume of the discharge.”

Amendment 12, in clause 3, page 7, line 38, leave out “subsection (1)(d)” and insert “subsections (1)(d) and (e)”.

Amendment 1, in clause 3, page 8, line 5, at end insert—

“(c) be published on the home page of the undertaker’s website.”

This amendment would ensure that information regarding a discharge from an emergency overflow must be published on the home page of the undertaker’s website.

Amendment 13, in clause 3, page 8, line 5, at end insert—

“(c) be uploaded and updated automatically, where possible;

(d) be made available on the undertaker’s website alongside searchable and comparable historic data.”

Amendment 14, in clause 3, page 8, line 5, at end insert—

“(3A) The undertaker must ensure that, within 12 months of the passing of this Act, appropriate monitors are installed to collect the information required by subsection (1).”

Amendment 22, in clause 3, page 8, line 27, leave out from start to “in” and insert

“a Minister with specific responsibility for issues relating to the coast,”.

Amendment 2, in clause 3, page 9, line 23, at end insert—

“141H Failure to report discharge from emergency overflows

(1) If a relevant undertaker fails to comply with its duties under section 141F—

(a) the undertaker commits an offence, and

(b) the chief executive of the undertaker commits an offence, subject to subsection (2).

(2) It is a defence for the chief executive to prove that they took all reasonable steps to avoid the failure.

(3) A person who commits an offence under this section is liable, on summary conviction or conviction on indictment, to imprisonment for a term not exceeding 5 years or an unlimited fine, or both.”

This amendment would make it an offence for an undertaker to fail to comply with its duty to report discharges from emergency overflows.

Amendment 3, in clause 3, page 9, line 23, at end insert—

“141H Restriction on the use of emergency overflows in areas used for aquatic sports

(1) A sewerage undertaker must not permit a discharge from an emergency overflow in an area used for aquatic sports.

(2) In this section, an “area used for aquatic sports” is a section of any body of water connected to and within a one mile radius of—

(a) the clubhouse of a rowing club affiliated with British Rowing,

(b) a Royal Yacht association training centre or the clubhouse of an affiliate member, and

(c) the properties or facilities used by any organisation that the Secretary of State deems to provides water-based sporting activities for the purpose of teaching, training or leisure.

(3) If a relevant undertaker fails to comply with its duties under section (1)—

(a) the undertaker commits an offence, and

(b) the chief executive of the undertaker commits an offence, subject to subsection (4).

(4) It is a defence for the chief executive to prove that they took all reasonable steps to avoid the failure

(5) A person who commits an offence under this section is liable, on summary conviction or conviction on indictment, to imprisonment for a term not exceeding 5 years or an unlimited fine, or both.”

This amendment creates an offence for a sewerage undertaker to use an emergency overflow in an area used for aquatic sports.

Amendment 20, in clause 4, page 9, line 29, leave out

“use that is to be made of”

and insert

“priority that is to be given to”.

Amendment 21, in clause 9, page 13, line 40, leave out from “duties” to end of page 14, line 2.

Government amendment 4.

Amendment 9, in clause 12, page 15, line 34, leave out from “to” to “such” in line 36 and insert “recover from its creditors”.

Amendment 26, in clause 12, page 15, line 39, at end insert—

“(2A) The Secretary of State may not require or permit any modified charges to be imposed on persons who do not receive services from the company for the purposes of making good any SAO loss.”

Amendment 10, in clause 13, page 18, line 13, leave out from “to” to “such” in line 15 and insert “recover from its creditors”.

Amendment 27, in clause 13, page 18, line 18, at end insert—

“(2A) The Secretary of State may not require or permit any modified charges to be imposed on persons who do not receive services from the company for the purposes of making good any SAO loss.”

Amendment 24, in clause 15, page 21, line 4, leave out subsections (2) to (8) and insert—

“(2) The provisions of this Act come into force on the day on which this Act is passed.”

Government amendments 5, 6, 7 and 8.

[Emma Hardy]

What a delight it is to be back in the Chamber debating this transformational Bill. I will keep my opening comments brief, because I know that many want to speak, and I will respond to amendments tabled by hon. Members when closing this debate after hon. Members have spoken to them, as is established practice.

I want to start by thanking all members of the Public Bill Committee for their careful consideration and scrutiny of the Bill and, dare I say, their comradery in discussions and debates. It is clear that this is an area that everyone acknowledges is in need of change and reform. I also thank the Chairs, the hon. Member for Brigg and Immingham (Martin Vickers) and my hon. Friend the Member for Ealing Central and Acton (Dr Huq). It was a pleasure to serve under them.

Since being in Committee, I have had several further insightful conversations on the Bill with Members from across the House and on the amendments tabled by the Government for consideration on Report, which I will take the opportunity to speak to now. I will start with Government amendment 4, which is a minor and technical amendment that ensures that clause 10 encompasses new enforcement functions arising from the changes made to clause 2 in the other place.

Government amendment 4 clarifies that cost recovery powers for the Environment Agency, expanded by the provisions in clause 10, also extend to costs incurred when enforcing the requirement to publish implementation plans. That requirement was added on Report in the Lords after cross-party discussions and collaboration. The amendment also clarifies that EA cost recovery powers concerning both pollution incident reduction plans and implementation reports are available for plans covering areas that are wholly or mainly in Wales, as well as for plans covering England, which are already included in clause 10. Such clarifications ensure that the EA regulators in both England and Wales can fully recover costs for the extent of their water company enforcement activities and carry out their duties and functions effectively.

The Government have tabled amendments 5 to 7 in order to commence clause 1 on Royal Assent. That will give Ofwat and companies certainty on when the powers to make rules on remuneration and governance will come into force and will therefore be useful to companies in planning for the 2025-26 financial year. Commencement of clause 1 on Royal Assent will ensure Ofwat can implement its rules as soon as possible following its statutory consultation with relevant persons, which include the Secretary of State, Welsh Ministers and the Consumer Council for Water. I know that some Members have expressed concerns around the timeline over which Ofwat’s rules will come into effect. I therefore hope the alteration to the commencement provisions for clause 1 will reassure those Members that the Government and the regulators are absolutely committed to ensuring Ofwat’s rules are put in place as quickly as possible.

I now turn to new clause 18, which is the most substantial of the Government amendments. As I have stated before, this Government are a Government of service, and we are absolutely committed to taking action to address water poverty. We are working with industry to keep existing support schemes under review to ensure vulnerable customers across the country are supported. We also expect companies to hold themselves accountable for their public commitment to end water poverty by 2030 and will work with the sector to ensure appropriate measures are taken to deliver that.

That is why we have tabled the new clause, which adds to the existing powers to provide for special charging arrangements for customers in need. The new provision will enable water companies to provide consistent support for consumers across the country. It will also allow for automatic enrolment on any future scheme and broader information sharing between public authorities and water companies. The clause imposes a requirement for consultation on any future scheme, and it also amends the Digital Economy Act 2017 to ensure that water companies identify eligible customers and that they get the full support to which they are entitled.

[Sir John Hayes (South Holland and The Deepings) (Con)]

I am grateful to the Minister for giving way and for her ongoing discussions about drainage and local authorities and other water-related matters. On the issue of water poverty, can she confirm that, either as part of the Bill or as an adjunct to it, when water companies fail to deliver an adequate service in new build situations—where new houses are built, but the water infrastructure is insufficient to furnish those new houses with the proper supply of water—the Bill and the regulatory environment that she has just described will allow customers to get their entitlement and to free themselves from water poverty, as she put it?

[Emma Hardy]

I thank the right hon. Gentleman for his intervention and also for the many times that he has talked to me about internal drainage boards since I became a Minister. On his question, if customers are not getting the service to which they are entitled, that is absolutely something that should be taken through Ofwat and the regulators. I am more than happy to pick that matter up with him outside the Chamber.

I hope that Members across the House will agree that new clause 18 is a welcome addition to the Bill, ensuring that the Government have the necessary powers in place to bring forward secondary legislation in future—once we have thoroughly considered all options for improving the support available for vulnerable customers.

[David Chadwick (Brecon, Radnor and Cwm Tawe) (LD)]

Does the Minister agree that it is supremely unjust that, in Wales, customers face some of the highest bills for their water, despite having some of the lowest incomes in the United Kingdom?

[Emma Hardy]

Bills have obviously had to increase in the latest price review because we have had record levels of under-investment in our infrastructure. However, new clause 18 is intended to ensure greater fairness. It is important for struggling customers that he, as the local Member of Parliament, is talking to the water companies to ensure that they are informed about the support mechanisms that are available, and about how they can access them and everything else to which they are entitled.

[Graham Stuart (Beverley and Holderness) (Con)]

I am extremely grateful to the Minister for giving way. She will know that just 7% of outfalls were monitored when Labour last left office. I am pleased to say that that figure is now 100%. Does she not agree that new clause 16 would ensure that the fines collected from polluting water companies through the water restoration fund, which was founded by the Conservatives in 2022, are used to improve and prevent further deterioration of our waterways, including our precious chalk streams? Will she now do what we all look to Ministers to do, which is pirouette at the Dispatch Box, recognise the rightness of the cause and change course?

[Emma Hardy]

The right hon. Gentleman is indeed an eager beaver. As much as I do not wish to pour water on his enthusiasm, I will of course respond to all the amendments at the end of this stage of the Bill, as protocol expects. I hope he is able to contain his excitement, and is looking forward to my final comments on that area. And I shall be practising my pirouettes in anticipation.

I wish to pay special thanks to the Welsh Government, the Deputy First Minister and the officials who have worked so openly and collaboratively with the UK Government throughout the development and passage of this Bill. I also thank the Senedd for their consent, which we received on 21 January. I look forward to continuing to work closely with our Welsh counterparts to protect our rivers, lakes and seas, particularly those that cross our borders.

[Catherine Fookes (Monmouthshire) (Lab)]

I thank my hon. Friend for all her work on this Bill. Does she agree that we have made much more progress on banning bosses’ bonuses in the six months that we have been in office than the Conservatives did in 14 years?

[Emma Hardy]

That excellent point was well made by my hon. Friend. I hope all hon. Members agree that the amendments tabled by the Government will only strengthen this Bill and will support new clause 18.

[Several hon. Members rose—]

--- Later in debate ---

[Emma Hardy]

I thank Members for their constructive engagement throughout this debate. As I have said before, it is wonderful to hear the shared passion across this House for improving the performance of the water sector so that it better delivers for customers and the environment. Given the limited time that I have to address over 50 amendments—I am not looking in any one direction—

[Jerome Mayhew (Broadland and Fakenham) (Con)]

The Minister makes reference to the very limited time. Why is that? This is a Government who hold general debates on Mondays and Thursdays. They have no business, yet we have less than two hours to debate this really important issue.

[Emma Hardy]

The hon. Member and I served on the Public Bill Committee, where we spent much time discussing many of the amendments. I cannot comment on decisions about the business of the House and urgent questions.

As I say, I will do my absolute best to cover all the points raised by hon. Members. I hope they accept that I generally try to be generous with interventions, but I want to put on the record my response to the amendments. I hope the House will give forgive me.

A number of hon. Members have tabled amendments that seek to increase transparency around water company operations and pollution incidents. The Government absolutely agree that greater transparency is needed to better enable the regulators and the public to hold water companies accountable. Although I have previously explained why it is not practical to prohibit all discharges from emergency overflows, which are a necessary safety valve in our sewage system, I reiterate this Government’s commitment to reducing the harm caused by sewage discharge. Ensuring that all emergency overflows are monitored is a critical step in enabling the outcomes that we all want to see. Information on the frequency and duration of discharges will help to direct investment to further reduce sewage discharges into our waterways, and to better enable the public to make informed decisions about accessing their local waterways.

[Mr Gagan Mohindra (South West Hertfordshire) (Con)]

Will the Minister give way?

[Emma Hardy]

I will, but I have only 10 minutes.

[Mr Mohindra]

I thank the Minister for being so generous with her time. As she will be aware, the United Kingdom has most of the world’s chalk streams, and the River Chess runs through my constituency. How can she ensure that we continue to monitor our unique environment and protect it from the threat of overflows, to which she just referred?

[Emma Hardy]

I share the hon. Gentleman’s passion and love for chalk streams—the rainforests of the United Kingdom. Part of this Bill will drive the performance change in the industry that we want to see and reduce sewage discharges, which are doing such damage to such precious habitat.

Although some Members have called for the Government to go even further on monitoring, I reassure the House that we have carefully considered how best to increase transparency without driving unmanageable increases in customers’ bills. As promised in Committee, I have provided a factsheet on this issue, and I can make it available in the House of Commons Library. Rolling out event duration monitors over two price review periods will provide the best value for money for customers and the environment, and does not risk compromising water companies’ ability to deliver other vital improvements to our sewage system.

It is important that we direct investment at improving the sewage network to decrease overflow charges, and not just at monitoring, particularly where it does not provide valuable insight into the harms associated with discharge. There is a balance to be struck, and I believe we have got it right. The public know that there is too much sewage in our waterways. Whichever way we look at it—be it through volume or duration—they know there is too much. The focus must be on reducing it.

[Anna Dixon (Shipley) (Lab)]

My hon. Friend talks about the importance of water quality. Will she join me in commending campaigns such as the Ilkley Clean River Group and other citizen scientists across the country? In the absence of data collected under the Conservatives and the work of the Environment Agency, they had to do the work themselves to expose the sewage scandal.

[Emma Hardy]

I wholeheartedly pay tribute to the Ilkley Clean River Group and to the work that my hon. Friend does in championing it in this House.

[Ms Polly Billington (East Thanet) (Lab)]

I remind my hon. Friend how much this matters to my constituents in East Thanet. We are surrounded on three sides by the sea, yet we manage to clean up our water. However, I was struck by the fact that the Reform manifesto did not contain one word about water pollution or safety. I also want to point out the emptiness of the Opposition Benches in this debate. That should be put on the record.

[Emma Hardy]

I thank my hon. Friend for her intervention. I would have thought that this would be an important issue for all political parties.

[Alison Hume (Scarborough and Whitby) (Lab)]

Residents in Grosmont in my constituency have had a van parked in the street processing raw sewage, with a pipe left open in the street, for months between the processing of the sewage and the holding tank being emptied. Does my hon. Friend agree that disgusting incidents such as these illustrate our crumbling water infrastructure and the importance of the Bill, which will ringfence funding for vital infrastructure?

[Emma Hardy]

I wholeheartedly agree with my hon. Friend. What she is witnessing in the streets of her constituency is a perfect example of the crumbling infrastructure that we have inherited.

[Several hon. Members rose—]

[Emma Hardy]

Let me try to get through my remarks.

If it becomes feasible in future for companies to install monitors more quickly, they will be encouraged to do so. In addition to reporting requirements for emergency overflows, other measures in this Bill will ensure that water companies have robust plans to reduce pollution incidents and empower the regulator to punish wrongdoing effectively. This includes requirements to produce pollution incident reduction plans and implementation reports, as set out in clause 2 of the Bill, and requirements for water companies to consider the use of nature-based solutions in the production of their drainage and wastewater managements plans, as set out in clause 4.

The transparency provided by these measures will drive a culture change ensuring that water companies have the right incentives to reduce discharges of sewage into our precious rivers, lakes and seas. Let me be clear that the Bill also provides comprehensive powers for Ofwat to enforce the requirements introduced by the Bill to increase transparency, including through use of significant fines. I can reassure the House that where discharges are found to have breached permit conditions, the regulator will not hesitate to take action. In relation to new clause 14, I also make it clear that Ofwat has a duty to secure that companies are able to finance the delivery of their statutory obligations, including meeting pollution targets.

The Government are committed to acting as fast as possible to reduce sewage pollution in our waterways, and already have stretching pollution targets in place, informed by detailed analysis and extensive engagement. These targets will drive £60 billion of investment between 2025 and 2050, and almost £12 billion of that investment will begin this year, improving 2,800 storm overflows by 2030. I hope this reassures the House that, where water companies do not comply with requirements around pollution incidents and the reporting of those pollution incidents, the regulator will not hesitate to take action.

[Pippa Heylings]

The water restoration fund was created by the previous Government, yet not one penny of the £11 million levied on water companies between 2022 and 2023 reached any restoration of the waterways. Does the Minister agree that our precious chalk streams could be helped by the water restoration fund being continued?

[Emma Hardy]

As I have mentioned, I am a huge fan of our chalk streams. The hon. Member is right to point out that the much-lauded water restoration fund that some Members are so keen to talk about was established in November 2022, yet 18 months later the grand total of the number of projects supported by it was zero.

A number of hon. Members have also put forward suggestions to improve information and data sharing more broadly. The hon. Member for Beaconsfield (Joy Morrissey) has put her name to some of these amendments. Although the Government do not think it necessary to bring forward legislation in this space, we are actively considering ways of making data more accessible to the public through non-legislative means. This includes information on water companies’ performance and data on local sewer networks in map form, which must be made available free of charge under the Water Industry Act 1991.

[Matt Rodda (Reading Central) (Lab)]

Will the Minister give way?

[Emma Hardy]

This is going to be my last one.

[Matt Rodda]

I am grateful to the Minister for giving way. Her comments on this point will be welcomed by many of our local residents. Will she provide further information about the greater powers for Ofwat?

[Emma Hardy]

This Bill will, of course, empower Ofwat to take necessary action where it finds wrongdoing, including through changes to remuneration under clause 1. I know my hon. Friend cares a lot about this.

[Several hon. Members rose—]

[Emma Hardy]

I am sorry, but I will have to stop taking interventions if I am to respond to all the amendments.

Water UK has published a centralised map on its website of discharge data from all storm overflows operated by English water companies. I genuinely found it clear and useful, so I encourage all hon. Members to have a look.

I have heard calls from across the House for reforming the planning frameworks, the regulators and the incentives that govern the water industry model. Although I understand and, believe me, fully share hon. Members’ frustrations with the performance across the water sector, the fundamental issues facing the water industry and the regulatory framework in which it operates can no longer be addressed in a piecemeal way. I have spoken at great length throughout the Bill’s passage about the independent commission led by Sir Jon Cunliffe, which will make recommendations to fundamentally transform how our water system works.

The broad-ranging commission is bringing together a wide range of expertise to make recommendations in line with eight objectives to deliver the necessary reset to ensure a resilient, innovative and sustainable water sector in England and Wales. It will report to the Government by summer 2025. This includes specific objectives to review the roles, structures, duties and powers of the regulators, the planning frameworks—including the price review process—and the resilience of water companies. That includes financial resilience, which I know matters to many hon. Members.

Points have been raised about taking water companies into public ownership, and the Government have repeatedly made it clear that we do not consider nationalisation to be within the commission’s scope. Nationalisation would cost over £90 billion, and it would take years to unpick the current ownership model, at the expense of delivering and addressing more immediate public priorities. However, the commission will consider alternative water industry models within its scope. I take this opportunity to invite all hon. Members to put forward their views to the commission through the upcoming call for evidence, which will be launching soon.

[Dr Hudson]

I am grateful to the Minister for giving way. I suspect that the Government do not agree with our water restoration fund, but if the Cunliffe review says that the water restoration fund should be reinstated, will the Minister commit to doing so?

[Emma Hardy]

Despite our political differences, the hon. Gentleman and I had a very interesting and—what is the right word?—comradely debate in Committee.

As we explained in Committee, conversations on the water restoration fund are still ongoing. I honestly do not believe that primary legislation is needed, which Conservative Front Benchers know, as they established the fund without primary legislation. I gently point out, as I have already mentioned, that within the 18 months of its establishment under the previous Government, the fund did absolutely nothing.

[Claire Young (Thornbury and Yate) (LD)]

Will the Minister give way?

[Emma Hardy]

I have two minutes remaining, so I have to skip through as much as I can, as I know Members will want me to answer questions, particularly on the SAR.

Some hon. Members have expressed concern about the rules on performance-related pay and consumer representation. Although the Government agree it is crucial that consumers’ voices are heard and considered in water company decision making, we have already taken action on this. It is not necessary to require environmental experts to be placed on company boards because, following the agreement made with my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs in his first week in office, nine of the 16 companies have updated their articles of association to include a social and environmental commitment. DEFRA is working with all of them to ensure they do the rest as soon as possible.

I agree with the hon. Member for Westmorland and Lonsdale (Tim Farron) about the representation of environmental non-governmental organisations on company boards. Members of water company boards are subject to a number of duties under the Companies Act 2006, including a duty to promote the success of that company. A director’s fiduciary duties may conflict with the organisational objectives of the environmental group in question, thus preventing their objective participation in board membership. We cannot have a situation in which an environmentalist on a water company board is not comfortable with their duty to promote the success of that company.

I produced a factsheet detailing how the SAR is used to ensure the continued provision of vital public services. However, I remind the House of the facts. I am being very clear: the shortfall recovery power can only be used to recover shortfalls in repaying Government funding. For the last time, I hope, it cannot and would never be used to recover financial creditor or shareholder losses relating to investment in the company. If the amendments were accepted as proposed, it would involve a radical change to insolvency policy, which has been a long-established practice since 1986.

Question put and agreed to.

New clause 18 accordingly read a Second time, and added to the Bill.