Water (Special Measures) Bill [ Lords ] (Fourth sitting)

Debate between Emma Hardy and Neil Hudson

Committee stage
Tuesday 14th January 2025 Public Bill Committees

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

I thank the hon. Member for Epping Forest for tabling new clause 3, which would require a water company to reduce customer bills by an equivalent amount to the total monetary penalties paid in the previous year by that company. I will start by clarifying that we expect the cost of the penalties to be borne by the companies, not by the customers. However, I would also like to reassure the hon. Member that there are existing procedures in place to ensure that customers are reimbursed for a water company’s poor performance.

As the independent economic regulator of the water industry, Ofwat is best placed to ensure that customers are reimbursed appropriately if water companies perform poorly. Ofwat already sets specific performance targets for water companies in the five-yearly price review. Those performance commitments hold water companies to account for the outcomes that customers pay for. Where they are not met, companies must reimburse customers through lower water bills in the next financial year.

Those performance targets take a holistic view of water company performance and consider wider factors beyond companies receiving penalties. Performance targets include customer-facing commitments, such as water supply interruptions; environmental commitments, such as pollution incidents, storm overflows and bathing water quality; and commitments related to asset health, such as repairs to burst mains. As a result of underperformance in the last financial year, Ofwat is currently requiring 13 companies to return £157 million to customers.

The hon. Member’s new clause is therefore not appropriate for this Bill, given that it would overlap with existing procedures. However, there is simply not enough improvement in performance across the water industry. That is why we have launched the independent commission, which will look at issues, including performance, and make recommendations on how to transform the water sector.

I hope that the hon. Member for Epping Forest is reassured about how customers will be reimbursed for poor performance, and about the steps that we are taking to improve performance. On that basis, I ask him to withdraw his new clause.

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

I thank the Minister for her comments. I am afraid that I am not fully reassured, and we would like to see provision in the Bill for any fines imposed on water companies to have a concomitant effect—a direct effect—on customer bills. This well-intended measure has been tabled to create a link between the two, so although I hear the Minister’s comments, we would still like to press new clause 3 to a vote.

Question put, That the clause be read a Second time.

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[Dr Hudson]

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

New clause 4 amends the Water Industry Act 1991 to insert new rules regarding the limits to the amount of money that can be borrowed by a water company, which the Secretary of State for the Department for Environment, Food and Rural Affairs would be able to enact by means of statutory instrument. Although we have discussed statutory instruments in Committee, the Opposition hope that the Government will recognise that this proposed statutory instrument power needs to be made.

New clause 4 ensures that water companies are not excessively borrowing money, as that is ultimately bad for bill payers. At the heart of our concern about financial resilience is the borrowing in the industry and the over-leveraging because of that borrowing. It is clear that there is a direct link between financial resilience, problems connected to borrowing and the very survivability of the water firms. That should be of huge concern to all of us.

Consumers are concerned that the provision of their water is at risk, and we as legislators must work out how to deal with the issues, including the financial implications, relating to the risk of nationalising the water companies that have no other way of providing services. That can reverberate back to the consumers again, who may face increased costs because of the financial support that the Government have to provide to keep water companies afloat. In other words, tackling the choices that water companies may have made, and will make in the future, including borrowing choices, is an issue that we are required to correct for the very future of our water industry.

I reiterate my profound respect for the way that both the Minister and Baroness Hayman have conducted themselves in this debate. I note that Baroness Hayman expressed concern in the other place that putting a fixed percentage limit on borrowing could be a risk to investment at a crucial time for financial resilience and investment in the water industry. That is why my Conservative colleague, Lord Roborough, revised his amendment on that in the other place to give the Secretary of State the power to set limits by means of a statutory instrument. I pay tribute to my colleague and friend Lord Roborough for working so hard to raise the issue of financial resilience in the other place through this amendment.

We are not saying that a hard limit has to be set on borrowing levels, but merely giving the Secretary of State the option to do so if they feel it necessary to protect consumers from the negative effects of the water industry. I come back to the point I made in previous sittings: giving the powers to the Secretary of State, a democratically elected Minister in His Majesty’s Government, through statutory instrument, improves democracy and accountability for the water companies. I do not think the Labour Government need to shy away from this constructive amendment, which gives the Secretary of State the ability to hold the water companies to account, as we all want to do.

If the Minister does not see the need for the amendment —I am not pre-empting her, but I imagine that is how her response will go—can she clarify how much borrowing the Government consider acceptable for a water company, and what they will do to reduce the impact on the consumer of excessive borrowing and spending? The new clause also limits the amount of dividends that can be paid out to shareholders if the water company has exceeded the borrowing limit. Should a limit be set, it would therefore make water companies fairer in their practices to bill payers, as when a company borrows it will have less of an impact on consumer bills.

While in government, the Conservatives gave Ofwat the powers to link performance to payouts to shareholders and water company management. New clause 4 further aims to protect consumers from companies that are failing to prioritise their customers. Considering those points, the Opposition believe that the Government could move a bit on this, and enact democratic accountability with the statutory instrument. We hope that they will look on new clause 4 favourably.

[Emma Hardy]

I thank the hon. Member for Epping Forest for tabling the new clause, which would implement a limit on borrowing by water companies. I note that Baroness Hayman had multiple discussions with Lord Roborough on the similar amendment that he put forward in the House of Lords, and that Lord Roborough was satisfied with our reasoning for not introducing restrictions on borrowing in the Bill.

Debt has been rising in companies since privatisation, and it of course accelerated under the previous Administration. In some instances, levels of debt have reached a point at which the financial resilience of companies could be threatened. We have been clear that Ofwat must continue to have a strong focus on company financial resilience to secure efficient long-term investment and deliver long-term value for money for customers and the environment.

I assure the Committee that Ofwat is already taking steps to closely monitor debt levels as part of its annual monitoring financial resilience report, and it will take action where the financial resilience of a company is threatened. Ofwat published its final determinations for the 2024 price review in December, which included a confirmed £104 billion upgrade for the water sector. Investment in the water sector is financed up front by investors, and repaid by customers over time to smooth the impact on bills. Borrowing is therefore a key part of the process.

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[Dr Hudson]

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

New clause 6 is a fair and reasonable request to strengthen the Bill. Quite simply, it would do what it says on the tin by requiring the Government to report on the impact that they expect the Bill to have on water pollution and on the actual and verifiable effects that the Bill, when it becomes an Act, will have on our water quality.

It is completely agreed that accountability for addressing the quality of our water system should be at the heart of how we tackle water pollution and related issues. That should be true of every actor involved: not just the water companies, but the Government whose regulation they are expected to abide by. We cannot rightly say on the one hand that water companies should be expected to meet criteria to restore public trust, while suggesting on the other hand that the Government should not likewise work to be accountable and to uphold public trust on the issue.

Furthermore, the new clause feeds into the basic fact that ensuring that our water systems are being improved is not a one-time event that can be magically resolved with a single piece of legislation every now and then. It must be a consistent focus for the Department for Environment, Food and Rural Affairs and for all the agencies under whose remit the issue falls.

The work of agencies such as the Environment Agency is vital. I pay tribute to its hard work, not least when flooding hits, as we have discussed. We should not underestimate those on the frontline who do so much to keep people safe, to make sure that the environment is protected and to ensure that the quality of people’s water is safe and suitable.

To improve our water systems, however, the buck must stop not with the EA, but higher up: with DEFRA and the Government. The new clause would help to provide that accountability. As in our earlier discussions regarding the online publication of implementation reports, if the measures set out in the Government’s approach do not meet their targets, for legitimate reasons, the Government would have a chance to lay out exactly why not and to give a justification for their findings on the Act’s impact. Our new clause would provide a natural mechanism to ensure that long-term planning and reviews of the Act are taking place and that the Government are looking at water pollution and the actions that the water industry has taken or needs to take to further improve the situation.

We should not shy away from the fact that the new clause would build on the previous Government’s efforts to look at that point. Our plan for water set out a 25-year plan to ensure that our water companies were investing in our water system for the long term, not just while the issue was in the headlines. Again, that is why our new clause matters: because it would ensure the continued focus of Governments of all parties on the protection of our waters. That matters all the time, not just when it becomes a political or media issue.

We must also consider the evolving factors that affect the water industry and its ability to reduce water pollution. The flooding that we have seen in the past weeks has highlighted once again that our country is facing more regular extreme flooding events. In simple terms, more flooding means more excess groundwater and surface water that can enter the network, which creates more of a risk that sewerage overflows will be required to maintain our water systems.

With such events becoming more unpredictable in their timing and yet more commonplace because of extreme weather events and the effects of climate change, looking at the evolution of issues such as this will be crucial to ensuring that any measures to improve overflows and water quality are successful in the long term. We need to make decisions now that have an impact in the future, because in the long term we all want water quality to improve and to be protected for future generations. To achieve that, we need long-term and consistent attention and reflection on the policies being enacted and their effects. The new clause would help to facilitate that.

Once again, transparency is not a hindrance; it helps everybody involved in managing the quality of our water system. Trust can be maintained only if everyone tries to do what is right and the Government, of whichever political party, are no exception. We need to be trying to do the right thing. Given that, His Majesty’s Opposition believe the new clause to be a highly reasonable and fair amendment to the Bill, and we hope that the Minister might support it.

[Emma Hardy]

I will quickly note the constructive and nice way in which the hon. Member for Epping Forest is taking part in these debates. I also want to come up with more dentistry analogies, so I will be thinking of those as we keep going.

The Bill will drive meaningful improvements in the performance and culture of the water industry. In line with that, it will introduce many measures to disincentivise pollution. For example, it will provide Ofwat with legal powers to ban bonuses where companies fail to meet standards on environmental performance, financial resilience, customer outcomes or criminal liability. The Bill will also enable automatic and severe fines, allowing regulators to take swift action. It will enable the public to hold companies to account through a new requirement for water companies to produce annual reports on pollution incident reduction. Collectively, these measures will strengthen enforcement, improve transparency and disincentivise water company pollution.

The Committee and the wider public are able to see a more detailed assessment of the expected impact of the Bill via the published impact assessment. I reassure the Committee that my Department is committed to post-legislative scrutiny of primary legislation. The Department for Environment, Food and Rural Affairs will work with the cross-party Select Committee on Environment, Food and Rural Affairs to assess the impacts of the Act three to five years after Royal Assent as part of the standard practice for all new legislation. I welcome that scrutiny.

The Government therefore cannot accept new clause 6. Although we agree on the importance of understanding the impact of the Bill on environmental pollution, adding further reporting requirements to the Bill would be duplicative and unnecessary.

[Dr Hudson]

I thank the Minister for her constructive response, but the Opposition still feel that this is an important new clause in relation to the impact on water pollution, so we would like to proceed again to a formal vote.

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[Dr Hudson]

As we have gone through the Bill, there has been a lot of cross-party consensus on trying to get measures in place. I respect the efforts of the hon. Member for Westmorland and Lonsdale and the third party in trying to improve the situation, not least in such matters as nature-based solutions. From the official Opposition’s perspective, however, the hon. Member’s new clause 7 is perhaps an overly eager response. Throwing out Ofwat completely at this juncture when we want it to do its regulatory job would create more problems than he wants, whatever the intention of the new clause.

I know that the Liberal Democrats have argued that steps should be taken to set up a new regulator in some way. New clause 7 does not really introduce a specific requirement or measures to enable a transition from Ofwat to the purported new regulator. If we were to proceed with the new clause, we would simply be left in limbo and in the lurch with regard to regulation of the industry. It is not that we believe that the situation is perfect: we have debated the powers of the Environment Agency and Ofwat, and we have agreed that things are not perfect with the water industry and regulators. We have all heard at first hand about issues that we are not happy with, such as executives moving into higher-paid roles within water regulators, of which we heard evidence in the EFRA Committee in the last Parliament.

The hon. Member for Westmorland and Lonsdale generously shouted out the people who work in Ofwat and the Environment Agency, but although he will not push new clause 7 to a vote, he still talks about abolishing Ofwat. In doing that, we would be left with a vacuum while a new regulator was set up—something we can ill afford when we all agree that there is so much work to be done. A new regulator could not be established overnight; it could take months or even years while structures were being established, the personnel needed to do its everyday work were appointed and the like. Let us be honest that making such a move would not come without financial cost.

Even if that money could be raised through Government resources—ultimately, that means taxpayers’ money—we would be using it to establish a completely new infrastructure for the water regulator, rather than trying to enhance and give more power to the regulator we already have. In addition, we have to remember that its role as a regulator affects consumer bills, too. While none of us wants to see water bills rise for any of our constituents, particularly in difficult economic times, bills would have only been higher if a regulator had not been there at all. If we are left with a vacuum until a replacement mechanism is put in place, and if that takes a lot of time, do we really want to run the risk of unregulated companies raising prices even further in the meantime?

We are in agreement that the status quo has not been good enough when it comes to water companies, but progress has been made and continues to be made in that seismic task. Water companies are starting to face the financial penalties for their failures to both people and our precious environment. For example, back in November, Wessex Water was ordered to pay £500,000 for the loss of thousands of fish because of a sewage pumping failure. That very same month, Thames Water was fined over £18 million for its failure to obey rules introduced on the spending of dividends. Those incidents are not good news stories, and we should never say that they are, but they are signs that the mechanism is working. Ofwat is holding the companies to account and trying to act—it is trying to use the teeth that are there.

There are early signs that giving the regulator those teeth—which we have heard a lot about in this Committee —means that there are clear consequences for the water companies that break the rules that have been implemented. That is not the end of the story, but it is the start of the journey, as we try to hold those water companies to account. As I have also mentioned, the pathway for inspections into water company activity is increasing. It is the whole approach—from incident, to investigation, to penalty—that needs to be examined and reviewed in order to drive change, and that is what has been done and what this legislation is trying to take forward.

Although things are not perfect, we need to allow the existing legislation, as well as this new legislation, to take effect so that the regulator can get on and do its job. We should not put things in jeopardy by completely abolishing things. I note that the Liberal Democrats have tabled this new clause, and they are not pushing it to a vote, but I want to put on record the Opposition’s reservations about what they are suggesting.

[Emma Hardy]

I thank the hon. Member for Westmorland and Lonsdale once again for his thorough consideration of the Bill. I will turn first to new clause 7, which was tabled in his name and which proposes the abolition of Ofwat. As the hon. Member will be aware, and as he already mentioned in October ’24, the UK and Welsh Governments launched the independent commission to fundamentally transform how our water system works. The commission, led by Sir Jon Cunliffe, will be broad-ranging and will make recommendations in line with eight objectives, which include specific objectives considering the role, structures, responsibilities and powers of the regulator.

It is right that the commission, rather than this Water (Special Measures) Bill, is the vehicle for considering the water regulator’s roles and responsibilities. This Bill focuses on strengthening the powers of the regulators to drive improvements in performance. The Bill will not, and cannot, fix all the sector’s problems. The commission is the right place to consider the long-term future of the regulatory system and the role of the regulator. Indeed, I would argue that the Labour Government want to move away from sticking-plaster politics to fundamentally reset and transform the problems facing our country for good. I hope therefore that the hon. Member for Westmorland and Lonsdale is content that this new clause is unnecessary.

New clause 20 was also tabled by the hon. Member for Westmorland and Lonsdale. It sets out requirements for a water review that is undertaken by the Secretary of State. I think we are all agreed that we have seen years of water company underperformance, and we all agree that there is a clear need to fundamentally reset the water sector. Although I understand that the hon. Member is seeking to ensure that any review of the water sector is sufficiently thorough, the Government are confident that the commission’s scope is broad and comprehensive. Sir Jon will be supported by a range of experts from the regulatory, environment, health, engineering, customer, investor and economic sectors to effectively examine this sector as a whole, including the regulatory framework.

By setting out considerations for a water review in primary legislation, we risk prejudicing or pre-empting the outcome of the current commission, as well as its independence. The sector is facing complex challenges that require the support of customers, environment groups, investors and companies alike to address. An independent review is best placed to find solutions to those challenges, and it is critical that its independence is preserved. The commission will report its findings in summer 2025, and the Government will consider them in full before outlining the next steps. I therefore hope that the hon. Member for Westmorland and Lonsdale understands that to avoid duplication and, importantly, maintain the independence of the commission, the Government will not accept the new clause.

Water (Special Measures) Bill [ Lords ] (Third sitting)

Debate between Emma Hardy and Neil Hudson

Committee stage
Tuesday 14th January 2025 Public Bill Committees

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

It is lovely to see everybody again and it is a pleasure to serve under your chairwomanship, Dr Huq.

Clause 7 will give the environmental regulators new powers to impose automatic penalties for specified offences. The current process for imposing fixed monetary penalties for minor to moderate offending can be time and cost-intensive. To impose a penalty, the regulators must evidence beyond reasonable doubt—the criminal standard of proof—that an offence has been committed. In addition, the fixed monetary penalty amount that regulators can currently impose for certain water industry offences to that standard of proof is set at just £300. That means it is generally not cost-effective for the regulators to impose financial penalties for frequent minor to moderate offending. Clause 7 introduces automatic penalties for specified offences, which will enable the regulators to impose penalties more quickly without having to direct significant resources to lengthy investigations.

I reassure hon. Members that we will consult on the specific offences that will be in scope for the new automatic penalties and on the value of the penalties. The proposed offences will cover information requests and reporting offences, pollution offences and water resource offences. The House will also have the opportunity to debate and vote on secondary legislation before any changes are made. I hope the Committee agrees that this measure is essential for improving compliance across the water sector.

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

It is a privilege to serve under your chairship today, Dr Huq. We have no formal objection to clause 7, which imposes a duty on environmental regulators to impose penalties for offences by water company that the clause specifies. Offences have of course increased, and water bosses have been banned from receiving bonuses if a company has committed serious criminal breaches. Regulators have more powers than they used to in being able to impose larger fines for polluters without needing to go to court. The clause focuses on exactly the same principle and we therefore have no formal objections.

I raised in an earlier Bill Committee sitting—this is relevant here—that there has been an increase in the number of inspections that water companies can expect, from 4,000 a year by April this year to 10,000 a year by April of next year. In other words, what has been addressed in the past is not just regulation, but the whole pathway of the enforcement of regulations, so that regulations are not merely blunt instruments but active ones that water companies can expect to have to deal with if they do not act responsibly to their customers, the environment and the wider public.

On that last point, will the Minister clarify and ensure that these offences are and will be enforced and commit to making further amendments to the law, not only regarding the offences themselves, but also on their enforcement, if the Government believe that things need to be tightened up moving forward? Aside from those clarifications, we have no formal objections to the clause.

[Tim Farron (Westmorland and Lonsdale) (LD)]

It is a great privilege to serve under your guidance this morning, Dr Huq. We also have no objection to the clause and, in fact, we consider automatic penalties to be a positive move.

My concern is that we see water companies not paying the fines that are levied against them. We talk about minor to moderate offences, but water companies wriggle out of paying fines for much larger offences, too. I just want to probe the extent to which the automatic penalties might stretch to what are considered more serious breaches.

I mentioned an example last week in Committee. In November 2021, Ofwat launched an inquiry into sewage discharges and how water companies manage their treatment centres and networks. It found three water companies in particular to be in breach: Thames, Northumbrian and Yorkshire. It imposed fines on those three companies—a £17 million fine against Northumbrian Water, a £47.15 million fine against Yorkshire Water and a £104.5 million fine against Thames Water—but as of autumn last year, not a single penny of that has been collected. It is understood that Ofwat allocated a grand total of eight and a half people to pursuing that particular line of inquiry.

Large fines, which there is no doubt that these companies rightly face, make no difference if they are never collected. That underpins the failure of our regulatory framework—water companies clearly feel they can just run rings around Ofwat and the other regulators. We very much welcome the automatic penalties, but we remain a bit concerned and would like the Minister to clarify whether those automatic penalties would have covered fines of that size as well. Otherwise, we are very supportive of the clause.

[Emma Hardy]

Clause 8 grants the Secretary of State and Welsh Ministers the power to introduce conditions or general rules subject to which water industry abstraction and impounding licences will have effect. This provision is needed to ensure that automatic penalties under clause 7 can be applied to abstraction and impounding offences under the Water Resources Act 1991. Existing licences have been issued since the 1960s and have inconsistent conditions, making the use of automatic penalties nearly impossible.

More broadly, clause 8 allows for the harmonisation of requirements in relation to abstraction and impounding activities so that the sector operates under consistent and modern standards. A delegated power to introduce conditions or general rules through regulations is crucial in this context, because water resource management is dynamic and must be responsive to emerging challenges. I hope that hon. Members will agree that this power is needed to improve the water industry’s regulatory framework.

[Dr Hudson]

Clause 8 seeks to grant the Secretary of State and Welsh Ministers additional powers to impose conditions or general rules on water industry licences relating to abstraction and impoundment activity. His Majesty’s loyal Opposition do not have any formal objections to the clause, but I would suggest that it reinforces some of my comments on clause 6 about the need to make the Government have the powers they need to regulate as necessary a more consistent principle across the Bill.

[Emma Hardy]

I thank the hon. Gentleman for his comments. Modifying the licences individually is both expensive and time consuming, which is why we are hoping to modernise and harmonise the process under this clause. It is crucial that automatic penalties under clause 7 can be applied to abstraction and impounding offences, so this power is needed to improve the water industry’s regulatory framework. For that reason, I commend the clause to the Committee.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Clause 9

Requirement for Ofwat to have regard to climate change etc

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[Dr Hudson]

Clause 9 would introduce a new requirement for Ofwat to consider, as part of its regulatory decision making and the exercise of its powers and duties as given by the Water Industry Act 1991, the section 1 duty confirmed the Climate Change Act and section 5 of the Environment Act 2021. We have no formal objections to raise to that basic principle and no amendments that we wish to make to clause 9.

Can the Minister provide some clarity on the line that amendment 27 from the Liberal Democrats seeks to remove from the Bill? It states that Ofwat’s duty to have regard to the Secretary of State’s duty to meet environmental targets applies

“where the Authority considers that exercise or performance to be relevant to the making of such a contribution.”

Will the Minister assure the Committee that she and the Government will work with Ofwat so that it has clear guidance on when these environmental targets would be relevant, so that there are no grey areas in Ofwat’s work as it looks to enforce those targets? Can she assure the Committee that the Government will also work with Ofwat to ensure that with regard to its powers and duties in the spirit of clause 9, consumers are protected should there be any subsequent financial costs to water companies, so that we get both environmental protection and the value for money that the tax-paying consumer deserves?

I would be grateful if the Minister provided clarification on some of those questions. However, his Majesty’s loyal Opposition have no formal objections to clause 9.

[Emma Hardy]

As I am sure the hon. Member for Westmorland and Lonsdale will agree, the Government heard the strong support in the other place for adding a further environmental duty to Ofwat’s core duties to support the Government in making progress against our environmental targets. I pay tribute to Baroness Hayman for her work on this.

We understand that there are concerns around the current core environmental performance of the water industry and around the role and responsibilities of the water industry regulators. It is for this reason that the Government tabled an amendment in the other place that will require Ofwat to have regard to the need to contribute to achieving targets set under the Environment Act 2021 and Climate Change Act 2008 when carrying out its functions.

This amendment will further ensure that Ofwat’s work to contribute to the achievement of environmental targets complements the work of Government, who are ultimately responsible for the 2021 Act and the 2008 Act targets. It is important to note that the independent commission announced by the Government will take a full view of the roles and responsibilities of the water industry regulators. Any changes made now to Ofwat’s duties may therefore be superseded by the outcomes of the commission. I hope the Committee agrees that this power is needed to ensure that the environment is considered in regulatory decision making.

Amendment 27 seeks to remove Ofwat’s discretion to exercise its duty to have regard to environmental targets where it feels this as relevant. It will be for Ofwat as the independent regulator to determine how it applies the Government’s new obligation to its regulatory decision making, and how this new duty will not take precedence over other duties. It is for this reason that flexibility has been built into the drafting of this duty, ensuring that Ofwat has discretion to exercise the duty where it feels it is relevant.

Mechanically applying a duty in circumstances where it is not relevant to a particular matter would be a waste of resource. That discretion is in line with similar duties for other regulators. For example, the Financial Services and Markets Act 2000 was recently amended to provide an environmental duty for the financial regulators. It is right that as the independent regulator, Ofwat has the discretion to balance its duties and determine when it is appropriate that they are applied. The new duty introduced by the Government can be only a stopgap before more fundamental reforms are brought forward. For those reasons, we will not accept the amendment from the hon. Member for Westmorland and Lonsdale, and I hope he feels able to withdraw it.

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[Dr Hudson]

Clause 10 amends the Environment Act 1995 to allow the Environment Agency and Natural Resources Wales the power to make charging schemes to recover costs from water companies. While the Opposition wish to raise no formal objections to the clause, we would be grateful for clarification on a couple of points from the Minister.

First, can the Minister explain whether the changes in this clause to the Environment Act 1995 that allow costs to be recovered from water companies could impact consumers in any way? Although it is already possible, we must be mindful that consumers may face extra costs, which I will discuss later regarding issues with the special administration orders that the Government have laid out in clauses 12 and 13, to be debated shortly. Consumers have already been informed by Ofwat that they should expect to see bills rise—the complete opposite of what the Government had said they intended to deliver. Therefore, do the Government feel confident that they can avoid contributing to the problem of a rising trajectory of bills, at a time when trust in the industry, as we have been debating in Committee, remains low due to financial mismanagement from some water companies and, too often, consumers receive poor quality from these services?

A further question, which I would be grateful if the Minister could clarify, is what modelling have the Government done to ensure that all the costs recovered will always be to the benefit of the taxpayer and the consumer? While we all share the desire that water companies that do the wrong thing must pay to put it right, we must ensure that, when we punish those water companies, we do not hurt the end consumer, who very much deserves to be protected. I would be grateful for the Minister’s thoughts on this, but again, we have no formal, explicit objections to the clause.

[Emma Hardy]

Clause 10 requires payment by water companies. It is fair and reasonable that the regulator should recover costs associated with its regulatory functions. Ofwat will consider the regulator’s proposals to determine which costs are appropriate to be passed on. The impact assessment, which I have mentioned in previous debates, details exactly how much all of the Bill will cost the customer. All the details are in there, and I refer the hon. Member for Epping Forest to look at that if he wants the specifics on the exact numbers that each measure will take.

I thank all hon. Members who have contributed their views on clause 10. I remain of the view that clause 10 will empower environmental regulators to become self-sufficient, reducing the burden on the taxpayer to fund water industry enforcement activities. Therefore, I commend the clause to the Committee.

Question put and agreed to.

Clause 10 accordingly ordered to stand part of the Bill.

Clause 11

Drinking Water Inspectorate: functions and fees

Question proposed, That the clause stand part of the Bill.

[Emma Hardy]

We are making excellent progress on the Bill this morning. I am grateful for the opportunity to speak on the importance of clause 11. I would like to mention the unsung hero of water regulation: the Drinking Water Inspectorate.

The clause enables the Drinking Water Inspectorate to fully recover the costs for the security and emergency regulatory work that it provides to companies. I think one of the reasons that it is an unsung hero is because it does its job so well; that is why not many people have heard of it. The responsibility for security and emergencies was delegated to the Drinking Water Inspectorate in 2022, but since then it has been unable to fully recharge for that work. This clause, subject to amendments to the Water Quality and Supply (Fees) Order 2016, will ensure that the inspectorate can fully recover all costs related to security and emergencies, enabling it to scale up its enforcement activities and enhance its capacity to conduct security and emergencies checks with water suppliers.

The clause will give the DWI greater flexibility in how it structures the fees it charges water companies. It will allow the DWI to introduce new charging models that more equitably share the financial burden of regulation in the water sector. I hope the Committee agrees that the clause rightly remunerates the DWI for its security and emergencies work and allows it to design a more equitable fee structure.

[Dr Hudson]

Clause 11 extends the purposes for which water quality inspectors may be appointed to include functions relating to national security directions under section 208 of the Water Industry Act 1991, and it provides flexibility for the charging of fees for regulatory work. This is a straightforward clause to which we raise no formal objection, but once again we would be grateful for a couple of clarification points from the Minister. How will the Government increase the Drinking Water Inspectorate’s ability to monitor and audit water supplies? Does the Minister feel that the clause will improve the inspectorate’s functions? Will the Minister please explain how the Government intend to support the powers of the Drinking Water Inspectorate, beyond this clause? She praised the inspectorate, and I echo that praise, but how do the Government intend to support its capabilities?

Once again, we wish to raise no formal objections to the clause. I would be grateful for clarity on the points I have highlighted.

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[Emma Hardy]

I hope this clause will be a little less fractious than the last one—it is pretty straightforward. If a water or waste water company is about to go insolvent, it can make a winding-up petition to court, as may its creditors. If the court is satisfied that the company is insolvent, it must make a special administration order, triggering a water industry special administration regime, or SAR.

Unlike in normal administration, in a SAR the administrator must prioritise the public interest ahead of creditors. In this case, that means ensuring that water and waste water services continue. However, there is no statutory requirement for creditors or the court to notify the Government or Ofwat that a winding-up petition has been made. In addition, neither the Government nor Ofwat have guaranteed rights to be heard at the subsequent court hearings. This creates the risk that a SAR could be triggered without Government involvement. Given the essential nature of water and waste water services, a SAR presents significant risk to public safety if it is not conducted appropriately. It would be vital, in the event of an imminent SAR, for the Government to be quickly made aware of important developments and to be involved in the arrangements for how the SAR is run. Creditors are unlikely to protect the public interest as comprehensively as a Government and may exercise undue influence over a SAR if a Government are unable to make their views heard.

This clause prohibits a court from making an SAO without the Government and Ofwat being notified, and it gives both parties guaranteed rights to be heard at the subsequent court hearings. That provides a vital safeguard against the risks of a SAR being triggered without Government involvement and the potential dilution of the public interests that that could entail. This also updates the water industry’s SAR to bring it into line with more recently introduced regimes, such as energy, where these rights are standard practice. I hope the Committee agrees that these rights are essential to safeguard the public interest and modernise the water industry’s special administration regime. I commend the clause to the Committee.

[Dr Hudson]

The Opposition note that clause 14 attempts to make amendments to previous legislation so that a court may not exercise powers that it currently has with regard to an application for winding up an undertaker without providing advance notice of the petition to the Secretary of State, Welsh Ministers—as appropriate—and Ofwat, and without a period of 14 days having elapsed, as outlined in subsection (2). We also note that the clause likewise grants a further power for the Secretary of State, Welsh Ministers and Ofwat to be entitled to be heard at a winding-up petition’s hearing and any other hearing that relates to part 4 of the Insolvency Act 1986.

Again, we do not wish to raise any formal objections to this particular clause, but we ask for a couple of clarifications from the Minister, if she will indulge us. First, we would like to hear the Minister articulate what benefits this particular clause brings to the Bill. I was not fully clear from her introductory remarks about the actual benefits. Secondly, does she believe that this change to winding up a water company or any other relevant undertaker will provide a fairer winding-up process?

While we are focusing on water companies and the processes for them, we all want to ensure that the clause provides, again, protection for the consumers, who, as we agree across the Committee, have for too long faced unsatisfactory levels of service from the water industry and the practices of some water companies, so could the Minister please explain whether consumers were considered when this clause was drafted? I and others have outlined in Committee that the performance of water companies in financial resilience, as well as many other matters, has not been satisfactory and has been very upsetting for the British public. Therefore could the Minister please respond and assure the Committee that there can be no unforeseen repercussions for consumers from this clause? That is a recurrent theme as we go through line-by-line scrutiny of the Bill: are there any unintended consequences whereby the taxpayer and the end point consumer will be unfairly penalised by the legislative changes? With that in mind, we have no formal objections to this clause but again we seek clarification that the end point consumer will not inadvertently suffer detriment from this legislation.

[Emma Hardy]

To be clear, this is literally just a point of process. The provision, which is not currently available in law, says that in the event of an application to the court for a SAR, the Government will be notified at the same time. The reason, as I outlined in my opening remarks, is that we do not believe that creditors are likely to protect the public interest as comprehensively as the Government. It is a mere process clause that provides that in the event of an application to the court for special administration, the Government and Ofwat need to be informed at the same time. The Government maintain the importance of ensuring that the Government and Ofwat are notified in the event of a winding-up petition. For that reason, I urge that the clause stand part of the Bill.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Clause 15

Extent, commencement, transitional provision and short title

--- Later in debate ---

[Dr Hudson]

I support Government amendment 5, as it is a privilege amendment in accordance with the procedure for the passage of Bills between the other place and this place. We wish to raise no formal objections to this and we have no opposition to the amendment.

[Emma Hardy]

I thank all hon. Members for their contributions. Amendment 20, tabled by the hon. Member for Westmorland and Lonsdale, seeks to make all provisions in the Bill come into force on the day it receives Royal Assent. I share his urge to get on with things, which is why I am a little confused by the desire elsewhere for another water review, but we will get to that when we get to it. First and foremost, I would like to reassure the hon. Member that the Government have carefully considered the appropriate method and timing for the commencement of each clause and have made provision accordingly in clause 15. A one-size-fits-all approach cannot be justified.

For example, the emergency overflows provision will be implemented over the course of two price review periods to protect bill payers from sudden cost increases. Therefore, the commencement provision for clause 3 has been designed to allow for a staged implementation where it is needed. The Government have already committed in clause 15 to the immediate commencement of the civil penalties provisions on Royal Assent. I assure the Committee that the Government and the water industry regulators are dedicated to ensuring that all measures in the Bill are commenced and implemented as soon as possible and appropriate, to drive rapid improvements in the performance and culture of the water industry.

The hon. Member for Westmorland and Lonsdale tempts me to read through a list of every provision and when they will be enacted, but I am going to save that treat for another time and instead list the clauses, rather than going through them in detail. The provisions in clauses 5 to 8, and in 10 to 15, will all come into force automatically either on Royal Assent or two months later. Clauses 1 to 4 and clause 9 will not commence immediately after Royal Assent and will require secondary legislation to come into force, which is due to the need for regulations required to commence the powers. I am sure that the hon. Member will have thoughts to share on those provisions involving statutory instruments after Royal Assent.

I trust that the hon. Member for Westmorland and Lonsdale is reassured by the Government’s careful consideration of the commencement of each clause, which has the best interests of bill payers in mind and recognises the need to debate and discuss some of the exact details under secondary legislation. I therefore ask the hon. Member to withdraw his amendment.

Government amendment 5 removes the privilege amendment made in the other place. I like this amendment, because one of the quirks of how British politics has evolved is that we have the amendment in the Bill—I found it quite amusing. The privilege amendment is a declaration from the other place that nothing in the Bill involves a charge on the people or on public funds. It is because the Bill started in the Lords that we have to have the amendment to remove that. It recognises the primacy of the Commons, and I think it is quite fun. It is standard process for that text to be removed from the Bill through an amendment at Committee Stage.

Clause 15 sets out the extent of the Bill, when and how its provisions are to be commenced and its short title. The Bill extends to England and Wales only. As set out in the clause, the provisions of the Bill will variously come into force on Royal Assent, two months following Royal Assent, or in accordance with regulations made by the Secretary of State or Welsh Ministers. The clause makes specific provisions, such as that the commencement of clause 3 may make reference to matters to be determined by the environmental regulators.

--- Later in debate ---

[Dr Hudson]

Yes, I was aware of that. I am acutely aware of it now and congratulate my hon. Friend on securing it. It highlights the fact that there is a lot of agreement. I am sure that his debate will demonstrate cross-party consensus on the use of nature-based solutions. We debated flood mitigation in Committee last week, but the water restoration fund is pivotal to trying to improve the situation at the local level and at the local catchment level as well.

Since being introduced by the previous Government, the water restoration fund has provided £11 million for communities to repair their local waterways and restore them to the quality that they should be at—the quality to which local communities should be entitled. At the heart of the proposal is simply this: those who are at fault for the damage done to our waterways must make restoration for it. Given the facts, I find it disappointing that, despite the cross-party efforts in the other place to enact such measures, they were not listened to by the Government. I hope that in a spirit of consensus the Government will look at that in this Session.

The arguments made by the Government in the other place were not satisfactory. They objected to the principle of ringfencing the funding and to the need for the Treasury to have flexibility in how it spends the money, but in this specific case the argument does not quite stack up. Where money comes from taxation, ringfencing is not always the most reliable way to ensure the Treasury has the spending power it needs to deliver public spending, but we are talking about something completely different. Fines are much more uncertain and provide less guarantee regarding the amount of money that they will bring in. To rely on funds such as these for day-to-day broad Treasury spending simply does not make sense.

Ringfencing penalties for the water restoration fund is a much more sensible measure that allows Governments to guarantee that they can meet a specific need. In other words, those who are at fault for harming the quality of our rivers, seas, coasts and lakes make restoration for the damage caused by their action—or inaction. Given all that we have outlined, there cannot be a more justified way of directly making restoration for damage to our previous water system than the mechanism laid out by the water restoration fund. Water companies pay the fines for the damage that they have done, and local communities that are affected are empowered to restore the precious waterways that they live near.

A finer detail of the amendment that should not be ignored is the fact that we will improve chalk streams. It is unfortunately clear that, despite the Government’s pitch to the British public that they would do better than the previous Government in protecting our waterways, their actions on chalk streams do not bear that out. It was very disappointing that over the Christmas period it was revealed that plans from the Conservatives to recover our chalk streams have been laid to one side by the Government. Given that England is home to over 80% of the world’s chalk streams, the failure to act on this issue is neglect of a vital duty to protect a not only a key part of the UK’s environment, but a feature in the environment of the world. They are a precious resource that very few countries are lucky to have access to. Members across this House represent areas with chalk streams. It is a dereliction of duty to ignore that category in the UK environment.

The plans that the previous Government proposed would have given chalk streams a new status of protection. Special consideration would have been given to watercourses in road guidance, and supporting the physical restoration of the streams as key pillars of our plan would have put chalk streams back on the road to the recovery that is needed. As the deviser of the plans has said publicly, although the Government may want to focus on chalk streams in national parks and landscapes, they risk ignoring chalk streams in most need of recovery across the country. Can the Minister explain why this vital plan of action, which was ready to go, has not been fulfilled? I hope that this decision was not based on politics. We need to look at this in terms of evidence and what is best for our environment.

[Emma Hardy]

I wonder whether there has been some confusion, given that the debate on chalk streams comes later on.

[Dr Hudson]

It is actually part of our amendment.

[Emma Hardy]

Well, have a go again then.

[Dr Hudson]

Good. We are all for talking about and raising the issue of chalk streams, but it is clear that we wanted to include that in our amendment. Our amendment will therefore be a chance to give chalk streams the attention they need from this Government. The previous Government were ready to deliver that and hand the baton over to the new Government, so that they could follow through on the explicit requirement that chalk streams be considered.

The amendment is a chance for the Government to reconsider their stance on the water restoration fund. I would be grateful for clarity from the Minister about what they are planning to do. If they are serious about improving our waterways and if the money from penalised water companies is allowed to go back into the local area to improve those waterways, we could agree about that. If the Government do not face up to this, that might be a negation of the various promises they made to the electorate when in opposition and send a message that their words are merely soundbites. I hope that the Minister will consider the points I have made and support this amendment to restore the water restoration fund—for the sake of not only our waters, but the democratic and local accountability on which they rely. We will seek to push new clause 2 to a vote.

[Tim Farron]

I rise briefly to support the new clause. Among many other reasons, it bears great similarity to one proposed by my noble Friend Baroness Bakewell. We consider everything in it to be right. As the hon. Member for Epping Forest has said, we should be deeply concerned about the Treasury seeking to hang on to money that, if there is any justice, ought to be invested back into the waterways that have been polluted by those who have been fined for that very offence.

I talked earlier about the deep sense of injustice felt across the country about those who pollute, who are getting away with polluting and who even—far from being found guilty—are getting benefits from that pollution. The measure would simply codify a move towards the establishment of a water restoration fund, supported, at least in part, by the fines gathered from those guilty in the first place. There would be a great sense of justice being done for folks concerned about how Windermere is cleaned up, how we make sure that Coniston’s bathing water standards remain high and how we deal with some of the issues I mentioned earlier on the River Lowther, River Eden and River Kent.

The water restoration fund should in part be supported by funds gained from those who are guilty: that is basic justice. We strongly support the new clause and will be voting for it if it is put to a vote.

Water (Special Measures) Bill [ Lords ] (Second sitting)

Debate between Emma Hardy and Neil Hudson

Committee stage
Thursday 9th January 2025 Public Bill Committees

[Emma Hardy]

I thank the hon. Member for Beaconsfield for tabling amendment 4, which seeks to make a failure to publish discharge data from emergency overflows in near-real time a criminal offence.

I wholeheartedly agree that it is vital that regulators have a clear means of ensuring that water companies comply with this duty. However, clause 3 already ensures that the duty is enforceable by Ofwat under section 18 of the Water Industry Act 1991, which provides a range of tools—including significant fines—for Ofwat to bring companies into compliance. Changing the provision to a criminal offence might slow down enforcement, because criminal prosecution is typically slower than enforcement by section 18 of the 1991 Act.

In addition, we do not believe that in this case it would be proportionate to create direct criminal liability for a chief executive, particularly the potential sanction of imprisonment, because the large number of emergency overflows operated by companies, with each company operating in a different situational context, means that it is unreasonable to hold a single person to account for full compliance with the duty. By making changes such as introducing bonus bans and provisions to support prosecuting executives for obstructing the regulator, the Bill already strengthens provisions to hold executives to account for wrongdoing.

[Dr Hudson]

I thank the Minister for her comments. I can confirm that we will not push the amendment to a vote. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Dr Hudson]

I beg to move amendment 10, in clause 3, page 9, line 38, 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 (5).

(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.

I will try not to mention teeth in this part of our proceedings, but I cannot promise. It is with great pleasure that I rise to speak in favour of amendment 10, on behalf of my hon. Friend the Member for Beaconsfield —this is sounding like “Groundhog Day”, isn’t it? The amendment has a simple principle: that waters used for aquatic sports should be subject to the same protections as those used for bathing. It establishes that there should be clear consequences for water companies and their chief executives when they fail to comply with a clear duty to protect the waters in which people practise aquatic sports.

Aquatic sports are an important part of our sporting heritage in this country, but the impact of overflow discharges into our waterways and rivers is potentially creating an existential risk to some sports clubs up and down the country. We have heard reports of increased incidences of illness among participants as a direct and indirect consequence of exposure to pathogens and bacteria from sewage outflows in the waterways where they practise their water sports. That is a significant cause for concern for our rowing, sailing, canoeing and other aquatic sports clubs.

Many clubs take their duty of care very seriously indeed. They are having to put in place their own monitoring systems to protect their participating members. Training sessions, competitions and regattas are all facing potential cancellation, and participation in those sports risks becoming less attractive and less available to people. We can all agree that actively participating in sport and physical exercise is so good for not only our physical health, but our mental health. Any deterrents discouraging people from being involved in some sports are deeply regrettable.

The amendment is trying to put the safety of the waters used for aquatic sports on the same basis as those where people bathe. It is time for water companies to take responsibility for ensuring that those waters are safe to use. The amendment sets out a reasonable expectation that a water company must not discharge from an emergency overflow within a one-mile radius of an area used for aquatic sports. The definition of such an area is clearly outlined, and further discretion is provided for the Secretary of State to determine such areas where needed. The consequences for water companies and their chief executives for failure to comply with this duty are set out clearly and are consistent with amendment 4, also tabled by my hon. Friend the Member for Beaconsfield.

[Emma Hardy]

I thank the hon. Member for Beaconsfield for proposing amendment 10, which seeks to make it an offence for sewage undertakers to use an emergency overflow in areas used for aquatic sports. I will mention how much I enjoyed meeting the Clean Water Sports Alliance just last week to hear about its fantastic work to get us all up, out and active, although I have so far resisted the temptation to don a wetsuit and join in.

I agree that it is vital for us to reduce the impact of sewage pollution, so that our children and their children can make the memories that we did enjoying our waterways. However, we do not believe that the amendment is necessary. It risks duplicating existing requirements to limit pollution for emergency overflows, as well as protections for bathers that are already in place. Emergency overflow discharges are permitted only in very strict circumstances and as a last resort, such as in the event of mechanical breakdown or a downstream blockage. That factsheet on the different circumstances might help.

Should an emergency overflow discharge occur outside permit conditions, the Environment Agency is able to take robust enforcement action, including fines and criminal prosecution. The measures in the Bill will increase transparency around emergency overflow discharges, shining a light on where they should not be happening.

--- Later in debate ---

[Emma Hardy]

As I say, I wholeheartedly agree with the intention behind the amendment, but I note that later on we will be discussing the importance of chalk streams as well. The amendment would create a hierarchy between what is important and what is not. My argument is that emergency overflows are a problem wherever they are, and they should not be used unless it is, as the Bill says, an absolute emergency.

Measures in the Bill will increase transparency around emergency overflow discharges, shining a light on where they are happening. Although emergency overflow discharge should occur only very rarely—when it says on the tin; it should be an emergency—it is not possible to eliminate them altogether, as they are important safety valves to protect businesses and home in time of emergency. Removing or blocking emergency overflow outlets could lead to excess effluent waste water being released elsewhere, including through manholes. That would have significant safety implications.

Significant protections are in place for designated bathing waters both inland and on the coast. The Government consult on and designate our bathing waters. The Environment Agency monitors them to ensure that the health of bathers is protected, and to assess what action is needed to improve water quality. Once designated, water companies are required to investigate and improve bathing water sites, including with upgrades and improvements to overflows where needed. As part of the storm overflow discharge plan—those are obviously different from emergency overflows—by 2035 water companies will have improved all storm overflows that are discharging near every designated bathing water. We have also recently consulted on reforms to the Bathing Water Regulations 2013, including expanding the definition of “bathers” to include other water users.

A Government response to the consultation will be issued in due course, and if reforms are taken forward in future, that could mean that more bathing sites, including those used by aquatic sport users, will be subject to improvements. As such, we do not believe that the amendment is required.

[Dr Hudson]

I thank the Minister for her comments and for acknowledging the importance of the safety of the waters in which people practise water sports. I also thank the hon. Member for Westmorland and Lonsdale for supporting that concept—we must try to keep these waters safe. I confirm, happily, that we will not be pushing the amendment to a vote.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to consider new clause 25— 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.”’

--- Later in debate ---

[Emma Hardy]

Individuals can already be prosecuted, under section 110 of the Environment Act 1995, for obstructing Environment Agency investigations. However, that legislation does not allow executives to be prosecuted where obstruction has occurred with their consent or connivance or is attributable to their neglect. The Bill will remedy that omission by adding a consent, connivance or neglect provision to the Act, meaning that executives or other relevant officers may face imprisonment if obstruction occurs as a consequence of their actions.

[Dr Hudson]

The Opposition have no formal objections to the clause, but I do have a couple of clarifying questions. I realise I am getting into territory with which I have no familiarity. I am not a lawyer; I am a veterinary surgeon. When we are changing offences to make them more criminal, there are implications for the courts and for individuals. Although expanding the options available to the court when sentencing offenders who have not followed the rules is welcome, how have the Government ensured that the offences are clear, so that those who commit them face the full punishment if and when required?

In terms of modelling the potential impact downstream, what work have the Government done to look at the situation retrospectively? If this provision had been law over the last few years, how many offenders would have been caught by it and potentially imprisoned? I realise that that is quite a technical question, but I wonder if the Government have looked at that at all. When we bring in laws, we need to ensure that we are aware of their implications and know how the legal and judicial system can exercise them. However, we have no formal opposition to the clause.

--- Later in debate ---

[Emma Hardy]

Regulators can currently impose civil penalties where they are satisfied beyond reasonable doubt that an offence has been committed. The civil penalties are imposed by the regulators, rather than through the courts. The criminal standard of proof is appropriate for severe offences—for example, where there is a major impact on human health, on quality of life or on the environment. A high investigatory burden is not proportionate for minor to moderate offences that have a lower impact. Clause 6 will allow these offences to be enforced more quickly, cost-effectively and proportionately by enabling penalties to be imposed using the civil standard of proof, which is

“on the balance of probabilities”.

The penalties will be in addition to existing enforcement options that can be imposed only using the criminal standard of proof, including prosecution and unlimited variable monetary penalties, which will remain unchanged. Of course, the most serious cases will still require criminal proceedings. The Government will consult on the specific offences for which the civil standard of proof may be used and on the cap for the new lower standard of proof for variable monetary penalties. There are no plans to remove unlimited penalties for severe offences. Parliament will then debate and vote on secondary legislation before any changes are made.

The clause will strengthen the power of the water industry regulators, driving improved performance in the sector, and I commend it to the Committee.

[Dr Hudson]

I note that clause 6 would grant the Secretary of State and Welsh Ministers the power to introduce secondary legislation concerning fixed and variable monetary penalties, as confirmed by the Regulatory Enforcement and Sanctions Act 2008. It would likewise change the condition of imposing these penalties from “beyond reasonable doubt” to

“on the balance of probabilities”.

Although His Majesty’s Opposition have no problems with the clause, we believe it would be beneficial for the Minister to make some clarifications to aid the reading of the clause in the future. First, how often does the Minister think that secondary legislation may be required for the fixed monetary penalties? During the last Government’s period in office, we knew that sometimes penalties needed to be adapted to get regulation of our water industries right. As I discussed in previous debates, the Conservative Government saw fit to amend the amount that water companies could be fined for violating the water quality rules.

As was also mentioned earlier, Baroness Hayman in the other place highlighted the importance of flexibility in changing rules on the water industry. The Opposition agree that flexibility is important, but for there to be flexibility, there also needs to be consistency, and awareness and monitoring of the issue so that we know exactly what flexibility is needed. Could the Minister therefore comment, now or in due course, on whether the Government will be continuously updating and monitoring to ensure that monetary penalties are having the desired outcome, that they remain aware of any potential issues and that they can determine whether they need to modulate and change things?

Does the Minister support the use of secondary legislation to increase scrutiny? As we have already discussed, the Government have sought to avoid the responsibility of accountability at ministerial and Government level by using statutory instruments for things like Ofwat’s remuneration and governance guidance. Can they not see that a bit of a discrepancy remains? If they are willing to use available powers to make change but not enhance powers, they might need to do that on other issues that we have discussed. Barring those comments and clarifying questions, we have no formal objections that we wish to raise.

[Emma Hardy]

I thank the hon. Member for Epping Forest for his contribution to the debate. I think the point my hon. Friend, and friend, Baroness Hayman made in the Lords is that we do need some flexibility, and that it would be inappropriate to set out the details of implementing these powers in the Bill, because that would result in a fixed power that would not be adaptable to the industry’s circumstances. We would like to be able to continue to adapt it.

I think the shadow Minister is trying to make sure that we set things in the right way and at the right level. That is why Ofwat will be doing a consultation. We want the level to be a deterrent rather than something that water companies can easily dismiss, but it needs to be set at the right level. It is important that that is done properly and through consultation.

I am grateful that everybody supports the clause. By strengthening the powers of the water industry regulators, we will drive improved performance in the sector.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Jeff Smith.)

Water (Special Measures) Bill [ Lords ] (First sitting)

Debate between Emma Hardy and Neil Hudson

Committee stage
Thursday 9th January 2025 Public Bill Committees

[Emma Hardy]

I have to say that it is slightly disappointing that we do not have a full contingent for such an important Bill Committee, which matters so much to people up and down the country. There could be personal reasons, so let us reserve judgment, but it is a little surprising to me too.

[Dr Hudson]

The Minister said that she worries that the amendment from Lord Cromwell would duplicate things. Actually, it is quite a simple amendment that achieved a lot of cross-party support in the other place. If it duplicates things, a bit of repetition is not a bad thing to ensure annual financial reporting by water companies. It would not create confusion: repeating this important matter on the face of the Bill would just create clarity, so we urge the Government to reconsider.

[The Chair]

Just for the record, I am advised by the Clerk that Adrian Ramsay has sent his apologies, as he is ill.

--- Later in debate ---

[Emma Hardy]

I strongly disagree that this amendment weakens the Bill or is retrograde. Instead, it is doing things effectively. If we were to put a six-month deadline in the Bill and rush to get the rules done in that period of time and there were complications, we would risk leaving a loophole that could be exploited by companies that have exploited loopholes for an incredibly long time and become rather apt at doing so. With respect, I would rather do it properly.

[Dr Hudson]

The Minister says that she would like to do this properly. We all agree around this House on the scale of the problem, the public outrage at some of the things that have happened with water companies and the fact that we are trying to address and improve our water quality. I am therefore curious why both the Government and the third party are shying away from giving the Secretary of State and the Department the democratic powers and accountability to pass statutory instruments, which, as we all know, can be done very quickly. We have talked about dental analogies. I am an equine vet; I have rasped many teeth in my time. It would help ministerial oversight to see that the dental work is being done properly.

[Emma Hardy]

I am desperately searching for a dental analogy. I have already outlined to the hon. Gentleman that we tabled this amendment to protect the independence of Ofwat, protect investor confidence and ensure that rules under clause 1 are effective and in place as soon as possible. It is therefore necessary to remove Lord Roborough’s amendment. I again urge hon. Members to look at the written evidence supplied by Ofwat today. On that basis, and considering the arguments I have put forward for removing the six-month deadline for the rules to be published, I ask the hon. Member for Westmorland and Lonsdale not to press amendment 21.

Turning to amendment 22, also tabled by the hon. Member for Westmorland and Lonsdale, public trust in the water sector has been severely damaged and the number of serious pollution incidents is increasing. At the same time, companies are paying out millions in bonuses. I therefore fully support the intention behind the amendment and agree on the importance of ensuring that customers and the environment are put at the heart of companies’ objectives. That is why the Secretary of State announced immediate action to improve the performance of the water industry in his first week in office. That included an agreement that companies would update their articles of association to make the interests of customers and the environment a primary objective. I am pleased to inform the House that a number of companies have already made that change, and DEFRA is working to ensure that all companies implement it as soon as possible.

This is a Government of service, focused on improving people’s lives, and it is important that consumer interests are represented at the heart of decision making. That is why, under clause 1 of the Bill, Ofwat must make rules requiring consumer involvement in corporate decision making. Companies will be required to put in place arrangements to involve consumers in decisions that have a material effect on consumer interests. I trust therefore that the hon. Member for Westmorland and Lonsdale is reassured by the steps being taken by Government and he feels able to withdraw amendment 22.

Flooding

Debate between Emma Hardy and Neil Hudson

Monday 6th January 2025 Commons Chamber

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

I thank the Minister for advance sight of her statement. I put on the record my gratitude to the Minister and her whole team for hosting a constructive and helpful cross-party meeting on Friday, together with officials from DEFRA, the Environment Agency, the Met Office and the Ministry of Housing, Communities and Local Government.

On behalf of His Majesty’s Opposition, I pay tribute to the emergency services, local authorities and the Environment Agency for their efforts, over the challenging festive period and the ongoing start of the working year, to help people quickly, often in dangerous circumstances. I thank members of the public, volunteer groups and our amazing farmers, who have once again stepped in to help their neighbours and local communities in difficult times.

The current flooding, snow and rain have had, and continue to have, hugely detrimental impacts across the United Kingdom. Today, roads are closed, many schools have been unable to reopen on what should have been the first day of term, rail services have been suspended, and airports have experienced extreme delays. Furthermore, as the Minister said, as a result of the extreme weather Leicestershire Fire and Rescue Service has declared a major incident across Leicester, Leicestershire and Rutland. Our thoughts are with all those whose homes and businesses have been damaged, and with all those who continue to be affected.

Many of those people will be distressed, angry and completely exhausted as they begin the new year with the process of restoring and rebuilding their homes and businesses. I sound a bit like a broken record, but I reiterate that we must not underestimate the mental health impacts of flooding on communities, in respect of both the anxiety of being flooded and the trauma when flooding hits. It is essential that practical support is provided as quickly as possible and remains in place after the waters have subsided and the blue lights have departed. Will the Minister update us on the action the Government are taking to get schools open as soon as possible? What steps are her Department taking to ensure that insurance claims can be processed as quickly as possible, so that those affected can return to their homes as soon as they can?

In addition, what steps are the Government taking to review and potentially expand the vital Flood Re scheme, so that insurance cover is expanded in terms of the age of building eligibility and to include businesses? We discussed that issue at the cross-party meeting on Friday. While in government, the Conservatives ringfenced £100 million to help communities threatened by repeated flooding. Will the Minister commit to that funding, and will those affected by flooding again, in the latest period of bad weather, be eligible to apply?

Furthermore, will the Minister provide assurances that discretionary funding, such as the flood recovery framework or the Bellwin scheme, will be implemented to alleviate the effects of flooding? Even if the thresholds for the numbers of properties affected are sometimes not met, will the Minister and her colleagues across Government commit to a compassionate, pragmatic and case-by-case approach to awarding that vital discretionary funding?

Additionally, the previous Conservative Government established the farming recovery fund to support farmers recovering from uninsurable damage. Will the Minister confirm whether the Government will renew that Conservative initiative and provide new funding for this winter’s storms?

Finally, the Secretary of State has set up a flood resilience taskforce to improve flood preparedness that has met only once. What work did the taskforce do ahead of the latest bad weather? Should it not meet more regularly—certainly before the end of this month, as the Minister stated—to learn any lessons and to respond to the ever-dynamic weather events we have seen in recent weeks? With many warnings for flooding still in place, I know that many people will be experiencing huge anxiety and uncertainty, so I conclude by wishing every community, and the services and people supporting them, a safe period moving forward.

[Emma Hardy]

I will try to answer as many of the hon. Gentleman’s questions as I can. I share his concern about the impact of flooding on people’s mental health, which cannot be exaggerated. Someone losing their home, or seeing it damaged, and having to move out over the winter has a devastating impact on them. I agree that farmers have done a great job in supporting communities at risk of flooding.

On Flood Re, we do not currently have plans to extend the scope; however, we regularly review all policies. If any hon. Member wants to contact me with specific suggestions on Flood Re, I am open to receiving them.

On the different pockets of funding that the previous Government announced, we will look at how the flood funding formula works as a whole. I mentioned the review of the formula, and I will let the hon. Gentleman know as soon as it goes live so that he can join in the consultation.

We will hopefully be able to announce the schemes that are being funded by next month. I know that people have been impatient to receive that information. We have worked as quickly as we can. There is a formula for when Bellwin is activated—a local authority has to hit a certain level of expenditure. We have been really pleased that money from the farming recovery fund has already arrived in farmers’ bank accounts. We have been getting that money out the door to the people who need it the most.