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

Debate between Emma Hardy and Tim Farron

Committee stage
Tuesday 14th January 2025 Public Bill Committees

[Emma Hardy]

May I say—often said, not always meant—that it is indeed a pleasure to serve under your chairwomanship, Dr Huq? I thank the hon. Member for Westmorland and Lonsdale for the intention behind new clause 8. Ofwat has a range of primary duties, including protecting the interests of consumers, ensuring that companies properly carry out their functions and ensuring that companies can finance the delivery of their statutory duties. Removing Ofwat’s duty to ensure that companies are appropriately financed would put at risk companies’ ability to deliver for customers and the environment. The new clause also seems to contradict the others tabled by the hon. Member. For example, new clauses 19 and 23 seek to increase regulation around water company financial resilience, but new clause 8 seems to aim to reduce it.

Ofwat must continue to ensure that water companies can finance the proper carrying out of their statutory obligations, in line with the outcome the new clause seeks. Ofwat already has a primary duty to seek to ensure that companies deliver their statutory obligations, including environmental obligations. Ofwat’s existing duties, combined with the strengthened power for regulators provided by the Bill, will therefore drive the desired outcome sought by the new clause and ensure that the environment is at the heart of water companies’ activities. That is something on which we all agree.

In addition, the independent commission on the water sector will look at wider long-term reform of the water sector, including considering and clarifying the role of regulators, and we do not wish to prejudice the outcome of the commission by implementing the new clause. I hope that the hon. Member is reassured that Ofwat’s existing core duties capture the intent behind it, and that the independent commission will consider the duties of Ofwat more broadly. For those reasons, we will not accept the new clause.

[Tim Farron]

I thank the Minister for her response. The new clause aims not to replace the business side of Ofwat’s regulatory framework and powers, but to supplement it. As I said earlier, it is odd that in the broadest sense—I know that this is not entirely true—Ofwat looks at the business side of the water industry and the EA looks at the environmental side. They are clearly one and the same, or they ought to be. We are simply trying to draw these things together. This is not about reducing Ofwat’s powers on one side in order to beef them up on the other; this is about additionality. We think it is entirely consistent.

I hear the Minister—if I were at that crease, my straight bat would be “Sir Jon Cunliffe” every single time. I get that, but surely, there has to be some point to this water Bill, and we are trying to push the Government to strengthen the regulators. We debated earlier the extent to which Ofwat should exist or not, but if we take it that the Government have a majority and therefore that Ofwat is likely to overcome my time on this Committee, what can we do to make it a more holistic regulator with more power and scope? We therefore think there is a very strong case for new clause 8.

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

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[Tim Farron]

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

The Environment Agency will have more powers as a consequence of the Bill. There will be greater regulation and there will be an impact on the Environment Agency as an organisation. It is my privilege to represent large chunks of the English Lake district. We have an agency full of really good people—dedicated and qualified professionals, many of whom are from and love the area, and yet they already find themselves overwhelmed with their responsibilities. I made an allusion earlier, but it might help to give a sense of how the organisation copes with its challenges.

We are still in the process of having walls built around the River Kent to protect the town of Kendal and its businesses from a repeat of the devastation in December 2015, when something like 6,000 of my residents lost their homes and we saw just under 1,000 businesses devastated. The Environment Agency is looking after that, and just up the road are Windermere, Coniston, Ullswater and the other lakes, rivers and coastal areas of our beautiful part of the world. We are already stretching the capacity of those people, to say the least, and we are beginning to see that in real time, as we try to deal with sewage spills in the tributaries that lead into Windermere. We see many such failures, and although the Environment Agency is trying to find the time to regulate, observe and scrutinise them, it is understandably distracted by the huge civil engineering project that it is overseeing in Kendal to protect the town from flooding.

This is about paying tribute to people in the EA, but also recognising that they are already under enormous pressure. The Minister has said that there will be 500 new members of staff at the Environment Agency. That is one answer to the question. We are trying to recognise that that is still only one person per English constituency. We need to therefore test the extent to which the Environment Agency has the capacity to do its job, because part of the problem is insufficient regulatory powers, and the other is agencies without the resource to police the powers that they already have. This aims to be a helpful new clause. It recognises that the Government seek to and will do good through the Bill, but we need to ensure that the agencies there to deliver that good have the capability to do so.

[Emma Hardy]

I thank the hon. Member for suggesting new clause 10 and agree it is important to understand the impacts of the Bill on the Environment Agency. I echo remarks made by all Members on the wonderful work that the Environment Agency does, particularly those who are working in the frontline and those who were working on new year’s day trying to support communities that had been flooded. I also pay tribute to the Wildlife and Countryside Link and to all the environmental groups, organisations and charities that have shown an interest in the Bill. Their tireless campaigning is probably what has led to many of us being here to discuss it today.

I reassure the hon. Member for Westmorland and Lonsdale that the current provisions in the Bill are sufficient to do what he wants. Through clause 10, the Environment Agency will be able to recover costs for the full extent of their water company enforcement activities, including for new provisions in the Bill. This will allow the Environment Agency to fully fund their water industry enforcement functions and meet the requirements of the Act, ensuring that polluters can be held to account for breaches of their obligations.

Environment Agency funding will continue to be closely monitored by DEFRA as a sponsoring Department, ensuring that the regulator is fully equipped to carry out its duties and functions effectively and to deliver for the public and the environment. The Environment Agency is already recruiting up to 500 additional staff for inspections, enforcement and stronger regulation of the water industry, increasing compliance checks and quadrupling the number of water company inspections by March. This increased capacity is funded by £55 million a year through increased grant in aid funding from DEFRA and additional funding from water quality permit charges levied on water companies.

I hope the hon. Gentleman is reassured that these measures will ensure that the Environment Agency consistently has the resources it needs to fund its regulatory activities. As such, the proposed new clause is unnecessary and therefore I ask him to withdraw it.

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[Tim Farron]

I do not think it is unrealistic—we need to be ambitious—but I absolutely accept that there are multiple sources of pollution.

I promise to be brief in talking about my patch, which is not of interest to everybody. It is key to point out that pollution in Windermere generally comes from three sources. It is true that agricultural run-off is an issue but, sadly, the policies of this Government and the previous one, over a period of time, have effectively destocked the fells, meaning run-off has a massively reducing impact on Windermere and the broader catchment.

The bigger two problems are the 14 assets that United Utilities has either on or around the lake or its tributaries. There is also the best part of 2,000 septic tanks around the lake or its tributaries. Unlike septic tanks and, indeed, package treatment works in many rural communities, these are not scattered all over in the middle of nowhere; they are in a ring around the lake, most of them within yards of a mainline sewer. It is, then, entirely possible for the water companies, while gaining significant income benefit as a consequence, to mainline a massive proportion of the sources of sewage spillage into the lake, via the septic tanks and the package treatment works being brought into the system.

The new clause is of course slightly selfish, but it is really important that we seek to maintain national parks right across the country at the highest possible bar, and therefore make sure they set an example for others to follow. We will seek to press new clause 27 to a vote.

[Emma Hardy]

I thank the hon. Member for Westmorland and Lonsdale for tabling the new clauses. It is always nice to have a conversation about the beautiful chalk streams and national parks in our country.

New clause 12 would have significant implications for existing legal frameworks and operational delivery, and would not necessarily result in environmental improvements for chalk streams, for which there are already established objectives to conserve and restore their ecological health. Under the water environment regulations, the default objective is to achieve good ecological status for all chalk streams in England. Good ecological status is a high standard that represents a thriving aquatic environment with only minor disturbances from natural conditions.

High ecological status equates to water that is almost entirely undisturbed from its natural conditions. If we set high ecological status as the objective for all chalk streams, overriding cost-benefit assessments, it would have wide-ranging impacts on future planning developments and human interaction with chalk streams, including by restricting farming and fishing. Any planning for housing developments that would have even a minor impact on the water quality of chalk streams would be restricted without impractical and disproportionately costly mitigation measures. The new clause would place achieving that demanding objective on water companies only, as the hon. Member for Broadland and Fakenham highlighted, regardless of the pressures that are actually impacting chalk streams. This would not allow for the consideration of technical feasibility or costs, which would ultimately be borne by water bill payers. The new clause would necessitate amendments to the water environment regulations and habitat regulations, creating complexity and difficult delivery implications.

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[Emma Hardy]

The hon. Gentleman is right to highlight that the pollution caused in the Norfolk broads and in many other areas does not come from water companies alone. As has been discussed, it comes from the environment, road run-off and various other places. “High ecological status”, as we have stated, could involve not being able to fish in those waters at all, which I know is a recreational activity in his area. It may also restrict planning for housing developments with any minor effects on the water quality of water bodies in national parks. The Government therefore cannot accept either new clause, although I recognise the intention behind them. I hope that the hon. Gentleman feels able not to press both.

[Tim Farron]

In short, I am happy not to push new clause 12 to a vote now, nor will I seek to push new clause 27 to a vote when we get to that stage. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 13

Guidance on poly- and perfluorinated alkyl substances

“After section 86ZA of the Water Industry Act 1991, insert—

‘86ZB Guidance on poly- and perfluorinated alkyl substances

(1) The Secretary of State must by regulations made by statutory instrument make provision for the regulation of poly- and perfluorinated alkyl substances in drinking water based on guidance issued by the Drinking Water Inspectorate.

(2) Until the Secretary of State makes provision for the regulation of poly- and perfluorinated alkyl substances, water and sewerage companies must implement any relevant guidance issued by the Drinking Water Inspectorate.

(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.’”—(Tim Farron.)

This new clause would require the Secretary of State to make regulations relating to the presence of poly- and perfluorinated alkyl substances in drinking water based on guidance issued by the Drinking Water Inspectorate, and require water companies to follow the Inspectorate’s guidance in the interim.

Brought up, and read the First time.

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[Tim Farron]

Thank you—I do not want to detain the Committee any longer than I need to. The new clauses are about a vexing and serious issue: the presence of polyfluorinated and perfluorinated alkyl substances in our waterways and in our drinking water, in particular. I pay tribute to my hon. Friend the Member for Twickenham (Munira Wilson) for championing this issue in this place and outside it.

The new clause attempts to raise the existing guidance from the Drinking Water Inspectorate on PFAS levels in drinking water to a statutory level; that is the key point. The Bill seeks to increase regulatory power over water companies, and the new clause will increase the Drinking Water Inspectorate’s power to enforce the guidance regarding PFAS. There is currently no legal limit on the amount of PFAS present in our drinking water. There is only guidance, even though the Environment Agency and the Health and Safety Executive have both recommended that there should be a legal limit.

New clause 13 would require water companies to prioritise and take a proactive stance on limiting PFAS in drinking water. Currently, if a water company were to breach PFAS guidance, its regulatory compliance score would not be affected as it would if, for example, lead was found in its water. This would encourage them to invest in treating water to remove PFAS. This is an important first step in prompting the Government to create a fully-fledged chemical strategy to deal with chemical pollutions of all kinds, starting with the most direct threat to human health, which is the direct consumption of PFAS through drinking water. PFAS are toxic, they are forever and they are very pervasive. Links have been found between PFAS chemicals and a host of health issues, such as, but not limited to, cancer, thyroid disease, fertility issues, lowered birth weight, weakened bones in children and immune resistance to vaccinations.

New clause 14 would put the duty on the water companies to take responsibility for the reduction and prevention of PFAS chemicals in water systems, ensuring that each water company is responsible.

[Emma Hardy]

I thank the hon. Member for proposing new clauses 13 and 14 on this incredibly important issue, and for highlighting the importance of PFAS monitoring. I want to reassure everybody that the quality of drinking water in England is exceptionally high and among the best in the world. It is important to me that it remains that way.

Across Government, we are working to assess PFAS levels occurring in the environment, as well as their sources and potential risks, to inform future policy and regulatory approaches, safeguard the current high drinking water quality and ensure our regulations remain fit for purpose. Water companies have a statutory obligation under the Water Supply (Water Quality) Regulations 2016 to carry out risk assessments to identify anything that could pose a risk to health or cause the water supplier to be unwholesome. That includes the risk of PFAS.

I will explain which PFAS are tested for in drinking water. The Drinking Water Inspectorate issued a series of information letters to water companies to set out a risk-assessment methodology and associated monitoring strategies for up to 48 individual PFAS compounds. The guideline values of PFOS, or perfluorooctane sulfonic acid, and PFOA, or perfluorooctanoic acid, are agreed with the UK Health Security Agency, and have been applied to 48 individual PFAS. The DWI guidance will be reviewed and updated where necessary.

The Drinking Water Inspectorate has provided guidance on PFAS to water companies since 2007 and, as I explained, that is regularly updated as new research emerges. In July 2024, DEFRA announced a rapid review of the environmental improvement plan to deliver on our legally binding targets to save nature. That includes how best to manage chemicals, including the risks posed by PFAS, and we are working closely with the DWI on all matters, including PFAS.

I reassure the hon. Member for Westmorland and Lonsdale that the Water Industry Act 1991 already provides the necessary powers to amend existing regulations to deal expressly with PFAS, should the Government wish to do so. I will have a meeting with his hon. Friend, the hon. Member for Twickenham (Munira Wilson), on this issue. I hope that the hon. Gentleman is reassured that this new clause is not suitable for the Bill, so I ask him to withdraw it.

New clause 14 focuses on chemical contaminants entering our waterways. I agree with the hon. Member for Westmorland and Lonsdale about the importance of the issue, which is why, as I announced, we will have the rapid review of the environmental improvement plan to deliver on our targets to restore nature. That includes looking carefully at the risks posed by PFAS. The review will consider and set out effective measures to mitigate harmful chemical substances entering our water through the environment. Through the chemical investigations programme, we are working with the water industry to understand how levels of contaminants in treated waste water affect our water environment. The programme will provide valuable information to understand the effectiveness of different measures to tackle chemical contamination of our rivers.

Significant costs are associated with end-of-pipe technologies at sewage treatment works to manage the more challenging chemicals, such as PFAS. We therefore need to prevent contaminants entering the water system in the first place, before they get to the waste water treatment works, where the cost for treatment will be unfairly borne by water customers, rather than the polluters. Work continues across Government to help us to assess the levels of PFAS occurring in the environment, their sources and the potential risks, so that those can inform future policy and regulatory approaches to safeguard our high drinking water quality and to ensure that regulations remain fit for purpose.

The DWI expects water companies to plan to reduce PFAS concentrations in treated water progressively by implementing a reactive and systematic risk-reduction strategy. That is why we need to need to prevent them entering the water in the first place. I hope that the hon. Member is reassured by the actions that we are taking and will not press new clause 14.

[Tim Farron]

I am substantially reassured that the Minister is taking this issue seriously, and I am grateful that she is to meet my hon. Friend the Member for Twickenham, who has championed it so well. All the same, while I do not agree, I accept the Minister’s point about the way in which we are doing this—which, I guess, is contained in new clause 14, so I will not press that to a vote—but new clause 13 simply says what the Health and Safety Executive and the Environment Agency are already saying, which is that those chemicals are deeply dangerous and that the restrictions on them should therefore be moved from guidance to a statutory level. That ought to be a no-brainer, so we will press that new clause to a vote.

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

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[Tim Farron]

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

I will try to be brief, I promise. The new clause is based on the fact that we seriously approve of the Government’s approach to monitoring. We want the regulatory bodies to be well equipped and resourced to be able to hold water companies and other potential polluters to account. But the Government have made a clear decision, of which I totally approve, to lionise and put front and centre citizen science and voluntary groups around the country—groups such as Windrush Against Sewage Pollution, Save Windermere in my constituency, the Clean River Kent group and the Rivers Trusts in Eden and South Lakeland. These are wonderful people, pretty much all of them acting in a voluntary capacity. The groups contain lots of incredibly clever, bright people who are passionate about our environment.

The Government are doing something we approve of by seeking to deploy and mobilise people in their communities. The new clause is about trying to make sure that we equip them, underpin what they do and provide resource to support them, and that the Government use some resource to proactively look to fill in the gaps. We are simply saying that we approve of the mobilisation of citizen science across the country to hold water companies to account through use of the real-time database and a variety of other tools. But if we are going to rely on a group of people, let us support them. We will seek to push this to a vote, because we think it is a central part of what the Bill should aim to achieve.

[Emma Hardy]

I thank the hon. Gentleman for tabling new clause 15. We fully support greater involvement of citizen science to hold water companies to account. I thank them for all the work that they have done in this area up and down our country. Local people know their rivers best, and their campaigns on pollution issues have been crucial in bringing the scale of the issues to light.

The Bill already includes several amendments to support transparency to make it easier to scrutinise water companies. Clause 2 will enable the public to scrutinise the measures that water companies are taking to reduce pollution incidents. Clause 3 will make information on discharges from emergency overflows available in near real time. This data, in addition to the near real-time information already available on storm overflow discharges, will be provided in a way that will enable citizens to identify trends and key issues. That will supplement the significant information that the Environment Agency already publishes.

The Environment Agency also operates a 24-hour environmental incident hotline to enable the public to report incidents that they observe in their local area. The Environment Agency shares the enthusiasm and values the expertise and local knowledge of citizen scientists. It has recently funded an internal project supporting citizen science, which will run until March 2025.

I welcome the hon. Gentleman’s approval of the Government’s work on this issue. The question is whether we require primary legislation to continue doing something we are already doing successfully. This project, along with many others that are being supported by the Government or the Environment Agency, is considering how to facilitate better engagement with citizen scientists. The Government believe that the existing measures are more effective for supporting citizen science than creating a fixed legislative duty on the Secretary of State. We are already doing work in this area, so we will not support the new clause.

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[Tim Farron]

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

Water bill poverty is a reality, and many people will require greater water use because of disability, age or health conditions. Although WaterSure benefits exist, they are patchy and are something of a postcode lottery. Which benefits a person may receive under WaterSure depends on supplier and catchment, and whether someone qualifies depends on which water company they get water from. That is not right. There should be a single social tariff that is applicable and understandable for everyone. A postcode lottery should not dictate whether a person gets the support they may need, and which water company someone lives under should not dictate whether they can afford their bills.

Some water companies require three or four pieces of evidence and some just a quick assessment of finances, and the savings range from 15% to 90% off a bill. We would bring that under one simple tariff. We have certainly heard Government Members regularly talk about the value and importance of such a measure, and we simply want to put it on the face of the Bill. A unified and universal social tariff is about basic social justice. It would help those people for whom paying water bills is most difficult, for a variety of reasons—health and disability reasons, as well as financial ones. This is something that the Government should accept, or else we will seek to press it to a vote.

[Emma Hardy]

I thank the hon. Member for tabling new clause 17. It is clear that consumers are concerned about their bills, and this Government want to do everything they can to help and support people who are struggling, particularly given that water bills are due to rise following Ofwat’s final determinations. Although this Government do not consider it suitable to adopt the new clause at this time, we will continue to consider all measures available to best support vulnerable customers, and we are exploring options to improve social tariff arrangements and improve fairness and consistency in who is eligible for support and in the levels of assistance provided.

There are already customer assistance schemes in place. WaterSure caps water and sewerage bills for vulnerable customers who have the higher essential water use requirement for family or health reasons. Under the scheme, £66 million of support was provided to 230,000 households in ’23-24, with an average bill discount of £286. That sits alongside debt measures, water efficiency measures and company social tariffs, which are all targeted at supporting customers who are struggling to pay. Company social tariffs, which water companies design themselves and offer to customers who are struggling to afford their water bills, are forecast to provide an average of £640 million a year in support between 2025 and 2030.

Prior to the introduction of any new support scheme, in-depth research and analysis must be completed to ensure a properly designed policy. Therefore, the Government are continuing to work with the water industry to explore options to improve affordability arrangements, including by holding the sector accountable for its public commitment to end water poverty by 2030. For that reason, I ask the hon. Member for Westmorland and Lonsdale to withdraw new clause 17.

[Tim Farron]

In-depth analysis is not going to tell us anything other than that there is massive inconsistency across the country. Of course, WaterSure provides benefits, but it is different depending on where someone lives. The benefits received by someone living in a Yorkshire Water area, United Utilities or Northumbrian Water area will differ, as will the qualifying criteria. That means that some people in poverty, and some people with serious disabilities or health needs, who therefore have higher water usage requirements, will be hit by higher bills simply because of the lack of a single social tariff. We think that the new clause is important to ensuring social justice and helping those most in need in our communities, and therefore that it is very important to put it to the vote.

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

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[Charlie Maynard]

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 26

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.’”—(Tim Farron.)

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.

Brought up, and read the First time.

[Tim Farron]

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

I do not really want to press this new clause to a vote, but we tabled it because my noble Friend Lady Bakewell withdrew it in the Lords after being given assurances by the noble Baroness, Lady Hayman, for whom I have enormous respect and of whom I think very highly. It seeks to ban bonuses for senior company executives who have been found guilty of a category 1 or 2 discharge. It would prevent any loopholes such as pay rises and share options that might enable bonuses to be paid under those circumstances.

From the Dispatch Box in the other place, Baroness Hayman said:

“However, we are very aware that water companies need to attract investment so, as outlined in Ofwat’s consultation, the circumstances under which performance-related pay bans are being proposed represent very serious failures by a company. I reassure the noble Baroness, Lady Bakewell of Hardington Mandeville, that this includes instances of criminal convictions, credit ratings falling below investment grade and Ofwat’s proposed metric for bonuses to be prohibited if a company has had a serious category 1 or 2 pollution incident in the preceding calendar year…I would like to be clear with all noble Lords that we are not asking companies to meet any higher or new standard than that which is already expected of them.”—[Official Report, House of Lords, 20 November 2024; Vol. 841, c. 247.]

We were grateful for that assurance, but nothing of that sort has appeared in the Bill since. Will the Minister give me some reassurance as to why we should not press the new clause to a vote? I do not see anything in writing that gives us confidence, other than the words of the noble Baroness.

[Emma Hardy]

I thank the hon. Gentleman for tabling new clause 26. The Government agree that we need to rebuild trust in the water sector and that executives should be firmly held to account for companies’ serious failures to meet environmental standards. That is why clause 1 will give Ofwat new powers to issue rules on remuneration and governance. The legislation requires Ofwat to set rules that make the payment of bonuses contingent on companies achieving high environmental standards. It is more appropriate for Ofwat, as the independent regulator, to determine the performance metrics to be applied when setting the rules for performance-related pay.

As outlined in the initial policy consultation, Ofwat is currently considering prohibiting bonuses where companies have had a serious category 1 or 2 pollution incident in the preceding calendar year. That is not on the face of the Bill, but it is very clearly in Ofwat’s consultation. It is looking to consult on prohibiting bonuses after a category 1 or 2 pollution incident, as my noble Friend outlined. That provides an early indication of the direction of travel on the environment metric.

Ofwat would be able to use its direction-giving power and wider enforcement framework to hold companies to account where it has reason to believe that they are in breach of the rules. However, banning bonuses, even in cases of unwanted but legal spills, would effectively ban bonuses for all companies. That could unnecessarily threaten the sector’s ability to attract and retain talent. I refer the hon. Member for Westmorland and Lonsdale to the consultation that Ofwat has launched so that he can see for himself the pollution metric that I have mentioned. On that basis, I hope that he feels able to withdraw new clause 26.

[Tim Farron]

I am reassured to a large degree by what the Minister says, but I am concerned that it is not on the face of the Bill. Simply handing this over to Ofwat, given its track record, does not fill me with confidence. We will reserve our position on this one—we may potentially talk about it further on Report—but we will not press new clause 26 to a vote. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

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

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

Debate between Emma Hardy and Tim Farron

Committee stage
Tuesday 14th January 2025 Public Bill Committees

[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]

It is good to start the day off with a bit of unity in the Committee Room and everyone agreeing. In terms of which offences the automatic penalties will apply to, we are looking at targeting minor to moderate offending. The purpose behind the clause, and much of the Bill, is to change the culture of the water industry.

As I said in my opening remarks, one of the concerns about how the water industry operates at the moment is that the standard of proof needed to impose fines for minor to moderate offending is often seen as not being worth the cost. Companies are therefore getting away with minor to moderate offences because of the cost of trying to prosecute them. These penalties will apply to those offences. If the offence turns out to be more significant—not minor to moderate, but more of a major pollution incident—obviously, penalties will apply in the usual way.

For an offence to be suitable for an automatic penalty, we consider that the Environment Agency must be able to quickly identify and impose the penalty and the offence must cause no or limited environmental harm. I describe it to colleagues as similar to speeding ticket offences. Everybody knows that if they go over 30 mph in a 30 mph zone where there is a camera, they will get caught and fined. That is the idea behind the fixed penalty notice. If someone commits an offence that they are not meant to do, they are automatically fined.

The proposed offences will cover information requests. The details will be dealt with in secondary legislation, on which colleagues across the House will vote. My thinking on information requests is that a situation where someone has to comply with a request for information and is given a timeframe, but does not deal with it in the timeframe, is the kind of thing we are looking at for automatic fines. As for reporting offences, pollution offences and water resource offences, we will consult on where the penalties can be used, and Parliament will debate and vote on them before any changes are made.

The Regulatory Enforcement and Sanctions Act 2008 provides for the enforcement of penalties if a company refuses to pay a penalty. That includes allowing regulators to use the same enforcement mechanisms available to a court. The Act also allows for interest charges in the event of late payment. Parliament will debate and vote on the details in secondary legislation.

I thank all hon. Members for their invaluable contributions to the debate on clause 7. The clause will fundamentally drive improved compliance across the water sector through introducing automatic penalties for specific offences, allowing the regulators to impose penalties more quickly.

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.

Clause 8

Abstraction and impounding: power to impose general conditions

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

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[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

[Tim Farron]

I beg to move amendment 27, in clause 9, page 14, line 11, leave out from duties to end of line 13.

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[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.

[Tim Farron]

I am not reassured that removing this discretion means that a mechanical duty is placed upon Ofwat. I think that removing discretion is actually very important. It will only be applied where it is relevant by definition. I feel that by building in wriggle room, we are creating vagueness in the process. Nevertheless, we will not seek to push this amendment to a vote today. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 9 ordered to stand part of the Bill.

Clause 10

Charges in respect of Environment Agency and NRBW functions

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

[Emma Hardy]

Thank you, Dr Huq, for giving me the opportunity to speak on clause 10, which is one of my favourites. The costs for Environment Agency and Natural Resources Wales enforcement activities are paid by the taxpayer via grant in aid. The clause broadens existing charge-making powers, allowing the Environment Agency and Natural Resources Wales to recover costs for enforcement from water companies instead of taxpayers. Failure to introduce the clause would result in the burden of funding water industry enforcement continuing to fall on the taxpayer. It could also result in the regulators being unable to scale up their water industry enforcement activities due to wider budgetary pressures.

The Secretary of State, or the Welsh Minister in Wales, and HM Treasury are required to approve charging schemes in consultation with affected parties. Those safeguards ensure that environmental regulatory powers are proportionate and support sustained improvements in environmental performance in the water industry. I hope the Committee agrees that this power is essential for environmental regulators to become more self-sufficient and less reliant on the taxpayer. I commend the clause to the Committee.

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[Tim Farron]

I back my hon. Friend the Member for Witney, who has made an excellent case for our amendment to clauses 12 and 13. We are deeply concerned about the issue. There are two aspects to the public’s reaction to the scandal in our water industry. First, there is revulsion about sewage being dumped in our lakes, rivers, streams and coastal areas, which is obviously appalling. Secondly, there is a deep sense of injustice that people are making vast amounts of money while not providing basic services.

For a day or two last week, the coldest place in the country was Shap, in my constituency. I had the pleasure of being there over the weekend. All water was frozen. However, that is not always the case. Last year alone, at Shap pumping station, 1,000 hours’ worth of sewage was pumped into Docker beck. Just along the way at Askham waste water treatment works, 414 hours’ worth of sewage were dumped into the beautiful River Lowther just last year. I make that point because the water bill payers who have to deal with that know that of every £9 they spend on their water bills, £1 is going to serve United Utilities’ debt. That is at the low end of the scale: until the change announced just before Christmas, 46% from Thames Water’s bills was used to service debt.

Over the lifetime of our privatised system in this country, the water companies have collectively racked up £70 billion of debt. That means that all bill payers are paying between 11% and 46% of their bills simply to service those companies’ debt. Our amendment would simply tackle the fact that if investors choose to take risks, hoping to make gains, but fail, they should accept the consequences of those risks, which they chose to take, rather than passing on the cost to my constituents and everybody else’s. It is not for the public to carry the can for corporate failure.

[Emma Hardy]

I will speak to amendments 11 and 12, both of which were tabled by the hon. Member for Westmorland and Lonsdale. I welcome the opportunity to bust some myths and add some facts to the debate. Speaking of facts, following the debate that we had at our last sitting, we have produced a fact sheet relating to storm and other overflows, which has been circulated to all members of the Committee. I recognise that we are not discussing that now, but I thought I might mention that my promise to provide the evidence has been fulfilled. For this debate, perhaps it would be helpful to produce a fact sheet that explains exactly what this is and what it is not, because there has been an awful lot of confusion already.

On the subject of facts, I am not quite sure where the shadow Minister’s number on average bill increases of over £80 a year comes from. The fact is that the average bill increase is £31 a year.

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[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

[Tim Farron]

I beg to move amendment 20, in clause 15, page 21, line 22, 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.”

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[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.

[Tim Farron]

I am happy to accept many of the assurances that the Minister gave, particularly on the role of Government amendment 5—I learn something new every day. The Liberal Democrats retain concerns about the delay in implementation of some of the good things in the Bill. All the same, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: 5, in clause 15, page 22, line 40, leave out subsection (11).—(Emma Hardy.)

This amendment reverses the “privilege amendment” made in the Lords.

Clause 15, as amended, ordered to stand part of the Bill.

New Clause 1

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.”—(Adrian Ramsay.)

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.

Brought up, and read the First time.

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[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.

[Emma Hardy]

I thank the hon. Member for Epping Forest for tabling new clause 2, which seeks to establish a water restoration fund in legislation. I accept his invitation to do better than the previous Government when it comes to pollution in the waterways, and welcome the low bar that they have set me.

A water restoration fund is already being established to direct water company fines into water environment improvement projects. This arrangement does not require legislation, because it exists. Defining a water restoration fund in legislation would create an inflexible and rigid funding mechanism, with the amendment requiring specific detail on the scope, operation and management of fines and money. We need to maintain flexibility in how water company fines are spent, to ensure that Government spending is delivering value for money.

The hon. Member can already see from the Bill and the discussions we have had that the cost recovery powers that we have introduced for the Environment Agency are an example of how we can ensure that water companies pay for enforcement. It is continuing to work with His Majesty’s Treasury regarding continued reinvestment of water company fines and penalties, and water environment improvement. A final decision on that will be made when the spending review concludes later this year. On that basis, I ask the hon. Member to withdraw his amendment.

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

Debate between Emma Hardy and Tim Farron

Committee stage
Thursday 9th January 2025 Public Bill Committees

[Emma Hardy]

I understand the point that the hon. Gentleman is making, which is that people need to have access, clearly and simply, to as much information as possible. My point is that if we put such details into law in the Bill, the way in which we want people to access such information may change—technology or best practice may evolve—and we will have to resort to altering legislation using statutory instruments. That is why I think it is better that we look to the guidance produced by the Environment Agency as the best way to present that information, while continually evaluating how we do so. I completely understand the essence of what the hon. Gentleman is saying, however, because we all want information to be transparent and clear for everyone, and certainly not buried on a website.

To conclude, I will briefly speak to why clause 2 should stand part of the Bill. The occurrence of pollution incidents is unacceptably high and has not reduced in the last four years. Water companies must reduce pollution incidents as a matter of urgency. Currently, sewage companies in England produce pollution incident reduction plans on a non-statutory basis. These plans vary in standard, content and frequency, and that makes them hard to scrutinise. It is particularly difficult to identify the progress that companies have made on the actions that they committed to in these plans. More transparency and greater accountability are needed.

That is why the clause will require both water supply companies and sewerage companies in England and Wales to publish annual pollution incident reduction plans to address matters such as the seriousness of pollution incidents and their causes. These plans will need to set out the actions that the water companies intend to take to reduce pollution incidents, and an assessment of the impact that those actions will have.

In addition, the Secretary of State will be able to direct water companies to include other matters in the plans as needed. Moreover, companies will be required to produce an accompanying implementation report detailing the progress they have made with the measures to which they committed in the previous year. Companies must clearly explain the reason for any failure to implement their plans and set out the steps they are taking to avoid similar failure in the future. This will create a high level of transparency, enabling the public and regulators to hold water companies accountable for making the improvements that they have committed to.

Chief executives will be personally liable for the production of these plans and must approve them before publication. If a company fails to publish a compliant plan and implementation report by the deadline each year, the company or the chief executive could be prosecuted for the offence. That could result in a fine and a criminal record. This emphasises that taking action to minimise pollution incidents should be at the core of the chief executive’s role.

We believe that this provision will ensure that the right people, with the right incentives, lead water companies through the changes necessary to drive down pollution incidents. Furthermore, regulators will be required to take companies’ compliance records in relation to implementation reports into account when carrying out their enforcement duties.

I hope that all hon. Members agree with me about the importance of clause 2, and I commend it to the Committee.

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

There are no further comments from us, and we do not seek to press to a vote any of the amendments that we have tabled. We are concerned that there is not enough detail in the Bill about the impact of pollution incidents on the wider environment, much as I am grateful to the Minister for many of the comments she has made. All the same, we will not seek to trouble the Committee with a vote at this stage, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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[Emma Hardy]

I think that might be really helpful. It has been an interesting but slightly muddled conversation. We were going to produce a factsheet to explain the difference between emergency and storm. Maybe we can include as much information as we can for Committee members by the end of Committee or before Report, if that does not put too much on my hard-working officials.

On the annual data being analysed, the proposed amendments are unnecessary and I ask hon. Members not to press their amendments. On amendment 16, which was also tabled by the hon. Member for Westmorland and Lonsdale, and which is about the speed of delivery, the need to deliver the installation of monitors on emergency overflows must be balanced with practical constraints and with due consideration for the cost of rolling out so many monitors, especially as those costs are ultimately passed to consumers through water bills.

Water companies have been instructed to install monitors at 50% of emergency overflows by 2030. This represents a doubling of the previous Conservative Government’s target of 25% of emergency overflows monitored by 2030. The Environment Agency will agree with water companies which emergency overflows will have monitors installed over the next five years based on priority areas, such as those that impact designated bathing and shellfish waters. As set out in the impact assessment, we expect the roll-out of monitors at emergency overflows to cost £533 million over a 10-year period. We believe that pace of roll-out strikes the right balance of recognising the urgency—this Government are doing double what the previous Government promised—while ensuring that companies have the capacity to progress other improvements and balancing customer bill impacts.

To speak frankly, it is very important to monitor, but it is also very important to fix the causes of some of the problems that we see. There is always a balance between monitoring and fixing the problem, and we believe that we have got that balance right.

Requiring a faster roll-out of monitors could undermine the delivery of other improvements that water companies must make in price review 24—I would not want to be in a situation at the end of the price review where we monitor everything and fix nothing. That includes upgrades to wastewater treatment works and sewerage networks to reduce sewage discharges from storm overflows. Where companies can move further and faster to achieve the roll-out of monitors at emergency overflows, they will of course be encouraged to do so, but we cannot accept this amendment to require water companies to install all monitors within 12 months. I therefore ask the hon. Member to withdraw it.

[Tim Farron]

I am grateful to my hon. Friend the Member for Witney for his detailed points and for the Minister’s replies to them. We will not seek to press the majority of the amendments to the vote. Nevertheless, we stand by all that we have said and we do wish to press amendment 13 to a vote. The reality is that duration monitors only do so much good. Asking for volume to be added to duration is not to the exclusion of quality. In fact, it is part of an attempt to try to get to the bottom of it. Again, off the top of my head, earlier last year there was a sewage overflow into Coniston Water from 22 August, which lasted just over a week, and a sewage overflow around Easter time in Windermere, which lasted a matter of hours. The former was more of a trickle—still unacceptable—and the latter was a deluge. The difference in terms of quality was significant as well as in terms of volume. We therefore ask that the Committee considers amendment 13, which we seek to press to a vote.

Question put, That the amendment be made.

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[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.

[Tim Farron]

I want to point out something that is probably blindingly obvious, because I want to support the hon. Members for Epping Forest and for Beaconsfield. When emergency overflows happen in rivers near places where people may engage in aquatic sports, that is one thing and it is unacceptable, but it is worth bearing the lakes in mind—I will pick Windermere for an example. A drop of water that enters the north end of the lake takes nine months to pass through the River Leven and out into Morecambe bay. The consequences of an overflow in a lake—in the Lake district or elsewhere—are so much greater than in other waterways. I also have 30 outdoor education centres in my constituency, many of them on lakes. They are much more affected by overflows than any other form of spillage, which is why I think the amendment is worth pursuing.

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[Emma Hardy]

I thank all Members for their contributions to the debate on clause 3. I reiterate my promise to provide a factsheet and information about the numbers we have used. We have had an interesting debate about the different types of monitors. To clarify, we have emergency overflows, storm overflows, water quality monitors, event duration monitors and volume monitors, which we have discussed. We will make sure that the factsheet provides clarification so that we are all on the same page and understand the debate clearly.

Putting all that to one side, I think we ultimately all agree that it is important to better understand the frequency and duration of discharges from all the emergency overflows. We all think we need to improve transparency and inform investigations by the regulators into potential non-compliance.

Combined with the equivalent duty for storm overflows, which has just come into force, clause 3 will ensure that all sewage overflows on the network are monitored. That will enable regulators and, importantly, the public to see, in near real time, when a discharge from any overflow has occurred and how long it lasted. Water companies will use that information to prioritise investment to mitigate the impact of the most polluting overflows, as guided by the regulators. We have discussed our concerns about volume monitors being more difficult and costly to install. I gave a rather garbled explanation of the difficulty owing to the pipework in the majority of overflows requiring modification. As I said, I will provide further information on those numbers.

Such a large programme of work would take much longer than 12 months. We do not think that this added cost is proportionate to the additional value that volume information would provide, especially given that volume information alone does not provide a comprehensive account of the impact of a discharge—measurement of the water quality is required for that. To repeat a point, I do not want to be a Minister in a few years’ time who has perfected the art of monitoring and done nothing to deal with the causes. That is why the water companies will begin installing continuous water quality monitors for storm overflows, as set out in the price review ’24, to provide further information on the impact of sewage discharges on water quality.

New clause 25, tabled by the hon. Member for Westmorland and Lonsdale, would require capacities for each sewage treatment works and pumping station to be calculated. That is unnecessary because that information is already included in environmental permits and available from the Environment Agency’s public register. The new clause also proposes a general duty for water companies to collect data relating to their performance operating a sewerage system. We do not believe that that broad duty adds any meaningful requirement on water companies beyond their existing duties through the environmental information regulations.

On that basis, I commend clause 3 to the Committee and ask the hon. Gentleman not to press his new clause.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Clause 4

Nature-based solutions

[Tim Farron]

I beg to move amendment 26, in clause 4, page 10, line 4, leave out—

“use that is to be made of”

and insert—

“priority that is to be given to”.

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[Emma Hardy]

I thank all hon. Members for their thoughtful contributions during this debate and the careful consideration of the amendments tabled to clause 4. We are in danger of having a bit of a love-in with so much agreement in this room.

I turn first to amendment 26, which was tabled by the hon. Member for Westmorland and Lonsdale. I was genuinely really pleased to see clause 4 added on Report in the Lords, as a result of the collaborative cross-party approach to strengthening the Bill so that it further encourages greater use of nature-based solutions by water companies, and I appreciate the kind comments from the Opposition spokesperson, the hon. Member for Epping Forest. This is why clause 4 requires sewerage undertakers to address, in their drainage and sewerage management plans, the use that is to be made of nature-based solutions in their networks.

Sewerage undertakers already have existing obligations under section 94A of the Water Industry Act to address the sequence and timing for the implementation of measures proposed in their drainage and sewerage management plans. We believe that these obligations sufficiently require sewerage undertakers to address the relative prioritisation of the proposed measures in their plans. Nature-based solutions are one of a diverse range of potential solutions to complex drainage and sewerage issues. Clause 4 will ensure that sewerage undertakers highlight the proposed role of nature-based solutions within their network. It is right that undertakers have due flexibility to consider the full range of solutions available to them and to work with stakeholders to identify the right solutions.

As much as I love nature-based solutions—and so does everyone in the room, it appears—I am sure we all accept that it is not appropriate to prioritise nature-based solutions ahead of other available options in every circumstance. We believe, however, that the provisions in clause 4 will have sufficient positive effect in supporting greater exploration and development of nature-based solutions without posing operational challenges for the sewerage undertakers. On that basis, I ask the hon. Member for Westmorland and Lonsdale to withdraw his amendment.

Moving to new clause 5, which the hon. Member for Epping Forest tabled, I take this opportunity again to agree and emphasise that the Government think that nature-based solutions are critical to ensuring that we have a resilient and sustainable sewerage system. I am therefore delighted to inform the House that we have recently seen the regulator doing just that. In its final determinations for the 2024 price review, Ofwat has set out an allowance of £3 billion for water company investment in nature-based solutions and biodiversity. That includes £2.5 billion to reduce storm overflow spills through green solutions.

However, the Government have noted the concerns and amendments in the other place, which is why we introduced our amendment to place a new requirement on sewerage undertakers to support the greater use of nature-based solutions, which now forms clause 4. Clause 4 will ensure that nature-based solutions are considered from the start of investment planning and decision making as a solution across multiple risks, including pollution, flooding and drainage. I trust that the hon. Member is therefore reassured that his new clause has already been provided for. On that basis, I ask him not to push his new clause to a vote.

Although I have outlined some of the merits of clause 4, I will briefly reiterate why this Government consider the clause to be an essential part of the Bill. Nature-based solutions are vital to protecting the environment and the wider water system, as well as delivering co-benefits including protection from flooding for the public and enhancing the natural environment. I concur with the comments made about flooding by the Opposition spokesperson. Clause 4 will drive further exploration and development of nature-based solutions, and will require undertakers to be transparent as to how they have deployed, or propose to deploy, nature-based solutions within their drainage and sewerage networks. Compliance with that duty will be monitored by Government and regulators.

Sewerage undertakers will also be required to conduct public consultations on their drainage and sewerage management plans, which will allow the public to scrutinise the plans and propose changes. Therefore, to help realise the Government’s desire to see further development of nature-based solutions by sewerage undertakers, I commend clause 4 to the Committee.

[Tim Farron]

I will add to the words I have already said, but not by very many, I promise. The simple bottom line of our proposal is that nature-based solutions offer great value for dealing with sewage. As has been mentioned on both sides of the Committee, they also have a significant impact on flood prevention. I am bound to crowbar this in, but it is a reminder that among the things that we should be enormously grateful to those who work our uplands—our hill farmers—for is that their work, if we support them properly, prevents people who live in towns, villages and cities from being flooded.

Another part of the Department for Environment, Food and Rural Affairs brief is the environmental land management scheme, and how we can look to further support those working in the uplands—our land managers and our upland farmers, both tenants and owners—to be able to deliver those nature-based solutions to protect millions of homes and avoid billions of pounds of damage, as well as being part of the solution to dealing with sewage.

We will not seek to press the Committee to a Division. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4 ordered to stand part of the Bill.

Clause 5

Impeding investigations: sentencing and liability

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

[Emma Hardy]

Thank you, Mr Vickers, for the opportunity to speak on the importance of clause 5. The clause strengthens the penalty for obstructing the investigations of the Environment Agency, Natural Resources Wales and the Drinking Water Inspectorate. Obstruction of investigations by the regulators is already an offence, but that has not stopped companies blocking the regulators’ investigations.

In 2019, the Environment Agency prosecuted a number of individuals at Southern Water for removing evidence from the possession of officers. I am sure Members will agree that such behaviour is unacceptable. Currently, the offence of obstructing the Environment Agency and Natural Resources Wales’s investigatory powers—under section 108 of the Environment Act 1995—is punishable only by a fine, and can only be heard in the magistrates court. There is also no mechanism for prosecuting executives where obstruction of those powers occurs under their guidance.

The offence of obstructing the Drinking Water Inspectorate is already triable in the Crown court. That too, however, only carries a maximum penalty of a fine. I am sure Members will agree that it should never be preferable to accept a fine rather than face the full consequences of lawbreaking, and where lawbreaking occurs with their involvement, executives should be held accountable. Clause 5 makes the offence of obstructing the Environment Agency and Natural Resources Wales’s powers under section 108 of the 1995 Act triable in the Crown court. It expands the maximum penalty for obstructing Environment Agency, Natural Resources Wales and Drinking Water Inspectorate investigations to be up to two years’ imprisonment for conviction on indictment.

Clause 5 will address a notable justice gap and further deter the offence of obstruction. In turn, it should better enable our regulators to carry out their investigations uninhibited and hold water companies to account accordingly.

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

Debate between Emma Hardy and Tim Farron

Committee stage
Thursday 9th January 2025 Public Bill Committees

[Emma Hardy]

I thank the hon. Gentleman for his helpful question. Yes, we obviously have regular conversations with Ofwat to ensure that it is capable of delivering everything here. There is an impact assessment on the table in the room, if the hon. Member would like to look at exactly how that all works out.

Amendment 18, also tabled by the hon. Member for Westmorland and Lonsdale, speaks to the representation of customer views and those of wider groups. The Government are clear on the importance of elevating the voice of consumers in water company governance and decision making. That is why—as I have mentioned—under the Bill, Ofwat will set rules requiring water companies to have arrangements in place for including consumers in company decision making.

In October last year, Ofwat published a public consultation on the rules on remuneration and governance and how they will apply. The proposed options put forward by Ofwat include giving a non-executive director the responsibility for oversight of consumer interests on the board and providing opportunities for consumer panel representatives to meet with the CEO on a regular basis. Furthermore, companies already have a range of environmental obligations that they should be meeting, and experts in water and sewage policy should already be considering those obligations to inform board-level decision making. I trust the hon. Member for Westmorland and Lonsdale is therefore reassured by the Government and Ofwat’s approach and is content that amendment 18 is not needed.

I will now take a little time to discuss clause 1 itself and the importance of it standing part of the Bill. As hon. Members know, clause 1 provides Ofwat with new powers to set rules on pay and governance in the water sector and requires that Ofwat make rules on four topics. I have already spoken about one of these, consumer representation. The legislation also provides Ofwat with new powers to issue rules on remuneration and governance, and requires that Ofwat set rules that make the payment of bonuses contingent on companies achieving high environmental standards. As the independent regulator, it is more appropriate for Ofwat to determine the performance metrics to be applied when setting the rules for performance-related pay.

In addition, Ofwat must also make rules covering the fitness and propriety of chief executives and directors. That means that it will be required to set standards of fitness and propriety that chief executives and directors must meet in order to be appointed by water companies or stay in post. People holding those senior roles will be held accountable against those standards and, if they fail to meet them, companies may need to take corrective action or ultimately remove executives from post if necessary. Ofwat’s initial policy consultation outlined some proposed standards of fitness and propriety that included ensuring that individuals have sufficient knowledge of the duties of water companies, are financially sound and have not been the subject of regulatory investigation. Collectively, those rules on remuneration and governance will help to drive meaningful improvements in the performance and culture of the water industry and form a central part of the Bill.

To pick up on the point made by my hon. Friend the Member for Hastings and Rye about whether the rules go further than the previous Government’s, the short answer is yes. The legislation will provide Ofwat with legal powers to ban bonuses, whereas currently it can only set expectations, and it will require Ofwat to set rules prohibiting the payment of bonuses in certain circumstances. Executives will no longer be able to take home eye-watering bonuses where companies fail to meet standards on environmental performance, financial resilience, customer outcomes or criminal liability. We will go further by requiring Ofwat to set rules requiring water companies to ensure that directors and executives meet the highest standards of fitness and propriety, and that customers are involved in company decision making that impacts consumers.

Finally, turning to amendment 19, also tabled by the hon. Member for Westmorland and Lonsdale, I would like to reassure the hon. Member that both the Government and Ofwat take the handling of actual or potential conflicts of interest very seriously. Ofwat employees are already bound by a range of robust rules and processes that support the management of conflicts of interest, including when leaving the organisation. Failure to comply can result in disciplinary action. That includes the civil service business appointment rules, duties of confidentiality and the Official Secrets Acts.

[Tim Farron]

The underlying issue here is a cultural one—I do not think I am alleging corruption. For example, one can look at fines outstanding. Ofwat set fines for, I think, four water companies; at the last check just before Christmas, many months later on, not a penny of the fines had actually been collected. There is a sense of a lack of urgency and a lack of understanding of the anger felt towards the water industry. When we have this revolving door, there may be no corruption at all, but there is a kind of watering down—no pun intended—of the culture of being a watchdog. There is a level of compliance, and it is apparent.

[Emma Hardy]

I understand the hon. Gentleman’s intention, which fits within the bigger picture of how we change the culture and improve trust in the industry. On these specific points, there is already legislation in place. However, I take his wider point that there is no trust and a lot of anger, and we need to do something around the culture of how these organisations work.

Given that existing measures are already place and Ofwat’s forthcoming fit and proper person rules should encompass conflicts of interest, the amendment is unnecessary. I ask the hon. Member to withdraw it. I hope that hon. Members will support the Government’s amendments and that all members of the Committee are satisfied that clause 1 should stand part.

[Tim Farron]

We would be content not to press any of the amendments bar amendment 18, which we will seek to push to a vote. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 18, in clause 1, page 2, line 3, at end insert—

“(ca) 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.”.—(Tim Farron.)

Question put, That the amendment be made.

Water Companies: Regulation and Financial Stability

Debate between Emma Hardy and Tim Farron

Wednesday 23rd October 2024 Westminster Hall

[Emma Hardy]

rose—

[Tim Farron]

If the Minister wants to say, “Yes”, she will meet me, I will be delighted to give way to her.

[Emma Hardy]

In the spirit of collaboration, which I have just spoken so much about, of course I will meet the hon. Member.

[Tim Farron]

Mr Pritchard, she’s a good ‘un. I thank the Minister very much indeed; I appreciate that.

Finally, I thank everyone who has contributed to the debate, but I also thank you, Mr Pritchard. That might sound a bit smarmy, but you and I go back a long way. I wish that when I first started here I had a Chair of Westminster Hall debates who talked us through the process as well as you have today. I am very grateful to you, and indeed to everybody else who has been here for this debate.