Water Companies: Executive Bonuses

Jerome Mayhew Excerpts

Tuesday 5th December 2023 Commons Chamber

[Steve Double (St Austell and Newquay) (Con)]

It is a real pleasure for me to take part in this debate. I was born and raised in the heart of Cornwall, have lived there my whole life, and have always enjoyed the sea. Members who follow me on any my private social media platforms will know that I am found in, on or beside the sea at just about every possible opportunity. Therefore, I have taken a very keen interest in the whole issue of water quality, particularly bathing water and sewage discharge, throughout my life, long before I was first elected to this House.

We have to start by saying that this is not a new issue. Let us remember that Surfers Against Sewage was started in 1990 specifically to raise awareness about it and deal with it. At that time, less than 25% of UK bathing waters were at a minimum acceptable standard for bathing, whereas there is now only one beach in my constituency that does not meet that standard. I am sorry, but pretending that things are worse than they have ever been is absolute nonsense. We have seen incredible progress on this issue over many years.

I remember very clearly that the Labour Government did absolutely nothing in 13 years to address the issue—zero. When we came into office in 2015, we were the first ever Government to take this matter seriously and start to address it.

[Jerome Mayhew (Broadland) (Con)]

What my hon. Friend has just said is not actually accurate. Labour did not just do nothing; in 2006, it cut a deal with the water companies to agree self-assessment on their environmental performance. Does he agree that that is worse than nothing?

[Steve Double]

My hon. Friend makes a good point. Labour actually made the situation worse—so much so that in 2009, the Labour Government was taken to court by the EU for failing to deal with the issue—so I am sorry, but we will take no lectures whatsoever from the Opposition Front Benchers about dealing with it. We are the first Government who have ever taken this matter seriously and taken action to start addressing it. We do not even have to think back in history, because we have a living example right before us today: in the one part of the UK where the Labour party is in government, the situation is far worse than in England. Wales is responsible for 25% of sewage discharges for the whole of England and Wales, yet it has only 5% of the population, so again, we will take no lectures from the Opposition.

It was this Government who first introduced substantial monitoring of storm overflows. When Labour left office, 7% of storm overflows were monitored; that figure is now 91%, and it will reach 100% in the next few weeks. I place on record my thanks—and, I believe, our thanks—to one of my Cornish colleagues, my right hon. Friend the Member for Camborne and Redruth (George Eustice), who started the process of dealing with this issue when he came into DEFRA. I do not believe we would be in the position we are in today with monitoring, or with any of the other measures, if he had not initiated that work when he first became a DEFRA Minister.

[Jerome Mayhew]

The Liberal Democrats often claim that they are very interested in sewage, yet they fail to mention that the water Minister between 2013 and 2015 was the former Member for North Cornwall, a Liberal Democrat. What did he do to improve the situation? Nothing.

[Steve Double]

My hon. Friend makes an excellent point. It was not until 2015 that the Government started to take this issue seriously and take action; it did not even happen under the coalition Government. Therefore, all the crowing from the Liberal Democrats that they regard this as a really important issue is nonsense, because when they were in government, they initiated nothing to address it.

It is clear that there is now far greater public awareness and concern about this issue, and it is much higher up the political agenda than ever before, and rightly so. Some of us, particularly in Cornwall, have been pushing for that to be the case for a very long time, so I welcome the fact that sewage discharges are now a much bigger priority and there is much greater public awareness of them. However, again, let us be frank: people are only aware of what is going on because of the increased monitoring that we have introduced. For 13 years under Labour, all of this sewage was being discharged into the sea, but no one knew about it because there was no monitoring. It is only because of the increase in monitoring over the past few years that we know what is going on.

The first step towards dealing with an issue is to know what is happening. The first step that the Government took was to introduce monitoring, and we now have the data that enables us to hold the water companies to account. Before we had that monitoring and that data, we could not hold them to account because we did not know what was going on; now, we are holding them to account. Since 2015, there have been 58 prosecutions of water companies for failing to fulfil their obligations, and £141 million has been secured in fines. That money is being invested in environmental improvements and in reducing pollution. We must always remember that under this Government, it is the water companies that get taken to court; under Labour, it is the Government who get taken to court.

We now have a plan to reduce storm overflows, which I had the great privilege of launching during my brief time as water Minister. I acknowledge that my hon. Friend the Member for Taunton Deane (Rebecca Pow) put in most of the legwork to produce that plan; I just had the glory moment of crossing the t’s, dotting the i’s and launching it. We now have a plan to invest £56 billion in upgrading the infrastructure to reduce sewage discharges, but we have to be honest with the British public. We hear comments from Opposition Members like, “Let’s stop sewage immediately; we could do it straightaway,” but that is nonsense. We are talking about Victorian infrastructure that has been in place for over 100 years: it is going to take an awful lot of money and an awful lot of time to upgrade and improve that infrastructure to address this issue. However, we now have a plan to make sure that it will happen, and we can hold the water companies to account to ensure that they make that investment and deliver on that plan.

There is also a myth—I am sure Labour Members will mention it today—that somehow Conservative Members voted to allow water companies to continue to discharge sewage. It is a lie: it is not the truth. Actually, we were the ones who brought forward the Environment Act 2021, which contains all the measures that enable us to hold the water companies to account. The Opposition did not support the Act so, if anything, they were the ones who tried to stop us taking action against the water companies, and we were the ones who voted for the Act and all the measures it contains. We need to be absolutely clear that we are the ones taking action and we are the ones taking this matter seriously.

The motion mentions directors’ bonuses. It is absolutely right that directors of water companies who fail to keep their obligations when it comes to sewage discharge and other forms of pollution should not be rewarded because of that, but we are already doing it. Ofwat has confirmed that it has the power to review both dividend payments and bonuses where water companies fail to keep to their environmental obligations. I know it is difficult for Labour Members, because they probably sit there looking at all the things we are doing and thinking, “Why on earth didn’t we do this when we were in government for 13 years?” I know it must be difficult for them, because they did absolutely nothing. They made things worse, not better, and it is this Government who are delivering on this issue.

I take this issue seriously. I have taken this issue seriously for many years—long before I came to this House—and it is right that the public are now much more aware of how important it is, but let us get real: we are dealing with it. We are taking the necessary steps to reduce the amount of sewage that will be discharged, and I welcome that. I believe that this Government will continue to deliver on our plan, and we will see things continue to improve in the years ahead.

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[Jerome Mayhew]

The hon. Gentleman is right: in my view there was a failure of regulation in the noughties, because during that period the financial engineering took place to load those businesses with debt. Does he accept that that manipulation of debt was completed by 2009? If he does, what does he have to the say about the Labour Government in power at the time? Were they asleep at the wheel?

[Andy Slaughter]

I accept that the debt has been loaded and that the gearing is completely out of proportion. Under Macquarie, Thames Water’s debt went from £4 billion to £10 billion, but it is now at £14 billion under the current owners. I do not know whether the hon. Gentleman was listening to the radio or has read the media this morning, but Thames appears to be asking for a 40% rise in bills. It has £14 billion-worth of debt, and according to press reports, it might run out of money by next April. That would be the second scare within a year. This is a company that almost has a licence to print money. It has 17 million customers, all paying their bills every year. Its job is obviously not straightforward, but it is not the most difficult job in the world. It cannot perform any part of that function well, and it cannot run its own company well, and that is the parlous state into which it has descended. I therefore understand that the Environment, Food and Rural Affairs Committee has called Thames Water before it tomorrow to answer some questions.

If the Select Committee can do that, what are the Government doing? I heard an extraordinarily wittering, complacent speech from the Minister the hon. Member for Taunton Deane (Rebecca Pow) just now. There was no grasp of the risks. A major company could go under, with a failure to supply a basic service. What more basic service is there than the supply of water and sewerage services to a large part of the population in this country? There was no understanding of the risks or what the remedies need to be.

This is another area where this Government have failed completely. It is their job, which I do not believe they will do in the small amount of time they have left, to take this issue seriously. They will have to, because otherwise my constituents and those in London and the south-east will not be able to have any realistic purveyor of water and sewerage services going forward. I hope that when the Minister the hon. Member for Keighley (Robbie Moore) winds up, he shows some awareness of those needs.

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[Ruth Cadbury (Brentford and Isleworth) (Lab)]

My constituents are not only bill payers and users of Thames Water, but they live with its decades-long failure to plan and invest. The River Thames flows alongside Chiswick, Brentford and Isleworth, where we walk, kayak, row and paddleboard. Too often, the Thames is polluted with dilute sewage just about every time it rains. Mogden sewage treatment works, covering 55 acres, sits in my constituency. For decades, Mogden has been a regular source of pungent sewage smells and a virulent subspecies of mosquito.

In February 2020, the streets and parks of Isleworth and the pristine Duke of Northumberland’s river was flooded with raw—not even dilute—sewage, because the main sewage intake into Mogden backed up and punched a hole through into the river. That was a direct result of maintenance failure and that issue not appearing on the risk assessment register. This debate matters to my constituents.

In October 2020, 2 billion litres of dilute sewage was discharged into the River Thames at Isleworth Ait over just two days. That was two thirds of the total discharges in 2020. In 2022, that same sewer storm outflow spilled 20 times for a total of 164 hours, discharging again into the River Thames. Just across the river at Petersham, another outfall regularly discharges. All of that is 10 years after Mogden sewage treatment works had its treatment capacity almost doubled.

I am struggling to find any evidence of any fines that Thames Water has received for the discharges I have just described. That is because they are planned. They are permitted discharges. The discharges of which we are notified are the only ones we know about, because, as the BBC “Panorama” investigation found, water companies appear to be covering up illegal sewage discharges, making sewage pollution disappear from official figures.

The water companies not only process our sewage and storm run-off, but supply fresh water. As other Members have already said, however, too much of that fresh water is wasted through pipe leaks. After too many water main bursts flooded shops and homes, we had, as my hon. Friend the Member for Hammersmith (Andy Slaughter) described, a programme to replace the Victorian fresh water pipes across the Thames Water area, but it seems to have stopped and we are just supposed to wait until the next burst happens. There is so much more that Thames Water could be doing to stop the leakages.

The overall picture of our water situation in the Thames Water area is a failure of oversight—a failure to upgrade the water and sewage infrastructure continually as London’s population grows, and as drought and heavy rain become regular aspects of our weather. For over 20 years—first as a councillor, and as an MP since 2015—I have been pressuring Thames Water to take action, as have the Mogden Residents’ Action Group, Hounslow London Borough Council and other residents. As a result of a legal challenge by residents, Thames Water was forced to increase the capacity of the sewage treatment works, to improve its reporting and to do continuous mosquito eradication.

Thames Water has also done some other work. We have had to put up with recent roadworks locally, because it has now installed a pipe to pump excess methane into the main gas grid, which is to be welcomed. We have had the multibillion-pound tideway project to take sewage out of the Thames, but it does not benefit those of us who live upstream of Hammersmith, so we are now faced with another expensive tunnelling project: the Teddington direct river abstraction scheme, which will address not high rainfall periods but periods of drought.

The Teddington DRA is designed to take millions of litres of water from the Thames, pump it across London to the Lee valley, and then replace that water with treated effluent from Mogden. That means a new pipeline and access shafts, so we are going to have a building site the size of half a football pitch on the Ivybridge estate, a low-income council estate in my constituency. The project will involve tunnelling beneath homes. It will also potentially impact on biodiversity in the River Thames and on riverside walks, and impact on river users as well. Are there really no alternatives to this three-year construction project across my constituency and those neighbouring it? The Environment Agency certainly raised doubts about the scheme when it wrote to Thames Water in March this year. The Teddington DRA will save only a 10th of the 630 million litres lost per day through leaks.

What are the rewards for this managed incompetence? Thames Water’s chief executive, Sarah Bentley, received a £496,000 pay-out last year. At least she had the good grace this year to say that it

“just did not feel like the right thing to take performance-related pay this year.”

I support the Opposition’s motion calling on the Government to enable Ofwat to block company bosses’ bonuses where high levels of sewage are being pumped into rivers; to end self-monitoring and force all companies to monitor every single water outlet; to ensure that water bosses face personal criminal liability for extreme and persistent lawbreaking: and to introduce severe and automatic fines for illegal discharges that bosses cannot ignore. We should not be dependent on whistleblowers to find out about failures. With a boost in the powers of the water regulator, water bosses who fail to meet high environmental standards on sewage pollution must be met with significant sanctions to ensure that they cannot profit from damaging the environment.

[Jerome Mayhew]

I am grateful to the hon. Lady for giving way and apologise more generally for jumping up and down like a jack-in-the-box. Is she aware of Ofwat’s press release of 29 June entitled “Ofwat delivers decision on executive pay”? In that, it says that it has recently announced

“new powers that will enable it to stop the payment of dividends”

directly and in full if a company does not meet its performance targets, including environmental targets. It goes on to say:

“In line with the new guidance”,

which it published that day,

“Ofwat expects water company remuneration committees to take full account of performance for customers and the environment”,

and that, if they do not, Ofwat will intervene on every single basis. Does she not accept that the powers are already in place and being used?

[Ruth Cadbury]

I would like to see them—I find that Ofwat is just too powerless. On dividends, Thames Water has not paid them for five years—so it keeps telling me—but that did not stop it until this year paying its senior executives very high dividends.

Why should my hard-pressed constituents face an average increase of £39 in their water bills? They have lost trust in Thames Water after years and years of scandal, putting up with smells, mosquitoes, building works, flooding and sewage through their streets and parks. Having met and talked to Thames Water for almost 20 years as a councillor and an MP, it is clear to me that it still has a lot to do to clean up its act. Bills are rising, service standards remain poor, and we continue to see raw sewage being pumped into the Thames.