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

Debate between Jerome Mayhew and Charlie Maynard

Committee stage
Thursday 16th January 2025 Public Bill Committees

[Charlie Maynard]

I thank the hon. Member for that intervention. I do not know when that changed. [Interruption] In 2015, was it? There we are: maybe it was changed in 2015. Perhaps all of us, or most of us, recognise that is not a good situation. Time and again—I have seen this in Witney, Ducklington, Bampton, Aston and Carterton—this is just waved through. When I quiz people from Thames Water about why they have waved it through, they say, “We have a duty to connect.” They do have a legal duty to connect, which they take seriously, but they take their duty to add capacity to match that increase much less seriously.

[Jerome Mayhew]

This is a request for information on my part. In my conversations with Anglian Water, one of its key asks relates to the imbalance in which the company has a legal duty to connect any planning application that is passed, yet it is not a statutory consultee. It is therefore not required—not able, in fact—to take part in the planning process. Until the companies are made statutory consultees, all this is irrelevant, so should not the new clause focus on their becoming statutory consultees?

While I am on my feet, I have a query about the drafting. The hon. Gentleman defined a “relevant time”, but I do not see that definition in the new clause. Is it contained somewhere in the draft legislation? If it is not, what might the effective definition be?

[Charlie Maynard]

The point about “relevant time” is fair and deserves to be clarified. I completely agree on the issue of statutory consultees and have no issue with that either—that would make much more sense, because there is a real failure in that regard.

I will go a step further—I have lived experience in this regard—and give a special shout-out to Thames Water employee Richard Aylard, who for two years dutifully showed up every six weeks with West Oxfordshire district council to hash through these issues. I learned a lot from him and am grateful to him, as well as to Jake Morley, Lidia Arciszewska, Phil Martin, Laurence King, Alaric Smith and Alistair Wray. They sat through all that, and we all learned together. It is important that everybody knows what came out of those meetings. When sewage treatment works’ capacity is calculated—they are very much under-capacity in my patch and, I am sure, in those of other hon. Members—there are four criteria. The first is the population or population equivalent, which is normally optimistically understated. The second is per capita consumption. Thames Water has a high per capita consumption when it suits the company and a low per capita consumption when it suits the company, so again that is understated.

The third is the Environment Agency multiplier, which is typically 3.0, and is discounted far too often. When there is a known record of spills, Thames Water is still allowed to discount the EA multiplier, often from 3.0 down to 2.4; that is a 20% cut, which means that the capacity can be 20% less. That is a real problem, and it is being done repeatedly on sewage treatment works that have dumped sewage left, right and centre for years.

The fourth criterion is infiltration. Some 47% of the capacity of west Oxfordshire’s big nine sewage treatment works comes from infiltration. That means that our pipes are leaking. There is not enough science on this matter. If we were to put in flow meters, we would have the information, but it seems that we Lib Dems are the only team in the room, alongside the hon. Member for Waveney Valley, that advocates flow meters. If we want to solve these problems, we have to get serious about the information.

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

Debate between Jerome Mayhew and Charlie Maynard

Committee stage
Tuesday 14th January 2025 Public Bill Committees

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

The hon. Gentleman says it is the creditors who put the undertakers in the position that they are in, but surely that cannot be right. Creditors are the people who provide services for a fee to the undertaker—they will not be the organisations that put the undertaker into that position. Surely the hon. Gentleman agrees that if he were to replace the consumer or any other body with recovery from creditors, that would be meaningless unless Government debt was placed above those of other creditors. How would that be fair to the providers of services to water undertakers?

[Charlie Maynard]

I thank the hon. Gentleman—I think he jumped in before I had finished the sentence, which was on the creditors and the management. Who is responsible for this? Yes it is the management, yes it is the regulators and prior Governments, and yes it is the creditors who have provided the debt—they have gone into that with eyes and ears open and they have made that decision to provide that debt willingly. Therefore, they have put that money at risk and they have to take responsibility for that. That is what debt is.

I am not talking about Government debt, but about a loss and who is making good that loss. The Government are proposing that all the consumers pay for that—in other words, the bill payers. That is wrong. The bill payers should not be paying for this; the creditors should be, because they have put in, in Thames Water’s case, £17 billion—soon to be £20 billion very likely—which has saddled those companies with vast amounts of debt. More than a third of the bills of the bill payers of Thames Water is just being spent on paying interest on that debt.

[Jerome Mayhew]

The hon. Gentleman is conflating the term creditor with debt provision, but actually there is a plethora of suppliers to any large organisation such as a water undertaker. They are creditors—that is just how they are defined. His clause would cover small and medium enterprises that are providers of services, and in fact any provider of a service who would be a creditor of such an organisation. How does he propose that his clause only affects debt provision, which I understand is the direction he is trying to focus the clause on, and does not cover all creditors as it is currently drafted?

[Charlie Maynard]

The change in wording would mean that the clause states:

“The Secretary of State may make modifications of the conditions of the company’s appointment so that they include conditions requiring or enabling the company…to recover from its creditors such amounts as may be determined by or under the conditions”.

Let us talk through the special administration regime and what happens. I would like this to already have happened but it has not When a company is put into special administration—I would like this to already have happened, but it has not—a court appoints a special administrator. A special administrator looks at the creditors. It looks at the debt and the other creditors involved, and it will prioritise, according to the seniority of that debt and those creditors, who is senior to the other. Suppliers will be a lot more senior.

[Jerome Mayhew]

They will be right at the bottom.

--- Later in debate ---

[Jerome Mayhew]

The hon. Gentleman will perhaps know that under current insolvency law, there are secured creditors. There is a hierarchy of debt, and the least protected—not the most protected—are suppliers. Does he envisage changing the rules to give additional protection in this process to unsecured creditors and essentially reverse the security of credit? That would be an odd thing to do, but I understand why he might need to do it to make this process effective.

[Charlie Maynard]

We are seeking for the debt providers to take the hit. They have gone into this process and been part of the problem that has led to the state of our rivers today. They should be taking the hit ahead of the customers. That is our direction of travel, and I think that is fair and reasonable. What the clause does is the opposite, and that is what we are going after.

We fully support the losses being recovered by the administration process—we have no issue with that—but if we support the clause as drafted, we will find a very large bill on the customer’s account. That is something we want to avoid. I am keen to hear the Minister’s view as to why it is reasonable for the customer to be paying rather than the lenders.

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

Debate between Jerome Mayhew and Charlie Maynard

Committee stage
Tuesday 14th January 2025 Public Bill Committees

[Jerome Mayhew]

This is a genuinely interesting point. I know it is late, but I would be grateful if the hon. Member could expand in further detail. While he is referencing regulated capital value and the difference between what is on the sheet and what is reality, could he explain in a bit more detail, for the benefit of the Committee, what that means in reality? If there were to be a rebase of regulated capital value, what would be the practical impact of that?

[Charlie Maynard]

I question what value regulated capital value, given how completely out of whack it is with reality, is bringing to the table. I do not have all the answers, but I question whether this has any utility to the conversation. What is happening here is that a business is generating £1.2 billion of cash flows, and it has this enormous balance sheet and this enormous regulated capital value. Because of those essentially false premises—I believe that we do not actually have assets of that value—regulated capital value is essentially a figment. We are grappling with things that have no basis, and we would do well to reconcile and to look at the facts—at what these assets are actually worth—and then to build out from there.

[Jerome Mayhew]

One possible reason why regulated capital value is important is that the assessment of whether bills are reasonable or not relates—in part, at least—to what is considered to be a reasonable return on capital. Does the hon. Member agree that if one’s regulated capital value has depreciated to zero, there might be an adverse knock-on impact on what is considered a reasonable bill, to take account of the debt and the capital investment? Does he think that that might be something to do with it?

[Charlie Maynard]

The whole thing is reverse engineered—I am completely in agreement on that—and that is not necessary or useful in terms of where we are getting to, and that is causing a lot of the trouble. I would like to find a way out of that, and I would really recommend that the water commission digs into this to find a way out. I am on the Business and Trade Committee and I will be asking the Financial Reporting Council, which oversees the accounting body, to ask these accounting firms whether they actually think those numbers—those incredibly slow depreciation periods of 150 years—are valid and, if so, why.

[Jerome Mayhew]

I am grateful to the hon. Member for allowing me another intervention, this time on proposed new subsection (2DZB)(a), which refers to

“a prohibition on water or sewerage undertakers having offshore holding companies”.

He referenced some of the international investors who have holdings in Thames Water, and perhaps in the majority of the other water companies. Access to international markets is very important for raising investment into our water utilities. Does he accept that using offshore holding companies might be a mechanism that allows for easier transfer of funds, easier investment and easier access to international finance, and may therefore have a benign rationale? We always assume that offshore holding companies are somehow suspicious, or that their motivation is tax avoidance, and I believe that the hon. Member referenced that earlier. That might be the case—in which case, they should not be encouraged—but with his 25 years’ experience in finance, which he referenced, does he think that there is an argument for saying that offshore holding companies make it easier to access international investment?

[Charlie Maynard]

I have the name of one here: Thames Water Utilities Cayman Finance Holdings Ltd. Why Cayman? If I say “Cayman”, people say “tax haven”. That is why it is there. We should be doing our best to stop that. Last I looked, London was still a financial capital, and equity and debt could still be raised in this country, and I sincerely hope that remains the case. So I do not see a good reason to have holding companies offshore. Hon. Members might be happy to hear that that was all I wanted to say on new clause 19.

New clause 23 is also being considered in this tranche, and I will highlight proposed new subsection (2DZB)(b), which refers to

“a process for agreeing capital expenditure necessary for service improvements, bill increases, and changes to operating costs while the undertaker is subject to the Special Administration Regime”.

We have to spend a huge amount of money on our water utility companies, because they have not been spending enough over the last decade or two. When a special administrator is appointed in such instances, the goal is to ensure that the special administrator takes that future spend into account in considering how much debt needs to be cut. We do not want to come out of special administration with debt that is still high, which will prevent the investments from being made that will be required over the next. That is the goal of the new clause.

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

Debate between Jerome Mayhew and Charlie Maynard

Committee stage
Thursday 9th January 2025 Public Bill Committees

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

I am pleased to see you in your place, Mr Vickers.

I am not going to speak to the Government amendments; I merely repeat the very good arguments put forward by my hon. Friend the Member for Epping Forest. At this stage, however, I will just express a couple of concerns that I have about amendment 18, tabled by the Liberal Democrats.

I understand the rationale or the intention behind amendment 18; we all want the water companies to pay closer attention to the interests of their consumers. I note in passing that they already have a statutory duty—a consumer-focused statutory duty—but the actions taken by the Conservative Government over the past 14 years to ask questions about the state of sewage discharges and to get information about them, so as to take effective action to bring them to an end, bring with them an additional need.

The hon. Member for Westmorland and Lonsdale highlighted a loss of trust in the water undertakers, and I agree with him on that. There has been a significant loss of trust as their poor behaviour, which was uncovered by the Conservative Administration, has been met with considerable outrage—justifiable outrage—by the Government and by members of the public.

However, I fear that there will be some significant unintended consequences associated with the drafting of amendment 18, relating to the legal obligations of a board member. The hon. Member for Westmorland and Lonsdale referred to those new positions being on the boards of companies. There are legal obligations that apply to all board members and I question whether the representatives of consumers and of the voluntary organisations that have been so active in this area over the past few years would really want to be exposed to the legal obligations of being a member of the board of a plc, because those obligations are significant and onerous.

[Charlie Maynard]

It is fairly standard on boards today to have directors and officers insurance; indeed, all board members have it. What is the problem with the new people also having D&O insurance?

[Jerome Mayhew]

I am grateful for that intervention. However, it seems an odd way to proceed if it is recognised that there is a risk to voluntary members who join boards, exposing them to personal obligations, such as a fiduciary duty of care. There is also a legal duty of loyalty to the organisation, which such volunteers might find quite difficult to stomach. There is a duty of obedience to the organisation as well. It seems odd at this drafting stage to say, “We recognise that there is a risk, but don’t worry: you can take out insurance and you’ll probably be okay.” It seems odd to introduce an amendment in an imperfect form, rather than perfecting it.

[Charlie Maynard]

First, it is up to each individual to sign up or not; they do so of their own free will. Secondly, this is standard insurance which almost all boards have in the UK and internationally nowadays, which protects board members. It would not be specifically for those board members; it would be for all board members. To say that that is a concern, and that we should not make this provision on those grounds, seems odd.

[Jerome Mayhew]

I have expressed my concerns. It would be perfectly possible to achieve the object, which I share, of improving the voice of the customer in water companies, or of improving the implementation of the existing obligation on water companies to take account of the consumer interest. I do not think that the current drafting is the best that we can do. I raise these concerns so that they may be properly considered.

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

Debate between Jerome Mayhew and Charlie Maynard

Committee stage
Thursday 9th January 2025 Public Bill Committees

[Charlie Maynard (Witney) (LD)]

Amendment 13 is about volume. It would add volume to the list in clause 3, which includes

“the location of the emergency overflow…when the discharge began…when the discharge ended.”

The Liberal Democrats seek to add the volume of discharge to that list, and that is common sense. As many Members have said, we want to know how much sewage is coming out, and we are looking for help from all Members to get the amendment into the Bill. If we are serious about solving the problems in our rivers, we need to know how much sewage is coming down.

[Jerome Mayhew]

I am grateful to the hon. Member for giving way and for the conversation that we had over the lunch recess. One challenge with the measuring of volume is what we are measuring the volume of. The industry estimates that 97%-plus of volume from a storm event is water—it is just rainwater. How do these amendments address the measurement of what is being passed, and is this something on which we could co-operate?

[Charlie Maynard]

Let us talk about the spectrum of information here. We have got the number of spills, where we have no idea how long those spills went on. We then have EDMs—event duration monitors—which count the number of hours of pollution. There is then the volume of flow, and then various iterations around measuring dissolved oxygen, or whatever it might be. I do not want the perfect to be the enemy of the good. We need to make progress. Thames Water is installing flow monitors all over its network, upstream of its sewage treatment works, but not downstream. That is because it is scared of actually having to count and have in the public domain the volume of sewage that it is dumping.

As my hon. Friend the Member for Eastbourne (Josh Babarinde) said, “If you have a coke bottle of sewage, and you don’t know how diluted it is, you still don’t want it in your bath.” Of course we want to know how diluted it is—that would be nice—but if we are serious about addressing these problems, we need to know how much is coming out of those overflows.

To quantify what has been going on over the last few years—I give the previous Government some credit—some 14,000 monitors have been installed in the last seven years, which is good news. The figure was less than 1,000, and 15,000 have now been installed on the storm overflows, but another 7,000 do not have monitors. Amendment 16 talks about where those locations are. We can have overflows at a sewage treatment works, at a pumping station or on the sewer network. I believe that everyone on this Committee wants to capture wherever that overflow is, which is what the amendment would do.

I will try to quantify some of the numbers, and I will talk about my favourite, Thames Water. Right now, Thames Water has 30 event duration monitors at inlet storm overflows at waste water treatment works. It has 183 EDMs on storm tanks at waste water treatment works and 137 EDMs at storm discharge overflows at pumping stations, and it has 320 storm overflows on the sewer network—not in a pumping station or at a treatment works. We are trying to capture all those areas, because we need to know what is going on. If we do not know what is going on, we cannot fix it.

Amendment 13 is on the volume of discharge. Amendment 14 concerns the same count, so I will not go into it in more detail. Amendment 15 relates to reporting on discharge from overflows and would add to existing stipulations about the form in which the information must be published. I will read it out: the information must

“be uploaded and updated automatically”.

Let us get rid of human involvement. We are in 2025—all this stuff can, and should, be automated.

Professor Peter Hammond has done some great research, and I am incredibly grateful to Windrush Against Sewage Pollution, which has been one of the drivers of information and campaigning in this space. Well done to Peter, Ash, Vaughan and Geoff; I give them many thanks. Peter spotted that when Thames Water monitors its sewage, it does so at the wrong times of day, when the level of sewage is at its lowest. We want to automate that so that it is monitored all the time. That means less human interaction and lower costs, and it is much more achievable.

There is a map that shows whether sewage has been dumped in the last 48 hours, is being dumped currently or has not been dumped in the last 48 hours—Thames Water was actually one of the first to put that in the public domain—but it does not give the historical information. We need the historical information in there and it needs to be downloadable, so that any citizen scientist can come along, pull the data off and act on it. Without amendment 15, we do not have that. These are very nuts-and-bolts, practical things that we want to head along.

--- Later in debate ---

[Jerome Mayhew]

I will start with the Liberal Democrat amendment to add volume measurers to storm outflows. I hope I made it clear in my earlier intervention that I am sympathetic to the amendment’s objective, but I have questions about whether the route that the Liberal Democrats have gone down is the right one. Legislating for another piece of kit—volume-measuring equipment, alongside the EDM—yes, would go some way to solving the problem, but it would not solve the real problem, which is that we need to know when a discharge is happening, the volume of the discharge, the level of sewage as opposed to water in that discharge, and the consequential impact on the watercourse into which it is being discharged.

I was grateful for the intervention of the hon. Member for Hastings and Rye, who referred to the water report of the Environmental Audit Committee, of which I was one of the authors. We took a lot of evidence on the issue and we had a trip to Oxfordshire, to the River Windrush. We met the leading citizen scientists in the area and took evidence from them there and in our more formal evidence sessions in this place. The hon. Lady was right that the outcome of the combination of evidence we received was that the most appropriate form of technical solution was a measurer of water quality upstream and downstream, and for that water quality measurement to be published timeously. For that reason, section 81 of the Environment Act 2021 requires automatic publishing within 60 minutes of an event happening.

That leads me to a question. The hon. Member for Witney referred to Thames Water choosing when to measure, but with respect to him, the clause is about emergency overflows, not about standard monitoring, and under the existing legislation, Thames Water or any other water undertaker has no option as to when it measures—the EDM is triggered by the emergency event. It also has no option as to when it can publish, because it has to be within 60 minutes of the event being notified.

[Charlie Maynard]

Yes, of course, the EDMs are automatic; I was talking about the spot monitoring by individuals.

[Jerome Mayhew]

With respect, that is a separate point, because we are talking about amendments to clause 3, which is about emergency overflows. I accept the point. As with so many of our discussions this morning and this afternoon, we are all trying to get the right outcome, but this is line-by-line consideration of the Bill, which is rather boring and technical, but it is where we try to tease out some of the drafting issues and what can be improved. I am not sure that the problem that the hon. Gentleman is seeking to resolve sits naturally in this clause.

Moving on to amendment 15, again I highlight my fear that, given that the clause relates to emergency overflows, the amendment leads to a legal duplication of section 81 of the Environment Act. I do not want to do the Minister’s job for her, but from my perspective, that is a reason why we should look carefully at amendment 15 before we accept it. Of course, when I say that I do not want to do the Minister’s job for her, that is only pro tem—in the future, I definitely want to do this job for her.

The Liberal Democrats have not yet spoken in favour of amendment 16, so I will leave that until such time as they decide to. The hon. Member for Witney can come back to it.

Finally, on amendment 17, which the hon. Member for Westmorland and Lonsdale—

[The Chair]

Order. Amendment 17 is not in this grouping.

[Charlie Maynard]

Mr Vickers, may I revert to amendment 16? I am sorry; I thought I had mentioned it. I will read it out:

“The undertaker must ensure that, within 12 months of the passing of this Act, appropriate monitors are installed to collect the information required”.

That point is 12 months, so that is holding people’s feet to the fire, but we have a massive problem. This is totally doable in terms of timeline. If the Government came back and said, “No, we want 36 months, not 12 months,” then fine, I have no problem with that, but I have talked about being depressed by the desire to slow things down, and about the House of Commons Library data on giving another 10 years to install these monitors. Why are we going slow? We all say to the public that we are really serious about it; let us be serious. I thought that I had covered amendment 16, but there it is again.

[Jerome Mayhew]

I now rise to talk about amendment 16. My primary objection here is the overarching one: I am not convinced that this is the right technical approach, for the reasons set out in the report of the Environmental Audit Committee, and also in the Environment Act 2021. However, if I am wrong on that, I am happy to support this amendment as a probing amendment and look forward to the answer that the Minister gives; but if it were to be taken to a vote, without further information about the practicality of being able to obtain the required tens of thousands of these machines, install them and have them operational and reporting in a 12-month period, I am not sure that I, as a responsible legislator, could support amendment 16. I would need further information on whether that was a practical option.