Water Industry: Financial Resilience

Debate between Jim McMahon and Rebecca Pow

Wednesday 28th June 2023 Commons Chamber

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

(Urgent Question): To ask the Secretary of State for Environment, Food and Rural Affairs if she will make a statement on the financial resilience of the water industry.

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

Water is what makes life possible on our planet, and it is essential for our health and wellbeing, as well as for our economy, including the production of food and clean energy. The Government are taking significant steps to ensure that the water industry is delivering the outcomes that bill payers expect and deserve. Water companies have invested £190 billion since privatisation in 1989. In April, the Government published the plan for water, bringing together more investment, stronger regulation and tougher enforcement capacity for regulators in relation to those who pollute.

Ofwat and the Government take the financial resilience of the water sector very seriously. Ofwat is the independent economic regulator for the water sector and has responsibility for its financial resilience. The sector as a whole is financially resilient. Ofwat continues to monitor the financial position of all the key water and waste water companies. Ofwat reports annually on the sector’s financial resilience, and Ofwat’s latest annual monitoring financial resilience report shows that the water sector is financially resilient.

Market confidence in the sector is demonstrated by new acquisitions, such as Pennon’s purchase of Bristol Water, and by shareholders being willing to inject new capital. Ofwat has taken steps in recent years to strengthen the sector’s position. That includes action to update the ringfencing provisions in water company licences to better safeguard the interests of customers, and barring water companies from making payouts to shareholders and removing money or assets from the business if they lose their investment grade credit rating. Ofwat has outlined that water companies must be transparent about how executive pay and dividends align to the delivery of services to customers, including environmental performance. Since privatisation, total capital investment has outstripped dividends by 250%.

On 20 March 2023, Ofwat announced new powers that will enable it to take enforcement action against water companies that do not link dividend payments to performance for both customers and the environment. In December 2022, Ofwat strengthened its powers on executive pay awards by setting out that shareholders, and not customers, will fund pay awards where companies do not demonstrate that their decisions or pay awards reflect overall performance. We support Ofwat’s work, and we urge all water companies to take this opportunity to review their policies.

The scale of Government commitment to the water industry is highlighted by the integrated plan for water, and by our commitment to the financial resilience of the sector in delivering for customers and the environment.

[Jim McMahon]

Thank you, Mr Speaker, for granting the urgent question, but it is a concern that the Secretary of State did not proactively make a statement to the House on an issue of such importance. Indeed, where is the Secretary of State? One of the largest water companies in Britain is potentially going to go to the wall, and the Secretary of State is missing in action.

It was clear to anyone looking on that a culture that allowed vital investment in ending the sewage scandal and tackling water leaks to be sacrificed in favour of a goldrush for shareholders was never sustainable. Just last year, as raw human sewage was being pumped out across the country, £1.4 billion was paid out to shareholders. Now, all that was warned about is coming to pass: leaks are leading to water shortages; sewage dumping pollutes our rivers, lakes and seas; and the only thing on the up is debt, at £60 billion. The Conservative party’s cycle of privatising profit, usually for multibillion-pound foreign sovereign wealth funds, and nationalising risk is not sustainable, and neither is it a fair deal for working people.

The news we are seeing is the result of the Conservative party’s failed “profit above public interest” experiment, in which it handed over the water industry at a knock-down price to private enterprise, together with the entire infrastructure serving the nation. That was almost unique to water. For instance, when rail was privatised, the tracks were not sold off. With water, however, the lot was handed over, with few safeguards for our national interest, our national security or bill payers.

When was the Minister’s Department first made aware of the financial situation at Thames Water? Has her Department had any reason to believe that those responsible at Thames Water would not be able to meet their licence conditions or legal obligations? If this means a taxpayer-funded bail-out, how much will that cost and how will it be paid for? What assessment has she made of the liability of UK pension funds that are invested in Thames Water, and in other water companies considered to be at risk? Given where we are, will she confirm her confidence in the financial regulator? Finally, given what we see with Thames Water today, does she have concerns about any other water companies, or does she consider this to be an isolated case?

[Rebecca Pow]

In the Department for Environment, Food and Rural Affairs, we have our individual portfolios, and I am the water Minister. The Secretary of State has full confidence in her Ministers when sending them to the Dispatch Box.

The shadow Minister raised the issue of debt. For information, debt to equity fell last year by 4% in the water industry, actually making it more resilient. Since privatisation, capital investment in the water industry has been 84% higher than it was pre-privatisation—we need to get that out there and on the table.

In terms of Thames Water, it is not for me to comment on the individual financial position of a water company. We have an independent regulator that is doing that; indeed, that is what the regulator, Ofwat, is for. Water companies are commercial entities, and it is for the company and its investors to resolve any issues. The Government, of course, are confident that Ofwat, as the economic regulator of the water industry, is working closely with any company that is facing financial stress.

Oral Answers to Questions

Debate between Jim McMahon and Rebecca Pow

Thursday 30th March 2023 Commons Chamber

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

The Tory sewage scandal is a national disgrace. The waters that run through our communities, the seas that millions look out to, and the quality of life and livelihoods have been turned into an open sewer. The Tory plan means discharges will continue to 2050, 27 years away, and even then there is no delivery plan, and we do not know which communities will benefit first and which could be waiting for decades, whereas our plan will see systematic dumping ended by 2030. Over the weekend The Times reported new data showing 800 discharges every day. Is the Secretary of State familiar with those figures, and if so, given that the Environment Agency has said it will publish by midday tomorrow, will she make a statement to the House before it rises for Easter today?

[Rebecca Pow]

I will honestly say that a lot of the—[Interruption.] Well, I am not sure they are facts. [Interruption.]

Water Company Performance

Debate between Jim McMahon and Rebecca Pow

Tuesday 21st February 2023 Commons Chamber

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

I congratulate the right hon. Member for Romsey and Southampton North (Caroline Nokes) on securing this urgent question. She, like many of us, is absolutely sick and tired of the impact that sewage discharges are having on our streams, rivers, seas and local economies. They are devastating whole regions and devastating our coastlines. Frankly, we are here again with the same old excuses and the same old promises for action getting drawn out, but there is no action behind it. The water companies know they can laugh all the way to the bank because the Government will not take action, and the regulators know that the Government will not take action because they have taken away the capacity to take action from the regulators.

All the while, it is local people who are suffering—whether that is people being able to enjoy their local beauty spots and to take a walk down the river, or that is coastal businesses that are reliant on seasonal tourism to provide jobs and livelihoods to people. They are affected, not the Government, and what do we see? This year alone, when the Bank of England and the Government are telling hard-working people to rein it in and stop asking for pay rises, the water bosses are asking for 20% increases in salary. There is not a single thing the Government have said—in the environmental improvement plan or in anything said at the Dispatch Box—that sends out the message that things will be any different, and the water companies know that. They have already banked £66 billion in dividend payments and more will follow.

Labour does not want to sit on the sidelines and witness our country being turned into an open sewer. We set out at the Labour party conference in September a position that would clean up the water industry in this country, deliver value for money for consumers and bill payers, and finally work in the national interest, so when on earth will the Government get on and deliver Labour’s plan?

[Rebecca Pow]

It is so easy to just stand there with no facts and no detailed information, and level an attack. I agree, as does the Secretary of State, that sewage in water, unacceptable leakage and so forth are not to be tolerated, and that is why we have set so many actions in train—more than ever before. We are taking more action than any Government have ever before on the water companies.

Do not forget that, since privatisation, the water companies have made a huge investment—billions of pounds of investment—in improving our water company infrastructure. Because of our new storm overflows discharge reduction plan, they are now committed to £56 billion of investment up to 2050, and £7.1 billion of that is already under way, including the Thames Tideway super sewer. A great deal of enforcement action is already taking place. Just in 2021, £121 million of fines were meted out to water companies. Because of the very detailed investigation now under way by Ofwat, the regulator, and the EA, we have more and more data and information to pinpoint where permits are being contravened and where water companies are not taking the actions they should be, and enforcement will follow. We are now consulting on a potential figure of £250 million to make sure we have a realistic and sensible fine that will really do the job in holding our water companies to account.

Environment, Food and Rural Affairs

Debate between Jim McMahon and Rebecca Pow

Monday 16th January 2023 Ministerial Corrections

[Rebecca Pow]

That is yet another measure that has been put in place. There is a requirement now for water companies to report all discharges from storm sewage overflows with dates and deadlines, but some water companies have gone over and above. They already have that in place and some companies, in particular around the coast, are reporting daily.

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

I thank you, Mr Speaker, and your officers for allowing the time for this very important session; it is appreciated. When we met here in December, I asked the Environment Secretary if she had met water bosses to tackle the Tory sewage scandal that has had turned Britain into an open sewer. We are facing huge water leaks, drought and sewage pumping out across the country, and not a single English river free of pollution. Yet it was not seen as a priority that she clean up her own mess, because as a previous Environment Minister she literally opened the floodgates. Now she has finally met water bosses, can she say what firm commitments have been secured to finally end the Tory sewage scandal?

[Rebecca Pow]

I have been meeting regularly with water companies, as has the Secretary of State. In fact, we had a joint meeting just last week with the five poorest performing water companies. That was a very feisty meeting, as can be imagined. The water companies are being held to account. We now have the data we need, thanks to the monitoring and the programmes that this Government are putting in place, which were not in place under all those years of the Labour Government. It is no good standing up there and scare-mongering. At the end of last week I met South East Water, and this week it is South West Water.

[Official Report, 12 January 2023, Vol. 725, c. 687.]

Letter of correction from the Under-Secretary of State for Environment, Food and Rural Affairs, the hon. Member for Taunton Deane (Rebecca Pow).

Errors have been identified in my response to the hon. Member for Oldham West and Royton (Jim McMahon).

The correct response should have been:

Oral Answers to Questions

Debate between Jim McMahon and Rebecca Pow

Thursday 12th January 2023 Commons Chamber

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

I thank you, Mr Speaker, and your officers for allowing the time for this very important session; it is appreciated. When we met here in December, I asked the Environment Secretary if she had met water bosses to tackle the Tory sewage scandal that has had turned Britain into an open sewer. We are facing huge water leaks, drought and sewage pumping out across the country, and not a single English river free of pollution. Yet it was not seen as a priority that she clean up her own mess, because as a previous Environment Minister she literally opened the floodgates. Now she has finally met water bosses, can she say what firm commitments have been secured to finally end the Tory sewage scandal?

[Rebecca Pow]

I have been meeting regularly with water companies, as has the Secretary of State. In fact, we had a joint meeting just last week with the five poorest performing water companies. That was a very feisty meeting, as can be imagined. The water companies are being held to account. We now have the data we need, thanks to the monitoring and the programmes that this Government are putting in place, which were not in place under all those years of the Labour Government. It is no good standing up there and scaremongering. At the end of last week I met South East Water, and this week it is South West Water.