Water Companies: Regulation and Financial Stability

Joe Morris Excerpts

Wednesday 23rd October 2024 Westminster Hall

[Robbie Moore (Keighley and Ilkley) (Con)]

It is a pleasure to serve under your chairmanship, Mr Pritchard. I congratulate the hon. Member for Westmorland and Lonsdale (Tim Farron) on securing this important debate.

As has been acknowledged by all hon. Members, the UK’s waterways are the country’s lifeblood. When they are in a good condition, it is beneficial not only for the environment, but for public health. It is also crucial for biodiversity and local communities that rely on the waterways—not only for recreational purposes, but for tourism.

The last Government were determined to take a positive stance on improving water quality. To do that, however, we needed to understand the situation that water companies were in. That is why we specifically focused on increasing the monitoring of outfalls from the start, taking a monitoring rate for storm overflows from 7% in 2010 under the last Labour Administration to 100% at the end of 2023. In March 2024, we fast-tracked £180 million of investment that had to be allocated within the last financial year by water companies, with an expected reduction of 8,000 sewage spills in English waterways. We also linked shareholder dividends to environmental performance, quadrupled water company inspections and launched a whistleblowing portal for water company workers to report breaches.

[Joe Morris (Hexham) (Lab)]

Does the shadow Minister not feel embarrassed that it was his Government who beggared the Environment Agency and weakened regulators to the point where we had sewage flowing into rivers such as the Tyne and the Coquet in Northumberland? Does he not feel a little bit of guilt about trumpeting his Government’s apparently positive record?

[Robbie Moore]

I thank the hon. Gentleman for joining the debate; I see that he came in right at the last minute just to make that contribution.

My answer is no. When we were in Government, we absolutely wanted to embolden the regulators with as much power as they required, which is why we specifically linked dividends to environmental performance so that Ofwat had more power to hold water companies to account. Not only that: we increased the amount of funding allocated to the Environment Agency and empowered the whistleblowing portal so that employees within water companies, or indeed within the EA or any of the other regulators, could make their concerns known. In that way, we as the Government—and now the incoming Government—could make proper progress and ensure that proper, positive change was implemented to improve water quality.

The financial stability of the water companies is, of course, a serious issue, and that affects our constituents through not only potential price increases, but performance-related issues. Sensibly, Ofwat expects water companies to maintain a level of financial headroom to manage short-term volatility and shocks to their financial structures, and to meet their obligations and commitments, which are set both by Government and internally by the regulator. Above all else, however, consumers must be protected so I welcome the fact that Ofwat strengthened its powers to improve financial resilience. That includes stopping water companies from paying dividends when financial resilience is also at risk.

The new Government have said that cleaning up England’s rivers, lakes and seas is a priority and to achieve that the Water (Special Measures) Bill has been introduced through the House of Lords into Parliament. Perhaps I should not have been so surprised that that is effectively a reworked version of the policies introduced under the last Government. In the Bill, the Government pledge to introduce new powers to block bonuses for executives of water companies that pollute our waterways —something announced by the last Conservative Government. However, the powers are not quite the promises constantly regurgitated by the Labour party when they were out on the doorstep— they were telling many of their voters that water company bosses would end up “in the dock” if their water company had been falling foul of environmental permitting obligations. The Water (Special Measures) Bill simply does not achieve that. By introducing the Bill, the new Government have frustrated not only campaigners but investors who want to invest in the sector.

Opposition Members spent many a day out on the doorstep also promising that they would take swift and bold action, but as we have seen from today’s announcement of a new commission, a new review and a new taskforce, the Government are just throwing the hard decisions into the long grass and simply kicking the can down the road.