Ofwat: Strategic Priorities

Debate between Liz Twist and Philip Dunne

Thursday 9th June 2022 Commons Chamber

[Philip Dunne]

I do apologise, Mr Deputy Speaker. I will address you, as I should do.

I was just saying how heartened I have been to be involved in a campaign over the past two years with so many people from across society and the political spectrum who are engaged in trying to restore our rivers to a healthy and natural state. Some people have called for the issue to be solved overnight; of course, in an ideal world we would all like that to be the case, but it is simply not deliverable.

We need to introduce a degree of realism into the debate, because otherwise we find people out there in the wider community believing some of the very unfortunate propaganda that has been used for party political reasons on this debate—not today, but during the course of these discussions—to try to make out that, for example, Conservatives are voting in favour of sewage pollution. That is completely inappropriate and a disgraceful slur, given the work that has been done by Conservatives, with others.

[Liz Twist (Blaydon) (Lab)]

It is not my intention to go into a party debate, but does the right hon. Gentleman agree that there is a real need to ensure that Ofwat accounts for its actions? Does he agree with the suggestion that some have made that there should be annual reports against the priorities for Ofwat to his Committee?

[Philip Dunne]

I would like to say to the hon. Lady that my remarks about people misinterpreting what is being done do not apply to her. She has been a doughty champion on this issue; she has led debates in this House and we have had good cross-party discussions. She makes an interesting point: there are already five-yearly reviews, but whether that should be done more frequently is an interesting question, and maybe the Minister might like to respond to it in her winding-up speech.

Moving on, the pressures on the drainage systems have been developing over six decades, as investment in water treatment infrastructure and drainage systems underground has not kept pace with development above ground, as my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter) has pointed out. It is also exacerbated by pollution caused by others—both farming practices, which my right hon. Friend the Member for Hereford and South Herefordshire described, and run-off from highways and other hard standing—so I accept that it is not exclusively the responsibility of water companies.

As the Secretary of State himself acknowledged before our Select Committee, the solution ultimately may require separation of surface and foul water drainage systems, and I believe the Department is currently trying to get a harder estimate of the cost of such a massive exercise. It will take enormous capital expenditure to correct the problem for good, and the work will take decades to complete, but a start needs to be made now. The SPS provides that opportunity.

I will focus my remarks now on what Ofwat should consider in its negotiations with water companies to encourage them to identify and quantify solutions. It inevitably takes time to progress solutions through the planning process before the required infrastructure construction can begin, whether through nature-based solutions or traditional mechanical and chemical systems. Much of that involves installing monitoring equipment to increase public awareness of the quality of receiving waters in real time. That was a key transparency recommendation of my private Member’s Bill and our Committee report, and it is now required to be introduced under the Environment Act. However, it merely establishes the baseline; the real spend will be incurred in the corrective measures required.

In my own constituency, Severn Trent Water has announced plans to invest £4.5 million to achieve bathing water quality status along some 15 miles of the River Teme between Knighton and Ludlow as part of their “Get River Positive” investment plan. That is obviously very welcome. The Thames Tideway tunnel will make a remarkable difference to water quality here in London. It illustrates well both the high cost and the length of time involved in delivering a transformational project to improve water quality, namely £4.9 billion and 11 years from securing planning to becoming operational respectively.

[Philip Dunne]

I bow to the hon. Lady’s knowledge of her constituency and the area around it. I am informed that the tideway tunnel will take 37 million tonnes of the 39 million tonnes of sewage currently discharged annually into the Thames out of the river, so it may not affect every single treatment plant, and it is primarily coping with the north of the Thames rather than the south of the Thames, as I understand it. I will touch on how it is being paid for in a moment.

Given Ofwat’s unique opportunity to approve capital investment, it needs to focus not only on the economic impact of household bills but on the environmental impact that water companies have. With the rising cost of living, none of us wishes to see bills rising sharply, but equally, if water rates are set so low as to preclude necessary capital investment in water quality, we will simply kick the can down the road for another five years and the problem will be harder to solve and more expensive to fix.

Given that the current cost of capital is still at historically low interest rates, over a multi-decade investment cycle water companies remain well placed to fund significant capital investment. For example, the tideway tunnel, the biggest current project, is due to add only £19 per annum to household bills in London. I believe that a balance can be found as regards Ofwat’s new priority for water companies to improve treatment in addition to the necessity to secure adequate drinking supply and have low bills.

[Liz Twist]

I recently hosted a meeting with the Consumer Council for Water, which is looking at the introduction of a social tariff. Does the right hon. Gentleman agree that an important part of this equation for people is that everyone should be able to afford their bills but that we have to get the work done that we need?

[Philip Dunne]

Indeed. The Consumer Council for Water is a statutory consultee with Ofwat, so it will be able to make that case as part of the determination process once Ofwat is following its instructions under the SPS.

It was clear from our inquiry that there had been a lack of political will from successive previous Administrations to empower regulators to tackle pollution and improve water quality. This had not been included as a priority in previous strategic policy statements. Evidence suggested that Ofwat’s price review process had hitherto focused on the twin primary objectives of securing clean water supply and keeping bills down. There was virtually no emphasis on facilitating the investment necessary to ensure that the sewerage system is fit for the 21st century. Anglian Water, for example, told the Committee that in 2017 the Government’s last strategic policy statement, which sets the objectives for Ofwat, “ducked the hard choices”.

So in October last year we wrote to the Secretary of State to contribute to the consultation on the draft SPS. We were concerned that the draft that had been published for consultation by the Government was imprecise in its expectations, with no indication of what specific outcomes were expected and by when. We called for the next SPS to make it unambiguously clear to Ofwat that a step change in regulatory action and water company investment is urgently required to upgrade the sewerage network, improve the parlous state of water quality in English rivers, and restore freshwater biodiversity.

In February, we were pleased when the Government published the final SPS, which had been significantly strengthened following our recommendations. We had made five specific recommendations that the Government accepted and have now been incorporated in the SPS guidance. They are, first and foremost, the very welcome prioritisation of investment over lowering bills to ensure that the sewerage system is fit for the future; secondly, challenging water companies to meet a target of zero serious pollution incidents by 2030; thirdly, amending the previous wording on the use of storm overflows from being used in “exceptional” circumstances to

“only in cases of unusually heavy rainfall”;

fourthly, prioritising overflows that do the most harm to sensitive environments; and finally, requiring that water companies should significantly increase their use of nature-based and catchment-based solutions. That is all new, and our Committee can justly take some credit for it.

What has become clear is that water companies now know that they need to act and they must start to do so immediately. Some are already acting ahead of the measures set out in the Environment Act to produce drainage and sewage management plans. I have been sent plans from four companies—Northumbrian Water, Severn Trent Water, Thames Water and Wessex Water—and I am quite sure that others have also prepared plans setting out what they are committing to do under the current and the next water industry national environment programme as part of their plans for capital investment.

I have a couple of frank questions for the Minister about whether our water company regulators are fit for purpose. With the work that I and my Committee have done, there is no doubt that both the Environment Agency, through poor monitoring, and Ofwat, through poor enforcement, have not met the standard we expect of our regulators to protect the environment of our waterways. Self-monitoring by water companies, permitted by the Environment Agency since 2010, has allowed them to discharge sewage more or less at will. The proof is that it took water companies revealing during the course of our inquiry that they might be in breach of their permits for the Environment Agency and Ofwat to announce major investigations into potentially widespread non-compliance by water and sewerage companies at sewage treatment works. Those investigations continue, so I cannot discuss them.

Where the Environment Agency has prosecuted companies for persistent breaches, judges have started to impose more meaningful fines, but even though these fines might start to capture the attention of water company boards rather than being seen as an inconvenient cost of doing business, as previously low fines appear to have been, fines paid by water companies for breaching environmental standards go directly to the general Treasury account; they do not contribute to solving the problem. I urge the Minister, therefore, to work with Treasury colleagues to enable water company fines to be ringfenced for water quality improvement. There could be a stand-alone fund managed by DEFRA or an arm’s length body with an independent chair, or it could be left to water companies to administer based on the environmental priorities of the river or coastal system they have been found to have polluted. Instead of allowing water companies to hand back a tiny rebate to individual ratepayers, potentially hundreds of millions of pounds could be put back into environmental protection. Although we all hope that no such fines will be necessary, we must deal with the world as we find it, and we think that would be a practical step toward solving the problem.

I have another suggestion for the Government. We know that more houses must be built to meet the UK population’s needs. When development consents are granted, developers are obliged to contribute to the additional infrastructure required—roads, schools, medical facilities, or other basic infrastructure—but, as we have just heard from my hon. Friend the Member for Central Suffolk and North Ipswich, water companies are not statutory consultees and local authorities have no power to require developers to contribute to any necessary water infrastructure. Indeed, the infamous right to connect explicitly removes such costs from developers. I urge the Minister to work with me on using the opportunity presented by the Levelling-up and Regeneration Bill, which had its Second Reading last night, to put this right and to empower local authorities to require developers to contribute to meeting the cost of the infrastructure required for water and waste water connectivity of new developments, which are contributing to the pressure.

I commend the motion to the House.

Environmental Audit Committee

Debate between Liz Twist and Philip Dunne

Thursday 13th January 2022 Westminster Hall

[Philip Dunne (Ludlow) (Con)]

I am delighted to serve under your chairmanship, Mrs Murray. I am grateful to the Backbench Business Committee for giving me the opportunity to introduce the Environmental Audit Committee’s latest report, which, as you say, is on the topic of water quality in rivers. This is an issue of particular interest to me, as I had a private Member’s Bill in the last Session of Parliament that was not able to progress, and our Committee has worked very hard for over a year in taking evidence, including from the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Taunton Deane (Rebecca Pow), who I am delighted to see is in her place. As an Environment Minister, she has taken a particular interest in championing this issue in Government and in introducing measures to the Environment Act 2021, which became law two months ago and whose measures will in some respects pre-empt some of our recommendations. We are grateful to her for her interest in this subject.

I would like to take the opportunity—it is the first time we have been able to do so—to welcome our latest recruit to the Committee, the right hon. Member for Walsall South (Valerie Vaz). We look forward to her contributions to our Committee in due course.

By way of introduction, we have been concerned about water quality because of the extraordinary evidence that we have received from campaign groups up and down the country. We recognise that we are presiding over a cocktail of contamination in our rivers, stemming from more than 60 years of under-investment in drainage networks, sewers and treatment plants, mostly because they are underground, out of sight and not at the top of public consciousness, other than when there is a disgusting sewage spill—an incident that captures public attention. For 60 years, however, we have been developing more and more housing, industry and agricultural buildings above ground, without putting corresponding investment underground to deal with the effluent that a growing population of both humans and animals creates. That is something that we absolutely have to put right.

At present, only 14 of England’s rivers are in good ecological health, and not a single one gets a clean bill of health for chemical contamination. Getting a full overview of the health of our rivers, and the pollution affecting them, has been hampered by outdated, underfunded and inadequate monitoring regimes, which is why it has taken our report to pull all the data together. Water companies appear to be dumping untreated or partially treated sewage in rivers on a routine basis, often breaching the terms of the permits that, on paper only, allow them to do so in exceptional circumstances. That was one of the most significant findings. We think part of the reason is that they have been allowed to self-monitor for the last 12 years or so.

One of the Minister’s innovations in the Environment Act is to increase the amount of monitoring, using the latest technology, so that we can understand, in real time, the impact of discharging sewage into our river systems. We have not been able to do that until now, other than through individual lab testing. Monitors will be placed upstream and downstream of the outfalls, and that will have a transformative effect, not least in allowing the public to know whether there has been a sewage discharge before they intend to visit a river.

However, it is not all about sewage. Water companies have to deal with an increasing volume of plastic and other non-biodegradable material being flushed down our toilets, and that includes wet wipes. I support my hon. Friend the Member for South Leicestershire (Alberto Costa) in his move to promote a private Member’s Bill to ban the use of plastic in wet wipes, which act as a dam in the sewerage system.

A combination of excessive amounts of non-biodegradable material gets caught up in meshes and added to by fats, oils and greases coming out of food service establishments to create fatbergs—we had evidence that some are as big as blue whales. Those need to be removed from the sewers, and water companies are spending £100 million a year of their scarce resource on removing that material. Some 7 million wet wipes a day go into our sewers, so we as individuals can do something about that to try to reduce that problem.

The problem is not all about the water companies; it is also, we found, due to diffuse pollution from agriculture. That, in fact, accounts for slightly more of the causes of pollution than sewage from water treatment plants. Intensive livestock and poultry farming is putting significant pressure on particular catchments. I think there are 14 across England where development is on hold because of the nutrient load already existing in our river systems. One of the worst is in the River Wye catchment, where it appears that there has been particular pressure, building up over a number of years, from poultry farming. We have therefore called for a nutrient budget to be calculated for each catchment, and for the Environment Agency’s good resources to be used to review it so as to establish a framework that would allow development to take place without adding to the nutrient load in the receiving waters.

Going back to the water companies for a moment, we were alarmed by the degree of permit breaches, which were brought to our attention not so much by the Environment Agency or the water companies themselves but by citizen scientists doing their own investigations under freedom of information requests. We think it is important that the Environment Agency and other regulators get a proper picture of the true number of sewer overflow discharges, because we fear they may be higher than is currently permitted.

We have made a number of suggestions about how, in considering how to allocate resource from the spending review, the Department for Environment, Food and Rural Affairs should consider giving additional resources to the Environment Agency so that it can adequately undertake its enforcement, which has, all too often, been slow—to put it mildly. We have seen an increase in fines imposed as a result of prosecutions in the last few years—two have been very significant—but, by and large, fines for enforcement of clear breaches, with discharge above permit levels, have been a routine cost of doing business. We do not think that that is appropriate, so we think that greater enforcement must be undertaken by the environment network.

We have also called on Ofwat to prioritise the long-term investment in waste water assets as a key outcome of its next pricing review period. As the Minister is here and will be finalising the strategic pricing statement guidance to Ofwat in the coming weeks, we strongly encourage her to consider giving greater priority in the next pricing review to capital investment by water companies, to allow them to invest more in improving the treatment capacity available across the network.

We have a large number of recommendations. I do not have enough time to go into them all, but I will conclude by saying that one of our recommendations—which I think will have some resonance in this covid environment, in which many people have been using rivers for recreation—is that each water company should seek to get bathing water quality status in at least one river stretch or water body within its area before 2025, and then routinely seek to do so in subsequent pricing periods. I look forward to responding to any comments that Members might have on the report.

[Liz Twist (Blaydon) (Lab)]

I thank the Environmental Audit Committee and its Chair for their comprehensive, detailed and extensive report. Of course, I have not been able to take all of it in yet, given that its publication date was today. My question is about the topic on which the Chair ended—namely, the capacity of the Environment Agency to deal with discharges into rivers, whether they are permitted or not. At the start of this week, we saw that the Environment Agency has been briefing staff not to pursue smaller-category incidents. I wonder whether the Chair of the Committee agrees that funding the Environment Agency to protect our rivers is crucial, and that it needs to be able to fully follow up on any incidents and not ignore even minor ones, which can later be found to be more significant.