Water Companies: Private Ownership

Lord Katz Excerpts

Wednesday 29th October 2025 Lords Chamber

[Lord Sikka]

To ask His Majesty’s Government what assessment they have made of the social cost of leaving England’s water companies in private ownership.

[Lord in Waiting/Government Whip (Lord Katz) (Lab)]

My Lords, the Government are committed to protecting the most vulnerable households, and we expect water companies to put robust measures in place for households that are struggling to pay their bills. We are bringing forward secondary legislation to introduce new and increased compensation—double the previous amounts, or more—that it will be compulsory for water companies to pay customers for poor service.

[Lord Sikka (Lab)]

As the Minister is struggling to provide information about the social cost of leaving water in private hands, I shall help him a little bit. Analysis suggests that, between 2025 and 2050, customers of privatised water companies will pay over £1 trillion, expressed in 2025 prices. It will probably be higher as companies raise capital from customers while shareholders take returns. People will not own a blade of grass in return. If the Minister disagrees with this alternative analysis, I ask him to please commit to publishing the Government’s data.

[Lord Katz (Lab)]

The Government have indeed published our analysis of the cost of renationalising the water sector, which I believe is what my noble friend is getting at. Our analysis is that—on the basis of regulated capital value, which takes into account not just equity but debt—it would cost at least £100 billion to renationalise the water industry. We are not going to unpick the current ownership model, during which time underinvestment and sewage pollution would only get worse. We believe that the answer is better regulation. We have introduced the Water (Special Measures) Act, which has already hit bonuses for 10 water executives and toughened the rules so that bosses face up to two years in prison for covering up sewage spills. Following the Cunliffe review this year, we are taking forward a number of reforms to the sector, chiefly the creation of a powerful new water regulator.

[Baroness Grender (LD)]

My Lords, does the Minister regret that average household water bills will rise by £123 a year from this April? Given that so many families already spend more than 3% of their income on water, what can be done to reverse years of shareholder and executive bonuses without improved services and genuine reinvestment? Why is it that customers even now, even after the Cunliffe review, are still having to bear the cost of historic underinvestment?

--- Later in debate ---

[Lord Katz (Lab)]

I thank the noble Baroness for that question. To build on the answer I gave to my noble friend Lord Sikka, we have already put in place new measures, including the emergency legislation last year, to ensure that we are bearing down on water executives. We have indeed taken action. As I said, we are putting in place robust support measures for customers who are struggling to pay their bills and, as a result, water companies have more than doubled the number of customers who receive help with bills through social tariffs, from 4% to 9% by 2030. We are working with industry to keep current support schemes under review to ensure that customers are sufficiently supported.

[Lord Cromwell (CB)]

Does the Minister agree that the real issue is not public or private ownership but that the regulator clearly lacked the financial engineering skills to understand, spot and curtail the excessive debt loading and value extraction by private equity in previous years?

[Lord Katz (Lab)]

I agree completely with the noble Lord. Efficient, precise and forensic regulation is needed in this sector. That came across very clearly in the report of the Independent Water Commission led by Sir Jon Cunliffe. In response to his report, we have already committed to establishing a single regulator for water and to introduce a regional element within it so that, working with local communities, local businesses and water companies, the needs of an area, whether agriculture or the built environment, are taken account of in determining water company action.

[Baroness McIntosh of Pickering (Con)]

My Lords, the Cunliffe review does indeed refer to the need for a single regulator. It concludes in recommendation 16 that this regulator

“should combine the functions of Ofwat, DWI, and water functions from the EA and NE”.

Natural England is being given a very big role in the Planning and Infrastructure Bill and I just wonder how this fits with what the Government are proposing if they fulfil the recommendations of the Cunliffe review. Will we have to rewrite the planning Bill when the next water Bill comes along?

[Lord Katz (Lab)]

I thank the noble Baroness for her question and indeed her interest in this area and the Planning and Infrastructure Bill. I do not think anybody in your Lordships’ House would really like us to go through the pain of the Planning and Infrastructure Bill again. That is not what we are going to do. It will be helpful for the House to set out that we have already announced five commitments in response to the Cunliffe review and Sir Jon’s report. We will be publishing a White Paper and hope to have a water reform Bill in the next Parliament.

[Baroness Blower (Lab)]

My Lords, I speak as a Thames Water customer. On 6 August 2024, Ofwat announced fines of £104 million on Thames Water, £47 million on Yorkshire Water and £17 million on Northumbrian Water. Almost a year later, the Minister said that Thames Water should pay the fine by 20 August 2025; has it paid up? Can my noble friend the Minister say why organisations with criminal convictions seem to be allowed to negotiate fines when other criminals would not get away with that?

[Lord Katz (Lab)]

I thank my noble friend for that question. I will have to write to her about whether that fine has been paid. We have been very clear through the Water (Special Measures) Act and our response to the Cunliffe review that we are absolutely going to bear down on water company executives who take unjustified profits. We have already done that. We have already fined a number of organisations and cumulatively more than £240 million in wastewater enforcement fines and redress has been confirmed by Ofwat in 2025. We are serious about tackling the state of the water sector and very clear that water companies here are meant to secure investment and keep bills down, not take profits.

[Lord Roborough (Con)]

My Lords, there are ongoing concerns about the financial position of Thames Water. Can the Minister please confirm that no matter what, including the special administration regime, consumers will not be forced to pay higher bills to cover failures at Thames Water or indeed any other water company?

[Lord Katz (Lab)]

The noble Lord will be aware there is a high bar for the use of a special administration regime but we have made our preparations and are ready for all eventualities, including applying for such a regime, if necessary. While the company is stable, we have stepped up the preparations. It is clear that if it is in serious breach of its principal statutory duties or an enforcement order is appropriate for the company to retain its licence, we will act. We will make sure that it is not at bill payers’ expense.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, going back to the criminal convictions, the water companies currently have 12,000 criminal convictions against them. Can the Minister tell me at what number he will consider these people criminals and not fit to have an operating licence to deliver our water?

[Lord Katz (Lab)]

I can only repeat what I have already said. It is very simply the case that we are absolutely continuing the regime and approach of the previous Government, but we have done more. We introduced new legislation last year to ensure that we can block executive bonuses, which we have done. We will continue to bear down on water companies and ensure that their executives cannot take unjustified bonuses. We will continue to make sure, through the work and progress of the White Paper, which will be coming shortly for your Lordships’ consideration. We hope there will be legislation next year, although I cannot say what will be in a future King’s Speech. We will make sure that the water companies live up to their obligations to customers and, indeed, the taxpayer.

[Lord Brooke of Alverthorpe (Lab)]

I will try to help the Minister. Is he aware that the American President is now investing in private companies in a way that the USA has not seen or done before, seeing that there is strategic advantage in that? When we are presented with the water Bill, could we please explore alternatives to the methods we presently have for investment and ownership, and try to spread it over a broader front? If he cannot give me an answer today, perhaps when I ask my Question on public/private partnerships on Monday his Treasury Minister may be able to do so.

[Lord Katz (Lab)]

I thank my noble friend and of course we look forward to his Question on Monday. Ahead of that, I can say that this is exactly what the response to the Cunliffe review will be doing—both in the White Paper and then in future legislation. We will consider a range of options for the way we harness the potential of private ownership to provide our water supply and ensure that we have a water infrastructure that is fit for the future.