Independent Water Commission

Lord Katz Excerpts

Monday 12th January 2026 Lords Chamber

[Baroness McIntosh of Pickering]

To ask His Majesty’s Government when they plan to introduce legislation giving effect to the recommendations of the Independent Water Commission chaired by Sir Jon Cunliffe.

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

My Lords, the Government have carefully considered the Independent Water Commission’s final recommendations and will respond in a forthcoming White Paper. A new water reform Bill will then follow, during this Parliament, to bring forward root-and-branch reform that secures better outcomes for customers, protects the environment, stimulates investment and restores trust and accountability. Together with steps already taken by the Government, this will mark the most fundamental reset to our water system in a generation.

[Baroness McIntosh of Pickering (Con)]

My Lords, among the recommendations made by Sir Jon Cunliffe were proposals to have mandatory statutory provisions for sustainable drains and the end to the automatic right to connect to main sewers. Given the outage and the water leaks in Kent and Sussex, whereby tens of thousands of homes have been without water, have the Government made an assessment, given that that area has had the most dramatic housebuilding development, of whether the fact that there are no statutory provisions for SUDS or end to the automatic right to connect to main sewers has contributed to the loss of water in those cases?

[Lord Katz (Lab)]

I know that the noble Baroness has taken a long interest in SUDS, and I want to reassure her and the House that the Government are strongly committed to improving the implementation of sustainable drainage systems. In December 2024, we made changes to the National Planning Policy Framework to support increased delivery of SUDS; the new planning policy framework now requires all developments to utilise SUDS where they could have drainage impacts appropriate to the nature and scale of the development. In June last year, the Government introduced new national standards to make clear that SUDS should be used to cope with the change in climatic conditions and deliver wider benefits. We are now consulting on a revised National Planning Policy Framework, including for flood risk and sustainable drainage systems, and separately on proposals to increase the adoption of shared amenities with guidance to ensure lifetime maintenance.

As the noble Baroness has raised the current situation on the ground in Kent and parts of Sussex, I want to make it clear that restoring supply must be the company’s priority and every possible measure must be taken to protect vulnerable customers and ensure that those affected receive decent and proper compensation. To that extent, Defra Ministers are meeting daily with the chief executive of the water company and local MPs to reinforce the fact that this level of service failure cannot continue.

[Baroness Grender (LD)]

My Lords, given the commitment from the Minister, the noble Baroness, Lady Taylor, on 20 November to publish a White Paper by the end of last year, does the Minister now regret the assurances given to those of us who pressed for urgent legislation to protect chalk streams—protections abandoned at the time by the Conservatives? What assurances can he now give that these vital measures will be delivered without further delay?

[Lord Katz (Lab)]

When we are delivering a once-in-a-generation reset of a system that has not been touched in, frankly, decades—in the last 14 years of the last Government—it is important that we make sure that we get the reforms right. If that means that there is a delay in publishing the White Paper, it is better to make sure that we measure twice and cut once. It is important that we provide certainty to customers, the industry, regulators and, indeed, investors in making that delay. That does not mean that we have not been doing anything. There has been constant dialogue with key stakeholders, including companies and investors, throughout the development of the White Paper. Obviously, we have also already legislated through the Water (Special Measures) Act to make sure that we a have a really strong regulatory regime. It has already seen over £4 million in bonuses to company executives banned by Ofwat in six out of the nine water companies. So, it is not as if action has not been taken.

[Lord Hunt of Kings Heath (Lab)]

My Lords, in considering the response of the Government, my noble friend the Minister mentioned the chief executive of South East Water. He will be aware of the criticism that the chief executive failed to show up for many days when the crisis hit Tunbridge Wells and that, at a recent Select Committee hearing, he gave what the Drinking Water Inspectorate politely described as misleading evidence. In the response to the review, can we be assured that, when chief executives behave in such a despicable way, they will be removed from their position?

[Lord Katz (Lab)]

I say to my noble friend that Defra takes this matter with the utmost seriousness. It simply cannot be the case that people are left to go days on end without an adequate water supply. As I have said, we will take every step to make sure that the chief executive and the executives in the water company are held to account on delivery. As I said in response to the previous question, we have already taken action to legislate and toughen up the regulatory framework. As a consequence, we have already seen, in six out of nine water companies, bonuses banned. We are willing to take action. I am not going to set out the exact details of the White Paper now, but it is important that water company executives realise that they are there to serve their customers, not simply to feather their nest.

[Lord Cromwell (CB)]

My Lords, this is a useful and substantive report that I welcome—in particular, its suggestion to merge the regulators into one super-regulator, which we certainly need. The underlying problem, which it identifies, is the need for long-term investment. I was surprised, therefore, that there is very little reference to the regulator needing skills in the financial engineering which has bedevilled the way that water companies have been run in the past. There is one reference, on page 197, to needing financial skills, but that is about it, I think. Does that give the Minister cause for concern?

[Lord Katz (Lab)]

The noble Lord is certainly right to recognise the importance of the recommendation by Sir Jon, in the commission report, of establishing a single powerful regulator for the entire water sector that will stand on the side of customers. He is right that the new regulator needs a wide range of skills, not only in terms of knowledge and understanding of the environment, customer service and regulation but also in terms of financial incentives. In the price review of 2024, we have seen the commitment to more than £100 billion of future investment in water infrastructure. In fact, since Ofwat announced its final determination, water companies have already raised over £2 billion in new equity investment. There is work going on, but he is absolutely right that there is no point having a single powerful regulator that is not able to regulate across the land and across the entire water sector’s activity.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, does the Minister understand the depth of disappointment that a lot of environmental campaigners have felt because the remit did not include taking water out of private hands? There is a general feeling of absolute anger that public ownership was not considered. Does the Minister accept that? I include Feargal Sharkey and myself among those environmental campaigners who are horribly disappointed.

[Lord Katz (Lab)]

I am afraid to say to the noble Baroness that I do not accept that there was widespread public anger that nationalisation was not used as a solution. We have committed to a once-in-a-generation reset of the water sector; we have been very clear that we have no intention of nationalising it. It would cost around £100 billion to do that, it would be immensely disruptive and it would create more problems and more costs than solutions. As a Government, we are determined, as we have already demonstrated through the legislation of the Water (Special Measures) Act and the hard work we are doing with Sir Jon Cunliffe, to get a system that works on the side of consumers and on the side of the environment and not worry about structural nostrums.

[Lord Roborough (Con)]

The Cunliffe report highlighted eroded trust in water industry regulators among stakeholders and has recommended a new integrated regulator. Can the Minister confirm that this new regulator will be fully accountable to the Secretary of State and, by extension, will be fully exposed to parliamentary scrutiny?

[Lord Katz (Lab)]

Absolutely. One of the key parts of Sir Jon Cunliffe’s report is around the importance of setting a strategic direction for the industry, and one of the things that are set out there is the importance of that ministerial and strategic direction. I imagine that the development of that will of course involve both Houses of Parliament. However, it is really important to understand that, in other areas of accountability, one of the important things that Sir Jon recommended was ending the years of water companies marking their own homework by introducing open monitoring. It is important that we see accountability and transparency across the piece.

[Lord Sikka (Lab)]

My Lords, the Minister has once again mentioned the £100 billion possible cost of bringing water into public ownership. That is a bogus number, and no Minister has publicly engaged in any debate about it. The Government had a chance to silence critics by asking the Water Commission to consider public ownership as an option and independently calculate its cost. Why did the Government not ask the Water Commission to do that?

[Lord Katz (Lab)]

At the risk of repeating myself, we were very clear as a Government that we had no intention of nationalising the water sector. The £100 billion figure is not bogus, because it is based on the regulated capital value of the water sector. My noble friend has to remember that it is not just the capitalised value of the companies as they currently exist but the equity and the debt that you would be bringing on to the books if you were to nationalise. Defra has provided a comprehensive note on its website that explains that calculation; I gently suggest to my noble friend that he has a look at that to understand the workings.