Pollution in Rivers and Regulation of Private Water Companies

Lord Teverson Excerpts

Thursday 29th February 2024 Lords Chamber

[Lord Teverson (LD)]

My Lords, I declare my interest as chair of the Cornwall and Isles of Scilly Local Nature Partnership. I, too, congratulate my noble friend on getting the timing of this debate exactly right. We have heard that, within the last 48 hours, Thames Water has been lobbying the Government to increase charges by some 40%, to decrease the level of fines and to loosen up on dividend control. Of course, that is there partly because Thames Water is very much under threat of both itself and its holding company going under water. Can the Minister confirm those conversations? Also, as my honourable friend Sarah Olney asked in the other place, do the Government have a contingency plan in case Thames Water finally dies and drowns in its own debt? That is very important to a very large proportion of the population of this nation.

My noble friend Lord Addington said that he was here during water privatisation; I did not know that the House had people in short trousers at that time, but he obviously looks far younger than he is. When I was young, I used to enjoy board games, and my parents got fed up with me because I was far too competitive. One of my favourites was Monopoly. Noble Lords who are Monopoly fans and players will know that one of the squares you did not want to land on was the water company, because it was boring and had very low returns. What you wanted to do was to get on the properties, become a red-blooded property developer and get hotels. In a way, before their privatisation, the water companies were exactly that: they were boring and a utility—that was their asset class, if you like—and had low returns.

I guess that the first members of Ofwat had that in their minds and thought, “Hey, this is a fairly easy job. We’re going to agree investment and price increases and, frankly, after that we can probably go home and it will run itself”. But what they did not realise is that the people who were going to buy those purchases—as the noble Lord, Lord Sikka, will know well—were private equity firms who were greatly into financial engineering, and they thought, “Hey, there’s a real opportunity here”—and at the time, Ofwat was nowhere near capable of controlling or regulating that industry. You can say that it was naivety or negligence or that the people who were there at the time did not see it approaching. The result has been that we have rivers and waterways that are indeed polluted by sewage.

I will echo, in some ways, my noble friend Lord Russell on why rivers are important. One of the things that often used to be said in the social area was that you can tell how good a society is by how it treats its prisoners. Well, I would say that you can tell how good an environment is by how good the quality of its rivers is. Because the rivers are the lifeblood and the veins of our nation; they support biodiversity, they have all sorts of ecosystem services and, clearly, they provide water. If they are not straightened, they can provide flood prevention. That is why they are important—as well as for human health. And because they are not healthy—in all the ways that we have heard—we have that challenge to both biodiversity and to human health. And those are the challenges that we have here. Of course, we also have, as we know, not just effluent in terms of pollution but, as has been mentioned by other noble Lords, plastics and other urban waste, and the phosphates that come primarily from agriculture.

I was glad that the noble Duke, the Duke of Wellington, who is not in his place at the moment, mentioned ELMS. It seems to me that one of the important things here —perhaps the Minister, as a Defra Minister, might like to comment on this—is the question of how we can help farmers and the agricultural sector to get away from this issue of phosphates. Will there be, through the ever-changing environmental land management scheme, an exit route—a ramp off—where we can offer the agricultural sector help on that? Then, there are the intensive parts of cattle-rearing, obviously; I would not say that those companies are always the best in terms of the environment but, generally, the agricultural sector reacts only to the financial incentives that it is given by government. So what ways are there to do that?

A number of noble Lords mentioned the Environment Agency. In my work with local nature partnerships and some of the schemes that we—along with the Environment Agency—are looking at in Cornwall at the moment, I have never come across anybody from the Environment Agency who has not wanted to be on the right side of this argument, to be out there, to warn, to change and, ultimately, to enforce the fact that river health is really important. Yet, as a number of Peers have said, Environment Agency funding has fallen substantially over the years. It has started to come up again in terms of environmental enforcement, perhaps, but we are still way behind. I make this plea to the Minister: in the past, when the Chancellor has said, “I need some money”, Defra has been a department that usually puts up its hand. That should stop. We need to have Natural England and the Environment Agency funded well.

I was pleased to hear mention of natural systems and the way we should tackle this problem, not through hard concrete so much as through nature-based solutions. This is talked about a lot. It can sound a bit clichéd but I really believe that it is the way forward. If there are planning issues or Ofwat regulatory issues around it, that needs to change; that is one of the ways in which we need to move forward.

Again, coming back from privatisation, I remind noble Lords that we have been through this process once before. I come from the south-west. When water was privatised, bills went up by 100%—in fact, by more than that at the time. Households were really squeezed. What we need here is a solution where we do not have, as Thames Water would want, bills going up by another 40% over the next few years. We need this to be financed in a different way and, with the squeeze on household incomes at the moment and everything on that side, we need to find a different way to do it; that needs to be through the water companies rather than through consumers.

Lastly, I come back to the regulator. After a financial crisis in 2013, the reputation of the Financial Conduct Authority was shot. The Government—it was the coalition Government at the time—decided that that reputation had gone too far and that we had to change, so the Prudential Regulation Authority and the FCA were brought in to have a new system. I say to the Minister and to the House that Ofwat’s reputation is shot, I am afraid. We need a different, far cleverer and more adept regulator; that would be one of my biggest asks. I also agree—absolutely and definitely—with my noble friend Lady Bakewell that we need to bring these companies into some sort of social ownership.

So there is a real challenge here. Rivers are key to the health of our nation and our population. We need to get those things right. The noble Baroness, Lady Jones of Moulsecoomb, said that we should pay them 50p. I suggest something different: if you look at a Monopoly board, the water company is two spots before “Go To Jail”—just out of interest—but its cost is £150. Perhaps that would do instead.