Water and Sewage Regulation (Industry and Regulators Committee Report)

Lord Whitty Excerpts

Monday 16th October 2023 Lords Chamber

[Lord Whitty (Lab)]

My Lords, I thank my noble friend Lord Hollick for his cogent introduction, and thank the committee for what is a trenchant, highly critical report with very interesting recommendations and conclusions. This is a complete failure of the system of regulation, post-privatisation. I would also like to thank whoever invented the title of the report because it most succinctly expresses the outrage at the pollution that is caused by these water companies and the affluence with which they have treated their shareholders, investors and those who bankroll them. It is a disgrace, and one which this House and the Government need to face up to.

I have to first make a confession. I was a small cog in the structure of regulation of this industry, for a few months at Ofwat and for several years at the Environment Agency. That was more than 10 years ago. I clearly remember thinking and arguing at that time that the system was inadequate and that we had failed to use the powers that we already had, particularly in Ofwat but occasionally in the Environment Agency as well. In those days, the Environment Agency had more resources for monitoring, but we did not always use our powers to their full extent—and we see the results.

It is possible to argue that, in the early years of privatisation, more resources were brought to much-needed investment, technology and management improvement. But after that first period, this has not been the case. We now need to face up to the fact that the major political parties are not prepared to commit themselves to renationalisation. Like the noble Baroness, Lady Jones, I would prefer that solution. If it is not possible, we need to start again on the system of regulation, not only of the areas covered by Ofwat, the Environment Agency and the Drinking Water Inspectorate but of the wider aspects of the water system. These broader aspects include taking account of the growth in population and the pressures from housing and from business, of the fact that water usage in this country is one of the highest in Europe, and of the fact that we completely fail to address water efficiency in appliances for industry, agriculture and domestic households.

We need a new start. In my view, if we are not to go for renationalisation then we need to establish a single and very powerful regulator for the water sector as a whole—one which subsumes all these interests and puts water centrally, as it should be, in the management of the resources of this country. It is not only about the dangers that the sewage overflows and discharges cause to our rivers and fisheries, and their threat to human health; it is also about the complete and utter failure to recognise that, as climate change progresses, water will become scarcer and less predictable, and so we need a much more effective system of management and a much stronger regulator.

We need a regulator if we are to keep the present system of ownership because these are regional monopolies, untroubled by competition. Unlike some privatised industries, there is no competition. They are also untroubled by requirements to review the franchise periodically, as exist in some privatised industries. That means they are almost free to make as much money as they like. If we add to that the complete failure of co-ordination and of clear strategies by the regulators and Defra, then we are heading for catastrophe unless we start again.

I ask the Minister to recognise that the list of failures spelled out by my noble friend and his committee in the report need a new approach. If we are not going for renationalisation, can all parties commit to a much more effective system of regulation and to starting again? I agree with the noble Baroness, Lady Jones, that sanctions need to be placed on these companies. I would hope that those sanctions were effective and would eventually lead to the sector being brought back into public ownership. But in the meantime, we need a much more effective and co-ordinated—and much more environmentally sensitive—system of regulation, which recognises and addresses the problems of this sector, and we need to start now.