Water (Special Measures) Bill [HL]

Lord Whitty Excerpts

2nd reading
Wednesday 9th October 2024 Lords Chamber

[Lord Whitty (Lab)]

My Lords, I do not wish to repeat the statements that have been made on various sides so far, so I will start again and review some of the history. I do so from a number of different perspectives. First, I was once an official of the trade union that organises most of the workers in the water industry, which would strongly prefer a return to public ownership. I have to tell my noble friend the Minister that we are in a strange week. We are reviewing the two most unpopular privatisations, rail and water—unpopular, that is, with their individual consumers. With one it is clear what the second stage will bring—a return to public ownership, in a form that still requires some determination and definition. However, here we are unclear about what the second stage will be.

Having said that, I strongly support what is in this Bill. To those who represent, directly or indirectly, the interests of the directors of water companies, I say that the more stringent measures to be taken against directors and boards of water companies will be triggered where they have broken the regulations, broken the law, and failed to run their company in line with the commitments given at the previous price review and the strategic plan agreed with Ofwat.

Those are egregious offences and they require those draconian powers—as some see them—to ensure that the behaviour of the management of the companies complies with the intention of the law both on the regulation of the industry and on the environmental regulations. When the regulatory restructuring was first established, it was assumed that water was like any other natural monopoly, which required strong regulation as there was no pressure of competition. Indeed, the only competition in this industry has been through takeovers and consolidation, and that has not benefited consumers of water.

I speak from various perspectives. I was a Minister in Defra at a time when water regulation did not seem too bad. Indeed, I acknowledge that, in the first 10 years or so of water privatisation, there was an increase in investment—certainly over and above what the state had done previously—and there were some major improvements. These were financed both by investment within the industry and the sell off by water companies of their non-water assets, including substantial amounts of land, which has made the environmental benefits of the previous water companies and the environmental regulations we have sought from them less easy to deliver. I was subsequently briefly a member of the board of Ofwat and, for quite a long time—mainly under the tutelage of the noble Baroness, Lady Young—a member of the board of the Environment Agency.

My experience in Ofwat was terrible. It was the weakest possible regulator. I remember one major company failed to meet its commitments on leakage, for example. The tariff would have enabled us to fine it £250,000 for its breach of its commitments, but we actually fined it £12,000. It has always been a weak operator.

I then moved across to the Environment Agency. At the time, I consulted with the Ministers of the then Labour Government on whether I could sit on two boards. I subsequently found that that would have been a good idea—naturally, I would have taken only one fee. That is why, if I cannot have the outcome for the longer term—as the noble Baroness, Lady Jones of Moulsecoomb, was advocating—my second choice would be that of the noble Duke, the Duke of Wellington. That is, to have a single regulator that covers a lot, or all, of the three major regulators—four if you include the Welsh board—in one place, with one strategic plan and one strategic outcome at the price review, whose timing and scope need to be reviewed as well. That would make it a much more powerful regulator than it currently is. That is my second choice, and I hope that the review the Minister promised us comes up with that solution fairly fast.

Another problem with the present situation is that Ofwat and the Environment Agency do not properly talk to one another. This has improved a bit, but the coincidence of their objectives, on both timescale and the way they deal with the companies, is not the best example of co-operation I have found in state bodies. Again, that is a reason I support the noble Duke, the Duke of Wellington.

When I stopped being a regulator, I became a consumer champion. I agree with the doubts people have expressed about putting consumers on the board—that may or may not suit a particular company—but the Consumer Council for Water, which has managed to sustain its lack of resources and still perform a useful role, needs to be seriously strengthened. I ask my noble friend the Minister whether, even in this short-term Bill, we could give extra powers and resources to the Consumer Council for Water. It can represent the interests of both household consumers and small companies, which are crucial users of the water industry’s output. Like farmers and others, they are affected by the environmental regulations that are required to clean up our waterways. The role of regulation of the water sector is not simply about the price and cleanliness of the water that comes through our taps—which has, for the first time in my lifetime, been questioned in one or two areas; it is about the environmental effects on our streams, rivers, seas and beaches. Consumers come in many forms, and the consumer role in this sector needs to be strengthened, not weakened.

I hope my noble friend the Minister can take that point on board and that all these considerations are taken into account in the second stage of this and the review. I also hope that that review is concluded fairly fast, because the companies, consumers and the environment need to know. The rivers, lakes and seas mentioned in this debate need a future different from the one that faces them at the moment.