Water Companies: Executive Bonuses

Debate between Munira Wilson and Rebecca Pow

Tuesday 5th December 2023 Commons Chamber

[Rebecca Pow]

That is a very sensible and important point. That is why the price review process is under way, and all the water company plans are being forensically analysed, with requirements that we have put on them to deliver all this infrastructure, but also always to be mindful of the costs to the bill payer. We have to get investors in to invest in this, but we also have to be mindful of what goes on the bill, which is essential, and that is what Ofwat will be considering. Members will be hearing a lot more about those price plans shortly. There is also a system for vulnerable customers. We have upped the number of customers that water companies have to help if they are struggling with their bills, so there is a clear plan for that.

Our storm overflows discharge reduction plan goes even further. It requires water companies to deliver the largest infrastructure programme in water company history, amounting to £60 billion of investment over 25 years.

[Munira Wilson]

Will the right hon. Lady give way?

[Rebecca Pow]

I will carry on for a minute, because I know that you, Mr Deputy Speaker, will be urging me to speed up. For information, I wanted to say that in a recent High Court judgment it was found that our storm sewage overflows discharge reduction plan actually goes over and above the requirements of existing regulation. It would be nice if the Opposition recognised that, because it was specifically highlighted.

--- Later in debate ---

[Rebecca Pow]

We have such a strong plan and it will be fully operational. I completely support the Government with the line they took last night. I am lined up with what we were dealing with last night and I support the Government position. I was dealing with some particularly urgent business last night. In my view, the new clause was superfluous because we already have powers, including those on criminal conduct, for people to act if they have been affected by pollution. They can already seek compensation when there is evidence of personal injury, loss or damage.

To get back to my speech, I am now on the bit about tougher enforcement. We recognise concerns about enforcement. We are working closely with Ofwat and the new leadership at the Environment Agency to ensure that regulators are holding the water industry to the highest possible standards. That includes bringing fines against water companies that do not comply with their permits and publishing the environmental performance assessment of water companies in England, giving a clear picture of company performance. Where that is insufficient, action will be and is being taken.

I had been meeting all the lagging water companies highlighted through that assessment to challenge them on their performance, and I am pleased that the new water Minister, my hon. Friend the Member for Keighley, is continuing to do that. I believe he met Yorkshire Water yesterday and South East Water last night, so we are continuing our unstinting drive with the water companies.

The regulator has launched the largest criminal and civil investigations in water company history into sewage discharges at more than 2,200 treatment works, following new data that has come to light as a result of increased monitoring at waste water treatment works. We have taken robust enforcement action against illegal breaches of storm overflow permits. Since 2015, the Environment Agency has concluded 59 prosecutions against water and sewage companies, securing fines of more than £150 million.

I cannot miss the opportunity to say that in Labour-run Wales sewage discharges are double what they are in England, so it is hard to take any lessons from the Opposition. They have the opportunity to step in and sort that out but they have not taken it.

The Government have launched the revolutionary storm overflows reduction plan, which prioritises action on the overflows that cause the most harm, to make the biggest difference as quickly as possible. Our strict targets will see the toughest ever crackdown on sewage spills and, as I have already stated, will require water companies to deliver that huge infrastructure programme worth £60 billion. Our plan will protect biodiversity, the ecology of our rivers and seas, and the public health of water users for generations to come.

[Munira Wilson]

Will the Minister give way?

[Rebecca Pow]

No, because I am moving on to bonuses and dividends.

The Government have taken unprecedented measures to bring into balance the remuneration of water company executives. This summer, Ofwat confirmed new plans to ensure that customers no longer fund executive bonus payments if companies have not met Ofwat’s expectations on environmental performance. Ofwat will regularly review executive bonus payments and, when companies do not meet expectations, step in to ensure that customers do not pick up the bill. That answers the point made earlier by the hon. Member for Bristol East (Kerry McCarthy). There is no need for the Labour party’s proposals, because we are already doing really strong work on bonuses and dividends.

I want to be really clear that bill payers come first. For the 2022-23 period, no water and sewage company in England and Wales is paying a chief executive officer bonus out of customer money, while half of CEOs are taking no bonus whatsoever. This is the first time that has ever happened in the history of the water industry, reflecting the industry’s recognition that the public expect better.

In March 2023, Ofwat announced new measures on dividends that will enable it to take enforcement action against companies that do not link dividend payments to performance. I remind the House that in each year since privatisation, investment has actually been much greater than the dividends paid out.

I am going to conclude—

[Munira Wilson]

Will the Minister give way?

[Rebecca Pow]

I have given way enough; we want to get on and hear other speakers.

This Government will leave no stone unturned in tackling all aspects of water pollution and poor water company performance. That is why we have introduced the most comprehensive costed plan for water that delivers more investment, stronger regulation and tougher enforcement. By contrast—

Water Resources Management Plan: Teddington

Debate between Munira Wilson and Rebecca Pow

Wednesday 6th September 2023 Westminster Hall

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Rebecca Pow)]

It is a pleasure, Sir Christopher, to have you in the Chair.

I thank the hon. Member for Twickenham (Munira Wilson) for securing the debate and giving us the opportunity to discuss the subject and the whole issue of water supply that faces the country. I put on record an apology for the tardiness in replying to letters—I am trying to get to the bottom of exactly how that happened.

The hon. Member knows—we all know—that water is a precious and vital resource. It is needed for everything we do. It is essential for a healthy environment and a prosperous economy, but a reliable water supply is often taken for granted, as I have been discovering more and more since becoming water Minister. We have not experienced country-wide water shortages since the 1970s, although there were some significant strains on water supply in large parts of the country last year. There was drought, with that record heat and dry weather.

Climate change and a growing population, especially in the drier parts of the country, are causing real challenges for our water supply. I was glad that the hon. Member at least recognised that the system is under pressure. Water companies must take those factors into account when they plan in order to provide a reliable supply of safe drinking water, and water for all the other uses we require. It is our job as a Government to work with the water regulators to ensure that water companies do that effectively.

[Mr Virendra Sharma in the Chair]

The Government’s plan for water identified that by 2050 about 4 billion extra litres of water a day will be needed. That is a quarter as much water as we use now. That is a significant amount and it will be achieved in many ways, which I will outline. We have a detailed plan as to how that will happen. We have to take a strategic approach to planning future water needs, work with regional water resources groups and water companies to meet the challenges of climate change, and at the same time protect and enhance the environment. I totally agree that we must not do it at the expense of the environment.

We need to preserve those iconic habitats, such as chalk streams, which the Government have worked so much to protect, particularly through the chalk stream restoration group, which I am proud to have instigated. We are driving forward a vision for chalk streams, including the reduction of unsustainable water extraction. That will be delivered by measures in our plan for water and via the landmark Environment Act 2021.

The plan for water also reflects the Government’s commitment to a twin-track approach to improving water resilience, by investing in new supply infrastructure, and reducing demand through the reduction of leaks, as was mentioned. Of course, that is an important part, but in addition we plan to increase water efficiency. Half our additional water needs can be made up by water-demand improvements. By 2050, we expect to see leakage levels halved. Thames Water met its leakage target for 2019-20 by cutting leakage by 10.7%, but it did not do so well last year because of the dry weather and the freeze-thaw. I urge the company to get on track with its targets for leakage. That is an important part of the picture. It is not the case that it is not doing it, but it has to do it in addition to all the other things.

There are targets for reducing average per capita consumption to 110 litres per person per day. At the moment, the average is 144 litres, so there is a significant way to go. Lots of water companies are already making good strides in that direction. We have implemented legally binding demand management targets through Environment Act powers, to ensure that we remain on track to meet those targets, as I am sure the hon. Member for Twickenham will know.

We must expect all water companies to act on customers’ needs for that resilient supply and to manage the water sustainably. I hope the hon. Member appreciates our collaboration with the regional water resource groups, which include Water Resources South East. I met and spent a long time talking to them about water supply over the summer, to look at what they are doing. All those groups, including Thames Water, have been consulting on their draft plans, as she pointed out. Those consultations are helping inform future decisions on the right way to secure water supplies, including for Thames Water’s 10 million customers, which is a huge number to deliver water to.

To support the robustness of water resource planning, the water regulators issued detailed guidance to the water companies on how to do that. If water companies are forecasting a water supply deficit, as we will see in the south-east, they must study the options available to them and justify their preferred solutions. I understand that the Teddington direct river abstraction was one of 2,400 options modelled by Water Resources South East to address climate change and population growth and to protect our environment.

The hon. Member for Twickenham expounded on Thames not delivering any new water resources, but it is very difficult for it to do that if objections constantly arise. I will cite the Abingdon reservoir, on which another Liberal Democrat, the hon. Member for Oxford West and Abingdon (Layla Moran), secured a debate in Westminster Hall. More objections were raised about that reservoir. At some point, we have to work out where we will get this new water from. That is why we have a consultation process, to which people have rightly supplied input. I agree that they need to be listened to in the summary of what goes on, but we have to get new water supplies. Many other water companies are facing this and we have proposals for a whole range of models, including recycling facilities, new reservoirs, such as the south Lincolnshire reservoir and the fens reservoirs, desalination plants, such as those that South West Water has put in, and extensions to other reservoirs. We have already seen quite a number of those coming into place, so there is a whole range of options and they are looking at them all.

The Environment Agency and Ofwat have helped to shape those regional plans. They are statutory consultees on the water resources management plans, and the Environment Agency also invited the Secretary of State, as the hon. Member for Twickenham knows, to consider the draft plans before they are finalised. It will be advising the Secretary of State later this year. The hon. Lady asked about the date. It is going through due process. It will be later this year. As she knows, the Secretary of State has a number of options to consider: to accept the plans, to change the plans or to trigger an inquiry.

I have mentioned all the new schemes and systems. Because this is so critical, £469 million was recently made available by Ofwat to properly investigate the range of potential strategic water resources options such as new reservoirs, recycling projects—the one that the hon. Lady is talking about is a recycling project, as she knows—and inter-regional water transfers. That is the work that is supported by RAPID, or the Regulators’ Alliance for Progressing Infrastructure Development. This joint team is made up of the three regulators—Ofwat, EA and the Drinking Water Inspectorate—and works with companies to develop their strategic water resources infrastructure in the best interests of water users and the environment. The environment is absolutely critical and we must ensure that it is taken into account. I am not going to give detailed comments on the hon. Lady’s particular project but obviously one of the reasons for it is to put extra water into the river to keep that flow going because we need to ensure that the environment of the river remains good. As far as I understand it, it is to be used when needed and is not a continuous use project at all.

[Munira Wilson]

I have a final point. Although it is meant to be a drought measure, for technical reasons, to keep the system working, what is known as a sweetener flow would have to be operational every single day, so we are talking about millions of litres of treated effluent going into the Thames every single day to keep the system going. On the Minister’s point about all projects being objected to, as I pointed out in my speech, a very popular proposal in the consultation had broad public support, but Thames Water dismissed it out of hand and is proceeding with this, which will waste bill payers’ money and have a massive impact on the environment. It is not the case that everyone is objecting to everything.

[Rebecca Pow]

I thank the hon. Lady for that. This is long term and strategic—that is what we have to talk about now in terms of water supply. I am concerned that it keeps being described as treated effluent. She will know that, once water has gone through a treatment plant and has had the full and correct treatment, it goes back into the rivers. This will have an extra layer of treatment to ensure that it really is fresh water being returned to the river. We must be very careful about how that is interpreted.

I would be the first person to say that if this goes ahead or gets the support, it has to be permitted by the EA and strictly controlled so that there are no issues about the actual quality of the water going into the river. I agree that it is important to keep the environment going, and I hope I have demonstrated that we have a robust system to look at these projects and get the water that our country needs. The new infrastructure requirements were set out in our national policy statement for water resources infrastructure, and the statement applies to the planning consent of nationally significant infrastructure projects. The proposed Teddington district river abstraction might qualify for one of those.

As I have said, the Environment Agency will be a statutory consultee on development consent orders, and the EA will also determine any abstraction licence or environmental permit. Water quality, temperature, flow and fish protection are all things that will have to be considered. I hope that the hon. Member agrees with and understands this robust process. Obviously, we need to listen to people’s voices, but we also need to secure those resilient supplies for the future and for our water supply. We have a sound and robust system in place, with targets and our twin-track approach. We need to ensure that the right schemes go ahead. I thank the hon. Lady for her words.

Question put and agreed to.

Water Industry: Financial Resilience

Debate between Munira Wilson and Rebecca Pow

Wednesday 28th June 2023 Commons Chamber

[Rebecca Pow]

I thank my hon. Friend for that. He is right that customers come first, and Thames Water customers will be assured their water supplies and wastewater services. I am happy to meet him to discuss that.

[Munira Wilson (Twickenham) (LD)]

Residents in Twickenham, Teddington and the Hamptons will be extremely worried to hear that Thames Water is on the brink of collapse, but they are also fed up to the back teeth with this company. Not only does it pump sewage into our precious River Thames, but recently we have seen sewage flooding our streets at times of flooding from rainfall, and there are now plans to pump treated sewage into the Thames at times of drought. That is indicative of the company’s underinvestment in fixing leaks and being stripped to the bare bones while lining executives’ pockets. All the while, the Government have been missing in action and the regulator has failed. Will the Minister back the Liberal Democrats’ proposals to reform water companies into public good companies, transforming their boards and priorities in the interests of the environment and consumers?

[Rebecca Pow]

I will highlight the Thames super-sewer—it will be ready to open in the not-too-distant future—which is a tremendous project for the people of London, including many of her constituents. We have a privatised system, whose financial resilience, as I have reported, has increased rather than decreased in the last year. These companies attract money from investors so that we can get what we need. The Government have costed plans. The Liberal Democrats have no costed plans for what they suggest they might do with the water companies, nor plans for where the money will come from.

Water Quality: Sewage Discharge

Debate between Munira Wilson and Rebecca Pow

Tuesday 25th April 2023 Commons Chamber

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Rebecca Pow)]

The debate provides a welcome and much-needed opportunity to set the record straight on sewage and what the Government are doing. Not only are we taking this issue extremely seriously, but we are and have been acting. We have a realistic, costed plan to clean up our network of rivers and coasts, and it is already in operation—and what a tide of positivity we have heard from the Conservative Benches today.

There is general consensus among all our colleagues that this Government have a pragmatic, practical, costed, reliable and comprehensive plan. Those words have been used by all colleagues, and we are all pulling together to understand this issue. Those colleagues included my right hon. and learned Friend the Member for North East Hertfordshire (Sir Oliver Heald), my hon. Friends the Members for Keighley (Robbie Moore), for St Ives (Derek Thomas), for North Norfolk (Duncan Baker), for Gedling (Tom Randall), for Totnes (Anthony Mangnall), for Truro and Falmouth (Cherilyn Mackrory), for Hastings and Rye (Sally-Ann Hart), for Runnymede and Weybridge (Dr Spencer) and for Ashfield (Lee Anderson)—plain speaking, as ever—as well as my hon. Friend the Member for South West Hertfordshire (Mr Mohindra), my hon. Friend the Member for North Devon (Selaine Saxby) with her wonderful adaptive surfing centre, my hon. Friends the Members for Clwyd South (Simon Baynes) and for North West Norfolk (James Wild) and my right hon. Friend the Member for Ludlow (Philip Dunne), who systematically unpicked the Labour party’s plan by himself.

Following today’s debate, I cannot help but feel that for the Opposition this is nothing but a political game to fire up those outside this place with a view to making some sort of gain. Labour’s plan is completely superfluous. Where have Labour Members been? We are doing all these things they are asking for, and more. It was this Government who uncovered the scandal of storm sewage overflows being used far too frequently, because it was this party that increased the monitoring of storm sewage overflows. We have ramped it up from a paltry 7% under Labour to 91% now, and it will be 100% by the end of the year. It was also the Labour Government who were taken to court for pollution, so where the idea of all those clean rivers comes from, I do not know.

What did we discover from all our monitoring? We discovered that water companies were indeed using storm sewage overflows far too frequently, and that is completely unacceptable. So what did we do? We acted. We brought in the Environment Act 2021 to require a new storm overflow discharge reduction plan, fully costed and with a clear impact assessment, delivering up to £56 billion of capital investment to revolutionise our Victorian infrastructure. We are consulting on lifting the cap on fines entirely so that the Environment Agency can issue potentially unlimited penalties on water companies, in addition to Ofwat’s existing powers to fine companies up to 10% of annual turnover.

Ofwat has strengthened its powers on executive pay awards so that if water companies want to pay bonuses even if environmental performance is found wanting, their shareholders must pay for that, not their customers. Through the new water restoration fund, money collected through fines will be spent on improving water quality. The hon. Member for Plymouth, Sutton and Devonport (Luke Pollard) needs to get with the programme: we have already done what he asked. Our Treasury friends who sit here agreed to it. We are also bringing in new monitoring requirements under the Environment Act for near real-time reporting on storm overflows. My hon. Friend the Member for Truro and Falmouth asked if we could do more. Yes; we are going to increase water quality monitoring upstream and downstream.

[Munira Wilson (Twickenham) (LD)]

Will the Minister give way?

[Rebecca Pow]

I am not going to give way, because there simply is not time.

I note that the hon. Member for Oldham West and Royton (Jim McMahon) likes our monitoring ideas in the Environment Act so much that he has put our monitoring framework from the Act into clause 1 of his Bill. Marvellous! We also recently published our integrated plan for water. This includes an announcement that we are accelerating £1.6 billion of investment in reducing storm overflow discharges, upgrading wastewater treatment works and bringing in measures to improve drought resilience. The whole issue is extremely complicated, and that is why I made this a priority when I came into the Department. Our plan for water sets out how we will deliver the improvements we need across all matters connected to water, including all forms of pollution.

I ask people to remember that no Conservative Member has ever voted to allow raw sewage into our rivers. We voted for measures to clean up our rivers, and the Opposition voted against them. We have produced much cleaner water since Victorian times. We have almost the highest-quality drinking water in the world, and 93% of our bathing waters are excellent.

How could we take Labour’s suggestions on sewage seriously? Labour’s plans would potentially require enough pipes to be dug up from our roads to go around the globe two and a half times. Can anyone imagine the disruption that would cause, not to mention that it is totally impractical? We have heard no clear indication of how Labour’s plan would be paid for. Would it be added to customers’ bills? The shadow Minister could not answer that question on Sky this morning, and I did not hear the answer this afternoon. As for the Lib Dems, it is really not worth commenting on what they say.

The scale of this Government’s ambition cannot be highlighted enough, and I urge all colleagues to support the Government’s amendment.

Water Company Performance

Debate between Munira Wilson and Rebecca Pow

Tuesday 21st February 2023 Commons Chamber

[Munira Wilson (Twickenham) (LD)]

The Minister may be aware that Thames Water is considering plans to draw out water from the river at Teddington in my constituency in times of drought and replace it with treated sewage. That can cause all sorts of havoc with ecosystems if it is not monitored and regulated properly. She will appreciate that my constituents and I have little faith in regulators when Thames Water is currently losing a quarter of its supply every day through leaks and avoiding fines because the targets set for it are just not strong enough. Will she look at strengthening those targets so that companies are more liable to fines and at cracking down on the eye-watering bonuses executives are raking in, which is forcing them to look at these sorts of damaging river abstraction plans when they should be fixing leaks?

[Rebecca Pow]

The issue of leaks is important. We are tackling it and water companies have targets to cut leaks. In the 2019 price review, they had to cut leakage by 16% and reduce bursts by 12%. If they are not seen to be reaching their targets, Ofwat imposes penalties on them. Three companies are currently paying back £150 million because of leaks and supply cuts. So there is already a system in place and it needs to be adhered to. Water is a precious resource and we need all the water we can get, which is why it is so important to tackle leakage and not just tackle environmental performance in terms of bonuses. I agree with the hon. Lady that bonuses should be linked to environmental performance, and that is what we have directed Ofwat to do.