Water (Special Measures) Bill [Lords]

Neil Hudson Excerpts

Report stage
Tuesday 28th January 2025 Commons Chamber

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. We have many contributions to come and quite a tight deadline, so Back Benchers will be limited to four minutes. I call the shadow Minister.

[Dr Neil Hudson (Epping Forest) (Con)]

I appreciate the opportunity to discuss this vital issue of water quality once again. As His Majesty’s most loyal Opposition have maintained through the passage of the Bill, it is just an attempt to copy and paste some of the work done by the previous Conservative Government and the measures taken to identify the problem. We will not shy away from the fact that the Conservative Government were the first to identify the scale of the sewage problem and actually to start to address it. As my right hon. Friend the Member for Beverley and Holderness (Graham Stuart) just said, when Labour left office in 2010, only 7% of storm overflows were monitored. When we Conservatives left office last year, 100% were monitored and our landmark Environment Act 2021 paved the way to improving the quality of our precious waters.

However, we are under no illusions: there is always more that can be done, and we have always said that we will seek to work constructively to make the Bill as effective as possible. In that spirit, I thank the Minister for her willingness to discuss matters of the Bill with me and with colleagues across the House; the Minister in the other place, Baroness Hayman, showed an equal willingness to listen to suggestions from colleagues. I also thank members of the Bill Committee for their constructive approach and all the Bill team, Department for Environment, Food and Rural Affairs and parliamentary staff supporting this legislation and our scrutiny of it.

As a result of that dialogue, the Bill now includes welcome improvements in several areas, such as company requirements to produce implementation reports to outline how they envision their commitments on improving water quality happening, as well as consideration of nature-based solutions in licensing activities. However, in that same constructive spirit, the Opposition today ask the Government to go even further. We want the Government to back our new clause 16 mandating the water restoration fund, which had cross-party support in Committee. I thank the good folk of the Conservative Environment Network and Wildlife and Countryside Link for their support and campaigning on the new clause, as well as the Angling Trust for its discussions. I also thank the former MP for Ludlow and former Chair of the Environmental Audit Committee Philip Dunne for his assiduous efforts to see the fund introduced.

[Sir Desmond Swayne (New Forest West) (Con)]

These are very substantial sums. A water company in my region was fined £100 million the year before last. It is vital that these amounts go to our chalk streams, which are in desperate need of them.

[Dr Hudson]

I totally agree with my right hon. Friend. It is right that if water companies do the wrong thing, the money levied from them is ploughed back into improving the water and not back into Treasury coffers. The water restoration fund, since being introduced by the previous Conservative Government, provided £11 million for communities to repair their local waterways and restore them to the quality they should be.

[Graham Stuart]

To follow up the point made by our right hon. Friend the Member for New Forest West (Sir Desmond Swayne), that money will ultimately come from water bill payers. It will be ordinary families across the country who must contribute to the £100 million fines or whatever is imposed on our water companies. For that to be taken and then swallowed by the Treasury, rather than used to improve water, would be a disgrace. Does he not agree that the Government must accept new clause 16?

[Dr Hudson]

I thank my right hon. Friend for that intervention. I will come on to an amendment we have also tabled to ensure that if fines are levied on water companies, customers’ bills go down accordingly, so that taxpayers and bill payers are not penalised for water companies doing the wrong thing.

The Government have made ejections in this House and in the other place to the principle of ringfencing the funding and have stated the need for the Treasury to have flexibility on how it spends that money, but in this specific case, their argument still does not stack up. Where money comes from taxation, ringfencing is not always the most reliable way to ensure that the Treasury can have the spending power it needs to deliver that spending, but here we are talking about something very different. Fines are much more uncertain and provide less of a guarantee regarding the amount of money they will bring in. To rely on those funds for day-to-day Treasury spending does not make sense. Ringfencing those penalties for our water restoration fund is a sensible measure that enables Governments to guarantee they can meet a specific need. Water companies pay the fines for the damage they have done, and the local communities affected are empowered to have their local waterways restored.

It is worth repeating the finer detail of our amendment; it should not go ignored that this will also improve chalk streams. It was incredibly disappointing that over Christmas, the Government revealed that they had abandoned plans by the Conservatives to recover our chalk streams. Given that England is home to 80% of the world’s chalk streams, a failure to act on this issue neglects a vital duty to protect a key part of our environment. In light of this, we believe that the Government need to think again about rejecting our important amendment, which is a matter of principle, a matter of justice in righting wrongs, and a fundamental commitment to water quality.

When it comes to improving our waters, it is supporting those who are most affected when water companies fail to abide by their duties that are at the heart of the Opposition’s concerns —the British public, as individual consumers, bill payers and members of local communities. Customers must not pay the price for water companies’ failure to do their duties, whether financial, environmental or otherwise. As such, the Opposition have tabled new clause 19, which would require the DEFRA Secretary of State to provide that where a water company has faced financial penalties for failure to comply with the law, a financial amount equal to those penalties must be removed from the bills of that water company’s consumers.

This is very important, as a toxic cocktail of poor behaviour by water companies and rising bill prices has led to many people feeling that they are receiving poor value for money and not getting the quality water services that they deserve. A concomitant reduction in customer bills that people will see directly on their statements will be a real and tangible sign that poor behaviour is not going unchecked. The Government have previously rejected the proposal, but we urge them to think again about this simple yet effective amendment that would do so much to underpin all the work that is being done and protect bill payers.

I turn to some of our further amendments. Our concerns about the water industry and finances extend to what is in the Bill as it stands—in particular, the provisions for special administration orders in clauses 12 and 13, which the Opposition have raised in the other place and in Committee. Those clauses would give the Government the power to recover any losses they make through placing a company in special administration by raising consumer bills. My Conservative colleagues in the other place sounded the alarm on this issue, and I put on record again my thanks to them for doing so. If water companies require the Government to place them in special administration through their own failure, why should consumers foot the bill for failures they have had no influence on or responsibility for? That is particularly the case if a customer’s bills will rise as a result of mismanagement by a company whose services they do not even rely on.

This proposal runs contrary to the nature of all the action taken in recent years to improve water quality, whereby companies that are responsible for failing to get their affairs in order must take responsibility. We have all been starkly aware of concerns surrounding the financial resilience of Thames Water, and as many will know, Ofwat’s “Monitoring financial resilience” report in November identified 10 companies that needed an increased level of monitoring and/or engagement concerning financial resilience. We acknowledge that the Government believe that they expect to use special administration orders as a last resort and in limited circumstances. However, it is the Opposition’s firm belief that an injustice remains, with people having to pay for companies that they have no connection to. We have therefore tabled amendments 26 and 27, which would explicitly forbid the raising of prices for consumers who do not use the services of the water company that is in special administration. We believe this is a fair and reasonable compromise that the Government should accept, so that we can work to improve the water industry’s financial practices.

We have also tabled new clause 17, which would amend the Water Industry Act 1991 to insert new rules regarding limits on the amount of money that can be borrowed by a water company. Regrettably, the Government rejected this sensible measure in Committee, so we have tabled it again to ensure that water companies do not excessively borrow money, which is ultimately bad for bill payers. When we talk about financial resilience, the heart of the issue is concern about borrowing, and the resultant over-leveraging in the industry. We will be pushing that new clause to a Division. We will also be supporting the measures on nature recovery that we tabled in Committee.

We will be looking very closely at some of the amendments from the Liberal Democrats. New clause 2, which they tabled in Committee, would abolish Ofwat. At that stage, we pointed out that the new clause was not explicit about what it would transition to, so we do not believe that is a sensible way forward.

New clause 18 would grant the Government a power to create a unified scheme of charging arrangements for customers in need of support regardless of the specific supplier, and introduce a consultation for that purpose. Although the Opposition welcome looking at that, can the Government please ensure that others consumers do not face rising bills as a result? It will be interesting to see what the Government do with that.

--- Later in debate ---

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Order. Unfortunately, colleagues making interventions have eaten into time, so I now have to call the Front Benchers. I call the shadow Minister, Dr Neil Hudson.

[Dr Hudson]

It has been a wide-ranging debate, although shorter than we had hoped for. I thank Members for participating today. I thank my hon. Friend the Member for Beaconsfield (Joy Morrissey) for her passion for enhancing the accountability of water companies and protecting watersports, which we are all passionate about, and my hon. Friend the Member for Bridgwater (Sir Ashley Fox) for passionately advocating for the water restoration fund.

New clause 16 would establish the water restoration fund, to ringfence money from fines to restore local waterways, not to balance the Treasury’s books. This was a Conservative fund, and the Labour Government must not let ideology stand in the way of evidence-based policymaking. They must take the baton forward and ringfence this money, so that waterways can be restored locally.

[Pippa Heylings]

Will the hon. Member give way?

[Dr Hudson]

No, I have no time.

New clause 19 is designed to ensure that fines on water companies result in equivalent reductions in customers’ bills. That is only fair, and we urge the Government to take forward the new clause.

New clause 17 seeks to strengthen the financial resilience of water companies by enabling the Secretary of State to stipulate the limits of borrowing, so that these companies do not leverage too much debt. That is an important new clause that needs to go forward.

Through amendments 26 and 27, we want to protect customers in different parts of the country so that they do not have to pay for the misdemeanours of water companies that do not serve them. We urge the Government to take forward our amendments and make this Bill stronger, so that we can improve our precious waterways.

--- Later in debate ---

[Emma Hardy]

I am sorry, but I will have to stop taking interventions if I am to respond to all the amendments.

Water UK has published a centralised map on its website of discharge data from all storm overflows operated by English water companies. I genuinely found it clear and useful, so I encourage all hon. Members to have a look.

I have heard calls from across the House for reforming the planning frameworks, the regulators and the incentives that govern the water industry model. Although I understand and, believe me, fully share hon. Members’ frustrations with the performance across the water sector, the fundamental issues facing the water industry and the regulatory framework in which it operates can no longer be addressed in a piecemeal way. I have spoken at great length throughout the Bill’s passage about the independent commission led by Sir Jon Cunliffe, which will make recommendations to fundamentally transform how our water system works.

The broad-ranging commission is bringing together a wide range of expertise to make recommendations in line with eight objectives to deliver the necessary reset to ensure a resilient, innovative and sustainable water sector in England and Wales. It will report to the Government by summer 2025. This includes specific objectives to review the roles, structures, duties and powers of the regulators, the planning frameworks—including the price review process—and the resilience of water companies. That includes financial resilience, which I know matters to many hon. Members.

Points have been raised about taking water companies into public ownership, and the Government have repeatedly made it clear that we do not consider nationalisation to be within the commission’s scope. Nationalisation would cost over £90 billion, and it would take years to unpick the current ownership model, at the expense of delivering and addressing more immediate public priorities. However, the commission will consider alternative water industry models within its scope. I take this opportunity to invite all hon. Members to put forward their views to the commission through the upcoming call for evidence, which will be launching soon.

[Dr Hudson]

I am grateful to the Minister for giving way. I suspect that the Government do not agree with our water restoration fund, but if the Cunliffe review says that the water restoration fund should be reinstated, will the Minister commit to doing so?

[Emma Hardy]

Despite our political differences, the hon. Gentleman and I had a very interesting and—what is the right word?—comradely debate in Committee.

As we explained in Committee, conversations on the water restoration fund are still ongoing. I honestly do not believe that primary legislation is needed, which Conservative Front Benchers know, as they established the fund without primary legislation. I gently point out, as I have already mentioned, that within the 18 months of its establishment under the previous Government, the fund did absolutely nothing.