Water (Special Measures) Bill [Lords]

Neil Hudson Excerpts

Tuesday 11th February 2025 Commons Chamber

[Emma Hardy]

I thank my hon. Friend for his intervention. I know how much he cares about this and many environmental issues. Amendment (a) refers only to the reporting arrangements for levels of debt rather than specifying the levels of debt that would be acceptable. It is about increased transparency, whereas his points fall more into the remit of the water commission, which is looking at all those issues as part of its wider work. I stress that the amendment is just about how information is reported and transparency.

The information must be made available in a prominent place on the water company’s website, ensuring accessibility for members of the public. Subsection (4) of proposed new section 35E also provides Ofwat with the power to determine the information that a water company must publish, as well as the ability to review requirements on financial reporting from time to time. That addition will ensure that reporting requirements keep pace with changes in the expectations and needs of bill payers. I would like to be clear, however, that the Government expect the power to be used to ensure that reporting requirements remain relevant, rather than to dilute or diminish the ambition of reporting requirements.

Financial reporting will also continue to be underpinned by pre-existing statutory obligations and licence conditions. In line with other requirements brought forward in clause 1, this new requirement will commence on Royal Assent. These amendments will help to rebuild public trust in the sector and provide the public with the levels of openness and transparency that they deserve.

I turn to the other Government amendment, which relates to the requirement for Ofwat’s rules to be confirmed by way of affirmative statutory instrument, as reintroduced by the motion tabled by Lord Blencathra in the other place. While the Government recognise that there were calls in the other place for increased parliamentary oversight of Ofwat’s rules, we have significant concerns that a requirement for Ofwat’s rules to be finalised through an affirmative statutory instrument would delay the rules being implemented.

We are clear that Ofwat’s rules should be brought forward as soon as possible. That will ensure swift and meaningful improvements in the performance and culture of water companies as they begin to deliver on the largest investment package in the history of the water sector. Requiring the rules to be confirmed by statutory instrument would risk delay to the rules coming into force. We also maintain concerns that the Lords amendments would compromise the independence of Ofwat, because they would require Ofwat’s rules to be confirmed through legislation prepared by the Government. That independence must be protected if we are to ensure investor confidence in the water sector.

The Government are confident that the Bill already provides for sufficient scrutiny of Ofwat’s rules as it is required to conduct a statutory consultation on the rules before they are finalised. Separately, Ofwat has already concluded an initial policy consultation on a draft of the rules and how they will apply. It received 11,700 responses on the rules through its consultation, which it is actively considering. As such, the Government are seeking to reverse the requirement and to introduce provisions in its place that will require Ofwat to provide its first set of rules in draft to the Secretary of State at least seven days before they are issued. I hope that hon. Members across the House will support that change, which will ensure that Ofwat’s rules are put into place as soon as possible following Royal Assent, in addition to the Government’s amendments to introduce new financial reporting requirements.

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

It is a great pleasure to speak in this final stage of the Bill. Before I start my remarks, I will respond to the pertinent question about levels of borrowing for water companies asked by my friend and former colleague on the Environment, Food and Rural Affairs Committee, the hon. Member for Brent West (Barry Gardiner). The Minister is right that Government amendment (a) is about reporting rather than the levels of borrowing. It is regrettable that the Government chose to reject the Conservative amendment in Committee that would have allowed the Secretary of State to set the amounts of borrowing for water companies. I hope that, as we move towards Cunliffe review, the Government may look at that again so that we can have tighter control on the water companies and their levels of debt.

Before I make my remarks on the Lords messages, I will say that getting to the Bill to this stage has been the result of much hard work across this House and the other place. I thank everyone, both front of house and behind the scenes, who has worked hard to get us here. That includes: the Minister for her willingness to listen to those across the House throughout the Bill’s passage; similarly, her counterpart in the other place, Baroness Hayman; those who have worked to draft the Bill and amendments; the Bill Committee; parliamentary staff from the Department for Environment, Food and Rural Affairs; and campaign groups and stakeholders who provided their insights to the Committee to help make the Bill even stronger, not least the Conservative Environment Network, the Angling Trust, and the Wildlife and Countryside Link.

Sadly, however, as the Opposition have stressed throughout the Bill’s passage in this House and the other place, this final stage of the Bill risks being yet another missed opportunity to act holistically on this important issue. It is unfortunate that the Government have been unwilling to go much further than their copy-and-paste approach, rebooting measures that the Conservatives took in government to address this issue.

We heard in previous stages how the bans on bonuses for water company chief executives and ensuring that 100% of storm overflows are monitored—up from 7% under Labour—were introduced by the previous Conservative Government. None the less, ever the optimist, I came to the Chamber hoping that the Government might be willing to reconsider their position on the issues of the amendments and the reasoning from the other place, which cover familiar ground. We debated these issues in the previous stages, not only in this House but in the other place.

At the heart of the Lords amendments is a theme that His Majesty’s most loyal Opposition have emphasised throughout the Bill’s passage: accountability. The previous lack of accountability for water companies created many of the issues that the water industry has faced. The Conservatives in government and now this Government have attempted to try and address that. This is another chance for the Government to go even further and inject some of what is really needed into their approach.

I turn to Lords amendment 1B, which reverses the Government’s decision to remove measures from the Bill that would require financial reporting to be collected by Ofwat for its remuneration guidance. We know that one of the most worrying aspects of our water industry has been its financial resilience, as Ofwat’s “Monitoring financial resilience” report back in November made clear, with 10 companies at need of increased monitoring and three in the highest category of risk, with closer monitoring required at a more senior level with Ofwat.

We all know, too, the cases involving specific water companies and the real risk that financial mismanagement brings for the survival of those companies and the water provision that their consumers rely on. It is disappointing, therefore, that the Government have been unwilling throughout the Bill’s passage to accept Conservative amendments, or Cross-Bench amendments such as this one by Lord Cromwell, offered in a constructive spirit, which may have gone some way to address the issue. None the less, the Opposition truly want to see better financial resilience. Therefore, on financial reporting in particular, we want the Government to accept this as a reasonable step to regain accountability on financial resilience.

The Lords amendment to clause 1 would quite simply mean that, when it comes to financial reporting, there would be nowhere to hide for water companies and the decisions they make in this area. I note that, following the Lords’ rejection of Commons amendment 1, the Government have tabled amendment (a) to Lords amendment 1B, which will go some way to improving the financial transparency of water companies, as a formal concession to Lords amendment 1B.

Subsection (4) of Government amendment (a) states that what water companies must publish should be decided “from time to time”. I hope the Minister can see that such vagueness might be a problem moving forward, as “from time to time” could allow the regulator not to review when the need arises, because it had done so a few years prior or even longer ago, and justify that by arguing that it was doing so “from time to time”, as the law outlines. Even if nothing or little would need changing from year to year, or every few years, surely it would be better to require this at least to be reviewed at precise regular intervals so that the most valuable information is provided in the best possible format.

That aside, however, His Majesty’s most loyal Opposition acknowledge the Government’s concession on financial transparency, and indeed public access, including characteristics of capital and debt. We are pleased to see that addition to the Bill.

In the same spirit, I move on to Lords reason 2A to disagree with Commons amendment 2, which urges this House to consider again the requirement that any rules under clause 1 be brought into force by means of a statutory instrument from the Secretary of State. Again, this amendment is familiar territory that we have debated at many stages, having been a measure consistently called for by His Majesty’s Opposition in the other place and in this House, both in the Chamber and in Committee. We have maintained throughout that accountability is needed to deliver and enforce change in the water industry, but that must include the Government of the day, no matter which party they are.

It is odd that, on the one hand, this Government have claimed that they want a tight grip on water companies, while on the other, they consistently oppose a measure that would allow them to do exactly that. It is odd, too, that in Committee, the Liberal Democrats sought to amend the same part of the Bill that would have that effect. Their intentions were to bring in guidance as soon as possible, but there is a distinction between intent and effect. Removing some of the same lines would have had the same exact effect in ridding the Bill of the statutory instrument requirement that this amendment seeks to maintain.

The Government have argued—as the Minister has again today—that they fear that Ofwat’s flexibility to adapt their rules as necessary could be impeded in some way. But statutory instruments remain a timely measure to introduce any changes if needed. So once again, the Government’s argument does not stack up. It is only right that we, as parliamentarians elected by the British public to represent their interests with our voices and votes, are able to look at the proposed rules and exercise our ability to voice concerns if they risk falling short of protecting the public’s interests. Why deny the public and Members of this House the ability to uphold accountability of the water industry, which has been missing for too long? As such, once again we have urged the Government to accept what we believe is a reasonable set of amendments in the name of accountability.

Now, at the 11th hour, the Government have tabled Government amendment (a) in lieu of Lords reason 2A that disagrees with Commons amendment 2, the amendments tabled and argued for by my Conservative friends in the other place the noble Lord Roborough and Lord Blencathra, and add that the remuneration and governance rules may not be not be enacted until they have been provided in draft to the Secretary of State. There is a move towards some Government accountability, but sadly, not what the Opposition had wanted: a statutory instrument laid by the Secretary of State and approved by both Houses.

None the less, I am grateful that the Government have listened to Lord Roborough, me and the other Conservative colleagues who have argued for more accountability, and that they have moved a little towards us with this amendment. However, I am still unclear why the Government appear scared of full accountability. Sadly, I fear that some of these last-minute concessions, which we would like to go further, look like the Government trying to avoid double insistence and the Bill failing. We do not wish the Bill to fail, as we all want the same thing: to see our waters improve and for the Government to continue with the measures that the Conservatives set in train in the last Parliament. In that spirit, we will not stand in the way of the Government’s amendments.

There has been many a chance for the Government to grab opportunities to bolster the Bill with both hands. Many chances have been missed throughout its passage, not least by the Government continually rejecting our water restoration fund to ringfence fines to restore local waterways, rather than to balance the Treasury’s books. They did not accept our sensible proposals to go further with nature-based solutions to flood risk. They rejected our proposals for fines on water companies to result in equivalent reductions in customers’ bills, and our sensible proposals to allow the Secretary of State to place limits on the amount that water companies can borrow. They blocked our proposals to protect consumers in different parts of the country from paying for failing water companies that do not supply them.

As the Bill progresses and the Cunliffe review begins, I again urge the Government, for the sake of our water, environment, constituents, communities and, indeed, fairness, not to let political pride and dogma stand in the way of doing the right thing and making water legislation the best it can be. We wish the Bill well as it ends its journey in this House.

[Madam Deputy Speaker (Caroline Nokes)]

I call the Liberal Democrat spokesperson.

--- Later in debate ---

[Tim Farron]

The hon. Lady is right. Previous Governments of all parties have not tackled these issues as they should have done—including, of course, the previous Labour Government, under Gordon Brown and Tony Blair. There is no doubt whatsoever, however, that we are now looking at a massively changed situation. Why do the public care so much more about this issue than five or six years ago? It is because—I say this neutrally—we were in the European Union before then, and we had different levels of scrutiny. It is also because this House went through the process of basically lifting the bonnet to see what was already acceptable, at which point people in this place and around the country became utterly outraged at what was permissible. Yes, parties of all sides bear a responsibility, and not least the party that privatised the industry in the first place and let the cat out of the bag.

Ofwat does need to be scrutinised; that is what I find most frustrating. Now that the UK is not in the European Union, our own regulations are not scrutinised from outside—so if we do not do it, who will? We have heard many times of Ofwat’s failure to scrutinise properly and hold to account the water companies; we heard on more than one occasion in Committee, as well as in this Chamber, of the £164 million in fines that Ofwat has levied against three water companies, of which, four years on, it has collected precisely zero pounds and zero pence. Our argument throughout this process has been that Ofwat, despite containing many very good and valuable people who are working their hardest, is nevertheless a regulator not fit for purpose. The amendment seeks to force Ofwat to give six months’ notice of bonuses it has signed off, rather than the seven days that the Government want, which is inadequate.

[Dr Hudson]

I am slightly curious as to why, at the eleventh hour, the third party is now changing its position. In the other place, when this amendment was pushed to a vote, the Liberal Democrats abstained on two occasions, but now they are playing political games and actually risking the progress of the Bill. The amendment, as it stated, was to introduce a statutory instrument to increase parliamentary scrutiny and accountability. The Government have moved some way—although not as far as we would like—but the third party is now playing political games, and risks the progress of a Bill that is trying to improve the state of our waters.

[Tim Farron]

I thank the hon. Gentleman for his intervention. I can do maths, so I know there is absolutely no threat whatsoever to the progress of this Bill—I know what the numbers will be, roughly, when and if we divide on this matter.

I am not a late convert but an early convert—a convert long before the hon. Gentleman—to the importance of scrutiny. It is therefore important that we make this case: imperfect though this proposal is, it is far better for this House to be given six months’ notice of Ofwat’s intention to allow bonuses than seven days. That is surely better, and that is why we insist as we do. This is Parliament scrutinising Ofwat because of Ofwat’s failure to scrutinise the water companies.

That is our simple point. It is why we have proposed much more radical reform throughout this process, including the abolition of Ofwat altogether. It is not the fault of the people who work for the organisation specifically. When regulation of the water industry is fragmented across parts of Ofwat and other agencies, which do not have the necessary powers and resources, the water companies will, of course, run rings around the regulators, and it is our constituents and our waterways—our lakes, rivers and coastal areas—that bear the brunt and suffer.

[Dr Hudson]

I am very grateful to the hon. Gentleman for giving way again. He talks about a number of fantastic amendments the third party made in Committee, many of which were so poorly worded that they were not actually worth voting on. His particular amendment about abolishing Ofwat actually contained no suggestion as to what the third party would replace it with, or how much it would cost—

[Tim Farron]

It did.

[Dr Hudson]

It did not. It did not set out how much it would cost or how long it would take. While we want Ofwat to have the teeth to hold water companies to account, the third party proposes getting rid of it. Again, is it the party of protest that is not offering any credible solutions.

[Tim Farron]

Well, first of all, if the hon. Gentleman had paid more attention, he would know that we proposed a clean water authority, which would gather up all the powers of Ofwat and the environmental and water regulatory powers of the Environment Agency.

I say this gently, but, again, there is a pattern here. Both in opposition and in government, the Conservative party shows greater levels of fury and anger over Liberal Democrats campaigning to clean up our waterways than over the fact that our waterways are full of poop in the first place.

[Dr Hudson]

Will the hon. Gentleman give way?

[Tim Farron]

I have already taken two interventions from the hon. Gentleman, so I will not.

My simple comment is that this Bill will do good, and we are supportive of it. We wish only to trouble the House a short time to ensure greater scrutiny is brought in. We have accepted throughout this process, with some reluctance, the Government’s position that this is part 1, and that part 2 is to come, and that the review led by Sir Jon Cunliffe will potentially consider more radical action. We hope that is the case, and we shall engage with things on that basis. I have in my hand some pieces of paper that I propose to send to Jon Cunliffe, which tighten up some of the smorgasbord of amendments, as they have been called.

We care deeply about our waterways. I am honoured to represent the bulk of the English Lake district, with so many lakes and rivers, as well as our coastal areas in Morecambe bay. The quality of our waterways is deeply personal to me and to my communities. We shall continue to campaign unashamedly for something far better for our constituents, and indeed for our water right across the United Kingdom.

[Emma Hardy]

With the leave of the House, I thank all hon. Members for their thoughtful and valuable contributions to today’s debate. Without stepping into the territory of a Second Reading debate, I suggest gently to the House that we are here today debating the Water (Special Measures) Bill precisely because of the public outrage caused by previous lack of investment, and the fact that every single river, lake and sea in our country has been polluted. Had the previous Government, as stated by the now official Opposition, done the marvellous, wonderful job that they seem to want to suggest they did, there would not be the need for this Bill in the first place—neither would there be the need for all the campaigns that have taken place up and down the country. However, I will go no further into that.

I have respect for the hon. Member for Epping Forest (Dr Hudson), as he knows. However, I say gently that it is dishonest to suggest that legislation is needed for the water restoration fund, because, in fact, the Conservatives created the fund without legislation. To imply that legislation is required to have the fund would, therefore, be inadvertently dishonest. It was created without legislation, and therefore it does not need legislation to be held.

[Dr Hudson]

I am slightly concerned that the Minister is raising questions about my honesty. The water restoration fund exists, but where is it now? What has happened to it? Are the Government going to use it again? That is why we wanted to push, at every stage of the Bill, the point that the water restoration fund needs to be used to ringfence money so that fines on water companies can be ploughed back into restoring local waterways. I will be very happy if the Minister says today that the water restoration fund is carrying on, and then my honesty will be intact.