Draft Flood Reinsurance (Amendment) Regulations 2025

Neil Hudson Excerpts

Wednesday 26th February 2025 General Committees

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

It is a delight and a privilege to serve under your chairship, Ms Vaz. I thank the Minister for laying these important regulations.

I am pleased to say that His Majesty’s most loyal Opposition are happy to support this measure, which will help to ensure that Flood Re can continue to operate effectively. As the Minister articulated, the Flood Re scheme is vital. Since its inception in 2016 under the Conservatives, many people have relied on the scheme. We have sadly seen increasingly frequent extreme weather events in recent months and years, with the number of named storms continually going up, so it is important that people have coverage. When those extreme weather events cause flooding in the United Kingdom, they have brought horror and devastating consequences to many people’s livelihoods and finances.

The Minister and I have great mutual respect. We have talked a lot about the severe financial implications when floods hit, and about the human implications—the mental health impacts, the stress and anxiety of people who worry about being flooded and then the trauma when they are. The Flood Re scheme is vital to mitigating, to some degree, the things people go through. Enabling the effective use of Flood Re to support those affected by flooding will not only mean that people receive the financial support they need, but reduce harm to their mental wellbeing, because they know that some support is there when they need it most.

With that, and given that not having an effective Flood Re scheme may result in high-risk households being left without flood insurance, it is a clear and common-sense decision to support this statutory instrument. The increase in the levy is therefore a pragmatic decision, which I note takes into account inflation. According to the Government’s assessment, the cost of the increase in the levy, which will most likely be passed on to consumers through the premiums, is estimated to be about £1.60 per policy.

Although I welcome reaffirming the importance of Flood Re, I hope to see more ambition from the Government about the scheme’s future expansion—I have talked to the Minister about that before. There is potential to expand the scheme, and we have talked a lot about whether businesses can come under its umbrella. What discussions has the Minister had with businesses about the potential merits of expanding the scheme to include them? Equally, there are people who live above their business, so a composite home and business could be affected by flooding. Again, in the spirit of cross-party consensus, I hope the Government will move forward to help more people when floods hit.

Furthermore, the eligibility for Flood Re states that a home must have been built before 1 January 2009. Although I appreciate that regulations have since been strengthened to consider flood resilience, the Minister will be aware that properties continue to be built on at-risk floodplains. In the light of the central, top-down Government targets that are coming for house building, which may mean that more houses are built in at-risk areas, will the Minister ensure that homes built after 2009 have the security of flood insurance? Will she consider expanding the Flood Re scheme to include homes built after 1 January 2009? Labour Back Benchers have also called for that.

Helping people who are traumatised by flooding is above party politics. I have been calling for the expansion of the Flood Re scheme for some time. I hope that the Minister, her colleagues and her officials in DEFRA can look at its merits and talk to the Treasury about that too.

More broadly, as well as insurance, prevention is key. The last Government protected more than 600,000 properties from flooding between 2010 and 2024, and published a policy statement to make England more resilient, with 40 actions and five ambitious policies stemming from that. Furthermore, in March 2020, it was announced that the flooding budget would be doubled to £5.2 billion over the next six-year spending period to deploy more flood schemes. The Minister has confirmed that the Government will bring forward a flood resilience strategy. When can we expect it to be published, and will it include specific targets?

The Government have also launched the floods resilience taskforce. At the last count, we believe it has met only a couple of times recently—if it has met more than that, I stand to be corrected—despite the increase in drastic and devastating flooding. We want it to meet more frequently. Can the Minister assure us that it will meet regularly, and sometimes in advance as these frequent events come down the pipeline? We know flooding will happen in the winter months, so can the taskforce meet more regularly? What has the taskforce done to tackle flooding, especially after the storms that have recently hit the UK? How will it protect residents, farmers and businesses from the next set of storms that we know will come?

For properties that are sadly flooded, support is required. The last Government introduced the frequently flooded allowance, which was a ringfenced fund of £100 million to protect areas that had been affected by repeated flooding. The Government have yet to confirm whether that funding will continue and whether it will be ringfenced. Can the Minister enlighten us on the Government’s plans?

The support available to handle the aftermath of flooding, such as the Flood Re scheme that we are talking about today, has also included discretionary funding, such as the Bellwin scheme. Again, the Minister and I have had exchanges across the Dispatch Box on this issue. When such events happen, can she assure us that there will be cross-Government talks to make sure these support schemes can be activated on a pragmatic, compassionate and case-by-case basis?

[Sir Julian Smith (Skipton and Ripon) (Con)]

Does my hon. Friend agree that engagement must happen with councils as well? North Yorkshire has suffered very badly from floods recently, but the engagement with North Yorkshire council has often been lacking, from not only this Government but previous Administrations. That is largely based on cost, but that engagement is key.

[Dr Hudson]

I totally agree. There needs to be joined-up thinking at all levels of government, including local authorities. There also needs to be engagement with local emergency resilience groups, many of which are volunteers. When storms and floods hit, can people get the information they need? DEFRA could work with the Environment Agency, local authorities and emergency resilience groups to help people when they are flooded. There needs to be a co-ordinated effort that considers things such as planning, insurance, flood prevention, support and response. I hope that my questions are constructive in helping people when they experience dreadful flooding events. We support helping Flood Re to do its excellent work.

[The Chair]

Before I call anyone else, I remind hon. Members that the regulations increase the levy from £135 million a year to £160 million a year. Could Members focus their comments on the topic of the regulations?

Water (Special Measures) Bill [Lords]

Neil Hudson Excerpts

Consideration of Lords message
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.

Oral Answers to Questions

Neil Hudson Excerpts

Thursday 6th February 2025 Commons Chamber

[Mr Speaker]

I call the shadow Minister.

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

To have growth in agriculture we need healthy animals, and for that, farms need biosecurity. Crucial to that is the Animal and Plant Health Agency, which deserves our thanks in these challenging times. With the alarming recent foot and mouth outbreak in Germany, avian influenza again surging, bluetongue still with us and African swine fever at our doorstep, we must act urgently. Please can the Government release the further necessary £1.4 billion to redevelop the APHA headquarters in Weybridge? The programme was started under the Conservatives, with £1.2 billion committed in 2020. For the sake of agriculture, animal health, rural mental health, biosecurity and national security, please will the Minister act now?

[Daniel Zeichner]

The hon. Gentleman makes an important set of points about the biosecurity needed to protect our country. Over the past few weeks we have had a series of questions across the Dispatch Box about the foot and mouth outbreak in Germany and avian influenza. We have had this discussion about the investment in Weybridge, and I am delighted that this Government have brought forward a £280 million investment there. Of course, we need to do more in future, but what on earth were the previous Government doing over the past 14 years?

Draft Separation of Waste (England) Regulations 2025

Neil Hudson Excerpts

Wednesday 29th January 2025 General Committees

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

It is a great privilege to serve under your chairship, Mrs Furniss, and to be sitting opposite the Minister again, as I have done on various issues. I thank her for bringing these important regulations to the Committee.

The principle of improving our recycling is one that I wholeheartedly support. I believe the Conservatives have a strong track record in this area; I thank the Minister for graciously acknowledging the importance of our landmark Environment Act 2021. Between 2010 and 2022, we reduced the amount of waste going to landfill by about 47% and cut the amount of biodegradable waste going to landfill by 46%. We also introduced a simpler recycling collection system to make it easier to recycle, saving people time and stopping confusion, to boost recycling rates. Additionally, our introduction of the single-use plastic bag charge in 2015 led to a remarkable drop in plastic bag usage, significantly reducing plastic waste.

I am pleased to see that the Labour Government have drawn on our previous consultations to shape this statutory instrument. In 2021, the Conservative Government conducted an initial consultation on consistency in household and business recycling, followed by an additional targeted consultation in 2023 that focused on exemptions to allow co-collection of recyclable waste streams. The process engaged English waste collection and disposal authorities, the Environment Agency and key stakeholders across the waste sector.

These regulations, set to take effect at the end of March this year, introduce mandatory waste separation for businesses and non-domestic premises. Businesses with fewer than 10 employees—microbusinesses—have been given an extended timeline until March 2027 to comply. Under the regulations, businesses will need to separate their waste into three key streams: dry recyclables such as glass, plastic, metal, paper and card, food waste and residual waste.

Recycling is important, and we must continually look at ways to increase it and make it easier for councils to carry out their waste management roles. However, I do have a couple of clarification questions for the Minister that I hope she may be able to address. First, can the Minister confirm what specific campaigns or initiatives will be launched to ensure that businesses and non-domestic premises are fully aware of the changes coming down the line? Secondly, what measures are being put in place and what reassurances are being put out there to help businesses—particularly small and microbusinesses—to comply with the regulations without facing financial burdens?

This is an important issue; I look forward to seeing how these regulations and this important recycling agenda progress in future.

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.

Water (Special Measures) Bill [ Lords ] (Fifth sitting)

Neil Hudson Excerpts

Committee stage
Thursday 16th January 2025 Public Bill Committees

[Charlie Maynard]

I completely agree with the hon. Member. Using West Oxfordshire as an example again, we have installed Grampian conditions, which I encourage other Members to look into, where we have said, “You may not occupy this house.” We could not stop the houses being built by arguing that there was insufficient capacity, but we could put a Grampian condition in force that says, “Those houses may not be occupied. Any buyer knows this, so they will not buy them.” It is flagged to any buyer so that they do not buy a house they cannot occupy, which will continue until the capacity has been added. That puts some heat underneath the water companies to get on and increase their sewage treatment works capacity. I really encourage the Government to look into those. We have vast amounts of housing that will be built, and under the current law, they will be steamrolled through and the capacities will not keep up. That is a real problem for everybody, and it puts more pressure on our rivers.

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

I am grateful to the hon. Member for giving way, and I have a lot of respect for the new clauses that he has tabled to put pressure on water companies to provide more information at critical stages. The Opposition have tabled amendments requiring water companies to publish data on their websites to enable citizen science, so I respect what he is saying. I guess some of the issue is in the detail of the wording of the new clause. I am sure we are all in agreement about water companies providing information, but proposed new section 37(1A) says that we want them to be “full and accurate” and “honest”. I guess the devil is in the detail. How will that be judged? If this new clause were to come into play, how will people judge that? Is an “honest assessment” whether something is not false, or whether something is complete or incomplete? There is an element of challenge that could be put in. I understand the sentiment, but the devil is in the detail of the wording as to how this could actually work.

[Charlie Maynard]

I thank the hon. Member for his kind words, and I look forward to his support in some of the votes at some point. In the meantime, if he has recommendations on the wording that he would like to put forward, I ask that he please do so. These new clauses are already in place, so maybe that is impossible, but let us by all means try to improve them.

--- Later in debate ---

[Charlie Maynard]

We will not press this new clause to a vote. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Question proposed, That the Chair do report the Bill, as amended, to the House.

[Dr Hudson]

It is a great pleasure to again serve under your chairship today, Dr Huq. May I first, on behalf of the Opposition and, I hope, colleagues from across the Committee, give a vote of thanks to everyone involved in this process? I have a list here, and please shout out if I miss anyone out.

First, I thank the Chairs—Dr Huq and Mr Vickers—for guiding us through the process. I thank all the Bill Committee staff—the Clerks and officials—for their assiduous, thorough work, which keeps us on message as Members of Parliament scrutinising this legislation. We thank them for that. Dr Huq, thank you—I will use the word “you” for you. I thank the DEFRA officials for all their hard work on this and for engaging with the Opposition as well. I very much appreciate the Minister allowing the officials to do that.

I thank the Doorkeepers and Hansard. I do not think I have missed anyone in the room except the public. This gives me the chance to thank the members of the public who have come in and watched our proceedings, as well as people who have watched online from afar. There are also, as the Minister said, the stakeholders: the environmental groups, the volunteers and the experts who have fed into this Bill and the water debate that we are having and who are helping legislators across the House to improve and refine legislation. We thank the public very much as well.

We have had a very interesting few days. It has shown us that there is a lot of cross-party consensus on what we are trying to do to improve our water quality. There is some disagreement about how best we do that, but this Committee has shown the House that, actually, there is a lot of agreement about the scale of the problem and the fact that we need to address it.

I respectfully say that I am disappointed with the comments from the third-party spokesperson, the hon. Member for Westmorland and Lonsdale, about the Bill Committee stage being a charade. I do not think that line-by-line scrutiny of Bills is a charade. Yes, there is a process as to how Committees are populated, but that is democracy. I would have thought that that particular party, given its title, would respect election results. That is how democracy works. We have seen that they have had some disagreement among themselves about some of their votes as well, but I will leave that point there.

We have had some interesting discussions, and it would be remiss of me not to talk about teeth. We have had dental analogies aplenty: we are wanting to give more teeth to the various regulators. Finally, I think I did detect—we will have to check Hansard—the Minister using the word “Ofwet”. When this matter goes to the commission, “Ofwet” might be an interesting term for a new body that might be set up, but I will leave that with the Minister.

[Tim Farron]

Thank you, Dr Huq, and Mr Vickers, in his absence, for brilliantly chairing our five Committee sittings. I will not list everyone that the hon. Member for Epping Forest just did, but I endorse what he said. I thank the Clerks, the DEFRA officials, the Minister’s team and colleagues on both sides of the House for their courtesy and the seriousness with which they have engaged with the Opposition, the members of the public who attended the Committee in person and those who have followed it from afar.

There is no doubt that the voluntary sector and the public have been ahead of politicians on this issue for many years. I would argue that the UK leaving the European Union was a key moment, because we had to go back and look under the bonnet to see what was already accepted and already permitted. We could argue about whether the previous Government gave us regulations and standards that were as good as what we had before we left the European Union. That might be an additional issue, but none the less, the likes of Surfers Against Sewage, Windrush Against Sewage Pollution, Save Windermere, the Clean River Kent Campaign and so many others in all our communities have led the debate on this and created great scrutiny. That is why we strongly approve of a significant part of the Government’s ethos in the Bill, which is to put an awful lot of power in the hands of those who care so much in our communities.

I do not mean to offend people by referring to this as a charade, but the reality is that we spent five years in Government, and I am pretty confident that the Government that I was part of never allowed a single Opposition amendment to pass in Committee. There is a little bit of pretence in this. All the same, it is an enjoyable pretence. Having gone through the Bill line by line, we all understand it better, which means that, on Report, a dozen and a half of us can speak about this Bill in the Commons with a greater awareness than beforehand.

We support the Bill. If anybody was to call a Division on it, we would go into the Aye Lobby. Our frustration is that we feel that the Government have missed an opportunity. Their answer is obviously, “Here comes the Cunliffe review, and we will see what happens next.” Are we going to get an undertaking that there will be another Bill in the next King’s Speech? If there is, that is exciting and interesting, and that could answer many of our concerns.

The Bill could have been much clearer about limiting bonuses and about recognising that a fundamental problem with the water industry is the fragmentation and the weakness of regulation. It could have recognised that the financials are clearly all wrong, unfair and wasteful. We are looking at duration, but not volume, content or impact, and we are not supporting the citizens behind the citizen science enough by giving them the information, the resource and the place on the water company boards that they need. There are many areas where we think the Bill could be so much better, and where we do not need to wait for Sir Jon to do those things.

Having said that, what is wrong with this Bill is what is not in it, not what is in it. We are therefore happy to support it and are very grateful for the constructive nature of the debate throughout.

Draft Free-Range Egg Marketing Standards (Amendment) (England) Regulations 2024

Neil Hudson Excerpts

Wednesday 15th January 2025 General Committees

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

It is a pleasure to serve under your chairship, Mrs Harris. I thank the Minister for bringing the draft regulations to the Committee. I am pleased to say that we, His Majesty’s most loyal Opposition, are supportive of the statutory instrument and offer no objections. The initial consultation conducted by the previous Conservative Government in January 2024 demonstrated strong support for the proposals, leading to this statutory instrument.

Current marketing standards allow hens to be housed for 16 weeks before their eggs are required to be re-labelled as barn eggs. Recent avian influenza outbreaks have once again necessitated the introduction of mandatory housing measures for free-range poultry in certain areas, which can sometimes exceed the 16-week limit. Consequently, producers adhering to these essential measures have been penalised through the loss of their free-range status.

In the previous Parliament I served on the Environment, Food and Rural Affairs Committee, and we looked into this issue extremely closely and fed our work in to the Government. I am pleased that the previous Government responded positively, and that the new Government have picked up the baton. The changes in the statutory instrument will remove the 16-week derogation period, thereby protecting producers who are doing the right thing by responsibly housing their birds under the chief veterinary officer’s instructions during the imposition of avian influenza controls. I should declare an interest: I am a veterinary surgeon so I have a strong personal and professional interest in this subject.

The changes are made in the knowledge that once the restrictions are lifted, the birds will be back out and free-range. Furthermore, they will ensure that English free-range producers maintain parity with the EU, where the 16-week time limit was removed from egg marketing standards legislation in 2023, as the Minister articulated. This will create a level playing field for our producers and reduce the likelihood of English free-range eggs being substituted with imported eggs.

Although we support the statutory instrument, I do have some questions for the Minister. Before I ask them, I put on the record my thoughts and sympathy for farmers and bird keepers who have been affected by avian influenza outbreaks. The virus is still with us and there are still outbreaks. I also pay tribute to everyone at the Animal and Plant Health Agency. Vets, officials and scientists are working hard on the situation, as they are working on many different disease situations. Avian influenza is with us, bluetongue is still bubbling away, and we now have the real concern of foot and mouth disease having been confirmed in our near neighbour Germany.

As a veterinary surgeon, I am all too aware of the devastating impacts that animal disease outbreaks can have. Avian influenza outbreaks obviously affect not only reared domestic birds but wild birds, but there are also significant human impacts, not least on the mental health of those in the frontline. Given the ongoing avian influenza situation, will the Minister outline the additional measures the Government are taking on avian influenza to preserve our nation’s biosecurity? What is the current policy and status in terms of vaccine development and deployment?

In addition, will the Minister clarify what steps are being taken to co-ordinate the changes with Welsh authorities? We know they are introducing changes, but we must make sure that we have a consistent approach across the UK. We strongly support these crucial measures and I am grateful that the regulations have been brought to the Committee today.

Foot and Mouth Disease

Neil Hudson Excerpts

Wednesday 15th January 2025 Commons Chamber

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

(Urgent Question): To ask the Secretary of State for Environment, Food and Rural Affairs if he will make a statement on the Government’s emergency contingency response to the recent confirmation of foot and mouth disease in Germany?

[The Minister for Food Security and Rural Affairs (Daniel Zeichner)]

The whole House will be aware of the concern across rural communities about the potential threat of foot and mouth disease. It is a severe, highly contagious viral disease of livestock that can have a significant economic impact, and a truly devastating effect on farming and rural communities when outbreaks occur, as we know from history.

I assure the House that the UK is currently free of foot and mouth disease, and has been since 2007. But following confirmation on 10 January, foot and mouth disease in the German state of Brandenburg, the Department for Environment, Food and Rural Affairs has taken rapid action to protect the UK, including suspending the commercial import of susceptible animals from Germany and restricting personal imports of animal products from across the European Union.

I assure the House that the Government will do whatever it takes to protect our nation’s farmers from the risk posed by foot and mouth. We have increased risk levels in the UK to medium. Last night, the chief veterinary officer and I spoke directly with the German Federal Minister and his officials. The Government have taken decisive and immediate action. The import of cattle, pigs and sheep from Germany has been stopped to protect farmers and their livelihoods. We will not hesitate to add additional countries to the list if the disease spreads. I can inform the House that this morning the chief veterinary officer has confirmed that while Germany’s surveillance continues to be ongoing, it has not as yet detected any further cases.

Foot and mouth disease guidance is available on gov.uk and livestock farmers are urged to be extra-vigilant and report any suspect disease to the Animal and Plant Health Agency immediately. The UK chief veterinary officer is also urging livestock keepers to remain vigilant to the clinical signs of FMD. I reiterate that there are no cases in the UK currently. I also reassure the House that FMD poses no risk to human or food safety but it is a highly contagious viral disease in cattle, sheep, pigs and other cloven-hoofed animals. Livestock keepers should therefore be absolutely rigorous about their biosecurity.

The Government are absolutely focused on responding to the animal disease threats we face, protecting animal health and welfare. Upholding high biosecurity standards is paramount for protecting and promoting food production and food safety, both animal and human, and supporting our economy and trade. That is why we have invested a further £200 million in the UK’s main research laboratory testing facilities at Weybridge to bolster protection against animal disease.

While we stand ready to protect our livestock from the threat of foot and mouth and other exotic diseases, we also offer our support to our European neighbours as they face this threat to their livestock, farming and rural communities. I can assure the House that the Government will be decisive and take the necessary action to protect our farmers from foot and mouth disease.

[Dr Hudson]

Thank you for granting this urgent question, Mr Speaker. I declare a strong personal and professional interest. As a veterinary surgeon I supervised some of the animal culls in the 2001 outbreak, witnessing sights I never want to see again.

The confirmation on 10 January of foot and mouth disease in Germany, with subsequent slaughter and movement restrictions, is sending shockwaves around Europe and the UK. We have requested this urgent question as no statement was provided to the House on Monday or Tuesday. The shadow DEFRA Secretary, my right hon. Friend the Member for Louth and Horncastle (Victoria Atkins), is unable to be with us today as she is at the LAMMA show in Birmingham speaking to agricultural manufacturers and farmers.

In 2001, the foot and mouth outbreak resulted in more than 6 million animals being culled and cost £12.8 billion in today’s prices. It devastated the farming community, and farmers want reassurance that action is been taken to protect our borders, their livestock and their livelihoods.

The mental health impacts of foot and mouth cannot be overstated. Can the Minister reassure us that the announced movement restrictions are fully in place for animals and products coming to the UK from the affected area? Will the Government think about extending the ban to personal imports of meat and milk products unless accompanied by veterinary documentation? Can the Minister update us on the work tracing possible movements of products from Germany? What advice is there about movements of people and vehicles from the area in terms of fomite transmission of the virus? And, heaven forbid, if foot and mouth ever enters the United Kingdom, what is the situation regarding vaccine supply and potential deployment?

Finally, I pay tribute to the chief vets and the veterinary and animal officers and scientists and officials at the Animal and Plant Health Agency, who do so much to keep our country biosecure. This foot and mouth disease wake-up call is yet more evidence that the Government must now commit to fully fund the redevelopment of the APHA HQ in Weybridge. I urge the Government from the bottom of my heart to fully fund that redevelopment, to make sure that the burning pyres of slaughtered animals, as well as the economic and mental health devastation of foot and mouth disease, remain resolutely confined to the history books.

[Daniel Zeichner]

I fully appreciate the expertise and passion the hon. Gentleman brings to this subject; he knows of what he speaks. I hope I made it clear in my initial reply just how seriously the Government take these issues. I spoke to him earlier this morning ahead of a Delegated Legislation Committee to make it clear that we would work on a cross-party basis to tackle this, should it come to our shores.

I will try to address the hon. Member’s questions, particularly those around vaccination, because that is always raised and is always of concern.

We are absolutely ready in case that is a control that we need to implement. According to the general advice with regard to control measures, if an outbreak were to occur in the UK, vaccination is a control option that would be considered by DEFRA and devolved Administrations at the outset, in addition to culling and immediate movement controls. I can assure the shadow Minister that the UK vaccine bank holds vaccines for a range of foot and mouth disease serotypes. I can also assure him that there is good, close working with the devolved Administrations on this matter and that we are working in harmony.

On the movement of personally carried goods, I remind the shadow Minister that this Government strengthened those controls at the borders. I am confident that we are doing everything possible at the moment to ensure that we are following the right procedures, given the risk assessments that have been carried out. Our sincere hope is obviously that this does not extend beyond the Brandenburg area, but we are absolutely ready to deal with those issues.

On the investment at Weybridge, as I have said, we have committed an initial £200 million. This is a debate we have been having for some time, and I am afraid that we are working with the resources we have now. However, I am confident that we have a very good set of procedures in place to tackle any potential incursion.

Water (Special Measures) Bill [ Lords ] (Third sitting)

Neil Hudson Excerpts

Committee stage
Tuesday 14th January 2025 Public Bill Committees

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

It is lovely to see everybody again and it is a pleasure to serve under your chairwomanship, Dr Huq.

Clause 7 will give the environmental regulators new powers to impose automatic penalties for specified offences. The current process for imposing fixed monetary penalties for minor to moderate offending can be time and cost-intensive. To impose a penalty, the regulators must evidence beyond reasonable doubt—the criminal standard of proof—that an offence has been committed. In addition, the fixed monetary penalty amount that regulators can currently impose for certain water industry offences to that standard of proof is set at just £300. That means it is generally not cost-effective for the regulators to impose financial penalties for frequent minor to moderate offending. Clause 7 introduces automatic penalties for specified offences, which will enable the regulators to impose penalties more quickly without having to direct significant resources to lengthy investigations.

I reassure hon. Members that we will consult on the specific offences that will be in scope for the new automatic penalties and on the value of the penalties. The proposed offences will cover information requests and reporting offences, pollution offences and water resource offences. The House will also have the opportunity to debate and vote on secondary legislation before any changes are made. I hope the Committee agrees that this measure is essential for improving compliance across the water sector.

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

It is a privilege to serve under your chairship today, Dr Huq. We have no formal objection to clause 7, which imposes a duty on environmental regulators to impose penalties for offences by water company that the clause specifies. Offences have of course increased, and water bosses have been banned from receiving bonuses if a company has committed serious criminal breaches. Regulators have more powers than they used to in being able to impose larger fines for polluters without needing to go to court. The clause focuses on exactly the same principle and we therefore have no formal objections.

I raised in an earlier Bill Committee sitting—this is relevant here—that there has been an increase in the number of inspections that water companies can expect, from 4,000 a year by April this year to 10,000 a year by April of next year. In other words, what has been addressed in the past is not just regulation, but the whole pathway of the enforcement of regulations, so that regulations are not merely blunt instruments but active ones that water companies can expect to have to deal with if they do not act responsibly to their customers, the environment and the wider public.

On that last point, will the Minister clarify and ensure that these offences are and will be enforced and commit to making further amendments to the law, not only regarding the offences themselves, but also on their enforcement, if the Government believe that things need to be tightened up moving forward? Aside from those clarifications, we have no formal objections to the clause.

[Tim Farron (Westmorland and Lonsdale) (LD)]

It is a great privilege to serve under your guidance this morning, Dr Huq. We also have no objection to the clause and, in fact, we consider automatic penalties to be a positive move.

My concern is that we see water companies not paying the fines that are levied against them. We talk about minor to moderate offences, but water companies wriggle out of paying fines for much larger offences, too. I just want to probe the extent to which the automatic penalties might stretch to what are considered more serious breaches.

I mentioned an example last week in Committee. In November 2021, Ofwat launched an inquiry into sewage discharges and how water companies manage their treatment centres and networks. It found three water companies in particular to be in breach: Thames, Northumbrian and Yorkshire. It imposed fines on those three companies—a £17 million fine against Northumbrian Water, a £47.15 million fine against Yorkshire Water and a £104.5 million fine against Thames Water—but as of autumn last year, not a single penny of that has been collected. It is understood that Ofwat allocated a grand total of eight and a half people to pursuing that particular line of inquiry.

Large fines, which there is no doubt that these companies rightly face, make no difference if they are never collected. That underpins the failure of our regulatory framework—water companies clearly feel they can just run rings around Ofwat and the other regulators. We very much welcome the automatic penalties, but we remain a bit concerned and would like the Minister to clarify whether those automatic penalties would have covered fines of that size as well. Otherwise, we are very supportive of the clause.

[Emma Hardy]

Clause 8 grants the Secretary of State and Welsh Ministers the power to introduce conditions or general rules subject to which water industry abstraction and impounding licences will have effect. This provision is needed to ensure that automatic penalties under clause 7 can be applied to abstraction and impounding offences under the Water Resources Act 1991. Existing licences have been issued since the 1960s and have inconsistent conditions, making the use of automatic penalties nearly impossible.

More broadly, clause 8 allows for the harmonisation of requirements in relation to abstraction and impounding activities so that the sector operates under consistent and modern standards. A delegated power to introduce conditions or general rules through regulations is crucial in this context, because water resource management is dynamic and must be responsive to emerging challenges. I hope that hon. Members will agree that this power is needed to improve the water industry’s regulatory framework.

[Dr Hudson]

Clause 8 seeks to grant the Secretary of State and Welsh Ministers additional powers to impose conditions or general rules on water industry licences relating to abstraction and impoundment activity. His Majesty’s loyal Opposition do not have any formal objections to the clause, but I would suggest that it reinforces some of my comments on clause 6 about the need to make the Government have the powers they need to regulate as necessary a more consistent principle across the Bill.

[Emma Hardy]

I thank the hon. Gentleman for his comments. Modifying the licences individually is both expensive and time consuming, which is why we are hoping to modernise and harmonise the process under this clause. It is crucial that automatic penalties under clause 7 can be applied to abstraction and impounding offences, so this power is needed to improve the water industry’s regulatory framework. For that reason, I commend the clause to the Committee.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Clause 9

Requirement for Ofwat to have regard to climate change etc

--- Later in debate ---

[Dr Hudson]

Clause 9 would introduce a new requirement for Ofwat to consider, as part of its regulatory decision making and the exercise of its powers and duties as given by the Water Industry Act 1991, the section 1 duty confirmed the Climate Change Act and section 5 of the Environment Act 2021. We have no formal objections to raise to that basic principle and no amendments that we wish to make to clause 9.

Can the Minister provide some clarity on the line that amendment 27 from the Liberal Democrats seeks to remove from the Bill? It states that Ofwat’s duty to have regard to the Secretary of State’s duty to meet environmental targets applies

“where the Authority considers that exercise or performance to be relevant to the making of such a contribution.”

Will the Minister assure the Committee that she and the Government will work with Ofwat so that it has clear guidance on when these environmental targets would be relevant, so that there are no grey areas in Ofwat’s work as it looks to enforce those targets? Can she assure the Committee that the Government will also work with Ofwat to ensure that with regard to its powers and duties in the spirit of clause 9, consumers are protected should there be any subsequent financial costs to water companies, so that we get both environmental protection and the value for money that the tax-paying consumer deserves?

I would be grateful if the Minister provided clarification on some of those questions. However, his Majesty’s loyal Opposition have no formal objections to clause 9.

[Emma Hardy]

As I am sure the hon. Member for Westmorland and Lonsdale will agree, the Government heard the strong support in the other place for adding a further environmental duty to Ofwat’s core duties to support the Government in making progress against our environmental targets. I pay tribute to Baroness Hayman for her work on this.

We understand that there are concerns around the current core environmental performance of the water industry and around the role and responsibilities of the water industry regulators. It is for this reason that the Government tabled an amendment in the other place that will require Ofwat to have regard to the need to contribute to achieving targets set under the Environment Act 2021 and Climate Change Act 2008 when carrying out its functions.

This amendment will further ensure that Ofwat’s work to contribute to the achievement of environmental targets complements the work of Government, who are ultimately responsible for the 2021 Act and the 2008 Act targets. It is important to note that the independent commission announced by the Government will take a full view of the roles and responsibilities of the water industry regulators. Any changes made now to Ofwat’s duties may therefore be superseded by the outcomes of the commission. I hope the Committee agrees that this power is needed to ensure that the environment is considered in regulatory decision making.

Amendment 27 seeks to remove Ofwat’s discretion to exercise its duty to have regard to environmental targets where it feels this as relevant. It will be for Ofwat as the independent regulator to determine how it applies the Government’s new obligation to its regulatory decision making, and how this new duty will not take precedence over other duties. It is for this reason that flexibility has been built into the drafting of this duty, ensuring that Ofwat has discretion to exercise the duty where it feels it is relevant.

Mechanically applying a duty in circumstances where it is not relevant to a particular matter would be a waste of resource. That discretion is in line with similar duties for other regulators. For example, the Financial Services and Markets Act 2000 was recently amended to provide an environmental duty for the financial regulators. It is right that as the independent regulator, Ofwat has the discretion to balance its duties and determine when it is appropriate that they are applied. The new duty introduced by the Government can be only a stopgap before more fundamental reforms are brought forward. For those reasons, we will not accept the amendment from the hon. Member for Westmorland and Lonsdale, and I hope he feels able to withdraw it.

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[Dr Hudson]

Clause 10 amends the Environment Act 1995 to allow the Environment Agency and Natural Resources Wales the power to make charging schemes to recover costs from water companies. While the Opposition wish to raise no formal objections to the clause, we would be grateful for clarification on a couple of points from the Minister.

First, can the Minister explain whether the changes in this clause to the Environment Act 1995 that allow costs to be recovered from water companies could impact consumers in any way? Although it is already possible, we must be mindful that consumers may face extra costs, which I will discuss later regarding issues with the special administration orders that the Government have laid out in clauses 12 and 13, to be debated shortly. Consumers have already been informed by Ofwat that they should expect to see bills rise—the complete opposite of what the Government had said they intended to deliver. Therefore, do the Government feel confident that they can avoid contributing to the problem of a rising trajectory of bills, at a time when trust in the industry, as we have been debating in Committee, remains low due to financial mismanagement from some water companies and, too often, consumers receive poor quality from these services?

A further question, which I would be grateful if the Minister could clarify, is what modelling have the Government done to ensure that all the costs recovered will always be to the benefit of the taxpayer and the consumer? While we all share the desire that water companies that do the wrong thing must pay to put it right, we must ensure that, when we punish those water companies, we do not hurt the end consumer, who very much deserves to be protected. I would be grateful for the Minister’s thoughts on this, but again, we have no formal, explicit objections to the clause.

[Emma Hardy]

Clause 10 requires payment by water companies. It is fair and reasonable that the regulator should recover costs associated with its regulatory functions. Ofwat will consider the regulator’s proposals to determine which costs are appropriate to be passed on. The impact assessment, which I have mentioned in previous debates, details exactly how much all of the Bill will cost the customer. All the details are in there, and I refer the hon. Member for Epping Forest to look at that if he wants the specifics on the exact numbers that each measure will take.

I thank all hon. Members who have contributed their views on clause 10. I remain of the view that clause 10 will empower environmental regulators to become self-sufficient, reducing the burden on the taxpayer to fund water industry enforcement activities. Therefore, I commend the clause to the Committee.

Question put and agreed to.

Clause 10 accordingly ordered to stand part of the Bill.

Clause 11

Drinking Water Inspectorate: functions and fees

Question proposed, That the clause stand part of the Bill.

[Emma Hardy]

We are making excellent progress on the Bill this morning. I am grateful for the opportunity to speak on the importance of clause 11. I would like to mention the unsung hero of water regulation: the Drinking Water Inspectorate.

The clause enables the Drinking Water Inspectorate to fully recover the costs for the security and emergency regulatory work that it provides to companies. I think one of the reasons that it is an unsung hero is because it does its job so well; that is why not many people have heard of it. The responsibility for security and emergencies was delegated to the Drinking Water Inspectorate in 2022, but since then it has been unable to fully recharge for that work. This clause, subject to amendments to the Water Quality and Supply (Fees) Order 2016, will ensure that the inspectorate can fully recover all costs related to security and emergencies, enabling it to scale up its enforcement activities and enhance its capacity to conduct security and emergencies checks with water suppliers.

The clause will give the DWI greater flexibility in how it structures the fees it charges water companies. It will allow the DWI to introduce new charging models that more equitably share the financial burden of regulation in the water sector. I hope the Committee agrees that the clause rightly remunerates the DWI for its security and emergencies work and allows it to design a more equitable fee structure.

[Dr Hudson]

Clause 11 extends the purposes for which water quality inspectors may be appointed to include functions relating to national security directions under section 208 of the Water Industry Act 1991, and it provides flexibility for the charging of fees for regulatory work. This is a straightforward clause to which we raise no formal objection, but once again we would be grateful for a couple of clarification points from the Minister. How will the Government increase the Drinking Water Inspectorate’s ability to monitor and audit water supplies? Does the Minister feel that the clause will improve the inspectorate’s functions? Will the Minister please explain how the Government intend to support the powers of the Drinking Water Inspectorate, beyond this clause? She praised the inspectorate, and I echo that praise, but how do the Government intend to support its capabilities?

Once again, we wish to raise no formal objections to the clause. I would be grateful for clarity on the points I have highlighted.

[Tim Farron]

We also have no objections to the clause, but I want to probe it a bit. The Minister rightly praised the Drinking Water Inspectorate. I think most of us would say that its performance as a regulator is significantly better than Ofwat’s, but one of the biggest problems that we face within regulation is the fragmented regulatory framework. We have the DWI, Ofwat, the Environment Agency and others too. What consideration has the Minister given to the efficacy of continuing that fragmentation?

The Minister may argue, in relation to the DWI, that if it ain’t broke, don’t fix it. I take that point, but regulation of the water industry is absolutely broke. It is very clear, particularly when it comes to the Environment Agency and Ofwat, that large water companies run rings around the regulators because of their heft, their weight, their capability and the volume of their staffing, which is larger than that of the regulators. The culture of the regulators is sometimes not aimed at pursuing those they are meant to regulate.

Although the DWI is broadly a successful regulator, do we not face the ongoing problem that having so many regulators gives water companies the ability to avoid their responsibilities? Will the Minister give that some further consideration?

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[Charlie Maynard]

We are seeking for the debt providers to take the hit. They have gone into this process and been part of the problem that has led to the state of our rivers today. They should be taking the hit ahead of the customers. That is our direction of travel, and I think that is fair and reasonable. What the clause does is the opposite, and that is what we are going after.

We fully support the losses being recovered by the administration process—we have no issue with that—but if we support the clause as drafted, we will find a very large bill on the customer’s account. That is something we want to avoid. I am keen to hear the Minister’s view as to why it is reasonable for the customer to be paying rather than the lenders.

[Dr Hudson]

On clauses 12 and 13, the Opposition tabled amendments 7 and 8 to remove them. They provide the Government with the power to issue special administration orders to water companies that face financial difficulties.

I put on record my thanks to my Conservative colleagues in the other place for sounding the alarm on this issue when the Bill came forward. They made the case that the measures in clauses 12 and 13 could put the very people we want to protect in such legislation, namely the consumers, at risk. The moral hazard has been explicitly set out by my colleagues in the other place, but I will attempt to summarise it so that we are clear what the problem is. As it stands, the clauses will give the Government the power to recover any losses they make through placing a company in special administration by raising consumer bills.

The problem seems self-evident. If water companies, through their own failure, require the Government to place them under special administration, why should consumers be expected to foot the bill for those failures when they had no particular responsibility for them? It runs contrary to the nature of all the action that has been taken in recent years to try to improve our water quality, and companies that have failed to get their affairs in order must take responsibility.

I was on the Environment, Food and Rural Affairs Committee in the last Parliament, and we spent a lot of time looking at the financial resilience and behaviour of the water sector in close detail. I know that the current iteration is continuing that work. It was concerning to hear about the financial resilience of the sector at first hand in our hearings and meetings. As I said in a sitting of this Committee last week, the financial resilience of the water industry is not a hypothetical issue, but one of paramount concern right now.

We are all starkly aware of concerns surrounding the financial resilience of companies such as Thames Water. We heard about that in detail on the Environment, Food and Rural Affairs Committee in the last Parliament. In November, Ofwat’s “Monitoring Financial Resilience” report identified 10 companies that needed an increased level of monitoring and/or engagement concerning financial resilience. Three were placed in the highest category of “action required”, which means that action must be taken or is being taken to strengthen a company’s financial resilience challenges and that there is a requirement to publish additional information and reporting on improvements at a more senior level with Ofwat.

As well as sending out the opposite message to the companies that Ofwat is working so hard to scrutinise and regulate to protect consumers, clauses 12 and 13 send out the wrong message to consumers themselves. Consumers were recently told that they can expect their average bills to rise by a minimum of about £86, at a time when no doubt some of them have concerns about how to afford their existing bills, along with wider cost concerns. I say gently to the Government that the recent Budget did not help the situation for people’s household budgets. How can it be fair that as a result of these clauses the Government may lead consumers to pay more at a time when many are finding it difficult to pay their bills and do not feel that they are getting the clean water that they deserve? It will potentially add insult to injury when many people are all too aware that they could face higher prices on their water bills because of the Government’s moves.

Shareholders and water company bosses used to be able to receive dividends and bonuses despite polluting our rivers and seas and failing to do the right thing to tackle it. Although reforms have been made to ensure that water company bosses who are not doing their duty with regard to our waterways are forbidden from claiming excessive bonuses, the sting will remain for many people when they keep in mind the prospect of paying higher bills to bail out companies for their poor financial performance.

To water companies, these clauses will send out a signal that they do not have to worry about incurring the consequences of financial irresponsibility, as the Government will have a mechanism to bail them out and consumers may indirectly have to fork out the costs. Nobody is being required to take accountability or face the consequences of the decisions that have caused the failure, but those who have no responsibility or influence are being forced to pay an unfair price increase.

Worse still, the clauses fail completely to specify how much they can require companies to raise from consumers or how much consumers could have to pay in increased costs as a result of the Government’s imposition of these conditions on water companies. That means that any announcements of price changes to water bills, such as those announced by Ofwat, could give no indication at all of how much consumers could end up paying on their water bills. To compound the higher prices even further, consumers may end up facing higher bills to solve special administration financial issues for companies by which they are not even served.

Under clause 12, proposed new section 12J(4) of the Water Industry Act states that “relevant financial assistance” in subsection (3) can include

“any other company which holds or held an appointment under this Chapter and whose area is or was wholly or mainly in England.”

Companies that do the right thing could be forced to pay up, or make their consumers pay up, for the mistakes of those who have failed to do the right thing. As my noble Friend Lord Remnant put it:

“It is the debt and equity investors”

in a company that has failed to do the right thing

“who should pay for these losses in the form of lower proceeds from any eventual sale. Why should a retired police officer in Yorkshire or a hard-working nurse in Cornwall lose out to a hedge fund owner in New York trying to make a quick return?”—[Official Report, House of Lords, 20 November 2024; Vol. 841, c. 293.]

Although in the other place the Government attempted to explain away concerns by suggesting that they do not think that they will have to use the power except as a last resort, and that the bar for special administration would be extremely high, the fact that on more than one occasion the Government could have accepted amendments to remove proposed new subsection (4) must mean that they expect that on at least some occasions they will require its use. The time taken to defend the measure and oppose reforms suggests that this is no mere formality in the wording of the Bill, but something that the Government may put in place.

The Minister in the other place said that the Government would seek to exercise the power in proposed new subsection (4) only if Government bail-outs to water companies could not be financed for the duration for which a company is in special administration—that is, during the shortfall. If that is the condition the Government are setting for the measure—if we have to have the measure at all—could they not have set it out explicitly within the Bill? At the very least, that would have provided clarity about how far the power should be permitted to go.

Clause 13 will provide the Welsh Government with the same powers as those in clause 12. Although the powers in clause 13 are independent of who occupies the offices of the Welsh Government, it should be noted that the Welsh Government who would currently be expected to exercise the powers do not have the most brilliant track record on the water industry, to say the least. Under the Welsh Labour Administration, the average number of spills from storm overflows in 2022 was two thirds higher than in England. That record suggests that the Government in Wales leave much to be desired when it comes to the competence of the water industry, and there is evidence for concern when it comes to exercising the clause’s powers.

Regardless of the specifics of the subsections and of who holds the powers contained in clauses 12 and 13, they are, as they stand, completely against the principles of improving the water industry. I urge the Minister to consider those points and to remove the clauses. Accordingly, we will seek a vote to remove clauses 12 and 13 from the Bill.

[Tim Farron]

I back my hon. Friend the Member for Witney, who has made an excellent case for our amendment to clauses 12 and 13. We are deeply concerned about the issue. There are two aspects to the public’s reaction to the scandal in our water industry. First, there is revulsion about sewage being dumped in our lakes, rivers, streams and coastal areas, which is obviously appalling. Secondly, there is a deep sense of injustice that people are making vast amounts of money while not providing basic services.

For a day or two last week, the coldest place in the country was Shap, in my constituency. I had the pleasure of being there over the weekend. All water was frozen. However, that is not always the case. Last year alone, at Shap pumping station, 1,000 hours’ worth of sewage was pumped into Docker beck. Just along the way at Askham waste water treatment works, 414 hours’ worth of sewage were dumped into the beautiful River Lowther just last year. I make that point because the water bill payers who have to deal with that know that of every £9 they spend on their water bills, £1 is going to serve United Utilities’ debt. That is at the low end of the scale: until the change announced just before Christmas, 46% from Thames Water’s bills was used to service debt.

Over the lifetime of our privatised system in this country, the water companies have collectively racked up £70 billion of debt. That means that all bill payers are paying between 11% and 46% of their bills simply to service those companies’ debt. Our amendment would simply tackle the fact that if investors choose to take risks, hoping to make gains, but fail, they should accept the consequences of those risks, which they chose to take, rather than passing on the cost to my constituents and everybody else’s. It is not for the public to carry the can for corporate failure.

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[Emma Hardy]

I hope this clause will be a little less fractious than the last one—it is pretty straightforward. If a water or waste water company is about to go insolvent, it can make a winding-up petition to court, as may its creditors. If the court is satisfied that the company is insolvent, it must make a special administration order, triggering a water industry special administration regime, or SAR.

Unlike in normal administration, in a SAR the administrator must prioritise the public interest ahead of creditors. In this case, that means ensuring that water and waste water services continue. However, there is no statutory requirement for creditors or the court to notify the Government or Ofwat that a winding-up petition has been made. In addition, neither the Government nor Ofwat have guaranteed rights to be heard at the subsequent court hearings. This creates the risk that a SAR could be triggered without Government involvement. Given the essential nature of water and waste water services, a SAR presents significant risk to public safety if it is not conducted appropriately. It would be vital, in the event of an imminent SAR, for the Government to be quickly made aware of important developments and to be involved in the arrangements for how the SAR is run. Creditors are unlikely to protect the public interest as comprehensively as a Government and may exercise undue influence over a SAR if a Government are unable to make their views heard.

This clause prohibits a court from making an SAO without the Government and Ofwat being notified, and it gives both parties guaranteed rights to be heard at the subsequent court hearings. That provides a vital safeguard against the risks of a SAR being triggered without Government involvement and the potential dilution of the public interests that that could entail. This also updates the water industry’s SAR to bring it into line with more recently introduced regimes, such as energy, where these rights are standard practice. I hope the Committee agrees that these rights are essential to safeguard the public interest and modernise the water industry’s special administration regime. I commend the clause to the Committee.

[Dr Hudson]

The Opposition note that clause 14 attempts to make amendments to previous legislation so that a court may not exercise powers that it currently has with regard to an application for winding up an undertaker without providing advance notice of the petition to the Secretary of State, Welsh Ministers—as appropriate—and Ofwat, and without a period of 14 days having elapsed, as outlined in subsection (2). We also note that the clause likewise grants a further power for the Secretary of State, Welsh Ministers and Ofwat to be entitled to be heard at a winding-up petition’s hearing and any other hearing that relates to part 4 of the Insolvency Act 1986.

Again, we do not wish to raise any formal objections to this particular clause, but we ask for a couple of clarifications from the Minister, if she will indulge us. First, we would like to hear the Minister articulate what benefits this particular clause brings to the Bill. I was not fully clear from her introductory remarks about the actual benefits. Secondly, does she believe that this change to winding up a water company or any other relevant undertaker will provide a fairer winding-up process?

While we are focusing on water companies and the processes for them, we all want to ensure that the clause provides, again, protection for the consumers, who, as we agree across the Committee, have for too long faced unsatisfactory levels of service from the water industry and the practices of some water companies, so could the Minister please explain whether consumers were considered when this clause was drafted? I and others have outlined in Committee that the performance of water companies in financial resilience, as well as many other matters, has not been satisfactory and has been very upsetting for the British public. Therefore could the Minister please respond and assure the Committee that there can be no unforeseen repercussions for consumers from this clause? That is a recurrent theme as we go through line-by-line scrutiny of the Bill: are there any unintended consequences whereby the taxpayer and the end point consumer will be unfairly penalised by the legislative changes? With that in mind, we have no formal objections to this clause but again we seek clarification that the end point consumer will not inadvertently suffer detriment from this legislation.

[Emma Hardy]

To be clear, this is literally just a point of process. The provision, which is not currently available in law, says that in the event of an application to the court for a SAR, the Government will be notified at the same time. The reason, as I outlined in my opening remarks, is that we do not believe that creditors are likely to protect the public interest as comprehensively as the Government. It is a mere process clause that provides that in the event of an application to the court for special administration, the Government and Ofwat need to be informed at the same time. The Government maintain the importance of ensuring that the Government and Ofwat are notified in the event of a winding-up petition. For that reason, I urge that the clause stand part of the Bill.

Question put and agreed to.

Clause 14 accordingly ordered to stand part of the Bill.

Clause 15

Extent, commencement, transitional provision and short title

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[Tim Farron]

We recognise and, indeed, strongly believe that patience is a virtue, but on these Benches we are also a bit impatient. Our concern regarding this clause is simply about implementation. There are two categories of things to be delivered. Some are to be done straightaway, and with others it looks like we are preparing to drag our heels. Therefore our amendment seeks to simplify implementation with one clear and immediate deadline for all provisions of the Bill.

Clause 15 provides that issues to do with remuneration and governance, pollution incident reduction plans, emergency overflows and nature-based solutions, for example, will come into force

“on such day as the Secretary of State may by regulations appoint”—

in other words, not right now. That troubles us, given that there is this great sense that there has been a lot of talk about reform of the water industry and we run the risk, at least when it comes to those provisions, of getting just more talk. Making things subject to consultation, further navel contemplation, does not feel like the way to radically reform our industry. Our single deadline would cut through all that and bring the urgent change that the water industry desperately needs, so we commend amendment 20 to the Committee.

[Dr Hudson]

I support Government amendment 5, as it is a privilege amendment in accordance with the procedure for the passage of Bills between the other place and this place. We wish to raise no formal objections to this and we have no opposition to the amendment.

[Emma Hardy]

I thank all hon. Members for their contributions. Amendment 20, tabled by the hon. Member for Westmorland and Lonsdale, seeks to make all provisions in the Bill come into force on the day it receives Royal Assent. I share his urge to get on with things, which is why I am a little confused by the desire elsewhere for another water review, but we will get to that when we get to it. First and foremost, I would like to reassure the hon. Member that the Government have carefully considered the appropriate method and timing for the commencement of each clause and have made provision accordingly in clause 15. A one-size-fits-all approach cannot be justified.

For example, the emergency overflows provision will be implemented over the course of two price review periods to protect bill payers from sudden cost increases. Therefore, the commencement provision for clause 3 has been designed to allow for a staged implementation where it is needed. The Government have already committed in clause 15 to the immediate commencement of the civil penalties provisions on Royal Assent. I assure the Committee that the Government and the water industry regulators are dedicated to ensuring that all measures in the Bill are commenced and implemented as soon as possible and appropriate, to drive rapid improvements in the performance and culture of the water industry.

The hon. Member for Westmorland and Lonsdale tempts me to read through a list of every provision and when they will be enacted, but I am going to save that treat for another time and instead list the clauses, rather than going through them in detail. The provisions in clauses 5 to 8, and in 10 to 15, will all come into force automatically either on Royal Assent or two months later. Clauses 1 to 4 and clause 9 will not commence immediately after Royal Assent and will require secondary legislation to come into force, which is due to the need for regulations required to commence the powers. I am sure that the hon. Member will have thoughts to share on those provisions involving statutory instruments after Royal Assent.

I trust that the hon. Member for Westmorland and Lonsdale is reassured by the Government’s careful consideration of the commencement of each clause, which has the best interests of bill payers in mind and recognises the need to debate and discuss some of the exact details under secondary legislation. I therefore ask the hon. Member to withdraw his amendment.

Government amendment 5 removes the privilege amendment made in the other place. I like this amendment, because one of the quirks of how British politics has evolved is that we have the amendment in the Bill—I found it quite amusing. The privilege amendment is a declaration from the other place that nothing in the Bill involves a charge on the people or on public funds. It is because the Bill started in the Lords that we have to have the amendment to remove that. It recognises the primacy of the Commons, and I think it is quite fun. It is standard process for that text to be removed from the Bill through an amendment at Committee Stage.

Clause 15 sets out the extent of the Bill, when and how its provisions are to be commenced and its short title. The Bill extends to England and Wales only. As set out in the clause, the provisions of the Bill will variously come into force on Royal Assent, two months following Royal Assent, or in accordance with regulations made by the Secretary of State or Welsh Ministers. The clause makes specific provisions, such as that the commencement of clause 3 may make reference to matters to be determined by the environmental regulators.

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[Adrian Ramsay]

I thank the Minister for her response. I appreciate that special administration would only happen in extreme cases. We have, however, repeated failures and neglect, including on environmental performance, from a number of water companies. That is why I wanted to make the provision explicit in the Bill that environmental neglect could be a reason for special administration. I take her point that there are reviews and wider plans underway. Although I am happy not to push this to a vote at this stage, I will take a close interest in how the situation progresses. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 2

Establishment of Water Restoration Fund

(1) The Secretary of State must, within 60 days of the passing of this Act, make provision for the establishment, operation and management of a Water Restoration Fund.

(2) A Water Restoration Fund is a fund—

(a) into which any monetary penalties imposed on water companies for specified offences must be paid, and

(b) out of which payments must be made for expenditure on measures—

(i) to help water bodies, including chalk streams, achieve good ecological status, and improve ecological potential and chemical status;

(ii) to prevent further deterioration of the ecological status, ecological potential or chemical status of water bodies, including chalk streams;

(iii) to enable water-dependent habitats to return to, or remain at, favourable condition;

(iv) to restore other water-dependent habitats and species, especially where action supports restoration of associated protected sites or water bodies.

(3) The Secretary of State must, by regulations, list the specified offences for the purposes of this section, which must include—

(a) any relevant provisions of the Water Resources Act 1991, including—

(i) section 24(4) (unlicensed abstraction or related works or contravening abstraction licence);

(ii) section 25(2) (unlicensed impounding works or contravening impounding licence);

(iii) section 25C(1) (contravening abstraction or impounding enforcement notice);

(iv) section 80 (contravening drought order or permit);

(v) section 201(3) (contravening water resources information notice);

(b) any relevant regulations under section 2 of the Pollution Prevention and Control Act 1999 (regulation of polluting activities etc) related to water pollution;

(c) regulations under section 61 of the Water Act 2014 (regulation of water resources etc).

(4) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.

(5) The provisions in this section replace any existing provision for the sums received for specified offences, including in section 22A(9) of the Water Industry Act 1991 (penalties).—(Dr Hudson.)

Brought up, and read the First time.

[Dr Hudson]

I beg to move, That the clause be read a Second time. The proposed new clause would introduce a legal requirement that money collected from water companies from financial penalties imposed by the Bill are legally required to be used by the water restoration fund. As with much of the Bill, the Government intend to build on the work begun by the previous Conservative Government. The water restoration fund is one pillar of that record that the Government would do well to advance. I look forward to hearing from the Minister what they plan to do with that excellent fund, which needs to be reinstated and progressed.

I have personally championed the water restoration fund, not only in my present role as shadow DEFRA Minister, but before that as a member of the Conservative Environment Network. I pay tribute to that body for its successful campaigning, which in led no small part to the previous Conservative Government introducing the excellent water restoration fund. In 2022, I was proud to sign the Conservative Environment Network’s “Changing course: a manifesto for our rivers, seas and waterways”. That was its first public declaration, setting out the ambition to introduce this policy recommendation.

In addition to the Conservative Environment Network, I would like to namecheck and thank the good folk of Wildlife and Countryside Link for their support and campaigning for the fund and this proposed new clause. I also pay tribute to the Angling Trust for the discussion we had on this matter, and give a big shout-out to our former colleague Philip Dunne, who was respected across the House. The former MP for Ludlow and Chair of the Environmental Audit Committee made assiduous efforts to see this fund introduced, as well as wider measures to protect our precious waterways.

As we have discussed with the Minister, there is considerable consensus on what we can do collectively and on a cross-party basis to protect and nurture our watercourses and waterways. I hope the Government will take forward and continue the water restoration fund because it is pivotal to what we are trying to do.

[Jerome Mayhew]

I have a slightly cheeky intervention. Is the shadow Minister aware that there is a debate in Westminster Hall at 4 o’clock tomorrow led by yours truly on nature-based solutions for farmland flooding? The fund is central to improving the situation.

[Dr Hudson]

Yes, I was aware of that. I am acutely aware of it now and congratulate my hon. Friend on securing it. It highlights the fact that there is a lot of agreement. I am sure that his debate will demonstrate cross-party consensus on the use of nature-based solutions. We debated flood mitigation in Committee last week, but the water restoration fund is pivotal to trying to improve the situation at the local level and at the local catchment level as well.

Since being introduced by the previous Government, the water restoration fund has provided £11 million for communities to repair their local waterways and restore them to the quality that they should be at—the quality to which local communities should be entitled. At the heart of the proposal is simply this: those who are at fault for the damage done to our waterways must make restoration for it. Given the facts, I find it disappointing that, despite the cross-party efforts in the other place to enact such measures, they were not listened to by the Government. I hope that in a spirit of consensus the Government will look at that in this Session.

The arguments made by the Government in the other place were not satisfactory. They objected to the principle of ringfencing the funding and to the need for the Treasury to have flexibility in how it spends the money, but in this specific case the argument does not quite stack up. Where money comes from taxation, ringfencing is not always the most reliable way to ensure the Treasury has the spending power it needs to deliver public spending, but we are talking about something completely different. Fines are much more uncertain and provide less guarantee regarding the amount of money that they will bring in. To rely on funds such as these for day-to-day broad Treasury spending simply does not make sense.

Ringfencing penalties for the water restoration fund is a much more sensible measure that allows Governments to guarantee that they can meet a specific need. In other words, those who are at fault for harming the quality of our rivers, seas, coasts and lakes make restoration for the damage caused by their action—or inaction. Given all that we have outlined, there cannot be a more justified way of directly making restoration for damage to our previous water system than the mechanism laid out by the water restoration fund. Water companies pay the fines for the damage that they have done, and local communities that are affected are empowered to restore the precious waterways that they live near.

A finer detail of the amendment that should not be ignored is the fact that we will improve chalk streams. It is unfortunately clear that, despite the Government’s pitch to the British public that they would do better than the previous Government in protecting our waterways, their actions on chalk streams do not bear that out. It was very disappointing that over the Christmas period it was revealed that plans from the Conservatives to recover our chalk streams have been laid to one side by the Government. Given that England is home to over 80% of the world’s chalk streams, the failure to act on this issue is neglect of a vital duty to protect a not only a key part of the UK’s environment, but a feature in the environment of the world. They are a precious resource that very few countries are lucky to have access to. Members across this House represent areas with chalk streams. It is a dereliction of duty to ignore that category in the UK environment.

The plans that the previous Government proposed would have given chalk streams a new status of protection. Special consideration would have been given to watercourses in road guidance, and supporting the physical restoration of the streams as key pillars of our plan would have put chalk streams back on the road to the recovery that is needed. As the deviser of the plans has said publicly, although the Government may want to focus on chalk streams in national parks and landscapes, they risk ignoring chalk streams in most need of recovery across the country. Can the Minister explain why this vital plan of action, which was ready to go, has not been fulfilled? I hope that this decision was not based on politics. We need to look at this in terms of evidence and what is best for our environment.

[Emma Hardy]

I wonder whether there has been some confusion, given that the debate on chalk streams comes later on.

[Dr Hudson]

It is actually part of our amendment.

[Emma Hardy]

Well, have a go again then.

[Dr Hudson]

Good. We are all for talking about and raising the issue of chalk streams, but it is clear that we wanted to include that in our amendment. Our amendment will therefore be a chance to give chalk streams the attention they need from this Government. The previous Government were ready to deliver that and hand the baton over to the new Government, so that they could follow through on the explicit requirement that chalk streams be considered.

The amendment is a chance for the Government to reconsider their stance on the water restoration fund. I would be grateful for clarity from the Minister about what they are planning to do. If they are serious about improving our waterways and if the money from penalised water companies is allowed to go back into the local area to improve those waterways, we could agree about that. If the Government do not face up to this, that might be a negation of the various promises they made to the electorate when in opposition and send a message that their words are merely soundbites. I hope that the Minister will consider the points I have made and support this amendment to restore the water restoration fund—for the sake of not only our waters, but the democratic and local accountability on which they rely. We will seek to push new clause 2 to a vote.

[Tim Farron]

I rise briefly to support the new clause. Among many other reasons, it bears great similarity to one proposed by my noble Friend Baroness Bakewell. We consider everything in it to be right. As the hon. Member for Epping Forest has said, we should be deeply concerned about the Treasury seeking to hang on to money that, if there is any justice, ought to be invested back into the waterways that have been polluted by those who have been fined for that very offence.

I talked earlier about the deep sense of injustice felt across the country about those who pollute, who are getting away with polluting and who even—far from being found guilty—are getting benefits from that pollution. The measure would simply codify a move towards the establishment of a water restoration fund, supported, at least in part, by the fines gathered from those guilty in the first place. There would be a great sense of justice being done for folks concerned about how Windermere is cleaned up, how we make sure that Coniston’s bathing water standards remain high and how we deal with some of the issues I mentioned earlier on the River Lowther, River Eden and River Kent.

The water restoration fund should in part be supported by funds gained from those who are guilty: that is basic justice. We strongly support the new clause and will be voting for it if it is put to a vote.

--- Later in debate ---

[Dr Hudson]

I am not reassured by those comments. The Minister says that the water restoration fund does not need new legislation, but we are concerned that the fact that the fund is not in the Bill shows that the Government are not doing anything with it. They are completely silent about it. I fear that they are going to drop the baton they are being handed and let it pass away. The fund needs to be in the Bill. I am not reassured by the Minister, so we will press a vote on the establishment of a water restoration fund in the Bill.

Question put, That the clause be read a Second time.

--- Later in debate ---

Brought up, and read the First time.

[Dr Hudson]

I beg to move, That the clause be read a Second time.

New clause 3, which His Majesty’s Opposition will again push to a vote, has at its heart the people we want to protect—the very individuals who this Committee has acknowledged are most affected: the consumers and bill payers. They are the pivotal reason why we have tabled the clause.

The clause would require the Secretary of State to make provision so 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. Of course, one might suppose that it is difficult to make an equivalence between the amount of a financial penalty and the amount to be reduced on the bills, but subsection (2) sets out that it must be calculated by dividing the total financial penalty by the water company’s number of customers. We have laid out a formula that the Secretary of State could follow in fulfilling the duties under the clause.

The Government might object that the clause would create additional duties for the Secretary of State on top of their existing ones, but the Opposition believe that the measure is relatively simple, can be calculated and is worth adopting for the very principle of accountability for which all of us across this House are striving.

I have already mentioned that, when the Conservatives were in government, we took action to set out that water bosses would be banned from receiving bonuses if a company had committed serious criminal breaches. The Bill copies that and takes it forwards, but the new clause takes the principle of accountability, which has been raised in the Committee’s last couple of sittings, even further.

[Helena Dollimore (Hastings and Rye) (Lab/Co-op)]

It is a pleasure to serve under your chairship, Dr Huq. The hon. Member referred to the record of his party while in government for the last 14 years, and said that it set the threshold for a water boss being denied a bonus at the level of criminal activity. Does he agree that many of our constituents would find it strange to set a bar for not having a bonus at the level of committing criminal activity, given that in many workplaces up and down the country a bonus is based on good performance and on serving customers? The last Government set the bar for banning bonuses far too high, and that is why, despite repeated failure, the boss of Southern Water still received a bonus, as the boss of Ofwat confirmed to the Select Committee.

[Dr Hudson]

The Conservative Government were the first Government to start addressing this issue by actually evaluating the data, monitoring overflows and monitoring outflows. I gently remind the hon. Member that when her party left power, only 7% of storm overflows were measured; when the Conservatives left power, 100% were measured. We were the first party to find that there was a problem.

To return to the dental analogy, in the last parliamentary Session we tried to give the regulators more powers—more teeth—to go after the water bosses. We need to firm up how the regulator has been using those powers, so that we can hold the water companies to account. I agree that there is outrage across the House about how water companies have breached their terms of reference and broken the law. We have tried to hold them accountable. The Bill will try to take things further, but I gently say to the Government that we were the party that started collecting the data, which allowed us to realise the scale of the situation and try to introduce measures to sort it.

The new clause ensures fairness for customers and ensures that fines on water companies will not impact customers, who are not at fault for the water companies’ mistakes or the bad practices that led to the fines. We believe that customers should not be impacted by fines imposed on water companies. The clause attempts to remedy that. In the name of accountability and trust between the public and Governments—of all colours—that seek to address this issue, subsection (3) states that the reductions to customer bills imposed under the clause will be indicated on the statement of account for each consumer who has received the reduction. We believe that that is important.

For too long, a toxic cocktail of water companies’ poor behaviour and rising bills has led too many people to feel that they are getting poor value for money, and that they are not getting the quality water services they deserve for the price they are paying—hard-working people, up and down the country, who work consistently to pay their bills and do the right thing, while the water industry’s negative practices continue. Given the amount of time we have spent talking about this issue, they may also feel that the new Government are not willing to act to protect the consumer in this area.

Subsection (3) seeks to break that cycle and send a signal to bill payers that actions to regulate water companies have a real, tangible effect. Showing the reduction in consumer bills directly on the statement of account will provide a real, tangible sign that the poor behaviour has been looked at, people are going after the water companies and consumers will benefit from that. It also serves as compensation for those who have been directly affected and as an example of justice in action—the principle being that those who harm pay a penalty, and those who are harmed receive restitution.

I return to my comments about the water restoration fund. Fines being re-circulated into the local area will be good for local accountability.

[Dan Aldridge (Weston-super-Mare) (Lab)]

It is a pleasure to serve under your chairmanship, Dr Huq. The hon. Gentleman talks about the outrage across the House, and I also feel outraged as a member of the public. The vast majority of my constituents are incredibly outraged at the situation they find themselves in. One of the things I am told when I knock on doors in my constituency is, “The previous Government have shown no contrition about their role in the degradation of our waterways.” The Opposition have a revisionist attitude that is incredibly perplexing to me and angering to my constituents, so I would just like to see a bit of contrition from them.

--- Later in debate ---

[Dr Hudson]

Can I just say that the previous Government went and looked for the problem, and found the scale of it? We all agree that it is a huge problem that needs to be addressed; we are not downplaying the scale of it. We collected data and were brave enough to say, “There is a problem.”

Labour Members threw a lot of things at us during the passage of the landmark Environment Act 2021. They have made misleading comments about Conservative Members of Parliament, but we were the party that grasped the nettle and said, “There is a problem, and we need to look at it.” A lot of the amendments that were tabled to try to scupper the Environment Act were completely uncosted and would have cost taxpayers lots and lots of money. We tried to introduce practical, cost-effective, reasonable measures to address the scale of the problem that we unearthed.

[Jerome Mayhew]

The shadow Minister is right that a lot of the supposed solutions were uncosted and had an impractical timeframe. One that springs to mind was the Liberal Democrat amendment that was costed: there was a tax that was supposed to pay for the improvements to water quality. Does he agree that, on a basic calculation, it would have taken more than 300 years to pay it back?

[Dr Hudson]

I agree. Amendments are easy to table with a view to obstruction and making political points, and those were not affordable and would not have been deliverable in any realistic timescale. Governments have to make realistic, cost-effective decisions that honour the taxpayer, and they have to be clear with the public about how such measures will be implemented and paid for.

If the Government do not support our amendment, I hope they will clarify what steps they are taking to protect customers from the knock-on impact of fines. Unfortunately, in many industries when costs are imposed, customers sometimes pay higher prices. With the new clause, we want to ensure that when we rightly impose financial penalties on water companies there are no unintended consequences for the consumers we aim to defend by imposing the financial penalties in the first place. With that in mind, and given the aim of accountability, we sincerely hope the Government will support the new clause. Ultimately, we aim to press it to a vote.

Ordered, That the debate be now adjourned.—(Jeff Smith.)

Water (Special Measures) Bill [ Lords ] (Fourth sitting)

Neil Hudson Excerpts

Committee stage
Tuesday 14th January 2025 Public Bill Committees

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

I thank the hon. Member for Epping Forest for tabling new clause 3, which would require a water company to reduce customer bills by an equivalent amount to the total monetary penalties paid in the previous year by that company. I will start by clarifying that we expect the cost of the penalties to be borne by the companies, not by the customers. However, I would also like to reassure the hon. Member that there are existing procedures in place to ensure that customers are reimbursed for a water company’s poor performance.

As the independent economic regulator of the water industry, Ofwat is best placed to ensure that customers are reimbursed appropriately if water companies perform poorly. Ofwat already sets specific performance targets for water companies in the five-yearly price review. Those performance commitments hold water companies to account for the outcomes that customers pay for. Where they are not met, companies must reimburse customers through lower water bills in the next financial year.

Those performance targets take a holistic view of water company performance and consider wider factors beyond companies receiving penalties. Performance targets include customer-facing commitments, such as water supply interruptions; environmental commitments, such as pollution incidents, storm overflows and bathing water quality; and commitments related to asset health, such as repairs to burst mains. As a result of underperformance in the last financial year, Ofwat is currently requiring 13 companies to return £157 million to customers.

The hon. Member’s new clause is therefore not appropriate for this Bill, given that it would overlap with existing procedures. However, there is simply not enough improvement in performance across the water industry. That is why we have launched the independent commission, which will look at issues, including performance, and make recommendations on how to transform the water sector.

I hope that the hon. Member for Epping Forest is reassured about how customers will be reimbursed for poor performance, and about the steps that we are taking to improve performance. On that basis, I ask him to withdraw his new clause.

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

I thank the Minister for her comments. I am afraid that I am not fully reassured, and we would like to see provision in the Bill for any fines imposed on water companies to have a concomitant effect—a direct effect—on customer bills. This well-intended measure has been tabled to create a link between the two, so although I hear the Minister’s comments, we would still like to press new clause 3 to a vote.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Dr Hudson]

I beg to move, That the clause be read a Second time.

New clause 4 amends the Water Industry Act 1991 to insert new rules regarding the limits to the amount of money that can be borrowed by a water company, which the Secretary of State for the Department for Environment, Food and Rural Affairs would be able to enact by means of statutory instrument. Although we have discussed statutory instruments in Committee, the Opposition hope that the Government will recognise that this proposed statutory instrument power needs to be made.

New clause 4 ensures that water companies are not excessively borrowing money, as that is ultimately bad for bill payers. At the heart of our concern about financial resilience is the borrowing in the industry and the over-leveraging because of that borrowing. It is clear that there is a direct link between financial resilience, problems connected to borrowing and the very survivability of the water firms. That should be of huge concern to all of us.

Consumers are concerned that the provision of their water is at risk, and we as legislators must work out how to deal with the issues, including the financial implications, relating to the risk of nationalising the water companies that have no other way of providing services. That can reverberate back to the consumers again, who may face increased costs because of the financial support that the Government have to provide to keep water companies afloat. In other words, tackling the choices that water companies may have made, and will make in the future, including borrowing choices, is an issue that we are required to correct for the very future of our water industry.

I reiterate my profound respect for the way that both the Minister and Baroness Hayman have conducted themselves in this debate. I note that Baroness Hayman expressed concern in the other place that putting a fixed percentage limit on borrowing could be a risk to investment at a crucial time for financial resilience and investment in the water industry. That is why my Conservative colleague, Lord Roborough, revised his amendment on that in the other place to give the Secretary of State the power to set limits by means of a statutory instrument. I pay tribute to my colleague and friend Lord Roborough for working so hard to raise the issue of financial resilience in the other place through this amendment.

We are not saying that a hard limit has to be set on borrowing levels, but merely giving the Secretary of State the option to do so if they feel it necessary to protect consumers from the negative effects of the water industry. I come back to the point I made in previous sittings: giving the powers to the Secretary of State, a democratically elected Minister in His Majesty’s Government, through statutory instrument, improves democracy and accountability for the water companies. I do not think the Labour Government need to shy away from this constructive amendment, which gives the Secretary of State the ability to hold the water companies to account, as we all want to do.

If the Minister does not see the need for the amendment —I am not pre-empting her, but I imagine that is how her response will go—can she clarify how much borrowing the Government consider acceptable for a water company, and what they will do to reduce the impact on the consumer of excessive borrowing and spending? The new clause also limits the amount of dividends that can be paid out to shareholders if the water company has exceeded the borrowing limit. Should a limit be set, it would therefore make water companies fairer in their practices to bill payers, as when a company borrows it will have less of an impact on consumer bills.

While in government, the Conservatives gave Ofwat the powers to link performance to payouts to shareholders and water company management. New clause 4 further aims to protect consumers from companies that are failing to prioritise their customers. Considering those points, the Opposition believe that the Government could move a bit on this, and enact democratic accountability with the statutory instrument. We hope that they will look on new clause 4 favourably.

[Emma Hardy]

I thank the hon. Member for Epping Forest for tabling the new clause, which would implement a limit on borrowing by water companies. I note that Baroness Hayman had multiple discussions with Lord Roborough on the similar amendment that he put forward in the House of Lords, and that Lord Roborough was satisfied with our reasoning for not introducing restrictions on borrowing in the Bill.

Debt has been rising in companies since privatisation, and it of course accelerated under the previous Administration. In some instances, levels of debt have reached a point at which the financial resilience of companies could be threatened. We have been clear that Ofwat must continue to have a strong focus on company financial resilience to secure efficient long-term investment and deliver long-term value for money for customers and the environment.

I assure the Committee that Ofwat is already taking steps to closely monitor debt levels as part of its annual monitoring financial resilience report, and it will take action where the financial resilience of a company is threatened. Ofwat published its final determinations for the 2024 price review in December, which included a confirmed £104 billion upgrade for the water sector. Investment in the water sector is financed up front by investors, and repaid by customers over time to smooth the impact on bills. Borrowing is therefore a key part of the process.

--- Later in debate ---

[Dr Hudson]

I thank the Minister for the constructive tone with which she has engaged in this whole debate, but I think we are going round in circles. We are trying to hold the water companies to account, and the Government are saying, “It is okay, Ofwat can do that,” but we have heard contributions saying that Ofwat is not using its powers and we need to give it more powers.

All we are doing, with this new clause, is putting in place the principle that the Secretary of State has the capability to oversee that. If the Secretary of State and the Government felt that Ofwat was doing what the legislation intended, they would not need to activate the new clause’s provisions. If, however, they did not feel that Ofwat was doing that, the new clause would give them that particular power. We are again talking about—I know the Government Back Benchers are going to wince—teeth. In this case, regarding Ofwat’s and the Environment Agency’s capabilities, we are saying to the democratically elected Government of the day that there is an extra tooth to hold over Ofwat, and that if Ofwat is not doing its job then the Government can, potentially, step in.

I take on board the comments about the commission but, to echo some of the comments of the hon. Member for Witney about being impatient for change, if this issue is going to the commission, and the can is being kicked down the track, that is disappointing. With this new clause, we are trying, constructively, to give the Government and the Secretary of State of the day the capability to act if they feel that the processes set up under the previous Administration and the new Administration are not working well. I urge the Minister to think again on this matter, and we will press the clause to a vote.

Question put, That the clause be read a Second time.

--- Later in debate ---

Brought up, and read the First time.

[Dr Hudson]

I beg to move, That the clause be read a Second time.

New clause 6 is a fair and reasonable request to strengthen the Bill. Quite simply, it would do what it says on the tin by requiring the Government to report on the impact that they expect the Bill to have on water pollution and on the actual and verifiable effects that the Bill, when it becomes an Act, will have on our water quality.

It is completely agreed that accountability for addressing the quality of our water system should be at the heart of how we tackle water pollution and related issues. That should be true of every actor involved: not just the water companies, but the Government whose regulation they are expected to abide by. We cannot rightly say on the one hand that water companies should be expected to meet criteria to restore public trust, while suggesting on the other hand that the Government should not likewise work to be accountable and to uphold public trust on the issue.

Furthermore, the new clause feeds into the basic fact that ensuring that our water systems are being improved is not a one-time event that can be magically resolved with a single piece of legislation every now and then. It must be a consistent focus for the Department for Environment, Food and Rural Affairs and for all the agencies under whose remit the issue falls.

The work of agencies such as the Environment Agency is vital. I pay tribute to its hard work, not least when flooding hits, as we have discussed. We should not underestimate those on the frontline who do so much to keep people safe, to make sure that the environment is protected and to ensure that the quality of people’s water is safe and suitable.

To improve our water systems, however, the buck must stop not with the EA, but higher up: with DEFRA and the Government. The new clause would help to provide that accountability. As in our earlier discussions regarding the online publication of implementation reports, if the measures set out in the Government’s approach do not meet their targets, for legitimate reasons, the Government would have a chance to lay out exactly why not and to give a justification for their findings on the Act’s impact. Our new clause would provide a natural mechanism to ensure that long-term planning and reviews of the Act are taking place and that the Government are looking at water pollution and the actions that the water industry has taken or needs to take to further improve the situation.

We should not shy away from the fact that the new clause would build on the previous Government’s efforts to look at that point. Our plan for water set out a 25-year plan to ensure that our water companies were investing in our water system for the long term, not just while the issue was in the headlines. Again, that is why our new clause matters: because it would ensure the continued focus of Governments of all parties on the protection of our waters. That matters all the time, not just when it becomes a political or media issue.

We must also consider the evolving factors that affect the water industry and its ability to reduce water pollution. The flooding that we have seen in the past weeks has highlighted once again that our country is facing more regular extreme flooding events. In simple terms, more flooding means more excess groundwater and surface water that can enter the network, which creates more of a risk that sewerage overflows will be required to maintain our water systems.

With such events becoming more unpredictable in their timing and yet more commonplace because of extreme weather events and the effects of climate change, looking at the evolution of issues such as this will be crucial to ensuring that any measures to improve overflows and water quality are successful in the long term. We need to make decisions now that have an impact in the future, because in the long term we all want water quality to improve and to be protected for future generations. To achieve that, we need long-term and consistent attention and reflection on the policies being enacted and their effects. The new clause would help to facilitate that.

Once again, transparency is not a hindrance; it helps everybody involved in managing the quality of our water system. Trust can be maintained only if everyone tries to do what is right and the Government, of whichever political party, are no exception. We need to be trying to do the right thing. Given that, His Majesty’s Opposition believe the new clause to be a highly reasonable and fair amendment to the Bill, and we hope that the Minister might support it.

[Emma Hardy]

I will quickly note the constructive and nice way in which the hon. Member for Epping Forest is taking part in these debates. I also want to come up with more dentistry analogies, so I will be thinking of those as we keep going.

The Bill will drive meaningful improvements in the performance and culture of the water industry. In line with that, it will introduce many measures to disincentivise pollution. For example, it will provide Ofwat with legal powers to ban bonuses where companies fail to meet standards on environmental performance, financial resilience, customer outcomes or criminal liability. The Bill will also enable automatic and severe fines, allowing regulators to take swift action. It will enable the public to hold companies to account through a new requirement for water companies to produce annual reports on pollution incident reduction. Collectively, these measures will strengthen enforcement, improve transparency and disincentivise water company pollution.

The Committee and the wider public are able to see a more detailed assessment of the expected impact of the Bill via the published impact assessment. I reassure the Committee that my Department is committed to post-legislative scrutiny of primary legislation. The Department for Environment, Food and Rural Affairs will work with the cross-party Select Committee on Environment, Food and Rural Affairs to assess the impacts of the Act three to five years after Royal Assent as part of the standard practice for all new legislation. I welcome that scrutiny.

The Government therefore cannot accept new clause 6. Although we agree on the importance of understanding the impact of the Bill on environmental pollution, adding further reporting requirements to the Bill would be duplicative and unnecessary.

[Dr Hudson]

I thank the Minister for her constructive response, but the Opposition still feel that this is an important new clause in relation to the impact on water pollution, so we would like to proceed again to a formal vote.

[The Chair]

It is votes à gogo this afternoon.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Dr Hudson]

As we have gone through the Bill, there has been a lot of cross-party consensus on trying to get measures in place. I respect the efforts of the hon. Member for Westmorland and Lonsdale and the third party in trying to improve the situation, not least in such matters as nature-based solutions. From the official Opposition’s perspective, however, the hon. Member’s new clause 7 is perhaps an overly eager response. Throwing out Ofwat completely at this juncture when we want it to do its regulatory job would create more problems than he wants, whatever the intention of the new clause.

I know that the Liberal Democrats have argued that steps should be taken to set up a new regulator in some way. New clause 7 does not really introduce a specific requirement or measures to enable a transition from Ofwat to the purported new regulator. If we were to proceed with the new clause, we would simply be left in limbo and in the lurch with regard to regulation of the industry. It is not that we believe that the situation is perfect: we have debated the powers of the Environment Agency and Ofwat, and we have agreed that things are not perfect with the water industry and regulators. We have all heard at first hand about issues that we are not happy with, such as executives moving into higher-paid roles within water regulators, of which we heard evidence in the EFRA Committee in the last Parliament.

The hon. Member for Westmorland and Lonsdale generously shouted out the people who work in Ofwat and the Environment Agency, but although he will not push new clause 7 to a vote, he still talks about abolishing Ofwat. In doing that, we would be left with a vacuum while a new regulator was set up—something we can ill afford when we all agree that there is so much work to be done. A new regulator could not be established overnight; it could take months or even years while structures were being established, the personnel needed to do its everyday work were appointed and the like. Let us be honest that making such a move would not come without financial cost.

Even if that money could be raised through Government resources—ultimately, that means taxpayers’ money—we would be using it to establish a completely new infrastructure for the water regulator, rather than trying to enhance and give more power to the regulator we already have. In addition, we have to remember that its role as a regulator affects consumer bills, too. While none of us wants to see water bills rise for any of our constituents, particularly in difficult economic times, bills would have only been higher if a regulator had not been there at all. If we are left with a vacuum until a replacement mechanism is put in place, and if that takes a lot of time, do we really want to run the risk of unregulated companies raising prices even further in the meantime?

We are in agreement that the status quo has not been good enough when it comes to water companies, but progress has been made and continues to be made in that seismic task. Water companies are starting to face the financial penalties for their failures to both people and our precious environment. For example, back in November, Wessex Water was ordered to pay £500,000 for the loss of thousands of fish because of a sewage pumping failure. That very same month, Thames Water was fined over £18 million for its failure to obey rules introduced on the spending of dividends. Those incidents are not good news stories, and we should never say that they are, but they are signs that the mechanism is working. Ofwat is holding the companies to account and trying to act—it is trying to use the teeth that are there.

There are early signs that giving the regulator those teeth—which we have heard a lot about in this Committee —means that there are clear consequences for the water companies that break the rules that have been implemented. That is not the end of the story, but it is the start of the journey, as we try to hold those water companies to account. As I have also mentioned, the pathway for inspections into water company activity is increasing. It is the whole approach—from incident, to investigation, to penalty—that needs to be examined and reviewed in order to drive change, and that is what has been done and what this legislation is trying to take forward.

Although things are not perfect, we need to allow the existing legislation, as well as this new legislation, to take effect so that the regulator can get on and do its job. We should not put things in jeopardy by completely abolishing things. I note that the Liberal Democrats have tabled this new clause, and they are not pushing it to a vote, but I want to put on record the Opposition’s reservations about what they are suggesting.

[Emma Hardy]

I thank the hon. Member for Westmorland and Lonsdale once again for his thorough consideration of the Bill. I will turn first to new clause 7, which was tabled in his name and which proposes the abolition of Ofwat. As the hon. Member will be aware, and as he already mentioned in October ’24, the UK and Welsh Governments launched the independent commission to fundamentally transform how our water system works. The commission, led by Sir Jon Cunliffe, will be broad-ranging and will make recommendations in line with eight objectives, which include specific objectives considering the role, structures, responsibilities and powers of the regulator.

It is right that the commission, rather than this Water (Special Measures) Bill, is the vehicle for considering the water regulator’s roles and responsibilities. This Bill focuses on strengthening the powers of the regulators to drive improvements in performance. The Bill will not, and cannot, fix all the sector’s problems. The commission is the right place to consider the long-term future of the regulatory system and the role of the regulator. Indeed, I would argue that the Labour Government want to move away from sticking-plaster politics to fundamentally reset and transform the problems facing our country for good. I hope therefore that the hon. Member for Westmorland and Lonsdale is content that this new clause is unnecessary.

New clause 20 was also tabled by the hon. Member for Westmorland and Lonsdale. It sets out requirements for a water review that is undertaken by the Secretary of State. I think we are all agreed that we have seen years of water company underperformance, and we all agree that there is a clear need to fundamentally reset the water sector. Although I understand that the hon. Member is seeking to ensure that any review of the water sector is sufficiently thorough, the Government are confident that the commission’s scope is broad and comprehensive. Sir Jon will be supported by a range of experts from the regulatory, environment, health, engineering, customer, investor and economic sectors to effectively examine this sector as a whole, including the regulatory framework.

By setting out considerations for a water review in primary legislation, we risk prejudicing or pre-empting the outcome of the current commission, as well as its independence. The sector is facing complex challenges that require the support of customers, environment groups, investors and companies alike to address. An independent review is best placed to find solutions to those challenges, and it is critical that its independence is preserved. The commission will report its findings in summer 2025, and the Government will consider them in full before outlining the next steps. I therefore hope that the hon. Member for Westmorland and Lonsdale understands that to avoid duplication and, importantly, maintain the independence of the commission, the Government will not accept the new clause.