Water Companies: Executive Bonuses

Rebecca Pow Excerpts

Tuesday 5th December 2023 Commons Chamber

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

I would like to thank the hon. Member for Croydon North (Steve Reed) for raising this important issue. As I have said constantly, all sewage in our waterways is completely and utterly unacceptable. I am pleased to have this opportunity to put on record the huge strides that we have made to deliver clean water for customers and the environment. We are the party for nature. We are the party that brought forward the Environment Act 2021, although many of the measures in it were not supported by Opposition Members. It is a globally leading piece of legislation. If the hon. Gentleman went out on to the global stage, he would realise that we are revered for it, and we now have the whole framework in place to deliver what it states. There are many measures in it to tackle water.

I am genuinely proud to have instigated and driven through our plan for water, which was supported by hundreds of people. It had a huge amount of expertise put into it to deliver it, and we are delivering it. It sets out a genuinely holistic plan to deliver more investment, stronger regulation and tougher enforcement, and make no mistake, it is cross-party. I would like to make the hon. Gentleman an offer. Would he like me to give him a copy, because I am not sure that he has actually looked at it? I would be happy to do that after the debate.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

My hon. Friend mentions the plan for water, but she will be aware that the previous Secretary of State came to Herefordshire, where she attended a roundtable in Hereford and promised that a plan for the River Wye would be brought to us by 15 September, three months after that meeting. We have yet to see it. I have to say, on behalf of the people of my county, that we are starting to run out of patience. When can we expect this plan to come through?

--- Later in debate ---

[Rebecca Pow]

I am well aware that the previous Secretary of State came to the River Wye, and my right hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman) will know that I came to the River Wye some time before her visit—he could not make my visit—so I have some knowledge of the area, and I understand his concerns. The action plan is under way. As my right hon. Friend knows, we have had a few changes but the new water Minister, my hon. Friend the Member for Keighley (Robbie Moore), is here, and the action plan is very much on the cards. I thank the people who did all that work on the Wye, because it is not just about water and sewage; it is a very complicated issue that also brings in farming and farmers along the river, as my right hon. Friend is well aware from his involvement.

Whatever the Labour party might say, many of the problems that were vociferously raised by the shadow Minister actually started on Labour’s watch. We are where we are because of Labour’s failure to do anything about it. There was virtually no monitoring. In fact, it was Labour that allowed the water companies’ self-monitoring that the shadow Minister criticises. It was his party that started the self-monitoring.

To set the record straight, I remind the shadow Minister that the Labour Government were given legal notice by the EU on sewage discharges from overflows in Whitburn. Labour certainly did not have a glowing record when it had its opportunity.

[Mike Amesbury]

A whistleblower made serious allegations against United Utilities on “Panorama”, and the Minister mentioned monitoring. It was clearly gaming the system. What robust intervention has she so far made with United Utilities, which operates in my constituency and beyond?

[Rebecca Pow]

The hon. Gentleman is right to be concerned. As I go through my speech, he will hear all the measures that we have put in place for all the water companies, not just United Utilities.

As I said at the beginning, I want to be clear that the current volume of sewage discharged by water companies is utterly unacceptable. They must act urgently to improve their performance so that they can meet both Government and public expectations, but it is because of the monitoring that this Government required the water companies to put in place that we now know what is happening and the scale of the challenge that we face.

We have upped the pressure on the water companies so that, by the end of this year, 100% of all storm sewage overflows will be monitored. We are taking the most ambitious action in water company history to tackle sewage pollution, including using new powers and new responsibilities in the landmark Environment Act 2021, which I was proud to take through Parliament—many of the shadow Ministers obviously engaged with the Act’s passage—and there is also the additional £60 billion storm sewage overflow discharge reduction plan.

Despite saying that they care about our precious water, many Opposition Members did not vote for all these measures so that the people of this country—including you and me, Mr Deputy Speaker—can have the wonderful water and the beautiful environment that we deserve. It is through our measures that we are now holding water companies to account, in a way that has never been seen before, with more investment, stronger regulation and tougher enforcement. We will continue to go further in holding the industry accountable for its actions.

[Kerry McCarthy (Bristol East) (Lab)]

The Minister knows perfectly well that we opposed some of these measures during the passage of the Environment Bill because we did not think it was strong enough. The Bill was very weak in places, hence our opposition. Given that the Minister’s constituents are covered by Wessex Water, does she think it is right that the company is asking its customers to pay an extra £150 a year towards funding work on infrastructure, when the chief executive took home pay of £982,000 in 2021-22? I do not think my constituents, who are also customers of Wessex Water, should have to pay that extra money. Does she?

[Rebecca Pow]

That is an important point, and it is why we have made so many changes to the regulator—I will go into detail in a minute. It is quite clear that customers will not be paying for water company bonuses. Ofwat and its board now have very strong powers to oversee all of this.

I am going to go through the points one by one. I will start with more investment. We are ensuring that our regulators have the investment and the powers they need, and we are ensuring that the water companies deliver the infrastructure improvements that we urgently require. Since privatisation we have unlocked over £215 billion of investment in England, with £7.1 billion in environmental improvements by water companies over the period 2020 to 2025. It includes £3.1 billion in storm overflow improvements; and £1.9 billion of that is for the incredible Thames tideway tunnel, which is on track to transform tackling sewage pollution for the people of London. I am sure that our Liberal Democrats present will welcome that, because it is a game-changing project.

In addition, over 800 storm overflow improvements countrywide have been set in motion. They are under way and will be completed by 2025. It is because of all our monitoring that we were able to pinpoint where all this work needs to take place.

[Seema Malhotra]

Could the Minister perhaps say a bit more about consumer protection? We all want this problem to be dealt with, and she is laying out some of the actions that she is saying the Government will take forward, but with my constituents having seen a £175 increase and expecting that to continue, there is a real question about consumer fairness and what customers are actually paying for. It would be helpful to know what discussions she has had with water bosses about their increased bills and what they are going towards.

[Rebecca Pow]

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

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

[Munira Wilson]

Will the right hon. Lady give way?

[Rebecca Pow]

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

[Neil Coyle]

Will the right hon. Lady give way on that point?

[Rebecca Pow]

I am going to carry on for a bit.

Ensuring that our regulators are fit for purpose, to enforce our new regime, is absolutely crucial. With that in mind, we have increased the Environment Agency’s overall grant-in-aid funding by over 40% and capital funding by 80% since 2010. We have also provided an extra £2.2 million per year specifically for water company enforcement activity. In May we did even more: we provided £11.3 million of funding increase to Ofwat to treble its enforcement activity, because both EA and Ofwat have enforcement powers. In June, in recognition of the urgency of action, Ofwat approved a further £2.2 billion of accelerated infrastructure, which included £1.7 billion of investment, in reducing sewage discharges, including a major project to reduce sewage discharges in Lake Windermere.

The shadow Minister mentioned automatic fines. That idea would backfire, because if the regulators found evidence of criminal misdemeanours, it would prevent them from going through the courts and we would effectively end up with even higher fines. So the system of automatic fines would not work, but we have just brought in our unlimited penalties for the environment, so the regulators could use that option, but we still need the option for them to go to the courts if necessary.

[Claire Hanna (Belfast South) (SDLP)]

On that point, will the Minister give way?

[Rebecca Pow]

I will talk about stronger regulation now. We are bringing in even tougher regulations than ever before to hold water companies to account. In the summer, Ofwat confirmed new plans to ensure that customers no longer fund executive bonus payments where companies have not met Ofwat’s expectation on environmental performance. Using new powers granted to Ofwat by this Government in the landmark Environment Act 2021, Ofwat announced in March that it will take enforcement action against water companies that do not link dividend payments to environmental performance. As I said, we have also legislated to bring in unlimited penalties on water companies that breach their environmental permits. The changes will provide the Environment Agency with the tools it needs to hold water companies to account.

[Claire Hanna]

The Minister may be aware of the evolving environmental catastrophe in Lough Neagh, which is the largest lake in these islands and a key biodiversity asset for Northern Ireland. It is dying in front of our eyes because of blue-green algal bloom related to agricultural run-off and sewage discharge from Northern Ireland Water, which is entirely Government owned. In that context, does she agree with me that Northern Ireland desperately needs an independent environment agency, to try to reconcile the competing priorities of the Department of Agriculture, Environment and Rural Affairs—DEFRA’s sister Department in Northern Ireland—which is responsible for both swelling agricultural assets and protecting the environment? Clearly, in this context the environment is being failed.

[Rebecca Pow]

I have heard about this incident. I refer DAERA to our plans on water to see how we are tackling such issues. Farming is a big cause of some of the pollution. We have launched our slurry infrastructure grant and a range of measures to work with farmers to cut down that pollution, so lessons could be shared.

[Neil Coyle]

On that point, will the Minister give way?

[Rebecca Pow]

I just wanted to say that we want to continue to drive down nutrient pollution from the water sector, which is why we have set a legally binding target to reduce phosphorus loads from wastewater treatment—

[Neil Coyle]

On that point, will the Minister give way?

[Neil Coyle]

On that point, will the Minister give way?

[Rebecca Pow]

The hon. Gentleman is so unrelenting that I will give way.

[Neil Coyle]

It seems apt that this is debate No. 2 this afternoon. If the Minister has so much faith in the measures she is talking about, why was she absent last night from the vote on new clause 10 in the Victims and Prisoners Bill on the sewage illness victim compensation scheme, despite voting just 15 minutes later?

[Rebecca Pow]

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

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

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

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

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

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

[Munira Wilson]

Will the Minister give way?

[Rebecca Pow]

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

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

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

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

I am going to conclude—

[Munira Wilson]

Will the Minister give way?

[Rebecca Pow]

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

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

[Neil Coyle]

rose—

[Rebecca Pow]

The hon. Gentleman has had his chance.

By contrast, the official Opposition and the Liberal Democrat party do not have credible plans to reduce discharges—we cannot just switch off storm overflows overnight, as some suggest—and their mixed bag of proposals would actually add hundreds pounds to customers’ bills. That addresses the point made by the hon. Member for Feltham and Heston (Seema Malhotra). Labour’s proposals would involve the digging up of enough pipes to go two and a half times around the globe. [Interruption.] That is actually correct.

As I said, I am really happy to share our plan for water with the shadow Secretary of State so that the Opposition can see exactly what is in place—our comprehensive, costed plan—and see that we are delivering now.