Water Companies: Regulation and Financial Stability
Debate between Robbie Moore and Luke Charters(1 month, 1 week ago)
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Robbie Moore
I thank the hon. Gentleman for joining the debate; I see that he came in right at the last minute just to make that contribution.
My answer is no. When we were in Government, we absolutely wanted to embolden the regulators with as much power as they required, which is why we specifically linked dividends to environmental performance so that Ofwat had more power to hold water companies to account. Not only that: we increased the amount of funding allocated to the Environment Agency and empowered the whistleblowing portal so that employees within water companies, or indeed within the EA or any of the other regulators, could make their concerns known. In that way, we as the Government—and now the incoming Government—could make proper progress and ensure that proper, positive change was implemented to improve water quality.
The financial stability of the water companies is, of course, a serious issue, and that affects our constituents through not only potential price increases, but performance-related issues. Sensibly, Ofwat expects water companies to maintain a level of financial headroom to manage short-term volatility and shocks to their financial structures, and to meet their obligations and commitments, which are set both by Government and internally by the regulator. Above all else, however, consumers must be protected so I welcome the fact that Ofwat strengthened its powers to improve financial resilience. That includes stopping water companies from paying dividends when financial resilience is also at risk.
The new Government have said that cleaning up England’s rivers, lakes and seas is a priority and to achieve that the Water (Special Measures) Bill has been introduced through the House of Lords into Parliament. Perhaps I should not have been so surprised that that is effectively a reworked version of the policies introduced under the last Government. In the Bill, the Government pledge to introduce new powers to block bonuses for executives of water companies that pollute our waterways —something announced by the last Conservative Government. However, the powers are not quite the promises constantly regurgitated by the Labour party when they were out on the doorstep— they were telling many of their voters that water company bosses would end up “in the dock” if their water company had been falling foul of environmental permitting obligations. The Water (Special Measures) Bill simply does not achieve that. By introducing the Bill, the new Government have frustrated not only campaigners but investors who want to invest in the sector.
Opposition Members spent many a day out on the doorstep also promising that they would take swift and bold action, but as we have seen from today’s announcement of a new commission, a new review and a new taskforce, the Government are just throwing the hard decisions into the long grass and simply kicking the can down the road.
Mr Charters
Does the hon. Member not welcome the Government’s appointment of former deputy governor of the Bank of England Jon Cunliffe? He had that expertise as deputy governor in financial stability. Does the hon. Gentleman not think that we need to look again at the whole system when it comes to the financial instability of water companies that he and his colleagues left behind?
Robbie Moore
I thank the hon. Gentleman for his intervention. I absolutely welcome anything that will improve the water sector. When I was a Minister in the Department, many issues needed to be addressed. I noticed that the hon. Gentleman commented in his speech that the Minister was working at pace, but the review will take at least a year to implement. I want to ask the Minister, as I did the Secretary of State in the House earlier: when will the positive recommendations from the review be implemented? We know that we are entering price review 2024, which exists from 2025 to 2030, but when is the industry likely to see any positive implications of the results of the commission that has been instigated today?
The Government have also confirmed that they will work with farmers to reduce agricultural pollution. I understand that Ministers have said that that will be through a series of
“proportionate and effective regulations, advice and incentives to deliver improvements”.
Can the Minister clarify how that will roll out? What new regulations does the Department anticipate bringing in? The farming budget is rumoured to be slashed by at least £100 million, so how will the Government incentivise farmers through public money to do the right thing in reducing run-off from fields and from their agricultural activities?
Will the Minister also outline whether any regulatory easement will be applied to water companies going forward? Many Members have raised concerns to do with Thames Water and the like, but I would like to specifically understand whether the Minister, her colleagues or the Secretary of State are looking at implementing a regulatory easement, as the Opposition would not want to see lower standards, the relaxation of environmental permits or a reduction in agreed levels of investment by any water company, irrespective of their financial circumstances.
Sound management of water companies is vital if customers are to receive the high level of service that they expect, and better environmental performance must be driven forward.