Water (Special Measures) Bill [Lords]

Steve Reed Excerpts

2nd reading
Monday 16th December 2024 Commons Chamber

[The Secretary of State for Environment, Food and Rural Affairs (Steve Reed)]

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

I am delighted to open the Second Reading debate on the Water (Special Measures) Bill—something I hope the whole House will consider to be an early Christmas present. I thank the noble Baroness Hayman of Ullock for her outstanding leadership of the Bill during its passage through the House of Lords, where it quite rightly won support from all sides.

Our rivers, lakes and seas are part of our beautiful British landscape and have been enjoyed by generations. Our countryside is one of the things that makes us proudest to be British, but that pride too often turns to dismay because in too many parts of our country, the local river, lake or beach has been made filthy by pollution. People worry that the places they enjoyed when they were younger are no longer there for their own children or grandchildren. No parent should have to worry that their child might get sick from splashing around in the local sea or river. Our green and pleasant land is no longer quite so pleasant. Our rivers, lakes and seas are being choked by record levels of pollution from untreated sewage, as well as chemicals and run-off from agriculture and highways.

The Bill is not just about the desecration of water running through our countryside. Clean water is essential for every home and business up and down the country. It is one of the essential foundations of our economy, our communities and our national security. We use water to cool power stations, generate electricity, supply our leisure industries and grow the food that feeds us, but our water infrastructure is under increasing strain. It is outdated, inadequate and crumbling. The situation is made worse by our changing climate, with more frequent and severe rainfall, floods and droughts. Water supplies to homes and businesses are disrupted too frequently in some parts of the country. I have spoken to residents in Hastings and Rye who were rightly furious at the inadequate information, lack of alternative supply and little to no compensation when yet another outage happened in their locality.

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

I thank the Secretary of State for the work he and his Department are doing to change the compensation rules so that when these incidents happen, my constituents get higher levels of compensation—something that the Conservatives had 14 years to do, but failed to do. Had they acted in that time, my residents would not be left without compensation for the incidents that have happened in Hastings, Rye and the villages.

[Steve Reed]

I pay huge credit to my hon. Friend. She has been such a champion for her communities in Hastings and Rye, demanding the better water services they deserve.

The failure to invest in our water infrastructure means that the demand for clean drinking water will start to outstrip supply as early as the mid-2030s. Without urgent action, some parts of the country would then face water rationing. The water system is broken but, instead of fixing it, the previous Conservative Government just stood back and watched as our water infrastructure crumbled into disrepair. Instead of strengthening regulation to ensure water companies invested sensibly and at the right time, the Conservatives hobbled the regulator and let water companies divert millions of pounds into wholly unjustified multimillion-pound bonuses and dividend payments.

[Chi Onwurah (Newcastle upon Tyne Central and West) (Lab)]

Does the Secretary of State share my amazement that under the previous Conservative Government organisations had to campaign to have sewage-free rivers, lakes or seas, as if it were some kind of privilege rather than a right for everyone? Does he have any idea of the amount of money that was taken out of the sector, and out of the infrastructure we needed, in profits and bonuses under that Government?

[Steve Reed]

I agree that it is indeed amazing. I know that all of us on the Labour Benches, and perhaps on the Opposition Benches too, share the public’s anger at what happened to our rivers, lakes and seas.

The legacy of 14 years of Conservative Government is the highest level of sewage spills on record, economic growth held back by a lack of water supplies, and now potentially painful bill rises to fix the problems they left behind.

[Jerome Mayhew (Broadland and Fakenham) (Con)]

The Secretary of State says there was the highest level of spills on record. How does he know? When Labour was in power previously, only 7% of sewage outlets were even monitored.

[Steve Reed]

I have to say to the hon. Gentleman that there is very little point in monitoring sewage in the water if all you do is watch the sewage increase and keep on flowing into our rivers, lakes and seas. The Conservatives seem to be satisfied with the failure they presided over. The Labour party will fix the problem that they left behind.

If you find cracks in the wall of your house and ignore it for years, the problem gets worse and the cost of putting it right escalates. That is exactly what the Conservatives did to our water system. They refused to bring in the investment early enough, so ageing infrastructure crumbled even further and the cost to bill payers has rocketed.

[Charlie Maynard (Witney) (LD)]

We are about a month away from Thames Water signing up for another £3 billion of debt. If that happens, 46% of the bills of every customer in that catchment will be spent on interest expenses, and that is without even paying down the £20 billion of debt. How is that helping anyone?

[Steve Reed]

I thank the hon. Gentleman for his intervention. One of the reasons the Government commissioned a review into governance and regulation is because of the failure of the current system that the previous Government allowed to continue.

I share customers’ anger about the scale of water bill rises they seem likely to face. They are rightly furious at being left to pay the price of Conservative failure. I am grateful that the party opposite has indicated support for the Bill. It is just a shame its support has come so late. In December last year, while they were still in government, I called a vote on introducing a ban on unjustified bonuses for water bosses, but they refused to do it. They could have acted at any point over the past 14 years, but they would not do it. There have been many times in history when Labour has had to clean up the Tories’ mess, but rarely quite so literally as cleaning up the raw sewage polluting our country’s waterways.

[Mr Richard Holden (Basildon and Billericay) (Con)]

I thank the Secretary of State for giving way. Does he acknowledge, though, that under the previous Labour Government we saw none of the massive capital investment that we are seeing now with the Thames tideway tunnel, which was started under the Conservative Government in 2016? It will be completed next year and is one of the biggest changes to removing sewage from our waterways in history.

[Steve Reed]

The Conservatives had 14 years to fix the system and they chose to do absolutely nothing. They have left it to the incoming Labour Government to clear up the mess they left behind.

The truth is that the water sector needs a complete reset. It needs reform that puts customers and the environment first for once, and a new partnership with the Government to invest for the future and upgrade our water infrastructure.

[Calum Miller (Bicester and Woodstock) (LD)]

My constituents do not understand why they may be facing a 50% price increase from Thames Water, partly to service a £3 billion loan. The Secretary of State talks about resetting the water industry. Will he consider taking Thames Water into a special administrative regime, so it can be properly reset and the inappropriate debt built up under the previous Government written off to the benefit of taxpayers and consumers?

[Steve Reed]

There is a process by which any company would go into administration. That situation has not yet arisen with any company. The Government are, of course, closely monitoring the situation with Thames Water, but as things stand the company remains viable and I reassure consumers in that area that there is no threat, and would be no threat, to water supply in any circumstance.

The Government have a three-stage plan to deliver change and bring in the biggest ever investment in our water sector. That started with the initial reforms I announced in the week following the general election. It continues with the Bill before the House today. It will be completed with the water commission, led by Sir Jon Cunliffe, and further legislation that will follow on from that.

In my first week as Environment Secretary, I met water company chief executives and announced a set of immediate reforms to start the process of change. Money earmarked for investment to upgrade water infrastructure will now be ringfenced, so it cannot be diverted for other purposes, including paying bonuses or dividends. If it is not spent on what it was intended for, it will be refunded back to customers as discounts on their bills. Water companies agreed to formally change their company objectives to place customers and the environment at the heart of everything they do. They will set up powerful new customer panels to scrutinise key decisions. Customers who face frequent water outages—like the constituents my hon. Friend the Member for Hastings and Rye (Helena Dollimore) talked about—or contaminated tap water, as residents and businesses experienced in Brixham in Devon, will now receive more generous compensation and they will get it faster.

We promised in our manifesto to put water companies under special measures to clean up our water. The core provisions of the Bill do precisely that by strengthening the powers of the regulators and holding water companies to account for poor performance.

[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

The Secretary of State rightly talks about the role that regulators have to play, whether that is Ofwat or the Environment Agency. While the water companies were getting away with what they were doing, the Conservative party took huge amounts of money out of the EA. Independent figures from Unchecked UK suggest an 88% reduction in enforcement activities, and that a 50% reduction in the environmental protection budget led to a 60% reduction in activity. Will he set out more on how regulators will be key to clearing up our water industry?

[Steve Reed]

Absolutely. My hon. Friend makes some extremely important points. In my speech, I will be coming on to how we intend to ensure the regulator not only has additional powers but additional resources to enforce those powers.

[Melanie Onn (Great Grimsby and Cleethorpes) (Lab)]

On compensation, sewage discharges have a massive impact on the local economy in places like Cleethorpes in my constituency, which relies on holidaymakers to support our tourist and hospitality economy. Will the compensation extend to businesses, or will those companies which are put under special measures be required to support other local businesses that are hampered as a result of sewage discharges?

[Steve Reed]

That is an important point. Polluted water does not just damage people’s health; it damages the health of local economies as well, and the compensation will extend to businesses in a way that it previously did not.

The Bill gives Ofwat legal powers to ban bonuses if water company executives fail to meet high standards. It will introduce stricter penalties, including imprisonment, when senior executives in water companies obstruct investigations by environmental regulators, and it includes provisions to allow automatic and severe fines to be imposed for wrongdoing. When increased costs are a result of penalties being issued by the regulators, for instance under the new automatic penalties regime, penalties will come out of water company profits and not from customers.

[Ms Polly Billington (East Thanet) (Lab)]

In evidence given to the Environment, Food and Rural Affairs Committee, Ofwat confirmed that had the measures to ban bonuses been in place earlier, the boss of Southern Water—which covers my constituency—would not have received his most recent bonus. It was Tory inaction that allowed it.

--- Later in debate ---

[Steve Reed]

My hon. Friend is a doughty campaigner for cleaner water for her constituents, and she is quite right. If millions of pounds had not been diverted unnecessarily and unfairly into bonuses, that money could have been invested in improving the broken water infrastructure.

The Bill will go further by expanding the cost recovery powers for the Environment Agency, Natural Resources Wales and the Drinking Water Inspectorate. That means that water companies will bear the cost of enforcement activities, in line with the “polluter pays” principle, while also giving regulators the extra resources needed to hold water companies properly to account.

[Munira Wilson (Twickenham) (LD)]

As the Bill seeks to strengthen the regulation of our water companies, is this not an opportunity to finally regulate the existence of perfluoroalkyl and polyfluoroalkyl substances in our water? Those highly toxic chemicals can be linked to serious health conditions. Scotland, the European Union and United States have put guidance on a legal footing. Why is the Secretary of State not using this opportunity to regulate the presence of PFAS in our drinking water, and to protect our health and that of our children?

[Steve Reed]

I recognise the point that the hon. Lady is making, and the Water Minister, my hon. Friend the Member for Kingston upon Hull West and Haltemprice (Emma Hardy), will be pleased to meet her to discuss it further.

This Government will not let water companies get away with abuses that the last Government did nothing to stop. The Bill will open up the sector to greater scrutiny by ensuring that there is consistency and transparency in the reporting of pollution. It requires water companies to report in near real time on discharges from emergency overflows which at are present largely unmonitored. It requires water companies to consider the use of nature-based solutions such as reed beds, wetlands and tree planting when they develop their drainage and wastewater management plans. That will ensure that they consider all possible opportunities to use sustainable approaches that benefit the environment as well as managing water more effectively.

[Ben Coleman (Chelsea and Fulham) (Lab)]

I am extremely encouraged by what the Secretary of State is saying. In my constituency—I have been following this for well over two years—the amount of sewage discharge has been absolutely contemptible. In 2023 alone, Thames Water pumped sewage into the river 116 times, for 990 hours, even when it was not raining. I am heartened to hear that, unlike the last Government, our Government intend to take serious measures to ensure that bosses are forced to clear up the mess that they create, and stop them doing it. Can the Secretary of State reassure me that, unlike the last Government, he will ensure that the regulators use the powers they are given and do not behave as feebly as they have for the past 14 years?

--- Later in debate ---

[Steve Reed]

My hon. Friend is right to make that point. We are not just giving the regulators more teeth; we are also giving them more resources to ensure that they can carry out enforcement against those responsible for wrongdoing.

The Bill requires Ofwat to consider how it can contribute to achieving targets set under the Environment Act 2021 and the Climate Change Act 2008 when carrying out its functions. Together, these measures will ensure that water companies serve customers and the environment far better in future.

[Amanda Martin (Portsmouth North) (Lab)]

Does the Secretary of State agree with me, and with my constituents, that sewage pumped 193 times for 404 hours, in the context of £41 million in bonuses, produces angry residents, un-swimmable seas and potential bill rises—in short, a real faeces show—and does he agree that it cannot happen again?

[Steve Reed]

I am grateful to my hon. Friend for explaining why her constituents are so angry about the situation, and why the Bill is so necessary as we start to turn the water industry around so that it serves customers and the environment better than it did previously.

I want to reassure the House that although water is a devolved matter, my Department has engaged with the devolved Governments of Wales, Scotland and Northern Ireland throughout the development of the Bill. All its provisions will apply to both England and Wales, and we will continue to work closely with our Welsh counterparts as it progresses.

[Kit Malthouse (North West Hampshire) (Con)]

rose—

[Steve Reed]

I hope that Members will allow me to make some progress. I am worried about how much time I am taking, given that so many other Members want to contribute to the debate.

The Bill is just one part of the Government’s ambitious and long-term approach to fundamentally transforming the water sector. Together with the Welsh Government, I have commissioned Sir Jon Cunliffe, the distinguished former deputy governor of the Bank of England, to lead an independent commission on the future of the water industry. It will be the most comprehensive review of the industry since its privatisation 35 years ago.

[Several hon. Members rose—]

[Steve Reed]

I will make some progress, if Members do not mind.

The commission will review regulation and governance from the bottom up to ensure that we have a robust framework that can attract the significant investment that is needed to clean up our waterways, while guaranteeing future water supplies, restoring public confidence and promoting economic growth. Sir Jon will be supported by an advisory group covering areas including the environment, public health, engineering, customers, investors and economics. The commission will seek advice from stakeholder groups, including environmental campaigners, consumer champions, water companies, regulators and the public, and it will make recommendations by June 2025. This is our opportunity to completely reset the water industry so that it is fit for the future and can finally move on from the failures of the past.

I want to thank my hon. Friend the Member for Hull West and Haltemprice, who will steer the Bill through this House. I know that she will lead this work with the expertise and passion for which she is well known across the House. No one is better suited to lead our Department’s first piece of primary legislation under the new Government.

This Bill is our chance to right the wrongs that have so angered members of the public up and down the country. Water pollution is not inevitable and it is not acceptable.

Our children and grandchildren deserve to make the same wonderful memories that we did, splashing about in clean rivers, swimming in the sea or playing on the shores of our beautiful lakes, without fear of getting sick. It is time to clean up our water once and for all, and the Bill is an important step in making that happen. Let us seize the opportunity to give this country back the clean rivers, lakes and seas that are our shared birthright.

[Madam Deputy Speaker]

I call the shadow Secretary of State.

Water (Special Measures) Bill [Lords]

Steve Reed Excerpts

Report stage
Tuesday 28th January 2025 Commons Chamber

[The Secretary of State for Environment, Food and Rural Affairs (Steve Reed)]

I beg to move, That the Bill be now read the Third time.

Our rivers, lakes and seas are awash with pollution. The legacy of 14 years of Conservative failure is the highest level of sewage spills on record, economic growth held back by a lack of water supplies and, now, painful bill rises to fix the problems that they left behind. The British public are rightly angry about the state of our waterways. It has been left to this Government to clean up the mess once and for all. The water sector needs a complete reset, reform that puts customers and the environment first, and a new partnership with the Government to invest for the future and upgrade our broken infrastructure. This Government have a three-stage plan to make that happen.

During my first week in post, I met water company chief executives and announced immediate steps to improve the performance of the water industry, including ringfencing money for investment in water infrastructure so that it can never again be diverted to bonuses or dividends, and ensuring that customers who face frequent water outages or contaminated tap water receive more generous and faster compensation.

This evening, I am delighted to open the Third Reading debate on the Bill. Its core provisions will strengthen the powers of the regulators so that they can better hold water companies to account for poor performance. It will give Ofwat new powers to ban undeserved bonuses when water company executives fail to meet the high standards the public rightly demand. It will introduce stricter penalties, including imprisonment where senior executives of water companies obstruct investigations by environmental regulators, and includes provisions for automatic and severe fines for wrongdoing. We have also extended powers so that environmental regulators can recover costs for a wider range of future enforcement measures—the polluter, not the public, will pay. We have also introduced mandatory monitoring of emergency overflows and pollution incidents so the public can hold companies to account.

The Bill has been strengthened and improved in its passage through both Houses. I am thankful to all hon. Members, and all noble Lords in the other place, for their thorough consideration and scrutiny of the Bill, and for the many and varied amendments that have been tabled and debated. Water companies will now be required to include water supply as well as sewage-related incidents in pollution incident reduction plans, and we have created personal liability for chief executives so that there is accountability for these plans at the very highest level. Water companies will also need to produce an implementation report alongside their annual plans so the public can see what action they are taking to reduce pollution incidents.

We have introduced two clauses to consider more nature-based solutions such as reed beds and wetlands in drainage and wastewater management plans, and for Ofwat to track progress against our environmental targets. A further clause will ensure that measures are in place to support vulnerable customers, as set out by the water Minister, my hon. Friend the Member for Kingston upon Hull West and Haltemprice (Emma Hardy), earlier this evening.

[Steve Race (Exeter) (Lab)]

Will the Secretary join me in commending the citizen scientists and local campaign groups that have driven many of these issues right up the political agenda, including the Friends of the River Exe in Exeter? I am delighted that this Government have acted so quickly to hold the water companies to account for the sewage crisis. Does he agree both that this is long overdue, and that it will fundamentally change the way our rivers are treated?

[Steve Reed]

I echo my hon. Friend’s commendation for the citizen scientists and the work they have done to highlight the scale of the problem.

The support for the Bill across the House and among the public demonstrates our collective desire to clean up our rivers, lakes and seas. I am proud of the progress we have made through the Bill, but it is not the extent of our ambition.

In October, I announced the biggest review of the water sector in a generation. Sir Jon Cunliffe has appointed an expert advisory group with leading voices representing the environment sector, public health, engineering, customers, investors and economists, and is preparing to launch a public call for evidence within weeks.

[Tim Farron]

The Secretary of State talks about Sir Jon Cunliffe’s water commission, and we are obviously interested in engaging with that. Does he think, though, that today’s appointment of a former Thames Water executive to the commission will fill the public with confidence that it will be independent in any way?

[Steve Reed]

Of course, it is an independent commission; it is up to Sir Jon to appoint to the board whom he likes. However, it is a very balanced board, and I hope the hon. Gentleman will recognise that voices from many stakeholder groups are represented, as indeed they should be.

The commission will report to the UK and Welsh Governments this summer, after which both Governments will respond and consult on Sir Jon’s recommendations, including on further legislation.

[Tom Hayes (Bournemouth East) (Lab)]

The Secretary of State is right that things are getting better. In my constituency, two new investments in water sector upgrades, by Wessex Water and Pennon, are worth a total of £230 million. Clearly, much more has to be done, but will he join me in welcoming those new investments? Does he recognise that such investment is not consistent across the country, which is exactly why we need the Bill?

[Steve Reed]

I thank my hon. Friend for his intervention and I welcome those investments. From visiting him in his constituency, I know what a champion he is for cleaning up the water and the beaches in Bournemouth.

I thank the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Kingston upon Hull West and Haltemprice and the noble Lady, Baroness Hayman of Ullock for their expert leadership of the Bill through Parliament, and members of staff in the Bill team and in DEFRA for their hard work and professionalism. I thank Members on all sides who participated in the debates at all stages. I extend my thanks to our colleagues in the Welsh Government and the Senedd for working collaboratively with the UK Government on the Bill. I am delighted that, at the Welsh Government’s own request, the benefits brought about by the Bill will extend to Wales.

[Iqbal Mohamed (Dewsbury and Batley) (Ind)]

Consumers listening to this debate have been concerned about the role of Ofwat. What reassurance can the Secretary of State give them that Ofwat, the regulator, will put consumers’ interests and environmental interests before corporations’ interests?

[Steve Reed]

Sir Jon Cunliffe’s commission will be reviewing precisely those points, and I hope the hon. Gentleman will take the opportunity to contribute his views when the call for evidence begins in just a few weeks.

The changes the Government have made in a short amount of time show that with collective determination and ambition we can turn the water sector around. The failures of the past are ending. The future of the water sector is full of promise. Our waterways have been poisoned by unacceptable levels of sewage and other pollution for too long. With these changes, finally, we will clean up our rivers, lakes and seas for good.