Independent Water Commission

With permission, Mr Speaker, I would like to update the House on the action that this Government are taking to fundamentally transform our water industry and clean up our waterways for good.

Fourteen years of Conservative failure have left our water sector in disrepair. The rivers, lakes and seas that we all love have record levels of pollution. Severe droughts are set to leave parts of the country facing significant water shortages by 2050, particularly in the south-east, and water companies forecast that England will need to find an extra 5 billion litres of water a day to fill the gap between supply and demand by that same year. A rising population and the increasing impacts of climate change are putting strain on the water system. Firmer action should have been taken by the previous Government to ensure that money was invested to fix the water and sewerage system. Instead, they allowed that money to be siphoned off for bonuses while our water infrastructure crumbled.

A secure water supply is essential for every home and business throughout the country. It is the foundation of our economy, our communities and our global security. It is essential to life itself. We use water to cool power stations, and it is vital to our electricity supply. We use water to grow the crops that provide the food on our plate, and we use it to supply our leisure industries. Without a resilient water supply, we cannot build the new homes and critical infrastructure that we need to grow the economy.

Concerns about pollution, water shortages, bill increases and the sector’s financial resilience all point to the need for profound change. The water sector needs a complete reset, with a reformed water sector working in partnership with Government to bring in the investment we need. We need a clear long-term plan to ensure that the sector puts customers and the environment first and can attract investment to upgrade our infrastructure. We need a water system fit for the future. We cannot clean up our rivers, lakes and seas overnight, but we have a plan, and the work of change has started.

On 11 July, I made a statement to the House on the agreement that I reached with water companies and Ofwat to ringfence money earmarked for investment in water infrastructure so that it can no longer be diverted for shareholder payouts and undeserved bonus payments. On 9 September, we introduced the Water (Special Measures) Bill, which sets out new measures, including measures strengthening regulation to ensure that water bosses face personal criminal liability for serious and repeated lawbreaking; giving the water regulator new powers to ban the payment of bonuses if environmental standards are not met; and boosting accountability for water executives through a new code of conduct. Today, I am pleased to announce the third stage of our plan.

Together with the Welsh Government, we are launching an independent commission that will lead the biggest review of the water industry since privatisation 35 years ago. The commission will ensure that we have the robust regulatory framework that we need to attract the significant investment that is required to clean up our waterways, build new infrastructure to address water scarcity, and restore public confidence in the sector. I am delighted that it will be led by the former deputy governor of the Bank of England, Sir Jon Cunliffe, who has decades of economic and regulatory experience. Sir Jon will be supported by an advisory group of experts covering areas such as the environment, public health, engineering, customers, investors and economics. He will seek advice from wider groups of stakeholders including environmental campaigners, consumer champions, water companies, regulators and the public at large.

The commission will conduct a root-and-branch review of the water sector’s regulatory system. It will cover the water industry in England and Wales and the strategic planning framework under the water framework directive and river basin management plans to ensure that strategic water planning across sectors is effective at catchment, regional and national scales. Where housing, planning, agriculture and drainage interlink with strategic planning across the water system, they are also in scope.

The commission will set a new framework for the future. It will not make recommendations that affect the current price review ’24 process, in order to ensure that there is a stable climate for investment as that process concludes. It will be pragmatic and will focus on reforms that improve the privatised regulatory model. Nationalisation of the water sector will not be in scope, because of the high costs of buying out the current owners, lack of evidence that it would lead to improvements, and the long delays that it would cause in the process of cleaning up polluted water and serving customers better.

The commission will make recommendations in the first half of 2025, reporting to me as Environment Secretary and to the Deputy First Minister and Cabinet Secretary for Climate Change and Rural Affairs in Wales. Once it has made its recommendations, the UK and Welsh Governments will respond and consult on proposals, including subsequent legislation. Further details of the commission’s scope, delivery, approach and timelines are set out in its terms of reference, which will be available on gov.uk today.

This Government will deliver an ambitious, long-term and collaborative approach to reforming the water sector, creating a strong new partnership between Government, water companies, customers, investors and all those who work to protect our precious environment. The commission will set the groundwork for the reformed water sector that we want to see. I thank Sir Jon for leading this important work.

This is our opportunity to ensure that our children, and their children, have the chance to create memories that will last a lifetime—to splash about at the seaside, row on our rivers or enjoy a picnic on the lake shore. This is our opportunity to inject billions of pounds into the economy and to power UK growth by attracting global investment into a transformed water sector. This is our opportunity to clean up our water once and for all.

I call the shadow Minister.

I thank the Secretary of State for prior sight of his statement.

Fourteen years in opposition—and this is what the Labour party has to offer. Labour Members have had more than a decade to craft a clear package of policies, listen to campaigners and prepare to govern, yet what they have brought to the House today illustrates no sign of any ambition. This is a sign of hesitation. It is a way to delay the difficult decisions and buy themselves more time. It is part of a growing trend that unfortunately we are seeing consistently from this new Labour Government, across all Departments: announce a review, a taskforce and yet another commission, and hope the public do not notice that really they never had much of a plan at all.

That approach is simply not going to wash with the bill payers. Before the election, the Secretary of State toured the country with campaigners like Feargal Sharkey, promising radical change to the sector. He is now in power, and what has he actually achieved so far? He spent the entire election campaign telling voters that he wanted to put water company bosses in the dock, but we can see from the Government’s announcements on the Water (Special Measures) Bill that it will achieve no such thing, as campaigners and industry experts have already pointed out. Nor will the Bill provide any reassurance whatever for investors. Rather marvellously, the Secretary of State has managed not only to frustrate campaigners, but to disenfranchise investors from any long-term aspirations to invest in the sector.

The Secretary of State says that he has announced a ban on water company bonuses. Hang on: that was a policy that we brought forward in our time in government and that the Secretary of State is now attempting to reannounce and pass off as his own. It was the Conservatives who announced a ban on water company bosses’ bonuses, linked shareholder dividends to environmental performance, quadrupled water company inspections, fast-tracked investments to cut spills and launched a whistleblowing portal for water company workers to report breaches.

Well, that was all a little bit embarrassing, wasn’t it? The previous Government had 14 years in power, our rivers, lakes and seas are awash with record levels of pollution, and that is all the Conservatives have to say. I took action seven days after the general election: I brought the water chief execs into my office, and we agreed that money earmarked for investment will be ringfenced so that it cannot be diverted to pay multimillion-pound bonuses to water chief execs who oversee failure in the water sector, as happened on the shadow Minister’s watch. The commission will reset the sector that the Conservatives broke, and clean up the water that they polluted. It will report to the Government in June and inform subsequent legislation.

At the weekend, I went swimming in the North sea —probably for the last time this year—having first checked on the Surfers Against Sewage website that there had not been any legal or illegal spills. It is disgraceful that the last Conservative Government left our seas and waterways in such as state, and it is notable that Water UK continuously blames the regulator for not allowing it to raise prices in order to invest further in our system. Will the Secretary of State make sure that we assess the value extracted by the water companies? They have taken billions of pounds in profits and hundreds of millions in bonuses. We need to make sure that future investment adds value and does not take it away.

I thank my hon. Friend for her comments. Unfortunately, customers have been left to pay the price of 14 years of Conservative failure to secure investment in our water infrastructure, so it has collapsed to such an extent that Ofwat now recommends eye-watering bill increases. Every penny of that is down to the failure of the Conservative party. Our reset will ensure that that kind of catastrophic failure can never happen again.

I call the Liberal Democrat spokesperson.

I am grateful to the Secretary of State for advance sight of his statement. To a large degree, I welcome it—or at least the intention behind it—but water companies dumped 54% more sewage into our lakes, rivers and coastal areas in 2023 than in the previous year. That amounts to 464,000 spills, including many in the lakes and rivers of Westmorland. My constituency is the most beautiful part of England and also the wettest, so water is deeply personal to us.

Does the Secretary of State understand my worry that we might have gone from having a Conservative Government who would not face up to this outrage or tackle it, to having a new Labour Administration who have acknowledged this outrage and decisively resolved to have a jolly good think about it? While Thames Water crumbles as we speak and water companies seek bill increases of 40%, despite such poor performance across the country, does he really think that having a commission is necessary, given the urgent need for action? We have a fragmented, under-resourced and under-powered regulatory system, which allows powerful water companies to play regulators off against each other while our constituents pay the price. Is the solution not obvious? As the Liberal Democrats propose, we should create a new, unified and far more powerful clean water authority.

Does the Secretary of State share my deep concern that the current regulator has to give 25 years’ notice in order to strip a water company of its licence for environmental failure? Will he ensure that this ludicrous protection for failing companies should be replaced by a six-month period of notice instead? We are already more than 5% of the way through this Parliament, and this issue is one of our constituents’ most pressing concerns. Do we have to drag our heels like this?

I thank the hon. Gentleman for his comments. He is absolutely right to point out that last year we saw the highest levels of sewage ever recorded in our rivers, lakes and seas. No wonder the public are so angry, including in his constituency. Tragically, Lake Windermere, an iconic and beautiful site, has been polluted with sewage and agricultural run-off because of the failures of the previous Government.

I have taken action already. We had a reset moment just seven days after the general election, when we carried out within a week things that the Conservatives failed to do in 14 years in power. The Water (Special Measures) Bill is going through the Houses of Parliament right now to ban the payment of unfair bonuses to water bosses. The commission, led by Sir Jon Cunliffe, will look at the entire sector—root and branch—including governance and regulation, which the hon. Gentleman points to. It will look specifically at the point that he has raised, so that we end up with a system of regulation that is fit to clean up our waterways and then to protect them for the decades to come.

I thank the Secretary of State for his statement and his announcement of this important review. To have Sir Jon Cunliffe, a long-term public servant, running it is very welcome indeed. Will my right hon. Friend say a bit more about how the close working between the Welsh Government and the UK Government will work, because that will be important in determining how this announcement affects my constituents?

My hon. Friend alludes to an important point. Rivers and water catchments are no respecters of boundaries, and it is important that we have a model that works within catchments, including where they cross boundaries, as they do in some cases between England and Wales. The review has been jointly commissioned by the UK and Welsh Governments, and it will jointly report to both Governments. It will seek a better model for structuring and supporting our water sector, so that we can ensure that we clean up all our rivers, all our lakes and all our seas; so that the public can get back to enjoying them; and so that we can bring in the investment to support the infrastructure, which will be delivered at pace, to drive economic growth in every single part of the United Kingdom.

We come to the Chair of the Select Committee.

The Secretary of State is quite right to point to the role of the payment of bonuses and dividends in bringing us to this point, but he must surely acknowledge that that is far from being the whole story. There are a number of business and accounting practices in companies such as Thames Water that have brought us to the stage we are at today. If he is serious about having a water system that is fit for the future, he has to understand properly what has gone on before. Will he therefore confirm that the commission will be properly resourced with the necessary forensic accounting resource, so that those who have been responsible for the most egregious practices in the past and who now seem to be appearing in other water companies around the country will not be allowed to do the same thing there?

I thank the Chair of the Select Committee for the points that he makes. Of course, he is right. The Water (Special Measures) Bill, with its ban on bonuses, will not be sufficient to reset the sector, although it is an ask that the public are rightly making because of the unfairness of people who are overseeing failure being richly rewarded for that failure. That should not have been allowed to go on under the previous Government, and it will not go on under this new Government.

The reason we have set up the commission is to address the very points the right hon. Gentleman makes about financial and environmental sustainability and viability. I look forward to working with him and his Committee as the commission carries out its work, as we review its findings in the summer of next year, and as we then shape what will be significant new legislation to reset the sector—a reformed sector—in a new partnership with Government to bring in the investment that will finally clean up our waterways.

I declare an interest as a customer of Southern Water who lost my water supply for five days earlier this year, as did 30,000 of my constituents. As the Secretary of State knows well from his visits to Hastings and to Rye, we have major issues from flooding to sewage to water outages. I welcome the water commission. How can my constituents, particularly volunteer groups such as the Clean Water Action group, have their voices heard, particularly their concerns about ensuring that the regulators have the power and resources to clean up our sea?

My hon. Friend is a powerful campaigner for cleaner water. In fact, it is hard to think of anybody who has campaigned harder on the issue. The commission will seek to engage the public at large, as well as a wider group of stakeholders who will be represented on an advisory group, which will include a customer voice. Once the commission has reported, the Government will consult on those findings and that will inform the subsequent legislation that will reset this sector once and for all.

Order. I say gently to the Secretary of State that I am here and he should be speaking through the Chair, not to the Member, as he has done for the last two questions. We can work together to get everybody looking the right way. I call Sir Gavin Williamson to set a good example.