That this House takes note of the Report from the Industry and Regulators Committee The affluent and the effluent: cleaning up failures in water and sewage regulation (1st Report, HL Paper 166).
My Lords, I am pleased to introduce this debate on the affluent and the effluent. I thank our staff for their valuable contributions to the committee’s work, and the many contributors who gave evidence to the inquiry.
In May last year, we launched our inquiry into water and sewage regulation following a public outcry at the discharge of sewage into our waters. We published our report this March, which received a response from the Government that was curt and dismissive and implied that the committee had gone beyond its remit in questioning matters of public water policy. It was a clear attempt by the Government to dodge parliamentary scrutiny of their record.
In April, the Government published their Plan for Water. In May, England’s water companies issued an apology for sewage discharges and announced a recovery plan. We then launched a follow-up inquiry in June focusing on the role of Defra, which concluded with a letter to the Secretary of State last month; a response to that letter is expected on 27 October, this month. In our report, we found that, after privatisation, pressures on the water and sewerage network increased due to climate change and population growth; but the levels of investment fail to match that, leading to a serious deterioration in water quality and a network struggling to cope. Storm overflows are supposed to provide a safety valve during periods of heavy rainfall, but they are now used as a matter of routine.
According to Environment Agency figures, there were more than 300,000 monitored sewage spills in 2022 and 75% of all rivers are polluted. The Environment Agency itself has struggled to monitor or enforce against water companies due to budget cuts. There has been a growing pressure on our water supply itself, meaning that England will require an initial 4 billion litres of water a day by 2050, an increase of 41%. Taps will run dry with increasing frequency unless new water supplies can be established and more measures are introduced to reduce demand. The last reservoir built was in 1991. The Government’s plans for storm overflows estimates that £56 billion of investment will be needed by 2050 to clear up this mess. To this end, water companies have proposed investing £11 billion before 2030. Further billions of pounds will be needed to maintain the existing infrastructure.
Water companies recently published their business plans for the next five-year price review, proposing to invest £96 billion between 2025 and 2030—a 90% increase on the current period and a very welcome acknowledgement of the need for action. It is clear that investment over the last decade in our water system fell far short of what was needed—a casualty of weak regulation and incompetent government leadership. The opportunity to invest when interest rates were historically low and before prices surged with inflation was squandered. Now, a much higher level of investment is needed to remedy this neglect, and that burden will fall heavily on household bills.
My Lords, I am grateful to the noble Lord, Lord Hollick, for precipitating this debate. I declare an interest as a member of the Industry and Regulators Committee and as a farmer who holds some irrigation licences.
As you will see from the report our committee published on 23 September, to any objective eye we are in a very poor place, be it by security of additional supplies, through population growth, behavioural habits or hotter weather; poorly maintained infrastructure, perhaps best and most recently illustrated through Thames Water’s failure to bring the only significant desalination plant on stream during one of the hottest summers on record; or the financial health of the sector, which has been consistently raided for dividends and executive bonuses, while racking up ever-higher levels of debt. Thames Water alone has a whopping £14 billion of debt; it was debt free when it was privatised.
Meanwhile, sewage releases, politely called storm overflows, are running at extraordinary levels because the sector has failed to invest in adequate mitigation. According to the Defra consultation document published in March last year, in 2020 there were 400,000 sewage discharges, totalling over 3 million hours of sewage flow. Some 10% of those overflow points pumped out raw sewage more than 100 times each. All of this was under the supposedly beady eye of two large regulators, Ofwat and the Environment Agency. Even the regulators’ regulator, the Office for Environmental Protection, as recently as five weeks ago announced
“possible failures to comply with environmental law … in relation to … sewer overflows”.
It is interesting that, in the Government’s response to an Urgent Question triggered by the OEP’s intervention, they said that they started monitoring sewage overflow 10 years ago. If that is the case, what has this monitoring achieved when, in 2020, there were still 400,000 discharge events?
My Lords, it is a pleasure to follow the noble Lord, Lord Agnew, who in the committee gave us many examples of practical things that could be done. I am glad he has had the opportunity to raise them in the House today.
To say that the investigation into the water companies was timely is a great understatement. There has been a great deal of public concern about the performance of the industry, the profits taken out and the state of our rivers and beaches. The early response to our report shows the great contribution that House of Lords committees can make to debates on wider issues. The immediate response from the press—from the Times to Feargal Sharkey and experts—has been very positive in welcoming the recommendations in the report. The water companies seem to have regarded it slightly as a wake-up call and to have understood that they cannot get away with the kind of approach they had in the past—although part of their approach was to give an apology and say, “But it wasn’t really us; it was all the people who went before us”.
On the other hand, the Government’s response, as my noble friend said, was curt and dismissive. The Secretary of State, in particular, thinks she has immunity to every problem that has ever arisen in her department.
I have to admit that I never wanted privatisation in the first place, and I was part of the Front-Bench team in the Commons opposing it. I recently saw the figures I used during the wind-up there, which showed that the Labour Government from 1974 to 1979 invested £1,254 million in the water industry per year, but that from 1979 onwards, when the Conservatives came in, there was a sudden drop. Investment went down to £926 million, then £899 million, then £818 million. In other words, there was deliberate underinvestment to try to make a case for privatisation, because we were told that was the only way the investment would come.
My Lords, I had the privilege of being a member of the committee that produced this report under the incisive chairmanship of the noble Lord, Lord Hollick. At the start of our inquiry I actually had some sympathy with the regulators and the water companies. The regulator, Ofwat, had been left by government to take what amounted to controversial decisions about the prioritisation between its objectives and those of the water companies. The water companies were primarily tasked with providing clean, cheap water, and to a great extent they have done so. If noble Lords need proof of that, please consider that, every weekend, millions of people in this country wash their cars and water their gardens with what amounts to pure, purified drinking water. Rightly or wrongly, environmental issues have been moved up the list of priorities only more recently.
However, this pool of sympathy dried up during the course of our inquiry. As the noble Lord, Lord Hollick, referred to, we uncovered financial engineering being used to take advantage of regional monopolies, including debt loading and opaque dividend extraction. This was at the expense of much-needed—now frighteningly overdue—investment into the very infrastructure on which our water and sewerage system depends.
How did we get here? As regards the regulators, the committee was far from convinced that Ofwat had the business savvy to spot what was going on and act early enough to stop it. By its own admission, it took only a light-touch approach to regulating the industry. The Environment Agency—demoralised and lacking the resources it needed to hold the water companies to account—has also not kept water companies up to the mark on their environmental performance. Indeed, civil society organisations called out the issues of pollution long before the regulators did. The committee’s very timely report also helped to bring the issue to prominence, as the noble Baroness, Lady Taylor, mentioned. Finally, Defra, the department with overall responsibility, appears to have been far too complacent in looking into what was going on. It left the regulators and water companies themselves to make decisions about the competing demands of sewage and water management, and profit.
My Lords, I have been on the Industry and Regulators Committee since its inception and I am pleased that, before my time to rotate off, we will be looking at the issue, among other things, of whether regulators have the right kinds of remits, overlaps and priorities and whether the government/regulator relationship is right. It is my view that our Ofwat inquiry highlights well areas for improvement in those matters and, in the important case of utilities, whether privatisation has made things far too private—by which I mean lacking in transparency and in action.
One of the conclusions of our report deals with this by suggesting that utility companies should be subject to the same kinds of transparency requirements as publicly listed companies. There has clearly been failure. Water companies have got away with sweating the assets for far too long, to pay out large dividends instead of properly providing for future infrastructure, and have turned emergency sewage discharge into a routine way of operation.
Regulators focused too much on bills as their yardstick, were dozy about future water security and complacent about discharges, while Governments—always suspect in the short-term electoral cycle—have set meagre targets and inadequate Environment Agency budgets and have been held in thrall to the construction industry when it comes to changing planning laws in necessary ways. It is a catalogue of failure, leaving a dire situation for both finance and infrastructure.
A fundamental requirement throughout the company and regulator chain must be to ensure investment sufficient to match demand caused by population growth, property development and climate change. That has fallen a long way behind and there is no way to claw back the money that has gone to private pockets, leaving consumers to foot the bill in future. I doubt there is going to be any other way.
My Lords, I congratulate the noble Lord, Lord Hollick, and the members of his committee on the most fantastic report. I have really enjoyed this debate so far and I look forward to the Minister’s replies on all these crucial issues of public health and the health of nature and the environment. It has been quite a slog to get this issue on to the agenda, but finally it is on the agenda and the public know about it. They are fully aware of it. I do not want to give any hints to the current Government on how to perhaps claw back some of the votes they have lost so far, but this is going to be an issue on doorsteps for the general election, so the faster the Government act, the better for them. Obviously they are going to lose big time, but we do not have to worry about that too much at the moment.
Ofwat, the water regulator, has said repeatedly over the years that water companies have had all the money they needed to do the necessary investment—so we have to ask where it has gone. Ofwat allowed our bills to rise by more than 40% in recent decades in order to fund investment, but the investment largely did not happen. Most of it went to shareholders at the average rate of £2 billion a year for the past 27 years. That money is our money; it is taxpayers’ money. I do not want to pay higher bills; I want a refund, and I think a lot of people will agree with me.
We are all fed up with pollution in our rivers and on our coastlines, with sewage floating past swimmers and surfers, and with businesses suffering when signs are put up saying, “Please don’t swim here”—not to mention environmentalists despairing at the loss of ecosystems because of the filthy rivers. We have to ask what the regulators have actually been doing over the last three decades, and whether it is possible to create an enforcement regime that will hold a private monopoly to account. I suspect that many of the public are no longer asking about regulations and regulators; they are probably asking about the prison sentences that ought to be given out. I am not a big fan of increasing the prison population, particularly at the moment, so if we are to penalise the people who have put us in this position—for example, the CEOs who are personally responsible for polluting our rivers—we should issue community service orders so that they can work on the ground to fix the pollution that they have created.
My Lords, I thank my noble friend Lord Hollick for his cogent introduction, and thank the committee for what is a trenchant, highly critical report with very interesting recommendations and conclusions. This is a complete failure of the system of regulation, post-privatisation. I would also like to thank whoever invented the title of the report because it most succinctly expresses the outrage at the pollution that is caused by these water companies and the affluence with which they have treated their shareholders, investors and those who bankroll them. It is a disgrace, and one which this House and the Government need to face up to.
I have to first make a confession. I was a small cog in the structure of regulation of this industry, for a few months at Ofwat and for several years at the Environment Agency. That was more than 10 years ago. I clearly remember thinking and arguing at that time that the system was inadequate and that we had failed to use the powers that we already had, particularly in Ofwat but occasionally in the Environment Agency as well. In those days, the Environment Agency had more resources for monitoring, but we did not always use our powers to their full extent—and we see the results.
It is possible to argue that, in the early years of privatisation, more resources were brought to much-needed investment, technology and management improvement. But after that first period, this has not been the case. We now need to face up to the fact that the major political parties are not prepared to commit themselves to renationalisation. Like the noble Baroness, Lady Jones, I would prefer that solution. If it is not possible, we need to start again on the system of regulation, not only of the areas covered by Ofwat, the Environment Agency and the Drinking Water Inspectorate but of the wider aspects of the water system. These broader aspects include taking account of the growth in population and the pressures from housing and from business, of the fact that water usage in this country is one of the highest in Europe, and of the fact that we completely fail to address water efficiency in appliances for industry, agriculture and domestic households.
My Lords, I must first declare my interests as a farmer and chair of the UK Centre for Ecology & Hydrology.
Rivers are an important source of life. They host a huge range of species, both above and below the waterline—too many to list in a five-minute speech. They also have a life force of their own, having run through our landscapes for millennia. We are here today and gone tomorrow compared to these moving symbols of what should be our national pride. They are also a force for cohesion. The early Babylonian and Egyptian empires, for instance, were founded on their management of water. Even today—this is a topical point—with all the violence in Israel, there is a movement there called the Blue Peace, the theory being that the management of water is too serious an issue to be disturbed by nationalistic politics. People from all sides have indeed kept talking, whatever the extremists are up to.
I mention all that because I am trying to emphasise a point, well made in the report and by other speakers today. As a nation, we are currently failing our rivers and must now make more effort to all work together to ensure they are restored to the historic institutions they should be: places as sacred as our cathedrals, where nature and mankind should thrive together. It is obvious, as others have said, that we are currently failing to achieve that end. It is also obvious that any campaign for instant renewal of our rivers is way beyond the current resources of this nation or its water consumers, but we have to start now to turn the situation around.
First—this is a practical point—in order to make a realistically costed plan, which sorts out the essential from the merely good to have, we need a map of the detailed condition of all our rivers, from headwaters to estuaries. The only way we will achieve that is by testing all the waters on a more regular basis. Where possible, we should have remote electronic monitors up and down all our rivers. I know these monitors are costly at the moment, and slightly limited in the information they provide, but their efficiency will improve, and their price will drop if the quantity is guaranteed. I believe we need thousands of them.
4:17 pm
20 of 46 shown
Ofwat has the powers to regulate the price water companies can charge, the level of their capital investments and the size of returns they can make to their investors, but it has failed to ensure that companies invest sufficiently in water infrastructure, thus creating a backlog. Ofwat has been cautious about raising customer bills to finance long-term investment without the determined political backing of the Government. Decisions about the level of what people pay is, in the end, the responsibility of the elected Government, who must give regulators clear guidance on how to strike the right balance between investment and affordability.
The Government’s 2022 strategic policy statement for Ofwat gives no sense of priority—in effect, ducking this key decision. Will the Government provide further guidance on pricing ahead of the next price review? Underinvestment means that customer bills have been flat or falling for 15 years, but it is now inevitable that they will have to increase from 2025, when Ofwat’s next price review comes into effect. Company business plans published recently are proposing an average increase of 28.6% by 2030, even before inflation is taken into account. Including inflation, Thames Water has proposed a sharp 61% increase on today’s bills by 2030.
In the face of these rises, the Government must ensure that consistent support nationwide is offered to households struggling with their bills during a cost of living crisis. The Government initially committed to consult on a single nationwide social tariff to end the current postcode lottery, but then dropped the proposal. Water companies are now trying to help by more than doubling the number of households eligible to receive support, but the Government should have stepped in to ensure consistency. They urgently need to set out their approach.
Water companies have been assiduous in maximising their returns from their monopolies. It has been estimated that their dividends extracted since privatisations have exceeded £50 billion, while the debt of water companies has increased to over £60 billion, partly as a result of private equity owners loading the companies up with debt to help to pay themselves larger returns. All this has been in plain sight of a dozing regulator and an unconcerned Defra. This debt mountain has left companies vulnerable to higher interest rates. Ofwat now has stronger powers to control dividends and has set out a more determined approach, but this cannot recoup what has already been lost. The regulator now faces the challenge of requiring companies to boost significantly their level of investment just when they are facing rising costs, financial strains and uncertainty over government and regulatory actions, all of which is making water companies much less attractive to investors.
It is not clear to us that the water companies are capable of delivering investment at the level that is required. This is why we have called on the Government to increase the use of competition in delivering major water infrastructure. With this approach, specialist infrastructure companies, rather than the water companies themselves, can build the infrastructure that we urgently need. This approach has reduced the costs of the Thames Tideway tunnel project from an expected £80 per customer per year to around £25. Specialist infrastructure companies without the financial baggage of water companies can be an efficient and cost-effective solution for large projects. We recommend that the Government legislate to make it easier for more infrastructure to be built in this way. We await their response.
We noted in our recent report that some progress has been made. We called for the Government to provide a national water strategy, to look at the water system holistically, which they have done through the Plan for Water. The Government have also designated a National Policy Statement for Water Resources Infrastructure, as we recommended, to help water infrastructure to proceed more smoothly through planning. Funding has also been made available to monitor storm overflows. Ofwat has tightened its controls on the sector’s finances and, together with the Environment Agency, is investigating the water companies’ role in sewage discharges. All essential funding was previously cut by the Government.
However, major challenges remain. Can the Minister explain what action will be taken to reduce water demand? Why has mandatory water metering not been introduced? Concerns remain about the capacity of water companies and their supply chains to carry out projects at the necessary scale proposed. To ensure that infrastructure plans are independently assessed and their progress professionally reviewed, we recommend that consideration be given to granting the National Infrastructure Commission a statutory role to carry out these duties.
We remain concerned at the Government’s deep-rooted complacency. They have failed to set out how customers will be supported to pay rising bills. They have failed to provide Ofwat with any guidance on how to balance investment and bills. They have shown an almost casual confidence in the task of funding a huge investment programme in very challenging times. Nowhere is this complacency clearer than in relation to wet wipes. In 2021, a consultation found that 96% of respondents supported a ban on wet wipes containing plastic. The Government’s response was to bring forward yet another consultation—which was published only this weekend, after two years. Can the Government tell us when the ban is expected to take effect? This is an easy win. Its delay is unnecessary and deeply damaging to the environment.
Too often in the water sector, government, regulators and water companies have shown themselves to be poor stewards of an essential public service by preferring the easy, short-term option to prioritising the long-term well-being of the system, the quality of water and the environment. We need the Government to take responsibility to ensure a clean, plentiful water system free of sewage. The public deserves better. I beg to move.
It is my contention that buried in this ocean of complacency is the more disingenuous excuse that it is all too expensive to deal with. In 2020, the Government optimistically created a thing called the Storm Overflows Taskforce. In November 2021, it reported that it would cost between £350 billion and £600 billion to solve the problem. This is equivalent, at the bottom end, to 15 more Elizabeth lines or—dare I say it?—at the top end, to six more full-fat HS2s. This is ludicrous, because numbers like this attempt to shut down the debate, as they are utterly unaffordable. The reality is that so much could be done affordably.
At its simplest, a sewage overflow is activated when the volume of water is more than can be handled by the sewage treatment plant, into which the water flows. Our infrastructure has been and continues to be built to comingle sewage and rainwater, so this is a constant problem. The solution is to reduce the amount of rainwater that hits the sewage plant in a concentrated period of time. There are at least two effective and simple solutions to help achieve this, and one alternative to expensive, hard-infrastructure treatment plants.
First, in a pilot scheme on the Isle of Wight, households were given water butts with slow-release valves, enabling water to be held in the butt until after the storm and then released, in a measured way, over hours and days. As of this month, Southern Water had agreed to extend the pilot to the whole of Cowes. This tiny intervention has, so far, delivered a 70% reduction in sewage releases. In a year, this could be rolled out across the whole of England and Wales at minimal cost. Perhaps the Minister could explain why his department is not pushing this small and elegant solution far harder.
Secondly, certain areas of farmland could be designated to be inundated during heavy storms. With an increasing trend for environmentally led farming, such as overwintered stubbles, this is becoming more and more viable. The Government were considering this in 2016; perhaps the Minister could update us but, rather than giving us a cursory reply today, I ask him to write with some detail. Over 50 million gallons of water flow through my own farm a year, ultimately ending up in the sea, in a system that cannot cope with inundation. It would be perfectly feasible for me to hold areas of land under water for a week or two, while the local drainage system recovers. To put this volume of water into perspective, it is equivalent to about half the annual drinking water requirement of Norwich. So one farm, of a couple of thousand acres, could make a real difference. It would require lateral thinking and proper co-ordination between the regulators and water companies. Perhaps the Minister could tell us if such dexterity of mind exists inside the bureaucratic machine.
The third solution, which now has credible pilot sites, is the use of wetlands in place of hard infrastructure. I recently visited a site in north Norfolk where the cost of construction was £250,000 and the annual running cost £10,000, against a treatment plant of £1 million with running costs of £100,000 a year. With the imminent arrival of biodiversity net gain regulations next year, the opportunity to incorporate more wetlands, and pay for it, becomes possible.
I have tried to show that there are innovative but proven ways to solve these problems without breaking the bank. Lastly, I ask the Minister whether his department is on target to provide a full and unambiguous response to our committee’s letter, due a reply on 27 October, covering this and other issues.
We had big promises from the water companies—they were going to solve the problems of leaking pipes and everything else—and we were promised that Ofwat would be the great guardian of the consumer and the taxpayer. It has been very different in reality. Investors have done very well; the rest of us have had serious problems and been left with a situation in which we now need many critical improvements, because those promises were not fulfilled. The water companies have done well, but everybody else, as my noble friend pointed out, has been left with considerable problems. This industry has not invested, and very big figures are needed in investment for the future.
We have seen the dividends taken out of water companies and the big salaries paid to many executives working there. While the companies may say that they recognise the problems, there is no guarantee that they will be easily able to provide the investment that is now needed. Therefore, we now face a very significant and serious dilemma.
Investment is needed—my noble friend pointed out the scale—but who will pay for it? Those who ripped us off are long gone. Many of those companies have been sold on and assets have changed. Water companies maximised their returns but many debt issues remain. We as consumers and taxpayers will not get the money back from the investments that were promised; we paid our water rates and so on. The big question still remains as to how these issues will be dealt with and who is to pay.
There is another very big issue: the nature of regulation. Is Ofwat fit for purpose? It has been too weak. Has it not had enough powers? Has it chosen not to use those powers? Has it lacked government support, or has it just been outsmarted by the water companies? Whatever the fact of how this has happened, we are in a situation where regulation of the water industry, and probably a whole range of industries, needs to be completely overhauled. These companies, and the people regulating them, need to act in a totally different way in future.
Where does this leave us? The regulators have taken some steps, at least latterly, but Ofwat’s Water Company Performance Report 2022-23 makes for depressing reading. Performance has fallen short for the majority of companies. Seven of the water companies are described as “lagging”, the report’s lowest categorisation, while fewer than half achieved their performance target on reducing pollution incidents.
We now have a water and sewerage industry desperately in need of a massive catch-up on spending, with numbers ranging from the Government’s quotation of £56 billion—noble Lords should remember that that will be spent over 25 years—to the hundreds of billions cited by the water companies, and the almost fantasy figures that the noble Lord, Lord Agnew, quoted from the task force.
Long-term money for infrastructure needs to be raised and sustained, not just in the short term but over the years and decades ahead. A crucial question therefore is how to raise the necessary investment funds. First, there is currently no suggestion that the money extracted by private equity investors will ever be recovered. Secondly, we have a number of water companies that have themselves been teetering on the brink of being washed over the financial weir into bankruptcy. Thirdly, we were told initially that the water companies would raise this money in the City or from their existing investors, but the talk now is of putting up customer bills. At a time of economic uncertainty and a cost of living crisis, when the benefits of investment might take 25 or more years to be felt, that is an extremely challenging proposition to put forward.
So we seem to be up sewage creek without an affordable paddle—but this is not just about money. The committee had severe doubts about the capability of some water companies, even if the necessary billions of pounds were made available to them, to manage the very substantial infrastructure projects that are required. Ofwat, when asked about this, appears to be crossing its fingers and hoping for the best.
To conclude, solving the problems highlighted in this report is going to be a long haul, and for that reason I hope that the current and future Governments will take note of it. I will pose four questions to the Minister and look forward to his responses when he winds up. How much money is needed to modernise our water and sewerage systems? How is that money going to be raised? How will this massive infrastructure renewal be competently delivered? Finally, are Defra, the regulators and the water companies really up to the job of getting these matters right?
Behavioural change in water consumption has a part, and it will now have to be more draconian than it need be, and so too does banning harmful products such as wet wipes that cause environmental damage and cost. Why is it that the pleas of the wet wipe industry to government have overturned the needs of the sewage industry? The Environment Agency has found that last year the environmental performance of water companies was at its lowest ever, so what are it and the Government doing about it, other than monitoring decline?
Ofwat says that 14 of the 17 water companies have not spent the funds they have been granted to invest in the network, with some spending less than half. So what is happening, other than knowing the bad statistics? In recent times, there have been more fines levied for pollution, but that is not getting at those responsible; it has to come back to the boards and executives of the water companies. Whether it is sewage or lack of investment, these are things that affect the health and well-being of everyone. I am just as worried about a pathogen in waterways as I am about a dodgy financial product. The first might kill me, the latter might fleece me—so why do we closely regulate only the latter?
The former Ofwat chair Jonson Cox said in a letter to the committee that the sector had “lost public legitimacy”. He said it was
“tempting to lay the blame at the doors of regulators. But these are FTSE 100/250 scale companies and need to take responsibility, as the regulatory regime requires them to do”.
He went on to say:
“The CEOs and shareholders of these large-scale companies need publicly to face into their performance shortfalls, and not hide behind their trade association, Water UK, or regulators”.
Well, I agree with that, as did the committee, but surely as utilities they have responsibilities beyond that of top-end listed companies and must be held accountable accordingly—not, as seems currently the case, having health and safety cop-outs and being treated more leniently than others who released pathogens into public places would be. If water companies do not perform, responsible people should be banned from the sector, and indeed from other utilities—end of. Regulators need to be more joined up, cover more and be more active. Utilities are special and special provisions must apply, and that should apply to underspending on investment as well as to illegal discharges.
Water companies themselves should be fined if they dump sewage. Instead of those fines adding to the water bill, the money should be found by selling shares to the Government. If they keep getting fined, the public will get their water companies back into public ownership at no extra cost. Certainly, no water bill should go up until there is a guarantee that no money will go into shareholder bank accounts, be siphoned off to parent companies or be taken out by CEO or senior staff bonuses. I want the CEOs of these water companies put on notice that they will be taken to court if the problems are not fixed.
There are a lot of options for cleaning up this mess but they all involve a lot of money and some understanding from the Government that this is an urgent situation that has to be fixed. I very much look forward to the Minister telling us what the Government are going to do. Quite honestly, the petty, rather dismissive response from the Government to the report from the noble Lord, Lord Hollick, is shameful. I do not understand how any Government could be so petty and almost vindictive.
We need a new start. In my view, if we are not to go for renationalisation then we need to establish a single and very powerful regulator for the water sector as a whole—one which subsumes all these interests and puts water centrally, as it should be, in the management of the resources of this country. It is not only about the dangers that the sewage overflows and discharges cause to our rivers and fisheries, and their threat to human health; it is also about the complete and utter failure to recognise that, as climate change progresses, water will become scarcer and less predictable, and so we need a much more effective system of management and a much stronger regulator.
We need a regulator if we are to keep the present system of ownership because these are regional monopolies, untroubled by competition. Unlike some privatised industries, there is no competition. They are also untroubled by requirements to review the franchise periodically, as exist in some privatised industries. That means they are almost free to make as much money as they like. If we add to that the complete failure of co-ordination and of clear strategies by the regulators and Defra, then we are heading for catastrophe unless we start again.
I ask the Minister to recognise that the list of failures spelled out by my noble friend and his committee in the report need a new approach. If we are not going for renationalisation, can all parties commit to a much more effective system of regulation and to starting again? I agree with the noble Baroness, Lady Jones, that sanctions need to be placed on these companies. I would hope that those sanctions were effective and would eventually lead to the sector being brought back into public ownership. But in the meantime, we need a much more effective and co-ordinated—and much more environmentally sensitive—system of regulation, which recognises and addresses the problems of this sector, and we need to start now.
Sampling by staff is an extremely skilled job and takes time. It is therefore expensive, so random sampling is rare. I have heard stories from farmers—possibly exaggerated—that the chance of their bit of river being randomly tested is less than once in 100 years. We need to know on a daily basis what is happening to our rivers so that we can decide what our financial priorities ought to be. Sampling by staff, for instance, does not happen at night, nor usually at that vital time when it is raining.
With money short and rivers below par, we need to know what our priorities should be. For example, are the phosphates too high in the night or the day, or before or after rain? Is it the nitrates or the microplastics, nanoplastics, chemicals or a lack of oxygen that is the more pressing problem in each river? You can find out more from continuous monitoring in two weeks than you will probably find after many years of random sampling. We need to know how and where to spend our money.
I will touch quickly on a couple more points. I strongly support the report’s emphasis on building up more water supplies through new reservoirs and water transfers. The less water we take out of our headwaters and iconic rivers such as chalk streams, the less will be the effects of whatever pollution is seeping into system.
Finally, we need everyone, led by the Government, to come together—it is that cohesion agenda again—to promote better behaviour by water users. Thames Water has said that 85% of the 75,000 blockages it clears annually are caused by things that should go in the bin. We all know about wet wipes, but the public also need to know about the dangers of antibiotics, medicines and other no-nos getting into the system. We need a campaign to educate the public about not using the sewage system as an alternative to rubbish collection. I can see it being quite an amusing and imaginative campaign.
It is going to take a lot of work, money and time to get our rivers right again, but that work has to start now. I thoroughly commend this report.