Water Companies

(Urgent Question): To ask the Secretary of State for the Environment if she will make a statement on the performance of the water sector.

I welcome this opportunity to update the House on the progress the Government have made on this important issue. In these divisive times, there are few topics that unite all of us in this House—but water does. We all agree that the status quo cannot continue. Following 14 years of Conservative failure, this Labour Government are turning it around, but there is still lots more to do.

I have been grateful to meet with many passionate campaigners and Members of this House. Recently, that included an engaging meeting with my hon. Friends the Members for Norwich South (Clive Lewis) and for Shipley (Anna Dixon). Just last week I met with campaigners from Save Windermere and academics from the People’s Commission on the Water Sector.

People are right to be angry about the problems facing the water industry. Customers have been let down by rising bills, under-investment in creaking infrastructure, supply interruptions and unacceptable levels of pollution in our rivers, lakes and seas.

That is why this Government took action on day one by updating the water companies’ articles of association—the foundational legal documents that outline their internal rules and purpose—to put customers and the environment at their heart. We also established powerful consumer panels to give customers a voice. In week six of this Government, we introduced fundamental reforms through the Water (Special Measures) Act 2025, ringfencing customers’ money, banning unfair bonuses, introducing criminal liability for polluting water bosses and creating automatic penalties for wrongdoing. Within a year in office, this Government had changed the guaranteed standards of service, doubling compensation for customers when things go wrong. Following that, we gave the Environment Agency more money and more power to monitor water companies, enabling it to deliver a record 10,000 inspections. After that, we strengthened protections for vulnerable households by changing the reforms around WaterSure to ensure that vulnerable people did not face excessive bills.

No one solution is going to fix the whole water industry. Since I have had the honour and privilege of being in this position, my focus has been on finding the quickest and most effective way to deal with each of those structural challenges. That is exactly why this Government are delivering the once-in-a-generation reform through our clean water Bill to reset the water sector and end the cycle of decline. And because the Government believe in experts, we have also supported the chief medical officer in bringing together a wider expert panel through the public health water taskforce, providing independent and technical advice on risks, alongside the fantastic work done by the Department for Environment, Food and Rural Affairs’ own scientific adviser, creating the science advisory council to look at what we can do around water.

We will deliver on our promise to clean up our rivers, lakes and seas not just today, but for generations to come. These changes are designed to address the structural challenges in the sector and to deliver a cleaner, more resilient and more accountable water system for the future.

I thank the Minister both for her response and for putting up with me—I am a bit of a broken record on this issue. We are all well aware that water is essential to life itself—to food, industry, nature, housing, energy, and now even the data centres powering the supposed AI revolution—and yet we have handed a monopoly where no competition is possible to companies, many owned overseas, whose overriding priority is profit. The result is systemic failure, with not one major reservoir built and the old ones sold off. That is why we were back in the Chamber last week over South East Water and the drought outages, just weeks into the summer.

Raw sewage has poured into our rivers and seas—3.5 million hours of it in 2024 alone—fouling beaches where children swim. It is why eight-year-old Heather Preen died after contracting E. coli from raw sewage, and why thousands of our constituents are made sick every year. When public anger saw the Government ban bonuses, water execs raised their salaries and rebranded the payouts “retention payments” and that comes on top of the £78 billion to shareholders and £60 billion borrowed, our bills up 40%, and 30p in every pound we pay servicing water companies’ debts instead of fixing pipes.

This was never a market failure. Instead, it is the market working as designed—profits out, sewage in, cost of living up and security of supply decimated. Surely the Minister understands that we can no more regulate privatised water companies than regulate the tide. How many more failures, inquiries and deaths before the Government accept that these problems are systemic and give the public the option of taking their water back?

I thank my hon. Friend for his question. He is right that he has been passionate about this matter for a long time. We have known each other a very long time, and—I have said this to him before—I genuinely admire and respect his passion. I know what it means to him. In fact, he was the person responsible for bringing Julie, Heather’s mum, to meet me when they came to Parliament for a premiere of “Dirty Business”, which I found really moving.

My hon. Friend knows I am going to agree with him on reservoirs. It is shameful that we have not had one built. Our climate is changing: we are facing drought in the summer and we have too much rain in the winter, and yet we cannot seem to hold it. That is a fundamental failure.

He knows my thoughts on South East Water, too, as well as my feelings about competition, which is why I think we should be introducing more new appointments and variations. As I said last week, where a water company might want to transition to a new ownership model such as not for profit, we are committed to developing a transparent process to look at whether that request should go ahead—a process that has never existed before.

Labour came into government promising major reform of England’s water sector, but progress so far has been slow. The Water (Special Measures) Act 2025 was largely a rebadging of many Conservative reforms. During its passage, we tabled many sensible amendments, including ones to ringfence funding from enforcement fines to a bespoke water restoration fund; to guarantee that companies fixed the environmental damage they caused locally; to require Ofwat to create rules on financial reporting in its remuneration and governance rules; to reduce consumer bills if companies were hit with enforcement fines; and to ensure that companies did not leverage too much debt. Sadly, the Government failed to support those amendments and missed the opportunity to increase accountability.

We on the Conservative Benches have been clear: no one wants to see water companies such as Thames Water collapse. Although water supply would continue, failure would expose taxpayers to billions of pounds of liabilities and drive customer water bills sharply upwards, without addressing the underlying issues. Yet we have seen the third party in this place lead legal action that could have pushed Thames Water to the brink, and both they and Reform appear relaxed about the consequences for consumers and the public purse. Government have to be prepared to step in if a company fails, but that should be a last resort, so can the Minister update the House on the current situation at Thames Water?

I think the shadow spokesperson managed to read his statement out without actually listening to the answer that I have given. But I am always keen to update everybody on the action we have already taken, so just in case he missed it, I am happy to say it again. We have passed the Water (Special Measures) Act 2025; ringfenced customers’ money so that it cannot be diverted away from investments; secured £104 billion of private investment to upgrade our infrastructure; given the EA more powers to monitor water companies; banned unfair bonuses; introduced criminal liability for water bosses; introduced automatic penalties; reduced the burden of proof for many offences so that regulators are on the front foot; introduced cost recovery to shift the cost of pollution on to those who pollute; banned the sale and supply of wet wipes; reformed our bathing water regulations; established the water delivery taskforce; more than doubled compensation for customers when things go wrong; and introduced strengthened protections for vulnerable households through reforms to the WaterSure scheme. In fact, I would say that we have done more in 20 months than the hon. Gentleman’s Government did in 14 years.

I call the Chair of the Environmental Audit Committee.

My hon. Friend the Minister is absolutely right to say that we are united by our anger about the systemic failures in the water industry, in terms of both financial and environmental regulation, and the under-investment in infrastructure over a long period—although the fact that Welsh Water, a not-for-profit water company, is also a poor performer when it comes to the environment shows that it is simplistic to say that profit is the only issue here.

The Government have rightly addressed one of the issues—the amount of investment going in—but we need to see results from higher bills, and we also need to see regulatory reform as soon as possible. Will the water Bill tackle the environmental failures and also put in place a regime that prevents the kind of appalling indebtedness that we saw with Thames Water, and the industry more generally, and the prioritisation of those debts ahead of delivering for customers?

I thank my hon. Friend for his work as Chair of the Environmental Audit Committee. He is right to highlight the under-investment in infrastructure. In fact, some of the problems around resilience are, quite frankly, due to the under-investment in infrastructure, which is why we need to set resilience standards. He is also right that we need to see action resulting from higher bills, which is why we formed the water delivery taskforce to hold the water companies to account for the promises they have made on delivering infrastructure.

On the point about having an integrated regulator, at the moment Ofwat looks at things financially, the Environment Agency looks at the environment and the Drinking Water Inspectorate looks at drinking water. By abolishing that and bringing the regulator into one, we will have an integrated regulator that places the environment, customers and—what has been missing for the last 14 years—public health at its heart, which is incredibly important. Finally, I agree with him about debt levels; that was one of the things in the Sir Jon Cunliffe commission.

I call the Liberal Democrat spokesperson.

Thames Water, which serves my constituency, embodies the systemic failures of the sector. The company is in breach of its licence conditions by not having held any investment grade credit ratings for nearly the last two years and by failing to inform Ofwat and the Government of the change of control at the company. The Government have stood by and let that happen. Now, their only plan is to hand the company over to the very same creditors who have pillaged, and continue to pillage, it. They must now change course, put Thames Water into special administration and bring it out as a business that is mutually owned and operated in the interests of its customers and the environment.

I find the shadow Minister’s words extraordinary—he comes across as a corporate shill. I have provided him with information from Thames Water’s own independent expert that demonstrates that the cost to the Government will be zero in the medium term, but he has not responded. Will the Government please now put the company into special administration?

I thank the hon. Member for his question, but I think it is a misrepresentation—I am sure it was an accident—to say that the Government are doing any kind of deals. The Government are working closely with Ofwat, which is evaluating the consortium’s proposals. Of course, the Government will always have the best interests of customers and the environment at heart. As I have said many times in the House, we stand ready for all eventualities, including applying for special administration if necessary.

In Hastings, Rye and the villages we have had sewage dumped in our sea, two major water outages—lasting five and nine days—Hastings town centre flooded and, last year, as the Minister knows, 300 million plastic beads washed up on our beaches all thanks to Southern Water. Its failures are making people sick, damaging local businesses and tarnishing our livelihood as a seaside economy. That is why so many of the people I represent are fed up with Southern Water, while having to pay more in their bills. They welcome the action that the Labour Government are taking to ramp up regulation, ban bonuses and much more, but they want to know what more can be done. The water White Paper, which she has brought forward, talks about the importance of ownership and opens the door to the Government looking at not-for-profit structures. Could she say a bit more about that?

I thank my hon. Friend, who continues to be a formidable, incredibly impressive campaigner, as she was through her work on the Environment, Food and Rural Committee; honestly, she has been amazing. We have set out our White Paper, and a transparent process will look at whether a new model will go ahead. As the Secretary of State has also said, I have always been in favour of mutuals, and I do not have a problem with not-for-profits, but we need a clear look at the process to see whether that would be in the best interests of customers before any change goes ahead.

Is not the root problem a profound failure of regulation over the last 25 years, for which Labour, the Conservatives and the Lib Dems all bear responsibility? We have regulated for lower prices and more investment, but we have not stopped companies from loading up their balance sheets with debt, which means higher prices and less investment. I am not a believer in nationalisation, because I know from having been Chancellor that the state will never find the £104 billion now promised by the private sector, but if we are to stick with private companies, do we not need to regulate differently so that we have lower prices and more investment?

I thank the right hon. Gentleman for his question—it still feels slightly odd to be on the opposite side of this, with him questioning me. I will gently say that, yes, I do accept the premise of his question—we need tougher and more effective regulation, because the regulation system has failed—but I would have thought that, as the second most powerful person in the previous Government, he might have had an opportunity to act himself.

We come to the Chamber almost weekly to highlight the failures of the water sector in our constituencies, but I want to highlight a wider point today. For years, economic policy in this country has been based on trying to achieve growth by unlocking private capital, often from abroad. In this essential sector, we are now seeing the end result: water bankruptcy, environmental devastation, non-existent infrastructure and the public left picking up the tab. What conversations is the Minister having with colleagues across Government, especially in the Treasury, about learning from this monumental failure?

I thank my hon. Friend for his passionate work on this issue. I know how much he cares about the damage that over-abstraction is doing to our environment and to nature. On the water delivery taskforce, we have Ministry of Housing, Communities and Local Government Ministers and Treasury representatives all looking at how we can make the fastest and most effective change to our water system. They look particularly at water infrastructure because, as has been highlighted already, one of the problems is that we have been unable to build the infrastructure we need, which is resulting in damage to the environment now.

Since Mr Speaker allowed me to ask an urgent question on Wednesday last week, to which the Minister helpfully responded, it will not surprise her to know that I have received quite a number of public comments concerning the performance of South East Water, most of which are not repeatable before the watershed.

Two issues clearly have come to light and struck a chord. First, it really is time that the water companies were allowed to act as consultees in planning applications, because we are building house after house after house without saying where the water is going to come from, and of course the water companies have a statutory duty to provide it. The second point that has come through loud and clear underscores something that the Minister said to me, which is that it really is time that every new house built had a grey water system, because we are pouring water that we cannot afford to waste literally down the drain.