To ask His Majesty’s Government what assessment they have made of the announcement by Ofwat on 20 March of a change to the licences of water companies requiring that dividend payments are linked to performance.
My Lords, we support Ofwat’s new measures, which were made possible by new licence modification powers that this Government gave to Ofwat via the Environment Act 2021. The measures strengthen the existing dividend licence conditions so that Ofwat can take enforcement action against water companies that do not make an explicit link between dividend payments and their performance for customers and the environment.
I thank the Minister for his response. Since I tabled this Question, the Government have published their plan for delivering clean and plentiful water, which is to be welcomed and offers much hope. However, river pollution has blocked the development of 20,000 much-needed new homes, and more than 7,500 days’ worth of raw sewage has been dumped in various Ministers’ constituencies. Does the Minister believe that withholding dividend payments to water company executives and shareholders will really contribute to making the difference needed to improve long-term water quality? Surely something more robust is needed.
My Lords, that is just part of a great many things that the Government are doing. The new power that the Environment Agency has to link the companies’ licences to ring-fence provision on infrastructure spending is important. This comes as part of a plan that includes the Environment Act, as I said earlier; the Storm Overflows Discharge Reduction Plan; a strategic policy statement for Ofwat, in which the Government required very stringent new standards; and our recently published plan for water. No Government are doing more to tackle this issue.
My Lords, I also commend Ofwat on its recent announcement that it will seek to take some powers over dividends, but what it actually says is that the company boards will be required to take account of their performance towards the environment. What worries me—I wonder whether it worries the Minister—is that it is up to the company to assess its own performance. Is that really a strong enough power?
It is not just up to the company; it is up to the regulators, Ofwat and the Environment Agency. We are currently considering this, and there is a proposal to lift the cap on fines from the Environment Agency to an unlimited level. This is part of a concerted effort to tackle a serious problem.
My Lords, I welcome the Government’s commitment to implement Schedule 3 to the Flood and Water Management Act 2010, but will my noble friend exercise a degree of urgency? Wales has already implemented this, making SUDS and sustainable drains mandatory in all new builds. That one measure alone will prevent sewage spilling over antiquated pipes and leading to river and sea pollution.
My noble friend is absolutely right: this was a key recommendation of the Pitt review following the floods in 2007. The Government are implementing it. It is complicated, because it is about who owns and has responsibility for the maintenance of the SUDS. My noble friend is right that this will have an impact on the amount of unwanted effluent that flows from developments into watercourses and aquifers, and it is being implemented—we are taking it forward urgently.
My Lords, following on from the previous question about the water companies marking their own homework, can the Minister explain how it is that the water companies themselves are responsible for monitoring and reporting? Will that change? He will know that a lot of the monitors do not work, so how can we be assured that decisions will be made on the basis of accurate reporting? It is not in their interest to provide that accurate information.
There was no information on this until 2013, when I required water companies to publish a full list. We now have—or will have in a matter of weeks—100% of all the monitors. The Environment Agency investigates anywhere a fault is not being correctly measured. The telemetry will exist to measure the quality of water in all these outflows, above the outflow and below it, so accurate comparisons can be taken. That sharing of information, which was lamentably woeful but which we have corrected, will be a key part of our attempts to successfully clear up our rivers.
My Lords, the Government can be extremely proud of their record on the environment with regard to the Environment Act and a number of the measures to ensure improvement that I know my noble friend the Minister is personally committed to. Can he explain to the House whether he believes that Ofwat has sufficient powers to deal with this enormous problem that is exercising the public so much across the country?
My noble friend raises a key point. The Government give direction to the regulators of utilities such as water companies, and we have given very clear direction, which has been manifest in the latest Ofwat demand that water companies tackle this. It is not the only regulator. As I said earlier, the Environment Agency has huge powers and will levy fines and make sure that water companies that fail are taken into account. Of course, Ofwat also has to balance the importance of the pressure of bills on households with an increasing level of investment in tackling these issues. It is a constant balancing issue and one that I hope we are getting right.