Water (Special Measures) Bill [HL]

Committee (3rd Day)

Clause 6: Automatic penalties for certain offences

Amendment 69 not moved.

Amendment 70

70: Clause 6, page 10, line 35, at end insert— “(8A) All fines imposed on the undertaker or its employees under this section by—(a) the Secretary of State,(b) the Welsh Ministers, or(c) another relevant authoritymust be gathered together and once per annum be used to reduce all customers’ bills by an equal amount per customer.(8B) Any reduction applied under subsection (8A) must be separately disclosed within the customer’s statement of account.”

My Lords, I welcome the noble Baroness, Lady Bakewell of Hardington Mandeville, back to her place. Her contributions have been missed on earlier days in Committee.

The main focus of the Bill is on improving the health of our rivers, and that aim will likely lead to a larger number of punishable offences. In its manifesto, Labour set out its plans to impose severe fines on water companies that failed to meet the expected standards, but it did not establish what would be done with that additional income. Amendment 70 seeks to put in place a system whereby the fines imposed on water companies and their employees—by this Government, the devolved Governments or, in fact, any other relevant authorities—are collected. Then, once a year, the income from these fines could be used to reduce customer bills.

In government we created the water restoration fund, which sees the money collected by the Treasury from fines and penalties and then channelled into improving the water environment. However, we sit here today with consumers facing pressure on their water bills as part of the inflationary environment that has created the cost of living crisis, as well as the cost of investing to improve water quality. It seems appropriate that fines and penalties should be returned to those consumers and identified by a separate line in their bills, making it clear that the regulator is taking action to punish wrongdoing and that money is returned to the consumer as a consequence.

An amendment such as this would benefit so many individuals and resolve how additional income from stricter fines is applied. It is not a subject that the Bill adequately addresses, as the noble Baroness, Lady Bakewell of Hardington Mandeville, has recognised in other amendments. Does the Minister agree that the money from the fines should be used to benefit the consumer through mechanisms such as the water restoration fund that we implemented when in government or by using the sum to reduce customer Bills, as this amendment suggests? As such, will the Minister confirm that the penalties will not return to the Treasury under this Government? I beg to move.

My Lords, I apologise to the Committee and the Minister for my absence on the first and second days in Committee. I regret that an attack of Covid meant that I was confined to quarters and unable to travel to London. I did, however, watch the debate on both days on parliamentlive.tv and was therefore able to hear the nuances of the contributions, which you do not always get by reading Hansard. I thank the noble Lord, Lord Roborough, for his comments.

A seminar of all the devolved Administrations once a year, to discuss how to return all fines to the relevant customers, will do nothing to fix the problems of inadequate investment in crumbling and inadequate infrastructure. I am sympathetic to the need to keep customers’ bills to an acceptable level. Consumers should not have to pay for the inadequacies of the water boards to ensure that problems are fixed. I do not see why an annual gathering of the devolved Administrations or other authorities will be sufficient to refund bill payers in a timely fashion.

On these Benches, we believe that setting up a water restoration fund is a much more effective and transparent way of moving forward. It is also more likely to see the necessary investment in infrastructure carried out in a timely fashion. I will listen to the Minister’s response. However, I do not feel certain that she will give this amendment a positive welcome.

My Lords, I thank the noble Lord, Lord Roborough, for raising this important issue and tabling Amendment 70, which speaks to the administration of fines. I too welcome the noble Baroness, Lady Bakewell of Hardington Mandeville, back to her rightful place. I hope that she is now completely recovered, but I also congratulate the noble Earl, Lord Russell, on doing such a sterling job in her absence.

I emphasise that the money from civil penalties imposed by the Environment Agency and fines issued by the court go to the Government’s Consolidated Fund. This is in line with other enforcement regimes under the Regulatory Enforcement and Sanctions Act 2008. On the use of penalty funds, the water restoration fund, which launched in April this year, is reinvesting water companies’ environmental fines and penalties into projects to improve the water environment. Up to £11 million of funding from fines and penalties accrued since 2022 was made available on a competitive basis to support a range of water restoration projects. Defra is continuing to work with His Majesty’s Treasury regarding the reinvestment of water company penalties and fines, because while the Budget has of course now been announced, decisions have not yet been taken on all departmental spending.

I assure noble Lords that there are existing procedures in place to ensure that customers are reimbursed for poor performance. As the economic regulator, Ofwat sets specific performance targets for water companies and, where these are not met, companies must reimburse customers through lower water bills in the next financial year. I will give an example: as a result of Ofwat’s annual performance assessment process, it is requiring 13 companies to return £157 million to customers for underperformance in the financial year 2023-24.

My Lords, I am grateful for the comments from the Minister. It is perhaps not the fullest reassurance that I was looking for about the future destination for fines and penalties. Amendment 70 is, by its nature, a probing amendment and I look forward to further discussions with the Minister.

Amendment 70 withdrawn.

Amendment 71

71: Clause 6, page 11, line 9, at end insert— “(11) Section 5(6) also applies for the purposes of this section.”Member’s explanatory statement This amendment provides that Clause 6 applies to water supply and sewerage licensees only in relation to their licensed activities.

Amendment 71 agreed.

Clause 6, as amended, agreed.