Water (Special Measures) Bill [HL]

The Bill also includes provision to make obstruction of the general investigatory powers of the Environment Agency, Natural Resources Wales and the Drinking Water Inspectorate punishable by imprisonment and allows for executives to be held personally liable for obstruction where the offence has been committed with their consent, connivance or neglect. This will help the water industry regulators to carry out effective investigations and will bring criminal charges against persistent lawbreakers.

To further ensure that non-compliance is tackled, the Bill includes provisions to enable the Environment Agency and Natural Resources Wales to issue automatic and severe penalties for certain offences, as well as provisions to strengthen environmental civil sanctioning powers so that regulators can impose a penalty on the civil standard of proof for water industry offences. This will ensure that water companies face rapid repercussions where it is immediately clear that they have acted unlawfully, and that rapid enforcement action is taken against minor to moderate offences before they can become a more serious matter.

To ensure that the regulators are able to make full use of their expanded and new powers, the Bill also provides for enhanced cost-recovery powers for the Environment Agency, Natural Resources Wales and the Drinking Water Inspectorate to ensure that water companies bear the cost of non-compliance, in line with the “polluter pays” principle. In addition, the Bill contains provisions to ensure the independent monitoring of all water company outlets. These provisions place a requirement on water companies to publish discharge data at 100% of emergency overflows and publish data on discharges from emergency overflows in near-real time. The Bill also places annual pollution incident reduction plans on a statutory footing, increasing transparency around water company operations. The Bill will also bring forward provision to modernise the existing special administration regime for the water industry, to bring it in line with special administration regimes for other regulated sectors and to ensure that taxpayer money is protected in the event of a water industry special administration regime.

Collectively, these measures represent the most significant increase in enforcement powers in a decade. This will help to ensure that water companies are delivering for customers and the environment as we move towards the largest-ever investment period for the water industry, with an £88 billion spending package proposed for the next price review period.

I turn to delegated powers and devolution. The Government are committed to working closely with the devolved Governments to tackle shared problems, including the issues facing the privatised water industry. My officials have worked closely with Welsh counterparts during the development of the Bill, and I am delighted that most provisions in the Bill are expected to apply to both England and, at the request of Welsh Ministers, Wales. Although the Bill does not apply to Scotland or Northern Ireland, my officials have also engaged with these devolved Governments during the Bill’s development.

With regard to the Bill’s powers, it contains provisions both to amend primary legislation and to confer a limited number of delegated powers on regulators and the Secretary of State. To reflect the evolving nature of the issues facing the water industry and the changing expectations of customers, the Bill contains eight legislative and three non-legislative delegated powers. These provisions contain a mix of powers conferred directly on regulators—for example, the power to set rules in relation to remuneration and governance—and powers that will be enacted via the affirmative resolution procedure, such as the power to amend relevant environmental regulations. These delegated powers will enable government to keep pace with and react to developments in the water industry. I assure noble Lords that these powers will be subject to all appropriate scrutiny and safeguards.

Since the Bill’s introduction there has been some inaccurate reporting on the effects of its provisions. I would like to take the opportunity to correct some of these misconceptions, to ensure that we can have a fully informed and helpful debate.

First, it has been reported that some of the Bill’s measures—for example, those that will enable the banning of bonus payments and those that enable imprisonment for obstruction offences—already exist in law. Let me explain why this is not the case. Although it is possible for Ofwat to set expectations with regards to executive remuneration, it does not have the power to set legally binding rules. The Bill introduces such a power, meaning that Ofwat will be able to stop the payment of bonuses to executives where performance has not been up to scratch—for example, in the areas of consumer matters, environmental performance, financial resilience and criminal liability. Similarly, although the obstruction of regulators can be punished by imprisonment, that is currently possible only in extremely limited, emergency circumstances. The Bill strengthens the maximum penalty for all cases of obstruction to imprisonment for up to two years. It also makes that offence triable in the Crown Court and, importantly, ensures that executives can be held liable for wrongdoing, which is not currently the case.

Secondly, there have been reports around the use of special administration regimes to nationalise water companies and on the impact of the special administration regime clauses on customer bills. I want to be clear. Special administration is not a form of renationalisation. It is a tool to ensure that vital public services continue to be provided after a company fails. The Government would take no ownership or management of the company during a special administration regime. It would cost billions of pounds and take years to unpick the current ownership model; it would slow down our reforms, leave sewage pollution to get only worse and stall much- needed investment. There is a very high bar for the imposition of a special administration regime. The Government and Ofwat will always act to protect consumers as a priority, and any intervention that would increase customer bills would be considered very seriously and as a last resort.

Having spoken about what the Bill will do, it is important to note as well what it does not cover. This Bill focuses specifically on measures relating to the regulation of water companies, taking immediate action in response to the poor performance of the water industry in recent years. However, the Government are clear that the Bill alone will not be enough to fix our water system. It is an immediate down payment on the wider reform that is needed after years of failure and environmental damage. It is for this reason that the Government have also announced a review to fundamentally transform how our water system works and clean up our rivers, lakes and seas for good.

Through this review, we will examine holistically the framework that underpins our water sector; we will invite views from a range of experts and stakeholders; and we will hold a public consultation to ensure the proposals are robust and radical enough to meet the public’s appetite to clean up our polluted waterways. I am sure that many noble Lords here today will take a keen interest in the work of this review, and I have already had discussions with many in this House about wider issues facing the water sector. I look forward to working with noble Lords closely as the review progresses, and further detail on this will come forward later this autumn.

To conclude, I know that there is considerable support, both within Parliament and among the public, for this Bill. I hope that Members of your Lordship’s House will agree on the importance of working together to reset and transform the water sector through these first crucial steps and the work to come. I look forward to what I am sure is going to be a passionate debate; I would expect nothing less for a Bill of this importance and I am greatly looking forward to hearing noble Lords’ contributions. I hope that your Lordships will support the Bill and ensure that we work together to strengthen our regulators and hold water companies to account.

which did not work then, despite the rhetoric. That is a lot of activity, but where is the impact assessment by the Government to show what it will achieve? The Government hope that automatic fines and the changed burden of proof will free up the Environment Agency to pursue the larger and more complex cases. If that is the case then we should see the calculations leading to that belief.

Will the measures in this Bill improve water quality? Charles Watson, the chair of River Action, said that while it was a “relief” to see the new Government acknowledge problems in the water sector, only a “comprehensive and holistic review” of regulation would fix matters. James Wallace, the chief executive, said:

“Talking about CEO bonuses is not going to sort things out. What we really need to see is a regulator, the Environment Agency, with its teeth given back and its funding given back”.

The Chartered Institution of Water and Environmental Management, while welcoming the review, said it is of paramount importance

“that this review cuts right across the activities of all government departments. From Defra, through housing, transport, energy, health and more. It mustn’t be kept in a Defra-sized box, or it will fail to match Reed’s ambitious pitch”.

I hope the Minister will confirm that the review will cut across all those different government departments and agencies.

Those I have just quoted welcome the Bill as a little step forward, but the real achievement would be if the Government could deliver on the Secretary of State’s vision in the review. That is why I conclude that the Bill is good political talking tough, but it might achieve little; it is possibly activity over achievement. However, we shall examine it fairly and seek to improve it, while asking some key questions.

First, I want to look at new Section 35B of the Water Industry Act 1991, which introduces the concept of “specified standards”. The existing Section 35A already deals with remuneration. The company has to base it on meeting “standards of performance,” in the wording of Section 35A of the 1991 Act. The water services regulation authority, Ofwat, will be given the power to draft rules on what these specified standards are, including whether someone is a fit and proper person to be a senior officer,

“or in respect of other matters”.

That is quite a wide-ranging power. How will it interface with the Company Directors Disqualification Act 1986, which provides extensive powers to disqualify a director? The Financial Conduct Authority also has rules on what is a fit and proper person.

In future, we could see water company executives who will have satisfied all the company law criteria to be a director, but their remuneration will be subject to new so-called “specified standards”. Those standards will include

“consumer matters, … the environment, … the financial resilience of undertakers, and … the criminal liability of undertakers”,

and

“any other matters that the Authority considers appropriate”.

Who on earth will ever want to be a director of any water company with those potentially onerous conditions? We have no idea yet what those conditions will be, and it is essential that we have some indication of that before we get to Report. The Secretary of State has to be consulted under new Section 35C. Since the Government have specifically made a big fuss about these new rules, the Government must have some idea of what they want in them and cannot say, “Oh it is not up to us; it is entirely up to the authority in due course to invent the rules”.

Punishing directors for carrying out the wishes of the shareholders is surely the wrong approach. When Macquarie had 48% of the shares in Thames Water, jacked up the debt by £2.8 billion and took out £1.1 billion in dividends, do we really think that the managing director and directors could have stopped that? The majority shareholder, I submit, was in the driving seat. Macquarie and other shareholders would have rapidly replaced those directors and executives if they tried to limit dividends and spend more of the profits on infra- structure. There is no question on these Benches of us seeking to let water companies off the hook. Where they have failed to deliver, they should suffer sanctions and penalties. However, penalising the management is targeting the wrong group; it is the shareholders who should lose out financially for company wrongdoing, however that may be defined. The description of a person in a “senior role” includes

“such other description of role with the undertaker as may be specified”.

We need to know a little more about who those people might be. That is something we shall need to explore in Committee.

I turn to Clause 4, which amends Section 110 of the Environment Act 1995 with a new imprisonment provision, of which the Government have made a big thing. Sections 110(1) and (2) of the Act sets out the offences of knowingly obstructing “an authorised person” from carrying out lawful duties, of failing

“to comply with any requirement”,

of preventing

“any other person from appearing before an authorised person”

or of failing to “provide facilities” for an investigation. That person shall be guilty of an offence. The penalty is a summary fine or imprisonment to the maximum of the magistrates’ court levels. On indictment, it could be a fine and/or up to two years in prison.

That is the current law, so how does Clause 4 change it? It makes not a single change to the offences in Sections 110(1) and (2). It makes not a single change to the fines and imprisonment. I am very happy to be corrected by the Minister, and I hear what she said about there being a difference. I am happy to be educated on that in Committee, but it seems that the Government here are dancing on the head of a pin—making a big thing about a tiny little change. I think these offences were included in the past. This clause seems to replicate existing provisions to let the Government boast that they are taking tough action against water undertakers, to make a political point.

I instinctively dislike civil penalties imposed by government or arm’s-length bodies or other organisations, whether it is the Inland Revenue or a parking fine company. It avoids due process. I leave it to the noble and learned Lords in this place to give their opinions on the dangers of changing the burden of proof from “beyond reasonable doubt” to just “the balance of probabilities”. I have no problems if a company has genuinely committed the offences and deserves the penalties, but changing the balance of proof could mean that some were unjustly penalised. That could result in large fines and damage to the company’s reputation.

I have similar concerns with Clause 6, on automatic penalties for specified offences that will be created by the Secretary of State. At least those have to be laid before Parliament under the affirmative procedure, and we will have a chance to debate them. As the noble Baroness pointed out on the delegated powers, the Bill gives enormous powers to government agencies. I look forward to reading the Delegated Powers Committee’s report to see what it says about the powers in the Bill and whether it agrees with the Government that the scrutiny they propose is adequate. I also want to see more of the Government’s thinking on the regulations they propose. They cannot say that it will be up to Ofwat and the Environment Agency to invent the rules, and that it is nothing to do with them. They have clear ideas about what they want in the regulations, and we need a steer.

We will also want to explore the Government’s thinking on the involvement of consumers in board decision-making. The Bill is exceptionally vague on that. Clause 1(3) requires a water company to involve consumers in any decisions

“likely to have a material impact”

on consumers. I suggest that any decision made is likely to have an impact on consumers, so what is the Government’s definition of “material”? Clause 1(3) also says that consumer views may be represented by someone being on a “board, committee or panel”. These are radically different concepts, from executive decision-making to an advisory panel. Again, we would like to hear more of the Government’s thinking.

The Secretary of State made a major speech to the water industry on 5 September, and committed the Government to building nine new reservoirs, multiple large-scale water transfer schemes and 8,000 kilometres of water mains pipes, and to upgrading 2,500 storm overflows. As the noble Baroness said, Ofwat costed that at £88 billion. The Secretary of State, in his interview last Sunday, was adamant that every penny of that money would be raised in the private sector and invested within the next five years. As the Secretary of State is clear that these things need to be done—a lot of them were set out in the Plan for Water of 2023 —and it would be a real achievement to do them, why are they being kicked into a long-term review? That is what we should be discussing in this House as soon as possible—the balance between investment and increasing water bills.

The Secretary of State’s endorsement of privatisation and bringing in private investment was interesting. He said that his plans would

“unlock the biggest ever investment in our water sector, and the second biggest private sector investment into any part of the economy for the entirety of this Parliament”.

In other words, he was saying that privatisation worked, but proper regulation was inadequate.

Those are the big issues that will actually deliver a better water industry, not the presentational matters in the Bill. Nevertheless, we will explore it constructively, support it where it is right, and seek to amend it where necessary to ensure due process and clarity. We look forward to addressing all that in Committee.

“We want an end to pollution, clean rivers and seas. We wanted transformative action and these small steps do not satisfy that goal”.

Similarly, Charles Watson of River Action said:

“What we’ve got today is a long list of measures that will cost the government nothing and is really not going to fix anything because it’s the system that’s broken”.

The review of water health is welcome. Is the Minister able to confirm that the review will be independent of government, with an independent chair? When will it start work, and when is it expected to complete? Steve Reed has said that a “full review” of the water sector will take place over the course of this Parliament. I hope that Labour has the courage to be brave. It also needs to find its own policies and grasp the reform nettle. Why is more comprehensive legislation not yet ready, after some 100 days, on such a fundamental issue?

The broken system and the consequences of light-touch regulation were all issues at the general election. Our rivers, streams and lakes have been polluted to the point of ecosystem collapse in some cases. I am proud that my party has led the campaign on these issues, which cut through to people on all sides of the political spectrum. The broken system saw the polluter paid time and again, instead of the “polluter pays” principle ever being applied.

My warning to Labour is that the people who voted for it did so with an expectation that real action would be taken to resolve this mess, and that it would be undertaken at scale and pace. The Liberal Democrat position is clear: out-of-control water companies must be forced to put the interests of the environment before profits. They must be held to account for their corporate failings. Our policies include plans to abolish Ofwat and install a clean water authority—a regulator with real powers. We would turn private water firms into public benefit companies—the quickest and least costly method of resolving this mess. England remains the only country in the world to have privatised its entire water system, and for good reason.

The hard part about scrutinising the Bill is that the important parts of the puzzle are not in it at all. They are yet to come, and we do not know exactly when they will arrive and what they will say. I remain to be convinced that, even with further legislation, Labour can keep private water companies and the existing regulation architecture, including Ofwat, in place, and pull off the magic trick of protecting the environment, making regulation fit for purpose, securing the billions of investment and protecting bill payers in the midst of a cost of living crisis.

Can the Minister reaffirm that, where water companies systematically use overflows to dispose of untreated sewage in dry conditions, it is the Government’s intention to swiftly prosecute them? Enforcement powers exist already—water industry bosses can be sent to prison under certain circumstances—but these powers have hardly ever been used. Since 2001, the DWI has brought only three prosecutions and given two cautions. Are the Government clear that the regulators will have a firm touch and prosecute breaches?

It is welcome that the Environment Agency will be able to levy automatic fines and recover costs, but cost recovery is retrospective and does not pay for the enforcement today. The Environment Agency had its budget cut almost in half between 2009 and 2019. Will this Government properly fund enforcement? Laws cannot be enforced without effective regulators. We need fundamental regulatory reform. The Bill could be strengthened through the inclusion of environmental and clean-water duties on Ofwat. Companies that persistently breach obligations should face the prospect of special administration. We need much larger fines that are a real deterrent. We need legislation which ensures that funds from fines will be invested in environmental projects through the water restoration fund. Enforcement is still based solely on ecological impact, with no requirement to restore areas that have been severely polluted in the past. We need more investment in mechanisms and processes that work with nature—so-called nature-based solutions. All water companies should be required to implement pollution reduction plans. Ofwat should have a statutory duty applied to contribute to meeting our climate and nature targets.

The Bill has many measures coming in at different times and subject to different consultation processes by associated regulators and the need for many measures to be approved by statutory instruments. When does the Minister envisage that all the measures contained in the Bill will be enacted? Will the Minister agree to work with your Lordships’ House to ensure that measures in statutory instruments are able to be debated on the Floor of the Chamber as far as is possible? Finally, I worry that the villain of the piece is the lack of funding for enforcement measures. Only real reform, determination and hard cash will ever change this.

Throughout this Bill, there are frequent references—sometimes slightly confusingly—to new powers for the regulators. Dividing regulation between Ofwat as the financial regulator and the Environment Agency as the environmental regulator has, with hindsight, allowed the industry to evolve in a way that has damaged the aquatic environment and offended the public’s perception of our green and pleasant land. The state of our rivers, lakes and beaches is a national disgrace—we must surely all admit that. At last, this Government are trying to overcome this stain on our reputation and our sense of well-being. I have a concern, however, that unless we improve the way we regulate the polluters we will not in the long term arrive where we want and need to be in terms of the ecological state of our inland and coastal waterways.

A number of us yesterday received emails suggesting that Ofwat should be given an additional duty to protect the environment. Whereas this is a laudable intent and something that all businesses and indeed individuals should aspire to, I am not sure that, in the current regulatory structure, it would be sensible to add this statutory duty to the other regulator while it is principally the duty of the Environment Agency.

I turn now to some specific ways in which I think the Bill could be improved. I am very grateful to the Minister for a meeting that a number of us had with her on Monday. It is, I think, significant that the Bill has been tabled in this House, thus enabling it to be better scrutinised—and improved—before it goes to the other place where, as we know, very few amendments will ever be properly considered, let alone voted on.

I am a bit concerned at the idea of consumer representatives on boards. In my experience, such defined interests on a board are not likely to improve the effectiveness of the board. New Section 35B(6), inserted by Clause 1, on page 2 of the Bill, does refer to a “committee or panel”—as the Opposition spokesman has already said. I believe that one of these would be much more effective and appropriate, particularly if the chief executive was required to have regular meetings with such a panel. If consumer interests are to be represented, why not also environmental interests, which I would have thought are, in this circumstance, equally important?

In new Section 94EA, inserted by Clause 2, the requirement for water and sewerage undertakers to prepare and publish a pollution incident reduction plan should, I suggest to the Minister, be extended to include a legal requirement to implement the plan. There are too many cases of plans being announced and then not being delivered.

The Bill introduces the concept of “emergency overflows” in addition to the permitted combined sewage overflows, or CSOs. I understand the department’s wish to have another category of overflows, but it surely cannot be justified that the water companies can claim that an emergency overflow is legal if it is caused by an electrical power failure, as detailed in new Section 141G(2)(a), inserted by Clause 3. Any other public service provider, such as a hospital or a school, would be required to have in place sufficient electricity generator capacity to cope with power failures. I suggest to the Minister that this is too easy an escape clause for the water companies.

In conclusion, I support this Bill but I hope that, in Committee, we can help the Minister to make this an even better Bill before it goes to the other place.

There is also a problem with local councils. First, if a council has an application for planning permission for a chicken farm, it cannot look at the total number of chicken farms in the area but has to look at the case for that individual farm—and that causes it, naturally, to have to say yes. That is especially so in areas such as ours, where small farming is so important for employment.

Should we blame the farmers, because after all this substance comes out of the backsides of their chickens? They should not cop the whole rap—small farming is a religion where we live, and quite rightly so. Farmers have been overwhelmed with advice from the Government and their agencies as to what they should be doing, but doing it can be costly, as there is a shortage of government funds and some advice is not taken, however wise it may be.

At the end of the day, the culprits that I prefer to finger are big agra—and in this case Avara in particular. It was formed in 2018 by a joint venture with Cargill, a UK company; it is one of the UK’s biggest food businesses, with £1.5 billion-worth of turkey and chicken. The heart rather misses a beat at the thought of all those chickens and turkeys. Its directors are paid on a scale that would make even water company directors envious, at £438,000 each per year for doing their job. It would do no harm if there was proper scrutiny of their pay, in the way that the water industry itself is to be controlled.

However, in fairness, Avara is not coining it in; it made an operating loss of some £11 million according to its latest annual report. It is certainly not indifferent to the damage that can be caused by its activities; it has to retain a social licence to operate and, if it goes on messing up the environment for everybody, it will not be allowed to stay in business. That means expensive shipping of the stuff to places where it is more used as a fertilizer and less harmful.

I imagine that some of those directors on £438,000 a year are shaking in their boots at the arrival on the scene of the noble Baroness, Lady Hayman. When she wants action, in my experience action is what she normally gets. If this Bill does not provide sufficient solution to the problems, she will find something that does—I promise you that. She repeated today the Government’s pledge of wider scrutiny of water, which could lead to some huge changes.

I also, in a House that is not an elected House, pay tribute to the local citizens who put their backs into campaigning against this stuff, including scientists who provided 200 samples a month of water from the Cambrian mountain source to where the Wye comes out in Monmouth. There is no doubt whatever that they have had had an effect. Natural Resources Wales at one stage claimed that chicken poo had nothing to do with what was going on, but even it has had to concede that now.

We can make some progress through amending this Bill. As noble Lords know, those possibilities are being explored. At the very least, the Bill and the debates on it present a matchless opportunity to promote the cause of this iconic river and stop it dying before our eyes.

I notice that the document that appeared only late this morning—the memorandum from the Department for Environment, Food and Rural Affairs about delegated legislation—states that, in particular in this part of the Bill:

“This power is intended to be used exceptionally, and only in circumstances where the Secretary of State considers water companies to have failed to include material relevant to the function and purpose of a Pollution Incident Reduction Plan … There is no parliamentary procedure required for giving directions under the WIA 91”—

the original Act—

“and the Department does not consider that the nature of the direction proposed would require a departure from that position”.

I have to ask the Minister to look again at that because it is important in this section of the Bill that Parliament, in both Houses, is aware of it.

Clause 3, which of course is new Chapter 5 of the Water Industry Act 1991, requires water companies to report on discharges within very narrow timeframes. That is all well and good, but I am disappointed that the Government are not also seeking, even if it is in a different Bill coming forward, to reduce the volume of wastewater entering the sewerage system in the first place.

Something which I have raised several times on the Floor of the House is the use of grey water, from rainwater run-off and domestic appliances, which adds to the volume of the sewerage system. I have asked several questions about the need for both domestic and commercial changes to building regulations; I have always been told by the Front Bench that it is too expensive. Surely, with the Government’s ambitious housebuilding programme, now is the time to incorporate it in new builds, where the need for immediate connection to the existing system may end up being in conflict with the measures in this Bill. I hope that the Minister will, if necessary, discuss this with the appropriate department with those responsibilities.

There are a few other things that I would like to raise. Will there be a review of existing licences, some of which go back many years?

When I lived in Devon, my home was subject to three feet of flooding throughout the ground floor on two occasions, eight years apart. When a house floods like that, I know to my personal cost that it is not just a matter of waiting for the water to go down. We were out of our home for six months each time. I would have liked to have heard more about the need for flood prevention in critical areas. We all know this is going to get worse due to climate change.

Have the Government anticipated that higher corporate financial penalties, as promised in the Bill, may be scapegoated in future to explain the lack of infrastructure capital investment? How can this be avoided? I hope the Government have reflected on that.

I hope to participate in Committee, when we shall of course deal with the detail. Will the Minister publish an impact assessment before Committee? Can she confirm the timetable after Royal Assent and say when she anticipates the measures in the Bill will be enacted?

Like other noble Lords, including the noble Earl, Lord Russell, who spoke so well earlier, I want to add my voice to say that I hope that, in summing up, the Minister today will be able to say a bit more about the review on which we are all pinning such high hopes. Like others, I would very much like to see a very clear and firm look taken at the operating and financing models of companies. My party has long and strongly argued for social and environmental purposes to be incorporated in water company corporate articles of association. I very much hope to see that sort of aspect looked at.

We need to make sure that all areas across government are included, because there are so many areas which impinge on how we manage our water, including talking about planning rules for new homes and the right to connect for developers, or incentivising sustainable agriculture so that we help farmers to do what we need them to do and not contribute to some of the run-off that the noble Lord, Lord Lipsey spoke so powerfully about, and really starting to prioritise catchment-scale planning for water. We need to look at all the areas in that review and ensure that we have an enforcement regime that is worthy of the name. Without that, it is not worth the paper it is written on.

I will add one thing that no other Member has yet mentioned this afternoon. I hope that the review will look at the role of consumers, of us as individuals, in paying for all the new infrastructure that will be required to deliver the water services we want and need and also at our responsibility to save water, which for too long has not been articulated strongly enough. I remember that 10 years ago, during the passage of what became the Water Act 2014, I made the case for compulsory water metering and better standards for installations in homes. The case for compulsory water metering with social tariffs has not gone away; it is still here. However, I hope that the Government will at least look at the role of what consumers are expected to do and pay for in this whole review, because they must be an integral part.

I was very pleased to hear the Minister say that there will be public consultation on this, because it is our water system. It is a problem that all of us know about, wherever we live, whether it is on the Wye or me by the River Wey in Surrey. We have all had our water stopped and have all seen slurry in the rivers. All of us have a say in this and the public will want us to do the best we can to help the Government make this special measures Bill and the review what they need to be.

We are not even being offered a guarantee of clean water or that the leaks will be fixed. In fact, we have the insanity of a country soaked in record rainfall arranging a deal that would use tankers to import Norwegian water in the event of drought. That is so lunatic that I cannot even finish my sentence about it. As other noble Lords have said, water is a basic of life. We need water—all life needs water—so why is it in private hands and subject to profiteering?

Much of this Bill is about what happens when a water company fails and goes into a special administrative regime. Ministers have said on several occasions that they will not bring water companies into public ownership because of the cost. They have been quoting a six year-old Social Market Foundation report, but they ignore the very recent calculations by Moody’s and the S&P credit rating agency that these shares are junk. Their estimate of how much it would cost is very different.

Professor Ewan McGaughey of King’s College London said:

“Special administration would not cost the Treasury or taxpayers anything ... special administration enables the Minister to put a plan before”

the High Court to cancel a company’s debt

“if continued payments to banks would interfere with properly carrying out the water company’s sewage or clean water functions”.

So why does the Minister not just do that? Special administration sounds great and very cheap. As Professor McGaughey said:

“The best way to clean our water is with more investment. Forty percent more investment would be possible if we stop bailing out banks and shareholders with billpayer rises. It will cost us over £12.5 billion this Parliament to keep paying shareholders and banks. … The right way to close this black hole is to make failed companies lose their licences, cancel the debt and transition to public water … This is all possible under the existing law”.

As for the debt that was accumulated to pay shareholder dividends, I understand that the Thames Water debt is now being traded by hedge funds. They are buying this debt on the cheap because they think this Government are stupid enough, or corrupt enough, to compensate them at a higher level. As much as I hate the idea of rewarding the parasites in our water industry with compensation for worthless shares, I dislike even more the idea of hedge-fund managers making a profit from a Labour Government’s ideological rejection of public ownership, so will the Minister give me an assurance that minimal compensation will be paid to the creditors of failed water companies and that our water bills will not be used to line the pockets of the hedge funds?

The Minister mentioned in her opening statement that this Bill had public support. I knocked on a lot of doors during the general election—I spoke to a lot of people in their homes and on the streets—and I think that a huge number of people, if not the majority, would support the following criteria for a more radical water Bill: no compensation for shareholders, minimal compensation for creditors, and public ownership being one of the options for these failed companies.

I will bring forward amendments to ensure that this Bill does not simply allow these failed zombie companies to continue extracting bill payers’ cash while loading huge amounts of debt on to the balance sheet. The Government need a serious look at the opportunity to bring these companies into public ownership, and this Bill should give Ministers the option to nationalise these companies where it makes sense.

To date, there have been no restrictions on dividend payments. Not a single water company discloses its distributable reserves, so we have no idea of their dividend- paying capacity anyway.

The Government are pinning their hopes on Ofwat, but Ofwat is not really up to the job. It has presided over the entire mess. It has not curbed financial engineering. Water companies continue to inflate their level of investment by capitalising interest and repair and maintenance payments. That is permitted by Ofwat. Ofwat systematically favours companies over customers. Anyone has only to look at how the pricing formula PR24 operates. Ofwat uses fictitious gearing ratios to enable companies to receive real excess returns. That should really be a criminal offence.

Ofwat cannot be trusted. It is too cosy with the water industry. Two-thirds of England’s biggest water companies employ key executives who have previously worked at Ofwat. Executives of water companies and regulators regularly meet in hotels and expensive private clubs to discuss their common position and how to quell public anger about bill rises and sewage dumping. This Bill does absolutely nothing to check collusion with and the cognitive capture of the entire regulatory apparatus.

On 5 September, the Environment Secretary said that

“customers will have the power to summon board members and hold water executives to account through new customer panels with teeth”.

Without a statutory base, customer panels will achieve absolutely nothing. In my view, at least 50% of the board of directors of any regulatory body and the regulated entity need to be directly elected by customers. Customers must also vote on executive pay. If they think executives deserve higher pay and bonuses, then they can award them. Let there be a bit of democracy. At least give people the power to check abuses. If the Minister has any objections to the democratisation of the water industry, it would be good to hear them.

The main aim of the Bill seems to be to prevent public ownership of the industry. It enables Ministers to restructure water companies and return the monopoly to the private sector, with the cost borne by customers and the public purse. Clause 10 empowers the Government to provide financial assistance that they may or may not ultimately be able to recover. This strategy cannot address the cause of the crisis, which is profiteering and cash extraction by water companies.

If the water industry had been in public ownership for the last 35 years, £85 billion would have gone into infrastructure instead of dividends. Interest payments on debt would have been much lower as the cost of government-backed debt is always lower than that borne by companies; that would have freed billions more for investment. But the Government oppose public ownership.

In response to an Oral Question from me on 23 July 2024, the Minister said that public ownership

“would cost billions of pounds”.—[Official Report, 23/7/24; col. 364.]

That seemed to imply that the Government had actually done some calculation. So I quickly followed it up with a Written Question seeking details of that calculation. All I got in response was a reference to the Social Market Foundation report of 2018. If any of my master’s students had written that as a dissertation, they would have been guaranteed a fail. It is a dismal piece of work commissioned by water companies. A former government adviser has said that that report has “virtually no intellectual substance”. The £90 billion quoted in that report is utterly incorrect. When taking over an industry, one buys only the equity, not the debt—and that is what it included.

In 2019, Moody’s said that the equity value of water companies was only £14.5 billion. Since then, lots of changes have occurred: most water company shares are junk or worthless. Debt is junk: some of the Thames Water debt is trading at less than 6p in the pound. The Government should let the companies collapse and bring them into public ownership at low price. That is how capitalism operates: if a company collapses, it does not get bailed out. Only public ownership can provide long-term stability and it ought to be done through a not-for-profit organisation. The cost of this can be loaded on to the acquired companies, as the private equity model does, or it can be recouped by issuing public bonds, ensuring that people actually own essential industries.

The Bill is delaying the inevitable and, naturally, I will help the Minister by tabling some amendments.

It is perhaps overoptimistic of me to expect the Minister to excise Clause 1 from the Bill in its entirety. There may, however, be areas of common ground on which I would welcome her thoughts. The Bill is too widely drawn. It states that the rules will apply only to pay which is linked to

“the meeting of any targets or performance standards”

by the water company or the individual. There is no clarity on how the relevant standards will be measured, which will fall to Ofwat to determine, nor on when the relevant trigger occurs and which remuneration will be affected. For example, will the relevant remuneration be that payable in respect of the year in which the failure occurs or when the penalty is imposed? Where remuneration is based on multi-year performance and there is a failure in only one of the years, would the whole award be impacted or only a proportion?

The key elements will be the metrics which Ofwat applies to determine whether the standards have been met. A properly constructed system of metrics linked to objective measures, which seeks to eliminate reward for failure but which aligns with the company’s own key performance indicators and does not penalise those in the industry who are meeting or outperforming stringent targets, should be the aim. Should the rules, however, be punitive and have the effect of discouraging the best people from working in the industry and restrict water companies from rewarding performance when appropriate, the consequence will be damaging.

Do we really want companies to move away from bonuses and long-term incentive schemes linked to performance to compensating increases in fixed pay? There is a precedent within the financial services industry when mandatory bonus caps were imposed—since removed by the last Government, a move endorsed by the current Government. The experience was not a happy one because it removed incentivisation and increased fixed costs, to the detriment of consumers.

In terms of employees within the scope of these rules, they apply to the chief executive and other directors of the regulated water company. The Bill provides that Ofwat may extend the rules to

“such other description of role”

as it specifies. Not only would such an extension be wider in scope than the current disclosure requirements of the Water Industry Act 1991, but it would be difficult to implement in practice as different water companies will have individuals described differently by title and role. This additional power conferred on Ofwat by the Bill should surely be removed if we wish to attract and support the next generation of leaders in this vital industry from middle management. This will not be achieved by extending these restrictive remuneration practices to them.

Clause 1 also includes provisions intended to establish consumer involvement in corporate decision-making. Clause 1(6) provides that this may include a requirement for persons representing the views of consumers to be

“members of a board, committee or panel”

of the water company. While I support the principle of strengthening the voice of consumers, this should not be through a highly prescriptive, one-size-fits-all approach.

We do not have different categories of director in this country. Non-executive directors may have particular specialisations, but they are chosen for their wider skills and ability to make a comprehensive contribution. Those representing consumer interests may not wish, or be equipped, to sit on corporate boards, with all the responsibilities and liabilities that entails. It should not be for Ofwat to require that such people sit on the boards of the water companies; it should be left to the companies to decide which forum best suits their own requirements, whether it be board, committee or panel. Providing such flexibility was effective when companies enacted the workforce engagement mechanism for the purposes of the UK Corporate Governance Code.

Finally, I turn to the section on special administration orders, which relates to the insolvency of water companies. Clause 10 gives the Secretary of State the power to modify a water company licence in order to recover any shortfall in costs for the Government from its consumers, and new Section 12J(4) extends this recourse to all other companies in the sector. Forcing good companies and their blameless customers to bail out failed companies cannot be justified. This unquantifiable potential liability will serve only to deter much-needed external investment in the sector.

There are provisions of this Bill which will deter the investment that the industry so badly needs, and experienced executives from working in it. Let us not return to a pre-privatisation environment. In particular, the discretion given to Ofwat is too broad, but I look forward to the next stages of the Bill, which will give us opportunities to improve it.

At this point, I declare that I was a non-executive member of Yorkshire Water for 10 years, fulfilling the role which the Bill identifies as being a voice for communities and customers. That this is a role which all boards should include is welcome, although I accept the argument made by the noble Lord, Lord Remnant, that it is not one we should define as is indicated in the Bill—that will not work.

Aside from the financial models, the problem is Ofwat. As the prime regulator—though not the only regulator—it needs to be abolished and replaced with a body that has more powers. Some of those powers are set out in the Bill, but fundamentally there needs to be a different regulator. As was previously said, we have a revolving-door syndrome whereby executives of water companies become executives of Ofwat, and sometimes back again. That is a malaise that has to be stopped; it reinforces bad behaviours and no new thinking comes into the sector. Perhaps as a result, Ofwat has failed to regulate the sometimes overly high profits to shareholders and bonuses to executives. Furthermore, as other noble Lords have mentioned, Ofwat has no powers to force water companies to improve environmental water quality, which includes preventing storm overflows being used as a cost-saving measure.

One of the inherent challenges in reforming wastewater treatment is that the public sewer system also takes the flows of surface water from the road network—something that the noble Baroness, Lady Browning, spoke about. The Government in their drive for more housing need to ensure that sustainable urban drainage is a part of any new housing development, and that, if need be, surface water attenuation tanks or ponds are part of preventing water surge into the public sewer system.

Finally, I urge the Government to consider ownership as well as financial models of water companies in developing a better approach to this essential public service. As part of that thinking, I urge them to develop the concept of a national water grid. It is surprising that areas where there is perhaps too much water are not used to push water down the systems of various companies to help those who are increasingly going to be short of water.

The system, as it is, is not doing its best; some say it is failing the customers and failing the environment. Some companies, in the drive for profits and investment, have lost sight of their sole purpose, which is to provide an absolutely essential public service. This Bill makes small steps in the right direction, but fundamental changes in approach are still needed, and I look forward to the Minister solving all those problems.

Given that this Bill is only part of a broader water industry reform, it is obviously not a panacea, and it will not address many of the egregious issues we face. It focuses mostly on the stick, without providing carrots to encourage and support the investment and good behaviour needed. For example, take the provisions regulating executive pay, which we have heard so much about, and sentencing and liability. The pay provisions take power from shareholders and put it in the hands of Ofwat, while the liability and sentencing provisions increase dramatically the jeopardy and peril associated with working for a water company.

To echo the noble Lord, Lord Blencathra, with these provisions in place, how on earth will water companies recruit the expertise needed to implement the fundamental changes that will be required once the full review is complete? Who on earth would want to become a water company director if they will become subject to punitive sanctions and strict limits on performance-related bonuses? Surely, as the noble Lord, Lord Sikka, noted, this will result in considerable increases in basic salaries to attract the necessary talent. This will impact profitability, increase prices paid by customers and limit the funds available to invest in essential infrastructure.

I am grateful for all the briefings we have received, which accept that the industry’s principal challenge is infrastructure investment. Since privatisation in 1989, and doubtless long before that, the water industry has simply not invested at the rate required to keep up with population growth. This Government are determined to put a rocket under housing development, with their promise of 1.5 million new homes, and yet I see no provisions within this Bill to improve long-term infra- structure investment. I understand that the Environment Agency is already rejecting substantial housing developments across the country on the basis that the provision of water and sewerage cannot be guaranteed. We are all aware of the impact of the nutrient neutrality rules blocking development in sensitive catchments. Could the Minister expand upon the Government’s plans to enable the much-needed increase in capital spending to free these constraints?

As for the provisions on special administration regimes, they are clearly designed with the perilous state of Thames Water in mind. I note that no impact assessment has been published. Is there any risk that the introduction of these provisions may encourage water companies to seek the solace of insolvency sooner than they might otherwise do and thus hasten their collapse?

With respect to environmental matters, I am grateful for the briefing on water industry impacts on national parks, including in the Lake District and Lake Windermere. These provide a good case study of the water industry’s travails. It is noticeable that some of the issues identified, including the heightened nutrient run-off in the summer months when fresh water is scarce, are the product of the popularity of the lakes for visitors and not necessarily due to inadequate provision of services to the resident population. Is this, therefore, not necessarily a problem of the water company’s making but rather due to the popularity and success of the national parks in encouraging the huge influx of visitors into these very sensitive ecosystems? Noble Lords who followed our debates on agriculture and the environment will know that I am passionate about access to the countryside. But that needs to be access that is funded and supported by investment in infrastructure, so as not to damage the vulnerable ecosystems that we so cherish.

I have heard similar issues raised in discussions regarding the River Exe, in which concerned communities bemoan the terrible state of the once abundant river, named “Isca” by the Romans due to its surfeit of fish, which is no longer. These communities blame the farmers for their run-off and the water companies for their sewage leaks, without ever truly reflecting upon the mass of population who consume the food that the farmers produce and then produce the waste that the water companies remove—while insisting on ever-lower prices for both services. Ultimately, it is we who are the polluters. We need to invest properly in both our agriculture and in our water companies if we are to care for ourselves, our land and rivers.

Finally, I note the considerable environmental investments that have been undertaken by various water companies over the years, such as the south-west peatlands project, which has re-established over 1,000 hectares of peat on Dartmoor since 2020. Could the Minister explain how the Government intend to build such upon excellent pilot projects to seek nature-based solutions to the infrastructure challenges that the water industry faces?

What matters is what is happening on the ground—or perhaps I ought to say what is happening in the water. The noble Earl, Lord Devon, referred to Lake Windermere, where, as we all know, there has been a well-publicised campaign about pollution problems. As he said, those are urban not rural in origin. It is true that the water in the lake is not up to the best target standards, but for years considerable sums have been spent, progress has been made and measures put in hand to improve matters.

The problem is that the way in which that campaign has been promoted has had a damaging impact on the tourist industry there. As your Lordships will know, the tourist industry was very badly hit by Covid and has not properly recovered. The message that has been received in many places is clearly—wearing my hat as the chairman of the Cumbria LEP, I have been told this by a number of angry people in the visitor economy —that, if you go on holiday to Windermere, you will be having your holiday on the Costa del Septic Tank. As can be imagined, that is not something that positively encourages people.

This is a very real and serious concern, which we must bear in mind in parallel with the overriding long-term objective of improving water standards. The scale of the problem is such that we cannot solve it all immediately—and if resources are transferred from one place to another place, somebody else is going to suffer. There has to be progress over time, which will inevitably involve a degree of political direction. We do not want to duck that.

Finally, I turn to a similar but much smaller-scale matter, which I hope I will be allowed—having been given my pass to the political tumbril—to illustrate from my own personal circumstances. It is a good graphic example of something that has a much wider application. The Minister, as a noble Cumbrian, knows that my home is too big, and is situated in the Petteril catchment area, which is part of the Eden catchment area—one of the problem catchments in this country. It has been designated as a place of national importance, which, both by statute and by contract, I am obliged to look after properly—and that is what I am trying to do.

Some of the adjacent cottages, which are an integral part of the whole, are served by a United Utilities septic tank subject to a grandfathered discharge licence dating back between 50 and 100 years. Nobody would get a discharge licence on those terms now, but it is valid. The result is that, from time to time, horrifyingly disgusting discharges go straight into a stream that is part of what I might describe as a water feature—part of the garden, which is of national significance. Visitors pay good money to see that and there is absolutely nothing I can do about it.

I have talked to United Utilities about this, and the people there they explain that there is a licence to discharge, albeit that it is below contemporary standards. It is not a priority for them. I can understand their point, and where their thinking is coming from. Across rural Britain, and England in particular, there are many similar arrangements, which for practical purposes are equivalent to the well-recognised and understood private small-scale systems that exist.

I suggest that the best way of dealing with the kinds of problems that such arrangements bring about is to transfer the responsibility for dealing with those discharges from the utility company to the private landowners affected, together with a dowry to enable them to carry out the work. The companies would be relinquishing their responsibilities and taking them off their balance sheet. Speaking for myself—and, I dare say, for a lot of other people—I would much rather be subject directly to the rules and the law, and be able to take responsibility and gain control over my own immediate environment, than have no choice but passively to endure the noxious consequence of the inactivity of the utility.

I raise that as a thought, and in conclusion I simply join others in saying that I am looking forward to considering the Bill, and also the promised review in due course. This manifesto Bill is targeted at a real abuse, but we need to examine it and ensure that it meets its purpose well and avoids collateral damage. After all, that is what the House of Lords is for.

My experience in Ofwat was terrible. It was the weakest possible regulator. I remember one major company failed to meet its commitments on leakage, for example. The tariff would have enabled us to fine it £250,000 for its breach of its commitments, but we actually fined it £12,000. It has always been a weak operator.

I then moved across to the Environment Agency. At the time, I consulted with the Ministers of the then Labour Government on whether I could sit on two boards. I subsequently found that that would have been a good idea—naturally, I would have taken only one fee. That is why, if I cannot have the outcome for the longer term—as the noble Baroness, Lady Jones of Moulsecoomb, was advocating—my second choice would be that of the noble Duke, the Duke of Wellington. That is, to have a single regulator that covers a lot, or all, of the three major regulators—four if you include the Welsh board—in one place, with one strategic plan and one strategic outcome at the price review, whose timing and scope need to be reviewed as well. That would make it a much more powerful regulator than it currently is. That is my second choice, and I hope that the review the Minister promised us comes up with that solution fairly fast.

Another problem with the present situation is that Ofwat and the Environment Agency do not properly talk to one another. This has improved a bit, but the coincidence of their objectives, on both timescale and the way they deal with the companies, is not the best example of co-operation I have found in state bodies. Again, that is a reason I support the noble Duke, the Duke of Wellington.

When I stopped being a regulator, I became a consumer champion. I agree with the doubts people have expressed about putting consumers on the board—that may or may not suit a particular company—but the Consumer Council for Water, which has managed to sustain its lack of resources and still perform a useful role, needs to be seriously strengthened. I ask my noble friend the Minister whether, even in this short-term Bill, we could give extra powers and resources to the Consumer Council for Water. It can represent the interests of both household consumers and small companies, which are crucial users of the water industry’s output. Like farmers and others, they are affected by the environmental regulations that are required to clean up our waterways. The role of regulation of the water sector is not simply about the price and cleanliness of the water that comes through our taps—which has, for the first time in my lifetime, been questioned in one or two areas; it is about the environmental effects on our streams, rivers, seas and beaches. Consumers come in many forms, and the consumer role in this sector needs to be strengthened, not weakened.

I hope my noble friend the Minister can take that point on board and that all these considerations are taken into account in the second stage of this and the review. I also hope that that review is concluded fairly fast, because the companies, consumers and the environment need to know. The rivers, lakes and seas mentioned in this debate need a future different from the one that faces them at the moment.

Care should be taken by this Government to ensure that we do not create an environment where no good, top-quality executives want to go near this industry because of the draconian penalties and the random way in which government and its agencies run roughshod over the sector. Moving from where we are now to where we want to get to is a far from simple task. It will require capable and hard-working individuals to drive change through. In essence, I am saying: do not frighten the horses in a mad rush to punish an industry where those who have created the problems have long gone and those who are needed to sort it out are in short supply.

This begs the question: how was it allowed to get into this state? The answer, I am afraid, comes back to the inadequacies of the regulators. This is a serious cause for concern, as the Bill gives a whole range of new powers to the regulators, which have not shown a high level of competence to date. I ask the Minister to reflect on whether it is appropriate to give the regulators additional powers that interfere with the running of a large-scale business that they clearly do not understand.

In conclusion—to avoid repetition and in the interests of time—I support the comments made by my noble friends Lord Blencathra and Lord Remnant. In particular, I question the fit-and-proper-person test and the need to have consumer representation on water company boards. This, in my experience, will lead to conflict and paralysis in the boardroom, the inevitable slowing-down of decision-making, increased volatility and, worst of all, increased costs for the consumer.

While some water companies—and here again I agree with the noble Baroness, Lady Pinnock—have performed better than others, it is going to be a long, hard and expensive slog to put things right. It will be a thankless task of trying not to succeed but just to make things less bad for a long time, while at the same time under personal risk of financial and/or criminal penalties, compounded by public resentment that the cost will ultimately fall on the consumer. This makes me ponder, as others have: who would now want to take on such a role, with such possible outcomes and high levels of public hostility?

My two questions to the Minister, therefore, are as follows. First, do the Government accept that a very attractive—but no doubt therefore criticised—employment package will be needed to secure, retain and hold to account managers of water companies and of regulators with the necessary skills and robustness? Secondly, do the Government also recognise that, for earlier investors, the party is largely over? They are decreasingly willing to provide capital to UK water companies, and that is a very big challenge for a Government who are seeking private finance to right the wrongs of the past.

Turning now to the regulators tasked with enforcing this Bill, Ofwat has been, so long as water was plentiful and cheap to the consumer, light-touch—and, frankly, outsmarted by private equity financial engineering. The Environment Agency, which will have a vital role in monitoring performance against the stipulations in the Bill, has been drained of resources and morale. I agree again with the noble Lord, Lord Whitty, on the disconnect from Ofwat. Defra, as a supervising department, was found by a committee of this House—of which I had the privilege to be a member—to have been overly complacent about both the water companies and the regulators.

Will the Minister explain how all these issues— the lack of skills, of resources and, above all, of incisiveness—will now change as part of achieving the purpose of this Bill? Simply putting up water bills, as the companies propose, will not create enough money. Hedge funds know this and are reportedly buying up discounted Thames Water paper, to which other speakers referred. Financial restructuring and swapping debt for equity are likely to follow. Will the Minister therefore explain on what grounds the Government think that the regulators—or, indeed, government departments—will be any better at understanding and supervising hedge fund strategies than they were with private equity financial engineering?

Finally, there have been significant issues around the lack of monitoring data and I am glad to see that the Bill starts to address this. Let us remember that it was civil society, not the regulators, that persistently highlighted the sewage pollution issues and it will be an important monitoring ally in keeping both the water companies and the regulators up to the mark. Otherwise, there a risk here of the regulators marking their own homework and blame-shifting between organisations. New Section 141F set out in the Bill is helpful on this, and this is reflected in the positive comments of the Information Commissioner’s Office. Nevertheless, an amendment is going to be needed that expands it to include requirements that monitoring data must be automatically available, online and in real time, including the volume and type of discharge and an explanation of why it happened and what is being done to mitigate and prevent a recurrence.

To conclude, I support the Bill as far as it goes. It is a first and belated step to address one aspect of the problems of the UK water and sewerage system. The systems we inherited from the Victorians reached their capacity in 1960. To build a resilient water and sewerage system fit for the future, we will need a long-term strategy, cross-party co-operation and consistent long-term resourcing. All of these are very, very substantial challenges.

I therefore urge the Minister to use the passage of this Bill to complete the unfinished business from the Pitt review of 2007 by ending the automatic right to connect, ensuring that developers pay for new connections and mandating developers to construct sustainable drainage systems at the time that a development is built. I shall seek to press the Minister to implement Schedule 3 to the Flood and Water Management Act 2010 without delay, to end the automatic right to connect and to insist on mandatory use of SUDS; otherwise, as the noble Baroness, Lady Parminter, so eloquently pointed out, we will just load more sewage into the watercourses, rivers and seas for the foreseeable future, which is not acceptable.

I would also like the Bill to reflect the impact that the housebuilding programme is having on the ability of water companies to perform their duties under the Bill. The Bill gives the House the opportunity to end the gap in responsibilities between planners, investors and housebuilders and to recognise the responsibility of others, such as highways authorities, which contribute to road surface water run-off entering the combined sewers and storm drains without currently having any responsibility to prevent this form of pollution. That is very costly indeed and is a gap that must be plugged—to coin a phrase.

On Clause 2 and the pollution incident reduction plans, can the Minister say how onerous she expects it will be, in terms of both time and resources, for the water companies to implement them? Will allowance be made through either the existing price review or, more likely, subsequent price reviews for this time and resource factor to be taken into account?

During the passage of the Bill, I hope that we will have the opportunity to consider the role of regulators and comparisons between Ofwat and others such as WICS—the Water Industry Commission for Scotland—particularly as regards customer engagement. I also take note of the fact that Ofwat has only comparatively recently allowed prices to be fixed as part of the quin- quennial review to take account of innovation. Actually, innovation lies at the heart of what the Government are proposing to do in this Bill and the future work that they have set out this afternoon.

Two of the areas in which I believe WICS is very strong in the statutory duties that it performs are promoting the interests of Scottish Water’s customers, including having regard to the interests of current and future customers, and ensuring that customer charges reflect the lowest reasonable overall cost for Scottish Water to deliver Scottish Ministers’ objectives for the water sector. That has in no way compromised the independence of WICS in the way that it operates.

In looking at the level of penalties, I urge the Government to make them proportionate to the offence and the scope and means by which it is actually within the power of the water companies to prevent pollution in the manner in which the Government intend them to be held to account.

Regarding the proposal from the noble Duke, the Duke of Wellington, and others, such as the noble Lord, Lord Cromwell, in support of the idea of establishing one regulator, I remember, in a previous life as a shadow Minister, under the good offices of my noble friend Lord Blencathra, looking at this matter prior to one of the elections—probably the 2005 election. We were going to have “blue water thinking” on scrapping the existing regulators and coming up with one new regulator. So that is the challenge that lies at the door of the current Minister and I wish her extremely well in that regard. We stepped back from that commitment at that time.

There is plenty more to say, and I look forward to saying it in Committee.

The review should therefore cover the appropriate powers and approaches of the regulators. I do not support the creation of a single regulator for the water industry. I think it would be disastrous to combine economic and environmental interests in one regulator. It would hide the environmental and economic trade-offs. As long as there are two regulators, both robustly defending their part of the equation, either economic or environmental, it is a very transparent system.

In addition, if you think about it, regulating the water companies because of their impact on rivers is a rather crazy thing to do when what we should be doing is regulating rivers and water bodies in an integrated way to take account of all the pressures on them. After all, farmers, planners, builders, water companies, fisheries, forestry and a whole range of other economic activities impact on rivers. If we have one regulator which is talking simply about water company impacts and another regulator which is talking about all other impacts—or if, even worse, the regulators are fragmented even further—I think that we would lose sight completely of integrated management of our water environment. I am surprised that the noble Lord, Lord Whitty, was keen on the single regulator solution. I thought that we had trained him rather better at the Environment Agency—he is off my Christmas card list.

The third thing I would like is a review of the culture in water companies. There is a totally different culture in the parts of water companies that deal with drinking water. There is an absolute prohibition on falling from grace in that part of the water industry because drinking water standards are regarded as inviolable, and it is not good for business to poison people. There is not that culture on the other side of the water industry, which deals with sewage. That is very visible considering the prosecutions against and fines on water companies in the recent past. Many of them are not just negligent, but also carried on for far too long and caused even more damage than was necessary, had they been dealt with promptly. We need a radical look to make sure that the high-quality culture in the drinking water supply is merged in the case of pollution reduction measures. That culture really has to change.

The fourth thing I would like in the review is the need, at long last, for an open public debate about the options, trade-offs and costs of cleaning up the water environment. It is not as simple as punishing the water companies and controlling them, and the water environment then recovering. It will not, and it is unfair to wind the public up to expect that, which is what much of the public debate is about at the moment. People think: “It’s all these rotten water companies and if we sort them out we will have a clean environment”. That is simply not the case. There needs to be a properly informed, understandable public debate about how much the public can pay, what they think it is most important for them to pay for and over what period of time. At the moment we have more heat and steam than illumination.

Can my noble friend the Minister tell the House more about the timescale of this review and whether the scope will be consulted on? I have gone on rather long about the review and have very little to say about the Bill itself. It is a bit performative—kicking the water companies, which have lost the confidence of the public and the Government. It is not a substitute for more fundamental action on water policy and the water environment. However, as the Bill is here, I would like to support several of the amendments to it that have already been mentioned, and raise a few of my own. It is important to give an environmental duty to Ofwat to ensure that it cannot be guided, or by default, soft-pedal the environment, as has happened since 2010. I would like the earmarking of all water company fines to an environmental fund such as the Water Restoration Fund. I would like measures to ensure the commencement of Schedule 3 to the Flood and Water Management Act, as the noble Baroness, Lady McIntosh, mentioned. It is outrageous that 14 years have passed since Parliament endorsed SUDS and soft drainage measures to try to reduce the amount of run-off into the sewerage system and therefore the cause of more overflows. Why on earth are we here creating legislation if it is never commenced? I would also like measures to strengthen the examination and sign-off of the pollution incident reduction plans by regulators and by Ministers to make sure that they are fit for purpose and can be properly implemented and monitored.

There are other amendments to come forward, but I make one last plea to the Minister. It is a more general point about legislation, but this is a good place to make it. She very kindly summarised the number of delegated powers in the Bill. I remember the days when I first came into this House when it was regarded as outrageous if we did not have, in draft, guidance and secondary legislation that flowed from a piece of primary legislation before we finally pressed the button on it at Report and Third Reading. I would like to think that a new Labour Government would bring back a commitment to making sure that this House sees in draft form what the contents of guidance and secondary legislation will look like, so that when we debate the Bill we are not debating a pig in a poke.

I turn to two or three specific points, the first being the modification of the standard of proof in Clause 5. I acknowledge that this lower standard of proof is used elsewhere, but it is important to note that the original intention of the legislation that we are amending in this clause was to deliver a more consistent penalty regime across sectors. That was following recommendation 8 of the Hampton report. This change, on the face of things, undermines the original function of the 2008 Act. Again, we lack an impact assessment. We do not know the rationale so, before we debate the Bill in Committee, the Government should set out a proper detailed case showing why specifically the standard of proof needs changing in this sector but not in other sectors. How many times is it anticipated that this power will be used?

I turn to the companies’ right to appeal fines imposed by the regulator. This is covered by Clause 6(7), in particular the right of appeal. This provision appears to create the possibility of the regulator imposing an automatic penalty. The company that is the subject of the penalty will not be able to appeal a decision by the regulator to the effect that there were no exceptional circumstances to mitigate the culpability of the company for what is otherwise a strict offence.

In other words, an event has happened which the company rightly or wrongly says made it impossible or very difficult to take reasonable steps to prevent an otherwise unlawful discharge. That discharge will on its face be unlawful but, as matters stand at the moment, the company can escape or mitigate that penalty if, but only if, it can show there are exceptional circumstances.

This Bill would give that decision simply to the regulator, but those words “exceptional circumstances” are important. The courts understand them well; as they have said repeatedly, they do not admit of detailed exegesis—they mean what they say. It is the context that matters. The burden is on the person who asserts exceptional circumstances to make his case. In practice, that is a heavy burden, because it has to be exceptional. If it is not made out, an appeal to the courts is dismissed with costs. What is wrong with that? Where is the evidence that this provision has been misapplied by the courts?

If there is an extraordinarily heavy rainfall or other event that may or may not be an exceptional circumstance, the water company would still have to show that it could not have anticipated that event—and we know that rain does fall in this country—and could not reasonably have taken suitable preventive measures. But why, if the company believes that exceptional circumstances have obtained and is prepared to risk the costs of an appeal, should it be deprived of challenging the regulators’ decision to the contrary? Where is the evidence that this provision is not working appropriately at present? The Government, through the regulator, surely have the details of cases, and the number of cases, where decisions on exceptional circumstances have been appealed, and details of the outcomes. They are all there—the regulator must know. They can point then to the misuse of the provision and failure by the courts. I suggest that may be hard to establish.

Generally, let us have proper information and an impact assessment, then we can make a fair and sensible decision. At present, it does not look right. Adopting a clumsy and over-penal approach will drive up costs and put at risk the very investment that we all want.

I have a final point on legal advice on compatibility with the European Convention on Human Rights. I have highlighted two provisions in particular, Clause 5 and 6, although I do not limit it to that. The Minister has declared on the face of the Bill that the provisions in the Bill are compatible with convention rights. In respect to those two provisions, and others, I am not sure that that is right. We would be greatly assisted if the Minister would provide a copy of the advice. If she is minded to fall back on the argument that the advice is privileged, there is another route. Will she set out in writing, without reference to the advice itself, the legal reasoning that underlies that conclusion in respect of those two clauses? If she does not cite the advice itself, what she sets out is not privileged, and she has not opened up disclosure of the advice. What could be the problem with that? It would put my concerns, and I suspect those of others, to rest.

Solutions so far have been concrete construction-based, which has a high carbon footprint. Nature-based solutions, which are more carbon friendly, have been rejected. Only 2% of Ofwat’s budget is allocated to nature recovery solutions. Bill payers have had an extremely poor deal, while the shareholders and directors have been rewarded. It is time that this trend was reversed. There will be amendments in Committee to ensure that this happens efficiently—and we have heard a lot about the amendments that may be coming forward.

It is absurd that Ofwat is unable to rescind the licence of a poorly performing company without giving 25 years’ notice. My noble friend Lord Russell referred to that. I wonder what planet those who drafted that legislation were living on when they drew up that guidance.

Pollution incident reduction plans should help to concentrate the minds of those managers running the sewerage systems. The plans should include reporting on the state of the sewerage infrastructure, alongside the action being proposed to remedy this within a reasonable time limit. Monitoring each sewage discharge within the hour of occurrence is to be welcomed but, once the spillages have been recorded, are they to be published in a way that can be readily accessible to the public and those directly affected? Transparency is strongly recommended by the Information Commissioner’s Office.

I note that the regulations under this section will be made only after the Minister has consulted such persons as the Minister considers fit. That could be anyone—the CEO of the water company concerned, Ofwat, the Environment Agency or some other person. I am sure that this is something that will come forward in Committee. If the regulations are to be meaningful and effective, the regulator has to have teeth and be up for the job. Currently, there is little confidence in the ability of either Ofwat or the Environment Agency to deal with the scale of the problem, which is endemic within the water industry.

This leads me on to sanctions. It is going to be extremely difficult to identify who is the guilty party responsible for a breach of the regulations regarding sewage discharges, as well as dealing with water leakages. The noble Baroness, Lady Jones of Moulsecoomb, raised the issue of leakages. I welcome that the sanctions are to be stricter and toughened up. The Bill gives the job of monitoring and implementing this section to the Environment Agency.

During the passage of both the Agriculture Act and the Environment Act, the woeful reduction in funding for the Environment Agency was a cause for concern to your Lordships across all sections of the Chamber. This funding situation has not improved. It seems unlikely that the Environment Agency will be able to conduct its role in this Bill effectively.

The system of fines laid out in the Bill may be levied and go into a consolidation fund. Those fines will recompense the EA for the cost of the work that it has conducted in imposing fines, but it will be retrospective. Surely any fines levied should go into a fund for remedial action to ensure that a problem does not occur again and be returned to bill payers, who have, after all, suffered as a result of loss of water supply and incursions of sewage into their homes and business premises.

One of the Environment Act’s tenets is that the polluter pays. That has to happen. The noble Lord, Lord Lipsey, gave a graphic description of pollution in the River Wye—and we have heard that before. My noble friend Lady Parminter referred to yesterday’s news that Ofwat had fined water companies £158 million, with Thames Water having the largest share. I received an email from David Black, CEO of Ofwat, yesterday morning informing me of this, and giving me some detail. Later, I listened on the radio to David Henderson, the CEO of the water industry’s union, Water UK, saying the problem was lack of investment due to Ofwat preventing the industry raising consumers’ bills and preventing borrowing for investment. There was no mention that the water companies were set up debt free; nor that some of their assets had been sold off to increase shareholders’ dividends; nor that salaries and bonuses of CEOs and directors had been increased to what an ordinary bill payer would consider an obscene level.

The water industry as a whole is in a dire state. The regulators are ineffective and too close to those they are supposed to be bringing to book. My noble friend Lady Pinnock and the noble Baroness, Lady Browning, raised the issue of ex-water board members being on the regulatory boards—hardly impartial. The noble Lord, Lord Sikka, gave detail of Ofwat’s poor performance. Neither Ofwat nor the Environment Agency are going to change their modus operandi in the way in which the Government envisage. The EA has been chronically underfunded for years. Ofwat already has powers which, if they had been exercised continually since inauguration, would have prevented some of the excesses and failure of service from which the country is suffering. It is no secret that on these Liberal Democrat Benches we would have abandoned the current system and replaced it with a clean water authority to take on the relevant environmental and regulatory powers, including river health, as my noble friend Lord Russell indicated.

We have heard some excellent contributions from all sides of the Chamber. Many have suggested how they would improve the Bill. My noble friend Lady Parminter referred to public interest being essential for Ofwat. The noble Lords, Lord Remnant and Lord Douglas-Miller, and my noble friend Lady Pinnock warned about a broad-brush approach that lumps all water companies together. Your Lordships are exercised about the state of the water and sewage industry, quite rightly so. I am grateful to all those organisations which have provided briefings for this debate, many of which have suggested amendments for Committee. I agree completely with the need for impact assessments and statutory instruments to be prepared.

I look forward to the Minister’s response to the debate and to working with her during future stages of the Bill to ensure that we have a Bill that is effective into the future and dovetails into subsequent legislation which the Government intend to bring forward following the review of the water industry. As all noble Lords have said, this is not going to be an easy task—quite the opposite.

The measures on special administration orders appear to give the Government the power to change a water company’s charges paid by consumers to whatever level they wish to recover costs. It will be important to understand what work the Government have done to establish the impact these measures might have on consumer bills. The Minister mentioned that increases would be taken very seriously, but we may need more reassurance than that.

It is also relevant to raise the question of to whom water companies should pay their fines. We on this side of the House would be interested to hear whether Ministers agree that when water companies fail to deliver a service to customers that is safe and does not pollute our rivers, they are failing their customers and should compensate them accordingly. Ofwat already acts on behalf of the consumer, so can the Minister explain what assessment the Government have made of the impact of consumer involvement on decision-making? What responsibility will those consumer representatives take for such involvement given the dire consequences of failure laid out in this Bill? The noble Duke, the Duke of Wellington, made a number of suggestions which we are likely to be interested in supporting.

Our natural environment deserves to be treated better than it has been for many decades and the industry must continue to clean up its act. It is clear that those who focus on protecting our natural environment are not wholly impressed by this Bill. There have been a number of representations from River Action, Surfers Against Sewage and, as the noble Lord, Lord Lipsey, eloquently pointed out in respect of the River Wye, among others on how the Bill could be improved. We will monitor those and other suggestions with interest.

On pollution incident reduction plans, we agree that water companies need a clear plan of action to deliver positive change. However, it would be useful to know what assessment the Government have made of the practical benefits of the plans to ensure those documents have the desired effect.

We will also be looking at the measures to increase reporting of overflow events. Do the Government intend to make any distinction between events caused by third parties, such as run-off from roads, and those that are a result of failure within a water company?

I turn to employees. This sector creates livelihoods for 100,000 of our fellow countrymen and women, and we must ensure that this remains an industry that is an attractive place to build a career, while we also root out offenders. We support tough sentences for those who break the law but, to slightly repeat my noble friend Lord Remnant’s point, can the Minister explain why sending water executives to prison, under the measures in Clause 4, is really the best use of our prison capacity when current pressure on our prison estate has led to the Government implementing a prisoner early-release scheme? I ask the Minister to publish the Government’s justice impact assessment to understand the impact of this clause.

Clause 2(4) places a serious obligation on those qualifying as being authorised by the agency, and in turn will require a significant compliance effort to ensure that all those impacted are aware of the law and what their obligations are. My noble friend Lord Sandhurst has spoken about a number of other measures that touch on justice-related matters, and it is important we get this right in the Bill. I will not repeat his arguments, but we will certainly be looking to improve the Bill in those areas as it passes through your Lordships’ House.

I would also be grateful if the Minister could confirm that the measures in this Bill on remuneration and performance-related pay are designed to be retroactive, to take effect from the beginning of the financial year prior to the Bill becoming law. In addition, how will this interference in existing employment contracts work in practice? I would also agree with my noble friend Lord Remnant’s points— echoed by other noble Lords, including the noble Lord, Lord Sikka—about unintended consequences, as seen in the financial services industry, that this may simply mean that basic salaries increase dramatically.

The Bill also lacks clarity on the fit and proper person test for senior water executives. I am very familiar with how this works in the financial services industry but, in relation to this industry, I ask the Government to publish exactly how it will work, before the Bill reaches Committee. It is crucial we have more clarity on these issues, as water companies may now need compliance departments to comply with additional regulations. This will also have an impact on customer bills. What assessment have the Government made of the impact of introducing a fit and proper test and these other regulatory requirements on consumer bills? As other noble Lords have pointed out, shareholders and debt holders are essential to providing the long-term investment the industry needs, with £88 billion targeted. Returns must be sufficiently attractive and predictable to attract that capital.

We are concerned that the offences specified under Clause 6 are not listed in the Bill. The Government need to include these in the Bill rather than setting them down later in secondary legislation which noble Lords cannot amend. We would very much like to see a draft of these offences prior to Committee. As other noble Lords have pointed out, there are significant delegated powers provided in this Bill, and I echo all the comments for “More disclosure, please”.

As the noble Duke, the Duke of Wellington, and my noble friend Lord Douglas-Miller and many others mentioned, Ofwat and the Environment Agency may not be the right bodies to deliver the additional monitoring, penalties and enhanced regulatory regime required by this Bill. We would be very grateful to know what assessment Ministers have made of the performance of Ofwat and the Environment Agency before pressing ahead with a Bill that grants those regulators more powers. I particularly take note of the comments made by the noble Lord, Lord Whitty, on this subject.

We are concerned that, under the recovery of costs provisions in a special administration regime, the Government may be able to recover costs incurred in action on one company from the wider industry. That represents a risk that shareholders should not be exposed to, and I would welcome clarification from the Minister on this point.

While the Bill makes significant provisions to increase the accountability of directors, companies and employees to the Government, we would really prefer to give this accountability of management, and performance-related pay, to shareholders, by adding more clarity to the impact of regulatory actions on shareholder returns. That is likely to lead to more coherent and efficient thinking throughout these businesses and less onus on government enforcement. It is also far more likely to achieve the change in culture that many noble Lords have demanded.

The Government should not be placed in a position where they may be forced to step in and correct market failures. Given the failures of regulation to protect the industry from aggressive financial structures, we think it is appropriate to introduce a cap on the leverage that a regulated water company can have within its operating company. Should shareholders and debt investors choose to put additional leverage on these companies above the operating company level, it will be at their own risk as we cannot allow these regulated monopolies providing essential services to be threatened in that delivery. Contributions from many Members suggest this might be a welcome move.

While not within the scope of the Bill, we would also like to see water companies incentivised to work with land and waterway managers on ecosystem restoration, bringing cleaner water and better flood resilience. I very much support the comments and questions on this area from the noble Earl, Lord Devon. Within that context, I also draw the House’s attention to my interest as a land and river owner.

In conclusion, we on these Benches firmly support the Government’s ambition to deliver the cleaner rivers, lakes and beaches we all want, but we will be holding Ministers to account on the measures in the Bill in Committee, to ensure there is more clarity both for noble Lords and for the sector before the Bill goes for scrutiny in the other place. Once again, I thank the Minister for her engagement to date and I look forward to much constructive discussion about the Bill in the coming weeks.

The noble Baroness, Lady Jones, and my noble friend Lord Sikka particularly asked about nationalising water companies. As I have said previously, the Government have no intention to nationalise the water companies. We are focusing on improving the performance of the water industry as an urgent priority. The measures in the Bill are designed to do exactly that.

As we have said, it will cost billions of pounds and take years to unpick the current ownership model, during which time underinvestment in infrastructure and sewage pollution will only get worse. Research that has been commissioned by the Consumer Council for Water, which we have heard about—

There were also questions around the detail of Ofwat’s rules. The noble Lords, Lord Blencathra and Lord Remnant, mentioned this. We feel that it is more appropriate for Ofwat, as the independent regulator, to determine the specific performance metrics that should be considered when setting the rules. Allowing Ofwat to set out in the rules the performance metrics to be applied will also enable those standards to be more easily amended—subject to the relevant procedural requirements, of course—where or when it is appropriate to do so in the future. Ofwat would need to consult with relevant persons, including the Secretary of State, Welsh Ministers, the Consumer Council for Water and others, before such rules were finalised. I also reassure noble Lords that Ofwat will issue a policy consultation in October on the scope of the rules.

Consumers were mentioned a number of times. First, on representation on boards, as we go through the Bill, we will look at this in more detail, but the idea behind the Bill is that Ofwat will be required to issue rules on consumer representation. Customers largely foot the bills for water company decisions, so we believe it is right that they have a say where their interests are at stake. Ofwat will need to consult with relevant persons, including the Consumer Council for Water, before finalising the rules on performance-related pay, and fitness and propriety and customer representation. I think my noble friend Lord Whitty asked about some of those issues.

The noble Lord, Lord Roborough, asked in his speech just now about further increases to customer bills. Where increased costs are a result of penalties being issued by the regulators—for example, under the new automatic penalties regime—the penalties will come out of water company profits and not from customers. Where costs are unrelated to penalties—for example, where they will fund new and improved infrastructure—we are working closely with the water industry regulators to see how we can best minimise the impact of measures introduced by the new legislation on customer bills. We do not want to see the customers bearing the brunt of these new actions.

A number of noble Lords, including the noble Lords, Lord Remnant, Lord Douglas-Miller and Lord Cromwell, and the noble Earl, Lord Devon, asked about investor confidence. Private sector investment is at the core of how we grow our economy. The Government are committed to establishing a strategic framework in order to deliver long-term stability, and which is conducive to attracting the sustained investment in the sector that we need. The Bill will deliver a clear and consistent regulatory framework for the water industry and its investors. I do not think anyone would think that investors have a lot of confidence in much of the water industry as it stands. On 10 September, Defra and Treasury Ministers held a round table with investors where they outlined how the Government will work in partnership to attract the billions in private sector investment that we desperately need to be able to clean up our rivers, lakes and seas.

On that issue, there was also discussion around attracting talent. A number of noble Lords talked about the fact that it is more stick than carrot and asked how we are going to attract people into this. We believe it is right that companies and their executives are held to account for basic and fundamental performance requirements. Should companies meet their performance expectations, we believe that executives should rightly be rewarded, and there are also previous and existing examples of similar rules in other sectors. I will give a couple of examples. The financial services sector previously had a set cap on the level of bonuses—somebody mentioned that; I am sorry but I cannot remember who it was—and fit and proper person tests are also conducted by the Financial Conduct Authority and the Prudential Regulation Authority in that sector. Those sectors have continued to attract talent.

The noble Earl, Lord Devon, asked about ensuring that water companies invest sufficiently when considering pressures such as climate change and population growth, and about ring-fencing money for improvements. In July, Ofwat announced in its draft determinations a proposed £88 billion worth of expenditure between 2025 and 2030, which will be the largest investment in infrastructure that has ever been made by the water industry. We hope that that investment will deliver much of the work needed to achieve the issues that the noble Earl referred to.

The pollution incident reduction plans were discussed by many noble Lords during the debate. One question was: why have we not included a duty to implement the plans rather than just publish them? I think the noble Baroness, Lady Parminter, in particular talked about this. We say that these plans should be seen as part of the broader package of powers for regulators which exist and which are strengthened through the Bill to reduce pollution incidents.

The Environment Agency already has access to a range of tools to enforce against pollution incidents and this Bill is designed to supplement this with its provisions for automatic penalties and for Ofwat to ban bonuses when water companies have not met environmental standards. Water companies will also be required to report on overall progress on the actions that were set out in the previous plans. A specific duty to implement the plan would make enforcement more difficult, we believe, as it would cut across the wider legal requirements for pollution reduction.

The noble Baronesses, Lady McIntosh, Lady Browning and Lady Pinnock, all talked about sustainable drainage systems—SUDS. This is a complex issue. Existing planning policy requires that SUDS are included in all new major developments unless there is clear evidence that that would be inappropriate. This is in addition to requirements that SUDS should be given priority in new developments in flood-risk areas. However, I am aware of the issue around the previous legislation that has been sitting in front of us for 14 years, so I want to assure noble Lords that the Government are currently assessing how best to implement their ambitions on SUDS, while also being mindful of the cumulative impact of new regulatory burdens on the development sector. We are having regular discussions and trying to co-ordinate joint work with MHCLG officials on this issue. We want to move this forward.

The impact assessment was mentioned. There is an impact assessment for the Bill—I am sure noble Lords will be delighted to hear that—but it is currently with the Regulatory Policy Committee. We will publish it as soon as it has concluded its review. We are hoping that will be fairly soon.

The timeline for implementation was mentioned. Our ambition is to implement the provisions to give the regulators the powers they need to take tougher action against water companies for the next investment period, which is due to start in April next year.

The use of delegated powers was mentioned by the noble Duke, the Duke of Wellington, the noble Lord, Lord Sandhurst, and my noble friend Lady Young of Old Scone. I want to reiterate the reassurances I made in my opening speech that the provision of delegated powers will be subject to appropriate scrutiny and safeguards. We believe the powers are necessary to ensure that the provisions in the Bill keep pace with the changing requirements on the water industry and the changing expectations of customers. A full justification for the inclusion of delegated powers in the Bill is available through the delegated powers memorandum which has just been published.

On the statutory instruments for new penalties, we will be consulting on whether new automatic penalties can be used. Parliament will debate and vote on secondary legislation before any changes are made, so we intend to bring that before the House.

A few noble Lords mentioned local issues. The noble Earl, Lord Devon, talked about Devon, not unexpectedly, and my noble friend Lord Lipsey talked about the River Wye. I was impressed that he got away with that word. When I was in the other place and we had a similar debate, I got ticked off and had to change what I had said. But we are concerned about the issue of poo in the River Wye and he is right to raise it. There are also issues in Cumbria, where I live, around Lake Windermere and the other lakes, as mentioned by the noble Lord, Lord Inglewood. This is something that I personally feel we need to sort out. Our national parks are hugely important. They should be peaceful, beautiful places, not places that have been damaged by sewage overspills and other pollution. I reassure noble Lords that cleaning up iconic sites such as the River Wye and Lake Windermere is a top government priority. We want to get this sorted. The 2024 price review package that I mentioned earlier will include funding for improvement projects at priority sites and we are also working closely with the Welsh Government, particularly on the issues around the River Wye.

I am just about out of time. If I have missed anything that I should have answered, we will of course check Hansard and I will get back to people in writing, but once again I thank all noble Lords who have spoken today for their valuable contributions. It is clear that we agree on the importance of addressing issues in the water sector swiftly and decisively and that there is a consensus on the core aims of the Bill. The water industry really does need an overhaul, so I look forward to continuing constructive engagement with noble Lords. My door is always open. I commend the Water (Special Measures) Bill to the House and beg to move.