1: Before Clause 1, insert the following new Clause—
“Purpose(1) The purpose of this Act is to put in place measures to address river pollution by water companies and water and sewerage companies.(2) The Secretary of State and, as the case may be, the Water Services Regulation Authority must have regard to the purpose set out in subsection (1) in implementing the provisions of this Act, and in doing so must also have regard to—(a) the need to meet the biodiversity targets set under sections 1 (environmental targets) and 3 (environmental targets: species abundance) of the Environment Act 2021, and(b) the current or predicted impacts of climate change identified in the most recent report under section 56 of the Climate Change Act 2008 (report on impact of climate change).”
My Lords, in moving Amendment 1, I will also speak to Amendment 91 in my name. These amendments seek to set a strategic direction for the Bill and, crucially, to apply a new duty on the water regulator to take account of—and take all reasonable steps to ensure that Ofwat and, by extension, the water companies that it regulates, contribute to—our targets under the Climate Change Act and the Environment Act. It would have immediate effect outside the price review process by applying climate and nature considerations into yearly in-period determinations. I am grateful to the noble Baronesses, Lady Parminter and Lady Young of Old Scone, and the noble Lord, Lord Randall of Uxbridge, as well as the Blueprint Coalition, for their support.
As the first speaker in Committee, and conscious that I was not here at Second Reading, I will quickly say that I fully support the general intent of the Bill and note that this is just one stage of the Government’s wider plans for tackling water pollution. While I do not have major issues with what is in the Bill, it presents us with a legislative opportunity to strengthen the regulator to ensure that Ofwat has the duty to contribute to the delivery of our climate change and nature targets. This is a key chance to modernise Ofwat’s remit and ensure that it is fit for purpose.
As we all know and hear daily, the water industry has a huge impact on our natural environment. Its shortcomings and their effects are well documented—I will not repeat them here—but it is not just the shortcomings of the water industry. It is hard to imagine that these shortcomings would have been possible with a regulator which had a remit that also ensured it took these issues seriously. But the fault, or reason, does not lie simply with Ofwat. It lies with the duties it has—or, more importantly, does not have—which have been legislated by this Parliament over the past three decades. In short, there is a misbalance between what Ofwat currently does and prioritises and what the Government and the public would like us to do: ensure that industry cleans up its act.
My Lords, I will be brief because the noble Baroness, Lady Willis, has set out clearly the case for a duty for Ofwat to deliver on the Government’s biodiversity and climate change objectives. I just want to pick up on the point about the review, because I think the Minister will say, “This is a fantastic amendment, but we just need to wait for the review”, and there are three reasons why this Committee will find that response unsatisfactory.
The first point is that made by the noble Baroness, Lady Willis, which is around the timing of the review, which we all welcome, but we do not know when exactly it is going to finish. Of course, by the time it is in legislation, and we do not know when there is going to be a slot, we could have missed our biodiversity targets, let alone our climate target.
Secondly, there is nothing in this amendment which is not already Government-stated policy. It is Government-stated policy to deliver on our biodiversity objectives, to move towards our climate change objectives, and to adapt to respond to those. So why do we need to wait for the review? There is nothing about putting this in legislation now which is counter to the Government’s position and therefore there is no barrier.
Thirdly, the wording is rather clever. It does not say “Ofwat”; it talks about “the Authority”. So, whatever the review decides, it is relevant. It is also clever because it says that it must “take all reasonable steps”. Again, it is not precluding or being prescriptive about that future authority; it is just setting the parameters.
It is a very well-crafted amendment and I think the Committee will be deeply disappointed if the Minister comes back and just says we should wait for the review. It would also make us question what the point of the review is, and we would not wish to do that because we have the highest regard for the Minister. If the Government are not prepared at this stage to put in the Bill that part of the review is to ensure that we deliver on our environmental and climate targets, then how can we be sure the review is going off on the right foot?
My Lords, I add my support to these two amendments, to which I have put my name. I was pondering why Ofwat lost the plot on the environment around 2010. In a way, it is not surprising, because the reality is that it was getting a strong steer from government that the important thing was to keep bills down and that everything else should take second place. It was eminently possible to say that to Ofwat because the number of objectives and duties that it had been given was quite a large, disparate and often conflicting set and was growing yearly.
Ofwat currently has a primary duty under Section 2 of the Water Industry Act 1991 to
“further the consumer objective … to protect the interests of consumers, wherever appropriate, by promoting effective competition”.
That really became the sole mission of Ofwat in the 2010s.
Section 3 says that Ofwat’s work to further the conservation of flora and fauna should be undertaken only as far as it is consistent with the primary consumer objective. So, there is a “get out of jail free” card for Ofwat about environmental improvement and biodiversity decline and they take a very second-class seat. Ofwat also has a duty for pursuing sustainable development and a whole suite of environmental and recreational duties.
In 2014, a very muddled objective was added to Ofwat’s increasing list relating to resilience. In 2024, Ofwat got a statutory duty to promote growth. If one was being benign towards Ofwat, one could say that perhaps it was a bit confused by a number of directions which were mutually inconsistent, but the primary one was that Ofwat was told very firmly to keep prices down, and it pretty well did that in terms of the environmental elements of successive price rounds since then. Had Ofwat been challenged at any point as to whether it was meeting these duties, many of which are about contributing to or furthering or having regard to, it would have been very easy for it simply to construct arguments that demonstrated that it had a limited compliance with almost anything and to deliver nothing that it did not want to deliver.
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The Government are already being criticised for lack of progress in meeting those targets; the Office for Environmental Protection, for example, has done work to highlight that. The target of halting the decline of species and biodiversity by 2030 is incredibly close and the Government certainly will not make it if an important body such as Ofwat, which controls the framework within which our freshwater environment flourishes, or not, is not clearly tasked with doing its bit now. As has already been said, it is not just about the five-yearly price rounds; it is about the day-to-day decisions that Ofwat is making as we speak, and will make over the next five years, that certainly need to be guided by this revised duty. I hope that the Minister will give way on that amendment.
My Lords, I congratulate the Minister on bringing forward the first Defra Bill to Committee stage; I congratulate the noble Baroness and those who supported the amendments moved.
I wish to add a note of caution and I declare my interests in the register: not least, I am an officer of the All-Party Parliamentary Water Group, and I worked for five years with the water regulator for Scotland, the Water Industry Commission for Scotland. The degree of caution I would like to urge in this regard is that I believe we are already committed in law. The Water Industry Act 1991 reflects that very carefully, as do the Environment Act and the Agriculture Act and others, not least the Flood and Water Implementation Act 2010, which is built on that.
I urge the Minister to be cautious in trying to reach a balance both in the Bill before us in Committee today and, more especially, the review to which other noble Lords have spoken, which we will go on to consider. I believe that the balance is currently right but falls heavily on the side of environmental benefits. I do not think that it is entirely clear what the costs will be.
I will issue a note of regret that I have not had the chance to go through the 87 pages of the impact assessment, which was released only on Thursday when I was due to speak in a debate on the Friday—literally, the first working day before Committee. One thing I have picked up that the impact assessment looks at is what the cost of natural capital and decarbonisation, for example, would be. I would certainly like more information on this, if possible. In relation to natural capital and decarbonisation, it says:
“This measure will help to protect the Water Environment and improve the state of the UK’s natural capital. The measure will ensure Water Companies take steps to protect the environment”.
My Lords, I also add my support for these amendments, and I agree with much of what has been said already. On the matter of water usage, I have lived in deserts and I find the idea of people power-washing their cars with pure drinking water in this country extraordinary. But that is where we are today, I guess.
Why do I support these amendments? It is simply because it is vital that this Bill is consistent with existing policy and legislation to which it naturally links. The only reservation I have, which may be something that comes out of the review, is that it brings us back to the question of whether Ofwat and the Environment Agency should be a single agency or two separate ones with a division of responsibilities.
My Lords, I declare my interests as on the register. I thank the noble Baroness, Lady Willis of Summertown, for moving the amendment and for the interesting points she makes regarding the importance of clarifying the intention of this Bill. As we said at Second Reading, we are committed to cracking down on pollution by water companies and we support the Government’s intention to deliver effective measures that bring polluters to justice. While government can always do better, we are proud of our record in the past: we increased the number of storm overflows monitored across the network from 7% in 2010 to 100% today; and the Thames Tideway Tunnel is now complete.
So we on these Benches share the Government’s concerns about the many instances of water and sewerage companies discharging pollution in recent years. This poses a risk to those who use and enjoy our waterways and is causing serious damage to the environment. It is imperative that the Government continue to build on the progress the previous Conservative Government made on improvement, monitoring and tougher action to tackle sewage overflow incidents.
The Government are right to prioritise this issue, but we have serious concerns about the impact of this Bill on the water industry that we expect to explore as we go through Committee. I reiterate my thanks to the Minister, who has continued to engage constructively with us. I am grateful for the time she has given us in the lead-up to Committee. I hope we will continue to make constructive progress and improve this Bill for the benefit of all stakeholders—cost-effective water for consumers and security for the 100,000 employed in the water industry—while protecting the Government from financial risk and restoring our natural environment and incentivising investment.
Amendment 1 would make the purpose of the Bill clear and place a duty on the Secretary of State to have regard to that purpose, as well as the need to meet certain biodiversity targets and the current unpredicted impacts of climate change. The noble Baroness, Lady Willis, is right that we should take every opportunity to improve biodiversity, and there is an opportunity in the Bill to deliver transformative change for our rivers. We have amendments coming up in later groups that would help to incentivise the industry to invest in catchment restoration. That would not only improve water quality and flood management but contribute to nature restoration, biodiversity protection and, more importantly, the recovery of our biodiversity.
My Lords, I thank the noble Baroness, Lady Willis of Summertown, for her interest in and general support for the Bill. I am sure that, despite missing Second Reading, she will make a very valuable contribution to Committee.
As I set out at Second Reading, the purpose of this Bill is deliberately narrow in order to improve water industry performance as an urgent priority. On her Amendment 1, I agree with the noble Baroness that addressing the wider issue of river pollution arising from water and sewerage companies’ operations is of critical importance, as of course is meeting our biodiversity targets. The noble Baroness, Lady Parminter, said that she hoped I was not going to just refer to the review, and I am sure she will be delighted to know that I am not.
The noble Baroness, Lady McIntosh of Pickering, made the important point that we already have commitments in law on this; we already have targets that we need to be meeting on biodiversity and the wider environment. It is important to stress that we must have regard to the Climate Change Act in this space. The Government are already required to meet the legally binding targets under the Environment Act 2021 and the Climate Change Act 2008, and to set out their plans to adapt to the impacts of the changing climate.
As the noble Lord, Lord Blencathra, just mentioned, we are doing a rapid review of the environmental improvement plan. This is because we are serious about meeting the Environment Act’s biodiversity targets. We did not feel that it was fit for purpose to meet those targets, which is why we are doing this review—to protect and restore our natural environment and come up with a delivery focus to help meet very ambitious targets.
Ofwat—I think the noble Baroness, Lady McIntosh, mentioned this—has a core duty under Section 2A of the Water Industry Act 1991 to work towards strengthening resilience. This duty ensures that Ofwat is already required to promote long-term planning for water companies to adapt to environmental pressures, including climate change. I take on board the comments of my noble friend Lady Young of Old Scone, who felt that Ofwat at some point lost the plot. This is why we need to look at the role of regulators through the review—I am afraid I will be mentioning the review from time to time today.
I thank the Minister and everybody else who has contributed to this discussion on my amendment. I am not going to repeat the valid and important points that have been made, but I will respond to the noble Baroness, Lady McIntosh, on the term “caution on costs”. There is a lot of debate about costs, and nature-based solutions can often be much cheaper while also elevating biodiversity. For the last 20 years we have been told to be cautious about costs and on-costs, and as a result our species targets have gone down and down. The time has come to redress that balance, and I look forward to debating this another time.
On the commission, I appreciate the Minister’s comment that we already have commitments to the environment in the Environment Act and the Climate Change Act. However, I was shocked when I discovered over the weekend that, according to the list of protected species that we want to stop the decline of by 2030—not 2035—25% of plants and birds and 100% of freshwater invertebrate species rely on clean rivers. Therefore, while I am delighted about the commission and will absolutely get behind it and join in, it is going to be too slow and too late to achieve the biodiversity targets we set out in the Environment Act. I look forward to picking up this issue on Report, but for now I beg leave to withdraw the amendment.
Amendment 1 withdrawn.
Clause 1: Rules about remuneration and governance
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In Ofwat’s duties there is no mention of climate change—which is going to make its job harder as we experience more erratic weather events—or biodiversity, on which we have binding targets that will be impossible to achieve without putting an end to sewage pollution in our rivers. We can all acknowledge that the regulators are busy and, without these targets on their list of things to do, this will continue to fall by the wayside or be deprioritised, as it so obviously has been in recent years. That is why I have tabled Amendment 91, which would help the Government and the public to ensure that a greater contribution is made by the sector. With a clear duty, it would mean that the regulator has to further two of the Government’s core aims.
Amendment 91 would amend the Water Industry Act 1991, which established Ofwat, to require it to take all reasonable steps, in exercising its powers, to contribute to the achievement of our biodiversity targets under the Environment Act and our net-zero targets under the Climate Change Act, and to adapt to the impacts of climate change. Such a duty is currently missing from Ofwat’s governance.
Ofwat’s current primary duty, set under Section 2 of the Water Industry Act in 1991, is
“to further the consumer objective … to protect the interests of consumers, wherever appropriate by promoting effective competition”.
Section 3 goes on to state that Ofwat’s work to further the conservation of flora and fauna should be undertaken only as far as is consistent with the primary consumer objective. This clear subordination of environmental considerations to economic ones was not corrected by the introduction of a rather muddled resilience objective in 2014 and was actively exacerbated by the 2024 imposition of a new statutory growth duty on Ofwat
“to have regard to the desirability of promoting economic growth”.
In a speech in the other place last Wednesday, the Secretary of State announced an independent water commission that
“will ensure that we have the robust regulatory framework that we need to attract the significant investment that is required to clean up our waterways”.—[Official Report, Commons, 23/10/24; col. 279.]
That is good and welcome, as is the text in the notes that it must consider alignment with net-zero objectives. However, I went back through it and did a word search. Nature is mentioned once in the notes and there is no mention at all of biodiversity or of consideration of alignment with our mandatory targets for biodiversity, as outlined in the Environment Act and associated secondary legislation.
Is it relevant that we are asking Ofwat and, through it, our water companies to look at the biodiversity and water targets? Over the weekend, I went back and looked at the 2030 species abundance target, which was one of the biodiversity targets that was published as a statutory instrument in January 2023. I counted the list of species that will contribute to this target; included are 244 freshwater invertebrate species, which absolutely require clean water; 40 species of birds that forage and nest in riverine environments—that is 25% of the total list of bird species; and 48 plant species associated with, or growing in, rivers, streams or marshy freshwater environments, which is 22% of the plant list. By the most basic calculation, almost a quarter of the plants and birds on our species abundance list—the list that will be used to check whether we meet those targets—and 100% of our freshwater invertebrates rely on clean, unpolluted rivers to thrive, yet we have no statutory purpose or duty for Ofwat to look at this. Many of those species will not recover unless we improve the quality of our rivers, so this is a fundamental part of what we should be looking at. We urgently need every water company to acknowledge the Environment Act targets and for Ofwat to measure their performance against them.
It may well be argued that this would be covered by the independent water commission review, but there is an issue of timing as well. Even if these biodiversity targets are included as part of the consultation outlined by the Secretary of State last week in the other place, it will not, as stated, have any findings until the first half of 2025; and because of the current price review processes, changes will likely not come into effect until 2029 to 2030, which, if I have understood correctly, means they would be implemented after the biodiversity target to halt species decline in 2030 has come and gone. Perhaps the Minister can clarify on this.
A review is not legislation—I do not need to remind people in this Committee of that. Legislating for a climate and nature duty for Ofwat early in this Parliament would allow benefits to accrue ahead of the looming environmental deadlines falling at the end of Parliament, including the previously stated 2030 biodiversity targets. If we do this now, with a duty that will come into force in 2025, we can build these environmental objectives into work on the next price review from the start, as well as applying climate and nature considerations into yearly in-period determinations and everyday decision-making.
In summary, it would be counterproductive not to take this opportunity to give Ofwat a new duty to help ensure that we meet our climate and, crucially, Environment Act habitat and species targets. I hope we can find some agreement there.
The public were clear at the election that they expected change and that protecting and restoring our environment, including biodiversity, is a priority. This amendment would be a simple, proportionate, pragmatic and positive change that we could make today. I beg to move.
The Minister will no doubt say that the broader review which has been referred to will consider how to streamline and focus Ofwat’s duties, and I agree that that is important and that the review should do it, but I share the views expressed that we cannot wait that long. The review will report eventually and there will be a delay while legislation comes forward. This amendment, which gives equal prominence to environmental duties and consumer duties, is fundamental if Ofwat is going to immediately play its full part in meeting the legally binding targets of the Environment Act and the Climate Change Act. At the end of the day, though I gather the debate on climate change last Thursday tried to deny it, these are in fact existential issues, which is why there are legally binding targets on both climate change and biodiversity.
It goes on to say:
“The measure is not expected to significantly impact greenhouse gas emissions”.
That is possibly debatable.
We will go on to discuss my main concern in greater depth in relation to amendments in my name in later groups, so I will not argue this at length now. However, I was absolutely astounded to learn this week that water companies are prevented from encouraging customers to take water efficiency measures. This addresses the point raised by the noble Baroness, Lady Young of Old Scone—a very pertinent point in this regard—about keeping customers’ bills down, which has been the concern of successive Governments as well as of the Consumer Council for Water, Citizens Advice and many MPs, as I found when I was next door, along with other noble Peers.
I am concerned that the definition of “wholesome water” is focused entirely on environmental matters and does not allow for measures to introduce water efficiencies, which I think all noble Lords would sign up to, such as recycling grey water to wash vehicles and, possibly, even dishes. I am a firm believer that clean drinking water coming into the home should be kept precisely for that purpose. It is extremely expensive to produce. We should keep drinking water for the purposes of drinking water. We should seek at every opportunity to encourage water companies to encourage their customers, in whichever area they live. In an area of hard water, for example, it is more difficult to work up a lather. Water companies are best placed to know the water quality in that area and I believe they should be allowed to address it.
The second thing that astounded me this week was that Ofwat had taken away some of the powers for water companies to introduce water efficiency schemes. It took some of those moneys away for better use—to give back as grants for water efficiency. I have no truck with Ofwat in this regard, but I would argue that water companies are better placed to know what water efficiency measures will work in each region in which they operate.
I conclude by saying that, while I listened very closely and admire the eloquence and knowledge with which the noble Baroness, Lady Willis of Summertown, moved the amendment, I think we have to err on the side of caution and make sure we are allowing the water companies the tools they need to do the job, to ensure that we preserve as far as possible drinking water for drinking water purposes, and allowing them to roll out measures to ensure that water efficiency going forward will encourage us all to use water differently. They are currently prevented from doing that by the definition as I understand it of “wholesome water”. We will go on to discuss that at a later stage, but one has to be cautious with the best intentions that are sometimes expressed in these amendments.
The Government want to keep the Bill narrowly focused on the regulation of water companies and their manifesto commitments on penalties for water companies, with the promise of further reform soon. We on these Benches are disappointed that the Government have not brought forward more comprehensive reforms in the Bill. If the promised water Bill does not materialise next year, it would not be the first time that a Government had delivered just partial reform.
We want to see a more ambitious approach from the Government, focused on the whole water sector and not just penalties for water companies—or for executives of water companies. For that reason, we believe there are areas beyond the Government’s fairly narrow focus in the Bill that ought to be included and should not be put at risk by the unclear timing of the future water Bill. The Minister has previously spoken about the need for incentives to attract talent to the sector, as well as an effective penalties regime. We need whole-sector reform if we are to deliver the clean rivers and healthy environment that people across the country are calling for. We support the spirit of the amendment by the noble Baroness, Lady Willis. We on these Benches agree that the Government must go further than the measures included in the Bill, and must do so urgently.
Amendment 91 similarly seeks to place duties on the Secretary of State to take reasonable steps to contribute to the achievement of our biodiversity targets and our climate change targets and to adapting to the impacts of climate change. The Minister will know that, in 2023, the last Government published the first ever comprehensive Environmental Improvement Plan, setting out targets and indicators for water-quality improvement.
Over 25 pages of the plan are devoted to water and targets. There were targets to reduce nitrogen, phosphorus and sediments; a target to halve the length of rivers polluted by abandoned mines; an interim target to construct eight water treatment works; targets on reducing water waste, reducing leakage by a further 20% by 2027; a target to restore 75% of our water bodies to good ecological status; a target to require water companies to have eliminated all adverse ecological impact from sewage discharges at all sensitive sites by 2035 and all other overflows by 2050; a target to create a level of resistance to drought so that emergency measures are needed only once in every 500 years; a target to direct water companies’ fines relating to environmental breaches to improving the water environment; a target to crack down on sewage pollution by holding water companies to account for delivering the targets set out in the Storm Overflows Discharge Reduction Plan; a target to require water companies to upgrade 160 of the wastewater treatment works to meet the strictest phosphorus limits by 2028, with a further upgrade of 400 of them by 2038, which would reduce nutrient pollution from treated wastewater; and—of great concern to me—a target to protect our chalk streams by supporting the chalk stream strategy. Lastly, there was a target to make sustainable drainage systems mandatory in new developments, subject to final decisions following consultation on scope, threshold and process.
I mention those targets to show that the Opposition are not coming here to say that we have just discovered some good ideas and actions for the future. We have a track record of setting tough targets, and they are in the EIP. These targets are specific to water quality and will greatly increase biodiversity. They are not just reasonable steps but specific, measurable targets.
The Government have said that they are urgently reviewing the latest EIP, which is about to be published. I do not expect the Minister to say what the tweaks will be, but can we expect any changes to the water EIP targets when the Government publish them? We share the ambition of the noble Baroness, Lady Willis, for water sector reform, and we hope that the Government will listen to the concerns of noble Lords, who are calling from all sides of the Committee for a more ambitious approach.
I hope that the noble Baroness, Lady Willis, is reassured that the Government share her ambition to tackle the wider issues of river pollution, biodiversity and climate change. I hope she understands that, because we feel we are already acting in this space through legislation that is in place, we will not accept Amendment 1.
Amendment 91 was also tabled by the noble Baroness, Lady Willis. In addition to the duty under Section 2A, Ofwat has a core duty under the Water Industry Act to work to ensure the long-term resilience of water companies’ supply and sewerage systems. Furthermore, on 23 October the Government announced the independent commission into the water sector and its regulation. This is intended to be the largest review of the industry since it was privatised, and part of the development of further legislation, not just a review. We want it to have a positive end in tackling the problems we see in our water industry. The objectives of this independent commission will include ensuring that the water industry regulatory framework delivers long-term stability to restore our rivers, lakes and seas to good health, to meet the challenges of the future and drive economic growth.
I hope the disappointment of the noble Lord, Lord Blencathra, will be replaced with excitement when he sees that these will form the basis of this further legislation to attract long-term investment and set out recommendations to deliver a collaborative, strategic and, importantly, catchment approach to managing water, tackling pollution and restoring nature.
The noble Baroness, Lady McIntosh, made a specific point about the impact assessment. I do not have the assessment in front of me, so I am not entirely sure what section she was referring to. I hope she and I can catch up following Committee and discuss this, so I can answer her questions in more detail.
The commission’s terms of reference do include environmental aspects. The commission’s objectives include to “support best value delivery” of environmental outcomes, and to:
“Rationalise and clarify requirements on water companies”
to achieve better environmental outcomes. Furthermore, under “approach and deliverables”, it says that the chair
“will invite views from an advisory group of nominated experts, covering areas including the environment”,
and
“will also seek views from wider groups of stakeholders, including environmental campaigners”.
Therefore, we are trying to make sure that, as well as meeting the targets already in legislation, we put the environment at the heart of what we are doing.
I hope that the noble Baroness, Lady Willis, is reassured that these two new Clauses are unnecessary as they overlap with existing government requirements, Ofwat’s core duties and our ambitions for the future. I hope she will take an active part in what we are trying to achieve with the commission, and I thank noble Lords for their engagement on these important matters.