Consideration of Bill, as amended in the Public Bill Committee
[Relevant documents: oral evidence taken before the Environment, Food and Rural Affairs Committee on 21 January 2025, on Reforming the water sector, HC 588; oral evidence taken before the Environment, Food and Rural Affairs Committee on 26 November 2024, on Work of the Department and its arm’s-length bodies, HC 415.]
New Clause 18
Special provision in charges schemes
“(1) The Water Industry Act 1991 is amended as set out in subsections (2) and (3).
(2) In section 143A(3)(b), after ‘regulations’ insert ‘or, in the case of regulations made by the Secretary of State (rather than the Welsh Ministers), by which that entitlement is otherwise to be established’.
(3) After section 143A insert—
‘143AA Special provision under section 143A: financial arrangements
(1) Subsection (2) applies if regulations under section 143A impose on relevant undertakers whose areas are wholly or mainly in England requirements of the sort described in subsection (2)(d) of that section.
(2) The Secretary of State may by regulations establish a scheme for the purpose of distributing among the relevant undertakers that are subject to the requirements all or part of the costs incurred by them in complying with the requirements (with the distribution to be on such basis as is provided for in the regulations).
(3) The scheme may operate by way of—
(a) direct payments between relevant undertakers, or
(b) payments into and out of a fund established and maintained under the regulations.
(4) Subsections (5) and (6) apply if a scheme is established under subsection (2).
(5) If the Secretary of State or the Authority makes price control provision, they must design the provision with a view to not preventing the passing-on of costs as described in subsection (7).
(6) The Secretary of State may by regulations—
(a) make provision about how the Authority is to comply with subsection (5);
(b) modify the effect of any price control provision made by the Authority with a view to enabling the passing-on of costs as described in subsection (7).
(7) The passing-on of costs occurs when a relevant undertaker is able to recoup its relevant net costs by charging additional amounts under section 142(1).
(8) An undertaker’s relevant net costs are the total of its costs incurred in—
(a) complying with the requirements referred to in subsection (1), and
(b) complying with the requirements of the scheme,
less any payments it receives under the scheme.
(9) In this section, “price control provision” means provision made by or under—
(a) regulations under section 143A,
(b) rules under section 143B, or
(c) a condition of a relevant undertaker's appointment under Chapter 1 of Part 2,
that restricts the amount that may be charged by a relevant undertaker under section 142(1).
(10) Where a determination within section 12(3) (determination by CMA provided for by undertaker’s appointment) involves the making of price control provision, subsections (5) and (6) apply in relation to the CMA as they apply in relation to the Authority.
143AB Special provision under section 143A: consultation
(1) This section applies to—
(a) regulations under section 143A that, in relation to relevant undertakers whose areas are wholly or mainly in England, make provision of the sort described in subsection (2)(d) of that section, and
(b) regulations under section 143AA.
(2) Before making regulations to which this section applies, the Secretary of State must (subject to subsection (3)) consult—
(a) the Authority,
(b) the relevant undertakers to which the regulations would apply, and
(c) such other persons as the Secretary of State considers appropriate.
(3) But the Secretary of State does not have to consult if—
(a) the regulations only amend earlier regulations, and
(b) the Secretary of State considers that the amendments are sufficiently minor that consultation is unnecessary.”
(4) The Digital Economy Act 2017 is amended as set out in subsections (5) and (6).
(5) In section 38 (disclosure of information to water and sewerage undertakers)—
(a) in subsection (2), for “people living in water poverty” substitute “eligible people”;
(b) after subsection (9) insert—
“(9A) A person is “eligible” for the purposes of this section and section 39—
(a) if the person is living in water poverty, or
(b) in the application of the sections to a water or sewerage undertaker for an area which is wholly or mainly in England, if the person is among those for whom special provision is required to be made by regulations within subsection (3)(a).”
(6) In section 39 (disclosure of information by water and sewerage undertakers), in subsection (2), for “people living in water poverty” substitute “eligible people (see section 38(9A))’.”—(Emma Hardy.)
This new clause supplements existing powers to provide for special charging arrangements for customers in need. It enables automatic enrolment, cost-sharing among water companies (and their customers), and broader information-sharing between public authorities and water companies; and imposes a requirement for consultation.
With this it will be convenient to discuss the following:
New clause 1—Water Restoration Fund—
“(1) No more than 60 days after the day on which this Act is passed, the Secretary of State must by regulations make provision for the establishment, operation and management of a Water Restoration Fund.
(2) A Water Restoration Fund is a fund—
(a) into which any monetary penalties imposed for specified offences must be paid, and
(b) out of which payments must be made for expenditure on measures to improve the quality of the freshwater environment in England.
(3) The Secretary of State must by regulations list the specified offences for the purpose of this section, which must include—
(a) any relevant provisions of the Water Resources Act 1991, including—
(i) section 24(4) (unlicensed abstraction or related works or contravening abstraction licence); 22 Water (Special Measures) Bill [HL];
(ii) section 25(2) (unlicensed impounding works or contravening impounding licence);
(iii) section 25C(1) (contravening abstraction or impounding enforcement notice);
(iv) section 80 (contravening drought order or permit);
(v) section 201(3) (contravening water resources information notice);
(b) regulations under section 2 of the Pollution Prevention and Control Act 1999 (regulation of polluting activities etc);
(c) regulations under section 61 of the Water Act 2014 (regulation of water resources etc).
(4) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.
What a delight it is to be back in the Chamber debating this transformational Bill. I will keep my opening comments brief, because I know that many want to speak, and I will respond to amendments tabled by hon. Members when closing this debate after hon. Members have spoken to them, as is established practice.
I want to start by thanking all members of the Public Bill Committee for their careful consideration and scrutiny of the Bill and, dare I say, their comradery in discussions and debates. It is clear that this is an area that everyone acknowledges is in need of change and reform. I also thank the Chairs, the hon. Member for Brigg and Immingham (Martin Vickers) and my hon. Friend the Member for Ealing Central and Acton (Dr Huq). It was a pleasure to serve under them.
Since being in Committee, I have had several further insightful conversations on the Bill with Members from across the House and on the amendments tabled by the Government for consideration on Report, which I will take the opportunity to speak to now. I will start with Government amendment 4, which is a minor and technical amendment that ensures that clause 10 encompasses new enforcement functions arising from the changes made to clause 2 in the other place.
Government amendment 4 clarifies that cost recovery powers for the Environment Agency, expanded by the provisions in clause 10, also extend to costs incurred when enforcing the requirement to publish implementation plans. That requirement was added on Report in the Lords after cross-party discussions and collaboration. The amendment also clarifies that EA cost recovery powers concerning both pollution incident reduction plans and implementation reports are available for plans covering areas that are wholly or mainly in Wales, as well as for plans covering England, which are already included in clause 10. Such clarifications ensure that the EA regulators in both England and Wales can fully recover costs for the extent of their water company enforcement activities and carry out their duties and functions effectively.
I am grateful to the Minister for giving way and for her ongoing discussions about drainage and local authorities and other water-related matters. On the issue of water poverty, can she confirm that, either as part of the Bill or as an adjunct to it, when water companies fail to deliver an adequate service in new build situations—where new houses are built, but the water infrastructure is insufficient to furnish those new houses with the proper supply of water—the Bill and the regulatory environment that she has just described will allow customers to get their entitlement and to free themselves from water poverty, as she put it?
I thank the right hon. Gentleman for his intervention and also for the many times that he has talked to me about internal drainage boards since I became a Minister. On his question, if customers are not getting the service to which they are entitled, that is absolutely something that should be taken through Ofwat and the regulators. I am more than happy to pick that matter up with him outside the Chamber.
I hope that Members across the House will agree that new clause 18 is a welcome addition to the Bill, ensuring that the Government have the necessary powers in place to bring forward secondary legislation in future—once we have thoroughly considered all options for improving the support available for vulnerable customers.
Does the Minister agree that it is supremely unjust that, in Wales, customers face some of the highest bills for their water, despite having some of the lowest incomes in the United Kingdom?
Bills have obviously had to increase in the latest price review because we have had record levels of under-investment in our infrastructure. However, new clause 18 is intended to ensure greater fairness. It is important for struggling customers that he, as the local Member of Parliament, is talking to the water companies to ensure that they are informed about the support mechanisms that are available, and about how they can access them and everything else to which they are entitled.
I am extremely grateful to the Minister for giving way. She will know that just 7% of outfalls were monitored when Labour last left office. I am pleased to say that that figure is now 100%. Does she not agree that new clause 16 would ensure that the fines collected from polluting water companies through the water restoration fund, which was founded by the Conservatives in 2022, are used to improve and prevent further deterioration of our waterways, including our precious chalk streams? Will she now do what we all look to Ministers to do, which is pirouette at the Dispatch Box, recognise the rightness of the cause and change course?
The right hon. Gentleman is indeed an eager beaver. As much as I do not wish to pour water on his enthusiasm, I will of course respond to all the amendments at the end of this stage of the Bill, as protocol expects. I hope he is able to contain his excitement, and is looking forward to my final comments on that area. And I shall be practising my pirouettes in anticipation.
I wish to pay special thanks to the Welsh Government, the Deputy First Minister and the officials who have worked so openly and collaboratively with the UK Government throughout the development and passage of this Bill. I also thank the Senedd for their consent, which we received on 21 January. I look forward to continuing to work closely with our Welsh counterparts to protect our rivers, lakes and seas, particularly those that cross our borders.
I thank my hon. Friend for all her work on this Bill. Does she agree that we have made much more progress on banning bosses’ bonuses in the six months that we have been in office than the Conservatives did in 14 years?
That excellent point was well made by my hon. Friend. I hope all hon. Members agree that the amendments tabled by the Government will only strengthen this Bill and will support new clause 18.
I appreciate the opportunity to discuss this vital issue of water quality once again. As His Majesty’s most loyal Opposition have maintained through the passage of the Bill, it is just an attempt to copy and paste some of the work done by the previous Conservative Government and the measures taken to identify the problem. We will not shy away from the fact that the Conservative Government were the first to identify the scale of the sewage problem and actually to start to address it. As my right hon. Friend the Member for Beverley and Holderness (Graham Stuart) just said, when Labour left office in 2010, only 7% of storm overflows were monitored. When we Conservatives left office last year, 100% were monitored and our landmark Environment Act 2021 paved the way to improving the quality of our precious waters.
However, we are under no illusions: there is always more that can be done, and we have always said that we will seek to work constructively to make the Bill as effective as possible. In that spirit, I thank the Minister for her willingness to discuss matters of the Bill with me and with colleagues across the House; the Minister in the other place, Baroness Hayman, showed an equal willingness to listen to suggestions from colleagues. I also thank members of the Bill Committee for their constructive approach and all the Bill team, Department for Environment, Food and Rural Affairs and parliamentary staff supporting this legislation and our scrutiny of it.
As a result of that dialogue, the Bill now includes welcome improvements in several areas, such as company requirements to produce implementation reports to outline how they envision their commitments on improving water quality happening, as well as consideration of nature-based solutions in licensing activities. However, in that same constructive spirit, the Opposition today ask the Government to go even further. We want the Government to back our new clause 16 mandating the water restoration fund, which had cross-party support in Committee. I thank the good folk of the Conservative Environment Network and Wildlife and Countryside Link for their support and campaigning on the new clause, as well as the Angling Trust for its discussions. I also thank the former MP for Ludlow and former Chair of the Environmental Audit Committee Philip Dunne for his assiduous efforts to see the fund introduced.
These are very substantial sums. A water company in my region was fined £100 million the year before last. It is vital that these amounts go to our chalk streams, which are in desperate need of them.
I totally agree with my right hon. Friend. It is right that if water companies do the wrong thing, the money levied from them is ploughed back into improving the water and not back into Treasury coffers. The water restoration fund, since being introduced by the previous Conservative Government, provided £11 million for communities to repair their local waterways and restore them to the quality they should be.
To follow up the point made by our right hon. Friend the Member for New Forest West (Sir Desmond Swayne), that money will ultimately come from water bill payers. It will be ordinary families across the country who must contribute to the £100 million fines or whatever is imposed on our water companies. For that to be taken and then swallowed by the Treasury, rather than used to improve water, would be a disgrace. Does he not agree that the Government must accept new clause 16?
I thank my right hon. Friend for that intervention. I will come on to an amendment we have also tabled to ensure that if fines are levied on water companies, customers’ bills go down accordingly, so that taxpayers and bill payers are not penalised for water companies doing the wrong thing.
The Government have made ejections in this House and in the other place to the principle of ringfencing the funding and have stated the need for the Treasury to have flexibility on how it spends that money, but in this specific case, their argument still does not stack up. Where money comes from taxation, ringfencing is not always the most reliable way to ensure that the Treasury can have the spending power it needs to deliver that spending, but here we are talking about something very different. Fines are much more uncertain and provide less of a guarantee regarding the amount of money they will bring in. To rely on those funds for day-to-day Treasury spending does not make sense. Ringfencing those penalties for our water restoration fund is a sensible measure that enables Governments to guarantee they can meet a specific need. Water companies pay the fines for the damage they have done, and the local communities affected are empowered to have their local waterways restored.
It is worth repeating the finer detail of our amendment; it should not go ignored that this will also improve chalk streams. It was incredibly disappointing that over Christmas, the Government revealed that they had abandoned plans by the Conservatives to recover our chalk streams. Given that England is home to 80% of the world’s chalk streams, a failure to act on this issue neglects a vital duty to protect a key part of our environment. In light of this, we believe that the Government need to think again about rejecting our important amendment, which is a matter of principle, a matter of justice in righting wrongs, and a fundamental commitment to water quality.
When it comes to improving our waters, it is supporting those who are most affected when water companies fail to abide by their duties that are at the heart of the Opposition’s concerns —the British public, as individual consumers, bill payers and members of local communities. Customers must not pay the price for water companies’ failure to do their duties, whether financial, environmental or otherwise. As such, the Opposition have tabled new clause 19, which would require the DEFRA Secretary of State to provide that where a water company has faced financial penalties for failure to comply with the law, a financial amount equal to those penalties must be removed from the bills of that water company’s consumers.
To conclude, we urge the Government not to waste this opportunity to make this Bill properly effective. Members on both sides of the House want a clean water system, a healthy water environment, financially resilient water companies and fairness for the consumer. The Government have the opportunity to work towards that, with the constructive suggestions made by His Majesty’s loyal Opposition. We have made those suggestions at all stages of the Bill, and we urge the Government to take them forward.
I refer Members to my entry in the Register of Members’ Financial Interests.
First, I thank EFRA Ministers for the work they have done on this Bill, and for everything they have been doing in working on the consultation. It is quite clear to most of the public that not only is England’s privatised model of water failing, but it is an extreme ideological outlier. It is one of the worst for costs and results. [Interruption.] The hon. Member for Broadland and Fakenham (Jerome Mayhew) is chuntering away in his place. We need a long-term, patient approach, especially given the climate crisis, and that is fundamentally incompatible with privatisation.
While the chief executive officer of Thames Water was getting £195,000 in bonuses, we in Harpenden and Berkhamsted saw over 100 days of non-stop sewage in our river, which is a chalk stream. The same is now happening again, one year later, with 1,000 hours of non-stop sewage. Does the hon. Member agree that the system clearly does not work, and that such bonuses do not provide the right incentives?
I agree with the hon. Lady. I hope her party comes to its senses at some point—maybe in the same way that my party needs to come to its senses—and accept that some form of public ownership will probably be the best way to resolve that.
That is my personal view; I put that on the record.
These companies have legal obligations first and foremost to their shareholders, which means short-term profit maximisation. When water was privatised, to quote from Unison’s recent report on this matter, to
“ensure the commercial success of the companies, the government wrote off all the existing debts of the RWAs”—
regional water authorities—
“(£6.5 billion in total) and gave the private companies £7.7 billion of public subsidies in tax relief on profits.”
It has come to my attention that even some former chief executives of water companies fear for the future of the industry, because good investors have by and large exited it. It is now the Macquaries and vulture capitalists of this world that dominate shareholding.
This issue goes far beyond regulation. Indeed, our own regulator, Ofwat, has been found wanting, as its own growth duty prioritises business as usual. In other areas, the Government have quite rightly recognised and embraced the value of public ownership, such as in rail and with Great British Energy. Unfortunately, when it comes to water companies there seems to be an inconsistency in Government policy. Many of us on this side of the House ran on a manifesto commitment to reduce the cost of living, and that commitment is one that I think every Labour MP believes in. However, the cost of corruption and of extraction by a private water company should under no circumstances, as is currently configured in the Bill, land on the heads of our constituents should any of these companies go bust or be taken into special administration.
Water is a monopoly industry, which means that bill payers and taxpayers are the same. What message would it send to our constituents if they are asked to pay, via their bills or via tax, to make a payout for the mistakes and excesses of privatised water?
Doubtless the behaviour of the privatised firms should be looked at closely, but one of the fundamentals of having a state-run system for such long-term assets was that they were chronically under-invested. They could never win out in the political battle between schools, hospitals and long-term water infrastructure, and only privatisation allowed the record investment that has gone in since. The hon. Gentleman ought to recognise that in trying to get the balance right.
I do recognise that, and not for one second am I calling for nationalisation, which is the model the right hon. Member was talking about. There is a plethora of possibilities for public ownership, from mutualisation through to giving regional authorities more scope, and even working with the private sector. We must ensure that the public have a critical say over the future of water, and there are multiple forms that public ownership can take. I am not necessarily in favour of 1970s-style nationalisation, which is pretty much what they have in Scotland at the moment.
I will, however, ask those on the Front Bench to consider new clause 8 and ensure that our constituents—the people we came into politics for—do not foot a single penny more for the failures of privatised water. Investors, shareholders and creditors should be the ones who take the haircut. They should be the ones who foot the bill because of what they have done to our water. This should not be landing on the heads of our constituents. This is a political choice, and I urge my Government to make it clear that we will always back the public, not the private companies that have got us into this mess.
I pay tribute to the Minister and the Bill team from the Department for Environment, Food and Rural Affairs who are in the Chamber, as well as to all my colleagues who sat on the Committee for what was a genuinely enjoyable and collegiate experience. I hope they will forgive me for making a few criticisms in the next few minutes.
We tabled 44 amendments in Committee, but only 34 today, you will be delighted to know Madam Deputy Speaker—[Interruption.] I know—I am failing. I will not speak to all of them for blindingly obvious reasons. We tabled those amendments because we in the Liberal Democrats, humbly yet enthusiastically, have taken on the mantle in this place and beyond of being the voice for many thousands of campaigners, volunteers and citizen scientists who continue to lead the way in exposing the failures and injustices in the water industry, and fighting for meaningful change. We are immensely grateful to those people all across the country.
Our water industry has become a money-making vessel for speculators, who appear to care little for the quality of our rivers, lakes and seas—something I can tell the House is a source of great fury in England’s precious Lake district. The water companies have accumulated £70 billion in debt since privatisation, while still managing to pay out £83 billion in dividends. That is more than a third of the total spent on infrastructure during that time. In the last year, water companies paid out £9.3 million in executive bonuses, and Thames Water’s bonuses doubled to £1.3 million that year. Money leaks out of the industry, infrastructure is failing, and it is our constituents who pay the price.
Meanwhile the regulatory framework has failed utterly and is not fit for purpose. As I speak, £164 million in fines has been levied against water companies by Ofwat, following an investigation that began four years ago, of which it has so far failed to collect a single penny.
Thames Water has had an increase in the number of pollution incidents, which went up 40% in six months last year. It has been issued with fines, but that has not changed anything. Does my hon. Friend agree that we need regulation with proper teeth, and that new clause 25 would do exactly that by putting water companies into special measures when they fail our constituents?
I strongly agree with my hon. Friend. The water companies simply do not fear Ofwat, or indeed any other part of our fragmented regulatory system. They dwarf Ofwat in terms of resources, they flout the limited regulations that they face, and they run rings around the regulators and obviously get away with it. There was the outrage of the water companies being permitted, just before Christmas, to increase water bills by 36% by 2030, and what makes it even worse is that a third of customers’ bills are being spent just on servicing the debt—a debt that was in part run up to fund excessive dividends.
Water companies are already passing on the consequences of their complete financial mismanagement to our constituents—their customers—but this Bill could enable that to go further and to be even worse. According to the Government’s explanatory notes,
“following the provision of financial assistance by the Secretary of State to a company in special administration”,
clause 12 of the Bill, as drafted, would
“require a water company to raise amounts of money determined by the Secretary of State from its consumers, and to pay those amounts to the Secretary of State to make good any shortfall”.
In other words, when a water company goes into special administration, there is a cost to the Government of ensuring that supply is maintained, and the Government need to recoup that cost. That sounds reasonable at first glimpse, but it does not seem reasonable that bill payers should have to pick up the tab, despite bearing none of the blame for the financial mess a water company finds itself in.
My hon. Friends and I are keen to press amendment 9, which would make it explicit that it should be the creditors of the companies—the big financial investors that have loaded debt on to the water companies—that cover those costs instead. The amendment would strike out the Government’s provision in the Bill that opens up bill payers to carrying the cost of paying off company debt, even in the event of bankruptcy.
I fear that the Government’s drive for growth has meant that they have become fearful of the tough regulation that my hon. Friend suggests. They see it only as an impediment, instead of the basis for a stable economy. Does he agree that weak regulation is not only bad for consumers and for the environment, but also for investment over the long run?
Somebody representing the water industry will say that the water industry, as structured, is deeply unappealing to investors. There is a case for changing the model of how we structure those companies. When a company goes into special administration, we do not think it is right that innocent customers should have to foot the bill. The management of those companies, and their investors and creditors, are responsible for the mess the company is in. They took the risks and speculated in order to make money, so it is only right that they should have to cover the costs of the risks that they took, not our constituents.
One of the positive aspects of the Bill is the Government’s decision to deploy volunteers, citizen scientists and campaigners to ensure scrutiny of the water industry. Only last week, I spent time speaking with the leaders of the Save Windermere campaign and the Clean River Kent Campaign. I also enjoyed getting my hands dirty and my legs very wet alongside the Eden Rivers Trust in the River Eden not long ago. We are lucky across the whole country to have passionate, committed, expert volunteers who are dedicated to cleaning up and protecting our precious waterways, yet we are saddened that the Government have failed to provide those volunteers with the resources they need or the power they deserve.
Does my hon. Friend agree that one kind of support that such community groups need is water restoration grants? Those are vital and will flow from the water restoration fund, which is the subject of one of his amendments. Those funds are vital to cleaning up bathing waters across the country.
Those funds are vital. Bathing water status is important. We hope that DEFRA will come out with new criteria soon so that places such as the River Kent can bid to be included.
We have tabled new clauses 4, 10, 13 and 15, which between them would strengthen the hand of those wonderful volunteers, including by ensuring that the Government’s proposed live database, which we support, retains comprehensive historical data. If it does not, the Government are expecting campaigners to be watching that database 24/7. If they have the temerity to go to sleep, look after their kids or go to work, they may miss something. If we are to back campaigners and volunteers, the least we can do is give them the tools to scrutinise water companies’ performance. Knowledge is power, and our amendments would give those campaigners knowledge and power.
New clause 11 and amendment 14 address monitoring. Event duration monitors tell us how long a spill took place over. For instance, they tell us that last February, United Utilities spilled into Windermere for 10 hours in one go, but those monitors do not tell us anything about volume. As a result, they do not tell us enough about the impact of sewage spills on the ecology and wildlife of our waterways. It is equally possible to have a long duration trickle or a short duration deluge of sewage into our lakes, rivers and seas. New clause 11 would insist that water companies have to measure and report on the volume of discharges and that regulators hold them to it.
New clause 25 would put into law concrete pollution targets and proper penalties when companies fail to meet them. Companies who fail to meet those targets would be put into what we are calling special measures, meaning that they would be subject to financial penalties and/or be made to undertake a specific improvement project. No water company chief executive will quake in their boots if they are not held to targets that are ambitious and enforceable with penalties, and which actually mean something.
Water industry staff do amazing work, giving us the world’s cleanest drinking water and working their socks off to tackle and repair leaks, to bolster infrastructure and to oversee the operation of waste water treatment systems to serve our communities. They are just as much victims as their fellow bill payers of the utterly failed system that we are faced with. The system has failed for two key reasons: inadequate regulation and a broken ownership and financial model. That is why we propose through new clause 2 the abolition of Ofwat and the creation of a new consolidated super-regulator, with the power, focus and resource to hold the water industry to account and to enforce stronger rules.
New clause 26 would migrate water companies away from the failed privatised model and towards mutual ownership status. This would prevent the water industry from being used as a cash cow for speculators, where bill payers pay the price through higher bills and sewage-infested rivers and lakes, and instead create a form of ownership where a “low risk, with modest but reliable reward” model would ensure that we attract responsible investors and prevent money leaking out of the system in the form of unearned dividends and immoral financing of colossal debt.
We recognise the Government’s decision to present the Bill now and hold out the hope of more radical change later in the Parliament, following the recommendations of Sir Jon Cunliffe’s review. We confess, however, to suffering from extreme raised eyebrow syndrome today, as it has been revealed that a former Thames Water executive has been appointed to Sir Jon’s independent water commission. That does not fill us with enormous confidence.
The Bill is okay—it is even good in parts—but it would be significantly better with the Liberal Democrats’ suggested amendments. We humbly ask right hon. and hon. Members to support those amendments, and especially amendment 9, to give the British people the radical water industry clean-up that they voted for.
I thank the Minister for bringing forward the Bill so fast in the first six months of the Government. It was an honour to sit on the Bill Committee and to engage in constructive discussion with hon. Members from across the House. However, I must take issue with the hon. Member for Westmorland and Lonsdale (Tim Farron) and his veritable smorgasbord of amendments and new clauses. I will not support them, because, let us remember, this is just the first step in cleaning up the appalling mess we have been left with our water companies. I am sure that the commission will bring forward ideas for more legislation.
I grew up in the countryside on a farm, and one of my favourite memories was running down the garden and out into the river at the bottom, going for a walk and sploshing through the streams. I and my family took it for granted that we could just mess about in the streams. Apart from really annoying my mum when I got back by leaving a messy puddle of water on the floor, there was never any fear that I would get sick or that I had been wading through sewage. What a change there has been, with parents now worried about their children going into the water. They cannot run helter-skelter into the local chalk stream for fear that they will get an ear infection or an eye infection, or perhaps encounter a wet wipe or something much worse.
Sadly, the health of the Wye and the Usk, our two majestic rivers in Monmouthshire, has really suffered over the past 14 years. I have spent many happy hours walking alongside them, seeing herons and kingfishers, and we have had some of our happiest family days out there. The dreadful state that those two rivers are in makes them two really good examples of the 14 years of Conservative failure and flimflam. We have record levels of illegal sewage dumping in our rivers, lakes and seas, and chronic ongoing diffuse pollution from agriculture.
In every constituency across the UK there are amazing groups of citizen scientists who have really brought our rivers to the fore. I pay tribute to Save the River Usk and Friends of the River Wye in Monmouthshire, who are among the best in the UK. [Interruption.] I am afraid that I will not give way as we are under extreme time pressure. One of my key promises in the election campaign was to work to clean up our rivers. Feargal Sharkey endorsed my campaign—when someone like him endorses a campaign, we know that we will be held to account. That is why I am so pleased that in the last six months we have done more than the Conservatives and the Lib Dems when they were in coalition.
I would like to speak to amendments 2 and 3, tabled in my name. Amendment 2 would further strengthen the Bill by making it a criminal offence for water companies to fail to report discharge from emergency overflows. Amendment 3 would prohibit such discharge in river areas such as the Thames that are used for aquatic sports.
I have the privilege of representing the towns and villages of Beaconsfield, Marlow, Bourne End and the south Bucks villages. Unfortunately, we are served by Thames Water, and we have some of the highest levels of fines in the country. We are blessed with a beautiful waterway setting throughout my constituency, including the River Thames. Our area is rich in watersport clubs—the Marlow rowing club, the Marlow canoe club and the Upper Thames sailing club to name but three. Young people from high schools and grammar schools use the Thames for their water sports as well.
Amendment 3 would give water used for aquatic sports the same protection as that used for bathing. It would establish clear consequences for water companies and their chief executives where they fail to comply with a clear duty to protect the water in which people practise aquatic sports, particularly rowing. That is particularly true of Thames Water and of the Thames. I appreciate the cross-party support in Committee on these amendments.
Aquatic sports are an important part of our sporting heritage in this country, but storm overflow discharge into our rivers has adversely affected the health of participants, creating an ongoing health risk to rowing, sailing, canoeing and other aquatic sports clubs along the Thames and across the country. Many clubs, particularly in places such as Marlow, take their duty of care very seriously, and are having to put in place their own monitoring systems to protect their members.
Amendment 3 would ensure that water used for aquatic sports was put on the same statutory footing as bathing water. It is time for water companies to take responsibility for ensuring that those waters are safe to use, and to protect our young people for the future. The amendments set out a reasonable expectation that a water company must not discharge an emergency overflow within a 1-mile radius of an area used for aquatic sports. The definition of such an area is clearly outlined, and further discretion is provided for the Secretary of State to determine such areas where needed. The amendment would bring much-needed support to our vital aquatic sports.
My hon. Friend and constituency neighbour and I, along with my hon. Friend the Member for South West Hertfordshire (Mr Mohindra) and the former Member for Uxbridge and South Ruislip, have held a number of meetings with local stakeholders and the Canal & River Trust about these issues, which affect the River Colne, which crosses our respective constituencies. Does she share my appreciation of the measures introduced by the last Government, which ensure effective monitoring? Will she join me in thanking Conservative-led Hertfordshire, Buckinghamshire and Hillingdon councils for their work to ensure that watersports users have access to good quality, clean facilities?
My hon. Friend raises an excellent point—the previous Government put in place monitoring for all waterways so that we can hold water companies to account. He mentioned the cross-border and cross-party efforts, but mainly those of the Conservative councils that worked together to hold Thames Water and other water companies to account.
I was surprised that the Government did not readily accept amendment 3, as it is not party political. It is about necessary support for our vital aquatic sports clubs, and would further strengthen the protection of waterways used for aquatic sports across the country. That would include the Thames and other rivers across England, many in areas where young people access waterways and where there is storm overflow. I urge the Government to accept these reasonable and important amendments to strengthen the Bill.
Water quality and sewage pollution is one of the most pressing issues in my constituency. In the past year alone, we have had 57 sewage dumps—the equivalent of 594 hours of sewage spilled—at Bournemouth pier. As many Members will know, Bournemouth pier is a place where people surf, paddleboard, swim and walk their dogs. It is a magnet for tourism. This is more than just an environmental issue; it is a public health issue, with people frequently getting sick from swimming in the sea. It also has massive economic consequences for my constituency, which thousands of people visit over the summer. It is impacting our reputation, our businesses and our tourism industry. However, it is also a matter of deep pride for my constituents. We are proud to be one of the most beautiful bits of coastline in the UK—we are often ranked in the top 20 in Europe. My constituents want to enjoy those coastal waters, not be afraid to go in them. It is a situation that cannot be allowed to continue.
I am truly glad the Conservatives have found some vim on this issue, but I gently remind them that we did not come to power in a vacuum. We are facing a Victorian situation with the amount of sewage, and that comes from a failure to deal with systemic issues. [Interruption.] Despite their protestations, the Conservatives’ actions have spoken louder than their words. Under the previous Government, we heard talk of scrapping nutrient neutrality, and they slashed the Environment Agency’s budget, with the then water Minister instructing the Environment Agency not to publish data. We have heard all about the increase in monitoring, but if they knew so much about the problem, why did they not do anything about it? It is a little too late for that. It is Labour that is bringing forward the legislation to deal with this issue.
I am proud to support this Bill, with its provisions for criminal liability and banning bonuses. The amendments the Minister has outlined today, in particular to improve transparency, give industry certainty and speed up the implementation of these measures, are so important.
I welcome the Bill. While its provisions are modest, I none the less welcome this step to improve on the failures of previous Conservative Governments on sewage pollution.
For too long, water companies have been allowed to operate without proper regulation and oversight. Since privatisation, English water companies have paid out £83 billion in dividends while amassing £74 billion in debt. Shockingly, with the Bill still making its way through the House, water companies have brazenly said that they plan to circumvent the ban on bonuses by jacking up C-suite salaries to compensate. The Bill must do more and be more ambitious to truly hold water companies to account. I am therefore pleased to support the new clauses in the name of my hon. Friend the Member for Westmorland and Lonsdale (Tim Farron), which would strengthen the Bill, improving monitoring, protecting consumers and ensuring responsibility falls on sewerage companies to clean up their act.
I will speak to amendment 9 and new clauses 11 and 21. Amendment 9 would ensure that creditors, not bill payers, pay for the bail-out of water companies in special measures. It would protect consumers against the reckless financial mismanagement of Thames Water. Ordinary bill payers should not be required to pay for the mistakes of a company they had no choice to use and the folly of investors that indulged it.
New clause 11 would require sewerage undertakers to install volume flow meters in all their locations where overflows occur. Campaign organisations in my constituency, including the famous Henley Mermaids, tell me that flow meters would help to inform them when it is safe to go in the water.
New clause 21 is also of special importance to my constituency, much of which is in the Chilterns national landscape. It would commit sewerage undertakers to secure and then maintain high ecological status in protected landscapes. It would require them to improve outflow from storm overflows in areas such as Goring, in my constituency, which lies within the Chilterns national landscape. My right hon. Friend the Member for Kingston and Surbiton (Ed Davey) would very much welcome that, as we both enjoyed stand-up paddleboard yoga in Goring in July.
The measures we propose should be taken in the round. All our amendments significantly improve the Bill.
New clause 21 would also improve sewage outflow in Henley-on-Thames and the villages along the Thames Path national trail. That is desperately needed to end the shame of welcoming the world to our beautiful town of Henley at the royal regatta, only to subject it to what we put down the toilet.
In conclusion, I welcome the Bill and the protections it will deliver to my constituents, but I hope the Government will consider going further very soon.
I thank the Minister for all the hard work she and her team have been doing on the Bill. It is very important to my constituents.
To go back to the very basics, we are talking about something that everybody in North East Derbyshire uses every day—water. I believe that everybody in my constituency, and in the whole country, has a right to know that the water in our rivers and streams is clean, clear and free from pollution. The reason I have to state that now in this House is that we have not had the action we should have had over the past 14 years. That is a huge failure of the previous Government to get action taken and completed on this important issue. Instead, in 2023 water was polluted over 2,000 times in North East Derbyshire—and that is in just one constituency.
Last week, I met local residents in Ashover, which is situated on the River Amber, in my constituency. They impressed on me their concerns about pollution in that very picturesque part of the river. We have had good news, in that Severn Trent Water has improved treatment tank capacity in the area, but my residents are worried that that will not be enough, and indeed that we will not know whether it is enough. They are already concerned that the water they see does not live up to the standards they wish to see. That is why I particularly welcome the fact that the Bill is bringing in independent monitoring of water quality. I am afraid I disagree with the hon. Member for Westmorland and Lonsdale (Tim Farron). What I think is important is not that we get carried away with volume, but the impact on water quality. That is what matters most.
They are not mutually exclusive, are they? Knowing the duration of a spill is important, but knowing what went into it and how much also helps to know the impact so we can regulate it. Is that not true?
The Bill looks at the result—the impact. I do not understand why we need to look at the volume if we are looking at the impact.
A huge amount has been spent on bosses’ bonuses: over £9 million in 2023-24. To put that into perspective, the average salary in my constituency is just over £30,000. If bonuses are received, we expect it to be for work well done and not just as a matter of course for the failings those bosses are responsible for.
Time and time again, we heard from the former Government that the water industry would change. Unfortunately, it did not under the previous measures, and that is why I welcome the action to ensure results as soon as possible. The Bill will mean cleaner rivers, which is my hope for the River Amber and what my constituents deserve; better infrastructure; better protection for those who use our waters for leisure activities; and better protection for the nature in our beautiful constituency. That is why it has my full support.
My constituency of Bridgwater has the Rivers Axe, Brue, Parrett and Tone within its boundaries, together with countless streams, brooks and rhynes. It is therefore of the utmost importance to my constituents that the water quality of our rivers is maintained and improved. The town of Burnham-on-Sea and Highbridge is a coastal resort, as are the villages of Berrow and Brean. It is important for the tourism industry, as well as the local people who enjoy those beaches, that we improve the quality of our bathing water, and I therefore welcome the Bill. We are told that it has four key aims:
“To block the payment of bonuses to executives who pollute waterways;
To bring criminal charges against persistent law breakers;
To impose automatic and severe fines for wrongdoing; and
To ensure independent monitoring of every”
—sewer overflow—“outlet.”
I welcome all those aims, building as they do on the work of the last Government to improve our water quality.
I want to speak in favour of new clauses 16 and 19. New clause 16, entitled “Establishment of Water Restoration Fund”, establishes the principle that fines should go towards environmental improvement rather than to the Treasury. I am somewhat curious as to why the Government would not support that, but perhaps the Minister can explain when she responds to the debate. In November 2024, Wessex Water, which serves my constituency, was fined £500,000 for polluting two rivers, one in Wiltshire and one in Somerset. That money should be used to improve the local environment; it should not be swallowed up by the Treasury.
New clause 19 states that when civil penalties are imposed, there should be an equivalent reduction in customer bills. That is important, because otherwise the water company that has been fined will simply pass on that fine to the consumers; the new clause would ensure that there was no penalty for the customer. I am curious, again, to know why the Government would oppose new clause 19—along with new clause 16—and I look forward to hearing the Minister’s explanation.
I thank the ministerial team for all their hard work in producing the Bill within six months of Labour’s election in July.
Is there anything more emblematic of the decline and mismanagement presided over by the last Government than the state of our rivers and waters? It was fascinating to hear from the shadow Minister that the Opposition seem suddenly to have realised that this is a bigger problem than they ever thought it was when they were in government. As we have heard from Members on both sides of the House, waterways throughout the country have been choked with record levels of sewage. In 2003, 39 sites in my constituency were polluted by Severn Trent Water and United Utilities. Across those sites, there were 2,579 sewage dumps—and what was the punishment for the bosses of those companies? Did any of them face imprisonment? Were their bonuses curtailed, or stopped entirely? Did they feel the hard edge of enforcement action? The answer is no.
If the hon. Gentleman, as a Back-Bench MP, is presuming to tell a regulator with criminal powers how to investigate and prosecute companies or indeed any defendants, we need to be very careful, because never before in our law have we permitted Members of Parliament and Ministers to direct independent investigators on whom to investigate and prosecute.
I welcome that intervention from the shadow Secretary of State, but let me suggest that if the measures in this Bill had been implemented by her Government, we might have seen some of those enforcement actions.
I thank the hon. Gentleman for giving way; he is very kind. I remind him that in 2002 a Labour Government allowed, through their regulatory regime, the uplift in bonuses that he outlined. Can he tell the House how much sewage dumping happened in his constituency between the years 1997 and 2010, and can he justify why only 7% of rivers were being monitored? He will not be able to, because we did not know.
I welcome the hon. Member’s intervention. I simply say to him that his party was in power for 14 years and did nothing. To go back 30 years seems rather extraordinary.
In 2002, the United Utilities chief executive received a bonus of nearly £1 million, and Severn Trent lifted its bonus to £3.36 million. That is millions of pounds that my constituents in High Peak have put in bosses’ back pockets to reward their failure. When I speak to residents on the doorstep in High Peak, they ask me, “How did they get away with it? How can they be allowed to do this?” They got away with it because Conservative Members let them. The previous Conservative Government cut the Environment Agency’s budget by half between 2010 and 2024, leaving the agency toothless to tackle the disgraceful behaviour of our water company bosses. Perhaps that helps us to understand the enforcement issues we have been talking about.
I also remember that just before the election, the hon. Member for Keighley and Ilkley (Robbie Moore), in his previous role as Water Minister, told Environment Agency officials not to publish the headline figures of the total number and duration of spills. How typical of the Conservative party’s approach—rather than face issues head-on and tackle them, it chose to hide them and keep them in the shadows. That approach to government has left our water infrastructure crumbling. By failing to confront these issues, failing to invest in our broken infrastructure and letting consumer money be spent irresponsibly, the Conservative Government left my constituents in High Peak paying twice.
These points underpin the importance of this legislation. This Bill, coupled with the Government’s wider programme to safeguard the environment, will ensure that the beauty of the Peak district in my constituency, with our nature-rich rivers, is entrenched for generations to come. The Bill introduces tougher penalties, including imprisonment for water executives who fail to comply with or obstruct investigations. The Bill will ban bonuses for CEOs and senior leaders unless high standards are met on protecting the environment and their consumers. The Bill will also introduce severe and automatic fines for offences, closing the gap in the Environment Agency’s enforcement powers. Importantly, the water companies will have to start covering the costs of enforcement action. Unlike the previous Government, we will not let the water companies hide from their wrongdoing. The Bill will see that every outlet has independent monitoring.
Order. Unfortunately, colleagues making interventions have eaten into time, so I now have to call the Front Benchers. I call the shadow Minister, Dr Neil Hudson.
It has been a wide-ranging debate, although shorter than we had hoped for. I thank Members for participating today. I thank my hon. Friend the Member for Beaconsfield (Joy Morrissey) for her passion for enhancing the accountability of water companies and protecting watersports, which we are all passionate about, and my hon. Friend the Member for Bridgwater (Sir Ashley Fox) for passionately advocating for the water restoration fund.
New clause 16 would establish the water restoration fund, to ringfence money from fines to restore local waterways, not to balance the Treasury’s books. This was a Conservative fund, and the Labour Government must not let ideology stand in the way of evidence-based policymaking. They must take the baton forward and ringfence this money, so that waterways can be restored locally.
New clause 19 is designed to ensure that fines on water companies result in equivalent reductions in customers’ bills. That is only fair, and we urge the Government to take forward the new clause.
New clause 17 seeks to strengthen the financial resilience of water companies by enabling the Secretary of State to stipulate the limits of borrowing, so that these companies do not leverage too much debt. That is an important new clause that needs to go forward.
Through amendments 26 and 27, we want to protect customers in different parts of the country so that they do not have to pay for the misdemeanours of water companies that do not serve them. We urge the Government to take forward our amendments and make this Bill stronger, so that we can improve our precious waterways.
I thank Members for their constructive engagement throughout this debate. As I have said before, it is wonderful to hear the shared passion across this House for improving the performance of the water sector so that it better delivers for customers and the environment. Given the limited time that I have to address over 50 amendments—I am not looking in any one direction—
The Minister makes reference to the very limited time. Why is that? This is a Government who hold general debates on Mondays and Thursdays. They have no business, yet we have less than two hours to debate this really important issue.
The hon. Member and I served on the Public Bill Committee, where we spent much time discussing many of the amendments. I cannot comment on decisions about the business of the House and urgent questions.
As I say, I will do my absolute best to cover all the points raised by hon. Members. I hope they accept that I generally try to be generous with interventions, but I want to put on the record my response to the amendments. I hope the House will give forgive me.
A number of hon. Members have tabled amendments that seek to increase transparency around water company operations and pollution incidents. The Government absolutely agree that greater transparency is needed to better enable the regulators and the public to hold water companies accountable. Although I have previously explained why it is not practical to prohibit all discharges from emergency overflows, which are a necessary safety valve in our sewage system, I reiterate this Government’s commitment to reducing the harm caused by sewage discharge. Ensuring that all emergency overflows are monitored is a critical step in enabling the outcomes that we all want to see. Information on the frequency and duration of discharges will help to direct investment to further reduce sewage discharges into our waterways, and to better enable the public to make informed decisions about accessing their local waterways.
I thank the Minister for being so generous with her time. As she will be aware, the United Kingdom has most of the world’s chalk streams, and the River Chess runs through my constituency. How can she ensure that we continue to monitor our unique environment and protect it from the threat of overflows, to which she just referred?
I share the hon. Gentleman’s passion and love for chalk streams—the rainforests of the United Kingdom. Part of this Bill will drive the performance change in the industry that we want to see and reduce sewage discharges, which are doing such damage to such precious habitat.
Although some Members have called for the Government to go even further on monitoring, I reassure the House that we have carefully considered how best to increase transparency without driving unmanageable increases in customers’ bills. As promised in Committee, I have provided a factsheet on this issue, and I can make it available in the House of Commons Library. Rolling out event duration monitors over two price review periods will provide the best value for money for customers and the environment, and does not risk compromising water companies’ ability to deliver other vital improvements to our sewage system.
It is important that we direct investment at improving the sewage network to decrease overflow charges, and not just at monitoring, particularly where it does not provide valuable insight into the harms associated with discharge. There is a balance to be struck, and I believe we have got it right. The public know that there is too much sewage in our waterways. Whichever way we look at it—be it through volume or duration—they know there is too much. The focus must be on reducing it.
My hon. Friend talks about the importance of water quality. Will she join me in commending campaigns such as the Ilkley Clean River Group and other citizen scientists across the country? In the absence of data collected under the Conservatives and the work of the Environment Agency, they had to do the work themselves to expose the sewage scandal.
I remind my hon. Friend how much this matters to my constituents in East Thanet. We are surrounded on three sides by the sea, yet we manage to clean up our water. However, I was struck by the fact that the Reform manifesto did not contain one word about water pollution or safety. I also want to point out the emptiness of the Opposition Benches in this debate. That should be put on the record.
Residents in Grosmont in my constituency have had a van parked in the street processing raw sewage, with a pipe left open in the street, for months between the processing of the sewage and the holding tank being emptied. Does my hon. Friend agree that disgusting incidents such as these illustrate our crumbling water infrastructure and the importance of the Bill, which will ringfence funding for vital infrastructure?
I wholeheartedly agree with my hon. Friend. What she is witnessing in the streets of her constituency is a perfect example of the crumbling infrastructure that we have inherited.
If it becomes feasible in future for companies to install monitors more quickly, they will be encouraged to do so. In addition to reporting requirements for emergency overflows, other measures in this Bill will ensure that water companies have robust plans to reduce pollution incidents and empower the regulator to punish wrongdoing effectively. This includes requirements to produce pollution incident reduction plans and implementation reports, as set out in clause 2 of the Bill, and requirements for water companies to consider the use of nature-based solutions in the production of their drainage and wastewater managements plans, as set out in clause 4.
The transparency provided by these measures will drive a culture change ensuring that water companies have the right incentives to reduce discharges of sewage into our precious rivers, lakes and seas. Let me be clear that the Bill also provides comprehensive powers for Ofwat to enforce the requirements introduced by the Bill to increase transparency, including through use of significant fines. I can reassure the House that where discharges are found to have breached permit conditions, the regulator will not hesitate to take action. In relation to new clause 14, I also make it clear that Ofwat has a duty to secure that companies are able to finance the delivery of their statutory obligations, including meeting pollution targets.
The Government are committed to acting as fast as possible to reduce sewage pollution in our waterways, and already have stretching pollution targets in place, informed by detailed analysis and extensive engagement. These targets will drive £60 billion of investment between 2025 and 2050, and almost £12 billion of that investment will begin this year, improving 2,800 storm overflows by 2030. I hope this reassures the House that, where water companies do not comply with requirements around pollution incidents and the reporting of those pollution incidents, the regulator will not hesitate to take action.
The water restoration fund was created by the previous Government, yet not one penny of the £11 million levied on water companies between 2022 and 2023 reached any restoration of the waterways. Does the Minister agree that our precious chalk streams could be helped by the water restoration fund being continued?
As I have mentioned, I am a huge fan of our chalk streams. The hon. Member is right to point out that the much-lauded water restoration fund that some Members are so keen to talk about was established in November 2022, yet 18 months later the grand total of the number of projects supported by it was zero.
A number of hon. Members have also put forward suggestions to improve information and data sharing more broadly. The hon. Member for Beaconsfield (Joy Morrissey) has put her name to some of these amendments. Although the Government do not think it necessary to bring forward legislation in this space, we are actively considering ways of making data more accessible to the public through non-legislative means. This includes information on water companies’ performance and data on local sewer networks in map form, which must be made available free of charge under the Water Industry Act 1991.
I am grateful to the Minister for giving way. Her comments on this point will be welcomed by many of our local residents. Will she provide further information about the greater powers for Ofwat?
This Bill will, of course, empower Ofwat to take necessary action where it finds wrongdoing, including through changes to remuneration under clause 1. I know my hon. Friend cares a lot about this.
I am sorry, but I will have to stop taking interventions if I am to respond to all the amendments.
Water UK has published a centralised map on its website of discharge data from all storm overflows operated by English water companies. I genuinely found it clear and useful, so I encourage all hon. Members to have a look.
I have heard calls from across the House for reforming the planning frameworks, the regulators and the incentives that govern the water industry model. Although I understand and, believe me, fully share hon. Members’ frustrations with the performance across the water sector, the fundamental issues facing the water industry and the regulatory framework in which it operates can no longer be addressed in a piecemeal way. I have spoken at great length throughout the Bill’s passage about the independent commission led by Sir Jon Cunliffe, which will make recommendations to fundamentally transform how our water system works.
The broad-ranging commission is bringing together a wide range of expertise to make recommendations in line with eight objectives to deliver the necessary reset to ensure a resilient, innovative and sustainable water sector in England and Wales. It will report to the Government by summer 2025. This includes specific objectives to review the roles, structures, duties and powers of the regulators, the planning frameworks—including the price review process—and the resilience of water companies. That includes financial resilience, which I know matters to many hon. Members.
Points have been raised about taking water companies into public ownership, and the Government have repeatedly made it clear that we do not consider nationalisation to be within the commission’s scope. Nationalisation would cost over £90 billion, and it would take years to unpick the current ownership model, at the expense of delivering and addressing more immediate public priorities. However, the commission will consider alternative water industry models within its scope. I take this opportunity to invite all hon. Members to put forward their views to the commission through the upcoming call for evidence, which will be launching soon.
I am grateful to the Minister for giving way. I suspect that the Government do not agree with our water restoration fund, but if the Cunliffe review says that the water restoration fund should be reinstated, will the Minister commit to doing so?
Despite our political differences, the hon. Gentleman and I had a very interesting and—what is the right word?—comradely debate in Committee.
As we explained in Committee, conversations on the water restoration fund are still ongoing. I honestly do not believe that primary legislation is needed, which Conservative Front Benchers know, as they established the fund without primary legislation. I gently point out, as I have already mentioned, that within the 18 months of its establishment under the previous Government, the fund did absolutely nothing.
I have two minutes remaining, so I have to skip through as much as I can, as I know Members will want me to answer questions, particularly on the SAR.
Some hon. Members have expressed concern about the rules on performance-related pay and consumer representation. Although the Government agree it is crucial that consumers’ voices are heard and considered in water company decision making, we have already taken action on this. It is not necessary to require environmental experts to be placed on company boards because, following the agreement made with my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs in his first week in office, nine of the 16 companies have updated their articles of association to include a social and environmental commitment. DEFRA is working with all of them to ensure they do the rest as soon as possible.
I agree with the hon. Member for Westmorland and Lonsdale (Tim Farron) about the representation of environmental non-governmental organisations on company boards. Members of water company boards are subject to a number of duties under the Companies Act 2006, including a duty to promote the success of that company. A director’s fiduciary duties may conflict with the organisational objectives of the environmental group in question, thus preventing their objective participation in board membership. We cannot have a situation in which an environmentalist on a water company board is not comfortable with their duty to promote the success of that company.
I produced a factsheet detailing how the SAR is used to ensure the continued provision of vital public services. However, I remind the House of the facts. I am being very clear: the shortfall recovery power can only be used to recover shortfalls in repaying Government funding. For the last time, I hope, it cannot and would never be used to recover financial creditor or shareholder losses relating to investment in the company. If the amendments were accepted as proposed, it would involve a radical change to insolvency policy, which has been a long-established practice since 1986.
Proceedings interrupted (Programme Order, 16 December 2024).
The Deputy Speaker put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).
New Clause 16
Establishment of Water Restoration Fund
“(1) The Secretary of State must, within 60 days of the passing of this Act, make provision for the establishment, operation and management of a Water Restoration Fund.
(2) A Water Restoration Fund is a fund—
(a) into which any monetary penalties imposed on water companies for specified offences must be paid, and
(b) out of which payments must be made for expenditure on measures—
(i) to help water bodies, including chalk streams, achieve good ecological status, and improve ecological potential and chemical status;
(ii) to prevent further deterioration of the ecological status, ecological potential or chemical status of water bodies, including chalk streams;
(iii) to enable water-dependent habitats to return to, or remain at, favourable condition;
(iv) to restore other water-dependent habitats and species, especially where action supports restoration of associated protected sites or water bodies.
(3) The Secretary of State must, by regulations, list the specified offences for the purposes of this section, which must include—
(a) any relevant provisions of the Water Resources Act 1991, including—
(i) section 24(4) (unlicensed abstraction or related works or contravening abstraction licence);
(ii) section 25(2) (unlicensed impounding works or contravening impounding licence);
(iii) section 25C(1) (contravening abstraction or impounding enforcement notice);
(iv) section 80 (contravening drought order or permit);
(v) section 201(3) (contravening water resources information notice);
(b) any relevant regulations under section 2 of the Pollution Prevention and Control Act 1999 (regulation of polluting activities etc) related to water pollution;
(c) regulations under section 61 of the Water Act 2014 (regulation of water resources etc).
(4) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.
(5) The provisions in this section replace any existing provision for the sums received for specified offences, including in section 22A(9) of the Water Industry Act 1991 (penalties).”—(Victoria Atkins.)
Brought up.
Question put, That the clause be added to the Bill.
93|18:00|181|322|The House divided:|Question accordingly negatived.||0|0
New Clause 19
Civil penalties: equivalent reduction to customer bills
“(1) The Secretary of State must make provision for any monetary penalties imposed on a water company to result in equivalent reductions to the amounts charged to customers by the relevant water company.
(2) In fulfilling its duties under subsection (1), the Secretary of State must arrange, annually—
(a) for the total amount of monetary penalties imposed on a water company in the previous year to be calculated;
(b) for that total to be divided by the number of customers of the water company;
(c) for each customer’s next bill from the water company to be reduced by that figure.
(3) Any reduction applied under this section must be indicated on a customer’s statement of account.
(4) In this section, ‘water company’ has the meaning given by section 6(5).”—(Victoria Atkins.)
This new clause would provide for any fines imposed on water companies to result in equivalent reductions to customers’ bills.
Brought up.
Question put, That the clause be added to the Bill.
94|18:15|180|325|The House divided:|Question accordingly negatived.||0|0
Clause 10
Changes in respect of environment Agency and NRBW functions
Amendment made: 4, page 14, leave out lines 35 and 36 and insert—
“(a) sections 205A and 205B of the Water Industry Act 1991 (pollution incident reduction plans and implementation reports),”.—(Emma Hardy.)
This amendment updates clause 10 to reflect amendments made to clause 2 in the Lords.
Clause 12
Modification by Secretary of State of water company’s appointment conditions etc to recover losses
Amendment proposed: 9, page 15, line 34, leave out from “to” to “such” in line 36 and insert “recover from its creditors”.—(Tim Farron.)
Question put, That the amendment be made.
95|18:29|73|321|The House divided:|Question accordingly negatived.||0|0
Clause 15
Extent, commencement, transitional provision and short title
Amendments made: 5, page 21, line 6, at end insert—
“(aa) section 1 (rules about remuneration and governance);”.
This amendment brings clause 1 into force on Royal Assent.
Amendment 6, page 21, line 16, leave out paragraph (a).
This amendment is consequential on Amendment 5.
Amendment 7, page 21, line 30, leave out paragraph (a).
This amendment is consequential on Amendment 5.
Amendment 8, page 22, line 1, at end insert—
“(aa) section (Special provision in charges schemes);”.—(Emma Hardy.)
This amendment brings NC18 into force two months after Royal Assent.
I beg to move, That the Bill be now read the Third time.
Our rivers, lakes and seas are awash with pollution. The legacy of 14 years of Conservative failure is the highest level of sewage spills on record, economic growth held back by a lack of water supplies and, now, painful bill rises to fix the problems that they left behind. The British public are rightly angry about the state of our waterways. It has been left to this Government to clean up the mess once and for all. The water sector needs a complete reset, reform that puts customers and the environment first, and a new partnership with the Government to invest for the future and upgrade our broken infrastructure. This Government have a three-stage plan to make that happen.
During my first week in post, I met water company chief executives and announced immediate steps to improve the performance of the water industry, including ringfencing money for investment in water infrastructure so that it can never again be diverted to bonuses or dividends, and ensuring that customers who face frequent water outages or contaminated tap water receive more generous and faster compensation.
This evening, I am delighted to open the Third Reading debate on the Bill. Its core provisions will strengthen the powers of the regulators so that they can better hold water companies to account for poor performance. It will give Ofwat new powers to ban undeserved bonuses when water company executives fail to meet the high standards the public rightly demand. It will introduce stricter penalties, including imprisonment where senior executives of water companies obstruct investigations by environmental regulators, and includes provisions for automatic and severe fines for wrongdoing. We have also extended powers so that environmental regulators can recover costs for a wider range of future enforcement measures—the polluter, not the public, will pay. We have also introduced mandatory monitoring of emergency overflows and pollution incidents so the public can hold companies to account.
Will the Secretary join me in commending the citizen scientists and local campaign groups that have driven many of these issues right up the political agenda, including the Friends of the River Exe in Exeter? I am delighted that this Government have acted so quickly to hold the water companies to account for the sewage crisis. Does he agree both that this is long overdue, and that it will fundamentally change the way our rivers are treated?
I echo my hon. Friend’s commendation for the citizen scientists and the work they have done to highlight the scale of the problem.
The support for the Bill across the House and among the public demonstrates our collective desire to clean up our rivers, lakes and seas. I am proud of the progress we have made through the Bill, but it is not the extent of our ambition.
In October, I announced the biggest review of the water sector in a generation. Sir Jon Cunliffe has appointed an expert advisory group with leading voices representing the environment sector, public health, engineering, customers, investors and economists, and is preparing to launch a public call for evidence within weeks.
The Secretary of State talks about Sir Jon Cunliffe’s water commission, and we are obviously interested in engaging with that. Does he think, though, that today’s appointment of a former Thames Water executive to the commission will fill the public with confidence that it will be independent in any way?
Of course, it is an independent commission; it is up to Sir Jon to appoint to the board whom he likes. However, it is a very balanced board, and I hope the hon. Gentleman will recognise that voices from many stakeholder groups are represented, as indeed they should be.
The commission will report to the UK and Welsh Governments this summer, after which both Governments will respond and consult on Sir Jon’s recommendations, including on further legislation.
The Secretary of State is right that things are getting better. In my constituency, two new investments in water sector upgrades, by Wessex Water and Pennon, are worth a total of £230 million. Clearly, much more has to be done, but will he join me in welcoming those new investments? Does he recognise that such investment is not consistent across the country, which is exactly why we need the Bill?
I thank my hon. Friend for his intervention and I welcome those investments. From visiting him in his constituency, I know what a champion he is for cleaning up the water and the beaches in Bournemouth.
I thank the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Kingston upon Hull West and Haltemprice and the noble Lady, Baroness Hayman of Ullock for their expert leadership of the Bill through Parliament, and members of staff in the Bill team and in DEFRA for their hard work and professionalism. I thank Members on all sides who participated in the debates at all stages. I extend my thanks to our colleagues in the Welsh Government and the Senedd for working collaboratively with the UK Government on the Bill. I am delighted that, at the Welsh Government’s own request, the benefits brought about by the Bill will extend to Wales.
Consumers listening to this debate have been concerned about the role of Ofwat. What reassurance can the Secretary of State give them that Ofwat, the regulator, will put consumers’ interests and environmental interests before corporations’ interests?
Sir Jon Cunliffe’s commission will be reviewing precisely those points, and I hope the hon. Gentleman will take the opportunity to contribute his views when the call for evidence begins in just a few weeks.
The changes the Government have made in a short amount of time show that with collective determination and ambition we can turn the water sector around. The failures of the past are ending. The future of the water sector is full of promise. Our waterways have been poisoned by unacceptable levels of sewage and other pollution for too long. With these changes, finally, we will clean up our rivers, lakes and seas for good.
I thank everyone who has scrutinised and worked on the Bill in both Houses, including the shadow Minister, my hon. Friend the Member for Epping Forest (Dr Hudson), our very efficient Whip, my hon. Friend the Member for Broadland and Fakenham (Jerome Mayhew), and the noble Lord Roborough, who led very constructive discussions in the other place. It is a shame that the Government rejected the amendments put forward today. I thank the Doorkeepers, the hon. Members who chaired the Committee and everyone who helped His Majesty’s official Opposition to scrutinise the Bill.
Across the House, we can all agree that there are fundamental problems facing the water and sewerage industry. Since 2010, the number of designated bathing waters has increased; we have seen a significant improvement in water quality ratings, with more water rated as excellent or good; and an increase in blue flag beaches. But of course we want to see more. We were, in fact, the first Government in history to set out that storm overflows must be reduced, and our landmark Environment Act 2021 gave stronger powers to regulators and imposed strict demands for tackling pollution. We set legally binding targets to improve water quality and availability, and to reduce nutrient pollution. We rolled out catchment-sensitive farming to all farms in England. We stepped up the requirements for investment, including investment from water companies and storm overflow improvements, and nationally significant infrastructure projects such as the Thames tideway tunnel super sewer. When we came into government, just 7% of storm overflows were monitored. When we left government, we had increased that to 100%.
We support the Bill, but we do so with some disappointment at its lack of ambition. Frankly, as we have said before, much of what the Bill tries to do, including monitoring, blocking bonuses and fines, was brought in by the Conservatives in government. We say that the primary legislation is not necessary, but we will of course support the Bill.
I am especially disappointed that the Government have declined to accept our amendments. In particular, it is woeful that they have failed to put the water restoration fund into legislation. [Interruption.]I will deal with the Minister’s comments in a moment. The public rightly want to see the Government addressing water quality, but rather water company fines being used to restore water bodies, that money will be going into the gaping hole of the Treasury’s coffers, presumably in an attempt to undo some of the damage caused by the Chancellor’s disastrous growth-blocking, tax-hiking, job-cutting, investment-plummeting Budget.
I sat on the Public Bill Committee, and I must say that the tone that the right hon. Lady is striking is very different from that of her colleagues on the Committee. I just wonder whether she as any regrets about her Government’s record on tackling sewage or pollution. Would she acknowledge any regrets?
I do love being mansplained to by Labour Back Benchers. I suppose it is part of the Labour party’s women problem. The hon. Gentleman is now throwing his thumbs up at me—goodness me!
What I will say is that throughout the passage of the Bill, we have said, “We have made some progress, but there is more to do.” That is precisely why we are supporting the Bill tonight, although we will try to improve it and strengthen it.
I will not, because I want to allow others to speak.
The Government have also sadly failed to recognise the importance of chalk streams, refusing to confirm the continuation of protections put in place by us Conservatives. I am afraid that warm words about rainforests, much as we agree with them, will not protect these vital habitats. We want to see improved water quality, and I urge the Government to take stock and seek to adopt a more rounded approach that cleans up our rivers and seas, treats bill payers and taxpayers properly, and builds on our work to construct the water systems of the future.
Let me say, without going through all the flowery stuff that we did earlier, that I am grateful to Members in all parts of the House for what has been a broadly collegiate debate. However, the shadow Secretary of State said something that is worth reflecting on. I think she was talking about what I am about to mention, namely the fines of £164 million that Ofwat had indeed proposed should be levied against the very three water companies to which she referred. For what it is worth—and I am not here to defend the Treasury—this was not a Treasury decision at all. It was because of Ofwat’s weakness, and a culture of timidity that is evident when it comes to gathering money from the water companies, that the money was not collected. That information is 100% correct, because it was given to me in response to one of my Freedom of Information Act requests.
In any event, the key feature is my disappointment in the Bill. I will certainly support it should it come to a vote, and I support it anyway, but its weakness lies in the fact that it is not radical enough. It does not go far enough, and it does not tackle the weakness in regulation to which, in a roundabout, accidental way, the Secretary of State has referred .
We will engage with the Cunliffe water review and recognise it as independent. My reflection is simply this. The Labour party has been in opposition for a long time. They were a well-funded Opposition through short money—we could only dream of such things—and surely had the capability to come up with a set of plans that meant they could get on with it straightaway, rather than kicking it to halfway into the Parliament. This is an unambitious Bill, but it is good enough, and it will have our support.
Question put and agreed to.
Bill accordingly read the Third time and passed, with amendments.
On a point of order, Madam Deputy Speaker. I need some assistance in understanding how the House can express its displeasure at the Government’s manipulation of the business of the House to stop proper consideration of this Bill. Water was at the heart of the last general election—it is really important to our constituents—and yet the Bill’s Report stage was limited to less than one and a half hours, and not a single Back Bencher has been able to contribute on Third Reading. Is there a way that we can express our disapprobation of the Government putting forward two non-urgent statements today on Gaza and on Sudan and the eastern Democratic Republic of the Congo—both of them important in their own right but, I suspect, designed to eat up time?
Further to that point of order, Madam Deputy Speaker. May I gently refute what the hon. Member for Broadland and Fakenham (Jerome Mayhew) just said? Two important statements were made today. It is for the Chair to decide on urgent questions, of which there were two today, with both running for a considerable time. It was not the Government’s intention at all for this debate, which is on a matter of great importance to many people across the House, to be curtailed. I will certainly take on board what he says, and there will potentially be further opportunities with the Bill. [Interruption.] There will be statements tomorrow, and there were statements earlier this week; there are lots of important matters. We take great care to ensure that important Government announcements are made to the House through oral statements, and we are criticised when we do not do that.
(5) The Secretary of State may by regulations made by statutory instrument add to the list of offences specified in subsection (3).
(6) The provisions in this section replace any existing provision for the sums received for specified offences, including in section 22A(9) of the Water Industry Act 1991 (penalties).”
This new clause would require all funds from fines on water companies for environmental offences to be ringfenced for the Water Restoration Fund, for spending on freshwater recovery.
New clause 2—Abolition of the Water Services Regulation Authority—
“(1) The Water Industry Act 1991 is amended as follows.
(2) For section 1A (Water Services Regulation Authority) substitute the following—
‘1A Abolition of the Water Services Regulation Authority
(1) The body corporate known as the Water Services Regulation Authority (in this Act referred to as “the Authority”) is abolished.
(2) All references to the duties and functions of the Authority in this Act or any other enactment are null and void.’
(3) Omit Schedule 1A (The Water Services Regulation Authority).”
This new clause abolishes Ofwat.
New clause 3—Impact of the Act on the Environment Agency—
“The Secretary of State must, within 12 months of the passing of this Act—
(a) review the impact of this Act on the Environment Agency;
(b) consider whether the Environment Agency requires any additional resources to meet the additional requirements placed upon it by this Act.”
New clause 4—Duty to publish maps of sewage catchment networks—
“After section 205 of the Water Industry Act 1991 insert—
‘205ZA Duty to publish maps of sewage catchment networks
(1) Each relevant undertaker must publish a map of its sewage catchment network.
(2) A map published under this section must illustrate any relevant pumping stations, pipes, and other works constituting part of the undertaker’s sewerage network.
(3) Maps published under this section must be published within 12 months of the passing of this Act, and must be updated whenever changes are made to the sewage catchment network or the components listed in subsection (2).
(4) Maps published under this section must be made publicly accessible on the undertaker’s website.’”
New clause 5—Duty to prevent chemical pollutants entering the water environment—
“After section 68 of the Water Industry Act 1991 (Duties of water undertakers and water supply licensees with respect to water quality), insert—
‘68A Duty to prevent chemical pollutants entering the water environment
(1) It shall be the duty of a water undertaker to take such steps as are necessary to reduce and prevent chemical pollutants, including but not limited to poly- and perfluorinated alkyl substances, entering the water environment.
(2) In fulfilling its duty under subsection (1), a relevant undertaker must publish a strategy outlining how it intends to reduce and prevent chemical pollutants entering the water environment.
(3) In developing a strategy under subsection (2), a relevant undertaker must consult with appropriate agencies, including but not limited to—
(a) the relevant Government department;
(b) the Authority;
(c) the Environment Agency; and
(d) the Drinking Water Inspectorate.
(4) A strategy under subsection (2) must include consideration of how the costs of reducing and preventing chemical pollutants entering the water environment are to be borne or recovered, where such consideration must prevent such cost recovery from resulting in additional charges being made upon consumers.’”
New clause 6—Licence conditions about nature recovery—
“In the Water Industry Act 1991, after section 17FB insert—
‘17FC Nature recovery
(1) reducing flood risk and pollution incidents, improving water quality and benefiting nature restoration in their catchment area.
(2) The Authority must not take any action that discourages or prevents a relevant undertaker from making an investment in accordance with subsection (1).’”
This new clause would make it a condition of all water companies’ licences to consider nature-based solutions to flood risk, improving water quality and benefiting nature restoration in their catchment area, and prevent the regulator from discouraging or stopping such investments.
New clause 7—Review of price review process—
“In section 2 of the Water Industry Act 1991, after subsection (2B) insert—
‘(2BA) In furthering its objectives and purposes under subsection (2A), the Authority must, within 12 months of the passing of the Water (Special Measures) Act 2025, review its practices as to reviewing price limits.
(2BB) A review under subsection (2BA) must consider—
(a) whether the current practice of price reviews every five years should be replaced with an annual, or otherwise more frequent, system;
(b) how changes to inflation and other financial or economic changes could or should be reflected in prices charged by water companies;
(c) how any future system of price reviews could better support undertakers in planning and delivering investments beyond a single asset management plan period.’”
New clause 8—Prohibition on bail-out of water company shareholders and creditors—
“(1) The Secretary of State and His Majesty’s Treasury must not directly or indirectly discharge, assume, or guarantee any debts of legal entities in any water company group subject to proceedings under section 24 of the Water Industry Act 1991 (special administration orders made on special petitions), except in accordance with subsection (2).
(2) The special administrator of a water company may reduce the debts owed by the regulated entity to its creditors by up to 100 per cent, taking into account the future forecast expenditure over the short, medium and long term and subject to the administrator’s confidence in the company’s ability to accommodate this spending.
(3) The prohibition set out in subsection (1) and the reduction of debts set out in subsection (2) must not include pension, wage and other obligations owed to employees, excluding any past or current member of a board of directors, within the water company group.”
This new clause aims to allow up to 100% of debts to be cancelled in the event of special administration proceedings, taking into account the scale of investment required to hit the future targets established by the Authority.
New clause 9—Ofwat to publish guidance on debt levels after administration—
“In section 2 of the Water Industry Act 1991, after subsection (2D) insert—
‘(2DZA) For the purposes of ensuring that relevant undertakers are able to finance the proper carrying out of their functions under subsection (2A)(c), the Authority must establish guidelines to be followed by relevant undertakers who have been in special administration.
(2DZB) Guidelines produced under subsection (2DZA) must—
(a) set out a maximum level of debt which can be accrued by the undertaker;
(b) set out a process for agreeing capital expenditure necessary for service improvements, bill increases, and changes to operating costs while the undertaker is subject to the Special Administration Regime;
(c) state the penalties which will be imposed for breaches of such guidelines, which may include—
(i) financial penalties;
(ii) prohibitions on the payment of dividends or other bonuses; or
(iii) such other special measures as the Authority deems appropriate.’”
New clause 11—Duty on sewerage undertakers to monitor overflows at sewage treatment works, pumping stations and on the sewer network—
“(1) The Water Industry Act 1991 is amended as follows.
(2) In section 94—
(a) after subsection (1)(b) insert—
‘(c) to make provision for the accurate collection of data relating to its performance in fulfilling its duties under paragraphs (a) and (b).’
(b) after subsection (2) insert—
‘(2A) In performing its duties under subsection (1)(c), a sewerage undertaker must—
(a) install volume flow meters in all locations where sewage overflows occur, including sewage treatment works, pumping stations and on the sewer network for which it is responsible;
(b) establish appropriate required capacities for each sewage treatment works and pumping station;
(c) publish information on the data and calculations used to establish such required capacities; and
(d) install all required monitoring tools within 12 months of the passing of this Act.’”
New clause 12—Rules about performance-related pay—
“(1) The Water Industry Act 1991 is amended as follows.
(2) After section 35D (inserted by section 1 of this Act) insert—
‘35E Rules about performance-related pay
(1) The Authority must issue rules prohibiting a relevant undertaker from giving to persons holding senior roles performance-related pay in respect of any financial year in which the undertaker has failed to prevent all sewage discharges, spills, or leaks.
(2) The rules issued under subsection (1) must include—
(a) provision designed to secure that performance-related pay which, if given by a relevant undertaker, would contravene the pay prohibition on the part of the undertaker, is not given by another person;
(b) that any provision of an agreement (whether made before or after the issuing of the rules) is void to the extent that it contravenes the pay prohibition;
(c) provision for a relevant undertaker to recover any payment made, or other property transferred, in breach of the pay prohibition.
(3) For the purposes of subsection (1)—
(a) “performance-related pay” means any payment, consideration or other benefit (including pension benefit) the giving of which results from the meeting of any targets or performance standards on the part of the relevant undertaker or the person to whom such payment, consideration or benefit is given;
(b) a person holds a “senior role” with a relevant undertaker if the person—
(i) is a chief executive of the undertaker,
(ii) is a director of the undertaker, or
(iii) holds such other description of role with the undertaker as may be specified.’”
This new clause creates a new section in the Water Industry Act 1991 to require Ofwat to ban bonuses for water company bosses if they fail to prevent sewage discharges, spills, or leaks.
New clause 13—Rules about competitive procurement in water infrastructure—
“(1) The Water Industry Act 1991 is amended as follows.
(2) After section 35A insert—
‘Rules about competitive procurement in water infrastructure
(1) The Authority must issue rules requiring relevant undertakers to use competitive procurement processes in respect of procurement relating to water infrastructure.
(2) If the Authority considers that a relevant undertaker is contravening the rules, the Authority may give the undertaker a direction to do, or not to do, a particular thing specified in the direction.
(3) It is the duty of a relevant undertaker to comply with a direction given under subsection (2), and this duty is enforceable by the Authority under section 18.
(4) Rules under this section may—
(a) make different provision for different relevant undertakers or descriptions of undertakers;
(b) make different provision for different purposes;
(c) make provision subject to exceptions.
(3) The Authority may from time to time—
(a) revise rules issued under this section, and
(b) issue the revised rules.’”
New clause 14—Ofwat consideration of pollution targets for price reviews—
“(1) The Water Industry Act 2011 is amended as follows.
(2) After section 17I insert—
‘“17IA Duty to have regard to pollution targets in carrying out price reviews
When carrying out a periodic review for the purpose of setting a Price Control in respect of one or more relevant undertakers, the Authority must have regard to the performance of the relevant undertaker or undertakers against pollution targets across the previous five years.’”
New clause 15—Database of performance of sewerage undertakers—
“(1) The Water Industry Act 1991 is amended as follows.
(2) In Chapter 3 of Part II (Protection of customers etc), after section 27ZA (Power to require information for purpose of monitoring) insert—
‘27ZB Duty to establish database
(1) It shall be the duty of the Authority to establish and maintain a database containing information relating to the performance of sewerage undertakers.
(2) The database must—
(a) be publicly and freely accessible;
(b) enable uploaded information to be updated in live-time;
(c) contain such data or information as the Authority thinks is necessary for the purposes of public transparency as to the performance of sewerage undertakers; and
(d) contain—
(i) current and historic data; and
(ii) data and information which has been independently collected or analysed including—
(a) the start time, end time and duration of all sewage spill events,
(b) flow data from flow monitors,
(c) the location of each flow meter from which flow data is provided.
(3) The Authority may make rules about the provision of data and information under this section.
(4) Rules under subsection (3) must include rules relating to information provided about the location of flow meters.
(5) The Authority may impose penalties on undertakers who fail to provide such information as is required by this section.’”
New clause 16—Establishment of Water Restoration Fund—
“(1) The Secretary of State must, within 60 days of the passing of this Act, make provision for the establishment, operation and management of a Water Restoration Fund.
(2) A Water Restoration Fund is a fund—
(a) into which any monetary penalties imposed on water companies for specified offences must be paid, and
(b) out of which payments must be made for expenditure on measures—
(i) to help water bodies, including chalk streams, achieve good ecological status, and improve ecological potential and chemical status;
(ii) to prevent further deterioration of the ecological status, ecological potential or chemical status of water bodies, including chalk streams;
(iii) to enable water-dependent habitats to return to, or remain at, favourable condition;
(iv) to restore other water-dependent habitats and species, especially where action supports restoration of associated protected sites or water bodies.
(3) The Secretary of State must, by regulations, list the specified offences for the purposes of this section, which must include—
(a) any relevant provisions of the Water Resources Act 1991, including—
(i) section 24(4) (unlicensed abstraction or related works or contravening abstraction licence);
(ii) section 25(2) (unlicensed impounding works or contravening impounding licence);
(iii) section 25C(1) (contravening abstraction or impounding enforcement notice);
(iv) section 80 (contravening drought order or permit);
(v) section 201(3) (contravening water resources information notice);
(b) any relevant regulations under section 2 of the Pollution Prevention and Control Act 1999 (regulation of polluting activities etc) related to water pollution;
(c) regulations under section 61 of the Water Act 2014 (regulation of water resources etc).
(4) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.
(5) The provisions in this section replace any existing provision for the sums received for specified offences, including in section 22A(9) of the Water Industry Act 1991 (penalties).”
New clause 17—Rules about borrowing—
“After section 154B of the Water Industry Act 1991 (financial assistance for major works) insert—
‘Chapter III
Rules about borrowing for undertakers
154C Restrictions on undertakers relating to borrowing
(1) The Secretary of State may by regulations made by statutory instrument implement a limit on borrowing by a relevant undertaker.
(2) Where a relevant undertaker has total borrowing exceeding the limit set by regulations made under subsection (1), the relevant undertaker may not make a payment of dividends, capital, assets, or interest to shareholders or controlling entities.
(3) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.’”
This new clause would enable limits to be placed on the amount of money that can be borrowed by a water or sewerage undertaker, and prevent an undertaker who has exceeded such limits from being able to pay dividends to shareholders.
New clause 19—Civil penalties: equivalent reduction to customer bills—
“(1) The Secretary of State must make provision for any monetary penalties imposed on a water company to result in equivalent reductions to the amounts charged to customers by the relevant water company.
(2) In fulfilling its duties under subsection (1), the Secretary of State must arrange, annually—
(a) for the total amount of monetary penalties imposed on a water company in the previous year to be calculated;
(b) for that total to be divided by the number of customers of the water company;
(c) for each customer’s next bill from the water company to be reduced by that figure.
(3) Any reduction applied under this section must be indicated on a customer’s statement of account.
(4) In this section, ‘water company’ has the meaning given by section 6(5).”
This new clause would provide for any fines imposed on water companies to result in equivalent reductions to customers’ bills.
New clause 20—Principles of best regulatory practice—
“In section 2 of the Water Industry Act 1991, after subsection (4) insert —
(4A) For the purposes of having regard to the principles of best regulatory practice, the Authority shall not employ any individual who has been employed by a relevant undertaker in the preceding three years.”
New clause 21—Environmental duties with respect to protected landscapes—
“After section 4 of the Water Industry Act 1991 insert—
‘4A Environmental duties with respect to protected landscapes
(1) Where a relevant undertaker operates, or has any effect, on land within protected landscapes, that undertaker must—
(a) Secure and maintain “high ecological status” in the water in these areas by 2028;
(b) further the conservation and enhancement of wildlife and natural beauty;
(c) improve every storm overflow that discharges within these areas by 2028;
(d) reduce the load of total phosphorus discharged into freshwaters within these areas from relevant discharges by 2028 to at least 90% lower than the baseline as defined in Regulation 13(1) of the Waste Water Targets set under the Environment Targets (Water) (England) Regulations 2023.
(2) A relevant undertaker must be put into special administration, and not be eligible for a further licence, if it fails to—
(a) demonstrate adequate progress each year;
(b) meet the targets in subsection (1).
(3) Within one year of the day on which the Water (Special Measures) Act 2025 is passed, the Secretary of State must lay a report on the undertakers’ implementation of the environmental duties in subsections (1) and (2) before Parliament.
(4) Following the first report being published under subsection (3), a progress report on implementation must be included in the annual environment improvement plan, issued under section 8 of the Environment Act 2021.
(5) The Secretary of State must by regulations make provision requiring an undertaker to achieve bespoke objectives for specific iconic and the most culturally and ecologically significant waterways, including, where appropriate, complete removal of sewage discharge from the undertaker’s infrastructure.
(6) A statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.
(7) In this section—
“protected landscapes” includes national parks, national landscapes and national trails;
”land” includes rivers, lakes, streams, estuarine and other waterways;
”High Ecological Status” means the classification of water bodies defined in Regulation 6 of The Water Environment (Water Framework Directive) (England and Wales) Regulations 2017.’”
New clause 22—Consultation on public ownership of water companies—
“(1) The Secretary of State must within three months of this Act coming into force, publish a public consultation on making provision for the transfer of ownership of undertakers to public ownership.
(2) The consultation must consider—
(a) the process of transferring private water companies to public ownership;
(b) the circumstances in which water companies will be transferred to public ownership;
(c) the establishment of new public bodies to manage water services;
(d) transition arrangements for employees, contracts, and ongoing operations;
(e) governance structures for publicly-owned water services, including provisions for local democratic control and accountability.
(3) The Secretary of State must, within twelve months of the passing of this Act, lay before both Houses of Parliament a report on this consultation.”
New clause 23—Special administration for breach of environmental and other obligations—
“(1) Section 24 of the Water Industry Act 1991 (special administration orders made on special petitions) is amended as follows.
(2) After subsection (2)(a), insert—
‘(aa) that there have been failures resulting in enforcement action from the Authority or the Environment Agency on three or more occasions to—
(i) maintain efficient and economical water supply,
(ii) improve mains for the flow of clean water,
(iii) provide sewerage systems that are effectually drained,
(iv) comply with the terms of its licence, or
(v) abide by anti-pollution duties in the Environmental Protection Act 1990, Water Resources Act 1991, or the Environmental Permitting (England and Wales) Regulations 2016 (SI 2016/1154);’
(3) After subsection (2), insert—
‘(2A) In support of an application made by virtue of subsection (1)(a) in relation to subsection (2)(aa), the Secretary of State must compile and present to the High Court records of—
(a) water pipe leaks
(b) sewage spilled into waterways, bathing waters, and private properties, and
(c) falling below international standards of effective water management.’”
This new clause aims to require the Secretary of State to place a water company into special administration arrangements if they breach certain environmental or other conditions.
New clause 24—Special administration: criminal convictions—
“After subsection (2)(e) of section 24 of the Water Industry Act 1991 insert—
‘(f) that has been the recipient of two or more criminal convictions in the last five years.’”
This new clause aims to exert pressure on companies to operate within the law by preventing water companies with numerous criminal convictions from remaining in business.
New clause 25—Companies to be placed in special measures for missing pollution targets—
“In section 2 of the Water Industry Act 1991, after subsection (2D) insert—
‘(2DZA) For the purposes of ensuring that the functions of water and sewerage undertakers are properly carried out, the Authority must establish—
(a) annual, and
(b) rolling five-year average pollution targets which must be met by water and sewerage undertakers, and the penalties to be imposed for failure to meet such targets.
(2DZB) The performance of a water or sewerage undertaker against such targets must be measured through independent analysis of monitoring data.
(2DZC) A timetable produced under subsection (2DZA)(b) must require the following reductions in the duration of sewage spill events, using the annual total hours’ duration of all sewage spill events recorded by Event Duration Monitors, based on an average from the last five years, as a baseline—
(a) a 25% reduction within five years;
(b) a 60% reduction within ten years;
(c) an 85% reduction within fifteen years; and
(d) a 99% reduction within twenty years.
(2DZD) A water or sewerage undertaker which fails to meet pollution targets set out by the Authority will be subject to such special measures as the Authority deems appropriate, which may include—
(a) being required to work on improvement projects with or take instruction from the Authority, the relevant Government department, or such other bodies or authorities as the Authority deems appropriate; and
(b) financial penalties.’”
New clause 26—Independent review: companies exiting a special administration regime—
“(1) The Secretary of State must, within six months of the passing of this Act, either—
(a) commission an independent review, or
(b) take steps to extend the terms of reference of any existing independent review or commission,
to consider the merits of changing the law to provide that a water company exiting a special administration regime becomes a company mutually owned by its customers.
(2) A review under subsection (1) must consider—
(a) the general merits of mutual ownership of water companies in such circumstances, and
(b) what model of mutual ownership would be most suitable.
(3) The Secretary of State must, as soon as practicable after receiving a report of a review under subsection (1), lay before both Houses of Parliament—
(a) a copy of the report, and
(b) a statement setting out the Secretary of State’s response to that report.”
This new clause would require the Secretary of State to commission an independent review of the potential merits of changing the law so that a water company exiting a special administration regime becomes a company mutually owned by its customers.
Amendment 23, in clause 1, page 1, line 11, at end insert—
“(1A) The Authority must use its power under subsection (1) to issue rules which require—
(a) the interests of customers, and
(b) the environment,
to be listed as primary objectives in a relevant undertaker’s Articles of Association.”
Amendment 15, in clause 1, page 2, line 3, at end insert—
“(d) requiring the management board of a relevant undertaker to include at least one representative of each of the following—
(i) groups for the benefit and interests of consumers;
(ii) groups for the benefit and interests of residents of the areas in which the undertaker is operational;
(iii) experts in water and sewerage policy and management; and
(iv) environmental interest groups.”
Amendment 16, in clause 1, page 2, line 3, at end insert—
“(d) preventing a relevant undertaker from employing any individual who has been employed by the Authority in the preceding three years.”
Amendment 17, in clause 2, page 4, line 34, after “occurrence” insert “and impact”. Amendment 19, in clause 2, page 5, line 15, after “occurrence” insert “and impact”.
Amendment 18, in clause 2, page 5, line 17, at end insert—
“(ea) the use the undertaker plans to make of nature-based solutions for reducing the occurrence and impact of pollution incidents,”.
Amendment 11, in clause 3, page 7, line 35, at end insert—
“(e) the volume of the discharge.”
Amendment 12, in clause 3, page 7, line 38, leave out “subsection (1)(d)” and insert “subsections (1)(d) and (e)”.
Amendment 1, in clause 3, page 8, line 5, at end insert—
“(c) be published on the home page of the undertaker’s website.”
This amendment would ensure that information regarding a discharge from an emergency overflow must be published on the home page of the undertaker’s website.
Amendment 13, in clause 3, page 8, line 5, at end insert—
“(c) be uploaded and updated automatically, where possible;
(d) be made available on the undertaker’s website alongside searchable and comparable historic data.”
Amendment 14, in clause 3, page 8, line 5, at end insert—
“(3A) The undertaker must ensure that, within 12 months of the passing of this Act, appropriate monitors are installed to collect the information required by subsection (1).”
Amendment 22, in clause 3, page 8, line 27, leave out from start to “in” and insert
“a Minister with specific responsibility for issues relating to the coast,”.
Amendment 2, in clause 3, page 9, line 23, at end insert—
“141H Failure to report discharge from emergency overflows
(1) If a relevant undertaker fails to comply with its duties under section 141F—
(a) the undertaker commits an offence, and
(b) the chief executive of the undertaker commits an offence, subject to subsection (2).
(2) It is a defence for the chief executive to prove that they took all reasonable steps to avoid the failure.
(3) A person who commits an offence under this section is liable, on summary conviction or conviction on indictment, to imprisonment for a term not exceeding 5 years or an unlimited fine, or both.”
This amendment would make it an offence for an undertaker to fail to comply with its duty to report discharges from emergency overflows.
Amendment 3, in clause 3, page 9, line 23, at end insert—
“141H Restriction on the use of emergency overflows in areas used for aquatic sports
(1) A sewerage undertaker must not permit a discharge from an emergency overflow in an area used for aquatic sports.
(2) In this section, an “area used for aquatic sports” is a section of any body of water connected to and within a one mile radius of—
(a) the clubhouse of a rowing club affiliated with British Rowing,
(b) a Royal Yacht association training centre or the clubhouse of an affiliate member, and
(c) the properties or facilities used by any organisation that the Secretary of State deems to provides water-based sporting activities for the purpose of teaching, training or leisure.
(3) If a relevant undertaker fails to comply with its duties under section (1)—
(a) the undertaker commits an offence, and
(b) the chief executive of the undertaker commits an offence, subject to subsection (4).
(4) It is a defence for the chief executive to prove that they took all reasonable steps to avoid the failure
(5) A person who commits an offence under this section is liable, on summary conviction or conviction on indictment, to imprisonment for a term not exceeding 5 years or an unlimited fine, or both.”
This amendment creates an offence for a sewerage undertaker to use an emergency overflow in an area used for aquatic sports.
Amendment 20, in clause 4, page 9, line 29, leave out
“use that is to be made of”
and insert
“priority that is to be given to”.
Amendment 21, in clause 9, page 13, line 40, leave out from “duties” to end of page 14, line 2.
Government amendment 4.
Amendment 9, in clause 12, page 15, line 34, leave out from “to” to “such” in line 36 and insert “recover from its creditors”.
Amendment 26, in clause 12, page 15, line 39, at end insert—
“(2A) The Secretary of State may not require or permit any modified charges to be imposed on persons who do not receive services from the company for the purposes of making good any SAO loss.”
Amendment 10, in clause 13, page 18, line 13, leave out from “to” to “such” in line 15 and insert “recover from its creditors”.
Amendment 27, in clause 13, page 18, line 18, at end insert—
“(2A) The Secretary of State may not require or permit any modified charges to be imposed on persons who do not receive services from the company for the purposes of making good any SAO loss.”
Amendment 24, in clause 15, page 21, line 4, leave out subsections (2) to (8) and insert—
“(2) The provisions of this Act come into force on the day on which this Act is passed.”
Government amendments 5, 6, 7 and 8.
The Government have tabled amendments 5 to 7 in order to commence clause 1 on Royal Assent. That will give Ofwat and companies certainty on when the powers to make rules on remuneration and governance will come into force and will therefore be useful to companies in planning for the 2025-26 financial year. Commencement of clause 1 on Royal Assent will ensure Ofwat can implement its rules as soon as possible following its statutory consultation with relevant persons, which include the Secretary of State, Welsh Ministers and the Consumer Council for Water. I know that some Members have expressed concerns around the timeline over which Ofwat’s rules will come into effect. I therefore hope the alteration to the commencement provisions for clause 1 will reassure those Members that the Government and the regulators are absolutely committed to ensuring Ofwat’s rules are put in place as quickly as possible.
I now turn to new clause 18, which is the most substantial of the Government amendments. As I have stated before, this Government are a Government of service, and we are absolutely committed to taking action to address water poverty. We are working with industry to keep existing support schemes under review to ensure vulnerable customers across the country are supported. We also expect companies to hold themselves accountable for their public commitment to end water poverty by 2030 and will work with the sector to ensure appropriate measures are taken to deliver that.
That is why we have tabled the new clause, which adds to the existing powers to provide for special charging arrangements for customers in need. The new provision will enable water companies to provide consistent support for consumers across the country. It will also allow for automatic enrolment on any future scheme and broader information sharing between public authorities and water companies. The clause imposes a requirement for consultation on any future scheme, and it also amends the Digital Economy Act 2017 to ensure that water companies identify eligible customers and that they get the full support to which they are entitled.
This is very important, as a toxic cocktail of poor behaviour by water companies and rising bill prices has led to many people feeling that they are receiving poor value for money and not getting the quality water services that they deserve. A concomitant reduction in customer bills that people will see directly on their statements will be a real and tangible sign that poor behaviour is not going unchecked. The Government have previously rejected the proposal, but we urge them to think again about this simple yet effective amendment that would do so much to underpin all the work that is being done and protect bill payers.
I turn to some of our further amendments. Our concerns about the water industry and finances extend to what is in the Bill as it stands—in particular, the provisions for special administration orders in clauses 12 and 13, which the Opposition have raised in the other place and in Committee. Those clauses would give the Government the power to recover any losses they make through placing a company in special administration by raising consumer bills. My Conservative colleagues in the other place sounded the alarm on this issue, and I put on record again my thanks to them for doing so. If water companies require the Government to place them in special administration through their own failure, why should consumers foot the bill for failures they have had no influence on or responsibility for? That is particularly the case if a customer’s bills will rise as a result of mismanagement by a company whose services they do not even rely on.
This proposal runs contrary to the nature of all the action taken in recent years to improve water quality, whereby companies that are responsible for failing to get their affairs in order must take responsibility. We have all been starkly aware of concerns surrounding the financial resilience of Thames Water, and as many will know, Ofwat’s “Monitoring financial resilience” report in November identified 10 companies that needed an increased level of monitoring and/or engagement concerning financial resilience. We acknowledge that the Government believe that they expect to use special administration orders as a last resort and in limited circumstances. However, it is the Opposition’s firm belief that an injustice remains, with people having to pay for companies that they have no connection to. We have therefore tabled amendments 26 and 27, which would explicitly forbid the raising of prices for consumers who do not use the services of the water company that is in special administration. We believe this is a fair and reasonable compromise that the Government should accept, so that we can work to improve the water industry’s financial practices.
We have also tabled new clause 17, which would amend the Water Industry Act 1991 to insert new rules regarding limits on the amount of money that can be borrowed by a water company. Regrettably, the Government rejected this sensible measure in Committee, so we have tabled it again to ensure that water companies do not excessively borrow money, which is ultimately bad for bill payers. When we talk about financial resilience, the heart of the issue is concern about borrowing, and the resultant over-leveraging in the industry. We will be pushing that new clause to a Division. We will also be supporting the measures on nature recovery that we tabled in Committee.
We will be looking very closely at some of the amendments from the Liberal Democrats. New clause 2, which they tabled in Committee, would abolish Ofwat. At that stage, we pointed out that the new clause was not explicit about what it would transition to, so we do not believe that is a sensible way forward.
New clause 18 would grant the Government a power to create a unified scheme of charging arrangements for customers in need of support regardless of the specific supplier, and introduce a consultation for that purpose. Although the Opposition welcome looking at that, can the Government please ensure that others consumers do not face rising bills as a result? It will be interesting to see what the Government do with that.
I am proud that we are already standing here debating the Bill, only six months in. It will bring criminal charges against persistent lawbreakers, with penalties including imprisonment. In addition, the cost recovery powers of regulators will be expanded to ensure that water companies bear the cost of enforcement action taken in response to their failings.
We have been left a very difficult legacy due to the disastrous inaction of the Tories and the Lib Dems when they were in coalition. It will take much more work and many years across borders, with both farmers and water companies, to restore our rivers, but the Bill makes an excellent start to cleaning up the horrific mess. It will mean that in future, I hope, parents will be able to allow their children to run helter-skelter into their local rivers and streams.
I end by saying that my constituents will welcome the actions taken by the Labour Government. We owe it to them and to the next generation to leave this country with seas, rivers and an environment that are protected and thriving.
I am proud to support this major step forward in the Government’s wider reforms to fix the broken water system left behind by the Conservative party. This is a great first step, and a commission will look at the whole water industry, which will hopefully address some of the concerns raised by Members. Only by taking these actions with this ambitious plan, which the Government have done in their first six months in office, can we begin to turn the page on years of decline and attract much-needed investment into the sector, which will preserve the beauty of High Peak and the Peak district for the long term.
Question put and agreed to.
New clause 18 accordingly read a Second time, and added to the Bill.
The Bill has been strengthened and improved in its passage through both Houses. I am thankful to all hon. Members, and all noble Lords in the other place, for their thorough consideration and scrutiny of the Bill, and for the many and varied amendments that have been tabled and debated. Water companies will now be required to include water supply as well as sewage-related incidents in pollution incident reduction plans, and we have created personal liability for chief executives so that there is accountability for these plans at the very highest level. Water companies will also need to produce an implementation report alongside their annual plans so the public can see what action they are taking to reduce pollution incidents.
We have introduced two clauses to consider more nature-based solutions such as reed beds and wetlands in drainage and wastewater management plans, and for Ofwat to track progress against our environmental targets. A further clause will ensure that measures are in place to support vulnerable customers, as set out by the water Minister, my hon. Friend the Member for Kingston upon Hull West and Haltemprice (Emma Hardy), earlier this evening.
Now I am going to correct the Minister, and I will do so from the Dispatch Box rather than through a point of order. Last summer it emerged that Thames Water, Yorkshire Water and Northumbrian Water would be fined a record £160 million between them for a “catalogue of failure” over illegal sewage discharges, subject to consultation. However, in August—when this Government were in power—the Treasury held back those fines, which were due to go into the water restoration fund to help clean up affected areas. The Minister gave figures earlier, but it is her Government’s fault that money was not paid into that fund. We on the side of the House believe that the polluters should pay for their mistakes, rather than their fines paying for pay rises for the Government’s trade union buddies. [Interruption.] Yes, I am sure that the train drivers are very grateful.