PARLIAMENTARY DEBATE
Water (Special Measures) Bill [ Lords ] (Fifth sitting) - 16 January 2025 (Commons/Public Bill Committees)

I beg to move, That the clause be read a Second time.

Good morning, everyone. I will highlight two key points about new clause 28, which concerns what happens when companies that have gone into special administration come out of it. Subsection (1) refers to considering

“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.”

Subsection (2) states that that would involving considering

“the general merits of mutual ownership of water companies in such circumstances, and…what model of mutual ownership would be most suitable.”

We are not saying that companies have to be this or that; we are just advocating considering this possibility. Private companies have made an absolute mess of our water sector, have added no value over the past 36 years and have ramped up nearly £70 billion of debt. When the companies come out of special administration, we have an opportunity to do something different and not to repeat the mistakes of the past. I want the Committee to take that on board. We are not asking for a commitment; we are just asking for consideration. Hon. Members all know how badly the private companies have treated us, our rivers and our communities.

These companies are monopolies, so they have absolute power. Unfortunately, our regulators have completely failed in their task. If they have failed in the task, and if we do not have absolute confidence in the regulators—I do not think that anybody who will be voting today does—we must not give water back to the private sector.

Globally, this is standard. It is what the rest of the world does with its water sector. Even in the US, the vast majority of the water sector is mutually or municipally held. Chile may be the one shining example of private capitalism that we can point to in this regard, but there are almost no other countries in the world that do as we do. We are asking the Committee to do what is standard, rather than what is unusual.

The Under-Secretary of State for Business and Trade, the hon. Member for Harrow West (Gareth Thomas), has written about the benefits of the mutual ownership model, which he states forces water companies

“to operate in the interests of consumers; where environmental considerations such as disposal of sewage would take precedence over profit.”

That is our request. I rest my case.

For several decades, the water companies have been able to profit from failure. There is a strong groundswell of opinion among the public, across political persuasions, that real action must be taken and that if there has been real failure, water companies must not just be allowed to carry on operating in the private sector. I welcome the hon. Member’s amendment; mutual ownership is clearly one alternative model. Does he agree that full public ownership is another option that should be investigated in these circumstances?

What I really like about our proposal is that the companies are coming out of special administration, so it does not cost anybody anything: the equity of the shareholders has been written off. We often hear that it would not be a good idea, because it would cost too much to buy the companies out. Under our proposal, we would not need to buy them out, because we are advocating this only where companies are going into special administration. We are advocating a mutual model and—I say respectfully to the hon. Member—only that. That is what is on the table today, and that is what we are after.

Does the hon. Member agree that it is lucky that within six months we will have the Cunliffe review, which will look in great depth at ownership, regulation and everything to do with the water industry? Maybe this is something that we could take further at that stage.

That may be a chink of light, because all I have heard from the Government so far is “Only private companies welcome here.” My understanding is that the Cunliffe review’s remit purposely excludes ownership. If that is now on the table, it is great news, because it is one of the fundamental problems in the water sector. If the commission’s remit now includes ownership structures, I am delighted. I would love the Minister to clarify the point.

It is a pleasure to serve under your chairwomanship once again, Dr Huq. As promised, I have provided a fact sheet on the use of special administration. All Committee members should have received it by email, but hard copies are available on the table for their convenience.

Welcome to the last day of Committee.

On that point, may I intervene?

On the welcoming point? Of course.

We all welcome one another, but I meant the fact sheet. I really appreciate your going to the trouble of putting it together; I thank your team as well. I have read it diligently and done my best, but I have a quiz question for you. The first bullet point refers to giving

“the power to recover HMG funding should there not be sufficient funds to pay HMG back at the end of a SAR.”

Then, under the heading “Context”, the penultimate bullet point states:

“If this shortfall occurred, and Ministers decided to use this new power, the Secretary of State and Welsh Ministers must launch a consultation prior to this power being used. This will ensure that those affected (e.g. water billpayers) are able to provide their views. It will also ensure that the shortfall recovery mechanism is implemented in a way that means costs are recovered fairly.”

To me, that completely confirms paragraph 69 of the explanatory notes published by the Department for Environment, Food and Rural Affairs, which says that the Government will make the bill payers, as opposed to the creditors, pay for the costs. Please confirm, if you could.

At the risk of having the same debate over and over, I refer the hon. Member to the last page of our fact sheet. I am not sure how much clearer we can make it:

“Would the shortfall recovery mechanism be used to compensate financial creditors or shareholders following a SAR?

No. The shortfall recovery mechanism could only ever be used to recover a Government shortfall in the unlikely event of a SAR.”

Once again, I welcome everybody to the last day of this Committee. As I may not have the opportunity to do so later, may I thank all Members for their contributions and for taking part? I especially thank the hon. Member for Westmorland and Lonsdale for tabling another new clause.

As I have said, a special administration regime enables a company that provides vital public services, such as water, energy or rail, to be put into administration in certain circumstances. During a SAR, a special administrator appointed by and answerable to the court takes over the affairs of the business.

The court-appointed special administrator’s statutory objectives, which are set out in legislation, are twofold: to continue the running of the company to meet its statutory functions until it is possible to rescue the company, for example via a debt restructure, or to transfer the company to new owners, for example by selling it. There is nothing to prevent the company, or parts of it, from being transferred as a going concern to mutual ownership by a company’s customers, should the special administrator deem that appropriate. Although in an insolvency scenario the special administrator’s primary purpose is to rescue the company as a going concern, mutual ownership could be an option following a SAR, provided that the organisation in question had sufficient funds and could ensure that the company, or parts of it, could continue properly to carry out its activities relating to water.

We pushed the Minister earlier on the Cunliffe review. I thought it had been explicitly stated that ownership was off the table for that review. By talking about mutuals being a potential outcome, is the Minister saying that what is actually off the table is full-scale nationalisation, but that mutualisation, public benefit companies and not-for-profit companies could be a serious option in the Cunliffe review and in whatever legislation might follow?

Yes. We have ruled out nationalisation, but all other forms of ownership are in the scope of the Cunliffe review. I stress, however, that in a scenario in which a company was exiting special administration, it could go into mutual ownership if the organisation in question had sufficient funds and could ensure that the company, or parts of it, could continue to properly carry out its activities related to water. Of course, no one would want, in any situation, to transfer to a company incapable of operating and providing water.

It is important to emphasise that it would not be appropriate for the Government to dictate the terms of exit from a SAR, as that would interfere with the conduct of the court-appointed administrator and their statutory objectives.

I thank the Minister for the helpful clarification that the Cunliffe review will consider ownership models, including those that the hon. Member for Westmorland and Lonsdale has advocated. Will the Minister clarify why the Government are not permitting the Cunliffe review to consider full public ownership as one of the options? Why would they not allow an open assessment of all the potential options, especially given that, as we have heard, public ownership is so common in countries around the world for what is a natural monopoly?

The commission will focus on reforms that improve the privatised regulatory model. We have already been quite clear that nationalisation of the water sector is not in scope because of the high costs associated with that option, the lack of evidence that it would lead to improvements, and the delays that it would cause in achieving better outcomes for consumers and the environment.

The commission covers Wales and will review the model in Wales, where the largest water company operates a not-for-profit dividend model with no shareholders. In addition, as I have previously noted, the scope of the independent commission will include the governance of companies and the operation of existing tools such as the special administration regime. In the light of my comments, I hope that the hon. Member for Witney can see why the Government will not accept his new clause.

I am happy to hear that mutual ownership is being considered. I am very grateful for that.

I will take my chances and try to clear up one point. I completely agree with what the Minister read out from the last page of the fact sheet:

“Would the shortfall recovery mechanism be used to compensate financial creditors or shareholders following a SAR?

No.”

Absolutely, but my point is not remotely about that. I am not asking about compensating creditors.

Let me take the Committee back to the first paragraph on page 1. Where there is a recovery to be made, who pays for it? We are not talking about compensating creditors; we are talking about taking money off them. Rather than the money being taken from the customers, which is exactly what the bullet point that I read out three minutes ago states, we believe that it should be taken from the creditors.

It is not about compensation. I am surprised that there is confusion on the point, because that is not where I am coming from. It is about the shortfall and who pays for it. It is clearly stated twice—both in DEFRA’s explanatory notes and in the bullet point, which I can read out again as desired—that the bill payers will pay for it.

Question put, That the clause be read a Second time.

I beg to move, That the clause be read a Second time.

In my first speech of what I suspect will be our last sitting—we will see—let me thank you, Dr Huq, and every member of the Committee. It is no fault of anyone here, but I think these Committees are something of a charade. There was a brief time under the Theresa May Government when Committees were genuinely balanced, but I have never known a Committee to accept any Opposition amendment. I am sure it is not always because the Opposition’s ideas are bad—that is just how it works. We know that it is a bit of a charade. Having said that, 16 or 17 of us have been through the process of looking at the Bill in some detail, and that in itself has value.

Despite that frustration, which I have had for nearly 20 years, I am grateful to have been in the good company of courteous, decent people and to have had a robust but polite debate over the past few days. I am especially grateful to the Minister and her team for their engagement, which is genuinely appreciated; to the Conservative Front Benchers, the hon. Members for Epping Forest and for Broadland and Fakenham; and to my Green colleague, the hon. Member for Waveney Valley. They have all been very courteous and constructive.

I will seek to be brief, which does not always happen—whether I merely seek it, or whether it happens, let’s find out. We think that new clause 30 is very important. As we said in the previous sitting, the Government have chosen to underpin an awful lot of the scrutiny of the water industry on volunteers, citizen scientists and the like, which we strongly approve of. Groups such as Clean River Kent, and the Rivers Trust in Eden, south lakes and Windermere are great examples in my own communities, and around Staveley and Burneside, Staveley parish council has done a great job holding United Utilities to account. What they do is of immense value.

Underpinning the ability of those groups to scrutinise in the future is this interesting live database, which will demonstrate the performance of various water company assets around the country. We want to clarify in the Bill that the database will be publicly and freely accessible and updated in live time, but critically, that it will contain not just current but historical data—that is probably the key bit of the new clause. If we are going to depend on volunteers, we cannot assume that they are going to be on it 24/7; they have lives to lead. We must clarify in the Bill that historical data will be available and searchable, so that if we blink, we do not miss it.

I thank the hon. Member for giving way and I thank you, Dr Huq, for your excellent chairmanship; it is a pleasure to serve under you today. The Bill already introduces a duty on water companies to produce and publish pollution targets and a reduction plan. We can also get data fairly straightforwardly on how water companies are performing overall. However, what my residents in North West Leicestershire want to know is how their water company is performing week in, week out on the sewage outlets that they are interested in. I believe we already have plenty of ways to monitor performance, and this addition is unnecessary.

I thank the hon. Member for her intervention. What we are talking about, though, is a toolkit that is being provided for the voluntary sector and for activists up and down the country, including ourselves. It is a great addition—this is a good new thing that the Government are proposing.

I have some examples of why this toolkit is necessary. About 10 months ago, at the Glebe Road pumping station water treatment works at Windermere, we had a significant deluge of untreated sewage going into the lake, and we found out only because a whistleblower told us. The Environment Agency was notified 13 hours after the incident took place. The good thing about what the Government are proposing is that there will be a live database so that we can see what is happening there and then, and we can be on it.

However, unless we include the new clause—I would be happy to accept clarification from the Minister if something similar is going to happen anyway—the assumption will be that there is someone on it. Matt Staniek, who leads Save Windermere, works every hour God sends, but he is allowed to sleep sometimes, and what if something happens at 3 o’clock in the morning and he is tucked up? Do we miss it? I am simply saying that we should put in the Bill that this very good toolkit, which I commend the Government for, should be historically searchable, so that we can really hold the water companies to account.

I am sympathetic to quite a lot of the intention behind the new clause, but as ever, the devil is in the detail. Proposed new section 272B(2)(d)(ii)(a) contains a duty to publish the start time, end time and duration of all sewage spill events. Does the hon. Gentleman accept that there has already been a duty to publish that information for some time? All undertakers have a duty to publish information from event duration monitors within—from memory—60 minutes of an event being triggered. Will the hon. Gentleman give a bit more detail on what he has in mind for the authority to publish? Proposed new subsection (2)(c) says that the database must

“contain such data or information as the Authority thinks is necessary”.

Such a bland statement will be open to challenge and interpretation, with all sorts of committed parties deciding that their “independently collected and analysed information” should be in the database, and other people saying it should not. Is this not just a charter for judicial review of the authority?

I will not rehash the debates we have had in Committee already, but we are talking about more than just event duration monitoring, as set out in proposed new section 27ZB(2)(d)(ii)(a); we are talking about flow and volume, and it is right to specify those things.

That may be the hon. Member’s intention, but the drafting does not say that. Part of the problem is that (ii)(a) deals the with start time, end time and duration, not flow. Does that particular sub-paragraph not duplicate the existing legal requirements for publication within 60 minutes?

We dealt with that with other amendments; even though they are not part of the Bill, that would be covered by the suite of things we have proposed. Fundamentally, all we are asking for is that the information and the evidence that is put out there will be searchable historically. That cannot be beyond the wit and capability of the very clever IT specialists who I am sure are already working for the water companies. This is important, and it is part of what those of us in this corner of the Committee Room are trying to do, which is to take the Government at their word when it comes to the elevation—and we support that elevation—of the role of volunteers and citizen scientists, equipping them to do their job properly and not expecting them to be at their computers 24/7 without sleep.

Very briefly, to return to the SAR—our favourite subject—it might be best if we take the conversation out of Committee and sit down with officials to make sure we are both having the same conversation about the same thing and we can clarify that. We will follow up on that, and of course I extend that offer to the shadow Minister.

New clause 30 would require Ofwat to establish a public database on the performance of sewerage undertakers. I understand and acknowledge the intent behind the new clause, and I echo the hon. Gentleman’s thanks to all the environmental campaign groups that have been working in this area to make information available. It is vital that the public are able to access and scrutinise information on the performance of water companies.

To support this, the Government are focusing our efforts on ensuring that the most salient information is published in a transparent way and is publicly accessible. That is why clause 3 already requires water companies to publish information on discharges from emergency overflows in a way that is readily accessible and understandable to the public. As mentioned, this matches the pre-existing duty for storm overflows. To support the storm overflow duty, Water UK has published a centralised map of discharge data from all storm overflows operated by English water companies on one website. A similar approach is intended for emergency overflows.

We have also requested that water companies begin installing continuous water quality monitors for storm overflows in the 2024 price review. This will provide useful information on the impact of sewage discharges on water quality, and we will be working with water companies to consider how best to publish the information in near-real time. That is in addition to the duty to publish information on pollution incidents in clause 2, as well as existing regulatory requirements for the Environment Agency to publish water company environmental performance data. This data includes the annual environmental performance assessment of the water sector, which provides information on the performance of waste water treatment works.

Information from flow monitors, as we have discussed previously, is very technical and does not relate to the impact of the discharge, unlike continuous water quality monitoring data. Therefore, we do not think there is sufficient additional value in requiring this data to be published. As the industry is already centralising data on sewage discharges from storm overflows on one website, and given the existing environmental performance reporting, the Government do not believe that an amendment to require further publications by Ofwet—Ofwat—to do the same thing is necessary. I therefore hope that the hon. Member feels able to withdraw his new clause.

We are not going to push this to a vote. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

I beg to move, That the clause be read a Second time.

New clause 32 is about procurement. I will read out the key point:

“The Authority must issue rules requiring relevant undertakers to use competitive procurement processes in respect of procurement relating to water infrastructure.”

What are we getting at here? There is an unholy trinity that is causing trouble inside our water sector: too much debt, regulatory capital value—a concept that is misfiring big time—and the ownership model. I hope that the Government will take on that unholy trinity and find a stake.

The new clause addresses RCV, because it is not working in the water sector. I touched on that in our last sittings, so I will not drag the Committee through it again. Regulatory capital value encourages as big an asset base as possible, which gives water companies an incentive to source product as expensively as possible—to pour really expensive concrete. It has been going on over the last few decades, so I am not pinning the blame on this Government, but I am asking for their help to stop it.

It is not in the customers’ interests for us to continue to have faulty procurement processes that encourage water companies to buy things expensively. With new clause 32 the Liberal Democrats are trying to highlight that problem and address it. I suspect that the provision will not be passed, but I am going to be talking about it. RCV is the issue, and I am interested to see if the Government will recognise it as such and look to address it.

I thank the hon. Member for Westmorland and Lonsdale for the intention behind new clause 32. On a personal level, I welcome the scrutiny and the level of detail that we have gone into. As the Bill started in the other place, there was a lot of cross-party work and the Government have taken onboard some of the recommendations. I gently push back on the idea that this is not a necessary or valid way to examine legislation.

The Government agree that competitive procurement can be a successful way to provide better value for money for consumers, and greater innovation within major infrastructure projects. In the 2019 price review, Ofwat developed the direct procurement for customers approach, or DPC, building on the success of the Thames tideway tunnel. The DPC allows the water company to competitively tender for services in relation to the delivery of major infrastructure projects. At price review 2024, Ofwat noted that, by default, all projects with a total life cost of over £200 million should be delivered through a DPC. Following final determinations in December 2024, Ofwat announced that 26 major water company projects would be delivered by competitive tendering processes, including a DPC, with a total whole-life cost of almost £50 billion.

Two-hundred million is a really big number. In my patch in Witney, we have sewage treatment works as far as the eye can see that are undercapacity and are leaking sewage all over the place—at Bampton, Cassington, Carterton, Witney, Milton; you name it. It is awful, and I am sure that is the case in other constituencies, too. Two-hundred million pounds is miles higher than any of their spend, so—correct me if I am wrong—all those sewage treatment works are going to carry on without the new procurement processes because they are below the £200 million threshold.

The point is that competitive tendering processes were introduced back in 2019, including looking at where money is being used and how that money can be used most effectively. As I have just mentioned, we have £50 billion-worth of competitive processes in the next price review determination. Water companies are already actively using competitive procurement processes. This is something that Ofwat already encourages through the price review process. I therefore hope that the hon. Member is content that this amendment is unnecessary.

We will not put this to a vote, but I will continue to highlight the point that £200 million is too high a benchmark and we should drop it, because that would serve us all, and our customers, better. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 33

Responsibility in relation to planning issues

“(1) The Water Industry Act 1991 is amended as follows.

(2) In section 37 (General duty to maintain water supply system etc), after subsection (1) insert—

“(1A) When participating in a planning consultation, or when otherwise providing advice in relation to a planning matter, a water undertaker must provide—

(a) full and accurate information, and

(b) an honest assessment,

in relation to its current and future ability to fulfil its duties under subsection (1).

(1B) An undertaker which fails to provide information required under subsection (1A) will be subject to such penalties as the Authority may impose.

(1C) Where, in providing information required under subsection (1A), an undertaker expects not to be able to fulfil its duties under subsection (1), the undertaker must establish a plan to meet its requirements by a relevant time.

(3) In section 94, after subsection (2) insert—

“(2A) When participating in a planning consultation, or when otherwise providing advice in relation to a planning matter, a water undertaker must provide—

(a) full and accurate information, and

(b) an honest assessment,

in relation to its current and future ability to fulfil its duties under subsections (1) and (2).

(2B) An undertaker which fails to provide information required under subsection (2A) will be subject to such penalties as the Authority may impose.

(2C) Where, in providing information required under subsection (2A), an undertaker expects not to be able to fulfil its duties under subsections (1) and (2), the undertaker must establish a plan to meet its requirements by a relevant time.

(2D) An undertaker which fails to carry out a plan established under subsection (2A) will be subject to such penalties as the Authority may impose.””—(Charlie Maynard.)

Brought up, and read the First time.

I beg to move, That the clause be read a Second time.

There are only three new clauses to go; I will highlight the key parts of new clause 33. Subsection (2)(1A) states:

“When participating in a planning consultation, or when otherwise providing advice in relation to a planning matter, a water undertaker must provide full and accurate information, and an honest assessment, in relation to its current and future ability to fulfil its duties under subsection (1)”

Subsection (3)(2C) states:

“Where, in providing information required under subsection (2A), an undertaker expects not to be able to fulfil its duties under subsections (1) and (2), the undertaker must establish a plan to meet its requirements by a relevant time.”

What does that mean? It means that if an undertaker does not have sewage treatment work capacity, they must commit to draw up a plan to install it by a relevant time. The “relevant time” means that if 200 or 2,000 houses are being added and the sewage treatment works do not have sufficient capacity, then the undertaker will be saying, “By the time those houses are occupied, we will have increased capacity by the amount required.”

This is all very common-sense, but many hon. Members will have been district councillors in their time—I currently am one—and I am sure they will have seen it happen time and time again in planning committees where, guess what, the response from the water utility is: “Fine, no problem. Hook ’em up.”

Is it not the case that the water companies used to have more power to object? Did they have a veto which the previous Government removed? Do they now have to cope with whatever the planning authority decides?

I thank the hon. Member for that intervention. I do not know when that changed. [Interruption] In 2015, was it? There we are: maybe it was changed in 2015. Perhaps all of us, or most of us, recognise that is not a good situation. Time and again—I have seen this in Witney, Ducklington, Bampton, Aston and Carterton—this is just waved through. When I quiz people from Thames Water about why they have waved it through, they say, “We have a duty to connect.” They do have a legal duty to connect, which they take seriously, but they take their duty to add capacity to match that increase much less seriously.

This is a request for information on my part. In my conversations with Anglian Water, one of its key asks relates to the imbalance in which the company has a legal duty to connect any planning application that is passed, yet it is not a statutory consultee. It is therefore not required—not able, in fact—to take part in the planning process. Until the companies are made statutory consultees, all this is irrelevant, so should not the new clause focus on their becoming statutory consultees?

While I am on my feet, I have a query about the drafting. The hon. Gentleman defined a “relevant time”, but I do not see that definition in the new clause. Is it contained somewhere in the draft legislation? If it is not, what might the effective definition be?

The point about “relevant time” is fair and deserves to be clarified. I completely agree on the issue of statutory consultees and have no issue with that either—that would make much more sense, because there is a real failure in that regard.

I will go a step further—I have lived experience in this regard—and give a special shout-out to Thames Water employee Richard Aylard, who for two years dutifully showed up every six weeks with West Oxfordshire district council to hash through these issues. I learned a lot from him and am grateful to him, as well as to Jake Morley, Lidia Arciszewska, Phil Martin, Laurence King, Alaric Smith and Alistair Wray. They sat through all that, and we all learned together. It is important that everybody knows what came out of those meetings. When sewage treatment works’ capacity is calculated—they are very much under-capacity in my patch and, I am sure, in those of other hon. Members—there are four criteria. The first is the population or population equivalent, which is normally optimistically understated. The second is per capita consumption. Thames Water has a high per capita consumption when it suits the company and a low per capita consumption when it suits the company, so again that is understated.

The third is the Environment Agency multiplier, which is typically 3.0, and is discounted far too often. When there is a known record of spills, Thames Water is still allowed to discount the EA multiplier, often from 3.0 down to 2.4; that is a 20% cut, which means that the capacity can be 20% less. That is a real problem, and it is being done repeatedly on sewage treatment works that have dumped sewage left, right and centre for years.

The fourth criterion is infiltration. Some 47% of the capacity of west Oxfordshire’s big nine sewage treatment works comes from infiltration. That means that our pipes are leaking. There is not enough science on this matter. If we were to put in flow meters, we would have the information, but it seems that we Lib Dems are the only team in the room, alongside the hon. Member for Waveney Valley, that advocates flow meters. If we want to solve these problems, we have to get serious about the information.

I thank the hon. Member for the new clause. We all recognise the situation he describes. In East Anglia, planned housing growth over the coming decades outpaces available water resources. In my constituency, we already have a water resource zone in Hartismere where business operations and planned business growth are being restricted by the water available. He is addressing some of the important points about water companies’ being able to take responsibility, but do we not also need a joined-up approach? The planning system must be used to address the issues by means of stricter water efficiency requirements, sustainable drainage systems and housing plans that are realistic given the available natural resources. Is there not a problem with just putting the ball in the water companies’ court, rather than taking a more joined-up approach?

I completely agree with the hon. Member. Using West Oxfordshire as an example again, we have installed Grampian conditions, which I encourage other Members to look into, where we have said, “You may not occupy this house.” We could not stop the houses being built by arguing that there was insufficient capacity, but we could put a Grampian condition in force that says, “Those houses may not be occupied. Any buyer knows this, so they will not buy them.” It is flagged to any buyer so that they do not buy a house they cannot occupy, which will continue until the capacity has been added. That puts some heat underneath the water companies to get on and increase their sewage treatment works capacity. I really encourage the Government to look into those. We have vast amounts of housing that will be built, and under the current law, they will be steamrolled through and the capacities will not keep up. That is a real problem for everybody, and it puts more pressure on our rivers.

I am grateful to the hon. Member for giving way, and I have a lot of respect for the new clauses that he has tabled to put pressure on water companies to provide more information at critical stages. The Opposition have tabled amendments requiring water companies to publish data on their websites to enable citizen science, so I respect what he is saying. I guess some of the issue is in the detail of the wording of the new clause. I am sure we are all in agreement about water companies providing information, but proposed new section 37(1A) says that we want them to be “full and accurate” and “honest”. I guess the devil is in the detail. How will that be judged? If this new clause were to come into play, how will people judge that? Is an “honest assessment” whether something is not false, or whether something is complete or incomplete? There is an element of challenge that could be put in. I understand the sentiment, but the devil is in the detail of the wording as to how this could actually work.

I thank the hon. Member for his kind words, and I look forward to his support in some of the votes at some point. In the meantime, if he has recommendations on the wording that he would like to put forward, I ask that he please do so. These new clauses are already in place, so maybe that is impossible, but let us by all means try to improve them.

I will say a brief word on the new clause. This is important, and I would like to add to the detail that my hon. Friend the Member for Witney has set out. Essentially, we have two problems here, one of which is that water companies are not statutory consultees, and they should be. I take the point that it could be more clearly stated, but the new clause does say “When participating” more than once, not “If participating”.

Without pointing fingers—well, maybe a bit at water companies in certain parts of the country, including mine—the key thing is that there is an incentive for a water company, when giving its advice to a planning committee, whether it be in the national parks, the dales, the lakes or a local council, basically to say that everything is fine, and why would it not? If a water company says, “We have no capacity issues. You can build those 200 houses on the edge of Kendal and it won’t cause any problems for our sewer capacity,” two things happen, do they not? First, the water company is not conceding the need to spend any money on upgrading the sewerage network. Secondly, it is guaranteeing itself 200 households that pay water bills, in addition to the ones it already has, so it has a built-in incentive—maybe not to be dishonest, but to not really give the fullest and broadest assessment of the situation.

I would like to give the hon. Member a practical example of where the absolute opposite has happened in Wales. In my constituency of Monmouthshire, Welsh Water was very clear that, because of the phosphate levels in the River Wye, there could be no development whatsoever in my area of the constituency—Monmouth—for several years. It absolutely stopped all development and seemed to be very honest in doing so. Now the problems have cleared up somewhat, and Monmouthshire county council has put forward a proposal in the local development plan to build houses. We also have a sustainable drainage systems regime, which means that absolutely nothing will be built without those systems. By the way, 50% of the homes will be affordable and they will be 100% net zero, so I commend Monmouthshire county council for putting that forward. I just wanted to say that there are examples where the opposite has happened to what the hon. Member for Westmorland and Lonsdale is saying.

I thank the hon. Member for the intervention; I am sure that is the case, and the two are not mutually exclusive. I want to see houses built. The great frustration in our communities in the lakes and dales and just outside is that we desperately need homes that are affordable, and we want homes to be zero carbon. We want to be in a situation where the local community is able to hold developers to account. The danger is that developers who are going to build stuff on the cheap that is not affordable to potential buyers or renters are able to get themselves off the hook because the water companies will not really test the resilience of the existing infrastructure.

It is true that both things can happen. We feel that this is about giving planning authorities the power to say, “The developer is seeking to do this, but the community as a whole does not have the resilience or the capacity to cope with 200 extra bathrooms; so what resources will the developer or the water company put in to ensure that the facilities are upgraded to make that possible?” This is about ensuring that planning does its job.

I thank the hon. Member for Monmouthshire for her excellent point. It is very interesting that a mutually owned water company is taking that very sensible decision and approach. It highlights that that is a benefit. They are not trying to make money hand over fist. They are trying to do the right thing.

With your indulgence, Dr Huq, I will clarify something that I should have mentioned in the previous debate. Ofwat reserves the right to explore the use of DPC for major projects below the £200 million threshold where it offers value for money for customers. I just wanted to put that on record.

I thank the hon. Member for Westmorland and Lonsdale for tabling new clause 33, which would increase the responsibilities of water companies where they participate in the planning process. As we all do, I genuinely recognise the intent behind the clause and where the hon. Member is trying to get to. We absolutely recognise concerns surrounding water and sewage companies’ ability to keep pace with the needs arising from new property developments.

This is an active issue across many of our constituencies, and we have heard many personal stories. In my constituency of Exmouth and Exeter East, we have had a new town built called Cranbrook. A sewage treatment works was promised but has not been delivered. That has put pressure on systems elsewhere, and we have seen big sewage outflows in other parts of the constituency. We know that in the Ministry of Housing, Communities and Local Government there are big reforms coming for the national planning policy framework. Will the Minister please confirm whether her Department is having active conversations about what we are speaking about, and whether or not there will be changes in this space?

Conversations are ongoing, but I would not want to pre-empt their results. I recognise from previous conversations that this is a concern for the hon. Gentleman.

The Government consider that the Bill is not an appropriate vehicle to resolve this issue. It should be addressed through measures such as the water resources management plans or draining and waste water management planning. As was mentioned earlier, it is our job as legislators to ensure that we draft the right amendments to the right Bills in order to achieve the aims we are seeking.

Water companies already account for local plan growth forecasts in their water resource management plans. These plans for water provision over a five-year period with a forward look over 25 years provide for a development outline. We recognise the need for stronger and earlier join-up between local planning authorities, regulators and water companies. As I mentioned, work is under way to consider such questions and to ensure timely and mutual understanding of water resource requirements at a local scale to support sustainable development. That work includes the independent commission on the water sector regulatory system, which will provide recommendations for the roles and responsibilities of the water industry regulators that govern the water industry model and strategic planning.

As such, it would be premature to legislate in this area or to impose any additional responsibilities for regulators until the commission has concluded its review, but I reassure hon. Members that the Government recognise the need for water companies and local planning authorities to co-operate effectively in considering the water infrastructure requirements that will underpin development plans, housing growth and sustainable development. The proposed new clause is unnecessary, and I ask the hon. Member for Witney to withdraw it.

We wish to press the new clause to a Division.

Question put, That the clause be read a Second time.

I beg to move, That the clause be read a Second time.

We have conferred, and hon. Members will be delighted to hear that we have two proposed new clauses to go and we will not press either to a vote. My hon. Friend the Member for Witney and I may disagree, but I think we have confirmed that that is our view.

I have little to say on new clause 34. We had the substance of this debate on amendment 19, but the new clause is significant all the same. The point is simply that among the things that deeply undermine the public’s confidence in the water companies, and in the industry in general, is the very obvious revolving door between the regulator and the water companies themselves.

I will reiterate some points and add to some things that were said the other day. In its analysis in 2023, The Observer found 27 former Ofwat directors, managers and consultants working in the water industry that they had previously regulated.

The hon. Member mentioned directors. I think we all agree that the strength of this Bill is its clarity, but in his new clause, he has chosen to write “any individual”. Does he agree that it is the directors, not the catering team, the cleaning staff, the admin people, the accountants and so on, who have sought to swindle customers or flim-flam the taxpayer? That is where we should focus the attention, and that vagueness does not add to the Bill.

That is an excellent point, and if I was pushing the new clause to a vote, that might make me think twice. I am not the only person who has done this, but I have spoken at length on this issue, not just during this Committee, to make the point that we understand that this is a heated debate, which at times has become quite fiery out there in communities and in this place. But the people who work for the water companies, the regulators and so on are human beings doing a job, and we need to value them. That even includes the directors.

Having said all that, it is clearly wrong that directors are switching from one to the other. I add that our research found that the director for regulatory strategy at Thames Water had previously been a senior Ofwat employee. We had a senior principal at Ofwat moving directly from Thames, where they had worked on market development. We also found links between Ofwat and Southern Water, Northumbrian Water and South West Water, including directors and those who work on regulation.

There is a serious point about regulatory capture, which we should talk about cross-industry, cross-sector. There is something that we could do constructively across the House on regulatory capture. We talk a lot at the moment about artificial intelligence and the growth of the tech industry, and we need to implement stuff on regulatory capture now. Any lessons that we learn about regulatory capture in the water industry should be implemented across other industries. I hope that the whole House can come together on that.

I am grateful for that well-informed and thoughtful intervention. The hon. Member is absolutely right: that is what we should do. To be reasonable, we want people who understand the industry working for the regulators. We understand why there could be a benign reason for what is happening, but nevertheless, we trace it to some of the reluctance in the culture of Ofwat towards taking action. I talked about the £168 million-worth of fines still not collected by Ofwat from three transgressing water companies. Some of the reluctance comes not from corruption but cosiness, and we need to make sure we address that, as the new clause seeks to do. We dealt with this issue on amendment 19 and it was pushed to a vote. I do not want to trouble the Committee again, so I will be happy to withdraw the new clause.

I thank hon. Members for their contributions. Again, we recognise the intent behind new clause 34, tabled by the hon. Member for Westmorland and Lonsdale. However, it would be disproportionate to prevent all water company employees from being able to accept employment in Ofwat.

Ofwat seriously considers the handling of actual and potential conflicts of interest. Staff in Ofwat are bound by the civil service business appointment rules, which do not apply to every agency, but they do in terms of Ofwat, and by the duty of confidentiality and the Official Secrets Act. Any new employees in Ofwat, regardless of their previous employment, would be bound by those rules. Compliance is mandatory and any breach may result in disciplinary action being taken.

Individuals with experience working in the water sector have a wealth of knowledge—the hon. Gentleman mentioned this—that might be a valuable asset to Ofwat and could support better policymaking. I hope that this reassures him on his concern about the potential conflicts of interest in Ofwat, and that the new clause, as drafted, is therefore unnecessary.

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 35

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.’”—(Charlie Maynard.)

Brought up, and read the First time.

This is a big one: companies to be placed in special measures for missing pollution targets. I will read out the key bits:

“(2DZA) For the purposes of ensuring that the functions of water and sewerage undertakers are properly carried out, the Authority must establish…annual, and…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.”

On the five-year average, obviously we have wet years and dry years. We cannot just have flat numbers. We have to take an average. The new clause also states:

“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 25% reduction within five years;…a 60% reduction within ten years;…an 85% reduction within fifteen years…and…a 99% reduction within twenty years.”

What are we trying to get at? Clause 2 is about pollution incident reduction plans. That is about specific events, so it is at a micro level. We have a national problem and need to think about things at a national level. We have a lot of data already. I think it was Peter Drucker who said, “If you can’t measure it, you can’t improve it.” We have been advocating for measuring it; we have had that debate. The good news is that we already have one metric of measurement—event duration monitors—that tells us how many hours of sewage are spilled per year. EDMs are a long way from perfect in two respects. First, we do not know the volumes going out or how much of that is actually sewage, as we have discussed at length. Secondly, a lot of EDMs are sub-par. I will give a shout-out to Professor Peter Hammond, who has highlighted some essential messages about that. However, that is still the best dataset we have, and we should all take the view that we should not let the perfect be the enemy of the good.

As soon as we put in flow monitors and quality monitors—I know the Government do not support that—we will advocate using those as a metric, but we do not have those now. However, we do have EDM data, so I am advocating that we use that metric. We already know how many hours are spilled by operator. We can take the five-year average and start setting out targets.

Businesses like knowing where they stand. I am a naive politician who is only six months into the job, so there is an awful lot I do not know. I probably committed a key error here by putting in numbers, so some smart politician could come along and say, “That is an incredibly generous number. We’ll go lower than that.” Fine—I do not really care if someone wants to play that game. I want our rivers fixed, and we get our rivers fixed by setting targets, telling the water companies that we want them to meet those targets and giving them sticks, and possibly carrots, to meet them.

We are missing an opportunity—respectfully, I feel that we have missed a lot of opportunities. We did not have to have this Bill now, but we do have it. We ought to be going for the wins now, but every single amendment has been rejected regardless of which party tabled it. That is a loss for our rivers as much as for hon. Members present. However, this new clause provides an opportunity to set some targets. Whether it is today—although this new clause will almost certainly fail because we will not push it to a vote—or in the future, I encourage the Government to take the metric they have, which is hours of sewage spilled, set benchmarks against which to measure water companies and set out bad news or good news depending on whether they miss or hit them. If we hit those targets, we are seriously getting closer to fixing our rivers. Without them, we are not.

I echo my hon. Friend the Member for Westmorland and Lonsdale in saying that I have really enjoyed most of the three days of this Committee. I appreciate the courtesy and generosity in the answers. I thank the Chair, the team of Clerks, who have been so helpful, and the DEFRA team.

I would like to thank, as I have before, all the environmental groups and activists up and down the country who do so much to champion cleaner air, rivers, lakes and seas for us all. I look forward to seeing hon. Members on Third Reading and Report.

As I did before, I will gently push back and say that the Government did work collectively and cross-party in the other House and brought in compromise amendments before the Bill came here. It would be slightly disingenuous to imply that the Government have not accepted amendments or worked with other parties on the Bill.

I thank the hon. Member for Westmorland and Lonsdale for tabling new clause 35. We must ensure that companies accelerate action to reduce pollution to the environment, halting the unacceptable harm they have caused in recent decades. That is why we have introduced a new requirement for water companies to produce annual pollution incident reduction plans and the accompanying implementation reports through the Bill. Again, I gently note that the implementation reports and the strengthening of that provision was done cross-party in the other place.

The plans will need to set out the actions that water companies intend to take to reduce pollution incidents, and an assessment of the impact that those actions will have. Companies must then report on the progress they have made with measures they committed to in the previous year, and must clearly explain the reasons for any failures to implement their plans and set out the steps they are taking to avoid similar failures in the future.

In addition to the new requirements that increase accountability for pollution incidents, the Government are committed to acting as fast as possible to reduce sewage pollution in our waterways and upholding stringent performance criteria for water companies, as evidenced by the significant forthcoming programme of investment in price review ’24. A delivery programme of this scale, improving thousands of storm overflows with billions of pounds of investment, requires clear and robust regulation. The new clause as drafted would unfortunately undermine that.

The Government’s storm overflows discharge reduction plan sets stretching timebound targets to eliminate ecological harm from all storm overflows by 2050, and for water companies to significantly reduce harmful pathogens from storm overflows discharging into bathing waters by 2035. This is supported by an ambitious backstop target. By 2050, no storm overflow will be permitted to spill more than 10 times a year on average. Those stretching targets are informed by detailed analysis and extensive engagement. They will drive £60 billion of investment between 2025 and 2050—the largest infrastructure programme in water company history. Almost £12 billion of that investment will begin this year, improving over 2,800 storm overflows by 2029-30.

Those targets bolster underpinning legislative requirements to limit pollution from storm overflows. The Environment Agency monitors and enforces against breaches of environmental requirements, utilising monitoring data to support its investigations. Where breaches are identified, it has significant powers to ensure enforcement orders and financial penalties, and where appropriate, to pursue criminal prosecution. The measures in the Bill will further strengthen its powers, including by introducing automatic penalties.

These timelines are too slow. Setting the date at 2035 for monitor installation will mean that this is done at a much slower rate than the rate over the last seven years. That is disappointing. Targets set for 2045 and 2050 are too far away. We do not need to, and should not, move that slowly. We must do better.

I think when we had this debate, it led to the first of the fact sheets that we produced for the Committee. The hon. Member is talking about the speed of installation, and we highlighted that we will double the rate of the previous Government. We also highlighted that some of the improvements involve engineering and work. That is why we think that with £12 billion of investment, we are improving things, and I mention again the 2,800 storm overflows by 2029-30. So in the next few years, there will be billions of pounds-worth of improvements.

We all want opportunities to go quicker—everybody would want everything to be done quickly. As a Government, there is always a balance between making promises we cannot keep—which is never the best way to go—and being stretching and ambitious. I feel that we are being stretching and ambitious while also ensuring that we do not make promises we cannot keep. Obviously, however, if there was a way to go faster, everybody would accept that.

The Environment Agency is currently consulting on proposals to add new spill frequency thresholds to storm overflow permits. That will maintain the performance of storm overflows that have undergone improvements, and make it easier for the Environment Agency to act quickly if storm overflow performance deteriorates. Ofwat sets specific performance targets for water companies in the five-yearly price review. Ofwat is expanding those performance commitments for price review ’24, to include an ambitious storm overflow spill reduction target, which, if achieved, would see average spill per storm overflow reducing by 45% by 2029, compared with the 2021 levels across the industry. Where the commitments are not met, companies must reimburse customers, holding water companies to account to deliver outcomes.

I am sorry, but with spill per overflow, I again think we are drinking the water industry’s Kool-Aid. We are doing its metrics, and that is not doing anybody any favours. We are talking about spill per overflow; what we should be talking about is how many hours. We have that information. Why are we not saying how many hours? Let us think about it. We could have a spill for one hour or a spill for a month. That is just one, in that metric. It is missing a huge amount of what is going on. Please can we move away from these metrics towards spill hours, at a minimum?

Again, I recognise the intent behind the hon. Gentleman’s comments. Whichever way we want to address this, talk about it or set targets, ultimately what we want from a Government is less sewage going into our rivers, lakes and seas. If we can find a way to all agree on the best way to move that forward, that is something we can unite behind.

As I mentioned, the Government cannot accept the new clause, but I recognise the intent behind it. It would cut across the existing targets that I have set out, creating confusion and uncertainty about which water targets the companies should meet. That would risk undermining the extensive forward investment programme that is already under way and is essential to delivering the changes that we all want. For those reasons, and for the last time, I ask the hon. Member to withdraw his new clause.

We will not press this new clause to a vote. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Question proposed, That the Chair do report the Bill, as amended, to the House.

It is a great pleasure to again serve under your chairship today, Dr Huq. May I first, on behalf of the Opposition and, I hope, colleagues from across the Committee, give a vote of thanks to everyone involved in this process? I have a list here, and please shout out if I miss anyone out.

First, I thank the Chairs—Dr Huq and Mr Vickers—for guiding us through the process. I thank all the Bill Committee staff—the Clerks and officials—for their assiduous, thorough work, which keeps us on message as Members of Parliament scrutinising this legislation. We thank them for that. Dr Huq, thank you—I will use the word “you” for you. I thank the DEFRA officials for all their hard work on this and for engaging with the Opposition as well. I very much appreciate the Minister allowing the officials to do that.

I thank the Doorkeepers and Hansard. I do not think I have missed anyone in the room except the public. This gives me the chance to thank the members of the public who have come in and watched our proceedings, as well as people who have watched online from afar. There are also, as the Minister said, the stakeholders: the environmental groups, the volunteers and the experts who have fed into this Bill and the water debate that we are having and who are helping legislators across the House to improve and refine legislation. We thank the public very much as well.

We have had a very interesting few days. It has shown us that there is a lot of cross-party consensus on what we are trying to do to improve our water quality. There is some disagreement about how best we do that, but this Committee has shown the House that, actually, there is a lot of agreement about the scale of the problem and the fact that we need to address it.

I respectfully say that I am disappointed with the comments from the third-party spokesperson, the hon. Member for Westmorland and Lonsdale, about the Bill Committee stage being a charade. I do not think that line-by-line scrutiny of Bills is a charade. Yes, there is a process as to how Committees are populated, but that is democracy. I would have thought that that particular party, given its title, would respect election results. That is how democracy works. We have seen that they have had some disagreement among themselves about some of their votes as well, but I will leave that point there.

We have had some interesting discussions, and it would be remiss of me not to talk about teeth. We have had dental analogies aplenty: we are wanting to give more teeth to the various regulators. Finally, I think I did detect—we will have to check Hansard—the Minister using the word “Ofwet”. When this matter goes to the commission, “Ofwet” might be an interesting term for a new body that might be set up, but I will leave that with the Minister.

Thank you, Dr Huq, and Mr Vickers, in his absence, for brilliantly chairing our five Committee sittings. I will not list everyone that the hon. Member for Epping Forest just did, but I endorse what he said. I thank the Clerks, the DEFRA officials, the Minister’s team and colleagues on both sides of the House for their courtesy and the seriousness with which they have engaged with the Opposition, the members of the public who attended the Committee in person and those who have followed it from afar.

There is no doubt that the voluntary sector and the public have been ahead of politicians on this issue for many years. I would argue that the UK leaving the European Union was a key moment, because we had to go back and look under the bonnet to see what was already accepted and already permitted. We could argue about whether the previous Government gave us regulations and standards that were as good as what we had before we left the European Union. That might be an additional issue, but none the less, the likes of Surfers Against Sewage, Windrush Against Sewage Pollution, Save Windermere, the Clean River Kent Campaign and so many others in all our communities have led the debate on this and created great scrutiny. That is why we strongly approve of a significant part of the Government’s ethos in the Bill, which is to put an awful lot of power in the hands of those who care so much in our communities.

I do not mean to offend people by referring to this as a charade, but the reality is that we spent five years in Government, and I am pretty confident that the Government that I was part of never allowed a single Opposition amendment to pass in Committee. There is a little bit of pretence in this. All the same, it is an enjoyable pretence. Having gone through the Bill line by line, we all understand it better, which means that, on Report, a dozen and a half of us can speak about this Bill in the Commons with a greater awareness than beforehand.

We support the Bill. If anybody was to call a Division on it, we would go into the Aye Lobby. Our frustration is that we feel that the Government have missed an opportunity. Their answer is obviously, “Here comes the Cunliffe review, and we will see what happens next.” Are we going to get an undertaking that there will be another Bill in the next King’s Speech? If there is, that is exciting and interesting, and that could answer many of our concerns.

The Bill could have been much clearer about limiting bonuses and about recognising that a fundamental problem with the water industry is the fragmentation and the weakness of regulation. It could have recognised that the financials are clearly all wrong, unfair and wasteful. We are looking at duration, but not volume, content or impact, and we are not supporting the citizens behind the citizen science enough by giving them the information, the resource and the place on the water company boards that they need. There are many areas where we think the Bill could be so much better, and where we do not need to wait for Sir Jon to do those things.

Having said that, what is wrong with this Bill is what is not in it, not what is in it. We are therefore happy to support it and are very grateful for the constructive nature of the debate throughout.

Thank you very much, Dr Huq, for your wonderful chairwomanship. I thank everybody on the Committee. It has been a new experience for so many of us, with Members in new positions and some new Members appearing on a Bill Committee for the first time. It has been really enjoyable, and there has been pleasant camaraderie. Where there have been disagreements, we have had them in a polite and courteous manner. I think we have set a wonderful example for many of the other debates, and long may it continue.

I thank the incredible Bill Committee team, who have done such an amazing job in supporting me in my work. I thank the Whip, my hon. Friend the Member for Manchester Withington, for making sure that we all voted in the right way at the right time, which definitely prevented me from getting into trouble while leading on my first Bill. And of course, we have had loads of written evidence, and for a small Bill, we have had lots of amendments, which shows the strength of feeling and interest in the Bill from the wider community.

What else can I say other than we’ve only just begun, and you ain’t seen nothing yet? Following this Bill, which is just part of our phased transition to transform the water sector as a whole, we also have the Cunliffe review, and in the words of Arnold Schwarzenegger, “I’ll be back”, with another Bill—similar time, same place. I hope to see many of you there, as we go again to clear up our rivers, lakes and seas for good.

Question put and agreed to.

Bill, as amended, accordingly to be reported.