My Lords, the Government welcome this robust regulatory response from Ofwat where water companies are underperforming. It provides a great example of strong environmental and economic regulatory frameworks in action. The penalties to these 11 water companies were the result of missed performance commitments on areas such as water supply interruptions, pollution incidents and internal sewer flooding. The Government will continue to work with regulators to hold companies to account on their environmental and other commitments.
My Lords, the Minister just mentioned that the 11 companies fined by Ofwat missed targets in a number of areas: water supply interruptions, pollution and internal sewer flooding. The problem is that these performance commitments do not set the bar particularly high, which makes it extremely worrying that so many companies are falling short, some by a considerable distance. Does he believe that the current sanction, which sees failing companies having to repay customers a proportion of their bills in future years, is enough to bring about the improvements that we so desperately need? With this in mind, how does he respond to the suggestion by Ofwat’s newly appointed chair, Iain Coucher, that the regulator should be granted powers to debar the directors of egregious water companies?
I take what the noble Baroness says about the level these sanctions are set at. If she thinks that there are areas that could be improved on, we will work with Ofwat to do that. She talks about this as though it is the only area of enforcement. Where water companies have failed to achieve their environmental standards and illegally pumped sewage into rivers, enormous fines have been applied, which have had a dramatic impact on the amounts of dividends that they have been able to award.
My Lords, will my noble friend estimate for the House the contribution that the 300,000 new houses being built will make to the problem? When will we have an end to the automatic right to connect so that we will have antiquated, antediluvian pipes replaced with modern pipes that can actually take sewage from these new houses?
Enormous amounts of money have been spent on new water infrastructure, but sewage companies are responsible for the maintenance and resilience of drainage and wastewater networks. To address current and future pressures on drainage networks, we are making drainage and wastewater management plans statutory through the Environment Act, so they will be consulted. They have to put these forward as a legal measure to ensure that they take into account the pressure of new housing.
My Lords, is the Minister aware of some analysis done by the Rivers Trust that shows that the monitoring of our rivers by the Environment Agency has much reduced in recent years? It would probably say that it does not have the resource. Could he consider either adding to its resources or at least redirecting its priorities?
We have put more money into the Environment Agency and it has been recruiting more enforcement officers to do precisely that. We are also working with citizen science. I pay tribute to the Rivers Trust and others that are providing people to assist the Environment Agency in assessing the quality of river water.
My Lords, as someone who lives in an area which is likely to see a reduction in water bills due to penalties from Ofwat, I would prefer our rivers, waterways and seas to be sewage-free rather than to receive a small monetary handout. It appears that the threat of financial penalties is insufficient to encourage water companies to change their damaging environmental practices. Are the Government ready to propose more stringent means to ensure that water companies invest in infra- structure rather than directors’ bonuses?
We are seeing precisely that. There has been a £56 billion investment in infrastructure, the biggest investment in real terms that the industry has ever seen. Further to the question asked by the noble Duke, I can say that since 2015 the Environment Agency has brought 54 prosecutions against water companies, securing fines of almost £140 million. In 2022 the EA has already concluded six prosecutions, with fines of more than £2.4 million, so we are seeing not only more investment but more enforcement, and the Government will insist on an improvement in the releases of sewage into rivers.
My noble friend raises a very important point. The chalk streams strategy, written by Charles Rangeley-Wilson, whom I suspect was my noble friend’s constituent, is a brilliant piece of work which the Government have accepted and which will form the basis of our policies to put these very valuable environmental and ecological systems in a pristine state as quickly as possible.
My Lords, the Minister talked about the enormous fines that can be given to water companies, but Ofwat has already admitted that it is able to fine up to only 10% of their turnover. Ofwat said that this is a very small percentage of the value of those companies, because they are so asset-rich. Will he look again at the limits on the fines that can be passed on to the water companies, because they are clearly not working?
My Lords, have the Government given consideration to changing the building regulations, particularly with regard to rainwater run-off, so that the water is recycled and not taken into the system, thus reducing the volume going out of the system?
My noble friend is absolutely right to raise this. One of the problems is that water coming off roofs and driveways—absolutely clean water—goes into the same sewerage system. To separate foul water from clean water has been estimated at costing between £350 billion and £600 billion, which would have a dramatic effect on people’s bills. However, there is nothing to stop us trying to do this with new housing, as well as retrofitting it into existing housing, and ongoing discussions are taking place with other government departments to see if this can happen.
My Lords, by no means wanting to excuse the water companies anything, I say that, certainly in the west of England, a lot of the river pollution comes from industrial food farming, particularly chickens and nitrates. What are the Government doing to fine it for its contribution to the pollution in our rivers?
The noble Baroness raises a very severe problem. We rightly hold water companies to account, but they are only part of the problem. Phosphates from the poultry industry have caused rivers such as the Wye—one of the great rivers of our country—to become, in part and at certain times of the year, practically ecologically dead. We have to recognise that there is a planning issue, alongside the way in which we support and incentivise farmers, and the way in which we enforce these issues, which all have to be brought together. We all want to see things such as food security, free-range eggs and broiler houses in this country, but not at the price that we are now paying in rivers such as the Wye.
I refer the noble Lord to the Environment Act as a first measure, probably the most significant piece of environmental legislation that any country has brought forward. That brings with it controls and sanctions, alongside a new statutory policy statement to Ofwat, to give it more powers, higher enforcement fines and many other things that I have already discussed this afternoon. I hope that he can see, on reflection, that there is a plan, and that we are determined to end the shameful situation of illegal outflows into rivers, whether it is from sewage or from illegal pollution coming from farmland.
My Lords, those of us who watch this situation closely do not actually think that Ofwat is doing a very good job. A case in point is that it fined Thames Water £50 million, which was great—but Thames Water is now giving each of its customers £3.40 as a sort of recompense. Does that sound reasonable or fair?
As part of this failure to hit its commitments, Thames Water will be returning to customers next year £51 million. An average household water bill to take all the fresh water into a household and remove all the dirty water is just over £1 a day, which is a lot of money for someone on low income, but in terms of household incomes, it probably sits well below energy costs, for example. This system of being able to return money to customers is absolutely at the heart of the kind of incentives we want to see.