To ask Her Majesty’s Government what plans they have, if any, to seek to limit the bonuses of the executives of water companies responsible for persistently polluting rivers and waterways with raw sewage; and in what circumstances they would consider implementing such plans.
My Lords, the pollution of rivers and waterways is unacceptable. The Government have set new environmental commitments for water companies. Since producing its report, Putting the Sector Back in Balance, and the board leadership principles, Ofwat has required companies to link executive performance-related pay to customer outcomes. The Government expect regulators to take strong action against polluters. Ofwat will respond to the recent EAC recommendations on executive pay in due course.
My Lords, we have debated the scandal of illegal sewage dumping and misreporting of incidents by the water companies many times in this Chamber. The Minister will know the depth of anger that exists among the wider public. The Commons Environmental Audit Committee and many environmental groups now want action on the remuneration and bonuses of senior executives as the fining of the water companies as a whole clearly has proven ineffective. However, the chairs of Ofwat and the Environment Agency have said that they cannot act until they are given extra powers to do so. What further evidence, if any, can the Minister possibly need that we need to take this action now, given the scale of the problem, and why do we not give the regulators those additional powers that they need now to take the sort of action that everybody is crying out for?
My Lords, the regulator, Ofwat, produced the report Putting the Sector Back in Balance and the board leadership and principles reports. These require the water companies to improve their corporate and financial behaviours, including by being transparent about how executive performance pay and dividends relate to the services for customers. They put that in place through the board leadership, transparency and governance principles, which will be effective in tackling the problem.
My Lords, I declare an interest as a former director of a water company—but a water supply company, not a company taking waste. I ask my noble friend to confirm that, within the water industry, given the number of companies that need to extract water from rivers to supply their consumers, there is considerable pressure on the companies that take waste to clean up their act. Within the industry itself, there is considerable pressure to act.
There are enormous challenges for the water industry, not least in the south and east of England, where there is a real challenge in terms of a shortage of water at certain times. The Government, working with the regulators, with the extra powers that we now have through the Environment Act, are driving water companies, both suppliers and providers of sewerage and wastewater services, with the means they need to address those challenges.
My Lords, although Southern Water has been fined for the unlicensed discharge of sewage into waterways, no other water company has so far been penalised. Unless the management of water companies are personally financially penalised, nothing will improve. The chief executive of Severn Trent was paid £2.8 million in 2020. When are the Government going to get tough on this revolting practice and ensure that the polluter pays?
My Lords, the “polluter pays” principle was clearly defined in the Environment Act. It is applicable where there is evidence or potential of environmental harm or negative environmental impact. The “polluter pays” principle is vital in cleaning up our rivers. Measures in the Environment Act and the strategic policy statement by Ofwat are driving a better solution for this very serious problem which, as has been rightly pointed out, is an affront not just to us in this House but to the wider public in well.
My Lords, what sanctions are available to counter the massive failures by the water companies in terms both of the illegal spillage of sewage and the failures to invest adequately?
There are a number of sanctions and Ofwat is very clear about them, but one thing we did not have was data. In 2013, we discovered that there was information about only 10% of sewage outflows. That has now risen to 80%, and by next year we will have 100% of all outflows fully available. That transparency means that ordinary members of the public as well as regulators can understand from the water company what is going on and take action.
My Lords, the Environment Agency recently announced that it did not have sufficient resource to investigate many of the discharges of sewage. Following the passing of the Environment Act, would Ministers be prepared to consider giving guidance, or more of a direction if they can, to the Environment Agency to divert resources from other departments to the investigation of sewage discharges, which are of such concern to the public?
I pay tribute to the noble Duke for his work during the passage of the Environment Act. The Environment Agency has risen to the challenge of innovating to use maximum monitoring and inspection coverage with the use of drones and geospatial mapping tools. Like any organisation, it can always do more with more, but it is prioritising. It is also developing its river surveillance network, which will make better use of data through a catchment-based approach, meaning that it will be able to target its resources better. Fines are being put in place on water companies, the largest of which was a £90 million fine against Southern Water. So action has been taken, and more will be taken as this problem is dealt with.
My Lords, will my noble friend agree to make water companies statutory consultees so that, when an application for a major housing development is made, the wastewater does not enter antiquated sewer pipes thus causing sewage spills in nearby rivers, which causes the problems that the noble Duke, the Duke of Wellington, has rightly identified? If we do not do more at the front end when a housing application is made, this problem will continue to grow.
I have sympathy with my noble friend’s points. This was a recommendation of the Pitt review, following the floods in 2007. I absolutely concur that we have to link planning with the provision. Many new houses are tapping into Edwardian sewerage systems, which are inadequate. We have to make sure that water companies have the resources that they need and that the planning system is fit for purpose in tackling this.