Amendment 12

Part of Water (Special Measures) Bill [HL] - Report – in the House of Lords at 7:13 pm on 20 November 2024.

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Photo of Baroness Hayman of Ullock Baroness Hayman of Ullock The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs 7:13, 20 November 2024

My Lords, in Committee noble Lords across the House made it clear that, although they were supportive of the new requirement for water companies to produce annual pollution incident reduction plans, they wanted further assurances that the measures in the plans would be duly implemented. I have listened carefully to the points raised in Committee and to the views shared on this issue during a number of very constructive meetings with several noble Lords, including the noble Lord, Lord Roborough, the noble Duke, the Duke of Wellington, and the noble Baronesses, Lady Jones of Moulsecoomb and Lady Bakewell, among others, and I thank them for their time and consideration.

The noble Lord, Lord Roborough, asked for further explanation as to why we believe annual reporting is more appropriate than more regular reporting for pollution incident reduction plans. The measures in these plans are typically programmes of ongoing maintenance that will need to continue on an ongoing basis. Examples include regular cleaning of wet wells at sewage pumping stations to remove detritus that could lead to blockages or replacing rising main sewage pipes. We want companies’ focus to be on delivering the measures they have set out in their plans rather than on preparing reports for publication to talk about delivery. More regular reports also may lead to a focus on the wrong metrics to show progress for progress’s sake rather than the work necessary to reduce pollution incidents.

In response to the noble Lord, Lord Roborough, and other noble Lords, I am pleased to propose a group of amendments to enhance and strengthen Clause 2 of the Bill. I turn first to Amendments 12, 13, 14, 16, 17, 18, 22, 25, 27 and 31, all tabled in my name, which will expand the scope of pollution incident reduction plans to encompass water supply system-related incidents. The noble Baroness, Lady Bakewell of Hardington Mandeville, specifically raised this in Committee when she tabled an amendment which would require that water-only companies as well as water and sewerage companies produce pollution incident reduction plans. She made very persuasive points which we listened to carefully and, on reflection, we agree that including water supply incidents in scope would strengthen these plans. While pollution incidents attributable to the water supply system are less frequent than incidents attributable to the sewerage system, they have the potential to be equally serious. I thank the noble Baroness for drawing our attention to this in Committee. Such incidents could include a burst clean-water main leading to erosion and then silt pollution in the watercourse or the addition of chlorinated or fluorinated water into the watercourse.

The amendments tabled in my name will mean that water companies will have a duty to develop and publish measures to reduce pollution incidents attributable to the water supply system as well as the sewerage system. This duty will apply to all relevant companies, including water-only companies as well as water and sewerage undertakers. We believe this will support the overall intent of Clause 2 in further reducing the frequency and impact of pollution incidents from the water sector. I once again thank the noble Baroness, Lady Bakewell of Hardington Mandeville, and all who spoke in support of this topic in Committee for their constructive approach.

I now move to Amendments 29, 34 and 35, also tabled in my name. These amendments create personal liability for chief executives to ensure that pollution incident reduction plans are published and implemented in line with the requirements set out in the Bill. A key aim of this Bill has been to hold water company executives to account for pollution caused by the water industry. As a core part of their role, water company executives should be acting to minimise pollution incidents and ensuring that their infrastructure is fit for purpose and resilient to pressure, including from climate change and population growth.

This is why Clause 1 of the Bill will enable Ofwat to ban bonuses for executives when water companies fail to meet environmental standards. But we want to build on this by making chief executives personally liable for the production of pollution incident reduction plans. This will mirror the personal liability which accompanies the duty for directors of a company to publish accounts and a company report under the Companies Act 2006. This will emphasise that minimising pollution incidents is a central aspect of a water company chief executive’s role. Under this group of amendments, the chief executive must personally ensure that the company produces a plan each year which meets all legal requirements. The chief executive must also personally approve the plan before it is published.

If the company fails to publish a compliant plan by the deadline each year, the chief executive—as well as the company—will have committed an offence. The regulator will be able to prosecute against this offence and, if the courts find the chief executive guilty, they will issue a fine.

To ensure that this measure is proportionate, imprisonment will not be available as a sanction. Furthermore, we have provided a defence to ensure that chief executives are not penalised if non-compliance arises due to circumstances that are—I emphasise—genuinely out of their control.

Through bringing forward these amendments, we will ensure that the production and publication of pollution incident reduction plans is overseen at the highest level, reflecting the importance of water companies bringing forward measures to meaningfully reduce pollution incidents.

I turn now to Amendments 19, 32 and 37, tabled in my name. In Committee, noble Lords made it clear that they wanted to see a clearer mechanism to ensure that water companies implemented their pollution incident reduction plans. We have listened very carefully and now propose a group of amendments to further ensure that companies implement the measures in their plans.

However, before I describe these amendments, I would like to recap why we do not think imposing a direct duty for water companies to implement the plans—as is proposed in Amendment 15A, tabled by the noble Lord, Lord Roborough—is helpful. First, at present, it is rightly the responsibility of companies to produce these plans and to decide the steps they will take to reduce pollution incidents. A direct duty to implement the measures in the plans could therefore result in companies setting enforceable duties for themselves. This would create a confused regulatory system, which could ultimately make it more challenging for the regulators to enforce legal requirements for pollution reduction.

For example, regulators would need to disentangle measures that water companies have put in their plans from pre-existing regulatory duties. This could make investigations and enforcement action more challenging and add complexity and confusion to the regulatory system.

Secondly, a direct duty may inadvertently reduce companies’ ambition. To manage the risk of enforcement, companies might be persuaded to make a commitment only when highly confident they could deliver.

Thirdly, this direct duty may force companies to continue implementing measures, even when they have realised it is not the most effective way to reduce pollution incidents. Companies should have the flexibility to learn and iteratively improve their approach. Sometimes, this may mean companies ceasing implementation of a specific measure and taking a different approach. Therefore, we do not think it is appropriate to create a legal duty for water companies to implement the measures they have set out in their plans.

I will now turn to the government amendments themselves and explain how they will ensure that water companies reduce pollution incidents and are held to account for delivery of their plans. First, this group of amendments introduces a duty for companies to produce an implementation report alongside their annual plans. Companies will be required to set out where they have and have not implemented the measures they planned to implement in the preceding year. Companies must then set out the reasons for any failure to implement their plans and the steps they are taking to avoid similar failures in the future.

This will create a high level of transparency, enabling the public and regulators to scrutinise the extent to which companies have implemented their plans. Requiring companies to set out the steps they are taking to avoid similar failures in the future will ensure that companies cannot continue to make the same excuse year after year.

Secondly, we are also amending the Bill to ensure that the environmental regulators take into account companies’ track records in implementing their plans when undertaking regulatory activities. This means that the regulator will consider the extent to which the company has implemented its plan when considering its enforcement response to a pollution incident, or when planning its schedule of investigations. This may well mean that a company will face more severe enforcement action for a pollution incident if it has failed to sufficiently implement those plans.

I hope the House will agree that, collectively, these amendments represent a significant strengthening of the Bill, and will ensure that companies are firmly held to account for implementing the measures outlined in their pollution incident reduction plans.

I will conclude by speaking to Amendments 15, 20, 21, 23, 24, 28, 30, 33, 36, 38, 60 and 63. I am delighted to move this suite of amendments to extend the application of the provisions introduced by Clause 2 of the Bill to Wales. Upon reviewing the requirements imposed by Clause 2 of the Bill, the Welsh Government and Natural Resources Wales have requested that Clause 2 be extended to apply in Wales. This was announced by the Deputy First Minister on 16 October and these amendments seek to deliver on that request.

I look forward to continuing to work collaboratively with our counterparts in Wales, and indeed with all of the devolved Governments, to tackle shared problems relating to the water industry and water quality more broadly.

I once again thank all noble Lords for their thoughtful contributions and input to discussions around the new requirement to produce pollution incident reduction plans, and hope that noble Lords agree that these amendments will significantly improve and strengthen this new requirement. I move that these amendments form part of the Bill.