Lord Gascoigne:

Moved by Lord Gascoigne

59: After Clause 47, insert the following new Clause—“Water infrastructure project licencesOmit sub-paragraph (a) of regulation 4(3) of the Water Industry (Specified Infrastructure Projects) (English Undertakers) Regulations 2013 (S.I. 2013/1582).”Member’s explanatory statementThis new clause would amend the Water Industry (Specified Infrastructure Projects) (English Undertakers) Regulations 2013 to remove the “size and complexity” test for the awarding of a licence for a water infrastructure project, meaning that projects would be considered on value for money alone.

My Lords, the Minister said in the last group that he was running out of energy, so I reassure him that he is not hallucinating: I am not my noble friend Lady Coffey. However, I am moving Amendment 59 on her behalf. I refer noble Lords to my interests on the register and declare that I am on the board of the Conservative Environment Network—although I speak completely independently of it.

I am sure that whenever I stand to speak, many of my colleagues on this side and on the front bench think that what I have to say is full of excrement. I am pleased to satisfy them today because when it comes to sewerage, it is not often that it can be associated with good news. But Tideway is the good news story in the UK. It was officially opened by His Majesty the King earlier this year, and London’s super-sewer is now fully connected and has, to date, captured over 7 million tonnes of sewage, which would historically have spilled into the River Thames. That is enough storm sewage to fill Wembley one and a half times. While I was waiting today, I was trying to figure out how many times it would fill this Chamber, but I will leave that to brainier folks than I.

This super-sewer is a marvel of modern engineering. It spans the length of London from Acton in the west right through to the Beckton sewage treatment works in the east, passing under iconic London landmarks as it goes. Having taken many years to build, it will continue to serve Londoners for generations to come, helping to protect our precious natural environment from sewage at the same time.

However, ambitious infrastructure projects such as Tideway do not come cheap. That is why, in 2013, the specified infrastructure projects regulations were created. I do not want to go too much into the weeds of this but these regulations made it possible for the Tideway project to be paid for using a novel financing mechanism. This reduced the political and financial risk for Tideway’s investors, reduced the cost of capital, and spread the costs over multiple generations of Londoners who will benefit from that infrastructure. The incurred debts are repaid over the long term by Thames Water bill payers, much like a mortgage.

Before work started, it was estimated that the project would cost customers between £20 and £25 per year, and that was in 2014-15 prices. The cost has remained well within that range since, which in itself is a remarkable achievement. As I said at the beginning of my remarks, this makes Tideway a good news story.

It cuts to the very core of what we are debating in the Planning and Infrastructure Bill. As we were discussing on a previous day, we know that too many infrastructure projects are held back in this country by external forces. These are well known, but, for the water sector, I throw in the additional factor of the uncertainty over whether the regulator will authorise the investments. It is great to see the final version of the Cunliffe review, which was published earlier this week, and the changes that could be coming Ofwat’s way as a result.

Another change the Government could consider is Amendment 59, tabled in my noble friend Lady Coffey’s name. The specified infrastructure project regulations of 2013 have enabled Tideway to come into existence, but they have the potential to make it possible to finance far more infrastructure projects in the country. This simple amendment to the 2013 regulations, merely removing the size and complexity test to award a licence for an infrastructure project, would mean that projects would be considered based on value for money alone. This can help to build large and necessary infrastructure, such as much-needed reservoirs, across the country. We have not built a new reservoir in this country since the 1990s, despite growing water insecurity. This amendment can help change that.

With many other companies eyeing up these regulations as a means of financing infrastructure projects, I respectfully encourage the Government to make it easier for the regulations to be used and to consider the strengths of this amendment, which clearly align with their own ambition to build more infrastructure and unlock economic growth.

I speak also on behalf of my other noble friend Lady McIntosh of Pickering on her Amendment 62. Both my noble friends apologise for not being able to speak to their amendments directly. My noble friend Lady McIntosh wishes to have a debate about the smaller reservoirs required by local golf clubs and farms, for example, and to set out why she is in favour of building them to serve their needs. This is currently discouraged by the de minimis rules in the Reservoirs Act 1975. The rules and safety regulations are very onerous, and disproportionate to the risk posed. While my noble friend welcomes the review currently under way, we would like to inject a sense of urgency into that review, so that changes from legislation—most likely through regulations, rather than primary legislation—can follow. I beg to move.

My Lords, I have Amendment 61 in this group. Its purpose follows on from what my noble friend Lord Gascoigne said: namely, that we have not built a new reservoir for a long time. The intention of the amendment is to give the Government the power to change that—to make things happen.

I would hope that the existence of such a power would mean that things happen anyway, but we need the ability to shift things onwards and to get out of the situation we are building ourselves into. We want to put in another 1.5 million houses but have no way of supplying them with water, particularly in some bits of the country that would actually welcome additional houses. It is important to get over whatever the blockage is and it would be a good idea to give the Government a bit of dynamite to do this.

I am delighted that Tideway has come in on budget. Perhaps the noble Lord could introduce whoever is responsible for that to whoever is responsible for the doors here.

My Lords, as we consider the challenge of water security, we all feel the urgency. Demand is rising, our climate is changing and not a single new major reservoir has been completed in over three decades, as we have already heard. Yet pursuing a one-size-fits-all solution rarely serves us well, especially regarding water storage and distribution. I particularly thank the noble Lords, Lord Gascoigne and Lord Lucas, for inspiring this discussion and debate.

There is consensus on building new reservoirs, but this cannot be done in isolation. Proper investment from water companies is essential, particularly in tackling leaks and improving demand management so that we use water more wisely, even as we boost supply. This is not either/or; it must be both. Yesterday, in the Statement regarding the Independent Water Commission, the full implication of the broken infrastructure that has led to so much water going to waste was laid down very clearly.

It is tempting to focus on grand, large-scale projects, but we should make space for smaller, locally led interventions that reflect the needs and fabric of our communities. Alongside ambitious infrastructure, a programme of carefully sited small and medium reservoirs, delivered in partnership with farmers, landowners and councils, can speed up progress, reduce environmental barriers and, most importantly, engage local people. We have heard not just from experts but from communities themselves that local schemes such as Slow the Flow projects, natural dams and catchment-based storage bring added benefit for flood mitigation and biodiversity, not just water supply. These nature-friendly solutions must be championed alongside larger reservoirs.

However local schemes alone are not enough. We must pair them with strategic national thinking. Regions with water surpluses should be able to support those facing deficit—a modern, integrated network for water transfer. I ask noble Lords to bear with me, because this is a little complicated. The National Infrastructure Commission, which was replaced by the National Infrastructure and Service Transformation Authority in April 2025, was praised by the National Audit Office for its proposals, which constituted a positive cost-benefit case for establishing a network of strategic transfers of water—a transfer system that enables us to balance supply across the country, smoothing out regional disparities and providing resilience against drought and flooding. The recent Commons Library briefing, Future Water Resources, highlights several proposed intercompany transfers, such as Thames Water to Southern Water—120 megalitres a day—demonstrating that active steps can be and are already being undertaken. Alongside large and small reservoirs, these transfer schemes are truly integral to future-proofing our water supply and reducing the risk of shortages.

Turning to the amendments before us, Amendment 59, in the name of the noble Baroness, Lady Coffey, proposes removing the size and complexity test for new water infrastructure to focus solely on the value for money test. But, as Ofwat’s current regulations set out, that test ensures that projects do not threaten a water company’s fundamental service to customers. Given the sector’s current state, we should tread carefully before removing this safeguard. A more prudent path may be to consider government co-funding models, such as that now being used for nuclear, if projects exceed what companies can realistically deliver and are in jeopardy of providing a poor or totally broken service—or further broken, should I say—to consumers.

Amendment 61, in the name of the noble Lord, Lord Lucas, would hand powers to the Secretary of State to dictate timelines and, crucially, permit bypassing planning controls. While there is much in the amendment that we read with interest, I worry in particular about proposed new subsection (3)(b), which is a significant centralisation of power. Yes, there has been an unacceptable delay in reservoir construction, but concentrating such powers is unlikely to foster better outcomes. Proper local engagement, as we all made very clear in our Second Reading speeches, and scrutiny need to be balanced and are vital partners to each other.

Amendment 62, tabled by the noble Baroness, Lady McIntosh of Pickering, aligns more closely with the objectives on these Benches. I look forward to hearing the Minister’s response to the compelling arguments that were made on the noble Baroness’s behalf.

Above all, we must ensure that interventions, whether mighty reservoirs or smaller, community-scale schemes, work for people and for nature, and are delivered with transparency, accountability and genuine urgency. I hope the Minister will clarify the Government’s support for small reservoirs and for a robust water transfer network, so that every region and every customer in every region can feel protected, valued and heard.

My Lords, I intervene in this group to flag up a couple of points. I thank my noble friend Lord Gascoigne for introducing Amendment 59, which makes an interesting point.

In response to the noble Baroness, Lady Grender, the size and complexity threshold test is about assessing whether an infrastructure project is of such size or complexity that the water undertaking cannot manage it or, if it attempts to manage it, it might prejudice its financial ability to meet its obligations to customers. Actually, under current circumstances, we have reached the point where many water undertakers may not have the capacity to undertake infrastructure projects in the way we expected in the past. We know that there was a substantial period when they did manage investment and they increased investment in the water industry, but in more recent years they have not done so and there is considerable risk to their ability to undertake the infrastructure projects we are looking for.

We should not be surprised that that is the case. Take Anglian Water, which is not among the most prejudiced of the water companies at the moment. I was very interested to attend a presentation about Anglian Water’s proposals for the Fens reservoir. It was fascinating, positive and optimistic. Then, in response to a question, Anglian Water mentioned that it is not going to own it. Somebody else will own it, and we do not know who.

So we have to be aware that there is substantial uncertainty about how we will fund much of this infrastructure, but the most important thing was mentioned by my noble friend Lord Gascoigne in moving Amendment 59. The amendment is about which projects should go out to competitive tender. That is all it really tells us. The answer ought to be: if it will secure value for money—indeed, if there is potential for independent financing which, as he said, can be more cost-effectively delivered, and we know that the risk premium on the water undertakings themselves is making their borrowing more expensive than what may well be available through other sources of financing —then we should go down that path. The size and complexity threshold test is unhelpful, gets in the way and creates serious impediments to getting on with infrastructure projects.

Of course, the amendment is not deliverable. It does not deliver the objective in its own right. One would have to substantially change Section 36 and other sections of the Water Act 1991 to achieve the objective, because the regulation derives its power from the primary legislation. We need to look at the Water Act 1991 in substance to achieve that on Report.

What my noble friend Lord Lucas’s amendment says is helpful. When one looks at what it is that governs the delivery of reservoirs, as far as I can tell the Reservoirs Act 1975 basically says that it ought to be done by an appropriately approved construction engineer. That is pretty much it. There is a great deal that should be added to what is required in order to secure reservoir development.

I have two other points to make. The first is that Amendment 62 from the noble Baroness, Lady McIntosh, raises a more significant point than the amendment itself says. We are aiming to secure what we need in terms of water supply. I remind noble Lords of my interests in the Cambridgeshire Development Forum and the Oxfordshire Development Forum, which of course means that two reservoirs—the Fens reservoir and the Lincolnshire reservoir—are relevant, as well as the Grand Union Canal project and related activity to try to supply the east of England. We are in a position at the moment where, by 2050, we will have a deficit in water supply equivalent to a third of our present use. That is the degree of stress that we are looking at and therefore need demand management to be substantially improved and the supply to be improved.

There are many measures that we need to take. I think the small-scale, farm-scale reservoir approaches that are implicit in this amendment have significant potential. I hope Ministers will look at permitted development rights at the 25,000 cubic metre threshold and say that we can go beyond that to a higher level of permitted development rights on small-scale reservoirs.

There is no definition of low-hazard reservoirs. There is a definition in the Reservoirs Act of high-risk reservoirs, but it would be helpful for the permitted development rights to be supplemented by amendments to the Reservoirs Act that demonstrate that there is a streamlined, simplified procedure for enabling other reservoirs to go ahead. We have not had big reservoirs for 30 years, but we have had smaller-scale reservoirs in the intervening period, and we should have more.

Time in Committee has not permitted a proper examination of the ways in which we should use this legislation. Time should permit us, before the end of the year, to take on board some of the recommendations of the Cunliffe report. Some are relevant. For example, recommendation 74 talks about extending permitted development rights for water companies. We should certainly look at that. Recommendation 40 talks about changing some of the planning regulations relating to water reuse. We should certainly pick that up to drive water reuse infrastructure in the new developments that we are bringing forward. I hope that will go into some of our planning thinking. Recommendations 72 and 73 say that we should support the timely delivery of water industry infrastructure through the planning processes. I hope that this first part of the Bill and the national infrastructure project will do exactly that.

The report also says that the role of water companies in the planning process should be strengthened. I hope that, when we get to strategic development strategies and plan-making, we will make sure that water companies are involved, that the water resources plans coming through from, for example, Water Resources East, are reflected in the strategic development strategies, and that we make sure that water companies, water resource management plans and the infrastructure delivery programmes of the water undertakers take full account of where the strategic development and the new homes and new employment will be delivered. I hope that we will be able to come back to that further on Report.

My Lords, I will address these important amendments concerning water infrastructure, each of which touches on the future resilience and efficiency of our water sector. These amendments reflect a shared desire to ensure that the regulatory framework keeps pace with the demands of modern infrastructure delivery while safeguarding value for money and service quality for consumers.

Amendment 59, tabled by my noble friend Lady Coffey, proposes to remove the size and complexity test currently embedded in water regulations. This is a timely and helpful amendment, particularly in the light of the Cunliffe review published on Monday. The review highlights that, under specified infrastructure projects regulations, this test can apply only where projects are of such scale and complexity that they risk threatening the water company’s ability to provide services and value to customers. The Government have recently signalled their intention to relax this criterion. In this context, will the Minister clarify when the Government intend to relax it by? How will they do so? Could the opportunity presented by my noble friend Lady Coffey’s amendment be used to implement such a relaxation? We need a regulatory environment that is more flexible and better suited to facilitating timely delivery of much-needed infrastructure projects without unnecessary procedural hurdles that can cause delays and cost overruns.

Amendments 61 and 62 relate to reservoir construction and regulation. We recognise the importance of the delivery of new reservoirs, and we acknowledge their vital role in enhancing water security and supporting our long-term infrastructure goals. While I would like to support my noble friend Lord Lucas on his Amendment 61, we have a concern about whether introducing new, possibly burdensome regulation is necessary or whether it would risk creating delays or have unintended consequences.

In contrast, Amendment 62 tabled by the noble Baroness, Lady McIntosh of Pickering, seeks to deregulate low-hazard reservoirs. We believe that this approach could streamline processes where the risk is minimal, allowing resources to be focused on the highest-risk infrastructure.

Water infrastructure is a critical national priority. In the light of these differing proposals, I ask the Minister to give the Committee a clear answer on the Government’s position. How do the Government intend new reservoirs to be built? What regulatory approach will be taken to balance safety, efficiency and the urgent need for water infrastructure? I look forward to the Minister’s response on these important matters.

My Lords, it was of course a pleasure to hear the noble Lord, Lord Gascoigne, introduce these amendments. He referred to the success of the Thames Tideway project, and there were a number of references to who did it. The person in charge of that project is Andy Mitchell, who has done an extraordinarily good job, so it is quite right that his name should be referred to next to the project itself.

The amendments seek to insert new clauses specific to water infrastructure. Amendment 59 tabled by the noble Baroness, Lady Coffey, seeks to remove the size and complexity test from the specified infrastructure projects regulations, known as SIPR. The Government are resisting this amendment because we have already committed to reviewing the SIPR framework. That was set out in the Chancellor’s New Approach to Ensure Regulators and Regulation Support Growth policy paper, published in March 2025, which confirmed that Defra will amend the SIPR framework to help major water projects proceed more quickly and deliver better value for bill payers. It is important that the planned review goes ahead so that any changes are properly informed by engagement with regulators and industry. Removing the size and complexity threshold now would pre-empt that process and risk creating a regime that does not reflect the sector’s diverse needs or long-term priorities.

We will continue to work closely with stakeholders to ensure that the specified infrastructure projects regime remains targeted and proportionate and delivers value for customers. The noble Lord, Lord Jamieson, asked by when this review will be completed, and I can assure him that it will be completed in this calendar year. I therefore thank the noble Baroness, Lady Coffey, for tabling the amendment, but I kindly ask the noble Lord, Lord Gascoigne, to withdraw it on her behalf.

Amendment 61 tabled by the noble Lord, Lord Lucas, seeks to introduce enabling regulations for milestones and enforcement for various delivery phases of all water undertakers’ reservoir proposals. The Government have already taken urgent steps to improve water security. This involves action to improve water efficiency and to reduce water company leaks alongside investing in new supply infrastructure, including new reservoirs and water transfers. We are taking action to speed up the planning process for new reservoirs. For example, we recently revised the National Policy Statement for Water Resources Infrastructure to make clear that the need for the proposed reservoirs in the water companies’ statutory management plans has been demonstrated.

Ofwat’s price review final settlement in December 2024 for the water sector has also unlocked record investment, around £104 billion of spending by water companies between 2025 and 2030. This includes £8 billion of investment to enhance water supply and manage demand, such as enabling the development of nine new reservoirs. As part of that, leakages will reduce by 17%. We have taken steps with Ofwat to improve water company oversight by increasing reporting and assurance requirements on companies’ delivery, improving protection for customers from companies failing to deliver the improvements by returning the funding to customers, and encouraging companies to deliver on time by applying time-based incentives.

The Government, as the Committee has already heard, also commissioned Sir Jon Cunliffe to lead the Independent Water Commission, to which the noble Lord, Lord Lansley, referred. It is a once-in-a-generation opportunity to modernise the water industry and deliver resilient water supplies. The Government are grateful to Sir Jon and the commission for their work and will carefully consider their findings and recommendations, including those that the noble Lord, Lord Lansley, referred to.

We will provide a full government response to the commission’s report in the autumn, setting out our priorities and timelines. The Government will introduce root and branch reform to revolutionise the water industry. Working in partnership with water companies, investors and communities, the Government will introduce a new water reform Bill to modernise the entire system so that it is fit for decades to come. I hope that the noble Lord, Lord Lucas, is therefore reassured that the proposed new Clause is unnecessary, and I kindly ask him not to move his amendment.

Amendment 62, introduced by the noble Lord, Lord Gascoigne, on behalf of the noble Baroness, Lady McIntosh, is not necessary. It is a probing amendment to encourage the consideration of measures to facilitate the construction of small reservoirs. The Government are already encouraging building both small and large reservoirs. That improves resilience to climate change, sustains food production and water security and supports economic growth.

Reservoir safety legislation does not prevent new reservoirs being constructed but does ensure that structures are well built and maintained. The streamlining of the planning system will make them quicker and easier to build in the future. However, it is important that new reservoirs do not pose flood risks for local communities by being built in the wrong locations and that existing reservoir dams are structurally safe.

Reservoirs that store water above ground level pose risks to life, property, businesses and the environment, and could cause economic disruption to local communities if the dam structure were to fail. These risks are managed through reservoir safety regulations. Reservoirs that store water below ground level do not pose the same risks and so are out of scope of the reservoir safety regulations. Current advice to farmers and landowners who wish to build reservoirs is to consider options for non-raised water storage. The Government intend to consult in the autumn on proposals to improve reservoir safety regulations, including making the requirements more tailored to the level of hazard posed and bringing some smaller raised reservoirs in scope. These proposals do not alter the need for more reservoirs, nor prevent new ones being built. They are to ensure that reservoir dams are structurally sound and that flood risks for communities down stream are effectively managed.

I appreciate the interests of noble Lords in tabling these amendments. However, for the reasons I have set out, I kindly ask the noble Lord to withdraw the amendment.

My Lords, I am conscious that the hour is late and already the two Chief Whips are conspiring to tell us that we need to rattle through.

Wind up!

Exactly—that is just what my Chief Whip says.

I am grateful to the Minister and everyone who has participated. I obviously cannot do justice to what my noble friend Lady Coffey would say on Amendment 59 in this group, but it has been a good discussion, albeit short.

I think it was my noble friend Lord Lucas who made the correct observation that this is not just about water infrastructure in itself. It is about the importance of it linking into housing and the need to build more homes. My noble friend Lord Lansley made a very good point about the Cunliffe review as a whole and the need to have a broader discussion about what was said in that review. I am sure that will happen.

I am conscious that we are heading into Recess. I am grateful for the many brainy points that my noble friend makes about the issues within the regulations and this legislation. For now, on behalf of my noble friend, I beg leave to withdraw this amendment.

Amendment 59 withdrawn.