Earl Russell:

Moved by Earl Russell

484: After Clause 196, insert the following new Clause—“Offence of failing to meet pollution performance commitment levels (1) A water or water and sewerage company (“C”) commits an offence where C has—(a) failed to meet its pollution performance commitment level for three consecutive years, or(b) experienced an increase in serious pollution levels for three consecutive years. (2) For the purposes of this section—(a) “water or water and sewerage company” means companies which are responsible for the provision of water, or water and sewerage, services and which are regulated by Ofwat and the Environment Agency,(b) “pollution performance commitment level” means the level of performance on pollution that the company has committed to deliver, and which is reported against by Ofwat in its annual water company performance report, and(c) “total pollution incidents per 10,000km2” and “serious pollution incidents” mean the relevant figures under those headings reported by the Environment Agency in its annual environmental performance report.(3) If guilty of an offence under this section, C is liable—(a) on summary conviction, to a fine;(b) on conviction on indictment, to a fine.”Member’s explanatory statementThis new clause creates an offence of failing to meet pollution performance commitment levels.

My Lords, in moving Amendment 484 on behalf of my noble friend Lady Bakewell, who is unable to be here, I shall also speak to Amendment 485 in this group on pollution. I thank the noble Baroness, Lady Jones, for her support for both. The amendments address the critical, environmental and public trust issue of the persistent and systematic failure of water companies to stem the flow of pollution into our rivers, lakes and coastal waters. The amendments are designed to work in tandem as a linked pair of provisions specifically targeting persistent and sustained underperformance. They are not designed to punish one-off incidents. They are a measured response to prolonged and sustained regulatory failures that, in the public’s eye, have become a matter of criminal neglect.

Amendment 484 would insert a new Clause into the regulatory framework, creating a clear corporate criminal offence for a water or sewage company. That offence would be triggered when a company already regulated by Ofwat or the Environment Agency either fails to meet its pollution performance commitment level for three consecutive years or experiences an increase in serious pollution levels for three consecutive years. The pollution performance commitment level used is the exact target that companies commit to under the existing regulatory framework, which Ofwat reports on annually. The data regarding serious pollution incidents is similarly drawn directly from the Environment Agency’s annual environmental performance data.

A three-year threshold is a deliberate and calibrated response. We recognise that water companies can face individual problems from climate change, weather events, rapid population growth and other unforeseen circumstances. However, when failures persist year after year, are reported in black and white in regulatory reports but nothing is done, that is a different matter. By setting this three-year window, we would offer companies ample opportunity to correct their course. If they failed to do so, as a result of this amendment it could result in the matters being criminal.

Amendment 485 would build directly upon this foundation by creating personal criminal liability for senior managers. Liability would arise where a corporate offence under Amendment 484 was committed and the individual had failed to take all reasonable steps to prevent it. We have adopted a functional or a robust definition of senior manager, mirroring successful legal models in health and safety and economic crime already in legislation. It would apply to anyone who plays a significant role in making decisions about how the company’s relevant activities are managed or organised. This ensures that no one could evade their responsibility through misleading job titles or a corporate web of complex structures.

Critically, this amendment includes built-in protections to ensure fairness. The core requirement is to “take all reasonable steps”. A manager who could demonstrate that they have done this would have a clear path to acquittal. This structure would pierce the corporate veil without being reckless. Decisions regarding budgets and infrastructure carry personal weight for those who operate at the top.

Although there has been change, there is a lot that still needs to be done. Bill payers are facing a 26% increase in their Bills and, in 2025 alone, supply interruptions across England and Wales rose by 8%. Even more concerning is the 60% increase in serious category 1 and category 2 incidents, which climbed to 75 in 2024. I recognise that we have had the Water (Special Measures) Act, the Cunliffe review and the recent white paper and that there is more legislation to come. We welcome a lot of the measures, particularly those in the White Paper. Regulators have also imposed record fines, some as high as £90 million, but we must confront the reality that we may have reached the limits of a solely fines-based model.

When penalties are too modest, they just become the cost of doing business; when they are too punitive, they risk bringing down the very water companies that we are trying to sanction. Despite these fines, executives continue to draw substantial bonuses. Shareholders continue to receive massive dividends, while the environment bears the scars. The public is being asked to fund a staggering £104 billion in the promised AMP8 investment, and much of it is publicly underwritten through government schemes. We must have a statutory mechanism that ensures that this money delivers verifiable environmental gains rather than just being siphoned into higher gearing and profits.

Some critics may argue that these amendments will deter talent and overburden regulators. I disagree. These provisions are carefully calibrated to protect those who work in this industry, and they could do exactly the opposite. They could attract into the industry those people we need who are motivated to make change. Having that protection of the “reasonable steps” defence could help to attract the very talent we need. These measures are in line with requirements of the Environment Act that the polluter must pay. For too long this has not happened, and individual poor performance has been allowed to pass unchallenged.

These amendments provide the precise tools needed to bridge the gap between reporting failure and enforced change. Persistent pollution is not a technical glitch or an oversight; it is a substantial betrayal of public trust and an environmental duty. These issues need more thought than I have seen to date from the Government, despite the legislation coming forward.

The new water regulator, when established, must have the necessary tools to hold individual companies and individual corporate members within them to account personally for any serious and persistent failings; otherwise, it will not succeed, just as other regulators have not. I hope that the Government will view these amendments as a timely enhancement to their own thinking and plans for further reform. I beg to move.

I love these amendments and wish I had tabled them myself. They are excellent. Water companies dumping sewage into rivers has been illegal for years: it is just this and the previous Government’s refusal to act that has let it continue without serious consequences.

The legislation allows Ministers to set a bar of what is acceptable behaviour and, so far, every politician in charge has refused to say what is and is not a major failure. The result of this political cowardice is that water companies continue to make a profit out of polluting our waterways and beaches, and the people in charge continue to collect their big pay cheques and bonuses.

Regulators such as Ofwat have been in bed with the water industry bosses, and the Environment Agency has lost staff and legitimacy. Labour are wedded to private ownership of water and refuse to consider public ownership, even though it would be the most popular legislation they could enact this Parliament. I keep making suggestions about how Labour can get some voters back, but it is not listening.

These companies are fleecing bill payers with the excuse that they need to carry out the investment they have failed to do for decades. They have taken the public’s money and given it directly to shareholders. They have run up debts to pay even higher dividends and the bill payers are now paying for those debts. What is going to stop them doing this all again?

These amendments take a direct route to stopping pollution by making this personal to the people at the top. If they do not spend the money to invest and reduce pollution, then that is a crime. They are taking the public’s money and failing to improve. My own preference would be to put them on long-term community service cleaning up the sewage from our beaches, waterways and riverbanks. I would probably put them in special uniforms so that everybody passing by would know exactly who they are. I would also put a complete ban on dividend and bonus payments.

I am happy—she says, through gritted teeth—to support this more moderate suggestion, as being something the Minister might accept. I would not give them three years to turn it around either, but setting some sort of firm deadline would be preferable to the inaction of this, and the last, Government.

Finally, the best way of stopping the crime of water companies dumping sewage in our rivers is to take them into public ownership. Reduce Bills by reducing the money wasted on debt repayments and replace the current set of overpaid bosses with people who can do the job and care about our environment.

My Lords, I declare a historic connection with the water industry in the sense that I was the chairman of a water-only company more than 10 years ago, but it means I know a bit about the water industry and perhaps that is helpful after the last Intervention, because the truth of the matter is that this is not just a problem of the water companies.

First, it is the problem of those people who controlled the water companies. The way in which it was operated was a great mistake. There were two regulators and the Environment Agency was almost always overturned by Ofwat. Ofwat was leaned on by successive Governments to keep down the price of water. So I start by saying that we must have a system in which we are paying for the big changes that we know about—and, because I have been around for such a long time, I remember why privatisation took place. It was not anything to do with Mrs Thatcher wanting to privatise. It was because, when it had been public ownership, both municipal and national, there had never been investment. It is all right for the noble Baroness to say that that is what we want; if you look at the history, it is about the worst history of public investment that we ever had. We had Surfers Against Sewage and the filthiest water: the worst water in northern Europe. When we signed up to the water directive, as we did when were sensibly in the European Union, it was quite clear that we did not meet the standards. The Daily Telegraph used to say, “Oh well, of course our water is better than anywhere else because they drink bottled water in France”. The truth was that our water did not meet the standards of the whole of Europe.

The privatisation took place to get private money into the water industry, to make the changes that were necessary—and, for a bit, it worked. I was the Minister responsible after that had been done and it was murder to try to deal with it. As these companies brought new technology and the rest into it, they had to charge more and therefore we had all the arguments about keeping the water price down. Unfortunately, we have to recognise that water is not cheap and it is going to be more and more expensive. For example, Essex & Suffolk Water—which is about 200 to 300 yards outside Anglia, where I am affected, so I do not have a direct connection—has announced that it cannot provide new water for any new or extended industry until 2036. That is the effect of climate change and of not having the water we need.

We have to be frank about our problem: we are going to have to spend a lot more money on water, make it much more efficient, use new technology and do that through the privatised system that we have. There is no point in arguing about it; it is not going to be nationalised. The Government have made that quite clear and nobody else is going to nationalise it. So let us see how we can make this work. That is why I have come to be semi-supportive of this Amendment: the reality is that we have not been able properly to regulate water and we need to do so. Directors of companies in these areas need to be personally responsible when, for a period, they have clearly not done the job which they are supposed to do.

The noble Baroness wanted us not to have three years. Frankly, you have got to have a period in which you can see whether this a persistent problem or a one-off. We are going to have lots of one-off problems. I know it bores the Committee for me constantly to talk about climate change, but the point about climate change is that it is really climate disruption. It means that we have very significant changes in weather which we cannot predict in advance and therefore we can have real problems, with so much water that we cannot deal with it or not enough water so we cannot provide for people. That does not mean to say that the people of Tunbridge Wells do not have a very considerable complaint about the fact that, yet again, they have not been able to have the water that they ought to have.

What I want to say to the Government, therefore, is very simple. Because we know that people will have to pay more for their water, we have to be very careful to make sure that those who are providing it and those who have to deal with these problems are behaving properly. The reason I am attracted to tougher measures —although I would not support exactly the wording of this amendment—is really that we have to carry the public with us. There is no point in pretending that we are not all going to have to pay more for water. It is not because we have got to build reservoirs if we are going to have enough water for people to be able to drink. We are going to have to do much more about moving water from the north of England down to the south because, at the moment, it goes off on the way, and by the time it gets to Southern Water or to any of the other water companies in the south, they have real difficulty, and one understands that.

Therefore, because we are going to have to spend so much more money—and the only people who pay for that are the people who actually use the water—I think there are two things we have to do. One is not in this amendment. I do think we have to look at the way that we deal with the payment for water. It has always seemed to me that we should have a basic payment and then a very sharp, rising payment for those who use a great deal of water. I want to protect the family that is using water, but I do not see why they should be penalised by people who are using a great deal more water for swimming pools and the like. I want to see a rather different way of looking at it. I say that only to qualify what I am about to say about this amendment.

What this amendment seeks to do is to ask the Government seriously to consider how they can assure the public that, in paying the extra money they are going to have to pay for water, the companies concerned are using the best private enterprise mechanisms, they are using the best modern technology and they really are on the route to solving the problems which we have faced.

There is one coda. We have to be a bit careful about blaming the water companies for everything. A great deal of the pollution that we have is because of industrial farming, and we have to recognise that there is a real issue. For example, in the Wye Valley, where I have family, very large concentrations of chicken farms really do damage the water quality. There is nothing the water company can do with that, because this is runoff from the farms. In saying this, I do not want to look as if I am merely blaming the water companies. I am merely saying they do have a very major part to play and I would like the Government to make sure that the public feel that they are playing that part properly.

It is very brave of the noble Lord to say categorically that this Government will not put the water companies into public hands, because they are famous for their U-turns, so who knows what is going to happen next week? Secondly, all these bonuses and huge payouts surely show a level of incompetence. They had the money to do the investment and they gave it instead to shareholders.

I am sorry, the second part of the noble Baroness’s comments are ones she makes about everybody who is in the private sector. That is what she thinks about the private sector and I do not agree with her. The Polanski mechanisms of this world are devastating politically and economically and, really, I am not going to answer that because I just think it is not true and is nonsense.

However, the first part is actually quite important. The reason the Government do not want to nationalise the water companies is that it would cost a great deal of money that we ought to use for other things—and it does not necessarily end up with a better system. I am a historian: I always like to look at what happened before. When it was in the public sector and was run by municipalities, we did not spend the money. That was the problem. And we still would not do so, because there is always something better to spend the money on immediately. We are politicians; you do it for what the next moment is. The trouble with investment in water is that it is crucial, but it is long term.

First, I do not want to get into a spat with the noble Lord but could he not mention people by name in this Chamber? That is quite rude. Secondly, I am an archaeologist and I know exactly how these things start. The fact is, it may be that public ownership did not help but private ownership has made it much worse—and it is not true that I condemn all private businesses.

We are straying away from the Amendment and strolling into a bigger debate. If we can get back to the amendment, that will be fantastic.

On the personal attack, Mr Polanski is the leader of a party. If he cannot be referred to in this House, I wonder what on earth we are coming to.

I will follow the strictures just put on us to stay with the Amendment. I say to the noble Lord, Lord Deben, as he still came back for another bite, that as someone who sat on the Industry and Regulators Committee that looked into the water industry in detail, I know that the Victorian system reached its capacity in 1960, and public and private ownership both failed in different ways for the simple reason that he gave: short-termism. That is the problem we face: the multiple billions that have to be spent over a long period, and no Government looking to get re-elected for the next five years will ever spend it.

My Lords, I thank the noble Baroness, Lady Bakewell of Hardington Mandeville, for tabling this Amendment and the noble Earl, Lord Russell, and the noble Baroness, Lady Jones of Moulsecoomb, for putting their names to it and contributing today.

Although we understand the noble Baroness’s intention, we do not believe that this amendment is the right approach to ensuring that our water companies act ethically and serve the customer. Neither do we believe that increasing offences for companies or for individuals is the right approach to decreasing water pollution. They are already subject to the powers of Ofwat and the Environment Agency; additional measures will just drive up legal costs and encourage hostile behaviour.

The Water (Special Measures) Act of last year placed a new duty on companies to publish an annual pollution incident reduction plan, and we should wait and see what the outcome of that policy is before we attempt to legislate further. It is undoubtedly an important issue, but we simply do not believe that this is the best way to go about it. I look forward to hearing the Minister’s response.

I thank the noble Baroness, Lady Bakewell of Hardington Mandeville, for tabling the Amendment, the noble Earl, Lord Russell, for moving it, and the noble Baroness, Lady Jones of Moulsecoomb, for putting her name to it and speaking to it. I enjoy—well, “enjoy”—sparring on issues of water ownership and water companies. Usually it is in Oral Questions rather than in the middle of the Crime and Policing Bill but, hey ho, you take your chances wherever you can. I also thank the noble Lord, Lord Deben, for bringing his sense of history and active participation over a number of decades, if I may say so, on the issue of water ownership and stewardship. I found myself agreeing—which may not be too strange—in no small part with many of his comments.

Before I get into the meat of my remarks, I want to be clear: as the noble Lord, Lord Deben, said, the Government are not going to nationalise the water industry. It would cost around £100 billion.

It is not true.

I am very happy to direct the noble Baroness towards Defra’s costings on this. You have to take account of all sorts of factors, including debt that you inherit as well as the equity stake of the companies that they are currently valued at. It is a very simplistic economics that leads you down the primrose path of the valuations that some people like to think it would cost. That is not the case.

I also gently point out to the noble Earl, Lord Russell, that the £104 billion that comes up in PR24 to which he referred is an investment commitment from the water companies. We are building new aqueducts now and we have not built them for decades, and that is one of the main reasons why we have continual problems of lots of rain but not enough water supply, to which the noble Lord, Lord Deben, referred. Anyway, I will take off my Defra Whip hat and put on my Home Office Whip hat, and I will speak to the Amendment.

Performance commitment levels, including for pollution, are set for Ofwat in the price review process. Where companies fail to meet these commitment levels, they must return money to customers through reduced Bills in the next financial year. Companies are therefore already penalised for failing to meet their performance targets. In addition, this Government have already introduced the toughest sentencing powers in history against law-breaking water executives. Provisions in the Water (Special Measures) Act 2025, to which the noble Earl, Lord Russell, referred, extend the sentencing powers of the courts to include imprisonment in all cases where the regulator’s investigations have been obstructed by individuals and enable obstruction cases to be heard in the Crown Court. As a company cannot go to prison, the provisions ensure that directors and officers are held to account. The threat of imprisonment will act as a powerful deterrent as water companies invest in upgrading broken water infrastructure and clean up our rivers, lakes and seas for good.

The 2025 Act also allows the Government to expand and strengthen the current range of financial penalties available to the Environment Agency in a bid to clamp down on more water company offences. The Government have consulted on the scope for these new penalties and their value. The changes will make it much easier and quicker for the Environment Agency to hold water companies to account. Through the 2025 Act, the Government have also given Ofwat the power to ban executive performance bonuses where companies fail to meet certain standards. Since this was introduced in June last year, six companies out of nine—Anglian Water, Southern Water, Thames Water, United Utilities, Wessex Water and Yorkshire Water—have triggered the bonus ban rule, and more than £4 million of potential bonuses have been blocked. This is the legislation working in action.

The Government announced, in response to the Cunliffe review, that they will establish a single powerful regulator for the entire water sector, with the teeth to enforce the standards that the public rightly demand. We have also accepted the recommendation from Cunliffe to end the era of water companies marking their own homework through operator self-monitoring. We will introduce open monitoring to increase transparency and restore public trust. We have set out our wider vision for the future of the water sector in a white paper published on 20 January. This marks the most fundamental reset to our water system in a generation. When parliamentary time allows in a new Session, we will introduce a water Bill creating the Laws that we need to fundamentally change the system.

The noble Lord, Lord Deben, asked whether the Government are committed to this. The Water (Special Measures) Act last year, our response to the Cunliffe review, the water White Paper and our commitment to legislate are a down payment on our commitment to do right by the industry, the environment, the consumer and those who wish to invest in our water system. I hope that the measures I have set out demonstrate that the Government and regulators are taking firm action to hold water companies and their executives to account for poor performance. For these reasons, in the knowledge that we will bring forward further legislation in due course, I hope that the noble Earl will withdraw the amendment.

My Lords, I thank everybody who has spoken. That was a more interesting group of amendments than I expected it to be. I apologise—at the start I should have declared my interest as a board member and director of the Water Retail Company.

This has been an interesting debate. My Amendment was not really about the ownership or privatisation of water—my party has a middle way on that—but about ensuring that the Government have the tools to change the behaviour and direction of water company executives. I take the Minister’s point about the £140 billion, but a lot of that is underwritten. We need that to be invested to get the change. I recognise the issues of climate change and the problems that we face, but this amendment is carefully crafted and is about adding this extra tool to the toolbox.

Fundamentally, my worry is that when we create the new regulator, which I welcome, it needs to be set up to succeed and to deliver—when, frankly, no other regulator has to date delivered in this space. My worry is that fines alone may not be enough to change corporate behaviour. I do not want to come back in another five or 10 years, when the climate has moved on and the problems we face are worse, and see that more money has gone in but the systems have not changed. However, I beg leave to withdraw my amendment, and I thank all those who have spoken.

Amendment 484 withdrawn.

Amendment 485 not moved.