“(1) The Secretary of State must make provision for any monetary penalties imposed on a water company to result in equivalent reductions to the amounts charged to customers by the relevant water company.

(2) In fulfilling its duties under subsection (1), the Secretary of State must arrange, annually—

(a) for the total amount of monetary penalties imposed on a water company in the previous year to be calculated;

(b) for that total to be divided by the number of customers of the water company;

(c) for each customer’s next bill from the water company to be reduced by that figure.

(3) Any reduction applied under this section must be indicated on a customer’s statement of account.

(4) In this section, ‘water company’ has the meaning given by section 6(5).”—

This new clause would provide for any fines imposed on water companies to result in equivalent reductions to customers’ bills.

Brought up, read the First time, and Question proposed (this day), That the clause be read a Second time.

Question again proposed.

I thank the hon. Member for Epping Forest for tabling new clause 3, which would require a water company to reduce customer bills by an equivalent amount to the total monetary penalties paid in the previous year by that company. I will start by clarifying that we expect the cost of the penalties to be borne by the companies, not by the customers. However, I would also like to reassure the hon. Member that there are existing procedures in place to ensure that customers are reimbursed for a water company’s poor performance.

As the independent economic regulator of the water industry, Ofwat is best placed to ensure that customers are reimbursed appropriately if water companies perform poorly. Ofwat already sets specific performance targets for water companies in the five-yearly price review. Those performance commitments hold water companies to account for the outcomes that customers pay for. Where they are not met, companies must reimburse customers through lower water bills in the next financial year.

Those performance targets take a holistic view of water company performance and consider wider factors beyond companies receiving penalties. Performance targets include customer-facing commitments, such as water supply interruptions; environmental commitments, such as pollution incidents, storm overflows and bathing water quality; and commitments related to asset health, such as repairs to burst mains. As a result of underperformance in the last financial year, Ofwat is currently requiring 13 companies to return £157 million to customers.

The hon. Member’s new clause is therefore not appropriate for this Bill, given that it would overlap with existing procedures. However, there is simply not enough improvement in performance across the water industry. That is why we have launched the independent commission, which will look at issues, including performance, and make recommendations on how to transform the water sector.

I hope that the hon. Member for Epping Forest is reassured about how customers will be reimbursed for poor performance, and about the steps that we are taking to improve performance. On that basis, I ask him to withdraw his new clause.

I thank the Minister for her comments. I am afraid that I am not fully reassured, and we would like to see provision in the Bill for any fines imposed on water companies to have a concomitant effect—a direct effect—on customer bills. This well-intended measure has been tabled to create a link between the two, so although I hear the Minister’s comments, we would still like to press new clause 3 to a vote.

Question put, That the clause be read a Second time.

The Committee divided: Ayes 5, Noes 12.

Question accordingly negatived.