Earl Russell (LD)

My Lords, I rise briefly to respond to the amendment in the name of the noble Baroness, Lady Coffey. It was moved in Committee by the noble Lord, Lord Gascoigne. It aims to remove the size and complexity tests currently required for awarding a water infrastructure project licence. While this is a technical amendment, it would have significant implications. Under existing regulations, a water infrastructure project licence is awarded only if the project is considered large or complex enough to potentially threaten the incumbent water undertaker’s ability to deliver services. The test involves assessing factors like projected costs, risk profile, delivery complexity and the water company’s competencies, among others, to determine whether specifying the project to an extended provider would result in better value for money and service stability. The amendment’s goal is clear: it is to remove this test. I have listened to what the noble Baroness said. It is argued that the amendment would allow smaller or less complex projects potentially to be outsourced or treated as specified infrastructure projects, SIPs, and offer better economic efficiency. While we recognise that this could lead to broader applications of the project licences and potentially facilitate more third-party infrastructure projects in the water sector—we share this ambition to accelerate infrastructure delivery—we are cautious on this amendment, and I follow the line that we took in Committee. The current regulatory framework, which includes a size and complexity threshold, exists as a crucial safeguard. Ofwat’s regulations are intended, and the test ensures it, for ambitious projects, if managed by an incumbent company, not to threaten the water company’s fundamental services obligations to its customers. Given the widely acknowledged fragility of the water sector more generally and the broken infrastructure that has led to substantial water wastage, we must think carefully before rushing to add to this. Instead of risking unintended consequences through a quick legislative fix, we prefer a more robust path that could be considered by the Government co-funding models, for example, similar to those used in the nuclear sector, if crucial projects exceed what companies can realistically deliver. It is also essential to take note of the Government’s concerns raised in Committee regarding the amendment. They confirmed that they actively resisted this amendment, certainly in Committee. They have already made a commitment to review the specified infrastructure projects, SIPR, framework. Our understanding is that Defra intends to amend it to help major water companies to proceed more quickly and deliver better value for bill payers. The Government stated their concerns that removing the size complexity threshold now would pre-empt that planned review process. They emphasised the importance of ensuring that any changes are properly informed by engagement with regulators and industry to create a regime that remains targeted and proportionate to the sector’s diversity needs. The Minister assured the Committee that this essential review, which follows the publication of the Cunliffe review on water industry modernisation, will be completed in this calendar year. For those reasons, while we welcome the spirit of Amendment 58A, we believe that the responsible course of action is to allow the Government to complete their committed to and planned regulatory review, so we are unable to support this amendment.