Contribution
My Lords, I will speak to Motion 1A by the noble Lord, Lord Cromwell, to amend Commons Amendment 1, and my own Motion to disagree with Commons Amendment 2. Before I begin, my noble friend Lord Roborough and I remain very grateful to the Minister for her excellent engagement and spirit of openness throughout the discussions on this Bill. We are also grateful to her excellent team of officials, who have been very helpful throughout. Where we have agreed, there has been fruitful progress and where we have disagreed, I hope that we have done so constructively.
I speak first in support of the amendment from the noble Lord, Lord Cromwell, who has argued convincingly for improved financial reporting and transparency by water companies. We support his amendment. On Report, the noble Lord explained:
“This amendment is not complex or onerous, but it is vital. It requires simply that water companies report annually on their financial structuring, debt levels and any associated risks”.—[Official Report, 20/11/24; col. 236.]
He emphasised the need for this to be set out in plain language and prominently displayed.
We all know that debt levels in the water industry are simply too high. Last year, the BBC reported that water companies have a combined debt level of £60 billion; the cost of servicing that debt has grown significantly in recent years. Most notably, Thames Water faces serious financial difficulties. Although the Government have previously argued that the noble Lord’s amendment is duplicative, his Motion today makes his objective even clearer. Yes, existing reporting requirements are already in place for water companies but we know that they are not working. Stronger reporting and transparency requirements are a step in the right direction.
The Minister has accepted that debt levels are being monitored by Ofwat already. On Report, she conceded that
“more can be done to ensure that debt levels are more closely monitored in future”.—[Official Report, 20/11/24; col. 249.]
We agree with her; more can be done, and the noble Lord, Lord Cromwell, has given us that opportunity today. The official Opposition will support him in his Motion, if he chooses to test the opinion of the House.
Turning to the Motion in my name, I am seeking to restore the wording of my noble friend Lord Roborough’s amendment to the Bill following the decision in the other place to remove it. The Bill as drafted allows Ofwat to set rules on water company governance and remuneration for executives without appropriate oversight. Our Motion would ensure that the first rules are provided to the Secretary of State by Ofwat and put before Parliament through the affirmative procedure for statutory instruments.
I am grateful to the Minister for sharing the Ofwat letter with us but, if I may say so, it is a wee bit feeble. A drop-in session for Members of Parliament is not enough. Parliament, without being arrogant about it, deserves the right to greater scrutiny than that.
My noble friend Lord Roborough’s Motion strikes at the heart of what is wrong with our water industry today: the failure of our regulator to tackle problems in the sector and the inability of Ministers to intervene on the independent regulator.
In opposing our Motion, the Government have effectively argued that Ministers and Parliament do not need additional powers to hold the regulator to account. At the same time, Ministers have told us that whole regulatory framework of our water industry needs to be reviewed, and have already started work on that review. So, which is it? Either the water industry is not properly regulated, and therefore Ministers and Parliament need appropriate powers and processes to challenge and scrutinise the regulator, or the sector is regulated well, and these powers are not necessary.
The Minister said that the Government say that they do not want to interfere with the independence of Ofwat, but I was under the impression given by the long-term review that the Government intend to interfere in a mega way and possibly scrap Ofwat. The Government have recognised that the sector is not regulated as well as it needs to be, so it follows that we should put additional oversight in place.
I do not think we can wait for the Government’s review to conclude. Ofwat is not performing as it should, and this House should have a role in scrutinising its plans under this Bill. I believe our Motion delivers that much-needed scrutiny, and I intend to test the opinion of the House when my Motion is called.