Earl Russell (LD)

My Lords, I will speak to Amendment 72 in the name of my noble friend Lady Bakewell and signed by myself. I am grateful for the support of the noble Baroness, Lady Jones, although I note that she is not in her place. This amendment would require all funds from the fining of water companies for environmental offences to be ring-fenced for the water restoration fund and spent on freshwater recovery. We on these Benches have tabled Amendment 72 because it is unclear that fines imposed on water companies for breaches of their licences will bring any improvement to the water industry itself. At Second Reading, a number of noble Lords suggested that the Bill could be used to bolster the water restitution fund—the pot set up by the previous Administration to channel environmental fines and penalties into projects that improve the water environment. The idea of this amendment is to achieve just that. The Government have indicated that the Environment Agency will act as an enforcer to ensure that water companies adhere to the terms of their licences, monitor sewage overflows effectively, take steps to prevent this from happening in the future and make sewage reduction plans work. As has been raised many times during debates on the environment and water quality, the Environment Agency is chronically underfunded. Indeed, it has lost almost half of its funding in recent years. This lack of investment in the Environment Agency has led to what was once an effective organisation that could be relied on becoming weakened and less able to fulfil its statutory obligations effectively. The case for this regulation is strong, as the water restoration fund is without legal foundation. The fund is not receiving all the fines. This is a direct consequence of the fund’s non-statutory character. In the continual absence of a legal imperative, revenue from fines can continue ending up in alternate destinations. The Government’s answer to make the regulator effective is for it to have the power to levy fines on operators that breach their licence conditions and break the law in other ways. These fines will then go back to the Environment Agency to recompense it for its work. As this is retrospective, it begs a question about what section of its current work programme the Environment Agency will have to put to one side while it is dealing with bringing the water industry into line. There is also an issue around transparency. Customers know their bills will be going up—Ofwat agreed this in the latest review. They also know that the water companies have received fines in the past, but customers are unclear about what happens to those fines. Is it to be assumed that they have just gone towards the funding of Ofwat? In future, if the Bill is enacted, a lot more fines will be imposed. Bill-paying customers and the public in general expect to be able to trace what has happened to those fines. Amendment 72 introduces new clauses to establish a water restoration fund. This fund will receive and hold all the fines and monetary penalties that are imposed on water companies for illegal activities and breaches of their licence conditions. The fund will then use the money recovered to invest in schemes to promote fresh-water recovery. It is only by improving the quality of fresh-water resources that we can begin to see an increase in the biodiversity of species that rely on the water they live in and around being fresh, unpolluted and free of sewage. As sewage discharges reduce, the quality of our fresh water will increase, and customers’ bills will need to be increased to deal with the chronic underfunding of the past. We will ideally reach a stage where the polluter does indeed pay for the damage they have done, as set out in the Environment Act. We realise that this amendment leaves the Government with a conundrum as to how to fund the Environment Agency to carry out its work as a regulator, imposing fines and penalties on retrograde water companies. Our solution, of course, is to implement Amendment 80 and set up the clean water authority—but I do not want to rerun arguments that we have already heard. By accepting this amendment, the Government can future-proof the water restoration fund and ensure that one of the legacies of the Bill is a legally secure guarantee that sanctions for water pollution will always be used to help repair the damage caused and begin to restore the natural environment. I look forward to the Minister’s response.