Earl Russell (LD)

My Lords, in rising to speak to this amendment, I declare my interests as set out in the register. I wish to inform the Committee that my noble friend Lady Bakewell is unwell and unable to attend today, so I will be speaking to many of her amendments as well as my own. This second group of amendments concerns the rules for remuneration and governance, and Amendment 2, tabled by my noble friend Baroness Bakewell, requires Ofwat to issue such rules. This Government are seeking to strengthen the measures in this Bill by making them firm commitments with due weight in law, and not merely the vague assumptions as currently written into the Bill. We on these Benches have little faith that, without this amendment, the water companies will keep to the spirit of the law on these matters. I have a very similar “must” to “may” amendment, Amendment 24, in group 6, and I shall make general points on both in this speech. We have strong grounds for taking such a position, based on the past performance of the water companies themselves, especially in relation to awarding pay and bonuses and returns to shareholders, which have always come first. Meanwhile, investment in infrastructure and the protection of our environment from the harm these companies have caused and continue to cause have always come a very distant second, if at all. By way of a very brief introduction, we would of course prefer it if this Government had a more comprehensive and clearer set of plans in place to make more rapid progress on these matters. We on these Benches are clear that we would abolish Ofwat and replace it with a new, unified and far more powerful clean water authority, and we would make water companies public interest companies. This Government have taken a different route and are of a different opinion, believing that the shopping list of measures in this Bill can bring improvements that will hold while a full review is undertaken, before fuller and more fundamental reforms are implemented later on. We welcome the announcement of the review, but I share the concerns expressed by the noble Baroness, Lady Willis, particularly about our commitment to 30 by 30 and further delay on these matters. The trick for the Government is to make sure that they can make the rapid change required and make Ofwat fit for purpose, since that is their stated intention, and to put in place all our environmental regulations and protections in the timeframes available. That is a bit of a magic trick, and I remain to be convinced that the Government will be able to pull it off, so that is a key concern for us. We will work to support the Bill where we feel that it brings improvements, and there are many measures that we welcome and will support. We thank the Government for bringing them forward and signalling the future direction of travel and intention to take these matters very seriously. But the measures are really a list of stopgaps and quick fixes, intended to make the system work somewhat better than it has until the full review is finished and implemented. These measures come first and will need to work alongside any further actions. That is something we will need to think about in Committee—how the measures and amendments we are bringing forward and discussing today might work with potential outcomes from the review that is yet to come. For the measures in the Bill to work, even the stopgap measures, the clauses need to be strong and effective. If they are not firm or binding, or can be easily ignored or circumvented without clear consequences, they simply will not work or do what they are intended to do. This is one area of the Bill that we think can easily and should be strengthened, so that it has the intended and required effect. The wording here as it stands is simply not strong enough. We cannot allow weak and ineffective measures to stand while the country waits for the Government to consider making further legislative changes post the review, and these then to pass through Parliament, to be enacted at a much later stage, which, as we have heard, could be by 2030. I seek clarification from the Minister as to when those measures will go through that process and come into force. Since privatisation 35 years ago, we have witnessed one of the worst environmental crises in the UK, with unabated and unprecedented pollution. Just 14% of our rivers and streams are in good ecological health. In 2023, there were some 3.6 million hours-worth of untreated sewage discharges in England alone. Meanwhile, water companies have paid at least £78 billion in dividends, while failing to invest adequately in the infrastructure required. At the same time, they have piled on £64 billion net in debt, yet they were privatised debt free. The levels of executive pay and remuneration have rightly caused outrage across the country, as water bosses have got even richer as our bills have got even higher and we face more and more pollution in our rivers and streams. Clause 1 amends the Water Industry Act 1991 to insert new Section 35B, which links the remuneration of water company directors to the meeting of a single set of specified standards, which include environmental standards. This is a welcome and long overdue measure. Performance-related pay and profits must be linked to the outputs achieved, and investment and environmental standards must be the benchmarks. While the intention is clear, the determination of the proposed legislation is weak. As drafted, it simply says that the authority “may” issue such rules. That is neither clear nor well-defined enough as it stands. The Bill must ensure that Ofwat issues clear and well-defined guidance, in a defined timeframe. What is written is not enough and brings no guarantee that Ofwat will issue such guidance, with no means of holding it to account if it decides that it is simply not minded or does not see any need to issue any guidance.