Contribution
It is a pleasure to speak with you in the Chair, Dr Allin-Khan. I pay tribute to the hon. Member for Harrogate and Knaresborough (Tom Gordon) for securing this debate and giving those in positions of power in our water industry a chance to hear hard truths and take accountability. Although the state of the industry and the morally questionable behaviour of many companies is a talking point for some, I know that he has been a dogged campaigner on this for many years. In fact, I am sure I saw a photo somewhere of him wading in the River Nidd, such is his commitment to getting up close and personal with the issues.
Speaking of getting up close and personal, those of us who are members of the Environment, Food and Rural Affairs Committee have had—I hesitate to say the pleasure—the task of grilling the bosses of nine water companies as part of our inquiry into reforming the water sector. We have dived into many of the issues that we are hearing about, such as sewage overflows, compliance with environmental laws, support for vulnerable customers, the impact of flooding and outages, and, of course, the atrocious corporate culture and disconnection from the principles of delivering an essential public service that has taken hold in much of the water industry. That work has reinforced for me just how bad things have got, how far public confidence in the water industry has been damaged and how necessary robust reform has become.
What I have heard from my constituents is echoed across the country: a sense that accountability is an afterthought, that communities are left to pick up the pieces when things go wrong, and that bosses can get additional compensation regardless of how their company performs. That is precisely why the Water (Special Measures) Act is so important. It rightly strengthens the powers available to regulators and makes it clear that persistent failure—environmental, operational or corporate—must carry real consequences. It reflects a clear Labour principle that essential public services must work in the public interest and not simply for shareholder return.
Crucially, the Act marks a decisive shift away from the regulatory complacency of the past. In the year from July 2024, criminal prosecutions of water companies rose by 145%—a clear sign of meaningful progress. However, enforcement needs to be felt not just at operational level, but at the top. It is impossible to justify the need for customers to tolerate sewage in our waterways, botched responses during outages and poor communication, while senior executives still receive substantial payouts with impunity. That disconnect is corrosive. It undermines confidence not only in individual companies, but in the whole system, regulators included. That is why I believe that the true test of the Act and the newly released water White Paper will be whether they drive a genuine shift in the industry—one in which transparency and consumer trust are central to how success is measured.
Some companies, as we have heard, have sought to repackage rewards under labels such as “retention payments”. The public do not distinguish between a bonus and a retention payment. They see only failing senior execs continuing to be rewarded. The boss of South East Water is set to receive a £400k bonus just for staying in his job, despite, as we have heard, the company leaving thousands of households in Kent and Sussex without water for days and issuing some of the worst crisis communications I have ever seen. Last month, the BBC picked up on the comment I made on social media that David Hinton should do his job or go. Having heard him in front of the EFRA Committee, I absolutely stand by that.
Ofwat is currently responsible for enforcing the Act. Enforcement has often been too slow and remote from customers’ lives, and that cannot be separated from how the regulator has operated. The Committee took a long, hard look at Ofwat and found a regulator that was too cosy in dealing with water companies and too bureaucratic in dealing with customers. A regulator that is slow to act, overly procedural and reluctant to challenge company behaviour will never deliver the cultural change that the Government are determined to secure.
It is important to recognise that not all regulators have failed. During a recent Committee session with South East Water and the drinking water inspectorate, the response from the DWI was, as the Chair of the Committee has said, incredibly useful. It was clear that it is doing very effective work, despite having fewer than 60 staff. As we move towards a new single regulator, we have to preserve the DWI’s culture, expertise and robustness. I hope that, in responding to the debate, the Minister can set out what the Department will do to make sure that the few examples of where the current regulatory system is working well are preserved rather than thrown out with the bathwater.
I welcome the measures set out in the new water White Paper, such as an end to companies marking their own homework. An MOT-style regime for water assets will finally move us from crisis response to prevention. The new water ombudsman, with its legally binding powers, will be customers’ advocate when things go wrong. Our communities want action. They want to know that when rules are broken, consequences will follow. The only way to change behaviour in a broken system is to change the law, and I am confident that we will continue to see tough action from this Government where the last failed so miserably.