Water and Sewage Companies: Directors’ Remuneration

Baroness Bakewell of Hardington Mandeville Excerpts

Thursday 22nd February 2024 Lords Chamber

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I congratulate the noble Lord, Lord Sikka, on his excellent introduction to this extremely important subject. England’s water system is at breaking point. Water companies are responsible for one of the worst environmental crises in the UK: the illegal dumping of sewage into rivers, lakes and coastlines through storm overflows.

The scale of the sewage crisis afflicting our rivers and coastal waters is staggering to comprehend. In 2021, the water companies were responsible for 368,966 spills, during which raw sewage and untreated wastewater were pumped into aquatic environments for a total of 2,650,290 hours. The noble Viscount, Lord Stansgate, has given some excellent statistics on this.

England is home to 85% of the earth’s chalk streams—rare and precious habitats that the Government and water companies should recognise that they have a particular duty to protect, instead of allowing them to be devastated by raw sewage overflows. If my colleague Lord Chidgey were still with us, he would have something to say about this.

The Conservatives have done nothing to stop water companies polluting our rivers with sewage. They have consistently voted against tougher action to stop illegal sewage overflows, while the water regulator, Ofwat, has said that only six of the 11 sewerage companies met their sewage overflow targets. This is unacceptable.

Of the 827 illegal dumps of sewage in 2021 and 2022, only 16 resulted in prosecution. This means that this Government have effectively decriminalised the dumping of sewage in our rivers, lakes and coastal waterways. It is sadly now true that it is cheaper for water companies to pay the fine for this illegal activity than for them to invest in the infrastructure to future-proof and clean up our waterways. The cost of fines is written into their business plans.

Since privatisation, £65.9 billion has been paid out in water company dividends. There was a 20% increase in executive pay last year, and Britain’s privatised water and sewerage companies paid £1.4 billion in dividends in 2022, up from £540 million the previous year. This was despite rising household bills and a wave of public outcry over sewage leaks.

This has gone on long enough. Water companies must be brought to account for their actions. The Government must ensure that water companies invest their profits now, not by 2050. That is too far away. We need to ensure that the water in our lakes, rivers and seas is not filled with sewage. Discharging raw sewage is a risk to environmental health, public health, animal welfare and our economy. It should not continue.

British people are fed up with their beaches being closed due to sewage while water company executives are making millions and holidaying abroad. The Liberal Democrats continue to call for the Government to instigate a sewage tax. This would be a 16% tax on pre-tax profits, providing a £340 million fund to clear up the rivers that have been damaged and to fix the sewerage system. This would be in addition to the current 19% rate of corporation tax.

With only 14% of English rivers in a good ecological state, reforming water and sewerage companies is essential. We on these Benches support a public benefit company model for water companies, so that particular economic and environmental policy objectives must be considered explicitly in the running of the companies. While sewage is pumped into our waterways and our water infrastructure is leaky and outdated, water firms are handing out large profits to overseas investors and bonuses to their CEOs. The British taxpayer deserves better.

It is time for water company reform. Ofwat and the water companies should set minimum criteria for the value, scope and eligibility criteria for social tariff schemes across the country. Water companies should put a share of their own profits into social tariffs. They should be encouraged to work more collaboratively to raise awareness of priority services, as well as being more proactive in identifying customers in need of temporary support.

This is an emotive subject, but one that has to be tackled. I look forward to the Minister’s positive response.