Water and Sewage Companies: Directors’ Remuneration

Baroness McIntosh of Pickering Excerpts

Thursday 22nd February 2024 Lords Chamber

[Baroness McIntosh of Pickering (Con)]

My Lords, I start with my declaration of interests, as on the register. I am co-chair of the All-Party Parliamentary Water Group. Last year, I undertook to chair a study organised by CIWEM, the Chartered Institution of Water and Environmental Management, into bioresources strategy. For a number of years, I worked with the water regulator for Scotland, the Water Industry Commission.

At the outset, I congratulate the noble Lord, Lord Sikka, on securing this debate, and on his forensic examination of the subject. I, for one, think that privatisation has been a success. We can always improve upon it, and that is the purpose of today’s debate. It has delivered benefits, but there is always cause to look at the regulation.

I applaud the Government for the action they have taken on holding directors to account, particularly the instruction they have given to Ofwat and the work Ofwat has done on executive pay. It has been very clear that companies need to demonstrate that performance-related executive renumeration is linked to performance for customers and the environment. In June last year, Ofwat confirmed that, where companies do not so demonstrate that executive pay is linked to performance, it will stop companies recovering the cost of bonuses from customers. So, one of the points the noble Lord raised has already been addressed by both the Government and Ofwat. I look forward to hearing from my noble friend the Minister about what further action is envisaged.

Water companies have a public role to play in other areas, such as flood defences, particularly by working with farmers and others. I will spend some time outlining how that work could be done. If we are to follow through the thrust of the title of this debate and link renumeration to performance, I hope that my noble friend the Minister and his department will look at the corollary of that: giving water companies the tools to do the job. The Government promised in this place and the other place that Schedule 3 to the Flood and Water Management Act 2010 will be implemented, as it has been implemented in Wales. Will my noble friend tell us today, or in writing after the debate, what the programme is for that?

It is extremely important that we stop the automatic right to connect, whereby water companies are expected to connect pipes from three, four or five-bedroom homes to antiquated Victorian pipes that simply cannot take the amount of wastewater and sewage coming out of new-build houses. The Government must insist on mandatory SUDS—sustainable drainage systems—for all new builds, and I hope they will also commit to an ambitious programme of retrofitting sustainable drains to existing developments. Obviously, that raises the difficult question of who will maintain the SUDS, and I can well imagine that that might be the cause of the delay we are suffering in implementing Schedule 3. If my noble friend could report back on that, that would be immensely helpful.

The Government also need to attack the vexatious problem of building on inappropriate places such as flood plains. Building on flood plains is increasingly having the undesirable effect of mixing sewage with floodwater in combined sewers, which then pollutes existing developments. That has very negative public health consequences, causing people living there to leave. Will the Government also look carefully at making national highway authorities, not local authorities, responsible for water run-off from the major highways, which mixes with the combined sewers and is an additional source of flooding?

Will the Government also look favourably on rewarding farmers for storing water on flood land? According to the NFU, over half the best, most fertile farmland in Britain is flood plains. The farming community and landowners are performing a public good by preventing communities downstream flooding. However, there is great uncertainty as to how farmers can benefit from public funds. The NFU is seeking urgent clarification from Defra as to who will be eligible to apply for both the flood recovery framework and the farming recovery fund, and what level of damages can be recovered. Equally, there should be a simple recognition of the public good that farmers deliver in that regard.

I am very keen on and excited by the prospect of introducing more private sector funding from both farmers and water companies. Will my noble friend the Minister and his department look at that? That could include a whole-catchment area approach, and more Slowing the Flow schemes such as those successfully implemented in Pickering, protecting downstream communities from flooding.

I welcome the level of investment announced in the five-year business plan that Ofwat has yet to approve. It will factor in £96 billion in the next investment period, 2025-30, of which £11 billion will be allocated to reduce overflow spills. That is very welcome indeed.