Sewage Disposal in Rivers and Coastal Waters

Lord Sikka Excerpts

Thursday 7th July 2022 Lords Chamber

[Lord Sikka (Lab)]

My Lords, I thank the noble Lord, Lord Oates, for this vital debate. It is a pleasure to follow so many other knowledgeable speakers.

The water industry has been a serial offender for far too long. On 1 March 2018, the then Environment Secretary, Michael Gove, said that

“water companies … have not been acting … in the public interest”

and

“have been playing the system for the benefit of wealthy managers and owners, at the expense of consumers and the environment.”

He added that the water companies have,

“shielded themselves from scrutiny, hidden behind complex financial structures, avoided paying taxes, have rewarded the already well-off, kept charges higher than they needed to be and allowed leaks, pollution and other failures to persist for far too long.”

The privatisation of water has been a disaster. It is now a monopoly owned mostly by organisations from overseas, including the super-rich, banks, hedge funds, private equity, foreign Governments and businesses based in tax havens who have little or no experience of the daily hazards inflicted by the industry upon the people in this country.

The water companies have collected over £60 billion in dividends since 1989. In addition, untold billions have been sucked out through intra-group transactions and interest payments on loans from affiliates. Hopefully, the Minister will be able to tell us exactly how much has been taken out by the water companies. As an accountant, I struggle to understand their accounts—I hope the Minister has advisers who can help him to unravel these things. If the industry was in public ownership, all the money that has been extracted could have been used to build better infrastructure, but the Government’s fetish about privatisation has landed us with all these problems.

Since 1989, water bills have increased by 40% above the rate of inflation. People have to pay them because there is no alternative. You cannot switch to an alternative supplier of these services, and the regulators simply wring their hands—they are very ineffective. As Michael Gove reminded us, since privatisation there has been no investment in new nationally significant supply infrastructure, such as major reservoirs. That is how bad privatisation has been. London and big cities now face a threat to their drinking water supply, as has been documented in the newspapers this week. Around 3 billion litres are lost every day due to leaks, which is further evidence that the companies are out of control and do not take their public duties very seriously.

Last year, water companies discharged raw sewage into English rivers 372,533 times, while the water companies covering England released untreated sewage for a combined total of 2.7 million hours. The Government’s storm overflows discharge reduction plan will seek to eliminate 40% of raw sewage overflows into rivers by 2040—that is not good enough. It is complacent and will wilfully inflict health hazards on people. In January 2022, the House of Commons Environmental Audit Committee Report said that,

“A ‘chemical cocktail’ of sewage, agricultural waste, and plastic is polluting the waters of many of the country’s rivers. Water companies appear to be dumping untreated or partially treated sewage in rivers on a regular basis, often breaching the terms of permits that on paper only allow them to do this in exceptional circumstances.”


Water companies, regulators and Ministers have defended the practice of allowing leaks into rivers and seas by claiming that it is better to allow the sewage to leak into waterways because otherwise it would back up into streets and homes. This is an indictment of the lack of investment and the way in which the Government and regulators indulge the water companies. Water companies have pocketed billions of pounds from sewage charges levied on customers but have not delivered the required service. This is organised fraud on a gigantic scale for which no corporate executive is called to account. The discharges kill fish and threaten biodiversity and marine life. The pollution may eventually find its way into the food chain—polio has already returned to the UK.

There are widespread illegal sewage discharges from treatment plants. On 12 May 2022, the Environment Agency said that

“Our initial analysis of the information collected to date has confirmed that there may have been widespread and serious non-compliance with the relevant regulations.”


Still, no executive is prosecuted, and there is no clawback of any executive bonus or pay. The Government continue to be complacent. Water companies face no action. There is a lack of any pressure points. Even when companies admit that they have not complied with the rules and regulations, they are still permitted to extract monopoly rents because people have nowhere else to go—they have to pay. We have no alternative infrastructure anywhere. The fines levied are puny and, so far, they have failed to bring about a desirable positive change. In a monopoly, they are simply passed on to the customers and that is why we end up paying higher and higher charges.

Profits form a key part of the executive key performance indicators in companies, and executive pay is linked to these indicators, which include profits. It is very easy for water companies to increase their profits by letting the leaks continue, which means they spend less on repair and maintenance, or by dumping raw sewage into rivers—that increases profits too. The Government continue to tell us that water companies are making huge profits, but they are doing so because they are not carrying out their obligations. Looking at profits alone does not tell us anything about the quality of their performance.

Last year, nine water industry CEOs received more than £15 million in pay and bonuses—bonuses for what? Polluting rivers? In the past, Ministers have said that shareholders can constrain these things. Well, their shareholders are abroad; are they really bothered about what goes on in this country? Many are just subsidiaries and affiliates of giant investment funds and other corporations; they have no incentive whatever to reduce these bonuses. So, the executives get fat cat pay while the public get health hazards, leaks and higher bills.

The Government can create pressure points to force companies to deliver, and I invite the Minister to consider at least the following five modest reforms. First, the directors of companies engaging in unlawful practices need to be made personally liable for the consequences. The spectre of personal liability should check predatory practices. At the very least, their bonuses and salaries should be clawed back because they have obtained them in fraudulent way.

Secondly, no dividends should be paid until the regulator certifies that water companies have met their statutory and regulatory duties.

Thirdly, customers should have direct representation on water company boards and a statutory right to vote on executive pay. With such arrangements, it is extremely unlikely that customers facing escalating charges, leaking pipes and polluted rivers would vote for a bonus or even a salary increase for any executive. Governments often talk about democracy in society. This is democratising these monopolies. Let them face the democracy of the customers.

Fourthly, the regulator itself should have direct representation of customers on its board. I am not talking about some toothless customer panels, but people actually sitting on the board and questioning the executives of the regulatory bodies about their failure to act.

Fifthly, the general public should be permitted to take legal action against negligent companies. After all, these companies are wilfully neglecting their public duty. Therefore, the public should have a right to take legal action against these companies and the regulators.

These are just some proposals for starters. As we are getting a new occupant at No. 10, maybe they will resonate with the new leader of the Conservative Party.

--- Later in debate ---

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Benyon) (Con)]

My Lords, I refer noble Lords to my entry in the register. I congratulate the noble Lord, Lord Oates, on securing this debate and thank noble Lords for their contributions.

The noble Lord, Lord Oates, was absolutely right to mention the late Lord Chidgey. I remember having a very good debate about chalk streams with him in this Chamber just before he died. He saw my passion for them and raised me his. He was a great fighter for river health in this place.

My wife refers to my local river as my mid-life crisis; I suppose it is better than a fast car or soaring political ambition. I share noble Lords’ indignation and frustration that our rivers are not of the quality they should be and not in the state they should be in. That 14% figure is shaming. It is a high bar to reach. One wonders how many rivers there were in the past. One fact we must always remember is that we have been putting sewage, in one form or another, into our rivers for decades—centuries, even—but it has gotten out of hand and must stop.

The noble Baroness, Lady Ludford, talked about her eponymous sewer: “Sarah’s sewer”. In my former life as the Water Minister, I remember being shown “Prescott’s sluice” in the East End of London. I am not sure that I want to have a sluice named after me; the noble Lord, Lord Prescott, who was here earlier, may be able to tell me whether it was named after him. I am trying to think of alliteration; perhaps my sewer should have been called “Dick’s drain” because, when I arrived as Water Minister in 2010, everyone was opposed to it. The chairman of Ofwat took me on to Westminster Bridge, pointed to the river and said, “It won’t be a different colour if you spend billions on a new sewer. It will look just the same but will have cost water customers an enormous amount of money”. It was opposed right across politics. The noble Baroness is right that her former colleague, Simon Hughes—the former MP for Bermondsey—fiercely opposed it. The noble Lord, Lord Berkeley, and many others used to come and see me about it. Indeed, like a student going in front of a don, I had to go right to the top of the Government to tell Oliver Letwin why his fears were not to be realised. I am glad that I now see it under construction and that this iconic river, in one of the great cities of the world, will be cleaner as a result.

A healthy water environment is fundamental to a thriving economy, to abundant biodiversity and of course to public enjoyment of our beautiful rivers, lakes and bathing waters. The noble Lord, Lord Stoneham, made the very good point that this is not subject to the four-year or five-year electoral horizons that most politicians look to; we want to see generational and multidecadal change. The Government’s 25-year environmental plan includes a commitment to restore three-quarters of our water bodies to close to their natural state, but we know that we need to do more to meet this rightly high bar. That is why we are going further and faster than any Government in protecting and enhancing the health of our rivers and seas. This has included ground-breaking action to massively reduce the harm caused by storm overflows.

The noble Lord mentioned the importance of civic society. Politicians can hold Governments to account but the public can too. A huge breadth of civil society groups stand up for their rivers, and I remember from when we ran a campaign called Love your River how important it is to give people their sense of place.

Like the noble Baroness, Lady Jones, I can admire the noble Lord, Lord Sikka, but I can disagree with his points. He talked about privatised ownership being some sort of fetish. Actually, I would say that £150 billion of investment in our water sector would not have been reached by any degree if it had still been in public ownership. The owners of those companies would have had to get in the queue behind the health service, pensions, the police, hospitals and so on. Renationalisation would require a future Government to buy out the pension funds that pay perhaps his and perhaps my pension, and perhaps the pensions of many people on low incomes. The cost of buying Thames Water was estimated a year or two ago—my figures might be out of date—at £12 billion. To buy out the entire water sector would be a terrible shame. It would be the wrong thing for investment.

[Lord Sikka (Lab)]

The numbers that the Minister quotes have little or no substance. If water companies had to meet their statutory obligations, the chances are that their income streams would actually be negative. They would be begging the Government to buy them out; we would not have to pay them anything.

[Lord Benyon (Con)]

I do not agree with that. I also believe it is good that international sovereign wealth funds want to invest in our regulated utility sector, but it has to be a regulated sector that cracks the whip when it needs to—that is, when those companies do not do what they are required to.

The noble Lord, Lord Oates, asked the House to take note of the impacts of current sewage disposal rates in UK rivers, and further noted the responsibility of water companies to alleviate these impacts. There are two main types of sewage discharges into the water environment by water companies: treated and untreated. Discharges of treated wastewater into our waterways are one of the most significant pressures on the water environment. Treated sewage is the biggest source of phosphorus within the water environment, and excess phosphorus is the most common reason a water body fails to meet good status. Water companies are required to reduce phosphorus loads into the water environment from treated sewage by 50% by 2027. We have recently consulted on a proposal for an Environment Act target to deliver even more progress and deliver an 80% reduction by 2037.

However, it is the untreated discharges that are understandably generating the most public interest. Discharges from storm overflows not only impact the ecology of the receiving water body but can also impact public health where water bodies are used for recreational activities. We have been clear that the current use of overflows is completely unacceptable. They were only ever meant to be an emergency measure but now they are seemingly part of doing business; anecdotally, it seems that only centimetres of rain can trigger them, and that is simply not good enough. We have made it crystal clear to water companies that they must massively reduce sewage discharges from storm overflows as a priority. If we do not see the change we expect, we will not hesitate to take further action.