Water (Special Measures) Act 2025: Enforcement

Tim Farron Excerpts

Tuesday 20th January 2026 Westminster Hall

[Tim Farron (Westmorland and Lonsdale) (LD)]

It is as privilege to serve under your guidance, Dr Allin-Khan. I say a big thank you to my hon. Friend the Member for Harrogate and Knaresborough (Tom Gordon) for securing this debate and leading it so ably. I also make a little apology to my hon. Friend the Member for Taunton and Wellington (Gideon Amos) for clearing my throat while he was speaking. I was not doing so to make him shut up and sit down—I am not the Speaker. I genuinely had a frog in my throat.

I remember the Water (Special Measures) Act 2025 well. I genuinely enjoyed being on the Bill Committee with Members here and others. There are lots of good things in it, but overall the Liberal Democrat view was that it felt like incremental change when more radical reform was needed. All the same, it included some real positives, including provision to ban bonuses for the senior executives of failing water companies. Yet, as we have heard from multiple sources, water companies are now making a mockery of that legislation.

We have heard about some of those already, but let me run through some examples. Southern Water’s chief exec’s pay has doubled to £1.4 million via a “two-year long-term incentive plan”. Wessex Water’s chief exec and chief financial officer both got an extra £50,000 undisclosed from its parent company. As we have heard, Thames Water tried it on—21 senior managers were set to be paid a total of £2.46 million in retention payments. In perhaps the most explicit example, as set out by my hon. Friend the Member for Harrogate and Knaresborough, the chief executive of Yorkshire Water received £1.3 million from the holding company, Kelda Holdings.

Those are clear and obvious examples of water companies trying to perhaps abide by the letter of the law, if they can get away with it, while completely and utterly flouting the spirit of it. It is totally predictable. Outrageously, Ofwat have either signed off many of these cases or just shimmied and said, “None of our business. We’ve got no powers to do it”—a reminder that it is high time it was abolished and replaced with a more powerful regulator.

[Mr Carmichael]

Thames Water first paid out bonuses it said it would not recoup, and has subsequently said only that the payment of bonuses is paused. My hon. Friend knows that I am a nasty, suspicious and cynical person, but I am pretty sure the senior management, the chief executive and the chair of that company are heading for the door one way or another at some stage. I suspect that one of their last acts before they leave the office will be to press “pay” on those bonuses. Does my hon. Friend agree that if that happens, we can agree that whatever the good intentions behind the Water (Special Measures) Act, they simply have not worked, and we need to build a consensus on how to regulate these things more effectively?

[Tim Farron]

My right hon. Friend is neither nasty nor cynical; he knows Thames Water only too well. Well intentioned though the Act may be, it is clearly full of holes, and the water company chief executives and others are finding ways through them.

We contrast all of that with the fact that in 2024—the last time we had comprehensive figures—the water companies between them dumped sewage in our waterways for a duration of 3.6 million hours. My patch of Westmorland is now the third hardest-hit constituency in England for duration of sewage spills. In 2024 alone, there were over 5,000 sewage discharge incidents, amounting to more than 55,000 hours of raw sewage released into our rivers and lakes, from the Eden to the Eea and from the Kent to the Crake. In just the first 20—no, 19 and a half—days of 2026, there have already been 424 hours of sewage discharge into Westmorland’s precious waterways.

At the same time, water companies across the country are shamelessly slithering around the bonus ban. Their bonuses and dividends are being paid, for the most part, by bill payers. Indeed, water companies are wading in colossal debt, often incurred to pay those bonuses and dividends. In just 2024, £1.2 billion was paid out in dividends, mostly out of debt. In my communities in Westmorland, 11p out of every pound we pay on our water bills goes just to finance debt. Thames Water is even worse: customers are paying over 30p in the pound simply to service the company’s debts.

My message to industry leaders is this: bonuses are meant to be paid to folks who do a good job. If you are leading a company that actively pollutes our lakes, rivers and seas, I hate to be the one to break it to you, but you are not doing a good job.

[Alison Bennett (Mid Sussex) (LD)]

My hon. Friend is right to discuss the problems of sewage in our waterways, but as my hon. Friend the Member for Tunbridge Wells (Mike Martin) and I, and the hon. Member for East Grinstead and Uckfield (Mims Davies), have all experienced in recent weeks, it is not just about sewage in waterways; it is about freshwater supply. Does my hon. Friend agree that the chief executive of South East Water should also go for failing to deliver tap water to our taps?

[Tim Farron]

I imagine that that is item 1—indeed, probably items 1 to 6—on the job description. If they cannot fulfil that obligation, then go they should.

The Government brought in the Act to stop bonuses like this being paid, but they are clearly not effectively enforcing that ban in practice. Although I am critical of the Government, my main criticism is reserved for the water company bosses themselves, who have the nerve to go looking for ways to get around the bonus ban to enrich themselves, often out of bill payers’ money. I tell water industry bosses this: your customers see you, our constituents see you and your hard-working frontline employees see you. Your authority is diminished because your integrity is diminished. That proves the Liberal Democrats right: we need far more radical change in our water industry.

So we come to the White Paper released by the Government this week. Having rejected our 44 amendments to what is now the Water (Special Measures) Act 2025, the Government soon conceded that they needed to do more and launched the independent commission into the water sector, chaired by Sir Jon Cunliffe. The commission reported last July, and this week’s White Paper draws from its report. It is meant to be a step towards a more far-reaching water Bill, perhaps in the coming parliamentary Session, and there are welcome elements in the Government’s trailing of it. For example, it is good that they want to borrow the Liberal Democrats’ plan for a single unified regulator to bring financial and environmental oversight together.

I want quickly to add to the point made by my right hon. Friend the Member for Orkney and Shetland (Mr Carmichael) and others that the Drinking Water Inspectorate is doing a good job. We should not level it down to the level of the rest of the regulatory sector, but level the sector up to the inspectorate’s level.

It is good that the Government want to make regulation more proactive through the work of a chief engineer. However, the disaster in Kent and Sussex over the water supply, the financial failure of Thames Water, the failure of all water companies to prevent sewage dumping and the decision of water industry leaders to stick two fingers up to bill payers and Parliament by dodging the bonus ban all tell us that we will never solve this crisis while we maintain the current ownership model. The Liberal Democrats demand that our water companies be transitioned to being mutually owned public benefit companies, so that money raised in the water industry is reinvested in our infrastructure, and the main motivation is not the profiteering of people who are often probably not even resident in this country, but the quality of our water supply and sewage removal systems and the benefit to the customer. We are therefore bitterly disappointed that the Government have no plans to change the ownership model at all. As a result, the White Paper looks like yet another missed opportunity.

Water UK has welcomed the White Paper, which ought to really worry the Government because it is the water companies’ trade body. Of course it is delighted that the Government continue to protect the water companies from the fullest scrutiny. As my hon. Friend the Member for Eastleigh (Liz Jarvis) pointed out, we are measuring the duration, not the volume, of sewage. I said that sewage was dumped for 3.6 million hours in 2024, and that is all I can say, because the duration of spills is all we are allowed to know, but the volume of sewage going into our waterways is surely even more significant. There can be long trickle or a swift deluge, yet the Government refuse to enforce the measurement of volume, despite Liberal Democrat amendments to the Bill that would have allowed them to do that.

It feels like the Government, in failing to enforce the 2025 Act and stand up to the water companies in their new water White Paper, are content merely to make tentative steps to be better than the dismal record of their Tory predecessors—which is not a high bar. The British people need this Government to be a lot more than just a bit better than the Conservatives. They need radical reform of this failed ownership model and of inadequate regulations and enforcement. The Liberal Democrats will offer that reform.