Peers to push for stronger Special Measures

The Second Reading of the Water (Special Measures) Bill in the House of Lords last week met with a mixed reception, with some peers indicating they would be looking to toughen up the starting positions as introduced by Defra’s Parliamentary under-secretary Baroness Hayman during the committee stage.

Baroness Hayman summarised the key provisions, which are centred around giving new powers to regulators to sharpen up water industry performance. She explained the Bill contains provisions both to amend primary legislation and to confer a limited number of delegated powers on regulators and the secretary of state: eight legislative and three non-legislative delegated powers, with provisions containing “a mix of powers conferred directly on regulators—for example, the power to set rules in relation to remuneration and governance — and powers that will be enacted via the affirmative resolution procedure, such as the power to amend relevant environmental regulations”.

Among the most vocal critics was the Green Party’s Baroness Jones, who said: “The Bill is deeply disappointing. It is disappointing to the point of being almost a joke, because it does not do what the majority of people would like it to do. It is about the regulation of a capitalist monopoly and the good management of a privatised cash machine that water bill payers subsidise. The money just goes straight out and we do not get a benefit. The Bill tries to regulate by using the same people and organisations that have failed for the past 30 years. How can that change? I do not see that that is possible.

"The Bill also tries to threaten the top people with jail time using the same tools that have been failing to work for 20 years. What it does not do is get back the billions of pounds that these company shareholders have pocketed for decades, or even stop those same shareholders from pocketing billions of pounds of our money in the future. Nor does it stop the water companies dumping sewage in the waterways.”

Labour’s Lord Sikka, another advocate of nationalisation, was among those who also criticised the fundamental strategy to bolster existing regulators’ powers. He said: “The Government are pinning their hopes on Ofwat, but Ofwat is not really up to the job. It has presided over the entire mess.”

The Liberal Democrats’ Earl Russell was more moderate, saying there was much to welcome in the Bill and “much that we on these Benches will support”. But he urged: "We call on Labour to be braver and bolder and to act with greater urgency. The environment cannot wait while Labour decides on the real systemic reforms that are the only solutions to this crisis…The reality is that the Bill is just a list of useful, but ultimately nothing more than stopgap, measures. The real change needed is a radical and complete systematic overhaul of the whole system.” 

He championed the Lib Dem policies of abolishing Ofwat in favour of “a clean water authority — a regulator with real powers” and turning private water firms into public benefit companies — “the quickest and least costly method of resolving this mess”.

Crossbencher the Duke of Wellington put forward a constructive position:  “In conclusion, I support this Bill but I hope that, in Committee, we can help the minister to make this an even better Bill before it goes to the other place.”

Meanwhile shadow Defra minister Lord Blencathra argued the Bill needed detail on a lot of key points, and in his view sought to make a loud noise about minimal changes. He posed specific challenges, such as how will Ofwat’s power to assess whether someone is fit and proper to be a senior water company officer interface with the Company Directors Disqualification Act 1986, which provides extensive powers to disqualify a director, and the Financial Conduct Authority's rules on what is a fit and proper person.

He also argued: “Penalising the management is targeting the wrong group; it is the shareholders who should lose out financially for company wrongdoing, however that may be defined”.

He concluded: “It seems that the Government here are dancing on the head of a pin—making a big thing about a tiny little change. I think these offences were included in the past. This clause seems to replicate existing provisions to let the Government boast that they are taking tough action against water undertakers, to make a political point.”

Baroness Hayman gave little further away in her closing responses to the debate. To those who asked why the Bill is not being used to reform Ofwat or the Environment Agency, she said: “The Bill introduces the most significant increase in enforcement powers for the water industry regulators in a decade and is designed to give them the teeth they need to take tougher action against water companies in the next investment period. However, we want to go further. Through the review, as I mentioned, we will look at the regulators in order to carefully consider their roles and responsibilities and how we can ensure that they operate as effectively as possible. So that will be part of the review.”

She also confirmed that an impact assessment for the Bill will be published, and on timing said: “Our ambition is to implement the provisions to give the regulators the powers they need to take tougher action against water companies for the next investment period, which is due to start in April next year.”