Philip Dunne – 2022 Speech on Ofwat

The speech made by Philip Dunne, the Conservative MP for Ludlow, in the House of Commons on 9 June 2022.

I beg to move,

That this House has considered the Government’s strategic priorities for Ofwat.

I wish to begin my remarks by placing on the record my thanks to the Backbench Business Committee for granting this opportunity to hold an important debate and in particular for its tolerance. The interventions of the Easter recess, the Prorogation and the recent Whitsun and jubilee mean that it is some two months since my fellow signatories, my right hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman) and my hon. Friend the Member for Devizes (Danny Kruger), and I first submitted our application for this debate. I am pleased to see them both in their places today, and I hope that they will have an opportunity to contribute.

Jesse Norman (Hereford and South Herefordshire) (Con)

I thought the Environmental Audit Committee’s report was a model of its kind. I noted in particular that it created this context of identifying a “chemical cocktail” of sewage, slurry and plastic. Does my right hon. Friend feel that the Government’s response adequately addressed that issue—both on the sewage side and on the wider phosphates issue?

Philip Dunne

My right hon. Friend tempts me to rewrite my speech from scratch. First, I thank him for his comments about our report, which was a significant body of work and the first such report of consequence for a number of years. The Government response to our 55 recommendations was one of the most positive responses to any of the reports that our Committee has prepared in the time I have served on it. We made 55 recommendations and I believe only five were rejected by the Government; the others were either accepted in whole or in part. So I think the Government have moved quite a long way in addressing these concerns, but my right hon. Friend will recognise that solving this problem is going to take decades, not days. I know that the Minister will address that in her remarks.

I was just going to thank my colleagues on the EAC for embracing and sharing my passion for the issue of improving water quality as we conducted our inquiry. We published the report in January and it made specific recommendations for the strategic policy statement on Ofwat, which provides the context for today’s debate. I will discuss that shortly.

Having been tempted by my right hon. Friend to praise the Government, or potentially not to do so, I would like to take this moment, while I am in a generous mood, to thank the Minister, the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Taunton Deane (Rebecca Pow). I am pleased to see her in her place, responding to this debate, and I thank her for her personal commitment to this vital issue of improving water quality over the past two years. In particular, I thank her for driving her officials to work with me to amend the Environment Act 2021 and put into law many of the core elements of my private Member’s Bill, which the pandemic prevented from being debated. I am very grateful to her and I would like the House to be aware, from me, that she has moved the Government a very considerable distance on this issue.

There is no doubt that over the past two years there has been a massive awakening of public interest in the state of our rivers. The introduction under this and the previous Conservative Government of event duration monitors at water treatment plants and storm overflows and the annual publication of their findings since March 2020, has brought to public attention the appalling degree of sewage routinely spilled into our waterways by all water companies involved in the treatment side of the business.

Jeremy Hunt (South West Surrey) (Con)

I congratulate my right hon. Friend for his extraordinary campaigning on this issue, which has changed the entire debate. Although I recognise that the Government are spending £3 billion on schemes to prevent sewage overspills, does he know that in my constituency, in the River Wey, we have had nine overspills in one village and 12 in Godalming, that in Bramley we have had overspills and that we have had 76 in Chiddingfold? Does he agree that this is totally unacceptable and that much more needs to be done?

Philip Dunne

I am very grateful to my right hon. Friend for introducing the next comment in my speech, which was to highlight precisely the volume of spillages that these monitors have revealed—not just in his local river, but right across the country, in all catchments. All water treatment plants are obliged now to have event duration monitors. They are obliged to have them but not all have installed them—or at least not on all the storm overflows. I believe there are about 22,000 overflows and about 20,000 have the monitors on them, so this number will continue to increase until they are all being monitored; I will come on to discuss that in a moment.

My right hon. Friend has described the particular challenge in his river system, but he will be aware that the aggregate number showed that there were 372,533 spill events, lasting 2,667,452 hours, during 2021. Every Member of this House will have access to those figures and can look them up. I commend to them The Rivers Trust website, as it has made this information very accessible. It is very easy to find where a facility is being monitored and what spillage events have occurred in the previous year.

Sir Peter Bottomley (Worthing West) (Con)

Not many in the House will have been able to attend the reception for World Oceans Day, where I congratulated Surfers Against Sewage on their 32 years of work trying to make sure that our seas are safe as well. Our seas and rivers are intimately connected.

Philip Dunne

Mr Deputy Speaker, I am rather concerned that my speech has been leaked to other Members of the House, because the Father of the House has just pre-empted my next sentence. He is absolutely right: it is appropriate that we are having this debate on the day after World Oceans Day. Of course, the devastating effect of the spillages impacts the receiving waterway, and gradually impacts the oceans as the rivers flow into the seas around us. This has a differing effect depending on the severity of the spillage, but the effect is routine, not exceptional.

Water companies were allowed to spill discharges so that they did not back up through the drainage system into people’s houses and on to our streets. The whole purpose of the licences was to allow such an opportunity in exceptional circumstances. What is so apparent from all this information is that it is routine spillages that are causing so much damage to our rivers and our oceans.

Jesse Norman

Sewage discharges, at least in the River Wye, on which my right hon. Friend’s report brilliantly focused, are only 25% of the problem. Phosphate leaching from fields is more like 65%. Does he feel that the Government have set an adequately ambitious target in saying that 80% of this phosphate should be reduced by 2037? I wonder whether we should go faster than that.

Philip Dunne

My right hon. Friend is right to refer to other polluters. If we take a look across the country as a whole, we will see that it is roughly evenly balanced between pollution from water treatment plants and storm overflows and pollution from agriculture. In the Wye, pollution is particularly prone to come from agriculture. As he knows, I am one of his parliamentary neighbours and our waterways along the whole of the Wye and the Lugg catchment are very affected by intensive poultry farming and the phosphates that it generates through spreading litter on the fields.

The Government need to join up their support mechanisms for agriculture. Now that we have left the EU, we have the opportunity through the environmental land management scheme to redirect support in a way that meets not only the objectives to ensure viable agriculture in this country, but other objectives of the same Department—the Department for Environment, Food and Rural Affairs.

I would like to see a more joined-up approach, so that we can use the mechanisms that exist, such as the sustainable farming incentive, the environmental land management scheme system and the farming rules for water to ensure that we are not only helping farmers to generate and maintain a viable business—I should declare an interest as a farmer and a recipient of the basic payment scheme at the moment—but improving our waterways. My right hon. Friend was absolutely right to raise that issue.

Sewage discharges at the scale that I have mentioned must stop. Campaigning groups up and down the country, with which I have been working, have recognised that for some time—from national organisations such as the Rivers Trust, which I have mentioned, the Angling Trust and Surfers Against Sewage, which was mentioned by my hon. Friend the Member for Worthing West (Sir Peter Bottomley), to individual catchment campaign groups such as Windrush Against Sewage Pollution, which gave powerful evidence to our Committee. All have been focused on raising awareness and urging the Government to take action to compel change in the behaviour and performance of water companies, and they are right to do so.

This is why the strategic policy statement for Ofwat is so critical: it is the primary mechanism through which the Government, via the Secretary of State for Environment, Food and Rural Affairs, are able to influence the economic regulator, Ofwat, to refocus the prioritisation of capital expenditure for the next five-year pricing period—from 2025 to 2029—of the water companies in England, which are responsible for the treatment of sewage and other waste water.

The latest strategic priority statement for Ofwat was published on 28 March, when we had originally sought to hold this debate, having previously been laid before the House in draft for the statutory 40 days. This document is therefore the critical point of influence and the device through which we in this place can persuade the Government to reprioritise Ofwat to compel water companies to act to reduce pollution of our waterways for which they are responsible.

Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)

I agree with my right hon. Friend’s point about Ofwat, but there is also another issue here relating to the planning system. We find that some of the water companies are not statutory consultees for large-scale new residential developments, and those residential developments can have a vast impact on the amount of surface water run-off at times of heavy rainfall. Moreover, new developments can impact on existing sewerage networks, which, historically, can often be very inadequate. How important would he consider that to be as a part of tackling this issue of sewage discharge into rivers?

Philip Dunne

Again, my hon. Friend has made a point that I was intending to make in my speech. In fact, it is my final point. I have something specifically to address that in a request to the Minister when we get there. He is absolutely right: development puts pressure on the water treatment works without requiring developers to contribute to improving that infrastructure.

Mr Deputy Speaker (Mr Nigel Evans)

Order. Mr Dunne, could you please face the front of the House, so that your wonderful voice can be picked up by the microphone and your words everlastingly put into Hansard?

Philip Dunne

I do apologise, Mr Deputy Speaker. I will address you, as I should do.

I was just saying how heartened I have been to be involved in a campaign over the past two years with so many people from across society and the political spectrum who are engaged in trying to restore our rivers to a healthy and natural state. Some people have called for the issue to be solved overnight; of course, in an ideal world we would all like that to be the case, but it is simply not deliverable.

We need to introduce a degree of realism into the debate, because otherwise we find people out there in the wider community believing some of the very unfortunate propaganda that has been used for party political reasons on this debate—not today, but during the course of these discussions—to try to make out that, for example, Conservatives are voting in favour of sewage pollution. That is completely inappropriate and a disgraceful slur, given the work that has been done by Conservatives, with others.

Liz Twist (Blaydon) (Lab)

It is not my intention to go into a party debate, but does the right hon. Gentleman agree that there is a real need to ensure that Ofwat accounts for its actions? Does he agree with the suggestion that some have made that there should be annual reports against the priorities for Ofwat to his Committee?

Philip Dunne

I would like to say to the hon. Lady that my remarks about people misinterpreting what is being done do not apply to her. She has been a doughty champion on this issue; she has led debates in this House and we have had good cross-party discussions. She makes an interesting point: there are already five-yearly reviews, but whether that should be done more frequently is an interesting question, and maybe the Minister might like to respond to it in her winding-up speech.

Moving on, the pressures on the drainage systems have been developing over six decades, as investment in water treatment infrastructure and drainage systems underground has not kept pace with development above ground, as my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter) has pointed out. It is also exacerbated by pollution caused by others—both farming practices, which my right hon. Friend the Member for Hereford and South Herefordshire described, and run-off from highways and other hard standing—so I accept that it is not exclusively the responsibility of water companies.

As the Secretary of State himself acknowledged before our Select Committee, the solution ultimately may require separation of surface and foul water drainage systems, and I believe the Department is currently trying to get a harder estimate of the cost of such a massive exercise. It will take enormous capital expenditure to correct the problem for good, and the work will take decades to complete, but a start needs to be made now. The SPS provides that opportunity.

I will focus my remarks now on what Ofwat should consider in its negotiations with water companies to encourage them to identify and quantify solutions. It inevitably takes time to progress solutions through the planning process before the required infrastructure construction can begin, whether through nature-based solutions or traditional mechanical and chemical systems. Much of that involves installing monitoring equipment to increase public awareness of the quality of receiving waters in real time. That was a key transparency recommendation of my private Member’s Bill and our Committee report, and it is now required to be introduced under the Environment Act. However, it merely establishes the baseline; the real spend will be incurred in the corrective measures required.

In my own constituency, Severn Trent Water has announced plans to invest £4.5 million to achieve bathing water quality status along some 15 miles of the River Teme between Knighton and Ludlow as part of their “Get River Positive” investment plan. That is obviously very welcome. The Thames Tideway tunnel will make a remarkable difference to water quality here in London. It illustrates well both the high cost and the length of time involved in delivering a transformational project to improve water quality, namely £4.9 billion and 11 years from securing planning to becoming operational respectively.

Ruth Cadbury (Brentford and Isleworth) (Lab)

I welcome the right hon. Gentleman’s mention of the Tideway tunnel. It is an enormously expensive project and collects a lot of the sewage from London, but not from any sewage treatment works above Hammersmith—by which I mean specifically Mogden sewage treatment works. Every time it rains more than a drizzle, Mogden and Thames Water discharge dilute sewage into the River Thames, and the Thames Tideway tunnel can do nothing about that.

Philip Dunne

I bow to the hon. Lady’s knowledge of her constituency and the area around it. I am informed that the tideway tunnel will take 37 million tonnes of the 39 million tonnes of sewage currently discharged annually into the Thames out of the river, so it may not affect every single treatment plant, and it is primarily coping with the north of the Thames rather than the south of the Thames, as I understand it. I will touch on how it is being paid for in a moment.

Given Ofwat’s unique opportunity to approve capital investment, it needs to focus not only on the economic impact of household bills but on the environmental impact that water companies have. With the rising cost of living, none of us wishes to see bills rising sharply, but equally, if water rates are set so low as to preclude necessary capital investment in water quality, we will simply kick the can down the road for another five years and the problem will be harder to solve and more expensive to fix.

Given that the current cost of capital is still at historically low interest rates, over a multi-decade investment cycle water companies remain well placed to fund significant capital investment. For example, the tideway tunnel, the biggest current project, is due to add only £19 per annum to household bills in London. I believe that a balance can be found as regards Ofwat’s new priority for water companies to improve treatment in addition to the necessity to secure adequate drinking supply and have low bills.

Liz Twist

I recently hosted a meeting with the Consumer Council for Water, which is looking at the introduction of a social tariff. Does the right hon. Gentleman agree that an important part of this equation for people is that everyone should be able to afford their bills but that we have to get the work done that we need?

Philip Dunne

Indeed. The Consumer Council for Water is a statutory consultee with Ofwat, so it will be able to make that case as part of the determination process once Ofwat is following its instructions under the SPS.

It was clear from our inquiry that there had been a lack of political will from successive previous Administrations to empower regulators to tackle pollution and improve water quality. This had not been included as a priority in previous strategic policy statements. Evidence suggested that Ofwat’s price review process had hitherto focused on the twin primary objectives of securing clean water supply and keeping bills down. There was virtually no emphasis on facilitating the investment necessary to ensure that the sewerage system is fit for the 21st century. Anglian Water, for example, told the Committee that in 2017 the Government’s last strategic policy statement, which sets the objectives for Ofwat, “ducked the hard choices”.

So in October last year we wrote to the Secretary of State to contribute to the consultation on the draft SPS. We were concerned that the draft that had been published for consultation by the Government was imprecise in its expectations, with no indication of what specific outcomes were expected and by when. We called for the next SPS to make it unambiguously clear to Ofwat that a step change in regulatory action and water company investment is urgently required to upgrade the sewerage network, improve the parlous state of water quality in English rivers, and restore freshwater biodiversity.

In February, we were pleased when the Government published the final SPS, which had been significantly strengthened following our recommendations. We had made five specific recommendations that the Government accepted and have now been incorporated in the SPS guidance. They are, first and foremost, the very welcome prioritisation of investment over lowering bills to ensure that the sewerage system is fit for the future; secondly, challenging water companies to meet a target of zero serious pollution incidents by 2030; thirdly, amending the previous wording on the use of storm overflows from being used in “exceptional” circumstances to

“only in cases of unusually heavy rainfall”;

fourthly, prioritising overflows that do the most harm to sensitive environments; and finally, requiring that water companies should significantly increase their use of nature-based and catchment-based solutions. That is all new, and our Committee can justly take some credit for it.

What has become clear is that water companies now know that they need to act and they must start to do so immediately. Some are already acting ahead of the measures set out in the Environment Act to produce drainage and sewage management plans. I have been sent plans from four companies—Northumbrian Water, Severn Trent Water, Thames Water and Wessex Water—and I am quite sure that others have also prepared plans setting out what they are committing to do under the current and the next water industry national environment programme as part of their plans for capital investment.

I have a couple of frank questions for the Minister about whether our water company regulators are fit for purpose. With the work that I and my Committee have done, there is no doubt that both the Environment Agency, through poor monitoring, and Ofwat, through poor enforcement, have not met the standard we expect of our regulators to protect the environment of our waterways. Self-monitoring by water companies, permitted by the Environment Agency since 2010, has allowed them to discharge sewage more or less at will. The proof is that it took water companies revealing during the course of our inquiry that they might be in breach of their permits for the Environment Agency and Ofwat to announce major investigations into potentially widespread non-compliance by water and sewerage companies at sewage treatment works. Those investigations continue, so I cannot discuss them.

Where the Environment Agency has prosecuted companies for persistent breaches, judges have started to impose more meaningful fines, but even though these fines might start to capture the attention of water company boards rather than being seen as an inconvenient cost of doing business, as previously low fines appear to have been, fines paid by water companies for breaching environmental standards go directly to the general Treasury account; they do not contribute to solving the problem. I urge the Minister, therefore, to work with Treasury colleagues to enable water company fines to be ringfenced for water quality improvement. There could be a stand-alone fund managed by DEFRA or an arm’s length body with an independent chair, or it could be left to water companies to administer based on the environmental priorities of the river or coastal system they have been found to have polluted. Instead of allowing water companies to hand back a tiny rebate to individual ratepayers, potentially hundreds of millions of pounds could be put back into environmental protection. Although we all hope that no such fines will be necessary, we must deal with the world as we find it, and we think that would be a practical step toward solving the problem.

I have another suggestion for the Government. We know that more houses must be built to meet the UK population’s needs. When development consents are granted, developers are obliged to contribute to the additional infrastructure required—roads, schools, medical facilities, or other basic infrastructure—but, as we have just heard from my hon. Friend the Member for Central Suffolk and North Ipswich, water companies are not statutory consultees and local authorities have no power to require developers to contribute to any necessary water infrastructure. Indeed, the infamous right to connect explicitly removes such costs from developers. I urge the Minister to work with me on using the opportunity presented by the Levelling-up and Regeneration Bill, which had its Second Reading last night, to put this right and to empower local authorities to require developers to contribute to meeting the cost of the infrastructure required for water and waste water connectivity of new developments, which are contributing to the pressure.

I commend the motion to the House.