I thank the Minister for introducing the second group of amendments, which relate to some very important provisions in the Bill.
Lords Amendments 1 to 14 are largely drafting amendments, but they include some important additions to the Bill. Lords amendments 1 to 3 detail the efficient use of water resources and take into account the effect on the environment of water use, with particular reference to what constitutes a bulk supply agreement with water undertakers, and the effect of such agreements on the environment. Lords amendments 1 to 14 and Lords amendment 31 give a greater role, as the Minister acknowledged, to the Environment Agency and Natural Resources Wales with regard to the effects on the environment of bulk supply agreements. We welcome the strengthening of the role of these two bodies to provide environmental expertise and to prevent bulk supply agreements from damaging the environment.
Amendments 34 to 42 relate to social and environmental safeguards more generally, and amendment 38 in particular requires that the Secretary of State and Welsh Ministers “must” have regard to social and environmental matters when compiling their statements to Ofwat, thereby strengthening the requirement in the Bill. The change from “may” to “must” have regard is a major concession by the Government. Given the importance of securing environmental safeguards at the heart of all aspects of water management, one can say only that it is surprising that the Government did not make that amendment of their own volition, rather than as a result of facing pressure from Members of both Houses on the point.
It is important to put on the record our deep disappointment that the Government have not gone further and recognised the need to make the Bill stronger and more effective by making sustainable development a primary duty for the regulator, as is the case with other regulators. We believe that resilience and the associated term that the Government use here—“the efficient use of water”—are not good enough. In the water White Paper, the Government said that they would carefully consider the case for that, and many environmental organisations are concerned that Ofwat does not have the necessary powers to prevent environmental damage and damaging water exploitation. That is particularly important in the light of greater competition, where companies will be looking to maximise efficiency however they can. Without a tough regulatory
duty, that could come at the expense of the environment. My question to the Minister about the Government’s failure to grasp the opportunity presented by the Bill to strengthen regulation in this regard is this: why have they failed to respond to this vital issue in a robust manner and safeguard our environment?
On water abstraction, the Government’s White Paper, “Water for Life”, published in 2011, set out the case for a comprehensive reform of abstraction licences, suggesting that the current licensing system was outdated and in need of urgent reform to deal with increasing pressure on water resources—an issue with which we are all now familiar. Pressures develop because of population change and climate change. The Government tabled an amendment requiring the Secretary of State to publish a report on abstraction reform within five years. That is in the context, however, of the Government’s decision to allow the introduction of greater competition in the upstream market to take effect before reform of the abstraction regime.
We, along with leading environmental experts, are concerned that without comprehensive abstraction reform, upstream competition could incentivise existing abstraction licence holders to sell their water to water companies, even when the catchment is already over-abstracted or over-licensed. In response, the Government have said that the Environment Agency is adequately placed to review and/or change abstraction licences. We do not agree with that assessment.
In his response to their lordships’ amendments, Lord De Mauley said:
“The Environment Agency will soon use its powers to revoke or vary abstraction licences without compensation where they are causing serious damage to the environment.”—[Official Report, House of Lords, 4 February 2014; Vol. 752, c. 163.]
However, following budget cuts, the Environment Agency has cut 600 staff since 2010, so surely the Minister must concede that the Environment Agency will now have less capacity effectively to discharge its duties in that respect. What will be the priority for this smaller, rather emaciated, Environment Agency—flood defence schemes or attention to abstraction reform? Given its much reduced resource, is the Minister confident that the Environment Agency can manage all its duties effectively?
Under the new market conditions created by the upstream market reforms in the Bill, more water could be abstracted from water courses than is sustainable or suitable for local ecosystems. We support the amendment for upstream market reforms to allow new water undertakers into the market, but we still think it wise for the Government to deliver progress on abstraction reform, running concurrently.
We asked the Government to bring forward reformed abstraction licences on the same day as the upstream reform measures in the Water Bill come into effect, but they have unfortunately neglected to do so. Instead, under amendments 65 and 104, the Secretary of State is required to produce a report on progress made on water abstraction reform within five years of the Bill being passed, as the Minister indicated. We do not oppose that amendment because it is better than nothing, but it is unsatisfactory overall, because unsustainable water abstraction could continue for some time after the Bill has been passed—before DEFRA effectively addresses the issue.
In conclusion, why are the Government reluctant to commit to ensuring that the abstraction reforms run concurrently with the upstream marketing reforms? I look forward to hearing the Minister’s answer on that point.