Labour calls for water companies to lose licence for environmental violations

The government has been accused of “tinkering at the edges” of the issues facing the water industry, by opposition MPs.

Shadow environment minister Emma Hardy made the accusation while speaking at a Parliamentary debate on proposed amendments to the special administration regime (SAR) for water companies facing insolvency or failing to meet statutory duties.

Changes, which have now been passed, include provisions that change how a water company can be structured in the case of administration to make the regulated part of the business more attractive to a potential buyer.

While she supported the proposed amendments, Hardy said the sector was facing more fundamental challenges than such policy changes cover, and that government should take a firmer approach.

“Tinkering at the edges in this way suggests the government is failing to grasp the scale of the issues facing water provisions and the state of the crisis at which we have arrived,” she said.

She said the proposed legislative changes reflect “the desperate and perilous situation the sector has reached” with many water companies “struggling to function as effective businesses”.

An SAR can be triggered if a company is failing to fulfil its statutory duties.

Hardy called for clarity over what the SAR would be granted for, and proposed it should include a violation of environmental law.

She pointed to the 2017 enforcement against Southern Water and questioned: “What would it possibly take for a licence to be removed if multiple and repeated breaches of environmental law and deception of the regulator by providing falsified performance is not enough? What fear can those in the sector really have?”

Minister for water Robbie Moore said the powers of both Ofwat and Environment Agency would remain and pointed to the power of enforcement held by each, which would not change under a special administration regime.

Both parts of the proposed amendments were passed by the Fourth Delegated Legislation Committee to update the previous policy, which was largely based on insolvency rules from 1986.

It is the first time the liquidation process has been updated since privatisation in 1989 by the Department of environment, food and rural affairs (Defra).

Under the new rules, administrators can impose a restructuring for the struggling water to continue operating if they think it is otherwise stable enough to meet its obligations and continue operating.

This would allow a company to restructure its debts within the SAR process and exit the special administration as a going concern.