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Water (Special Measures) Bill [HL]

My Lords, I am delighted that Clause 10 does not appear to envisage a role for Ofwat. The amendments in this group are not really related to each other. As such, I shall confine my remarks to Amendment 86 in my name and I shall be brief.

Under the “Special administration orders” section of the Bill relating to the insolvency of water companies, Clause 10 gives the Secretary of State the power to modify a water company licence in order to recover any shortfall in costs for the Government from its consumers. New subsection (4) extends this recourse to all other companies in the sector.

I hope the Minister will tell me that I am mistaken in my interpretation of what this new subsection is designed to achieve. Does it not force good companies and their blameless customers to bail out failed companies? Can this possibly be justified? It has been a recurring theme of this debate, supported by the comments of many noble Lords, that the sector is in critical need of substantial investment to raise standards across the board and deliver the service that consumers and the general public so rightly expect. Any suggestion of collective punishment for the financial woes of others is to be resisted.

The consequence of imposing an unquantified and unquantifiable potential liability on the sector will at best push up the returns required by investors to inject capital into the water companies, inevitably increasing costs to consumers. At worst, it risks making the sector uninvestable. That is surely not the intention of new subsection (4), but it may be the consequence. My amendment would remove that risk, and I hope the Minister will support it.