On 9 July 2021, Southern Water entered 51 guilty pleas to charges of making unpermitted discharges or untreated sewage along the southern coast of England. The charges covered 6,971 unpermitted discharges, some 61,704 hours or a total of 7 years worth of discharges of millions of gallons over the five years from 2010 to 2015.
Passing sentence on the company, The Honourable Mr Justice Johnson imposed a fine of £90 million, to be paid (a welcome and important point) from the company’s operating profits rather than passed on to customers to be paid through their bills. The judge said the company had shown –
“a shocking and wholesale disregard for the environment, for the precious and delicate ecosystems along the North Kent and Solent coastlines, to human health and to the fisheries and other legitimate businesses that depend on the vitality of the coastal waters.”
The judge added that it was –
“inherently unlikely this was due to a small number of rogue employees…“It is far more likely to be due to deliberate disregard for the law from the top down.”
Record of non compliance
This record fine built on a lengthy history of serious criminal and civil penalties for the company. The water regulator OFWAT had imposed a penalty of £126 million in 2019 for its “shocking failures” at sewage treatment sites, and its “deliberate misreporting”, in civil enforcement proceedings coordinated with the lengthy and detailed criminal investigation by the Environment Agency.
Fine: example to others, or a symptom on wholesale non-compliance?
To give credit where it is due, this criminal investigation was the longest ever undertaken by the Environment Agency, the forensic detail of Southern Water’s actions must have been very carefully presented, and this approach to the investigation has had a major impact. Sometimes such landmark cases can have an exemplary effect on other companies, and achieve more in terms of improving compliance across the field, rendering repeated prosecutions unnecessary. Hopefully this is such a case.
It has to be said, though, that levels of compliance in this area are extremely low, and that the water industry’s lack of urgency in addressing this is striking, given the 32 years since privatisation. As we have noted before, there were 400,000 instances of untreated sewage being discharged into England’s rivers in 2020, and it is not a coincidence that in 2020, 0% of those rivers achieved chemical standards, and 84% did not achieve ecological standards first set in the Water Framework Directive 2000, reported by the BBC’s Roger Harrabin as “total failure” in English river quality.
Shiny new legislation, or enforce the laws already in place?
We have reported in other articles on the steps taken by the Rt. Hon. Philip Dunne MP, Chair of the House of Commons Environmental Audit Committee to introduce a Sewage (Inland Waters) Bill, declaring that –
“Water companies are licensed to spill. This is ruining habitats and risks endangering health. It has got to stop.”
The government has indicated that new measures to address this will be introduced into the Environment Bill. Once again, shiny new legislation is seen as the answer to a problem, rather than supplying the political will and the financial and human resources to support the regulators to enforce the laws we already have.
The Environment Bill itself is, however, the obvious place to ensure that overall enforcement of environmental laws is strengthened not weakened, that the Office for Environmental Protection is adequately independent not just appointed, funded and directed by the Secretary of State, that environmental principles are clearly enacted in law and not hollowed out and subject to unjustifiable exceptions, that environmental standards are clear and objective not subject to Ministerial reinterpretation or discarding.
It is precisely because the kind of egregious and deliberate law breaking shown by Southern Water demands a robust and effective enforcement response that, in common with the House of Commons EFRA and EAC Committees and many other commentators we have been urging major improvements to the governance provisions of the Environment Bill since 2019.
Actually, water companies are not “licensed to spill” as Philip Dunne MP put it, in other than circumstances of ‘exceptional rainfall’. As was seen very clearly in the BBC Panorama programme ‘The River Pollution Scandal’ on 17 April 2021 - https://www.bbc.co.uk/programmes/m000vk71 - a number of them are nevertheless ignoring this very limited exception to their discharge permits, and discharging untreated sewage sometimes for weeks and months at a time. It seems to be a successful application of the government’s “levelling up” agenda, as Northern rivers are equally bad as Southern ones.
Drastic cuts in Environment Agency enforcement funding
It is also surely no coincidence that the UK government has cut Environment Agency funding for enforcement by half, from £157.3 million in 2010 to £75.6 million today. In January 2021 The Times reported that the Chair of the Environment Agency Emma Howard Boyd had written to the Secretary of State for Environment Food and Rural Affairs George Eustice in August 2020 to point out that –
“All this is allowing more people and businesses to break the environmental rules” … “serious waste criminals are taking advantage: the Environment Agency is now finding illegal waste sites as fast it can close down existing ones”.
The letter also pointed out that the Agency –
“now has only the resources to attend the most serious environmental incidents”.
And to make the link between these cuts and compliance with the laws completely clear, Emma Howard Boyd is reported to have added that -
“Water company performance, which had been improving for most of the last decade, has now gone into reverse, with more pollution incidents last year than in previous years, for which we and the government are being increasingly heavily criticised”.
Responsibilities of owners and shareholders
The ownership of Southern Water is shared by a consortium of investors representing infrastructure investment funds, pension funds and private equity. The managers and shareholders of these firms, and others like them holding investments and ownership stakes in the UK’s water industry, may wish to consider whether their own investment objectives are met by allowing the companies in which they invest to be run in a way which the judge in this case described as showing …”a deliberate disregard for the law from the top down”. Emerging trends in legislation could make that a costly option for investors. Further instances of corporate behaviour like Southern Water will only add to demands that the law be brought home to individual directors.