I thank noble Lords for their suggested amendments and the points raised in relation to penalties and the water restoration fund.

First, I will talk to Amendment 45, tabled by the noble Duke, the Duke of Wellington. While I acknowledge the intention behind this amendment, which seeks to strengthen Ofwat’s enforcement powers, we do not believe that automatic penalties are appropriate for the obligations which Ofwat is responsible for enforcing. Ofwat’s role as the economic regulator is distinct from the role of environmental regulators and from the permitting regime for environmental activities. Offences that may be subject to automatic penalties and outlined on the face of the Bill, such as pollution control, abstraction, impounding and drought, fall within the remit of the Environment Agency and Natural Resources Wales. Extending the enforcement of these areas to Ofwat would therefore duplicate the responsibilities of the regulators and create more complexity in the current system.

Furthermore, Ofwat’s investigation and enforcement activities relate largely to breaches of core licence conditions, which are highly complex matters that are not fixed to singular assets or permits but rather systemic failings right across the company’s operations. Investigations often require significant and detailed evidence to be gathered, potentially from a number of sites, to establish whether a breach has occurred. This can take months to conclude and does not lend itself to an automatic penalty.

Ofwat has existing appropriate powers to impose financial penalties. For example, the Water Industry Act 1991 enables Ofwat to take enforcement action, including imposing financial penalties on companies if they are in breach of their statutory duties or licence conditions.

Finally, I remind the House that the independent commission will consider the roles and responsibilities of the water industry regulators and how we can ensure our regulators operate as effectively as possible. This is something that may be discussed in some depth by the commission. The Government will therefore not accept this amendment, but I hope the noble Duke feels reassured on the points about automatic penalties.

I will take Amendments 46 and 47, tabled by the noble Baroness, Lady Bakewell of Hardington Mandeville, and by the noble Duke, the Duke of Wellington, together. I very much appreciate the intention behind the amendments, but we do not believe it is necessary to define a mechanism for spending the money received through fines in law. A water restoration fund was launched in April this year, and this arrangement does not require legislation. As we have heard, the water restoration fund serves as a mechanism to direct water company fines and penalties into water environment improvement projects. We feel that defining a water restoration fund in law would instil inflexibilities regarding the scope of the fines available to include within the fund and how the money gathered from fines could be spent. We believe that retaining flexibility is important to ensure funding programmes deliver value for money.

As for the devolved elements of the noble Duke’s amendment, water is a devolved policy area, so it is for the Welsh Government to determine the extent to which a water restoration fund should apply in Wales.

What has come across in the debate, and what came across strongly in Committee, is the recognition that investment in the water industry will be absolutely critical to improving the existing poor standards. The Government are continuing to work with His Majesty’s Treasury on the continued reinvestment of water company fines and penalties in water environment improvement. We are working with the Treasury on this specific issue because we recognise its importance. As this is ongoing work and discussion, we will not be able to accept the amendments today. I thank noble Lords for the debate, and hope that they have been reassured by my comments.