The Polluter Pays: Part 3 The Future Regulation of Water Pollution

This Article is the third of a 3-part series which looks at:

Part 1 Recent fines and the law relating to water pollution

Part 2 Criminal and civil penalties for water pollution

Part 3 The future regulation of water pollution and conclusion

Plan for Water

The ‘Plan for Water’ is a Government policy paper which was published by Defra on 4th April 2023. It sets out the Government’s intention to reduce water pollution by strengthening the powers of water regulators and providing tougher enforcement measures.

Here are the four key elements of the 'Plan for Water' -

1. Enforcement capacity

The Environment Agency’s enforcement capabilities will be increased by a boost to their budget of £2.2m per year. Permit charges will also be reviewed to fund more inspections and set new targets for the EA to oversee.

2. Unlimited fines

The Government has proposed removal of the penalty cap to provide the EA with greater power to issue unlimited fines to companies that pollute waters, without the need to go to Court. It is proposed such penalties will also be expanded to include a wider range of environmental offences.

3. Water Restoration Fund

HM Treasury currently receive money collected from fines and penalties (taken out of company profits) where water pollution occurs. It is proposed that a new Water Restoration Fund will be set up to hold money received from:

i. payments to rectify pollution arising out of a breach of permit conditions;

ii. environmental fines; and

iii. penalties derived from water company profits.

The fund will be used for future projects that improve the environment.

4. Ofwat to impose financial penalties where leakage reduction targets are not met

Defra will give water companies targets to reduce leakage by 16% by 2025, 20% by 2027, 30% by 2032 and 50% by 2050.

Ofwat will also be given new powers under the Environment Act 2021 to take enforcement action against water companies that fail to link company dividend pay-outs to environmental performance.

Conclusion

The rhetoric from the EA and the trend set by the Courts in imposing record-breaking fines is evidence of the fact that water pollution cases are being dealt with more seriously. Alongside fines, the EA have called for prison sentences to be imposed in the most serious cases of water pollution, with company directors potentially at risk.

Whilst these fines are high at present, the consultation and recent policy paper illustrate the intention of Government and the Regulators to substantially increase the penalties for committing such offences, such as removing the cap on the EA’s variable monetary penalties and increasing further the fines imposed following criminal prosecution. At the same time, the resources available to regulators such as the EA will be increased to allow them to investigate more allegations.

Preventative measures should be taken in the first instance to ensure there is no breach or potential breach of the Regulations.

Company insurance policy schedules should also be reviewed carefully to ensure cover for pollution claims and pollution claims clean-up costs is provided. AXA’s Management Liability Policy (MLP) provides such cover along with cover for legal representation in criminal and regulatory investigations.