‘Ring-fenced’ money from water company fines will return to DEFRA instead of Treasury under new plans

Money from fines imposed on water companies will be reinvested into schemes that benefit the environment, the government has announced, with campaigners warning that for this to have any meaning, the Environment Agency (EA) and Ofwat need to be “properly resourced to enforce the existing regulations”.

Since 2015 the EA has concluded 56 prosecutions against water and sewerage companies, securing fines of over £141 million. At present, the money from fines imposed by Ofwat and from EA prosecutions are returned directly to the Treasury. 

Under the new plans, “ring-fenced” funds will go to DEFRA and will reportedly be invested directly back into environmental and water quality improvement projects. According to the government, this could include creating wetlands, revegetating river banks and reconnecting meanders to the main channel of rivers. 

The government has said that further details on the plans will follow next year.

Water minister Rebecca Pow said: “It is right that water companies are made to pay when they break the rules, but it is also right that this money is then channelled back into improving water quality.”

Chancellor of the exchequer, Jeremy Hunt added: “These fines hold rule-breaking companies to account and mean record investment in our waterways.

“It comes on top of our requirement for water companies to invest in the natural environment - raising the largest ever environmental infrastructure investment of £56 billion over 25 years.”

Hunt is referring to plans within the government’s Storm Overflows Discharge Reduction Plan, which will require water companies to deliver a £56 billion capital investment over 25 years to tackle storm sewage discharges.

This plan is currently facing legal challenges from two separate organisations, with WildFish claiming that the plan is “unlawfully encouraging law breaking for years to come” and the Good Law Project considering the plan to be “insufficient” for meeting the secretary of state’s legal obligations.

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Environmental Audit Committee chairman, Rt Hon Philip Dunne welcomed today’s announcement and said it will “go a long way to developing nature based solutions”.

“For too long water companies and others have contributed to shocking levels of water pollution, but have largely got away with it. Refunnelling record levels of fines to improve nature - the ultimate victim of poor water quality - sends a clear signal that the polluter should pay to clean up the mess”, he added. 

Nick Measham, chief executive of environmental charity Wildfish also told ENDS that they welcomed the announcement but added that for it to have any meaning, the EA and Ofwat need to be “properly resourced to enforce the existing regulation which is flouted on a daily basis by farmers and water companies”.

He said the money should first be used to give the regulators the “resources to hold the polluters to account meaningfully” and also channelled into “fixing the problems”. 

“Too often the money flows to local NGOs for pet projects, not to rectify the underlying pollution problem. The practice of polluters treating fines, if they are levied, as a cost of doing business has to stop too,” he added.