Water Industry (Financial Assistance) Bill
(12 years, 3 months ago)
Commons ChamberRead Hansard Text Read Debate Ministerial Extracts
The Secretary of State for Environment, Food and Rural Affairs (Mrs Caroline Spelman)
I beg to move, That the Bill be now read a Second time.
In December, the Government published “Water for Life”. The White Paper set out many of the challenges facing the water sector. These challenges are not just about how much water we have available now and in the future; they range from the environmental impact of water management to the means by which we deal with waste water and, not least, the issue of affordability.
There have been dramatic improvements in the health of many of our rivers, but more needs to be done. The House will recall that the Government have invested £92 million to improve our rivers and waterways. Despite that, however, over-abstraction and pollution of our rivers, lakes and streams means that only a quarter of our water bodies are fully functioning ecosystems. The water and sewerage sectors have, though, made significant progress. More than £90 billion has been invested in the 22 years since privatisation to reduce the water industry’s impact on the natural environment and to continue to deliver high-quality drinking water while keeping water bills generally affordable.
It is also worth noting that last year, despite the driest spring on record, there were no hosepipe bans, which was testament to the 36% reduction in leakage achieved by the industry since privatisation.
Mr Tobias Ellwood (Bournemouth East) (Con)
I do not want my right hon. Friend to digress too far from her speech. She mentioned hosepipe bans last year, but there are likely to be bans this summer owing to the lack of rainfall now. Has any thought been given to the long term and to providing a national grid for water so that we can share the water supply up and down the country?
Mrs Spelman
Thought has been given to that. We had a drought summit last week, and I have said publicly that hosepipe bans are more likely this year because we have had our second dry winter. The important point, however, is local connectivity. That is the key. Water companies explained to us at the summit how they are connecting to their neighbours. It is important for the House to know that transporting water over a significant distance is prohibitively expensive. The idea of building a pipeline to transport water from the north-west, which pleasantly has it in abundance, to the south-east, which traditionally does not, might sound attractive, but it is prohibitively expensive. However, local connectivity produces, in essence, a virtual national grid.
Today, our reward for all that investment is world-class drinking water and a cleaner environment. Water supplies are also safer, better and more secure than ever before. Water and sewerage services also remain relatively inexpensive compared with other household bills, and are good value for money. The average bill stands at just over £1 a day. At the same time, water companies are investing £22 billion over the current five-year price round in mains replacement, flood resilience, river improvements and better water quality in 55 wetlands and bathing areas.
However, a minority of customers struggle to pay their water charges, either because they are on low incomes or because they live in areas where bills are higher than average. In fact, 23% of household customers across England and Wales spend more than 3% of their disposable income on water and sewerage charges. We now want to start tackling that problem. The Water Industry (Financial Assistance) Bill will allow us to provide support to keep bills down in the south-west and to reduce the risk of future infrastructure developments, such as the Thames tunnel super-sewer, raising bills disproportionately. Clause 1 creates a general power to enable the Government to make a payment to water companies for the purpose of reducing charges payable by customers. The only circumstances under which we currently envisage using that general power is in support of South West Water customers. We believe that the circumstances they face are exceptional.
Anna Walker’s review of charging for household water and sewerage services, which was commissioned under the previous Government, identified why households in the south-west face the highest water bills in the country. At privatisation, South West Water had the lowest regulatory asset base per property. Since then, the company has had to invest around £2 billion to raise the standard of its infrastructure to the same level as the rest of the country. With comparatively fewer customers, the cost of new investment per property has been higher there than anywhere else. The benefits of that investment include improved water quality, reduced leakage, cleaner beaches and better bathing water quality, as enjoyed by the south-west’s many visitors. However, the costs have been borne solely by South West Water customers, whose bills have risen as a result. I would like to pay tribute today to hon. Members past and present in all parts of the House who have devoted years to raising the profile of this historic unfairness on behalf of their constituents.
Steve McCabe (Birmingham, Selly Oak) (Lab)
Does the Secretary of State accept that average water bills across the country are set to rise by almost 6% in April and that this Bill will do nothing to help the vast majority of people, who have seen their incomes cut or frozen? Why should water companies not have to tighten their belts like everybody else?
Mrs Spelman
I can give the hon. Gentleman the assurance that water companies are indeed tightening their belts like everybody else. The rise that he described is the one set out by the economic regulator Ofwat, as an indicator of the overall level of inflation, which has not a little to do with the economic mess that we inherited from the previous Administration. However, the important point for the hon. Gentleman is this. He and I share the use of Severn Trent Water’s services, and companies such as ours will be able to introduce a company social tariff, which would assist the most vulnerable in the water area where we reside. Indeed, it would be open to every company to do so, and we have published a consultation about the company social tariff.
Andrew George (St Ives) (LD)
Let me congratulate my right hon. Friend on bringing forward this measure and remind her of the cross-party nature of the origins of the Bill and the fact that we have been working towards it across all parties for many years, including under the previous Administration, and not only following the Anna Walker review, as there has clearly been every intention of addressing what has been a clear historic unfairness for South West Water customers.
Mrs Spelman
My hon. Friend is quite right. Indeed, I look across the Chamber to the right hon. Member for Exeter (Mr Bradshaw) as a demonstration of the cross-party consensus that existed, which I have acknowledged. The diligence with which south-west constituency Members raised awareness of this historic unfairness is the reason our Government have sought, finally, to do something about it and stop turning a deaf ear to families struggling with that historic legacy, which is what had happened for too long.
There are limits to the help that we can give, because of the vast economic deficit that we inherited. However, we believe that the Government should help to correct the historic inequity that has left water bills in the south-west so markedly out of kilter with those elsewhere in the country. We have therefore committed to funding South West Water to enable it to cut bills by £50 a year for all household customers. The payments will start in April next year and will be maintained to the end of the next spending review period. The £50 reduction will be transparent on customers’ bills and, contrary to the impression that might have been gained, will not provide any sort of benefit to South West Water. It will simply be passported straight through to the householder, who will receive that money in full.
We take pride in helping hard-pressed families in the south-west, but we recognise that the challenge of helping vulnerable customers with water affordability problems is a different and more general problem that can be felt in households anywhere in the country, as the hon. Member for Birmingham, Selly Oak (Steve McCabe) suggested. As constituency MPs, we all know the families that we are talking about. That is why our water White Paper has set out definitively the dual approach that we are taking to tackling affordability issues. First, we are taking measures now to enable water companies to introduce social tariffs and to tackle bad debt. Secondly, over the longer term, we are introducing a package of reforms to increase competition and innovation in the industry that will help to keep bills down and improve customer service.
We consulted recently on how water companies could design social tariffs to reduce the bills of those who would otherwise struggle to pay in full. We will publish final guidance in the spring to enable companies to bring forward social tariffs in their charging schemes from 2013. Water companies’ responses to the consultation have shown their commitment to addressing customers’ affordability problems. Many already have schemes in place, such as trust funds, matched payment schemes, referrals to benefits advice and some existing social tariffs, but we have to be realistic in acknowledging that bad debt is also a serious problem in the water industry.
Bad debt adds an average of £15 to all paying customers’ bills, and this Government are taking action to address that. We are consulting on measures to reduce bad debt, and we are considering two options. The first is a regulatory measure that would make landlords liable for the water charges for their tenants’ properties if they failed to supply details of those tenants to the water company. However, we are mindful that the measure has to be proportionate and easily administered, so we are also consulting on whether we should ask landlords to share their tenants’ details with water companies voluntarily.
Alison Seabeck (Plymouth, Moor View) (Lab)
Will the proposals that the Secretary of State has just mentioned be similar to the present regulations involving landlords and energy companies, or might they be somewhat different?
Mrs Spelman
Electricity utility bills are the domain of the Department of Energy and Climate Change, rather than the Department for Environment, Food and Rural Affairs. We are seeking to ensure that people who use water pay for it; it is a question of fairness. Water has historically been treated somewhat differently from other utilities such as electricity and gas, so there might be some differences in the details of the proposals. The hon. Lady will have an opportunity to raise that point as part of the consultation.
This Government are going to get a grip of the issue of bad debt, which is forcing up bills for those who do the right thing and settle their bills on time. We are on the side of those who play by the rules and pay their bills in good faith and, unlike the previous Government, we are going to ensure that their interests are properly served by clamping down on those who do not, or will not, pay their bills.
Despite the considerable progress that has been made on cleaning up our water environment, challenges still remain, not least in the river that ebbs and flows outside these very walls. The House has previously debated the fact that London’s sewerage system is operating close to capacity. We are now at a stage at which waste water containing untreated sewage overflows into the Thames between 50 and 60 times a year, involving an average total of 39 million cubic metres a year. The sewage discharges kill fish and leave litter and debris floating in the water. Because of the tidal ebbs and flows, that debris can take up to three months to reach the mouth of the river, and frankly, it stinks—just ask David Walliams. Hon. Members will recall his Sport Relief challenge last spring to swim 140 miles along the length of the Thames here to Westminster. His challenge should have been the distance, the strong currents and the undertows, not the quality of the water he swam in—water that was bad enough following heavy rain to place his entire endeavour in jeopardy.
We might not quite face the “Great Stink” of 1858, when the stench of sewage led to this House’s curtains being soaked in chloride of lime in an attempt to disguise the overpowering smell and, ultimately, to Parliament being suspended, but the sewer outflows will only get worse with population growth, increased urbanisation and more extreme rainfall events caused by climate change. This, as I am sure all Members will agree, is unacceptable.
We are the world’s seventh largest economy; this is our capital city; this city is a shop window for our entire country—and the status quo is simply not good enough. This Government are going to put the “Great” back in “Great Britain”—a Government who are showing that Britain is open for business and competing globally. That is why we need a 21st century solution, not a 19th century one that would still rely on allowing the Thames to function as a sewer.
Mr Andrew Love (Edmonton) (Lab/Co-op)
Over 1 million customers of Thames Water are in what is termed water poverty. The Thames tunnel, which I support, is estimated to cost something in the region of £4.2 billion, putting £1 a week on the bills of Thames customers. What are the Government going to do to ensure that more people will not fall into water poverty as a result?
Mrs Spelman
Naturally, Thames Water will be one of the water companies looking at a company social tariff. That provides a means, as with Severn Trent Water and every other water company, of really helping the most vulnerable customers. It is important, too, to put in context what Thames Water customers, probably including some hon. Members, pay now. Unlike South West Water, Thames Water currently has significantly below average water bills. The average combined water and sewerage bill is £356 a year. South West Water ratepayers pay £517 a year, whereas Thames Water’s ratepayers have a combined bill of £319 a year. We are starting with Thames Water’s ratepayers who have a significantly below average bill.
Mrs Spelman
Let me make a little progress, if I may.
We need a solution that prevents sewage from entering the Thames in the first place. Today, the proposed Thames tunnel offers the most timely, comprehensive and cost-effective solution to the combined sewer outflow problems. We are very aware, though, of the impact its construction would have on local communities. Thames Water has just finished its second public consultation on its proposals, and will consider the responses it has received. It plans to publish its response in the latter half of May. Thames Water will continue to work hard with those potentially affected to minimise the impact where practicable.
We recognise that the large and complex Thames tunnel project comes at a cost, which will impact on Thames Water sewerage bills, but we are confident that the bills would still remain below the current national average and below the average bills of Southern, Anglian, Wessex and Severn Trent Water customers—and well below those of South West Water customers.
Mr Slaughter
Does the Secretary of State agree that
“the cost of the tunnel is too large to justify the environmental benefits”,
and that the
“Projected costs ... outweigh the advantages of a cleaner river”?
Mrs Spelman
Is the hon. Gentleman saying that his party is not in favour of trying to clean up the sewage out of the Thames? He will know that the initial study on the Thames tideway was launched when his party was in power—in 2001—and that a significant amount of time was spent looking at alternatives and carefully assessing with the greatest rigour what the costs of such a complex project might be. Just to put this in context, the proposed cost for the Thames tunnel is comparable to the amount having to be spent in Paris to do almost exactly the same thing, and on what the German Government are having to do to deal with an outdated system on the Rhine-Ruhr. So I do not accept his argument that the expenditure on cleaning the sewage out of the Thames is not justified.
The objective of our approach is to help relieve the extent to which households in London are being asked to contribute. As I said in my written ministerial statement on 3 November 2011, the Government believe that the private sector can and should finance this project, but we accept that there are some risks that are not likely to be borne by the private sector at an acceptable cost. We are willing, in principle, to provide contingent financial support for exceptional project risks where this offers best value for money for Thames Water’s customers and taxpayers. However, I will want to be assured that, when we offer this contingent support, taxpayers’ interests remain a top priority. We are working with Ofwat, Infrastructure UK and Thames Water to ensure that the financial structure for the proposed Thames tunnel includes safeguards, so that the likelihood of Government support being called on is minimal.
Simon Hughes (Bermondsey and Old Southwark) (LD)
I do not oppose the Bill at all, but may I just alert my right hon. Friend to something? Leaving aside the arguments about whether there should be a full tunnel or another solution, which I hope to address if I am called to speak, there are concerns about the Government giving money to a company such as Thames Water. It is not a very transparent organisation, being a private equity-funded company that has 10 layers of corporate structure, including in tax havens in some parts of the world. The Government should attach tough conditions to support for any water company if this is to be seen as transparent and good value for money.
Mrs Spelman
I share the right hon. Gentleman’s concern that there should be rigour in this exercise, and I have just talked about the safeguards we are seeking. I can also assure him that we have been advised by Ernst and Young that the projected cost of this project does represent value for money, but the rigour will continue to be maintained throughout the elaboration of the project.
Mrs Spelman
I wish to make a little more progress.
We believe that simply having this power available will help us to maximise private sector investment in the tunnel and keep the cost of financing down. The Bill in 1858 that provided the money to construct a new sewer scheme for London, and to build the Embankment in order to improve the flow of water and of traffic, was rushed through Parliament and became law in a mere 18 days. Although we do not anticipate such swift progress, we need to ensure that assistance is provided promptly to South West Water customers and, similarly, that Londoners can be assured that the power to provide contingent financial support is in place while we work with Thames Water and other stakeholders to plan for the financing and structuring of the tunnel.
Mrs Spelman
I have already taken one intervention from the hon. Gentleman.
As the Bill contains just two simple spending powers to implement intentions that the Chancellor set out in the autumn statement, our intention is that the Speaker be able to certify it as a money Bill. I am, however, mindful of the limitations that would place on discussions in the other place and of the desire to debate the need for the Thames tunnel, in particular. The need for the proposed Thames tunnel will no doubt be discussed in detail if, as I expect, the waste water national policy statement is debated before the end of March. We will also shortly be laying a draft order before Parliament to amend section 14 of the Planning Act 2008. This section 14 order would enable a major sewer such as the Thames tunnel to be included as a nationally significant infrastructure project, and we look forward to hearing any concerns that hon. Members may have.
Miss Anne McIntosh (Thirsk and Malton) (Con)
My right hon. Friend will be aware that the Select Committee undertook some work on the waste water policy statement, largely addressing the whole issue of the Thames tunnel. I am mildly surprised that we did not use that opportunity, either during the Committee’s work or the Government’s response to it, to discuss this particular planning point.
Mrs Spelman
I thank my hon. Friend for that question. As I just said, there were 21 working days for the national waste water policy to be debated from the moment it was laid before Parliament on 9 February. There is still time and I am sure that hon. Members will take advantage of that.
Finally, those looking forward to seeing the other legislative reforms proposed in the White Paper should rest assured we are firmly committed to our programme of market reform for the water and sewerage sector.
Frank Dobson (Holborn and St Pancras) (Lab)
Will the right hon. Lady give way?
Mrs Spelman
I am just summing up.
It is right, however, that the House should get the chance to scrutinise our proposals in detail and, to that end, we will publish a draft water Bill in the coming months. I commend this Bill to the House.
Mary Creagh (Wakefield) (Lab)
The Bill is welcome, if a little unexpected. It is welcome because it provides assistance to the people hit hardest by the botched Tory privatisation of the water industry, which created a water company in the south-west with too few people to pay for the £2 billion investment needed to create the south-west’s sewerage system over the following 20 years, with just 3% of the population clearing up 30% of the nation’s coastline. It left them with the highest unmetered water bills of any region and the Bill seeks to provide some relief, a fact that we welcome.
Miss McIntosh
I am delighted that the hon. Lady had the opportunity to visit my constituency and I look forward to hearing from her how that went. Does she not appreciate the fact that, as the Secretary of State has just mentioned, £90 billion has been invested since privatisation that probably would not otherwise have been invested? There was also a debate among the hon. Lady’s hon. Friends in the past about privatising the railways, but there is general agreement in the country that water privatisation has been a success bar the unfortunate circumstances that pertain in the south-west in the context of its having the longest coastline and the application of the EU bathing directive in that regard.
Mary Creagh
I am happy to report that the pigs I met in the farmer’s field in the hon. Lady’s constituency were extremely well. There was a very strong smell of bacon coming off them, even while they were alive, which was very nice, and I was very happy to see them.
On privatisation, we accept the consensus that privatisation is here to stay and that it has delivered the investment in the infrastructure at no direct cost to the taxpayer. It is clear that that cost has been paid indirectly by customers through their bills, however, with particular damage to customers in the south-west. That is why the Bill is with us today.
Stephen Gilbert (St Austell and Newquay) (LD)
This seems to be a particularly smelly debate. Can the hon. Lady explain why over 13 years, despite recognising the problems of privatisation in Cornwall and the south-west, Labour did nothing to help address the concerns that the Bill addresses?
Mary Creagh
I have in my hand a graph from Ofwat’s website about the annual average bill. The hon. Gentleman will see—I am not sure whether he can see this far, but I would be happy to pass it on to him—that when we passed the relevant water legislation in 2000 water bills dropped from an average of £325 a year to £285 a year. During that water review period, water bills were much lower. We took action across the country and that will also have affected the hon. Gentleman’s constituents in the south-west. He is also ignoring the fact that we asked Anna Walker to consider the issue of affordability. We have had the Walker report and only one aspect of its many recommendations is being debated today. The rest are being left, I am afraid, on the long finger.
Sheryll Murray (South East Cornwall) (Con)
I paid water bills in the south-west for 13 years under the hon. Lady’s Government and I cannot remember my bills ever being stable or not increasing considerably. I do not know where she has got her figures from—perhaps she is looking at a national figure—but I can assure her that my bills have not reduced.
Mary Creagh
Does the hon. Lady think that the £50 a year for which the Bill provides until the end of the spending review period is adequate compensation for her constituents? It will undoubtedly be eaten up by the next two years-worth of price increases in cash terms.
Neil Parish (Tiverton and Honiton) (Con)
Does the hon. Lady accept that this coalition Government have done more in 13 months than the Labour Government did in 13 years? We have 3% of the population in the south-west and 30% of the beaches, and that is why we have got these extreme costs. This Government have faced up to their responsibilities and delivered real cash to water bill payers, rather than just talking about it like the previous Government.
Mary Creagh
I am disappointed at the hon. Gentleman’s tone, because he is ignoring the fact that we commissioned the Walker report when we were in government. He is also ignoring the action we took, not least to prevent customers from being disconnected. I am sure that many of his constituents were affected in the early days of water privatisation when hundreds of thousands of customers were cut off—disconnected—from their water supply for non-payment of bills. We changed that. We changed the law and effectively instigated a right to water, which we think is a basic human right and is required for basic dignity and decency. I am sure that affected many people in the south-west.
The Bill is welcome because it lays down powers exercised by the Secretary of State to provide finance for the huge infrastructure investment that is needed to clean up the Thames, which has had very little investment since the great sewer drilled by Bazalgette 150 years ago. However, there are a number of questions that the Secretary of State must answer. First, why is the Bill so short? We are in a time of drought not seen in this country since 1976, so why is she focusing on the little picture rather than the big picture? Why was the water White Paper that was due in spring 2011 not published until December 2011? Her colleague the Minister with responsibility for water is now promising a draft water Bill this spring, so can she confirm that there will not be a full water Bill to take forward the other measures in Anna Walker’s report in the Queen’s Speech this May—yes or no?
Mrs Spelman
The Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Newbury (Richard Benyon), will be happy to answer this point in detail, but we do not need new measures to do some of the important things we need to do right now to tackle this drought. I mentioned the drought summit. As we saw last year, flexibility in terms of abstraction licences helped our farmers and we did not need hosepipe bans.
The extra time we took for the water White Paper improved it, putting resilience at its heart, and the climate change risk assessment vindicated that decision. I am sure that hon. Members would like the time to debate, through proper pre-legislative scrutiny, the measures set out in the water Bill. The Prime Minister gave an undertaking to the Chairman of the Select Committee on Environment, Food and Rural Affairs that a draft bill would come forward within months and I have repeated that commitment today.
Mary Creagh
I take it from that answer that there will not be a full water Bill in the Queen’s Speech this May. On the issue of abstraction, the proposals so far in the water White Paper talk about reforming the abstraction licence with an end date of 2027. The Secretary of State has had three drought summits—
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon)
Much can be done now.
Mary Creagh
That is fantastic; so we can look forward to a reform of the abstraction regime that will not take until 2027.
Frank Dobson
In considering any water shortages that may or may not occur this year, will my hon. Friend and the Secretary of State bear in mind that in the 22 years since privatisation there has been no net increase in reservoir capacity in England?
Mary Creagh
I am sure that the Secretary of State will have digested that point from my right hon. Friend.
This is an orphan Bill, which is decoupled from the long-term reforms required to tackle climate change and keep water affordable. Why does the Bill, which affects two areas—the south-west and London—not mention those two areas? Is it because that would make it a hybrid Bill, which would require full and proper scrutiny in the other place? Is it because by not mentioning those two areas and drawing the Bill widely, the Secretary of State is able to define it as a money Bill, which means that it receives only a cursory one day’s scrutiny in the other place? What possible reason could she have to fear their lordships’ scrutiny of this worthy and timely Bill? We can surmise that she is keen to get her short Bill through Parliament—an endeavour that does not seem to have been properly communicated by the Whips to her own Back Benchers, if today’s sudden change of business is anything to go by.
Andrew George
I note that the hon. Lady described the Bill as worthy and timely. I am curious about her line. She says that £50 per household in the south-west is insufficient; I would like to know whether she and her party propose offering more to the south-west, and how that would be funded. Secondly, in view of the line that she is taking, is she suggesting that she and her party will vote against the Bill today?
Mary Creagh
I am happy to say that we will not vote against the Bill. If the hon. Gentleman waits, I will come on to some of the wider affordability issues and will, I hope, answer some of his questions on the wider issues.
The next unanswered question is: why are we debating the Bill now? We know that the Government ran out of meaningful new legislative business about two months ago, and the House has been surviving on thin rations—a meagre diet of one-line-Whip business and Back-Bench business debates, valuable though they are. There was no new Government legislation, but suddenly—boom!—out of the Department for Environment, Food and Rural Affairs, a Department whose Ministers are the embodiment of clout, grip and competence, spurted a sudden, short water Bill, born of the realisation that if the Department has lost its slot in May’s Queen’s Speech, it had better deliver on the Chancellor’s promises to the south-west and his coalition partners. That happened just six short weeks before the end of one of the longest parliamentary Sessions ever held. Clearly, such a masterstroke of parliamentary planning and timing could have been confected only by the Department that brought us the forest sell-off.
Labour in government corrected many of the injustices of water privatisation. As I said, in 2000 we banned water companies from cutting off the water supply of homes, schools and hospitals for non-payment. It is extraordinary to think that legislators would allow provisions that let hospitals—care givers and providers of sanitation—be cut off for non-payment of bills. We allowed for compulsory metering in areas of scarcity, and a more muscular Ofwat, holding the water companies to account, has emerged in recent years.
Mary Creagh
I will make some progress, and then I will give way. Where specific issues required careful consideration, we brought in experts to advise us. We commissioned the Pitt report after the 2007 floods, the Cave report to look at competition and innovation, and the Walker report, which analysed water charging and looked explicitly at the problem of high bills in the south-west. My hon. Friend the Member for Ogmore (Huw Irranca-Davies) legislated for water companies to introduce social tariffs in the Flood and Water Management Act 2010. I shall now examine each of those issues in turn.
Some have questioned why the Tory and Lib Dem Government wanted to extend £40 million a year in financial assistance to a region dominated by Tories and Lib Dems. I will leave others to speculate about the politics, but it is clear that customers in the south-west face bills that are, on average, 43% higher than in other areas. That is why we examined the issue in government and did the groundwork on helping those 700,000 households. I pay tribute to colleagues in all parts of the House, and to our former colleague, Linda Gilroy, for their work on the issue.
Mr Matthew Offord (Hendon) (Con)
Perhaps the hon. Lady could tell the House the average cost of a water bill in the south-west pre-privatisation, and say how that compared with bills in other parts of the country.
Mary Creagh
I do not know what the costs were, but I can say that all water bills were considerably lower pre-privatisation. If the hon. Gentleman looks at graphs of what happened to bills post-privatisation, he will see that they went up exponentially, particularly in the early 1990s. They were kept down in ’91 and ’92, and then they went up exponentially across the board. From memory, they were around £250; that has gone up massively.
Mary Creagh
I do not have those figures. Does the hon. Gentleman have them? Perhaps he will share them with the House in the debate.
We accept the argument that the south-west requires additional help to keep water affordable, but stopping there misses the point. Ofwat, the independent regulator, estimates that a fifth of households are already spending more than 3% of their income on their water bills, yet Ministers have failed to bring forward any plans to tackle high bills, apart from in the south-west, which has the highest bills in the country. There, around 200,000 people spend more than 3% of their disposable income on water bills, but in the Thames region there are a staggering 1 million people in the same predicament, so surely we should be working towards extending help through a national affordability solution. Without one, the effect of the Government’s £50-a-year payment in the south-west will soon be wiped out by price rises; prices will rise by more than inflation in each of the next three years. The assistance is welcome, but decoupled from wider reform, it will provide little lasting help on water affordability. I hope that answers the point raised by the hon. Member for St Ives (Andrew George).
We know from Ofwat that the groups most vulnerable to water poverty are single parents, pensioners and jobseekers. When we were in government, we introduced WaterSure, a national affordability scheme paid for by a cross-subsidy from water customers, and paid only to metered households with three or more children or to people with certain medical conditions, but the limitations of the scheme are apparent, because not everyone in water poverty has three or more children, and many pensioners and jobseekers will not be eligible for the scheme.
There is a further problem of penetration of WaterSure. Only a third of eligible households access the scheme, so there is big issue relating to the role of the water companies in educating their customers about WaterSure and the role of places such as jobcentres in making sure that people have access and understand their entitlement.
Mrs Spelman
When the hon. Lady’s party was in power, what did it plan to do about the fact that two thirds of people eligible under WaterSure were not taking it up? Will she acknowledge, therefore, that with the baton being passed to the present Government, who continue to run the WaterSure policy but with more determination to enable more eligible households to take it up, we have supported that with the introduction of guidance on social tariffs to all companies?
Mary Creagh
The right hon. Lady might want to answer her own question. We commissioned the Walker report, which said that Ofwat should do a six-monthly league table of water companies showing the best and worst performers. She has had 18 months. Has she implemented the recommendations of the Walker report? She has made her own guidance to water companies on social tariffs voluntary, not mandatory, and I fail to see how allowing them to choose whether to implement them will help customers.
Alison Seabeck
Perhaps I can shed some light on what was going on under the previous Government. In the Plymouth south-west area, a detailed pilot was undertaken to identify people for whom water was unaffordable. That was to feed through into forward policy development. Anna Walker used that as part of the basis for some of the work that she did, so it is not true that we were not considering how to reach the people who needed help.
Mary Creagh
I thank my hon. Friend for that clarification. It is clear that much work was done in the south-west because it has the highest penetration of WaterSure customers and the highest rate of metered households, despite the fact that water is plentiful in the south-west, so it has nothing to do with scarcity. It has to do with people making a rational economic choice and understanding that if they move to metered bills, their costs will go down.
The Government should be using existing data about benefits to ensure that everyone who is eligible is on the WaterSure tariff. I hope we have described the heavy lifting that we did on that tariff. Last year the Government consulted on taking on the costs of WaterSure and absorbing them at a cost to the Exchequer of £10 million a year, as opposed to continuing the cross-subsidy. This idea was dropped from the water White Paper. What has happened to that notional £10 million? Why is it not being used to part-fund company social tariffs or a wider tariff to help the wider population?
Londoners will see their bills rise by £70 to £80 a year when the Thames tunnel is finished in, we hope, 2020. London has some of the poorest people in the country and a significant number living in water poverty. WaterSure will not help most of them. It is imperative that company social tariffs are introduced well before the Thames tunnel is completed to minimise the financial impact on Londoners, yet the Government’s draft guidance on company social tariffs shows that they are adopting a minimalist approach.
The Government have ruled out data sharing, which is key to helping water companies identify customers in water poverty and enabling them automatically to reduce their bill, which is obviously the least painful way, rather than allowing people to get into water debt and then taking action through the courts to pursue the money. They have ruled out an affordability scheme administered nationally, and they have ruled out an extension of WaterSure, which is the only national social tariff. Under DEFRA’s draft guidance, the design of social tariff schemes is left entirely to the water companies. Indeed, it is their choice whether to implement a scheme at all. This is the big society in action: a postcode lottery for millions of customers facing water poverty. We believe that it is untenable for the Government to pass a water financial assistance Bill without providing any assistance to the rest of the country. We will pursue amendments that would oblige water companies to deliver a social tariff scheme that meets clear and uniform criteria.
Dan Rogerson
On the question of how WaterSure will be funded and placing obligations on companies, if we have a funded social tariff in the south-west, it will have a disproportionate effect on the other bill payers who are paying into the pot. More work needs to be done before we start pushing regions down the route of having generous social tariffs, because we need to know what costs are being loaded on to other bill payers in the region.
Mary Creagh
That is an excellent point. That is why we were interested in the Government’s consultation, which talked about a national affordability scheme and offered the potential to absorb the costs of WaterSure. I hope that the Minister will offer some clarity on that in his closing speech, and I am sure that we can work together on that.
Simon Hughes
I do not mean to pre-empt what the hon. Lady might say on the other aspects of bills for water rate payers, but are she and her colleagues concerned—I put this point to the Secretary of State—that the value to water rate payers in London of the Thames tunnel, which is now priced a £4.1 billion, might not be what it was when the previous Government thought it was a good idea? There are big questions about whether it represents value for money for water rate payers and is the best solution in the light of the evidence.
Mary Creagh
We believe that the allocation of sums, guarantees, indemnities, or whatever form the financial assistance takes, should be done with full parliamentary oversight, and I will address that when I move on to clause 2.
We believe that the tariffs should be paid for by cracking down on bad debt, which the Secretary of State mentioned in her speech. Ofwat’s website states:
“More than five million households currently owe money on their water bills and over the last five years the amount owed has increased by more than 50%.”
In 2010, £1.6 billion was outstanding, three times the amount of bad debt for gas and electricity bills, despite the fact that water bills are much lower. As she said, the people who cannot or will not pay add an average of £15 a year to the bills of consumers who play by the rules. Bad debt arises in part because landlords are under no legal obligation to provide their tenants’ details to water companies. Rather than a voluntary approach, the Government should compel landlords to share their tenants’ details with water companies, and I know that the consultation is ongoing and is due to close fairly soon. If we reduce bad debt, we can reduce everyone’s bills and fund social tariffs that help those struggling to pay.
Clause 2 creates financial mechanisms and guarantees to support the construction of the Thames tunnel. Why do the Government avoid using the words “Thames tunnel”? Are they trying to avoid a proper discussion of the merits? Labour supports the project. Our Flood and Water Management Act 2010 introduced a “provision of infrastructure” regulation, creating the framework for the tendering, designation and building of such projects. However, costs have risen and time scales have stretched. The Government need to show leadership and make a clear commitment to the project and ensure that the right vehicle for managing and delivering it is put in place. The consultation process for the tunnel is vital for ensuring that sites are placed correctly and the environmental impact of the work on residents is minimised.
Mr Slaughter
I agree with what my hon. Friend says about the Thames tunnel, and to that extent I agree with the Secretary of State. However, had the Secretary of State not chuntered through her speech in such a cursory manner on an issue that is very important to London Members, I could have told her that the virulently anti-tunnel comments that I quoted were not mine, but those of my neighbouring Tory MP, the hon. Member for Chelsea and Fulham (Greg Hands), who happens to be a Government Whip. This is just another example of members of the Government saying one thing in the House before going back to their constituencies and saying the exact opposite.
Mary Creagh
That used to be the province of the Liberal Democrats, but perhaps saying two different things, depending on whether one is at the top or the bottom of the hill, in the House or in one’s constituency, is contagious. We should all take the necessary precautions, but such indiscipline would never have been allowed when I was a Government assistant Whip.
There remain, however, a number of hurdles to clear, not least that of the Communities and Local Government Secretary, who has an effective veto over the tunnel, so DEFRA support alone will be insufficient. We see the tunnel, in addition to its environmental benefit, as an opportunity to create up to 4,000 direct jobs for Londoners, to expand apprenticeships and to regenerate London. With the provision of financial assistance, we expect not just those apprenticeships but higher-level training to be a non-negotiable part of the deal.
In an infrastructure project of this scale, complexity and duration, we should be setting targets not just for apprentices but for the number of young people who will achieve masters-level civil engineering qualifications over the project’s lifetime, as well as encouraging local and national procurement to secure growth and the economic recovery in London.
No impact assessment has been produced alongside the Bill. The rather short explanatory memorandum states that this is because the Bill is associated with public expenditure, but clearly there will be burdens on water companies when administering any schemes under clauses 1 and 2, so what conditions will South West Water have to fulfil? Presumably, there will be an audit process, so what will the company’s administrative costs be, or has it agreed to waive them?
Of more concern, however, is the fact that there is no provision anywhere in the Bill to require potentially large sums of taxpayers’ money to be spent transparently and accountably. Clauses 1 and 2 state that undefined “terms and conditions” can be attached to the use of public money, but that falls well short of making clear exactly what will happen, and we believe that certain safeguards should be specified in the Bill.
I had a little look at the Water Industry Act 1991 this morning, and section 152 states that the Government can pay out money to water firms only
“in the interests of national security.”
So it is clear that infrastructure projects of the scale and cost of the one before us were simply not envisaged at the time of privatisation.
Today’s Bill shows those limitations, and section 154 of the 1991 Act also states very clearly that if any financial assistance or guarantee is given,
“the Secretary of State shall lay a statement of the guarantee before each House of Parliament”
and
“as soon as possible after the end of each financial year…lay before each House of Parliament a statement relating to that sum.”
The right hon. Lady says that the subsidy to South West Water will continue until the end of the next comprehensive spending review period, but that again is not in the Bill or in the explanatory memorandum, and we want to see those things guaranteed.
Mr Adrian Sanders (Torbay) (LD)
Will the hon. Lady commit her party, should it ever return to power, to continue the £50 discount each year?
Mary Creagh
We have to look at the cost of water bills in the round—the average, unmetered cost of water bills. We want to bring them down throughout the country, but we are not sure what sort of economy we will inherit, so I shall not make any election promises today.
We will seek to amend the Bill in Committee so that the Government are required to seek further parliamentary approval for such payments through the laying of a statutory instrument. That power should be triggered after a sober assessment of the facts, and after the Secretary of State has made her case to the House.
The explanatory memorandum is silent on state aid. Is the Bill compatible with EU state aid rules? Has the Environment Secretary discussed the matter with the European Commission? [Interruption.] Okay. So water customers do not run any risk of having to repay the assistance at a later date. That is a relief.
In conclusion, despite the right hon. Lady’s warm words, this “financial assistance” Bill is poorly named. It extends no financial assistance to anyone except those living in the south-west. It is an orphan Bill, conceived in haste, which is silent on the wider affordability issues, and it ignores the cost-of-living crisis for households hit by this Government’s assault on the squeezed middle.
We recognise that privatised water has brought benefits, with £90 billion invested in our infrastructure at no direct cost to the taxpayer, and we believe that water should remain a properly regulated private industry. Today, however, is a day for thinking about the water customer. Since privatisation, customers’ bills have increased year on year, wherever they live. Many have found themselves adjusting to metered water, and by 2015 there will for the first time be more metered customers than unmetered ones. Climate change will mean more regions being under greater water stress, with consequences for customers’ water use. That is why it is down to us to hammer out a new consensus on water affordability. I ask Ministers to work with us to amend the Bill and help hard-pressed families.
Miss Anne McIntosh (Thirsk and Malton) (Con)
I congratulate the Secretary of State and the Department on bringing forward what some might call a small but perfectly formed Bill. The House will be at a loss to understand from what the shadow Secretary of State said whether the Labour party is in favour of the Bill, the Thames tunnel super-sewer structure and the more affordable water bills that the Bill proposes.
I would have welcomed the opportunity to put my points to the Secretary of State, but I see that she has been called away urgently. She talked about the 21 days available for a debate on the national waste water policy. I am delighted that the relevant documents have been selected for this debate, which allows me to draw attention to the conclusions in the Environment, Food and Rural Affairs Committee’s fourth report, on the draft national policy statement on waste water. We stated:
“Given the importance of this NPS in delivering waste water and water quality objectives, we recommend that it be subject to a debate on the floor of the House of Commons on an amendable motion prior to desgination.”
When the Under-Secretary of State, my hon. Friend the Member for Newbury (Richard Benyon), winds up the debate either today or on some future date, will he confirm whether the Government intend to table an amendable motion for debate?
Simon Hughes
The Minister knows that some of us have been asking for that process to be followed, and we look forward to such a motion coming before the House. I therefore endorse the hon. Lady’s request, which I think will have widespread support from all parties.
Miss McIntosh
I am sure the Secretary of State, wherever she is, and my hon. Friend the Minister will have heard that point.
Mr Love
I, too, express my interest in having a debate on the national policy statement, which is very important. The hon. Lady mentioned the need for an amendable motion, but from speaking to the Minister’s office and the Department’s parliamentary office, I understand that it will be non-amendable. An amendable one would be greatly preferable.
Miss McIntosh
I am grateful to the hon. Gentleman, and I commend his work in bringing his constituents’ concerns to the Select Committee and continuing to represent them now. Those of us who work in London during the week all wish to see the super-sewer in place, but we understand the length of time that it will take. There has not been an engineering project of that nature since, I think, 1858, and the Committee has no doubt about the impact that the sewer’s construction will have on his constituents and others.
The Committee’s wish, as recorded in our report, is for an amendable motion, and I am delighted that there is support for that. It may be within the gift not of the Minister but of the party managers, and looking further along the Treasury Bench I see how well represented they are today. I am sure that our point will be taken back to the highest possible authorities. I welcome, in passing, the Leader of the House’s commitment to allow more time for this debate.
At the conclusion of her speech, the Secretary of State made some remarks—on which, unfortunately, she would not take any interventions—about the amendment relating to planning, which will be of great interest to the Select Committee and, I am sure, to right hon. and hon. Members who live along the path of the proposed super-sewer. I hope that my hon. Friend the Minister will be able to clarify those remarks.
On the waste water national policy statement, the Committee is pleased that the Government’s response to our report set out the areas where DEFRA has accepted our recommendations and consequently amended the NPS—for example, in line with our recommendation that the inclusion of a project in Ofwat’s asset management plan be removed as a criterion of proof of the need for the project.
Neil Parish
It is absolutely right that the planning process be taken into consideration. In my view, the Thames tunnel must go ahead, because when I was returning to Battersea from this House late one evening, cycling along the Embankment, the tide was low, and I could smell the sewage being pumped out into the Thames. [Interruption.] Hon. Members may turn their noses up, but I have smelt it, and we must do something about it.
Miss McIntosh
Given what the hon. Member for Edmonton (Mr Love) said as well, I do not think that the House is in any doubt about the need for the Thames tunnel super-sewer, but we should not underestimate how long the project will take and its cost. Concerns about rising costs, to which hon. Members alluded, were expressed in the evidence to the Committee.
Mary Creagh
The hon. Lady said that she was not clear whether we support the Bill. I want to put it on the record that I said at several points that we do support it. As for whether we would continue with it, we would have no plans to repeal it in government if we were elected in 2015.
Miss McIntosh
I am sure that the whole House will welcome the hon. Lady’s helpful clarification, because her concluding remarks were a little ambivalent.
Returning to DEFRA’s acceptance of some of our conclusions, some of the site-specific material has been moved to an annex that is part of the document that is not to be relied on by the decision maker in reaching a decision on a project. That meets, to some extent, our criticism about the inclusion of weak material on the Thames tunnel, as well as on Deephams sewage treatment works. Perhaps my hon. Friend the Minister will also give us a status report on those treatment works.
David Mowat (Warrington South) (Con)
In the Select Committee’s consideration of the £50 reduction in the south-west, did it look at water poverty more generally across the United Kingdom, including whether other regions have more consumers in water poverty than the south-west, so that it might have been fairer for the money to have been allocated in a different way?
Miss McIntosh
In our report on the Thames tunnel, we did not consider aspects of affordability, which are rightly covered in an earlier report to which I will turn shortly.
I am delighted that DEFRA accepts that the remaining site-specific sections have been improved and that the Government have, as recommended by the Committee, moved to change the definitions in the Planning Act 2008 to include sewerage transfer and storage projects such as the Thames tunnel in the process for deciding applications for nationally significant infrastructure projects. The Committee welcomes that. I hope that we have discharged our duties comprehensively, given that this was one of our first opportunities to do so under the Planning Act.
Simon Hughes
I pay tribute to the hon. Lady and her colleagues on the Select Committee. May I make an unashamed, but well-linked plug? Next Tuesday, 6 March, at 7 o’clock in Committee Room 11, I will be hosting a meeting to discuss the state of the issues that relate to the Thames tunnel. I hope that she or one of her colleagues will be able to come and listen to what is said.
Miss McIntosh
I am most grateful. If it does not clash with our Committee meeting, all of us who are available will endeavour to be there.
I echo the comments of the hon. Member for Wakefield (Mary Creagh) about there not being an impact assessment. The explanatory notes state that because the Bill is concerned solely with public expenditure, no impact assessment has been undertaken. Clearly, it is not just about public expenditure; a substantial amount of money is being requested by the water companies, through the Government, to give a £50 reduction. The Minister will be aware that some of those who live in and represent the south-west are concerned that increases in inflation will wipe out the £50 reduction.
Today, the Select Committee took evidence from the Minister of State, Cabinet Office, who is responsible for providing policy advice. He told us that an impact assessment is meant to look at the environmental impact of a project. I am not suggesting that the Bill is defective because it does not have an impact assessment, but I would like to record my personal disappointment that there is no impact assessment. It would have allowed the House to perform proper scrutiny on Second Reading and in subsequent parliamentary stages. It should have been incumbent on the Government to produce an impact assessment on the implications for the water companies of the reduction of water bills in the south-west of England and on the impact that the Bill will have on Thames Water.
The Select Committee produced an excellent first report of this Parliament, if I may describe it as such, entitled, “Future flood and water management legislation”. It is right at this moment to pay tribute to the work of the previous Government. There was all-party support for the Pitt report and its recommendations. There was also all-party support for, and obviously positive scrutiny of, the Flood and Water Management Act 2010. The fact that we are having to wait for the draft water Bill, which will cover all the other aspects, is a source of concern. We are approaching apace 30 June 2013, when the Association of British Insurers will look to replace its statement of principles on the provision of flood insurance. There will also be a host of other measures to consider.
Perhaps in responding, the Minister could explain what he is doing about insurance. I want to record my personal resistance to any state funding of insurance. There are hard cases, which many of us will have in our own constituencies, where houses remain at a substantial or high risk of flooding. I can think of examples such as Thirsk, Pickering, Malton in the past, and Sinnington at the moment. There are therefore insurance aspects that need to be considered. However, as soon as a Government introduce an element of state funding or state insurance, it leads others who are on a low or fixed income to argue that they have concerns about their ability to pay insurance. I know from the visits I made as shadow floods Minister to parts of the country such as Cumbria that there is real concern, particularly when properties are rented, about whether those on low incomes can afford even contents insurance.
Stephen Gilbert
With some 200,000 homes in the country at risk of flooding, what mechanism would my hon. Friend propose for ensuring that the people affected can access affordable insurance?
Miss McIntosh
Speaking in an entirely personal capacity, and looking at sustainable development and flood prevention, the one thing we could do today is to stop building on floodplains. Perhaps the House would like to unite around that and an amendment could be tabled to a future water Bill.
There are things that we can do now. There has been lots in the papers recently about water stress and scarcity, and drought. That will inevitably have an impact on homes. There is a risk of subsidence and there are reports of roads cracking. That obviously has insurance implications for householders and business properties, but also for highways. Again in a personal capacity, I challenge the Minister on how we will pay in those mostly rural areas for roads that are cracking now because of drought rather than the flood damage that occurred in the previous two years.
I welcome the fact that our report discusses the new responsibilities of the upper-tier authorities for flood and water management, and that funds are available. The Government response talks about providing the funding to lead local flood authorities through direct grants and says that that is expected to fund fully their new responsibilities under the Act. However, my local authority tells me that those moneys are not ring-fenced. If that is the case, and we are reducing, because of austerity, the money for the core tasks of the upper-tier authorities—county and unitary—that will pose real difficulty for them, and I put that to the Minister.
My hon. Friend the Member for Tiverton and Honiton (Neil Parish) mentioned affordability. The Minister and others have been challenged about that in many forums, not only the Select Committee, but all-party groups. It is right that the Bill focuses on affordability for the south-west region. [Hon. Members: “Hear, hear.”] I have no connection with the south-west, other than hoping that I have many friends on both sides of the House who represent the region extremely ably. However, there is a particular issue in that the population is small and there is a heavy emphasis on fixed and lower incomes. As I said, the application of the EU drinking water directive, and especially the bathing water directive, posed enormous problems for the south-west.
I therefore welcome the fact that the Bill addresses affordability. I hope that when the House has ample time—I am sorry if it will not be this year; we keep hearing that something will happen in the coming weeks or the coming months—and the draft Bill is before us, we can address some of the other affordability problems and also a social tariff.
David Mowat
I have listened to the points about the south-west, and I, too, have no problem with the region being helped through the Bill. However, there is an issue about water poverty and in which regions it is greatest. There is a case for helping them, notwithstanding the specific problems that exist in the south-west. I believe that there is more water poverty in the north-west than the south-west, and there is therefore a case for doing something there at the same time.
Miss McIntosh
I do not want to rehearse the arguments I have just made, but every hon. Member could point to examples of water poverty. I am sure all of us have constituents who write to us or come to our surgeries to talk about the affordability of their bills. Dealing with that is the role of Ofwat. I should like to record my thanks to the chief executive, and more especially the chairman, of Ofwat for their work in that regard. They have a real role to play.
One other piece of unfinished business that I expect to be included in the draft water Bill—this was raised in the Committee’s scrutiny of future flood and water management legislation and the Government’s response—is the Gray review of regulatory aspects. I hope my hon. Friend the Minister confirms that that will be covered by the draft Bill, along with the Cave review, which is on aspects of competition—specifically, the level of competition that there will be—and the Walker review. In times of water stress and scarcity, it is important that we encourage people to use water sensibly and, as Ofwat and Anna Walker have frequently said, that we encourage households and businesses not to heat their water beyond the supply that they need, because doing so leads to unsustainable use.
Another issue pertains specifically to the Thames tunnel and more widely. The Committee is persuaded that the Thames tunnel is the best way to proceed for the purposes intended, because sustainable drainage systems were excluded. However, we just touched on how to prevent floods, and I hope the Minister can today report on progress on establishing sustainable drainage systems throughout England and Wales. Will he renew the commitment, or give us a once-and-for-all-time commitment, that the Government will end the automatic right to connect, which goes to the heart of water stress and scarcity? In Filey in my area, 300 houses will be built on a functional floodplain against the council’s advice. The field takes surface water surplus, but there is nowhere to displace it to. Yorkshire Water is trying hard to accommodate proper capacity and connection for those 300 extra homes without making others short of supply, but the area is not flush with water, if you will pardon the expression, Mr Deputy Speaker.
I welcome the debate and the opportunity to draw the Committee’s wider concerns to the House and the Minister. On the two specific points to which my right hon. Friend the Secretary of State referred, I hope the Minister will confirm that there will be a debate on an amendable motion on the Floor of the House on the national policy statement on waste, and clarify what planning issue the Government will bring before the House.
Jim Fitzpatrick (Poplar and Limehouse) (Lab)
It is a pleasure to follow the hon. Member for Thirsk and Malton (Miss McIntosh), who as Chair of the Environment, Food and Rural Affairs Committee obviously speaks with great authority on such matters. As one of her vice-chairs on the all-party parliamentary group on local environmental quality, I am used to following her—I have certainly done so for the past couple of years. Perhaps in future I will get ahead of her, but that is something to hope for.
I shall not speak for long. I want to raise two issues, the first of which is the Thames tideway tunnel and how it will impact on my constituency. I am grateful to the Minister who has responsibility for the natural environment and fisheries for the letter he sent to London MPs yesterday to explain how the Bill will help. The second issue relates to water for fire sprinkler systems, which we have discussed before. It could be referred to in the Water Industry Act 1991, which the Bill amends. This might be a missed opportunity to amend the Act further to deal with that issue.
I shall deal with the constituency matter first. As a former Minister in the Department for Environment, Food and Rural Affairs and a former Minister for London, I am familiar with the challenges facing the Government in dealing with the problem of massive sewage discharges into the Thames. Since the formation of the coalition Government, all the political parties, as well as the Select Committee, have considered the matter and concluded that something needs to be done.
In my constituency, Thames Water’s original plans would have taken nearly all of King Edward memorial park, which, given the population density, is one of the very few green open spaces in Tower Hamlets in east London. Not surprisingly, the plans caused considerable outrage—and that hostility continues today—and it led to the formation of the Save King Edward Memorial Park campaign. It comprises local residents, freeholders, leaseholders, council and social tenants, and residents from the new expensive blocks on the river as well as from the established estates and nearby. All were determined to protect the park from being destroyed by Thames Water.
I pay tribute not only to the campaign officers but to all residents, local councillors and officers of Tower Hamlets council, as well as to the local papers, the East London Advertiser and The Wharf, for the campaign to save the park. The campaign officers are Carl Dunsire, Emma Dunsire, Robin Milward, Toni Davey, Mahbub Mamun Alam, Raihan Islam and Mark Baynes. They have all done an excellent job bringing the community together and lobbying Thames Water and myself—and I have been in discussions with DEFRA, so the campaign has clearly made an impact. Local celebrities, including Sir Ian McKellen, Lee Hurst and Helen Mirren—to name but a few—have also registered their support.
I must also pay tribute and give credit to Thames Water. That will not go down well in the constituency because it is still regarded pretty much as the enemy, but to its credit, it has engaged with us, understood and several times changed its plans for King Edward memorial park. Mr Phil Stride and his team deserve credit for that. Some months ago, Thames Water also engaged as a consultant our former colleague, Mr Martin Salter, the former Reading MP. That has helped the consultation process with local residents. Also, I recently chaired a constituency public meeting to which more than 100 people turned up.
The Save KEMP campaign, which, as well as local residents, comprises people of professional standing—for example, Carl Dunsire is an engineer—identified an alternative brownfield site on Heckford street. That proposal was put to Thames Water a considerable time ago, and since then the company has floated it as a secondary option. Having said that, the company’s preferred option remains to build out on to the river from the foreshore of King Edward memorial park, rather than in the park.
John Biggs, the Greater London assembly member for east London, and I wrote to Thames Water this week seeking the latest consideration of the two options and the costings. Heckford might be slightly more expensive but given the disruption to the local community, the support for the project and everything else, if the costs were equitable, the local community would be strongly in favour of Heckford.
Frank Dobson
Will my hon. Friend bear it in mind, when talking about the extra expense, that Thames Water, over the past six or seven years, has made profits totalling £1 billion, which have been paid out to its currently Australian shareholders and before that its German shareholders?
Jim Fitzpatrick
My right hon. Friend makes an important point that will be a matter for scrutiny in Committee. I expect it to be raised in Committee in due course.
East London assembly member John Biggs and I are seeking Thames Water’s latest considerations, and obviously the Bill would affect the building of the Thames tideway tunnel. The local community is resolute on this issue. My only concern about the choice between the Heckford street site and the Thames foreshore site is that building the interceptor to the sewer on the foreshore would mean much more traffic by water, on the Thames. If Heckford street is chosen, there will be several thousand heavy goods vehicles on the streets of Tower Hamlets and further east for several years. That would not be a welcome dimension, but these things are in the balance, and obviously we are pressing for the best possible outcome for the local community.
The second issue that I want briefly to mention is fire sprinklers. I pay tribute to the Minister, who is always courteous and efficient. I am grateful for the meeting that he afforded me and the officers of the all-party group on fire safety and rescue to discuss the matter only four to five weeks ago. There is a myth perpetrated by the media—mostly in adverts on TV and in the cinema—that when a fire in a building activates the sprinkler system, every sprinkler right across the building is activated and the whole place is doused in water and damaged. The reality, of course, is that the only sprinkler activated is the sprinkler head immediately above the seat of the fire, as the heat generated by the fire melts the soldered link, causing the blockage to fall away and allowing the water to act as an extinguishing agent. The problem with the myth is that people are frightened of sprinklers, because they think that if they install them in their building and they are inadvertently activated—we know that smoke detectors can go off because of burning toast—their home would be damaged. However, that is not the case, and the cost to society of not installing sprinkler systems in buildings includes the hundreds of millions of pounds lost to schools damaged by fire every year—a cost that is often passed on to local council tax payers, as most local authorities self-insure.
Mr Slaughter
My hon. Friend is making a good point about a matter that was brought home to me recently. Hon. Members will remember the serious fire that closed Wood lane, opposite the BBC in Shepherd’s Bush—perhaps that is why it got so much publicity. The consequence of such events in major buildings with no sprinkler systems is not just the risk of loss of life, but often the permanent loss of jobs where buildings cannot reopen and the huge damage to industrial and public buildings.
Jim Fitzpatrick
My hon. Friend anticipates the point that I am coming to, immediately after I make the point that when a school burns down, the problem is not just the damaged building, but the disruption to the education of the students at that educational establishment and the impact on parents, who have to take their kids to schools further away, with disruption to friendships and the rest of it. As for the point that he correctly makes, when there is damage to an industrial or commercial premises, there is not only the damage to the building, but the cost of insurance for the company, a loss of production and, more often than not, unemployment costs to the individuals who work on those premises, because it takes months and sometimes longer to rebuild or replace, if at all possible.
Most critical of all is the loss of life. Fire deaths affect the most vulnerable in society. The majority of people who die in fires are the most vulnerable—the old, the sick, the young, people with social difficulties or people with addiction problems. The most vulnerable are the ones who predominantly die in fires. Tragically, we have recently seen a number of major multiple fatalities across the country, most recently in London—in what was formerly Brent East—where a mother and five children died in a fire. However, the experience of local authorities where fire sprinklers are the norm is entirely different. There is a district in Arizona called Scottsdale—one of Phoenix’s five districts—that is the fire sprinkler capital of the world, as I am sure the House will be pleased to learn. Scottsdale has had a city ordinance for 30 years that says that if someone builds something, they have to install a sprinkler system. One person has died in a fire in Scottsdale in 30 years. Scottsdale has 250,000 people. They smoke, they cook, they burn candles and they probably have heating too, despite the desert climate. Sprinklers save lives. That is now becoming the UK experience. More local authorities, more registered social landlords and more developers are recognising the benefits of sprinkler systems.
There has been extensive correspondence between the all-party group and DEFRA on the Water Industry Act 1991. If I may, I shall quote from a letter from former chief fire officer Ronnie King, who is a highly regarded officer in the fire service, as well as being the active administrative secretary of the all-party parliamentary group on fire safety and rescue and the chair of the water liaison group. In reference to the Act, which the Bill amends, he says:
“To this end I outline in this letter a proposed change to section 57 on the provision of water for firefighting. Section 57 covers the duty to provide water for firefighting and currently this duty is limited solely to providing water from designated fire hydrants. Increasingly householders are seeing the benefit of installing sprinkler systems, which will lead to significant reductions in fire deaths and injuries if they could be more widely used. Under the current legislation such supplies are classified as non-domestic supplies and are subject to agreement of terms and conditions on a case by case basis. An amendment of section 57 to include as firefighting water that taken from service pipes connected to a sprinkler system will clarify the status of connections to the water system for automatic fire sprinkler purposes. The current ambiguity is a barrier to the proliferation of sprinkler systems.”
I acknowledge that the Minister has asked his officials to examine that matter and to report on it. If nothing can be done in this Bill, we would be grateful if it could be considered for the water Bill that is coming along not far behind it. I also want to acknowledge that the vast majority of the water companies already do the right thing in co-operating, without the legislative clarity that the proposed amendment would provide. An amendment to the Water Industry Act 1991 in the Bill would be welcomed by the fire service and the fire industry as another major step towards a safer society, but I recognise that that might not be possible yet. School fires are increasing, and I am told that 10% of schools are affected by vandalism involving fires each year. More fires are occurring during school hours, and it is only a matter of time before there is a major tragedy. Most fire legislation is reactive and retrospective, drafted on the back of a major loss of life. The amendment that I have suggested could take us forward significantly, and protect our children in the future.
In conclusion—and as a complete aside—we really need to hold a fire evacuation drill in this place at some point, because we need to give leadership to the rest of the country on these issues. I am grateful for your indulgence, Mr Deputy Speaker.
Andrew George (St Ives) (LD)
It is always a great pleasure to follow the hon. Member for Poplar and Limehouse (Jim Fitzpatrick). As a former fireman, he demonstrates his passion for and knowledge of that subject. The last two contributions have shown how wide-ranging this debate can be—
Mr Deputy Speaker (Mr Nigel Evans)
Order. I have been thanked for my indulgence, but let us just say that a conversation went on about how relevant some of the contributions were. Please do not test my patience too much.
Andrew George
Thank you, Mr Deputy Speaker. I was in no way implying any criticism of your great office, or of the way in which you apply the rules to our debates. I have carefully cut out of my speech all the parts referring to swimming and surfing in the waters of the south-west, and any other matters that you might consider a further indulgence.
As a Member of Parliament from the south-west, it is my primary objective to address the two issues that represent the primary purpose of this three-clause Bill before us today. Having said that, the hon. Member for Poplar and Limehouse spoke about the associated issue of fire sprinklers, which I hope will be dealt with elsewhere. Similarly, I know that the hon. Member for Thirsk and Malton (Miss McIntosh) never misses the opportunity to address the important matter of flood defences in her constituency.
I come to this debate to congratulate the Government warmly on what they are achieving through this measure, particularly by the clause that is intended, although not by name, to benefit or at least address an unfairness to the water bill payers of South West Water that has gone on for 22 years. The unfairness has been identified across all parties and by the Anna Walker review, which was commissioned by the previous Government in August 2008 and concluded in December 2009—just before the last general election. It highlighted the need to address this significant and long-standing unfairness.
I welcomed the comments of the shadow Secretary of State, the hon. Member for Wakefield (Mary Creagh). She clearly enters into debates in a full-blooded manner in a debating Chamber that often becomes extremely tribal. At certain points in the debate, I was not sure whether Labour Members were going to be encouraged to vote against the Bill. Following my intervention on the hon. Lady, however, she made it clear that she and her hon. Friends would support the Bill. That will resonate through the House, following what is, after all, a cross-party consensus on this issue. She raised legitimate questions about problems of affordability—across the country generally, but particularly for the customers of South West Water—that need to be looked at further. I hope that my hon. Friend the Under-Secretary will deal with some of those issues in his response. I hope, too, that legislation will be forthcoming soon after the next Queen’s Speech so that we can further meet concerns about affordability issues.
Speaking about how South West Water operates itself, I have in the past called it an ethics-free and risk-free money extortion system. I know that is rather strong language; it goes back primarily to the days when Bill Fraser was the chief executive of South West Water. His management of the business in a rather belligerent and Thatcherite style has largely been remedied by both his successors, Bob Baty and Chris Loughlin. With Chris Loughlin and his board of directors addressing the legacy, it might no longer be appropriate to describe the company as ethics-free. Chris Loughlin has managed the company well and genuinely wants to address the concerns about water affordability. I take my hat off to him and his board members for their efforts.
That said, one thing we cannot escape from is the fact that all water companies—certainly including South West Water—have a monopoly within their areas. There is effectively no competition at all. Significant questions have been raised about the effectiveness of Ofwat as a regulator. It is supposed to establish the “K” factor every few years to restrain the levering up of water bills, but water companies are still able almost to predict the end-of-year dividends at the beginning of each financial year.
Sheryll Murray
Does my hon. Friend agree that about 20,000 households in the south-west could reduce their bills by about £350 to £400 if they took up the option of water meters, and that many of those households include the elderly and the most vulnerable?
Andrew George
I absolutely agree that there are still many customers of South West Water who could enjoy lower bills as a result of transferring to water meters. Ultimately, however, the unit charges are bound to have to increase once all households switch to water meters. Unmetered households are currently charged significantly more than metered households, so when companies plan for the future it will simply not be possible for them to maintain the same level of profitability and dividend to their shareholders if they continue to charge at the current rate.
The point that my hon. Friend makes is extremely valid, but I must also say that I have taken up issues with South West Water, as I know other hon. Members have done. One such issue relates to customers living in sheltered accommodation or in houses in multiple occupation where they have single unmetered bills but do not have the benefit of being able to convert their property on to a meter because of the circumstances in which they live. In those circumstances South West Water has to be asked for what is known as an “assessed charge”, which often results in those people—inevitably, they are vulnerable households—having their water bill halved or significantly reduced to below that level. So there is further work to do to address the problems of water affordability for those living in households that cannot convert from unmetered to metered properties. I have asked South West Water if they would, as a default, automatically offer the assessed charge to those living in such accommodation, rather than their having to trigger it by requesting it. That is an important point.
Miss McIntosh
May I return to the hon. Gentleman’s comment about almost being able to predict the dividend at the beginning of the year? Water companies do not rely solely on water bills for their income and investment. Given that they are now viewed as a fairly reliable investment for pension and insurance funds, is it not a good thing that their dividend is fairly stable?
Andrew George
I certainly would not wish to denigrate or diminish in any way the importance of successful British companies. Where a company provides a good basis for investors, I celebrate that, along with others. I am simply commenting on the reality of the situation of water companies in relation to all other private companies, which ply their trade in a much more risky environment. That is simply a matter of fact, not of debate.
Simon Hughes
There is a link between the experience of colleagues and constituents in the south-west and that of people in the Thames area, because Kemble used to own South West Water and it now owns Thames Water. When it owned South West Water the bills were significantly high and there were a lot of complaints. People are fearful that some of the practices it used then, which included paying out dividends greater than its income—that seems to be not about saving the capital—might be being applied at the moment.
Andrew George
I am grateful to my right hon. Friend for that intervention.
On the question of the high water bills in the south-west, let me put on record the fact that in 2010-11, bills for South West Water customers were, on average, £486, which is certainly higher than the average bills in the rest of the country, which were £339. Unmetered customers had much higher bills, of course, at a rate of £721, whereas bills for metered customers in the south-west were £394 on average. As I and others have said, that was the focus of the Anna Walker inquiry.
Andrew George
My hon. Friend is absolutely right. Cornwall has been at the bottom of the earnings league table pretty much since records began. It has significantly higher water bills than anywhere else in the country, high levels of unemployment in some parts, as well as dependence on benefit, pensioner households and so on, and if we add to that the low average incomes across the households in the area, it is inevitable that in many households people will pay more than 3% of their income to meet their water bills.
As my right hon. Friend the Secretary of State said earlier, the problem is partly caused by a lower level of infrastructure at the time of privatisation in the early ’90s and by the fact that the south-west has been significantly more burdened by the costs of the bathing water directive than any other region in the country. I have drawn the same parallel as others. The bathing waters around the Cornish and south-west coast are a national asset yet only 3% of the population must pay for the cost of cleaning up. The cost is very high, because many outfalls must all be dealt with very expensively, which is the primary cause of the excessive bills across the south-west. The general populace enjoy other national assets, such as the museums and galleries of London, and it is the general taxpayer who pays for them. We do not ask just London taxpayers to pay for the National Gallery, the British Museum and the other museums—we, as a country, contribute and that is an important parallel.
There has been a long-standing campaign and the Anna Walker review was rather belated but at least welcome and took us a long way down that road. I congratulate the previous Government for that and pay tribute, as other hon. Members have, to Linda Gilroy, a former Member of this House who contributed a great deal towards advancing the case for fairness in the billing of water customers, particularly in the south-west. I also congratulate the hon. Member for Plymouth, Moor View (Alison Seabeck) for calling a debate on 14 June 2010, which can be found at column 710 of Hansard, and my hon. Friend the Member for Torbay (Mr Sanders) for doing so on 9 March 2011.
There are issues that need to be addressed. To sum up—I am aware that I have taken as much time as the previous speakers—I hope the Minister will address my questions. Clause 1(3) concerns the discretion of the Secretary of State in determining which customers within any particular water company area might benefit from the intervention of the Secretary of State to vary the bills or make a contribution, and my question, which relates back to the announcement of the payment of £50 per household in last year’s autumn statement, concerns how a household will be defined.
In my area, a large number of households run bed-and-breakfast facilities, guest houses and other businesses, and they are businesses for the purposes of South West Water’s billing structure. However, there are also many wealthy second home owners who have water meters and pay virtually nothing towards the very high costs of getting water to their properties, which are often very remote—on cliffs and so on—and taking away their sewage. Often, they let their properties at very high prices and make a lot of money, but they are not considered to be businesses and so they will get the benefit of the reduction of £50 per household. That clear and evident unfairness is one of many, but I shall not bore the House with a raft of examples regarding this issue of how households should be defined. If we are addressing issues of vulnerability and affordability amongst water rate payers, we need to be very careful how we define households.
The £50 per household reduction is a rather blunt instrument. Yes, it is efficient and it means that the administrative costs will, one hopes, be less than would have been the case with a more elegant and sophisticated measure for targeting vulnerable households. However, because of the problems with adopting a WaterSure system across the south-west and because of the evident unwillingness of water rate payers in the south-west to make any further contribution to a scheme that would benefit vulnerable households, it is unlikely that those households will be able to benefit from any application of a regionally based WaterSure system. I therefore urge my hon. Friend the Minister to look again at whether we can resurrect any form of a national WaterSure system. Clearly, we will go back to South West Water and talk to it again about how it might address the issue of particularly vulnerable households.
A number of matters need to be addressed and I am sorry that I have not addressed those concerning London, but I know they will be addressed by many other people. I look forward to hearing my hon. Friend’s reply and his responses to the questions that have been raised.
Dame Joan Ruddock (Lewisham, Deptford) (Lab)
May I start by apologising to the House? I have an urgent constituency engagement and will have to leave before we conclude the debate.
Let me say at the outset that my constituents and I support the construction of the Thames tunnel. There is no doubt that we cannot continue to discharge raw sewage into the Thames. Much as I would like to debate many of the wider issues, I am essentially here to make a statement on behalf of my constituents, because Thames Water has a proposal to intercept the Deptford storm relief sewer that runs through Deptford discharging north into the Thames.
The site selected by Thames Water is a triangle of green, open space—the Crossfield amenity green, which is bounded by Coffey street, Crossfield street and Deptford Church street. For those who do not know it, Deptford Church street is a major dual carriageway intersecting the Crossfield residential housing estate. Thames Water proposes at least four years’ work on the site, the permanent legacy of which will be four main ventilation columns at least 6 metres high, with associated control units and maintenance requirements. During the phase one consultation, the preferred site was Borthwick wharf foreshore, but for the phase two consultation Deptford Church street is the preferred site and the Borthwick wharf foreshore is put forward, together with the Sue Godfrey nature reserve in Bronze street, as an alternative.
We in Deptford cannot understand Thames Water’s change of plans, which will have a great impact on an exceptional area of my constituency. The phase two consultation site information paper identifies three reasons why Deptford Church street is now preferred. The reasons given are, first, that Deptford Church street has relatively good access compared to Borthwick wharf foreshore; secondly, that using Deptford Church street would avoid work to the Thames foreshore; and, thirdly that the potential effects on residents, visitors and business amenity would be less than with the alternative site.
On access, no traffic impact assessment is provided to enable comparison between the two sites, so how can we judge? On avoiding work on the foreshore, there is a particular paradox. The majority of the site selection assessments favour sites in close proximity to the river, with jetty or wharf facilities. Clearly, the Borthwick wharf foreshore would have a great advantage over Deptford High street, in that material and spoil could be delivered and removed using the River Thames. Furthermore, the alternative site is located at the point at which the combined sewer overflows are discharged into the River Thames. Intercepting the sewer at that point would capture the contents of the entire length of the sewer. Intercepting it further inland, at Deptford Church street, would leave a length of the sewer uncaptured.
Thames Water has provided no data on the number of people, households and businesses affected at both sites, so it is impossible to compare the sites. In addition, the impact on St Joseph’s Catholic primary school on Deptford Church street is direct and severe when compared to any comparable community impact resulting from the use of the Borthwick wharf foreshore. A number of businesses will be directly affected by the use of Deptford Church street, while Borthwick wharf and the adjacent Payne’s wharf are both vacant.
Let me turn to the issues specific to the Deptford site chosen by Thames Water. There are two primary schools close to the proposed site: St Joseph’s Catholic primary school is opposite the site, and the new Tidemill academy is close by. As I say, the proposed works will take at least four and a half years, which represents most of the period of primary school attendance. That area of Deptford appears in the top 10% of areas in the country in the index of deprivation, making primary education of paramount importance. Both indoor and outdoor learning will be impacted by noise and air pollution.
Fire evacuation for St Joseph’s during the period is of concern. The school requires an off-site space near the school for 260-plus children and 25-plus staff, and they need to reach it quickly and safely. The site currently used is the green space that Thames Water proposes using for its shaft and associated construction works. No impact assessment on the school and its fire regulations has been offered.
Sited alongside the green is the grade-I listed St Paul’s church, the single most significant listed building in Lewisham. The proposed shaft and associated building works directly affect the setting and structure of the church, the boundary wall to the church cemetery, which is listed in its own right, and the grade-II listed railway viaduct to the south. It is therefore not surprising that English Heritage has expressed a preference for the alternative site to the Deptford Church street site, as there would then be less impact on heritage assets in our area.
The effects of the disruption to traffic patterns would be numerous, and the disruption would cause congestion and danger. The proposal involves closing the two northbound lanes of Deptford Church street; the two southbound lanes would provide one lane in each direction. Again, no detailed traffic modelling has been provided. There could even be emergency vehicle access restrictions associated with the traffic management measures along the proposed construction vehicle routes. Bus lanes in both north and southbound directions would be temporarily suspended, yet the width of the southbound carriageway is insufficient to accommodate heavy goods vehicles and buses in a two-way traffic scheme, particularly as Deptford Church street is on the borough’s oversized vehicle route.
There can be no doubt that the proposed works will impact on existing businesses along Crossfield street, particularly given that access, both vehicle and pedestrian, could be disrupted and restricted. The construction vehicle movements would have a highway safety impact in Coffey street, particularly for those accessing St Paul’s church, and when the movements coincide with St Joseph’s school’s arrival and departure times. Narrowing Crossfield street would have an impact on the commercial units on Crossfield street, particularly in relation to deliveries and servicing. A further raft of transport concerns have been raised by Lewisham council in its formal objections to Thames Water, but they are too numerous for me to go into now.
Dame Joan Ruddock
I am most grateful to my right hon. Friend for that intervention. I will now slow down, as I know that he is desperate to be able to speak in the debate.
Overlying all the concerns that I have outlined is an aspect of Deptford that has been completely neglected. Planning consents have already been given for the construction of thousands of new homes in the immediate vicinity of the Deptford Church street site. Work is already under way and the nearby Convoys site, which has a footfall—this is quite amazing—equivalent to the whole of the south bank, is expected to be redeveloped over precisely the same period as the Thames tunnel. This is a prescription for chaos. It is particularly unfortunate because Deptford has enjoyed a prolonged period of regeneration led by Lewisham council, financially underpinned by the Labour Government and supported by a number of private sector partnerships.
Lewisham is the 12th most densely populated local authority in the UK, and my constituency the most dense of all. As a consequence, every small piece of open space is greatly valued and provides essential green lungs for the city. The Crossfield amenity green will be made unavailable and inaccessible for at least four years in an area of very limited open space.
Lewisham borough’s core strategy emphasises the importance of improving connectivity throughout the area for pedestrians and cyclists. The recently completed links project from Deptford high street through to Margaret McMillan park, as well as the work on Giffin square, the Deptford Lounge, Tidemill academy and Wavelengths, demonstrate the implementation of the council’s strategic aspirations for the area.
The completion of the Thames tunnel site works is not expected until 2021, resulting in an unacceptable delay to the delivery of the council’s strategic objectives for links to and connections through the area. Furthermore, Deptford high street is classified as a site of nature conservation importance in the adopted unitary development plan. If the borough were the local planning authority for this application, it would either refuse permission that had adverse impacts on nature conservation or, if development were considered essential, it would require an environmental appraisal that included methods of mitigation and proposals for compensation.
I appreciate the need for the Thames tunnel, so I would not be objecting to this site if I thought this was a case of simple nimbyism. It is not. There is so much at stake that we have to make the loudest and clearest objections on the grounds that I have outlined. Already 1,300 people, in an area where there is not a great deal of activism, have signed a petition opposing the use of the Crossfields amenity green. I support the measures in the Bill that will enable Thames Water to undertake a much needed improvement on behalf of all Londoners, but I| believe that it can provide the necessary shafts elsewhere with less damage than that which would result in my constituency. My plea to Thames Water is, in the words of the local campaign, “Don’t dump on Deptford.”
Mr Matthew Offord (Hendon) (Con)
I rise to support the Bill, as I have much experience of both South West Water and Thames Water, However, I must say that my perceptions of the two companies differ widely. They appear to operate at different ends of the spectrum: South West Water levies one of the highest surcharges in the UK and has the lowest number of consumers, while Thames Water levies one of the lowest surcharges and has the highest number of consumers.
The Bill is about a decade overdue. The shadow Secretary of State said that many of the problems are the result of privatisation, but that is an erroneous assertion. If we look at the value of the water companies before privatisation, we will see that Anglian Water was worth £357 million, North West Water £458 million, Severn Trent £476 million and Thames Water £558 million, but South West Water was worth a lowly £106 million. In general terms, at the time of privatisation South West Water had the lowest amount of assets per property, and since privatisation the company has invested about £2 billion, in 2007 prices, to bring its infrastructure to the same level as that elsewhere in England and Wales.
At privatisation, South West Water’s bills were about £50 higher than the national average. This disparity was exacerbated by the impact of the bathing water directive and, of course, the urban waste water treatment directive. As the Public Accounts Committee and the National Audit Office recognised in 1992, privatisation of the water industry was an unprecedented task, with 10 utility monopolies floated on the stock market at the same time after years of restricted investment and an obligation then to spend more than £24 billion in a decade in order to catch up. Any perception of failure now can be attributed only to the lack of governmental interest in the industry 10 years after privatisation and, in the case of South West Water, in the 19 years its consumers have had to wait for the Walker review.
If greater interest had been shown, one industry practice that is causing problems across the country would have been identified: the use of combined sewer overflows. CSOs are intended to act as release valves at times of higher operational use. When Sir Joseph Bazalgette first planned the sewers for London, he gave every person a sewage production allowance and decided the diameter of pipe needed to remove it. He then doubled that diameter. We should all be grateful that he did so; had he not, the smaller size of the sewers would have ensured that they overflowed in the 1960s.
However, the Metropolitan Board of Works said that the cost of Bazalgette’s plans was too high, so he proposed and installed the combined sewer overflow system. This ensured that when it rained the accumulation of rain water that enters the sewerage system can be released through the CSOs, taking the sewage with it. London’s current population is estimated to be about 8 million and rising. In a typical year, 39 million tonnes of untreated sewage is discharged into the River Thames with as little as 2 mm of rainfall. To put that in perspective, that is enough to fill the Royal Albert hall 450 times, and the discharges occur about once a week on average.
The emerging effluent contains not only sewage and storm water, but biochemical oxygen demand material, pathogens, nutrients, heavy metals, pesticides, oils and suspended solids. In short, London’s Victorian sewers can no longer cope, which is why London desperately needs the super-sewer, or Thames tunnel. The CSOs discharge into the river not only chemical and biological contaminants, but nearly 10,000 tonnes of litter every year, including toilet paper, wipes, sanitary towels, condoms, cotton buds and other flushable items. I know that the hon. Member for Hammersmith (Mr Slaughter) accompanied Thames Water on a trip, as I did, where he saw for himself the problems at the pumping station at Fulham. The hidden dangers of the effluent that goes into the river include pathogens, viruses and bacteria, such as E. coli, hepatitis A and faecal streptococci.
Due to the ebb and flow of the tide, it can take up to three months for sewage that has entered the uppermost reaches of the Thames to reach the sea. That is a problem in itself, but the persistence of infection is a real problem. Around 50% of typhoid bacteria are destroyed in an aquatic environment in one to three days, and 90% is destroyed in three to 13 days, but the most resistant can remain for weeks and retain their power of infection, which has an impact on not only the people who use the river, but those who live around it.
Mr Slaughter
The hon. Gentleman is making a powerful case, and he is right to say that I visited a pumping station, although it was the Hammersmith one. When most people think about pumping stations, they think that some form of treatment is going on there. On the contrary: a structure that is probably half the size of this Chamber fills up with raw sewage, which is then pumped straight into the Thames, and that happens on at least a weekly basis. Does he agree that it is highly irresponsible to say that we should clean up the Thames so that it is so clean that salmon can thrive and prosper in it? We need to clean it up because it is an essential health matter.
Mr Offord
I thank the hon. Gentleman for his intervention. I am probably aware who he is citing, and, having had conversations with the former leader of Hammersmith and Fulham council, I can assure the hon. Gentleman that we do not agree on this subject, though we may agree on many others.
The super-sewer in London is essential to ensure that the UK complies with European environmental standards and, most particularly, the urban waste water treatment directive. All British taxpayers are at risk of having to fund hefty EU fines if the UK is confirmed to be in breach of that directive.
It is not just London and Thames Water that need to take action, however. All water companies have a contract with their consumers not only to provide them with clean water, but to remove their sewage and to treat it responsibly, but that is not happening. The water quality of Britain’s beaches is being jeopardised by thousands of unregulated overflow pipes that dump raw sewage into coastal waters and rivers. It has been estimated that 3,500 pipes operated by water companies pump unlimited amounts of raw sewage into more than 80 rivers and along sections of our coastline. That comprises more than 60 operated by South West Water, including pipes on the River Torridge, which flows to a popular Devon beach; more than 250 outlets operated by Yorkshire Water, including sewage flowing into the North sea; sewage overflows on the River Don, where thousands of fish were killed by sewage pollution in 2006; and an overflow, operated by United Utilities near Manchester, which was blamed for polluting a fishery in 2005.
Dan Rogerson
The hon. Gentleman is making a powerful case for the need to be mindful at all times of how outdated sewerage systems can cause problems. People may be more accepting of occasional discharges during periods of very high rainfall, but he knows north Cornwall well, and if he considers the area of Trevone he may wish to look again at South West Water’s record on delivering its promises, because in that area discharges have been occurring several times a month, and the company has yet to take action. I have raised that issue with South West Water, and we hope to address it soon, but he is absolutely right that there is a problem not just here in London, but throughout the country.
Mr Speaker
Order. There is a worrying pattern developing whereby the erudition of interventions is equalled only by their length.
Mr Offord
I take it from that only that you would like me to talk for even longer, Mr Speaker.
I absolutely agree with the hon. Gentleman, however, and having had some experience as a lifeguard in Cornwall I have seen at first hand the problems that South West Water has caused. I intend to go on to address the points that he raises.
From my experience in Cornwall and elsewhere, I am aware also that there are 500 regulated sewer overflows on Britain’s beaches that, as the hon. Gentleman rightly says, are supposed to operate only after heavy rain. However, swimmers and surfers often complain, even to me, that the overflows operate more regularly to relieve pressure on sewerage systems that are said to be “at bursting point” by the various water companies.
Despite a £10 billion investment programme by water companies since privatisation, about one in four beaches still fails to qualify for the European Union’s top category. The investment has ensured that 96% now meet the lower mandatory standard, but this still means that a swimmer, surfer or scuba diver has a 14% chance of contracting a bacterial or viral infection, and that is simply not acceptable.
Every year the water companies factor into their operating costs the insignificant fines, ranging from a couple of thousand pounds to tens of thousands of pounds, that can be levied on them, and they know that it is cheaper to pay them than to ensure that their infrastructure performs within the terms of their licences. Water companies are labelled repeat offenders, as year on year they are fined for impacting the environment with unlicensed discharges of untreated sewage. Only last Friday South West Water was ordered to pay almost £40,000 in fines and costs for allowing sewage to escape into the River Dart near Galmpton in south Devon, after effluent entered the river last May and caused the closure of a shellfishery.
The 1976 EU bathing water directive is not designed to identify effectively the impacts on the environment from combined sewer overflows. It is useful in giving an indication of water quality over the bathing water season, but all that it really tells us is the water quality during 20 short periods over 140 days, and only in the most popular bathing zones, not at the points where water is most likely to be polluted, such as the mouth of a river or the nearest CSO on the beach.
The revised bathing water directive, which will come into force in 2015, will mean four years’ consecutive data being examined and water being measured against tougher standards. However, there will still be 20 samples, and many pollution incidents will fall between the gaps. I remain concerned that many CSOs are deemed not to have an impact on bathing waters, and so are licensed for even more frequent discharges—the licences do not contain a set figure.
The CSOs also discharge when a predetermined volume of water is being passed forward within the sewerage system. When that volume is reached, the CSO can be employed to release pressure from the system, resulting in raw sewage on beaches and in rivers more than 100 times a year, equal to the frequency in London. Those CSO discharges can also have an impact on the coastal environment. Our over-reliance on CSOs has resulted in the European Commission taking the UK to court over a breach of the EU urban waste water directive of 1991. The case has been heard, but we are still waiting for the judgment.
I support the Thames tunnel, the super-sewer or whatever we want to call it, for the environmental and economic benefits that it will achieve in London. The project is expected to add £70 to £80 to the average Thames Water waste water charge, which has been among the lowest in the country, and I recognise the problems that that would cause some people. Even with the Thames tunnel, however, Thames Water’s bill would rise only to the national average. The additional resources from the Government should allay some of the fears of the people whom colleagues have mentioned.
I also welcome the reduction for South West Water customers, but according to one estimate highlighted by the company itself, the cost of removing or further reducing the impact of CSOs in its region’s network would be about £500 million, which could add as much as £40 a year to the average bill in the region. If the Government propose to subsidise each South West Water customer by £50, the company should by its own evidence be able to afford to undertake that work from its current resources. I should like that to happen, particularly given the introduction of the new bathing water directive. Until that occurs, it is anathema for any Government to claim that we have bathing water of a high standard in this country. My experience, and that of other Members, has been that that is simply not the case.
Mr Ben Bradshaw (Exeter) (Lab)
I wholeheartedly associate myself with the final comments of the hon. Member for Hendon (Mr Offord).
I welcome the Bill, and I thank the Minister and the Secretary of State for introducing it. As my hon. Friend the shadow Secretary of State said, it goes a small way towards righting the terrible injustice that was done as a result of how the water industry was privatised, particularly in the south-west, in 1989.
As other Members have said, other people deserve credit, too. I thank the excellent public servant Anna Walker, whose year-long review in 2008-09 made recommendations, some of which the Government are now implementing. I also thank my right hon. Friend the Member for Leeds Central (Hilary Benn), who was the Secretary of State who commissioned the Walker review.
I also thank somebody else who has been named by a number of Members today—my colleague the former Member for Plymouth Sutton, Linda Gilroy. Linda worked tirelessly as a leading member of the all-party water group during her 13 years in this place. She was like a terrier with a bone on the issue—I remember seeing two Prime Ministers and several other Ministers scurrying away from her whenever they saw her approaching them in the Division Lobby, because they knew she would pin them against the wall to talk about water prices. She brought not just great persistence but huge expertise to the subject, and she helped to change minds. It is no exaggeration to say that without Linda Gilroy’s contribution, the Walker review would never have happened. We might have got there in the end, but we would have been much less far down the road. It is gratifying that Members in all parts of the House have paid tribute to her, because she is no longer in this place to smile on her legacy.
I would be grateful if the Minister could answer a couple of questions. What will happen at the end of the next comprehensive spending review period? Will further legislation be needed if the £50 rebate is to be extended beyond the next CSR period; and if so, how will the legislative mechanism be put in place to do that? Given that when the Labour Government considered this issue in the past there was a problem with European state aid rules, is he satisfied that there will not be such a problem with what the Government are doing?
Why are the Government implementing only part of the Walker review? Will the Minister assure us that the other bits will be implemented when the Government bring an all-singing, all-dancing water Bill to this House? I am a little disappointed that we will apparently not get such a Bill in the forthcoming Queen’s Speech, but I hope that we will during this Parliament. That is absolutely vital because, as the hon. Member for St Ives (Andrew George) said very clearly and convincingly, there is a desperate need for root-and-branch reform of the water industry.
The £50 cut in bills in the south-west is extremely welcome, but our bills will still be the highest in the country, and the cut will already have been wiped out by the time we get it owing to the increases in the current and forthcoming financial years, with a 5.7% increase in April.
Anne Marie Morris (Newton Abbot) (Con)
Does the right hon. Gentleman agree that despite the fact that the £50 cut will be impacted by high inflationary rises, those rises apply across the country, so one cannot say that we are worse off in the south-west, because we are still better off by that £50?
Mr Bradshaw
That is absolutely right. I am afraid that water customers across the country are paying the price for this Government losing control of inflation. The reason we are all facing these massive increases in the current financial year and the next is that inflation is out of control. We in the south-west are suffering like everybody else. However welcome the £50 cut is, it will already have been wiped out by the time we get it. People will not notice it because their bills will be no lower than they were before, as a result of the two years of increases that they will suffer this year and the next.
We must stop the culture of annual increases, and I hope that the Government will do that when they bring forward their full water Bill. The hon. Member for St Ives is absolutely right about this. We always talk about the water industry as though it were the same as the gas industry, the electricity industry and the other privatised utilities, but it is not—it is a monopoly private provider. Customers in the south-west cannot choose where they get their water from. Admittedly there is also a problem in the energy industry, but people do have a limited choice of provider for their gas and electricity.
The other reason it is completely wrong to put water in the same category as the other privatised utilities is that water is plentiful. We live in a wet country; it rains. If it stops raining, we might as well all pack up go home, but that is not going to happen—we hope. Water is not like gas, electricity or oil, where the resources are finite. The Government must challenge the assumption that water prices should always rise. Given the advances in modern technology, there are strong arguments for water bills coming down rather than going up. I ask the Minister to look carefully at the structure of the industry and the strength of the regulator. For the reasons that the hon. Member for St Ives and I have mentioned, there is a very good argument for the water regulator being much stronger than the regulators of the other privatised utilities.
The Prime Minister is fond of making speeches about crony capitalism; well, he can show us his mettle by dealing with an industry that is a private monopoly where customers have no choice. The industry has its hands round their necks, they cannot go anywhere else, they are fed up, and they do not understand the inevitability of year-on-year increases.
Of course we have to improve our outdated infrastructure, and a lot of work has been done on that. However, when I hear industry spokespeople and Ministers saying that we are about to face a terrible drought, worse than that in 1976, I wonder why the industry and the Government have not looked more carefully at the idea of water trading, which I think has been mentioned by a Government Member. Why do we not pipe water from the Severn catchment area, where it is plentiful, to the Thames catchment area? That could be done quite cheaply. It is not hugely expensive or terrible for climate change, as the Secretary of State said in her opening remarks. A similar thing could be done across the country. My right hon. Friend the Member for Holborn and St Pancras (Frank Dobson) mentioned reservoir capacity.
There is no reason why in this country, which has a cool, temperate climate with plenty of rain, we should pay such high prices for our water. We should not accept inexorable rises year on year, particularly when families are feeling the pinch. I share the admiration of the hon. Member for St Ives for the current management of South West Water. However, in the increases that that company and the rest of the industry have asked for in this financial year and the next, they have not shown the sensitivity that they might have shown to the state of household finances.
Richard Benyon
I urge the right hon. Gentleman to read our water White Paper, which addressed many of the points that he is making. It was long overdue in doing so. It is important that water companies talk to each other about bulk trading, moving water and the connectivity between water company areas. That is precisely what the White Paper sought to achieve. It addressed a long-standing problem.
Mr Bradshaw
I look forward to the recommendations in the White Paper being implemented in legislation. I hope that that will happen in the next Session and that we will not have to wait another year or more, but there is talk of the legislative process being clogged up by House of Lords reform. We need this legislation as soon as possible to address the problem once and for all.
I will end my remarks on this point. The Bill is a welcome development, as far as it goes. Of course the £50 cut is welcome, regardless of the fact that it will be wiped out by the big increases in water bills this year and next. However, it is only a temporary solution to the problem in the south-west and nationally. Although it will assuage the public anger in the south-west over the cost of water bills temporarily, if those bill continue to go up every year, this bit of help will be but a distant memory in a few years’ time. I address my final remark as much to those on the Opposition Front Bench as to the Government. Whoever is in power has to grasp this nettle once and for all and reform this industry properly, so that it operates for the benefit of the consumer and the customer.
Anne Marie Morris (Newton Abbot) (Con)
I congratulate the Government, because they have done an extremely fine job. Frankly, I find the comments about the £50 reduction being cheeseparing a bit sad.
I was interested to hear the comments of the right hon. Member for Exeter (Mr Bradshaw) and I agreed with him on many points. He said that he is concerned that the £50 will be wiped out by price rises. As I said, there will be price rises across the country. Is he saying that the Opposition would have provided more money to give a greater subsidy? If so, how would they have funded that? I will leave him to ponder that.
Gavin Shuker (Luton South) (Lab/Co-op)
The hon. Lady asked about Opposition policy. We support the £50 payments in the south-west, but are looking for further action on water affordability across the piece, which this Bill does not provide.
Anne Marie Morris
Like the hon. Gentleman, we are all looking at how we can deal with the affordability issue. However, the Bill is intended purely as an academic piece of legislation to allow the £50 reduction, not to address the whole gamut of water issues, which is substantial. I welcome the £50 reduction and think that the 710,000 householders who will benefit from it will be absolutely delighted.
I will raise some technical points, because this is a technical Bill. I will not talk about the big picture of water issues. I will be grateful if the Minister considers the points that I raise in his winding-up speech, whether that be today or on another occasion. My concern is that the £50 is aimed at the domestic user as opposed to the non-domestic, commercial user. I understand why the Government are trying to be careful with their resources, but I emphasise that including the non-domestic, commercial user would mean an extra £3.5 million, which falls within the £40 million ceiling. I recognise the Government’s concerns, but there is a potential issue with domestic households that pay through commercial intermediaries.
For example, park homes cover a significant number of residents throughout the south-west, and the rates are effectively levied against the park home owner. I am therefore concerned that those living on park home estates will not receive the benefit. There is a similar problem with sheltered housing. I am worried that subsection (7) of proposed new section 154A in clause 1 does not fully address that. I would be grateful if the Minister considered that because I cannot believe that anybody feels that those individuals should be excluded from the benefit.
My second technical concern relates to the debate about WaterSure and support for those who cannot afford to pay their water bills. I will not go into the debate because it is something for the water Bill. My concern is technical because, if the Government decide to support the Consumer Council for Water’s view that WaterSure should be nationally funded, I am not sure whether subsection (2) of proposed new section 154A would enable them to take that position. I would therefore be grateful if that were reviewed.
Otherwise, I think I will make history by making the shortest speech of the afternoon and simply say, “Well done Government—huge benefit! £40 million should not be sniffed at.”
Alison Seabeck (Plymouth, Moor View) (Lab)
It is a great irony for us in the south-west, surrounded by water as we are, that we have the highest water bills in the country. I represent a coastal city that sits on three rivers, and the injustice of the expense of water bills in Plymouth aggravates almost everyone I know in my constituency and the wider region.
Water bills in the south-west are, on average, 43% higher than in the rest of the country and we have 200,000 households under water stress—paying, as we have heard several times, more than 3% of their income towards their bills. A Government Member said that there were more people in his region to which that applies, and that is true, but we have the highest percentage of people in that position. Those people are pensioners and families with high and essential water needs. They are often supported through WaterSure, but only about a third of those eligible get that help.
People have been paying through the nose for a basic commodity. I accept that it needs to be valued because, with climate change and other pressures, it could become more scarce. If we do not prepare well for the decades and century ahead how we manage the future costs of the necessary work and, from my perspective, prevent a repeat of the mistakes that were made when water was privatised and the south-west paid a disproportionately high price, we will all fail water bill payers. The Bill clearly tries to set out some ground rules in that regard.
The high cost of water is not a new problem, but it has dominated concerns in Plymouth throughout my time in Parliament and for many years before that. It has posed problems for Governments of all political persuasions and it will clearly continue to exercise the current Minister in the months and years ahead.
As we have heard, for many years, I and other south-west Members have campaigned to address the higher bills left us by privatisation. The detailed Walker review did, to Anna Walker’s credit, much of the groundwork for the announcements that followed, including the Chancellor’s announcement of the £50 refund for households in the south-west, and ultimately led to the Bill.
Through parliamentary questions, Adjournment debates and the work of the all-party parliamentary water group, which was initially chaired by Linda Gilroy, who has rightly been lauded in the Chamber today, then by the hon. Member for Thirsk and Malton (Miss McIntosh), and then by the hon. Member for St Ives (Andrew George), Members of all parties have sought to keep the issue high on the agenda.
At a time of soaring utility bills, high inflation and stagnant wages, action on water bills is welcome. However, it needs to be meaningful and lasting to make water bills more affordable in the long term. The continuing upward pressure on the south-west, despite the refund, will mean that many families dip below the poverty line. It is not acceptable to increase the number of children and pensioners in poverty. Although I welcome any help that the Government are able to give—it would be churlish not to welcome the £50—it is small relief from ever-rising bills. This is not the end of the debate and the problem extends beyond the south-west.
That said, all of us who live in and represent constituencies in the south-west—I should declare an interest as a South West Water bill payer—have a duty to ask whether the Bill will effect meaningful and lasting changes. Sadly, my conclusion is that it will not. There is a strong view that this gain will be temporary, and that even with the changes, water bills in the south-west will be back at their current levels within two or three years, for the reasons I have set out, with wages stagnant and inflation high.
Will the Minister look at the issue of water companies overcharging for surface water drainage, which affects water bill payers specifically in the south-west, but also more generally? Very many households do not connect their waste water into the sewerage system and water companies do not have complete data on where those properties are—I have been out in my patch trying to identify them. In Plymouth, no council data exist for the 1950s from the plans, and it is believed that later plans are inaccurate in terms of the connection of mains sewers to properties. It is wrong that the default position is to assume that people are connected and charge them. As a result, the onus is on the bill payer or house owner to understand exactly where their water goes and whether they have a direct connection into the mains sewer. That adds further unfairness to the system, and I ask the Minister to address it at some point.
I wholly support the comments of the hon. Member for Newton Abbot (Anne Marie Morris) on park home owners. Many people in Glenholt park in the north of my constituency are anxious about how the proposals will play out for them, and I am afraid that not all park home owners are responsible or willing to be generous with the people on their sites.
A number of related issues, including the adoption of private sewers, will impact on the cost of water nationally, and they need to be understood with regard to the Bill. I note that the explanatory notes state that the Bill gives the Secretary of State
“a power to give financial assistance”
with regard to the
“construction of…sewerage infrastructure”.
I assume that that is partly designed to reassure Thames Water bill payers on the linked new ring main sewer. However, civic schemes are not mentioned in the Bill, so when the Minister winds up, will he tell the House whether assistance could be applied for by a water company that finds it has a much more extensive private sewer commitment than it believed it had inherited? The Minister will know—we have written to each other on the subject—that we are unclear what the burden is likely to be for some water companies in that respect.
The Government need to introduce measures to tackle long-term water affordability, not just in the south-west but nationally, and they should consider the feasibility of a national social tariff. We have heard that from other hon. Members and I hope the Government will consider the proposal.
Anna Walker, who dedicated a whole chapter to the injustice felt and experienced in the south-west, set out a number of main challenges nationally, including the cost that other bill payers incur as a result of bad debt—it is around £15 per person, as we have heard. She looked at the implications of metering and considered how future costs should be met, acknowledging some of the issues that we have debated. She was also clear that it was appropriate for water customers to pay for improvements to the quality of water and the disposal of sewage, because they ultimately benefit from such improvements, but she was also clear that customers should be fully consulted before the Government agree to such changes to avoid the accusation of imposing a stealth tax. I believe that the proposals of my hon. Friend the Member for Wakefield (Mary Creagh), the shadow Secretary of State, on parliamentary oversight of specific schemes, should be debated seriously in Committee on the Floor of the House.
The Bill will be a waste of time if, within a short period, the problem of affordability comes back on to the agenda, not just in the south-west but nationally, and if customers feel that they have not had input into the reasons for the higher bills that they pay. The Government will do them no favours if they simply appease us in the south-west who have kicked off over the years and made a lot of noise about our bills, and they will miss an opportunity not only to consider water affordability in a more strategic and inclusive way but obviously to tackle the historical injustice in our region.
Whatever the new regime, basic standards must apply, but that is not entirely clear from the Bill, and it needs the appropriate regulation, which also is not entirely clear. As has been said, the House must be able to consider every proposal on its merits, but that is not in the Bill either. So more work needs to be done. Given the expertise and experience of Members across the Chamber, I hope for further and more detailed debate in the short Committee stage because it would be of benefit to the Bill.
Simon Hughes (Bermondsey and Old Southwark) (LD)
I am grateful for the opportunity to take part in the debate and to follow the hon. Member for Plymouth, Moor View (Alison Seabeck), who rightly concentrated on matters in the south-west.
May I say, as I have said in other policy areas, that as a London MP I fully support the Government’s proposal, derived from a Liberal Democrat election commitment, to assist people in the south-west? Over the years, I have campaigned with colleagues to improve water quality in the south-west and to clean up sewage on its beaches—I and my hon. Friend the Member for St Ives (Andrew George) helped with the Surfers Against Sewage campaign. I am also clear that there is a collective responsibility for Members across the UK to legislate to end disparities in water prices. As a London MP, therefore, I do not resent our legislating to assist colleagues in a beautiful part of the country where bills have been disproportionate compared with ability to pay and the justice of the case.
Sheryll Murray
Does the right hon. Gentleman agree that, from a south-west perspective, this is truly a cross-party initiative? I cannot think of another example where every major political party has campaigned on the water issue.
Simon Hughes
I absolutely accept that. I was not disputing the cross-party nature of the campaign. I was trying to support my hon. Friend and colleagues across the House by saying that those of us who do not come from the south-west have supported them too.
A pledge made by the Liberal Democrats bas been honoured, and a pledge made by the coalition Government has also been honoured—generally, then, this is a good proposal.
The second part of the Bill is the one that preoccupies those of us with London constituencies and constituencies served by Thames Water. It is the largest water company in the country and covers a significant number of colleagues with constituencies in the Thames valley as well as in the capital. That relates to clause 2. I support the general proposal that the Government should be able to assist major infrastructure projects, and I am aware that last year and the year before, the Chancellor rightly identified a set of infrastructure projects around the country to get people back into work. Good, long-term, viable infrastructure projects are a good thing, and we should support them.
There is always a danger, however, that infrastructure projects start with one price tag but end up with another. When the Thames tunnel scheme to deal with sewage in the Thames—the system built in the Victorian era by Bazalgette is no longer fit for purpose—was first proposed, the general cost was said to be between £1 billion and £2 billion, but everybody now accepts that, at 2011 prices, the Thames tunnel would cost £4.1 billion or more. That excludes financing costs, as the notes to the Bill explain, but includes £900 million for risk and optimism bias. So this is a big project that will cost a lot of money.
In 2006, the water regulator warned potential buyers of Thames Water that it would not allow them to saddle the company with high debt levels and pass financial risk on to the customers. I want to concentrate my remarks on the financing, and the financing structure, but I also want to place on the record my position on the project. I have supported the general position that we need to deal with the infractions on air quality and water quality in London that have brought us before the European authorities. That is what we are facing in relation to water and air quality; therefore, we need to act.
I have started from the proposition that the Thames tunnel, as proposed by Thames Water, is the right answer. When it was endorsed by the last Government it had my support, but I am increasingly troubled that it looks as if it may not be the answer that everybody once thought it was. Therefore, when I recently made a full submission as part of the consultation process, I asked—I am also about to write to the Secretary of State to ask this question, after this debate and after a meeting on Monday—whether, at least between now and the point in the normal timetable when Thames Water might be in a position to make an application, there could be a final independent review of the viability of the current project.
Those driving the project have an interest—Thames Water has an interest, and there are others with an interest. It is important not just to have a battle between those with an interest in favour and local authorities such as mine—[Interruption]—and that of the hon. Member for Hammersmith (Mr Slaughter), who is about to intervene on me—which, because of the effect on their constituents, have become opposed. At the moment we have a dialogue of two different interested groups, and I think we need to get some people involved who do not have a vested interest. There are people in the European Commission who do not have a vested interest, there are people in international environment agencies who do not have a vested interest, and there are also people who do not have a price interest. Before they commit their support to a project that is rapidly increasing in cost—I will say why that is a danger for the Government, as well as for everybody else—I think the Government would be wise to commit themselves to one last review. I hope I can persuade colleagues over the next few weeks that this can be done in a way that is compatible with the timetable in general terms.
Mr Slaughter
The right hon. Gentleman took part in a Westminster Hall debate last September—less than six months ago—at which I think I was also present, when he said:
“The Thames tunnel is the best direction.”—[Official Report, 14 September 2011; Vol. 532, c. 316WH.]
Is he saying that he has changed his mind since then? If he is saying that he has reservations about cost or individual sites, I would say that I probably share them—if I get a chance to speak, I will probably address them. Is he, however, saying that he has now changed his mind about the project as a whole?
Simon Hughes
The answer is that there is a proposal on the table for what is called “the full tunnel”. I am not as certain now that what is called the full tunnel is the right solution. There is already the tunnel being built in the east—that is well under way—and there is an argument for a smaller tunnel and other measures. I just think we need to satisfy ourselves before we go for the full tunnel that that is the right solution. There are also site issues, of course, but I regard those as secondary, although in my constituency, as in the hon. Gentleman’s, they are hugely important to our constituents, not least with a major site being planned in the middle of my constituency affecting thousands of people, thousands of homes and two or three major schools.
Mr Slaughter
The right hon. Gentleman is being very generous. When he says “not the full tunnel”, I should point out that the context of his remarks last September was his objection to the wholly inadequate Selborne report, which proposes a partial tunnel—a disastrous tunnel—in west London. I hope he is not saying that he supports that.
Simon Hughes
Rather than have a long dialogue, I will let the hon. Gentleman have a copy of my submission to Thames Water later, so he can read my full views. However, let me summarise, as I did in my submission:
“I am now clear that, since the end of the first round of consultations in 2011, the arguments for a review of the full tunnel proposal and possible alternatives have substantially increased. There has been a growing amount of opposition against the full tunnel from my constituents and other constituents in greater London.”
I go on to say that we should therefore give that argument greater weight.
Let me turn to the substance of the financial issues, which are dealt with in this part of the Bill. Back in 2007, a memorandum was submitted to the Treasury Committee by a Mr Martin Blaiklock—consultant, infrastructure and energy project finance—on the subject of Thames Water specifically, but also on equity-type investment generally. He said:
“Over the last 12 months I have be keeping a particularly close watch on the activities of Thames Water, not least because I am a Thames Water customer, but also because it is one example,—and a good example,—of Private Equity involvement with public services. The case of Thames is significant as it is the UK’s largest privatised water utility, serving the Capital and 13 million customers, and also a monopoly service provider...Thames Water Utilities Limited…is the utility licensed by OFWAT. However, Thames Water Utilities Limited is 5 or 6 times removed from the controlling investor group…of whom a number are based offshore in Luxemburg…Is this the ‘transparent’ corporate structure expected of a UK monopoly public service provider?”
I cannot put this on the record, but there is a helpful graph in that memorandum to the Treasury Committee showing Thames Water Utilities Ltd at the bottom. Above it are lots of holding companies, including Thames Water plc, Thames Water Holdings plc, Kemble Water Ltd and Kemble Water Holdings Ltd, and intermediate holding companies. The list goes right up to non-Macquarie investors and then to Macquarie, and shows the purchase of part of the company by the Chinese state finance organisation and others. That shows an organisation that does not do transparent finance. We therefore need certain safeguards to be put in place to protect any taxpayer investment and Government support.
The company also has considerable activity in the Cayman Islands. I am not sure whether that is the most appropriate way for a major utility company to spend its money. The tax arrangements of Thames Water, having been bought by Kemble, have involved setting up a subsidiary financing branch in the Cayman Islands, based at Ugland House, which has 18,856 other businesses registered at it. There is a real question of transparency for Thames Water, and the Government need to have a public debate on it. We need to look at this matter in Committee and on Report to determine exactly how the financing arrangements are arrived at. There is at the moment no proposal from Thames Water as to how it will raise the £4.1 billion to finance the project, and I am concerned that the cost might ultimately be borne by the Thames Water ratepayer, which might not provide the best value for money for our constituents who pay their bills.
Mr Blaiklock concluded:
“There is no doubt that the introduction of Private Equity-type investment into the privatised UK public services has sharpened up the financial management of such enterprises. However, such Private Equity investment has also
(a) introduced a lack of transparency in the control, governance and, therefore, the accounts of such utilities. Some utilities, such as Thames Water, are effectively owned and controlled offshore, possibly by companies with limited liability and domiciled in tax havens. Corporate information is, not surprisingly, hard to come by for such Private Equity investments! Hence, in the event of operational failure by such utilities…it is quite possible that the controlling company and its directors cannot be called to account, notwithstanding OFWAT’s Conditions P and F licensing requirements…
(b) increased the leverage and, thereby, decreased the financial strength of such utilities, at the expense of customers and the security of service; and
(c) introduced corporate uncertainty. The investment horizon for Private Equity is traditionally three to five years, which is short for public service utilities, which require long-term capital and financial stability. The only balancing feature has been the increased intervention, as direct investors, by pension funds and life insurance companies—as principals, not clients—albeit some are offshore owned and controlled. Such investors have longer time horizons and are ideal investors for such public service utilities.”
The other activity that is certainly questionable is the way in which Thames Water has managed its affairs in recent years. Extremely high dividend payments have been made over the past years, representing a direct transfer of income and capital out of Thames Water to private investors. At the financial year end in 2011, Thames Water made £225.2 million in profits, but it distributed £271.4 million in dividends. This high dividend policy is a recent development, but it is not limited to last year. In 2010, the unadjusted common dividend payout ratio, in percentage terms, was 141.5%—that is, nearly half as much again, on top of profits, was paid out. The figure for 2009 was 126.7%—a quarter as much paid out again as was made in profits, and in 2008, 61.3% was paid out. That contrasts with Anglian Water’s dividend ratio of 81.%, Southern Water’s 58.7% and South East Water’s 48.4%. The policy of paying higher returns to investors started immediately after the company was purchased by the consortium behind Kemble Holdings in 2007. The company paid out £535 million in dividends in 2007, and £233 million in 2008.
All this has happened while the company has vastly increased its debt position. In the financial report of 2008, the change in the amount of debt held by Thames Water was more than £1.5 billion. Ofwat warned the bidding companies to keep a good debt ratio, advising that 45% would be appropriate. The ratio is now at 80%. We—Parliament—and the Government need to ask why Thames Water has increased its debt holding by so much when it is known that it has an extremely large capital project coming up, which will need a substantial amount of borrowing.
My question to my right hon. Friend the Secretary of State is whether the Government have investigated whether Thames Water would have been able to make a greater contribution to any scheme from its own funds if it had not spent the last few years borrowing money in order to pay itself. Both the financial policy and the tax arrangements of Thames Water seem to me to be appropriate for us to debate.
My conclusion is that we might need to insert conditions into the Bill regarding any financial arrangements whereby the Government underwrite the borrowing by Thames Water, making it clear that they should be transparent, ethical and accountable so that Thames Water users, those of us who represent people in the Thames Water area and everybody else in the country can understand that there has been some pretty strange organisational finance going on in the last five years. We must make sure that the objectives do not feather the nests of the equity investors rather than benefit Thames Water users, so we must ensure that we have the right financial vehicles if we are to go ahead with infrastructure projects like this one. We will have plenty of opportunity to debate the project itself on other occasions, but I hope that the Secretary of State will be sensitive, as I know the Treasury is sensitive, to these real concerns about how Thames Water runs its financial affairs.
Alex Cunningham (Stockton North) (Lab)
I would like to talk about the Bill’s impact on people in north-east England and to outline some of the responsibilities that water companies, which make billions of pounds of profit between them, might need to be compelled to fulfil, although I acknowledge that some do the right thing—part of the time, at least.
I would also like to take the opportunity to invite those who want a consistent and high-quality water supply to come to the north-east—industrialists, manufacturers, green revolution companies, call centres, breweries and individual people would all be made welcome in the region. My message to allcomers is clear: “You need water; we’ve got it”—and I would encourage anyone needing water for their businesses to get in touch with Tees Valley Unlimited, and we will work with them to develop their business without fear of ever having to do without their water supply.
What of domestic supplies and customers? About 370,000 people in the north-east spend more than 3% of their income on water, which is why I am glad that the Opposition will introduce a new clause to enable the introduction of national minimum standards for water company social tariffs. Such tariffs will ensure that financial assistance is provided to those most in need across the country—not just to those in the south-west, about whom we have heard so much. It is worth noting that the south-west has almost exactly the same number of households paying a disproportionately large part of their income for water supplies.
Some Members have talked about water meters, and I would encourage all individuals and families to explore using them. My personal saving in my home came to about 60%, so people should look at this option to solve some of their financial issues. However, I recognise that that is more difficult for families than for a couple living in a larger house.
There has been a lot of consensus around the place today, but it saddens me to say that the Government are taking a similar approach to that being taken to the big six energy companies. The Government seem incapable of taking on the powerful vested interests of the large water companies and are set to miss the opportunity to make a real difference with a more comprehensive Bill that would put pressure on companies to deliver for our communities the services they deserve at a reasonable and fair cost. From April, water bills will rise by an average of 5.7%, which is a huge amount, given that for many ordinary families pay freezes and job losses are the name of the game. Such a hands-off approach from the Government is truly shameful and it is even more appalling when people are already contending with a 20% increase in energy bills over the past year.
More important than that, however, is the following question: did we really hand over or sell our water assets to allow companies to make huge profits, borrow on the back of those assets to pay dividends and still fail to provide enough water for people in the south to water their gardens if they choose to do so? I am particularly concerned and surprised about the proposals in clause 1 to allow the Secretary of State to provide financial assistance—taxpayers’ money—at the stroke of a pen if she
“considers it desirable to do so”
to a privately owned water or sewerage company that may be failing in its basic duty to deliver an adequate water supply all year round in parts of our country. I do not know how much cash the Secretary of State will have to splash around, but providing a blank cheque at taxpayers’ expense and at a whim to any water company she likes, whenever she likes, is absolutely not what is needed to ensure that ordinary people get a fair deal on their water.
That issue is all the more pressing given that huge areas of the south and east of England are suffering their worst drought in almost 35 years. One recently proposed solution is shown in the decision by a utility company to draw up plans for a £2.6 billion pipeline to send water from the north to the drought-hit south. United Utilities has revealed plans for the pipeline, but I must question whether it is really the answer. It would be incredibly expensive to transport water from north to south, and I know who will end up meeting the cost.
The Environment Agency last looked at the idea of a pipeline in 2006 and estimated that it would cost up to eight times more than developing the existing infrastructure. Water is heavy—1 cubic metre of water, which is what one person uses a week on average, weighs a full metric tonne—so the energy required for the construction, development and operation of large-scale water transfer systems also adds further to carbon emissions, which lead to climate change.
The north-east of England has significant infrastructure for industrial and domestic water supply. One of Europe’s largest man-made lakes, Kielder water in Northumberland, was created to supply water to the industry of north-east England, much of it on Teesside, in and around my constituency. Sadly, the growth of some of the industries, such as steel, that are heavily water intensive did not materialise. As we have seen, the north-east economy has been rebalanced in recent times, with different industries and a wider range of jobs. That was done under the previous Government and, of course, the work was led by the now defunct One North East regional development agency.
In recent years, Kielder water has come into its own, with underground springs ensuring that it always remains at a high level, regardless of the prevailing climate. That means that while the south of England is often forced to implement drought strategies and hosepipe bans, north-east England enjoys plentiful water supplies. People in the north-east have, of course, had to pay the price for an abundant water supply, which is now managed by Northumbrian Water. Unlike other companies, it has pegged its price rise to inflation this year. Over the years, however, consumers in the region have paid higher bills to finance this reservoir, and given such an abundance of water there are surely no excuses for a hike in prices when there is no need for investment in reservoir infrastructure. Northumbrian Water does do the right thing; it does invest in works and it works hard for its communities. We all like the idea of reduced bills, but we also need investment and the constant water supply that we have in the north-east. Indeed, with such an abundance of water, instead of transferring large amounts of water to the overcrowded and drought-ridden south, would it not make both environmental and economic sense for industry to move to the north-east? I have already issued the invitation: “Come north, we have all the water anyone needs.”
If we are going to go down the north-south route, I want to know what the benefits will be for people in north-east England. They have paid for the investment—will they get a dividend through reduced bills when their water is moved elsewhere, if that ever happens?
On a different matter, is it not an absolute disgrace that in England and Wales leakage rates, at about 25%, are higher than a decade ago? Some private companies, now exporting their profits to their shareholders overseas, are failing in their duty to create 21st century services for our people. Water companies might have done well on investment, but they have done so at the expense of consumers.
What action will the Secretary of State take, for example, to cut Thames Water’s obscene leakage rates? The company loses 30% of the water it puts into the mains—200 litres a day for every customer—yet it has posted profits, in what could be considered a bad year, of £208.5 million. That money could go a long way towards investing in improvements and helping the company to move towards the record of Paris and New York, which lose only 10% in leakage, or perhaps, one day, to equal Singapore, where the leakage rate is about 5%.
I have already personally dismissed the idea of the water-rich north sending our supply south, but water companies in the south could help themselves, each other and consumers. Last December, the Environment Agency told Ministers that the myriad small water companies in south-east England could save £500 million by 2035 if they shared supplies. Instead, the companies were planning to saddle customers with a bill of £760 billion for unnecessary new reservoirs. What will the Government do about that? Will they introduce legislation to deal with some of those matters?
Will the Government make any moves to force the private water companies to take the right action, stop the leaks, share supplies around the country where necessary and deliver for consumers? I do not think the Bill demonstrates that the Government have a long-term vision for affordable water supplies or the industry as a whole, and I only hope Ministers will take action to sort it out. My message tonight is: “If you want water and you’re an industrialist, come to the north-east.”
Oliver Colvile (Plymouth, Sutton and Devonport) (Con)
It is a delight and a pleasure to participate in this debate, particularly as I come from a city that has Burrator reservoir, which was built by Sir Francis Drake and is in the Torridge and West Devon constituency. I also want to thank hon. Members for the tone of the debate. It has most certainly been a cross-party debate and we have been able to support what is being proposed. I thank the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Newbury (Richard Benyon), who came to Plymouth earlier this week to support south-west Devon and to visit Plymouth Marine Laboratory, a premier marine scientific research organisation. He was able to talk about how the cost on top of the water rates is £15 for those people, because of bad debts.
I am aware that the issue of water rates has been very important, particularly in my constituency. I pay tribute, oddly enough, to my predecessor, who was the Labour Member of Parliament for Plymouth, Sutton and campaigned very effectively along with the hon. Member for Plymouth, Moor View (Alison Seabeck) to ensure that this message was heard. I have become aware in the course of today’s debate that we have all worked together to achieve this, but that it is this Government who have delivered the ability to ensure the £50 provision. We have all worked together as Members of Parliament and, more importantly, we have made sure that 90% of the Members of Parliament in the south-west have been sending a clear message, too.
There has been an enormous amount of regeneration in my constituency, but in 1997 St Peter’s ward was one of the poorest wards in the whole country. People in the ward have been challenged to ensure that they can meet their water bills. The £50 reduction is welcome, and I thank my hon. Friends for the hard work that they have done, but the 4% increase—