Water Bill

Monday 25th November 2013 Commons Chamber

[Relevant documents: Sixth Report from the Environment, Food and Rural Affairs Committee, Draft Water Bill, Session 2012-13, HC 674 and Government Response, Cm 864.]

Second Reading

16:50

[The Secretary of State for Environment, Food and Rural Affairs (Mr Owen Paterson)]

I beg to move, That the Bill be now read a Second time.

I am delighted to present a Bill that reflects my twin priorities of growing the economy and improving the environment. The Bill will promote growth for the long term, improve the resilience of our water supplies and the environment and increase choice for customers. Our White Paper on water sets out a vision for the future of the water sector. We need continued investment in our water and sewerage systems. We need investment in storing water and moving it to where it is needed; investment in maintaining our sewerage network and improving drainage, including through sustainable drainage options; investment that will protect our rivers through improvements to water quality; action to address over-abstraction; and investment in greater water efficiency.

[Caroline Lucas (Brighton, Pavilion) (Green)]

Given that the Secretary of State says that it is designed to protect the environment, will he agree to amend the Bill to require fracking companies to have a full liability guarantee to cover a range of eventualities before an environmental permit is allocated? He will know that even if liability is proven, if the companies go bust the costs will still be passed on to the taxpayer, or to the water companies, which in turn will pass them on to the customer.

[Mr Paterson]

On the issue of fracking, I have made it absolutely clear that we will in no way dilute or diminish any of the existing regulations relating to the extraction of hydrocarbons from underground. A whole framework of different regulations is already laid down by European legislation, and we intend to respect them, but there is great merit in developing fracking, as we have seen in the dramatic reduction in gas prices in the States, with huge benefit to the US economy. We think we will see similar merits in our economy.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

My constituency has a place called Barton Moss, which is to be explored for shale gas. It is next to a raised peat bog, which is one of the rarest and most precious resources in the country that has not been ruined by over-extraction. There are real concerns among my constituents about dewatering those precious mosslands. They see a real need for reform in the Bill to ensure that explorers or exploiters of shale gas do not dewater areas and that if there are any pollution incidents, there is a financial guarantee that they will be made to pay for what they do.

[Mr Paterson]

I have sympathy with the hon. Lady’s question; I have mosses in my own constituency. Let me reassure her that there is absolutely no intention to dilute or reduce in any way the rigour of our environmental regulation. I also remind her that on a visit to Washington, I spoke to the Environmental Protection Agency, which could not name a single case of water pollution from any of the 2 million wells that have been sunk in the United States. I think we should look at fracking with open eyes—we should recognise that oil has been extracted at Wytch Farm, for example, for decades almost within sight of a site of special scientific interest and a bird reserve—and, done properly, it is a thoroughly meritorious and worthwhile activity that will bring jobs and prosperity to this country.

[Barbara Keeley]

rose—

[Mr Paterson]

I hope that the hon. Lady will not mind if I carry on, as the debate is about the Water Bill rather than fracking.

Earlier this year, we announced that the Bill would also include measures to deal with the availability and affordability of flood insurance. That is an important issue for many Members of the House and their constituents and I am glad that we are making progress on it.

[Mark Pritchard (The Wrekin) (Con)]

My right hon. Friend will know, as a fellow Shropshire MP, that there is significant flooding in areas such as Shifnal and Albrighton in the east of the county in my constituency. What discussions has he had with the Association of British Insurers to ensure that people have access to affordable flood insurance?

[Mr Paterson]

I am grateful to my hon. Friend and neighbour for his question. I shall come on to that in a minute, but we have had exhaustive and extensive discussions with the ABI to ensure that the statement of principles is succeeded by a new regime, on which I shall elaborate in a few minutes.

The main focus of the Bill is reform of the water industry. Reform will provide more choice for non-household customers and bring new entrants into the market. It will use the power of competition to drive efficiency, innovation and benefits to the environment.

[Mr John Redwood (Wokingham) (Con)]

As somebody who strongly welcomes the introduction of competition, why will not the Secretary of State allow competition for everybody? If it is really a natural monopoly, nothing will happen and no harm will be done, but if it is not, we could all get the benefit of competition with lower prices and the quality of water we want.

[Mr Paterson]

As my right hon. Friend knows, I have total sympathy with that position. I am quite clear that as an aspiration universal competition is worth while. Our problem is that we want to take the first step and take the wholesale route, which will bring immediate benefits and real efficiencies to major businesses, but it is hard to move down to a household level, where the gains are much smaller because of the narrow margins, until we have universal metering. At the moment, metering is at about 40% and we need to move closer to universal metering before we can reach the position with which he and I have much sympathy.

Privatisation of the UK water industry has seen the sector attract £116 billion in low-cost investment, enabling our infrastructure to be upgraded and environmental standards to be improved. I saw that for myself when I visited Northumbrian Water’s waste treatment site in Howdon. Its investment in anaerobic digestion is enabling it to process 500,000 tonnes of sewage every day that was previously dumped untreated in the North sea.

Our rivers are now cleaner than they have been for decades. Rivers that were previously classified as sterile or biologically dead are now supporting otters and salmon. A substantial programme of investment has also led to more than 82% of our bathing waters meeting the highest EU standard this year. That is a great example of improving the environment and growing the economy.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

The Secretary of State will know that there has obviously been general support for a clean Thames, but the proposals for the Thames tunnel are still controversial. Will he update the House on whether the Government have concluded their discussions and negotiations with Thames Water about the mechanism to ensure, if we are to have a tunnel after the planning inquiry, that people in the Thames area do not pay through the nose for the privilege?

[Mr Paterson]

I am fully aware that that is a matter of enormous interest to the right hon. Gentleman and his constituents. To put it bluntly, it is not acceptable that we continue to put 20 million tonnes of untreated sewage in the Thames every year. We have considered a range of alternatives—I know that he has been advising on this—and have concluded, as did the previous Government, that the tunnel is the best solution. We continue to negotiate in detail with Thames Water on the arrangements that will lead to the conclusion of the project.

We now need to build on our success. The Bill will shape the way the industry develops over the next decade and beyond. It will build on the strengths of the regime and use increased competition to drive greater innovation and efficiency, which will benefit customers and make sure that our water supplies and natural environment are resilient.

The Bill shows that we are tackling affordability for the long term.

[Mr Charles Walker (Broxbourne) (Con)]

My right hon. Friend says that we are going to improve the nation’s ability to capture and store water, thereby reducing abstraction. Will he be telling us later in his speech where the new reservoirs are to be built?

[Mr Paterson]

I will be moving on to that. I cannot tell my hon. Friend exactly where the new reservoirs will be because that will be down to the individual companies, according to local circumstances, but I can categorically assure him that I hope that the measures in the Bill will release a floodtide of new investment, potentially in new reservoirs, use of aquifers and transfer of water between water companies, to maximise use of the water that lands on this country. I remind him that 95% of that water ends up in the sea. We need to manage the water better before it gets there.

The Bill shows that we are tackling affordability for the long term. The package of reforms is designed to exert a sustained downward pressure on water bills and ensure affordable flood insurance for households in areas at high risk of flooding. We are well aware of the financial challenges that hard-working households are facing.

Earlier this month I wrote to water companies asking them to consider whether to apply the full price increases next year that were planned for in the 2009 price review. I asked them to share the benefits of historically low financing costs with their customers. Ofwat is with me on this. It estimates that by taking account of lower financing costs, the next price review could reduce pressure on bills by between £120 million and £750 million a year from 2015, while still enabling companies to invest in high-quality services and the environment. This demonstrates once again how critical financing costs are to the bills that customers pay: 1% on finance costs leads to about a £20 increase in bills to customers. We must not undermine in any way the stable regulatory system which gives confidence to investors.

This Bills means that all business, charity and public sector customers in England will be able to choose their water supplier and, for the first time, their sewerage supplier. They will be able to shop around for the best deal and a package that suits them. Large water users could make savings by switching to a water supplier that offers them water efficiency advice and smart metering. We have seen how competition in Scotland is delivering real benefits to customers and to the environment. The public sector in Scotland is forecast to save £36 million over four years, thanks to better water efficiency and discounts. Customers in England deserve the same opportunities. Multi-site customers such as hospitals and supermarkets could save thousands of pounds in administration costs by dealing with only one water company.

[Oliver Colvile (Plymouth, Sutton and Devonport) (Con)]

I am fully aware that in the south-west we have significantly higher water rates—probably the highest in the country. The Government have noted that and uniquely have given customers of South West Water £50. Does my right hon. Friend think that competition will drive down bills in the south-west as well?

[Mr Paterson]

I have no doubt at all that we want more efficient water companies with more investment, which undoubtedly will lead to a cheaper product.

We are already seeing the first signs of a competitive market. In September, to answer my hon. Friend’s question directly, First Milk became the first multi-site customer to switch to Severn Trent Costain. The two companies are working together to improve First Milk’s water efficiency and lower its environmental impact, but these opportunities are limited at present because they are open only to the largest water users. The Bill will simplify the existing regime, providing clear rules of access and non-discriminatory pricing to attract new entrants to the market. We expect this expanded retail market to open in 2017.

[Andrew Miller (Ellesmere Port and Neston) (Lab)]

I take the right hon. Gentleman’s point about expanding the market and the smaller companies. However, the Canal & River Trust, a body supported on both sides of the House, is concerned that clause 12 will impact negatively not just on its ability to deliver its charitable objectives, but on its navigation functions and income. Will he have a close look at that and agree to meet representatives of the Canal & River Trust to discuss their concerns?

[Mr Paterson]

I thank the hon. Gentleman for that interesting question. We would be happy to meet the Canal & River Trust—it would be appropriate for the Under-Secretary of State, my hon. Friend the Member for North Cornwall (Dan Rogerson), to do so, as he is taking the Bill through the House—but I think that it is being negative. With its wonderful and virtually national network, it has a real opportunity, because if we open up more upstream providers we will need a vehicle for moving water around. I take a very positive view of this for the Canal & River Trust. We are definitely happy to meet it.

We are not at this point offering choice to household customers. We are taking a step-by-step approach, gaining experience from a competitive business retail market first and reducing any risk to investment in the sector. We have seen in Scotland that competition tends to be around value-added services, rather than price, making the case for household competition less attractive. The conditions need to be right. For example, we would need much higher levels of metering before household competition was practical. Although household customers will not be able to choose their supplier, they will benefit from a framework that encourages water companies to put customers at the centre of decision making or risk losing market share. Ofwat will ensure that household customers do not subsidise the costs of increased competition.

I know that some water companies have asked for the option of exiting the retail market. The problem with that approach is that household customers could lose out because they would not have the ability to move to a new supplier, and if the incumbent water company keeps its household customers but disposes of its business customers, the householder is stranded with a company that has little incentive to provide a decent service. We are not prepared to risk that.

The Bill will also make it much easier for new businesses to enter the water market to provide new sources of water or sewage treatment services, known as upstream services.

[Mr Charles Walker]

On that point, will my right hon. Friend clarify something for me? What is a new source of water?

[Mr Paterson]

A new source of water is one that is not currently being used, so that could mean opening up old boreholes, or farmers building new reservoirs, or water companies building new reservoirs—we have not built a new reservoir in this country for over 30 years. There are all sorts of new sources of water. Around 95% of the water that lands on this country ends up in the sea. We want to manage it better before it gets there.

[Hywel Williams (Arfon) (PC)]

The Secretary of State has just referred, as he did earlier in his speech, to “this country”. Which country does he mean?

[Mr Paterson]

Well, water lands on the whole of the United Kingdom. The hon. Gentleman is probably referring to the Welsh aspect of the Bill, and I think that he knows that the Bill’s competition elements will not apply to customers in Wales.

[Mr Redwood]

I am grateful to the Secretary of State for giving way once again—we are teasing out important points. Does he agree that there are quite a lot of rising water tables under the big towns and cities of this country, because they used to be tapped but no longer are? Is not that a good source of new water that competition could deploy?

[Mr Paterson]

My right hon. Friend is absolutely spot on. We used to have heavy industries in our cities that used large amounts of water, as I know well, having worked on Merseyside for 25 years. Merseyrail has had problems with water because so many of the extractive industries have gone. There is no problem with the volume of water; it is about getting it to the right place at the right time and by the right means. That is what I hope the Bill will facilitate.

Our reforms will increase water supplies by making it more attractive for landowners to develop new sources of water, or for innovative businesses to treat and dispose of waste water. Let me take a hypothetical example. If a brewery with its own borehole has spare capacity, it might be able to supply its pubs in the area more cheaply than they could be supplied by the local water company. The brewery could put its spare water into the water company’s supply system or work with a retailer providing broader services to those businesses.

We also want to make it easier for our farmers and land managers to develop new sources of water, such as on-farm reservoirs, and to hold water back. For example, a farmer with an on-site reservoir that more than meets the farm’s water needs could make an arrangement with either a licensee or the incumbent water company to enable it to put water into the supply system. The water could be supplied regularly or only at times of high demand. Either way, the farmer would have a new product that he could sell.

[Guy Opperman (Hexham) (Con)]

I applaud the Secretary of State’s notification that Northumbrian Water is doing great work at Howdon. On the creation of future reservoirs, how will we provide financial incentives for the farmers and other providers of such future reservoirs, whether big or small, to go ahead and do the necessary infrastructure planning for such operations?

[Mr Paterson]

It is known as the market; where there is demand, people will invest. We are hoping to create a new market for this product, and I am absolutely confident, given the freedoms we are releasing in this Bill, that there will be significant investment. We should not forget that £116 billion is an extraordinarily large amount of money that we would never usually have got from the Treasury under any Government of any colour. This is a great success. We want that investment to keep flowing in for exactly the sort of projects that my hon. Friend discusses.

For the first time, we are opening a market for businesses to recycle and reuse waste water as a new water resource. They will also be able to purchase sewage sludge that might otherwise have been sent to landfill—for example, for use in anaerobic digestion plants.

We need to increase the number of options that water companies can use to store and supply water to their customers. The solutions will vary across the country, reflecting different levels of water demand and availability, geography, and geology. For some, storing more water in new reservoirs or in recharged aquifers will help. Others, particularly in water-stressed areas, may need more action to cut demand, including through greater water metering. For others, improving interconnection to move water around between their supply systems will help. Companies such as Severn Trent, Anglian and Yorkshire Water collaborated on practical solutions during last year’s drought. This Bill will make such supply arrangements much easier to put in place. It will enable water resources to be used more flexibly and efficiently, reducing the need for expensive new solutions that customers would have to pay for.

The Bill provides flexibility for the regulator to work with the industry on shaping and introducing these new markets. It also includes checks and balances so that the Government can ensure consistency with our policy framework. We will be issuing guidance to Ofwat on how it must set the rules of the game. We have already published charging principles so that people can see how Government policy will shape the new regime. Since the pre-legislative scrutiny of the draft Bill, we have strengthened the role of Government, with a power to veto Ofwat’s charging rules, and the new market codes. I am extremely grateful to Members of this House, especially those on the Environment, Food and Rural Affairs Committee, who scrutinised the draft Bill. The Bill is stronger as a result of that scrutiny.

Governments do not create successful markets. Well-functioning markets are created by participating businesses and are allowed to evolve over time. That is why the detailed work to develop these new markets is being delivered by the experts. Through the Open Water programme, we are working with the water industry, Ofwat, the Scottish Government, regulators and customers on the detailed work required to prepare for implementation of these new markets. We are committed to reforming the abstraction regime so that it is fit to face the challenges of the future.

[Mr Charles Walker]

Will my right hon. Friend give way on that point, because it is such an interesting topic that I think he will have a lot to offer?

[Mr Paterson]

indicated assent.

[Mr Walker]

Over the past 30 years, these so-called experts, particularly the water companies, have destroyed many of the chalk streams in my part of the country and in Wiltshire, Hampshire and Dorset—the list is almost endless. I therefore do not have a lot of confidence in them. They are very good at looking after their own interests but not the interests of the environment.

[Mr Paterson]

I am grateful to my hon. Friend for his statement. I assure him that I take on board the damage that has been done by over-abstraction. However, this is extremely complicated and it is going to take time; we could make a real mess of things if we blunder into it. I am absolutely confident that through the upstream reforms that I mentioned, by holding more water back in various forms, which might be the reservoirs my hon. Friend wants, putting down aquifers, or SUDS—sustainable drainage systems—schemes, we will have water available for these rivers when they run dry. I totally sympathise with his worries about the chalk streams. It is very much our intention that this Bill will provide more water to keep these rivers flowing.

[George Hollingbery (Meon Valley) (Con)]

I want to take my right hon. Friend back to his example of the brewery. He says that we will benefit from these upstream reforms and that water will be held back. Does he agree that when he is considering the regulatory framework it will be important to ensure that resources that have been used in one way previously and will be subject to change—for example, by the brewery drawing more water than it would have done in totality before—are assessed by various agencies to make sure that the strain on resources is not overbearing on the system in its entirety?

[Mr Paterson]

My hon. Friend is absolutely right: there is no point in over-abstracting from a new source. However, as my right hon. Friend the Member for Wokingham (Mr Redwood) said, because of the reduction in heavy industry there are significant amounts of water in various parts of the country, and this is all a question of moving it around according to local circumstances. I know that my hon. Friend and my hon. Friend the Member for Broxbourne (Mr Walker) have a real interest in abstraction. Our clear view is that the Bill will lead to a greater supply of water, which will help the rivers, about which my hon. Friends rightly worry, not to run dry.

[Barbara Keeley]

Will the Secretary of State give way?

[Mr Paterson]

I am happy to give way.

[Barbara Keeley]

I thank the Secretary of State for giving way, although he does not look overly happy to be doing so. He kindly answered my earlier question about pollution, which is a real concern to my constituents. I am very concerned about mosslands in my constituency and the Secretary of State has said that he shares my concern. Lancashire Wildlife Trust and other organisations that protect the mosslands are very concerned about the possibility of de-watering, given that shale gas exploration is happening very close to our mosslands. Will the Secretary of State address that point?

[Mr Paterson]

I am happy to answer the hon. Lady. We are completely clear that we will not allow the procedure to go ahead if it is going to cause environmental damage. We have to respect a whole range of directives pertaining to water. We are absolutely clear that we will not weaken or dilute—to use a watery phrase—the robustness of our regulation. We will completely lose public confidence if we do that. This has to be done in a robust manner.

The hon. Lady should look at examples that I have cited, such as Wytch Farm, which has been extracting hydrocarbons for decades without any environmental damage at all and which is very close to some very sensitive environmental sites. If this is done professionally and regulated properly, the hon. Lady should have nothing to fear. I am as keen as she is to protect our wetlands, including mosses, and I am clear that we will not dilute in any way the rigour of our regulation.

To return to abstraction, I know that some people—we have heard from some of them—think that we are not moving fast enough. Reform of the regime is complex. It has been in place for 50 years and the changes will affect the businesses of abstractors up and down the country—businesses that require water for public supply, electricity generation, manufacturing and irrigation. We must get this right. Shaping a new regime involving up to 30,000 abstractions is complicated, so we will consult on our proposals soon.

Reform of the abstraction regime is only part of the story. We are taking action now to reduce the damage to rivers, such as the chalk streams that support some of Europe’s unique habitats. We are using and improving the tools we have now to vary and remove damaging abstraction licences. For example, we have already made changes to protect the River Darent and the River Itchen.

In this Bill we are making it easier to tackle damaging abstractions in advance of our wider reform by making funding of schemes to restore sustainable abstraction quicker and easier. We will not take any risks with the introduction of upstream reform. We have looked carefully, with both Ofwat and the Environment Agency, at the concerns that have been raised. I am satisfied that there are robust regulatory safeguards in place to prevent upstream competition from leading to environmental damage. We will also co-ordinate implementation. The new upstream markets will not open before 2019 and we expect to implement abstraction reform in the early 2020s so that we can make sure that these reforms are carefully co-ordinated.

Resilience was a central theme of our water White Paper and it is a central theme of this Bill. We listened to calls in pre-legislative scrutiny to make sure that it is also central to the way in which the sector is regulated. We have strengthened Ofwat’s role in safeguarding long-term resilience. The Bill includes a new primary duty to take account of environmental pressures, population growth and demand on our essential services. I know that some are keen for Ofwat’s existing sustainable development duty to become a primary duty. We have looked at the arguments for that change. People want Ofwat and water companies to address longer-term challenges and deliver a better deal for customers and the environment. We want to achieve that, too.

[Miss Anne McIntosh (Thirsk and Malton) (Con)]

If we really want to improve environmental stewardship, I would argue, as others have done to the Select Committee, that the statutory duty on sustainable development will put the Government in a better place than resilience.

[Mr Paterson]

I am grateful to the Committee Chair for all her hard work. We have looked at the issue and believe that resilience means a stronger focus on longer-term planning and investment. By creating a new overarching duty specifically designed to increase the focus on long-term resilience, I think we will deliver what the Committee has been looking for. Resilience also means protecting the water resources that are so critical to current and future supplies. As I have said, ultimately 95% of water runs out to the sea, and the Bill will help to manage it more effectively.

Just as water reform measures will help our supply systems and environment to deal with water shortages, we must also be prepared for flooding. I have seen for myself how devastating it is to be flooded. This time last year, I visited Exeter and Kennford and saw the impact of the floods on people’s homes, lives and families.

[Diana Johnson (Kingston upon Hull North) (Lab)]

Has the right hon. Gentleman had any discussions with his colleagues in the Department for Communities and Local Government, because the Help to Buy scheme operates in areas where his proposed flood insurance scheme will not operate? It seems to me that one hand of the Government does not know what the other hand is doing.

[Mr Paterson]

Our planning guidance is absolutely clear that there should be no building on areas that are subject to flooding.

We know perfectly well that the priority must be to avoid flooding in the first place. That is why we will spend £2.3 billion over this Parliament on protecting households and businesses against flooding. In practical terms, that means that 165,000 properties will be better protected in 2015 than they were in 2010. It is also why we will make record levels of capital investment over the six years from 2015-16: the level will rise to more than £400 million per annum by 2020-21.

We need to give people at high risk of flooding the certainty that they can continue to get affordable flood insurance, as was touched on by my hon. Friend the Member for The Wrekin (Mark Pritchard). We consulted on draft flood insurance proposals over the summer, and I know that hon. Members agree that a solution is essential for the continuing protection of people at high risk of flooding. We are still in intensive and constructive discussion with the insurance industry on some of the finer points of detail, but we plan to table new clauses in time for consideration in Committee. The powers in the Bill will help to ensure that affordable flood insurance is available for households in high-risk areas.

[Mark Pritchard]

My right hon. Friend is being generous in giving way, as is his custom. In addition to those comments, he will know that there is often run-off from motorways and roads, so what discussions has he had with the Highways Agency and local government on that issue?

[Mr Paterson]

That issue is really for the Environment Agency, which works closely with the Highways Agency and local government to ensure that there is no pollution from water that runs off public roads.

[Nia Griffith (Llanelli) (Lab)]

Will the Secretary of State give way?

[Mr Paterson]

I think that this will be the last time that I give way.

[Nia Griffith]

The Secretary of State rightly says that we have discussed flood insurance for a considerable time. I very much welcome the Flood Re programme, but why is there not more detail in the Bill, and why will so much of it be pushed aside and dealt with as statutory instruments, when so many hon. Members want to discuss the detail more fully?

[Mr Paterson]

The hon. Lady takes rather a churlish attitude, as her Government did absolutely nothing to replace the statement of principles, despite knowing perfectly well that it would run out in June 2013. We have been involved in extremely detailed negotiations but, as she knows, the subject is very complex. I entirely agree that it would have been ideal to have detailed clauses ready in time for the Bill; sadly, they are not ready. She is, however, rather critical of those who may be members of the Committee. If she is lucky, she might get on to the Committee, because it will be able to debate those clauses in exhaustive detail.

Our preferred approach, which is known as Flood Re, will limit the amount that high-risk households have to pay on the flood insurance element of their premiums and excesses. The effective limit on the premium would vary according to council tax band, rising for more expensive properties, which means that benefits will be targeted towards lower-income households. Insurers have agreed to continue to meet their commitments under the 2008 statement of principles until the Bill has passed through Parliament and Flood Re has been set up.

Although Flood Re remains our preferred approach, we are seeking reserve powers to provide affordable cover if it should prove unworkable or prices in a free market prove unacceptable. Having a fall-back means that customers can have confidence that the issue is being addressed. All Government policies go through a rigorous economic impact assessment, but that cannot always represent the full range of benefits, such as the value of reducing the uncertainty for households over whether they will be able to afford flood insurance. Our preferred option, Flood Re, may require me to provide a ministerial direction. If that is the case, I will be happy to do so.

I am pleased that there is cross-party support for our proposed approach. There will be a fair deal for householders and taxpayers, and better choice for flood insurance customers. I am particularly grateful to the Association of British Insurers and the rest of the insurance industry for their co-operation and work in developing a sensible solution for homes that are at flood risk.

[Andrew Percy (Brigg and Goole) (Con)]

My constituency is at massive risk of flooding because it is below sea level in many places. We require pumping 24 hours a day to keep us dry. I welcome what the Secretary of State has said about Flood Re because getting flood insurance has been a problem for my constituents. However, there is concern among people who live in houses that were built after 2009 and there is concern about the development of our town, given that we are so susceptible to flood risk. Will he set out the Government’s thinking on properties that were built after 2009? Will any solution be offered for them in the future?

[Mr Paterson]

It is not our proposal to include those whose houses were built after 2009 if they were built on areas that are subject to flood risk.

In the Bill, the Government are seeking to put in place the long-term conditions for sustainable economic growth and the improved resilience of our water supplies and environment. We are also seeking to increase choice for the consumer, exert a sustained downward pressure on water bills and ensure that there is affordable flood insurance. The approach under the Bill is one of partnership —partnership between the Government, business, regulators, environmental organisations and the public. I look forward to working with colleagues and each and every one of those groups to make that a reality. I commend the Bill to the House.

17:26

[Maria Eagle (Garston and Halewood) (Lab)]

Despite the sensible measures that are contained in the Bill, this is a wasted opportunity to tackle the impact that rising water bills are having on stretched household budgets. Water bills have increased by almost 50% in real terms since privatisation. With wages not keeping pace with inflation, that is adding to the cost of living crisis. Prices have risen faster than wages in 40 of the 41 months in which the Prime Minister has been in Downing street. People are more than £1,600 a year worse off on average under this Government.

The rising cost of water is adding to that pressure. However, the Bill fails to provide Ofwat with tougher powers to bring down prices and it fails to require water companies to help those who are struggling to pay their bills. Despite the promises from the Prime Minister that we would see action, the Secretary of State has not brought forward a single new measure. All that we have seen is one weakly worded letter to water bosses, begging them not to hike bills next year. There was not even a threat of action if they take no notice—no threat of a tougher regulatory regime and no threat to impose an affordability scheme.

[Mr Paterson]

I am very grateful to the shadow Secretary of State for giving way. It might rather spoil her argument if I pointed out that all the current prices were set by her Government in the last price review in 2009. Between 1999 and 2009—between the first and last price reviews under the last Government—water bills rose in real terms by £65, from £324 to £389, which is an increase of more than 20% in the average household bill. Today, under this Government, the price of the average bill is £388.

[Maria Eagle]

The right hon. Gentleman appears to be making a second speech. The previous Government were the only Government to see water bills cut during their time in office. We need to see a determination in the right hon. Gentleman to ensure that Ofwat has the proper powers to deal with water companies. He ought to remember, even if he is technically in favour—

[Mr Redwood]

Will the hon. Lady give way?

[Maria Eagle]

I will finish dealing with the Secretary of State’s point before I give way to anybody else. He needs to ensure that Ofwat has the power to deal with water companies that have a captive market. Even if he gets to increasing competition and extending it to householders, as he said himself, that will not happen for some time.

[Mr Paterson]

rose—

[Maria Eagle]

I will not give way until I have finished answering the point the right hon. Gentleman has already made. Even if we get to such a point, there will be a significant period in which householders are subject to a monopoly. He must ensure that Ofwat has the relevant powers.

During our exchanges in the House in questions to the Department for Environment, Food and Rural Affairs last Thursday, I asked the right hon. Gentleman what steps he had taken between meeting the water companies in July, which he referred to in his letter, and his follow-up letter to them this month. He was not able to list a single action because the truth is that he did nothing for four months until he began acting under orders from No. 10. That was after the Prime Minister decided that he had no choice but to appear interested in the issue, following an intervention from the Leader of the Opposition.

The right hon. Gentleman made it clear in his letter to the water companies that he favours a voluntary approach, with companies deciding for themselves if and how to help those who are struggling. He does not propose any new powers to widen Ofwat’s scope to reopen pricing settlements between reviews, yet while customers pay among the highest bills in Europe, water companies are doing well from their monopoly position.

Last year, regional water companies made £1.9 billion in pre-tax profits, but paid out a staggering £1.8 billion to shareholders. We know they do that and that it is achieved through financial engineering designed to maximise their debt and minimise tax liabilities. That is unacceptable and morally wrong when people are struggling, and I believe people across the country will agree.

[Caroline Lucas]

With 40% of low-income households paying some of the highest bills, and three-quarters of our rivers being degraded through abstraction, does the hon. Lady agree that a privatised monopoly industry is failing our environment and consumers? Does she also agree that we need to move the Bill towards greater public ownership and public control of our water resources?

[Maria Eagle]

I have some sympathy with the first part of the hon. Lady’s intervention, but perhaps less so in practical terms with her latter point.

[Mr Redwood]

I am interested in the Opposition’s argument. What reduction in bills could the extra powers that the hon. Lady wants the regulator to have produce for the average consumer, and how much should companies put into helping those who have a problem with affordability?

[Maria Eagle]

I will say a little more about what extra powers I think the regulator should have, and perhaps at that point I will deal with some of the questions raised by the right hon. Gentleman.

The Opposition will seek to amend the Government’s legislation and address its central weakness, which is the lack of measures to tackle the contribution that rising water bills are having on household budgets. First, we will seek to grant Ofwat more wide-ranging powers to reopen price reviews between the current five-year periods. In his answer to me last Thursday the Secretary of State said:

“I have written to water companies to call on them to consider the pressure on household incomes when making future bill decisions and, in particular, to consider whether they need to apply the full price increases next year allowed for in the 2009 price review.”—[Official Report, 21 November 2013; Vol. 570, c. 1350.]

However, it should not be for water companies simply to “consider” limiting price rises; the regulator needs much greater powers of intervention when those companies are making far more than anticipated at the time of the review.

[Mr Paterson]

I am grateful to the hon. Lady for giving way again. The fact is that the previous Government let Ofwat go to sleep. They did not have a proper regulator but we have a robust new regulator in Jonson Cox. Only last week he turned down a proposed price increase by Thames Water, which would have put 8% on bills. That is what a proper regulator does, backed by a proper Government who have a real interest in keeping bills down for our hard-working families.

[Ms Eagle]

The right hon. Gentleman clearly has great faith in Mr Cox, and we will see in due course whether he is correct in that respect. My point is that Ofwat’s powers—rather than the personality running it at any given time—are limited to acting when revenues are at least 10% higher than expected. That does not adequately address the high dividend payments, particularly relating to gearing, which happen across the industry. Last Thursday, the Secretary of State referred to Ofwat as “a vigorous independent regulator”. I have no doubt that, under its current leadership, it would wish to be so, but it needs to be strengthened to be more effective. The Government’s Bill is a wasted opportunity to strengthen Ofwat.

[Richard Benyon (Newbury) (Con)]

The hon. Lady has been on her feet for some time and I am looking forward to hearing her vision for the water sector for the years ahead. I hope she gives the House a view on how we can encourage more investment to tackle the problems described by hon. Members on both sides of the House. She is talking about the very important question of prices for our households, but will she extend that to talk about the great need for greater investment in our water sector?

[Maria Eagle]

If the hon. Gentleman is slightly more patient, he will hear what I have to say in the rest of my speech on those and other matters, but the Secretary of State was on his feet for 35-plus minutes, so the hon. Gentleman has not been waiting too long yet.

It is time for a wider review of whether we have the right balance between Ofwat’s regulatory role and the need for a powerful champion for consumers. The review should consider the future relationship between, and roles of, Ofwat and the Consumer Council for Water. I believe there is a need for a proper ombudsman role because adequate powers of redress for customers do not currently exist. The Bill should have established such an arrangement rather than simply arranging for it to be possible at some undefined point in the future.

The Government should also consider accepting the Consumer Council for Water proposal for it to be given enhanced rights to be consulted on each water company’s charging scheme and any changes to it, and a continual scrutiny role to “find and fix issues”, as it puts it, as they arise. I believe there is merit in those proposals and hope Ministers agree.

The second major change the Opposition want during the passage of the Bill is the introduction of a clear legal requirement on water companies to sign up to a new national affordability scheme. When I raised that with the Secretary of State last Thursday, he responded:

“The Government encourage water companies to introduce social tariffs for vulnerable consumers and to reduce bad debt.”—[Official Report, 21 November 2013; Vol. 570, c. 1350.]

However, it is absolutely clear that his encouragement is not enough. Just three companies have introduced social tariffs, with fewer than 25,000 customers receiving assistance. Considering that Ofwat estimates that 2.6 million households, or 11%, currently spend more than 5% of their income on water, it is clear that only a tiny fraction of those struggling are being helped.

[Miss McIntosh]

The hon. Lady will recall that the Flood and Water Management Act 2010 contained provisions for social tariffs, but the Department for Work and Pensions refused, as it continues to refuse, to allow the information relating to benefits to be released. I cannot understand why that is the case, but why did Labour Members not push harder for that information to be released when Labour was in government?

[Maria Eagle]

The hon. Lady has a point, and I will shortly say something about what I believe we ought to do about it.

It is not good enough that so few customers can benefit or receive assistance when they have genuine hardship in paying. It is time to replace voluntary social tariffs with a national affordability scheme, funded by the water companies from their excess profits. We need to end the postcode lottery that means that the help one can get depends on where one lives, and we need the Government to set clear eligibility criteria.

In response to my question last week, the Secretary of State said:

“The shadow Secretary of State has to recognise that the schemes that help some water bill payers are paid for by others.”—[Official Report, 21 November 2013; Vol. 570, c. 1352.]

Of course, that is the Government’s approach because he is not willing to stand up to vested interests. He is not willing to say to the water companies that they cannot continue to pay out almost every pound they make in dividend payments—£1.8 billion last year—and leave it solely to other customers to fund measures to help those in need. The Government should finally drop their opposition to a national affordability scheme and require the water companies to step up and meet their social obligations.

[Mrs Caroline Spelman (Meriden) (Con)]

rose—

[Maria Eagle]

I will give way to the former Secretary of State.

[Mrs Spelman]

For the benefit of the House, it is only fair to explain that there are two ways that the most vulnerable people in society can be helped. The hon. Lady mentioned social tariffs, but the WaterSure scheme, which is funded centrally from Government and does not require cross-transfer between water consumers in any one company, helps households that consume large quantities of water through no fault of their own.

[Maria Eagle]

The right hon. Lady is correct. I was about to mention WaterSure in my next breath, if she had waited a moment.

WaterSure was introduced by Labour as a targeted payment to households with three or more children or to households that demand a high use of water owing to a medical condition, yet only a third of eligible households access the scheme. Ministers should set a target and work with the water industry to ensure it is achieved, and use existing data on benefits to ensure that everyone eligible is on the lowest tariff. It is essential that the cost to households of non-payment, by others who can afford to pay—

[Sheryll Murray (South East Cornwall) (Con)]

Will the hon. Lady give way?

[Maria Eagle]

I will give way to the hon. Lady in a moment.

It is essential that the cost to households of non-payment by others, who can afford to pay but who choose not to, is finally tackled. Failing to address this matter is unacceptable when it adds £15 to the average bill and households are struggling with rising bills. It is time to require landlords to provide tenants’ details to water companies, something the Environment, Food and Rural Affairs Committee, chaired by the hon. Member for Thirsk and Malton (Miss McIntosh), has demanded.

[Sheryll Murray]

Will the hon. Lady give way?

[Maria Eagle]

No.

The Department for Environment, Food and Rural Affairs should implement the provisions in the Flood and Water Management Act 2010 on bad debt without further delay.

On the financial practices of water companies, I urge the Secretary of State to press his right hon. Friend the Chancellor to use the autumn statement next week to set out measures to crack down on the tax avoidance that we know goes on in the water industry. We cannot have a situation where water companies are taking strategic decisions with the clear purpose of structuring their financial affairs in a way that leads to worrying—

[Sheryll Murray]

On a point of order, Madam Deputy Speaker. The Secretary of State was generous with his time. I cannot understand why the shadow Secretary of State is not being as generous.

[Madam Deputy Speaker (Dawn Primarolo)]

Order. That is not a point of order; it is a point of debate. The hon. Lady knows full well that it is up to the person speaking to decide whether they will give way. There have been interventions. We will have to wait and see if there will be any more.

[Maria Eagle]

We cannot have a situation where water companies are taking strategic decisions, with the clear purpose of structuring their financial affairs in a way that leads to worrying debt and hinders their ability to invest, when their sole purpose is to minimise their tax liability. Ofwat said in March that

“the overall proportion of equity has diminished from 42.5% in 2006 to 30% of regulatory capital value today with several companies at 80% gearing, thus obtaining only one fifth of their financing from equity. This reduction is a serious concern.”

[Mr Graham Stuart (Beverley and Holderness) (Con)]

I thank the hon. Lady for giving way. She makes an important point about the behaviour of the water companies. Will she explain why, under the previous Government, the water companies’ combined debt of £939 million in 2004 had increased by 70% by 2010, when her party left office? Perhaps she could provide us with some context.

[Maria Eagle]

I understand the hon. Gentleman’s point. I do not believe the Labour Government did enough during our time in office to ensure that that was correctly handled, but that is not a reason to allow the water companies off the hook now.

Under Ofwat’s current powers, capital structure and consequent risk are matters for the boards and shareholders of those companies, so any action must come from the Government. We have seen from briefings to the Financial Times that Ministers are considering reducing the interest payments that can be deducted from a company’s tax bill, especially for larger and more highly indebted companies—as many water companies now are—or even putting a levy on the debt held by highly leveraged water companies. Whichever solution—if any—that the Government decide on, it must happen quickly.

Despite the gaping hole left by the Government’s failure to introduce in the Bill measures on water affordability for households, there are measures that we support. That should not be a surprise, given that they arose from three important reviews taken forward by the last Government: the Pitt review on flooding, the Walker review on affordability and the Cave review on competition.

[George Hollingbery]

The hon. Lady has made some candid remarks about the last Government’s failure and some sensible points about what might be changed in the Bill. She also makes much of the Government’s admission of certain issues that she now thinks are terribly important, but nowhere in the Environment, Food and Rural Affairs Committee’s scrutiny of the Bill, published only eight or nine months ago, is there a record of any Labour Member making any of the suggestions that she is making now. Is this not just a transparent device to bring a certain topic in a certain context to the Chamber today?

[Maria Eagle]

The hon. Gentleman is entitled to his opinions.

The three reviews built on the Flood and Water Management Act 2010, which we enacted before the last election. We support the measures to increase competition and enable non-household customers to choose their water supplier, and we want new entrants into the sector and so support measures to encourage that development. We also support the regulatory reforms designed to place a greater focus on the long-term resilience of water supplies and the measures to provide, at long last, the statutory basis for agreement on reinsurance.

We have concerns about several areas, however, many of which are shared by the Environment, Food and Rural Affairs Committee, chaired by the hon. Member for Thirsk and Malton. First, we agree with the Government’s decision to open up non-residential competition, as there is increasing evidence of a successful market emerging in Scotland. The introduction of competition for business customers is intended to provide choice, drive down costs and improve water efficiency, and we hope that it is successful, but the Government should listen to the Select Committee, which has said:

“We believe that protecting householders from subsidising competition in the non-household sector is a fundamental principle that should be enshrined in primary legislation.”

The Consumer Council for Water has rightly said:

“It is a vital principle that customers who are not eligible to switch retailer should not be disadvantaged. This should ideally be reflected in legislation.”

The statement in the recently published charging principles that household customers will not subsidise the development of competitive markets for business customers is a step forward, but not enough. We agree with the Select Committee and the Consumer Council for Water that it should be included in the Bill, and if Ministers refuse to reconsider their decision, we will seek to amend it.

Secondly, we do not understand why Ministers are being stubborn over enabling water companies to exit the retail market, which seems a perfectly non-contentious but important principle for the effectiveness of a market. The Select Committee is also clear on that point, and I think that the Government should rethink it. Thirdly, the Secretary of State should reconsider his decision not to require the separation of company wholesale and retail arms as part of his package of reforms. The Select Committee has called for a

“requirement for the functional separation of incumbent companies’ wholesale and retail arms. We further recommend that the principle of non-discrimination be included on the face of the Bill.”

We agree with the Select Committee.

Fourthly, we believe that the Government’s concerns about agreeing to the wide-ranging calls to elevate Ofwat’s sustainable development duty to a primary duty are misplaced. The Select Committee said:

“We are persuaded that the increasing pressures on our water resources, highlighted in the Water White Paper, justify such a change.”

The change is also supported by the 15 environmental non-governmental organisations that make up the Blueprint for Water coalition, including the WWF, the Royal Society for the Protection of Birds, the Wildlife Trusts and the Marine Conservation Society. Without the change, Ofwat could, for example, be forced to strike out investment to deliver demand management in over-abstracted areas by having to place significant financial implications for companies above the principles of sustainable development.

[Richard Benyon]

May I take the hon. Lady back to the question of exits? We looked carefully at this, and I believe that the kind of structure our water industry should have is a matter for this House and this Parliament. If she is saying that we should allow exits, she is effectively saying we should allow water companies no longer to be integrated, when it is the Government’s belief—and perhaps that of the Opposition—that they should be. If we were to allow exits, it would say that water companies could change their structure, but does she not agree that that should be a matter for Parliament, not for the water companies to decide on a whim?

[Maria Eagle]

I am of course interested to hear the views of the hon. Gentleman who was, until recently, a well-liked Minister in the Department. [Interruption.] Well, he is still well liked, but no longer a Minister. I am not wishing to rub it in, but he decided to return to the Back Benches. [Interruption.] I am trying to be nice to him, although I know that that is unusual. It is interesting to hear his point of view. Water companies have changed their structures since privatisation, and I view it as normal in a functioning market for organisations to be able to exit it. I am sure that this can be considered in greater detail in Committee. I do not know whether he will have the honour of serving on the Committee—we will wait to see—but we will have an opportunity, as I say, to debate the issue in more detail in Committee. It is odd to open up a market and then to prevent certain companies from leaving it.

I was moving on to my fifth point about the detail of the Bill. We have serious concerns about the Government’s disjointed and, frankly, botched plans to introduce upstream competition. We support the principle of upstream competition and acknowledge the benefits that it could bring, but even a slimmed-down version of the Government’s plans would not adequately address the potential consequences of not taking forward abstraction reform in parallel.

The Government’s White Paper “Water for Life” set out a strong case for abstraction reform, yet the target date for a new regime is now 2022. The fact is that, historically, we have seen the over-allocation of water resources. Competition in advance of abstraction reform risks increasing the total amount of water taken from the environment—not least as those with unused or part-used abstraction licences seek new ways to realise their value.

The Government are asking the House to support these reforms, although their sustainability is dependent on a further piece of legislation. The Secretary of State knows full well that this is a promise that he cannot guarantee to deliver. Regretfully, I have to say that, unless he is able to offer some very convincing remedies on this issue, our instinct will be to seek to remove this entire part of the legislation. It would be better for the Government to bring back a properly integrated set of reforms in the future.

We support the measures on flood reinsurance—however belated they may be. It was disappointing that the Government were adding clauses to the Bill at such a late stage, but they are welcome, and we will scrutinise them carefully in Committee. The Government’s climate change risk assessment states that floods are the greatest threat that climate change poses to our country. That is one of the reasons why the Secretary of State should take the issue far more seriously, and why it is, frankly, incredible that he has talked of the benefits that could come to the UK from climate change.

There are real risks and far-reaching consequences for the UK from climate change, yet the Secretary of State’s complacent approach, combined with severe cuts to investment in flood defences, is deeply worrying. I hope that he has seen the letter that he has been sent in the past week by Professor Lord Krebs, chairman of the adaptation sub-committee of the Committee on Climate Change. In that letter, Professor Krebs raises serious concerns about the failure of the Government’s proposals to strengthen incentives for the uptake of household flood protection measures. He warns that the consequences will be

“that Flood Re costs will be higher than they need to be, at the expense of householders funding the programme through the industry levy.”

The Committee on Climate Change has therefore made five proposals that it believes believe would reduce Flood Re costs and improve value for money, and I hope that the Secretary of State will consider those proposals carefully.

The Bill contains a number of important measures that the Opposition will support. On the back of three important reviews commissioned and published by the previous Government, it builds on the reforms and legislation that we introduced when in office. However, the weakness that lies at its heart is the Government’s inability to stand up to vested interests and their failure to take anything approaching a tough approach to the water companies.

Ministers continue to defend the need for a voluntary approach—a voluntary approach to whether help should be provided to those who struggle with their bills, and a voluntary approach to whether customers are offered relief from rising bills, even where companies are benefiting from financial circumstances beyond their control. Let me tell the Secretary of State that it is now 20 years since privatisation, and the voluntary approach has had more than enough time to be tried and tested. It has failed, so it is time not for more letters from him, but for action.

It is time for a new deal with the water companies: a new deal on the contribution that the water companies make through taxation and investment; a new deal on the steps that the water companies must take to tackle the affordability of water for households that are struggling; and a new deal on the extent to which the water companies are regulated. The Bill could and should have been an important step forward in delivering such a new deal. Instead, it is a wasted opportunity. I hope that the Secretary of State will work with us to improve the Bill, particularly in respect of the need to tackle the rising cost of water for struggling households. If he continues to refuse to act, I can assure him that the next Labour Government will act.

17:56

[Miss Anne McIntosh (Thirsk and Malton) (Con)]

I welcome the Bill and would like to thank both my right hon. Friend the Secretary of State and the hon. Member for Garston and Halewood (Maria Eagle) for their kind words about the work that my colleagues and I have done on the Select Committee on Environment, Food and Rural Affairs. We must have done something right, as no fewer than four of our erstwhile colleagues serve on either the Government or the Opposition Front Bench. We shall obviously continue to maintain our rule of scrutiny with ever-increasing vigilance.

Today is the anniversary of the floods in Malton, Old Malton, Norton, Brawby and elsewhere in my constituency. In fact, I had to take a 10-mile detour because there was a lake outside my office, which I could not access as I normally would. The floods started in November and went on, intermixed with snow, until about March or April. It is therefore timely that we debate the Water Bill today. There is much in it to commend. It has been a long time in progress and, as the hon. Lady said, there remains a great deal of unfinished business from the Pitt review, the Walker review and the Cave review and, indeed, the Flood and Water Management Act 2010. The largest and most significant recent development since 2007 has been surface water flooding. It is a new threat, particularly with water running off the road in just about every constituency of every Member who has spoken in the debate thus far.

[Nia Griffith]

Given that the Flood Re scheme does not apply to properties built after 1 January 2009, does the hon. Lady agree that planning authorities need to be ever more vigilant not only in refusing to build on floodplains but in avoiding the knock-on effects of building in certain places that can have devastating effects on existing properties?

[Miss McIntosh]

I am grateful for the intervention, but I think the hon. Lady misses the point that so many other people do. Water running off the road in this way is a new development. While the water is on the surface of the road, it is the responsibility of the highways authorities, whether it be the Highways Agency, the county council or the unitary council. As soon as that water runs off the road and goes into a combined sewer, it most frequently becomes the responsibility of the water company.

I believe that the Government should look at the possibility of creating a statutory responsibility on highways authorities—and should be supported by the whole House in this—for surface water while it is on the road. [Interruption.] The Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for North Cornwall (Dan Rogerson) mutters under his breath, “What will the cost be?” I do not care what it will be: if we are to have sustainable drainage systems, we have to look at creating a system that will retain the surface water on the road and stop it going into the combined drains and sewers. That has been happening since 2007, for nearly seven years. Surface water has been mixing with sewage and coming into homes, such as the home of Mr and Mrs Hinds, causing health-related and very antisocial problems. Successive Governments have failed to deal with the issue, but I believe that the Bill presents us with a unique opportunity to sort it out.

According to the Environment Agency, 2.4 million properties in England are at risk of flooding from rivers and the sea, 1 million of those properties are at risk of surface water flooding, and a further 2.8 million properties are at risk of surface water alone. The agency estimated that the cost of the 2012 floods was £600 million. I agree with my right hon. Friend the Secretary of State that we need not just to grow the economy, but to limit the damage caused to it by floods.

It is regrettable that the sustainable drainage system that was envisaged in the Flood and Water Management Act 2010 has still not been implemented. I understand that discussions are taking place and that it is all very difficult, but we must get our heads around this. It is not impossible, although the difficult aspects may take a little longer to address. I urge my hon. Friend the Minister to rise to the challenge, and to introduce SUDS before April next year. It is unacceptable for my constituency and others elsewhere in the country to face a possible flood threat this very week because we have not put secondary legislation on to the statute book.

I am at my wits’ end because we have still not implemented the Pitt recommendation that the automatic right to connect should be removed. Sustainable drains are a significant aspect of that. The Environment Agency is already a statutory consultee, but we have not accepted that water companies should have the same status. I believe that they should be able to say, frankly and honestly, that in the case of major developments, there should be no ability to connect without a significant new investment.

[Andrew Percy]

Proposals for new housing in Goole pose the double threat of river and surface water flooding, and are therefore unacceptable to local communities. Goole has been flooded for about five of the last eight years. We want sustainable drainage systems, so that if the new housing development proceeds, it will have no further impact on our already creaking drainage system.

[Miss McIntosh]

I hope that we will all continue to press the Government to proceed with SUDS.

As for abstraction, I can only support what other Members have already said. Abstraction has an important part to play in resilience in times of drought and, potentially, in times of floods, when there are competing demands for the water supply. I urge the Government to show a greater sense of urgency. My right hon. Friend the Secretary of State said that they would be consulting shortly, and it would be helpful to know when that consultation might take place.

The water White Paper, which we also scrutinised, placed great emphasis on the importance of resilience and the need for innovation to improve it, but I think that the Bill has toned down that emphasis slightly. I hope that the Government will find renewed enthusiasm for resilience. There will always be competing claims from the farming industry and angling, but we must not forget jam-makers such as those whom I visited in the constituency of my hon. Friend the Member for Witham (Priti Patel), as well as brewers and other industrial users.

The role of the Environment Agency has been extremely positive, and fewer properties have been built on functional floodplains since it became a statutory consultee. However, I believe that it could do much more to share information, particularly mapping information. It is extremely frustrating for constituents not to be able to access a single map. Sir Michael Pitt—from east Yorkshire—was very clear in that regard, and I think that we owe him a great debt of gratitude for the work that he has done. I believe that there should be a one-stop shop for our constituents, and that they should be able to know exactly where to go.

[Mr Graham Stuart]

Does my hon. Friend agree that not only is mapping important, but it is important for maps to be updated quickly? Following the completion of a £3 million flood defence scheme in the village of Burstwick, in my constituency, it took more than a year for maps to be updated, and during that time residents were still being asked for higher insurance premiums because the insurance companies did not have access to the information.

[Miss McIntosh]

My hon. Friend has eloquently re-emphasised the point that I was making.

[Diana Johnson]

Does the hon. Lady share my concern about the fact that the Environment Agency will not be producing its compound risk maps until the end of 2015? It is taking far too long to convey the necessary information to insurance companies and to constituents.

[Miss McIntosh]

I do regret the amount of time that it is taking.

The Select Committee was very disappointed to hear how little maintenance and dredging of watercourses has been taking place. While it is always pleasing to see capital expenditure increase, the evidence that we heard was more than anecdotal: it is an absolute fact that, were there to be regular maintenance and dredging of the main and even the minor watercourses, floods could be prevented. I urge the Government to spend more than just £20 million per annum in England for that purpose. I also urge them to allow the drainage boards, which do such excellent work, to keep the money rather than passing it to the Environment Agency, and to agree a work programme with the agency but use their own drainage board engineers for the maintenance and dredging.

[Neil Parish (Tiverton and Honiton) (Con)]

I agree wholeheartedly that drainage boards could do much more work. The money that they spend often goes a great deal further than the excessive amount spent by some public bodies. As the Secretary of State is aware, the Parrett and Tone rivers in Somerset are completely silted up and they need to be dredged quickly.

[Miss McIntosh]

I am sure that the whole House, including the Secretary of State, has heard what my hon. Friend said. Dredging little and often can prevent floods. The drainage boards have an army of volunteers, a huge fount of knowledge and, probably, more engineers than the Environment Agency.

I am delighted that the Government have authorised the pilot schemes, and the Select Committee will observe the outcome very closely. I commend the Pickering pilot project, which is one of those schemes at which this country excels. It has already slowed the flow, it is creating new peat bogs, and it is holding water back so that it cannot flood Pickering. If we can succeed with a combination of slowing the flow and building a reservoir, not only will Pickering be safe from flooding, but the benefits of the pilot can be used elsewhere, and resilience to flooding and possible water shortages can be improved.

I believe that the 2014 price review gives us an opportunity to invite Ofwat to reward innovation, which it is not doing at the moment. Ofwat should invite water companies to show that they can bring positive benefits to consumers by creating innovative flood defence and water supply schemes like the Pickering project, and to include such proposals in their business plans. I regret that that did not happen in earlier price reviews and this is a unique opportunity to do that.

I also invite the Government to engage much earlier with EU directives. I yield to no one in respect of the benefits they can bring, but they can be very costly. If we sign up to very short-term, tight timetables, that adds to the costs. My right hon. Friend will be aware of the EU water framework directive, the bathing water directive, the drinking water directive, the urban waste water treatment directive and others. We have to get in there early and put our views across. Their aims and objectives are laudable, but they must be affordable and done on a realistic timetable.

[Mr Graham Stuart]

My hon. Friend made an important point about dredging. It is essential to ensure that unnecessary costs are not imposed on those who try to carry it out. South Holderness drainage board raised money locally to dredge Stone creek and Hedon haven, but then found that the Marine Management Organisation —which, as on previous occasions, would not have charged the EA anything—imposed a cost of several thousand pounds on the drainage board and then at the end more than doubled that amount, imposing a crippling cost on local people raising local money to try to do the right thing.

[Miss McIntosh]

I thank my hon. Friend for that.

I want to mention briefly some new aspects of the Bill and some omissions. On the omissions, bad debt costs each and every household approximately £14 a year. That is unacceptable. We need secondary legislation to progress this matter, and I urge the Government to bring that forward as swiftly as possible.

On social tariffs, I fail to understand why successive Governments have had difficulty in releasing information on benefits. In response to a recent question to the Department for Work and Pensions, the following answer came back from the Minister of State, my hon. Friend the Member for Hemel Hempstead (Mike Penning):

“There is no legislation in place currently”—

well, I knew that and I told him that, but it is always good to know I was right—

“that would permit the release of benefits information to water utility companies: it is likely that new legislation would be required to enable the sharing of benefits data with water utility companies on this scale.”—[Official Report, 18 November 2013; Vol. 570, c. 681W.]

I urge my right hon. and hon. Friends to put pressure on the DWP to release that information so that we can make the best possible tariff available to the appropriate customers at the earliest possible time.

On insurance, the Select Committee came down in favour of Flood Re, but there are a lot of unknowns, and I do not believe we know any more about the known unknowns than we did before this debate started. For example, under Flood Re, why have we chosen household bands as the basis for insurance levy scales? If there is a database, where is it? What is the definition of uninsurable properties? Are small businesses excluded? If they are to be excluded, why are they excluded? It has been put to me that farms might be excluded. Obviously, that would not go down well in my area. I would quite like to know before the end of the evening whether farms and small businesses are going to be excluded.

The memorandum of understanding between the Government and the insurance industry commits the Government to take primary responsibility as an insurer of last resort in an extreme flood event while the fund is growing. We need greater clarity this evening, before the Bill goes on to Committee, on precisely where we are in that regard. The House would also like to know whether the Bill achieves the normal historical value for money requirement in respect of such proposals.

The Select Committee welcomes the commitment to open up the retail market to competition by 2017, but we believe the case for upstream reform needs to be made more vigorously. We need to know precisely what the implications are for customer bills. It has been put to us that there might be de-averaging of household bills. We also need to know the implications for national resilience of upstream reforms, including in respect of climate change and population growth. We note that the start date is two years later, but the House would like to know whether it is feasible at all and whether we even need primary legislation.

It is true that the Select Committee came down in favour of functional separation between the wholesale and retail arms and in favour of a voluntary exit strategy. We would like to hear a little more when the Minister winds up about why the Government are against that.

Members on both sides of the House are interested in cost of living issues, of course, and we need greater assurances on the impact on householders. The Flood Re levy has been set at £180 million per annum, which is £10.50 per customer, for the first years. We also need to know the timetable for the application for state aid. It would be helpful to know that we are going to be in a position to have signed off on state aid before this Bill leaves the House and achieves Royal Assent and, more importantly, by the start date of 2017. Concerns have been expressed about stranded assets and the impact on household customers generally, particularly from the Flood Re insurance levy, and the formalising of the cross-subsidy that has existed under the statement of principles.

To conclude, the potential risks of de-averaging prices in respect of household customers and upstream competition must be addressed. On the comparative merits of the Ofwat duty, we would prefer sustainable development as opposed to the Government’s proposal of resilience. That needs to be explored. We also need to look at possible greater resilience in terms of both water supply and the use of abstraction, and we need the review of abstraction policy sooner rather than later. We applaud the sustainable development and wider environmental aims of biodiversity protection and climate change mitigation, but I personally would argue that this should be addressed through Ofwat’s primary duty of sustainable development. The Government need to explain how the transition in the insurance sector from the cross-subsidy being formalised in Flood Re to an eventual free market will be managed. I believe this is too important to leave to secondary legislation and we need more details in the Bill.

I give the Bill a warm welcome. I have highlighted a number of concerns which I hope will be addressed and I look forward to hearing the rest of the debate.

18:18

[Joan Walley (Stoke-on-Trent North) (Lab)]

It is a pleasure to follow the hon. Member for Thirsk and Malton (Miss McIntosh). As Chair of the Select Committee that has conducted detailed pre-legislative scrutiny of the Bill, she speaks with great knowledge of and authority on these matters. The Secretary of State would have been well advised to listen carefully to her comments, particularly in view of the greater role and scope there now is for Select Committees, especially in speaking in favour of amendments. The Government must urgently reflect on, and respond to, her points in respect of how surface water mixes with sewage in flooding situations. The cross-cutting issues that she raised in relation to water—not least highways and expenditure on highways, which are matters for the Department for Communities and Local Government and other Departments—need to be looked at in a holistic way. I hope that, in the winding-up speech tonight and in Committee, Ministers will take the Select Committee recommendations seriously.

Today’s debate takes me back to the first Committee of this House that I was a member of, which considered the paving Bill for the legislation that led to water privatisation. It was very divisive at the time and was rightly opposed by the Opposition and by many of the environmental groups that believed water to be a natural eco-service, and that the concept of paying large dividends to shareholders at a time when investment was needed in the water infrastructure was simply the wrong way of addressing how to secure investment and manage our water supply. A quarter of a century later, the private companies that were created—and indeed Ofwat, the regulatory body—have had mixed fortunes and mixed success. However, where we are now and the current structure has to be our starting point for taking the Water Bill forward. Today, the challenges we face are greater than ever, particularly, as we heard from my hon. Friend the Member for Garston and Halewood (Maria Eagle), given that we are getting close to the finalisation of the next price review in 2015. It is absolutely critical that as much pressure as possible be applied in order to get this right.

Top of my list of questions is, how do we ensure a safe, affordable water supply for domestic use, for industry, for farming, for all areas of the UK, particularly given that different administrative arrangements apply, which does not make matters easy? There are parts of the Bill I do welcome, not least the one dealing with flooding and insurance, but like many of the Members who intervened earlier, I feel that the flooding issue must be dealt with urgently and in detail. A statement of intent is not quite the same as a measure on the statute book.

[Oliver Colvile]

Is the hon. Lady aware that last autumn in the south-west, we had a massive amount of rain that affected our entire transport network and cut off our railway lines for a very long time?

[Joan Walley]

I am grateful to the hon. Gentleman for his intervention, and that is exactly the point I am making: our water policy needs to take into account the whole issue of mitigation to prevent such situations, but it also needs to be adaptable. The adaptation that we need requires huge amounts of investment and a whole new, collaborative approach to planning. The Bill has been brought forward by DEFRA, but as the Energy and Climate Change Committee has pointed out, it is the problems associated with climate change that are bringing about flooding, and we have to find new ways of dealing with them urgently. It has taken much too long to deal with outstanding flooding insurance claims. Importantly, it is a question not just of how we deal with individual claims and of having an insurance system in place, but of how we deal with all the associated disruption.

As we approach the European elections—I am sure that many of us here will be thinking about what Europe has done for us—how do we ensure that water supply and management fits within the context of the European water framework directive? We have a fundamental disconnect at the heart of water policy which the Bill could actually put right. As my hon. Friend the Member for Garston and Halewood said, the Bill is a wasted opportunity. The water companies, regulated by Ofwat, supply water, but at a local level there is little meaningful collaboration, accountability, transparency or resource, as has been mentioned, to ensure that we have in place what is needed to meet the requirements of the water framework directive.

The directive has two key objectives: an environmental objective, based on the premise of preventing further deterioration and achieving “good status” in all waters; and a managerial objective aimed at creating integrated water management at the river basin level to ensure overall co-ordination of water policy. Here, I want to make a plea to the Government and to DEFRA on behalf of the Environment Agency. The agency needs to be fully resourced for its task of leading the framework directive, in order to enable it to identify significant water management issues, to develop measures to address these at the river basin district level, and to develop and publish the plans for implementing these measures, known as the river basin management plans.

Given the length of time it takes to get legislation on to the statute book, equipping the Environment Agency to work within the framework to carry out its responsibilities needs to be looked at in parallel with the Water Bill before us. Let me give an example of the current unsatisfactory position. When the Government set up the Canal & River Trust in 2012, they committed to a new structure for the canal network which included the navigational waters—some 2,000 miles of canals and river navigations in England and Wales. These rivers were to be handed over to the trust to ensure certainty and long-term funding through the trust arrangements. However, we now know that the Chancellor has reneged on this commitment, and the plans have been put on hold. I am grateful to the Under-Secretary of State for Environment, Food and Rural Affairs, the hon. Member for North Cornwall (Dan Rogerson), for agreeing to meet me to discuss this issue, as I believe it is vital that this transfer take place and be fully funded.

There is a further concern, which was touched on in an intervention from my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller). Through clause 12, Ofwat is to be given the power to intervene in private supplier agreements with water undertakers, with the apparent intent of assisting smaller private water suppliers in their commercial relations with undertakers. Not surprisingly, the Canal & River Trust is alarmed that Ofwat will therefore be able to vary or terminate water sales agreements at the request of the undertaker and without the agreement of the trust. I heard the Secretary of State’s rather complacent reply to my hon. Friend’s intervention, and I hope that, when the Under-Secretary replies, he will tell us what specific, constructive discussions he will have with the trust on this issue, so that we can make amendments to the Bill that will safeguard delivery of the trust’s charitable objectives when the Bill’s legislative passage is completed.

There is uncertainty about other aspects of the Bill, as well. The Bill is all about the economics of, and very little about the environmental and social aspects of, water policy. It mirrors the assumptions that lay behind the changes to the water industry proposed back in 1987, rather than looking at the assumptions we need to make today for the future. Here, I would like to give credit to the former Environment Minister, the hon. Member for Newbury (Richard Benyon), who only last week in the press disclosed how close we were to drought just before the 2012 Olympics. There are also many other factors that point to the need for long-term planning.

We need to take account of the work of the Natural Capital Committee, which is looking to embed the value of natural capital in the national accounts and policy making as soon as possible. We must also recognise the need to look for a credible long-term plan to restore our natural capital, and recognise the work of the Committee on Climate Change. Reference was made earlier to the adaptation sub-committee report, which highlights the need to incentivise efficient water management and to have a price for water that better reflects its scarcity. Of course, there are also the risks associated with water flooding. All these factors point to the need for a much wider, all-encompassing approach to water than the one the Bill provides for.

We should also address the issue of Ofwat having a primary sustainability duty. Its role of granting new water supply licences and overseeing bulky supply agreements should include consideration of the sustainability of water sources. There is common agreement that, without such a duty, we will see over-abstraction, over-licensing and greater environmental damage to our already overstressed river systems. We have heard the Secretary of State’s response to concerns about fracking. He has stated that all the protection and regulation that we need is already in place. However, the proposal for financial guarantees in relation to pollution that my hon. Friend the Member for Garston and Halewood outlined will be vital, and I hope that they will be incorporated in the Bill as it completes its passage through both Houses. I know from the initial meeting that the Minister kindly organised recently that there is widespread concern among many organisations, including the WWF, the Royal Society for the Protection of Birds and the Angling Trust, about the need for a primary sustainability duty, not only on resilience, to be incorporated in the Bill. Will the Government table an amendment on sustainable development? Will the Minister tell us how he intends to deal with this issue?

I want briefly to broaden the debate. Following the discussions that I have had with many different experts in the industry, I do not believe that we should be carrying on with business as usual. Instead, we should be gearing up to a different set of policies designed for the 21st century. The confluence of the various factors I have mentioned means that we should be taking a more fundamental step change in how we invest in improving the environment and safeguarding our water supplies.

I would like to see far more local governance arrangements that would fit with the river basin concept, involving not just water companies but local councils, farmers and other organisations working together on a risk-based approach. I should mention that some water companies are starting to think outside the box. I refer the House to a recent document published by Severn Trent Water, “Changing Course through the sustainable implementation of the Water Framework Directive”. We need much more collaboration of that kind, but the Bill does not really give it to us.

I want to mention the work that I have been doing in my constituency to bring all the different partners together. This has culminated in an application for European funding under the Life Plus programme, which would enable us to implement measures that would prevent pollution in the River Trent. We need to see much more of that kind of approach. Water efficiency should also be promoted.

The Bill will promote greater competition, but what will it do to challenge traditional kinds of capital investment? We should be looking into different kinds of investment. Expensive engineering solutions are not always the way forward, even though the water companies depend on capital value for the returns that they make. If the Government can be persuaded to introduce an obligation for sustainability into Ofwat’s powers, Ofwat could look at a return on revenue expenditure, too. We need to look at the kind of investments involved. The Bill could enable Ofwat to take a much more proactive role in vetting companies’ proposals for investment.

I would also like to see the dividends paid out to water company shareholders managed differently. Yes, money is needed for investment in water management, but it would be so much better if the profits could stay in the business and be reinvested, rather than global private equity companies that do not necessarily have a long-term commitment to our river basins paying out massive returns—well above what we can earn in interest from our bank account—to shareholders.

[Roger Williams (Brecon and Radnorshire) (LD)]

The hon. Lady is describing the model used by Welsh Water, a not-for-profit company that is responsible to its customers, rather than to shareholders.

[Joan Walley]

Indeed. One difficulty is that we are looking at the provision of water for the whole of the United Kingdom, despite the different administrative arrangements that have been put in place by the Parliaments in the different Administrations. The way in which the money is reinvested in Wales is hugely beneficial. As I have said, we should be thinking outside the box in regard to how we incentivise the necessary investment in our water industry.

[Hywel Williams]

We are talking about non-distributable profit. Any profit that is made is reinvested in the system and in creating lower prices. I am not here to praise Dwr Cymru Welsh Water in particular, but its price rise next year will be 1%. Given that that is lower than inflation, it will effectively be a price cut.

[Joan Walley]

That just shows that there are all kinds of different ways of looking at this, and that we do not have to depend on the present traditional arrangements. The Bill should really be looking at the challenges that we face, rather than promoting business as usual.

With more than 2 million households in England and Wales being forced to spend more than 5% of their income on water, it is clear that the Government’s approach is not working. The Bill should do something about that. We need a national affordability scheme to help those struggling to pay their bills, and it should be funded by the water companies themselves. The fact that water bills are rising by 1.8% above the rate of inflation when we are seeing investor returns of 17.5% across all the companies demonstrates just how unfair the whole structure is.

Given the challenges of climate change and the likelihood of increased flooding, balancing affordability with our wider environmental commitments to mitigate and adapt to flooding will involve ever-greater calls for the right kind of investment in the water industry. This will require a cross-cutting response from the Government, and detailed policy measures that will require the Treasury, the Department for Business, Innovation and Skills, the Department for Education and the Department for Communities and Local Government to be equally committed to the measures coming out of DEFRA. As we approach future challenges, and the final implementation date of the water framework directive, households and businesses will need to access affordable water supplies. Key changes will be needed throughout the passage of the Bill.

The Government will need to make a step change in regulatory, social, environmental and fiscal policy, but the water companies, businesses, farmers, householders, local authorities and the regulator will also need to refocus on their long-term objectives and on delivery mechanisms if we are truly to value water as a natural resource and a vital component of everyday life.

18:38

[Richard Benyon (Newbury) (Con)]

I refer hon. Members to my entry in the Register of Member’s Financial Interests. It is a great pleasure to follow the hon. Member for Stoke-on-Trent North (Joan Walley), for whom I have the greatest respect. She will be a loss to the House when she stands down. I listened to her remarks with great interest, and I will comment on a number of them in due course.

I hope that the House will forgive me if I start by quoting from the water White Paper, about which I feel a sense of propriety. If I say so myself, it was a very good document. It is a rare occurrence in Parliament for such a document to be well received not only by those on both sides of the House but by green non-governmental organisations, by the water industry and by people throughout the sector who are involved in this important subject.

The White Paper asks:

“How do we protect the environment and take less water from our rivers, while meeting the demands of a growing population? How do we encourage innovation and dynamism in the water sector while ensuring it remains a low-risk choice for investors? How do we incentivise less wasteful use of water while keeping water affordable for everyone?”

That encompasses, in a short paragraph, what we are seeking to achieve, not only in tonight’s discussion of the Bill, but across the much wider platform of restoring sustainability in this sector. This is about the balance between the environment and the demands of a growing population; the need for innovation and a new type of investment, which the hon. Lady was right to talk about, without spooking the investor, whose money we need; and stopping waste yet keeping water affordable. The water White Paper was a call to action and a vision for the management of this sector and its theme will, I hope, run and not only through this Bill. As hon. Members on both sides of the House understand, the Bill is just a work in progress in respect of delivering that ambition; it delivers an element, and I particularly wish to discuss the importance of abstraction.

Let me make an obvious point: water comes from nature. It is vital that we understand that we are talking about not just an environmental factor, but a key economic matter. The hon. Lady talked about the Natural Capital Committee. When we discuss natural capital, we need to understand its importance for the economy. We need to consider how we manage water resources in parts of the country with a level of rainfall lower than that in some sub-Saharan African countries. When we talk about development and the needs of the economy in the years ahead, we must address that through the prism of natural capital. I am grateful to people such as Dieter Helm, who guided me in this relatively new—for me and for many other hon. Members—approach to economic thinking. I am proud that this Government have hard-wired natural capital into their economic thinking.

It is a shaming statistic for this country that only 27% of our rivers and lakes are fully functioning ecosystems. I am pleased that we have set about addressing that, through a catchment management approach and targeting our resources in as meaningful a way as possible. We are talking about not only an environmental imperative, but an economic one. We have to comply with the water framework directive. If by 2027 we have not got our house in order and our act together, we will get a slapped wrist and a stonking great fine from the European Union. If we are talking about improving the quality of our environment just so that we comply with a European directive, what a pathetic ambition that would be. We should want to restore the quality of our natural environment because we want to restore the quality of our natural environment and feel proud about this country’s natural systems.

We have what some would call the “God-given” advantage of having 80% of the world’s chalk streams in this country, but in many cases they are failing ecological systems. We have to set about putting that right and making sure that we do not just suck water out of the top of aquifers, such as those of the River Kennet, to provide water for excellent and much-needed households in places such as Swindon; we must set about getting reforms that can address that problem. I really welcome the Bill’s means of ending the very bureaucratic system involved in closing down unsustainable abstractions and of getting this into the five-yearly price review. That is a major step forward, which came about through a proper process of pre-legislative scrutiny. I congratulate everyone, including the Select Committee, on the work that was done in trying to draw that to our attention. Let us make it clear that our ambitions for getting our act together require a new piece of legislation in a new Parliament. It would be a great help if the Minister could assure us in his wind-up that we have a continuing and dynamic ambition to legislate in the next Parliament to make sure that the increase to about 30,000 abstraction licences in England will be properly managed in a fit-for-purpose system that recognises the demands of a growing population and the economic growth potential that that will bring.

On economic potential, let me relate to the House my last experience as a Minister, which was to take a trade mission of water companies and others in the environmental sector—the green growth sector—to Brazil. That BRIC country—the group made up of Brazil, Russia, India and China—is wrestling with the problems that make ours appear small fry. Sao Paulo, the largest conurbation in the southern hemisphere, is trying to address the demands for water and for dealing with waste, and it is desperate for new technologies. British companies from our supply chain sector have achieved great things in the delivery of the greenest Olympics ever and are ready to give work to other British companies and to create British jobs in that green technology sector. So the water sector has a lot to give, not just in this country, but around the world. Understanding that economic driver is as important as the environmental and social dimension to our policies.

[Jessica Lee (Erewash) (Con)]

I thank my hon. Friend for all the work he has done in this area and for his expertise. I hesitate to interrupt his flow—to use a water analogy—but he just mentioned the social aspect. Does he agree that volunteers play an important part in managing all this country’s waterways, particularly through the Canal & River Trust? In my constituency, where the waterways play a hugely important historical and heritage role, I have set up the Erewash rangers scheme to try to recruit more volunteers along the waterways.

[Richard Benyon]

I am grateful to my hon. Friend for her intervention. If I felt a degree of paternalism towards the water White Paper, I feel one even more towards the Canal & River Trust, which is one of the great successes. It has seen volunteer numbers rocket since it went from being a government organisation—as British Waterways —to being in the charitable sector, and Members on both sides of the House should take pleasure in its success. Will the Minister respond, if not tonight, at some point, to the real concerns that the CWT has about clause 12? I hope that we can allay its fears because, as the Secretary of State rightly said, the CWT will be an important player in delivering the kind of connectivity we want in our water sector. The CWT will also be a huge resource, in terms of the economic regeneration of our cities, the potential for tourism and the social dimension of volunteer numbers. So I hope that the Minister is able to address the CWT’s concerns, which have been eloquently voiced to hon. Members on both sides of the House.

A debate is rightly taking place about the affordability of water. That was of primary importance in the Government’s mind as we developed the vision in the water White Paper and in the Bill, and I know that it is a great concern of the Minister as he steers the Bill through. Those who believe in price caps can relax about water, because we have a price cap for water—the five-yearly price review. Ofwat provides a price cap for customers, albeit one that is done by negotiation. It has been an effective way of keeping water relatively affordable, although I know that some of my colleagues from the south-west have views on that—we have partly addressed those. Obviously, there are ongoing concerns about water prices, so it is also important to recognise what the Walker review said. It found that the rateable value of a property bears no relation to a customer’s ability to pay and it discovered that 40% of low-income households live in the top rateable value properties.

The concerns and fears that people have about increased metering do not necessarily correlate with the idea that we should leave as many households as we can paying for water through a rateable system. In the next price review period, possibly with the aid of some legislative stimulus, we could see a much higher rate of metering. Knowledge is power for households. We will not be having this debate in 20 years’ time, because we will all be managing our utilities on our laptops at work. We will be able to see that a rocketing in our water usage could be down to a leak in the system. We will be able to manage our household bills more effectively. The high level of metering in the south-west and the work that Southern Water and Thames Water are doing to increase the level of metering should be applauded and supported.

The WaterSure scheme and other social tariffs are important tools, but we should consider the whole question of affordability in a much more holistic way. The effect of a freeze in council tax, of getting more families on low incomes out of paying tax altogether and of other measures will have infinitely more impact on the total expenditure of those households than will tinkering around the schemes with some of these points.

My hon. Friend the Member for Thirsk and Malton (Miss McIntosh), the Chair of the Select Committee, made an important point about bad debt, but I refer her to her own local water company, Yorkshire Water, which is an exemplar in dealing with bad debt. The money we all pay on our bills for bad debt varies around the country. Some are paying £14 or £15 and some are paying a lot more, because our water companies might be bad at dealing with bad debt. I was impressed to hear that, at Yorkshire, a resolve scheme negotiates repayment terms for customers with arrears of more than £500. A couple years ago, some 5,000 customers paid back £650,000 of bad debt, and the water company wrote off £1 million of bad debt. It is that kind of partnership approach that is delivering a much lower figure of bad debt, which should be seen in the context of affordability. Ofwat estimates that the next year’s price review could reduce bills by between £120 million and £750 million, which seems an awfully wide difference.

Of course we all want to keep water bills low and as many people as possible out of water poverty, but we concentrate on that at the risk of reducing investment. I have spoken about that matter recently in the House and I will continue to do so. A high level of investment is better for customers. It is about stimulating innovation and resilience and reducing the impact on the quality of people’s lives and ultimately on the bills they pay.

The hon. Member for Stoke-on-Trent North mentioned my comments about the drought. In the spring of 2012, the Environment Agency said to me that there was a 3% chance of us having enough rain through that summer to refill the reservoirs and depleted aquifers. We were fortunate because it started to rain in May. It rained right through the jubilee and stopped just as the first athletes started arriving in the Olympic village. We all thought, “Thank goodness”, although we did have a number of flooding incidents in certain areas. That rainfall might have caused us a problem that summer, but we were planning very seriously for a third dry winter. I put to the House this question: are we really content to see people in the most economically active part of the UK, which is sixth largest economy in the world, reduced to collecting their water from standpipes in the street? That is the sort of image that brings down Governments and causes wholesale, serious and endemic problems in society, and we must use this Bill to avoid that.

[Guy Opperman]

I represent Northumberland—probably the wettest county in England—and we should probably have held the Olympics, as there would then have been no such fears. The Secretary of State referred to water supply earlier, when he called on business men, farmers and other people to get involved and create smaller reservoirs. As my hon. Friend drafted the White Paper on water and knows so much about the subject, can he say what assistance will come from DEFRA and the Bill to incentivise and assist such people to create those reservoirs?

[Richard Benyon]

There is provision in the Bill to establish an inset regime and allow new entrants to design innovative infrastructure, which can link into the water system. Moreover, under the capital allowance system, farmers can invest in new reservoirs and have the right to give the surplus of that water to their water companies. In dire circumstances, the Environment Agency can purchase that water to keep rivers flowing. Real opportunity exists for people. I am not saying that that will resolve our water resilience issues; many farmers will need to build many reservoirs for that to happen. None the less, there is a genuine opportunity.

I have one plea. Yes, we can get involved in lengthy debates about whether we should have a primary or a secondary sustainability duty, or whether the robust new resilience duty—I urge hon. Members to read about that—will provide an added incentive; but if the rivers do not flow, our reservoirs are empty and our economy suffers, we should be absolutely determined to concentrate on the outcomes. I appeal to Members in this Chamber and in the other place not to get stuck on the tokenism of any duty, but to consider the outcome that it can deliver. I am relatively agnostic about whether Ofwat should have a primary or secondary duty to deliver sustainability. I am much more concerned about the outcomes, and I have yet to be convinced that just changing the wording will make a huge amount of difference. A really important gain in all this is the resilience duty on Ofwat.

[Neil Parish]

Like other Members, I thank my hon. Friend for all the work that he did on the Bill when he was Minister. Does he not feel that the one thing we are missing in this country is the recycling of water? It would be good to use recycled water to grow crops, as it contains a huge amount of nutrients. When we get a wet year, we forget about all the dry years that we have had or may have in the future.

[Richard Benyon]

My hon. Friend is right. I see this in household terms: my simple view is that if a builder wants to build 1,000 houses in the Test valley—I do not know why I am picking on the Test valley; I could pick on any number of catchments in the south or east of England—for that to be considered sustainable development, he should have to prove to his local authority that he is hardwiring into his thinking recycling rain water, greywater systems and permeable membranes outside the houses. In fact, he should think of everything to ensure that the development’s water demands are as low as possible.

An important change is being made that will assist investment in our water sector, by cracking the problem with the investment cycle that we have faced for years. I am grateful to British Water—the organisation that represents supply chain companies—for drawing my attention to how investment fell off a cliff edge a year or so before the end of a price review period. That is a problem. Britain is losing jobs, losing skills to abroad and losing much-needed infrastructure investment. Three changes will make a difference in that regard. The first is the resilience duty, which I have already mentioned. The second is the requirement on water companies to invest for the long term, particularly through the 20-year reviews of their water needs. The third is the need for a six-year investment programme, which is a major step forward. Over time, the cycle of investment will level out rather than fall off that cliff.

We need to think beyond the Bill on sustainability. I am pleased, for example, that improvements to the building regulations include a standard daily usage of 125 litres per head. The code for sustainable homes refers to 105 litres per head. We use 155 litres per head in this country—a figure higher than almost anywhere in Europe. We must consider the demand side as well as the supply side.

I hope that that clause on flood insurance goes through with the support of all parties. All Members with constituents who live at risk of floods feel strongly that the statement of principles, worthy though it might have been when it was drawn up, was full of faults. There was no affordability element. Our constituents face excess charges that are at times more than £10,000—an impossible situation that cannot be allowed to continue.

I have the scars of the negotiations on Flood Re on my back—I pay full tribute to the ABI for the constructive way in which it negotiated—but I think we have reached a point at which we can address the needs of the 500,000 households that are at the highest risk. It will limit the cost, and as best it can, it will link that limit to people’s ability to pay. Linking the scheme to council tax banding is the right way to do that. Excess charges will be capped at somewhere between £250 and £500. That is a major win for those people who come to see us in our surgeries and tell us that every time it rains their stress levels rise considerably.

[Alison Seabeck (Plymouth, Moor View) (Lab)]

I am listening with interest to the hon. Gentleman’s comments, given his experience. Does he have any concerns at all that linking the scheme to council tax banding, which is based on property values from back in the 1990s, could still be problematic for some households, as those figures are skewed?

[Richard Benyon]

I understand the hon. Lady’s point, which is justifiable, but if she is involved further in the machinations on the Bill, I urge her not to try to unpick that one. The scheme is not perfect, and she is right to have concerns. Band H has been cut out, so millionaires are not covered. Only bands A to G are included, and I think that this is probably the best way to do things. Obviously, it can be reviewed in the future.

The key question is how we make the transition from a system under which a subsidy supports the change to a much more risk-reflective form of insurance, which reflects betterment, such as when a household spends money from the scheme to improve resilience to flooding in the future. For example, sockets would no longer be placed at the skirting board but a metre above it. Other household measures could be reflected. We should encourage households to see the process as a transition under which they will be rewarded when they take responsibility. If they take measures to reduce the flood risk to their property, they will benefit.

[Diana Johnson]

I pay tribute to the hon. Gentleman for the work that he did on the flood insurance scheme. Does he agree that in areas such as mine, Hull, where 90% of the city is below sea level, home owners and home builders can do all they can, but we will always be at risk of flooding? That must be taken into account in any scheme, and I hope that the scheme that we end up with will not just disappear after the 25 years planned for Flood Re.

[Richard Benyon]

I entirely accept that. It will be the job of future Governments to see where this all goes, but we need to think about it as a transition. I am pleased that, through the partnership funding scheme, we could ensure that the system was skewed in favour of those with the least ability to pay, including many of the hon. Lady’s constituents on low incomes. The Government can do their bit by ensuring that more flood defences are built, that those with the least capacity to contribute to such schemes are protected and supported through central funding and that an insurance scheme reflects the needs of those who are on the lowest incomes.

The Bill is an opportunity to change how we approach the management of water in a changing climate. We forget at our peril that a drought in 2012 was followed by floods in 2012. The words in the Water White Paper, which were written at a time when that was fresh in our minds, are as relevant today as they were yesterday and will be more relevant in the years to come, as floods such as those that happened in Cornwall and other places happen more frequently. Droughts such as those that we experienced in 2012 might possibly be followed by a third dry winter. I do not want to be part of a House of Commons or a society in this country that has not grasped the risk that we could face. The Bill is part of the process of facing up to that risk, creating more resilience in our water sector and incentivising new much-needed investment. I hope that my hon. Friend the Minister will show in his concluding speech how that is all just work in progress and that much more is needed to address the environmental, economic and social problems that will accrue if we do not address the problem for the long term.

[Several hon. Members]

rose—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Before I call the next speaker, I should point out that a significant number of hon. Members want to take part in the debate and there is not a long time left before the Front Benchers will conclude it. If hon. Members were to limit their speeches to approximately 10 minutes, everyone who wished to speak would have the opportunity to do so. If hon. Members do not do that, in the near future I will have to impose a time limit on speeches.

19:08

[Hywel Williams (Arfon) (PC)]

I will certainly bear your comments in mind, Madam Deputy Speaker. It is a pleasure to follow the hon. Member for Newbury (Richard Benyon). His beat as a Minister did not really include Wales, of course, but I came across him in the Science and Technology Committee. His sincerity and commitment were manifest in those meetings. Let me also pay tribute to the hon. Member for Stoke-on-Trent North (Joan Walley) and say how much I agreed with her remarks about sustainability and fracking, which my hon. Friend the Member for Brighton, Pavilion (Caroline Lucas) would also have endorsed had she not had to leave.

Water has a huge significance for people in Wales. Our way of looking at water must be framed by Tryweryn and the other valleys that were drowned to provide water, largely for conurbations in England. I am also aware that I am standing on the shoulders of others who came before me, such as Cynog Dafis, the Member for Ceredigion and, with due respect to my hon. Friend the Member for Brighton, Pavilion, the first Green MP —although he was a Green-Plaid Cymru coalition MP.

[Joan Walley]

I cannot help pointing out that the former Member for Ceredigion served with great distinction on the Environmental Audit Committee.

[Hywel Williams]

Indeed. I was aware of that. He is a friend of mine and I think highly of him.

My party’s stance has always been that it is up to the people of Wales to decide on the sustainable use of its natural resources. As scarcity bites, the economic case for Wales exporting water is growing. If so, Wales should be compensated fairly and the benefits should go to the people of Wales.

There is a point which has not yet been made— the territorial significance for Wales of the current water companies. Labour in government, through the Government of Wales Act 2006, failed to act on that. Much of mid-Wales is served by Severn Trent Water. Part of north-east Wales is served by Dee Valley Water. As a consequence, perhaps, part of Herefordshire is served by Dwr Cymru Welsh Water. One of the aims of my party is to regularise that situation. The lines should be redrawn. That is something that I will talk about in Committee if I am fortunate enough to be appointed to it.

As for the current arrangements in Wales, to paraphrase L P Hartley, Wales is another country: they do things differently there. That is a slightly over-used phrase, but in Wales we have a different situation. We have a water company, Dwr Cymru Welsh Water, which is a third sector company, as I mentioned earlier, with a non-distributable profits model. The previous company, Hyder —or Hi-dere, as the BBC used to insist on calling it —was run on conventional commercial lines. Glas Cymru reinvests its profits in a better system and in lower prices. As I said, its current price rises are below inflation.

[Roger Williams]

The hon. Gentleman will know that price rises since Glas Cymru was formed in 2001 and up to the present day are below the rate of inflation. It is the long-term situation.

[Hywel Williams]

The hon. Gentleman makes a good point. Provision of water in Wales is a difficult matter. The geography is against us, but Glas Cymru has done a fine job.

There have been concerns about large profits in the industry, overcharging and a lack of investment, alongside high gearing and a low tax take. I read a report to that effect in the Financial Times on 27 October. Hence the need for greater competition. A water industry insider put it to me thus: some water companies are over-geared, they are over-reliant on cheap finance, which is not going to be there for ever, and they are run as cash cows. This is not a sustainable model. Dwr Cymru has the lowest gearing in the industry and, as I said, all its profits are ploughed back. Unsurprisingly, this third sector company has reported customer satisfaction levels of well over 90%.

Another way in which things are different in Wales is the Welsh Government’s stance on competition, which essentially is against it. Under the Bill, businesses and non-householder customers will be able to switch their water and sewerage suppliers, but the Bill’s provisions on competition are confined to England. I refer the House to the report by the Welsh Assembly Environment and Sustainability Committee chaired by Lord Dafydd Elis-Thomas. When questioned, 113 large-scale users—using over 50 megalitres per annum—said that a price differential of 10% to 15% would be required to tempt them to switch. By the way, that was also the stance of small and medium-sized enterprises.

A price differential of 10% to 15% is substantial, and it is significant that none of the large users that have the ability to switch in Wales have done so. Customer service is important and that is a central element of the water service that we have in Wales. Either Dwr Cymru is doing a cracking job, or switching is unlikely to hold much appeal other than, perhaps in theory, to Ministers.

Competition could be extended to Wales if the Welsh Government so wished. Dee Valley Water’s evidence to the Welsh Assembly Committee noted that competition in the non-domestic sector might be cross-subsidised by the domestic sector—that is, the public would be paying. That point was made earlier, and the answer, I think, is transparency. I understand that the Government in Cardiff do not wish competition to be extended to Wales. Can the Minister, when he winds up the debate or later in writing, clarify whether under the 2006 Act the Government in London have a veto on Welsh decisions on water? Will that continue to be the case, or is the Cardiff Government’s right to choose not to introduce competition an absolute right? I would be grateful to hear from him on that matter.

Other Members have posed the question of how we can incentivise companies to alter the way they manage their systems and water and sewerage networks to improve efficiency and to encourage the development and deployment of innovative technologies that can cut costs and lower the sector’s electricity usage and its carbon footprint. The point has not yet been made that water companies are heavy users of electricity. I am not sure whether competition and the price instrument will achieve all these aims. I hope we will able to discuss this further in Committee.

Lastly, on affordability, the question is how the bottom 1% of the population pays for its utilities. Overall, the Bill is a missed opportunity. It has no specifics on sustainability or the decarbonisation of the water sector. The point about fracking has already been made. There is no legal obligation on people to pay their bills. In other countries, there is a voucher system for vulnerable groups. The Bill is also lacking in specifics on water management. The current UK system is luxurious in that there is no separation of clean and grey water, which could be achieved in the future. That is a formidable list and I hope we will have the opportunity to address these matters in Committee.

19:17

[Stephen Gilbert (St Austell and Newquay) (LD)]

It may please you, Madam Deputy Speaker, and the rest of the House to know that I do not intend to take 10 minutes for my remarks, let alone an extended period of time. Other colleagues will, I hope, be able to get in and make valid points on this important Bill.

I begin by continuing a theme established by the hon. Member for Arfon (Hywel Williams)—extending competition. He was talking, of course, about extending competition in Wales. Although the extension of competition in the water industry allowed for in the Bill is welcome, it is a missed opportunity because it could go further. It is welcome that businesses, charities and public sector organisations will be able to switch suppliers in pursuit of the best deal, but it is regrettable that that does not extend to household residential supplies and consumers.

I note what the Secretary of State said about the need to increase metering before such a transition can be put in place. It strikes me that offering the ability to switch to those households that already have meters would be a driver for greater take-up of metering. As we know from our experience in the south-west and in Cornwall, where we have particularly high levels of metering, that can help households to bear down on water use and improve affordability. The incentive of being able to shop around for the best deal if the household has a meter may produce a double whammy. Consumers would shop around for better water tariffs and metering would increase, enabling households better to control their water usage and its affordability. It is a thought that I leave with my hon. Friend the Minister.

However, it is clear that the introduction of competition into the market is long overdue. The fact that the previous Conservative Government essentially created a number of monopolies across the country has been a key failing of that privatisation. I have always felt that it was a privatisation too far, and precisely because it did not allow choice in the way that other privatisations of state industries did. There was no competition in the market and therefore no real driver for improved conditions. We see that in my constituency, much to our pain, as we still suffer from the highest water bills in the country. I am therefore pleased that the coalition Government have taken a step towards tackling that through the £50-a-year rebate.

I must say to Opposition Front Benchers, in relation to the earlier comments from the hon. Member for Garston and Halewood (Maria Eagle) about this being part of a cost of living crisis, that in Labour’s 13 years in office there were three reviews and one Act of Parliament, but not a penny came off water bills in Cornwall as a result.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

I am sure that the hon. Gentleman has misled the House inadvertently, because he will know that Labour’s first price review led to a real-terms cut in water bills.

[Stephen Gilbert]

And the hon. Gentleman will know that the coalition Government acted to take £50 off bills in the south-west, which has made a real difference to affordability for my constituents and others who have suffered for a very long time.

[Sheryll Murray]

Will my hon. Friend confirm that his party, which represented all six seats in Cornwall under the previous Government, fought for a long time to get something done about increased water bills and that it took the Conservative-led coalition to do something about it?

[Stephen Gilbert]

As with everything my hon. Friend says, her question was good in part—the first part was very good, but on the second part I am afraid I must disagree. The Liberal Democrats in Cornwall have certainly fought for many decades to redress the unfair water bills that my constituents and others in Cornwall suffer, and thanks to both parties coming together we were able to do that.

[Alison Seabeck]

rose—

[Stephen Gilbert]

At the risk of breaking my earlier promise to you, Madam Deputy Speaker, I will give way once more.

[Alison Seabeck]

This rewriting of history is wonderful. The effort to get bills down in the south-west, led in no small part by my former colleague Linda Gilroy when she chaired the all-party group on water, was an all- party effort. The groundwork that enabled the coalition Government to introduce the £50 rebate was all done under the previous Labour Government, particularly through the Walker review.

[Stephen Gilbert]

The hon. Lady and I know each other well, and I certainly would not be so churlish as to deny the all-party effort in Cornwall and Devon to drive the issue forward, but unfortunately in Westminster for 13 years the Labour Government did nothing. It was the coalition Government who delivered that change.

To finish my points on the introduction of competition, I want to ask my hon. Friend the Minister about charities. It strikes me that charities can be run from people’s domestic residences. Many charities are small, as he will know from his constituency as much as I do from mine. Are there going to be size restrictions and criteria for qualifying for the introduction of competition in the market for charities? How big will they have to be, for example? I would appreciate some clarity on that, as would others across the country.

Finally, I want to mention Flood Re, following some of the comments from my hon. Friend the Member for Newbury (Richard Benyon), whom I congratulate on his hard work to secure the renegotiation with the Association of British Insurers and the National Flood Forum. He and I crossed swords here when I tried to push him to accept a deal to ensure that flood insurance remained affordable and available for my constituents. I am delighted to welcome a deal that I think takes a huge step in that direction. I suspect that he and his colleagues played the Government’s hand as best they possibly could. Hopefully we have the rudiments of a deal that will be in place for the long term.

Three years ago this week parts of my constituency were under water and hundreds of businesses and homes had been damaged by flood water. I think that it is timely and right that the Government have brought forward these proposals, which will mean that people will still be able to insure their homes, sell their homes and, if disaster strikes, barring the loss of life, rebuild their homes and reassemble their lives.

However, some key issues remain. I seek assurance from the Minister that premiums for those people in flood risk areas will not be dissimilar to those for people in non-flood risk areas and that there will be some equivalent of the premium element on the household insurance policy that flood insurance will cover. In particular, I support the calls from other right hon. and hon. Members on excesses. I have constituents who were hit by the flood three years ago and had a £15,000 excess on their flood insurance. Clearly, if they do not have £15,000 in the bank, having insurance that requires them to pay £15,000 before being able to make a claim is nonsense. We must ensure that we drive down those excesses as far as possible. I welcome the figure of £250 to £500 that has been proposed.

I have one final question. The Secretary of State said that homes built after 2009 would not be included—I quote, I hope—“if built on floodplains.” Does that mean that homes built after 2009 which are not built on floodplains will be included? We need some clarification on that.

Overall, I think the Bill introduces long-overdue competition into the water market, driving down costs for business and, ultimately, I hope, for consumers. It delivers on one of my pledges to my constituents, which is that flood insurance will remain affordable and available.

19:26

[Alison Seabeck (Plymouth, Moor View) (Lab)]

This is one of those occasions when there are Members with enormous experience of the subject under discussion sitting on both sides of the House. As a result, the discussion we are having is extremely useful. I draw attention to the contributions from the hon. Member for Newbury (Richard Benyon), who said that he has scars on his back from this, which I quite understand, and the hon. Member for Thirsk and Malton (Miss McIntosh)—she is no longer in her place—who has contributed significantly over the years, and it is years, to bringing forward the Bill.

It is ironic that we are surrounded by water in this country—certainly in the south-west, which has some of the highest levels of rainfall, because of the prevailing winds—yet we are in need of additional powers to protect us against drought. Such measures are important, so there is a lot of sympathy with the general thrust of the Bill, but the issue is with the detail and with what is not there. I was concerned to hear the Secretary of State say that he hoped to bring forward—not that he would do so for certain—the clauses to Committee. It would be helpful if the Minister, when winding up the debate, confirmed whether all the clauses specific to the insurance elements, and any other key elements, will be dealt with by a Commons Committee and not left to a Committee in the House of Lords.

Flood insurance is desperately needed to protect domestic properties. A number of Members have seen their constituents flooded regularly, or indeed have been flooded themselves. In Plymouth we are relatively fortunate, but we have small areas that flood regularly. Our biggest problem is the railway, which is regularly cut off. The organisations involved seem incapable of coming up with a solution that does anything other than cut off the far south-west every time there is flooding at Exeter, which is desperately bad news for business. I am not sure how the insurance companies view claims for loss of business, but without doubt there is a loss of business. That is a separate issue, but it is very specific to our region.

Another point that concerns me is that so much of this is being done by order and by statutory instruments—that is, secondary legislation. Indeed, the EFRA Committee, which has done sterling work in this area, felt that the draft Bill relied heavily on secondary legislation in a number of key areas. The Government have obviously not listened with regard to this aspect of the Bill. I am absolutely confident that in Committee my Front-Bench colleagues will press for some of those key issues to be firmly and clearly included in the Bill.

The Bill seeks to extend competition, which most people would say is a worthy aim, but not to extend it to domestic bill payers—a point well made by the hon. Member for St Austell and Newquay (Stephen Gilbert). That is another missed opportunity. The Government are failing yet again to get a grip on the things that could make a significant difference to the cost of living that all my constituents are facing. Despite the welcome £50 rebate, the south-west still has some of the highest water bills in the country. The amount paid by people on relatively low incomes is extremely high, and about 200,000 households are described as being under water stress.

[Sheryll Murray]

Can the hon. Lady tell us exactly what her Government did, in the 12 years when they had the chance, to help the hard-pressed, hard-working people of the south-west with their water bills?

[Alison Seabeck]

Their first review cut water bills, even in the south-west, and then, admittedly, as my hon. Friend the Member for Wallasey (Ms Eagle) explained, there was a constant battle and a need to bring something forward. I fully accept that it was a slow process. I personally went to see the Chancellor of the Exchequer to make exactly that point—to say that we needed, frankly, to get our fingers out and do something about bill payers in the south-west. I do not think that anybody argued that as vehemently as I and Linda Gilroy, my colleague in Plymouth, Sutton at the time. Even the hon. Lady, in all fairness, will be aware of the work that went on.

In the south-west we have a high percentage of people, including pensioners and families, with high and essential water needs. In fact, there are more than in any other English area, and some of them are being supported through the WaterSure scheme.

South West Water bill payers are the victims of a botched privatisation process. We have too large an area, with a massive need for capital investment, including cleaning up our shoreline, and very few bill payers to meet those costs. It is a dreadful situation, and one that was not thought through but driven through purely for ideological reasons. This Bill develops the market in water further, with a new retail market. The proposed changes are interesting, but they are not embraced entirely by the water companies, which are asking questions about the need for a provision to allow for retail exits, about why the system is voluntary, and about whether there will be a level playing field for all retailers.

South West Water has expressed concerns about the Government’s ill-considered and risky-to-implement proposals on the relaxation of the selling of licences without reforming abstraction methods, and says that it can foresee problems for rivers. During this debate, people have been tweeting me about the importance of the chalk streams. Indeed, several hon. Members on both sides of the House have touched on that point. The Secretary of State talked about new sources of water. However, if my local water company is saying that it has concerns, I have to be concerned. Equally, if the general public and Members of this House have concerns, the Minister must respond to them when he winds up.

Water companies across the UK, many of them based overseas, are making significant and increasing profits, with soaring dividends for shareholders. I am sure that they would say that the picture of their accounts is much more complicated than that which appears in the headlines, and that, in some cases, they hold significant debts, but that just means we need greater transparency so that we can fully understand where the pressures exist. The new chair of Ofwat has suggested that some of the financial arrangements that these companies pursue are complex, or perhaps they could be otherwise described as hidden, and that they are running a debt in order to minimise tax payments in the UK, but—surprise, surprise—they are still managing to pay out huge dividends. As we have heard, they have announced £1.9 billion in pre-tax profits and given £1.8 billion back to the shareholders. This is a system for the few, not the many. People in Plymouth have been paying through the nose for a basic commodity while shareholders seem to be benefiting. No one denies that shareholders are people who have backed a company for a decent return, but we need to understand that it is a decent return and not an excessive one.

Water is a commodity that needs to be valued because it will potentially become even more scarce as climate change kicks in further. If we do not prepare well for the decades and century ahead, we could be left with water in short supply or prices rising further for the taxpayer. At a time of soaring utility bills, high inflation and stagnant wages, water customers really do need to feel that they are getting a fair deal from their supplier. South West Water has invested in new technology in Plymouth—I recently saw it for myself at its treatment works in my constituency—and there are, at last, some improvements to the local sewage works, but it needs to offset that capital expenditure and the benefits to customers against its profit and dividend levels.

The Bill does not put in place measures that achieve transparency or affordability. The notion of a national scheme to assist with affordability, which has been discussed over very many years, and in depth by the Walker review, needs to be implemented. This Bill could have been the vehicle to do that—another wasted opportunity. Some companies are doing some of the work on a voluntary basis, including, in all fairness, South West Water, but it makes much more sense to bring them all together into some sort of national scheme—to get them all signed up and have a level playing field where good companies feel that everybody else is pulling their weight.

My hon. Friend the Member for Wallasey and the hon. Member for Thirsk and Malton raised a very important point about access to data, particularly in relation to the Department for Work and Pensions. I urge the Minister to do all he can to press the DWP to sort itself out on this one; it is almost a no-brainer.

My constituents find it impossible to understand why the regulator seems to have no teeth and simply rubber-stamps increases in bills. I am sure that the Minister will say that is not the case, but that is how it is viewed by my constituents. We know that the regulator has to perform a complex balancing act, with requests for increases from companies because they need to develop major schemes such as new ring sewers, new reservoirs, and so on, but my constituents are not convinced that anybody is listening to them. No one would argue against the vital work on infrastructure, protection against flooding and drought plans, which the Bill champions, but what is missing is the fairness agenda. The Government fail to understand that if my constituents feel they are being unfairly penalised while shareholders, perhaps overseas, are benefiting, this legislation will have failed and this Government will have failed them.

19:38

[Anne Marie Morris (Newton Abbot) (Con)]

The Government are to be commended for all they have done with regard to securing our water supply and trying to help our resilience in relation to flooding. I particularly pay tribute to my hon. Friend the Member for Newbury (Richard Benyon), who in his time as a Minister was a great supporter of such work. I am pleased to say that as a result I had three flood defence schemes supported locally, and I am grateful for that. The Bill is very welcome as part of a series of across-the-House measures to try to address this problem. Introducing competition in water supply is an excellent move forward. The fact that the Government have managed to negotiate the Flood Re deal is very much to their credit.

The challenge, inevitably, is in the detail. The Minister, and you, Madam Deputy Speaker, might remember that in 2005, when there was deregulation of the industry, there was a review of the so-called cost principle, which had been put in place to ensure the protection of water authorities in areas where, because of their rural nature and the distances involved, water would be very expensive to supply. It meant that rural customers did not have to bear a disproportionately high price for their water supply. That has now been removed and responsibility for overseeing the issue has been transferred to Ofwat. I am concerned that that control has been removed from the Government and politicians, so will the Minister assure me that it will work?

On flood insurance, flooding is a very key issue in my constituency and I think that a fantastic deal has been brokered, but there are challenges. The Minister will probably agree that prevention is undoubtedly better than cure. Our planning process has a number of statutory consultees, but after speaking to my local district council and the Environment Agency I understand that neither the Environment Agency nor the water companies are statutory consultees with regard to planning or connection. That means that a disaster is waiting to happen. Such consultation happens on a voluntary basis from time to time, but not regularly.

What happens, therefore, is that connections are made and the water companies have no power to make any recommendations—they certainly have no power to object—and yet, when the rain comes down, the sewers are flooded and the playing fields get covered in sewage, as has happened in my constituency, it is the water companies that have to take up the challenge of remedying the problem. I urge the Minister to consider making those bodies statutory consultees or to put in place another measure that ensures a holistic, joined-up approach so that the different bodies involved work together.

[Sarah Newton (Truro and Falmouth) (Con)]

My hon. Friend is making an incredibly important point. As chairman of the Truro and Kenwyn neighbourhood plan, I can absolutely say that this is a problem and that it would be enormously beneficial if there was a statutory obligation to consult on plans.

[Anne Marie Morris]

I thank my hon. Friend for her intervention. It is always nice to get support.

The Bill singularly fails to address the issue of tidying up the fantastic Government initiative to help South West Water bill payers with a subsidy of £50. That was incredibly welcome and it has been incredibly well received, but unfortunately, as with many such things, the challenge is in the detail. The Government proposed that, when domestic users were billed through commercial intermediaries, the benefit would, in effect, pass down the line. For example, if the owner of a park home with a number of plots applies to South West Water for the rebate, the intention is for that rebate to get passed down to local users. Unfortunately, there is no obligation on commercial intermediaries—which include not just park home owners, but housing associations and Ministry of Defence premises—and the consequence, as I have discovered in my constituency, is that a number of local residents are not benefiting. Park homes represent 2.5% of the housing stock in my district council area of Teignbridge, so this is not a small problem; it is a significant problem.

Will the Minister consider some changes that I think might resolve the problem? First, on the obligation, one of the reasons why park home owners and others are not claiming is that they say that the claim process is complex and time-consuming and that they get no compensation, so let us simplify the process. Secondly, it seems that any claim has to be validated by the district council, so why not give the opportunity to a tenant whose commercial intermediary does not claim to ask the district council—which will have the records and will know whether they are a domestic individual—to apply on their behalf to the water company and then the subsidy could simply flow through?

There is another issue: I am afraid to say that some unscrupulous commercial intermediaries will take the money and not pass it on to the individual resident. At present, the only recourse for the resident is to bring a civil action—a small claims court action—which costs, on average, £1,000. To be frank, that is completely inappropriate given the amount of money involved. From my days studying law, I remember learning that if someone takes something with the intention of permanently depriving someone else of the use of it, that is theft, which, in my book, is a crime. If not passing on the subsidy were to result in criminal rather than civil liability, that would be a measure with teeth and I suspect that those who are not minded to pass on the subsidy at present would do so.

I hope that the Minister will find those suggestions helpful. This is a good Bill. I have used up my time, but I hope that I have made my point and I look forward to hearing the Minister’s response.

19:45

[Diana Johnson (Kingston upon Hull North) (Lab)]

I want to speak specifically to clause 47, which is 11 lines long and introduces the new flood insurance schemes. This is the first opportunity we have had to discuss them on the Floor of the House. As the Chair of the Environment, Food and Rural Affairs Committee has said, the Flood Re scheme still raises many questions that need to be answered. I also share her concerns about a lot of it being left to secondary legislation.

The Flood Re scheme follows on from the statement of principles, which was first agreed in 2000, was renewed in 2008 and ran until this summer. Flood insurance has been of particular interest to me since the very bad floods in Hull in 2007. Since then, I have questioned and lobbied Ministers and secured Adjournment debates on the issue, because I am concerned about my constituents and want whatever scheme that is put in place to meet their needs.

In 2012, the then Secretary of State told me on the Floor of the House that she was

“proud that we have found a way forward with the insurance industry that, above all, guarantees that universal and affordable insurance remains available to all”.—[Official Report, 25 June 2012; Vol. 547, c. 30.]

She said that that included my constituents, but all we have 18 months on is this very short clause outlining the Flood Re scheme. I want to set out why I am so concerned about this.

Ninety per cent. of my home city of Hull is low-lying—below sea level—and prone to floods from the River Hull and the Humber estuary. In 2007 we had a deluge of surface water. June of that year was the wettest month recorded in Yorkshire since 1882. The rain that came down on that day was a once-in-250-years event. One in five properties in Hull were flooded, including 7,208 residential properties and 1,300 businesses.

Flooding causes misery. Any MP who has constituents who have been flooded or who has been flooded themselves will know that it is a miserable experience. Homes are disrupted for weeks and months and dehumidifiers and dryers are needed. Having had secondary flooding in my home in Hull, I know that it is horrible. We want to do everything we can to protect people so that they do not have to go through that.

Part of the deal under the statement of principles was that if someone who did not have insurance in 2007 got flooded, they would never get insurance. People also had to stick with the provider they had in 2007. I had to stick with Aviva—I could not move anywhere else—and my premiums and excesses went up just like those of my constituents have since 2007.

The Government have promised a new scheme and, as I have said, the former Secretary of State made out that it would be affordable and available to all. I have three problems with what is being proposed, as I understand it, although it has not yet been suggested as part of primary legislation. First, I have a big problem with the 2009 cut-off. Secondly, I have a problem with the fact that small businesses are not included in the Flood Re scheme. My third problem is that reviews will take place every five years and that, as I understand it, the scheme is transitional and is planned to move to a full open market approach by the end of 25 years.

[Jonathan Evans (Cardiff North) (Con)]

On the hon. Lady’s first two points, she might like to know that the all-party group on insurance and financial services made exactly those points to the Government as part of the consultation.

[Diana Johnson]

I am grateful to the hon. Gentleman for that intervention. I think there is widespread concern about those two points in particular.

When I asked the House of Commons Library to give me figures for homes built since 2009, I was told that 444,300 private dwellings had been built between 2009 and 2012, and that 1,850 permanent dwellings had been built in Hull between 2009 and the second quarter of 2013, of which 1,720 were private homes. Therefore, more than 1,700 properties will not be part of the Flood Re scheme, despite the fact that the city is prone to flooding and that, with 90% of it below sea level, people may have real problems.

As I understand it, the Government are telling people who bought their homes after 2009 that their properties should have been properly assessed for flood risk under PPS25—planning policy statement 25—and the national planning policy framework, and that they can therefore get insurance on the open market. However, the National Flood Forum has pointed out that an unknown number of people will be at significant flood risk, but unable to get insurance under Flood Re or on the free market.

I accept that the Government’s approach appears sensible, but they have to acknowledge, first, that lots of properties built since 2009 have flooded in various parts of the country and, secondly, that they have caused other properties to flood, particularly from surface water problems. The extent of the problem is not clear, but many communities will raise that issue with the Minister over the coming months, as will hon. Members in Committee.

At Kingswood in my constituency, houses have been built over many years: it is a major area of house building as part of a development for the city. Outline planning permission was first given in 1994 and was renewed in 2004. Like areas all over the UK that were given planning permission before 2009, some properties built since 2009 will not be covered by the Flood Re scheme. A key issue about phased developments is whether standards from an earlier period are applied to houses built post-2009, and I want the Minister to address what will happen to such properties.

When the statement of principles was first set out, the cut-off date for houses not to be covered—2008—was in the future, but the Bill actually has a retrospective date of 2009. Why do the Government not accept that it would be better to give everyone proper warning and make the cut-off date 2015, for example, so that we all know what will happen?

I have concerns about the surface water maps that are available. I understand that local authorities will publish their maps next week, but insurance companies have their own ones. I also have concerns about the fact that the Environment Agency will not produce its compound risk maps until the end of 2015. That will leave house purchasers, community activists and insurance companies, now and in future, with different sorts of information available to them. How can they make good and sensible choices on that basis?

I am really concerned that when I asked the Secretary of State for Communities and Local Government in the House this afternoon about what discussions he has had with his colleagues in the Department for Environment, Food and Rural Affairs, he did not seem to know that there was a problem. Yet his Department is at the moment promoting the Help to Buy scheme extremely heavily in Kingswood to get people to buy new homes in an area that another Department says will be completely excluded from the Flood Re scheme. There is a mis-selling issue there, with people not being fully aware of what this Government are doing. Will the Minister address that point about whether other Ministers know what this scheme means for their Departments?

Last Wednesday, it was announced that Hull would be the city of culture for 2017, but on Thursday in DEFRA questions the Minister told me that the cut-off date of 2009 stood and would send “a very clear message” against building on areas that were likely to flood. The problem is that 90% of Hull is below sea level, so it is prone to flooding. The Government cannot have it both ways. They must accept that issues in different geographical areas of this country have to be addressed.

I want to make three more points. The first is about the role of the Environment Agency. I understand that of 455,500 applications for planning permission, the Environment Agency has commented on only 6.6%. The vast majority do not require it to comment because they are too small or do not meet the requirements set out in legislation. If we want the Environment Agency to play more of a role, we must make it clear that its advice on where houses are built must be taken. I say to the Minister that it is wholly unfair and arbitrary to choose 2009 as the cut-off date for Flood Re; 2015 would be much better. If he is not willing to go that far, perhaps he should consider mitigation for Hull and similar areas.

My second point is that the Government should look at what is happening to small businesses. The Federation of Small Businesses has said that one in five small firms was affected by flooding last year alone. Small firms will end up paying exorbitantly high costs to be insured against the threat of flooding. I hope that amendments will be tabled on that point.

My final point is about the 25-year transitional element of the Flood Re scheme. Will the Minister set out what the five-year reviews are about, because we need more details? Will he address what will happen to areas such as Hull in the longer term? If the free market is just opened up, we will be left with no insurance companies that want to offer insurance in those areas, because the risks are too high. I hope that he will give us more information about the Flood Re scheme.

19:56

[Mr Charles Walker (Broxbourne) (Con)]

What a surprise to be called so early in the debate, Madam Deputy Speaker, but I am delighted to have the chance to speak.

As I was preparing in the Tea Room, my hon. Friend the Member for Meon Valley (George Hollingbery) said, “I suspect you’ll go into the debate and just shout a lot.” He was very accurate in his analysis: I am going to shout a lot. There is nothing like a good shout to get things off your chest. I will try not to shout too loudly, but I want to shout about water because it is very important to me.

I congratulate the new Minister on his elevation to the Front Bench. I also lament the passing of my hon. Friend the Member for Newbury (Richard Benyon). He was a wonderful Minister, and it is a great shame that he is not still one, because he will be much missed and knew a great deal about water.

I want to pay one final tribute during my 10 minutes. It is to the former Member of Parliament for Reading West, Mr Martin Salter, who has been a great champion of fishing and of the conservation of rivers for many years. I am sure that wherever he is today, he is watching this debate fondly.

I listened to the Secretary of State, and I am afraid that my heart did not leap with joy. I fear that, in reality, we will not build the reservoirs that we need. In 10 or 15 years, we will be in this place once again talking about the continued decimation of our waterways and, in particular, but not exclusively, of our chalk streams. A few years ago, Thames Water had the great idea of building a reservoir in Oxfordshire near Abingdon. It was a spade-ready project in 2010, with everything ready to go, but it has not yet taken off because of planning issues and people who are not too keen on its construction.

I must be a really rubbish politician because when it comes to water, I have only one speech, which most hon. Members will have heard at least three times in this place.

Since 1973-74, we have not built a reservoir of any note in east and south-east England. We have added to the population by quite a few millions and we have built many hundreds of thousands if not millions of new homes, but we have somehow decided that we do not need reservoirs. I have looked at the Bill, and I do not see any concrete plans for new reservoirs. I have talked to many water companies and, apart from Thames Water, they seem to have a marked reluctance to build new reservoirs, but without them, we are going to continue to abstract.

I am afraid that the trading of abstraction licences leaves me cold. Initially, licences were not awarded on any scientific basis; water companies were told: “Here are a few thousand. Now go off and enjoy yourselves.” The truth is that if all the abstraction licences on the River Lea were used, it would not exist. That is not a far-fetched scenario because there are quite a few rivers in my constituency and elsewhere in Hertfordshire and Buckinghamshire that do not exist any more. They have been sucked dry and are now empty river beds. When it rains in the winter, clean water might flow through them, but it does not flow for long.

The Environment Agency has a new trick. That is to reclassify a river that dries up for the first time in 30 or 40 years as a winterbourne. I understand that one of those winterbournes might be the Upper Kennet around Manton and Marlborough. I know that the Upper Kennet is not a winterbourne because over my lifetime, I have caught well over 400 trout and 400 grayling in that stream. I understand that there is a move in the EA to reclassify it as a winterbourne. That is total and utter nonsense.

Let me return to abstraction licences. I fear that if there is unrestricted trading in abstraction licences, we will see more and more water sucked out of already stressed environments. That thought gives me sleepless nights because, as I have said, one could walk across many streams in Hertfordshire and Buckinghamshire in one’s bedroom slippers and not get wet. I think of rivers such as the Mimram, the Chess, the Beane and many others that are too numerous to name in this debate. Some of those rivers flow some of the time, some of them flow none of the time and some of them flow all of the time, but the one thing that they have in common is that they are under great stress.

It would be easy to lash the water companies, as I am sort of lashing those on the Government Front Bench. It is a very gentle lashing—indeed, it is almost a licking. I have taken the trouble to meet my water company. I met the chief executive of Affinity Water, who seems to be a switched-on individual. I have invited him to go fishing on the River Chess, so that we are on someone else’s water. He has accepted that invitation and we hope to go in May. Hopefully we will have a wet winter, so that beautiful river will have something near a proper flow, and he will walk down the river and see what a wonderful environment it is. However, such environments are becoming all too rare.

As I say, Mr Deputy Speaker—what a magical change in the Chair—there are parts of the Bill that I am sure I will welcome when I have found them. I have yet to find them, but I will welcome them when I do. What has distressed me most about aspects of this debate is that there has been a lack of willingness to focus on the fact that water, because of the way in which we manage it, is a rare resource in this country. Quite a lot of it falls out of the sky but, as the Secretary of State said, we wave 95% of it goodbye in the winter months, as it rushes down into the North sea and the English channel. As my hon. Friend the Member for Newbury said, we have to get much better at capturing and storing that water.

Although I am hugely attracted to the idea of farmers building small reservoirs, it simply is not the answer. The idea that a farmer will build a reservoir of sufficient capacity to sell water to major water companies is, I am afraid, as near to nonsense as one can get without it becoming nonsense. What we need to do—again, it is the broken record—is to build some reservoirs. There needs to be a consensus about building reservoirs.

Of course, there are parts of the country where water is abundant. People say airily, “Let’s transport it from the north of England to the south of England or from Wales to other parts of the country.” I am sure that the Welsh do not like the idea of having their water pinched any more than the people of Northumberland do.

[Jonathan Evans]

They could sell it.

[Mr Walker]

They could sell the water, but the truth is that it is extremely expensive to cart water around the country. I do not know whether anybody has noticed, but water tends to weigh quite a lot. Yes, gravity can be used, but there needs to be gravity for that to work. We could ship water around the United Kingdom, but that is not the answer. It is talked about by people who want to deflect attention from the real issue, which—again, I am afraid—is building reservoirs.

Before I get too boring, I would like to say that I look forward to hearing from the hon. Member for Dunfermline and West Fife (Thomas Docherty). That is a big mouthful, but I got my mouth around it—sorry, Mr Deputy Speaker, but there are a lot of mouth analogies. I would like to hear the view of the Opposition on conservation. Of course it is important that we try to keep people’s water bills as low as is possible. However, the Walker household, which is metered, gets a fairly good deal. We can have loads of baths, use the facilities and have showers every day and it costs us about £2 to have pharmaceutical-grade water pumped into our house. Of course price is important, but so is conservation because we live in a lovely country and we need to keep it beautiful.

I am about to overrun my allotted time, so I will conclude by saying one more thing. My hon. Friend the Member for Newbury said that he led a delegation of water companies to Brazil. Having drained my rivers, they are going to drain the Amazon. I hope that they are not as successful with the Amazon. However, the point that was made by my hon. Friend and that will be made again by my hon. Friend the Member for Meon Valley, who is a courageous campaigner on all matters water, is that this country has 85% of the world’s chalk streams. Funnily enough, they are not making them any more. If there is another ice age, we might get a few more, but they are not making any more right now.

We have been disastrous at protecting our natural environment. Indeed, a press release from the Salmon and Trout Association just flashed before my eyes, saying that we are not even going to reach the target of getting 32% of our rivers up to an acceptable level and that it is going to be pushed further into the future. That is ridiculous nonsense. As my hon. Friend the Member for Newbury said, we should want to reach that target ourselves as a sovereign nation and should not need the European Union to require it of us. This country is so good at lecturing parts of the developing world about their environmental responsibilities—particularly Brazil and Indonesia about the rain forests. They should take no lessons from us. Until we manage our own environment more effectively, there is very little that we can teach Brazil.

With that final flourish, Mr Deputy Speaker, I shall sit down. I have been very naughty and taken 12 minutes. I see the Whip looking at me aggressively, so I am sitting down.

20:07

[Mrs Emma Lewell-Buck (South Shields) (Lab)]

The Bill does not excite people or generate much interest outside the House. Right hon. and hon. Members who have been involved in previous debates on this issue have shown that they have a depth of knowledge that spans time frames that go back much longer than I have been in the House. However, my constituents have concerns about their rising water bills, and because of their worries and sleepless nights, I am speaking in this debate.

The Bill provides an opportunity to introduce measures to help those who are struggling to pay their water bills and measures to toughen the regulatory regime under Ofwat. In announcing the draft Bill, the previous Secretary of State, the right hon. Member for Meriden (Mrs Spelman), said that it would ensure

“that the water industry continues to provide an affordable and clean water supply”.

Earlier this month, a spokesperson for No. 10 said that the Prime Minister takes the price of household bills seriously:

“The Prime Minister wants to see household costs across the piece being reduced as low as possible. The intention is to try to reduce the burdens on hard-pressed families.”

It is therefore reasonable to ask why the Bill delivers so little for those people. It will not help families who are faced with rising water costs; nor will it empower Ofwat to become the champion for the consumer that it needs to be.

For those who, like me, are new to Parliament, I will remind the House of some of the history of water affordability. The only time when water charges have been reduced was under the last Labour Government. The average water bill in my constituency is now £359 per year and has increased nationally by almost 50% since privatisation was introduced by the Conservative Government in 1989. At the same time, regional water companies made £1.9 billion profit last year. I and my colleagues in the Labour party have been campaigning hard on energy prices, but the situation with water bills is no better—indeed, some would say that it is worse.

Although households spend less on water as a flat figure, the proportion of a water bill that goes towards company profits is three times higher than for an energy bill. As with energy prices, the rising cost of water far outstrips both earnings and inflation. Water is a natural resource; it is essentially free; and it is essential for our survival. Management of that natural resource therefore needs to be conducted with some kind of social responsibility.

During a cost of living crisis, affordability must be the absolute priority, and the Bill must do more to ensure that water companies’ profits are not put before the needs of consumers. The coalition agreement clearly stated that the Government would

“examine the conclusions of the Cave and Walker Reviews, and reform the water industry to ensure more efficient use of water and the protection of poorer households”.

That is one statement that they have not been able to delete.

In 2009, the Consumer Council for Water stated that

“many low income customers continue to pay their water bills even where it becomes unaffordable to do so”.

It claimed that people tend to

“cut back on water usage or sacrifice other essentials such as food or heating in order to ensure their bill is paid”.

The problem now in my constituency is that people are already cutting back on food, heating and water. Since the Government continue to legislate in a way that exacerbates poverty, what are my constituents supposed to do? What should they cut back on next—fresh air perhaps? They have nowhere left to go.

[Miss McIntosh]

I am following the hon. Lady’s contribution with great interest, and she is a leading member of the Environment, Food and Rural Affairs Committee. Water, however, is not free. Drinking water must be processed, as must the foul water that comes from every home. I hope that she will take the opportunity to go to a waste water treatment plant and see the full gamut of where a lot of the costs come from.

[Mrs Lewell-Buck]

I thank the hon. Lady for that intervention and I will take up that offer. I was being glib when I said that water is free. I meant that to most people, including my constituents, water falls from the sky and is therefore free, but I understand the hon. Lady’s point.

People in my constituency are clear in the knowledge that water bills are likely to rise in the future due to a growing population, climate change, the replacement of water infrastructure and additional environmental standards. Under the previous Labour Government, the Walker review, which was published in 2009, advocated affordability and made a number of recommendations to ensure that water remains affordable for all. Two years later, the current Government published a consultation on those proposals and rejected universal discounts, which they cited as “unaffordable”, for people on low incomes and minimum discounts for low-income households with children. Instead, the Government opted for WaterSure and social tariffs, and repeated that intention in the “Water for Life” White Paper.

WaterSure intends to cut costs for households that have a water meter and more than three children under 19 years old and that claim a range of benefits including council tax benefit, housing benefit and employment and support allowance. The scheme ensures that those families pay only the average for their region, so adding approximately 40p to the bills of those customers not on the scheme. Water Direct is another scheme whereby the Department for Work and Pensions subtracts money from the benefits of those who are in debt to their regional water company and sends it direct to that water company. What is not clear, however, is how such schemes are likely to be affected by the introduction of universal credit, and that creates uncertainty for a number of families.

Social tariffs allow water companies to develop tariffs in consultation with customers, with the intention of helping the most vulnerable. However, the Government’s implementation of those tariffs falls a long way short of dealing with the scale of the problem. In evidence to the Environment, Food and Rural Affairs Committee, the Consumer Council for Water estimated that to “effectively address the problem” of affordability would cost anywhere between £162 million and £447 million. The Walker review’s estimate was £340 million, yet it predicted that social tariffs would generate only £36 million a year, adding that that was

“significantly short of what is needed to address affordability”.

Even that limited impact may not be felt in the majority of regions.

Rather than take strong action to ensure that companies have a duty of affordability, the Government introduced tariffs on a voluntary basis from April this year. So far, only three companies have taken that up. Northumbrian Water—my local provider—certainly found little appetite among customers for the implementation of a social tariff. That is hardly surprising when so many people are already struggling to afford bills with stagnating wages. In constituencies such as mine, such a tariff would make water less affordable for even more people.

It is no surprise that the Government’s light-touch solutions have done little to help consumers. Citizens Advice has expressed disappointment that the Government’s guidance for social tariffs is “lacking in detail” and that water companies have been given freedom to ignore it completely with little or no justification. It is no coincidence that Citizens Advice has reported increasing numbers of people coming to it with inquiries about water debt. It is not only Citizens Advice that recognises the problem. This afternoon, I spoke with Northumbrian Water, which is anticipating a rise in debt over the next year, linked to the severity of public sector cuts in our region. It now works closely with Citizens Advice, recognising that if someone is struggling with their water bill, they are likely to be struggling with other bills as well. In short, it is a wider problem than just water bills—it is a cost of living crisis.

The Government clearly do not recognise the need for decisive action. Last week at DEFRA questions, the Secretary of State said that he had written to water companies, calling on them to consider the pressure on household incomes and advising that the Government encourage water companies to introduce social tariffs. As Secretary of State, should he not be doing more than just encouraging and advising? Is simply writing to the water companies the best he can do?

The United Nations recognises water as a basic human right that should be

“available, accessible, safe, acceptable and affordable for all without discrimination”.

Why then are the Government not committed to ensuring just that—that water is affordable for all?

20:17

[George Hollingbery (Meon Valley) (Con)]

I declare an interest as the riparian owner of a small stretch of the headwaters of the River Itchen in Hampshire and as a small part-owner of similar rights on the River Spey in Scotland. I am also chairman of the all-party angling group.

In an ideal water world, we would have cheap bills for all, plentiful and clean drinking water and sparklingly clean rivers and watercourses, stuffed with myriad fish, leaping with baby otters and surrounded by clouds of fly-life with beds of iris and crow’s foot—okay, this is the bit where we hear the needle being ripped off the Enigma Variations, because unfortunately, that dreamy picture does not match reality.

To be clear, things are not all bad. The industry has invested some £110 billion in the 25 years since privatisation, and much has been achieved in restoring antiquated infrastructure. Let us not forget the scale of the task: the industry looks after 414,000 km of water pipes; 1,380 treatment works; 6,000 reservoirs; 392,000 km of sewers and so forth. In 2012-13 alone, £4.5 billion of investment has been made. A great deal of good work is being done; things are improving in tackling water quality in the environment; and the health of rivers has improved. Point sources of pollution have been tackled, and whole catchment management plans promise improvements in diffuse pollution. However, as the water White Paper so tellingly pointed out, only 27% of our rivers and lakes are fully functioning ecosystems. We surely have a great deal more to do.

What does the Bill contribute? Hon. Members know that we face difficult financial times and that consumers must be protected in a monopolistic market. The Bill will help. The opening of certain retail markets to competition, with the prospect of that widening to all consumers of water, must surely be a crucial step in keeping downward pressure on end-user pricing. That and many other measures in the Bill, such as the change in the byzantine regime that compensated companies for the removal or change in abstraction licences, will help to solve a number of problems that the industry faces and that directly impact on pricing.

We face a problem, however. We must not throw the proverbial baby out with the tap water and get into the position in which the energy sector finds itself. A lack of long-term investment has left us all vulnerable to power outages, as old capacity is closed down and new capacity has yet to come on stream. The few hon. Members who are in the Chamber might think that the two sectors are wholly different. They might think, “Surely, the raw materials of water fall freely out of the sky regularly, sometimes on a prodigious scale.” That is true in part, but it is the how much, how often and where that matters.

As was pointed out to me in an excellent briefing from the Angling Trust, the UK has less rainfall per person than our northern European neighbours. London is drier than Istanbul. In the UK, every person uses approximately 150 litres of water a day, which is one of the highest usages in Europe. The UK—believe it or not—has less available water per person than most other European countries.

Last summer demonstrated how precarious our position has become. My hon. Friend the Member for Newbury (Richard Benyon), who is in his place, has painted a compelling picture of the crisis that we faced. It is not an exaggeration to say that many parts of the country would have faced severe shortages. Many people in the south and east of the country would have relied on standpipes, and there might have been an absolute disaster for our natural environment. Rivers had begun to run dry, as their natural sources dried up and as water companies abstracted yet more to meet demand.

We need to understand that the three-year scenario will happen—it is not a matter of if, but truly a matter of when. We should remember that it does not matter how cheap water is if there is none. I therefore want to make a few comments on resilience. More can and is being done on leakage. There is some success on consumption through metering, through the advent of modern technologies that use less water for the same tasks and through education, but we face a potential structural problem in the regulatory environment.

Resilience necessarily means building infrastructure. Ofwat rightly has a primary duty to protect customers, but it therefore has a perverse incentive not to sanction investment in what is, by definition, redundant capacity. That is why I am particularly pleased by clause 22, which promotes resilience to being a primary duty for Ofwat. The measure is very much helped by the explicit guidance published in May by my hon. Friend the Member for Newbury and the Department, “Strategic policy statement to Ofwat: incorporating social and environmental guidance”. Paragraphs 3.6 to 3.9 explicitly set out the Government’s expectation that Ofwat should ensure long-term resilience and, crucially, sustainability in the system.

It is important to recognise that resilience is not the same as sustainability. None of us wants a system that creates resiliency in the water supply that relies on sources that are environmentally damaging. In the round, however, I am glad that we now seem to have a regulatory environment that recognises that protecting customers also means protecting a sustainable supply of water. However, I wonder whether we might go a step further. Hon. Members know that one of the biggest problems faced by large-scale infrastructure projects, such as those likely to be needed by the water industry, is delays in the planning system. To that end, I wonder whether the Minister has considered a national policy statement for water. After all, we have one for waste water, so why not have one for water? Such a statement would go a further step towards allowing Ofwat’s two conflicting duties to be resolved in a timely and structured manner. It should ensure that the necessary infrastructure is introduced in a way that is controlled by the Government, at a reasonable pace, and as the economy and consumers’ wallets allow.

As we have heard, one of the most urgent but complex areas of change that is needed is in abstraction. Hon. Members know that over-abstraction is damaging our environment and that the governing regime is antiquated and not fit for purpose. Licences granted in an entirely different social and historical context are still in force and in urgent need of change. I accept that that is a complex matter, but I remain somewhat disappointed that the necessary reform is not tackled in the Bill. I am reassured by the Secretary of State’s remarks this evening on our intentions in that regard, and I hope we hear similar commitments from the Opposition.

[Mr Charles Walker]

I agree with my hon. Friend that water abstraction is complex and that it does obvious damage—that obvious damage is dried up river beds.

[George Hollingbery]

Who could possibly disagree? That is clearly one consequence that we need to reform shortly. I will come to that in a moment.

Those of us who hold our natural environment dear, particularly those rivers and streams across the country that are fed by chalk aquifers, cannot wait for ever for change. Too many of our chalk streams, such as the Chess, the Beane, the Kennet and many others, have been irreparably damaged by over-abstraction. That simply cannot be allowed to continue, as my hon. Friend says. How can we possibly continue to lecture countries such as Brazil and Indonesia on environmental damage when we, the custodians of 85% of chalk streams—unique ecosystems—are complacent and allow them to be degraded over time, doing nothing about it? That simply will not do. We must change the system, and do so soon.

I understand why the Government have delayed reform, but the fact that the Bill does not change abstraction licensing at the same time as allowing new upstream supplies may well present a problem. One of the proposed resilience reforms is that those with unused abstraction licences for purposes other than general water supply and those with water surplus to their needs can sell water on. I welcome that in principle, but one concern is that, if proposals to reactivate old licences or sell bulk water across borders are not very carefully assessed in respect of their impact in source areas—in terms both of the environment and of local pricing incentives and competition—unanticipated damage could easily be done. I am glad to note that the Government have partially recognised that and committed to introducing changes to the Bill in Committee to ensure that permission must be obtained from the Environment Agency before any changes of use of water abstraction rights are made. May I suggest that a similar assessment of the impact on local pricing and competition in source areas also be made?

The same rules must surely apply to the bulk transfers proposed by the Bill. The Government have said that they are considering that, and I hope that similar changes will be introduced. It is worth noting we will need to consider how permitting would apply across the border into Scotland and Wales. No doubt, the ministerial team have that under review. Furthermore, it would be reassuring if the Government considered allowing such arrangements to be terminated on advice from the relevant assessor if it is clear that they are contributing to over-abstraction, causing environmental damage or skewing the competitive environment.

Finally, on water metering, as undertakers have made more progress on leak reduction, measures to reduce demand will become more important. Measures in building regulations and the advent of new technologies that reduce the amount of water needed to perform certain tasks have a part to play, but so does water metering. That is another complex matter. Hon. Members know that water metering increases costs for some people and reduces them for others. We should never allow companies to cut off supply to those who cannot pay their bills. However, water metering reduces consumption and allows householders and undertakers more accurately to identify local leakage, which can then be dealt with.

The Water Industry (Prescribed Conditions) Regulations 1999 allow universal water metering to be introduced in areas of water stress. I wonder whether it is time to take that a step further. We should consider not standing in the way of rolling out water metering schemes throughout all areas, water stressed or not, if an undertaker can demonstrate that they have a clear, deliverable plan to help customers to deal with the change; that they have similar, robust plans to deal with the difficulties faced by those who are least likely to be able to deal with increased bills; that their request for the roll-out forms part of a long-term strategy to reduce demand; and that the Secretary of State retains the power to remove the scheme if those things are not delivered. All I ask is that the Minister and his team consider such a change.

In conclusion, the Bill is a step in the right direction towards reform of the water industry. Its measures will help to increase competition and so keep down prices. It clearly recognises the need to guarantee long-term supply, but does so in the context of other measures and proposed changes that acknowledge that sustainability of the source of supply is as important as resilience. It would have been hugely preferable if abstraction reform were followed by changes to upstream competition in that order, but, when taken with the licensing requirements that Government are contemplating, the dangers posed can be mitigated. I look forward to joining colleagues in the Aye Lobby should a Division be called.

20:29

[Sheryll Murray (South East Cornwall) (Con)]

I welcome the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for North Cornwall (Dan Rogerson) to the Front Bench, and I pay tribute to my hon. Friend the Member for Newbury (Richard Benyon), who led on the Bill from the beginning.

We often take water for granted. Not everyone in the world is so lucky. Indeed, I have walked, with some of my staff, along the beautiful coastal path between Looe and Polperro to raise money for WaterAid.

I have done in-depth research into the job that South West Water does in my constituency. I thank Chris Loughlin and his staff for taking the time to show me around Restormel treatment works, which is the biggest treatment works in Cornwall—it does not supply my constituency, but it is based there—and the Torpoint waste water treatment works. I now understand more about what happens to the water that falls out of the sky. During these visits, at either end of my constituency, I was fascinated by the work undertaken and have a much better understanding of the level of investment being carried out to ensure that our water is clean and our waste water properly treated. That investment does not come cheap, of course. While water bills in South East Cornwall and the far south-west reflect that investment, they have been unusually high for a number of years. I again thank my hon. Friend the Member for Newbury for showing a clear understanding of the matter, and the Chancellor for the contribution of £50 to each household towards that higher than average cost in Cornwall.

I want to highlight two concerns. First, we should not put in place legislation that will further increase the cost of our water. It is imperative that we monitor water quality without putting an expensive burden of regulation on our water companies. I am thinking in particular about our beaches and coastal water. We must remember that the south-west is a tourist area, and it is vital that local hard-working families do not have to pick up the cost burden of further European legislation. We must not become the Government of red tape. The Department for Environment, Food and Rural Affairs and other Departments have done much to reduce the burden on industry following the mess left by the previous Labour Administration.

Secondly, any legislation must allow water companies to be able to react quickly to circumstance. We do not need legislation that says that everyone must be consulted in triplicate. There is no point in putting sandbags out once a town has been flooded. When the need arises, water companies must be able to do what is necessary to save lives, homes and businesses. Tragically, my constituency has been hit more than most by the weather and by flooding—it is a key problem. I thank the former Secretary of State, my right hon. Friend the Member for Meriden (Mrs Spelman), and my hon. Friend the Member for Newbury for visiting it on a number of occasions to see the situation on the ground for themselves.

[Mr Charles Walker]

My hon. Friend is making a powerful speech. Is it not the case that if homeowners cannot get insurance their homes become, in essence, worthless, because nobody will give them a mortgage on them?

[Sheryll Murray]

Many of my constituents who live in the areas affected by flooding have a particular problem getting insurance. I speak as someone who, many years ago, worked in the insurance industry and dealt with domestic insurance. One constituent was told that she could get insurance after 10 flood-free years, and was flooded after nine-and-a-half years. My constituents cannot afford to pay repair costs every time it floods. Will the Minister consider ways to mitigate the causes of flooding and to help people to get the insurance they desperately need? Some of my constituents have been caught in a flooding trap: they cannot get insurance to be able to recover from floods and, as my hon. Friend the Member for Broxbourne (Mr Walker) said, they cannot sell their home at a reasonable rate because the flooding has caused a type of blight.

South East Cornwall is not rich. Wages are frequently below average, with many people relying on seasonal tourist work. The Bill must not place an extra burden on them. It is not just the Opposition’s constituents who are hard pressed. The Opposition must accept that they need to look at solutions, rather than sitting and sniping from the sidelines about increasing bills, and making cheap political points.

[Mr Walker]

I thank my hon. Friend for her tireless campaigning on this subject. She has worked with Members across the House to bring this important matter to the attention of the Government and she deserves to be thanked for it.

[Sheryll Murray]

I welcome my hon. Friend’s comments.

I ask the Minister to look at South East Cornwall as an example. As my neighbour, he knows my constituency well. I am happy to meet him to discuss the many individual stories I have heard about flood insurance, if that would be helpful.

20:37

[Jonathan Evans (Cardiff North) (Con)]

I draw the attention of the House to my entry in the Register of Members’ Financial Interests and to my chairmanship of the all-party group on insurance and financial services.

My remarks will be limited entirely to that part of the Bill that deals with flood insurance. Since 2010, the all-party group has met on four occasions to consider the issue in great detail. It has met the British Insurance Brokers Association and the Association of British Insurers, and has frequently met the National Flood Forum. The group had the pleasure of meeting my hon. Friend the Member for Newbury (Richard Benyon)—I am not sure it was a pleasure for him—who kept us up to date with the progress of his deliberations. I join other Members in thanking him for his contribution.

My remarks will focus entirely on the all-party group’s opinion of the Government’s proposals and the representations it made as part of the consultation. The concept of Flood Re is generally supported by the group, but its members have a number of concerns. Many of those were raised by the hon. Member for Kingston upon Hull North (Diana Johnson). She reminded us of the dreadful experience in Hull and highlighted some of the issues we need to examine in the context of the Flood Re proposal.

There is concern regarding small businesses. The Bill proposes to cover residential property, but under the statement of principles some small businesses were covered too. It is easy to see in Hull many corner shops and things of that nature where it is difficult to distinguish between the residential and business elements. The Federation of Small Businesses, the British Insurance Brokers Association and the British Property Federation have urged the Government to reconsider their exclusion of small businesses under the scheme. We do not want major businesses covered, but perhaps a turnover of £1 million would be an appropriate cut-off point when covering smaller businesses. The cost would not be prohibitive.

On another contentious area, the Government say, “Come what may, we must have the flood insurance obligation.” That is clearly desirable, but it cannot be a blank cheque. Under the one-in-200-years principle, insurance is supposed to cover all circumstances likely to arise, but it is difficult to assess what a one-in-200-years risk might be, given, for example, that the six wettest years on record have all been since 2000. As we have heard, climate change is happening and it is difficult to make those assessments. Just this year, there have been major floods in Alberta, Canada that might count as a one-in-200-years event: total estimated damage was more than 5 billion Canadian dollars, 100,000 people were displaced, several people died and 2,200 troops were deployed. In the next few years, we could suffer such a calamity, yet it is not clear from the Flood Re proposal what the Government would bring to the party. It is unrealistic to think the insurance industry could cover the costs of such a calamitous event. The Government have been sending signals about what they might do, but they have not been much more than signals. We would like a bit more than that.

It is proposed that Flood Re be based on council tax bands. I agree with my hon. Friend the Member for Newbury, the former Minister, that we do not want to unpick this, but I would like it to go a bit further. The measure is a sort of rating by proxy, not risk, but band H properties have been excluded, which is something that the all-party group is concerned about. As he said, the reason for the exclusion is that we do not want subsidies for the rich, but I wonder whether that has been thought through. My hon. Friend the Member for Brecon and Radnorshire (Roger Williams) will be able to remind the House, as I can, of the council tax revaluation in Wales. Our top band is no longer H, but I. Band H properties are not occupied by millionaires, yet would not be covered by this proposal. Has that been taken into account?

The reason we do not want band H properties excluded is that historically all bands have been based on valuations of no relevance today. At some point, there is likely to be a revaluation, and who is to say that new bands will not be added, as happened in Wales? For that reason, it would be much better not to exclude band H properties. Against the claim that it would help the wealthy, I would simply say that the wealthiest occupiers probably use brokers to arrange their insurance. It is the people who cannot do that—people in what I would term “middle class-ish” properties—who might find themselves in difficulty. I make that case on behalf of not one political party, but the all-party group, and I urge the Government to reconsider.

The hon. Member for Kingston upon Hull North drew our attention to the distinct position of properties built after 2009. Yet again, I share that concern. That year was chosen because it was when the statement of principles was renewed, and the view, therefore, was, “Well, everyone knew that from that year onwards they would be excluded, so let’s not have them covered,” but we know that there is already much better mapping data. I would like us to make use of the mapping data, rather than simply not covering post-2009 properties.

[Julian Sturdy (York Outer) (Con)]

My hon. Friend is making a powerful point. Should we not be ensuring that we do not build new properties in flood risk areas?

[Jonathan Evans]

That is a much better proposition than telling someone in a property built in 2010, “Flood Re is not for you.” If it is to be a solution to the difficulties of insurance, as many properties as possible should be covered. That includes what are termed “genuinely uninsurable” properties. They are excluded as well, yet they might be occupied or habitable properties with a council tax rating. Why are we not to include them? In my judgment, their number is not so considerable as to make the scheme impossible to operate. As the Minister knows, the all-party group made that representation to him during the consultation, and we hope he will take it on board as he considers his amendments in Committee.

I already know of one area where the Minister has accepted our recommendation. We suggested giving regulatory responsibility to the Financial Conduct Authority, and that is now in the Bill. The all-party group welcomes that inclusion, but hopes that the Minister will give further consideration to the other points we have made in support of what in our judgment is a proper solution to a difficulty that has taken too long to resolve.

20:46

[Roger Williams (Brecon and Radnorshire) (LD)]

It is a great pleasure to follow my hon. Friend the Member for Cardiff North (Jonathan Evans). In a different incarnation, he was my Member of Parliament, and indeed my tenant, so our relationship goes back a long way. His expertise in insurance, which he brings to this debate, is well known. We have heard many other contributions tonight, including from the hon. Member for Newbury (Richard Benyon), who has great experience and knowledge of these matters. Had he been introducing the Bill, he would have had three years to prepare, whereas my hon. Friend the Minister, whom I am pleased to see here, has had about three weeks. Nevertheless, he was a member of the Environment, Food and Rural Affairs Committee that scrutinised the draft Bill and will be aware of the detail and some of our concerns about things that are not in the Bill.

I broadly welcome the Bill. One of the vital challenges facing the UK is the need to protect the health of our rivers and lakes, while keeping water available and affordable. Water resources are currently under considerable pressure, and it is predicted that water constraints will become more severe in the future. There is limited competition in the current system, so I welcome the competition clauses, which will open the sector up to more competition and encourage the construction of more connections between water company areas. The introduction of retail competition among water companies could support greater water efficiency in the non-domestic sector.

Although I welcome the idea that businesses and local authorities can switch water suppliers, I recognise that individual consumers will not have that opportunity. The regulator must ensure that bills remain affordable, while expecting water companies to have the ability to invest in the infrastructure. We need consumer bills to be affordable now, but we must also recognise that water supplies are needed for the future, so I hope that we can amend the Bill in Committee to make it better for consumers and for the environment. There has been concern that, as companies compete for customers in the commercial sector, domestic customers may carry more of the costs of supply. We will need to hear from the Minister in Committee how that will be prevented.

The system for abstraction licences is not fit for purpose and is long overdue for reform. The Government have said that the work will have to wait until the mid-2020s, but it is important to address it much earlier than that. We need a system of licensing abstraction that balances resilience with the state of the environment.

One of Ofwat’s secondary duties is to promote sustainable development. Liberal Democrats would like to see that duty elevated to a primary level. For that reason, I intend to table an amendment in Committee to give Ofwat a primary duty to promote sustainability. I agreed with the comments of my noble Friend Baroness Parminter, in a debate on the Gracious Address in the other place, that a thorough examination is needed of the effect of the water industry on the environment now and in the longer term.

Ofwat seems to have a rather confused approach to sustainability. Let me quote from the supplementary written evidence submitted by Ofwat to the EFRA Committee in respect of the draft Water Bill:

“I provide further written evidence on specifically why we consider that our duty to contribute to sustainable development should not be elevated to a primary duty”,

yet it also said:

“Indeed, the core vision of our strategy is: ‘A sustainable water cycle in which we are able to meet the needs of water and sewerage services while enabling future generations to meet their own needs”,

It calls this “sustainable water”—it seems to me that its thinking is rather confused. My understanding of sustainability is that it is about balance, not conflict, and Ofwat should be well aware that its decision making can affect the environment as well as economic and social matters. I believe that Ofwat has accepted the need for sustainability as a primary duty and that the Government should legislate to establish it.

[Huw Irranca-Davies (Ogmore) (Lab)]

The hon. Gentleman, who represents a constituency not far away from mine, makes some very good points. Does he agree that in his opening remarks the Secretary of State seemed to be arguing for that duty of sustainability and, indeed, that his rhetoric fitted exactly what the hon. Gentleman suggests should be on the face of the Bill?

[Roger Williams]

I thank the hon. Gentleman for those comments. There is widespread acceptance that sustainability should be a core feature of Ofwat’s work, yet it seems that some people are setting their face against having that on the face of the Bill.

The UK has been faced with an increase in the number and severity of flood events, and it is vital for the Government to provide widespread and affordable household insurance in at-risk areas. I thus welcome the proposed new legal framework that seeks to establish Flood Re—a levy-funded reinsurance pool for high-risk individuals. If that is introduced, insurance companies must make their customers aware of the scheme and the opportunities it provides. A number of my constituents in Llangammarch Wells were really frightened by some press releases put out by the Environment Agency in Wales—now called Natural Resources Wales—about restricted insurance. After further consultation with Natural Resources Wales, we have been able to sort that matter out.

Water bills set a particular challenge for low-income families. There are no specific benefits such as housing benefit or council tax benefit to help with these costs, but the Government have stated that they will continue to support the WaterSure initiative, even though take-up has been rather poor. Other water companies can bring forward their own schemes, and Welsh Water provides a good example of how that can be done in practice.

The water industry is responsible for the most essential public services. Few things are more important for public health—or indeed for normal day-to-day living—than a safe and reliable supply of drinking water, and the efficient collection and treatment of waste water. More than 90% of health improvements over the last two centuries have resulted from the provision of safe-to-drink tap water and proper sanitation.

The water industry everywhere is very capital-intensive. Many of its assets—reservoirs, treatment works, water pipes and sewers—have very long lives, but, even when we allow for that and for the fact that investment doubled after privatisation in 1989, the average age of water company networks is increasing every day. The rate of renewal of sewers, for example, gives an average assumed age of more than 600 years. Investment levels are agreed with regulators every five years, and investment decisions are based on the priorities for the years ahead.

The water industry invests and spends more than it receives from its customers through bills. It finances its expenditure by raising money from investors in the capital markets, and so far that money has come almost entirely from bonds and other borrowing. In other words, the industry is cash-flow negative, and that will persist, partly because of the backlog of asset renewal but mainly because of the new standards that must be met. As a result of that cash-flow negativity and continuing high and necessary levels of investment, the cost of capital and funds raised from the capital markets is key, and will become more and more important. The cost of capital on money raised since privatisation already absorbs a third of the bill, and relatively small changes in the allowed or achieved cost of funding. Every 1% saving on the cost of financing the industry’s “regulated capital value” reduces customer bills by 5%.

Given that so much of the value chain is represented by the network of assets, both the raw material and the retail element represent a very small part of the overall bill. The Water Bill proposes that business customers in England should be allowed to choose their water retailers, but the Welsh Government have decided not to go down that route. As Professor Dieter Helm has said, large business customers will argue that they should pay only marginal costs, and if water companies succumb to the pressure, it will mean higher bills for household customers.

The true cost per customer varies enormously, and the rural customer costs many times more than the urban customer. Averaging the cost in that way is good public policy. “De-averaging” poses a real risk by giving business customers choice, thus causing water companies to reduce their tariffs locally to satisfy demands from big customers and to recover the lost income from household customers who cannot exert the same pressure.

The water industry should be owned, managed and operated in the interests of customers. I do not believe that it should be re-nationalised, but this long-term industry provides us all with the most essential of public services. Few things are more important to public health, and indeed to modern life, than a safe and reliable supply of tap water.

[Huw Irranca-Davies]

At the risk of being slightly parochial, may I ask whether the hon. Gentleman finds it odd, given the rush to privatisation all those aeons ago, that we have only one mutual water company? In a week in which we have heard bad news about co-operative movements and so on, we should bear it in mind that that one mutual company has achieved very high levels of customer satisfaction, has invested massively over the last couple of decades, and manages to keep its bills pretty low despite having no profits, no shareholders and no dividends.

[Roger Williams]

I think that it will come as no surprise to the hon. Gentleman that I am not only a customer of Welsh Water, but a great fan of the model. Welsh Water is just about the only public utility company which receives letters of support that outnumber its letters of complaint, and its credit rating is higher than those of all the other water companies. It can borrow at almost the same rate as the Government.

The water company that serves Wales, and much of Herefordshire and Deeside, is owned, financed and managed on behalf of its customers. Glas Cymru has a strong board with a majority of non-executive directors, all of whom are individuals of high standing. It complies with corporate governance best practice, although it has no shares listed on the Stock Exchange. It accounts for its performance to its members and other stakeholders and measures its performance against things that really matter to customers: drinking water, reliability of service, protecting our rivers and coastal waters from pollution, and customer satisfaction. The pay of everybody who works for Glas Cymru is linked to performance against those measures, and because Glas Cymru is one of 10 large water and sewerage companies in England and Wales everyone can judge whether it has done a good, bad or middling job on the measures that matter to customers and the environment. Welsh Water is unique in the water industry. Its employees are rewarded on the basis of customer satisfaction rather than shareholder value. The Bill does not address the structure of the water industry—that may be for another day—but I welcome its broad thrust and look forward to working on the Bill Committee with my hon. Friend the Minister.

21:00

[Ian Swales (Redcar) (LD)]

It is a pleasure to follow my hon. Friend the Member for Brecon and Radnorshire (Roger Williams), whose speech was comprehensive.

In my constituency, 5 September was a bright, sunny day, as was 7 September. In between, on 6 September, we had 10% of our annual rainfall in a single day. There was heavy flooding all around my constituency. That was not isolated at all; many communities were affected, including both homes and businesses, and some of the affected homes had been completed within the last two years. For some of the people affected, this was the third or fourth time they had been flooded in the last few years, and it was heartbreaking to go around hearing all the stories. There was the story of the 20-year relationship that had finally been broken by yet another flooding incident, and that of John and Margaret Cone, whose house I went to in 2008 to see the watermarks 2-feet up their walls just before they moved out. They had to move out again, now aged over 80, and watch builders taking down part of the outside skin of their house to try to dry out the cavity.

I know that many other Members have similar constituency stories, but Redcar is on the coast and is flanked by the tidal part of the river Tees, yet this flood was not caused by the sea. Just a few months ago we were celebrating the completion of the £30 million sea defences in Redcar, but this incident was all about rainfall on the land.

We might think that being on the coast would help because water can run to the beach and away, but we have problems with natural watercourses and culverts. Some of those natural watercourses are commemorated in current street names: the Fleet, Long Beck and West Dyke. Culverts, sewers and house building have together created environments in which the water cannot get away as it should, the most absurd example being in the village of New Marske, which is halfway up a hill yet has serious flooding problems. Northumbrian Water has been investing heavily in tanks around the town and they are there to hold up excess surface water, to avoid inundating the sewerage system and putting raw sewage into the sea. Of course, given the golden beaches from Redcar down to Saltburn, which are a Mecca for surfers, I very much welcome that I and attended the “Surfers against Sewage” reception in the House just a few weeks ago. However, I also have to say that I support householders against sewage and many householders in my constituency had raw sewage in their house that day. An investigation is going on into the role of these tanks, and it is concerning that a lot of the major flooding was in the area of these tanks—so-called hydro-break tanks. I therefore think they may well be part of the problem, and I am not convinced that their overflow arrangements work sufficiently well in times of very high rainfall.

My area is suffering from a set of man-made problems. It is by the sea and it is not in a valley, so drainage should be no problem. We need radical solutions. I think of the city of Valencia in Spain where, after serious flooding in the 1950s, the entire river was taken out of the city. If anyone watches the Formula 1 race at Valencia, they can see the cars racing around where the new river is now, and the old river is a very strange-looking park in the middle of the city. It is a nice green area, but with bridges all the way across it. We may need similarly radical solutions to help divert flooding away from towns and villages, and I hope that, once the needs assessment is made, DEFRA will look sympathetically at the possible solutions.

On the wider issues, one of the problems the water industry has is that the benefits of investment are not necessarily aligned with the costs. For example, councils and builders continue to build on flood plains because they benefit from that and do not bear the costs when things go wrong. Who pays if watercourses are not properly kept clear? The people responsible for keeping them clear do not pay the costs if they are not clear. Do developers pay for all the new infrastructure costs of water and sewerage when they do developments? One of the things the Government should therefore look at is the alignment of costs and benefits.

There is no doubt that in the current system, water companies play a very big role in paying for the costs of the whole infrastructure—and so they should. It is not acceptable that they come running to the taxpayer to meet extra costs, particularly when many of them are clever at avoiding taxes. Water companies must be made to pay the full investment and infrastructure costs of the areas they are responsible for.

I very much welcome the part of the Bill dealing with flood insurance. The Bill’s aims and the Flood Re proposals are an excellent way of addressing the issues. I note that clause 47 is going to be fleshed out in Committee, and the Chair of the Environment, Food and Rural Affairs Committee, the hon. Member for Thirsk and Malton (Miss McIntosh), said that she would like to see more included in the Bill in this regard. I certainly support that, because we should all be concerned that the devil might be in the detail. I hope the Minister will say something about how he sees clause 47 being fleshed out.

[Mel Stride (Central Devon) (Con)]

On making flood insurance available for properties most at risk, does the hon. Gentleman agree that it is vital that we drill down to the details, such as the excess arrangements in the policies that are made available to those in need?

[Ian Swales]

I certainly agree and the hon. Gentleman makes an excellent point, which I will cover in the next few minutes. We have heard from other Members today examples of great excesses being charged. Some, but not many, of my constituents are being refused insurance on any terms at all. However, the ones who do get insurance are reporting high premiums and high excesses; some excesses are so high that they are effectively insured only for an Armageddon situation. I therefore urge the Minister not just to concentrate on the availability of insurance but to make the premium levels and excess levels stick with the industry.

I was interested to hear the speech of the hon. Member for Kingston upon Hull North (Diana Johnson), who made some very good points about houses completed since 2009. I hope the Minister will define what he means by houses built on a flood plain. What will happen to houses not deemed to have been so built, but which have nevertheless been flooded recently, like some in my constituency? What will happen to houses built since 2009 that have yet to be flooded but will flood in future? Will the insurance industry take the opportunity to withdraw insurance? The planning systems need looking at. Building regulations would help a lot in dealing with water consumption, and a lot more attention needs to be paid in the planning system to the issue of building on flood plains.

Some of the measures in the Bill are undoubtedly designed essentially to deal with water shortages, particularly in the south-east. This is yet another capacity issue for the south-east, to add to those of housing, schools, transport and many others. Water is plentiful in the north-east and, I understand, in the north-west too. I therefore hope that DEFRA Ministers will lend their full weight to the Government’s efforts to rebalance the economy away from the south-east.

21:09

[Tessa Munt (Wells) (LD)]

I apologise for not being present for the opening of the debate; this was because I was attending a Committee elsewhere in the House.

I want to address three areas: fracking, flooding on farmland and flood insurance. I shall start with flood insurance. Much of the patch that I represent is at or below sea level, and it is prone to flooding. Many planning permissions on land in areas that have already flooded are in existence now, but I want to concentrate on future developments. In large parts of my constituency, it would be hard to build any sort of home or business without it being on the flood plain. Would the Minister consider encouraging local authorities to look at the townhouse model? Homes should be built on stilts in flood areas, or at least with garages at ground floor level so that people are not put at risk through flooding and so that goods and property can be moved to upper floors more easily to avoid damage.

I have a minor suggestion for the Minister. It was suggested earlier that the water companies should be a statutory consultee, but would it also be possible for representatives of the Association of British Insurers to clarify the insurance situation on new property proposals being put before development committees, when they involve developments in areas of flood risk? In that way, developers would be forced to use design to mitigate the risk, and purchasers would understand the risks and insurance costs involved, as well as knowing that they would be able to get insurance for their home or business.

Turning to flooding on farmland, I should like to pay tribute to my hon. Friend the Member for Newbury (Richard Benyon), who took the trouble to visit my constituency when he was the Minister with responsibility for this issue. He visited the Axe and Brue valleys in April this year and met more than 100 farmers and smallholders whose homes, stock and businesses had been severely affected by months of flooding. The farmers made it clear that the rivers, rhynes and waterways had suffered over the past 13 to 15 years because they had not been cleared or maintained. They had been neglected in the areas served by the Axe and the Brue rivers. There were problems with silt, blockages and overgrowing. In Somerset, money usually goes to the areas surrounding the Tone and Parrett rivers, but it is important that all our waterways should be maintained and improved.

The Environment Agency’s six aims and objectives recognise wildlife, flora and fauna, but there is no recognition whatever of the value of productive land. There should be, particularly at a time when food production is so important and we desire to be self-sufficient, or at least self-supplying. That point was also highlighted regularly. I hope that the Minister will use this opportunity to ensure that the residents and businesspeople in my part of Somerset get the dredging that they need and the ongoing maintenance that they deserve from the Environment Agency. I also hope that the agency and the Government will recognise the value of productive land, and that there is a response to the need to protect agricultural interests as well.

[Ian Swales]

Does my hon. Friend agree that failure to dredge does not often result in a cost to those who should be dredging, and that it mainly results in a cost to the insurance industry? Does she think that something should be done about that?

[Tessa Munt]

My hon. Friend is absolutely right. It would be so much better if we could get the dredging programme sorted out, because it would get rid of the need for massive insurance claims. In my area, if water can reach the pumps, it can be pumped away. Because of the lack of dredging, however, it cannot reach the pumps. It is possible to see the pumps from the flooded areas, but the water cannot reach them and therefore cannot be taken away. Dredging would cure that problem.

My final area of concern is the risk that fracking for shale gas poses to our rivers and groundwater in terms of pollution and water stress. The Bill already amends the 2010 environmental permitting regulations that cover fracking activities, making it an excellent opportunity to address these concerns and strengthen the existing regulatory framework. The House has heard repeatedly that our regulatory regime for fracking is the most stringent in the world, and it is true that, if properly implemented and enforced, the existing regulations could mitigate many of the risks posed by fracking. However, although fracking has been taking place for years, this particular new technology that is planned for the UK brings more serious risks that we cannot properly assess at this early stage. Even the best regulatory regime can only mitigate risk; it cannot eliminate it. That means that a water pollution incident cannot be ruled out. It is therefore of considerable concern that it is not clear who would be liable if something does go wrong. One of the main risks from fracking is pollution of groundwater, which can occur because of faults in production wells. Groundwater clean-up is very costly and can take decades. For example, the contamination of a chalk aquifer near St Albans in Hertfordshire in 2000 led to an extensive contamination of the public drinking water supply, and the cost of the clean-up, which took a decade, was about £16 million.

Even if liability for pollution can be proven, there remains a risk that fracking companies could go bankrupt, leaving taxpayers or water companies with the costs. That has been a major issue in the case of Scottish Coal, whose liquidators have been given permission to abandon coal mines and polluted land without carrying out restoration or in any way controlling pollution from the sites. Instead of identifying and addressing these risks, it appears that the opposite direction of travel is being taken. Not only is there pressure to simplify and streamline regulation, with the Environment Agency committing to, for example, a dramatic reduction in the time it takes to issue permits to fracking operators, but there is evidence to suggest that existing regulations are not being adequately enforced. For example, at Preese Hall, the Environment Agency did not issue environmental permits for the disposal and management of flow-back waste water; it only discovered after the site had been hydraulically fractured that the flow-back fluid should be classified as radioactive waste.

If experiences in the United States have taught us anything, it would be that we need a strict regulatory regime. We cannot rely on putting our faith in the industry behaving well on a voluntary basis. In a groundbreaking peer-reviewed study of aquifers overlying the Marcellus and Utica shales in Pennsylvania and New York, Osborn et al, 2011, uncovered systematic evidence of methane contamination of drinking water linked to shale gas extraction.

In England, a third of all our domestic water supply comes from groundwater reserves, which are also essential for industry and farming. It is vital that we go as far as possible to mitigate risks in advance and ensure that we make provision to cover the full costs of clean-ups. With that in mind, I ask the Minister to ensure the Bill addresses these issues by implementing a liability guarantee. Such a guarantee would ensure the public purse and the taxpayer are not hit when anything goes wrong.

My next big concern is the amount of water that is required for the production of shale gas. Shale gas exploration and production is a highly water-intensive industry, and the process of fracking requires enormous volumes of water. At Preese Hall up to 8,400 cubic metres—about the equivalent of three and a half Olympic-sized swimming pools—is required per well. The fracking process may have to be repeated several times over the life of the well to keep the gas flowing. With proposals for thousands of sites, each with multiple wells, the potential drain on our already stressed rivers and groundwater could be huge.

I ask the Minister and his Department to consider the Bill as an opportunity to address these concerns by reforming the abstraction regime for taking water from the environment. That should go a long way to ensuring that additional pressure on water resources from fracking does not result in the over-abstraction of water from areas already under water stress. If the Government choose to exploit this new resource, we can make sure that we do so in a way that does not place unacceptable risks on the environment or on the public purse. Such an approach will also guard against unnecessary resource risks to our communities, our countryside and our businesses.

21:19

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

It is a pleasure to respond to this debate on behalf of the Opposition. We have had a good and lively discussion this evening, with a number of thoughtful and knowledgeable contributions. I hope to address in turn each issue raised by Members.

I am disappointed that in about five hours of debate we heard little from Government Members about how they propose to deal with the cost of living crisis. Some of them scoffed when Labour Members talked about the pressures facing households up and down the country. The cold, hard reality is that families are struggling today. My hon. Friend the Member for South Shields (Mrs Lewell-Buck), who serves with such distinction on the Environment, Food and Rural Affairs Committee, made an excellent and thoughtful speech about the pressures on household budgets.

[Mel Stride]

The hon. Gentleman is right to focus on cost of living issues. We also accept that they are important. Does he not accept that, if we look at the increase in average water and sewerage costs, we saw the greatest spike from about 2005 to the end of the period in which the Labour Government were in office?

[Thomas Docherty]

I will come on to that point in just one moment. As my hon. Friend the Member for South Shields mentioned, the latest figures show that more than 80,000 households have sought advice from citizens advice bureaux about water bill debts in the past year, which is almost exactly the same as the figure for how many sought help because they could not pay their energy bills.

The hon. Gentleman asks what the previous Government did. As we have heard today, we took decisive action to help families. We were the only Government to have forced a real-terms cut in a price review. He joined the House in 2005, which is interesting because it was the previous price review in which there was a real-term cut. The previous Government introduced WaterSure—the first social tariff scheme.

[Sheryll Murray]

Will the hon. Gentleman enlighten us on his proposals? We have heard an awful lot about the problems but not much about his or his party’s solution.

[Thomas Docherty]

If the hon. Lady shows a bit of patience, she might hear more detail from us than we heard today from the Secretary of State.

The previous Labour Government passed legislation that allowed the water companies to introduce their own schemes. Those companies had assured the country that they were keen to do so, yet almost four years after that legislation was passed, how many of them have kept their promises? How many water companies have developed a scheme within their region? How many of those fat-cat boards have put even a fraction of their obscene profits into the pockets of the hardest hit households? Just three out of 20 of the most successful and profitable companies in the country have lifted a finger to help their customers. It is no wonder that the most charitable description of the system, as offered by Citizens Advice, is “ad hoc”.

What did we hear from the Secretary of State today? What was his response to corporate failure and what was his proposal to help customers? He has written a second letter to his friends, the water bosses, not to demand real action but to make a helpful suggestion. He does not believe in Government intervention. No matter how much the market fails and the companies drag their feet and how many customers cannot afford the inflation-busting prices, this is a Government who do not believe that they should act. We on the Labour Benches do not share that belief. We believe that when fat-cat bosses will not act, the Government must.

As my hon. Friend the Member for Garston and Halewood (Maria Eagle) said, we will introduce a national affordability scheme. I welcome the points made by my hon. Friend the Member for Plymouth, Moor View (Alison Seabeck), who has been a constant champion of hard-pressed customers in the south-west region. Along with other Members, she raised the subject of flooding and flood insurance, which is an important issue. We share the concerns of many Members from across the House about both flood defences and how households can secure affordable insurance. The latest figures from the Environment Agency put the cost of damage to property in the past year at £277 million, almost £200 million of which was household damage.

We heard an excellent speech from the Chair of the Environmental Audit Committee, my hon. Friend the Member for Stoke-on-Trent North (Joan Walley), who highlighted the problem eloquently. The Chair of the Environment, Food and Rural Affairs Committee, the hon. Member for Thirsk and Malton (Miss McIntosh), highlighted the important and often overlooked issue of surface water run-off. The Opposition welcome the principle behind the proposed new scheme, Flood Re, but like the Select Committee we have serious and legitimate concerns about the fact that the Bill contains only one clause on that matter.

My hon. Friend the Member for Kingston upon Hull North (Diana Johnson) spoke from the heart about the problem of flooding. I am sure that the House would acknowledge that she has been a champion for her city, and I hope the Minister will provide real answers to the important issues that she raised.

I understand that Ministers are hastily drafting new clauses even now, but they must be adequately scrutinised. The issue has been raised by Members on both sides of the House, so will the Minister give a firm undertaking that the new clauses will be tabled in time to be reviewed adequately in Committee? Will he assure the House that such crucial amendments will not be rushed out at the last minute without due scrutiny?

We also heard from Members on both sides of the House about the tax paid by the water companies. As my hon. Friend the shadow Secretary of State has already said, it is simply unacceptable for water companies to make £1.9 billion in pre-tax profits and pay out £1.8 billion to shareholders. That is why we need to give the regulator broader powers to step in to protect customers and to ensure that fat-cat companies play by the same rules as other businesses. We want to ensure that excess profits, rather than heading to shareholders’ pockets, are used responsibly to reduce bills and improve infrastructure such as the Thames tunnel.

The hon. Member for Broxbourne (Mr Walker) mentioned abstraction. Not for the first time, he raised his concerns about the damage to chalk streams and asked whether I would set out our party’s position on the environmental impact issue. I am always keen to oblige him, so let me set out clearly our view of the crucial need for environmental mitigation. Even when the Government have tried to introduce reform, they have failed to follow through. As the Environment, Food and Rural Affairs Committee has warned repeatedly, a half-baked proposal to introduce upstream competition without proper abstract reform is worse than the status quo. As the WWF warned today,

“The licence system is completely broken, unsustainable and out of date”.

Why have the Government ended up in that mess? As in so many other cases where the Government have decided that something is difficult, tricky or requires them to act, they have just pushed this off. It should be no surprise that the Secretary of State ideologically opposes any Government action, but I wonder why the Minister responsible for water, the Under-Secretary of State for Environment, Food and Rural Affairs, the hon. Member for North Cornwall (Dan Rogerson), has simply gone along with his boss’s laissez-faire attitude to our natural environment. Simply to promise, as Ministers apparently have, that the Department will do something in the next Parliament shows a lack of credibility.

Let me be clear: if Ministers have found thinking of solutions too hard, they should postpone all upstream reform until we have Ministers and officials who will stand up to the vested interests who are damaging our rivers.

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dan Rogerson)]

I am grateful to the hon. Gentleman for giving way, and I look forward to debating many of these issues with him in Committee over the coming weeks. I am struggling to follow his argument. He says that there is an issue with abstraction reform and that we should press ahead and do something now, but his solution otherwise is to delay the whole process and not to consider any kind of reform of the industry. That seems to be his argument.

[Thomas Docherty]

Oh dear me; the Minister has obviously forgotten his own position. He will still be a member of the Environment, Food and Rural Affairs Committee for a little longer, so perhaps he can set out which side of the argument he agrees with—that expressed by the Select Committee of which he is a member or that in his new role as a Minister.

The hon. Members for Arfon (Hywel Williams) and for Newbury (Richard Benyon) mentioned retail competition, and the Opposition support non-domestic competition. It has been a success in Scotland, and like the Select Committee of which the Minister is still a member, we believe that, implemented properly, it will work in England. Like the Committee, however, we think there are technical improvements that we intend to explore further in Committee.

[Hywel Williams]

Has the hon. Gentleman any estimate of the cost of introducing competition in Scotland, where it is already under way, or in England? How much does he reckon that it will cost?

[Thomas Docherty]

The hon. Gentleman indicated that he is looking forward to serving on the Bill Committee, so we can discuss the matter further there. I refer him to the Select Committee’s report. The estimate of the first decade of competition in Scotland is that it will save the public sector £100 million. I think that the Department has produced figures for the savings in England, but the key point is that competition must be introduced properly.

Clearly, a range of important issues will require greater scrutiny and debate in Committee. The Bill is contentious not because of what it proposes—after all, the coalition has taken three and a half years to introduce measures that Labour developed in government—but because of what it does not deal with. It contains nothing on helping households struggling to pay their bills, nothing to make water companies pay their fair share of taxes, nothing to give the regulator real teeth to take on the fat cats, and nothing on reforming water abstraction.

I can assure the House that we will table amendments in Committee that will help households, give the regulators new powers, tackle tax avoidance and protect our natural environment. In conclusion, we will work constructively with the Government, and in that spirit, we will vote the Bill on Second Reading.

21:31

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dan Rogerson)]

I particularly welcome that last comment from the hon. Member for Dunfermline and West Fife (Thomas Docherty) and I look forward to discussing some of these issues in Committee. I thank all hon. Members for their participation in this interesting debate, which has been well informed. Hon. Members have covered a number of aspects of the Bill and, as it is a debate on Second Reading, some things that they would like added to the Bill. I will try to cover as many of those issues as I can.

I start by responding to the closing remarks from the hon. Member for Dunfermline and West Fife. He dangled the prospect of something to do with affordability and helping people with their bills. I was in the House in the previous Parliament when constituents throughout the country and particularly in areas such as mine in the south-west were facing a real challenge, as the hon. Member for Plymouth, Moor View (Alison Seabeck) pointed out. I had meetings with the hon. Gentleman’s Front-Bench colleague who is no longer in his place, the hon. Member for Ogmore (Huw Irranca-Davies), and we debated these issues. It was felt that nothing could be done. It was a very difficult problem. What we had from the previous Government was a series of reviews, some of which were good, well informed reviews that made a number of suggestions, but it has taken this Government to act upon them. That is the difference between the Government and the Opposition.

The hon. Member for Dunfermline and West Fife says that he will not oppose the Bill today. That is encouraging, and I look forward to working at that level of consensus to deliver the aspects of the Bill that will assist many of our constituents around the country, as well as updating the framework around the water industry for the future and dealing with the flood insurance issues, to which I shall return in a little while. These are hugely important issues. As a Member for an area where water issues have been a live topic of debate and as a member of the Select Committee, as the hon. Gentleman helpfully pointed out, I am all too aware of the range of challenges that we face, from the cost of living for hard-pressed families to future pressures on water resources and flooding. We heard many contributions about those issues.

I have witnessed at first hand the environmental benefits that investment in the water sector have delivered over the past 24 years since the industry was privatised. I could raise some issues about how that occurred at the time. My hon. Friend the Member for South East Cornwall (Sheryll Murray) sought to give us a history lesson about the political balance in Cornwall and what that may or may not have delivered. There were no proposals to deal with the lack of affordability in the south-west until the coalition Government came in. Single-party Governments of both stripes did not deal with the problem, so I leave hon. Members to draw their own conclusions on what might have led to the change.

[Ian Swales]

We heard about the real-terms cut applied by the previous Government. Do we know the average annual value of that cut?

[Dan Rogerson]

We saw bills cut for a period, but then they went back up again. If we talk to our constituents about their memories of water bills over the past few years, both in the run-up to the general election and since in the price review period presided over by the previous Government, we will hear that their experience was that bills were rising.

On the environmental benefits since privatisation, we have seen huge improvements—for example, in bathing water quality—and that is very much to be welcomed and something that we should dwell on. We have had the opportunity to consider how that progress has been made. Of course, we will see further challenging regulation on bathing water quality in future, so it is absolutely vital that the industry, along with everyone else in the community who can influence water quality, is ready for the challenge, to make it even better.

The Bill seeks to look at market reform, because we need water supplies that are resilient to future pressures, while keeping bills affordable and, indeed, minimising the impact on the environment. That is competition not for the sake of it, but to drive greater efficiencies in the water industry and encourage more innovation. The benefits to business customers are obvious: more choice, better customer service and packages tailored to their needs.

All customers, including householders, will benefit from an industry that is incentivised to look for the most efficient way to meet future demand. We know that that works in practice. Last week, I visited a housing development in Rissington in Gloucestershire, where Albion Water—a new entrant—is supplying water and sewerage services. With its innovative solutions, it can provide separate supplies of drinking water and recycled greywater to houses in the development. It can therefore compete successfully against the incumbent water company on price, while reducing daily drinking water consumption by nearly half. That is evolution, rather than a radical overhaul.

Since privatisation, the industry has been successful in bringing in investment, which has delivered huge improvements, as I have mentioned. We have a strong and stable regulatory regime and no intention of disrupting it. That is why we are working closely with the industry to develop future markets.

Market reform is understandably of great interest to hon. Members. They want to know about it from both perspectives: they are concerned in some cases that we might be going too far, and in others that we might not be going far enough. Some Members, such as my hon. Friend the Member for St Austell and Newquay (Stephen Gilbert), are keen to see competition in the residential sector, but we want to ensure that the change that we introduce is proportionate and that we proceed on a good evidence base. We can learn from the experience of Scotland, where business customers and non-domestic customers increasingly benefit from competition, so we know that the system can work. Competition in the residential sector would be a huge change, so we would have to come to anything that we wanted to do in that area at a later date. However, I take on board my hon. Friend’s comments and am reassured that he is observing that.

[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

At least half my constituency is supplied by Thames Water. There are consistent rumours that it is thinking about forcing all its customers on to water meters. Will the Bill make it easier for Thames Water to do that?

[Dan Rogerson]

Companies in water-stressed areas will be able to push people towards meters. Of course, new properties are customarily metered now, as a result of existing legislation. As we have heard today, there is a range of views on whether metering is desirable. Certainly, with regard to managing a scarce resource, it is desirable, but we must carefully examine the implications, such as the cost of the investment needed to install meters and the impact on bills, because there are always winners and losers. We need to look at that closely, as we move forward.

[Mr Charles Walker]

The population of this country is forecast to grow by 8 million or 9 million, and most of that growth will be in the east and the south-east. The problem is that the Bill simply does not address what we are going to do with these people and how we are going to provide them with water. We need more reservoirs.

[Dan Rogerson]

I agree that, as my right hon. Friend the Secretary of State said, we need to capture more of this water and make it work for us in such a way that we can improve environmental outcomes as well as resilience. That is very much what we want to happen.

[Miss McIntosh]

In terms of capturing water, is my hon. Friend going to deal with SUDS and surface water, because I know that he will care as passionately about this in his new position as he did when he was a member of the Select Committee?

[Dan Rogerson]

I had a premonition that I might get such an intervention from my hon. Friend, the Chair of the Select Committee. I know she is pleased that we are, as a Government, making progress towards implementing this process in April 2014. She would like it to be sooner, but we have to make sure that we get it right. The views of the Select Committee have been very useful in making sure that we get it brought in adequately.

We heard a couple of very specific questions on market reforms. My hon. Friend the Member for St Austell and Newquay asked about small charities that operate from residential properties. The reform would affect non-domestic properties, so if a charity is operating from a property that is primarily residential, it will not have access to it, but it will be open to it if it is operating from other premises.

On abstraction reform, I entirely agree with Members’ comments about the need to tackle abstraction, which is damaging our rivers. We are tackling this in two ways. First, we are taking action using the tools already available to address over-abstraction. The Environment Agency has reviewed thousands of abstraction licences and has changed about 80 of them, returning 75 billion litres of water per year to the environment in England. That is equivalent to the annual average water use of a city larger than Birmingham. There is clearly a lot more to do in the individual catchments that have been mentioned, and we have to take account of the stress that is put on them.

The Bill will also help by removing water companies’ right to compensation to ensure that the funding of these schemes moves into Ofwat’s price review process, which is a far better way of tackling over-abstraction. In the longer term, we need a reformed regime fit to face the future challenges, and we will publish a consultation on possible options in December. [Interruption.] These reforms will affect a range of businesses, so we need to get them right.

[George Hollingbery]

An awful lot of gibbering and jabbering and yibbering and yabbering is going on on the Opposition Front Bench. Will the Minister please remind us of how much abstraction reform occurred in the 13 years of the Labour Government just past?

[Dan Rogerson]

Very little, I think is the answer. I thank the hon. Gentleman for his intervention.

Dealing with abstraction gives me an opportunity to welcome the contribution by my predecessor, the hon. Member for Newbury (Richard Benyon), not only because of all the work that he put in and how he has informed our debate, but because by seemingly being very popular across the House he will make it much harder for anyone to oppose what is in the Bill, as it was his work that got us to this stage. I am sure that that will help to develop the consensus, because everyone agrees with the conclusions he drew and the position we are in. The Government are clear that any moves on abstraction and upstream reform must work together, so what we are establishing in the Bill will come into effect alongside the abstraction reform that we are moving towards. We have to get this right because it is crucial that we have the water resources to deliver the growth and environmental outcomes that we want to see.

Many Members covered flood insurance. I am all too aware of the devastation caused by flooding and its financial and emotional impact. I recall the destruction in Boscastle in my constituency. I became the Member of Parliament for North Cornwall a year after that tragedy, where fortunately no lives were lost. It also affected other nearby communities such as Crackington and Canworthy Water. The problem was that flood insurance companies were not up to the task. Fortunately, the Association of British Insurers was able to step in to offer advice and to help resolve the issues. As we have heard, other Members have similar recollections from their constituencies.

Flood risk management remains a top priority for this Government. We have committed record levels of capital spend and more than quadrupled contributions from other sources. As a result, we will have improved defences for 165,000 households by March 2015 and an extra 300,000 by 2021. I recently visited South Zeal in Devon, where residents shared with me their harrowing experiences of flooding. They also showed me the actions the community is taking to become more resilient to flooding, to keep down their insurance premiums in the long term. This Government are committed to providing access to affordable insurance for households at high risk.

We will table new clauses in Committee. Draft clauses have been available for some time and much of our work in Committee will be based on them. Were we to delay the Bill after this Second Reading debate, we would not be able to deliver our programme in a timely fashion. That is our objective. Yes, it is regrettable that those clauses are not in the Bill as drafted, but these are very complicated negotiations to ensure that an industry-led solution works not only for the industry, but fundamentally for communities and residents who need support.

[Thomas Docherty]

The Minister has given an undertaking that those new clauses will be available for scrutiny by the Bill Committee next week. Will he say, once and for all, whether those 20-odd clauses will be available in time for the Committee adequately to review them next week?

[Dan Rogerson]

It is my intention that they will be available for the Committee to look at as soon as possible, but we have to get them right and make sure that they deliver what the Government and my predecessor agreed with the industry, so that we deliver effectively.

[Alison Seabeck]

I thank the hon. Gentleman for giving way; he is being very decent with his time. Will he confirm that the new clauses will be available for the witness sitting, which will take place before the Committee considers the Bill? Will he make it clear that they will be available for the witnesses and not just the Committee?

[Dan Rogerson]

We would be much further forward had the previous Government done some of this work before they left office, but we have had to act on what we inherited, which, sadly, was very little.

Members have raised a number of other issues, including the use of council tax banding. I hope that all Members accept that that is a way forward. It may have some problems around the edges, but fundamentally it is the right approach. It is not my intention to move away from what was originally agreed, although the hon. Member for Cardiff North (Jonathan Evans) has made a case on behalf of his all-party group and Members who have an interest in issues such as band H and the 2009 cut-off.

The hon. Member for Kingston upon Hull North (Diana Johnson) made an impassioned plea, understandably, for her constituents and the issues faced by communities such as Hull, which is constructed in such a way that it has historically been subject to flooding. My hon. Friend the Member for Wells (Tessa Munt) pointed out similar issues with her rural constituency. The agreement takes forward the work that was already in place. The hon. Lady set out the argument—although she came to a different conclusion from ours—that we do not wish to incentivise more building in areas prone to flooding, which explains the 2009 cut-off. The Government will respond to any argument for change, but our current view and, indeed, our agreement with the industry—which is, crucially, at the heart of this—is that that is the right way to proceed.

[Lady Hermon (North Down) (Ind)]

Will the Minister give way?

[Dan Rogerson]

I am sorry, but the hon. Lady has not been present for most of the debate and I need to make progress.

The Chair of the Environment, Food and Rural Affairs Committee raised the issue of state aid. We have made it clear that aspects of Flood Re will count as state aid, so under competition rules we will need to seek approval from the Commission. We have been in communication with it and will start, along with the ABI, the formal notification process in 2014.

As we have heard, the aspiration of all this is to move to a free market over the next 25 years. Part of that involves seeking to continue to invest in flood defences and their maintenance, which I have already talked about, and looking at property-level protection schemes to ensure that they can be insured.

Hon. Members have mentioned uninsurable properties. I want to make it clear that no property will be seen as uninsurable initially, but if a property is repeatedly flooded, issues may arise that the scheme will have to take into account as we move forward. Certainly, the expectation is that all properties will initially be covered.

In relation to the impact on bills, a crucial part of the agreement was to get a limit on the proposed industry levy of £10.50 for a combined policy. The ABI thinks that that reflects existing levels of cross-subsidy for high flood risk, but it can of course be set out far more transparently. As I have said, I hope to table the flood clauses as early as we can in Committee, but we have to make sure that they are ready for debate.

We have sought to be as helpful as we can on the issues raised by members of the all-party group. I hope that consensus on a solution that works for those under threat of flooding and that is affordable and deliverable for the industry means there will be support for the proposals as a whole.

[Richard Benyon]

Before the Bill goes into Committee, may we lay one myth to rest? We can probably all point to developments in our constituencies that should never have taken place, but the fact is that in 97% of the times that the Environment Agency has objected on flood risk grounds in recent years, developments have not gone ahead. If hon. Members are honestly saying that no developments should ever take place in flood risk areas, there would be no more developments in Hull, London and York. We have to make sure that such developments are the right ones.

[Dan Rogerson]

My hon. Friend is absolutely right. House building has not been at its fastest recently, so the vast majority of properties in this country were built before the cut-off date, which ensures that there is affordable coverage for those who need it.

The Chair of the Select Committee made a point about sharing benefits data with water companies, as did the hon. Member for Plymouth, Moor View. We have to be careful because those data are very sensitive, and sharing them with the industry would currently be illegal. We can look at that, and the Select Committee has made recommendations, but we must get it right.

[Thomas Docherty]

The Minister is obviously talking about bits of the Bill that do not yet exist and which the House has not seen. A few moments ago, he said that capital expenditure had gone up. It might help him if I point out that there has been a drop of £96 million this year compared with the situation that the Government inherited in 2010. We want to place on the record the accurate figures, rather than those given to him by his civil servants.

[Dan Rogerson]

Over the spending review period as a whole, the investment will be bigger, and we will see the numbers climbing over the coming spending review period as well, by up to £400 million a year by 2021.

Several hon. Members raised the issue of bad debt, and rightly pointed out that some companies are better than others. We of course want all companies to aspire to do better. To return to the points made by my right hon. Friend the Secretary of State, we now have a far more vocal and effective regulator than we have had for some time. On issues of bad debt, affordability and company transparency, which matters to many right hon. and hon. Members, the expectation on companies to deliver is now much greater. I want to make it clear that many companies are doing a good job, investing money and delivering for customers, but where there are problems, the regulator will tackle them. My right hon. Friend set out absolutely clearly in his letter to the companies his expectations for the industry. The Government are supporting the regulator to carry out the work that is necessary.

[Joan Walley]

Will the Minister give way?

[Dan Rogerson]

I will give way for a final time.

[Joan Walley]

In the remaining six minutes, will the Minister say whether he is minded to consider that the regulator should have a duty in respect of sustainability as a primary function, which has been raised by many Members?

[Dan Rogerson]

I am happy to consider that. The case for such a duty has been made by Members on both sides of the House. The clear gain that we want is for Ofwat to have an additional duty in respect of resilience, for all the reasons that we have given. We want to incentivise the water industry to have long-term solutions to the problems that face it, rather than moving from price review period to price review period. We want to encourage continued investment in solutions that involve retaining water for use, rather than abstraction-based solutions. We want to incentivise investment in the best environmental solutions.

Ofwat already has a duty in respect of sustainable development. We have received legal advice that, regardless of whether that is a primary duty, there is a duty on Ofwat to take sustainability into account. Were we to make that a primary duty, we would perhaps not be able to bring in the resilience duty that we want. We will consider that issue and I am sure we will return to it in Committee, because a number of hon. Members have said that they will raise it. At the moment, we think that there are dangers in elevating the sustainability duty above the resilience duty. If I can be convinced that there is a way to deliver both, I will be happy to listen, but I want to ensure that we have resilience.

A number of other detailed issues have been raised. My hon. Friend the Member for Newton Abbot (Anne Marie Morris) spoke about park homes and I am meeting her this week to discuss the matter. I will be pleased if we can make progress on it, but there are issues with the way in which they take their water from an intermediary, as she pointed out. Canals were mentioned. We have discussed the Canal & River Trust on the Floor of the House in Question Time. I am happy to meet the hon. Member for Stoke-on-Trent North (Joan Walley) and other hon. Members to discuss that issue.

I am grateful that we have had so much time to discuss the issues and to get them out in the open. We have talked about the need to keep water available and affordable, and to continue to improve the environment. We have also mentioned the uncertainties in our water supply and the pressures on it, such as unpredictable weather and the growing population. We have a responsibility to ensure that we use our water wisely, to protect it and to ensure that there is enough for future generations. That is why we are taking action now. I am grateful for the support of Members from all parts of the House. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second Time.

Water Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Water Bill:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 17 December 2013.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

(7) Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Mark Lancaster.)

Question agreed to.

Water Bill (Money)

Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Water Bill, it is expedient to authorise the payment out of money provided by Parliament of:

(1) any expenditure incurred under or by virtue of the Act by the Secretary of State or the Competition and Markets Authority; and

(2) any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Mark Lancaster.)

Question agreed to.

Water Bill (Ways and Means)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Water Bill, it is expedient to authorise:

(1) the inclusion in sewerage licences of conditions requiring the payment of sums to the Water Services Regulation Authority,

(2) an extension of the cases in which a penalty may be imposed under section 22A of the Water Industry Act 1991,

(3) an extension of the cases in which a penalty may be imposed under section 111 of the Enterprise Act 2002 as applied by section 17M or 17Q of the Water Industry Act 1991,

(4) the charging of fees for providing copies of, or data comprising, all or part of the main river map for England,

(5) the conferring of powers on the Secretary of State to make regulations requiring insurers to pay levies or make contributions for purposes relating to flood insurance, and

(6) the payment of sums into the Consolidated Fund.—(Mark Lancaster.)

Question agreed to.