18:23 - The House divided: - Ayes: 6 / Noes: 282 - Question accordingly negatived.
20:59 - The House divided: - Ayes: 216 / Noes: 291 - Question accordingly negatived.
21:13 - The House divided: - Ayes: 218 / Noes: 289 - Question accordingly negatived.
Thomas Docherty
I do not want to get sidetracked by a debate about the merits of privatisation—I think you would pull me back in line if I did so, Madam Deputy Speaker—but I will just point out to the hon. Lady that Scottish Water, which is owned by the state, has invested more per connected property, I think, than any of the English water companies, with the exception of South West Water, so I am not entirely convinced by her argument.
To go back to the comments made by the hon. Member for Skipton and Ripon, despite paying out hundreds of millions of pounds to investors, Yorkshire Water has paid next to nothing in corporation tax over the past few years. I am not singling out Yorkshire Water in particular—it is clear that its behaviour is no better or worse than that of any of its competitors. The problem lies with the culture of water companies themselves. They have behaved in an unacceptable manner towards their customers for too many years. It is clear that they have come to regard customers as nothing more than cash cows, and many have paid little or no attention to customer complaints. That is why we believe it is in the interests of hard-pressed customers that the industry be subjected to greater scrutiny.
New clause 11 in particular shines a light on the opaque world of the companies’ financial and business practices. This is not an unreasonable or overly bureaucratic requirement. For many years, water companies voluntarily produced reports such as those that the new clause would require of them; yet, strangely, in recent years they seem to have got out of the habit of providing that information to customers, the regulator and the Department.
It is also worth noting, before the Minister replies, that Ofwat’s Scottish counterpart, the Water Industry Commission for Scotland, requires Scottish Water to produce the relevant information on an annual basis. Therefore, we believe that this is not an onerous or bureaucratic requirement.
New clause 12 would require Ofwat to pay far more attention to the problem of affordability of bills. I am conscious that we will have a wider debate about affordability when we discuss the second group of amendments, but Ofwat’s current interpretation of its role as an economic regulator is far too narrow. Both household and business customers feel that they are an afterthought, and the new clause makes it clear that Ofwat must have due regard to the cost of bills when setting the prices in future review periods. Labour believes that during a time of unprecedented squeezes on household budgets, much more must be done to help hard-pressed customers. Our two new clauses are important measures that would ensure that water companies served their customers’ interests, not the other way around.
We will, unsurprisingly, support the Select Committee’s new clause 2 on retail exit if it is pressed to a vote. We welcome the fact that the hon. Member for Brecon and Radnorshire (Roger Williams) appears to have had a change of heart over the festive break. During the Bill’s Committee stage he did not vote in favour of Labour’s proposal, but we very much welcome his change of heart. If we do not get an opportunity to discuss the proposal today, we hope that the other place will note that even members of the Bill Committee have signalled that they believe, on reflection, that it is a sensible and worthwhile measure. I will not repeat the discussion we had in Committee, but I think it is fair to say that, based on the signatories to the new clause, the proposal has cross-party support, which we welcome.
We will also support the Government’s amendments. I am slightly surprised that they felt the need to table a series of amendments, but not as surprised, I suspect, as the Minister when he was informed by his civil servants. The Minister has told us many times that he is lucky enough to be half Welsh, so one would have thought that he would have noticed the impact on Wales of the new clauses tabled by the Government in Committee. I hope he will explain how that slightly embarrassing oversight occurred.
We hope we will have an opportunity later this evening to press our new clauses to a Division. We welcome the spirit in which this first part of the debate has been conducted and I do not wish to detain the House any further at this point.
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dan Rogerson)
I start by echoing the remarks of the Opposition spokesman, the hon. Member for Dunfermline and West Fife (Thomas Docherty), with regard to the earlier statement made by my right hon. Friend the Secretary of State. Our thoughts are with those who have been affected by the storms and flooding over the Christmas and new year period, and I pay tribute to all those who have worked incredibly hard, including the Environment Agency, local authorities, the emergency services and, of course, those volunteers and community representatives who have supported their neighbourhoods and neighbours.
This discussion has covered a number of new clauses and amendments in relation to the regulation of water and sewerage undertakers and licensees, particularly those provisions designed to extend competition in the sector. The new clause tabled by the hon. Member for Arfon (Hywel Williams) would alter the devolution settlement by devolving further powers to the National Assembly, and he has set out his appetite for doing so. Generally, the Government of Wales Act 2006 devolves its issues down the national border, but the situation is not so straightforward for water supply. Water catchment areas and water supply management infrastructure cross the national boundary. The appointment and regulation of any incumbent water company whose area is not wholly or mainly in Wales is not devolved. That means that the legislative competence of the Assembly does not cover the parts of Severn Trent Water’s area in Wales.
Jonathan Edwards
Would the Minister be so kind as to inform the House of the situation in terms of the geographical boundaries of the water system in Northern Ireland? Is it based on the water table, as is the case in Wales, or on the actual state border with the Republic?
Dan Rogerson
The hon. Gentleman sets out his aspirations quite clearly by viewing the boundary between Wales and England in the same way as the sovereign state boundary between the Republic of Ireland and Northern Ireland, but I am addressing my remarks to the devolution settlement within the United Kingdom.
Roger Williams (Brecon and Radnorshire) (LD)
The Minister is well aware of the new clause’s implications for devolution. Does he agree that such a fundamental change would be better considered as part of devolution legislation, not as a new clause in a Bill on another matter?
Dan Rogerson
I thank my hon. Friend for his helpful intervention. He has somewhat pre-empted the remarks I was about to make, but I am happy that we speak as one on this issue.
Licensing of water suppliers is also not devolved. I recognise the deep, historical reverberations in Wales—we heard about them in the heartfelt speech by the hon. Member for Arfon—about the management of water, which is an essential natural resource. Much of the responsibility for water is, I am pleased to say, now devolved. However, further changes to the current devolution arrangements would have implications for customers and household bills on both sides of the border. They would also affect the companies, their assets and their operating rules, and possibly the people who work for them. Therefore, changes should not be undertaken without very serious consideration of all the implications.
The UK Government position is that we will not make changes to the devolution settlement in advance of the review and report by the Commission on Devolution in Wales—the Silk commission—which, as hon. Members will know, is led by Mr Paul Silk. The commission is currently working on part II of its remit and is expected to report in the spring. It is reviewing the powers of the National Assembly for Wales in the light of experience. The commission’s terms of reference make it clear that any changes it proposes must enable the UK Parliament and the National Assembly better to serve the people of Wales.
Thomas Docherty
I wish you a happy new year, Mr Deputy Speaker. Given that new clause 2 specifies that the process can take place only with the Secretary of State’s consent, will the Minister tell the House how such an unintended consequence might happen?
Dan Rogerson
We are very clear that we look at such issues strategically across the whole market, rather than picking them case by case. The issue is that we want to make reforms based on the principles that we set out during discussions in Committee and elsewhere.
Were a company to exit and to leave household customers on their own—without the non-household element—customers would not only be left with a company that had limited incentives to focus on improving customer service, but would be at risk of having higher bills, because providing, as new clause 2 does, for forced legal separation of the companies’ retail businesses would reduce regulatory stability and risk increasing the cost of capital.
Let me be clear: we want to see a successful retail market. The Bill sets a framework for new entrant retailers to enter the market on an equal footing with the retailers of the incumbent water companies. Our opposition to a provision about retail exit has nothing to do with supporting the position of incumbent water companies; we expect Ofwat to use its regulatory powers to make sure that new entrants can be confident that they are competing on a level playing field.
However, retail exit is not about delivering a level playing field. For example, in written evidence to the Public Bill Committee, the Water Industry Commission for Scotland argued that a provision about retail exit was needed so that new entrants had other options for increasing their market share than
“to acquire customers by winning them one contract at a time.”
However, that is exactly how entrants to the market in Scotland have had to win business unless an existing licensee surrenders its licence or has it withdrawn. In that case, the customers of the exiting licensee are shared out among other licensees, but otherwise all business customers stay with the incumbent retailer, Business Stream, until they actively decide to switch.
Some commentators have painted a picture of an incumbent water company being left without any customers, because all of them are lost to their customers once our retail reforms are in place. We feel that that is a very unlikely scenario, given that non-household customers represent only some 10% of the total retail market, and that 90% of customers—in other words, households—will not be able to switch suppliers.
It is quite an assertion to say that 100% of an incumbent’s non-household customers will switch suppliers. Some 60% of non-household customers in Scotland have put their water services out to tender, but most customers have elected to stay with Business Stream. We understand that only about 5% to 10% of customers have switched since 2008. The customers who stayed with Business Stream have benefited from improved services, without having to switch, by renegotiating their terms. We might expect a more active market in England from 2017.
Thomas Docherty
I fear that the Minister is confusing two different issues. Undoubtedly, competition in itself has brought huge savings and has made Business Stream—or Scottish Water—change its whole ethos, but like does not follow like: simply because customers have stayed with Business Stream does not mean that the market is not working. Given that only 10% of customers have switched, as he says, does he not accept it is quite likely that some smaller water companies will not be able to compete with big retail providers?
Dan Rogerson
I certainly was not seeking to suggest that the market is not working in Scotland. My point was that some people have chosen to stay with their incumbent, and they may wish to do so rather than to have an incumbent abandon them and walk away.
An Oxera report commissioned by WICS and published in November 2012 predicted that incumbents would lose some 40% of their non-household customers in the first year of the opening of the retail market, with a 5% loss of profit. However, arguments that make an economic case for exits seem to be based on incumbents losing all their public sector and multi-site customers in the first year of market opening. The Oxera view is bolder than that of the rating agency Moody’s which, in February 2012, said that a worst-case scenario would be incumbents losing 25% of their non-household customers in the short to medium term, with a much smaller loss of 0.69% of profit. Although no doubt all incumbents will lose some customers, we can suppose incumbents will take steps, such as those that Business Stream has taken, to retain customers.
Anecdotal evidence from business customers suggests that incumbents are already upping their game, even though retail competition reform is some years away. Large business customers have suddenly discovered that they have a named customer service contact, and some have been offered improved metering services. The idea of incumbents sitting around while customers disappear is therefore, in our view, an unlikely scenario. In addition, water-only companies will be able to apply to Ofwat for a sewerage licence, which will allow them to compete with licensees and other incumbent sewerage companies by offering both water and sewerage services to their customers.
My point is that this is evolution, not revolution. Many non-household customers may choose to stick with the incumbent supplier because the incumbent supplier will improve its services to them as a result of the reforms. The benefits of that may in turn be passed on to household customers. Forcing or even allowing retail exit ignores such points. Where customers choose to switch, we anticipate a growth market in which innovation and competition lead to benefits, both environmentally and in customers’ bills. Allowing partial retail exit would open the door to forced separation if individual cases of discrimination were discovered, and we have made clear our position on that.
As I have said, any decision on separation should be made by Ministers and Parliament. We are not prepared to take the risk of forced restructuring, or even the potential for it as provided for in new clause 2, destabilising investment or increasing costs to customers. The new clause envisages the Secretary of State permitting exits, but that may not reduce the risk of a competition authority forcing an incumbent water company to make an application to exit. I therefore urge hon. Members who tabled new clause 2 and amendment 12—led by the Chair of the Select Committee, the hon. Member for Thirsk and Malton (Miss McIntosh)—not to press them to a Division.
The hon. Lady raised other issues about the industry in general, particularly in relation to upstream reform. We know from experience that setting out how markets should work in primary legislation is very inflexible and can stifle innovation. I know that she is keen for us to do more in that regard, but our view is that that was one clear lesson from the last attempt to extend competition through legislation in 2003. That is why the framework in the Bill sets the scope and direction of reform, without being overly prescriptive. We are working closely with Ofwat, customers and the industry—through the high-level group and the Open Water programme—to ensure that new markets work effectively, and we know that the industry does not want to constrain the market unnecessarily with too much detail in primary legislation, any more than the Government want to do that.
On new clauses 11 and 14, the hon. Members for Dunfermline and West Fife and for Hayes and Harlington (John McDonnell) have raised important issues about how the sector is run. As the hon. Member for Dunfermline and West Fife pointed out, we had a previous debate on this set of issues in which hon. Members from all parties were keen to put on the record their concerns about the past operation of the industry. I fear, however, that we have been talking about things as they were, not as they are and will be. Ofwat is already taking action to improve standards of corporate governance across the sector. It recently consulted on principles relating to board leadership, transparency and corporate governance, and it is putting pressure on water companies to strengthen audit arrangements, board member appointments and governance. The response from water companies has been positive and I welcome that. I do not want to belittle the issues that the hon. Member for Hayes and Harlington set out, but Ofwat has listened and is providing leadership to deal with them.
John McDonnell
Is the Minister satisfied that United Utilities, which supplies water to the north-west, is forecast to have made £627 million in the year up to March last year, which is up from £594 million; that Pennon, the owner of South West Water, which must supply his constituency, is due to unveil profits of £273 million, which is up from £268 million; and that earnings at Severn Trent Water, which supplies the midlands, are expected to hit £525 million, which is up from £504 million? The profiteering is continuing as normal.
Dan Rogerson
The hon. Gentleman is referring to the current price review period, but we are about to enter a new one. The measures that I am setting out have been prepared by Ofwat to change the industry and to meet its aspiration of better performance by the industry. They also recognise the low cost of borrowing from which companies have benefited in the latter years of the current price review period.
John McDonnell
Would the Minister put his mortgage on United Utilities, Pennon and Severn Trent not increasing their profits next year?
Dan Rogerson
I suspect that they would not welcome my mortgage, given the debts that they are already dealing with because of the investment that they have put into the sector. The Secretary of State made it very clear in the letter that he sent to the industry and the framework that he set out for Ofwat that we want to see a settlement that reflects the market conditions that companies have benefited from in recent years. Ofwat, in turn, has been very clear that it expects companies to take account of that in the coming price review period. Companies are responding to that and we have seen some good signs.
Mr Charles Walker (Broxbourne) (Con)
I do not often applaud water companies, but Affinity Water, which serves large parts of my part of the world, hopes to achieve an average bill reduction of 0.7% before inflation in each of the five years up to 2020. That is worth welcoming.
Dan Rogerson
I thank my hon. Friend for that intervention. As he is not always an enthusiast for what water companies do, it means all the more that he is prepared to offer those words of congratulation. It is fair for hon. Members across the House to express clearly their view that water companies should offer a fairer deal to consumers. That is what the Government want to see as well. That is why I am pleased that water companies are responding positively to the process.
Hywel Williams
The Minister talks about fair deals between water companies. Is he satisfied with the terms for the supply of water from Wales to Severn Trent, especially given that Severn Trent is apparently selling on 30 million litres of water a day to Anglian Water at commercial rates? Of course, that is happening on the back of Welsh resources.
Dan Rogerson
The hon. Gentleman is tempting me to get into the specifics of individual companies. The framework that the Government have set out and our policy statements are very clear, and Ofwat is responding to that. The companies will have to take account of that and satisfy the regulator that they are acting fairly and effectively.
Richard Benyon
Given that one of the key objectives of the Bill is to increase the resilience of the water sector across the country—or perhaps I should say countries—should we not welcome the fact that Severn Trent is trading bulk quantities of water with Anglian Water and say that we hope to see more water flowing from areas where it rains a lot to areas where it does not?
Dan Rogerson
My hon. Friend and predecessor is a great advocate of ensuring that we have a far more resilient water sector on environmental and sustainability grounds, as well as on economic and social grounds. It is important that we get that message across and I welcome his intervention.
New clauses 11 and 14 would place a duty on water companies to report information that is already freely available in the public domain. Both new clauses require reporting about company performance, investment, tax, corporate structure and dividends. Indeed, the hon. Member for Hayes and Harlington cited those figures in his speech, which shows that they are readily available.
New clause 14 would also require the Secretary of State to report on the cost of water, disconnections, water quality, leakage and the legal compliance of water companies. The cost of water to consumers is published every year in each company’s charges scheme. The Water Industry Act 1999 removed the power of any water company to disconnect homes because of the non-payment of bills. That prohibits the disconnection of the water supply to homes, schools and hospitals. The drinking water inspectorate is responsible for providing independent reassurance that water supplies are safe and that drinking water quality is acceptable to consumers. In England and Wales, 99.96% of drinking water supplies meet national and European standards. The tiny proportion that are failing to meet that standard—0.04%—are predominantly private supplies, rather than supplies from incumbent water companies. Since the mid-1990s under the current framework, there has been a 30% reduction in leakage, which is more than 2 billion litres per day. Companies are now operating at their sustainable economic level of leakage.
Dan Rogerson
My hon. Friend is an astute and fearless challenger of all authorities, whether they be in the private or public sector. I am sure that he is well aware of the routes that he can take to challenge the company on that matter publicly and privately. The new clauses that we are debating would not assist him in that aspiration.
Thomas Docherty
The Minister probably has first-day-back blues. I refer him to Opposition new clause 11, which would allow the hon. Member for Broxbourne (Mr Walker) to check the performance of his water company.
Dan Rogerson
The hon. Gentleman hopes that his new clause would require further reports to be made to the Secretary of State. However, that information is already in the public domain. That is why supporting new clause 11 would not be helpful. I understand and respect his desire to ensure that the industry is as transparent as possible. I understand the ambition behind the new clause, but I do not share his enthusiasm for the wording that he has chosen.
The privatisation of the water industry has been a success story in terms of investment. Helpfully, the hon. Member for Hayes and Harlington pointed out that I represent a constituency in the South West Water area. The coalition Government have recognised that there were a few flaws in the privatisation process, so there is now extra money to support bill payers in the south-west, who paid for the clean-up of the beaches around the south-west peninsula.
As was pointed out by my predecessor, my hon. Friend the Member for Newbury (Richard Benyon), there has been huge investment in infrastructure since privatisation. That is one of the key successes that we want to build on and not jeopardise. The stable regulatory framework for the water sector has enabled companies to attract more than £111 billion of low-cost investment to upgrade water and sewerage infrastructure and to improve customer service and environmental standards.
I agree that we should be putting pressure on the water sector to act as transparently and responsibly as possible. Ofwat is already doing excellent work on the issues that have been raised by hon. Members. I do not believe that duplicating the reporting requirements would help. For that reason, I believe that new clauses 11 and 14 should be resisted.
New clause 12, for which the hon. Member for Dunfermline and West Fife argued, would place a duty on Ofwat to have regard to the charges to household and non-household customers. That would simply duplicate Ofwat’s existing duty.
I turn to a number of technical amendments, which the hon. Member for Dunfermline and West Fife charitably referred to. I will move amendments 13 to 50, 52 to 54 and 60 to 87 formally at the appropriate time. They will mainly make changes to schedules 5 and 7. Schedule 7 makes consequential changes to the Water Industry Act 1991 and other primary legislation as a result of our reforms, and schedule 5 makes further changes should the Welsh Ministers decide to adopt the reforms being introduced in England. Amendment 59 and new schedule 1 will provide the Secretary of State with the power to produce transitional orders that allow us to deliver retail and upstream reform separately.
Taken together, our amendments will provide Ministers with the maximum flexibility to commence the different market reform provisions transparently and in stages, as per our commitment to stagger the implementation of our retail and upstream reforms. They will enable the current arrangements to continue without diverting attention from the immediate priority of preparing for the opening of the reformed retail market in April 2017.
Hywel Williams
We have had an interesting debate, and I was glad to hear the contributions of the Chair of the Environment, Food and Rural Affairs Committee, the hon. Member for Thirsk and Malton (Miss McIntosh), and the hon. Member for Hayes and Harlington (John McDonnell), with whom I yet again agreed entirely. I was also glad to see the hon. Member for Newbury (Richard Benyon) taking an interest in his former beat, and to see the hon. Member for Brecon and Radnorshire (Roger Williams) in his place, although essentially in a non-speaking role.
I was disappointed by the lack of contributions from Welsh Members, and disappointed that the hon. Member for Dunfermline and West Fife (Thomas Docherty) did not make any reference to my new clause 1. Pretending it is not there does not mean it will go away.
Thomas Docherty
I wish you a merry Christmas and a happy new year, Mr Deputy Speaker.
I welcome the thoughtful remarks by the hon. Member for Thirsk and Malton (Miss McIntosh). As she rightly said, the Minister and I had the pleasure of serving on the Select Committee under her chairmanship. She was an excellent tutor to both of us, although I suggest, looking at the debates today and in the Bill Committee, that I remember more of what the Select Committee agreed than the Minister. I am sure he will eloquently explain his position.
Dan Rogerson
The hon. Gentleman is always kind enough to remind me repeatedly, so I fear I can never forget any of our deliberations.
Thomas Docherty
It is always a good thing to be a charitable and giving soul, so I do my best to try to accommodate the Minister.
I would like to speak to the new clauses that stand in my name. As I said earlier, much attention has been paid to households that faced a difficult Christmas and new year because of the climatic conditions that battered the United Kingdom. Much less, however, has been written on households that faced a stressful period because of the economic conditions that have battered the United Kingdom, not just in the past three weeks but in the past three years. Hundreds of thousands of households did not enjoy the Christmas that all of us here in the House of Commons did, in warm and secure homes with plenty to eat and with presents given and received. Too many families were left unable to enjoy the Christmas joys that we take for granted.
The cost of living crisis cannot be dismissed as a soundbite, as many Government Members try to do. The cases of hardship regularly brought to the attention of Members of Parliament cannot simply be batted away. At a time when household incomes are continuously being squeezed, it is not acceptable to Opposition Members for most water companies to continue to do so little to help their struggling customers.
The size of water bills may not have reached the obscene level of their gas and electricity counterparts, but there is no disputing their cumulative impact. Citizens Advice reported to MPs in November that it had received almost as many inquiries from people worried about their water bills as they had about the other two utilities. DEFRA’s own statistics state that some 2.5 million households now find themselves in what the Department itself defines as water poverty, while in the past year water companies reported pre-tax profits of £1.9 billion and paid out, in dividends, a staggering £1.8 billion to their shareholders.
You might have expected the water companies to rush forward with schemes to assist their hardest-pressed customers, Mr Deputy Speaker. After all, the previous Labour Government put in place legislation to allow each company to introduce a tailor-made scheme for its own region. The water companies told the then Government and Parliament that that was all that was needed: a voluntary system of social tariffs that each and every water company would then set and implement quickly. Four years later, what progress has been made? So far, only three water companies have got around to implementing social tariffs, helping a grand total of 25,000 households across the country. Even by the end of the price review period, more than a third of water companies will still have not bothered to lift a finger and introduce such a scheme. When the water companies gave evidence to the Bill Committee, did they acknowledge that they had let down their customers and Parliament? Did they acknowledge that the rate of progress was not good enough? Did they say sorry, even once? Of course not. They blamed everyone but themselves: they blamed the regulator, they blamed the Government and they blamed the customers.
What has been the response of the Secretary of State, and his Minister with responsibility for water, to the crisis facing households? The Secretary of State sent a letter to the companies in October begging them not to raise prices further. It was not, we note, an instruction or a warning that if they did not take heed, the Government would step in. It was not even a rebuke; it was just a weak letter. That is why the Opposition have tabled four new clauses that will each help hard-pressed households. Taken together, they would make a tangible difference to those struggling with the cost of living crisis. With your permission, Mr Deputy Speaker, I will briefly take each new clause in turn, explaining the existing problems and how our proposals would address them.
First, on bad debt, I will build on the excellent remarks by the Chair of the Select Committee. Ofwat estimates that on average bad debt adds £15 to every customer’s annual bill. Note, of course, that that is just the average amount; in some cases, it is significantly more than that. As the hon. Lady said, water companies are, rightly, not allowed to cut off those who cannot afford to pay their bills, but they are allowed to pass the cost of non-payment on to their other customers. In effect, the sector already has cross-subsidisation.
Dan Rogerson
The hon. Gentleman has set out how the burden of pursuit would fall on the water companies, but of course the burden of providing that information to them would fall on the landlords, so there would be a burden.
Thomas Docherty
I congratulate the Minister on stating the blindingly obvious. Of course, the landlord would have to provide that information, but it is not the longest list in the world, and it is information that landlords have anyway, so the Opposition, like the Select Committee, find it difficult to comprehend why it would be so onerous for landlords to provide a list of their tenants by property. If he has specific examples of hard-pressed landlords who have made representations to him, I am sure he will refer to them when he responds.
For the fourth time, I ask myself the question: why the opposition from the Government? The Secretary of State has had his usual Pavlovian reaction to a suggestion that the Government should take action. It appears once again that when Parliament, the Select Committee and the water industry ask DEFRA to do something, its knee-jerk response is to think of spurious reasons why it should not or cannot do it. Our new clause would be a pragmatic and efficient measure that would help to drive down costs on all decent households, help water companies to do their job and ensure that all customers meet their responsibilities.
Our second new clause—new clause 10—recognises that not all water companies have done all they can to tackle the problem of bad debt. As I mentioned earlier, although the average bad debt figure is about £15, there are wide variations across the country. As the hon. Member for Newbury (Richard Benyon) pointed out, that is because some, such as Yorkshire Water, have worked with customers and debt advice groups, such as Citizens Advice, to put in place measures to help customers genuinely struggling to access payment packages and programmes, but unfortunately that is not the case across the country. Too many water companies have come to the unsurprising conclusion that, because they can pass the cost of bad debt on to their other customers, they need not bother to do anything about it themselves.
That is why we have tabled new clause 10. We want to give Ofwat and water companies a clear and unambiguous signal that hard-pressed customers should no longer be treated as a cash cow by companies that cannot be bothered to meet their own responsibilities. Where the regulator and the Department are satisfied that water companies are not doing enough to pursue bad debtors, the cost should no longer be passed on to other customers. Taken together, not only would our two new clauses be practical measures, but they would send a clear signal that while we will do more to help those who are struggling, we expect all customers and water companies to do their fair share.
Our third new clause—new clause 8—would help to ensure that customers know about the help for which they are eligible. In 1999, the last Labour Government introduced WaterSure to help low-income metered households with high essential water use. WaterSure caps the bills of metered households in receipt of a qualifying benefit or tax credit at the average bill for that water company’s operating area. It applies to households with three or more children under the age of 19 living at home or where someone in the household has a medical condition that necessitates high water use. It is an important measure that at the time received cross-party support and which, according to the latest figures that the Minister gave us in Committee, has helped 70,500 households in England—I think a similar scheme has helped approximately 20,000 households in Wales. Although that is welcome, we believe that that level is unacceptable. Given that, as the Consumer Council for Water has said, only one third of eligible households are in receipt of the benefit to which they are entitled, the Government have been guilty of complacency.
The Minister previously claimed there was no need for the new clause because all the water companies already provided this information. For the benefit of Members who have not had a chance to look at the amendment paper, we are proposing that information about the eligibility criteria and how to apply should be included in all water bills. He believes that all water companies already provide this information, but unfortunately for him the reality does not match his statement. Not only do his own figures show that the current approach is not working, but our own anecdotal research shows that customers are not even aware that WaterSure exists. We want to make it clear to water companies that they must do much more to promote the scheme, and we want Ofwat and the Government to hold them to account if they do not. I hope he has reflected not only on the evidence we presented in Committee, but on his own figures and the evidence from the CCW, and will listen to common sense.
Finally, our fourth new clause—new clause 7—deals with the central problem of the failure of the voluntary approach to social tariffs. As we have set out, too few water companies are helping too few customers through social tariffs, and it is clear that left to their own devices many water companies, by their own admission, will never introduce such schemes. That is why we are proposing a national affordability scheme to end the postcode lottery and ensure national standards for eligibility. We would expect schemes to be funded by the excess profits of the water companies, not by other water bill payers. As I have said, last year these companies made an eye-watering £1.9 billion in pre-tax profits and paid out £1.8 billion to investors. The idea, for example, that Yorkshire Water, which paid out £240 million, cannot afford to provide support through social tariffs is clearly nonsense.
Enough is enough. Hard-pressed households need real help now, and these new clauses are four practical and simple measures that would ensure they get it. It is time for the coalition to match our commitments.
Dan Rogerson
The hon. Member for Dunfermline and West Fife (Thomas Docherty) has proposed a number of new clauses, which I shall address before dealing with the lead new clause 3, tabled by the Select Committee Chairman.
New clause 7 would place a requirement on the Government to introduce through secondary legislation what is described as “a National Affordability Scheme”. The details of the scheme are not entirely clear. We debated in Committee an identical clause tabled by the hon. Gentleman, but at that point, the funding was not made clear. He said today that it would be funded specifically from the profits of the water companies rather than from other bill payers in a cross-subsidy approach.
Thomas Docherty
I refer the Minister to the evidence session during the eighth sitting of the Public Bill Committee, where I specifically said that the scheme would be funded from excess profits. Perhaps the civil servants should pay more attention in future.
Dan Rogerson
The hon. Gentleman is, as always, keen to assist. What I said comes entirely from my recollection of his introduction of the measure in Committee and if it is faulty, it is certainly not on account of any information briefed to me by others. I am grateful to the hon. Gentleman for highlighting the issue of excess profits. However, this does not address the point that we have a regulated system under which the profits are allowed for under the price review process. I appreciate that he was not a Member when his party was most recently in government, but it was quite happy to move forward with the pricing process. What he is saying now is that he has no confidence in the regulator—in other words, that the regulator would set a level of profit that it thinks reasonable for the price review period, but that this would now somehow be unpicked as being in excess in some cases in order to fund the scheme. I am happy to give way again, in case he wants to correct this.
Thomas Docherty
I am grateful, but on this occasion it is perhaps the Minister who should have paid more attention to my remarks a few moments ago. I clearly said that the last Government gave the water companies time to introduce the voluntary schemes, but that they have now failed to honour their commitment, so the Government should step in and do what the companies failed to do themselves.
Dan Rogerson
I understand the hon. Gentleman’s views on social tariffs, which he feels have not been introduced in a speedy enough fashion. My point was rather about the issue of excess profits. I said that the hon. Gentleman was seeking to introduce a concept that is perhaps a subjective rather than an objective assessment of the profits made by water companies. The whole point of the price review process and price review period, however, is that a regulated process takes account of the need to attract investment and thus the need to make a reasonable return in profit.
Roger Williams
My understanding is that the water companies made larger profits because the period of very low interest rates benefited them to a great extent. However, basing an entire policy on windfall profits that might not occur in the future would certainly not be a very good idea.
Dan Rogerson
I thank my hon. Friend for his intervention. He is absolutely right to point out that what is proposed is a new bold national scheme built on profits that might or might not go up or down in accordance with the markets and through the price review process. Although I accept that the intention of the hon. Member for Dunfermline and West Fife is, as always, to be helpful, I feel that his scheme could use a little work and I therefore urge my hon. Friends to resist it should he seek to press it to a vote.
Let me move next to new clause 8, also tabled by the hon. Gentleman. It would place a legal requirement on water companies to include information in their bills about the WaterSure scheme, but, as I have said—I provided information to this effect to the Committee—all water companies already do so voluntarily. He made a point based on anecdotal evidence. I would be happy to see that evidence and I am sure that he will want to share it with us, but I think we should base our policy making on the evidence provided to us, and the Consumer Council for Water has been quite clear that companies provide such information to customers.
In addition, new clause 8 would place requirements on water companies to provide information about tariff structures and the lowest available tariff, a point picked up on by my hon. Friend the Member for Sherwood (Mr Spencer). The proposals simply fail to reflect the realities of the water sector as opposed, for example, to the energy sector. Water companies do not have complex tariff structures. The sole choice for the majority of household customers is whether to pay according to the amount of water they use through a metered tariff, which is particularly prevalent in areas such as my own, or according to the rateable value of their home through an unmetered tariff. The cheapest option for each household will therefore depend on the location of the property and the amount of water used by the household.
Many smaller households with low water use can benefit from a meter. Water companies are required to fit a water meter free of charge on request and they also advise customers on whether they might benefit financially from the installation of a water meter. A further point to bear in mind about the operation of WaterSure is that it caps the bills of eligible customers at the average of the metered and unmetered bill for the area. That could, in effect, put the bills of some eligible customers up and it is therefore not surprising that they have chosen not to apply for WaterSure.
There is no evidence, in my view, that further regulation is required in this area. As I have noted, all companies already include details of WaterSure in their household bills and they also all provide details of the support available to any customer struggling to pay their bill. Legislation to require the companies to do something that they are already doing voluntarily would be redundant.
The Consumer Council for Water works closely with the companies on the format of their bills. Its expert advice, as we discussed in Committee, is that one of the biggest risks in using water bills as a means of communication with customers is information overload. I do not, therefore, consider the new clause to be necessary.
Let me turn next to new clause 9, also tabled by the hon. Gentleman. We discussed an identical clause that he tabled in Committee. Section 45 of the Flood and Water Management Act 2010 already enables Ministers to introduce secondary legislation that would require landlords to provide water companies with personal details about their tenants or become liable for paying the bill. That was a point that the Chairman of the Environment, Food and Rural Affairs Committee was keen to emphasise, given her involvement with the passage of that Act.
Following extensive consultation with the industry and with landlords’ organisations the Government took the decision that a voluntary approach would be more suitable. During consultation, landlords argued that the additional regulatory burden would be disproportionate as they are not the source of the problem we are trying to tackle. At the same time, the evidence provided by the water sector to support the case for additional regulation was not sufficient to make the case for additional regulation of millions of small and micro-businesses.
The Government simply do not believe that more regulation is always the answer. As we discussed in Committee, good practice in tackling bad debt is not applied consistently across the water sector. The hon. Gentleman quite rightly took great pains to point that out. The significant variation in performance between companies tells us that the focus should be on driving better standards across the sector rather than regulating landlords.
One reason we do not propose to bring forward the bad debt regulations on landlords is that we do not wish to endorse the argument that performance on bad debt is not within the control of water companies. We think there is more that the companies can do to collect their debts and we want them to focus on that rather than look to the Government to solve the problem for them.
Of course, the real drivers of company performance are the incentives and penalties set by the regulator so I am pleased to be able to report that Ofwat has changed its approach to bad debt in the methodology it is using for the 2014 price review. The new approach will enable it more effectively to bear down on the costs of bad debt. It is doing so by insisting that the companies demonstrate that any increase in bad debt is genuinely beyond their control and that they have taken all available steps to control it. Unless they can prove that that is the case they will not be allowed to include it in customer charges. We are already seeing our focus on the industry’s taking responsibility for tackling bad debt bear fruit. As I mentioned in Committee, the industry is working with landlords’ organisations to establish a new voluntary scheme that will enable landlords to provide information about their tenants direct to water companies swiftly and easily.
Miss McIntosh
I am most grateful to my hon. Friend for giving way, but before he concludes his remarks he must say what the Government object to as regards the 2010 Act. I do not personally subscribe to the data protection argument if someone is genuinely in need.
Dan Rogerson
The Chair of the Select Committee is quite right that I have yet to respond to that aspect of her argument and I will seek to do so, I hope to her satisfaction, once I have made my closing remarks on new clause 9.
The industry is working with landlords’ organisations to establish the new voluntary scheme that will enable landlords to provide information about their tenants direct to water companies swiftly and easily and that approach has the support of Water UK and the main landlords’ organisations. The new database will launch in March next year and I believe that it should be given time to work. For those reasons, I believe that new clause 9 is not necessary.
Thomas Docherty
I am grateful to the Minister and am listening carefully to what he says. He will, I am sure, come on to his justifications as regards new clause 10 in a second. Before he finishes dealing with new clause 9, however, can he say what he defines as “time to work”?
Dan Rogerson
We should at least allow the database to be set up and give it a chance to operate. That would seem to be a fair approach and it is certainly the one I seek to take. I understand the hon. Gentleman’s keenness to see progress but I believe that the voluntary approach will have some effect and we should give it time to do so.
Let me turn now, as the hon. Gentleman uncannily predicts, to new clause 10, which he has tabled in his efforts to make some changes to the Bill, and in Committee we discussed a similar clause that he tabled. The new clause will provide a new power for Ministers and Ofwat to disallow companies from recovering the cost of unpaid bills from their paying customers. The hon. Gentleman has argued that there is no incentive for companies to collect bad debt. During our previous discussions, I made it clear that Ofwat has the power to decide which costs may be recovered through the price review. Ofwat is already using the price review process to bear down on the costs of bad debt and requiring companies to demonstrate high performance in debt collection and to show that any increase in bad debt is beyond their control before they are allowed to include it in customer charges. The price review will challenge poor performers to raise their game.
The new clause proposes a power for a future Secretary of State to intervene in the setting and recovery of charges. That is exactly the kind of political interference that concerns the investors who are critical to the water industry. I have stated before that the stability of the regulatory regime is vital to keeping the cost of borrowing low. An increase in that cost will have the direct result of putting up customers’ bills and I am firmly of the view that it is for the regulator and not the Government to make detailed decisions about charges. New clauses 9 and 10 intend to incentivise companies to improve their debt collection performance and I absolutely support that objective. I cannot, however, support the approach that has been proposed and I am sorry to disappoint the hon. Gentleman—and, I am sure, to surprise him.
Let me turn finally to new clause 3, tabled by my hon. Friend the Member for Thirsk and Malton (Miss McIntosh), the hon. Members for Poplar and Limehouse (Jim Fitzpatrick) and for North Tyneside (Mrs Glindon) and my hon. Friend the Member for Brecon and Radnorshire (Roger Williams). The proposed clause targets a number of points that we have already discussed in some detail, including bad debt and social tariffs.
The practical effect of the new clause would be to require the Department for Work and Pensions to supply water companies with personal information about their customers. The clause focuses solely on the subset of customers that are both in receipt of benefits and living in rented accommodation. Amendment 9 would simply include the proposed new clause in the list of measures to be commenced two months following Royal Assent.
I am grateful to my hon. Friend the Member for Thirsk and Malton for her clarification that the clause is intended both to help water companies to collect their debts and to target social tariffs at customers in rented accommodation who are also in receipt of benefits. However, I am afraid that I do not believe that the clause is likely to achieve either objective effectively.
As I have already set out, the Government’s position on bad debt among water customers is that there is a great deal more that the industry can do for itself. We think, therefore, that there is more companies can do to collect their debts and we want them to focus on that rather than to look to the Government to solve the problem for them.
I am pleased, as I have said, that the industry is already taking more responsibility, by working on a voluntary approach to sharing information on customers in rented accommodation, using the landlord database, as we have discussed in response to new clause 9, tabled by the hon. Member for Dunfermline and West Fife.
Thomas Docherty
I remind the Minister that our scheme would not involve cross-subsidisation. I am surprised that he is so against the use of benefit systems for social tariffs, because the Liberal Democrats in Scotland actively supported the introduction of social tariffs based on council tax benefit. What is the difference?
Dan Rogerson
I am seeking to point out that there are a range of benefits and a range of circumstances for people. The hon. Gentleman highlights one benefit. Of course council tax benefit no longer exists in this country in the format that it does in Scotland, as we have now moved over to local council tax forms of support, so there is a different system, which would not necessarily translate across. The hon. Gentleman is keen always to learn the lessons of Scotland, but some of these things do not apply simply, given the different frameworks following the devolution settlement.
We place emphasis on locally designed social tariffs developed in close consultation with the customers who will ultimately foot the bill, as opposed to crude, centrally imposed eligibility criteria. Although I very much thank hon. Members for their new clauses and understand their aspirations in tabling them, I would urge my hon. Friends to resist them.
Miss McIntosh
We have had a fruitful debate, but I express my disappointment that my hon. Friend the Minister has not seen fit to take a simple measure that already exists on the statute book and is not intended to be regulatory. He will, of course, have opportunities in the future to appear before the Select Committee that I chair and that will give him plenty of opportunity to explain at greater length why he is unable to support these new clauses. It is my fervent wish that such new clauses might perhaps find their way on to the notice paper in another place. However, I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 4
Sustainable drainage and automatic right to connect
‘The Secretary of State shall by order made by statutory instrument implement the provisions of section 32 and Schedule 3 of the Flood and Water Management Act 2010, and any other provisions as the Secretary of State considers appropriate in connection with the coming into force of those provisions, no later than the end of the period of one month beginning with the date on which this Act is passed.’.—(Miss McIntosh.)
Brought up, and read the First time.
Thomas Docherty
May I wish you a warm and happy new year, Madam Deputy Speaker?
We have had a thoughtful and knowledgeable debate over the past hour and a half or so. I commend two Select Committee Chairmen and a former Minister for their remarks, even if we did not agree with every part of the former Minister’s interpretation of the past three and a half years.
Time is limited, so I hope the House will understand if I restrict my remarks to some of the new clauses. Unsurprisingly, the Opposition agree with the Environment, Food and Rural Affairs Committee about SUDS. I am sure that, as a former member of that Committee, the Minister will agree with himself on the issue. The hon. Member for Thirsk and Malton (Miss McIntosh), who chairs the Committee, was right to highlight the increasing burden being placed on a network that, in many cases, is struggling to cope. We have heard that the ability to cope with additional development is not always given the consideration that it needs. I hope that the Minister will reflect on the cross-party support on that point that the hon. Lady demonstrated.
There is a broad coalition of opinion on abstraction reform, to which the hon. Member for Newbury (Richard Benyon) alluded, but it is not just made up of what he might describe as the usual suspects—the non-governmental organisations involved. That well known environmental organisation the Food and Drink Federation made a submission to the Public Bill Committee. We welcomed the Minister’s announcement in the Committee. It was disappointing that his colleagues chose to make it to the media before it was made to Parliament, but of course I assign no responsibility for that to him. We welcome the consultation, but we agree with the Environment, Food and Rural Affairs Committee that it is long overdue.
I say to the hon. Member for Newbury that the Government certainly could not be accused of legislating in haste, because after almost four years we simply have not seen sufficient progress on abstraction reform. My hon. Friend the Member for Garston and Halewood (Maria Eagle) and I look forward as Ministers in the next Parliament to taking such legislation through with due speed, and we look forward to the support of Conservative Members.
My hon. Friend the Member for Stoke-on-Trent North (Joan Walley), the Chair of the Environmental Audit Committee, made an incredibly thoughtful and logical speech, and we support her new clause 6. We are clear that, as she said, this is not a debate about the merits and demerits of fracking technology. It is about trying to ensure that there are safeguards in place. Her constituency is still suffering the fallout from open-cast mining not having had sufficient guarantees in place, so I understand exactly where she is coming from.
Given that time is incredibly short I will bring my remarks to a conclusion, but it is clear that the other place will have an important job to do in the weeks ahead. A number of issues in this group of amendments—and indeed elsewhere—have not been addressed, and my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) is right to say that we must consider Flood Re in some detail. With the greatest respect, the Opposition will not simply go along with the Government because they have come to a deal and say that that is good enough; we need more detail from Ministers. We look forward to the Bill making progress but we will, as I have suggested, press some amendments to a vote.
Dan Rogerson
In the time available I shall seek to respond to as many points as I can. The Chair of the Environment, Food and Rural Affairs Committee, the hon. Member for Thirsk and Malton (Miss McIntosh), has been a strong advocate of and campaigner for sustainable drainage over many years, and the Government are pressing ahead and implementing the requirement to secure approval for sustainable drainage systems for new developments under schedule 3 to the Flood and Water Management Act 2010. Regrettably, it is looking increasingly unlikely that we will be in a position to ensure that the scheme comes into force this April, which was our preferred date for implementation as stated previously. I accept that that will be a great disappointment for the hon. Lady and other hon. Members, but I remain committed to introducing the legislation at the earliest opportunity. I plan to lay the relevant affirmative regulations by April, to underline the Government’s commitment to addressing flood risk.
I share the hon. Lady’s frustration that the process has been so protracted, but we are working with developers and local government to develop the processes, standards and guidance that are an integral part of a new SUDS approvals and adoption regime, rather than just imposing them. That takes time, but it is time well spent if the end result is an approach that is fair to all parties and successful from the outset because local government and developers are fully prepared to take on their respective new responsibilities.
Amendments 1, 2 and 3 address flooding on highways or that caused by the run-off from highways. The causes of flooding can be complex and it is difficult to make a general statement about them. There are already legislative powers to ensure that highway surface water drainage does not pollute or flood, and section 100 of the Highways Act 1980 enables the local highway authority to take action related to the drainage of highways—for example, it can construct drains or erect barriers on the highway or adjoining land to divert surface water into an existing drain.
The majority of new road drainage systems are not connected to the public sewerage system. Typically, they discharge under designated conditions, either to a watercourse or a storage pond with controlled exits to a watercourse, or alternatively soak into the ground in a designed manner. A decision to connect new highway surface water to a combined or foul public sewer can be made only subject to an agreement with the receiving water authority. There is no automatic right to connect new highway drainage to the public sewerage system. We recognise, however, that in some cases local flooding may be exacerbated by drainage from existing highways, and as I have said, the 2010 Act places a duty on lead local flood authorities to develop a local flood risk management strategy for their area. I hope hon. Members will be reassured by that.
Let me seek to address the points raised by the Chair of the Environment, Food and Rural Affairs Committee about flood insurance, and amendments 5, 6 and 7, which relate to small businesses. Flood Re has been specifically designed to recreate the current cross-subsidy in the domestic home insurance market. There is little evidence that the same type of cross-subsidy applies in the commercial insurance market, and the majority of business insurance policies are already priced to risk. A recent English business survey of more than 9,000 businesses in England found that fewer than 1% of businesses had experienced difficulty getting property insurance in the last year due to the risk of flooding, and that no businesses had been refused insurance cover due to such a risk.
As outlined by the Association of British Insurers in its evidence session, businesses tend not to face the systematic issues that householders experience. We must also remember that Flood Re is funded through a levy on all household insurance policies. We have deliberately set that at £10.50, which the ABI estimates is the same as the current cross-subsidy. Widening Flood Re to include small businesses would significantly increase costs. We do not want someone living in a council tax band A property, for example, to subsidise the cost of insuring a private company that potentially earns up to £1 million a year. I am also mindful of the need to comply with state aid rules. Government intervention to support business would be carefully scrutinised and at greater risk of rejection—I know the hon. Lady is familiar with that issue.
On flood insurance and amendment 8, which was tabled by the same group of hon. Members, we are clear that we are talking about a one-in-200-year annual loss, not a one-in-200-year flood event. If Flood Re is legally responsible for claims above a one-in-200-year level, the cost of the liability could be prohibitive. Likewise, if the Government took on a liability beyond a one-in-200-year level, we could expose the taxpayer to extremely large and unpredictable costs. In such a catastrophic situation, many more homes than would be insured by Flood Re are likely to be affected. That is why the memorandum of understanding says that the Government of the day would work with Flood Re and representatives of the insurance industry to decide how any available resources should be distributed to Flood Re customers if flooding exceeds such a level.
Government amendment 58 is a technical one. On the issues raised by the hon. Member for Stoke-on-Trent North (Joan Walley), the Chair of the Environmental Audit Committee—we discussed them in Committee—the Government remain convinced that the existing provisions would be helpful enough in terms of the checks on companies’ financial probity and their technical ability. However, she rightly raised issues that could be addressed following Lord Krebs’s intervention in his letter. I am pleased to hear her calling for things such as betterment, meaning better quality reinstatement, and more information to customers, for which Lord Krebs has also called. Many hon. Members would like to include that in discussions with the ABI.
On misconnections, the hon. Member for Edmonton (Mr Love) is aware that local authorities currently have the power. We are not convinced that giving the power to companies would be helpful. His points are on the record and it is right that the Government take account of what he has said. I am happy to talk to him in future to see that we get the right response.
There is only a very little time for me to respond to all the points hon. Members have made on abstraction. My predecessor as Minister, my hon. Friend the Member for Newbury (Richard Benyon), has rightly said that there is agreement in the House that we want progress. Action is taking place under the existing regime—the Environment Agency has changed 77 licences since 2008, returning around 75 billion litres of water per year—but we need to go much further. That is why we are consulting. The process is under way and will lead to legislation, hopefully with the support of all parties, to reform that complicated system. However, we need to do that properly. I do not believe it is appropriate to do it in the way suggested in the new clause.
Finally, Government amendments 55 to 57, which I have tabled, seek to clarify the resilience duty. We want to make it absolutely clear to hon. Members that we are covering environmental sustainability. I hope the changes we are making to the resilience duty will reassure hon. Members who believe that we need to elevate the sustainable development duty that we are looking at environmental resilience as well as social and economic resilience.
Miss McIntosh
We have had a good debate on Flood Re. The Environment, Food and Rural Affairs Committee wanted to flag up the point that the proposals do not reflect the value for money of other aspects of Government policy.
We have also had a good debate on abstraction, but the jury is out. The Bill would be a retrograde step if there is a severe drought between now and whenever the Government introduce provisions.
Obviously, both personally and on behalf of the Committee, I am disappointed that the SUDS provisions will not be in place. The House would wish to record its disappointment and the fact that, if the regulations will be introduced only in April, there is time before those who must apply them are in a position to do so.
However, mindful of the opportunities that hon. Members have had to debate the matter, and that the Bill must continue its passage, I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 7
National affordability scheme
‘(1) The Secretary of State must, by order, introduce a National Affordability Scheme for water.
(2) The National Affordability Scheme must include an eligibility criteria, determined by the Secretary of State, in consultation with—
(a) the Water Services Regulation Authority; and
(b) the Consumer Council for Water.
(3) An order under this section—
(a) shall be made by statutory instrument; and
(b) may not be made unless a draft of the order has been laid before and approved by resolution of each House of Parliament.’.—(Thomas Docherty.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Dan Rogerson
I beg to move, That the Bill be now read the Third time.
I begin by thanking those who have been involved in the Bill. Members of the Public Bill Committee, under the excellent co-chairmanship of the hon. Members for Halifax (Mrs Riordan) and for North Wiltshire (Mr Gray), did an outstanding job of ensuring that critical issues were debated in depth, and the considered amendments that were tabled allowed us to explore several issues in detail. I thank hon. Members on both sides of the House for their contributions over the past weeks and months—and, indeed, today. Members of the EFRA Committee scrutinised the draft Bill, and I was grateful for the continued engagement of current and former members of that Committee during our debates on the Bill, including on Report. The Bill leaves the House stronger as a result of the changes made to the draft Bill before the introduction of this legislation, and the amendments made in Committee and on Report.
The Bill addresses difficult challenges that we all accept that we are facing. Climate change and population growth will place our water resources under more pressure than ever before. At the same time, unfortunately, it is widely recognised that the future holds more frequent and severe weather events. We need to keep bills affordable while addressing those challenges, which means finding new approaches to encourage innovation and greater efficiency in the water industry. We also need an affordable solution to the problem of flood insurance for those at high risk of flooding.
The Bill is just one part of the action that the Government are taking to secure our vision of a sustainable and resilient water sector. It provides a framework for greater competition with the aim of driving more efficiency and innovation. Its measures will ensure a resilient future in which water is available to all at an affordable price, but not at the expense of the environment. It will ensure that there is choice and flexibility for customers and that bills are kept affordable, that there is more innovation in the water industry, and that there are opportunities for new businesses so that the industry continues to attract crucial investment. The Bill will not only protect and improve the environment, but contribute to the growth of our economy.
The Bill will deal with the availability and affordability of flood insurance for households at high risk of flooding, and in the longer term it will ensure a smooth transition to a free market. The most significant change made to the Bill during its passage through the House was the addition of its flood insurance clauses in Committee. I am greatly encouraged by the support for our proposed approach of ensuring that households at high risk of flooding may access affordable flood insurance.
I visited the south-west flooding incident room last week, and I would like to thank all those who are still working hard on the ground to support people following such distressing events. Hon. Members know that our preferred approach on flood insurance is to create an industry-led flood reinsurance scheme. Flood Re will carefully target benefits towards low-income households, who are the people most in need of support during the managed transition to risk-reflective prices. In developing the scheme, we have been mindful of the costs of the levy, which will be spread across all those holding household policies. We believe that our proposals get the balance right, and it also right that we should take powers on a fall-back obligation to ensure that there is certainty for householders.
Just as we want to ensure affordable flood insurance, we also want to make sure that water bills continue to be affordable for everyone, and that has been a recurring theme of the debate on this Bill. We want those who are struggling to pay to get help. All water and sewerage companies have developed packages to help customers with affordability problems, and they include customer assistance funds, support tariffs, debt advice and water efficiency measures. Most water companies are taking action to put social tariffs in place in 2015. The most important thing we can do is make sure that everyone’s bills are kept affordable. Let us not forget that this is a sector subject to price-cap regulation, which means that Ofwat scrutinises and challenges the business plan of all water companies to secure a fair deal for customers. By taking account of lower financing costs, Ofwat estimates that the next price review could significantly reduce pressure on bills from 2015 by between £120 million to £750 million a year. This Bill will contribute to the affordability of bills for all. Measures will exert a downward pressure on bills by encouraging greater competition to keep bills as low as possible.
Greater competition will drive more efficiency and innovation in the water sector. All customers and the environment will benefit from an industry that is incentivised to find the most efficient ways to meet future demand. We are preparing to open the expanded retail market in 2017. Upstream reform will take place at a slower pace because of its increased complexity, which also means that we expect it to be introduced in parallel with longer-term abstraction reform.
In Committee and today, Members raised concerns about making legislation on upstream reform before the abstraction regime has been reformed. Let me assure Members again that we are confident that there are sufficient existing safeguards to prevent an unsustainable increase in abstraction in response to the implementation of upstream reform. We are tackling unsustainable abstraction now by varying and removing abstraction licences, but over the longer term we are committed to making the abstraction regime more flexible and resilient. A consultation on abstraction reform was launched on 17 December and we expect to legislate in the next Parliament.
Improving our approach to abstraction is critical, but it is only one part of our approach to ensuring the long-term resilience of our water resources. Today we amended the Bill to make it absolutely explicit that the new resilience duty is about ensuring the long-term resilience of both our water supply and sewerage services and the environment on which those services depend. I want to make it very clear that this is not about resilience of supply at the expense of our precious water resources. It is about ensuring that we all have enough water for the long term and that our environment does not suffer as a result.
I have no doubt that this Bill will continue to receive thorough scrutiny in another place. I look forward to following those discussions with interest. After that, I am looking forward to the implementation of the Bill. Experts are already working hard on the detailed work to develop new markets in water. The open water programme, which includes Government, regulators north and south of the border, water companies and customers, is developing the practical details of market implementation. It launched its market blueprint consultation last week.
We are also continuing to work with the Association of British Insurers, and I am grateful to it and the rest of the industry for their co-operation and hard work. I reiterate my thanks to all Members and all officials and staff who have aided in the preparation and passage of the Bill, and I commend it to the House.
Miss McIntosh
My hon. Friend will have an opportunity to read our proceedings tomorrow and see the debate that we have had on SUDS. For reasons that the Minister has not rehearsed in full, the SUDS regulations will not be on the statute book by April. I am sure that there are very good reasons for that, including those that my hon. Friend raised, but I do believe that SUDS will have a substantial role to play.
If the flood insurance system leaves out leasehold flats, that will be a matter of concern.
Dan Rogerson
I am grateful to my hon. Friend for giving way on this point, as I did not have the opportunity to deal with it on Report. I assure her that householders living in those sorts of properties would have access to the contents aspects of flood insurance if they were council tax payers.
Miss McIntosh
That will be very welcome news. As I said, I was alerted to this problem after the time for tabling amendments had expired.
What we have seen this week and saw in the weeks running up to Christmas shows the scale of the challenge that we face. I welcome the all-party approach that we have seen across the House today and in Committee, which I was not at liberty to participate in. That is a very good basis on which the Bill can go forward from this House, and I commend it to its future stages.
Question put and agreed to.
Bill accordingly read the Third time and passed.