Water Supply Disruption

Baroness Bakewell of Hardington Mandeville Excerpts

Tuesday 6th March 2018 Lords Chamber

[Baroness Jones of Whitchurch (Lab)]

My Lords, I thank the Minister for repeating the Statement and I pay tribute to the emergency services, who once again made us proud of their dedication and humanity when struggling in the worst of weather to provide healthcare and reach out to people cut off by the snow. I also thank many of the staff in the utilities—the engineers and the linesmen who worked in atrocious conditions to try to repair services, so that supplies of heating and water were retained. But the individual commitment of the staff cannot disguise the huge failings in the response of the water companies themselves in the recent bad weather.

I appreciate the update that the Minister has given today but as of yesterday, 5,000 homes were still without water in Kent and thousands of properties across Wales, parts of the Midlands and Scotland were waiting to have their supplies reconnected. In London, 12,000 households were still without water last night and relying on bottled water, but even supplies of bottled water were running out at some of the distribution points. This really is a very poor response. It is not as if the bad weather was a freak occurrence. The Met Office was warning of the predicted freeze weeks in advance. Yes, of course pipes are liable to freeze when the temperature drops but, equally, we should measure water companies’ success by the speed of their response and the interim help and support they provide to their customers.

I absolutely agree with Rachel Fletcher, Ofwat’s chief executive, who is quoted in the Financial Times today as saying:

“While the recent severe weather conditions have undoubtedly had an impact on pipes and infrastructure, water companies have been warned time and again that they need to be better at planning ahead to deal with these sorts of situations, including proactively communicating with customers when they anticipate issues”.


I really struggle to understand why the water companies are so poor at this. Anyone with any business involvement knows that risk assessments and the mitigating actions that follow are fundamental to the planning process, as is having in place a proper disaster recovery system. This should be ingrained in the systems of utilities because, for example, water companies are inevitably at risk of extremes of weather, whether flood, drought or snow. I hope when the Minister met Ofwat and Water UK today they were able to reassure her that supplies will have been reconnected to all affected homes by the end of the day and that, despite the review the Minister referred to, compensation will be provided to individuals and businesses affected by the loss of supply on this occasion.

There is a wider challenge here. It is not just about the aftermath of one week of bad weather. The performance of the water companies has been under criticism for some time. Six companies missed their leakage targets for 2016-17, with Thames Water’s performance data showing that 670 million litres are being lost to leakages every single day. This total works out at an average of 180 litres per day being lost for each property the company supplies. Despite these failings on leakages, water bills have increased by more than 40% since privatisation, with many consumers set to have another rise in a few weeks’ time. Meanwhile, rather than fix the problems the private water companies are paying out huge dividends to investors. For example, the owners of the top nine water companies paid out more than £18 billion in dividends in the 10 years to 2016, and their CEOs are being paid huge salaries and bonuses. Clearly, these companies have got their priorities wrong.

I therefore have to say that the Secretary of State was quite right to criticise the water companies in his speech last week, including their tendency to avoid paying tax and to hide their earnings offshore, but like many of his speeches it lacked a follow-up action plan. These problems have been known about for some time. I hope the Minister can also confirm that as part of the review, Ofwat will be given new powers to tackle excessive pay in this sector and to require a greater proportion of profits to be reinvested in service delivery and resilience. I hope he can also confirm that Ofwat will be instructed to use its existing powers more actively to ensure that water companies plan effectively for adverse weather events in future, as we all expect of them. Finally, can the Minister confirm that Ofwat will take a more active role in overseeing companies’ delivery of leakage repairs, intervening where necessary and increasing fines for missed deadlines so that real incentives are put in place to deliver the change that we should all expect? I look forward to his response.

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I thank the Minister for repeating the Statement and the noble Baroness, Lady Jones of Whitchurch, for her comments. I agree with everything she said. The freezing weather at the end of last week was not a surprise—it had been well trailed and advertised for some time. It is therefore extremely disappointing that some water companies did not appear to respond quickly to the demand on their services by identifying and correcting burst pipes and leaks. This has caused great distress and inconvenience to thousands of households. It is unacceptable that water bill payers have been left without running water while schools and businesses across the UK are being forced to close because of water shortages. While this is a period of extreme short-term pressure, the vast amount of water that leaks from companies’ pipes every day has not decreased for the past four years. Data from the water industry regulator Ofwat shows that more than 3 billion litres leaks every day. What are the Government going to do to ensure this problem is addressed in the long term?

While expressing disappointment at the response of the water companies, I pay tribute and express the thanks of these Benches to the engineers who have worked long hours, often through the night, to reconnect households to their water supplies and to mend burst pipes and leaks. Their efforts should be recognised.

There is a real gap in the market when it comes to providing capital for critical infrastructure. A housing investment bank is needed to provide long-term capital for major new developments, to guarantee proper infrastructure and services. Locally led housing delivery must be integrated into infrastructure delivery to ensure vital utilities such as water are available at all times.

A public awareness campaign is needed to help residents insulate pipes to prevent bursting in extreme weather conditions. Can the Minister give a commitment that such a campaign will receive priority before we suffer another freezing spell from Siberia?

[Lord Gardiner of Kimble]

My Lords, I entirely agree with the noble Baronesses about the courage and fortitude of the emergency services, often in very difficult circumstances, and I begin by thanking them. I was on the conference call with the chief executives of the water companies, Ofwat and Water UK, and from the update that I have received during the course of the day it is very clear that the priority is to restore the water supply, particularly for vulnerable people and for hospitals and other institutions in the care sector. I think we are all in agreement—which may be an inconvenience—that the water companies clearly need to do better. Some are better than others. It is very important that Ofwat conducts a review and looks at the issues of preparedness and lack of preparedness. We are expecting an interim report on that by the end of the month so that we are clear about this. I emphasise “interim”—obviously we want a thorough report but we want early consideration of those matters. There have undoubtedly been some failings, and I think some of the water companies have acknowledged that as well.

The noble Baroness, Lady Jones of Whitchurch, in particular asked for some reassurances. I have outlined the numbers of households that were without supply this morning and the intelligence that we got from the water companies at the 10.30 am meeting as to their plans for restoration of supply during the day. I will obviously get constant reports on that, as will my honourable friend.

I think there has been general reflection on this—indeed, my right honourable friend reflected on it in his speech last week at the Water UK City Conference. He called on the boards of water companies to address urgently pay, terms and conditions and so forth, to demonstrate value for money, to up their game and to lower bills. Ofwat will report to the Secretary of State on corporate behaviour by the beginning of April. If Ofwat needs further powers, it should include that in that report.

Ofwat is taking enforcement action. For instance, a large fine was imposed on Thames Water for missing the leakage target and it has set the lowest cost of capital ever for the 2019 price review. I should say that water bills have in fact fallen in real terms over the last five years by 5%, and since 1994 bills are 3% higher. Since privatisation, £140 billion has been invested in infrastructure, but we need to do more. Simply put, in a country like ours we need to invest more, and we are going to look to the water companies to do so.

I was quite shocked by some of the leakage figures and tried to imagine what they meant in terms of millions of litres per day; it is really extraordinary. Ofwat has set a challenging target of 15% by 2025, and the 25-year environment plan also set out that leakages should be minimised and go down year on year. We will ask Ofwat to consider the campaign on insulating pipes, which was mentioned by the noble Baroness, Lady Bakewell, as part of its review. That is something else that we need to work on.

The points that the noble Baroness has made have been absolutely fair. I thought it was very interesting to see different chief executives’ reports into the issues that they were facing. One of the things that we are continually assessing is the situation with the thaw. As we all know, the pipes burst on the thaw, and of course the rapid thaw has probably precipitated some considerable bursts in smaller pipes rather than in the mains. This has been one of the practical issues; there have been many small bursts as the thaw has been so rapid. I think we all look forward to hearing more about what Ofwat reports on preparedness, and on what better work needs to be done in preparing should we have a similar occurrence in future, as undoubtedly we will with the climate as it is.