Water Bill

Baroness Neville-Rolfe Excerpts

Monday 27th January 2014 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, my noble friend the Minister has persuasively outlined the case for this Bill and has been very helpful in providing advance information to all sides of the House, for which I thank him. I was especially struck today by the list of innovations that he and my noble friend Lord Moynihan outlined. These are just the sort of things that improve life for business and consumers in a quiet way.

This is a highly technical subject. We have a 230-page Bill to scrutinise and I know that many noble Lords are better versed in the intricacies than I am. However, I want to make three general points. I come to the subject as a businesswoman, including a directorship in a UK company, 2 Sisters Food Group, that uses water in its production, and as a farmer’s daughter. We had two large lakes on the farm where I was brought up, a constant menace to generations of adventurous children like ourselves. The Bill offers the prospect of making such lakes valuable assets in which to invest rather than simply a dangerous liability.

One of my main interests is improving UK competitiveness, so that we are not left behind in the global race. One key to competitiveness is good infrastructure and investment in things like water. Water is, of course, a central part of industrial production in a range of sectors, from beverages, such as whisky, to car manufacturing. I have chosen these examples because they are both important export industries too. Water is important in many businesses and, as others have said, is essential to life and to civilisation.

With our population expected to rise to 70 million by 2027, our water infrastructure will come under huge pressure, especially in the south and east. That brings me to my first point. Are we doing enough? Does the Minister think that this Bill will encourage the large-scale investment that we need? Many believe that in decades to come we will need major strategic and co-ordinated investments in the water sector; for example, by providing for large-scale movements from surplus to deficit areas. Are we doing enough in this Bill or, crucially, somewhere else to provide for this possibility?

If you have visited the Pont du Gard, Rome or Bath, you will know that the Romans had the right approach to the subject. Can we learn from experience overseas? I have talked to the Californians about the problems of raising revenue for water schemes for both consumers and agriculture in the Napa Valley. I have talked to the Spanish about the more successful catchment investments that they have made to support salad and other crops in southern Spain, which serve the UK market in winter. I recognise that the Bill is not seeking to do everything but it is important for your Lordships’ House to understand the wider strategic context.

Secondly, I am concerned about the quality of our regulatory regimes. Water is an important example and, as it is a natural monopoly without substitutes of the kind you find in energy or telecoms, the regulatory regime is even more important. I am very glad to see the increase in competition that will be encouraged and to hear today of the positive experience in Scotland. However, I have a concern that the new regime for competition with its new market operator, appeals to the Competition and Markets Authority, charging guidance and charging codes, and any new regulations made under the new powers, when fitted together with the existing Ofwat regime and the work done by the Environment Agency could be bureaucratic and therefore prone to error.

Having too many layers and agencies can risk regulatory arbitrage, confusion and excess bureaucracy. More expensive people will be hired and they may waste resources chasing each other and having endless meetings. Consumers, business, the water industry and Parliament will not be quite sure who to hold to account on what. Will the Minister let us know what steps are being taken to prevent overlap and confusion in this vital utility and perhaps comment on the scale of new staff and administrative costs that he expects to be incurred?

My third and final point relates to how we ensure the right balance between the all-important current consumer and investment for the long-term resilience of the system. Ofwat is to be given a new overarching duty, on which many speakers have touched today. Under this resilience objective, Ofwat will have to secure the long-term resilience of water supply and sewerage systems,

“as regards environmental pressures, population growth and changes in consumer behaviour”.

Following discussion in the other place Ofwat has also been asked to ensure that water and sewerage undertakers,

“manage water resources ‘in sustainable ways’ and reduce demand ‘for water so as to reduce pressure on water resources’”.

That all comes at a cost. No doubt the regulatory formula for the water companies, many of which are now unfortunately owned abroad, will be adjusted to take these duties into account. Let me share my concern. I am not sure whether to worry more that the incentives will be too low for proper investment in our water infrastructure or the opposite—that too much investment will go into resilience and sustainability at a guaranteed high rate of return. Certainly, as my noble friend Lord Crickhowell suggested, it will take time to see how the system pans out.

Major infrastructure always raises such intergenerational issues, as my noble friend Lady Parminter suggested, because the necessary investments are so long term. It is a real dilemma suitable for the forthcoming debate in your Lordships’ House. I support the Bill because it is taking this sector in the right direction. I look forward to my noble friend the Minister’s reply on the three points that I have raised and to participating in Committee.