Water Bill
Debate between Baroness Parminter and Lord Whitty(10 years, 8 months ago)
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Lord Whitty
My Lords, in moving Amendment 41 I will also comment on the government amendments in this group. I am pleased to see that the Government have at last recognised the importance of this issue and brought forward some amendments of their own. I will listen carefully to what the Minister says, but my first take on them is that, although they are very welcome, they are unclear in certain respects and do not yet go far enough.
This issue is one where economic and environmental regulation overlap. One of the central provisions of the Bill will allow and indeed encourage the eventual development of competitive markets, including in upstream water bulk supplies. That will not happen instantaneously—the Government have indicated that it will probably not happen until after 2020—but the legislation which will govern it happening is already the legal basis for that extension of competition into upstream areas. I am not opposed in principle to that, but there is a very basic problem. All competition, at least in the early stages, requires a surfeit of supply. However, difficult though it has been to believe over the past few weeks, there is a serious shortage of upstream water, in particular at key points in the summer. The level of water abstractions in the majority of our rivers in England—it rains rather more in Wales so I will confine this to England—is such that they have been overabstracted and at times are running dangerously low. This is the result in large part of overabstraction in the upstream areas and a shortage of water in the summer months. The reform of the abstraction regime has been talked about for a long time. Some limitation of abstraction rights is an essential prerequisite to introducing multiple suppliers with competition upstream.
Past legislation has given some powers to the Environment Agency and to the Welsh authorities in this respect, but most of the abstraction rights were embedded in the 1960s—so they are already 50 years old—at a point when there was much less concern about there being a limited supply of water. When the EA is carrying out its functions and rationalising, restricting and, in some cases, possibly taking away abstraction rights, that legislation requires compensation to be paid. That is paid out of the Environment Agency’s grant in aid and, in effect, out of Defra’s budget, so it has been very careful in using its powers. This Bill, rightly, makes one major step forward in removing from the water companies—which are the biggest, although not the only, abstracters—the right to such compensation. Although we note that the companies can, subject to Ofwat approval, recoup any loss from attenuation of abstraction rights by charging the consumer, this is a very welcome change as it means that the Environment Agency can be more aggressive in pursuing the restriction of abstraction rights in general, including those of water companies.
A further distortion and danger is that in many of the catchment areas, current abstraction rights are at a much higher level than the actual level of abstraction. Indeed, on average, 40% of the theoretical abstraction levels are actually drawn in most years. However, even with people taking up under half of their abstraction rights, several of our catchment areas are under severe pressure. If we have new entrants into the upstream area, some of that unused abstraction will undoubtedly, one way or another, be transferred to those new entrants. The logic is that we need a reformed abstraction regime, putting a cap on abstractions and allowing the restriction of or attaching conditions of time or place to the abstractions that are relevant to individual catchment areas. We need to do that before we introduce upstream competition.
It is clear from the amendments the Government have tabled that they recognise that. Indeed, the earlier Defra White Paper recognised that. Yet the Bill does not provide for any future legislation on abstraction reform as it does for upstream competition. The consequence of that is that if the Bill stays as it stands, even if the government amendments are adopted, we will be able to move to competition upstream, which would almost certainly have the consequence of greater use of dormant and underused abstraction rights and therefore more pressure on our catchments. It is true that in the very long run effective competition will lead to greater efficiency upstream, but the immediate effect of introducing competition would be more drawing-down and more abstractions, and there is no adequate limit on the totality of those in the abstraction regime as it stands.
Of course, Defra is currently consulting on changes to the abstraction regime. It is quite a good consultative paper, I have to say, although it was issued well after the Bill entered the parliamentary process. What I am trying to guard against is the possibility that down the line abstraction reform has not happened and yet the number of people using water upstream for commercial purposes has increased. The government amendments give some greater powers to the Environment Agency and the NRBW to check on this, and they institute a five-year delay, but the provisions are fairly weak.
It is not enough to consult with the regulators without giving them effective legislative backing for intervening and for restricting or putting qualifications on abstraction rights. That is why we say that reform should be in place and enforced before we move to introduce upstream competition. The government amendments and the five-year gap do not mean that abstraction legislation will be in place. They call for a report to Parliament. I do not want to be too cynical in your Lordships’ House but we know that plenty of reports to Parliament never actually see their way through to explicit legislation or regulation.
The department clearly recognises the problem and has been prepared to move a bit with the amendments in this group, all of which I can support, but they are necessary but not sufficient. The Government could say to me today that they will strengthen their approach and include a requirement to have legislation in place before the upstream competition provisions are triggered. They could still bring that forward at Third Reading. Indeed, that is probably the best way of proceeding. I hope the Minister will say that but in the mean time this is such a serious issue that I have to ask your Lordships to seriously consider my amendment. I beg to move.
Baroness Parminter
My Lords, along with a number of colleagues around the House, I raised serious concerns in Committee about the potential for environmental damage resulting from the upstream competition proposals being agreed in advance of reforming the water abstraction regime. I will not repeat those this afternoon. However, I am very pleased to say that the Government have clearly listened to our concerns and are proposing a number of significant amendments to address them.
First, the Government propose to report in 2019 on progress in reforming the water abstraction regime. The Government’s stated aim, following the publication of their consultation on abstraction reform last December —which the noble Lord, Lord Whitty, welcomed—is to legislate early in the next Parliament and implement abstraction reform in the early 2020s. The report will therefore give Parliament an opportunity to scrutinise the management of the interface between what should be by then the two pieces of legislation and their implementation. We can then seek to ensure that their implementation delivers the desired outcomes for both customers and the environment.
I am also grateful that specific concerns that I raised about sleeper licences and bulk trading were heard. The Government have introduced amendments to require Ofwat to consult the Environment Agency or Natural Resources Wales before they issue the codes on bulk supply agreements and before allowing a water supply agreement between relevant parties and incumbent water companies. Equally, relevant parties will be required to consult before entering into bulk supply agreements, and Ofwat will have to take into account any response from the Environment Agency or Natural Resources Wales. In that regard, I do not agree with the noble Lord on the Front Bench opposite that these government amendments are weak. I know from my conversations with Ofwat, which did not want the amendments to be tabled, that it most assuredly does not see them as weak.
In advance of the abstraction regime being reformed, the Environment Agency is already seeking to vary and remove unsustainable existing licences. It will be helped in that by the Government’s removal in this Bill of a statutory right to compensation for a water company resulting from such modifications or the revoking of a licence. The Government have therefore gone a long way towards addressing concerns that noble friends and colleagues expressed in Committee. These proposals satisfy my concern that legislating now for upstream reform in advance of reform of the water abstraction regime could lead to an unsustainable increase in abstraction. Therefore, I would not support any further amendments being tabled by the Opposition Front Bench.
Baroness Parminter
My Lords, I, too, thank the Government for listening so assiduously to the concerns that I and colleagues around the House raised in Committee. The Government have listened very carefully to those concerns, and I particularly welcome the new amendment which outlines that the resilience duty includes promoting the efficient use of water. This powerful commitment to water efficiency is testament to the tenacity of my noble friend Lord Redesdale. It also delivers the Liberal Democrat party policy agreed five years ago to reform Ofwat’s remit to put water resource efficiency at the heart of water company plans.
I also sincerely thank the Minister and the Bill team for accepting my genuinely strongly felt concerns about the necessity of the Government taking account of social and environmental matters when formulating the strategic guidance with which the regulator has to conform. Their amendment to Clause 24 reflects that and I am extremely grateful.
Lord Whitty
My Lords, I, too, welcome all the government amendments in this group. However, I do not understand why they have not gone the full hog towards what the noble Lord, Lord Redesdale, the noble Baroness, Lady Parminter, and I were arguing to begin with, which is that if you give Ofwat a responsibility or a primary duty for sustainable development, these things would naturally flow from that. These are criteria that are applied to other regulators. Everything that has been said in this debate and in the White Paper, including everything said just now by the noble Baroness, shows that you need to have a holistic approach to the management of water. This is not about just one dimension or aspect, but about the cost to consumers and to business, about providing infrastructure for the country, about water quality for consumers, about whole ecosystems and catchment areas, about maintaining water resources against climate change pressures, about resilience and about efficiency.
Resilience and efficiency have now been written into this, but not very much of the rest. I, too, admire the noble Lord, Lord Redesdale, for the pressure that he has brought to bear regarding water efficiency—he has won a notable victory here—but this still baffles me, and my amendment reiterates the need to provide a broader primary duty. The Government have obviously recognised some aspects of upgrading that responsibility because they have, rightly, taken up the earlier amendment tabled by the noble Baroness, Lady Parminter, that changed,
“may have regard to social and environmental matters”,
to “must” in respect of the Minister’s statement. They recognise sustainability in general and that it is an important part of how we manage in the context and framework within which Ofwat works.
As there are multiple regulators in this system, it has traditionally been assumed that Ofwat is primarily an economic regulator, the Environment Agency primarily an environmental regulator and the Drinking Water Inspectorate primarily a quality regulator. However, they actually overlap: the Environment Agency has serious economic responsibilities in its remit, very specifically about water resources, while Ofwat has a secondary sustainability duty and now, as a result of the amendments on resilience, broader aspects of its responsibilities relate to sustainability. I appreciate the references to resilience. When sustainability was being pushed in the Commons, the Government came up with the resilience criteria, and when it was being pushed in the Lords, they pleased the noble Lord, Lord Redesdale, with the water efficiency criteria.
Water Bill
Debate between Baroness Parminter and Lord Whitty(10 years, 9 months ago)
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Baroness Parminter (LD)
My Lords, I welcome the fact that the Water Bill places the Government’s strategic priorities and objectives on a clearer statutory footing and requires Ofwat to carry out its functions in accordance with it. New Section 2A(3) to be inserted by Clause 24 makes it clear that, “In formulating a statement” the Government “must have regard to” Ofwat’s duties, but only,
“may have regard to social and environmental matters”.
The government briefing note on sustainable development and the resilience duty that was issued last month confirms that the Government are strongly committed to sustainable development, balancing the equally important needs of society with those of economic growth and environmental protection. Before lunch we debated how this is articulated in the duties for Ofwat, but it is equally important that it is articulated clearly in the duties placed on future Governments. That is why I believe that the word “may” should be changed to “must”, so that Governments must take into account social and environmental matters when formulating future policy steers.
Statements of strategic priorities will replace the existing social and environmental guidance currently issued to Ofwat. In future, the Secretary of State will issue a single consolidated statement setting out social, environmental and economic policy priorities. My noble friend the Minister kindly confirmed in a letter to me on 17 January that the Government intend to continue to provide guidance on social and environmental matters within that single consolidated policy statement. Given that the Government have said that they will provide guidance on such matters, I feel that the use of the word “may” insufficiently reflects that commitment and the need for future Governments to take account of these matters when formulating the crucial strategic policy that will guide Ofwat. I beg to move.
Lord Whitty
My Lords, I support these amendments. New Section 2A(3) to be inserted by Clause 24 seems to differentiate between Ofwat’s duties regarding strategic priorities and social and environmental matters. We attach “must” to the former and “may” to the latter, but the Secretary of State ought to have regard to both. This is not the usual theological argument between “may” and “must”. Those of us who have been around the block on this legislation have come across that argument a number of times and have completely failed to understand parliamentary counsel’s advice. The provision clearly differentiates the status of the two duties. It does not differentiate and downgrade the social and environmental objectives for Ofwat, which some noble Lords might think would be sensible, as Ofwat is primarily an economic regulator. This is for the Secretary of State. It is the Secretary of State’s duty to balance all these issues out. He should therefore have regard to both duties and if it is “must” for the former it should be “must” for the latter. The provision does not say, “give priority to”; nor does it say, “If you have regard to these duties, you do not necessarily need to carry out exactly what they prescribe”. However, it is the duty of the Minister to balance all these things out. If the legislation gives less status to one than to the other, the outcome of the balancing seems to be predictive.
I do not think that is right. All parts of the policy need to be looked at. I think “must” is probably the appropriate modal verb but both duties need to be in the same form. They are both important and the Secretary of State, whoever that might be, needs to have regard to both. I therefore support the intention of the amendment.
Baroness Northover (LD)
My Lords, I thank my noble friend Lady Parminter for her amendment. She notes that Clause 24 on setting strategic priorities and objectives for Ofwat requires that the Secretary of State “must” have regard to Ofwat’s duties but “may” have regard to social and environmental matters. She would like to change “may” to “must”. I am also familiar with the debates to which the noble Lord, Lord Whitty refers, having delivered a “must” to the noble Lord, Lord Ramsbotham, yesterday at Third Reading of the Children and Families Bill.
The Government are keen to hear and understand my noble friend’s concerns. However, we think that the new power to set strategic priorities and objectives for Ofwat will ensure that social and environmental matters will continue to be addressed. The purpose of Clause 24 is to strengthen and clarify the existing guidance-giving powers. It enables the Secretary of State to issue a single consolidated statement setting out social, environmental and economic policy priorities in the round to help Ofwat to balance all the relevant considerations appropriately when making regulatory decisions.
The Government’s principles of economic regulation require that Ofwat regulates within a clear framework of policies and duties set by the Government. Under the new power, Ofwat must carry out its relevant functions in accordance with the statement. The new powers stipulate that, in issuing the guidance to Ofwat, the Secretary of State must have regard to all Ofwat’s duties. These are set out in Section 2 of the Water Industry Act 1991 and include protecting the interests of consumers, promoting economy and efficiency by companies in their work and, as we have already discussed, contributing to the achievement of sustainable development. These duties encompass the regulator’s essential purposes and it is right that, in giving a steer on policies and objectives, the Government should be bound by them. We note that the duties clearly embrace both social and environmental matters. In addition, the new powers under Clause 24 stipulate that when formulating a statement the Secretary of State may have regard to social and environmental matters. We hope that this serves to provide additional reassurance that such matters will continue to be addressed through the strategic priorities and objectives. As a further check, Clause 24 also requires that we consult widely on the statement of strategic priorities and objectives. Following this, the statement will be subject to parliamentary scrutiny. When we consulted on the existing strategic policy statement last year, the social and environmental content received a warm welcome from both environmental NGOs and consumer groups. I thank my noble friend Lady Parminter for her own tribute to this.
We have great sympathy with my noble friend’s objectives but we are not persuaded that such a change to the Bill is required. I therefore ask her to withdraw her amendment.
Baroness Parminter
I rise to support the intention of Amendment 120, if not the intention of Amendment 122, which is grouped with it. The issue of bad debt and the implications of what that means for the affordability of all our bills is an important one.
At Second Reading I asked the Minister why the Government, unlike the Welsh Government, are not implementing the bad debt provisions in the Flood and Water Management Act 2010, alluded to by the noble Lord, Lord Whitty. If they were to do so, it would help company debt recovery and bring down household bills. The response I received was that the Government were wedded to the idea of a voluntary scheme, with a database that the water companies were helping to fund, which would be brought in, probably via regulations, in the next month or so. I may be wrong, but I suspect that, with only an intervening 10 days between Second Reading and now, that is the answer that we will get again and that the Government will not wish to support these amendments.
Therefore I ask the Government, if they are determined to stick with the voluntary approach, whether they will set a reasonable review period to evaluate whether or not the voluntary scheme for landlords is effective. All the evidence to date, from the voluntary schemes of companies such as Northumbrian Water and others, shows that they do not work. It seems to be a reasonable request, if the Government are not prepared to move ahead with a mandatory scheme, for them to give an indication to the House of a reasonable review period, so that if the scheme is found to be ineffective—as most of your Lordships believe it will be—the regulations can be changed to make it compulsory.
Water Bill
Debate between Baroness Parminter and Lord Whitty(10 years, 9 months ago)
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Baroness Parminter (LD)
My Lords, I thank my noble friend Lord Redesdale for raising this issue yet again. He has done so on numerous occasions, as have many other noble Lords. It is an important debate. It is quite clear that the Government are committed to sustainable development, but they believe that they do not need to elevate the primary duty of sustainable development for the regulator in the water industry because it has a secondary duty. What they are prepared to give is the new primary duty for resilience. I think we are going to carry on arguing about whether resilience delivers the environmental and social benefits that those of us who are concerned about sustainable development believe it does. The Government say it does and I am sure that the Minister will reiterate today that he believes that resilience will deliver the sustainable benefits that we believe are crucial for the regulator to deliver. There are others who believe that the resilience duty does not.
I would like to pick up on what my noble friend Lord Redesdale has said. We should try and move the debate on from arguing about what “sustainable development” and “resilience” mean to what we actually want to achieve. It is significant that my noble friend Lord Redesdale raised the issue of water efficiency. That is, bluntly, what we want to achieve—a more resilient future for our water industry which protects the scarce resources that we have, to the benefit of the environment and communities. I urge the Minister to reflect again between now and Report on a duty to promote water efficiency. I think that is a constructive way forward. There will be a difference between those of us who believe resilience is sufficient and those of us who would have liked to see a primary duty on the regulator. I do not think the Government are going to move, but I do think that a duty to look at the issue of water efficiency is a helpful way forward.
Lord Whitty
My Lords, I have tabled an amendment in this group which attempts to deal in a slightly different way with exactly the same issue as the amendment of the noble Lord, Lord Redesdale. Which is the closest approximation to perfection I am not entirely sure, and whether either of them is perfectible in the eyes of the Government, I am not entirely sure.
We do have an issue. The noble Baroness, Lady Parminter, stated the current situation correctly. I say to the noble Lord, Lord Crickhowell, that, since 2003, Ofwat has had a sustainable development responsibility but it is a secondary objective. What these amendments attempt to do is to put it on a par with the economic objective for consumers. There is an economic, a social and an environmental dimension of sustainability which goes wider than that responsibility to consumers, now and in the future. The reason why relations and general coherence are better than the early days which the noble Lord, Lord Crickhowell, described, is that Ofwat has recognised that it is more than an economic regulator, and the Environment Agency has recognised that it has economic objectives as well as environmental objectives. Some of those have become a little controversial in recent days, in that, for example, flood defence priorities are determined largely in terms of economic effect. Both agencies now have all three—certainly environmental and economic objectives—which they routinely integrate within their operations. For that reason it is slightly odd that there is a differential between the objectives to consumers on the economic side and the objectives of sustainability on the other side, in terms of Ofwat’s requirements. The Government have made two attempts at convincing those of us who are interested in this subject through some very well written briefs. They were much more understandable than the Bill itself, or indeed the Explanatory Notes. By and large, I understood those briefs; they have nevertheless failed to convince me. They are arguing in terms that are now obsolete. They argue that the economic regulator is Ofwat and the environmental regulator is the EA. They both overlap and they need to operate a coherent approach to this in relation to sustainability.
The Government have moved significantly, as the noble Baroness, Lady Parminter, was hinting, in stretching the definition of “resilience”. Resilience is a jolly good, robust term. We all approve of resilience, and long-term resilience is clearly a responsibility of Ofwat and indeed the EA, in relation to water resources and their delivery. It is not quite the same as sustainability. It is part of sustainability but it is not the totality. The noble Baroness and the noble Lord, Lord Redesdale, have both pointed to the energy efficiency dimension, which, let us be fair, has been lacking until at least very recently in some of Ofwat’s priorities, when it allows expenditure during the price review. It is that which worries people—that this issue will fall out.
The Minister told me the other day that resilience includes social resilience; it presumably therefore includes issues of affordability and access as well as environmental and social issues. That may be so but the normal meaning of “resilience” is protection and upgrading of the assets that you have, and which need a long-term permanence to protect them. The Government are in danger of stretching the term rather beyond what the Oxford English Dictionary would term as resilience.
Energy Bill [HL]
Debate between Baroness Parminter and Lord Whitty
Baroness Parminter
On behalf of these Benches and in the absence of the noble Lord, Lord Teverson, who is serving the House in another place today, I add our thanks for the way the Minister and his team have handled this Bill and the co-operation we have had from officials. It has been much appreciated. In particular, on Amendment 1, the way that the Minister has listened to the comments from across this House on the issue of moving from “may” to “must” well reflects the concerns that many of us have had about the need to upgrade consumer protection, if we are to make a reality of the Green Deal and all the aspirations that the Government rightly have for delivering our targets on lowering carbon emissions. It is an extremely welcome step and is an indication that the Minister is listening on this issue, as indeed he has on many others.
I remain disappointed that I was unable—either through lack of eloquence or other means—to persuade the Minister that provision for a consumer ombudsman was needed in this legislation. However, I accept what he has said and what his officials have confirmed, that the legislation is enabling in such a way that, should the Secretary of State feel that is desirable, that option remains open. I believe that an ombudsman for the general public is going to be essential in this important area and that this will be something that will come forward, if not in another place, then certainly in the future.
Amendment 1 is a welcome indication that the Minister is listening and confirms that he has been paying attention to the many useful points of clarification that have come from Members who all support ensuring that this Green Deal works.
Lord Whitty
My Lords, until the noble Baroness made her last point, I was not going to intervene on this amendment, but I would like to associate myself with the words of both my noble friend Baroness Smith and the noble Baroness, Lady Parminter, regarding the way the Committee and Report stages of this Bill have been conducted. I appreciate that the Minister has come some considerable way towards meeting a number of concerns although on this particular one I think the noble Lord, Lord Best, is correct about the need for minimum standards and the noble Baroness, Lady Parminter, is right about the need for consumer protection.
It is important that the Government and the House recognise that, in supporting the provisions of this Bill on the Green Deal, we all recognise that there is still a substantial amount of work to be done in putting the deal together and thereby inspiring confidence in householders and landlords, on the one hand, and in the various different parts of the supply chain, on the other, which will need to act together to deliver the Green Deal.
At several points—I will return to this on a further amendment—during the discussion in Committee and on Report, the Minister said we may need to make a number of amendments in another place. I think the Government will find that there are some anxieties both in industry and on the part of consumers about how exactly the Green Deal is going to be sold and how it is going to be delivered. I suspect therefore the Government need to remain open to the possibility of amending the Bill in another place. I think everybody who was involved in the Committee wish the Green Deal good speed. However, we also know that there are some problems ahead and the Government would be wise to be flexible.