Water Bill

Lord Benyon Excerpts

Monday 6th January 2014 Commons Chamber

The performance of the companies has not really matched the rise in payments. I looked at, for example, the issue of leakages. A great deal has been said about the investment in the infrastructure of the water industry since privatisation. I represent a constituency that is served by Thames Water, which continues to lose up to a third of its water in leakages every year. The right hon. Member for Bermondsey and Old Southwark (Simon Hughes) wrote an article in the Evening Standard, which excoriated Thames Water for its failure to invest in tackling that particular problem. Not only do the companies fail to tackle the leakages, but they are some of the worst polluters of our rivers. I asked the House of Commons Library to provide some recent information on the companies. South West Water was fined £50,000 plus costs for sewage discharge into Salcombe bay in November 2013. It was fined a further £50,000 for sewage discharge into the Tamar estuary. Thames Water lost a final appeal against pollution fines in 2011, and the estimated final cost of those fines was £400,000.

[Richard Benyon (Newbury) (Con)]

The hon. Gentleman has been a consistent if sometimes lonely voice on this issue for a great many years. It is not for me or for anybody to defend individual water companies, but does he not concede that companies such as South West Water have spent an enormous amount of money cleaning up our beaches and rivers? Has he measured the trajectory of investment that was happening before privatisation and compared it with the £100 billion plus that has been spent since privatisation on improving our water sector and making it more environmentally-friendly and on keeping costs down for customers?

[John McDonnell]

I have heard the argument about infrastructure investment doubling since privatisation, but what is significant—

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[Richard Benyon]

I promise not to intervene again, but I cannot resist doing so now. Does the hon. Gentleman’s research go back prior to the privatisation of the water sector? In those years, were there any cases of pollution, of leakage or of poor infrastructure? The Minister will know that there were, because there were some appalling cases, one of which was in his constituency, and that the £100 billion we managed to gear into this sector has dramatically improved things. I entirely agree with the hon. Gentleman that there is much more work to be done, and we cannot have a system where the water industry sits outside—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. Interventions are supposed to be brief. If the hon. Gentleman wants to make a defence of the water industry, he can stand up to make a speech—he may not do so in an intervention.

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[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.

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[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.

[Richard Benyon]

Average figures are exactly that—average. There are, of course, water companies that underperform and their debt is much higher than average, but the corollary is that other water companies perform considerably better. Does the hon. Gentleman not think that there is much work to be done to learn best practice from water companies such as Yorkshire Water, which serves the constituency of the Chair of the Select Committee, my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) and is outperforming the others extremely well? We should learn from such companies about bad debt.

[Thomas Docherty]

I know that you are a fan of all things Yorkshire, Mr Deputy Speaker, and I will come on to Yorkshire Water in a moment, if the former Minister will bear with me.

As the hon. Lady said, among those who do not pay there are those who can pay. That is unfair on decent customers who meet their obligations and we believe the time has come for more robust action to be taken. Some 80% of those who do not pay are in rented accommodation. One of the challenges facing water companies is tracking down those who refuse to pay because they move homes far more often than the average person. The only way to track them down effectively is to require landlords to provide water companies with a list of tenants. Individuals moving property would not then disappear from the system and evade paying their debts.

The measure would be a simple step and it would not require a disproportionate amount of new bureaucracy to implement. It is estimated that approximately half of total bad debt falls into the category of “can pay, won’t pay”. The Select Committee, of which the Minister was previously a member, has unanimously backed the measure throughout this Parliament, so why the opposition from the Government?

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I ask the Minister in a positive spirit whether he has thought seriously about accepting the new clause. If there are good reasons for refusing to do so, I would accept them, but it seems to me to be a relatively simple measure that could make a significant difference.

[Richard Benyon]

I rise to speak briefly to new clause 5, but I also want to touch on the comments made by my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) about Flood Re. I was intrinsically involved in the tortuous and detailed negotiations with the industry to try to come up with something from zero when the coalition Government came into office. We had urgent and overdue discussions about what would replace the statement of principles. All hon. Members would agree that it is absolutely right that this needs to be scrutinised by the House, with ongoing scrutiny of how it works. I hope that the Minister will agree that flexibility should be built into it to enable it to be changed as circumstances change in years ahead.

However, on behalf of my constituents, who suffered some of the worst flooding in the south of England in 2007 and have continued to face flooding in certain areas since, I beg the House not to unpick the detailed negotiations that have resulted in the Flood Re proposal before the House. For example, if we started to introduce a wide range of businesses into the scheme, that would completely change the complex mathematical—probably algorithmic—calculations that will make it viable. I want as many properties to be included as possible, but if we start to say that we want it to include band H houses, different types of businesses, and houses built after a certain date, hon. Members have to understand that that would come at a cost. The cost might be that the industry walks away and that we have nothing, with constituents who live in areas at risk of flooding facing the really terrifying prospect, when we have the kind of weather we are currently experiencing, of not being able to get insurance. The affordability factor that we have managed to build in would be gone, so I just urge the House to have a little caution when—rightly—scrutinising this Bill, which I really believe is right and should become law as quickly as possible.

I want to speak about new clause 5, but I should have started by reminding hon. Members about my entry in the Register of Members’ Financial Interests. I have been accused of obsessing about over-abstraction, and I have been obsessed about it since long before I entered the House. More than 20 years ago, I set up an environmental body relating to a small river in my constituency, the River Pang, which is a chalk stream. It was one of the National River Authority’s ALF—alleviation of low flow—schemes. We managed to stop over-abstraction by a water company at the top of the aquifer and to restore the river. It is currently in desperate need of further restoration, as are others in my area, particularly the River Kennet. It seems strange to talk about over-abstraction when many of our rivers are overflowing at this time, but it is nevertheless a very serious issue. The River Kennet is a site of special scientific interest, and has overlaying European and national designations. It is an example of a river for which we have to find a better solution.

When I was in the Minister’s role, I would dearly have loved to bring meaningful abstraction reform before Parliament, but it would have been wrong to do so. As has already been said, we have been dealing with a regulatory system that dates back to the 1960s, when people did not mention the words “climate change” and we did not have the levels of population and demand that we now face, particularly in the south and east of England. When the consultation and all the work being done by the Department and the Environment Agency is over, I know that we will have about 30,000 abstractions that affect the livelihoods of our constituents and the ability of their businesses to perform and that have a huge impact on our environment. I hope that the House agrees that we must get the system right, and that we legislate in haste and repent—in opposition—at leisure. I hope that we get this right, and that the reassurance the Minister will be able to give us will set my mind, and those of other hon. Members, at rest.

I have said that the problem is complex. Organisations such as the WWF have been a fantastic help to the Government and hon. Members in our thinking about how we should deal with over-abstraction. I regret that the abstraction incentive mechanism originally hinted at in the water White Paper has been diminished in relation to its ability to address abstraction where it will cause real problems to the environment. I hope that it comes forward in the future as a very useful tool that values water differently where it is scarce and where it is plentiful.

There are technical measures in the Bill that will not be talked about in the Dog and Duck, but that are groundbreaking—perhaps game changing would be a better description. The change from using the environmental improvement unit charge method of assessing over-abstraction to putting it in the five yearly price review is a major one that will make a big difference to how we deal with the environmental damage that is caused by over-abstraction.

I looked closely at new clause 5, which was tabled by my hon. Friend the Member for Thirsk and Malton and other Members. I wondered whether it might be an elegant way forward. However, I think that it would face problems. There would be problems in getting the legislation through Parliament. It undoubtedly uses Henry VIII clauses and would give a dramatic power to the Committee Corridor, as opposed to the whole House. That would concern many Members of this House and would certainly concern Members in another place, where they do not like Henry VIII clauses. I hope that the Minister will address that in his remarks.

I then looked at how such secondary legislation would implement the abstraction reforms that we want to see and that will result from the current consultation and the implementation of a new scheme. If that could all be dealt with in the obscurity of the Committee Corridor to a level that satisfied my concerns and the concerns of the many organisations that are worried about over-abstraction now and in the future, that would be fine. However, the use of secondary legislation is a limiting factor. I regret that in my time as a Minister, I did not get my head around what an abstraction Bill in the next Parliament would look like. I suspect that it will be a relatively complicated document. That legislation would be diminished if it was dealt with as secondary legislation, as under new clause 5.

I hope that the Minister will give two assurances. First, I hope that he will address the concerns that were put eloquently by the Chair of the Select Committee, my hon. Friend the Member for Thirsk and Malton, and my concerns about whether such legislation would deliver what we want it to deliver. The second assurance is perhaps an impossible one for him to give, but I will ask him to give it anyway. I hope that he will give an assurance that the Government are as determined as they were when they put together the water White Paper—a document that was roundly welcomed by Members in all parts of the House, the industry, NGOs and every stakeholder I can think of—that abstraction reform will be followed up by his party and mine, and hopefully by other parties, and that it will race through the House in the early years of the next Parliament so that we can see meaningful abstraction reform that addresses the problems that blight so many rivers. This is not just an environmental problem; more fundamentally to many of our constituents, it is an economic one. Not only do we rely on rivers and aquifers for aesthetic reasons and leisure activities; they are fundamental to our economy. That is why it is so important that we get abstraction reform right. I hope that the Minister will give us those assurances this evening.

[Steve McCabe]

I will be extremely brief and confine my remarks to Flood Re. With all due respect to the hon. Member for Newbury (Richard Benyon), if this is the best that three and a half years of intense negotiations can produce, I am not sure that congratulations are in order. As I understand it, the scheme will cover only a fraction of the 6 million homes that are deemed to be at flood risk.

I want to ask the Minister three questions. First, if it is true that there is a 60% chance that the scheme will fall into deficit, and if, as Professor Diacon, who was asked to review it, said, it relies on luck in the first place, what are the contingency plans if the scheme falls apart? Secondly, what will be the trigger for the Government to intervene on the insurance companies if insurance premiums for everyone else, who will not be covered by the scheme, continue to rise to such a point that they cannot afford them?