Water Industry

Debate between Lord Benyon and Alec Shelbrooke

Tuesday 5th November 2013 Commons Chamber

[Richard Benyon]

Like the right hon. Gentleman, I am keen that everybody pay the required tax, but I caution people who criticise capital allowances. If our water company were not exercising its rights under capital allowances, either investment would fall or our bills would rise, or both. There is sometimes a lack of basic economic understanding: tax deferred is not tax not paid; it has to be paid. In one respect, however, I entirely agree, and I am deeply uncomfortable with some practices in aspects of corporate Britain. Work needs to be done—and in fairness to the Government much has been done—to close loopholes.

We need to make the argument that investment in the industry keeps bills down. The right hon. Member for Holborn and St Pancras seems affronted by Chinese companies and sovereign wealth funds and investors from all parts of the world investing in our regulated sector. I am not affronted. I welcome it. It is the sign of a vibrant industry and one that we need to encourage. We need more investment if we are to deal with some of the Victorian—or at least Edwardian—infrastructure we are trying to replace. Under a nationalised industry, directors of water boards would sit outside the Treasury saying, “Please can we have some more money for investment?” Down the ages, Chancellors have said, “Certainly. Just get in the queue behind the NHS, pensioners and the welfare state, and if there are any scraps left, we will give them to you.”

We have seen an historic level of investment— £116 billion—and we want to see more. We also want to ensure that we keep the bills as low as possible. Supplying all the water that goes into households and treating all the sewage that comes out costs households an average of £1 a day, although I accept that there are wide discrepancies in price. As a percentage of our household expenditure, that might be quite small compared with energy costs and other items, but it is still a significant amount, and those in the lowest income decile in this country are, broadly speaking, in water poverty. We need to address that. There are huge challenges facing the industry, and I hope the Water Bill and the ongoing activities in the sector will tackle them.

The challenges include continuing to ensure investment to deal with leakage and other concerns, such as those expressed by my hon. Friend the Member for Broxbourne (Mr Walker), and to ensure that new infrastructure is built. We must also address the challenges of affordability and the credibility of the industry among its customers. An important matter for our constituents is that the companies address the question of resilience. They must be able to keep the water flowing from the taps in a time of changing climate.

In my short tenure as Minister with responsibility for these matters, I saw the worst drought for decades. We are the sixth largest economy in the world, but if we had had a third dry winter, towns in some of the most economically vibrant parts of the country would have faced the very real prospect of standpipes. That is unacceptable in this day and age. Large national events could have been affected. Indeed, the Olympics presented quite a worry at the time. We clearly need more investment to ensure that water continues to flow in areas that are prone to drought.

During that time, I also saw floods. We must not forget that the water companies’ role in managing sewerage systems is vital in protecting our constituents’ homes from flooding. There is also a need for continuing investment in that regard.

[Alec Shelbrooke]

I shall expand a little on my hon. Friend’s comments on the role of water companies in dealing with flooding when I speak later. Would he care to comment on how the water companies are often ignored when they tell developers that there is a flood risk in the area in which they are building? Does he agree that the water companies are often left to clear up the resulting mess, which puts pressure on their budgets?

[Richard Benyon]

My hon. Friend makes a good point. The Government are right to deal with the connection to private sewers, where many leakages have occurred. They, and the water companies, are also taking action in other areas to ensure that they are playing their part. Sometimes just a small investment can make a big difference to the flood risk in an entire street, for example. It is vital to ensure that the water companies are sitting down and talking to the flood forums and the local flood authorities to make sure that these issues are being addressed, but perhaps that is a wider issue for another debate.

The Water Bill will play a key part in addressing the challenges. The question of building new infrastructure and new reservoirs was raised earlier. The key reform to ensure that that happens, to secure the long-term sustainability of the industry and long-term benefits for our constituents, will involve enabling new entrants to come into the industry and provide new competition. The competition that will exist in the non-household sector must, in time, be introduced in the household sector as well, and I hope that that will be the long-term ambition in a forward-thinking political agenda. That would result in the kind of benefits for households that businesses will soon be able to achieve by switching supplier. The Bill should be seen only as work in progress, however.

One of this Government’s achievements of which I am most proud is the water White Paper. It might sound rather prosaic to say that I am proud of a document, but it set out some important provisions. It demonstrated that the Government were getting a grip on water policy. In the past, water policy had been created by all kinds of different organisations and bodies, not least the water companies themselves. In the White Paper, we demonstrated our determination that the Government should own the policy and that the regulators should regulate. We stated that, in a regulated sector, if the water companies functioned within meaningful regulation by the three regulators, we would have an industry of which we could be proud. The water White Paper was welcomed by customers’ groups, the industry, investors, green NGOs and all parts of the House, although I do not know whether that makes it a unique document, as the natural environment White Paper achieved much of the same.