Water Industry

Debate between Lord Benyon and Gareth Thomas

Tuesday 22nd January 2019 Westminster Hall

[Richard Benyon (Newbury) (Con)]

If hon. Members check my entry in the Register of Members’ Financial Interests, they will see that I chair an organisation called the UK Water Partnership. As the Leader of the Opposition claimed that I was some sort of stooge for the water companies, I put on the record that the UK Water Partnership is a public-private partnership, and that I was asked to chair it by the Department for Environment, Food and Rural Affairs. It brings together industry, policy makers and the research community to try to provide the key to unlocking a $500 billion global marketplace, as well as tackling water security issues through a strategic approach to research innovation and global clients. It effectively works right across the water sector, helping British companies to do better in a global marketplace. I very much do not speak for water companies.

As the water Minister who introduced more competition, changed Ofwat’s prioritisation of environmental protection, introduced the catchment approach to upstream water management and oversaw the Thames Tideway tunnel in its initial phase, I have a fair degree of insight into how private water companies work and what they deliver for customers.

I appreciate the hon. Member for Harrow West (Gareth Thomas) bringing this matter to the House. I suppose it all depends on which end of the telescope we look down. It is easy to pray in aid companies and organisations that fail, and so give a malign picture of the whole operation of our water sector. I will try to give a more balanced view, but I totally accept some of the points made, as there are good players and bad players in every sector.

As in any field that involves a number of organisations, we will of course come across ones that are good and others that are bad, but I am absolutely certain that we have benefited from privatisation. It is wrong to turn the clock back and pretend that there was some halcyon era of cheap water, exemplary customer service, massive investment and great environmental activity by companies in the days when they were publicly owned. To those who say, “Ah, but we would do it better this time,” I say that that is the Venezuela defence. Socialists say that Venezuela has not done socialism right and that they would do it differently here, that nationalisation would be different from in the past. Those years of bad service, under-investment and environmental degradation must not happen again.

[Gareth Thomas]

I am enjoying the trip to Venezuela that the right hon. Gentleman is taking us on. May I draw him back to my remarks about the mutual model of democratic public ownership, which would see the water companies remaining in the private sector, albeit run by their customers and employees, a bit like at John Lewis and Nationwide?

[Richard Benyon]

I can come on to talk about suggestions that I think have some virtue, particularly employee share ownership schemes. As with everything, there is no perfect right or absolute wrong; there is a massive area of grey, and I will explore some of the nuances, on which I think we can perhaps find some agreement.

On the model of nationalisation I have heard certain individuals speak about at Momentum rallies, I think about the head of a nationalised utility company going to see the Chancellor to plead for more infrastructure investment funds, only to be told, “Get in the queue behind the NHS, welfare, policing and schools”—the long list of public spending priorities that come before something that is now funded privately and by institutional investors. Let us consider some facts. Since privatisation, water companies in England and Wales have spent about £150 billion on improvements to the water service. That is infrastructure that had been absolutely ignored by public expenditure before it was put into the private sector. The companies now spend about £8 billion a year continuing with those improvements.

When I was water Minister, I met institutional investors and saw that the regulated utility sector is an extremely popular place for people to invest, including for pension funds—the people who pay the pensions of people in the public sector. I welcome the fact that sovereign wealth funds and overseas investors want to invest in the United Kingdom. They do so because it is a stable and relatively low-yielding but relatively secure investment.

--- Later in debate ---

[Richard Benyon]

There has absolutely been bad practice. I have had my concerns about Thames Water in the past, but today the company has capped its dividend payments, is investing more in resilience and is doing a whole new range of different activities, and my concern is that we risk cutting off an enormous amount of infrastructure investment if we do not get this right. I think there is a way forward, and I will touch on it in a moment.

Compared with 30 years ago, customers are now five times less likely to suffer from supply interruptions, eight times less likely to suffer from sewer flooding and 100 times less likely to have low water pressure. The hon. Member for Harrow West talked about Welsh Water; he is right that people sometimes suggest that it is a mutualised organisation, when it is a private company. Welsh Water loses 121 litres per property in leakage, which is more than nearly every other water company. Its average combined water and sewage bill is £439, which is 8% higher than the average English and Welsh bill, at £405. It is higher than the bill in six English companies, and that is in a country where there is no shortage of water. I come from the Thames Water region and we are short of water there, but in Wales they are not so I cannot understand why the bills are so high. In Welsh Water, the average number of minutes lost due to supply interruptions is 43 minutes, which is about 400% higher than in most other companies, where fewer than 10 minutes are lost.

The picture is not universally wonderful, and there occasionally needs to be a bit of balance in the subject. Water companies have reduced leakage by a third since the 1990s. We are about to see an incredible increase in innovative methods of detecting leakage, and it is right that in the current price review round there is an enormous driver on those companies to crack down on it further.

On the environment, standards have dramatically risen, with the welcome return of wildlife to rivers that had been biologically dead since the industrial revolution. Otters rely on healthy rivers and were thought to be on the verge of being wiped out 30 years ago, yet they are now seen in every county in England.

The average domestic water bill is just over £1 a day—that is £1 a day to get all the water we need into the household, and all the sewage and waste water out. Although bills went up immediately after privatisation to help deal with decades of under-investment when the industry was owned and run by the Government, bills have stayed pretty much the same in real terms since 1994 after inflation, and are set to fall in real terms over the next few years. By 2025, bills will have fallen in real terms for a decade. The industry’s independent regulator Ofwat—which has just come in for some stick—has calculated that bills are £120 lower than they would have been if the combination of privatisation and tough independent regulation had not happened. Bills would have been £120 more per household if the industry had remained in public ownership.

On the subject of customer satisfaction, the hon. Member for Harrow West has said that people are terribly dissatisfied with their water companies. I went on the internet last night to look at what Ofwat, the Consumer Council for Water and individual water companies are saying, and customer satisfaction levels for water and sewerage services are around 90%. As politicians, would we not love to have a bit of that, particularly at the moment?

[Gareth Thomas]

I wonder whether the right hon. Gentleman would comment on two things. The first is the National Audit Office’s calculations, which suggest that there has been a 43% increase in real terms in water bills since privatisation, and the second is the significant difference in water prices between publicly owned Scottish Water and the privatised water companies in England, which I mentioned.

[Richard Benyon]

I do not know the circumstances in Scotland, so I can only speculate, but that is another country that is not short of water, as many parts of this country are. I just think that we need to look at what the customers are saying, and my impression is that customers are not shrinking violets. When I came into this House in 2005, my inbox was overflowing with complaints about Thames Water’s customer service, which made me realise that water is an absolute necessity of life. It is the first thing that people will complain about; it is something that we perhaps rely on too much, and use too much of, in the area of the country in which I live. However, the idea that customers are somehow not involved in and concerned with raising these issues is wrong. When they are asked about them, they give quite interesting responses.