Water Bill

Lord Borwick Excerpts

Monday 27th January 2014 Lords Chamber

[Lord Borwick (Con)]

My Lords, first, I welcome this Bill as a much needed change to the legislation. I thank South West Water, which invited me to a water works and sewage works in Exeter to brief me on the industry and show me how it works in practice. I little thought that on entering your Lordships’ House my first visit to a company would be to a sewage works.

There are several challenges facing the supply and regulation of water in the UK, and the Bill sets out eminently reasonable reforms to ensure a long-term plan for improving our infrastructure and for providing better value for customers. The best way to improve the efficiency of suppliers and to drive down costs for customers is of course to allow more competition. Of course, the real task for any new competitor is to understand the legislation, the rules and regulations. The length of the Bill hinders that somewhat. Perhaps we are, oddly, overregulating to allow more competition.

It is good that the Bill seeks to allow new entrants into the market with more upstream competition and more competition for business customers. However, I wonder if this extension of upstream competition is slightly out of sync with reform for abstraction licences. The Government are concerned that the water supply is limited and are rightly looking at reforming these licences, the system for which was set up in the 1960s. Reforms will make abstraction more sustainable, but this probably is not happening for another two years or so; indeed, a consultation was launched only last month. Even with a more competitive market and more upstream competition, we may not have the surge in new entrants that we want until they have more certainty on the future of abstraction licences. It would be disappointing if good reforms were hindered in the short term because they are not aligned with other important steps being taken. However, I am sure that hindered reforms are better than no reforms.

Although it is not specifically covered in the Bill, I will talk briefly about the issue of identifying tenants, which surely must be an area of future consideration. At present, there is a premium of around £11 per household on all water bills because of bad debts. Water companies do not know who the occupiers are, as they are often short-term renters. Sometimes a property will have a high turnover of tenants, too, making the problem worse. Enabling legislation to make landlords identify the tenants who are liable for unpaid bills does exist but has not been implemented. This may seem like more bureaucracy for landlords, but it would arguably add no more burden than the checks they already have to make to make certain that they get paid the rent, and information they already give—for instance, to the immigration authorities. Ultimately, everybody pays for the failure to successfully recover unpaid debts.

There are two causes of bad debt for water companies: those who cannot pay and those who will not pay. For those who cannot pay, we already have mechanisms in place. The social tariff exists, in most water companies, for customers on an income below £15,800. That tariff is usually applied to those in arrears, if they can demonstrate that they cannot pay. For those who will not pay, marking their credit rating will at least reduce their ability to take credit in the future, to the benefit of future lenders.

Perhaps we also ought to look at reduced flow measures. Essentially, those who will not pay their water debts would receive a water supply only sufficient to enable them to drink. However, the reduced flow would make it inconvenient to use the supply in other ways, such as for baths. Such measures were made illegal in the Water Industry Act 1999. However, they are applied in certain Australian states, so measures like this ought to be considered. After all, I am sure that we would like to see a reduction in the bills of ordinary and honest families. This could be a way to achieve that.

It is good to see the Government addressing the affordability of flood insurance for those in high-risk areas. However, I have one small point of concern with the flood reinsurance scheme. While flood reinsurance seems to be backed by industry, perhaps we need to think more fundamentally about where many areas of housing are located. We would all argue that it is simply not a good idea to have lots of housing in an area of high risk and frequent flooding.

As the noble Lord, Lord Oxburgh, referred to shot foxes: the Bill has simple aims, and indeed, it was summarised in only four pages. However, it is 230 pages of dense text, including 81 clauses in four parts, and has no fewer than 12 schedules. Is it possible that the drafting team for the roughly 700-page Finance Bill, having taken a rest after passing their Bill through the other place, leapt to what passes for immediate action to draft this particular legislation? Battalions of people have been interpreting the Finance Bill for a living, but they are threatened by the welcome creation of the Office of Tax Simplification. I hope that they do not believe that this is an employment scheme to ensure that they will be able to find their metier in the world of sewage. My only plea is that readability should be higher up the list of priorities.

However, I must say that it is a rare thing indeed for a Bill to have so much support from the industry concerned. That is not to say this Bill is a gift to the industry, to the customer’s detriment. It rather suggests that quite sensible and thorough reforms are contained in the Bill. Credit must go to the Government—and to the Minister—for ensuring that customers will be offered more choice and that the long-term resilience of water and sewage supplies will be more secure.