Water Industry (Financial Assistance) Bill

Lord Grantchester Excerpts

Tuesday 27th March 2012 Lords Chamber

[Lord Grantchester]

My Lords, the business before your Lordships’ House tonight was flagged up as a Bill only last month, at the beginning of February. It is indicative of a poorly balanced legislative programme whereby the other place has completed its deliberations and is therefore largely inactive while your Lordships' House is kept busy night after night. Having this Bill designated a money Bill partially cures that imbalance. However, it is deeply unsatisfactory, and conducting a one-stage passage late at night in your Lordships’ House underlines the fact. It is regrettable that several noble Lords are unable to participate because of that.

This short, two-clause Bill belies the years of deliberation, reports, campaigns and research that have gone into the two areas that the Bill covers: South West Water and Thames tideway. Calling it a money Bill deprives your Lordships’ House the opportunity to scrutinise much of the background work and reduces parliamentary governance to a unicameral dimension. Avoiding the Bill being hybrid has resulted in it being unnecessarily wide ranging in its scope and the powers it grants to the Secretary of State. Set against the water White Paper, the national policy statement on waste water and the infrastructure planning changes, that is deeply unsatisfactory.

The Minister outlined the Bill and its purpose, although it cannot be stated in the Bill. But this is the wrong Bill. Your Lordships’ House cannot amend it. Rushing it out in the last weeks of the Session says something deeply troubling about the department and the coalition’s programme next Session. Has Defra missed the opportunity to put forward the right Bill, a new water Bill, in time to be included in legislation for next Session? The Minister has already said that he has secured a consolation prize of a draft Bill instead. How long does that put back the necessary measures that are badly needed?

Clause 1 is of benefit to South West Water householders and brings relief from the legacy of privatisation, as bills in the south-west have risen 43 per cent more than in other areas. Water bills are becoming a nationwide pressing anxiety, with rises set to be 5.7 per cent per household this year. As yet, there is no generally recognised definition of water poverty in the same way as applies to fuel poverty. Nevertheless, 11 per cent of all households spend more than 5 per cent of disposable income on water, with 23 per cent of households spending more than 3 per cent.

The Opposition support the Government in reducing the discrepancy in South West Water bills for consumers. Nevertheless, there are anxieties about the measure. With a cost of around £40 million per annum, South West Water will receive £50 per household. This is rather a blunt instrument. While happily confronting the universality of certain payments, such as universal child benefit, the coalition is introducing another such payment here. Has the Minister considered other options? He will know that for farmers and growers water use is a key factor of production. Has his department looked at whether visitors and holiday homes could contribute further or be denied the subsidy? With a new water Bill, the benefits of WaterSure, introduced by the previous Labour Administration, could be brought to a greater number of claimants for a more focused and targeted operation.

As the Bill is silent on how long the subsidy will be paid, can the Minister give the House more detail tonight? The Explanatory Notes quote the water White Paper, which states,

“until at least the end of the next spending review period”.

Indeed, the Minister stated that in his introduction. It would be helpful if he could confirm that date and say what his department has in mind after that period. We understand that it might be continued as part of Defra’s own budget. Can he say which part and for how long? In view of his department’s eagerness to introduce budget cuts, what other expenditure will need to be cut to fulfil this payment to the south-west? Will his department come forward with transparency through a statutory instrument so that Parliament can fulfil its role in scrutinising expenditure? There are grave concerns that the Bill is being used for election purposes.

Lastly, can the Minister inform the House whether his department has sought to see strings attached to the payment? South West Water is a company with a monopoly in the area. Many fund managers have water utilities in their portfolios because of the high dividend policy followed. Have the Government expressed any views regarding company bonuses or regarding any reduction in leakages or an abstraction review while this payment continues?

The opposition Benches support the Bill in relieving financial pressure on South West Water bills. However, we would like to see the introduction of social tariffs across the industry to help those on low incomes. We also call on the Minister to undertake reviews and to make reports to Parliament so that the situation can continue to be monitored. More importantly, we wish to see a sunset clause introduced, whereby the Government have to promote proactively any further payments and state where the payments will come from.

Clause 2 is intended to fund a vitally needed infrastructure project—the Thames tideway tunnel. London’s sewers carry both raw sewage and rain run-off. They were designed for a capacity of 4 million inhabitants but London now has in excess of 8 million inhabitants. Because rainwater is included, this means that there are 50 to 60 overflows every year straight into the Thames. Small amounts of rain—even 2 millimetres—can result in massive amounts of untreated sewage discharges. It is extremely unfortunate that past works included rainwater with the sewage. How to tackle the problems has been the subject of a decade of argument, proposals, options and reports. The cost has increased to £4.1 billion and the project could take until 2020 to complete.

I know that several noble Lords—most notably the noble Earl, Lord Selborne, who chaired a report on behalf of several local authorities—will speak further about the scheme details and their alternatives. I shall concentrate on some wider issues that need to be taken up. First, we need to understand in some depth the risks of infraction proceedings. It is deeply unsatisfactory that my noble friend Lord Berkeley cannot speak at this late hour, as he has specifically researched this position in Brussels. If the United Kingdom is at risk now, will this continue to be the position until works are complete? Will the Government seek some accommodation that proceedings will not be initiated, especially as construction may temporarily exacerbate the situation? While the Bill gives the go-ahead to finance the tunnel solution, it will still be subject to the planning process and no doubt be called in by the Secretary of State for Communities and Local Government. Can the Minister assure the House that while the decision-making process with DCLG is a legal one, the lead will continue to be taken by his department?

This is all the more interesting as the Explanatory Notes state:

“As the Bill is concerned solely with public expenditure, no Impact Assessment has been undertaken”.

That will be deeply worrying for many noble Lords as it means that there will be little parliamentary opportunity to monitor the progress of works, that environmental concerns are being properly addressed, and that innovation and technology advances will be promoted so that value-for-money outcomes can be achieved. Can the Minister say how effective scrutiny and governance of the scheme will be in the future? The scheme no doubt will be promoted by Thames Water in commercial circumstances.

The opposition Benches will support the scheme provided that it meets the EU directive and its standards. Does the Minister know that that can be the case? There are enough valid concerns and criticisms in much of the alternative options that an impact assessment of future complementary projects could be vital. There are the Deephams discharges and whether it is better to rebuild the plant on existing footprint or to rebuild on a new site. Can the Minister say whether that will be designated a nationally significant project as well?

Can the Minister also say whether measures complementary to large infrastructure projects such as SuDS—sustainable drainage systems—will also be given due weight so that the tunnel will be fit for purpose for generations to come? Rainwater and sewage should be separated on all new build. Climate change will necessitate many behavioural changes and much of England will be subject to water restrictions from 5 April this year. On this side of the House, we are worried about the lack of thought on how to reduce per capita water usage. In the UK, household water consumption has grown to around 150 litres or 35 gallons per person per day, which is double what many other western countries achieve. From these Benches, we call for more action, including the publishing of the so-called missing chapter of the water White Paper to ensure that water efficiency measures are taken more seriously.

We welcome the 4,200 new jobs and maybe a further 4,000 that will be created in the supply chain. We would wish to see the requirement to include apprenticeship programmes to level 5 and level 6 standard. At this late hour, I do not wish to detain the House long. The Bill gives the Minister wide powers. He must ensure that Thames Water can finance the project in the most cost-effective manner and report this to Parliament to reassure us that costs will not continue to increase. Can the Minister assure us that Ofwat has strengthened its capacity to focus on the tunnel? Lastly, can the Minister be confident that none of this expenditure will fall foul of state aid rules? Does he have confirmation from Brussels that the Thames tunnel will be fit for purpose?