Water Bill

Lord Grantchester Excerpts

Monday 27th January 2014 Lords Chamber

[Lord Grantchester (Lab)]

My Lords, the Water Bill has very much to commend it, and has been commended around the House. I will start by declaring my interest, albeit a very minor one, as a dairy farmer. I am very aware of the price rises that have come through in recent years, and due to my experience in the dairy industry I am not at all surprised that a milk co-operative of farmers is leading the way in some of the advantages in Scotland. I thank all Members today for their contributions, the Minister for his introduction, and thank him and his officials for the helpful discussions he has conducted with all sides of the House. We have also received many briefings, which have been very helpful, especially the information from and discussions with the Water Industry Commission for Scotland. The noble Earl, Lord Selborne, underlined the importance of understanding the benefits achieved and the lessons learnt.

All sides of the House have come forward with a general welcome, but I am sure that the Minister is in for a very heavy and intense Committee stage, as all noble Lords expressed concerns when they got into the detail of what is involved in the Bill. My noble friend Lord Whitty outlined our approach, and his description of the industry shows that reform is required. The need for reform of the industry was echoed throughout the Chamber. There is a welcome choice for businesses and non-household customers by allowing them to switch suppliers. The noble Lord, Lord Cameron, called for more ambition, and competition without de-averaging was brought up around the House, especially by the noble Lord, Lord Moynihan, and other noble Lords.

Improved services and innovation were a key focus of many comments, and there was also a keen focus on customers, which my noble friend Lady Kennedy deemed to be missing. She mentioned the WaterSure scheme and the necessity of a change of culture. The ensuing downward pressure on prices was also welcomed around the House, especially by the noble Lord, Lord Sheikh, and the noble Baroness, Lady Parminter. That leads to improved infrastructure, which was a keen focus of the noble Baroness, Lady Neville-Rolfe, whose speech I would sum up as a cry of, “We can do better”. I look forward to many of the Minister’s replies on the infrastructure and resilience of the water provision. That was an important part of the speeches by the noble Baroness, Lady Parminter, the noble Lord, Lord Crickhowell, and the noble Earl, Lord Cathcart. Indeed, there was a general call—in particular from the noble Baroness, Lady Parminter, my noble friend Lady Kennedy, and the noble Lord, Lord Borwick—for a sharpening up of real action to be applied through the use of databases, metering, and the achieving of a more ambitious leadership, which the noble Lord, Lord Cameron, also mentioned.

The Minister will need to explain to the noble Lord, Lord Oxburgh, how the various regulatory authorities will complement each other. This landscape will be welcomed by all before Committee. It will be easier to trade water. The noble Earl, Lord Selborne, among others, showed his concern for innovation and management plans. That was also welcomed by others.

The Bill will make it easier for new entrants in a more open marketplace, by removing some of the existing regulatory barriers. This was welcomed by the noble Lord, Lord Borwick; but many who spoke were concerned by the lack of an exit ability in this Bill. Charities, hospitals, and multisite companies, will also benefit from dealing with one supplier, and from an invoice rationalisation. Extending the scope for an environmental permitting regime to include water abstraction and fish passage approvals was also a key emphasis for many noble Lords.

An important reason for this Bill is the introduction of the Flood Re scheme. One half of the question to the issue concerns flood defences, a matter addressed by the noble Baroness, Lady Humphreys. We support the Flood Re scheme and encourage measures to make insurance affordable, just as we hope the Government will ensure that water bills are affordable for all. Households in areas of risk from flooding can find it difficult to obtain affordable insurance. Various aspects of this were of keen interest to the noble Earl, Lord Lytton. That is why the previous Government began negotiations with the insurance industry to establish a levy-funded insurance pool for households at high risk of flooding, aimed at keeping premiums affordable.

The Government have failed to prioritise the issue, and the new scheme will not be introduced until 2015 at the earliest, with some reports suggesting that it may slip by another year. The Government’s flood reinsurance scheme does not appear to account for a change in a number of properties at high risk of flooding. The main risk is not static, with the Government’s own figures showing over the next 15 years alone, 1 million more people could be put at significant risk of floods because of climate change. The Government have rejected clear advice from the Committee on Climate Change that the flood reinsurance scheme fails to take into account the likely increase in numbers of at-risk properties as a consequence of climate change, and fails to incentivise flood resilient repairs to at-risk properties.

The setting of a target number of registered premises by the Secretary of State should be informed by the best available independent evidence, including taking into consideration these impacts on climate change, and the Government should be required to consider the advice of the Committee on Climate Change. Given that the Secretary of State in the other place does not believe in climate change, can the Minister guarantee that this will not affect the longevity and effectiveness of the Flood Re scheme?

The long-term aspects of the success of the scheme were a matter of great concern to the noble Lord, Lord Crickhowell, the noble Earl, Lord Cathcart, and others. It also does not seem as though the flood reinsurance policy includes any provisions to reduce flood risk, or to encourage the transition to risk-reflective pricing. Can the Minister tell the House what steps will be taken in this direction?

We would also encourage the Government to publish regular reports on the number of properties eligible for inclusion in the scheme, and the cost of including those properties. Can the Minister please provide the House with a full breakdown of the number of properties that the Government propose to exclude, including band H properties and those built after 1 January 2009? A large number of properties have been excluded from the scheme, no right of appeal has been established for households that are not included in it and there is currently no means of checking whether a property is included in it—for example, prior to purchase. This often hinges on whether the property was built before 2009. Furthermore, will he please tell the House whether households will have a right of appeal to be removed from the scheme? Many speakers today asked questions around exclusions from the scheme, and I am sure this issue will be well tested in Committee.

Purchasers should be able to check whether or not a property is covered by the Flood Re scheme prior to purchase. Surely the Government cannot intend families to be unaware of whether or not a property is covered by the scheme when they are putting in an offer for it. Noble Lords would appreciate reassurance on this front. It should not be sufficient to rely on proper and effective searches to unearth these details. The noble Lord, Lord Cameron, also voiced his concerns about that. Therefore, while I congratulate the Minister on making some progress on this matter, the condensed timetable in which it has been put before Parliament means it is especially important that he responds to these concerns, and others from around the House. Do the Government recognise the concern at the reduction in flood defence resources that they have imposed on the Environment Agency, and the greatly reduced funding by the Minister’s department following downgrading of this element from that department’s list of priorities?

It is deeply concerning that the Secretary of State for the Environment gives every impression of being highly sceptical of the scientific evidence of climate change, and so unwilling to take this seriously that he has apparently failed even to request a briefing on this issue from his own Chief Scientific Adviser. In fact, the Secretary of State has said that, if climate change is a reality, which he has not accepted, there could even be benefits for the UK.

The realities of flooding in Somerset, and its effects, were spoken about by the noble Baroness, Lady Bakewell. These are all very serious issues and we all share a deep concern for those affected. The costs of flooding to the UK’s economy are already considerable. The economic losses from the July 2007 floods were estimated to be £3.2 billion. Flooding on 20 July 2007 in Gloucestershire alone is estimated to have cost the country £50 million. Figures published by the Association of British Insurers show that the cost of flood damage since 2000 has increased 200% on the previous decade. At a time when severe flooding is becoming more frequent, thanks to climate change, the Government are cutting spending on flood defences, in spite of the evidence showing that for every £1 invested in flood defence schemes £8 is saved further down the line, as was clearly stated by the noble Lord, Lord Sheikh.

The Government have reduced investment in flood defences in real terms from £646 million in 2010 to £527 million this year. By 2015, the figure will be £546 million—still £100 million lower than the level they inherited. Furthermore, the Government have also admitted that the £148 million they propose to raise from external contributions has not been secured. The previous Labour Government prioritised flood defences and increased funding each year after the 2007 floods from £264 million in 2007-08 to £354 million in 2010-11 to protect homes and businesses.

The noble Lord, Lord Crickhowell, expressed concerns about flood plains. Will the Government make water undertakers statutory consultees on planning proposals for building on flood plains? On social tariffs, will the Minister please tell the House whether he will be backing Labour’s plan for a national affordability scheme? Does he agree that having only 25,000 homes on a social tariff is vastly insufficient? Labour would like to see the introduction of a national affordability scheme with a single eligibility criterion for assistance with bills, and which requires all companies to participate in and fund the scheme. Regulation of the existing regulatory price control regime by a tougher Ofwat would ensure that this did not lead to higher bills for other customers.

In Committee, we would like to examine Ofwat’s powers with a view to providing it with a greater range of criteria to trigger a reopening of the current five-year price reviews, thereby enabling Ofwat to require water companies to reduce prices for customers. Ofwat needs to become more of a powerful consumer champion that stands up to the water industry, rather than being just a regulatory body. It is important that there should be movement both ways. If a company is allowed to reopen due to changes, it must also be the case that, if a change is to that company’s advantage, consumers should be able to examine those changes through Ofwat. All water companies should be required to provide detailed information on their performance, ownership and financial tax structures—an issue raised by my noble friend Lord Hanworth.

I am sure that much on the future infrastructure and structure of the industry will be of great concern to the Competition and Markets Authority. We recognise the improvements that should come from changing the frequency of drought planning to a five-year cycle to coincide with other water planning cycles. Given the usual ability to improve Bills as they flow through their stages in your Lordships’ House, I am sure that all participants will ensure that this Bill will be much improved when it leaves.