Water Bill

Lord Grantchester Excerpts

Thursday 6th February 2014 Lords Chamber

Moved by

[Lord Grantchester]

118: After Clause 24, insert the following new Clause—
“Billing information: affordability
Any company providing water services to a residential household must include on its bills—(a) details of any tariffs provided by that company;(b) a recommendation of the lowest possible tariff for each residential household; and(c) information regarding eligibility criteria and how to make an application for assistance under Water Sure.”

[Lord Grantchester]

My Lords, Amendment 118 is a straightforward requirement on companies to meet what ought to be seen as a basic customer service in the household sector. The amendment would simply require a company to do three things: to give consumers information about tariffs, including any social tariffs; to fit the most appropriate tariff to a household using the information it holds on households; and to provide information where there is a broad social support scheme available—currently Water Sure—clearly setting out the eligibility criteria.

This is basic customer service. The information is useful to everyone but vital to those with affordability issues. Affordability is clearly a problem for many families. Ofwat estimates that 11% of households spend more than 5% of their income on water, which would amount to more than 2 million households in the UK struggling to pay their bills. As the Prime Minister has been heard to say, the Government have not done enough and must do better.

The Water Sure scheme mentioned in the amendment was set up to help in this respect. It applies to low-income, metered households with high water use. Examples include those in receipt of qualifying benefit or tax credit with three or more children under 18 or those who, due to medical conditions, have very high water usage. It takes the step of capping the amount that such a family would have to pay to the average for that operating area.

These households have to apply to be on the tariff. Unfortunately, take-up of this scheme is much lower than it might be. This means that many who may need help are paying more than they need to pay and perhaps find themselves in difficulty as a result. Only a third of households that could benefit are actually using the scheme. In many areas, only a few hundred homes are receiving Water Sure payments. This amendment would go a long way towards ensuring that the necessary help will be more explicitly available. A company will have to put the details of the Water Sure tariff on customers’ bills. That company would also need to provide information that would enable the bill payer to work out whether or not they are eligible and, if they are, clear instructions about how to apply.

This is a simple amendment that will be greatly beneficial to a large number of families struggling to cope with the cost of living crisis. I beg to move.

--- Later in debate ---

[Lord De Mauley]

My Lords, I thank the noble Lord, Lord Grantchester, for introducing Amendment 118, which, as he said, would insert a new clause into the Bill to place a legal requirement on water companies to include information on their bills about the Water Sure scheme. The scheme provides a mandatory safety net for low-income customers on a meter who, for reasons of ill health or because they have a large family, use larger than average amounts of water. It caps the bills of these households at the average for their company area.

The eligibility criteria for Water Sure are twofold: the household must be in receipt of a relevant low-income benefit and must have three or more dependent children living at home or someone with an illness that necessitates high water use. It is unfortunately a feature of all means-tested benefits of this sort that take-up, as the noble Lord mentioned, can fail to match eligibility. That is why promotion of the scheme is so important. I am pleased to be able to tell the noble Lord that all water companies already voluntarily provide information about Water Sure on their bills.

In addition, Amendment 118 would require all water companies to provide information about tariff structures and the lowest available tariff. This is not the energy sector—water companies do not have complex tariff structures. In fact, the situation is quite the reverse. The choice for the majority of household customers is between paying according to volume of water used—a metered tariff—or according to the rateable value of their home. All water companies provide information on household customer bills about how to get a meter fitted free of charge. Companies also provide advice to customers on whether or not they might benefit financially from the installation of a meter; a role also performed by the Consumer Council for Water. The cheapest option for each household will depend on the location of the property and the amount of water used by the household. Where a company offers a social tariff, information on whether a household may qualify is provided by the company alongside the customer bill. The Consumer Council for Water works closely with each water company on the information provided on household bills to ensure that customer interests are met. Its very practical advice is that customers are likely to be put off by too much information in their bills.

For these reasons, I cannot agree that customers will be best served by placing an increasing number of legal requirements on water companies to include additional information on customer bills. I believe that the current approach of working in partnership with the body responsible for representing the interests of customers is more likely to be effective. I therefore hope that I can persuade the noble Lord to withdraw his amendment.

[Lord Grantchester]

I thank the Minister for that reply. I had not heard that all companies were already providing this information. My information was that this was not the case and that only some were. I am encouraged that the reassurance has been provided but, nevertheless, feel that the promotion of the scheme could be improved if it was included in people’s bills when they had to pay them. I am sure we will want to return to this issue because, given that the uptake of Water Sure payments is at a rather low base at the moment, we want to be reassured about what more could be done to bring this to the attention of families.

Thanks largely to the Consumer Council for Water, customer service has been improving in the water industry, dominated as it is, as my noble friend behind me has said, by large regional monopolies. Nevertheless, it is regrettably necessary to spell out these requirements. In the mean time, I beg leave to withdraw the amendment.

Amendment 118 withdrawn.

Water Bill

Lord Grantchester Excerpts

Tuesday 4th February 2014 Lords Chamber

[Lord Moynihan]

My Lords, in moving the amendment, I shall speak also to Amendments 40, 42, 56, 57 and 59, as well as indicating my support for Amendment 105 from the noble Lord, Lord Whitty, in this group.

The balance between regulation and negotiation in the water industry is crucial to this set of amendments. At the heart of the Bill is the intention to create a market where access is regulated—in other words, the rules of entry are set out very clearly, and must be adhered to by all market participants. I am concerned that in some places the Bill leaves too much too open; it appears to be based on the premise that the parties within the retail market should negotiate between themselves on service and price. In my view, that negotiation could substantially limit the effectiveness of the retail market. Allowing individual parties to negotiate in this way opens the door to current incumbents to discriminate against new retailers by offering them higher prices, less preferable terms or poorer service levels. Alternatively, and perhaps more worryingly, current incumbents could simply be slow in responding to requests for information or services from new entrants; this would be difficult to police.

As the noble Lord, Lord Whitty, suggested, in speaking to Amendment 1, some companies may change their allocations of retail costs to ensure that as little revenue as possible is at risk under the new market arrangements. The result of those changes is to reduce the amount of revenue that is open to competition and, potentially, to reduce the margin available to any new entrant. If allowed to stand, that move by the companies may reduce the level of entry into the new retail market. That would be a very serious issue indeed and, I hope, will not result from this legislation. This is an example of how companies might be expected to react when there is insufficient clarity in how the market will operate.

It is interesting to note the experience and views of the Water Industry Commission for Scotland, which opines that it could be difficult for Ofwat to put a framework in place that will allow the regulator to ensure that there is an effective level playing field for all market participants. It is likely to require relatively draconian rules to be drafted and policed. Notwithstanding those rules, some companies may choose to seek to frustrate the operation of the market or seek to get round the rules or even break them to maximise profit, which could be to the substantial detriment of all customers and, indeed, the environment. Having to negotiate on too many issues could also increase the upfront costs for new entrants, which may deter them from entering the market—or, if the new entrant does enter the market, will increase the costs that have to be passed on to customers. To be effective, a retail market, rather than relying on negotiation, needs all participants to have access to clear and accessible prices and to standard terms and conditions. In regulatory economics, I would describe this kind of access to the market as being regulated rather than negotiated.

In Scotland, the retail market is specifically designed to ensure that there is a level playing field. Scottish Water was required to separate its retail arm on a functional basis but chose to create an arm’s-length subsidiary. This has meant that the required governance code, the document that gives new entrants the confidence that they can compete on their merits with the incumbent retailer, could be less onerous than it would otherwise have been. However, the governance code still requires Business Stream to operate profitably as a standalone entity; the code also requires it to limit the access of Scottish Water’s management to its financial and operational information. Scottish Water is not allowed to know about Business Stream’s strategy for the competitive market in Scotland. Finally, under the terms of a licence condition, Business Stream is required to publish within 40 business days of offering a new tariff to any customer.

The market and operational codes are common to all market participants. The market operator, the Central Market Agency, handles all switches and aggregates supply information to determine amounts owing from retailers to Scottish Water, which is also required to seek the commission’s approval on its wholesale tariffs. All entrants have equal access to all tariffs, even those that are a result of legacy arrangements between Scottish Water or its predecessor organisations and larger businesses. The commission has taken further steps related to the reallocation of supply points from companies that exit the market to ensure that all market participants have the opportunity to compete on a level playing field.

To ensure that new entrants do not face increased barriers and costs when trying to access the retail market, I hope that the Bill can be amended so that it focuses on regulated access rather than negotiation. As such, it would require each wholesale company to publish a wholesale charging scheme; rules that support the level playing field between all market participants to be put in place; and the use of operational and market codes that are available to all participants in each area.

The Government’s response to the Defra Committee’s pre-legislative scrutiny states:

“Preventing discriminatory behaviour is critical to providing a level playing field in which new entrants can be confident that they will be treated fairly by incumbent water companies. However, the Government does not accept that a blanket requirement for incumbent companies to functionally separate their retail functions is the best solution to this”.

In the light of that, Clause 23 would impose a new general duty on Ofwat to exercise its powers and perform its duties in a way that helps to ensure that no undue preference or discrimination is shown by water and sewerage companies, including against water and sewerage supply licensees. As is usual in industry reform legislation, Clause 43 would also give Ofwat a time-limited power to drive changes to existing licences, including to companies’ conditions of appointment, when it considers that those changes are necessary or expedient in consequence of the new statutory provisions. Ofwat has published discussion papers that recognise the important role that such licence conditions play in ensuring a level playing field between existing and new entrant retailers. However, many believe that there is a deficiency in Clause 43 as currently drafted which could be exploited by companies seeking to resist any efforts by Ofwat to make changes to their conditions of appointment—for example, in order to introduce new governance codes.

There are also real risks in leaving such a vital part of a successful market to be developed and possibly challenged through secondary regulation. The burden on Ofwat could be lifted by imposing the non-preference, non-discrimination duty directly on to companies. While general competition law arguably already prohibits such discrimination, enforcing such competition law duties has been shown to be a costly and prolonged process. I am therefore suggesting amendments that, while not requiring functional separation, would make companies’ non-discrimination duties directly enforceable by Ofwat, using its existing powers under Section 18 of the Water Industry Act 1991. This would help reduce the cost of implementing the market reform and policing and of enforcing effective competition in the future.

The aim is competition; the aim is choice. The question is how we engage with a process that is clear and straightforward, while protecting consumers. The hurdle is incumbent companies. Many of them can use complex contracts with significant legal fees attached and delaying mechanisms. It is therefore very important that the aim moves towards regulated access with clarity and less emphasis on bilateral negotiations, and that that regulated access is for everybody. At that point, anyone entering the market can plug in and play. There should be no prohibitions put in place as a result of bilateral negotiation. It is for those reasons that I have tabled the amendments in my name. I beg to move.

[Lord Grantchester (Lab)]

I shall speak to Amendment 105 in this grouping and agree with many of the comments in its other amendments, in that they resonate with Amendment 105.

The proposed new clause in Amendment 105 is another technical amendment about how this market is to be made to work. We support the introduction of a market to non-household customers, but remain concerned that the market as currently drafted in this Bill is not up to the function as well as it could be. It is essential in a market to have a fair playing field, where each competitor has the same rules applying to it. I quote the Water Industry Commission for Scotland:

“To be effective a retail market needs all participants to have access to clear and accessible prices, clearly defined and common levels of service, and standard terms and conditions. Allowing parties to negotiate could open the door for a current incumbent to discriminate against new retailers by offering them less preferable terms, poorer service levels or simply by being slow to respond to requests. This would limit the effectiveness of the market and increase costs for new entrants (and customers)”.

Incumbent water companies have a very large advantage, having been in place for many years, and can offer more favourable terms to their own in-house companies than to new entrants. There are many barriers to entry that may become apparent and it is important that the new entrant has the protection with the ability to challenge any that may materialise, and not merely on pricing. This would not in any way cut across the Government’s view that a blanket requirement for incumbent companies to separate their operations by function is unnecessary.

The Minister may point out that Clause 23 may do what we are seeking. However, this clause requires Ofwat to secure merely that no undue preference, including for itself, is shown. There does not appear to be a definition of “undue preference” and it is important to show from the outset that all competitive pressures must be fair, and appear to be fair, to the new entrants. The Minister will no doubt point to the market codes that will be issued with the Bill, but evidence that has been provided to us during its passage, such as that from Business Stream, the Scottish water company, suggests that this is not enough.

I hope that the Minister is able to recognise the significance of this amendment that will ensure that the terms offered to existing licences are also offered to new licences and that the regulator is able to pay close attention to such deals. The new market situation in Scotland has highlighted this issue. Without correction, there are grounds to fear that when the market opens in 2017 it will not function as the Minister would hope. As a result fair competition may be impeded, and business will not get the kind of benefits and savings that we would like to see.

Water Bill

Lord Grantchester Excerpts

Tuesday 4th February 2014 Lords Chamber

Moved by

[Lord Grantchester]

101: Clause 16, page 53, line 16, at end insert—
“( ) The rules under this section will require water and sewerage undertakers to consult with the Council on their draft charges scheme.”

[Lord Grantchester (Lab)]

My Lords, this amendment would ensure that the Consumer Council for Water would have to be consulted by the water and sewerage undertakers when they drew up their draft charging schemes. The importance of this is that it would allow the CCW to play a role from an early stage and provide the ability for it to flag problems then, before the relevant bills start arriving on customers’ doorsteps and further problems occur.

One example where the Consumer Council for Water had previously challenged a charging plan concerned some companies’ plans to restrict half-yearly payment options for those on direct debit payments. Some customers prefer to pay in that way, as it better enables them to manage their money. The elderly, in particular, may want to retain that option, so it is important that attempts by those companies to stop it were successfully challenged by CCWater. That is just the kind of circumstance that the amendment is designed to pre-empt.

That gives rise to a whole series of problems surrounding direct debits and whether there should be any extra charge for non-direct debit payments, which can be disguised as a discount for direct debits. That may become part of the Consumer Rights Bill, shortly to come before your Lordships’ House. Another example of the benefit that the amendment would create was provided when CCWater negotiated with companies not to backdate charges if a company was at fault for initial error that resulted in substantial backdated charges. That can be as simple as misreading of a water meter by the water company’s employees. It is clear that in such an environment it is always useful, and sometimes essential, for CCWater to have such a say before charging schemes are finalised. It ties in with other steps that we hope to take to protect consumers during the passage of the Bill, such as providing for collective redress where a number of consumers have been subject to detriment.

The amendment is short and simple. I therefore hope that the Minister will find that it makes sense to include it in the Bill. I beg to move.

[Baroness Northover (LD)]

My Lords, the noble Lord, Lord Grantchester, has already highlighted the important work being done by the Consumer Council for Water, a view with which we very much concur. As he laid out, the purpose of his amendment is to require water and sewerage undertakers to consult the Consumer Council for Water on their draft charges schemes. That is clearly a reasonable objective. I therefore confirm that the Consumer Council for Water is in fact already routinely consulted by water companies on their charging schemes. That is in addition to the important work that CCWater undertakes to ensure that the consumer voice is heard during the price review process.

The noble Lord is right to say that the protection of consumers is essential, and never more so than in a sector with monopoly characteristics, such as water and the sewerage sector. CCWater plays a vital role in working with the water companies to ensure that their charges schemes do not have unintended consequences for hard-pressed customers, and we want that to continue.

I am therefore very happy to be able to reiterate the assurances already given in another place that the charging guidance produced by the Government will ensure that consumer groups such as CCWater continue to be properly consulted on company charges schemes in future. CCWater has identified its three top priorities in relation to the Bill. The third of those is that the charging guidance,

“should reflect that CCWater should be consulted by each company on its charges scheme and any changes to it before they are implemented”.

Once more, I confirm that the charging guidance produced by the Government will ensure that CCWater continues to be consulted on charges schemes. With that reassurance, I hope that the noble Lord will be content to withdraw his amendment.

[Lord Grantchester]

My Lords, I am very grateful to the Minister for that assurance. The provision should indeed, as a minimum, be included as statutory guidance. That is very well accepted by the Consumer Council for Water. However, we have received briefing from it that it is particularly keen that that should be written into the Bill. We will consult further and reflect on the Minister’s words but, in the mean time, I beg leave to withdraw the amendment.

Amendment 101 withdrawn.

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.

Natural Capital Committee

Lord Grantchester Excerpts

Thursday 24th October 2013 Grand Committee

[Lord Grantchester (Lab)]

I thank the noble Baroness, Lady Miller of Chilthorne Domer, for tabling this debate this afternoon. It gives the Committee the opportunity to debate the first report of the Natural Capital Committee, issued in April this year, following its establishment in May 2012. There has always been a debate around the relative merits of the environment when set against economic development and around how to translate this into public policy priorities. The debate initially focused on sustainability, with the thought that competing claims had to be balanced between two polarities. When English Nature was set up some 10 years ago, sustainability was likened to a stool with three legs: the first leg being the economy, the second the environment and the third, in equal balance, being communities or society. At that time, debates contested whether it was possible to balance these competing aims and whether economic benefit would take precedence or the environment should be given an overriding veto.

The difficulties in settling this debate can be readily appreciated when there is no clear and independent assessment of value. When the environment, or elements in it, can be described, in the classical sense, as a free good, how can it be assigned a value? Meanwhile, the degradation of our environment here in the UK and internationally could not be denied. The effects of waste and pollution in one country are often visited on its neighbours. Nature and the environment cannot simply be seen as isolated elements or units in a biodiversity action plan, such as one to increase songbirds. Instead, the natural environment needs to be assessed and valued as an ecosystem. No longer can this be seen as an either/or debate; instead it must now be recognised that nature and the environment represent a complicated, interrelated system. A properly functioning natural environment is the foundation of sustained economic growth and prospering communities. It bears repeating that we need to create a green economy, where economic growth and the integrity of natural resources sustain each other and the consequences of actions and decisions better reflect the importance of the environment.

Although some may find it reprehensible to try to assign value to natural capital, nevertheless the widening recognition of other assets, such as intellectual property and brand values, perhaps points to natural capital accounting as the best way forward, especially across continents, cultures and national governance divergences. In advising the Government on the state of natural capital in England, the Natural Capital Committee set out to do three main things: first, provide advice on when, where and how natural assets may be being used unsustainably; secondly, advise the Government on how they should prioritise action to protect and improve natural capital and the environment through its methodology; and, thirdly, advise on research priorities to improve future advice and decisions on enhancing natural resources and natural capital.

In reporting directly to the Cabinet’s Economic Affairs Committee, it must work across government and have an interdepartmental profile. It will not be lost on many that this is where it is most needed—under the nose of the Chancellor of the Exchequer. The committee could be seen to have already had an effect on resource allocation and decision-making through its advice on accounting for forest assets in response to the recommendations of the Independent Panel on Forestry, which was set up following the disastrous disregard for woodland assets in the early days of the coalition.

The committee has produced an interesting and thought-provoking first report. The Woodland Trust urged the Government to adopt the committee’s recommendations, stating that the extent to which the NCC informs policy will be a key test of the natural environment White Paper and its ability to achieve a paradigm shift in how nature is valued. With the disastrous lack of border controls and risk analysis of tree diseases in the UK, better protection of our natural assets means, to the Woodland Trust, stronger and better enforced planning protection and robust action on tree diseases. The UK’s woodlands are vulnerable to the effect of historical fragmentation and a continual drift towards decreasing diversity.

The report made reference to trends in UK fisheries but made no reference in its recommendations to the marine environment. This is perhaps a glaring omission that the committee should correct as soon as possible. In the four years since the Marine and Coastal Access Act 2009 was passed, the designation of the first tranche of up to 31 marine conservation zones is still awaited. These sites represent less than a quarter of the sites proposed to achieve an ecologically coherent network, known as an ECN in the jargon. The designation of a network of marine conservation zones is vital to stemming the degradation of the marine environment. Does the noble Lord agree that this is perhaps one of the most pressing issues that his department should be tackling? Will he put the marine environment at the heart of the debate on the EU fisheries policy? Will he ask the Natural Capital Committee to undertake some work on this for inclusion in any report it might produce in 2014?

The committee made 13 recommendations in its report. Will the Government be making a more comprehensive reply beyond the succinct, one-and-a-half-page letter dated 22 May 2013? I believe that the committee deserves better. It is interesting that the committee wishes to develop a framework to define and measure natural capital by drawing on data across departments. If it follows the UN’s global standard known as the System of Environmental-Economic Accounting, will that fall foul of the UK’s data protection laws? It will be interesting to hear the accountancy profession’s assessment of this, as well as of the Prince of Wales’s Accounting for Sustainability project.

The accounting profession will be very familiar with the notion of a risk register as set out in the second recommendation made by the committee. The risk register will identify a range of risks and make assessments against the size of the impact and against the likelihood of occurrences. Will the Minister comment on whether the Government see this as a useful tool to inform practical applications in policy and decision-making? While some may find it difficult to identify the practical usefulness of natural capital accounts, risk registers throughout government applicable to ecosystems and regions could develop into a useful policy assessment tool. Are the Government actively considering this recommendation?

In the thesis undertaken by Mr Christopher Baldock of Imperial College London, Opportunities for Development, he states that the main reasons given for the lack of use and integration of natural capital accounts in decision-making were identified as the lack of a recognised framework of evaluation methodologies, too many ad hoc initiatives hampering development and the lack of recognised uses and application of accounts. Have the Government considered how this could be tackled and improved? How will they identify and embed best practice in the uptake of methodologies across the public estate?

The report identifies the United Nations Statistical Commission of the System for Environmental-Economic Accounts as a major step forward and, importantly, that this system uses the same accounting conventions as the UN system of natural accounts. The report sees UK environmental accounts as limited to a number of physical flows and natural resource assets accounts that include only partial aspects of natural capital. They are not currently aligned with ecosystem accounting and do not provide a fully integrated account of the stocks, flows and changes over time. Can the Minister update us on whether his department has asked the Office for National Statistics to prioritise activity on this?

Will the Government press for an international natural capital accounts body to co-ordinate efforts and collaboration between states and between corporate and international bodies? There is a need to link up and demonstrate the importance and usefulness of accounts if natural capital accountancy is not to fade slowly away from being central to the green economy.

Much debate could be had on each of the other recommendations of the report, not least its comments on agriculture and the natural capital of the countryside in relation to bees and other pollinators, a subject that I know is most dear to the Minister. It must be borne in mind that agriculture exists in a food chain, and that the actions of all in that chain, not least of food retailers in setting the price of food that the consumer pays, have a bearing on agriculture’s ability to respond. These are important matters in the redesigning of the common agricultural policy. The five lines on this in recommendation 13 are incredibly flippant and risk alienating one of the most important communities whose good will is vital in maintaining the nation’s natural capital—the farming community.

I end with one or two remarks on offsetting. The report has merely one sentence on this, which states:

“Offsetting and other forms of compensation are explored after a clear set of principles and a policy framework have been developed”.

Quite simply, offsetting means that if a developer is going to build something that will damage or destroy a habitat of conservation value, it must buy a biocredit to compensate for that loss elsewhere. I find this incredibly dangerous because it sends the mixed message that it is somehow all right to denigrate our natural assets in exchange for making a payment to a good cause. It is the equivalent of having an environmental swear box. Disconcertingly, this was picked up and referred to in the Secretary of State’s page-and-a-half letter to the committee, which stated that the Treasury was particularly engaged in exploring this potential. While the Government may warmly welcome the committee’s ongoing input, I urge them to dismiss this as a very retrograde and dangerous activity to promote.

That said, the committee’s first report is very provocative. The state of natural capital in the UK is at a critical point. Recognition of the committee’s work from the Government who set it up must amount to more than lip service. With the debates over decarbonisation targets and climate change at the forefront of public policy, the Minister’s department should respond more constructively to the committee’s recommendations. I look forward to the review of the Natural Capital Committee in 2014.

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley) (Con)]

I start by thanking my noble friend Lady Miller of Chilthorne Domer for raising this important issue today. I welcome the chance to discuss the vital topic of England’s natural capital. As my noble friend set out, our natural capital provides a range of essential services to society. We all rely on the benefits of natural capital for our clean air, water, food, energy and well-being.

The contents of my noble friend’s speech and, indeed, that of the noble Lord, Lord Grantchester, draw me to make a couple of declarations of interest. I have a farm with a river running through it and some trees growing on it, so I hope noble Lords will appreciate that I come to this with an interest in, and a limited amount of knowledge of, some of the issues.

[Lord Grantchester]

The Minister’s comments remind me that I omitted to declare my interests in the farming field.

[Lord De Mauley]

My Lords, natural capital therefore underpins two of the Government’s key priorities: encouraging economic growth and enhancing the natural environment. These two agendas are not mutually exclusive. In fact, the sensible use of our natural assets is an essential precondition of our prosperity.

In its first report, The State of Natural Capital, published in April this year, the Natural Capital Committee made just this compelling argument: that long-term economic growth will be undermined if we continue to erode our natural capital. The Government agree: long-term prosperity is possible only if we preserve the foundations on which our economy and well-being are based.

It is therefore crucial that we measure, value and protect our stocks of natural capital. Indeed, this is why the Government set up the independent Natural Capital Committee in 2012, the first of its kind in the world. The committee has been asked to provide expert, independent advice to government on the state of England’s natural capital assets. In the past, the benefits that flow from our natural capital have too often been taken for granted, and as a result our assets have become eroded.

The job of the Natural Capital Committee is to highlight where we are not on a sustainable path and advise the Government on how they should prioritise action to protect and improve natural capital. This will help us deliver on the White Paper commitment to leave the natural environment in a better state than that in which it was inherited.

I read with great interest the Natural Capital Committee’s first report earlier this year, which set out its views on why valuing, maintaining and restoring natural capital is important. It also presented initial evidence of the benefits of incorporating natural capital into decision-making at all levels.

As my right honourable friend Owen Paterson’s and the Economic Secretary to the Treasury’s official response to The State of Natural Capital makes clear, the Government welcome and fully support the analysis offered in it. However, the specific issue of what resources have been reallocated in light of the Natural Capital Committee’s assessments is as yet difficult to address. I shall discuss that a little more in a moment.

The committee’s first major publication was a framework-setting document that principally set out what it was going to do to inform its next annual report. It contained no substantive recommendations to the Government that required an immediate change in resource allocation. Rather, the majority of the recommendations referred to work that the NCC is undertaking. For example, one of the key recommendations was to develop metrics to value and measure changes to natural capital. This is a job that the committee is undertaking. It is currently doing excellent work to advance our understanding of England’s natural capital assets. This will be reported on in the second state of natural capital report.

As we have yet to be advised to take specific substantive action, it is not yet possible to attempt meaningfully to hold government to account on the Natural Capital Committee’s recommendations. One potential exception to this is the Government’s work to develop national natural capital accounts.

The Natural Capital Committee recommended that work led by the Office for National Statistics to produce UK environmental accounts should be,

“given the greatest possible support by Government”.

I can confirm that that is the case and, despite the scale of the challenge involved, work is progressing well. My department and the Office for National Statistics are working closely with the Natural Capital Committee to ensure that the accounts are completed on target by 2020. Resource had already been allocated to this work.

The noble Lord, Lord Grantchester, asked whether we will produce a full response to the committee’s next report. We are very much looking forward to it. We will respond appropriately once we have seen what the report contains and have had chance to consider it.

Another area where resources are being committed to the important subject of natural capital is research—my noble friend Lady Miller referred to that. Following discussions with the committee, the Natural Environment Research Council recently announced that it was contributing £5 million to a programme that will deliver on the research priorities of the NCC and its aim to improve understanding of how the state of the natural environment affects the performance of the economy and individual well-being. This is good news and another sign of how seriously the work of the committee is being taken.

In addition to the Natural Environment Research Council’s important contribution, the Natural Capital Committee is undertaking some research of its own to enhance our understanding of natural capital, which it will advise on in its second state of natural capital report. We are very much looking forward to reading that report, the development of which is under way. It will be submitted to the Economic Affairs Committee in early 2014.

It is, of course, too early to speculate what resource implications this may have for the Government, but we will consider them at the appropriate time. I appreciate that there is eagerness to push forward with the natural capital agenda, and that eagerness is shared by Defra and the rest of government.

My noble friend Lady Miller highlighted the importance of soils, and I echo her enthusiasm for them. We recognise that soils are an essential part of our natural resources and support food production, carbon storage, water filtration, biodiversity and wildlife. I can find little to disagree with in what she said about them.

She also spoke about bees and pollinators. The noble Lord, Lord Grantchester, also mentioned them. Noble Lords may like to know that today we are holding a workshop of interested NGOs and other parties on the national pollinator strategy. We are working towards the publication of a document at the end of the year which will go for consultation with a view to finalising it in spring 2014. I am excited about that.

My noble friend asked about the common agricultural policy and the extent to which we are moving in what one might describe as away from subsidising production towards paying for environmental benefit. The United Kingdom has always made clear that we would like to move away from subsidies in the long run. We support a greener cap with the emphasis on Pillar 2, recognising that there is scope for using taxpayers’ money to pay farmers for public goods that the market otherwise would not reward, such as protecting the natural environment and supporting biodiversity. We negotiated hard to secure a final outcome that was a significant improvement on the Commission’s original proposals, but it is very disappointing that we did not get as far as we would have liked. Securing the flexibility to transfer up to 15% from Pillar 1 to Pillar 2 was a good outcome of this set of negotiations. The Government have always made the case that transferring funding from Pillar 1, which is subsidy, to Pillar 2, which is in favour of the environment and the rural economy, represents the best use of taxpayers’ money while supporting farmers to deliver the valuable goods and services that the market left alone would not provide.

As part of our consultation on the implementation of the new cap in England, we would welcome the views of interested parties, including, of course, noble Lords, on how much that transfer should be. That consultation will commence shortly.

My noble friend also mentioned the Thames tunnel, but in the interests of economy of time, I hope she will forgive me if I leave that until the next debate.

My noble friend Lord Courtown mentioned work he has been doing in the north Swindon area, which I know well. He talked about retaining existing features—hedges, trees and so on—while conducting development between them. I congratulate him and thank him on that.

My noble friend asked about co-operation between Defra and other government departments on natural capital. The natural environment White Paper is a cross-government document. It contains a number of important cross-government commitments, and we have made good progress on them. We work closely with the Treasury and have produced new supplementary Green Book guidance for all government departments on valuing nature in policy appraisal. The Natural Capital Committee will report to the Chancellor’s Economic Affairs Committee. In the planning system, the new NPPF is a good outcome. I regularly meet Ministers from the Department for Communities and Local Government. There is also good work in the area of schools and health, so I can confirm to my noble friend that we work across government departments.

The noble Lord, Lord Grantchester, raised a number of issues. In forestry, he will know that we have accepted the vast majority of the recommendations of the independent panel led by the right reverend Prelate the Bishop of Liverpool, who we thank enormously for his work.

The noble Lord spoke about tree diseases and pests. He will know that since concerns about Chalara arose some 12 or 13 months ago, we have developed a risk register of pests and diseases, and we have progressed substantially with contingency planning. Both those elements were recommended in a report by the experts we convened.

He asked whether the Government will provide advice on marine conservation zones. The NCC’s terms of reference are very clear that the committee may not perform a watchdog or advocacy role with respect to government policy decisions or be policy prescriptive in its advice. However, the NCC is interested in all categories of natural capital and will provide advice on whether all assets are being used sustainably.

I am running out of time. If I have not answered all noble Lords’ questions, I will write to them. I ask your Lordships to accept that we have already shown international leadership in this field and no longer take our natural capital assets for granted. We recognise that natural capital is integral to delivering sustained, and sustainable, economic growth in England. As a result, the Government fully support the work of the Natural Capital Committee and are looking forward to its upcoming advice.

Thames Tideway Tunnel

Lord Grantchester Excerpts

Thursday 24th October 2013 Grand Committee

[Lord Grantchester (Lab)]

I am so glad that my noble friend Lord Berkeley has secured this debate today on the proposals for the Thames tideway tunnel. Coming as it does after our previous debate, it allows our discussion to transcend from the sublime to the slime. I pay tribute to my noble friend’s persistent challenges to the project, which have meant that it has been critically examined in all its aspects.

We are in familiar waters. To reiterate: 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. As much of London’s infrastructure dates back to horse-and-carriage days and therefore rainwater is included, there are 50 or 60 overflows each year straight into the Thames. In a typical year, 18 million tonnes of untreated sewage enter the river through the combined sewage overflows that the Thames tideway tunnel needs to intercept.

The tunnel will remove and treat a total of 39 million tonnes of untreated sewage from the tidal River Thames. These discharges breach the urban waste water treatment directive. Years of independent studies and assessments working up a solution cannot shield the UK and the taxpayer from the prospect of substantial fines if the proposed timetable does not proceed. Delays have already led to an increase in the cost estimate in excess of £4 billion.

Your Lordships’ House last examined the proposals during the passage of the Water Industry (Financial Assistance) Bill in March 2012, when the Government took enabling powers to provide contingent financial support for exceptional project risks, guaranteeing the project even though we still do not know who will finance and build a tunnel. Since then, my noble friend Lord Berkeley has updated the House through his continual questioning, to which the Minister has positively responded.

Labour supports this project. We remain unconvinced by alternative solutions to the problem of London’s sewage discharge. We have examined the Environment Agency’s An Assessment of Evidence on Sustainable Drainage Systems and the Thames Tideway Standards, published this month, which concludes that sustainable urban drainage systems—or SUDS—alone would not be enough to combat the sewage issues facing the Thames and meet the environmental standards for the Thames established by the Thames Tideway Strategic Study in 2006. In 2012, Sheffield University published a further independent study examining the potential to retrofit SUDS on the tideway catchment areas. It concluded that retrofitting SUDS, while technically possible, is not feasible due to the very high costs and disruption that would be likely to be involved. Retrofitting could well complement conventional sewage infrastructure and be instrumental over time in separating rainwater from sewage as development projects slowly rebuild and modernise buildings and areas throughout the capital. SUDS will also play a key role in ensuring that new developments extending London’s footprint do not add to existing problems.

Labour also recognises that the Government have designated the project a nationally significant infrastructure project and that Defra is now in the formal planning process. The Planning Inspectorate will review the plans before they come back to the two departments, Defra and DCLG, for their respective approvals. As the Minister has already had discussions in DCLG, perhaps I might tempt him to say whether he foresees any problems in this joint approval process that might amount to any sense of a battle or veto between the two departments.

Labour will continue to support the proposals for the Thames tideway tunnel, subject to some overall tests being met. Obviously, the plans must be effectual, the expected state of the Thames at the project’s completion must comply with all EU directives on water standards and the Government should select the most appropriate delivery vehicle. Most critically, we want to be able to substantiate that the scheme satisfies value-for-money tests and that costs are assiduously examined. We will continue to challenge the Government about customers’ bills being added to. Labour does not want customers being disproportionately penalised for cleaning up the river when balanced against prices, executive pay packages and dividends to shareholders—in this case, a largely private equity group.

There has been widespread concern that Thames Water has paid out more than £2 billion in dividends in the past six years—more than £650 million in the past two years alone—as well as £1 million in management fees. What discussions have the Government had with Thames Water on this issue? It is a matter of some concern that large amounts need to be set aside for the tideway tunnel.

The Minister has given clear explanations at the Dispatch Box about why the company has not paid any tax. All UK companies are allowed to claim capital allowances when they spend on capital investment programmes. That is understood, but can the Minister categorically confirm that in Thames Water’s case these allowances apply to past capital projects and state whether he has appreciated that it seems that Thames Water can add to customers’ bills? The consumer suffers, as we are now considering social tariffs, the taxpayer in the form of the Treasury will offset capital costs and have no receipts, yet profits continue to support private equity returns.

We will continue to press the Government for more innovative financial schemes that are more environmentally sensible. There was an interesting report in the press this week that Ofwat plans to block Thames Water’s request for a further price rise of up to 8% in customers’ bills next year to cover some of the costs it has picked up from bad debts and buying land for the tunnel—the so-called super sewer. Ofwat’s response was forthright and noted. It stated that this request was in addition to the already assured price hike of 1.5% above inflation for 2014-15. Water bills and the cost of living are critical issues. We will continue to monitor the situation closely and take a keen interest in the outcome regarding the Government’s guarantee for the project.

Agriculture: Common Agricultural Policy

Lord Grantchester Excerpts

Tuesday 30th July 2013 Lords Chamber

[Lord De Mauley]

Well, my Lords, that is indeed a question. In the context of the reduced CAP budget, the UK’s key aims for the CAP reform negotiations were to increase the resilience, market orientation and international competitiveness of EU agriculture; to improve the CAP’s capacity to deliver environmental outcomes; and to simplify the CAP for farmers and authorities. We want an efficient and responsive agricultural sector in the EU and globally, and we want the future CAP to achieve this.

[Lord Grantchester]

My Lords, I declare my interests in the countryside. Does the Minister’s department recognise that success in greening policies relies very heavily on good will and implementation from farmers? Is the cart before the horse in this instance? Will the Minister outline what the Government want to achieve from greening measures, rather than transferring funds into Pillar 2 from Pillar 1 simply because they can?

[Lord De Mauley]

I understand the noble Lord’s question, and others have asked that. The Government’s view is that environmental outcomes can be more targeted and more effective if they are delivered through Pillar 2. There will be a new set of environmental measures within Pillar 2 but we will honour the obligation in Pillar 1 to achieve the greening that is set down.

Horsemeat

Lord Grantchester Excerpts

Thursday 14th February 2013 Lords Chamber

[Lord Grantchester]

My Lords, I declare my interest as a dairy farmer with experience of the food chain. In today’s industrial food chains, the situation that broke three weeks ago was never going to be the actions of one rogue supplier. Three weeks ago, my honourable friend the shadow environment Secretary of State, Mary Creagh, called on the Secretary of State to ensure that all horsemeat intended for human consumption is tested for substances harmful to human health such as bute. Why did the noble Lord’s department not order full testing and stipulate that horsemeat should be released only when it is clear from bute? Given that the evidence of what has gone on is destroyed when products are withdrawn from the shelves, will the FSA now take overall control of all product testing?

Food: Waste

Lord Grantchester Excerpts

Thursday 17th January 2013 Lords Chamber

[Lord De Mauley]

My Lords, the waste review commits us to exploring the potential for a successor to Courthauld 2. The UK Government are working with WRAP and current Courthauld signatories and trade bodies to determine the best way forward following the completion of the second phase of the Courthauld commitment and the agreed outcome will aim to build on the significant progress made so far. As I say, the agreed outcome will build on progress and it is anticipated that we will launch Courthauld 3 in the spring of this year.

[Lord Grantchester]

My Lords, under the Waste Strategy 2000, the Government have strict targets for recycling household waste. By 2020 the amount of biodegradable municipal waste for landfill must be reduced by 35% of the amount produced in 1995. Do the Government have plans to go further, such as a ban on all food waste to landfill?

[Lord De Mauley]

No, my Lords. We do not plan to ban all food waste to landfill. However, we are making significant progress and we will continue to make significant progress—building, I may say, in a spirit of friendliness, on progress made by the previous Government.

Public Bodies (Water Supply and Water Quality Fees) Order 2012

Lord Grantchester Excerpts

Thursday 13th December 2012 Grand Committee

[Lord Grantchester]

I thank the Minister for his introduction and explanation of the order. I will not detain the Committee for long, as it seems largely straightforward.

The issue is the switch of payments for the regulatory function of the Drinking Water Inspectorate, which will be made in future by customers rather than by the taxpayer, and how this will work. The Minister has explained that the Public Bodies Act 2011 enables him to change the funding arrangements to reflect the fact that if an industry needs regulation in undertaking an activity that could cause adverse effects in others, then the industry should face the regulatory cost. There is no more important product than safe, clean, hygienic drinking water. The change will comply with the Hampton review recommendations for better regulation and with the Defra charging handbook strategy aims. It will bring funding into line with that for other water regulators, such as Ofwat and the Environment Agency.

The new system will ensure that regulatory costs are recovered in proportion to the individual relative regulatory burden, serving as an indicator of the relative efficiency and effectiveness of each water company or supplier. Furthermore, only one of the 21 responses from the 33 key stakeholders consulted did not support this policy change. I note the proposed charging system will apply to all water companies and that none is classified as a micro-business, with the result that there are no discriminatory burdens that will weigh disproportionately.

The cost of the regulatory function of the inspectorate is in the round rather small, and the Minister may well say this is a tidy-up exercise, with the modest cost to consumers judged to be more than outweighed by the non-monetarised benefits already highlighted. Nevertheless, I would like the Minister to expand where he can on some of the potential implications and the public information for customers.

The Explanatory Memorandum explains that the total charge being transferred from taxpayers to customers amounts to £1.9 million, less than a 0.1% increase to most individual bills, or around 15p per annum. The 13th report from the Secondary Legislation Scrutiny Committee updates this figure to include unmetered and metered households to produce an estimate of 9p or 10p per annum. While noble Lords will not be expecting front page exposure in the Daily Mail of “the thin end of the wedge” even if charges were to increase, can the Minister say what would trigger concern and action on any report to Ofwat? Will Ofwat’s approval be required for all and any increases? Will it be looking at cost control and cost-cutting measures if it is to address the Secondary Legislation Scrutiny Committee’s concern that the change in the charging system does not appear to promote economy in the inspectorate’s delivery. The scrutiny committee had asked for more clarity on how the charging structure will promote this effectiveness and economy, and I thank the Minister for his further explanation in his introduction of the order.

In the Minister’s officials’ meeting with the industry has any discussion taken place on how water companies will spread the charge across their customer base? Will the charge be made per customer bill, or will it be volume related, a question especially pertinent to metered supplies and high-volume commercial operations? Will there be consistency across the regions, will intercompany performances be monitored and published, and will this include Wales?

Will the Minister indicate whether the water companies will be highlighting the admittedly small charge with a separate line on the face of customers’ bills, even if only annually, and therefore fulfilling the very reason to make the charging change? No doubt this will require public information arrangements to be made for customers.

Finally, water affordability is becoming an ever increasing concern to more and more households. While the Minister may be reluctant to go into detail today on the proposed social tariff scheme, will he at least confirm by stating the commitment that this fee will qualify to be included under the social tariff umbrella?

I have no intention not to agree with this order. But if the Minister could indicate any understanding on how this change will be implemented, it will be of great interest to consumers.

[Lord De Mauley]

My Lords, the Government are committed to everyone in England and Wales having access to clean, wholesome drinking water and keeping water bills at an affordable level. Approval of this order will enable the Drinking Water Inspectorate to recover the cost of regulatory activities from the water companies which benefit from them. This change in funding will result in a saving, as I said earlier, of about £2 million to the taxpayer each year and may increase the average annual customer bill by about 10p, as the noble Lord, Lord Grantchester, mentioned. He asked about the way in which the charge will be passed on. Explicitly in answer to his question, Ofwat must approve any passing on of charges. Therefore, if water companies propose an inappropriate means of passing on charges, it would have the chance to object.

The noble Lord, Lord Grantchester, asked about the consistency of how charges will be passed on. For instance, will it be a separate line on the bill? On the one hand, that is up to the companies to put forward a proposal but, on the other hand, how it is dealt with is subject to Ofwat approval. It will be included in the social tariff scheme.

To the extent that I have not answered the noble Lord’s questions, perhaps I may write to him.

[Lord Grantchester]

My Lords, the Minister has done very well in answering all the questions but one, which was regarding Ofwat having to agree to any changes and increases in the charges from year to year.

[Lord De Mauley]

My Lords, the cost will not be subject to Ofwat control but will require approval by Ministers. I hope that that satisfies the noble Lord. On the basis of that, I thank the noble Lord for his questions and I ask the Committee to agree the order.