Water Supply (Amendment to the Threshold Requirement) Regulations 2011

Lord Knight of Weymouth Excerpts

Tuesday 22nd November 2011 Grand Committee

[Baroness Parminter]

I think it is right that the Government are accepting the recommendations of the Cave report, but it is very disappointing that the impact assessment makes it clear that no guaranteed or quantifiable environmental benefits in terms of reducing water use will result from there regulations. It is all about “could” and “might be”; nothing is guaranteed and there are no quantifiables in that.

The impact assessment also makes it quite clear that, without further reforms to the water supply licensing regime, the uptake on supply switching is going to be very limited. The Minister pointed out that there is a market of 26,000, but the assessment makes it clear that, without further reform, the potential is just two or three companies per annum. It strikes me that this statutory instrument on its own is pretty unimpressive and I wonder why it has been brought forward before the White Paper, given that the White Paper is going to be coming forward fairly shortly. I am sure that some form of further legislative reform will take place following that. I should like to know why these regulations—and the cost of bringing them to this House and into the market—has been brought forward on their own, given its limited potential.

[Lord Knight of Weymouth]

My Lords, I am grateful to the Minister for setting out so clearly what the statutory instrument does and to the noble Baroness for making some useful comments, with which I agree, about the impact assessment. This is a perfectly harmless statutory instrument, so I am very content with it. Like the noble Baroness, I am not sure that it is going to have a massive impact but, given that the Cave review recommended that this should happen, that the Cave review did a good job and that we look forward to the Government’s comments in the White Paper, I am certainly happy to give this statutory instrument my blessing.

I would not want to burden anybody with having to work out any more impacts but, especially given that this is a Defra statutory instrument, the rural impact would be particularly interesting. It would be interesting to know whether any thought has been given to including rural impacts in general. When I was reading through the impact assessment, I thought that it might make a difference in some urban areas because in urban areas the market is more likely to be active. In the rural parts, however, if it makes any difference at all or if there is enough of a market operating, I shall be quite surprised. If the Minister has any comments on that, I shall be delighted, but this is a pretty straightforward statutory instrument. We welcome competition in the water industry; we hope that it benefits consumers and that the department and the regulator will make sure that that happens. I am happy to give it a positive nod.

[Lord Taylor of Holbeach]

I thank noble Lords for their contributions. I am particularly grateful to my noble friend Lady Parminter for pointing out that she felt that the environmental potential of changes in the market had not been properly stated in the impact assessment. Impact assessments are of course designed to report on measurable impacts. One of the difficulties in this case is that we cannot predict the impact of a reform of this nature. I can say that since non-household competition was introduced in Scotland in April 2008, more than 45,000 customers have renegotiated the terms of their supply, enjoying the range of benefits that come from a competitive market.

One element to which I tried to draw the Grand Committee’s attention was that among the services that can be offered to companies in this category is advice on reducing water consumption. It is not very easy to quantify and you cannot rely on it in an impact assessment. However, I should have thought that it would be one of the strongest reasons why some companies would look to change supplier. The reason will probably not be price. In some ways it is more difficult to compete on price in water than it is in almost any other area. However, there could well be competition on service. Water efficiency is a big gain from a freer market.

The noble Lord is absolutely right to say that we need a White Paper and that this is only a beginning. I cannot pretend that it is only the beginning of a reshaping of the water market in the UK along the lines of the review that Professor Cave produced. However, we are right to introduce this statutory instrument at this stage. I hope that we will learn from the way that the market improves through this statutory instrument things that we can then include in the legislation that will follow the White Paper.

It is difficult to quantify the impact on rural areas. The impact assessment does not have a special chapter just because it comes from Defra. We might consider that. It is something of which the noble Lord, Lord Knight, might try to persuade us. If the process allowed us to flag up our own special interests, it would be very good to do so. There are one or two large consumers of water in rural areas who might well benefit from this proposal. There could then be an assessment of the impact on rural areas and rural businesses; I should like to think so.

I thank my noble friends. I think we have pointed out areas that we will probably debate in greater detail and with, I have little doubt, somewhat more vigour when we come to consider other aspects. Meanwhile, I commend these regulations to the Committee.