Water Bill

Debate between Maria Eagle and Graham Stuart

Monday 25th November 2013 Commons Chamber

[Maria Eagle]

We cannot have a situation where water companies are taking strategic decisions, with the clear purpose of structuring their financial affairs in a way that leads to worrying debt and hinders their ability to invest, when their sole purpose is to minimise their tax liability. Ofwat said in March that

“the overall proportion of equity has diminished from 42.5% in 2006 to 30% of regulatory capital value today with several companies at 80% gearing, thus obtaining only one fifth of their financing from equity. This reduction is a serious concern.”

[Mr Graham Stuart (Beverley and Holderness) (Con)]

I thank the hon. Lady for giving way. She makes an important point about the behaviour of the water companies. Will she explain why, under the previous Government, the water companies’ combined debt of £939 million in 2004 had increased by 70% by 2010, when her party left office? Perhaps she could provide us with some context.

[Maria Eagle]

I understand the hon. Gentleman’s point. I do not believe the Labour Government did enough during our time in office to ensure that that was correctly handled, but that is not a reason to allow the water companies off the hook now.

Under Ofwat’s current powers, capital structure and consequent risk are matters for the boards and shareholders of those companies, so any action must come from the Government. We have seen from briefings to the Financial Times that Ministers are considering reducing the interest payments that can be deducted from a company’s tax bill, especially for larger and more highly indebted companies—as many water companies now are—or even putting a levy on the debt held by highly leveraged water companies. Whichever solution—if any—that the Government decide on, it must happen quickly.

Despite the gaping hole left by the Government’s failure to introduce in the Bill measures on water affordability for households, there are measures that we support. That should not be a surprise, given that they arose from three important reviews taken forward by the last Government: the Pitt review on flooding, the Walker review on affordability and the Cave review on competition.