Water Industry (Financial Assistance) Bill

Alex Cunningham Excerpts

Wednesday 29th February 2012 Commons Chamber

[Alex Cunningham (Stockton North) (Lab)]

I would like to talk about the Bill’s impact on people in north-east England and to outline some of the responsibilities that water companies, which make billions of pounds of profit between them, might need to be compelled to fulfil, although I acknowledge that some do the right thing—part of the time, at least.

I would also like to take the opportunity to invite those who want a consistent and high-quality water supply to come to the north-east—industrialists, manufacturers, green revolution companies, call centres, breweries and individual people would all be made welcome in the region. My message to allcomers is clear: “You need water; we’ve got it”—and I would encourage anyone needing water for their businesses to get in touch with Tees Valley Unlimited, and we will work with them to develop their business without fear of ever having to do without their water supply.

What of domestic supplies and customers? About 370,000 people in the north-east spend more than 3% of their income on water, which is why I am glad that the Opposition will introduce a new clause to enable the introduction of national minimum standards for water company social tariffs. Such tariffs will ensure that financial assistance is provided to those most in need across the country—not just to those in the south-west, about whom we have heard so much. It is worth noting that the south-west has almost exactly the same number of households paying a disproportionately large part of their income for water supplies.

Some Members have talked about water meters, and I would encourage all individuals and families to explore using them. My personal saving in my home came to about 60%, so people should look at this option to solve some of their financial issues. However, I recognise that that is more difficult for families than for a couple living in a larger house.

There has been a lot of consensus around the place today, but it saddens me to say that the Government are taking a similar approach to that being taken to the big six energy companies. The Government seem incapable of taking on the powerful vested interests of the large water companies and are set to miss the opportunity to make a real difference with a more comprehensive Bill that would put pressure on companies to deliver for our communities the services they deserve at a reasonable and fair cost. From April, water bills will rise by an average of 5.7%, which is a huge amount, given that for many ordinary families pay freezes and job losses are the name of the game. Such a hands-off approach from the Government is truly shameful and it is even more appalling when people are already contending with a 20% increase in energy bills over the past year.

More important than that, however, is the following question: did we really hand over or sell our water assets to allow companies to make huge profits, borrow on the back of those assets to pay dividends and still fail to provide enough water for people in the south to water their gardens if they choose to do so? I am particularly concerned and surprised about the proposals in clause 1 to allow the Secretary of State to provide financial assistance—taxpayers’ money—at the stroke of a pen if she

“considers it desirable to do so”

to a privately owned water or sewerage company that may be failing in its basic duty to deliver an adequate water supply all year round in parts of our country. I do not know how much cash the Secretary of State will have to splash around, but providing a blank cheque at taxpayers’ expense and at a whim to any water company she likes, whenever she likes, is absolutely not what is needed to ensure that ordinary people get a fair deal on their water.

That issue is all the more pressing given that huge areas of the south and east of England are suffering their worst drought in almost 35 years. One recently proposed solution is shown in the decision by a utility company to draw up plans for a £2.6 billion pipeline to send water from the north to the drought-hit south. United Utilities has revealed plans for the pipeline, but I must question whether it is really the answer. It would be incredibly expensive to transport water from north to south, and I know who will end up meeting the cost.

The Environment Agency last looked at the idea of a pipeline in 2006 and estimated that it would cost up to eight times more than developing the existing infrastructure. Water is heavy—1 cubic metre of water, which is what one person uses a week on average, weighs a full metric tonne—so the energy required for the construction, development and operation of large-scale water transfer systems also adds further to carbon emissions, which lead to climate change.

The north-east of England has significant infrastructure for industrial and domestic water supply. One of Europe’s largest man-made lakes, Kielder water in Northumberland, was created to supply water to the industry of north-east England, much of it on Teesside, in and around my constituency. Sadly, the growth of some of the industries, such as steel, that are heavily water intensive did not materialise. As we have seen, the north-east economy has been rebalanced in recent times, with different industries and a wider range of jobs. That was done under the previous Government and, of course, the work was led by the now defunct One North East regional development agency.

In recent years, Kielder water has come into its own, with underground springs ensuring that it always remains at a high level, regardless of the prevailing climate. That means that while the south of England is often forced to implement drought strategies and hosepipe bans, north-east England enjoys plentiful water supplies. People in the north-east have, of course, had to pay the price for an abundant water supply, which is now managed by Northumbrian Water. Unlike other companies, it has pegged its price rise to inflation this year. Over the years, however, consumers in the region have paid higher bills to finance this reservoir, and given such an abundance of water there are surely no excuses for a hike in prices when there is no need for investment in reservoir infrastructure. Northumbrian Water does do the right thing; it does invest in works and it works hard for its communities. We all like the idea of reduced bills, but we also need investment and the constant water supply that we have in the north-east. Indeed, with such an abundance of water, instead of transferring large amounts of water to the overcrowded and drought-ridden south, would it not make both environmental and economic sense for industry to move to the north-east? I have already issued the invitation: “Come north, we have all the water anyone needs.”

If we are going to go down the north-south route, I want to know what the benefits will be for people in north-east England. They have paid for the investment—will they get a dividend through reduced bills when their water is moved elsewhere, if that ever happens?

On a different matter, is it not an absolute disgrace that in England and Wales leakage rates, at about 25%, are higher than a decade ago? Some private companies, now exporting their profits to their shareholders overseas, are failing in their duty to create 21st century services for our people. Water companies might have done well on investment, but they have done so at the expense of consumers.

What action will the Secretary of State take, for example, to cut Thames Water’s obscene leakage rates? The company loses 30% of the water it puts into the mains—200 litres a day for every customer—yet it has posted profits, in what could be considered a bad year, of £208.5 million. That money could go a long way towards investing in improvements and helping the company to move towards the record of Paris and New York, which lose only 10% in leakage, or perhaps, one day, to equal Singapore, where the leakage rate is about 5%.

I have already personally dismissed the idea of the water-rich north sending our supply south, but water companies in the south could help themselves, each other and consumers. Last December, the Environment Agency told Ministers that the myriad small water companies in south-east England could save £500 million by 2035 if they shared supplies. Instead, the companies were planning to saddle customers with a bill of £760 billion for unnecessary new reservoirs. What will the Government do about that? Will they introduce legislation to deal with some of those matters?

Will the Government make any moves to force the private water companies to take the right action, stop the leaks, share supplies around the country where necessary and deliver for consumers? I do not think the Bill demonstrates that the Government have a long-term vision for affordable water supplies or the industry as a whole, and I only hope Ministers will take action to sort it out. My message tonight is: “If you want water and you’re an industrialist, come to the north-east.”