Water and Sewerage Charges (South West Water)

Alison Seabeck Excerpts

Wednesday 9th March 2011 Westminster Hall

[Mr Sanders]

I only half-share the right hon. Gentleman’s view, because Ofwat is the body that should protect the consumer and it has allowed South West Water to raise charges by the amounts that I described.

[Alison Seabeck (Plymouth, Moor View) (Lab)]

I agree with the hon. Gentleman’s assessment that Ofwat’s role in this regard is key, although I also accept the points made by my right hon. Friend the Member for Exeter (Mr Bradshaw). I have just received an e-mail from one of my constituents that makes exactly the same point as the hon. Gentleman. My constituent says that he lives in a three-bedroom house; there are two residents, and he has received a bill for more than £1,000 for the coming year. Ofwat has agreed these prices. My constituent’s question is, “Do they realise just how much individual customers are having to pay and the impact on those households?” I urge the Minister to look again—please—at the role of Ofwat in all this.

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[Mr Sanders]

My hon. Friend is absolutely right. In my constituency of Torbay, the unitary authority area now has a gross value added level lower than Cornwall’s was when it qualified for objective 1 assistance, and there are other such pockets in the south-west.

[Alison Seabeck]

I would like to reinforce the hon. Gentleman’s point. Does he not agree that, with the current increase in water rates, we will see more pensioners, particularly in the area around Torbay and in my constituency of Plymouth Moor View, falling back down below the poverty line? The Government would not want to see that happen, but undoubtedly they will.

[Mr Sanders]

The hon. Lady is absolutely right on that point.

If Ofwat is not supportive, we at least have political unity around the idea that something more than a social tariff and something specific to the south-west needs to be done, and I need only consult the Hansard report from a previous debate on this very issue, in January 2010, to see that. In that debate, we had the support of the then Labour Members for Plymouth and some warm words from the then Minister with responsibility for water, the hon. Member for Ogmore. The right hon. Member for West Dorset (Mr Letwin), who is now one of the Prime Minister’s chief aides, stated that

“there seems to be a strong case for some kind of spreading of cost”—[Official Report, 27 January 2010; Vol. 504, c. 323WH.]

The Liberal Democrats have, of course, championed the cause for many years. I see that I am joined today by Members from all parties, who are united in wanting to get something done for their long-suffering constituents, and I hope that many of them will be able to contribute later in the debate.

The overarching problem, which Walker ably demonstrates, stems from privatisation. On privatisation, South West Water had the smallest asset base—what was called the regulatory capital value—per customer, and it now has the highest, at 210%. South West Water customers will therefore pay far more for longer. If that situation were to occur in any other utility it would be outrageous, but for some reason successive Governments have tolerated it in the water industry. The previous Government sadly never understood the damage caused by the failed privatisation. I describe it as failed not because the water companies have not provided a good service—on the whole they have—but because it has simply not delivered a market, not even a heavily regulated one. No domestic consumer can choose between water companies, and instead of being reinvested fully in the service, the surplus created is converted into profit for shareholders. The water customers in the south-west do not like that, and I suspect that if it happened to other regions they would not like it either.

That brings me to some potential hope in this doom and gloom. We have a new Government. We are in the era of new politics, and appear to have a listening Government, and so I invite the Minister to join in this spirit of new politics and listen to the people of the south-west. If he spoke to them, they would tell him that they do not want just a social tariff or some adjustments around the edges, but a fair and transparent system, whereby they pay the same as everyone else in the UK for the water and sewerage services they use.

The Minister’s party was in power at the time, so he might not join me in wishing that privatisation had never happened in this industry, but I hope that he will acknowledge that it was carried out in a wrong-headed way. The company in the south-west needed a much bigger customer base, and needed to be compensated for the poor state of its infrastructure. If the Minister does join me in this, I hope that he can take the next logical step and support something that addresses these historical problems and lifts the unfairness. I particularly mention unfairness because it is important not to conflate it with affordability, and it would be very foolish if the Government pretended that addressing the problem of water poverty also solved that of unfairness. I shall give an example to illustrate the problem. A family earning £35,000 would never come under the scope of WaterSure or any improved social tariff. They would, however, feel incredibly aggrieved if they had to pay anything up to £400 more for exactly the same service and product than if they lived anywhere else in the country, and that insult is made worse by the fact that the service is a basic necessity.

I understand, however, the Minister’s difficulty in being able to give concrete answers to many of the questions that will be raised today. There will necessarily be input from the Treasury as well as from No. 10, and in a way it is a shame that we cannot have Ministers from both Departments—the Treasury and DEFRA—here today, as some might argue that the solution is to be found at the Treasury. The Treasury can make or break another Department’s plans, but I hope that the Minister is pushing the case both for a social tariff and, more importantly, a solution to the south-west injustice.

Overall, we know the problem. Water bills for all customers in the south-west are far too high, as a result of the way in which the industry was privatised. We need a structural solution, through Government intervention, to remedy that unfairness. I am not sure how much detail the Minister can give in response, but I want him to recognise the difference between addressing water poverty and addressing unfairness. I hope that he can restore, or shall we say maintain, my faith, and that of others, in this Government, by promising to address both those issues.

[Alison Seabeck]

On a point of order, Mr Amess. To avoid any possible misunderstanding, I should draw Members’ attention to an entry in the Register of Members’ Financial Interests by my right hon. Friend the Member for Greenwich and Woolwich (Mr Raynsford), in whom I have an indirect interest: he is my partner.

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[Andrew George]

I know that Ministers are wrestling to produce a fair and equitable solution, and I know that this Minister has been engaging constructively and is well seized of the problem and the challenges that we in the south-west face—I have no doubt that he understands the issue fully. Discussions with other Departments, especially the Treasury, will inevitably be involved. I hope that the issues can be resolved to the satisfaction of the long-suffering water rate payers of the south-west. My hon. Friend is absolutely right that any solution must emphasise fairness.

It is worth while, when considering the issue, to compare water with electricity, telecoms and other utilities. In any other part of the country, it is at least possible to opt for another supplier of services. Therefore, whichever part of the country someone happens to live in, they will know that a regulator is regulating the market to ensure that there is fair competition and an even playing field, so that anyone in the country has the opportunity to at least obtain services—in this case, we are talking about water and sewerage services—that are no worse and no better than anywhere else in the country. We pay a significant amount more.

[Alison Seabeck]

On the glamorous subject of sewage, does the hon. Gentleman share my concern that, apart from the current pressure on bill payers in the south-west, we will have additional pressure from the transfer across of the private sewer network? It seems to be a completely unknown quantity—South West Water does not really know what it is taking on and what the impact will be. Will the hon. Gentleman join me in urging the Minister to offer reassurance on that?

[Andrew George]

The hon. Lady is absolutely right. I do not know whether this is area in which she is declaring her interest.

[Alison Seabeck]

Not in sewage.

[Andrew George]

I am sure that her interest is in something far more glamorous than the adoption of private sewers. I have raised the matter with the Minister and there has been consultation on it. Water companies are aware of the issue and some have undertaken their own calculations of the impact that it might have. I am confused and uncertain about how far down the water companies will have to go—it is possible to get stuck on these issues due to the number of metaphors that could be adopted in relation to them, but I shall not dwell on that for too long—before they take on those obligations. Other issues include the state in which those sewers would have to be in order for them to be fit to be adopted and, indeed, whether the companies will have the opportunity to assess the condition of those drains and sewers in the first place.

The information that appears to be coming from the marketplace and from those who are engaged in the industry is that both the previous and present Governments have not properly assessed the true impact that the proposal is likely to have. The knock-on effect will be on all customers—not only in the south-west, but countrywide—although it will be disproportionately worse for those in the south-west, because any increase in their bills will be on top of something that is already extortionately high. I know that the Minister is looking into the issue. The matter clearly needs to be resolved before we go down the track of finally forcing water companies to adopt private sewers and drains. I hope that the Minister will address the issue in his comments.

The hon. Member for Newton Abbot (Anne Marie Morris) has left the Chamber, but she raised the issue of fairness. When we have debated how we can address the legacy of unfairness that has been left to South West Water customers, we have talked about the potential adoption of a national levy, which is one of the options proposed by the Anna Walker review. A national levy would be a very small, gnat bite of a charge, which few people would notice and which would address some of the inherited legacy of additional unfairness in the south-west and other parts of the country. However, if we adopted such a levy, and if it were simply a flat rate charge for all water rate payers, poor water rate payers in one part of the country—the north-east, for example—might end up subsidising wealthy second home owners, who already pay, if they have water meters, significantly less than most people in their locality. Clearly, to address the issue of fairness, if we were to adopt a national solution, it would have to be significantly more sophisticated than a simple, flat-rate solution. I know that the Minister is well aware of the issues.