Water Bill

Debate between Charles Walker and Owen Paterson

Monday 25th November 2013 Commons Chamber

[Mr Paterson]

I am fully aware that that is a matter of enormous interest to the right hon. Gentleman and his constituents. To put it bluntly, it is not acceptable that we continue to put 20 million tonnes of untreated sewage in the Thames every year. We have considered a range of alternatives—I know that he has been advising on this—and have concluded, as did the previous Government, that the tunnel is the best solution. We continue to negotiate in detail with Thames Water on the arrangements that will lead to the conclusion of the project.

We now need to build on our success. The Bill will shape the way the industry develops over the next decade and beyond. It will build on the strengths of the regime and use increased competition to drive greater innovation and efficiency, which will benefit customers and make sure that our water supplies and natural environment are resilient.

The Bill shows that we are tackling affordability for the long term.

[Mr Charles Walker (Broxbourne) (Con)]

My right hon. Friend says that we are going to improve the nation’s ability to capture and store water, thereby reducing abstraction. Will he be telling us later in his speech where the new reservoirs are to be built?

[Mr Paterson]

I will be moving on to that. I cannot tell my hon. Friend exactly where the new reservoirs will be because that will be down to the individual companies, according to local circumstances, but I can categorically assure him that I hope that the measures in the Bill will release a floodtide of new investment, potentially in new reservoirs, use of aquifers and transfer of water between water companies, to maximise use of the water that lands on this country. I remind him that 95% of that water ends up in the sea. We need to manage the water better before it gets there.

The Bill shows that we are tackling affordability for the long term. The package of reforms is designed to exert a sustained downward pressure on water bills and ensure affordable flood insurance for households in areas at high risk of flooding. We are well aware of the financial challenges that hard-working households are facing.

Earlier this month I wrote to water companies asking them to consider whether to apply the full price increases next year that were planned for in the 2009 price review. I asked them to share the benefits of historically low financing costs with their customers. Ofwat is with me on this. It estimates that by taking account of lower financing costs, the next price review could reduce pressure on bills by between £120 million and £750 million a year from 2015, while still enabling companies to invest in high-quality services and the environment. This demonstrates once again how critical financing costs are to the bills that customers pay: 1% on finance costs leads to about a £20 increase in bills to customers. We must not undermine in any way the stable regulatory system which gives confidence to investors.

This Bills means that all business, charity and public sector customers in England will be able to choose their water supplier and, for the first time, their sewerage supplier. They will be able to shop around for the best deal and a package that suits them. Large water users could make savings by switching to a water supplier that offers them water efficiency advice and smart metering. We have seen how competition in Scotland is delivering real benefits to customers and to the environment. The public sector in Scotland is forecast to save £36 million over four years, thanks to better water efficiency and discounts. Customers in England deserve the same opportunities. Multi-site customers such as hospitals and supermarkets could save thousands of pounds in administration costs by dealing with only one water company.

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[Mr Paterson]

I thank the hon. Gentleman for that interesting question. We would be happy to meet the Canal & River Trust—it would be appropriate for the Under-Secretary of State, my hon. Friend the Member for North Cornwall (Dan Rogerson), to do so, as he is taking the Bill through the House—but I think that it is being negative. With its wonderful and virtually national network, it has a real opportunity, because if we open up more upstream providers we will need a vehicle for moving water around. I take a very positive view of this for the Canal & River Trust. We are definitely happy to meet it.

We are not at this point offering choice to household customers. We are taking a step-by-step approach, gaining experience from a competitive business retail market first and reducing any risk to investment in the sector. We have seen in Scotland that competition tends to be around value-added services, rather than price, making the case for household competition less attractive. The conditions need to be right. For example, we would need much higher levels of metering before household competition was practical. Although household customers will not be able to choose their supplier, they will benefit from a framework that encourages water companies to put customers at the centre of decision making or risk losing market share. Ofwat will ensure that household customers do not subsidise the costs of increased competition.

I know that some water companies have asked for the option of exiting the retail market. The problem with that approach is that household customers could lose out because they would not have the ability to move to a new supplier, and if the incumbent water company keeps its household customers but disposes of its business customers, the householder is stranded with a company that has little incentive to provide a decent service. We are not prepared to risk that.

The Bill will also make it much easier for new businesses to enter the water market to provide new sources of water or sewage treatment services, known as upstream services.

[Mr Charles Walker]

On that point, will my right hon. Friend clarify something for me? What is a new source of water?

[Mr Paterson]

A new source of water is one that is not currently being used, so that could mean opening up old boreholes, or farmers building new reservoirs, or water companies building new reservoirs—we have not built a new reservoir in this country for over 30 years. There are all sorts of new sources of water. Around 95% of the water that lands on this country ends up in the sea. We want to manage it better before it gets there.

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[Mr Paterson]

It is known as the market; where there is demand, people will invest. We are hoping to create a new market for this product, and I am absolutely confident, given the freedoms we are releasing in this Bill, that there will be significant investment. We should not forget that £116 billion is an extraordinarily large amount of money that we would never usually have got from the Treasury under any Government of any colour. This is a great success. We want that investment to keep flowing in for exactly the sort of projects that my hon. Friend discusses.

For the first time, we are opening a market for businesses to recycle and reuse waste water as a new water resource. They will also be able to purchase sewage sludge that might otherwise have been sent to landfill—for example, for use in anaerobic digestion plants.

We need to increase the number of options that water companies can use to store and supply water to their customers. The solutions will vary across the country, reflecting different levels of water demand and availability, geography, and geology. For some, storing more water in new reservoirs or in recharged aquifers will help. Others, particularly in water-stressed areas, may need more action to cut demand, including through greater water metering. For others, improving interconnection to move water around between their supply systems will help. Companies such as Severn Trent, Anglian and Yorkshire Water collaborated on practical solutions during last year’s drought. This Bill will make such supply arrangements much easier to put in place. It will enable water resources to be used more flexibly and efficiently, reducing the need for expensive new solutions that customers would have to pay for.

The Bill provides flexibility for the regulator to work with the industry on shaping and introducing these new markets. It also includes checks and balances so that the Government can ensure consistency with our policy framework. We will be issuing guidance to Ofwat on how it must set the rules of the game. We have already published charging principles so that people can see how Government policy will shape the new regime. Since the pre-legislative scrutiny of the draft Bill, we have strengthened the role of Government, with a power to veto Ofwat’s charging rules, and the new market codes. I am extremely grateful to Members of this House, especially those on the Environment, Food and Rural Affairs Committee, who scrutinised the draft Bill. The Bill is stronger as a result of that scrutiny.

Governments do not create successful markets. Well-functioning markets are created by participating businesses and are allowed to evolve over time. That is why the detailed work to develop these new markets is being delivered by the experts. Through the Open Water programme, we are working with the water industry, Ofwat, the Scottish Government, regulators and customers on the detailed work required to prepare for implementation of these new markets. We are committed to reforming the abstraction regime so that it is fit to face the challenges of the future.

[Mr Charles Walker]

Will my right hon. Friend give way on that point, because it is such an interesting topic that I think he will have a lot to offer?

[Mr Paterson]

indicated assent.

[Mr Walker]

Over the past 30 years, these so-called experts, particularly the water companies, have destroyed many of the chalk streams in my part of the country and in Wiltshire, Hampshire and Dorset—the list is almost endless. I therefore do not have a lot of confidence in them. They are very good at looking after their own interests but not the interests of the environment.

[Mr Paterson]

I am grateful to my hon. Friend for his statement. I assure him that I take on board the damage that has been done by over-abstraction. However, this is extremely complicated and it is going to take time; we could make a real mess of things if we blunder into it. I am absolutely confident that through the upstream reforms that I mentioned, by holding more water back in various forms, which might be the reservoirs my hon. Friend wants, putting down aquifers, or SUDS—sustainable drainage systems—schemes, we will have water available for these rivers when they run dry. I totally sympathise with his worries about the chalk streams. It is very much our intention that this Bill will provide more water to keep these rivers flowing.