Oral Answers to Questions

Debate between Dan Rogerson and Thomas Docherty

Thursday 9th January 2014 Commons Chamber

[Dan Rogerson]

As I made absolutely clear to the hon. Gentleman in my previous answer, many water companies are now taking such action, but there are other things we can do to help people who are struggling with their water bills. The biggest thing we can do is to ensure that we bear down on charges for everybody. My right hon. Friend the Secretary of State has been clear in his expectations, Ofwat has been clear in the way it has entered into the price review period and companies are now responding. We will see, in the vast majority of cases, bills going with inflation or even perhaps, in some cases, going below inflation. That is a real improvement on the last price review period, given the opportunities companies have had with low borrowing.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

Water bills have increased by almost 50% in real terms since privatisation, yet in the past financial year the regional water companies made £1.9 billion in pre-tax profits and paid out a staggering £1.8 billion to shareholders. Will the Minister explain why on Monday his Government rejected Labour’s proposed amendment to the Water Bill for a national affordability scheme with clear and standardised criteria set by the Secretary of State to replace the Government’s failed voluntary approach?

[Dan Rogerson]

I am happy to reiterate to the hon. Gentleman what I said on Report on Monday. His proposal to fund some sort of national affordability scheme out of excess profits relies on the regulator allowing excess profits in the first place. This Government’s robust price review period will press down. Under the previous Government, when the previous spending review took place, there was a lack of guidance. It is a very different situation now.

Water Bill

Debate between Dan Rogerson and Thomas Docherty

Monday 6th January 2014 Commons Chamber

[Thomas Docherty]

I do not want to get sidetracked by a debate about the merits of privatisation—I think you would pull me back in line if I did so, Madam Deputy Speaker—but I will just point out to the hon. Lady that Scottish Water, which is owned by the state, has invested more per connected property, I think, than any of the English water companies, with the exception of South West Water, so I am not entirely convinced by her argument.

To go back to the comments made by the hon. Member for Skipton and Ripon, despite paying out hundreds of millions of pounds to investors, Yorkshire Water has paid next to nothing in corporation tax over the past few years. I am not singling out Yorkshire Water in particular—it is clear that its behaviour is no better or worse than that of any of its competitors. The problem lies with the culture of water companies themselves. They have behaved in an unacceptable manner towards their customers for too many years. It is clear that they have come to regard customers as nothing more than cash cows, and many have paid little or no attention to customer complaints. That is why we believe it is in the interests of hard-pressed customers that the industry be subjected to greater scrutiny.

New clause 11 in particular shines a light on the opaque world of the companies’ financial and business practices. This is not an unreasonable or overly bureaucratic requirement. For many years, water companies voluntarily produced reports such as those that the new clause would require of them; yet, strangely, in recent years they seem to have got out of the habit of providing that information to customers, the regulator and the Department.

It is also worth noting, before the Minister replies, that Ofwat’s Scottish counterpart, the Water Industry Commission for Scotland, requires Scottish Water to produce the relevant information on an annual basis. Therefore, we believe that this is not an onerous or bureaucratic requirement.

New clause 12 would require Ofwat to pay far more attention to the problem of affordability of bills. I am conscious that we will have a wider debate about affordability when we discuss the second group of amendments, but Ofwat’s current interpretation of its role as an economic regulator is far too narrow. Both household and business customers feel that they are an afterthought, and the new clause makes it clear that Ofwat must have due regard to the cost of bills when setting the prices in future review periods. Labour believes that during a time of unprecedented squeezes on household budgets, much more must be done to help hard-pressed customers. Our two new clauses are important measures that would ensure that water companies served their customers’ interests, not the other way around.

We will, unsurprisingly, support the Select Committee’s new clause 2 on retail exit if it is pressed to a vote. We welcome the fact that the hon. Member for Brecon and Radnorshire (Roger Williams) appears to have had a change of heart over the festive break. During the Bill’s Committee stage he did not vote in favour of Labour’s proposal, but we very much welcome his change of heart. If we do not get an opportunity to discuss the proposal today, we hope that the other place will note that even members of the Bill Committee have signalled that they believe, on reflection, that it is a sensible and worthwhile measure. I will not repeat the discussion we had in Committee, but I think it is fair to say that, based on the signatories to the new clause, the proposal has cross-party support, which we welcome.

We will also support the Government’s amendments. I am slightly surprised that they felt the need to table a series of amendments, but not as surprised, I suspect, as the Minister when he was informed by his civil servants. The Minister has told us many times that he is lucky enough to be half Welsh, so one would have thought that he would have noticed the impact on Wales of the new clauses tabled by the Government in Committee. I hope he will explain how that slightly embarrassing oversight occurred.

We hope we will have an opportunity later this evening to press our new clauses to a Division. We welcome the spirit in which this first part of the debate has been conducted and I do not wish to detain the House any further at this point.

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dan Rogerson)]

I start by echoing the remarks of the Opposition spokesman, the hon. Member for Dunfermline and West Fife (Thomas Docherty), with regard to the earlier statement made by my right hon. Friend the Secretary of State. Our thoughts are with those who have been affected by the storms and flooding over the Christmas and new year period, and I pay tribute to all those who have worked incredibly hard, including the Environment Agency, local authorities, the emergency services and, of course, those volunteers and community representatives who have supported their neighbourhoods and neighbours.

This discussion has covered a number of new clauses and amendments in relation to the regulation of water and sewerage undertakers and licensees, particularly those provisions designed to extend competition in the sector. The new clause tabled by the hon. Member for Arfon (Hywel Williams) would alter the devolution settlement by devolving further powers to the National Assembly, and he has set out his appetite for doing so. Generally, the Government of Wales Act 2006 devolves its issues down the national border, but the situation is not so straightforward for water supply. Water catchment areas and water supply management infrastructure cross the national boundary. The appointment and regulation of any incumbent water company whose area is not wholly or mainly in Wales is not devolved. That means that the legislative competence of the Assembly does not cover the parts of Severn Trent Water’s area in Wales.

--- Later in debate ---

[Thomas Docherty]

I wish you a happy new year, Mr Deputy Speaker. Given that new clause 2 specifies that the process can take place only with the Secretary of State’s consent, will the Minister tell the House how such an unintended consequence might happen?

[Dan Rogerson]

We are very clear that we look at such issues strategically across the whole market, rather than picking them case by case. The issue is that we want to make reforms based on the principles that we set out during discussions in Committee and elsewhere.

Were a company to exit and to leave household customers on their own—without the non-household element—customers would not only be left with a company that had limited incentives to focus on improving customer service, but would be at risk of having higher bills, because providing, as new clause 2 does, for forced legal separation of the companies’ retail businesses would reduce regulatory stability and risk increasing the cost of capital.

Let me be clear: we want to see a successful retail market. The Bill sets a framework for new entrant retailers to enter the market on an equal footing with the retailers of the incumbent water companies. Our opposition to a provision about retail exit has nothing to do with supporting the position of incumbent water companies; we expect Ofwat to use its regulatory powers to make sure that new entrants can be confident that they are competing on a level playing field.

However, retail exit is not about delivering a level playing field. For example, in written evidence to the Public Bill Committee, the Water Industry Commission for Scotland argued that a provision about retail exit was needed so that new entrants had other options for increasing their market share than

“to acquire customers by winning them one contract at a time.”

However, that is exactly how entrants to the market in Scotland have had to win business unless an existing licensee surrenders its licence or has it withdrawn. In that case, the customers of the exiting licensee are shared out among other licensees, but otherwise all business customers stay with the incumbent retailer, Business Stream, until they actively decide to switch.

Some commentators have painted a picture of an incumbent water company being left without any customers, because all of them are lost to their customers once our retail reforms are in place. We feel that that is a very unlikely scenario, given that non-household customers represent only some 10% of the total retail market, and that 90% of customers—in other words, households—will not be able to switch suppliers.

It is quite an assertion to say that 100% of an incumbent’s non-household customers will switch suppliers. Some 60% of non-household customers in Scotland have put their water services out to tender, but most customers have elected to stay with Business Stream. We understand that only about 5% to 10% of customers have switched since 2008. The customers who stayed with Business Stream have benefited from improved services, without having to switch, by renegotiating their terms. We might expect a more active market in England from 2017.

[Thomas Docherty]

I fear that the Minister is confusing two different issues. Undoubtedly, competition in itself has brought huge savings and has made Business Stream—or Scottish Water—change its whole ethos, but like does not follow like: simply because customers have stayed with Business Stream does not mean that the market is not working. Given that only 10% of customers have switched, as he says, does he not accept it is quite likely that some smaller water companies will not be able to compete with big retail providers?

[Dan Rogerson]

I certainly was not seeking to suggest that the market is not working in Scotland. My point was that some people have chosen to stay with their incumbent, and they may wish to do so rather than to have an incumbent abandon them and walk away.

An Oxera report commissioned by WICS and published in November 2012 predicted that incumbents would lose some 40% of their non-household customers in the first year of the opening of the retail market, with a 5% loss of profit. However, arguments that make an economic case for exits seem to be based on incumbents losing all their public sector and multi-site customers in the first year of market opening. The Oxera view is bolder than that of the rating agency Moody’s which, in February 2012, said that a worst-case scenario would be incumbents losing 25% of their non-household customers in the short to medium term, with a much smaller loss of 0.69% of profit. Although no doubt all incumbents will lose some customers, we can suppose incumbents will take steps, such as those that Business Stream has taken, to retain customers.

Anecdotal evidence from business customers suggests that incumbents are already upping their game, even though retail competition reform is some years away. Large business customers have suddenly discovered that they have a named customer service contact, and some have been offered improved metering services. The idea of incumbents sitting around while customers disappear is therefore, in our view, an unlikely scenario. In addition, water-only companies will be able to apply to Ofwat for a sewerage licence, which will allow them to compete with licensees and other incumbent sewerage companies by offering both water and sewerage services to their customers.

My point is that this is evolution, not revolution. Many non-household customers may choose to stick with the incumbent supplier because the incumbent supplier will improve its services to them as a result of the reforms. The benefits of that may in turn be passed on to household customers. Forcing or even allowing retail exit ignores such points. Where customers choose to switch, we anticipate a growth market in which innovation and competition lead to benefits, both environmentally and in customers’ bills. Allowing partial retail exit would open the door to forced separation if individual cases of discrimination were discovered, and we have made clear our position on that.

As I have said, any decision on separation should be made by Ministers and Parliament. We are not prepared to take the risk of forced restructuring, or even the potential for it as provided for in new clause 2, destabilising investment or increasing costs to customers. The new clause envisages the Secretary of State permitting exits, but that may not reduce the risk of a competition authority forcing an incumbent water company to make an application to exit. I therefore urge hon. Members who tabled new clause 2 and amendment 12—led by the Chair of the Select Committee, the hon. Member for Thirsk and Malton (Miss McIntosh)—not to press them to a Division.

The hon. Lady raised other issues about the industry in general, particularly in relation to upstream reform. We know from experience that setting out how markets should work in primary legislation is very inflexible and can stifle innovation. I know that she is keen for us to do more in that regard, but our view is that that was one clear lesson from the last attempt to extend competition through legislation in 2003. That is why the framework in the Bill sets the scope and direction of reform, without being overly prescriptive. We are working closely with Ofwat, customers and the industry—through the high-level group and the Open Water programme—to ensure that new markets work effectively, and we know that the industry does not want to constrain the market unnecessarily with too much detail in primary legislation, any more than the Government want to do that.

On new clauses 11 and 14, the hon. Members for Dunfermline and West Fife and for Hayes and Harlington (John McDonnell) have raised important issues about how the sector is run. As the hon. Member for Dunfermline and West Fife pointed out, we had a previous debate on this set of issues in which hon. Members from all parties were keen to put on the record their concerns about the past operation of the industry. I fear, however, that we have been talking about things as they were, not as they are and will be. Ofwat is already taking action to improve standards of corporate governance across the sector. It recently consulted on principles relating to board leadership, transparency and corporate governance, and it is putting pressure on water companies to strengthen audit arrangements, board member appointments and governance. The response from water companies has been positive and I welcome that. I do not want to belittle the issues that the hon. Member for Hayes and Harlington set out, but Ofwat has listened and is providing leadership to deal with them.

--- Later in debate ---

[Dan Rogerson]

My hon. Friend is an astute and fearless challenger of all authorities, whether they be in the private or public sector. I am sure that he is well aware of the routes that he can take to challenge the company on that matter publicly and privately. The new clauses that we are debating would not assist him in that aspiration.

[Thomas Docherty]

The Minister probably has first-day-back blues. I refer him to Opposition new clause 11, which would allow the hon. Member for Broxbourne (Mr Walker) to check the performance of his water company.

[Dan Rogerson]

The hon. Gentleman hopes that his new clause would require further reports to be made to the Secretary of State. However, that information is already in the public domain. That is why supporting new clause 11 would not be helpful. I understand and respect his desire to ensure that the industry is as transparent as possible. I understand the ambition behind the new clause, but I do not share his enthusiasm for the wording that he has chosen.

The privatisation of the water industry has been a success story in terms of investment. Helpfully, the hon. Member for Hayes and Harlington pointed out that I represent a constituency in the South West Water area. The coalition Government have recognised that there were a few flaws in the privatisation process, so there is now extra money to support bill payers in the south-west, who paid for the clean-up of the beaches around the south-west peninsula.

As was pointed out by my predecessor, my hon. Friend the Member for Newbury (Richard Benyon), there has been huge investment in infrastructure since privatisation. That is one of the key successes that we want to build on and not jeopardise. The stable regulatory framework for the water sector has enabled companies to attract more than £111 billion of low-cost investment to upgrade water and sewerage infrastructure and to improve customer service and environmental standards.

I agree that we should be putting pressure on the water sector to act as transparently and responsibly as possible. Ofwat is already doing excellent work on the issues that have been raised by hon. Members. I do not believe that duplicating the reporting requirements would help. For that reason, I believe that new clauses 11 and 14 should be resisted.

New clause 12, for which the hon. Member for Dunfermline and West Fife argued, would place a duty on Ofwat to have regard to the charges to household and non-household customers. That would simply duplicate Ofwat’s existing duty.

I turn to a number of technical amendments, which the hon. Member for Dunfermline and West Fife charitably referred to. I will move amendments 13 to 50, 52 to 54 and 60 to 87 formally at the appropriate time. They will mainly make changes to schedules 5 and 7. Schedule 7 makes consequential changes to the Water Industry Act 1991 and other primary legislation as a result of our reforms, and schedule 5 makes further changes should the Welsh Ministers decide to adopt the reforms being introduced in England. Amendment 59 and new schedule 1 will provide the Secretary of State with the power to produce transitional orders that allow us to deliver retail and upstream reform separately.

Taken together, our amendments will provide Ministers with the maximum flexibility to commence the different market reform provisions transparently and in stages, as per our commitment to stagger the implementation of our retail and upstream reforms. They will enable the current arrangements to continue without diverting attention from the immediate priority of preparing for the opening of the reformed retail market in April 2017.

--- Later in debate ---

[Thomas Docherty]

I wish you a merry Christmas and a happy new year, Mr Deputy Speaker.

I welcome the thoughtful remarks by the hon. Member for Thirsk and Malton (Miss McIntosh). As she rightly said, the Minister and I had the pleasure of serving on the Select Committee under her chairmanship. She was an excellent tutor to both of us, although I suggest, looking at the debates today and in the Bill Committee, that I remember more of what the Select Committee agreed than the Minister. I am sure he will eloquently explain his position.

[Dan Rogerson]

The hon. Gentleman is always kind enough to remind me repeatedly, so I fear I can never forget any of our deliberations.

[Thomas Docherty]

It is always a good thing to be a charitable and giving soul, so I do my best to try to accommodate the Minister.

I would like to speak to the new clauses that stand in my name. As I said earlier, much attention has been paid to households that faced a difficult Christmas and new year because of the climatic conditions that battered the United Kingdom. Much less, however, has been written on households that faced a stressful period because of the economic conditions that have battered the United Kingdom, not just in the past three weeks but in the past three years. Hundreds of thousands of households did not enjoy the Christmas that all of us here in the House of Commons did, in warm and secure homes with plenty to eat and with presents given and received. Too many families were left unable to enjoy the Christmas joys that we take for granted.

The cost of living crisis cannot be dismissed as a soundbite, as many Government Members try to do. The cases of hardship regularly brought to the attention of Members of Parliament cannot simply be batted away. At a time when household incomes are continuously being squeezed, it is not acceptable to Opposition Members for most water companies to continue to do so little to help their struggling customers.

The size of water bills may not have reached the obscene level of their gas and electricity counterparts, but there is no disputing their cumulative impact. Citizens Advice reported to MPs in November that it had received almost as many inquiries from people worried about their water bills as they had about the other two utilities. DEFRA’s own statistics state that some 2.5 million households now find themselves in what the Department itself defines as water poverty, while in the past year water companies reported pre-tax profits of £1.9 billion and paid out, in dividends, a staggering £1.8 billion to their shareholders.

You might have expected the water companies to rush forward with schemes to assist their hardest-pressed customers, Mr Deputy Speaker. After all, the previous Labour Government put in place legislation to allow each company to introduce a tailor-made scheme for its own region. The water companies told the then Government and Parliament that that was all that was needed: a voluntary system of social tariffs that each and every water company would then set and implement quickly. Four years later, what progress has been made? So far, only three water companies have got around to implementing social tariffs, helping a grand total of 25,000 households across the country. Even by the end of the price review period, more than a third of water companies will still have not bothered to lift a finger and introduce such a scheme. When the water companies gave evidence to the Bill Committee, did they acknowledge that they had let down their customers and Parliament? Did they acknowledge that the rate of progress was not good enough? Did they say sorry, even once? Of course not. They blamed everyone but themselves: they blamed the regulator, they blamed the Government and they blamed the customers.

What has been the response of the Secretary of State, and his Minister with responsibility for water, to the crisis facing households? The Secretary of State sent a letter to the companies in October begging them not to raise prices further. It was not, we note, an instruction or a warning that if they did not take heed, the Government would step in. It was not even a rebuke; it was just a weak letter. That is why the Opposition have tabled four new clauses that will each help hard-pressed households. Taken together, they would make a tangible difference to those struggling with the cost of living crisis. With your permission, Mr Deputy Speaker, I will briefly take each new clause in turn, explaining the existing problems and how our proposals would address them.

First, on bad debt, I will build on the excellent remarks by the Chair of the Select Committee. Ofwat estimates that on average bad debt adds £15 to every customer’s annual bill. Note, of course, that that is just the average amount; in some cases, it is significantly more than that. As the hon. Lady said, water companies are, rightly, not allowed to cut off those who cannot afford to pay their bills, but they are allowed to pass the cost of non-payment on to their other customers. In effect, the sector already has cross-subsidisation.

--- Later in debate ---

[Dan Rogerson]

The hon. Gentleman has set out how the burden of pursuit would fall on the water companies, but of course the burden of providing that information to them would fall on the landlords, so there would be a burden.

[Thomas Docherty]

I congratulate the Minister on stating the blindingly obvious. Of course, the landlord would have to provide that information, but it is not the longest list in the world, and it is information that landlords have anyway, so the Opposition, like the Select Committee, find it difficult to comprehend why it would be so onerous for landlords to provide a list of their tenants by property. If he has specific examples of hard-pressed landlords who have made representations to him, I am sure he will refer to them when he responds.

For the fourth time, I ask myself the question: why the opposition from the Government? The Secretary of State has had his usual Pavlovian reaction to a suggestion that the Government should take action. It appears once again that when Parliament, the Select Committee and the water industry ask DEFRA to do something, its knee-jerk response is to think of spurious reasons why it should not or cannot do it. Our new clause would be a pragmatic and efficient measure that would help to drive down costs on all decent households, help water companies to do their job and ensure that all customers meet their responsibilities.

Our second new clause—new clause 10—recognises that not all water companies have done all they can to tackle the problem of bad debt. As I mentioned earlier, although the average bad debt figure is about £15, there are wide variations across the country. As the hon. Member for Newbury (Richard Benyon) pointed out, that is because some, such as Yorkshire Water, have worked with customers and debt advice groups, such as Citizens Advice, to put in place measures to help customers genuinely struggling to access payment packages and programmes, but unfortunately that is not the case across the country. Too many water companies have come to the unsurprising conclusion that, because they can pass the cost of bad debt on to their other customers, they need not bother to do anything about it themselves.

That is why we have tabled new clause 10. We want to give Ofwat and water companies a clear and unambiguous signal that hard-pressed customers should no longer be treated as a cash cow by companies that cannot be bothered to meet their own responsibilities. Where the regulator and the Department are satisfied that water companies are not doing enough to pursue bad debtors, the cost should no longer be passed on to other customers. Taken together, not only would our two new clauses be practical measures, but they would send a clear signal that while we will do more to help those who are struggling, we expect all customers and water companies to do their fair share.

Our third new clause—new clause 8—would help to ensure that customers know about the help for which they are eligible. In 1999, the last Labour Government introduced WaterSure to help low-income metered households with high essential water use. WaterSure caps the bills of metered households in receipt of a qualifying benefit or tax credit at the average bill for that water company’s operating area. It applies to households with three or more children under the age of 19 living at home or where someone in the household has a medical condition that necessitates high water use. It is an important measure that at the time received cross-party support and which, according to the latest figures that the Minister gave us in Committee, has helped 70,500 households in England—I think a similar scheme has helped approximately 20,000 households in Wales. Although that is welcome, we believe that that level is unacceptable. Given that, as the Consumer Council for Water has said, only one third of eligible households are in receipt of the benefit to which they are entitled, the Government have been guilty of complacency.

The Minister previously claimed there was no need for the new clause because all the water companies already provided this information. For the benefit of Members who have not had a chance to look at the amendment paper, we are proposing that information about the eligibility criteria and how to apply should be included in all water bills. He believes that all water companies already provide this information, but unfortunately for him the reality does not match his statement. Not only do his own figures show that the current approach is not working, but our own anecdotal research shows that customers are not even aware that WaterSure exists. We want to make it clear to water companies that they must do much more to promote the scheme, and we want Ofwat and the Government to hold them to account if they do not. I hope he has reflected not only on the evidence we presented in Committee, but on his own figures and the evidence from the CCW, and will listen to common sense.

Finally, our fourth new clause—new clause 7—deals with the central problem of the failure of the voluntary approach to social tariffs. As we have set out, too few water companies are helping too few customers through social tariffs, and it is clear that left to their own devices many water companies, by their own admission, will never introduce such schemes. That is why we are proposing a national affordability scheme to end the postcode lottery and ensure national standards for eligibility. We would expect schemes to be funded by the excess profits of the water companies, not by other water bill payers. As I have said, last year these companies made an eye-watering £1.9 billion in pre-tax profits and paid out £1.8 billion to investors. The idea, for example, that Yorkshire Water, which paid out £240 million, cannot afford to provide support through social tariffs is clearly nonsense.

Enough is enough. Hard-pressed households need real help now, and these new clauses are four practical and simple measures that would ensure they get it. It is time for the coalition to match our commitments.

--- Later in debate ---

[Dan Rogerson]

The hon. Member for Dunfermline and West Fife (Thomas Docherty) has proposed a number of new clauses, which I shall address before dealing with the lead new clause 3, tabled by the Select Committee Chairman.

New clause 7 would place a requirement on the Government to introduce through secondary legislation what is described as “a National Affordability Scheme”. The details of the scheme are not entirely clear. We debated in Committee an identical clause tabled by the hon. Gentleman, but at that point, the funding was not made clear. He said today that it would be funded specifically from the profits of the water companies rather than from other bill payers in a cross-subsidy approach.

[Thomas Docherty]

I refer the Minister to the evidence session during the eighth sitting of the Public Bill Committee, where I specifically said that the scheme would be funded from excess profits. Perhaps the civil servants should pay more attention in future.

[Dan Rogerson]

The hon. Gentleman is, as always, keen to assist. What I said comes entirely from my recollection of his introduction of the measure in Committee and if it is faulty, it is certainly not on account of any information briefed to me by others. I am grateful to the hon. Gentleman for highlighting the issue of excess profits. However, this does not address the point that we have a regulated system under which the profits are allowed for under the price review process. I appreciate that he was not a Member when his party was most recently in government, but it was quite happy to move forward with the pricing process. What he is saying now is that he has no confidence in the regulator—in other words, that the regulator would set a level of profit that it thinks reasonable for the price review period, but that this would now somehow be unpicked as being in excess in some cases in order to fund the scheme. I am happy to give way again, in case he wants to correct this.

[Thomas Docherty]

I am grateful, but on this occasion it is perhaps the Minister who should have paid more attention to my remarks a few moments ago. I clearly said that the last Government gave the water companies time to introduce the voluntary schemes, but that they have now failed to honour their commitment, so the Government should step in and do what the companies failed to do themselves.

[Dan Rogerson]

I understand the hon. Gentleman’s views on social tariffs, which he feels have not been introduced in a speedy enough fashion. My point was rather about the issue of excess profits. I said that the hon. Gentleman was seeking to introduce a concept that is perhaps a subjective rather than an objective assessment of the profits made by water companies. The whole point of the price review process and price review period, however, is that a regulated process takes account of the need to attract investment and thus the need to make a reasonable return in profit.

--- Later in debate ---

[Dan Rogerson]

The Chair of the Select Committee is quite right that I have yet to respond to that aspect of her argument and I will seek to do so, I hope to her satisfaction, once I have made my closing remarks on new clause 9.

The industry is working with landlords’ organisations to establish the new voluntary scheme that will enable landlords to provide information about their tenants direct to water companies swiftly and easily and that approach has the support of Water UK and the main landlords’ organisations. The new database will launch in March next year and I believe that it should be given time to work. For those reasons, I believe that new clause 9 is not necessary.

[Thomas Docherty]

I am grateful to the Minister and am listening carefully to what he says. He will, I am sure, come on to his justifications as regards new clause 10 in a second. Before he finishes dealing with new clause 9, however, can he say what he defines as “time to work”?

[Dan Rogerson]

We should at least allow the database to be set up and give it a chance to operate. That would seem to be a fair approach and it is certainly the one I seek to take. I understand the hon. Gentleman’s keenness to see progress but I believe that the voluntary approach will have some effect and we should give it time to do so.

Let me turn now, as the hon. Gentleman uncannily predicts, to new clause 10, which he has tabled in his efforts to make some changes to the Bill, and in Committee we discussed a similar clause that he tabled. The new clause will provide a new power for Ministers and Ofwat to disallow companies from recovering the cost of unpaid bills from their paying customers. The hon. Gentleman has argued that there is no incentive for companies to collect bad debt. During our previous discussions, I made it clear that Ofwat has the power to decide which costs may be recovered through the price review. Ofwat is already using the price review process to bear down on the costs of bad debt and requiring companies to demonstrate high performance in debt collection and to show that any increase in bad debt is beyond their control before they are allowed to include it in customer charges. The price review will challenge poor performers to raise their game.

The new clause proposes a power for a future Secretary of State to intervene in the setting and recovery of charges. That is exactly the kind of political interference that concerns the investors who are critical to the water industry. I have stated before that the stability of the regulatory regime is vital to keeping the cost of borrowing low. An increase in that cost will have the direct result of putting up customers’ bills and I am firmly of the view that it is for the regulator and not the Government to make detailed decisions about charges. New clauses 9 and 10 intend to incentivise companies to improve their debt collection performance and I absolutely support that objective. I cannot, however, support the approach that has been proposed and I am sorry to disappoint the hon. Gentleman—and, I am sure, to surprise him.

Let me turn finally to new clause 3, tabled by my hon. Friend the Member for Thirsk and Malton (Miss McIntosh), the hon. Members for Poplar and Limehouse (Jim Fitzpatrick) and for North Tyneside (Mrs Glindon) and my hon. Friend the Member for Brecon and Radnorshire (Roger Williams). The proposed clause targets a number of points that we have already discussed in some detail, including bad debt and social tariffs.

The practical effect of the new clause would be to require the Department for Work and Pensions to supply water companies with personal information about their customers. The clause focuses solely on the subset of customers that are both in receipt of benefits and living in rented accommodation. Amendment 9 would simply include the proposed new clause in the list of measures to be commenced two months following Royal Assent.

I am grateful to my hon. Friend the Member for Thirsk and Malton for her clarification that the clause is intended both to help water companies to collect their debts and to target social tariffs at customers in rented accommodation who are also in receipt of benefits. However, I am afraid that I do not believe that the clause is likely to achieve either objective effectively.

As I have already set out, the Government’s position on bad debt among water customers is that there is a great deal more that the industry can do for itself. We think, therefore, that there is more companies can do to collect their debts and we want them to focus on that rather than to look to the Government to solve the problem for them.

I am pleased, as I have said, that the industry is already taking more responsibility, by working on a voluntary approach to sharing information on customers in rented accommodation, using the landlord database, as we have discussed in response to new clause 9, tabled by the hon. Member for Dunfermline and West Fife.

--- Later in debate ---

[Thomas Docherty]

I remind the Minister that our scheme would not involve cross-subsidisation. I am surprised that he is so against the use of benefit systems for social tariffs, because the Liberal Democrats in Scotland actively supported the introduction of social tariffs based on council tax benefit. What is the difference?

[Dan Rogerson]

I am seeking to point out that there are a range of benefits and a range of circumstances for people. The hon. Gentleman highlights one benefit. Of course council tax benefit no longer exists in this country in the format that it does in Scotland, as we have now moved over to local council tax forms of support, so there is a different system, which would not necessarily translate across. The hon. Gentleman is keen always to learn the lessons of Scotland, but some of these things do not apply simply, given the different frameworks following the devolution settlement.

We place emphasis on locally designed social tariffs developed in close consultation with the customers who will ultimately foot the bill, as opposed to crude, centrally imposed eligibility criteria. Although I very much thank hon. Members for their new clauses and understand their aspirations in tabling them, I would urge my hon. Friends to resist them.

--- Later in debate ---

[Thomas Docherty]

May I wish you a warm and happy new year, Madam Deputy Speaker?

We have had a thoughtful and knowledgeable debate over the past hour and a half or so. I commend two Select Committee Chairmen and a former Minister for their remarks, even if we did not agree with every part of the former Minister’s interpretation of the past three and a half years.

Time is limited, so I hope the House will understand if I restrict my remarks to some of the new clauses. Unsurprisingly, the Opposition agree with the Environment, Food and Rural Affairs Committee about SUDS. I am sure that, as a former member of that Committee, the Minister will agree with himself on the issue. The hon. Member for Thirsk and Malton (Miss McIntosh), who chairs the Committee, was right to highlight the increasing burden being placed on a network that, in many cases, is struggling to cope. We have heard that the ability to cope with additional development is not always given the consideration that it needs. I hope that the Minister will reflect on the cross-party support on that point that the hon. Lady demonstrated.

There is a broad coalition of opinion on abstraction reform, to which the hon. Member for Newbury (Richard Benyon) alluded, but it is not just made up of what he might describe as the usual suspects—the non-governmental organisations involved. That well known environmental organisation the Food and Drink Federation made a submission to the Public Bill Committee. We welcomed the Minister’s announcement in the Committee. It was disappointing that his colleagues chose to make it to the media before it was made to Parliament, but of course I assign no responsibility for that to him. We welcome the consultation, but we agree with the Environment, Food and Rural Affairs Committee that it is long overdue.

I say to the hon. Member for Newbury that the Government certainly could not be accused of legislating in haste, because after almost four years we simply have not seen sufficient progress on abstraction reform. My hon. Friend the Member for Garston and Halewood (Maria Eagle) and I look forward as Ministers in the next Parliament to taking such legislation through with due speed, and we look forward to the support of Conservative Members.

My hon. Friend the Member for Stoke-on-Trent North (Joan Walley), the Chair of the Environmental Audit Committee, made an incredibly thoughtful and logical speech, and we support her new clause 6. We are clear that, as she said, this is not a debate about the merits and demerits of fracking technology. It is about trying to ensure that there are safeguards in place. Her constituency is still suffering the fallout from open-cast mining not having had sufficient guarantees in place, so I understand exactly where she is coming from.

Given that time is incredibly short I will bring my remarks to a conclusion, but it is clear that the other place will have an important job to do in the weeks ahead. A number of issues in this group of amendments—and indeed elsewhere—have not been addressed, and my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) is right to say that we must consider Flood Re in some detail. With the greatest respect, the Opposition will not simply go along with the Government because they have come to a deal and say that that is good enough; we need more detail from Ministers. We look forward to the Bill making progress but we will, as I have suggested, press some amendments to a vote.

[Dan Rogerson]

In the time available I shall seek to respond to as many points as I can. The Chair of the Environment, Food and Rural Affairs Committee, the hon. Member for Thirsk and Malton (Miss McIntosh), has been a strong advocate of and campaigner for sustainable drainage over many years, and the Government are pressing ahead and implementing the requirement to secure approval for sustainable drainage systems for new developments under schedule 3 to the Flood and Water Management Act 2010. Regrettably, it is looking increasingly unlikely that we will be in a position to ensure that the scheme comes into force this April, which was our preferred date for implementation as stated previously. I accept that that will be a great disappointment for the hon. Lady and other hon. Members, but I remain committed to introducing the legislation at the earliest opportunity. I plan to lay the relevant affirmative regulations by April, to underline the Government’s commitment to addressing flood risk.

I share the hon. Lady’s frustration that the process has been so protracted, but we are working with developers and local government to develop the processes, standards and guidance that are an integral part of a new SUDS approvals and adoption regime, rather than just imposing them. That takes time, but it is time well spent if the end result is an approach that is fair to all parties and successful from the outset because local government and developers are fully prepared to take on their respective new responsibilities.

Amendments 1, 2 and 3 address flooding on highways or that caused by the run-off from highways. The causes of flooding can be complex and it is difficult to make a general statement about them. There are already legislative powers to ensure that highway surface water drainage does not pollute or flood, and section 100 of the Highways Act 1980 enables the local highway authority to take action related to the drainage of highways—for example, it can construct drains or erect barriers on the highway or adjoining land to divert surface water into an existing drain.

The majority of new road drainage systems are not connected to the public sewerage system. Typically, they discharge under designated conditions, either to a watercourse or a storage pond with controlled exits to a watercourse, or alternatively soak into the ground in a designed manner. A decision to connect new highway surface water to a combined or foul public sewer can be made only subject to an agreement with the receiving water authority. There is no automatic right to connect new highway drainage to the public sewerage system. We recognise, however, that in some cases local flooding may be exacerbated by drainage from existing highways, and as I have said, the 2010 Act places a duty on lead local flood authorities to develop a local flood risk management strategy for their area. I hope hon. Members will be reassured by that.

Let me seek to address the points raised by the Chair of the Environment, Food and Rural Affairs Committee about flood insurance, and amendments 5, 6 and 7, which relate to small businesses. Flood Re has been specifically designed to recreate the current cross-subsidy in the domestic home insurance market. There is little evidence that the same type of cross-subsidy applies in the commercial insurance market, and the majority of business insurance policies are already priced to risk. A recent English business survey of more than 9,000 businesses in England found that fewer than 1% of businesses had experienced difficulty getting property insurance in the last year due to the risk of flooding, and that no businesses had been refused insurance cover due to such a risk.

As outlined by the Association of British Insurers in its evidence session, businesses tend not to face the systematic issues that householders experience. We must also remember that Flood Re is funded through a levy on all household insurance policies. We have deliberately set that at £10.50, which the ABI estimates is the same as the current cross-subsidy. Widening Flood Re to include small businesses would significantly increase costs. We do not want someone living in a council tax band A property, for example, to subsidise the cost of insuring a private company that potentially earns up to £1 million a year. I am also mindful of the need to comply with state aid rules. Government intervention to support business would be carefully scrutinised and at greater risk of rejection—I know the hon. Lady is familiar with that issue.

On flood insurance and amendment 8, which was tabled by the same group of hon. Members, we are clear that we are talking about a one-in-200-year annual loss, not a one-in-200-year flood event. If Flood Re is legally responsible for claims above a one-in-200-year level, the cost of the liability could be prohibitive. Likewise, if the Government took on a liability beyond a one-in-200-year level, we could expose the taxpayer to extremely large and unpredictable costs. In such a catastrophic situation, many more homes than would be insured by Flood Re are likely to be affected. That is why the memorandum of understanding says that the Government of the day would work with Flood Re and representatives of the insurance industry to decide how any available resources should be distributed to Flood Re customers if flooding exceeds such a level.

Government amendment 58 is a technical one. On the issues raised by the hon. Member for Stoke-on-Trent North (Joan Walley), the Chair of the Environmental Audit Committee—we discussed them in Committee—the Government remain convinced that the existing provisions would be helpful enough in terms of the checks on companies’ financial probity and their technical ability. However, she rightly raised issues that could be addressed following Lord Krebs’s intervention in his letter. I am pleased to hear her calling for things such as betterment, meaning better quality reinstatement, and more information to customers, for which Lord Krebs has also called. Many hon. Members would like to include that in discussions with the ABI.

On misconnections, the hon. Member for Edmonton (Mr Love) is aware that local authorities currently have the power. We are not convinced that giving the power to companies would be helpful. His points are on the record and it is right that the Government take account of what he has said. I am happy to talk to him in future to see that we get the right response.

There is only a very little time for me to respond to all the points hon. Members have made on abstraction. My predecessor as Minister, my hon. Friend the Member for Newbury (Richard Benyon), has rightly said that there is agreement in the House that we want progress. Action is taking place under the existing regime—the Environment Agency has changed 77 licences since 2008, returning around 75 billion litres of water per year—but we need to go much further. That is why we are consulting. The process is under way and will lead to legislation, hopefully with the support of all parties, to reform that complicated system. However, we need to do that properly. I do not believe it is appropriate to do it in the way suggested in the new clause.

Finally, Government amendments 55 to 57, which I have tabled, seek to clarify the resilience duty. We want to make it absolutely clear to hon. Members that we are covering environmental sustainability. I hope the changes we are making to the resilience duty will reassure hon. Members who believe that we need to elevate the sustainable development duty that we are looking at environmental resilience as well as social and economic resilience.

Water Bill

Debate between Dan Rogerson and Thomas Docherty

Monday 25th November 2013 Commons Chamber

[Thomas Docherty]

If the hon. Lady shows a bit of patience, she might hear more detail from us than we heard today from the Secretary of State.

The previous Labour Government passed legislation that allowed the water companies to introduce their own schemes. Those companies had assured the country that they were keen to do so, yet almost four years after that legislation was passed, how many of them have kept their promises? How many water companies have developed a scheme within their region? How many of those fat-cat boards have put even a fraction of their obscene profits into the pockets of the hardest hit households? Just three out of 20 of the most successful and profitable companies in the country have lifted a finger to help their customers. It is no wonder that the most charitable description of the system, as offered by Citizens Advice, is “ad hoc”.

What did we hear from the Secretary of State today? What was his response to corporate failure and what was his proposal to help customers? He has written a second letter to his friends, the water bosses, not to demand real action but to make a helpful suggestion. He does not believe in Government intervention. No matter how much the market fails and the companies drag their feet and how many customers cannot afford the inflation-busting prices, this is a Government who do not believe that they should act. We on the Labour Benches do not share that belief. We believe that when fat-cat bosses will not act, the Government must.

As my hon. Friend the Member for Garston and Halewood (Maria Eagle) said, we will introduce a national affordability scheme. I welcome the points made by my hon. Friend the Member for Plymouth, Moor View (Alison Seabeck), who has been a constant champion of hard-pressed customers in the south-west region. Along with other Members, she raised the subject of flooding and flood insurance, which is an important issue. We share the concerns of many Members from across the House about both flood defences and how households can secure affordable insurance. The latest figures from the Environment Agency put the cost of damage to property in the past year at £277 million, almost £200 million of which was household damage.

We heard an excellent speech from the Chair of the Environmental Audit Committee, my hon. Friend the Member for Stoke-on-Trent North (Joan Walley), who highlighted the problem eloquently. The Chair of the Environment, Food and Rural Affairs Committee, the hon. Member for Thirsk and Malton (Miss McIntosh), highlighted the important and often overlooked issue of surface water run-off. The Opposition welcome the principle behind the proposed new scheme, Flood Re, but like the Select Committee we have serious and legitimate concerns about the fact that the Bill contains only one clause on that matter.

My hon. Friend the Member for Kingston upon Hull North (Diana Johnson) spoke from the heart about the problem of flooding. I am sure that the House would acknowledge that she has been a champion for her city, and I hope the Minister will provide real answers to the important issues that she raised.

I understand that Ministers are hastily drafting new clauses even now, but they must be adequately scrutinised. The issue has been raised by Members on both sides of the House, so will the Minister give a firm undertaking that the new clauses will be tabled in time to be reviewed adequately in Committee? Will he assure the House that such crucial amendments will not be rushed out at the last minute without due scrutiny?

We also heard from Members on both sides of the House about the tax paid by the water companies. As my hon. Friend the shadow Secretary of State has already said, it is simply unacceptable for water companies to make £1.9 billion in pre-tax profits and pay out £1.8 billion to shareholders. That is why we need to give the regulator broader powers to step in to protect customers and to ensure that fat-cat companies play by the same rules as other businesses. We want to ensure that excess profits, rather than heading to shareholders’ pockets, are used responsibly to reduce bills and improve infrastructure such as the Thames tunnel.

The hon. Member for Broxbourne (Mr Walker) mentioned abstraction. Not for the first time, he raised his concerns about the damage to chalk streams and asked whether I would set out our party’s position on the environmental impact issue. I am always keen to oblige him, so let me set out clearly our view of the crucial need for environmental mitigation. Even when the Government have tried to introduce reform, they have failed to follow through. As the Environment, Food and Rural Affairs Committee has warned repeatedly, a half-baked proposal to introduce upstream competition without proper abstract reform is worse than the status quo. As the WWF warned today,

“The licence system is completely broken, unsustainable and out of date”.

Why have the Government ended up in that mess? As in so many other cases where the Government have decided that something is difficult, tricky or requires them to act, they have just pushed this off. It should be no surprise that the Secretary of State ideologically opposes any Government action, but I wonder why the Minister responsible for water, the Under-Secretary of State for Environment, Food and Rural Affairs, the hon. Member for North Cornwall (Dan Rogerson), has simply gone along with his boss’s laissez-faire attitude to our natural environment. Simply to promise, as Ministers apparently have, that the Department will do something in the next Parliament shows a lack of credibility.

Let me be clear: if Ministers have found thinking of solutions too hard, they should postpone all upstream reform until we have Ministers and officials who will stand up to the vested interests who are damaging our rivers.

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dan Rogerson)]

I am grateful to the hon. Gentleman for giving way, and I look forward to debating many of these issues with him in Committee over the coming weeks. I am struggling to follow his argument. He says that there is an issue with abstraction reform and that we should press ahead and do something now, but his solution otherwise is to delay the whole process and not to consider any kind of reform of the industry. That seems to be his argument.

[Thomas Docherty]

Oh dear me; the Minister has obviously forgotten his own position. He will still be a member of the Environment, Food and Rural Affairs Committee for a little longer, so perhaps he can set out which side of the argument he agrees with—that expressed by the Select Committee of which he is a member or that in his new role as a Minister.

The hon. Members for Arfon (Hywel Williams) and for Newbury (Richard Benyon) mentioned retail competition, and the Opposition support non-domestic competition. It has been a success in Scotland, and like the Select Committee of which the Minister is still a member, we believe that, implemented properly, it will work in England. Like the Committee, however, we think there are technical improvements that we intend to explore further in Committee.

--- Later in debate ---

[Dan Rogerson]

Very little, I think is the answer. I thank the hon. Gentleman for his intervention.

Dealing with abstraction gives me an opportunity to welcome the contribution by my predecessor, the hon. Member for Newbury (Richard Benyon), not only because of all the work that he put in and how he has informed our debate, but because by seemingly being very popular across the House he will make it much harder for anyone to oppose what is in the Bill, as it was his work that got us to this stage. I am sure that that will help to develop the consensus, because everyone agrees with the conclusions he drew and the position we are in. The Government are clear that any moves on abstraction and upstream reform must work together, so what we are establishing in the Bill will come into effect alongside the abstraction reform that we are moving towards. We have to get this right because it is crucial that we have the water resources to deliver the growth and environmental outcomes that we want to see.

Many Members covered flood insurance. I am all too aware of the devastation caused by flooding and its financial and emotional impact. I recall the destruction in Boscastle in my constituency. I became the Member of Parliament for North Cornwall a year after that tragedy, where fortunately no lives were lost. It also affected other nearby communities such as Crackington and Canworthy Water. The problem was that flood insurance companies were not up to the task. Fortunately, the Association of British Insurers was able to step in to offer advice and to help resolve the issues. As we have heard, other Members have similar recollections from their constituencies.

Flood risk management remains a top priority for this Government. We have committed record levels of capital spend and more than quadrupled contributions from other sources. As a result, we will have improved defences for 165,000 households by March 2015 and an extra 300,000 by 2021. I recently visited South Zeal in Devon, where residents shared with me their harrowing experiences of flooding. They also showed me the actions the community is taking to become more resilient to flooding, to keep down their insurance premiums in the long term. This Government are committed to providing access to affordable insurance for households at high risk.

We will table new clauses in Committee. Draft clauses have been available for some time and much of our work in Committee will be based on them. Were we to delay the Bill after this Second Reading debate, we would not be able to deliver our programme in a timely fashion. That is our objective. Yes, it is regrettable that those clauses are not in the Bill as drafted, but these are very complicated negotiations to ensure that an industry-led solution works not only for the industry, but fundamentally for communities and residents who need support.

[Thomas Docherty]

The Minister has given an undertaking that those new clauses will be available for scrutiny by the Bill Committee next week. Will he say, once and for all, whether those 20-odd clauses will be available in time for the Committee adequately to review them next week?

[Dan Rogerson]

It is my intention that they will be available for the Committee to look at as soon as possible, but we have to get them right and make sure that they deliver what the Government and my predecessor agreed with the industry, so that we deliver effectively.

--- Later in debate ---

[Dan Rogerson]

My hon. Friend is absolutely right. House building has not been at its fastest recently, so the vast majority of properties in this country were built before the cut-off date, which ensures that there is affordable coverage for those who need it.

The Chair of the Select Committee made a point about sharing benefits data with water companies, as did the hon. Member for Plymouth, Moor View. We have to be careful because those data are very sensitive, and sharing them with the industry would currently be illegal. We can look at that, and the Select Committee has made recommendations, but we must get it right.

[Thomas Docherty]

The Minister is obviously talking about bits of the Bill that do not yet exist and which the House has not seen. A few moments ago, he said that capital expenditure had gone up. It might help him if I point out that there has been a drop of £96 million this year compared with the situation that the Government inherited in 2010. We want to place on the record the accurate figures, rather than those given to him by his civil servants.

[Dan Rogerson]

Over the spending review period as a whole, the investment will be bigger, and we will see the numbers climbing over the coming spending review period as well, by up to £400 million a year by 2021.

Several hon. Members raised the issue of bad debt, and rightly pointed out that some companies are better than others. We of course want all companies to aspire to do better. To return to the points made by my right hon. Friend the Secretary of State, we now have a far more vocal and effective regulator than we have had for some time. On issues of bad debt, affordability and company transparency, which matters to many right hon. and hon. Members, the expectation on companies to deliver is now much greater. I want to make it clear that many companies are doing a good job, investing money and delivering for customers, but where there are problems, the regulator will tackle them. My right hon. Friend set out absolutely clearly in his letter to the companies his expectations for the industry. The Government are supporting the regulator to carry out the work that is necessary.

Water Industry

Debate between Dan Rogerson and Thomas Docherty

Tuesday 5th November 2013 Commons Chamber

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dan Rogerson)]

This has been a fascinating debate. Contrary to what the hon. Member for Dunfermline and West Fife (Thomas Docherty) just said about my attitude, I welcome the debate. It is a foretaste of the discussions that we will have on Second Reading of the Water Bill and in Committee and subsequent stages.

Today’s debate has been a useful opportunity for hon. Members to raise a range of issues such as affordability and the practices of water companies, and also local issues such as flooding, development and the history of water supply going back to the locally owned water provision that the right hon. Member for Holborn and St Pancras (Frank Dobson) spoke about. I will come back to some of the comments of the hon. Member for Dunfermline and West Fife. It is a great shame that he finished off his speech as he did. He knows quite a bit about these issues and enjoyed dealing with them in the Select Committee. He should have written the speech himself, instead of giving a speech that was written for him. He could have done much better himself.

[Thomas Docherty]

rose—

[Dan Rogerson]

The hon. Gentleman did not take interventions, so I shall follow his lead and try to respond to some of the issues raised in the debate. We will have plenty of opportunity to come back to his comments.

I congratulate the hon. Member for Dover (Charlie Elphicke) on leading the charge to secure the debate. He wanted to send a clear message to Ofwat and particularly to the water companies that consumers expect more now. They want a fairer deal to cope with the cost of living and to reflect the fact that the water companies have had some good years. They have had much lower borrowing costs in recent years than was predicted when those prices were set. The hon. Gentleman is looking for some flexibility during the current price review period for those issues to be taken on board.

Clearly, that is a matter for the regulator. Ofwat is being far more assertive in the message that it is sending to the water companies. It has the power to revisit the current price settlement, but in particular circumstances. Ofwat’s discussions with water companies are obviously focused on the coming price review period. It will want to see whether water companies come forward with any suggestions. As my right hon. Friend the Secretary of State pointed out in his letter to the water companies, they are in far better circumstances than were predicted at the beginning of the current period. As a Government, we are supporting Ofwat and providing political cover. If Ofwat is looking for a deal from water companies that more accurately reflects current circumstances, it has the political back-up to do that. I welcome the signs that Ofwat is indeed doing that.

The issues surrounding investment are crucial. The right hon. Member for Holborn and St Pancras spoke about the simple business of a couple of pipes in the ground catching the rain water and sending it on. That was the case once upon a time. There are also the issues of what happens—how can I put this delicately?—after the water has been consumed by the consumer. What used to happen is that a pipe would be installed, as I know all too well, representing a coastal constituency, and the waste would drift out into the Atlantic ocean. That is not acceptable now and we expect a far better standard of treatment for sewage and better solutions to deal with the problems. That is why we have much better bathing water quality than we used to have.

[Dan Rogerson]

I will not give way. I accept what the right hon. Gentleman says about what he considers simple problems. Yes, we want the water companies to do better on price, but we also want them to continue investing and improving. We have a responsibility to deliver better environmental quality. We have seen improvement in that but we want it to go much further, so we want the investment to continue. We will have the opportunity to consider some of these issues on Second Reading of the Bill, so perhaps we can come back to the more technical issues at that point. I know that hon. Members on both sides of the House will want to engage with me in the run-up to that and I look forward to some informal discussions, as well as the discussions on Second Reading.

I pay tribute to my ministerial predecessor, my hon. Friend the Member for Newbury (Richard Benyon)—he is not currently in his place—who did a huge amount of work to get us where we are. Some Opposition Members claimed that nothing has happened over the past three years, but nothing happened over the 13 years they were in office, other than reviews. Her Majesty’s Opposition seem to stake their reputation on a number of reviews, but they did nothing on the back of them. This Government will look at that work and the evidence provided and do something, such as dealing with the inequality in the south-west and the problems people there face, which Anna Walker looked at, and the issue raised by the Cave review, which looked at the water industry as a whole. This Government are taking action.

The Government are also looking at flood insurance, because the previous Government left the clock ticking on an agreement that was about to evaporate. We have negotiated something that will now be delivered in a Bill. I pay tribute to my hon. Friend the Member for Newbury for being at the forefront of delivering that settlement. We look forward to debating that as we take the Bill through the House.

The hon. Member for South Swindon (Mr Buckland) talked about leakages. He said that although water companies have improved, they could do much better and there is still a long way to go. I absolutely agree. The important point is that we still see companies investing in the infrastructure to put it right and get a better solution to the problems. That is why in all our discussions on price we must ensure that we get the balance right so that we can continue to see that investment.

We heard an interesting exchange between the hon. Member for South Swindon and the hon. Member for Dunfermline and West Fife on household disconnections. It was not clear to me whether the hon. Member for Dunfermline and West Fife was recommending that water companies should have that power. I hope that that was not the case, because it is certainly not something the Government want to reopen.

[Thomas Docherty]

indicated dissent.

[Dan Rogerson]

I am pleased to see that is not something the hon. Gentleman wants, because we certainly do not.

We hope to see some benefits through retail competition, but we want to do that carefully. This is a huge area of reform and a big change. That might slightly disappoint the right hon. Member for Wokingham (Mr Redwood), who looks forward to a time when there will be an ample supply of water for everybody to enjoy in all sorts of ways and when we will not have such nasty things as metering and restrictions. There are other reasons for metering which relate to energy use and environmental concerns, because whatever we do to reform the retail side will not suddenly and hugely increase the amount of water. We will work on abstraction reform and encouraging new people into supply, but that does not necessarily mean we want to abandon our commitment to using the water we have efficiently and managing our resources effectively.

However, I accept what the right hon. Gentleman said about the challenges monopolies present, which is why we want first to move towards allowing businesses, charities and so on to have the benefit of competition. We also want them to look at how they can simplify, so that businesses with many sites across the country, for example, can have one unified bill. That would be a huge saving for them and would allow far more transparency, rather than having separate bills for every site.

A number of hon. Members mentioned the tax situation and financing. Some of those points are for the Treasury, rather than me, but they have had the chance to put them firmly on the record. Many of them have been campaigning on that outside this place, which I know they will continue. I know that Ofwat is listening to that carefully. One of the things it is keen to do with water companies is look at how it regulates to encourage transparency and overcome opaqueness, which relates to what Jonson Cox has said. The companies that take a more responsible attitude to engaging with consumers, feeding back their information and being open about what they do can be regulated in a way that reflects that, and those that refuse to engage with that progress will be the ones that Ofwat will want to investigate much more closely and have close conversations with in future. That is the sort of approach that I very much welcome. Having mentioned Ofwat a number of times, I should also pay tribute to the Consumer Council for Water for its work as the voice of the consumer, which has not been mentioned in the debate so far.

Several hon. Members raised the issue of bad debt, and I am pleased about that. We have been very clear that we want the companies that have done less well on that to look to the examples of those that have done much better in offering a better deal, and to try to build on that work.

The hon. Member for Elmet and Rothwell (Alec Shelbrooke) talked about development issues. Water companies have the opportunity to have an input into that process, but so does the Environment Agency in relation to flooding, and that is important. We want to see housing growth in the economy and investment in housing for people who are desperate to get on to the housing ladder or, indeed, to rent. We have to get the right balance in that process.

My right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) posed a number of challenges and raised detailed issues that I am happy to discuss with him as we move towards the Second Reading of the Water Bill and its progress into Committee.

The hon. Member for Brigg and Goole (Andrew Percy) raised issues about flooding and infrastructure investment. It is important that we encourage companies to continue to invest to overcome these problems at the same time as bearing down on price. The hon. Member for Skipton and Ripon (Julian Smith) talked about transparency and the tax framework. He also noted that some consumers feel that they have very little voice in what is being done with the money that they hand over to the water companies in their bills. Ofwat is taking a much tougher line on this, and I welcome that.

Our approach in the Water Bill is to look to update the structure of the industry to deal with some of the problems we have heard about, but not to try to step in and do what Ofwat is there to do. It is the regulator, and, as my hon. Friend the Member for Newbury said, it will regulate. We will therefore make sure that there are opportunities for it to make any proposals that it thinks will improve the Bill. If there are things we are not doing in primary legislation or it wishes to see change, it will be able to get involved in and develop those things without having to come back to this House or the other place.

The Government’s approach to this issue is a responsible one. Knee-jerk reactions that undermine the strengths of the regulatory system could be immensely damaging. A stable, independent regulatory system is vital in keeping bills affordable. Small changes to the industry’s financing costs can have a significant impact on customers’ bills. In that context, I reiterate my strong support for Ofwat’s drive to secure efficiencies and improvements through the price review and other measures that will allow us to keep customers’ bills as low as possible while ensuring that we can continue to attract significant, low-cost investment in the sector.

I thank hon. Members for bringing this issue to the attention of the House. The interest and passion expressed by Members displayed the importance that we all place on the matter, and I assure them that it continues to receive the highest level of attention from the Government. We will return to many of these important aspects of the industry as we move towards the Second Reading of the Water Bill in due course.

Oral Answers to Questions

Debate between Dan Rogerson and Thomas Docherty

Thursday 10th October 2013 Commons Chamber

[Dan Rogerson]

I thought for a moment that my hon. Friend, who chairs the Select Committee, was petitioning the Prime Minister to summon us back to it, and that our tenure on the Front Benches might be very brief.

The timing of the Bill is, of course, a matter for those who manage our business. I look forward to debating the issues with colleagues in the House and, subsequently, in Committee.

What my hon. Friend has said about investment in the sector is crucial. We have already managed, through our regime, to deliver huge investment in water infrastructure. We now want to establish a regime which, while being fair to customers, also attracts further investment, so that we can have an industry that is fit for the future.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

May I begin by paying tribute to the previous Minister who worked in a bipartisan manner throughout his term in office and welcoming both new members of the Government Front-Bench team? I should also thank the chairlady of the Select Committee for her tutelage of us all over the past three and a half years.

Does the Minister understand that when households are struggling with inflation-busting water bills, it is simply unacceptable for water companies to try to avoid paying corporation tax? If he does, will he work with Opposition Members to make the necessary improvements to the forthcoming Water Bill?

[Dan Rogerson]

I welcome the hon. Gentleman to his post and look forward to debating these issues with him. As we look at the regime the Bill is seeking to bring in, we can discuss some of these issues, although there are probably other key areas we will want to focus on. The issue of corporation tax is crucial across many industries and I look forward to hearing what the hon. Gentleman has to say on the subject as we move forward.

Dairy Industry

Debate between Dan Rogerson and Thomas Docherty

Thursday 13th September 2012 Westminster Hall

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

It is a pleasure to serve under your chairmanship this afternoon, Mr Walker. To put a time limit on speeches was a courageous decision for someone who is currently running for office.

I welcome the new Minister to his post. He may know that the last Liberal Minister to hold the farming brief was Auberon Herbert, who was President of the Board of Agriculture between 1914 and 1915. However, that does not bode well for the current Minister because Herbert only held his post for one year and did not survive the forming of a coalition Government. None the less, I wish the Minister well in the post.

I am sure that hon. Members wish to pay tribute to the outgoing Agriculture Minister, the right hon. Member for South East Cambridgeshire (Mr Paice). While he and I may not always have agreed, he did his best and will be sadly missed by the farming industry and by members of the Environment and Rural Affairs Committee.

I pay tribute to the hon. Member for Tiverton and Honiton (Neil Parish). We served together on the Select Committee, and as many Members know, he is a mine of information on agriculture. He and I have combined on more than one occasion to ensure that our farmers’ voices have been heard in Parliament. He is a real champion of Devon farmers and regularly makes the case that Devon cream is far superior to Cornish cream. With your permission, Mr Walker, he will sum up at the end of the debate.

A number of important debates are taking place in the House today, and I appreciate that Members might not be able to stay for the whole of this debate. None the less, I thank everyone for coming along.

Members will know that despite the favourable market conditions, the UK dairy sector has been a source of dispute for a number of years. During the summer, the public campaign led by dairy farmers to protest against large cuts in milk prices captured the British public’s imagination. The profile generated by that campaign combined with the lobbying and overwhelming support from all parts of the House have resulted in some significant progress. Indeed, more than 70 parliamentarians went to the National Farmers Union’s dairy summit in July. Several retailers that were identified as not doing enough to support the dairy farmers took belated steps to address some of the unsustainable prices that they paid for their milk. That has helped processors either rescind or reverse the effects of their proposed August milk price cuts. Many of the same retailers have made commitments to address their long-term pricing models for liquid milk. That is very welcome.

In recent days, Arla Foods has committed itself to a 2.5p per litre rise, and today Müller-Wiseman has announced that it will raise its price to 29p per litre. Agreement has been reached between farming unions and Dairy UK on a voluntary code of practice for dairy contracts. However, the industry still suffers from systemic problems that need to be addressed. As the NFU has warned this week, if we do not take action, recent progress will be nothing more than a sticking-plaster solution.

The milk supply industry is not made up simply of producers and processors. Supermarkets also have an important role to play in ensuring fair prices. It is simplistic to portray all retailers as the villains of the piece; the situation is much more complex. Some retailers, such as Tesco and Sainsbury’s, have taken progressive steps in the liquid milk sector, with dedicated pools of producers, and they should be congratulated.

The cheese market remains much more challenging for farmers, however. I hope that one outcome of the code will be to increase transparency in the pricing of milk going to make cheese. Last year, the Select Committee took evidence from Tesco for our report on the dairy industry. We found dishonest its arguments on why it does not provide the same support for farmers who produce milk for the cheese market. It is ludicrous to suggest that there is not enough stability in demand for a workable contract for cheese.

The Select Committee was clear that if supermarkets such as Tesco continue to rip off farmers, the Government should be prepared to step in. Tesco is by no means the worst offender, and I am disappointed to have to report that we are repeatedly told that the Co-op provides the worst deal to dairy farmers. It is vital that customers and Co-op Members apply pressure to those retailers to provide a fairer share of the retail value to their suppliers.

The recent crisis was brought about by the reckless actions of Asda, which was selling milk at a loss-leading price of eight pints for £2, which is less than the price of bottled water. That in turn sparked a price war, which inevitably led to a cut in the price being paid to farmers. While supermarkets have seen quarter on quarter rises in their profits, many farmers have been pushed to the brink. Although I welcome moves by Morrisons, Asda and the Co-op belatedly to increase their price, they have a responsibility to ensure that we have a sustainable dairy industry now and in the future.

[Dan Rogerson (North Cornwall) (LD)]

I congratulate the hon. Gentleman on securing this debate. Although he has been making a good case, he made some rather strange assertions about cream, which we will brush over. Does he agree that when looking at how the price is passed on to the various people in the chain, the trends that have emerged are that the processors’ share seems to have been relatively static, the retailers’ share has grown and the farmers’ share has shrunk? Anything that we do to look at the relationship between the processor and the farmer must also take account of the relationship between the retailer and the processor.

[Thomas Docherty]

The hon. Gentleman is correct. I will touch on the role that the groceries code may play in that process in the future. I did not say that I necessarily agreed with the assertions about Devon, but they have been forcefully made on more than one occasion.

I say well done to those retailers who have belatedly got on board, but why did it take them so long? The actions of the House and the dairy industry forced the retailers to take those steps. Members on both sides of the House will look to the Minister to hold all elements of the supply chain to account. We all want the groceries code and the voluntary code to work, but it is vital that he takes the lead on pushing through these issues.

On the specific case of the adjudicator, the previous Government gained cross-party support for a supermarket ombudsman to ensure a fair deal for farmers and food producers from the major retailers. Following a Competition Commission inquiry in 2008, Labour introduced a new groceries supply code of practice in August 2009, which came into effect in February 2010. The Competition Commission also recommended the creation of an ombudsman to enforce and monitor the code of practice.

This Government presented their Groceries Code Adjudicator Bill in the House of Lords before the summer recess. However, the Bill grants only limited power to the adjudicator to tackle the issues in the dairy industry. It will be limited to tackling the direct supply between the processor and the supermarket, or the farmer if they have a direct contract with the supermarket, and will not be able to deal with a three-party contract. I hope that the Minister will reflect on that and listen to the Select Committee’s cross-party advice.