Yorkshire Water

Denis MacShane Excerpts

Tuesday 16th November 2010 Westminster Hall

[Mr Denis MacShane]

(Rotherham) (Lab): I am pleased to have secured this Adjournment debate on Yorkshire Water and the problem of leakages in the region and in my constituency in particular.

Sometimes, an individual case illuminates the landscape of powerful organisations that, although they may genuinely believe themselves to be working in a responsible, correct and legal manner, do not realise that by a sequence of events and decisions, they end up treating an ordinary—I do not much like that word—citizen of our nation unfairly. This is the story of a little man confronting a giant, powerful conglomerate that is trampling over his rights.

Mr George Georgiou is a British citizen of Cypriot origin who lives in Foljambe road, a modest road in my constituency. He came to Rotherham in 2007 to buy a little fish and chip shop at the bottom of that road, which produces as good a cod and chips as one can get in Rotherham, a town that is widely acknowledged to have the best fish and chip shops in Yorkshire.

There was flooding in other parts of the constituency in 2007. Early in 2008, Yorkshire Water carried out some mains work at the top of Mr. Georgiou’s road. Ever since, he has experienced flooding in his basement. He lives at the foot of the road, which is about 200 or 300 yards long. When the water goes downhill from any mains, it ends up in his basement.

To set the scene, Yorkshire Water is the monopoly utility supplier of water in the region. It wields its monopoly power from a product that falls for free from the sky. It makes handsome profits; last year it made £116 million. It operates in a closed market with no competition, and it pays its top executives well. Its chairman, Kevin Whiteman, to whom I shall return, was paid a little short of £500,000 last year. Despite the profits and the pay of its bosses, Yorkshire Water has the worst performance on leakage of any water company in Britain. Ofwat last week condemned the firm for losing 295 million litres a day through leakages last year. Some of that 295 million litres has flooded the basement of my constituent’s home.

For nearly three years, Mr Georgiou has, with my help, asked Yorkshire Water to accept its responsibilities. That giant monopoly has treated a man who is struggling to keep his head above water—almost literally—and his business alive with nothing short of contempt. Following the classic behaviour of the bully, the more that Mr Georgiou has protested, the more the bullying has increased.

Mr Georgiou has had to install a pump in the basement of his house and shop, as if it were a ship of Nelson’s time that needed continuous pumping to keep it dry. He hardly dares to leave his home for the fear that the water may rise and cause an electrical short. It is surreal to go into a modest home at the foot of a road in Rotherham and find, beneath a ground-floor fish and chip shop, the steady ingress of water, with a pump working away and buckets present day and night.

Like all water companies, Yorkshire Water has a statutory duty to repair and prevent leaks. Instead of so doing, it has come up with excuse after excuse to explain why the water in Mr Georgiou’s home is nothing to do with it. I have here a huge file of letters, which make up a kind of comedy. Yorkshire Water explains that the land around Mr Georgiou’s house is damp. Well, it is damp in the winter when it rains and dry in the summer when it does not rain. The correspondence then states that it is drains water and that other homes have been affected. That shows a tenuous connection with truth, given that neighbours and previous inhabitants of 69 Foljambe road confirm that it is as dry as any other home, save for when the rain becomes so torrential that all Rotherham is damp for days afterwards.

I will not burden the Chamber by reading out the whole correspondence, but I will quote from Yorkshire Water’s own assessment:

“Some of the cellar water examples are in the range expected of mains water”.

It then quotes from the Yorkshire Water excuse book, as written by its Czech consultant, one Mr Kafka:

“because it is possible to propose other explanations of certain sample results does not mean that these other explanations are true.”

I have tried to work my head around that statement, of which the former US Secretary of State for Defence, Mr Rumsfeld, might have been proud. In plain English, Yorkshire Water was saying that anything that it says is true and anything that one of its clients says, even on the basis of independent advice, can be ignored.

Mr Georgiou is a determined and reasonable man. From his e-mails, it is clear that he is not the cross constituent whom all hon. Members know only too well. He has sought advice from and sent samples to outside experts and assessors. They have all come back and said that they think it is mains water from Yorkshire Water. At his own expense, Mr Georgiou has had his basement and the land around it dug up in search of the water leak. Yorkshire Water insists that he is responsible for the leak because it has nothing to do with water at the foot of Foljambe road.

In a letter dated 6 October 2008, Mr Trevor Craddy of Yorkshire Water complains about Mr Georgiou having hired a private plumber, at his own expense, to dig up the land to find where the water was coming from:

“One would have expected that the private plumber having been unable to find a leak would have stopped digging at that point.”

To stop digging is advice that Yorkshire Water might well have taken. For a small amount of money in relation to the firm’s profits and salary levels, it could have tanked the cellar and helped Mr Georgiou to focus on his fish and chips, rather than making him into a Rotherham David taking on the Goliath of this unaccountable, rich monopoly.

The environmental health department of Rotherham metropolitan borough council has investigated the leak and has shown that the water does not come from its pipes. All I have sought to do is to help my constituent, in a classic example of what an MP does at the constituency level. I have no axe to grind against Yorkshire Water; it is a good company in many ways, save for the wretched problem of endless leaks. I have secured this debate to ask the Minister to examine why it is that there is no effective mechanism to hold to account such powerful, rich monopolies. They have a licence to make money and pay pharaonic executive salaries, beyond public control or accountability. Ofwat appears to be powerless —we have written to it. Rotherham council is powerless. The Consumer Council for Water is helpless.

On 17 November 2008, Mr David Freeman of the Consumer Council for Water in Yorkshire wrote:

“We do not feel able to tell Mr Georgiou that we are satisfied that the problem is not mains water”.

That double negative flatly contradicts the constant line from Yorkshire Water that the water that is constantly going into Mr Georgiou’s home, that is making his life a misery and that is stopping him from developing his small business, has nothing to do with it. The Consumer Council for Water, like Ofwat, has no power to compel Yorkshire Water to behave responsibly.

I have tried to work with the company. I have had several conversations with Kevin Whiteman, who was Yorkshire Water’s chief executive officer and is now its chairman. In summer 2009, he agreed to make a joint visit to Mr Georgiou’s home, but that never happened. In what I thought was a reasonable way forward, he agreed to arbitration. I recommended that warmly to Mr Georgiou. Naturally, Mr Georgiou wanted his team of experts to discuss the matter with Yorkshire Water’s experts. One does not go into an arbitration by oneself to face a giant company that has a battery of scientists, technicians, lawyers and public relations people. Mr Georgiou and I said to Mr Whiteman that we would go to arbitration. We laid out the issues that we thought needed to be discussed, presented our papers and notified him of our team of expert witnesses.

Suddenly, however, Yorkshire Water and Mr Whiteman withdrew their offer of arbitration. I cannot, in my 16 years as an MP, remember such an example of bad faith and breach of trust by the CEO of a powerful monopoly. He offered arbitration, but the moment it was clear that arbitration would not deliver the result he wanted, he withdrew it. To withdraw that offer of arbitration, made to me and which I persuaded Mr Georgiou to accept, shows an indifference to fair play and to a basic level of respect for a British citizen who has nowhere else to go if he wants his water delivered—Yorkshire Water is, of course, a monopoly supplier.

That is why I have sought this Adjournment debate. I want to send a message to Yorkshire Water, on behalf of all the residents of Yorkshire, that the loss of 295 million litres a day from its pipes is not acceptable. The company and industry were privatised more than two decades ago. At the time, we were told that the companies had to take over from municipal water works engineers, who were just paid ordinary salaries, and that a shareholding structure with a board of directors and non-executive directors, and paying the chief executive and the chairman loads of money, would improve things. Yet here we are, 20 years later, and the leakage rate is as bad as ever, which is a huge waste of a precious resource when we are worrying about water shortages across the world and, frankly, not the best of tributes to the notion that privatisation of a monopoly public utility is the magic solution to making companies really efficient.

I sought an Adjournment debate with reluctance. I had obtained one some months ago, but withdrew it, because I still wanted Yorkshire Water and Mr Georgiou to come together and find a deal. I could not believe that the thousands of pounds of investigations, documents, technicians, lawyers and staff hours spent saying no to this man could possibly be justified. For probably a 10th of the collective money spent by Yorkshire Water in denying him his rights, it could have tanked the cellar and made good the problem.

All right hon. and hon. Members deal daily with difficult cases and we make our representations as best we can. However, I have never come across such a shocking example of the mistreatment of an individual without any resources or private wealth. The entire bureaucracy of Yorkshire Water has been deployed against Mr Georgiou. All he wants is for the firm to accept its clear responsibility and duty so he can carry on his business without manning the pumps in his cellar all the time.

I do not have time to read out all the letters and reports cranked out by Yorkshire Water as it spent thousands of pounds and hour upon hour of its employees’ time in order to crush Mr Georgiou. Instead of producing his fish and chips, he has had to engage in this lonely battle for justice. The latest twist to the tale is a county court civil case—again, Yorkshire Water would rather spend a fortune on lawyers than simply accept its responsibility.

I finish, frankly, in despair. The Minister is a decent man and, as a constituency MP, he can probably tell other dire stories of how powerful, unaccountable monopolies trample over the rights of citizens. He has no executive powers, as a Minister, to compel Yorkshire Water to do anything. I do not know if the new Government’s ideas of localism or the big society can alter the balance of power between the citizen and the monopoly or quasi-monopoly companies, which have so much power without responsibility in our land.

I regret having to bring the matter to the attention of the House—I do not want a war of words with Yorkshire Water—but my duty to my constituent is clear. I hope that Mr Georgiou can feel at least that his Parliament and MP can be voices against what I believe is a great wrong done to him. I am grateful to have had the privilege of securing this Adjournment debate today.

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

I start by congratulating the right hon. Member for Rotherham (Mr MacShane) on securing the debate. Without commenting on his specific case, I also congratulate him on fulfilling the House’s fine tradition of right hon. and hon. Members standing up for their constituents when they feel they have been wronged. It might have been a tad easier to give the right hon. Gentleman a fuller response had I known he would raise that specific case, but I will do my best to talk about it. In my early remarks, I will set that case in context.

The control of leakage from water company distribution networks is a vital component in maintaining an adequate supply-demand balance in the supply of water. The failure of some water companies consistently to meet leakage targets undermines efforts to convince customers to adopt water-efficient behaviours. It is clear from the views expressed in the current water White Paper online survey that leakage is an issue held in high importance by the public, not just in the right hon. Gentleman’s constituency but across the country.

The failure of some companies to meet annual leakage targets reflects badly on the generally good performance on leakage—that is why I would take slight issue with the right hon. Gentleman. He said that we are where we were 20 years ago, but there has been considerable improvement. It is not my job to defend or to be the voice of any water companies. If anything, my job is to ensure that a fair deal is being achieved by the consumer. However, we want to be accurate in dealing with leakage—it is not where we would like it to be, but we are moving in the right direction, and a number of different factors are involved. I will talk about some of those factors in a moment.

The latest figures show that leakage has reduced by more than a third since its peak in 1994-95—a reduction of 1,837 megalitres per day, equivalent to the daily needs of more than 12 million domestic customers. Between now and 2015, the target leakage in England and Wales is due to fall by a further 97 megalitres per day.

At this stage, it is useful to remember that fixing leaks can be costly—that is no excuse for it not happening, but it can be costly. Customers have told Ofwat, the independent regulator, that they do not want to see large rises in bills to reduce leakage, and, clearly, the serious disruption caused by digging up streets must be considered.

Companies are now reaching a level of leakage at which the extra costs associated with repairing leaks—in terms of manpower, materials, fuel, carbon emissions and so on—are equal to the costs of producing the water that is leaking. That is not to say that we should not redouble our efforts—of course we should—but we should see them in the full balance of what we are seeking for a modernised water company through the current review process.

The water companies report their leakage performance annually to Ofwat. When Ofwat assesses a company’s performance against leakage targets, any decisive external events are taken into account. The prolonged cold winter we experienced last winter presented a challenge to the water companies in managing an increase in burst mains and in minimising interruptions to consumers. The coldest winter for more than 30 years had different impacts on networks across England and Wales. All companies reported high numbers of burst pipes over that period because of ground movement caused by freezes and thaws—I am not saying that that is in any way related to the particular case referred to by the right hon. Gentleman. In addition, snow cover for longer than normal made it more difficult for the companies to find and repair their leaking pipes.

Ofwat’s primary consideration when deciding what action to take against a company that fails its leakage targets is whether the target failure affects customers’ security of supply. Does the increased leakage mean a higher risk of restrictions on customers’ use of water? A leakage target failure would be considered much more serious were it to jeopardise water supplies to customers. Ofwat’s policy for assessing leakage failures takes account of a company’s performance over a three-year period, and it does not automatically take regulatory action after a single year’s failure.

A range of options is available to Ofwat. The right hon. Gentleman said that it was powerless—I will come on to talk about his specific case—but Ofwat can act against a water company that is failing on leakages. For example, in 2006 Ofwat used its powers to secure an undertaking from Thames Water in response to a failure to meet leakage targets. Since then, Thames Water has reduced leakage by more than 190 megalitres a day. It achieved that by spending approximately £150 million of shareholders’ money, not by putting the cost on its bills. That is one tool that can be used to bear down on the problem.

During last winter’s cold weather, Yorkshire Water experienced an increased number of burst mains, and the same happened across the country. This is the first time the company has failed a leakage target since targets became mandatory in 1998-99. Since 1995, when the company received significant negative media coverage after the drought of that year, it has renewed more than 2,800 km of water mains. The right hon. Gentleman made some grudging, but nevertheless generous comments about the company’s performance on some issues, grinding his teeth as he did about pay issues, and I completely understand. As I say, however, I am here not to be the voice of the water companies or the regulator, but to make sure that the consumer gets the best deal.

On the circumstances of the case the right hon. Gentleman described, I must be extremely careful, because I understand—he may differ—that it is now the subject of legal proceedings. I will therefore have to be extremely guarded in the words that I use, and he will be able to correct me if the information I have is wrong.

As the right hon. Gentleman said, his constituent, Mr Georgiou, has experienced long-term, chronic ingress of water into his cellar—that is not disputed. He made a complaint to Yorkshire Water, which was not resolved to his satisfaction. The Consumer Council for Water became involved and supported Mr Georgiou in the processing of his complaint.

I will not reiterate the details of the case because the right hon. Gentleman has laid them before us, but I will answer some of his specific points. He said that the consumer council was unable to force Yorkshire Water to act, and he is absolutely right that it does not have the power to force a water company to take action. Nor is it in a position to determine liability in such cases. However, it does have powers to obtain any information required to ensure that customers’ complaints have been handled appropriately. My understanding is that it supported Mr Georgiou in getting the information that he required. A review of how the consumer council handled the case is being carried out by the regional chair, who will look carefully at these issues.

The right hon. Gentleman has a further opportunity to raise this matter through the parliamentary ombudsman on behalf of his constituent. He says that Ofwat has no specific powers to resolve this complaint, and he is right that it does not have the power to resolve complaints about liability in such cases. It appears the case has reached the point where it is the subject of legal proceedings. I would very much like to be able to say more, but I am informed that that could prejudice those proceedings.

[Mr MacShane]

The Minister is being extraordinarily fair and decent about this case. Nothing would give Mr Georgiou and me greater pleasure than not to have to proceed to a county court case, but to settle this matter modestly, cleanly and quickly now. As a result of this debate, I hope that Yorkshire Water might take that on board.

[Richard Benyon]

That is a very reasonable comment.

I started by saying that the House offers hon. Members the ability to stand up for people who feel, rightly or wrongly—this may be their perception or the reality—that they have been done down by a large company, bureaucracy or organisation, and it is entirely right that hon. Members have that ability.

On the exact rights and wrongs of this case, I have the right hon. Gentleman’s word, which I entirely endorse as correct. However, when such matters are dealt with in legal proceedings, other factors are sometimes brought in, and it would be entirely wrong for me to pass comment at this stage. None the less, the right hon. Gentleman’s comments are on the record. His persistence on behalf of his constituent is not only on the record of the House, but visible to those of us in the Chamber in the form of the file sitting on the desk in front of him. I assure him that if I can assist further without prejudicing legal proceedings in any way, I will, of course, be happy to talk to him.