Water Industry

Frank Dobson Excerpts

Tuesday 5th November 2013 Commons Chamber

[Charlie Elphicke]

My hon. Friend makes a powerful point. Ensuring that we have investment in the infrastructure that the country needs is really important.

[Frank Dobson (Holborn and St Pancras) (Lab)]

In view of the hon. Gentleman’s commitment to the issue, I hope that he will confirm that the only time there have been reductions in water charges was under the previous Labour Government.

[Charlie Elphicke]

rose—

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[Frank Dobson (Holborn and St Pancras) (Lab)]

I congratulate the Members who secured this welcome debate.

Until recently, there had been a general consensus that the privatised water industry was a success. That was a consensus to which I never subscribed, whether in government or in opposition. It is far from being a success.

We must not allow the water industry to get away with all sorts of technical explanations of why it cannot do its job properly and reasonably cheaply, because it has a simple task. It gets its raw material free: it is called rain. It collects the rainwater and pumps it along pipes to its customers. It then charges them for using the water.

[Mr Charles Walker]

That is exactly the problem. Our water companies are lousy at collecting water. When it is at its most abundant, they wave it down the rivers into the sea. That is why they need to be building more reservoirs. I am sorry to labour the point, but they are not collecting the water.

[Frank Dobson]

The next word in my notes is “reservoirs”. Every substantial reservoir that the water companies use was built when the industry was in the public sector. The private sector has not increased reservoir capacity in this country since privatisation in 1989-90.

[Alec Shelbrooke]

I stand to be corrected, but I understand that only 1% of rainfall is captured for domestic use. I wonder whether the right hon. Gentleman has found that during his research.

[Frank Dobson]

God knows; it would depend on when, if the hon. Gentleman sees what I mean.

The bulk of the reservoir capacity and the pipework was provided when big cities such as Birmingham, Manchester, Sheffield and Leeds and the Metropolitan Water Board in London were trying to look after the interests of the people of their areas. They created the reservoirs and laid the pipes.

During the arguments about the privatisation of the water industry, I received a letter in beautiful copperplate handwriting from an ancient ex-councillor in Sheffield. He said, “All the people at Yorkshire Water are doing is collecting water in reservoirs we built and sending it along pipes we laid. I speak as the former chairman of the water committee in Sheffield.” He pointed out that while the chief executive of Yorkshire Water was getting several hundred thousand pounds a year, when he had been responsible for it he had been paid “nowt” and the job had been done properly, whereas it had not been done properly ever since.

[Mr Redwood]

Does the right hon. Gentleman concede that the pipe network that the nationalised industry put in was riddled with holes by the time the private sector took over? More than 25% of the water was being lost en route and the private sector has been renewing the pipes.

[Frank Dobson]

That is certainly true. Until 1995, Ministers from all parties accepted the statement by the water industry that the bulk of the water that leaked out of the system leaked out of customers’ pipes. It took a lot of effort from me and somebody who was working for me at the time to finally reveal that that was nothing short of a lie. It was not that the Ministers were lying; they were being provided with lies by the water industry. I have had the figure changed into fashionable litres now.

[Andrew Percy]

What was it in gallons?

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[Frank Dobson]

In 1995, 826 million gallons of water per day were leaking out of the water companies’ pipes. According to my calculations, that is 3,755 million litres per day. The companies now proudly proclaim that they are dealing with the leaks. They have got the figure down to the apparently minuscule 2,910 million litres per day. Once they had to admit they were getting it wrong, we could see that it was a farcical record. Frankly, they simply deserve—I do not know; perhaps total abuse is the word—for their failure, and so does the system that regulates them, and the Ministers and civil servants who are also involved.

During the recent period water companies have increased charges; under the Labour Government charges went down at first then gradually crept up again. One thing that has not gone down, of course, is the huge dividends that the water companies have been paying. Since privatisation, they have paid out £37 billion in dividends. As the hon. Member for Dover (Charlie Elphicke) pointed out, that is 21% of gross value added compared with comparable parts of the private non-financial sector, which come in at about 11% of gross value added.

Look at the figures for individual water companies: Severn Trent Water has paid £6.2 billion in dividends; Thames Water has paid out £6.3 billion; United Utilities in the north-west paid out £7.3 billion; and Anglian Water has paid out £6 billion. Then there is tax avoidance and, as the hon. Member for Dover pointed out, a large amount of that is the product of manipulation of the companies’ borrowing, to the infinite benefit of their foreign owners in particular, more so than to their British owners.

Then there is the bosses’ pay. Some of them are being paid more than £1 million a year for collecting rainwater and sending it down a pipe. I understand the Health Secretary suggested that some managers in the national health service might be overpaid. It may be the case that some are, but let us consider Leeds Teaching Hospitals NHS Trust, for example—two teaching hospitals, 12,000 staff and 1,200 doctors to manage. I do not think anybody in the world would think that the person responsible for managing that, who gets about £250,000 a year, does not have a rather more complex task than someone who collects rainwater and sends it down a pipe. We must get some sense of proportion.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Has the right hon. Gentleman made any assessment of the effect on bills if there were not the excesses of bonuses, payments and dividends that he detailed earlier?

[Frank Dobson]

I cannot really do that as I have only just come back to looking at the water industry from the time when I tried to make life difficult for it, with some success. “Hammer the customers for the profiteers” is the motto of the water industry. We have higher charges, and now water companies want to install compulsory water meters everywhere. That is basically their policy, and a lot of people who I think ought to know better have been going along with that.

It costs about £250 to supply and install a water meter, and they have about 15 years of life before the grit and impurities in the water make them not do their job accurately. If it is a smart meter I understand that the situation is even worse. It costs about £50 to install a new meter if one has previously been installed. I think there are more than 10 million unmetered households, so at £250 a throw—according to my calculations—that is £2.5 billion. Does anybody think that investing in water meters is the best way of spending £2.5 billion? Even if they do, I certainly do not.

Another thing is that, as soon as anything goes wrong, the companies come rushing to the taxpayer to bail them out. South West Water could not cope with the problems it faced, particularly its sewerage problems and ended up getting a leg-up from the taxpayer.

[George Hollingbery]

I read one or two historical documents on water management before I came to the Chamber. I believe I am right in saying that the previous Labour Government’s policy was for universal water metering—the policy statement was made in 2008. Is that correct?

[Frank Dobson]

That might be the case, but the statement was not made in my name—let us put it that way. When I was responsible for water in opposition, I was opposed to metering. I remained opposed to it when Labour was in government and continue to be opposed to it.

South West Water is not the only one. Thames Water had sewage and run-off problems and came up with a great £4 billion scheme. Because of how it finances itself, it could not finance the scheme, despite paying £6 billion in dividends over the years. The only way in which it can proceed is by Government guarantee. It is therefore not really privatised; it is a dependency of the Treasury.

[Rehman Chishti]

The right hon. Gentleman says that the previous policy was not in his name. Does his party leader have his support for his current policy on water? Is so, what is his party leader’s policy?

[Frank Dobson]

My understanding is that the party’s policy—no doubt it will be enunciated in due course from the Front Bench—is that the current situation is unsatisfactory, and that we need a dramatic change in the powers and functions of the regulator. No Government Member would think there is anything wrong with that proposal.

Where is all that customers’ money going? In the case of Thames Water, it is being paid out to shareholders in Australia and China. Prior to that, it was paid out to shareholders in Germany. People talk about the wonders of the City of London as a financial centre, but I wonder why, in such a great financial centre, one or two of the people with all the money have not thought of getting together to own the water supply for their own city. Apparently, that has not occurred to them.

Thirty per cent. of the average water bill goes to profits. Even the energy industry uses only 9% of charges as profit, but the water industry uses 30%—30% of every penny and pound that people pay goes off in profits, which is, to say the least, a remarkable return on investment.

[Charlie Elphicke]

The percentage is not that high. Nevertheless, does the right hon. Gentleman agree that the previous Government allowed an inappropriate settlement that should not have been agreed?

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[Frank Dobson]

It is no good my saying that the previous Government’s record was as good as it ought to have been—I will not pretend that it was.

Another thing is that, over the years, charges for water have risen at twice the average of price rises for everything else. There can be no possible justification for that. What sickens customers are the water industry’s byzantine financial arrangements and how it is an outpost of the tax avoidance industry. Nobody appears to understand this. Ofwat, successive civil servants and successive Ministers do not appear to have understood what is going on. I am not excusing anybody: I have no faith in the continuation of the existing system. The industry continues to be run for the benefit of companies, company bosses and shareholders. If it is to be run properly from an environmental, security of water supply and cost point of view, it is essential, before changes are made, to subject the industry to freedom of information, so that troublemaking pressure groups and individuals can get to work on the figures in a way that Ofwat and the Department are clearly incapable of doing.

I have a more advanced view of what should be done: we should follow recent examples from Germany. Berlin decided to bring the control and operation of its water supply back under the ownership of the people of Berlin, and the people of Hamburg voted in a referendum to bring its electricity supply back under the control and ownership of the people of Hamburg. That almost happened in Berlin, but the necessary turnout was not quite achieved. I propose a trial run in London. We could give the people of London a referendum to ask, “Do you want to take over, and bring your water industry back under the ownership of something similar to the Metropolitan Water Board?” That would be popular with the public: at the weekend, an opinion poll showed that 69% of the population wanted the energy industry to go back into public ownership.

[Mr Redwood]

The right hon. Gentleman has just criticised spending £2.5 billion on water meters as a luxury we cannot afford. How much would it cost to buy companies back into public ownership, and why would it be a good investment?

[Frank Dobson]

These industries are pleading poverty all the time, so it would not be all that expensive. The cost could be paid out over a very long period, which is what happened when industries were brought into public ownership in the 1940s and early 1950s.

Most people are sick to death of what is going on. They have no faith in Ofwat, officials at the Department or Ministers. I share their lack of faith and until we put forward some aggressive propositions nothing will change to the advantage of the people we try to represent.

[Richard Benyon (Newbury) (Con)]

It is a great pleasure to take part in a debate from the Back Benches for the first time in a few years. This is an important subject and I apologise to those on both Front Benches for not being able to be here for the winding-up speeches, as I have a long-standing engagement that I have to attend.

I welcome the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for North Cornwall (Dan Rogerson), to his post. I told him in the Lobby the other night that I had three and a half years to get my head around the water industry. He has three and a half weeks before the Water Bill comes before the House, but he is a clever fellow and I am sure he will be more than a match for the job.

I hope this debate does not over-emphasise the negative and allows us to take a little pride, at least on the Conservative Benches, in what has been achieved in the water industry. I thought the only voice, upon deep consideration, really talking about renationalisation was dear old Len McCluskey—I sometimes wonder whether he is a stooge of Conservative central office—but I now see that there are others: it is a great pleasure to follow the right hon. Member for Holborn and St Pancras (Frank Dobson). I take great pride, however, in what was achieved by privatisation through good, strong political leadership. My right hon. Friend the Member for Wokingham (Mr Redwood) was part of the intellectual force behind privatisation. With people such as Nicholas Ridley and others, he led the debate—with, I have to say, the support of about 8% of the population. However, they drove though something that has delivered for customers. Twenty-two years down the road, I am the first to agree with my hon. Friends, and probably all Members, that the industry is long overdue a tweaking—in fact, more than a tweaking; a serious reform—but I shall explain later why I think the Government are getting it right and the part the House can play to protect the incomes of our householders, particularly those on low incomes.

Jonson Cox, the chairman of Ofwat, came into my office shortly after his appointment and said he was keen to ensure that the industry took more notice of customers’ needs. To summarise, I said: “Good. That is precisely what the Government hope you will do in this price review—more power to your elbow—but we want you to do much more. We want you not only to keep household bills down, but to keep investment up and ensure that water companies play their part in improving the environment.” We must accept, however, that sometimes those three things conflict.

[Frank Dobson]

When the hon. Gentleman was talking to the new boss of Ofwat, did he draw to his attention the marked reluctance of the water industry to pay the proper amount of tax, bearing it in mind that the aforesaid new boss of Ofwat, when he was at Anglian, made pretty sure it kept its tax liability to a minimum?

[Richard Benyon]

Like the right hon. Gentleman, I am keen that everybody pay the required tax, but I caution people who criticise capital allowances. If our water company were not exercising its rights under capital allowances, either investment would fall or our bills would rise, or both. There is sometimes a lack of basic economic understanding: tax deferred is not tax not paid; it has to be paid. In one respect, however, I entirely agree, and I am deeply uncomfortable with some practices in aspects of corporate Britain. Work needs to be done—and in fairness to the Government much has been done—to close loopholes.

We need to make the argument that investment in the industry keeps bills down. The right hon. Member for Holborn and St Pancras seems affronted by Chinese companies and sovereign wealth funds and investors from all parts of the world investing in our regulated sector. I am not affronted. I welcome it. It is the sign of a vibrant industry and one that we need to encourage. We need more investment if we are to deal with some of the Victorian—or at least Edwardian—infrastructure we are trying to replace. Under a nationalised industry, directors of water boards would sit outside the Treasury saying, “Please can we have some more money for investment?” Down the ages, Chancellors have said, “Certainly. Just get in the queue behind the NHS, pensioners and the welfare state, and if there are any scraps left, we will give them to you.”

We have seen an historic level of investment— £116 billion—and we want to see more. We also want to ensure that we keep the bills as low as possible. Supplying all the water that goes into households and treating all the sewage that comes out costs households an average of £1 a day, although I accept that there are wide discrepancies in price. As a percentage of our household expenditure, that might be quite small compared with energy costs and other items, but it is still a significant amount, and those in the lowest income decile in this country are, broadly speaking, in water poverty. We need to address that. There are huge challenges facing the industry, and I hope the Water Bill and the ongoing activities in the sector will tackle them.

The challenges include continuing to ensure investment to deal with leakage and other concerns, such as those expressed by my hon. Friend the Member for Broxbourne (Mr Walker), and to ensure that new infrastructure is built. We must also address the challenges of affordability and the credibility of the industry among its customers. An important matter for our constituents is that the companies address the question of resilience. They must be able to keep the water flowing from the taps in a time of changing climate.

In my short tenure as Minister with responsibility for these matters, I saw the worst drought for decades. We are the sixth largest economy in the world, but if we had had a third dry winter, towns in some of the most economically vibrant parts of the country would have faced the very real prospect of standpipes. That is unacceptable in this day and age. Large national events could have been affected. Indeed, the Olympics presented quite a worry at the time. We clearly need more investment to ensure that water continues to flow in areas that are prone to drought.

During that time, I also saw floods. We must not forget that the water companies’ role in managing sewerage systems is vital in protecting our constituents’ homes from flooding. There is also a need for continuing investment in that regard.

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[Alec Shelbrooke]

I cannot believe I forgot the name of my hon. Friend’s constituency, but there we go. Like his constituency, my constituency had a huge amount of water flooding through it during those storms. Fundamentally, the river valley could not cope with the amount of water. Nobody can do anything about such one-off events, but we can avoid exacerbating the situation. There is a live planning application for a development on the floodplain in the village that was 6 feet under water that day, which is disgusting. Yorkshire Water should have the ability to turn around and say, “No. That area will not be developed.” The developers can put in any flood protection scheme they like on their new development, but they do not give a tinker’s cuss what happens 100 metres down the road, where the houses will be flooded.

Those problems can be alleviated if the water industry has the ability to work hand in hand with the developers. I mentioned the ring road, which should have a flood alleviation drain built under it. The proposal will have a huge impact on my constituents, who have had to deal with flooding and must now deal with extra housing. We are talking about investment in the water industry and how it best uses the money it gets from water bills. Given the pressures of development, we need to ensure that the industry has every ability to work hand in hand with developers.

One village in my constituency, Methley, suffers from huge toxic, rancid smells from a pumping station for sewage. Yorkshire Water believes that that happens because there is a kink in the sewage pipe somewhere in the two miles of road by the village. It does not have the resources to dig up the road and find the kink—it says that the number of people affected does not justify the amount it would need to spend. That is an example of the pressures the water companies are under.

[Frank Dobson]

Surely Yorkshire Water has access to a device that will identify where the aforesaid kink is and does not need to dig up two miles of road.

[Alec Shelbrooke]

One would have thought so, and I have had meetings about that. Unfortunately, Yorkshire Water is uncertain about where the sewer actually runs, and that is a consequence of decades gone by when there was not proper mapping. That shows the problems the privatised water industry has come up against when dealing with a legacy of poor investment and poor records.

Incidents such as the one in Methley are a blight on people’s lives. I have stood there and the smell is appalling—people are prisoners in their own homes. We have to ensure that water companies have a say over inappropriate developments. There are 4,500 houses in Garforth and 1,000 house Rothwell, but no consideration is given to water in planning developments. The developers do not care and leave it to Yorkshire Water to deal with. The time water companies have to take to deal with such issues means that they are not able to deal with historical issues, such as ensuring efficient water use, repairing collapsed sewers and so on.

I urge the Minister to take those points into consideration during the passage of the Water Bill. For my constituents, the ability of the water companies to make their lives better cannot come quick enough.

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[Frank Dobson]

Does the right hon. Gentleman not agree that it would be ludicrous to expect the British taxpayer to bail out a company that was partly owned by Chinese taxpayers? If Chinese taxpayers want to invest in Thames Water, they should bear the brunt of any charges that the company might incur. The scheme is going to cost £4 billion, but Thames Water’s shareholders have already benefited from £6 billion of dividends. None of that money came to the people of London.

[Simon Hughes]

I take a similarly hard line on this issue. If Thames Water does not have the money in its own coffers to do what it wants, it should not be doing the job, and it certainly should not be asking the taxpayers of the United Kingdom for help to do it.

I also want to flag up some proposals that I hope the Government will take on board. I do not expect my hon. Friend the Minister to provide an immediate response of yes, yes, yes, but I know that he is alert to the questions I am going to ask about what Ofwat and the Government can do. I pray in aid a useful pamphlet, which I am happy to promote, that was recently published by CentreForum, a Liberal think-tank. It was written by George Turner, who used to run my office here. He became interested in the water industry during his time here because of the Thames Water issues. His pamphlet has the additional commendation of having had its foreword written by Sir Ian Byatt, the well-regarded first regulator at Ofwat.

I shall quote briefly from the pamphlet, then set out my recommendations for what I hope the Chancellor will say in his autumn statement on 4 December. The pamphlet refers only to England; Wales and Scotland have entirely different arrangements. It states:

“Water is one of the essential industries. We literally cannot live without it…There are allegations of widespread tax avoidance. The level of corporate borrowing is becoming unsustainable. The ownership structure means that there is very little public accountability. Most of our largest companies are owned by private equity funds and there are no public meetings where management can be held to account. The ownership structures are murky to say the least with strings of companies dotted around the world’s island secrecy jurisdictions and tax havens. This makes it difficult for the public to know what is going on with its water suppliers.”

The problem has come to a head in relation to Thames Water, which has got itself into this position over the proposed tunnel. I suggest that some of the ideas in the pamphlet should be picked up by the Government, Parliament, Ofwat and the Select Committee. First, we could introduce a water levy on highly geared water companies, which would take away the incentive to introduce risk by increasing gearing and removing financial flexibility. This was mentioned by my right hon. Friend the Member for Wokingham (Mr Redwood) and my hon. Friend the Member for Newbury (Richard Benyon).

Secondly, we could ask the Government to look at—I ask them to do so now—the tax treatment of debt in highly geared companies and to consider economies and systems such as the German ones, where there are earnings-stripping rules that prevent companies from taking out excessive loans with the intention of avoiding tax.

Thirdly, we could legislate—I hope the Minister will be sympathetic when the Water Bill goes through its stages—to make sure that water companies make the interests of the consumer much more central in their organisations, either through a consumer representative on the board or by placing a duty on the non-executive directors to report on how best to serve the consumer interest, or both.

Fourthly and importantly, we should amend the Bill to introduce mandatory annual customer meetings, where customers can hold management to account in companies that do not currently have annual general meetings in the UK. I would also hope to change the law through the Bill, so that, when restructuring companies which have gone into special administration, the regulator must always first consider non-profit companies, rather than putting them straight back into the private sector, as we saw in a recent example in the railway industry. I hope that the Government will also look at how different models of corporate ownership have impacted on the water industry, as they have not all been satisfactory.

I hope that Ofwat will also do four things—and soon. First, I hope it will report on all the companies in England, not just Thames Water, to establish whether more modest dividend and financial policies would have allowed them to have enough money to spend and to reduce bills. Secondly, it should look at how price cuts could be implemented at the next price review. Thirdly, it should change the licence conditions of companies to impose London stock exchange disclosure requirements on non-stock market-listed companies. Lastly, picking up the point made by the right hon. Member for Holborn and St Pancras, Ofwat should change the licence conditions to require public disclosure of all intermediate holding companies, ultimate controlling companies and all the beneficiaries of those companies, so that we know exactly where the benefits that go in dividends to shareholders end up in those many companies behind many of this country’s water companies.

We may have the best drinking water quality in the world, and we are soon to debate changes in the structure of the industry. I hope the Government will be responsive to amendments designed to enhance the interests of the consumer. I hope the water companies will understand that it is now time for them to stop stacking up money for profits to be paid out in dividends, and to put the interests of the consumer and the consumer’s bills first.

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[Julian Smith (Skipton and Ripon) (Con)]

The cost of living is a major issue in Yorkshire, as it is across the rest of the country. I therefore pay tribute to the Government for acknowledging that we need to deal on every level with the cost of living, and this debate is at the very centre of what we are doing.

The policies the Government have come up with to get every energy consumer on to the lowest tariff are exactly the right thing to do, and I hope the review of green levies and Labour’s £125-worth of green taxes will enable us to reduce energy bills, too. As my hon. Friend the Member for Newbury (Richard Benyon) and my right hon. Friend the Member for Wokingham (Mr Redwood) have said, addressing water bills will be another big step, by making the industry more competitive and ensuring we have a water industry that is fit for the future.

Giving businesses the opportunity to switch will enable big users of water to get the very best deal. It is unfortunate, however, that that opportunity will not be available to the consumer. I agree with my right hon. Friend, who urged the Government to push ahead, where possible, with consumer-led competition. My constituents really have only one option, which is Yorkshire Water, unless they happen to live in Long Preston, near Settle in the western part of my constituency, where they have their own water trust, which enables them to guarantee much lower prices.

I wish to focus on Yorkshire Water because my hon. Friend the Member for Brigg and Goole (Andrew Percy) is correct: Yorkshire Water has done some positive things on infrastructure, and it has also done some good, and some bad, things on flooding, but the financial situation and decisions of Yorkshire Water show that it is exploiting my constituents and people across Yorkshire.

If Members have not read the Yorkshire Water annual report, perhaps I should recap. In 2013 it made an operating profit of £331 million on a turnover of £936 million. Average increases in bills were 6.6% with the average bill being £356. There was a quadrupling of the dividend payment, from £62.3 million to £256 million in the past year. The thing that really sticks in the craw of my constituents is the fact that despite those massive dividends and huge opportunities for its shareholders, Yorkshire Water paid zero tax in the last financial year, and with a highly leveraged balance sheet. When we compare that behaviour with the behaviour of my constituents, the small and micro-businesses throughout my rural constituency, we see that today’s debate and the one we will continue to have about holding the feet of the water companies to the fire is vital.

People will say that Yorkshire Water has done nothing illegal, and it has not, but we thought as Yorkshire MPs that we should take that from the horse’s mouth, so we invited the senior management team down to Westminster. Let me list that team: Kevin Whiteman, the chairman, earns £1,077,000; Richard Flint, the chief executive, earns £1,091,000; Liz Barber, the director of finance and regulation, earns £476,000; and the communications officer earns £165,000.

[Frank Dobson]

May I urge the hon. Gentleman not to use the word “earns”, because it has a sensation that they deserve the money? The best way to describe it is probably to say that they are “being paid”.

[Julian Smith]

The right hon. Gentleman’s intervention is very accurate.

Those highly paid—highly compensated—board members showed no contrition about how tough it is at the moment for consumers. They basically said that they would not budge on their stretching of the tax rules to ensure that they paid no tax. We talked about the clause in their commitment to customers where they said that they would be responsible and that they were environmentally and socially engaged, but they just would not listen.

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[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.

[Frank Dobson]

rose—

[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.