Water Industry

Debate between Gareth Thomas and Daniel Zeichner

Tuesday 22nd January 2019 Westminster Hall

[Gareth Thomas (Harrow West) (Lab/Co-op)]

I beg to move,

That this House has considered the future of the water industry in England and Wales.

Customers and employees should be helped to take back control of the companies providing our water and taking away our sewage. The people of England should once again be front and centre of their water industry. Democratic, publicly owned businesses operating in the private sector, regulated with vigour by a more effective Ofwat is the Co-operative party’s vision of the future of the water industry. I am proud to chair that political party. I am grateful to the Backbench Business Committee for the opportunity to explore that agenda through this debate.

Nationwide, John Lewis, the Co-operative Group, the Royal London insurance company and NFU Mutual are just five successful examples of people-run businesses—mutuals—where profit is sought not to line the pockets of wealthy investors, but to reward customers and employees, and to invest in local communities. Such businesses are inspiration for reform of the water industry.

Margaret Thatcher’s decision 30 years ago to privatise our water industry has created an expensive, unaccountable and unfair system. No other country has a fully privatised system of water and sewage services with so little competition. The resulting monopoly businesses are overseen by a woefully weak water regulator. Unsurprisingly, the consumer voice in England carries little weight against the interests of distant investors, whose decisions have seen water bills rise by 40% above inflation since privatisation.

[Daniel Zeichner (Cambridge) (Lab)]

Does my hon. Friend agree that the rather poor practices of some water companies have led to widespread public disillusionment? When I worked for Unison a few years ago, an excellent report was published showing some remarkably creative accounting, which seemed to suggest that money was being diverted not to investment, but to shareholders.

[Gareth Thomas]

My hon. Friend and the trade union movement in general have pointed that out on a number of occasions. I will come on to one of the trade union movement’s particular campaign issues.

Water companies have become a desirable global financial commodity, bought and sold by big banks, international infrastructure investors, pensions and sovereign wealth funds. Since privatisation, as my hon. Friend just pointed out, dividend payments have been very high, at an average of £200 million a year per company, and £2 billion a year in total. Over the past 30 years, at least £48 billion has gone directly to shareholders.

Analysis by Greenwich University suggests that the more than 40% increase in household bills in that time was driven mainly by the need to finance growing interest payments on debt—a point that the trade union movement in particular has highlighted. That analysis shows that accelerating debt levels are the result of the high dividend payments paid by water companies to their shareholders, which exceeded the privatised companies’ cash balances in every year bar one since 1989. Indeed, it is striking that total payments to shareholders are very similar to the total outstanding debt burden of privatised water companies, with at least £48 billion in payments in the past 30 years and at least £51 billion in total debt.

The Leader of the Opposition and, in particular, the shadow Chancellor deserve considerable credit for highlighting the lower cost of water bills in Scotland, where Scottish Water is publicly owned. While bills in Scotland are 2% less in real terms than they were 18 years ago, English water bills increased by some 13% in real terms over the same period.

Privatisation has not meant more investment. Indeed, annual investment in water supply infrastructure was lower in 2018 than it was in 1990 and has fallen by about 10% in the past 10 years. All of the capital investment made since privatisation could have been covered using only the money generated by customer bills. Instead, much of the income generated by water bills appears to have been used to pay the interest on debt built up by the privately owned water companies, in turn to fund dividend payouts.

Despite similar levels of capital investment, we are now in a situation in which, according to research by the University of Greenwich, consumers in England are paying £2.3 billion a year more for their water and sewerage bills under the current privatised system than if the utility companies had remained in state ownership.

Transport for London Funding

Debate between Gareth Thomas and Daniel Zeichner

Tuesday 15th December 2015 Westminster Hall

[Daniel Zeichner (Cambridge) (Lab)]

I congratulate my hon. Friend the Member for Harrow West (Mr Thomas) on securing this debate, and the Minister on his recent promotion. We have had a fantastic discussion in which hon. Members have spoken with passion and conviction about their local area. It is important that those points are heard.

My hon. Friend the Member for Harrow West gave an excellent account of the whole range of issues. I was struck by his mention of potential delays to the upgrade of the underground system. I hope that the Minister responds positively to my hon. Friend’s hope that he might meet a delegation of staff, particularly given the number of staff cuts in the control rooms. My hon. Friend concluded with some interesting suggestions about how the funding gap might be closed, and I am sure that the Communities and Local Government team will listen closely to that.

[Mr Gareth Thomas]

Will my hon. Friend encourage the Minister to clarify—if not today, then shortly—whether the British Transport police will maintain their funding levels and, therefore, the numbers of constables and other police able to operate on the tube? There seems to be some doubt about whether they have benefited from the Government’s largesse to other police forces.

[Daniel Zeichner]

I am sure that the Minister will have heard that point. My hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) made some fascinating points. The point about the cruise terminal was new to me, but I hope that others will hear it. My hon. Friend the Member for Hammersmith (Andy Slaughter) continued his fantastic campaign on the Transport for London Bill, reiterating points that were made in a debate a few weeks ago and that, doubtless, will be made again. I will return to those.

My hon. Friend the Member for Eltham (Clive Efford) took me back to my childhood: I used to be driven by my parents from south London through the Blackwall tunnel when there was only one tunnel. I remember the pong, which I think was from a dog biscuit factory. Some things do not change, really, and there is clearly much more work to be done. His points about the unfairness of potentially charging his constituents to cross the river were well made.

I want to talk a little more generally about London’s transport system. As someone from outside London, I have to say that London’s system is widely admired as a model of excellence. There are now more passenger journeys in the capital than in the rest of England combined. In the UK, other metropolitan areas—including Manchester, notably—are keen to bring in Oyster-style, multi-platform, integrated smart ticketing. Indeed, I understand that Singapore’s Land Transport Authority last year announced a new Government contracting model after explicitly studying the bus systems of London and Australia; they say that imitation is the sincerest form of flattery, and that is clearly the case here.

We all know that the Department for Transport took a huge hit in the comprehensive spending review, as did the Department for Communities and Local Government. I fear that the repercussions will reverberate through the quality and connectivity of the transport system across the entire country. I am also sure, regrettably, that the savage reductions in funding and subsequent cuts to transport services will be keenly felt by all those who rely on them to go about their daily life. It is distressing but simple: cuts to central Government funding and local authority budgets mean that services will suffer.

Let us remember that in 2013 TfL’s operational funding was slashed by a quarter, requiring it to identify £16 billion in savings by 2021. Last month it was announced that the grant worth £700 million in 2015-16 will be phased out by the end of the decade. The Department for Transport said that this may be mitigated by “new commercial freedoms” for TfL. The implications of those commercial freedoms are potentially significant, and I will largely focus on them.

Along with funding for cycling nationally, London’s dedicated transport funding has been deliberately targeted in the spending review. As of 2014-15, a record 8.6 million people were living in the capital. By 2030, that figure is forecast to reach 10 million, rising again to 11 million by 2050. The pressures on the capital’s transport system will only intensify. TfL has already been making fierce and highly controversial cuts, but even it said in its annual budget last year:

“It is becoming progressively more difficult to achieve this without compromising our core services.”

I would be grateful if the Minister could offer some assurances about how the cut to TfL’s revenue support has been planned. It is well known that before the late 1990s, London Regional Transport was plagued by a pattern of annualised budgets and sudden funding reductions, which in turn created huge inefficiencies. TfL has more long-term financial certainty under Labour’s Greater London Authority Act 1999, but can the Minister really guarantee that additional costs will not be created—for example, in variations to TfL’s commercial contracts—as a result of this decision? We need further assurances.

Since October 2013, the bus service operators grant, which was previously paid to bus operators that were running bus services under franchise to TfL, has been incorporated into the general grant paid to TfL and the Greater London Authority. Now that TfL’s grant is being snatched by the Treasury, so too is this important grant that pays bus operators to keep costs down and helps to subsidise fares for ordinary people. BSOG was already cut by 20% in the previous Parliament, with the total value of the grant across the country falling from £469 million in 2009-10 to £298 million in 2013-14. Now the Government are quietly removing it from TfL entirely. That is unacceptable, and we will not let it go unnoticed. I would greatly appreciate the Minister’s assurance that BSOG will again be allocated to the capital on a separate basis; otherwise, this is clear discrimination against London.

TfL passes part of its grant to the boroughs to spend on local road maintenance and improvement. I am sure that those boroughs would be pleased to be told how that will be funded when TfL’s operational funding is soon reduced to zero. We have heard about the other possible method that TfL might use to alleviate the loss of the grant and to raise revenue to invest in London’s transport network. That method—the so-called commercial freedoms—is proving especially controversial, and many of my hon. Friends have already raised concerns about the wider implications.

The Department for Transport has stated that TfL could save the necessary £700 million a year by generating additional income from the land it owns in London, or with the “additional financial flexibility” that the Government will provide it with. TfL is one of the largest landowners, owning 5,700 acres of land in the capital and more than 500 potential major development sites. Against this backdrop of cuts, it is only natural that TfL wants to plug at least partially the gap that the grant will leave by selling off existing or underused facilities. We support making good use of assets, but there are certain issues that really must be addressed.

First, we need to be sure that forced sales will not, paradoxically, have an adverse impact on the very transport system that they are trying to fund. Selling off land might seem like a good deal in the short term, but it might not look so bright a few years later, when it transpires that the land is needed to expand transport services to meet increasing demand. If TfL land is to be used for housing, let us at least ensure that it is housing at a price that ordinary Londoners can afford. We need a pledge from the Minster that there will be a strong affordable housing element in such developments—particularly important given the disastrous general housing policies being pursued by the Government. Sadly, I have little confidence that that will be achieved.

We are deeply sceptical of the Government’s motives and fear that the asset sell-offs will be all about short-term gain at the expense of securing a future transport system for ordinary Londoners. I do not have time to go into the nitty-gritty of the argument, but the proposed mechanism for property development—namely, the provision allowing limited partnerships—is deeply worrying. I am sure that there will be time enough to discuss that controversial element when the Transport for London Bill wends its way back to us from the other place. Ultimately, a long-term investment strategy aimed at raising money to reinvest in the transport system is one thing, but short-term profiteering on property development is quite another.

In conclusion, TfL’s transport system works, and it ought to be protected, but it is at serious risk from a Government who seek short-term savings and do not understand the importance and value of a widely admired but pressured system that keeps our great capital city moving.