Water Industry

Debate between Gareth Thomas and Thérèse Coffey

Tuesday 22nd January 2019 Westminster Hall

[Dr Coffey]

My right hon. Friend is correct, and that has been considered. The balance is very important. However, we need to continue to challenge South West Water to make sure its investment is effective. The hon. Member for Keighley (John Grogan) talked about the challenges on sewage, and there are particular challenges in the south-west on aspects of combined overflows. We continue to press the company to make sure that it is maximising the investment on improvements.

[Gareth Thomas]

Will the Minister comment on two points? I mentioned in an earlier intervention that, since Scottish Water was set up in its current form, the price of water is 2% lower in real terms, while water bills in England have gone up by an average of 13% in real terms. Secondly, in the current price review, does the Minister intend to require Ofwat to significantly lower the cost of capital, which is included in the amount that Ofwat allows water companies to charge?

[Dr Coffey]

I am not aware that I have the power to direct Ofwat on exactly how it comes up with its cost of capital. My understanding is that it has reduced what it assumes to be appropriate for the weighted average cost of capital, but I expect the price review to be published shortly. I am due a briefing from Ofwat within the next week on that particular issue.

On prices, Severn Trent’s average bill is still lower than that of Scottish Water. I want to bring some facts into the debate. The need for ongoing investment in the water industry will vary around the country, as will what water companies put forward as necessary for the changes we require.

Ofwat has highlighted the benefit of modernising licence modification powers, after the Secretary of State asked it to look into what further powers it felt it needed. We are currently consulting publicly on that proposal and will make a final decision after the consultation. If we decide to proceed, we hope to bring that forward in a legislative vehicle in the next Session.

The Government’s strategic policy statement in 2017 set out the need to improve protections for vulnerable customers. To help water companies achieve that, the Government introduced data-sharing provisions in the Digital Economy Act 2017 to better identify those who may need help with their bills. Companies have responded positively to that challenge in their draft business plans. Between 2020 and 2025, they have pledged to reduce dividends and bills, increase investment to £50 billion, improve transparency on executive pay and increase the uptake of social tariffs by nearly 90%. Welsh Water’s level of investment is nowhere near as high as that of the average water company in England.

I am pleased that many water companies have set out how they will share profits with customers either directly or through community benefit schemes. They have set challenging targets to extend their support to vulnerable customers, including a commitment from Northumbrian Water and South West Water to eradicate water poverty in their regions.

The industry plans to reduce leakage by 16% by 2025 and has set the ambitious target of a 50% reduction by 2050. Companies also plan to reduce individual water use by 2045, targeting 83% metering penetration and a per capita consumption of 123 litres, which would be a significant improvement on today’s average of 141 litres in England. We will hold them to account on those plans and we will take action ourselves. In our water conservation report, which was published just before Christmas, I said that we would carry out a call for evidence and a consultation on the measures we can take to reduce demand.

Even though we expect that leakage will fall and demand will drop, water supply still needs to be increased. To ensure key infrastructure can be delivered on time, we are consulting on a draft national policy statement for water resources infrastructure, which will streamline the planning process for new large water infrastructure projects, such as reservoirs, desalination plants and water transfers. We expect companies to collaborate with one another on regional water resource plans that transcend company boundaries, to identify the most cost-effective solutions for each region and for the nation. That includes water companies considering other water users in their plans and working together where appropriate. The Environment Agency’s national framework for water resources will support that work.

It is important to recognise the regulators of the water industry, namely the Drinking Water Inspectorate, the Environment Agency and DEFRA, which itself continues to regulate on a small number of matters. They all have good powers to protect consumers and the environment.

The work of the Consumer Council for Water has been referred to. As the consumer body, its role is to hold the water companies to account on behalf of customers. It acts for both residential and business customers. We want to see a water industry that puts customers at the heart of the business, contributes to society and protects our precious natural environment. We will continue to push the sector and to hold it to account, to ensure that it achieves those objectives.

Public Services (Social Value) Bill

Debate between Gareth Thomas and Thérèse Coffey

Friday 25th November 2011 Commons Chamber

[Mr Thomas]

The hon. Gentleman makes an interesting point about Barrett Homes. I draw his attention to subsection 5(d) of new clause 1, which refers to the business being

“majority-owned and controlled in the interests of improving the social or environmental well-being of the United Kingdom.”

Given that Barrett Homes has a substantial shareholder base, it would be difficult to justify in any court of law that it met that definition.

The hon. Gentleman's interesting point relates to Fairtrade, too, and if the Government accept the new clause, a small amendment in the other place could help to ensure that Fairtrade organisations were not excluded. I am open to the idea that his suggestion might work and I gently suggest that it would require the Minister to have a slightly more open mind than he demonstrated in Committee. Perhaps the hon. Gentleman will have more luck in encouraging the Minister behind the scenes than I did in Committee.

New clause 2 highlights the key role that local authorities will play in helping to grow the social enterprise sector. Indeed, many of the representations I have received about the Bill stress the importance of local authority commissioners for social enterprises. A requirement for a proper strategic look at the needs of social enterprises in each local authority area would mean that Conservative councils, desperate simply to privatise services, would have to at least to consider the merits of the social enterprise sector. They would do well to look at the example of the many Labour-run co-op councils around the country that are already doing much to encourage social enterprises to develop.

In Committee, a number of Members noted the danger of strategy documents gathering dust and achieving little, which none of us in the House of Commons would want to see. I accept that that is a risk, and new clause 3 is designed to help minimise that risk. I have been struck by the enthusiasm of many of the organisations included for consultation on new clause 3. New clause 3 requires an annual report to be laid before Parliament with the clear involvement through consultation of a diverse range of representative bodies from the sector and others, such as the National Audit Office, which, if it wanted to do so, could comment effectively on the success or otherwise of the commissioning for social value part of the Bill. The Charity Commission would be able to provide a view on the effectiveness of the Government’s strategy to encourage further charities that are social enterprises, while the Office for National Statistics clearly needs to be encouraged to develop statistics to enable the sector’s strength and performance to be properly understood.

Evidence-based policy making and proper evaluation of what has worked and what has happened so that one can learn from mistakes is surely always a sensible approach for Ministers and Parliament to encourage. The National Council for Voluntary Organisations, the Association of Chief Executives of Voluntary Organisations, Social Enterprise UK and Co-operatives UK are all strong, excellent bodies that could offer insightful comments to help Ministers and, crucially, Parliament, to assess the effectiveness of the Government’s policies for encouraging the sector to grow.

I was struck by the recent Public Administration Committee’s report “Change in Government: the agenda for leadership”, published in September. The Committee noted the Prime Minister’s promise on, among other things,

“re-empowering…communities as part of the ‘Big Society’”.

Two paragraphs on, it stated:

“The principal message of this report is that unless there is a comprehensive change programme for government, there will be little of the real change”

that the Conservative manifesto promised. There are three new clauses before the House today that all offer the chance of that comprehensive change programme for social enterprise to be embedded across Whitehall.

My final point on the three new clauses is to draw the House’s attention to the new suggested definition for the sector. In Committee and in her intervention today, my right hon. Friend the Member for Salford and Eccles (Hazel Blears) rightly raised the issue of an asset lock to protect taxpayers’ assets to stop them simply being transferred to the private sector. In Committee, my right hon. Friend received support for the principle of an asset lock from the hon. Member for Bedford (Richard Fuller) and even from the Minister.

As I said in response to the intervention from the hon. Member for Finchley and Golders Green (Mike Freer), subsection 5(d) of new clause 1 seeks to add a key description to the definition of social enterprise which locks in any public assets transfer to the social enterprise. That matters because the Opposition remember the bus privatisation scandal of the 1980s. The bus industry was transferred lock, stock and barrel from public ownership to employee mutuals. It was not that long before the employee mutuals handed themselves over to what had become big corporate bus businesses. Those businesses gained the assets on the cheap while the community and employees lost some of the social value implicit in those public assets, which were taken out as profits of those private businesses to reward their shareholders.

I do not criticise the entrepreneurs who set up and now run the bus industry, as the rules at the time allowed them to do what they did. I am certainly not against privatisation. It has its place, although that is not everywhere and not all the time. If that is the Government’s intention for an industry or a particular part of a sector, however, we should have proper, transparent debate about its merits.

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

I appreciate the point made by the right hon. Member for Salford and Eccles (Hazel Blears) about how some overage must be retained by the taxpayer when surpluses are gained later, but the hon. Gentleman is rewriting the history a little, I think, of the effect of bus privatisation. I remember that when I was a schoolgirl in Liverpool the introduction of choice and competition meant that we had better services, not worse, as a result of the privatisation.

[Mr Thomas]

My recollection is slightly different; we remember that in the 1980s there were substantial cuts in bus services after privatisation. Arguably, that is not the point. The key point is whether the assets should remain in the ownership of the public sector or, if not, in that of members of the public who are combining in a social enterprise. The asset lock clause seeks to achieve just that.