Water Bill

Guy Opperman Excerpts

Monday 25th November 2013 Commons Chamber

[Mr Paterson]

My right hon. Friend is absolutely spot on. We used to have heavy industries in our cities that used large amounts of water, as I know well, having worked on Merseyside for 25 years. Merseyrail has had problems with water because so many of the extractive industries have gone. There is no problem with the volume of water; it is about getting it to the right place at the right time and by the right means. That is what I hope the Bill will facilitate.

Our reforms will increase water supplies by making it more attractive for landowners to develop new sources of water, or for innovative businesses to treat and dispose of waste water. Let me take a hypothetical example. If a brewery with its own borehole has spare capacity, it might be able to supply its pubs in the area more cheaply than they could be supplied by the local water company. The brewery could put its spare water into the water company’s supply system or work with a retailer providing broader services to those businesses.

We also want to make it easier for our farmers and land managers to develop new sources of water, such as on-farm reservoirs, and to hold water back. For example, a farmer with an on-site reservoir that more than meets the farm’s water needs could make an arrangement with either a licensee or the incumbent water company to enable it to put water into the supply system. The water could be supplied regularly or only at times of high demand. Either way, the farmer would have a new product that he could sell.

[Guy Opperman (Hexham) (Con)]

I applaud the Secretary of State’s notification that Northumbrian Water is doing great work at Howdon. On the creation of future reservoirs, how will we provide financial incentives for the farmers and other providers of such future reservoirs, whether big or small, to go ahead and do the necessary infrastructure planning for such operations?

[Mr Paterson]

It is known as the market; where there is demand, people will invest. We are hoping to create a new market for this product, and I am absolutely confident, given the freedoms we are releasing in this Bill, that there will be significant investment. We should not forget that £116 billion is an extraordinarily large amount of money that we would never usually have got from the Treasury under any Government of any colour. This is a great success. We want that investment to keep flowing in for exactly the sort of projects that my hon. Friend discusses.

For the first time, we are opening a market for businesses to recycle and reuse waste water as a new water resource. They will also be able to purchase sewage sludge that might otherwise have been sent to landfill—for example, for use in anaerobic digestion plants.

We need to increase the number of options that water companies can use to store and supply water to their customers. The solutions will vary across the country, reflecting different levels of water demand and availability, geography, and geology. For some, storing more water in new reservoirs or in recharged aquifers will help. Others, particularly in water-stressed areas, may need more action to cut demand, including through greater water metering. For others, improving interconnection to move water around between their supply systems will help. Companies such as Severn Trent, Anglian and Yorkshire Water collaborated on practical solutions during last year’s drought. This Bill will make such supply arrangements much easier to put in place. It will enable water resources to be used more flexibly and efficiently, reducing the need for expensive new solutions that customers would have to pay for.

The Bill provides flexibility for the regulator to work with the industry on shaping and introducing these new markets. It also includes checks and balances so that the Government can ensure consistency with our policy framework. We will be issuing guidance to Ofwat on how it must set the rules of the game. We have already published charging principles so that people can see how Government policy will shape the new regime. Since the pre-legislative scrutiny of the draft Bill, we have strengthened the role of Government, with a power to veto Ofwat’s charging rules, and the new market codes. I am extremely grateful to Members of this House, especially those on the Environment, Food and Rural Affairs Committee, who scrutinised the draft Bill. The Bill is stronger as a result of that scrutiny.

Governments do not create successful markets. Well-functioning markets are created by participating businesses and are allowed to evolve over time. That is why the detailed work to develop these new markets is being delivered by the experts. Through the Open Water programme, we are working with the water industry, Ofwat, the Scottish Government, regulators and customers on the detailed work required to prepare for implementation of these new markets. We are committed to reforming the abstraction regime so that it is fit to face the challenges of the future.

--- Later in debate ---

[Richard Benyon]

I am grateful to my hon. Friend for her intervention. If I felt a degree of paternalism towards the water White Paper, I feel one even more towards the Canal & River Trust, which is one of the great successes. It has seen volunteer numbers rocket since it went from being a government organisation—as British Waterways —to being in the charitable sector, and Members on both sides of the House should take pleasure in its success. Will the Minister respond, if not tonight, at some point, to the real concerns that the CWT has about clause 12? I hope that we can allay its fears because, as the Secretary of State rightly said, the CWT will be an important player in delivering the kind of connectivity we want in our water sector. The CWT will also be a huge resource, in terms of the economic regeneration of our cities, the potential for tourism and the social dimension of volunteer numbers. So I hope that the Minister is able to address the CWT’s concerns, which have been eloquently voiced to hon. Members on both sides of the House.

A debate is rightly taking place about the affordability of water. That was of primary importance in the Government’s mind as we developed the vision in the water White Paper and in the Bill, and I know that it is a great concern of the Minister as he steers the Bill through. Those who believe in price caps can relax about water, because we have a price cap for water—the five-yearly price review. Ofwat provides a price cap for customers, albeit one that is done by negotiation. It has been an effective way of keeping water relatively affordable, although I know that some of my colleagues from the south-west have views on that—we have partly addressed those. Obviously, there are ongoing concerns about water prices, so it is also important to recognise what the Walker review said. It found that the rateable value of a property bears no relation to a customer’s ability to pay and it discovered that 40% of low-income households live in the top rateable value properties.

The concerns and fears that people have about increased metering do not necessarily correlate with the idea that we should leave as many households as we can paying for water through a rateable system. In the next price review period, possibly with the aid of some legislative stimulus, we could see a much higher rate of metering. Knowledge is power for households. We will not be having this debate in 20 years’ time, because we will all be managing our utilities on our laptops at work. We will be able to see that a rocketing in our water usage could be down to a leak in the system. We will be able to manage our household bills more effectively. The high level of metering in the south-west and the work that Southern Water and Thames Water are doing to increase the level of metering should be applauded and supported.

The WaterSure scheme and other social tariffs are important tools, but we should consider the whole question of affordability in a much more holistic way. The effect of a freeze in council tax, of getting more families on low incomes out of paying tax altogether and of other measures will have infinitely more impact on the total expenditure of those households than will tinkering around the schemes with some of these points.

My hon. Friend the Member for Thirsk and Malton (Miss McIntosh), the Chair of the Select Committee, made an important point about bad debt, but I refer her to her own local water company, Yorkshire Water, which is an exemplar in dealing with bad debt. The money we all pay on our bills for bad debt varies around the country. Some are paying £14 or £15 and some are paying a lot more, because our water companies might be bad at dealing with bad debt. I was impressed to hear that, at Yorkshire, a resolve scheme negotiates repayment terms for customers with arrears of more than £500. A couple years ago, some 5,000 customers paid back £650,000 of bad debt, and the water company wrote off £1 million of bad debt. It is that kind of partnership approach that is delivering a much lower figure of bad debt, which should be seen in the context of affordability. Ofwat estimates that the next year’s price review could reduce bills by between £120 million and £750 million, which seems an awfully wide difference.

Of course we all want to keep water bills low and as many people as possible out of water poverty, but we concentrate on that at the risk of reducing investment. I have spoken about that matter recently in the House and I will continue to do so. A high level of investment is better for customers. It is about stimulating innovation and resilience and reducing the impact on the quality of people’s lives and ultimately on the bills they pay.

The hon. Member for Stoke-on-Trent North mentioned my comments about the drought. In the spring of 2012, the Environment Agency said to me that there was a 3% chance of us having enough rain through that summer to refill the reservoirs and depleted aquifers. We were fortunate because it started to rain in May. It rained right through the jubilee and stopped just as the first athletes started arriving in the Olympic village. We all thought, “Thank goodness”, although we did have a number of flooding incidents in certain areas. That rainfall might have caused us a problem that summer, but we were planning very seriously for a third dry winter. I put to the House this question: are we really content to see people in the most economically active part of the UK, which is sixth largest economy in the world, reduced to collecting their water from standpipes in the street? That is the sort of image that brings down Governments and causes wholesale, serious and endemic problems in society, and we must use this Bill to avoid that.

[Guy Opperman]

I represent Northumberland—probably the wettest county in England—and we should probably have held the Olympics, as there would then have been no such fears. The Secretary of State referred to water supply earlier, when he called on business men, farmers and other people to get involved and create smaller reservoirs. As my hon. Friend drafted the White Paper on water and knows so much about the subject, can he say what assistance will come from DEFRA and the Bill to incentivise and assist such people to create those reservoirs?

[Richard Benyon]

There is provision in the Bill to establish an inset regime and allow new entrants to design innovative infrastructure, which can link into the water system. Moreover, under the capital allowance system, farmers can invest in new reservoirs and have the right to give the surplus of that water to their water companies. In dire circumstances, the Environment Agency can purchase that water to keep rivers flowing. Real opportunity exists for people. I am not saying that that will resolve our water resilience issues; many farmers will need to build many reservoirs for that to happen. None the less, there is a genuine opportunity.

I have one plea. Yes, we can get involved in lengthy debates about whether we should have a primary or a secondary sustainability duty, or whether the robust new resilience duty—I urge hon. Members to read about that—will provide an added incentive; but if the rivers do not flow, our reservoirs are empty and our economy suffers, we should be absolutely determined to concentrate on the outcomes. I appeal to Members in this Chamber and in the other place not to get stuck on the tokenism of any duty, but to consider the outcome that it can deliver. I am relatively agnostic about whether Ofwat should have a primary or secondary duty to deliver sustainability. I am much more concerned about the outcomes, and I have yet to be convinced that just changing the wording will make a huge amount of difference. A really important gain in all this is the resilience duty on Ofwat.