Water Bill

Hywel Williams Excerpts

Monday 25th November 2013 Commons Chamber

[Mr Paterson]

A new source of water is one that is not currently being used, so that could mean opening up old boreholes, or farmers building new reservoirs, or water companies building new reservoirs—we have not built a new reservoir in this country for over 30 years. There are all sorts of new sources of water. Around 95% of the water that lands on this country ends up in the sea. We want to manage it better before it gets there.

[Hywel Williams (Arfon) (PC)]

The Secretary of State has just referred, as he did earlier in his speech, to “this country”. Which country does he mean?

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[Joan Walley]

Indeed. One difficulty is that we are looking at the provision of water for the whole of the United Kingdom, despite the different administrative arrangements that have been put in place by the Parliaments in the different Administrations. The way in which the money is reinvested in Wales is hugely beneficial. As I have said, we should be thinking outside the box in regard to how we incentivise the necessary investment in our water industry.

[Hywel Williams]

We are talking about non-distributable profit. Any profit that is made is reinvested in the system and in creating lower prices. I am not here to praise Dwr Cymru Welsh Water in particular, but its price rise next year will be 1%. Given that that is lower than inflation, it will effectively be a price cut.

[Joan Walley]

That just shows that there are all kinds of different ways of looking at this, and that we do not have to depend on the present traditional arrangements. The Bill should really be looking at the challenges that we face, rather than promoting business as usual.

With more than 2 million households in England and Wales being forced to spend more than 5% of their income on water, it is clear that the Government’s approach is not working. The Bill should do something about that. We need a national affordability scheme to help those struggling to pay their bills, and it should be funded by the water companies themselves. The fact that water bills are rising by 1.8% above the rate of inflation when we are seeing investor returns of 17.5% across all the companies demonstrates just how unfair the whole structure is.

Given the challenges of climate change and the likelihood of increased flooding, balancing affordability with our wider environmental commitments to mitigate and adapt to flooding will involve ever-greater calls for the right kind of investment in the water industry. This will require a cross-cutting response from the Government, and detailed policy measures that will require the Treasury, the Department for Business, Innovation and Skills, the Department for Education and the Department for Communities and Local Government to be equally committed to the measures coming out of DEFRA. As we approach future challenges, and the final implementation date of the water framework directive, households and businesses will need to access affordable water supplies. Key changes will be needed throughout the passage of the Bill.

The Government will need to make a step change in regulatory, social, environmental and fiscal policy, but the water companies, businesses, farmers, householders, local authorities and the regulator will also need to refocus on their long-term objectives and on delivery mechanisms if we are truly to value water as a natural resource and a vital component of everyday life.

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[Hywel Williams (Arfon) (PC)]

I will certainly bear your comments in mind, Madam Deputy Speaker. It is a pleasure to follow the hon. Member for Newbury (Richard Benyon). His beat as a Minister did not really include Wales, of course, but I came across him in the Science and Technology Committee. His sincerity and commitment were manifest in those meetings. Let me also pay tribute to the hon. Member for Stoke-on-Trent North (Joan Walley) and say how much I agreed with her remarks about sustainability and fracking, which my hon. Friend the Member for Brighton, Pavilion (Caroline Lucas) would also have endorsed had she not had to leave.

Water has a huge significance for people in Wales. Our way of looking at water must be framed by Tryweryn and the other valleys that were drowned to provide water, largely for conurbations in England. I am also aware that I am standing on the shoulders of others who came before me, such as Cynog Dafis, the Member for Ceredigion and, with due respect to my hon. Friend the Member for Brighton, Pavilion, the first Green MP —although he was a Green-Plaid Cymru coalition MP.

[Joan Walley]

I cannot help pointing out that the former Member for Ceredigion served with great distinction on the Environmental Audit Committee.

[Hywel Williams]

Indeed. I was aware of that. He is a friend of mine and I think highly of him.

My party’s stance has always been that it is up to the people of Wales to decide on the sustainable use of its natural resources. As scarcity bites, the economic case for Wales exporting water is growing. If so, Wales should be compensated fairly and the benefits should go to the people of Wales.

There is a point which has not yet been made— the territorial significance for Wales of the current water companies. Labour in government, through the Government of Wales Act 2006, failed to act on that. Much of mid-Wales is served by Severn Trent Water. Part of north-east Wales is served by Dee Valley Water. As a consequence, perhaps, part of Herefordshire is served by Dwr Cymru Welsh Water. One of the aims of my party is to regularise that situation. The lines should be redrawn. That is something that I will talk about in Committee if I am fortunate enough to be appointed to it.

As for the current arrangements in Wales, to paraphrase L P Hartley, Wales is another country: they do things differently there. That is a slightly over-used phrase, but in Wales we have a different situation. We have a water company, Dwr Cymru Welsh Water, which is a third sector company, as I mentioned earlier, with a non-distributable profits model. The previous company, Hyder —or Hi-dere, as the BBC used to insist on calling it —was run on conventional commercial lines. Glas Cymru reinvests its profits in a better system and in lower prices. As I said, its current price rises are below inflation.

[Roger Williams]

The hon. Gentleman will know that price rises since Glas Cymru was formed in 2001 and up to the present day are below the rate of inflation. It is the long-term situation.

[Hywel Williams]

The hon. Gentleman makes a good point. Provision of water in Wales is a difficult matter. The geography is against us, but Glas Cymru has done a fine job.

There have been concerns about large profits in the industry, overcharging and a lack of investment, alongside high gearing and a low tax take. I read a report to that effect in the Financial Times on 27 October. Hence the need for greater competition. A water industry insider put it to me thus: some water companies are over-geared, they are over-reliant on cheap finance, which is not going to be there for ever, and they are run as cash cows. This is not a sustainable model. Dwr Cymru has the lowest gearing in the industry and, as I said, all its profits are ploughed back. Unsurprisingly, this third sector company has reported customer satisfaction levels of well over 90%.

Another way in which things are different in Wales is the Welsh Government’s stance on competition, which essentially is against it. Under the Bill, businesses and non-householder customers will be able to switch their water and sewerage suppliers, but the Bill’s provisions on competition are confined to England. I refer the House to the report by the Welsh Assembly Environment and Sustainability Committee chaired by Lord Dafydd Elis-Thomas. When questioned, 113 large-scale users—using over 50 megalitres per annum—said that a price differential of 10% to 15% would be required to tempt them to switch. By the way, that was also the stance of small and medium-sized enterprises.

A price differential of 10% to 15% is substantial, and it is significant that none of the large users that have the ability to switch in Wales have done so. Customer service is important and that is a central element of the water service that we have in Wales. Either Dwr Cymru is doing a cracking job, or switching is unlikely to hold much appeal other than, perhaps in theory, to Ministers.

Competition could be extended to Wales if the Welsh Government so wished. Dee Valley Water’s evidence to the Welsh Assembly Committee noted that competition in the non-domestic sector might be cross-subsidised by the domestic sector—that is, the public would be paying. That point was made earlier, and the answer, I think, is transparency. I understand that the Government in Cardiff do not wish competition to be extended to Wales. Can the Minister, when he winds up the debate or later in writing, clarify whether under the 2006 Act the Government in London have a veto on Welsh decisions on water? Will that continue to be the case, or is the Cardiff Government’s right to choose not to introduce competition an absolute right? I would be grateful to hear from him on that matter.

Other Members have posed the question of how we can incentivise companies to alter the way they manage their systems and water and sewerage networks to improve efficiency and to encourage the development and deployment of innovative technologies that can cut costs and lower the sector’s electricity usage and its carbon footprint. The point has not yet been made that water companies are heavy users of electricity. I am not sure whether competition and the price instrument will achieve all these aims. I hope we will able to discuss this further in Committee.

Lastly, on affordability, the question is how the bottom 1% of the population pays for its utilities. Overall, the Bill is a missed opportunity. It has no specifics on sustainability or the decarbonisation of the water sector. The point about fracking has already been made. There is no legal obligation on people to pay their bills. In other countries, there is a voucher system for vulnerable groups. The Bill is also lacking in specifics on water management. The current UK system is luxurious in that there is no separation of clean and grey water, which could be achieved in the future. That is a formidable list and I hope we will have the opportunity to address these matters in Committee.

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[Thomas Docherty]

Oh dear me; the Minister has obviously forgotten his own position. He will still be a member of the Environment, Food and Rural Affairs Committee for a little longer, so perhaps he can set out which side of the argument he agrees with—that expressed by the Select Committee of which he is a member or that in his new role as a Minister.

The hon. Members for Arfon (Hywel Williams) and for Newbury (Richard Benyon) mentioned retail competition, and the Opposition support non-domestic competition. It has been a success in Scotland, and like the Select Committee of which the Minister is still a member, we believe that, implemented properly, it will work in England. Like the Committee, however, we think there are technical improvements that we intend to explore further in Committee.

[Hywel Williams]

Has the hon. Gentleman any estimate of the cost of introducing competition in Scotland, where it is already under way, or in England? How much does he reckon that it will cost?