Water Bill

Joan Walley Excerpts

Monday 25th November 2013 Commons Chamber

[Joan Walley (Stoke-on-Trent North) (Lab)]

It is a pleasure to follow the hon. Member for Thirsk and Malton (Miss McIntosh). As Chair of the Select Committee that has conducted detailed pre-legislative scrutiny of the Bill, she speaks with great knowledge of and authority on these matters. The Secretary of State would have been well advised to listen carefully to her comments, particularly in view of the greater role and scope there now is for Select Committees, especially in speaking in favour of amendments. The Government must urgently reflect on, and respond to, her points in respect of how surface water mixes with sewage in flooding situations. The cross-cutting issues that she raised in relation to water—not least highways and expenditure on highways, which are matters for the Department for Communities and Local Government and other Departments—need to be looked at in a holistic way. I hope that, in the winding-up speech tonight and in Committee, Ministers will take the Select Committee recommendations seriously.

Today’s debate takes me back to the first Committee of this House that I was a member of, which considered the paving Bill for the legislation that led to water privatisation. It was very divisive at the time and was rightly opposed by the Opposition and by many of the environmental groups that believed water to be a natural eco-service, and that the concept of paying large dividends to shareholders at a time when investment was needed in the water infrastructure was simply the wrong way of addressing how to secure investment and manage our water supply. A quarter of a century later, the private companies that were created—and indeed Ofwat, the regulatory body—have had mixed fortunes and mixed success. However, where we are now and the current structure has to be our starting point for taking the Water Bill forward. Today, the challenges we face are greater than ever, particularly, as we heard from my hon. Friend the Member for Garston and Halewood (Maria Eagle), given that we are getting close to the finalisation of the next price review in 2015. It is absolutely critical that as much pressure as possible be applied in order to get this right.

Top of my list of questions is, how do we ensure a safe, affordable water supply for domestic use, for industry, for farming, for all areas of the UK, particularly given that different administrative arrangements apply, which does not make matters easy? There are parts of the Bill I do welcome, not least the one dealing with flooding and insurance, but like many of the Members who intervened earlier, I feel that the flooding issue must be dealt with urgently and in detail. A statement of intent is not quite the same as a measure on the statute book.

[Oliver Colvile]

Is the hon. Lady aware that last autumn in the south-west, we had a massive amount of rain that affected our entire transport network and cut off our railway lines for a very long time?

[Joan Walley]

I am grateful to the hon. Gentleman for his intervention, and that is exactly the point I am making: our water policy needs to take into account the whole issue of mitigation to prevent such situations, but it also needs to be adaptable. The adaptation that we need requires huge amounts of investment and a whole new, collaborative approach to planning. The Bill has been brought forward by DEFRA, but as the Energy and Climate Change Committee has pointed out, it is the problems associated with climate change that are bringing about flooding, and we have to find new ways of dealing with them urgently. It has taken much too long to deal with outstanding flooding insurance claims. Importantly, it is a question not just of how we deal with individual claims and of having an insurance system in place, but of how we deal with all the associated disruption.

As we approach the European elections—I am sure that many of us here will be thinking about what Europe has done for us—how do we ensure that water supply and management fits within the context of the European water framework directive? We have a fundamental disconnect at the heart of water policy which the Bill could actually put right. As my hon. Friend the Member for Garston and Halewood said, the Bill is a wasted opportunity. The water companies, regulated by Ofwat, supply water, but at a local level there is little meaningful collaboration, accountability, transparency or resource, as has been mentioned, to ensure that we have in place what is needed to meet the requirements of the water framework directive.

The directive has two key objectives: an environmental objective, based on the premise of preventing further deterioration and achieving “good status” in all waters; and a managerial objective aimed at creating integrated water management at the river basin level to ensure overall co-ordination of water policy. Here, I want to make a plea to the Government and to DEFRA on behalf of the Environment Agency. The agency needs to be fully resourced for its task of leading the framework directive, in order to enable it to identify significant water management issues, to develop measures to address these at the river basin district level, and to develop and publish the plans for implementing these measures, known as the river basin management plans.

Given the length of time it takes to get legislation on to the statute book, equipping the Environment Agency to work within the framework to carry out its responsibilities needs to be looked at in parallel with the Water Bill before us. Let me give an example of the current unsatisfactory position. When the Government set up the Canal & River Trust in 2012, they committed to a new structure for the canal network which included the navigational waters—some 2,000 miles of canals and river navigations in England and Wales. These rivers were to be handed over to the trust to ensure certainty and long-term funding through the trust arrangements. However, we now know that the Chancellor has reneged on this commitment, and the plans have been put on hold. I am grateful to the Under-Secretary of State for Environment, Food and Rural Affairs, the hon. Member for North Cornwall (Dan Rogerson), for agreeing to meet me to discuss this issue, as I believe it is vital that this transfer take place and be fully funded.

There is a further concern, which was touched on in an intervention from my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller). Through clause 12, Ofwat is to be given the power to intervene in private supplier agreements with water undertakers, with the apparent intent of assisting smaller private water suppliers in their commercial relations with undertakers. Not surprisingly, the Canal & River Trust is alarmed that Ofwat will therefore be able to vary or terminate water sales agreements at the request of the undertaker and without the agreement of the trust. I heard the Secretary of State’s rather complacent reply to my hon. Friend’s intervention, and I hope that, when the Under-Secretary replies, he will tell us what specific, constructive discussions he will have with the trust on this issue, so that we can make amendments to the Bill that will safeguard delivery of the trust’s charitable objectives when the Bill’s legislative passage is completed.

There is uncertainty about other aspects of the Bill, as well. The Bill is all about the economics of, and very little about the environmental and social aspects of, water policy. It mirrors the assumptions that lay behind the changes to the water industry proposed back in 1987, rather than looking at the assumptions we need to make today for the future. Here, I would like to give credit to the former Environment Minister, the hon. Member for Newbury (Richard Benyon), who only last week in the press disclosed how close we were to drought just before the 2012 Olympics. There are also many other factors that point to the need for long-term planning.

We need to take account of the work of the Natural Capital Committee, which is looking to embed the value of natural capital in the national accounts and policy making as soon as possible. We must also recognise the need to look for a credible long-term plan to restore our natural capital, and recognise the work of the Committee on Climate Change. Reference was made earlier to the adaptation sub-committee report, which highlights the need to incentivise efficient water management and to have a price for water that better reflects its scarcity. Of course, there are also the risks associated with water flooding. All these factors point to the need for a much wider, all-encompassing approach to water than the one the Bill provides for.

We should also address the issue of Ofwat having a primary sustainability duty. Its role of granting new water supply licences and overseeing bulky supply agreements should include consideration of the sustainability of water sources. There is common agreement that, without such a duty, we will see over-abstraction, over-licensing and greater environmental damage to our already overstressed river systems. We have heard the Secretary of State’s response to concerns about fracking. He has stated that all the protection and regulation that we need is already in place. However, the proposal for financial guarantees in relation to pollution that my hon. Friend the Member for Garston and Halewood outlined will be vital, and I hope that they will be incorporated in the Bill as it completes its passage through both Houses. I know from the initial meeting that the Minister kindly organised recently that there is widespread concern among many organisations, including the WWF, the Royal Society for the Protection of Birds and the Angling Trust, about the need for a primary sustainability duty, not only on resilience, to be incorporated in the Bill. Will the Government table an amendment on sustainable development? Will the Minister tell us how he intends to deal with this issue?

I want briefly to broaden the debate. Following the discussions that I have had with many different experts in the industry, I do not believe that we should be carrying on with business as usual. Instead, we should be gearing up to a different set of policies designed for the 21st century. The confluence of the various factors I have mentioned means that we should be taking a more fundamental step change in how we invest in improving the environment and safeguarding our water supplies.

I would like to see far more local governance arrangements that would fit with the river basin concept, involving not just water companies but local councils, farmers and other organisations working together on a risk-based approach. I should mention that some water companies are starting to think outside the box. I refer the House to a recent document published by Severn Trent Water, “Changing Course through the sustainable implementation of the Water Framework Directive”. We need much more collaboration of that kind, but the Bill does not really give it to us.

I want to mention the work that I have been doing in my constituency to bring all the different partners together. This has culminated in an application for European funding under the Life Plus programme, which would enable us to implement measures that would prevent pollution in the River Trent. We need to see much more of that kind of approach. Water efficiency should also be promoted.

The Bill will promote greater competition, but what will it do to challenge traditional kinds of capital investment? We should be looking into different kinds of investment. Expensive engineering solutions are not always the way forward, even though the water companies depend on capital value for the returns that they make. If the Government can be persuaded to introduce an obligation for sustainability into Ofwat’s powers, Ofwat could look at a return on revenue expenditure, too. We need to look at the kind of investments involved. The Bill could enable Ofwat to take a much more proactive role in vetting companies’ proposals for investment.

I would also like to see the dividends paid out to water company shareholders managed differently. Yes, money is needed for investment in water management, but it would be so much better if the profits could stay in the business and be reinvested, rather than global private equity companies that do not necessarily have a long-term commitment to our river basins paying out massive returns—well above what we can earn in interest from our bank account—to shareholders.

[Roger Williams (Brecon and Radnorshire) (LD)]

The hon. Lady is describing the model used by Welsh Water, a not-for-profit company that is responsible to its customers, rather than to shareholders.

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[Dan Rogerson]

Over the spending review period as a whole, the investment will be bigger, and we will see the numbers climbing over the coming spending review period as well, by up to £400 million a year by 2021.

Several hon. Members raised the issue of bad debt, and rightly pointed out that some companies are better than others. We of course want all companies to aspire to do better. To return to the points made by my right hon. Friend the Secretary of State, we now have a far more vocal and effective regulator than we have had for some time. On issues of bad debt, affordability and company transparency, which matters to many right hon. and hon. Members, the expectation on companies to deliver is now much greater. I want to make it clear that many companies are doing a good job, investing money and delivering for customers, but where there are problems, the regulator will tackle them. My right hon. Friend set out absolutely clearly in his letter to the companies his expectations for the industry. The Government are supporting the regulator to carry out the work that is necessary.

[Joan Walley]

Will the Minister give way?

[Dan Rogerson]

I will give way for a final time.

[Joan Walley]

In the remaining six minutes, will the Minister say whether he is minded to consider that the regulator should have a duty in respect of sustainability as a primary function, which has been raised by many Members?

[Dan Rogerson]

I am happy to consider that. The case for such a duty has been made by Members on both sides of the House. The clear gain that we want is for Ofwat to have an additional duty in respect of resilience, for all the reasons that we have given. We want to incentivise the water industry to have long-term solutions to the problems that face it, rather than moving from price review period to price review period. We want to encourage continued investment in solutions that involve retaining water for use, rather than abstraction-based solutions. We want to incentivise investment in the best environmental solutions.

Ofwat already has a duty in respect of sustainable development. We have received legal advice that, regardless of whether that is a primary duty, there is a duty on Ofwat to take sustainability into account. Were we to make that a primary duty, we would perhaps not be able to bring in the resilience duty that we want. We will consider that issue and I am sure we will return to it in Committee, because a number of hon. Members have said that they will raise it. At the moment, we think that there are dangers in elevating the sustainability duty above the resilience duty. If I can be convinced that there is a way to deliver both, I will be happy to listen, but I want to ensure that we have resilience.

A number of other detailed issues have been raised. My hon. Friend the Member for Newton Abbot (Anne Marie Morris) spoke about park homes and I am meeting her this week to discuss the matter. I will be pleased if we can make progress on it, but there are issues with the way in which they take their water from an intermediary, as she pointed out. Canals were mentioned. We have discussed the Canal & River Trust on the Floor of the House in Question Time. I am happy to meet the hon. Member for Stoke-on-Trent North (Joan Walley) and other hon. Members to discuss that issue.

I am grateful that we have had so much time to discuss the issues and to get them out in the open. We have talked about the need to keep water available and affordable, and to continue to improve the environment. We have also mentioned the uncertainties in our water supply and the pressures on it, such as unpredictable weather and the growing population. We have a responsibility to ensure that we use our water wisely, to protect it and to ensure that there is enough for future generations. That is why we are taking action now. I am grateful for the support of Members from all parts of the House. I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second Time.

Water Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Water Bill:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 17 December 2013.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

(7) Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Mark Lancaster.)

Question agreed to.

Water Bill (Money)

Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Water Bill, it is expedient to authorise the payment out of money provided by Parliament of:

(1) any expenditure incurred under or by virtue of the Act by the Secretary of State or the Competition and Markets Authority; and

(2) any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Mark Lancaster.)

Question agreed to.

Water Bill (Ways and Means)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Water Bill, it is expedient to authorise:

(1) the inclusion in sewerage licences of conditions requiring the payment of sums to the Water Services Regulation Authority,

(2) an extension of the cases in which a penalty may be imposed under section 22A of the Water Industry Act 1991,

(3) an extension of the cases in which a penalty may be imposed under section 111 of the Enterprise Act 2002 as applied by section 17M or 17Q of the Water Industry Act 1991,

(4) the charging of fees for providing copies of, or data comprising, all or part of the main river map for England,

(5) the conferring of powers on the Secretary of State to make regulations requiring insurers to pay levies or make contributions for purposes relating to flood insurance, and

(6) the payment of sums into the Consolidated Fund.—(Mark Lancaster.)

Question agreed to.