Water Bill

Debate between John McDonnell and Hywel Williams

Monday 6th January 2014 Commons Chamber

[John McDonnell]

I agree that significant investment has been made in the infrastructure, but the problem is that since the 1990s that has declined as a proportion of the overall turnover of the industry. So the record is not glowing by any means, and the cost of that investment has been paid through significant debt burdens on those companies, which is eventually then paid for by consumers

[Hywel Williams]

I am sure the hon. Gentleman would agree that the level of investment would be even higher if all the profits were devoted to investment in the infrastructure, rather than being siphoned off abroad.

[John McDonnell]

That is one reason why I support the Welsh model of a not-for-profit company, because, as I say, I feel that the general public have been ripped off throughout this period.

Let me just finish off with my last couple of examples, because I would not want to miss them out: United Utilities was fined £75,000 for management failures that contributed to a fire in October 2013; and Severn Trent Water received a £30,000 fine for sewage pollution in September last year. The performance record of these companies is that not only do they not tackle the leakages and the real need for infrastructure investment, but they are polluting the very water they are supposed to be protecting and supplying.

--- Later in debate ---

[John McDonnell]

Former Ministers need an element of retraining, so may I say to the hon. Gentleman that he can intervene on me as often as wants, but perhaps he could be a bit briefer?

The issue is this: we are not talking about advocating a return to the previous model of nationalisation here; we are talking about the long-term future of the water industry, which is why this debate is important. My view is that privatisation and competition has not worked, but there are other models that we should explore. The Welsh model of a not-for-profit organisation ploughing the money that comes back into the infrastructure and into quality of service is the one we should now be exploring.

[Hywel Williams]

Does the hon. Gentleman agree that this can be clearly seen in Welsh Water’s response to the cryptosporidium outbreak in my constituency some years ago, when it managed to spend £1 million almost immediately on installing new mechanisms to get rid of the cryptosporidium and then spent £7 million on further treatment works? It responded appropriately and quickly to the outbreak.

[John McDonnell]

Competition and privatisation have not worked, which is why I do not think that the Bill, the main thrust of which is to introduce more competition and privatisation, represents the way forward. It provides further opportunities for exploitation. I think that we can all agree to condemn the level of profiteering that has taken pace, particularly in recent years.

I wish to put on the record what has been happening, as independent examinations have shown. Sir Ian Byatt, Britain’s top water regulator throughout the 1990s, wrote in the foreword to a report by the think-tank CentreForum that

“many companies, especially the private equity infrastructure funds, have paid out excessive dividends to their owners.”

He went on to argue for some form of dividend control. That was echoed by Jonson Cox, Ofwat’s chairman, who has called for water companies to share unintended gains with consumers, arguing that the profits and tax- reducing corporate structures were “morally questionable”. I can understand why.

Let me give some examples of the profiteering that has gone on. Northumbrian Water is owned by Cheung Kong Infrastructure Holdings, which is based in Hong Kong. Last year its operating profits were £154 million, but it paid nothing in tax. Its debt was £4 billion. Its chief executive, Heidi Mottram, received a salary, bonus and benefits worth £595,000. Yorkshire Water is owned by Citi, a US company, GIC, which is based in Singapore, Infracapital Partners and HSBC, based in the UK. Last year its operating profit was £335 million, but it paid only £100,000 in tax. Its debt was £4.7 billion. Its chief executive, Richard Flint, received a salary, bonus and benefits worth £800,000.

Anglian Water is owned by Canadian Pension Plan, Colonial First State Global Asset Management and Industry Funds Management, which is based in Australia, and 3i, which is based in the UK. Last year its operating profit was £363 million, but it paid only £1 million in tax. Its debt was £6.9 billion. Its chief executive, Peter Simpson, received a salary, bonus and benefits worth £1,024,000. Thames Water is owned by Macquaire Group, which is based in Australia, China Investment Corporation and Abu Dhabi Investment Authority. Last year its operating profit was £577 million, but it paid minus £70 million in tax, because it is receiving grants from the Government, as the right hon. Member for Bermondsey and Old Southwark (Simon Hughes) pointed out at the time in his article in the Standard on behalf of the Liberal Democrats. Its debt was £9 billion. Its chief executive, Martin Baggs, received a salary, bonus and benefits worth £845,000.

South Staffs Water is owned by Alinda Capital Partners, which is based in the US. Last year its operating profit was £16 million, but it paid only £200,000 in tax. Its debt was £488 million. Its chief executive, Elizabeth Swarbrick, received a salary, bonus and benefits worth £202,000. Sutton and East Surrey Water is owned by Sumitomo Corporation, based in Japan. Last year its operating profit was £17 million, but it paid only £1 million in tax. Its debt was £219 million. Its chief executive, Anthony Ferrar, received a salary, bonus and benefits worth £290,000. Those are obscene levels of profiteering at the expense of the consumer.

Why is the borrowing level so high? It is not because it is all going into infrastructure. It has now been exposed that some of the borrowing is being used to pay dividends to shareholders and high salaries to chief executives and board directors. That was not the intention of the Thatcher Government’s original privatisation—well, it was not the stated intention. Privatisation was meant to reduce prices, increase investment and make the industry more accountable to the wider public through shareholding. That has not been the case. It is not more accountable through shareholding, because most of the companies that now own British water are owned by overseas shareholders. It does not make it any more efficient for the consumer, because prices have gone through the roof in recent years, which people are angry about. It does not make it more accountable to the taxpayer. In fact, the taxpayer is being bled dry as a result of tax avoidance and the various scams that have been going on, which have been explored by Richard Murphy, the tax justice expert.

Corporate Watch has produced an excellent report on some of those issues. It reports that six UK water companies took high-interest loans from their owners through the Channel Islands and then converted them into euro bonds. They then lent them back to the companies and paid virtually no tax on them whatsoever. This is a tax scam for which these water companies are used as a vehicle. Corporate Watch found that the six companies it looked at—Northumbrian, Yorkshire, Anglian, Thames, South Staffs, and Sutton and East Surrey—had borrowed £3.4 billion using this method. It highlights Northumbrian Water as “the most brazen case” as it paid 11% on just over £1 billion of loans it had taken from its owner, the Cheung Kong group, a Hong Kong-based conglomerate run by the world’s ninth-richest person. No wonder he is the world’s ninth-richest person—we are making him so. This is a scandal. The Bill does not go any way near addressing this rip-off of the British consumer or tackling some of the tax evasion and tax avoidance by these companies that has gone on. People are angry about this. In recent reports in the media there has been exposure after exposure, and people expect this House to act on these matters.

Waste Reduction

Debate between John McDonnell and Hywel Williams

Wednesday 18th May 2011 Westminster Hall

[John McDonnell (Hayes and Harlington) (Lab)]

I wish to raise four matters that relate to my constituency or are of personal interest. I congratulate the hon. Member for Arfon (Hywel Williams) on securing this debate; as he has said, coming in real nappy week, it is timely.

The first of the four matters is landfill. I represent a west London constituency that still has considerable open spaces. It covers a large geographical area. For the past 40 years, it has been a site for gravel extraction, the gravel being used by the construction industry in London and the south-east. I have appeared at every planning inquiry for gravel pits in my area for at least 35 years, and only once did we prevent a gravel application from going ahead. Usually, the extracting companies are offered a five-year term for operating the site, but as more gravel is discovered, so permission is renewed and renewed again. In some areas, a whole generation can be blighted by mineral extraction.

Following extraction, the holes are used for landfill. Putting to one side the traffic and noise caused by gravel extraction, the landfill exercise generates more traffic, more noise and more pollution, particularly air pollution and dust. In that respect, I have had considerable problems in my constituency over the last 30 years. For instance, the Stockley site operated for a number of years after the second world war and into the 1970s, and we were plagued with dumping, which can be associated with illegal dumping, and then with methane fires under the ground. Because of such problems, we need to include stricter controls on the development of landfill sites. Under the Localism Bill, greater authority will be given to local authorities, councils and communities to have a say in refusing landfill developments.

The second matter is incineration, a subject which has already been mentioned. Planning permission was given to an incinerator at Colnbrook, which is outside my constituency but adjacent to it. In recent years, the site was given an extension. The prevailing wind means that pollution from the incinerator is blown across my constituency. I have often raised questions in the House about the health impact of the pollution from incineration during my 14 years as a Member.

Research has been undertaken into the high level of birth defects, most of which was refuted by the Department of Health, yet researchers still come up with increasing evidence of the association between incineration and local health problems. I urge the Government to use the review to ensure that the Department of Health supports additional research into the implications of incineration on the health of communities that live down wind. We heard earlier about the research that is being undertaken. It is still relatively small-scale, and I would welcome additional funding going to primary care trusts, or whichever body results from the health legislation, to assist them in undertaking research in areas with incinerators where pollution could have an impact on local communities.

The third of my concerns is about council provision. We have heard about excellent examples of recycling in Wales, but there is an inconsistency of approach between local authorities. We are all in favour of localism, but it would be welcome if the Government were to consider standardising the opportunity to minimise waste as well as recycling it. For example, there is still an inconsistency in my area in the number of recycling centres, and we do not have a food waste service, which is another inconsistency among the London boroughs. I hate to use the phrase, but there is a postcode lottery for policy on waste and for access to facilities to minimise waste or to recycle food waste, compost and so on. In my area, the figures are still significant. In my borough of Hillingdon, 44,644 tonnes of waste is recycled and 64,566 tonnes is disposed of either through incineration or landfill. Therefore, we are still disposing of more waste than we recycle. No attempt is being made to assess what could be achieved through minimisation and prevention, which leads me on to a personal campaign. I support the Nappy Alliance, which is a representative organisation of the reusable nappy sector.

My youngest child was in reusable nappies 15 years ago, which is when I became an advocate of reusable schemes, working through the National Childbirth Trust. It is blindingly obvious that we would have a big impact on the environment if we could promote the use of reusable nappies and provide disincentives for the use of disposable ones.

The Nappy Alliance has brought forward its own charter, which I support. It believes that there should be a 1p tax on disposable nappies to try to prevent the harm that they do to the environment. We should urge the Government to exhort local authorities to work with local community organisations to see what can be done to support the development of reusable nappies. We have seen the figures about the impact on the environment and the savings that could be provided.

The cost of disposing of disposable nappies is estimated to be around £100 million. If the promotion of reusable nappies leads to a 10% reduction in disposable nappies, we could save £10 million, which is worth considering. The savings could be significantly more as people begin to understand the benefits of using reusable nappies.

I urge the Government to enter into discussions with local authorities, the voluntary sector and private industry to see whether we can promote local schemes for reusable nappies. In that way, we will assist in reducing landfill, incineration and overall pollution.

[Hywel Williams]

Does the hon. Gentleman agree that if this is to be a long-term change, there needs to be a cultural change among young parents? It has taken many years for people to get out of the habit of using the old-style terry nappies. Therefore, we need a sustained effort by third sector organisations, charities, local authorities and central Government to achieve such a change.

[John McDonnell]

It requires a sustained effort, of course, but it should not be an arduous task. In fact, it could be a relatively easy exercise of advocacy. We could make use of the various mechanisms that already exist, particularly to improve the level of parenting. For example, the Sure Start centres and our local nurseries and schools could be used. The task could be relatively easy, if there were a concerted effort by local authorities and community organisations.

It is not like the old days, when we had to swill nappies around in buckets. The design of reusable nappies has moved on dramatically since then. Once parents have been introduced to them, they will see the benefit of them. Parents of younger children often look to see what wider goals there are in life. They want to ensure that they preserve the planet for their children, and they are just at that period in their lives when they are open to the arguments about waste prevention, the protection of the environment and overcoming climate change.

We need clear statements from national Government that this is an important issue that needs to be addressed and from local government about what can be done in the local area. They need to work together on a national plan that can be rolled out on a local level, with the support of the local voluntary sector as well as the private sector industries.

In my area, there are increasing pressures on our local environment as a result of illegal dumping. In their waste review, the Government must look at every measure they possibly can to minimise waste rather than putting the pressure on recycling. Certainly they must do everything they can to prevent landfill and incineration. In the past, I have been a supporter of the landfill tax, but I can see how that has resulted in further illegal dumping.

With the M25, M4 and the A40 all passing through my west London constituency, a large number of illegal dumpers have been able to take waste from central London, drive along the A40, the M4 or the M25 and then fly-tip the illegal rubbish in my constituency. No matter how much we put in place by way of detection and legal action against fly-tippers—some of the legislation that the previous Government introduced was excellent in giving us the tools to do that—the real solution is about minimisation and preventing the build-up of waste products. The disposable nappy might seem a small matter, but if we minimised its use and transferred to reusable nappies, we would be making a major contribution to the future waste policy of this country.