Yorkshire Water

Lord Benyon Excerpts

Tuesday 16th November 2010 Westminster Hall

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Richard Benyon)]

I start by congratulating the right hon. Member for Rotherham (Mr MacShane) on securing the debate. Without commenting on his specific case, I also congratulate him on fulfilling the House’s fine tradition of right hon. and hon. Members standing up for their constituents when they feel they have been wronged. It might have been a tad easier to give the right hon. Gentleman a fuller response had I known he would raise that specific case, but I will do my best to talk about it. In my early remarks, I will set that case in context.

The control of leakage from water company distribution networks is a vital component in maintaining an adequate supply-demand balance in the supply of water. The failure of some water companies consistently to meet leakage targets undermines efforts to convince customers to adopt water-efficient behaviours. It is clear from the views expressed in the current water White Paper online survey that leakage is an issue held in high importance by the public, not just in the right hon. Gentleman’s constituency but across the country.

The failure of some companies to meet annual leakage targets reflects badly on the generally good performance on leakage—that is why I would take slight issue with the right hon. Gentleman. He said that we are where we were 20 years ago, but there has been considerable improvement. It is not my job to defend or to be the voice of any water companies. If anything, my job is to ensure that a fair deal is being achieved by the consumer. However, we want to be accurate in dealing with leakage—it is not where we would like it to be, but we are moving in the right direction, and a number of different factors are involved. I will talk about some of those factors in a moment.

The latest figures show that leakage has reduced by more than a third since its peak in 1994-95—a reduction of 1,837 megalitres per day, equivalent to the daily needs of more than 12 million domestic customers. Between now and 2015, the target leakage in England and Wales is due to fall by a further 97 megalitres per day.

At this stage, it is useful to remember that fixing leaks can be costly—that is no excuse for it not happening, but it can be costly. Customers have told Ofwat, the independent regulator, that they do not want to see large rises in bills to reduce leakage, and, clearly, the serious disruption caused by digging up streets must be considered.

Companies are now reaching a level of leakage at which the extra costs associated with repairing leaks—in terms of manpower, materials, fuel, carbon emissions and so on—are equal to the costs of producing the water that is leaking. That is not to say that we should not redouble our efforts—of course we should—but we should see them in the full balance of what we are seeking for a modernised water company through the current review process.

The water companies report their leakage performance annually to Ofwat. When Ofwat assesses a company’s performance against leakage targets, any decisive external events are taken into account. The prolonged cold winter we experienced last winter presented a challenge to the water companies in managing an increase in burst mains and in minimising interruptions to consumers. The coldest winter for more than 30 years had different impacts on networks across England and Wales. All companies reported high numbers of burst pipes over that period because of ground movement caused by freezes and thaws—I am not saying that that is in any way related to the particular case referred to by the right hon. Gentleman. In addition, snow cover for longer than normal made it more difficult for the companies to find and repair their leaking pipes.

Ofwat’s primary consideration when deciding what action to take against a company that fails its leakage targets is whether the target failure affects customers’ security of supply. Does the increased leakage mean a higher risk of restrictions on customers’ use of water? A leakage target failure would be considered much more serious were it to jeopardise water supplies to customers. Ofwat’s policy for assessing leakage failures takes account of a company’s performance over a three-year period, and it does not automatically take regulatory action after a single year’s failure.

A range of options is available to Ofwat. The right hon. Gentleman said that it was powerless—I will come on to talk about his specific case—but Ofwat can act against a water company that is failing on leakages. For example, in 2006 Ofwat used its powers to secure an undertaking from Thames Water in response to a failure to meet leakage targets. Since then, Thames Water has reduced leakage by more than 190 megalitres a day. It achieved that by spending approximately £150 million of shareholders’ money, not by putting the cost on its bills. That is one tool that can be used to bear down on the problem.

During last winter’s cold weather, Yorkshire Water experienced an increased number of burst mains, and the same happened across the country. This is the first time the company has failed a leakage target since targets became mandatory in 1998-99. Since 1995, when the company received significant negative media coverage after the drought of that year, it has renewed more than 2,800 km of water mains. The right hon. Gentleman made some grudging, but nevertheless generous comments about the company’s performance on some issues, grinding his teeth as he did about pay issues, and I completely understand. As I say, however, I am here not to be the voice of the water companies or the regulator, but to make sure that the consumer gets the best deal.

On the circumstances of the case the right hon. Gentleman described, I must be extremely careful, because I understand—he may differ—that it is now the subject of legal proceedings. I will therefore have to be extremely guarded in the words that I use, and he will be able to correct me if the information I have is wrong.

As the right hon. Gentleman said, his constituent, Mr Georgiou, has experienced long-term, chronic ingress of water into his cellar—that is not disputed. He made a complaint to Yorkshire Water, which was not resolved to his satisfaction. The Consumer Council for Water became involved and supported Mr Georgiou in the processing of his complaint.

I will not reiterate the details of the case because the right hon. Gentleman has laid them before us, but I will answer some of his specific points. He said that the consumer council was unable to force Yorkshire Water to act, and he is absolutely right that it does not have the power to force a water company to take action. Nor is it in a position to determine liability in such cases. However, it does have powers to obtain any information required to ensure that customers’ complaints have been handled appropriately. My understanding is that it supported Mr Georgiou in getting the information that he required. A review of how the consumer council handled the case is being carried out by the regional chair, who will look carefully at these issues.

The right hon. Gentleman has a further opportunity to raise this matter through the parliamentary ombudsman on behalf of his constituent. He says that Ofwat has no specific powers to resolve this complaint, and he is right that it does not have the power to resolve complaints about liability in such cases. It appears the case has reached the point where it is the subject of legal proceedings. I would very much like to be able to say more, but I am informed that that could prejudice those proceedings.

[Mr MacShane]

The Minister is being extraordinarily fair and decent about this case. Nothing would give Mr Georgiou and me greater pleasure than not to have to proceed to a county court case, but to settle this matter modestly, cleanly and quickly now. As a result of this debate, I hope that Yorkshire Water might take that on board.

[Richard Benyon]

That is a very reasonable comment.

I started by saying that the House offers hon. Members the ability to stand up for people who feel, rightly or wrongly—this may be their perception or the reality—that they have been done down by a large company, bureaucracy or organisation, and it is entirely right that hon. Members have that ability.

On the exact rights and wrongs of this case, I have the right hon. Gentleman’s word, which I entirely endorse as correct. However, when such matters are dealt with in legal proceedings, other factors are sometimes brought in, and it would be entirely wrong for me to pass comment at this stage. None the less, the right hon. Gentleman’s comments are on the record. His persistence on behalf of his constituent is not only on the record of the House, but visible to those of us in the Chamber in the form of the file sitting on the desk in front of him. I assure him that if I can assist further without prejudicing legal proceedings in any way, I will, of course, be happy to talk to him.