Water Bill

Lord De Mauley Excerpts

Thursday 6th February 2014 Lords Chamber

[Lord Redesdale (LD)]

My Lords, I rise to support this amendment. I believe that the noble Lord, Lord Whitty, has underestimated the effect of the change to the primary duties of Ofgem in the 2008 Act, which states that the duties for present and future customers are one of the underlying bases of its commitment to sustainability. The problem that it faces is that the limitations of the sustainable action that should be undertaken have not yet been tested. I had the fun of suggesting to Ofwat that we could take it to judicial review to suggest that it was not fulfilling this pledge. That had an enormous effect on Ofgem. Ofgem should be commended for the strides that have been taken over the past six years to move from an organisation that saw sustainability as something outside its remit to seeing it as something that is very much part of its remit. The value of this—in an amendment first moved by the noble Lord, Lord Oxburgh, to which I added my name—is such that it has changed the culture of Ofgem. It is rather unfortunate that Ofwat does not have the same duty and therefore the same drive to understand that it has that responsibility.

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley) (Con)]

My Lords, the purpose of Amendment 109 is to ensure that, in discharging its primary duty to protect consumers, Ofwat must take account of the needs of both current and future customers.

I agree that this is an essential objective. Water is an industry with unusually long planning and investment horizons. Our water resources management-planning processes require companies to plan, as a minimum, 25 years ahead and encourage them to plan over much longer timeframes. Although much of our current infrastructure will be expected to serve customers well for decades or even centuries to come, this is why we have introduced the new duty of resilience, which requires Ofwat to secure the long-term resilience of systems to the long-term pressures identified in the water White Paper, such as climate change, environmental pressures and population growth. It also requires Ofwat to ensure that the companies take action to meet the long-term needs of consumers by promoting appropriate long-term planning and investment; and by taking any and all relevant measures to manage water resources sustainably and reduce demand.

So let me assure the noble Lord, Lord Whitty, that I concur entirely with his aims. However, I consider his amendment to be unnecessary, because its effect would be to duplicate an identical existing provision in Section 2(5A) of the Water Industry Act 1991, which provides a definition of “consumers” for the purpose of the consumer duty. It clearly states that,

“‘consumers’ includes both existing and future consumers”.

I hope that this will satisfy the noble Lord and that he will feel able to withdraw his amendment.

[Lord Whitty]

My Lords, I thank the noble Lord, Lord Redesdale, for his support and agree with him that I was perhaps too dismissive in relation to the effect on Ofgem. Such a responsibility has had an effect on Ofgem and on the way in which its work, output and regulatory responsibilities are seen by the companies and consumers within the energy sector, so it has made a difference.

The arguments that the Minister has just put were very similar to those put initially by Energy Ministers in relation to the amendment to the 2008 Bill pursued by the noble Lords, Lord Oxburgh and Lord Redesdale. I cannot remember whether I openly supported them, but I certainly spoke to the then Minister—it was none other, I believe, than the noble Lord, Lord Hunt of Kings Heath—who agreed that the briefing that he had from his department was too negative and reflected the usual view of Whitehall that just because there were references to it in other documents you should not make it clear in the Bill. The Minister should perhaps go back to his own officials and say, “Well, yes, it may be that we can point to other documents, but people will look at the Bill”. They will look particularly at the front end of the Bill, if they get that far, which amends the 1991 Act—although that bit of it has not been amended yet by the Minister.

The role of future consumers is reflected very early on in the Bill in defining Ofwat’s responsibilities. The flexibility shown by Ministers in responding to the amendments to the 2008 Bill proposed by the noble Lords, Lord Oxburgh and Lord Redesdale, should be repeated here. Perhaps the Minister could agree to go back to his officials. I do not suppose that he will tell me that he is going to do that, so I will withdraw the amendment now and allow him time and grace to do that, because I would like to see this matter addressed on Report. I beg leave to withdraw the amendment.

--- Later in debate ---

Let us be frank: some of the suspicion out there, in view of recent months, is that there are forces within the Government who regard any reference to sustainability or sustainable development as part of what the Prime Minister allegedly referred to as “green crap”. I am not sure whether that has been mentioned before in this House and if it is out of order, I will withdraw it. However, it has been widely reported. If the Government being so illogically resistant to the amendment of the noble Lord, Lord Redesdale, is seen to be part of the attack on green measures, then I regret that. The Government have to reassure the many people who are interested in the long-term future of water supply and the ecological and economic sustainability thereof. Given my support for the noble Lord, Lord Redesdale, I hope that the Government will recognise that they need to do something on this front. I look forward to hearing from the Minister both today and in the period between now and Report.

[Lord De Mauley]

My Lords, I turn first to Amendments 110 to 112, in the name of my noble friend Lord Redesdale. I thank him for them, as I thank my noble friends Lord Selborne, Lord Crickhowell and Lady Parminter and the noble Lord, Lord Whitty, for their comments on these amendments, which would extend the new duty of resilience so that it became a dual duty of resilience and sustainable development. Of course, as my noble friend knows well, Ofwat has had a stand-alone statutory duty to contribute to the achievement of sustainable development since 2005. The Government have reinforced the importance of this duty by providing clear statutory guidance that sustainable development is central to everything that Ofwat does and must be fully embedded throughout its regulatory decision-making. We also require an annual report from Ofwat on its contribution to sustainable development.

I know that my noble friend Lord Redesdale has a long-standing interest in this issue, and I am particularly grateful to him for his assiduousness in pursuing this. He wishes, understandably, to see meaningful changes to culture and practice in economic regulation in water. These changes are already taking place: by correcting the historic bias towards capital investment, for example, the current price review looks set to achieve a much more equitable balance between capital and operational solutions than has previously been the case. Similarly, Ofwat has been working with the industry and Infrastructure UK to halt the stop-start pattern of work, sometimes described as “cyclical investment”, that has been a cause for concern in this sector for many years. Again, we are seeing measurable changes in behaviour. Ofwat has recently given permission to water companies to bring forward £100 million of investment into 2014 to smooth the investment profile and benefit the wider water supply chain.

My noble friends Lord Redesdale and Lady Parminter suggested a water efficiency duty for Ofwat. My noble friend Lord Redesdale referred to the fact that the water companies do indeed have a water efficiency duty. Ofwat has an obligation to ensure that the companies can perform their functions.

Having said all that, we are not and must not be complacent. That is why we have created a new duty of resilience, designed to address the specific issues relating to the long-term pressures facing the water industry. The resilience duty encompasses all the activities that water companies can undertake to manage those pressures: from investing in the additional water storage, to tackling unsustainable abstraction, to focusing on environmental management across the catchment. This duty recognises the need to address the pressures caused by climate change and population growth, and to protect the natural environment on which our water sector relies.

In response to concerns raised by people such as my noble friend, I am delighted that we have already amended this duty in another place to be absolutely explicit about the need to manage water resources sustainably and to manage demand to alleviate pressures on those precious resources. I think that I can say that our amendments have been welcomed, for example by the coalition of environmental NGOs with a particular interest in this area, the Blueprint for Water, with which my noble friend has been closely involved. I met this coalition recently, and it expressed itself satisfied with what we had done in this regard. I therefore hope that I will be able to persuade my noble friend that, given the changes already made, further amendment of the kind he proposes is not required.

Turning to Amendment 113 in the names of the noble Lords, Lord Whitty and Lord Grantchester, the noble Lord, Lord Whitty, has argued that elevating the existing sustainable development duty to primary status would help us to achieve a wide range of important objectives. Let me be quite clear: the Government support those objectives. As I said in the debate on the previous group, we want to see the regulatory regime for water recognise more clearly the needs of future, as well as current, consumers. We recognise the need for a strategic response to climate change, and we firmly believe that catchment management and demand management should form a mainstream part of water company activity.

The Government commissioned the Ofwat review to consider the case for elevating the sustainable development duty as proposed by the noble Lords. Having looked carefully at the arguments, David Gray concluded that he simply did not believe that the creation of a primary sustainable development duty would have the effect that its proponents were looking for. Despite the scepticism of the noble Lord, Lord Whitty, therefore, while we—and I speak for the entire Government—remain fully committed to the principles of sustainable development, we do not believe that the amendment is the best way to achieve the objectives that the noble Lords wish to see. I also believe that we should recognise where changes have already begun to take place. I have already spoken about the way Ofwat’s new price review methodology, to which the noble Lord, Lord Whitty, referred, has addressed the industry’s perceived preference for capital investment, resulting in the companies bringing forward business plans that propose a much more even split between capital and operational expenditure, such as demand management activity.

During our particularly constructive Second Reading debate, a number of noble Lords highlighted the importance of taking a proportionate approach to changes to Ofwat’s duties. Of course, it must be right that we should occasionally amend the duties to ensure that they remain up to date with the Government’s policy priorities. This is what we have done in the case of the resilience duty, in order to reflect the core policy message of the water White Paper on the need to build the long-term resilience of the sector. We have amended this provision in another place to emphasise that this must include the sustainable management of water resources. However, I agree that we must demonstrate restraint in applying new duties to the regulator; and the changes that we have already proposed strike the appropriate balance. I must therefore ask my noble friend to withdraw his amendment.

[Lord Redesdale]

My Lords, yet again I am not disappointed in my expectation that I will not get anything out of the Government. However, it seems almost a waste of a parliamentary process to have a White Paper which is full of water efficiency proposals and then to say, “We’ve had enough duties”, so that something which all noble Lords believe should be an objective is not moved forward on.

The noble Earl, Lord Selborne, and the noble Lord, Lord Crickhowell, raised very interesting points. I will make two points. First, the battles that the noble Lord, Lord Crickhowell, undertook, which were incredibly valuable, are not now taking place in the same way. Most groups agree that there has been a shift from the regulator against the balanced approach to economic environmental regulations. The noble Earl, Lord Selborne, raised the Gray review. I met Mr Gray to discuss this; one of his recommendations was that it is fine, because the Environment Agency leads on policy on this area, and therefore deals with this issue. Since the review, however, the Environment Agency has lost that ability, so it is out of kilter. Things have moved on so that the balance which the regulator has to take—and I understand the difficulties it faces between price, social cohesion and environment, which is tricky—has to be dealt with. However, the problem is that the regulator is seen as not meeting that objective.

The Minister talked about meeting with the NGOs. I believe he met with the RSPB and the WWF, but those are not all the NGOs that make up Blueprint for Water. I have discussed this with Blueprint for Water, and meeting with one, two or three NGOs out of a group of them is always slightly difficult. The whole group does not believe that, but those two NGOs will speak on their behalf. Therefore the Minister’s view that the Bill does not need amending to expand the role of resilience, even though it was amended in the other place, was unfortunate. It leaves no option when we come to the next stage but to try to force through sustainability as a solution to that problem. That may not be the simplest way of dealing with this issue, but, as was proved by Ofgem’s change in attitude, it does have an effect. Therefore it is rather unfortunate that the Minister has not agreed even to have discussions on this. Although I shall withdraw the amendment, I hope to bring it back at the next stage because this is a core issue.

This is not a political matter, which is why I very carefully did not ask the noble Lord, Lord Whitty, or any other noble Lords to put their names to this amendment. This is about whether we believe that water should be a sustainable resource and whether there is somehow a political lever. Most people in this country do not believe that water should be dealt with in a political context; it is about whether we have it or not and whether the regulator makes sure that we judiciously use this resource. If that means that I am a wishy-washy liberal, I sit on these Benches so I am quite happy to be described in those terms—and not as one of abuse. However, the Conservative Party talked about being the “greenest Government ever” and the coalition has moved forward on many of these green policies, so I find it incredible that we are bringing politics into this area. Therefore I hope that the Government will think again about a water efficiency duty. On that basis, I beg leave to withdraw the amendment.