Thames Tideway Tunnel

Lord Grantchester Excerpts

Thursday 24th October 2013 Grand Committee

[Lord Grantchester (Lab)]

I am so glad that my noble friend Lord Berkeley has secured this debate today on the proposals for the Thames tideway tunnel. Coming as it does after our previous debate, it allows our discussion to transcend from the sublime to the slime. I pay tribute to my noble friend’s persistent challenges to the project, which have meant that it has been critically examined in all its aspects.

We are in familiar waters. To reiterate: London’s sewers carry both raw sewage and rain run-off. They were designed for a capacity of 4 million inhabitants, but London now has in excess of 8 million inhabitants. As much of London’s infrastructure dates back to horse-and-carriage days and therefore rainwater is included, there are 50 or 60 overflows each year straight into the Thames. In a typical year, 18 million tonnes of untreated sewage enter the river through the combined sewage overflows that the Thames tideway tunnel needs to intercept.

The tunnel will remove and treat a total of 39 million tonnes of untreated sewage from the tidal River Thames. These discharges breach the urban waste water treatment directive. Years of independent studies and assessments working up a solution cannot shield the UK and the taxpayer from the prospect of substantial fines if the proposed timetable does not proceed. Delays have already led to an increase in the cost estimate in excess of £4 billion.

Your Lordships’ House last examined the proposals during the passage of the Water Industry (Financial Assistance) Bill in March 2012, when the Government took enabling powers to provide contingent financial support for exceptional project risks, guaranteeing the project even though we still do not know who will finance and build a tunnel. Since then, my noble friend Lord Berkeley has updated the House through his continual questioning, to which the Minister has positively responded.

Labour supports this project. We remain unconvinced by alternative solutions to the problem of London’s sewage discharge. We have examined the Environment Agency’s An Assessment of Evidence on Sustainable Drainage Systems and the Thames Tideway Standards, published this month, which concludes that sustainable urban drainage systems—or SUDS—alone would not be enough to combat the sewage issues facing the Thames and meet the environmental standards for the Thames established by the Thames Tideway Strategic Study in 2006. In 2012, Sheffield University published a further independent study examining the potential to retrofit SUDS on the tideway catchment areas. It concluded that retrofitting SUDS, while technically possible, is not feasible due to the very high costs and disruption that would be likely to be involved. Retrofitting could well complement conventional sewage infrastructure and be instrumental over time in separating rainwater from sewage as development projects slowly rebuild and modernise buildings and areas throughout the capital. SUDS will also play a key role in ensuring that new developments extending London’s footprint do not add to existing problems.

Labour also recognises that the Government have designated the project a nationally significant infrastructure project and that Defra is now in the formal planning process. The Planning Inspectorate will review the plans before they come back to the two departments, Defra and DCLG, for their respective approvals. As the Minister has already had discussions in DCLG, perhaps I might tempt him to say whether he foresees any problems in this joint approval process that might amount to any sense of a battle or veto between the two departments.

Labour will continue to support the proposals for the Thames tideway tunnel, subject to some overall tests being met. Obviously, the plans must be effectual, the expected state of the Thames at the project’s completion must comply with all EU directives on water standards and the Government should select the most appropriate delivery vehicle. Most critically, we want to be able to substantiate that the scheme satisfies value-for-money tests and that costs are assiduously examined. We will continue to challenge the Government about customers’ bills being added to. Labour does not want customers being disproportionately penalised for cleaning up the river when balanced against prices, executive pay packages and dividends to shareholders—in this case, a largely private equity group.

There has been widespread concern that Thames Water has paid out more than £2 billion in dividends in the past six years—more than £650 million in the past two years alone—as well as £1 million in management fees. What discussions have the Government had with Thames Water on this issue? It is a matter of some concern that large amounts need to be set aside for the tideway tunnel.

The Minister has given clear explanations at the Dispatch Box about why the company has not paid any tax. All UK companies are allowed to claim capital allowances when they spend on capital investment programmes. That is understood, but can the Minister categorically confirm that in Thames Water’s case these allowances apply to past capital projects and state whether he has appreciated that it seems that Thames Water can add to customers’ bills? The consumer suffers, as we are now considering social tariffs, the taxpayer in the form of the Treasury will offset capital costs and have no receipts, yet profits continue to support private equity returns.

We will continue to press the Government for more innovative financial schemes that are more environmentally sensible. There was an interesting report in the press this week that Ofwat plans to block Thames Water’s request for a further price rise of up to 8% in customers’ bills next year to cover some of the costs it has picked up from bad debts and buying land for the tunnel—the so-called super sewer. Ofwat’s response was forthright and noted. It stated that this request was in addition to the already assured price hike of 1.5% above inflation for 2014-15. Water bills and the cost of living are critical issues. We will continue to monitor the situation closely and take a keen interest in the outcome regarding the Government’s guarantee for the project.