Water Bill

Maria Eagle Excerpts

Monday 6th January 2014 Commons Chamber

[Maria Eagle (Garston and Halewood) (Lab)]

This Bill includes important reforms that build on three important reviews taken forward by the previous Government: the Pitt review on flooding, the Walker review on affordability and the Cave review on competition. It also follows on from the Flood and Water Management Act 2010 that we took through Parliament before the last election. That is why the Opposition supported the Bill on Second Reading and will do so again on Third Reading this evening.

We have backed measures to increase competition, extending to non-domestic customers the opportunity to switch supplier. Such an opportunity is already enjoyed in Scotland where it has been shown to be successful in reducing costs to business. We support the reforms intended to encourage new entrants into the market, and we back regulatory reforms aimed at ensuring long-term resilience of our water supplies. We also support the measures, at long last, to provide a statutory basis for agreement on flood reinsurance, providing relief to those who live in hard-to-insure households.

However, there remains a major hole at the heart of the Bill, and at the heart of the Government’s water policy. That is the absence of any serious attempt to tackle the impact that rising water bills are having on household budgets, which is adding to the cost of living crisis. There is a real gulf between the rhetoric of the Government and the reality on this. Again, this evening, we have seen Government Members troop through the Lobby to stand up for the monopoly water companies, and against the interests of households. In his Second Reading speech, the Secretary of State assured the House:

“The package of reforms is designed to exert a sustained downward pressure on water bills”.—[Official Report, 25 November 2013; Vol. 571, c. 49-50.]

Yet, time after time the Government have opposed sensible amendments that would have ensured that that was a reality in this Bill. For all the briefing to newspapers back in October, the Prime Minister and the Secretary of State are simply unwilling to do anything that might be perceived as interfering in a market that they believe is working well. I do not believe that consumers agree that a monopoly industry that enabled companies last year to make pre-tax profits of £1.9 billion and pay out dividends totalling £1.8 billion to shareholders is a market that is working and adequately regulated.

Our reforms would have introduced a new national affordability scheme, requiring all water companies to help those struggling with their bills. That would have ended the current postcode lottery whereby companies choose whether to offer a social tariff and set the criteria for eligibility. Just three companies have introduced such a scheme, helping just 25,000 households. In their submissions to Ofwat for the next price review period from 2015, we see that there are still companies that do not intend to set a social tariff and that those that do are proposing to assist a relatively small number of customers.

Given that Ofwat estimates that 2.6 million households—11%—currently spend more than 5% of their income on water, it is clear that only a tiny fraction of those struggling are being helped. It is also clear that many customers do not know about even the help that is available. Only a third of eligible households access WaterSure, which was introduced by Labour to help households that have a high level of water use due to a medical condition or because they have three or more children. Yet the Government have opposed our proposal to require water companies to include information with bills about the help available to customers, just as they have consistently opposed forcing water companies to publish annual information, including on their corporate structure, and on their levels of investment, taxation and dividends paid to shareholders, and then enabling Ofwat to take full account of that information when determining whether to re-open price settlements and cut bills.

Finally, our proposed reforms would have tackled bad debt, which adds £15 to the average bill, by requiring landlords to provide water companies with details of their tenants on request. We sought to give Ofwat powers to ban water companies that fail to act on bad debt from transferring the cost of lost revenue from non-paying customers to other bill payers. By rejecting all of these sensible measures, Ministers have wasted the perfect opportunity that this Bill offered to tackle the impact that rising water bills are having on stretched household budgets. Instead, the Government’s preferred approach has been to send just one weakly worded letter to water bosses, begging them not to hike bills next year, without even a threat of action if they do not comply. So while the water companies are doing very well from their monopoly position, customers in this country will continue to pay among the highest bills in Europe.

Disappointingly, Ministers have also not been more willing to listen to concerns raised on other aspects of the Bill during its passage through this House. The Government’s only concession has been a grudging acceptance that it is right to make it clearer to Ofwat that it must have a higher regard to the environment in the way that it regulates the industry. The Government’s compromise is to stick to their decision to elevate “resilience” rather than “sustainability” but to require Ofwat to

“secure resilience in sustainable ways”.

We will have to consider carefully whether that sends a clear enough signal or not.

Disappointingly, Ministers have not heeded the concerns about the total amount of water taken from the environment if upstream competition happens ahead of abstraction reform. I welcome the fact that the consultation on abstraction licence system reform was finally launched just before recess, but, on the Government’s own timetable, reforms will not be implemented until the early 2020s, and upstream competition is due to begin in 2019.

Finally, it is disappointing that Ministers have rejected each of the sensible and modest proposals to improve the Flood Re scheme. The Secretary of State will have today heard the clear warnings from Sir David King, the Government’s special envoy on climate change, that changes to the climate will lead to

“quite a radical change in weather conditions”

and more frequent severe flooding. Requiring the Committee on Climate Change regularly to advise on the increase in the number of properties likely to be at risk of flooding as a result and the consequence for the Flood Re scheme was surely a sensible move, yet it has been rejected by the Government.

Similarly, it is difficult to see how the Government could have had any serious objections to strengthening incentives for the uptake of household flood protection measures—providing a right of appeal for those who find that their property has been removed from the scheme, allowing a right of public access to any Flood Re insurance database and publishing figures for the number of properties in the categories to be excluded from the scheme.

This Bill contains important reforms, but it remains seriously flawed as it leaves this House; flawed because it does not sufficiently protect the environment; flawed because the Flood Re insurance scheme will not be in place until 2015 but also remains disconnected from future increases in at-risk properties as a result of our changing climate; flawed because it has failed to toughen the powers of the regulator to cut bills; flawed because it leaves it to the water companies to decide whether to establish a social tariff and preserves the postcode lottery on eligibility; and flawed because it does nothing to protect customers who pay their bills from seeing higher charges as a result of those who can pay but will not. This Bill could have delivered a framework for that new deal with the water companies. Instead, a huge opportunity to tackle water’s contribution to the cost of living crisis has been missed.