Water Bill

Debate between Maria Eagle and George Hollingbery

Monday 25th November 2013 Commons Chamber

[Maria Eagle]

I understand the hon. Gentleman’s point. I do not believe the Labour Government did enough during our time in office to ensure that that was correctly handled, but that is not a reason to allow the water companies off the hook now.

Under Ofwat’s current powers, capital structure and consequent risk are matters for the boards and shareholders of those companies, so any action must come from the Government. We have seen from briefings to the Financial Times that Ministers are considering reducing the interest payments that can be deducted from a company’s tax bill, especially for larger and more highly indebted companies—as many water companies now are—or even putting a levy on the debt held by highly leveraged water companies. Whichever solution—if any—that the Government decide on, it must happen quickly.

Despite the gaping hole left by the Government’s failure to introduce in the Bill measures on water affordability for households, there are measures that we support. That should not be a surprise, given that they arose from three important reviews taken forward by the last Government: the Pitt review on flooding, the Walker review on affordability and the Cave review on competition.

[George Hollingbery]

The hon. Lady has made some candid remarks about the last Government’s failure and some sensible points about what might be changed in the Bill. She also makes much of the Government’s admission of certain issues that she now thinks are terribly important, but nowhere in the Environment, Food and Rural Affairs Committee’s scrutiny of the Bill, published only eight or nine months ago, is there a record of any Labour Member making any of the suggestions that she is making now. Is this not just a transparent device to bring a certain topic in a certain context to the Chamber today?

[Maria Eagle]

The hon. Gentleman is entitled to his opinions.

The three reviews built on the Flood and Water Management Act 2010, which we enacted before the last election. We support the measures to increase competition and enable non-household customers to choose their water supplier, and we want new entrants into the sector and so support measures to encourage that development. We also support the regulatory reforms designed to place a greater focus on the long-term resilience of water supplies and the measures to provide, at long last, the statutory basis for agreement on reinsurance.

We have concerns about several areas, however, many of which are shared by the Environment, Food and Rural Affairs Committee, chaired by the hon. Member for Thirsk and Malton. First, we agree with the Government’s decision to open up non-residential competition, as there is increasing evidence of a successful market emerging in Scotland. The introduction of competition for business customers is intended to provide choice, drive down costs and improve water efficiency, and we hope that it is successful, but the Government should listen to the Select Committee, which has said:

“We believe that protecting householders from subsidising competition in the non-household sector is a fundamental principle that should be enshrined in primary legislation.”

The Consumer Council for Water has rightly said:

“It is a vital principle that customers who are not eligible to switch retailer should not be disadvantaged. This should ideally be reflected in legislation.”

The statement in the recently published charging principles that household customers will not subsidise the development of competitive markets for business customers is a step forward, but not enough. We agree with the Select Committee and the Consumer Council for Water that it should be included in the Bill, and if Ministers refuse to reconsider their decision, we will seek to amend it.

Secondly, we do not understand why Ministers are being stubborn over enabling water companies to exit the retail market, which seems a perfectly non-contentious but important principle for the effectiveness of a market. The Select Committee is also clear on that point, and I think that the Government should rethink it. Thirdly, the Secretary of State should reconsider his decision not to require the separation of company wholesale and retail arms as part of his package of reforms. The Select Committee has called for a

“requirement for the functional separation of incumbent companies’ wholesale and retail arms. We further recommend that the principle of non-discrimination be included on the face of the Bill.”

We agree with the Select Committee.

Fourthly, we believe that the Government’s concerns about agreeing to the wide-ranging calls to elevate Ofwat’s sustainable development duty to a primary duty are misplaced. The Select Committee said:

“We are persuaded that the increasing pressures on our water resources, highlighted in the Water White Paper, justify such a change.”

The change is also supported by the 15 environmental non-governmental organisations that make up the Blueprint for Water coalition, including the WWF, the Royal Society for the Protection of Birds, the Wildlife Trusts and the Marine Conservation Society. Without the change, Ofwat could, for example, be forced to strike out investment to deliver demand management in over-abstracted areas by having to place significant financial implications for companies above the principles of sustainable development.