Water Industry (Financial Assistance) Bill

Mary Creagh Excerpts

Wednesday 29th February 2012 Commons Chamber

[Mary Creagh (Wakefield) (Lab)]

The Bill is welcome, if a little unexpected. It is welcome because it provides assistance to the people hit hardest by the botched Tory privatisation of the water industry, which created a water company in the south-west with too few people to pay for the £2 billion investment needed to create the south-west’s sewerage system over the following 20 years, with just 3% of the population clearing up 30% of the nation’s coastline. It left them with the highest unmetered water bills of any region and the Bill seeks to provide some relief, a fact that we welcome.

[Miss McIntosh]

I am delighted that the hon. Lady had the opportunity to visit my constituency and I look forward to hearing from her how that went. Does she not appreciate the fact that, as the Secretary of State has just mentioned, £90 billion has been invested since privatisation that probably would not otherwise have been invested? There was also a debate among the hon. Lady’s hon. Friends in the past about privatising the railways, but there is general agreement in the country that water privatisation has been a success bar the unfortunate circumstances that pertain in the south-west in the context of its having the longest coastline and the application of the EU bathing directive in that regard.

[Mary Creagh]

I am happy to report that the pigs I met in the farmer’s field in the hon. Lady’s constituency were extremely well. There was a very strong smell of bacon coming off them, even while they were alive, which was very nice, and I was very happy to see them.

On privatisation, we accept the consensus that privatisation is here to stay and that it has delivered the investment in the infrastructure at no direct cost to the taxpayer. It is clear that that cost has been paid indirectly by customers through their bills, however, with particular damage to customers in the south-west. That is why the Bill is with us today.

[Stephen Gilbert (St Austell and Newquay) (LD)]

This seems to be a particularly smelly debate. Can the hon. Lady explain why over 13 years, despite recognising the problems of privatisation in Cornwall and the south-west, Labour did nothing to help address the concerns that the Bill addresses?

[Mary Creagh]

I have in my hand a graph from Ofwat’s website about the annual average bill. The hon. Gentleman will see—I am not sure whether he can see this far, but I would be happy to pass it on to him—that when we passed the relevant water legislation in 2000 water bills dropped from an average of £325 a year to £285 a year. During that water review period, water bills were much lower. We took action across the country and that will also have affected the hon. Gentleman’s constituents in the south-west. He is also ignoring the fact that we asked Anna Walker to consider the issue of affordability. We have had the Walker report and only one aspect of its many recommendations is being debated today. The rest are being left, I am afraid, on the long finger.

[Sheryll Murray (South East Cornwall) (Con)]

I paid water bills in the south-west for 13 years under the hon. Lady’s Government and I cannot remember my bills ever being stable or not increasing considerably. I do not know where she has got her figures from—perhaps she is looking at a national figure—but I can assure her that my bills have not reduced.

[Mary Creagh]

Does the hon. Lady think that the £50 a year for which the Bill provides until the end of the spending review period is adequate compensation for her constituents? It will undoubtedly be eaten up by the next two years-worth of price increases in cash terms.

[Neil Parish (Tiverton and Honiton) (Con)]

Does the hon. Lady accept that this coalition Government have done more in 13 months than the Labour Government did in 13 years? We have 3% of the population in the south-west and 30% of the beaches, and that is why we have got these extreme costs. This Government have faced up to their responsibilities and delivered real cash to water bill payers, rather than just talking about it like the previous Government.

[Mary Creagh]

I am disappointed at the hon. Gentleman’s tone, because he is ignoring the fact that we commissioned the Walker report when we were in government. He is also ignoring the action we took, not least to prevent customers from being disconnected. I am sure that many of his constituents were affected in the early days of water privatisation when hundreds of thousands of customers were cut off—disconnected—from their water supply for non-payment of bills. We changed that. We changed the law and effectively instigated a right to water, which we think is a basic human right and is required for basic dignity and decency. I am sure that affected many people in the south-west.

The Bill is welcome because it lays down powers exercised by the Secretary of State to provide finance for the huge infrastructure investment that is needed to clean up the Thames, which has had very little investment since the great sewer drilled by Bazalgette 150 years ago. However, there are a number of questions that the Secretary of State must answer. First, why is the Bill so short? We are in a time of drought not seen in this country since 1976, so why is she focusing on the little picture rather than the big picture? Why was the water White Paper that was due in spring 2011 not published until December 2011? Her colleague the Minister with responsibility for water is now promising a draft water Bill this spring, so can she confirm that there will not be a full water Bill to take forward the other measures in Anna Walker’s report in the Queen’s Speech this May—yes or no?

[Mrs Spelman]

The Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Newbury (Richard Benyon), will be happy to answer this point in detail, but we do not need new measures to do some of the important things we need to do right now to tackle this drought. I mentioned the drought summit. As we saw last year, flexibility in terms of abstraction licences helped our farmers and we did not need hosepipe bans.

The extra time we took for the water White Paper improved it, putting resilience at its heart, and the climate change risk assessment vindicated that decision. I am sure that hon. Members would like the time to debate, through proper pre-legislative scrutiny, the measures set out in the water Bill. The Prime Minister gave an undertaking to the Chairman of the Select Committee on Environment, Food and Rural Affairs that a draft bill would come forward within months and I have repeated that commitment today.

[Mary Creagh]

I take it from that answer that there will not be a full water Bill in the Queen’s Speech this May. On the issue of abstraction, the proposals so far in the water White Paper talk about reforming the abstraction licence with an end date of 2027. The Secretary of State has had three drought summits—

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

Much can be done now.

--- Later in debate ---

[Mary Creagh]

That is fantastic; so we can look forward to a reform of the abstraction regime that will not take until 2027.

[Frank Dobson]

In considering any water shortages that may or may not occur this year, will my hon. Friend and the Secretary of State bear in mind that in the 22 years since privatisation there has been no net increase in reservoir capacity in England?

[Mary Creagh]

I am sure that the Secretary of State will have digested that point from my right hon. Friend.

This is an orphan Bill, which is decoupled from the long-term reforms required to tackle climate change and keep water affordable. Why does the Bill, which affects two areas—the south-west and London—not mention those two areas? Is it because that would make it a hybrid Bill, which would require full and proper scrutiny in the other place? Is it because by not mentioning those two areas and drawing the Bill widely, the Secretary of State is able to define it as a money Bill, which means that it receives only a cursory one day’s scrutiny in the other place? What possible reason could she have to fear their lordships’ scrutiny of this worthy and timely Bill? We can surmise that she is keen to get her short Bill through Parliament—an endeavour that does not seem to have been properly communicated by the Whips to her own Back Benchers, if today’s sudden change of business is anything to go by.

[Andrew George]

I note that the hon. Lady described the Bill as worthy and timely. I am curious about her line. She says that £50 per household in the south-west is insufficient; I would like to know whether she and her party propose offering more to the south-west, and how that would be funded. Secondly, in view of the line that she is taking, is she suggesting that she and her party will vote against the Bill today?

[Mary Creagh]

I am happy to say that we will not vote against the Bill. If the hon. Gentleman waits, I will come on to some of the wider affordability issues and will, I hope, answer some of his questions on the wider issues.

The next unanswered question is: why are we debating the Bill now? We know that the Government ran out of meaningful new legislative business about two months ago, and the House has been surviving on thin rations—a meagre diet of one-line-Whip business and Back-Bench business debates, valuable though they are. There was no new Government legislation, but suddenly—boom!—out of the Department for Environment, Food and Rural Affairs, a Department whose Ministers are the embodiment of clout, grip and competence, spurted a sudden, short water Bill, born of the realisation that if the Department has lost its slot in May’s Queen’s Speech, it had better deliver on the Chancellor’s promises to the south-west and his coalition partners. That happened just six short weeks before the end of one of the longest parliamentary Sessions ever held. Clearly, such a masterstroke of parliamentary planning and timing could have been confected only by the Department that brought us the forest sell-off.

Labour in government corrected many of the injustices of water privatisation. As I said, in 2000 we banned water companies from cutting off the water supply of homes, schools and hospitals for non-payment. It is extraordinary to think that legislators would allow provisions that let hospitals—care givers and providers of sanitation—be cut off for non-payment of bills. We allowed for compulsory metering in areas of scarcity, and a more muscular Ofwat, holding the water companies to account, has emerged in recent years.

[Dan Rogerson (North Cornwall) (LD)]

Will the hon. Lady give way?

[Mary Creagh]

I will make some progress, and then I will give way. Where specific issues required careful consideration, we brought in experts to advise us. We commissioned the Pitt report after the 2007 floods, the Cave report to look at competition and innovation, and the Walker report, which analysed water charging and looked explicitly at the problem of high bills in the south-west. My hon. Friend the Member for Ogmore (Huw Irranca-Davies) legislated for water companies to introduce social tariffs in the Flood and Water Management Act 2010. I shall now examine each of those issues in turn.

Some have questioned why the Tory and Lib Dem Government wanted to extend £40 million a year in financial assistance to a region dominated by Tories and Lib Dems. I will leave others to speculate about the politics, but it is clear that customers in the south-west face bills that are, on average, 43% higher than in other areas. That is why we examined the issue in government and did the groundwork on helping those 700,000 households. I pay tribute to colleagues in all parts of the House, and to our former colleague, Linda Gilroy, for their work on the issue.

[Mr Matthew Offord (Hendon) (Con)]

Perhaps the hon. Lady could tell the House the average cost of a water bill in the south-west pre-privatisation, and say how that compared with bills in other parts of the country.

[Mary Creagh]

I do not know what the costs were, but I can say that all water bills were considerably lower pre-privatisation. If the hon. Gentleman looks at graphs of what happened to bills post-privatisation, he will see that they went up exponentially, particularly in the early 1990s. They were kept down in ’91 and ’92, and then they went up exponentially across the board. From memory, they were around £250; that has gone up massively.

[Mr Offord]

How much was it in the south-west?

[Mary Creagh]

I do not have those figures. Does the hon. Gentleman have them? Perhaps he will share them with the House in the debate.

We accept the argument that the south-west requires additional help to keep water affordable, but stopping there misses the point. Ofwat, the independent regulator, estimates that a fifth of households are already spending more than 3% of their income on their water bills, yet Ministers have failed to bring forward any plans to tackle high bills, apart from in the south-west, which has the highest bills in the country. There, around 200,000 people spend more than 3% of their disposable income on water bills, but in the Thames region there are a staggering 1 million people in the same predicament, so surely we should be working towards extending help through a national affordability solution. Without one, the effect of the Government’s £50-a-year payment in the south-west will soon be wiped out by price rises; prices will rise by more than inflation in each of the next three years. The assistance is welcome, but decoupled from wider reform, it will provide little lasting help on water affordability. I hope that answers the point raised by the hon. Member for St Ives (Andrew George).

We know from Ofwat that the groups most vulnerable to water poverty are single parents, pensioners and jobseekers. When we were in government, we introduced WaterSure, a national affordability scheme paid for by a cross-subsidy from water customers, and paid only to metered households with three or more children or to people with certain medical conditions, but the limitations of the scheme are apparent, because not everyone in water poverty has three or more children, and many pensioners and jobseekers will not be eligible for the scheme.

There is a further problem of penetration of WaterSure. Only a third of eligible households access the scheme, so there is big issue relating to the role of the water companies in educating their customers about WaterSure and the role of places such as jobcentres in making sure that people have access and understand their entitlement.

[Mrs Spelman]

When the hon. Lady’s party was in power, what did it plan to do about the fact that two thirds of people eligible under WaterSure were not taking it up? Will she acknowledge, therefore, that with the baton being passed to the present Government, who continue to run the WaterSure policy but with more determination to enable more eligible households to take it up, we have supported that with the introduction of guidance on social tariffs to all companies?

[Mary Creagh]

The right hon. Lady might want to answer her own question. We commissioned the Walker report, which said that Ofwat should do a six-monthly league table of water companies showing the best and worst performers. She has had 18 months. Has she implemented the recommendations of the Walker report? She has made her own guidance to water companies on social tariffs voluntary, not mandatory, and I fail to see how allowing them to choose whether to implement them will help customers.

[Alison Seabeck]

Perhaps I can shed some light on what was going on under the previous Government. In the Plymouth south-west area, a detailed pilot was undertaken to identify people for whom water was unaffordable. That was to feed through into forward policy development. Anna Walker used that as part of the basis for some of the work that she did, so it is not true that we were not considering how to reach the people who needed help.

[Mary Creagh]

I thank my hon. Friend for that clarification. It is clear that much work was done in the south-west because it has the highest penetration of WaterSure customers and the highest rate of metered households, despite the fact that water is plentiful in the south-west, so it has nothing to do with scarcity. It has to do with people making a rational economic choice and understanding that if they move to metered bills, their costs will go down.

The Government should be using existing data about benefits to ensure that everyone who is eligible is on the WaterSure tariff. I hope we have described the heavy lifting that we did on that tariff. Last year the Government consulted on taking on the costs of WaterSure and absorbing them at a cost to the Exchequer of £10 million a year, as opposed to continuing the cross-subsidy. This idea was dropped from the water White Paper. What has happened to that notional £10 million? Why is it not being used to part-fund company social tariffs or a wider tariff to help the wider population?

Londoners will see their bills rise by £70 to £80 a year when the Thames tunnel is finished in, we hope, 2020. London has some of the poorest people in the country and a significant number living in water poverty. WaterSure will not help most of them. It is imperative that company social tariffs are introduced well before the Thames tunnel is completed to minimise the financial impact on Londoners, yet the Government’s draft guidance on company social tariffs shows that they are adopting a minimalist approach.

The Government have ruled out data sharing, which is key to helping water companies identify customers in water poverty and enabling them automatically to reduce their bill, which is obviously the least painful way, rather than allowing people to get into water debt and then taking action through the courts to pursue the money. They have ruled out an affordability scheme administered nationally, and they have ruled out an extension of WaterSure, which is the only national social tariff. Under DEFRA’s draft guidance, the design of social tariff schemes is left entirely to the water companies. Indeed, it is their choice whether to implement a scheme at all. This is the big society in action: a postcode lottery for millions of customers facing water poverty. We believe that it is untenable for the Government to pass a water financial assistance Bill without providing any assistance to the rest of the country. We will pursue amendments that would oblige water companies to deliver a social tariff scheme that meets clear and uniform criteria.

[Dan Rogerson]

On the question of how WaterSure will be funded and placing obligations on companies, if we have a funded social tariff in the south-west, it will have a disproportionate effect on the other bill payers who are paying into the pot. More work needs to be done before we start pushing regions down the route of having generous social tariffs, because we need to know what costs are being loaded on to other bill payers in the region.

[Mary Creagh]

That is an excellent point. That is why we were interested in the Government’s consultation, which talked about a national affordability scheme and offered the potential to absorb the costs of WaterSure. I hope that the Minister will offer some clarity on that in his closing speech, and I am sure that we can work together on that.

[Simon Hughes]

I do not mean to pre-empt what the hon. Lady might say on the other aspects of bills for water rate payers, but are she and her colleagues concerned—I put this point to the Secretary of State—that the value to water rate payers in London of the Thames tunnel, which is now priced a £4.1 billion, might not be what it was when the previous Government thought it was a good idea? There are big questions about whether it represents value for money for water rate payers and is the best solution in the light of the evidence.

[Mary Creagh]

We believe that the allocation of sums, guarantees, indemnities, or whatever form the financial assistance takes, should be done with full parliamentary oversight, and I will address that when I move on to clause 2.

We believe that the tariffs should be paid for by cracking down on bad debt, which the Secretary of State mentioned in her speech. Ofwat’s website states:

“More than five million households currently owe money on their water bills and over the last five years the amount owed has increased by more than 50%.”

In 2010, £1.6 billion was outstanding, three times the amount of bad debt for gas and electricity bills, despite the fact that water bills are much lower. As she said, the people who cannot or will not pay add an average of £15 a year to the bills of consumers who play by the rules. Bad debt arises in part because landlords are under no legal obligation to provide their tenants’ details to water companies. Rather than a voluntary approach, the Government should compel landlords to share their tenants’ details with water companies, and I know that the consultation is ongoing and is due to close fairly soon. If we reduce bad debt, we can reduce everyone’s bills and fund social tariffs that help those struggling to pay.

Clause 2 creates financial mechanisms and guarantees to support the construction of the Thames tunnel. Why do the Government avoid using the words “Thames tunnel”? Are they trying to avoid a proper discussion of the merits? Labour supports the project. Our Flood and Water Management Act 2010 introduced a “provision of infrastructure” regulation, creating the framework for the tendering, designation and building of such projects. However, costs have risen and time scales have stretched. The Government need to show leadership and make a clear commitment to the project and ensure that the right vehicle for managing and delivering it is put in place. The consultation process for the tunnel is vital for ensuring that sites are placed correctly and the environmental impact of the work on residents is minimised.

[Mr Slaughter]

I agree with what my hon. Friend says about the Thames tunnel, and to that extent I agree with the Secretary of State. However, had the Secretary of State not chuntered through her speech in such a cursory manner on an issue that is very important to London Members, I could have told her that the virulently anti-tunnel comments that I quoted were not mine, but those of my neighbouring Tory MP, the hon. Member for Chelsea and Fulham (Greg Hands), who happens to be a Government Whip. This is just another example of members of the Government saying one thing in the House before going back to their constituencies and saying the exact opposite.

[Mary Creagh]

That used to be the province of the Liberal Democrats, but perhaps saying two different things, depending on whether one is at the top or the bottom of the hill, in the House or in one’s constituency, is contagious. We should all take the necessary precautions, but such indiscipline would never have been allowed when I was a Government assistant Whip.

There remain, however, a number of hurdles to clear, not least that of the Communities and Local Government Secretary, who has an effective veto over the tunnel, so DEFRA support alone will be insufficient. We see the tunnel, in addition to its environmental benefit, as an opportunity to create up to 4,000 direct jobs for Londoners, to expand apprenticeships and to regenerate London. With the provision of financial assistance, we expect not just those apprenticeships but higher-level training to be a non-negotiable part of the deal.

In an infrastructure project of this scale, complexity and duration, we should be setting targets not just for apprentices but for the number of young people who will achieve masters-level civil engineering qualifications over the project’s lifetime, as well as encouraging local and national procurement to secure growth and the economic recovery in London.

No impact assessment has been produced alongside the Bill. The rather short explanatory memorandum states that this is because the Bill is associated with public expenditure, but clearly there will be burdens on water companies when administering any schemes under clauses 1 and 2, so what conditions will South West Water have to fulfil? Presumably, there will be an audit process, so what will the company’s administrative costs be, or has it agreed to waive them?

Of more concern, however, is the fact that there is no provision anywhere in the Bill to require potentially large sums of taxpayers’ money to be spent transparently and accountably. Clauses 1 and 2 state that undefined “terms and conditions” can be attached to the use of public money, but that falls well short of making clear exactly what will happen, and we believe that certain safeguards should be specified in the Bill.

I had a little look at the Water Industry Act 1991 this morning, and section 152 states that the Government can pay out money to water firms only

“in the interests of national security.”

So it is clear that infrastructure projects of the scale and cost of the one before us were simply not envisaged at the time of privatisation.

Today’s Bill shows those limitations, and section 154 of the 1991 Act also states very clearly that if any financial assistance or guarantee is given,

“the Secretary of State shall lay a statement of the guarantee before each House of Parliament”

and

“as soon as possible after the end of each financial year…lay before each House of Parliament a statement relating to that sum.”

The right hon. Lady says that the subsidy to South West Water will continue until the end of the next comprehensive spending review period, but that again is not in the Bill or in the explanatory memorandum, and we want to see those things guaranteed.

[Mr Adrian Sanders (Torbay) (LD)]

Will the hon. Lady commit her party, should it ever return to power, to continue the £50 discount each year?

[Mary Creagh]

We have to look at the cost of water bills in the round—the average, unmetered cost of water bills. We want to bring them down throughout the country, but we are not sure what sort of economy we will inherit, so I shall not make any election promises today.

We will seek to amend the Bill in Committee so that the Government are required to seek further parliamentary approval for such payments through the laying of a statutory instrument. That power should be triggered after a sober assessment of the facts, and after the Secretary of State has made her case to the House.

The explanatory memorandum is silent on state aid. Is the Bill compatible with EU state aid rules? Has the Environment Secretary discussed the matter with the European Commission? [Interruption.] Okay. So water customers do not run any risk of having to repay the assistance at a later date. That is a relief.

In conclusion, despite the right hon. Lady’s warm words, this “financial assistance” Bill is poorly named. It extends no financial assistance to anyone except those living in the south-west. It is an orphan Bill, conceived in haste, which is silent on the wider affordability issues, and it ignores the cost-of-living crisis for households hit by this Government’s assault on the squeezed middle.

We recognise that privatised water has brought benefits, with £90 billion invested in our infrastructure at no direct cost to the taxpayer, and we believe that water should remain a properly regulated private industry. Today, however, is a day for thinking about the water customer. Since privatisation, customers’ bills have increased year on year, wherever they live. Many have found themselves adjusting to metered water, and by 2015 there will for the first time be more metered customers than unmetered ones. Climate change will mean more regions being under greater water stress, with consequences for customers’ water use. That is why it is down to us to hammer out a new consensus on water affordability. I ask Ministers to work with us to amend the Bill and help hard-pressed families.

--- Later in debate ---

[Miss McIntosh]

Given what the hon. Member for Edmonton (Mr Love) said as well, I do not think that the House is in any doubt about the need for the Thames tunnel super-sewer, but we should not underestimate how long the project will take and its cost. Concerns about rising costs, to which hon. Members alluded, were expressed in the evidence to the Committee.

[Mary Creagh]

The hon. Lady said that she was not clear whether we support the Bill. I want to put it on the record that I said at several points that we do support it. As for whether we would continue with it, we would have no plans to repeal it in government if we were elected in 2015.

[Miss McIntosh]

I am sure that the whole House will welcome the hon. Lady’s helpful clarification, because her concluding remarks were a little ambivalent.

Returning to DEFRA’s acceptance of some of our conclusions, some of the site-specific material has been moved to an annex that is part of the document that is not to be relied on by the decision maker in reaching a decision on a project. That meets, to some extent, our criticism about the inclusion of weak material on the Thames tunnel, as well as on Deephams sewage treatment works. Perhaps my hon. Friend the Minister will also give us a status report on those treatment works.