Water Bill

Oliver Colvile Excerpts

Monday 25th November 2013 Commons Chamber

[Mr Paterson]

I will be moving on to that. I cannot tell my hon. Friend exactly where the new reservoirs will be because that will be down to the individual companies, according to local circumstances, but I can categorically assure him that I hope that the measures in the Bill will release a floodtide of new investment, potentially in new reservoirs, use of aquifers and transfer of water between water companies, to maximise use of the water that lands on this country. I remind him that 95% of that water ends up in the sea. We need to manage the water better before it gets there.

The Bill shows that we are tackling affordability for the long term. The package of reforms is designed to exert a sustained downward pressure on water bills and ensure affordable flood insurance for households in areas at high risk of flooding. We are well aware of the financial challenges that hard-working households are facing.

Earlier this month I wrote to water companies asking them to consider whether to apply the full price increases next year that were planned for in the 2009 price review. I asked them to share the benefits of historically low financing costs with their customers. Ofwat is with me on this. It estimates that by taking account of lower financing costs, the next price review could reduce pressure on bills by between £120 million and £750 million a year from 2015, while still enabling companies to invest in high-quality services and the environment. This demonstrates once again how critical financing costs are to the bills that customers pay: 1% on finance costs leads to about a £20 increase in bills to customers. We must not undermine in any way the stable regulatory system which gives confidence to investors.

This Bills means that all business, charity and public sector customers in England will be able to choose their water supplier and, for the first time, their sewerage supplier. They will be able to shop around for the best deal and a package that suits them. Large water users could make savings by switching to a water supplier that offers them water efficiency advice and smart metering. We have seen how competition in Scotland is delivering real benefits to customers and to the environment. The public sector in Scotland is forecast to save £36 million over four years, thanks to better water efficiency and discounts. Customers in England deserve the same opportunities. Multi-site customers such as hospitals and supermarkets could save thousands of pounds in administration costs by dealing with only one water company.

[Oliver Colvile (Plymouth, Sutton and Devonport) (Con)]

I am fully aware that in the south-west we have significantly higher water rates—probably the highest in the country. The Government have noted that and uniquely have given customers of South West Water £50. Does my right hon. Friend think that competition will drive down bills in the south-west as well?

[Mr Paterson]

I have no doubt at all that we want more efficient water companies with more investment, which undoubtedly will lead to a cheaper product.

We are already seeing the first signs of a competitive market. In September, to answer my hon. Friend’s question directly, First Milk became the first multi-site customer to switch to Severn Trent Costain. The two companies are working together to improve First Milk’s water efficiency and lower its environmental impact, but these opportunities are limited at present because they are open only to the largest water users. The Bill will simplify the existing regime, providing clear rules of access and non-discriminatory pricing to attract new entrants to the market. We expect this expanded retail market to open in 2017.

--- Later in debate ---

[Joan Walley (Stoke-on-Trent North) (Lab)]

It is a pleasure to follow the hon. Member for Thirsk and Malton (Miss McIntosh). As Chair of the Select Committee that has conducted detailed pre-legislative scrutiny of the Bill, she speaks with great knowledge of and authority on these matters. The Secretary of State would have been well advised to listen carefully to her comments, particularly in view of the greater role and scope there now is for Select Committees, especially in speaking in favour of amendments. The Government must urgently reflect on, and respond to, her points in respect of how surface water mixes with sewage in flooding situations. The cross-cutting issues that she raised in relation to water—not least highways and expenditure on highways, which are matters for the Department for Communities and Local Government and other Departments—need to be looked at in a holistic way. I hope that, in the winding-up speech tonight and in Committee, Ministers will take the Select Committee recommendations seriously.

Today’s debate takes me back to the first Committee of this House that I was a member of, which considered the paving Bill for the legislation that led to water privatisation. It was very divisive at the time and was rightly opposed by the Opposition and by many of the environmental groups that believed water to be a natural eco-service, and that the concept of paying large dividends to shareholders at a time when investment was needed in the water infrastructure was simply the wrong way of addressing how to secure investment and manage our water supply. A quarter of a century later, the private companies that were created—and indeed Ofwat, the regulatory body—have had mixed fortunes and mixed success. However, where we are now and the current structure has to be our starting point for taking the Water Bill forward. Today, the challenges we face are greater than ever, particularly, as we heard from my hon. Friend the Member for Garston and Halewood (Maria Eagle), given that we are getting close to the finalisation of the next price review in 2015. It is absolutely critical that as much pressure as possible be applied in order to get this right.

Top of my list of questions is, how do we ensure a safe, affordable water supply for domestic use, for industry, for farming, for all areas of the UK, particularly given that different administrative arrangements apply, which does not make matters easy? There are parts of the Bill I do welcome, not least the one dealing with flooding and insurance, but like many of the Members who intervened earlier, I feel that the flooding issue must be dealt with urgently and in detail. A statement of intent is not quite the same as a measure on the statute book.

[Oliver Colvile]

Is the hon. Lady aware that last autumn in the south-west, we had a massive amount of rain that affected our entire transport network and cut off our railway lines for a very long time?

[Joan Walley]

I am grateful to the hon. Gentleman for his intervention, and that is exactly the point I am making: our water policy needs to take into account the whole issue of mitigation to prevent such situations, but it also needs to be adaptable. The adaptation that we need requires huge amounts of investment and a whole new, collaborative approach to planning. The Bill has been brought forward by DEFRA, but as the Energy and Climate Change Committee has pointed out, it is the problems associated with climate change that are bringing about flooding, and we have to find new ways of dealing with them urgently. It has taken much too long to deal with outstanding flooding insurance claims. Importantly, it is a question not just of how we deal with individual claims and of having an insurance system in place, but of how we deal with all the associated disruption.

As we approach the European elections—I am sure that many of us here will be thinking about what Europe has done for us—how do we ensure that water supply and management fits within the context of the European water framework directive? We have a fundamental disconnect at the heart of water policy which the Bill could actually put right. As my hon. Friend the Member for Garston and Halewood said, the Bill is a wasted opportunity. The water companies, regulated by Ofwat, supply water, but at a local level there is little meaningful collaboration, accountability, transparency or resource, as has been mentioned, to ensure that we have in place what is needed to meet the requirements of the water framework directive.

The directive has two key objectives: an environmental objective, based on the premise of preventing further deterioration and achieving “good status” in all waters; and a managerial objective aimed at creating integrated water management at the river basin level to ensure overall co-ordination of water policy. Here, I want to make a plea to the Government and to DEFRA on behalf of the Environment Agency. The agency needs to be fully resourced for its task of leading the framework directive, in order to enable it to identify significant water management issues, to develop measures to address these at the river basin district level, and to develop and publish the plans for implementing these measures, known as the river basin management plans.

Given the length of time it takes to get legislation on to the statute book, equipping the Environment Agency to work within the framework to carry out its responsibilities needs to be looked at in parallel with the Water Bill before us. Let me give an example of the current unsatisfactory position. When the Government set up the Canal & River Trust in 2012, they committed to a new structure for the canal network which included the navigational waters—some 2,000 miles of canals and river navigations in England and Wales. These rivers were to be handed over to the trust to ensure certainty and long-term funding through the trust arrangements. However, we now know that the Chancellor has reneged on this commitment, and the plans have been put on hold. I am grateful to the Under-Secretary of State for Environment, Food and Rural Affairs, the hon. Member for North Cornwall (Dan Rogerson), for agreeing to meet me to discuss this issue, as I believe it is vital that this transfer take place and be fully funded.

There is a further concern, which was touched on in an intervention from my hon. Friend the Member for Ellesmere Port and Neston (Andrew Miller). Through clause 12, Ofwat is to be given the power to intervene in private supplier agreements with water undertakers, with the apparent intent of assisting smaller private water suppliers in their commercial relations with undertakers. Not surprisingly, the Canal & River Trust is alarmed that Ofwat will therefore be able to vary or terminate water sales agreements at the request of the undertaker and without the agreement of the trust. I heard the Secretary of State’s rather complacent reply to my hon. Friend’s intervention, and I hope that, when the Under-Secretary replies, he will tell us what specific, constructive discussions he will have with the trust on this issue, so that we can make amendments to the Bill that will safeguard delivery of the trust’s charitable objectives when the Bill’s legislative passage is completed.

There is uncertainty about other aspects of the Bill, as well. The Bill is all about the economics of, and very little about the environmental and social aspects of, water policy. It mirrors the assumptions that lay behind the changes to the water industry proposed back in 1987, rather than looking at the assumptions we need to make today for the future. Here, I would like to give credit to the former Environment Minister, the hon. Member for Newbury (Richard Benyon), who only last week in the press disclosed how close we were to drought just before the 2012 Olympics. There are also many other factors that point to the need for long-term planning.

We need to take account of the work of the Natural Capital Committee, which is looking to embed the value of natural capital in the national accounts and policy making as soon as possible. We must also recognise the need to look for a credible long-term plan to restore our natural capital, and recognise the work of the Committee on Climate Change. Reference was made earlier to the adaptation sub-committee report, which highlights the need to incentivise efficient water management and to have a price for water that better reflects its scarcity. Of course, there are also the risks associated with water flooding. All these factors point to the need for a much wider, all-encompassing approach to water than the one the Bill provides for.

We should also address the issue of Ofwat having a primary sustainability duty. Its role of granting new water supply licences and overseeing bulky supply agreements should include consideration of the sustainability of water sources. There is common agreement that, without such a duty, we will see over-abstraction, over-licensing and greater environmental damage to our already overstressed river systems. We have heard the Secretary of State’s response to concerns about fracking. He has stated that all the protection and regulation that we need is already in place. However, the proposal for financial guarantees in relation to pollution that my hon. Friend the Member for Garston and Halewood outlined will be vital, and I hope that they will be incorporated in the Bill as it completes its passage through both Houses. I know from the initial meeting that the Minister kindly organised recently that there is widespread concern among many organisations, including the WWF, the Royal Society for the Protection of Birds and the Angling Trust, about the need for a primary sustainability duty, not only on resilience, to be incorporated in the Bill. Will the Government table an amendment on sustainable development? Will the Minister tell us how he intends to deal with this issue?

I want briefly to broaden the debate. Following the discussions that I have had with many different experts in the industry, I do not believe that we should be carrying on with business as usual. Instead, we should be gearing up to a different set of policies designed for the 21st century. The confluence of the various factors I have mentioned means that we should be taking a more fundamental step change in how we invest in improving the environment and safeguarding our water supplies.

I would like to see far more local governance arrangements that would fit with the river basin concept, involving not just water companies but local councils, farmers and other organisations working together on a risk-based approach. I should mention that some water companies are starting to think outside the box. I refer the House to a recent document published by Severn Trent Water, “Changing Course through the sustainable implementation of the Water Framework Directive”. We need much more collaboration of that kind, but the Bill does not really give it to us.

I want to mention the work that I have been doing in my constituency to bring all the different partners together. This has culminated in an application for European funding under the Life Plus programme, which would enable us to implement measures that would prevent pollution in the River Trent. We need to see much more of that kind of approach. Water efficiency should also be promoted.

The Bill will promote greater competition, but what will it do to challenge traditional kinds of capital investment? We should be looking into different kinds of investment. Expensive engineering solutions are not always the way forward, even though the water companies depend on capital value for the returns that they make. If the Government can be persuaded to introduce an obligation for sustainability into Ofwat’s powers, Ofwat could look at a return on revenue expenditure, too. We need to look at the kind of investments involved. The Bill could enable Ofwat to take a much more proactive role in vetting companies’ proposals for investment.

I would also like to see the dividends paid out to water company shareholders managed differently. Yes, money is needed for investment in water management, but it would be so much better if the profits could stay in the business and be reinvested, rather than global private equity companies that do not necessarily have a long-term commitment to our river basins paying out massive returns—well above what we can earn in interest from our bank account—to shareholders.