Water Bill

Roger Williams Excerpts

Monday 6th January 2014 Commons Chamber

[Dan Rogerson]

The hon. Gentleman sets out his aspirations quite clearly by viewing the boundary between Wales and England in the same way as the sovereign state boundary between the Republic of Ireland and Northern Ireland, but I am addressing my remarks to the devolution settlement within the United Kingdom.

[Roger Williams (Brecon and Radnorshire) (LD)]

The Minister is well aware of the new clause’s implications for devolution. Does he agree that such a fundamental change would be better considered as part of devolution legislation, not as a new clause in a Bill on another matter?

[Dan Rogerson]

I thank my hon. Friend for his helpful intervention. He has somewhat pre-empted the remarks I was about to make, but I am happy that we speak as one on this issue.

Licensing of water suppliers is also not devolved. I recognise the deep, historical reverberations in Wales—we heard about them in the heartfelt speech by the hon. Member for Arfon—about the management of water, which is an essential natural resource. Much of the responsibility for water is, I am pleased to say, now devolved. However, further changes to the current devolution arrangements would have implications for customers and household bills on both sides of the border. They would also affect the companies, their assets and their operating rules, and possibly the people who work for them. Therefore, changes should not be undertaken without very serious consideration of all the implications.

The UK Government position is that we will not make changes to the devolution settlement in advance of the review and report by the Commission on Devolution in Wales—the Silk commission—which, as hon. Members will know, is led by Mr Paul Silk. The commission is currently working on part II of its remit and is expected to report in the spring. It is reviewing the powers of the National Assembly for Wales in the light of experience. The commission’s terms of reference make it clear that any changes it proposes must enable the UK Parliament and the National Assembly better to serve the people of Wales.

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[Dan Rogerson]

I understand the hon. Gentleman’s views on social tariffs, which he feels have not been introduced in a speedy enough fashion. My point was rather about the issue of excess profits. I said that the hon. Gentleman was seeking to introduce a concept that is perhaps a subjective rather than an objective assessment of the profits made by water companies. The whole point of the price review process and price review period, however, is that a regulated process takes account of the need to attract investment and thus the need to make a reasonable return in profit.

[Roger Williams]

My understanding is that the water companies made larger profits because the period of very low interest rates benefited them to a great extent. However, basing an entire policy on windfall profits that might not occur in the future would certainly not be a very good idea.

[Dan Rogerson]

I thank my hon. Friend for his intervention. He is absolutely right to point out that what is proposed is a new bold national scheme built on profits that might or might not go up or down in accordance with the markets and through the price review process. Although I accept that the intention of the hon. Member for Dunfermline and West Fife is, as always, to be helpful, I feel that his scheme could use a little work and I therefore urge my hon. Friends to resist it should he seek to press it to a vote.

Let me move next to new clause 8, also tabled by the hon. Gentleman. It would place a legal requirement on water companies to include information in their bills about the WaterSure scheme, but, as I have said—I provided information to this effect to the Committee—all water companies already do so voluntarily. He made a point based on anecdotal evidence. I would be happy to see that evidence and I am sure that he will want to share it with us, but I think we should base our policy making on the evidence provided to us, and the Consumer Council for Water has been quite clear that companies provide such information to customers.

In addition, new clause 8 would place requirements on water companies to provide information about tariff structures and the lowest available tariff, a point picked up on by my hon. Friend the Member for Sherwood (Mr Spencer). The proposals simply fail to reflect the realities of the water sector as opposed, for example, to the energy sector. Water companies do not have complex tariff structures. The sole choice for the majority of household customers is whether to pay according to the amount of water they use through a metered tariff, which is particularly prevalent in areas such as my own, or according to the rateable value of their home through an unmetered tariff. The cheapest option for each household will therefore depend on the location of the property and the amount of water used by the household.

Many smaller households with low water use can benefit from a meter. Water companies are required to fit a water meter free of charge on request and they also advise customers on whether they might benefit financially from the installation of a water meter. A further point to bear in mind about the operation of WaterSure is that it caps the bills of eligible customers at the average of the metered and unmetered bill for the area. That could, in effect, put the bills of some eligible customers up and it is therefore not surprising that they have chosen not to apply for WaterSure.

There is no evidence, in my view, that further regulation is required in this area. As I have noted, all companies already include details of WaterSure in their household bills and they also all provide details of the support available to any customer struggling to pay their bill. Legislation to require the companies to do something that they are already doing voluntarily would be redundant.

The Consumer Council for Water works closely with the companies on the format of their bills. Its expert advice, as we discussed in Committee, is that one of the biggest risks in using water bills as a means of communication with customers is information overload. I do not, therefore, consider the new clause to be necessary.

Let me turn next to new clause 9, also tabled by the hon. Gentleman. We discussed an identical clause that he tabled in Committee. Section 45 of the Flood and Water Management Act 2010 already enables Ministers to introduce secondary legislation that would require landlords to provide water companies with personal details about their tenants or become liable for paying the bill. That was a point that the Chairman of the Environment, Food and Rural Affairs Committee was keen to emphasise, given her involvement with the passage of that Act.

Following extensive consultation with the industry and with landlords’ organisations the Government took the decision that a voluntary approach would be more suitable. During consultation, landlords argued that the additional regulatory burden would be disproportionate as they are not the source of the problem we are trying to tackle. At the same time, the evidence provided by the water sector to support the case for additional regulation was not sufficient to make the case for additional regulation of millions of small and micro-businesses.

The Government simply do not believe that more regulation is always the answer. As we discussed in Committee, good practice in tackling bad debt is not applied consistently across the water sector. The hon. Gentleman quite rightly took great pains to point that out. The significant variation in performance between companies tells us that the focus should be on driving better standards across the sector rather than regulating landlords.

One reason we do not propose to bring forward the bad debt regulations on landlords is that we do not wish to endorse the argument that performance on bad debt is not within the control of water companies. We think there is more that the companies can do to collect their debts and we want them to focus on that rather than look to the Government to solve the problem for them.

Of course, the real drivers of company performance are the incentives and penalties set by the regulator so I am pleased to be able to report that Ofwat has changed its approach to bad debt in the methodology it is using for the 2014 price review. The new approach will enable it more effectively to bear down on the costs of bad debt. It is doing so by insisting that the companies demonstrate that any increase in bad debt is genuinely beyond their control and that they have taken all available steps to control it. Unless they can prove that that is the case they will not be allowed to include it in customer charges. We are already seeing our focus on the industry’s taking responsibility for tackling bad debt bear fruit. As I mentioned in Committee, the industry is working with landlords’ organisations to establish a new voluntary scheme that will enable landlords to provide information about their tenants direct to water companies swiftly and easily.

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[Miss McIntosh]

It is always a delight to be supported by the hon. Gentleman.

The current system for managing abstraction of water from rivers and aquifers was introduced in the 1960s, and does not effectively address the severity of pressures on water resources caused by increasing demand from a growing population and an increasingly varied climate. The current system does not help abstractors to trade water effectively or provide an incentive for them to manage water efficiently. The current weaknesses in the system mean that it could start to constrain economic growth, reduce the resilience of the water supply and lead to environmental damage.

I note that the reasons and need for abstraction reform are acknowledged and discussed in the Government consultation “Making the most of every drop”, which was published last December. When my hon. Friend the Minister replies, will he address the issue of why there was so much emphasis on abstraction and resilience in the water White Paper, and why we lost that emphasis in the draft Water Bill and, to a certain extent, in the Bill before us this evening?

The detail of a new abstraction regime will need to be developed following the end of the Government consultation, which was launched on 17 December. Following the conclusion of that consultation, which will not be until March, DEFRA will have to produce legislative proposals and secure space in the highly charged legislative programme before a new regime can be introduced. Once again, these amendments are intended to be entirely helpful and constructive.

During the Committee stage, the Opposition tabled a new clause to provide that upstream reform may not be implemented until new primary legislation on the licensing of abstraction has been passed, and five years has expired to allow for its implementation. Sadly, that proposal was voted down.

New clause 5 would require the Secretary of State to introduce a reformed abstraction regime within seven years of the Act being passed—by 2021. That was on the basis of the evidence that we received, and we believe that that is the most accurate and cost-effective timetable for all the parties involved.

The abstraction reform must be resilient to the challenges of climate change, or extreme weather conditions, and population growth and better protect the environment. Those high-level requirements are entirely in line with the key commitments regarding abstraction reform in the water White Paper.

Let me turn now to upstream and abstraction reform. In our pre-legislative scrutiny report on the draft Water Bill, the Select Committee called on the Government to make clear in the Bill the key principles that underpin the introduction of upstream reforms. Further work needs to be undertaken to establish how upstream reforms can be introduced in a way that will preserve investor confidence, ensure that customers do not face increased bills and maintain resilience in the sector. I was extremely pleased to see the emphasis on resilience in the water White Paper.

Upstream reform aims to encourage upstream competition. I am talking about the input of raw or treated water into a water company’s network or the removal of waste water or sewage for treatment. Clause 1 unbundles all the existing licensing structures so that new entrants can sell raw or treated water into an incumbent’s network. It also looks at the wholesale authorisation to input water into a part of the system. The Environment Agency’s statistics show that on average, between 2002 and 2011, only 45% of the annual total of water licensed for abstraction in England and Wales was actually abstracted. Therefore, if all of this unused but already licensed water was abstracted, there could be a significant deterioration of the environment. We hope that when the Government look at abstraction and upstream reform, they will bear these thoughts in mind.

One other aspect of upstream reform and abstraction that the Government should consider is, very topically, the role of water companies and other private sector companies in flood prevention and in protecting homes and businesses from floods. The Minister will be familiar with the work of his Department in the Natural Environment White Paper, which looked at a project known as ScaMP—Sustainable Catchment Management Programme—involving United Utilities in Cumbria. Surely there must be much more scope for the type of partnership approaches we have seen in Pickering where the first soil of the reservoir will be dug tomorrow.

I will conclude my remarks by looking at flood insurance. Amendments 5, 6, 7 and 8 seek to amend clauses 51 and 53. The Select Committee took a lot of evidence in relation to Flood Re and the potential for reinsurance companies. Given how deeply wedded the Government are to Flood Re, I hope that they have not closed the door completely on reinsurance. In summing up this debate, perhaps the Minister will inform us how the state aid application to the EU Commission in Brussels is going to enable Flood Re to come into effect according to the Government’s timetable.

Clause 51 and the amendments we propose to it would have the effect of bringing small businesses within the ambit of Flood Re. There is considerable doubt and anxiety that small businesses will not be covered under the new Flood Re proposals. The impact that flooding can have on small businesses is clear. In 2001 and 2005, a dental practice in my constituency was flooded twice and the dental chair and all the computer equipment had to be replaced each time.

[Roger Williams]

I am sure that many Members will have a deal of sympathy for my hon. Friend and her concern for small businesses. I guess that the difficulty in getting this into legislation will be how to define a small business. Perhaps she has some ideas on that.

[Miss McIntosh]

Like my hon. Friend, I merely shadow DEFRA so I do not have the definition to hand, but I am sure that the Federation of Small Businesses will have a definition. I think it is generally deemed to be a business that has fewer than 50 employees, though many small businesses employ five or fewer or are often a single employee. The example I cited was that of a small dental practice with two or three dentists. The knock-on effect on an independently run, stand-alone dental practice of fitting, for the second time, a new dental chair and computer equipment goes beyond what would normally be expected. The knock-on effect on the insurance premium and excess for that dental practice was considerable and, possibly, unaffordable.