Water Industry (Financial Assistance) Bill

Sheryll Murray Excerpts

Wednesday 29th February 2012 Commons Chamber

[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.

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[Andrew George]

Thank you, Mr Deputy Speaker. I was in no way implying any criticism of your great office, or of the way in which you apply the rules to our debates. I have carefully cut out of my speech all the parts referring to swimming and surfing in the waters of the south-west, and any other matters that you might consider a further indulgence.

As a Member of Parliament from the south-west, it is my primary objective to address the two issues that represent the primary purpose of this three-clause Bill before us today. Having said that, the hon. Member for Poplar and Limehouse spoke about the associated issue of fire sprinklers, which I hope will be dealt with elsewhere. Similarly, I know that the hon. Member for Thirsk and Malton (Miss McIntosh) never misses the opportunity to address the important matter of flood defences in her constituency.

I come to this debate to congratulate the Government warmly on what they are achieving through this measure, particularly by the clause that is intended, although not by name, to benefit or at least address an unfairness to the water bill payers of South West Water that has gone on for 22 years. The unfairness has been identified across all parties and by the Anna Walker review, which was commissioned by the previous Government in August 2008 and concluded in December 2009—just before the last general election. It highlighted the need to address this significant and long-standing unfairness.

I welcomed the comments of the shadow Secretary of State, the hon. Member for Wakefield (Mary Creagh). She clearly enters into debates in a full-blooded manner in a debating Chamber that often becomes extremely tribal. At certain points in the debate, I was not sure whether Labour Members were going to be encouraged to vote against the Bill. Following my intervention on the hon. Lady, however, she made it clear that she and her hon. Friends would support the Bill. That will resonate through the House, following what is, after all, a cross-party consensus on this issue. She raised legitimate questions about problems of affordability—across the country generally, but particularly for the customers of South West Water—that need to be looked at further. I hope that my hon. Friend the Under-Secretary will deal with some of those issues in his response. I hope, too, that legislation will be forthcoming soon after the next Queen’s Speech so that we can further meet concerns about affordability issues.

Speaking about how South West Water operates itself, I have in the past called it an ethics-free and risk-free money extortion system. I know that is rather strong language; it goes back primarily to the days when Bill Fraser was the chief executive of South West Water. His management of the business in a rather belligerent and Thatcherite style has largely been remedied by both his successors, Bob Baty and Chris Loughlin. With Chris Loughlin and his board of directors addressing the legacy, it might no longer be appropriate to describe the company as ethics-free. Chris Loughlin has managed the company well and genuinely wants to address the concerns about water affordability. I take my hat off to him and his board members for their efforts.

That said, one thing we cannot escape from is the fact that all water companies—certainly including South West Water—have a monopoly within their areas. There is effectively no competition at all. Significant questions have been raised about the effectiveness of Ofwat as a regulator. It is supposed to establish the “K” factor every few years to restrain the levering up of water bills, but water companies are still able almost to predict the end-of-year dividends at the beginning of each financial year.

[Sheryll Murray]

Does my hon. Friend agree that about 20,000 households in the south-west could reduce their bills by about £350 to £400 if they took up the option of water meters, and that many of those households include the elderly and the most vulnerable?

[Andrew George]

I absolutely agree that there are still many customers of South West Water who could enjoy lower bills as a result of transferring to water meters. Ultimately, however, the unit charges are bound to have to increase once all households switch to water meters. Unmetered households are currently charged significantly more than metered households, so when companies plan for the future it will simply not be possible for them to maintain the same level of profitability and dividend to their shareholders if they continue to charge at the current rate.

The point that my hon. Friend makes is extremely valid, but I must also say that I have taken up issues with South West Water, as I know other hon. Members have done. One such issue relates to customers living in sheltered accommodation or in houses in multiple occupation where they have single unmetered bills but do not have the benefit of being able to convert their property on to a meter because of the circumstances in which they live. In those circumstances South West Water has to be asked for what is known as an “assessed charge”, which often results in those people—inevitably, they are vulnerable households—having their water bill halved or significantly reduced to below that level. So there is further work to do to address the problems of water affordability for those living in households that cannot convert from unmetered to metered properties. I have asked South West Water if they would, as a default, automatically offer the assessed charge to those living in such accommodation, rather than their having to trigger it by requesting it. That is an important point.

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[Simon Hughes (Bermondsey and Old Southwark) (LD)]

I am grateful for the opportunity to take part in the debate and to follow the hon. Member for Plymouth, Moor View (Alison Seabeck), who rightly concentrated on matters in the south-west.

May I say, as I have said in other policy areas, that as a London MP I fully support the Government’s proposal, derived from a Liberal Democrat election commitment, to assist people in the south-west? Over the years, I have campaigned with colleagues to improve water quality in the south-west and to clean up sewage on its beaches—I and my hon. Friend the Member for St Ives (Andrew George) helped with the Surfers Against Sewage campaign. I am also clear that there is a collective responsibility for Members across the UK to legislate to end disparities in water prices. As a London MP, therefore, I do not resent our legislating to assist colleagues in a beautiful part of the country where bills have been disproportionate compared with ability to pay and the justice of the case.

[Sheryll Murray]

Does the right hon. Gentleman agree that, from a south-west perspective, this is truly a cross-party initiative? I cannot think of another example where every major political party has campaigned on the water issue.

[Simon Hughes]

I absolutely accept that. I was not disputing the cross-party nature of the campaign. I was trying to support my hon. Friend and colleagues across the House by saying that those of us who do not come from the south-west have supported them too.

A pledge made by the Liberal Democrats bas been honoured, and a pledge made by the coalition Government has also been honoured—generally, then, this is a good proposal.

The second part of the Bill is the one that preoccupies those of us with London constituencies and constituencies served by Thames Water. It is the largest water company in the country and covers a significant number of colleagues with constituencies in the Thames valley as well as in the capital. That relates to clause 2. I support the general proposal that the Government should be able to assist major infrastructure projects, and I am aware that last year and the year before, the Chancellor rightly identified a set of infrastructure projects around the country to get people back into work. Good, long-term, viable infrastructure projects are a good thing, and we should support them.

There is always a danger, however, that infrastructure projects start with one price tag but end up with another. When the Thames tunnel scheme to deal with sewage in the Thames—the system built in the Victorian era by Bazalgette is no longer fit for purpose—was first proposed, the general cost was said to be between £1 billion and £2 billion, but everybody now accepts that, at 2011 prices, the Thames tunnel would cost £4.1 billion or more. That excludes financing costs, as the notes to the Bill explain, but includes £900 million for risk and optimism bias. So this is a big project that will cost a lot of money.

In 2006, the water regulator warned potential buyers of Thames Water that it would not allow them to saddle the company with high debt levels and pass financial risk on to the customers. I want to concentrate my remarks on the financing, and the financing structure, but I also want to place on the record my position on the project. I have supported the general position that we need to deal with the infractions on air quality and water quality in London that have brought us before the European authorities. That is what we are facing in relation to water and air quality; therefore, we need to act.

I have started from the proposition that the Thames tunnel, as proposed by Thames Water, is the right answer. When it was endorsed by the last Government it had my support, but I am increasingly troubled that it looks as if it may not be the answer that everybody once thought it was. Therefore, when I recently made a full submission as part of the consultation process, I asked—I am also about to write to the Secretary of State to ask this question, after this debate and after a meeting on Monday—whether, at least between now and the point in the normal timetable when Thames Water might be in a position to make an application, there could be a final independent review of the viability of the current project.

Those driving the project have an interest—Thames Water has an interest, and there are others with an interest. It is important not just to have a battle between those with an interest in favour and local authorities such as mine—[Interruption]—and that of the hon. Member for Hammersmith (Mr Slaughter), who is about to intervene on me—which, because of the effect on their constituents, have become opposed. At the moment we have a dialogue of two different interested groups, and I think we need to get some people involved who do not have a vested interest. There are people in the European Commission who do not have a vested interest, there are people in international environment agencies who do not have a vested interest, and there are also people who do not have a price interest. Before they commit their support to a project that is rapidly increasing in cost—I will say why that is a danger for the Government, as well as for everybody else—I think the Government would be wise to commit themselves to one last review. I hope I can persuade colleagues over the next few weeks that this can be done in a way that is compatible with the timetable in general terms.