Water Industry (Financial Assistance) Bill

Debate between Simon Hughes and Sheryll Murray

Wednesday 29th February 2012 Commons Chamber

[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.