Skip to main content

Water (Wales)

Volume 127: debated on Friday 12 February 1988

The text on this page has been created from Hansard archive content, it may contain typographical errors.

Motion made, and Question proposed, That this House do now adjourn. [Mr. Peter Lloyd.]

2.38 pm

The subject of this debate is the fascinating one of Welsh water. Wales is drenched in water and sometimes, sadly, drowned in water. Sumptuous qantities of rain and snow fall and feed our fabulous rivers and lakes. Water has been the inspiration of our artists and poets for generations, whether it be the surging mountain streams of Snowdonia, or the still quiet beauty of the reens of the Gwent wetlands.

Sadly, in the midst of that abundance, there is a great shortage of water, and our task this afternoon is to consider the mundane use of water as a basic necessity of life. Perhaps uniquely in Wales, water has become a politically explosive issue. The story is a joyless one of high charges, exploitation and bitterness that springs from a deep injustice, which is felt widely. However, there is worse to come and the present situation is desperate.

In spite of the great achievements of the Welsh water authority, many of its efforts have been frustrated by the Government. Sadly, it has acted as the punch bag for blows that should more accurately have been aimed at the Government. I am especially grateful to the Welsh water authority for taking a decision that arose out of a complaint from a pensioner who is a constituent of mine.

My attention was drawn to the fact that a new charge was to be levied by the water authority. It was a particularly mean and unjust charge, in that it was planned to charge an extra 50p to all those who took advantage of instalment payments. They are the people who can least afford to pay large bills, and they were to be penalised by a charge of an extra £5 per year for their 10 transactions. Happily, I was informed yesterday that the Welsh water authority, to its great credit, has dropped that charge. As I understand it, it is the only authority in the country to do so. That fair and reasonable decision will lift a little of the onerous burden of those charges that fall so frequently and so heavily on those who can least afford it. That is some consolation but, sadly, only a small one.

For many years the Welsh water authority and the Select Committee on Welsh Affairs has argued that rebates on water rates should be allowed in the same way as rebates are allowed on general rates. The Government have always refused. In Wales we have long been cheated on our water bills. Every statistical analysis, from whatever base chosen, shows the same bleak story. There are high costs, which are getting worse. They are getting worse in real terms and in terms relative to the rest of Britain.

From 1981–82 to 1987–88 the average national total for water supplies, sewerage and environmental services has increased in England and Wales from £60 to £99. That is an increase of £39. However, in Wales alone, the increase has been staggering; from £69 to £122. That is a difference of £54. When compared to the 100 index, in 1981 Wales stood at 114 and it has now leapt to 124.

Perhaps a more telling example was revealed in a written answer to my hon. Friend the Member for Houghton and Washington (Mr. Boyes). In that answer the average of total domestic bills throughout the country was reduced to a figure of 100, and a comparison was made to show what has happened to that figure since 1978–79. The national figure has increased from 100 to 214. However, the Welsh figure has leapt from 100 to 268. That is a staggering increase.

As I have said, the story has been bleak. Wales has been treated badly. I do not know of any comparison that can be made from any year, however the statistics are approached, that will not give the same result.

What does the future hold? Again, Welsh water consumers are to be hit for six, with charges that are at least twice the rate of inflation. For those who can least afford it—those living in low-rated properties—the rise will be greater. At most it will be a rise of about 25 per cent, but that will be on top of the other increases this year. The standing charge in Wales will soar to the highest level in Britain. From April it will be a massive £36, compared with £6 in Yorkshire, and it will be more than twice as high as the next highest charge—£17 in the south-west.

Water charges will also clobber Welsh industry. They are probably the most expensive in Britain. They are 50 per cent. higher than the cost in London, and the fixed charges for those in industry with water meters is six times greater than the cost to industry in Birmingham.

It is ironic that those charges are a direct result of Government policy. It is frustrating and mocking all the other Government policies for making Wales a magnet for footloose industry. Again, Wales is about to be cheated and forced into an unjust straitjacket by the Government.

One has sympathy for the embattled Welsh water authority because it is being squeezed from every direction. The crude current cost-accounting system penalises present payers for the debts of the distant past and the cost of water facilities for future generations.

The sins of omissions by our Victorian grandparents have left a legacy of debt, which now stands at £450 million, and which this year will cost £54 million to fund. They have left us the legacy of crumbling sewers and sea outfalls that mean that 30 per cent. of our beaches do not conform to European standards for safe bathing.

We are also funding the future. Some £73 million—the bulk of which comes not from capital but from revenue, although it is capital spending—is being spent to provide services, many of which will last for 100 years for the benefit of future generations. Welsh water ratepayers are shouldering those costs and debts. Many of those debts are British national debts, not specific Welsh debts.

In the summer our seaside towns experience a four or fivefold increase in population from holidaymakers. They are welcome, but they place an enormous burden on the costs of dealing with pollution and sewage, without contributing a single penny to the cost of Welsh water.

There is the daunting future problem of the acidification of our lakes. The problem is growing at an alarming pace and there are no cheap solutions to this national and international problem. We are encumbered by the past, the future, the environment, the polluted beaches, the holidaymakers and by the distortion of the simplified economics being applied to the Welsh water authority. Yet again the Government are insisting on an inappropriate and artificially high rate of return on investment. They are insisting that the Welsh water authority applies an incongruous cost-accounting system, which will lead to the grotesque spectacle of Welsh water rates spiralling yet again beyond sense or justice.

If that were not enough, the Government have decided that the straitjacket that they have applied to the Welsh water authority should again be tightened. Tougher new financial targets have been set, including an irrationally high rate of return on assets. The long-term capital improvements should be paid for over a long period by those who are benefiting from them. However, the Government are insisting that they be financed by the present generation of ratepayers out of revenue. Water rates are being used to raise money that should be found from the Exchequer. Water rates are being used to collect taxes on an unfair basis because they place the heaviest burden on those families who can least afford it.

My hon. Friend the Member for Houghton and Washington, in the recent debate on the Public Utility Transfers and Water Charges Bill, made a convincing case for the claim that the Government are covertly planning to make water meters compulsory. That is an alarming prospect. I shall not repeat the evidence that he produced, as I have drawn it to the Minister's attention, but it fits precisely the Thatcherite view.

Water meters will be an extra obstacle costing about £100 per dwelling, which is equivalent to an initial cost of £100 million to £150 million for Wales alone. Water meters have to be serviced, read, repaired and replaced every seven years. The Government are conducting trials, and it is certainly part of their view and their narrow philosophy that the only measure of virtue and efficiency is the balance sheet and that everything must he paid for in a precise way.

Water meters seem likely to be forced on us. How else will the Government gauge the charge that people will have to pay for their water rates, which are now based on rateable values? After the poll tax there will be no rateable values, unless the whole panoply of rateable values is to be kept just to assess the level of water rates. Is that what the Government have in mind? The new imposition will be wasteful and unnecessary, and I should like the Minister to explain the Government's intentions.

Finally, compulsory metering is opposed by the water authorities and by most people who know about it. About a quarter of the customers of the Welsh water authority have installed metering because they see it as an escape from the excessively high charges. However, those are the people who use the smallest amount of water. That has exacerbated the situation and led to higher bills for everyone else.

What are the Government's proposals on metering? Domestic rate relief used to be a cushion that Wales was given to compensate for the disadvantages of the terrain and the real problems involved in getting water from the hills into people's homes. That cushion was to compensate for high water bills, and was removed by the Government. What alternative do they now have in mind, or are they content to see our water bills spiralling out of control? Will the Minister tell us what the Exchequer will do to wipe off the legacy of debt which has become increasingly irrelevant?

That is a particularly important point in my constituency. In Newport, a splendid profitable water undertaking was handed over to us which provided cheap water, yet in a few years our water rates have risen by more than 2,500 per cent.

When can we expect national funding to tackle the truly national problems of polluted beaches and acid rain? Those creating the main problem on the beaches are not from Wales. Why should the water ratepayers in Cardiff and Newport, who spend their holidays elsewhere, or perhaps have no holidays because they are saving up for private medical insurance, pay to deal with the problem when people from Stoke-on-Trent and Birmingham, who use the beaches in great numbers, cause the problem but do not pay for it?

When will there be a system of rebate for water rates which every hon. Member on the Standing Committee, which had a Conservative majority, decided would be fair and reasonable? When are we to have realistic rates and targets for Welsh water that can be achieved without continually spiralling costs? If the Minister cannot answer those questions are the people of Wales right to assume that an artificial position is being imposed on Welsh water purely to serve the Government's main interest, to fatten up the industry as a juicy prize for the speculators when privatisation comes about?

2.54 pm

I congratulate the hon. Member for Newport, West (Mr. Flynn) on raising this subject. He was not a Member when the Select Committee on Welsh Affairs considered this subject at considerable length but it may pay him to read the report of that Committee, which was chaired by the hon. Member for Swansea, East (Mr. Anderson), in which he will find a number of answers to many questions that he has raised. For answers to some of the other questions the hon. Gentleman will have to wait until next Session when we produce our Bill on water privatisation.

The hon. Gentleman was right in saying that this is a warm subject in Wales. It has been for many years. I remember during the 1970s when the Welsh water authority came into its own and we had considerable problems. The authority is a considerable organisation. It employs 4,500 people. It has fixed assets of £2 billion. It provides 2·7 million people with water — and, as the hon. Gentleman said, more in the tourist season. It is responsible for more than 22,000 km of water mains, more than 14,000 km of sewers and 5,700 km of main river. It has within its area a coastline 1,300 km long and the estuaries, the waters of which it has to assess for quality, have nearly 500 km of shoreline. It owns 90 reservoirs, 900 service reservoirs, 250 water treatment works, over 400 water pumping stations, and so on. In 1986–87 its annual report showed an income of £207 million, a profit of £25 million and capital expenditure of £62 million.

The main activities of the Welsh water authority are the provision of water resources, water supply and sewerage and sewage treatment services. These basic activities account for over 90 per cent. of the authority's operating expenditure, but it also undertakes a number of other important activities, including environmental conservation, fisheries, navigation, flood defence and land drainage. It also regulates other users of water. It controls, through a licensing system, the abstraction of water from rivers and other sources. Its consent is needed for the discharge of effluent into lakes, rivers and other places where water might be contaminated. It has, therefore, a wide role and it must be able to fund its activities adequately, bearing in mind the needs of its customers and the contribution that it plays in safeguarding the health of people and developing the economy of the area that it serves.

The hon. Member for Newport, West referred to the financial policy of the Welsh water authority. Its ambitious programme of efficiency measures has been taken, and with considerable success, both on the water authority's own initiative and in response to Government controls designed to ensure that the water authority operates within a proper commercial environment. The programme has taken place at a time when there is increasing public awareness of environmental issues and a demand for more resources to be given to issues such as water quality, pollution prevention and bathing water standards — all matters to which the hon. Gentleman referred and which form a growing part of the authority's work. At the same time, the authority must meet statutory requirements in respect of water quality, sludge disposal, dangerous substances and discharges to coastal waters, including the Control of Pollution Act 1974. It has not been easy, but the Government's challenging and demanding performance aims have led to a real reduction in operating costs.

The Government, in conjunction with the water authorities, have set certain objectives. The authorities must provide an acceptable level of service having regard to costs and the environment, remedy deficiencies over a reasonable period, and achieve these aims at least cost by steadily improving efficiency. Three constraints are set. Performance aims set a limit to the amount that the Welsh water authority can spend on running its services—and the figure is reduced progressively in real terms to spur increased efficiency. The financial target requires the Welsh water authority to achieve a percentage rate of return on its net current cost assets. This target has been gradually increased from 0·3 per cent. in 1981–82 to 1·65 per cent. in 1986–87. I am delighted to say that the authority has consistently achieved its targets. The current year's target is 1·95 per cent. and that for 1988–89 is 2–35 per cent.

The third constraint, the external financing limit, restricts the amount the authority can borrow from external sources. The external financing limit has been gradually reduced. My right hon. Friend the Secretary of State will shortly be writing to the chairman of the Welsh water authority to inform him of next year's limit. The decline in the external financing limit reflects Government policy, which is to reduce the burden that nationalised industries impose upon public expenditure and to ensure that, as far as possible, they make a sufficient rate of return to finance their own activities. However, it is worth noting in this context that the proposals for 1988–89 show that investment by the authority is expected to be £70 million, 30 per cent. above 1985–86, in cash terms. The policy has greatly strengthened the financial position of the authority and reduced the burden of interest payments for consumers.

There is a tendency in Wales — and the hon. Gentleman gave voice to it—to relate water charges to rainfall and to argue that, because we have so much free water falling, its supply should be equally inexpensive. One only wishes that the provision of wholesome water was that easy, but it is not, and the Welsh water authority has to do a great deal to get water of the right standard to the household tap and to dispose of household effluent.

The hon. Gentleman referred to costs. It is worth pointing out that in the period from 1975–76 to 1987–88, six of the nine English water authorities increased their average charges by more than the Welsh water authority. Of the three water authorities whose charges have increased by less, only Severn Trent is significantly lower. The differential between charges is therefore reducing, so that while in 1975–76 the highest charge was 71 per cent. above the lowest, in 1987–88 the differential was only 41 per cent.

This year, the Welsh water authority estimates that it will require to meet expenditure of £260 million—£16·5 million more than last year — resulting in an average increase in charges of 8 per cent. Of the sum required, about half is to meet running costs — the costs of manpower, local authority rates, power, materials, and so on. Over 20 per cent. is needed to pay the interest charges on current debts and 27 per cent. to meet new capital investment. For example, in the south-east division capital expenditure will complete the Wye transfer to protect the area against drought; there will be a replacement water treatment works at Maerdy; major improvements to water distribution systems at Gilfach Goch, Blaenavon and Brecon; supplies to new housing areas; alterations to older dams to bring them into line with new standards; sewerage and sewage disposal improvements at Caerphilly, Troedyrhiw and Llantrisant; continuation of the west Barry scheme which will improve bathing waters at Barry island and the Knap; and expenditure on the Newlands sewage treatment works which serves Gwent's eastern valleys and affects the quality of water in the Usk. Security measures and warnings will be introduced at numerous sites and radio communication and remote monitoring of installations will make the response to customers problems more effective. All this will cost £23 million.

This is perhaps an appropriate point to refer briefly to the hon. Member's call for finance to clean up beaches and improve water quality. The Government fully share the concern to ensure that the quality of water and beaches is improved. I wonder though whether the hon. Member fully appreciates what is already being done. The Welsh water authority already has clear objectives to bring about improvements, and much of its expenditure is designed to meet these objectives. For example, the west Barry scheme, to which I referred earlier, will greatly improve the beaches at Barry island and the Knap. As for the future and what more might be done, all I can say at present is that we are studying the position urgently with the water authorities.

Let me remind hon. Members of how much the picture has already changed since 1974, when the authority was first established. I fear that we take too much for granted. The authority replaced 209 separate river authorities, water undertakings and sewerage and sewage disposal authorities. It took over a mixed inheritance with a complex of assets, some in good condition and others providing a totally inadequate level of service. It also took over a considerable debt. There were some areas where water resources were so inadequate that the supply failed after but a few weeks of dry weather. It is worth remembering how the Welsh water authority was able to cope with the drought of 1984 without having to fall back to the conditions that we had in 1976—a lesser drought. I can remember that Cardiff's water supply was reduced to two hours a day.

In other areas, the mains were incapable of carrying the supply demanded. In the authority's annual report in 1982, Mr. Haydn Rees, the chairman, reported that it had been the accepted practice in west Gwynedd, in holiday periods, for water to be available only on alternate days. In most areas, records of public sewers were poor, and in coastal areas sewage was often discharged to the sea untreated. Many inland sewage treatment works had been neglected. Some appeared to be abandoned, and, in some instances where treatment tanks were full of settled sludge, there were substantial trees growing in them.

This was the difficult legacy the Welsh water authority took over and it had serious long-term implications for both capital and revenue costs. In the succeeding years, much had to be done, and since then the Welsh water authority has invested over £600 million in fixed assets. Major strides have been made, particularly in the period since the reorganisation of the water authority in 1982. Efficiency and the services provided have been enhanced.

Between 1982 and 1987, turnover increased by 46 per cent. while operating costs rose by only 25 per cent. In fact, at 1986–87 prices, operating costs fell by 4 per cent. between 1982 and 1987 and they are expected to fall by a further £1 million—1 per cent.—in 1988–89. In the same period, total expenditure rose by 22 per cent., but the differential between turnover and expenditure meant that the water authority had turned the loss of almost £8 million in 1981–82 into a surplus of £25 million in 1986–87. In the same period, the number of employees fell by 15 per cent. and capital expenditure, which between 1974 and 1979 rose by only 11 per cent. rose by 33 per cent. The water authority's rate of return on its net current cost assets has risen fivefold.

The hon. Member also raised the question of giro charges for payment by instalments. As he said, the authority did consider not using that method, but it has now reversed its original decision and decided to continue to pay giro charges this year for those who use the Post Office to pay water charges. This will be of direct benefit to lower-income consumers. That policy is not without cost to the water authority and it will keep the situation under review. No decisions either way have been made about continuing the policy after 1989.

The hon. Gentleman raised the point that the increase in the Welsh water authority's charges is above the current rate of inflation. I can assure him that neither the Secretary of State nor I have any desire to see water charges rise by more than is necessary. The water authority is very well aware of our views on this. In fact the Welsh water authority is very conscious of the need to be efficient and to cut costs while meeting statutory needs and providing the highest possible standard of service to its customers, commensurate with efficiency and proper costing. The average household is paying £2·60 a week for its water and sewerage and all the other services provided by the Welsh water authority. This, I understand, is less than the admission charge to one of Newport county's home games. The increase in charges for the average household will be 23p a week—about the cost of one pint of milk.

We are being provided with a valuable service at little cost. That is not to be complacent. The Government still believe that there is room for further cuts in operating costs and thus benefits to the consumer, but increased charges are necessary to allow the water authority to pay for the services and improvements that it demands.

It is certainly true that the Welsh water authority's charges are among the highest in England and Wales — only Anglian's exceed it—

The motion having been made after half-past Two o'clock and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at eight minutes past Three o'clock.