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Surface Water and Highway Drainage Charges (Exemption) Bill

Volume 492: debated on Tuesday 12 May 2009

Motion for leave to introduce a Bill (Standing Order No. 23)

Mr. Mike Hall (Weaver Vale) (Lab): I beg to move,

That leave be given to bring in a Bill to require water companies to exempt from surface water and highway drainage charges places of worship, non-profit making sports clubs, scout groups and guide associations; and for connected purposes.

In short, the need for this Bill has been created by the water regulator, Ofwat, when it called on water companies to alter the way in which they charged for surface area and highway drainage, and by the very short-sighted actions of United Utilities, when it implemented changes to the way in which it charged non-household customers for surface water drainage—incidentally, those changes were approved by Ofwat.

On 30 September 2003, Ofwat announced the outcome of its review into how water companies charged for surface water drainage. It concluded that the fairest way to charge for surface water drainage was by charging non-household customers on the basis of the size of their estate—that is called site area charging. However, Ofwat failed to implement its own guidance in those matters and did not carry out a regulatory impact assessment on the change of policy. Astonishingly, it did no work on the impact that surface area charging would have on community voluntary groups.

What Ofwat did instead was to warn water companies that a change to surface area charging may have a negative impact on sensitive properties such as schools, hospitals and places of worship. In general, Ofwat warned water companies that they would need to take into account the scale and speed of any changes to see whether they were reasonable and acceptable to customers. United Utilities took Ofwat’s advice and brought in surface area charging, but it did not take into account the scale and speed of the changes, the impact that that would have on its customers and whether that was reasonable or acceptable.

In defence of the change, United Utilities stated that it had been required by Ofwat to bring in surface area charging. It went on to claim that the changes would be revenue neutral. On that point, United Utilities has not been able to produce figures that substantiate that claim.

It was not long before churches, community sports clubs and scout groups contacted me about media reports and contacts from their parent organisations warning that they would be required by United Utilities to pay massive increases for surface area and highway drainage. Before the change to surface area charging was introduced, such organisations had been granted significant discounts on their water bills because of their status. Their bills were based on the rateable value of their property, which was either zero or heavily discounted.

I took up these cases with United Utilities. Sadly, in several cases, it emerged that United Utilities had not been billing the organisations for water rates at all, and it then decided to issue them with water bills based on surface area charging. The bills were also backdated for seven years. That was a particularly insensitive approach by United Utilities.

I will give two examples of just how much the water bills are going up. The 1st Halton scout group in my constituency saw its water bill go up from £37.80 to £198, which equals a massive 424 per cent. increase. St. Mark’s church and the Bethesda church in the Hallwood ecumenical parish in Runcorn are billed jointly. In 2007-08, they did not pay any water rates. In 2008-09, their surface area charge went up to £181.76. That is set to rise to approximately £2,000 by 2010-11. That is a massive increase that the Hallwood ecumenical parish will not be able to afford.

For places of worship, community sports clubs, scout groups and guide associations, every extra £1 they spend on surface water drainage is £1 less that they have to spend on the valuable services they provide for their parishioners, communities and members. In the area covered by United Utilities, there are more than 2,000 faith buildings and 600 not-for-profit sports clubs. There are also 900 scout groups in the United Utilities area which are going from strength to strength. Over a three-year period, those groups will face an increase in bills of up to around £2,000 per annum. If those increases are implemented, for many groups it will mean bankruptcy.

There has been considerable criticism of the way in which the surface area charging scheme has been implemented for places of worship, community sports clubs, scouts and guides. That criticism has come from both sides of this House, and we have seen concerted effort from hon. Members, especially through the all-party scout group, to try to change the policy. Interestingly, Ofwat has now started to criticise United Utilities’ approach.

On 21 January, Ofwat issued a statement saying that United Utilities had poorly implemented the new system of surface water charges. In particular, it had failed to communicate the fairness and environmental benefits of the new system and failed to take into account the impact on the 2,000 faith buildings and 600 not-for-profit sports clubs in its area. Ofwat went on to announce that United Utilities had agreed to a one-year moratorium during which surface area charges would be frozen at 2008-09 levels for faith buildings, community sports clubs, scout groups and guide associations.

At face value, that was a much welcomed measure. However, I am very concerned that this one-year moratorium will only delay the implementation of surface area charging and will not result in a charging policy that is both acceptable and fair to those groups. The reason I am concerned is that Ofwat has made it clear that United Utilities should use the one-year moratorium to work with customers to communicate the need for the new charges and offer advice on how they can implement environmental improvements which will help them to reduce costs significantly.

Ofwat has also said that United Utilities will use the moratorium to create a new time frame for the implementation of the surface area charging scheme by spreading the remaining charge over a longer period of time to allow time for customers to take measures that will offset future costs and also benefit the environment. On that basis, at the beginning of the financial year 2010-11, places of worship, community sports clubs, scout groups and guide associations will still be faced with substantially larger bills for surface area drainage. Simply altering the implementation date is not good enough. Those organisations want to see a scheme that places them back where they were prior to the change.

Ofwat has made it clear that certain water companies have been able to bring in changes to charges that have been beneficial to the communities they serve, and it cites Severn Trent Water. Severn Trent has an exemption for community and voluntary groups from surface area charging. It is very popular with those groups, for understandable reasons, and that is why there have been no complaints to Ofwat about the charges under Severn Trent. Unfortunately, Ofwat has instructed Severn Trent that the exemption cannot continue and that it must re-visit the scheme and remove any subsidies.

Ofwat has made it clear to water companies that it will not approve any tariffs for surface area charging that involve cross-subsidies, are based on rateable values or involve exemptions. Ofwat has also instructed all water companies that their tariffs for surface area charging have to be approved by November this year. Conversely, Ofwat has not said what types of charges other than surface area charging will be acceptable. Unless something is done now, places of worship, non-profit making sports clubs, scout groups and guide associations will still be faced with the bills, which will have been delayed for only 12 months.

United Utilities and other water companies have fallen foul of the same directives from Ofwat. We have here a classic case of unintended consequences of the actions of the regulator, and only the regulator can break the deadlock and put things right. United Utilities and other water companies say that they do not have the legal scope to bring in a scheme for surface area charging that will benefit places of worship, community sports clubs and guides and scouts.

The Bill sends a very strong message to Ofwat that it must act now to break the deadlock, and must start to be part of the solution and stop being part of the problem. If action is not taken now, it will have a massive impact, with massive water bills closing down places of worship, community sports clubs, scout groups and guide associations across the county. The purpose of this Bill is to provide certainty that such a scheme is possible by bringing forward legislation that exempts places of worship, community sports clubs and guides and scouts from having to pay surface area drainage charges. I commend my Bill to the House.

Question put and agreed to.


That Mr. Mike Hall, Andrew Miller, Helen Southworth, Derek Twigg, Mr. George Howarth, Ian Stewart, Mr. Greg Pope, Mr. Neil Turner, Janet Anderson, Dr. Brian Iddon, Tom Levitt and David Heyes present the Bill.

Mr. Mike Hall accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 16 October and to be printed (Bill 94).