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Water Charges

Volume 497: debated on Monday 12 October 2009

Motion made, and Question proposed, That this House do now adjourn.—(Mark Tami.)

I am grateful for the opportunity to bring again to the Floor of the House an issue that has been of concern to residents of the south-west for a long time—indeed, since 1989, when the then Conservative Government privatised the water companies and, in my view and that of my parliamentary colleagues and most residents of the south-west, created a grave injustice, which has to this day led to the south-west paying more for its water and sewerage than any other part of the country.

I note that Labour Members are present, and that several people from the Labour Benches and from among my Liberal Democrat parliamentary colleagues wish to intervene. I also note, however, that not one Member from the Conservative party is here to debate this important issue.

The Government have been very slow in recognising the difficulties that I have mentioned. However, they have at last produced—reluctantly, perhaps, and later than they should have done—a report that allows us to try to make some progress. In asking Anna Walker to present a report on water charges, the Government have created a useful vehicle for debating not only the issue on which I want to concentrate but a lot of the other issues of water poverty and water shortage.

In her foreword, Anna Walker points out the aim of the review and three of its particular points. The third is to

“make recommendations on any action that should be taken to ensure that England and Wales have a sustainable and fair”—

I highlight the word “fair”—

“system of charging in place. This could include changes to current legislation and guidance.”

She goes on:

“Prices can vary considerably between companies (average bills range from around £280 to £500). Customers are not used to such differences in prices for essential services,”—

I underline the word “essential”—

“and, if they are in a high cost area, consider it unfair.”

The report goes on to discuss regional costs and the fact that they should be allowed to continue. However, Anna Walker highlights the question of who should pay for environmental improvements from which all customers benefit. I wish to concentrate on the part of the report about environmental works. On page 55 of the report, in paragraph 3.3.18, Anna Walker writes:

“The arguments as to whether environmental improvements should be paid for by the local water customer, the national water customer or the taxpayer are complex. The review team would welcome views on the arguments it has set out in the interim report before reaching a firm conclusion in the final report…There are real choices to be made over the standards to be met, how future environmental improvements are achieved and the period over which they should be carried out, all of which can affect the costs radically and which are particularly important if the water customer locally or nationally is expected to pay for them.”

She goes on to discuss

“much greater formal involvement of customers in decisions on what is to be spent.”

To make the matter very clear, I should say that if there had been any consultation with the customers of the south-west, they would never have agreed to the system that we have, under which they end up paying far more for their water than people anywhere else in the country.

Is my hon. Friend aware that that lack of communication continues today? My constituent George Sale and others have pointed out to me that they appear suddenly to have been given standing charges for both water and sewerage. There seems to have been no communication about those charges; they were simply added to the bills.

I do not need to comment further, as my hon. Friend has put his point firmly on the record.

Why does the south-west have such particular problems? The region has 3,429 square kilometres of environmentally sensitive countryside. Some 40 per cent. of its land receives special protection for its outstanding quality, compared with a figure of 23 per cent. for England overall. The region has 2,100 kilometres of coastline, more than any other region and 25 per cent. of England’s total coast. There are 507 kilometres of heritage coast, 59 per cent. of England’s total. The region has 144 European Community designated bathing waters, 33 per cent. of the total for England and Wales. Only some 3 per cent. of the population live in the south-west water areas, so, as we keep repeating, 3 per cent. of the population are paying to clean up 33 per cent. of the nation’s bathing waters. There are 22 designated shellfish waters, representing 21 per cent. of England’s total, and the seas off the south-west of England support half of the UK’s wildlife.

The hon. Gentleman makes a powerful case, which his party and Labour Members have been making for far too long. Has he seen the report that has been submitted to the Walker review by the socio-economic research and intelligence observatory—SERIO—of Plymouth university, which emphasises the injustice and unfairness of the situation? Has he noted from that report that approximately a quarter of the English population visited the south-west in 2008?

Indeed, and I think that the figure was 18.2 million, about 7.1 million of whom visited specifically to go to the seaside. I have a copy of that report—it is an excellent contribution and I hope that Anna Walker considers it. I congratulate the hon. Lady, who was partly responsible for bringing it about.

In the same way that we do not expect London taxpayers to fund the British Museum or the National Gallery, it would be entirely wrong that the bathing waters on the south-west coast, which are a national asset, should be entirely paid for by the local water rate payers of that area. Given that the Anna Walker inquiry has clearly indicated that there should be an option of spreading the cost nationally, does my hon. Friend agree that it should also be spread retrospectively, so that it relates to past as well as future investment?

That is a good point. The south-west has already paid for the bulk of its Clean Sweep programme, although it is still paying the interest costs. I hope that if the inquiry and the Government decided on spreading the costs fairly across the country, they would indeed be retrospective. I put that question to the Minister for the South West, and he did not rule it out. As the SERIO report states, the Environment, Food and Rural Affairs Committee said in 2009:

“The question for Defra is whether environmental improvements in certain regions, such as measures to protect bathing beaches in the south west, should be seen as a national benefit to be paid for by tax payers or as a regional infrastructure deficit”—

the point put by my hon. Friend.

People in the south-west are paying £497, which they expected to rise to £517 by 2015. Thames Water has the lowest figure, £286, and that was going to rise only to £343. A month after the Walker report came out, Ofwat leapt to the defence of water customers—just so that there is no doubt in the written record, I am being ironic. Its press release was headed: “Ofwat holds bills down for customers”. I will take it that a 6 per cent. cut in bills over the next four years is a cut, but Ofwat has not taken on the total injustice of the south-west paying more than other regions.

It is 19 years since privatisation, and those who introduced privatisation have no alternative policy, and after 12 years of the current Government, we are still debating this subject. Is not the answer to vote Liberal Democrat?

I could not disagree with that point, so elegantly made by my hon. Friend.

Ofwat has stepped in, but it has compounded the injustices. Table B of its document “Comparison between companies’ final business plan proposals and Ofwat Draft Determinations” shows that the figure for the south-west, which was proposed to be £517 in 2015, will be only £458, which is a difference of minus 11 per cent. People in other regions, such as the Hartlepool Water region, will have a difference of 14 per cent., but they pay less than those in the south-west at the moment. Thames Water customers will pay 15 per cent. less than proposed, and they pay the lowest amount at the moment. Southern and Severn Trent are down 12 per cent. That does not deal with the fundamental injustice.

I say to members of Ofwat that they might be good accountants, and they might know the cost of everything, but the one thing that they do not appear to know is the value of the resource that we have. They do not understand the social impact and corrosiveness of having a totally unjust system that allows the south-west to pay more and other areas to have their bills reduced even further. Ofwat objects to our principle because it says, “The polluter pays.” We all agree with that principle, but when it comes to sewerage, that is something that we all have to do. The elderly and the sick have to do it. Why should they have to pay more for doing it in the south-west than they do in the south-east? Why should the sick, who might have other problems, be charged excessively? The principle of “polluter pays” is fine up to a point, but this is an essential health service. Let us keep it that way, and let us have the charges fair and just. There are ways that that can be done without too much difficulty.

I begin not only by congratulating the hon. Member for Teignbridge (Richard Younger-Ross) on securing the first Adjournment debate after the summer recess but by facing up to my obligations, having contributed to the very problem that we are debating. I have holidayed in the south-west in two of the past three years with my family, and I am afraid that we have contributed either to the problem or to the tourism economy—I think both.

I genuinely congratulate the hon. Gentleman on both securing the debate and summarising the salient points pertaining to a crucial issue for his constituents and those of some of my hon. Friends, who have campaigned on this issue for years and years. It would ill become me to dwell on the iniquities of previous Governments who took through privatisation and made errors. We are trying to consider how we can resolve the situation.

The House will be aware that this is not the first debate that we have had on water charges this year. It is, in fact, the third. That is a tribute to the pressure that hon. Members are keeping up on the Government and the regulator to seek a resolution. In May, the hon. Member for East Devon (Mr. Swire) secured a debate on water charging in the south-west. In June, my hon. Friend the Member for Plymouth, Sutton (Linda Gilroy) secured a debate on water charging and metering. Of course, the hon. Member for Teignbridge was part of the delegation that I met on 16 July to discuss the interim report of the Walker review of charging for household water and sewerage services. The Members who are present this evening have been pursuing the matter with some zeal on behalf of their constituents and the south-west region, and they have met me on several occasions. I thank them for giving me the opportunity to hear their views.

This is the first debate on the matter in the House since Anna Walker published her interim report, so I very much welcome it. She did so on 29 June, and I should like to take this opportunity to put on record once again my appreciation of the excellent work that Anna and her team have done so far. They have toured the country—north and south, east and west—and returned to areas including the south-west to take views. I recognise the difficult challenges that were given to Anna Walker. The Government response to the interim report welcomed its publication and acknowledged that it had raised important questions about the fairness of current charges. It also pledged a full Government response when the final report is published.

I hope that hon. Members understand that I do not want to pre-empt or pre-define Anna Walker’s findings. I believe that it is right to wait for the final report before responding to individual recommendations or the report as a whole. Many of the interim proposals, such as how water is paid for and the affordability of bills, are linked. It makes sense to consider the final recommendations as a package rather than in isolation. Indeed, the debate introduced by my hon. Friend the Member for Plymouth, Sutton focused on how many factors are interwoven.

In addition, the interim report invited further views on several key questions. As part of that, a second workshop was held in Plymouth on 17 July, which was chaired by my hon. Friend the Member for Plymouth, Sutton. The review team is currently working up its final proposals in the light of the comments that were received there and in other roadshows.

For those reasons, I do not propose to pre-empt the Walker review’s final recommendations, although I want to try to respond in general terms to the points that the hon. Member for Teignbridge and others have made in the debate so far.

Before my hon. Friend proceeds to do that, will he agree to meet me and hon. Members who have assiduously pursued such matters soon after the report is published?

Yes, I am more than happy to give that commitment. One of the benefits of the way in which my hon. Friend and Opposition colleagues have pursued the matter is that they have tried to find solutions rather than simply to produce heat rather than light. On that basis, I am happy to meet a delegation again, led by my hon. Friend with others, so that we can examine Anna Walker’s final deliberations. I am looking forward to meeting them.

The hon. Member for Teignbridge referred to the cost of cleaning up beaches and the fact that 30 per cent. of the country’s beaches are in the south-west. I am familiar with that because, if Wales is split from the equation—Wales claims to have the highest proportion of coast per head of population in the UK—I acknowledge the hon. Gentleman’s point. When looking at the matter in terms of England, the population compared with the amount of coastline in the south-west is starkly significant. As I have made clear in previous debates, households in the south-west pay more for their water and sewerage services than those elsewhere in the country. That is an inalienable fact.

That reflects to some extent the substantial investment that South West Water has made since privatisation, including, as the hon. Gentleman said, the Clean Sweep programme. The cost to customers of that company and in that region has fallen. The Walker review has been looking carefully at how environmental improvements, which confer some national benefits, should be paid for.

Paragraph 3.3.18 of the interim report concluded, as the hon. Gentleman said, that

“the arguments as to whether environmental improvements should be paid for by the local water customer, the national water customer or the taxpayer are complex.”

I think that we would all agree with that. Where the burden falls is not simple, but very complex. The report goes on to say in paragraph 3.6.2 that

“the review team is minded to recommend that, in the long term, the net benefits are likely to be limited of moving to national or taxpayer charging for some environmental benefits”.

As I said a moment ago, I do not want to pre-empt Anna Walker’s final recommendation on the so-called “equalisation” of environmental investment, but she has identified several practical issues around equalisation in the interim report. In particular, if Anna recommends an equalisation scheme, she will need to decide what counts as an environmental improvement with a public benefit.

All environmental legislation has some public benefit. In terms of water quality, it would not just be the bathing waters directive, but a host of other environmental measures. The matter is therefore complex. For example, the cost of building the Thames tideway might need to be included. Thames Water customers face a £2 billion bill to construct that to help meet the requirements of the urban waste water treatment directive and prevent sewage discharges into the Thames. That is only one example, but it is a key one, which is in front of us now.

The final report also needs to decide whether it would be fair to equalise costs that have direct or indirect private benefits, such as local tourism, and public health benefits from clean beaches. Environmental costs also reflect the local costs incurred, for example, in treating sewage and other pollutants. If they cost more to treat in some parts of the country than in others, Anna will need to advise on whether it is fair to expect companies to subsidise those who live in high-cost areas. That is the nub of the issue. In addition, Anna will need to consider whether sharing environmental costs beyond the customer base of individual companies would risk acting as a disincentive to keep cost pressures, and hence customers’ bills, down. Those are the things that Anna must wrestle with as she comes to her final deliberations.

Is that not exactly what Ofwat has been doing in its determination? It has said to the water companies, “You can’t spend as much as you want, you’ve got to spend less.” That is why it has made such limited cuts. Of course, it has not addressed the inequalities.

Indeed—as the hon. Gentleman says, Ofwat has not addressed the inequalities, which is what Anna is wrestling with as we speak. She is trying to finalise her comments on sharing the environmental costs, meaning equalising the costs across a wider customer base beyond the region, which has not been done before. Ofwat has acted to keep bills down on this occasion, in its interim findings on the periodic review 2009 process—we await the final determination—but it has not looked at equalisation. Anna is looking at whether she can address those issues. There would also be administrative costs in setting up and operating an equalisation mechanism, which ultimately would have to be paid by water customers. Anna Walker is aware of those difficult issues and is looking closely at whether any equalisation scheme can be both fair and workable.

The interim Walker report invited views on a number of proposals on the related issue of water affordability, including capping the bills of metered households on council tax benefit in high-cost areas, and refinement to the WaterSure scheme, including capping bills at the national rather than regional average. There are pros and cons associated with all such proposals, and it is essential to ensure that Anna Walker’s final recommendations are perceived as fair by everyone—not only those in the south-west, but across the board in England and Wales. Any measures to assist customers in the south-west must be paid for either by other customers of South West Water, by water customers nationally or by taxpayers—there are no other options, unless someone is going to surprise me tonight.

I must be honest: as well as being contacted and lobbied by the extremely strong campaign from the south-west—I have regularly met hon. Members involved in that—strong concerns have been expressed by other hon. Members, particularly from the north-east of England. They have said that their constituents who do not find it easy to pay bills now would be faced with additional burdens in future if they had to subsidise costs elsewhere. The reality is that the problem is difficult to square, but that underlines the challenges that Anna Walker faces as she finalises her report. There are no easy solutions or quick fixes, and almost every different proposal for water charging creates winners and losers.

The hon. Gentleman made some observations on Ofwat’s proposals and on what its draft determinations would mean for water and sewage bills. He said that bills could fall by around £30 between 2010 and 2015 for south-west households and compared that with other bills that are already low. I understand him, but as I think he would agree, we are seeing a dampening in the draft proposals for households in the south-west. By the way, the determination on that is due in late November.

In conclusion, I recognise—as I have said repeatedly in this House and elsewhere—that the cost of water and its affordability is an issue in the south-west. I very much look forward to seeing Anna Walker’s final recommendations, including those on paying for environmental improvements, hopefully in November.

I know that my right hon. Friend the Prime Minister has pledged to meet a delegation led by my hon. Friend the Member for Plymouth, Sutton to discuss the Walker review. I am sure that other hon. Members who have attended this debate will also be there. I would, of course, be happy to have an additional meeting with the hon. Member for Teignbridge, my hon. Friend and other hon. Members with constituencies in the south-west to discuss the review’s final report once it has been published.

I understand the criticisms that have been levelled about tardiness on this issue, but the Government’s commitment to looking at it properly has now been evidenced by the bringing forward of Anna Walker’s report. I commend the work that she has done on what is not an easy task. I also commend the work that hon. Members here have done in campaigning on this issue and in bringing more light than heat to it. I look forward to the final recommendations and meeting with hon. Members who wish to advance the case of their constituents in this matter.

Question put and agreed to.

House adjourned.