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Water Bills (South-West)

Volume 511: debated on Monday 14 June 2010

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

I am grateful for the opportunity to be the first to raise this issue in the new Parliament on behalf of water bill payers in Plymouth and the wider south-west. The problem we face is simple: water rates in the south-west are 25% higher than the UK average, placing an unfair burden on the budgets of my constituents and all residents across the south-west of England. This is an issue that dates back to the botched privatisation of water utility companies in the late 1980s, and it is to the shame of all parties that the problem remains unresolved after so many years, despite the constant efforts of right hon. and hon. Members from the south-west to keep the matter high on the agenda of the Minister’s Department.

I am pleased to welcome the new Minister, and I am pleased to see so many Members from other parties in their places tonight, including the hon. Member for St Ives (Andrew George), who is the new joint chair of the all-party water group, and the hon. Member for Newton Abbot (Anne Marie Morris), who is carrying on the active interest in water pricing shown by her predecessor. I hope that by the end of this debate we will have been able to put on record some of the options for consideration, including a levy proposal.

It would be remiss of me not to place on record the thanks due for the unstinting efforts and enthusiasm of my former colleague, Linda Gilroy, who not only chaired a very active all-party water group, but individually campaigned for many years on behalf of water bill payers.

I congratulate the hon. Lady on securing the debate. She is right to pay tribute to Linda Gilroy, but other former colleagues from Devon and Cornwall played their part, including the former Members for Truro, for Falmouth and Camborne and for Teignbridge. I may have forgotten others, but they all stood up for the south-west on this issue.

The hon. Gentleman is right and the valuable contributions of those former Members will be missed.

Linda Gilroy was instrumental in organising the many meetings and briefings that we had with Ministers and others, and with the all-party group she produced a very thorough paper on the pressures felt by customers and water companies—and not just South West Water—which in turn fed into Anna Walker’s considerations in her review. In 1989, the privatised utilities were given responsibility not only for the provision of water and the disposal of waste but also for the maintenance of the coastline. The Minister will be well aware that in the south-west we are blessed with some of the most beautiful coastline in the country. Our beaches, bays and coves are famed, and rightly so, but they are an expensive luxury and one that is enjoyed not only by the people of the south-west, but by people from across the country and around the world. They are a common good and to the benefit of the whole public.

South West Water deserves credit for the work it has done to clean up the beaches. It has invested more than £1.5 billion through its clean sweep programme, which has modernised sewage treatment all around the peninsula, removing almost 250 crude outfalls and transforming the bathing waters of the region.

Those improvements are not paid for by the whole public. When the water utilities were privatised, the public in each area became responsible for paying for the maintenance of the coastline in their region. For the people of the west midlands, that was not a problem because they do not have a coastline, but in the south-west we have 30% of England’s coast, and the burden of cost is placed on just 3% of the population. The Prime Minister himself acknowledged the problem when he said, while holidaying in the region:

“I understand the unfairness that people feel in the South West that they are paying a lot of money so that there are clean beaches for people like me from Oxfordshire to come and play on.”

Indeed, the number of tourists to the region continues to grow, with the latest figures showing 21 million visits, the vast majority of which are by people coming from outside the south-west.

The water industry faces many challenges in the years ahead, and none of the solutions comes without a cost. It will have to deal with pollution concerns; better manage surface water and flooding; continue to try to provide an affordable supply of water; reduce greenhouse gas emissions; and adapt the service to make it more resilient to climate change.

I pay tribute to the hon. Lady for what she is saying, all of which I endorse. When she refers to cleaning up the coastline, she is talking about a national asset being paid for by local water rate payers—a point that the Anna Walker review made clear. That is clearly not the case with national galleries or national museums, which are paid for by all taxpayers. We should all reflect on that.

Yes, indeed, and I shall return to that point.

It is welcome that all water companies are now expected to produce water resources plans for the Environment Agency and strategic direction statements for Ofwat, both of which are useful indicators to assist in the long-term planning for the sector, but also help in assessing the likely impact of such works on bill payers.

I very much support this debate. I would like to reinforce the point that although many people feel that we in the south-west live in a land of plenty—a land of flowing milk and honey—there are areas of great deprivation. For many people in our constituencies, the cost of living is high compared with the national income, and they are therefore hit particularly hard.

The hon. Lady is absolutely right, and I concur with that view. Again, however, I will deal with that issue in more depth a little later.

Bills in the south-west are 25% higher than the national average, which over the course of a year equates to £100 more, while for unmetered customers the figure is considerably higher, at almost £300. For people on low or fixed incomes, that can mean a substantial amount of their income. Indeed, for those on the lowest incomes, water bills can take 10% of their incomes. For elderly individuals living alone on a basic pension—we in the south-west have a larger-than-average older demographic— or for lone parents with young children or single people in rented accommodation, water bills present a struggle.

The Minister will know that the area covered by South West Water is large and diverse, ranging from Cornwall in the far west through to Devon, and taking in parts of Dorset and Somerset. We also have some of the poorest areas of the country. Cornwall is the only area of the country to be in receipt of EU convergence funding—previously known as objective 1 funding—and poverty remains an issue, despite big moves in the right direction over the past 13 years. The Consumer Council for Water has actively campaigned to try to influence price levels in the south-west, and has carried out further, detailed research to try to discover what the bill payers themselves feel should be done to remedy the problem.

The bill payers whom I have spoken to—I am sure that other hon. Members have had similar conversations—feel that it is unfair and indefensible to expect some of the nation’s least well-off families to shoulder the burden of the cost of a system that requires them to pay for the upkeep of beaches that are largely used by wealthier holidaymakers from outside the region who do not pay for the coastline in the south-west. A solution to that long-standing injustice must be found. Many of my constituents have already lost patience with the process. A recent letter from one elderly constituent from St Budeaux expressed utter exasperation at the lack of transparency in how the costs are apportioned.

In acknowledgement of the problem, the previous Government set up the Walker review to examine the case surrounding water charges. Anna Walker was asked, among other things, to examine the current system of charging households for water and sewerage, and to assess both the effectiveness and fairness of the current and alternative methods of charging, and the link to affordability. Anna Walker delivered her extremely thorough report last year, having toured the country and visited the south-west and Plymouth on more than one occasion. The report acknowledged for the first time what most of us knew: that the long-standing high charges in the south-west were a direct result of the privatisation in 1989.

Anna Walker also suggested that the options for tackling the root causes should include a specific one-off adjustment, estimated at around £650 million, to pay off South West Water’s debt, or annual transfers either from the Government—I suspect that this is unlikely in the current economic climate—or from other water customers around England and Wales. That would not be popular either, because Thames Water customers are financing the Thames tideway project around the city, and water shortage issues have a significant future cost in a number of other areas.

A further alternative would be to rely on a package of proposals targeting specific groups of South West Water customers, perhaps through a series of measures such as the use of a seasonal tariff charged for additional summer use. That would pick up second-home users, but also businesses. It could help some residents to achieve a saving of between £40 and £50, but it is not a popular option. It is seen as a tourist tax, and would require compulsory metering, which would also have a cost. I know that the hon. Member for St Ives (Andrew George) is concerned about second-home owners and their potential for benefiting significantly from having meters. He sees that as unfair. Indeed, in a debate on 2 June 2008, he said that metering was

“a way of rewarding people who should be paying more”.—[Official Report, 2 June 2008; Vol. 476, c. 619.]

Another option would be the wider use of affordability measures, and South West Water has been quite proactive in trying to identify and assist vulnerable customers in that regard. Such measures could be more widely applied and could deliver around £80 per annum for low-income households. That would have to be linked to water efficiency, however. It is essential to encourage that, not only for economic reasons but because water is becoming an increasingly scarce resource at certain times and in certain areas.

As a result of this debate, I have received some useful briefings from people on related matters, especially on the re-use of rain water and on building regulations. I suspect that there is a whole new debate to be had on those matters, but I want to put on record my gratitude to the businesses and organisations that have e-mailed me. This flags up just how useful these debates in an often rather empty Chamber can be—it is actually quite full tonight, so thank you to everyone who has stayed.

Low-income customers with medical conditions could benefit significantly if changes to the current WaterSure scheme, as recommended in the review, were adopted. That would result in it being capped, either at a national average or on a regional basis, whichever is the lower, and would have a redistributive effect within the region, but that in turn would mean that other South West Water customers would pay more, which would probably not have broad support. This is not a straightforward issue, which is partly why I am back here tonight, five years after I secured my first debate on the subject.

A national levy is another idea that has been put forward. That would have the effect of supporting South West Water bill payers now, but they could well find themselves having to pay for similar schemes in the future, such as additional reservoirs in the Thames Water area or elsewhere in the south of England, for example. The Consumer Council for Water’s research suggests that water bill payers would consider that option, and we local MPs certainly need to explore it with our constituents. I appreciate that many of the options would have consequences for bill payers elsewhere, but we must resolve to produce a fairer system that does not penalise low-income families merely for living on a peninsula surrounded by the sea.

I congratulate the hon. Lady on securing a debate on this topic so early in this Parliament. Does she share my concern that the modelling work to support the policy implementation of any of the options in the Walker review is not happening fast enough, and that we need to go further and faster towards reaching a solution to a problem that has bedevilled my constituency and many others for many years?

I agree, and I hope that the Minister listened to the hon. Gentleman’s genuine concern. His comment is well timed, as I was about to say that the current Government have, in the work carried out by Anna Walker and by their own officials, a basis for going forward without further delay. The previous Government had already asked Ofwat to consider the Walker report, but no Government can compel the regulator to act. Before the election, MPs asked Ofwat to consider how the Walker review could be implemented. Ofwat was clearly willing to do that work, and its position has not changed. Serendipitously, Ofwat asked for a meeting with south-west MPs today. That has usefully coincided with this debate, and, I am sure, helped to inform those hon. Members present of Ofwat’s position and of its thoughts on the subject of affordability.

Action on water charges, particularly on behalf of vulnerable customers, is long overdue. The public have seen improvements to the quality of the water around our coasts, and this has without doubt benefited other businesses, including those linked to the tourism industry, but it has come at a huge cost and left many people struggling to pay their bills. In this difficult economic climate, people are worried about such pressure on their income. Will the Minister therefore confirm that he will meet Ofwat urgently, to ask it to continue with its assessment of Walker and to give it a timetable for bringing forward its advice to the Government? South West Water bill payers will not be pleased to hear tonight that that has been pushed further back into the long grass. I hope that the Minister can be positive, especially as we were tantalisingly close to getting an announcement prior to the last election.

Does the Minister intend to publish a water White Paper and take forward both the Cave and Walker proposals? If so, when will that be and is it likely to look at the future of Ofwat and its role? Will the Minister also confirm that work is continuing to ensure the widest possible data sharing, so that people receive the help and entitlements they are due? That work was in train between a range of Departments and other organisations prior to the general election.

Will the Minister also acknowledge that there is an ongoing need for all the bodies involved in environmental improvements in water supply and removal both to inform customers on work planned and to ask their views? On affordability, may I make the following plea, which came out of today’s meeting with Ofwat? The Minister must not rely solely on the Government office for the south-west figures, which include Wessex Water and skew the figures slightly. If we drill down and look at Devon and Cornwall separately, we will see that the situation there is much more serious. I hope that the Minister will press his officials to look at the minutiae.

Finally, will the Minister confirm whether he accepts the Walker review principle that it was right for environmental improvements to be funded regionally except where there is an exceptional expenditure, as was the case in the south-west? If he does, does he not feel duty bound to right the historic wrong that the south-west has suffered?

I congratulate the hon. Member for Plymouth, Moor View (Alison Seabeck) on securing this debate on an issue about which she has shown a clear commitment during her time in the House. The hon. Member for Torbay (Mr Sanders) made the point that it has also been a very important issue for a great many former and current Members on both sides of the House. I know that the all-party group on water is well attended and is very passionate on this issue, and I certainly intend to address as many of the points the hon. Lady raised as possible in the few minutes available for my response.

The hon. Lady asked about White Papers. The new Government are very eager to introduce a White Paper on water, but we are determined to get it right. Our priority is to introduce a White Paper on the natural environment, which will involve a lot of issues that affect water—water will be fundamental to that White Paper—and then to introduce a White Paper on water, which will address many of the issues raised in the Cave and Walker reports. I can therefore assure the hon. Lady that this issue is a priority for the Government.

As I have said, I am aware that the hon. Lady and several other Members on both sides of the House have campaigned tirelessly on this issue for many years. I also understand that it is an issue that arises frequently in Adjournment debates, so I suppose I should not be too surprised that my first Adjournment debate as a new Department for Environment, Food and Rural Affairs Minister is on this topic.

I would like to say at the outset that the Government recognise that water affordability is a problem for some households, particularly in the south-west. We recognised that in our coalition statement, which pledged:

“We will examine the conclusions of the Cave and Walker Reviews and reform the water industry to ensure more efficient use of water and”—


“the protection of poorer households.”

I also want to acknowledge that there is an important distinction between water affordability for low-income households and the more general sense of unfairness felt by households in the south-west at having to pay the highest bills in the country.

I wish to reinforce the point that we have both unaffordability for households and a huge sense of a lack of fairness; both apply to the south-west.

I absolutely accept what the hon. Lady says. This year, the average bill for households in the region is almost £490, which is about £150 higher than the national average bill and—to refer to a particular point that she made—about £80 higher than Wessex Water bills, which is the next highest bill area. Affordability is very important. Although we often examine the average water prices across the country, we must also recognise that certain areas contain pockets of poverty where people may pay less in water bills, but utility bills may have a marked effect on their quality of life because they account for a high percentage of people’s net income.

Clearly, bills vary between water companies. That reflects the cost of providing water and sewerage services in an environmentally sustainable way. Ofwat, as the independent economic regulator of the water industry, ensures that bills are no higher than they need to be. The reasons for the relatively high bills—my use of “relative” is, of course, a relative use of the word—in the south-west were looked at by Anna Walker in her independent review of charging for household water and sewerage services. As has been said, she published her final report and recommendations last December, and I should like to take this opportunity to put on the record this Government’s recognition of the thorough and collaborative way in which she undertook her review.

As the hon. Lady said, the Walker report found that at the time of water privatisation, in 1989, South West Water had the lowest regulated asset base per property of any water and sewerage company. Since then, the company has invested about £2 billion, much of which has been spent on sewerage infrastructure and on improving sewerage services. That has brought sewerage standards in the area up to the same level as those elsewhere in England and Wales, and the cost has been met by local customers.

The cost per household has also been compounded by the relatively low number of households in the south-west, together with the relatively high proportion who live in rural areas. Those factors make it comparatively expensive to provide these households with water and sewerage services. Anna Walker recommended that Ofwat should advise the Government on options that could tackle the issue of high water bills in the south-west. The hon. Lady and those who attended a meeting with Ofwat representatives today will know that Ofwat is already working on that.

Some of the options suggested by Anna Walker could benefit all households in the region. In particular, a one-off or other financial adjustment funded by the Government, or an annual adjustment of bills financed by the Government or water customers nationally, could bring average household bills down by about £50 a year. Another option suggested by Anna Walker that would benefit all households in the south-west is a seasonal tariff, which would have the advantage of pricing water in a way that reflects the additional costs that tourists place on the water and sewerage system when they visit the region.

The Minister makes a good point, but when we examine the issue of affordability I want us to ensure that the WaterSure provision does help those who are particularly in need. I have looked at the detail of this and it is clear that it is not simply a matter of someone’s health need, the amount of money they have and the benefits that they are on. The way in which the system works means that it does not help those who really need that support, and I want the Government to consider that when we examine affordability.

As my hon. Friend did in her earlier intervention, she points out the important and urgent need to represent the needs of the most deprived and poorest households in the south-west. I shall discuss WaterSure in a moment and I am conscious of the amount of time available to me, but I must say that she rightly points out that when we address the urgent needs of the poorer families in the south-west we may have to examine the WaterSure provision.

Anna Walker estimated that, if water charges in the summer were four times higher than they are for the rest of the year, the average bill for all households in the region would be reduced by £60 a year. The other options identified in the review focused on providing additional support for vulnerable or low-income households, both in the south-west and elsewhere. My hon. Friend will be interested to learn that that includes a proposal to revise the national WaterSure tariff and to discount the bills of all low-income households or of low-income households with children.

Let me add that the Flood and Water Management Act 2010 enables water companies to offer social tariffs to households that struggle with their bills. However—this will be of concern to hon. Members from the south-west—the cross-subsidy under WaterSure or under social tariffs would have to be met by other customers in each company’s operating area.

As Anna Walker’s report made clear, the options are complex and, contrary to what I believed before I came to this side of the House, there certainly are no easy answers.

We have heard a lot tonight about the options, but Members in the south-west are keen to know when the Government might present an option that we can decide on for addressing the problem. Can the Minister help me with a time frame?

Certainly; the hon. Gentleman raised this earlier, and I am loth to give him a specific date, but I assure him and all Members of the House that I do not intend to be standing at the Dispatch Box in Adjournment debates in the dim and distant future because I have been unable to give a resolution, as best I can, to this matter. It is clear that I will not be able to satisfy every Member of the House or every one of the hon. Gentleman’s constituents, but I will do my best and the Government will do their best to get a speedy resolution to this.

I see the issue very much in two parts. First—this is the point I was making to my hon. Friend the Member for Newton Abbot (Anne Marie Morris)—there is an urgency. People are coming to hon. Members’ surgeries in real difficulties and there is work to be done to address their concerns. As we take Walker through the legislative process, following those options, I hope that we will be able to find other solutions on a more medium-term basis. I can only assure hon. Members on both sides of the House that I will meet them to try to resolve these matters and that I will keep them informed as best I can.

I understand that hon. Members who received the briefing from Ofwat earlier today will have heard about the merits and otherwise of the options that have been put forward. There is a fundamental question about who should pay for any new affordability measures. The options are the Government, which means the taxpayer, as the hon. Member for Plymouth, Moor View has said, and which brings difficulties at this time, or water customers, either at company-specific level or nationally. The hon. Lady will appreciate the need to reduce Government spending to tackle the budget deficit, and she will also be aware of the very strong resistance identified in the Walker review to any suggestion that water customers nationally should subsidise special measures for those in the south-west. The Government will need to take those factors into account when deciding which of the Walker recommendations to take forward.

Could not the concern that customers nationally might not want to subsidise the south-west be offset by the fairness argument, in that south-west customers might well find themselves subsidising other areas of the country in future?

The hon. Lady points to a difficulty. She has mentioned the Thames tideway. What we decide to do now to help the south-west might legitimately be raised by customers in other areas in relation to concerns about a multi-billion pound project to improve the national asset that is the capital city. That is a difficult conundrum that I have to face, but I see her point.

Let me take this opportunity to remind the House of the support that is available for low-income households both in the south-west and elsewhere in England and Wales. Under the national WaterSure tariff, the bills of qualifying households are capped at the average bill for their company’s operating area. To qualify for WaterSure, households must be metered, in receipt of means-tested benefits and either have three or more dependent children aged under 19 and living at home—I have five children, so it is possible—or have someone in the household with a medical condition that necessitates a high, essential use of water.

WaterSure ensures that vulnerable and low-income households do not have to cut back on essential use of water because of worries about the potential size of their bills. Anna Walker made several recommendations about changing WaterSure and providing greater support for low-income households, which we will consider as part of our wider examination of the Walker review. In conclusion, I assure the hon. Lady and all hon. Members from the south-west that I will carefully examine the Walker recommendations, including those on water affordability, and Ofwat’s advice on the options for addressing high water bills in the south-west.

Question put and agreed to.

House adjourned.