The Government do not require water companies to introduce a social tariff. Water companies are best placed to take decisions on the design of social tariffs as part of their charges schemes, in consultation with their customers. Social tariffs are funded by cross-subsidy between customers, so it is vital that they take account of local circumstances and the views of local people. Most water companies will have a social tariff in place by 2015-16.
I am grateful to the Minister for that answer but I draw his attention to the fact that a cost of living crisis is affecting about 2 million households in England and Wales who are classed as living in water poverty, which means they are paying at least 3% of their household income in water bills. Will the Government think again and consider supporting Labour’s proposals to introduce a reduced social tariff to help families who are struggling to pay their water bills?
As I made absolutely clear to the hon. Gentleman in my previous answer, many water companies are now taking such action, but there are other things we can do to help people who are struggling with their water bills. The biggest thing we can do is to ensure that we bear down on charges for everybody. My right hon. Friend the Secretary of State has been clear in his expectations, Ofwat has been clear in the way it has entered into the price review period and companies are now responding. We will see, in the vast majority of cases, bills going with inflation or even perhaps, in some cases, going below inflation. That is a real improvement on the last price review period, given the opportunities companies have had with low borrowing.
Water bills have increased by almost 50% in real terms since privatisation, yet in the past financial year the regional water companies made £1.9 billion in pre-tax profits and paid out a staggering £1.8 billion to shareholders. Will the Minister explain why on Monday his Government rejected Labour’s proposed amendment to the Water Bill for a national affordability scheme with clear and standardised criteria set by the Secretary of State to replace the Government’s failed voluntary approach?
I am happy to reiterate to the hon. Gentleman what I said on Report on Monday. His proposal to fund some sort of national affordability scheme out of excess profits relies on the regulator allowing excess profits in the first place. This Government’s robust price review period will press down. Under the previous Government, when the previous spending review took place, there was a lack of guidance. It is a very different situation now.