Water Bill

Monday 6th January 2014 Commons Chamber

Consideration of Bill, as amended in the Public Bill Committee

New Clause 1

Legislative competence for water in Wales

‘The National Assembly for Wales shall have legislative competence for water up to the geographical boundary with England.’.—(Hywel Williams.)

Brought up, and read the First time.

16:54

[Hywel Williams (Arfon) (PC)]

I beg to move, That the clause be read a Second time.

[Mr Speaker]

With this it will be convenient to discuss the following:

New clause 2—Retail exit—

‘(1) The Secretary of State may by regulations make provision about the transfer of an undertaker’s assets and liabilities associated with its non-household retail business into a separate company.

(2) Regulations under this section are to be made by statutory instrument.

(3) Regulations under subsection (1) may, in particular, make provision for any such transfer to be subject to—

(a) approval by the Secretary of State;

(b) any such safeguards as may be specified in the regulations;

(c) the transferee company holding a licence containing a retail authorisation pursuant to section 17A of the Water Industry Act 1991;

(d) the provision of any information or other such assistance from the relevant undertaker as may be required by the Secretary of State for the purposes of approving the transfer.’.

New clause 11—Duties of undertakers to furnish the Secretary of State with information: annual review—

‘(1) Section 202 of the Water Industry Act 1991 (duties to undertakers to furnish the Secretary of State with information) is amended as follows.

(2) After subsection (1A) there is inserted—

“(1B) Any company with a duty under subsections (1) and (1A) must furnish the Secretary of State and the Authority with an annual review which provides information about—

(a) their performance;

(b) the total amount of investment;

(c) their taxation structure;

(d) their corporate structure; and

(e) the total amount of dividends paid to shareholders.

(1C) Information under subsection (1B) must be provided prior to the publication of the annual statement of the Secretary of State under section 2A.”.’.

New clause 12—Oversight of charges—

‘In section 2 of the Water Industry Act 1991 (general duties with respect of the water industry), after subsection (2C) there is inserted—

“(2CA) For the purposes of subsection (2A)(a) above the Secretary of State or, as the case may be, the Authority shall have regard to the rates of charges to—

(a) household premises; and

(b) non-household premises.”.’.

New clause 14—Privatisation of water supply: review—

‘(1) Chapter 1 of this Act shall not come into force until the Secretary of State has laid before Parliament a report on the performance of the water companies since the privatisation of the arrangements for water supply came into force under the Water Act 1989, the Water Industry Act 1991 and the Water Consolidation (Consequential Provisions) Act 1991.

(2) A report under subsection (1) must in particular review—

(a) the cost of water to the consumer,

(b) the number of disconnections of water supply,

(c) the purity of the water supplied and the number and consequences of water pollution incidences attributable to the operation of the water companies,

(d) the incidences of leakages, low pressure and disruptions to water supply,

(e) the levels of investment in the water supply infrastructure by the water companies,

(f) the profits made and dividends paid to shareholders by the water companies,

(g) the levels of management remuneration of the water companies,

(h) the levels of taxation paid by the water companies, and

(i) the adherence of the water companies in their operations in the UK and internationally to the national legislation and international conventions and treaties on the protection of the environment, human rights and wages and employment conditions.’.

Government amendments 13 to 22 and 59.

Amendment 12, page 124, line 1, in clause 80, at end insert ‘(h) section [Retail exit].’.

Government new schedule 1—‘Orders under section 77: further provision.

Government amendments 23 to 28, 60, 29 to 46, 61 to 64, 47 to 50, 52, 53, 65 to 87 and 54.

[Hywel Williams]

As is often remarked, Wales is the land of mountains and valleys, and of lakes and rivers. It is therefore very appropriate that I, as a Welsh Member, speak on the Water Bill.

Water and lakes have had a central part in Welsh culture for many centuries. We witnessed astonishing discoveries some decades ago at Llyn Cerrig Bach, the lake on Ynys Môn, of metal offerings to the gods from 2,000 years ago, including some gruesome slave chains.

There is the story of Llyn y Fan Fach. The poor farm boy wins the love of the maiden of the lake. By intrigue, they marry and prosper. He strikes her inadvertently three times, and on the third blow she returns to the lake with all their worldly wealth. There are many other such stories.

Our lakes have inspired poets—too many to quote. One very short extract, which I will translate, will suffice. Gwilym Cowlyd, in his long poem to the mountains of Wales sings thus:

“Y llynnau gywyrddion llonnydd - a gysgant

Mewn gw as gawd ofynydd

A thynn heulwen ysblennydd

Ar len y dwr lun y dydd”.

That translates as: the still green lakes sleep in a waistcoat of mountain, and splendid sunlight draws on the sheet of the water the picture of the day.

Our lakes and rivers inspired Welsh artists such as Richard Wilson, who is sometimes called the father of “English”—sic—landscape painting. His two substantial paintings of Afon Dyfrdwy, the River Dee, can be seen in the National Gallery. His defining painting of Llyn-y-Cau on Cader Idris can be seen at Tate Britain.

So far, so uncontroversial. That fits into the usual Wales box—it is nothing to disturb Front Benchers on either side of the House—and is the conventional picture of our country as a place of extreme natural beauty, and of a long-lived, varied and inspiring culture, but water has also been an emotive, emblematic and defining political matter in Wales for many decades. Let no one in the Chamber doubt or underestimate the power and significance of the water issue in Wales.

I referred in Committee to the controversy and conflict in the 1950s and 1960s over the drowning of Welsh valleys to supply English conurbations against the will of the people of Wales. That was demonstrated in this very House of Commons, when all but one of Wales’s MPs voted against the removal of the people of the village of Capel Celyn and the drowning of their valley to supply the burgeoning and thirsty industrial development of Merseyside.

At the time, the developers saw that as the entirely reasonable harnessing of readily available natural resources for much needed development. They wondered what all the fuss was about. Many Welsh people saw it as straightforward expropriation, akin to the highland clearances. Chillingly, the drowning of Welsh valleys led to the first sustained campaign of bombing in Wales, which, in a further development, led tragically to the injury of an innocent schoolboy, and to the deaths of two of the bombers and the jailing of some of the key perpetrators. Some hon. Members will be familiar with the pictures taken by Geoff Charles, the photo-journalist, of the 1956 demonstration in Liverpool. The people of Capel Celyn marched through the streets of the city to the council buildings, only to find the doors barred against them. Their banners, carried through a city still bearing the many scars of aerial bombardment, said: “Your homes are safe. Save ours. Do not drown our homes.”

One of the leaders of that march in 1956 was Gwynfor Evans, the president of Plaid Cymru, who in 1966 was elected as the MP for Carmarthen. He was the first Plaid Cymru MP, a political earthquake that still reverberates today. Let no one here today doubt or underestimate the power of the water issue in Wales. To borrow RS Thomas’s line, rather than

“Worrying the carcass of an old song”,

let us look at the situation facing us today.

Dwr Cymru Welsh Water is the provider for most of Wales and for parts of England. Dee Valley Water supplies part of north-east Wales and part of the north-west of England. Severn Trent Water supplies mid-Wales and benefits from its water resources. Indeed, it has a 99-year contract with Welsh Water, dating most recently from 1984, to supply up to 360 megalitres per day of non-potable water. That contract ends in 2073.

This arrangement has its roots in the Birmingham Corporation Water Act 1892. It might appear to some as reasonable and practical at the height of municipal power at the end of the 19th century or when water was in public ownership. Indeed, it was the pattern adopted on privatisation and it continues today. To others, it is nothing less than a clear injustice, with a private sector organisation from another country benefiting from a substantial part of what should be a valuable public resource for Wales.

The water industry in Wales is different from the industry in England and in Scotland. It is run on a non-profit distributing basis. Any profits are channelled into lower prices or investment in the service. This has led to below-inflation price rises for the past three years, with a promise of similar for the future; to a sustained lowering of the gearing of the organisation in an industry where gearing is notoriously high; and to a substantial and sustained investment programme.

To get to the nub of the matter before us in new clause 1, the current arrangements are that the National Assembly for Wales has responsibility for water in Wales, save for that water which flows from mid-Wales to England. New clause 1 provides that the National Assembly for Wales shall have legislative competence for water up to the geographical boundary with England—nothing more and nothing less. It is a reasonable aspiration for any legislature to have legislative competence for important resources within its territory, and it is reasonable that the current arrangements should be changed.

[Mr Philip Hollobone (Kettering) (Con)]

I am listening to the hon. Gentleman’s speech with great interest. When the water industry was established, the boundaries were set on the basis of natural watersheds, which, unfortunately, do not coincide with the boundary between Wales and England. Would the new clause not cause unnecessary and potentially expensive administrative complexity which would benefit neither Dwr Cymru customers nor those in England?

[Hywel Williams]

I thank the hon. Gentleman for his intervention. He anticipates my next points, though he is welcome to intervene again should he still be unsatisfied.

We are not in a static, pre-privatisation and pre-devolution situation. Things have moved on, not least in respect of the current status of the NAW as a legislature following the most recent Act—I note that some hon. Members still call it a Welsh Administration, but that is another matter—and there is the prospect of further change as a result of the Silk commission’s reports. Change is central to the relationship between England and Wales, and has been so at least since the establishment of the Welsh Office in 1964. The pace picked up enormously since 1997 and 1999, with the establishment of the Welsh Assembly. The then Labour Secretary of State for Wales said famously that devolution is a “process, not an event”. That is a truism, whatever the current Labour First Minister in Cardiff might wish for as a constitutional settlement, so that it will “all just go away” and he can continue on his unambitious meander.

Plaid Cymru tabled amendments to Labour’s Government of Wales Bill in 2005-06 that would have had a similar effect to new clause 1, but the then Labour Government rejected them. They retained what, as a shorthand, I call the “London veto on Welsh water”. Their attitude was in contrast to that of the then hon. Member for Suffolk Coastal and former Environment Minister, John Selwyn Gummer, who is now in another place. In response to my right hon. Friend the Member for Dwyfor Meirionnydd (Mr Llwyd), he said:

“Under the clause, a Secretary of State, by diktat, would be able to say that a Measure that has a passing or glancing effect on some matter of importance—sufficiently important for the Assembly to feel that a Measure is needed—should be stopped because he has ‘reasonable grounds to believe’ that it would have an ‘adverse effect’. It is difficult to imagine that a Secretary of State would not be able to stop anything that he did not like. The condition of having ‘reasonable grounds’ does not help, so vague is the wording used in the following paragraphs.”

It was not just the Plaid Cymru MP who was sceptical about the Labour Government’s attitude. John Selwyn Gummer went on to say:

“I agree with the hon. Member for Meirionnydd Nant Conwy.”

That was his constituency at the time.

“Either we trust the Welsh people or we do not. It is extremely difficult for me to accept that the Welsh people have to be singled out and measures taken to ensure that, where water is concerned, they should not in any way or in any circumstances be able to do anything that might upset the plans of English Ministers.”—[Official Report, 24 January 2006; Vol. 441, c. 1359.]

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I congratulate my hon. Friend on making a powerful case for the full devolution of Welsh water resources. Is it not the case that were his new clause successful, the people of Wales would be in full control over their entire water portfolio and that those who abstain or oppose his new clause when we divide will essentially be saying that large parts of Welsh water resources should be under the control of the British state?

[Hywel Williams]

My hon. Friend makes a telling point that I shall refer to later: there is no centre ground on this matter. Either the Assembly controls Welsh resources or the Government here in London do so. It is a question of whether the Welsh people have self-determination on this matter or whether there is a veto from London. I know which option he favours—it is the same one I favour.

[Jonathan Evans (Cardiff North) (Con)]

The hon. Gentleman rightly referred to the Capel Celyn situation—I remember it from many years ago when I first entered politics—and rightly said that across the political spectrum there was universal opposition in Wales to the drowning of valleys. Today, however, he should help the House. What is the mood in Wales today? He obviously feels that this is yet another step in devolution, but there is no great appetite for it elsewhere in Wales.

[Hywel Williams]

That is an interesting point. At every turn, when further devolution is proposed, right hon. and hon. Members of all parties always say that there is no appetite for it, and they point to polls allegedly showing no appetite for further change, but subsequent polls always show that the Welsh people support further devolution. They support devolution that goes further than the Government’s proposals. They supported further devolution before and after the Government of Wales Act. The hon. Gentleman has his own opinion and I have mine, but I think I have my ear closer to the ground of Welsh people’s opinion.

[Jonathan Edwards]

The hon. Member for Cardiff North (Jonathan Evans) might have noticed over the summer that the Silk commission undertook the most detailed study of devolutionary attitudes in Wales since the Senedd was created in 1999, and it clearly indicated overwhelming support for the people of Wales getting control over their natural resources, be that wind, water, shale gas or whatever. The people of Wales want those resources in the ownership of the Welsh people, and the guardian of the Welsh people is our own sovereign Parliament in Cardiff.

[Hywel Williams]

I am grateful to my hon. Friend for that further point, however disappointed we both might be with the guardianship of the current Government in Cardiff.

Eight years after the Government of Wales Act, circumstances on the ground are much more pressing. For example—a small example, perhaps—the fracking industry, if it proceeds, will be a heavy user of water, and as the Minister of State, Department for Business, Innovation and Skills, the right hon. Member for Sevenoaks (Michael Fallon), has confirmed:

“Water sourced from local water companies for projects in England could potentially originate from Wales.”—[Official Report, 18 December 2013; Vol. 572, c. 640W.]

At the very least, there is the threat of history repeating itself—of industrial development and growth in wealth in England being based on resources from Wales, of the benefits to Wales being limited and of the legislative control of the Welsh Government being limited to part of the country only and being subject to a London veto. I believe that that is insupportable. It would be seen by many as Capel Celyn and Tryweryn once again.

[Bob Stewart (Beckenham) (Con)]

Does the hon. Gentleman’s new clause imply that the Welsh Assembly could stop water coming into England if it wished to do so?

[Hywel Williams]

The hon. Gentleman anticipates my next point: it is a matter for the Welsh Government to decide what they would do; they have the right to decide for themselves. What I am against is this place’s veto and this place telling the Welsh Government what they would or should do. I think that in a reasonable world—and I think the Welsh Government are very reasonable people—they would be highly unlikely to turn the off taps, but they might be able to reverse what I described earlier as a patent injustice. What might the Welsh Government do with legislative competence up to the border? That is a matter for them.

This Water Bill introduces competition into water provision. Water companies in Wales are wholly or mainly exempt, but that still leaves open to competition a huge area of Wales owned by Severn Trent, which is expressly against the wishes of the Welsh Government—at least for that part of Wales for which they have the power to decide.

[Mr Hollobone]

I am following the hon. Gentleman’s speech with genuine interest. If water is abstracted from the area within Dwr Cymru’s competence and Dwr Cymru receives proceeds from that abstraction, could that money be used to keep water bills down for the vast majority of Welsh Water customers?

[Hywel Williams]

I thank the hon. Gentleman for his intervention. As I said, the agreement with Severn Trent predates privatisation, and the amount of money that changes hands is, I think, nominal. I have to confess that I do not know precisely how much it is, but my hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards) has referred in the past to a very small amount of money changing hands, which has only a marginal effect on what Welsh Water is able to achieve. I would also point out that what it achieves by being a not-for-distributive-profits organisation is enormously greater than any money it might get from Severn Trent.

[Mr Hollobone]

The hon. Gentleman mentioned fracking, which could well be a growth business in Wales as in England. From what he says, it seems to me that any water abstracted from Dwr Cymru’s area could mean a negotiation between Dwr Cymru and the users of that water. If it wanted to do so, Dwr Cymru could charge quite a high price for what is a very valuable resource.

[Hywel Williams]

The hon. Gentleman makes a fine point. That would be the case if, say, Northumbrian Water sells to Yorkshire Water: there are different prices in different parts of the country, depending on the economics of the transport of water. The moot point about water is that it is in some ways a transport business rather than a water supply business, because water is extremely heavy and difficult to move about. It would be a matter of negotiation. As I pointed out, however, Welsh Water does not have control of some of the more significant water resources in Wales—the water sources in mid-Wales. Incidentally, I do not want to stray from the water industry, Madam Deputy Speaker, but fracking might take place in south Wales and possibly not in north-west Wales—the part I represent. Someone has to say that, I suppose—start at home.

Ofwat addressed the matter of realigning legislative competence in its evidence to the Silk commission. People who frighten the horses over the costs would do well to listen to what Ofwat had to say about the “potential impacts” of moving away from the “wholly or mainly” boundary—that is, the current situation. It said:

“During our evidence session I was asked about any possible impacts of moving away from the current policy boundary definition. We believe that there are likely to be some administrative costs to companies (and customers) from such a change and that there could be some incidence effects on customer bills (which could be positive or negative for different customers).”

In other words, it will impact differently, but Ofwat says:

“Generally we would expect both of these to be relatively minor.”

I do not think that there is a reason to be particularly frightened of any costs that might be involved.

17:14

More significantly, perhaps, I point out to those on the Opposition Front Bench that the Labour party’s stance on the matter is clear. In their submission to the Commission on Devolution in Wales, the Labour Welsh Government stated that they wanted the National Assembly to have full legislative control over water up to the geographical boundary with England. They also stated that they wanted to remove the London Government’s power to intervene in Welsh affairs in relation to water, which I referred to earlier as the London veto. Interestingly, that is a complete volte-face from the stance taken by the Labour Secretary of State for Wales in 2006, who was insistent on the veto.

In its evidence to the Silk commission, Labour said that

“the Assembly’s legislative competence should henceforth extend up to the geographical boundary with England”

and, on page 9, that competence should be

“extended to the geographical boundary with England in line with the legislative competence for other acts of the Assembly.”

Labour also said:

“We also propose removal of the existing Secretary of State unilateral intervention power in the case of functions relating to water”—

that is, the veto. It went on to say:

“There is an important interdependency between Wales and England in terms of water resource management, water supply and water quality. We consider that any concerns about potential adverse impact in England in relation to these matters would be more appropriately addressed through inter-governmental mechanisms that set out the basis for co-operation and joint working between the respective Governments.”

That is the Labour party’s stance.

[Jonathan Edwards]

Considering the clear position of the Labour Welsh Government, does my hon. Friend share my surprise that there is not a single Labour MP based in Wales in the Chamber today to defend that position?

[Hywel Williams]

Alas, I am not surprised at all by the complete lack of Labour MPs from Wales in the Chamber. They might still be celebrating, who knows?

In conclusion, if the coalition Government are unwise and refuse to accept the new clause and we are forced to press it to a Division, I expect the main Opposition party, which is also the Government party in Wales, to join us in the Lobby. After all, this is not just a Welsh test for the coalition Government. It is also a test for the Opposition in this place and for their friends in Wales of their consistency and commitment to the people of Wales. Are they serious about devolving power to Cardiff, or is this to be a case of echoing St Augustine: “Make me pure, but not yet”?

[Miss Anne McIntosh (Thirsk and Malton) (Con)]

It is a pleasure to follow the hon. Member for Arfon (Hywel Williams), who moved his amendment so eloquently.

I want to speak in support of two little amendments that have been grouped under the heading “Regime of the water industry”. New clause 2 and amendment 12 have been tabled in my name and those of a number of colleagues on the Select Committee on Environment, Food and Rural Affairs. We followed the proceedings in the Public Bill Committee with great interest, but chose to bide our time until the remaining stages before we entered into the legislative process, having done what I thought was a welcome piece of work in the pre-legislative scrutiny of the draft Bill.

New clause 2 specifically considers the possibility of allowing a retail exit. It would empower the Secretary of State to make provision by regulation for the transfer of an undertaker’s assets and liabilities associated with its non-household retail business into a separate company. Regulations would be made in the normal way by statutory instrument and would make provision for any transfer to be subject to the approval of the Secretary of State and such safeguards as may be specified in the regulations. Amendment 12 would amend clause 80 by inserting the relevant section on retail exit.

We considered retail exit during the pre-legislative scrutiny. Inevitably, a number of companies may not necessarily fail but will regrettably have insufficient customers to allow them to stay in the market. New clause 2 and amendment 12 would simply recognise that impact and allow companies to function in what would be considered a normal competitive market. An exit clause such as we propose would facilitate new entrants, particularly larger ones, into the water and sewerage retail markets.

We recommended in our report during the pre-legislative scrutiny that the Bill should include such provisions to enable incumbent companies to exit the retail market voluntarily. It would be helpful to hear from the Minister whether he is minded to accept new clause 2 and amendment 12. During our inquiry, both regulators—Ofwat, which covers England and Wales, and the Water Industry Commission for Scotland—said that incumbent companies and, indeed, new entrants were united in calling for the Bill to include an exit route.

During the Public Bill Committee, Opposition Members proposed a new clause to allow incumbent companies to choose whether to provide to the retail or wholesale market only, subject to approval by the Secretary of State. Regrettably, the Opposition’s new clause was defeated in a vote. New clause 2 would have a different effect from the new clause proposed by the Opposition in Committee, as it would specifically enable companies to exit the retail market by transferring their retail contracts and liabilities—that is, their retail business—to a third party where they chose to do so. That would open up the market to new entrants who hold a retail authorisation, by allowing them to acquire whole retail businesses, rather than acquiring one contract at a time. That would allow economies of scale.

[Alison Seabeck (Plymouth, Moor View) (Lab)]

The hon. Lady is without doubt an expert in these matters, given her role on the Select Committee as well as the all-party group. On the basis of the work done by her Committee, will she give the House a sense of the amount of interest in entering the market and the number of people involved?

[Miss McIntosh]

I am grateful to the hon. Lady for her good services to the all-party group, where we serve as fellow officers. We hear of many entrants, but obviously, until the law is in place, it is difficult to put a number on that. I am sure that my hon. Friend the Minister will have heard and can perhaps comment, as he is closer to the issue.

We suggest that if existing companies are unable to compete with new entrants who want to come in for very good reasons and lose customers as a result, it makes sense to allow an exit strategy. I personally feel that we heard no compelling evidence during the pre-legislative scrutiny of the draft Bill and during our consideration of the water White Paper to suggest that the reform should not include a retail exit strategy. That is why we feel honour bound to come forward for the sake of the Bill’s completeness.

New clause 2 would give all undertakers the power but not the obligation to transfer their non-household retail business to a different company. It would give the Secretary of State the power to make any such transfer subject to approval and any necessary safeguards to ensure an orderly exit from the market. I hope that the House will be able to support the proposals because much of the Bill is silent on these matters and we want to use the new clause and amendment to give it more teeth.

There are several arguments in favour of allowing such a retail exit. For example, an exit clause is needed to allow the market to function normally and competitively. Additionally, a company should be able to organise its business in the way it considers best in the interests of its customers and shareholders. An exit clause would facilitate new entrants, especially larger ones, into the water and sewerage retail market because they would not need to win one contract at a time. Without new clause 2, I understand that economies of scale would work against new entrants and either prevent them from entering the market or, at the very least, reduce the benefits that they could provide to new customers due to higher costs of entry. I hope that my hon. Friend the Minister agrees that the proposal is helpful and that he will be minded to accept it. It would not be in the interest of companies or their customers to force companies to stay in a market in which they have few or no customers.

The general thrust of the new clause goes to the heart of this group of amendments dealing with the regime of the water industry. We should learn from what has happened in Scotland. I understand that DEFRA has stated that it intends to create a market in which access is regulated—in other words, with the rules of entry clearly set out and adhered to by all market participants. The reverse side of the coin is that if the rules of entry are to be set out, the House would, I am sure, want rules of orderly exit to be set out. I am not saying that exit would happen in many cases, but it is important that such rules are on the statute book.

Following our pre-legislative scrutiny, we said that as much detail as possible should be set out in the Bill so that the House could consider it. It is wrong—I part company from my hon. Friend the Minister in this respect —to leave too much to regulations, given that many of us with a great interest in this subject will not be selected to serve on the Delegated Legislation Committees that consider them. As the Bill does not provide for retail exit, the strategy is too open. It could be argued that the Government’s approach is based on the premise that parties in the retail market should be left to negotiate among themselves about matters such as service and price, but that could be set out in the Bill.

Considerations of price, service levels and the ability to respond to difficulties go to the heart of why it is important to have a competitive market in England, as has been achieved in Scotland. There must be a way of policing a situation in which incumbents are simply slow in responding to requests for information or services from new entrants. It is important not only to facilitate the path for new entrants, but to allow for an exit strategy and to bring about a competitive market. The Bill is completing its remaining stages in the House today, but little is known about upstream competition. The Government are asking that we take an awful lot on trust, but it would be better if the Bill provided for a definite exit strategy, which is why I commend new clause 2 and amendment 12 to the House.

[John McDonnell (Hayes and Harlington) (Lab)]

I am pleased to follow the hon. Member for Thirsk and Malton (Miss McIntosh). I see in the national press that she has had a little local difficulty. I hope that she can resolve the matter, because she would be a loss to the House if she were not returned at the next election—unless of course she were replaced by a Labour Member.

I want to speak to new clause 14, which is in my name. It suggests to the House that before we move forward with further legislation, we stand back and look objectively at the performance of the water supply industry since 1989 when it was privatised. I am not part of this common agreement among some parties in the House that privatisation and competition have been a success and are the way forward. In fact, I deeply regret what has happened since privatisation.

17:29

I have set out the suggestion that before we go further, the Government should produce a report that examines some of the key issues affecting the water supply industry and the consumer. I am talking here about the cost of water to the consumer, the number of disconnections that took place during privatisation—although that is no longer allowed under the Ofwat regulations—the purity of water supplies, the leakages, the levels of investment, the profits and the dividends paid to shareholders, management remuneration, the levels of taxation, particularly taxation avoidance, by the water companies and also their adherence to employment, human rights and environmental practices across the world. I say that because the water industry is second only to the energy industry in ripping off the British public. Since privatisation, the water companies have stolen from the average consumer of water in this country. The Government need to expose that in a comprehensive assessment, which this House can debate, before we consider the future structure of the water industry.

Let me go through some statistics showing what has happened since privatisation. Since 1989, real water bills have risen 50%. Since 2005, there has been a 35% nominal increase and a 7% real increase in bills. Since 2010, bills have gone up by more than 12.5%. At the same time, individual family incomes have gone down by 5%. It is interesting to see where the money has gone. Most of it has gone into paying interest charges on water company debts or dividends to their owners and shareholders. Interestingly, most of those owners and shareholders are now overseas.

The performance of the companies has not really matched the rise in payments. I looked at, for example, the issue of leakages. A great deal has been said about the investment in the infrastructure of the water industry since privatisation. I represent a constituency that is served by Thames Water, which continues to lose up to a third of its water in leakages every year. The right hon. Member for Bermondsey and Old Southwark (Simon Hughes) wrote an article in the Evening Standard, which excoriated Thames Water for its failure to invest in tackling that particular problem. Not only do the companies fail to tackle the leakages, but they are some of the worst polluters of our rivers. I asked the House of Commons Library to provide some recent information on the companies. South West Water was fined £50,000 plus costs for sewage discharge into Salcombe bay in November 2013. It was fined a further £50,000 for sewage discharge into the Tamar estuary. Thames Water lost a final appeal against pollution fines in 2011, and the estimated final cost of those fines was £400,000.

[Richard Benyon (Newbury) (Con)]

The hon. Gentleman has been a consistent if sometimes lonely voice on this issue for a great many years. It is not for me or for anybody to defend individual water companies, but does he not concede that companies such as South West Water have spent an enormous amount of money cleaning up our beaches and rivers? Has he measured the trajectory of investment that was happening before privatisation and compared it with the £100 billion plus that has been spent since privatisation on improving our water sector and making it more environmentally-friendly and on keeping costs down for customers?

[John McDonnell]

I have heard the argument about infrastructure investment doubling since privatisation, but what is significant—

[Alison Seabeck]

Let me pursue the point about South West Water. There is no doubt that it has made dramatic inroads into the problems around the coasts, but there is an issue with the privatisation in the first place. The customer base was far too small to sustain the work that needed to be done around those coasts. As a result, bill payers in the south west—here I disagree with the hon. Member for Newbury (Richard Benyon)—are paying an extraordinarily high amount for their water.

[John McDonnell]

I agree that significant investment has been made in the infrastructure, but the problem is that since the 1990s that has declined as a proportion of the overall turnover of the industry. So the record is not glowing by any means, and the cost of that investment has been paid through significant debt burdens on those companies, which is eventually then paid for by consumers

[Hywel Williams]

I am sure the hon. Gentleman would agree that the level of investment would be even higher if all the profits were devoted to investment in the infrastructure, rather than being siphoned off abroad.

[John McDonnell]

That is one reason why I support the Welsh model of a not-for-profit company, because, as I say, I feel that the general public have been ripped off throughout this period.

Let me just finish off with my last couple of examples, because I would not want to miss them out: United Utilities was fined £75,000 for management failures that contributed to a fire in October 2013; and Severn Trent Water received a £30,000 fine for sewage pollution in September last year. The performance record of these companies is that not only do they not tackle the leakages and the real need for infrastructure investment, but they are polluting the very water they are supposed to be protecting and supplying.

[Joan Walley (Stoke-on-Trent North) (Lab)]

My hon. Friend mentioned Severn Trent Water. Given the pollution incidents involving water companies, does he agree that there is an urgent need to examine the court costs and fines imposed on water companies? Does he also agree that there is a real danger that some companies might prefer to go ahead, pollute and accept a fine because that approach is nowhere near as expensive as making the investment in the first place?

[John McDonnell]

The drive for profits is making these companies ignore their duty towards the wider environment, and the fines and costs are relatively marginal in comparison with the profits they make.

[Richard Benyon]

I promise not to intervene again, but I cannot resist doing so now. Does the hon. Gentleman’s research go back prior to the privatisation of the water sector? In those years, were there any cases of pollution, of leakage or of poor infrastructure? The Minister will know that there were, because there were some appalling cases, one of which was in his constituency, and that the £100 billion we managed to gear into this sector has dramatically improved things. I entirely agree with the hon. Gentleman that there is much more work to be done, and we cannot have a system where the water industry sits outside—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. Interventions are supposed to be brief. If the hon. Gentleman wants to make a defence of the water industry, he can stand up to make a speech—he may not do so in an intervention.

[John McDonnell]

Former Ministers need an element of retraining, so may I say to the hon. Gentleman that he can intervene on me as often as wants, but perhaps he could be a bit briefer?

The issue is this: we are not talking about advocating a return to the previous model of nationalisation here; we are talking about the long-term future of the water industry, which is why this debate is important. My view is that privatisation and competition has not worked, but there are other models that we should explore. The Welsh model of a not-for-profit organisation ploughing the money that comes back into the infrastructure and into quality of service is the one we should now be exploring.

[Hywel Williams]

Does the hon. Gentleman agree that this can be clearly seen in Welsh Water’s response to the cryptosporidium outbreak in my constituency some years ago, when it managed to spend £1 million almost immediately on installing new mechanisms to get rid of the cryptosporidium and then spent £7 million on further treatment works? It responded appropriately and quickly to the outbreak.

[John McDonnell]

Competition and privatisation have not worked, which is why I do not think that the Bill, the main thrust of which is to introduce more competition and privatisation, represents the way forward. It provides further opportunities for exploitation. I think that we can all agree to condemn the level of profiteering that has taken pace, particularly in recent years.

I wish to put on the record what has been happening, as independent examinations have shown. Sir Ian Byatt, Britain’s top water regulator throughout the 1990s, wrote in the foreword to a report by the think-tank CentreForum that

“many companies, especially the private equity infrastructure funds, have paid out excessive dividends to their owners.”

He went on to argue for some form of dividend control. That was echoed by Jonson Cox, Ofwat’s chairman, who has called for water companies to share unintended gains with consumers, arguing that the profits and tax- reducing corporate structures were “morally questionable”. I can understand why.

Let me give some examples of the profiteering that has gone on. Northumbrian Water is owned by Cheung Kong Infrastructure Holdings, which is based in Hong Kong. Last year its operating profits were £154 million, but it paid nothing in tax. Its debt was £4 billion. Its chief executive, Heidi Mottram, received a salary, bonus and benefits worth £595,000. Yorkshire Water is owned by Citi, a US company, GIC, which is based in Singapore, Infracapital Partners and HSBC, based in the UK. Last year its operating profit was £335 million, but it paid only £100,000 in tax. Its debt was £4.7 billion. Its chief executive, Richard Flint, received a salary, bonus and benefits worth £800,000.

Anglian Water is owned by Canadian Pension Plan, Colonial First State Global Asset Management and Industry Funds Management, which is based in Australia, and 3i, which is based in the UK. Last year its operating profit was £363 million, but it paid only £1 million in tax. Its debt was £6.9 billion. Its chief executive, Peter Simpson, received a salary, bonus and benefits worth £1,024,000. Thames Water is owned by Macquaire Group, which is based in Australia, China Investment Corporation and Abu Dhabi Investment Authority. Last year its operating profit was £577 million, but it paid minus £70 million in tax, because it is receiving grants from the Government, as the right hon. Member for Bermondsey and Old Southwark (Simon Hughes) pointed out at the time in his article in the Standard on behalf of the Liberal Democrats. Its debt was £9 billion. Its chief executive, Martin Baggs, received a salary, bonus and benefits worth £845,000.

South Staffs Water is owned by Alinda Capital Partners, which is based in the US. Last year its operating profit was £16 million, but it paid only £200,000 in tax. Its debt was £488 million. Its chief executive, Elizabeth Swarbrick, received a salary, bonus and benefits worth £202,000. Sutton and East Surrey Water is owned by Sumitomo Corporation, based in Japan. Last year its operating profit was £17 million, but it paid only £1 million in tax. Its debt was £219 million. Its chief executive, Anthony Ferrar, received a salary, bonus and benefits worth £290,000. Those are obscene levels of profiteering at the expense of the consumer.

Why is the borrowing level so high? It is not because it is all going into infrastructure. It has now been exposed that some of the borrowing is being used to pay dividends to shareholders and high salaries to chief executives and board directors. That was not the intention of the Thatcher Government’s original privatisation—well, it was not the stated intention. Privatisation was meant to reduce prices, increase investment and make the industry more accountable to the wider public through shareholding. That has not been the case. It is not more accountable through shareholding, because most of the companies that now own British water are owned by overseas shareholders. It does not make it any more efficient for the consumer, because prices have gone through the roof in recent years, which people are angry about. It does not make it more accountable to the taxpayer. In fact, the taxpayer is being bled dry as a result of tax avoidance and the various scams that have been going on, which have been explored by Richard Murphy, the tax justice expert.

Corporate Watch has produced an excellent report on some of those issues. It reports that six UK water companies took high-interest loans from their owners through the Channel Islands and then converted them into euro bonds. They then lent them back to the companies and paid virtually no tax on them whatsoever. This is a tax scam for which these water companies are used as a vehicle. Corporate Watch found that the six companies it looked at—Northumbrian, Yorkshire, Anglian, Thames, South Staffs, and Sutton and East Surrey—had borrowed £3.4 billion using this method. It highlights Northumbrian Water as “the most brazen case” as it paid 11% on just over £1 billion of loans it had taken from its owner, the Cheung Kong group, a Hong Kong-based conglomerate run by the world’s ninth-richest person. No wonder he is the world’s ninth-richest person—we are making him so. This is a scandal. The Bill does not go any way near addressing this rip-off of the British consumer or tackling some of the tax evasion and tax avoidance by these companies that has gone on. People are angry about this. In recent reports in the media there has been exposure after exposure, and people expect this House to act on these matters.

17:45

Before we go any further with this Bill, we should consider in detail the record since privatisation on all these matters—cost, performance, and implications for our taxation system—and then come to a considered view about whether privatisation has worked and whether there are alternatives. Minor reforms will not satisfy people when their next water bills come through the door; they will be extremely angry. I urge that we look sensibly at the not-for-profit model that is operating in Wales, because on that basis people can at least be confident about what they pay in and that what is given to these companies through tax subsidies as a result of their long-term investment plans is poured back into the supply of decent and pure water at a reasonable cost. That is why I tabled my new clause.

It may well be that, as the hon. Member for Newbury (Richard Benyon) said, I am a lone voice in this House—with a number of others; my hon. Friend the Member for Luton North (Kelvin Hopkins) is here and has shared similar concerns—but I do not believe that I am a lone voice in the wider community. People are fed up with being ripped off by energy companies, water companies and others, and fed up with being exploited as a result of privatisation.

[Thomas Docherty (Dunfermline and West Fife) (Lab)]

May I take this opportunity, Madam Deputy Speaker, to wish you and all hon. Members a happy new year? I hope that all hon. Members have had a peaceful and enjoyable break and have returned refreshed and looking forward to this busy year.

Unfortunately, the festive period was not a happy experience for many households up and down the country. Many hon. Members spent a great deal of their recess dealing with the impacts of the recent weather events on their constituents. It is therefore appropriate that later we will discuss a series of amendments on the clauses that will help to provide support to many of those affected households. I look forward to having that debate in more detail, but for the moment I want to focus on the new clauses in the first group of amendments.

Last year, in his now infamous letter to water companies, the Secretary of State trumpeted water privatisation as

“one of the greatest success stories of privatisation.”

If one measures success by the payouts made to investors, it is without doubt a great success story. Let me echo the thoughtful remarks by my hon. Friend the Member for Hayes and Harlington (John McDonnell) and pick out a few examples of the dividends paid out since 1989. Severn Trent Water has paid out £6.2 billion in dividends, Thames Water has paid out £6.3 billion, the north-west’s United Utilities has paid out £7.3 billion, and Anglian Water investors have recouped some £6 billion. Overall, a staggering £40 billion has flowed into the pockets of investors. It is fair to say that many customers would not share the Secretary of State’s appreciation for his wonderful friends the chaps running the water companies.

Indeed, their view is shared by many of the coalition’s own MPs. I am disappointed that the hon. Member for Skipton and Ripon (Julian Smith) is not present. In last year’s excellent debate on the water industry he said that

“Yorkshire Water…is exploiting my constituents and people across Yorkshire.”—[Official Report, 5 November 2013; Vol. 570, c. 213.]

I do not know whether the Chair of the Environment, Food and Rural Affairs Committee shares that view of Yorkshire Water.

[Miss McIntosh]

Any company that is prepared to invest £1 million in improving the provision of water to Filey has to be congratulated, so I congratulate Yorkshire Water on that. Does the hon. Gentleman agree that this Government’s arrangements leave Yorkshire Water and other companies free to raise money on the markets in a way that otherwise would not be possible?

[Thomas Docherty]

I do not want to get sidetracked by a debate about the merits of privatisation—I think you would pull me back in line if I did so, Madam Deputy Speaker—but I will just point out to the hon. Lady that Scottish Water, which is owned by the state, has invested more per connected property, I think, than any of the English water companies, with the exception of South West Water, so I am not entirely convinced by her argument.

To go back to the comments made by the hon. Member for Skipton and Ripon, despite paying out hundreds of millions of pounds to investors, Yorkshire Water has paid next to nothing in corporation tax over the past few years. I am not singling out Yorkshire Water in particular—it is clear that its behaviour is no better or worse than that of any of its competitors. The problem lies with the culture of water companies themselves. They have behaved in an unacceptable manner towards their customers for too many years. It is clear that they have come to regard customers as nothing more than cash cows, and many have paid little or no attention to customer complaints. That is why we believe it is in the interests of hard-pressed customers that the industry be subjected to greater scrutiny.

New clause 11 in particular shines a light on the opaque world of the companies’ financial and business practices. This is not an unreasonable or overly bureaucratic requirement. For many years, water companies voluntarily produced reports such as those that the new clause would require of them; yet, strangely, in recent years they seem to have got out of the habit of providing that information to customers, the regulator and the Department.

It is also worth noting, before the Minister replies, that Ofwat’s Scottish counterpart, the Water Industry Commission for Scotland, requires Scottish Water to produce the relevant information on an annual basis. Therefore, we believe that this is not an onerous or bureaucratic requirement.

New clause 12 would require Ofwat to pay far more attention to the problem of affordability of bills. I am conscious that we will have a wider debate about affordability when we discuss the second group of amendments, but Ofwat’s current interpretation of its role as an economic regulator is far too narrow. Both household and business customers feel that they are an afterthought, and the new clause makes it clear that Ofwat must have due regard to the cost of bills when setting the prices in future review periods. Labour believes that during a time of unprecedented squeezes on household budgets, much more must be done to help hard-pressed customers. Our two new clauses are important measures that would ensure that water companies served their customers’ interests, not the other way around.

We will, unsurprisingly, support the Select Committee’s new clause 2 on retail exit if it is pressed to a vote. We welcome the fact that the hon. Member for Brecon and Radnorshire (Roger Williams) appears to have had a change of heart over the festive break. During the Bill’s Committee stage he did not vote in favour of Labour’s proposal, but we very much welcome his change of heart. If we do not get an opportunity to discuss the proposal today, we hope that the other place will note that even members of the Bill Committee have signalled that they believe, on reflection, that it is a sensible and worthwhile measure. I will not repeat the discussion we had in Committee, but I think it is fair to say that, based on the signatories to the new clause, the proposal has cross-party support, which we welcome.

We will also support the Government’s amendments. I am slightly surprised that they felt the need to table a series of amendments, but not as surprised, I suspect, as the Minister when he was informed by his civil servants. The Minister has told us many times that he is lucky enough to be half Welsh, so one would have thought that he would have noticed the impact on Wales of the new clauses tabled by the Government in Committee. I hope he will explain how that slightly embarrassing oversight occurred.

We hope we will have an opportunity later this evening to press our new clauses to a Division. We welcome the spirit in which this first part of the debate has been conducted and I do not wish to detain the House any further at this point.

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dan Rogerson)]

I start by echoing the remarks of the Opposition spokesman, the hon. Member for Dunfermline and West Fife (Thomas Docherty), with regard to the earlier statement made by my right hon. Friend the Secretary of State. Our thoughts are with those who have been affected by the storms and flooding over the Christmas and new year period, and I pay tribute to all those who have worked incredibly hard, including the Environment Agency, local authorities, the emergency services and, of course, those volunteers and community representatives who have supported their neighbourhoods and neighbours.

This discussion has covered a number of new clauses and amendments in relation to the regulation of water and sewerage undertakers and licensees, particularly those provisions designed to extend competition in the sector. The new clause tabled by the hon. Member for Arfon (Hywel Williams) would alter the devolution settlement by devolving further powers to the National Assembly, and he has set out his appetite for doing so. Generally, the Government of Wales Act 2006 devolves its issues down the national border, but the situation is not so straightforward for water supply. Water catchment areas and water supply management infrastructure cross the national boundary. The appointment and regulation of any incumbent water company whose area is not wholly or mainly in Wales is not devolved. That means that the legislative competence of the Assembly does not cover the parts of Severn Trent Water’s area in Wales.

[Jonathan Edwards]

Would the Minister be so kind as to inform the House of the situation in terms of the geographical boundaries of the water system in Northern Ireland? Is it based on the water table, as is the case in Wales, or on the actual state border with the Republic?

[Dan Rogerson]

The hon. Gentleman sets out his aspirations quite clearly by viewing the boundary between Wales and England in the same way as the sovereign state boundary between the Republic of Ireland and Northern Ireland, but I am addressing my remarks to the devolution settlement within the United Kingdom.

[Roger Williams (Brecon and Radnorshire) (LD)]

The Minister is well aware of the new clause’s implications for devolution. Does he agree that such a fundamental change would be better considered as part of devolution legislation, not as a new clause in a Bill on another matter?

[Dan Rogerson]

I thank my hon. Friend for his helpful intervention. He has somewhat pre-empted the remarks I was about to make, but I am happy that we speak as one on this issue.

Licensing of water suppliers is also not devolved. I recognise the deep, historical reverberations in Wales—we heard about them in the heartfelt speech by the hon. Member for Arfon—about the management of water, which is an essential natural resource. Much of the responsibility for water is, I am pleased to say, now devolved. However, further changes to the current devolution arrangements would have implications for customers and household bills on both sides of the border. They would also affect the companies, their assets and their operating rules, and possibly the people who work for them. Therefore, changes should not be undertaken without very serious consideration of all the implications.

The UK Government position is that we will not make changes to the devolution settlement in advance of the review and report by the Commission on Devolution in Wales—the Silk commission—which, as hon. Members will know, is led by Mr Paul Silk. The commission is currently working on part II of its remit and is expected to report in the spring. It is reviewing the powers of the National Assembly for Wales in the light of experience. The commission’s terms of reference make it clear that any changes it proposes must enable the UK Parliament and the National Assembly better to serve the people of Wales.

17:59

New clause 2 would provide the Secretary of State with the power to make regulations allowing incumbent water companies to transfer their non-household customers to a water supply licensee with a retail authorisation, subject to the approval of the Secretary of State. That would allow such companies partially to exit the water supply retail market or, alternatively, it might enable the introduction of regulations to mandate the separation of retail and wholesale functions into two legally separate companies, both of which would be within the incumbent’s control. Amendment 12 would commence the provision on Royal Assent, which means that it might be possible to transfer customers before the retail market opens in April 2017, if the Secretary of State produced the regulations before that date.

We heard a range of arguments for retail exit during the debate in Committee. Although some of them undoubtedly have merit—I again emphasise that we do not rule out coming back to the issue in future—other arguments are less convincing. The intention of new clause 2 is to allow retail exit only from the non-household market, leaving household customers with incumbent companies. That does not address our concern that enabling water companies to walk away from the non-household retail market risks being a bad outcome for household customers.

[Thomas Docherty]

I wish you a happy new year, Mr Deputy Speaker. Given that new clause 2 specifies that the process can take place only with the Secretary of State’s consent, will the Minister tell the House how such an unintended consequence might happen?

[Dan Rogerson]

We are very clear that we look at such issues strategically across the whole market, rather than picking them case by case. The issue is that we want to make reforms based on the principles that we set out during discussions in Committee and elsewhere.

Were a company to exit and to leave household customers on their own—without the non-household element—customers would not only be left with a company that had limited incentives to focus on improving customer service, but would be at risk of having higher bills, because providing, as new clause 2 does, for forced legal separation of the companies’ retail businesses would reduce regulatory stability and risk increasing the cost of capital.

Let me be clear: we want to see a successful retail market. The Bill sets a framework for new entrant retailers to enter the market on an equal footing with the retailers of the incumbent water companies. Our opposition to a provision about retail exit has nothing to do with supporting the position of incumbent water companies; we expect Ofwat to use its regulatory powers to make sure that new entrants can be confident that they are competing on a level playing field.

However, retail exit is not about delivering a level playing field. For example, in written evidence to the Public Bill Committee, the Water Industry Commission for Scotland argued that a provision about retail exit was needed so that new entrants had other options for increasing their market share than

“to acquire customers by winning them one contract at a time.”

However, that is exactly how entrants to the market in Scotland have had to win business unless an existing licensee surrenders its licence or has it withdrawn. In that case, the customers of the exiting licensee are shared out among other licensees, but otherwise all business customers stay with the incumbent retailer, Business Stream, until they actively decide to switch.

Some commentators have painted a picture of an incumbent water company being left without any customers, because all of them are lost to their customers once our retail reforms are in place. We feel that that is a very unlikely scenario, given that non-household customers represent only some 10% of the total retail market, and that 90% of customers—in other words, households—will not be able to switch suppliers.

It is quite an assertion to say that 100% of an incumbent’s non-household customers will switch suppliers. Some 60% of non-household customers in Scotland have put their water services out to tender, but most customers have elected to stay with Business Stream. We understand that only about 5% to 10% of customers have switched since 2008. The customers who stayed with Business Stream have benefited from improved services, without having to switch, by renegotiating their terms. We might expect a more active market in England from 2017.

[Thomas Docherty]

I fear that the Minister is confusing two different issues. Undoubtedly, competition in itself has brought huge savings and has made Business Stream—or Scottish Water—change its whole ethos, but like does not follow like: simply because customers have stayed with Business Stream does not mean that the market is not working. Given that only 10% of customers have switched, as he says, does he not accept it is quite likely that some smaller water companies will not be able to compete with big retail providers?

[Dan Rogerson]

I certainly was not seeking to suggest that the market is not working in Scotland. My point was that some people have chosen to stay with their incumbent, and they may wish to do so rather than to have an incumbent abandon them and walk away.

An Oxera report commissioned by WICS and published in November 2012 predicted that incumbents would lose some 40% of their non-household customers in the first year of the opening of the retail market, with a 5% loss of profit. However, arguments that make an economic case for exits seem to be based on incumbents losing all their public sector and multi-site customers in the first year of market opening. The Oxera view is bolder than that of the rating agency Moody’s which, in February 2012, said that a worst-case scenario would be incumbents losing 25% of their non-household customers in the short to medium term, with a much smaller loss of 0.69% of profit. Although no doubt all incumbents will lose some customers, we can suppose incumbents will take steps, such as those that Business Stream has taken, to retain customers.

Anecdotal evidence from business customers suggests that incumbents are already upping their game, even though retail competition reform is some years away. Large business customers have suddenly discovered that they have a named customer service contact, and some have been offered improved metering services. The idea of incumbents sitting around while customers disappear is therefore, in our view, an unlikely scenario. In addition, water-only companies will be able to apply to Ofwat for a sewerage licence, which will allow them to compete with licensees and other incumbent sewerage companies by offering both water and sewerage services to their customers.

My point is that this is evolution, not revolution. Many non-household customers may choose to stick with the incumbent supplier because the incumbent supplier will improve its services to them as a result of the reforms. The benefits of that may in turn be passed on to household customers. Forcing or even allowing retail exit ignores such points. Where customers choose to switch, we anticipate a growth market in which innovation and competition lead to benefits, both environmentally and in customers’ bills. Allowing partial retail exit would open the door to forced separation if individual cases of discrimination were discovered, and we have made clear our position on that.

As I have said, any decision on separation should be made by Ministers and Parliament. We are not prepared to take the risk of forced restructuring, or even the potential for it as provided for in new clause 2, destabilising investment or increasing costs to customers. The new clause envisages the Secretary of State permitting exits, but that may not reduce the risk of a competition authority forcing an incumbent water company to make an application to exit. I therefore urge hon. Members who tabled new clause 2 and amendment 12—led by the Chair of the Select Committee, the hon. Member for Thirsk and Malton (Miss McIntosh)—not to press them to a Division.

The hon. Lady raised other issues about the industry in general, particularly in relation to upstream reform. We know from experience that setting out how markets should work in primary legislation is very inflexible and can stifle innovation. I know that she is keen for us to do more in that regard, but our view is that that was one clear lesson from the last attempt to extend competition through legislation in 2003. That is why the framework in the Bill sets the scope and direction of reform, without being overly prescriptive. We are working closely with Ofwat, customers and the industry—through the high-level group and the Open Water programme—to ensure that new markets work effectively, and we know that the industry does not want to constrain the market unnecessarily with too much detail in primary legislation, any more than the Government want to do that.

On new clauses 11 and 14, the hon. Members for Dunfermline and West Fife and for Hayes and Harlington (John McDonnell) have raised important issues about how the sector is run. As the hon. Member for Dunfermline and West Fife pointed out, we had a previous debate on this set of issues in which hon. Members from all parties were keen to put on the record their concerns about the past operation of the industry. I fear, however, that we have been talking about things as they were, not as they are and will be. Ofwat is already taking action to improve standards of corporate governance across the sector. It recently consulted on principles relating to board leadership, transparency and corporate governance, and it is putting pressure on water companies to strengthen audit arrangements, board member appointments and governance. The response from water companies has been positive and I welcome that. I do not want to belittle the issues that the hon. Member for Hayes and Harlington set out, but Ofwat has listened and is providing leadership to deal with them.

[John McDonnell]

Is the Minister satisfied that United Utilities, which supplies water to the north-west, is forecast to have made £627 million in the year up to March last year, which is up from £594 million; that Pennon, the owner of South West Water, which must supply his constituency, is due to unveil profits of £273 million, which is up from £268 million; and that earnings at Severn Trent Water, which supplies the midlands, are expected to hit £525 million, which is up from £504 million? The profiteering is continuing as normal.

[Dan Rogerson]

The hon. Gentleman is referring to the current price review period, but we are about to enter a new one. The measures that I am setting out have been prepared by Ofwat to change the industry and to meet its aspiration of better performance by the industry. They also recognise the low cost of borrowing from which companies have benefited in the latter years of the current price review period.

[John McDonnell]

Would the Minister put his mortgage on United Utilities, Pennon and Severn Trent not increasing their profits next year?

[Dan Rogerson]

I suspect that they would not welcome my mortgage, given the debts that they are already dealing with because of the investment that they have put into the sector. The Secretary of State made it very clear in the letter that he sent to the industry and the framework that he set out for Ofwat that we want to see a settlement that reflects the market conditions that companies have benefited from in recent years. Ofwat, in turn, has been very clear that it expects companies to take account of that in the coming price review period. Companies are responding to that and we have seen some good signs.

[Mr Charles Walker (Broxbourne) (Con)]

I do not often applaud water companies, but Affinity Water, which serves large parts of my part of the world, hopes to achieve an average bill reduction of 0.7% before inflation in each of the five years up to 2020. That is worth welcoming.

[Dan Rogerson]

I thank my hon. Friend for that intervention. As he is not always an enthusiast for what water companies do, it means all the more that he is prepared to offer those words of congratulation. It is fair for hon. Members across the House to express clearly their view that water companies should offer a fairer deal to consumers. That is what the Government want to see as well. That is why I am pleased that water companies are responding positively to the process.

[Hywel Williams]

The Minister talks about fair deals between water companies. Is he satisfied with the terms for the supply of water from Wales to Severn Trent, especially given that Severn Trent is apparently selling on 30 million litres of water a day to Anglian Water at commercial rates? Of course, that is happening on the back of Welsh resources.

[Dan Rogerson]

The hon. Gentleman is tempting me to get into the specifics of individual companies. The framework that the Government have set out and our policy statements are very clear, and Ofwat is responding to that. The companies will have to take account of that and satisfy the regulator that they are acting fairly and effectively.

[Richard Benyon]

Given that one of the key objectives of the Bill is to increase the resilience of the water sector across the country—or perhaps I should say countries—should we not welcome the fact that Severn Trent is trading bulk quantities of water with Anglian Water and say that we hope to see more water flowing from areas where it rains a lot to areas where it does not?

[Dan Rogerson]

My hon. Friend and predecessor is a great advocate of ensuring that we have a far more resilient water sector on environmental and sustainability grounds, as well as on economic and social grounds. It is important that we get that message across and I welcome his intervention.

New clauses 11 and 14 would place a duty on water companies to report information that is already freely available in the public domain. Both new clauses require reporting about company performance, investment, tax, corporate structure and dividends. Indeed, the hon. Member for Hayes and Harlington cited those figures in his speech, which shows that they are readily available.

New clause 14 would also require the Secretary of State to report on the cost of water, disconnections, water quality, leakage and the legal compliance of water companies. The cost of water to consumers is published every year in each company’s charges scheme. The Water Industry Act 1999 removed the power of any water company to disconnect homes because of the non-payment of bills. That prohibits the disconnection of the water supply to homes, schools and hospitals. The drinking water inspectorate is responsible for providing independent reassurance that water supplies are safe and that drinking water quality is acceptable to consumers. In England and Wales, 99.96% of drinking water supplies meet national and European standards. The tiny proportion that are failing to meet that standard—0.04%—are predominantly private supplies, rather than supplies from incumbent water companies. Since the mid-1990s under the current framework, there has been a 30% reduction in leakage, which is more than 2 billion litres per day. Companies are now operating at their sustainable economic level of leakage.

18:15

The information on tax and corporate governance that is required by both new clauses is already available. They would therefore not increase transparency. I direct hon. Members towards each company’s business plan and annual reports and accounts.

[Mr Charles Walker]

To refer once again to Affinity Water, its business plan for the five-year period from 2015-16 to 2019-20 states that it intends to reduce abstraction by 42 million litres a day over that period. That is very welcome, particularly in my part of the world. How will I be able to check up on Affinity’s progress towards that objective?

[Dan Rogerson]

My hon. Friend is an astute and fearless challenger of all authorities, whether they be in the private or public sector. I am sure that he is well aware of the routes that he can take to challenge the company on that matter publicly and privately. The new clauses that we are debating would not assist him in that aspiration.

[Thomas Docherty]

The Minister probably has first-day-back blues. I refer him to Opposition new clause 11, which would allow the hon. Member for Broxbourne (Mr Walker) to check the performance of his water company.

[Dan Rogerson]

The hon. Gentleman hopes that his new clause would require further reports to be made to the Secretary of State. However, that information is already in the public domain. That is why supporting new clause 11 would not be helpful. I understand and respect his desire to ensure that the industry is as transparent as possible. I understand the ambition behind the new clause, but I do not share his enthusiasm for the wording that he has chosen.

The privatisation of the water industry has been a success story in terms of investment. Helpfully, the hon. Member for Hayes and Harlington pointed out that I represent a constituency in the South West Water area. The coalition Government have recognised that there were a few flaws in the privatisation process, so there is now extra money to support bill payers in the south-west, who paid for the clean-up of the beaches around the south-west peninsula.

As was pointed out by my predecessor, my hon. Friend the Member for Newbury (Richard Benyon), there has been huge investment in infrastructure since privatisation. That is one of the key successes that we want to build on and not jeopardise. The stable regulatory framework for the water sector has enabled companies to attract more than £111 billion of low-cost investment to upgrade water and sewerage infrastructure and to improve customer service and environmental standards.

I agree that we should be putting pressure on the water sector to act as transparently and responsibly as possible. Ofwat is already doing excellent work on the issues that have been raised by hon. Members. I do not believe that duplicating the reporting requirements would help. For that reason, I believe that new clauses 11 and 14 should be resisted.

New clause 12, for which the hon. Member for Dunfermline and West Fife argued, would place a duty on Ofwat to have regard to the charges to household and non-household customers. That would simply duplicate Ofwat’s existing duty.

I turn to a number of technical amendments, which the hon. Member for Dunfermline and West Fife charitably referred to. I will move amendments 13 to 50, 52 to 54 and 60 to 87 formally at the appropriate time. They will mainly make changes to schedules 5 and 7. Schedule 7 makes consequential changes to the Water Industry Act 1991 and other primary legislation as a result of our reforms, and schedule 5 makes further changes should the Welsh Ministers decide to adopt the reforms being introduced in England. Amendment 59 and new schedule 1 will provide the Secretary of State with the power to produce transitional orders that allow us to deliver retail and upstream reform separately.

Taken together, our amendments will provide Ministers with the maximum flexibility to commence the different market reform provisions transparently and in stages, as per our commitment to stagger the implementation of our retail and upstream reforms. They will enable the current arrangements to continue without diverting attention from the immediate priority of preparing for the opening of the reformed retail market in April 2017.

[Hywel Williams]

We have had an interesting debate, and I was glad to hear the contributions of the Chair of the Environment, Food and Rural Affairs Committee, the hon. Member for Thirsk and Malton (Miss McIntosh), and the hon. Member for Hayes and Harlington (John McDonnell), with whom I yet again agreed entirely. I was also glad to see the hon. Member for Newbury (Richard Benyon) taking an interest in his former beat, and to see the hon. Member for Brecon and Radnorshire (Roger Williams) in his place, although essentially in a non-speaking role.

I was disappointed by the lack of contributions from Welsh Members, and disappointed that the hon. Member for Dunfermline and West Fife (Thomas Docherty) did not make any reference to my new clause 1. Pretending it is not there does not mean it will go away.

[Thomas Docherty]

The hon. Gentleman should have intervened on me if he was concerned that I had not covered his new clause. I echo the point that the Minister made—the Silk commission is examining the issue and will report in the spring. [Interruption.] We think that will be the right time to consider the matter properly.

[Hywel Williams]

My hon. Friend the Member for Perth and North Perthshire (Pete Wishart) asks from a sedentary position, “What do you think?” The Minister might choose to enlighten us, but possibly not—he would prefer to listen to the Silk commission.

My hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards) made a point about legislative competences and borders. In Northern Ireland the matter is not considered problematic, because the national or state boundaries are followed; nor is it considered problematic for legislative competences to cross the border in the case of Wales. Legislative competence seems to become a problem only when proposed by Plaid Cymru. Of course, it is also proposed by the Labour Welsh Government, but they are not here to make that point. That does not seem particularly fair dealing.

The Minister said that the status quo is the status quo, and that the matter is not devolved because it is not devolved, and presumably it will not be. He gave us no indication of what the Government would eventually propose following Silk. We look forward to that with interest.

On a personal note, I missed many of the sittings of the Public Bill Committee—

[Thomas Docherty]

And we missed you.

[Hywel Williams]

The shadow Minister is very kind. I was disappointed to have missed those sittings, and I apologise to Members of the Committee. Unfortunately, it was unavoidable.

It is my pleasure to press new clause 1 to a Division.

Question put, That the clause be read a Second time.

18:23

Division 165

Ayes: 6

---

Labour: 3
Social Democratic & Labour Party: 2
Plaid Cymru: 2
Green Party: 1

Noes: 282

---

Conservative: 236
Liberal Democrat: 45
Democratic Unionist Party: 1

New Clause 3

Provision of benefits information

‘(1) The Secretary of State may by regulations make provision about the disclosure of benefits information about occupiers to water undertakers and sewerage undertakers in connection with section 144C of the Water Industry Act 1991 (non-owner occupiers).

(2) In this section “benefits information” means information which is held for benefit entitlement purposes by the Department for Work and Pensions.’.—(Miss McIntosh.)

Brought up, and read the First time.

[Miss Anne McIntosh]

I beg to move, That the clause be read a Second time.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

With this it will be convenient to discuss the following:

New clause 7—National affordability scheme—

‘(1) The Secretary of State must, by order, introduce a National Affordability Scheme for water.

(2) The National Affordability Scheme must include an eligibility criteria, determined by the Secretary of State, in consultation with—

(a) the Water Services Regulation Authority; and

(b) the Consumer Council for Water.

(3) An order under this section—

(a) shall be made by statutory instrument; and

(b) may not be made unless a draft of the order has been laid before and approved by resolution of each House of Parliament.’.

New clause 8—Billing information: affordability—

‘Any company providing water services to a residential household must include on its bills—

(a) details of any tariffs provided by that company;

(b) a recommendation of the lowest possible tariff for each residential household; and

(c) information regarding eligibility criteria and how to make an application for assistance under Water Sure.’.

New clause 9—Provision of information to water companies: landlords—

‘(1) The Water Industry Act 1991 is amended as follows.

(2) After section 207 (Provision of false information) there is inserted—

“Provision of information to water companies: landlords

Where a water company does not have information about a resident in a property that is using water, if the occupants of that property are tenants, the landlord must, on request, provide to the water company contact details for the tenants.”.’.

New clause 10—Water companies: recovery of losses—

‘(1) The Secretary of State, or the Authority, may prohibit losses to a water company due to non-payment of bills from being recovered through charges on customers.

(2) This section comes into force on the day after the Secretary of State has laid before Parliament a report setting out how water companies have failed to take action on these matters,’,

Amendment 9, in clause 80, page 124, line 1, at end insert—

‘(e) section [Provision of benefits information].’.

[Miss McIntosh]

I wish to consider new clause 3 and amendment 9, which seek to address legislation already on the statute books in the Flood and Water Management Act 2010. I remind the House that the cost of bad debt to each household in England is approximately £15 per annum, and in times of great hardship and a period of austerity, which the Government are dealing with through the actions we continue to take, it is incumbent on the Government to consider every opportunity to defray the costs to each household in that regard.

New clause 3 seeks to provide benefits information by allowing the Secretary of State to regulate to

“make provision about the disclosure of benefits information about occupiers”

to water and sewerage companies in connection with the revised part of the Water Industry Act 1991. It goes on to state that

“‘benefits information’ means information which is held for benefit entitlement purposes by the Department for Work and Pensions.”

Amendment 9 would make the consequential change to the current clause 80, to allow the provision of benefits information. I sat where the hon. Member for Dunfermline and West Fife (Thomas Docherty) is currently sitting and followed the passage of the Flood and Water Management Bill as closely as he is following the passage of this Bill. I have been very taken with the idea of trying to reduce bad debt in this way. Recently, I was most fortunate to receive a written answer from the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Hemel Hempstead (Mike Penning), who helpfully told me that at present the legislation does not permit the transfer and provision of benefits information by the Department for Work and Pensions in the way I wish. He did not say it could not be done; he said only that the current law does not permit it. We are where we are.

[Mr John Redwood (Wokingham) (Con)]

To help the House, will my hon. Friend explain what kind of information she would like to see transferred and how it would help?

[Miss McIntosh]

I hope that my right hon. Friend will bear with me as I take the House through it.

In the Environment, Food and Rural Affairs Committee report on the draft Bill, we reiterated our previous recommendations that the Department should implement without delay the existing provisions of the Flood and Water Management Act 2010 on bad debt, to which I have referred. In our view, it is unacceptable for honest customers to be forced to subsidise those who can pay but refuse to pay their water bills. To answer my right hon. Friend’s question, the specific provision is section 45 of the 2010 Act, which introduces new section 144C to the Water Industry Act 1991. That is what we propose in new clause 3, which would require landlords to arrange for information on their tenants to be provided to water companies.

Instead of implementing the existing bad debt provisions, the Government currently rely on a voluntary approach, whereby landlords share information on tenants on an online database set up by the water companies. Before I go further on the voluntary approach, it might be helpful to ask my hon. Friend the Minister this question: what is to prevent a customer who happens to be a tenant from marking on their electricity bill the fact that they have no problem with it being made known to the electricity company and the Department for Work and Pensions, whichever works best, that they are in receipt of benefits? The Environment, Food and Rural Affairs Committee was fortunate to enjoy the company of the hon. Member for Dunfermline and West Fife for a time. I am sure he remembers our exchange, but the Committee has great difficulty in understanding what the problem is for the Government—either the Department for Work and Pensions or the Department for Environment, Food and Rural Affairs—in permitting that flow of information.

The House will recall the tragic case of an elderly couple who sadly passed away because they could not afford to pay their utility bills for heating. No one had informed the electricity company of that fact. I believe that what is good for electricity companies—in law, such information can be provided to those utility companies —should be equally good for the water companies, which are also utility companies. They should have access to the same information.

A close reading of proceedings in Committee shows that Water UK acknowledged the new database for landlords and tenants, but claimed that

“experience has shown that a voluntary approach simply does not work.”––[Official Report, Water Public Bill Committee, 3 December 2013; c. 15, Q19.]

It gave the example of Northumbrian Water. It has had an easy-to-use website for landlords to provide information for two and a half years, yet only 7% of all rented properties have been registered. That is a problem and this is a matter of some urgency. The Government need to press ahead—the House would support that.

In Committee, the Opposition tabled a new clause that would have meant landlords providing contact details of their tenants to the water companies, but it was voted down. The Environment, Food and Rural Affairs Committee produced a report on the water White Paper—we have worked hard on the issue and I hope we have made a positive contribution. My hon. Friend the Minister nods because he, too, was a member of the Committee when we adopted the report. I find myself in good company this evening. The report recommended that DEFRA work with the Department for Work and Pensions to ensure that all means-tested benefits claimants are given the option to consent to the sharing of their data with their water company for the purposes of help with affordability issues.

I and hon. Members who have put their names to new clause 3—a number are members of the Environment, Food and Rural Affairs Committee—believe that there is a difference between electricity and gas bills and water bills. If people do not pay their heating bill, their supply can be cut off, whereas if people do not pay their water bill, the water company is simply not permitted to turn off the supply of clean water going in or prevent waste water—sewage—going out, for reasons of hygiene and good health.

18:45

My hon. Friend the Minister must recognise the urgency. This year, it will be four years since the Flood and Water Management Act 2010. The legal basis exists. New clause 3 and amendment 9 would give the Secretary of State the power to make the regulations on the disclosure of benefits information relating to tenants to water and sewerage companies in connection with the bad debt provisions in the Act. The benefits information should include all information held by the Department for Work and Pensions on benefit entitlements.

All the Secretary of State needs to do is introduce appropriate safeguards in regulations to protect data. As I have indicated to the Minister, there could be a box on the bill for the customer to tick to indicate that they are willing to have information shared with the water or sewerage company. The Committee has previously recommended a simple tick-box on a customer’s bill consenting to such information disclosure. I urge him to tell the House what has changed since he endorsed such a provision in the previous Parliament—he was a member of the Environment, Food and Rural Affairs Committee in the last Parliament, and was so until recently in this Parliament.

The Committee believes that the proposal is a helpful suggestion to the Government in closing a loophole and preventing an omission from the Bill. The legislation is in place. The new clause would enable companies to determine which customers cannot pay and those who will not do so. There is a clear distinction between the two. Those who can pay but will not pay are costing £15 per household. The provision would allow water companies to target information about the charitable funds and social tariffs they operate on the most vulnerable customers—those who simply cannot afford to pay, perhaps even for a temporary period—and allow them to make arrangements for which they are eligible.

There is a precedent for the disclosure of information. I understand that the Secretary of State for Environment, Food and Rural Affairs implements the warm home discount scheme, which has been regulated pursuant to powers granted to the Secretary of State in the Energy Act 2010.

The information provided by Ofwat following recent submissions of water companies’ business plans in December, which was part of the current price review round, shows that three companies have social tariffs, that 12 companies will have a social tariff by 1 April 2015, and that five companies have proposed not to introduce a social tariff.

In conclusion, I urge my hon. Friend the Minister to follow through on what he so eloquently supported when he was a member of the Select Committee and allow consumers to benefit by making benefits information available at the earliest possible opportunity. That will enable those who cannot pay to be on the radar screens not just of landlords but of the Department for Work and Pensions and their own water utility company.

[Thomas Docherty]

I wish you a merry Christmas and a happy new year, Mr Deputy Speaker.

I welcome the thoughtful remarks by the hon. Member for Thirsk and Malton (Miss McIntosh). As she rightly said, the Minister and I had the pleasure of serving on the Select Committee under her chairmanship. She was an excellent tutor to both of us, although I suggest, looking at the debates today and in the Bill Committee, that I remember more of what the Select Committee agreed than the Minister. I am sure he will eloquently explain his position.

[Dan Rogerson]

The hon. Gentleman is always kind enough to remind me repeatedly, so I fear I can never forget any of our deliberations.

[Thomas Docherty]

It is always a good thing to be a charitable and giving soul, so I do my best to try to accommodate the Minister.

I would like to speak to the new clauses that stand in my name. As I said earlier, much attention has been paid to households that faced a difficult Christmas and new year because of the climatic conditions that battered the United Kingdom. Much less, however, has been written on households that faced a stressful period because of the economic conditions that have battered the United Kingdom, not just in the past three weeks but in the past three years. Hundreds of thousands of households did not enjoy the Christmas that all of us here in the House of Commons did, in warm and secure homes with plenty to eat and with presents given and received. Too many families were left unable to enjoy the Christmas joys that we take for granted.

The cost of living crisis cannot be dismissed as a soundbite, as many Government Members try to do. The cases of hardship regularly brought to the attention of Members of Parliament cannot simply be batted away. At a time when household incomes are continuously being squeezed, it is not acceptable to Opposition Members for most water companies to continue to do so little to help their struggling customers.

The size of water bills may not have reached the obscene level of their gas and electricity counterparts, but there is no disputing their cumulative impact. Citizens Advice reported to MPs in November that it had received almost as many inquiries from people worried about their water bills as they had about the other two utilities. DEFRA’s own statistics state that some 2.5 million households now find themselves in what the Department itself defines as water poverty, while in the past year water companies reported pre-tax profits of £1.9 billion and paid out, in dividends, a staggering £1.8 billion to their shareholders.

You might have expected the water companies to rush forward with schemes to assist their hardest-pressed customers, Mr Deputy Speaker. After all, the previous Labour Government put in place legislation to allow each company to introduce a tailor-made scheme for its own region. The water companies told the then Government and Parliament that that was all that was needed: a voluntary system of social tariffs that each and every water company would then set and implement quickly. Four years later, what progress has been made? So far, only three water companies have got around to implementing social tariffs, helping a grand total of 25,000 households across the country. Even by the end of the price review period, more than a third of water companies will still have not bothered to lift a finger and introduce such a scheme. When the water companies gave evidence to the Bill Committee, did they acknowledge that they had let down their customers and Parliament? Did they acknowledge that the rate of progress was not good enough? Did they say sorry, even once? Of course not. They blamed everyone but themselves: they blamed the regulator, they blamed the Government and they blamed the customers.

What has been the response of the Secretary of State, and his Minister with responsibility for water, to the crisis facing households? The Secretary of State sent a letter to the companies in October begging them not to raise prices further. It was not, we note, an instruction or a warning that if they did not take heed, the Government would step in. It was not even a rebuke; it was just a weak letter. That is why the Opposition have tabled four new clauses that will each help hard-pressed households. Taken together, they would make a tangible difference to those struggling with the cost of living crisis. With your permission, Mr Deputy Speaker, I will briefly take each new clause in turn, explaining the existing problems and how our proposals would address them.

First, on bad debt, I will build on the excellent remarks by the Chair of the Select Committee. Ofwat estimates that on average bad debt adds £15 to every customer’s annual bill. Note, of course, that that is just the average amount; in some cases, it is significantly more than that. As the hon. Lady said, water companies are, rightly, not allowed to cut off those who cannot afford to pay their bills, but they are allowed to pass the cost of non-payment on to their other customers. In effect, the sector already has cross-subsidisation.

[Richard Benyon]

Average figures are exactly that—average. There are, of course, water companies that underperform and their debt is much higher than average, but the corollary is that other water companies perform considerably better. Does the hon. Gentleman not think that there is much work to be done to learn best practice from water companies such as Yorkshire Water, which serves the constituency of the Chair of the Select Committee, my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) and is outperforming the others extremely well? We should learn from such companies about bad debt.

[Thomas Docherty]

I know that you are a fan of all things Yorkshire, Mr Deputy Speaker, and I will come on to Yorkshire Water in a moment, if the former Minister will bear with me.

As the hon. Lady said, among those who do not pay there are those who can pay. That is unfair on decent customers who meet their obligations and we believe the time has come for more robust action to be taken. Some 80% of those who do not pay are in rented accommodation. One of the challenges facing water companies is tracking down those who refuse to pay because they move homes far more often than the average person. The only way to track them down effectively is to require landlords to provide water companies with a list of tenants. Individuals moving property would not then disappear from the system and evade paying their debts.

The measure would be a simple step and it would not require a disproportionate amount of new bureaucracy to implement. It is estimated that approximately half of total bad debt falls into the category of “can pay, won’t pay”. The Select Committee, of which the Minister was previously a member, has unanimously backed the measure throughout this Parliament, so why the opposition from the Government?

[Mr Mark Spencer (Sherwood) (Con)]

I understand, and sympathise with, the point the hon. Gentleman is making, but there is no legal way to force a tenant to inform their former landlord of a forwarding address. How can a landlord know what information to supply to the water companies, so they are able to track former tenants?

[Thomas Docherty]

I am grateful to the hon. Gentleman, who I think is a recent addition to the Select Committee. I do not think he was a member of the Committee when we had this discussion, so for his benefit I will say that it is quite simple. As the water companies have said, they would be supplied with names and addresses. The onus would then be on them to carry out the necessary activity to match up the appropriate individual, and there would be no significant burden on the landlord, the local authority or social housing provider. The burden for that work would fall on the water company. He will recall from our time in Committee that I was not always the water industry’s biggest fan, but on this the Select Committee, the water industry and the Opposition are united, so again I come back to this question of why the Government are so opposed to the proposal.

19:00

[Mr Redwood]

I fully agree with what the hon. Gentleman is trying to do, but I share the concern of my hon. Friend the Member for Sherwood (Mr Spencer). How would it help to know the name of the tenant who has done a bunk, moved somewhere else and not given a forwarding address and who has no intention of paying the bill? Would the water companies not need investigatory powers to track down the tenant?

[Thomas Docherty]

I have huge respect for the right hon. Gentleman and his knowledge, but we are clear that, as they themselves accept, it is the water companies who would have to do the legwork; no additional burden would be placed on the landlord, as it would be for the water companies to contact householders, and obviously they would have a list of new tenants. I will use the example of the electoral roll: candidates, parliamentarians and political parties receive a list of those who are new on the register, and we then contact them to welcome them to the area. When the name of somebody who disappears from one property appears at a different property, it would not be beyond the wit of a water company to work out who they were. In Committee, the Government’s key objection seemed to be that it would place an unfair burden on landlords, so we are keen to stress that, as the Minister will recall from his time on the Select Committee, it would place an additional burden not on the landlord, but on the water companies. The companies themselves want this power. To reiterate, we are absolutely clear that those who can pay should pay, so why the opposition from the Government?

[Dan Rogerson]

The hon. Gentleman has set out how the burden of pursuit would fall on the water companies, but of course the burden of providing that information to them would fall on the landlords, so there would be a burden.

[Thomas Docherty]

I congratulate the Minister on stating the blindingly obvious. Of course, the landlord would have to provide that information, but it is not the longest list in the world, and it is information that landlords have anyway, so the Opposition, like the Select Committee, find it difficult to comprehend why it would be so onerous for landlords to provide a list of their tenants by property. If he has specific examples of hard-pressed landlords who have made representations to him, I am sure he will refer to them when he responds.

For the fourth time, I ask myself the question: why the opposition from the Government? The Secretary of State has had his usual Pavlovian reaction to a suggestion that the Government should take action. It appears once again that when Parliament, the Select Committee and the water industry ask DEFRA to do something, its knee-jerk response is to think of spurious reasons why it should not or cannot do it. Our new clause would be a pragmatic and efficient measure that would help to drive down costs on all decent households, help water companies to do their job and ensure that all customers meet their responsibilities.

Our second new clause—new clause 10—recognises that not all water companies have done all they can to tackle the problem of bad debt. As I mentioned earlier, although the average bad debt figure is about £15, there are wide variations across the country. As the hon. Member for Newbury (Richard Benyon) pointed out, that is because some, such as Yorkshire Water, have worked with customers and debt advice groups, such as Citizens Advice, to put in place measures to help customers genuinely struggling to access payment packages and programmes, but unfortunately that is not the case across the country. Too many water companies have come to the unsurprising conclusion that, because they can pass the cost of bad debt on to their other customers, they need not bother to do anything about it themselves.

That is why we have tabled new clause 10. We want to give Ofwat and water companies a clear and unambiguous signal that hard-pressed customers should no longer be treated as a cash cow by companies that cannot be bothered to meet their own responsibilities. Where the regulator and the Department are satisfied that water companies are not doing enough to pursue bad debtors, the cost should no longer be passed on to other customers. Taken together, not only would our two new clauses be practical measures, but they would send a clear signal that while we will do more to help those who are struggling, we expect all customers and water companies to do their fair share.

Our third new clause—new clause 8—would help to ensure that customers know about the help for which they are eligible. In 1999, the last Labour Government introduced WaterSure to help low-income metered households with high essential water use. WaterSure caps the bills of metered households in receipt of a qualifying benefit or tax credit at the average bill for that water company’s operating area. It applies to households with three or more children under the age of 19 living at home or where someone in the household has a medical condition that necessitates high water use. It is an important measure that at the time received cross-party support and which, according to the latest figures that the Minister gave us in Committee, has helped 70,500 households in England—I think a similar scheme has helped approximately 20,000 households in Wales. Although that is welcome, we believe that that level is unacceptable. Given that, as the Consumer Council for Water has said, only one third of eligible households are in receipt of the benefit to which they are entitled, the Government have been guilty of complacency.

The Minister previously claimed there was no need for the new clause because all the water companies already provided this information. For the benefit of Members who have not had a chance to look at the amendment paper, we are proposing that information about the eligibility criteria and how to apply should be included in all water bills. He believes that all water companies already provide this information, but unfortunately for him the reality does not match his statement. Not only do his own figures show that the current approach is not working, but our own anecdotal research shows that customers are not even aware that WaterSure exists. We want to make it clear to water companies that they must do much more to promote the scheme, and we want Ofwat and the Government to hold them to account if they do not. I hope he has reflected not only on the evidence we presented in Committee, but on his own figures and the evidence from the CCW, and will listen to common sense.

Finally, our fourth new clause—new clause 7—deals with the central problem of the failure of the voluntary approach to social tariffs. As we have set out, too few water companies are helping too few customers through social tariffs, and it is clear that left to their own devices many water companies, by their own admission, will never introduce such schemes. That is why we are proposing a national affordability scheme to end the postcode lottery and ensure national standards for eligibility. We would expect schemes to be funded by the excess profits of the water companies, not by other water bill payers. As I have said, last year these companies made an eye-watering £1.9 billion in pre-tax profits and paid out £1.8 billion to investors. The idea, for example, that Yorkshire Water, which paid out £240 million, cannot afford to provide support through social tariffs is clearly nonsense.

Enough is enough. Hard-pressed households need real help now, and these new clauses are four practical and simple measures that would ensure they get it. It is time for the coalition to match our commitments.

[Mr Spencer]

I want to make some brief comments that were too long for an intervention, particularly about new clause 3, tabled by my hon. Friend the Member for Thirsk and Malton (Miss McIntosh). I sincerely hope that, in summing up, the Minister will reflect on today’s debate, which has shown recognition across the House that consumers and our constituents are finding it very difficult to pay their household bills because of pressure on the household budget. It is worth saying that the Government recognise that challenge and are doing their best to assist, not least by turning around the failing economy that they inherited. Needless to say, a section of society will find it very challenging to pay their utility bills, and the Government have an obligation to try to assist and support them.

There is another group of people who are unwilling to pay, as a result of a frankly malicious intent to avoid paying the bill that is due to be paid. It is vital that the water companies have the power to decide which cases fit into which categories. Those who are clearly unable to pay should be able to receive assistance, support and sympathy from the water companies. New clause 3 goes some way towards assisting the water companies to identify people within the benefit and welfare support system, who may be in need of extra assistance.

I am somewhat sympathetic to new clause 8, too, which was tabled by the hon. Member for Dunfermline and West Fife (Thomas Docherty) and is designed to ensure that water companies put the neediest customers on “the lowest possible tariff”. Those who find themselves under pressure in the most challenging of circumstances are often those least able to identify from their bills which is the correct tariff for them to be on and least able to challenge the water companies to put them on a better tariff, allowing them to afford to pay their household bills. I hope that the Minister will give further consideration to that, if he is minded to do so.

Finally, I support those who have said it is difficult to understand why the Department for Work and Pensions or the Department for Environment, Food and Rural Affairs are unable or unwilling to supply the necessary data to the water companies. I hope that when the Minister sums up, he will be able to shed some light on those thoughts.

[Mr Redwood]

I hope that the Government will look at the issue of unpaid bills. Colleagues of all parties are right to draw attention to the problem—one of the many sources of excess cost in the water industry, which it would be good to reduce or eliminate. It is undoubtedly the case that we pay dearly for our main utility provision in this country, and I fear that the main reason why water bills are high and will stay high is that there is no competition. It is a great pity that this Bill will not introduce proper competition into water as into other areas, as it would make a lot of difference. The amendments are designed to deal with the situation of having regional monopolies that are in many cases unresponsive and have high cost structures. Then there is the particular problem of customers deciding—quite wilfully, when some of them are perfectly capable of paying—not to pay their bills. Clearly, more needs to be done on that.

There is some good in all the amendments before us this evening, but I am not persuaded that they take the trick. It might be helpful to know who the tenant was, but if the tenant cannot be traced to where they have gone, it will be impossible to get them to pay. It might be useful to know something more about the benefits and financial circumstances of individuals, although there are issues of privacy and the handling of data that could cause difficulties, but that then fails to enable us to come down hard enough on the people who can afford to pay, which is the real issue.

[Thomas Docherty]

Given that it is the water industry itself that is pressing for this power relating to landlord information and given that it is prepared to bear the burden of tracking people down, does the right hon. Gentleman not accept that such a scheme is clearly workable?

[Mr Redwood]

It may or may not be. I do not have a very high opinion of the success of the water industry in these areas, and it may not be the best judge, but I accept that this is one of the best points in the hon. Gentleman’s case, and I look forward to hearing the Minister’s reply to it.

As I say, the amendments and new clauses are all well intentioned and, if passed, they might not make the situation worse and in some cases might even make it a little better. I hope, however, that the Minister, working with the water industry, can come up with something better because there is a serious issue here. A lot of money is owed to the water industry that people could afford to pay, but the matter is not being pressed.

19:15

For very good reasons, nobody here wants to change the rule about cutting people off because water is so essential. That weakens the industry’s position, which then requires other work. If the Minister is going to advise us to reject the amendments, I hope he will provide a scheme of his own because of the serious money at risk here and because it is not fair on all the other people who pay their water bills, many of them without a lot of resources themselves but who feel that they should pay. There is a cross-subsidisation going on to the benefit of people who often have more money but simply will not pay.

[Dan Rogerson]

The hon. Member for Dunfermline and West Fife (Thomas Docherty) has proposed a number of new clauses, which I shall address before dealing with the lead new clause 3, tabled by the Select Committee Chairman.

New clause 7 would place a requirement on the Government to introduce through secondary legislation what is described as “a National Affordability Scheme”. The details of the scheme are not entirely clear. We debated in Committee an identical clause tabled by the hon. Gentleman, but at that point, the funding was not made clear. He said today that it would be funded specifically from the profits of the water companies rather than from other bill payers in a cross-subsidy approach.

[Thomas Docherty]

I refer the Minister to the evidence session during the eighth sitting of the Public Bill Committee, where I specifically said that the scheme would be funded from excess profits. Perhaps the civil servants should pay more attention in future.

[Dan Rogerson]

The hon. Gentleman is, as always, keen to assist. What I said comes entirely from my recollection of his introduction of the measure in Committee and if it is faulty, it is certainly not on account of any information briefed to me by others. I am grateful to the hon. Gentleman for highlighting the issue of excess profits. However, this does not address the point that we have a regulated system under which the profits are allowed for under the price review process. I appreciate that he was not a Member when his party was most recently in government, but it was quite happy to move forward with the pricing process. What he is saying now is that he has no confidence in the regulator—in other words, that the regulator would set a level of profit that it thinks reasonable for the price review period, but that this would now somehow be unpicked as being in excess in some cases in order to fund the scheme. I am happy to give way again, in case he wants to correct this.

[Thomas Docherty]

I am grateful, but on this occasion it is perhaps the Minister who should have paid more attention to my remarks a few moments ago. I clearly said that the last Government gave the water companies time to introduce the voluntary schemes, but that they have now failed to honour their commitment, so the Government should step in and do what the companies failed to do themselves.

[Dan Rogerson]

I understand the hon. Gentleman’s views on social tariffs, which he feels have not been introduced in a speedy enough fashion. My point was rather about the issue of excess profits. I said that the hon. Gentleman was seeking to introduce a concept that is perhaps a subjective rather than an objective assessment of the profits made by water companies. The whole point of the price review process and price review period, however, is that a regulated process takes account of the need to attract investment and thus the need to make a reasonable return in profit.

[Roger Williams]

My understanding is that the water companies made larger profits because the period of very low interest rates benefited them to a great extent. However, basing an entire policy on windfall profits that might not occur in the future would certainly not be a very good idea.

[Dan Rogerson]

I thank my hon. Friend for his intervention. He is absolutely right to point out that what is proposed is a new bold national scheme built on profits that might or might not go up or down in accordance with the markets and through the price review process. Although I accept that the intention of the hon. Member for Dunfermline and West Fife is, as always, to be helpful, I feel that his scheme could use a little work and I therefore urge my hon. Friends to resist it should he seek to press it to a vote.

Let me move next to new clause 8, also tabled by the hon. Gentleman. It would place a legal requirement on water companies to include information in their bills about the WaterSure scheme, but, as I have said—I provided information to this effect to the Committee—all water companies already do so voluntarily. He made a point based on anecdotal evidence. I would be happy to see that evidence and I am sure that he will want to share it with us, but I think we should base our policy making on the evidence provided to us, and the Consumer Council for Water has been quite clear that companies provide such information to customers.

In addition, new clause 8 would place requirements on water companies to provide information about tariff structures and the lowest available tariff, a point picked up on by my hon. Friend the Member for Sherwood (Mr Spencer). The proposals simply fail to reflect the realities of the water sector as opposed, for example, to the energy sector. Water companies do not have complex tariff structures. The sole choice for the majority of household customers is whether to pay according to the amount of water they use through a metered tariff, which is particularly prevalent in areas such as my own, or according to the rateable value of their home through an unmetered tariff. The cheapest option for each household will therefore depend on the location of the property and the amount of water used by the household.

Many smaller households with low water use can benefit from a meter. Water companies are required to fit a water meter free of charge on request and they also advise customers on whether they might benefit financially from the installation of a water meter. A further point to bear in mind about the operation of WaterSure is that it caps the bills of eligible customers at the average of the metered and unmetered bill for the area. That could, in effect, put the bills of some eligible customers up and it is therefore not surprising that they have chosen not to apply for WaterSure.

There is no evidence, in my view, that further regulation is required in this area. As I have noted, all companies already include details of WaterSure in their household bills and they also all provide details of the support available to any customer struggling to pay their bill. Legislation to require the companies to do something that they are already doing voluntarily would be redundant.

The Consumer Council for Water works closely with the companies on the format of their bills. Its expert advice, as we discussed in Committee, is that one of the biggest risks in using water bills as a means of communication with customers is information overload. I do not, therefore, consider the new clause to be necessary.

Let me turn next to new clause 9, also tabled by the hon. Gentleman. We discussed an identical clause that he tabled in Committee. Section 45 of the Flood and Water Management Act 2010 already enables Ministers to introduce secondary legislation that would require landlords to provide water companies with personal details about their tenants or become liable for paying the bill. That was a point that the Chairman of the Environment, Food and Rural Affairs Committee was keen to emphasise, given her involvement with the passage of that Act.

Following extensive consultation with the industry and with landlords’ organisations the Government took the decision that a voluntary approach would be more suitable. During consultation, landlords argued that the additional regulatory burden would be disproportionate as they are not the source of the problem we are trying to tackle. At the same time, the evidence provided by the water sector to support the case for additional regulation was not sufficient to make the case for additional regulation of millions of small and micro-businesses.

The Government simply do not believe that more regulation is always the answer. As we discussed in Committee, good practice in tackling bad debt is not applied consistently across the water sector. The hon. Gentleman quite rightly took great pains to point that out. The significant variation in performance between companies tells us that the focus should be on driving better standards across the sector rather than regulating landlords.

One reason we do not propose to bring forward the bad debt regulations on landlords is that we do not wish to endorse the argument that performance on bad debt is not within the control of water companies. We think there is more that the companies can do to collect their debts and we want them to focus on that rather than look to the Government to solve the problem for them.

Of course, the real drivers of company performance are the incentives and penalties set by the regulator so I am pleased to be able to report that Ofwat has changed its approach to bad debt in the methodology it is using for the 2014 price review. The new approach will enable it more effectively to bear down on the costs of bad debt. It is doing so by insisting that the companies demonstrate that any increase in bad debt is genuinely beyond their control and that they have taken all available steps to control it. Unless they can prove that that is the case they will not be allowed to include it in customer charges. We are already seeing our focus on the industry’s taking responsibility for tackling bad debt bear fruit. As I mentioned in Committee, the industry is working with landlords’ organisations to establish a new voluntary scheme that will enable landlords to provide information about their tenants direct to water companies swiftly and easily.

[Miss McIntosh]

I am most grateful to my hon. Friend for giving way, but before he concludes his remarks he must say what the Government object to as regards the 2010 Act. I do not personally subscribe to the data protection argument if someone is genuinely in need.

[Dan Rogerson]

The Chair of the Select Committee is quite right that I have yet to respond to that aspect of her argument and I will seek to do so, I hope to her satisfaction, once I have made my closing remarks on new clause 9.

The industry is working with landlords’ organisations to establish the new voluntary scheme that will enable landlords to provide information about their tenants direct to water companies swiftly and easily and that approach has the support of Water UK and the main landlords’ organisations. The new database will launch in March next year and I believe that it should be given time to work. For those reasons, I believe that new clause 9 is not necessary.

[Thomas Docherty]

I am grateful to the Minister and am listening carefully to what he says. He will, I am sure, come on to his justifications as regards new clause 10 in a second. Before he finishes dealing with new clause 9, however, can he say what he defines as “time to work”?

[Dan Rogerson]

We should at least allow the database to be set up and give it a chance to operate. That would seem to be a fair approach and it is certainly the one I seek to take. I understand the hon. Gentleman’s keenness to see progress but I believe that the voluntary approach will have some effect and we should give it time to do so.

Let me turn now, as the hon. Gentleman uncannily predicts, to new clause 10, which he has tabled in his efforts to make some changes to the Bill, and in Committee we discussed a similar clause that he tabled. The new clause will provide a new power for Ministers and Ofwat to disallow companies from recovering the cost of unpaid bills from their paying customers. The hon. Gentleman has argued that there is no incentive for companies to collect bad debt. During our previous discussions, I made it clear that Ofwat has the power to decide which costs may be recovered through the price review. Ofwat is already using the price review process to bear down on the costs of bad debt and requiring companies to demonstrate high performance in debt collection and to show that any increase in bad debt is beyond their control before they are allowed to include it in customer charges. The price review will challenge poor performers to raise their game.

The new clause proposes a power for a future Secretary of State to intervene in the setting and recovery of charges. That is exactly the kind of political interference that concerns the investors who are critical to the water industry. I have stated before that the stability of the regulatory regime is vital to keeping the cost of borrowing low. An increase in that cost will have the direct result of putting up customers’ bills and I am firmly of the view that it is for the regulator and not the Government to make detailed decisions about charges. New clauses 9 and 10 intend to incentivise companies to improve their debt collection performance and I absolutely support that objective. I cannot, however, support the approach that has been proposed and I am sorry to disappoint the hon. Gentleman—and, I am sure, to surprise him.

Let me turn finally to new clause 3, tabled by my hon. Friend the Member for Thirsk and Malton (Miss McIntosh), the hon. Members for Poplar and Limehouse (Jim Fitzpatrick) and for North Tyneside (Mrs Glindon) and my hon. Friend the Member for Brecon and Radnorshire (Roger Williams). The proposed clause targets a number of points that we have already discussed in some detail, including bad debt and social tariffs.

The practical effect of the new clause would be to require the Department for Work and Pensions to supply water companies with personal information about their customers. The clause focuses solely on the subset of customers that are both in receipt of benefits and living in rented accommodation. Amendment 9 would simply include the proposed new clause in the list of measures to be commenced two months following Royal Assent.

I am grateful to my hon. Friend the Member for Thirsk and Malton for her clarification that the clause is intended both to help water companies to collect their debts and to target social tariffs at customers in rented accommodation who are also in receipt of benefits. However, I am afraid that I do not believe that the clause is likely to achieve either objective effectively.

As I have already set out, the Government’s position on bad debt among water customers is that there is a great deal more that the industry can do for itself. We think, therefore, that there is more companies can do to collect their debts and we want them to focus on that rather than to look to the Government to solve the problem for them.

I am pleased, as I have said, that the industry is already taking more responsibility, by working on a voluntary approach to sharing information on customers in rented accommodation, using the landlord database, as we have discussed in response to new clause 9, tabled by the hon. Member for Dunfermline and West Fife.

19:30

Benefits data, like all personal data, are highly sensitive. We must therefore take their security extremely seriously. The circumstances in which any personal data can be shared are tightly controlled by law. No legislative gateway permits data sharing for the purposes of collecting debt. Therefore, simply passing on the details of all those who are on benefits to water companies without the appropriate consents would be illegal.

Moving on to the objective of targeting social tariffs, new clause 3 would focus support on a very specific subsection of water customers: those who both receive benefits and live in rented accommodation. The problem with that approach is that it would target help at many people who do not need it and exclude many who do need it. It is important that we do not over-simplify. Benefit recipients are a very diverse group of people, including, for example, pensioners and those in receipt of child benefit, disability benefits and a range of both in and out-of-work benefits.

Evidence from Ofwat shows that the majority—60%—of households at risk of water affordability problems do not receive means-tested benefits. Additionally, when universal credit is fully rolled out, it will replace all the existing wide range of income-related social security benefits and tax credits. Many of its recipients will be in work and have reasonable earnings. So receipt of universal credit alone is not a suitable indicator of possible eligibility for access to a social tariff. Similarly, no evidence suggests that living in rented accommodation is a reliable indicator of affordability problems.

Furthermore, many customers, whether or not in receipt of benefits, own their own property but nevertheless suffer real affordability problems. Precisely because water affordability problems are not simple, we have resisted a simplistic, top-down approach to social tariffs.

My hon. Friend the Member for Thirsk and Malton asked why water companies could not simply use a tick-box to ascertain whether people were happy to share their data. Anyone can agree to have their personal information shared, but that is quite different from the effect of new clause 3, which would require the Government to share personal information. That is perhaps the problem that we would have with new clause 3.

We must not forget that all social tariffs are cross-subsidised by increasing the bills of ineligible customers.

[Thomas Docherty]

I remind the Minister that our scheme would not involve cross-subsidisation. I am surprised that he is so against the use of benefit systems for social tariffs, because the Liberal Democrats in Scotland actively supported the introduction of social tariffs based on council tax benefit. What is the difference?

[Dan Rogerson]

I am seeking to point out that there are a range of benefits and a range of circumstances for people. The hon. Gentleman highlights one benefit. Of course council tax benefit no longer exists in this country in the format that it does in Scotland, as we have now moved over to local council tax forms of support, so there is a different system, which would not necessarily translate across. The hon. Gentleman is keen always to learn the lessons of Scotland, but some of these things do not apply simply, given the different frameworks following the devolution settlement.

We place emphasis on locally designed social tariffs developed in close consultation with the customers who will ultimately foot the bill, as opposed to crude, centrally imposed eligibility criteria. Although I very much thank hon. Members for their new clauses and understand their aspirations in tabling them, I would urge my hon. Friends to resist them.

[Miss McIntosh]

We have had a fruitful debate, but I express my disappointment that my hon. Friend the Minister has not seen fit to take a simple measure that already exists on the statute book and is not intended to be regulatory. He will, of course, have opportunities in the future to appear before the Select Committee that I chair and that will give him plenty of opportunity to explain at greater length why he is unable to support these new clauses. It is my fervent wish that such new clauses might perhaps find their way on to the notice paper in another place. However, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 4

Sustainable drainage and automatic right to connect

‘The Secretary of State shall by order made by statutory instrument implement the provisions of section 32 and Schedule 3 of the Flood and Water Management Act 2010, and any other provisions as the Secretary of State considers appropriate in connection with the coming into force of those provisions, no later than the end of the period of one month beginning with the date on which this Act is passed.’.—(Miss McIntosh.)

Brought up, and read the First time.

[Miss McIntosh]

I beg to move, That the clause be read a Second time.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

With this it will be convenient to discuss the following: new clause 5 —Abstraction reform—

‘(1) The Secretary of State shall by regulations make provision to introduce a reformed abstraction regime.

(2) An abstraction regime under subsection (1) must—

(a) be resilient to the challenges of climate change;

(b) be resilient to the challenges of population growth; and

(c) better protect the environment.

(3) An abstraction regime must be introduced no later than the end of the period of seven years beginning with the date on which this Act is passed.

(4) Regulations under this section—

(a) shall be made by statutory instrument; and

(b) may not be made unless a draft of the instrument has been laid before and approved by a resolution of both Houses of Parliament.’.

New clause 6—Onshore oil or gas activities—effect on water environment—

‘In Part 1 of Schedule 5 of the Environmental Permitting (England and Wales) Regulations 2010 there shall be inserted after paragraph 13 the following—

“Onshore oil or gas activities—effect on water environment

13A (1) Without prejudice to the operation of Regulation 35(2) and paragraph 5(1)(d) of Schedule 10 and of Regulation 35(2) and paragraph 7(j) of Schedule 20, the regulator shall refuse an application for the grant or variation of an environmental permit or for the transfer in whole or in part of an environmental permit if—

(a) the regulated facility to which the application for or transfer of the environmental permit relates is to be carried on as part of an onshore oil or gas activity; and

(b) the regulator is not satisfied that the applicant or the proposed transferee has made or will make adequate financial provision for preventing or mitigating pollution of the water environment, by ensuring all of the following—

(i) operation of the regulated facility in accordance with the environmental permit;

(ii) compliance with any enforcement notice or suspension notice or prohibition notice or mining waste facility closure notice or landfill closure notice which may be served on the applicant or transferee by the regulator under these Regulations;

(iii) compliance with any order of the High Court which may be obtained against the applicant or transferee under Regulation 42 for the purpose of securing compliance with any of the notices listed in sub-paragraph (ii).

(iv) compliance with any order of any court issued under Regulation 44 against the applicant or transferee; and

(v) recovery by the regulator of its costs upon any exercise of its power against the applicant or transferee under Regulation 57;

(c) for the purpose of this paragraph ‘onshore oil or gas activity’ means any activity for the purpose of exploration for or extraction of onshore oil and gas;

(d) for the purpose of this paragraph ‘adequate provision by way of financial security’ means financial provision which is sufficient in value, secure and available when required.”.’.

New clause 13—Unlawful communications—

‘(1) Section 109 of the Water Industry Act 1991 (sewerage: unlawful communication with public sewer) is amended as follows.

(2) Omit subsection (1)(b).

(3) In subsection (2)(a) after “close”, insert “or redirect”.

(4) In subsection (2)(b) omit “from the offender”.

(5) At the end add—

“(4) The expenses are recoverable from—

(a) the offender; or

(b) the owner of the drain or sewer.

(5) A person who obstructs a sewerage undertaker in exercising a power under subsection (2)(a)—

(a) commits an offence; and

(b) is liable on summary conviction to a fine not exceeding level 5 on the standard scale.”.’.

Amendment 2, in clause 21, page 62, line 19, after ‘undertakers’, insert ‘and highway authorities’.

Amendment 3, page 62, line 22, after ‘undertaker’, insert ‘or a highway authority’.

Amendment 1, page 62, line 23, at end insert—

‘(2A) Highways authorities must include in schemes for the construction of new roads, drainage systems with a specification designed to decrease the risk of flooding of public sewerage systems.’.

Government amendments 55 to 57.

Amendment 5, clause 51, page 107, line 5, after ‘premises’, insert ‘and small businesses’.

Amendment 6, page 107, line 7, after ‘premises’, insert ‘and small businesses’.

Amendment 8, clause 53, page 107, line 37, after ‘made’, insert

‘which shall include the occurrence of a 1 in 200 year loss scenario’.

Government amendment 58.

Amendment 7, clause 69, page 119, line 37, at end insert ‘“small businesses”.’.

Amendment 10, clause 80, page 124, line 1, at end insert—

‘(f) section [Sustainable drainage and automatic right to connect].’.

Amendment 11, page 124, line 1, at end insert—

‘(g) section [Abstraction reform].’.

[Miss McIntosh]

I shall try to keep my remarks brief, but this is the first occasion that I can remember when there has not been a parliamentary week between the completion of the business of the Public Bill Committee and consideration on Report and Third Reading. I should therefore like to pass on my thanks not only to the Committee staff who have accommodated our being able to table amendments in a timely fashion, but to all those involved in the House service who have enabled us to have amendments before us to debate this evening.

I shall go through the new clauses and amendments first and then give the reasons for them. I, along with a number of members of the EFRA Committee, have thought it fit to assist the Government yet again, and I hope that we have more success with this round. Anyone who knows me even remotely will know that I am becoming a compulsive obsessive on sustainable draining systems and that I will never pass over an opportunity to discuss SUDS. So, under new clause 4, we seek to introduce the sustainable draining system, which is woefully late. It was already given statutory powers under the Flood and Water Management Act 2010, and in new clause 4 I link that to the end of the automatic right to connect.

I should like to pay tribute to a great Yorkshireman, Sir Michael Pitt, who after the surface water flooding of 2007 attempted to get on to the statute book under the 2010 Act—the then Government’s legislation—the end of the automatic right to connect. I would go further with substantial developments than I have had the opportunity to do here. I should personally like Yorkshire Water and other water companies, as well as drainage boards, to be given the right to be statutory consultees on major new developments on the same basis as that enjoyed by the Environment Agency following the 2010 Act.

[Thomas Docherty]

It is worth pointing out that local authorities in Scotland place great emphasis on the opinion of Scottish Water, which is, indeed, treated as a major statutory consultee when local authorities are making decisions about developments.

[Miss McIntosh]

As a non-practising Scottish advocate, I would always say that the Scottish legal system has a great deal to commend it, but Scotland needs to remain part of the United Kingdom to allow us to benefit from that.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

That is for another day.

[Miss McIntosh]

Indeed, that is a different argument.

I shall give our reasons for new clause 4 in a moment. Abstraction reform forms the basis of new clause 5, in which we would return to what was in the White Paper, where the Government waxed lyrical on abstraction regimes. We particularly call for the abstraction regime to be introduced no later than the end of the period of seven years beginning on the date on which the Bill is passed and comes into legal effect.

Amendments 2 and 3 would insert into clause 21 the relevant language of “undertakers” and “highways authorities”. I am attracted to amendment 1, tabled by my hon. Friend the Member for Sherwood (Mr Spencer), and look forward to his speaking to it in due course. Amendments 5, 6, 7 and 8 would include small businesses in the flood reinsurance scheme, for reasons that I shall give in a moment.

[Sheryll Murray (South East Cornwall) (Con)]

Does my hon. Friend agree that the Flood Re clauses will help the people whom the Minister and I met in Looe last Saturday who were unable to get insurance because of repeated flooding? Flood Re will give them the opportunity to obtain realistically priced insurance.

[Miss McIntosh]

Our thoughts are obviously with my hon. Friend’s constituents who were sadly inundated during the recent flooding. I look forward to hearing further from her during the debate, as well as the Minister’s response.

Amendments 10 and 11 are consequential amendments to clause 80 arising from new clauses 4 and 5.

Before I explain why the amendments and new clauses are important, I should point out that we have seen three types of flooding in the past three or four months. The most recent examples have been of coastal flooding, but the Yorkshire and East Anglia coasts suffered tidal surges before Christmas to devastating effect; more than 80 houses were evacuated at Filey in my constituency and a number more in Whitby. However, we have become more accustomed to surface water and river flooding, and surface water flooding has been on the increase, and has become more of a problem, since 2007.

I want to hear from the Minister why SUDS have been delayed. The latest we heard was that there was an implementation date of April 2014. People have been trying to convince me that Brawby in my constituency suffered in 2013 not from flooding but due to surface water running off from fields and roads into the combined sewerage pipe, which then spilled water from the sewerage system back on to the road. In that case, the water did not go into anyone’s house, but at Castlegate in Malton when exactly the same thing happened—water ran off the road into the combined sewers—water then entered a house.

The missing link is an audit of existing SUDS and an examination of future SUDS when major developments and roads are built. However, from my experience, and given what we heard during the statement on the floods, there is a further problem to deal with. If water runs off a highway, it is the responsibility of the county council, the unitary council or the Highways Agency itself. However, if that water then runs into the combined pipes, it suddenly becomes the water company’s problem, although what has happened is not its fault. I hope that that unacceptable situation can be addressed through the measures that I and other members of the EFRA Committee have tabled, or through amendment 1, which was tabled by my hon. Friend the Member for Sherwood. If fields are saturated, as is the case at present—it was the situation in my constituency between September 2012 and March 2013—highways authorities must take responsibility and create a SUD to take the excess water. I accept that such a process would involve cost, but I applaud the Government’s approach on partnership funding, so we could look to public sector partners, or be more imaginative by looking for private sector partners, such as local businesses that might be interested in investing. However, we cannot allow a situation to continue in which surface water running off a road becomes the responsibility of a water company and thus forces it to take preventive measures, given that the highways authority—whichever one it might be—should accept responsibility for it.

The EFRA Committee’s report following our pre-legislative scrutiny of the draft Bill highlighted concern about the delayed implementation of the provisions on sustainable drainage systems in the Flood and Water Management Act 2010—it is now four years since that Act was passed. The Committee also criticised a lack of urgency on improving the management of surface water in its report on the water White Paper, so I hope that my hon. Friend the Minister will be able to clarify what has been happening and why the process seems to be so complicated. As the Committee has not been convinced that the Department’s work to improve the management of surface water has involved the urgency that constituents throughout the country would expect, new clause 4 would require the Government to implement the relevant provisions of the 2010 Act within a month of the Bill being passed.

19:45

The key provisions to be implemented relate to ending the automatic right to connect to public sewers in England and Wales. In addition, developers of substantial property developments should be required to construct sustainable drainage systems before carrying out any new construction work. When houses are built on a field in Filey that takes surface water, that water will be displaced to existing developments, or more likely to the school, which required a multi-million pound refit following the 2007 floods. Water will find its way.

We also want the Environment Agency, highways authorities, British Waterways, internal drainage boards and water and sewerage companies to be statutory consultees when the new SUDS authority makes a determination on an application for connection. The reason for that is simple: why should a water company be asked to connect what are often outdated Victorian pipes to a major development of 300 houses, for example, when that is simply not possible? It is necessary that action is taken prior to planning permission being granted so that developers can make the necessary arrangements and save a great deal of grief down the line.

Surface water flooding is a major contributory factor to the damage caused to homes and businesses. It is a relatively new threat, especially when surface water runs off fields and roads and then floods public sewers. Extreme weather involving sporadic and intense rainfall—whether that is due to climate change or because of another reason—has caused surface water flooding, and it is difficult accurately to predict where such flooding will occur. In 2009, the Environment Agency estimated that of the 2.4 million properties then at risk of flooding from rivers or the sea, some 1 million were also at risk of surface water flooding. In addition, 2.8 million properties are at risk of surface water flooding alone. If a house is built on land that is prone to flooding, it is highly unlikely to be eligible for insurance. However, in the case of Filey, an existing bungalow or the school can suffer due to displaced water—secondary flooding, almost—and then find that its insurance premium and excess increase. Does the Minister think that that is fair? I do not think that it is, so we need to bring forward SUDS as a matter of urgency and end the automatic right to connect.

Amendments 2 and 3, which would amend clause 21, are important so that highways authorities have the power to construct, maintain and operate sustainable drainage systems to reduce the volume of surface water entering public sewers. If sewage water backs up into people’s homes, we know that they will be displaced for much longer than if only clean water had entered the house, given the public health requirements that must be met before they are allowed to re-enter. Clause 21 already gives the power to sewerage undertakers. Our amendments would extend the power to highways authorities, and clarify the fact that highways authorities are able to construct SUDS to prevent surface water flowing into sewers. It is the link that is missing at the moment.

The Committee’s report on managing flood risk, which was published last July, recommended that DEFRA should liaise with the Department for Transport and the Department for Communities and Local Government on measures to encourage highways authorities to install SUDS, which will improve the management of water run-off from roads. This is intended to be a precursor to creating a statutory duty for highways authorities to take responsibility for surface water on new and existing roads, and to build SUDS to address the problem of surface water flooding. We cannot ignore the incidents and frequency of surface water flooding in addition to river and coastal flooding incidents. The amendments are intended to be helpful to the Minister and the Government in that regard.

Let me turn now to abstraction reform and new clause 5. The Committee has repeatedly called for the implementation of abstraction reform by 2022. I cannot see how we can consider introducing upstream competition without having the necessary reforms to abstraction in place.

[Thomas Docherty]

Hear, hear!

[Miss McIntosh]

It is always a delight to be supported by the hon. Gentleman.

The current system for managing abstraction of water from rivers and aquifers was introduced in the 1960s, and does not effectively address the severity of pressures on water resources caused by increasing demand from a growing population and an increasingly varied climate. The current system does not help abstractors to trade water effectively or provide an incentive for them to manage water efficiently. The current weaknesses in the system mean that it could start to constrain economic growth, reduce the resilience of the water supply and lead to environmental damage.

I note that the reasons and need for abstraction reform are acknowledged and discussed in the Government consultation “Making the most of every drop”, which was published last December. When my hon. Friend the Minister replies, will he address the issue of why there was so much emphasis on abstraction and resilience in the water White Paper, and why we lost that emphasis in the draft Water Bill and, to a certain extent, in the Bill before us this evening?

The detail of a new abstraction regime will need to be developed following the end of the Government consultation, which was launched on 17 December. Following the conclusion of that consultation, which will not be until March, DEFRA will have to produce legislative proposals and secure space in the highly charged legislative programme before a new regime can be introduced. Once again, these amendments are intended to be entirely helpful and constructive.

During the Committee stage, the Opposition tabled a new clause to provide that upstream reform may not be implemented until new primary legislation on the licensing of abstraction has been passed, and five years has expired to allow for its implementation. Sadly, that proposal was voted down.

New clause 5 would require the Secretary of State to introduce a reformed abstraction regime within seven years of the Act being passed—by 2021. That was on the basis of the evidence that we received, and we believe that that is the most accurate and cost-effective timetable for all the parties involved.

The abstraction reform must be resilient to the challenges of climate change, or extreme weather conditions, and population growth and better protect the environment. Those high-level requirements are entirely in line with the key commitments regarding abstraction reform in the water White Paper.

Let me turn now to upstream and abstraction reform. In our pre-legislative scrutiny report on the draft Water Bill, the Select Committee called on the Government to make clear in the Bill the key principles that underpin the introduction of upstream reforms. Further work needs to be undertaken to establish how upstream reforms can be introduced in a way that will preserve investor confidence, ensure that customers do not face increased bills and maintain resilience in the sector. I was extremely pleased to see the emphasis on resilience in the water White Paper.

Upstream reform aims to encourage upstream competition. I am talking about the input of raw or treated water into a water company’s network or the removal of waste water or sewage for treatment. Clause 1 unbundles all the existing licensing structures so that new entrants can sell raw or treated water into an incumbent’s network. It also looks at the wholesale authorisation to input water into a part of the system. The Environment Agency’s statistics show that on average, between 2002 and 2011, only 45% of the annual total of water licensed for abstraction in England and Wales was actually abstracted. Therefore, if all of this unused but already licensed water was abstracted, there could be a significant deterioration of the environment. We hope that when the Government look at abstraction and upstream reform, they will bear these thoughts in mind.

One other aspect of upstream reform and abstraction that the Government should consider is, very topically, the role of water companies and other private sector companies in flood prevention and in protecting homes and businesses from floods. The Minister will be familiar with the work of his Department in the Natural Environment White Paper, which looked at a project known as ScaMP—Sustainable Catchment Management Programme—involving United Utilities in Cumbria. Surely there must be much more scope for the type of partnership approaches we have seen in Pickering where the first soil of the reservoir will be dug tomorrow.

I will conclude my remarks by looking at flood insurance. Amendments 5, 6, 7 and 8 seek to amend clauses 51 and 53. The Select Committee took a lot of evidence in relation to Flood Re and the potential for reinsurance companies. Given how deeply wedded the Government are to Flood Re, I hope that they have not closed the door completely on reinsurance. In summing up this debate, perhaps the Minister will inform us how the state aid application to the EU Commission in Brussels is going to enable Flood Re to come into effect according to the Government’s timetable.

Clause 51 and the amendments we propose to it would have the effect of bringing small businesses within the ambit of Flood Re. There is considerable doubt and anxiety that small businesses will not be covered under the new Flood Re proposals. The impact that flooding can have on small businesses is clear. In 2001 and 2005, a dental practice in my constituency was flooded twice and the dental chair and all the computer equipment had to be replaced each time.

[Roger Williams]

I am sure that many Members will have a deal of sympathy for my hon. Friend and her concern for small businesses. I guess that the difficulty in getting this into legislation will be how to define a small business. Perhaps she has some ideas on that.

[Miss McIntosh]

Like my hon. Friend, I merely shadow DEFRA so I do not have the definition to hand, but I am sure that the Federation of Small Businesses will have a definition. I think it is generally deemed to be a business that has fewer than 50 employees, though many small businesses employ five or fewer or are often a single employee. The example I cited was that of a small dental practice with two or three dentists. The knock-on effect on an independently run, stand-alone dental practice of fitting, for the second time, a new dental chair and computer equipment goes beyond what would normally be expected. The knock-on effect on the insurance premium and excess for that dental practice was considerable and, possibly, unaffordable.

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[Steve McCabe (Birmingham, Selly Oak) (Lab)]

Is it the hon. Lady’s understanding that not only would small businesses and micro-businesses in commercial premises not be covered by Flood Re, but people who run businesses from their own homes would find it almost impossible to get insurance under the arrangements as they stand?

[Miss McIntosh]

I welcome the hon. Gentleman’s intervention, but I believe that homes generally are covered. Our Government have persisted with his Government’s arbitrary choice of 2009 as the relevant year, although this is a new Bill and we have a still relatively new coalition Government. I was very taken by what the hon. Member for Stoke-on-Trent North (Joan Walley) said in a previous debate about 2009 having been plucked from the air as an arbitrary date, and many people will not realise that homes built after 2009 on a floodplain are simply not covered by insurance. One of the purposes of tonight’s debate is to entice the Government to seek a different year—it could be 2013 or 2015, but let us be imaginative.

[Sheryll Murray]

Will my hon. Friend clarify the difference between an insurance policy that covers a business premises and one that covers a private home? Insurers, and the Association of British Insurers, would probably find it difficult to distinguish if we were to include small businesses, but because her amendment is well intentioned, I am sure that she will be able to clarify her differentiation.

[Miss McIntosh]

I am sure that the Minister will be well aware of the point that my hon. Friend is trying to make. There is great concern among the farming community that farms may be excluded whereas the farm house may be included. I commend my hon. Friend’s knowledge, because she worked in the insurance industry for a time. We need to know whether farms and people working from their own homes are going to be included, and what the position will be for small businesses, because this could put them out of business in some of the areas that we have seen flooded over the past two years in repeat flooding incidents. It has also been brought to my attention, although, unfortunately, too late to have tabled an amendment, that there is concern that blocks of flats—leasehold flats—may be excluded from this arrangement. That may be news to the Minister as well, but before Third Reading he might like to ponder whether such blocks will be excluded.

Our amendments to clause 51 address concerns relating to the exclusion of small companies such as charities and, as I have mentioned, farms under the new Flood Re proposals in the Bill. Any business based in a property that is primarily a residential one, and on which the occupier therefore pays council tax, would fall within the Flood Re scheme. Any business based in premises used primarily for business will not be covered. It is extremely important that we understand these issues. For the first time that I can remember, under the Flood Re scheme, once it is up and running, the Government will be added as an insurer of last resort if in the three years before the fund has built up we suffer an exceptional one-in-a-thousand-year incident.

In the Public Bill Committee, the ABI stated that Flood Re is not the solution for small businesses and that there is not a sufficient evidence basis for providing insurance cover for small businesses. The Federation of Small Businesses is concerned that small businesses that have affordability problems will not be covered, other than in respect of the insurance premiums or excess that they might seek to defray. Although they do not pay council tax, they do pay business rates and therefore could be rated in a similar way to household customers under Flood Re. There remain a lot of known unknowns with Flood Re as to why a council band rate has been chosen and which particular band rate has been opted for, but that is a separate debate. If there is a lack of evidence, further investigations and monitoring should be conducted with regard to small businesses and how they might cope with sourcing flood insurance in the free market.

Our amendments to clause 53 would have the effect of ensuring that insurance companies cover for any liability in excess of a one-in-200-year loss. Our amendments seek greater clarification of the Government’s role in this scenario of a one-in-200-year loss, and, in particular, how the taxpayer would be protected. As I have mentioned, the Government will, for the first time, be the insurer of last resort. In later years, after the fund has built up, I do not believe that that will be a problem, but we are seeking the Minister’s reassurance about what the implications will be in respect of the first three years. In Committee, the Minister confirmed that there is no Government liability for Flood Re and that the Government have made it clear that Flood Re is not guaranteed above the one-in-200-year level, so he might just like to revisit that and clarify the point.

Our amendment 8 would put the Government’s commitment in the Bill and create certainty for all concerned as to who will assume the additional liability. A one-in-200-year loss scenario would be the total value of claims from households reinsured through Flood Re that, during the course of a year, actuaries would not expect to be exceeded in 99.5% of years. Expressed in a different way, that would mean that the actuaries would be 99.5% confident that the limit would not be exceeded in any one year. It is important to note that that is not the same as a one-in-200-year flood event; the ABI has estimated that this would mean flooding six times worse than that experienced in 2007. Obviously, neither the Minister nor the insurance industry will yet be able to say what the cost of the recent floods has been, but I hope that he will see fit to lend his support to our amendments, and I commend them to the House.

[Joan Walley]

I am fortunate to follow the hon. Member for Thirsk and Malton (Miss McIntosh), who speaks with the greatest authority on these subjects, as I am sure everyone in the Chamber would agree. I particularly share her concern about drainage and surface water, and I agree with the points she made earlier about the need to ensure that highways authorities also have statutory duties, so that we can deal with this issue in a joined-up way. The debate on this group of provisions is important because we have had pre-legislative scrutiny by the Environment, Food and Rural Affairs Committee of the draft Water Bill and subsequent debate in that Committee. When the Minister addresses the various comments that have been made, we will see the extent to which the Government are listening to what Parliament is saying about the amendments. There may not necessarily be agreement on all of them; I am talking about the amendments that seek genuinely to try to improve matters on the whole issue of water. We have an opportunity to put in place legislation that is fit for purpose, so I hope that improvements will be made.

[Thomas Docherty]

It will probably not cheer my hon. Friend to hear that every single amendment tabled in Committee by Opposition Members, and indeed by coalition Members, was rejected, even though the Minister had previously agreed with them in the Select Committee.

[Joan Walley]

I am grateful to my hon. Friend for pointing that out. As I have said, the proof of the pudding will be in the eating, so we will wait to hear what the Minister says in response. Given that the Bill has further stages to go through before Royal Assent—I am glad to see the hon. Member for Brecon and Radnorshire (Roger Williams) nodding—I think that it is the Opposition’s duty to press the Government as much as possible, because it is important that Parliament does the right thing. Even if the Government do not make concessions at this stage, there will be an opportunity in the other place to put more flesh on the Bill and to make it much more fit for purpose. We will wait to see what further progress we can make.

I will speak briefly to new clause 6, which stands in my name, because I realise that many Members wish to speak. I want to introduce my comments by considering the issue of contaminated land. It is clear to me from the work I have done recently that there is a problem with how we deal with contaminated land. The current regime and the funding for it, particularly that which involves local authorities, is not fit for purpose, and it needs to be. We are dealing with a huge amount of legacy problems. I do not want the Government to set up a whole new regime without giving due consideration to the preventive measures that would need to be put in place in relation to fracking and shale gas extraction.

Madam Deputy Speaker, I am sure you would rule me out of order if I were to speak this evening on whether we should have fracking or shale gas extraction. The point I want to make is that if it is to go ahead, with the enormous tax concessions it currently has, there needs to be a proper regime in place that relates to water, water quality and concerns about contamination. It is for that reason that I have tabled new clause 6. I acknowledge that, were the Government to act on the concerns I am raising, there would need to be consequential amendments to paragraph 9 of schedule 20 to the Environmental Permitting (England and Wales) Regulations 2010, so I do not want the Minister simply to claim on a technical point that the new clause is unworkable because it is not thorough in that regard.

My understanding is that the principles that the polluter should pay and that prevention is much better than an end-of-pipe solution mean that we should be dealing at this stage with the procedures that need to be put in place to prevent contamination of water as a result of fracking. I point out that the new clause is supported by many non-governmental organisations working on the front line to deal with that, including the Royal Society for the Protection of Birds, the Angling Trust, the World Wide Fund for Nature and the Salmon & Trout Association.

New clause 6 would amend the Environmental Permitting (England and Wales) Regulations 2010 to introduce a liability guarantee to ensure that fracking companies have the funds available to pay the clean-up costs should an accident occur during the fracking process. I think that is eminently sensible. A similar amendment was tabled in Committee and briefly debated, as my hon. Friend the Member for Dunfermline and West Fife (Thomas Docherty) just pointed out, but it got nowhere. I believe that it was important to table it again for further consideration, mainly because the Minister’s response in Committee did not offer adequate assurances that the public purse would not be hit should an accident occur.

As I understand it, the Minister’s main argument was that the existing regulations on the statute book already ensure that operators are technically and financially competent to carry out fracking activities. However, a financial competence check is carried out only in specific circumstances, and competence is not the same as securing a form of financial provision or guarantee for long-term environmental liabilities. In other words, it does not guarantee that a company has put in place funding or insurance for dealing with an accident; it only provides a snapshot in time of its financial situation. I am reminded of the complex discussions there have been about the ownership of football clubs and where due diligence should lie.

20:15

It is vital that anyone looking to carry out fracking should have the finances in place to pay for any remedial work that is needed. Tests for technical competence, which the Minister also mentioned in Committee to reassure Members, are also limited. Even the most technically competent operator might not be able to avoid an environmental impact as a result of its operation.

I understand that the hon. Member for Brecon and Radnorshire made the point in Committee—I was not party to those discussions but read the reports assiduously—that the amendment was intended simply to ensure that there is a plan in place for the low-probability but high-risk scenario of a pollution incident occurring. Although a stringent and well-enforced regulatory regime will mitigate risk, it cannot eliminate it altogether. It is for that reason that we need to look seriously at making that amendment before the Bill receives Royal Assent.

The importance of protecting ground and surface water must not be underemphasised. In the midlands—I represent a midlands constituency—40% of public water comes from ground water. The figure is even greater—more than 70%—in the southern regions of England. Not only do we depend on that resource for drinking water, but farmers and industries across the country depend on healthy aquifers, which are estimated to be worth £8 billion to the economy. We must look at this in the round, because we are talking about the food industry and food security. Are we really going to risk contaminating all that simply by failing to put proper safeguards in place when introducing legislation?

The Government must therefore put in place adequate provisions to ensure that companies are able to pay for the clean-up of a contamination incident. There is much peer-reviewed evidence to suggest that that is something we should be prepared for. For example, a study in the USA last year examined stray gas concentrations in 141 drinking water wells near Marcellus shale gas extraction sites in Pennsylvania. It detected methane in 82% of drinking water samples. Average concentrations were found to be six times higher for homes within 1 km of natural gas wells.

Some would argue that our regulatory regime is much more stringent than that in the US and that we can therefore prevent such accidents from occurring. Although it is true that the existing regulatory regime, if properly implemented and enforced, should mitigate most risk, that does not detract from the need for the new clause. Even if liability can be proven, there remains the risk that companies could go bankrupt, leaving taxpayers and water companies with the clean-up costs.

The precedent for that has already been set. I note that several Members present this evening represent former coal mining constituencies. Those of us who have dealt with the legacy of mining pollution will know that the cost of clean-up often falls on the taxpayer. In 1994 it was estimated that abandoned coal mines had polluted more than 400 km of rivers. Treatment schemes and remedial works undertaken by the Coal Authority have helped to protect the environment and people, but at a cost of tens of millions of pounds a year to the taxpayer, not the polluter. It is vital that we follow the principle that the polluter pays.

There is also concerning evidence that regulation is not being adequately enforced. I understand that at Preese Hall, the only site in the UK to be hydraulically fractured to date, the Environment Agency did not issue the environmental permits that were required. At the same time, the agency has committed to a dramatic reduction in the time it takes to issue permits. Streamlining regulation and issuing permits in this way is all well and good in some circumstances, but as we are dealing with a new technology in the UK with unknown risks, we should not be looking to streamline regulation until we can be certain that proper procedures are being followed.

The new clause would ensure that the fracking companies that will benefit from the most generous tax regime in the world for this industry have the funds available to pay for the cost of clean-up should an accident occur. Since we are repeatedly reassured that the risk of an accident occurring is minimal, why should we be concerned that the new clause would impose unreasonable costs on the industry? If there is a minimal risk, there is not a huge likelihood that it will be needed, but it would ensure that in the event of an accident the industry did not impose unreasonable financial and environmental costs on the public.

I wish briefly to refer to aspects of the Flood Re scheme and the amendments that relate to it. The adaptation sub-committee, which advises the Committee on Climate Change, has, through its chairman, Lord Krebs, made various points about the importance of getting the scheme absolutely right at this stage rather than later on. In a letter that he wrote to the Secretary of State for the Environment, Food and Rural Affairs about the awareness of flood risk and the importance of taking account of rising flood risk levels, he said that there are at least five issues that the Government need to address but have not yet done so. Given that, as we heard earlier in the Secretary of State’s statement on flooding, we know that we are now going to get events of this kind far more regularly, it is incumbent on Parliament to make sure that the insurance scheme that is being introduced is absolutely fit for purpose.

[Mr Spencer]

I rise to speak to amendments 1, 2, 3 and 10, particularly amendment 1, which stands in my name.

There is enormous frustration in Nottinghamshire about the fact that when a new development takes place there is an obligation to connect and that often means that the public sewer, which is already under pressure, becomes flooded. Many Members will recognise that villages in our constituencies have grown over a number of decades. Often in Nottinghamshire, those villages have a working sewerage system but no one has developed a surface water system. That means that when somebody builds a new conservatory at the back of their house the local authority allows them to put the downpipe into the public sewer, and that puts pressure on an already pressurised sewerage system.

The problem is exacerbated when a new road is built. There is a good example of that in Nottinghamshire, where the Hucknall inner relief road, which has been permitted by Nottinghamshire county council, is about to go right through the town of Hucknall, and the plan includes dumping the surface water from that new road into an already flooding public sewerage system. That is unacceptable. To put it into Sherwood language, while we have got diggers on the ground digging up the whole town to put a new road in, it is not beyond the wit of man to put an enormous pipe underneath the road to take the surface water and not put it into the public sewer and flood the homes of people who are already suffering from sewage flowing through them.

[Neil Carmichael (Stroud) (Con)]

We have exactly the same problem in my constituency of Stroud in connection with Slimbridge and a relatively old sewerage system. The real question is how we manage to calibrate the capacity and quality of the systems, certainly some of the older ones, within the context of this Bill.

[Mr Spencer]

It is very difficult, but we can make sure that anything new that is built does not make the problem worse. We have an obligation to try to improve things as developments take place. What causes enormous frustration is that the bodies responsible, whether it is the sewerage company or the highway authority, pass the buck so that, in effect, the person who causes the problem does not take responsibility for solving it but it falls on someone else.

Another example is a small village in Sherwood called Farnsfield, where there is already flooding. A developer is applying to put a large number of houses and new roads at the edge of the village, and there is no surface water system. The poor people in the old village who are suffering with sewage flooding their homes are going to have that problem made much worse if the new development takes place and the surface water is put into an already overflowing sewerage system. I appeal to the Minister to see whether he can find a way to encourage, if not force, local authorities to take responsibility when they allow planning permission for a new highway or road and make sure that the highway authority that is developing the road, or the developer that is developing a new estate, picks up the cost of solving the problem that they are creating and disposes of the surface water responsibly rather than putting pressure on an existing, overflowing sewerage system.

[Mr Andrew Love (Edmonton) (Lab/Co-op)]

I want to speak to new clause 13, which I have tabled. It is headed, “Unlawful communications”. Several hon. Members have asked me about that, and I apologise because it is a little confusing. It does not deal with unlawful communications but unlawful connections, or, more colloquially, misconnections. The new clause would amend section 109 of the Water Industry Act 1991, and that is why it uses the word “communications”, which is used in that Act. It is exactly the same as an amendment that was included in the draft Flood and Water Management Bill of 2009 but sadly had to be dropped from the final Bill because of a lack of legislative time as we approached the 2010 general election. The reason for tabling the new clause is to find out why the provision has not been included in this Bill.

Misconnections occur when separate surface water and foul water sewers are wrongly connected by households or businesses. The reasons for this range from the over-enthusiasm of household DIYers to cowboy builders and plumbers connecting to the first and most convenient sewer, which is often the wrong one. The consequence is pollution of groundwater, watercourses, streams, rivers, and, in my case, a local lake. The problem comes to light only as a result of the visible pollution that we can see, which is sometimes accompanied by some rather unpleasant smells, as has affected local communities in my constituency.

The cost of tracking this down once it has been discovered is very difficult to quantify, because it is extremely difficult to find out where the misconnections have taken place. It is also very time-consuming. As a result, it is a significant problem, particularly in more densely populated areas. A large number of misconnections are occurring in parts of my constituency.

Thames Water estimates that one in 10 homes in its area are misconnected. The Department for Environment, Food and Rural Affairs estimates that 300,000 homes in England and Wales were misconnected in 2009 and, ominously, that the number will increase to 500,000 by 2015.

Part of the solution, of course, is better information about and greater awareness of the problem of misconnection. Some steps have been taken to try to address that. Thames Water has set up an industry strategy group, as have other water companies. My local authority has sent leaflets to areas particularly badly affected. Of course, we can do better, but the reality in my constituency and up and down the country—this is verified by DEFRA figures—is that, as current misconnections are dealt with, others are adding to the problem and it is getting worse, not better. I could cite instances in my constituency and I am sure that other Members have similar examples.

Part of the reason for the problem is that, although water companies can disconnect from the connected drains, they cannot redirect them into correct sewers; only local authorities have the power to do that. If, for any reason, the householder or business does not carry out the works, the local authority has powers to do so and to bill that individual or organisation for the costs. New clause 13 seeks to grant water companies the same enforcement powers as those available to local authorities. They could then deal directly—they already deal with other aspects of the problem—with misconnections.

20:30

This is not intended as a strike against the work of local authorities. Indeed, in the Greater London area—I suspect the situation is similar in other parts of the country—many local authorities are doing tremendous work. One London local authority—the borough of Ealing—has a 90% record on sorting out these problems and the majority of local authorities achieve greater than 50% of corrections within a reasonable time frame. My own local authority achieved 64%. I am not, therefore, having a go at local government, but one London borough—I will not name it—has achieved only 12% of corrections. Indeed, it has misconnections going back to 2005.

Local authorities are not incentivised or always resourced to give the priority necessary to misconnections. The situation is getting worse: local authorities are finding it difficult, adjustments have to be made due to the austerity programme and this is one of the areas likely to be under considerable pressure.

There would be benefits from allowing water companies to carry out this sort of work. It should be more efficient if the same organisation did all the preparatory work and then carried it through. That should also mean that the work would be completed quicker and that it would cost less, which might incentivise some households and businesses to correct the problems they have created.

I commend new clause 13 on the simple basis that two bodies—the local authorities and the water companies—should have the opportunity to carry out the work. It may make a significant inroad into the problem. If there is confusion, the Department should play a co-ordinating role and bring local authorities and water companies together. There are real benefits to be achieved, including a significant environmental benefit. The lake that has been polluted in my constituency is a running sore. The same is happening to water courses and rivers up and down the country. We could really make a difference through this very simple procedural measure.

I ask the Minister in a positive spirit whether he has thought seriously about accepting the new clause. If there are good reasons for refusing to do so, I would accept them, but it seems to me to be a relatively simple measure that could make a significant difference.

[Richard Benyon]

I rise to speak briefly to new clause 5, but I also want to touch on the comments made by my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) about Flood Re. I was intrinsically involved in the tortuous and detailed negotiations with the industry to try to come up with something from zero when the coalition Government came into office. We had urgent and overdue discussions about what would replace the statement of principles. All hon. Members would agree that it is absolutely right that this needs to be scrutinised by the House, with ongoing scrutiny of how it works. I hope that the Minister will agree that flexibility should be built into it to enable it to be changed as circumstances change in years ahead.

However, on behalf of my constituents, who suffered some of the worst flooding in the south of England in 2007 and have continued to face flooding in certain areas since, I beg the House not to unpick the detailed negotiations that have resulted in the Flood Re proposal before the House. For example, if we started to introduce a wide range of businesses into the scheme, that would completely change the complex mathematical—probably algorithmic—calculations that will make it viable. I want as many properties to be included as possible, but if we start to say that we want it to include band H houses, different types of businesses, and houses built after a certain date, hon. Members have to understand that that would come at a cost. The cost might be that the industry walks away and that we have nothing, with constituents who live in areas at risk of flooding facing the really terrifying prospect, when we have the kind of weather we are currently experiencing, of not being able to get insurance. The affordability factor that we have managed to build in would be gone, so I just urge the House to have a little caution when—rightly—scrutinising this Bill, which I really believe is right and should become law as quickly as possible.

I want to speak about new clause 5, but I should have started by reminding hon. Members about my entry in the Register of Members’ Financial Interests. I have been accused of obsessing about over-abstraction, and I have been obsessed about it since long before I entered the House. More than 20 years ago, I set up an environmental body relating to a small river in my constituency, the River Pang, which is a chalk stream. It was one of the National River Authority’s ALF—alleviation of low flow—schemes. We managed to stop over-abstraction by a water company at the top of the aquifer and to restore the river. It is currently in desperate need of further restoration, as are others in my area, particularly the River Kennet. It seems strange to talk about over-abstraction when many of our rivers are overflowing at this time, but it is nevertheless a very serious issue. The River Kennet is a site of special scientific interest, and has overlaying European and national designations. It is an example of a river for which we have to find a better solution.

When I was in the Minister’s role, I would dearly have loved to bring meaningful abstraction reform before Parliament, but it would have been wrong to do so. As has already been said, we have been dealing with a regulatory system that dates back to the 1960s, when people did not mention the words “climate change” and we did not have the levels of population and demand that we now face, particularly in the south and east of England. When the consultation and all the work being done by the Department and the Environment Agency is over, I know that we will have about 30,000 abstractions that affect the livelihoods of our constituents and the ability of their businesses to perform and that have a huge impact on our environment. I hope that the House agrees that we must get the system right, and that we legislate in haste and repent—in opposition—at leisure. I hope that we get this right, and that the reassurance the Minister will be able to give us will set my mind, and those of other hon. Members, at rest.

I have said that the problem is complex. Organisations such as the WWF have been a fantastic help to the Government and hon. Members in our thinking about how we should deal with over-abstraction. I regret that the abstraction incentive mechanism originally hinted at in the water White Paper has been diminished in relation to its ability to address abstraction where it will cause real problems to the environment. I hope that it comes forward in the future as a very useful tool that values water differently where it is scarce and where it is plentiful.

There are technical measures in the Bill that will not be talked about in the Dog and Duck, but that are groundbreaking—perhaps game changing would be a better description. The change from using the environmental improvement unit charge method of assessing over-abstraction to putting it in the five yearly price review is a major one that will make a big difference to how we deal with the environmental damage that is caused by over-abstraction.

I looked closely at new clause 5, which was tabled by my hon. Friend the Member for Thirsk and Malton and other Members. I wondered whether it might be an elegant way forward. However, I think that it would face problems. There would be problems in getting the legislation through Parliament. It undoubtedly uses Henry VIII clauses and would give a dramatic power to the Committee Corridor, as opposed to the whole House. That would concern many Members of this House and would certainly concern Members in another place, where they do not like Henry VIII clauses. I hope that the Minister will address that in his remarks.

I then looked at how such secondary legislation would implement the abstraction reforms that we want to see and that will result from the current consultation and the implementation of a new scheme. If that could all be dealt with in the obscurity of the Committee Corridor to a level that satisfied my concerns and the concerns of the many organisations that are worried about over-abstraction now and in the future, that would be fine. However, the use of secondary legislation is a limiting factor. I regret that in my time as a Minister, I did not get my head around what an abstraction Bill in the next Parliament would look like. I suspect that it will be a relatively complicated document. That legislation would be diminished if it was dealt with as secondary legislation, as under new clause 5.

I hope that the Minister will give two assurances. First, I hope that he will address the concerns that were put eloquently by the Chair of the Select Committee, my hon. Friend the Member for Thirsk and Malton, and my concerns about whether such legislation would deliver what we want it to deliver. The second assurance is perhaps an impossible one for him to give, but I will ask him to give it anyway. I hope that he will give an assurance that the Government are as determined as they were when they put together the water White Paper—a document that was roundly welcomed by Members in all parts of the House, the industry, NGOs and every stakeholder I can think of—that abstraction reform will be followed up by his party and mine, and hopefully by other parties, and that it will race through the House in the early years of the next Parliament so that we can see meaningful abstraction reform that addresses the problems that blight so many rivers. This is not just an environmental problem; more fundamentally to many of our constituents, it is an economic one. Not only do we rely on rivers and aquifers for aesthetic reasons and leisure activities; they are fundamental to our economy. That is why it is so important that we get abstraction reform right. I hope that the Minister will give us those assurances this evening.

[Steve McCabe]

I will be extremely brief and confine my remarks to Flood Re. With all due respect to the hon. Member for Newbury (Richard Benyon), if this is the best that three and a half years of intense negotiations can produce, I am not sure that congratulations are in order. As I understand it, the scheme will cover only a fraction of the 6 million homes that are deemed to be at flood risk.

I want to ask the Minister three questions. First, if it is true that there is a 60% chance that the scheme will fall into deficit, and if, as Professor Diacon, who was asked to review it, said, it relies on luck in the first place, what are the contingency plans if the scheme falls apart? Secondly, what will be the trigger for the Government to intervene on the insurance companies if insurance premiums for everyone else, who will not be covered by the scheme, continue to rise to such a point that they cannot afford them?

20:45

There is not a lot of mass flooding in my constituency, but in one particular area, on the River Rea near Dogpool lane in Selly Park, homes have been flooded. It was the same problem that everyone will be familiar with—people were washed out and their belongings destroyed. In my question following today’s statement, I mentioned a constituent whose insurance premium has gone up by 50% in 12 months. If insurance premiums continue to rise, what will be the trigger for doing something about it? If there is no trigger, this will all have been a waste of time.

Finally, if Flood Re is not going to cover small and micro-businesses, what is the Government’s plan for them? Are we simply going to stand aside and see them washed away?

[Thomas Docherty]

May I wish you a warm and happy new year, Madam Deputy Speaker?

We have had a thoughtful and knowledgeable debate over the past hour and a half or so. I commend two Select Committee Chairmen and a former Minister for their remarks, even if we did not agree with every part of the former Minister’s interpretation of the past three and a half years.

Time is limited, so I hope the House will understand if I restrict my remarks to some of the new clauses. Unsurprisingly, the Opposition agree with the Environment, Food and Rural Affairs Committee about SUDS. I am sure that, as a former member of that Committee, the Minister will agree with himself on the issue. The hon. Member for Thirsk and Malton (Miss McIntosh), who chairs the Committee, was right to highlight the increasing burden being placed on a network that, in many cases, is struggling to cope. We have heard that the ability to cope with additional development is not always given the consideration that it needs. I hope that the Minister will reflect on the cross-party support on that point that the hon. Lady demonstrated.

There is a broad coalition of opinion on abstraction reform, to which the hon. Member for Newbury (Richard Benyon) alluded, but it is not just made up of what he might describe as the usual suspects—the non-governmental organisations involved. That well known environmental organisation the Food and Drink Federation made a submission to the Public Bill Committee. We welcomed the Minister’s announcement in the Committee. It was disappointing that his colleagues chose to make it to the media before it was made to Parliament, but of course I assign no responsibility for that to him. We welcome the consultation, but we agree with the Environment, Food and Rural Affairs Committee that it is long overdue.

I say to the hon. Member for Newbury that the Government certainly could not be accused of legislating in haste, because after almost four years we simply have not seen sufficient progress on abstraction reform. My hon. Friend the Member for Garston and Halewood (Maria Eagle) and I look forward as Ministers in the next Parliament to taking such legislation through with due speed, and we look forward to the support of Conservative Members.

My hon. Friend the Member for Stoke-on-Trent North (Joan Walley), the Chair of the Environmental Audit Committee, made an incredibly thoughtful and logical speech, and we support her new clause 6. We are clear that, as she said, this is not a debate about the merits and demerits of fracking technology. It is about trying to ensure that there are safeguards in place. Her constituency is still suffering the fallout from open-cast mining not having had sufficient guarantees in place, so I understand exactly where she is coming from.

Given that time is incredibly short I will bring my remarks to a conclusion, but it is clear that the other place will have an important job to do in the weeks ahead. A number of issues in this group of amendments—and indeed elsewhere—have not been addressed, and my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) is right to say that we must consider Flood Re in some detail. With the greatest respect, the Opposition will not simply go along with the Government because they have come to a deal and say that that is good enough; we need more detail from Ministers. We look forward to the Bill making progress but we will, as I have suggested, press some amendments to a vote.

[Dan Rogerson]

In the time available I shall seek to respond to as many points as I can. The Chair of the Environment, Food and Rural Affairs Committee, the hon. Member for Thirsk and Malton (Miss McIntosh), has been a strong advocate of and campaigner for sustainable drainage over many years, and the Government are pressing ahead and implementing the requirement to secure approval for sustainable drainage systems for new developments under schedule 3 to the Flood and Water Management Act 2010. Regrettably, it is looking increasingly unlikely that we will be in a position to ensure that the scheme comes into force this April, which was our preferred date for implementation as stated previously. I accept that that will be a great disappointment for the hon. Lady and other hon. Members, but I remain committed to introducing the legislation at the earliest opportunity. I plan to lay the relevant affirmative regulations by April, to underline the Government’s commitment to addressing flood risk.

I share the hon. Lady’s frustration that the process has been so protracted, but we are working with developers and local government to develop the processes, standards and guidance that are an integral part of a new SUDS approvals and adoption regime, rather than just imposing them. That takes time, but it is time well spent if the end result is an approach that is fair to all parties and successful from the outset because local government and developers are fully prepared to take on their respective new responsibilities.

Amendments 1, 2 and 3 address flooding on highways or that caused by the run-off from highways. The causes of flooding can be complex and it is difficult to make a general statement about them. There are already legislative powers to ensure that highway surface water drainage does not pollute or flood, and section 100 of the Highways Act 1980 enables the local highway authority to take action related to the drainage of highways—for example, it can construct drains or erect barriers on the highway or adjoining land to divert surface water into an existing drain.

The majority of new road drainage systems are not connected to the public sewerage system. Typically, they discharge under designated conditions, either to a watercourse or a storage pond with controlled exits to a watercourse, or alternatively soak into the ground in a designed manner. A decision to connect new highway surface water to a combined or foul public sewer can be made only subject to an agreement with the receiving water authority. There is no automatic right to connect new highway drainage to the public sewerage system. We recognise, however, that in some cases local flooding may be exacerbated by drainage from existing highways, and as I have said, the 2010 Act places a duty on lead local flood authorities to develop a local flood risk management strategy for their area. I hope hon. Members will be reassured by that.

Let me seek to address the points raised by the Chair of the Environment, Food and Rural Affairs Committee about flood insurance, and amendments 5, 6 and 7, which relate to small businesses. Flood Re has been specifically designed to recreate the current cross-subsidy in the domestic home insurance market. There is little evidence that the same type of cross-subsidy applies in the commercial insurance market, and the majority of business insurance policies are already priced to risk. A recent English business survey of more than 9,000 businesses in England found that fewer than 1% of businesses had experienced difficulty getting property insurance in the last year due to the risk of flooding, and that no businesses had been refused insurance cover due to such a risk.

As outlined by the Association of British Insurers in its evidence session, businesses tend not to face the systematic issues that householders experience. We must also remember that Flood Re is funded through a levy on all household insurance policies. We have deliberately set that at £10.50, which the ABI estimates is the same as the current cross-subsidy. Widening Flood Re to include small businesses would significantly increase costs. We do not want someone living in a council tax band A property, for example, to subsidise the cost of insuring a private company that potentially earns up to £1 million a year. I am also mindful of the need to comply with state aid rules. Government intervention to support business would be carefully scrutinised and at greater risk of rejection—I know the hon. Lady is familiar with that issue.

On flood insurance and amendment 8, which was tabled by the same group of hon. Members, we are clear that we are talking about a one-in-200-year annual loss, not a one-in-200-year flood event. If Flood Re is legally responsible for claims above a one-in-200-year level, the cost of the liability could be prohibitive. Likewise, if the Government took on a liability beyond a one-in-200-year level, we could expose the taxpayer to extremely large and unpredictable costs. In such a catastrophic situation, many more homes than would be insured by Flood Re are likely to be affected. That is why the memorandum of understanding says that the Government of the day would work with Flood Re and representatives of the insurance industry to decide how any available resources should be distributed to Flood Re customers if flooding exceeds such a level.

Government amendment 58 is a technical one. On the issues raised by the hon. Member for Stoke-on-Trent North (Joan Walley), the Chair of the Environmental Audit Committee—we discussed them in Committee—the Government remain convinced that the existing provisions would be helpful enough in terms of the checks on companies’ financial probity and their technical ability. However, she rightly raised issues that could be addressed following Lord Krebs’s intervention in his letter. I am pleased to hear her calling for things such as betterment, meaning better quality reinstatement, and more information to customers, for which Lord Krebs has also called. Many hon. Members would like to include that in discussions with the ABI.

On misconnections, the hon. Member for Edmonton (Mr Love) is aware that local authorities currently have the power. We are not convinced that giving the power to companies would be helpful. His points are on the record and it is right that the Government take account of what he has said. I am happy to talk to him in future to see that we get the right response.

There is only a very little time for me to respond to all the points hon. Members have made on abstraction. My predecessor as Minister, my hon. Friend the Member for Newbury (Richard Benyon), has rightly said that there is agreement in the House that we want progress. Action is taking place under the existing regime—the Environment Agency has changed 77 licences since 2008, returning around 75 billion litres of water per year—but we need to go much further. That is why we are consulting. The process is under way and will lead to legislation, hopefully with the support of all parties, to reform that complicated system. However, we need to do that properly. I do not believe it is appropriate to do it in the way suggested in the new clause.

Finally, Government amendments 55 to 57, which I have tabled, seek to clarify the resilience duty. We want to make it absolutely clear to hon. Members that we are covering environmental sustainability. I hope the changes we are making to the resilience duty will reassure hon. Members who believe that we need to elevate the sustainable development duty that we are looking at environmental resilience as well as social and economic resilience.

[Miss McIntosh]

We have had a good debate on Flood Re. The Environment, Food and Rural Affairs Committee wanted to flag up the point that the proposals do not reflect the value for money of other aspects of Government policy.

We have also had a good debate on abstraction, but the jury is out. The Bill would be a retrograde step if there is a severe drought between now and whenever the Government introduce provisions.

Obviously, both personally and on behalf of the Committee, I am disappointed that the SUDS provisions will not be in place. The House would wish to record its disappointment and the fact that, if the regulations will be introduced only in April, there is time before those who must apply them are in a position to do so.

However, mindful of the opportunities that hon. Members have had to debate the matter, and that the Bill must continue its passage, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.



New Clause 7

National affordability scheme

‘(1) The Secretary of State must, by order, introduce a National Affordability Scheme for water.

(2) The National Affordability Scheme must include an eligibility criteria, determined by the Secretary of State, in consultation with—

(a) the Water Services Regulation Authority; and

(b) the Consumer Council for Water.

(3) An order under this section—

(a) shall be made by statutory instrument; and

(b) may not be made unless a draft of the order has been laid before and approved by resolution of each House of Parliament.’.—(Thomas Docherty.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

20:59

Division 166

Ayes: 216

---

Labour: 210
Plaid Cymru: 3
Green Party: 1
Democratic Unionist Party: 1

Noes: 291

---

Conservative: 244
Liberal Democrat: 45
Independent: 1

21:12

Proceedings interrupted (Programme Order, 25 November 2013).

The Deputy Speaker put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).

New Clause 11

Duties of undertakers to furnish the Secretary of State with information: annual review

‘(1) Section 202 of the Water Industry Act 1991 (duties to undertakers to furnish the Secretary of State with information) is amended as follows.

(2) After subsection (1A) there is inserted—

“(1B) Any company with a duty under subsections (1) and (1A) must furnish the Secretary of State and the Authority with an annual review which provides information about—

(a) their performance;

(b) the total amount of investment;

(c) their taxation structure;

(d) their corporate structure; and

(e) the total amount of dividends paid to shareholders.

(1C) Information under subsection (1B) must be provided prior to the publication of the annual statement of the Secretary of State under section 2A.”.’.—(Thomas Docherty.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

21:13

Division 167

Ayes: 218

---

Labour: 211
Plaid Cymru: 3
Social Democratic & Labour Party: 2
Green Party: 1
Conservative: 1
Democratic Unionist Party: 1

Noes: 289

---

Conservative: 243
Liberal Democrat: 44
Independent: 1

Clause 12

Arrangements for water undertakers to take water from other persons

Amendment made: 13, page 48, line 8, after ‘213’, insert ‘(2) to (2B)’.—(Dan Rogerson.)

Clause 22

Amendments made: 55, page 63, line 25, leave out ‘against’ and insert ‘regards’.

Amendment 56, page 63, line 32, after ‘resources’ insert ‘in sustainable ways’.

Amendment 57, page 63, line 32, after ‘demand’ insert

‘for water so as to reduce pressure on water resources’.—(Dan Rogerson.)

Clause 29

Standards of performance: water supply

Amendments made: 14, page 69, line 42, after ‘retail authorisations’, insert ‘or restricted retail authorisations’.

Amendment 15, page 69, line 42, leave out ‘Secretary of State’ and insert ‘Minister’.

Amendment 16, page 70, line 3, leave out ‘Secretary of State’ and insert ‘Minister’.

Amendment 17, page 70, line 6, leave out ‘Secretary of State’ and insert ‘Minister’.

Amendment 18, page 70, line 8, leave out ‘Secretary of State’s’ and insert ‘Minister’s’.

Amendment 19, page 70, line 31, at end insert—

‘(6) In this section—

“the Minister” means——

(a) the Secretary of State, in relation to supplies of water made in accordance with a retail authorisation;

(b) the Welsh Ministers, in relation to supplies of water made in accordance with a restricted retail authorisation;

“prescribed” means prescribed by regulations made by the Minister.”.’.

Amendment 20, page 70, line 47, leave out ‘prescribed’ and insert ‘specified in the direction’.

Amendment 21, page 71, leave out lines 16 to 18 and insert—

‘(2) In the application of section 39 by virtue of subsection (1)—

(a) a reference to a water undertaker is to be treated as a reference to a water supply licensee, and

(b) a reference to the Secretary of State is to be treated as a reference to the Minister (as defined in section 38ZA(6)).

(3) Regulations under section 38ZA are to be made by statutory instrument.

(4) A statutory instrument containing regulations under section 38ZA is subject to annulment in pursuance of a resolution of—

(a) either House of Parliament, in the case of regulations made by the Secretary of State;

(b) the National Assembly for Wales, in the case of regulations made by the Welsh Ministers.

(5) Section 213(2) to (2B) applies to regulations made by the Welsh Ministers under section 38ZA as it applies to regulations made by the Secretary of State.”’.—(Dan Rogerson.)

Clause 30

Standards of performance: sewerage

Amendment made: 22, page 72, line 31, leave out ‘prescribed’ and insert ‘specified in the direction’.—(Dan Rogerson.)

Clause 64

Expenses of relevant bodies

Amendment made: 58, page 115, line 34, leave out ‘relevant insurers’ and insert

‘insurers of a description specified in the regulations’.—(Dan Rogerson.)

Clause 77

Transitional, transitory or saving provision

Amendment made: 59, page 123, line 20, at end insert—

‘( ) Schedule (Orders under section77: further provision) (further provision about orders under this section) has effect.’.—(Dan Rogerson.)

New Schedule 1

Orders under section 77: further provision

Introductory

1 (1) The provision that may be made by an order under section 77 (“a section 77 order”) includes such provision as is mentioned in this Schedule.

(2) Nothing in this Schedule affects the generality of section 77.

New retail authorisations and the threshold requirement

2 (1) A section 77 order may make provision for the threshold requirement (see section 17D of the Water Industry Act 1991) to have effect for a relevant period in relation to the supply of water to any premises, where the supply to those premises is made in connection with the introduction of water into the supply system of a water undertaker under a new wholesale authorisation.

(2) Provision under sub-paragraph (1) may in particular include such modifications of Schedule 2A to the Water Industry Act 1991 (forms of authorisations given by water supply licences) as appear to the Secretary of State to be appropriate.

Modifications relating to new wholesale authorisations

3 (1) Where a section 77 order makes provision as regards new wholesale authorisations, that provision may include provision for provisions of the Water Industry Act 1991 to have effect for a relevant period with such modifications as appear to the Secretary of State to be appropriate.

(2) Provision under sub-paragraph (1) may include provision for applying old provisions of the Water Industry Act 1991 with such modifications as appear to the Secretary of State to be appropriate.

(3) Provision under sub-paragraph (2) may in particular provide for the application of provision in old section 66D(2) to (8) for the purpose of determining—

(a) the period for which, and

(b) the terms and conditions on which,

a water undertaker’s duties under new section 66B or 66C are to be performed.

(4) Provision under sub-paragraph (2) may in particular provide for the application of provision in old section 66E for the purpose of determining charges payable in respect of the performance of a water undertaker’s duties under new section 66B or 66C.

(5) Provision under sub-paragraph (1) may in particular make provision about the interpretation of references to a water undertaker’s supply system, including in particular provision for such references to be treated as references to the supply system of a water undertaker as it is described in old section 17B.

(6) Provision under sub-paragraph (1) may provide for modifications to have effect for different relevant periods.

(7) Provision under sub-paragraph (1) may make provision—

(a) in relation to new wholesale authorisations that authorise the introduction of water into the supply system of a water undertaker whose area is wholly or mainly in England,

(b) in relation to new wholesale authorisations that authorise the introduction of water into the supply system of a water undertaker whose area is wholly or mainly in Wales, or

(c) in relation to new wholesale authorisations that authorise the introduction of water into the supply system of any water undertaker.

(8) Before making provision falling within sub-paragraph (7)(b) or (c), the Secretary of State must consult the Welsh Ministers.

Modifications relating to new supplementary authorisations

4 (1) Where a section 77 order makes provision as regards new supplementary authorisations, that provision may include provision for provisions of the Water Industry Act 1991 to have effect for a relevant period with such modifications as appear to the Secretary of State to be appropriate.

(2) Provision under sub-paragraph (1) may include provision for applying old provisions of the Water Industry Act 1991 with such modifications as appear to the Secretary of State to be appropriate.

(3) Provision under sub-paragraph (2) may in particular provide for the application of provision in old section 66D(2) to (8) for the purpose of determining—

(a) the period for which, and

(b) the terms and conditions on which,

a water undertaker’s duties under new section 66B or 66C are to be performed.

(4) Provision under sub-paragraph (2) may in particular provide for the application of provision in old section 66E for the purpose of determining charges payable in respect of the performance of a water undertaker’s duties under new section 66B or 66C.

(5) Provision under sub-paragraph (1) may provide for modifications to have effect for different relevant periods.

(6) Before making provision under this paragraph, the Secretary of State must consult the Welsh Ministers.

Old section 66D agreements and new water supply licences

5 (1) A section 77 order may include provision for securing that an old section 66D agreement continues to have effect in a case where the person who entered into the agreement as the holder of an old water supply licence is granted a new water supply licence.

(2) Provision under sub-paragraph (1) may provide for the modification of the agreement and may in particular include—

(a) provision for treating a reference in the agreement to the old water supply licence as reference to the new water supply licence;

(b) provision for treating a reference in the agreement to an authorisation given under the old licence as a reference to an authorisation or authorisations given under the new licence;

(c) provision for the Water Services Regulation Authority to vary the agreement by order, on application by a party to the agreement.

(3) Before making provision under this paragraph in relation to old section 66D agreements to which a water undertaker whose area is wholly or mainly in Wales is party, the Secretary of State must consult the Welsh Ministers.

New section 66E and old section 66D agreements

6 (1) A section 77 order may provide for new section 66E (rules about charges that may be imposed under a section 66D agreement) to have effect for a relevant period as regards—

(a) charges payable under old section 66D agreements, or

(b) specified descriptions of charges payable under old section 66D agreements.

(2) Provision under sub-paragraph (1) may include provision for making such modifications of—

(a) new sections 66E to 66ED, and

(b) old sections 66A to 66D and 66F,

as appear to the Secretary of State to be appropriate.

(3) Provision under sub-paragraph (1) may provide for the modification of old section 66D agreements and may in particular include provision for the Water Services Regulation Authority to vary the agreement by order, on application by a party to the agreement.

(4) Before making provision under this paragraph in relation to the supply of water using the supply system of a water undertaker whose area is wholly or mainly in Wales, the Secretary of State must consult the Welsh Ministers.

Interpretation

7 (1) In this Schedule—

“new restricted retail authorisation” means a restricted retail authorisation given by a new water supply licence;

“new retail authorisation” means a retail authorisation given by a new water supply licence;

“new supplementary authorisation” means a supplementary authorisation given by a new water supply licence;

“new water supply licence” means a water supply licence granted under new section 17A;

“new wholesale authorisation” means a wholesale authorisation given by a new water supply licence;

“old section 66D agreement” means such agreement or determination as is mentioned in old section 66D(3);

“old water supply licence” means a water supply licence granted under old section 17A.

(2) In this Schedule “relevant period” means—

(a) a period specified in or determined in accordance with a section 77 order, or

(b) a period that—

(i) begins at a time specified in or determined in accordance with a section77 order, and

(ii) ends at such time as the Secretary of State may specify by order.

(3) Before making provision under sub-paragraph (2)(a) or (b)(i) or making an order under sub-paragraph (2)(b)(ii) that affects provision to which paragraph 3(8), 4(6) or 6(4) applies, the Secretary of State must consult the Welsh Ministers.

(4) In this Schedule a reference to an old provision is a reference to a provision of the Water Industry Act 1991 as it has effect before the coming into force of an amendment or repeal of that provision made by this Act.

(5) In this Schedule a reference to a new provision is a reference to—

(a) a provision of the Water Industry Act 1991 after an amendment of that provision made by this Act has come into force, or

(b) a provision of the Water Industry Act 1991 inserted by this Act.’.—(Dan Rogerson.)

Brought up, and added to the Bill.

Schedule 4

Sewerage undertakers’ duties as regards sewerage licensees

Amendment made: 23, page 158, line 13, leave out

‘taking away matter discharged from the’

and insert ‘providing sewerage services to’.—(Dan Rogerson.)

Schedule 5

Extension of licensing provisions in relation to Wales

Amendments made: 24, page 164, line 44, at end insert—

24A (1) Section 38ZA (standards of performance in connection with the supply of water: water supply licensees) (inserted by section 29) is amended as follows.

(2) In subsection (1), the words “or restricted retail authorisations” are repealed.

(3) In subsection (6), for the definition of “the Minister” there is substituted—

“the Minister” means—

(a) the Secretary of State, in respect of the supply of water by a water supply licensee in accordance with the licensee’s retail authorisation using the supply system of a water undertaker whose area is wholly or mainly in England;

(b) the Welsh Ministers, in respect of the supply of water by a water supply licensee in accordance with the licensee’s retail authorisation using the supply system of a water undertaker whose area is wholly or mainly in Wales;”.’.

Amendment 25, page 165, line 4, at end insert—

26A In section 63AC(4) (as substituted by section31), the words “or a restricted retail authorisation” are repealed.’.

Amendment 26, page 166, line 27, at end insert—

35A (1) Section 95ZA (standards of performance in connection with provision of sewerage services: sewerage licensees) (inserted by section 30) is amended as follows.

(2) In the following places—

(a) the opening words of subsection (1),

(b) subsection (1)(b)(i), and

(c) subsection (2),

for “the Secretary of State” there is substituted “the Minister”.

(3) In subsection (2), for “Secretary of State’s” there is substituted “Minister’s”.

(4) After subsection (5) there is inserted—

(6) In this section—

“the Minister” means—

(a) the Secretary of State, in respect of the provision of services by a sewerage licensee in accordance with the licensee’s retail authorisation using the sewerage system of a sewerage undertaker whose area is wholly or mainly in England;

(b) the Welsh Ministers, in respect of the provision of services by a sewerage licensee in accordance with the licensee’s retail authorisation using the sewerage system of a sewerage undertaker whose area is wholly or mainly in Wales;

“prescribed” means prescribed by regulations made by the Minister.”’.

Amendment 27, page 166, line 27, at end insert—

35B In section 96ZA (procedure for regulations under section 95ZA) (inserted by section30), for subsection (2) there is substituted—

(2) In the application of section 96 by virtue of subsection (1)—

(a) a reference to a sewerage undertaker is to be treated as a reference to a sewerage licensee, and

(b) a reference to the Secretary of State is to be treated as a reference to the Minister (as defined in section 95ZA(6)).

(3) Regulations under section 95ZA are to be made by statutory instrument.

(4) A statutory instrument containing regulations under section 95ZA is subject to annulment in pursuance of a resolution of—

(a) either House of Parliament, in the case of regulations made by the Secretary of State;

(b) the National Assembly for Wales, in the case of regulations made by the Welsh Ministers.

(5) Section 213(2) to (2B) applies to regulations made by the Welsh Ministers under section 95ZA as it applies to regulations made by the Secretary of State.”’.

Amendment 28, page 169, line 13, at end insert—

44A In section 195(3AA), after “water supply licensee” there is inserted “or a sewerage licensee”.’.—(Dan Rogerson.)

Schedule 7

Further amendments

Amendments made: 60, page 172, line 14, at end insert—

‘Water Act 1989 (c. 15)

(1) Section 174 of the Water Act 1989 (general restrictions on disclosure of information) is amended as follows.

(2) In subsection (2)(b)—

(a) for “company” there is substituted “person”;

(b) for “on it” there is substituted “on the undertaker or, as the case may be, the person”.

(3) In subsection (6)(a)—

(a) for “company” there is substituted “person”;

(b) for “its licence” there is substituted “the person’s licence”.’.

Amendment 29, page 173, line 14, after ‘40F,’, insert ‘63AC to 63AF,’.

Amendment 30, page 173, line 16, after ‘110G,’, insert ‘110L to 110O,’.

Amendment 31, page 189, line 16, after ‘manner’, insert ‘and with such frequency’.

Amendment 32, page 189, line 22, at end insert—

‘(1B) The Authority may direct that the requirement in subsection (1A) is not to apply to such water supply licensees as may be specified in the direction.”’.

Amendment 33, page 189, line 23, leave out from ‘subsection (2),’ to end of line 24 and insert

‘for “any such direction” there is substituted “a direction under subsection (1) or (1A)”.’.

Amendment 34, page 189, line 24, at end insert—

‘(4A) In subsection (2B), for “section 17B(5)” there is substituted “section 17B”.’.

Amendment 35, page 192, line 12, at end insert—

‘(2A) In subsection (1), in the opening words, after “above” there is inserted “or section 63AC(2)”.’.

Amendment 36, page 195, line 18, at end insert—

‘80A In section 95B (publication of statistical information about complaints)—

(a) in subsection (1), after “undertakers” there is inserted “or sewerage licensees”;

(b) in subsection (2), after “undertakers” there is inserted “or sewerage licensees”.’.

Amendment 37, page 195, line 18, at end insert—

80B (1) Section 96A (information to be given to customers about overall performance) is amended as follows.

(2) In subsection (1), after “customers” there is inserted “, and, if the direction so specifies, sewerage licensees using the undertaker’s sewerage system for the purpose of providing sewerage services to the premises of customers,”.

(3) After subsection (1) there is inserted—

(1A) Each sewerage licensee must, in such form and manner and with such frequency as the Authority may direct, take steps to inform the licensee’s customers of—

(a) the standards of overall performance established under section 95ZA(1) which are applicable to that licensee;

(b) that licensee’s level of performance as regards those standards.

(1B) The Authority may direct that the requirement in subsection (1A) is not to apply to such sewerage licensees as may be specified in the direction.”

(4) In subsection (2), for “any such direction” there is substituted “a direction under subsection (1) or (1A)”.

(5) After subsection (2) there is inserted—

(2A) The sewerage licensees referred to in subsection (1) shall, if the Authority so directs, pass on the information about the matters mentioned in that subsection to their customers.

(2B) In subsection (1), the reference to the sewerage undertaker’s sewerage system is to be construed in accordance with section 17BA(7).”

(6) In subsection (3), after “undertaker” there is inserted “or sewerage licensee”.’.

Amendment 38, page 195, line 26, at end insert—

‘83A In section 102 (adoption of sewers and disposal works), in subsection (4) (sewerage undertaker to give notice of proposal), after “under this section” there is inserted—

“(za) shall give notice of its proposal to any sewerage licensee which uses, or removes matter from, the undertaker’s sewerage system in accordance with a retail, wholesale or disposal authorisation;”.’.

Amendment 39, page 195, line 34, at end insert—

‘85A In section 105C (adoption schemes: supplementary), in subsection (2), after paragraph (a) insert—

“(aa) any sewerage licensee which uses, or removes matter from, the sewerage system of any such sewerage undertaker in accordance with a retail, wholesale or disposal authorisation;”.’.

Amendment 40, page 196, line 8, at end insert—

‘87A In section 113 (power to alter drainage system of premises in an area), in subsection (3), for the words from “notice of its proposals to” to the end of the subsection substitute “—

(a) the owner of the premises in question, and

(b) any sewerage licensee providing sewerage services to those premises.”’.

Amendment 41, page 196, line 8, at end insert—

‘87B In section 117 (interpretation of Chapter 2), in subsection (5)(a), after “the Water Resources Act 1991” there is inserted “or the Environmental Permitting (England and Wales) Regulations 2010 (S.I. 2010/675)”.’.

Amendment 42, page 196, leave out lines 9 and 10 and insert—

88 (1) Section 146 (connection charges etc) is amended as follows.

(2) After subsection (3) there is inserted—’.

Amendment 43, page 196, line 16, at end insert—

‘(3) In subsection (4)—

(a) after “sewerage undertaker” there is inserted “or a sewerage licensee”;

(b) after “to the undertaker” there is inserted “or the licensee (as the case may be)”.

(4) In subsection (5), after “certain charges” there is inserted “by relevant undertakers”.’.

Amendment 44, page 196, line 16, at end insert—

‘88A In section 147 (charging for use of emergency water), in subsection (1), after “undertaker” there is inserted “or water supply licensee”.’.

Amendment 45, page 196, line 16, at end insert—

‘88B In section 150 (fixing maximum charges for services provided with the help of undertakers’ services), for subsection (1A) there is substituted—

(1A) This section does not apply to—

(a) water supplies provided by a water supply licensee, or

(b) sewerage services provided by a sewerage licensee,

to premises of customers in accordance with Chapter 1A of Part 2.”’.

Amendment 46, page 196, line 16, at end insert—

‘88C In section 152 (grants for national security purposes), in subsection (1), for “and licensed water suppliers” there is substituted “, water supply licensees and sewerage licensees”.’.

Amendment 61, page 196, line 16, at end insert—

‘In section 148 (restriction on charging for metering works), in subsection (2)(cc), after “section 66D” there is inserted “or 117E”.’.

Amendment 62, page 197, line 7, at end insert—

1 (1) Section 16 2 (works in connection with metering) is amended as follows.

(2) In subsection (1A)—

(a) in paragraph (d), for “licensed water supplier” there is substituted “water supply licensee”;

(b) after paragraph (d) there is inserted “, or

(e) a sewerage licensee provides sewerage services in respect of those premises using the undertaker’s sewerage system.”

(3) In subsection (1B), for “section 17B(5)” there is substituted “section 17B”.

(4) After subsection (1B) there is inserted—

(1C) In subsection (1A)(e) above, the reference to the sewerage system of a sewerage undertaker shall be construed in accordance with section 17BA.”’.

Amendment 63, page 197, line 7, at end insert—

‘In section 163 (power to fit stopcocks), in subsection (1), for “a licensed water supplier” there is substituted “a water supply licensee”.’.

Amendment 64, page 197, line 16, at end insert—

1 (1) Section 174 (offences of interferences with works etc) is amended as follows.

(2) In subsection (1A)(a)—

(a) in sub-paragraph (i)—

(i) for “any licensed water supplier” there is substituted “any water supply licensee”;

(ii) for “any such supplier” there is substituted “any such licensee”;

(b) in sub-paragraph (ii)—

(i) for “the supplier” there is substituted “the licensee”;

(ii) for “its licence” there is substituted “the licensee’s licence”.

(3) In subsection (2)(b), for “licensed water supplier” there is substituted “water supply licensee”.

(4) In subsection (2A)—

(a) in paragraph (b), in the opening words, for “a licensed water supplier” there is substituted “a water supply licensee”;

(b) in paragraph (b)(i), for “the supplier” there is substituted “the licensee”;

(c) in paragraph (b)(ii), for “the supplier”, in both places, there is substituted “the licensee”;

(d) in the words following paragraph (b), for “section 17B(5)” there is substituted “section 17B”.

(5) In subsection (3A)—

(a) in the opening words, for “the licensed water supplier” there is substituted “the water supply licensee”;

(b) in paragraph (a)(i), for “a licensed water supplier” there is substituted “a water supply licensee”;

(c) in paragraph (a)(ii)—

(i) for “the supplier” there is substituted “the licensee”;

(ii) for “its licence” there is substituted “the licensee’s licence”;

(d) in paragraph (b), for “a supplier”, in both places, there is substituted “licensee”.

(6) In subsection (5A)—

(a) in paragraph (a), for “a licensed water supplier” there is substituted “a water supply licensee”;

(b) in paragraph (b)—

(i) for “the supplier” there is substituted “the licensee”;

(ii) for “its licence” there is substituted “the licensee’s licence”;

(7) In subsection (8A)(b)—

(a) for “a licensed water supplier” there is substituted “a water supply licensee”;

(b) for “the supplier” there is substituted “the licensee”.’.

Amendment 47, page 197, line 31, at end insert—

92A (1) Section 195 (the Authority’s register) is amended as follows.

(2) In subsection (2)—

(a) in paragraph (bc), for “66D(1)” there is substituted “66CA(1)”;

(b) in paragraph (g), for “or 66H above” there is substituted “, 66H, 117N or 117O”.

(3) In subsection (3AA), for “licensed water supplier” there is substituted “water supply licensee”.

(4) Subsection (3A) is repealed.’.

Amendment 48, page 197, line 31, at end insert—

92B (1) Section 195A (reasons for decisions) is amended as follows.

(2) In subsection (1)(f), for “66D(1)” there is substituted “66CA(1)”.

(3) In subsection (3), after “appointment or” there is inserted “the person holding the”.’.

Amendment 49, page 197, line 31, at end insert—

92C (1) Section 201 (publication of certain information and advice) is amended as follows.

(2) In subsection (1)(b), for “company” there is substituted “person”.

(3) In subsection (2), after “Part II of this Act or” there is inserted “a person holding”.’.

Amendment 50, page 197, line 31, at end insert—

92D (1) Section 202 (duties of undertakers to furnish the Secretary of State with information) is amended as follows.

(2) In subsection (1A), for “company”, in both places, there is substituted “person”.

(3) In subsection (3), for “company”, in each place, there is substituted “person”.

(4) In subsection (4)(c)—

(a) after “particular company” there is inserted “or person”;

(b) after “to companies” there is inserted “or persons”;

(c) for “description or” there is substituted “description,”;

(d) after “Part II of this Act or” there is inserted “to all the persons holding”.

(5) In subsection (5), for “or licensed water supplier” there is substituted “, water supply licensee or sewerage licensee”.’.

Amendment 52, page 197, line 31, at end insert—

92F (1) In section 205 (exchange of metering information between undertakers), in subsection (4)—

(a) the “and” at the end of paragraph (a) is repealed;

(b) in paragraph (b), for “licensed water supplier” there is substituted “water supply licensee”;

(c) after paragraph (b), there is inserted—

“(c) any sewerage licensee.”’.

Amendment 53, page 197, line 31, at end insert—

92G (1) Section 206 (restriction on disclosure of information) is amended as follows.

(1) In subsection (3)(b), for “a licensed water supplier of any of the duties imposed on it” there is substituted “a water supply licensee or sewerage licensee of any of the duties imposed on the licensee”.

(2) In subsection (5)(a), for “a licensed water supplier of activities under its licence” there is substituted “a water supply licensee or sewerage licensee of activities under the licence held by the licensee”.’.

Amendment 65, page 197, line 31, at end insert—

1 (1) Section 203 (power to acquire information for enforcement purposes) is amended as follows.

(2) In subsection (1)—

(a) in paragraph (a)(ii), for “company” there is substituted “person”;

(b) in paragraph (b), in the opening words—

(i) for “company which” there is substituted “person who”;

(ii) for “the company” there is substituted “the person”.

(3) In subsection (7), after “such an appointment or” there is inserted “a person holding such a”.’.

Amendment 66, page 197, line 31, at end insert—

1 (1) Section 208 (directions in the interests of national security) is amended as follows.

(2) In subsection (1)—

(a) for “or licensed water supplier” there is substituted “, water supply licensee or sewerage licensee”;

(b) for “or supplier” there is substituted “or licensee”.

(3) In subsection (2)—

(a) for “or licensed water supplier” there is substituted “, water supply licensee or sewerage licensee”;

(b) for “or supplier” there is substituted “or licensee”;

(c) for “requiring it” there is substituted “requiring that undertaker or licensee”.

(4) In subsection (3)—

(a) for “or licensed water supplier”, in both places, there is substituted “, water supply licensee or sewerage licensee”;

(b) for “on it” there is substituted “on that undertaker or licensee”;

(c) for “to it” there is substituted “to that undertaker or licensee”.’.

Amendment 67, page 197, line 31, at end insert—

‘In section 211 (limitation on right to prosecute in respect of sewerage offences), in paragraph (b), after “undertaker;” there is inserted—

“(ba) a sewerage licensee;”.’.

Amendment 68, page 197, leave out lines 32 and 33 and insert—

1 (1) Section 213 (powers to make regulations) is amended as follows.

(2) In subsection (1)—

(a) the words “17D(8),” are repealed;

(b) after “36A” there is inserted “, 66M”.

(3) In subsection (2)(a), for “or sewerage undertaker or licensed water supplier” there is substituted “, sewerage undertaker, water supply licensee or sewerage licensee”.’.

Amendment 69, page 197, line 35, at end insert—

( ) in the definition of “customer or potential customer”, in paragraph (a), for “licensed water supplier” there is substituted “water supply licensee or sewerage licensee”;’.

Amendment 70, page 197, line 37, at end insert—

( ) in the definition of “sewerage services”, for “includes” there is substituted “—

(a) in the case of a sewerage undertaker, includes”;

( ) in that definition, after the paragraph (a) so formed there is inserted “or

(b) in the case of a sewerage licensee, means the services provided by that person in that person’s capacity as a sewerage licensee;”;’.

Amendment 71, page 198, line 3, at end insert—

‘( ) After subsection (10) there is inserted—

(11) Subsection (10) does not apply to references to the Chief Inspector of Drinking Water in sections 8, 17AA, 51CA, 51CB, 66DB, 66P and 86ZA.”’.

Amendment 72, page 198, line 3, at end insert—

‘In Schedule 1A (the Water Services Regulation Authority), in paragraph 9(3), for paragraph (f) (and the “and” following it) there is substituted—

(f) water supply licensees;

(fa) sewerage licensees; and”.’.

Amendment 73, page 198, line 3, at end insert—

‘1 (1) Schedule 2 (transitional provision on termination of appointments) is amended as follows.

(2) In paragraph 1—

(a) in sub-paragraph (3A)(a), for “a qualifying licensed water supplier” there is substituted “a qualifying water supply licensee or a qualifying sewerage licensee”;

(b) in sub-paragraph (3A)(b), for “carry on activities” there is substituted “carry on—

(i) activities”;

(c) in sub-paragraph (3A)(b), after the sub-paragraph (i) so formed there is inserted “; or

(i) activities relating to the removal or removals of matter mentioned in section 23(9) of this Act which were carried on by the transferor until that date (as the case may be).”;

(d) in sub-paragraph (4), in the definition of “other relevant companies”, for “to be holding” there is substituted “to be—

(a) holding”;

(e) in sub-paragraph (4), in that definition, after the paragraph (a) so formed there is inserted “or

(b) holding appointments as sewerage undertakers for any area in which, or in part of which, the activities relating to the removal or removals of matter mentioned in section 23(9) of this Act will be carried on by the transferee (as the case may be);”.

(3) In paragraph 2(7A)(b), for “licensed water supplier” there is substituted “water supply licensee or sewerage licensee”.’.

Amendment 74, page 198, line 3, at end insert—

‘In Schedule 8 (pre-1989 Act transitional authority for trade effluent discharges etc), after paragraph 2(3) there is inserted—

(3A) If a sewerage undertaker serves a notice under sub-paragraph (2) in relation to premises in respect of which a sewerage licensee provides sewerage services, the sewerage undertaker must send a copy of the notice to the sewerage licensee.”’.

Amendment 75, page 198, line 3, at end insert—

‘Water Resources Act 1991 (c. 57)

The Water Resources Act 1991 is amended as follows.

(1) Section 203 (exchange of information with respect to pollution incidents etc) is amended as follows.

(2) In subsection (1A)—

(a) for “licensed water supplier” there is substituted “water supply licensee”;

(b) for “supplier” there is substituted “licensee”;

(c) for “its licence” there is substituted “the licensee’s licence”.

(3) In subsection (2A)—

(a) for “licensed water supplier” there is substituted “water supply licensee”;

(b) for “supplier” there is substituted “licensee”.

(4) In subsection (3)—

(a) for “licensed water supplier” there is substituted “water supply licensee”;

(b) for “supplier” there is substituted “licensee”.

(5) In subsection (4), for “licensed water supplier” there is substituted “water supply licensee”.

(6) In subsection (5)(b), for “licensed water supplier” there is substituted “water supply licensee”.

(7) In subsection (8)—

(a) for “licensed water supplier” there is substituted “water supply licensee”;

(b) for “a company” there is substituted “a person”.’.

Amendment 76, page 198, line 3, at end insert—

1 (1) Section 204 (restriction on disclosure of information) is amended as follows.

(2) In subsection (2)(b)—

(a) for “company” there is substituted “person”;

(b) for “on it” there is substituted “on the undertaker or, as the case may be, the person”.

(3) In subsection (4)(a)—

(a) for “a company” there is substituted “a person”;

(b) for “its licence” there is substituted “the person’s licence”.’.

Amendment 77, page 198, line 10, at end insert—

‘Enterprise Act 2002 (c. 40)

The Enterprise Act 2002 is amended as follows.

(1) Section 168 (regulated markets) is amended as follows.

(2) In subsection (3)(ff), after “section 66D” there is inserted “or 117E”.

(3) In subsection (4)(ff), after “section 66D”, in both places, there is inserted “or 117E”.’.

Amendment 78, page 198, line 10, at end insert—

‘In section 249 (special administration regime), in subsection (1)(aa)—

(a) for “licensed water supplier” there is substituted “water supply licensee”;

(b) after “administration order)” there is inserted “or a qualifying sewerage licensee within the meaning of subsection (8) of that section”.’.

Amendment 79, page 198, line 14, at end insert—

1 (1) Section 52 (co-operation between water regulators) is amended as follows.

(2) In subsection (3)—

(a) in paragraph (a), for “and licensed water suppliers” there is substituted “, water supply licensees and sewerage licensees”;

(b) in paragraph (b), for “licensed water suppliers” there is substituted “water supply licensees”;

(c) in paragraph (c), for “and licensed water suppliers” there is substituted “, water supply licensees and sewerage licensees”.

(3) After subsection (8) there is inserted—

“(9) In this section—

“sewerage licensee” means a person holding a sewerage licence under Chapter 1A of Part 2 of the Water Industry Act 1991;

“water supply licensee” means a person holding a water supply licence under Chapter 1A of Part 2 of the Water Industry Act 1991.”’.

Amendment 80, page 198, line 31, at end insert—

‘Government of Wales Act 2006 (c. 32)

In Schedule 7 to the Government of Wales Act 2006 (Acts of the Assembly), in paragraph 19 (water and flood defence), in the second exception, for “licensed water supplier” there is substituted “water supply licensee”.’.

Amendment 81, page 198, line 31, at end insert—

‘Consumers, Estate Agents and Redress Act 2007 (c. 17)

The Consumers, Estate Agents and Redress Act 2007 is amended as follows.

In section 4 (meaning of “designated consumers”), in subsection (3)—

(a) for “or a licensed water supplier” there is substituted “, a water supply licensee or a sewerage licensee”;

(b) for “its capacity” there is substituted “the undertaker’s or licensee’s capacity”.’.

Amendment 82, page 198, line 31, at end insert—

‘(1) Section 25 (enforcement by regulator of section 24 notice) is amended as follows.

(2) In subsection (2), for “its capacity” there is substituted “the person’s capacity”.

(3) In subsection (3), in the table, for “or licensed water supplier” there is substituted “, water supply licensee or sewerage licensee”.

(4) In subsection (7), for “or licensed water supplier” there is substituted “, water supply licensee or sewerage licensee”.’.

Amendment 83, page 198, line 31, at end insert—

In section 33 (supplementary provision about transfer and abolition orders), in subsection (10)—

(a) for “or a licensed water supplier” there is substituted “, a water supply licensee or a sewerage licensee”;

(b) for “its capacity” there is substituted “the undertaker’s or licensee’s capacity”.’.

Amendment 84, page 198, line 31, at end insert—

‘In section 41 (interpretation of Part 1), in subsection (1)—

(a) the definition of “licensed water supplier” is repealed;

(b) at the appropriate place there is inserted—

““sewerage licensee” means a person holding a sewerage licence under Chapter 1A of Part 2 of the Water Industry Act 1991;”;

““water supply licensee” means a person holding a water supply licence under Chapter 1A of Part 2 of the Water Industry Act 1991.”’.

Amendment 85, page 198, line 31, at end insert—

‘(1) Section 42 (interpretation of Part 2) is amended as follows.

(2) In subsection (1), in the table—

(a) in the first column, for “or licensed water supplier” there is substituted “, water supply licensee or sewerage licensee”;

(b) in the second column, for “or licensed water supplier in its capacity” there is substituted “, water supply licensee or sewerage licensee in the undertaker’s or licensee’s capacity”.

(3) In subsection (2)—

(a) the definition of “licensed water supplier” is repealed;

(b) at the appropriate place there is inserted—

““sewerage licensee” has the same meaning as in Part 1;”;

““water supply licensee” has the same meaning as in Part 1.”’.

Amendment 86, page 198, line 31, at end insert—

‘In section 52 (enforcement of requirements imposed under Part 2), in subsection (3), for “or licensed water supplier” there is substituted “, water supply licensee or sewerage licensee”.’.

Amendment 87, page 198, line 33, at end insert—

In section 6 (other Part 1 definitions), in subsection (11) (“water company”)—

(a) in the opening words, the words “a company which holds” are repealed;

(b) in paragraph (a), at the beginning insert “a company which holds”;

(c) in paragraph (b), at the beginning insert “a person who holds”.’.—(Dan Rogerson.)

Schedule 11

Commencement orders: appropriate authority

Amendment made: 54, page 214, line 21, at end insert—

‘Section29	The Secretary of State, in relation to supplies of water made in accordance with a retail authorisation.
	The Welsh Ministers, in relation to supplies of water made in accordance with a restricted retail authorisation.’. —(Dan Rogerson.)

Third Reading

Queen’s consent signified.

21:26

[Dan Rogerson]

I beg to move, That the Bill be now read the Third time.

I begin by thanking those who have been involved in the Bill. Members of the Public Bill Committee, under the excellent co-chairmanship of the hon. Members for Halifax (Mrs Riordan) and for North Wiltshire (Mr Gray), did an outstanding job of ensuring that critical issues were debated in depth, and the considered amendments that were tabled allowed us to explore several issues in detail. I thank hon. Members on both sides of the House for their contributions over the past weeks and months—and, indeed, today. Members of the EFRA Committee scrutinised the draft Bill, and I was grateful for the continued engagement of current and former members of that Committee during our debates on the Bill, including on Report. The Bill leaves the House stronger as a result of the changes made to the draft Bill before the introduction of this legislation, and the amendments made in Committee and on Report.

The Bill addresses difficult challenges that we all accept that we are facing. Climate change and population growth will place our water resources under more pressure than ever before. At the same time, unfortunately, it is widely recognised that the future holds more frequent and severe weather events. We need to keep bills affordable while addressing those challenges, which means finding new approaches to encourage innovation and greater efficiency in the water industry. We also need an affordable solution to the problem of flood insurance for those at high risk of flooding.

The Bill is just one part of the action that the Government are taking to secure our vision of a sustainable and resilient water sector. It provides a framework for greater competition with the aim of driving more efficiency and innovation. Its measures will ensure a resilient future in which water is available to all at an affordable price, but not at the expense of the environment. It will ensure that there is choice and flexibility for customers and that bills are kept affordable, that there is more innovation in the water industry, and that there are opportunities for new businesses so that the industry continues to attract crucial investment. The Bill will not only protect and improve the environment, but contribute to the growth of our economy.

The Bill will deal with the availability and affordability of flood insurance for households at high risk of flooding, and in the longer term it will ensure a smooth transition to a free market. The most significant change made to the Bill during its passage through the House was the addition of its flood insurance clauses in Committee. I am greatly encouraged by the support for our proposed approach of ensuring that households at high risk of flooding may access affordable flood insurance.

I visited the south-west flooding incident room last week, and I would like to thank all those who are still working hard on the ground to support people following such distressing events. Hon. Members know that our preferred approach on flood insurance is to create an industry-led flood reinsurance scheme. Flood Re will carefully target benefits towards low-income households, who are the people most in need of support during the managed transition to risk-reflective prices. In developing the scheme, we have been mindful of the costs of the levy, which will be spread across all those holding household policies. We believe that our proposals get the balance right, and it also right that we should take powers on a fall-back obligation to ensure that there is certainty for householders.

Just as we want to ensure affordable flood insurance, we also want to make sure that water bills continue to be affordable for everyone, and that has been a recurring theme of the debate on this Bill. We want those who are struggling to pay to get help. All water and sewerage companies have developed packages to help customers with affordability problems, and they include customer assistance funds, support tariffs, debt advice and water efficiency measures. Most water companies are taking action to put social tariffs in place in 2015. The most important thing we can do is make sure that everyone’s bills are kept affordable. Let us not forget that this is a sector subject to price-cap regulation, which means that Ofwat scrutinises and challenges the business plan of all water companies to secure a fair deal for customers. By taking account of lower financing costs, Ofwat estimates that the next price review could significantly reduce pressure on bills from 2015 by between £120 million to £750 million a year. This Bill will contribute to the affordability of bills for all. Measures will exert a downward pressure on bills by encouraging greater competition to keep bills as low as possible.

Greater competition will drive more efficiency and innovation in the water sector. All customers and the environment will benefit from an industry that is incentivised to find the most efficient ways to meet future demand. We are preparing to open the expanded retail market in 2017. Upstream reform will take place at a slower pace because of its increased complexity, which also means that we expect it to be introduced in parallel with longer-term abstraction reform.

In Committee and today, Members raised concerns about making legislation on upstream reform before the abstraction regime has been reformed. Let me assure Members again that we are confident that there are sufficient existing safeguards to prevent an unsustainable increase in abstraction in response to the implementation of upstream reform. We are tackling unsustainable abstraction now by varying and removing abstraction licences, but over the longer term we are committed to making the abstraction regime more flexible and resilient. A consultation on abstraction reform was launched on 17 December and we expect to legislate in the next Parliament.

Improving our approach to abstraction is critical, but it is only one part of our approach to ensuring the long-term resilience of our water resources. Today we amended the Bill to make it absolutely explicit that the new resilience duty is about ensuring the long-term resilience of both our water supply and sewerage services and the environment on which those services depend. I want to make it very clear that this is not about resilience of supply at the expense of our precious water resources. It is about ensuring that we all have enough water for the long term and that our environment does not suffer as a result.

I have no doubt that this Bill will continue to receive thorough scrutiny in another place. I look forward to following those discussions with interest. After that, I am looking forward to the implementation of the Bill. Experts are already working hard on the detailed work to develop new markets in water. The open water programme, which includes Government, regulators north and south of the border, water companies and customers, is developing the practical details of market implementation. It launched its market blueprint consultation last week.

We are also continuing to work with the Association of British Insurers, and I am grateful to it and the rest of the industry for their co-operation and hard work. I reiterate my thanks to all Members and all officials and staff who have aided in the preparation and passage of the Bill, and I commend it to the House.

21:32

[Maria Eagle (Garston and Halewood) (Lab)]

This Bill includes important reforms that build on three important reviews taken forward by the previous Government: the Pitt review on flooding, the Walker review on affordability and the Cave review on competition. It also follows on from the Flood and Water Management Act 2010 that we took through Parliament before the last election. That is why the Opposition supported the Bill on Second Reading and will do so again on Third Reading this evening.

We have backed measures to increase competition, extending to non-domestic customers the opportunity to switch supplier. Such an opportunity is already enjoyed in Scotland where it has been shown to be successful in reducing costs to business. We support the reforms intended to encourage new entrants into the market, and we back regulatory reforms aimed at ensuring long-term resilience of our water supplies. We also support the measures, at long last, to provide a statutory basis for agreement on flood reinsurance, providing relief to those who live in hard-to-insure households.

However, there remains a major hole at the heart of the Bill, and at the heart of the Government’s water policy. That is the absence of any serious attempt to tackle the impact that rising water bills are having on household budgets, which is adding to the cost of living crisis. There is a real gulf between the rhetoric of the Government and the reality on this. Again, this evening, we have seen Government Members troop through the Lobby to stand up for the monopoly water companies, and against the interests of households. In his Second Reading speech, the Secretary of State assured the House:

“The package of reforms is designed to exert a sustained downward pressure on water bills”.—[Official Report, 25 November 2013; Vol. 571, c. 49-50.]

Yet, time after time the Government have opposed sensible amendments that would have ensured that that was a reality in this Bill. For all the briefing to newspapers back in October, the Prime Minister and the Secretary of State are simply unwilling to do anything that might be perceived as interfering in a market that they believe is working well. I do not believe that consumers agree that a monopoly industry that enabled companies last year to make pre-tax profits of £1.9 billion and pay out dividends totalling £1.8 billion to shareholders is a market that is working and adequately regulated.

Our reforms would have introduced a new national affordability scheme, requiring all water companies to help those struggling with their bills. That would have ended the current postcode lottery whereby companies choose whether to offer a social tariff and set the criteria for eligibility. Just three companies have introduced such a scheme, helping just 25,000 households. In their submissions to Ofwat for the next price review period from 2015, we see that there are still companies that do not intend to set a social tariff and that those that do are proposing to assist a relatively small number of customers.

Given that Ofwat estimates that 2.6 million households—11%—currently spend more than 5% of their income on water, it is clear that only a tiny fraction of those struggling are being helped. It is also clear that many customers do not know about even the help that is available. Only a third of eligible households access WaterSure, which was introduced by Labour to help households that have a high level of water use due to a medical condition or because they have three or more children. Yet the Government have opposed our proposal to require water companies to include information with bills about the help available to customers, just as they have consistently opposed forcing water companies to publish annual information, including on their corporate structure, and on their levels of investment, taxation and dividends paid to shareholders, and then enabling Ofwat to take full account of that information when determining whether to re-open price settlements and cut bills.

Finally, our proposed reforms would have tackled bad debt, which adds £15 to the average bill, by requiring landlords to provide water companies with details of their tenants on request. We sought to give Ofwat powers to ban water companies that fail to act on bad debt from transferring the cost of lost revenue from non-paying customers to other bill payers. By rejecting all of these sensible measures, Ministers have wasted the perfect opportunity that this Bill offered to tackle the impact that rising water bills are having on stretched household budgets. Instead, the Government’s preferred approach has been to send just one weakly worded letter to water bosses, begging them not to hike bills next year, without even a threat of action if they do not comply. So while the water companies are doing very well from their monopoly position, customers in this country will continue to pay among the highest bills in Europe.

Disappointingly, Ministers have also not been more willing to listen to concerns raised on other aspects of the Bill during its passage through this House. The Government’s only concession has been a grudging acceptance that it is right to make it clearer to Ofwat that it must have a higher regard to the environment in the way that it regulates the industry. The Government’s compromise is to stick to their decision to elevate “resilience” rather than “sustainability” but to require Ofwat to

“secure resilience in sustainable ways”.

We will have to consider carefully whether that sends a clear enough signal or not.

Disappointingly, Ministers have not heeded the concerns about the total amount of water taken from the environment if upstream competition happens ahead of abstraction reform. I welcome the fact that the consultation on abstraction licence system reform was finally launched just before recess, but, on the Government’s own timetable, reforms will not be implemented until the early 2020s, and upstream competition is due to begin in 2019.

Finally, it is disappointing that Ministers have rejected each of the sensible and modest proposals to improve the Flood Re scheme. The Secretary of State will have today heard the clear warnings from Sir David King, the Government’s special envoy on climate change, that changes to the climate will lead to

“quite a radical change in weather conditions”

and more frequent severe flooding. Requiring the Committee on Climate Change regularly to advise on the increase in the number of properties likely to be at risk of flooding as a result and the consequence for the Flood Re scheme was surely a sensible move, yet it has been rejected by the Government.

Similarly, it is difficult to see how the Government could have had any serious objections to strengthening incentives for the uptake of household flood protection measures—providing a right of appeal for those who find that their property has been removed from the scheme, allowing a right of public access to any Flood Re insurance database and publishing figures for the number of properties in the categories to be excluded from the scheme.

This Bill contains important reforms, but it remains seriously flawed as it leaves this House; flawed because it does not sufficiently protect the environment; flawed because the Flood Re insurance scheme will not be in place until 2015 but also remains disconnected from future increases in at-risk properties as a result of our changing climate; flawed because it has failed to toughen the powers of the regulator to cut bills; flawed because it leaves it to the water companies to decide whether to establish a social tariff and preserves the postcode lottery on eligibility; and flawed because it does nothing to protect customers who pay their bills from seeing higher charges as a result of those who can pay but will not. This Bill could have delivered a framework for that new deal with the water companies. Instead, a huge opportunity to tackle water’s contribution to the cost of living crisis has been missed.

21:40

[Miss McIntosh]

We have had a good debate today. I welcome the Bill and thank all those involved in preparing it, including my right hon. and hon. Friends. Obviously, a lot of work remains to be done to it in the other place, and we will watch those developments with interest.

I welcome the introduction of retail competition. The Select Committee would like to have seen the primary duty of sustainability in preference to resilience. I believe that too much detail has been left to be fixed at a later stage. I enjoyed the comment from my hon. Friend the Minister on not wanting to rely too much on regulation, because just about every clause calls for implementing regulation to be drafted. We will leave that conundrum with him.

Competition is to be welcomed. It should lead to greater efficiency. In particular, I hope that both the current 2014 price review and the competition provisions permitted following the Bill will lead to more innovation, not least following these weeks of sustained and considerable flooding across the country. I applaud the Government’s search for a partnership approach and for more private enterprise funding for flood prevention measures. I hope that the water companies will step up to the plate in that regard and that other private sector companies might help to fund schemes from which they might benefit.

I believe that there are still opportunities to write other provisions into the Bill before it receives Royal Assent, not least with regard to the partnership approach to flood prevention measures, which has been mentioned this evening, but also for increasing the amount of maintenance that can be done by internal drainage boards. We await the results of the pilot schemes, whereby DEFRA is allowing landowners to permit their own maintenance to be done on the watercourses locally, to see whether that scheme can be rolled out.

It is a joy to me that tomorrow we will see the Pickering pilot project in my constituency reach its final phase with the cutting of the first sod of earth, which will enable the reservoir to be built. It is a great disappointment for me personally, as I am sure it is for many in the country, that the sustainable drainage systems, which are left over from the Flood and Water Management Act 2010, will still not be on the statute book by April this year. SUDS, on their own, will do a huge amount to prevent surface water flooding from entering sewerage systems through the combined sewage pipes that we have heard so much about today and that can cause sewage spills on to roads and, regrettably, into homes and other properties.

Perhaps the most innovative aspects of the Bill that are to be welcomed are those relating to flood insurance. I commend Flood Re, but I hope that the Minister will have listened carefully to the concerns that have been raised today, not least from the Select Committee. We expect to see the same respect and acknowledgment of value for money in that as in other schemes. We will be looking to see that that is confirmed as we go forward.

[Geoffrey Clifton-Brown (The Cotswolds) (Con)]

My hon. Friend praises the SUDS system, but will she take into account, and ask our hon. Friends on the Front Bench to take into account, the fact that we may be building up considerable liabilities for ourselves in future if SUDS systems are inadequately designed by developers who have clever consultants and local authorities do not have the expertise to vet whether those systems are adequate in the type of floods that we are seeing at the moment?

[Miss McIntosh]

My hon. Friend will have an opportunity to read our proceedings tomorrow and see the debate that we have had on SUDS. For reasons that the Minister has not rehearsed in full, the SUDS regulations will not be on the statute book by April. I am sure that there are very good reasons for that, including those that my hon. Friend raised, but I do believe that SUDS will have a substantial role to play.

If the flood insurance system leaves out leasehold flats, that will be a matter of concern.

[Dan Rogerson]

I am grateful to my hon. Friend for giving way on this point, as I did not have the opportunity to deal with it on Report. I assure her that householders living in those sorts of properties would have access to the contents aspects of flood insurance if they were council tax payers.

[Miss McIntosh]

That will be very welcome news. As I said, I was alerted to this problem after the time for tabling amendments had expired.

What we have seen this week and saw in the weeks running up to Christmas shows the scale of the challenge that we face. I welcome the all-party approach that we have seen across the House today and in Committee, which I was not at liberty to participate in. That is a very good basis on which the Bill can go forward from this House, and I commend it to its future stages.

Question put and agreed to.

Bill accordingly read the Third time and passed.