Thames Tideway Tunnel
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Lord De Mauley
My Lords, I am pleased to say that an early initiative of this Government was to enhance our Civil Service’s ability to lead large projects, and indeed to render that ability on a level with the best of the private sector. We set up the Major Projects Leadership Academy, which is run by the Saïd Business School. I met Defra graduates and those undergoing the course there on Monday this week, and an impressive bunch they are.
Lord Grantchester (Lab)
Given the cost of living crisis, Ofwat rightly rejected Thames Water’s application to increase bills further. Given that Thames Water paid out £2.2 billion in dividends over the past six years and pays little or no corporation tax, what leadership are the Government showing to ensure the right vehicle for financing, managing and delivering the project is put in place, and that it will be subject to parliamentary oversight?
Lord De Mauley
My Lords, there is quite a lot in that question, but I should say to the noble Lord that Labour harps on about the cost of living, yet its own policies—spending commitments totalling £27.9 billion since 3 June last year, unworkable energy policies and increased borrowing—would increase it.
Public Bodies (Abolition of the Committee on Agricultural Valuation) Order 2014
Lord Grantchester Excerpts(10 years, 1 month ago)
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The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley) (Con)
I welcome this opportunity to introduce the order. It may be helpful if I explain why the Government have proposed to remove the Committee on Agricultural Valuation. The origins of the committee go back more than 60 years to the Agricultural Holdings Act 1948. On repeal of the 1948 Act, the committee’s existence was continued by the Agricultural Holdings Act 1986. The role of the Committee on Agricultural Valuation is to give advice to Ministers about provisions to be included in regulations on tenant-right matters and the amount of compensation for improvements to be paid to tenants at the end of an agricultural tenancy in England and Wales. Ministers are not obliged to take account of the advice of the committee.
There are no current members of the committee and the last time members were appointed was in 1990. It has not functioned for more than 20 years, hence the committee exists in legal name rather than reality. The Tenancy Reform Industry Group, known as TRIG, has provided advice to the Government on agricultural tenancy issues since 2003. TRIG is a non-statutory body, which comprises representatives of the main industry and professional organisations, such as the National Farmers’ Union, the Tenant Farmers Association, the Country Land and Business Association, the Farmers’ Union of Wales, the Central Association of Agricultural Valuers and the Royal Institution of Chartered Surveyors.
TRIG has not replaced the Committee on Agricultural Valuation and provides advice on a non-statutory basis across the range of tenancy matters, rather than just on end-of-tenancy compensation provisions. However, the existence of TRIG means that it is no longer necessary to retain the legislative provisions for the Committee on Agricultural Valuation to give specific advice on end-of-tenancy compensation matters.
As noble Lords know, the Government have made a commitment to reduce the number of unnecessary public bodies. In July 2010, my right honourable friend Caroline Spelman, then the Secretary of State for Environment, Food and Rural Affairs, announced proposals to reform a number of departmental public bodies; these included the Committee on Agricultural Valuation. The Public Bodies Act 2011 provides the legislative mechanism for the Government to carry out reform of public bodies. The Committee on Agricultural Valuation is listed in Schedule 1 to the Act. This enables the Minister to lay an order under the 2011 Act to abolish the committee.
In accordance with the requirements of the Public Bodies Act, a consultation was carried out in England and Wales last autumn. Having carefully considered the consultation responses, it is now proposed to repeal the legislation which provides for the Committee on Agricultural Valuation by an order under the Public Bodies Act.
Welsh Ministers have given their consent to the abolition of the committee. A legislative consent Motion was agreed without debate in the Welsh Assembly on Tuesday 1 April. The abolition of the committee has no impact on the ability of agricultural tenants to claim compensation at the end of a tenancy. As the committee is already effectively moribund, its abolition will have no impact on jobs, nor will it result in any savings for the Government. However, it will remove an unnecessary public body from the legislative framework.
I should probably disclose the fact that I am a landlord and have a tenant. I hope that this explanation has been helpful.
Lord Grantchester (Lab)
My Lords, I thank the Minister for his explanation of the order. I will make a declaration of interest as a farmer, but I have no tenants.
The Minister can relax and be assured that we are happy to endorse the order. He will forgive me if I delay the Committee for a few moments to ask a few questions for clarification. I appreciate that the committee has not met for over 20 years and that the term of the last appointments to the committee expired in 1993. Its abolition will have no impact on the functioning of agricultural tenancy legislation, especially as most new tenancies are now farm business tenancies under the Agricultural Tenancies Act 1995, for which different legislative arrangements apply for end-of-tenancy compensation.
We also have TRIG, as the Minister explained, set up by my noble friend Lord Whitty, to provide advice to government on agricultural tenancy matters as a non-statutory advisory body. Can the Minister confirm that there have been no costs from this committee’s dormancy and that, therefore, there are no savings to be achieved through this abolition.
In the explanatory document, the results of the consultation on this order were summarised. Notably, the Tenant Farmers Association made comments that the abolition should follow the enactment of the amended Agriculture (Calculation of Value for Compensation) Regulations 1978 agreed by TRIG, which have been with Ministers for some time and need urgent attention. I have no doubt that the Minister would want to bring this forward with any further amendments to the compensation regulations as part of the wider package of tenancy reform to ensure that legislative changes are complementary.
In the consultation, the chairman of TRIG also stated that abolition was supported, provided that TRIG’s proposed amendments to the Agriculture (Calculation of Value for Compensation) Regulations 1978 were enacted. I therefore ask the Minister whether the TFA gave any reasons in its consultation response as to why it felt that abolition should follow enactment of the new regulations. Was it consequential in any way or does it merely reveal frustration that these regulations have not been amended since 1983? Does the Minister have a timeframe in mind for bringing forward these amended regulations?
The Minister has already updated us on the situation in Wales, for which I thank him. Finally, I want to widen our consideration to include understanding the current position of his department under the Public Bodies Act 2011. There was some debate in the other place on this point, but no discussion concerning the money saved, which I understand was to be the main justification for the great burning of the quangos. While this order is a tidying-up exercise, no money will have been saved from the committee’s abolition. Will the Minister update this Committee on how much dead wood has now been burnt, how much has been saved by his department and what further savings may be expected?
I should be happy to receive an answer in writing listing the full names with commensurate cost implications of the quangos that have been abolished or reconstituted as a committee of experts, which are being retained and which are still to be reckoned with. We can then judge what percentage have been burnt and how successful the Public Bodies Bill 2011 has been in its contention to save public money. An outline today would be most appreciated, provided that the Minister will confirm that he will write with a full assessment of the Public Bodies Act on his department. With that, I am content to agree to the order today.
Lord De Mauley
My Lords, I thank the noble Lord, Lord Grantchester, for his comments, and for his general support of the order to remove the Committee on Agricultural Valuation. As I said, this order removes what is effectively a moribund body that has not met for more than 20 years. Its removal will have no impact on the relationship between agricultural tenants and their landlords. Qualifying tenants will still be entitled to claim compensation at the end of a tenancy, in accordance with the current legislative provisions.
Following recommendations from the Tenancy Reform Industry Group, we will shortly be consulting on changes to the Agriculture (Calculation of Value for Compensation) Regulations 1978, with a view to updating them as part of measures for wider reforms of tenancy legislation. That partly answers the noble Lord’s question, which I shall come back to in a moment. This will ensure that the compensation regulations and other tenancy legislation are brought up to date to provide a modern framework for the future.
The noble Lord asked various questions, the first of which was about savings. I can confirm that there are no savings. This measure is about not savings but tidying-up. Returning to the issue of the order of the various reforms, the abolition of the Committee on Agricultural Valuation is not dependent on amending the compensation regulations. As part of the agriculture theme of the Red Tape Challenge process, my department will be consulting on a number of changes to reform agricultural tenancy legislation. It was felt that it would be more sensible to take forward amendments to the Agriculture (Calculation of Value for Compensation) Regulations 1978, which were proposed by the Tenancy Reform Industry Group, as part of this wider package of tenancy reform. This will ensure that the proposed legislative changes complement one another.
We will be consulting on all proposed amendments to agriculture and tenancy legislation in 2014 with a view to making the changes in this Parliament where the legislative timetable permits. Moreover, as the legislation currently stands, we would be required to reconvene the Committee on Agricultural Valuation to make changes to the compensation regulations. As there are no current members of the committee, it would be time-consuming and would require a public appointment exercise, which would not be cost-effective. We took the view that abolition of the committee should not be delayed but should take place as soon as possible.
The noble Lord asked a more general question about progress on reform of public bodies. We have made good progress on the major reforms. We have been working to reduce the number of bodies from 92 in 2010 to 36 by 2015. So far, we have abolished 50 non-departmental public bodies. There are now only a few bodies still to be abolished and these are mainly defunct or non-operational. We are also making progress on 120 bodies that were due to be retained and substantially reformed. The vast majority of these are internal drainage boards, for which reforms are under way. Substantial reforms have already been made to the Environment Agency and Natural England. On his detailed questions, I will take advantage of his invitation to write to him.
Lord Grantchester
Has the Minister any idea on cost savings to his department under the Public Bodies Bill to date? That would be most helpful.
Lord De Mauley
May I include that in the letter? On that basis, I commend this order to the Committee.
Water Bill
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Lord Grantchester
“( ) Prior to making any regulations under subsection (5), the Secretary of State shall require the Committee on Climate Change to provide current and projected estimates of the number of properties that would be eligible for—
(a) inclusion in the Flood Reinsurance Scheme;(b) the value of levy required under section 53; and(c) the likelihood of an additional levy or contributions being needed from time to time.( ) The Secretary of State shall use the advice of the Committee on Climate Change when prescribing a target number under section 58(1).”
Lord Grantchester (Lab)
My Lords, as we have seen in recent months, flooding has devastating effects on people’s lives and livelihoods across all spectrums of society. Although Flood Re is a commendable scheme designed to help many who are most vulnerable to flooding, we on this side of the House think that considerable gaps exist which must be addressed.
One of our main concerns is how the scheme will operate within the 25-year span and adapt to weather conditions resulting from climate change. I am sure that noble Lords have seen today’s headlines concerning the IPCC report on climate change, which said that climate change will significantly impact on our weather conditions, especially as regards flooding. The report states:
“Increasing magnitudes of warming increase the likelihood of severe, pervasive, and irreversible impacts”.
We have the opportunity to respond to the threats posed by climate change, not only to ensure that we protect those who are most vulnerable to flooding but to assess how the level of flooding, and the implications of that, will change over time. As my noble friend Lord Whitty stated in Committee, Flood Re cannot be established on a totally static basis. It needs to be adaptable to a dynamic process called weather. The numbers at high risk are likely to increase, and the number of high-risk properties could treble to even more than 1 million. Climate change is a reality although some may have doubts concerning its cause. Nevertheless, it has affected, and will continue to affect, the risk of flooding, and its effects, in the future.
This amendment seeks to ensure that the Secretary of State consults the Committee on Climate Change, and uses its advice, when prescribing a target number of affected properties under Clause 58(1). The Committee on Climate Change’s adaptation sub-committee, which is chaired by my noble friend Lord Krebs, is the key adviser to the Government on the number of properties likely to be at risk of flooding over the timeframes envisaged by the scheme. The Secretary of State should take credible and independent benchmarked advice from the Committee on Climate Change and provide accurate and clear targets when reporting to Parliament. At present, the number of policies eligible for Flood Re is based on the cost of the flood risk component of any policy, which is set by the insurers and will differ based on each insurer’s assessment.
The Government therefore doubt how beneficial the committee’s advice would be, especially on a financial basis. However, it is important to realise that the principle and purpose behind Flood Re is to help to provide affordable insurance for households in flood risk areas which might otherwise find it difficult. This is bound to change over time. It would be nonsensical to say that no advantage could be gained from a sub-committee of the Committee on Climate Change giving its observations on the changes that this scheme may have to face over time as a result of further climate change.
A lot of elements are considered when setting targets under Clause 58(1) but, at the same time, a huge element cannot be fulfilled by the insurance industry alone and one needs the input of appropriate advisers, notably the Committee on Climate Change. I trust that the whole House can see the value of this amendment. I beg to move.
Lord Grantchester
My Lords, it surely would be beneficial for the Secretary of State to take the advice of the Committee on Climate Change. The noble Lord, Lord Krebs, accepts the task. Target numbers should not solely be based on figures from the insurance industry and should recognise the changes in climate as a fundamental element of the change in the nature of Flood Re over the next 25 years.
Let us be clear. In relation to an earlier amendment, the noble Lord, Lord Crickhowell, quoted Hiscox which said that, of 885,000 homes in high-risk areas, around 350,000 of them will be excluded, which is around 4% of the housing stock. A more telling statistic is that this is 40% of the high-risk properties. I understand the picture is complicated by the fact that much flooding occurs outside high-risk areas. The nature and scope of flooding are changing rapidly. I am told that 80% of its claims for recent floods came from homes that Hiscox did not consider to be at risk of flood. If this is the position today, how can we hope to keep abreast of the situation over the next 25 years of this scheme without recognised, independent expertise as could be provided by the Committee on Climate Change?
I hope that the noble Earl, Lord Lytton, will reflect on the nature of change and the size of the risk of flooding over the next 25 years and will join me in the Contents Lobby. I am expecting the work of the noble Lord, Lord Krebs, to be a prophet for the future as well as an assessment of the insurance industry, which I hope will persuade the noble Earl, Lord Cathcart, that science should also have a role. Flooding and climate change are matters of huge impact to more and more people. I wish to test the opinion of the House.
Lord Grantchester
My Lords, I rise to speak to Amendment 90CE, which is grouped with these amendments. I was slightly confused as to whether the Government were putting their name to our amendment, because I noticed that we have a little “g” in front of our Amendment 90CE. But I will take that as a misprint and that I must still convince the Government of the merit of the case.
The amendment would put in place regulations that would add clarity to set the date of commencement for Flood Re. It would also create a database of properties at risk of flooding and indicate whether the property is covered by the flood scheme. The amendment will insist that the database must be set up before Flood Re starts, as that would be logically helpful.
I begin by welcoming the Government’s helpful concession, particularly in Amendment 90B, which sets out regulations to allow insurers to provide information to policyholders in the scheme. We are glad that the Government have listened and acted on our concerns expressed in Committee with the introduction of their amendment, but we still feel that it does not go far enough. Delivering information to those already in the scheme—that is, policyholders—is helpful as far as it goes. Although it is important that insurance companies are well equipped and able to deliver information to policyholders in relation to the flood scheme and how they can protect their properties adequately, we believe that the database proposed by our amendment would be a lot more useful, primarily for potential homeowners but also for mortgage lenders. It has become much more difficult of late for people to get mortgages and it is even more difficult to get a mortgage if the mortgage lender is at all concerned about damage from flooding. As such, information should be provided to homebuyers at the start of their journey of finding a home rather than further along the process, after they have agreed with the vendor on a purchase or when they are at the stage of consulting mortgage companies after engaging solicitors. The database must be accessible to everyone and allow them to check whether a property for sale or rent is covered by the scheme and highlight its risk to flooding. This would prevent the all too recognisable reality experienced by people in the recent flooding whereby home owners were blindsided by their properties flooding and then found themselves caught when their insurance companies reassessed their policy terms. The database would also avoid the scenario whereby a home owner may believe that they are covered by Flood Re when in reality they are not.
It is a very straightforward amendment, which brings the whole subject of the database and properties into the public domain. It would add transparency and clarity to the scheme. At present, with the complicated nature of the scheme, especially in terms of eligibility, we should do all that we can to assist those potentially affected by the scheme by making them all the more aware of where they stand with regard to flood insurance on the property that they are inquiring about, not just once they become policyholders. We have already heard today of the complexities behind the scheme as regards leaseholders, as well as the exclusions for small businesses and other aspects.
Baroness Northover
My Lords, I thank the noble Lord, Lord Grantchester, for tabling Amendment 90CE, which proposes a publicly searchable database of flood risk. I am desolate that I must disappoint him as we cannot accept the amendment even though it does have a little “g” in front of it. Nevertheless, we agree with the intention behind the amendment that households that are ceded to Flood Re should be made aware of their flood risk. Knowing about flood risk is essential to helping affected households to manage their flood risk effectively, both in the short and long term. That is why we have recently published a note entitled Homebuyers and Their Flood Risk, in which we have explained the information currently available to prospective homebuyers.
It is a well established principle of the conveyancing process that the onus is on the buyer of a property to conduct their own searches and investigations into the potential risks to that property. In England, the Environment Agency provides a freely accessible resource of flood risk information for any area. Anyone may use this service to identify whether their post code is at risk of flooding from rivers, the sea or surface water. Similar resources are available to households in other parts of the UK. Should a household wish to identify flood risks specific to their property, commissioning a flood risk survey from a suitably experienced professional would identify the ways in which water can enter a property and what measures could be taken to prevent or limit possible damage. We believe that requiring Flood Re to help insurers guide their customers to information about flood risk and how to manage it will add significantly to public awareness of flood risk. That is why I moved Amendment 90B and I thank the noble Lord, Lord Grantchester, for his welcome of it. I hope therefore that noble Lords are willing to accept the government amendments in this group and that the noble Lord will be content not to move his amendment.
Earl Cathcart
My Lords, my noble friend Lord Howard moved this amendment in Committee. Unfortunately, he cannot be here today and has asked me to move it again on his behalf.
As a farmer, I pay land drainage rates and, in a past life, I was a member of a Norfolk internal drainage board. Internal drainage boards get their funding from two sources: from farmers and agricultural landowners, for draining agricultural land—this is the land drainage rate; and from local authorities, for draining developed areas—this is the special levy. IDBs work out the special levy that they charge local authorities based on the value per hectare of the developed land. This is clearly set out in the Land Drainage Act 1991. This amendment does not change this calculation, which is clear, fair and transparent. IDBs need to know the value per hectare of developed land to calculate the special levy. However, the Land Drainage Act 1991 says that IDBs must work out the value per hectare of developed land from lists of rateable values of property compiled in 1990—25 years ago. Using these old lists of rateable values to work out the value per hectare of developed land is neither fair nor transparent as the IDB needs to have the lists. In many cases, the lists no longer exist. In addition, they are out of date and do not include anything built after 1990. As the lists are out of date, the variation of values in them may be wrong as relative property values between areas have changed since1990.
The only way to solve this problem is to change the Land Drainage Act through this amendment to give the Defra Secretary of State the power to set out another way of working out the value per hectare of developed land, so that IDBs do not have to use the old rateable value lists, if they have them.
The amendment is not prescriptive. We do not want to repeat the mistakes of the past by setting the way of working out the value per hectare of developed land in primary legislation. The amendment would rectify that mistake by taking the prescription out of the Land Drainage Act and instead giving discretion to Defra to set a method that is appropriate now, and to change it in the future if circumstances change. This is important as IDBs do vital work not just in protecting people, their homes and businesses and some of our best farm land, but also play a key role in keeping our power stations, ports, roads and railways working.
In addition to their usual maintenance costs, IDBs now face heavy bills to repair and rebuild defences, drainage ditches and pumping stations after the ravages of this winter, with its record rainfall and the biggest tidal surge in 60 years. Unless IDBs have a fair way of valuing developed land, they cannot set a fair special levy on local authorities, so they cannot raise the funds they need to do their vital work. This amendment will ensure that IDBs can get the funds to do their vital work, while also sorting out past mistakes by replacing prescriptive and out-of-date legislation with a simple discretionary power.
After my noble friend Lord Howard brought forward this amendment in Committee, my noble friend Lord De Mauley wrote to all 120-odd IDBs to ask whether this was a concern for them. When I met my noble friend Lord De Mauley and his officials last week, he said he could not conclude that it was an overwhelming concern as he had had only six responses from the IDBs. I do not know the timescale between the letter being sent out and our meeting, but I do not think it was that long. I do not know what the latest position is with regard to responses from the IDBs, but I do know that the Association of Drainage Authorities has written supporting the amendment. The CLA and the NFU have also written supporting the amendment.
The letter from the NFU adds another point that I have not raised yet. It states:
“The NFU … considers that there is a need for this change both for existing IDBs but also to enable the creation of new IDBs in areas where they don’t currently exist, we would therefore urge support of this amendment”.
It goes on:
“Such an amendment is especially important for areas where the Environment Agency is considering to withdraw from maintaining significant drainage assets. It is our view that in areas such as on the Pevensey Levels in East Sussex or within the Alt Crossens catchment in West Lancashire, to name but two, there is a strong need for IDBs to be established in order that existing water level management activity may continue and that the cost of that activity is shared equitably between the beneficiaries”.
I hope my noble friend will accept this amendment. Being more realistic, I hope that he does not reject it today, but rather agrees to take it away and look at it between now and Third Reading. If he then agrees that there is a hole that needs plugging, he can either accept the amendment or come back with his own. I beg to move.
Lord Grantchester
My Lords, during our debates in Committee, the amendment of the noble Lord, Lord Howard of Rising, and the noble Earl, Lord Cathcart, seemed purely a matter of practicality. The noble Earl should be congratulated on finding this shortfall in the relevant documents. The Minister wished to reserve the Government’s position pending further evidence. I merely rise to ask the Minister whether the position could be addressed by secondary legislation. That would allow Parliament to keep a watch on the situation and assess when and if it develops.
Lord Cameron of Dillington
My Lords, I apologise that I did not manage to get in before the Labour Front Bench. Before the excellent exposition by the noble Earl, Lord Cathcart, I had no detailed knowledge of the technical benefits brought about by this amendment. However, I do know about the vital importance of the role of IDBs in the land drainage sector, both as a former chairman of the CLA water committee, who was once the keynote speaker at an Association of Drainage Authorities lunch—a memorable occasion—and as a farming resident in Somerset.
The 2010 Act, not entirely wisely in my view, gave new land drainage responsibilities to county councils and district councils, taking away from the previously comprehensive responsibility of the Environment Agency and IDBs. This has caused a degree of chaos, certainly in Somerset, with no one really taking full responsibility for their duties or even, to begin with, knowing what those duties entailed. That is by the by. My key point is that the one solid rock in all this has been the IDBs. Their local and comprehensive technical and engineering expertise is absolutely vital and we would be lost without them. Anything that helps them to perform their duties better must be in all our best interests. I strongly support this amendment, which would seem to further that end.
Water Bill
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Lord Deben (Con)
My Lords, I declare a past interest as a former chairman of a water company in this country and I sit on the board of one on the continent of Europe. I hope that my noble friend will take the remarks of the noble Earl, Lord Selborne, very carefully because there is a tendency to think of water as if it is like any other utility. Of course it is not because water is different, wherever you take it from, and it will be under bigger pressure than ever before because of the effects of climate change and of demand increases.
It is often possible in a small area to provide a small programme of water supply at a lower price because it is being tailored particularly and for very narrow demands. We are going to have to find better ways of sharing water supply in any case because of what is happening in this country, so the point that my noble friend Lord Selborne raises is very important. I have read carefully my noble friend’s comments about the Bill. None of us wants to reduce the amount of competition which the Bill provides, but I hope that the Minister will give some reassurance which goes beyond merely saying that Ofwat has the powers to deal with this. That is because I share my noble friend’s doubts that Ofwat has those and whether those powers would stand up in law—certainly, whether they would stand up were the law part of the very valuable European legal structure under which we operate. Thank God for the European Union, or we would never have the water supply which we have today. Our water would be much less clean and we would have much lower standards. We owe a great deal to our membership of the European Union on this, as on most other things.
However, on this particular issue we have to ensure that the Bill does not put us into a position in which de-averaging—one of the ugliest words in the English language—becomes a serious problem. I hope that the Minister will be able to reassure me that the legal situation is fully covered because I, too, think that there is sufficient precedent to make anybody reasonably concerned.
Lord Grantchester (Lab)
My Lords, I declare my interests as a farmer, thereby living in a rural area. Like the noble Earl, Lord Selborne, I am concerned with the effects generally on rural areas. While there are risks, I am not sure that this is the case here. We support the introduction of competition into the non-domestic market and take the issue of de-averaging very seriously. The noble Lord, Lord Deben, has spoken about how we must, indeed, be assiduous in making sure that price averaging is maintained as far as possible. However, we are satisfied that Ofwat has all the necessary regulatory tools to enable it to limit the effects of de-averaging.
Competition can also be about bringing innovation to the market in services and introducing efficiencies. However, we remain concerned that these amendments, which have been tabled by the noble Earl, Lord Selborne, might allow incumbent suppliers to constrain the development of future markets, thereby reducing the benefits that competition could bring.
Baroness Parminter (LD)
My Lords, in welcoming the proposals to open up retail competition in the business sector, on Second Reading I, too, raised my concern, like other noble Lords, about the potential for the de-averaging of prices. Ensuring that rural or remote businesses do not pay more than their urban counterparts is vital. We need to share costs for water fairly, regardless of location.
In Committee, the Minister reassured the House that the regulator had the necessary tools to limit the effects of de-averaging on customer charges. Having talked to Ofwat myself, I know that it confirms that this is its belief. Equally, the Consumer Council for Water, which has the interests of water customers at its core, commissioned Martin Cave to review the issue, and he has confirmed that Ofwat can facilitate upstream competition without de-averaging.
The Government will be producing charging guidance to Ofwat, which the Minister confirmed will explicitly say that de-averaging can occur only where it is in the best interests of customers. This Bill provides Parliament with the opportunity to debate and vote on that charging guidance, following a consultation process, so that we have the necessary safeguards to ensure that it does. Not only will Ofwat have to act in accordance with such guidance, but the Consumer Council for Water will be a statutory consultee in the preparation of Ofwat’s charging rules. This seems to me to be a reasonable defence against the potential for de-averaging of water bills, particularly given that as a final resort the Government can veto Ofwat’s charging rules if they do not reflect the guidance given.
On that basis, I am satisfied with the assurances given by my noble friend the Minister, and I will not support the amendments tabled by my noble friend Lord Selborne.
Lord Grantchester
“Collection of debt from tenants
(1) The Water Industry Act 1991 is amended as follows.
(2) After section 147 (charging for emergency use of water) there is inserted—
“147AA Charges to recover losses from bad debt
(1) The Secretary of State, or the Authority, may prohibit losses to an undertaker due to non-payment of bills from being recovered through charges on customers.
(2) Where an undertaker does not have information about a resident in a property who is using water, if the occupants of that property are tenants, the landlord must, on request, provide to the undertaker contact details for the tenants.
(3) 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.””
Lord Grantchester
My Lords, the issue of bad debt, particularly in the private rented sector, was debated in Committee. Amendment 71 seeks to prohibit water companies from making good their losses due to non-payment through increased charges on good, bill-paying customers.
Under this amendment, water companies must follow up on any debt with the specific resident customer. However, getting the details of the customer can be difficult in properties where the resident customer is a tenant in the private rented sector. The landlord of the property will be required by proposed new subsection (2) to supply details of the tenant to the water company to enable it to chase up the debt. This is an improvement on the present system, where the company simply makes good the shortfall across all other customers.
Ofwat estimates that 80% of bad debt originates from the private rented sector. As stated in Committee, it is estimated that about £15 is added to honest bill-payers’ water bills to cover bills left unpaid. We are aware that there are people who have difficulty with affordability—we have discussed this already today—but on the other hand there are those who can pay but simply do not. This is effectively stealing water from other genuine bill-payers, adding an unnecessary cost to their bills. The situation can be rectified by this amendment.
This approach is supported by the Consumer Council for Water, Ofwat, the EFRA Committee in the other place, and water companies. In June 2012 the EFRA Committee said:
“It is simply unacceptable that, at a time when so many are struggling to afford their water bills, customers face the additional burden of subsidising those who refuse to pay what they owe”.
Baroness Northover
My Lords, we all agree that bad debt in this sector must be tackled effectively. However, we believe that the best ways to do this are through the sector-led voluntary approach to information-sharing and by Ofwat getting the regulatory penalties and incentives right.
While we strongly support the aim of the amendment, we cannot agree that it is necessary because, as noble Lords will be aware—the noble Lord, Lord Grantchester, made reference to this—very similar provision already exists in primary legislation. Without anything changing in the Bill before us, the power exists for the Government to bring forward regulations to require landlords to provide water companies with details of their tenants. This could happen if it seemed appropriate.
However, after consulting widely with all those who would be affected by this measure, we decided that a voluntary approach would be more suitable than imposing those regulations. Landlords felt that it would not be fair to penalise them financially for the debts of others. Having looked carefully at all the evidence, we took the view that there was much more that the water sector could do to address the issue, and there is evidence that some companies are already doing it. It is important that we make decisions based on the evidence; and the evidence showed us that good practice in tackling bad debt is not applied consistently across the water sector.
On earlier amendments on affordability, the noble Earl, Lord Selborne, and others suggested that water companies’ hands were perhaps tied on bad debt. Several companies have excellent performance in the recovery of bad debt—there are many things that they can do—but many others do not. Water companies can, and many already do, use the courts to pursue debtors. However, too many companies still fail to use all the debt collection tools at their disposal and we want improvements in performance in this area.
By way of illustration, perhaps I might give noble Lords some examples of what we identify as good practice. Yorkshire Water is an outstanding example of good work on bad debt. It partners with Experian’s credit account information-sharing service. Yorkshire Water assesses all new customers’ credit histories, which enables it to tailor services to each individual, supporting those in financial difficulty and providing sanctions for those who avoid payment. Another effective scheme is the arrears allowance scheme run by United Utilities, which supports 8,300 customers. For the first six months, the company matches customers’ repayments pound for pound; then the company matches every £1 paid with a £2 allowance until arrears are cleared.
However, at the moment, by no means all companies use these approaches. We wish to see such approaches become much more widespread, and the regulator wants to promote this, too. The methodology for the current price review places a much stronger focus on the responsibility of the company to collect its debts.
The sector as a whole is now starting to respond to this challenge. It is working with landlords’ organisations to establish a new voluntary scheme. Soon, it will launch a database that enables landlords to provide tenant information voluntarily. Crucially, this scheme is supported by the industry through Water UK and the main landlords’ organisations. We wish to give this new system a chance to work and we hope that noble Lords opposite will do so, too.
Ofwat decides which costs may be recovered through the price review; it is absolutely central to what it does. It is clear that Ofwat is using the current price review process to bear down on the costs of bad debt, which is clearly very important. The regulator has been very clear to companies about how bad debt is viewed. Companies must demonstrate high performance in debt collection. They are obliged to show that any increase in bad debt is genuinely beyond their control.
I shall refer to a point made by the noble Lord, Lord Whitty, again in relation to the earlier group of amendments on affordability—the noble Lord, Lord Grantchester, may have referred to it just now as well. The noble Lord suggested that bad debt was mostly in the private rented sector. There is no evidence that bad debt is disproportionately in the private sector; nor does provision in the Flood and Water Management Act, which the noble Lord wishes to see implemented, focus on private rented properties. It would make all landlords, both private sector and social landlords, financially liable for their tenants’ debts. We may have misheard or misunderstood the noble Lord, but we wanted to put that clarification on the record in case that that was how the noble Lords opposite viewed the situation.
Intervention in the setting and recovery of charges is a job for the independent economic regulator. Ofwat has all the tools necessary to enable it to do this job, and it is absolutely right that it is allowed to do so independently. Although we share the view of the noble Lord opposite that those who seek to avoid paying for the water provided when they can pay should not push those costs on to others, I hope that he will accept that progress is being made in the way that I have described and will therefore be content to withdraw his amendment.
Lord Grantchester
I thank the Minister for her comments. We were perhaps talking at cross purposes on the amount of bad debt in the private rented sector. The point here is that local authorities and housing associations are much keener on water companies chasing up tenants and therefore reveal to them the details of those tenants far more readily than do landlords in the private rented sector. That could explain the preponderance of bad debt in the private rented sector.
Nevertheless, I contend that the voluntary approach is simply not working fast enough. It is evident that things are going on in this respect—I pay tribute to what is being done—but I am concerned that not all companies are working as assiduously as they could to reduce this problem.
Given that provision already exists in primary legislation, I urge the Government to press forward a little more keenly than they appear to be doing. I beg leave to withdraw the amendment.
Food: Adulteration
Lord Grantchester Excerpts(10 years, 2 months ago)
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Lord De Mauley
My Lords, I do agree and that, indeed, is what is happening.
Lord Grantchester (Lab)
My Lords, this is fraud on a massive scale. It is made easier by this Government’s changes to the structure of regulation, which weakened consumer protection by fragmenting the responsibilities of the Food Standards Agency between different bodies. Will the Government recognise this mistake and revisit the decision?
Lord De Mauley
My Lords, I am glad that the noble Lord has given me the opportunity to answer that question. I have seen no evidence to suggest that the machinery of government changes had any material impact on the response to the horsemeat fraud incident. That incident was fraud on an EU-wide scale and had nothing to do with changes in responsibilities between UK government departments.
Japan: Dolphins
Lord Grantchester Excerpts(10 years, 2 months ago)
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Lord De Mauley
My Lords, we regularly call for Japan to cease its so-called “scientific” whaling programme, as we consider there to be no valid argument for lethal scientific research on whales. As such, we therefore agree with Australian efforts to bring an end to these activities through the ICJ, and we look forward to the judgment in that case, which we expect this year.
Lord Grantchester (Lab)
My Lords, what discussions has the Minister had with colleagues in other European Governments to ensure that dolphins trapped in this hunt and sold for entertainment do not find their way into European aquariums?
Lord De Mauley
My Lords, the issue is indeed of concern to a number of EU member states, and was discussed at the EU CITES management meeting in December. We continue to consider what measures the EU can take. For example, parties to CITES can place a reservation on a species, which means that they are not bound by the CITES controls relating to that species. We will, through the EU, continue to encourage countries such as Japan and others to withdraw their reservations on, for example, whale species.
Water Bill
Lord Grantchester Excerpts(10 years, 3 months ago)
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The Earl of Lytton
My Lords, I welcome the opportunity to debate this important point. I declare a professional interest in aspects of planning. The question of planning policy and its co-runner, which it informs, development control, raises some important issues on the ground. These need to go beyond the question of new-build developments alone. I do not know whether the noble Lord, Lord Shipley, intended to address just new-build developments but if he did, perhaps I could digress into the area of what we do about some of the existing building stock, which I flagged up at Second Reading. I alluded then to the desirability of making conditions concerning the containing of surface water run-off within existing individual properties, as opposed to just allowing each to discharge it on to the next property downstream.
I wondered whether this might be made retroactive to a degree, perhaps by requiring extensions and alterations to existing properties to incorporate, in appropriate circumstances, a surface water attenuation scheme. I do not believe that this is a general requirement but there are precedents. For instance, if you renew the roof covering of your house, you are often obliged to upgrade the insulation of the roof of your property. There is an analogy there. Surface water attenuation on a per property basis could also be combined not only with water conservation, but with habitat-friendly outcomes. The same thing could apply to the principle of reducing vulnerability of the property itself—a point made earlier by the noble Baroness, Lady Parminter—in connection with quite ordinary adaptations that can be put in place to prevent properties being so severely affected by flooding, should it happen. There is also the question of community-based schemes to protect groups of buildings. I referred to the Lower Don Valley scheme, but there are others.
One of the things that has come out—sorry, that is probably a bad term—or rather, has arisen recently is the question of making foul drainage systems safer, so that if flooding does happen, flood water does not turn into a solution of dilute sewage, adding health hazards to all the other problems of clean-up. That requires special measures, not least because shared sewer pipes that are on private property but are ultimately connected to a public sewer are now the responsibility of the statutory sewage undertaker. I have this terrible feeling that they have no idea of the routes, the condition or the materials of half of these pipes for which they have now inherited responsibility. They have my sympathy in that respect.
The noble Lord, Lord Krebs, referred to building on flood plains. My only point there is that protecting properties so that they are themselves secure against flooding is one thing. Transferring risks to properties elsewhere is self-defeating. My difficulty is that I am not sure that a holistic approach is taken to dealing with the totality of flood plains. Often, these may be in more than one local planning authority area, so there may be problems of co-ordination. With regard to that, the noble Lord, Lord Shipley, referred to the competence and capacity of local government and the noble Baroness, Lady Parminter, referred to reductions in Environment Agency budgets that might affect its ability to have this overarching, integrated view. I worry about that. It is vital that the sort of report that the noble Lord, Lord Shipley, has in mind covers all these aspects. If we start leaving bits out, we shall be no further forward in a few years’ time than we are now.
I draw attention to the catchment area management plan referred to by the noble Lord, Lord Campbell-Savours. I have some experience of this, not all of it edifying. In at least one instance, I found that half the catchment area concerned, the upstream half, was missing from the plan. The only fact that I could ascertain was that the owner of the missing part was the National Trust. I am unsure what conclusions I should draw from that, but if you have a catchment management plan, the boundary of it has to be drawn along the watershed. No other boundary is possible. The simple arithmetic that was drummed into me, probably from O-level geography onwards, has not escaped me. Making up rules to suit as one goes along will not wash. I am sorry for that terminology as well.
Some time ago, I attended a professional lecture on restoring part of southern Exmoor to a peat bog so that it would hold more water and release it more slowly into the River Barle and the River Exe systems. It had something to do with pumping and repumping water back into Wimbleball reservoir, which I shall not go into. I nicknamed the scheme the “Exmoor sponge”. I do not think anyone else has used that term. There is nothing wrong with such projects, but if they do not have durable management structures that are proof against misuse for commercial objectives, neglect because of spending cuts, simply being forgotten, or participant landowners deciding that there are better land uses that they would rather adopt, they will fail. There need to be more durable ways of dealing with these things. That is the sum total of the points that I wish to make. The last of them probably goes a bit beyond the amendment proposed by the noble Lord, Lord Shipley, but it was worth mentioning in the context of what was said by the noble Lord, Lord Campbell-Savours.
Lord Grantchester (Lab)
My Lords, the amendment would set up a review of recent outcomes of planning policy in terms of flood risk for new developments. It has received widespread support around the Committee.
The noble Lord, Lord Moynihan, has already highlighted how the market will change following recent events. In view of the terrible situation that has resulted from recent weather events in Somerset and the Thames Valley, which may well trigger a wide-ranging review of flood risk policy, it makes sense to ask why there has been more building on low-lying and flood risk areas in the past four years, even allowing for the guidance to which the Minister has already referred today. There has been plenty of notice since 2007 that not all property in areas that might be developed would be eligible for flood insurance. Recent floods have highlighted that there may be errors in the guidance. Nor have successful protection measures been achieved.
Why has planning allowed development to take place against a background of increased perception of flooding potential following the floods in 2007 and in 2012? As the Government, the Environment Agency and planning authorities—indeed, the whole country—will be reassessing flood defences and expenditure, a review of where we are now would make eminent sense.
I was struck by the comments of the noble Lord, Lord Shipley, on the cumulative development effect, which would be worth of the attention of the Environment Agency. The amendment has also prompted some interesting suggestions from my noble friend Lord Campbell-Savours, so it is worthy of further assessment by the Government.
Baroness Northover (LD)
My Lords, we strongly support the intention behind this amendment. The importance of managing the impact of flooding has been brought into very sharp focus recently, and my noble friend has made a cogent case for ensuring that all those involved, whether builders, local councils, inspectors or national organisations, are fulfilling what is required of them in terms of capacity and performance in reducing flood risk.
My noble friends Lord Shipley and Lady Parminter made the case for a review of planning policy delivery. Planning policy for flooding is set out in the National Planning Policy Framework. The framework was published by the Department for Communities and Local Government in March 2012 following extensive public consultation and is supported by practice guidance. It sets strict tests to protect people and property from flooding, which all local councils must follow. We have been very clear that where these tests are not met, new development should not be allowed.
The framework states that councils should plan the location of new development to avoid areas of flood risk where possible. Only if no sites are available in areas of lower risk of flooding can local councils even begin to consider whether to allow development in areas where there is a higher risk. For logical reasons, this is known in planning terminology as the sequential test. Where the sequential test has shown that it is not possible, consistent with wider sustainability objectives, to locate in an area with a lower risk of flooding, then—depending on the flood risk—a second stringent test must be met before a development can go ahead. This is called the exception test, which provides a very strong safeguard. To pass the exception test, you must show that the development provides wider benefits to the community that outweigh the flood risk and that it will be safe for its lifetime without increasing flood risk elsewhere—which was another point that noble Lords flagged up. Where possible, the development will reduce flood risk overall, such as through new flood defences. If there is a risk of flooding, a planning application has to be supported by a site-specific flood risk assessment. This is important because, where there is a risk of flooding, councils should give the go-ahead to new development only where, following the sequential and, if required, the exception tests, it can be demonstrated that what is to be built is flood resilient and resistant, and, as necessary, includes safe access and escape routes. Quite simply, in terms of flood risk, if there are better sites for developments, or developments demonstrated to be necessary are not made safe, they should not be permitted.
Lord Grantchester
“Flood Reinsurance Scheme: commencement
(1) The Secretary of State may by order (the “commencement order”) appoint a day on which section 51 is to come into force.
(2) An order under subsection (1)—
(a) shall be made by statutory instrument; and(b) may not be made unless a draft has been laid before and approved by a resolution of each House of Parliament.(3) The Secretary of State may only make an order under subsection (1) if a Flood Reinsurance Scheme national database has been established.
(4) Any Flood Reinsurance Scheme national database must—
(a) be accessible by the public;(b) outline a property’s risk of flooding; and(c) indicate if the property is covered by the Flood Reinsurance Scheme.”
Lord Grantchester
My Lords, the amendment concerns information on the flood reinsurance scheme and would clarify that regulations will be brought forward to set the date of the commencement, and that Parliament will have approved by affirmative procedure the requirements on insurers of the scheme. Most critically, the proposed new clause would ensure that when these important Flood Re provisions come into effect, the database will have been established, as defined in Clause 61, with the relevant information in the right form as specified in subsection (4) of the proposed new clause. Subsection (4) of the proposed new clause says that the database must be accessible to everyone, and must allow them to check whether or not the property with which they are concerned is covered by the Flood Re scheme, and what the risk of the property flooding is.
I know that all noble Lords in the Chamber today share my heartfelt sympathies for those in Somerset and the Thames Valley who have been struggling to deal with these awful floods, and hope that this Flood Re scheme will make sure that people are able to get affordable and accessible insurance in future. The importance of the amendment is that it would provide information to someone buying a property as to whether their prospective purchase is at risk of flooding and, if so, if they will be able to get insurance under the scheme. It does not make sense that a family looking for a house in Somerset, the Thames Valley or elsewhere would be unaware of whether or not it was covered. It would add particular difficulties for them when it came to budgeting for the years ahead. It would be essential information when it came to looking for a mortgage. Lenders will require insurance on property to be able to advance money for the purchase, and will want to know whether or not the costs associated with the property are going to be high and whether insurance is affordable.
The terrible events of recent weeks show how important it is that the public should have confidence that the database is accessible, and that they will be able to access that part of the database to which insurance companies also have access. While the objective of the amendment is to emphasise transparency of and accessibility to information, including mapping, it also highlights the necessity for clarity on flood risk. The Minister may respond that subsection (4)(c) of the proposed new clause is opaque and refers only to property in the scheme. Yet the scheme must manage the situation and a transition over the period of the scheme. There must be a planned and collaborative withdrawal of the Flood Re scheme, and not a precipitate change into market conditions.
At present, it has been expressed that there is a lack of clarity concerning elements of property tenure and the mapping of risk in relation to the scheme, following changes made by the Environment Agency to information and websites in relation to the proposal of the scheme. The Minister has offered today to meet Members of the Committee concerning properties, and the scheme’s treatment of them following repeated flooding occasions. It is vital that the database is accessible as any updating occurs.
Amendment 161A, in the name of the noble Lord, Lord Oxburgh, also seems to me a good idea: it would bring the flood risks of properties further to the attention of householders. It is vital that clarity on flood insurance on a database is accessible throughout the period and is made a basic principle of the scheme. I beg to move.
Lord Oxburgh
Amendment 161A scarcely needs any detailed discussion: we have spoken this afternoon on a number of occasions of the importance of getting information to people. Certainly, this was a plea that came to us through many of the verbal representations that we had when we saw various interested groups in the lead-up to the discussion of this Bill. I simply offer this proposal to use council tax demands as a simple and almost cost-free way of disseminating information very widely, reminding people on an annual basis of their vulnerability to flood. It could serve as a portal to the various schemes and proposals that we discussed this afternoon.
Baroness Northover
As I said in my response, we are putting the onus on home owners to seek the information—and I have indicated where that can be acquired—rather than to receive the information, as the noble Lord suggests. I appreciate that this may not be quite as strong as he would wish, but nevertheless there are a number of different sources for this information and a number of ways in which property owners, when they are ceded to Flood Re, will be informed as to their status. If they make a claim they will obviously be informed that that is the case. Therefore there are a number of ways in which they will receive information, even if it is not quite as comprehensive as the noble Lord might wish.
Lord Grantchester
My Lords, I recognise the noble Baroness’s comments in welcoming many of my remarks. She maintains that there is a system in place concerning flood risk data, and I do not for a minute doubt that she is correct about that. While I am reassured, nevertheless I am concerned that people should be able to undertake their own research without the cost of expensive searches. My noble friend Lord Campbell-Savours has further argued that case. I suggest that those expensive searches may well occur further along the process of a purchase. Nevertheless, people these days are very much concerned that they are able to undertake easily, quickly and readily their own research. I will consider further what the noble Baroness said, but meanwhile I beg leave to withdraw the amendment.
Water Bill
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Lord Grantchester (Lab)
As my noble friend Lord Whitty said in relation to an earlier amendment, it is vital that there is clarity on aspects of the scheme, especially on defining the scheme concerning the inclusions and exclusions of property and responsibilities or liabilities around flood risk.
There appears to be a lack of clarity as regards the situation concerning owners of river banks and whether they are responsible upon the withdrawal of the Environment Agency from funding many aspects of flood prevention and the consequential third-party losses. The amendment seems to assume that the responsibilities of the Environment Agency will be reduced, as well as the funding. While there may be recognition that owners should be responsible for their own situations, it is nevertheless recognised that covering third-party losses could be severely onerous to riparian owners. This amendment seeks to limit their liability. Nevertheless, a limit to their liability begs the question of who would then take it on.
Even at this late hour, perhaps I may tempt the Minister. As regards limiting the liability of riparian owners, could they claim that a flood was an act of God? Is the Minister able to pass judgment on such things? However, this serious situation needs clarity, as landowners, farmers and even boating sports clubs could find themselves in severe difficulty alongside more affluent band H properties.
Baroness Northover
My Lords, far be it from me to judge upon acts of God or even the implications of the Equality Act.
I thank the noble Earl for his amendment, which I will address at a little length, as I think he would probably like to hear my comments. He speaks of instances where the Environment Agency might decide to withdraw from maintaining some flood management assets and suggests that this could create a challenging situation for landowners, residents and others affected. He will probably know that we are discussing those concerns with the Country Land and Business Association, to which he referred, and that my honourable friend the Parliamentary Under-Secretary of State met it on 23 January.
We share the noble Earl’s wish to reduce the possibility of litigation, which is an aspect that is implied by some of the concerns expressed by the noble Earl. That is why we are promoting the asset maintenance protocol published by the Environment Agency. We strongly believe that developing partnerships and working arrangements between local parties to guarantee future maintenance is the best way to prevent problems arising that could lead to claims of liability.
The Environment Agency and other authorities maintain many thousands of flood defence assets. The situation to which the noble Earl refers is not one which is affected by this Bill. He is picking up instances where the Environment Agency may decide that it is no longer going to support certain flood defences and the responsibility for that would fall to others. So I would separate this issue from the Bill, as the noble Lord, Lord Grantchester, sort of did.
The Environment Agency is looking to withdraw maintenance of some of these assets where maintenance is no longer economically justifiable or where the work may not have a high enough priority for central government funding over the longer term. Examples of such assets are embankments in rural areas that protect grazing land or small flow control structures such as gates or penstocks.
Understanding these concerns, the Environment Agency has published, and recently updated, a protocol explaining the processes it will follow. The agency is committed to bringing together landowners and other affected parties to make sure that they are clear on their respective roles and responsibilities and that they understand the range of options that may be available to them for future management of the assets and their likely costs, benefits and impacts. This may include options for continued maintenance of assets by local groups and options involving less or no maintenance. The agency will then work with all the interested parties to help them reach agreement on how the parties involved will take forward maintenance of the asset in the future. It is possible, for example, for the landowner on whose land a defence is situated to enter into an agreement to secure contributions from his neighbours towards the costs of maintenance and repairs.
We understand the noble Earl’s concerns about whether these agreements will be possible. However, it is important to remember that third parties are also expected to play their part. If third parties refuse to make reasonable contributions for the maintenance of a flood defence asset that is protecting their property, they could diminish the success of any future claims against the landowner.
The noble Earl has suggested regulations should be drawn up to set out what actions a landowner should take in order to meet any claims of liability. This would not be the simple clarification that the noble Earl might have been expecting. Such regulations would need to cover many types of assets, the type of location, as well as a list of all possible activities that might be appropriate for their maintenance. The regulations would need to address the range of impacts of flooding, ranging from a garden becoming waterlogged to flooding of many buildings and possible loss of life. Most importantly, the regulations would need to address such complications as a flood asset being owned by one or more landowners or a number of different beneficiaries of different means. Such regulations would be complex and, to be proportionate, would need to have an element of subjectivity to what a landowner would be required to do to avoid liability.
For that reason, we do not believe that such regulations could give significantly more certainty than the current case law. We firmly believe that use of the Environment Agency’s protocol gives all the parties involved a chance to ensure an outcome that reflects the particular situation and circumstances of each individual case, while avoiding the need for litigation between landowners. For these reasons I encourage the noble Earl to withdraw his amendment.
Water Bill
Lord Grantchester Excerpts(10 years, 3 months ago)
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Lord Grantchester
“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.”
Lord Grantchester
My Lords, Amendment 118 is a straightforward requirement on companies to meet what ought to be seen as a basic customer service in the household sector. The amendment would simply require a company to do three things: to give consumers information about tariffs, including any social tariffs; to fit the most appropriate tariff to a household using the information it holds on households; and to provide information where there is a broad social support scheme available—currently Water Sure—clearly setting out the eligibility criteria.
This is basic customer service. The information is useful to everyone but vital to those with affordability issues. Affordability is clearly a problem for many families. Ofwat estimates that 11% of households spend more than 5% of their income on water, which would amount to more than 2 million households in the UK struggling to pay their bills. As the Prime Minister has been heard to say, the Government have not done enough and must do better.
The Water Sure scheme mentioned in the amendment was set up to help in this respect. It applies to low-income, metered households with high water use. Examples include those in receipt of qualifying benefit or tax credit with three or more children under 18 or those who, due to medical conditions, have very high water usage. It takes the step of capping the amount that such a family would have to pay to the average for that operating area.
These households have to apply to be on the tariff. Unfortunately, take-up of this scheme is much lower than it might be. This means that many who may need help are paying more than they need to pay and perhaps find themselves in difficulty as a result. Only a third of households that could benefit are actually using the scheme. In many areas, only a few hundred homes are receiving Water Sure payments. This amendment would go a long way towards ensuring that the necessary help will be more explicitly available. A company will have to put the details of the Water Sure tariff on customers’ bills. That company would also need to provide information that would enable the bill payer to work out whether or not they are eligible and, if they are, clear instructions about how to apply.
This is a simple amendment that will be greatly beneficial to a large number of families struggling to cope with the cost of living crisis. I beg to move.
Lord De Mauley
My Lords, I thank the noble Lord, Lord Grantchester, for introducing Amendment 118, which, as he said, would insert a new clause into the Bill to place a legal requirement on water companies to include information on their bills about the Water Sure scheme. The scheme provides a mandatory safety net for low-income customers on a meter who, for reasons of ill health or because they have a large family, use larger than average amounts of water. It caps the bills of these households at the average for their company area.
The eligibility criteria for Water Sure are twofold: the household must be in receipt of a relevant low-income benefit and must have three or more dependent children living at home or someone with an illness that necessitates high water use. It is unfortunately a feature of all means-tested benefits of this sort that take-up, as the noble Lord mentioned, can fail to match eligibility. That is why promotion of the scheme is so important. I am pleased to be able to tell the noble Lord that all water companies already voluntarily provide information about Water Sure on their bills.
In addition, Amendment 118 would require all water companies to provide information about tariff structures and the lowest available tariff. This is not the energy sector—water companies do not have complex tariff structures. In fact, the situation is quite the reverse. The choice for the majority of household customers is between paying according to volume of water used—a metered tariff—or according to the rateable value of their home. All water companies provide information on household customer bills about how to get a meter fitted free of charge. Companies also provide advice to customers on whether or not they might benefit financially from the installation of a meter; a role also performed by the Consumer Council for Water. The cheapest option for each household will depend on the location of the property and the amount of water used by the household. Where a company offers a social tariff, information on whether a household may qualify is provided by the company alongside the customer bill. The Consumer Council for Water works closely with each water company on the information provided on household bills to ensure that customer interests are met. Its very practical advice is that customers are likely to be put off by too much information in their bills.
For these reasons, I cannot agree that customers will be best served by placing an increasing number of legal requirements on water companies to include additional information on customer bills. I believe that the current approach of working in partnership with the body responsible for representing the interests of customers is more likely to be effective. I therefore hope that I can persuade the noble Lord to withdraw his amendment.
Lord Grantchester
I thank the Minister for that reply. I had not heard that all companies were already providing this information. My information was that this was not the case and that only some were. I am encouraged that the reassurance has been provided but, nevertheless, feel that the promotion of the scheme could be improved if it was included in people’s bills when they had to pay them. I am sure we will want to return to this issue because, given that the uptake of Water Sure payments is at a rather low base at the moment, we want to be reassured about what more could be done to bring this to the attention of families.
Thanks largely to the Consumer Council for Water, customer service has been improving in the water industry, dominated as it is, as my noble friend behind me has said, by large regional monopolies. Nevertheless, it is regrettably necessary to spell out these requirements. In the mean time, I beg leave to withdraw the amendment.
Water Bill
Lord Grantchester Excerpts(10 years, 3 months ago)
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Lord Moynihan
My Lords, in moving the amendment, I shall speak also to Amendments 40, 42, 56, 57 and 59, as well as indicating my support for Amendment 105 from the noble Lord, Lord Whitty, in this group.
The balance between regulation and negotiation in the water industry is crucial to this set of amendments. At the heart of the Bill is the intention to create a market where access is regulated—in other words, the rules of entry are set out very clearly, and must be adhered to by all market participants. I am concerned that in some places the Bill leaves too much too open; it appears to be based on the premise that the parties within the retail market should negotiate between themselves on service and price. In my view, that negotiation could substantially limit the effectiveness of the retail market. Allowing individual parties to negotiate in this way opens the door to current incumbents to discriminate against new retailers by offering them higher prices, less preferable terms or poorer service levels. Alternatively, and perhaps more worryingly, current incumbents could simply be slow in responding to requests for information or services from new entrants; this would be difficult to police.
As the noble Lord, Lord Whitty, suggested, in speaking to Amendment 1, some companies may change their allocations of retail costs to ensure that as little revenue as possible is at risk under the new market arrangements. The result of those changes is to reduce the amount of revenue that is open to competition and, potentially, to reduce the margin available to any new entrant. If allowed to stand, that move by the companies may reduce the level of entry into the new retail market. That would be a very serious issue indeed and, I hope, will not result from this legislation. This is an example of how companies might be expected to react when there is insufficient clarity in how the market will operate.
It is interesting to note the experience and views of the Water Industry Commission for Scotland, which opines that it could be difficult for Ofwat to put a framework in place that will allow the regulator to ensure that there is an effective level playing field for all market participants. It is likely to require relatively draconian rules to be drafted and policed. Notwithstanding those rules, some companies may choose to seek to frustrate the operation of the market or seek to get round the rules or even break them to maximise profit, which could be to the substantial detriment of all customers and, indeed, the environment. Having to negotiate on too many issues could also increase the upfront costs for new entrants, which may deter them from entering the market—or, if the new entrant does enter the market, will increase the costs that have to be passed on to customers. To be effective, a retail market, rather than relying on negotiation, needs all participants to have access to clear and accessible prices and to standard terms and conditions. In regulatory economics, I would describe this kind of access to the market as being regulated rather than negotiated.
In Scotland, the retail market is specifically designed to ensure that there is a level playing field. Scottish Water was required to separate its retail arm on a functional basis but chose to create an arm’s-length subsidiary. This has meant that the required governance code, the document that gives new entrants the confidence that they can compete on their merits with the incumbent retailer, could be less onerous than it would otherwise have been. However, the governance code still requires Business Stream to operate profitably as a standalone entity; the code also requires it to limit the access of Scottish Water’s management to its financial and operational information. Scottish Water is not allowed to know about Business Stream’s strategy for the competitive market in Scotland. Finally, under the terms of a licence condition, Business Stream is required to publish within 40 business days of offering a new tariff to any customer.
The market and operational codes are common to all market participants. The market operator, the Central Market Agency, handles all switches and aggregates supply information to determine amounts owing from retailers to Scottish Water, which is also required to seek the commission’s approval on its wholesale tariffs. All entrants have equal access to all tariffs, even those that are a result of legacy arrangements between Scottish Water or its predecessor organisations and larger businesses. The commission has taken further steps related to the reallocation of supply points from companies that exit the market to ensure that all market participants have the opportunity to compete on a level playing field.
To ensure that new entrants do not face increased barriers and costs when trying to access the retail market, I hope that the Bill can be amended so that it focuses on regulated access rather than negotiation. As such, it would require each wholesale company to publish a wholesale charging scheme; rules that support the level playing field between all market participants to be put in place; and the use of operational and market codes that are available to all participants in each area.
The Government’s response to the Defra Committee’s pre-legislative scrutiny states:
“Preventing discriminatory behaviour is critical to providing a level playing field in which new entrants can be confident that they will be treated fairly by incumbent water companies. However, the Government does not accept that a blanket requirement for incumbent companies to functionally separate their retail functions is the best solution to this”.
In the light of that, Clause 23 would impose a new general duty on Ofwat to exercise its powers and perform its duties in a way that helps to ensure that no undue preference or discrimination is shown by water and sewerage companies, including against water and sewerage supply licensees. As is usual in industry reform legislation, Clause 43 would also give Ofwat a time-limited power to drive changes to existing licences, including to companies’ conditions of appointment, when it considers that those changes are necessary or expedient in consequence of the new statutory provisions. Ofwat has published discussion papers that recognise the important role that such licence conditions play in ensuring a level playing field between existing and new entrant retailers. However, many believe that there is a deficiency in Clause 43 as currently drafted which could be exploited by companies seeking to resist any efforts by Ofwat to make changes to their conditions of appointment—for example, in order to introduce new governance codes.
There are also real risks in leaving such a vital part of a successful market to be developed and possibly challenged through secondary regulation. The burden on Ofwat could be lifted by imposing the non-preference, non-discrimination duty directly on to companies. While general competition law arguably already prohibits such discrimination, enforcing such competition law duties has been shown to be a costly and prolonged process. I am therefore suggesting amendments that, while not requiring functional separation, would make companies’ non-discrimination duties directly enforceable by Ofwat, using its existing powers under Section 18 of the Water Industry Act 1991. This would help reduce the cost of implementing the market reform and policing and of enforcing effective competition in the future.
The aim is competition; the aim is choice. The question is how we engage with a process that is clear and straightforward, while protecting consumers. The hurdle is incumbent companies. Many of them can use complex contracts with significant legal fees attached and delaying mechanisms. It is therefore very important that the aim moves towards regulated access with clarity and less emphasis on bilateral negotiations, and that that regulated access is for everybody. At that point, anyone entering the market can plug in and play. There should be no prohibitions put in place as a result of bilateral negotiation. It is for those reasons that I have tabled the amendments in my name. I beg to move.
Lord Grantchester (Lab)
I shall speak to Amendment 105 in this grouping and agree with many of the comments in its other amendments, in that they resonate with Amendment 105.
The proposed new clause in Amendment 105 is another technical amendment about how this market is to be made to work. We support the introduction of a market to non-household customers, but remain concerned that the market as currently drafted in this Bill is not up to the function as well as it could be. It is essential in a market to have a fair playing field, where each competitor has the same rules applying to it. I quote the Water Industry Commission for Scotland:
“To be effective a retail market needs all participants to have access to clear and accessible prices, clearly defined and common levels of service, and standard terms and conditions. Allowing parties to negotiate could open the door for a current incumbent to discriminate against new retailers by offering them less preferable terms, poorer service levels or simply by being slow to respond to requests. This would limit the effectiveness of the market and increase costs for new entrants (and customers)”.
Incumbent water companies have a very large advantage, having been in place for many years, and can offer more favourable terms to their own in-house companies than to new entrants. There are many barriers to entry that may become apparent and it is important that the new entrant has the protection with the ability to challenge any that may materialise, and not merely on pricing. This would not in any way cut across the Government’s view that a blanket requirement for incumbent companies to separate their operations by function is unnecessary.
The Minister may point out that Clause 23 may do what we are seeking. However, this clause requires Ofwat to secure merely that no undue preference, including for itself, is shown. There does not appear to be a definition of “undue preference” and it is important to show from the outset that all competitive pressures must be fair, and appear to be fair, to the new entrants. The Minister will no doubt point to the market codes that will be issued with the Bill, but evidence that has been provided to us during its passage, such as that from Business Stream, the Scottish water company, suggests that this is not enough.
I hope that the Minister is able to recognise the significance of this amendment that will ensure that the terms offered to existing licences are also offered to new licences and that the regulator is able to pay close attention to such deals. The new market situation in Scotland has highlighted this issue. Without correction, there are grounds to fear that when the market opens in 2017 it will not function as the Minister would hope. As a result fair competition may be impeded, and business will not get the kind of benefits and savings that we would like to see.