Water Bill

Baroness Parminter Excerpts

Thursday 6th February 2014 Lords Chamber

[Lord Crickhowell (Con)]

My Lords, at Second Reading I said I was green with envy that the environmental regulators will now have the Bill rather than the legislation that I had to deal with as chairman of the National Rivers Authority when I was in almost continual friendly conflict—I emphasise the word “friendly”—with Ian Byatt the economic regulator. It was so friendly that I have two cartoons at home, which were sent to me by a notable newspaper, showing both of us in the boxing ring. In the first, we are engaged in a vigorous fight, and the second shows us collapsing together exhausted at the end of the exchange. We have made huge progress since then, and the existing sustainable development duty, as I understand it, is now being given statutory authority in the Bill. The clear steer that has been provided by the Government is now being given statutory effect in the Bill. As I understand it, Ofwat now has sustainable development as a central objective. It will have to take account of that. It will have to carry out its functions in accordance with the strategic priorities and objectives identified by the Secretary of State.

So while I entirely understand and, indeed, sympathise with the arguments advanced by the noble Lord, Lord Redesdale—and perhaps it is because we have made such a huge advance from the position with which I had to deal when the economic regulator just did not think he had any obligations to provide for the environment and blocked almost every proposal that came from Europe or from us—I would like my noble friend to clarify what is to be gained or lost if we accept the proposition put forward by the noble Lord, Lord Redesdale, over what we have already in the Bill. I find it very difficult to understand exactly what benefit we would gain. If there is nothing to be lost by including it, I would not be against including it. Against the background of a huge step forward having been taken, I am seeking from my noble friend clarification of the benefits and possible downsides of having this written into the Bill in the way proposed.

[Baroness Parminter (LD)]

My Lords, I thank my noble friend Lord Redesdale for raising this issue yet again. He has done so on numerous occasions, as have many other noble Lords. It is an important debate. It is quite clear that the Government are committed to sustainable development, but they believe that they do not need to elevate the primary duty of sustainable development for the regulator in the water industry because it has a secondary duty. What they are prepared to give is the new primary duty for resilience. I think we are going to carry on arguing about whether resilience delivers the environmental and social benefits that those of us who are concerned about sustainable development believe it does. The Government say it does and I am sure that the Minister will reiterate today that he believes that resilience will deliver the sustainable benefits that we believe are crucial for the regulator to deliver. There are others who believe that the resilience duty does not.

I would like to pick up on what my noble friend Lord Redesdale has said. We should try and move the debate on from arguing about what “sustainable development” and “resilience” mean to what we actually want to achieve. It is significant that my noble friend Lord Redesdale raised the issue of water efficiency. That is, bluntly, what we want to achieve—a more resilient future for our water industry which protects the scarce resources that we have, to the benefit of the environment and communities. I urge the Minister to reflect again between now and Report on a duty to promote water efficiency. I think that is a constructive way forward. There will be a difference between those of us who believe resilience is sufficient and those of us who would have liked to see a primary duty on the regulator. I do not think the Government are going to move, but I do think that a duty to look at the issue of water efficiency is a helpful way forward.

[Lord Whitty]

My Lords, I have tabled an amendment in this group which attempts to deal in a slightly different way with exactly the same issue as the amendment of the noble Lord, Lord Redesdale. Which is the closest approximation to perfection I am not entirely sure, and whether either of them is perfectible in the eyes of the Government, I am not entirely sure.

We do have an issue. The noble Baroness, Lady Parminter, stated the current situation correctly. I say to the noble Lord, Lord Crickhowell, that, since 2003, Ofwat has had a sustainable development responsibility but it is a secondary objective. What these amendments attempt to do is to put it on a par with the economic objective for consumers. There is an economic, a social and an environmental dimension of sustainability which goes wider than that responsibility to consumers, now and in the future. The reason why relations and general coherence are better than the early days which the noble Lord, Lord Crickhowell, described, is that Ofwat has recognised that it is more than an economic regulator, and the Environment Agency has recognised that it has economic objectives as well as environmental objectives. Some of those have become a little controversial in recent days, in that, for example, flood defence priorities are determined largely in terms of economic effect. Both agencies now have all three—certainly environmental and economic objectives—which they routinely integrate within their operations. For that reason it is slightly odd that there is a differential between the objectives to consumers on the economic side and the objectives of sustainability on the other side, in terms of Ofwat’s requirements. The Government have made two attempts at convincing those of us who are interested in this subject through some very well written briefs. They were much more understandable than the Bill itself, or indeed the Explanatory Notes. By and large, I understood those briefs; they have nevertheless failed to convince me. They are arguing in terms that are now obsolete. They argue that the economic regulator is Ofwat and the environmental regulator is the EA. They both overlap and they need to operate a coherent approach to this in relation to sustainability.

The Government have moved significantly, as the noble Baroness, Lady Parminter, was hinting, in stretching the definition of “resilience”. Resilience is a jolly good, robust term. We all approve of resilience, and long-term resilience is clearly a responsibility of Ofwat and indeed the EA, in relation to water resources and their delivery. It is not quite the same as sustainability. It is part of sustainability but it is not the totality. The noble Baroness and the noble Lord, Lord Redesdale, have both pointed to the energy efficiency dimension, which, let us be fair, has been lacking until at least very recently in some of Ofwat’s priorities, when it allows expenditure during the price review. It is that which worries people—that this issue will fall out.

The Minister told me the other day that resilience includes social resilience; it presumably therefore includes issues of affordability and access as well as environmental and social issues. That may be so but the normal meaning of “resilience” is protection and upgrading of the assets that you have, and which need a long-term permanence to protect them. The Government are in danger of stretching the term rather beyond what the Oxford English Dictionary would term as resilience.

--- Later in debate ---

My question for the Minister, therefore, is in tune with present government initiatives: why not completely or significantly deregulate the installation of water meters and allow suppliers to install them when they wish, while continuing to regulate their use for charging? The need to be more agile in response to changing conditions and the availability of more effective and cheaper technology means that such an easing of red tape would have benefits both for suppliers and consumers. I beg to move.

[Baroness Parminter]

My Lords, I thank the noble Lord, Lord Oxburgh, for his probing amendment. My Amendment 133, also in this group, seeks to amend the Water Industry Act 1991 to allow water companies to introduce compulsory metering, if supported by their customers.

Current legislation means that water companies are able to introduce domestic water meters on a compulsory basis only where the Secretary of State has determined that either the whole or part of their area is an area of serious water stress. My amendment would simply remove this barrier, allowing water businesses to do what they felt was in the best interests of their customers and increasingly scarce water resources.

We know that metering gives consumers greater control over their water consumption and so can improve affordability. It also helps water companies to target households using large amounts of water, provide water efficiency support and tackle leaks. On that point, perhaps I may say how welcome it is that this Bill transfers the responsibility for supply pipes from customers to water companies as this should help to drive down leakages. The case for smart metering, combined with advice on how to reduce water usage, and social tariffs that minimise affordability issues for disadvantaged heavy-use households, is strong, and has been well made by the noble Lord, Lord Oxburgh. As he has said, the independent Walker review in 2009 recommended a widespread switchover, as, indeed, did the EFRA Committee in the other place.

We know now that some water companies denied pursuing this course of action by current legislation want it. The chief executive of Northumbrian Water, Heidi Mottram, supports it. The company knows that it has to plan its businesses for the future, when climate change and other constraints may well impact on areas not presently water stressed. Given the opportunities in this Bill to trade water, they want all the tools they can get to maximise the precious and increasingly valuable resource that water is.

This seems to be a reasonable amendment. All it would do is give companies the right to speak to their customers and manage their businesses to their benefit, with increasingly scarce water resources. It does not force, rather it enables water companies to consider the wider social and environmental benefits that metering brings.

[Lord Curry of Kirkharle (CB)]

My Lords, I, too, thank the Minister and the department for the very helpful briefing notes we have been given, and for the opportunity to explore the Bill with him and his team. I fully endorse the comments of the noble Baroness, Lady Parminter, on Amendment 133. I also firmly support the noble Lord, Lord Oxburgh. I declare an interest in that I chair the management board of a rural estate that has an extraction licence.

At a time when the management of water is such a critical issue, I would go even further than this amendment. I think that a timetable should be set, by which time all consumers of water are charged for the volumes they use. These amendments mark a step towards that objective. I cannot understand the reluctance to expand the use of water meters. I know that there is an installation cost involved and that it will take time. The potential costs of installation could be fairly significant, as the noble Lord, Lord Oxburgh, pointed out, and of course meters have a limited life and will need to be replaced over time. However, these costs need to be set against the fact that metered customers use between 10% and 15% less water. Some will use more and some less, but the overall net benefit of a saving of 10% to 15% is massive.

The current policy of allowing companies to apply for the right to install water meters in areas of water stress has a certain logic. However, we have seen vividly over the past two years the dramatic impact of extreme weather events, whether they are the result of climate change or whatever. Flooding in winter and drought in summer could become much more frequent occurrences than has been the case historically, and water stress could become a reality well beyond the south and east of England. Even using the existing definition, we are likely to see a requirement for increased water use. Better, I would suggest, that we should extend the option of charging now in anticipation of the inevitable pressures on supplies, as mentioned earlier by the noble Lord, Lord Redesdale.

I come back to the issue of managing water. The well-known maxim, “If you can’t measure it, you can’t manage it”, seems to apply very precisely to the subject of water. As I have mentioned, I chair an estate. We are now well advanced in the process of installing meters in every household and enterprise across the entire estate. We know where every litre goes and we can charge appropriately. We are also able to monitor, remotely in the office, how much water is being used, where and by whom. It is very effective and much more efficient. The water industry needs to become much smarter in its management of water, and measuring is essential. I understand that Anglian Water now has around 90% of its customers metered, not through compliance but because it makes sound economic sense. Other companies, particularly in the freed-up market that we are trying to achieve through this Bill, need to be encouraged to do the same.

I would like to make one final point. It costs all of us £14 every year to cover the costs of unpaid water bills. It is a fact of life that if we do not appreciate the value of water, we are likely to be much more indiscriminate in our use of it. We should take the opportunity in this Bill to further establish the principle of charging for water use. The Walker review, which has already been mentioned twice, firmly endorsed this approach, and I hope that the Minister will give this proposal his serious consideration.