Water Industry

Gavin Shuker Excerpts

Tuesday 5th November 2013 Commons Chamber

[Gavin Shuker (Luton South) (Lab/Co-op)]

I am extremely grateful, Madam Deputy Speaker, for your generosity in allowing me to speak in this debate. I apologise for having missed the opening speech because of parliamentary business that I could not avoid.

It is a pleasure to follow the right hon. Member for Wokingham (Mr Redwood). I think that he and I will agree about one thing: the botched privatisation of the late 1980s and early ’90s has led us to a wholly undesirable situation. However, we are where we are. As someone who, in the past couple of years, has had responsibility on the Opposition Front Bench for the issue of water, I have watched the situation very closely. I was struck today by the news that this Government are now apparently taking water affordability incredibly seriously. There has been a damascene conversion—or perhaps a Dunfermline and West Fife conversion, as my hon. Friend the Member for Dunfermline and West Fife (Thomas Docherty) has joined the Front-Bench team and is clearly getting far better results than I ever did in the role that he has the privilege of holding.

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

I welcome the hon. Gentleman to this debate and hate to interrupt his complimentary remarks about his hon. Friend. However, following what Government Members have said about the Water Bill and what we want to do on pricing, it is fair to say that we have been working on this issue for a very long time. I think he will find that any announcements in recent days that have come from sources on the Opposition side might be a little new to the debate.

[Gavin Shuker]

What a fantastic set-up for the speech I am about to give, which is about the Government’s record in the past few years. I freely accept that the hon. Gentleman was not a member of the Government at that time, but he obviously voted on many of the issues that I want to talk about.

It is crucial that we in this House have a proper understanding of the impact that the Bill that is being sold to us will have on the consumer bills that are being levied on many of our constituents right now. Let us be clear: no one was talking about water affordability or Government action to reform the water industry to deliver for customers and not just for shareholders until the Leader of the Opposition gave his living standards speech in Brighton back in September.

[Richard Benyon]

rose—

[Gavin Shuker]

I am happy to take an intervention from the former water Minister.

[Richard Benyon]

I hesitate to rise, because I could just sit here and enjoy the hon. Gentleman’s speech. He and I had endless discussions about affordability when he was in his Front-Bench role, so he knows that he need only read the water White Paper to see that we were concerned about that issue, and he knows that the underlying truth of the Water Bill is that, in order to keep bills low, we need to make sure that we have an industry fit for the future, which is all about affordability and protecting our constituents. He also knows, therefore, that it is ridiculous to suggest that this issue has appeared just in the past few days.

[Gavin Shuker]

The hon. Gentleman makes a passionate defence of his own record in post.

Let us look at some of the specific measures on which this Government had the opportunity to work and legislate but deliberately chose not to do so. First, there is bad debt. I was interested to read a copy of the Secretary of State’s letter to the water companies—sent out today, curiously enough, purely coincidentally—which talked about bad debt. I thought, “Fantastic! At last this Government have adopted the right position on bad debt.” Each household has to pay £15 or so because some people cannot pay and will not pay, and that money is dumped on the bills of consumers who step up and do pay.

On energy bills, is it not interesting that there is a provision that requires landlords to give companies their tenants’ details so that they can reclaim the money? On reading the letter, I thought, “Fantastic. At last the Government have responded to the Opposition’s calls to make the water situation analogous with that of energy.” However, the letter only makes a firm threat to look at the issue in more detail if the companies themselves do not voluntarily make progress on the provision.

My position and that of my party is clear: bad debt as a result of those people who will not or cannot pay dumps an additional cost on every household, so it would make sense to implement the provision. The Government could have taken that action. We made the case for it, but they have had no interest in it until now.

That is not the only issue. Government Members and the press have today mentioned the social tariff. I was the lead Opposition Member on the Water Industry (Financial Assistance) Bill Committee. We sought to amend the Bill so that every water company operating in the UK had to do one simple thing, namely offer a social tariff to those people who find it hard to pay their bills or who find themselves in a situation where they cannot pay for the service provided. The Government chose to vote down that proposal and Government Members voted against it. Instead, they favoured a voluntary approach: if water companies wanted to introduce a social tariff, they could. It is amazing how few water companies have actually done so.

[George Hollingbery]

I think I am right in saying that the previous Labour Government were in power for 13 years and I am struggling to add up the number of water regulation Bills they introduced during that time. If the hon. Gentleman would like to tell me, I will take a round number.

[Gavin Shuker]

Why not start with the three reviews that led to the water White Paper? The Pitt, Walker and Cave reviews looked directly at competition and were conducted in the five years before we exited government and this Administration came in. They laid the groundwork and contained radical ideas that would have resulted in better provisions for water affordability. They would have put in place a framework to deal with the issue in its entirety. The water White Paper, which resulted from those reviews, was quite good, but that has left many of us asking: why is the Water Bill so washed out?

[Thomas Docherty]

My hon. Friend is making an excellent speech. I think I am right in saying that it was only under the Labour Government that water bills actually fell. Is that correct?

--- Later in debate ---

[Gavin Shuker]

My hon. Friend is absolutely right. If we look at the price review periods since privatisation, we will see that water bills came down in real terms during only one of them and that was under the previous Labour Government. On the price review process, my hunch is that this Government believe that the water companies will read the signals coming from hard-pressed consumers and come in at RPI plus 0 or RPI minus 1 in the next price review period and claim it as their victory, but let us be clear: getting a sustained reduction in water costs requires action from this Government.

[Andrew Percy]

We have moved on a little, but the hon. Gentleman has graciously given way. He is doing a good job of reading the Labour brief and trying to pretend that all of a sudden it is interested in people’s bills. On the Pitt review, is he suggesting that it was somehow planned by the Labour Government, or did it come about because I and my constituents were all under about 2 feet of water for a long time?

[Gavin Shuker]

Intense flooding has major implications and climate change means that it will happen more regularly, but the hon. Gentleman seems to be saying that the previous Labour Government were in some way wrong to review the situation and flood defences. He was not the MP for his area at the time, but he knows that the flooding was devastating. If he wants proper action on ensuring that his constituents will be protected against the next bout of flooding, he should support our efforts to amend the Water Bill to make sure that there is a proper, workable Flood Re solution for flooding insurance. He mentions the Labour brief. I humbly point out to him that for the past few years I have been writing the brief.

[Charlie Elphicke]

Does the hon. Gentleman agree that the last Labour Government did nothing on social tariffs?

[Gavin Shuker]

No, that is not the case. The Flood and Water Management Act 2010 created the legislative framework for that measure.

I want to talk about some of the measures that have been trumpeted as the solution to bring about water affordability and to stop the rising tide of householders who are finding themselves in water poverty or unable to pay their water bills. The approach of the Water Bill is entirely the wrong way around. It is interesting to hear Government Members say that the only answer is greater competition. I accept that retail business competition could be a good way of reducing water usage. That has made a profound difference north of the border. That is why we have supported it continually. The idea came out of the Cave review.

However, at a time when many parts of the UK are much more water-scarce than other parts of the continent and even parts of Africa, it is short-sighted to think that that idea will work without considering abstraction reform as well. The Government have chosen to punt that issue into the 2020s—until 2025—for the next Government to look at. If we do not deal with scarcity in many parts of the country, there will be a major problem. Instead, the Government have looked for a number of measures that will shake up the industry and make them look pro-reform, but that will not necessarily tackle the issue of abstraction.

There is an idea that the only answer to the problem of some parts of the country being water-rich and others water-poor is to build pipelines. I remind the House that 2% of the country’s energy usage already goes on water. There is a major carbon cost to that idea. If people do not believe that that would end up on people’s bills, they are wrong.

[Alec Shelbrooke]

Just to clarify, did the hon. Gentleman say that we need a national water grid to move water around or that we do not?

[Gavin Shuker]

I am happy to clarify that. I was saying that the idea of a national water grid is stillborn, purely on the basis that the carbon costs make it too difficult. If we accept the premise for that idea, surely what we need is a similar level of investment in water efficiency. We must have a similar amount of foresight on how we will get by with less in the many water-stressed areas. The south-east continues to grow and water is becoming more scarce.

Unless there is proper leadership on that issue, things will become very difficult. Big concrete, in-the-ground solutions are not the right approach. There is a need for additional water capacity, but we need to consider the issues. I say humbly that the Government have a green deal, but where is the blue deal? Where is the deep thinking about what we need to do?

Another area where the Government have been caught napping is the structure of the industry. After privatisation, a number of companies emerged that were listed on the UK stock market. There was then a shift in the industry towards foreign ownership. Today, the majority of the industry is owned by private equity firms. At the same time, dividends and water bills have continued to rise. Unison has done some fantastic research that has tracked the nature of the industry. However, it is not just Unison that has raised concerns. Jonson Cox, the chair of Ofwat, has said that there needs to be greater clarity in many of the difficult accounting explanations. I hope that Ofwat will continue to pursue that issue.

One issue on which the Government could take action is Eurobonds, and the practice whereby water companies effectively borrow from arm’s length bodies of themselves at greater levels of interest, which is obviously favourable on their balance sheet. The Government consulted on that issue and decided to do nothing, yet it is a major reason why the water industry is skewed the way it is. If we want to drill down and ensure that the benefit of the reforms goes not only to shareholders but to customers and households, the Government must consider that issue again.

Finally, I want to mention social responsibility for water companies. In January 2012 I went to a fantastic research facility at the university of Leeds called Water at Leeds. I gave a speech in which I laid out Labour’s response to the water White Paper and the forthcoming legislation. I also talked about the consensus that exists on water. Both parties in government, the industry and customers have bought into the idea of a largely monopolised, yet privately owned, privately run and privately debt-financed water industry, but that consensus could break down if action is not taken.

Today, 72% of people believe that water would be better off nationalised. That is a massive flashing red light to the water industry that it needs to take action, and to the Government if they believe that that should not be the policy that passes through. I believe one way of doing that would be to have a social responsibility clause in the Water Bill that lays out clearly and benchmarks what each water company is doing in terms of social responsibility. That would include the companies saying how they manage their tax affairs in a way that is easy to understand and has clarity, rather than things being hidden away on the balance sheet. They would also mention their responsibility to their broader constituencies, and whether they employ apprentices and are investing in R and D, as Cave mentioned in his report. Let us look at the water companies and instead of saying that some have a good story to tell, let us try to raise them all up to the level of the very best.

Those five areas—bad debt, social tariff, abstraction reform, Eurobonds and social responsibility—would in themselves create a coherent basis for tackling water affordability and water scarcity. I humbly remind the House that despite all the hype of today and what the Minister may say, this Government have looked those challenges squarely in the eye and dodged each one.

--- Later in debate ---

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

It is a pleasure to serve under your chairmanship for the first time, Madam Deputy Speaker; I welcome you to the Chair. I thank the Backbench Business Committee for giving us this opportunity—I lobbied for it, so I am one of those responsible for securing the debate—and I thank my hon. Friend the Member for Dover (Charlie Elphicke) for introducing the debate. I apologise for being unable to hear his contribution—I was detained—but I have been present for much of the debate. I welcome the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for North Cornwall (Dan Rogerson), who has inherited the Water Bill. His predecessor, my hon. Friend the Member for Newbury (Richard Benyon), said that this issue has occupied him for the past three years. I thank him for always being courteous and engaging, not least on matters relating to Thames Water.

I received an encouraging piece of information a few weeks ago, as did other hon. Members who represent the Thames Water area. As my hon. Friend the Member for South Swindon (Mr Buckland) said a moment ago, the provisional view of Ofwat is that it is minded to reject the latest application from Thames Water to increase prices. Given that we had previously been told by Thames Water that it expected to increase prices not just next year but every year by approximately £60 to £80 per household, to fund the Thames tunnel, that is a welcome relief. I understand that Ofwat has not made its final decision, but I hope it will confirm it this week. My constituents would be encouraged by that news.

It was also encouraging to hear the Environment Secretary this week tell water companies to be mindful that price increases should be imposed only where necessary, and remind them to introduce special tariffs for hard-pressed households. That takes me back to debates at the end of the previous Parliament when my hon. Friends the Members for Brecon and Radnorshire (Roger Williams) and for Cheltenham (Martin Horwood) tabled an amendment to the Flood and Water Management Bill to allow for social tariffs, which had never before existed in the water industry. There had been social tariffs in the energy industry, but not in the water industry. The Act became law on 8 April 2010—probably the last piece of legislation to sneak over the line before the general election. Since then, the Government have been positive about encouraging individuals to consider how they can get help with their water bills and ensuring that water companies introduce social tariffs. Since the Liberal Democrats have been in the Government, guidance on social tariffs was issued in June 2012 and water companies have been able to introduce their own social tariffs since 2013. I credit Thames Water with welcoming and responding to that opportunity.

Many families are often hard pressed by the cost of their water bills. For years, I and my hon. Friend the Minister and his colleagues in Cornwall and the south-west campaigned for a reduction in south-west water bills, but the Government have now dealt with that and, in a welcome move, have legislated to reduce bills in the south-west.

For the benefit of those who follow our debates, I should add that there are two other schemes that provide help. The first is the WaterSure scheme, funded by water customers, which provides financial help to householders with three or more children under the age of 19, if on a water meter and in receipt of certain benefits—people should check which benefits and whether they qualify—and for those without children but in receipt of benefits and with a medical condition requiring excessive water use. That is important. Not everybody knows about it, but they should, particularly those struggling who might qualify. The other scheme, Water Direct, run by the Department for Work and Pensions, helps householders in receipt of certain benefits to manage debt with water companies. Under that scheme, the DWP acts as a broker to help make arrangements.

[Gavin Shuker]

Will the right hon. Gentleman give way?

[Simon Hughes]

Before I give way, I pay tribute to the hon. Gentleman for the work he did from the Opposition Front Bench and for his contribution a few minutes ago, which I heard and enjoyed.

[Gavin Shuker]

That is incredibly generous of the right hon. Gentleman. I am just checking I am not dead—people rarely speak nicely of each other in the House, so perhaps I am.

I wanted to be helpful, actually. Does the right hon. Gentleman agree that neither of those quite good schemes is well known, partly because they operate regionally? In other words, there is no clearly identifiable social tariff scheme that the entire water industry can point to—although I appreciate that WaterSure is a national scheme—and there are patches of coverage, which is one reason why all water companies should have a social tariff.

[Simon Hughes]

I apologise if I phrased my remarks as if to suggest that the hon. Gentleman was the former Member for Luton South. He is clearly still the current Member, as I know, not least because when I last went to Luton on official business—to watch Millwall beat Luton Town—he was there to buy me a drink afterwards. I was very grateful—actually, I cannot remember whether I bought him a drink or he bought me one, but anyway it was a very nice pub, and I recommend it. Luton has good breweries, beer and pubs. But we, as the away team, were very well received by our hosts. [Interruption.] He wants me to stop rubbing it in. I apologise.

One of the dates in my diary this week, besides this debate, was that for making representations to the public inquiry into the Thames tideway tunnel. The latest date for written representations was yesterday, which was when I submitted mine. For my constituents and many others, not just in London but in the whole Thames Water region, it remains a live issue whether Thames Water’s current plans for the tunnel are the right ones, given the alternative ways of dealing with sewage in London, and the question whether the route is the right one. Obviously, the route will impact significantly on constituencies such as mine. For example, a big site on Chambers wharf is proposed for the drive shaft, but I and my constituents argue that it should be used for the reception shaft—if it is to be used at all—and that the drive shaft should be elsewhere.

We also have concerns about the financing. The hon. Member for South Swindon said that the debate was ongoing in government about what the right approach should be, if the Government are to respond to Thames Water’s approaches. My constituents think—the right hon. Member for Holborn and St Pancras (Frank Dobson) probably shares this view—it is a bit rich for a non-public company to run down its assets and then ask the Government to underwrite it in borrowing significant amounts of money and expecting the taxpayer, the bill payer or both to pick up the bill, as is currently proposed.

I have regularly urged my right hon. Friend the Chief Secretary to the Treasury and colleagues in the Department for Environment, Food and Rural Affairs—before and after the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for North Cornwall, took up his post—to be careful not to endorse a solution that appears to condone allowing water companies in England to run down their assets and then try to get Government support to bail them out. That would not send the right message. The water companies must understand that, if they make choices resulting in their profits going not to the consumer but to their shareholders in the form of dividends, they really cannot expect the Government to come to the rescue, even if that means that one company eventually has to be replaced by another. I am sure that there is no shortage of companies willing to enter the water market in England.