Water Industry

Rehman Chishti Excerpts

Tuesday 5th November 2013 Commons Chamber

[Charlie Elphicke]

I thank my hon. Friend for his customary generosity.

I will turn to the pressures that hard-working families are facing as we come out of a very difficult economic time for our country. The fact is that most people do not particularly care about politics. They vote us in every few years and decide the Government of the day, but they do not consider politics on a daily basis; they consider how they are going to keep the wolf from the door. They consider how they are going to get through the day, provide for themselves, their families and loved ones, raise their children, manage to pay their bills and get a better paid job. The Government have been very effective in ensuring that there is more employment and a return to economic growth, from rescue to recovery and onward to greater economic strength for our country.

Part of keeping the wolf from the door is dealing with the utility bills that cost all our constituents so much money. That is why water reform matters. People do not really have a choice, because there is not much competition. It is a natural monopoly and people have to pay their water bills. There is an opportunity to foster more competition and ensure that the industry is more effectively regulated than it has been. For many years nothing was done to keep on top of the water industry, particularly before this Government were elected. Now we have an opportunity to make further changes and look more closely at what the issues are and what might be done.

Before the Government were elected, there was a settlement with Ofwat and the water industry that was to last for five years. The assumptions on which the settlement was made have since altered. Retail prices index inflation has risen more quickly than it was expected that construction inflation would rise, and interest rates have been lower than expected. The result has been excess profits for the industry. Ofwat figures highlight a return on regulated equity in excess of 20% in some cases. Investment was allowed to fall in real terms after 2007, while customer bills have risen by more than inflation. Dividend payments are often greater than the profits made, which some would say is particularly unattractive.

[Rehman Chishti (Gillingham and Rainham) (Con)]

I, too, pay tribute to my hon. Friend for the work he has done to bring the issue to light. In relation to bills and affordability, does he agree that it is completely and utterly unacceptable that bills have risen by 60% over the past 10 years, which clearly shows that the previous Government did absolutely nothing to help the consumer?

[Charlie Elphicke]

I thank my hon. Friend for that intervention. Certainly a better deal needs to be driven for the consumer than was driven by the previous Government. They also permitted a culture of industrial-scale tax avoidance, which was wrong.

--- Later in debate ---

[Rehman Chishti]

One of the key problems is that constituents at the bottom end of the income scale have over many years incurred a debt as a result of high water bills. Given the big profits made by these companies, surely they have a moral responsibility to help those people at the bottom end with the debts they have incurred.

[Charlie Elphicke]

My hon. Friend makes an important point, but I will leave it to my hon. Friend the Member for South Swindon, who has been studying those issues with considerable care and concern.

Secondly, there is the question of how we tackle tax avoidance. The unacceptable, even antisocial, tax avoidance culture in the water industry has meant that many companies have not paid tax for years. It is wrong that that situation has arisen. Everyone should pay their fair share. We need sustainable debt, not 100% mortgages. Under the previous settlement, these water companies have been allowed to become casinos. We have an opportunity to look carefully at that to see whether the position is safe, secure and sustainable for the future.

--- Later in debate ---

[Frank Dobson]

That might be the case, but the statement was not made in my name—let us put it that way. When I was responsible for water in opposition, I was opposed to metering. I remained opposed to it when Labour was in government and continue to be opposed to it.

South West Water is not the only one. Thames Water had sewage and run-off problems and came up with a great £4 billion scheme. Because of how it finances itself, it could not finance the scheme, despite paying £6 billion in dividends over the years. The only way in which it can proceed is by Government guarantee. It is therefore not really privatised; it is a dependency of the Treasury.

[Rehman Chishti]

The right hon. Gentleman says that the previous policy was not in his name. Does his party leader have his support for his current policy on water? Is so, what is his party leader’s policy?

[Frank Dobson]

My understanding is that the party’s policy—no doubt it will be enunciated in due course from the Front Bench—is that the current situation is unsatisfactory, and that we need a dramatic change in the powers and functions of the regulator. No Government Member would think there is anything wrong with that proposal.

Where is all that customers’ money going? In the case of Thames Water, it is being paid out to shareholders in Australia and China. Prior to that, it was paid out to shareholders in Germany. People talk about the wonders of the City of London as a financial centre, but I wonder why, in such a great financial centre, one or two of the people with all the money have not thought of getting together to own the water supply for their own city. Apparently, that has not occurred to them.

Thirty per cent. of the average water bill goes to profits. Even the energy industry uses only 9% of charges as profit, but the water industry uses 30%—30% of every penny and pound that people pay goes off in profits, which is, to say the least, a remarkable return on investment.