Water Bill Debate
Full Debate: Read Full DebateDepartment: Department for Environment, Food and Rural Affairs
Thomas Docherty
Main Page: Thomas Docherty (Labour - Dunfermline and West Fife)Department Debates - View all Thomas Docherty's debates with the Department for Environment, Food and Rural Affairs
(10 years, 4 months ago)
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Thomas Docherty (Dunfermline and West Fife) (Lab)
May I take this opportunity, Madam Deputy Speaker, to wish you and all hon. Members a happy new year? I hope that all hon. Members have had a peaceful and enjoyable break and have returned refreshed and looking forward to this busy year.
Unfortunately, the festive period was not a happy experience for many households up and down the country. Many hon. Members spent a great deal of their recess dealing with the impacts of the recent weather events on their constituents. It is therefore appropriate that later we will discuss a series of amendments on the clauses that will help to provide support to many of those affected households. I look forward to having that debate in more detail, but for the moment I want to focus on the new clauses in the first group of amendments.
Last year, in his now infamous letter to water companies, the Secretary of State trumpeted water privatisation as
“one of the greatest success stories of privatisation.”
If one measures success by the payouts made to investors, it is without doubt a great success story. Let me echo the thoughtful remarks by my hon. Friend the Member for Hayes and Harlington (John McDonnell) and pick out a few examples of the dividends paid out since 1989. Severn Trent Water has paid out £6.2 billion in dividends, Thames Water has paid out £6.3 billion, the north-west’s United Utilities has paid out £7.3 billion, and Anglian Water investors have recouped some £6 billion. Overall, a staggering £40 billion has flowed into the pockets of investors. It is fair to say that many customers would not share the Secretary of State’s appreciation for his wonderful friends the chaps running the water companies.
Indeed, their view is shared by many of the coalition’s own MPs. I am disappointed that the hon. Member for Skipton and Ripon (Julian Smith) is not present. In last year’s excellent debate on the water industry he said that
“Yorkshire Water…is exploiting my constituents and people across Yorkshire.”—[Official Report, 5 November 2013; Vol. 570, c. 213.]
I do not know whether the Chair of the Environment, Food and Rural Affairs Committee shares that view of Yorkshire Water.
Miss McIntosh
Any company that is prepared to invest £1 million in improving the provision of water to Filey has to be congratulated, so I congratulate Yorkshire Water on that. Does the hon. Gentleman agree that this Government’s arrangements leave Yorkshire Water and other companies free to raise money on the markets in a way that otherwise would not be possible?
Thomas Docherty
I do not want to get sidetracked by a debate about the merits of privatisation—I think you would pull me back in line if I did so, Madam Deputy Speaker—but I will just point out to the hon. Lady that Scottish Water, which is owned by the state, has invested more per connected property, I think, than any of the English water companies, with the exception of South West Water, so I am not entirely convinced by her argument.
To go back to the comments made by the hon. Member for Skipton and Ripon, despite paying out hundreds of millions of pounds to investors, Yorkshire Water has paid next to nothing in corporation tax over the past few years. I am not singling out Yorkshire Water in particular—it is clear that its behaviour is no better or worse than that of any of its competitors. The problem lies with the culture of water companies themselves. They have behaved in an unacceptable manner towards their customers for too many years. It is clear that they have come to regard customers as nothing more than cash cows, and many have paid little or no attention to customer complaints. That is why we believe it is in the interests of hard-pressed customers that the industry be subjected to greater scrutiny.
New clause 11 in particular shines a light on the opaque world of the companies’ financial and business practices. This is not an unreasonable or overly bureaucratic requirement. For many years, water companies voluntarily produced reports such as those that the new clause would require of them; yet, strangely, in recent years they seem to have got out of the habit of providing that information to customers, the regulator and the Department.
It is also worth noting, before the Minister replies, that Ofwat’s Scottish counterpart, the Water Industry Commission for Scotland, requires Scottish Water to produce the relevant information on an annual basis. Therefore, we believe that this is not an onerous or bureaucratic requirement.
New clause 12 would require Ofwat to pay far more attention to the problem of affordability of bills. I am conscious that we will have a wider debate about affordability when we discuss the second group of amendments, but Ofwat’s current interpretation of its role as an economic regulator is far too narrow. Both household and business customers feel that they are an afterthought, and the new clause makes it clear that Ofwat must have due regard to the cost of bills when setting the prices in future review periods. Labour believes that during a time of unprecedented squeezes on household budgets, much more must be done to help hard-pressed customers. Our two new clauses are important measures that would ensure that water companies served their customers’ interests, not the other way around.
We will, unsurprisingly, support the Select Committee’s new clause 2 on retail exit if it is pressed to a vote. We welcome the fact that the hon. Member for Brecon and Radnorshire (Roger Williams) appears to have had a change of heart over the festive break. During the Bill’s Committee stage he did not vote in favour of Labour’s proposal, but we very much welcome his change of heart. If we do not get an opportunity to discuss the proposal today, we hope that the other place will note that even members of the Bill Committee have signalled that they believe, on reflection, that it is a sensible and worthwhile measure. I will not repeat the discussion we had in Committee, but I think it is fair to say that, based on the signatories to the new clause, the proposal has cross-party support, which we welcome.
We will also support the Government’s amendments. I am slightly surprised that they felt the need to table a series of amendments, but not as surprised, I suspect, as the Minister when he was informed by his civil servants. The Minister has told us many times that he is lucky enough to be half Welsh, so one would have thought that he would have noticed the impact on Wales of the new clauses tabled by the Government in Committee. I hope he will explain how that slightly embarrassing oversight occurred.
We hope we will have an opportunity later this evening to press our new clauses to a Division. We welcome the spirit in which this first part of the debate has been conducted and I do not wish to detain the House any further at this point.
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dan Rogerson)
I start by echoing the remarks of the Opposition spokesman, the hon. Member for Dunfermline and West Fife (Thomas Docherty), with regard to the earlier statement made by my right hon. Friend the Secretary of State. Our thoughts are with those who have been affected by the storms and flooding over the Christmas and new year period, and I pay tribute to all those who have worked incredibly hard, including the Environment Agency, local authorities, the emergency services and, of course, those volunteers and community representatives who have supported their neighbourhoods and neighbours.
This discussion has covered a number of new clauses and amendments in relation to the regulation of water and sewerage undertakers and licensees, particularly those provisions designed to extend competition in the sector. The new clause tabled by the hon. Member for Arfon (Hywel Williams) would alter the devolution settlement by devolving further powers to the National Assembly, and he has set out his appetite for doing so. Generally, the Government of Wales Act 2006 devolves its issues down the national border, but the situation is not so straightforward for water supply. Water catchment areas and water supply management infrastructure cross the national boundary. The appointment and regulation of any incumbent water company whose area is not wholly or mainly in Wales is not devolved. That means that the legislative competence of the Assembly does not cover the parts of Severn Trent Water’s area in Wales.
Thomas Docherty
I wish you a happy new year, Mr Deputy Speaker. Given that new clause 2 specifies that the process can take place only with the Secretary of State’s consent, will the Minister tell the House how such an unintended consequence might happen?
Dan Rogerson
We are very clear that we look at such issues strategically across the whole market, rather than picking them case by case. The issue is that we want to make reforms based on the principles that we set out during discussions in Committee and elsewhere.
Were a company to exit and to leave household customers on their own—without the non-household element—customers would not only be left with a company that had limited incentives to focus on improving customer service, but would be at risk of having higher bills, because providing, as new clause 2 does, for forced legal separation of the companies’ retail businesses would reduce regulatory stability and risk increasing the cost of capital.
Let me be clear: we want to see a successful retail market. The Bill sets a framework for new entrant retailers to enter the market on an equal footing with the retailers of the incumbent water companies. Our opposition to a provision about retail exit has nothing to do with supporting the position of incumbent water companies; we expect Ofwat to use its regulatory powers to make sure that new entrants can be confident that they are competing on a level playing field.
However, retail exit is not about delivering a level playing field. For example, in written evidence to the Public Bill Committee, the Water Industry Commission for Scotland argued that a provision about retail exit was needed so that new entrants had other options for increasing their market share than
“to acquire customers by winning them one contract at a time.”
However, that is exactly how entrants to the market in Scotland have had to win business unless an existing licensee surrenders its licence or has it withdrawn. In that case, the customers of the exiting licensee are shared out among other licensees, but otherwise all business customers stay with the incumbent retailer, Business Stream, until they actively decide to switch.
Some commentators have painted a picture of an incumbent water company being left without any customers, because all of them are lost to their customers once our retail reforms are in place. We feel that that is a very unlikely scenario, given that non-household customers represent only some 10% of the total retail market, and that 90% of customers—in other words, households—will not be able to switch suppliers.
It is quite an assertion to say that 100% of an incumbent’s non-household customers will switch suppliers. Some 60% of non-household customers in Scotland have put their water services out to tender, but most customers have elected to stay with Business Stream. We understand that only about 5% to 10% of customers have switched since 2008. The customers who stayed with Business Stream have benefited from improved services, without having to switch, by renegotiating their terms. We might expect a more active market in England from 2017.
Thomas Docherty
I fear that the Minister is confusing two different issues. Undoubtedly, competition in itself has brought huge savings and has made Business Stream—or Scottish Water—change its whole ethos, but like does not follow like: simply because customers have stayed with Business Stream does not mean that the market is not working. Given that only 10% of customers have switched, as he says, does he not accept it is quite likely that some smaller water companies will not be able to compete with big retail providers?
Dan Rogerson
I certainly was not seeking to suggest that the market is not working in Scotland. My point was that some people have chosen to stay with their incumbent, and they may wish to do so rather than to have an incumbent abandon them and walk away.
An Oxera report commissioned by WICS and published in November 2012 predicted that incumbents would lose some 40% of their non-household customers in the first year of the opening of the retail market, with a 5% loss of profit. However, arguments that make an economic case for exits seem to be based on incumbents losing all their public sector and multi-site customers in the first year of market opening. The Oxera view is bolder than that of the rating agency Moody’s which, in February 2012, said that a worst-case scenario would be incumbents losing 25% of their non-household customers in the short to medium term, with a much smaller loss of 0.69% of profit. Although no doubt all incumbents will lose some customers, we can suppose incumbents will take steps, such as those that Business Stream has taken, to retain customers.
Anecdotal evidence from business customers suggests that incumbents are already upping their game, even though retail competition reform is some years away. Large business customers have suddenly discovered that they have a named customer service contact, and some have been offered improved metering services. The idea of incumbents sitting around while customers disappear is therefore, in our view, an unlikely scenario. In addition, water-only companies will be able to apply to Ofwat for a sewerage licence, which will allow them to compete with licensees and other incumbent sewerage companies by offering both water and sewerage services to their customers.
My point is that this is evolution, not revolution. Many non-household customers may choose to stick with the incumbent supplier because the incumbent supplier will improve its services to them as a result of the reforms. The benefits of that may in turn be passed on to household customers. Forcing or even allowing retail exit ignores such points. Where customers choose to switch, we anticipate a growth market in which innovation and competition lead to benefits, both environmentally and in customers’ bills. Allowing partial retail exit would open the door to forced separation if individual cases of discrimination were discovered, and we have made clear our position on that.
As I have said, any decision on separation should be made by Ministers and Parliament. We are not prepared to take the risk of forced restructuring, or even the potential for it as provided for in new clause 2, destabilising investment or increasing costs to customers. The new clause envisages the Secretary of State permitting exits, but that may not reduce the risk of a competition authority forcing an incumbent water company to make an application to exit. I therefore urge hon. Members who tabled new clause 2 and amendment 12—led by the Chair of the Select Committee, the hon. Member for Thirsk and Malton (Miss McIntosh)—not to press them to a Division.
The hon. Lady raised other issues about the industry in general, particularly in relation to upstream reform. We know from experience that setting out how markets should work in primary legislation is very inflexible and can stifle innovation. I know that she is keen for us to do more in that regard, but our view is that that was one clear lesson from the last attempt to extend competition through legislation in 2003. That is why the framework in the Bill sets the scope and direction of reform, without being overly prescriptive. We are working closely with Ofwat, customers and the industry—through the high-level group and the Open Water programme—to ensure that new markets work effectively, and we know that the industry does not want to constrain the market unnecessarily with too much detail in primary legislation, any more than the Government want to do that.
On new clauses 11 and 14, the hon. Members for Dunfermline and West Fife and for Hayes and Harlington (John McDonnell) have raised important issues about how the sector is run. As the hon. Member for Dunfermline and West Fife pointed out, we had a previous debate on this set of issues in which hon. Members from all parties were keen to put on the record their concerns about the past operation of the industry. I fear, however, that we have been talking about things as they were, not as they are and will be. Ofwat is already taking action to improve standards of corporate governance across the sector. It recently consulted on principles relating to board leadership, transparency and corporate governance, and it is putting pressure on water companies to strengthen audit arrangements, board member appointments and governance. The response from water companies has been positive and I welcome that. I do not want to belittle the issues that the hon. Member for Hayes and Harlington set out, but Ofwat has listened and is providing leadership to deal with them.
Dan Rogerson
My hon. Friend is an astute and fearless challenger of all authorities, whether they be in the private or public sector. I am sure that he is well aware of the routes that he can take to challenge the company on that matter publicly and privately. The new clauses that we are debating would not assist him in that aspiration.
Thomas Docherty
The Minister probably has first-day-back blues. I refer him to Opposition new clause 11, which would allow the hon. Member for Broxbourne (Mr Walker) to check the performance of his water company.
Dan Rogerson
The hon. Gentleman hopes that his new clause would require further reports to be made to the Secretary of State. However, that information is already in the public domain. That is why supporting new clause 11 would not be helpful. I understand and respect his desire to ensure that the industry is as transparent as possible. I understand the ambition behind the new clause, but I do not share his enthusiasm for the wording that he has chosen.
The privatisation of the water industry has been a success story in terms of investment. Helpfully, the hon. Member for Hayes and Harlington pointed out that I represent a constituency in the South West Water area. The coalition Government have recognised that there were a few flaws in the privatisation process, so there is now extra money to support bill payers in the south-west, who paid for the clean-up of the beaches around the south-west peninsula.
As was pointed out by my predecessor, my hon. Friend the Member for Newbury (Richard Benyon), there has been huge investment in infrastructure since privatisation. That is one of the key successes that we want to build on and not jeopardise. The stable regulatory framework for the water sector has enabled companies to attract more than £111 billion of low-cost investment to upgrade water and sewerage infrastructure and to improve customer service and environmental standards.
I agree that we should be putting pressure on the water sector to act as transparently and responsibly as possible. Ofwat is already doing excellent work on the issues that have been raised by hon. Members. I do not believe that duplicating the reporting requirements would help. For that reason, I believe that new clauses 11 and 14 should be resisted.
New clause 12, for which the hon. Member for Dunfermline and West Fife argued, would place a duty on Ofwat to have regard to the charges to household and non-household customers. That would simply duplicate Ofwat’s existing duty.
I turn to a number of technical amendments, which the hon. Member for Dunfermline and West Fife charitably referred to. I will move amendments 13 to 50, 52 to 54 and 60 to 87 formally at the appropriate time. They will mainly make changes to schedules 5 and 7. Schedule 7 makes consequential changes to the Water Industry Act 1991 and other primary legislation as a result of our reforms, and schedule 5 makes further changes should the Welsh Ministers decide to adopt the reforms being introduced in England. Amendment 59 and new schedule 1 will provide the Secretary of State with the power to produce transitional orders that allow us to deliver retail and upstream reform separately.
Taken together, our amendments will provide Ministers with the maximum flexibility to commence the different market reform provisions transparently and in stages, as per our commitment to stagger the implementation of our retail and upstream reforms. They will enable the current arrangements to continue without diverting attention from the immediate priority of preparing for the opening of the reformed retail market in April 2017.
Hywel Williams
We have had an interesting debate, and I was glad to hear the contributions of the Chair of the Environment, Food and Rural Affairs Committee, the hon. Member for Thirsk and Malton (Miss McIntosh), and the hon. Member for Hayes and Harlington (John McDonnell), with whom I yet again agreed entirely. I was also glad to see the hon. Member for Newbury (Richard Benyon) taking an interest in his former beat, and to see the hon. Member for Brecon and Radnorshire (Roger Williams) in his place, although essentially in a non-speaking role.
I was disappointed by the lack of contributions from Welsh Members, and disappointed that the hon. Member for Dunfermline and West Fife (Thomas Docherty) did not make any reference to my new clause 1. Pretending it is not there does not mean it will go away.
Thomas Docherty
The hon. Gentleman should have intervened on me if he was concerned that I had not covered his new clause. I echo the point that the Minister made—the Silk commission is examining the issue and will report in the spring. [Interruption.] We think that will be the right time to consider the matter properly.
Hywel Williams
My hon. Friend the Member for Perth and North Perthshire (Pete Wishart) asks from a sedentary position, “What do you think?” The Minister might choose to enlighten us, but possibly not—he would prefer to listen to the Silk commission.
My hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards) made a point about legislative competences and borders. In Northern Ireland the matter is not considered problematic, because the national or state boundaries are followed; nor is it considered problematic for legislative competences to cross the border in the case of Wales. Legislative competence seems to become a problem only when proposed by Plaid Cymru. Of course, it is also proposed by the Labour Welsh Government, but they are not here to make that point. That does not seem particularly fair dealing.
The Minister said that the status quo is the status quo, and that the matter is not devolved because it is not devolved, and presumably it will not be. He gave us no indication of what the Government would eventually propose following Silk. We look forward to that with interest.
On a personal note, I missed many of the sittings of the Public Bill Committee—
Hywel Williams
The shadow Minister is very kind. I was disappointed to have missed those sittings, and I apologise to Members of the Committee. Unfortunately, it was unavoidable.
It is my pleasure to press new clause 1 to a Division.
Question put, That the clause be read a Second time.
Thomas Docherty
I wish you a merry Christmas and a happy new year, Mr Deputy Speaker.
I welcome the thoughtful remarks by the hon. Member for Thirsk and Malton (Miss McIntosh). As she rightly said, the Minister and I had the pleasure of serving on the Select Committee under her chairmanship. She was an excellent tutor to both of us, although I suggest, looking at the debates today and in the Bill Committee, that I remember more of what the Select Committee agreed than the Minister. I am sure he will eloquently explain his position.
Dan Rogerson
The hon. Gentleman is always kind enough to remind me repeatedly, so I fear I can never forget any of our deliberations.
Thomas Docherty
It is always a good thing to be a charitable and giving soul, so I do my best to try to accommodate the Minister.
I would like to speak to the new clauses that stand in my name. As I said earlier, much attention has been paid to households that faced a difficult Christmas and new year because of the climatic conditions that battered the United Kingdom. Much less, however, has been written on households that faced a stressful period because of the economic conditions that have battered the United Kingdom, not just in the past three weeks but in the past three years. Hundreds of thousands of households did not enjoy the Christmas that all of us here in the House of Commons did, in warm and secure homes with plenty to eat and with presents given and received. Too many families were left unable to enjoy the Christmas joys that we take for granted.
The cost of living crisis cannot be dismissed as a soundbite, as many Government Members try to do. The cases of hardship regularly brought to the attention of Members of Parliament cannot simply be batted away. At a time when household incomes are continuously being squeezed, it is not acceptable to Opposition Members for most water companies to continue to do so little to help their struggling customers.
The size of water bills may not have reached the obscene level of their gas and electricity counterparts, but there is no disputing their cumulative impact. Citizens Advice reported to MPs in November that it had received almost as many inquiries from people worried about their water bills as they had about the other two utilities. DEFRA’s own statistics state that some 2.5 million households now find themselves in what the Department itself defines as water poverty, while in the past year water companies reported pre-tax profits of £1.9 billion and paid out, in dividends, a staggering £1.8 billion to their shareholders.
You might have expected the water companies to rush forward with schemes to assist their hardest-pressed customers, Mr Deputy Speaker. After all, the previous Labour Government put in place legislation to allow each company to introduce a tailor-made scheme for its own region. The water companies told the then Government and Parliament that that was all that was needed: a voluntary system of social tariffs that each and every water company would then set and implement quickly. Four years later, what progress has been made? So far, only three water companies have got around to implementing social tariffs, helping a grand total of 25,000 households across the country. Even by the end of the price review period, more than a third of water companies will still have not bothered to lift a finger and introduce such a scheme. When the water companies gave evidence to the Bill Committee, did they acknowledge that they had let down their customers and Parliament? Did they acknowledge that the rate of progress was not good enough? Did they say sorry, even once? Of course not. They blamed everyone but themselves: they blamed the regulator, they blamed the Government and they blamed the customers.
What has been the response of the Secretary of State, and his Minister with responsibility for water, to the crisis facing households? The Secretary of State sent a letter to the companies in October begging them not to raise prices further. It was not, we note, an instruction or a warning that if they did not take heed, the Government would step in. It was not even a rebuke; it was just a weak letter. That is why the Opposition have tabled four new clauses that will each help hard-pressed households. Taken together, they would make a tangible difference to those struggling with the cost of living crisis. With your permission, Mr Deputy Speaker, I will briefly take each new clause in turn, explaining the existing problems and how our proposals would address them.
First, on bad debt, I will build on the excellent remarks by the Chair of the Select Committee. Ofwat estimates that on average bad debt adds £15 to every customer’s annual bill. Note, of course, that that is just the average amount; in some cases, it is significantly more than that. As the hon. Lady said, water companies are, rightly, not allowed to cut off those who cannot afford to pay their bills, but they are allowed to pass the cost of non-payment on to their other customers. In effect, the sector already has cross-subsidisation.
Richard Benyon
Average figures are exactly that—average. There are, of course, water companies that underperform and their debt is much higher than average, but the corollary is that other water companies perform considerably better. Does the hon. Gentleman not think that there is much work to be done to learn best practice from water companies such as Yorkshire Water, which serves the constituency of the Chair of the Select Committee, my hon. Friend the Member for Thirsk and Malton (Miss McIntosh) and is outperforming the others extremely well? We should learn from such companies about bad debt.
Thomas Docherty
I know that you are a fan of all things Yorkshire, Mr Deputy Speaker, and I will come on to Yorkshire Water in a moment, if the former Minister will bear with me.
As the hon. Lady said, among those who do not pay there are those who can pay. That is unfair on decent customers who meet their obligations and we believe the time has come for more robust action to be taken. Some 80% of those who do not pay are in rented accommodation. One of the challenges facing water companies is tracking down those who refuse to pay because they move homes far more often than the average person. The only way to track them down effectively is to require landlords to provide water companies with a list of tenants. Individuals moving property would not then disappear from the system and evade paying their debts.
The measure would be a simple step and it would not require a disproportionate amount of new bureaucracy to implement. It is estimated that approximately half of total bad debt falls into the category of “can pay, won’t pay”. The Select Committee, of which the Minister was previously a member, has unanimously backed the measure throughout this Parliament, so why the opposition from the Government?
Mr Mark Spencer (Sherwood) (Con)
I understand, and sympathise with, the point the hon. Gentleman is making, but there is no legal way to force a tenant to inform their former landlord of a forwarding address. How can a landlord know what information to supply to the water companies, so they are able to track former tenants?
Thomas Docherty
I am grateful to the hon. Gentleman, who I think is a recent addition to the Select Committee. I do not think he was a member of the Committee when we had this discussion, so for his benefit I will say that it is quite simple. As the water companies have said, they would be supplied with names and addresses. The onus would then be on them to carry out the necessary activity to match up the appropriate individual, and there would be no significant burden on the landlord, the local authority or social housing provider. The burden for that work would fall on the water company. He will recall from our time in Committee that I was not always the water industry’s biggest fan, but on this the Select Committee, the water industry and the Opposition are united, so again I come back to this question of why the Government are so opposed to the proposal.
Mr Redwood
I fully agree with what the hon. Gentleman is trying to do, but I share the concern of my hon. Friend the Member for Sherwood (Mr Spencer). How would it help to know the name of the tenant who has done a bunk, moved somewhere else and not given a forwarding address and who has no intention of paying the bill? Would the water companies not need investigatory powers to track down the tenant?
Thomas Docherty
I have huge respect for the right hon. Gentleman and his knowledge, but we are clear that, as they themselves accept, it is the water companies who would have to do the legwork; no additional burden would be placed on the landlord, as it would be for the water companies to contact householders, and obviously they would have a list of new tenants. I will use the example of the electoral roll: candidates, parliamentarians and political parties receive a list of those who are new on the register, and we then contact them to welcome them to the area. When the name of somebody who disappears from one property appears at a different property, it would not be beyond the wit of a water company to work out who they were. In Committee, the Government’s key objection seemed to be that it would place an unfair burden on landlords, so we are keen to stress that, as the Minister will recall from his time on the Select Committee, it would place an additional burden not on the landlord, but on the water companies. The companies themselves want this power. To reiterate, we are absolutely clear that those who can pay should pay, so why the opposition from the Government?
Dan Rogerson
The hon. Gentleman has set out how the burden of pursuit would fall on the water companies, but of course the burden of providing that information to them would fall on the landlords, so there would be a burden.
Thomas Docherty
I congratulate the Minister on stating the blindingly obvious. Of course, the landlord would have to provide that information, but it is not the longest list in the world, and it is information that landlords have anyway, so the Opposition, like the Select Committee, find it difficult to comprehend why it would be so onerous for landlords to provide a list of their tenants by property. If he has specific examples of hard-pressed landlords who have made representations to him, I am sure he will refer to them when he responds.
For the fourth time, I ask myself the question: why the opposition from the Government? The Secretary of State has had his usual Pavlovian reaction to a suggestion that the Government should take action. It appears once again that when Parliament, the Select Committee and the water industry ask DEFRA to do something, its knee-jerk response is to think of spurious reasons why it should not or cannot do it. Our new clause would be a pragmatic and efficient measure that would help to drive down costs on all decent households, help water companies to do their job and ensure that all customers meet their responsibilities.
Our second new clause—new clause 10—recognises that not all water companies have done all they can to tackle the problem of bad debt. As I mentioned earlier, although the average bad debt figure is about £15, there are wide variations across the country. As the hon. Member for Newbury (Richard Benyon) pointed out, that is because some, such as Yorkshire Water, have worked with customers and debt advice groups, such as Citizens Advice, to put in place measures to help customers genuinely struggling to access payment packages and programmes, but unfortunately that is not the case across the country. Too many water companies have come to the unsurprising conclusion that, because they can pass the cost of bad debt on to their other customers, they need not bother to do anything about it themselves.
That is why we have tabled new clause 10. We want to give Ofwat and water companies a clear and unambiguous signal that hard-pressed customers should no longer be treated as a cash cow by companies that cannot be bothered to meet their own responsibilities. Where the regulator and the Department are satisfied that water companies are not doing enough to pursue bad debtors, the cost should no longer be passed on to other customers. Taken together, not only would our two new clauses be practical measures, but they would send a clear signal that while we will do more to help those who are struggling, we expect all customers and water companies to do their fair share.
Our third new clause—new clause 8—would help to ensure that customers know about the help for which they are eligible. In 1999, the last Labour Government introduced WaterSure to help low-income metered households with high essential water use. WaterSure caps the bills of metered households in receipt of a qualifying benefit or tax credit at the average bill for that water company’s operating area. It applies to households with three or more children under the age of 19 living at home or where someone in the household has a medical condition that necessitates high water use. It is an important measure that at the time received cross-party support and which, according to the latest figures that the Minister gave us in Committee, has helped 70,500 households in England—I think a similar scheme has helped approximately 20,000 households in Wales. Although that is welcome, we believe that that level is unacceptable. Given that, as the Consumer Council for Water has said, only one third of eligible households are in receipt of the benefit to which they are entitled, the Government have been guilty of complacency.
The Minister previously claimed there was no need for the new clause because all the water companies already provided this information. For the benefit of Members who have not had a chance to look at the amendment paper, we are proposing that information about the eligibility criteria and how to apply should be included in all water bills. He believes that all water companies already provide this information, but unfortunately for him the reality does not match his statement. Not only do his own figures show that the current approach is not working, but our own anecdotal research shows that customers are not even aware that WaterSure exists. We want to make it clear to water companies that they must do much more to promote the scheme, and we want Ofwat and the Government to hold them to account if they do not. I hope he has reflected not only on the evidence we presented in Committee, but on his own figures and the evidence from the CCW, and will listen to common sense.
Finally, our fourth new clause—new clause 7—deals with the central problem of the failure of the voluntary approach to social tariffs. As we have set out, too few water companies are helping too few customers through social tariffs, and it is clear that left to their own devices many water companies, by their own admission, will never introduce such schemes. That is why we are proposing a national affordability scheme to end the postcode lottery and ensure national standards for eligibility. We would expect schemes to be funded by the excess profits of the water companies, not by other water bill payers. As I have said, last year these companies made an eye-watering £1.9 billion in pre-tax profits and paid out £1.8 billion to investors. The idea, for example, that Yorkshire Water, which paid out £240 million, cannot afford to provide support through social tariffs is clearly nonsense.
Enough is enough. Hard-pressed households need real help now, and these new clauses are four practical and simple measures that would ensure they get it. It is time for the coalition to match our commitments.
Mr Spencer
I want to make some brief comments that were too long for an intervention, particularly about new clause 3, tabled by my hon. Friend the Member for Thirsk and Malton (Miss McIntosh). I sincerely hope that, in summing up, the Minister will reflect on today’s debate, which has shown recognition across the House that consumers and our constituents are finding it very difficult to pay their household bills because of pressure on the household budget. It is worth saying that the Government recognise that challenge and are doing their best to assist, not least by turning around the failing economy that they inherited. Needless to say, a section of society will find it very challenging to pay their utility bills, and the Government have an obligation to try to assist and support them.
There is another group of people who are unwilling to pay, as a result of a frankly malicious intent to avoid paying the bill that is due to be paid. It is vital that the water companies have the power to decide which cases fit into which categories. Those who are clearly unable to pay should be able to receive assistance, support and sympathy from the water companies. New clause 3 goes some way towards assisting the water companies to identify people within the benefit and welfare support system, who may be in need of extra assistance.
I am somewhat sympathetic to new clause 8, too, which was tabled by the hon. Member for Dunfermline and West Fife (Thomas Docherty) and is designed to ensure that water companies put the neediest customers on “the lowest possible tariff”. Those who find themselves under pressure in the most challenging of circumstances are often those least able to identify from their bills which is the correct tariff for them to be on and least able to challenge the water companies to put them on a better tariff, allowing them to afford to pay their household bills. I hope that the Minister will give further consideration to that, if he is minded to do so.
Finally, I support those who have said it is difficult to understand why the Department for Work and Pensions or the Department for Environment, Food and Rural Affairs are unable or unwilling to supply the necessary data to the water companies. I hope that when the Minister sums up, he will be able to shed some light on those thoughts.
Mr Redwood
I hope that the Government will look at the issue of unpaid bills. Colleagues of all parties are right to draw attention to the problem—one of the many sources of excess cost in the water industry, which it would be good to reduce or eliminate. It is undoubtedly the case that we pay dearly for our main utility provision in this country, and I fear that the main reason why water bills are high and will stay high is that there is no competition. It is a great pity that this Bill will not introduce proper competition into water as into other areas, as it would make a lot of difference. The amendments are designed to deal with the situation of having regional monopolies that are in many cases unresponsive and have high cost structures. Then there is the particular problem of customers deciding—quite wilfully, when some of them are perfectly capable of paying—not to pay their bills. Clearly, more needs to be done on that.
There is some good in all the amendments before us this evening, but I am not persuaded that they take the trick. It might be helpful to know who the tenant was, but if the tenant cannot be traced to where they have gone, it will be impossible to get them to pay. It might be useful to know something more about the benefits and financial circumstances of individuals, although there are issues of privacy and the handling of data that could cause difficulties, but that then fails to enable us to come down hard enough on the people who can afford to pay, which is the real issue.
Thomas Docherty
Given that it is the water industry itself that is pressing for this power relating to landlord information and given that it is prepared to bear the burden of tracking people down, does the right hon. Gentleman not accept that such a scheme is clearly workable?
Mr Redwood
It may or may not be. I do not have a very high opinion of the success of the water industry in these areas, and it may not be the best judge, but I accept that this is one of the best points in the hon. Gentleman’s case, and I look forward to hearing the Minister’s reply to it.
As I say, the amendments and new clauses are all well intentioned and, if passed, they might not make the situation worse and in some cases might even make it a little better. I hope, however, that the Minister, working with the water industry, can come up with something better because there is a serious issue here. A lot of money is owed to the water industry that people could afford to pay, but the matter is not being pressed.
Dan Rogerson
The hon. Member for Dunfermline and West Fife (Thomas Docherty) has proposed a number of new clauses, which I shall address before dealing with the lead new clause 3, tabled by the Select Committee Chairman.
New clause 7 would place a requirement on the Government to introduce through secondary legislation what is described as “a National Affordability Scheme”. The details of the scheme are not entirely clear. We debated in Committee an identical clause tabled by the hon. Gentleman, but at that point, the funding was not made clear. He said today that it would be funded specifically from the profits of the water companies rather than from other bill payers in a cross-subsidy approach.
Thomas Docherty
I refer the Minister to the evidence session during the eighth sitting of the Public Bill Committee, where I specifically said that the scheme would be funded from excess profits. Perhaps the civil servants should pay more attention in future.
Dan Rogerson
The hon. Gentleman is, as always, keen to assist. What I said comes entirely from my recollection of his introduction of the measure in Committee and if it is faulty, it is certainly not on account of any information briefed to me by others. I am grateful to the hon. Gentleman for highlighting the issue of excess profits. However, this does not address the point that we have a regulated system under which the profits are allowed for under the price review process. I appreciate that he was not a Member when his party was most recently in government, but it was quite happy to move forward with the pricing process. What he is saying now is that he has no confidence in the regulator—in other words, that the regulator would set a level of profit that it thinks reasonable for the price review period, but that this would now somehow be unpicked as being in excess in some cases in order to fund the scheme. I am happy to give way again, in case he wants to correct this.
Thomas Docherty
I am grateful, but on this occasion it is perhaps the Minister who should have paid more attention to my remarks a few moments ago. I clearly said that the last Government gave the water companies time to introduce the voluntary schemes, but that they have now failed to honour their commitment, so the Government should step in and do what the companies failed to do themselves.
Dan Rogerson
I understand the hon. Gentleman’s views on social tariffs, which he feels have not been introduced in a speedy enough fashion. My point was rather about the issue of excess profits. I said that the hon. Gentleman was seeking to introduce a concept that is perhaps a subjective rather than an objective assessment of the profits made by water companies. The whole point of the price review process and price review period, however, is that a regulated process takes account of the need to attract investment and thus the need to make a reasonable return in profit.
Dan Rogerson
The Chair of the Select Committee is quite right that I have yet to respond to that aspect of her argument and I will seek to do so, I hope to her satisfaction, once I have made my closing remarks on new clause 9.
The industry is working with landlords’ organisations to establish the new voluntary scheme that will enable landlords to provide information about their tenants direct to water companies swiftly and easily and that approach has the support of Water UK and the main landlords’ organisations. The new database will launch in March next year and I believe that it should be given time to work. For those reasons, I believe that new clause 9 is not necessary.
Thomas Docherty
I am grateful to the Minister and am listening carefully to what he says. He will, I am sure, come on to his justifications as regards new clause 10 in a second. Before he finishes dealing with new clause 9, however, can he say what he defines as “time to work”?
Dan Rogerson
We should at least allow the database to be set up and give it a chance to operate. That would seem to be a fair approach and it is certainly the one I seek to take. I understand the hon. Gentleman’s keenness to see progress but I believe that the voluntary approach will have some effect and we should give it time to do so.
Let me turn now, as the hon. Gentleman uncannily predicts, to new clause 10, which he has tabled in his efforts to make some changes to the Bill, and in Committee we discussed a similar clause that he tabled. The new clause will provide a new power for Ministers and Ofwat to disallow companies from recovering the cost of unpaid bills from their paying customers. The hon. Gentleman has argued that there is no incentive for companies to collect bad debt. During our previous discussions, I made it clear that Ofwat has the power to decide which costs may be recovered through the price review. Ofwat is already using the price review process to bear down on the costs of bad debt and requiring companies to demonstrate high performance in debt collection and to show that any increase in bad debt is beyond their control before they are allowed to include it in customer charges. The price review will challenge poor performers to raise their game.
The new clause proposes a power for a future Secretary of State to intervene in the setting and recovery of charges. That is exactly the kind of political interference that concerns the investors who are critical to the water industry. I have stated before that the stability of the regulatory regime is vital to keeping the cost of borrowing low. An increase in that cost will have the direct result of putting up customers’ bills and I am firmly of the view that it is for the regulator and not the Government to make detailed decisions about charges. New clauses 9 and 10 intend to incentivise companies to improve their debt collection performance and I absolutely support that objective. I cannot, however, support the approach that has been proposed and I am sorry to disappoint the hon. Gentleman—and, I am sure, to surprise him.
Let me turn finally to new clause 3, tabled by my hon. Friend the Member for Thirsk and Malton (Miss McIntosh), the hon. Members for Poplar and Limehouse (Jim Fitzpatrick) and for North Tyneside (Mrs Glindon) and my hon. Friend the Member for Brecon and Radnorshire (Roger Williams). The proposed clause targets a number of points that we have already discussed in some detail, including bad debt and social tariffs.
The practical effect of the new clause would be to require the Department for Work and Pensions to supply water companies with personal information about their customers. The clause focuses solely on the subset of customers that are both in receipt of benefits and living in rented accommodation. Amendment 9 would simply include the proposed new clause in the list of measures to be commenced two months following Royal Assent.
I am grateful to my hon. Friend the Member for Thirsk and Malton for her clarification that the clause is intended both to help water companies to collect their debts and to target social tariffs at customers in rented accommodation who are also in receipt of benefits. However, I am afraid that I do not believe that the clause is likely to achieve either objective effectively.
As I have already set out, the Government’s position on bad debt among water customers is that there is a great deal more that the industry can do for itself. We think, therefore, that there is more companies can do to collect their debts and we want them to focus on that rather than to look to the Government to solve the problem for them.
I am pleased, as I have said, that the industry is already taking more responsibility, by working on a voluntary approach to sharing information on customers in rented accommodation, using the landlord database, as we have discussed in response to new clause 9, tabled by the hon. Member for Dunfermline and West Fife.
Thomas Docherty
I remind the Minister that our scheme would not involve cross-subsidisation. I am surprised that he is so against the use of benefit systems for social tariffs, because the Liberal Democrats in Scotland actively supported the introduction of social tariffs based on council tax benefit. What is the difference?
Dan Rogerson
I am seeking to point out that there are a range of benefits and a range of circumstances for people. The hon. Gentleman highlights one benefit. Of course council tax benefit no longer exists in this country in the format that it does in Scotland, as we have now moved over to local council tax forms of support, so there is a different system, which would not necessarily translate across. The hon. Gentleman is keen always to learn the lessons of Scotland, but some of these things do not apply simply, given the different frameworks following the devolution settlement.
We place emphasis on locally designed social tariffs developed in close consultation with the customers who will ultimately foot the bill, as opposed to crude, centrally imposed eligibility criteria. Although I very much thank hon. Members for their new clauses and understand their aspirations in tabling them, I would urge my hon. Friends to resist them.
Miss McIntosh
I shall try to keep my remarks brief, but this is the first occasion that I can remember when there has not been a parliamentary week between the completion of the business of the Public Bill Committee and consideration on Report and Third Reading. I should therefore like to pass on my thanks not only to the Committee staff who have accommodated our being able to table amendments in a timely fashion, but to all those involved in the House service who have enabled us to have amendments before us to debate this evening.
I shall go through the new clauses and amendments first and then give the reasons for them. I, along with a number of members of the EFRA Committee, have thought it fit to assist the Government yet again, and I hope that we have more success with this round. Anyone who knows me even remotely will know that I am becoming a compulsive obsessive on sustainable draining systems and that I will never pass over an opportunity to discuss SUDS. So, under new clause 4, we seek to introduce the sustainable draining system, which is woefully late. It was already given statutory powers under the Flood and Water Management Act 2010, and in new clause 4 I link that to the end of the automatic right to connect.
I should like to pay tribute to a great Yorkshireman, Sir Michael Pitt, who after the surface water flooding of 2007 attempted to get on to the statute book under the 2010 Act—the then Government’s legislation—the end of the automatic right to connect. I would go further with substantial developments than I have had the opportunity to do here. I should personally like Yorkshire Water and other water companies, as well as drainage boards, to be given the right to be statutory consultees on major new developments on the same basis as that enjoyed by the Environment Agency following the 2010 Act.
Thomas Docherty
It is worth pointing out that local authorities in Scotland place great emphasis on the opinion of Scottish Water, which is, indeed, treated as a major statutory consultee when local authorities are making decisions about developments.
Miss McIntosh
As a non-practising Scottish advocate, I would always say that the Scottish legal system has a great deal to commend it, but Scotland needs to remain part of the United Kingdom to allow us to benefit from that.
Miss McIntosh
It is always a delight to be supported by the hon. Gentleman.
The current system for managing abstraction of water from rivers and aquifers was introduced in the 1960s, and does not effectively address the severity of pressures on water resources caused by increasing demand from a growing population and an increasingly varied climate. The current system does not help abstractors to trade water effectively or provide an incentive for them to manage water efficiently. The current weaknesses in the system mean that it could start to constrain economic growth, reduce the resilience of the water supply and lead to environmental damage.
I note that the reasons and need for abstraction reform are acknowledged and discussed in the Government consultation “Making the most of every drop”, which was published last December. When my hon. Friend the Minister replies, will he address the issue of why there was so much emphasis on abstraction and resilience in the water White Paper, and why we lost that emphasis in the draft Water Bill and, to a certain extent, in the Bill before us this evening?
The detail of a new abstraction regime will need to be developed following the end of the Government consultation, which was launched on 17 December. Following the conclusion of that consultation, which will not be until March, DEFRA will have to produce legislative proposals and secure space in the highly charged legislative programme before a new regime can be introduced. Once again, these amendments are intended to be entirely helpful and constructive.
During the Committee stage, the Opposition tabled a new clause to provide that upstream reform may not be implemented until new primary legislation on the licensing of abstraction has been passed, and five years has expired to allow for its implementation. Sadly, that proposal was voted down.
New clause 5 would require the Secretary of State to introduce a reformed abstraction regime within seven years of the Act being passed—by 2021. That was on the basis of the evidence that we received, and we believe that that is the most accurate and cost-effective timetable for all the parties involved.
The abstraction reform must be resilient to the challenges of climate change, or extreme weather conditions, and population growth and better protect the environment. Those high-level requirements are entirely in line with the key commitments regarding abstraction reform in the water White Paper.
Let me turn now to upstream and abstraction reform. In our pre-legislative scrutiny report on the draft Water Bill, the Select Committee called on the Government to make clear in the Bill the key principles that underpin the introduction of upstream reforms. Further work needs to be undertaken to establish how upstream reforms can be introduced in a way that will preserve investor confidence, ensure that customers do not face increased bills and maintain resilience in the sector. I was extremely pleased to see the emphasis on resilience in the water White Paper.
Upstream reform aims to encourage upstream competition. I am talking about the input of raw or treated water into a water company’s network or the removal of waste water or sewage for treatment. Clause 1 unbundles all the existing licensing structures so that new entrants can sell raw or treated water into an incumbent’s network. It also looks at the wholesale authorisation to input water into a part of the system. The Environment Agency’s statistics show that on average, between 2002 and 2011, only 45% of the annual total of water licensed for abstraction in England and Wales was actually abstracted. Therefore, if all of this unused but already licensed water was abstracted, there could be a significant deterioration of the environment. We hope that when the Government look at abstraction and upstream reform, they will bear these thoughts in mind.
One other aspect of upstream reform and abstraction that the Government should consider is, very topically, the role of water companies and other private sector companies in flood prevention and in protecting homes and businesses from floods. The Minister will be familiar with the work of his Department in the Natural Environment White Paper, which looked at a project known as ScaMP—Sustainable Catchment Management Programme—involving United Utilities in Cumbria. Surely there must be much more scope for the type of partnership approaches we have seen in Pickering where the first soil of the reservoir will be dug tomorrow.
I will conclude my remarks by looking at flood insurance. Amendments 5, 6, 7 and 8 seek to amend clauses 51 and 53. The Select Committee took a lot of evidence in relation to Flood Re and the potential for reinsurance companies. Given how deeply wedded the Government are to Flood Re, I hope that they have not closed the door completely on reinsurance. In summing up this debate, perhaps the Minister will inform us how the state aid application to the EU Commission in Brussels is going to enable Flood Re to come into effect according to the Government’s timetable.
Clause 51 and the amendments we propose to it would have the effect of bringing small businesses within the ambit of Flood Re. There is considerable doubt and anxiety that small businesses will not be covered under the new Flood Re proposals. The impact that flooding can have on small businesses is clear. In 2001 and 2005, a dental practice in my constituency was flooded twice and the dental chair and all the computer equipment had to be replaced each time.
Joan Walley
I am fortunate to follow the hon. Member for Thirsk and Malton (Miss McIntosh), who speaks with the greatest authority on these subjects, as I am sure everyone in the Chamber would agree. I particularly share her concern about drainage and surface water, and I agree with the points she made earlier about the need to ensure that highways authorities also have statutory duties, so that we can deal with this issue in a joined-up way. The debate on this group of provisions is important because we have had pre-legislative scrutiny by the Environment, Food and Rural Affairs Committee of the draft Water Bill and subsequent debate in that Committee. When the Minister addresses the various comments that have been made, we will see the extent to which the Government are listening to what Parliament is saying about the amendments. There may not necessarily be agreement on all of them; I am talking about the amendments that seek genuinely to try to improve matters on the whole issue of water. We have an opportunity to put in place legislation that is fit for purpose, so I hope that improvements will be made.
Thomas Docherty
It will probably not cheer my hon. Friend to hear that every single amendment tabled in Committee by Opposition Members, and indeed by coalition Members, was rejected, even though the Minister had previously agreed with them in the Select Committee.
Joan Walley
I am grateful to my hon. Friend for pointing that out. As I have said, the proof of the pudding will be in the eating, so we will wait to hear what the Minister says in response. Given that the Bill has further stages to go through before Royal Assent—I am glad to see the hon. Member for Brecon and Radnorshire (Roger Williams) nodding—I think that it is the Opposition’s duty to press the Government as much as possible, because it is important that Parliament does the right thing. Even if the Government do not make concessions at this stage, there will be an opportunity in the other place to put more flesh on the Bill and to make it much more fit for purpose. We will wait to see what further progress we can make.
I will speak briefly to new clause 6, which stands in my name, because I realise that many Members wish to speak. I want to introduce my comments by considering the issue of contaminated land. It is clear to me from the work I have done recently that there is a problem with how we deal with contaminated land. The current regime and the funding for it, particularly that which involves local authorities, is not fit for purpose, and it needs to be. We are dealing with a huge amount of legacy problems. I do not want the Government to set up a whole new regime without giving due consideration to the preventive measures that would need to be put in place in relation to fracking and shale gas extraction.
Madam Deputy Speaker, I am sure you would rule me out of order if I were to speak this evening on whether we should have fracking or shale gas extraction. The point I want to make is that if it is to go ahead, with the enormous tax concessions it currently has, there needs to be a proper regime in place that relates to water, water quality and concerns about contamination. It is for that reason that I have tabled new clause 6. I acknowledge that, were the Government to act on the concerns I am raising, there would need to be consequential amendments to paragraph 9 of schedule 20 to the Environmental Permitting (England and Wales) Regulations 2010, so I do not want the Minister simply to claim on a technical point that the new clause is unworkable because it is not thorough in that regard.
My understanding is that the principles that the polluter should pay and that prevention is much better than an end-of-pipe solution mean that we should be dealing at this stage with the procedures that need to be put in place to prevent contamination of water as a result of fracking. I point out that the new clause is supported by many non-governmental organisations working on the front line to deal with that, including the Royal Society for the Protection of Birds, the Angling Trust, the World Wide Fund for Nature and the Salmon & Trout Association.
New clause 6 would amend the Environmental Permitting (England and Wales) Regulations 2010 to introduce a liability guarantee to ensure that fracking companies have the funds available to pay the clean-up costs should an accident occur during the fracking process. I think that is eminently sensible. A similar amendment was tabled in Committee and briefly debated, as my hon. Friend the Member for Dunfermline and West Fife (Thomas Docherty) just pointed out, but it got nowhere. I believe that it was important to table it again for further consideration, mainly because the Minister’s response in Committee did not offer adequate assurances that the public purse would not be hit should an accident occur.
As I understand it, the Minister’s main argument was that the existing regulations on the statute book already ensure that operators are technically and financially competent to carry out fracking activities. However, a financial competence check is carried out only in specific circumstances, and competence is not the same as securing a form of financial provision or guarantee for long-term environmental liabilities. In other words, it does not guarantee that a company has put in place funding or insurance for dealing with an accident; it only provides a snapshot in time of its financial situation. I am reminded of the complex discussions there have been about the ownership of football clubs and where due diligence should lie.
Thomas Docherty
May I wish you a warm and happy new year, Madam Deputy Speaker?
We have had a thoughtful and knowledgeable debate over the past hour and a half or so. I commend two Select Committee Chairmen and a former Minister for their remarks, even if we did not agree with every part of the former Minister’s interpretation of the past three and a half years.
Time is limited, so I hope the House will understand if I restrict my remarks to some of the new clauses. Unsurprisingly, the Opposition agree with the Environment, Food and Rural Affairs Committee about SUDS. I am sure that, as a former member of that Committee, the Minister will agree with himself on the issue. The hon. Member for Thirsk and Malton (Miss McIntosh), who chairs the Committee, was right to highlight the increasing burden being placed on a network that, in many cases, is struggling to cope. We have heard that the ability to cope with additional development is not always given the consideration that it needs. I hope that the Minister will reflect on the cross-party support on that point that the hon. Lady demonstrated.
There is a broad coalition of opinion on abstraction reform, to which the hon. Member for Newbury (Richard Benyon) alluded, but it is not just made up of what he might describe as the usual suspects—the non-governmental organisations involved. That well known environmental organisation the Food and Drink Federation made a submission to the Public Bill Committee. We welcomed the Minister’s announcement in the Committee. It was disappointing that his colleagues chose to make it to the media before it was made to Parliament, but of course I assign no responsibility for that to him. We welcome the consultation, but we agree with the Environment, Food and Rural Affairs Committee that it is long overdue.
I say to the hon. Member for Newbury that the Government certainly could not be accused of legislating in haste, because after almost four years we simply have not seen sufficient progress on abstraction reform. My hon. Friend the Member for Garston and Halewood (Maria Eagle) and I look forward as Ministers in the next Parliament to taking such legislation through with due speed, and we look forward to the support of Conservative Members.
My hon. Friend the Member for Stoke-on-Trent North (Joan Walley), the Chair of the Environmental Audit Committee, made an incredibly thoughtful and logical speech, and we support her new clause 6. We are clear that, as she said, this is not a debate about the merits and demerits of fracking technology. It is about trying to ensure that there are safeguards in place. Her constituency is still suffering the fallout from open-cast mining not having had sufficient guarantees in place, so I understand exactly where she is coming from.
Given that time is incredibly short I will bring my remarks to a conclusion, but it is clear that the other place will have an important job to do in the weeks ahead. A number of issues in this group of amendments—and indeed elsewhere—have not been addressed, and my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) is right to say that we must consider Flood Re in some detail. With the greatest respect, the Opposition will not simply go along with the Government because they have come to a deal and say that that is good enough; we need more detail from Ministers. We look forward to the Bill making progress but we will, as I have suggested, press some amendments to a vote.
Dan Rogerson
In the time available I shall seek to respond to as many points as I can. The Chair of the Environment, Food and Rural Affairs Committee, the hon. Member for Thirsk and Malton (Miss McIntosh), has been a strong advocate of and campaigner for sustainable drainage over many years, and the Government are pressing ahead and implementing the requirement to secure approval for sustainable drainage systems for new developments under schedule 3 to the Flood and Water Management Act 2010. Regrettably, it is looking increasingly unlikely that we will be in a position to ensure that the scheme comes into force this April, which was our preferred date for implementation as stated previously. I accept that that will be a great disappointment for the hon. Lady and other hon. Members, but I remain committed to introducing the legislation at the earliest opportunity. I plan to lay the relevant affirmative regulations by April, to underline the Government’s commitment to addressing flood risk.
I share the hon. Lady’s frustration that the process has been so protracted, but we are working with developers and local government to develop the processes, standards and guidance that are an integral part of a new SUDS approvals and adoption regime, rather than just imposing them. That takes time, but it is time well spent if the end result is an approach that is fair to all parties and successful from the outset because local government and developers are fully prepared to take on their respective new responsibilities.
Amendments 1, 2 and 3 address flooding on highways or that caused by the run-off from highways. The causes of flooding can be complex and it is difficult to make a general statement about them. There are already legislative powers to ensure that highway surface water drainage does not pollute or flood, and section 100 of the Highways Act 1980 enables the local highway authority to take action related to the drainage of highways—for example, it can construct drains or erect barriers on the highway or adjoining land to divert surface water into an existing drain.
The majority of new road drainage systems are not connected to the public sewerage system. Typically, they discharge under designated conditions, either to a watercourse or a storage pond with controlled exits to a watercourse, or alternatively soak into the ground in a designed manner. A decision to connect new highway surface water to a combined or foul public sewer can be made only subject to an agreement with the receiving water authority. There is no automatic right to connect new highway drainage to the public sewerage system. We recognise, however, that in some cases local flooding may be exacerbated by drainage from existing highways, and as I have said, the 2010 Act places a duty on lead local flood authorities to develop a local flood risk management strategy for their area. I hope hon. Members will be reassured by that.
Let me seek to address the points raised by the Chair of the Environment, Food and Rural Affairs Committee about flood insurance, and amendments 5, 6 and 7, which relate to small businesses. Flood Re has been specifically designed to recreate the current cross-subsidy in the domestic home insurance market. There is little evidence that the same type of cross-subsidy applies in the commercial insurance market, and the majority of business insurance policies are already priced to risk. A recent English business survey of more than 9,000 businesses in England found that fewer than 1% of businesses had experienced difficulty getting property insurance in the last year due to the risk of flooding, and that no businesses had been refused insurance cover due to such a risk.
As outlined by the Association of British Insurers in its evidence session, businesses tend not to face the systematic issues that householders experience. We must also remember that Flood Re is funded through a levy on all household insurance policies. We have deliberately set that at £10.50, which the ABI estimates is the same as the current cross-subsidy. Widening Flood Re to include small businesses would significantly increase costs. We do not want someone living in a council tax band A property, for example, to subsidise the cost of insuring a private company that potentially earns up to £1 million a year. I am also mindful of the need to comply with state aid rules. Government intervention to support business would be carefully scrutinised and at greater risk of rejection—I know the hon. Lady is familiar with that issue.
On flood insurance and amendment 8, which was tabled by the same group of hon. Members, we are clear that we are talking about a one-in-200-year annual loss, not a one-in-200-year flood event. If Flood Re is legally responsible for claims above a one-in-200-year level, the cost of the liability could be prohibitive. Likewise, if the Government took on a liability beyond a one-in-200-year level, we could expose the taxpayer to extremely large and unpredictable costs. In such a catastrophic situation, many more homes than would be insured by Flood Re are likely to be affected. That is why the memorandum of understanding says that the Government of the day would work with Flood Re and representatives of the insurance industry to decide how any available resources should be distributed to Flood Re customers if flooding exceeds such a level.
Government amendment 58 is a technical one. On the issues raised by the hon. Member for Stoke-on-Trent North (Joan Walley), the Chair of the Environmental Audit Committee—we discussed them in Committee—the Government remain convinced that the existing provisions would be helpful enough in terms of the checks on companies’ financial probity and their technical ability. However, she rightly raised issues that could be addressed following Lord Krebs’s intervention in his letter. I am pleased to hear her calling for things such as betterment, meaning better quality reinstatement, and more information to customers, for which Lord Krebs has also called. Many hon. Members would like to include that in discussions with the ABI.
On misconnections, the hon. Member for Edmonton (Mr Love) is aware that local authorities currently have the power. We are not convinced that giving the power to companies would be helpful. His points are on the record and it is right that the Government take account of what he has said. I am happy to talk to him in future to see that we get the right response.
There is only a very little time for me to respond to all the points hon. Members have made on abstraction. My predecessor as Minister, my hon. Friend the Member for Newbury (Richard Benyon), has rightly said that there is agreement in the House that we want progress. Action is taking place under the existing regime—the Environment Agency has changed 77 licences since 2008, returning around 75 billion litres of water per year—but we need to go much further. That is why we are consulting. The process is under way and will lead to legislation, hopefully with the support of all parties, to reform that complicated system. However, we need to do that properly. I do not believe it is appropriate to do it in the way suggested in the new clause.
Finally, Government amendments 55 to 57, which I have tabled, seek to clarify the resilience duty. We want to make it absolutely clear to hon. Members that we are covering environmental sustainability. I hope the changes we are making to the resilience duty will reassure hon. Members who believe that we need to elevate the sustainable development duty that we are looking at environmental resilience as well as social and economic resilience.