House of Commons Hansard Debates for 16 Jun 1992

Mr. Campbell-Savours : The Minister was pressed by my hon. Friend the Member for Dewsbury (Mrs. Taylor) on the need to borrow money to fund all these commendable projects, which we support because we welcome this investment. Why do not the water companies borrow more money as against raising it from consumers, who in these difficult times cannot pay the increases? Why do not they simply borrow more on the markets, as normal business men do?

Mr. Maclean : Once again, the hon. Gentleman betrays the Opposition's irresistible desire for politicians to tell companies how to operate. He asks why we do not tell the water companies how to raise their finances.

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Mr. Campbell-Savours : I only asked.

Mr. Maclean : And I have given him the answer--they must judge how to fund their investment. They can borrow if they wish. Our water industry's investment programme is second to none, and it must be funded. I regard it as perfectly acceptable that consumers should pay a major share of that investment.

Mrs. Ann Taylor : Does the Minister have an opinion on the document issued by the Director General of Water Services on the cost of capital ?

Mr. Maclean : I have opinions on many documents, including those issued by the Opposition. The point is that we have set up independent and tough regulatory machinery. I am not in the business of second-guessing or criticising our regulators.

I give another example--

Mr. John Marshall : My hon. Friend mentioned the London water ring main being built by Thames Water. Will he join me in congratulating Thames Water on the fact that the project is ahead of schedule ?

Mr. Maclean : I should be delighted to do so, but my hon. Friend should not assume that that is a unique achievement--many of the investments by water companies are ahead of schedule. They are pressing on apace, and I look forward to being present at the opening of many more sewage and water treatment works and watching investment take place for the benefit of the consumer.

Mrs. Alice Mahon (Halifax) rose --

Mr. Soley rose --

Mr. Maclean : I must make some progress. I have have already given way many times.

My hon. Friend the Member for Hendon, South (Mr. Marshall) mentioned Thames Water's investment. Thames Water is investing nearly £400 million a year, and there are a considerable number of other investments across the country which I do not have time to mention now.

Mrs. Mahon : On a point of order, Mr. Deputy Speaker. Is not it a custom of the House that when a Minister mentions one's constituency, he usually has the courtesy to give way ? The Minister mentioned the Calder Valley and Calderdale, and Halifax is right in the middle.

Mr. Deputy Speaker : That is not a point of order for the Chair.

Mr. Maclean : I thought that I had been very generous in giving way. I gave way four times to the hon. Member for Dewsbury (Mrs. Taylor), although I did not intervene in her speech.

My hon. Friends will want to know how British contractors and British plant manufacturers are benefiting from the investment. It is all very well to quote the figure of £28,000 million but it represents work being done by our constituents across the country and investment by British firms.

The National Economic Development Committee for the construction industry made a special analysis of the situation and confirmed that British contractors and plant manufacturers have benefited considerably from the programme. For example, John Brown Engineering, Trafalgar House Construction and John Laing are

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benefiting and playing their part in the provision of new infrastructure. I should like to know how many tens of thousands of jobs are dependent on those construction projects, the ones that the Opposition are pooh-poohing.

What is the £28,000 million being spent on?

Mr. Campbell-Savours : How wonderful.

Mr. Maclean : If the hon. Gentleman thinks that it is wonderful, he should tell the hon. Member for Dewsbury so that she can praise it occasionally.

What is the money being spent on? What benefits is it bringing to customers and consumers? In the years to 1995, forecast expenditure in the water industry will be £17.2 billion. Better treatment of drinking water accounts for £2.5 billion of that money. That accords directly with the priorities of customers. In the recently published survey carried out by MORI for the Office of Water Services, 98 per cent. of customers thought it essential or very important that tap water should be safe to drink.

Mrs. Mahon : Will the Minister give way?

Mr. Maclean : That is what the money is being spent on. A further £3.9 billion is to modernise and renovate water distribution systems. There is no point in sending out clean water from the treatment works unless it reaches the customer through clean pipes. Renovation also reduces leakage. New water resources and other works will account for another £1.8 billion.

An even greater proportion of the programme--£9 billion--is accounted for by renovation and repair of the sewerage system. That includes £2.4 billion for building new sewage treatment works and for improving existing ones.

Mrs. Mahon : Will the Minister give way?

Mr. Maclean : No.

Mr. Soley : Will the Minister give way?

Mr. Maclean : I give way to the hon. Gentleman.

Mr. Soley : The Minister has been generous in giving way and I am grateful. The debate should be about the quality of service as we are talking about a monopoly supplier. What troubles us is the issue of sewerage and I will give an example from my constituency. In my constituency, pipes apparently come near the surface and cause backflows in heavy storms such as we have had recently. There are at least half a dozen houses in which the basements have been flooded with sewage, one on three occasions. This is why they trouble the Minister on the issue. Why is the answer from Thames Water that it cannot even provide help-line advice? It says that it can provide no compensation, that it cannot pump out the sewage, and that it cannot do anything. If British Gas were involved, one could get something done.

I have constituents who are literally ankle deep in sewage in their living rooms because the pipes are too near the surface. All they have been told is that they should ensure that they insure against such an event in future. Will the Minister give the House a commitment that he will check with all water authorities to ensure--

Mr. Deputy Speaker : Order. This intervention is too long. I make a plea to the House. Many hon. Members want to contribute. Interventions are acceptable, but they should be short.

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Mr. Maclean : The hon. Gentleman raises a good point which goes to the heart of the investment programme about which we are talking. There is a huge backlog of work which needs to be carried out on sewerage systems throughout the country. Thames no doubt has its priorities. Providing the London ring main for fresh water is one of the top priorities. I cannot give the hon. Gentleman an assurance because I should not want to interfere or to direct Thames into priorities that I as a politician would impose. Thames must service its customers and that is what Ofwat is there to ensure. I hope that as it clears the backlog of its major works and priorities, Thames will be able to direct attention to other important problems. I am not surprised that we need to spend an enormous amount on sewerage and sewage treatment. The amount is substantially more than needs to be spent on water supply. Vital though it is, sewerage has been an invisible and unappreciated service--unless and until something goes drastically wrong. As a more responsible attitude to the environment develops and spreads, the old attitudes are changing. In the MORI survey, 88 per cent. of customers said that it was essential or very important to have sewage treatment to EC standards.

I emphasise that much of the expenditure is needed so that the United Kingdom can comply with EC legislation, and rightly so. By 1995, £2 billion will have been spent by water companies to achieve compliance with the standards in the EC drinking water directive. We have accelerated our programme to achieve compliance with the bathing water directive and to bring the great majority of bathing beaches into compliance by 1995. The total cost in England and Wales until 1998 will be £2 billion.

In this area, as in all others, improvements must be paid for. The Opposition always seem to fail to grasp that point. They want control of the water companies--

Mrs. Mahon : Will the Minister give way?

Mr. Maclean : I want to make this point. The Opposition want control of the water companies. They would either buy them back at the market cost of £8 billion or they would carry out the sinister threat of the hon. Member for Dagenham, who said :

"A Labour Government would take action to regulate the water industry which would reduce the profitability of the privatised water companies and, therefore, would be likely to depress the share price."

Another option trailed by the Opposition is to "take control", without spelling out what that means. We have not heard a single word from the Opposition today about what they mean by "taking control" or "taking over" the companies. Whether that distorted thinking prevails, or the hon. Lady's, at election time, the Government, in either scenario, would have to find the £28 billion for investment and Labour Members are now telling us that they hate the thought of the PSBR rising. The £28 billion investment programme is the equivalent of £130 a year for every household in England and Wales, which is more than £67 million per day, or more than £5,000 per minute of every day, for 10 years. In the time that the hon. Member for Dewsbury was speaking, the water companies invested £235,000. The water companies need to make profits to finance that programme. The Director General of Water Services, Ian Byatt, recognised that when he published his annual report in June. He said :

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"Many customers criticise the profits made by water companies It is important that the companies should be profitable otherwise investors will not provide the funds essential for the completion of the £28 billion investment programme. Our surveys show that customers want safe, clean drinking water and clean rivers and beaches. Over 70 per cent. of these profits are reinvested in the water business to achieve this."

The Opposition have again ignored that point today, concentrating instead on bosses, salaries, no doubt believing there are votes to be gained in the process. We have always made it clear that salaries are a matter for the shareholders and that the best people are needed to manage that huge investment programme, but that companies cannot expect the workers to exercise restraint unless management does so likewise.

Before the Opposition get totally hooked on knocking the water companies, they should remember that more than 50 per cent. of water workers own shares and benefit from the enterprise they work in. Total investment last year is estimated to have been twice the companies' pre-tax profits. That is an exceptionally high proportion by any standard.

Mrs. Mahon : Will the hon. Gentleman give way?

Mr. Maclean : I want to make progress. I have been generous in giving way.

If the hon. Member for Dewsbury does not want water companies to make and spend those profits, which elements of the investment programme does she want to sacrifice? Does she want raw sewage to go into the sea? Does she want us to continue to dump sewage sludge at sea? If she wants to freeze water bills and profits, what schemes would she cancel--which of the 595 on -going projects in South West Water area, which of Anglian Water's 210 sewage works that are being improved? How about the Severn Trent £20 million scheme at Stoke Bardolph, which is an investment of £40 for every adult and child in the Nottingham area?

Perhaps she would have stopped the £30 million refurbishment of the Knostrop sewage works in Leeds--[ Hon. Members :-- "No."] I am grateful to the Opposition. They do not want to cancel any of those things. Of course not. The hon. Member for Dewsbury is always berating us for not doing things faster. The Opposition seem incapable of grasping the confusion and contradiction of their position. Without those necessary profits, there would be no investment in the first place. Benefits have to be paid for, but the hon. Member for Dewsbury begrudges the margin needed to attract the necessary funds, which would have to be found from the consumer to raise the funds, if it were a public sector investment, as she wants, and if the water companies were taken into public ownership.

Of course water charges are increasing in order to pay for that investment. Charges are planned to increase by 63 per cent. in real terms by the end of the century, because that is the only way to pay for the improvements that the public have clearly said that they want and expect. There is no secret about the increase--it was set out clearly in the prospectus issued for privatisation--but the figures are not carved in stone. They are liable to change if the relevant circumstances change.

The House should remember that when we are considering proposals for further environmental improvements, and new European Community environmental legislation, we must not fall into the trap of thinking that

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every possible environmental improvement is costless of, at least, easily afforded. Sooner or later, hard choices will have to be made. We are certainly not making light or the increases that are necessary in water charges or the difficulties they may, perhaps, cause for a small minority of customers.

The fact that water charges are increasing may well have contributed to the increase in complaints about water companies received by the director general, and, possibly, to the rise in disconnections of customers, which he has reported. [Interruption.] I shall come to that matter later.

Bills must, of course, be paid. The power of companies to disconnect customers must remain as a legitimate last resort to deal with those who do not pay their bills. It would be entirely wrong that people who pay should have to subsidise those who do not. In fact, a substantial proportion of customers disconnected, almost three quarters, are reconnected within 48 hours because the bill has subsequently been paid or arrangements made for the arrears to be paid by instalments. Almost 10 per cent. of disconnections are made to households that have "gone away" leaving unpaid debts for others to pick up. For the small minority, who have genuine difficulty in paying, the director general is encouraging companies to review and improve their procedures to ensure that every possible assistance is provided.

It is hardly surprising that the number of complaints to Ofwat should have increased because this is the first time that the water industry's customers have had an independent regulator to whom to complain. He has set out deliberately to ensure that customers know that they can refer their complaints to him and that they can be sure that they will be listened to. We have published a citizens charter, which encourages them to expect and demand higher standards of service. We are proud of that. Consumers are taking advantage of that opportunity. The complaints naturally cover a whole range of matters, but about 63 per cent. of them are about charges or billing. The same MORI survey for Ofwat shows that 80 per cent. of customers are satisfied with the overall service that they received. I am certain that companies want that percentage to be higher and will take steps to achieve that.

Yet another success of the system we introduced in 1989 is the framework of independent regulation of the industry. We saw that at work yesterday. The National Rivers Authority--NRA--is exerting its influence, and, if necessary, its authority, to protect rivers from excessive abstraction. The water companies--indeed, ultimately the water consumers concerned--may find that painful.

Mr. Michael Ancram (Devizes) : I am grateful to my hon. Friend for being more generous in giving way than the hon. Member for Dewsbury (Mrs. Taylor) was when I tried to intervene in her speech. Does my hon. Friend accept that many Conservative hon. Members accept that the preservation of river environments is an important part of water usage and that we very much welcome yesterday's statement? I do not know what influence my hon. Friend has over the chairman of the NRA, but will he ask him to extend his review of rivers to include the River Kennet in my constituency? At present, it is at severe risk, but it is not included in the present list.

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Mr. Maclean : I am sure that the chairman of the NRA will want to read this debate carefully. By the action that the NRA took yesterday, it has shown that it is a good independent regulator which can take the necessary action without any prodding, prompting or kicking from me or any other politician. We should leave such action to the good sense and judgment of the independent regulators. No doubt my hon. Friend will draw his concern to the chairman's attention. Equally, the Director General of Water Services is a tough and independent regulator of prices. His influence has been seen in the way in which most companies have chosen to contain their price increases below their permitted K factors. It has been seen also in his proposals for reducing the allowance for the cost of capital. He has not hesitated to ensure that the water consumer is not disadvantaged by diversification by the parent companies. He has not hesitated to criticise where necessary. I am sure he will do so again--for example, when he publishes, in July, his overall review of the companies' annual results.

Opposition Members seem incapable of accepting that the framework is working as we intended. They want us to dictate to the independent regulators how to do their jobs. They cannot resist reverting to the failed policy of Government interference.

Several Hon. Members rose --

Mr. Maclean : I agree with the hon. Member for Dewsbury that water is an important national resource. In our climate, people tend to think that there is rather a lot of it and that it should be delivered free. The truth is that some parts of the country are very short of it. It costs a lot to deliver to EC standards, and even more to treat the sewage that we do not all like to think or talk about. All the water delivered to our homes is of drinking water standard, but only 2 per cent. is used for drinking, and each year our annual consumption of water increases by1 per cent.

The Government take the view that we need a proper debate about the long- term management of our water resources. So we shall shortly issue a consultation paper which will look at the merits of water conservation and discuss options for the management, custody, distribution and use of our water resources. I want to see a wide range of responses, not just from those areas short of water but also from areas which are perceived as having plenty of it. The Government will then consider action in the light of those responses. Mrs. Mahon rose --

Mr. Maclean : I do not know where the hon. Member for Dewsbury gets the idea that the Government are backing compulsory metering. It is one option which will be considered in the consultation paper. The hon. Lady should not jump to hasty conclusions.

Because of the unavoidable increase in charges, the customers, the consumers, of a privatised water industry are benefiting from an unprecedented investment programme to raise standards of service and improve environmental quality.

Several Hon. Members rose --

Mr. Maclean : I have been generous in giving way to Opposition Members. I must make progress.

Mrs. Mahon : Will the Minister give way?

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Mr. Maclean : No, I am sorry. Having given way generously to Opposition Members, I have tried to restore the balance by giving way occasionally to my hon. Friends.

We have seen an unprecedented investment programme which has raised standards of service and improved environmental quality.

That investment is being managed by companies which, because they are subject to private sector discipline, are achieving progressively greater levels of efficiency and, therefore, economy. They are protected for the first time by powerful independent regulators in the form of Ofwat, the National Rivers Authority, and the drinking water inspectorate.

The hon. Member for Dewsbury fails to understand the concept of the drinking water inspectorate, which performs an audit inspection task of the water companies. I shall not prejudice its decision on the cryptosporidium case. It is a complex issue and any prosecution that it might wish to take would need to be very well founded indeed. Water services in Britain are among the best in Europe, but water charges in Britain are among the lowest. They average only 46p per household per day for the combined cost of water supply and sewerage. That is the price paid by an average family of two adults and two children for the delivery of nearly 1,000 pints of water and taking away the same quantity of sewage. It is substantially less than the French, the Germans or the Italians have to pay for their water services. It is a penny a day more expensive than The Times or The Daily Telegraph but less than the cost of a cup of coffee outside this place. I reckon that that is a magnificent bargain, and as the benefits of privatisation are fully realised, it will become an even better bargain.

In the two months since their election defeat, Opposition Members have clearly not learnt from their mistakes. Their internal analysis document of their defeat said that Labour was seen

"as a party of the past"

with

"a set of negative and off-putting associations"

and

"too much baggage from the late 70s and early 80s to persuade people that they can really trust us".

In this debate, where they picked a subject to deflect attention from their present failings, they have merely highlighted their prejudices, which are deeply rooted in the past. They are still saddled with the renationalisation baggage that their union masters will not let them jettison, and they have shown why they still cannot be trusted. I commend the Government amendment to the House. 5.29 pm

Mr. Jimmy Wray (Glasgow, Provan) : I am disappointed in the Minister because he would not give way to my hon. Friend the Member for Halifax (Mrs. Mahon).

Several organisations have asked me to speak in this debate, but it would be unfair of me not to look at the position in England and Wales. I listened carefully to the Minister when he spoke about privatisation and who the shareholders were. He said that 50 per cent. of the shareholders were workers in the industry but he did not say how many shares the workers had compared to managers and directors. That matter was a scandal and a national disgrace. Indeed, the privatisation of the water industry was the sale of the century.

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I remember when we were debating the matter in the House in 1988. The Government sold the public assets of this country, worth £27 billion, and 435,000 acres of prime land. They sold land and property worth some £3 billion and made a profit of some £745 million. Various organisations warned us about that. My hon. Friend the Member for Dewsbury (Mrs. Taylor) mentioned one of those organisations--the Central Council of Physical Recreation, which warned us about section 7 of the Act referring to relevant bodies. The relevant bodies turned a blind eye to the Central Council of Physical Recreation, which had been in operation for some 40 years. The relevant bodies defined in the Act include the National Rivers Authority, the water undertaker and the sewage undertaker. Section 7 has eroded the protection of access rights for the public since privatisation.

I was worried when the Government told us about French interest in British water supplies. Three French companies were interested in water and its treatment--Lyonnais, Generale and Saur--and that interest was shown for the first time in the deal between Trafalgar House and Saur. Three months after Saur and Trafalgar House had entered into a deal, the business was sold on to Generale at a vast profit. The Council for the Protection of Rural England is still worried about the selling off of the Welsh valleys by private developers, who will rape the unspoiled landscape and sell it for a profit. That is what it is all about.

The high water charges are a national disgrace. The Minister has the nerve to stand at the Dispatch Box and tell us that this is about purifying water. Profits in 1988 were £745 million. In 1991-92, they are £1.5 billion. What an increase. By 1992-93, water companies are expected to show bumper profits of some £1.65 billion.

Mrs. Mahon : I thank my hon. Friend for giving way. He shows much more gallantry than the Minister. I shall help my hon. Friend, because I was trying to be helpful to the Minister when he was talking about the price of water. Those paying for the increased profits are people on benefits. I looked into the matter today and found that, in my constituency, people on income support, receiving as little as £66.60 a week, were paying more than £3 a week out of that benefit for water.

There have been massive increases in charges since privatisation and the Minister should be aware of the percentage of people's benefits being paid for water. I shall put my findings on the board for him. Those people are the real payers for the profits in the privatised industry.

Mr. Wray : I am grateful to my hon. Friend, and glad that she has been able to make that point.

The Government have deceived the Scottish electors. During the general election campaign Conservative Members spoke of the privatisation of the Northern Ireland water industry, but did not mention the privatisation of the Scottish water industry. We know what there have been meetings between the Scottish Office and Ofwat about the possibility of privatising the nine regional and three island water authorities in Scotland by setting up six water companies, which will be hived off to private enterprise. Why has that plan not been discussed with us?

Why has there been no mention of the meeting proposed in the near future between Scottish Office officials and financial analysts from NatWest? The

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Government mentioned nothing about that-- indeed, they denied it in the Scottish press. The Scottish Office said that it had no plans to do so, but it is on record as planning to have such a meeting. I have read the report produced by Strathclyde water committee three years ago that stated clearly that, if the waters of Scotland were to be privatised, £4 billion would first have to be invested in Scottish water to meet European Community standards. Strathclyde, one of the biggest regional water authorities, is on record as saying that it would have to spend £800 million over the next 15 years to bring its water up to EC standards.

The Transport and General Workers Union, the GMB, the Labour party, the nationalists and the Scottish people are all against privatisation of water. One reason we are against it is the number of disconnections that have taken place in England and Wales, where last year there were 21,000 disconnections, compared with 7,673 in 1990-91. How does that tally with what the Minister has to say? Complaints have increased to 10,635--a 130 per cent. increase. I would not be happy with such an increase if I had set up a water authority consumer protection service.

We are worried about water metering ; we do not want the very food of life to be cut off from the people we represent--people whose only fault is poverty. It is a cardinal sin for water or electricity supplies to be cut off.

One of the major worries in Scotland involves the Greater Glasgow health board, which is now putting forward plans to regional authorities on the fluoridation of public water supplies. We are worried because we thought that the local authorities hired directors of water to treat water to make it wholesome, not to treat the people who drink the water. In 1975, we took the case to the Court of Session on moral, medical and legal grounds, and won. The matter was ruled ultra vires, and the Government had to introduce an Act to give permission to local authorities to fluoridate and mass- medicate the nation.

Mr. John Marshall : Will the hon. Gentleman give way?

Mr. Wray : Once I have finished my speech, I shall give way. We believe that fluoridation takes away the fundamental right of freedom of choice in medical matters. We have often asked the Government to state whether fluoridating public water supplies comes within the terms of medicinal products as defined by the Medicines Act 1968. Section 130 of that Act clearly states that any substance mixed with an element and administered to an animal or human being to prevent disease is a medicine-- the disease in that case being dental caries. So fluoride in this case would constitute a medicinal product, and before a local authority could give its permission to put fluoride in the water the proposal would have to be passed by the Committee on the Safety of Medicines.

Under the Sale of Food (Weights and Measures) Act 1926, mixing fluorides with foodstuffs is prohibited. Incidentally, fluoride is a poisonous byproduct of an aluminium smelter's waste. When it enters the water, it does not become fluoride ; it becomes acid. It then goes directly into the body, where I am told it is attracted to calcium and teeth. I did not invent the diseases with which fluoridation of water is associated--chronic fluoride

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poisoning and skeletal and dental fluorosis. Not being a medical man myself, I am worried by the differing views that we have heard on this subject in recent years.

I should like to repeal the Water (Fluoridation) Act 1985 if I ever have the chance to introduce a Bill. That would certainly be one of my priorities.

I hope that, after examining the privatisations of all our national resources, a Labour Government would take them all back into public ownership, to ensure that we take profits from the very few and distribute them to the many.

5.42 pm

Sir Giles Shaw (Pudsey) : I commence by declaring an interest, as a non-executive director of a water company. It is high time we had the opportunity to discuss this industry. The fact that it has been attacked by the Labour party for being successful probably denotes an accolade for the industry. If so, that proves that we have come of age in two years--not an unreasonable track record.

The House will forgive me if I do not follow the hon. Member for Glasgow, Provan (Mr. Wray) and his analysis of the problems, as he sees them, in Scotland. I shall confine myself to the main issues related to the industry today.

I was disappointed that the hon. Member for Dewsbury (Mrs. Taylor)--perhaps typically--designed such an oddly worded motion. It talks of being "alarmed" at the record profits, record dividends and record salaries in the industry. I do not see why that should be a cause of alarm to the hon. Lady. She has always been extremely anxious that improvements should be carried out quickly, and that as many innovations as possible should be effected in the industry. She was one of the first to say that there should be no derogation for sewerage systems in Yorkshire. She said that they should all meet the required standards by the due date. She was one of the first to welcome new European directives and to demand that they be instantly absorbed in our water industry. She would be the first to recognise that a huge onus has been laid on the industry since privatisation to deliver change as quickly as possible. That is why there is record investment leading to record levels of improvement. Record levels of improvement mean record levels of customer satisfaction.

Mrs. Ann Taylor : The hon. Gentleman mentioned his role with Yorkshire Water. Is he prepared to comment, where the Minister was not, about the director general's suggestion in the cost-of-capital paper? What is his view on restructuring the investment programme?

Sir Giles Shaw : I shall not give that view today, but I agree that all companies will have to adopt a considered approach to a review of capital investment. I remind the hon. Lady and the hon. Member for Workington (Mr. Campbell-Savours), who did not appear to recognise the fact, that, quite apart from capital investment out of profit, there is investment through large borrowings. Some £1.5 billion profit in the industry in 1991-92 contributed to an investment of £3 billion during that year. On average, 70 per cent. of profits are ploughed back into investment.

It is not correct for the hon. Lady or the hon. Member for Workington to assume that the consumer is carrying the load for capital investment. Consumers make a contribution to profit, a significant amount of which is

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