Examination of Witnesses (Questions 40
- 59)
MONDAY 19 JANUARY 1998
MR IAN
BYATT, MR
MIKE SAUNDERS,
and MR CLIVE
WILKINSON; MR
FRANK MARTIN
40. In 1994 you said there was room for
improvement in the quality of service which was provided within
the current price limits, and you have repeated that more recently.
Are you saying that you are not satisfied with the rate of improvement
of service?
(Mr Byatt) I am one of those people who regard
the human endeavour as ultimately stretchable and there is a sense
in which we are never satisfied, but the number of properties
at risk of low pressure was nearly 2 per cent. in 1990, fell to
1 per cent. in 1993, and is down to 0.4 per cent. now, so I would
like to see that rate of improvement continue. Where ultimately
we finish I think is very difficult to tell because, as living
standards rise and people's attitudes and habits change, it is
much more important now that there should be a prompt reply to
a telephone call. Twenty years ago people did not do business
in the same way by telephone; they did it much more by written
complaints. So I do see it as a dynamic situation.
41. I hear what you say. In a sense I think
it takes us back to a reply that you gave to the Chairman earlier
in which you talked about the variation across the industry, if
I read it correctly, and, therefore, the difficulty of applying
common standards, but there are companies within the industry
who are looking to that, are they not? Sixteen of the companies
surveyed, for example, said that the most influential thing that
OFWAT does is to provide comparative data and four of the companies
that were surveyed said that they were looking at a customer charter.
What I am interested in is whether or not you are doing anything
to pursue that route and perhaps looking at a national charter,
given that at the moment there is variation across the industry
but there is sufficient common ground to make sure that where
there are improvements of service a charter would allow that to
continue and would be across the board?
(Mr Byatt) We publish every year what we call
a "Which" table which shows how everyone is assessed
on the various standards and we believe that is a very powerful
way of pushing people. We also are now writing to individual companies
who fall down on these matters, in other words, have poor performance,
and to set standards. We also believe that we should-and this
is part of our response to this report-assess companies in terms
of "satisfactory", "good" and "poor".
"Satisfactory" would indicate that we thought they were
doing okay; the "good" ones would be the ones we want
to encourage, and the "poor" ones are the ones we would
chase. So we will be doing more in the way of making explicit
our standards of service and that is to complement the comparative
approach which we have used hitherto.
42. Could I ask you a couple of questions
about the quality of the data that you use there. The first is
the role of the Customer Service Committees. Could you say something
briefly about them and in particular whether or not they truly
reflect the views of customers, and how do you ensure that if
they do, they continue to do so?
(Mr Byatt) I wonder whether I could ask Mr Wilkinson
to reply.
(Mr Wilkinson) On the question of representation,
I think they do reflect the communities. The Director General
makes the appointments. We advertise for people to participate
in the local press throughout the area. It is an extremely big
area. The boundary stretches from Yorkshire to Gloucester, from
Wales over to Leicester, so we like to advertise in the area.
We balance between male/female; we balance between skills, people
whose background may be on the social side, CAB or local authority,
as against people in business. We try to balance local communities,
ethnic communities, as well. So that is how we try to balance
the representation to give us a good reflection of what normal
customers would think. We hold all our meetings in public and
we advertise them in the local press and encourage as many people
to come to the meetings as possible, but one way of getting across
that we are there and what we are saying that we are adopting-and
I think most of the CSCs have adopted-is to publish pretty well
all the public policy letters we write to the company. By "publish"
I mean to the broadcast and print media but to every Member of
Parliament and every metropolitan and county council. So everybody
can see the policy line we are taking, the issues we are raising
and what we are doing on their behalf, because we have limited
resources and it is very difficult with those limited resources
to go out to every consumer on regular consumer surveys. We obviously
have contact daily with customers through the complaints procedure
and communicate with them through that. Over the years that we
have published all this information, several hundred letters and
press notices, we have consistently had a stream of letters from
MPs and local authorities responding to the policy points we have
raised and giving us their views, and I take the view that local
authorities and MPs are the elected representatives of communities
and when they have problems generally they often go to their MP
or their local authority to ask them to support them. So I take
that also as a way of assessing public opinion about the way we
operate, the things we say and whether we genuinely represent
consumer interests as well the community, the people that are
selected to represent those communities on Customer Service Committees.
43. If I could make one comment rather than
a question before I move on to my next question, that sounds well
and good but to an individual customer who is having real difficulty
with this, is not one of the real problems with the pressure you
bring to bear on companies on behalf of individual consumers or
a group of consumers in an area that at the end of the day they
cannot then go off and seek a new supplier, so the water companies
will always know that whatever pressure is brought to bear, they
can drag their heels?
(Mr Wilkinson) That is absolutely correct, of
course, and that is the thing that drives us always to be looking
to see whether we can improve, whether our profile is high enough
to make sure people know we exist. It is pointless having somebody
representing you if nobody knows we are around and does not know
what we are saying on their behalf. That is why I think it is
absolutely crucial for us to publish and have a high profile.
I appear regularly on "Fair Means", Radio Leicester,
Radio Worcester, Hereford, Radio Derby, as well as all the publications.
So we try to get across as much about what we are doing and the
policies as we possibly can. The companies do not like this policy.
They do not like to have correspondence between me and them published.
They do not like it going to Members of Parliament and local authorities
who can respond to it. It puts enormous pressure on them then
to change what they are doing if we are being critical of them.
If we look at the evidence since we were set up to where we are
now I think it would show that the companies have moved in a very
big way to being much more customer orientated and we have achieved
quite a few successes over the years. We are not perfect, I would
not say that, but I think we do represent consumers in a very
good and positive way.
44. Going back to the point about quality
of data, could I just ask a brief question about the role of reporters.
Do you feel that there is an element of compromise there because
at the end of the day they are paid by the water companies, are
they not? Can you guarantee that they provide the independent
information which is necessary for you to make your judgments?
(Mr Byatt) We do our damnedest. We have to approve
the appointment. We have recently issued a protocol to all the
water companies and the plan is that they will put up some candidates
and we will tell them who can be appointed and who cannot be appointed.
It is not simply that they are paid for by the water companies,
they have a clear duty of care to the Regulator. We also meet
frequently with them, my staff do this, and the detailed contact
at the level of measuring this or measuring that and measuring
it in a comparable way is a very important part of their role.
I believe we have better comparable information across the companies
than any of the other Regulators and this is in part because we
have used this technique. Nothing is perfect and we keep on pushing
to improve it.
45. Do your staff go out and check the data
that has been brought back by the reporters?
(Mr Byatt) When the data comes from the companies
all kinds of queries are made by my staff and the reporters are
encouraged to engage in that. If the reporters are not querying
what the companies are doing properly then we tell those reporters
they are not doing very well. There is quite a dialogue, yes.
Mr Campbell: Thank you very much.
Mr Wardle
46. I apologise for being late. I wonder
if I could just stick with what Mr Campbell was asking about because
I have become fascinated by the way these committees are put together.
I would like to ask Mr Wilkinson a question. Mr Wilkinson, a long
time ago I used to be a manufacturer in the Black Country and
you used to do other things and here we are in different roles
and it is good to see you. I do not doubt that you strive earnestly
to get a balanced and energetic, conscientious committee but what
happens if a Ralph Nader, as it were, is lurking around in Tipton
or Gornol(?), Bloxwich or somewhere like that, and has actually
got a view of his own or her own, somebody who has really got
a difficult point of view, how on earth do they ever get on to
a committee of the great and good of this sort? How does the maverick
get on to a committee like this if the maverick has a point?
(Mr Wilkinson) Before now we followed a Nolan
procedure. The only thing you can do is to advertise in every
one of the local press, which is what we do, to have a very high
profile so that at every opportunity both in the broadcast and
in the print media on every issue what you have to say is there
for people to see, so therefore they know you are around and your
address. Also, when you are writing to every local authority,
county council and met district council and saying to them "will
you please present this letter, this press notice, this policy
issue to your equivalent sub-committee and give us your feedback"
then they themselves know we are around and can nominate.
47. I hear what you say but, as I understand,
it Mr Byatt makes these appointments.
(Mr Wilkinson) He does.
48. That is what the 1991 Act provides for.
Should it not be the Secretary of State in theory? Can you imagine
what would happen if the Chief Constable appointed everybody to
a police authority. Are you comfortable, Mr Byatt, with the fact
that you pick your own gamekeepers?
(Mr Byatt) I have a statutory duty to protect
the interests of customers. I work closely with the Customer Service
Committees. They are very valuable to me.
49. I am sure you do, you pick them.
(Mr Byatt) The process which I have is essentially
a process whereby there is an advertisement, they are interviewed
and I follow the Chairman's recommendations. I do not impose my
own will on these matters.
50. I do not doubt your integrity in this,
I just wonder whether the system is right now a few years have
elapsed since the Bill was put on the statute book. I would like
to stick with the 1991 Act for a moment. You were talking about
water metering earlier, and indeed before I arrived so rudely
late and it may be you touched on this then. I have at the back
of my mind the year 2000 is a very important year. Is that not
the year when all sorts of chaos and mayhem could break loose
because you have to change the basis of charging from one that
is geared to the old rateable value basis? Bearing in mind that
by no means all private accounts are now metered-20-25 per cent
across the country perhaps, is that the figure-what are you going
to do? Are you going to fight it? Are you going to delay it? What
are going to do when the Act says this should be done by 2000?
(Mr Byatt) The present legislation says that water
companies will not be able to charge according to rateable values
from 2000 onwards. The previous Government said that it would
extend the period. The present Government is reviewing charging
methods.
51. Which is precisely why I am asking.
I think the present Government saw what was looming up and did
that. What are you asking the current Government to do about it?
(Mr Byatt) My own view is that the sensible thing
to do is to extend the use of rateable value for charging purposes
because no better method has been found for unmeasured customers
and there will be a large number of unmeasured customers in 2000.
I am always extremely nervous of anything which changes the distribution
of charges for no particular business purpose. If one went, for
example, on to council tax bands, which some people have advocated,
then we would find that quite a number of people in low rateable
value property, many of whom do not have much money, would be
paying rather more. I advocate continuing the present arrangements.
52. I think there are some huge icebergs
looming up, particularly with people in the properties you have
described because if there is a shift and if it does not take
account of people on low incomes in low rateable value properties
they could have a terrible shock. This will all impinge on the
subject of this afternoon, the investigation into customer complaints.
My experience with constituents, as I discussed with you last
time, has been that the chief complaint was about the way in which
under the K-factor, properly regulated I know, water charges soared
in the early years, and you modified that. You can imagine how
people, particularly those in low rateable value houses, will
feel if this happens again. I do hope you can press the importance
of that on the Government. I think it is fair to say that those
who brought the Act in in 1991 did not think far enough ahead
and the year 2000 is coming at us fast. You said earlier, Mr Byatt,
that the companies are required to carry out their environmental
obligations, again we are back to the Act, but a moment earlier
you said to the Chairman, referring to paragraph 3.9, you really
could not quantify the acceptable trend in reducing leakage. What
else do they have in the way of environmental obligations that
are more important than reducing leakage and wastage of that important
natural resource?
(Mr Byatt) They have massive obligations arising
from the incorporation of European Directives into English law,
for example the Waste Water Treatment Directive which will cost
the company something of the order of six billion in terms of
capital investment. There certainly are some major obligations.
53. But none that would cause you to lose
sight of this huge volume of leakage on which the Chairman is
pressing?
(Mr Byatt) It is very important to get leakage
down and all the companies now have targets and leakage is now
falling significantly. I believe that it is extremely important
as we move into levels of lower leakage to be sure that we are
getting down to the economic level of leakage so that customers
are paying what they ought to pay and not excessive amounts.
54. I could only feel comfortable with that
assertion if I had some numbers to work with, and if the Chairman
cannot whittle them out of you, then I am sure I cannot. Can I
just clarify something that you said to Mr Leslie. You talked
about investment. It seemed to me as you were talking to him that
what you tended to do was to look at historic data, to look at
reports and accounts. To what extent under the Act, and under
your powers that flow from the Act, are the companies required
to review their investment plans with you in advance, for example
when you are agreeing the price award?
(Mr Byatt) Absolutely. The level of investment
is an extremely important element in the price limit.
55. So you have sight of their plans before
those plans are approved?
(Mr Byatt) Yes.
56. It is all done in advance as part of
the formula?
(Mr Byatt) Yes, and in this review it will be
done in a very open way because next October there will the first
sight and shot of all these matters with indicative K factors
and investment levels before things are settled, so that there
can be a proper public debate, including, of course, Members of
Parliament.
57. By then, depending on what answers we
hear from the Government in the meantime, the icebergs may be
upon us so far as the year 2000 is concerned and that consideration.
Can I finish with one question and I unashamedly go back to a
question I asked when Mr Byatt was last here, but it is fun to
test the Treasury, who sit here every week. Mr Byatt, you said
this afternoon, I think to Mr Leslie, that the water companies
had invested £5 billion since privatisation. For the sake
of the record this afternoon, am I not right in saying that upon
privatisation or immediately before, £5.7 billion in round
terms of water company debt was written off by the then Government?
(Mr Byatt) I think I said they had borrowed £5
billion but the debt which the former water authorities owed to
the National Loans Fund was written off.
58. That is my point. So before they converted
to plcs that was struck off the balance sheet?
(Mr Byatt) Yes.
59. Perhaps the Treasury could explain.
Perhaps I have asked this before but maybe we can hear from the
Treasury experts, Mr Chairman?
(Mr Martin) If you have asked it before I wish
I had looked up the answer.[2]
Mr Wardle: That is just my way and
that is tough. What I would really like to know, and it is a very
straightforward question, is if the water authorities before they
converted to plcs had that wonderful moment when the debt was
wiped out, is it not the case that the debt obligations must still
exist so far as the taxpayer is concerned? Is it not the case,
therefore, that at some point over a stream of future years as
those debts mature, the Treasury, HMG, the taxpayer, must meet
that indebtedness? It cannot just disappear into thin air, can
it? I wonder what the answer is. Would it be possible to get that
in writing if it was an unfair question to throw at them now,
Chairman?
2 Note by Witness: The Government announced in 1989
that all outstanding loans would be written off when the water
industry was privatised. When the National Loans Fund debt was
written off the Exchequer automatically lost the right to both
the outstanding principal and the interest which would have been
payable on the loans until such time as the original debt would
have fallen due for repayment. Repayments of capital and interest
could not, therefore, be used as an offset to the Government's
future funding requirements. The effect was to increase the burden
on the Exchequer and taxpayer. Most of the outstanding loans at
the time of privatisation had an initial maturity period of 25
years, and hence the impact was spread over many years. Back
|
