House of Commons Hansard Debates for 7 Dec 1998 (pt 13)

Mr. Tom Brake (Carshalton and Wallington): Will the Minister give way?

Mr. Meacher: Yes, if the hon. Gentleman wishes to comment on this point.

Mr. Brake: Yes, I do. Is the Minister saying that he disowns the document entitled "Ending the Meter Mania",

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in which the then shadow Environment Secretary, the present Secretary of State for Health, suggested that council tax banding was quite a fair and simple way of administering water charges?

Mr. Meacher: I am not saying that. I have made it clear that the Government believe that it is essential that any proposals for a new charging regime provide adequate assurances regarding transitional arrangements. We do not want to see a large number of winners and losers--the winners would be very pleased, but we are concerned about the losers, particularly if they include those from the poorer groups. That would be a major disadvantage of the council tax band proposal. It depends on the structure and the ratio between the top and the lowest bands.

We are perfectly willing to consider the options and any proposals that are brought forward. Some ideas have already been suggested--indeed, I recently met representatives from a water company and a non-governmental organisation who are pushing the council tax band proposal strongly. We do not have a principled objection to the development of charges based on council tax bands so long as the proposals are refined to address the difficulties that I have mentioned.

Promoting increased customer choice means giving customers the option of a measured as well as an unmeasured charge. The use of water meters is not the only way of reducing water consumption. We need to ensure that water companies have programmes and targets for reducing leakage. I emphasise that that is an important part of our plan.

Mr. Peter Bottomley: Will the Minister give way?

Mr. Meacher: I can see that I will not be able to make this speech until I allow the hon. Gentleman to intervene. Perhaps he would like to make his point.

Mr. Bottomley: I hope that the Minister will appreciate the point that I tried to make five minutes ago, where it would have fallen more naturally. Is it not a disgrace that an elderly single pensioner living in a bed-sitting room may at present be required to pay £185 a year, whereas the water company would say that, if she had a meter, the likely charge would be between £120 and £140 a year? During the Committee stage and before the Report stage of the Bill, will the Minister consider what sense of urgency he is willing to put into the legislation so that, perhaps by the end of 1999, every pensioner in those circumstances will have received an estimate from his or her water supplier of the gain to the pensioner if a water meter were installed during the next 12 months?

Mr. Meacher: I am pleased to say that I have good news for the hon. Gentleman. The Bill contains such proposals--Christmas has come early. We propose that customers should be able to opt for a meter to be installed free of charge by serving a measured charges notice on the water company. I know that that is not exactly what the hon. Gentleman suggested, but it comes to the same thing. If a pensioner wants a meter, he or she will find it easy to obtain one by serving a notice on the water company.

The Bill contains additional protection for customers. Some of those who serve a notice on the water company may be worried that, at the end of a year, they will be

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worse off, and for that reason may not prepared to take the risk. They will be able to revoke the notice within the first year if they would prefer to revert to an unmeasured charge.

We are conscious of exactly the group to which the hon. Gentleman refers. We are making it extremely easy for them. The cost of a meter is £150 to £200. That will be provided free by the water company and, if it is not in their interest, customers will be able to revert to the previous system.

Mr. Graham Brady (Altrincham and Sale, West) rose--

Mr. Meacher: This is probably the last intervention that I shall take.

Mr. Brady: I am grateful to the Minister. If metres are to be made available free of charge, and given that those who want a meter installed are generally those who will benefit from it, is it not inevitable that water charges for those who do not have meters will increase? Will that not be a pressing difficulty for those who do not fall into the poorest category and get relief, or do not benefit from a meter?

Mr. Meacher: The hon. Gentleman asks a fair question. The outcome depends on the rebalancing of the tariff basket. At present, about 14 per cent. of households have a meter. That figure is increasing at a rate of 2 to 3 per cent. a year, and we expect the rate to accelerate as a result of the Bill. If it became a flood, that would be a serious matter.

The cost of selective and optional metering under the Bill, as well as the metering that the water companies already intended, is estimated by Ofwat at £300 million in the period 2000 to 2005. That relatively small cost must be compared with the £8 billion to £8.5 billion that is the extent of the environmental quality investment programme that the water companies will be required to carry out. The hon. Gentleman's point is relevant, but the situation will be perfectly manageable.

Many of those who request a meter will be owner-occupiers, but there will also be tenants who could benefit from paying for water on a measured basis. That group is likely to include many of those among the least well-off, for whom any savings in costs would be particularly valuable. We estimate that as many as 54 per cent. of households in receipt of income benefit would gain from a switch to measured charges--not just the well-off, but a large proportion of the poorest would benefit.

It would not be right to discriminate between owner-occupiers and tenants. We therefore believe that tenants should have the same options as other customers to request the installation of a meter. For practical purposes, we propose to exclude that option for those with fixed-term tenancies of less than six months, because the customer would not be in residence long enough to benefit from the savings that may be made from having a meter.

We have prepared a regulatory appraisal to accompany our proposals, which makes it clear that the industry's compliance costs are low in relation to its turnover. I mentioned the £300 million figure, which includes the metering that companies are already programming in the

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absence of Government policy on this issue. That figure is taken into account in the director general's assessment that substantial price cuts can be afforded in 2000. The director general proposes cuts of as much as 15 to 20 per cent. after taking account of the increase in metering.

When customers move to a measured charge, other charges may have to be adjusted to take account of any shortfall or increase in the revenue to the water companies. The consequences for other charges will depend on the rate of switching, the characteristics of those for whom meters are installed and the manner in which costs are apportioned between different customers, which is a matter for water companies. Customers often opt for meters because their measured charges will be lower than their previous bills--tests show that it could be as much as 10 or 11 per cent.--which implies that they have been overpaying relative to their water use for some years. Putting their charges on a fairer basis inevitably has implications for the charges of other customers. We believe that the effect will be manageable within the annual changes in bills.

On delivery mechanisms, we propose that the Director General of Water Services should approve water companies' annual charges schemes. That formalises existing practice, under which the Office of Water Services is consulted by water companies on the preparation of their charges schemes. The Secretary of State will be able to give the director general guidance on the exercise of his power to approve charges schemes, and he will also be able to specify in regulations particular issues to be covered in charges schemes, such as social and environmental objectives--which remain a key part of our aims--and protection for vulnerable groups.

We do not propose that the use of such powers should conflict with the prime responsibility of the Director General of Water Services, which is economic regulation. The powers are deliberately circumscribed to ensure that they are not used to limit the total revenues of relevant undertakers. That will prevent the Secretary of State from making regulations that affect the overall price limits set by the director general following a periodic review. That is an important point, because it removes any risk that this mechanism could be used to create uncertainty about the effect of regulations on the companies' income.

Part I delivers our commitment to introducing a system that provides fair and affordable water charges, especially for vulnerable customers, while ensuring the sustainable use of water supplies and the protection of the aquatic environment. Part II contains provisions to improve the arrangements for regulating the water industry in Scotland.

The Under-Secretary of State for Scotland, my hon. Friend the Member for Western Isles (Mr. Macdonald), when he winds up the debate, will comment in more detail on the provisions in part II, but I shall briefly set the scene. The need for new arrangements was identified in last year's Scottish water industry review. My right hon. Friend the Secretary of State for Scotland announced the findings of that review to the House in December last year. As he explained, the review recognised a consensus that the existing arrangements for regulating the water industry in Scotland were not satisfactory. In particular, the current division between price regulation by the Scottish Water and Sewerage Customers Council and efficiency regulation by the Scottish Office had proved untenable.

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