Examination of witnesses (Questions 520-539)|
TUESDAY 13 FEBRUARY 2001
MEACHER MP AND
520. Do you think that the success of the Energy
Savings Trust is something that could be mirrored with a Water
(Mr Meacher) When I first appeared before this Committee,
I did make some comments that I was rather in favour of the Water
Savings Trust idea, because I do think the Energy Saving Trust
has been remarkably successful. I do not demur from that view.
It is however the case that some regions are now facing a resource
surplus for the foreseeable future. If one said to the great British
public after the floods of last December that we are now instituting
a Water Savings Trust to which you are going to have to contribute
by a levy on your bills, it might produce a degree of incredulity.
Secondly, the levy on customers would mean that those on low incomes
in water plentiful areas would be subsidising activities in water
stressed areas and, to a degree therefore, there is a degree of
inequity, although not intended. The duty on water companies to
promote the efficient use of water was only introduced in 1995
and I have already indicated the whole range of improvements which
has already occurred. I am not opposed to the idea but I have
to say I doubt that this is the moment to introduce it.
521. Can I ask you whether the government's
assessment of the impact of climate change is that there is going
to be much more water in the United Kingdom and therefore there
is no need to implement a measure such as a Water Savings Trust?
(Mr Meacher) On balance, I think that is probably
true. There will be a division even within the United Kingdom
between the drier and wetter regions. The wetter regions will
become even wetter and more liable to flooding. The drier regions
such as East Anglia and parts of the south east will become drier.
That applies much more strongly regionally across the world but
even within the United Kingdom I would expect overall, as a result
of climate change, that the net balance would be an increase in
precipitation, an increase in water supply. Again, for that reason,
I doubt whether this is the time to introduce it. However, having
said that, no one foresaw the droughts of 1994, 1995 and 1996.
I continue to take the view, even though people have found it
difficult to take it seriously, that we need to prepare for future
522. Can I bring you on to some of the bits
of the Bill that have been highlighted? We have been told that
quite a lot of the major recommendations of Taking Water Responsibly,
which was a very coherent approach, are not in the Bill.
(Mr Meacher) There are parts which are not in the
Bill which is precisely because those provisions have not yet
been finalised. They will be included in the Bill on its introduction
and I think the Environment Agency assured you a week ago that
they would provide you with such a list.
523. They did give us a list but it is a bit
worrying that the decisions have not been taken on things which
include details of the means by which the abstracted water returns
to the environment, power for the Agency to waive the requirement
to advertise for applications. There are a lot of detailed points
that we have been given. If we give you a copy of these, may we
take it that, before the Committee finishes its considerations,
we can have your comments on those bits which have been omitted
from the Bill?
(Mr Meacher) As far as we are able to provide them
as a result of consultation within government, yes.
524. I accept all the subjunctive clauses but
will you give us an answer?
(Mr Meacher) Yes.
525. Can I ask you why there is nothing in the
Bill about the health and safety aspects and work on the people
working in the industry? We have taken evidence and you know what
happens when there are major changes. It is the people working
in the industry who suffer. Unless they get it right, no one gets
clean water. Why is there not something on the face of the Bill
which protects not only their employment but also the quality
of their water?
(Mr Meacher) With regard to the quality of water,
that is covered by the Drinking Water inspectorate.
526. I will not be distracted. There is nothing
on the face of this Bill that protects the health and safety involvement
of the workers in this industry.
(Mr Meacher) I suspect they are covered by the Health
and Safety at Work Act of 1974 which is a long lasting Bill but
a Bill which has stood the test of time.
527. If there are major changes in companies,
they are not protected in any way, are they?
(Mr Meacher) There is a distinction, I understand,
between their employment prospects and I know that the restructuring
proposals which have been discussed which are current within the
media have caused the unions in particular to be concerned about
job cuts. In addition, they are concerned that the periodic review
which has tightened the screw on companies considerably after
the much laxer periodic reviews of the past, requiring them to
achieve an £8 billion extra of water quality investment at
the same time as reducing charges on average by 12 per cent and
528. We are particularly concerned about the
way the companies have been reappraising risk and discounting
risk over a much longer period of time. Each time they do that,
they cut jobs and delay the renewal of assets. This is the evidence
we have received. The risk then must automatically be increased
to the public. All right; it may be minimal, but each time you
do it you increase the risk to the public. The gas and electricity
industry both have clauses in the Utility Act 2000 which requires
the Secretary of State to consult the Health and Safety Executive
on all relevant issues. If there is not such a provision in water,
why not? Why is it not in this Bill?
(Mr Meacher) The government's view unequivocally is
that any restructuring proposals must safeguard the public health
and the environment.
529. Why can you not write in very simply, to
save a lot of bother, a requirement to consult the Health and
Safety Executive on relevant issues or a requirement on the Secretary
of State to satisfy himself companies are renewing assets and
have sufficient personnel to guarantee the use of those assets?
(Mr Meacher) There are several different considerations
there. It is the responsibility of Ofwat to ensure the long term
maintenance of assets, both the
530. Why is there the difference between the
other utilities and water? It is such a simple safeguard. You
are not detracting from Ofwat's responsibilities of looking after
its assets; you just say, "Fine. In future, also consult
the Health and Safety Executive."
(Mr Meacher) These considerations which you have properly
brought forward are safeguarded at the present time.
531. Why are the people working in the industry
not convinced of that?
(Mr Meacher) I am not aware of any cases that have
come to my attention where health and safety at work are put at
risk for workers in the industry. If so, clearly the Health and
Safety Executive would immediately be involved.
532. You are aware that the companies are reassessing
risk and extending the life of their assets?
(Mr Meacher) I am aware that one of the ways in which
they are responding to the periodic review is precisely in the
way you suggest: that they may well be considering a reassessment
of risk. The proper protection against that is for both the government
and the Regulator to make absolutely clear that standards will
be maintained, both in terms of public health and in terms of
protection of the environment, and that they will be fully enforced.
That is certainly my position.
533. I offer you a simpler way round that: you
can go away and think about this one as well.
(Mr Meacher) I find your request very difficult to
534. The Secretary of State is going to use
his powers to set standards of performance?
(Mr Meacher) Yes.
535. Only in exceptional circumstances or always?
(Mr Meacher) As we consider appropriate. We are not
just talking about proposals from Ofwat; we are talking about
the Consumer Council, the Drinking Water Inspectorate. In the
light of the situation and cases that arise, we will set the standard
536. Do you think some of the changes in the
Bill are going to increase the cost of capital and customers'
(Mr Meacher) No, I do not. I know this again has been
alleged. The purpose of the Bill is to make the regulatory regime
more open, accountable and predictable. That should not raise
the cost of capital. We are proposing that there should be a water
advisory panel, advising the director general. That should not
confuse accountability because it will still be the director general
who takes the decisions in the long run.
537. You have total faith in the director general.
You do not think you need any extra powers?
(Mr Meacher) I think he is a very good director general,
but I realise that governments are of the day and so is the director
general. The way of dealing with the question of the cost of capital
is to look at the structural implications of what we are proposing
and I do not believe that those are likely to raise the cost of
capitalneither the power to initiate standards of performance,
the guidance that we are giving on social, environmental matters,
which is guidance not direction. All of those should not affect
the question of the cost of capital, in my view. It can be argued
that, because we are looking to abstraction licences of normally
12 years, which could be extended, there is a shorter time span
for the investment to produce its return. That could affect cost
to customers, but the applicant can justify a longer time scale
and there is a presumption for renewal so again I do not believe
that that should have an effect. If it is necessary to invest
extra funding to protect SSSIs, to deal with low river flow, of
course that applies at the present time and the current periodic
review had 100 such schemes in it. These cost £230 million,
but it still produced an overall average national cut in bills
of 12 per cent.
538. It has been put to us that as better off
people living in houses with high rateable values realise that
they might be better off if they go to metering, this may put
a greater cost on people on lower incomes, in terms of the distribution
of water charging. Is this something that you are concerned about?
(Mr Meacher) I do understand the argument and indeed
it has been suggested that there would be greater equity within
the system if one resorted to some kind of council tax based form
of water charging. My response to that is let 100 flowers bloom.
If companies can come forward with alternative proposals, there
is nothing to stop them. We can ensure that they are provided
with data on council tax bands without primary legislation. There
is no reason why they should not do it. One particular water company,
I do know, has thought about this very seriously. The problem
is that all the models that we have looked at do lead to substantial
changes, large numbers of winners and losers, and as always the
government is concerned about the losers. Quite a lot of those
losers may be in the lower income brackets. That is something
of a deterrent, but we are looking for greater equity within the
system of water charging.
539. Do I take it from that that you accept
that, as time moves forward, it is going to be increasingly difficult
to base water charging on a rateable value system based on assessments
made nearly 30 years Sago now?
(Mr Meacher) Absolutely. It is more difficult to base
on a rateable value system which is now very dated. The only ways
to deal with that are to have property revaluation, which is never
very popularthe longer the time which that has been left,
the more drastic will be the changes; or to go over to some system
of metering. We disagree with the previous government's intentions,
which were implicit, I think, to move to universal domestic metering
very quickly, but we would be happy if there were a steady increase
in voluntary metering. There are still large numbers of consumers
for whom it is almost certainly in their economic interests to
move to a metered system.