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Richard Younger-Ross : I was heartened to hear on the radio that the new leader of the Conservative party accepts that some of its past policies were wrong and that the poll tax was a mistake. I was less heartened when the right hon. and learned Member for Folkestone and Hythe (Mr. Howard) went on to say that water privatisation was a great success because it had created vast investment in the industry. Although I accept that the increase in funding has created the clean sweep schemes and the environmental improvements that we all supported, it has been done at a specific cost, which consumers throughout the country have borne.
As my hon. Friend the Member for Lewes (Norman Baker) said, the cost has not been equal across the board. Some people in specific areas have borne a disproportionate amount, especially those whom I represent in Teignbridge and those in my hon. Friends' constituencies in the south-west. Devon and Cornwall have 3 per cent. of the population of Britain, but 30 per cent. of the nation's beaches, and we continue to pay for
cleaning them up. It is argued that there is a benefit to the south-west and the Minister nodded earlier when tourism was mentioned. However, a benefit to tourism does not directly benefit pensioners, people on fixed incomes and those on low incomes. There is little to help them to pay their water bills, which have more than doubled since water privatisation and will increase even more.I ask the Minister to consider the wording of the new clause carefully. It would not force him to take action but empower him. It would make him examine the financial implications and empower him to ensure greater justice throughout the United Kingdom and to introduce water justice. The two words "water justice" are important to people in the south-west. I suspect that, as time goes by and other environmental improvements are introduced and other areas have to bear the cost, people in other parts of the country will also say, "There was a missed opportunity—we could have had an equalisation scheme. We want water justice and we want it now."
Andrew George: I should like to speak to amendment No.132, which stands in my name. I especially want to draw the Minister's attention to the specific circumstances on the Isles of Scilly. Water supplies and services there were not privatised under the original legislation. The Isles of Scilly were specifically excluded from section 222 of the Water Industry Act 1991. The position is not only legally but locally complex, in that the council has taken responsibility for water services and drinking water to St. Mary's and Bryher, but the Duchy of Cornwall is largely responsible for the private water arrangements of the islands of St. Agnes and St. Martin's and Tresco Estates is responsible for the residents of Tresco island.
Many constituents have expressed anxiety about drinking water standards. Although the council is doing its best to ensure that drinking water is properly monitored, it would be helpful if the Minister and the Department considered amendment No. 132, which would at least allow for the sort of improvements that may be required in due course. I do not suggest that we should introduce mainland circumstances and privatisation to the Isles of Scilly because that would not be appropriate but I hope that the Minister will at least reflect on the specific, special circumstances that pertain there and ensure that the islands and drinking water customers in particular are properly protected in the same way as those on the mainland.
Mr. Morley: New clause 11 offers a new system of paying for environmental improvements and I understand the case about high costs in the south-west. Like other companies, water companies must meet their costs, including those of environmental standards. Ultimately, all those costs come from their customers. Ofwat sets an upper limit on customer prices, but there is a strong and visible link between what the company spends and the customers who fund that through their bills. Water companies understand that, and it could be argued that it has made them far more sensitive to the views of their customers, whom they rightly perceive as
a key concern. Strong evidence in the current periodic review shows that companies' business plans pay more attention to customers' priorities. That is no bad thing.6.45 pm
Although I can understand the reasoning behind new clause 11, I am worried that it would weaken the connection between the company and the customers by creating a national environment fund that drew its money from customers throughout the country. There is a question about whether companies would pay as much heed to their customers if customers throughout the country met the cost of their plans. There would be a lack of accountability and a weakening of the driver that encourages individual companies to keep their costs as low as possible.
Nick Harvey (North Devon): Holidaymakers throughout the country get the benefit of the capital work that is undertaken. Will the Minister at least consider the point that by opting for a water meter, wealthy owners of second homes in the south-west opt out of contributing to sewerage services and cleaning up the beaches because they have remarkably low bills that reflect their occasional visits? Will he consider the principle of insisting on a standing charge to ensure that they share the burden with regular residents?
Mr. Morley: That is an interesting idea. Of course, it is Liberal Democrat policy to have compulsory water meters. The hon. Gentleman mentioned one of the potential downsides. The issue of second homes is serious and too wide for me to tackle in the debate, but I understand his point.
There are other problems with the new clause. Depending on the details, the proposal might remove the incentive for companies to spend efficiently. If a company currently undertakes an agreed investment programme at a lower cost than planned, the saving benefits the company and can be passed on to its customers at the next price review. That would not be the case if there was a national scheme such as the new clause proposes. It provides that the company be reimbursed for the estimated cost. What happens if the company manages to undertake the programme for less cost? Who keeps the difference? If the national fund meets the cost, there is no motive for the company to invest efficiently. If it pays the estimated cost regardless of the out-turn cost, that asks customers in the rest of the country to fund a windfall saving to a company from which they will never benefit.
I understand the issue of prices in different parts of the country and fairness, but we must consider fairness to other customers. The hon. Member for Teignbridge (Richard Younger-Ross) said that although benefits in clean beaches and good bathing water quality go to the south-west economy, they may not affect individual pensioners. That is a fair point. However, there are pensioners throughout the country, not only in the south-west, and we must consider their costs and the way in which the new clause would apply to them.
Although I understand the argument, I am not convinced that there is a genuine distinction between the environmental measures that benefit a locality and the national benefit. We have mentioned that in the context
of tourism and the local economy. We must ensure that prices are as low as possible in all companies. That is an issue for the price review. When making decisions that affect water company obligations, we take account of customers' costs and bill levels in each company but I do not believe that it is necessarily to consumers' advantage to release companies from their responsibility to manage their investment programmes efficiently and justify them. I fear that the proposal might yield a short-term gain, but a cost disadvantage to consumers in the south-west in the long term.
Andrew George: Does the Minister not accept that Ofwat assesses the efficiency of the companies, along with the appropriateness of their proposed schemes, and sets a K factor that takes into account all those measures? Surely the same principles could therefore be applied to this task?
Mr. Morley: The difference there is that the K factor formula is applied across the whole country; it is a national formula. What is being proposed here is to even out what I accept are regional disparities by getting consumers in other parts of the country to make a contribution to—in this case—the south-west. I understand the points that have been made, but I would want to approach this issue by ensuring that efficiency drivers and investment programmes were in place to bring down costs for all consumers. That is the best way forward.
Amendment No. 132 applies to the Isles of Scilly. The hon. Member for St. Ives (Andrew George) will be interested to learn that I know the area very well; in fact, I have visited all the main islands. I understand his point, and he is quite right about the provision for the opt-out. There was always a provision for the council to apply to the Secretary of State to make an order so that the water undertakers' functions under the Act could be performed either by the council or by the relevant water undertaker. I understand the split that the hon. Gentleman mentioned in that regard.
An order was made in 1990 to give the council on the Isles of Scilly various functions. Its provisions, which include enabling powers to make drinking water regulations, place certain emergency duties on water undertakers that could prove very costly for the council. I understand that the arrangements on the Isles of Scilly for monitoring drinking water quality might not be wholly consistent with arrangements on the mainland. I assure the hon. Gentleman, however, that we are already considering how best to use the powers under section 222 of the Water Industry Act 1990, and we shall consult the council about costs and other implications. We therefore accept the thrust of his argument. There are powers available to provide what he is seeking, and we are prepared to talk to the council about how we can address the issue. On that basis, I hope that he will not press his amendment to a vote.
Amendment No. 131 seeks to give greater prominence to certain demand management options, and we recognise that that is important. We had this discussion in Committee. I would say to the hon. Member for Lewes (Norman Baker) that water companies are already obliged to produce 25-year plans, so in that respect I believe that the Bill already covers his proposal.
Amendment No. 16 deals with water conservation. We do not disagree with the general principle advanced by the hon. Member for Leominster (Mr. Wiggin), but the fact that the Bill does not mention a duty does not mean that a requirement that public authorities "shall" do something is not a statutory duty. The Bill contains a statutory duty in respect of water conservation. As with other matters that we have discussed, difficulties might arise if we are over-prescriptive in our wording. We have no problem with the hon. Gentleman's arguments about the promotion of water conservation, but there is a statutory requirement in the Bill that meets the thrust of his arguments. In that regard, too, I hope that he will not press his amendment to a vote.
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