Examination of Witnesses (Questions 60-67)
WEDNESDAY 11 JUNE
2003
MR PHILIP
FLETCHER AND
MR ROGER
DUNSHEA
Q60 Alan Simpson: I guess you get
quite a lot of correspondence on the adoption of private sewers.
Mr Fletcher: Yes. I have not seen
as much just recently as I might have expected, but if I can make
a prediction it is that my postbag—or if not mine, then
ministers'—will be rapidly going up. I have seen early-day
motions with impressive numbers of signatures. Again, this is
an issue on value. All of us can see—and there are issues
around private drinking water pipes—it is not unlike the
Chairman's point about customers who have still got their own
drinking water supply. My concern is that any move for the water
companies to adopt private sewers needs to be thought about in
terms of potential cost. There are reasons why these sewers have
not been adopted. Sometimes it is historical accident; sometimes
it is that the original development, whether public or private
sector, has put in a botched job, and there is going to be one
heck of a cost to put it right. At the moment it is unfortunately
customers with those private sewers who are suffering the consequences.
Before a leap in the dark to put all the costs on to water customers
at large, I welcome the fact that Defra is having research carried
out to get a measure of how big the problem is.
Q61 Mr Drew: One thing I noticed
when reading through both your report and your forward programme
is that you do not mention soft technology solutions. I am working
with Severn Trent on one reed bed proposal. Is not part of the
problem with sewerage that we always look at putting sewers in,
when in reality that cannot be the answer, certainly in rural
areas, because they are too expensive? Now we have the opportunity
to draw down money through the movement within the CAP to pay
farmers to allow their lands to be used for both flood relief
or indeed sewerage relief. Should this not be something that you
are openly promulgating and talking to the water companies about?
Mr Fletcher: I was at an occasion
last night with the Royal Society for the Protection of Birds
and a number of other environmental groups, and in a number of
respects I would love to see—and I am pleased to say that
the companies working with various other groups are in many cases
seeking to develop lateral thinking that will lead to less hard
engineering and hopefully better value for money—a win for
the environment and a win for the customers as well. There is
nothing in the present system that shall preclude that, other
than the dangers of saying, "we have to achieve target X
by two years' time and there is not time to think about the more
difficult solutions; therefore we go for a hard-edged engineering,
perhaps less than optimal, solution". It is back to the point
about the Water Framework Directive: now is the time to think
about it. Nothing in the system precludes companies from achieving
a better outcome for the environment and the customer by a route
which is other than what was first thought of. It is how the incentive-based
system is supposed to work.
Q62 Mr Drew: Could you not encourage
them to say this is something they should be actively pursuing,
not just as the end of the thought process, where all else has
failed, but something early on that they almost look at the soft
technology solution from the outset. I think that that would give
you both value for money, but also it will find solutions where
there are no solutions.
Mr Fletcher: I am encouraging
them to look for the value solution. The only reason I am ducking
away, as I am slightly from your invitation to go out and proselytise,
is my concern that the economic regulator should not be straying
too far beyond his specific job into "managing" the
companies in a particular direction. I am not anti-green—that
was said about my predecessor at the last review. I shall be cheering
with the rest and encouraging proper solutions to get the right
outcomes.
Q63 Ms Atherton: It is always very
gratifying when it is proposed that you are replaced by a whole
committee of people, where one person has sufficed in the past;
and that is what the Water Bill calls for in replacing the Director
General with a committee. How do you feel about that?
Mr Fletcher: I actually think
that, though I shall regret it, obviously, in terms of a job that
I find very stimulating to do, it is right. Certainly the press
has always enjoyed the personalisation of the regulator and there
has been a lot of playing around with—because Mr X is succeeded
by Ms Y, then somehow policy is going to change. That contributes
to regulatory uncertainty, which is a bad thing; it adds to the
cost of capital; it disadvantages customers. The fact that there
is a collective board which represents corporate continuity through
changes of individuals I think is entirely proper and appropriate.
It will be the third of my jobs where, with whatever personal
regrets, I think the move to abolish that job is the right move
to make.
Q64 Ms Atherton: Do you feel the
same way about WaterVoice with the Consumer Council for Water?
Mr Fletcher: Yes, I do. I hope
it continues to be called WaterVoice because we are painfully
raising the awareness of customers to the fact they do have this
champion, who at the moment sits within the Ofwat net but is not
by any means a sort of Ofwat poodle, which speaks independently
of me and is critical of me when they think it appropriate to
be so. I think it is right to signal that by making them quite
independent. What I hope we do not lose from that is the good,
constructive, but sometimes quite tense—that is overdoing
it, but sometimes quite fractious almost relationship between
us, in which we fight our corner and usually come to some sensible
way forward that is in the interests of customers as a whole.
Q65 Mr Mitchell: The Economist.com
has given us a series of bills. It is called Soaking the Scots.
The average household water bill in England is 236; Scotland is
263; and it draws the conclusion that it is better to privatise
it. However, surely the higher bills in Scotland are due to the
sparsity of the population?
Mr Fletcher: We try in all our
comparative work to even out for that sort of geographical factor;
and the basis on which my opposite number in Scotland is making
those comparisons is intended to have ironed out just that sort
of sparsity/density issue that is particular to the company. Those
figures should be on a real basis of comparison. What I am certainly
not saying is that privatisation in the particular and unique
form in which England and Wales chose to do it, was necessarily
the best possible one that could have been arrived at. What I
will say is that the combination of a private sector body delivering
in some cases public goods, remaining a monopolist and therefore
requiring all sorts of forms of regulation, and being spurred
on through that regulation as well as through the private sector
imperatives to do it, has resulted in significant advances. The
trick is going to be whether we can keep some sort of beneficial
cycle going through the next review and the one beyond that. That
is the job I see as my biggest challenge.
Q66 Mr Mitchell: Let me try another
way. Scotland's water regulator reckons that about £86 of
the average domestic water bill in 2001-02 was wasted. What was
your comparable estimate for England?
Mr Fletcher: He is basing that
on the performance of Scottish Water against the generality of
water and sewerage companies in England and Wales; so he is saying:
"If Scottish Water were performing at the level of efficiency
of England and Wales, then the bills will be £86 less than
they are at the moment in Scotland."
Q67 Chairman: Mr Fletcher, thank
you very much for coming. Mr Dunshea can no doubt take you outside
and kick you where he thought you could have given better answers!
We have had a very stimulating session. I suppose that is your
last appearance in this guise, depending upon the outcome of the
Water Bill.
Mr Fletcher: Well, maybe, maybe
not, because the Government has said it will not implement the
new regime until April 2005 at the earliest. In other words, it
will let me carry through. If you were to see me about this time
next year, there would be stimulating things to talk about on
the review.
Chairman: That seems to me to be an appetiser,
Mr Fletcher, which we will find it difficult to resist. Thank
you very much.
| 
