Water Bill [Lords]

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Mr. Wiggin: I shall speak only to amendment No. 101. This fairly straightforward little amendment would be tacked on to the end of paragraph 27(3) of

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schedule 7, which deals with regional committees—that term is enough to send a shiver up anyone's spine. The amendment refers to

    ''undertakers' power to require fixing of charges by reference to volume''.

We have had a long debate on issues of volume, and the amendment is designed to qualify them. I hope that it finds favour with the Government, but I suspect that it will not.

Norman Baker: I shall address my remarks to new clause 26, in my name and that of my hon. Friend the Member for Guildford (Sue Doughty). Members will know that I have referred to metering on Second Reading and during this Committee, and I want to explain in some detail why it is the correct way forward. I draw the Minister's attention to the fact that the new clause is detailed, so he will not be able to use the standard response that there is no detail. He will have to use his other response and tell us what is wrong with the detail. I look forward to it.

The new clause is what Sir Humphrey might have called courageous, as it is not without political risk, but we have proposed it because we think that it is right. Unlike gas or electricity, bills for which are based on consumption, water has historically been charged on the notional 1973 rateable value of the property—in other words, the amount for which someone could theoretically have rented out their house in 1973. That is an odd way of charging for water, especially as that value, if it had any meaning to start with, is 30 years old.

The 1991 Act conceded that water companies should no longer use rateable value and provided that its use would no longer be permitted beyond 31 March 2000. That decision was subsequently overturned. We now have an odd no-man's land in which companies use both rateable value and metering, which gives us the worst of all possible worlds. We are moving by stealth towards universal metering, but the Government do not want to champion it overtly. They are waiting for people to make their individual choices and for water companies to push the idea in the hope that we get universal metering without the Government doing anything.

That is a fundamentally dishonest policy, which has its own dangers. The current hybrid situation represents a worse solution than basing everything on rateable value, because there is a cross-subsidy from unmetered to metered properties. That is not something that people want to see in terms of social justice.

The new clause would prevent water companies from using rateable values as a basis for water charging, effective from 31 March 2018. We have built in the long lead-in period in recognition of the fact that such changes cannot be achieved overnight. We must consider the infrastructure and how quickly we can introduce universal metering throughout the country, and having talked to water companies, we believe that 15 years is a reasonably generous period. I

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hope that that deals with the practicality of whether we could achieve the change in that period.

Mr. Lansley: Before we go too far into the discussion of the hon. Gentleman's metering proposals, will he clarify whether he intends the metering to be strictly based on the volume of water supplied or whether he wants the charges to be levied in relation to the variable costs of water supply in which fixed costs are attributed to each customer on the basis on which those costs arise? Does he intend that the fixed costs should still be varied according to the volume of water consumed?

Norman Baker: My preference would be for the system to operate in the same way as electricity and gas. There would be a minimal standing charge, together with costs according to volume. I would also want to see rising tariffs providing a disincentive to use a greater amount of water.

Mr. Lansley: The hon. Gentleman's reply is interesting and not what I expected. It is interesting because the structure of costs in the water industry is different from gas and electricity, and the variable cost of water is a far smaller proportion of the total cost than the variable costs of either gas or electricity. I see no reason to suppose that, if one were charging only on the basis of the variable cost of water supply, there would be any incentive to water conservation, because the variation in charge would be very limited. The application of a standing charge, if it were unrelated to the rateable value, would mean that cross-subsidisation from expensive properties to cheaper ones would be removed.

Norman Baker: I hope that the hon. Gentleman will let me develop my arguments, because he has intervened at an early point in the case that I am making. I have indicated that if there were a standing charge, it should be low. I am ambivalent about whether there should be such a charge—on balance, perhaps, I think that there should. However, I believe that there should be an increase in tariffs on the amount of water consumed, to give an incentive to reduce water consumption.

Mr. Thomas: Will the hon. Gentleman give way?

Norman Baker: Yes. I am trying to make a case, but I will give way.

Mr. Thomas: I appreciate what the hon. Gentleman is trying to do, but I should like him to clarify a point. Does he intend the standing charge to include a certain amount of water that can be consumed under that standing charge before the extra charges for variable amounts of consumption are incurred? Will the standing charge allow for an average household's consumption, with more to be paid on top, or will the standing charge apply whether one uses no water at all or a little water?

Norman Baker: The answer is that the new clause allows either solution to be introduced; it is not prescriptive. However, I would want there to be rising tariffs at a key point. It could be that a given amount of water could be taken under the standing charge arrangement, and then a rising tariff applied according to consumption, to act as a disincentive to use of water

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beyond the point at which increased consumption might become environmentally disadvantageous.

The new clause would require the Secretary of State to put in place a strategy for attainment of comprehensive water metering by 31 March 2018 and, in the interim, it would enable water companies to introduce compulsory metering, when the Secretary of State allowed it. In that way, metering would be implemented gradually, with the expectation that it would occur first in areas where there is currently a water shortage, such as the south-east, and that the areas where water supply is less of a problem would be left until later.

The new clause would implement comprehensive metering to a set timetable. The Government are currently allowing metering to be introduced by stealth, and should make up their mind whether they regard metering as a good idea. The 1991 Act initially suggested that it should be phased out. New consumers may choose to switch from rateable value to metering, but there is no choice for those who come into a property that is already metered—they have to inherit it.

The water companies have made it plain to us that it is not possible to carry on indefinitely with the current legislation, which is based on that hybrid solution. They say that there is a cross-subsidy from unmetered to metered customers that will be unsustainable as the number of metered customers continues to grow. Those who are opposed to metering must face that fundamental point.

Kevin Brennan (Cardiff, West): Can the hon. Gentleman tell the Committee, from the discussions that he had with the water companies, how many of those companies are in favour of compelling people to transfer to water meters, as he suggests, and how many are not?

Norman Baker: I cannot give the hon. Gentleman an absolute figure. I have spoken to the water bodies collectively—to Water UK—and to individual companies in my patch, and to several others throughout the UK. None of them wants compulsory metering, but all recognise that the current situation cannot be allowed to continue indefinitely.

Kevin Brennan: If the hon. Gentleman cannot do that—I realise that it might be a bit much—can he tell us one company that is in favour and one that is not?

Norman Baker: I can tell the hon. Gentleman that South East Water recognises the need for compulsory metering, and it has been helpful in drafting the new clause under discussion. No doubt other companies are opposed to it, and I am sure that hon. Members will draw attention to them in their own contributions to the debate.

I do not want to lose the last point that I made—one which hon. Members must address in the interests of equity and fairness to consumers who are not well off. At present, creeping metering happens where people perceive that switching to metering is of direct economic interest to their own situation. The figures to which I referred earlier are in a parliamentary answer

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provided to me by the Minister earlier this year. They indicate that the average metered bill is significantly lower than the average unmetered bill in every company area except Portsmouth. That means that those who are unmetered are providing a cross-subsidy to those who are metered. It is often the poorest who are unmetered. That should not be allowed to continue. We must address that in some way. My preferred solution is to have universal metering. In a sense the alternative solution is rateable value. The present hybrid arrangements are unsustainable.

3.15 pm

Dr. Nick Palmer (Broxtowe): Does not the hon. Gentleman think that one of the reasons for that difference may be that metered customers use less water?

Norman Baker: Of course metered customers use less water. The very fact that they are metered acts as in incentive to use less water. But there is an overall cost to the water supply as they are paying less than they would have done under rateable value. The income that the water company would have received has to be obtained somewhere else and is a cost to other householders.

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