Water Bill [Lords]

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Mr. Robert Key (Salisbury): My water system is metered in my constituency home and in my London home. Is the hon. Gentleman's water metered at both ends?

Norman Baker: It is certainly metered in my house in Lewes; I made sure that it was. I live in a block of flats in the Westminster city council area, and I do not know whether it is metered or not. I have only just moved in and I have not yet had a bill.

Kevin Brennan: May I check a further point with the hon. Gentleman? As I understand it, he proposes that the charges should rise according to the volume of water used. Why should a bath for the fourth child in a family of four cost more than a bath for an only child in a family?

Norman Baker: I understand that important point; I referred to the vulnerable groups regulations, which

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should protect such people. I do not want a system that discourages the essential use of water in any way. Any system that introduces metering must deal with that problem, as the present regulations do not protect people. We discussed in earlier sittings the percentage of household income that is spent on water bills, which is way above the 3 per cent. guideline given by the Department for Environment, Food and Rural Affairs.

The vulnerable groups regulations, if they are properly drafted, in conjunction with the rising tariffs, should protect people who may question whether the fourth child can have a bath. If they can afford it, they may wish to use water to bathe the fourth child, while someone else may wish to water their garden or to wash their car using a hosepipe.

It is important to charge by volume, but also to have protection for essential use in the circumstances that I have described. That is what the new clause tries to achieve.

I hope that the Minister will respond positively to the new clause, although he will probably not accept it. However, the Government must be honest about water metering; it is not sufficient to leave it to metering by stealth, which does not provide the safeguards that the new clause would introduce.

3.30 pm

Mr. Morley: I will deal with stealth metering in a moment, but I must first deal with the amendment tabled by the hon. Member for Leominster. This is more technical and he is asking to use the term ''household premises'' as defined by the competition provisions in schedule 4. There is a problem with that, because that definition, which can be elaborated on in regulations, was created for use under the proposed competition regulations. It is not a definition that we wish automatically to apply to metering, and if any changes made to the definition of household premises automatically affected metering, it would restrict the ability to fine tune the competition provisions.

There are fundamental differences between metering and competition and we would not wish to replicate some areas here. That is why I do not think that the hon. Gentleman's definition is suitable. I am not aware of any problem with the current definitions; they were introduced in the Water Industry Act 1999 and have been in operation for three years without any great difficulty. I do not see the case for the amendment.

I do not agree with the new clause tabled by the hon. Member for Lewes. My disagreement is more with the philosophy of it, than with the new clause itself. I shall explain why. The Government are clear about our objectives: we believe that, in the long term, the most appropriate way of charging for water is metering. We have said that on a number of occasions. We have a difference with the hon. Gentleman because he accuses the Government of metering by stealth.

We are metering by choice; we are giving people the choice of moving on to a water meter. It is true that, over time, more and more people have done that. All new houses must have water meters; once one is put in,

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the regulations say that it has to stay in. The hon. Gentleman misunderstands the situation. There is already provision for companies to apply for compulsory metering if they so choose. That is in water-stressed areas, and if the company wants to make the case that there is a problem with water resources in its area, it can come to DEFRA and make an application for compulsory metering. So far, none has done so. We would expect any company to address the points made about matters such as leakages, before it asks for compulsory metering, but the provision is there.

Norman Baker: I assure the Minister that I know that the provision is there. I have had discussions with the water companies about it. Their view—I am obviously putting their case, which they wish to have communicated, rather than the Minister's interpretation of it—is that the hurdles that they would have to overcome to qualify for that are so high that it is difficult, and not sensible, for them to invest a huge amount of time in overcoming them. That is their argument; the Minister may not accept it, but that is what they told me.

Mr. Morley: I am not entirely convinced by that argument. If the water companies think that the hurdles are too high, they are welcome to address that through Ofwat and directly to DEFRA, as they do in our discussions. The provision is there, should it be necessary, and should there be an issue of real water shortages. Water metering is a complicated issue; that emerged from our discussion, and I am glad that we have had it. It is quite an important issue and there is no harm in addressing the pros and cons of it.

I can claim to have experience of both sides of the argument because I live in the Anglian region. I think that Anglian was the only company that started with compulsory water metering. I remember the horrendous difficulties that it ran into with that programme. It was paying for the meters that were being installed; it is worth bearing it in mind, when we talk about giving people choice, that meter installation is free. That is quite a powerful inducement for people to move over to it. There were enormous problems with Anglian and that is why I would be reluctant to accept the date that the hon. Gentleman cites in his new clause. There are terrific technical problems in many parts of the country in installing meters. We have heard about difficulties with blocks of flats. In my constituency, older blocks of terraced houses use one water supply, and attaching a meter to that is horrendously problematic.

My own home in north Lincolnshire—I must quickly say that I am metered in London—is an 18th-century manor house that has been socially divided into two houses. I live, in a socially responsible way, in one half of that building. There is only one water supply for the whole building, and it runs through my side of the house. Trying to install two meters is incredibly difficult. I know that because Anglian Water came round to fit my compulsory meter and, despite spending half a day under the sink in my kitchen, could not work out how to do it for the two

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separate houses without enormous costs and problems. We have to be careful when setting dates for overcoming technical problems.

Although I believe that metering is the way forward—I make it clear that the Government believe that metering is the long-term future—I point out to the hon. Gentleman that the effect on demand is more complex than he thinks. There have been several studies on that, and the water companies and Ofwat currently assume that metering would bring a 5 per cent. saving in water use; not bad, but not huge either. However, in some areas this summer, metered customers used more water proportionally than unmetered customers. The reasons for that are not clear and more analysis is needed, but it is not necessarily the case, as the hon. Gentleman believes, that metering is the new nirvana and will solve all the problems. Meters may be part of the solution for water management, and we would not rule them out.

I also want to clarify that there is no cross-subsidy between metered and unmetered supply. Ofwat is responsible for setting prices and tries to ensure that there is no subsidy. If there were any implications, they would be for the unmetered supply because the biggest water users would move on to meters. It is also more likely that those who pay the highest rateable value would move over to meters so, as the overall income changes, there are implications for the charges of those with an unmeasured supply. Ofwat is responsible for examining that, and it sets prices, taking those factors into account. However, I do not want to give the impression that metered customers are subsidising unmetered customers, because that is not true; we would have strong words to say if it were.

Norman Baker: The Minister said that there is no cross-subsidy, but does he accept that if somebody on an unmeasured supply changes to a metered supply in the belief, usually correct, that they will save money, the overall income stream to the water company will diminish? That affects the resources available to the water company for future investment and, if Ofwat is approached and told, ''We want an increase of X per cent,'' the figures on its balance sheet will probably justify that. There is an implication for unmeasured customers from the reduction in income from measured customers.

Mr. Morley: That is basically what I was saying, but the implication is for the unmeasured customers. If the base declines, Ofwat will have to decide on the charging regime to be applied to unmeasured as opposed to metered customers. However, I want to make it clear that there is no subsidy from unmetered to metered customers.

Kevin Brennan: Is not the implication of the suggestion of the hon. Member for Lewes that the introduction of compulsory metering will lead to a massive and sudden fall in income to water companies? That will lead to much lower investment and bigger problems with leakages.

Mr. Morley: That again would be an implication of a fast move to metering, which would affect water companies, consumers and vulnerable groups. We would prefer an orderly and phased move towards the

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changes, to minimise dramatic impact on consumers and people. I do not believe that the new clause would achieve that.

I want to say a word about vulnerable groups. Some of my hon. Friends were concerned, and I can tell them that vulnerable group regulations are under review. They are designed to assist metered customers who need to use large volumes of water for essential purposes. The results of the review and consultation will be issued by the end of this year. That is an aside to say that we are sensitive to the needs of vulnerable groups in relation to water meters and we are trying to address them.

It would be to many people's advantage to move to metering at the moment. As prices and regimes change, I suspect that more and more people will find it in their interests to do that and we will see continued progress as more people make the move. We are moving towards maximising the number of people on water meters, bearing in mind the technical problems, which will not be easy to resolve. That is part of an overall approach to water management, which also includes tackling leaks, considering building regulations and the design of new houses, and minimising water use. We must consider a range of issues in ensuring that we have good water management, and leakages is just one of them.

I return to the point that if there are shortages in a water-stressed area, companies can apply for compulsory metering. They can also already insist on compulsory metering for large water users. In my area, for example, it is compulsory for people with swimming pools and, I think, sprinklers to have a meter. Such measures can be applied, which shows that far from introducing meters by stealth, we are giving people the choice. We are working in a way that allows transitions without huge distortions for either the companies or consumers. We recognise that there are sensitivities in terms of what people want to do and that effective measures are needed for vulnerable groups. We already have some measures in place and are trying to improve them further.

The Government approach is the right one. We are aiming for the same end point as the hon. Member for Lewes, but it is a question of being practical and proportionate and of recognising the difficulties in applying large-scale metering throughout the country. We have recognised those problems, and our balance is just about right. We are open for discussions about different charging mechanisms and other approaches. As I have mentioned several times, we are receptive to new ideas and approaches. The hon. Gentleman has the best intentions and motivations, but his new clause would not work in the interests of either water companies or consumers.

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