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Adam Afriyie (Windsor) (Con): The hon. Lady is casting aspersions on the former Conservative Government of eight years ago and she has demonstrated concern about privatisation, but she has not advanced any positive suggestions about what the Liberal Democrats would do. Is she proposing that water and sewerage charges should be harmonised throughout the UK?

Julia Goldsworthy: I am proposing a variety of   suggestions. The last one is another precedent set by    a Labour Government—indeed, this Labour Government—in an attempt to mitigate the unfair costs that some people face in respect of utility bill payments.

My hon. Friend the Member for Truro and St. Austell (Matthew Taylor) unearthed an interesting piece of information from Trade and Industry questions the other week. The Minister for Energy helpfully informed him that the typical household electricity bill in Scotland saw a saving of £27 a year—the result of a subsidy to electricity consumers in northern Scotland introduced in April this year. My hon. Friend also asked the Minister for Energy to have a word in the ear of Department for Environment, Food and Rural Affairs Ministers to explain why such a subsidy was required in northern Scotland to keep down fuel bills and reduce fuel poverty.

Surely the Minister recognises that increasing water bills in the south-west will pose very similar problems. I encourage him to make a foray on to his own patch on this issue, as the Trade and Industry Minister was very keen to ensure that he did not trespass on his. What are the Minister's views on the potential applicability of such an idea to water consumers? He will doubtless agree that it would appear hypocritical for his Government to provide support in one part of the United Kingdom but not in another.

This problem has a very long history. I hope that tonight's debate will bring some hope to my constituents and that they will finally get a fair deal on water bills. They do not care what form the solution takes, just as long as it results in bills that are more affordable. I do not consider that an unreasonable request.
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10.15 pm

The Minister for Climate Change and the Environment (Mr. Elliot Morley): I congratulate the hon. Member for Falmouth and Camborne (Julia Goldsworthy) on making a case that, as she rightly stated, has been made on many occasions by various Members of this House, including her predecessor, who was very active on this issue. That case was also made recently by my hon. Friends the Members for Plymouth, Sutton (Linda Gilroy) and for Plymouth, Devonport (Alison Seabeck), and by a delegation organised by the hon. Member for Truro and St. Austell (Matthew Taylor).

I start by considering the very roots of the problem. I know that the hon. Member for Windsor (Adam Afriyie) said that the previous, Conservative Government are completely blameless on this issue, but the green dowry is a real problem that stems from 1989, when, as part of the privatisation process, the then Government wrote off existing debt of some £5 billion for all water companies. They also provided an additional cash injection of £1.5 billion—the so-called green dowry—in recognition of the upgrades that a number of companies would need.

Of course, hindsight is a wonderful thing, but it seems questionable whether the green dowry for the south-west was anything like sufficient at that time to compensate for the poor infrastructure, especially given the important point that it was calculated that such infrastructure investment would not be needed, as sea disposal of sewage was considered acceptable in 1989. It is not acceptable, and although there is no doubt that prices have gone up, people appreciate—as the hon. Member for Falmouth and Camborne said—that our beaches and rivers now enjoy record water quality. That is very desirable, but it is clear that it has come at a price. A better dowry for the south-west would have been sensible, recognising the scale of the problem in 1989. Had that happened, we would not face the difficulties that we currently face.

Adam Afriyie: The dowry to which the Minister refers dates from some 16 years ago. One can argue that the decision was right or wrong, but this Government have had eight years to resolve the situation. Surely he will come up with answers this evening, rather than simply laying the blame at the door of a previous Government in respect of events that took place many years ago.

Mr. Morley: Far be it from me to lay the blame on previous Conservative Governments; I am simply painting the background to the existing problems and describing their root. However, I will certainly touch on potential solutions.

I should point out to the hon. Member for Falmouth and Camborne that there are no easy answers to this problem, and one reason why is that the companies involved are private companies. I take it that the hon. Member for Windsor is not suggesting that we provide public subsidies for private companies, because that does not quite go with Conservative philosophy. It should not be forgotten that during the previous price round, the regulator, rightly or wrongly, cut bills by an average of just over 10 per cent. Although prices will rise between now and this time next year, which will affect customers in the south-west, in real terms they will still
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be paying less than they did in 1999. In 2006, the average bill will still be 2 per cent. lower, in real terms, than it was in 1999. These are nevertheless average prices, and such prices can mask disproportionate effects upon individuals. I am not being complacent about that. It is also fair to point out that the number of pensioners in relative poverty in the south-west fell by about a quarter between 1996–97 and 2002–03, from 270,000 to 210,000. It is true that pensioners' incomes in the south-west are marginally lower than those in Great Britain as a whole, but they are higher than in all regions outside London, the south-east and the east. Pensioners' incomes have risen faster than earnings over the past nine years.

In the country as a whole, pensioners' incomes have risen by 27 per cent., compared with 15 per cent. for wages, as a result of uprating the basic state pension in line with inflation, or by 2.5 per cent. each year, in uprating the guaranteed credit element of the pension credit in line with earnings so that the poorest pensioners will see year-on-year increases in income that are greater than inflation.

I stress these points because one of the ways in which the Government have approached the issue has been to tackle low incomes generally. That is a powerful argument. There are many different mechanisms in respect of utility prices, but low incomes are key to the problem. Affordability is also a key point. That problem applies throughout the country. There are certain improvements in the south-west that are dedicated to the area, including, in particular, water coloration and drinking water quality. There is also the issue of connecting homes to mains sewerage, which is a particular problem in the south-west. I understand that the current price round is designed to connect 261 properties to the mains, which is quite a lot. It is designed also to address sewer flooding, which is a problem in parts of the south-west, as it is in other parts of the country.

It would be wrong to think that the costs that fall upon south-west consumers are for the benefits of other people. Many of the costs are for the benefit of south-west customers and consumers. However, I recognise the point that the hon. Lady is making.

Andrew George: The Minister has given figures for average pensioner income. In the area that we are talking about, many pensioners come from a more wealthy background to retire in the area, which masks the underlying trend among local pensioners. Do the figures that the Minister has given reflect the figures for pensioner income throughout the far wider Government south-west zone than the area of South West Water, which is clearly geographically much smaller than the Government zone?

Mr. Morley: I do not dispute the point that the hon. Gentleman makes. There will be distortions as a result of wealthy pensioners who retire in the south-west, and that can mask real poverty. We are aware of that as a Government; we take it seriously.

I shall deal with the idea of lifting some of the price burden on to other areas to lower the price within the south-west. There are some problems, as I have said before when discussing these matters with hon. Members who have suggested that there should be
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cross-subsidy. Ultimately, all costs fall on the consumer. Ofwat sets an upper limit on prices. There is a strong argument for a strong and visible link between what the company spends and the customers who fund those moneys through their bills. If some of the cost is offset, that reduces the pressure on companies to ensure that they are offering the best service to their consumers.

There is also a problem with how we shift prices into other regions, because each region has its own problems and costs. The hon. Lady mentioned the Thames region. There is much discussion about the Thames interceptor, which would cost between £3 billion and £4 billion. As a result of particular problems with the Thames region, particularly with leakage, the level of increase in the region has been higher than in the south-west, although the overall bill is lower. I accept that.

On the logic of what the hon. Lady argues in terms of transferring costs, she must surely recognise that many consumers in the Thames region think that as the Thames runs through the capital, it is important that the river should be clean because of the Olympics and London's role as a national showcase, and that some of the cost should be spread to other people. How do we explain to poor people in Newcastle, Liverpool or Sheffield that their bills have to rise? Although what she proposes would help poor people in the south-west, it would also help wealthy people in the south-west—the very people who, as the hon. Member for St. Ives (Andrew George) said, have gone there to retire. How can we offload their charges on to poor people?

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