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Linda Gilroy (Plymouth, Sutton) (Lab/Co-op): My hon. Friend mentions Newcastle, but someone on pension credit in the south-west will pay two to three times as much—perhaps 7 to 10 per cent.—as a proportion of their income as the equivalent person in Birmingham. I am sure he accepts that that is unfair and needs to be addressed.

I thank the Minister for meeting my hon. Friend the Member for Plymouth, Devonport (Alison Seabeck) and me last week, when he explained the difficulties. I also thank him for considering tariffs. However, will he encourage people to look across the piece to other Departments—the Department for Work and Pensions and the Treasury—to find solutions, rather than telling us that we cannot do something about a situation that is patently unfair?

Mr. Morley: My hon. Friend has a distinguished record on the subject, especially with her involvement in the Public Utilities Reform Group and the relevant all-party group. She raises an interesting point. I repeat that there are no easy solutions, but I also repeat that I have an open mind. I am willing to explore new ideas. She has some thoughtful ideas on how we might address the problem. They raise issues for DWP and other Departments, but I am happy to examine her ideas in detail.

The assistance for areas with high electricity distribution costs scheme has been presented as a panacea. I regret that that is not the case. I have, however, looked carefully at the AAHEDC—assistance for areas with high electricity distribution costs—scheme and can claim to be something of an expert on its intricacies and details. I regret to say that I cannot
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understand how it could act as a solution. The electricity and water companies are very different. They have different infrastructure, operation and regulations. The big difference is that the electricity company has a national grid, on which the scheme is based, but water companies tend to be self-contained within their regions. There is no comparison.

Under the AAHEDC scheme, electricity suppliers in Britain subsidise the distribution company in northern Scotland. It works through National Grid Transco. The company collects a designated payment from all GB suppliers to be paid to the Scottish hydroelectric distribution company, which passes on its benefits to suppliers in its region by reducing its distribution use of system charges. The scheme is designed to assist the development of hydropower. That is part of its background and the reason for its existence. The benefits of hydropower are distributed throughout the grid. I am afraid that there is no comparison and, in that sense, the scheme is irrelevant. What is important is how it works.

There is no national grid for water. There are no network charges between water companies that can be adjusted in the same way. There are also other differences. The electricity scheme represents the continuation of a scheme that has been in place since 1943. As a matter of fact, it was put in place by a coalition Government. The scheme is not new. Indeed, the AAHEDC is a continuation of it. As I said, in part it is a form of support for renewable energy development. We have other mechanisms for renewable energy. The scheme is an early version of those. I am afraid that the comparison is a dead end.

Andrew George: The Minister says that there is no comparison, but the comparison between the support that the Government wish to give to renewable energy is equivalent to the support that we would wish to give to the tourist industry and the viability of the coast line around the south-west. That carries a premium by comparison with the clean-up costs in the rest of the country.

Mr. Morley: It does carry a premium, but other regions, companies and customer groups could make similar arguments about their circumstances. I mentioned Thames, but other parts of the country also have high costs. The hon. Gentleman's argument is a difficult one to make.
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The issue is one of affordability for those least able to pay. We want to address that issue and that is why we have the vulnerable groups regulations. Last year, a cross-Government steering group reviewed the way in which lower income households are helped with their water and sewerage charges. The Government are working with Ofwat, the water companies and the Consumer Council for Water to take forward the recommendations of the affordability report. That includes looking into alternative tariff structures and charging options, and a pilot study in the south-west.

The first strand of work is to look at the scope for redistributing the burden among customers of a company through tariff and charge structures. We did review the water charging system in 1997–98 and that resulted in the Water Industry Act 1999, which introduced protection against disconnection, and the free meter option. I stress that for many people in the south-west going on to a meter would cut their costs—

Julia Goldsworthy: Not for everybody.

Mr. Morley: I do not dispute that, but I urge people to take up the option. It is free and they can try a meter for a year, after which they have the right to have it taken out if they do not think that it saves them money. That is a fair offer and I urge the hon. Lady to encourage her constituents to take it up.

We are open to new ideas on charging methods and tariffs. A working group will look at the current charging system and explore a range of tariff options. The group includes representatives from the Treasury, Ofwat, the Consumer Council for Water and the water companies. The group will consider how tariffs might distribute the total burden of a company's charges in ways that might address affordability. It will consider, for example, the block tariff, which has great scope for improving the situation.

As the hon. Lady says, we are setting up the south-west affordability pilot study, and I regret that it has taken some time. It is a new approach and we have to tender for the work, which takes a little time, although we have reached the closing stages. The pilot is limited—we never pretended otherwise—but it will benefit the most vulnerable, and that should be our priority.

Question put and agreed to.

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