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24 Apr 2007 : Column 246WH—continued
Sir Nicholas Winterton (in the Chair): Well, then, that is fine, but it should have been drawn to my attention. However, I gather from the Minister that the hon. Lady has done him the courtesy of advising him of her intent. I am grateful for that.
Matthew Taylor: The hon. Lady advised me of her intent as well.
The average bill that landed on doormats in the south-west in the past few weeks was £483, while the average metered bill was £378—well above the national average. For low-income families and the disabled, who may use quite high levels of water, especially those families with children, as the hon. Lady said, having a meter might not be a better option; but unmetered bills can average a staggering £650. Also, many people do not have the option of having a meter. A couple of surgeries ago, I was approached by an elderly pensioner who was told by South West Water that it was not possible to fit a meter. He therefore has to pay the full £650.
By 2009-10, the average bill in the south-west will cost about £700 in today’s money, and the average working household will be paying twice the national average on water and sewerage.
Julia Goldsworthy (Falmouth and Camborne) (LD): I want to follow up the point made by the hon. Member for Plymouth, Sutton (Linda Gilroy). At our last meeting with Ministers from the Department for Environment, Food and Rural Affairs, the Minister promised that he would help to lead a joint meeting with the Treasury, because co-operation from both Departments is needed to tackle this issue. A couple of weeks ago, at Treasury questions, the Economic Secretary rejected that idea. Will my hon. Friend continue to press the Minister to ensure that that cross-departmental meeting goes ahead for all the reasons that the hon. Member for Plymouth, Sutton outlined?
Matthew Taylor: I will, and I believe that specific issues could be tabled for discussion at that meeting, for which it would be useful to have both Ministers present.
It is worth making a few comparisons, because the Minister may not realise how high are the bills that we pay. Many Ministers pay charges in the capital and have earnings much higher than the average earnings in our part of the country. The average bill in London was just £275 this year. That is a difference of £208, which means that the average bill in the south-west is 75 per cent. higher than in the capital—nearly 150 per cent. with unmetered bills.
Alison Seabeck (Plymouth, Devonport) (Lab): Does the hon. Gentleman therefore share my concern that plans to bring in the 5,000 km of private sewers under South West Water’s remit could add to the cost to bill payers? Will he seek clarification from the Minister on that?
Matthew Taylor:
I shall seek clarification from the Minister on that, and I shall come to that point shortly. DEFRA accepts that those changes will add to bills, but I do not think that its figures are very reliable. Rather than helping to reduce bills, the plans regarding private sewers will increase them. DEFRA estimates that the increase will be anything from £3 to £11, but the industry believes that it will be much higher. My
experience from dealing with large numbers of constituents who face problems with this issue tells me that costs are likely to be extremely high.
I do not believe that the figures take into account the fact that those sewers are likely to be extremely dilapidated and will therefore require very high levels of capital infrastructure costs, and not just maintenance costs. Typically, in our part of the world, many of the estates were not officially adopted when they were built precisely because their sewerage systems were not of an adequate quality and were often made of pitch fibre. They are currently collapsing and often need replacing. Whilst that is a huge issue for the residents of those estates, simply deciding to bung the problem on to South West Water bills without an adequate calculation of the likely increase in bills could leave us saddled with a repetition of the mistakes that the Conservatives made in the late 1980s.
In my last debate on this, in 2005, I got the distinct feeling that the Minister who responded saw bills as a south-west problem and a south-west responsibility, but the entire country benefits from our coastline. In 2003, Cornwall alone received 5 million UK tourist visitors and there were 25 million tourist nights. Those figures do not include the 2 million overseas visitors. Our part of the coastline is part of the bedrock of Britain’s tourism industry and is a national asset, but just 3 per cent. of the national population is bearing the cost of cleaning up to a third of the national beaches.
At the heart of the debate, more than the question of who should pay for what and who benefits from what, is the fact that the people who are paying for all this are the poorest in the UK. It is a mistake of the Minister’s Conservative predecessors, but surely a concern of the Labour party, that people on such low incomes, in such high levels of poverty, are paying such big bills without any help from the benefit system in the way in which it would help them out with housing or council tax costs.
Andrew George (St. Ives) (LD): My hon. Friend would agree that when South West Water was set up—this applies to many other such companies—a risk-free money extortion system was created for those receiving dividends as shareholders of the company. They could predict the dividends that they would accrue at the end of the year, and the comparison should be made with the poverty of the people who have to pay the bills. This situation will continue and will perennially be a problem unless a Government intervene and provide better regulation to give customers a better deal.
Matthew Taylor: I shall come to regulatory issues in a moment, but I must make some progress or I shall run out of time.
My hon. Friend the Member for Falmouth and Camborne (Julia Goldsworthy) secured an Adjournment debate in the main Chamber on 14 November 2005, when she was told that the Government’s approach was to “tackle low incomes generally.” Water bills in the region have continued to rise while we have been tackling serious poverty, particularly in Cornwall, where wages are among the bottom 2 per cent. nationally, and while the gap between Cornish incomes and national incomes has widened since 1997.
The south-west has the highest proportion of pensioners. The Minister shook his head in respect of this issue of
poverty, but will he consider the fact that the average water bill of £483 eats up 7 per cent. of the disposable income of a single pensioner who is in receipt of pension credit? Measures have been designed to tackle the problem, but they have not addressed the scale of the problem of water bills. A national income tax rate of 7 per cent. for water bills would cause an explosion of anger, but that is what many people on low incomes in the south-west face.
Given the time constraints, I want to shift my focus to solutions. I have consistently called for action to remove the disproportionate and unfair burden of unaffordable bills from households in the south-west. This is not just a matter of high profits, so even the toughest regulation would not provide a solution. In the financial year 2005-06, South West Water’s return on capital employed—the equivalent of the interest rate that the company could get by banking the money in a financial institution—was 4.8 per cent. That is a slight reduction on the year before, and the figure is the lowest of any water company in England and Wales. The company also has the lowest costs of borrowing, so while there might be room for manoeuvre at the margin, we are not talking about a solution to the high bills.
The high rates reflect the genuinely high costs of the clean-up, especially the capital costs of the “clean sweep” scheme. In addition, the company now has to pay the costs of the capital invested. We need a mechanism for redistributing the environmental costs more fairly across the country. As the Conservatives faced loss of office, we reached a point when the then Secretary of State for the Environment, the right hon. Member for Suffolk, Coastal (Mr. Gummer), took a proposal to Cabinet for such a funding increase, but it was turned down by his Cabinet colleagues. There is no indication that Labour has changed the view in any way, but I would like to know what the Minister’s position is.
Labour has put in place exactly such a mechanism in relation to bills in Northern Ireland—it has capped the level of those bills—and that is funded by UK taxpayers. It is hard to see why the Government take one view on Northern Ireland but another one on the south-west. They have also introduced a similar mechanism for electricity bill payers in northern Scotland, who would have otherwise faced disproportionately high bills. I do not believe that such help breaks any rule that the Government have seen through; it is more likely that they simply see helping out the south-west as being too expensive.
I do not want to concentrate on what I believe the Government will continue to reject, much as my Liberal Democrat colleagues and I will continue to campaign. I want to examine other options. There is the possibility of extending the benefits system at some level to try to help those on low incomes. The Government should re-examine that because bills have continued to soar.
In addition to lasting solutions such as that, action could be taken on second home owners. Second homes have been switching to using meters, because as they are unoccupied for much of the year, their bills are much lower than average. Yet holiday-home owners are perhaps the greatest beneficiaries of the beach clean-up programme for which they are now avoiding paying. Every second home that switches to using a meter, and cuts its bills in the process, increases bills for everyone else, because South West Water still has to raise the same sums overall. A quarter of Britain’s second home owners—some
58,000 households—are to be found in the south-west. Taking them up to the average levels of payment would not cut overall bills significantly, but doing so could at least create a fund to help with the benefits system and to help those on low incomes to pay those bills.
The Minister may refer to the Government’s pilot affordability scheme, but the Consumer Council for Water points out that it is falling
“far short of what is needed”.
Indeed, it covers only 1,000 out of 600,000 households and is failing to make structural changes.
South West Water is trialling its three-year water care project, which is better news. Customers identified as struggling to pay their bills—those who are not paying or who have contacted the company to say that they cannot pay—are actively contacted. The bailiffs are not simply sent in, nor do warning letters simply come through. The company now actively contacts people to offer advice on their billing and to see whether they could go on to a lower rate or benefit from a water meter. Practical help in installing low-water-use devices is available; the company will pay for people to get things such as low-water-use cistern devices and water-saving shower heads. The company will help people to move to a more comfortable debt repayment scheme and offer a new start on their water bills, rather than having the bailiffs press them for money that they simply do not have.
That is a solution for a tiny number. It is no long-term solution, because people’s bills continue to be high even after much of that action. The Consumer Council for Water, South West Water and DEFRA are examining whether, short of some of the big scale, long-term solution that I would press for, we can at least find systems that reduce the bill for ordinary families and pensioners in the south-west by changing the tariff regime.
I am thinking of the so-called rising block, whereby people would pay an affordable amount for an amount of water that would allow their household to operate on a reasonable basis through the year and would provide essentials, such as washing and toilet functions. The cost would be relatively low, and as people start to use more water, for example for watering the garden, running a swimming pool and so on, they would start to pay higher rates. That is the so-called rising block tariff and I understand that the Minister may have DEFRA’s research on that.
I call for Ministers to give an open door to such a scheme being trialled in the south-west, although I do so with caveats. The first is that the Government would have to share information on household numbers, because we know that larger households with a lot of children need to use greater amounts of water, thus a rising block tariff could hit larger families hard were it done on a simple per-property basis. The second is that the needs of some disabled people who have relatively high levels of water use arising out of their disabilities would have to be recognised.
Finally, we would need to examine the second home issue seriously, because such properties already benefit from the installation of meters and use water for only part of the year. A rising block tariff could give them an even bigger discount as a result, so the systems should apply specifically to occupied households. A consideration of the numbers in full-time residence at a household would catch that particular issue.
To some extent, that matter has been researched, and I believe that the Minister has seen some of the work. Such a scheme would need to be modelled specifically for the south-west. I believe that Members of Parliament who represent the region would co-operate, and that South West Water and the Consumer Council for Water are keen to do so. It would provide a solution and, were we to get on with it, it could be done in time for next year.
Sir Nicholas Winterton (in the Chair): May I just clarify matters relating to interventions? I do this partially with an apology to the hon. Member for Plymouth, Sutton (Linda Gilroy). Strictly speaking, only additional speeches need to get the permission of the person who secured the debate, the Minister and the Chair. Interventions are taken at the discretion of the speaker. May I say to hon. Members that notice, even of an intervention, is helpful? It might help the person who secured the debate and the Minister to deal with the matter; thus the debate will be more constructive. I hope that that proves helpful to hon. Members.
12.50 pm
The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Barry Gardiner): The hon. Member for Truro and St. Austell (Matthew Taylor) has done his constituents a real service by enabling us to debate this issue. I am well aware of the depth of concern in the region.
I pay particular tribute to the untiring efforts of my hon. Friend the Member for Plymouth, Sutton (Linda Gilroy), who recently led a high-level delegation from the National Consumer Council and South West Water to see my hon. Friend the Minister for Climate Change and the Environment. I give his apologies that, as the Minister with primary responsibility for this issue, he is not here today. He is in Copenhagen on ministerial business, but I know that he would have wanted to respond to the points that have been made, and that he will read Hansard with great care.
I also pay tribute to my hon. Friend the Member for Plymouth, Devonport (Alison Seabeck) who, in the relatively short time that she has been in the House, has grasped this extremely complex issue in an outstanding way. She raised with the hon. Member for Truro and St. Austell the issue of private sewerage, and I give her the assurance that she sought that the matter is at the forefront of Ministers’ thinking. The Government have decided in principle to transfer private sewers to the company. We shall consult on the route and timing of that transfer, and take full account of the cost to customers when we do so. Ofwat provided a model of the impact on bills of the decision on private sewerage. That produced a range of different impacts for each company, and that will be clarified and improved as we develop the approach for adopting private sewers.
I hope that that gives both my hon. Friend and the hon. Member for Truro and St. Austell the assurance that they sought. The Government are very much alive to the issue and are looking carefully at the financial impact. We share a common view of the problem and a determination to adopt a constructive approach, although I cannot accept all the hon. Gentleman’s proposals.
South West Water’s customers pay more for their water and sewerage services than customers in other regions. That arose from privatisation, which required
each customer to pay for the costs incurred by their water company. Identifying the problems does not necessarily mean that there are easy solutions, and so far none of the ideas has been a complete solution in the interests of customers.
The hon. Gentleman’s party has put forward a number of ideas for reducing the burden on South West Water’s customers. They have often involved shifting the burden to national taxpayers or water customers in other parts of the country. I wonder how many “Focus” leaflets are being put out in London stating that people in Twickenham should pay more to help out the people of Truro and St. Austell.
Like other companies, water companies must meet their costs, including the costs of running services and of meeting drinking water and environmental standards. Ultimately, all those costs are paid by their customers. Ofwat sets an upper limit on customer prices, but there is a strong and visible link between what the company spends and what customers fund through their bills.
I am not convinced that it would be right to break that link. There is a considerable risk that any national fund to support water companies’ costs from customers throughout the country would weaken the connection between the water company and the customer. There is a question whether companies would pay as much heed to their customers if customers throughout the country met the cost of their plans. There would be a lack of accountability and a weakening of the incentive to individual companies to keep their costs as low as possible. Any such solutions would run counter to the present legislative and regulatory framework. I also doubt that customers in other regions, each with their own problems and costs, would agree that they should shoulder the impact of any redistribution of South West Water’s costs.
The hon. Gentleman brought up the particular point about redistributing the environmental costs throughout the country. Since privatisation, every sewerage company in England has had to meet the same list of legal requirements for sewage treatment, but those legal requirements vary in different parts of the country. The basic requirement everywhere is for secondary treatment of sewage, and there are more stringent standards on top of that in designated sensitive areas. Those areas include designated bathing water, as the hon. Gentleman said, as well as many fresh water sites.
What is necessary to deliver those standards has varied widely and depended on the sewerage company’s starting point at privatisation—what sewerage network and treatment plants they had to start with. The cost of improvements to meet the required standards also depended on the size of the work, and in the south-west the scattered population has resulted in smaller treatment works, many of which do not offer the same economies of scale that other regions are able to enjoy.
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