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18 Mar 2008 : Column 157WH—continued

Miss McIntosh: The WWF, the briefing of which the hon. Gentleman is reading, has obviously been busy preparing for the debate. It is keen on rolling out full metering. I should think that everybody present wants a more sustainable water policy and supply that is more in kilter with demand. So far, he has said nothing about the benefits for his constituents of rolling out metering. Is he minded to turn to that?

Matthew Taylor: I am keen on rolling out metering; that is the short answer. In the South West Water area, 60 per cent. of people are on meters, twice as many as in the rest of the country. The reason is that people want to mitigate high bills, so the incentives are that much stronger. To be fair, in the early days when it was discretionary, we had a much more flexible approach to the installation of meters in our part of the world than in other places, where people faced high charges if they got it wrong and had no opportunity to change. That opportunity now exists. The remaining number consists in part of those who cannot fit water meters—there are quite big issues of practicality in some mansion blocks and so on that have shared water supplies—and those who believe that they benefit from not having one. The implication of what I said about the rising block tariff is that those who use large amounts of water should pay for it unless they have a disability or similar situation that justifies such use.

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On water resources, everyone rightfully expects a continuous supply of clean, safe water to their homes and businesses, and they expect that water, once used, to be cleaned up before being released on to the beaches or the land. Delivering that supply despite the impacts of climate change and ongoing diffuse pollution is a challenge faced by the water industry. There is no doubt that tackling that challenge requires a new way of thinking and a move away from typical high-energy, end-of-pipe and highly chemical and capital-intensive solutions to an approach that uses soft engineering solutions and works with the natural landscape. A radical new approach, if delivered rightly, would give customers better value and lower bills in the long term as well as an infinitely better environment. With the growing impact of climate change, I do not believe that there is an alternative.

That is why I return to the Government’s water strategy, “Future Water”. It is an excellent review of the correctly identified core issues of tackling climate change and diffuse pollution. The strategy rightly acknowledges that if we are to protect our valuable and vulnerable water resources, we need to take a new approach to managing them, and that the European legislation, the water framework directive, pushes us to take such a holistic view of our water resources. People often suggest that such legislation comes from Europe, but the Government signed up to it, so it came from the Government in the first place. There is a clear Government approach.

The Minister for the Environment (Mr. Phil Woolas): The hon. Gentleman is making an interesting and important speech. I should like to confirm for the record that not only was the water framework directive supported by the UK Government, but many of the measures in it were proposed by us. We welcome it. It is an example of why we need a good, joined-up European Union policy.

Matthew Taylor: I agree. Some years ago, when the Conservatives were in office, I took part in similar debates. Towards the end of those, as South West Water bills rocketed out of control and the Conservatives started losing seats, they moaned about European rules until I pointed out that they had issued a press release when the rules were drawn up claiming that the British Government had led the development of those rules, so there was not much for them to moan about. I am glad that the Minister does not blame others—

Mr. Woolas: On this occasion.

Matthew Taylor: That is the right approach. The policy is supported by Government, but also by non-governmental organisations and, at least in theory, by the industry. The change in approach will mean a move away from expensive, energy-intensive, temporary end-of-pipe treatment measures and towards less intrusive catchment management, in which water companies will develop working relationships with landowners, farmers and other stakeholders to prevent the quality of water from being lowered before it enters the water companies’ systems, so that we do not need to tackle issues such as nitrates afterwards.

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Adopting catchment management methodology, if it is delivered effectively, enables water companies to lower their expenditure on end-of-pipe treatment without the risk of compromising water quality or safety. Lower capital investment will then benefit the customer by lowering water bills in the long run. Furthermore, ending the need for end-of-pipe treatments will lower companies’ carbon footprint and increase their environmental sustainability. It is a long-term solution, whereas capital investment needs constant renewal and expenditure.

Page 51 of “Future Water” says:

I could not agree more. Unfortunately—so far, at least—Ofwat could not agree less. That is a fundamental problem, and it is the reason for the debate. Ofwat said in its PR09 consultation:

which is good. However, it went on to say that

and, specifically, that any proposals for expenditure would be considered only if the company owned the land.

Assuming that Ofwat does not want water companies to buy up agricultural land in every catchment and around every river, its fundamental criteria effectively block the very measures that the Government say are necessary, the water framework requires of water companies and many NGOs and water companies themselves accept are necessary. Ofwat is directly contradicting the Government view. That is clearly nonsensical, especially given that such measures are meant to reduce customer bills in the long run. I do not believe that customers in the south-west are saying, “We want a worse environment and higher bills, please,” so why is the water regulator, which is charged with protecting customers’ interests, standing in the way of such measures? The answer is that it has a very narrow, old-fashioned approach to the issues.

The traditional means of dealing with such problems have been expensive, but the alternatives can be cheaper. The water industry estimates that, since 1990, it has spent £1 billion on pesticide removal alone. Projects under way in the water supply areas of Bristol and Wessex Water show that working with farmers can reduce nitrate and pesticide pollution in ground-water. In northern England, upland moors and bogs are being restored over tens of thousands of acres to purify the water before it enters the system. South West Water is planning a number of such catchment management projects in PR09, with the support of organisations across the south-west, including national parks, the Environment Agency, the Royal Society for the Protection of Birds and a broad swathe of environmental organisations, but not, it seems, of Ofwat.

Other countries are doing it. New York state experimented on the relative value between water treatment and forestry and found that the latter provided better treatment at a much lower cost. So why is the regulator here standing in the way? Natural England, which carried
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out work on the subject for the Government, concluded from its study on the options raised by them that agriculture requires regulation changes, advice and incentives. If the water companies are not acting, whose responsibility is it to drive things forward? Who is going to provide the incentive to stakeholders, such as landowners and farmers, to change their practices? If the Government or Ofwat have a better idea, they should tell us.

There is no doubt that if we are successfully to adopt a more catchment-based approach to water resource management, we need to determine the payment mechanism and how to fund it in the long term. Water quality trading is one idea. However, those discussions need to take place now, while the Government and others are setting the agenda for the next five or 20 years. We cannot keep ducking the issue; it is time to make changes. The fundamental premise of any future water charging system should be that water companies can demonstrate to Ofwat that they are proposing the most efficient solution to deliver a specific outcome. It should be irrelevant whether that is a soft engineering solution, such as a wetland to improve water retention and remove pollutants, or a traditional capital intensive project. We should start from a level playing field.

The Government, non-governmental organisations, such as Wildlife and Countryside Link, which covers all the major NGOs, and Natural England all appear, to differing degrees, to agree that such upstream thinking and working with the environment is the way to go. The water framework requires a solution, but so far Ofwat seems to be offering nothing but roadblocks, although it told me at the weekend that it is reviewing its position, which I hope is true. I hope that following this debate and ministerial discussions, Ofwat will change its negative position.

The best reason to favour such schemes is that they are the cheapest way to achieve the required performance, which is entirely consistent with water sector regulatory incentives. To be fair to Ofwat, the PR09 consultation opens that possibility: it produced its 25-year strategic direction statement, to replace the five-year plans, which proved so inadequate; it is encouraging water companies to adopt a longer-term perspective; and it is offering water companies the ability to offer alternative strategies alongside their business plans to show how things could be done differently. The vast majority of water companies have published their SDSs—only a couple are still to come—and they all talk about such holistic approaches. However, it is up to the Government and the regulator to ensure that their words are translated into action.

Most companies, frankly, are paying lip service to the issues and not offering practical solutions, although that is not the case with all of them. I am delighted that for once we can boast about water companies, rather than complain: Wessex Water and Anglian Water are planning catchment solutions. However, they still do not know whether Ofwat will simply block them, and certainly most water companies are not yet committed to such new approaches. We must move beyond platitudes, warm words and ministerial reviews, and actually take action. Publication of the Government’s strategy is helpful and the Ofwat review is the time to take action. Let us change things now before water customers suffer further unnecessary rises in bills and the environment continues to deteriorate.

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10.5 am

Linda Gilroy (Plymouth, Sutton) (Lab/Co-op): I congratulate the hon. Member for Truro and St. Austell (Matthew Taylor) on securing this debate—there probably is no subject of greater interest to constituents in the south-west—and particularly on the way he discussed the long-term solutions and opportunities available at this critical point for dealing with an intractable problem. I welcome the line that the Minister has taken since taking up his post and, in particular, the very thorough and good report, “Future Water”. I agree with the hon. Gentleman on its quality.

The debate has been given momentum, perhaps not by our problems in the south-west, but by the need to consider metering—perhaps mandatory metering—and specific charging tariffs, to which the hon. Gentleman referred, which can provide fairer bills generally and go a long way to protecting vulnerable customers. The move to metering and smart metering—the latter also needs to be on the agenda—is being given momentum by companies facing drought measures. Compulsory metering is being applied to water companies in the south-east owing to water scarcity, and some water companies will be following a full metering programme.

In water company areas other than the south-west, where water scarcity has been a problem for a very long time, that will create issues of affordability, particularly for householders in low rateable value properties. They pay proportionately less for their water now, but will find that their bills increase under metering, although on nothing like the scale faced in the south-west, where bills are £100 more than the average. The hon. Gentleman mentioned that they can be in the region of £500 or £600, but recently I have seen bills for £700 and £800, which are not uncommon in low-income households. I would therefore welcome any action that can be taken.

I shall discuss the metering and charging review and set out three issues that I would like the Minister to take in, or at least focus on. He has set out five goals—for the sake of time, I shall not repeat them all, because I know that other hon. Members want to speak. The first goal is to assess the effectiveness and fairness of charging methods, which is essential, given current trends in water metering and for the reasons set out by the hon. Gentleman. As set out in the second goal, following trials, we must also consider the effectiveness of different types of social and block tariff, paying particular attention to how they can affect vulnerable households. The remaining goals relate to pace of change, universal metering—we have heard how two thirds of people in the south-west are already on meters—and the cost of metering, including smart metering. Our metering policy must also take into account the social cost of carbon emissions, because climate change is, of course, a big issue, and any policy that takes account of it is a winner. We also need to look closely at the cost of different options. On the introduction of any such policy nationwide, the Minister must recognise that, through South West Water, twice as many customers in our region have meters already; otherwise we will yet again be on the losing side. The review will consider whether legislation is needed for charging or metering.

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The current list focuses on tariff types and metering, but it ignores the benefits of improving water efficiency inside the home, which Eaga did so much to explore in the south-west’s affordability pilot. The pilot showed that one can reduce the amount of water used in the home by an average of 11 per cent., as the Department for Environment, Food and Rural Affairs report on it sets out. The saving can make a difference to the bills that vulnerable households receive, and to the water company through reduced energy costs and less stress on water resources. Put another way, if the pilot measures were adopted throughout all homes in London, a further 200,000 homes could be built without any more demand on the water and sewerage resources—another win-win situation.

Julia Goldsworthy: The hon. Lady makes a very important point but does she agree that, although the pilot was important in ensuring that people on low incomes access all the benefits to which they are entitled and use their water efficiently, that alone will not resolve the fundamental structural problem?

Linda Gilroy: I certainly agree with the hon. Lady, and in the other two points I will make, I hope to show the way in which my proposals are a package. If that package cannot solve all the problems, it can certainly make a significant difference to the problems that we have faced for many years.

On the second goal of the review, I welcome the intention to


However, the review must go further. It must consider the different water companies’ effectiveness in ensuring that vulnerable households access the tariffs that are designed to protect them. Without the review of that issue, the best-designed tariffs in the world will prove ineffective at helping the most vulnerable households. To give a sense of the scale of the issue, the Consumer Council for Water recently estimated that, of the 400,000 households thought to be eligible for vulnerable persons regulations—that is a ball park figure—as few as 16,420 are registered to benefit from the tariff. More must be done to increase drastically the proportion of eligible households that benefit from it.

Matthew Taylor: I completely share the hon. Lady’s view on that point, which is why, if we go down the route of the rising block tariff, it is important that information be shared with the water companies so that support can be given as automatically as possible, rather than claimed, as Ofwat says it must be. All the evidence shows that when it must be claimed, the most vulnerable rarely get it.

Linda Gilroy: That is correct, and no doubt adopting a rising block tariff—I shall be brief because the hon. Gentleman has already dealt with it in detail—would reduce the number of households that were eligible for the vulnerable persons regulations. The tariff caps at a certain level people who are on a metered charge. The two measures would work hand-in-hand, but because it will be some years before we see the benefits of any new policy—apart from anything else, it would require the
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even wider introduction of meters—something should be done now to place upon the companies an obligation to increase drastically the uptake of the vulnerable persons regulations. That should be done by setting targets for uptake. I know that there are hon. Members—some probably in this Chamber—who object to targets, but that would be one very good target to introduce.

As the Minister knows, the all-party group on water is conducting an inquiry at this critical time, for all the reasons that the hon. Member for Truro and St. Austell set out. I understand that the Minister will attend the launch of our report on 2 April, and I hope that everybody here today will also attend. During the course of the inquiry, our noble Friend Lord Whitty, who is one of the team, along with the hon. Member for St. Ives (Andrew George) and the former Minister, my right hon. Friend the Member for Scunthorpe (Mr. Morley), asked whether it would be possible

as a performance target in the price review to include

That would be one way of ensuring that more was done.

I also make a plea to set the vulnerable persons regulations cap not at the regional average, which still gives people in the south-west a cap that is £100 higher than the average, but at the national average. Although compulsory metering can bring in tariffs, in the meantime we must do something about the vulnerable persons regulations, and in the long term we must also consider the situation of people who will not be helped by compulsory metering but will still have large bills. After all that is done, we must still examine the benefits system. I urge the Minister to consult Ministers in the Department for Work and Pensions on that issue, so that we do not still have a significant group of people whose problems have not been resolved, even when we have secured long-term solutions to this intractable problem. He must ensure that he talks to his colleagues and that they talk to him about the likely residual problem, so that it can be dealt with.

Overall, the water package enables us to see some light at the end of the tunnel. I know that my hon. Friend the Minister is doing a great deal, that he has studied carefully the links with the programme for energy conservation in homes, and that he is a strong believer in the need to tackle both matters at the same time. That would be very helpful, because far too many of our constituents still pay not just 10 per cent. of their income for water, but 20 per cent., 25 per cent. and even occasionally more than that, for their utility bills, including fuel and water.

10.17 am

Julia Goldsworthy (Falmouth and Camborne) (LD): It is a great pleasure to follow the hon. Member for Plymouth, Sutton (Linda Gilroy). She has done a huge amount of work through her membership of the all-party group on water, as her remarks demonstrate, and she clearly has an in-depth understanding of the issue.

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