Memorandum submitted by the Churches'
Legislation Advisory Service (Ofwat 05)
SURFACE WATER DRAINAGE
EXECUTIVE SUMMARY
— The Churches' Legislation Advisory Service
represents the major churches in the United Kingdom on issues
of secular law as they affect their interests.— Churches
(and charities in general) are facing huge rises in the bills
for surface water drainage.— This seems contrary to the
guidance originally issued by the Secretary of State in 2000 subsequent
to the passing of the Water Industry Act 1999.
— The root of the problem is a change of
policy by Ofwat, which insists that water utility companies should
charge all non-domestic customers on the same basis. This has
had the effect of preventing the utility companies from making
any concessions to churches and charities.
— Such a policy is inequitable and needs
to be reversed.
WHO WE
ARE
1. The Churches' Legislation Advisory Service,
formerly the Churches Main Committee, is an ecumenical body that
brings together all the major churches in the United Kingdom (and,
because the umbrella ecumenical bodies are members, many of the
smaller churches as well), together with the United Synagogue.
Our purpose is to represents the major churches in the United
Kingdom on issues of secular law as they affect their interests.
A note of our membership in England and Wales is annexed.
2. We welcome the opportunity to submit evidence
to the Committee's inquiry into Ofwat's Price Review 2009. The
Committee's press notice mentions specifically that one of the
issues included in the inquiry is "affordability of water
services" and it is a particular aspect of this that we wish
to address.
SURFACE WATER
DRAINAGE CHARGES:
THE PROBLEM
3. Traditionally, charities and those who
operated community buildings such as places of worship and village
halls were not charged for disposal of the surface water that
runs into sewers from their buildings at the same rate as privately-owned
or commercial premises, because drainage charges were linked to
rateable value and they were zero rated under the rateable value
system of charging. However, that is changing.
4. After the Water Act 1999 came into force,
Owat issued guidance that "it would be inappropriate to charge
all customers as if they were businesses"; and the water
utilities continued to bill community buildings for drainage services
at lower rates or to exempt them completely.
5. In 2000 the then Secretary of State issued
guidance on matters to be taken into account by Ofwat in agreeing
companies' charging schemes, including charging non-household
users that are not businesses, among which were places of worship,
community facilities, charities and voluntary bodies. The guidance
stated that those making similar demands on a service should be
charged on the same basis; however, it also made clear that where
premises imposed customer-related costs in line with or lower
than those of typical households, those premises should be able
to benefit from tariffs which reflect their small demand on the
water system:
... there are many non-household users who are
not businesses ... including places of worship ... and it would
be inappropriate to charge all non-household customers as if they
were businesses.
In addition, the guidance stated that the utility
companies should consider phasing in any large, sudden changes
in charges.[14]
6. In 2003, Ofwat decided that the existing
exemptions should end, on the grounds that it was unfair to discriminate
between different types of customer. Ofwat has therefore given
the water companies until 2010 to start charging all users for
the disposal of water from their properties through public sewers.
These charges have already been levied by Northumbria Water, Severn
Trent Water, United Utilities and Yorkshire Water.
7. At least one utility company, Severn
Trent, decided to continue treating places of worship as before—only
to be told by Ofwat that this was not possible under the new charging
regime. In July 2008, Severn Trent explained the situation to
the Chairman of the Leicester Diocesan Board of Finance as follows:
In 1990 we changed the way in which we charged
newly-built or substantially-altered non-domestic properties for
surface water drainage. Historically, these charges were levied
based on a property's rateable value; however when new rateable
value assessments were abolished, we had to identify a different
way of levying our charges. Therefore, we changed our surface
water drainage charges so that this service was charged for based
on the total size [sic] area (m2) of a particular property.
Between 1997 and 2000 this basis of charge was
extended to all measured non-household properties which had previously
been charged for surface water drainage based on rateable value.
However, there were three exceptions to this, with one being places
of religious worship. We believed the exceptions were necessary
given the significant adverse financial effects of transferring
these three groups from rateable value to site area based charges.
We decided that places of religious worship should
not be included in the changes because they had/have rateable
values of £0 and as such pay nothing towards the costs of
surface water drainage when they are connected to the sewer. Our
exemptions were agreed with Ofwat.
Although Ofwat originally agreed to our decision
to make limited exclusions from the changes in our surface water
drainage charges, they have now written to us requiring us to
remove the current exemptions, and transfer places of religious
worship to site area based charges. This is because under Condition
E of the Water Licence we must ensure that charges are neither
unduly preferential nor unduly discriminatory towards any class
of customer.[15]
Crucially, the letter also points out that Ofwat
will not approve Severn Trent's Scheme of Charges unless Severn
Trent can demonstrate that it is adhering to Ofwat's policy.
Surface water drainage charges: the impact
8. The new system of charging has two elements.
— The charge for surface water drainage
is based on the area that drains into the sewers, from roofs
and hard-standing such as car-parks. Where the land is permeable
(such as gardens, churchyards or sports fields) no charge is made.
In addition, if the water from the roofs and from any hard-standing
drains into soakaways instead of into the sewers, the charges
do not apply. But it is not always possible to install soakaways,
particularly in urban areas.
— The charge for highway drainage is
allocated between users on the basis (so far as we know) of their
impermeable hard-standing surface area.
9. The result of Ofwat's change of policy
is that charities are facing huge increases in their drainage
charges: the "large, sudden changes" that the Secretary
of State's guidance was intended to avoid. The effects of the
change are felt most keenly by places of worship, by village halls
and other operators of community buildings (such as the Scouts
and the Guides) and by community amateur sports clubs.
10. The impact on individual places of worship
has been enormous. For example:
— St Cuthbert's, Seascale, in the Diocese
of Carlisle, faces an annual increase of 591 per cent over three
years. The charges rise from £34.14 in 2008 to £205.73
in 2009, £364 in 2010 and £543 in 2011.
— St Luke's, North Thornaby, in the Diocese
of York, paid £70 in 2007 under the old system but expects
its bill to rise to about £600: over 750%.
— Heaton Moor United Reformed Church was
told by United Utilities in October 2007 that the new charging
system would come into operation on 1 April 2008 and that it would
be placed in Band 3. The charges are being phased in over three
years; however, the full, unmoderated site area charge for Band
3 is £545.
— One medium-sized Baptist congregation
with a small building was until recently paying less than £100
per annum. The church has now received a bill for 2008-09 for
£2,000 and a further bill for the previous three years for
£5,000.
11. The situation is exacerbated by the
fact that those companies that are implementing this system often
do so merely on the basis of the site boundaries, in spite of
the fact that much of the area may be taken up by a churchyard
for which (because it is permeable) no charge is payable. The
onus of proof is on the customer—which means that, in order
to contest a charge, the church in question may well have to commission
and pay for an independent site survey.
12. It is impossible to estimate the total
cost of the new charging system to faith-communities in England
and Wales;[16]
however, the Church Commissioners estimate that it will cost the
Church of England an additional £15 million. On the basis
that the Church of England has about 16,000 parishes and that
there are some 30,000 places of worship in England and Wales[17]
that do not belong to the Church of England, the likely total
for all faith-communities will almost certainly be something in
excess of £40 million.
The issues
13. There are two interlinked issues: highway
drainage and site drainage.
14. As to the first, operators of community buildings
generally feel that the new method of charging is grossly unfair,
since it takes no account of the amount of traffic generated by
the building in question. It is tolerably clear that a church
or a village hall with a car-park is going to generate massively
less traffic than a supermarket with a car-park of similar size.
If the purpose of the separate highway charge is, at least in
part, to pay for the costs of treating rainwater polluted by vehicular
traffic, then surely the "polluter pays" principle should
apply.
15. As to site run-off, we would make three
points:
— The utility companies have enormous power
over consumers because they are monopoly suppliers. You can live
in Yorkshire and still buy your electricity from Scottish &
Southern—but you can only buy sewerage services from the
local water utility.
— The companies that have begun to implement
Ofwat's preferred charging regime seem to have done so in quite
different ways, with surprising variations across Northern England.
As we have seen, at least one of them—Severn Trent—has
contemplated introducing a lower rate of charging for buildings
operated by charities but has been told by Ofwat that it may not
do so.[18]
The most aggressive of the companies that have implemented the
new system—United Utilities—has now frozen bills for
2009 while it considers the matter further.[19]
— We cannot see why the onus should be
on the customer to prove that part of a site is permeable: the
utility company ought to know this for itself.
16. In a press release dated 6 February,
United Utilities said this:
We are sorry for any inconvenience and confusion
caused during the implementation of the changes to Site Area charging.
We sympathise with those groups who have seen the greatest impact
from the new method of charging. We've listened to their concerns,
and we recognise that in some cases we have miscalculated the
site area of a customer's premises, and we're working to rectify
this.[20]
As well it might. Furthermore, United Utilities
remains
... committed to implementing a fair system of
charging for these services that not only reflects the costs,
but also recognises the impact on some customer groups.
A possible way forward?
17. On charges for highway run-off, our
view, quite simply, is that Ofwat's preferred charging policy
is wrong; it should be replaced by a policy that more fairly reflects
the relative amounts of traffic that are being generated by each
facility in question.
18. Charges for site run-off are more difficult.
We fully understand the importance of making sure that the sewage
system is capable of coping with extreme weather events; nevertheless,
we would argue that charges for water services and drainage cannot
be considered in isolation from the Government's wider policy
agenda.
19. Part of that policy agenda is social
cohesion and community-building; and the provision of places of
worship, village halls, community amateur sports clubs and the
like are all part of that process. We cannot emphasise too strongly
that for some small congregations that are already struggling
with maintenance bills, a massive increase in charges for surface-water
drainage may be the last straw: they will either disband entirely
or simply walk away from the building.
20. In April 2008 the responsible Minister,
Mr Phil Woolas, stated in response to a series of parliamentary
questions from Sir Nicholas Winterton that the water utilities
... are obliged under their licences to ensure
that charges are neither unduly preferential [n]or unduly discriminatory
between groups of customers. Ofwat therefore considers that churches
and other places of worship should be treated no differently to
other non-household customers.[21]
21. However, the position, at least so far
as Defra is concerned, now appears to be changing. In answer to
a supplementary question from Miss Anne McIntosh on 15 January
2009 the responsible Minister, Huw Irranca-Davies, said that
| as part of our examination of what is currently
going on and our undertaking to review how the charges are rolled
out, we will take into consideration the| economic impact on voluntary
sector groups.[22]
22. Most recently, in a letter dated 9 February
to Martin Dales, a member of the General Synod of the Church of
England for the Diocese of York, the Secretary of State for the
Environment, Food and Rural Affairs, made the following statement:
Our view, which we have already expressed to
United Utilities and Ofwat, is that something is clearly very
wrong if faith buildings, community amateur sports clubs and scout
huts are facing hikes in their bills of several hundred per cent,
and where there are massive variations between what is being charged
in different areas, by different companies.
I'm sure you will understand that it is for companies
to prepare their charging schemes and for Ofwat, as the independent
economic regulator of the water industry, to review and approve
them. However, we have made it very clear to United Utilities
and to Ofwat that we believe these increases are not in line with
Defra's charging guidance to Ofwat in 2000 or Ofwat's more detailed
2003 guidance to the water companies. I have taken up these concerns
with the company and with Ofwat.
23. We welcome this apparent change of heart
within Defra. If the Secretary of State's guidance of 2000 regarded
it as "inappropriate to charge all non-household customers
as if they were businesses" in 2000, we cannot understand
why it should be regarded as appropriate to do so now—nor,
evidently, does the current Secretary of State.
CONCLUSION
24. We disagree with Ofwat's basic position
on charging. Simply to charge all non-domestic users on the same
basis has the effect of transferring part of the burden from commercial
organisations—who have the option of passing on their costs
in their prices—to churches and other not-for-profit organisations
that do not have that option. Moreover, while the savings for
commercial organisations are not great, the added burden on small
voluntary organisations can be crippling.
25. We would argue very strongly for a reinstatement
of the old system under which charities and the operators of community
buildings such as places of worship and village halls should not
be liable for surface water drainage charges. In some cases, the
new charges will be the difference between continuing in operation
and closing down. We cannot believe that Ministers would regard
such an outcome as socially desirable.
26. The current charging policy has been
introduced without any serious discussion of its wider public
policy implications, particularly for the voluntary sector. We
hope that the Committee will press Ofwat and Defra very hard on
this issue.
Churches' Legislation Advisory Service
February 2009
14 See HC Deb (2007-08) 9 Oct 2008 c 742W. Back
15
Letter dated 16 July 2008 from Patricia Wells, Customer Liaison
Team, Severn Trent Water to S G Barney, Chairman, Leicester Diocesan
Board of Finance. Back
16
The Committee will be aware that part of mid-Wales is supplied
by Severn Trent rather than by Welsh Water. Back
17
Figures derived from a written answer to the Bishop of Southwell
and Nottingham on registered places of worship: see HL Deb (2008-9)
23 Feb 2009 c WA25. There are currently 29,774 certified places
of meeting for religious worship registered under the Places of
Worship Registration Act 1855. This figure does not include the
16,000 Church of England and 625 Church in Wales parishes because
they are exempt from registration under the Act. Back
18
Severn Trent's Scheme of Charges 2008/09 still included the exemption:
"All non-household properties will pay for this element of
the charge by a banded charge according to their total site area.
The three exemptions to this are schools, hospitals and places
of religious worship. We charge these properties by rateable value"-see
p 5 of the Scheme, available at http://www.stwater.co.uk/upload/pdf/Final_scheme_of_charges.pdf
accessed 7 February 2009. Back
19
The freeze applies to places of religious worship, NHS trusts,
the Scouts and the Guides but does not apply to other buildings
operated by charities or, for example, to premises used by the
Boys' Brigade or the Woodcraft Folk. Back
20
Emphasis added. Back
21
HC Deb (2007- 08) 29 April 2008 c 421W. Back
22
HC Deb (2008-09) 15 Jan 2009 c 329. Back
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