Examination of Witnesses (Questions 60
- 70)
WEDNESDAY 20 MAY 2009
MS ANNA
WALKER AND
MRS SUE
ELLIS
Q60 David Lepper: My constituency
in Brighton is very like that, with lots of multi-occupied, privately
rented, lots of student households changing every year, or maybe
more frequently.
Ms Walker: Yes.
Q61 David Lepper: Is it possible
for the landlord to incorporate the water charge in the rent with
other services? Does that happen very often? Is it legally possible?
I ask because of what you have said about the bill having to go
to the occupier.
Ms Walker: I am not aware of there
being any legal problem with doing that and, indeed, in some cases
where, for example, it is a multi-occupancy building and the water
charges have to be shared, that actually does happen. Interestingly,
as you raise this issue, Welsh ministers have expressed real concern
to us about social housing incorporating water bills in charges,
but then, when the tenant cannot pay, actually they lose their
water as well as potentially where they are living.
Q62 David Lepper: So there are problems.
Ms Walker: There are some real
issues. Actually that is disconnection in its own way. We do think
that the help that companies need anyway is somehow that they
can pin the bill, and there are models from council tax, and,
secondly, a flow of information on those who are likely to be
"cannot pays".
Q63 Chairman: I am going to move
on in a second to surface area water charges, but just before
we get there, on page 15 of your Call for Evidence you helpfully
provide a break-down of average bills, and you separate out the
water from the sewerage charge. Most of our questions have concentrated
on the water-in side of the business, but, looking forward, a
number of environmental, surface drainage and other flooding associated
issues would suggest that it is the sewage water services side
of water companies future investment and, therefore, charging
that is going to be the predominant driver for the foreseeable
future, certainly PRO9 and beyond. What are you going to be saying
about the efficiency and the way in which companies deal with
that side of their responsibilities: because it is relatively
straightforward to focus on things like water metering—that
is a highly specific debate—but in terms of improving the
efficiency of the delivery of the other side, the predominant
side, the bill, it is more difficult. What are you going to be
saying on that?
Ms Walker: The other side of the
bill, the sewerage side of the bill, the bit that is not clean
water, has actually got three services involved: sewerage, surface
water drainage and highways drainage. We do have a lot to say
on these three. We believe that there is a relationship between
clean water and foul water, sewerage, because there is a relationship
in terms of the volume used. So we can see why metering, or the
same basis of charging, would be appropriate. On surface water
drainage and highways drainage, we have absolutely recognised
that there is a big issue as a result of climate change and how
is the system going to deal with those peak storm waters, some
of which are actually very local, of course. One of the fairness
principles that emerged from the debate that we had nationally
on that is a very strong view that it is important that the polluter
pays as far as is possible, because it is, on the whole, the polluter
who has got the ability to make a difference. With surface water
drainage there are issues, as we were talking about before, over
how tenable is it to actually measure the surface area drainage
of each property. In the short run we do not think that is going
to be immediately viable, but the report will enjoin Ofwat and
the companies to think how they could develop a system which actually
would reward those with sustainable drainage systems, and there
really are things that those with surface drainage could do to
ensure that less water enters the network. On highways drainage,
95, 97.5%, something like that, of highways drainage actually
is the responsibility of local authorities. I had not realised
what a small percentage of our road network belongs to the Highways
Agency, and it is the major road network. So most of it is the
responsibility of local authorities. Local authorities are also,
as a result of the Pitt Report, the responsible authorities for
sustainable drainage. We do think that some way should be found
of incentivising highways authorities, i.e. local authorities,
to think more clearly about sustainable drainage as part of the
road network. That actually would require, to really make that
happen, I think, a shift in about £700 million a year, which
is currently paid for by the water customer. What the research
shows is the water customer does not know they are paying for
it and they certainly cannot do anything to make a difference
there. There is a real issue here, though, because of this question
of new burdens on council tax and council tax payers and the Government
agreement that, if there is to be a new burden, then that will
be financed. What our report will seek to highlight, though, is
the importance of putting responsibility where somebody could
make a difference and, secondly, if there was to be a shift, it
would not actually be a new burden, it would be a shift from a
water customer to a council tax payer, so, one way or another,
the local authority would get the money back.
Q64 Chairman: Just to conclude this
area of questioning, if we look at what I call the externalities,
dealing with surface water flooding through extreme weather events
is no fault of anybody's, it is a challenge for a number of statutory
bodies?
Ms Walker: Yes.
Q65 Chairman: The response to external
pressure through European legislation on water quality, sewage
and environmental matters is a matter which is visited upon a
nation state and which then has to be farmed out in some way,
and sometimes the bills are extremely big and sometimes the policies
are not always thought through with precision. Have you reached
a view as to whether, under these kind of what I call more extreme
circumstances, there is any role for central funding to try and
smooth out the effects that, for example, were visited years ago
on West Country water users by the advent of the Bathing Waters
Directive, which, effectively, had a disproportionate effect on
a part of the world which, in population terms, was sparse?
Ms Walker: We do, in the report,
raise this question of whether environmental improvements, as
we call them, are public goods and, therefore, should be paid
for by all rather than by the few. Even then there is a choice,
because the all could be either the taxpayer or water customers
as a whole, and, of course, there are precedents in energy. Renewable
energy, a large proportion of it, is paid for by energy customers
rather than by the taxpayer. So we do actually raise that issue.
There are some arguments against as well, but we definitely raise
that issue, and in that part of the report looking at those issues,
as I said earlier, we will particularly highlight, whatever the
decision is on that, how crucially important it is to have much
greater transparency than we currently do about those costs that
are being incurred, because some of them can actually be debated
before they are incurred, they cannot be after they have been
incurred, and certainly the timescale over which any improvements
are implemented is a choice.
Q66 Chairman: Let us move on, finally,
in this part of our questioning to the surface area water charges.
I know Mr Drew is champing at the bit. We want to ask a question
or two about surface area water charges, because ministers have
given the impression that behind the scenes conversations have
been going on with Ofwat to try and take away the difficulties
which many of us, including myself in the north-west of England,
have found by the somewhat brutal way in which, in this case,
United Utilities chose to introduce this method, whereas other
water companies have found a way which has been softer, more compliant,
more negotiable, more aware of the impact that it was having on
certain types of organisation, like churches, sports clubs, scouts
organisations, to recognise that somebody has had very little
room for financial manoeuvring (and we were talking about cross-charging
earlier on) and recognising there was a problem when the charging
system had to be rationalised, and some companies took a darn
site better view of what the customer's position was than others
who just went in and then had to try and diplomatically retreat
from the battle-field under an absolute shower of abuse for the
way that they had done it. So are you going to be contributing
to developing a lasting solution to this problem and, if so, what
should it be, taking into account that, if you are a large-scale
industrial user with a lot of square meterage for water to drain
off, the chances are you might be able economically to do something
about the problem, but if you are a church, a scout group, or
another form of charitable enterprise, you cannot. We have had
examples. St Lukes, North Thornaby: previous charge £70,
new annual charge £600, Penrith Rugby Football Club went
from £671.42 to £4,105.18, the Halton Scout Group went
from £37.80 to £198, and one could go on. There is a
litany of misery caused by this. Have you come to a conclusion
on this?
Ms Walker: The first point I would
make is the debate which is currently going on—and I know
how intense it is and, indeed, we have discussed the issues with
United Utilities—is all about non-household charging.
Q67 Chairman: Indeed. I did not quote
one household charge in that respect.
Ms Walker: But there clearly are
issues, at least in due course, over household charging. What
I would say on this is that there must be a first question, which
is, given the issues that the country is facing over surface water
drainage, is it the right thing to move towards seeking to ensure
that charges reflect ownership of areas of surface more accurately
than they currently do? One thing I did not mention earlier which
I perhaps should have and is relevant to this discussion, one
of the things our report will show, is how widely different household
charging costs are for highways drainage, surface water drainage
and sewerage. We wonder how related any of that is to cost at
the moment. A good charging system ought to relate to cost in
some way, but then, I think, a second thing a good charging system
ought to do is to incentivise improvements. If our issue actually
is can we deal with surface water drainage so that it does not
create a peak problem within our sewerage network, which is a
problem that we have got with climate change, then the charging
system needs to incentivise the church, or the scout hut, or whatever
it is, to potentially make a difference, because there are options
for somewhere like that to put more permeable surfaces in. The
third point I would make (and it is really relevant to the work
that we are doing, and I think Sue and I, who actually had the
meeting with United Utilities about this, were very struck) is
it goes to show that, with any charging system that there is,
if you want to move it on, which periodically there is no choice
but to do, you have to think about who are going to be winners
and losers and actually to have a proper explanation of what is
happening and a clear transition period from one to the other.
Q68 Chairman: You just said something
quite profound. You said there ought to be a relationship between
charging and cost. One might deduce from that that Ofwat have
not actually been making that connection in their price determination,
because there is almost a hint of arbitrariness in the way that
charges are actually levied. Is that a fair assumption from what
you have just said?
Ms Walker: Our report will have
in it a table, and, indeed, we would be happy to share it with
you sooner, if you like, which will show the level of discrepancy
between different companies as a result of which we are asking—we
do not have the information—how cost-based is this at the
moment? We believe it needs further looking at.
Q69 Chairman: Having had a distinguished
public sector career, you will understand in the old days of the
public expenditure rounds how people used to say, "Jolly
good. Here is our baseline. We will put in for a percentage on
the baseline", so that, if you had any little back pockets
of money, you knew that any percentage change was going to come
on top of your back pocket money, but then we got to fundamental
expenditure reviews and zero-based budgeting, which meant winding
the clock back. Do you think water companies should be subject
to the same scrutiny by the regulator to properly sort out the
basis upon which the charging regime has been made: because it
strikes me that we spend a lot of time arguing about the percentage
of increase in bills but never the percentage upon what?
Ms Walker: We do think that some
further questions need to be asked. We definitely think that,
and the report makes that clear, and, indeed, we have already
had a discussion with Ofwat over that. Actually what may emerge
is that it is quite difficult to identify the different costs
of water which is going through the same network. You ought to
be able to identify it for foul sewerage, because it is actually
related to the amount of water used in a household, but this question
of what is highways drainage and surface drainage may be much
more difficult to look at. However, given the problems that we
have got with the network going forward, we think it is an area
that does need to be looked at. I feel that quite a lot of some
of these water sector charges have been hidden areas and, both
because there is the potential for prices to rise in the future
and because of the effects of climate change, we have now got
to shed a light and look at them in greater depth.
Chairman: David, is there anything you
want to take up on that?
Q70 Mr Drew: There is. We thought
in the Severn Trent area we had a reasonable compromise that Severn
Trent notionally charged but were able to offer discounts to those
users who were within the eligibility criteria, provided they
asked for such a discount. There was an issue about how they knew
to ask for a discount, but we thought this was working quite well.
To be honest, United Utilities just blew a hole through this,
and we were, in my part of the world, very angry, because it opened
up a can of worms which was much better buried somewhere under
the surface waiting until there was an appropriate way of handling
it which was fair, which was reasonable, but also which actually
took the wider customer base into the confidence of why these
groups were not being charged full cost recovery apart from United
Utilities, who thought they should be paying full cost recovery.
Ms Walker: I absolutely I understand
those points, and it is very marked that the issues, as I have
understood it, have grouped around the United Utilities area.
There have been moves within other water companies for this charging,
but it has not led to as much controversy.
Chairman: We will now move on to a different
subject.
|
