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27 Jan 2010 : Column 319WH—continued

Only two labelling irregularities have been identified so far, and they concerned imports of fresh herbs. The
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packaging showed that the produce originated in the Jordan valley, while the accompanying proof of preferential origin showed that the herbs were produced in a location in the state of Israel.

There is no blanket legal requirement for the place of production to be inserted on all produce or its packaging. In the absence of such a marking, as was the case in a number of the examinations undertaken to date, there is little that Customs can do when the accompanying proof of preferential origin shows that the produce was produced in an Israeli location. Similarly, the department does not have sufficient evidence to the effect that the goods were not produced in Israel where "produce of Israel" has been inserted on the product or its packaging. Most of the products that have been examined to date bore such an origin marking.

With the voluntary labelling guidelines that Revenue and Customs contributed to DEFRA's issuance of its guidelines, we are hopeful that those UK supermarkets that decide to implement the voluntary arrangement will persuade their suppliers to display clearly the place of production on their products or their packaging. That could have a useful knock-on effect in helping Revenue and Customs with its series of targeted physical examinations. In the meantime, we will extend our series of targeted examinations to include peppers, halva and tahini.

We are aware that certain supermarkets may be able to identify the origin of their products from their tracking systems and we would be very happy to utilise those systems, where possible, to refuse claims to preference immediately at the time of importation into the UK. However, when we look at our import declaration database, supermarkets are rarely shown as the importers on the customs declaration. In effect, it would be possible only to utilise a tracking system post-importation of the goods and the checks would have to start at the supermarket end of the chain.

We are prepared to explore with supermarkets the feasibility of using their tracking systems to link particular products that the systems show as originating in the settlements with particular customs import declarations and any claims to preference made on them.

The Revenue and Customs delegate to the European Union's origin committee has advised the European Commission and other member states in the committee's meetings of the UK's actions in respect of monitoring of the EU-Israel agreement, particularly in relation to the series of targeted physical examinations.

Outside of those meetings, Revenue and Customs has asked the Commission to ensure that the Israelis are correctly complying with the requirements of the 2005 technical arrangement by inserting the precise place of production rather than a head office or distribution centre on the proof of preferential origin. We will continue to press this point with the Commission.

We are aware of the Commission's fact-finding missions to Israel and Palestine in 2009 and we have asked the Commission to provide us with reports of those missions as soon as they are available.

My hon. Friend referred to provisions in section 167 of the Customs and Excise Management Act 1979, which enable Revenue and Customs to take action against traders who commit an offence. Under those provisions, we can only take criminal action against the UK importer where there is firm evidence to the effect
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that they knew that the goods originated in a settlement but nevertheless claimed Israeli preference. The provisions do not enable the department to take action against the exporter in Israel who has drawn up a proof of preferential origin containing an incorrect place of production or an incorrect origin declaration.

However, new civil penalty provisions came into force on 24 December 2009, as a result of which Revenue and Customs can issue a financial penalty where an importer persistently claims preference on products that are not entitled to such treatment, which will be in addition to the liability to pay the full rate of customs duty.

Although legal constraints mean that the department has no alternative other than to initiate verification inquiries with the Israeli customs authorities, it is happy to make improvements to its risk assessment and to include further fresh produce in its series of targeted physical examinations. We will also pay further attention to imports of particular products, such as cosmetics, which were mentioned by my hon. Friend. We will explore with supermarkets the possibility and feasibility of using their tracking systems post-importation to identify imports of goods that were not entitled to the preference claimed.

We will continue to work closely with the European Commission and other Departments with the objective of ensuring compliance with the rules in this complex and sensitive area. That will include pressing the Commission to monitor the operation of the 2005 technical arrangement even more closely.

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Water and Sewerage (South-west)

4.39 pm

Mr. Adrian Sanders (Torbay) (LD): I am grateful to have the opportunity of raising this very important issue-

Miss Anne Begg (in the Chair): Order. May I ask the hon. Gentleman to go back to where he was sitting before? He must not speak from the Front Bench even in a half-hour debate.

Mr. Sanders: I just thought it was more comfortable.

Miss Anne Begg (in the Chair): I apologise. You could have sat on the Front Bench, but not where your party's spokesperson would normally sit.

Mr. Sanders: Wherever, this is still an opportunity to raise a vital issue that affects my constituents in Torbay and many other people across the far south-west, and it has done so for more than 20 years.

The high water bills facing South West Water customers have been in place since privatisation and stem from the iniquitous requirement for 3 per cent. of the population to pay for the clean sweep programme for 33 per cent. of the UK's coastline. The average bill for South West Water customers is £490, a staggering £723 for unmetered customers. The next highest average bill is Wessex Water at £412 and the national average is £343.

Ofwat has only recently, since the publication of the interim Anna Walker report, paid some attention to that disparity in water and sewerage charges. South West Water customers with water meters can look forward to a £6 fall in prices by 2015. That is not much, but it is a move in the right direction. Ofwat's action will also be of little help to unmetered customers, whose bills are set to rise by 29 per cent., taking their average up to £935 a year. While many more will move to metered billing, a number will remain who cannot have meters installed, the majority of whom live in blocks of flats. Their bills will increase exponentially, plunging thousands into water poverty. The £6 reduction itself will be little consolation to many of my constituents on low incomes who are struggling to pay the historically high bills. The south-west has some of the lowest incomes in the UK coupled with some of the highest housing costs.

The Walker review of charging for household water and sewerage services is long overdue. It has now published its final report and, rightly, there is an entire section dedicated to the unique problems faced by consumers in the south-west. Chapter 14 begins by reinforcing the underlying inequalities facing the region: the high proportion of pensioners; the large rural area to be covered; the lower disposable incomes and-importantly in terms of water costs-the domination of tourism in the local economy.

A great attraction in the south-west is its coastline; an estimated 18 million people visit the region every year, and research shows that at least 7 million of those visit specifically to go to the seaside. There is, therefore, an important challenge to keep the coastline clean. More crucially, in terms of water bills, the Walker report recognises the low asset base that South West Water started with at the time of privatisation. That has
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improved now that the clean sweep programme has been implemented. The company has the highest capital expenditure by far-over 150 per cent. of the average of the water companies.

Mr. Oliver Letwin (West Dorset) (Con): Will the hon. Gentleman give way?

Mr. Sanders: The usual courtesy is for the Member who initiates the debate to be informed if a Member wishes to intervene, but on this occasion I will give way.

Mr. Letwin: I am very grateful. Does the hon. Gentleman agree that there seems to be a strong case for some kind of spreading of cost, as the Walker report suggests, because the coastline is there for the nation as a whole, including all the tourists he mentioned?

Mr. Sanders: The right hon. Gentleman makes a point that has been made at meeting after meeting by the hon. Member for Plymouth, Sutton (Linda Gilroy), her colleague, the hon. Member for Plymouth, Devonport (Alison Seabeck), and Liberal Democrats. May I finish, because it is an important point. For example, we all contribute to the wonderful museums and galleries here in London that are a national asset-but they are based in London. The same logic should apply to water charges.

Linda Gilroy (Plymouth, Sutton) (Lab/Co-op): The hon. Gentleman referred to chapter 14 of the Walker report. I am sure he understands that the Prime Minister put that in train several years ago following the affordability pilot. However, since the scale of the problem we were lumbered with 20 years ago is so big, does he agree that, equally, the solutions to it will probably come from more than one direction, as outlined in the Walker report?

Mr. Sanders: The hon. Lady is right and I shall cover some of that ground in a moment.

The report rightly states:

Fortunately, Anna Walker has suggested some potential remedies for that injustice. There is a clear financial imbalance in the way the water companies were set up at privatisation. South West Water customers shouldered a disproportionate burden of the programme to clean up our coastline and improve our bathing waters.

It is clear from the report's recommendations that retrospective financial redress is necessary, not least to fund the continuing cost of South West Water's investments. One remedy is a one-off payment, which, as the report states

That would cost approximately £650 million. Another alternative is an annual subsidy to South West Water. Walker estimated a figure of about £33 million a year. There are options on how to fund the subsidy: direct Government funding or a levy of about £1.50 to every household water and sewerage bill in the rest of the country.

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Dan Rogerson (North Cornwall) (LD): My hon. Friend is making an excellent case, and I congratulate him on securing the debate and on all the work that he has done in the past. The scale of the figures that he is talking about shows the size of the investment that bill payers are being asked to make. That is the crucial point. If the Government cannot help with the lump sum because its scale in the current circumstances is so high, that shows what is being asked of ordinary bill payers in the south-west and, indeed, what has been asked of them during the past 20 years since the botched privatisation.

Mr. Sanders: That is certainly one conclusion that we could rightly draw.

On the matter of an annual or lump sum subsidy, while a one-off payment would go some way to redress the balance-as Walker points out, there are strong arguments in favour of a one-off adjustment-it would not completely rectify the long-term problems facing the region. A further subsidy would be necessary in the future, especially if we envisage a time when another widespread series of improvements are necessary. An annual subsidy would resolve that problem for the foreseeable future. However, those solutions throw up a wider problem surrounding fairness. Aside from South West Water, customers in Wales or Wessex are also paying above the average-in their case, £100 more per year than those, say, in the Thames Water area. If we are to adjust for inexcusably high bills in the south-west, why not in Wales or any other area? Would not the logical extension of the argument be that water bills should be equalised throughout the United Kingdom?

Julia Goldsworthy (Falmouth and Camborne) (LD): Referring back to what my hon. Friend said about the need for equalisation, does he agree that it is important that we deal with the problem now as a matter of urgency? In future, there will be a need for considerable investment in other parts of the country, and it might be the case that for other national goods the cost needs to be spread throughout the country. Would it not be a double unfairness for South West Water customers to have to pay for their retrospective costs while also having to help foot the bill for the other bill payers in the country?

Mr. Sanders: We need an answer, and we need it soon.

Of course, privatisation should not have happened to this industry. Water is not something that lends itself easily to competition on the free market. Indeed, all we have is a system of regional monopolies, unlike the other utilities, which have seen rigorous competition and benefits for consumers as a result of their privatisations. In effect, all privatisation has done is to siphon off funds to shareholders that could have been invested in a more effective clean sweep programme.

Mr. Hugo Swire (East Devon) (Con): Will the hon. Gentleman give way?

Mr. Sanders: Other hon. Members asked in advance, but I shall give way.

Mr. Swire: I am extremely grateful. I apologise to the hon. Gentleman for intervening. He is very generous. I totally agree with what he is saying. This is long overdue and most welcome. But would he not concede that historical costs involved pre-privatisation would have
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had to be paid for by the taxpayer anyway, to do with the infrastructure work of South West Water-the Victorian ducts and so forth? Those costs would have had to have been met by the taxpayer in some way, shape or form, regardless of privatisation.

Mr. Sanders: Indeed those costs would have had to have been met, but they would have been equalised out across the whole of the United Kingdom. They would not have just fallen on those in the far south-west.

In my constituency, customers have not only suffered from high water bills, but a reduction in standards for the clean sweep programme. In the early 1990s, South West Water announced a £95 million project to provide a supertunnel for sewage from the three towns in Torbay. Not only would it have stopped any raw sewage entering the sea, it would have had more than enough capacity to deal with the flash flooding that has become more and more common. The Government of the day reduced the environmental standard required of the clean sweep programme, and so the Torbay scheme-effectively the last big capital works programme-was downsized. Consequently, we have a system of combined sewerage overflows that pollute the sea several times a year. For a tourist economy that in no small part relies on the cleanliness of its beaches and water, it is simply not good enough. Torbay can still boast more blue flag beaches than any other UK seaside resort. If the previous Government had not reduced the environmental standard, we would now be able to market Torbay as an area where every beach is a blue flag beach.

Even more worrying is the flooding that has become a common occurrence in parts of Torbay. The residents of Station lane in Paignton, for example, have suffered frequently as a direct result of the scaled-down clean sweep scheme. I ask the Minister to take separate and urgent action to bring a more satisfactory solution to solve the long-running sores of flooding and sewerage outfalls in my constituency.

Returning to the Walker report, there are recommendations, on which I hope the Minster will comment, that would be of benefit to consumers across the United Kingdom. Chapter 11 focuses on water affordability. The recommendations would help many vulnerable and low-income residents in my constituency: a 20 per cent. discount for those in receipt of tax credits and other benefits; a discounted tariff for low-income families with children; and reforms to the WaterSure scheme. All those will help. There is also scope for targeted water efficiency work interlocking with Warm Front and the decent homes initiatives. Walker recommends focusing these efforts on high water cost areas-the south-west, in particular. For the south-west there is the further suggestion of a seasonal tariff to take into account the population swell and increased water demand during the peak tourist season. Such a scheme is currently being piloted by Wessex Water, but this one focuses more on environmental than affordability criteria. The practicality of such a scheme across the far south-west, with en masse meter readings, is very doubtful. The potential solutions are not, unfortunately, quite as straightforward as they sound.

There will be a great deal of groundwork to be undertaken by Ofwat. For the overall system of redressing the financial balance, there will be, as Walker points out, a range of legal, technical, financial and economic
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issues. They will need to be contemplated, and financial corrections will need to avoid distorting markets and state aid considerations. Ofwat is best placed to advise Government on how to progress this, and I urge the Minister to instruct Ofwat to waste no time in looking into these matters.

There are difficulties with all the proposals, but the one with the most resonance and the most practicality is an annual levy on other water company areas to address the low customer base in the south-west. It would avoid state aid issues and appears the fairest option to pursue. I hope also that the Minister has had sufficient time to consider the report carefully, as he indicated he would in a parliamentary answer to me earlier this month.

The people of the south-west have suffered from the burden of high water bills for more than 20 years, and I hope that the Minister will give an indication today that such an injustice can finally be put to an end.

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