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27 Jan 2010 : Column 326WH—continued

4.53 pm

The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Huw Irranca-Davies): I am very pleased to respond to this debate. I congratulate the hon. Member for Torbay (Mr. Sanders) on securing the debate and also on the considered and intelligent way that he made his points on behalf of his constituents and others in the south-west. I am pleased to see several hon. Members who have lobbied me intensively during my time as a Minister in the Department for Environment, Food and Rural Affairs. I am sure they lobbied my predecessors as well. I hope that my progress report today will reassure them.

It is worth pointing out that I responded last year to three separate debates on this issue, all of which were well attended. I could certainly forecast at that point that it would not be long after Anna Walker produced her final report that I would be here once again, and the hon. Gentleman has not disappointed me-quite rightly, too.

Since the last debate in October, we have made a lot of progress on water matters, as the hon. Gentleman said. Ofwat issued its final determinations of water price limits on 26 November, which will reduce bills by an average of £3 and a little more within the south-west. That is good, but it does not solve the underlying issues. Bills in the UK will fall by an average of £3 before inflation between 2010 and 2015. At the same time, critically, provision will also be made for £22 billion in investment.

On 22 December, DEFRA published river basin management plans for 10 river basin districts in England and Wales. The plans set out how we will achieve good water status for each lake, stretch of a river, estuary and coastline. To respond to the hon. Gentleman's understandable comments, several strands of work in the south-west river basin plan are directly relevant to him and his constituents. We are working with South West Water to investigate urban drainage systems to identify and remedy misconnections and other sources of diffuse pollution that are putting the quality of the coastal water at risk. Because planned development in the area will be concentrated around Torbay, future management of urban drainage in the future is an important consideration. We support how the SeaTorbay partnership is working to improve public understanding of and involvement in coastal wildlife and conservation.

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On 19 November, we published the Flood and Water Management Bill. The Bill received Second Reading in the House on 15 December. Last Thursday it completed Committee stage, and Report and Third Reading are provisionally scheduled for 1 February.

Last but by no means least, Anna Walker published her final report on charging for household water and sewerage services on 8 December. It included a package of recommendations to DEFRA Ministers and Welsh Ministers. I am glad that the hon. Gentleman referred to the situation in Wales as well. Welsh constituents are covered not only by Welsh Water/Dwr Cymru but by Severn Trent.

I reiterate my thanks and congratulations to Anna Walker. I think that all Members appreciate the outstanding work that she and her team have done in grappling with a range of complex and incredibly difficult issues, not only in the south-west but nationally, involving the fairness of current charges. Her final recommendations reflect extensive and exhaustive stakeholder engagement, including workshops across England and Wales. Two were held in Plymouth, and I know that some hon. Members attended both the first and second to make their views known. The thoroughness of Anna Walker's work is reflected by a chapter in the report dedicated to the south-west. She recognised, as do we, that there are issues to be resolved.

Julia Goldsworthy: The Minister is absolutely right to say that the Walker report homed in on some of the issues in the south-west that cause the greatest problems for people on low incomes, but is water poverty not a national issue? Should the Government not consider it in the same way as fuel poverty? We would not expect fuel customers in the north-east to be responsible for their own winter fuel payments because it is colder up there. Surely, as a point of principle, we should not expect South West Water customers to pay for the fuel-poor; the burden should be spread nationally.

Huw Irranca-Davies: I will turn to the detail of the Walker recommendations and the possible way forward in a moment. Anna Walker rightly identified that, curiously, the issue in the south-west-she highlighted the causes, to which I will turn in a moment-could well in future be a burden somewhere else in the country. We do not want to replicate the mistakes of the past. If I have time, I will turn in my remarks to what discussions have taken place on the Flood and Water Management Bill in light of that. I will come to the hon. Lady's points in a moment.

Anna Walker concluded that the regulatory regime in England and Wales has served customers well over the last 20 years, but that we now face considerable new challenges across the UK. In particular, demand for water is growing and water supply is already under pressure across the south and east of England. On top of that, we face challenges such as climate change and water affordability.

The final report highlights that water affordability is a real issue for some households across the whole of the UK, but notably in the south-west. It therefore recommended a package of measures for the Government to consider how to help low-income customers. My
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hon. Friend the Member for Plymouth, Sutton (Linda Gilroy) made the comment that there is a package there, which is quite interesting. There are a range of possible solutions that she puts forward as a package.

Anna Walker proposed that the WaterSure tariff should be retained for low-income customers with high essential use for medical reasons, but that bills should be capped at the national or regional average, depending on which is lower. That would be paid for by regional water customers. She also suggested that all metered customers on certain means-tested benefits should be offered a 20 per cent. discount on their bills or, failing that, that a discount should be introduced for low-income households with one or more children.

Let me just add that during the Committee stage of the Flood and Water Management Bill, the issue of social tariffs operated by companies was raised. It was raised across the room by Labour and Liberal Democrat MPs. I agreed to take away and consider whether a new clause should and could be brought forward on Report to enable companies to operate social tariffs. I thought it would be interesting to put that on the table. The Bill is essentially concerned with the implementation of the Pitt recommendations. We are trying to deal with the issue of debt in water companies, which impacts on the wider consumer base, and if we can get it right, we may be able to do something about an enabling power around social tariffs.

Turning to the chapter in Anna's report on the south-west, I have acknowledged repeatedly in debates here and elsewhere that South West Water customers pay more for water and sewerage services than other customers do. This year, the average household bill is around £490, which is 43 per cent. more than the national average. Anna looked closely at why that is the case. She concluded that one of the key reasons that bills in the south-west are relatively high when compared to other parts of the country was, frankly, the poor state of the local sewerage infrastructure at the time of privatisation in 1989. The source of the problem goes back to the birth of privatisation and, I do not hesitate to say it, to the midwives who conceived this particular child. She found that South West Water had an underdeveloped set of assets due to the reliance on sewage disposal at sea, which meant that the region had the smallest regulatory asset base per property of any water and sewerage company at that point in time. That meant that South West Water had to spend a lot of money on infrastructure development to meet national standards, with the result that South West Water went from the company with the smallest regulatory asset base per property to the one with the highest, and here we are.

The cost of investing in the sewerage system in Devon and Cornwall, post privatisation, as the hon. Member for Torbay knows, has been met by the company's customers. Anna Walker identified a number of options that could potentially address that. One option would be a one-off financial adjustment funded by the Government to address the specific circumstances of South West Water at the time of privatisation. A further option that she identified was an annual transfer to the south-west from the Government. Alternatively, she proposed that bills in the South West Water area could be adjusted-either as a one-off, or annually-through contributions by other water customers across the rest of the country.

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In addition to her more general recommendations on affordability, Anna suggested that households in the south-west could be helped by a seasonal tariff that would charge more for water during the summer months. That would take account of the fact that water use in the south-west in the summer is up by one third on the rest of the year. Anna Walker indicated that if water in the summer months was charged at three or four times the normal unit cost, then average residents' bills could be reduced by around £40 to £60 a year. However, I know that there is some concern about seasonal tariffs and their impact on the tourism industry in the south-west. I understand that. Under Anna Walker's proposal, water bills would increase for hotels, guest houses, restaurants and other seasonal businesses during the summer months. That brings us back to the question of what is the fairest way of charging for water.

Let me pose some questions that Anna rightly posed too. First, is it fair for local or national water customers, or the taxpayer, to pick up the tab, given that it is visitors to the south-west in the summer months who make use of peak-period water? Curiously, the analogy is correct. When I went on holiday to the south-west last year, I had north-east MPs say to me, "Whatever you do, you must make sure that you do not replicate the mistakes of the past and have us paying." It is a tricky one. Visitors to the south-west in the summer months during the peak period make use of the water and sewerage services. All I am saying is-I am not proposing this as a solution-that a seasonal tariff may offer the opportunity, as Anna proposed, to provide part of a fairer distribution of costs.

Mr. Sanders: May I focus on a part of the matter that is often overlooked? Visitors already pay a contribution through their accommodation tariff-all hotel accommodation is water-metered. Is it second home owners that we are getting at? I think that the tourism industry, which is still the biggest industry and the largest employer in Devon and Cornwall, would see the seasonal tariff as a stealth tax. I would like to knock that one off the table as soon as possible.

Huw Irranca-Davies: I hear what the hon. Gentleman is saying, and I am certainly not favouring one proposal over another, or even proposing a mix at the moment. As we take the matter forward, it is important that the hon. Gentleman and others, their constituents and the wider consumer representation base have the opportunity to properly wrestle with the recommendations and try to find the right way forward. I know that earlier today we were hopeful of securing, with a delegation led by my hon. Friend the Member for Plymouth, Sutton alongside honourable colleagues, a meeting with the Prime Minister. Unfortunately he has been delayed, as we know, by some other business. However, I understand that the meeting will be rearranged not only to raise the issue with him, but to secure-I am convinced that he will give this-his support for resolving the matter. Anna Walker was only one stage.

Linda Gilroy: The hon. Member for Torbay (Mr. Sanders) asked in his speech whether the Minister would refer the options for the south-west to the regulator. I know that
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the Government have to respond to the whole report and will take time to do that. Will the Minister please comment on that? Hopefully, we will be able to secure the Prime Minister's interest in doing so too.

Huw Irranca-Davies: Yes, I am happy to do so. As I said, things have progressed, and we are not waiting to get on with it. In our response to the final report, I and colleagues in the Welsh Assembly Government said:

it is right that we do so-

Also, in line with the specific recommendations that Anna made for the south-west, I have already asked Ofwat to consider and advise on the options for dealing with bills in the south-west.

Mr. Swire: Will the hon. Gentleman give way?

Huw Irranca-Davies: I am running out of time. Just to conclude that remark, Ofwat will be working with South West Water over the coming months to complete the task.

Mr. Swire: Neither my right hon. Friend the Member for West Dorset (Mr. Letwin) nor I were aware of the delegation to the Prime Minister. We have not been operating in a vacuum; we have been discussing the issue with South West Water and other stakeholders, which may or may not be of interest to people following the general election. Would it not be in order, as it affects all our constituents in the south-west, for the Conservatives to at least be invited to come along to the delegation, or is it a Lib-Lab pact?

Huw Irranca-Davies: Personally, I would have welcomed any representation that the hon. Gentleman and his party wanted to make. I would only point out that in the year and a half that I have been Minister, I have received no delegation, request for a delegation or representations from the hon. Gentleman and his party whatever. However, even at this late stage, I would welcome any requests for a meeting with me to express their views.

In conclusion, we are awaiting Ofwat's advice on Anna Walker's proposals on water charges in the south-west. It is, of course, for Ofwat to consider the practicality and fairness of these proposals ahead of advising Ministers and to decide how much time it needs to complete the task.

5.10 pm

Sitting adjourned without Question put (Standing Order No.10(11)).

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