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5 pm
I want briefly to touch on new clauses 16 and 17, tabled by my hon. Friend the Member for Stroud (Mr. Drew). The Minister's comments on the skills issue were very welcome. Notwithstanding the contribution that Unison has made to putting this on the agenda, he and I met some GMB shop stewards in a meeting that was lively for both of us. I was there in my role as chair of the all-party group on water. We were challenged to do things that I do not think we would begin to consider, such as addressing the skills issue by renationalising the water industry.
One had to have considerable sympathy with the views that the shop stewards expressed. They were worried about the pressures arising from what is broadly seen as a pretty tough settlement in PR09. They were also very worried about the investment in skills, development and the work force when everything else gives, in some companies more than others. I welcome what the Minister said and his assurances that that issue was on his agenda and that he was talking to the Minister for Further Education, Skills, Apprenticeships and Consumer Affairs. However, although I am hopeful that we can better align these issues, as has been done in the energy industry-I have seen some very good work done along these lines-if that does not happen the early advent of another water Bill will keep the minds of people who are in charge of the water undertakings focused on
getting a move on. Otherwise, some of us will hope to be in a position to bring forward some further thinking along the lines set out by my hon. Friend the Member for Stroud in new clause 16.
As my hon. Friend said in his remarks on new clause 17, innovation is important in addressing some of the drought problems confronting the industry-not, perhaps, in the part of the country that I come from, but in some of the more eastern parts of the country. On show in a reception in the House of Commons were some of the proposals that are coming forward. They require quite a lot of investment and certainty for a number of years ahead.
My hon. Friend made points about the length of time involved and the periodic price review period, as well as about the way that that militates against such decisions being taken in a sensible way. In the all-party water group we have debated the impact of the welcome 25-year water management plans and the strategic statements that are now made, but we almost need more than that. There has been quite a lot of discussion inside and outside this place about whether we need perhaps to review the length of the price review period, which is five years, and about whether that is long enough. It has the perverse sort of outcomes that were outlined by my hon. Friend in his introduction of new clause 17. There would certainly have to be protections for consumers on pricing, but if we can get more sensible, value-for-money, long-term decisions in the investment procedure, that will pay dividends for consumers, too. It gives the water undertakings greater capacity to make sensible, value-for-money decisions. My hon. Friend described that as "levelling out."
In conclusion, we might want to return to new clause 17 in a future Bill, if note is not taken of it through the methods outlined by the Minister in his introductory speech. I greatly welcome new clause 22, and will certainly support the Government on it.
Nia Griffith (Llanelli) (Lab): I rise to speak in support of Government new clause 22, which will enable water companies to operate social tariffs with the aim of reducing charges for individuals who would find it difficult to pay in full. It will make it clear once and for all, beyond any doubt, that Ofwat will have such powers. We are familiar with this concept from the similar system of having reduced council tax charges for low-income households. Hon. Members will also remember that in pre-meter days, water rates were strongly linked to household rates, so we understand the concept that, in an unequal society, this is one way of helping those on the lowest incomes to receive commodities such as water. Likewise, there are measures in the Energy Bill to tackle fuel poverty.
I am very pleased that the Minister has been willing to listen to Members on this issue and to put this measure into the Bill. I know that things have been rather rushed and were done only just in time-after the Walker review came out, there were concerns as to whether the measure could be fitted in-but it is important to pass the measure, which mirrors measures in the Energy Bill and is similar to something that we already do with council tax.
The new clause states that the Minister "must issue guidance" that includes the
"factors to be taken into account"
when water companies draw up such schemes. The guidance will then go to Ofwat. I understand that for Wales, Welsh Assembly Government Ministers will draw up the guidance that Ofwat will use when dealing with water companies that operate wholly or mainly in Wales, such as Dwr Cymru, Welsh Water. Will the Minister confirm that that is the case? I would like to ask a further question on that. We know that Dwr Cymru is extremely proud of the fact that, this year, it managed to give back to every household a dividend of about £21. That was quite controversial because many households did not really notice the difference. The poorest households noticed because that is an enormous amount to them, but the most well-off households did not necessarily particularly notice it. There has been considerable criticism that the money could have been invested in improving the sewerage system in places such as Llanelli, or in working towards the adoption of sewers with which there have been major difficulties in the past for local communities who have had to pay continually for repairs. This issue is controversial, and I would like the Minister to tell us whether the guidance from Welsh Assembly Government Ministers to Ofwat could include guidance on how to deal with dividends, or whether this issue can be decided only in advance in relation to charges. That would be of interest to the water rate payers of Wales. I look forward to the Minister's clarification of this issue. I strongly support the principle behind the new clause, and I very much look forward to its operation.
Huw Irranca-Davies: The debate has kicked us off very well indeed. As I expected, there has been a good debate on this part of the Bill. I shall try to deal in detail, but fairly rapidly, with some of the points that have been raised. I can give all hon. Members the assurances that they seek, including the right hon. Member for Wokingham (Mr. Redwood), who made a valid point about rushing ahead and whether we are pre-empting what might be the ideal. I think that I can give him the assurance he requires. I acknowledge that, as the hon. Member for Vale of York (Miss McIntosh) has commented, the measures on social tariffs have come late in the day, and I shall explain why. I hope that I can persuade her to join us on this matter and approach it in the same spirit that we have dealt with the rest of the Bill, because we have an opportunity here.
Let me deal first with the question of why now. The hon. Member for Cheltenham (Martin Horwood) talked about putting matters beyond doubt legally. That is the purpose of the measure, but this issue was specifically raised by Ofwat and others in our evidence sessions. In response to Committee members, they said that the impediment to moving on this matter was lack of clarity in the law. We knew that there was huge support for this approach in Committee, and my hon. Friend the Member for Stroud (Mr. Drew) was right to say that I am a listening Minister. It has been a struggle to bring forward a proposal in time, but I pay tribute to my Bill team, who worked very hard. They spoke to stakeholders outside the House to try to get this right, and I think that we have something good.
I do not want to legislate for the sake of it, but I believe that our proposals are broadly welcomed. To pick up the remarks from several hon. Members, including Labour Members, I should like to bring forward legislation rapidly when we return after the general election, if I am in a position to do so, and we have an opportunity in this debate to achieve a consensus on the matter.
Why are we including provisions on social tariffs and bad debts, and not other Walker review recommendations? The review was tasked with looking at a number of wide-ranging and complex issues, which meant that it was published later than we initially hoped. We are amending the Bill to include provisions to tackle bad debt and, because of concerns raised on Second Reading, we have also introduced this provision on social tariffs.
The social tariff measure was a firm recommendation in Anna Walker's interim report, and her final report said that it should be a priority. This is a timely opportunity to include it because, as has been noted, we need to act soon to help customers who are already facing real hardship. However, other recommendations in Anna Walker's report, and the Cave report that I mentioned previously, require a lot of further consideration. I assure the House that we will consult fully on them. Although it is still the Government's intention to bring forward any new legislation that is needed, I should point out that not all the recommendations in Anna Walker's report require legislation.
In response to the question about businesses, I want to make it clear that the present wording is quite deliberate. We have been working very hard and burning the midnight oil to get it right. As I have made clear, part of the mechanism is that water companies will consult their customer bases before any scheme is implemented. That consultation will have to cover the acceptability of any cross-subsidies, as our guidance will make clear. We will, of course, consult properly on that guidance in the first place.
The right hon. Member for Wokingham quite rightly had reservations about whether this provision should be brought forward now, but it is framed in such a way that it does not pre-empt Anna Walker, or the detail inherent in a proper consultation exercise. I am sure that he would support the idea that we should consult not only those who might benefit, but people who might be asked to carry the burden.
The Consumer Council for Water made its concerns clear, and we framed our approach accordingly. We are not setting out specific proposals now, but ensuring that we have the power to consult and bring in such proposals at an appropriate time.
Linda Gilroy: Will the Government take note of the work done by CC Water, in the context of the water review, to assess the extent to which people will tolerate some form of cross-subsidy?
Huw Irranca-Davies: I assure my hon. Friend that we will take that work into account. The council has done a very good sensitivity analysis of the extent to which people are willing to bear some sort of burden.
There is one matter that I want to knock on the head. We had a very good debate in Westminster Hall the other day, when we discussed possibilities for dealing with the legacy issues in the south-west that arise from the original privatisation of the water companies. I said that the idea of a seasonal tariff was one of about six, seven or a dozen options, but it is not for me as a Minister to say that is the only one that we should take up. In fact, Anna Walker made it clear that a package of measures might need to be brought forward.
Contrary to speculation in the Western Morning News and other newspapers, I am not advocating any particular approach. We need a proper consultation with the wide consumer base before any measure is brought forward. No stealth tax is being imposed, and the fact that we are having this debate in full public view on the Floor of the House shows our desire to get the balance right.
5.15 pm
A few Members mentioned the Ofwat review, so let me reiterate what I said, because many of the proposed changes before us relate to Ofwat's remit. We absolutely acknowledge that we need to take a fundamental look at its remit so that it is fit to meet what are quite changed circumstances from those when privatisation occurred. We need to do so in recognition of the fact that the review must feature not only the proposed changes before us, but other contemporary and long-term issues. That is the appropriate way to undertake such work. Ofwat will do its own post-match review following PR09, but we need to engage not only with the regulator, but with wider stakeholders on a review of how we meet climate change and sustainability objectives. The right hon. Member for Wokingham was right to say that the proposed changes are well intentioned, and the definition of sustainable water management should indeed be part of that review.
Mr. Redwood: I am very grateful to the Minister for being so helpful, but will he answer my query? Does the law as it stands place a duty on a water authority to deal with foul water that escapes and causes problems, or do we need to strengthen the law?
Huw Irranca-Davies: I shall return to that issue in a moment. I believe that such powers exist-not in this Bill, but under existing water industry legislation. However, I shall seek some inspiration to recall the exact Act.
I hope that the hon. Member for Cheltenham will accept my assurance that we are seriously minded to undertake an all-encompassing review of Ofwat. Rather than try to include or identify in the Bill some of the issues that might be needed on Ofwat, however, we should do such work properly, in the round, and look at how we meet all the different challenges.
Martin Horwood: The explicit assurance that I and the Scout Association were looking for, however, was on the exercise of the remit in respect of the concessionary charges scheme. We want an assurance that Ofwat will clearly see that it is responsible for ensuring that the scheme is fairly applied to community groups.
Huw Irranca-Davies: The hon. Gentleman gives me the opportunity to put on record how we see the proposals working. Ofwat would be responsible for scrutinising and approving all charges schemes, and for ensuring that schemes complied with its price limits, were not unduly preferential or discriminatory, had regard to Government guidance, and protected customers. The proposals would make it clear in law that companies could bring forward concessionary schemes for community groups in their charges schemes, and Government guidance to companies would set out how we think those concessionary schemes would work. In approving the charges schemes, Ofwat would ensure that companies had regard to that guidance, and we would not expect Ofwat to approve a charges scheme that did not follow that guidance.
It is not for the Government to tell individual companies how to structure their scheme for charges. Severn Trent is working very well, because it has come up with a scheme that responds to its local, wide-ranging customer base. If a Minister did that work, they would create not least some market uncertainty, which could ultimately push up prices. Severn Trent has run a successful concessionary scheme. Yorkshire Water has also already set fair and affordable area-based surface water drainage charges for its non-domestic customers, so in such cases it might not be necessary to introduce concessionary schemes. However, if companies are allowed such flexibility, they will be able to reflect the circumstances in their area.
Let me make it clear that we will expect all companies that move to area-based charges, of which there are currently only four, to assess whether a concessionary scheme is necessary for their customers, and to ensure that community groups do not face unaffordable surface water drainage charges. Government guidance will make that clear, and I am sure that the hon. Gentleman will provide some input.
Companies will decide which community groups are included in their concessionary schemes, although we have published draft guidance; the Government will provide guidance on the types of organisation that should benefit, and examples of best practice. I think that we got it right with the draft guidance that we supplied to the Public Bill Committee on its opening day on 7 January. The Chairman referred to the package of documents on the desk in the Committee Room. We expect companies to decide to which groups to grant the concession by assessing the benefit to the community, consulting their customers and undertaking an impact assessment. That will ensure that all such schemes are fair for all customers. The absolute assurance is that concessionary schemes will not be brought forward where there are issues of unaffordability for community groups, scouts, churches and so on.
Martin Horwood: I hope that the House will forgive my pressing this point. In fact, just for once, it is not the ministerial guidance that we, and the Scout Association, are worried about. The concern is whether Ofwat's remit will still conflict with this issue, and about the fact that Ofwat is not mentioned in the new clause. As long as the Minister can give the assurance that Ofwat will see it as its role to support the implementation of these schemes, we can all relax and attend our scout events.
Huw Irranca-Davies: The answer is a straightforward yes.
I was pleased to have a very productive meeting with my hon. Friend the Member for Stroud and members from Unison. I also met friends from the GMB with my hon. Friend the Member for Plymouth, Sutton (Linda Gilroy) and led a delegation with my right hon. Friend the Member for Makerfield (Mr. McCartney). We dealt with issues to do with skills within the utility sector and throughout the water sector.
One of the problems with the water sector is that it is fragmented in comparison with the energy sector, for example, so there is a good role for somebody in bringing people together. That is why I want to seek a meeting with my hon. Friend the Minister for Further Education,
Skills, Apprenticeships and Consumer Affairs to talk about how we can lend our weight to trying to get an all-encompassing approach, right down the supply chain and across the industry, so that companies do not have to struggle with a more piecemeal and short-term approach to skills development. EU Skills has been working with members of Water UK to develop a detailed and comprehensive work force planning tool. The key skills issue for the sector is the ageing work force; 11 per cent. are due to retire in the current regulated period, and increasing numbers in subsequent regulatory periods. We all have a role to play, and I will certainly play mine.
My hon. Friend the Member for Stroud talked about the price review and about trying to flatten out some of the decisions on investment and, linked to that, skills and training. For the first time ever, we have the five-year PR09 in the context of a 25-year strategic direction statement to consider the long term as well. DEFRA and Treasury Ministers have encouraged companies to bring forward their expenditure early in the PR09 process, where that is in the interests of customers, in order to flatten out the traditional wave shape that we have sometimes seen. Let us not forget that PR09 allows for more than £22 billion of expenditure to 2015; that is good for jobs and leads to a need for skilled workers.
In his introductory remarks, the right hon. Member for Wokingham expressed support for competition in the water industry to drive prices down. Many issues arise in a purely competitive approach. First, we are in a devolved situation. The right hon. Gentleman is a former Wales Office Minister, as I am, and he will know that Welsh Assembly Government Ministers have a key role to play, as does Welsh Water-Dwr Cymru-which has a somewhat different structure from other such companies. Although it is not without flaw, it is generally perceived in Wales to be a good model of a mutual approach towards water utility provision.
The right hon. Gentleman also talked about the transfer of water. That is not an unfeasible engineering solution, but we need to take into account the carbon impact if long distances are involved. As he rightly said, sustainable water management, among other things, might well be a good idea, but let us do it within the review of the full role of Ofwat.
To pick up the right hon. Gentleman's earlier point, I have had inspiration on where provision already exists on undertakers. Section 94 of the Water Industry Act 1991 requires undertakers to drain their areas appropriately, and Ofwat is required to ensure that they are able to fulfil those functions. There is also public health legislation and nuisance legislation, both of which would be relevant to powers to prevent and redress instances of local foul sewage pollution. Having been on the receiving end of overflowing sewers, as I said in Committee, I have a great deal of sympathy with that issue.
I turn to the comments of my hon. Friend the Member for Plymouth, Sutton. First, I welcome her work and that of other hon. Members in lobbying on the whole range of issues raised by Cave and Walker, in the south-west and more broadly. I hope that an additional Bill can be brought forward very soon, but we need to take this opportunity to act as well. We have made it clear that we will consult fully on Walker, but we have also already asked Ofwat to examine the recommendations in the report, not least in relation to the south-west, and to advise Ministers accordingly.
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