7.17 pm

Stephen Gilbert (St Austell and Newquay) (LD): It may please you, Madam Deputy Speaker, and the rest of the House to know that I do not intend to take 10 minutes for my remarks, let alone an extended period of time. Other colleagues will, I hope, be able to get in and make valid points on this important Bill.

I begin by continuing a theme established by the hon. Member for Arfon (Hywel Williams)—extending competition. He was talking, of course, about extending competition in Wales. Although the extension of competition in the water industry allowed for in the Bill is welcome, it is a missed opportunity because it could go further. It is welcome that businesses, charities and public sector organisations will be able to switch suppliers in pursuit of the best deal, but it is regrettable that that does not extend to household residential supplies and consumers.

I note what the Secretary of State said about the need to increase metering before such a transition can be put in place. It strikes me that offering the ability to switch to those households that already have meters would be a driver for greater take-up of metering. As we know from our experience in the south-west and in Cornwall, where we have particularly high levels of metering, that can help households to bear down on water use and improve affordability. The incentive of being able to shop around for the best deal if the household has a meter may produce a double whammy. Consumers would shop around for better water tariffs and metering would increase, enabling households better to control their water usage and its affordability. It is a thought that I leave with my hon. Friend the Minister.

However, it is clear that the introduction of competition into the market is long overdue. The fact that the previous Conservative Government essentially created a number of monopolies across the country has been a key failing of that privatisation. I have always felt that it was a privatisation too far, and precisely because it did not allow choice in the way that other privatisations of state industries did. There was no competition in the market and therefore no real driver for improved conditions. We see that in my constituency, much to our pain, as we

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still suffer from the highest water bills in the country. I am therefore pleased that the coalition Government have taken a step towards tackling that through the £50-a-year rebate.

I must say to Opposition Front Benchers, in relation to the earlier comments from the hon. Member for Garston and Halewood (Maria Eagle) about this being part of a cost of living crisis, that in Labour’s 13 years in office there were three reviews and one Act of Parliament, but not a penny came off water bills in Cornwall as a result.

Thomas Docherty (Dunfermline and West Fife) (Lab): I am sure that the hon. Gentleman has misled the House inadvertently, because he will know that Labour’s first price review led to a real-terms cut in water bills.

Stephen Gilbert: And the hon. Gentleman will know that the coalition Government acted to take £50 off bills in the south-west, which has made a real difference to affordability for my constituents and others who have suffered for a very long time.

Sheryll Murray: Will my hon. Friend confirm that his party, which represented all six seats in Cornwall under the previous Government, fought for a long time to get something done about increased water bills and that it took the Conservative-led coalition to do something about it?

Stephen Gilbert: As with everything my hon. Friend says, her question was good in part—the first part was very good, but on the second part I am afraid I must disagree. The Liberal Democrats in Cornwall have certainly fought for many decades to redress the unfair water bills that my constituents and others in Cornwall suffer, and thanks to both parties coming together we were able to do that.

Alison Seabeck rose—

Stephen Gilbert: At the risk of breaking my earlier promise to you, Madam Deputy Speaker, I will give way once more.

Alison Seabeck: This rewriting of history is wonderful. The effort to get bills down in the south-west, led in no small part by my former colleague Linda Gilroy when she chaired the all-party group on water, was an all- party effort. The groundwork that enabled the coalition Government to introduce the £50 rebate was all done under the previous Labour Government, particularly through the Walker review.

Stephen Gilbert: The hon. Lady and I know each other well, and I certainly would not be so churlish as to deny the all-party effort in Cornwall and Devon to drive the issue forward, but unfortunately in Westminster for 13 years the Labour Government did nothing. It was the coalition Government who delivered that change.

To finish my points on the introduction of competition, I want to ask my hon. Friend the Minister about charities. It strikes me that charities can be run from people’s domestic residences. Many charities are small, as he will know from his constituency as much as I do from mine. Are there going to be size restrictions and

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criteria for qualifying for the introduction of competition in the market for charities? How big will they have to be, for example? I would appreciate some clarity on that, as would others across the country.

Finally, I want to mention Flood Re, following some of the comments from my hon. Friend the Member for Newbury (Richard Benyon), whom I congratulate on his hard work to secure the renegotiation with the Association of British Insurers and the National Flood Forum. He and I crossed swords here when I tried to push him to accept a deal to ensure that flood insurance remained affordable and available for my constituents. I am delighted to welcome a deal that I think takes a huge step in that direction. I suspect that he and his colleagues played the Government’s hand as best they possibly could. Hopefully we have the rudiments of a deal that will be in place for the long term.

Three years ago this week parts of my constituency were under water and hundreds of businesses and homes had been damaged by flood water. I think that it is timely and right that the Government have brought forward these proposals, which will mean that people will still be able to insure their homes, sell their homes and, if disaster strikes, barring the loss of life, rebuild their homes and reassemble their lives.

However, some key issues remain. I seek assurance from the Minister that premiums for those people in flood risk areas will not be dissimilar to those for people in non-flood risk areas and that there will be some equivalent of the premium element on the household insurance policy that flood insurance will cover. In particular, I support the calls from other right hon. and hon. Members on excesses. I have constituents who were hit by the flood three years ago and had a £15,000 excess on their flood insurance. Clearly, if they do not have £15,000 in the bank, having insurance that requires them to pay £15,000 before being able to make a claim is nonsense. We must ensure that we drive down those excesses as far as possible. I welcome the figure of £250 to £500 that has been proposed.

I have one final question. The Secretary of State said that homes built after 2009 would not be included—I quote, I hope—“if built on floodplains.” Does that mean that homes built after 2009 which are not built on floodplains will be included? We need some clarification on that.

Overall, I think the Bill introduces long-overdue competition into the water market, driving down costs for business and, ultimately, I hope, for consumers. It delivers on one of my pledges to my constituents, which is that flood insurance will remain affordable and available.

7.26 pm

Alison Seabeck (Plymouth, Moor View) (Lab): This is one of those occasions when there are Members with enormous experience of the subject under discussion sitting on both sides of the House. As a result, the discussion we are having is extremely useful. I draw attention to the contributions from the hon. Member for Newbury (Richard Benyon), who said that he has scars on his back from this, which I quite understand, and the hon. Member for Thirsk and Malton (Miss McIntosh)—she is no longer in her place—who has contributed significantly over the years, and it is years, to bringing forward the Bill.

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It is ironic that we are surrounded by water in this country—certainly in the south-west, which has some of the highest levels of rainfall, because of the prevailing winds—yet we are in need of additional powers to protect us against drought. Such measures are important, so there is a lot of sympathy with the general thrust of the Bill, but the issue is with the detail and with what is not there. I was concerned to hear the Secretary of State say that he hoped to bring forward—not that he would do so for certain—the clauses to Committee. It would be helpful if the Minister, when winding up the debate, confirmed whether all the clauses specific to the insurance elements, and any other key elements, will be dealt with by a Commons Committee and not left to a Committee in the House of Lords.

Flood insurance is desperately needed to protect domestic properties. A number of Members have seen their constituents flooded regularly, or indeed have been flooded themselves. In Plymouth we are relatively fortunate, but we have small areas that flood regularly. Our biggest problem is the railway, which is regularly cut off. The organisations involved seem incapable of coming up with a solution that does anything other than cut off the far south-west every time there is flooding at Exeter, which is desperately bad news for business. I am not sure how the insurance companies view claims for loss of business, but without doubt there is a loss of business. That is a separate issue, but it is very specific to our region.

Another point that concerns me is that so much of this is being done by order and by statutory instruments—that is, secondary legislation. Indeed, the EFRA Committee, which has done sterling work in this area, felt that the draft Bill relied heavily on secondary legislation in a number of key areas. The Government have obviously not listened with regard to this aspect of the Bill. I am absolutely confident that in Committee my Front-Bench colleagues will press for some of those key issues to be firmly and clearly included in the Bill.

The Bill seeks to extend competition, which most people would say is a worthy aim, but not to extend it to domestic bill payers—a point well made by the hon. Member for St Austell and Newquay (Stephen Gilbert). That is another missed opportunity. The Government are failing yet again to get a grip on the things that could make a significant difference to the cost of living that all my constituents are facing. Despite the welcome £50 rebate, the south-west still has some of the highest water bills in the country. The amount paid by people on relatively low incomes is extremely high, and about 200,000 households are described as being under water stress.

Sheryll Murray: Can the hon. Lady tell us exactly what her Government did, in the 12 years when they had the chance, to help the hard-pressed, hard-working people of the south-west with their water bills?

Alison Seabeck: Their first review cut water bills, even in the south-west, and then, admittedly, as my hon. Friend the Member for Wallasey (Ms Eagle) explained, there was a constant battle and a need to bring something forward. I fully accept that it was a slow process. I personally went to see the Chancellor of the Exchequer to make exactly that point—to say that we needed, frankly, to get our fingers out and do something about

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bill payers in the south-west. I do not think that anybody argued that as vehemently as I and Linda Gilroy, my colleague in Plymouth, Sutton at the time. Even the hon. Lady, in all fairness, will be aware of the work that went on.

In the south-west we have a high percentage of people, including pensioners and families, with high and essential water needs. In fact, there are more than in any other English area, and some of them are being supported through the WaterSure scheme.

South West Water bill payers are the victims of a botched privatisation process. We have too large an area, with a massive need for capital investment, including cleaning up our shoreline, and very few bill payers to meet those costs. It is a dreadful situation, and one that was not thought through but driven through purely for ideological reasons. This Bill develops the market in water further, with a new retail market. The proposed changes are interesting, but they are not embraced entirely by the water companies, which are asking questions about the need for a provision to allow for retail exits, about why the system is voluntary, and about whether there will be a level playing field for all retailers.

South West Water has expressed concerns about the Government’s ill-considered and risky-to-implement proposals on the relaxation of the selling of licences without reforming abstraction methods, and says that it can foresee problems for rivers. During this debate, people have been tweeting me about the importance of the chalk streams. Indeed, several hon. Members on both sides of the House have touched on that point. The Secretary of State talked about new sources of water. However, if my local water company is saying that it has concerns, I have to be concerned. Equally, if the general public and Members of this House have concerns, the Minister must respond to them when he winds up.

Water companies across the UK, many of them based overseas, are making significant and increasing profits, with soaring dividends for shareholders. I am sure that they would say that the picture of their accounts is much more complicated than that which appears in the headlines, and that, in some cases, they hold significant debts, but that just means we need greater transparency so that we can fully understand where the pressures exist. The new chair of Ofwat has suggested that some of the financial arrangements that these companies pursue are complex, or perhaps they could be otherwise described as hidden, and that they are running a debt in order to minimise tax payments in the UK, but—surprise, surprise—they are still managing to pay out huge dividends. As we have heard, they have announced £1.9 billion in pre-tax profits and given £1.8 billion back to the shareholders. This is a system for the few, not the many. People in Plymouth have been paying through the nose for a basic commodity while shareholders seem to be benefiting. No one denies that shareholders are people who have backed a company for a decent return, but we need to understand that it is a decent return and not an excessive one.

Water is a commodity that needs to be valued because it will potentially become even more scarce as climate change kicks in further. If we do not prepare well for the decades and century ahead, we could be left with water in short supply or prices rising further for the taxpayer. At a time of soaring utility bills, high inflation

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and stagnant wages, water customers really do need to feel that they are getting a fair deal from their supplier. South West Water has invested in new technology in Plymouth—I recently saw it for myself at its treatment works in my constituency—and there are, at last, some improvements to the local sewage works, but it needs to offset that capital expenditure and the benefits to customers against its profit and dividend levels.

The Bill does not put in place measures that achieve transparency or affordability. The notion of a national scheme to assist with affordability, which has been discussed over very many years, and in depth by the Walker review, needs to be implemented. This Bill could have been the vehicle to do that—another wasted opportunity. Some companies are doing some of the work on a voluntary basis, including, in all fairness, South West Water, but it makes much more sense to bring them all together into some sort of national scheme—to get them all signed up and have a level playing field where good companies feel that everybody else is pulling their weight.

My hon. Friend the Member for Wallasey and the hon. Member for Thirsk and Malton raised a very important point about access to data, particularly in relation to the Department for Work and Pensions. I urge the Minister to do all he can to press the DWP to sort itself out on this one; it is almost a no-brainer.

My constituents find it impossible to understand why the regulator seems to have no teeth and simply rubber-stamps increases in bills. I am sure that the Minister will say that is not the case, but that is how it is viewed by my constituents. We know that the regulator has to perform a complex balancing act, with requests for increases from companies because they need to develop major schemes such as new ring sewers, new reservoirs, and so on, but my constituents are not convinced that anybody is listening to them. No one would argue against the vital work on infrastructure, protection against flooding and drought plans, which the Bill champions, but what is missing is the fairness agenda. The Government fail to understand that if my constituents feel they are being unfairly penalised while shareholders, perhaps overseas, are benefiting, this legislation will have failed and this Government will have failed them.

7.38 pm

Anne Marie Morris (Newton Abbot) (Con): The Government are to be commended for all they have done with regard to securing our water supply and trying to help our resilience in relation to flooding. I particularly pay tribute to my hon. Friend the Member for Newbury (Richard Benyon), who in his time as a Minister was a great supporter of such work. I am pleased to say that as a result I had three flood defence schemes supported locally, and I am grateful for that. The Bill is very welcome as part of a series of across-the-House measures to try to address this problem. Introducing competition in water supply is an excellent move forward. The fact that the Government have managed to negotiate the Flood Re deal is very much to their credit.

The challenge, inevitably, is in the detail. The Minister, and you, Madam Deputy Speaker, might remember that in 2005, when there was deregulation of the industry, there was a review of the so-called cost principle, which had been put in place to ensure the protection of water authorities in areas where, because of their rural nature and the distances involved, water would be very expensive

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to supply. It meant that rural customers did not have to bear a disproportionately high price for their water supply. That has now been removed and responsibility for overseeing the issue has been transferred to Ofwat. I am concerned that that control has been removed from the Government and politicians, so will the Minister assure me that it will work?

On flood insurance, flooding is a very key issue in my constituency and I think that a fantastic deal has been brokered, but there are challenges. The Minister will probably agree that prevention is undoubtedly better than cure. Our planning process has a number of statutory consultees, but after speaking to my local district council and the Environment Agency I understand that neither the Environment Agency nor the water companies are statutory consultees with regard to planning or connection. That means that a disaster is waiting to happen. Such consultation happens on a voluntary basis from time to time, but not regularly.

What happens, therefore, is that connections are made and the water companies have no power to make any recommendations—they certainly have no power to object—and yet, when the rain comes down, the sewers are flooded and the playing fields get covered in sewage, as has happened in my constituency, it is the water companies that have to take up the challenge of remedying the problem. I urge the Minister to consider making those bodies statutory consultees or to put in place another measure that ensures a holistic, joined-up approach so that the different bodies involved work together.

Sarah Newton (Truro and Falmouth) (Con): My hon. Friend is making an incredibly important point. As chairman of the Truro and Kenwyn neighbourhood plan, I can absolutely say that this is a problem and that it would be enormously beneficial if there was a statutory obligation to consult on plans.

Anne Marie Morris: I thank my hon. Friend for her intervention. It is always nice to get support.

The Bill singularly fails to address the issue of tidying up the fantastic Government initiative to help South West Water bill payers with a subsidy of £50. That was incredibly welcome and it has been incredibly well received, but unfortunately, as with many such things, the challenge is in the detail. The Government proposed that, when domestic users were billed through commercial intermediaries, the benefit would, in effect, pass down the line. For example, if the owner of a park home with a number of plots applies to South West Water for the rebate, the intention is for that rebate to get passed down to local users. Unfortunately, there is no obligation on commercial intermediaries—which include not just park home owners, but housing associations and Ministry of Defence premises—and the consequence, as I have discovered in my constituency, is that a number of local residents are not benefiting. Park homes represent 2.5% of the housing stock in my district council area of Teignbridge, so this is not a small problem; it is a significant problem.

Will the Minister consider some changes that I think might resolve the problem? First, on the obligation, one of the reasons why park home owners and others are not claiming is that they say that the claim process is

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complex and time-consuming and that they get no compensation, so let us simplify the process. Secondly, it seems that any claim has to be validated by the district council, so why not give the opportunity to a tenant whose commercial intermediary does not claim to ask the district council—which will have the records and will know whether they are a domestic individual—to apply on their behalf to the water company and then the subsidy could simply flow through?

There is another issue: I am afraid to say that some unscrupulous commercial intermediaries will take the money and not pass it on to the individual resident. At present, the only recourse for the resident is to bring a civil action—a small claims court action—which costs, on average, £1,000. To be frank, that is completely inappropriate given the amount of money involved. From my days studying law, I remember learning that if someone takes something with the intention of permanently depriving someone else of the use of it, that is theft, which, in my book, is a crime. If not passing on the subsidy were to result in criminal rather than civil liability, that would be a measure with teeth and I suspect that those who are not minded to pass on the subsidy at present would do so.

I hope that the Minister will find those suggestions helpful. This is a good Bill. I have used up my time, but I hope that I have made my point and I look forward to hearing the Minister’s response.

7.45 pm

Diana Johnson (Kingston upon Hull North) (Lab): I want to speak specifically to clause 47, which is 11 lines long and introduces the new flood insurance schemes. This is the first opportunity we have had to discuss them on the Floor of the House. As the Chair of the Environment, Food and Rural Affairs Committee has said, the Flood Re scheme still raises many questions that need to be answered. I also share her concerns about a lot of it being left to secondary legislation.

The Flood Re scheme follows on from the statement of principles, which was first agreed in 2000, was renewed in 2008 and ran until this summer. Flood insurance has been of particular interest to me since the very bad floods in Hull in 2007. Since then, I have questioned and lobbied Ministers and secured Adjournment debates on the issue, because I am concerned about my constituents and want whatever scheme that is put in place to meet their needs.

In 2012, the then Secretary of State told me on the Floor of the House that she was

“proud that we have found a way forward with the insurance industry that, above all, guarantees that universal and affordable insurance remains available to all”.—[Official Report, 25 June 2012; Vol. 547, c. 30.]

She said that that included my constituents, but all we have 18 months on is this very short clause outlining the Flood Re scheme. I want to set out why I am so concerned about this.

Ninety per cent. of my home city of Hull is low-lying—below sea level—and prone to floods from the River Hull and the Humber estuary. In 2007 we had a deluge of surface water. June of that year was the wettest month recorded in Yorkshire since 1882. The rain that came down on that day was a once-in-250-years event. One in five properties in Hull were flooded, including 7,208 residential properties and 1,300 businesses.

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Flooding causes misery. Any MP who has constituents who have been flooded or who has been flooded themselves will know that it is a miserable experience. Homes are disrupted for weeks and months and dehumidifiers and dryers are needed. Having had secondary flooding in my home in Hull, I know that it is horrible. We want to do everything we can to protect people so that they do not have to go through that.

Part of the deal under the statement of principles was that if someone who did not have insurance in 2007 got flooded, they would never get insurance. People also had to stick with the provider they had in 2007. I had to stick with Aviva—I could not move anywhere else—and my premiums and excesses went up just like those of my constituents have since 2007.

The Government have promised a new scheme and, as I have said, the former Secretary of State made out that it would be affordable and available to all. I have three problems with what is being proposed, as I understand it, although it has not yet been suggested as part of primary legislation. First, I have a big problem with the 2009 cut-off. Secondly, I have a problem with the fact that small businesses are not included in the Flood Re scheme. My third problem is that reviews will take place every five years and that, as I understand it, the scheme is transitional and is planned to move to a full open market approach by the end of 25 years.

Jonathan Evans (Cardiff North) (Con): On the hon. Lady’s first two points, she might like to know that the all-party group on insurance and financial services made exactly those points to the Government as part of the consultation.

Diana Johnson: I am grateful to the hon. Gentleman for that intervention. I think there is widespread concern about those two points in particular.

When I asked the House of Commons Library to give me figures for homes built since 2009, I was told that 444,300 private dwellings had been built between 2009 and 2012, and that 1,850 permanent dwellings had been built in Hull between 2009 and the second quarter of 2013, of which 1,720 were private homes. Therefore, more than 1,700 properties will not be part of the Flood Re scheme, despite the fact that the city is prone to flooding and that, with 90% of it below sea level, people may have real problems.

As I understand it, the Government are telling people who bought their homes after 2009 that their properties should have been properly assessed for flood risk under PPS25—planning policy statement 25—and the national planning policy framework, and that they can therefore get insurance on the open market. However, the National Flood Forum has pointed out that an unknown number of people will be at significant flood risk, but unable to get insurance under Flood Re or on the free market.

I accept that the Government’s approach appears sensible, but they have to acknowledge, first, that lots of properties built since 2009 have flooded in various parts of the country and, secondly, that they have caused other properties to flood, particularly from surface water problems. The extent of the problem is not clear, but many communities will raise that issue with the Minister over the coming months, as will hon. Members in Committee.

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At Kingswood in my constituency, houses have been built over many years: it is a major area of house building as part of a development for the city. Outline planning permission was first given in 1994 and was renewed in 2004. Like areas all over the UK that were given planning permission before 2009, some properties built since 2009 will not be covered by the Flood Re scheme. A key issue about phased developments is whether standards from an earlier period are applied to houses built post-2009, and I want the Minister to address what will happen to such properties.

When the statement of principles was first set out, the cut-off date for houses not to be covered—2008—was in the future, but the Bill actually has a retrospective date of 2009. Why do the Government not accept that it would be better to give everyone proper warning and make the cut-off date 2015, for example, so that we all know what will happen?

I have concerns about the surface water maps that are available. I understand that local authorities will publish their maps next week, but insurance companies have their own ones. I also have concerns about the fact that the Environment Agency will not produce its compound risk maps until the end of 2015. That will leave house purchasers, community activists and insurance companies, now and in future, with different sorts of information available to them. How can they make good and sensible choices on that basis?

I am really concerned that when I asked the Secretary of State for Communities and Local Government in the House this afternoon about what discussions he has had with his colleagues in the Department for Environment, Food and Rural Affairs, he did not seem to know that there was a problem. Yet his Department is at the moment promoting the Help to Buy scheme extremely heavily in Kingswood to get people to buy new homes in an area that another Department says will be completely excluded from the Flood Re scheme. There is a mis-selling issue there, with people not being fully aware of what this Government are doing. Will the Minister address that point about whether other Ministers know what this scheme means for their Departments?

Last Wednesday, it was announced that Hull would be the city of culture for 2017, but on Thursday in DEFRA questions the Minister told me that the cut-off date of 2009 stood and would send “a very clear message” against building on areas that were likely to flood. The problem is that 90% of Hull is below sea level, so it is prone to flooding. The Government cannot have it both ways. They must accept that issues in different geographical areas of this country have to be addressed.

I want to make three more points. The first is about the role of the Environment Agency. I understand that of 455,500 applications for planning permission, the Environment Agency has commented on only 6.6%. The vast majority do not require it to comment because they are too small or do not meet the requirements set out in legislation. If we want the Environment Agency to play more of a role, we must make it clear that its advice on where houses are built must be taken. I say to the Minister that it is wholly unfair and arbitrary to choose 2009 as the cut-off date for Flood Re; 2015 would be much better. If he is not willing to go that far, perhaps he should consider mitigation for Hull and similar areas.

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My second point is that the Government should look at what is happening to small businesses. The Federation of Small Businesses has said that one in five small firms was affected by flooding last year alone. Small firms will end up paying exorbitantly high costs to be insured against the threat of flooding. I hope that amendments will be tabled on that point.

My final point is about the 25-year transitional element of the Flood Re scheme. Will the Minister set out what the five-year reviews are about, because we need more details? Will he address what will happen to areas such as Hull in the longer term? If the free market is just opened up, we will be left with no insurance companies that want to offer insurance in those areas, because the risks are too high. I hope that he will give us more information about the Flood Re scheme.

7.56 pm

Mr Charles Walker (Broxbourne) (Con): What a surprise to be called so early in the debate, Madam Deputy Speaker, but I am delighted to have the chance to speak.

As I was preparing in the Tea Room, my hon. Friend the Member for Meon Valley (George Hollingbery) said, “I suspect you’ll go into the debate and just shout a lot.” He was very accurate in his analysis: I am going to shout a lot. There is nothing like a good shout to get things off your chest. I will try not to shout too loudly, but I want to shout about water because it is very important to me.

I congratulate the new Minister on his elevation to the Front Bench. I also lament the passing of my hon. Friend the Member for Newbury (Richard Benyon). He was a wonderful Minister, and it is a great shame that he is not still one, because he will be much missed and knew a great deal about water.

I want to pay one final tribute during my 10 minutes. It is to the former Member of Parliament for Reading West, Mr Martin Salter, who has been a great champion of fishing and of the conservation of rivers for many years. I am sure that wherever he is today, he is watching this debate fondly.

I listened to the Secretary of State, and I am afraid that my heart did not leap with joy. I fear that, in reality, we will not build the reservoirs that we need. In 10 or 15 years, we will be in this place once again talking about the continued decimation of our waterways and, in particular, but not exclusively, of our chalk streams. A few years ago, Thames Water had the great idea of building a reservoir in Oxfordshire near Abingdon. It was a spade-ready project in 2010, with everything ready to go, but it has not yet taken off because of planning issues and people who are not too keen on its construction.

I must be a really rubbish politician because when it comes to water, I have only one speech, which most hon. Members will have heard at least three times in this place.

Since 1973-74, we have not built a reservoir of any note in east and south-east England. We have added to the population by quite a few millions and we have built many hundreds of thousands if not millions of new homes, but we have somehow decided that we do not need reservoirs. I have looked at the Bill, and I do not

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see any concrete plans for new reservoirs. I have talked to many water companies and, apart from Thames Water, they seem to have a marked reluctance to build new reservoirs, but without them, we are going to continue to abstract.

I am afraid that the trading of abstraction licences leaves me cold. Initially, licences were not awarded on any scientific basis; water companies were told: “Here are a few thousand. Now go off and enjoy yourselves.” The truth is that if all the abstraction licences on the River Lea were used, it would not exist. That is not a far-fetched scenario because there are quite a few rivers in my constituency and elsewhere in Hertfordshire and Buckinghamshire that do not exist any more. They have been sucked dry and are now empty river beds. When it rains in the winter, clean water might flow through them, but it does not flow for long.

The Environment Agency has a new trick. That is to reclassify a river that dries up for the first time in 30 or 40 years as a winterbourne. I understand that one of those winterbournes might be the Upper Kennet around Manton and Marlborough. I know that the Upper Kennet is not a winterbourne because over my lifetime, I have caught well over 400 trout and 400 grayling in that stream. I understand that there is a move in the EA to reclassify it as a winterbourne. That is total and utter nonsense.

Let me return to abstraction licences. I fear that if there is unrestricted trading in abstraction licences, we will see more and more water sucked out of already stressed environments. That thought gives me sleepless nights because, as I have said, one could walk across many streams in Hertfordshire and Buckinghamshire in one’s bedroom slippers and not get wet. I think of rivers such as the Mimram, the Chess, the Beane and many others that are too numerous to name in this debate. Some of those rivers flow some of the time, some of them flow none of the time and some of them flow all of the time, but the one thing that they have in common is that they are under great stress.

It would be easy to lash the water companies, as I am sort of lashing those on the Government Front Bench. It is a very gentle lashing—indeed, it is almost a licking. I have taken the trouble to meet my water company. I met the chief executive of Affinity Water, who seems to be a switched-on individual. I have invited him to go fishing on the River Chess, so that we are on someone else’s water. He has accepted that invitation and we hope to go in May. Hopefully we will have a wet winter, so that beautiful river will have something near a proper flow, and he will walk down the river and see what a wonderful environment it is. However, such environments are becoming all too rare.

As I say, Mr Deputy Speaker—what a magical change in the Chair—there are parts of the Bill that I am sure I will welcome when I have found them. I have yet to find them, but I will welcome them when I do. What has distressed me most about aspects of this debate is that there has been a lack of willingness to focus on the fact that water, because of the way in which we manage it, is a rare resource in this country. Quite a lot of it falls out of the sky but, as the Secretary of State said, we wave 95% of it goodbye in the winter months, as it rushes down into the North sea and the English channel. As my hon. Friend the Member for Newbury said, we have to get much better at capturing and storing that water.

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Although I am hugely attracted to the idea of farmers building small reservoirs, it simply is not the answer. The idea that a farmer will build a reservoir of sufficient capacity to sell water to major water companies is, I am afraid, as near to nonsense as one can get without it becoming nonsense. What we need to do—again, it is the broken record—is to build some reservoirs. There needs to be a consensus about building reservoirs.

Of course, there are parts of the country where water is abundant. People say airily, “Let’s transport it from the north of England to the south of England or from Wales to other parts of the country.” I am sure that the Welsh do not like the idea of having their water pinched any more than the people of Northumberland do.

Jonathan Evans: They could sell it.

Mr Walker: They could sell the water, but the truth is that it is extremely expensive to cart water around the country. I do not know whether anybody has noticed, but water tends to weigh quite a lot. Yes, gravity can be used, but there needs to be gravity for that to work. We could ship water around the United Kingdom, but that is not the answer. It is talked about by people who want to deflect attention from the real issue, which—again, I am afraid—is building reservoirs.

Before I get too boring, I would like to say that I look forward to hearing from the hon. Member for Dunfermline and West Fife (Thomas Docherty). That is a big mouthful, but I got my mouth around it—sorry, Mr Deputy Speaker, but there are a lot of mouth analogies. I would like to hear the view of the Opposition on conservation. Of course it is important that we try to keep people’s water bills as low as is possible. However, the Walker household, which is metered, gets a fairly good deal. We can have loads of baths, use the facilities and have showers every day and it costs us about £2 to have pharmaceutical-grade water pumped into our house. Of course price is important, but so is conservation because we live in a lovely country and we need to keep it beautiful.

I am about to overrun my allotted time, so I will conclude by saying one more thing. My hon. Friend the Member for Newbury said that he led a delegation of water companies to Brazil. Having drained my rivers, they are going to drain the Amazon. I hope that they are not as successful with the Amazon. However, the point that was made by my hon. Friend and that will be made again by my hon. Friend the Member for Meon Valley, who is a courageous campaigner on all matters water, is that this country has 85% of the world’s chalk streams. Funnily enough, they are not making them any more. If there is another ice age, we might get a few more, but they are not making any more right now.

We have been disastrous at protecting our natural environment. Indeed, a press release from the Salmon and Trout Association just flashed before my eyes, saying that we are not even going to reach the target of getting 32% of our rivers up to an acceptable level and that it is going to be pushed further into the future. That is ridiculous nonsense. As my hon. Friend the Member for Newbury said, we should want to reach that target ourselves as a sovereign nation and should not need the European Union to require it of us. This country is so good at lecturing parts of the developing world about their environmental responsibilities—particularly Brazil

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and Indonesia about the rain forests. They should take no lessons from us. Until we manage our own environment more effectively, there is very little that we can teach Brazil.

With that final flourish, Mr Deputy Speaker, I shall sit down. I have been very naughty and taken 12 minutes. I see the Whip looking at me aggressively, so I am sitting down.

8.7 pm

Mrs Emma Lewell-Buck (South Shields) (Lab): The Bill does not excite people or generate much interest outside the House. Right hon. and hon. Members who have been involved in previous debates on this issue have shown that they have a depth of knowledge that spans time frames that go back much longer than I have been in the House. However, my constituents have concerns about their rising water bills, and because of their worries and sleepless nights, I am speaking in this debate.

The Bill provides an opportunity to introduce measures to help those who are struggling to pay their water bills and measures to toughen the regulatory regime under Ofwat. In announcing the draft Bill, the previous Secretary of State, the right hon. Member for Meriden (Mrs Spelman), said that it would ensure

“that the water industry continues to provide an affordable and clean water supply”.

Earlier this month, a spokesperson for No. 10 said that the Prime Minister takes the price of household bills seriously:

“The Prime Minister wants to see household costs across the piece being reduced as low as possible. The intention is to try to reduce the burdens on hard-pressed families.”

It is therefore reasonable to ask why the Bill delivers so little for those people. It will not help families who are faced with rising water costs; nor will it empower Ofwat to become the champion for the consumer that it needs to be.

For those who, like me, are new to Parliament, I will remind the House of some of the history of water affordability. The only time when water charges have been reduced was under the last Labour Government. The average water bill in my constituency is now £359 per year and has increased nationally by almost 50% since privatisation was introduced by the Conservative Government in 1989. At the same time, regional water companies made £1.9 billion profit last year. I and my colleagues in the Labour party have been campaigning hard on energy prices, but the situation with water bills is no better—indeed, some would say that it is worse.

Although households spend less on water as a flat figure, the proportion of a water bill that goes towards company profits is three times higher than for an energy bill. As with energy prices, the rising cost of water far outstrips both earnings and inflation. Water is a natural resource; it is essentially free; and it is essential for our survival. Management of that natural resource therefore needs to be conducted with some kind of social responsibility.

During a cost of living crisis, affordability must be the absolute priority, and the Bill must do more to ensure that water companies’ profits are not put before the needs of consumers. The coalition agreement clearly stated that the Government would

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“examine the conclusions of the Cave and Walker Reviews, and reform the water industry to ensure more efficient use of water and the protection of poorer households”.

That is one statement that they have not been able to delete.

In 2009, the Consumer Council for Water stated that

“many low income customers continue to pay their water bills even where it becomes unaffordable to do so”.

It claimed that people tend to

“cut back on water usage or sacrifice other essentials such as food or heating in order to ensure their bill is paid”.

The problem now in my constituency is that people are already cutting back on food, heating and water. Since the Government continue to legislate in a way that exacerbates poverty, what are my constituents supposed to do? What should they cut back on next—fresh air perhaps? They have nowhere left to go.

Miss McIntosh: I am following the hon. Lady’s contribution with great interest, and she is a leading member of the Environment, Food and Rural Affairs Committee. Water, however, is not free. Drinking water must be processed, as must the foul water that comes from every home. I hope that she will take the opportunity to go to a waste water treatment plant and see the full gamut of where a lot of the costs come from.

Mrs Lewell-Buck: I thank the hon. Lady for that intervention and I will take up that offer. I was being glib when I said that water is free. I meant that to most people, including my constituents, water falls from the sky and is therefore free, but I understand the hon. Lady’s point.

People in my constituency are clear in the knowledge that water bills are likely to rise in the future due to a growing population, climate change, the replacement of water infrastructure and additional environmental standards. Under the previous Labour Government, the Walker review, which was published in 2009, advocated affordability and made a number of recommendations to ensure that water remains affordable for all. Two years later, the current Government published a consultation on those proposals and rejected universal discounts, which they cited as “unaffordable”, for people on low incomes and minimum discounts for low-income households with children. Instead, the Government opted for WaterSure and social tariffs, and repeated that intention in the “Water for Life” White Paper.

WaterSure intends to cut costs for households that have a water meter and more than three children under 19 years old and that claim a range of benefits including council tax benefit, housing benefit and employment and support allowance. The scheme ensures that those families pay only the average for their region, so adding approximately 40p to the bills of those customers not on the scheme. Water Direct is another scheme whereby the Department for Work and Pensions subtracts money from the benefits of those who are in debt to their regional water company and sends it direct to that water company. What is not clear, however, is how such schemes are likely to be affected by the introduction of universal credit, and that creates uncertainty for a number of families.

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Social tariffs allow water companies to develop tariffs in consultation with customers, with the intention of helping the most vulnerable. However, the Government’s implementation of those tariffs falls a long way short of dealing with the scale of the problem. In evidence to the Environment, Food and Rural Affairs Committee, the Consumer Council for Water estimated that to “effectively address the problem” of affordability would cost anywhere between £162 million and £447 million. The Walker review’s estimate was £340 million, yet it predicted that social tariffs would generate only £36 million a year, adding that that was

“significantly short of what is needed to address affordability”.

Even that limited impact may not be felt in the majority of regions.

Rather than take strong action to ensure that companies have a duty of affordability, the Government introduced tariffs on a voluntary basis from April this year. So far, only three companies have taken that up. Northumbrian Water—my local provider—certainly found little appetite among customers for the implementation of a social tariff. That is hardly surprising when so many people are already struggling to afford bills with stagnating wages. In constituencies such as mine, such a tariff would make water less affordable for even more people.

It is no surprise that the Government’s light-touch solutions have done little to help consumers. Citizens Advice has expressed disappointment that the Government’s guidance for social tariffs is “lacking in detail” and that water companies have been given freedom to ignore it completely with little or no justification. It is no coincidence that Citizens Advice has reported increasing numbers of people coming to it with inquiries about water debt. It is not only Citizens Advice that recognises the problem. This afternoon, I spoke with Northumbrian Water, which is anticipating a rise in debt over the next year, linked to the severity of public sector cuts in our region. It now works closely with Citizens Advice, recognising that if someone is struggling with their water bill, they are likely to be struggling with other bills as well. In short, it is a wider problem than just water bills—it is a cost of living crisis.

The Government clearly do not recognise the need for decisive action. Last week at DEFRA questions, the Secretary of State said that he had written to water companies, calling on them to consider the pressure on household incomes and advising that the Government encourage water companies to introduce social tariffs. As Secretary of State, should he not be doing more than just encouraging and advising? Is simply writing to the water companies the best he can do?

The United Nations recognises water as a basic human right that should be

“available, accessible, safe, acceptable and affordable for all without discrimination”.

Why then are the Government not committed to ensuring just that—that water is affordable for all?

8.17 pm

George Hollingbery (Meon Valley) (Con): I declare an interest as the riparian owner of a small stretch of the headwaters of the River Itchen in Hampshire and as a small part-owner of similar rights on the River Spey in Scotland. I am also chairman of the all-party angling group.

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In an ideal water world, we would have cheap bills for all, plentiful and clean drinking water and sparklingly clean rivers and watercourses, stuffed with myriad fish, leaping with baby otters and surrounded by clouds of fly-life with beds of iris and crow’s foot—okay, this is the bit where we hear the needle being ripped off the Enigma Variations, because unfortunately, that dreamy picture does not match reality.

To be clear, things are not all bad. The industry has invested some £110 billion in the 25 years since privatisation, and much has been achieved in restoring antiquated infrastructure. Let us not forget the scale of the task: the industry looks after 414,000 km of water pipes; 1,380 treatment works; 6,000 reservoirs; 392,000 km of sewers and so forth. In 2012-13 alone, £4.5 billion of investment has been made. A great deal of good work is being done; things are improving in tackling water quality in the environment; and the health of rivers has improved. Point sources of pollution have been tackled, and whole catchment management plans promise improvements in diffuse pollution. However, as the water White Paper so tellingly pointed out, only 27% of our rivers and lakes are fully functioning ecosystems. We surely have a great deal more to do.

What does the Bill contribute? Hon. Members know that we face difficult financial times and that consumers must be protected in a monopolistic market. The Bill will help. The opening of certain retail markets to competition, with the prospect of that widening to all consumers of water, must surely be a crucial step in keeping downward pressure on end-user pricing. That and many other measures in the Bill, such as the change in the byzantine regime that compensated companies for the removal or change in abstraction licences, will help to solve a number of problems that the industry faces and that directly impact on pricing.

We face a problem, however. We must not throw the proverbial baby out with the tap water and get into the position in which the energy sector finds itself. A lack of long-term investment has left us all vulnerable to power outages, as old capacity is closed down and new capacity has yet to come on stream. The few hon. Members who are in the Chamber might think that the two sectors are wholly different. They might think, “Surely, the raw materials of water fall freely out of the sky regularly, sometimes on a prodigious scale.” That is true in part, but it is the how much, how often and where that matters.

As was pointed out to me in an excellent briefing from the Angling Trust, the UK has less rainfall per person than our northern European neighbours. London is drier than Istanbul. In the UK, every person uses approximately 150 litres of water a day, which is one of the highest usages in Europe. The UK—believe it or not—has less available water per person than most other European countries.

Last summer demonstrated how precarious our position has become. My hon. Friend the Member for Newbury (Richard Benyon), who is in his place, has painted a compelling picture of the crisis that we faced. It is not an exaggeration to say that many parts of the country would have faced severe shortages. Many people in the south and east of the country would have relied on standpipes, and there might have been an absolute disaster for our natural environment. Rivers had begun to run dry, as their natural sources dried up and as water companies abstracted yet more to meet demand.

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We need to understand that the three-year scenario will happen—it is not a matter of if, but truly a matter of when. We should remember that it does not matter how cheap water is if there is none. I therefore want to make a few comments on resilience. More can and is being done on leakage. There is some success on consumption through metering, through the advent of modern technologies that use less water for the same tasks and through education, but we face a potential structural problem in the regulatory environment.

Resilience necessarily means building infrastructure. Ofwat rightly has a primary duty to protect customers, but it therefore has a perverse incentive not to sanction investment in what is, by definition, redundant capacity. That is why I am particularly pleased by clause 22, which promotes resilience to being a primary duty for Ofwat. The measure is very much helped by the explicit guidance published in May by my hon. Friend the Member for Newbury and the Department, “Strategic policy statement to Ofwat: incorporating social and environmental guidance”. Paragraphs 3.6 to 3.9 explicitly set out the Government’s expectation that Ofwat should ensure long-term resilience and, crucially, sustainability in the system.

It is important to recognise that resilience is not the same as sustainability. None of us wants a system that creates resiliency in the water supply that relies on sources that are environmentally damaging. In the round, however, I am glad that we now seem to have a regulatory environment that recognises that protecting customers also means protecting a sustainable supply of water. However, I wonder whether we might go a step further. Hon. Members know that one of the biggest problems faced by large-scale infrastructure projects, such as those likely to be needed by the water industry, is delays in the planning system. To that end, I wonder whether the Minister has considered a national policy statement for water. After all, we have one for waste water, so why not have one for water? Such a statement would go a further step towards allowing Ofwat’s two conflicting duties to be resolved in a timely and structured manner. It should ensure that the necessary infrastructure is introduced in a way that is controlled by the Government, at a reasonable pace, and as the economy and consumers’ wallets allow.

As we have heard, one of the most urgent but complex areas of change that is needed is in abstraction. Hon. Members know that over-abstraction is damaging our environment and that the governing regime is antiquated and not fit for purpose. Licences granted in an entirely different social and historical context are still in force and in urgent need of change. I accept that that is a complex matter, but I remain somewhat disappointed that the necessary reform is not tackled in the Bill. I am reassured by the Secretary of State’s remarks this evening on our intentions in that regard, and I hope we hear similar commitments from the Opposition.

Mr Charles Walker: I agree with my hon. Friend that water abstraction is complex and that it does obvious damage—that obvious damage is dried up river beds.

George Hollingbery: Who could possibly disagree? That is clearly one consequence that we need to reform shortly. I will come to that in a moment.

Those of us who hold our natural environment dear, particularly those rivers and streams across the country that are fed by chalk aquifers, cannot wait for ever for

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change. Too many of our chalk streams, such as the Chess, the Beane, the Kennet and many others, have been irreparably damaged by over-abstraction. That simply cannot be allowed to continue, as my hon. Friend says. How can we possibly continue to lecture countries such as Brazil and Indonesia on environmental damage when we, the custodians of 85% of chalk streams—unique ecosystems—are complacent and allow them to be degraded over time, doing nothing about it? That simply will not do. We must change the system, and do so soon.

I understand why the Government have delayed reform, but the fact that the Bill does not change abstraction licensing at the same time as allowing new upstream supplies may well present a problem. One of the proposed resilience reforms is that those with unused abstraction licences for purposes other than general water supply and those with water surplus to their needs can sell water on. I welcome that in principle, but one concern is that, if proposals to reactivate old licences or sell bulk water across borders are not very carefully assessed in respect of their impact in source areas—in terms both of the environment and of local pricing incentives and competition—unanticipated damage could easily be done. I am glad to note that the Government have partially recognised that and committed to introducing changes to the Bill in Committee to ensure that permission must be obtained from the Environment Agency before any changes of use of water abstraction rights are made. May I suggest that a similar assessment of the impact on local pricing and competition in source areas also be made?

The same rules must surely apply to the bulk transfers proposed by the Bill. The Government have said that they are considering that, and I hope that similar changes will be introduced. It is worth noting we will need to consider how permitting would apply across the border into Scotland and Wales. No doubt, the ministerial team have that under review. Furthermore, it would be reassuring if the Government considered allowing such arrangements to be terminated on advice from the relevant assessor if it is clear that they are contributing to over-abstraction, causing environmental damage or skewing the competitive environment.

Finally, on water metering, as undertakers have made more progress on leak reduction, measures to reduce demand will become more important. Measures in building regulations and the advent of new technologies that reduce the amount of water needed to perform certain tasks have a part to play, but so does water metering. That is another complex matter. Hon. Members know that water metering increases costs for some people and reduces them for others. We should never allow companies to cut off supply to those who cannot pay their bills. However, water metering reduces consumption and allows householders and undertakers more accurately to identify local leakage, which can then be dealt with.

The Water Industry (Prescribed Conditions) Regulations 1999 allow universal water metering to be introduced in areas of water stress. I wonder whether it is time to take that a step further. We should consider not standing in the way of rolling out water metering schemes throughout all areas, water stressed or not, if an undertaker can demonstrate that they have a clear, deliverable plan to help customers to deal with the change; that they have similar, robust plans to deal with the difficulties faced

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by those who are least likely to be able to deal with increased bills; that their request for the roll-out forms part of a long-term strategy to reduce demand; and that the Secretary of State retains the power to remove the scheme if those things are not delivered. All I ask is that the Minister and his team consider such a change.

In conclusion, the Bill is a step in the right direction towards reform of the water industry. Its measures will help to increase competition and so keep down prices. It clearly recognises the need to guarantee long-term supply, but does so in the context of other measures and proposed changes that acknowledge that sustainability of the source of supply is as important as resilience. It would have been hugely preferable if abstraction reform were followed by changes to upstream competition in that order, but, when taken with the licensing requirements that Government are contemplating, the dangers posed can be mitigated. I look forward to joining colleagues in the Aye Lobby should a Division be called.

8.29 pm

Sheryll Murray (South East Cornwall) (Con): I welcome the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for North Cornwall (Dan Rogerson) to the Front Bench, and I pay tribute to my hon. Friend the Member for Newbury (Richard Benyon), who led on the Bill from the beginning.

We often take water for granted. Not everyone in the world is so lucky. Indeed, I have walked, with some of my staff, along the beautiful coastal path between Looe and Polperro to raise money for WaterAid.

I have done in-depth research into the job that South West Water does in my constituency. I thank Chris Loughlin and his staff for taking the time to show me around Restormel treatment works, which is the biggest treatment works in Cornwall—it does not supply my constituency, but it is based there—and the Torpoint waste water treatment works. I now understand more about what happens to the water that falls out of the sky. During these visits, at either end of my constituency, I was fascinated by the work undertaken and have a much better understanding of the level of investment being carried out to ensure that our water is clean and our waste water properly treated. That investment does not come cheap, of course. While water bills in South East Cornwall and the far south-west reflect that investment, they have been unusually high for a number of years. I again thank my hon. Friend the Member for Newbury for showing a clear understanding of the matter, and the Chancellor for the contribution of £50 to each household towards that higher than average cost in Cornwall.

I want to highlight two concerns. First, we should not put in place legislation that will further increase the cost of our water. It is imperative that we monitor water quality without putting an expensive burden of regulation on our water companies. I am thinking in particular about our beaches and coastal water. We must remember that the south-west is a tourist area, and it is vital that local hard-working families do not have to pick up the cost burden of further European legislation. We must not become the Government of red tape. The Department for Environment, Food and Rural Affairs and other Departments have done much to reduce the burden on industry following the mess left by the previous Labour Administration.

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Secondly, any legislation must allow water companies to be able to react quickly to circumstance. We do not need legislation that says that everyone must be consulted in triplicate. There is no point in putting sandbags out once a town has been flooded. When the need arises, water companies must be able to do what is necessary to save lives, homes and businesses. Tragically, my constituency has been hit more than most by the weather and by flooding—it is a key problem. I thank the former Secretary of State, my right hon. Friend the Member for Meriden (Mrs Spelman), and my hon. Friend the Member for Newbury for visiting it on a number of occasions to see the situation on the ground for themselves.

Mr Charles Walker: My hon. Friend is making a powerful speech. Is it not the case that if homeowners cannot get insurance their homes become, in essence, worthless, because nobody will give them a mortgage on them?

Sheryll Murray: Many of my constituents who live in the areas affected by flooding have a particular problem getting insurance. I speak as someone who, many years ago, worked in the insurance industry and dealt with domestic insurance. One constituent was told that she could get insurance after 10 flood-free years, and was flooded after nine-and-a-half years. My constituents cannot afford to pay repair costs every time it floods. Will the Minister consider ways to mitigate the causes of flooding and to help people to get the insurance they desperately need? Some of my constituents have been caught in a flooding trap: they cannot get insurance to be able to recover from floods and, as my hon. Friend the Member for Broxbourne (Mr Walker) said, they cannot sell their home at a reasonable rate because the flooding has caused a type of blight.

South East Cornwall is not rich. Wages are frequently below average, with many people relying on seasonal tourist work. The Bill must not place an extra burden on them. It is not just the Opposition’s constituents who are hard pressed. The Opposition must accept that they need to look at solutions, rather than sitting and sniping from the sidelines about increasing bills, and making cheap political points.

Mr Walker: I thank my hon. Friend for her tireless campaigning on this subject. She has worked with Members across the House to bring this important matter to the attention of the Government and she deserves to be thanked for it.

Sheryll Murray: I welcome my hon. Friend’s comments.

I ask the Minister to look at South East Cornwall as an example. As my neighbour, he knows my constituency well. I am happy to meet him to discuss the many individual stories I have heard about flood insurance, if that would be helpful.

8.37 pm

Jonathan Evans (Cardiff North) (Con): I draw the attention of the House to my entry in the Register of Members’ Financial Interests and to my chairmanship of the all-party group on insurance and financial services.

My remarks will be limited entirely to that part of the Bill that deals with flood insurance. Since 2010, the all-party group has met on four occasions to consider

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the issue in great detail. It has met the British Insurance Brokers Association and the Association of British Insurers, and has frequently met the National Flood Forum. The group had the pleasure of meeting my hon. Friend the Member for Newbury (Richard Benyon)—I am not sure it was a pleasure for him—who kept us up to date with the progress of his deliberations. I join other Members in thanking him for his contribution.

My remarks will focus entirely on the all-party group’s opinion of the Government’s proposals and the representations it made as part of the consultation. The concept of Flood Re is generally supported by the group, but its members have a number of concerns. Many of those were raised by the hon. Member for Kingston upon Hull North (Diana Johnson). She reminded us of the dreadful experience in Hull and highlighted some of the issues we need to examine in the context of the Flood Re proposal.

There is concern regarding small businesses. The Bill proposes to cover residential property, but under the statement of principles some small businesses were covered too. It is easy to see in Hull many corner shops and things of that nature where it is difficult to distinguish between the residential and business elements. The Federation of Small Businesses, the British Insurance Brokers Association and the British Property Federation have urged the Government to reconsider their exclusion of small businesses under the scheme. We do not want major businesses covered, but perhaps a turnover of £1 million would be an appropriate cut-off point when covering smaller businesses. The cost would not be prohibitive.

On another contentious area, the Government say, “Come what may, we must have the flood insurance obligation.” That is clearly desirable, but it cannot be a blank cheque. Under the one-in-200-years principle, insurance is supposed to cover all circumstances likely to arise, but it is difficult to assess what a one-in-200-years risk might be, given, for example, that the six wettest years on record have all been since 2000. As we have heard, climate change is happening and it is difficult to make those assessments. Just this year, there have been major floods in Alberta, Canada that might count as a one-in-200-years event: total estimated damage was more than 5 billion Canadian dollars, 100,000 people were displaced, several people died and 2,200 troops were deployed. In the next few years, we could suffer such a calamity, yet it is not clear from the Flood Re proposal what the Government would bring to the party. It is unrealistic to think the insurance industry could cover the costs of such a calamitous event. The Government have been sending signals about what they might do, but they have not been much more than signals. We would like a bit more than that.

It is proposed that Flood Re be based on council tax bands. I agree with my hon. Friend the Member for Newbury, the former Minister, that we do not want to unpick this, but I would like it to go a bit further. The measure is a sort of rating by proxy, not risk, but band H properties have been excluded, which is something that the all-party group is concerned about. As he said, the reason for the exclusion is that we do not want subsidies for the rich, but I wonder whether that has been thought through. My hon. Friend the Member for Brecon and Radnorshire (Roger Williams) will be able to remind the House, as I can, of the council tax

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revaluation in Wales. Our top band is no longer H, but I. Band H properties are not occupied by millionaires, yet would not be covered by this proposal. Has that been taken into account?

The reason we do not want band H properties excluded is that historically all bands have been based on valuations of no relevance today. At some point, there is likely to be a revaluation, and who is to say that new bands will not be added, as happened in Wales? For that reason, it would be much better not to exclude band H properties. Against the claim that it would help the wealthy, I would simply say that the wealthiest occupiers probably use brokers to arrange their insurance. It is the people who cannot do that—people in what I would term “middle class-ish” properties—who might find themselves in difficulty. I make that case on behalf of not one political party, but the all-party group, and I urge the Government to reconsider.

The hon. Member for Kingston upon Hull North drew our attention to the distinct position of properties built after 2009. Yet again, I share that concern. That year was chosen because it was when the statement of principles was renewed, and the view, therefore, was, “Well, everyone knew that from that year onwards they would be excluded, so let’s not have them covered,” but we know that there is already much better mapping data. I would like us to make use of the mapping data, rather than simply not covering post-2009 properties.

Julian Sturdy (York Outer) (Con): My hon. Friend is making a powerful point. Should we not be ensuring that we do not build new properties in flood risk areas?

Jonathan Evans: That is a much better proposition than telling someone in a property built in 2010, “Flood Re is not for you.” If it is to be a solution to the difficulties of insurance, as many properties as possible should be covered. That includes what are termed “genuinely uninsurable” properties. They are excluded as well, yet they might be occupied or habitable properties with a council tax rating. Why are we not to include them? In my judgment, their number is not so considerable as to make the scheme impossible to operate. As the Minister knows, the all-party group made that representation to him during the consultation, and we hope he will take it on board as he considers his amendments in Committee.

I already know of one area where the Minister has accepted our recommendation. We suggested giving regulatory responsibility to the Financial Conduct Authority, and that is now in the Bill. The all-party group welcomes that inclusion, but hopes that the Minister will give further consideration to the other points we have made in support of what in our judgment is a proper solution to a difficulty that has taken too long to resolve.

8.46 pm

Roger Williams (Brecon and Radnorshire) (LD): It is a great pleasure to follow my hon. Friend the Member for Cardiff North (Jonathan Evans). In a different incarnation, he was my Member of Parliament, and indeed my tenant, so our relationship goes back a long way. His expertise in insurance, which he brings to this debate, is well known. We have heard many other

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contributions tonight, including from the hon. Member for Newbury (Richard Benyon), who has great experience and knowledge of these matters. Had he been introducing the Bill, he would have had three years to prepare, whereas my hon. Friend the Minister, whom I am pleased to see here, has had about three weeks. Nevertheless, he was a member of the Environment, Food and Rural Affairs Committee that scrutinised the draft Bill and will be aware of the detail and some of our concerns about things that are not in the Bill.

I broadly welcome the Bill. One of the vital challenges facing the UK is the need to protect the health of our rivers and lakes, while keeping water available and affordable. Water resources are currently under considerable pressure, and it is predicted that water constraints will become more severe in the future. There is limited competition in the current system, so I welcome the competition clauses, which will open the sector up to more competition and encourage the construction of more connections between water company areas. The introduction of retail competition among water companies could support greater water efficiency in the non-domestic sector.

Although I welcome the idea that businesses and local authorities can switch water suppliers, I recognise that individual consumers will not have that opportunity. The regulator must ensure that bills remain affordable, while expecting water companies to have the ability to invest in the infrastructure. We need consumer bills to be affordable now, but we must also recognise that water supplies are needed for the future, so I hope that we can amend the Bill in Committee to make it better for consumers and for the environment. There has been concern that, as companies compete for customers in the commercial sector, domestic customers may carry more of the costs of supply. We will need to hear from the Minister in Committee how that will be prevented.

The system for abstraction licences is not fit for purpose and is long overdue for reform. The Government have said that the work will have to wait until the mid-2020s, but it is important to address it much earlier than that. We need a system of licensing abstraction that balances resilience with the state of the environment.

One of Ofwat’s secondary duties is to promote sustainable development. Liberal Democrats would like to see that duty elevated to a primary level. For that reason, I intend to table an amendment in Committee to give Ofwat a primary duty to promote sustainability. I agreed with the comments of my noble Friend Baroness Parminter, in a debate on the Gracious Address in the other place, that a thorough examination is needed of the effect of the water industry on the environment now and in the longer term.

Ofwat seems to have a rather confused approach to sustainability. Let me quote from the supplementary written evidence submitted by Ofwat to the EFRA Committee in respect of the draft Water Bill:

“I provide further written evidence on specifically why we consider that our duty to contribute to sustainable development should not be elevated to a primary duty”,

yet it also said:

“Indeed, the core vision of our strategy is: ‘A sustainable water cycle in which we are able to meet the needs of water and sewerage services while enabling future generations to meet their own needs”,

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It calls this “sustainable water”—it seems to me that its thinking is rather confused. My understanding of sustainability is that it is about balance, not conflict, and Ofwat should be well aware that its decision making can affect the environment as well as economic and social matters. I believe that Ofwat has accepted the need for sustainability as a primary duty and that the Government should legislate to establish it.

Huw Irranca-Davies (Ogmore) (Lab): The hon. Gentleman, who represents a constituency not far away from mine, makes some very good points. Does he agree that in his opening remarks the Secretary of State seemed to be arguing for that duty of sustainability and, indeed, that his rhetoric fitted exactly what the hon. Gentleman suggests should be on the face of the Bill?

Roger Williams: I thank the hon. Gentleman for those comments. There is widespread acceptance that sustainability should be a core feature of Ofwat’s work, yet it seems that some people are setting their face against having that on the face of the Bill.

The UK has been faced with an increase in the number and severity of flood events, and it is vital for the Government to provide widespread and affordable household insurance in at-risk areas. I thus welcome the proposed new legal framework that seeks to establish Flood Re—a levy-funded reinsurance pool for high-risk individuals. If that is introduced, insurance companies must make their customers aware of the scheme and the opportunities it provides. A number of my constituents in Llangammarch Wells were really frightened by some press releases put out by the Environment Agency in Wales—now called Natural Resources Wales—about restricted insurance. After further consultation with Natural Resources Wales, we have been able to sort that matter out.

Water bills set a particular challenge for low-income families. There are no specific benefits such as housing benefit or council tax benefit to help with these costs, but the Government have stated that they will continue to support the WaterSure initiative, even though take-up has been rather poor. Other water companies can bring forward their own schemes, and Welsh Water provides a good example of how that can be done in practice.

The water industry is responsible for the most essential public services. Few things are more important for public health—or indeed for normal day-to-day living—than a safe and reliable supply of drinking water, and the efficient collection and treatment of waste water. More than 90% of health improvements over the last two centuries have resulted from the provision of safe-to-drink tap water and proper sanitation.

The water industry everywhere is very capital-intensive. Many of its assets—reservoirs, treatment works, water pipes and sewers—have very long lives, but, even when we allow for that and for the fact that investment doubled after privatisation in 1989, the average age of water company networks is increasing every day. The rate of renewal of sewers, for example, gives an average assumed age of more than 600 years. Investment levels are agreed with regulators every five years, and investment decisions are based on the priorities for the years ahead.

The water industry invests and spends more than it receives from its customers through bills. It finances its expenditure by raising money from investors in the

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capital markets, and so far that money has come almost entirely from bonds and other borrowing. In other words, the industry is cash-flow negative, and that will persist, partly because of the backlog of asset renewal but mainly because of the new standards that must be met. As a result of that cash-flow negativity and continuing high and necessary levels of investment, the cost of capital and funds raised from the capital markets is key, and will become more and more important. The cost of capital on money raised since privatisation already absorbs a third of the bill, and relatively small changes in the allowed or achieved cost of funding. Every 1% saving on the cost of financing the industry’s “regulated capital value” reduces customer bills by 5%.

Given that so much of the value chain is represented by the network of assets, both the raw material and the retail element represent a very small part of the overall bill. The Water Bill proposes that business customers in England should be allowed to choose their water retailers, but the Welsh Government have decided not to go down that route. As Professor Dieter Helm has said, large business customers will argue that they should pay only marginal costs, and if water companies succumb to the pressure, it will mean higher bills for household customers.

The true cost per customer varies enormously, and the rural customer costs many times more than the urban customer. Averaging the cost in that way is good public policy. “De-averaging” poses a real risk by giving business customers choice, thus causing water companies to reduce their tariffs locally to satisfy demands from big customers and to recover the lost income from household customers who cannot exert the same pressure.

The water industry should be owned, managed and operated in the interests of customers. I do not believe that it should be re-nationalised, but this long-term industry provides us all with the most essential of public services. Few things are more important to public health, and indeed to modern life, than a safe and reliable supply of tap water.

Huw Irranca-Davies: At the risk of being slightly parochial, may I ask whether the hon. Gentleman finds it odd, given the rush to privatisation all those aeons ago, that we have only one mutual water company? In a week in which we have heard bad news about co-operative movements and so on, we should bear it in mind that that one mutual company has achieved very high levels of customer satisfaction, has invested massively over the last couple of decades, and manages to keep its bills pretty low despite having no profits, no shareholders and no dividends.

Roger Williams: I think that it will come as no surprise to the hon. Gentleman that I am not only a customer of Welsh Water, but a great fan of the model. Welsh Water is just about the only public utility company which receives letters of support that outnumber its letters of complaint, and its credit rating is higher than those of all the other water companies. It can borrow at almost the same rate as the Government.

The water company that serves Wales, and much of Herefordshire and Deeside, is owned, financed and managed on behalf of its customers. Glas Cymru has a strong board with a majority of non-executive directors, all of whom are individuals of high standing. It complies with corporate governance best practice, although it

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has no shares listed on the Stock Exchange. It accounts for its performance to its members and other stakeholders and measures its performance against things that really matter to customers: drinking water, reliability of service, protecting our rivers and coastal waters from pollution, and customer satisfaction. The pay of everybody who works for Glas Cymru is linked to performance against those measures, and because Glas Cymru is one of 10 large water and sewerage companies in England and Wales everyone can judge whether it has done a good, bad or middling job on the measures that matter to customers and the environment. Welsh Water is unique in the water industry. Its employees are rewarded on the basis of customer satisfaction rather than shareholder value. The Bill does not address the structure of the water industry—that may be for another day—but I welcome its broad thrust and look forward to working on the Bill Committee with my hon. Friend the Minister.

9 pm

Ian Swales (Redcar) (LD): It is a pleasure to follow my hon. Friend the Member for Brecon and Radnorshire (Roger Williams), whose speech was comprehensive.

In my constituency, 5 September was a bright, sunny day, as was 7 September. In between, on 6 September, we had 10% of our annual rainfall in a single day. There was heavy flooding all around my constituency. That was not isolated at all; many communities were affected, including both homes and businesses, and some of the affected homes had been completed within the last two years. For some of the people affected, this was the third or fourth time they had been flooded in the last few years, and it was heartbreaking to go around hearing all the stories. There was the story of the 20-year relationship that had finally been broken by yet another flooding incident, and that of John and Margaret Cone, whose house I went to in 2008 to see the watermarks 2-feet up their walls just before they moved out. They had to move out again, now aged over 80, and watch builders taking down part of the outside skin of their house to try to dry out the cavity.

I know that many other Members have similar constituency stories, but Redcar is on the coast and is flanked by the tidal part of the river Tees, yet this flood was not caused by the sea. Just a few months ago we were celebrating the completion of the £30 million sea defences in Redcar, but this incident was all about rainfall on the land.

We might think that being on the coast would help because water can run to the beach and away, but we have problems with natural watercourses and culverts. Some of those natural watercourses are commemorated in current street names: the Fleet, Long Beck and West Dyke. Culverts, sewers and house building have together created environments in which the water cannot get away as it should, the most absurd example being in the village of New Marske, which is halfway up a hill yet has serious flooding problems. Northumbrian Water has been investing heavily in tanks around the town and they are there to hold up excess surface water, to avoid inundating the sewerage system and putting raw sewage into the sea. Of course, given the golden beaches from Redcar down to Saltburn, which are a Mecca for surfers, I very much welcome that I and attended the “Surfers against Sewage” reception in the House just a few weeks

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ago. However, I also have to say that I support householders against sewage and many householders in my constituency had raw sewage in their house that day. An investigation is going on into the role of these tanks, and it is concerning that a lot of the major flooding was in the area of these tanks—so-called hydro-break tanks. I therefore think they may well be part of the problem, and I am not convinced that their overflow arrangements work sufficiently well in times of very high rainfall.

My area is suffering from a set of man-made problems. It is by the sea and it is not in a valley, so drainage should be no problem. We need radical solutions. I think of the city of Valencia in Spain where, after serious flooding in the 1950s, the entire river was taken out of the city. If anyone watches the Formula 1 race at Valencia, they can see the cars racing around where the new river is now, and the old river is a very strange-looking park in the middle of the city. It is a nice green area, but with bridges all the way across it. We may need similarly radical solutions to help divert flooding away from towns and villages, and I hope that, once the needs assessment is made, DEFRA will look sympathetically at the possible solutions.

On the wider issues, one of the problems the water industry has is that the benefits of investment are not necessarily aligned with the costs. For example, councils and builders continue to build on flood plains because they benefit from that and do not bear the costs when things go wrong. Who pays if watercourses are not properly kept clear? The people responsible for keeping them clear do not pay the costs if they are not clear. Do developers pay for all the new infrastructure costs of water and sewerage when they do developments? One of the things the Government should therefore look at is the alignment of costs and benefits.

There is no doubt that in the current system, water companies play a very big role in paying for the costs of the whole infrastructure—and so they should. It is not acceptable that they come running to the taxpayer to meet extra costs, particularly when many of them are clever at avoiding taxes. Water companies must be made to pay the full investment and infrastructure costs of the areas they are responsible for.

I very much welcome the part of the Bill dealing with flood insurance. The Bill’s aims and the Flood Re proposals are an excellent way of addressing the issues. I note that clause 47 is going to be fleshed out in Committee, and the Chair of the Environment, Food and Rural Affairs Committee, the hon. Member for Thirsk and Malton (Miss McIntosh), said that she would like to see more included in the Bill in this regard. I certainly support that, because we should all be concerned that the devil might be in the detail. I hope the Minister will say something about how he sees clause 47 being fleshed out.

Mel Stride (Central Devon) (Con): On making flood insurance available for properties most at risk, does the hon. Gentleman agree that it is vital that we drill down to the details, such as the excess arrangements in the policies that are made available to those in need?

Ian Swales: I certainly agree and the hon. Gentleman makes an excellent point, which I will cover in the next few minutes. We have heard from other Members today examples of great excesses being charged. Some, but

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not many, of my constituents are being refused insurance on any terms at all. However, the ones who do get insurance are reporting high premiums and high excesses; some excesses are so high that they are effectively insured only for an Armageddon situation. I therefore urge the Minister not just to concentrate on the availability of insurance but to make the premium levels and excess levels stick with the industry.

I was interested to hear the speech of the hon. Member for Kingston upon Hull North (Diana Johnson), who made some very good points about houses completed since 2009. I hope the Minister will define what he means by houses built on a flood plain. What will happen to houses not deemed to have been so built, but which have nevertheless been flooded recently, like some in my constituency? What will happen to houses built since 2009 that have yet to be flooded but will flood in future? Will the insurance industry take the opportunity to withdraw insurance? The planning systems need looking at. Building regulations would help a lot in dealing with water consumption, and a lot more attention needs to be paid in the planning system to the issue of building on flood plains.

Some of the measures in the Bill are undoubtedly designed essentially to deal with water shortages, particularly in the south-east. This is yet another capacity issue for the south-east, to add to those of housing, schools, transport and many others. Water is plentiful in the north-east and, I understand, in the north-west too. I therefore hope that DEFRA Ministers will lend their full weight to the Government’s efforts to rebalance the economy away from the south-east.

9.9 pm

Tessa Munt (Wells) (LD): I apologise for not being present for the opening of the debate; this was because I was attending a Committee elsewhere in the House.

I want to address three areas: fracking, flooding on farmland and flood insurance. I shall start with flood insurance. Much of the patch that I represent is at or below sea level, and it is prone to flooding. Many planning permissions on land in areas that have already flooded are in existence now, but I want to concentrate on future developments. In large parts of my constituency, it would be hard to build any sort of home or business without it being on the flood plain. Would the Minister consider encouraging local authorities to look at the townhouse model? Homes should be built on stilts in flood areas, or at least with garages at ground floor level so that people are not put at risk through flooding and so that goods and property can be moved to upper floors more easily to avoid damage.

I have a minor suggestion for the Minister. It was suggested earlier that the water companies should be a statutory consultee, but would it also be possible for representatives of the Association of British Insurers to clarify the insurance situation on new property proposals being put before development committees, when they involve developments in areas of flood risk? In that way, developers would be forced to use design to mitigate the risk, and purchasers would understand the risks and insurance costs involved, as well as knowing that they would be able to get insurance for their home or business.

Turning to flooding on farmland, I should like to pay tribute to my hon. Friend the Member for Newbury (Richard Benyon), who took the trouble to visit my

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constituency when he was the Minister with responsibility for this issue. He visited the Axe and Brue valleys in April this year and met more than 100 farmers and smallholders whose homes, stock and businesses had been severely affected by months of flooding. The farmers made it clear that the rivers, rhynes and waterways had suffered over the past 13 to 15 years because they had not been cleared or maintained. They had been neglected in the areas served by the Axe and the Brue rivers. There were problems with silt, blockages and overgrowing. In Somerset, money usually goes to the areas surrounding the Tone and Parrett rivers, but it is important that all our waterways should be maintained and improved.

The Environment Agency’s six aims and objectives recognise wildlife, flora and fauna, but there is no recognition whatever of the value of productive land. There should be, particularly at a time when food production is so important and we desire to be self-sufficient, or at least self-supplying. That point was also highlighted regularly. I hope that the Minister will use this opportunity to ensure that the residents and businesspeople in my part of Somerset get the dredging that they need and the ongoing maintenance that they deserve from the Environment Agency. I also hope that the agency and the Government will recognise the value of productive land, and that there is a response to the need to protect agricultural interests as well.

Ian Swales: Does my hon. Friend agree that failure to dredge does not often result in a cost to those who should be dredging, and that it mainly results in a cost to the insurance industry? Does she think that something should be done about that?

Tessa Munt: My hon. Friend is absolutely right. It would be so much better if we could get the dredging programme sorted out, because it would get rid of the need for massive insurance claims. In my area, if water can reach the pumps, it can be pumped away. Because of the lack of dredging, however, it cannot reach the pumps. It is possible to see the pumps from the flooded areas, but the water cannot reach them and therefore cannot be taken away. Dredging would cure that problem.

My final area of concern is the risk that fracking for shale gas poses to our rivers and groundwater in terms of pollution and water stress. The Bill already amends the 2010 environmental permitting regulations that cover fracking activities, making it an excellent opportunity to address these concerns and strengthen the existing regulatory framework. The House has heard repeatedly that our regulatory regime for fracking is the most stringent in the world, and it is true that, if properly implemented and enforced, the existing regulations could mitigate many of the risks posed by fracking. However, although fracking has been taking place for years, this particular new technology that is planned for the UK brings more serious risks that we cannot properly assess at this early stage. Even the best regulatory regime can only mitigate risk; it cannot eliminate it. That means that a water pollution incident cannot be ruled out. It is therefore of considerable concern that it is not clear who would be liable if something does go wrong. One of the main risks from fracking is pollution of groundwater, which can occur because of faults in production wells. Groundwater clean-up is very costly and can take decades. For example, the contamination of a chalk aquifer near

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St Albans in Hertfordshire in 2000 led to an extensive contamination of the public drinking water supply, and the cost of the clean-up, which took a decade, was about £16 million.

Even if liability for pollution can be proven, there remains a risk that fracking companies could go bankrupt, leaving taxpayers or water companies with the costs. That has been a major issue in the case of Scottish Coal, whose liquidators have been given permission to abandon coal mines and polluted land without carrying out restoration or in any way controlling pollution from the sites. Instead of identifying and addressing these risks, it appears that the opposite direction of travel is being taken. Not only is there pressure to simplify and streamline regulation, with the Environment Agency committing to, for example, a dramatic reduction in the time it takes to issue permits to fracking operators, but there is evidence to suggest that existing regulations are not being adequately enforced. For example, at Preese Hall, the Environment Agency did not issue environmental permits for the disposal and management of flow-back waste water; it only discovered after the site had been hydraulically fractured that the flow-back fluid should be classified as radioactive waste.

If experiences in the United States have taught us anything, it would be that we need a strict regulatory regime. We cannot rely on putting our faith in the industry behaving well on a voluntary basis. In a groundbreaking peer-reviewed study of aquifers overlying the Marcellus and Utica shales in Pennsylvania and New York, Osborn et al, 2011, uncovered systematic evidence of methane contamination of drinking water linked to shale gas extraction.

In England, a third of all our domestic water supply comes from groundwater reserves, which are also essential for industry and farming. It is vital that we go as far as possible to mitigate risks in advance and ensure that we make provision to cover the full costs of clean-ups. With that in mind, I ask the Minister to ensure the Bill addresses these issues by implementing a liability guarantee. Such a guarantee would ensure the public purse and the taxpayer are not hit when anything goes wrong.

My next big concern is the amount of water that is required for the production of shale gas. Shale gas exploration and production is a highly water-intensive industry, and the process of fracking requires enormous volumes of water. At Preese Hall up to 8,400 cubic metres—about the equivalent of three and a half Olympic-sized swimming pools—is required per well. The fracking process may have to be repeated several times over the life of the well to keep the gas flowing. With proposals for thousands of sites, each with multiple wells, the potential drain on our already stressed rivers and groundwater could be huge.

I ask the Minister and his Department to consider the Bill as an opportunity to address these concerns by reforming the abstraction regime for taking water from the environment. That should go a long way to ensuring that additional pressure on water resources from fracking does not result in the over-abstraction of water from areas already under water stress. If the Government choose to exploit this new resource, we can make sure that we do so in a way that does not place unacceptable

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risks on the environment or on the public purse. Such an approach will also guard against unnecessary resource risks to our communities, our countryside and our businesses.

9.19 pm

Thomas Docherty (Dunfermline and West Fife) (Lab): It is a pleasure to respond to this debate on behalf of the Opposition. We have had a good and lively discussion this evening, with a number of thoughtful and knowledgeable contributions. I hope to address in turn each issue raised by Members.

I am disappointed that in about five hours of debate we heard little from Government Members about how they propose to deal with the cost of living crisis. Some of them scoffed when Labour Members talked about the pressures facing households up and down the country. The cold, hard reality is that families are struggling today. My hon. Friend the Member for South Shields (Mrs Lewell-Buck), who serves with such distinction on the Environment, Food and Rural Affairs Committee, made an excellent and thoughtful speech about the pressures on household budgets.

Mel Stride: The hon. Gentleman is right to focus on cost of living issues. We also accept that they are important. Does he not accept that, if we look at the increase in average water and sewerage costs, we saw the greatest spike from about 2005 to the end of the period in which the Labour Government were in office?

Thomas Docherty: I will come on to that point in just one moment. As my hon. Friend the Member for South Shields mentioned, the latest figures show that more than 80,000 households have sought advice from citizens advice bureaux about water bill debts in the past year, which is almost exactly the same as the figure for how many sought help because they could not pay their energy bills.

The hon. Gentleman asks what the previous Government did. As we have heard today, we took decisive action to help families. We were the only Government to have forced a real-terms cut in a price review. He joined the House in 2005, which is interesting because it was the previous price review in which there was a real-term cut. The previous Government introduced WaterSure—the first social tariff scheme.

Sheryll Murray: Will the hon. Gentleman enlighten us on his proposals? We have heard an awful lot about the problems but not much about his or his party’s solution.

Thomas Docherty: If the hon. Lady shows a bit of patience, she might hear more detail from us than we heard today from the Secretary of State.

The previous Labour Government passed legislation that allowed the water companies to introduce their own schemes. Those companies had assured the country that they were keen to do so, yet almost four years after that legislation was passed, how many of them have kept their promises? How many water companies have developed a scheme within their region? How many of those fat-cat boards have put even a fraction of their obscene profits into the pockets of the hardest hit households? Just three out of 20 of the most successful and profitable companies in the country have lifted a

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finger to help their customers. It is no wonder that the most charitable description of the system, as offered by Citizens Advice, is “ad hoc”.

What did we hear from the Secretary of State today? What was his response to corporate failure and what was his proposal to help customers? He has written a second letter to his friends, the water bosses, not to demand real action but to make a helpful suggestion. He does not believe in Government intervention. No matter how much the market fails and the companies drag their feet and how many customers cannot afford the inflation-busting prices, this is a Government who do not believe that they should act. We on the Labour Benches do not share that belief. We believe that when fat-cat bosses will not act, the Government must.

As my hon. Friend the Member for Garston and Halewood (Maria Eagle) said, we will introduce a national affordability scheme. I welcome the points made by my hon. Friend the Member for Plymouth, Moor View (Alison Seabeck), who has been a constant champion of hard-pressed customers in the south-west region. Along with other Members, she raised the subject of flooding and flood insurance, which is an important issue. We share the concerns of many Members from across the House about both flood defences and how households can secure affordable insurance. The latest figures from the Environment Agency put the cost of damage to property in the past year at £277 million, almost £200 million of which was household damage.

We heard an excellent speech from the Chair of the Environmental Audit Committee, my hon. Friend the Member for Stoke-on-Trent North (Joan Walley), who highlighted the problem eloquently. The Chair of the Environment, Food and Rural Affairs Committee, the hon. Member for Thirsk and Malton (Miss McIntosh), highlighted the important and often overlooked issue of surface water run-off. The Opposition welcome the principle behind the proposed new scheme, Flood Re, but like the Select Committee we have serious and legitimate concerns about the fact that the Bill contains only one clause on that matter.

My hon. Friend the Member for Kingston upon Hull North (Diana Johnson) spoke from the heart about the problem of flooding. I am sure that the House would acknowledge that she has been a champion for her city, and I hope the Minister will provide real answers to the important issues that she raised.

I understand that Ministers are hastily drafting new clauses even now, but they must be adequately scrutinised. The issue has been raised by Members on both sides of the House, so will the Minister give a firm undertaking that the new clauses will be tabled in time to be reviewed adequately in Committee? Will he assure the House that such crucial amendments will not be rushed out at the last minute without due scrutiny?

We also heard from Members on both sides of the House about the tax paid by the water companies. As my hon. Friend the shadow Secretary of State has already said, it is simply unacceptable for water companies to make £1.9 billion in pre-tax profits and pay out £1.8 billion to shareholders. That is why we need to give the regulator broader powers to step in to protect customers and to ensure that fat-cat companies play by the same rules as other businesses. We want to ensure that excess profits, rather than heading to shareholders’ pockets, are used responsibly to reduce bills and improve infrastructure such as the Thames tunnel.

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The hon. Member for Broxbourne (Mr Walker) mentioned abstraction. Not for the first time, he raised his concerns about the damage to chalk streams and asked whether I would set out our party’s position on the environmental impact issue. I am always keen to oblige him, so let me set out clearly our view of the crucial need for environmental mitigation. Even when the Government have tried to introduce reform, they have failed to follow through. As the Environment, Food and Rural Affairs Committee has warned repeatedly, a half-baked proposal to introduce upstream competition without proper abstract reform is worse than the status quo. As the WWF warned today,

“The licence system is completely broken, unsustainable and out of date”.

Why have the Government ended up in that mess? As in so many other cases where the Government have decided that something is difficult, tricky or requires them to act, they have just pushed this off. It should be no surprise that the Secretary of State ideologically opposes any Government action, but I wonder why the Minister responsible for water, the Under-Secretary of State for Environment, Food and Rural Affairs, the hon. Member for North Cornwall (Dan Rogerson), has simply gone along with his boss’s laissez-faire attitude to our natural environment. Simply to promise, as Ministers apparently have, that the Department will do something in the next Parliament shows a lack of credibility.

Let me be clear: if Ministers have found thinking of solutions too hard, they should postpone all upstream reform until we have Ministers and officials who will stand up to the vested interests who are damaging our rivers.

The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dan Rogerson): I am grateful to the hon. Gentleman for giving way, and I look forward to debating many of these issues with him in Committee over the coming weeks. I am struggling to follow his argument. He says that there is an issue with abstraction reform and that we should press ahead and do something now, but his solution otherwise is to delay the whole process and not to consider any kind of reform of the industry. That seems to be his argument.

Thomas Docherty: Oh dear me; the Minister has obviously forgotten his own position. He will still be a member of the Environment, Food and Rural Affairs Committee for a little longer, so perhaps he can set out which side of the argument he agrees with—that expressed by the Select Committee of which he is a member or that in his new role as a Minister.

The hon. Members for Arfon (Hywel Williams) and for Newbury (Richard Benyon) mentioned retail competition, and the Opposition support non-domestic competition. It has been a success in Scotland, and like the Select Committee of which the Minister is still a member, we believe that, implemented properly, it will work in England. Like the Committee, however, we think there are technical improvements that we intend to explore further in Committee.

Hywel Williams: Has the hon. Gentleman any estimate of the cost of introducing competition in Scotland, where it is already under way, or in England? How much does he reckon that it will cost?

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Thomas Docherty: The hon. Gentleman indicated that he is looking forward to serving on the Bill Committee, so we can discuss the matter further there. I refer him to the Select Committee’s report. The estimate of the first decade of competition in Scotland is that it will save the public sector £100 million. I think that the Department has produced figures for the savings in England, but the key point is that competition must be introduced properly.

Clearly, a range of important issues will require greater scrutiny and debate in Committee. The Bill is contentious not because of what it proposes—after all, the coalition has taken three and a half years to introduce measures that Labour developed in government—but because of what it does not deal with. It contains nothing on helping households struggling to pay their bills, nothing to make water companies pay their fair share of taxes, nothing to give the regulator real teeth to take on the fat cats, and nothing on reforming water abstraction.

I can assure the House that we will table amendments in Committee that will help households, give the regulators new powers, tackle tax avoidance and protect our natural environment. In conclusion, we will work constructively with the Government, and in that spirit, we will vote the Bill on Second Reading.

9.31 pm

The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Dan Rogerson): I particularly welcome that last comment from the hon. Member for Dunfermline and West Fife (Thomas Docherty) and I look forward to discussing some of these issues in Committee. I thank all hon. Members for their participation in this interesting debate, which has been well informed. Hon. Members have covered a number of aspects of the Bill and, as it is a debate on Second Reading, some things that they would like added to the Bill. I will try to cover as many of those issues as I can.

I start by responding to the closing remarks from the hon. Member for Dunfermline and West Fife. He dangled the prospect of something to do with affordability and helping people with their bills. I was in the House in the previous Parliament when constituents throughout the country and particularly in areas such as mine in the south-west were facing a real challenge, as the hon. Member for Plymouth, Moor View (Alison Seabeck) pointed out. I had meetings with the hon. Gentleman’s Front-Bench colleague who is no longer in his place, the hon. Member for Ogmore (Huw Irranca-Davies), and we debated these issues. It was felt that nothing could be done. It was a very difficult problem. What we had from the previous Government was a series of reviews, some of which were good, well informed reviews that made a number of suggestions, but it has taken this Government to act upon them. That is the difference between the Government and the Opposition.

The hon. Member for Dunfermline and West Fife says that he will not oppose the Bill today. That is encouraging, and I look forward to working at that level of consensus to deliver the aspects of the Bill that will assist many of our constituents around the country, as well as updating the framework around the water industry for the future and dealing with the flood insurance issues, to which I shall return in a little while. These are hugely important issues. As a Member for an area where water issues have been a live topic of debate and as a member of the Select Committee, as the hon.

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Gentleman helpfully pointed out, I am all too aware of the range of challenges that we face, from the cost of living for hard-pressed families to future pressures on water resources and flooding. We heard many contributions about those issues.

I have witnessed at first hand the environmental benefits that investment in the water sector have delivered over the past 24 years since the industry was privatised. I could raise some issues about how that occurred at the time. My hon. Friend the Member for South East Cornwall (Sheryll Murray) sought to give us a history lesson about the political balance in Cornwall and what that may or may not have delivered. There were no proposals to deal with the lack of affordability in the south-west until the coalition Government came in. Single-party Governments of both stripes did not deal with the problem, so I leave hon. Members to draw their own conclusions on what might have led to the change.

Ian Swales: We heard about the real-terms cut applied by the previous Government. Do we know the average annual value of that cut?

Dan Rogerson: We saw bills cut for a period, but then they went back up again. If we talk to our constituents about their memories of water bills over the past few years, both in the run-up to the general election and since in the price review period presided over by the previous Government, we will hear that their experience was that bills were rising.

On the environmental benefits since privatisation, we have seen huge improvements—for example, in bathing water quality—and that is very much to be welcomed and something that we should dwell on. We have had the opportunity to consider how that progress has been made. Of course, we will see further challenging regulation on bathing water quality in future, so it is absolutely vital that the industry, along with everyone else in the community who can influence water quality, is ready for the challenge, to make it even better.

The Bill seeks to look at market reform, because we need water supplies that are resilient to future pressures, while keeping bills affordable and, indeed, minimising the impact on the environment. That is competition not for the sake of it, but to drive greater efficiencies in the water industry and encourage more innovation. The benefits to business customers are obvious: more choice, better customer service and packages tailored to their needs.

All customers, including householders, will benefit from an industry that is incentivised to look for the most efficient way to meet future demand. We know that that works in practice. Last week, I visited a housing development in Rissington in Gloucestershire, where Albion Water—a new entrant—is supplying water and sewerage services. With its innovative solutions, it can provide separate supplies of drinking water and recycled greywater to houses in the development. It can therefore compete successfully against the incumbent water company on price, while reducing daily drinking water consumption by nearly half. That is evolution, rather than a radical overhaul.

Since privatisation, the industry has been successful in bringing in investment, which has delivered huge improvements, as I have mentioned. We have a strong

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and stable regulatory regime and no intention of disrupting it. That is why we are working closely with the industry to develop future markets.

Market reform is understandably of great interest to hon. Members. They want to know about it from both perspectives: they are concerned in some cases that we might be going too far, and in others that we might not be going far enough. Some Members, such as my hon. Friend the Member for St Austell and Newquay (Stephen Gilbert), are keen to see competition in the residential sector, but we want to ensure that the change that we introduce is proportionate and that we proceed on a good evidence base. We can learn from the experience of Scotland, where business customers and non-domestic customers increasingly benefit from competition, so we know that the system can work. Competition in the residential sector would be a huge change, so we would have to come to anything that we wanted to do in that area at a later date. However, I take on board my hon. Friend’s comments and am reassured that he is observing that.

Geoffrey Clifton-Brown (The Cotswolds) (Con): At least half my constituency is supplied by Thames Water. There are consistent rumours that it is thinking about forcing all its customers on to water meters. Will the Bill make it easier for Thames Water to do that?

Dan Rogerson: Companies in water-stressed areas will be able to push people towards meters. Of course, new properties are customarily metered now, as a result of existing legislation. As we have heard today, there is a range of views on whether metering is desirable. Certainly, with regard to managing a scarce resource, it is desirable, but we must carefully examine the implications, such as the cost of the investment needed to install meters and the impact on bills, because there are always winners and losers. We need to look at that closely, as we move forward.

Mr Charles Walker: The population of this country is forecast to grow by 8 million or 9 million, and most of that growth will be in the east and the south-east. The problem is that the Bill simply does not address what we are going to do with these people and how we are going to provide them with water. We need more reservoirs.

Dan Rogerson: I agree that, as my right hon. Friend the Secretary of State said, we need to capture more of this water and make it work for us in such a way that we can improve environmental outcomes as well as resilience. That is very much what we want to happen.

Miss McIntosh: In terms of capturing water, is my hon. Friend going to deal with SUDS and surface water, because I know that he will care as passionately about this in his new position as he did when he was a member of the Select Committee?

Dan Rogerson: I had a premonition that I might get such an intervention from my hon. Friend, the Chair of the Select Committee. I know she is pleased that we are, as a Government, making progress towards implementing this process in April 2014. She would like it to be sooner, but we have to make sure that we get it right. The views of the Select Committee have been very useful in making sure that we get it brought in adequately.

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We heard a couple of very specific questions on market reforms. My hon. Friend the Member for St Austell and Newquay asked about small charities that operate from residential properties. The reform would affect non-domestic properties, so if a charity is operating from a property that is primarily residential, it will not have access to it, but it will be open to it if it is operating from other premises.

On abstraction reform, I entirely agree with Members’ comments about the need to tackle abstraction, which is damaging our rivers. We are tackling this in two ways. First, we are taking action using the tools already available to address over-abstraction. The Environment Agency has reviewed thousands of abstraction licences and has changed about 80 of them, returning 75 billion litres of water per year to the environment in England. That is equivalent to the annual average water use of a city larger than Birmingham. There is clearly a lot more to do in the individual catchments that have been mentioned, and we have to take account of the stress that is put on them.

The Bill will also help by removing water companies’ right to compensation to ensure that the funding of these schemes moves into Ofwat’s price review process, which is a far better way of tackling over-abstraction. In the longer term, we need a reformed regime fit to face the future challenges, and we will publish a consultation on possible options in December. [Interruption.] These reforms will affect a range of businesses, so we need to get them right.

George Hollingbery: An awful lot of gibbering and jabbering and yibbering and yabbering is going on on the Opposition Front Bench. Will the Minister please remind us of how much abstraction reform occurred in the 13 years of the Labour Government just past?

Dan Rogerson: Very little, I think is the answer. I thank the hon. Gentleman for his intervention.

Dealing with abstraction gives me an opportunity to welcome the contribution by my predecessor, the hon. Member for Newbury (Richard Benyon), not only because of all the work that he put in and how he has informed our debate, but because by seemingly being very popular across the House he will make it much harder for anyone to oppose what is in the Bill, as it was his work that got us to this stage. I am sure that that will help to develop the consensus, because everyone agrees with the conclusions he drew and the position we are in. The Government are clear that any moves on abstraction and upstream reform must work together, so what we are establishing in the Bill will come into effect alongside the abstraction reform that we are moving towards. We have to get this right because it is crucial that we have the water resources to deliver the growth and environmental outcomes that we want to see.

Many Members covered flood insurance. I am all too aware of the devastation caused by flooding and its financial and emotional impact. I recall the destruction in Boscastle in my constituency. I became the Member of Parliament for North Cornwall a year after that tragedy, where fortunately no lives were lost. It also affected other nearby communities such as Crackington and Canworthy Water. The problem was that flood insurance companies were not up to the task. Fortunately, the Association of British Insurers was able to step in to

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offer advice and to help resolve the issues. As we have heard, other Members have similar recollections from their constituencies.

Flood risk management remains a top priority for this Government. We have committed record levels of capital spend and more than quadrupled contributions from other sources. As a result, we will have improved defences for 165,000 households by March 2015 and an extra 300,000 by 2021. I recently visited South Zeal in Devon, where residents shared with me their harrowing experiences of flooding. They also showed me the actions the community is taking to become more resilient to flooding, to keep down their insurance premiums in the long term. This Government are committed to providing access to affordable insurance for households at high risk.

We will table new clauses in Committee. Draft clauses have been available for some time and much of our work in Committee will be based on them. Were we to delay the Bill after this Second Reading debate, we would not be able to deliver our programme in a timely fashion. That is our objective. Yes, it is regrettable that those clauses are not in the Bill as drafted, but these are very complicated negotiations to ensure that an industry-led solution works not only for the industry, but fundamentally for communities and residents who need support.

Thomas Docherty: The Minister has given an undertaking that those new clauses will be available for scrutiny by the Bill Committee next week. Will he say, once and for all, whether those 20-odd clauses will be available in time for the Committee adequately to review them next week?

Dan Rogerson: It is my intention that they will be available for the Committee to look at as soon as possible, but we have to get them right and make sure that they deliver what the Government and my predecessor agreed with the industry, so that we deliver effectively.

Alison Seabeck: I thank the hon. Gentleman for giving way; he is being very decent with his time. Will he confirm that the new clauses will be available for the witness sitting, which will take place before the Committee considers the Bill? Will he make it clear that they will be available for the witnesses and not just the Committee?

Dan Rogerson: We would be much further forward had the previous Government done some of this work before they left office, but we have had to act on what we inherited, which, sadly, was very little.

Members have raised a number of other issues, including the use of council tax banding. I hope that all Members accept that that is a way forward. It may have some problems around the edges, but fundamentally it is the right approach. It is not my intention to move away from what was originally agreed, although the hon. Member for Cardiff North (Jonathan Evans) has made a case on behalf of his all-party group and Members who have an interest in issues such as band H and the 2009 cut-off.

The hon. Member for Kingston upon Hull North (Diana Johnson) made an impassioned plea, understandably, for her constituents and the issues faced by communities

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such as Hull, which is constructed in such a way that it has historically been subject to flooding. My hon. Friend the Member for Wells (Tessa Munt) pointed out similar issues with her rural constituency. The agreement takes forward the work that was already in place. The hon. Lady set out the argument—although she came to a different conclusion from ours—that we do not wish to incentivise more building in areas prone to flooding, which explains the 2009 cut-off. The Government will respond to any argument for change, but our current view and, indeed, our agreement with the industry—which is, crucially, at the heart of this—is that that is the right way to proceed.

Lady Hermon (North Down) (Ind): Will the Minister give way?

Dan Rogerson: I am sorry, but the hon. Lady has not been present for most of the debate and I need to make progress.

The Chair of the Environment, Food and Rural Affairs Committee raised the issue of state aid. We have made it clear that aspects of Flood Re will count as state aid, so under competition rules we will need to seek approval from the Commission. We have been in communication with it and will start, along with the ABI, the formal notification process in 2014.

As we have heard, the aspiration of all this is to move to a free market over the next 25 years. Part of that involves seeking to continue to invest in flood defences and their maintenance, which I have already talked about, and looking at property-level protection schemes to ensure that they can be insured.

Hon. Members have mentioned uninsurable properties. I want to make it clear that no property will be seen as uninsurable initially, but if a property is repeatedly flooded, issues may arise that the scheme will have to take into account as we move forward. Certainly, the expectation is that all properties will initially be covered.

In relation to the impact on bills, a crucial part of the agreement was to get a limit on the proposed industry levy of £10.50 for a combined policy. The ABI thinks that that reflects existing levels of cross-subsidy for high flood risk, but it can of course be set out far more transparently. As I have said, I hope to table the flood clauses as early as we can in Committee, but we have to make sure that they are ready for debate.

We have sought to be as helpful as we can on the issues raised by members of the all-party group. I hope that consensus on a solution that works for those under threat of flooding and that is affordable and deliverable for the industry means there will be support for the proposals as a whole.

Richard Benyon: Before the Bill goes into Committee, may we lay one myth to rest? We can probably all point to developments in our constituencies that should never have taken place, but the fact is that in 97% of the times that the Environment Agency has objected on flood risk grounds in recent years, developments have not gone ahead. If hon. Members are honestly saying that no developments should ever take place in flood risk areas, there would be no more developments in Hull, London and York. We have to make sure that such developments are the right ones.

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Dan Rogerson: My hon. Friend is absolutely right. House building has not been at its fastest recently, so the vast majority of properties in this country were built before the cut-off date, which ensures that there is affordable coverage for those who need it.

The Chair of the Select Committee made a point about sharing benefits data with water companies, as did the hon. Member for Plymouth, Moor View. We have to be careful because those data are very sensitive, and sharing them with the industry would currently be illegal. We can look at that, and the Select Committee has made recommendations, but we must get it right.

Thomas Docherty: The Minister is obviously talking about bits of the Bill that do not yet exist and which the House has not seen. A few moments ago, he said that capital expenditure had gone up. It might help him if I point out that there has been a drop of £96 million this year compared with the situation that the Government inherited in 2010. We want to place on the record the accurate figures, rather than those given to him by his civil servants.

Dan Rogerson: Over the spending review period as a whole, the investment will be bigger, and we will see the numbers climbing over the coming spending review period as well, by up to £400 million a year by 2021.

Several hon. Members raised the issue of bad debt, and rightly pointed out that some companies are better than others. We of course want all companies to aspire to do better. To return to the points made by my right hon. Friend the Secretary of State, we now have a far more vocal and effective regulator than we have had for some time. On issues of bad debt, affordability and company transparency, which matters to many right hon. and hon. Members, the expectation on companies to deliver is now much greater. I want to make it clear that many companies are doing a good job, investing money and delivering for customers, but where there are problems, the regulator will tackle them. My right hon. Friend set out absolutely clearly in his letter to the companies his expectations for the industry. The Government are supporting the regulator to carry out the work that is necessary.

Joan Walley: Will the Minister give way?

Dan Rogerson: I will give way for a final time.

Joan Walley: In the remaining six minutes, will the Minister say whether he is minded to consider that the regulator should have a duty in respect of sustainability as a primary function, which has been raised by many Members?

Dan Rogerson: I am happy to consider that. The case for such a duty has been made by Members on both sides of the House. The clear gain that we want is for Ofwat to have an additional duty in respect of resilience, for all the reasons that we have given. We want to incentivise the water industry to have long-term solutions to the problems that face it, rather than moving from price review period to price review period. We want to encourage continued investment in solutions that involve retaining water for use, rather than abstraction-based solutions. We want to incentivise investment in the best environmental solutions.