Severn-Trent Water Authority

HC Deb 22 July 1981 vol 9 cc468-76

Motion made, and Question proposed, That this House do now adjourn.—[Lord James Douglas-Hamilton.]

2.29 am

Mr. Les Huckfield (Nuneaton)

Once again I rise, this time to say that I am grateful for the opportunity to raise the subject of the Monopolies and Mergers Commission report and recommendations on the Severn-Trent regional water authority, which serves my constituents and many of those living in the West and East Midlands. I make 'no apology to the House for being a persistent critic of the authority ever since its inception.

This was the third great reorganisation, following the reorganisation of local government and of the National Health Service carried out under the Conservative Government. As they have now admitted that the reorganisation of the NHS was in some ways a mistake, and as I understand that there are also some severe doubts in the Conservative Party about the reorganisation of local government, I hope that the Minister will feel empowered to say that his party and Government are none too happy with the way in which the reorganisation of the water services has turned out.

The report is nothing less than a major challenge and presents a major criticism of the way in which the authority is being run. It underlines and endorses many of the criticisms that I have made as a Member of Parliament over the years. My motivation in seeking to raise the matter on the Adjournment of the House is that I am concerned about the way in which the authority appears to have responded to the report. The chairman of the authority, Sir William Dugdale, was quoted in the Coventry Evening Telegraph on 9 June this year as saying that the report had given the authority "8 out of 10". I can only conclude from that quotation that Sir William Dugdale must have been reading a different report, because I interpret the report as having severely criticised the authority.

Apart from that, I feel that I have to put these matters right and that I have to put the record right for my constituents. If they are informed only through the pages of the Nuneaton Evening Tribune, they will receive a wilfully distorted and garbled version of what I say, because that paper, too, has been beguiled and lulled from time to time by the authority's press releases. Fortunately, the better-informed and more discerning citizens of Nuneaton and Bedworth read other local papers and listen to Mercia Sound commercial radio.

At page 4, paragraph 1.7, of the commission's report there is a magnificent list of bodies from which the commission took evidence. There is no sign in that list that the commission took evidence from individual household consumers. That is a point that I shall seek to raise again. I maintain that in the set-up of the authority, as it was created under the Water Act 1973, there is no mechanism so that the consumers' voice can be directly heard. Even the report admits that the local authority representatives on the authority are there only in a most indirect fashion.

I shall take some examples of what the authority has done. Between 1974 and 1979 it increased its internal self-financing ratio from 18 to 51 per cent., thus increasing its reserves from £5.2 million to £82.3 million, a £77.1 million increase. It increased its charges so that they became uniform throughout the whole authority. Because of direct billing, which was a major innovation in itself, many people lost the advantage not only of rate support grant but of the old rate rebate system. They also lost the advantage of payment by instalment systems. Apart from that, the Severn-Trent water authority introduced and operated a different charging policy from that of all the other regional water authorities. It now proposes to go over to water metering.

I should have thought that those were major innovations. I should have thought that all of those, because they represented major and significant steps forward, were at least deserving of major publicity and a major public relations campaign, instead of which all that we had were a few leaflets and a few explanations on the backs of water bills. If British Rail, the National Bus Company or British Gas had introduced such major changes affecting every one of its consumers in the significant way that water authorities, customers were affected, there would rightly have been a major outcry. No wonder my constituents have been upset and alarmed. I believe that a major promotional exercise ought to have been undertaken to explain exactly what the authority was undertaking.

The commission's report says that the authority has not received many complaints and that it receives an average of only 12 complaints per 1,000 customers. The real number of complaints can be measured by the figure for January of this year, when the authority issued no fewer than 2,600 summonses for non-payment of water rates in North Warwickshire alone. Many of those were simply because many constituents thought that they did not have to pay water rates because their garages did not have any water or drainage connection. I have tried to make that point to the authority, but, unfortunately, even the Nuneaton Evening Tribune cannot understand it. There is a widespread feeling about the authority, but there is no mechanism whereby it can be channelled and heard.

Let us look at some of the individual items of criticism upon which the report concentrates. For example, it says that there is no quantification of results of investment projects, so that it is unable to get a ranking mechanism for capital investment. After all, we are talking about a capital investment programme of £90 million a year. That is explained on page 252, paragraph 10.119.

There is no system for producing integrated long-range plans or medium-term operation plan facilities, and there is no procedure for monitoring the outturn of the corporate plan. Those are major and devastating criticisms.

Pages 127 to 132 represent six solid pages of criticism of the management style and system. The authority does not appear to have a real policy for dealing with leakages. Between 1979 and 1991, the annual water requirement will increase by 18 per cent., but half of that increase will be necessary simply through increased transmission problems. It has been estimated that simply by plugging up the leaks the authority could save £1 million a year.

On top of that, it has not been very good on industrial relations procedures. The unions complain about lack of consultation on outside contractors and their employment. The unions are not consulted on manpower planning. NJCC staff are graded without union consultation. There are three and a half solid pages—pages 153 to 157—of criticism on the authority's manpower planning and efficiency. That is the view of the report, and I maintain that they are severe criticisms.

Page 91, paragraph 5. 13, states: In an organisation the size of the Severn-Trent Regional Water Authority, with a capital and revenue turnover of £400 million a year, asset lives of over 50 years and a statutory duty to meet future demand, one would ideally expect to find a system of interdependent planning associated with time horizons extending from less than one year for operations to 20 or more years for strategy, from which plans could be produced". That does not exist, because the central message of the report— I quote from page 287, paragraph 11. 165—is that It will be apparent from our conclusions on particular matters elsewhere in this report that we believe the Authority to have gone too far in granting autonomy to its Divisions. We believe that generally Headquarters does not, and with the present reporting procedure and lines of responsibility cannot, control and monitor the operation of Divisions to the degree desirable for efficiency and cost savings". That is another central criticism from the report. No wonder the report admits on page 119, paragraph 5.120, that the Severn-Trent Water Authority is not in the upper quartile of performers". I maintain that we have an authority that is too big and which the management cannot control. I believe that those two criticisms, which I have always made, are repeated and endorsed in the report that I have brought before the Minister today.

I also believe that consumers do not really have any mechanism or any way to put their complaints about these matters or in many cases even of knowing that they are taking place. The report says of the 27 of the authority's 48 members who come from local authorities that, although in many cases they do a very sincere job, because the local authority representation is far too indirect they cannot be said to be consumer representatives. That is why the report recommends something like a nationalised industry corporation to run the authority. I am not sure that that is the best way to do it, although the report says that if a nationalised industry corporation were set up about?1 million per year could be saved in administration and running costs.

Incidentally, the Secretary of State may already be thinking of ways to cut the running and administration costs, as the most energetic and voluble of the authority's members have not been replaced, or they have been replaced by more docile counterparts.

My personal remedy would be to split up the authority for the time being. I do not believe that one can run or even try to run a single major water authority stretching from the Welsh border to East Anglia. It is simply too big. it might be nice in theory, but it has not worked out in practice. Even though the chairman has his private aeroplane and there are fast ears standing by and all the administrative paraphernalia, it is simply too big for one management, one chairman and one authority to run. Ultimately, of course, I would prefer the authority, once broken up, to be under a directly elected regional government, but we may have to wait a little time for that.. Even now, I believe that a directly elected element could be injected into the representative structure.

Even if we cannot achieve that straight away and change the way in which the authority is run, I hope that the Minister will tell us something about the way in which he intends to stop what has been christened in the Midlands "The Severn-Trent regional gravy train". If he considers what the report says about subsidised meals, the criticisms about limousines picking up members to go to meetings and the now legendary figures for car allowances, I am sure that he will agree that something must be done to improve the authority's reputation.

The appendix on page 463 shows that regular car users employed by the authority performing services for the authority with cars of more than 2,000cc receive an allowance that works out at 24.41p per mile. Casual users in class 5 who do up to 3,000 miles per year receive an allowance of—wait for it—41.26p per mile. It is no wonder that the authority is legendary for its car allowances, and it is no wonder also that the report picks up the fact that between 1981 and 1982 the authority has budgeted £2.8 million for car allowances alone. Something must be done about that.

I hope that the Minister will tell us not only what he intends to do following the criticisms of the authority with regard to car allowances. I remind him that when I and many others were criticising the authority about car allowances, at roughly the same time the authority was talking about taking a delegation to see Japanese waterworks on the spot. That is the kind of public relations image that scarcely builds up confidence among the consumers in the authority's area.

I hope, therefore, that the Minister will be able to tell us what he and his Department intend to do in response to the report. The 460 pages of the report represent a fundamental criticism of management style.

My constituents are very upset at the treatment that they have received. I think, for example, of the old lady aged 74 who came to see me just before Christmas. She lives in a warden scheme dwelling in Nuneaton. I shall not mention her name as I have not consulted her first. All that she did was to ask whether she could pay her water rates by instalments. The authority responded by issuing a summons. She owed £22.

If that is the way that the authority treats its customers, it is no wonder that it is out of touch with their real needs. Fortunately, I was able to intervene and do something. But such cases indicate the lack of a mechanism whereby the regional water authority can keep tabs on or get any idea of the real needs of my constituents and its customers.

I hope that the Minister will tell me that the Department of the Environment intends to split up the water authority. I think that it is too big. If it is not to be split up, my constituents and people living in the Midlands will want to know what is likely to happen. We are not prepared to tolerate this kind of dictation. I described the authority as the kingdom of Dugdalia because, under its chairman Sir William Dugdale, it stretches over the vast areas to which I referred.

I warn the Minister—I do not threaten him personally—that I do not intend to give up my fight and that my constituents do not intend to give up their fight. They deserve a better service than they have received hitherto. I hope that the Minister will give us some pointers in that direction tonight.

2.46 am

The Under-Secretary of State for the Environment (Mr. Giles Shaw)

I am extremely grateful to the hon. Member for Nuneaton (Mr. Huckfield) for providing this first opportunity to review in some detail the recommendations made by the Monopolies and Mergers Commission in its report on the Severn-Trent water authority.

Apart from the individual appraisal conducted by the Monopolies and Mergers Commission of the Severn-Trent authority and the two associated water companies in its area, the report has a wider function. It must be viewed as an appraisal not only of that authority and of how a big company within the water industry operates but of how the Water Act 1973, which set up these structures, operates. It is only right that an appraisal of this kind should be undertaken about eight years after the initiation of the new water structure.

I take the point made by the hon. Gentleman that he was a critic of the new structure that was introduced at that time. But I make no apology for the fact that, in reviewing the report, the Government will want to look closely at the lessons to be learnt from it in relation not only to the Severn-Trent authority but to other major regional water authorities.

The report is substantial. It has 73 recommendations. The hon. Gentleman will not expect me to be able to tell him how many of the recommendations will be adopted or when the Government's authoritative conclusion should be made in response to the report. However, I assure him that we have already initiated discussions at official level between the Severn-Trent authority and my Department. We hope to have individual discussions with all water authority chairmen and their officials on what they read out of the recommendations. Indeed, we had a meeting today. My right hon. Friend the Minister for Local Government and Environmental Services chaired a meeting of all chairmen of regional water authorities at which, among other things, the MMC report was discussed. We take the report seriously as an intelligent and elaborate exposé of one company which can have lessons for each and every one.

We visualise that discussions with the Severn-Trent authority could be continued at a formal and authoritative level, to be concluded in about October this year, with a view to making a final statement to the House fairly early in the new Session in November. I hope that the hon. Gentleman will agree that in that way we shall respond fully and in depth, not just in relation to Severn-Trent but in relation to what lessons are to be learnt for the water authorities and the water industry as a whole.

The hon. Gentleman sought in his initial remarks to offset what he thought was perhaps too exaggerated a comment by the chairman of Severn-Trent as to the tenor of the report by the Monopolies and Mergers Commission. I take that point. A very substantial and thorough investigation has been carried out, and the undertaking provides water and sewerage services to about 8 million people. It has an annual budget of over £250 million and employs a staff of nearly 11,000. As the hon. Gentleman also knows, the report covered the two private water companies which in their turn serve a further 1½ million people in the Severn-Trent area.

It was a large report, and the hon. Gentleman is right in saying that it was significantly critical of a number of very important aspects of the authority's operations. But the chairman was also right in drawing attention to those aspects of the report which are complimentary to the way in which the authority has run its affairs. For example, it comes out of the investigation quite well in regard to the achievements it has made in improvements in water quality and supply, for its maintenance of that supply, and for the improvement of river water quality through the increased efficiency of treatment of water at reclamation works. It also gave a fairly strong endorsement to its policy of direct billing and the way in which it was carried out, although I accept the hon. Gentleman's view that perhaps more could be done to explain the reason why this was so. But, as he will know, it is important that the authority should move towards having direct contact with the customers in this way and move on from there to consider perhaps optional metering as another way in which customers would be able to pay for their water services, if that is their desire.

There have been matters which have given rise to public criticism, both in the Severn-Trent area and elsewhere. The commission did not consider that the rate of complaint was high, although again the hon. Gentleman feels that the consumer representation and the access to the authority was inadequate, in his view. I think that the representation of the consumer not only within Severn-Trent but within water authorities as a whole is a matter for reappraisal. The Act envisaged that the representations from elected authorities—which form majorities in every regional water authority—would in some way be able to serve the consumer through the districts of which they were representative. The hon. Gentleman would also know that my right hon. Friend last year, in his speech to the conference in October, expressed his concern that this was perhaps not a system that was working sufficiently well. The hon. Gentleman is right to say that the question of consumer representation and consumer access to their authorities is one that requires further examination. I have little doubt that that also will take place.

The authority's charging policy was not criticised, although the commission thought that the option of universal metering should be kept under continual review. Sir William Dugdale, the chairman of the authority, in commenting or, the conclusions of the report, has said that on some points which our critics take up, it is reassuring. He might have used other expressions which are not acceptable to the hon. Gentleman, but I think he took a fair amount of credit for the fact that, in establishing a very large undertaking within a fairly short period of time, a standard of service has been provided within the Severn-Trent area which is a great tribute to the way in which the authority has tackled its statutory responsibilities.

The chairman clearly recognises that the commission is critical of some very important aspects of the authority's operation. From the discussions that we have had since, it is clear that the chairman and his colleagues on the board of Severn-Trent feel that on the whole the report is entirely constructive and points the way for steps to be taken quickly by the authority to improve its efficiency, and hopefully to reduce its costs.

This brings us to the most important recommendations of the commission's report. These are taken very seriously by the Government. All water authorities have been asked to consider the relevance of the report to their operations and to describe what action is being taken where the commission's recommendations are applicable to them.

The main question, which the hon. Gentleman referred to, is that of management structure, divisions, and the central control of divisions. The hon. Gentleman will know that many water authorities operate similarly large organisations, bit in a different way. Some of them have multi-purpose divisions, some have separate divisions, some have close central co-ordination and some have divisional responsibilities deferred to smaller groups of people. They are all management styles. It is not sensible to expect a single management style to be extracted from the report and applied, willy-nilly, to authorities as small as the South-West and as large as Thames. However, we understand from the report—as the hon. Gentleman would wish—that there was criticism of the management structure in Severn-Trent and of the way in which the divisions were controlled. As he said, there was also criticism of the planning aspects. Again, these must be and will be put right. We must decide which are the most important recommendations which the authority should implement. We must also decide how it can implement them. I assure the hon. Gentleman that Severn-Trent will quickly consider making changes in what it sees as the necessary areas thrown up by the report.

I turn to the hon. Gentleman's specific points. He made a general statement to the effect that the authority had an area that was much too big. He specifically asked that the area should be broken up. The principle behind the original Act was that a water authority should preside over the complete catchment area, from source to the sea. Therefore, in an area such as the Midlands, which has a large catchment area, it is necessary to have an authority of that size to cover that geographical area. The hon. Gentleman knows better than I that the catchment area probably has its centre in Wolverhampton. It catches much of the water resources from the West. The river system, however, flows to the East. Therefore, there is a large geographical area. In itself, that need not be a disadvantage when it comes to running the authority. However, if we want an authority to control water from source to ultimate disposal, a large geographical area is inevitable.

The hon. Gentleman said that the authority was too big and that its structure should be revised. We have taken note of the comments about the costly complex committee structure and the support services. We have also noted that the commission recommends that smaller authorities or boards would provide a more efficient method of running the business. We must consider that most carefully, because it is fundamental to the report.

There was criticism that Severn-Trent was not decentralised enough. The effectiveness of the Severn-Trent management structure and methods is the subject of a public interest recommendation. It is too complex to deal with on our present knowledge, but I assure the hon. Gentleman that that will be one of the most important parts of the formal report that we shall make to the House early in the new Session.

The hon. Gentleman raised a point about there being no overall policy for dealing with leakages. I agree that the protection and control of leakage can be very important. Some authorities have tackled this problem seriously and effectively. Clearly, there must be room for improvement in Severn-Trent. The hon. Gentleman was strong about the lack of consumer contact. We are following up that question not only with Severn-Trent but with all the other water authorities. That also involves consumer complaint. As regards rebates and other forms of consumer assistance, we are not dealing with a tax, for which a rebate would be an appropriate arrangement. We are dealing with a vital energy supply. If there are requirements based on social conditions and deprivation, they will be more properly met through the social services system.

Mr. Les Huckfield

Will the Minister have a look at a direct consumer mechanism, whereby consumers can express their complaints to the authority?

Mr. Shaw

I agree to do that. I shall write to the hon. Gentleman about the precise possibility for Severn-Trent. I agree that there are problems as regards industrial relations. However, I have nothing to add to what the Monopolies and Mergers Commission said on that issue.

The water industry seems to have got itself a bad name over car allowances. I am certain that it should and will put its house—

The Question having been proposed after Ten o'clock on Wednesday evening and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at one minute to Three o'clock am.