Water Charges (Wales) (Hansard, 26 March 1982)

§ Mr. Wyn Roberts
I was saying, before being so politely interrupted, that the hon. Member for Caernavon (Mr. Wigley) has produced a range of quixotic remedies for high water charges in Wales and for the ills of the Welsh water authority and, in particular, has come up with a magic cure-all formula in the form of a £40 million payment to the WWA by the Severn-Trent and North-West water authorities. He knows well that I am unable to go into the question of the "no profit—no loss" principle of charging for bulk transfers of water at a time when my right hon. Friends the Secretaries of State for Wales and for the Environment have before them for determination the disputed proposals by the WWA to increase such charges. Our position in relation to this matter is quasi-judicial and it would be improper for me to be drawn into discussing the merits or the effects of the proposals.
What I can say is that a charge of 25p per 1,000 gallons of water abstracted in Wales might well result in the English water authorities developing alternative sources of supply leading to the waste of national resources and the loss of income to Wales. Wales does not have a monopoly of water and no way is it going to be possble to obtain more than the market will bear. The arguments, I am afraid, typify the somewhat muddled thinking of the members of Plaid Cymru and illustrate how their policies would militate against the interests of Wales.
I also rebut the hon. Gentleman's allegation—made by his party if reports in the press are correct—that the WVVA' s request for a determination of the dispute has "lain on my desk" since 15 October. Had the party had the courtesy to check with my Department, it would have discovered that we have been far from inactive in this matter. I must tell the House that, to my knowledge, this is the first occasion on which this provision of the Water Act 1945 has ever been invoked. No procedures are laid down in the Act and it has been necessary for my Department and the Department of the Environment to agree on a memorandum of procedure which fully safeguards the interests of the parties. This is a complex matter and a crucially important one. We have to ensure that the matter is ultimately decided in accordance with a fair and proper procedure. I can now say that not only has the procedure been agreed, but the Welsh Water Authority has submitted its evidence and the evidence of the other water authorities is awaited. I hope that a decision can be reached in May.
The hon. Gentleman made much of the abundance of water in Wales, but I continue to be amazed at his naive refusal to recognise that the water has to be stored, treated and distributed to a sparse population through some of the most difficult terrain in Britain. The per capita costs of distribution must inevitably be higher in those conditions. The average of population per kilometre of water main in England and Wales is 187 but in Wales alone it is only 136. In the Severn-Trent water authority area it is 192, which is above the average. Similarly, it is significantly higher in the North-West area. But I remind the House that the Welsh water authority has nevertheless contrived to keep its average household bill lower than those of some English water authorities. Other water authorities have higher combined charges for the coming year.
1254 We have also heard a lot of the so-called equalisation scheme. I say "so-called" because we found that, far from equalising charges throughout England and Wales, the scheme caused the bills of 40 per cent. of consumers in England and Wales to move further away from the national average. The hon. Gentleman is right to quote my favourable remarks on the Bill when it passed through Parliament, but I had no idea then that its effects would eventually become as eccentric as they have become.
The equalisation scheme was based on the historic debts of water authorities, and would have had a steadily diminishing effect. The hon. Gentleman, like the Labour Party, makes much of equalisation, but the £2 million to £3 million that the authority might get as a result of the Act has to be related to its projected total running costs of more than £171 million for next year. It is these costs chat determine the charges.
We have considered whether some other form of equalisation scheme—for example, based on length of water main per head of population—could be introduced, but not one has been able to devise a scheme which would have a material effect on charges but which would not penalise efficiency and the careful use of resources and reward profligacy and inefficiency. One advantage of the present system is that each water authority can identify its costs and is responsible for taking action to reduce them in so far as that can be done while maintaining the desired level of service.
I turn to the question of the water bills received by consumers. I must refer to the reprehensible campaign being orchestrated by the hon. Member for Caernarvon and his party whereby consumers are being encouraged not to pay their water charges. I deplore, and I am sure that hon. Members will join with me in deploring, the incitement to abandon legal requirements.
Action of this kind, surely, is foolish in the extreme and is totally unworthy of a political party represented in the House. It may be easy to persuade some people not to pay their bills, but the majority know that it is wrong not to pay their bills. It is no good the hon. Member for Caernarvon trying to behave like a Hampden. I am afraid that Hampden's boots are a bit too big for him. What does he think would happen to the water authority finances if his campaign were to succeed? It would have no alternative but to borrow to make good the deficit. The resultant interest charges would add to the burden of the authority's debt and would have to be met by consumers generally. Hundreds of thousands of responsible consumers, many of them financially hard-pressed, would have to pay for the selfish and ill-considered gesture of a few. One should also take account of the strain and expense which this action, if it became widespread, would place on the authority's administrative and legal facilities.
I earnestly ask the hon. Member for Caernarvon although it is somewhat belated, in view of what he said, to give the reconstituted authority a fair chance to get to grips with the pressing task of cost cutting and improved performance, which is the key to lower charges, by a personal and public statement terminating this ridiculous campaign that he and his party have started. If he does not renounce it, I am sure that the people of Wales will have the good sense to reject his exhortations and abide by the law.

§ Mr. Wigley
In view of the Minister's anxiety to get out of the mess confronting the authority, will he not 1255 consider the recommendation of the Daniel committee of an interim Exchequer grant to give the newly-constituted body an opportunity to find the savings that he believes to be there so that water charges can be kept down this year? In view of the way that the Gentleman castigates us for withholding our water charges, has he not considered that what we are doing is the same as what the Severn-Trent and the North-West authorities are doing in withholding their charges and not acceding to the bills being sent to them by the Welsh water authority?

§ Mr. Roberts
I do not accept that there is a parallel between the action of the hon. Gentleman and those others whom he is encouraging and the actions of the water authorities. They know and he knows that the matter is subject now to determination. When that determination is given, I am sure that the authorities concerned will abide by it.
The basis on which water bills are calculated remains a perennial problem which has confronted successive Governments, and I am the first to acknowledge that the present rateable value based system can give rise to anomalies. The problem has been to devise an alternative method which would be fair without at the same time giving rise to additional administrative costs which would wipe out any benefit to consumers.
In late 1980, the Government asked the National Water Council to carry out a consultation exercise and a review of the alternatives, which have included such suggestions as charging according to floor space or the number of residents in a property. In its report, the NWC concluded that the present system remained the fairest practical answer, provided that consumers were given the options of a metered supply. The Welsh water authority has been offering such an option since April 1981 and, since this could be advantageous particularly to the consumers who use little water but live in properties with a higher than average rateable value, it is surprising that the take-up has been relatively low, despite the fact that in most cases a meter can be installed within the building at modest cost to the consumer.
It is also worth emphasising that water charges are taken into account by the DHSS in calculating eligibility for supplementary benefit, and I urge hon. Members to bear this fact and the metering option in mind in dealing with constituents' inquiries. The hon. Gentleman referred to a particularly distressing case. Obviously I cannot comment on it, but he may see fit to follow it up.
So far, I have spoken mainly about charges and very little about costs. The consumer, of course, is concerned only with charges—with the bill he receives—but those in a responsible position in Government and in the water authority know that the only practical way, in the long run, to bring down charges is to contain costs, while maintaining a satisfactory level of service. This has been a major concern of my right hon. Friend the Secretary of State and myself since taking office.
We appreciate that the Welsh water authority has faced a difficult task. It inherited the functions of six river 1256 authorities, 17 water undertakings and six joint sewerage boards and the sewerage functions of 183 local authorities. Some of those undertakings were first-class, but others had neglected their responsibilities. Moreover, water services were commonly subsidised. To weld those undertakings into a single all-purpose water authority was a major operation. I pay tribute to the work that has been done. I also pay tribute to the retiring chairman, Mr. Haydn Rees. But the work cannot be regarded either as successful or complete unless the unified organisation achieves results that the constituent undertakings could not achieve at less cost in real terms.
This is where we feel that the Welsh water authority is now falling behind what should be its goal. I drew attention to his in a speech that I made to the authority on 18 November 1980. Since then, the financial position of the authority has worsened.
It was clear that improvements could be made in the authority's efficiency and performance, and my right hon. Friend the Secretary of State and I became convinced that the right way to tackle the problem was to move away from the cumbersome local government-type structure of the authority and replace it with a small board with appropriate financial and management expertise.
I do not propose to dwell on the full background of the reorganisation of the authority. The consultation document published last July fully explored the issues and the proposals were fully debated in the House before the relevant order was made.
Subsequent events—including the report made by Price Waterhouse, which investigated the authority in November last, and the revelation of an estimated deficit of over £8 million on 31 March next, on top of the deficit of £845,000 carried forward from the previous year—have vindicated this decision and shown how necessary it was to press ahead with change, despite opposition from within this House and elsewhere.
The recent increase in charges, amounting to 18.4 per cent. for the average domestic property, was the result not of the financial target set by the Government, but of the simple need to balance the books.
The hon. Gentleman asked certain specific questions. He referred to the position in Scotland. I am not answerable for Scottish affairs but I can tell him that both this Government and the previous Labour Government have taken the view that water authorities should be self-sufficient industries without subsidies. No case to treat the industry differently from other service industries such as gas and electricity has been made and, of course, local authority rate support grant cannot be applied to water services in England and Wales.
The hon. Gentleman alleged that there was discrimination against the domestic user, because of the charges for bulk transfers. The WWA claims that there is no discrimination in favour of commercial users and that its charges are designed to ensure that each class of consumer pays his fair share.
I am grateful to the hon. Gentleman for initiating the debate. It gave him the opportunity to air his views and me 1257 the chance to present some of the Government's views. However, I urge him to reconsider his exhortation to the Welsh people not to pay their water rates. He knows that the path that he is treading is a dangerous one and is not, I think, suited to an hon. Member.
Furthermore, I do not believe that the hon. Gentleman's suggestion would ultimately benefit the people of Wales. 1258 If his campaign is successful it will result in a further burden on water rate payers. I urge him and his colleagues to reconsider their suggestion.