HC Deb 28 November 1984 vol 68 cc919-21
9. Mr. Hicks

asked the Secretary of State for the Environment what factors he took into account in setting the proposed levels of capital investment in the water and sewerage industries; and if he will make a statement.

Mr. Gow

The public expenditure provision for water authorities announced in the autumn statement of my right hon. Friend the Chancellor of the Exchequer is expected to enable their investment to increase by about £80 million, or 12 per cent., in 1985–86. This takes account of the needs identified in the water authorities' 1984 corporate plans, including the development of water resources, faster progress with the renewal of sewers and water mains and further work to restore or maintain the quality of rivers, estuaries and coastal waters.

Mr. Hicks

I welcome the intention to increase the level of financial expenditure on the infrastructure. Does my hon. Friend think that it is sensible at this stage to impose a water tax on consumers, especially when we are all anxious to keep down inflation and when the general public are still worried about the basis on which water and sewerage charges are imposed?

Mr. Gow

My hon. Friend is not right in referring to this as a water tax. There is a danger in thinking that one can have higher investment in the water industry, and more money spent on the repair of sewers and the construction of reservoirs, without paying for all of this. The targets that have been set by my right hon. Friend the Chancellor are in no way unreasonable. The present rate of return on assets is only 1 per cent. Under my right hon. Friend's proposals, the average rate of return next year is estimated to be 1.4 per cent.; in 1986–87, 1.7 per cent.; and in 1987–88, 1.9 per cent.

Mr. O'Brien

Will the Minister consider the position that will develop in the coming year for the regional water authorities, especially the Yorkshire water authority, as a result of the hardship that will be imposed on industrial and domestic users because of the suggested 12 per cent. increase in water charges? Will the Minister have regard to the hardship that will be created in the Yorkshire water authority area in particular and throughout the country in general?

Mr. Gow

The increase in water charges in the next financial year will vary from region to region and from authority to authority. The average water charge levied by water authorities in the current financial year is £78. If the average charge rises by 10 per cent. next year, the bill will rise from £78 to £85 or, to put it another way, from 21p a day to 23p a day. Water charges are taken fully into account when supplementary benefit is calculated. Some 3 million households receive help in the way that I have described.

Mr. Conway

What steps is my hon. Friend taking to substitute water metering for water rates?

Mr. Gow

Earlier this month I announced in the House that my Department had set up a study with the water industry to inquire into the possibility of extending water metering to the household customer. That inquiry will be completed as soon as possible and I shall then report further to the House.

Mr. Penhaligon

Whilst most hon. Members recognise that water has to be paid for, why do water authorities have to be run for profit? Why do profits have to increase by one third this year, especially after the difficulties experienced in the west country?

Mr. Gow

The hon. Gentleman has not understood that a consequence of higher water charges will be the much needed higher investment, for which the hon. Gentleman called earlier this year. He is aware that in the south-west work is starting about now on the third of the strategic reservoirs. In the public sector we are seeking to follow the necessary disciplines of obtaining a proper return on investment. A 1 per cent. return on investment is inadequate for the water industry.

Mr. Teddy Taylor

While I support the general argument that my hon. Friend puts forward, does he agree that it is completely unreasonable that my constituents in Southend, and others, should have to pay what is called an additional extra because the water authorities are obliged to spend £50 million of capital expenditure for the sole purpose of taking nitrates out of water? As that is caused solely by agricultural practice, should that not be put on the agriculture Vote, instead of making my constituents pay more money to receive polluted water?

Mr. Gow

I shall discuss my hon. Friend's suggestion with my right hon. Friend the Minister of Agriculture, Fisheries and Food, but I do not expect that it will be well received.

Dr. Cunningham

How does the Minister explain his sudden conversion to higher capital investment in the water industry when, in the past two financial years, he has presided over an underspend in excess of £100 million? Is it not adding insult to injury to those people who suffered severe water shortages this year to impose upon them some of the biggest increases in water rates? Is not the reality that the manipulation of external financing limits is simply a tax on water consumers? Why does the hon. Gentleman not face the truth?

Mr. Gow

The hon. Gentleman had left what was then the rather esoteric atmosphere of No. 10 Downing street before the famous letter of 15 December 1976 was written to Dr. Witterveen by his right hon. Friend the Member for Leeds, East (Mr. Healey).

Mr. Rogers

What about Disraeli? Tell us about Disraeli.

Mr. Gow

This is what the right hon. Member for Leeds, East then wrote: An essential element of the Government's strategy will be a continuing and substantial reduction over the next few years in the share of resources required for the public sector. The hon. Member was a member of that Government. We are increasing capital expenditure in the water industry. The hon. Gentleman has confused investment with the cash limits set for that year. Although the EFL was undercalled by over £100 million in 1982–83, the investment underspend was £37 million and, thanks to low tender prices, that represented a volume of work close to what had been planned.

Mr. Speaker

Order. I again call for shorter answers.