HC Deb 17 December 1986 vol 107 c1196
9. Mr Hicks

asked the Secretary of State for the Environment what representations he has received from water authorities about the 1987-88 water rate; and if he will make a statement.

Mr. Ridley

I have now received responses from the chairmen of most authorities. The overall reaction is that the settlement is reasonably fair.

Mr. Hicks

As the external financing limits of water authorities have been increased by some £14 million nationally, why has the provisional figure of £1 million for the South West water authority been withdrawn, with the probable effect of water rate increases of 5 per cent. rather than less than 4 per cent.?

Mr. Ridley

The settlement for the South West water authority allows it an average increase of 9 per cent. in investment, with only average increases in charges of under 6 per cent. It has the highest operation cost rises among those that are planned for next year. If it could hold its operating costs to something near the rate of inflation, it would be able to have higher investment or lower charges, or both.

Mr. Boyes

Nevertheless, the Secretary of State must be aware that some chairmen of water authorities are expressing concern. For example, in a letter to my right hon. Friend the Member for Bristol, South (Mr. Cocks) the chairman of Wessex Water says that the large reduction in borrowing imposed by the Government leaves the authority with a dilemma—either to increase charges to a level which the authority regrets, or to postpone capital work to the detriment of present standards of service. Because, since 1978–79, water authority charges have increased by a staggering 143 per cent., is it any wonder that Mr. Anson, Mr. Watts, the Confederation of British Industry and others are expressing concern about the Government's attitude to the water industry?

Mr. Ridley

The hon. Gentleman must know of the massive increase in investment in water, but I question the extent to which that should be described as investment. It is largely a matter of replacing worn-out capacity and renewing the capital stock of the water authorities. It is an overhead and an on-cost which should properly be paid for from charges, which is why the charges have increased. It would be wrong to borrow to replace normal assets.