HC Deb 31 March 1994 vol 240 cc1091-100 12.30 pm
Mr. Matthew Taylor (Truro)

I have sought a debate because residents in the South West Water area are being hit by a crisis. They are struggling to pay the highest water bills in England and Wales. This year average bills for the region are £340. The charges have more than doubled in the past five years, and they are set to double again.

The reason for that is simple. Less than 3 per cent. of the nation's population—the people of the south-west—are being forced to pay to fund the clean-up of 30 per cent. of the nation's beaches. South West Water predicts that, even without taking account of inflation, in the year 2000 a typical bill will be at least £450 a year. If we allow for inflation, average bills could be £700 a year by 2000. Without help for those on low incomes or living alone, already many people simply cannot afford the bills. Some bills facing pensioners and others on low incomes are already more than £600, yet no help is available.

The Government have repeatedly claimed that they were unaware of the huge problems and of the huge bills that would face South West Water rate payers. More recently, they have claimed that they are doing what they can to tackle the problems. However, ever since privatisation was proposed they have been repeatedly warned that the problem of water charges in the south-west had to be addressed and solved.

In the final stages of the water privatisation debate on 8 December 1988 I said: I represent an area where people are on low incomes, where some villages do not yet have their own sewerage systems, and where many beaches are polluted. It is they who will have to foot the bill for the improvements that are required". I warned that both future British Government support and much of the European funding available to the public sector but not to the private sector could be cut off by privatisation, saying The work is essential to bring our beaches up to the European standard, and I hope that the Minister can assure the people of Cornwall that they will not be expected to meet all the costs of cleaning up the beaches, which are used by citizens of the United Kingdom and Europe, purely because the Government, by their ideological approach, are cutting off the potential to obtain money in other ways".—[Official Report, 8 December 1988; Vol. 143, c. 535–36.] Yet Ministers now say that they did not see the problem coming. And so far as I recall, with the honourable exception of the then Member of Parliament for Falmouth and Camborne, David Mudd, no hon. Member representing the south-west joined me in opposing the Water Act.

In practice those worries were quickly confirmed. In February 1989 I wrote to the then Secretary of State for the Environment protesting at proposed increases of 13.1 per cent. for South West Water customers. Such was my concern that I then sought and won an Easter Adjournment debate on water and sewerage in the south-west, almost exactly five years ago, on 13 March 1989. I cited then the concerns of local people and again stressed the particular problems of the area and said: I am concerned that people in Cornwall will have to pay to clear up the mess after privatisation simply because successive Governments"— this is true of Labour as well as of Conservative Governments— have failed to invest properly in clean water and proper sewerage systems. Although only 1.5 million live in the South West Water area, at times there are up to 500,000 tourists supplementing that number. Local people therefore have to pay for the infrastructure to support a heavy influx of visitors. Those visitors are welcome, but I am sure that they expect the beaches to be cleaned up through national intervention and Government money, rather than depending on an over-stretched local private company. I concluded: Prices are already rising from the privatisation burden and so falling on local populations. It is time that the Government started to think about the public good rather than private affluence. After all their words about the environment, they could not do better than to start by investing some of the Chancellor's surplus billions in tomorrow's Budget into cleaning up our water. They would be doing so by public demand."—[Official Report, 13 March 1989; Vol. 149, c. 67 and 69.] That was when the Government had money to spare for substantial tax cuts for the wealthy. They did not invest the money to help low-income families.

Ministers still say that they could not see the problem coming. Conservative Members of Parliament across the region had still not woken up to the scale of the problem that was to emerge. A little over a year later, on 16 July 1990, I won a further Adjournment debate on the subject of sewage pollution in Cornwall and the cost of treating it. It followed new Government announcements that they were bringing forward the clean-up programme dramatically, but not increasing the so-called green dowry allowed to water companies at the time of privatisation to meet the then environmental obligations placed on them. That is a crucial point for those Conservatives who have sought to blame Europe for the rising costs.

Not only is it a fact that European standards could be set only with the agreement of British Ministers, who had a right of veto, but the British Government took the decision to increase and accelerate the clean-up. In 1989, the EC had drafted the municipal waste water treatment directive, the precursor to what is now the urban waste water directive. In 1990, before it was agreed, the United Kingdom Government not only brought forward the beach clean-up, but jumped the gun on the municipal waste water treatment proposals by unilaterally adopting them for immediate application.

The Government responded to the fourth report of the House of Commons Select Committee on the Environment published in December 1990. In the introduction to the response the Department stated: the Government decided to press its own review to a conclusion and not to await the results of the Committee's deliberations … In March the Government announced a major change of policy to require higher standards of treatment before sewage effluent is discharged to sea. The Secretary of State for the Environment said that in future all significant discharges of sewage to sea should first be treated at sewage treatment works: the additional cost associated with this change was put at around £1.5 billion". That was a United Kingdom decision, not a European one. I do not disagree with the decision—the clean-up is welcome. But it is not possible for the Government to blame others for decisions that they took in advance of European decisions.

The introduction to the response to the Select Committee concluded: Government policies in this area are in advance of Community environmental policy developments as contained in a draft EC Directive on Municipal Waste Water Treatment which is currently the subject of negotiation. This Directive if adopted will establish uniform minimum standards throughout the European Community. The Government strongly supports this draft directive and is working towards its early adoption. That confirms that the Government took those decisions in advance of Europe and were instrumental in persuading Europe to adopt them. It is good that they did so, but the Government cannot now shift the blame on to others.

Mr. Patrick Nicholls (Teignbridge)

Will the hon. Gentleman give way?

Mr. Taylor

No, I shall not give way now as I wish to make progress. I shall give way later if there is time.

Due to my concerns I sought an Adjournment debate on 16 July 1990. Referring to the privatisation of water I said—

Mr. Nicholls

On a point of order, Mr. Deputy Speaker. This is supposed to be a debate. Is the hon. Gentleman allowed to make wild assertions when he is not even prepared to debate the issue?

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse)

That is a matter for the hon. Member for Truro (Mr. Taylor).

Mr. Taylor

I said that if I had time I would give way later when I have made some progress.

Referring to the privatisation of water, I said: To show how powerful that problem is, South West Water has been unable to provide me with a figure for the cost of introducing secondary or tertiary treatment for sewage outfalls in Cornwall. It says that the implications of the Secretary of State's announcement are still being assessed, but will the Minister clarify that? By how much, and when, does he foresee charges rising to tackle these problems? Massive investment is needed. For such a policy to be introduced on the back of water ratepayers, pensioners and others who are struggling to pay their bills is unacceptable and the Government must seek an alternative route. I concluded: Given all the sources of finance available to Government, they must make available the money to meet these costs. It did not take long for the extra burden on the already rising water bills to be confirmed, together with the fact that the Government would not in any form help with the costs of the bills, which were set to fall so hard on South West Water rate payers. At the end of the Adjournment debate, the Minister, the hon. Member for Wells (Mr. Heathcoat-Amory), concluded: It is much better for private companies to raise money from charges to customers. The Government apply that system generally and Cornwall will be no exception."—[Official Report, 16 July 1990; Vol. 176, c. 836–42.] The director general of water services was formally notified of the Government's decision on 14 November 1990 and he had, therefore, to raise the limit on South West Water price rises as the Government had not announced any funding or increase in the green dowry to help meet the costs of the new standard. He announced that South West Water's increase over and above inflation would be allowed, not at 6.5 per cent., as planned after privatisation, but at 11.5 per cent. plus inflation each year. In other words, prices have doubled in the past five years, which has everything to do with the Government's decision. Yet Ministers still say that they did not see the problem coming.

Looking through the relevant press cuttings throughout the period, I cannot find south-west Conservative Members arguing the same point. Perhaps some did. However, it was 1992, especially the general election campaign, that really seems to have woken them up. The Minister should realize that there is now a strong, cross-party case, echoed not only by Members of Parliament of all parties in the south-west, but by many independent organisations.

The first reaction about which we read was on 6 May 1992. Following substantial gains in the south-west by the Liberal Democrats, the Western Morning News reported: MPs returning to Westminster after the election campaign have spoken of widespread anger and concern on the doorstep over soaring water bills.

Mr.Nicholls

Will the hon. Gentleman give way?

Mr. Taylor

I shall give way in a minute.

Mr.Nicholls

Will the hon. Gentleman give way? He is not making any progress.

Mr. Taylor

I shall give way in a minute.

The article said that the Members of Parliament believed that it was unfair that local people were having to pay for the clean-up of the region's coastline when it was a national asset enjoyed by millions of holidaymakers every year. A separate article in the West Briton on 21 May reported the then chairperson of the west country Conservative Members committee, the hon. Member for St. Ives (Mr. Harris), as saying: 'We all found that this was one of the main issues locally in the General Election … People are right to complain about the escalating charges

Mr. Nicholls

On a point of order, Mr. Deputy Speaker. For the hon. Gentleman to name Conservative Members and not to be prepared to give way, when he has actually quoted my words, is an abuse.

Mr. Deputy Speaker

Order. I have already ruled that it is up to the hon. Member for Truro (Mr. Taylor) to decide whether to give way or not. The hon. Member for Teignbridge (Mr. Nicholls) has been here long enough to know that.

Mr. Taylor

In a further Liberal Democrat-initiated Adjournment debate on 2 June 1992, my hon. Friend the Member for North Cornwall (Mr. Tyler), who was newly elected, again pressed the issue. He pointed out the low incomes of the area and told the Minister: There is therefore now a major affordability gap between what is expected of the water charge payers of the south-west and what they can afford…what can the Minister do, post privatisation, to reintroduce national Exchequer support, by way of a green dowry or by any other means, to ensure equalisation between the richer and less well-off parts of the country and to ensure adequate investment in national assets such as the south-west coastline? Despite echoes of our concerns from Conservative Members, the Minister was dismissive, describing South West Water's rising charges as good value to a household."—[Official Report, 2 June 1992; Vol. 208, c. 798–808.] Apparently the Government, although not Back-Bench Conservative Members, had still not realised the severity of the problem. When Cornish Conservatives met the then Secretary of State for the Environment on 9 July, the Western Morning News reported the Minister as saying: There is no question of water users elsewhere subsidising the clean up in the West country, nor of any Treasury help. In August, the regional office of Ofwat called on the Government to give special cash to the region to ease the problem, but it was turned down straight by the Minister. In November, Ofwat released figures showing that South West Water prices were rising at almost twice the rate as those in other parts of the country and that by the year 2000 bills were likely to be twice as high as those in the affluent south-east. In January 1993, Liberal Democrat Members presented the Prime Minister with our document calling for a fair deal and some 30,000 signatures in support of the campaign to get water prices cut. The Government's position became increasingly confused.

On 4 March, at Prime Minister's Question Time, the Prime Minister wrongly argued that I would find that water prices were similar in other counties to those in the west country."—[Official Report, 4 March 1993; Vol. 220, c. 451.] The following week however—after an outcry throughout the west country—the Prime Minister gave a more positive response when I questioned him again on 11 March, saying: I am examining the matter with my right hon. Friend the Secretary of State for the Environment."—[Official Report, 11 March 1994; Vol.220, c.1105.] The news that the Prime Minister was acknowledging the scale of the problem was extremely welcome, and gained him positive coverage.

On 12 March, the hon. Member for Teignbridge (Mr. Nicholls) told the Western Morning News: Ultimately the Government is the only thing that can come to the rescue of the South West. It seemed that the Government were taking action. At this point, the hon. Member for Teignbridge may wish to intervene.

Mr. Nicholls

The hon. Gentleman's generosity overwhelms me.

Is the hon. Gentleman seriously suggesting that a party that would apply qualified majority voting to everything, and then dispense with a national veto, would actually have used the Luxembourg compromise to defeat these directives?

Mr. Taylor

The hon. Gentleman has not been listening. I said that I agreed with them; I also said that the British Government introduced them, not the European Parliament. That is made absolutely clear in the Government's response to the Environment Select Committee's report in December 1990—and, in fact, this occurred before Europe had set those standards.

Mr. Nicholls

My point is that the directives that have inflicted this level of water charges on the south-west were imposed by Europe; they have never been imposed by the House of Commons. It is a disgrace, even by the hon. Gentleman's standards, that he has had the bare-faced, brazen cheek to pretend to the House that the Liberal party—which would give away our ability to veto—would have vetoed in our place.

Mr. Taylor

The hon. Gentleman is wrong. He is welcome to read the report now, if he cares to do so.

By April, the Prime Minister was writing to Conservative Members to tell them that there were now difficulties in lowering bills. That led the Western Morning News, correctly, to predict catastrophe for the Conservatives in the county elections. Meanwhile, the environment Minister disclaimed any responsibility, arguing in a letter to south-west Liberal Democrat Members on 27 April: Responsibility for water charges rests with the Director General of Water Services", denying that the Government were considering a review of water prices and refusing even to attend a meeting to discuss the issue.

That confirmed comments made to the Western Morning News on 23 April, when a Department of the Environment spokesperson—named, unusually; I shall not name that person, as he or she is not present to answer—said: Why should we give South West Water any money? That was why they were privatised. It is up to them to get the money they need from their customers. The news report continued: Mr. Howard's Department said yesterday there was no review, and stressed that curbing water prices was a matter for the industry watchdog, Ofwat. Within two weeks, however, the Director General of Ofwat, Ian Byatt, was reported in the Western Morning News on 7 May as confirming that only the Government can stop South west Water bills spiralling". He said that price limits were based on environmental obligations laid down by the Government, and he had little room for manoeuvre. In September, the National Consumer Council published a report entitled "Paying the Price", arguing that water privatisation had produced a bonanza for shareholders but a raw deal for customers. People in the south-west would certainly agree with that. The sense of a Government in complete confusion over the issue was greatly increased in October, when the new water Minister told the Western Morning News: Ministers had no idea how much the coastal clean up would cost when they signed up". According to the newspaper, he agreed that Ministers had to take some blame. At the beginning of December, Downing street officials briefed Sunday newspapers that the Government had won "important concessions" on relaxing standards to cut the rise in bills, only to have to backtrack. On 14 December, The Independent reported: The Department of the Environment has admitted that nothing agreed at last week's summit would change the price of water or the rules governing its quality for several years to come The Government are apparently still examining ways in which to minimise the clean-up, although that would hurt the tourist industry and would only slow down the increase in bills—and would not even do that for several years. In 1993, the Secretary of State for the Environment wrote to my right hon. Friend the Member for Yeovil (Mr. Ashdown), saying: The work is proceeding urgently but it may take some time. The work now appears to hinge on redefining sensitive coastal waters as less sensitive waters, and therefore pollutable. Under EC rules, that process was due for completion by December 1993 but the Government have not even met that target. The Government have failed to meet the deadline by more than three months. It is rumoured that many projects in some of the most important tourist and environmental sites in the area, including St. Ives and Newquay, could be affected.

The Minister must take the opportunity today to stop making excuses and recounting the history lesson that he gives every time. He must answer a few straight questions: what is happening now about less sensitive waters? Has a list been drawn up? If so, when will it be published and approved, and what EC approval is required?

We have proposed solutions that would cut bills now. First, the Government should replace the outdated water rates system with a system based on council tax charges, which would help people living alone or on low incomes.

Why did the Secretary of State, not only to us at a meeting but afterwards on the record to the media, say that he was looking at that proposal and then deny it later?

Mr. Deputy Speaker

Order. With great respect to the hon. Gentleman, this is in danger of becoming an abuse of the House. He has already taken 20 minutes and the Minister will not have much time to wind up.

Mr. Taylor

I was about to finish my last paragraph. I had understood that the convention is that the time is in the hands of the hon. Member proposing an Adjournment debate, some of whom speak for just one minute and leave the remaining time available to the Minister, and vice versa. I wanted to make some important points. On several Adjournment debates, Ministers have replied to me incorrectly on the history of this matter.

In addition, as to replacing water rates with the council tax system, we believe that the only solution is for national funds to tackle the problem. Otherwise, the problem of 30 per cent. of the clean-up being funded by 3 per cent. of the population cannot be tackled. Many hon. Members on both sides of the House have argued that point. It will not do to blame Europe. It was not Europe but the Government who initiated this problem. And the Minister must answer that charge.

12.51 pm
The Parliamentary Under-Secretary of State for the Environment (Mr. Tony Baldry)

We have heard a monologue lasting more than 20 minutes from the hon. Member for Truro (Mr. Taylor), without much substance. The rate of increase in water charges in the south-west in recent years has been a cause of concern to the Government. My hon. Friends have been vigorous in their representations to Ministers on that matter, as is clearly evidenced by the presence today of my hon. Friends the Members for Falmouth and Camborne (Mr. Coe), for Tiverton (Mrs. Browning), for Teignbridge (Mr. Nicholls) and for Taunton (Mr. Nicholson). With other hon. Friends, they have been extremely conscientious in ensuring that Ministers appreciate the concerns of those living in the south-west. I appreciate the fact that some Opposition Members share their concerns.

Water and sewerage charges have been rising across the country as a whole in recent years. That has been necessary to help pay for the multi-billion pound investment programme in the water industry. How often do we hear calls from Opposition Members for more investment? "Spend more money" is practically the rallying call of the Labour and Liberal parties but they complain as soon as more money is invested in the industry. Such complaints are all the more perverse because the previous Labour Government, supported by the Liberals in the Lib-Lab pact, starved the water industry of the money it needed for investment.

When the water authorities were constituted in 1974, their investment stood at some £1.4 billion at current prices. The Labour Government, due to economic mismanagement, simply could not afford to keep up that rate of investment. That Labour Government was marked by rising inflation, economic mismanagement and poor public spending control so that, in December 1976, the Labour Government, propped up by the Liberals, had to announce overnight a moratorium on the letting of new construction contracts by water authorities. That moratorium signalled public spending cuts for the next two years. South West Water's capital expenditure was actually reduced by 6 per cent. in cash terms. So we do not need lectures from the Liberal Democrat or Labour parties on investing in the water industry.

We have reversed their neglect. To do so, increases in water bills would have been necessary even had the water industry remained in the public sector. But privatisation has allowed water companies access to the financial markets to enable them to obtain part of the funds that they need for their investment programmes, in the form of long-term private sector loans.

Overall, water companies are investing some £3 billion a year. If the companies are to continue to undertake the investment required of them, they must be profitable and able to reinvest those profits in the water infrastructure. We hear many cheap comments from Opposition Members about the water companies' profits. South West Water's last annual report, for the year ended March 1993, states that the company made a pre-tax profit of £92.7 million, but it reported capital spending of £203.7 million in the same period. South West Water's capital investment in the south-west was, therefore, more than double its pre-tax profit.

I acknowledge that in recent years water and sewerage charges have risen more rapidly in the south-west than in other parts of the country, but let us have some sense of proportion. The average South West Water bill for the coming year is £304, which is £40 more than the average bill in the Anglian region and £48 more than the average in Wales. So customers in the south-west are paying on average less than £1 a week more than customers in those regions and the average bill for the coming year will be 83p a day, for water delivered for all purposes and for taking waste water away. That shows that the cost of water in the south-west still represents good value for money.

South West Water's charges have increased more rapidly than those elsewhere because of the company's substantial capital investment programme. It is investing, and plans to continue to invest, between £200 million and £250 million a year, every year until 2000. Much of that spending programme is needed to clean up bathing waters and beaches in the south-west and to comply with the European Community bathing water directive. My hon. Friend the Member for Teignbridge (Mr. Nicholls) made some telling remarks about that directive. People do not want dirty beaches and they should not have them. South West Water is spending millions of pounds to clean up the beaches and no one has ever suggested that schemes to clean up beaches that fail European Community mandatory standards should be deferred.

I am glad that South West Water's "Clean Sweep" coastal sewage treatment programme is well under way. That is good news for local people and for tourism. People welcome those environmental improvements, but there will also be important economic benefits because clean beaches and safe bathing waters are increasingly necessary to attract and retain a thriving tourist industry, on which many jobs in the south-west depend.

Last year, many people in the south-west became concerned about the scale of possible future price increases set out in South West Water's market plan. That plan was published in May last year and set out three possible options for typical household bills in 2000, which is six years away. The options were: £400, £450 or £500, depending on assumptions made. The hon. Member for Truro suggested that those were actualities, but it is important to make it clear that they are hypothetical bills that are six years away.

South West Water argues that if it is to meet the higher standards that will be legally required by 2000 it will have to levy a typical charge of £450 in that year. It is important for us to recognise that those figures were the company's estimates only. We are not talking about charges this year, next year or in 2000. Charge increases from 1995 onwards will be subject to the new price limits, which the Director General of Water Services, Mr. Byatt, will announce in July, following his first periodic review of all water company prices.

The hon. Member for Truro suggested some ways in which the director general could reduce water bills in the south-west. Essentially the Liberal Democrats want some form of cross-subsidisation. They want other parts of the country to help to meet the costs of sewage treatment in the south-west. To put it bluntly, that would be a form of cross subsidy, but why should there be such cross-subsidisation from customers in other parts of the country? Such subsidies are not consistent with transparency or accountability. Nor is it desirable for water and sewerage services to be paid for out of general taxation rather than charges to consumers.

Doubtless the hon. Gentleman's colleagues in other parts of the country will explain to their voters the Liberal Democrat view that their bills should be increased and that they should pay twice in their bills to subsidise the south-west. I somehow doubt that they will do so because a consistent theme of the Liberal Democrat party is that its members can always be guaranteed to say different things in different parts of the country.

Some people have argued that it is unfair for the south-west, with only 3 per cent. of the nation's population, to have to pay to clean up 30 per cent. of its beaches. But that argument ignores the fact that other parts of the country have particular geographical problems—for instance, East Anglia has a problem with nitrates arid the north-west has a problem with lead. Those problems also require additional investment, which has to be paid for by the customers in those areas.

Sir Peter Emery (Honiton)

rose—

Mr. Baldry

No, I cannot give way. The director general will announce in July the new annual price limits for South West Water and for other companies, for a ten-year period beginning 1 April 1995.

I was not given a proper opportunity to answer this important debate by the hon. Member for Truro, but I suspect that much of what I have to say I shall say by way of a press release in the south-west—because the hon. Gentleman abused our procedure. The director general and the Government are keen to ensure that future price rises are not a penny higher than necessary. That is the action that we are taking to ensure that we comply properly with the directives, and to ensure that bills in the south-west are kept as low as possible—

Mr. Deputy Speaker

Order.

Forward to