HC Deb 01 April 1996 vol 275 cc126-34

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Conway.]

10.17 pm
Mrs. Helen Jackson (Sheffield, Hillsborough)

I asked for this debate because of my disgust at the wriggling and constant evasion on the part of the Government and, in particular, of the regulator, in respect of the chaos that Yorkshire people suffered last year. As the public inquiry in Leeds town hall, funded by Yorkshire Water and headed by Professor Uff, provides more and more details of the inadequacies—which go back not months but years—I predict that the Government's explanation will change. Instead of saying that it had been an exceptional, once-in-500 years summer and that the company did all that it could, they will say that it is a case of one bad company and that now that its senior executives and chairman have gone, everything will be all right. I also predict that the Government will fail even to address the flaws in the regulatory system that allowed the chaos to happen.

The Government's golden rule is that nothing, but nothing, must be seen to be wrong with water privatisation. That must be stated and restated by Government and regulator alike but never subjected to public scrutiny. I suggest that even today's announcement about competition was more a diversion from the public scrutiny of the management of the water industry that people want than anything new about how the industry will be managed in future. What other reason is there for the refusal of the Department of the Environment and the regulator to attend or give evidence in public to the inquiry in Leeds? Were they not also involved during last year's crisis? Did not the Secretary of State meet the company's chairman, Gordon Jones? Did not Ian Byatt write letters of complaint to the company? Why should those meetings and that correspondence be kept secret when everything else is in the public domain?

The public inquiry has been useful, in particular because it has offered the chance to the other regulator, the National Rivers Authority, to clarify many of the long-term issues relating to water resource management in Yorkshire without getting hung up on the "we must defend privatisation" charade. Certain factors have stood out, including the explanation that water for drinking in Yorkshire and anywhere else can be collected for treatment purposes from three sources: reservoirs, bore holes and rivers. Reservoirs are the cheapest source because water flows down hill and is collected in the uplands, where it is kept relatively pure. Bore holes are the next most expensive option because of the pumping costs, and rivers are the most expensive because the water needs to be pumped and cleaned up more to make it safe to drink.

Last March, Yorkshire Water looked at the beautiful reservoirs of the Pennines brimming over after one of the wettest winters in history and saw not water, but a year of bumper profits. Instead of conserving the good wine till last, it gobbled it all up month after month through the summer. It was not until the middle of August, the 18th to be precise, that Yorkshire Water looked to increase its take from rivers, despite persistent NRA warnings.

The second fact to come out of the inquiry is that the company was warned way back in 1991 that the grid system was not sufficient to move water around the county. Indeed, since 1989, drought restrictions have been imposed throughout the county in every single year.

The third fact to come out of the inquiry is that the need for investment to reduce leakage was identified four years ago, but no action was taken. According to the minutes of a meeting of the Ofwat Yorkshire customer service committee, the director general visited Yorkshire on 8 April 1992 to discuss in particular Ofwat's concern about the leakage control policy and the lack of investment to combat those leaks. There is nothing new about leaks.

The truth is that, last year, there was no drought in the real sense of the word in Yorkshire. A drought occurs when there is year on year of low rainfall—more like in 1976, or, potentially, this year—and when stocks are low after a number of dry winters and summers. In 1976, people displayed a community spirit to save on external use and garden watering.

Yorkshire people are not blind, and they can detect greed and waste. They saw the brimming reservoirs in March, and fished in them. Those reservoirs were full of public water collected from rain in public ownership. They saw and reported leaking pipes and discovered that it took at least two weeks for the company to take action. They read about the 100 million gallons of water leaking daily from company pipes. With one voice—chambers of commerce, Tory and Labour Members of Parliament, local authorities, rich and poor alike and public health bodies—they turned on the company when they were threatened with standpipes, rota cuts, business relocation and constant appeals to restrict their use of water for washing and in the garden. They said, "No. This is your problem. We, the customers, will not accept the blame." Indeed, usage started to go up every time a Yorkshire Water boss issued another television appeal.

Tonight, I want to take the issue further. The problem was not trivial, but touches the very heart of public health. People now want to know why the Government allowed that irresponsible company simultaneously to retain its senior management, return record profits and increase prices by nearly 6 per cent. while overseeing a crisis that could have caused major outbreaks of dysentery, environmental devastation and even mass evacuation.

The public want to know what the so-called independent regulator's role was in all this. He showed no concern about water resources last year until 21 August, when he issued a press release calling for the companies to improve the way they manage the demand for water"— not the way they manage water, but the way they manage the demand for water. He admitted: where companies are short of water is it likely that leakage control should be an important part of its strategy, … In other areas, however, it will not be cost effective. These are decisions for the company to make. Although Ofwat monitors companies' leakage rates, its prime concern is with the service that customers get. That is not true. If Ofwat's prime concern was for customers, we would have seen action years ago to set targets on leakage. Instead, Ofwat's prime concern is with the financial well-being of the water undertakers. In the words of the Department of the Environment, Ian Byatt is the independent economic regulator of the Water Industry in England and Wales. It is to the director general that companies deliver their annual leakage returns and their five-year investment plans. It is the director general who says whether companies can sell off their land or reservoirs. It is he who receives their capital asset management reports.

Are all these reports and information simply a library exercise? No, they are not even that, because the information is kept behind closed doors and in locked cupboards and is not open to the public.

When investment proposals are inadequate, does the director general ever intervene? At the price review in 1994, he will have known that Yorkshire Water's investment in water distribution was dropping 26 per cent. from 1992 to 1993—a shortfall of £100 million, which just happens to be the sum being rushed through in six months to improve the grid because of the crisis.

What action did the regulator take at the time of the price review? What happens when investments have been promised and agreed but are not delivered? The inquiry heard last week from the Sewer Renovation Federation. I quote from the evidence of Paul Hayward: the total infrastructure renewals underspend for all … private water companies amounted to £l398 million by March 1995, of which Yorkshire Water's share was £136 million". That £136 million represents money collected from customers for the express purpose of maintaining the water and sewerage infrastructure, but not spent.

Mrs. Elizabeth Peacock (Batley and Spen)

Does the hon. Lady agree that if Yorkshire Water had had first-class management last year, we would not have had a crisis because there was not a drought? There was water in many areas in Yorkshire, which Yorkshire Water said it would take five years to put pipelines in to transport. If we had had a first-class regulator who was doing his job properly, he would have urged them on to manage the company better, to ensure that leakages were reduced and that people in Yorkshire received the service for which they pay.

Mrs. Jackson

What the hon. Lady says endorses the concern and anger that has been felt by public representatives of all political views in Yorkshire about the poor management last year.

I would make two points in response. First, there were some extraordinary management decisions. In the middle of the crisis, when morale was at rock bottom, Yorkshire Water management continued the process of contracting out—outsourcing. On 4 August, in the middle of the crisis, it held a meeting with workers to say that the jobs of workers in leakage control teams in South Yorkshire were on the line. Is that not an extraordinary management decision, when everyone needs to join in and do what they can to tackle leakage? Yes, there were some extraordinary management decisions, but I am sure that the hon. Lady will acknowledge that the actions could have been taken before last year and then we should not have had the problem that we had last year.

Secondly, what is the point of the regulator having powers to monitor the service and financial indicators if he is either unwilling or unable to take action to ensure that companies keep to their plans? He would say that in mid-November, which was right at the end of the crisis—it had even started to rain—he did decide to act. He was spurred on by the imminent public inquiry into the emergency drought order seeking permission to impose rota cuts.

The regulator wrote to Yorkshire Water stating that he intended to investigate its performance—in private. The only record that we have of that letter was leaked to The Times and he still will not make public the letter or what he was particularly concerned about. We know from the one in The Times that he was particularly concerned that the plight of customers raises serious questions about decisions taken by the company in the years leading up to this summer as well as the action or inaction in response to warning signs". The regulator recognised that the problem went back some years and did not start just last summer. In the letter he announced that he was setting up a team which would report its findings in January. What team? I rang the regulator on Friday and I was told that it would not include any senior executives from the company, which is what had been said in the letter—if there were any of the old ones left—but that his team included just his own staff and appointed advisers. What have they been doing since 12 November and who are the consultant advisers? How much are they being paid and what are the inquiry's terms of reference? None of that information was forthcoming.

On 7 March, Mr. Horsman from the Mid-Yorkshire chamber of commerce received a letter from Mr. Byatt explaining that he would not attend the Leeds inquiry because his own inquiry was under way. In the letter, he said that the teams had been appointed and had started in January and that his inquiries would be completed in April. 1 wondered this morning if that was what the Secretary of State meant when he spoke about bringing competition into the water industry. As soon as one inquiry is set up, it has to compete with another.

Will there be a race to the finishing line? John Uff has given 30 April, but can Ian Byatt get there first? Is there a third report in preparation and completely under wraps? We must not forget Mr. Nixon, the Department of the Environment inspector from the Dewsbury public inquiry held on 12 to 14 November. His report was on the Secretary of State's desk by 24 November, but despite persistent questioning in the House, nobody saw it until 16 January when it was reluctantly placed in the regional office in Yorkshire and Humberside for anyone who was interested enough to go and get it. Even then, it came with a letter stating that the Secretary of State saw no useful purpose in going further into the questions that it raised because the application for the emergency drought order had been withdrawn. That two-day public inquiry was a waste of time.

We need answers from the Government about the part that they played in last year's crisis and in the period running up to it. What meetings took place between Ministers and Yorkshire Water throughout last year? What ultimatums were given and when by any Minister and especially by the Minister for Local Government, Housing and Urban Regeneration whose bulging postbag on this issue must have been a great embarrassment to him? What pressure was brought to bear by Tory Members in Yorkshire's marginal constituencies who saw their chance of re-election draining away like the water supply? What discussions have taken place between Ministers and the regulator about whether they should participate in the public inquiry?

I believe that neither Ministers nor Ian Byatt dare to face the public. The regulator will not make his letters and his actions public because they endorse his failure as a regulator. The problems were not of one summer—they are long standing—nor do they relate to one poor company. The Ministers and the regulator must answer in public how they will stop the rampant profiteering in this industry. It is for them to say what they will do to make regulation of this public service—a much better description than utility—work for customers, not for companies.

I wish Kevin Bond and his new team at Yorkshire Water well. He has started this job today. I am pleased that he comes from the environmental side of the industry, because he well understands the interface between the different elements of the industry: water, drainage and sewerage. I do not want this debate to add to the significant job that he has started today.

I believe that the Government have missed a huge opportunity over this two-week inquiry. By hiding from public scrutiny on the appalling record of events in Yorkshire, they have added one more episode to the catalogue of disasters from which they seek to evade all responsibility—from the Scott report, to the recent bovine spongiform encephalopathy scare, to the death of children for whom no intensive care beds can be found and to chaos in our prison system—the failure to deliver a proper water supply for the people of Yorkshire last year.

10.37 pm
The Parliamentary Under-Secretary of State for the Environment (Mr. James Clappison)

The issue of water supply in Yorkshire is of concern to the public in Yorkshire and it will assist hon. Members if I outline a brief factual account of the background to this. Rainfall across the Yorkshire region between April and October 1995 was only 59 per cent. of the long-term average; rainfall in the west of Yorkshire, where Yorkshire Water's reservoirs are situated, was even lower, at between 46 per cent. and 52 per cent. of the long-term average; and approximately half the company's water resources are obtained from these reservoirs.

Rainfall continues to be disappointingly low. Following nine months of rainfall at or below 50 per cent. of long-term average for west Yorkshire, January was again 50 per cent. of average; February was just above average; and, so far in March, it is about 58 per cent. of average—with less than 50 per cent. of average in Calderdale and Kirklees.

In the autumn of 1995, Yorkshire Water drew up plans to secure water supplies through the winter of 1995 and the summer of 1996. These plans were set against the possibility of the winter being as dry as ever recorded and a repeat of the exceptional conditions last summer. The company has identified a possible daily shortfall of some 132 million litres.

Mrs. Helen Jackson

I am sure that the Minister recognises that the proposals to establish a better grid to move water around the county was in existence two years before the summer of last year.

Mr. Clappison

I am setting out the company's plans in response to those conditions that I have described. It has devised 18 schemes capable of delivering in total an extra 137 million litres per day. These schemes involve the construction of over 100 km of large diameter pipework and seven associated pumping stations in two main phases. One phase is due for completion about now and the other by May. One of these pipelines will connect Eccup reservoir, north of Leeds, with Bradford, Calderdale, Wakefield and Kirklees. The other will run from Selby to Leeds, Wakefield, Huddersfield and Calderdale. The cost is some £100 million.

These schemes are also based on further drought orders and time-limited variations to existing abstraction licences on the rivers Derwent, Ure, Wharfe and Ouse. The Environment Agency is considering the licence variations. Drought order applications have been handled expeditiously by my Department. There are currently 11 drought orders extant in the Yorkshire Water area and one application is under consideration. Another drought order application, concerning the River Derwent, is still the subject of discussion between the company, the Environment Agency and English Nature in view of the particular environmental issues involved. My Department will proceed with its consideration when the company indicates that it is ready to proceed.

Even with the severe conditions considered in its recent planning, Yorkshire Water has expressed confidence that, with the new schemes in place, there will be no need for water tankering or water rationing in 1996. I hope that that is of interest to Yorkshire consumers. The company states, however, that it will be necessary to maintain a hosepipe ban.

The company is presently engaged in a £12 million pilot leakage reduction programme in west Yorkshire to find the most cost-effective long-term solution. This is in addition to the enhanced leakage control programme that the company ran throughout 1995. We note that the Environment Agency intends to agree economic targets for leakage reduction with Yorkshire Water within the next few months for Leeds, Bradford, Calderdale and Wakefield. The company has also recently announced environmental and engineering studies of the option of transferring water from the River Tees, which is supported in part by the Kielder reservoir, into Yorkshire. That is part of its medium to long-term water resource planning.

Mrs. Helen Jackson

Will the Minister give way?

Mr. Clappison

Briefly.

Mrs. Jackson

In the light of today's announcement, will the Minister confirm that the transfer of water from Kielder reservoir to Yorkshire can operate whether or not the rules that were introduced today are in place?

Mr. Clappison

This is part of the company's long-term planning. I hope that I have set out clearly for the hon. Lady the short and medium-term measures that it is taking against a background of assumptions about the situation this year.

On Government monitoring, since last September, my right hon. Friend the Secretary of State has commissioned a series of reports from the National Rivers Authority on the developing water resources situation throughout England and Wales. The third report considered the position as at 31 January 1996 and again drew attention to the difficult situation in west Yorkshire. I can assure the hon. Lady that they certainly have taken an interest in what is taking place in Yorkshire. A fourth report, which will be published in late April by the Environment Agency, will consider the situation as at 31 March and the contingency arrangements to maintain supplies in the event of a dry summer.

Ministers and senior officials have kept in close contact with the management of Yorkshire Water throughout the drought, from the early part of July 1995, when it became clear that there might be a problem. Indeed, my right hon. Friend the Secretary of State is meeting the chairman of Yorkshire Water tomorrow to hear from him the very latest position.

In common with all water companies, Yorkshire Water has a statutory duty to maintain water supplies, and we expect it to take all measures necessary to do that.

The hon. Lady referred to the independent commission of inquiry into water supply, which was announced at the beginning of February 1996. It is a private inquiry, commissioned and funded by Yorkshire Water. The commission's chairman, Professor John Uff, has publicly stated the complete independence of the inquiry and that Yorkshire Water is no more than one interested party in the proceedings. Yorkshire Water has stated that it will consider the inquiry's report, when it is published, to determine how it should influence the company's planning for water supply in the future.

My Department has made plain our willingness to help guide the inquiry to published information that may be relevant to its deliberations, but we have not received an invitation to submit evidence. Professor Uff has indicated that he is fully content with that position. Contrary to recent press reports, we understand that no criticism of the Department has been made in the inquiry sessions. I understand that the inquiry sessions will conclude this week.

The Director General of the Office of Water Services decided in November 1995 to carry out his own inquiry into various aspects of Yorkshire Water's performance of its statutory functions, including those relating to water supply. He has powers of enforcement that may be exercised as appropriate following his own investigations. The director general therefore considers that it would not be right for him to be seen to participate in an inquiry commissioned by the company while his own investigations continue. He has written to the inquiry chairman with this explanation of his position in relation to the inquiry. We are aware of the criticisms of Yorkshire Water's actions made by the NRA in its evidence to the independent inquiry. It will now be for the Environment Agency, irrespective of the outcome of the independent inquiry, to make use of statutory powers as it thinks fit to remedy any deficiencies. We note that the Environment Agency may seek to enter into a formal agreement with Yorkshire Water under section 20 of the Water Resources Act 1991 concerning the company's management of the Yorkshire grid. Such an arrangement would have to be lodged with the Secretary of State and would be enforceable by him. We shall await receipt of such agreements as and when they are developed.

As the hon. Lady is well aware, my right hon. Friend the Secretary of State announced on 1 September 1995 a review of water resources and supply arrangements in England and Wales as a whole in the longer term. This is being conducted with the Office of Water Services, the Environment Agency, the water industry and others. A report on the outcome can be expected within the next four months. The outcome of the independent inquiry into water supply in Yorkshire is a matter for the company that commissioned it, and its shareholders and customers. We shall study its findings with interest in relation to our own work.

As the hon. Lady said, we issued a consultation paper today on extending competition and customer choice in water and sewerage services. It is an evolutionary approach, beginning with large users. We hope that, in the long term, it may be possible to extend the benefits of competition to the majority of water customers, both in Yorkshire and elsewhere.

It must be accepted that rainfall in Yorkshire has been exceptionally low, and that no amount of rhetoric or hindsight can alter the basic truth that the provision of water supplies depends fundamentally on rainfall. What matters now is that action is taken to secure supplies for the future in the event of further exceptional conditions. Normal supplies have been maintained so far, and it is important that that should remain the case.

Question put and agreed to.

Adjourned accordingly at fifteen minutes to Eleven o'clock.