HC Deb 08 May 1996 vol 277 cc151-71

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

9.35 am
Mr. Richard Burden (Birmingham, Northfield)

I am grateful for the opportunity to raise this matter today. It is nearly three years since I first raised in the House the subject of pre-payment water meters. At that time, the level of water disconnections was high and there was an understandable public outcry at the growth that had taken place. I said at that time that I was worried that what became known as pre-payment water meters might herald a new era of water disconnection by the back door. Sadly, I think that I have been proved right about that, and public concern is growing about the operation of water pre-payment devices.

Perhaps I should start by explaining exactly what pre-payment water meters are, because they are called by different names in different places. The Office of Water Services, or Ofwat, calls them budget payment units or budget payment devices. In my area of Severn Trent, pre-payment water meters are referred to by a brand name—the water key. The names vary, but the functions remain essentially the same wherever they are used, with one significant difference, which I will describe later.

The pre-payment water meters are like the old coin-operated meters that were common some time ago for paying for gas and electricity and are still in operation in many parts of the country. They are a pay-as-you-go system, but instead of being operated by the insertion of a coin, the pre-payment water meter is an electronic device operated by a key, or sometimes a card. The customer has to have the key or card charged up, normally at a post office, and by the insertion of the key or card in the unit at home, water is received for the period that has been paid for. I understand that some of the other utility services are also moving towards electronic rather than coin-operated systems for pre-payment.

The way the pre-payment water meter works—like the traditional coin-operated gas and electricity meters—is that, if the customer cannot, or, for other reasons, does not, keep up payments and does not charge up the card or key, the water supply automatically cuts off. In many cases, there is a warning period, and sometimes an emergency supply may be supplied for seven days, but we must be clear about the fact that, if the key or the card is not charged up, the customer is disconnected.

Disconnection from any utility service is a serious matter, but the public health consequences involved with water are so serious that the implications of water disconnection are that much more severe. If families do not have a supply of water, they cannot have baths. They have no water to wash in and no water to cook with. The customers cannot even flush their toilets. That is why many of us—I am pleased to say that that includes all hon. Members on the Opposition Benches and a growing number of hon. Members on the Government side—want to outlaw water disconnections altogether.

That is also why existing legislation, inadequate though it is, in my view, lays down clear notice requirements on any water company that is contemplating disconnecting a domestic customer for non-payment. The customer has the right to dispute liability and have a court hearing before disconnection takes effect. Within 48 hours of disconnection—if it is anticipated that it will last for more than 24 hours—the water company must notify the local authority. That is because of the possible environmental health consequences of disconnection.

The pre-payment water meter drives a coach and horses through existing legislation by allowing what has been described as self-disconnection. In reality, it is not self-disconnection. It is the pre-payment meter that cuts off the water supply, not the customer. It is disconnection none the less. As that bypasses existing legislation, no fewer than 26 local authorities have signified their willingness to mount a legal challenge to the use of pre-payment meters. Those local authorities are not interested in establishing an obscure point of law for the sake of it. They are willing to present a legal challenge, however, because a growing number of people are having their water supply cut off.

Reports from Ofwat tell us that about 16,000 pre-payment water meters have been installed. They are mainly in the areas covered by Severn Trent Water, North West Water, Welsh Water and Wessex Water. There has been a startling increase in the number of hidden disconnections associated with these meters.

In Birmingham, for example, Severn Trent Water has pioneered the use of pre-payment meters. It is no accident that, as a result, Birmingham city council is leading the legal challenge to the installation of such meters. The council estimates that, in Birmingham alone, there have been no fewer than 2,489 disconnections associated with pre-payment meters. Those were the disconnections that had taken place by April. As it is estimated that only about 1,500 pre-payment meters have been installed in the Birmingham area, there is clearly a pretty staggering disconnection rate.

Those figures do not sit easily with Ofwat's press release yesterday, in which it applauded the fact, as it saw it, that there had been a 42 per cent. reduction in domestic disconnections in one year. Ofwat stated that only three out of every 10,000 households are having their water supply disconnected.

It is convenient for Ofwat and the water companies that disconnections by the operation of pre-payment water meters are not included in the statistics. However, the disconnections are still real for the families involved—and I mean families. When a disconnection takes place and a household runs out of water, it is not only the householder who has failed to pay his or her bill who is affected. It means, for example, that the children cannot have a bath. The elderly relative who lives upstairs will not be able to flush the toilet.

Water disconnection affects the entire family. Whether disconnection takes place by the operation of a pre-payment meter or otherwise, it is still real, and the public health risks are still there.

I do not know what the Minister will say when he replies. I am hardly encouraged, however, by the replies that I received to written questions that I tabled last week. On 29 April, I was told that the Government had not yet obtained the figures setting out the number of pre-payment water devices that had been installed throughout the country. I was told that the Government did not collect figures centrally which would show how many customers had had their water supply interrupted through the use of such meters.

But the response of the Under-Secretary of State for the Environment, the hon. Member for Hertsmere (Mr. Clappison), to one of my questions was interesting. As I have said, he told me that the figures were not collected, but he added: There is no disconnection of the water supply to the property as a result of the operation of a budget payment unit. The supply continues to be available and can be used as soon as the unit is recharged."—[Official Report, 29 April 1996; Vol. 276, c. 333.] Now we know. Apparently, it is not a disconnection, because the customer can have his supply restored if he pays up. Presumably, by that logic, there are no electricity, gas or telephone disconnections. If the customer pays up, he can always have the service restored.

It is a fascinating argument. Will it be used by the Government after the next election? Will they say, "We were not really defeated at the election, because, when another election comes along, if we secure more votes, it will not count that we were defeated earlier." It is logic of which Sir Humphrey Appleby would have been proud.

We know, however, that disconnection is real. We also know that Ministers are reluctant to admit that pre-payment meters disconnect, because they know that, as soon as they use the word "disconnection", there will be a public outcry. As soon as they use that word, the dubious legality of pre-payment devices will take centre stage.

We shall probably be told today that pre-payment meters are popular with customers. No doubt we shall be told that they are voluntary, and that no customer is forced to have such a meter. We shall probably be told also that Severn Trent in the midlands has conducted a MORI poll, the result of which reflected massive customer satisfaction with pre-payment meters. It is probable that we shall be told that the meters are not about disconnecting, but instead are an aid to budgeting. It will be claimed that they are a new form of easy payment terms.

I am all in favour of the easy payment schemes. I am in favour, too, of allowing customers, especially those on low incomes, to spread the payment of their water bills. It would not be a bad thing if the bills were rather smaller, but assuming that they remain at their present level, it is a good idea to allow customers to spread their payments. It is not necessary, however, to install a device that cuts people off from their water supply if they are to have easy payment terms.

I have criticised Severn Trent Water many times for its promotion of the water key or pre-payment meter. I compliment it, however, on introducing another scheme, which it has called the watercard. Perhaps the terminology is unfortunate, because I understand that there is a pre-payment device that is also called a watercard. The Severn Trent watercard is not a pre-payment meter. Instead, it is a smartcard that is issued to the customer, who can then take it to the post office and charge it up, as it were. He is able to pay as much or as little towards his bill as he wants. No device is installed in the home. The card simply records the amount that has been paid, in a very easy way.

I welcome the fact that Severn Trent Water is promoting its smartcard. I urge other companies to take up the scheme. I understand that a similar scheme is being operated by Dwr Cymru, and that is good. The scheme is an aid to budgeting. Machines that cut off customers from their water supply are not easy-payment schemes. Instead, they lead to disconnections by the back door.

We hear from water companies and from Ofwat that pre-payment meters are an aid to budgeting. When will they admit to the families that have had the devices installed that they cost more than other systems? It is an interesting aid to budgeting. It is an interesting easy payment scheme if it costs more to have such a system. In the Severn Trent area, each installation of a pre-payment meter costs the customer about £26. That could be about 10 to 15 per cent. of someone's water bill for a year. For the privilege of having a pre-payment meter, the customer is charged £26.

There is another catch in the operation of the vast majority of such meters. I said at the beginning of my speech that they differed in one significant respect from traditional gas and electricity meters. The difference is that the vast majority of water pre-payment meters are not volumetric. Normally, when the customer charges up his water key or other pre-payment device, that does not involve his buying a certain quantity of water; he is buying a certain amount of time during which he is connected to the water supply. His annual water charge is divided by the amount charged up on his card or key.

The catch is this. If the customer does not keep the card or key charged up, that will not alter his liability to pay his annual water bill. That means that, even if the customer is cut off, he will be charged for water that he is not receiving. That is a very strange aid to budgeting—a very strange easy payment scheme. The customer is told that the device will be helpful, but if he cannot keep up the payments, he is charged for water that he is not allowed to receive.

I would be interested to know how many of the customers who have apparently expressed great satisfaction with the operation of pre-payment meters were told in advance that, if they could not keep up their payments, their water supply would be cut off, but they would still be charged for it. I suspect that the answer is, not very many.

No doubt we shall be told that pre-payment meters do not have to operate on the basis of time; at the flick of a switch, they can become volumetric. We may be told that that would remove all the problems, but it would not. This debate is not about the hidden, creeping spread of compulsory water metering, about which there is just as much public concern, but no doubt that will feature in another debate later today. I do not want the use of pre-payment water meters to add to that spread.

So what is the problem with pre-payment water meters? We know that 26 local authorities are mounting a legal challenge. We know that today, in Liverpool, local authorities, health professionals, tenants' groups and others are gathering to mount a campaign against North West Water's plan to expand the use of pre-payment water meters in its area.

It is time for the Government to recognise the real and growing public concern about such devices. It is time for them to recognise that, under legislation passed by the House at the time of privatisation, clear rules and criteria were laid down about the circumstances in which a customer could be cut off. It is time for them to recognise that those arrangements cannot co-exist with the operation of pre-payment water meters, which bypasses them completely.

It is also time for the Government to start collecting figures relating to the number of customers whose supplies have been interrupted—the Government may not like the word "disconnected"—by the operation of pre-payment meters. If it is possible for local authorities to monitor the position, why is it so difficult for the Government to do so—or is it simply that they do not want to? The disconnections are real: thousands of customers throughout the country are having their water supplies cut off, without any court orders, because of the operation of pre-payment meters. Surely it is time for the Government to recognise that they should at least show some interest and concern.

Is it not time for the Government to accept that, if a family are without water, it will not matter to them why they are without water—whether it is because of the operation of a device on the wall, or because of a court order? The health risks will be exactly the same. That should not be of concern to the customer alone.

Mr. Peter L. Pike (Burnley)

My hon. Friend has mentioned health risks. No doubt he is aware of the letter sent by the chief executive of Liverpool health authority, Mr. Hoyle, to Brian Staples, chief executive of United Utilities. That letter clearly spells out that, even if the Government take no notice of what the public and local authorities think, the introduction of pre-payment meters is a dangerous move, which increases health risks considerably.

Mr. Burden

My hon. Friend is absolutely right. I am sure that that will be an underlying theme in today's press conference in Liverpool, which will deal with the health problems associated with the operation of such meters.

Only a couple of months ago, the Save The Children Fund published a lengthy, thoughtful and well-researched report about the impact of normal water metering on low-income families. Hon. Members who have not yet looked at that report should do so. It makes the point that I made earlier—that the spread of pre-payment meters could make the problems of water poverty and disconnection associated with the operation of ordinary meters even worse.

Disconnection is a major problem; that is why there was a public outcry a few years ago. It is not good enough for either the Government or Ofwat to say that the number of disconnections has fallen by 42 per cent. in one year, while omitting from the figures the growing number of disconnections that result from the use of pre-payment water meters.

I have mentioned easy payment terms. Some time ago, along with my hon. Friend the Member for Sheffield, Hillsborough (Mrs. Jackson) and Conservative Members, I met Ministers to examine ways in which low-income families could be helped to spread the cost of their water bills. Much more could be done in terms of the relationship between water bills and the benefits system: water charges could be taken out of benefits, if the customer wishes, more effectively than at present. I welcome the increase in the number of watercards, as used by Severn Trent; the electricity companies are using them as well. I approve of ways in which the payment of water bills is made as easy and flexible as possible.

It would not be a bad idea for the benefits system to reflect the true cost of water—and, as I have said, when the regulation of the water industry is examined, it would not be a bad idea to assess the overall cost of water to the customer, particularly the low-income customer, rather more thoroughly, and to pay more attention to the problem of water poverty. That growing problem could be alleviated by allowing customers to spread their payments.

A family may be finding it difficult to make ends meet. They may then be presented with, as it were, a disconnection notice in one hand and a pre-payment water meter in the other. Perhaps they are having problems in coping with the weekly or monthly budget. Will they be able to pay the electricity bill and the gas bill? Has the telephone been cut off? What about the cost of the children's clothes?

If, as well as all that, the family have a large water bill to pay, will it really help them for the water company, Ofwat or indeed, the Government to tell them, "We have the answer to all your problems; the answer is to have a device fitted in your home, and to pay £26 for the privilege. The way in which that will help you is this: if you do not keep up the payments, you will run out of water"? Where is the logic in that? That does not help any family to pay their water bill, and it is time the Government recognised that.

Pre-payment water meters are potentially unlawful. That will no doubt be sorted out elsewhere. I hope that it does not have to go to court. I hope that the Government will recognise their responsibilities, recognise that it is time for them to stick by the legislation they passed at the time of water privatisation, and make it clear that water pre-payment meters have no place and should be outlawed.

9.59 am
Mr. William O'Brien (Normanton)

I congratulate my hon. Friend the Member for Birmingham, Northfield (Mr. Burden) on his success in introducing this subject. The issue surrounding pre-payment water meters is serious, and one to which the House should give due regard.

The issue of standing charges has come to light because of the introduction of pre-payment water meters. Standing charges have become part of the unit cost; they are being lumped into the full water bill and divided into units, as my hon. Friend the Member for Northfield pointed out. Standing charges are therefore part of the debate on pre-payment.

The argument that Oflot and the water authorities have been using for years—that it is necessary to levy standing charges for pipes, meter readings, and so on—has been exposed as a myth by the introduction, or the suggestion of the introduction, of water meters. If for all these years we have been led to believe that there could be no changes in the application of standing charges, yet with the introduction of pre-payment water meters by various water authorities such charges are being abolished, can we believe Ofwat, its director and water companies about pre-payment water meters, or are we again being misled?

The charges for sewerage and sewage disposal are also included in the overall bill. We receive two water bills in the Yorkshire area—one for water supply and one for sewerage and sewage disposal. If those are lumped together, charges for sewerage and sewage disposal must be included in the unit costs of pre-payment water meters. People should be made aware of what their pre-payment water charges include. We are not being told the exact costs.

We have been told that, when the meter is charged, people can use as much water as they desire within that period. One would therefore assume that the customer is being advised. I would question Oflot and water companies on whether customers are being advised on all the issues involved.

As has been pointed out, if the charged key or charged card that allows the pre-payment water meter to function is not replaced and the water services are cut off, people will still have to pay the full bill for the year. Is the Minister aware that the full bill will include charges for sewerage and sewage disposal? Customers are being charged on two counts, and I do not believe that people have been advised correctly about it.

Other factors give rise for concern, especially in my county of Yorkshire. At present, there is no suggestion of the introduction of pre-payment water meters there. That is obviously because of the other arrangements relating to the interruption of water supply. If pre-payment water meters were installed in Yorkshire, they would apply in areas where there is still a ban on the use of water. There is a hosepipe ban in the area where I live and throughout the county of Yorkshire. So the idea that people who charge the pre-payment meters are allowed to use as much water as they desire during that period is not strictly correct. Hosepipe bans and other restrictions would still apply.

I was advised by an officer of Ofwat that a person would be able to use as much water as they wanted if one of the meters were installed, but that is not strictly correct in the Yorkshire Water area, due to the shortage of supply. Until that is put right—the Opposition day debate later will address that problem—the introduction of pre-payment water meters into the Yorkshire Water area should not be considered. It would be wrong to apply that procedure there.

I do not totally blame Yorkshire Water. Some of the responsibility lies here, with the Government. Indeed, I know that there is evidence that the Government have been neglectful of the warnings that have been given from time to time about the interruption of water supply in the Yorkshire area. Now, advice is being given that pre-payment water meters are the answer to the problem, by allowing people to judge for themselves and be the masters of their water supply.

The main reason for installing pre-payment meters—it is the same for my constituents who have had electricity or gas meters installed—is that people have difficulty in paying their water charges in instalments or every six months. The idea of pre-payment electricity and gas meters was to try to give the responsibility of continuity of supply to the customer. I fear that the same practice is being applied to water.

I have witnessed instances of a single mother, a single parent, a family on low income, unemployed people and people on minimum social benefit not having the opportunity to recharge their electricity or gas meters and having their supplies cut off. The same will apply to water supply. Although people can use an alternative to gas or electricity as a means of providing heat or power to cook, there is no alternative to the supply of water. They cannot, say, turn to solid fuel as they can in the supply of energy. They cannot turn to any other source of the facility that is necessary in every home if their water supply is cut off.

The introduction of pre-payment meters presents a social problem, and the Government should take a great deal more interest in this important matter. Ministers say that they are not responsible for keeping records of the number of people who are disconnected, and that it is the responsibility of the water companies, but there are social responsibilities, such as the threat to family health and especially to children and the elderly.

The social services departments of local authorities have some responsibilities when water supplies are disconnected, but no notice is given to those departments that a person is to be disconnected, and that generates a great deal of concern and breaches the legislation. Therefore, the Government have responsibilities, and need to look at the introduction of pre-payment meters with some in-depth interest to ensure that health and the quality of life will not be threatened by the termination of water supply.

I ask the Minister to consider the interruption of supply, the issue of two services—water supply and sewage disposal and treatment—the issue of unit costs, and the fact that standing charges are included in the total cost of pre-payment meters. The Government cannot say that they are not responsible for such matters, because, in the interests of public health and community services, they should give a lead. I ask the Minister carefully to consider my points and the concerns that have been expressed by hon. Members about the introduction of pre-payment water meters.

10.12 am
Mr. Chris Davies (Littleborough and Saddleworth)

The provision of a water supply is so essential to the maintenance of a basic quality of life and public health that we might have assumed that any threat to its continued provision would be subjected to the most intense public scrutiny. However, local authorities such as mine, Oldham and Rochdale, and more than two dozen others are presently seeking to challenge the way in which water companies are introducing these pre-payment devices, because no proper regulation has so far been introduced. The debate must send a firm message to the Government that proper regulation is required.

I do not regard the issue of pre-payment water devices as simply black and white, in that we cannot simply cast aside any thought of these devices being introduced.

Evidently, some people like them. In theory, they have been introduced by water companies with the voluntary agreement of consumers, but the latter feel that they have been misled, and, as a consequence of being unable to meet the regular payments, they have self-disconnected their water supply.

I am sure that all hon. Members have experienced the problem of constituents who have sunk deeply into debt and know not where to turn coming to our advice centres, desperately seeking assistance to get out of an intolerable situation. Anything that can assist debt management may be of advantage to our constituents. The first key issue is the need to ensure—for the individual, but also for the sake of the community as a whole—that basic water supplies are maintained.

Secondly, there must be a mechanism for ensuring that supplies are paid for. It is not adequate to say that some people will be allowed not to pay their bills, while other people have to pay. There is no point in saying that there are easy payment methods, even for a commodity as essential as water, because, for people who are deeply in debt, there are no easy payment methods but simply a range of options, some of which may be less unpleasant than others.

Let us look at the system by which the water companies collect the money that is owed to them for a water supply. When bills remain unpaid, applications are eventually made to magistrates, but it is only with the greatest reluctance that courts will sanction disconnection, and usually it is done only after arrangements for payment have been broken a number of times. It is right that courts are reluctant to accede to a water company's request to disconnect.

When hon. Members table parliamentary questions about disconnections, Ministers are obliged to reply. In recent months, there has been a drop in reported disconnections, and I suspect that that is a consequence of the introduction of pre-payment water devices, because water companies are targeting those customers who are most likely to fall behind in their payments, seeking their permission to install the devices.

We must look carefully at how pre-payment devices work in practice, and their consequences for the consumer and the water companies. First and most important, as they are presently conceived and introduced, they do not provide an appropriate means of assisting a consumer in any sort of co-ordinated debt management strategy. In practice, they give priority to the payment of the water company's debts.

The advice to someone who is deeply in debt, with a multitude of creditors, will be to look at the entirety of the problem and to prioritise the debts, seeking to ensure that some money is paid to each creditor so as to keep the creditors at bay. That does not happen here. The problem for the consumer might be worsened, because, to maintain a water supply, the consumer gives priority to payments to the water company, thereby increasing indebtedness to other organisations.

Secondly. I fear that, far too often, the installation of these pre-payment devices is voluntary in name only. The water company official may turn up on the doorstep with the device readily to hand and place a contract and a pen in front of the consumer saying, "Here you are. Voluntary agreement. Put one in. Easy payments. If you don't, we will take you to court." Few people will not feel intimidated in such circumstances, and I suspect that, placed in such a situation, the vast majority would agree to the installation of the device, without appreciating the possible consequences.

Thirdly, the practical result is that self-disconnections are increasing, and are occurring away from the public gaze. That is different from disconnections that are authorised through court procedures.

The final point is that the introduction of these devices, as has been pointed out, provides no assistance with the saving of money. They are not like an electricity or a gas meter, where supply may be cut off but at least consumers face no cost during the period in which they are deprived of power. In this case, the bills continue to mount, whether the water is coming through the taps or not.

Pre-payment water meters could have a role in a proper debt management strategy, but not as they are at present. The devices as used and installed are not taking full advantage of the electronic and technological opportunities that are available.

For example, it would be possible for such meters to be installed with a device that would ensure that, although disconnection took place, one hour's water supply per day was permitted. That might overcome some of the public health concerns that hon. Members have expressed. I am told by the House of Commons Library, however, that, although it is possible to install such devices, not one water company has yet done so. They are therefore not seeking to find a grey, middling solution, but going simply for the black-and-white solution and saying, "You will have full disconnection and nothing else."

It would be possible to link pre-payment devices to water meters so that they worked a bit more effectively, in the same way as electricity and gas meters operate. In that way, if people are not paying for their water supply, they are at least not incurring the additional charges that must be met in any case. That would help the person to feel that, if they were cut off for, say, 12 hours at a time because they had been late getting to the post office or because they had not been able to restock the card, at least their debts were not increasing come what may. In practice, however, such modifications are not being introduced on a large scale by any water company.

As we consider this question, we must be concerned above all about how important water supply is to an average family. The idea of cutting down the water supply even to one hour a day is intolerable to many of us. None the less, there are hard questions to be faced, and I recognise that any Government would have difficult choices to make in balancing questions of water supply against the need for payment.

In the Minister's reply, I shall be looking for certain assurances. The first is a clear statement that the Minister recognises the need for proper Government regulation on this issue, regulation that, to date, has clearly been lacking. It is important that proper procedures are laid down by Parliament for the introduction of these devices, that there is independent scrutiny and that there are proper checks and controls on the actions of water companies, which, to date, seem to be motivated entirely by commercial interests.

Secondly, I look to the Minister to say that water companies will be required to make it possible for hon. Members to obtain information about the number of self-disconnections taking place. If that is too difficult, we should be able to find out at least how many self-disconnections are occurring for more than 24 hours at a time.

It is important that devices do not cut off water supply for more than a basic maximum period. I have said that devices can be installed which cut off water supply for 23 hours a day but which still leave a basic minimum water supply. Under any circumstances, 23 hours without water should be the absolute maximum permitted by law. Further devices could be introduced which, for example, do not cut off water supply at all, but leave simply an irritating tone—perhaps a bit like a smoke alarm bleeping—that reminds the consumer that there is a need to stock up the water meter, without interfering with that vital supply of water.

Finally, the Minister must recognise the need for some proper court supervision of procedures. Disconnections take place only after they have been properly scrutinised by the court, yet water companies are being allowed to escape that proper legal scrutiny. That should not be tolerated.

If there is to be a future for pre-payment devices, they must be subjected to proper parliamentary control or, on a day-to-day basis, to proper scrutiny by the courts. It is important that there is voluntary agreement by householders and that they are able to look to independent arbitration and scrutiny to ensure that their interests are not consumed by those of commercially minded water companies. Thank you, Mr. Deputy Speaker.

10.25 am
Mr. Peter L. Pike (Burnley)

I congratulate my hon. Friend the Member for Birmingham, Northfield (Mr. Burden) on bringing to the House's attention a subject of great importance. It is perhaps regrettable that no Conservative Back Bencher has thought that there is a problem, or even that the matter needs to be debated. I find that somewhat surprising.

I echo the comments of the hon. Member for Littleborough and Saddleworth (Mr. Davies): in the Minister's response, we must have an assurance that he recognises that the Government have a responsibility to do something in this matter. Water supply is crucial to the everyday life of people in this country—so crucial that it cannot be left to market forces alone. The Government must take action to regulate and control the way in which pre-payment devices can be used. We cannot allow it to be left just to privatised companies to determine the way ahead. The Government must consider the implications.

Secondly, I refer again to the letter that I mentioned in an intervention on my hon. Friend the Member for Northfield. All too often, the Government tend to ignore the public's views—they do not think the public matter—and those of local authorities, but I hope that, on an issue of such importance, they will take account of the views of health authorities. That is why I referred to the letter from the chief executive of Liverpool health authority to the chief executive of United Utilities. The health authority is not in my constituency—that covers East Lancashire health authority further up country—but United Utilities serves the region in which I live.

The letter was sent on 26 March, when a trial was being considered in the Liverpool region, and my hon. Friend the Member for Northfield referred to the protests in Liverpool today about this very issue. The letter states: However, that is the opinion of Dr. Martyn Regan, Consultant in Communicable Disease Control, that measures such as the introduction of a Water Card Budget Scheme may lead to an increase in self-disconnection and could therefore only increase the risk of transmission of gastro-intestinal diseases, both in the household and the community. Dr. Regan is not saying that such a measure will have that result; all he is saying—he is not overstating the case—is that it may do so. The fact that it may do so means that the Government should ensure that it does not do so. I emphasise the words at the end, which refer not only to the household but to the community. That must be recognised. Even under the old system, the people who came to see me at my advice bureau were not those whose supply had been disconnected, but neighbours who were concerned about problems created by that disconnection. The health authority is not overstating the case. Water is so crucial in every way for health that we must ensure that the budgetcard schemes are properly run and controlled.

Finally, in fairness to North West Water—or United Utilities, as it now is—I must add that the health authority welcomed its proposal to introduce a customer counselling initiative. My hon. Friend the Member for Northfield mentioned a slightly different scheme. The Opposition have not hammered the water authorities—or rather, the water companies, as they now are. We have tried to take a balanced approach—to criticise where we think that they are wrong, but also to put the more positive side.

The counselling initiative can step in when people are getting into difficulties with payment, advise them and help them to pay, so that they are not disconnected, with all the risks that that entails for households, especially for those containing sick or elderly people, or young children, and also to the neighbours and the wider community. The Government clearly have a responsibility to ensure that the new means of cutting people off as a way of seeking payment—at the end of the day, it means self-disconnection—is properly controlled and monitored.

10.30 am
Mrs. Helen Jackson (Sheffield, Hillsborough)

I congratulate my hon. Friend the Member for Birmingham, Northfield (Mr. Burden), who has worked hard on the subject for several years, and I shall make three points in support of his arguments. Fundamentally, this is the same debate as we had on whether water disconnections should be legal or illegal. Primarily, the issue is one of public and environmental health. Does the water supply to a home come into the bracket of essential public services, or can it be seen as an optional extra for families?

Those of us who came together at the time of the disconnections debate and formed the all-party parliamentary water group did so chiefly because of our view that water was such an essential public service that it could not be treated in the same way as other utilities that one could choose to use or to do without. A house without running water is still considered statutorily unfit, and a work site without running water is illegal. Running water is essential. Therefore, no payment system or device that contains within it the means of cutting off the supply to a home should be supported.

Secondly, I hope that the Minister will at least take on board the last point in early-day motion 835—the request for such disconnection figures to be included in the regular annual disconnection figures supplied by the Director General of Water Services. As it happens, those figures came out today, and the last year's total was 5,826. Yes, it is lower than the high spot of 21,000, but the 1,212 households disconnected via the new devices last year should be added to it.

In 1994, the director general was pressed by the Institution of Environmental Health Officers to publish figures for disconnections related to pre-payment water devices. He wrote that he did not think that appropriate at that time, because the devices had been introduced on a trial basis. But there is absolutely no reason why the director general should not immediately be asked to make those figures public, as he does with other disconnection figures. I hope that the Minister agrees.

In view of the shortness of time, my next point must be my last. I stress what my hon. Friends have already said—that, although water has to be paid for, there are many other ways of making paying for it easier. Smartcard systems are available whereby one pays in small chunks, without the risk of disconnection. People on benefit should have an automatic right to have their bills paid directly, which is not now the case. Many water companies are investigating other methods, such as easy payment systems and debt counselling, in an effort to ensure that water bills are paid without their having to resort to the use of a device or to other action that results in households' supply of such an essential commodity being cut off.

10.35 am
Ms Joan Ruddock (Lewisham, Deptford)

I begin by congratulating my hon. Friend the Member for Birmingham, Northfield (Mr. Burden) on securing a debate on what he has described as water disconnection by the back door. As my hon. Friend said, the debate is timely, in that, two weeks ago, 26 local authorities, led by Birmingham city council, announced their challenge to the legality of the use of pre-payment water meters as a means of disconnection under the Water Industry Act 1991. The Opposition wholeheartedly support that action, and reject the water regulator's assertion that such use is legal.

The debate is also timely in view of the alarming increase in the number of pre-payment meters. A little more than a year ago, in March 1995, there were not many more than 4,000, but at the end of March this year there were 14,500 and, as my hon. Friend said, the number is now reckoned to be about 16,000.

Other Opposition Members have given a clear account of the arguments, so I shall simply summarise them. The devices in question are not volumetric; they calibrate collection charges, not the volume of water used, so they do not represent a conservation measure. They also result in higher charges overall, and customers often pay extra to use the system, as well as incurring extra costs for travelling to charge their smart cards or keys.

As my hon. Friend the Member for Normanton (Mr. O'Brien) said, there are additional concerns about standing charges and sewerage charges. Not only are the devices payment meters, but they effect disconnections. We believe that they are circumventing the law by allowing water companies to exercise the sanction of cutting off water without going to the courts, thus allowing them to act in secret. Local authorities are not notified of their actions, so, as my hon. Friend the Member for Normanton also said, social services departments cannot investigate a family's plight, or carry out their statutory duties towards any children and elderly people in the house.

We do not even know precisely how often self-disconnections occur. My hon. Friend the Member for Northfield mentioned the Birmingham research, which I too have seen. What struck me most was the fact that self-disconnections are now running at 20 times the rate of statutory disconnections. Some households had been disconnected every two to four weeks, some as many as 15 times. Surely that gives the lie to the suggestion that the number of water cut-offs is decreasing.

As we have heard, Severn Trent holds up its MORI survey on pre-payment water meters as evidence that customers approve of them. Yet 49 per cent. of respondents had experienced disconnections, and, during cut-offs for periods of longer than seven hours, 28 per cent. had borrowed water—that is illegal under the Water Acts—18 per cent. had stored water, and 13 per cent. had gone without water. The public health risks are obvious. As my hon. Friend the Member for Sheffield, Hillsborough (Mrs. Jackson) said, water cannot be equated with any other commodity.

The Government and the Minister should reflect on the fact that Save the Children became so concerned about pre-payment meters that it published a report on the subject. Its concern—which we should all share—is that the poorest families will keep losing their water supply as their money runs out. Even if the supply is cut off for only one or two days, insanitary conditions are created, with particular risks for children and the elderly.

The poorest families do not even save money by using these meters or by going without water, because the company goes on charging. The increase in water bills has made it difficult for poor families to keep in credit, but the regulator chooses not to see the paradox. The poorest are failing to keep in credit, while the industry fat cats have massive credit in the bank.

We can use any of the companies using pre-payment meters as examples. Severn Trent, which had 1,450 pre-payment devices in place in March this year, has a daily pipe leakage of 115 million gallons—enough to provide for the daily water needs of more than 4.25 million customers. The company's dividends, however, have increased by 69 per cent since privatisation. North West Water, with 1,400 pre-payment meters in place, has a daily leakage rate of 158 million gallons—enough to provide for 5.5 million customers. Dividends paid by the company have increased by 34 per cent. since privatisation.

Similar statistics apply to both Wessex Water and Welsh Water, which have thousands of pre-payment devices in place. Wessex Water is losing 25 million gallons of water daily—enough to meet the needs of 750,000 customers—but has increased the dividends paid by 90 per cent. since privatisation.

The Government have abrogated their responsibility, claiming that the use of pre-payment devices is a matter for the water companies". But they cannot hide from the fact that thousands of families—many with children and the majority on very low incomes—have had their supply of clean water cut off as a result of operating these devices. As the use of pre-payment meters increases across the country, the numbers experiencing such cuts are set to rise. As my hon. Friend the Member for Burnley (Mr. Pike) said, we want the Minister to accept the responsibility, and to respond accordingly.

It is a disgrace that water companies, which have made massive profits since privatisation and which lose millions of gallons of water through leakages each day, should penalise their poorest customers by denying them water because of their poverty. The Government have failed to acknowledge that this is an issue of public policy, with major public health implications. Once again, they have sided with the water fat cats and failed to act on behalf of customers.

No one disputes that, given the levels of poverty in this country, there will always be a pool of people who are struggling to pay bills for their most essential services. Such people need assistance, and should not be persuaded to accept a device that regularly puts their water supply at risk. My hon. Friends have today praised alternative methods of payment assistance, and Labour wholeheartedly supports such measures.

Water companies should begin to look at the alternatives, and should try to see that it is possible to help the poorest people by ensuring that they have a constant supply of clean water. We are anticipating that things will change, and that Labour will soon be in government. When we are in power, we will outlaw pre-payment meters which effect disconnections, and ban both compulsory metering and disconnections of domestic water supplies. That will bring about a civilised society and give our people a basic human right—a continuous and clean water supply.

10.44 am
The Minister for Construction, Planning and Energy Efficiency (Mr. Robert B. Jones)

I have listened with considerable interest to the debate, which has confirmed that Labour Members wilfully misunderstand the purpose of the devices. The units were introduced to help people on low incomes to pay their water bills, and their introduction has extended the range of payment options available to customers. Therefore, it is a development that the Government support.

Today's debate has proved—if one needed evidence for it—that the Labour party opposes freedom of choice. The hon. Member for Lewisham, Deptford (Ms Ruddock) emphasised that Labour in government would ban freedom of choice. The debate has been another demonstration that the Conservative party is the party of freedom of choice.

I join other hon. Members in congratulating the hon. Member for Birmingham, Northfield (Mr. Burden) on securing the debate, and focusing the House's attention on an important issue. But it is ironic that it should be an hon. Member representing a Birmingham constituency who is attacking the use of these devices. After all, it was Clive Wilkinson, the former Labour leader of Birmingham city council, who said about the pre-payment meters: The overwhelming view of customers in my area who have had them installed is that these units are a good thing. I have not received a single complaint about the units from customers. I do not want to see customers being denied the choice if they want to opt for one of these units. It is clear from what Clive Wilkinson said—and from what the hon. Member for Deptford has said this morning—that the only way in which he will get his way is by voting Conservative at the next general election.

Ms Ruddock

The Minister has used this quotation on a previous occasion, and tried to suggest that there is a split in the Labour party. What he fails to mention, however, is that Clive Wilkinson is now Ofwat's central customer services committee chairman, and a member of Ofwat's national customer council. It may be presumed from that that Clive Wilkinson was speaking for the industry.

Mr. Jones

He was speaking for the consumer, something that the Labour party—and certainly the hon. Lady—never do.

Opposition Members will note that I have referred to budget payment units—not pre-payment water meters. In most cases, these devices do not measure the amount of water used, but provide a practical method of payment for those customers least able to pay their bills. The Opposition claim to represent them, yet in the same breath they wish to deny them the use of a sensible and convenient payment option.

Perhaps the views expressed today are based on a genuine misunderstanding of the way in which the units operate, why they are installed and their advantages. I am therefore grateful to have been given this opportunity to explain the facts about this payment method. I do so on the assumption that everyone accepts that services must be paid for.

Those of us who agree with that will also agree that a full range of payment options should be available. We must help people pay with the least disruption and difficulty to themselves, and allow them to choose what that is. Budget payment units ensure that customers who experience difficulties in paying their water bills, but endeavour to pay, are given every assistance in doing so. To put it another way, budget payment units are intended for customers who intend to pay their water bills and want some assistance in budgeting to do so.

The mechanics of the scheme are relatively simple. A control box is fitted—usually to a wall inside the customer's home. A valve is fitted to the water supply pipe, and the customer is provided with an electronic smart card or key. The customer then charges the card with credits locally—usually at a Post Office—and then transfers the credits on the card to the control box. Credits represent the length of time during which the customer can use water services normally, and the control box keeps track of the amount that the customer has paid. This information is compared with the amount that the customer has agreed to pay in any period.

Opposition Members have referred to problems when customers are unable to recharge their cards or are unable to get to a post office do so. However, the inherent advantage of the payment scheme is that the units are pre-programmed with an emergency seven-day credit, and that, before the normal credit runs out, the customer is warned audibly that his or her credit is running out and that the emergency credit will shortly be activated. The customer then has seven days to recharge the card, and he or she will continue to receive a water supply during this period.

Another advantage of the system is that the technology employed informs the water company that the normal credits have been used, and that the emergency credits have been activated. The water company will try to contact the customer if the emergency credit period is running out and the unit has not been recharged. The company will also inform the local authority's environmental health officer about the situation. The water flow will be temporarily stopped at the end of the seven-day emergency credit period if the unit has not been recharged before then, but the flow will be restored immediately once the unit has been recharged to meet the amount outstanding.

I might share the concerns of the hon. Member for Northfield over the use of these units if they were imposed on unwilling customers by unfeeling water companies. However, these units—for which there is no installation charge—are installed only with a customer's agreement and at his or her request. I wish to emphasise the voluntary nature of this scheme—I find it difficult to understand why anyone would wish to object to the free choice made by responsible people in deciding which payment method best suits their needs.

Before a unit is installed in a customer's home, an agreement is made between the company and the customer about any payment problems that they may have. When deciding an affordable weekly or fortnightly charge, any arrears are included in the scheme only if that is the customer's wish. Furthermore, the charge amount agreed initially may be re-negotiated at a later date to take account of any change in the customer's circumstances.

Before a unit comes into use, a company official will ensure that the customer fully understands how the unit operates, including how to access the emergency credit period, where the units may be recharged and how to contact the company in the event of any problems. The official also ensures that the customer is fully aware of the procedure that is activated if the charge card is not recharged—that the company will contact the customer concerned, and that the local authority's environmental health officer will be informed of the situation.

The MORI survey on the use of Severn Trent's water key system found that 90 per cent. of customers on the scheme considered it a convenient method of paying their water bills, and that 88 per cent. said that they wanted to continue paying for their water with the system.

Mr. Burden

Clearly, the Minister has spent a great deal of time looking through his brief on this issue. Given the amount of work that he and his civil servants have put into this, why have the Government not collected figures on the number of customers who have had their water supplies cut off as a result of the operation of prepayment water meters? Will the Minister collect and publish the statistics?

Mr. Jones

This is a free agreement between customers and the supplier of water, and the Government see no reason to intervene in those freely arranged undertakings. The research carried out in 1995 for North West Water on the use of that company's watercard budget system found that more than 90 per cent. of customers considered the scheme an affordable and convenient way to pay, and preferred it to any other payment method. Welsh Water's research also showed that more than 90 per cent. of participating customers were satisfied with the scheme.

I do not think it unreasonable for me to suggest that those findings suggest that the overwhelming majority of customers using budget payment units find them the best and most convenient way of budgeting for their water bills.

The exhaustive procedure adopted by water companies in informing those customers about this payment method is based on a code of practice that was developed by the water industry associations in July 1995. The code describes in general terms the basis on which this payment method would be offered to and used by customers, and includes an obligation on the part of the company to explain fully in writing the total cost, any charge and the way the unit is calibrated to those involved in the scheme. The director general has welcomed the key principles of this code, but Mr. Byatt has made it clear to water companies that the code will need to be reviewed periodically, and revised in the light of experience.

Ofwat and the customer service committees have kept a watching brief on developments over the past three to four years, and all companies conducting trials on pre-payment devices have consulted customer service committees, and provided reports to them as trials have progressed. The result has been that the Ofwat national customer council recently endorsed budget payment units, saying that they should be available to all customers to help to take the worry out of paying water bills.

The users of the device do not share the Opposition's concerns. Nevertheless, it is important to keep the debate about this payment method in a proper perspective. The latest figures show that some 16,000 customers use the units—that is less than one tenth of 1 per cent. of all domestic customers.

As I have explained, a number of measures are in place to help prevent the water supply from being temporarily stopped as result of the operation of these units. The water flow is temporarily stopped for two main reasons: some customers experience difficulties in getting to a post office to recharge their cards, and other customers simply forget to recharge their cards.

While the location and number of post offices taking part in the schemes has been a problem in some cases, results of surveys show that this was not a problem for the overwhelming majority of customers. I understand, however, that companies are considering the possibility of making the recharging facility available in places other than post offices.

Sometimes, the temporary stopping of the water flow has been found to be deliberate—cases have been recorded in which customers have gone away for a period and have used the occasion to defer recharging their cards. Customers who pay for water charges on the basis of rateable value and use this budgeting option—which accounts for practically all customers—are still liable to pay the full annual water bill. I understand that the great majority of occupied properties restore their water flow within 24 hours.

Opposition Members have claimed that the use of the scheme is a ploy by water companies to avoid the time and expense involved in obtaining court orders to disconnect a customer's water supply. That is far from true—disconnections are reserved as an ultimate sanction against customers who can pay but will not pay. I shall repeat one of my opening remarks: these units are intended to help customers who intend to pay their bills. My reading of the situation is that water companies genuinely want to make a success of the scheme, and are doing all in their power to help those customers who have opted for this facility.

Mr. Chris Davies

Will the Minister give way?

Mr. Jones

No—I am trying to reply to the points that have been made in the debate.

It has been suggested that the arrangement would be more acceptable if the water flow was not temporarily stopped when a unit was not recharged, as agreed by the customer and company. I believe that the retention of the on-off valve is essential to the continuing success of the scheme.

Today, claims have been made that the operation of these units results in self-disconnection by the customer, and that such disconnections are not reported in Ofwat's bi-annual report on disconnections. The status of a water flow that has been temporarily stopped—which occurs when a valve connected to a pre-payment device shuts off the flow of water—is an issue that has been raised by a number of interested parties. The director general has stated that he does not consider that a customer's operation of a prepayment device which shuts off the flow of water in a property amounts to action by the company either to disconnect the supply pipe or to cut off the supply of water to a property.

The temporary stopping of a water flow is not a disconnection, because the supply continues to be available as long as the customer recharges his card. In fact, the rationale underlying this payment method is precisely to avoid placing customers in situations where they may be taken to court and where disconnection becomes a possibility. We should all remember that disconnections are not in the interests of customers or water companies. Similar payment devices have been widely used by the gas and electricity industries, and have been helpful in reducing the total number of disconnections.

I understand that some councils have reservations about the legality of using budget payment units as a means of paying for water. Should they decide to launch a legal challenge against one or more of the water companies that are using these devices, or the regulator, it would be a matter for the courts to decide. In the light of this, I will not say anything further about the proposed challenge, except to note that the chairman of the Ofwat national customer council has commented: This action pays no regard to the fact that these units can help customers to budget for their water bills, and that customers have expressed great support for them. I can't understand why some local authorities are trying to stop water customers from being able to choose this flexible and convenient payment method. I would have thought that they would share the objectives of Ofwat's National Customer Council that customers should have the widest range possible of payment options". Amen to that. It is true that, at present, a few companies impose a small cover charge of around 50p or less a week to use this system, or for the cost of replacing repeatedly lost or damaged cards. However, most companies that provide this payment option do not make any charge for the facility—and it should not be forgotten that the alternative of frequent cash payment of water bills at post offices involves a cost, too. The director general has asked companies to ensure that any charges are soundly based. It is also true that some of the units installed by Severn Trent Water have had problems, but new technology always results in teething problems.

It seems clear today that what is at stake is the principle of customer choice. There is a clear divide between the two sides of the House: the Labour party is wholly opposed to customer choice and the Conservative party, as always, will defend it.

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