Water Charges (Hansard, 28 March 1991)

§ The Parliamentary Under-Secretary of State, Department of the Environment (Baroness Blatch)
My Lords, the Director General of Water Services, the economic regulator for the water industry, has announced that average household water and sewerage charges in England and Wales will be £156 from 1st April 1991. That represents an average increase of 15.5 per cent. over the 1990–91 average charge of £135. Individual companies' increases are subject to limits prescribed in their instruments of appointment and set according to their investment requirements.

§ Lord Dean of Beswiclk
My Lords, I am grateful to the Minister for that detailed Answer. She must be aware that within that average figure some water users in this country will have inflicted on them an increase of nearly 27 per cent. Does the Minister agree that that is a substantial increase and is contrary to the Government's own policy of reducing inflation? Can the Minister confirm or deny that the area chairmen of the watchdog committees will receive an increase in remuneration of 33 per cent. from 1st April? Does the Minister agree that for that increase also to be borne by the water users of those areas, is disgraceful? In view of that, can she tell me what privatisation has done for the people in these areas?

§ Baroness Blatch
My Lords, I am not aware of the increase for the water companies' chairmen and I shall 1214 therefore have to write to the noble Lord on that question. As a result of privatisation, investment by the water industry in England and Wales is expected to rise by over one-third in real terms this year and by a further 9 per cent. next year. That high level of investment will be maintained until 1994–95. That contrasts with a cut in investment on sewerage systems of 45 per cent. in real terms and a cut in water supply investment of 9 per cent. in real terms when the Labour Party was in power.

§ Lord Elliott of Morpeth
My Lords, as the chairman of a water company I speak with some feeling. Is my noble friend appreciative of the fact that for quite a number of years water companies—and before privatisation, water authorities also—were asked by governments of both major parties to keep their charges down? They did so to the detriment of investment which should have been made then and which most essentially should be made now because of European standards. That is the main reason for the increased charges.

§ Baroness Blatch
My Lords, my noble friend makes an important point. It is absolutely essential that charges are linked to investment programmes. The K factor formula recognised the enormous backlog of work that needed to be completed. Much of that backlog goes back beyond the election of this present Government, to the previous government.

§ Lord Molloy
My Lords, can the Minister give some details about what the noble Lord has just said concerning the massive neglect from about 50 or 60 years ago right up until the date of privatisation? Can she also tell us about the wonderful changes that have since taken place? No one has yet heard of these things.

§ Baroness Blatch
My Lords, I gave a specific example of how cuts had taken place prior to privatisation and how investment is now almost spectacular in comparison. I can tell 1he noble Lord that £28 billion will be spent by water companies—

§ Lord Molloy
My Lords, the money "will be spent"?

§ Baroness Blatch
—and has started to be spent, as a result of privatisation and the freeing-up of artificially low charges.

§ Lord Dean of Beswick
My Lords, the Minister referred to the K factor which I clearly understand to be the additional money to be raised for development. Can the Minister tell the House what proportion of the billions of pounds which she mentioned is for further investment will come from the shareholders? As regards the answer to my first supplementary question on the 33.5 per cent. increase, the Minister must be aware that the chairmen and directors of these newly privatised water companies have already awarded themselves salary increases far in excess of what one would normally expect of people who behave reasonably. On that basis, if the Minister finds that the chairmen of the watchdog committees are to have an increase of 33.5 per cent., will she do her best 1215 to prevent the chairmen and directors of those companies using that as a criteria for a further massive increase which will have to be paid for by water users?

§ Baroness Blatch
My Lords, salary increases are very much a matter for the shareholders. There will continue to be downward pressure on the companies to be efficient and to make sure that the moneys that they spend are used to good effect. All shareholders, in addition to having invested their own moneys, are also consumers of the water provided. Therefore, they are also paying charges.