§ 5.35 p.m.
§ Lord Cocks of Hartcliffe rose to ask Her Majesty's Government what evidence there is that the introduction of domestic water metering will benefit the domestic consumer.
The noble Lord said: My Lords, I am grateful to those colleagues who have put down their names to take part in a debate upon what I regard as an important consumer matter. On 21st October last year, the noble Lord, Lord Clifford of Chudleigh, initiated a debate on the water industry. In the course of my remarks then, I declared an interest as a holder of shares in Wessex Water. I went on to say that I understood that it had recently acquired a large manufacturer of meter. Subsequently I received a letter from Wessex Water noting my comments, and saying:
To our knowledge no metering company has been purchased by any water company—and certainly not Wessex Water—this would appear to be nothing but a common rumour that has been circulating for over a year.
I am therefore grateful to your Lordships' House for giving me the opportunity to put straight the record with regard to my remarks on that point.
During that debate there was talk about the role of the regulators of the various privatised industries. I was interested to see an article in the Observer last
Sunday which reported that the new Director General of Fair Trading had said that he was unenthusiastic about the prospect of further specialist regulators, and that he turned a deaf ear to them and so forth. Also in the text I saw that Sir James McKinnon, "the controversial gas regulator", was often at loggerheads with BT. That explains to me why I have heard references to that gentleman from time to time as the,
skinhead of the regulatory profession.
§ Leaving that aside, the matter is important. In the other place, when my colleagues have asked Questions of the Government about the introduction and controlling of metering, Ministers have leg-glanced them to the boundary with all the grace of Ranjitsinhji, giving the regulator a big boost. My reference to Ranjitsinhji is apt today with the news that we are receiving from Bombay.
§ Lord Cocks of Hartcliffe
My Lords, 108 for three. The Minister referred to Ofwat considering ways to alleviate the hardship and difficulties experienced by a small proportion of customers who are metered. He went on to say:The Director General of Water Services has a general obligation to look after customers and consumer interests." —[Official Report, Commons, 27/1/93; col. 1034.]He was content with the way he was doing his job.
I am sure that the Government will be pleased to hear that further regulators will not be appointed, although they might have had them up their sleeve as one way of denting the rising unemployment figures. I have often thought that there should be a collective noun for regulators. It was suggested to me that "a pride of regulators" might be suitable. I warmed to that suggestion initially, because I thought that a conceit element was involved, but then I realised that it was associated with lions. The best suggestion that I have heard so far is the use of an "arrogance" as a collective noun, because to some extent that gives the idea of the olympic heights from which judgments are dispensed; the intellectual quality, and so forth.
The latest Ofwat paper entitled Paying for Growth, which appeared in February this year, refers throughout to domestic metering as taken for granted. I am sure that if challenged, the Government would call in aid the surveys which are being conducted. There is the general assumption that the argument about metering is over and done with.
Perhaps I may weary your Lordships by quoting from the 1991 Ofwat Annual Report. The Director General launched a consultation exercise. In response five of the customer service committees supported metering as the most appropriate long-term method. The remaining customer service committees were opposed to universal metering, four expressing a preference for a system of banded charges. The report goes on to deal with the two surveys which Ofwat undertook. The first was a questionnaire which was sent out with the water bills in March 1991. The second was conducted by the Office of Population Censuses and Surveys.
I shall deal with the results of those surveys in a moment. However, the general assumption about metering appears to be reinforced. Today I was 50 contacted by people on behalf of Anglian Water who wished to give me some background literature on the question. In view of the previous debate, one might say that that was nobbling the horse in the stable. However, in the course of their remarks, they stated:Ofwat has acknowledged that metering is generally regarded as the fairest method of charging".It has "acknowledged that metering is generally regarded". That is the assumption that we are up against and I believe that it is not correctly founded. Perhaps we may look at that issue closer.
The water metering survey was included with the water bills sent out to 18 million households, and it took the form of a questionnaire. The response, which I mentioned to your Lordships in a previous debate, was only 1.6 per cent., or 290,000 out of the 18 million. The National Consumer Council claimed that those who replied were below-average water consumers who could expect to pay less rather than more once meters were installed. Virginia Matthews observed that large-scale surveys such as that administered by Ofwat are a self-selecting sample and are not representative of the population as a whole. The magazine Consumer Voice stated:In none of the surveys were the respondents told that the average leakage is about 25 per cent. of the water supplied by the water companies".That was reported in the Financial Times on 7th July 1992 under the heading "Polls on Water Metering Mislead".
The questionnaire which was circulated with the bills gave the customers three choices. They were asked to comment on flat-rate charges, metering, banding (or "stepped-charges"). As regards the flat-rate charge, the text states:The company charges each household the same amount irrespective of its size. If your water usage is very small, it may be worthwhile opting for a meter".The leaflet then deals with metering. In respect of banding, it states, under the reasons for metering:you would still have an option to meter (as now) which would be worthwhile if your use was significantly less than for your type of property".The questionnaire asks five questions. A small user is pointed towards the answer which gives one an advantage. Therefore, I do not believe that the results of the questionnaire, pitiful though they were in terms of response, can be used as any form of criterion because people were pushed towards the answer which probably the regulator wanted.
After the debate in this House, the regulator, Ian Byatt, wrote to me stating:I fully share your views over our questionnaire to customers and its statistical shortcomings".The regulator's biography shows that he is a distinguished economist and statistician. One is bound to ask why, if he was aware of the statistical shortcomings, was the questionnaire sent out in the first place? His letter continues:Far more weight has been given by my office to the findings of the survey conducted for us by the Office of Population Censuses and Surveys".The OPCS Omnibus Survey shows that the results need to be treated with caution. Many respondents had not thought through the issue before the interview and they modified their views as the interview progressed. In dealing with the issue, I am obliged to 51 Dr. George Gaskell, senior lecturer at the London School of Economics. His name was quoted in an article which appeared in the Independent on 26th October 1991. He supervised the survey on metering in the Sutton area. Commenting on the OPCS Omnibus Survey response about the need to treat the results with caution, Dr. Gaskell stated:OPCS estimates that at the beginning of the interviews 54 per cent. favour metering and after about seven questions (perhaps two to three minutes) the percentage drops to 46 per cent.".Dr. Gaskell went on to say:Initially, most people are ill-informed about water charging and until there is a public debate which covers equity and costs to the consumer, etc., I do not think we can reach any conclusion about the likely distribution of preferences in an 'informed public'".Paragraph 4.1 of the OPCS Omnibus Survey Paying for Water states:… it is to be expected that respondents coming unprepared to the subject of water charges and indeed some of the others might modify or alter their views during the course of an interview".The first survey was conducted by OPCS in January 1991. There are 13 pages of questions before those on metering and they relate to smoking and home ownership. People are selected and then taken through a screed of questions. Buried deep in the heart of the questionnaire—that is, from question 53 onwards—are questions about metering. One wonders about people's stamina and endurance in going through such a screed. Most of the questions pertaining to the above-mentioned issues are straightforward and do not require much thought. Furthermore, it is not necessary to have read about those subjects because the answers are based on personal experience. However, that is not the case in respect of water metering.
The second OPCS survey was distributed in February 1991. On that occasion there were only eight pages of questions before those relating to water metering; that is a mere 36 questions. They were general, personal questions requiring little thought.
In response to the results of the survey and its consequences, the publication Using Water Wisely states:The introduction of metering will tend to benefit small households, especially people living in a house or flat with a relatively high rateable value. It is likely to increase the cost of water for people, especially large households, living in a house or flat with a relatively low rateable value. The effect on large households will be magnified if a rising block tariff is used".The publication continues:An important finding from the survey is that customers often have a poor understanding of the most effective ways in which they can reduce their use of water and therefore save costs. This highlights the need for more public education about using water wisely".An article published in the Daily Telegraph on 12th September 1992 headed, "Water Meters Bring Tension at Bath Time" stated:Households with five members or more experience the greatest financial difficulty, often because of unemployment".If universal metering were adopted, substantial resources would be required. It has been estimated that the metering of 95 per cent. of properties with external meters would involve sums in the region of 52 from £3 billion to £5 billion. It is doubtful whether those kinds of sums can be spared at the moment in view of all the other calls on the national purse and Exchequer.
The question of hardship is not difficult to identify. There have been trial metering areas. By far the largest was the Isle of Wight. It must be said that pleasant though it is, the Isle of Wight is hardly typical of the communities which we have in this country. The number of people there on income support is well below average, and the average income of people is well above average. There are numerous well-documented cases of the problems caused to large families by water metering. Those have been well publicised by the National Consumer Council. It says:thousands of families will face severe hardship once metering is introduced, and fears that poorer households will sacrifice bathing or clean clothes in order to preserve their spending power. Taken to its logical conclusion, the argument is that dirt and disease among the poor would return to levels seldom seen since the last century".Small businessmen have been badly hit by metering, and there are stories of some of them being pushed almost to the point of bankruptcy by the unexpectedly high bills.
In the Financial Times on 31st July the Secretary of State for the Environment was reported as being anxious about the impact of metering on poor families, and he stated that that matter clearly needed attention. The Opposition spokesman on environmental protection said that under pilot schemes in areas such as Blackburn:metering has nearly doubled water bills for large families with children".Therefore, basically, there is a problem in that the people who will be adversely affected by metering are those in society who are least able to defend themselves in terms of spending power.
The water regulator, Mr. Byatt, wants customer-friendly schemes to be put in place by companies by early 1993. He says:Metering customers is not about payments. It is about giving people choice and saving water where it is needed".I have spoken about the fact that trial areas were not representative. There are other areas in the country where that can equally be said to be true. I shall not weary the House with those details, but I am sure that we can all imagine that the same objections which there were to the old rating system in many cases will apply in reverse. Households of only one or two people will benefit, but large families will not. Frankly, if the director general is making such a big deal about water meters and how wonderful they are, we should ask why more people are not asking for meters. In the Guidelines on Optional Metering 1990–91 he states:25,000 meters were installed at the customer's request — less than 0.3 per cent. of all existing unmeasured households".As regards installation, I am afraid that this may give rise to fruitful territories for cowboy plumbers— if one can imagine such a thing. I have some anecdotal evidence for the House. A young friend of mine who lives in London told me that he had heard from Thames Water about customer meter reading and he had been asked to read the meter himself. A form was issued on which to do so. My friend tells me that those meters are under a heavy cover out in the 53 road and it is very difficult to lift the cover without a special tool. I 'phoned my friend last night and he told me that two of his friends and himself went out and had great difficulty trying to lift off the cover. That raises the question of whether or not there is an interest in this matter for the Health and Safety Executive because it may be that Thames Water will have to issue surgical trusses for people trying to read meters out in the road. Indeed, in future we may see reference in medical literature to Byatt's Syndrome or Regulator's Rupture.
We need a proper public debate about this matter. In the Ofwat publication Guidelines on Optional Metering it states:Some companies who allow customers to install their own meters insist on the meter being provided by the company … while some confine the charge to the meter only".It sounds rather like some building societies which insist on customers insuring with a particular insurance company. We are all familiar with that.
On timescales, it states:It would appear from a review of the companies' literature that it is the practice of some companies to request payment in advance while allowing themselves up to 6 months to carry out the work (ie, survey within three months, followed by installation within three months). Such undue delay cannot be considered acceptable commercial practice, even less so where payment has been made in advance".I do not wish to weary your Lordships longer, but I believe that there has been inadequate public debate and information about this matter. The last point that I wish to put to the House and the Minister is this —and it seems to be quite interesting. In the National Rivers Authority's response to the consultation paper Using Water Wisely, after the introduction, it deals with domestic metering. Paragraph 2.2 states:Where it can be shown that proper attention has not been given to the introduction of selective metering, the NRA will not grant licences for new sources".That seems to me to be the mailed fist in a not particularly velvet glove because pressure is being placed on the water companies by the NRA—that is, not granting licences for new sources—to introduce selective metering. When I was a boy, there was a very crude word that one could apply to that: it was "blackmail". Here we have a further variable introduced by the NRA, and it is the first time that I have seen any reference to it. Therefore, I ask your Lordships to consider very seriously whether we are going down the road which could lead to hardship for large numbers of our citizens without giving the matter proper thought and consultation.
§ 5.57 p.m.
The Earl of Lindsay
My Lords, I am grateful to the noble Lord, Lord Cocks of Hartcliffe, for raising this subject. It may be premature because in a few months we shall have the results of the three year national water metering trials. Nevertheless, metering domestic water supplies raises issues which we can explore in principle. Some data is already available, although it is incomplete.
The price of water is an emotive subject. Many see the water which comes out of our taps as an act of God for which anything other than a nominal charge is iniquitous and unprecedented. Others point to the fact that at present this country has enough water to 54 meet all reasonable needs. That may be theoretically correct. However, it overlooks the current situation on regional bases where equating demand with supply is far from simple.
Consumer demand, which is rising steadily by between 1 per cent. and 1.5 per cent, per annum, can be high where water sources are least available and low where they are most plentiful. One area of high and rising demand which is stretching existing resources extends through much of the south and east of England. Furthermore, across those regions the four years up to last autumn saw the lowest rainfall in 200 years. That included unusually low winter rainfalls, which is the season in which water resources are naturally replenished.
Some water is already transferred from one region to another but only where distance and logistics make it cost effective. To embark on a national water grid as envisaged by the British Waterways Board is quite a different matter. For example, re-engineering the canal system to distribute Cumbrian water to the South East and pumping it over three or four watersheds en route requires an investment of such magnitude that it is unlikely to stand up to cost benefit analysis compared with other options.
Such comparative analysis is vital to the interests of the consumer. Existing resources will not last indefinitely and there is already an urgent need in some areas for additional sources of public water; for example, Thames Water is planning a new 33,000 million gallon reservoir in Oxfordshire. London, incidentally, uses 33,000 million gallons of water approximately every 60 days. With the land take for such a scheme measuring five-and-a-half square miles, the planning, environmental and engineering implications are considerable and if the project goes ahead the cost will run into hundreds of millions of pounds. Given such costs, it is obviously crucial that we make the most economic use of existing water supplies. Efficient practice and the elimination of waste among both producers and users must be an integral part of the demand and supply equation. As regards the water companies, the infrastructure required to supply the consumer has needed, and is now receiving, considerable investment in terms of maintenance and renewal.
In 1989, when the water companies were privatised, £8 billion was budgeted over the following decade for the renewal of water distribution networks, with the reduction of leakage as one of its principal objectives. That programme is on target, although if water had not been transferred to the private sector one wonders whether it would have survived current Treasury reviews intact. The investment specifically targeted at leakage in the mains grid will, however, reach a point where it is no longer cost-effective to pursue. At that point attention inevitably turns to the water leakage that occurs in the service piping which connects the consumer to the mains and which is owned not by the water companies but by the consumers themselves. That piping is not at present the focus of much leakage control but is estimated to be the source of perhaps one-third of all leaks.
55 That brings me to the need for better practice from the consumer. The water companies consider it part of their duty to make sure that water is not wasted but is used wisely. In fact they have a vested financial interest, which is shared by their consumers, in avoiding or delaying the huge capital costs that attach to new reservoirs or long distance transfers. But how does one promote better practice and discourage waste among domestic water consumers? Without some kind of price mechanism it is difficult. Pleas and exhortations for greater responsibility are of limited effect, human nature being what it is.
Water charges for 99 per cent. of domestic consumers are presently based on the rateable value of their property and in most cases the charge does not distinguish between the over-indulgent and the prudent. Large or excessive usage, bad practice and waste are neither identified at source nor paid at source but are averaged out across consumers in a particular region.
Water charges based on rateable values cannot, by law, be used after the end of the century. In the pursuit of better practice therefore, how appropriate is it to introduce demand-related price mechanisms employing water meters?
There are, I believe, three important issues. The most critical is the extent to which metered charges for water will affect levels of demand and patterns of consumption over the longer term. Initial results from the national trials suggest that metering may reduce domestic demand by between 5 per cent. and 15 per cent. A September 1992 interim report by the Water Metering Trials Group adds the following:if there is a two part tariff, which charges more for water at certain times or for higher consumption, then this tends to have a greater effect on demand. Many people suggested before the trials that any impact on demand would not last, but as yet there is no evidence of it tailing off.The impact on peak consumption is more noticeable. Consumption in summer, when demands would normally be high, fell by as much as 30 per cent. in some of the trial areas. This could be significant, as the cost to the water industry (and its customers) of coping with peaks is considerable".What is also relevant is that metering domestic supplies should have an impact on the significant leakage that occurs in consumer-owned piping. An externally fitted water meter, close to where a domestic service pipe leaves the mains, will give the consumer an immediate vested interest in making good any serious leaks thereafter; and it is in the interests of all customers in that water region that overall leakage is reduced to a minimum. In some cases, the water pressure may be such that an unknown leak is the equivalent to three times that property's actual domestic usage. I take the noble Lord's point about the weight of the inspection hatches that may have been placed over external water meters that are already in place. Presumably water companies will seek to improve that situation.
If metering tempers demand and if it reduces leakage and waste, the benefits to the consumer will go further than a mere reduction in his or her quarterly bill. The pressure faced by some water companies to 56 invest in vast capital projects may be slowed or actually reduced; and for every project deferred there is a saving to the customer.
The second issue raised by metering domestic consumers is the cost to the industry of installation and administration. On the one hand, we can be sure that if we already had meters today we would not be getting rid of them, but, on the other, introducing them on a substantial scale .is not a welcome prospect for the water companies. I believe I am making a rather different point to the noble Lord.
It is estimated that for most domestic properties the installation cost will be between £160 and £200, and that some £3 billion or £4 billion would be needed if all domestic consumers in England and Wales were to be metered. The administration would attract running costs though perhaps one day these could be streamlined with remote reading technology. The sums involved in the widespread introduction of meters are probably irrelevant. Few expect it to be either practical or necessary. What is more likely is that, initially, only certain types of user might be metered. On the domestic front, research may show that those properties with higher rateable values, or those over a certain size, or those with grounds exceeding certain dimensions, may comprise a significant proportion of the higher users.
Thus, meters would probably only be installed on a selective basis. However, it is also likely that the pattern of their introduction would reflect regional circumstances with certain water companies employing meters as a strategic response to specific pressures of demand over supply in their own areas. Some regions already have sufficient infrastructure and resources to cope with forecast increases in demand and will therefore be less enthusiastic about incurring the expense of installing meters.
A marginal benefit may not be sufficient justification for metering. Where the benefit to producer and consumer would become significant is when the consequence of metering existing consumption either delays the need for costly new capital projects or reduces the need for imposing restrictions on certain practices, such as the use of hose pipes and car washes in dry summers.
Metering, therefore, may only be needed among certain types of property in certain areas as part of a balancing act between demand, supply and investment. One estimate from Thames Water, for instance, is that should metering be phased in at least 70 per cent. of its domestic consumers would not be affected.
If metering is so selective, confined to perhaps 15 per cent. to 20 per cent. of some areas, two questions remain. On what basis will the remainder be charged, given that it cannot be on the rateable value? Will some companies opt for a single standard charge while others choose banded charges based on the size of a building or on the number of its occupants or the size of the garden? Would some charges be based on the council tax bands, which I believe Scotland is opting for? The Government are rumoured to oppose this latter option and it would be interesting if my noble friend the Minister would explain why. The second question is that if metering is proved to encourage 57 better practice and less waste but is only introduced selectively, how can one reform the habits of those who remain unmetered?
The final fundamental issue raised by the introduction of domestic water meters is that charges based accurately on consumption will hit certain people disproportionately hard, such as large families on low incomes who have been living in houses with low rateable values. The noble Lord, Lord Cocks, highlighted that concern. The water companies have addressed that point and are, I believe, in discussion with the Government on what provision could be made in cases of genuine hardship or unacceptable increases in charges. Also hit might be those who have been used to watering their gardens liberally every day of the summer and washing both their cars every Saturday throughout the year. Below average users, however, such as the owners of small properties, the elderly and two people families will be beneficiaries.
In the national trials, incomplete results to date suggest that the majority have paid roughly the same or less than before the trials started, with two out of five paying 20 per cent. less and only one in five paying a bill that was over £20 greater than their former bills. Of great importance to the noble Lord's Question, however, is that the majority of customers in the trial areas now accept metering as being the best method of charging. An Ofwat survey recorded 72 per cent. of customers in trial areas being in favour compared with 50 per cent. in unmetered but similar trial areas. I know the noble Lord doubted that survey on the grounds of statistical science. He also doubted whether the Isle of Wight was a representative region. The Isle of Wight was just one of 12 areas chosen for the trials.
If domestic water meters improve consumer practices and reduce wastage, if their benefits outweigh their costs and if they are seen to be fair, their introduction must be of benefit to the consumer, the industry and the environment. It is not claimed that domestic metering will solve single-handedly all the problems of equating demand with supply. It might, however, temper unnecessary pressures on the domestic front. Should such pressures remain unrestrained the need for greater and more rapid investment elsewhere will simply accelerate, attracting substantial costs which will eventually have to be borne by both producers and consumers alike.
In conclusion, I believe that we can trust the water companies and Ofwat to come up with the right answer as the industry is reluctant to take on the installation and running costs of domestic water meters unless a clear benefit will result.
§ Lord Rea
My Lords, before the noble Earl sits down perhaps he could clarify a point. I have learnt a great deal from his extremely well-informed speech. However, he mentioned wastage beyond the point where the water supply goes to the domestic consumer, but I did not hear him say what proportion of water is lost in the mains before it reaches the domestic consumer, but I do not have the figures with me but I understand that in some cases the loss is as high as 25 per cent. Can the noble Earl say how much of that loss occurs in the mains pipes and how much 58 is lost by the domestic user after the water leaves the mains? Can he also say what would be the cost of reducing that wastage by the water companies prior to the point at which the water reaches the consumer and how that compares with the cost of introducing widespread metering for domestic users?
The Earl of Lindsay
My Lords, I shall tell the noble Lord, Lord Rea, what I can, but I should point out that I am a disinterested observer and I do not speak on behalf of the water companies and do not have a full brief. I believe that everyone who has studied the water industry knows that leakage from the mains grid has been substantial and was growing until 1989 owing to a shortage of investment. In 1989, when privatisation occurred, a substantial investment programme was put in place and, despite the recession, that investment programme remains on target. The water companies are confident that in time they will reach a point where they have tracked down and corrected all leaks that are economic to repair. Thereafter, if they continued to pursue small leaks with expensive machinery and expensive man hours they will not do the consumer any favours because bills would rise without any benefit.
As water companies reach that stage of solving the problem of major grid leaks, the leaks which occur in service pipes owned by consumers—which are currently estimated to account for one-third of all leaks—will grow as a proportion. I stress that I am not an interested party and my noble friend the Minister may have more information.
§ 6.13 p.m.
§ Lord Bridges
My Lords, I am sure that we are all grateful to the noble Lord, Lord Cocks, for putting down this Question. It raises a number of issues of considerable importance, which I believe will come closer to the centre of the political arena in the next few years. This is a valuable opportunity for us to increase our understanding of some of the problems that will arise. I too learned a great deal from the speech which we have just heard from the noble Earl, Lord Lindsay.
I should make it plain at the outset that I have no personal interest in this Question except as a small shareholder in one of the regional water plcs and as a domestic metered consumer.
The origins of the current charging system go back a long way, to the great improvements in the public water supply which occurred in the last century associated with the large programmes of municipal improvements which were then undertaken. It is my understanding that it was decided then as a matter of policy not to meter private consumers on public health grounds. It was argued that if the poorest families had to pay for water consumption on a metered basis they might either decline to be connected to the safe public water supply or would use water very sparingly. In either case the public health would suffer. That was a time of explosive population growth in our big industrial cities and of an alarming increase in water-borne diseases. Therefore access to clean water at minimal cost to the poorest was a very desirable 59 social objective, as it is in the developing world today. Hence the adoption at that time of a system of charging for water which we have today, still based largely on the concept of the net annual value of the property.
It is interesting that, in contrast, other industrial countries, arriving at a decision some years after we did, generally adopted a quite different system of paying for water based on a metered supply. In the course of the past 40 years I have lived in seven different capital cities around the world. The only country which did not adopt a metered supply was Russia where water charges were set so artificially low that water usage has become profligate and very wasteful. Washing everything under a running tap is now the rule in Russian society. The consumption of water per head in Moscow is, I believe, the highest in the world. Financing the use of water on that scale is one of the many severe problems facing the public authorities in that country. Elsewhere metered supply is the norm and does not seem to produce any particular social or political problems. From an international viewpoint it is our situation which is unusual and our practice appears to be based on historical experience rather than on current needs.
It is worth examining those current needs briefly. Water consumption has been increasing very rapidly in this country as a result of the rise in the standard of living, the number of washing machines now to be found in our homes and improved hygiene. Also, as has been said, much water is wasted because of leakages in the mains. Therefore it is inevitable that the water undertakings have to undertake major investments in order to meet the higher standards which are now set for them by the EC directives. Recent droughts have brought home to us the small margin between normal supply and consumption and the desirability of increasing that margin in many parts of the country. There is a great deal of work to do, involving substantial capital investment by the water companies. That is the core of the matter.
How are we to cope with those needs? The cost of meeting the investment targets can be decreased substantially if we can reduce the quantity of water which is wasted. As was made plain by the noble Earl, part of the problem is already being tackled by the water companies in their extensive programmes of mains renewal, but the consumer can help and reduce his bill by using less water. The best way of doing that is by moving to a generally meter-based system. We are all much more likely to be conscious of the need to stop waste if we pay for what we actually use in the same way as we pay for other utilities. There is no logic in paying for water on the basis of the artificial tax base which is now employed. I believe that the Government were right to include in the Water Act a provision which phases out that system by the end of the present decade. It would be possible to use the new council tax assessment in its place as a basis for payment for water but I would be strongly opposed to that. I too believe that payment should be related directly to consumption as the only sensible long-term solution.
60 We must not overlook the social consequences, which were rightly stressed by the noble Lord, Lord Cocks. What will be the effect on the poorest members of society with large families? Those who are users of large amounts of water will undoubtedly need some practical assistance. There are two possible ways of doing that. One way would be through the social security system. While that would perhaps be feasible, I suspect that it would be extremely expensive to devise a scheme which delivered help where it was really needed without a great deal of individual calculation of personal needs and the high administrative costs that would be caused. But perhaps this is something that might be looked into before we get into the debate that is certainly going to break over our heads nationally before very long.
Another possibility might be to relieve certain categories of citizen, such as those on income support, or pensioners over a certain age, from payment of the standing charge when metered supply is delivered. Relief from this charge for the least well off would of course mean an extra burden on the water companies, and that could perhaps be met by adjustment of the K factor to take account of the additional expense. That solution might be more acceptable to the Government than a straightforward compensating payment by the Exchequer.
I should perhaps comment on the question raised by the noble Lord, Lord Cocks, about the difficulty of reading water meters. I had a water meter installed at my house 10 years ago. I lift the grid without any difficulty at all. I am not suffering from Byatt's Syndrome, and I do not see why others should. If these meters are installed in a new system rather than those of 100 years ago, I do not think there need be undue difficulty about that, although of course the cost of installation remains a problem.
I have no idea how the Government intend to reply to this question. But my own suggestion is that the domestic consumer needs a reliable supply of water of high quality and reasonable cost, and that a metered supply will form an essential element in making that possible.
§ 6.22 p.m.
§ Lord Howell
My Lords, I too join in thanking the noble Lord, Lord Cocks, for giving us the opportunity to discuss these matters. I wish to start by raising moral questions about a charge on water, which is one of God's greatest gifts to us. It is essential to mankind and womankind, as is the air we breath. In view of the entrepreneurial pleas—ideological and theological—that we have heard in this Chamber already, some of your Lordships no doubt still regret that it has not been found possible to bottle the air we breath so that it can be charged for as well.
These are important questions. I thought so when I was Minister of State in the Department of the Environment dealing with water, a subject to which I shall return in a moment. I had urged upon me the need to go for water meters, and I turned it down. I regret that before I became a Minister the Isle of Wight experiment had started. I could not stop it, but I certainly prevented any water authorities from 61 extending it. I did it for the good reason that water is supplied by nature, by the Almighty if we are Christians, and therefore it should be freely available to the people of this country.
We all know that it has to be collected, purified, and transported to our doorsteps, and that has to be paid for, but the amount of water that comes through the taps should not be artificially restricted by some payment system such as has been suggested. Water itself should be freely available to the people of this country. That is why I take a fundamental objection, for example, to the views of Mr. Ian Byatt, the director of water regulation, in a paper recently published for Ofwat. He said:Water companies should look at compulsory metering for households as one way to meet the growing demand.I fundamentally object to that. I want the growing demand to be met. There is no reason in this country why the growing demand for water should not be met. When we are dealing with additional factors, such as people using hoses for cars or gardens, or washing various items, it is reasonable to charge additionally in those cases, but as regards the domestic water consumer, he has a right to water.
In 1976, when I was given some responsibility for the drought at that time, I provided the water for the nation. That is something that apparently this Administration is unable to achieve. I reached the conclusion then that there is no shortage of water in this country at all. None at all. There is plenty of water in the North and plenty in the West, and a great shortage in the South and in the East. The question to be considered therefore is the transporting of water from the North to the South and from the West to the East, about which the noble Earl, Lord Lindsay, was talking.
I therefore devised a plan called the national grid by which this would be brought about. I am sorry to say that from the moment I left office after the unfortunate events of 1979 that plan never saw the light of day again. It was soon murdered by incoming charlatans telling us that they were trying to solve the problem of the shortage of water, but they were doing no such thing. Under my plan, although we would use canals where it might be appropriate, the main purpose of a national grid, unlike electricity and gas, was to use the river system. If your Lordships will take time to look geographically at maps you will see that the rivers run conveniently for this purpose. For example, the Severn, a marvellous river, coming from mid North Wales down to the Bristol Channel—
§ Lord Howell
My Lords, I am told that the Severn rises on Plynlymon. Obviously my noble friend has greater knowledge on the precise location than I have. But the point I want to make —and I started to do this when the drought was on—is that we should get water out of the great reservoirs (which incidentally had been supplied by the ratepayers of Birmingham, and great municipal socialists like Mr. Joseph Chamberlain, who is now rejected of course in government circles) and put it in the River Severn, and 62 then take it out where we want to take it out. Of course it is too simple a solution for many involved minds. We could then in fact pump it into the Thames. My noble friend Lord Williams will no doubt tell me exactly where the Thames rises, although I think there are different views about that. Water could be easily pumped from the Severn into the Thames, where it then flows eastwards and can be taken out for the benefit of Kent or the benefit of Norfolk, and so on.
The noble Baroness who is to answer this debate will be familiar with the flow of the Tame and the Trent. The Trent flows from West to East, and therefore it would again be possible to put water into the Trent and take it out where we want to take it out towards the east coast. These schemes are feasible, and it is my great regret that they have never been carried out.
What happened instead was that all the new vested interests known as regional water authorities persuaded Ministers that they would all have a regional grid. I then said, "If you are going to do this by means of regional grids, it could conceivably work if each region is connected to the next region" so that water could go round in that way. To its credit I think that the Northumberland water authority did that, and was connected to the Yorkshire water authority. I am not sufficiently up to date to know exactly how that scheme is going, but it is possible to have such a system. Some authorities indicated that they would do that. However, the present Government decided to do away with national planning for water by closing down the national planning department. They allowed almost every region to be autonomous. The idea of a national strategy for our water affairs went out of the window.
The noble Lord, Lord Bridges, and the noble Earl, Lord Lindsay, concede that there could be social consequences from water metering, as does Ofwat. However, the noble Earl stated that the water industry and Ofwat are now talking to the Government on how to deal with the undoubted problem of large families in poor circumstances who are unable to pay.
I make this point on hygiene: that large families in poor circumstances are the very people for whom we wish to provide more water. I should have thought that the provision of water is essential when considering the morality of providing basic services to people in this country. Water meters for such families impose a tax. Neither Ofwat nor anyone else who recognises the problem has ventured to state how the industry should deal with the problem. Those bodies do not say, "We want to put water metering in but we recognise that there will be great social consequences as a result and therefore we as a great industry, a statutory body, will produce a scheme to meet that situation". No, my Lords. As the noble Lord, Lord Bridges, hinted, they say, "This is one more piece of service legislation which we wish the Government to adopt". If I have not carried the Government with me on anything else, I hope that they will agree that the cost of helping the poor and large families to use as much water as they need should not be imposed on the social services system of this country.
63 Let us consider Ofwat's hardship survey. It states that 8 per cent. of the population would find it difficult to pay a water bill—that is, 535,000 households. We are not referring to a small problem; that is a considerable number of people. It is a large problem.
A large number of people in this country with medical problems need to use a considerable amount of water. In providing water meters, the bureaucracy must meet the needs of those urgent medical cases which impose difficulties on the families concerned.
At one stage the reason given for water metering was that the rateable value system was ending. I understand that argument. But the scheme which was to take the place of the rateable value system has now been replaced. We shall not have the poll tax. We have gone back to a modified form of rateable value and a banding system. I believe that the ground has been cut from under the feet of people who say that water metering is the only way to deal with the situation left as a result of the collapse of the rateable value system.
I refer to the cost of the operation. I know, because I was involved in the matter that 25 per cent. or more of water was being lost in the mains system. I listened with great interest to what the noble Earl said. However, I doubt whether the investment programmes in such large conurbations as Liverpool and Glasgow have broken the back of the problem relating to the dangerous use of lead piping to transport water. I doubt whether that problem will be solved for a long time. The cost of installing water meters is likely to be considerable and will not justify the fuss that is being created.
What about the army of water meter inspectors who will be required? In the past I have had cause to ask, "Can't we do something about the army of inspectors knocking on the doors of houses all over the country?". I refer to gas and electricity meter inspectors, and now there will be water meter inspectors. It is bureaucratic nonsense. I do not understand how any government who wish to restrict unnecessary expenditure in such areas can entertain the idea. At one Cabinet meeting we considered whether we could have one group of inspectors to view all the meters. However, the uproar from the vested interests which had their financial affairs put into the hands of people not directly responsible to them was interesting to behold at the time. However, more and more people are becoming anxious about the number of people who knock on their doors, saying that they are inspectors of one kind or another. It is a hazard of our modern society whose growth we ought not to encourage.
I am grateful to my noble friend for raising the matter. I do not believe that water metering is necessary for domestic purposes. The charging system can make allowance for the additional use of water for gardens, cars and so on, as it used to in the old days. Let us realise that providence has provided a good, clean water supply to the people of this country. I believe that it should remain freely available to them.
§ 6.37 p.m.
§ Viscount Mountgarret
My Lords, I am grateful for the courtesy of the House in allowing me to speak briefly. I have been away for a few weeks and had not realised that this interesting and important Question tabled by the noble Lord, Lord Cocks, was on the Order Paper.
The noble Lord, Lord Howell, seems to be living in a country called Utopia. If I heard him aright, he suggested that the water in this country belonged to everyone and that they should have it virtually free. If I have misquoted him, I apologise. But that suggestion has to be impractical.
§ Lord Howell
My Lords, I am grateful to the noble Viscount for allowing me to intervene. I said that water was provided by the Almighty. If that is regarded as a Utopian proposition, I have to plead guilty.
§ Viscount Mountgarret
My Lords, I thank the noble Lord for the clarification. However, at the end of the day, , water has to be paid for, and paid for substantially, in particular nowadays when further requirements emanate from that remarkable organisation in Brussels which wants us to improve our water —and I had always believed that our water was substantially better than theirs. Such a provision costs a substantial sum of money.
I do not understand why we are considering the difference between the introduction of national metering of water, leaving matters in status quo, or having the cost based on rateable value (for want of a better word). The situation is no different from that of electricity or gas. There may well be hundreds of inspectors checking up on consumption of electricity or gas. I see no reason why there should not be some check on the amount of water consumed by individual customers. That seems entirely fair and right.
What are we trying to do? Are we trying to save water; or do we consider that it is a commodity available for all in unlimited quantities? I suggest that the former is more realistic. The only way that one can save water is to monitor it. To monitor water, it has to be metered. It is not a difficult matter to have check meters. I believe that I answer the question put to my noble friend by the noble Lord, Lord Howell. Check meters are an efficient and simple method of discovering leaks in a main or sub-main supply before it reaches consumers. If consumers with meters wish to use an unlimited amount of water to water their gardens or wash their cars that is entirely their decision, but they will have to pay for it. It does not seem to me to be fair or right for the next door household to feel that they should be more circumspect about saving water and therefore not water their garden or wash their car to the same extent as their neighbours just because they are not metered. They will pay the same if both houses are rated—I use that expression in advance of the council tax banding which we would probably go onto if we were talking about rateable values. If one wants something in this life one should pay for it; if not, one does not pay for it. Metering is a very good way to check on whether 65 there is wastage or unwarranted use of water. Obviously, difficulties can arise in the case of large blocks of flats, and so forth. However, if the electricity and gas boards can get the system right surely it is not impossible for the water companies to devise a sensible and satisfactory system to all concerned. The average household is thought to use approximately 100 gallons of water per day per person. In terms of present charges, that equates approximately to £150 a year for each household, assuming that each household has two people living in it.
The cost of the installation of meters has been blown out of all proportion. The cost is thought to be between £160 and £200—possibly a total figure of several billion pounds. A capital investment is required but in return there should be a charge made for the rent of meters. Speaking on the basis of a very small experience at home where I supply a substantial number of people with water, since the collapse of the rateable value system in the country I put every single property, water trough, and what have you, onto a meter. I have not had one single complaint. I have come across only two cases where elderly persons living on their own have had to pay more for their water during the year than they would have done had it been based upon rateable value. I do not know whether or not that would occur in future if charging was based upon banding under the council tax arrangements, but I do believe that there is some iniquity where the meter rate is of the order of £66 a year and one uses only £75 worth of water per year as a single person. I accept that that seems somewhat out of proportion, but there are probably ways in which that can be overcome.
This matter should be taken seriously. Metering is effective. It will obviate unnecessary leakage and people will be left to decide how much water they want to use. I very much hope that the matter will be given great attention and that we shall see metering as a necessary part of the provision of water to all our people.
§ 6.44 p.m.
§ Lord Monkswell
My Lords, I apologise to the House for not being able to get my name on the list this morning. For that reason I will not make a long contribution.
First, I should like to thank the noble Lord, Lord Cocks of Hartcliffe, for putting down this Question which is very timely. One asks why the Question had to be asked at all. Fundamentally, the reason seems to me to be that we have attempted to get rid of the rates. I believe it is recognised that the separation of water rates from domestic rates, and the provision of separate bills for households for the supply of water have given rise to many problems. We have a situation where the number of disconnections for the non-payment of water bills has escalated since the introduction of the change. That was virtually unheard of in this country prior to a couple of years ago. We appear to be going further down the road that will lead to problems. Water metering will bring problems to the most vulnerable members of our society and it will be unfair. Other citizens will also 66 experience problems. Mention has been made of the large family particularly with small children. Do the Government believe it is sensible to institute a charging system that will penalise manual workers and their families more than white-collar workers and their families? I am not sure that that is the Government's intention but that is how it will be seen.
Water supply is a long-term business requiring high capital investment that is paid for over a large number of years. The investment made in the last century to supply water to the main industrial and urban conurbations is still being used today. One has only to think of the water supply to Manchester or Birmingham to realise the long-term nature of the water supply industry. The use of water depends very much on long-term factors. One thinks of the toilet systems installed in our houses that may last for 30 or 40 years. They determine water usage. Washing machines also determine water usage. One thinks of the difference between showers and baths. They determine water usage. The capital facilities within a household will determine the water usage to a large extent.
Another relevant factor is that water usage will change over time within a particular family. One thinks of a family with young children where frequent nappy changes are required. That will require the high use of water. As that family grows up and changes, the use of water by the household will also change. Why should the payment for water be determined by the situation of a household at one particular point in time when water usage will vary over the years? We need to recognise that the payment for water in our country will be best determined by a system of taxation —as it has been historically for over 100 years —based on the ability to pay. Allusion has already been made to the introduction of the poll tax. That was introduced as a system which was seen to be fairer. Yet in a society where the extremes of income and wealth are getting greater that system of payment is palpably unfair. That has been recognised by the British people and Parliament has sought to change it. We have changed it. We are bringing back a system much more akin to the old rates system. I would argue that between now and the end of the century that system will become much fairer, and much more equitable across society as a whole. In the future, between now and the end of the century, we should look to paying for water by some mechanism associated with the system of fair rates.
§ 6.50 p.m.
§ Lord Ezra
My Lords, I should like to declare an interest. I have a connection with a company which is developing a system for the remote reading of meters (electricity, gas and water) that might help to solve the problem that the noble Lord, Lord Howell, referred to a moment ago.
The noble Lord, Lord Cocks, in introducing the debate, said that he considered that there ought to be a public debate on the issue. He is quite right, and we are indebted to him that he has given us the chance to 67 have a preliminary canter tonight. We have dealt with many of the issues that are likely to arise in the wider debate which will certainly come.
I do not believe that the question of water metering can be taken in isolation. It has to be seen in the whole context of our water strategy. I regard the objective of our water strategy to be to supply consumers with adequate supplies of water, of suitable quality, at lowest practical cost and on a sustained basis. I imagine I have got it about right. Anything that contributes to that end is in the interests of the consumer.
The first thing that has to be done is to make sure that there will be adequate supplies of water to meet the prospective needs. As the noble Lord, Lord Howell, rightly said from his great experience, there are adequate supplies of water in this country, taken as a whole, to meet the current and perhaps projected needs of the country. But I must say that, looking a bit further ahead than perhaps he thought of doing, we might have to contemplate the possible impact of global warming if that should come. If we have an increase in temperature of two or three degrees both in summer and winter, what impact will that have on water supplies? That is something that ought to be studied. But leaving that aside, there is the question of regional imbalances to which various noble Lords referred. The noble Earl referred to it, as did the noble Lords, Lord Cocks and Lord Howell, and others.
I am very pleased that efforts are being made to carry out transfers of water. Over the past year or two during the period of drought many questions have been asked on the Floor of this House about these transfers. I certainly think that they ought to be carried forward as much as possible.
I regret that the concept of a national grid was not pursued more vigorously at the time when it was proposed by the noble Lord, Lord Howell. It would certainly have cost less then than if we were to do it now. That is something very much to be said in its favour. I think that we would be much better off if we had one. But we have not, and perhaps the cost now would be considered too much.
Apart from the question of making sure that there are adequate water supplies both nationally and regionally, we have to make sure that we have an adequate and effective distribution system. The question of loss of water was referred to by many noble Lords. The average leakage in the public supply system is estimated, as I understand it, to be of the order of 22 per cent., varying from 6 per cent. to 36 per cent. That seems an appalling loss of water. Much is now being done, I believe, to put it right. The estimated loss through leakage in consumers' premises is estimated to be of the order of about 8 per cent. Obviously it is in the interest of consumers to try to get that put right. Altogether, one-third of the water that is distributed in this country is lost. That represents a major challenge.
Another aspect of the matter—I believe that the noble Lord, Lord Monkswell, referred to it—is efficiency in the use of water once it gets into the home. There could be technical developments to bring about 68 that efficiency. The use of water in toilet systems, for example, could be much improved, as could the use of water in washing machines, and so on. The suggestion has been made that these various items of domestic equipment could well have labels on them showing which were water-efficient and which were not. That would be in the general interest.
All these things lead naturally to the question of charging policy. It fits into the whole pattern of water strategy. The issue in the debate today is whether there should be a metered system such as is adopted in most other countries and in industry and commerce in this country, or whether we should continue to have the kind of system we have now which at the moment is related to rateable value and, after the year 2000, according to the Government's proposals, should relate to some other basis.
There is not the slightest doubt that if the objective is to try to make the best use of water, metering is a much better way of doing it than making a standard charge. Therefore I feel that there is a strong case for metering in those regions which have been, and are likely to continue to be, short of water. It is a sensible thing to do, and Anglia Water are indeed going ahead with a metering system.
Having said that, a very strong case was made—an indisputable case—for those who would be likely to suffer from a metered system; namely, families on low incomes with large numbers of children. There is no doubt that something would have to be done for them. There is absolute agreement among everybody who has spoken tonight that that question has to be dealt with. But in indicating that there is such a social problem, I do not think it destroys the case for metering in general. There is a problem; it has to be dealt with. But I believe that particularly in regions of the country that are likely to run short of water and where other ways of overcoming that could be more costly, metering would be desirable.
Furthermore, I believe that metering ought to be available to people as of choice. Reference was made, apart from to people on low incomes with many children, to elderly people and where there are just two of them living in a small house. I happen to come into that category. Some years ago I changed to a meter. My small house happens to be located in a highly rated area and we are away from it a lot. Within one year I got the money back on the meter. That was a very satisfactory transaction. I feel that people who are in that situation should have the choice of going onto a meter if they wish. I believe that that is generally proposed.
It concerns me that, if we are to go to a system in which some areas are to be metered, let us say those where water is likely to be in short supply, it would raise the question of what type of charging would be applied to the remainder of the country. Clearly we cannot continue ad infinitum on the rateable value basis. There are no rateable values any more and it has been decided—rightly in my opinion—that that system should no longer be used after the year 2000.
I do not think that transferring from rateable value to a council tax basis solves anything. It just goes back to the same type of system. To have a standard charge 69 for every household does not seem to me to be a very sensible way of proceeding because one gets wide variations in usage. So the question of banding is suggested. That would be desirable if to some degree the banding could reflect the likely usage. One gets into difficulties there. One can band according to the type of house and according to the occupancy at a certain date, which would presumably have to be declared. But I believe that a lot of thought has to be given to the alternative to metering. We are not there yet. I have looked at most of the documents on the case, as we all have, and I cannot see that much attention has been given to the matter.
In conclusion, I think the noble Lord, Lord Cocks, was absolutely right to raise the matter at this time. I think certain factors in regard to what must be done are becoming very clear.
We must take account of social circumstances. I believe that metering needs to be applied in those regions where there is likely to be a water shortage, but above all we must give a great deal of thought to what kind of charging system would apply elsewhere if there is not to be a general metering system.
§ 7.00 p.m.
§ Lord Williams of Elvel
My Lords, the House will be grateful to my noble friend Lord Cocks of Hartcliffe for raising this matter this evening. I too have to declare an interest, not as a director of a company that reads meters but as one who has a water meter. I have one from Welsh Water in Wales and I shall come back to the problems associated with metering—not that I wish to pursue a personal vendetta against Welsh Water, but I shall return to the point as a matter of general principle in a minute.
The question of metering was fundamental to the Water Act 1989. As the noble Lord, Lord Bridges, pointed out, it was assumed at that time—and it was a fairly easy assumption —that, with rates disappearing and the poll tax arriving, any idea of a rateable value being a possible basis of charging for water was absurd. Even allowing for the fact that it was unconstitutional for private companies to charge taxes, the rateable value was considered absurd since the rateable value would disappear. Thus, it was an easy assumption at the time.
Since then, we have had a rather interesting debate. First, the poll tax disappeared—and we must all be grateful for that. We have got back to a banding property tax and I think we are probably on the right lines, although I could argue with the Government on various aspects of the council tax. Nevertheless, the Government and the Director of Ofwat seem, in all kinds of documents—and your Lordships have most recently had the one called Paying For Growth—to insist that water meters are the right way of setting about charging for domestic use.
Your Lordships have put forward many arguments this evening: they fall into four categories, in my view. First, metering is immoral; secondly, it is inequitable; thirdly, it is impractical; and fourthly, it is unhealthy. I shall address those arguments as I go forward and on the whole I agree with them.
70 First, equity: the problem is that if water metering is introduced under the terms of the Water Act 1989, as it is on new properties, it can be introduced only partially. Perhaps I may give your Lordships an example of what I mean. A consumer advice bureau in Essex reports that a man who moved into a new property was told that he had to have a water meter as there was no rateable value on the properties. The resulting bill was roughly twice what people in similar older properties pay under the rateable value system. A consumer advice bureau in South Yorkshire reports that tenants on a new estate have been advised to put aside £7 per week for water. The rateable value would have meant a bill of £3.50 per week.
It has been documented by citizens advice bureaux on many occasions that in each case where water metering is introduced, it appears to give rise to an enormous increase in charges. That is noted by the director in the document Paying for Water: the way ahead and in the document Paying for Growth. I am sure that the Government have noted it. So why should we have the introduction of water meters which give rise to an increase on what people would otherwise pay?
The second point about equity concerned partial metering. The noble Lord, Lord Ezra, gave examples of where there might be reasonable differences, but it seems to me that it is more than a question of reasonable differences: it is the mere fact that in new properties there has to be metering but in old properties there does not. That will give rise to a two-tier system all over England and Wales and probably in Scotland, should the Government decide to get their Bill through to privatise Scottish Water.
The noble Earl, Lord Lindsay, raised the question of responsibility for leakage in the system. Here again, we come to the problem of equity. In the old days, if I may use that expression, under the system of rateable values, the water board was responsible for leakages. In the new days under metering, anyone on the domestic side of the meter is responsible for what happens on their side of the meter. The water company is only responsible for what happens on the water company's side of the meter. I hope the noble Baroness will forgive me, but here I come back to my experience in Wales. I have a water meter. Fortunately, we have a spring so most of the year we use the spring. When I got home I received a bill from Welsh Water plc for £20,000. It so happened that that weekend I was speaking to the Welsh Heart Foundation and I thought that I would probably be a candidate for treatment by the foundation when I received that bill for £20,000. It turned out that they were claiming that it was all due to leakage on my side of the meter. I said that it was impossible, it simply could not be true. However, they responded, "Yes, it is". I said, "Well, you must take me to court, I'm not going to have this". Then they changed their minds and said, "Oh yes, the meter got stuck, so we won't worry you any more and we will put in a bill for £20". I said, "That's fair enough, I'll settle for £20". Nevertheless, they had been prepared to send bills at random around the country. Fortunately, I was in a position to argue about it and they accepted my 71 argument. I should have been able to take them to court but people who are less advantaged than I do not have that privilege. That is again where equity comes in.
The second point is that meters are impractical. The Water Act states simply that all households should have access to supplies. That is an excellent principle. The problem is that the rise in water prices and the extraordinary rise in the number of disconnections —and the noble Baroness no doubt has the figures —mean that houses which are disconnected as a result of the appropriate procedures stop being houses which are habitable under Section 604 of the Housing Act 1985. So the more metering and disconnections continue, the fewer houses there are which are habitable. The result is that environmental health officers will have to come into the matter and argue with the water companies about the process of disconnections which we all thought had been established in the code of practice under the Water Act.
The third argument is that metering is basically immoral. There I agree with my noble friend Lord Howell. I feel that water is a gift of God—if one believes in that kind of thing—and we should not put a burden on those who are less able than others to pay for their water.
The last point is that it is unhealthy, and a number of noble Lords have made that point. Because of increased prices, the combination of high tariffs and metering will almost certainly lead to an unhealthy decline in water use. There will be less washing of clothes; fewer baths; people with eczema will suffer, as will people with other skin infections. Again, the intervention of environmental health officers will lead to enormous extra costs.
All this could be fairly easily handled were it not for the attitude of the water companies themselves. In this respect I come back to Welsh Water. If water companies see it as their duty to satisfy their shareholders, to award large salary increases to their chairmen and executive directors, to take over hotels, to take over electricity companies, to operate as entrepreneurial institutions, they are displaying an arrogance which is not permissible to custodians of what is a natural monopoly on which life depends.
I shall give the House one example of the arrogance of Thames Water. One would have thought that it would be anxious to encourage urban development corporations, a subject very near to the Minister's heart. Thames Water insists to the urban development corporation in London that, unlike all other utilities, there have to be advance payments for construction for connection to the mains. In the case of all other utilities the UDCs are generally able to negotiate "pay-as-you-go" arrangements. Only water differs in this respect. That is an example of the rather unpleasant attitude of the water companies.
What are the conclusions that arise from my noble friend's Question? The first is that the main plank for the argument for metering—that rateable values are to disappear—has now been removed, a point made by the noble Lord, Lord Bridges. We are now going back 72 to a banded property-related and income-related tax. Incidentally, I add one rider to the point made by the noble Lord, Lord Bridges, that these matters are satisfactorily dealt with in other countries. The noble Lord, as a distinguished member of the foreign service, no doubt had the benefit of living in apartments organised by the Foreign and Commonwealth Office. I lived in Paris as an ordinary citizen for four years, in Brussels for 18 months and in Rome for a year. I never knew what on earth I was paying for the water because it was all subsumed in the rent that I was paying—and the concierge fiddled the figures anyway. So the idea that the system works in any meaningful sense for the private individual in the great continent of Europe is one of which from my personal experience I can fairly easily dispose.
Pre-payment meters are even worse because they lead to self disconnection. If one cannot afford the penny in the slot, the shilling in the slot, or whatever it may be, pre-payment meters, which are now being adopted by two water companies, will lead to self disconnection with all the problems involved. That is the first conclusion.
I turn to the second conclusion. I agree with the noble Earl, Lord Lindsay, that leakage is all important. I am sceptical about the Isle of Wight evidence. I do not believe that what is coming out of the Isle of Wight is necessarily true for the country as a whole. Furthermore, we have seriously to address the problem of leakage control, not on an economic basis, as the noble Earl tried to imply —the idea that we should do everything economically viable to stop leakage in the system—but on the basis of stopping leakage in the system, full stop. As my noble friend Lord Howell said, water is not an economic commodity.
My next conclusion is that a two-tier system of metering and non-metering is, as the noble Lord, Lord Ezra, pointed out, in some way inevitable and that we must cater for that. But, if there is to be metering—this is my fourth conclusion—there must be, in spite of what Mr. Byatt of Ofwat said in his report, some adjustment for the social costs of what is happening. It is no good simply saying that water is an economic commodity and that we do not care about the social costs of the introduction of metering. That is the way forward to disaster. The fact of the matter is that privatisation of water as a natural monopoly, a commodity without which life cannot exist, has led to all the muddle which the Government now find themselves in.
I need hardly say that not only has the debate been useful but I do not think that the Government have even started to take the problem seriously. I suppose we should not be surprised about that but I hope that the noble Baroness, when she comes to answer, can assure us that the Government are taking seriously a problem which, as the noble Lord, Lord Bridges, said, will be on the agenda politically—right at the top perhaps—over the next four or five years. If they cannot ensure access to supply at all times for everyone at a fair price they will find that people will 73 tell them to pack their bags and go. The issue is that important. I hope the noble Baroness recognises that and I look forward to hearing what she has to say.
§ 7.16 p.m.
§ Baroness Denton of Wakefield
My Lords, I am grateful to the noble Lord, Lord Cocks, for giving the House the opportunity to discuss the question of water metering and for giving me the opportunity to examine the issue from the consumer's point of view. The noble Lord made reference to cricketing skills. I am beginning to wonder whether the noble Lord's own sport is regulator baiting. If it is, I am sure that we shall be able to bet on the evening.
The use of meters as a means of charging for water and sewerage services is not new. A substantial number of households in the Malvern area have had their use of water metered and have been charged on that basis for more than 100 years. As several noble Lords have pointed out, it is indeed commonplace in Europe and the United States. However, it is only in recent years that water companies have been looking seriously at the potential of installing water meters as a method of charging for their services.
Your Lordships will be aware that all water companies must move to a new method of charging for their services by the year 2000 when charging for water and sewerage on the basis of rateable value of property will be prohibited. The companies are considering a number of options which include metering, a flat rate charge and charges which are related to the classification of property into a number of bands based on certain criteria. It is for each water company to decide on its preferred method of charging according to the particular circumstances in its operating area. It must, however, satisfy the Director General of Water Services that the charging method it chooses and the associated tariff does not give undue preference to or unduly discriminate against any class or group of customers. I agree with the noble Lord, Lord Ezra, when he says that the alternative means of charging other than metering require close attention.
I have heard the matter disputed by noble Lords on the Opposition Benches, but I believe that water metering is potentially the fairest method of charging. There are matters that have to be analysed and worked upon in association with this; but water metering would seem to offer that. Ofwat is not suggesting that it is a universal solution. The director general's published conclusions following consultation on Paying for Water set out a strategy that aims among other things to respond to the views expressed by many customers that they should pay in relation to the volume of water used. I hasten to reassure the noble Lord, Lord Cocks, without indulging in an analysis of which are the most successful market research methods and questionnaire methodology, that the main purpose of the survey was to give customers an opportunity to express a view. Indeed, there is no firm evidence to back up the NCC's suggestion that those who replied were not average water consumers or were only those who could expect to pay less under metering. Perhaps I may also point 74 out that the surveys were only one part of the whole consultation exercise. Views were expressed from 30 consumer organisations, and individual letters were received from about 2,000 customers as well as from the 10 regional Ofwat customer service committees who have a statutory duty, as your Lordships know, to represent the views of customers.
The aim of the director general's strategy is to extend metering selectively in places where the overall benefit to customers outweighs the cost of installation; and to improve the customer's awareness of the right to opt for a meter at their own expense, as many of your Lordships have, in order to save money on their bills. I was pleased to note that as regards noble Lords who have benefited from that system, the balance was rather better than for those who seem, momentarily, unbenefited. There is also the strategy to develop tariff structures so that payments are more closely related to water use and rely less on standing charges and lump sum contributions for connection to the system.
It is important—I believe that my noble friend Lord Lindsay drew attention to it—to appreciate that we are dealing with a precious commodity, the supply of which must be used efficiently. We are asking that the consumer has the opportunity to choose between the volume of water used, which metering allows them to know, or the cost of an additional reservoir which, put on to their bills, would create infinitely greater hardship than some of the charges talked about by your Lordships.
The director general concluded that a rapid switch to metering would be unnecessarily expensive and advocated a selective approach, concentrating on areas where supplies are short and where the discretionary use for such activities as watering gardens by sprinklers is high or where the cost of installation is low; for example, in new properties or when work is being carried out on existing service pipes.
Most water companies have introduced metering for new or converted properties which do not have a rateable value. Three companies in the South and East have recently announced plans to compulsorily meter existing properties. Other companies in the South with water resource problems may follow that lead.
The Question tabled by the noble Lord, Lord Cocks, asks specifically about the benefits which metering will bring to the domestic consumer. I am sure that he would like to think that those with swimming pools, sprinklers and Range-Rovers to clean, will pay more than the person living alone in a small flat. All water companies are required to operate a meter option scheme whereby customers may opt to have a meter installed at their own expense. Many customers who have taken advantage of that scheme have indeed benefited from savings.
The impact of compulsory metering on customers' bills is in general less than many people expected. Unfortunately, I cannot share the noble Lord's "Betjeman" view of the Isle of Wight. The recession has hit the Isle of Wight as well as other places. Data from the metering trials has indicated that about 75 two-thirds of the customers paid about the same or less than they would have done under the rateable value system of charging.
Paying for the volume of water used also gives customers an element of control over the size of their bills. I accept that water is essential to life, and that there are minimum requirements for the maintenance of health and hygiene. Unfortunately, I cannot accept the comparison with air made by the noble Lord, Lord Howell. That seems to require rather less—if any—infrastructure compared with water. I fear that although it is God-given, I have yet to view God as an effective plumber. Beyond that, paying by volume means that customers are in a position to decide how much they want to spend on water, and they can influence the level of their bills by reducing discretionary use.
The noble Lord, Lord Monkswell, gave a very good argument for metering in drawing attention to the fact that people with washing machines and other equipment can make the decision as to the amount of water for which they will be charged. But the director general is ensuring that increases in water charges are kept to the minimum necessary. They may well increase by more than the rate of inflation—at least up to the end of the century—in order to finance improvements in water quality and sewage treatment required to meet EC standards, and for the restoration and maintenance of the existing system.
In this period of rising prices, the ability to influence the size of water bills will be welcomed by many customers. In areas where water demand is increasing and supplies are scarce, the compulsory metering of households, even for part of the company's area, may allow the costly development of new resources to be deferred and then result in lower bills. Water service from the installation of meters may also produce benefits to consumers during periods of low rainfall. Again, evidence from the Isle of Wight shows that where meters have been progressively installed, during the recent drought in the South-East it was possible to maintain supplies without any of the restrictions such as hosepipe bans which were enforced in many areas on the mainland. There can be wider environmental benefits where a reduced demand from metering can lead to lower abstraction and consequently an improvement in maintenance and water flow in rivers.
I can understand that many people, and everyone in your Lordships' House, has reservations about the impact of metering on large, low-income families and households containing someone who needs to use unusually large amounts of water because of a medical condition. As a result of these worries, we conducted a survey jointly with the Office of Water Services on the social impact of water metering. It was conducted in the 12 metering trial areas, and about 6,000 households were interviewed.
Your Lordships will be interested to know that the survey found that most households have not experienced difficulties as a consequence of metering, and that a large majority thought it reasonable to meter water. Only about 3.8 per cent. of the customers 76 interviewed could be regarded as having suffered some form or degree of hardship. I agree with noble Lords that the matter must be dealt with. I believe that it is a larger problem than that identified by your Lordships because not only is the cost of water expensive for large families—possibly single parent families—but we also have to be concerned about the heating costs for that water. There is an issue here which is not by any means restricted to water.
I accept that the metering trial areas are not representative of the country as a whole and that metering in other areas could possibly result in higher rates of hardship than were found in the survey. I am pleased to assure noble Lords that we are looking at the findings of the study and considering possible ways of alleviating the kinds of difficulties experienced by some households.
§ Lord Monkswell
My Lords, I am grateful to the noble Baroness for giving way. She mentioned the inquiry into the effects of water metering. She seems to have spoken only in terms of the effects on individual households. Have any measures been taken to judge the general effects on society of water metering? I am thinking in terms of the effect of the disconnection of water from a block of flats which resulted in an enormous smell in the surrounding neighbourhood. Can the noble Baroness say what is the effect likely to be on society at large and not just on the individual household?
§ Baroness Denton of Wakefield
My Lords, the overall effect has to be taken into account. Moving to the subject of disconnections, the Government believe that customers should pay their bills. We support the actions that the director general has taken following the increase in the number of customers who were disconnected for the non-payment of their water charges during the year 1991–92. There has been some welcome improvement in the recorded level of disconnections in the six months to 30th September, but it is too early to predict the impact of the director general's actions on the number of disconnections. We believe that disconnections should be limited to those who can pay but who choose not to. Such people should not fall as a cost on those who genuinely cannot pay or on those who make every effort to pay. It is important that that is understood.
I understand that there was an unusual case of tenants being disconnected, and perhaps that is what the noble Lord, Lord Monkswell, was referring to. The case involved 16 out of 114 tenants. The local authority was alerted and all those who were contactable had their supply restored quickly. Local authorities have the powers to deal with such matters and, as can be seen in this case, can deal quickly with them.
Perhaps I may thank my noble friend Lord Lindsay for bringing his usual well-informed views on this matter before your Lordships' House and for drawing attention to the enormous infrastructure spend which is essential in relation to water. The noble Lord, Lord Bridges, drew attention to current needs, to the situation as it is now and to the fact that householders have been happy to be able to measure their 77 consumption of other utility services. The noble Lord, Lord Ezra, raised a point which I hope answers that of the noble Lord, Lord Howell. He said that technology will soon mean that meter reading does not have to take place inside a house. That will be a great social benefit for all concerned.
I have to admire the knowledge of the noble Lord, Lord Howell, on water matters. It is perhaps greater than that of most of your Lordships, but I certainly do not suggest that that would ever allow him to be categorized as a "wet". However, I have to be philosophically opposed to his views. I must advise him that the long-distance transfer of water, using rivers and canals, has been considered, and although it was not rejected out of hand it could, however, cost several billion pounds. The National Rivers Authority continues to examine the possibility of other forms of long-distance transfer and whether it would be beneficial. Again, it is important that costs are kept down. There have been some criticisms of the use of the word "economically", but I believe that for the benefit of the users we should be looking at the economic delivery of water. We are talking about the cost to and the load on families.
My noble friend Lord Mountgarret referred to the need for efficiency in the delivery of this service. I was pleased to hear the noble Lord, Lord Ezra, identifying the fact that water is used most efficiently in areas of shortage if it is metered. Everything that we are seeing leads to that conclusion.
My noble friend Lord Lindsay asked about council tax valuations. We are aware that some water companies have asked about using council tax valuations as a basis for their future methods of charging for water. Your Lordships may recall that during the passage of the Local Government Finance Act 1992 we said that, as a general rule, it was not our policy that whole valuation lists should be sold to third parties which compile data bases of personal information. Regulations will be necessary if the valuations are to be used for other purposes. We shall consider whether to allow the use of valuation lists for 78 water charging purposes as part of our deliberations on the consultation paper which seeks views on these issues.
The noble Lord, Lord Williams, referred to the concern about prepayment meters. They are intended to help customers to budget and to avoid getting into debt. A water key budget system has been developed and is currently being trialled by Severn Trent Water plc in the Birmingham area and is being monitored closely by the Office of Water Services. It is similar to the scheme which is used by the gas and electricity services. It enables customers to buy as much water as they can afford when recharging the water key. I am pleased to tell the noble Lord that if a customer fails to recharge the water key before the credit runs out, the system allows water to be obtained for a further seven days. It is well recognised that we do not want to put such people at a disadvantage.
The noble Lord also referred to company profits, dividends and directors' salaries. The water companies need to be profitable if they are to fund the considerable capital investment programmes that we need. The remuneration of directors and senior managers is a matter for the companies and their shareholders. However, we have made it clear that customers are entitled to look to the leaders of the regulated water companies to set an example. I endorse that view wholeheartedly.
The failure to pay bills is not currently restricted to areas where there is metering. Nearly 1 million summonses were issued for the non-payment of bills in 1991–92. For some people, paying water bills is a problem whichever method of charging is used. As I said, we should endeavour to deal with that problem.
I close by once again thanking the noble Lord, Lord Cocks of Hartcliffe, for tabling this Unstarred Question. I thank also all noble Lords who have spoken and brought extremely well-informed views to the debate. Whatever the views expressed, it can only be to the benefit of consumers when matters such as this are discussed in your Lordships' House.
House adjourned at twenty-two minutes before eight o'clock.