A glass half full

Whitty4x3.jpgLarry Whitty outlines our concerns with the Water Bill ahead of Lords Second Reading

Having been rushed through the House of Commons, the Coalition’s Water Bill is now about to be rushed through the Lords, starting with the Second of Reading later today. 

The recent damaging floods and the impact on low income families’ cost of living from escalating water bills both illustrate the vital need for a new strategic approach to water management and water regulation. During the course of the Bill’s scrutiny in the Lords, Labour will outline plans to alleviate the pressure on households by introducing a National Affordability Scheme and giving Ofwat the power to reopen price settlements. 

We have a water system in England that results in floods and drought in successive months, along with water leakages and sewage spills. We also have a water industry dominated by private regional monopolies – for the most part owned by overseas investment funds – with high profits, high dividends, low to nil taxation, substantial investment requirements and increasingly unaffordable bills. Reports at the weekend revealed that £11bn was paid out in dividends to the owners of the largest six water companies over the last decade, while bills went up 50%.

The key propositions of the Bill are something we give broad support to.

First, the introduction of competition at the retail end of the market for non-domestic consumers only. But while we will back this minimal challenge to monopoly, it is only likely to affect a small part of the market, and some of the rules bizarrely seem to prevent rather than promote real competition.

Second, the imposition on Ofwat (as the economic regulator) of a primary resilience duty. Again this in principle is an advance, as Ofwat has tended to interpret its responsibilities very narrowly. But physical resilience is only one aspect of long term sustainability of our water resources and infrastructure.

Finally, a new system for flood insurance for properties at high risk (and known as ‘Flood Re’), which we will support while highlighting the lack of a robust future proofing involved. Given that Defra Secretary Owen Patterson can’t answer a straight question about whether or not he agrees with David Cameron that climate change is a factor in extreme weather, this is vital. 

Our main attempt to amend the Bill will be to insert what is hardly there at all. In particular we will focus on the beginning of the water cycle with water abstractions, and at the end with what people pay for what comes out of their taps and the service they get when something goes wrong. We will also call for more effective regulation of the Water Company Regional Monopolies, with regard to both the environment and treatment of consumers.

I hope also that ministers back our plans for the National Affordability Scheme, which water companies would have a legal requirement to sign up to. Ofwat estimates that a third of households are paying more than 3% of their disposable income on their water bills, with over two million spending in excess of 5%. Despite this, only three water companies are offering social tariffs.

This Bill has been a long time coming. Over two years ago – when Caroline Spellman was still Defra Secretary – the Coalition issued a rather good White Paper – Water for Life – which set out a broad long term strategy for water resources was widely welcomed. Ministers then produced a draft Bill which purported to put into effect some of the White Paper’s objectives. Pathetically thin, this was widely criticised – not least by the Select Committee. 

The government tweaked that draft Bill at a very late stage in the Commons, to include new provisions on flood damage insurance. But it remains woefully inadequate, and Labour will seek to make significant improvements before it leaves the Lords.

Lord Larry Whitty is a member of the Shadow Defra Team in the House of Lords

Published 27th January 2014 

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