A glass half empty

LarryWhitty.jpgLarry Whitty on the return to Parliament of the Water Bill for Lords Report stage

The Water Bill effectively rewrites large swathes of earlier water regulation going back to post-privatisation legislation in 1991. Even so, this massive Bill deals regrettably with only a small part of the water sector’s problems – despite most of these being identified in the Coalition’s White Paper over two years ago.

The unprecedented precipitation and flood damage earlier this year have shown clearly that our systems are not resilient enough against the extremes of climate. Indeed, only a few months before that, the UK was facing drought in the south of England with many catchments over-abstracted. Climate Change scientists have long argued that rising temperatures will lead to such weather events. But unfortunately, some Ministers in the government do not share our concerns - something reflected in cuts to flood defences and the environment agency.

Since privatisation, water supply in England has become an extremely profitable set of regional monopolies. In many cases these monopolies are owned by overseas interests, paying high levels of dividends to shareholders whilst borrowing from the markets for necessary investment; and at the same time paying very little tax in the UK.

The Bill makes a few changes, including some limited strengthening of Ofwat’s powers, the introduction of a limited degree of competition in the retail non-domestic sector, and the institution of a new system of Flood Insurance – Flood Re. But we also have a number of major concerns, the first four of which we are set to pursue on the first of two sessions of Report later today.

Our first issue concerns the introduction of competition into the retail business customer market. We welcome this but only when there is no detriment to household consumers. New competition will mean new entrants but it also means that some existing companies who are struggling would have the option to exit. We will therefore press for allowing retail exit to ensure this part of the market continues to run smoothly.

Secondly, we are concerned about the effects that may arise from the introduction of competition in Upstream Water Supply, where proper reform is required of the abstraction regime to allow regulators to stop over abstraction in river catchments. Our amendment will make it absolutely clear that abstraction legislation must precede any move to upstream competition. We hope Ministers will recognise the need for a coherent framework in order to protect water supplies, and against possible damage to the environment.

Our third issue is affordability. Over 11% of families pay more than 5% of income on their water bills, with 23% paying over 3%.  Since Labour’s more recent legislation in this area, water companies have been able to introduce a social tariff for vulnerable families. Yet very few have done so. We will be pursuing for a National Affordability Scheme to ensure all water companies offer affordable tariffs to low income families. And we’ve also tabled an amendment to stop water companies from recovering their losses through charges on regular customers in order to provide incentives to chase up those who haven’t paid. 

Finally, we’ll be focusing on sustainability. Ofwat, in its current five yearly price review, looks primarily at the economics of water supply. But there needs to be more of a focus on long term water resources and avoidance of environmental and flood damage. Ministers have conceded that there needs to be a stronger reference to resilience of the system but that is only part of the issue. Labour will press to make sustainable development a primary duty of the regulator. 

Throughout the Committee stage of the Bill, Labour and Crossbench Peers, along with some dissident Tories and LibDems, pursued the government to such a degree that they have now, rather belatedly, come forward with concessions on some of the above issues. (One notable exception being on our affordability amendments.) The main rationale for all of this has of course been a desire to avoid defeats in votes and fend off any internal revolts within the Coalition. But while much of it goes some way in our direction, it is still not far enough.

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

Published 25th March 2014

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