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Water Bills (South-West)

The hon. Gentleman left me very short of time, and I want to respond to some of the specific points that he raised, so I shall press on. Another reason why the Government are sceptical about the idea of the customers of one water company subsidising those of another is that such a subsidy would be very difficult to target. The overall effect would be that low-income customers in other water company areas would subsidise all customers, including owners of second homes in the south-west. I would like to speak positively about what can be done about water bills. The true water affordability problem is for those who are least able to pay. That is particularly serious in areas with high water charges and low incomes, and it is worst of all in the south-west. That is the problem that we must look at, and it would not be addressed by blanket subsidies to all customers, including the well-off in the south-west. The Government acknowledge that there is an issue with water affordability, particularly for those with the lowest incomes. We have already taken action, through legislation, when there might be a risk to household health. We have legislated to stop household water disconnection because of inability to pay. We have also set up protection for vulnerable groups on meters who might otherwise cut back on water that they could not afford. In 2004, as I am sure the hon. Gentleman knows, a cross-Government steering group reviewed the way low-income households are helped with their water and sewerage charges. A wide range of stakeholders were involved in discussions with the steering group, and the Government published their report on the review in 2005. Since then, the Government have been working with Ofwat, water companies and the Consumer Council for Water to take forward the recommendations in that report. They include measures, which I am sure hon. Members are aware of, to look into alternative tariff and charging options, and a pilot study in the south-west. I would like to talk briefly about the progress of that work. The first strand is to look at the scope for redistributing the burden among customers of a company through tariffs and charges. The Government reviewed methods of water charging and tariffs in 1997-98, which resulted in the Water Industry Act 1999, including protection against disconnection and the free meter option. We are currently working with water companies to develop a model to look at the distribution effect of tariffs, particularly the winners and losers that would be created among households. The model is looking at the effects of a wide range of measured and unmeasured tariffs. One tariff that the group is looking at is the rising block tariff, offering a free or cheap basic amount of water to a household, with higher charges above that. We have set up a working level group to look at the results of that work, and to advise on how lower income groups might be affected by any change to the current charging system. The members include representatives from the Treasury, Ofwat, the Consumer Council for Water and water companies. The group is considering how tariffs might distribute the total burden of a company’s charges in ways that might address affordability and promote water saving. We hope that that work will provide some real ways forward. There has been discussion about whether second home owners pay a fair share of costs. The Government recognise that there are issues about the balance between fixed costs of the network and costs that vary according to how much water is used. Ofwat regulate that balance when it approves company charge schemes. I certainly agree that second homes should pay a fair share, and we are willing to look at any proposals to improve fairness on this issue. The other strand of work from the report is the south-west affordability assistance pilot study. That involves the Government, South West Water and other stakeholders, and it is being run in the south-west to assess the combined impact of benefits checks, water efficiency measures and metering. The Government have been working on that pilot study with South West Water, the Consumer Council for Water and Ofwat since 2005. The pilot study is targeting and assessing the effectiveness of water affordability assistance to lower income households in the south-west. The pilot study is assessing the combined effect of benefits checks, water efficiency measures and metering on low-income households. The pilot—[Interruption.] The hon. Member for Truro and St. Austell—