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Water and Sewerage (South-west)

I will turn to the detail of the Walker recommendations and the possible way forward in a moment. Anna Walker rightly identified that, curiously, the issue in the south-west—she highlighted the causes, to which I will turn in a moment—could well in future be a burden somewhere else in the country. We do not want to replicate the mistakes of the past. If I have time, I will turn in my remarks to what discussions have taken place on the Flood and Water Management Bill in light of that. I will come to the hon. Lady's points in a moment. Anna Walker concluded that the regulatory regime in England and Wales has served customers well over the last 20 years, but that we now face considerable new challenges across the UK. In particular, demand for water is growing and water supply is already under pressure across the south and east of England. On top of that, we face challenges such as climate change and water affordability. The final report highlights that water affordability is a real issue for some households across the whole of the UK, but notably in the south-west. It therefore recommended a package of measures for the Government to consider how to help low-income customers. My hon. Friend the Member for Plymouth, Sutton (Linda Gilroy) made the comment that there is a package there, which is quite interesting. There are a range of possible solutions that she puts forward as a package. Anna Walker proposed that the WaterSure tariff should be retained for low-income customers with high essential use for medical reasons, but that bills should be capped at the national or regional average, depending on which is lower. That would be paid for by regional water customers. She also suggested that all metered customers on certain means-tested benefits should be offered a 20 per cent. discount on their bills or, failing that, that a discount should be introduced for low-income households with one or more children. Let me just add that during the Committee stage of the Flood and Water Management Bill, the issue of social tariffs operated by companies was raised. It was raised across the room by Labour and Liberal Democrat MPs. I agreed to take away and consider whether a new clause should and could be brought forward on Report to enable companies to operate social tariffs. I thought it would be interesting to put that on the table. The Bill is essentially concerned with the implementation of the Pitt recommendations. We are trying to deal with the issue of debt in water companies, which impacts on the wider consumer base, and if we can get it right, we may be able to do something about enabling power around social tariffs. Turning to the chapter in Anna's report on the south-west, I have acknowledged repeatedly in debates here and elsewhere that South West Water customers pay more for water and sewerage services than other customers do. This year, the average household bill is around £490, which is 43 per cent. more than the national average. Anna looked closely at why that is the case. She concluded that one of the key reasons that bills in the south-west are relatively high when compared to other parts of the country was, frankly, the poor state of the local sewerage infrastructure at the time of privatisation in 1989. The source of the problem goes back to the birth of privatisation and, I do not hesitate to say it, to the midwives who conceived this particular child. She found that South West Water had an underdeveloped set of assets due to the reliance on sewage disposal at sea, which meant that the region had the smallest regulatory asset base per property of any water and sewerage company at that point in time. That meant that South West Water had to spend a lot of money on infrastructure development to meet national standards, with the result that South West Water went from the company with the smallest regulatory asset base per property to the one with the highest, and here we are. The cost of investing in the sewerage system in Devon and Cornwall, post privatisation, as the hon. Gentleman knows, has been met by the company's customers. Anna Walker identified a number of options that could potentially address that. One option would be a one-off financial adjustment funded by the Government to address the specific circumstances of South West Water at the time of privatisation. A further option that she identified was an annual transfer to the south-west from the Government. Alternatively, she proposed that bills in the South West Water area could be adjusted—either as a one-off, or annually—through contributions by other water customers across the rest of the country. In addition to her more general recommendations on affordability, Anna suggested that households in the south-west could be helped by a seasonal tariff that would charge more for water during the summer months. That would take account of the fact that water use in the south-west in the summer is up by one third on the rest of the year. Anna Walker indicated that if water in the summer months was charged at three or four times the normal unit cost, then average residents' bills could be reduced by around £40 to £60 a year. However, I know that there is some concern about seasonal tariffs and their impact on the tourism industry in the south-west. I understand that. Under Anna Walker's proposal, water bills would increase for hotels, guest houses, restaurants and other seasonal businesses during the summer months. That brings us back to the question of what is the fairest way of charging for water. Let me pose some questions that Anna rightly posed too. First, is it fair for local or national water customers, or the taxpayer, to pick up the tab, given that it is visitors to the south-west in the summer months who make use of peak-period water? Curiously, the analogy is correct. When I went on holiday to the south-west last year, I had north-east MPs say to me, "Whatever you do, you must make sure that you do not replicate the mistakes of the past and have us paying." It is a tricky one. Visitors to the south-west in the summer months during the peak period make use of the water and sewerage services. All I am saying is—I am not proposing this as a solution—that a seasonal tariff may offer the opportunity, as Anna proposed, to provide part of a fairer distribution of costs.