TUESDAY 13 FEBRUARY 2001

THE RT HON MICHAEL MEACHER MP AND MR ALAN DAVIS

  540. And large numbers for whom it is not.
  (Mr Meacher) There will certainly be some for whom that is not so. Those who have high use particularly if they have several children; those who may have medical conditions, but those can be taken into account by moving—and indeed we did in the previous Water Bill, where a shift was made to metering but one was able to provide that, if one was a low income family with three or more children or with someone with a medical condition like incontinence or dialysis, one could still, whilst having a meter, be charged at the average basis under the uncharged system.

  541. To what extent do you currently monitor the impact of water charges on different income levels?
  (Mr Meacher) I think we do. Long ago when I first entered Parliament, which was in prehistoric times, I think there was a pamphlet called Family Expenditure Survey. I do not know whether the DSS continues to publish it but that had a breakdown of average budget household expenditure which would include expenditure on water.

  542. Is this something that you would expect the Regulator to take into account?
  (Mr Meacher) Yes.

  543. Are you aware that he is doing so currently?
  (Mr Meacher) As far as I know. I have no reason to doubt that. The Regulator, in determining a price structure, would take into account the impacts on those who are on lower incomes.

  544. What concerns us is that if more people move towards metering and their costs are lower the people who are not metered pay the difference.
  (Mr Meacher) That is perfectly true.

  545. It is terribly important that we should know that, is it not?
  (Mr Meacher) This is the unbalancing of the tariff basket. It is exactly the point that you are making and, yes, I agree. It is a matter of concern.

  546. You can call it a ramp, if you like, Minister. All I am saying is I do not like it.
  (Mr Meacher) Nor do I. I do not think we are yet at the point at which this is becoming a serious problem, but if the level of metering goes to levels of 30/50 per cent it could become a serious issue.

  Christine Butler: Should not the government grasp the nettle now and do something about that, because I cannot see the Regulator having the ability to do it without an intervention from the government. You could be hurtling towards a situation very soon now where you would be looking at what the cost of water would be to a poor family in a drought area, where there are overheads and external costs which are beyond yours, mine or their control and comparing what they pay in water to someone who is lucky enough to have a water company which does not have such high external costs, who has a nice large house and has decided, because there are only two of them, to go to a water meter. You would start to see some big differences but we know that that situation is not only here now but it could go on increasing. It would not be many years before you had a situation where you have gross inequities in the system.

  Mrs Dunwoody: We think that problem is arising very quickly. What we want to know is what are you going to do about it.

  547. Only government can grasp it and take a lead on this.
  (Mr Meacher) I entirely agree with your analysis. I was thinking, as you were speaking, as to what are the options of dealing with it, other than a shift to a universal system of metering. Otherwise, if the Government were to regulate a form of charging more closely in order to prevent it I suspect it could become very complicated and probably inequitable. I doubt if there are general, national rules which could be laid down which deal with this efficiently and fairly in all regions of the country.

  548. Can we take it, Minister, that there is some work. Firstly we need to know whether it is happening. Yes? That will be one of the things you will look at.
  (Mr Meacher) We would be very happy to provide you with a quick note, I know you are at the end of this investigation, of the extent to which this is happening and the impact on other consumers who have not shifted to metering.

  549. I am sorry to be cruel, Minister, but if you do not like the situation why did you introduce the Water Bill that has allowed it to happen.
  (Mr Meacher) I have never said that I, or we, are opposed to metering. What has caused it, or what will cause it, is a critical mass in terms of metering, a threshold point beyond which this unbalancing effect, between those who are metered and those who are still on an uncharged system, will begin to bite.

  550. This was known when the Bill was being debated a couple of years ago.
  (Mr Meacher) That is perfectly true. Of course it has been discussed. I do not think that that is a reason for saying that there should be no metering, which would seem to be the premise of your question. I think there is a lot of sense in people being metered for the water they use. It is certainly a way of making people conscious of the water they use, because a lot of people continue to believe that water is somehow free and they can use it in profligate quantities and there is no problem. It would encourage people, as well as all the pressure we are putting on business, to be more circumspect in their use of water. It is more equitable. Why, you might say, should one have to pay for the amount of electricity, gas or telephone that you use but not water?

  551. Can I just say, it looks as if the Regulator does not have to take the view that the basket has to unbalanced by spreading the cost. In fact, it could be borne only by the metered customers.
  (Mr Meacher) It could be. I do assure you, because I have had discussions with the Regulator about this, the previous Regulator was extremely conscious of this, and I am sure the present regulator, with whom a have not discussed this, is equally conscious of it.

  552. You are going to give us a note on this. I just want to finish with one matter, do you think the new regulatory arrangements could increase regulatory risk and, therefore, add to these bills? We had beautifully framed evidence from Dr Dieter Helm on this point, do you think that the new powers and the new regulations could actually increase regulatory risk?
  (Mr Meacher) I do not believe that the powers that are in this Bill are likely to increase regulatory risk. It is about greater transparency, greater accountability. There is an independent consumer council, there are clear divisions between the regulators, the Environment Agency, the Drinking Water Inspectorate and OFWAT.

  553. I do not think that was the suggestion, the suggestion was the right to fine companies, the extra powers that have been taken to set standards, all of these could increase the regulatory risk. Somebody would have to pay for it and almost inevitably it would be the customer.
  (Mr Meacher) The fact that there is greater regulation in terms of water supply in order to prevent excessive use—increased penalties for companies if they breach the terms of their appointment, which can be up to ten per cent of turnover, like other utilities, the increased charges for the supply of water unfit for human consumption—all of these seem to be very clear. I see no real reason why there should be greater unclarity. If I did think that I would reconsider it. I have not seen the evidence which suggests that the water companies are not very clear about their responsibility. The only issue is this question of sustainable development, social and environmental matters. If those are brought into the equation it could be said to be complicating a situation, it is no longer exclusively decided on an economic basis. We think one should integrate those other considerations. I repeat, it is guidance, it is not a direction. Ultimately it is for the Director General, even if he has his advisory panel, it is he himself who in the end then takes the decisions. We think that is clear.

  554. Minister, I think, if I may say so, I hope you will not misunderstand me, your evidence to this Committee always constitutes, really, a very excellent example of how a select committee should work in conjunction with the Government. It is very helpful and I believe you when you say you are going to go away and take account of some of the points we have made. I wish I could always say that to all of your colleagues. Thank very much for coming.
  (Mr Meacher) You are becoming so complimentary I am beginning to get worried.

  Chairman: Do not worry, it will not last. Thank you very much.