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Column Number: 219
Standing Committee D
Thursday 16 October 2003
(Morning)
[Mr. David Amess in the Chair]
Clause 42
Objectives and duties under WIA
8.55 am
Norman Baker (Lewes): I beg to move amendment No. 281, in
clause 42, page 45, line 23, after 'the', insert 'immediate and long term'.
Good morning, Mr. Amess. I happy to say that I am in fuller breath than I was during several earlier sittings. I am pleased to move the amendment, in my name and that of my hon. Friend the Member for Guildford (Sue Doughty). It relates to the objectives and duties under the Water Industry Act 1999. The amendment would insert the words ''immediate and long term'' in relation to the interests of consumers, and there is a good reason for doing that.
New subsection (2B) talks about consumers' interests being promoted by ''effective competition''. I do not think that anyone would deny that effective competition has a role to play, but on its own it cannot deliver on the long-term interests of consumers. Indeed, competition tends to operate on the basis of short-term rather than long-term advantage. In other words, what consumers say they want, by and large, if they are asked, is to have water at the cheapest price possible. They would regard that as an advantage to protect consumers, and they would say that competition was about that in so far as there is competition in a monopolistic industry such as water.
That is not necessarily in consumers' interests in the longer term, however. Water prices are in the news, because there has been a clear indication that they will rise above inflation, and there is a necessary objection to that from consumers and others who feel that prices are rising beyond what is reasonable. The interests of consumers in the longer term require, for example, investment in long-term infrastructure works to ensure that there is no water shortage, that there is adequate reservoir capability, that any pipe work to transfer water from one area to another is done, that the environment and the quality of water are satisfactory, that any concerns about pathogens, bacteria or whatever in water are dealt with satisfactorily, that water is of a satisfactory standard for drinking and so on. That requires long-term investment, but I am not confident that the clause takes account of those wider factors beyond competition and ensures that consumers' long-term interests are addressed.
I do not want to stray too far from the clause, but there is also an issue about the relative costs of water, which vary from one part of the country to another. We had a discussion about the south-west the other day. It is difficult to defend a situation that happens to have been inherited from privatisation whereby water
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prices vary widely between different parts of the country.
It could be argued that the prices for water consumers in one part of the country should reflect the costs that apply to their supply, and the costs of supplying water in the south-west will differ from the costs of supplying it in, say, Northumberland. Nevertheless, the wide variation does not necessarily relate simply to geographical necessity; it relates also to the rather curious and flawed arrangements for privatisation. Those were put in place by the last Conservative Government to privatise the then 10 public companies, with a green dowry to help them along the track. Those flawed arrangements have been perpetuated through the K factor subsequently and have never really been examined since, so they are still in place many years on.
That is not dealt with in new subsection (2B), which talks about promoting effective competition. The needs of the consumer must be addressed in many different ways, which go beyond that narrow aspect. It would be wrong if the objectives and duties under the WIA simply related to promoting competition and failed to take into account the myriad other factors that I have referred to.
I hope that the Minister will accept that there is good reason for the amendment. He may have been advised that there is a problem with it; for example, that it relates to the wrong part of the Bill. If so, will he explain how the wider objectives of ensuring that water is drinkable and there is proper long-term investment, which I am sure that he recognises are for the consumers' benefit, will be reflected in the objectives and duties under the WIA?
9 am
Mr. Andrew Lansley (South Cambridgeshire): I can be very brief. In the absence of the words proposed in the amendment, the duties would none the less embrace both immediate and long-term consumer objectives. They must be balanced in any case, so the amendment has no purpose.
The Minister for the Environment (Mr. Elliot Morley): I could just leave it at that, because that is true. There is no purpose in the amendment, because there is already an obligation on Ofwat to consider the full range of consumer interests. That includes the immediate, long-term and, for that matter, medium-term interests.
In the broader sense, the amendment would have no effect. In the literal sense, it deals only with the immediate and long term and does not mention the medium term. We must consider the whole range of interests, and the danger of such a specific amendment is that it does not. It fails to mention the medium term, and if we were to interpret it literally, we would have some difficulties with it.
The main point is that there are obligations on Ofwat. New subsection (2C)(e) concerns competition, and the proposal as a whole mentions competition where appropriate. The Bill is balanced and recognises that consumer needs must be taken into account when considering any potential benefit of competition. I do
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not disagree that competition is only one element of consumer interest, and we must take a broader view. However, the amendment is unnecessary, and I urge the hon. Member for Lewes (Norman Baker) to withdraw it.
Norman Baker: I am grateful that the Minister recognises that these issues should properly be taken into account. One reason that we tabled the amendment was that we are not convinced that Ofwat's approach to date has appropriately reflected the long-term considerations.
One of my concerns about the regulation of the water industry in general is the justified complaint that the consumer element has not had proper regard to environmental necessities and that, equally, the Environment Agency has not paid enough attention to the consumer element. The Bill is trying to address that, and the problem has been recognised implicitly, but we tabled the amendment to make the position clear.
I am grateful to the Minister for recognising that consumer interest is not merely about competition. I am not convinced that Ofwat takes that into account, and I hope that the new arrangement will improve that. I am happy to withdraw the amendment on the basis of the Minister's comments, but I put down the marker that there is a problem. The new arrangements must be better than the present ones. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr. Bill Wiggin (Leominster): I beg to move amendment No. 77, in
clause 42, page 45, leave out lines 26 to 36.
The Chairman: With this it will be convenient to discuss the following:
Amendment No. 82, in
clause 46, page 52, leave out lines 6 to 24.
Mr. Wiggin: I hope that the Committee is a little warmer this morning.
These are sensitive amendments. The Government have done a good job in listing the groups of people whose interests should be considered, and the amendments are designed not to withdraw that list in toto, but to ensure that all the right people are included. By including in the Bill a prescriptive list of people whose special interests must be considered, we may miss some out.
Norman Baker: Does the hon. Gentleman suggest, as a parallel, that that would be like including the phrase ''immediate and long term'' and missing out ''medium term''? The Minister might draw that comparison.
Mr. Wiggin: I am sure that the Minister is doing everything he can to ensure that the medium term is considered.
The hon. Gentleman is right in that when a Bill carries lists or terms that can be checked off, people immediately fall into the gaps. Ethnic minorities, victims of crime or people from other worthy groups
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that need special consideration may be missed out because of the prescriptive list.
Another group of consumers to consider—not in a positive way as the list suggests—are those who are able to pay their bills but knowingly avoid doing so because they know that they cannot be cut off, as opposed to those who cannot pay because of their low income. I am nervous when a list of worthy people is included in a Bill, and what we really want is a catch-all phrase or code of conduct.
Mr. George Osborne (Tatton): I am studying the Bill more closely than I have previously been able. It is strange that the new subsection states that
''the Authority shall have regard to the interests of''
a group of worthy people, but then says that that does not mean that it cannot have regard to the interests of everyone else. Is the subsection's purpose clear? It says that particular groups of people should be taken care of, but the last line of the subsection states that
''that is not to be taken as implying that regard may not be had to the interests of other descriptions of consumer.''
The subsection has no purpose. [Interruption.]
Mr. Wiggin: I agree with my hon. Friend, who put it succinctly, and that is why the amendment would withdraw those terms. However, that alone would be unsatisfactory, because we want worthy groups of people to be considered. I feel that the wording requires tightening up. The Minister's words will provide clarification for those who read the Hansard report of the Committee sitting, and I hope that we can prevent the exclusion of worthy groups of people.
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