[Lord Sikka] My Lords, I beg leave to ask the question
standing in my name on the order paper.
[Lord Benyon] My Lords it's Ofwat, the independent regulator,
not the government that assesses water companies’ business plans and sets
the overall price cap that each company may recover from its customers.
As part of that process Ofwat balances the interests of consumers
with the ability for companies to fund their services.
Companies are preparing their plans for 2025 to 2030,
which will be submitted to Ofwat in October 2023.
Ofwat will make final decisions on investment and bills by December 2024.
[Lord Sikka] My Lords, the minister sidestepped the issues here,
so let me just lay down some facts for him.
Since the water companies were privatised,
the water bills have soared by 40% in real terms,
investment has declined by 17%,
£72 billion has been paid in dividends
and another £15 billion possibly by the end of this decade.
And now the companies are saying that they will make investment
if they can increase water bills by another hundred pounds.
I do hope that the minister will exercise his considerable powers of persuasion
on the water industry and insist
that shareholders fund the investment and not customers
because they have already been fleeced for the last 34 years.
[Members] Hear! Hear!
[Lord Benyon] I fear the noble Lord and I are working off different
facts.
Captial investment by water companies is 84%
higher than it was before the sector was privatised.
I've seen evidence that is independently assessed
that water bills would have been higher if we hadn't privatised the industry.
£190 billion has been spent by water companies paid
for out of customers bills for investment in water.
My noble friend Baroness Vere said earlier that nationalisation is a soundbite,
not a solution.
I couldn't agree with her more.
[Lord Kirkhope of Harrogate] My Lords, I refer to my register of interests,
but I want to ask my noble friend a bit more about Ofwat.
The government is getting criticised a lot in relation to bills for water.
But am I not right in saying that the regulator,
looking at this matter in an independent fashion, has got pretty
well the final say on who has to find the money
for the developments that we're talking about?
[Lord Benyon] My noble friend is right to a point.
The government gives direction to Ofwat and it's given very clear direction
to Ofwat in terms of resolving issues
relating to sewage overflows into rivers.
And we have a system where we have like all utilities,
which is extremely attractive, not least to pension companies,
who are the recipients of dividend payments
who invest in our water industry,
and having that balance between making sure we're
being fair to bill payers in
how much they pay, but getting that investment is absolutely crucial.
And that's where we work regularly with Ofwat to achieve it.
[The Duke of Wellington] My Lords, none of us underestimate the complexity
and magnitude of this problem.
We have had years of underinvestment
in our sewage disposal and treatment systems
such is the size of the problem today
that I think we must all accept
that the strain will have to be taken by a combination of higher bills
for the consumer, shareholders receiving
smaller dividends and, I know that it's difficult for politicians
to even contemplate this, I think general taxation, i.e.
the Treasury must also
take a part in this burden.
[Lord Benyon] Well, I thank the noble Duke
for his continued interest in this issue.
Undoubtedly, we could resolve the situation
by spending somewhere between £120
billion and £600 billion, separating out
clean water from dirty water, retrofitting an entirely new sewage system,
creating an additional 40,000
Olympic swimming pool equivalence of storage.
And that would cost around between £271
and £817 per annum on bills.
It is really important that we are honest with
customers, with people who are using water and getting water into their homes
every day and getting sewage taken out of their homes every day
that it does come at a price.
And some of the promises being made
that this is a simple solution are entirely fallacious.
We have to be honest with the people who pay these bills.
[Baroness Jones of Moulsecoomb] My Lords, for the past 30 years
we customers have paid the water companies
all the money that they needed to do their job properly.
Now, their statutory duty was to build, operate and maintain sewage systems
capable of effectively dealing with the contents of sewers.
Now, we've paid the money for them to do that, the fact they're not doing it
means that surely we're owed a refund rather than paying more bills.
[Lord Benyon] First of all, the noble Baroness suggests
that there was no sewage going into rivers before water companies came along.
Underinvestment when they were nationalised businesses was
historic levels of low investment
and our bathing waters were much worse than they are today,
and I'm not saying for a moment that there are not serious problems.
This government is, if I can steal a soundbite
tough on sewage and rivers, tough on the causes of sewage in rivers,
but we want to be absolutely clear that everything,
everything that happens comes at a price.
We want companies to be able to pay out dividends
because that is what encourages companies to invest in our water sector.
And so it's getting that balance absolutely right.
[Viscount Hailsham] Would it not be appropriate
for executive bonuses to be linked to challenging reductions in pollution?
[Lord Benyon] My noble friend makes a very good point.
Water is the only utility business where the regulator does link
reward for
company executives and dividend payments to performance.
It is the only sector of privatised utilities
where that link is made.
[Baroness Hayman of Ullock]
My Lords, while we’re on soundbites can I just say that I think levelling up
is a bit of a soundbite rather than the solution.
But the National Infrastructure Commission has warned that
there doesn't appear to be a comprehensive and consistent understanding of asset
condition across the sector and also how this might change in the future.
We know that asset replacement rates need to be significantly higher.
So does the noble Lord, the minister, agree with the commission
that Ofwat should take a leadership role in developing consistent forward
looking metrics for defining a measuring asset health across England?
And if not, what does he consider the alternatives to achieve this?
[Lord Benyon] I actually do agree
that there is much more that we need to do to make sure that levelling
-- I do not agree that levelling up is a soundbite, it’s really happening!
I do agree that we need to make sure
that we are supporting water companies and through the regulator in making sure
that they are taking a longer term view on this.
Each price round is five years and investment decisions
we want them to take look way into the future ahead of that.
So we want to make sure
that we are working with the industry to create a long-term solution
and that we are doing that so with customers in mind
and some of the promises being bandied around about ending
all sewage outflows by 2030 really need to be challenged
and those making them
really need to be challenged because that will have a very big impact
on households who are struggling to pay other household bills at the moment.
[Baroness Bakewell of Hardington Mandeville] My Lords, the first CEO’s of
water companies to waive this year’s bonus due to sewage
pollution were Yorkshire Water, South West Water and Thames Water,
followed by Welsh Water and lastly, Southern Water.
The campaign waged both inside and outside this chamber
to influence water companies does begin to have an effect.
Does the minister believe that the measures
which have recently been announced by water companies are sufficient
to achieve the desired outcome?
[Lord Benyon] I think the noble Baroness
makes a good point because I think that the
activities within Parliament and outside it on this particular issue
have really struck home and people are rightly
demanding that
we take into account the impacts
of development of growing populations and the health of our rivers.
And it's not just water
companies, it's agriculture, it's the connections that we all make
from our own sewers and septic tanks that are causing problems to our rivers.
And so, yes, she's absolutely right.
We need to make sure that we are tackling these things and that it is right
that the water companies are recognising that.
And those four companies should be applauded for doing it.
But we want to see much more investment
from them and that's what the government is driving.
[Baroness Blower] My Lords, water companies have borrowed £56 billion,
even though investment has declined in real terms.
Water bills include about £80 to cover interest payments.
However, much of the debt is actually intra-group
and is used to shift profits and dodge corporate tax.
That much was acknowledged by Michael Gove
in a speech on the 1 March 2018.
Can the minister explain why the government has failed
to curb customer and tax abuses by water companies?
[Lord Benyon]
I’m concerned about making sure that water companies spend money on infrastructure
that is needed to clean up our rivers and our environment.
And what we have to ask ourselves is what is the best model of doing that
and one that encourages investment into this country from sovereign wealth
funds from other countries around the world, as well as pension
funds and investment base here, is surely a good way of doing it.
So the model is right.
The alternative means that the water companies will have to sit outside
the Chancellor of the Exchequer’s office in a queue behind the health service,
the police, the armed forces
and does she honestly believe
that there will be more investment
through that kind of system of public sector borrowing rather
than getting this kind of investment flowing into our infrastructure?