Anne McIntosh calls for ‘urgent reform’ of the water industry

As MP for Thirsk and Malton and Chair of the Environment, Food and Rural Affairs Select Committee, I have experienced first-hand the need for urgent reform of the water industry. Customers are facing rising energy bills and we need to keep water bills down.

The UK has experienced unusual and unpredictable weather patterns over the past few years. We have had record rainfall over the past two years following significant drought conditions in 2010/11. The big storm in October has been reported to be the most powerful to hit Britain in recent years.

As a result of extreme weather, widespread flooding has wrought devastation and heartache in communities across the country, including in my constituency, and has cost the economy millions. In some areas, we also have seen simultaneous periods of drought exacerbating problems faced with an outdated abstraction regime. The House of Commons will be debating on Tuesday 5th November the Reform and infrastructure of the water industry and consumers’ bills.

Legislation will shortly be brought before the House of Commons bringing the next stage of reform to the water industry. Primarily, the changes will allow for increased retail competition for business users as well as establishing a framework for affordable flood insurance. Whilst greater competition within the retail water sector will be a welcome change, more urgency is needed to push through changes that will improve resilience and flood protection.

The Government set out its plans for water reform in the Water for Life White Paper, following a series of Government-commissioned reviews of water policy. Our Select Committee called for rapid steps to be taken to tackle the environmental damage caused by over-abstraction of water. We called for more ambitious targets to be set to increase levels of water metering and we highlighted how bad debt in the water sector adds around £15 to each household’s water bill every year.

Almost two years later we are still facing the same issues. We urgently need the Government to implement existing provisions on bad debt and we recognise water meters contribute to the legal framework for lowering customer’s water bills.

We have heard persuasive evidence about the environmental damage unleashed by over-abstraction. Drought conditions have underlined the importance of introducing a reformed abstraction regime able to provide sustainable and reliable supplies of water.  The current abstraction licensing regime was introduced in the 1960s and was not designed to manage the competing demands for water which we see today. The Government’s current plans – to reform the abstraction regime by the mid-to-late 2020s – will not take effect rapidly enough. Our Committee has called for these to be brought forward so that the reformed regime is in place no later than 2022.

It is noteworthy that this year, water companies are spending £1 million on a website to make it easy for landlords to provide voluntarily basis contact information about their tenants, so companies can register them for billing. It is disappointing that the Government has so far failed to introduce the provisions relating to bad debt in the Flood and Water Management Act 2010.

Most water companies do provide social tariffs but again, our handicap is not having access to information regarding Department of Work and Pensions data for those most in need.

Ofwat as a regulatory authority seems to keep a tighter grip on increases to customer bills, certainly more than the energy sector. Any price increases have to be negotiated every five years through the Price Review, the next one currently being negotiated to be agreed in 2014.

Locally, flooding in Brawby, Norton and Malton is a source of great distress. In October I visited Brawby to see the problems first hand and last year I visited residents in Castlegate, Sheepfoot Hill to see the problems there. Surface water is spilling into combined sewer drains and in Brawby this has led to flooding on the road and in Malton and Norton into people’s homes.

Resolving the problem of flooding needs a multi-faceted approach. I believe ending the automatic right to connect and implementing outstanding provisions of the Flood and Water Management Act 2010, such as increasing the use of Sustainable Urban Drainage Systems (SUDS), in conjunction with prioritising the maintenance of flood defences and dredging water courses, will be important parts of this solution.

The flood insurance agreement between Government and the insurance industry (known as the Statement of Principles) has expired but is being kept going until a new arrangement is put in place to bring insurance cover for those households most at risk of flooding. The Water Bill seeks to establish a levy-funded reinsurance pool for high risk households (known as Flood Re) and fallback powers to regulate the insurance industry by requiring them to insure a certain share of a list of high flood risk properties (known as the Flood Insurance Obligation).

Flood Re should keep premiums affordable for all. Its aim is to provide reinsurance to the insurers in respect of relevant flood risk, in such a way as to promote the availability and affordability of flood insurance for household premises. This approach will provide stability for communities and certainty for householders in future. However, Ministers concede that they must publish further details regarding how the scheme will be accountable to Parliament and how assurances will be enforced to keep premiums at an affordable level for those in the scheme.

I believe that the solutions to reduce the impact of all of these issues are out there and would make a difference. Government must get on with implementing long overdue changes to address these issues – many of which were first recommended years ago. It is disappointing that we have not yet had Second Reading on the forthcoming Water Bill, so this week’s debate on the Water Industry can only be helpful to highlight the issues.