Labour rails against domestic water competition proposals

Exclusive: Labour has opposed measures to introduce competition into the residential water market, insisting that water and sanitation is “too important” to turn into a market.

“Water and sanitation are a vital public health service, and Labour does not believe increasing commercialisation of the retail part of the industry will improve water quality or safety,” shadow minister for flooding and coastal communities Sue Hayman told Utility Week. “As we have seen with other utilities, risk and confusion puts the onus on residents to choose which tariff is right for them.”

She pointed to a Public Accounts Committee report, which identified that customers are paying too much for their water, but said there is “no evidence” that commercialisation is the solution.

“Customers fear inflated prices from companies seeking a profit out of being in the market place for water services, and fear the risk of downward pressure on providers over the standards of service,” she said.

“Ofwat claim this move will improve customer services, but this has not been the experience of the public where commercialisation has been extended to other utilities. Water and sanitation is too important to turn into a market – that is why Labour opposes these measures.”

The idea of domestic competition was mooted by former chancellor George Osborne in a shock announcement as part of his 2015 autumn statement. In a document published in November 2015, the Treasury outlined plans to introduce competition into the sector as early as 2020, in an effort to “get a better deal for consumers”.

However, since the original announcement government has gone quiet on the issue, leading the industry to speculate that it may be stepping back from domestic reform.

Liberal Democrat peer Lord Rupert Redesdale, also chair and acting chief executive of The Water Retail Company, a new entrant in the non-domestic water market, told Utility Week he believes government should put its plans on hold, because of problems that could arise for vulnerable customers.

“People need water and, if they can’t afford it, this creates potentially huge bad debt problems for companies, which can be written in if they’re monopolistic water companies,” he said.

Water regulator Ofwat was asked to carry out a cost-benefit analysis of domestic competition. It published its final findings in September 2016, and sent them to the Department for the Environment, Food and Rural Affairs (Defra) for consideration.

At the time, a spokesperson for Defra told Utility Week: “Introducing competition to the household water market is clearly a complex issue and something that needs careful consideration. We will now consider the report.”

The Department is yet to respond to an updated request for comment.