Amendment made: 54, page 214, line 21, at end insert—

Third Reading

Queen’s consent signified.

I beg to move, That the Bill be now read the Third time.

I begin by thanking those who have been involved in the Bill. Members of the Public Bill Committee, under the excellent co-chairmanship of the hon. Members for Halifax (Mrs Riordan) and for North Wiltshire (Mr Gray), did an outstanding job of ensuring that critical issues were debated in depth, and the considered amendments that were tabled allowed us to explore several issues in detail. I thank hon. Members on both sides of the House for their contributions over the past weeks and months—and, indeed, today. Members of the EFRA Committee scrutinised the draft Bill, and I was grateful for the continued engagement of current and former members of that Committee during our debates on the Bill, including on Report. The Bill leaves the House stronger as a result of the changes made to the draft Bill before the introduction of this legislation, and the amendments made in Committee and on Report.

The Bill addresses difficult challenges that we all accept that we are facing. Climate change and population growth will place our water resources under more pressure than ever before. At the same time, unfortunately, it is widely recognised that the future holds more frequent and severe weather events. We need to keep Bills affordable while addressing those challenges, which means finding new approaches to encourage innovation and greater efficiency in the water industry. We also need an affordable solution to the problem of flood insurance for those at high risk of flooding.

The Bill is just one part of the action that the Government are taking to secure our vision of a sustainable and resilient water sector. It provides a framework for greater competition with the aim of driving more efficiency and innovation. Its measures will ensure a resilient future in which water is available to all at an affordable price, but not at the expense of the environment. It will ensure that there is choice and flexibility for customers and that bills are kept affordable, that there is more innovation in the water industry, and that there are opportunities for new businesses so that the industry continues to attract crucial investment. The Bill will not only protect and improve the environment, but contribute to the growth of our economy.

The Bill will deal with the availability and affordability of flood insurance for households at high risk of flooding, and in the longer term it will ensure a smooth transition to a free market. The most significant change made to the Bill during its passage through the House was the addition of its flood insurance clauses in Committee. I am greatly encouraged by the support for our proposed approach of ensuring that households at high risk of flooding may access affordable flood insurance.

I visited the south-west flooding incident room last week, and I would like to thank all those who are still working hard on the ground to support people following such distressing events. Hon. Members know that our preferred approach on flood insurance is to create an industry-led flood reinsurance scheme. Flood Re will carefully target benefits towards low-income households, who are the people most in need of support during the managed transition to risk-reflective prices. In developing the scheme, we have been mindful of the costs of the levy, which will be spread across all those holding household policies. We believe that our proposals get the balance right, and it also right that we should take powers on a fall-back obligation to ensure that there is certainty for householders.

Just as we want to ensure affordable flood insurance, we also want to make sure that water bills continue to be affordable for everyone, and that has been a recurring theme of the debate on this Bill. We want those who are struggling to pay to get help. All water and sewerage companies have developed packages to help customers with affordability problems, and they include customer assistance funds, support tariffs, debt advice and water efficiency measures. Most water companies are taking action to put social tariffs in place in 2015. The most important thing we can do is make sure that everyone’s bills are kept affordable. Let us not forget that this is a sector subject to price-cap regulation, which means that Ofwat scrutinises and challenges the business plan of all water companies to secure a fair deal for customers. By taking account of lower financing costs, Ofwat estimates that the next price review could significantly reduce pressure on bills from 2015 by between £120 million to £750 million a year. This Bill will contribute to the affordability of bills for all. Measures will exert a downward pressure on bills by encouraging greater competition to keep bills as low as possible.

Greater competition will drive more efficiency and innovation in the water sector. All customers and the environment will benefit from an industry that is incentivised to find the most efficient ways to meet future demand.

We are preparing to open the expanded retail market in 2017. Upstream reform will take place at a slower pace because of its increased complexity, which also means that we expect it to be introduced in parallel with longer-term abstraction reform.

In Committee and today, Members raised concerns about making legislation on upstream reform before the abstraction regime has been reformed. Let me assure Members again that we are confident that there are sufficient existing safeguards to prevent an unsustainable increase in abstraction in response to the implementation of upstream reform. We are tackling unsustainable abstraction now by varying and removing abstraction licences, but over the longer term we are committed to making the abstraction regime more flexible and resilient. A consultation on abstraction reform was launched on 17 December and we expect to legislate in the next Parliament.

Improving our approach to abstraction is critical, but it is only one part of our approach to ensuring the long-term resilience of our water resources. Today we amended the Bill to make it absolutely explicit that the new resilience duty is about ensuring the long-term resilience of both our water supply and sewerage services and the environment on which those services depend. I want to make it very clear that this is not about resilience of supply at the expense of our precious water resources. It is about ensuring that we all have enough water for the long term and that our environment does not suffer as a result.

I have no doubt that this Bill will continue to receive thorough scrutiny in Another place. I look forward to following those discussions with interest. After that, I am looking forward to the implementation of the Bill. Experts are already working hard on the detailed work to develop new markets in water. The open water programme, which includes Government, regulators north and south of the border, water companies and customers, is developing the practical details of market implementation. It launched its market blueprint consultation last week.

We are also continuing to work with the Association of British Insurers, and I am grateful to it and the rest of the industry for their co-operation and hard work. I reiterate my thanks to all Members and all officials and staff who have aided in the preparation and passage of the Bill, and I commend it to the House.

This Bill includes important reforms that build on three important reviews taken forward by the previous Government: the Pitt review on flooding, the Walker review on affordability and the Cave review on competition. It also follows on from the Flood and Water Management Act 2010 that we took through Parliament before the last election. That is why the Opposition supported the Bill on Second Reading and will do so again on Third Reading this evening.

We have backed measures to increase competition, extending to non-domestic customers the opportunity to switch supplier. Such an opportunity is already enjoyed in Scotland where it has been shown to be successful in reducing costs to business. We support the reforms intended to encourage new entrants into the market, and we back regulatory reforms aimed at ensuring long-term resilience of our water supplies. We also support the measures, at long last, to provide a statutory basis for agreement on flood reinsurance, providing relief to those who live in hard-to-insure households.

However, there remains a major hole at the heart of the Bill, and at the heart of the Government’s water policy. That is the absence of any serious attempt to tackle the impact that rising water Bills are having on household budgets, which is adding to the cost of living crisis. There is a real gulf between the rhetoric of the Government and the reality on this. Again, this evening, we have seen Government Members troop through the Lobby to stand up for the monopoly water companies, and against the interests of households. In his Second Reading speech, the Secretary of State assured the House:

“The package of reforms is designed to exert a sustained downward pressure on water bills”.—[Hansard, 25 November 2013; Vol. 571, c. 49-50.]

Yet, time after time the Government have opposed sensible amendments that would have ensured that that was a reality in this Bill. For all the briefing to newspapers back in October, the Prime Minister and the Secretary of State are simply unwilling to do anything that might be perceived as interfering in a market that they believe is working well. I do not believe that consumers agree that a monopoly industry that enabled companies last year to make pre-tax profits of £1.9 billion and pay out dividends totalling £1.8 billion to shareholders is a market that is working and adequately regulated.

Our reforms would have introduced a new national affordability scheme, requiring all water companies to help those struggling with their bills. That would have ended the current postcode lottery whereby companies choose whether to offer a social tariff and set the criteria for eligibility. Just three companies have introduced such a scheme, helping just 25,000 households. In their submissions to Ofwat for the next price review period from 2015, we see that there are still companies that do not intend to set a social tariff and that those that do are proposing to assist a relatively small number of customers.

Given that Ofwat estimates that 2.6 million households—11%—currently spend more than 5% of their income on water, it is clear that only a tiny fraction of those struggling are being helped. It is also clear that many customers do not know about even the help that is available. Only a third of eligible households access WaterSure, which was introduced by Labour to help households that have a high level of water use due to a medical condition or because they have three or more children. Yet the Government have opposed our proposal to require water companies to include information with bills about the help available to customers, just as they have consistently opposed forcing water companies to publish annual information, including on their corporate structure, and on their levels of investment, taxation and dividends paid to shareholders, and then enabling Ofwat take full account of that information when determining whether to re-open price settlements and cut bills.

Finally, our proposed reforms would have tackled bad debt, which adds £15 to the average bill, by requiring landlords to provide water companies with details of their tenants on request. We sought to give Ofwat powers to ban water companies that fail to act on bad debt from transferring the cost of lost revenue from non-paying customers to other bill payers. By rejecting all of these sensible measures, Ministers have wasted the perfect opportunity that this Bill offered to tackle the impact that rising water bills are having on stretched household budgets. Instead, the Government’s preferred approach has been to send just one weakly worded letter to water bosses, begging them not to hike bills next year, without even a threat of action if they do not comply. So while the water companies are doing very well from their monopoly position, customers in this country will continue to pay among the highest bills in Europe.

Disappointingly, Ministers have also not been more willing to listen to concerns raised on other aspects of the Bill during its passage through this House. The Government’s only concession has been a grudging acceptance that it is right to make it clearer to Ofwat that it must have a higher regard to the environment in the way that it regulates the industry. The Government’s compromise is to stick to their decision to elevate “resilience” rather than “sustainability” but to require Ofwat to

“secure resilience in sustainable ways”.

We will have to consider carefully whether that sends a clear enough signal or not.

Disappointingly, Ministers have not heeded the concerns about the total amount of water taken from the environment if upstream competition happens ahead of abstraction reform. I welcome the fact that the consultation on abstraction licence system reform was finally launched just before recess, but, on the Government’s own timetable, reforms will not be implemented until the early 2020s, and upstream competition is due to begin in 2019.

Finally, it is disappointing that Ministers have rejected each of the sensible and modest proposals to improve the Flood Re scheme. The Secretary of State will have today heard the clear warnings from Sir David King, the Government’s special envoy on climate change, that changes to the climate will lead to

“quite a radical change in weather conditions” and more frequent severe flooding. Requiring the Committee on Climate Change regularly to advise on the increase in the number of properties likely to be at risk of flooding as a result and the consequence for the Flood Re scheme was surely a sensible move, yet it has been rejected by the Government.

Similarly, it is difficult to see how the Government could have had any serious objections to strengthening incentives for the uptake of household flood protection measures—providing a right of appeal for those who find that their property has been removed from the scheme, allowing a right of public access to any Flood Re insurance database and publishing figures for the number of properties in the categories to be excluded from the scheme.

This Bill contains important reforms, but it remains seriously flawed as it leaves this House; flawed because it does not sufficiently protect the environment; flawed because the Flood Re insurance scheme will not be in place until 2015 but also remains disconnected from future increases in at-risk properties as a result of our changing climate; flawed because it has failed to toughen the powers of the regulator to cut bills; flawed because it leaves it to the water companies to decide whether to establish a social tariff and preserves the postcode lottery on eligibility; and flawed because it does nothing to protect customers who pay their bills from seeing higher charges as a result of those who can pay but will not. This Bill could have delivered a framework for that new deal with the water companies. Instead, a huge opportunity to tackle water’s contribution to the cost of living crisis has been missed.

We have had a good debate today. I welcome the Bill and thank all those involved in preparing it, including my right hon. and hon. Friends. Obviously, a lot of work remains to be done to it in the other place, and we will watch those developments with interest.

I welcome the introduction of retail competition. The Select Committee would like to have seen the primary duty of sustainability in preference to resilience. I believe that too much detail has been left to be fixed at a later stage. I enjoyed the comment from my hon. Friend the Minister on not wanting to rely too much on regulation, because just about every Clause calls for implementing regulation to be drafted. We will leave that conundrum with him.

Competition is to be welcomed. It should lead to greater efficiency. In particular, I hope that both the current 2014 price review and the competition provisions permitted following the Bill will lead to more innovation, not least following these weeks of sustained and considerable flooding across the country. I applaud the Government’s search for a partnership approach and for more private enterprise funding for flood prevention measures. I hope that the water companies will step up to the plate in that regard and that other private sector companies might help to fund schemes from which they might benefit.

I believe that there are still opportunities to write other provisions into the Bill before it receives Royal Assent, not least with regard to the partnership approach to flood prevention measures, which has been mentioned this evening, but also for increasing the amount of maintenance that can be done by internal drainage boards. We await the results of the pilot schemes, whereby DEFRA is allowing landowners to permit their own maintenance to be done on the watercourses locally, to see whether that scheme can be rolled out.

It is a joy to me that tomorrow we will see the Pickering pilot project in my Constituency reach its final phase with the cutting of the first sod of earth, which will enable the reservoir to be built. It is a great disappointment for me personally, as I am sure it is for many in the country, that the sustainable drainage systems, which are left over from the Flood and Water Management Act 2010, will still not be on the statute book by April this year. SUDS, on their own, will do a huge amount to prevent surface water flooding from entering sewerage systems through the combined sewage pipes that we have heard so much about today and that can cause sewage spills on to roads and, regrettably, into homes and other properties.

Perhaps the most innovative aspects of the Bill that are to be welcomed are those relating to flood insurance. I commend Flood Re, but I hope that the Minister will have listened carefully to the concerns that have been raised today, not least from the Select Committee. We expect to see the same respect and acknowledgment of value for money in that as in other schemes. We will be looking to see that that is confirmed as we go forward.

My hon. Friend praises the SUDS system, but will she take into account, and ask our hon. Friends on the front bench to take into account, the fact that we may be building up considerable liabilities for ourselves in future if SUDS systems are inadequately designed by developers who have clever consultants and local authorities do not have the expertise to vet whether those systems are adequate in the type of floods that we are seeing at the moment?

My hon. Friend will have an opportunity to read our proceedings tomorrow and see the debate that we have had on SUDS. For reasons that the Minister has not rehearsed in full, the SUDS regulations will not be on the statute book by April. I am sure that there are very good reasons for that, including those that my hon. Friend raised, but I do believe that SUDS will have a substantial role to play.

If the flood insurance system leaves out leasehold flats, that will be a matter of concern.

I am grateful to my hon. Friend for giving way on this point, as I did not have the opportunity to deal with it on Report. I assure her that householders living in those sorts of properties would have access to the contents aspects of flood insurance if they were council tax payers.

That will be very welcome news. As I said, I was alerted to this problem after the time for tabling amendments had expired.

What we have seen this week and saw in the weeks running up to Christmas shows the scale of the challenge that we face. I welcome the all-party approach that we have seen across the House today and in Committee, which I was not at liberty to participate in. That is a very good basis on which the Bill can go forward from this House, and I commend it to its future stages.

Question put and agreed to.

Bill accordingly read the Third time and passed.