Water Industry

§ Mr. Deputy Speaker (Mr. Geoffrey Lofthouse)

Madam Speaker has selected the amendment in the name of the Prime Minister.

§ Mr. Chris Smith (Islington, South and Finsbury)

I beg to move, That this House notes that since water privatisation in England and Wales, there has been a 48 per cent increase in domestic water disconnections, a 67 per cent increase in consumers' bills, a 125 per cent increase in water companies' profits, and a 133 per cent increase in the average pay of water company chairmen; believes that in providing a basic necessity such as water, essential to life and health, the needs of the consumer must come first; regrets that instead of this the privatised companies have put dividend growth and directors' benefits first; expresses alarm at the rise in domestic water charges, especially in areas such as the South West; insists that high standards of drinking water quality and sewage treatment must be achieved, but believes that the cost of this investment should not be placed almost entirely as a burden on current customers; deplores the manner in which the democratically expressed wishes of the Scottish people with regard to water are being overridden by Her Majesty's Government; calls for an immediate ban on domestic water disconnections and on the compulsory introduction of domestic water meters; and insists on the introduction of a tougher regulatory regime for water that puts the public first. Early this morning, I went to the Library and looked up some of the debates on the Water Bill in 1988 and 1989. What a wonderful picture was painted at that time by the then Secretary of State for the Environment. On Second Reading on 7 December 1988, he said that all the Opposition scare stories about what would happen to water charges were completely unfounded and ridiculous. He said that there would be minor increases only as a result of privatisation, and that the shadow Secretary of State had been wide of the mark when he spoke about water charges doubling or trebling by the end of the century. Those who live in the area of South West Water have already seen their water and sewerage charges double, and we are not yet halfway since that time to the end of the century.

We were told that there would be wonderful access to the world's capital markets for money for investment and to clean up the environment. The world's capital markets are not funding the investment: it is being funded by the water companies' customers. In a remarkable little passage on Third Reading on 4 April 1989, Mr. Ridley said: The whole country knows that people work more effectively if there is every opportunity for them to better themselves by better performance."—[Official Report, 4 April 1989; Vol.150, c.91.] He was talking about the people who run the water companies. They have bettered themselves all right, but I doubt that it is better performance that has resulted in the departing chairman of Severn Trent Water getting a golden handshake of £500,000, or the former chief executive of North West Water getting £398,000 last November as a departing handshake. In the north-west region, two out of three bathing beaches are still illegally polluted with sewage. Privatisation has turned out to be a ghastly mistake.

§ Mr. William O'Brien (Normanton)

My hon. Friend spoke about Second and Third Readings of the Water Bill. I served on the Committee that examined the Bill. When we debated compulsory metering trials throughout the country—one was in my constituency—I said that that would be of no value to privatisation, that it would be costly and would inconvenience many constituents. That is exactly what happened: the meters are no longer in use. That is another example of incompetence, of spending taxpayers' money without thought as to the value. It shows how privatisation has failed the customers.

§ Mr. Smith

My hon. Friend, who played a distinguished role in the Standing Committee that considered the Bill, is absolutely correct. One of the points that he will have noticed in the motion before the House today is that we want to prohibit the introduction of compulsory metering into people's domestic water supply.

After all, water is not just another commodity that one might buy or sell in a supermarket; water is essential to life and health. Since privatisation, water charges have gone through the roof and many of our beaches remain polluted with sewage, yet company chairmen have awarded themselves massive salary increases while 240 families a week have their water supply disconnected.

§ Mr. Jacques Arnold (Gravesham)

The hon. Gentleman has referred on three occasions so far to what he calls dirty beaches. They obviously need to be cleared up. Where will the money come from? If it not raised through the water charges, will it come from taxes and if so, by how much?

§ Mr. Smith

I shall come to precisely that point in a moment. The hon. Gentleman has not been listening. It was his Secretary of State who said that the problem would be solved by access to the capital markets—that that would solve everything.

It is small wonder in those circumstances that it was recently said: Water privatisation is a rip-off, a steal, a plunder, legalised mugging, piracy, licensed theft, a diabolical liberty, a huge scam, a cheat, a snatch, a grab, a swindle". Those are not the modest and moderate tones of an Opposition spokesperson, but Mr. Joe Rogaly writing in the Financial Times on 12 July.

In rather more measured tones, the National Consumer Council said: The performance record of many companies and of the water industry as a whole is lamentably poor, with many consumers facing rising prices and poorer services. Let us look at precisely what has happened since privatisation. Water and sewerage charges have rocketed upwards, the average increase for England and Wales has been 67 per cent. since privatisation. That increase has been worse in some areas—in the north-west it was 75 per cent. and in the south-west it was 108 per cent. It cannot be right that single pensioners in the south-west of Britain are paying more than 9 per cent. of their entire income on water and sewerage charges.

§ Mr. Patrick Nicholls (Teignbridge)

I would have more sympathy with the hon. Gentleman's concern for the west country if his hon. Friends had not trooped through the Lobby to vote down a Bill that I introduced to bring relief.

The hon. Gentleman is moving inexorably towards saying that the EC directives should be implemented in full, without any negation on the time scale. Will he now 202 answer the question that he was asked a few moments ago and say whether that is to be funded by increased water charges, by an increase in general taxation or both?

§ Mr. Smith

As I told the hon. Member for Gravesham (Mr. Arnold), I shall come to that point in just a moment, but I would take the hon. Gentleman's intervention rather more kindly if the role that he and others played during the passage of the Water Bill had recognised what the Opposition warned time and again would be the adverse consequence of privatisation.

The water companies say that the water charges must rise because of the necessary investment in cleaning up the water supply. That might have been a believable argument had investment actually risen in line with the rise in the price increase, but it has not. Southern Water has had a 43 per cent. price increase but a zero increase in the level of capital investment.

§ Mr. Arnold

From what base?

§ Mr. Smith

The increases took place from 1989–90 to 1992–93, which are the latest available figures.

Welsh Water has had a 47 per cent. increase in price and a 1.1 per cent. increase in investment. Yorkshire Water has had a 33 per cent. increase in price and a 0.5 per cent. increase in investment.

Overall, capital expenditure in the water industry is now running at some £1.65 billion a year. That is more or less the same as the level of capital investment pre-privatisation. When the water companies tell us that those rises in charges have been due directly to improved investment, we should examine carefully what they are saying. How on earth can increased bills be justified if the investment is not being made?

§ Mr. Arnold

Will the hon. Gentleman give way on that point?

§ Mr. Smith

I shall not give way to the hon. Gentleman; he has already had one chance to intervene.

At the same time, profits have soared. We are talking about a captive market. Each water company has a monopoly in its own area. We all have to pay, so they have a guaranteed income. It is a very low-risk business. On average, water companies in England and Wales have shown a 125 per cent. increase in pre-tax profits from 1989–90 to 1993–94. The water companies have an answer to that. They say that two thirds of the profit goes into capital investment. That may well be the case, but what about the other third?

When we examine the dividend growth of the water companies, the answer becomes very clear. As the National Consumer Council pointed out last week, Dividend payouts attributed to 31 appointed water businesses were about £300 million in 1989–90 … and £1,365 million in 1992–93. The growth of dividend payments"— that is, gross dividends from core services— was 63 per cent. per year on average. That is where the profits have gone.

If we ask the water companies, they will tell us openly and brazenly that dividend growth is their No. 1 priority, and that it is their paramount duty because they put it in the prospectus when they floated the companies for privatisation.

The Opposition believe that the customer, not dividend growth, should be the No. 1 priority, because all customers pay for the water and sewerage services we receive.

§ Mr. Arnold

Will the hon. Gentleman give way?

§ Mr. Smith

No. I have already given way to the hon. Gentleman.

Money that should be paying for improved water and sewerage services is going instead into dividend growth. If we want to know why, we have simply to look at the share option schemes that are available to the directors, chief executives and chairmen of the water companies.

Then we have the point about the access to capital markets. There has been a modest increase in the borrowing levels of water companies over the past four or five years, but, as the National Consumer Council points out, borrowings have been relatively modest, and no significant capital was raised through equity issues (though one of the key reasons for privatisation was that the companies would be free to raise money in the markets). I have to say to both the hon. Gentlemen who have intervened so far that the answer to their question about where the funds for long-term investment—which will last for 40 or 50 years—will come from is precisely where the Government said it would when they put the Bill through the House—from a long-term borrowing strategy on part of the water companies, so that today's consumers do not have to bear the entire burden of 50 years' worth of investment all at once.

§ Mr. Michael Bates (Langbaurgh)

I assume that the hon. Gentleman agrees with the leader of the Labour party —the right hon. Member for Derby, South (Mrs. Beckett) —who said in The Times on 21 June that she would be in favour of taking water companies back into public ownership. Clearly, that would have a cost attached to it in purchasing the equity stock. Has the hon. Gentleman made any assessment of what that cost would be?

§ Mr. Smith

The hon. Gentleman is misquoting my right hon. Friend. She said that the water companies should be brought back within public control. That is something that I and the Labour party wholeheartedly endorse.

§ Mr. Bates

rose—

§ Mr. Smith

I shall not give way to the hon. Gentleman again, because he has in his hand what I suspect to be a Conservative party briefing note, not a copy of The Times.

§ Mr. Bates

On a point of order, Mr. Deputy Speaker. I am sorry to interrupt the debate, but I seek your guidance. The hon. Member for Islington, South and Finsbury (Mr. Smith) clearly said that I had misquoted the right: hon. Member for Derby, South. I would never do that. I want to put the exact quotation on the record. May I have the opportunity to do that?

§ Mr. Deputy Speaker

That is not a point of order for the Chair.

§ Mr. Smith

Even at this distance, I can tell the difference between a copy of The Times and an A4 sheet of briefing paper from Conservative central office.

§ Mr. Jacques Arnold

Will the hon. Gentleman give way?

§ Mr. Deputy Speaker

Order. I heard the hon. Member for Islington, South and Finsbury (Mr. Smith) say earlier that he would not give way again to the hon. Gentleman, who is clearly wasting his time trying to intervene.

§ Mr. Smith

I am conscious that time is short, and I know that a number of hon. Members want to speak.

One great claim advanced time and again during privatisation was that the great advantage would be access to borrowing, capital markets and equity funding. That has not happened. There are low levels of borrowing, there have been no requests for equity from the markets, and there have been higher and higher charges for the customer.

We were told that the water companies would invest in non-core activities—they would roam the globe, seeking opportunities for investment, purchase and enterprise. Perhaps we could be told why no less than £727 million has had to be written off because of a variety of mishaps and losses among the non-core subsidiaries and associates of the 10 principal water companies.

We need to examine the levels of disconnection. After privatisation, the number initially rocketed. In most areas of the country, they have since edged downwards, but in some—such as the Thames Water area—they are still rising strongly. Perhaps it was no accident that Thames Water donated £50,000 to the Conservative party in advance of the last general election.

§ Dr. Norman A. Godman (Greenock and Port Glasgow)

There is a curious inconsistency in the legislation governing water disconnections. There will be no disconnections in Scotland, because the Government introduced a last-minute amendment to that effect in the Committee stage of the Local Government etc. (Scotland) Bill.

§ Mr. Smith

My hon. Friend is right. Scottish Ministers said in Committee, "There will be no disconnections in Scotland; the water authorities in Scotland do not need disconnection as a power to recover debt." However, each time we press the responsible Ministers for England and Wales to adopt the same approach, they say, "The water companies must have disconnection as a power of last resort." One part of the Government says one thing and another part says the opposite.

The Opposition believe that water disconnection has no place in a civilised society. It cannot be right to cut off the means of life and health simply to recover a debt. A Labour Government will ensure that disconnection of domestic water is prohibited.

As my hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) mentioned Scotland, I shall refer to the Strathclyde referendum. What could be clearer than the result of that? Some 97 per cent. of people said that they had no time for the Government's proposals for the semi-privatisation of Scottish Water. However, the views of those 97 per cent. were utterly ignored by the Government. Once again, they have ridden roughshod over the wishes of the Scottish people.

§ Mr. Alex Salmond (Banff and Buchan)

I fully endorse what the hon. Gentleman has said about the Strathclyde referendum. However, is there not some contradiction in the Labour party's approach? It supports publicly owned and controlled water north of the border, yet the hon. Member for Sedgefield (Mr. Blair) has said that he is prepared to accept privately owned water south of the border.

§ Mr. Smith

I would take what the hon. Gentleman said more kindly if he had fought anywhere near so well and so 205 effectively on the future of water in Scotland as did my right hon. and hon. Friends who represent Scottish seats. We are committed to ensuring full and proper public control of water and sewerage services throughout Britain. In England and Wales, the quickest, most effective and most practical way to achieve that would be to improve and toughen the regulatory regime.

Compulsory water metering has been mentioned. Anglian Water has already introduced, by compulsion, water meters in parts of its patch. By doing so, it is ignoring the severe impact of that on large families and people with disabilities. Metering takes no account of human need, it rations by price, and it produces precious little environmental benefit. A Labour Government will prohibit compulsory metering in people's homes.

I want to concentrate for a moment on what has happened to the salaries and share options of the chairmen and chief executives of the water companies. The chairman of North West Water last year received a salary of £338,000. That is a sixfold increase since privatisation. Is the service provided by North-West Water six times better because of the chairman's remuneration? Of course it is not.

The briefing prepared by Thames Water in advance of the debate notes that its chairman receives a salary of £250,000—modest by comparison with the chairman of North-West Water. The briefing note explains: A recent Daily Telegraph survey concluded that he was in fact underpaid, considering the responsibility he holds. I ask the Minister to consider the responsibility held by a signalman working for Railtrack and to compare and contrast the standards applied in that situation with those that apply to the chairmen and chief executives of water companies.

In most of the water companies, there are poor levels of general service, the handling of complaints is inadequate and it is us, the poor old consumers, who are picking up the price tag. Privatisation has been a mess. What we need is better and tougher regulation. The public interest should come first—on charges, investment, water clean-up, directors' remuneration, what happens to dividends, disconnections and metering policy. There is no sign of the Government rising to that important challenge.

§ The Minister for the Environment and Countryside (Mr. Robert Atkins)

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: 'congratulates the water industry in England and Wales on its achievements since privatisation and commends the proposals for restructuring in Scotland which will facilitate the use of private finance; notes the improvements which have been made in environmental standards in particular with regard to the quality of rivers and bathing waters, and the consistently high quality of drinking water; notes that the industry in England and Wales is pressing ahead with a £3 billion a year investment programme which will result in further improvements to the upgrading of water and sewerage systems without placing undue burdens on consumers; and further notes that the privatised industry is successfully using its expertise to gain major contracts overseas, something which could not have been achieved under the policies of the last Labour government.'. I apologise for the fact that I have a stinking cold and therefore may not be so intelligible as I normally am.

206 My hon. Friends and I were astonished by the remarkable speech of the hon. Member for Islington, South and Finsbury (Mr. Smith). I heard more ill-informed twaddle, if I am being charitable—or more misleading distortions, if I am not—than I would have believed possible. What the hon. Gentleman said flies in the face of reality, as I shall show; it was typical of a party and a spokesman who know that they can say what the devil they like because they do not expect ever to be in a position to deliver their promises—and for once, I am not talking about the Liberals.

The motion refers first to water disconnections, which have fallen from some 18,600 in 1992–93 to 12,400 in 1993–94. The hon. Gentleman knows full well that before a disconnection can take place an exhaustive legal process involving considerable time and effort must be completed. I was fascinated to learn that he intends to do away with disconnections, as they have been legal in England and Wales since 1945 and the legislation allowing them was introduced by a Labour Government.

There is no evidence from the Department of Health of any health problems related to disconnections. My local water company carried out a survey in connection with a Bill—a ten-minute Bill, I believe—presented by the right hon. Member for Salford, East (Mr. Orme). The vast majority of customers who were asked for their views on disconnections wanted the ability to disconnect to be retained, because they did not believe any more than we do that genuine payers should subsidise non-payers.

Let us get the facts clear: the number of disconnections is falling; the power to disconnect has existed since 1945, when it was introduced by a Labour Government; there is no evidence of health problems resulting from disconnections; and, as the hon. Member for Islington, South and Finsbury knows, a lengthy legal process is necessary before any action can be taken.

§ Mr. Alan W. Williams (Carmarthen)

I have here an article from The Guardian of 17 June this year about a British Medical Association report on water disconnections. According to the headline, water firms are "risking health with cut-offs". That is the professional view.

§ Mr. Atkins

I am sorry to disagree with the hon. Gentleman, but I must take the advice of the Department of Health, the Chief Medical Officer and others associated with them. They tell me that there is no evidence of health problems resulting from disconnections. Personally, I would rather accept their view than that of the BMA.

The next issue raised in the motion is the increase in consumers' bills. Of course that has happened, but why? The real reason is a failure to invest over many years—typically, in the period of the last Labour Government. I remind the House that between 1976 and 1979 a Labour Government cut investment by a third and sewage treatment by 50 per cent., while overall capital expenditure was cut by nearly 50 per cent. When I stood for Parliament for the first time in 1979, the industrial towns of the north-west were experiencing problems: ancient sewers were collapsing because a Labour Government had not invested the amount necessary to ensure that they remained in good order.

§ Mr. Chris Smith

Why, then, was investment lower in the five years after the Conservative Government took over than in the last year of the Labour Government?

§ Mr. Atkins

We privatised the industry precisely because we recognised that the taxpayer could not go on bearing the burden imposed by a Labour Government's failure to spend money which any Government clearly found difficult to spend. That proves my point decisively; I rest my case.

The increases in consumers' bills were generated by the need to spend substantial sums in a variety of ways relating to directives that we must—and do—observe, together with the new infrastructure that has been introduced throughout England and Wales. Notwithstanding consumers' understandable criticisms of price increases—which, as I have said, have been caused by a lack of investment and capital expenditure—our prices are still among the lowest in Europe.

§ Sir Harold Walker (Doncaster, Central)

Will the Minister comment on the absurd inequities of basing water charges on long outdated historical rateable values? Only today, I received a letter from a Mrs. Woolford, who writes: I enclose copies of the water rates for 3 first floor flats all within 50 yards of each other, all of which rightly are in band A for the council tax. Each flat has 1 bath, 1 toilet, 1 wash basin"— yet the water charges differ widely. That is daft; what does the Minister suggest should be done about it?

§ Mr. Atkins

That is one reason why metering is being considered, along with other alternatives such as council tax banding. I shall deal with the point shortly.

§ Mr. Salmond

Will the Minister give way?

§ Mr. Atkins

I am conscious of the time. An intervention by the hon. Member for Hemsworth (Mr. Enright) on the ten-minute Bill has limited this Opposition day somewhat. I should like to make some progress; if I give way to everyone, I shall not have the opportunity to reply to the comments of the hon. Member for Islington, South and Finsbury and to allow hon. Members on both sides of the House to speak.

Next, the motion mentions water companies' profits. Of course their profits are up, and so they should be: without those profits no investment would take place, and some two thirds are being reinvested. Last year—the most recent for which figures have been announced—my local company, North West Water, provided a dividend of £86 million, but invested £424 million in new projects. Shareholders are entitled to a return on their investment, to attract them to invest so that the necessary infrastructure improvements can be made.

The motion refers to directors' pay. It is not for me as a Minister—or, indeed, for the Government—to intervene in private sector salaries, but my right hon. Friend the Prime Minister has made it clear—and I agree—that company directors throughout industry should appreciate public concern about the amounts that they pay themselves. Nevertheless, whatever view we may express, shareholders—whether institutional or individual—have the power to intervene, and they should use that power if necessary.

Let us put the matter in perspective. In most cases such as those raised by the hon. Member for Islington, South and Finsbury, the total salary package of directors is about one fifth of 1 per cent. of turnover, and sometimes much 208 less. Is this really all that the Labour party can talk about, in the context of the vast sums being spent on the water industry?

§ Mr. Derek Enright (Hemsworth)

Will the Minister give way?

§ Mr. Atkins

I certainly will not give way to the hon. Gentleman, who has already delayed our proceedings. I suspect that in this I may have the support of the hon. Member for Islington, South and Finsbury, but perhaps not.

The motion refers to the need for high standards of drinking water and sewage treatment. Of course we agree with that. Some 98.7 per cent. of our drinking water is of a very high standard. It is arguably the best in Europe, and possibly in the world.

The other day, the hon. Member for Bristol, South (Ms Primarolo) was reported in one of the more lurid tabloids as having referred to tap water that was "substandard or even dangerous", in spite of the fact that 98.7 per cent. of our water is of a very high standard. Her comments are scaremongering of the worst kind. If there are any problems of water pollution, they are referred to the drinking water inspectorate and prosecutions are brought if necessary. There is a legally binding requirement on operators to make improvements in such cases. The incidents to which the hon. Member for Bristol, South made great play did not merit such treatment.

As for the drinking water directive—

§ Mr. Salmond

rose—

§ Mr. Atkins

No, I shall not give way.

As for the drinking water directive, the United Kingdom has made clear to the Commission the changes that we believe should be made. We believe that a revised directive should be based on sound scientific and medical advice such as that in the World Health Organisation's recent guidelines and that standards should strike a proper balance between benefits to the consumer and the likely costs of achieving them. We also believe that the directive should accord fully with the principle of subsidiarity but, until revisions are agreed, the United Kingdom will comply fully with the provisions of the existing directive.

§ Dame Elaine Kellett-Bowman (Lancaster)

Under the revised guidelines, will properties such as colour, which do not matter—if one lives on peaty soil, there will be a slight coloration in the water but it makes no difference to people's health—count in any test?

§ Mr. Atkins

There is clearly some concern among consumers about the colour of water and, generally speaking, water companies prefer water to be clear and bright. However, I have some sympathy with my hon. Friend because peaty water in whisky adds a little flavour which might not otherwise be there.

The motion deals next with sewage treatment, of which the hon. Member for Islington, South and Finsbury made great play. Over the years, Governments of all political persuasions believed that coastal tides were sufficient to disperse sewage from outfalls without it being necessary to treat it. The advice now from health and scientific organisations is that that is no longer acceptable. We understand that—

§ Mr. Enright

Some of us knew that a long time ago.

§ Mr. Atkins

The hon. Gentleman may say that, but Governments of any party believed otherwise for many decades. Labour was told that the original view was unacceptable when it was in office. I remind the hon. Gentleman that the bathing water directive was promulgated in 1976, but what did the Labour Government do about it? Absolutely nothing.

§ Mr. Nicholls

They washed their hands of it.

§ Mr. Atkins

Indeed, they washed their hands of it, as my hon. Friend says.

The Opposition persists in their campaigns to knock the state of British beaches and do untold damage to our tourist industry in the process. They are only too ready to trumpet failures to meet the necessary standards—often marginal failures—but when improvements are made, we hear nothing from them.

Last year, about 80 per cent. of our bathing waters exceeded the mandatory coliform standards set down in the bathing water directive. In 1987, only 56 per cent. did so. The water industry and the Government are firmly committed to completing our programme as quickly as possible, but the improvement schemes have to be paid for.

The Government and the water companies have faced the difficulties and we are acting on them. As I said, vast sums of money are being spent. In the north-west—in Liverpool and Fleetwood—about £500,000-plus is being spent to ensure that pollution on the Merseyside and Fylde coasts is a thing of the past by the end of next year.

We have also taken a great deal of trouble over river quality. About 90 per cent. of rivers in England and Wales and 95 per cent. in the United Kingdom as a whole are already classified as being of good or fair quality compared with an average of 75 per cent. for rivers of comparable quality in the European Community. I might add that our monitoring and record keeping is among the best and most publicly available in Europe.

We are continuing to make significant progress in improving inland and coastal water quality. The National Rivers Authority—a much respected organisation—has recently reported a net improvement of almost 11 per cent. in river quality in England and Wales between 1990 and 1992.

In addition to the improvements that will result from obligations under EC and domestic legislation, we announced only recently—on 6 July—that between 1995 and 2000, £522.3 million of spending is to aimed specifically at achieving further improvements in river quality. Those improvements will be the result of tighter discharge consents for sewerage works and will be incorporated in the new statutory water quality objectives as they are introduced. The most cost-effective use of expenditure will be determined by the NRA in consultation with water and sewerage companies. That will allow a number of high-priority schemes to go ahead, which would not otherwise have been the case.

The Labour party must make up its mind—does it want bills kept down at the expense of clean beaches or rivers, or the reverse? It cannot have it both ways without even greater expense to the consumer and the taxpayer. A balance has to be struck, and we, the NRA, Ofwat and the water companies are doing just that.

We meet, or we will meet by the end of next year, the EC directives. Other countries—notably France, Germany, 210 Spain and Portugal—recognise, for example, that the high cost of implementing the urban waste water directive must be spread over more years than is proposed at the moment.

I will deal with the south-west for a moment, because I know that it is of interest to many of my colleagues who raise their concerns with me whenever they have the opportunity to do so. The Government are striving to ensure that a proper balance is struck between the desire for environmental improvements and the costs associated with them. South West Water alone—

§ Mr. David Jamieson (Plymouth, Devonport)

The Minister is talking to himself.

§ Mr. Atkins

That is something that I do quite often.

In the 1990s, South West alone is investing about £900 million on improvements to the arrangements at seaside towns for the collection of sewage and the provision of sewage treatment. The programme, known as "Clean Sweep", consists of 33 individual schemes and will result in cleaner bathing and other coastal waters throughout the south-west.

In view of price pressures, it is reasonable that any waste water improvement schemes should not be undertaken any earlier than is cost-effective, provided that they are completed by the legal deadlines. In determining future price limits, the Director-General of Water Services will be considering the most cost-effective way for South West Water to meet its legal obligations, including those set out in the urban waste water treatment directive.

§ Mr. Robert Hicks (Cornwall, South-East)

Before my hon. Friend leaves the subject of the link between investment and the cost to the consumer, and although I welcome the steps being taken to restrict the rate of price increases in water and sewerage charges, will he tell us what action is currently being taken to deal with the costs that 3 per cent. of the population of the United Kingdom —the people of Devon and Cornwall—are obliged to pay for about one third of the country's investment as a whole? When will the Government acknowledge that action is required to deal with the current situation even though we welcome measures to deal with a future situation?

§ Mr. Atkins

I am grateful to my hon. Friend, who understandably feels very strongly about this and has spoken to me about it many times, as he has to the Secretary of State and, indeed, the Prime Minister. Clearly, the problems in the south-west are endemic in the sense that the south-west has a substantial number of beaches and a smaller number of people who can afford to meet the cost of improvements required under EC directives while we endeavour to keep costs at an acceptable level.

If my hon. Friend is fair—I know him to be so—he will accept that we have spent a great deal of time and effort on, for example, river improvements. Where the NRA advised that it was unnecessary to spend excessive amounts of money to alleviate the problems of my hon. Friend's constituents, we took that advice. I assure him that I, the Secretary of State and the Prime Minister will continue to look for every legitimate way in which we can assist his constituents who are paying bills which, for all sorts of reasons, they are called upon to pay.

§ Mr. Nicholls

Will my hon. Friend be saying something in his speech or will the Under-Secretary of State, my hon. Friend the Member for Banbury (Mr. Baldry), say something in the winding-up speech about the considerable 211 efforts that the Government have made in putting our representations to the Office of Water Services to reduce water charges after they had virtually tripled? Has my hon. Friend detected the same degree of enthusiasm in the South West water authority to co-operate and to ensure that water charges are kept to an absolute minimum as he has detected among his colleagues on the Back Benches?

§ Mr. Atkins

As usual, my hon. Friend makes a fair point. My hon. Friend the Under-Secretary of State has taken note of that and certainly intends to address it in his winding-up speech. There are concerns in the south-west and we understand that fact, as does the regulator, who appreciates that the matter needs addressing. It is his responsibility and task to do so. My hon. Friend knows that, at the end of next week the regulator will be announcing the new price figures. My hon. Friend will therefore have to wait until then.

The Government and the director-general are determined to ensure that the rapid price increases which we have seen in recent years should not be repeated over the next five years. Those large increases were unavoidable, as I said earlier, but they must be a thing of past. The director-general—[Interruption.] Opposition Members keep suggesting that somehow I am not telling the truth. The fact remains that the investment that has had to be made is a direct result of the Labour party's inaction, inefficiency and incompetence. We know that. That is what people are having to bear in the south-west as much as anywhere else.

§ Mr. William O'Brien

May I draw the Minister's attention to the fact that, only a few months ago, he was in charge of water services in Northern Ireland? At that time, there was no problem of capital investment, no massive salaries were being paid to chairmen because the Minister was in charge of water services. There was no regulator, no massive increase of charges and the industry, as the Minister knows, was in public control. How does he justify the fact that, when he was in charge in Northern Ireland, there was none of what we are hearing today? I have listened carefully to the Minister. Will he explain why Northern Ireland enjoys those benefits without the regulator, without massive increases in chairmen's salaries, and without the dividends, while the rest of the United Kingdom is having problems?

§ Mr. Deputy Speaker (Mr. Michael Morris)

Order. I think that the Minister has got the question. The only problem is that it does not seem relevant to the motion, which is about England and Wales. I shall leave it to the Minister to judge.

§ Mr. Atkins

I shall not be drawn into a debate about Northern Ireland—[HON. MEMBERS: "Why not?] simply because this is not the place to do so. I shall not be drawn except to say that, before I left that fascinating and enjoyable part of the United Kingdom, one of the problems on my ministerial desk was that we were going to have to spend about £500,000,000 to improve water quality in Northern Ireland. That money would have to be found from the taxpayers of Northern Ireland. One of the matters that we had to consider was how that would be done. One of the options would have been privatisation, as the hon. Gentleman knows full well.

I shall conclude my remarks in relation to the director-general who, as I said to my hon. Friend the 212 Member for Teignbridge (Mr. Nicholls), is nearing the completion of his first periodic review of water price limits. Hon. Members will want to know that the outcome will be announced on 28 July, when the director-general will tell us the new annual price limits for each company for the 10-year period beginning on 1 April 1995. He has already said that he hopes that, nationally, it may be possible to limit overall price increases on average to between 0 and 2 per cent. above the rate of inflation. That will supersede the current average ceiling of 4 per cent. above the rate of inflation.

Before I leave the south-west, it would be invidious of me not to mention our friends the Liberal Democrats. God bless them. What would we do without them? The Liberal Democrats say one thing here and another thing there. They say one thing on one doorstep and another on the very next doorstep. I shall refer to the Liberal Democrat candidates who stood at the Euro-elections down in the south-west.

Their manifesto, which they called "Unlocking Britain's Potential", contained a pledge to provide national and European help with the unfair burden of local investment needed to clean up Britain's beaches". What European funding? I would like to know, as I suspect the House would, what European funding they think will be available. How much national support do they expect to be able to find? Will it come from other parts of the country? Is it something on which the Liberal Democrat Treasury spokesman, the right hon. Member for Berwick-upon-Tweed (Mr. Beith), has been consulted? Would he have any views about the cost implications of that? Who will pay? Will he be happy that his constituents in the north of England have to subsidise those in the west country?

Where exactly do the Liberal Democrats stand on those issues? They say: Liberal Democrats are determined to have clean beaches and lower bills. We want to hear from them how that can be done. It is no good saying all sorts of things on the doorstep which they cannot justify here, where such things ought to be justified. That is why the Liberal Democrats are all things to all men, women, children, animals and tabloids and why, when it comes to general elections, the vast majority of the public know that they count for very little.

That is enough of the Liberal Democrats. What, then, of the future? I have said that price rises must be contained. Most of the work has been done to catch up with the investment which needed to happen as a result of the Labour Government's incompetence. The directives to which I referred, must continue to be implemented, but over a reasonable time scale and on the basis of the best contemporary and technical health advice. All methods of charging must be considered. Is metering fair, bearing in mind that electricity and gas consumers are used to metering. Perhaps that is too long-term an answer.

§ Mr. Elliot Morley (Glanford and Scunthorpe)

Is the Minister aware that, on Monday, the local residents association in Crosby in my constituency presented a 11,000-signature petition against compulsory water metering? Does not the Minister think that water metering ought to be an option for consumers rather than a compulsion in all houses? Does he not think that the whole issue of pricing centres around the high price of water since 213 privatisation, rather than that of metering? The option of linking price to council tax bands is a fairer way than compulsory metering.

§ Mr. Atkins

The argument with which we are faced is what are the various options by which charges may be levied for water. That discussion probably crosses the House because some hon. Members believe that metering is the answer, some believe that council tax banding is an answer, some believe that ratable values extended to 2005 are the answer.

§ Mr. Morley

indicated dissent.

§ Mr. Atkins

The hon. Member for Glanford and Scunthorpe (Mr. Morley) clearly does not. All those issues must be examined. Indeed, I have asked the individual authorities, the Water Services Association and others to look at the matter and to give me some advice on what they believe is best. Whatever that advice is, a balance must be struck between the cost to the consumer and the need for environmental improvement. That is just what the Government, Ofwat the National Rivers Authority, water companies and others are doing.

I ought to draw to the attention of the House one point to which I did not notice any reference in the speech of the Opposition spokesman, the hon. Member for Islington, South and Finsbury—the worldwide recognition of what has been achieved in Britain by our water companies and what they have achieved abroad in export orders. For example, North West Water has obtained a contract for £1.5 billion to upgrade, extend and operate the sewerage system throughout Malaysia, a £285 million contract to operate water and waste systems in Mexico City. [Laughter.] Opposition Members are laughing about the fact that British industry has been successful in obtaining major contracts abroad and they do not consider it to be important.

§ Mr. Enright

rose—

§ Mr. Atkins

I am not giving way. I shall continue telling the House and the country what has been achieved by North West Water, for example. It has obtained another two contracts for treatment plants in Sydney and Melbourne, valued at £75 million with an estimated revenue of £400 million.

Thames Water, the company which looks after the hon. Member for Islington, South and Finsbury, has a contract to supply Ismit in Turkey with a water supply scheme worth £450 million. It has a 45 per cent. stake in a consortium developing a £344 million waste water infrastructure in Mexico. Severn Trent, to which the hon. Gentleman referred, has a £240 million contract for Mexico City and a 20-year concession to upgrade and operate sewerage facilities in New York state. So the achievements of British companies abroad, creating income for this country and protecting jobs goes on.

Since I became the Minister at the beginning of the year, a number of politicians from all parts of the world have come here to find out what the Department and the British Government are doing in relation to water and I shall give the House an indication of who. We have had politicians, at local and national level, from Israel, the Ukraine—[Interruption.] The Opposition do not like the facts. The fact is that we have a worldwide reputation on water and 214 that people come here to find out what has been achieved. People have come from Israel, the Ukraine, Oman, Brazil, Australia, Greece and Portugal. They want to know what has been achieved and to learn about our successes. What about Labour?

§ Mr. Chris Smith

Will the Minister give way?

§ Mr. Atkins

I will not give way any more because I am conscious of the time.

What about Labour? Labour cannot make up its mind what to do with this success story. Labour has produced a document called "In Trust for Tomorrow". The hon. Member for Islington, South and Finsbury reckons that 680,000 jobs will come of that. But who will pay? The document suggests an environmental court in which losing plaintiffs will have their costs paid by the taxpayer.

§ Mr. Chris Smith

indicated dissent.—

§ Mr. Atkins

The hon. Gentleman specifies in his document that there will be free charges. The document suggests greater regulation and more controls. Who pays? Has anyone checked with the shadow Treasury team? This is not "in trust for tomorrow"—like so much of the Labour party's policy, it is in hock for tomorrow.

§ Mr. Salmond

On a point of order, Mr. Deputy Speaker. I have looked closely at the motion and the amendment and I see that they both refer specifically to Scotland. The Minister proposes to conclude his speech without making any mention of the Scottish dimension to this issue. Is it in order for him so cavalierly to ignore the Scottish dimension to this issue?

§ Mr. Deputy Speaker

The Chair is not responsible for the Minister's speech. The Minister is still making his speech—

§ Mr. Enright

I bet you are glad of that; yours is much better.

§ Mr. Deputy Speaker

Order. The hon. Member for Hemsworth (Mr. Enright) is making many sedentary comments, most of which are not very helpful—although I accept the last one.

§ Mr. Atkins

I have a question for the Labour party. Will it renationalise water? We have heard from the acting leader of the Labour party, the right hon. Member for Derby, South (Mrs. Beckett), who said on 21 June 1994: 'There is one area … where we might be looking for some new form of public control, and that is water". The leader-elect, the hon. Member for Sedgefield (Mr. Blair), said of the major utilities, such as water, on 6 July: We believe that the great utilities must be treated as public services and should be owned by the public. Then we have the Labour party commission on the environment document which says: We will ensure that the actions of all private water companies are under public control. Yet on the wireless this morning, the hon. Member for Islington, South and Finsbury said that he would not renationalise, but that he was in favour of more regulation. That is simply a cop-out under pressure. What does it mean? Do his comments mean more intervention in company operations? Do they mean more regulation than is the case now? We have the most regulated water industry in Europe. Would he direct resources to one area 215 at the expense of another or would he subsidise consumers' bills? Who will pay? Has the hon. Gentleman cleated his comments with the shadow Treasury team?

The fact is, as the hon. Member for Islington, South and Finsbury knows, as we know and as the House knows, more Labour regulation equals more Labour interference, and that means more cost to the company, the customer and the taxpayer. Prices are now steadying as environmental improvements continue. That is the right balance, and that is why I urge my hon. Friends to support the Government's amendment and to oppose the misleading nonsense from the Opposition.

§ Mr. Richard Burden (Birmingham, Northfield)

I would not be letting out too many secrets if I said that, at the moment, the water industry in general and Severn Trent Water in particular are not the most popular institutions in the midlands. Why should they be? Last week, after careful examination of the company's accounts, we learned, as my hon. Friend the Member for Islington, South and Finsbury (Mr. Smith) said, that John Bellak, the former chair of Severn Trent, got a pay-off last year of £500,000. His salary had already gone up from £51,000 a year just before privatisation to £179,000 a year in the last year in which he was there.

Mr. Bellak has also done rather well in other ways. He, like many directors and chief executives of water companies, had been subject to share option deals. In the year ending March 1993, he exercised 107,572 share options at an option price of £2.62 per share. At the close of trading on 22 February 1994, the market price for Severn Trent shares was £5.83 per share. To work out the benefit of those share options, we would need to know whether the shares bought under the option were then sold and at what price. That is not absolutely clear at the moment because Mr. Bellak has not said anything about it. However, an article in the Observer suggested: company chairman John Bellak made £226,000, pre-tax, on the sale of 100,000 shares from his share option dealings. He did not do too badly, did he?

When there was a public outcry over the £500,000 pay-off to John Bellak, the cry that came back from the water companies, which may be echoed by Ministers, was, "Well, it was in his contract." We must ask, of course, who negotiated that contract in the first place. Although Ministers may now say that it is nothing to do with them and that they rather disapprove of these big pay increases, they are not exactly neutral in terms of how people like John Bellak came to be running the water industry. They appointed those people in the first place.

It is interesting that in 1987, when Mr. Bellak was chair of Severn Trent, the then Conservative Member of Parliament for Cannock and Burntwood said: Is my hon. Friend aware that the chairman, Mr. John Bellak, is both diligent and competent—indeed, one might describe him as a good bloke—and that under his leadership, the Severn-Trent water authority looks forward immensely to being in the vanguard of privatisation?"—[Official Report, 2 December 1987; Vol. 123, c. 921.] One would look forward to privatisation if one was going to make so much out of it. Mr. Bellak is also a prominent Conservative party supporter, and twice stood as a Conservative candidate in general elections.

It does not go like that for all the staff of the water companies. The staff at Severn Trent face reorganisation. 216 Some will do all right out of it, but the protections that they have enjoyed for many years will be swept away by the privatised water company. It seems that there are standards for the people who actually do the work which are different from the standards for those who run the privatised water companies. Yet the response of the water companies when these things are criticised is that somehow they have been misunderstood. I do not think that we misunderstand them. The people who misunderstand them are the Government.

The Conservative party has not always taken its present view of the water industry. Back in the 19th century, it was significant that Conservatives such as Joseph Chamberlain, again from the midlands, were prominent in setting up a proper, municipally run water industry. Arguably the best contribution to public health in that century was the establishment of clean, wholesome supplies of water under municipal control. No doubt, if a Conservative suggested that today, he would be regarded as a dangerous pinko. However, that was the view taken all those years ago.

Now, of course, we are in an era of privatisation. Now we are in an era when the salaries of the top executives shoot through the roof. We are in an era when profits have gone up by 117 per cent. since privatisation and when dividends went up by 63 per cent. on average between 1989–90 and 1992–93. For consumers, it has obviously been a very different story. Prices have gone up on average by 68 per cent. in the Severn Trent area.

The water companies say that they are misunderstood and that they are putting all the money into investment. It is true that there has been an increase in investment in the Severn Trent area. However, I ask Ministers to consider what happened, before privatisation, when a Conservative Government were in power. Prices were ruthlessly pushed up through the roof while investment was driven down by cash limits and controls on borrowing the like of which had not been seen in the water industry. Ministers have some explaining to do on that one.

The fact is that privatisation was sold as a way to boost investment. As my hon. Friend the Member for Islington, South and Finsbury said, the Government said that the water companies would have access to the money market and that they would have access to investment. They said that the companies could extend their share issue. We have not seen much of that since privatisation. Certainly there have been some increases in borrowing in the past two or three years, but in terms of the scale of their operations, water companies have a very low gearing. As for extra share issues, we have hardly seen them at all. About 69 per cent. of that investment is being financed directly by consumers through their water bills.

The Government said that they wanted water companies to operate in the private sector. I do not know of any other private body which knows that it can jack up prices by such an amount and still be sure of a captive market. Of course, that is the case with water because it is a natural monopoly. The consumer has no choice but to use water when it is needed and if they can afford to.

§ Mr. Nigel Evans (Ribble Valley)

Will the hon. Gentleman give way?

§ Mr. Burden

I will not give way, as other hon. Members want to speak.

We have seen the growth of water poverty. Pensioners and people on low incomes now have to choose between essentials, and must decide whether they can afford to have 217 a bath if they have a water meter. They must choose between paying the water bill or cutting back on essentials elsewhere. There is evidence that that is going on. Ministers may close their eyes to that, but evidence has come from local authorities, the National Consumer Council and from anti-poverty organisations. If they looked, they would see that that is the truth.

Nobody in the late 20th century should be put in the position of not being able to afford something as vital to health as a wholesome supply of water. Some water companies have a solution to the problem. Severn Trent has a great wheeze which they call a prepayment water meter. It is a bit like a coin-operated gas or electricity meter, only the water meter does not accept coins. A person buys a card which he or she charges up with a certain amount of time, and that is put into the water meter. That provides the person with a supply of water for a specific length of time.

The problem, of course, comes if the person is not able to charge up the card. What happens then is that the person runs out of water and he or she is effectively cut off. When Ministers say that they are pleased that the disconnection rate has gone down, we must remind them that it has gone down following the period after privatisation in which the rate actually went up. Are they including the question of disconnection by prepayment water meters in their disconnection figures, and if not, why not?

In the Birmingham area, Severn Trent has embarked on a trial with prepayment water meters. The trial has already led to a phenomenal rate of self-disconnection. It is arguable that prepayment meters are unlawful under sections 60 to 63 of the Water Industry Act 1991. Are the Government doing anything about that? Are they investigating the matter? The answer simply is no.

We need a new deal for our water service, and we certainly need new methods of charging. I do not want to see—as apparently Ofwat does—the introduction of compulsory water metering. That would discriminate against families on low incomes, the disabled and families with children. We should be moving towards a system of payment according to the council tax which can be related to the ability to pay. We must end the scandal of water disconnections and also the scandal of prepayment meters and self-disconnection. We need a regulator which stands up for the interests of the consumer. That has not been the case with Ofwat, and it is about time that that was changed. We need changes which benefit the system and which recognise the true cost of water bills, because that has not happened in recent years. But most of all, we need a change in attitude in the water industry.

As privatisation came along, the language of the industry changed. Suddenly, we did not have consumers —we had customers, as if there were somehow a choice about whether one paid or not. We did not have a public service—we had a business. Water is a public service. There is no more vital element than water.

If one does not have access to a wholesome supply of water, it is obvious to everyone—apart, it seems, from the Minister—that there will be health risks. That is why we need to get back—I shall say it—to a democratic system of public control of the water industry. We need a system 218 where water is treated as a public service and consumers are not treated as mere commodities, because that is the situation that we have at the present time.

§ Mr. Peter Atkinson (Hexham)

Opposition Members never cease to amaze me, and tonight they have amazed me more than ever before in the way that they have tried to turn the genuine success story of the British water industry into a failure. Sometimes they simply use blatantly misleading facts, and the hon. Member for Islington, South and Finsbury (Mr. Smith) was guilty of that.

Their other tactic is to do down the work that the men and women of the water industry have done to turn it around and to make it such a success. By unjustifiably attacking the industry, as they have in the debate, they are rubbishing the ordinary men and women who have put so much over the years into building up the business into a great success.

The hon. Gentleman represents a London seat, and he was rude about Thames Water. The hon. Gentleman is a neighbour of his hon. Friend the Member for Sedgefield (Mr. Blair). Does the hon. Gentleman keep his eyes closed when he walks around the city? Has he not seen the big holes in the ground with Mr. Joe Murphy's name on a sign above them and people digging them? Does he not realise that the London ring main is one of the biggest capital schemes in London for many years? Speaking from my own experience of the service I get when I have to use Thames Water's customer services, it is vastly better than it was before privatisation.

One of the remarks which the hon. Gentleman made which absolutely staggered me was that water companies are now collectively spending very much the same as they did pre-privatisation. That is clearly wrong. We know that they will be spending £30 billion before the end of the decade.

A research paper from the Library makes it clear that the hon. Gentleman does not understand that expended capital by the water industry does not include operating expenditure incurred as a result of compliance costs. If one improves bathing water and river water, one must put in some capital. But the vast majority of money goes on the day-to-day costs of running a plant to a much higher standard than it was run before. Clearly if one tipped sewage out in the sea untreated, and then tipped it into the sea treated, one would spend more money on a day-to-day basis than before. That is why those annual running costs must be put on to customers' bills—that is the only way.

If the hon. Gentleman wants to talk about a success story, I suggest that he goes to the north-east of England where the success of Northumbria Water and North East Water has been evident to everyone. My constituency has the distinction of having the largest man-made lake in Europe, the Kielder reservoir. Incidentally, that scheme was invested in before privatisation, and will prove its worth in the future.

An interesting point which my hon. Friend the Minister made related to what would happen if a scheme of unifying water charges—as the Liberal Democrats suggest—was introduced, and a national contribution was made to the problems of the south-west. The ratepayers and water consumers of Northumberland who invested many years 219 ago in capacity would then find their bills going up to pay for an area which did not invest at that time. That would be highly unfair.

The Kielder dam provides guaranteed water supplies to customers and industrial consumers in the north-east of England. One of the area's latest arrivals from abroad, the Fujitsu factory, has moved to the north-east simply because Northumbria Water could guarantee a regular supply. When the factory at Newton Aycliffe in County Durham starts to operate fully, it will use the daily equivalent of water to that used by a town of 100,000 people. The company went to the north-east because Northumbria Water could guarantee a regular supply come droughts. We never have hosepipe bans because we invested in our infrastructure. Northumbria Water is a regular spender of capital—it has spent about £35 million this year on improving drinking water. The water quality in a rural area that often has difficult supply problems is above the national average. The company spent £155 million on new sewers and £275 million on new treatment works.

A rash of new sewage treatment works has opened up in the north-east. The local water companies seem keen to invite local Members of Parliament to open them. I cannot see the connection. We have not seen the hon. Member for Sedgefield for some time. One of the reasons might be that he opened a sewage works in his constituency recently. I had the pleasure of opening a £3 million scheme last Saturday in Haltwhistle in my constituency. My hon. Friend the Member for Langbaurgh (Mr. Bates), who is not present at the moment, also opened a £13 million scheme. Northumbria Water is setting a standard and the pace for good service, good quality and profitable operations.

We have another water company in the north-east—North East Water, which is another success story. Its annual meeting took place today. We learnt an interesting fact about disconnections from that meeting today. We have heard much about disconnections tonight, but disconnections in the Northumbria Water and North West Water areas have decreased since privatisation. Last year North East Water, which covers a large part of Tyneside and Wearside where there are problems with poverty, did not disconnect one household. It has reduced its disconnections to nil this year, for which its customers should be grateful.

Even that company believes, however, that sanctions should be available against the "Can pay, won't pay" customer. Those are the people on whom disconnections are targeted, not those people who cannot pay because of difficulties. Water companies bend over backwards to help those who need help, which is why North East Water ended up with no disconnections. If the companies do not have that sanction it will be a tax on other consumers who pay their bills.

I realise that time is short so finally, in support of all those who work in the British water industry, I say "Well done." As a Northumbria Water consumer, and as someone who enjoys clean beaches and rivers, the 50p a day that I spend is money well spent. The River Tyne in my constituency is now the best salmon river in the country. Several years ago it was dead and nothing lived in it. Investment in clean beaches, clean rivers and a proper service system have shown that privatisation is an enormous success.

§ Mr. Nick Harvey (North Devon)

We are constantly told by the Government of the benefits of privatisation, but it is difficult to see that any benefits have arisen from the privatisation of the water industry. There is no competition in the industry, prices have risen dramatically, service is often poor, company profits have soared and, as other hon. Members have said, top salaries and share options are now at an indecent level.

At the time of privatisation, the Government claimed that water companies needed to be set free to raise capital in the marketplace. We were told that, by privatising the water companies, they would become more efficient. As a consequence, more money would be available to revitalise our water and sewerage system and the newly privatised water industry would be able to provide good arid reasonably priced service, while dealing with the very real environmental concerns. In addition to those promises, we were told that average price increases would be no more than 5 per cent. above the inflation rate each year.

We await with interest the results of the Office of Water Services report that is due to come out shortly. It is the first chance to consider comprehensively the consequences of the Government's policy on water. We will see the way in which the consumer has borne the brunt of the effects of those policies, while private water companies have benefited substantially.

The public are paying for successive Governments' lack of investment in, and neglect of, the water industry. I was intrigued to hear the Minister say that the problems were all down to Labour Governments. The Conservatives have been in power for twice as long as Labour since the war. It was a wonder that he did not put it all down to the 11 months of the Lib-Lab pact. [Interruption.] I thought that the more rational Conservative Members would grab at that.

The truth of the matter is that the policy has been a disaster. The consequences have been disastrous for the consumer, the environment and the tourist industry. Coming from a constituency where surfing and recreation in the sea waters are essential to our economic prospects, I say so with genuine concern.

The National Consumer Council concluded in its recent report: consumers have paid too much towards the cost of investment in the industry and the companies have received the lion's share of the benefits of privatisation. The NCC observed that domestic water bills have increased, on average, by 67 per cent. since privatisation.. Customers are paying £2 billion more than they would have been if charges had kept in line with inflation.

The hon. Member for Islington, South and Finsbury (Mr. Smith) referred to an article in the Financial Times and quoted Mr. Joe Rogaly, who had been writing about the industry. Mr. Rogaly also commented: Tory policies on water have made the poor worse off, in some cases absolutely as well as relatively. Making water high-cost for low income households is indecent. Low-income households now spend more than 3 per cent. of their disposable income on water bills, compared with only 2 per cent. five years ago.

Other hon. Members have referred to the south-west, where local people are being forced to pay average water bills of more than £300—the highest in the country. Water 221 charges have doubled in the past five years and are set to double again. The south-west is an area with many people on low incomes and with the highest proportion of pensioners. Although the average bill is £300, many households are paying more than £600. A pensioner living alone in the South West Water area spends more than 9 per cent. of his or her income on water.

Frankly, local people simply cannot afford to pay those bills. Members of Parliament of all parties who represent the south-west have people writing to them and coming to their surgeries to make that point time and again.

Meanwhile, the water companies' profits have risen by more than 20 per cent. each year in the five years since privatisation and dividend payments to shareholders have increased by about 63 per cent. per year. Furthermore, the bills have often increased way beyond increases in operating costs. One can only conclude that the regulatory system has failed to safeguard the interests of consumers. The Government and the water companies seem to have forgotten their social obligation to provide a service to the British people at an affordable price.

The regulatory system has compounded the problems that consumers face. While Ofwat has limited powers, the Government have repeatedly said that tackling rising bills and water quality is in the hands of the regulator. The Director-General of Water Services made it clear that he considers that his hands are tied and his ability to act is restricted.

The Government need to act on water bills, but all we hear from them are short-term solutions. As the hon. Member for Cornwall, South-East (Mr. Hicks) said in an earlier intervention, it is all very well coming up with a few schemes that will reduce the rate at which water bills increase during the next few years, but water bills in the south-west are already unacceptably high. We want some sign from the Government of how they are going to reduce those bills, not how bills that are already high will be increased, albeit at a slower pace.

The hon. Member for Cornwall, South-East was right. It is ludicrous for 3 per cent. of the population to pay for the clean-up of 30 per cent. of the nation's designated beaches. Before privatisation, the cost of cleaning up would have been spread around the country. At the point of privatisation, the Government recognised the justice of that when they gave South West Water a green dowry. It was not enough, but it was an acceptance of the principle that taxpayers in other parts of the country should contribute towards the cost of the clean-up in the south-west.

The Minister made the ridiculous claim that we were saying different things in different parts of the country and summoned as evidence, not a local leaflet issued by the candidates to whom he was referring, but the party's national manifesto. That was the very same document that had been published and distributed throughout the country so that everyone, including not only my right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith), but all his constituents could decide for themselves. We have made clear how we think the costs should met. Earlier, the hon. Member for Islington, South and Finsbury said how the Labour party would meet them. We need to hear from the Government how they will pay for the clean up.

As the hon. Member for South Hams (Mr. Steen) has already predicted, if the Government continue with their 222 policy of loading costs on to the householder, they will suffer electoral annihilation. They need to grasp that point now or the same trend that we saw in local, county, general and the recent European elections will return to haunt them again and again. The south-west will not tolerate the level of bills that it already faces, let alone any increase.

The Government's response has been to redesignate certain areas of water in the south-west, saying that they did not need the clean up that they were due to get. Some sensitive coastal waters are to be redefined as high-dispersal areas. In effect, that means that, in those areas, semi-treated sewage can be pumped out to sea. A couple of weeks ago, Ministers announced the slowdown of the clean-up of four beaches in the south-west. To my astonishment, some hon. Members greeted that information with delight. I even one heard one say on the radio that he did not know of any of his constituents who would put more than a toe in sea waters.

I tell hon. Members who hold that view that many people