Water Bill

Public Bill Committee, 3 December 2013.

James Gray (Conservative, North Wiltshire)

I welcome you to the first of nine sittings to consider the Water Bill in Committee. Those of you who have not done this before might need to know that we have two evidence sessions today, one this morning and one this afternoon. On Thursday, on the Committee Corridor in a Committee Room to be decided, we will set about the proper business of considering the Bill in detail.

I have a couple of preliminary remarks. Those of you who know me well will not be surprised to hear that I tend to the traditional side of chairing things. Eating and drinking—coffee, for example—are not allowed in the Committee Room. Order of dress and behaviour are the same as we would normally conduct ourselves in the main Chamber. Equally, anyone whose mobile phone goes off at any stage in Committee will be buying the rest of the Committee drinks for the rest of the year.

Now we have a couple of procedural matters. First, I and my fellow Chair will not be calling starred amendments that have not been tabled with adequate notice. The notice period in Public Bill Committee, as you will all know, is three working days, so amendments are to be tabled by the rise of the House on Monday for consideration on Thursday, and by the rise of the House on Thursday for consideration on the following Tuesday.

Before we set about the evidence sessions, we have to get through a number of formal motions, which we will do as swiftly as we can. First, we will consider the programme motion, which was agreed by a Programming Sub-Committee last week but can be debated for up to half an hour. We will then move on to motions to report written evidence and for the Committee to deliberate in private, as well as a number of other formal matters that we will talk through at the time. After that, we will move briefly into private session and I will ask members of the public to leave the room. We will move into our proper oral evidence session thereafter.

James Gray (Conservative, North Wiltshire)

May I welcome you all to this first evidence session on the Water Bill? I particularly thank our four witnesses who have agreed to give evidence to the Committee this morning: Cathryn Ross, chief executive of Ofwat; Alan Sutherland, chief executive of the Water Industry Commission for Scotland; Rob Wesley, head of policy for Water UK; and Mark Powles, chief executive of Business Stream. Thank you all very much for coming today.

We have, broadly speaking, decided on a line of questioning for you. We have until 10.15 am, so we will try to keep questions and answers light and swift and not get bogged down. If we do get bogged down, I am a rude, tough and difficult Chairman and I shall interrupt people. First, I call Dan Rogerson.

Dan Rogerson (Liberal Democrat, North Cornwall)

Good morning. I will start by asking about the balance between what is in the Bill and what might come later in terms of regulation and guidance. Does the panel feel that the right balance has been struck?

James Gray (Conservative, North Wiltshire)

You do not all have to answer the questions, but chip in if you have a particular view.

Thomas Docherty (Labour, Dunfermline and West Fife)

On Mr Powles’s point about exit, is there anyone here who does not agree that there should be an exit mechanism?

Thomas Docherty (Labour, Dunfermline and West Fife)

Scots are always very canny, but I am sure that lessons could be learned from how Scotland went about introducing reforms. Mr Sutherland, as a regulator for Scotland, what lessons can be learned? Has DEFRA learned them in preparing the Bill?

George Hollingbery (Conservative, Meon Valley)

Mr Sutherland, can you explain something to me? As an noviciate in this area, I am not familiar with regulated markets and I find them very complex. In your original reply, I think you said that the City and others would find mechanisms through which retail could be separated out by the companies that did not wish to do it any more. That will make regulation extraordinarily difficult, because the regulation will apply only to the original retailer, rather than the one to whom it is licensed. Is that correct?

John Penrose (Conservative, Weston-Super-Mare)

You mentioned, Mr Powles, that you thought that exit was a good thing and you said that you thought, among other things, that it baked in cost. Is there not also an issue with the speed of competitive change? Presumably, if people are not leaving the market, entrants or would-be entrants such as yourselves will find it harder to get in and it will slow you down. Is that an issue, or am I inventing that?

John Penrose (Conservative, Weston-Super-Mare)

May I take that point on to Mr Wesley? The free marketeer in me says that if people are bad at something, allowing them to get the heck out of the way so that new entrants who are better at it can pick things up surely must be sensible. What is it about your organisation that makes you think that regulators can do that better than customers interacting directly with a supplier and choosing for themselves?

Thomas Docherty (Labour, Dunfermline and West Fife)

There was some debate on Second Reading about costs and benefits. Mr Sutherland and Mrs Ross, what do you estimate the benefit in terms of savings to the taxpayer and businesses could be from retail competition? Mr Sutherland, I think you did specific work on the loss of potential savings if we do not have exit.

James Gray (Conservative, North Wiltshire)

We will get to that question.

James Gray (Conservative, North Wiltshire)

We have a lot to get through, so I ask that questioners and answerers be as swift as they can. Mr Docherty, have you had enough?

Thomas Docherty (Labour, Dunfermline and West Fife)

I am fine.

George Hollingbery (Conservative, Meon Valley)

Mr Wesley, Water UK and others in the industry were pretty concerned about the upstream reforms and the possible effect on pricing. Are you satisfied that the Bill now addresses those concerns?

George Hollingbery (Conservative, Meon Valley)

I am struggling slightly. Is that a general yes, or a general no?

Neil Parish (Conservative, Tiverton and Honiton)

My question is partly to Mr Sutherland and partly to Ms Ross. Scotland has one wholesale company, so dealing with greater retail competition is perhaps easier there than in England and Wales, where we have a number of companies. Is there enough competition in the Bill? Will it be easy enough for people to come in and out of the sector? Will we get real benefits from competition? In every other sector, and especially in energy, we say that more completion is better, yet I fear a little vested interest by the water companies. Perhaps I am being unkind.

Neil Parish (Conservative, Tiverton and Honiton)

Some companies act almost as monopolies. Are you worried that you cannot break that?

Hywel Williams (Plaid Cymru, Arfon)

The situation in Wales is somewhat different in that the Government have decided not to go ahead with the upstream and retail changes contained in the Bill. What effect do you think that that would have on the effectiveness of the markets in England and possibly in Wales as well?

Hywel Williams (Plaid Cymru, Arfon)

Welsh Water of course provides to some customers in England, and Severn Trent provides in Wales. Mr Powles, you referred to customers in Wales, and perhaps Mr Wesley would like to comment on this question. What proportion of the market is thus affected? Is it a high percentage of customers, a few, or only one or two? Much is made of the border, but is it actually an issue?

Sheryll Murray (Conservative, South East Cornwall)

Clause 16 will place a duty on the Government to issue guidance to Ofwat about the content of its rules on the charges scheme. Do you support the introduction of that mandatory guidance and when should it be published to be most effective?

Sheryll Murray (Conservative, South East Cornwall)

Are householders sufficiently protected from subsidising competition in the non-household sector through the issuance of ministerial guidance and Ofwat’s price review?

James Gray (Conservative, North Wiltshire)

Do the Opposition want to ask question 8? They do not. We will move on to question 9.

Matthew Offord (Conservative, Hendon)

Ms Ross, I particularly want to ask you about clause 22, which places on Ofwat a duty to ensure resilience of water and sewerage provision. Do you think that any other concerns should be taken into account in achieving that objective?

Matthew Offord (Conservative, Hendon)

Mr Wesley, perhaps you would also say a few words about sustainable development, and whether resilience should take priority over that.

Matthew Offord (Conservative, Hendon)

Mr Powles, do you have anything to add from your perspective?

Anne Marie Morris (Conservative, Newton Abbot)

Consumers are always concerned about affordability. Mr Wesley, perhaps I can ask you first about bad debts. There was in previous legislation the ability to require disclosure of information by landlords to water companies, which was never enforced; what happened instead was a voluntary code of practice and an ongoing pilot. My water company, South West Water, is concerned that that is not the way forward and would like the legislation to be properly enforced. I am interested in your view, representing the water companies across the piece.

Anne Marie Morris (Conservative, Newton Abbot)

Why? What is it about it being voluntary that makes it unworkable?

Anne Marie Morris (Conservative, Newton Abbot)

You have taken us on to part two of the affordability issue, which is the social tariff. It is a real challenge for all water companies to address that. Although there has been the opportunity for water companies to introduce their own social tariffs in addition to the Government’s own WaterSure programme, only three have taken it up—I am pleased to say that my local company is one. Why have the companies not taken it up? Was it the wrong approach? What can we do about the gap that is left by WaterSure, which, frankly, does not cover all of those with affordability problems? What can we do to make it work better?

Anne Marie Morris (Conservative, Newton Abbot)

I can see Mr Wesley champing at the bit. What are your thoughts?

Anne Marie Morris (Conservative, Newton Abbot)

You are both saying that it will happen, and I suspect that if I asked you whether we need to go that step further and make it mandatory for the water companies to provide subsidy, you would say, “No, it is going to happen. What we have in place is sufficient.” Is that your position?

Thomas Docherty (Labour, Dunfermline and West Fife)

We all recognise that water companies are the heroes of our communities, Mr Wesley, and are being held back by the regulator and DEFRA from making progress, but is not the reality that we are three and a half years into a process but only three water companies have actually done it? We are looking at 2015 at best before we make real progress. Is not the reality that almost as many people are going to Citizens Advice because they are struggling with their water bills as are going because of their energy bills? Finally, is it not that the debate is not around whether there should be a centrally imposed, standardised social tariff, but around whether Government now need to step in and say that you must, by a certain date, have come up with your own scheme, which Government will sign off on, because too many customers are struggling to pay their bills?

Dan Rogerson (Liberal Democrat, North Cornwall)

I want to put a question to Cathryn Ross. One of the crucial roles that Ofwat will play is in the discussion about bills generally in future—the discussion not just about the bills of those struggling now, for whatever reason, but about winning the case among customers for social tariffs. If there is going to be some element of dealing collectively with the problem—that is, through bills generally—then the lower the bills are, the more likely we are to win customer approval for such schemes. Would you agree?

Thomas Docherty (Labour, Dunfermline and West Fife)

Where we probably agree, Mr Wesley, is that the take-up of WaterSure is simply too low. Are there any specific measures that water companies could take, either voluntarily or by mandate, to promote awareness further? For example, they could include with bills information about eligibility and how to go about applying for WaterSure.

Thomas Docherty (Labour, Dunfermline and West Fife)

Forgive me if I was not clear in my question, but I was not saying that you should target customers. I appreciate that you believe that water companies are perfect, but it might be a not unreasonable step to include in the bill information about what WaterSure is and how to apply for it if someone thinks they are eligible.

Neil Parish (Conservative, Tiverton and Honiton)

I am keen that people struggling with their bills should be helped through WaterSure. However, there is also an element of perhaps £15 going on to bills because some people are not paying. Some of them will not pay, rather than not being able to pay. Is there enough in the Bill to deal with people who wilfully will not pay?

James Gray (Conservative, North Wiltshire)

I call John Cryer. We must discuss things that are in the Bill, rather than things that are not.

John Cryer (Labour, Leyton and Wanstead)

Mr Wesley, you said earlier that the companies are struggling to make bills more affordable. The fact that bills have risen by 60% in the last decade would suggest that that is not quite the case.

John Cryer (Labour, Leyton and Wanstead)

Which has fallen since 2007.

John Cryer (Labour, Leyton and Wanstead)

So you have not seen the Metro this morning, which says that Thames Water is planning to increase its bills by 11%.

John Cryer (Labour, Leyton and Wanstead)

So why do you think only three companies have introduced social tariffs? Are you seriously telling us that they are actually held back by the Government and the regulatory framework? Is that the only reason why only three companies have introduced social tariffs?

Chris Evans (Labour, Islwyn)

What is the average profit for a water company?

James Gray (Conservative, North Wiltshire)

I think that is slightly beyond the scope of the Bill.

Chris Evans (Labour, Islwyn)

I am coming to my point. Do you have that figure?

Chris Evans (Labour, Islwyn)

That seems a very long answer to a very simple question. Some £37 billion has been paid in dividends since privatisation. In the same time, only three companies have signed up to social tariffs. What is the average debt of a water company customer, considering that water is essential for life? Why are water companies so slow in introducing affordability schemes for hard-pressed customers when they have such massive profits?

James Gray (Conservative, North Wiltshire)

We are rapidly running out of time. I think you have probably made your point slightly wide of the Bill. We have only two minutes left, and we ought to give the Minister the final question.

Dan Rogerson (Liberal Democrat, North Cornwall)

I want to pick up Mr Wesley’s point on access to DWP data. I understand why the companies feel that that would be handy for them, but does he not feel that customers might prefer more information with their bill, rather than having their private data passed over to a private company?

James Gray (Conservative, North Wiltshire)

I thank you all very much for your evidence. This has been a lively and interesting session that I think will advise the Committee’s deliberations on the Bill. I hope you have not found the session too stressful.

Examination of Witnesses

James Gray (Conservative, North Wiltshire)

I welcome all three of you, and thank you kindly for coming before us to give evidence in our consideration of the Water Bill. We have Dame Yve Buckland, the chair of the Consumer Council for Water, Tony Smith, the chief executive of the Consumer Council for Water, and Dr Peter Kenway, the director of the New Policy Institute.

Thomas Docherty (Labour, Dunfermline and West Fife)

We talked a lot in the last session, which I think you all heard, about retail for non-domestic customers. The Bill does not include measures to extend retail to domestic customers in England or Wales. Do you support that approach?

Neil Parish (Conservative, Tiverton and Honiton)

I have a question along the same lines, but I am slightly playing devil’s advocate. Some of the water companies say that if we create too much competition and you take out the bigger players and their bills are reduced, domestic customers may well have to pay more. What is your view on that?

Neil Parish (Conservative, Tiverton and Honiton)

You do not seem very keen on competition at all, if I may be so bold.

Dan Rogerson (Liberal Democrat, North Cornwall)

We were hearing a lot from the previous panel about retail exit, when we open up markets for business customers. As well as the benefits of competition in terms of price, there are hopefully benefits to competition in terms of customer service and focus on delivering for customers. If we allow companies to exit from the business—more competitive—side, what effect do you think that might have on residential customers who, for very good reasons, as we have heard, will not be able to switch?

Dan Rogerson (Liberal Democrat, North Cornwall)

Dr Kenway, do you have a view on allowing retail exit and what that would do?

Dan Rogerson (Liberal Democrat, North Cornwall)

You have nothing to add on exit.

James Gray (Conservative, North Wiltshire)

Minister, I think you want to ask about bad debt as well, do you not?

Dan Rogerson (Liberal Democrat, North Cornwall)

We heard a bit about bad debt. Approaches were made directly about affordability, but the Bill does not specifically look at bad debt. That is one of the issues that the industry and those involved in the sector are looking at. Do you think that information sharing with landlords in particular, which is one of the issues that we were talking about earlier, has been effective in terms of a voluntary approach?

Pat Glass (Labour, North West Durham)

We have heard that only three companies have a social tariff up and running. Can you tell us who they are?

Pat Glass (Labour, North West Durham)

The chap from Water UK talked earlier about the reasons why there are only three schemes and for the tardiness in moving towards a scheme. He blamed Government regulations and customers. You said that it would cost customers £1 or £2 more, but that they are reluctant to pay that. Do you think they are aware that they are paying £11 on their bill for bad debt? If they were, would there be more enthusiasm for social tariffs?

Thomas Docherty (Labour, Dunfermline and West Fife)

On the issue of WaterSure, you heard the earlier exchanges of the water industry lobbyists. Do you think it is a reasonable suggestion that to encourage greater take-up, the water companies should be required to include information with the household bills that they send out about what the criteria are and how to go about applying?

Sheryll Murray (Conservative, South East Cornwall)

Are any water companies actually doing something with WaterSure to promote it, or is it general across the board that none of them are including information in their bills?

Emma Lewell-Buck (Labour, South Shields)

The Bill introduces a requirement that the water and sewerage companies need to make their charging schemes in accordance with any rules that Ofwat issues, but the rules that Ofwat issues have to be made in line with Government guidance. I am curious—does the panel feel that this approach does enough to protect households from subsidising the competition in the non-domestic sector?

Thomas Docherty (Labour, Dunfermline and West Fife)

There was an exchange earlier about de-averaging. As you understand it, is there a risk with the proposed upstream reforms that this could lead to de-averaging of charges for some customers?

Thomas Docherty (Labour, Dunfermline and West Fife)

Would it be fair to say that geography is the biggest driver determining which it is?

Thomas Docherty (Labour, Dunfermline and West Fife)

So, taking the south-west region as an example, is it most likely to be those customers at the furthest points from the supply who are at greatest risk?

Thomas Docherty (Labour, Dunfermline and West Fife)

To be fair to the Minister, he does not intend to allow de-averaging—I think his voters in Cornwall would be relieved to hear that—but, in your opinion, is there enough in the Bill as it stands to ensure that we do not accidentally end up with de-averaging, or do you think the Bill could do with some strengthening?

Thomas Docherty (Labour, Dunfermline and West Fife)

Clauses 26 and 34 strengthen the enforcement powers of both the Minister and Ofwat. Clause 23 gives a general duty to the regulator to ensure that there is no undue discrimination by the companies. Going back to Mr Powles’s point, in your opinion are these measures sufficient to ensure that new entrants can come into the market?

Thomas Docherty (Labour, Dunfermline and West Fife)

Dr Kenway, you are looking thoughtful.

Matthew Offord (Conservative, Hendon)

I am directing this question particularly to Dame Yve and Mr Smith, but it would be interesting to hear Dr Kenway’s view on this issue as well. I am sure that you realise that universal metering can occur only in those areas that are severely water stressed, as designated by the Secretary of State. Do you agree with the Government? What is your view of the Government’s decision that consumers are most appropriately placed to discuss with water companies their metering needs?

Matthew Offord (Conservative, Hendon)

You describe universal water metering as gung-ho, but that is a little like not having an electricity meter in your home and just paying the rateable value for your electricity supply. I am looking towards the Minister, who represents a seat in Cornwall. People there have some of the highest water bills in the country. They have some of the highest rainfall as well. People there could benefit from lower bills as a result of being on meters and having universal meters. Can you explain why you made the assertion about consumers not being so keen on the installation of water meters?

Sheryll Murray (Conservative, South East Cornwall)

Could I now turn to flood insurance? The Government intend to legislate through the Bill to ensure that domestic flood insurance remains widely affordable and available to people who live in a flood-risk area. Do you think that the provision of affordable flood insurance will have unintended consequences?

Mark Spencer (Conservative, Sherwood)

May I ask Tony, in particular, about the obligation to connect? We have existing problems with that in a village. If an application for a new housing development comes about upstream, the obligation to connect does not always make that connection between the existing problems and funding to solve the new problems that are going to arise with the extra flow.

Mark Spencer (Conservative, Sherwood)

Would it be of benefit if the Bill made the developer pay for the obligations downstream to solve the problems within the network?

Andrew Percy (Conservative, Brigg and Goole)

I just wanted to get your comments about the exceptions or exemptions under the new Flood Re scheme—so for buildings built after 2009, and perhaps band H properties. Do you have any views on those?

Andrew Percy (Conservative, Brigg and Goole)

But presumably consumers will be coming to you with strong views on that.

Andrew Percy (Conservative, Brigg and Goole)

That is regularly the case in my constituency. The area is drained marshland, so we regularly have floods. Unfortunately, assets fail reasonably regularly, so we have floods and consequently people cannot get flood insurance. There is a link, is there not?

Andrew Percy (Conservative, Brigg and Goole)

So you have no views on any of the exemptions at all.

Sheryll Murray (Conservative, South East Cornwall)

Could I put a scenario to you that you may find it helpful to answer? When we have heavy rainfall, a lot of the surface water flooding will flood the sewers, causing big problems where they both feed in. Do you have any thoughts about that with regard to my original question? You said you were more concerned with sewage flooding that comes up into people’s homes, but surely heavy rainfall could cause that to happen. Do you have any feedback on that at all?

Anne Marie Morris (Conservative, Newton Abbot)

I want to ask about the proposed exemptions that we believe will be introduced in secondary legislation. One is that band H properties will not be included, given the argument that people who own such properties should be able to afford their insurance. Another exemption is post-2009 properties, but would that be a sensible and fair cut-off point? I know it is to some extent historical, so I would be interested in your views about that. The other exemption—or exclusion, if you like—is properties that are “genuinely uninsurable”. Can anyone define what an uninsurable property is, and are we going to find people in difficulty who really should not be left in such circumstances?

Hywel Williams (Plaid Cymru, Arfon)

Things might be slightly different in Wales, where we had rebanding—it was abandoned as far as England was concerned—so the bands actually represent something more real in economic terms than they do in England.

Neil Parish (Conservative, Tiverton and Honiton)

On this particular issue, you could argue that if a band H property is listed and the family or whoever owns it is not actually that wealthy—they will have a lot of costs in keeping up the house—why are they singled out for exception?

Dan Rogerson (Liberal Democrat, North Cornwall)

I put a question to the earlier panel about DWP data being shared. Have customers fed back to you what they would feel about their data—Government data; sensitive data—being handed over to water companies?

Hywel Williams (Plaid Cymru, Arfon)

On a slightly broader issue, the theme of the Bill seems to be about competition and this frankly commercial model. As Dr Kenway said earlier, the economics do not actually stack up so neatly. May I ask for your general response to the situation in Wales, where we have a not-for-distributable-profit model for Welsh Water, which as far as I can see has led to low gearing, greater investment and lower-than-inflation price rises for the past three years?

Roger Williams (Liberal Democrat, Brecon and Radnorshire)

Until recently, Welsh Water paid a flat-rate dividend to all its consumers, regardless of the size of the bill. Do you see that as beneficial to customers?

Neil Parish (Conservative, Tiverton and Honiton)

Going back to the cost of WaterSure and how we pay for it within the industry, a lot of people out there are wilfully not paying their bills. If we could get that money out of them, we could use it to pay for a lot of the social tariff. I know that reducing water to a trickle is not the flavour of the month, but is there an argument that you could restrict water pressure to those households? If they are wilfully not paying bills, why should they have water supplied to them with no restrictions whatever?

Neil Parish (Conservative, Tiverton and Honiton)

Some payers and some areas have a history of not paying, and the companies know who they are.

Thomas Docherty (Labour, Dunfermline and West Fife)

I will not go into great detail about why Scottish water is even better than Welsh water. From listening to the debate, it strikes me that we have had lots of information about how customers perceive water as an economic resource. Members who served on the Select Committee on Environment, Food and Rural Affairs will have heard Ofwat say that there is not enough information or awareness about water as an environmental resource. From your research, is that something you have picked up? Do people not see water as a scarce resource?

Thomas Docherty (Labour, Dunfermline and West Fife)

I am really struck that my five-year-old knows that when he puts the kettle on—or, more accurately, when his dad puts the kettle on—the kettle should not be filled up because it would use too much energy. Does your research show that young people are as aware of the environmental side of water as they are about energy?

Thomas Docherty (Labour, Dunfermline and West Fife)

Dr Kenway, you were looking thoughtful there. Do you want to—

Thomas Docherty (Labour, Dunfermline and West Fife)

I have just one final question. Based on the last couple of minutes of that quite interesting exchange, do you think that enough is being done to educate not just young people, but the public—customers—in general, about the environmental scarcity of water, rather than the cost scarcity? If you think that there is more to be done, is there anything in particular that you would recommend that could be included in the Bill, or that Ofwat or the water companies could do as a programme?

James Gray (Conservative, North Wiltshire)

We never suffer. Unless colleagues have other questions to ask our witnesses, I will say thank you very much indeed for your frank, useful, interesting evidence. It has informed our consideration of the Bill quite considerably. We are most grateful to you for it. That brings us to the end of our morning’s business.

Linda Riordan (Labour, Halifax)

Good afternoon. We will now hear oral evidence from the Association of British Insurers, the National Flood Forum, the British Insurance Brokers’ Association and the Council of Mortgage Lenders. Before calling the first Member to ask a question, I remind all Members that questions should be limited to matters within the scope of the Bill, and that we must stick strictly to the timings in the programme motion the Committee agreed to. I hope that I do not have to interrupt mid-sentence, but will do so if need be. Please would the new witnesses introduce themselves to the Committee for the record?

Sheryll Murray (Conservative, South East Cornwall)

New clause 1(1)(a) establishes that the Flood Re scheme will apply to household premises only. The Government have confirmed that there will be no legislative intervention for the provision of insurance to small and medium-sized enterprises. Is this approach justified? I know that there are slight differences between insurance policies for commercial premises and those for private premises, but is this justified?

Sheryll Murray (Conservative, South East Cornwall)

I understand that they are included under the statement of principles. Is there a case for small companies to be included under some flood insurance scheme?

Sheryll Murray (Conservative, South East Cornwall)

As a supplementary question, if somebody is living above business premises, and their private residence is above a business, is there a case for including them in an insurance scheme?

Anne Marie Morris (Conservative, Newton Abbot)

I hear what you say with regard to business premises being very different from domestic premises, but the Federation of Small Businesses is certainly concerned that very small businesses that have affordability problems are not covered in any way. While they clearly do not pay council tax, they do pay business rates. Is there no system that you could sensibly look at, based upon rateable value, which will enable you to introduce a similar system? You also say that you have absolutely no evidence of any problem of insurance for very small businesses. That seems a little unlikely.

Anne Marie Morris (Conservative, Newton Abbot)

Would you be willing to conduct further investigations in this area, if you were asked?

Anne Marie Morris (Conservative, Newton Abbot)

If I may, I shall move on to the proposed exemptions, which will clearly be in delegated legislation. At the moment, the proposal is really in three areas. One is band H and beyond, and I believe the logic for that is that they should be able to afford and obtain a property insurance. You then have the group that is post-2009 construction, which is related to historic evidence. Then you have the category of genuinely uninsurable, and that is a very interesting phrase which seems to require a great deal of thought as to definition and interpretation.

Will you clarify for me why those three? Do you believe now that all three are right and justified, and should there be others which have perhaps been put forward which the Government have not taken forward as other exemptions?

Anne Marie Morris (Conservative, Newton Abbot)

Would you clarify why 2009 was thought to be the right cut-off date? Secondly, some towns and cities are on floodplains, so when you talk about ensuring that properties are not built where there is a problem, some towns, villages and even cities would not have any development and I do not think that is realistic.

Anne Marie Morris (Conservative, Newton Abbot)

I would be interested in Paul Smee’s comments on that. Will that make it difficult for people to get mortgages?

Anne Marie Morris (Conservative, Newton Abbot)

Mr Kerr, do you foresee individuals with houses built after that time having trouble getting any insurance at all? Will the problem be simply about cost, or might it be in obtaining insurance?

Anne Marie Morris (Conservative, Newton Abbot)

I hear two conflicting messages from what you just said. I understand that some properties will not be able to get insurance, yet when we talked about the genuinely uninsurable, you said that at this point they would be covered and then you would look at the information year on year.

Anne Marie Morris (Conservative, Newton Abbot)

Mr Cobbing, does it not give rise to a problem if some properties built after 2009 cannot get insurance?

Anne Marie Morris (Conservative, Newton Abbot)

This sounds to me both urgent and important and not something we can just leave, because in my experience of flooding and water locally in the south-west, you would land up with a big fight about who is actually responsible: you have the home owner, the Environment Agency and the rest.

Anne Marie Morris (Conservative, Newton Abbot)

Thank you, that is extremely helpful.

Anne Marie Morris (Conservative, Newton Abbot)

How many properties are included in that 5% that you cannot find insurance for?

Thomas Docherty (Labour, Dunfermline and West Fife)

Obviously, we are all trying to grapple with all the new clauses that have gone down, but bringing in the point from Anne Marie Morris, I will take Mr Kerr right back to this issue about those who are uninsurable. As I understand it, you are saying that it is a theoretical exercise at this point. As I read it, new clause 13 provides a review and an appeal. My assumption is that this relates to those people who may emerge in the future. Is that your understanding of these clauses?

Thomas Docherty (Labour, Dunfermline and West Fife)

I therefore take it that there is no mechanism at the moment for someone to appeal against being classed in the future as uninsurable?

Thomas Docherty (Labour, Dunfermline and West Fife)

I have to say that I sort of share the concerns of Mrs Morris. You appear to be saying on one hand, Mr Kerr, that there is no such thing as an uninsurable property, and then you promptly set out the series of steps that lead to someone being uninsured. So, which is it?

Thomas Docherty (Labour, Dunfermline and West Fife)

Okay. As I understand it, there are no clauses that will allow an individual to appeal against being classed as uninsured, but the Minister may provide clarity when he speaks later. First, is that the panel’s understanding as well?

Thomas Docherty (Labour, Dunfermline and West Fife)

I think that Labour Members are surprised by that. So what would you propose if Parliament was minded to introduce some sort of appeal mechanism? How would the panel suggest that is done? Should it be the Financial Conduct Authority? Should it be Ofwat? Who does the panel think is an appropriate appeal body?

Thomas Docherty (Labour, Dunfermline and West Fife)

As I understand it, some time post-2015, a person initially—if we are all on the same side and on the same argument—complains to Flood Re if, for whatever reason, Flood Re has decided that it no longer wants to insure them, meaning they are uninsurable. If, funnily enough, the person does not agree, what is their recourse, so that Flood Re does not simply get to chuck people overboard, if you will pardon the pun?

Thomas Docherty (Labour, Dunfermline and West Fife)

At the risk of hogging the time available, I think the point is that Flood Re has taken somebody out of Flood Re and made them uninsurable in the scenario that you have talked about. I think all Members of Parliament have had casework with various bodies where the public body, if I can call Flood Re that, takes a decision on the corporate level that does not reflect the particular circumstances. I genuinely have a concern that we are providing no mechanism where it is possible that Flood Re has made a mistake.

Sheryll Murray (Conservative, South East Cornwall)

Could you just clarify this, perhaps, in language that we all understand? I have a case where somebody was flooded. They were told that they could go 10 years flood free, and they would then be able to get insurance. Basically, they were flooded again nine and a half years down the road. That does not mean that they will not be able to access Flood Re, because their historic flooding record means that they will be treated the same as everybody else at the beginning and they can enter the scheme. Am I correct?

Sheryll Murray (Conservative, South East Cornwall)

If that person was flooded two years later and they did not do any remedial work to prevent future flooding, and then in 12 months’ time they were flooded again, you would say that, eventually, if it was a trend, they would actually fall into the category of genuinely uninsurable.

Sheryll Murray (Conservative, South East Cornwall)

If I can continue: basically, if somebody is constantly flooded and they do not carry out the repairs to their property or provide any remedial work, there is no need for an appeals procedure, because you have genuine, real-time evidence. If you have genuine evidence, it is very difficult to appeal against that, so there is no need for a costly body to conduct an appeals procedure where there is genuine evidence. Am I correct?

Sheryll Murray (Conservative, South East Cornwall)

Insurance companies very often work with their policyholders to prevent all sorts of things from happening that would make claims necessary.

Emma Lewell-Buck (Labour, South Shields)

I am curious to know whether the panel is concerned that, under the proposals in the Bill, the Secretary of State will be able to bring forward details of the flood insurance schemes via secondary legislation, which would bypass adequate parliamentary scrutiny.

Emma Lewell-Buck (Labour, South Shields)

Does anyone else on the panel have any concerns?

Thomas Docherty (Labour, Dunfermline and West Fife)

Just two quick questions and if you want to put your answers in writing afterwards that would helpful. Going back to the earlier points about the post-2009 category and the band H, it would be helpful to get something in writing about what you believe the costs would be if Parliament were to extend this. I think both sides of the Committee would find that helpful. Secondly, I have talked to the ABI about this previously and I know it was working on the figures and I am sure it has just forgotten to give them. I understand there are figures floating around of the estimated number of households affected in the four nations of the United Kingdom. I appreciate that you have not done it by water companies but you have done it roughly by nations. Could the Committee have those figures? If you have broken it down any further I am sure the Committee would welcome that information as well.

Thomas Docherty (Labour, Dunfermline and West Fife)

The problem with that, Mr Kerr, is that we will debate this at some length in a couple of sittings’ time.

Thomas Docherty (Labour, Dunfermline and West Fife)

We would accept that these are rough figures and we will not hold you to them. But the Committee would find it helpful to get an understanding of how many properties are affected. I suspect, looking at colleagues on the other side of the Room, that if you had figures for, say, the south-west, it would help many Members and equally figures for the north-east of England too.

Hywel Williams (Plaid Cymru, Arfon)

I am slightly concerned. You seem to be thinking about flooding incidents in terms of individual properties and modifying individuals’ behaviours so that they put up better flood defences. But with climate change and our experience, especially in Wales, of large-scale catastrophic floods such as those at Towyn, will we be facing such events into the future which would, forgive the use of the term, swamp any reinsurance scheme?

Hywel Williams (Plaid Cymru, Arfon)

I am concerned that there are some places where it is not economically viable to build proper flood defences, because the capital value of the properties that might be flooded is so low, such as individual rows of houses in country areas. I am concerned that they will never be able either to be safe from floods or to insure their properties so that they can get some recompense if the worst happens.

Roger Williams (Liberal Democrat, Brecon and Radnorshire)

The Environment Agency flood maps are produced by a technology that I think is called LIDAR. As I understand it, there is a difference in accuracy between some of the maps. Indeed, insurance companies produce their own flood maps as well. What criterion will be used for those who will benefit from Flood Re and those who will not? Which map will be used?

Roger Williams (Liberal Democrat, Brecon and Radnorshire)

Hydrology and so on.

Thomas Docherty (Labour, Dunfermline and West Fife)

Just following on with that line of questioning, how easy will it be for the consumer? My scenario is that I am looking to buy a house and want to check whether the property is going to fall into Flood Re. How do you envisage a member of the public being able to check that, if there is not going to be a map that you can look at?

Thomas Docherty (Labour, Dunfermline and West Fife)

But surely, if you are a potential house buyer, it is not unreasonable that you would want to know. It strikes me that Flood Re has got all these data and knows whether my property or Mr Williams’s property is on the register. Forgive me for asking the question, but is not the solution for someone to access or to do a search through Flood Re? They can say, “I am thinking about buying this property. This is the postcode or the street, and Flood Re holds the data.” Is not that the simplest way of taking this forward?

Neil Parish (Conservative, Tiverton and Honiton)

On the overall principle of the scheme, if the scheme gets going and there are not any major floods in the first year or two, I suspect the fund will build up and it will be quite resilient. What happens if—I hope this does not happen—there are major floods in the next year or over this winter? How robust will the scheme be? Will you be straight back to the Government with your hands out saying, “Let’s have some more money”?

Neil Parish (Conservative, Tiverton and Honiton)

Yes. It could be the year after.

Neil Parish (Conservative, Tiverton and Honiton)

So you believe you will not be coming back with hands outstretched to Government.

Neil Parish (Conservative, Tiverton and Honiton)

I am sorry to be cynical, but I suspect that you will be.

Neil Parish (Conservative, Tiverton and Honiton)

One final question. As far as affordability is concerned, you are absolutely convinced that under this scheme you will not price people out of the premium. It is all very well saying you will insure them, but if you are going to insure them for £1,000, £2,000, £10,000 or whatever, that is not affordable insurance.

Neil Parish (Conservative, Tiverton and Honiton)

And there will not be any exceptions.

Roger Williams (Liberal Democrat, Brecon and Radnorshire)

Mostly, insurance premiums, if there is not a big flood risk, will be linked to the rebuilding costs. You could have a relatively small property on a low council tax band, but because it is a listed building, or because of the particular materials that it is built from, it would have a high rebuilding cost. How does Flood Re deal with that situation?

Thomas Docherty (Labour, Dunfermline and West Fife)

Regarding the interesting discussion about bandings—forgive me, but we are coming into this slightly blind—what happens if there is a rebanding exercise at any point? I see straight away that there seems to be some amusement from the panel. What will happen if a property currently is not in band H, but there is a rebanding process and it finds itself in band H? Would they find themselves falling out of Flood Re?

Thomas Docherty (Labour, Dunfermline and West Fife)

When you say that there has been discussion with your colleagues, have they had discussions with Welsh or Scottish Ministers, or has that been all through DEFRA and the Treasury?

Hywel Williams (Plaid Cymru, Arfon)

Can I take that a little further? It is not just that it might not be comparable between England and Wales, but Wales went through a rebanding exercise some years ago, which was then abandoned as far as England was concerned. You might see large-scale changes in England, but not similar changes in Wales, hopefully at least, because the rebanding exercise was—[ Interruption. ] Thank you. It was a disaster in some ways. Many properties were wrongly placed, and the appeals process was protracted. Ultimately, it was successful for many property owners. That is more of a comment, I am afraid.

Hywel Williams (Plaid Cymru, Arfon)

As we are mining into the detail—as my colleague said, slightly blindly—can I ask about residential park homes, which are typically in places susceptible to flooding? I am thinking of properties on the riverside and so on. It is typical for them to be placed near floods. They are homes to many people. Will those homeowners be at a disadvantage?

Sheryll Murray (Conservative, South East Cornwall)

To return to Mr Docherty’s point about a change in council tax banding, property values change all the time, and most insurance policies are based on property value. If we had something rigid on the face of the Bill about council tax bandings, surely that would not give you the flexibility to change policies as time went on.

Sheryll Murray (Conservative, South East Cornwall)

It is only the flood element of an insurance policy that we are talking about, is it not? We are not talking about any other elements. It is a small part of the policy cover.

Linda Riordan (Labour, Halifax)

If there are no more questions from the Committee, I thank the panel on the Committee’s behalf. We shall move on to the questions for the next panel of witnesses.

Linda Riordan (Labour, Halifax)

Will the new witnesses please identify themselves for the Committee?

Mark Spencer (Conservative, Sherwood)

I draw the Committee’s attention to my declaration of interest, in that I hold two abstraction licences.

The Government have recently confirmed that they will seek to amend clause 1, which requires Ofwat to consult the EA over abstraction licences. Will you outline roughly the circumstances in which you might object to an abstraction licence?

Mark Spencer (Conservative, Sherwood)

Would you seek, or do you think you should have the right, to veto any current abstraction licence?

Mark Spencer (Conservative, Sherwood)

What differences do you identify between those who are abstracting from a watercourse and those who are abstracting from an aquifer below ground? Which is the best one to abstract from, to be blunt?

Mark Spencer (Conservative, Sherwood)

At times of high water flow, why do you not encourage abstraction to assist? What are you doing to twist that on its head, if you like?

Mark Spencer (Conservative, Sherwood)

Clause 41 basically aims to tackle over-abstraction by removing the right to compensation—you can withdraw a licence without having to pay compensation. The EA has estimated that about 40% of licence-abstracted volume is not being used. If you go down that route, how many of those sleeping licences might suddenly pop up?

Mark Spencer (Conservative, Sherwood)

Can you give the Committee a bit more detail about the compensation packages? If you withdraw a licence from an abstractor, how far can the compensation go? If you withdrew it from someone who is producing a crop that is of a small size, you could put a value on the crop at that point, but you could also put a value on its market value at the end of the process in eight or nine months’ time.

Mark Spencer (Conservative, Sherwood)

If somebody over-abstracts, what sort of teeth have you got to counter that?

Mark Spencer (Conservative, Sherwood)

Finally, how do you regard fracking, and how will you guard against over-abstraction in that industry?

Pat Glass (Labour, North West Durham)

Have the new flood maps been delayed?

Pat Glass (Labour, North West Durham)

So we can expect them by 31 December?

Pat Glass (Labour, North West Durham)

They would be really useful as we scrutinise the Bill, so when in December? We are likely to be finished by Christmas.

Pat Glass (Labour, North West Durham)

Before Christmas?

Roger Williams (Liberal Democrat, Brecon and Radnorshire)

To what accuracy are the maps going to be published? I have had some difficulty locally because a map was produced that led to quite a lot of concern, and we were told by the Environment Agency that it was not going to do the most accurate ones because few houses were involved.

Roger Williams (Liberal Democrat, Brecon and Radnorshire)

What does that mean—what accuracy?

George Hollingbery (Conservative, Meon Valley)

Just returning quickly to the bulk supply licences, the Government have already said that they are going to bring forward a new clause to deal with the issue of people entering the market as new suppliers. Presumably these bulk water transfers will come from people who are already suppliers—I think that is the thought. There is also some thought from Government that there is a need for the Environment Agency to look at the scale of those water transfers, because who knows what might happen in the area where it is being abstracted from? Has the Environment Agency any thoughts on that? Do you think that that would be a good thing to be able to do?

George Hollingbery (Conservative, Meon Valley)

Does the arrangement that you see in the amendment give you any teeth or are you merely advisory to Ofwat? Would you expect Ofwat always to take your advice, or do need to have powers to impose it?

George Hollingbery (Conservative, Meon Valley)

Finally, it seems to me there is quite a lot of new work for you in here. I am involved with the Environment Agency in other areas where they are always pleading poverty. Do you have the resources to be able to deal with this new level of work?

George Hollingbery (Conservative, Meon Valley)

Thank you. That is helpful.

Thomas Docherty (Labour, Dunfermline and West Fife)

Returning to the fracking exchange that we had slightly earlier on, I am not an expert, but my understanding of some of the correspondence I have seen from my and other MPs’ constituents that there is concern that if fracking goes wrong, it may pollute the water table. From your nod, Mr Bishop, you are vaguely aware of what I am trying to get to. Given that this is an emergent technology, is the Environment Agency or DEFRA having discussions with DECC about who should pay the compensation if that goes wrong?

Thomas Docherty (Labour, Dunfermline and West Fife)

So when you are looking at the licence conditions for fracking, considering how fracking licences should be granted and ensuring that there are robust procedures in the first place, is that one of the things that you are actively looking at?

Thomas Docherty (Labour, Dunfermline and West Fife)

Would it be helpful, Mrs Riordan, if Mr Bishop wrote to us after this to give us something in writing that we could consider?

Hywel Williams (Plaid Cymru, Arfon)

Can I just take you a little further on the fracking issue? If you are considering granting an environmental permit for fracking activities in an area that is water-stressed, would you consider the potential necessity of transferring large amounts of water from a water-rich area? To be plain with you, I am thinking about fracking in the north-west of England and the flooded valleys in Wales.

Anne Marie Morris (Conservative, Newton Abbot)

Mr Fox, I think you probably agree that prevention is better than cure. One of our challenges on flooding is ensuring that the Environment Agency is well aware and properly consulted when there will be development and new sites. Can you clarify whether you are happy and content, and if you feel, as a statutory consultee of the Environment Agency, that there is enough consultation through the planning process when a new development is envisaged and at the point of connection? I would also appreciate your thoughts on whether the water companies should be consulted—and should be statutory consultees—during the planning process and at the point of connection. That would ensure that, whenever we have a new development, we would be able to put in place, in a sensible and measured way, appropriate water supply and flood prevention mechanisms.

Neil Parish (Conservative, Tiverton and Honiton)

On coastal flood management and the so-called managed retreat, which I am not a great admirer of because you are often flooding good-quality land, does the Environment Agency have any figures on how much land nationally will be given up to the sea in the next few years? You do not necessarily have to give the details now, but could we have that in writing?

Matthew Offord (Conservative, Hendon)

This morning we had the opportunity to put questions to Ofwat about clause 22 and its duty on resilience of supply. It would be useful for us to hear your opinion on that duty. In particular, do you believe that that should be given priority over Ofwat’s second duty of sustainability?

Matthew Offord (Conservative, Hendon)

Thank you. It would be useful if you could give any examples of environmental damage happening as a result of the sustainability duty. Do you have any experience or knowledge of that occurring?

Matthew Offord (Conservative, Hendon)

To press you slightly more on that, do you believe that the Environment Agency should have a veto over Ofwat when environmental damage occurs?

George Hollingbery (Conservative, Meon Valley)

In answer to my previous question, you talked about reaching maximum capacity of supply and expressed worries about long-term resilience. I understand that we can do more about loss through the system due to such things as leakage. Is it your opinion that the only way to create greater resilience on the supply side is to increase storage capacity?

George Hollingbery (Conservative, Meon Valley)

I therefore put it to you that the answer is yes. It is not necessarily just reservoirs—I did not say reservoirs; I said storage capacity. Refilling aquifers is clearly an ideal and wonderful method, as the evaporation is much less, the filtering is better and you get cleaner water out of the bottom. On the use side, I accept that there is a lot we can do through building regulations and so on, but on the supply side, we do need more capacity of one sort or another.

George Hollingbery (Conservative, Meon Valley)

I presume you accept that resilience necessarily means redundancy in some way, shape or form, and that therefore there is a cost to consumers. One understands that there is no use having cheap water if there is no water, but is there an understanding at the Environment Agency that that inevitably means that there will be some cost to consumers on that?

Dan Rogerson (Liberal Democrat, North Cornwall)

In terms of resilience and management of the resources, and following on from what Mr Hollingbery was saying, if we are storing and increasingly trying to encourage other people to look at ways in which they could do that, would you agree that it would help if it were easier to transfer some of that resource around? That means that if redundancy is built into the system, the water can be used in different ways at different times, depending on where the demand is.

Dan Rogerson (Liberal Democrat, North Cornwall)

I was also thinking about in areas, so perhaps water that is not supplied into the mains water supply usually, but is used for other purposes. It is not so much having huge water mains across the whole of the country tying together, but looking at management within each area as well. Is that the sort of thing that could be helped by some of the measures in the Bill?

Dan Rogerson (Liberal Democrat, North Cornwall)

On the concept of the duties—I am sure we will hear a bit more about this with the next panel—is your understanding of resilience just focused on the human part of that triangle you were talking about, or is it also in terms of environmental resilience?

Linda Riordan (Labour, Halifax)

If Members have no further questions for these witnesses, I thank the panel on behalf of the Committee.

Linda Riordan (Labour, Halifax)

We shall now hear oral evidence from the Blueprint for Water coalition and the Chartered Institution of Water and Environmental Management. Would the new witnesses please identify themselves for the Committee?

Matthew Offord (Conservative, Hendon)

I have been asking the other witnesses this morning and this afternoon about clause 22 of the Bill, which requires Ofwat to have a primary duty to increase the resilience in upstream sewerage water supply. Do you believe that such a duty should take precedence over Ofwat’s secondary duty, which is sustainability?

Matthew Offord (Conservative, Hendon)

Do you believe that there are any additional circumstances that need to be taken into account within this new concept of resilience?

Matthew Offord (Conservative, Hendon)

Thank you.

One area that the Bill does not cover is the installation of universal metering. As you know, that only occurs in water-stressed areas at the designation of the Secretary of State. Do you agree with the Government’s view that the best way forward, upon ensuring the availability of water meters, would be at discussions through consumers and the water companies themselves, or do you see an alternative?

Thomas Docherty (Labour, Dunfermline and West Fife)

On the point about managing demand, does Blueprint for Water have views on the retail competition proposals? If so, what is the basis of those views?

Thomas Docherty (Labour, Dunfermline and West Fife)

We had some exchanges this morning when I commented on a sense that people are not as well educated about water as a finite resource—perhaps not scarce, but finite—as they are about how they use energy. There was evidence from the panel that this was true. Do you think that is a fair assessment? If you do, what can the ever-charming Minister, Ofwat or indeed anybody else do to encourage greater understanding of the finite nature of this resource?

George Hollingbery (Conservative, Meon Valley)

Unsurprisingly, this group of NGOs is very concerned about the sustainability duty. As am I. I am chairman of the all-party angling group. It is very important to me that we have water flowing down our rivers and we do not have it flowing down our rivers in too many places. There may be a little bit of a red herring here about the sustainability duty. It seems to me that the resilience duty and sustainability duty, as long as the Environment Agency is clearly involved in the process of setting this up, are very closely allied. We have just heard from the Environment Agency. It will have control over bulk transfer licences. It will have control over a change of use of water. It will be fully inputted in the sleeper licence reactivation issues. The financial compensation has been removed from the extraction changes.

We also have the Government document from May of this year and the strategic policy statement of Ofwat, incorporating a social and an environmental guidance. Sections 3.6 to 3.9 make it absolutely clear that sustainability must be part of what goes on. Are we basically all saying the same thing? Are not most of the bits of the jigsaw already in place to make this right rather than having to elevate sustainability to a primary duty which ultimately will create a very difficult position for Ofwat? It will be pulled in two different directions and be pretty much unable to resolve pricing for customers and pricing for the long-term resilience of the system.

George Hollingbery (Conservative, Meon Valley)

I think the evidence from our previous witness contradicts you.

Dan Rogerson (Liberal Democrat, North Cornwall)

I am interested in the issues around the duties on Ofwat, which we are discussing here. First, Mr Fenn, your concerns seem to be around how resilience is interpreted. Returning to what Mr Cunningham was saying and the discussion I had with a previous witness, would it be possible in your view to take resilience into account in such a way that it takes account of environmental resilience as well as the other two elements that we are talking about here: the economy and—

Dan Rogerson (Liberal Democrat, North Cornwall)

Coming back to colleagues from Blueprint, I am interested in the evidence that we were given about what is in place at the moment—you feel it has not yet delivered the results that it had the potential to deliver. A lot of this will be around abstraction reform, which is something we were talking about and, as you are aware, on which we will soon be consulting. Would simply having a sustainable development duty on the face of the Bill necessarily mean that the behaviours you want to happen would happen? Would we merely be ticking the box that says, “Sustainable development, job done,” without necessarily delivering some of the outcomes that you want to see? My worry is that we could just be saying, “Great, we’ve done it,” but unless we are serious about what we do on the ground, then it will not change anything.

Dan Rogerson (Liberal Democrat, North Cornwall)

Bearing in mind your earlier caveats about the things you would like to see in the Bill which have a long track record in terms of abstraction reform, those are the areas we need to get right in order to deliver the outcomes that you want to see. Just putting a sustainable development duty on Ofwat is not necessarily going to be the silver bullet that will deliver everything.

Linda Riordan (Labour, Halifax)

If Members have no further questions for these witnesses, I thank them on behalf of the Committee. We shall move on to questions to the next panel of witnesses.

Linda Riordan (Labour, Halifax)

We shall now hear oral evidence from the Department for Environment, Food and Rural Affairs. Please would the new witnesses identify themselves for the Committee?

John Cryer (Labour, Leyton and Wanstead)

The Bill seems to establish a broad framework and many of the details are going to be filled in. In fact, a lot of your intentions will be in the form of statutory instruments, secondary legislation and guidance. Can you explain the reason for that?

John Cryer (Labour, Leyton and Wanstead)

I am interested in the principle of leaving everything to statutory instruments. This is not a party political point, because the volume of statutory instruments has increased to an industrial scale over 30 or 40 years. When it comes to flood risk insurance, band H, for instance, is being exempted. I do not see why that should not be on the face of the Bill. Why would that change in the coming months?

Emma Lewell-Buck (Labour, South Shields)

The first panel we had this afternoon expressed some reservations regarding the point that has just been made, but they said that if there was proper consultation and thorough scrutiny, those reservations would be limited. Can you assure people that there will be proper scrutiny and consultation?

Emma Lewell-Buck (Labour, South Shields)

This was from the first panel this afternoon in relation to insurance. I would go further and say this: in light of the amount of issues that are not on the face of the Bill, will there be proper scrutiny and consultation for all those?

George Hollingbery (Conservative, Meon Valley)

What do we mean by exiting the retail environment and why do we not like it?

George Hollingbery (Conservative, Meon Valley)

So what you are basically saying is that you do not want it at the moment.

George Hollingbery (Conservative, Meon Valley)

What would your reaction be if some clever player managed to hive off their retail activities through a bit of offshore manoeuvring, some of their own legal work, the sale of certain bonds—who knows what the mechanism might be? Let us assume that someone out there manages to effectively place that retail business in a third-party hand, even though they retain the statutory duty to supply it. If that happens—I think Mr Sutherland suggested earlier today that that might happen—how do you then effectively regulate that third party?

George Hollingbery (Conservative, Meon Valley)

What sanctions are applicable to the retail company owned by the water company, that it can then somehow deal to its third party with? How does that work?

John Penrose (Conservative, Weston-Super-Mare)

I have a supplementary on that point. You said that you can effectively subcontract to someone else to organise your retail customers for you rather than exiting. Does that mean that you could subcontract to another water company? If I am Thames, can I subcontract to Scottish Water? Is that what you mean?

John Penrose (Conservative, Weston-Super-Mare)

Effectively, you could have quite a lot of consolidation through subcontracting without exit?

Thomas Docherty (Labour, Dunfermline and West Fife)

The parent water company is still required to do all the bureaucracy and meet all the regulation, so it is not actually getting out of the business. There will still be, as Mr Sutherland said, 40-plus water companies chasing 1.1 million customers, but is not the reality that, apart from a small minority of water companies and your officials, there is nobody in this water community who does not think that there needs to be an exit clause there to be used at the express permission of the Secretary of State? The regulator for Scotland, the regulator for England and Wales, the Office of Fair Trading, Policy Exchange, many of the water companies and the Select Committee of which you were a Member, all said that there should be an exit clause. Is it not the reality that what this is really about is that it was just a bit difficult and officials did not want to do it? You signed the Select Committee report, so when did you change your mind on this issue? Was it 30 seconds before or after you became the Minister?

The rest of the debate is in Hansard.