Select Committee on Environment, Transport and Regional Affairs Minutes of Evidence

Examination of witnesses (Questions 33-39)




  33. Can I welcome you to the Committee. Can I ask you to identify yourself and your team for the record, please?

  (Mr Fletcher) Thank you, Chairman. I am Philip Fletcher, Director-General of Water Services. My colleague is Fiona Pethick, Head of Policy Co-ordination at Ofwat.

  34. Thank you very much. Do you want to say anything by way of introduction, or are you happy to go straight to questions?
  (Mr Fletcher) Very briefly, Chairman. My overall approach is to welcome what I see as contributions towards a draft Water Bill, because I share some of Dr Helm's concerns that at the moment it is an incomplete Water Bill, as a whole, and I think the Government has made no secret of the fact that there are further things to come, like, for example, competition; until those elements are present, it is very hard to assess the overall impact of the Bill. I share, too, some of Dr Helm's concerns that it could, in some respects, increase regulatory risk, and, as he has explained, one consequence of regulatory risk is to increase ultimately the cost to the customers, which is one of my very main concerns. I do not share Dr Helm's extreme gloom about the current state of the industry, but perhaps that is for another time.

  Chairman: Thank you very much.

Mr Brake

  35. Mr Fletcher, are you as big a fan of water advisory panels as Dr Helm is?
  (Mr Fletcher) As my evidence shows, Mr Brake, I think my jury is out on the Water Advisory Panel at the moment. I do see some merits, perhaps I would, I am not an entirely unbiased witness, in the concept of the single regulator, and I think it can be flexible. I think it is very clear about accountability, and I think there are factors in the water industry, in terms of stability, long-run monopoly elements, that make the form in which it was privatised and regulated appropriate, and where I do not think it is clear that we need a wholesale change, as would be represented by a board. Now an advisory panel could take various different forms, and it is not very clear, from the Government's consultation paper, what they envisage. Is it to be similar to the advisory panel which the Director-General of Fair Trading is setting up, which would be, if you like, part of the family? He would chair it, it would be an opportunity to exchange views, and that, frankly, is something I value and for which reason my predecessor, Sir Ian Byatt, set up a Regulatory Policy Committee, which I maintain and find very helpful. If it is, as Dr Helm appeared to fear, some sort of external, further bit of regulation then I think it could itself introduce regulatory risk into the pattern. In some of the evidence that you have had, it is to be a court of appeal from the regulator for this, that or the other thing. This suggests to me that others do see it as rather complicating the overall regulatory system.

  36. So your preferred set-up would be one in which, as you have said, it would be there to exchange views, perhaps bounce ideas off, but, ultimately, you would be able to proceed, and disregarding, possibly, any advice that was proffered?
  (Mr Fletcher) I would have to take it into account, I take everybody's advice into account.

Mrs Dunwoody

  37. Oh dear; that is always a mistake, Mr Fletcher.
  (Mr Fletcher) I do not always agree with it.

  38. After over 30 years in this place, do take my advice, that is always a mistake.
  (Mr Fletcher) I will not always agree, I could not, because I get advice all the time, coming from very different directions. The advantage of something like a regulatory committee/advisory panel, of people who really know what they are talking about, but are within the ring-fence, no water interests, talking in private, in confidence, is that you are sure you can kick around ideas before you need to start making public statements about them. And I do find valuable that sort of mechanism, but it is something that can be done now, under the existing regime, and is done now.

Mr Brake

  39. And do you picture yourself chairing this?
  (Mr Fletcher) If the overall framework remains of a single regulator, I think that would be the way of avoiding confusion in it, and for me as the one who carries, ultimately, the responsibility, under the Act which Parliament has passed, still giving absolute clarity about where the responsibility lies.

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