|Water Bill [Lords]
Mr. Morley: I would disagree. We have started this the right way round. There is indeed an issue that the hon. Gentleman has mentioned. There can be a consequence if a company begins to lose big customers to competitors. The whole idea is that companies will strive to be efficient in delivering their service. The threshold has been set at 50 megalitres because we believe that 2,300 potential customers is sufficient to attract new competitors, but is not a great enough number to have the distorting effect mentioned earlier. It strikes a cautious balance, which will allow us to get some experience of competition in the water sector. We will review the situation in three years, and there is the potential to extend it if it is a success. However, if there are problems, we will not cause catastrophic consequences by going too far too fast.
Sue Doughty (Guildford): I have been following the argument with interest, and sympathise with some of the views put forward. What if this is not a success? What would happen if a company changed its supplier to one that was more competitive but found that the arrangement did not work? If that company was not happy with the supplier because, for example, the supply was intermittent or there were shortages of water, would the proposed three-year review suggest any way back from that situation?
Mr. Morley: I think that there would be a way back. In the electricity and gas industry it is normal for large users to sign contracts, some of which are for a fixed term. At the end of the fixed term customers are able to review the deal, so it is possible to change the situation, although the disruption of the relationships entered into by the large user must be taken into account.
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Paddy Tipping (Sherwood): It is important both to get some experience and to be cautious about this approach. Must it not be the case that a limited experiment that allows the bigger customers to make some choice will inevitably lead to efficiency and economies right down the chain? I welcome the Government's proposal, but we need to go cautiously. I expect that we will want to extend the experiment after three years, but I would be cautious about extending it into the domestic sector.
Mr. Morley: My hon. Friend is absolutely right. There is every likelihood that competition will bring about beneficial effects, as competition often does. However, I reiterate that it can sometimes have negative effects. Proceeding in this way allows us to examine progress cautiously, and in three years we can evaluate the pros and cons of the situation.
Dr. Brian Iddon (Bolton, South-East): Further to that point, will the Minister bear in mind what has happened to research in the electricity and gas supply industries? Competition has driven prices down to such an extent that research will no longer be possible on the scale that it was previously. I was at Loughborough university last week, where I saw a very large building in which British Gas used to do all its research. Except for one small corner, that building is now empty.
Mr. Morley: My hon. Friend demonstrates one of the potential negatives, but it is a matter for speculation as to whether we will see that outcome. We have the opportunity to see how this measure works and, if it is successful, there is the opportunity to extend it.
Mr. Simon Thomas (Ceredigion): I seek clarification from the Minister on that point. I understand from the Bill that, in future, the threshold could be lowered by means of a statutory instrument. Would further primary legislation be needed to introduce competition into the household sector? If so, will the Minister comment on what the Government's approach to any future legislation would be?
It would be relevant to our current scrutiny to know whether the extension of the scheme to the household sector is a serious option. We must also bear it in mind that we are discussing the delivery of potable water only. The water industry is much bigger than that; it includes sewerage and infrastructure investment. We must therefore take into account the dangers for the entire water industry of extending competition to the household sector.
Mr. Morley: I am sure that many large companies can provide their own sewerage infrastructure now; there is no restriction on that. I can confirm that if we wish to extend competition in the water industry to the domestic sector, primary legislation will be needed. The matter would therefore have to return to the House, so that there could be proper scrutiny and the House could have the opportunity to weigh up the pros and cons. The position that we have taken in the Bill is perfectly reasonable, and on that basis I hope that the hon. Member for Leominster (Mr. Wiggin) will withdraw the amendment.
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Mr. Wiggin: There are several misunderstandings, which I shall seek to clarify. First, if we can agree that competition is successful at any stage, we can fulfil the desire that we share to allow small consumers, including households, to have cheaper water.
Amendment No. 123 would remove the need for the word ''household'' to be in the Bill. That would mean that we did not need primary legislation, particularly if amendments Nos. 124 and 125 were also taken on board. Amendment No. 125 really tackles the issue of the large customers—the 2,300 over-50 megalitre customers to whom the Minister referred earlier. The danger is that they will not be a pilot scheme for the concept because they are not all in the same area and they are not similar companies. Without doubt, they will all say that the scheme is successful, because they will be having cheaper water, but that will not necessarily have the positive impact that the Minister is looking for in this experiment. Although he is right to be cautious, he is being cautious at the wrong end of the market.
Mr. Lansley: Does my hon. Friend agree that, even though the Minister seeks to be cautious, he clearly shows a willingness to consider extending competition to large non-domestic consumers of water? However, he is not willing to consider in the same way the extension of competition to the domestic sector, even though he told us that he was. Leaving in the Bill the prohibition on competition in the domestic sector is a substantial constraint, regardless of what the review might say in three years.
Mr. Wiggin: I agree. My hon. Friend's amendment No. 248 was also designed to do what I have described, for which I am extremely grateful, because we should be paving the way for cheaper water for domestic consumers. There has been a huge amount of debate about disadvantaged and vulnerable groups, and those are the people who would benefit from cheaper water—
Mr. Morley: Maybe, maybe not.
Mr. Wiggin: Yet in a bizarre volte-face, the Government have done everything that they can to preclude those people. I accept the Minister's caution, and I am not saying that we must proceed with all customers at once. There is nothing preventing the Government from proceeding with pilot schemes and doing different things in different areas. By its very nature, the supply of water falls tidily into that type of pilot scheme, because one cannot have Scottish water in London; it just does not get here. It would therefore be a much easier material with which to experiment, if that is what the Minister sought to do.
The Government's method works against smaller customers and vulnerable groups. Although I agree that the Minister is right to be careful, that is not the right way to proceed. The hon. Member for Ceredigion (Mr. Thomas) mentioned that electricity and gas prices had been driven down. I should imagine that that is a welcome change of events, particularly for vulnerable groups.
Mr. Thomas: The hon. Gentleman seems to suggest that the introduction of competition into the household sector would be good for vulnerable
Column Number: 269groups. Will he reflect that it is the vulnerable groups who pay most for their gas and electricity, because they cannot have direct debit or their credit history is so bad that they do not get the best deal from the privatised electricity and gas companies? In dealing with water, which is essential to life, we should perhaps take a much more cautious approach than the hon. Gentleman seems to advocate.
Mr. Wiggin: That was an extraordinary intervention, but I am always grateful for that sort. One cannot complain that people on the lowest incomes are being penalised for having cheaper gas and electricity if in fact they are being penalised because they are not paying by direct debit or because of their credit history. That is what they are being penalised for, not the cheaper prices of the underlying commodity. The hon. Gentleman is right to worry about those groups, but certainly not in the way that he suggests.
This part of the Bill is important because it shows the Government's fundamental misunderstanding of competition. They are trying to do the right thing in the wrong way; it is not the first time that they have done so and, sad to say, I doubt if it will be the last. Saddest of all, it will fail the people who they most want to look after in other parts of the Bill. The Minister has tried to be cautious and careful, and I appreciate what he said, but he is starting at the wrong end of the market.
Mr. Morley: I have outlined the Government's view on the matter. As a general principle, I love clauses that give Ministers the power to vary things as they see fit. I am all for the proposal, which has a certain attraction, but in this case extending competition to domestic consumers is a fundamental step, and it is not unreasonable that it should have to come back to the House. Technically, it would not have to be a very complicated measure—it would be an amendment to the Act—and it would give the whole House the opportunity to discuss its pros and cons. Competition can be good; it can bring benefits but also negatives. Our approach should be balanced and cautious.
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