14 December 2009

The Walker review of water charges, which I discussed the other day, leads me to questions about devolution.

Last month the team of Cornwall Libdem MPs responded to the queen’s speech — the Labour government’s program for the next six months — by suggesting a list of three measures that they think are needed urgently for Cornwall. The list comprised a devolution bill, second homes, and the equalisation of water charges.

Rogerson writes (presumably on behalf of the team) of wanting “radical devolution of power to Cornwall” and ensuring “the whole country pays its fair share for maintaining the coastline.”

The issue of the water bills of course applies to all the area of South West Water, as the Libdem MPs acknowledge, but the issue of water bills and devolution applies only to Cornwall.

Pick and mix

Let me point out again a dissonance here. The recent Cornwall devolution bill did not involve fiscal devolution but Barnett-type arrangements as far as I can see and now the Libdems seem to be saying that they want far-reaching devolutionary powers for Cornwall but when it comes to meeting the cost of Cornwall’s water bills they want to be part of “the whole country”. Apparently in a Liberal Democrat devolved Cornwall the full cost and payment for Cornish water and sewerage and beaches and clean-up is not to be the responsibility of only the people in Cornwall. This is an odd and unconvincing devolution. It looks to me like devolution with Cornwall half out of the country but jumping back to be wholly in the country for water bills. This is a pick-and-mix devolution, a hokey-kokey devolution, in, out, in, out.


There is another quirk in this. The coastline, for sewerage disposal and clean-up purposes at any rate, is the beaches, cliffs, and adjacent sea and definitely includes the foreshore, the part between high and low tide. Look at the argument for some sharing over the “whole country” of these Cornwall bills, look at the various Libdem descriptions of the the beaches of Cornwall as a “national asset” and a “national treasure” and of the Cornwall coastline as “Britain’s coastline”. Isn’t all this a recognition by the Libdems that the coastline of Cornwall (including the foreshore) is part of the whole country and not just a peculiar of Cornwall or the duchy? Oh dear, what do the foreshore nationalists say? I’d like to hear the nationalist argument for someone in Newcastle on Tyne, England paying towards a clean up of territory in Cornwall which belongs not to the whole country but to what those nationalists see as the sovereign duchy of Cornwall.

(Incidentally, “the whole country” of the Libdems is not identified. The Anna Walker inquiry into water charges covers England and Wales; Scottish Water is publicly owned as is the service in Northern Ireland. So country could mean England and Wales or England or the UK.)

The final report of the review by Anna Walker about the charging for water and sewerage bills for households in England and Wales has just been published. My focus is on the part of the review about the various options for altering the charges in the southwest.

The review explains very well in chapter 14 how we got here and why our bills are so much higher than other people’s. Briefly, at water privatisation the infrastructure in the southwest was poor; the EU demanded improvement of the sewage disposal arrangements and of the water quality; the infrastructure upgrading has led to the large bills paid by South West Water’s customers.

The review usefully suggests several possible ways of righting this inequity but does not recommend one rather than another. Again briefly, the suggestions fall into two categories which I now summarise.

(1) Transfer of funds to the southwest
A large one-off payment to the South West Water company by the UK government to level the historic costs (see section 14.2.3 and table 7 in the review for an explanation of this suggestion, the cost of which would illustratively be £650 million). This suggestion addresses the historic inequity that the Conservatives ignored when they privatised the industry and is probably the least unfair. Other review ideas are an annual subsidy for southwest customers from water customers elsewhere in England and Wales; or an annual subsidy from the UK government directly to the water company.

(2) Redistribution among southwest customers
South West Water customers to pay higher summer charges, some of these costs presumably being met from higher holiday accommodation prices; or, by various ways, helping low-income customers, other South West Water customers meeting these costs.

The review suggests Ofwat should be asked for its view on the review ideas.

Thus, a useful survey and useful suggestions but not the definite and decisive recommendation(s) for implementation that politicians and customers in the southwest were probably looking for. What follows this review is probably a period of reflection by Ofwat, then its observations, and then finally a government decision.

I am not sure anything will happen soon. This is a complex issue and fairness is not simply a question of being fair only to people in the southwest but of being fair to people elsewhere in England and Wales too. I do not see any government in a recession and with a vast deficit handing over £650 million to a water company. I just don’t see that it is practical politics or necessarily fair for any government to ask customers elsewhere to subsidise people in the southwest by paying more. The ideas in the review about affordability for low-income customers will probably be examined more sympathetically.

Previous post:
Water bills in Cornwall

The waters of comfort Psalm 23 in the Book of Common Prayer


15 October 2009

The third debate this year in the House of Commons on water and sewerage bills in the south west: in May a Tory MP initiated one, in June a Labour MP, and now a Libdem. You can read the latest debate at Hansard 12 October 2009 column 135.

Anna Walker’s interim report, the Independent reveiw for charging for household water and sewerage services, was published in June. The report discusses intelligently the question of the bills in the southwest and explains there are three options for payment: by the local water customer as at present, by the national water customer, or by the national taxpayer. The Walker review is considering these and will plump for one in the final report this autumn.

The report is firm that water charges should “continue to regionally based” (paragraph 3.6.1). However, in paragraphs 3.3.1-3.3.18 there is an interesting exploration of the arguments for and against nationalising the environmental part of the bills. This is the aspect that the latest Commons debate focused on; no one is suggesting that the whole of the water and sewerage bills should be equalised across England. We are all aware of the argument that southwest customers are paying for an environmental clean up which benefits the many visitors, that people in the southwest are relatively few and the southwest coastline long, and it would be fairer if those costs were shared out nationally. However, there are difficulties in moving to any national payment scheme such as what counts as an environmental aspect to be nationally charged, some environmental benefits are basically private benefits (tourism benefits from clean sea water and beaches), some environmental improvements benefit locals, and nationalising aspects of costs and bills might reduce the pressure on regional water companies to drive down their costs. MPs from other parts of England have also expressed their financially hard-pressed constituents’ concerns about taking on part of southwest bills (Hansard column 140).

If we did go to a national scheme for the environmental components it would include other environmental improvements outside the southwest such as the Thames Tideway. Water customers or taxpayers in the southwest would pay a share of those; but I do not expect our local MPs to dwell on that aspect.

In fact the report says that the nett benefit of a shift to a national payment scheme for environmental components would be “limited” (3.6.2), though I think in the southwest any reduction would be welcome. That wording makes it difficult to see the final report recommending such a shift.

There are of course other important aspects of water services that the Walker report looks at: affordability and availability, for example.

This is a complex issue with no easy solution, economically or politically, in 2009. Note that it is being discussed and settled outside the ambit of Cornish nationalism because it does not readily fit the nationalist agenda: the issue is about the southwest not just Cornwall, and indeed about water and sewerage in England as a whole; simultaneously claiming autonomy and a national subsidy for a service lacks credibility; and the arguments about what is a fair solution are as much technical as philosophical or political. It is an issue which reasonably exercises many people in Cornwall and tellingly there is no relevant specific nationalist argument to make.

PREVIOUS POST: Who would pay for devolved Cornish water?



6 June 2008

There was a debate in the House of Commons the other day about water usage and bills (Hansard 2 June 2008 column 614 onwards).

The main focus was on the high bills in the southwest and the especial difficulties that those on low income have in paying them. Linda Gilroy, a Labour MP from Plymouth who initiated the debate, put the context well: “too many people are struggling to pay bills that are unacceptably high. As things stand, the problem looks set to get worse.”

There was the usual nod to water meters which make people more aware of their water use and, according to Phil Woolas, the minister, reduce overall consumption by ten percent. However, I don’t see meters reducing prices as opposed to consumption in the long run as I explained in my previous water and sewerage post. Andrew George, the Liberal Democrat MP for St Ives, made the interesting point that metering benefited second-home owners by keeping their water usage bills low. Fairness is always complicated.

In the Commons there was a recital of small measures to help but no one seemed to have any effective major idea about getting to more affordable prices here (apart from the Libdem idea of a national equalisation scheme, in effect a subsidy of bills in Cornwall and the southwest by the rest of England, an idea which has its own problems as I outlined in my previous post). The (im)practicality of southwest customers breaking out of the geographic straitjacket into a genuine choice of supplier was not discussed.

I’m afraid it reminded me of HG Wells’s comment about the Fabians: piddling under the door and calling it the stream of progress. I think it’s obvious that customers in the southwest are stuffed: high bills and no choice in supplier. The problem of how to unstuff them is truly difficult. Phil Woolas said that “affordability continues to be a key concern of the government” which shows how desperately bereft of transformative ideas the government is.

Who’s to blame for our present position? Linda Gilroy put it crystal clearly when she spoke of “the botched privatisation by the Conservative government.” Indeed.

I repeat what I said before: it is time the Conservatives came up with some ideas for making better this situation that their party created. They keep very quiet about this problem and I think they aren’t going to volunteer a solution so let’s press them.

related posts

Can Cornwall’s water bills be cut? 6 June 2007

The water of affliction 2 October 2007


10 February 2008

Water bills in the southwest are high compared with the rest of England and the government has been under continual pressure to get them reduced.

There is no easy way of cutting the prices charged by a private company, regulated and without competition. The regulatory system hasn’t put a stop to high bills because the company can justify them to the regulator though many customers probably think regulation ineffective in protecting their financial interests. Strengthening regulation so that it deeply cuts bills would amount to the government capping the prices charged by the private company at a level that the company considers destructive to its effective and efficient operation. No government of any party is going to do that.

The Libdems have suggested a national subsidy: our bills here are reduced by getting people in other parts to pay more than the economic cost of their water supply. I agree with an equalisation scheme but have two concerns about this.

Firstly, Libdems argue that Cornwall can run its own affairs without outside intervention. They support an assembly (though a regional English one rather than a national one, I think). Yes, the people who tell us that they want devolution in Cornwall also want people elsewhere to chip in and help to pay our bills. It is incoherent for devolutionists to ask that people in, say Northamptonshire and Cumbria, be required to subsidise private water company bills in Cornwall; or at the very least this needs more arguments than Libdems have so far presented.

Secondly and more importantly, I should like to see them take this case for higher water bills elsewhere to those who will pay more. Perhaps the people of the southeast, where they face drought, will willingly pay more so that we may pay less? Why don’t the Libdems test the waters? Let them ask and let us all see what the response is.

Labour has now come up with an answer. Phil Woolas, the minister for water bills, wonders whether compulsory water meters in the southwest would deal with the high bills. No it won’t. It would simply move around the amounts individual households pay, some paying more and some less than now. Universal metering might reduce the total amount of water used and thus the costs of the company but not by much as the infrastructure for example would be the same. The company would still have to raise virtually the same amount of total money from customers so I expect the effect on bills overall would not be significant. We need to see what the estimated effect would be.

Of course universal metering might be fairer overall than the present system though not to households with young children or sick members, but in any case it does not deal with disproportionately high water bills in the southwest.

Labour has come up with an answer that is not a solution.

The Conservatives got us into this expensive mess when they privatised water supply and sewerage. It would be good to hear some ideas from them about how we find a way through the Northwest Passage of high bills. Don’t hold your breath.

related posts

Can Cornwall’s water bills be cut? 6 June 2007

Tory water bills 6 June 2008