Water firms face Commons attack

Conservative MPs told a Commons select committee that water firms are now engaged in “industrial tax avoidance” despite making huge profits, and that it is time for Parliament to take action.

The Yorkshire Post revealed this summer that Yorkshire Water paid no corporation tax last year, despite handing out dividends to shareholders worth more than £250m and hiking bills by an average of six per cent. The foreign-owned company stresses it has broken no rules.

North Yorkshire MP Julian Smith, a Government aide who grilled executives from Yorkshire Water over the firm’s tax affairs last month, has now led a group of MPs to pitch for a major debate on the issue via the Commons backbench business committee.

“The challenges being faced by constituents because of the non-payment of tax by water companies and the rise in bills are huge,” Mr Smith told the committee. “There will be lots of people wanting to say that the Government should do more.”

The committee has the power to grant Parliamentary time to debate matters of major public concern, and Mr Smith said he now expects the issue to be brought before the House within weeks.

“For my constituents who have seen their water bills rise, it is a real kick in the teeth to find out this big company has not paid any corporation tax,” he said. “I think the excuse they are playing within the rules is something people find difficult to accept.”

With rising energy bills having dominated affairs at Westminster following Labour’s pledge to freeze prices, there is a growing sense that rising water bills will be the next key battleground.

The Treasury yesterday sought to play down reports that George Osborne is considering an attack on the water industry in his Autumn Statement on December 4, including a clampdown on the tax affairs of the big firms.

Nonetheless, the Department for Environment, Food and Rural Affairs (Defra) hopes its forthcoming Water Bill will help households get a “fair” deal.

The Bill will end the industry’s regional monopolies for businesses and the public sector, though not households – but could also inject tougher competition rules to drive down bills for all.

At the heart of the Government’s new approach is Ofwat, the industry regulator, which has already indicated it is willing to use more of its existing muscle under the new chairmanship of Jonson Cox –ironically, a former boss of Yorkshire Water – who was appointed earlier this year. The regulator recently refused Thames Water’s request to raise its bills by eight per cent.

The new Bill will hand Ofwat powers to fine companies found to be overcharging customers.

A Defra source said: “Water companies should be expecting this. What we want is for price rises to be limited or not go up at all.

“If they want to put up prices, they’ll have to justify it. We don’t want there to be the automatic rises we have seen year on year.”

Labour, however, will seek to outflank the Government on the issue as it bids to build on the success of its energy bills policy.

Shadow Environment Secretary Maria Eagle wants to put the Opposition’s focus on the cost of living at the heart of its approach.

She said: “No one will believe a word Ministers say on water when they have stubbornly refused for three years to admit that rising bills are contributing to the cost of living crisis.

“The Government needs to get on with reforming the water industry.”