Section 1 – Financial assistance to reduce charges
10.Section 154A of the Water Industry Act 1991, as inserted by section 1, creates a power to give financial assistance to secure a reduction in charges for customers of water supply and sewerage services.
11.Under this section the Secretary of State can provide assistance in any form, including grants, loans and guarantees, for the purpose of securing a reduction in charges for water supply or sewerage services. Assistance may be given to a relevant undertaker or licensed water supplier in any manner. It may be given directly or it may be given indirectly, in which case it would be administered by a relevant undertaker.
12.The power is discretionary and may be exercised for such reasons as the Secretary of State feels desirable. It may be exercised in respect of all customers in an undertaker’s area or a particular description of customers in such an area. The Secretary of State may make the assistance subject to terms and conditions.
13.In the 2011 Budget, the Government committed to using public expenditure to support households who face water affordability pressures and households in areas with particularly high water charges. A commitment to make a payment to South West Water to reduce the charges of every South West Water household customer’s water and sewerage bill by £50 was announced in the Autumn Statement 2011. The background was described in the Water White Paper. Here it was explained that:
We have therefore decided to fund South West Water to enable it to cut bills by £50 per year for all household customers until at least the end of the next spending review period. This payment will be made transparently so it can be clearly demonstrated that all the benefit from this payment is passed through to customers. The Government will legislate to enable bills to be reduced from April 2013.”
Section 2 – Financial assistance for major works
14.Section 154B of the Water Industry Act 1991, as inserted by section 2, creates a power to give financial assistance in connection with the construction of water or sewerage infrastructure or the carrying out of works in respect of existing water or sewerage infrastructure, if that, or the combination of the two, involves works which are exceptionally large or complex. The intended use of the infrastructure must include use by water or sewerage undertakers in the exercise of their duties to maintain a water supply and provide sewerage services under the WIA, but the financial assistance is not limited to cases where the undertaker is carrying out the construction or works or will have exclusive use of the infrastructure. Under this section the Secretary of State can provide assistance in any form, including grants, loans, guarantees and indemnities, the provision of insurance and by acquiring shares or securities in a body corporate.
15.The power is discretionary and may be exercised for such reasons as the Secretary of State feels desirable. The Secretary of State may make the assistance subject to terms and conditions.
16.The Autumn Statement 2011 stated that the Government would, subject to affordability, consider using transparent forms of guarantee to support specific projects where this provides best value for money for taxpayers and users, recognising that the private sector cannot always bear every risk. This commitment was in line with Government confirmation in a November 2011 statement to Parliament that it was willing in principle to provide contingent financial support for exceptional risks in the construction of the Thames Tunnel, a sewerage infrastructure project designed to reduce the amount of untreated waste water being discharged into the River Thames.