Water Bill Rill

HL Deb 08 April 2003 vol 647 cc1-66GC

(Fourth Day)

Tuesday, 8th April 2003.

The Committee met at half past three of the clock.

[The Deputy Chairman of Committees (Lord Tordoff) in the Chair.]

Clause 38 [Objectives and duties under WIA]:

Baroness Miller of Chilthorne Domer moved Amendment No. 92: Page 42, line 15, at end insert— ( ) The Secretary of State shall define water poverty as those households spending over three per cent of their income on water charges.

The noble Baroness said: I am particularly pleased to open this sitting by moving this amendment because it lays the ground for much of our discussions on the rest of the Bill. It requires the Secretary of State to come up with a definition of water poverty, and it suggests what that definition should be. In framing that definition, I pay tribute to the work of the Chartered Institute of Environmental Health, which produced a good study, Water Poverty in England. That thorough study came up with a couple of modest recommendations, the first of which is that the Government should give consideration to setting 3 per cent of net income as the level above which it is unreasonable to expect a household to meet water charges. The second recommendation is that the water regulator should investigate the extent to which water poverty contributes to water debt.

I tabled the amendment because I believe that without a definition of what constitutes water poverty, it is hard to decide who is in water poverty. I do not believe that the regulations in the Bill do anything to reduce the number of households affected by water poverty or to help the industry in relation to the ever-increasing problem of water debt. We now rightly have a regime that does not allow people to be disconnected from the water supply if they fall into debt. That should remain. Once that arrangement is in place, one needs to be aware of who cannot pay their water bills and who will not pay their water bills. We will discuss water debt later today.

The amendment frames the issue in such a way that it begins to address something that has not been addressed by the Government to date. When the Minister replies, he may say that the Government's arrangement involving vulnerable groupings of people who may apply for help with their water bill answers the problem. However, I believe that there are some 4 million people in that vulnerable group, which includes the elderly—who may also be incontinent—those with severe illness problems and those with large families who may find it harder to be in full-time work— that is certainly true in relation to both parents. They are often people with multiple problems. The vulnerable groups provisions fail on two counts: first, the provisions made under them are taken up by only 1 per cent of those who are eligible, which is a really pathetic rate for benefit take-up; and, secondly, the concept that lies behind the approach is somewhat Victorian, in the sense that it involves a charitable assumption, which is run—for good reasons—by the industry in a way that assumes that other water consumers will pay for those who cannot pay.

I hope that the amendment will start the Government's thinking about defining water poverty and help them to decide that the current position is not satisfactory. I hope that the Minister will agree to the amendment as the first stage of addressing the problems of those who cannot afford their water bill and of the industry, for which the debt problem is substantial. The industry needs to know, if it is to deliver all that we expect of it—including environmental goods and so on in the Bill—that the people who cannot pay will be properly helped. That help should be provided on the same basis as that for other benefit help, not as a throwback to Victorian charities. I beg to move.

Baroness Byford

Whether it is necessary to have the amendment in the Bill, I understand the reasons why the noble Baroness, Lady Miller, moved it.

I have some questions for the noble Baroness., or for the Minister. First, is the criterion requested in this regard carried through in relation to any other utility Bills? Secondly, the noble Baroness said that 1 per cent of benefits were taken up, but 1 per cent of how many? Thirdly, in recent times, the water companies themselves have tried to address the whole question of debt and debt repayments. To a certain extent, they have been very successful at it. I am not associated with any water company at all and therefore have no insight in this regard. If they have been successful and no one has genuinely been put at risk who would otherwise have been helped by their strides to address the debt situation, one would have to question whether writing something into the Bill would detract from their ability to try to bring debtors into line and encourage them to pay something. I believe that there has been a lengthening of the time in which one can pay or spread the load.

Those are indirect questions. I understand why the noble Baroness made her remarks in this context. All of us are concerned about poverty. Those three questions need addressing. I should be grateful if that were done by the Minister when he winds up or by the noble Baroness, Lady Miller, when she responds to the Minister.

The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whitty)

I assume that the concept that the noble Baroness is proposing is the equivalent concept of fuel poverty, which is defined as 10 per cent of net income. However, that has various legislative strategy and scheme implications and the provision of various services are related to it. However, the approach in the amendment is entirely in isolation and is not followed through with amendments anywhere else in the Bill, so far as I can see, and would have no legal effect because it offers a definition that is not contained in any other legislation. I therefore believe that the effects are not clear.

There is obviously an issue in this regard but, as the noble Baroness said, we have already taken action to stop household water disconnection and in terms of protecting vulnerable groups, who would otherwise cut back on water that they could not afford, with meters. We also have the current consultation on extending the protection for vulnerable households. The Government are addressing the problems of water poverty but the definition does not appear to help or to be clearly based in fact on the people who may be affected by the costs or the difficulties of providing water. The fact that the amendment would not have any effect means that I am not sure that it is the best way, beyond pure symbolism, to deliver anything for those who are genuinely in poverty, partly because of their water costs.

Baroness Miller of Chilthorne Domer

I am slightly surprised by the Minister's lack of enthusiasm for the amendment. I had hoped that he would say that he agreed with the spirit of the amendment. There is not a great deal of carry-through to frame it so that it could take effect in relation to the rest of the Bill. At this stage I had hoped to discover the Government's attitude to the issue.

The fact that water is at the end of the debt list—which is of itself a reason for my amendment being worthy of more consideration than the Minister appears to give it—says nothing for the value of water. If the Government are concerned about creating a fair society— which I believe they are—then the people most in need of help with their water bills should be entitled to it. The failure to define "water poverty" does not help.

I have tables that answer the questions asked by the noble Baroness, Lady Byford, in regard to the kinds of people who apply and the numbers who are successful. Rather than read them out at length, I shall pass her a copy.

It is difficult to deal with a problem until it is clearly defined. If we cannot define the substance of water poverty it will be very difficult to find a mechanism for dealing with water debt in a way that does not badly affect people. Having brought in legislation to stop disconnections there was then a failure to address the issue of the rising debt problem. Although I accept that expanding the amendment would require a new clause in the Bill, it is worthy of somewhat more enthusiasm.

The noble Baroness asked a third question which I have not answered. I cannot remember what it was. Perhaps she will help me.

Baroness Byford

The noble Baroness said that 1 per cent of benefit take-up was referred to in the report. My question was, "1 per cent of how many people?" I want to establish how many households were affected. It could be 1 per cent of 10 or of 10,000. Obviously there could be quite a difference.

Baroness Miller of Chilthorne Domer

According to the report. some 4 million may fall within the category of water poverty. So it would be 1 per cent of 4 million.

As regards the Minister's question about whether this is the equivalent of fuel poverty, I do not believe that it is. Provisions for not disconnecting people from their water supplies are already in place, whereas if they could not afford heating they would stay cold. It is not equivalent but it is no less important for a different reason. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Byford moved Amendment No. 92A: Page 42, leave out line 16 to 26.

The noble Baroness said: Amendment No. 92A concerns special interest groups. The noble Lord. Lord Borrie, spoke on the subject at length in our previous discussions. We would prefer to have all groups included or none included. Having listened to what the noble Lord said last week, we consider that none should be included. I hope that I have spoken to the right amendment. I beg to move.

3.45 p.m.

The Deputy Chairman of Committees (Lord Tordoff)

I should inform the Committee that, were the amendment to be accepted, I would not be able to call Amendment No. 93 because of pre-emption.

Baroness Byford

I notice that Amendment No. 92A is grouped with Amendments Nos. 98A and 116A. I apologise to the Committee; my head is not quite as it should be. I shall now speak to those amendments.

Amendment No. 98A deals with a small grammatical point. We believe that the word "consumers" includes both existing and future consumers—a point we debated last week—and that the term "future consumers" has no place on the face of the Bill. The argument that I advanced in connection with Amendment No. 92A applies equally to Amendment No. 116A.

Baroness Miller of Chilthorne Domer

Going back slightly, if we were to define clearly people in water poverty we could simplify this part of the Bill for those who have difficulty paying their water bills. To that extent, I support the amendment. It is certainly not true that all those of pensionable age, for example, would need any special provisions. They often fall into the better-off categories of society. I press the Minister again on whether the Government are clear about people who are unable to pay their water bills.

Lord Borrie

I feel somewhat ambivalent to this group of amendments. I did not speak to the previous amendment because I was a little puzzled as to what it was for. It is of interest because, obviously, the whole issue of people who cannot pay because of low income is important. As the noble Baroness, Lady Byford, indicated, water companies have had to cope with this problem in recent years as they have been disallowed from disconnecting.

All of us, no doubt, are very much against the notion of disconnecting people who are poor—the "can't pays" rather than the "won't pays". None the less, I hope that Members of the Committee will recognise that the ultimate threat of disconnection was of some value—at any rate so far as concerned the "won't pays"—because eventually one got a payment. Water companies are now faced with the problem that there is no ultimate sanction because, for sheer humanitarian reasons, everyone has to be supplied with water. Very often the ones who cannot pay are in most need—the single-parent families, the substantial families—and for them it would be a disaster on a Baghdad scale if supplies were not maintained.

This is a very important matter. It is right that individuals with low incomes should be of special concern to the Secretary of State or the authority, as the case may be. The previous amendment might have defined people on low incomes and have been of some value to that extent, but otherwise it was—I suggest rather rudely to the noble Baroness—a little academic.

As to the list as a whole, it seems perfectly reasonable to pick out each of the other groups. However, as I suggested last time, I am not sure why individuals residing in rural areas should be picked rather than those living in urban areas, some of whom include the poorest in the country. Why should one pick one group rather than the other?

The trouble with picking such a group, as I suggested on a previous occasion, is that that encourages the Opposition to add to the list. Last time— I am glad that we have put this behind us now—students in full-time education were deemed to be a separate and proper group to pick out. That is the trouble with a list of this kind. At the end of the existing new subsection (2C) it says that this little list, is not to be taken as implying that regard may not be had to the interests of other descriptions of consumer". One wonders what the point of it is. No doubt the Minister will explain. At the moment I am ambivalent as to its purpose and unsure whether it should be retained.

Baroness O'Cathain

I feel that this part of the clause clouds the issue. The issue of water debt is, as we have discussed many times, twofold: there are the "can't pay" and the "won't pay". Some of the "can't pay" people attempt to pay because they have pride and do not want to have bills hanging over them, whereas some people who "won't pay" are as wealthy as anyone here and they think, "There is no sanction so we can get away with it".

I do not think that this amendment tackles either of those categories; it certainly does not tackle the second category. But there must be ways. I speak as a director of water companies that have not been involved in the minutiae of this, but I know that there has been an attempt to get water companies, through an organisation of water companies, to come to a solution of this major problem of indebtedness. I would prefer to see such a list done away with, and a commitment put on the face of the Bill for the Government to do everything possible to try to reduce the level of indebtedness of the water companies that has increased by 10 per cent since the sanction of disconnection was introduced. We shall come to further amendments later.

The emphasis in this set of amendments is on those who "can't pay"—not those on this list but those who have a real problem. There should be some way of dealing with that through the benefit system, which deals with matters such as mortgage repayments. There are also supplementary benefits for various things and I cannot see why water cannot be included in that. As the noble Baroness, Lady Miller, has stated, there is a list provided by the citizens advice bureaux which advises those who are in straitened financial circumstances to pay off their debts in a descending order of importance. I think water comes about fifth, after such matters as payments for clothes, catalogue buying and satellite television subscriptions. It is a big issue but I am not necessarily sure that the amendments—particularly this one—deal with it.

Lord Whitty

Likewise I am not sure that these amendments address the problems referred to. It is possible to be completely purist, as my noble friend Lord Borrie was urging us on this amendment, and to delete all reference to any individuals. Were the Bill to be in that form before the Committee I am sure that amendments from the Opposition to pay particular attention, for example, to pensioners, the disabled or those in rural areas would undoubtedly have arisen. Where one draws the line is a matter of judgment. A complete deletion of those would imply that there has to be equality of treatment for all groups.

I think it is right that the attention of the authorities should be drawn to these categories: the disabled, the elderly, those on low incomes and those in rural areas. That is right in this context as it is in other contexts. Therefore, to some extent it is a matter of taste, but it must be the case that to operate effectively the authorities would have to pay attention to those groups.

I do not like Amendment No. 98A at all. As my noble friend Lord Borrie mentioned on the previous occasion, the reference to future consumers is a way of getting the authorities to focus on the long-term interests of consumers as well as on the shorts-term interests of consumers. Therefore, to delete the list would not be helpful. Amendment No. 116A is effectively covered by those comments in relation to Amendment No. 92A.

Baroness Miller of Chilthorne Domer

If 4.4 million households in England and Wales were in debt at the end of the financial year 2001—that is the last year for which I have figures—that is 19 per cent of households. I understand that the Minister does not like this amendment tabled by the noble Baroness, Lady Byford, or my previous amendment, but if the amount of household water debt is that high, what do the Government intend to do to remedy the situation? If they will not accept any of our amendments, do they intend to bring forward something of their own?

Lord Whitty

We have discussed these issues with the companies, and we shall continue to do so. Dealing with household debt and dealing with the distribution of household debt is not really something that can be dealt with in the legislative arena. It certainly is not something that can be dealt with by these amendments.

Baroness Byford

I thank all noble Lords who have spoken in this short debate. I have three questions for the Minister. First, on the amendment that seeks to delete all those in the list, are specific groups named on the face of other utility Bills? Secondly, I understand that the thrust behind the Minister's response to Amendment No. 98A is that he wants to give encouragement to future consumers. There is no difference between us on that; we just do not think that it is necessary on the face of the Bill, hence the amendment.

Thirdly, surely all those groups of people laid down in the Bill, except perhaps those living in rural areas—it would not necessarily be true of them—would fall directly within the benefit system. If they fall within the benefit system, because they are low income families or are recognised as having problems, surely the benefit system would make it unnecessary to specify them separately in the Bill. With regard to the pensioner category who live in rural areas—I say to the noble Lord, Lord Borrie, that I am not making an appeal on our own behalf—

The Deputy Chairman of Committees

I note that there is a Division in the Chamber.

[The Sitting was suspended for a Division in the House from 3.57 to 4.7 p.m.]

Baroness Byford

Before the Sitting was suspended, I put three questions to the Minister. Provided that he is happy that he has understood them, I am happy to await his response.

Lord Whitty

The response is normally given by the mover of the amendment, but I shall attempt to answer.

Baroness Byford

Perhaps the Minister will forgive me. I thought that I had asked three questions to which he had not responded when the Division Bell sounded. I assumed that he would answer those before I did so.

Lord Whitty

One of the questions related to provisions in other legislation. The provision in the Utilities Act 2000 is virtually the same—apart from the last group; namely, customers … whose premises are not eligible to be supplied by a licensed water supplier". On the issue of the inter-relationship of those groups and those in debt, as I said, we have been in discussion with the water companies. One of the reasons why this matter is not easy to deal with in legislation is that the pattern of debt is very different for each water company. Therefore, we are conducting some research and discussion with the companies about how to deal with that.

Although much of the focus of the discussion has been on debt, these groups are not designated only because they are the most likely to fall into debt—some are not in debt. Disabled consumers, for example, have special service needs; rural consumers have connection and distance problems, and probably service problems as well. So it is not primarily for reasons of debt that these groups are listed here, although the issue is relevant. I believe that I have dealt, at least in part, with the three questions put by the noble Baroness.

Baroness O'Cathain

What else would the reason be, if not debt? The provision of water is automatic—water is water, is water, which is provided. Looking at the clause again, I cannot quite understand the Minister's point. The words are: the Authority shall have regard to the interests of". Surely those interests relate to paying for water rather than to anything else.

Lord Whitty

Yes, but the questions of connection. of how much is paid for the services and of how the service charges are raised—and, therefore, the amount of money required from consumers—are not necessarily related to the propensity of those consumers to get into debt. They relate to the totality of the charging system and to the way in which the service providers operate, to make sure that they do not discriminate against these groups.

Baroness Miller of Chilthorne Domer

Are there not effectively two categories? There are those who are presently classed as "vulnerable groups", and those who have to spend more than 3 per cent of their income on their water bills. Those are the two relevant groups.

I cannot quite understand why "individuals of pensionable age" in paragraph (b)—I do not quite have to declare an interest yet!— should be in a special category unless they have difficulty paying their bills; otherwise, why is there no category for those who are perfectly well off?

Baroness Byford

Before the Minister responds, perhaps I may ask him to clarify the point I raised with regard to those who are considered to be struggling to pay their bills. My question before the Sitting was suspended related to the fact that most of those people will be on some form of benefit; therefore, their needs will be covered by the benefits system. The Minister did not address that point in his reply.

Lord Whitty

Their income may be supplemented by the benefits system for certain services, but problems caused by the water companies may not be covered. The benefits system helps families which meet certain terms. But a family with a certain number of children or with a certain degree of disability may be in a different situation from another family as far as concerns its water requirements and the way in which the water companies supply the water. You cannot rely on the benefits system to remove the requirement for the authorities to pay attention to these groups.

Pensioners often have difficulties in meeting bills, in making complaints and in accessing the service companies. It seems sensible to include pensioners in the Bill, as is the case for other utilities. Not all pensioners, rural dwellers and people on low incomes will be vulnerable in relation to water. Clearly there is an overlap in the provisions, as there is in regard to fuel poverty.

It is important to stress that although the alleviation of fuel poverty as an objective is contained in government statements and government legislation, a definition of fuel poverty is not required by the legislation. Equally, we do not define water in the Bill in the way suggested by the noble Baroness in the previous amendment. But we do designate those groups to which authorities, councils and so on have to pay attention in relation to various aspects of their work.

Baroness Byford

I thank the Minister for that explanation. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 93 not moved.]

Baroness Byford moved Amendment No. 94: Page 42, line 45, leave out "that power or the performance of that duty" and insert "those powers or the performance of those duties

The noble Baroness said: Amendment No 94 seeks an explanation of why the multiple powers and duties at the beginning of new subsection (2E) become singular at the end of the subsection. Do the Government envisage that any of the interests mentioned in paragraphs (a), (b) and (c) will have an impact only upon a single duty mentioned in subsection (1)? I would be grateful if the Minister could clarify the point. I beg to move.

Lord Whitty

When the Secretary of State or the authority exercise powers or perform duties under this section they may have regard to certain interests affected by that power or that duty. To amend it to the plural would imply something entirely different. It could imply that when the Secretary of State or the authority exercise any of the powers or perform any of the duties under Section 2(1) of the Water Industry Act, they may have regard to interests affected by any of the other powers or duties. That clearly would be wrong. It is only when exercising one of those powers that they have to deal with the people affected by that power.

Baroness Byford

I am grateful for that clarification. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.15 p.m.

Baroness Byford moved Amendment No. 95: Page 42, line 46, at end insert— (2F) In performing the duty under subsection (2A)(c) above the Secretary of State or, as the case may be, the Authority shall—

1. (a) act in accordance with the current direction issued under section 5A(6) below;
2. (b) have regard to the long term interests of consumers;
3. (c) without prejudice to the generality of the foregoing. ensure that appointed companies are able to fund on reasonable terms all required investment programmes and the long term maintenance of their assets;
4. (d) apply to all appointed companies all determinations and conclusions of the Competition Commission (including all methodologies adopted by the Commission) which relate to any such company."

The noble Baroness said: In moving Amendment No. 95, I shall speak also to Amendment No. 99. The amendments relate to two important issues. Amendment No. 95 concerns the long-term interests of consumers. We discussed in earlier debates the cost of long-term maintenance. Proposed new subsection (2F)(b) and (c) speaks for itself in that regard. Paragraph (d) is particularly important as it requires that the methodology adopted by the commission should apply to all appointed companies. The amendment seeks to clarify the situation. I understand that the Enterprise Bill removes possible political influence. Once agreed, methodology is established.

Amendment No. 99 deals with the same issue and seeks reasonableness and proportionality. Proposed new subsection (1A) states: The Secretary of State may not exercise his power under subsection (1) above so as to increase the cost that may have to be met by any relevant undertaker or by any consumer".

That is proportionate and should be targeted. I beg to move.

Baroness O'Cathain

I thank my noble friend for introducing the amendment, to which I have attached my name. The background behind the amendment is that, in determining the prices to be charged, a methodology is given to all companies by which they produce their final figures. The amendment requires that the methodology should be agreed by the authorities and all the companies before they go on to do the "number crunching".

The appeal process should apply not only to companies which have appealed against the methodology but to all companies. That is very important. Otherwise the same situation will arise as the last time there were appeals from the water companies to Ofwat, when some companies were involved but it was not a general appeal. If an appeal is made and a condition is agreed through the appeals process, particularly in regard to the methodology, it should apply to all companies and there should be no further appeal.

Baroness Miller of Chilthorne Domer

On page 42, lines 6 and 7, the Government specify that the companies must be able to secure reasonable returns on their capital for shareholders. The noble Baroness. Lady O'Cathain, disagrees.

Baroness O'Cathain

The reasonable returns are not only for shareholders but for investment in maintenance and infrastructure. A high level of capital investment is required to enable the infrastructure to continue to supply fresh clean water to every household. It is not necessarily a shareholders' perk. It is not money to be given in dividends to shareholders.

Baroness Miller of Chilthorne Domer

I thank the noble Baronesses for that explanation. I should like the Minister in his reply to confirm that interpretation of what the Government have put on the face of the Bill. Some definition of where the reasonable returns on capital are expected to go is helpful and perhaps, for that reason, this amendment would also be helpful. There probably needs to be a hierarchy of interest of consumers, infrastructure, and so forth, that is clearly understood. I know that the pricing mechanism and the water authorities' duties include that. But as the Bill seems to go into great detail on some of these points, spelling out that hierarchy would be helpful.

Lord Whitty

In relation to this particular discussion, the reference to "reasonable return" in paragraph (c) is part of a sentence which refers to the proper carrying out of those functions. Therefore, it is fairly much as the noble Baroness, Lady O'Cathain, indicated. As regards hierarchy of objectives, the problem with Amendment No. 95—with which I have some sympathy—is that it appears to give primacy to the long term and to long-term investment over other provisions. Clearly, in some circumstances, the regulator would have to pay attention to the short-term impact. An immediate and draconian price rise, for example, could be something to which the regulator would have to pay attention, while also giving consideration overall to the longer term. It could override, in terms of its effect on the consumer, the long-term position.

This clause is fairly inoperable; it does not indicate the period of long term to which it refers. Of course, throughout the regulatory structure we will have periodic reviews. That could imply that there would always be a trade-off of the long term against the short term, whereas clearly the regulator and the other authorities would need to have a balanced approach.

The Secretary of State issued guidance to Ofwat earlier this year stating that, The Government would expect regulators and companies to take a long view, not confined to the limits of the periodic cycle, in devising and recommending solutions". That general guidance stands and achieves the objectives that the slightly difficult formulation in the amendment might not.

Amendment No. 99 concerns the question of the financial costs that might be imposed on water companies and their customers. I support the aim that the costs and benefits of any guidance issued under this clause must be assessed and properly considered. The Government are committed in this and in other contexts to producing regulatory impact assessments for that reason. In addition, in the impact assessment which accompanied this Bill, the Government said that where there might be significant financial implications, they should be taken forward by means of new legal provision.

I do not think that the way in which Amendment No. 99 is directed to undertakers' and consumers' costs is appropriate. However, I am prepared to take Amendment No. 99 away and try to come back with something more appropriate.

Baroness Byford

I am grateful to the Minister for his last comment on Amendment No. 99. As he knows, it is difficult to propose amendments that fit, that are relevant and with which the Government may have sympathy, even though the wording is perhaps not quite right or unacceptable. I thank the Minister.

With regard to Amendment No. 95, the Minister said that it might put in jeopardy a short-term need that needs addressing if we look too much at the long term. I should like to take this issue away and perhaps return to it at a later stage. I accept that the general guidance given to Ofwat is in being. But the amendment, particularly as regards methodology and the duty to publish it, has not been addressed. Therefore, we may need to look at this again.

I believe that these amendments would help the Bill. A two-stage approach helps to ensure that the price review process is more transparent and predictable to characteristics of good regulation. Price determinations are undertaken on the basis of published and agreed methodologies. I thought that that was something which the Government would support. We believe a two-stage approach achieves early resolution to disputes on methodology and policy. It has the potential that lengthy and costly appeals could be reduced. Therefore, it would be of benefit to customers who currently have to bear the full costs of appeals to the Competition Commission.

In the mean time, the Minister has said that he will look again at Amendment No. 99. He might also have a look at Amendment No. 95. I am not tying him to a commitment to do that as he has not given any indication of doing that. We are trying to ensure that all determinations are common to all companies. It seems much more logical to go down that line than perhaps to have different concepts for different companies in different areas. If the Government want to go down that latter course—a bad pun; another pound in the Water Aid bucket—I think that that and the implications that it might have on individual water companies should be made clearer. At this stage, I beg leave to withdraw Amendment No. 95.

Amendment, by leave, withdrawn.

The Duke of Montrose moved Amendment No. 96: Page 43, leave out lines 24 to 26.

The noble Duke said: This is another probing amendment. Subsection (4) contains various references to companies holding an appointment under Chapter 1 of Part 2 of the Water Industry Act. Suddenly, in sub-paragraph (iii), there is a reference to "the person" who is the licensed water supplier. The Secretary of State or the authority is to ensure that this person's licence does not authorise it to carry on any activities in the area of "the company". Frankly, I am unsure what the Government intend by this provision and would appreciate clarification from the Minister.

In speaking to Amendment No. 96, I shall speak also to Amendment No. 100, which is linked to it. Under new Section 2A, the Secretary of State may issue guidance to the authority concerning its contribution towards the attainment of any social or environmental policies. We welcome this provision, particularly the requirement that the Secretary of State and the assembly consult the necessary stakeholders.

I am also pleased that the draft guidance will be laid before Parliament, but I am unsure whether the guidance will have the same status as a statutory instrument subject to the negative procedure. It appears that there is the usual 40 days' time for consideration of content, during which either House can resolve that the guidance should not be issued. Does that mean that the draft guidance could be rejected or amended, if any Member wished to do so? Will the draft guidance be subject to a substantive debate in each House? I should appreciate some clarification on the parliamentary status of draft guidance. I beg to move.

4.30 p.m.

Baroness Farrington of Ribbleton

Amendment No. 96 seeks to remove the prohibition on licensed water suppliers associated with an undertaker from operating in that particular undertaker's area. This provision is needed to ensure consumers are protected and to promote competition.

We expect undertakers to compete in their areas of appointment against licensees by offering better prices and services and operating at higher efficiencies. At the same time, we expect undertakers to create associated companies so that they can enter the competitive market in other parts of England and Wales.

If these associated licensees were able to operate in their parent undertaker's area, the undertaker could find ways of encouraging customers to transfer to its associates in order to remove them from their regulated activities and the price control mechanism. This could be done only at the expense of the customers remaining with the regulated business.

The prohibition has also been put in place to ensure that when licensed water suppliers operate in an area they are competing with each other and the undertaker on a level playing field. I hope that I have given the explanation that the noble Duke sought.

As has been said, Amendment No. 100 seeks to redefine the duration for which any draft social and environmental guidance must be laid before Parliament for approval from "40 days" to "40 working days".

Although the social and environmental guidance is not a statutory instrument, the Bill replicates the negative procedure for parliamentary scrutiny, including the usual exclusions. The 40 days are therefore calendar days in exactly the same way. Forty working days would depart from the normal parliamentary procedure and would extend the time that the draft guidance has to lie before both Houses to beyond the time allowed for statutory instruments. We believe that that would not be appropriate. If a matter is raised, there could be a debate if the usual channels agree.

The Duke of Montrose

I thank the Minister for her clarification. I feel much more at one with what the Bill is trying to achieve and what we are discussing. There is a problem that the usual channels may not always agree to a debate. However, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Miller of Chilthorne Domer moved Amendment No. 97: Page 43, line 26, at end insert— ( ) to have regard to the Water Framework Directive and proposals for Water Framework Directive-related programmes when taking pricing decisions;

The noble Baroness said: This amendment seeks to probe the water industry's thinking on Water Framework Directive-related programmes, which may well require actions to be undertaken that the Government consider fall under the proposed new subsection (3)(e), which is introduced by subsection (4) of Clause 38, to contribute to the achievement of sustainable development".

I do not believe that the measure is specific enough. For example, would the planting of a forest in a river basin catchment be the kind of issue that the water industry would have regard to when carrying out its duties? My noble friend Lord Livsey will give further examples. Will the Minister explain to what extent the water industry must take the Water Framework Directive into account as, at this point in time, the directive is not included in the Bill? I beg to move.

Lord Livsey of Talgarth

I shall expand a little on what my noble friend has said, particularly in relation to the Water Framework Directive. Article 9 of the directive refers to the recovery of costs for water services. It states that, Member states shall take account of the principle of recovery of the costs of water services, including environmental and resource costs, having regard to the economic analysis conducted according to Annex III". It goes on to say that, water-pricing policies provide adequate incentives for users to use water resources efficiently, and thereby contribute to the environmental objectives of this Directive". It continues: an adequate contribution of the different water uses, disaggregated into at least industry, households and agriculture. to the recovery of the costs of water services, based on the economic analysis conducted according to Annex III and taking account of the polluter pays principle". In proposing the amendment, my noble friend Lady Miller draws attention to the fact that Article 9 of the Water Framework Directive lays out its stall as regards the matter we are discussing. I refer to the statement that I have just read out. We should like to probe the Minister's thinking on the matter as it seems to me that what is laid out in the Water Framework Directive is eminently sensible when calculating pricing policies.

It indicates clearly that the social dimension has to be taken into account and states that, Member States may in so doing have regard to the social, environmental and economic effects of the recovery as well as the geographic and climatic conditions of the region or regions affected". Therefore, the social dimension should be taken into account in pricing policies. These are very important issues in relation to the Bill. The amendment seeks to probe the Minister's thinking on whether the Water Framework Directive needs to be integrated into the Bill?

Baroness Byford

I do not want to comment further on what has been said but we come back to the same question and difficulty—that is, that there are issues in the Water Framework Directive that cannot be included in the Bill. It puts us in a ridiculous situation and I wish to log my concern again. I understand why the noble Baroness has moved the amendment.

Lord Whitty

As the noble Lord said, the amendment would require the Secretary of State and the authority to have regard to the Water Framework Directive and its consequent programmes when taking pricing decisions. I do not think that anyone will argue with that. However, we do not need new legislation to do that as it is already in process.

The directive requires us to have regard to certain principles in the recovery of costs, notably the polluter pays principle. As a result of the directive, we have set out in our consultation that the water charging system in this country already takes such matters into consideration without legislative change being required.

We certainly recognise that the directive will require programmes of investment by water companies and others. A process for implementing the directive will identify exactly what needs to be done and the timetable. Once those programmes are defined as legal obligations on the companies under the directive, the Secretary of State and the authority will be under a duty to ensure that their financing carries through. At present that is a responsibility of Ofwat. There is already a very well established procedure—the periodic review of water price limits—under which Ofwat sets price limits relating to considerations now required by the directive. The obligation that companies must meet, and of which Ofwat must take account, will be clearly set out in guidance to the regulator. In January, as I said, we issued new guidance for the next periodic review. That set out how the Water Framework Directive should be treated for the purpose of price limits in 2005 under the existing process. It is too early to say what investment will be required. Under the provisions of the Water Framework Directive, the indications may be that most of the investment will be required beyond 2010 but some schemes may need funding between 2005 and 2010, in which case the Water Framework Directive schemes will be included in the guidance that will be issued under existing legislation. There is no need for any new legislation in this field. We have therefore not provided new powers in the Bill.

Baroness Byford

I want to respond to the Minister on that. He clearly said that there is no need for that. The truth of the matter is that the Water Framework Directive will not be adopted until after we have passed the Bill; that is one of the arguments that we have had all along. It has huge implications. The Minister said that guidance was sent out to Ofwat earlier this year, if I understand him correctly—I listened quite carefully, I trust. He also said that there will be clear guidance to come in the future but that it was too early to say as yet.

We are being asked to take an awful lot of things on trust in the Bill in addition to giving the Government powers to do whatever, because we do not have any control over guidance. However, when we debate the Bill and primary legislation, we do have that. I again say that I find where we are unsatisfactory and will continue to say so throughout the Bill. The Government cannot have it both ways. They cannot say on the one hand that that is not necessary and, on the other hand, that we will clearly need to have guidance. Perhaps the Minister will comment on my comments.

Lord Whitty

The point is that we can and do issue guidance under present legislation; we have already done so in anticipation of the implications of the Water Framework Directive. We do not need new powers in that regard.

Baroness Miller of Chilthorne Domer

Before the Minister concludes, will he comment on paragraph (e) at line 27 on page 43? It refers to the need, to contribute to the achievement of sustainable development", which is a worthy goal that I fully support. Is it necessary to have that in the Bill?

Lord Whitty

This involves the substitution of a section in the previous regulations, which updates it. Normally, I am pressed by the Liberal Democrats to include sustainable development on virtually every page of the Bill. I am not quite sure what point the noble Baroness is making.

Baroness Miller of Chilthorne Domer

My point is that when the Minister responded to the amendment, he said that the amendments tabled by myself and my noble friend Lord Livsey to the Water Framework Directive were not necessary because that would happen anyway. I suggest that it is necessary to have those amendments in the Bill. I would be very pleased if the amendment on sustainable development were included in the Bill.

If we keep ignoring the Water Framework Directive and do not include it in any of the matters to which the various bodies must pay attention, guidance will of course later refer to that. As we said at the beginning of the Bill's Committee stage, that is unsatisfactory in terms of the start of the process for introducing the most important piece of water legislation for the past 20 years. We should also consider the fact that if that is not included in the Bill, it will be seen as a less important issue than those matters that are included. If the Minister does not believe that that will be the case, I should be relieved. The fact that it is not in the Bill and is not primary legislation will make it appear to be a less important issue.

When I moved the amendment, I asked the Minister about a specific example. River basin management might require the planting of a forest, which is a very wide point for the water industry authority to take account of. As water cycle issues are increasingly taken into account, a company might be required to regard that as relevant. Without our amendment, the sorts of directive-related programmes referred to in the amendment will be seen as being less worthy than other issues in the Bill. I shall return to this on Report, when we will again discuss the Water Framework Directive. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4.45 p.m.

Baroness Byford moved Amendment No. 98: Page 43, line 27, at end insert— (4) In performing their duties under this Act, the Secretary of State, the Assembly and the Authority shall also have regard to the following—

1. (a) the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed;
2. (b) the desirability of promoting and facilitating the development and use of effective forms of self-regulation;
3. (c) any other principles appearing to them to represent the best regulatory practice;
4. (d) the desirability of encouraging investment and innovation in the water industry; and
5. (e) the opinions of consumers and members of the public."

The noble Baroness said: In this amendment. we are considering the whole question of good regulation or better regulation. The Better Regulation Task Force, which was established back in September 1997, is, as noble Lords will know, an independent body that advises the Government on action to ensure that regulation and enforcement accord with the five principles of good regulation, which are set out in the relevant document.

We want to ensure that the five principles of good regulation are recognised in the Bill to ensure that all regulators follow those principles. The benefits that accrue with better regulation are proportionate, accountable, consistent, transparent and targeted. The amendment would strengthen the addition to the objectives of the regulation set out in the Bill. The Secretary of State or the authority shall consider those extra requirements. Paragraph (a) in the amendment refers to the need to be, targeted only at cases in which action is needed"; in other words, that involves not considering other bits where no action is needed. We believe that that would save costs to the Government and the water companies in terms of management time and cost time. If we can save in relation to such costs, that would obviously help the consumer. All costs that are put on water companies eventually get passed on to the consumer. If we target only cases in which action is needed, it appears to us logical that the Government would agree to that.

We also believe, as indicated in paragraph (b) of the amendment, that, effective forms of self-regulation", should be encouraged in the first place. In paragraph (d), we support, the desirability of encouraging investment and innovation in the water industry".

I beg to move.

Baroness Miller of Chilthorne Domer

I rise briefly to support the amendment, to which my name and that of my noble friend Lord Livsey are attached. It is very important. I expect that the Minister will again say that it is not necessary to include such provisions in the Bill. In a Bill that is very long on detail, it would be nice if some of the principles underpinning its entire regulatory nature were spelt out and reinforced. We have debated in previous sittings some of our concerns about proportionality and targeting. The amendment would strengthen the already good example that Ofwat has set in quoting the principles of good regulation in the periodic review for 2004.

Lord Borrie

My first reaction on reading the amendment was that it comes from the "motherhood and apple pie" school of legislative drafting. Extremely worthy principles are set out in it. It made me feel good inside just to read them, especially when I got to the end of the amendment, which states that, the opinions of consumers and members of the public", will be taken into account.

I do not want to make fun of the amendment, because it occurs to me that it has some very worthy principles. Those who drafted it ought to get a prize from the Better Regulation Task Force for doing so. I know that the same amendment features in the Communications Bill that the House is considering. However, I am conscious that although the principles might be very familiar to us as legislators, they are not so well embedded in our constitution and way of life that we can take them for granted. When one reads through them slowly, it seems that they are all pretty obvious. I have emphasised the parts that I think are most obvious. None the less, to have them in the Bill is worth while.

The Minister may feel that it is sufficient as an alternative if the regulators set everything out, not only when they start their working life, but perhaps regularly in their annual reports. So be it, but it may do good and will certainly do no harm to set the principles forth in the Bill. Despite my immediate reservations to seeing the words set out in cold print, I commend the amendment.

Baroness O'Cathain

I shall follow that ringing endorsement from the noble Lord. I thank him for his congratulations on the drafting of the amendment. In fact, it was sheer plagiarism, because it comes out of the Ofcom Bill. There is a virtue in that because, in the new regulatory system in which we are trying to have better regulation in all activities of the economy and our legislative life, the sooner people get used to the principles the better. We have had lots of principles for years and years that come as second nature to people, whether or not they are noble Lords or involved in legislation at all.

Following the establishment of the Better Regulation Task Force, the time has now come to take on board some of its work and conclusions. I am sure that we all think that its conclusions were superb. They were like a breath of fresh air going through the whole morass of regulation. The five principles listed in proposed new subsection (4)(a), which are, transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed —I call them the TAPCT principles—will become something of a mantra, but they are none the worse for that.

There is another message in the amendment beyond plagiarising the Ofcom Bill. In the periodic review in 1999, the Competition Commission was actually critical of Ofwat, primarily on the transparency route. It told them that the mistake should not happen again, and the amendment might help in that direction. As I say, we are definitely taking on the findings of the Better Regulation Task Force. There should be consistency of approach across the industry as a whole.

Do not forget that, when the Bill becomes an Act, Ofwat, the Drinking Water Inspectorate, the Environment Agency. English Nature, the Health and Safety Executive and, I am sure, many other such bodies will be involved. We want to ensure that people try with 100 per cent commitment to fulfil their obligations in regulation, as in everything else. We would like to know that there was consistency of approach in all the areas. I simply hope that the Government will buy into that, and therefore that the Secretary of State will underpin it. I thank all those who have supported what I originally suggested.

Lord Whitty

There is a straight plagiarism of the Communications Bill, which in other respects has not been the most popular piece of legislation in the House. Part of the amendment would not do any harm, but it does not really add anything. The water industry is not the same as the communications industry. The principles in proposed new paragraph (a) are already adopted by Ofwat, and making them statutory would not make a lot of difference.

There is a difference on the reference to self-regulation. In a fully competitive market, or one approaching full competitiveness such as telecommunications, self-regulation can lead to benefits to consumers and companies, and minimise the problems of official regulation. The water industry is different, however. It is still virtually monopolistic in terms of supply. It is essential. It covers very sensitive issues, such as pricing, cold-water quality, and environmental standards. I do not think that the option of self-regulation—it might apply to communications, and certainly does in several other sectors —should be given the preference that the amendment would demand by implication.

The regulatory system already works to deliver investment and innovation by setting and policing challenging standards for improvements. Not having precisely the same commitments on regulations as the Communications Bill will not detract from the water regulator continuing to have that effect. Putting an apparent preference for self-regulation in this Bill could greatly reduce the pressure on the water companies to achieve the objective that we are all seeking.

Lord Livsey of Talgarth

I have not spoken, but I agree with a lot that has been said from this side of the Committee. The amendment is excellent. It is a catchall, really, as it includes all the aspects that should be taken into account. Has the Minister considered the importance of reporting the performance of different companies in relation to proposed new paragraphs (b), (c) and (d)? Paragraph (b) is about, the desirability of promoting and facilitating the development". How much promoting and facilitating is being done? How much investment and innovation is taking place? How does one company compare with another in those terms and to improve matters so far as the delivery of services for customers is concerned?

There is a lot in the amendment. Although I agree with the Minister in one sense when he says that there is a monopoly, in another there is not, because there are variations in performance. I have seen Ofwat figures of comparison. The amendment sets out all the aspects that one would expect to find in a report.

Lord Whitty

The amendment does not require any reporting as I read it, but Ofwat already reports and the authority that replaces it will continue to report on much to which the noble Lord referred.

Baroness Byford

I thank the Minister for his response, although I am disappointed. He indicated that he considered that parts of the amendment were desirable, and that the Government could accept them. He has reservations on proposed new subsection (4)(b) and has explained why—in particular, that he thinks that it will reduce the ability of the water companies to run their businesses as well as they might.

Would proposed new subsection (4)(a) be acceptable? I am really looking to the Minister for guidance. I cannot see any reason not to accept proposed new subsection (4)(c) or (d). He indicated that proposed new subsection (4)(e) was already catered for, but would he have regard for proposed new subsection (4)(a), (c) and (d), or a rewording of those paragraphs? As the wording is obviously not acceptable to the Government, they could take the wording away and think about tabling or letting us table another amendment to deal with the issues that those paragraphs cover. To me, they seem to make common sense and to be acceptable.

5 p.m.

Lord Whitty

We do not usually legislate on the basis that there is no good argument against a particular provision. We legislate on the basis that it is necessary. In general, we do not need a repetition of the reference to various principles of regulation that are set out in the amendment. However, I shall have another look at it to see whether there is a version of it that would be helpful.

Baroness Byford

I am grateful to the Minister, particularly in relation to paragraph (a). It is important that it is targeted only at cases that need action. It seems to me silly to waste taxpayers' money on examining cases where no action is needed or where the action has been agreed with Ofwat directly and the water companies are trying to put the matter right. I believe that paragraph (a) is hugely important. I am grateful to the Minister for indicating that he is willing to consider paragraphs (a), (c) and (d). I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 98A not moved.]

Clause 38 agreed to.

Clause 39 [Guidance to Authority on social and environmental matters]:

[Amendments Nos. 99 and 100 not moved.]

Clause 39 agreed to.

Baroness Byford moved Amendment No. 101: After Clause 39, insert the following new clause—

"AUTHORITY'S STATEMENT OF POLICY After section 2 of the WIA there is inserted—

"2B AUTHORITY'S STATEMENT OF POLICY

(1) The Authority shall prepare and publish a statement of policy with respect to its determination of charges in periodic reviews and interim determinations under all or any of the instruments of appointment of companies as relevant undertakers made by virtue of Part 2 of this Act.

(2) The Authority's statement of policy under this section shall include a statement of its policy with regard to—

1. (a) the carrying out of its duties under this Act insofar as they relate to its determination of charges;
2. (b) the matters to be taken into account and the methodologies to be applied in its determination of charges; and
3. (c) the extent to which the performance of functions by persons with powers and duties conferred or imposed by or under this Act or any other enactment are relevant to its determination of charges.

(3) The Authority shall determine charges in periodic reviews and interim determinations under a company's instrument of appointment as a relevant undertaker on the basis of the most recently published statement of policy.

(4) The Authority may revise its statement of policy and where it does so shall publish the revised statement.

(5) Publication under this section shall be in such manner as the Authority considers appropriate for the purpose of bringing the matters contained in the statement of policy to the attention of persons likely to be affected by them and shall not be made less than twelve months before a periodic review.

(6) When preparing or revising its statement of policy under this section, the Authority shall consult relevant undertakers and such other persons as it considers appropriate, subject to the requirements of subsection (7).

(7) For the purposes of subsection (6)—

1. (a) consultation shall be by way of written notice given by the Authority not less than six months prior to the publication of the statement of policy which it is preparing or revising;
2. (b) such notice shall state—
1. (i) the matters which the Authority proposes to publish in its statement of policy and its reasons for including them in the statement; and
2. (ii) a period of not less than three months within which that person may give written notice of objection with respect to the matters referred to in the notice; and
3. (c) the Authority shall give each person reasonable opportunity to make oral representations to it on the matters referred to in the notice.

(8) The Authority shall not issue or publish a statement of policy unless—

1. (a) no notice of objection to the policy is given to the Authority within the time period specified in its notice under subsection (7); or
2. (b) if one or more relevant undertakers gives notice of objection to the Authority within that time—
1. (i) the proportion (expressed as a percentage) of the relevant undertakers who have given notice of objection is less than such percentage as may be prescribed; and
2. (ii) the percentage given by subsection (9) is less than such percentage as may be prescribed.

(9) The percentage given by this subsection is the proportion (expressed as a percentage) of the relevant undertakers who have given notice of objection, weighted according to their market share in such manner as may be prescribed.

(10) If the conditions referred to in subsection (8) are not met, the Authority shall (within three months of its receipt of the first or only notice of objection) refer the policy to the Competition Commission for review.

(11) Where a reference is made to the Competition Commission under this section, it shall be the duty of the Competition Commission to determine whether the policy which is the subject of the reference operates in a manner best calculated to fulfil the duties of the Authority arising under this Act.

(12) Where a reference is made to the Competition Commission under this section, the Authority shall not prepare or revise its statement of policy other than on the basis of the determinations of the Competition Commission.

(13) The Secretary of State may by regulations make such provision as he considers appropriate for regulating the procedure to be followed with respect to any reference to the Competition Commission under this section.

(14) Without prejudice to the generality of the power conferred by subsection (13), regulations under that subsection may, in relation to any such reference, apply (with or without modifications) the provisions of any enactment relating to the references to the Competition Commission under the provisions of this Act, the Fair Trading Act 1973 (c. 41) or the Competition Act 1998 (c. 41).""

The noble Baroness said: This amendment deals with the authority's statement of policy. We feel that it is important. I know it is a long amendment. I believe that the hearts of Ministers and legal people must have sunk when they saw the length of it. The Minister nods. I quite understand, but the amendment is very important; that is why we have tabled it. We would not table amendments unless we thought they were important.

The aim of the amendment is to achieve better decision-making through discussions at an early stage in order to get decisions right in the first place, which would, in turn, lessen the work referred to the Competition Commission. If that were achieved, it would save costs both from the commission's point of view and from that of the water companies, the latter having to provide senior managers who are then away from their job of running the water companies efficiently, which is what we require them to do. We believe that that preventive work would benefit all.

Concern has been expressed by Water UK that there is a lack of opportunity for companies to make representations early enough. Subsection (7)(c) of the proposed new clause would give each person reasonable opportunity to make oral representations. I hope that the idea will be welcomed by the Minister.

Subsection (11) places on the Competition Commission the duty to determine the policy. I shall deal with that shortly.

Subsection (12) states that, the Authority shall not prepare or revise its statement of policy other than on the basis of the determinations of the Competition Commission".

If it does, why have a Competition Commission at all? We believe that no one should overrule it. That is why the amendment is in that form.

Subsection (13) states that, The Secretary of State may by regulations make such provision as he considers appropriate for regulating the procedure to be followed with respect to any reference to the Competition Commission under this section".

I return to subsection (11), which states: Where a reference is made to the Competition Commission under this section, it shall be the duty of the Competition Commission to determine whether the policy which is the subject of the reference operates in a manner best calculated to fulfil the duties of the Authority arising under this Act".

I have picked up one or two specific issues from this rather long amendment. I suspect that other noble Lords may wish to comment on issues to which I have not referred. I beg to move.

Lord Whitty

My overall reaction to this rather lengthy amendment is that it is far too prescriptive and not something that we should include on the face of the Bill, because it greatly limits the flexibility with which the independent regulator can operate. In certain circumstances it is also counter-productive. We need to allow the regulator to find innovative ways to carry out its duties.

Essentially the amendment has two aspects. It would require the authority to prepare and publish a statement of policy about changes in periodic reviews. It would also give undertakers the right to oppose the policy of the authority.

It is certainly important for there to be constructive dialogue between the authority and undertakers, but I do not believe that the mechanism of the second of those provisions is right. The proposal for a statement of policy, and especially the procedures surrounding it, would be somewhat bureaucratic and would not improve the conduct of periodic reviews. Following the last periodic review, the Environmental Audit Committee recommended that the process should be made shorter. This amendment would require the authority to consult on a statement of policy at least 18 months before the periodic review, which would definitely prolong the process.

The same extended process would also apply to revisions of the statement of policy. The effect of that would be to make it more difficult for the authority's policies to keep up with the need for change. In keeping people informed of change there is already provision in the Bill for the authority to prepare and publish a code of practice and a forward programme. They must cover the discharge of all its functions, not merely those of price-setting.

I have some concern about other effects of the proposal; for example, the idea that undertakers should be able to oppose and block the policy of the authority even before it is made. Undertakers can already appeal against price determinations once they have been made, and there is also referral to the Competition Commission.

We need to remember that the authority must exercise its functions in the manner best calculated to satisfy a number of aims, including the consumer objective and the financial stability of an undertaker. Companies therefore already have the advantage over consumers, as consumers cannot appeal against price determinations. But the amendment seeks to go further and to give companies the right to obstruct any statement of policy with which they do not agree. Consumer bodies would have only limited rights to participate. So the balance that is struck—both the balance of judgment as to pricing decisions against other decisions that the regulator has to make, and the balance of influence between the companies and consumers—would be disturbed if this amendment were to be adopted in its literal form. The influence that undertakers would have over the authority's policy would detract from its duty to balance all of its duties as an independent regulator.

As far as the companies are concerned, they already have a chance to make representations. Ofwat consults on its periodic review and its methodology, and many informal discussions with the companies take place. There is already a much more constructive approach to establishing an agreed approach than is implied by the slightly confrontational implications of the amendment. While I understand some of the motivation behind the amendment, I do not believe that it would be helpful, and it would greatly restrict the ability of the regulator to do its job.

Baroness Byford

I thank the Minister. I do not necessarily agree with his assumption that the amendment is too prescriptive and that it would necessarily reduce the flexibility of the regulator. I shall consider that point.

With regard to including all its duties, we have discussed trying to ensure early representation and the chance for oral representations to be made. The Minister did not touch on that point in his response. I should have thought that the Government would welcome any proposal that would enable early discussions to take place. If the industry feels at present that it needs a further provision on the face of the Bill—because it is not sufficiently clear that there is a good line of communication—I should have thought that the Minister might feel able to accept such a proposal. That said, I will re-examine the point.

On the statement of policy, I heard what the Minister said, but I do not necessarily agree with him. I shall read his remarks carefully in Hansard. I shall make no further comment at this stage; I shall take the matter away and reflect on it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Byford moved Amendment No. 102: After Clause 39, insert the following new clause—

COORDINATED REGULATION After section 5 of the WIA there is inserted—

"PART 1A

COORDINATED REGULATION

5A COORDINATED REGULATION

(1) In this section—

1. (a) the Agency, the Authority, the Chief Inspector of Drinking Water and (if and while separately appointed) the Chief Inspector of Drinking Water for Wales and the Consumer Council for Wales shall together be referred to as "the regulators";
2. (b) water undertakers, sewerage undertakers, licensed water suppliers, and all other persons engaged in water supply, or the drainage or disposal of sewage, shall together be referred to as "the water industry" or "water industry bodies";
3. (c) "final price determinations" means final price determinations issued by the Authority pursuant to periodic reviews carried out by it under all or any of the instruments of appointment of companies as water or sewerage undertakers;
4. (d) "the consultees" means the persons that the Secretary of State is required to consult under subsection (3) below;
5. (e) under subsections (2), (6), (9) and (11) below—
1. (i) the duties of the Assembly shall relate to water industry bodies whose areas are wholly or mainly in Wales; and
2. (ii) the duties of the Secretary of State shall relate to all other water industry bodies.

(2) The Secretary of State, the Assembly and the regulators shall exercise all their statutory powers and duties, which relate to or may affect the water industry, in a coordinated manner.

(3) To that end, the Secretary of State and the Assembly shall from time to time (and so often as may be necessary for the purposes of subsection (6) below) consult each other and the regulators, the Council, representatives of the water industry, and such other persons as they consider appropriate, for the purpose set out in subsection (4) below.

(4) The purpose referred to in subsection (3) above is the consideration of—

1. (a) the policies that should be pursued by the water industry in the long term interests of consumers;
2. (b) the costs and benefits of those policies;
3. (c) the times within which those policies should be implemented; and
4. (d) accordingly how those policies should be funded.

(5) Without prejudice to the generality of subsection (.4) above, in considering the matters referred to in that subsection, the Secretary of State, the Authority and consultees shall take into account—

1. (a) the duties imposed on the Secretary of State, the Assembly and the Authority under sections 2 and 2A of the WIA;
2. (b) all other statutory duties and Community obligations imposed on the Secretary of State, the Assembly and the regulators which relate to or may affect the water industry; and
3. (c) all statutory and regulatory duties, and Community obligations, imposed on the water industry.

(6) The Secretary of State and the Assembly shall, at least twelve months before each occasion on which the Authority is due to issue final price determinations, issue a direction to the regulators on the matters listed under subsection (4) above, taking into account the matters listed under subsection (5) above.

(7) The Secretary of State and the Assembly shall, in formulating such direction, take into account the consultations carried out under subsection (3) above.

(8) The Authority shall give to the Secretary of State. the Assembly, the other regulators, the Council and the water industry at least eighteen months prior written notice of the date on which he will issue any final price determination referred to under subsection (6) above.

(9) The Secretary of State, the Assembly and the regulators—

1. (a) shall exercise all their statutory powers and duties, including their powers to issue directions and guidance (other than that contained in subsection (6) above), in accordance with the direction from time to time issued under subsection (6) above; and
2. (b) to that end, and for the purpose of meeting the requirement set out in subsection (2) above, shall consult and cooperate with one another in relation to the exercise of their respective powers and duties.""

The noble Baroness said: This amendment deals with co-ordinated regulation. As it is not quite so long as the previous one, I hope that the Minister may deal slightly more sympathetically with it.

It is important that co-ordination between regulators is established early. It should be reliable and transparent, and should bring forward everything that we seek to establish.

Each regulator has different, and potentially conflicting, responsibilities. Currently, no binding statutory framework is proposed in the Bill to ensure that regulators work together in an integrated and co-ordinated manner. Water companies and other organisations could find themselves having to juggle different interpretations and priorities, possibly resulting in inappropriate, unfair and costly regulation. That has been recognised in recent legislation introduced in Scotland. People usually regard reference to Scottish regulation as the "horror of horrors"; however, we believe that the matter should be more clearly defined in this Bill too. Were the amendment to be accepted, it would ensure co-ordinated and consistent regulation; it would introduce predictable regulation, and an integrated approach between the regulators; and it would achieve better regulation at a reduced cost.

The Water Environment and Water Services (Scotland) Bill—I believe I am right in saying that the Bill has not yet completed its passage—contains, on page 2, a specific provision to that effect. So the Scottish Parliament considers such a provision to be important. Under the heading "The general duties", subsection (4)(c) includes the provision that, Scottish Ministers … and the responsible authorities must … so far as practicable, adopt an integrated approach by co-operating with each other with a view to co-ordinating the exercise of their respective functions".

That seems a very sensible thing to do. Subsection (5) states: Without prejudice to subsections (1) to (4), the Scottish Ministers and every public body and office-holder must, in exercising any functions, have regard to the desirability of protecting the water environment".

In requesting co-ordinating regulation to be included in the Water Bill, our amendment is a matter of common sense. I hope that the Minister will be able to accept it.

In proposed new Section 5A(2), we ask that a direction for co-ordination should be placed on the face of the Bill. We believe that such a provision is important. That is why we have tabled the amendment. I beg to move.

Baroness Miller of Chilthorne Domer

Perhaps the reason for not attaching our names to this amendment is that we were frightened by its length. In all seriousness, we have tabled a much more amateurish proposal, which nevertheless aims to achieve a similar point in spirit; namely, that each regulatory body should pay attention to the duties of the others. Perhaps our proposal was too short and the amendment before the Committee is somewhat lengthy and complicated; but the Bill needs to include somewhere a provision that each regulatory body shall pay attention to the duties and obligations of the others.

That is not only because a good example has been set in Scotland. The unfortunate tensions that can sometimes exist between regulators are unlikely to be solved if they are required only to pursue their particular duties in parallel. We should like them to be empowered to work together and seek an amendment to that effect. Perhaps the Minister will be able to accept this amendment; if not, I expect that we shall want to return to the matter on Report.

5.15 p.m.

Lord Borrie

Since privatisation took place 13 or 14 years ago, the water companies have often been pulled in different directions by the different regulatory agencies. Although they all have their separate objectives—no doubt justifiably—I am sure that the idea that there should be co-ordination between them would be most helpful to companies and to their customers. In other words, co-ordination is a consummation much to be desired. It would be in the public interest. Surely the UK Parliament is not so grand that it will not take note of useful precedents that may come over the Border from Scotland. If there is a precedent in Scotland that is useful, let us follow it.

My only quibble relates to the mention in paragraph (a) of the amendment, on page 6 of the Marshalled List, where mention is made of the "Consumer Council for Wales". I believe that that body has been included in error. Those on the council are not regulators; they are advisers. I do not think that the council is meant to be included; it is there by accident. Apart from that, I commend the ideas behind the amendment to the Minister.

Lord Whitty

I do not think anyone will object to more co-ordination—my objection is not to the length of the amendment—although there is already a great deal of co-ordination. I know that there were complaints about the previous first round of the periodic review, but I think that the various bodies have worked together well as regards the latest periodic review. My objection is to the fact that the amendment effectively gives powers to the Secretary of State to override the independent economic regulation. Subsection (7) of the proposed new clause effectively says that the Secretary of State shall issue directions for everything covered by Clause 4—the totality of the duties of the economic regulator.

The Scottish example is simply a call for co-operation. The problem with this amendment is that it effectively blurs the jurisdiction between the regulator and the Government. It refers to the Government taking a lead in consultations on the periodic review, and then issuing directions, including on how policies should be funded. That would take the Government right into the domain of the independent economic regulator.

I do not believe that that is the noble Baroness's intention. It is certainly not an appropriate role from the Government's point of view. Indeed, the Government were criticised by the Environmental Audit Committee and by the Better Regulation Task Force for what was seen as too excessive an intervention in the last price review. The amendment would provide a statutory basis for a much more substantial intervention. I do not believe that that is a particularly healthy move.

Baroness Byford

I thank Members of the Committee who have taken part in this debate. As ever, I am glad to have the noble Lord, Lord Borrie, on side. His knowledge and experience of these matters is hugely important to our debate.

I accept that in paragraph (a) on page 6 we have perhaps put the Consumer Council for Wales in the wrong place. I shall look into the matter.

Lord Whitty

It should be the consumer council for water.

Baroness Byford: Now I understand

it is a mis-type. I apologise. I thank the Minister. I accept that there is an error.

As to subsection (7), it was not our intention to override the present position in the way the Minister suggested. I shall look again at that issue.

On the other hand. the amendment received support from other Members of the Committee. The Minister suggested that the amendment was too long. I accept that length does not always bring quality and we may need to look again at the amendment. Perhaps the Minister will indicate whether in principle—I am not pushing him on the wording—he will accept a revised amendment addressing the issue of co-ordinated regulation. If so, would he prefer me to draft it or would he prefer to put more suitable words together himself? It would save a lot of time in the long run if he did so because government amendments are usually accepted. Does the Minister wish to comment, or will he leave it for me to come back with this issue on Report?

Lord Whitty

Perhaps I may leave it to other noble Lords to bring forward a more appropriate amendment.

Baroness Byford

I am grateful to the Minister for that indication. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Byford moved Amendment No. 103: After Clause 39, insert the following new clause—

"NARROWING SCOPE OF REGULATORY APPEALS In section 12 of the WIA, after subsection (4) there is inserted— (4A) In determining any question or other matter under subsection (3) above, the Competition Commission may consider as determined any matter in respect of which the appointed company does not dispute the determination by the Authority.—

The noble Baroness said: In moving Amendment No. 103, I shall speak also to Amendment No. 104. Amendment No. 103 seeks to introduce a new clause in regard to the narrowing scope of regulatory appeals, and Amendment No. 104 seeks to introduce a new clause in regard to licence modifications.

The amendments seek to build in a provision for the Competition Commission to ignore any matter that the appointed company does not dispute. In other words, if a company recognises that there are problems which it is willing to address, and about which there is no dispute, they should not be discussed again and again. That would obviously save costs.

Am I correct in understanding that, at present, if a matter is referred to the Competition Commission it will have to consider all of the company's working functions and responsibilities—in other words, it cannot deal directly with specific problems? if so, surely an awful lot of time and money is wasted unnecessarily. Where a company and the commission agree, it would seem unnecessary to carry forward this expensive burden ad infinitum.

Amendment No. 104 concerns licence modifications. We believe that water companies should be able to go through the authority to the commission and to influence the content of a referral. That option is not open to them at the moment—they have to go to Ofwat—and we believe that a more direct route may be of benefit to all concerned. I beg to move.

Lord Whitty

I am not attracted to the amendment. Once a referral is made the Competition Commission has the right to examine the total package. The amendment would require it to investigate only those areas in which the undertaker disagrees with the authority.

The Better Regulation Task Force addressed this issue in 2001. It was concerned that any such restriction could lead to companies targeting only certain aspects of the price review—in other words, cherry picking those which they wanted turned over. The same reservation was expressed in the report Appeals Against Regulatory Decisions: Improving the Mechanisms, which was commissioned by Water UK, among others. The report recommended that the existing system of comprehensive price determination appeals to the Competition Commission should remain the central mechanism of appeal.

The alternative is that companies could decide those areas in which the commission intervenes. That is not particularly healthy. As consumers do not have a right of appeal in that sense, the effect would be to allow the companies to decide and restrict the Competition Commission's purview of their decisions. That would upset the balance not only between the regulators and the companies but between the regulators and the consumers. It would not be healthy to move down that road.

Baroness Byford

I thank the Minister for that response. I did not intend that water companies should be allowed to cherry pick. I was trying to establish whether one could save time and money—something we all agree is desirable. If the amendment suggests that companies should be allowed to cherry pick, I am obviously not too happy about it.

The amendment does not refer to "must" or "shall"; it refers to "may". I do not know whether the Minister considered the amendment in a different way. It does not seek to impose a duty that the commission "shall" consider. It would apply only in circumstances where it was decided that it would be wiser for the commission to consider only certain parts of a case rather than the whole case, in which instance this would be a sensible amendment. Perhaps the Minister has not read the amendment in the way it is intended.

Lord Whitty

It would still upset the balance between the authority and the consumers. The amendment is not justified.

Baroness Byford

I accept what the Minister has to say in regard to Amendment No. 103. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 104 not moved.]

Baroness Byford moved Amendment No. 105: After Clause 39. insert the following new clause—

"REGULATORY APPEALS After section 17 of the WIA there is inserted—

"CHAPTER 1A

REGULATORY APPEALS

17AA NOTICE OF APPEAL

(1) This section applies to any decision made by any relevant decision-maker (acting other than in a wholly adjudicatory capacity) under this Act, the Reservoirs Act 1975, the Water Resources Act 1991 or the Water Act 2003 against which there is no statutory right of appeal against the merits of that decision to any independent appeal body.

(2) Without prejudice to the generality of subsection (1), such decisions include any decisions—

1. (a) relating to the public disclosure of information; or
2. (b) made under any of the provisions listed under Schedule 16 below.

(3) The Secretary of State may add to the provisions listed under inserted Schedule 16 below by regulations.

(4) Subject to section 17AD(2) below, a person affected by a decision to which this section applies may appeal against it to the Competition Appeal Tribunal or such other relevant body as the Tribunal considers appropriate.

(5) The means of making an appeal is by sending the Competition Appeal Tribunal a notice of appeal in accordance with Competition Appeal Tribunal rules under section 15 of the Enterprise Act 2002.

(6) The notice of appeal must be sent within the period specified, in relation to the decision appealed against, in those rules.

(7) The notice of appeal must set out—

1. (a) the provision under which the decision appealed against was taken; and
2. (b) the grounds of appeal.

(8) The grounds of appeal must be set out in sufficient detail to indicate—

1. (a) to what extent (if any) the appellant contends that the decision appealed against was based on an error of fact or was wrong in law or both; and
2. (b) to what extent (if any) the appellant is appealing against the exercise of a discretion by the relevant decision-maker.

(9) In this section references to a decision under an enactment—

1. (a) include references to a decision that is given effect to by the exercise or performance of a power or duty conferred or imposed by or under an enactment; but
2. (b) include references to a failure to make a decision, and to a failure to exercise a power or to perform a duty, only where the failure constitutes a failure to grant an GC 32 application or to comply with any other form of request to make the decision, to exercise the power or to perform the duty.

(10) For the purposes of this section a decision to which effect is given by the exercise or performance of a power or duty conferred or imposed by or under an enactment shall be treated, except where provision is made for the making of that decision at a different time, as made at the time when the power is exercised or the duty performed.

17AB DISPOSAL OF APPEAL

(1) The relevant appeal body shall dispose of an appeal under section 17AA in accordance with this section.

(2) The relevant appeal body shall decide the appeal on the merits and by reference to the grounds of appeal set out in the notice of appeal.

(3) The relevant appeal body's decision must include a decision as to what (if any) is the appropriate action for the decision-maker to take in relation to the subject-matter of the decision under appeal.

(4) The relevant appeal body shall then remit the decision under appeal to the relevant decision-maker with such directions (if any) as the relevant appeal body considers appropriate for giving effect to its decision.

(5) The relevant appeal body must not direct the decision-maker to take any action which it would not otherwise have power to take in relation to the decision under appeal.

(6) It shall be the duty of the decision-maker to comply with every direction given under subsection (4).

17AC APPEAL OF DECISION

(1) A decision of the relevant appeal body on an appeal under section 17AA may itself be appealed.

(2) An appeal under this section—

1. (a) lies to the High Court; and
2. (b) must relate only to a point of law arising from the decision of the relevant appeal body.

(3) An appeal under this section may be brought by—

1. (a) a party to the proceedings before the relevant appeal body; or
2. (b) any other person who has a sufficient interest in the matter.

(4) An appeal under this section requires the permission of the relevant appeal body or of the court to which it is to be made.

17AD INTERPRETATION

(1) In this Chapter— the relevant appeal body" means the Competition Appeal Tribunal or such other of the following bodies which the Tribunal considers appropriate to hear the appeal—

1. (a) the Competition Commission;
2. (b) the Lands Tribunal;
3. (c) a Government Inspector;
4. (d) an arbitrator appointed by agreement between the appellant and the decision-maker; and "the relevant decision-maker" means the Director, the Environment Agency, the Secretary of State or the National Assembly for Wales where they take a decision which is appealable under section 17AA.

(2) The Secretary of State may by regulations prescribe the relevant appeal body by which particular types of appeal are to be determined and accordingly with which those appeals are to be lodged.""

The noble Baroness said: In moving Amendment No. 105, I shall speak also to Amendment No. 106. Amendment No. 182 concerns a schedule to the Bill.

In regard to Amendment No. 105, proposed new Section 17AA(1) would rectify the current situation where there is no statutory right of appeal under the Bill, the Reservoirs Act 1975 and the Water Resources Act 1999. We believe that an independent body should be available to consider appeals.

Subsection (4) states: Subject to section 17AD(2) below, a person affected by a decision to which this section applies may appeal against it to the Competition Appeal Tribunal or such other relevant body as the Tribunal considers appropriate".

We suggest that such appeals should be made to the Competition Appeal Tribunal but we are not tied to that one body; they could be made to a person appointed by the Minister to undertake such hearings who would consider the substance of the evidence. The Better Regulation Task Force supports our thoughts on the appeals system.

We believe that the proposed system of appeals for companies is not strong enough. The companies have raised with me the question of adequate provision in the Bill of human rights legislation. I beg to move.

5.30 p.m.

Baroness Young of Old Scone

I have a quandary about Amendment No. 105. During the course of this Bill, we seem to be in danger of focusing almost exclusively on the needs of the water companies. However, this amendment would affect far more than simply the water companies. I do not want to comment on the merits or demerits of substituting an appeals tribunal process for current judicial review by the courts. But I doubt severely that the Competition Appeal Tribunal would be an appropriate body for some of the decisions listed or that it should be the body that would appoint other bodies to hear appeals on these occasions.

That might be appropriate for bodies like water companies that are engaged in competitive issues. But many of the individuals or organisations who would be caught by this provision simply are not in that capacity and it would be inappropriate.

Lord Whitty

This rather complex set of amendments would, effectively, create a whole new chapter in what is currently the Water Industry Act. They have a wide range of implications in terms of appeals. Each measure referred to under Amendment No. 182 raises different issues. There is a fundamental issue as to whether appeals under those areas would best be dealt with by keeping the current judicial review in a High Court position rather than establishing a whole new appeals body which covers all of these issues. The difficulty is that any appeals body is bound to have limited expertise and resources to replicate what are, strictly speaking, policy decisions.

The provisions relating to flood plans, water resource management plans, drought plans, special-category effluent and so forth, are all essentially policy decisions of that nature. As the noble Baroness said, they affect a far wider range of players than the water companies and their consumers. In many of these, the Secretary of State issues directions only to set out what a plan should contain or to get the undertaker to review it. I should be surprised if that was seen as a threat. But what is a problem is if we build an appeal system which would cover all these issues.

Some issues are best covered by the Environment Agency as the appropriate appeal body; others, as they are primarily policy decisions, are best left to the use of judicial review, as is appropriate in such circumstances when reviewing unreasonable decisions. The purpose of a regulator is to balance the interests of the industry and the consumer and to give a balanced approach both in general and on a case-by-case basis. To have a whole new system of appeal and to extend the appeal to virtually everything covered in the Water Industry Act seems excessive.

In relation to some of the decisions, that would also be seriously counterproductive—for example, proposals and appeal against decisions relating to the disclosure of information. That would obstruct the powers which this Bill is trying to give to the consumer council to publish information in the interests of consumers. I do not think that the appeals mechanism proposed here is appropriate. If there are problems with particular decisions or particular policies, that is a matter for appeal via the courts. The idea that any regulator's decision can be appealed and is, therefore, a second-guess on all of these areas, does not seem to be sensible, given that we have the failsafe of judicial review.

Baroness Byford

I thank the Minister for covering some of the issues that I raised. The noble Baroness, Lady Young, said that she felt that this amendment was very narrow and that it aimed at being of benefit to the water companies, but that other people would be affected. Indeed, if the water companies themselves are affected, it affects all the consumers too. They are the ones that are providing water for us, both as individuals and as companies, and that actually get the benefit of trying to get this legislation right. Therefore, I slightly disagree with the noble Baroness—indeed, the noble Lord referred to it too.

However, I have heard what has been said. I accept that there is the right of judicial review and that that has always been clearly there. But that is a fairly lengthy and a costly step to take. We were trying to ensure that there was another way that could be looked at. I should like to take this away and consider it. I beg leave to withdraw Amendment No. 105.

Amendment, by leave, withdrawn.

[Amendment No. 106 not moved.]

Clause 40 [Standards of performance in relation to water supply]:

Baroness Byford moved Amendment No. 107: Page 46, line 16, after "research" insert "and the appraisal

The noble Baroness said: Amendment No. 107 is linked with Amendment No. 113. Amendments Nos. 109, 110 and 111 slightly fall within the same remit. With the leave of the Committee, I hope that the Minister is happy to take them together. I know that they apply to two different sections, but it would seem logical to do so. We asked for them to be ungrouped, so it is our fault, not that of the Government. But if I can speak to Amendments Nos. 107 and 113, and then to Amendments Nos. 109, 110 and 111 together, it would be sensible.

Amendment No. 107 proposes inserting the words "and the appraisal". We are asking the Government to take into consideration the cost benefit analysis. After research has been completed, surely some cost analysis should be the norm. It may be that the Minister tells me that that is so—in which case my amendments probably will be unnecessary.

For the convenience of the Committee I shall speak to the other amendments as well. Amendments Nos. 107 and 113 deal with water—if I am right. Amendments Nos. 109, 110 and 111 deal with sewerage. I hope that I have the right ones linked together. The same argument goes for both sets of amendments. In effect, we are asking the Government to consider particularly Amendment No. 107 in order that appraisal is taken into account. Indeed, it is implemented again later in Clause 41. The same applies to the other three amendments. I beg to move.

Lord Whitty

As I understand it, the second batch of amendments are, in a sense, the substantive ones in that they would require the Secretary of State to carry out an appraisal of the effects expected from performance, and prevent him from making regulations if the results of the appraisal indicated that the financial impacts of the regulations outweighed the benefits.

We have produced the regulatory impact assessment with this Bill. In that context, we committed ourselves to producing a separate regulatory impact assessment on each occasion on which the powers under the overall sections were used. The scope of RIA is considerably wider than the way in which the appraisal is defined in this context.

Compared to a full regulatory impact assessment, the appraisal proposed is narrow. It concentrates heavily on financial costs rather than environmental or social gains and other indirect effects which are important to the water and sewerage sectors. Therefore, the commitment to RIA is actually a bigger commitment than what is being sought in these two groups of amendments via an appraisal.

Baroness O'Cathain

I am heartened to hear that. I agree with the Minister that if a regulatory impact assessment was in force for these issues it would be better than the amendment, but where is it on the face of the Bill?

Lord Whitty

I referred to the regulatory impact assessment that came with the Bill. That is where the commitment is. It is not on the face of the Bill in that sense.

Baroness O'Cathain

The reason for the amendment is to have something on the face of the Bill. If the Minister could bring forward his own amendment to put the regulatory impact assessment on the face of the Bill, that would be wonderful. What are the Minister's comments on that?

Lord Whitty

We shall consider the implications of that. Precedent issues are involved here. By and large the regulatory impact assessment process is carried out on the basis of ministerial undertakings and is not on the face of a Bill. That is because it is essentially a procedural issue and not a statutory issue. Clearly if a regulatory impact assessment is required for the proposed legislation as a whole, any undertaking within that would be carried out were those powers to be used.

Baroness Byford

I am grateful to the Minister. I accept his final comment and genuinely thank him for it. We are pleased that the Government will think about these amendments and come back with something that, hopefully, will put the measure on the face of the Bill. That is what we were after and that is what I think the Minister said. My understanding of what the Minister said—we shall need to read Hansard tomorrow—

Lord Whitty

I said that I would consider it. I then put in the huge qualification that we have to consider it in the context of how we deal with other RIA commitments.

Baroness Byford

I accept the Minister's clarification. But he indicated that he would consider it and, without tying the Minister to anything specific, I am grateful for that. At this stage I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Duke of Montrose moved Amendment No. 108: Page 46, line 22, after "undertakers" insert "or licensed suppliers

The noble Duke said: In moving Amendment No. 108, I shall speak also to Amendment No. 112.

Under Section 38 of the Water Industry Act the Secretary of State may make regulations for the purpose of facilitating the determination of the extent to which breaches of prescribed obligations amount to breaches of the general duty to maintain an efficient and economical system of water supply.

Clause 40(6), to which this amendment refers, requires the Secretary of State to specify the water undertaker or undertakers to which any regulatory proposals may refer. I am puzzled as to why the new licensed water suppliers are not included in subsection (6). Is there not a chance that these suppliers might breach the general duty to supply laid out in Section 37 of the 1991 Act?

Under subsection (3) of the clause, for the purposes of making regulations, whether or not it is after an application, there appears a category of, such other persons or bodies as the Secretary of State may consider appropriate".

But there is no such mention in the case I am discussing.

Amendment No. 112 addresses the same general point. If a licensed water supplier would be affected by regulations, would it not be appropriate that a notice is also served on that supplier? I look forward to hearing the Minister's reply. I beg to move.

Baroness Miller of Chilthorne Domer

The issue of when water undertakers should be the only specified body and when water undertakers and licensed suppliers should be specified has arisen time and again in the Bill. 1, too, look forward to hearing the Minister's response.

5.45 p.m.

Baroness Farrington of Ribbleton

As the noble Duke said, Amendments Nos. 108 and 112 assume that statutory performance standards will apply to licensed water suppliers. This will not be the case. The standards exist to supplement the general duty on undertakers to provide an efficient and economic system of supply in their area. Licensed water suppliers will use the system but undertakers will remain responsible for the performance of the system which they own and operate. The standards will, therefore, apply only to them and not to licensed water suppliers.

They will compete on price and on service standards and the access agreement will deal with system issues to the satisfaction of the undertakers. It is therefore the role of the undertaker, through the contract and the agreement, to cover this area. Licensed water suppliers will not accept the responsibility that falls on the undertakers.

The Duke of Montrose

I thank the Minister for clarifying the issue as regards the fine line between the undertakers and the licence holders, which takes a bit of unravelling. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 109 to 112 not moved.]

Clause 40 agreed to.

Clause 41 [Standards of performance in relation to sewerage services]:

[Amendment No. 113 not moved.]

Baroness Byford moved Amendment No. 114: Page 48, line 10. after ''for" insert— (a)

The noble Baroness said: I apologise to the Committee for getting water and sewerage mixed up in the previous group of amendments. If the Committee will bear with me, I shall be dealing on this occasion, I hope, with sewerage in respect of Amendments Nos. 114, 115 and 116.

Sewerage and drainage systems are designed to cope with existing and planned development. The system has to be managed to cope with excessive rainfall and demand. However, water companies have no discretion as to where a developer or householder connects to the drainage or sewerage systems. Some developments are designed with sustainable drainage systems such as soakaways. This may mean that there is no surface water sewer.

Currently there is nothing to prevent a householder from connecting his surface water run-off to the public foul sewer. Such an overloading of systems can lead to sewer flooding. There is a case for allowing water companies to reject or amend developers' plans for connections in cases where it may lead to problems for existing infrastructure and to suggest alternative connection solutions.

All Members of the Committee will be aware of the proposed enormous housing developments, particularly for the South and the South East. I wonder how much consideration has been given to the pressure that will place on existing sewerage maintenance and infrastructure. Again, I should be grateful if the Minister will respond to that issue.

We believe that there should be a requirement to develop a sewerage system that is planned and managed in a sustainable manner to reduce the risk of flooding from sewers and which would ensure consideration of sewerage and ancillary works at an early stage of the development and construction process. The amendments ask the Government to carry out a quantitative economic and statistical appraisal. I advanced the same argument in regard to Amendments Nos. 109, 110 and 111, which dealt with water. These amendments deal particularly with sewage and sewerage responsibilities. I beg to move.

Baroness Miller of Chilthorne Domer

We had similar thoughts but found a different place in the Bill to insert them. They are found in Amendment No. 185, which is a long way ahead. We shall debate that amendment later. The issue of water running into sewers and so on is very important. I do not believe that it is given sufficient consideration in the Bill as it stands. I look forward to hearing the Minister's reply.

Baroness O'Cathain

Obviously I support these amendments. I said at Second Reading that there should be an obligation on building companies, development companies and construction companies to consult with the local water and sewerage companies. After all, they have been operating either in their current form or in their pre-privatisation role in the area for more than a hundred years in most cases. They know the specific area involved. Too often one finds, with the value of hindsight, that buildings should not have been constructed in certain areas because the infrastructure was not capable of supporting the new development, particularly in relation to areas such as water meadows and marshy lands, which are prevalent in parts of the South and South East, despite our lack of water. That can cause enormous problems for the construction of new developments and for the existing buildings and structures in the area. If there is a way to have an absolute demand that any new development should consult with the local water and sewerage companies, that would be to everyone's advantage.

Lord Livsey of Talgarth

I want to add to what has been said. My noble friend Lady Miller alluded to Amendment No. 185. We are discussing an important matter. In the past, I have had to deal with specific circumstances in which outdated flooding overflows have formed part of a previous development—perhaps 30 or 40 years previously. Additional housing in that situation caused serious pollution problems. They were not in the South East. Rivers of high-quality water were wrecked in storm conditions because of lax planning regulations when housing was expanded on certain sites.

Lord Whitty

While I accept what noble Lords have said about the importance of sewerage and the necessity for developments to take account of the problems that can arise if a development does not recognise what has happened there already and what will be needed in terms of increased pressure on the system—we are in discussion with water companies and the ODPM about sewerage and development —planning guidelines already specify that water companies should be consulted.

On the amendments as such, they are, as the noble Baroness said, the exact equivalent of those we have just discussed in relation to water, and they call for appraisals. I shall not repeat what I said about the desirability or preferability of having the RIA system, to which I referred. My comments in that respect also apply in this regard.

Baroness Byford

I am grateful to noble Lords who spoke. The noble Lord, Lord Livsey, commented on the importance of this matter; it is important. In some ways, it is almost more important than the water issue, although that sounds ridiculous. For those of us who went through areas and were caught out by flooding—that seems to happen so often—the most dreadful experience was not when clean water was coming in but when sewage water came back into people's houses. That is very undesirable. I hope that the Government will give greater consideration to this group of amendments. The householder can do nothing at all about the problem. One can get rid of dirty clean water—if I can express it that way—quite well, but the thought that one has had polluted water in one's house, however much one cleans it out, is absolutely abhorrent to most of us.

I heard the Minister's response to my earlier amendments. I am obviously disappointed that he is not able to give a better response to this group. Perhaps when he has had time to reflect on our discussions—Ministers' notes are often prepared before the debate has taken place—he may reconsider at a later stage. I hope that in particular in relation to this issue, which deals with the concerns expressed about foul water if flooding occurs; it also involves the importance of having enough good sewerage conditions, particularly with regard to new-build houses. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 115 and 116 not moved.]

Clause 41 agreed to.

Clause 42 [General functions of the Council]:

[Amendment No. 116A not moved.]

The Duke of Montrose moved Amendment No. 117: Page 48, line 31, at beginning insert "households containing

The noble Duke said: In moving this amendment, I shall speak also to Amendments Nos. 118 to 120.

This amendment has a slightly familiar ring to it; we are considering itemising various individuals and conditions. When considering the way in which the council might apply the criteria, it is important to consider households that contain the disadvantaged individual and not leave the clause open to rejection of their interests because another individual who is in the house does not meet those criteria. We have been given a request to have regard to the needs of full-time students. If a household of several students had one individual who did not meet the low-income criteria, the clause might allow the council to feel that it need not consider the interests of the remainder. By offering to households this consideration, that danger might be eliminated. I beg to move.

Baroness Farrington of Ribbleton

Amendments Nos. 117 to 120 would change the emphasis from individuals to households when it comes to the vulnerable groups to which the consumer council must have regard.

Could I reassure the noble Duke that if the interests of the individual are to be considered, the council is in effect already considering the interests of the household containing such an individual? This is the mirror image—the exact opposite—of the views that he expressed. That is particularly true with regard to water and sewerage services that are supplied to the premises as a whole in which the individual lives. That would be the case with issues related to water pricing. That is reflected in the vulnerable groups scheme. which is aimed at households that combine low income and unavoidable high-water use. However, there are occasions when the interests of the individual go beyond the interests of the household. For example, illness—such as the need for home dialysis—may make a consumer particularly vulnerable to interruptions in the water supply. We should ensure that the consumer council is able to have regard to those circumstances as well. The clause has been carefully drafted to achieve that without the noble Duke's amendment. I hope that, with that explanation, he feels satisfied that we are in agreement about what we want the Bill to say.

The Duke of Montrose

I thank the Minister for placing that explanation on the record, which is very much what we wanted. It proves that whatever the state of the household or the individual. it will receive the consideration that the council should give it. In view of that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 118 to 120 not moved.]

The Deputy Chairman of Committees (Lord Dean of Harptree)

If Amendment No. 121 is agreed to, I cannot call Amendment No. 122.

Baroness Miller of Chilthorne Domer moved Amendment No. 121: Page 49, leave out lines 13 to 35 and insert— ( ) Subject to subsection (7) below, in the exercise of its function under this section, the Council shall have regard to the need for excluding from such proposals, advice, information and views, so far as practicable—

1. (a) any matter which relates to the affairs of an individual, where the publication of that matter would or might, in the opinion of the Council, seriously and prejudicially affect the interests of that individual; and
2. (b) any matter which relates specifically to the affairs of a particular body of persons, whether corporate or unincorporate. where publication of that matter would or might, in the opinion of the Council, seriously and prejudicially affect the interests of that body."

The noble Baroness said: This amendment and those grouped with it deal with two issues, the first of which involves the fact that the Bill appears to require the consumer council for water and Ofwat to publish an explanation. I should be grateful for the Government's views on which of those bodies should publish what sets of information. Secondly, the amendments aim to give back to the consumer council for water the power that the Bill currently proposes to remove from it; that is, the power of being able to publish large swathes of information.

The defence of that is that it might well affect a company's share price if certain information was disclosed. We would prefer the Bill to be drafted in a different way, so that the consumer council for water could discover and require all the information from the water undertakers, and then decide in its opinion what information was able to be disclosed.

It will be very difficult for the consumer council for water to fulfil its role sufficiently and as fully as we believe that it should be able to if the Bill stays as it is. As it is drafted, there are many occasions on which the defence of the water industry, should it choose to use it, could be, "Well, that information will lay us open to unfair competition or is commercially sensitive" and so on. The amendments are designed to discover the Government's thinking in drafting the Bill in such a way that the consumer council for water has far too little power in terms of requiring information. I beg to move.

6 P.m.

Baroness Byford

I understand that there are many amendments in the group. Has the noble Baroness spoken to all of them?

Baroness Miller of Chilthorne Domer

I beg the noble Baroness's pardon. I have spoken to the amendments, because two sets of them are very similar and one is really a technical amendment that follows from the others.

Baroness Byford

I am sorry; I did not mean to cut in. We have Amendments Nos. 139, 140 and 141 in the group. If the three provisions that they would remove were left in the Bill, they would have the effect of leaving with the authority the responsibility for gathering necessary information, removing from the authority the responsibility for publishing the necessary information, and giving the publication responsibility to the council. The noble Baroness has covered the same subject, perhaps in slightly different words.

As a result of our three amendments, I ask the Minister what the rationale behind the provisions is. Does he consider them to be a reasonable reallocation of responsibilities or does he think, as we are suggesting, that it is not a very satisfactory position for the council to be put in? When we have debated the issues before, the Liberal Democrats may have gone in a slightly different direction from us, but sonic of the information that they think that the council should be able to have might well be confidentially and economically not that which is relevant to the council itself.

As I say, our three amendments are little ones. They are about clarity. The first is on the gathering of information, the second on publishing, and the third on whether all the responsibility is put on the council. I look forward to hearing what the Minister has to say.

Lord Whitty

The bulk of the amendments deal with the relationship between the council and the authority in terms of publication. It is worth bearing in mind that the provisions in the Bill are the same as those in the Utilities Act that set up Energywatch, the equivalent to the consumer council for water. They ensure that the consumer council takes into account any opinion expressed by the authority. The amendments suggest that we remove that requirement to have regard to the opinion of the authority.

I recognise the need for the independence of the council, but simply distancing itself from the authority and removing the necessity to have that regard could have a detrimental effect. There are quite a lot of technical issues involved in assessing whether publishing information can have serious prejudicial effects on companies or others. Therefore the advice of the authority would be appropriate, and it makes sense for the council to be able to draw on that expertise.

Baroness Byford

The group is split. It would certainly help me—I cannot speak for the whole Committee—if the noble Lord mentioned which amendments he is referring to as he goes through. That would be hugely helpful.

Lord Whitty

I am referring to the hulk of the amendments in the group. Amendments Nos. 121, 124, 132 and 155 deal with four different types of publication—advice to public authorities, advice and information about consumer matters, reasons for refusing to supply information, and the power to investigate other matters. All four areas are dealt with by the bulk of the amendments tabled by the noble Baroness, Lady Miller. They repeat the elimination of the requirement that the council should have regard to the view of the authority, presumably on the grounds that we must ensure that the council is independent, as she said. I question whether independence requires it not to have regard to the views of the authority, and therefore I would not accept those amendments.

The three amendments to which the noble Baroness, Lady Byford, referred are Amendments Nos. 139, 140 and 141. They would remove a direct duty on the council to publish statistical information on undertakers' performance against prescribed statistical standards. The noble Baroness, Lady Miller, also questioned who was really publishing what under the provisions.

So far as those amendments are concerned, I am aware that both Ofwat and WaterVoice support the status quo of leaving the duty with the authority rather than the change in the Bill, which would give it to the council. I take that view and the arguments put by the noble Baroness seriously. I am therefore prepared to consider further the form of the amendments, and accept at least in broad terms the principles that lie behind them.

Baroness Miller of Chilthorne Domer

I am grateful to the Minister for that unexpected willingness to consider some of the amendments again, as I was preparing to return to my idea that the members of the consumer council for water, when appointed, would find it very difficult to operate under the regime as drafted. I am particularly grateful for his assurance and will be pleased to see what the Government come back with. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Byford moved Amendment No. 122: Page 49, leave out lines 33 to 35.

The noble Baroness said: I shall speak to Amendment No. 122, and also Amendments Nos. 125 and 134. They are fairly short probing amendments that really seek clarification. What do the three lines referred to in the amendment mean? Is the reference to "paragraph (b)" meant to indicate proposed new Section 27E(4)(b) or, following the direction to proposed new Section 27E(3)(c), to proposed new Section 27E(3)(b)? The amendments are technical. I beg to move.

Baroness Farrington of Ribbleton

I am hoping that inspiration on the very technical nature of the points put by the noble Baroness will come to me. Before publishing information about an individual or a body, the consumer council must have regard to the opinion of the regulatory authority about whether the information might seriously or prejudicially affect the interests of the individual or body, and concerning the desirability of publishing such information.

The amendments would remove the authority's discretion to provide an opinion on a case-by-case basis, or by way of a general description of a type of information. We think that that would lose flexibility, which would bring several drawbacks. The practical effect would be that the council and the authority would have to treat each case individually. I am sure that the noble Baroness did not intend to increase bureaucracy for the council and the authority, nor the costs, which in due course would feed through to the companies and then to the consumers. I nearly used another word, but I did not want to put another pound in the water box!

The ability to provide an opinion on a general description of information would also help to ensure consistency of approach which will increase the value to the consumer of the council's publications and contribute to regulatory certainty for the water industry.

With regard to new Section 27E on page 49 or the page referred to by the noble Baroness—I believe I have this right—(b) refers to (4)(b). I hope with the explanation that I have given as to the unfortunate by-product of the amendment tabled that the noble Baroness will feel able to withdraw the amendment.

Baroness Byford

If I am totally honest, I am confused, but at a greater level. I apologise to the Committee. This has been a trying afternoon—I mean that genuinely. A problem that we face is that a Bill is being discussed in the Chamber and our second Front Bench speaker is unfortunately attached to that. That is why two of us are struggling as best as we can.

Baroness Farrington of Ribbleton

My noble friend Lord Whitty would understand. The noble Baroness may recall that last Thursday I was dealing with a Northern Ireland matter and he was here in Committee.

Baroness Byford

We have a practical problem. We are trying out this new concept. Sometimes some of us find it very trying. I am grateful to the Minister for her explanation. I shall need to look at this matter again. At this stage I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 123 to 125 not moved.]

Clause 42 agreed to.

Clause 43 [Provision of information to the Council]:

[Amendments Nos. 126 and 127 not moved.]

Baroness Miller of Chilthorne Domer moved Amendment No. 128: Page 51, line 29, after "may" insert "reasonably

The noble Baroness said: This group of amendments—Amendments Nos. 128, 131 and 137—is concerned with the provision of information to the consumer council for water. At the moment the Bill states that, The Council may not direct the Authority to supply information relating to any licensed water supplier or its customers". We would like to know whether the Government feel that the council will be able to fulfil its functions properly if that particular clause stays in the Bill. We are also not very happy with new Sections 27H to 27J. We are seeking to delete them as we believe that that would strengthen the position of the consumer council for water. I beg to move.

6.15 p.m.

Baroness Farrington of Ribbleton

We agree with the aim of Amendment No. 128. It is important that the council acts responsibly and avoids imposing an unnecessary burden when it directs the authority or an undertaker to supply it with information. I believe that I can reassure the noble Baroness that, as a public body with clear duties and functions, the Council can only request information required for the performance of its duties and functions. As we are establishing the council to be an effective body, it would be reasonable for it to require information sufficient to perform its allotted role effectively.

It would not be appropriate for it to demand information irrelevant to its duties and functions. Therefore, there is an appropriate safeguard against excessive requests. However, even when it is necessary for the council to have information, there is a further question about the form in which the information should be supplied. That is why the Bill is explicit that the form must be reasonable to ensure that the demand is realistic and sensible in terms of time, cost and effort.

Amendments Nos. 131 and 137 would replace the dispute resolution procedures in the Bill and enable the consumer council to enforce its own directions when the authority or an undertaker refuses to supply it with information. We recognise the need for the CCW to be as independent as possible. But we believe that the dispute resolution procedure in the Bill is a fair balance. It makes sense for the authority to take that role because of expertise in the industry. It will know whether a refusal to supply information is reasonable. I do not believe that that makes the consumer council dependent on the authority; rather it is a procedural safeguard. Furthermore, there is a power to designate a third party if it transpires that for any reason that is appropriate.

These amendments would actually mean that there would be no need for the consumer council to resolve a dispute about whether it was reasonable to direct the supply of information—it would just be able to enforce its own directions. We believe that that would not be an appropriate arrangement. I have gone into some detail so I hope that I have been able to reassure the noble Baroness and I hope that she will not press the amendment.

Baroness Miller of Chilthorne Domer

I note that the Minister welcomes Amendment No. 128 which inserts the word "reasonably". That was a precursor to the other two amendments because the consumer council would reasonably want those powers that we were giving it should Amendments Nos. 131 and 137 have been accepted. I shall read what the Minister has said about the dispute resolution procedure being sufficient, but I have doubts that at the moment the CCW is in a position to ensure that it can acquire all the information that it requires.

Baroness Farrington of Ribbleton

Before the noble Baroness withdraws the amendment, perhaps I can correct her. My reassurance was that the duty to behave reasonably was already present and, therefore, the amendment was not necessary—rather than saying that I was accepting the amendment.

Baroness Miller of Chilthorne Domer

I thank the Minister for that clarification. I agree that the word "reasonably" appears in line 28. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 129 to 132 not moved.]

The Duke of Montrose moved Amendment No. 133: Page 52, line 25, at end insert— except where the Authority is the body which has failed to supply information, and in which ease the Council shall have regard to advice from the Secretary of State as to the application of subsection (3)(c) above

The noble Duke said: In moving Amendment No. 133 I shall speak also to Amendments Nos. 135, 136 and 138. On page 51 at line 24 it is provided that the council may direct the authority to give it information. It is not, in our view, fitting or sensible that the authority should then be in a position to direct the council that it cannot supply the requested data because it would be undesirable to publish it.

On Amendment No. 135, the authority consists of a small number of people easily identified and clearly tied up with water matters. The Secretary of State is not any old Secretary of State but whichever one has the environment portfolio. On the other hand, the Assembly is a large body of people. Job titles are not the same as in London. Job content is not the same. The Bill should make it clear that there is a defined area within the Assembly which has rights of access to this information and that no other will do.

Turning to Amendment No. 136, the council may from time to time be reluctant to comply, or feel that it should not comply. It may also feel that it should publicise both the request and the reasons for its refusal to fulfil the same. It is possible that the body demanding the information will be unwilling itself to publish the details. The council should have the right to publish these reasons.

I now turn to Amendment No. 138. On page 51 of the Bill, the provision from line 24 onward specifies that the council may direct the authority or an undertaker to supply information. Under the terms of the Bill, the authority has the final say over whether this information may be published. In this clause it is made clear that if the council fails to allow publication of requested data, that failure may be published in the manner chosen by the body that requested it in the first place. That is unbalanced.

At the moment, relationships between the current director and WaterVoice are apparently good enough, so that, in practice, neither would have to "direct" and neither would "fail to comply". The changes being brought about by the Bill may, however, affect those working relationships, and not necessarily for the better. I beg to move.

Baroness Farrington of Ribbleton

Amendment No. 133 would require the council to seek the opinion of the Secretary of State when considering whether to publish a notice of reason from the authority on its refusal to provide the council with information.

I hope that I can reassure the noble Duke as to why, in each case, the Bill states that the council should have regard to the authority's opinion on whether information may have a serious or prejudicial effect.

Assessing whether publishing information may have a serious or prejudicial effect on a company may mean examining quite technical details involving financial markets, for example. There is nothing within the Bill to prevent the council from also consulting the Secretary of State, but the authority is best placed to take a proper judgment. That is still the case, even when it is the authority that holds the information.

Amendment No. 135 would allow only the Minister responsible for water services within the National Assembly for Wales to make a request for information from the council. It would, of course, normally be the case that the responsible Minister would make the request, and, where necessary, there would be liaison within the Welsh Assembly. However, the Assembly is a single entity in law and I do not believe that it would be appropriate to treat it differently in the Bill. I should be in trouble with the noble Lord, Lord Livsey, were I to say anything other than that.

I suggest that Amendment No. 136 is not necessary. The protection built into the Bill is to ensure that whichever body receives a notice explaining the reasons for refusing to supply information gives some thought to the implications before publishing it—especially the views of the individual or body which supplies the information. But, aside from the general safeguards on publication, there is nothing in the Bill that would prevent the council from publishing its own notice of refusal to supply information.

Amendment No. 138 would require the Secretary of State to enforce against the authority a council request to provide information. We would expect the authority to behave in a responsible and appropriate manner. However, except for the powers of judicial review, the Secretary of State currently has no powers to enforce against the regulator. It would have serious implications for regulatory independence if she did. I do not believe that it is a road that we should start along, even for such a relatively—I do not deny its importance—minor issue as this. I hope that the detailed explanations I have given have reassured the noble Duke and that he will not feel the need to press this matter further.

Lord Livsey of Talgarth

Before the Minister sits down, I acknowledge her remarks about the Assembly, and point out to the noble Duke that there is an environment Minister in the Assembly who would, on every occasion, deal with such a matter. There is also an environment committee in the Assembly, which the environment Minister would consult on occasions about such matters.

The Duke of Montrose

These amendments contain a fairly varied menu. I am grateful to the Minister for addressing each of them individually. In the light of what she has said, I think that we should take the amendments away and read her remarks in Hansard. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 134 to 138 not moved.]

Clause 43 agreed to.

Clause 44 [Provision of statistical information to consumers etc]:

Baroness Byford moved Amendment No. 139: Page 54, leave out lines 7 to 9.

The noble Baroness said: I move this amendment merely to thank the noble Lord, Lord Whitty, for agreeing to take the amendment away and reconsider it. I beg to move.

Baroness Farrington of Ribbleton

The Minister agreed to take away the amendment, not to accept it.

Baroness Byford

I accept that. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 140 and 141 not moved.]

Clause 44 agreed to.

Clause 45 [Consumer complaints]:

[Amendment No. 142 not moved.]

Baroness Miller of Chilthorne Domer moved Amendment No. 143: Page 55, line 4, after "subsection" insert "(2A) or

The noble Baroness said: This group of amendments is intended to give the CCW the power to set a level of compensation and not simply to have to refer the complaint on.

We believe that it is reasonable that, as a consumer body, the council should have the power to set a level of compensation not in excess of £5,000. That will not break the bank for any water undertaker, but we believe that it would give consumers confidence that it would be able to take action on their behalf rather than merely investigate, pass the buck to the authority and be able to do nothing substantial about a complaint. I beg to move.

Lord Livsey of Talgarth

I strongly support the amendment. In my experience, as matters stand, consumers have little chance to complain properly and to seek compensation. I believe that such a provision would considerably strengthen the powers that are necessary to achieve recompense for consumers.

I have long experience, for example, of cases of pollution from old pipes despoiling clothes, involving considerable amounts of money, where water companies have repeatedly refused to compensate adequately. These powers are necessary to secure such recompense.

6.30 p.m.

Baroness Byford

I shall speak to Amendments Nos. 151 and 153, which are also in this group. Both are probing amendments.

As the proposed new Section 29(11) now stands, it could be taken to mean that the council "may" report to the authority or to the Secretary of State or to the Assembly. Surely it is intended that it should report to the authority and to either the Secretary of State or the Assembly. I seek clarification because the word "or" links everything together. I am sure that my legal knowledge is not as good as that of the team sitting behind the Minister.

As to Amendment No. 153, subsection (2) will remove the duties of the authority in regard to complaints. Where in the Bill does it ensure that complaints sent to the authority are not simply ignored as being none of its business? The public are prone to take complaints to where they believe they should be dealt with, and then involve the press if they do not get a satisfactory answer from that source. Perhaps the Minister can clarify the situation.

Lord Borrie

I wish to speak to the amendments tabled by the noble Baroness, Lady Miller—that is, Amendments Nos. 143 and 144—and to the role that she has suggested for the consumer council.

The consumer council has played an important role in recent years. It is known generally as WaterVoice, is much respected and has done a great deal for consumers in representing their views to companies, in the areas in which they are located and nationally. The Bill gives it a more important role. It is made more independent of Ofwat—which everyone accepts is a good thing—and the Committee wishes it well in the future.

The council has a role in investigating consumer complaints but, as the noble Baroness said, in her view it should have a larger role in passing the buck to the companies or to the authority. It should be able to resolve disputes and. although the noble Baroness did not mention this, it should be able to fine companies up to £5,000.

I disagree with the noble Baroness on the latter part of her argument. It would be quite wrong to confuse the council's roles as a consumer advocate, as a partisan for consumers, and as a representative of consumers, both locally and nationally, with the role of an adjudicator, especially an adjudicator with a power to impose penalties. That is not an appropriate role. It is not appropriate to join together in one body the role of an advocate and the role of a judge or adjudicator, but that is what the noble Baroness seeks. She proposes that the council should be not only a judge, but a judge with the power to impose penalties.

We should stick with what is in the Bill, which states in proposed new Section 29(10): After investigating a complaint the Council may make a report to the Authority, the Secretary of State or the Assembly". The previous subsection states that representations may be made on behalf of the complainant to the relevant undertaker—that is the water company—about anything to which the complaint relates.

That seems to be an appropriate relationship between the bodies involved—especially between the consumer council and the authority. Other clauses, which we have yet to come to, indicate that the authority should have power to impose penalties on companies for various misdoings. I ask the Committee not to accept the noble Baroness's amendments.

Lord Whitty

Very much for the reasons outlined by my noble friend Lord Borrie, Amendments Nos. 143 and 144 are not appropriate. I understand the argument that the consumer council should have teeth, but we should not confuse the duties of a representative with those of an adjudicator and enforcer. There are other ways of giving the consumer council teeth to enable it to resolve disputes resulting in damages. WaterVoice has secured binding mediation agreements with a number of water companies whereby voluntary compensation can be made payable. According to the last report, a total of £600,000 was recovered in compensation or rebates for water customers in that way. We can certainly foresee further development of that approach.

Such an approach would be unprecedented. For example, Energywatch, which was established under the same legal framework as in the Bill, does not have statutory powers to secure compensation for customers who require it. I understand that it is not seeking such powers to do so. It would confuse the role of the consumer council if we were to give it such powers.

As to Amendments Nos. 146 and 147, it would appear that there is some misunderstanding about the purpose of proposed new Section 29(6). Under the Water Industry Act, certain specified technical issues are defined as "disputes"—for example, a request by a non-domestic customer for a water supply, a closure or a restricted use of a public sewer. Those disputes are reserved to the regulator for determination. They are not the same as complaints. The process leads to a binding decision being made and the Bill provides for disputes that are wrongly brought to the consumer council to be transferred to the authority. The need for the consent of complainants is included to give them the opportunity to consider the issue afresh before entering into a detailed disputes procedure.

It is not intended—it would not be sensible—for the council to get involved in technical issues which are properly disputes to be determined by the regulator. So there may be some terminological problems here.

Lord Livsey of Talgarth

I understand the arguments deployed by the noble Lord, Lord Borrie, that the consumer council should not be able to specify amounts of compensation and ensure that they are paid, but surely in the defence of the consumer it should be able to recommend to the regulator that a complaint should be upheld and that compensation should be paid. It would then be up to that body to decide how much should be paid.

At the present time there is an inadequate defence of consumer interests and, although the wording of the amendment may not be precisely in the right mode— and, as the noble Lord, Lord Borrie, said, the functions may not be as well defined as they ought to be—nevertheless it is very much in order for the consumer council to protect the interests of consumers in this respect.

Lord Whitty

The consumer council can make an assessment of a case and make approaches to the water companies. It can also engage, as has WaterVoice, in setting up a voluntary mediation process. But the amendments would turn the consumer council into an adjudicator and enforcer requiring compensation to be paid. That is a boundary it should not be allowed to cross. Were it to do so, it would distort its relations with the companies and everyone else.

Amendments Nos. 151 and 153 deal with a different issue. The council's power to make a report is discretionary. It will wish to ensure that it targets its report in the most effective way and it can decide whether a report will be of interest both to the authority and to the Government. There is nothing to stop the council sending a report to both bodies but we should not force the council to do so, which is the implication of the amendment.

The Bill requires the council to co-operate and to exchange information with the authority, with the Secretary of State and with the Assembly and to record the arrangements made in a memorandum. That is probably the best way of setting the ground rules between the various bodies involved.

If I understand the noble Baroness correctly as regards Amendment No. 153, I think that I can reassure her that the principle of Section 30 that there should be a proper mechanism for considering complaints is carried into the Bill by Clause 45. The authority must pass complaints to the consumer council. The council is also required to pass over to the authority, with the consent of the complainant—which I said in response to the middle group of amendments—anything which constitutes a dispute which is statutorily required to be determined by the authority. Therefore, there is a mechanism and we do not need Amendment No. 153.

Baroness Miller of Chilthorne Domer

I thank Members of the Committee who spoke in that interesting debate. The noble Lord, Lord Borrie, said that I did not emphasise enough the level of compensation to be paid. I obviously did because he spoke eloquently and at length. However, it strikes me that in other parts of the Bill, the Environment Agency, for example, has multiple roles—as a friend and as an enforcer. But in terms of the consumer council for water, that body is not allowed to have multiple roles.

Therefore, while I would accept what the Minister said, I shall balance it with the role being drawn up for the Environment Agency. I reserve my right to come back on this amendment at a later stage.

Baroness Byford

Before the noble Baroness withdraws the amendment, I should be grateful for the Minister's observation on her point about the Environment Agency. Constantly through this Bill, we have been questioning the position of the Environment Agency. I am now in a ridiculous position. In some ways, I do not support the noble Baroness's amendments in the way that she would like me to, but she raises a very important question which the Minister has not answered sufficiently. Therefore, I encourage him perhaps to return this: how can there be one set of rules for one authority and one set of rules for another? If that is to be so, the rules should be expressed more clearly than they are in this Bill.

So before the noble Baroness withdraws her amendment, I should be glad of further explanation from the Minister. I am not asking for what the noble Baroness is asking for on these particular amendments. But I have raised and will continue to raise throughout this Bill the issue of the very real position that the Environment Agency finds itself in, with greater freedom to be judge and jury of everything and with no comeback to even Parliament. I do not find that satisfactory. I shall listen with interest to what the Minister has to say to my question before the noble Baroness withdraws her amendment.

6.45 p.m.

Lord Whitty

The Environment Agency is not mentioned in any of these sections of the Bill. I am not sure how the Environment Agency got dragged into one of the perhaps limited number of areas in which it does not feature. It is well known that there is a statutory basis for the Environment Agency having a number of different responsibilities, but all that is wrapped up in its own operation. What we are talking about here is a consumer council. We can pursue this issue at another point in the Bill. The noble Baroness may have an objection to a particular power or duty of the Environment Agency but I do not think that that is particularly relevant to these amendments.

Baroness Miller of Chilthorne Domer

I shall explain it in a different way. Perhaps sauce for the goose, sauce for the gander would be a simpler and well-known way of putting it. If we can have one body that has multiple functions as friend/critic/enforcer/adjudicator, that could be the precedent for another body having the same powers. The Minister said that the Environment Agency has those roles on a statutory basis. In tabling these amendments, that is exactly what I am arguing that the consumer council for water should have. The Minister can hardly say that my amendments are not relevant when I am trying simply to give the statutory basis, as he said, that the Environment Agency has. It has crept in because I am drawing a parallel, as I am sure that he actually knows.

However, I shall consider what the Minister said and keep his remarks in mind. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 144 to 153 not moved.]

Clause 45 agreed to.

Clause 46 [Investigations by the Council]:

[Amendments Nos. 154 to 157 not moved.]

Clause 46 agreed to.

Clause 47 [Financial penalties]:

The Duke of Montrose moved Amendment No. 158: Page 59, line 9. leave out "(1) or

The noble Duke said: In speaking to Amendment No. 158, I speak also to Amendments Nos. 159, 160, 161 and 161A. Again, this is perhaps a slightly varied menu and I hope that it helps warm the cockles of the heart of the noble Baroness and the noble Lord on the other side that we are getting through so many items. These amendments all concern penalties. Under subsection (1) only the authority has a right to impose a penalty, so there should be no question of the Secretary of State or the Assembly doing so.

Amendment No. 159 is a probing amendment. The period of 42 days is almost certainly intended to be six weeks, but the Bill does not say so. Company accounts departments usually work a five day week, excluding bank holidays. This wording might throw them out, unless it is made clear in the Bill as to what is intended.

Turning to Amendment No. 160, perhaps the Minister can tell us on what the 10 per cent is based. Does he regard 10 per cent as the anticipated annual profit of a water company? Ten per cent of the turnover of Severn Trent is a vast sum. Moreover, a sizeable proportion of its turnover is derived from activities other than that of a water undertaker. Will such a penalty cover all activities? There are also small water undertakers for whom the loss of 10 per cent of turnover would be a death blow. Will the Secretary of State set out safeguards to stop this happening? If a company was generating only 2 per cent profit, it would put the company into loss for five years running.

As regards Amendment No. 161, reference to provision and final orders is contained in the Water Industry Act, Sections 18 to 20. From these it appears that the only way that the Secretary of State can avoid making at least a provisional order is if she decides that the contravention is trivial and has been corrected. Will the Minister explain in what circumstances the enforcement authority will impose a penalty without first having issued a provisional order?

That is particularly important as the company may appeal only to the enforcement authority itself over the timing of payment of penalties, there being, apparently, no independent body allowed for. If the company wishes to dispute the amount of a penalty, up to 10 per cent of turnover, it must go to the High Court. Is it reasonable that any company, but especially a small one, should be faced by a penalty of up to 10 per cent of turnover, imposed without an order 12 months after the contravention or failure? Is it fair that that company's only recourse should then be to the High Court?

I turn now to Amendment No. 161A. On page 61, lines 23 and 24, reference is made to charging interest at the rate specified in Section 17 of the Judgements Act of 1838. Will that same rate apply to this section? If not, will the Minister state whether the rate to be specified by the court will be above or below the rate applied by the enforcement authority when no appeal is involved? I beg to move.

Lord Whitty

I am not particularly taken with any of these amendments but for different reasons.

As regards Amendment No. 158, I am not entirely sure, even after the noble Duke has spoken, what the intention of the amendment is. However, its effect would be that the authority would not have to issue a notice of the proposed penalty and would not have to consider any representations or objections. I cannot see that that is an improvement in the situation from anyone's point of view. It would certainly he contrary to what we intend to do in the regulatory procedure as a whole.

Amendment No. 159 deals with the question of days. The use of the term "days" is common in statute, and it is accepted as having a common-sense meaning. There is nothing in these provisions that would suggest that this period of 42 days, itself a multiple of weeks, is anything other than calendar days. Therefore, I am not sure why we need to change it.

On Amendment No. 160, the amendment would reduce the maximum level of a penalty that an enforcement authority could impose from 10 per cent to 1 per cent of turnover. The noble Duke asked what was the turnover on which the penalty would be calculated. Although there are established bases of turnover, the definition will need to be the subject of consultation and detailed regulation. The amendment proposes to reduce the figure from 10 per cent to 1 per cent.

The figure of 10 per cent does not make its first appearance in this Bill. It already appears in the Competition Act 1998 as the limit to a penalty for restrictive agreements or for abuse of dominant position. There is also a 10 per cent limit in the Utilities Act 2000. That was introduced at Report stage in this Chamber in response to cross-party lobbying led by the noble friends of the noble Duke on the Opposition Benches.

Reducing the maximum penalty to 1 per cent would be out of kilter with the provisions in those pieces of legislation and would limit the enforcement authorities' ability to deal with companies that breach their conditions of appointment or other statutory duties. We must also bear in mind the significant public health or environmental damage that might result from a breach of such duties.

Amendment No. 161 would delete references to the time limits that apply to financial penalties where no final or provisional enforcement order has been made. The effect of the amendment would be absolutely to prohibit the enforcement authority from being able to impose a financial penalty in such circumstances.

It is surely appropriate that financial penalties can be imposed in circumstances such as the breach of a condition of appointment, where it may not be appropriate to go through the full enforcement order process.

The Bill as drafted includes a 12-month time limit on the ability of the enforcement authority to start within a year a free-standing process of imposing a penalty. This gives companies the ability to have a clearer expectation of what might happen so that they are able to plan ahead.

I turn to Amendment No. 161A. The Bill is drafted so that the court will be able to set the level of interest. It is appropriate for the court to have this flexibility to deal with appeals on a case-by-case basis. The effect of the amendment would be that the court would be tied to the same decision whenever there was a successful appeal, regardless of the seriousness of the company's failure or of the merits of the case. I do not believe that it would be appropriate to tie the hands of the court in such a way.

The noble Duke also raised the question of whether the Secretary of State should be able to set the level of penalties. That provision is only an extension of the existing enforcement procedure. It appears in the Bill, in the Water Industry Act and in other pieces of legislation. Drinking water quality is the responsibility of the Drinking Water Inspectorate which is part of the apparatus of the Secretary of State. That is why there is a specific reference to financial penalties being set by the Secretary of State in that context.

The Duke of Montrose

I thank the Minister for his various replies. In some ways Amendment No. 158 was a probing amendment. It seems to me that what the Bill is trying to say is that the authority can impose penalties under subsection (1) and the Secretary of State can impose penalties under subsection (2). The fact that they are run together looks slightly strange. However, I pass that by.

I was grateful to hear the Minister mention maintaining flexibility. That is a good idea as regards penalties. In view of what the Minister said on all the other matters. I shall take away the amendments and reconsider them. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 159 to 161.4 not moved.]

Clause 47 agreed to.

Clause 48 [Enforcement of certain provisions]:

The Duke of Montrose moved Amendment No. 161B: Page 63, line 7, leave out subsection (2).

The noble Duke said: In moving Amendment No. 161B, I wish to speak also to Amendment No. 161C.

In the 1991 Act the Secretary of State or the director has to be satisfied that the company has transgressed and is likely to do so again. The requirement for satisfaction has not altered, only now it is not necessary for wrongdoing already to have occurred.

How will the Secretary of State, the Assembly or the authority be satisfied that a company is likely to contravene a condition? Unless, that is, the condition or requirement is inherently unreasonable or some set of circumstances has arisen that will mean that the company is bound to be in difficulty.

I turn to Amendment No. 161C. This is beginning to read like a vendetta on water and sewerage companies. First, they no longer have to have transgressed to find themselves in serious difficulty. Now they have 21 days instead of 28 to make representations against what may be both a harsh and wholly unjustified charge. Will the Minister lay out a believable scenario which explains why the Government have thought it necessary to write these provisions into the Bill? I beg to move.

Lord Whitty

We have proposed a change to the existing enforcement provisions so that the enforcement authorities—the Secretary of State, the Assembly and the authority—are able to take action before something goes wrong. This proposal would be reversed by Amendment No. 161 B.

It is important to distinguish between the order and the penalty. It is important to bear in mind that although there are penalties for breaching an enforcement order, the order itself is first and foremost to tell the recipient what action they must take to rectify a situation that has gone wrong.

If it is apparent that a contravention is about to happen, the regulator or the Secretary of State should be able to take steps to prevent it via an enforcement order. One of the safeguards in the enforcement order procedure is that the enforcement authority must notify the proposed recipient before making an order. The proposed recipient can then make objections. In those circumstances it is sensible and desirable to make an order.

Amendment No. 16IC would remove the proposal in the Bill to speed up the enforcement process by reducing from 28 days to 21 days the minimum time that can be allowed for objecting to a notice informing someone that an order is being considered. The reason for this change in the Bill is to reduce the time in which further harm can occur. Therefore, the reduction in the number of days is sensible. If an enforcement order is being considered, the matter is usually already serious and it is important that the action that the order will require should be taken as rapidly as possible. In more complex cases, the notice can specify a longer time that would be more appropriate to those circumstances but in many cases 21 days should be the appropriate minimum time.

7 p.m.

The Duke of Montrose

I thank the Minister for his reply. We asked him to describe some scenarios. Are there frequent examples about which he knows in which the question of 21 or 28 days would have been vital? Did the things that went wrong go that seriously wrong that they required the reduction in the amount of time for which the people accused could appeal? Foreseeing the damage and accusing people before it happens is a very difficult concept. In terms of water regulation, we are in a fast-moving situation. Could the Minister tell us at some point what situations he foresees in which that shortening in time would be important?

Lord Whitty

I am reluctant to give hypothetical examples because one then has an example that every case is judged against. Clearly, as the noble Duke said, if, in a fast-moving situation involving water— literally—damage is being done and is likely to get worse, the damage done over 28 days is clearly greater than that done over 21 days. Any reduction is beneficial. It is reasonable to give a certain amount of time in which to comply but there can be significant benefits in making the period a week shorter. If problems are considerably more complex, it is reasonable that the timescale should be longer than 21 days. Twenty-eight days—effectively, a full month—appears to be too long for dealing with serious damage situations.

Baroness Byford

I wonder whether I may press the Minister further. Presumably, if there are emergencies—I do not believe that this falls into that category—there are facilities in the Bill by which everything gets overridden and emergencies are dealt with. My noble friend did not ask the Minister to give an example of a particular case; he asked the Minister more generally how many times in the past—let us say, the past two years—the regulators have found themselves at difficulty when working with the 28-day system. In other words, what pressure has been brought to bear to change the period from 28 to 21 days? That was the question; my noble friend did not ask for an example of a particular company or occurrence. Will the Minister clarify that?

Lord Whitty

No, I cannot clarify that because records will not be kept in that form. That is for the reasons that I have expounded. If we bring the period down to the minimum reasonable level of three weeks, we would be dealing with more situations more effectively than we might otherwise have done. Giving people three weeks in which to comply is not unreasonable; giving them 28 days—another week—if one is at the other end of the damage threatened is not justifiable.

Baroness Byford

I hear what the Minister said but it does not quite answer our discussion. Presumably somewhere in the Bill is the ability to make emergency provisions, but that is not what we are discussing; we are discussing asking for some damage to be put right. I ask the Minister what facts have brought the Government to wish to reduce the timescale from 28 to 21 days? In fairness, he has not answered that point.

Lord Whitty

All I can say is that 21 days is the equivalent period in the other utility provisions.

Baroness Byford

I thank the Minister for that answer; we had not had it previously.

The Duke of Montrose

The question raised was: what is an emergency? If something is causing great damage, it will do so during the first seven days. I cannot see that the period between 21 and 28 days will make a great deal of difference, although it might make a difference to the people making the appeal. Given what the Minister said, we will take the matter away. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 161C not moved.]

Clause 48 agreed to.

Clauses 49 to 53 agreed to.

Baroness O'Cathain moved Amendment No. 162: After Clause 53, insert the following new clause—

"RULES FOR THE AWARD OF COSTS OR EXPENSES After paragraph 7 of Schedule 7A to the Competition Act 1998 there is inserted— 8 Rules shall make provision in the case of references under the authority of section 12 of the WIA—

1. (a) for the award of costs or expenses, including any allowances payable to persons in connection with their attendance before the Competition Commission;
2. (b) for taxing or otherwise settling any costs or expenses directed to be paid by the Competition Commission and for the enforcement of any such direction.

9 In making provision for the matters in paragraph 8 the rules shall set out the principles to be followed for the award of costs or expenses and for taxing or otherwise settling such costs or expenses."

The noble Baroness said: This amendment, which appears in my name and that of my noble friend Lady Byford, deals with a situation in which there have been appeals to the Competition Commission by individual water companies. If the appeal, or the costs of the appeal, go against the water companies, customers of that water company would be liable for the cost of that appeal. The consumer body, WaterVoice, is particularly angry about all of that. The subtext of what we would like in this regard is that the Competition Commission should be given discretion—that should not be automatic in the case of, for example, a nonsense appeal—to allocate the costs to Ofwat. The costs would therefore be spread over all the water companies if the issue was of national significance. Some water companies might appeal for something that was "piggybacked on" by other water companies, and the poor water company that had led the appeal and incurred all the costs found itself to be disadvantaged and the customers of that company would find themselves with higher prices.

The director general should be under a duty to implement the Competition Commission's decisions for all water companies. That is the point in essence. I am interested that this amendment is grouped with Amendment No. 162A., which stands in the name of the noble Lord, Lord Borrie. I beg to move.

Lord Borrie

I shall speak to Amendment No. 162A and comment on Amendment No. 162. When a company challenges Ofwat's determination as to the prices that the company may in future charge its customers, it does so by seeking a reference to the Competition Commission. When the Competition Commission redetermines the price limits set by Ofwat, the present law requires the Competition Commission to provide in those price limits for the company's costs in pursuing the case before the Competition Commission, Ofwat's costs and the Competition Commission's costs. Those costs therefore fall ultimately on the customers. The only ground on which the Competition Commission may currently decline to allow for such costs in the price limits that it determines is if it considers the company's request for a reference to the Competition Commission or the costs incurred to be unreasonable.

A company currently appears to have little or no incentive to refrain from testing Ofwat's new price limits by going to the Competition Commission. In reports from the Competition Commission in 2000 about price limits set for Mid Kent Water and for Sutton and East Surrey Water, the Competition Commission stated the present law and had to follow it but questioned the desirability of invariably having to permit costs in such inquiries to be recovered from customers.

The purpose of the amendment, on which I have been greatly assisted by Ofwat, ensures that the Competition Commission should first conclude what price limits it should determine on the normal principles of what is necessary to enable the company to perform its normal core functions and to enable it to get a reasonable return on its capital. Then it will separately decide the fair allocation of costs between the company's customers, its shareholders, the customers of other regulated companies, and taxpayers.

In my view, the commission should have statutory discretion to decide what is just in each case, and therefore to decide whether the company's case had any substance, whether it had convinced the Competition Commission on any of the points that it contended for, and whether the company's method of presenting its arguments and the costs incurred were appropriate and reasonable. If the Competition Commission decided that the company had acted properly in pursuing its case, it would in principle be expected to include the company's cost in the new price limits—and so too the costs of Ofwat and the Competition Commission.

I am not sure whether I am right or not, but Amendment No. 162 seems to concern all references to the Competition Commission, not only those relating to price determinations. It deals generally with the allocation and setting of all costs incurred in such references through the making of rules by the Competition Commission. Amendment No. 162A ensures a discretion to the Competition Commission to decide whether costs faced by the company should be included in the price limits determined by the commission.

Baroness Byford

The amendment—

Baroness Farrington of Ribbleton

My noble friend Lord Whitty has to speak now.

Lord Whitty

My noble friend is exaggerating slightly, but the amendments raise some serious issues that the Government ought to consider. Amendment No. 162A in particular raises the question of whether it is sensible to continue to give no discretion to the competition authority as to where it allocates the costs. Some of the arguments in support of that by my noble friend are correct. Although Amendment No. 162 goes somewhat wider and I would not accept going quite so wide as it, I agree to take the amendments away together and I hope to come back on Report with a proposition from the Government.

Baroness Farrington of Ribbleton

May I apologise to the noble Baroness, Lady Byford. I failed to note that her name had been added to the amendment. I was speaking to save her time.

Baroness Byford

I stagger to my feet. My name is attached to Amendment No. 162. When we tabled the amendment, the noble Lord, Lord Borrie, had obviously not tabled Amendment No. 162A. I was interested to read that his amendment particularly tried to give discretion to the Competition Commission.

I should say straight away that I am very grateful for the Minister's indication that he will look at the two amendments, and I do not want to prolong the Committee. The only point that I want to make is particularly in relation to Amendment No. 162. Others speak with great authority because they are on water authorities, but I am not. I speak with a consumer's hat on, as the customer. As an outsider, it is a concern that the costs as the Bill stands will—I hope that the Minister will correct me if I am wrong—be handed directly to individual customers. That is bad enough in a big water company, but in a small water company the costs will be proportionately much higher.

That is the additional point that I wanted to underline. If the Minister is kindly to take the amendment away and consider it, I would hate him to come back on Report only for us to jump up again and say, "But, my Lord, you have not considered the matter fully". I am sure that the Government would not want that to be a result of the present drafting of the Bill.

With those few words, I express my grateful thanks to the Minister, although my noble friend will do so formally for us. I also wanted simply to highlight the whole question of costs and the effect that they have on smaller companies.

7.15 p.m.

Baroness O'Cathain

I am very grateful to the Minister for his reply, and to the noble Lord, Lord Borrie. Discretion is the big issue, and the one word that we both mentioned. It is a very adult way of behaving. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 162A not moved.]

Clause 54 agreed to.

Schedule 4 [Licensing of water suppliers]:

Baroness Byford moved Amendment No. 162B: Page 132, leave out lines 4 to 6.

The noble Baroness said: The amendment is probing. We are concerned that it would appear that, if a licensed water supplier had an authorisation to introduce water into the supply system of a water undertaker. he may not use the water supplied by another licensed water supplier. I find that extraordinary. Is that correct? If so, why the prohibition? I beg to move.

Lord Whitty

There is indeed a prohibition in the Bill as it stands. The provisions require licensed water suppliers who want to introduce water into the supply system to either obtain a source of water or buy water from an undertaker. I am prepared to have a look at whether that prohibition would be sensible in all circumstances. I am not sure that the amendment as it stands makes the right circumvention, but it clearly raises an issue at which we would like to look.

Baroness Miller of Chilthorne Domer

When the Minister looks at that issue—I am grateful to the noble Baroness for raising it through the amendment—will he also confirm whether it will be in line with the Water Framework Directive's requirement, which I think is for water to be treated as a tradeable commodity?

Lord Whitty

It is probably better that I look into that and come hack to it on Report.

Baroness Byford

I am very grateful to the Minister. As I said, the amendment was probing. Sometimes one merely has to do something extraordinary to bring forward a chance to debate what we thought was a gap or slight concern in the Bill. I thank him for agreeing to take the amendment away and, at this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Byford moved Amendment No. 162C: Page 132, leave out lines 36 to 40.

The noble Baroness said: The amendment is another probing amendment. It is a primary condition of a licensed water supplier's licence that the company may not supply domestic premises. During presentations on the Bill from various bodies, it was made clear to us that very large customers often do not require water of the same domestic standard. I underline the domestic angle.

Proposed new Section 17B(5)(a) states that the pipes involved will be used to send water from an undertaker's treatment works to the premises of its customers. It does not specify that none of those customers shall be requiring water of domestic quality. Therefore, it is surely wrong for those pipes to be used to carry water from another source to a non-domestic customer of a company that is not a part of the water undertaker.

Proposed new Section 17B(6), (7) and (8) on page 133 refers to treatment works being designated by the Secretary of State as treatment works for the purposes of proposed new Section 17B(5). There is no reference, however, to the treatment works being—I use the word carefully—exclusively for the use of a licensed water supplier. Will the Minister explain the intention? I beg to move.

Baroness Farrington of Ribbleton

Amendment No. 162C proposes the deletion of the definition of the undertakers' drinking water supply system in the competition provisions. That would reduce competition to the undertakers' non-potable system. That is only a small part of the pipe network owned by the undertakers. The restriction would rule out effective competition. Licensees—I hope that this answers the noble Baroness's concern—will be able, through the competition framework, to require access to water mains from the undertakers' treatment works to the customers' premises. If that is not sufficient to answer the range of concerns, I shall be happy to write to the noble Baroness.

Baroness Byford

I am grateful to the Minister for saying that she will do that. The reason for the amendment is that a different quality of water can be expected for domestic premises from that for premises that do not require such a high standard. From examining the provision I could not discover how water of different standards could be piped down one system. The Minister may be able to inform the Committee on that point; but I shall accept what the noble Baroness has said: that she will take the matter away and consider it. I am an amateur in these matters, but on looking at this I wondered how it was to be achieved.

Baroness Farrington of Ribbleton

I can assure the noble Baroness that she has raised a question that came into my mind. As a plumber's daughter, I do not understand how that will work. Together, we shall find out before Report stage.

Baroness Byford

It is good that the Committee includes such a variety of people. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 163 to 166 not moved.]

The Duke of Montrose moved Amendment No. 166A: Page 141. line 43, at end insert "; and (d) the modifications are such that no holder of a water supply licence will cause, by virtue of those modifications, any disadvantage to any water undertaker

The noble Duke said: We return to the modification of the standard conditions of water supply licences. The amendment is occasioned by the realisation that the Bill sets up competition in the water industry by laying out a new and level playing field for licensed water suppliers. It is fashioned from part of the pitch used by water undertakers but is not level with it. The water suppliers will operate by removing from the water undertakers up to 2,000 of their biggest customers. The undertakers will receive a copy of each licence granted to a water supplier, but the Bill does not give them the right to appeal against such a licence.

Modifications of licences must either involve only standard clauses or only change particular clauses in circumstances that do not disadvantage the relevant licence holder in relation to other holders. If any licence holder objects to a change in a standard clause, he has a vehicle for doing so. In all this, the water undertaker has no rights. I beg to move.

Lord Whitty

I understand the concern, but I do not believe that the amendment is necessary. When the regulator proposes modifications to the standard licence conditions for water suppliers, he will be bound by the duties under Section 2 of the Water Industry Act to promote effective competition in the interests of customers. That means that he could not promote a modification that would put an undertaker under unwarranted disadvantage. Nor could he, for example, amend an undertaker's condition of appointment so that licensees cannot compete effectively, as neither of those would be in the interests of competition or in the interests of the customer. I believe that the concern is unnecessary; therefore the amendment is not necessary.

The Duke of Montrose

I hear what the Minister says, but we wish to take the matter away and reconsider it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Duke of Montrose moved Amendment No. 166B: Page 143, line 23, after "it" insert "and put it into the public domain

The noble Duke said: In moving this amendment, I shall speak also to Amendment No. 166C. This is a probing amendment. We seek to determine who is meant by, persons likely to be affected by it". What type of publication does the Government have in mind as being suitable?

On Amendment No. 166C, once a matter has been referred to the Competition Commission, no one, not even the Secretary of State, should be allowed to withdraw it. It should be the duty of the authority to ensure that, by the time the reference is made, the basic reasons for doing so are well established. I beg to move.

Lord Whitty

On Amendment No. 166B. which seeks to place a requirement on the authority to put references in the public domain, that is already practised and Ofwat will have the responsibility to ensure that that continues in line with open and transparent regulation. I do not believe that we need to specify that on the face of the Bill.

Amendment No. 166C is slightly more complex. It removes the Secretary of State's power to veto referrals to the commission by the authority. The water supplier licence conditions are there to implement much of the Government's water supply competition policy. Hence the Bill gives the Secretary of State the power to determine the initial standards of licence. Therefore, it follows that a power of veto is logically required over a change to the licence conditions. Without it, the policy intent behind the initial standard conditions could be lost by subsequent modifications. It is also important to note that the same arrangement exists in the gas and electricity licensing regimes, and they have operated successfully there for some years.

Baroness Miller of Chilthorne Domer

In the Minister's first reply to the amendment asking for this matter to be put into the public domain, he referred to the fact that Ofwat already does this, so it does not need to be on the face of the Bill. When drafting amendments on something that is already custom and practice, it would be helpful to know when custom and practice mean that there is not a requirement for something to be said on the face of a Bill.

Baroness Byford

I had written that point in my notes. Is such a matter already on the face of other Bills, or is it just normal practice? If it is normal practice, but it is not on the face of any other Bill, then I believe we should start to include it; if it is already in other Bills, then it should be included here, because the principle has already been established.

Baroness O'Cathain

If such a matter is not established, it should be. The reality is that we are not supposed to be mind-readers. Above all, we need clarity and transparency, referring back to the wonderful five Ofcom virtues. I believe that this point is important.

Perhaps I may say to the Minister that. in our discussions on the Competition Bill—going back some time—I did not realise that we had allowed the Secretary of State to have such fantastic power. What happens if the Secretary of State has a brainstorm and goes mad?

Baroness Farrington of Ribbleton

That could never happen under a Labour government.

Baroness O'Cathain

The noble Baroness makes a sedentary intervention.

The Duke of Montrose

I suggest that we call the undertaker!

Lord Whitty

This may be an appropriate point at which to break the proceedings. Before the Committee adjourns, perhaps I may say, on the issue of what is placed in the public domain, that legislation is inevitably inconsistent as regards what is on the face of the Bill and what is not. The point in regard to this particular proposition is that this is so central to the Government's overall policy on transparent regulation that the assumption can be made. Whether that transfers itself into custom and practice so that it could never be altered becomes a philosophical point. I am not prepared to engage with the noble Baroness on that during the debate on this amendment, which, subject to my noble friend intervening, will be the last amendment that we shall consider today. Such provision probably does not need to be on the face of the Bill. Nor do I necessarily think that the draconian powers for a sane—let alone a mad—Secretary of State are sufficient to warrant the concerns that have been expressed.

The Duke of Montrose

I thank the Minister for his reply. As this has turned out to be such a hotly contentious issue, we should like to take it away and consider it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 166C not moved.]

Baroness Farrington of Ribbleton

This may he an appropriate moment for further consideration of the Bill in Committee to be adjourned until noon on Thursday.

The Deputy Chairman of Committees (Lord Haskel)

The Committee stands adjourned until noon on Thursday.

The Committee adjourned at twenty-eight minutes before eight o'clock.