New Clause 3

HC Deb 01 May 1973 vol 855 cc1011-25

PRECEPTS FOR WATER SUPPLY AND SEWERAGE FUNCTIONS

'(1) Sums required by a water authority to meet the cost of performing their water supply and sewerage functions shall be raised by precepts to the local authorities whose areas are comprised wholly or partly in the area of the water authority.

(2) Paragraphs 10 and 12 of Schedule 4 to this Act shall apply to the raising of precepts by a water authority for the purposes of this section and to the calculations of a penny rate product subject to any necessary modifications including—

(a) the substitution of "local authority area "for" local land drainage district "and" that area "for" that district "in each place where those words occur;

(b) the substitution for paragraph 10(2) of the following sub-paragraphs:—

"(2) Not later than the month of February immediately preceding each financial year, each water authority shall make or cause to be made estimates of their probable income and expenditure on revenue account in respect of

ing the water authority of an annual income of not less than one-eighth of the capital cost of any work which is requisitioned from it.

I must warn the House that there are a number of points in the drafting of this new Clause which may need further consideration and a bit of tidying up. For example, I have spotted that a provision is needed corresponding to paragraph 42(3) of Schedule 7 to the Bill for the identification of the sewerage element in a combined charge. But rather than wait for this tidying up of drafting points I thought it proper to bring this before the House at this stage because it is an important clause as regards the whole structure of the new water authorities.

Mr. Arthur Jones (Northants, South)

I am grateful to my right hon. Friend for the consideration which he has clearly given to the point which I raised in Committee.

The question of the one-eighth of the expense of the annual provision of the facility both for a private occupier and owner and for a developer, whether it is a local authority or a private developer, cannot be determined because we have no idea as yet what the level of charges will be. It is not possible to see to what this commitment must amount. However, I congratulate my right hon. Friend on giving a terminal date to the period of time for which a developer has responsibility. This is a period of 12 years, and it puts some terminal expense on the cost involved in provision and collection. I am grateful to my right hon. Friend.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

water supply and sewerage functions during that year making allowance for any estimated credit or debit balance to be brought forward from the previous year; and the amount by which expenditure is estimated to exceed the income shall be apportioned by the water authority among the local authorities any part of whose area is comprised in the area of the water authority on the basis of the appropriate penny rate product for the relevant area for the relevant year (calculated in accordance with Part III of this Schedule.";

(c) the omission of sub-paragraphs (5) and (6) of paragraph 10;

(d) in paragraph 10(7) the substitution of "Secretary of State" for "Minister";

(e) in paragraph 10(12)—

(i) in the definition of "local authority" the substitution of "district" for "county";

(ii) the omission of the definition of local authority members;

(iii) in the definition of "relevant expenditure" the substitution of "water supply and sewerage functions "for" land drainage functions";

(f) in paragraph 12(1)—

(i) after "local authority", the insertion of "their area or";

(ii) the omission of the words "in any local land drainage district";

(g) in paragraph 12(2) the substitution of "Secretary of State" for "Ministers";

(h) the substitution for paragraph 12(4) of the following sub-paragraph:—

"(4) In this part of this Schedule 'relevant year' has the meaning assigned to it by sub-paragraph (12) of paragraph 10 above"'.—[Mr. Rowlands.]

Brought up, and read the First time.

Mr. Ted Rowlands (Merthyr Tydvil)

I beg to move, That the clause be read a second time.

Mr. Speaker

I understand that it will be convenient to discuss with new Clause 3 the following amendments:

No. 66, in Clause 25, page 28, line 33, at end insert: 'Provided that this subsection shall not apply to water supply and sewerage functions'.

No. 68, in Clause 26, page 28, line 44, after 'rights', insert: 'but excluding services, facilities or rights performed, provided or made available in respect of water supply and sewerage functions'.

No. 72, in Clause 27, page 30, line 4, at end insert: 'other than those in connection with water Supply and sewerage functions'.

No. 79, in Clause 34, page 35, line 26, at end insert: '"water supply and sewerage functions" means functions in relation to the supply of water for domestic purposes (as defined in Schedule 3 to the Water Act 1945) and functions under section 14 above'.

No. 133, in Schedule 7, page 81, leave out lines 15 to 39 and insert: '40.—(1) For the purpose of sections 36 and 37 of that Act the aggregate amount of such portions of the general rate for the time being payable in a year in respect of any building or other premises as is attributable to any precept issued by a water authority shall be deemed to be the aggregate amount of the water rates payable in respect of such building or other premises at the rates for the time being charged by the undertakers. (2) For the purpose of this paragraph the portion of the general rate payable in respect of any building or other premises which is attributable to a precept shall be calculated by applying the equivalent rate to the rateable value of that building or those premises'.

No. 134, in page 82, line 4, at end insert: '46.—(1) The following provisions of this paragraph shall have effect for modifying references to a water rate and related expressions in Schedule 3 in its application to a water authority by virtue of any enactment. (2) In section 29—

1. (a) in subsection (1) for the words from "the aggregate amount" to "by the undertakers" there shall be substituted the words "the aggregate amount of each portion of the general rate for the time being payable in a year by those owners and occupiers in respect of those premises as is attributable to any precept issued by the undertakers under the special Act (which aggregate amount is hereafter in this section referred to as 'the aggregate amount')";
2. (b) after subsection (1) there shall be inserted the following subsection: —

(1A) If in the case of the owners and occupiers of premises in any area the aggregate amount is not sufficient to enable a valid requisition to be made under the last foregoing subsection, and the local authority of the district, or the local authorities of the districts, in which the area is situated undertake that, until the aggregate amount reaches a sum which would have enabled such a requisition to be made, or until the expiration of a period of twelve years, whichever first occurs, they will make good to the undertakers in each year the difference between that sum and the sum of the aggregate amount for that year and any other amount received in respect of water supplied, whether for domestic or non-domestic purposes, in that year, in respect of premises in that area, the undertakers shall lay any necessary mains and bring water to that area"; (c) in subsection (2) after the word "last" there shall be inserted the words "but one"; after the word "provisions" there shall be inserted the words "or after tender to them of an undertaking which satisfies the provisions of the last foregoing subsection"; and after the word "requisition" where it occurs for the second time there shall be inserted the words "or the provisions of the last foregoing subsection, as the case may be".

(3) In section 30—

1. (a) in subsection (1) the words "and payment or tender of the water rate" shall be omitted;
2. (b) the proviso to subsection (1) shall be lettered "(a)" and there shall be added thereto the following: "and (b) nothing in this subsection shall entitle the owner or occupier of any premises or parts of premises in respect of which a general rate is not payable to demand and receive from the undertakers a supply of water as aforesaid otherwise than in accordance with the provisions of paragraph 47 of this Schedule as modified by the special Act";
3. (c) in subsection (2) the words "during any period in respect of which the water rate therefor has been paid or tendered" shall be omitted.

(4) In section 40 of paragraph (a) the words from "at or before" to the end of the paragraph shall be omitted.

(5) In section 42 in paragraph (b) of subsection (8) for the words "water rate" there shall be substituted the words "general rate"

(6) In section 47 in subsection (1) the words "in lieu of charging a water rate" shall be omitted, and after subsection (1) there shall be inserted the following subsection:— (1A)Any person aggrieved by the refusal of the undertakers to furnish a supply as aforesaid to premises or parts of premises in respect of which a general rate is not payable or by the terms and conditions on which such supply is offered may appeal to the Secretary of State who may direct the undertakers to furnish such a supply upon such terms and conditions as he may determine and the undertakers shall give the supply accordingly.

(7) In section 48 in subsection (1) the words "and in respect of which they charge a water rate" and the word "additional" shall be omitted and in subsection (2) the word "additional" shall be omitted.

(8) In section 51 the words "and in respect of which they charge a water rate" shall be omitted'.

No. 148, in Schedule 8, page 88, line 58, at end insert' Section 28(5)'.

Mr. Rowlands

The purpose of this new clause is to allow water authorities under the Bill to precept on the rates of local authorities to finance both sewerage and sewage disposal and water supplies. These are two separate issues although in a sense they are related. In the case of sewerage and sewage disposal, this has been until now a local authority responsibility and therefore the cost has been rate-borne.

I think we should require of the Government and the Ministers in the course of the debate today to make a statement on the financing of sewerage and sewage disposal, because the situation is still far from clear. Anyone who tries to discover exactly what will happen will find himself befogged and befuddled by this situation. How will the cost be borne? What form will the charges take? At present they are rate-borne and the advantage of this to many local authorities, such as that which I represent, and many neighbouring authorities within the area of the Taf Fechan Water Board, is that not only do we as ratepayers finance and support the sewerage and sewage disposal service but the rate resources grant available from central Government does a great deal to offset the cost of this.

If there is no form of precept on local authority rates and if the cost of sewerage and sewage disposal is to be borne by the consumers themselves, there will be a very significant increase in cost to a large number of residents in the poorer communities which up to now have had central Government support in the form of a rate resources grant.

As regards the authorities within the Taf Fechan Water Board area, the cost to Merthyr for the year 1972–73 of sewerage and sewage disposal will be £171,000, of which half is borne by the rate resources grant. If no precept is allowed and therefore no rate resources grant is allowed on the cost of sewerage and sewage disposal, the increase in charges to the community will be very considerable indeed.

The Taf Fechan Water Board is perhaps unusual in one respect in that it uses precepting on the rates to finance water supply as well as sewerage and sewage disposal. It is unique rather than unusual in this. It means, however, that, if we are forced to abandon any form of precept and if the rate resources grant which helps us to keep down the charges for both water supply and sewage disposal in our areas ceases, then in April 1974 thousands of householders in the valleys of South Wales will get swingeing increases in the cost of water and of the sewerage service.

Therefore I think that the Minister must now tell us how he envisages the financing of sewerage and sewage disposal from next April, what form the charges will take and whether precepting will be allowed. But, particularly in the case of water supply in the Taf Fechan Water Board area, I should like him to say that we shall be allowed to continue our precepting, in agreement with all the local authorities in the area, because if we do not the extra burden which will fall on householders in these areas will be very heavy indeed.

The total cost of sewerage and sewage disposal and water supply in the Taf Fechan Water 3oard area in 1972–73 is over £2 million, of which the rate resources grant covers one half. In other words, 50 per cent. of the cost of these services is met indirectly through the rate resources grant by central Government. If precepting is not allowed and the grant is withdrawn, in April 1974 householders in the constituent authorities of the Taf Fechan Water Board will face swingeing increases.

I notice in the consultative document produced by the Department of the Environment that according to one of the statements there will be a very gradual transition from one system of finance to another and there will not be any wild increases in the cost of water supply and other services as a result of the reorganisation. But I have to tell the Minister and the Secretary of State that unless precepting is allowed to continue after April 1974, and the rate resources grant element continues to support the cost of water supply and sewerage disposal, this could lead to very big and immediate increases. At a stroke we would have a massive increase in the cost to local householders which could not be offset by any allowances or reduction in the rates.

4.30 p.m.

I ask the Minister, first, to make a statement on the future of the charges for sewage disposal and, secondly, to allow boards such as that to which I have referred to continue the practice of precepting on local authority rates where the local authority is in full agreement. Unless that is done, the cost to the householders in the area will be considerably increased.

I hope that it is not the aim of the Bill to transfer this heavy financial burden from central Government to the local community. That has been a feature of much of the Government's legislation. Unless the new clause is accepted there will be a dramatic transfer of the financial burden from central Government to local householders. I ask the Minister to consider the new clause and to make a statement on the financing of these services.

Mr. Arthur Probert (Aberdare)

My hon. Friend the Member for Merthyr Tydvil (Mr. Rowlands) has referred to the effect of the Bill on his constituents. With great respect to him, the effect on my constituents will be far greater.

I will illustrate this by reference to two local authorities within my constituency, the Aberdare urban district and the Mountain Ash urban district. For Aberdare, if precepting is not allowed and the rate resources grant disappears, it would mean a loss of £134,000, and for Mountain Ash a loss of £142,965, totalling approximately £300,000. This would have serious repercussions on the constituent local authorities of the Taf Fechan Water Board and on the consumers in the area. It would affect the Taf Fechan Water Board as a whole by more than £1 million. I hope that the Minister will pay serious attention to the effect of the proposals upon the water board and its constituent authorities.

Mr. Graham Page

I ask the House to resist the new clause and its associated amendments, which would completely change the proposals in the Bill for the financing of water supply and sewerage services after reorganisation. Indeed, I am sure that that is the intention of the new clause. It would change the basis of the financing from direct charges for services provided to local taxation through the general rates. The amendments would not only retain in essence the present financial basis but do away with the present water rate, which is a direct charge to the consumer although it may be based on the net annual value of the premises, and this would result in the financing of domestic water supplies as well as sewerage services through the general rate.

One consequence of that is that industry and some other non-domestic consumers would bear the full cost of their metered supplies on the basis of the quantiy used, and, in addition, in payment of the general rates would have to share the cost of supplies for domestic purposes to householders and to make a contribution to offices and shops.

The Central Advisory Water Committee's Sub-Committee on Water Charges concluded in 1963 that water should be paid for as far as possible on a quantity basis, and that only in exceptional cases should the genera! rate be called upon to meet deficits and that one class of consumer should not subsidise others.

One method of financing sewerage services provided by multi-purpose water authorities, which was discussed by the Central Advisory Water Committee in its 1971 report, envisaged charges for disposing of dirty water based on the cost of that service to each category of user. We have adopted this method in the Bill. We have also accepted the recommendation of the Committee on Sewage Disposal, chaired by the hon. Member for Holborn and St. Pancras, South (Mrs. Lena Jeger), that industry should be charged the full cost of receiving and conveying trade effluent in the public sewers and treating it at sewage disposal works.

If we were to accept the provisions of the new clause and the amendments, industry would presumably be entitled to have its liquid waste treated and disposed of without any direct charge being made but it would bear a rateable share of all sewerage and sewage disposal costs. As most of industry's liquid waste is treated in the factory and discharged direct to a river, estuary or the sea, this would favour those discharging to the sewers against those discharging direct. If the latter switched their waste to the sewers, the consequences would be that in some areas domestic ratepayers might find themselves subsidising industrial waste disposal. These are the difficulties that arise once we switch to the provisions advocated in the clause.

Perhaps that is not the intention of the hon. Member for Merthyr Tydvil (Mr. Rowlands). Perhaps he intends instead that industry shall still bear the full cost either by treating waste in the factory or by paying the water authorities to treat it and that it should also bear a rateable share of other sewerage costs. But, as with the water supply, that result would be inequitable and contrary to the principles we have endeavoured to embody in the Bill.

Alternatively—I think this is possibly what is behind the clause—the hon. Gentleman may be looking to the taxpayer to pay. Under present arrangements payments by a local authority under precept to water undertakers are relevant expenditure for the purpose of distributing the resources element of the rate support grant, but they are not taken into account in determining the national aggregate of that grant. Consequently, boards which incurred deficits to be met by way of precept have been obtaining an extra share of the grant although those precept payments attract nothing to the total to be shared out.

The hon. Gentleman mentioned £171,000, half of which his authority was getting from the rate support grant. The figure I have here is 45.2 per cent.—near enough half. The authority was getting that amount from the resources element and not by an increase in the total of the rate support grant. All it was doing was taking it from other authorities in the same area.

To put the whole cost of water on the rates, as is proposed in the new clause, would give areas such as Merthyr Tydvil and Aberdare an even larger share of the fixed amount of the cake. That would not be fair to other local authorities and their ratepayers and it would certainly be unacceptable to the Government. Water supply expenditure now attracts grant as regards both the aggregate of Exchequer grant to local authorities and the distribution of resources element.

I gave an assurance in Committee that in taking a decision about the appropriate level of Exchequer grant—to local authorities—after reorganisation we would take full account not only of local Government expenditure but of the fact that ratepayers in future will be paying directly for some water services that are at present paid for by local authorities from rate or rate support grant. I did not mean that the distribution of the grant among local authorities will be precisely the same. The effects of local government reorganisation and the shifting of responsibilities from local authorities, and the changes in local government finance, are bound to make substantial changes in the charges anyhow.

I do not agree that there will be massive changes or a massive increase in payment by any indivivdual. The individual ratepayers will have to contribute less to their local authorities in general rates by the removal of the sewerage charge and, indeed, the precepts for water from the general rates. I cannot agree that those should be allowed to continue and that local authorities should be allowed in future, after the reorganisation of the water service, including the sewerage and sewage disposal services, to precept and so place on their ratepayers that further charge.

Mr. John M. Temple (City of Chester)

Before my right hon. Friend leaves the part of his speech which refers to the grants of local authorities which have been taking place hitherto and which would be in respect of sewerage functions, can he say whether the Government have yet decided as to the scope and size of the grants which will be made to the regional water authorities to take the place of those grants which would have come in an indirect manner under the present system?

Mr. Page

The short answer to my hon. Friend is nil. On the basis that consumers of water and users of the sewerage system will pay for that use, they will thereby be relieved from the charge of that on the general rate fund. It is a matter of the ratepayer paying it out of another pocket, perhaps.

Mr. Temple

My right hon. Friend said that the grants will be nil. I do not think that he meant to imply that there will be nil grants to regional water authorities to take the place of the money which would have come to those persons who would have received the functions indirectly under the present system. I know that it is a complicated point but the gravamen of the point should be clear to my right hon. Friend. I do not think that he meant the answer to be nil.

4.45 p.m.

Mr. Page

I mean that eventually, over the period of years which is described in the Bill, the whole of the charge for sewerage and water supply will fall on the consumers. I give no undertaking that after the transition period there will be any further grants from the Exchequer for these services. That is the basis of charging under the Bill. It is no good my beating about the bush. It is the basis of the Bill that these services, as the Central Advisory Water Committee has said in more than one report, should be paid for by the consumer.

There will be a transitional arrangement for a period which at present in the Bill is set at two years, and that under an order or orders to be made under paragraph 5(2) of Schedule 5 the water authorities will be enabled to obtain a lump sum payment from the appropriate local authorities in respect of sewerage and sewage disposal services. The local authorities would raise these sums by levying a uniform poundage on rateable values in their area. That is merely a transition arrangement, and a temporary measure of this sort will give the authorities sufficient time to be able to set up direct charging arrangements.

The lump sum will not be a precept. It will not attract rate support grant. If direct charging has to start, or had to start on 1st April 1974 when the new authorities take over, the existing authorities would have an enormous task in identifying all properties connected to the public sewers. Their successors would have an equally difficult problem in arranging to collect from them. That transitional period does not mean an abandonment of the principles of the Bill that there shall be no precepting.

Charges rather than taxation is the principle of financing here. The new clause, which the hon. Member for Merthyr Tydvil has put before the Committee, would reverse that and make the principle taxation rather than charges. That would lead to the uneconomic use of resources. The new clause would introduce greater inequality than at present between different local authorities and their ratepayers and between different classes of consumers. I ask the Committee to resist the new clause.

Mr. Rowlands

My fears have been totally confirmed by the right hon. Gentleman's honest reply. While I did not expect him to accept the basic change which I am trying to make by the amendments and the new clause, I hoped that there would be some amelioration of the situation which many consumers and householders will face as a result of the charges—that is the extra direct charges that will occur from April 1974.

If nothing else, the Secretary of State for Wales must make a statement on what will happen after April 1974 to the constituent authorities within, for example, the Taf Fechan Water Board, if the precept stops at a stroke in April 1974. Such authorities will be faced with considerable increases. The Minister's statement that such increases can be offset by increases in rates is nonsense. Local authorities, which are poorer by nature of the definititon of the rate support grant, have been insisting on central government support. When the hon. Member for City of Chester (Mr. Temple) asked what was to be the support from central government and he heard that it was to be nil, I think that he was surprised. That is despite the fact that the Bill has been discussed for some considerable time and that the hon. Gentleman is one of the most perceptive hon. Members on these issues. 1 am not sure what will be the position of hon. Members and members of the public who have not followed these discussions come April 1974?

The Government in their consultative document stated that it was neither expected nor intended that regional water authorities would make any substantial changes in the pattern of charges for the first year or two of administration. If therefore authorities, such as the Taf Fechan Water Authority, are not allowed to continue with some interim precept, there will be a dramatic change in the pattern, which will lead to considerable increases in costs for householders and which will not be offset by any reduction in rates.

This is the difference between the philosophy of the Government and that of the Opposition. The Minister said that he believed in charges, not taxation. We believe in taxation not charges. In many areas the rate resources grant is not a fiddle to assist some ratepayers rather than others. The basis of the grant is that it assists areas of low rateable value and areas which are not as wealthy as others by giving central Government support for certain essential services. The community is entitled to such support. The Minister is saying that he is withdrawing completely that support from areas which have previously received support in providing sewerage and water supply services.

I reject the philosophy on which the Bill is based, namely that there should be charges, not taxation. I believe that taxation rather than charges should be the basis.

Mr. Graham Page

I ask the hon. Gentleman to consider what would happen if we were considering the situation against the background of complete nationalisation—for example, gas and electricity undertakings. Surely the hon. Gentleman would not expect a precept on local authorities in those cases.

Mr. Rowlands

The Minister raises the old argument which we had constantly in Committee. We regard water services and sewerage disposal matters as an important, intrinsic part of social service and of public health in the service of the community. We do not regard it as a commercial enterprise. That is the difference between the two sides.

I hope that this debate has shown the divide between the Opposition and the Government, and I hope that it will bring home to the public the practical consequences of the Bill. Whatever the Minister may say, I believe that people will face heavy and increased direct charges on households, irrespective of income or need, in the supply of water and sewage disposal, both of which are basic community services. Let the House now show what it feels and then let us allow the country to decide which philosophy is right.

Mr. Denis Howell (Birmingham, Small Heath)

I agree with my hon. Friend the Member for Merthyr Tydvil (Mr. Rowlands) that the Minister's answer was a little disappointing. My hon. Friend made his points extremely forcibly, but since this matter will arise for discussion on later amendments which deal with major issues of principle, I hope that he will agree not to press the issue at this point.

Mr. Rowlands

Since we shall have an opportunity to discuss these matters later, I beg to ask leave to withdraw the motion.

Motion, and clause, by leave, withdrawn.