Commons Sitting of 7 December 1988

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]

PRIVATE BUSINESS
NEWCASTLE UPON TYNE TOWN MOOR BILL [Lords]
Considered; to be read the Third time.
AVON LIGHT RAIL TRANSIT BILL [Lords]
Order for Second reading read.
To be read a Second time on Thursday 8 December.
CITY OF GLASGOW DISTRICT COUNCIL ORDER CONFIRMATION BILL
Considered; to be read the Third time.

BUSINESS OF THE HOUSE
Return ordered,
for Session 1987–88 of—

1

2

3

4

5

6

Date when Closure claimed and by whom

Question before House or Committee when claimed

Whether in House or Committee

Whether assent given to Motion or withheld by the Chair

Assent withheld because, in the opinion of the Chair, a decision would shortly be arrived at without that Motion

Result of Motion and, if a Division, Numbers for and against

and
(2) in the Standing Committees under the following heads:

1

2

3

4

5

Date when Closure claimed, and by whom

Question before Committee when claimed

Whether assent given to Motion or withheld by the Chair

Assent withheld because, in the opinion of the Chair, a decision would shortly be arrived at without that Motion

Result of Motion and, if a Division, Numbers for and against

and
(b) applications of Standing Order No. 28 (Powers of Chair to propose question) during Session 1987–88:
(1) in the House and in Committee of the whole House, under the following heads:

1

2

3

4

5

Date when Closure claimed, and by whom

Whether in House or Committee

Whether claimed in respect of Motion or Amendment

Whether assent given to Motion or withheld by the Chair

Result of Motion, and, if a Division, Number for and against

and
(2) in the Standing Commitees under the following heads:
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(1) the total number of Questions to Ministers or other Members which stood on the Order Paper, distinguishing those set down for oral, written answer priority and written respectively, the number of days upon which replies to Questions for oral answers were given in the House; and the total number of Questions for oral answer to which such answers were given in the House;

(2) the total number of Notices of Motions given for an early day;

(3) the number of Members ordered to withdraw from the House under Standing Order No. 42 (Disorderly conduct) showing separately the orders given in the House and those given in Committee; and the Members suspended from the service of the House under Standing Order No. 43 (Order in debate) or otherwise, distinguishing whether the offence was committed in the House or in Committee, the period of such suspension, the number of occasions on which more than one Member was so suspended having jointly disregarded the authority of the chair, and the number of occasions on which the attention of the House was called to the need for recourse to force to compel obedience to Mr. Speaker's direction; and

(4) the number of public petitions presented to the House distinguishing separately those brought to the Table at the times specified by Standing Order No. 133 (No debate on presentation of petition).—[The First Deputy Chairman of Ways and Means.]

BUSINESS OF THE HOUSE

  CLOSURE AND ALLOCATION OF TIME
  Return ordered,
  Respecting—
  (a) applications of Standing Order No. 35 (Closure of debate) during Session 1987–88:
  (1) in the House and in Committee of the whole House, under the following heads:

  1

  2

  3

  4

  Date when Closure claimed, and by whom

  Whether claimed in respect of Motion or Amendment

  Whether assent given to Motion or withheld by the Chair

  Result of Motion, and, if a Division, Numbers for and against

  —[The First Deputy Chairman of Ways and Means.]
  and
  (c) the number of Bills in respect of which allocation of time orders (distinguishing where appropriate orders supplementary to a previous order) were made under Standing Order No. 81 (Allocation of time to bills), showing in respect of each bill—

  (i) the number of sittings allotted to the consideration of the Bill in Standing Committee by any report of a Business Sub-Committee under Standing Order No. 103 (Business sub-committees) agreed to by the Standing Committee, and the number of sittings of the Standing Committee pursuant thereto; and

  (ii) the number of days or portions of days allotted by the allocation of time order and any supplementary order to the consideration of the Bill at any stage in the House or in committee, together with the number of days upon which proceedings were so taken in the House or in committee.—[The First Deputy Chairman of Ways and Means.]

  DELEGATED LEGISLATION
  Return ordered,
  Of the number of Instruments considered in Session 1987–88 by the Joint Committee and the Select Committee on Statutory Instruments respectively pursuant to their orders of reference, showing in each case the numbers of Instruments subject to the different forms of parliamentary procedure and of those within the Committees' orders of reference for which no parliamentary procedure is prescribed by statute; setting out the grounds on which Instruments may be drawn to the special attention of the House under Standing Order No. 124 (Statutory Instruments (Joint Committee)) and specifying the number of Instruments so reported under each of these grounds; and of the numbers of Instruments considered by a Standing Committee on Statutory Instruments, &c., and by the House respectively, in Session 1987–88, showing the number where the Question on the proceedings relating thereto was put forthwith under Standing Order No. 101(5). —[The First Deputy Chairman of Ways and Means.]

  PRIVATE BILLS AND PRIVATE BUSINESS
  Return ordered,
  Of the Number of Private Bills, Hybrid Bills, Bills for the confirmation of Orders under the Private Legislation Procedure (Scotland), Act 1936, and Bills for confirming Provisional Orders introduced into this House, and brought from the House of Lords, and of Acts passed in Session 1987–88, specifying also the dates of the House's consideration of the several stages of such Bills;
  Of all Private Bills, Hybrid Bills and Bills for confirming Provisional Orders which in Session 1987–88 were reported on by Committees on Opposed Bills or by Committees nominated by the House or partly by the House and partly by the Committee of Selection, together with the names of the selected Members who served on each Committee; the first and also the last day of the sitting of each Committee; the number of days on which each Committee sat; the number of days on which each selected Member served; the number of days occupied by each Bill in Committee; the Bills of which the Preambles were reported to have been proved; the Bills of which the Preambles were reported to have been not proved; and in the case of Bills for confirming Provisional Orders, whether the Provisional Order ought or ought not to be confirmed;
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  Of all Private Bills and Bills for confirming Provisional Orders which in Session 1987–88 were referred by the Committee of Selection to the Committee on Unopposed Bills, together with the names of the Members who served on the Committee; the number of days on which the Committee sat; and the number of days on which each Member attended;
  Of the number of Bills to confirm Orders under the Private Legislation Procedure (Scotland) Act 1936, distinguishing those proceeded with under section 7 and under section 9 respectively; specifying, in the case of Bills proceeded with under section 9 against which petitions were deposited, whether a motion was made to refer the Bill to a joint committee, and if so whether such motion was agreed to, withdrawn, negatived or otherwise disposed of; and stating for each joint committee to which a Bill was referred the names of the Members of this House nominated thereto, the first and last day of the committee's sitting, the number of days on which each joint committee sat for the consideration of the Bill referred to it, the number of days on which each Member of the committee served, and whether the committee reported that the Order ought or ought not to be confirmed.
  And of the number of Private Bills, Hybrid Bills, Bills for the confirmation of Orders under the Private Legislation Procedure (Scotland) Act 1936, and Bills for confirming Provisional Orders withdrawn or not proceeded with by the parties, those Bills being specified which were referred to Committees and dropped during the sittings of the Committee.—[The First Deputy Chairman of Ways and Means.]

  PUBLIC BILLS
  Return ordered,
  Of the number of Public Bills (other than Bills to confirm Provisional Orders and Bills to confirm Orders under the Private Legislation Procedure (Scotland) Act 1936) distinguishing Government from other Bills, introduced into this House, or brought from the House of Lords, during Session 1987–88, showing: (1) the number which received the Royal Assent, and (2) the number which did not receive the Royal Assent, indicating those which were introduced into but not passed by this House, those passed by this House but not by the House of Lords, those passed by the House of Lords but not by this House, those passed by both Houses but Amendments not agreed to; and distinguishing the stages at which such Bills were dropped, postponed or rejected in either House of Parliament, or the stages which such Bills had reached by the time of Prorogation.—[The First Deputy Chairman of Ways and Means.]

  SITTINGS OF THE HOUSE
  Return ordered,
  Of the days on which the House sat in Session 1987–88, stating for each day the day of the month and day of the week, the hour of the meeting, and the hour of the adjournment; the total numbers of hours occupied in the sittings of the House; and the average time; showing the number of hours on which the House sat each day, and the number of hours after the time appointed for the interruption of business and specifying, for each principal type of business before the House, how much time was spent thereon, distinguishing from the total the time spent after the hour appointed for the interruption of business.—[The First Deputy Chairman of Ways and Means.]

  SPECIAL PROCEDURE ORDERS
  Return ordered,
  Of the number of Special Procedure Orders presented in Session 1987–88, the number withdrawn; the number annulled; the number against which Petitions or copies of Petitions were deposited; the number of Petitions of General Objection and for Amendment respectively considered by the Chairmen; the number of such petitions certified by the Chairmen as proper to be received, and the number certified by them as being Petitions of General Objection and for Amendment respectively; the number referred to a Joint Committee of both Houses; the number reported with Amendments by a Joint Committee, and the number in relation to which a Joint Committee reported that the Order be not approved and be amended respectively; and the number of Bills introduced for the confirmation of Special Procedure Orders:
  Of Special Procedure Orders which, in Session 1987–88, were referred to a Joint Committee, together with the names of the Commons Members who served on each Committee; the number of days on which each Committee sat; and the number of days on which each such Member attended.—[The First Deputy Chairman of Ways and Means.]

  STANDING COMMITTEES
  Return ordered,
  For Session 1987–88 of (1) the total number and the names of all Members (including and distinguishing Chairmen) who have been appointed to serve on one or more of the Standing Committees showing, with regard to each of such Members, the number of sittings to which he was summoned and at which he was present; (2) the number of Bills, Estimates, Matters and other items referred to Standing Committees pursuant to Standing Order No. 102 (Standing Committees on Statutory Instruments, &c.), or Standing Order No. 103 (Standing Committees on European Community Documents) considered by all and by each of the Standing Committees, the number of sittings of each Committee and the titles of all Bills, Estimates, Matters and other items as above considered by a Committee, distinguishing where a Bill was a Government Bill or was brought from the House of Lords, and showing in the case of each Bill, Estimate, Matter and other item, the particular Committee by which it was considered, the number of sittings at which it was considered (including, in the case of the Scottish Grand Committee, the number of meetings held in Edinburgh, pursuant to a motion made under Standing Order No. 95(3) (Scottish Grand Committee)) and the number of Members present at each of those sittings.—[The First Deputy Chairman of Ways and Means.]

  SELECT COMMITTEES
  Return ordered,
  For Session 1987–88 of statistics relating to the membership, work costs and staff of Select Committees with so much of the same information as is relevant to the Chairmen's Panel and the Court of Referees.—[The First Deputy Chairman of Ways and Means.]

Oral Answers to Questions
  TRADE AND INDUSTRY

    Household Domestic Appliances
    Mr. Sumberg: To ask the Chancellor of the Duchy of Lancaster what action has been taken by his Department over the past two years to ensure greater safety in the use of domestic household electrical appliances.
    The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. Eric Forth): Effort has been directed to two main sectors.
    First, regulations have been prepared which set constructional requirements aimed at ensuring the intrinsic electrical safety of household appliances and accessories. Last year, the Plugs and Safety Sockets etc. (Safety) Regulations 1987 were introduced to improve the safety of those items. Consultation has also been carried out on the Low Voltage Electrical Equipment (Safety) Regulations, intended to implement the low voltage directive, which I expect to lay before the House early in the new year. More generally, the Consumer Protection Act 1987 also introduced a new general safety requirement for all consumer goods not covered by specific regulations to be reasonably safe.
    Secondly, promotional campaigns have been undertaken, in conjunction with industry, to heighten awareness of the hazards associated with the use of certain electrical equipment and the ways to minimise those risks. Particular examples have concerned the proper use and maintenance of electric blankets and the enhanced protection against electric shock provided by residual current devices.
    Mr. Sumberg: Does my hon. Friend agree that it is hardly helpful to safety in the home to oblige the disabled, the elderly and the plain incompetent, among whom I number myself, to fit plugs to electrical appliances? Is it not time that we followed the practice on continental Europe and obliged manufacturers to fit moulded plugs on all electrical appliances?
    Mr. Forth: I am charmed, if not seduced, by my hon. Friend's confession of weakness. There is no evidence that safety problems arise in domestic use from plugs not being attached to flexes by manufacturers, so I should be reluctant to make that compulsory. I remind my hon. Friend that 5 to 10 per cent. of households still use the old round-pin plugs, which could give rise to problems.
    Mr. Thurnham: Is my hon. Friend aware that Britain is one of the few countries in the world in which any Tom, Dick or Harry can set up as an electrician? No doubt any Frank, Fritz or Sebastian will soon be able to do so as well. Will my hon. Friend encourage householders to use only qualified electricians? Will he acknowledge the work done by the Electrical Contractors Association in setting high standards of training and encouraging the installation of residual current breakers in every house?
    Mr. Forth: I welcome what my hon. Friend has said. It is of the greatest importance that consumers generally— certainly in the sector that we are discussing—should always try to ensure the competence of a contractor. I

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    encourage the industry to go further in its efforts to ensure that potential users of its services use only the competent and qualified.
    Mr. Kennedy: I listened with interest to the Minister's first response, but something was lacking. Why is he so against making the attachment of plugs compulsory?
    Mr. Forth: I am sorry that I did not carry the hon. Gentleman with me. Not only are we generally against compulsion where it can be avoided, but there is no evidence that plugs not compulsorily attached to electrical flex cause any safety hazard in the home. The hon. Gentleman must concede that some housholds in his constituency may still use the old two-pin plugs. Making the use of square-pin plugs compulsory would thus give rise to problems, perhaps among people on low incomes.

    Rolls-Royce 211-524L Engine
    Mr. Richard Page: To ask the Chancellor of the Duchy of Lancaster when he expects to make an announcement on possible launch-aid for the Rolls-Royce 211-524L engine.
    The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Robert Atkins): Discussions are continuing with Rolls-Royce on its launch-aid application for the RB211-524J and 524L engines. I expect the Government to be in a position to make an announcement on the application early next year.
    Mr. Page: I am disappointed that an announcement will not be available today. I remind my hon. Friend that this engine application will produce the most powerful civil aviation engine in the world, one that will have considerable world markets. As our manufacturing base, although growing and expanding, is still regretfully rather small-as witnessed by our balance of payments problems will my hon. Friend use his considerable charm, influence and persuasion to ensure that, however it is funded, the application goes ahead?
    Mr. Atkins: I am delighted by my hon. Friend's question. My hon. Friend, along with me and those who appreciate the value of Rolls-Royce, recognises that the potential for this engine is not in doubt. Rolls-Royce has a deserved reputation for excellence, which this derivative will enhance. I agree that Rolls-Royce has found the right market. I hope that the engine will be successful.
    Mr. Greg Knight: Will my hon. Friend confirm that, with or without launch-aid, this is an excellent engine and that Rolls-Royce has an excellent safety record?
    Mr. Atkins: Of course I agree with my hon. Friend. I paid a visit to Rolls-Royce in his constituency and recognise the importance of the work force. As usual, my hon. Friend puts the case for his constituents and for Rolls-Royce with the persuasion that we have come to expect.

    Employment, Training and Inner-City Policy
    Mr. Rowe: To ask the Chancellor of the Duchy of Lancaster what discussions he has held concerning employment and training and inner-city policy; and if he will make a statement.
    The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Tony Newton): The measures available under the DTI's enterprise initiative already recognise that some areas of the country require additional assistance to encourage enterprise and growth.
    Mr. Rowe: My right hon. Friend will be aware of some of the evidence given recently to the Select Committee on Employment about the lack of provision for training in some of the urban development corporations. Will he give an assurance that he will take into account some of the excellent suggestions made in that evidence and elsewhere for improving the position, because the need is urgent?
    Mr. Newton: My hon. Friend knows the importance that we attach to employment and training issues in relation to inner-city policy. They are the subject of frequent discussion. I shall certainly take account of my hon. Friend's comments in considering the points made.
    Mr. Vaz: When the right hon. Gentleman considers future inner-city policy, will he learn from the mistakes that were made with the establishment of the inner-city task forces? Will he ensure that local authorities, such as mine in Leicester, are consulted fully before any of these policies are put into effect? Will he also consider extending the inner-city initiatives to the outer areas of cities, which suffer from similar problems to those in inner-city areas?
    Mr. Newton: As it happens, I was in Leicester yesterday and visited the task force area with which the hon. Gentleman is concerned. It seems to be doing very good work. I must say gently that it takes two to achieve the degree of co-operation that the hon. Gentleman and I would like to see. I hope that it will be possible to work as co-operatively as both of us would like.
    On the hon. Gentleman's other point, of course there are other places which suffer significant problems and that is one point that we shall bear in mind as we consider the deployment of the task force effort.

    Investment Media
    Mr. Dykes: To ask the Chancellor of the Duchy of Lancaster when he next intends to meet his European Community counterparts to discuss the equalisation of funding conditions for unit trusts and similar investment media throughout all the European Community member states.
    The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. Francis Maude): I regularly meet my European Community counterparts to discuss matters of mutual interest and concern. These include the sorts of matters indicated by my hon. Friend.
    Mr. Dykes: May I eschew the ghastly phrase "level playing fields" and ask my colleague whether he will work hard from now on to achieve the equalisation and harmonisation of conditions for these unit trust groups, both British and foreign? Does my hon. Friend agree that there should be equalisation of distribution and marketing provision in all member states as soon as possible? Does he agree also that insurance groups launching unit trusts and other similar instruments should not be able to conceal the real net charges from unit trust purchasers, but should reveal the same charges as other genuine unit trust groups?
    Mr. Maude: All unit trusts, whether produced by insurance companies, specialised unit trust companies or anyone else, have to meet the same terms and conditions. I am delighted that my hon. Friend did not talk about level playing fields. In the time that I have been doing this job, I have heard a great deal about playing fields but have never come across one which people agreed was level.
    We must ensure that such products are readily marketable across Europe. Under the directive that comes into force next October, it will be possible for a unit trust which is authorised in one Community country to be marketed throughout the Community, but it will have to be marketed subject to the rules of the country in which it is being marketed. There would therefore be no question of products authorised elsewhere but marketed in the United Kingdom being subject to a laxer regime.
    Mr. Teddy Taylor: Is my hon. Friend aware of the very real concern for the safety of the investing public if foreign financial intermediaries can operate in this country without qualifying under the Securities and Investments Board or FIMBRA? Can he assure the investing public in Britain that any financial intermediary operating in the United Kingdom will have to meet the high qualifications and standards of FIMBRA?
    Mr. Maude: Certainly. As I indicated, under the directive which covers unit trusts and collective investment schemes it will be essential for those products to be marketed in a country subject to the marketing rules of that country. There can therefore be no question of intermediaries, no matter where they are based, selling those products in the United Kingdom being subject to anything other than the United Kingdom rules.
    There is a further directive which affects investment services more generally. As I understand it—it is still in an early stage of negotiation—it will have the same broad division, so that services being promoted in one country will be subject to the conduct of business rules for that country.

    Regional Assistance
    Ms. Armstrong: To ask the Chancellor of the Duchy of Lancaster if he has any plans to announce new measures to boost the economies of Britain's regions.
    Mr. Newton: There is already a range of such measures which we shall continue to pursue vigorously. They are contributing to the economic revival which is clearly taking place in the regions.
    Ms. Armstrong: Does the Minister recognise that there is still a great difference between regions in terms of economic prosperity and deveopment and that, in some regions, there is almost over-capacity, whereas in others we are desperately looking for ways in which we can become self-sufficient? Self-sufficiency demands productive industries, research and development and skill-based industries. What does the Minister intend to do to ensure that we have that base from which we can then properly grow?
    Mr. Newton: I certainly recognise that there are still substantial differences between regions, but those regions that have had a particularly difficult time are now showing signs of a very strong revival. It is, of course, right that they should have the appropriate economic and industrial
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    base, but the mix of that base will be different from that upon which they have traditionally depended, because the world has changed. In the case of the hon. Lady's region, the north-east, it seems to me that what is happening—notably but by no means only as a result of the arrival of Nissan—is generating exactly the sort of new skill base through its effects on training, for example, that we want to see.
    Mr. Andy Stewart: Did my right hon. Friend read The Independent on Monday where he would have seen, listed constituency by constituency, the drop in unemployment? If he did, he would see that Sherwood, my constituency, was second from the bottom. That is due to an unprecedented reduction in manpower in the mining industry. We do not yet qualify for Government or EEC aid. Will he reconsider advising the EEC that we need such aid in the constituency of Sherwood? Better still, would he care to visit my constituency at the earliest possible opportunity to see what can be done about improving our prospects?
    Mr. Newton: I did read the tables in The Independent on Monday and they were indeed interesting. Although I did not visit my hon. Friend's constituency yesterday, I visited Leicester and Nottingham and discussed a numbr of those problems with Nottingham city council and Nottinghamshire county council. I am very much aware of the problems being created by the decline of mining employment and the British Government have indicated their support for some of the proposals put forward in respect of the point raised by my hon. Friend.
    Mr. James Lamond: Does the Minister recognise that certain industries are heavily concentrated in some regions, such as textiles in the north-west? Now that the textile industry is facing difficulties once again, does the right hon. Gentleman have any special measures that he intends to put into operation—such as additional finance to Inward, the development agency in the north-west—to enable any temporary difficulties which may arise because of the decline of certain industries to be overcome?
    Mr. Newton: I have no specific additional measures in mind of the sort that the hon. Gentleman suggested. As I said in the main answer, there is a range of measures—including regional selective assistance—designed to encourage the development of new industries in the regions. Our record in attracting and encouraging new inward investment in all parts of the country is already considerable. We shall seek to build further on that.
    Mr. Conway: Will my right hon. Friend take it from a former board member of the North of England Development Council that any colleague in this place who visits the assisted areas will see a marked improvement on the days when the Labour Government were implementing their broad-brush policies? Since the Government introduced their policy of targeting help, which is designed to create employment, there has been a vast improvement, as Labour Members well know.
    Mr. Newton: I agree with my hon. Friend. As I have said in answering earlier questions, I have been visiting some of the regions. There is no doubt that the sense of confidence and optimism is far greater than it was even a year or two ago.
    Mr. Caborn: Is the Minister aware of the report on the regional impact of the single market of 1992 which has been produced by the department of applied economics at the University of Cambridge? One of the conclusions reads:
    "Regional policy needs to be significantly strengthened if 1992 is not to be disastrous for the regions".
    The report's conclusions have been endorsed by the regional policy director of the Community. Is the Minister telling the House that we are leaving regional policy in 1992 to market forces?
    Mr. Newton: I am not saying any such thing. We have a substantial range of measures and we shall continue to press them vigorously. There are undoubtedly implications for the regions in 1992. For example, they will need to have good transport links with the markets of Europe, and my right hon. Friend the Secretary of State for Transport is actively pursuing that aspect.
    Mr. Batiste: Does my right hon. Friend agree that the best way to stimulate the economies of the regions is through the creation of genuinely local enterprise cultures, and that the most effective way of starting those cultures in areas of high unemployment where the economy is dominated by local authorities is for the authorities to put out to genuine tender as many of their services as possible?
    Mr. Newton: I am sure that that approach could make a contribution. Also important is the work of local enterprise agencies, in many of which local authorities play an important part. I welcome the growing number of private sector initiatives which are directed at producing exactly the sort of culture that my hon. Friend rightly advocates.

    British Engineering
    Ms. Quin: To ask the Chancellor of the Duchy of Lancaster if he will make a statement on the prospects for British engineering, in the light of the proposals to complete the European internal market in 1992.
    Mr. Newton: The creation of the single European market is opening up opportunities for all sectors of United Kingdom industry, including engineering. Our "Europe Open for Business" campaign is designed to assist firms of all kinds to take advantage of those opportunities.
    Ms. Quin: Given the importance of engineering to areas such as the north-east, and the enormous trade deficit in manufactured goods between the United Kingdom and the rest of the EEC, will the Government take every measure to ensure that British engineering derives some advantage from 1992? Or will engineering be allowed to go the way of so many other older industries, especially those in the north-east at this time?
    Mr. Newton: There is no question of our allowing the engineering industry, or any other, to go into decline for want of anything that the Government can do to help it to have a competitive and viable future. The range of our policies has greatly contributed to an overall increase in the competitiveness of British industry, and the engineering industry, amongst others, is gaining from that.
    Mr. Dickens: Does my right hon. Friend agree that British industry has a chance of walking tall in 1992 when we move into the single European market? Has this chance
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    not been based on the marvellous training schemes that we have introduced? People have been given new skills that can lead towards meaningful jobs. We no longer have the stupid overmanning that was to be found under the Labour Government. Is it not a fact that industry now delivers goods on time, of the the right quality, at competitive prices, with good after-sales service?
    Mr. Newton: I think that the answer to all those questions is yes. I only wish that I could imitate the style with which my hon. Friend put the points.
    Mr. George Howarth: Does the Minister accept that even with expansion of opportunity in the engineering industry there will be a severe skill shortage, which will create difficulties?
    Mr. Newton: There are problems of skill shortages in that and other industries, including the construction industry. The proposals put forward by my right hon. Friend the Secretary of State for Employment earlier this week are directed at precisely such problems.
    Mr. Bowis: Does my right hon. Friend agree that for engineering firms to do well in 1992 and beyond there is a great need for more young people to come into engineering? Will he encourage firms to keep close to the world of education—schools, colleges and higher education—so that, in particular, more women come into the industry and more poeple take joint courses in engineering and modern languages?
    Mr. Newton: Yes, those are among the objectives of the industry education compacts, which we are taking a number of steps to encourage, and very much in line with the proposals that my right hon. Friend the Secretary of State for Employment brought forward a couple of days ago.
    Mr. Henderson: How does the Minister explain the deterioration in the trade gap with the EEC in engineering products from £350 million in 1979 to a deficit of £2 billion in 1988? What specific steps will he take to prevent a further deterioration by 1992 and beyond?
    Mr. Newton: I attribute much of that problem to the economic policies that were pursued prior to 1979, and I expect there to be continuing advantage to the engineering industry, as to others, from the policies that have been pursued since then.
    Mr. Riddick: Does my right hon. Friend agree that the prospects for British engineering will be further improved with the privatisation of British Steel? With a privatised steel industry, we can expect prices to be stabilised, or even reduced, as the industry becomes more efficient and competitive.
    Mr. Newton: I hope that that forecast is right. I am certain that my hon. Friend's analysis that the prospects for British Steel have been improved is correct.

    World Trade
    Mr. Robert Hughes: To ask the Chancellor of the Duchy of Lancaster how much Britain's share of world trade has changed since 1979.
    The Minister for Trade (Mr. Alan Clark): Since the beginning of the decade our share of world trade in manufactures has held steady. Our share of trade in invisibles continues to increase.
    Mr. Hughes: Is not the true state of affairs that Britain's share of world trade has dropped from 9·1 per cent. in 1979 to 7·9 per cent. in the first quarter of this year? Whatever twisted logic the Minister may use, he cannot disguise his failure. What does he intend to do to improve British competitiveness?
    Mr. Clark: I do not need twisted logic, because the hon. Gentleman circulated the text of the supplementary question that he has just declaimed fairly widely. It begins "Dear Bob" and is headed "Your question 11 tomorrow." It is signed by the hon. Member for Norwich, South (Mr. Garrett), and says exactly what the hon. Member for Aberdeen, North (Mr. Hughes) should do. I tried to get hold of the hon. Gentleman to help him with his figures because I did not think that the House would consider that a fall from 8·1 to 7·9 per cent. was of seismic proportions. The hon. Gentleman will be glad to know that the figure has now gone up from 7·9 to 8·2 per cent.
    Mr. Robert Hughes: On a point of order, Mr. Speaker. I wonder whether you can make inquiries about whether the Minister has been reading private correspondence which has not been properly handed on.
    Mr. Clark: Further to that point of order, Mr. Speaker. The hon. Gentleman is presumably not aware that he shares both Christian name and surname with my hon. Friend the Member for Harrow, West (Mr. Hughes). Due to over-profligacy, I assume, in circulating the text, it was sent to everyone who carries his name—or was it?
    Mr. Beaumont-Dark: Does my hon. Friend agree that one of the great problems that we face in world trade is the fact that the pound continues to go higher? If the pound is allowed to continue its rise against the currencies of our competitor countries, is it not possible that we may return to the position of 1979 to 1981, which would be hugely damaging to manufacturing industry? [HON. MEMBERS: "Hear, hear."]
    Mr. Clark: My hon. Friend has his view, which seems to be widely shared by Opposition Members. The paradox is that Opposition Members and others declare simultaneously that the balance of payments deficit will lead to a sterling crisis, by which I assume they mean that the value of sterling will fall, not rise. That paradox may benefit from the attention of Lady Antonia Fraser's think tank.
    Mr. John Garrett: Will the Minister confirm that the Chancellor's Autumn Statement forecast that this year British non-oil exports would increase by less than the growth in world trade and that we would continue to lose our market share? What representations have he or his colleagues made to the Chancellor about his policy of forcing up interest rates and thus further damaging our international competitiveness in manufacturing?
    Mr. Clark: Industry is largely united in its view that it prefers increased interest rates to increased inflation. I did not know that my right hon. Friend had forecast that in his Autumn Statement, but I draw to his and to the hon.
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    Gentleman's attention the fact that, as I told the hon. Member for Aberdeen, North, in the first six months of this year our share increased from 7·9 to 8·2 per cent.

    HOTOL
    Mr. Jack: To ask the Chancellor of the Duchy of Lancaster what measures he has taken to promote and encourage overseas participation in the HOTOL project.
    Mr. Atkins: It is for Rolls-Royce and British Aerospace to determine jointly which pattern of international collaboration they wish to explore and we will support them in that endeavour. Following a visit that I made recently to Washington, where I met Dr. Graham, the President's science adviser at the White House, I am pleased to tell the House that avenues have been established for the companies to pursue discussions with their American counterparts.
    Mr. Jack: In welcoming my hon. Friend's positive statement about future developments in respect of HOTOL, may I ask him to confirm that the only real future for the project depends upon putting together international consortia with a vested interest in launching satellites? While he encourages that development, will he ensure that the companies participating in the materials development, technology and avionics associated with the project have sufficient encouragement from his Department to continue the work? We must not allow the project to wither on the vine.
    Mr. Atkins: My hon. Friend is right. I can do no better than quote from a recent report in the United States by a group of people from the United States and other nations. It concluded that it was
    "economically and technologically impossible for any single country or company to develop an HSCT aircraft."
    Collaboration must be the order of the day.
    Mr. Wood: Bearing in mind that HOTOL holds the prospect of a reduction by a factor of four in the cost of satellite launches, which would benefit broadcasters, telecommunications networks and defence departments, is it not extremely important that the industries involved should co-operate internationally in this venture?
    Mr. Atkins: As my hon. Friend knows, it will cost many billions of pounds to develop HOTOL. The early stages of such activity will require relatively small sums of about £2 million to £3 million a year, which it is well within the capability of the companies involved to provide. My hon. Friend is right to say that this is an innovative project that deserves consideration, and we are doing just that.

    Exporters (Support Scheme)
    Mr. Cran: To ask the Chancellor of the Duchy of Lancaster if he will report on the progress being made with his Department's review of support schemes for exporters; and when he expects the review to be completed.
    Mr. Alan Clark: Good progress is being made. My right hon. and noble Friend expects to announce the results of the review in the new year.
    Mr. Cran: Does my hon. Friend agree that a strong case can be made for encouraging exporting companies to use sources of market information other than those provided

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    under the aegis of his Department, if for no other reason than that, although companies appreciate the service, they have complained about the variability and quality of the service that they receive?
    Mr. Clark: I have heard no complaints, but I hope that my hon. Friend will let me know if he does. Of course, it is open to companies to use the private sector. As part of the enterprise initiative, we are actively enrolling the private sector in a consultancy role.
    Mr. Cryer: Would not any support scheme for exporters, which is vital in view of our massive balance of payments and trade deficit, be subject to Commission interference? Is it not particularly important that there should be export schemes to assist manufacturing industry in view of the £11 billion deficit with other EEC countries? Are not our membership of the EEC and high interest rates forced up by the Chancellor of the Exchequer sounding a death knell for yet more jobs in manufacturing industry, over and above the 2 million already destroyed by the Tory Government since 1979?
    Mr. Clark: Straight export subsidies, as the hon. Gentleman knows, are banned under article 16 of the GATT and article 9 of the subsidies code. I admit that there is a grey area within the European Community and practices there. Right hon. and hon. Members must weigh—and this is reflected in their correspondence—the relative advantages that their constituents can sometimes derive from Community grants as producers against the threats and dangers to which they may be subjected from their Community competitors, who also benefit from them.
    Mr. Ian Bruce: Will my hon. Friend comment on the way that his Department works with the Foreign and Commonwealth Office in supporting the efforts of British embassies? Does he agree that simple measures to monitor what is needed in export markets are often more cost-effective than grand dinners and soirees, where most of the money is spent rather than on practical measures?
    Mr. Clark: My hon. Friend is right in his implication that the bulk of the £100 million a year spent on export promotion is disposed of by the Foreign and Commonwealth Office. The relative merits of entertaining and hard fact finding depend on one's viewpoint.
    Mr. Cryer: And on one's taste buds!
    Mr. Clark: On every occasion that I visit a foreign capital, I make a point of calling on our commercial section there, and I am impressed by the increasingly rising standards of service, dedication and efficiency of the commercial sections of our posts overseas.
    Ms. Short: The Minister will remember the terrible effect on our exports and on manufacturing employment— which is now showing in our balance of payments problems—of the recession following 1979, largely caused by high interest rates. Is he not worried that with the high interest rates that we have now, the prospect of their increasing still higher, and 1992—when, senior British industrialists predict, one in two factories will close—we shall see another mammoth recession unless the Government act on interest rates?
    Mr. Clark: Interest rates are principally a matter for my right hon. Friend the Chancellor of the Exchequer. Many reasons have been advanced for the 1974–75 crisis.
    Ms. Short: I was speaking of 1979.
    Mr. Clark: It is generally accepted that it is a matter of cause and effect and that at that time high interest rates were a consequence of developments such as high oil prices. At present, we have a fall in oil prices.

    1992 Hotline
    Mr. Jacques Arnold: To ask the Chancellor of the Duchy of Lancaster how many calls have been received by his Department's 1992 hotline; and if he will make a statement.
    Mr. Maude: DTI's 1992 hotline has received over 105,000 calls since it opened on 18 March.
    Mr. Arnold: Does my hon. Friend consider that it is important that the hotline should bring to the attention of business men the significance of the enterprise initiative and of the many ways in which they can be given assistance in responding to 1992?
    Mr. Maude: My hon. Friend is right. There are a number of ways in which help and advice can be given to businesses as they adapt for the changes coming with the completion of the single market. No business in the length and breadth of the United Kingdom will be wholly exempt from the changes, and every one of them needs to look to its laurels to ensure that it is able to take advantage of the opportunities that will be forthcoming.
    Mr. Harry Greenway: Is my hon. Friend aware that many businesses all over the world are considering coming to this country as a means of building a bridge into Europe with 1992 in prospect? Is he in favour of that as a means of inspiring more business and more employment in this country, and if so, what is he doing about it?
    Mr. Maude: We have always had an open attitude to businesses which seek to establish themselves in this country. We have welcomed that and it has been enormously beneficial to us. It is a process that works both ways. The United Kingdom is now the second largest holder of external assets in the world, second only to Japan. That is a consequence of our having that open attitude to investment flowing both into and out of the United Kingdom.

    Airbus Industrie
    Mr. David Evans: To ask the Chancellor of the Duchy of Lancaster when he last met representatives of Airbus Industrie.
    Mr. Atkins: My right hon. and noble Friend the Secretary of State for Trade and Industry and I last met representatives of Airbus Industrie at a meeting of Airbus Ministers from the four partner countries held on 17 November 1988.
    Mr. Evans: Is my hon. Friend aware that the president of Airbus Industrie is German and that the managing director is French? In an important meeting on 15

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    December, will he support the view that the financial director should be a British subject, in the interests of British Aerospace and the British people?
    Mr. Atkins: Yes, Sir.
    Mr. Hoyle: Has the Minister discussed with Airbus Industrie the disappointment over the fact that British Airways went to Boeing in America rather than to Europe and that it is now the only major national carrier not using the European Airbus to any great extent? That disappointment is felt even when taking into account the Airbus orders that it inherited from British Caledonian.
    Mr. Atkins: I understand the hon. Gentleman's point. However, Rolls-Royce engines will be used on a variety of—
    Mr. Hoyle: Not on 737s.
    Mr. Atkins: No, not on 737s, but on a variety of the aircraft that have been purchased. In an industry that is as collaborative as the aerospace industry, a wide variety of British companies are already involved in a wide variety of Boeing aircraft, not least, for example, Shorts and Rolls-Royce. The hon. Gentleman's point is well taken.
    Mr. Bill Walker: When my hon. Friend next meets the members of Airbus Industrie, will he draw to their attention the way in which Britain has brought about financial discipline in the market place by requiring companies to show clearly how they operate and how they are funded? That is important because Airbus Industrie, which is an essential part of European aircraft collaboration, must be seen in the United Kingdom and elsewhere as a company whose accounts can be noted and accounted for.
    Mr. Atkins: My hon. Friend is correct in his assessment. Obviously, those in the industry know how successful the recent versions of the Airbus have been, particularly in competition with American manufacturers. It is all the more important, therefore, that we ensure that administratively and financially the company has a secure long-term future to offer customers and employees.
    Mr. Stott: Further to the point raised by my hon. Friend the Member for Warrington, North (Mr. Hoyle), given the fact that the British taxpayer has paid millions of pounds in launch-aid for the Airbus A320, that many thousands of jobs in British Aerospace depend on future sales of that aircraft, and that British Aerospace has decided to buy the Boeing 737 400 series, which does not have the Rolls-Royce engine, can the Minister quantify what that purchase will mean to the balance of payments?
    Mr. Atkins: The hon. Gentleman will not be surprised to know that I cannot do that off the top of my head. However, I emphasise what I said earlier. The aerospace industry is a collaborative industry involving a wide variety of manufacturers, in a wide variety of aspects, whether they be airframe, engines or avionics. In those circumstances, although I was as disappointed as many other people that British Airways felt that it could not buy the A320, the reason behind its decision was that it wanted a range that was not available by the purchase of the A320. That is a commercial matter for a company which is already involved with a variety of British companies in other aspects of Boeing aircraft, not least Rolls-Royce engines on the rest of its fleet.
    Mr. Grylls: Further to the good point made by my hon. Friend the Member for Tayside, North (Mr. Walker) about the organisation of Airbus, following the report by Sir Jeffrey Sterling, when will Airbus Industrie be turned into a company that actually has a balance—that would be a step forward—and when will it have a finance director? I understand that it does not have one at present.
    Mr. Atkins: In the context of Airbus ministerial meetings, we are working hard to ensure that we can achieve the ideal to which my hon. Friends have drawn the attention of the House. 1 hope that we can achieve it sooner rather than later.

    House Prices
    Mr. Michael: To ask the Chancellor of the Duchy of Lancaster what assessment he has made of the impact on the housing market, and on would-be first-time housebuyers in particular, of house price rises during 1988; and what proposals he has to regulate estate agents and others involved in that market as a consequence.
    Mr. Forth: I am pleased to see that home ownership in 1988 has continued to increase and that the proportion of homes in owner-occupation is at record levels. However, I am aware that some prospective home buyers experienced difficulties during the very active market conditions in July of this year and that the operation of the property transfer systems remains a matter of some public concern. Therefore, I have been conducting a wide-ranging programme of discussions with the leading estate agency bodies and other interested parties to consider the practices of estate agents in the operation of the property transfer system and the possible scope for self-regulation by estate agents.
    The Government's interim conclusions on the relevant issues were outlined in a recent speech given by my right hon. Friend the Chancellor of the Duchy of Lancaster. I have placed copies of the text of his speech in the House Library for reference.
    Mr. Michael: Does the Minister accept that his tears are meaningless in the context of inactivity and that those who were hurt in the scramble of house prices earlier this year were new and would-be house buyers? Discussions with estate agents do nothing to bring in regulation of the market, which is what the Minister should do as part of the Government's acceptance of their responsibilities.
    Mr. Forth: I am not entirely sure what the operation of estate agencies has to do with any difficulties that first-time buyers might have. It is instructive to note that the ratio of average income of first-time house buyers to the average price of houses has scarcely changed over the past 10 years. We should be careful before we rush to any conclusions about regulating a market which, generally speaking, has operated successfully and brought us to a position in which over two thirds of the people of this country are proud owner-occupiers.
    Mr. Andrew MacKay: Does my hon. Friend agree that there is a silver lining to the high increases in house prices in the south-east, namely, that market forces are now working? As employers cannot find labour in the south-east, they are seriously considering moving to areas

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    where house prices are much lower and labour is more plentiful, which will obviously help employment throughout the country.
    Mr. Forth: Yes, I agree with my hon. Friend. He and I know, but I doubt whether Opposition Members will ever learn, that the operation of the market overall and in the longer term is always to the benefit of the people of this country.
    Mr. Andrew F. Bennett: Does the Minister accept that there is not only a record number of home owners but a record number of repossessions? Does he accept also that there is concern that estate agents do not get the best possible prices for repossessed houses? The individual not only loses his home but ends up in debt. As repossession often occurs because of high interest rates and the problems of having to live on benefits, will the Government do something at least to make sure that estate agents get the full market value for repossessed homes?
    Mr. Forth: I congratulate the hon. Gentleman on his elevation to the Back Benches. I hope that his knowledge of estate agency matters will soon match his knowledge of education. If the hon. Gentleman has any specific cases that he wants to bring to my attention I should be grateful to know about them, because I will then be able to add them to the evidence that I have been gathering about the operation of estate agents over the past few months.

    CBI (Merger Policy)
    Mr. Ian Taylor: To ask the Chancellor of the Duchy of Lancaster what discussions he has had with the Confederation of British Industry regarding the proposed reform of the law on mergers.
    Mr. Maude: I have had no such discussions recently. However, the improvements to merger control procedures that we are proposing arose from our review of mergers policy, to which the CBI submitted views.
    Mr. Taylor: When my hon. Friend next has discussions with the CBI, will he remind it that many of its members are now successfully making acquisitions in other countries and that, rather than introduce protectionism in the domestic market and tinker with the takeover code, the way forward is for it to back my hon. Friend's efforts to remove restrictions in other countries, particularly within the European Community?
    Mr. Maude: It is worth pointing out that for the last 12 months for which figures are available, till September of this year, the value of acquisitions by United Kingdom companies overseas was slightly more than double the value of acquisitions in the United Kingdom by overseas companies. The policy of openness that we have espoused has been beneficial for the United Kingdom. My hon. Friend is absolutely right in saying that barriers to takeovers are being mounted in other countries within the European Community. I have asked the European Commission to bring forward proposals to address some of the barriers, and I have had an encouraging response.
    Mr. Austin Mitchell: Why does the Minister not admit that the Government's merger policy has been a total disaster? It has been diluted, it takes no account of jobs, industrial logic or the national interest and it has encouraged an orgy of speculation and takeover, rather
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    than investment, which has reached record heights in the last quarter. All the research shows that there has been not overall benefit, but overall harm, from those takeovers, yet the Government have dithered on with their review of policy. Why does the Minister not come out with the truth and tell us that the Government's only mergers policy is a great big "for sale" notice over British industry?
    Mr. Maude: It is difficult to know which of the hon. Gentleman's propositions is more wrong. He has got it wrong all the way down the line. We have made clear our policy. We shall refer mergers when a competition issue arises. We would not ordinarily refer mergers on any other basis, although it is not an exclusive criterion. As the figures that I have just given show, the fact is that we have been benefiting enormously from having a broadly open policy towards acquisitions. The result is that we have United Kingdom externally owned assets which are higher than those of any other country, except Japan. I should have thought that that would make the hon. Gentleman, with his well-known nationalism, rather proud.

    Shorts of Belfast
    Mr. Cash: To ask the Chancellor of the Duchy of Lancaster what is the extent of the financial interest of the Department of Trade and Industry in Shorts of Belfast.
    Mr. Atkins: I want my hon. Friend to listen carefully. The issued share capital of Short Brothers plc comprises 3,600,000 ordinary shares of £1 each, 7,710,000 A preference shares of £1 each and 79,700,000 B preference shares of £1 each. Of these, my right hon. Friend the Secretary of State for Trade and Industry holds 342,000 ordinary shares and 4,840,000 A preference shares. That adds up to about 10 per cent.
    Mr. Cash: Does my hon. Friend agree that Shorts has an extremely bright future and that it is a company that some of us wish to campaign to privatise? Does he further agree that if my right hon. Friend were prepared to accept such a proposal, it would lead to Shorts having an extremely bright future in the European Community for the next 20 years?
    Mr. Atkins: My hon. Friend is right. Shorts has contributed greatly to British Aerospace success. That is what it is and the House should be aware of it. Its plans for the future, which include privatisation and a new aircraft which it hopes to launch, suggest that its future will be as bright as it has reason to expect on the basis of its past achievements.
    Mr. Cryer: Is not the truth that the attempt to privatise Shorts produces uncertainty, and has not our experience of privatisation shown that it always leads to sackings under the guise of slimming down and improving competitiveness? Surely, in a place like Northern Ireland, it is better to have certainty to reduce the level of unemployment, which must contribute to the sectarian strife there. The Government's recipe is a recipe for disaster.
    Mr. Atkins: The main plans for privatisation will be controlled by my right hon. Friend the Secretary of State for Northern Ireland. As I said, our shareholding is relatively small. I disagree with the hon. Gentleman. I believe that privatisation has proved a success story in the

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    aerospace industry. British Aerospace and Rolls-Royce clearly show what that success has been, and Shorts deserves the same consideration.

    EC (Trade Statistics)
    Mr. John Marshall: To ask the Chancellor of the Duchy of Lancaster if he will make a statement on the growth of United Kingdom trade with the European Economic Community.
    Mr. Alan Clark: We welcome the growth in trade with the European Community. Increased trade widens buyers' choice, encourages greater efficiency, and stimulates growth in the economy as a whole.
    Mr. Marshall: Does my hon. Friend agree that the fact that the European Community takes 50 per cent. of our exports underlines both the potential for 1992 and the folly of those who sought at the 1983 election, and subsequently, to take Britain out of the European Community?
    Mr. Clark: My hon. Friend's point is well taken. I am glad to add another statistic. The value of our exports of manufactures to the European Community is growing at an annual rate of 17 per cent.
    Mr. Wilson: How does the Minister view the prospects for the Scotch whisky industry in the European Community?
    Mr. Clark: Very favourably—as they are throughout the world.
    Mr. Soames: With his well-known enthusiasm for the European Economic Community, does my hon. Friend agree that, although British business has done well in the Community recently, a limiting factor to developing our business is the poor language skills of British managers? Does he agree that the Government should take steps to ensure that companies are much better geared to promote their goods in the countries to which they are trying to sell them?
    Mr. Clark: My hon. Friend is entirely right. One problem is that so many of our customers speak English —of a kind. That sometimes deludes British exporters into thinking that they can reply at length, deliver technical specifications and issue sales literature in English. In fact, the sooner they realise that it is essential to circulate their literature and to converse in, if possible, the language of their customers, the better their prospects.

    Manufacturing Industry (Investment)
    Mr. Tony Lloyd: To ask the Chancellor of the Duchy of Lancaster by what percentage in constant value terms investment in manufacturing industries has changed from 1979 to the latest date for which figures are available.
    Mr. Atkins: Investment in manufacturing industry, including leased assets, in the first three quarters of 1988 is provisionally estimated to have been only 1·5 per cent. below the 1979 average level in constant value terms. However, it was 10 per cent. greater than in the same period a year earlier, and this strong growth is forecast to continue.
    Mr. Lloyd: Given those rather pathetic figures. will the Minister speculate whether the failure of manufacturing industry to invest in its and our future has any relationship with the massive and growing balance of payments crisis facing this country? What do the Government intend to do to stimulate investment?
    Mr. Atkins: The hon. Gentleman has been here long enough to be aware that there was a world recession. in 1980–81. We were not unique in suffering from that recession. The fact is that investment is at an all-time high. The CBI forecasts a rise of 14·5 per cent. this year and a further rise of 9 per cent. next year. That appears to fly in the face of what the hon. Gentleman is suggesting.

    Enterprise Initiative
    Mr. Harris: To ask the Chancellor of the Duchy of Lancaster how many applications have so far been received for consultancy projects under the enterprise initiative.
    Mr. Forth: My hon. Friend will be pleased to hear that a large and growing number of firms are improving their competitiveness by taking the enterprise initiative. Since January, 15,000 applications have been received for the self-help package of assistance with consultancy projects —2,500 of them in the last six weeks.
    Mr. Harris: Does my hon. Friend agree that this scheme has special value for small firms? Can he give any information about the number of applications made by small firms?
    Mr. Forth: My hon. Friend is right. The initiative is aimed primarily at small firms. We have been delighted with the take-up. I shall tell my hon. Friend what I probably do not need to tell him: we have already received 288 applications for consultancy projects from Cornwall, and 128 projects have been approved for assisted consultancy. I am sure he will agree that this is encouraging. We hope to see this greater progress maintained.

    EH 101 Helicopter
    Mr. Mans: To ask the Chancellor of the Duchy of Lancaster if he will make a statement on progress on the development of the EH 101 helicopter.
    Mr. Atkins: The Anglo-Italian EH 101 helicopter programme is approaching the end of its fifth year of full development. The flight-testing programme has been in progress for over a year and three development aircraft have now flown. Aircraft performance has generally been good, with problems no more than would usually be expected with such a development.
    Mr. Mans: I thank my hon. Friend for that reply. Will he elaborate on the progress of the RTM322 engine built by Rolls-Royce, which will be put in the aircraft at a later date?
    Mr. Atkins: As I have already said, the participation of Rolls-Royce in engine manufacture is proving highly successful, and the RTM322 is no exception. We hope that provision will be made for that engine to be available for the super version, but it is for customers to decide what they want.
    Mr. David Winnick: On a point of Order, Mr. Speaker.
    Mr. Speaker: Order. I shall take the statement from the Chancellor of the Duchy of Lancaster first.

North East Shipbuilders Ltd.
3.30 pm
The Chancellor of the Duchy of Lancaster and Minister of Trade and Industry (Mr. Tony Newton): With permission, Mr. Speaker, I wish to make a further statement about British Shipbuilders.
In my previous statement on 14 November, I was able to report good progress towards a successful sale of most of the remaining elements of British Shipbuilders, following that of Govan earlier in the year. That progress has continued. Agreement is now close for the sale of Clark Kincaid in Greenock and of the Appledore yard in north Devon, and negotiations for the sale of the Ferguson yard at Port Glasgow are under way.
I can additionally report today that I have accepted British Shipbuilders' advice that the preferred bidder for Marine Design Consultants should be the team led by the managing director. Subject to securing further new orders, its bid envisages work being continued in both its Sunderland and Dundee offices. I have asked British Shipbuilders to press ahead with detailed negotiations.
As I said on 14 November, the yards and other facilities that I have mentioned account for five of the six owned by BS, and nearly two thirds of those employed by them, when the process of seeking private sector purchasers was started by my predecessor last April.
The remaining undertaking is, of course, North East Shipbuilders Ltd. at Sunderland.
On 14 November I told the House that, although none of the original bids for NESL had proved acceptable, BS had received three new expressions of interest. To allow time for those to be explored, I was therefore giving until the end of November to establish whether proposals could be developed that gave a firm basis for negotiation. That would entail a clear statement of the work envisaged for the yards, evidence of the technical and financial capacity of the bidder, and the prospect of arrangements likely to be compatible with the European Community sixth directive concerning state support for shipbuilding.
In the event, two of those who had expressed interest prior to 14 November did not submit proposals. The third did so, and two other new proposals also came forward. All three have been carefully considered by British Shipbuilders and its independent financial advisers, against the criteria that I set out.
As a result of that examination, British Shipbuilders' clear advice to me is that none of these proposals could form the basis of a viable future for merchant shipbuilding in the Sunderland yards. None provides evidence of sufficient financial resources, given the major uncertainties of the shipbuilding market. None gives evidence of sufficient work for the future.
Mr. Bob Clay: Nonsense.
Mr. Newton: All would entail levels of subsidy which, in one case in particular, could have faced difficulties under the sixth directive.
Mr. Clay: This is an utter disgrace.
Mr. Newton: Reluctantly, and with great regret, I therefore—[Interruption.]
Mr. Speaker: Order.
Mr. Bob Cryer: The right hon. Gentleman is sacking people. How can we remain silent?
Mr. Speaker: Order.
Mr. Newton: Reluctantly, and with great regret, I therefore have to tell the House that I see no further realistic prospect of maintaining NESL in its present form, and its shipbuilding yards will therefore progressively close as the current work load runs out. [Interruption.]
There remain possibilities, which I have asked—[Interruption.]
Mr. Speaker: Order. Those hon. Gentlemen who have points to make may make them from a standing position when they are called.
Mr. Newton: There remain possibilities, which I have asked BS to make every effort to explore, of selling Sunderland Forge Services, which currently employs nearly 400 people, and interest has also been expressed in one of the yards for purposes other than shipbuilding.
Both my predecessors and I have made it clear that, should it not prove possible for shipbuilding to continue on Wearside, we would bring forward a range of measures to assist those affected and to promote alternative employment in the town.
There will be three main elements. First, we propose a new enterprise zone for Sunderland. [Interruption.]
Mr. Speaker: Order. Let us have the details.
Mr. Newton: As with existing zones, this would mean relief from rates for 10 years for all new developments, a simplified planning regime to help speed up such developments, and 100 per cent. capital allowances on new industrial and commercial development. My right hon. Friend the Secretary of State for the Environment is urgently undertaking the necessary consultations with the European Commission and will give details as soon as possible.
Secondly, I have asked English Estates to start work immediately towards the early provision of over £7 million of advance factory space, over and above its existing commitments in the north-east. This will provide around 220,000 sq ft of high quality factory space for new or expanding businesses.
Thirdly, some £10 million will be made available over the next three years for a programme of measures to encourage new enterprise and employment opportunities in Sunderland. About half will be used to give financial support to new or expanding businesses. The other half will be used to assist the present employees of NESL to develop new skills and find new jobs. My right hon. Friend the Secretary of State for Employment will provide services on the shipyard site to advise the work force on opportunities for jobs and training, including help for those who wish to apply for immediate retraining.
Taken together, the measures that I have announced have a total cost of some £45 million. They will significantly reinforce what is already being done to promote economic development in the area through the enterprise initiative, regional assistance, and the work of the Tyne and Wear urban development corporation, which will itself be announcing a number of new projects shortly as a result of the additional funding of £11 million

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announced on 25 November. I hope that they will also further support and encourage the private sector initiatives that are under way or being considered.
The House will share my regret that, despite every effort, it has not proved possible to find a way forward for NESL. But it must now be right to concentrate on securing a new industrial future for the town, and I believe that we shall have the support of the House in what I have announced to that end.
Mr. John Garrett: The Minister may talk about the failure of bids for NESL, but the fact is that he has just announced a devastating closure. Is the Minister aware that, for no reason other than dogma, he has just announced the destruction of the Sunderland economy and the death of British merchant shipbuilding? What does he think of his Government's Christmas present for families in Sunderland?
Does the Minister accept that this announcement is humiliating evidence of his failure to reverse the policies of his boss? Does he understand that this act of industrial vandalism not only brings to an end 600 years of shipbuilding on the Wear but destroys an essential British industry with a major contribution to make to our industrial and trading future?
Why has privatisation been given priority over the urgent practical need to secure vital orders? Why have months been wasted in finding private owners when all efforts should have been concentrated on obtaining the orders that would have safeguarded the yard's future? Why is the Government's obsession with the dogma of private ownership so much more important than the thousands of jobs on Wearside and the survival of a great British industry?
Why has the Minister ignored the incontrovertible evidence of an upturn in world shipping demand? Why has he chosen this moment to deliver the fatal blow, just when orders are becoming available and this modern and efficient yard is well placed to take advantage of the upturn?
Does the right hon. Gentleman agree—he did not mention this—that a Cuban order worth at least £110 million is available now and that it would secure the future of the yard? Does he further agree that Britain has already sacrificed more shipbuilding capacity than any other EEC country? Does he agree also that this will mean a total loss of about 5,000 jobs in an area of 20 per cent. unemployment and the loss of skills and experience that are essential to the Sunderland community and the nation?
As for the proposed grants, why is the right hon. Gentleman making unemployment worse before doing something about it? Does this event not add to the record of DTI incompetence? Is it not yet another example of a privatisation bungle, along with that of Girobank and the National Engineering Laboratory? Will he even now think again, swallow his prejudices—or rather, those of his master in another place—and concentrate on providing a future for Wearside and British merchant shipbuilding?
Will the Chancellor also reflect on the contrast between the Prime Minister's warm concern for the threatened workers at the Gdansk shipyard and the callous treatment of Sunderland—or does that explain his prevarication? Will he tell the noble Lord from us that this closure is a wilful act of destruction?
Mr. Newton: Far from dogmatically pursuing a particular policy, we have sought to overcome the problems left behind by a period in which British Shipbuilders, as a nationalised concern, has cost the taxpayer almost £2 billion, including losses of about £650 million, of which at least £100 million was lost by NESL in the past three years merely by fulfilling contracts to build ships.
Against that background, it was clear to my predecessor and to me that a solid future for the yards depended on finding new owners who could run them in a viable way. We are on the verge of succeeding in doing that, as I said in my statement, for five out of the six undertakings owned by British Shipbuilders at the outset of the process, covering about two thirds of the work force.
It is a great and genuine regret to me that we have not managed to find a comparable solution for NESL, and it would be manifestly unfair to the people of Sunderland to pretend that proposals that are manifestly not viable, are viable. I am not prepared to bank on hopes of an upturn in world shipbuilding, which are constantly being revised downwards and which have been further revised downwards in the past few months by the Association of West European Shipbuilders, which suggests that any real upturn will come at best in the latter half of the 1990s, not in the first half as it predicted before.
No one can dispute the fact that if £l2 billion had been spent in the past 10 years on providing alternative employment rather than on propping up this industry to make losses we should now be in a better position. I have decided that the right thing to do is to end the uncertainty with the statement I have made this afternoon, and to get on with the job of building a new future for Sunderland.
Mr. Michael Grylls: Does my right hon. Friend accept that his statement detailing the successful privatisation of five of the six remaining yards will bring comfort to those five yards, which will have a more secure future in the private sector? Obviously, for NESL this is a sad day, but will my right hon. Friend remind the company that Corby also had a sad day when the steelworks closed? Today, it is a thriving town with many different firms, large and small. British Steel Corporation (Industry) Ltd. the subsidiary of the then state-owned British Steel, made great efforts to bring new firms to Corby. What was done in Corby can be done in Sunderland, and I am sure that it can be with the help of the measures that my right hon. Friend has announced.
Mr. Newton: My hon. Friend speaks about what has happened in Corby. Consett is another example of a place where comparable proposals have been brought forward to seek to create secure employment for the future. They have met with immense success in recent years and I am determined that we shall have a similar success in Sunderland.
Mr. Chris Mullin: Sunderland has been murdered today, in the same way as Jarrow was murdered by a predecessor Government in 1934. Before today's announcement, male unemployment in Sunderland was running at over 20 per cent. There are whole streets where almost no one is working and generations of children are growing up who may never work. This closure was not inevitable. Orders could have been obtained—the Cuban order, for example—but no

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serious effort was made to obtain them. Will the Minister tell the House why the yard could not be permitted to remain under the existing ownership and management, and why a serious attempt could not be made to obtain the work that we know is available? What will happen to the assets? This is one of the most modern shipyards in Europe. Will its assets be looted, or mothballed against the day when, perhaps, it is possible to revive shipbuilding on the Wear?
Mr. Newton: As I said in my statement, apart from the possibility, which will be pursued vigorously, of selling Sunderland Forge Services, which accounts for about 15 per cent. of the work force at Sunderland, interest has been expressed in at least one of the yards for purposes other than shipbuilding. That, too, will be explored. When those possibilities have been explored, we shall have to consider the future of the yard if it does not prove possible to find such an alternative use.
We were not prepared to do what the hon. Gentleman suggests in the second part of his question. That was because, against the background that I have described of record and persistent heavy losses on almost all shipbuilding contracts made by the yard over many years, we did not think it sensible to continue to proceed with the present structure and management.
May I also say to the hon. Gentleman, without, I hope, too much aggression, that he is doing no service to the people whom he seeks to represent by using the kind of language that he used at the outset of his question. It is no more true that my statement has, to use his words, "murdered Sunderland" than it would be true to say that the arrival of Nissan in Sunderland suddenly overcame all problems. However, it is clear from the arrival of Nissan and other firms that the prospects in the north-east are good. It is worth noting that Nissan alone expects to create 1,900 new jobs in Sunderland in the next few years.
Mr. Neville Trotter: Does my right hon. Friend agree that the people who have murdered shipyards in Europe are the Koreans? They set the world prices for ships and are under-cutting the European yards by 40 per cent. While it is of little comfort to Sunderland, the same thing has happened, and is happening, all over western Europe. It is a matter of deep regret that the sincere and lengthy attempt by my right hon. Friend to save this yard and provide it with a viable future has not been successful. May I ask him for an assurance that there will be speedy action to provide alternative employment in other industries and that further funds will be made available if the initial allocation is insufficient?
Mr. Newton: I assure my hon. Friend that we shall take speedy action and keep the measures that we are taking under constant review to ensure that they are achieving the results that we want. I am grateful to my hon. Friend for what he said about what I have sought to do in the past two or three months, albeit, as things have turned out, I was unsuccessful.
I acknowledge what my hon. Friend said about Korean industry. The arrangements for subsidising European shipbuilding, which have been agreed in the Community, are in part directed at that problem. The difficulty with NESL and, more widely, with British Shipbuilders is that, even with subsidies extending up to 28 per cent. of the cost of a ship, they have still made losses over and above that permitted level of subsidy.
Mr. Clay: Is the Minister aware that four years ago, at a previous time of difficulty, one of his predecessors told shop stewards from NESL and myself that it was not his fault, but the Government's? Sadly, today's announcement is a tragedy as well as a farce. The Minister knows that the Cubans are anxious to place an order with Sunderland yards for 10 mixed-cargo ships and 10,000 containers. They are offering the yard a five-year co-operation deal to plan other work with it. How can the Minister say that no work is immediately available? The truth is that the privatisation on which the Government insisted has turned out to be a shambles.
Does the Minister recognise that it would be logical to allow the yard to take the available order, thereby securing jobs, not murdering them, tearing the heart out of the town and wrecking and frustrating any possible future for British merchant shipbuilding? He has destroyed the work of the past 600 years and any possible future for Sunderland. Shipbrokers and builders know that there will be an upturn in the market. Will he stop the murder of the yard, which is on the point of benefiting from that upturn, and prevent the murder of the town?
Mr. Newton: As to one or two of the hon. Gentleman's latter points, I cannot add to what I said earlier, except that I am told that the Japanese share our view about the diminution in the immediate prospects for an upturn in shipbuilding—a view that I reported as being held by the Association of West European Shipbuilders, which confirmed my doubts.
I hope that the hon. Gentleman will allow me to say that I have the greatest repect for the efforts that he has made in recent weeks to bring forward a package that would enable us to secure a future for the yard, which we both wanted. It is as much a matter of sadness to me as it is to him that I have not felt able to judge that the proposals that the consortium with which he was associated put forward constituted a viable basis for the future of the yards.
Part of that judgment—apart from doubts about its financial strength, based on advice that I received—rested on two facts about the Cuban order. First, there could be no certainty that the order could be secured in the face of international competition. Secondly, such indications as we had about the price that the Cubans would be likely to want to pay for those ships left it doubtful, to put it mildly, that anyone could build the ships without incurring losses. That is not a sensible basis on which to proceed.
Miss Emma Nicholson: I thank my right hon. Friend for the successful conclusion of the Appledore sale. I know that that must be small comfort to Opposition Members, but to my constituents it means much. I join my right hon. Friend in what I know to be sincere sadness and regret at the failure to sell NESL. Anyone who knows and loves the north-east must regret it deeply, and anyone who knows or has worked with my right hon. Friend must know that his regret is genuine and sincere.
Does my right hon. Friend agree that it is wrong to narrow the working futures of our young men and women to declining, huge industries that are rapidly becoming more difficult to continue? We need, most honestly, to offer proper training, proper new work and fresh working

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horizons, or those young men and women will not only not thank the Government, but will most sincerely not thank Her Majesty's Opposition.
Mr. Newton: I am grateful to my hon. Friend for her remarks. I share her pleasure at the prospect of a successful sale of the Appledore yard. I agree that we would be doing no service to anyone by pretending that something provides a future for employment when, in our judgment, it does not.
Dr. Norman A. Godman: Speaking as a former shipwright and, more important, as a Member who represents what was once a famous shipbuilding constituency, may I say how deeply sorry I am for the people of Sunderland. Will not the effects of this closure be felt far beyond that town's confines, as much of the equipment and materials used in the construction of a new ship are produced far away from the shipbuilding community?
To be parochial for a moment, will the Minister give the House an assurance that the Government will continue to support British Shipbuilders' bid for a ferry for Mauritius, irrespective of the negotiations on the takeover of Ferguson in Port Glasgow? Many people will regard the Minister's words vis-a-vis an enterprise zone with deep suspicion, given what has happened to my community following the closure of Scott Lithgow and the sleekit words offered in so-called condolence by his predecessor.
Mr. Newton: On the last point, I cannot add to the emphasis that I have given. The number of extensions of the period for the bids to be considered, and so on, shows clearly how concerned I was to explore every realistic possibility of selling those yards successfully.
On the hon. Gentleman's more specific points, the position with Ferguson is that the bid is not dependent on our obtaining the Mauritius ferry order, but, as I made clear to the Mauritius Government when I was in Mauritius six or eight weeks ago, we would very much like to secure the contract for that ferry. Again, as with the Cubans, there is no doubt that there is intense international competition for that order, as with any other shipbuilding order, and I can make no promises that it will be secured.
Mr. Neil Hamilton: Does my right hon. Friend accept that the Opposition do no service to the people of Wearside by trying to keep a hopelessly unviable enterprise going, any more than the right hon. Member for Chesterfield (Mr. Benn) did the workers of the Meriden motorcycle co-operative a service in trying to keep it going in the 1970s? The only result was that jobs were not secured and many workers lost a lot of money. Is it not far better to concentrate on getting jobs in the industries of the future than to be wedded to those of the past?
Mr. Newton: Over quite a period in Britain, the attempt to prop up industries that were unable to sell their products at a price which other people were prepared to pay and which guaranteed a profit has proved counter-productive to the interests of employment of many of our people. I accept that it is right now to concentrate on building secure jobs for the future, and that is what we are concentrating on.
Mr. John McAllion: The Minister said that the preferred bid for Marine Design Consultants was to that by Sunderland-based management-led buy-out. The right hon. Gentleman and I know that that will eventually lead to closure of the Dundee operation. The right hon. Gentleman knows also that a buy-out plan from the Dundee workers was recently modified following discussions with British Shipbuilders and a proposal by British Shipbuilders to the workers in Dundee. That plan has been submitted to the Minister's Department. Why is he not backing it? Why is he refusing to back the workers in Dundee in trying to keep their jobs and future in the city? Is the right hon. Gentleman content to sell Dundee and Sunderland in the same afternoon?
Mr. Newton: I have agreed with the advice that I was offered by British Shipbuilders, following consultation with its advisers, Lazards, that what I have named as the preferred bidder for Marine Design Consultants offers the best prospect for the future of the operation as a whole. The alternatives appear to have been three interlinked bids, over one of which at least there was considerable doubt about finance. I accepted the advice which I was offered, which seems to make sense as the best way of securing a future for MDC.
Mr. Bowen Wells: Although this was obviously a painful and difficult decision for my right hon. Friend to take, may I congratulate him on concentrating first on those in Sunderland, and their families, who will lose work? Will he either go himself or send one of his colleagues to Sunderland to explain to those people the future which he hopes will be bright and will provide employment and opportunity for them and their children?
Mr. Newton: I can assure my hon. Friend that, quite apart from the visit that I specifically paid to the yards early on in assuming these responsibilities, and the more recent visit only last month to the north-east, I intend to visit the area at an appropriate time when we have had the opportunity to do the further work that will be required on the details of the package that I have announced today.
I have no doubt that we had no real alternative to what I have announced today, but, equally, I have no doubt of our determination to carry through the task of ensuring a good industrial future for Sunderland.
Mr. Charles Kennedy: Further to the question put by the hon. Member for Greenock and Port Glasgow (Dr. Godman), may I confirm to the Minister that Ross-shire is another example of an area where a massive closure has been followed by the creation of an enterprise zone? What proportion of the £45 million package that he has announced for Sunderland is represented by that enterprise zone? Is he aware that the lesson of other enterprise zones, certainly that at Invergordon, is that if too much time and money are devoted to set-up costs, inevitable damage is done to attracting new business? Is the right hon. Gentleman further aware that the economic experience of enterprise zones, particularly in the wake of a closure such as this, which tears the economic base out of a community, is that there is a much more substantial case for them when the local economy is flourishing than when it has suffered the hammer blow that the right hon. Gentleman has announced today?
Mr. Newton: The hon. Gentleman raises two points. First, that part of the £45 million to which I referred, which is represented by the estimated costs of the enterprise zone, is about £25 million spread over a number of years.
On his final point, he second-guessed what I was going to say in reply to him when I had heard only half of his question. Surely the point about the position in the north-east now—I believe this is incontrovertible and would be understood by anyone who has been there recently, as I have on a number of occasions—is that there is already a degree of economic expansion and a greater degree of confidence and optimism, on which the enterprise zone and the other measures that I have announced today will build.
Mr. Phillip Openheim: Although no one can have anything but the deepest sympathy for the people of Sunderland because of the situation that they face, have not a large number of jobs in the shipbuilding industry been lost over a number of years and under a series of different Governments? Is it not true that, even in Japan, shipyards are closing because of the situation in the industry? Is it not further true that it is not in the long-term interests, either of the local economy in Sunderland or of our economy nationally, to keep open unviable and unprofitable industries and to try to compete with producers in the far east, who have proved that they can do the job better than we can?
Mr. Newton: My hon. Friend makes an important point in saying that these problems are by no means confined to Britiain or, indeed, to Europe. Employment in shipbuilding in Japan has fallen by very nearly half in the past 10 years, and in the past four or five years it has fallen faster in a number of European countries than in this country.
Mr. Ted Leadbitter: The Minister will recognise that, after 41 years' public service in the northern region, I have some experience of what the closure of a shipbuilding yard does to a town: it literally murders it. Does he understand that, for the very first time in many years, I have come here with a real sense of anger at this calculated statement? It is convenient after the visit of the Prime Minister to Poland and Gdansk—we know the calculation.
Is the Minister aware that the £45 million package to which he referred would go a long way towards keeping the heart and soul of Sunderland alive, rather than using it to implement this deviating exercise that he has put before the House today? Does he understand that the cost of closure, or the loss of assets and the loss of labour, is sufficient for me to say to him now that if he had the will to keep this yard open he would have done it?
Mr. Newton: I have already said that far more than the £45 million to which I have referred today has been put into North East Shipbuilders, and that ten times that amount has been put into British Shipbuilders as a whole over the past 10 years without producing a situation in which ships could be profitably built and sold. Many people in the House will share my view that, with hindsight, it might have been better if some of that money had been applied to creating alternative employment much earlier.
Mr. John Marshall: How does the £2,000 million that has been poured into the bottomless pit
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of British Shipbuilders compare with the cost of attracting Nissan to Sunderland? Will my right hon. Friend confirm that Nissan will produce, both directly and indirectly, well over 10,000 jobs? Is it not more important to attract sunrise industries than to prop up industries on which the sun set many years ago? Will he also confirm that jobs are safeguarded, not by the Government, but by industry producing the right goods, at the right time, at the right price?
Mr. Newton: I generally agree with my hon. Friend's remarks and, as I have said on several occasions. we are determined that that is precisely what will happen in Sunderland. We shall build on the north-east's success in attracting major inward investment, not only from Nissan, to ensure that jobs in the north-east and in Sunderland in particular will last and produce the goods that people want to buy, at the price they want to pay, and thus give real employment in the long term to the people whom we want to help.
Mr. Roy Beggs: My sympathies go today to the work force and families in Sunderland. I must criticise the Government for the insensitive way in which they have made this announcement, two weeks before Christmas. It is absolutely ridiculous. The same thing happens time and again. The Government should set an example and give a little thought to people's feelings, especially at this time of year.
Has Sunderland been sacrificed to secure the already privatised yards? May I have an assurance that the reasons outlined for the closure of the Sunderland yard will not be parroted off within the next few days to justify the closure of Harland and Wolff in Belfast?
Mr. Newton: The hon. Gentleman will know that my right hon. Friend the Secretary of State for Northern Ireland is making every effort to secure a future for Harland and Wolff. I can certainly assure him that there is no question of the proposition that he put in his question being the case or of Sunderland somehow being sacrificed for the other privatised yards. The reason for my making the announcement today, rather than at an earlier date, as some had pressed upon me, is simply that we gave a considerable extension of time because of our determination to try every possibility.
Sir Giles Shaw: Does my hon. Friend accept that, although I welcome the progress in the disposal of the other assets of British Shipbuilders, no one can possibly welcome the decision that he has announced in respect of NESL? I know some of the facts of the case, and I know that he has made prodigious efforts, including extending the period, not only for the offers and the statement, but to enable late-running offers to be considered, and has given every possible consideration to finding a favourable outcome.
Does my right hon. Friend accept that the consequences of the loss of NESL will be felt throughout the north-east and in Yorkshire, including Darlington and towns in the West Riding, many of which are suppliers, and that this will greatly concern many of us? Does he also accept the general feeling that, although the closure is a catastrophe, it is due to world forces very much beyond the control of the Government and has forced the

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Government to make a £45 million investment to diversify an economy in an area that sorely needs diversification to survive in the future?
Mr. Newton: I agree with my hon. Friend's concluding remaks and I am grateful to him for what he said at the outset of his question. The point that he made in the middle of his question echoed the remarks of an Opposition Member in an earlier question. I hope that Opposition Members and my hon. Friends will not exaggerate the effects of what I have had to announce today on other firms throughout the country. The work that is now going on at NESL will be sufficient in a few weeks to employ only about 100 to 150 people. It follows from that that many of the effects on other suppliers throughout the country will have been felt already.
Ms. Joyce Quin: Is the Minister aware that only this morning it was confirmed to me by the responsible official in the European Commission that the Government never reached the stage of making a final and formal presentation in support of any of the bids to keep the yards open, or in support of any rescue plan for them? Given that fact, is it not the case that the Government have failed to explore every avenue to keep the yards open, and have failed signally in the EEC to stand up for British merchant shipbuilding?
Mr. Newton: No, it is not. It would be necessary to obtain the agreement of the European Commission, under the sixth directive, to any proposal, but the first essential is to have a proposal to put to it that we believe provides a viable future for the yards. We have no such proposal, and that is what I have had to tell the House today.
Mr. Barry Field: It is not true that Conservative Members do not understand the import of my right hon. Friend's statement. When Samuel White yard shut in Cowes, 5,000 jobs went down the road. We on the Government Benches understand these matters. I understand that yesterday, despite the high level of unemployment in my constituency, at least one of the yards within it was endeavouring to recruit shipbuilding skills in the north-east. Will my right hon. Friend liaise with the Department of Employment to set up a temporary special unit to identify the shipbuilding shortage skills in yards with heavy order books and put them in touch with the men in Sunderland?
Mr. Newton: As part of the arrangements that I announced in my statement, we shall explore any means of finding alternative employment, whether in shipbuilding or in any other industries, for those who, unhappily, will become redundant at Sunderland.
Mr. Frank Doran: It will be small comfort for workers and others in Sunderland, who will be devastated by today's news, but I am pleased to say that Hall Russell of Aberdeen received a lifeline today in the form of a short-term agreement between the yard's receiver and the Overseas Development Administration. I say to the Minister and to Conservative Members such as the hon. Member for Torridge and Devon, West (Miss Nicholson), who welcome the prospect of privatisation of
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the yards in their constituencies, that the history of the Hall Russell yard since privatisation has been one of lurching from crisis to crisis.
The yard has a history that goes back 125 years, the last 20 of which showed substantial profitability. It is believed in Aberdeen that the Government wish to wash their hands of shipbuilding. Will the Minister tell us which of our indigenous industries are safe and will obtain Government support? It is difficult to believe that any industry will receive support from the so-called Department of enterprise.
Mr. Newton: I note the hon. Gentleman's remarks about the latest news at Hall Russell. I share his pleasure at what he has reported. The rest of his remarks bore little relation to reality. The Government have made huge subsidies available to the shipbuilding industry and have maintained the position in which help is available under the intervention fund within the terms currently agreed. There is no suggestion that that help should be withdrawn. We want to see industries and firms, whether old or new, that can provide secure employment. That is what my statement is directed towards.
Mr. James Cran: Does my right hon. Friend agree that his decision and the results of it will be ameliorated by the package of measures which he has announced, on which I congratulate him, and by the existence of the Northern Development Company, which is the job-attracting agency for the north of England? If Opposition Members examine the facts, they will find that the company is funded to greater extent than most of the other job-attracting agencies in the other regions of the United Kingdom. They will find also that it has been immensely successful in attracting jobs to the north of England. I want to hear my right hon. Friend say that its work will continue after the closure.
Mr. Newton: Yes. I met representatives of the Northern Development Company when I was in Newcastle last week. I discussed some of these matters with them and assured them that the Government would continue to be as helpful as they could be in respect of their activities. From what they said, I doubt whether they will share the overstated pessimism that has been expressed in some questions today. They know how much success has been achieved in attracting new jobs to the north-east in recent years and months. With their efforts, and those of others to which I have referred, I believe that there is no reason, in the longer run, for the pessimism that some Opposition Members have expressed.
Mr. Frank Cook: I should be able to accept the Minister's protestations of concern and anxiety if I could see more than one of the eight Tory Members who represent north-east constituencies in their places ready to question him on his statement. I know what happens to a community when a shipyard closes. I was living in Hartlepool—it is my home town—when the Sir William Gray yard closed. The effect of that closure was drastic, but the platers, welders, burners, boilersmiths, shipwrights, electricians and fitters were able to go to the Tees. They went to Furness and Smith's dock. Since then, Furness has closed. We are awash with shipyard trades in that area. Following that, Smith's dock closed. Those closures were followed by others. Where will all the trades go? It is no good the hon. Member for Isle of Wight (Mr.

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Field) telling us that someone from the Isle of Wight is trying to recruit among the trades that are represented at Sunderland. Where will the 2,000 men go? It is no good giving us promises. Give us reality.
Mr. Newton: I hope that the hon. Gentleman will refer back to what I said in my statement about the efforts that will be made to seek alternative employment where that is available and, perhaps more to the point, to offer retraining and training to assist those with particular skills to acquire new skills if their existing skills are not wanted in the future. We are aware of their considerable abilities. No one would pretend—I would not pretend to the hon. Gentleman—that the closure of the yards presents other than a significant problem. That is not to say, as he rather implied in his question, that pretending that the problem is not there is an answer in the longer run for the men who are involved. As I have said, our aim is to provide them with good and secure employment for the future.
Mr. Kenneth Hind: Does my right hon. Friend agree that this is clearly a sad day? Will he accept that many of his hon. Friends believe that no one could have tried as hard as he has to restore the yard? My right hon. Friend will no doubt agree that Conservative Members such as myself have faced similar problems to those that are now being experienced by Sunderland Members. Under the Labour Government, Dunlop, Thorn EMI and Courtauld closed in Skelmersdale, with the loss of over 7,000 jobs. We have now recovered, and as a consequence of guidelines similar to those that he is offering Sunderland, there is not an empty factory in Skelmersdale. The town is booming.
Mr. Newton: Yes. It has been an inescapable fact for many Members on both sides of the House that the decline of some older industries has presented comparable problems in many other parts of the country. The experience of many places, some of which have been mentioned this afternoon, is that of the creation of new jobs and an entirely different feeling after a relatively short time from what was understandably felt at the time when the change occurred.
Mr. Jim Cousins: Will the Minister accept that what will cause continuing controversy after his statement is the fact that alternative bids which people, industry, capital and labour in the north worked hard to put together were available? It is simply not true for the Minister to say that there were no alternatives. The north has produced alternative bids for running these yards. It is the Minister's judgment of those bids that has caused the closure. Will he tell us whether the interest rate rises caused by the Chancellor of the Exchequer over the past six months have proved to be a fatal extra element in the evaluation of those bids? Will he also tell us whether the public expenditure costs of those bids were greater, or smaller, than the £45 million of public expenditure for enterprise zones and the other proposals that he has announced this afternoon?
Mr. Newton: The question whether the cost of any particular proposition is greater or smaller than £45 million does not arise in circumstances in which we did not judge that any of the bids would provide a viable future for the yards.
I have no reason to suppose that the factors that the hon. Gentleman mentioned were a significant factor in
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what has happened—and it is not merely a question of my judgment. I considered the advice that was given by British Shipbuilders, on the basis of independent financial advice that it had received, and it seemed clear that the proposals that had been put forward were not sufficiently strong financially to provide a secure future for NESL. There was even some doubt about where the money that was to be paid for the yards was to be found.
Mr. Peter Thurnham: There is a long tradition of shipbuilding on the Wear. Will my right hon. Friend confirm that, if there is any prospect of its profitable continuation, there is nothing to stop a new enterprise being formed to bid for the £48 million of maintenance which he has just announced? Should the people of the north-east not take heart from the outstanding achievements of British Steel in Cleveland, which was the winner yesterday of the Institution of Mechanical Engineers Willis Faber prize for manufacturing efficiency?
Mr. Newton: In general, the turnaround in many of the areas that have been affected in previous years by substantial steel closures is certainly an encouragement to those who, understandably, will feel depressed by today's announcement.
Mr. Bill Michie: May I first express my sympathy to the workers in Sunderland? I say that because I spent my working life in Sheffield in steel and engineering and saw the trauma and misery created by the demise of the steel industry there. I listened to the Minister this afternoon saying that other enterprises will come forward, other investments will take place and people will be retrained. We had skills in Sheffield and Sunderland. We shall finish up with opportunities to man turnstiles at football stadiums and to sell ice cream in the summer. The young, who should have had skilled jobs, will operate in Macdonald's, selling hamburgers. How can the Government justify the youth training scheme on the grounds that there is a shortage of skills, when the skills are there now in Sunderland? The will is there and the power is there, but the problem is that the Government do not have the guts to fight international pressure.
Mr. Newton: I do not believe that the hon. Gentleman would have put his question in that way if he had recently been to the north-east, seen the new factories going up, spoken to the people who are undergoing training for the new jobs and talked to those in the Northern Development Company or the urban development corporations, or to those who are concerned with the Newcastle initiative. They can see the effects of their efforts on the ground.
Ms. Hilary Armstrong: Many of us have personal knowledge of the skills, the development of those skills, the learning of those skills and the practice of those skills by many workers in the yards. The town of Consett is in my constituency, and it suffered a similarly devastating blow. The Minister knows that the jobs that have been created in Consett—welcome though they are—have not replaced or redeveloped a skill base, and have therefore not given the town and its surrounding area the confidence that there is skilled and productive work for the next generation. That is what the people of the north-east want and what the people of the north-east deserve. They have given their all to build this country. [Interruption.] The hon. Member for Stockton, South

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(Mr. Devlin) may not think that they have given their all, but I know that they have and that they have the work and the skills to be proud of. What will the Government do to ensure that we receive such development? Throwing money is not enough. Proper planning and development and Government orders to that region are needed.
Mr. NewtonThe hon. Lady is obviously right to say that the mix of jobs that comes in the wake of changes of this kind, and the mix of skills that they require, will not be precisely the same as those of the jobs that they have replaced. That is an inescapable part of the process of change. I do not believe that the general point that she sought to make stands up against the background of experience of the north-east in attracting new industries, such as motor cars, electronics and many others. They may not be the old skills of shipbuilding, for example, but they are the skills and products that will be in demand in the future.
Mr. Elliot Morley: Whatever new industries may be attracted, the closure of the Sunderland yard strikes at the very bedrock of our manufacturing industry and the impact goes much further than Sunderland. Towns such as mine that have steel plate mills will be affected. Now that the steel industry has been privatised, the Government appear to have washed their hands of its future role but what surprises me is that the Government can write off billions of pounds in privatisation programmes—£5 billion for British Steel alone—yet cannot find the money to protect the jobs in the important industry of shipbuilding in Sunderland.
Mr. Newton: Perhaps it tells one something about some of the economic difficulties that this country experienced, especially during the 1970s, that the hon. Gentleman can describe as the bedrock of the economy, of this or any other area, an undertaking that has persistently lost money, to the extent of hundreds of millions of pounds overall, and £100 million at NESL alone, in a short time. That is no basis for employment in an area.
Mr. Roland Boyes: Will the Minister accept that his disgraceful statement today is a devastating blow to Sunderland? Conservative Members have demonstrated that the Government simply do not care. Several Conservative Members have made me angry by talking about it being a sad day for Sunderland. For between 2,000 and 5,000 workers, it may be a sad lifetime. Many of them will never work again.
The Minister said that a number of jobs would be created. I ask him to investigate that. Every pit in my constituency has been closed—two quite recently. How many jobs have been created in the Houghton end of my constituency by British Coal Enterprise Ltd. to absorb the jobs of people who have been made redundant and who are on the dole queue? Has the Minister any idea of the magnitude of youth unemployment in the borough of Sunderland? Month after month, 6,000 or more youngsters have no proper jobs and the three unemployment offices have had between 40 and 50 vacancies. What will happen to children in Sunderland? Where will they obtain jobs when another 2,000 jobs have been taken away?
I never expected to hear the Minister's statement today. I wrote him a letter about the matter recently. I pay tribute to my hon. Friends who have shipyards in their constituencies for their efforts in trying to retain them. They have swallowed a lot in accepting some form of privatisation, yet the Minister declares the death of the yards in Sunderland. That is unacceptable, and the Minister should be ashamed of himself.
Mr. Newton: The main thrust of the hon. Gentleman's question was about the prospect of future jobs. The best thing that I can do is to repeat that the Nissan investment alone has already created well over 1,000 jobs, with nearly 2,000 more expected during the next few years, which is roughly the number of people employed in NESL, excluding Sunderland Forge Services. I do not suggest that there is a neat equation for the people involved, but it is a good illustration of the scope for new jobs and it is only one example of the current growth in the north-east.

North East Shipbuilders Ltd.
4.30 pm
Mr. Bob Clay: I beg to ask leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the decision by the Government announced today to close North East Shipbuilders Ltd."
The matter is obviously specific in the light of the Minister's statement. It is urgent because, unless the House can call the Government to account within the next few hours, the orders that could come to that yard will no longer be available. The statement should not be allowed to stand. We must also try to stop the devastating demoralisation that is already flowing rapidly through the area that I and other hon. Members represent.
The House should examine carefully some of the statements made by the Minister. It is not true that the recent bids for privatisation were properly examined. I know from personal experience that one bidder was refused meetings with the Minister's financial advisers and accountants, despite the fact that for weeks previously the other bidders had plenty of opportunity to discuss the matter and plenty of information. How can he say that there was a serious assessment?
How can the Minister say that none of the bids would have been acceptable to the European Community when the Government never put a formal proposal to the EC? The House should debate the matter in detail. If, as the Minister says, the EC would have closed the yard, the Government should have told the EC that they were not prepared to close it.
Many specific matters about the conduct of this case should he discussed. For example, advice given in good faith by a civil servant to a bidder turned out to be wrong, but it was too late for the bidder seriously to revise his proposal. This afternoon the Minister rubbished British Shipbuilders and said that it was incapable of running the
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yard any longer, yet he relied on its judgment—rightly or wrongly—to assess whether the yard should stay open. It is nonsense.
This is a wicked decision that should he debated by the House immediately. We should not allow the Government to run away from the decision that they have made. They should be called to account, and we should be able to debate the shambles and the tragedy that they have perpetrated this afternoon.
Mr. Speaker: The hon. Gentleman asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
"the decision by the Government announced today to close North East Shipbuilders Ltd."
I have listened with concern to what the hon. Gentleman said and to the exchanges in the House this afternoon, but, as he knows, the Standing Order prevents me from giving reasons to the House. I regret that his application does not meet the criteria laid down under Standing Order No. 20 and I cannot, therefore, submit his application to the House.
Mr. Alan Williams: On a point of order, Mr. Speaker. Of course, I do not challenge your ruling, but you will have heard the depth of feeling about this catastrophe for the people of the north-east. As the Leader of the House is present, and as this is a Government decision, may I prevail upon you to ask him to allow time early next week for us to have a full debate? Perhaps he can make a proper statement announcing the time of that debate in tomorrow's business statement.
The Lord President of the Council and Leader of the House of Commons (Mr. John Wakeham): Further to that point of order, Mr. Speaker. I recognise the importance of the issue and the strength of feeling. I undertake to have discussions, through the usual channels, to see whether we can find a way of proceeding that will be satisfactory to hon. Members on both sides of the House.

SS Mediterran Frigo
4.33 pm
Mr. Paul Flynn: I beg to ask leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that should have urgent consideration, namely,
"the decision of the authorities to allow the vessel SS Mediterran Frigo to leave Newport docks following a drugs raid."
The matter is urgent because that vessel is now on the high seas, without a customs officer on board, after only one of its three holds was searched. About 48 hours ago, a quantity of drugs with a street value of £2 million was discovered on board the vessel. It is the third time that drugs have been discovered in Newport docks without a single arrest having been made.
The matter is specific because customs officers are inhibited by present laws from seizing any vessel with a weight of more than 250 tonnes and from conducting thorough investigations because they are liable to pay compensation for perishable cargoes that deteriorate. That ship has a cargo of bananas, which will deteriorate rapidly.
The matter is important because of the terrible damage done to many lives by those who traffic in drugs. By allowing customs officers to be inhibited in this way, we have created a position whereby the ship is heading for a port in Belgium, from which there is great difficulty in extraditing suspected offenders—we have had recent experience of that—and which is soft on drug traffickers, with a maximum sentence of two years for such an offence. Are we not encouraging drug trafficking by encouraging people to use big ships carrying perishable cargos heading for ports in Belgium and Holland?
In the Gracious Speech the Government said that they would
"continue the fight against international terrorism and against trafficking in drugs."
By allowing that vessel to leave swiftly after such a brief investigation in Newport, are we not creating a charter for drug traffickers?
Mr. Speaker: The hon. Gentleman asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he believes should have urgent consideration, namely,
"The decision of the authorities to allow the vessel SS Mediterran Frigo to leave Newport docks following a drugs raid."
I listened with great concern to what the hon. Gentleman said about this matter, but I do not consider that it is appropriate for discussion under Standing Order No. 20 and I cannot, therefore, submit his application to the House.

Ministerial Statements
4.36 pm
Mr. Tim Devlin: On a point of order, Mr. Speaker. The statement that we have just heard was timed for 3.30, and at exactly the same time the Government announced, at a press conference across the road in the Department of Health, the results of the inspection of Cleveland social services department. Members from the north such as myself and my hon. Friend the Member for Langbaurgh (Mr. Holt) would
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have liked to be present for both. Will you use your good offices to ask the Government not to put on important business relating to the north-east in two locations at the same time? If they do, Opposition Members will be able to raise spurious points about our absence in the House.
Mr. Speaker: I have considerable sympathy with what the hon. Gentleman has said, but it is no part of my responsibility to dictate to the Government whether they should have made two statements or one statement, or what they should do outside the House. I am sorry that I cannot help the hon. Gentleman.
Later—
Mr. Frank Cook: On a point of order, Mr. Speaker. You will already be aware that there was a press conference at 3.30 pm this afternoon relating to the social services inspectorate's report of the arrangements in Cleveland concerning child abuse. I am a Member of Parliament representing Cleveland constituents, yet I was informed of that press conference only at 26 minutes past three today, when I was planning to be in the Chamber for the bright and breezy announcement concerning North-East Shipbuilders. As the custodian of the proceedings of the House, are you not of the opinion that such matters should be brought to the House rather than be announced at press conferences, of which relevant Members are informed only four minutes before they begin?
Mr. Speaker: If I were drawn into giving my opinion on such issues I should be in serious trouble. I am not responsible for matters of that kind.

Civil Servant (Letter)
4.37 pm
Mr. David Winnick: On a point of order, Mr. Speaker. May I ask your guidance on a matter of public interest. The background to the matter is the letter that appeared in The Guardian today from an official in the information department of the Foreign and Commonwealth Office. I understand that that official has been suspended. As this is undoubtedly a matter of public interest, what steps can be taken to get the Prime Minister or the Foreign Secretary to answer the serious valid allegations made in that letter? Now that the official has been suspended, we should have a statement as soon as possible from the Prime Minister or the Foreign Secretary.
Mr. Speaker: That may be, but I cannot give the hon. Gentleman tactical advice on how to approach these matters. He knows the form himself.
Mr. Tam Dalyell: Further to that point of order, Mr. Speaker. Is it entirely a question of tactical advice? Is it not more that the House of Commons should be treated properly? It is most extraordinary for a senior official—we have looked him up in the Foreign Office list and he seems to be a second secretary—to write such a letter, giving not a private address but the address of the Foreign Office information department. In the circumstances, should not the House of Commons at least be told the background before other people rush to judgment? There is also an element of urgency about this case, so why should the House wait and wait?
Mr. Speaker: It may be a matter of great public interest, but it is not a matter of order for me. I feel sure that the hon. Gentleman's comments have been heard by the Leader of the House.
Mr. Dennis Skinner: Further to that point of order, Mr. Speaker. There is another way of examining the matter. At the weekend, the press were informed of the junior Health Minister's views about eggs and salmonella poisoning. As a result, at the earliest possible opportunity on Monday the Secretary of State for Health had to come to the Dispatch Box to explain away his junior Minister's comments.
That matter may or may not be as important as the issue that has been raised in The Guardian today. It is true that the official concerned is not an elected Member of the House and that he is not a junior Minister. One thing is certain—he never will be now. Nevertheless, the fact remains that he is a servant of the state, working in a Government Department, and has said something of great importance regarding the Prime Minister's conduct. If it is right that a Secretary of State must be trotted out every time his junior Minister opens her gob, is it not right that a Minister should explain to the House why it is that a senior official of his Department has said important things about the way in which the Government are running their business?
Mr. Speaker: It is, as I have said, a matter of considerable interest but not a matter of order for me.
Mr. Alan Williams: Further to that point of order, Mr. Speaker. You, Mr. Speaker, may not have a copy of the letter published in The Guardian, but it comes from the Ministry's information department. The Minister is responsible to the House for the activities not only of junior Ministers but the whole of his Department. When a Ministry's information department issues a statement as unusual and as important as the one in question, the Minister concerned surely has a duty to the House to explain it.
Mr. Speaker: That may be so, but it is a matter for the Leader of the House and the Government, not for the Chair.
Mr. Bob Cryer: Further to that point of order, Mr. Speaker. On one last point—
Mr. Speaker: Order. No, not one last point.
Mr. Dalyell rose—
Mr. Speaker: Order. No. About 50 right hon. and hon. Members wish to take part in today's Second Reading debate, and I shall have to place a limit on the length of speeches. The hon. Member for Bradford, South (Mr. Cryer) has not put down his name for that debate, although he may hope to catch my eye, and he is therefore taking time away from his right hon. and hon. Friends. However, I shall hear his point of order if it is important and if it is a matter for me.
Mr. Cryer: You, Mr. Speaker, urged the Leader of the House to make a statement on the matter. The Leader of the House is present and could do so immediately.
Mr. Speaker: I certainly did not urge the Leader of the House to make a statement. I said that the Leader of the House will have heard what had been said.

Orders of the Day

  Water Bill
  Order for Second Reading read.
  Mr. Speaker: I repeat that about 50 right hon. and hon. Members have asked to take part in this debate. I propose limiting speeches made between 7 and 9 o'clock to about 10 minutes, but I hope that right hon. and hon. Members called before 7 o'clock will also have regard to that time limit.
  4.44 pm
  The Secretary of State for the Environment (Mr. Nicholas Ridley): I beg to move, That the Bill be read a Second time.
  The main purposes of the Bill are to establish a National Rivers Authority responsible for the control of water pollution, water resource management, flood defence, fisheries and navigation; to provide a new statutory framework for setting river quality objectives and other standards, and set out effective means of enforcing these standards; to transfer the utility functions of the water authorities to new limited companies, and to provide for the terms of their appointment, and for the sale of shares to the public towards the end of 1989; to provide for the appointment of the 29 statutory water companies to continue supplying water in their existing areas, and to allow them to convert to plc status if, with the support of their shareholders, they so choose; to provide a clear legal framework for the duties, functions and powers of appointed companies, updating and amending water and sewerage law; and to provide for the appointment of a director general of water services to keep the provision of water and sewerage services under review, and to protect the interests of customers.
  The Bill applies to England and Wales. It is the Government's intention to introduce on Report a limited number of amendments relating to drinking water and the protection of the water environment in Scotland. The Scottish Office has consulted on those proposals. They will not change existing arrangements for the ownership and regulation of water supplies in Scotland.
  Preparing for privatisation of the water industry convinced us that we needed the National Rivers Authority. There is a distinction between the utility services of the water authorities—trading activities that can be better managed in the private sector—and the need to regulate in the public interest. Regulation should not be done by those who have a financial interest in the matters to be regulated. As the Select Committee on the Environment said,
  "Gamekeepers should not be poachers as well."
  It has been a glaring defect hitherto that water authorities combine the regulatory and utility functions. Those responsible for the treatment and disposal of sewage effluent should not also have the task of regulating pollution and prosecuting their own customers. This major advance puts right an inherent weakness in current arrangements. In this case, public ownership has disguised the truth and failed to protect the public interest. It is another nail in the coffin of that flawed ideology of the Labour party.

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  There has been general welcome for our proposals for the NRA, and I will say a few words about its powers and role as set out in the Bill. The water authorities have been drawing up schemes of organisation for the regional bodies which will, with the passage of the Bill, become part of the NRA. They are well on course to set up those bodies by 1 April 1989. I congratulate the water authorities on the work that has gone into those schemes of organisation, and I am grateful for the expert advice and assessment contributed by the NRA advisory committee, under the chairmanship of my noble friend Lord Crickhowell.
  The NRA will be a strong and effective body, comprehensively equipped to regulate all discharges to rivers, estuaries and coastal seas up to three miles out. The Bill provides a statutory framework for water quality objectives. The NRA will advise on statutory quality objectives that I, as Secretary of State, will set. The authority will monitor and enforce them. It will be able to grant or refuse effluent discharge consents. It will be able to set up water protection zones to protect water sources in designated areas from pollution by such substances as nitrates and pesticides. It will have powers to prevent and remedy pollution. On the "polluter pays" principle, it will be able to charge for discharge consents and to recover the costs of dealing with pollution incidents.
  That regime of improved standards, which the NRA will supervise, will be transparent and public. I shall be accountable to the House and to Parliament as a whole for the standards set for the authority to achieve. For the first time, the public will have a clear measure of what those standards are.
  The NRA is widely acknowledged as a major advance. Even the Opposition grudgingly support it. It is a product of our move towards privatisation. It comes as no surprise when the opponents of the Bill turn round and say: "In that case, since you've got the NRA, why privatise the water and sewerage undertakers?" I shall give the House four good, detailed reasons why that is the right thing to do.
  First, private ownership has long been a feature of the water industry. The statutory water companies have been in existence for a long time. There are 29 of them, responsible for one quarter of our water supply. They are privately owned. There have been few complaints about them. If the private supply of a public utility is anathema to the Labour party, why did it not take the opportunity to nationalise it during its periods in office? I assure the hon. Member for Copeland (Dr. Cunningham) that it will not have another opportunity.
  Dr. John Cunningham: That is such a boring old canard that it is barely worth a response. The Secretary of State gave the game away in his opening comments when he described them as "statutory water companies". He knows that they are not private enterprises. They simple act as agents for the regional water authorities and their activities are heavily circumscribed in law. That is why we did not nationalise them.
  Mr. Ridley: The hon. Gentleman is stretching logic too far. They are owned by private shareholders. The capital is supplied by the private sector. They are statutorily limited to the geographical areas in which they operate and
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  they are statutorily controlled as to their dividends and the amount that they can put to reserve. In every other respect, they are totally analogous with private sector companies. They have been privately owned for a long time, so that is not much of a point.
  Mr. Tim Devlin: In view of the objects of the Bill, if at the end of the process we create a number of privately owned water companies which are statutorily defined, will that not be acceptable to the Opposition?
  Mr. Ridley: I am sure that the hon. Member for Copeland (Dr. Cunningham) would have risen to say no if he had wanted to deny my hon. Friend's sensible proposition.
  The Bill provides a procedure for statutory companies wishing to convert to plc status.
  Mrs. Ann Taylor: They are not ordinary private companies.
  Mr. Ridley: The hon. Lady is wrong. Whether they are private companies or plcs is a separate matter.
  Economic regulation based on price control, rather than dividend limits, will provide them with a stronger incentive for efficiency and a stronger basis for comparative competition. However, the statutory water companies have performed their functions in private ownership without it even being an issue hitherto.
  The Government will announce later their decisions about any special shares which may be required in the water industry. However, the conditions which enable competition in management to take place must not also allow undue concentration. It is vital that people should feel that they have a local water company, with those running it living and working locally. It is also vital to maintain yardstick comparisons. If the regulator is to know the scope for efficiency improvements and the possibilities for the best management to deliver exacting environmental and water quality standards at a lower price, there must be an adequate number of independently owned and managed companies to afford a range of comparisons. That is what comparative competition means.
  The water plcs will be directly comparable with each other in the services that they provide. Shareholders, financial markets, commentators, the director general of water services and the customer will be able to make comparisons between each of the companies. Privatisation will clarify the costs that each company faces in order to meet its measured objectives.
  Mr. Bob Cryer: What about the French?
  Mr. Ridley: From those comparisons, it will be possible to judge performance and for the regulator to get his price control more accurate. Therefore, I shall later be bringing forward proposals, in conjunction with my noble Friend the Secretary of State for Trade and Industry, to ensure that our arrangements take full account of the need to preserve comparative competition.
  The third reason for privatising the water authorities is to give them scope for innovation and diversification. That is exemplified by the French water companies, which the hon. Member for Bradford, South (Mr. Cryer) just mentioned and which seem to cause such alarm to Labour

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  Members. Why do the French want to buy our water companies? Perhaps they have been successful worldwide because they have practical experience of water supply in the private sector and have successfully diversified from that base.
  Perhaps there is a lesson for the future of our water companies in that the strengths and diversity of the privately owned French companies has enabled them to dominate the world market. Some have an annual turnover as great as £5 billion. In addition to water supply and water treatment, they compete successfully, among other things, in markets for municipal services, housing, communications, construction, manufacture and cable television.
  Our nationalised water authorities have not been able to develop their expertise and experience in the same way. We have missed out on that world market hitherto. No Government have ever allowed—or could allow—nationalised industries such freedoms. By providing a home base which encourages enterprise, diversity and initiative, I believe that we have the opportunity to create companies which can even outdo the French in capturing the world market in water supply.
  Mr. Richard Livsey: The Secretary of State is making great play of the position of French water companies. Is he aware that there is huge variation in water prices throughout France? In Dax in south-west France water costs FF2·90 per cu m, in Paris it is FF5 per cu m, and in Angers it is FF10·50. Surely such an intolerable situation should not be used as an example. Does he feel that those disparities could occur in Britain with the plcs?
  Mr. Ridley: I am afraid that I cannot confirm the hon. Gentleman's prices. He obviously has more opportunity to check out such matters on the ground. I cannot answer for the French system of price regulation, but what I am proposing to the House is a system of price regulation which will ensure that the prices in each area reflect the economics of supply and the need for investment in improvements. Therefore, privatisation will, for the first time, give an incentive to innovation and efficiency and a new freedom to allow companies to follow the industrial logic of their own development both vertically and horizontally and to compete overseas.
  Dr. Cunningham: Is the Secretary of State happy about the depths of the penetration of French water industry companies into the British water industry in view of his hopes for the future? Is it true, as has been reported in the newspapers, that Mr. Patrick Brown of the Department of the Environment has been hinting in the City and elsewhere that further penetration by French water interests is unacceptable? If that is so, on what legal authority have such indications been based?
  Mr. Ridley: That is not so.
  I shall now give the fourth reason why privatisation must be right. If we are to enable our companies to innovate and diversify, they must have access to capital markets for the capital investment needed. Until this Government took office, nationalisation had constantly restricted and restrained that. Between 1974 and 1979, when the Labour Government gave up control of the economy to the International Monetary Fund, the water authorities suffered an overall reduction in capital
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  spending of one third in real terms. Within that total, the Labour Government halved expenditure on sewerage and sewage treatment. Since then, we have conducted a considerable catching up exercise. Investment has increased by more than 50 per cent. in real terms since 1980. We have doubled the programme in cash terms to £1·2 billion this year, and will increase it to £1·43 billion next year.
  The dirty man of Europe is indeed sitting on the Opposition Front Bench. To some extent, I exonerate Opposition Members. It was not deliberate—it was not because they meant to, as the hon. Member for Bootle (Mr. Roberts) admitted a few weeks ago—but because their financial incompetence prevented them from achieving even that basic water cleanliness that we all seek. The proof that public ownership cannot generate the necessary capital investment to protect the environment has been supplied in ample measure by the Labour party.
  Dr. Cunningham: In view of his extraordinary claims about expenditure, how does the Secretary of State explain the fact that in 1977–78, the last full year of the Labour Government, total capital expenditure by English and Welsh water authorities was £1,064 million? On the public works deflater, a decade later—after 10 years of the present Government—it was £1,187 million, a slight increase, but in each of the intervening eight years the figure was lower than it was in the year when Labour left office. The right hon. Gentleman has got his figures very wrong.
  Mr. Ridley: If the hon. Gentleman wants somebody to arbitrate between us about figures, I suggest that it be the hon. Member for Bootle, who was a member of the Select Committee on the Environment which published the figures in its report and showed quite clearly —[Interruption.] My hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi) has a copy. If the hon. Gentleman disputes the figures, I inform him that I am only quoting them.
  Sir Hugh Rossi: As attention has been drawn to the Select Committee's report—
  Dr. Cunningham: I did not mention the Select Committee's report.
  Sir Hugh Rossi: My right hon. Friend did. It might be awkward for the hon. Gentleman to be referred to ii, but the peak year on the chart is 1970. Until then, the decline occurred during the hon. Gentleman's term in office, and the figure did not begin to climb until 1980.
  Mr. Ridley: Perhaps it would be a help if we were to have visual aids in the Chamber. Opposition Members clearly do not understand figures, and they cannot read them.
  Mr. Peter L. Pike: If the Secretary of State reads the chart in the Select Committee report, he will recognise that, although the figure dropped during the period stated, it is still only two thirds of the peak figure of 1974. After nine years of Tory Government, that is appalling.
  Mr. Ridley: That is not correct. It is an interesting admission that the two periods of highest water investment

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  in the hon. Gentleman's history are 1974 and 1988—both under Tory Governments. That rather bears out what I said.
  Mr. A. E. P. Duffy: Will the Minister give way on that point?
  Mr. Ridley: Although Mr. Speaker appealed for brevity, I shall give way to the hon. Gentleman, but then I must make progress.
  Mr. Duffy: If we may refer to water authorities such as the Yorkshire water authority, does the Secretary of State recall that in recent years his Department squeezed the borrowing rules for water authorities to such an extent that, although investment has taken place as he has stated, it has had to be borne by water charges? The chairman of the Yorkshire water authority is recorded as saying in recent weeks that even before privatisation he may have to consider a water charge increase of 27 per cent. next year, which is three and a half times the present level.
  Mr. Ridley: If the hon. Gentleman believes that there has been a shortage of capital, I am sure that he will join the Government in the Lobby tomorrow night to support the privatisation of authorities so that they can get access to capital markets.
  The forward financial planning of the privatised industry will not be affected by any future Labour Government having to make their usual cuts, or bound by the yearly limits of public expenditure planning. The industry will have free access to capital markets, to raise the finance that is essential to investment in higher standards, to diversify, or to compete overseas. The investment programmes will indeed be large. They will start from a raised base, the 20 per cent. increase in investment in the water industry next year, which brings it to £1·43 billion, which was announced in the autumn statement. The privatised industry will have to sustain and increase those levels of investment.
  To demonstrate the scale of the environmental improvements that we are planning, I will go through the investment plans for the three main clean-up programmes.
  First, water authorities are already planning accelerated capital programmes over the next four years. The programmes will bring almost all sewage treatment works into full compliance with their consent limits by March 1992. We should make the fastest practical progress to getting all treatment works to meet the standards for sewage effluent already laid down in United Kingdom law. At each plant which is prone to failure there will be a costed timetable leading to compliance. As the Government confirmed in response to a question from my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) earlier this afternoon, the total cost of those remedial programmes will be between £900 million and £1,000 million over the four years to March 1992.
  Secondly, the industry is also spending £70 million each year on improving bathing waters in areas where they do not come up to standard. About 400 bathing waters are within the scope of the European Community bathing water directive, and 60 per cent. of them already meet the quality standards on coliform bacteria. We are discussing with water authorities a substantial acceleration of that programme, targeted to bring the remainder up to scratch
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  by 1995. The estimated total cost is in excess of £1 billion over the seven years, which represents more than a doubling of the present rate of spend.
  Thirdly, the Bill provides a new and greatly strengthened legal framework for setting standards for drinking water quality. For the first time, exact and numerical standards for drinking water quality will be set down in United Kingdom law and approved by Parliament. Those standards will include all those in the European Community drinking water directive, including that for pesticides. All water undertakers will have a duty to comply with the standards and to undertake specific sampling and monitoring procedures. Standards apply to private as well as public supplies. In addition, there will be a new criminal offence of supplying drinking water unfit for human consumption, punishable by fines or imprisonment.
  As part of my powers to assess compliance with the standards, I shall be able to require information to be published. This will help to make the new companies more accountable. I will also appoint technical assessors to monitor drinking water quality. As in other areas, water authorities and water companies are preparing programmes of improvement where existing water supplies do not meet one or more of the exacting standards in the European Community drinking water directive. It will be one of the main tasks of my technical team to ensure that the programmes progress satisfactorily.
  All the programmes for improving water supplies will be agreed with the Government before privatisation. Investors will have to know, and will know, the extent of financial commitment involved, and the work that I have described will enable that to be spelled out. Our provisional estimate is that additional expenditure on drinking water quality over the next 15 years or so will be about £1·5 billion. That is on top of existing capital expenditure levels and plans on water supplies.
  The three clean-up programmes, taken together, come to £2·4 billion on top of existing plans. They are only an estimate of the extra funds necessary to achieve the three known requirements going beyond present plans. They can be only broad-brush estimates, and I give them merely to show the magnitude of the cost increases involved. Without prejudice to decisions yet to be taken on the RPI-related price control formula, increased capital expenditure of the order of £2·4 billion to the end of the century would indicate costs in real terms of 7·5 to 12x00B7;5 per cent. higher than they would otherwise have been. That shows how wide of the mark the hon. Gentleman is in talking of doubling or trebling water charges.
  The water companies will also be investing in other activities and diversifying, just as the French have done so successfully. There has been talk of price increases to meet taxation and pay dividends. Like any other private company, the water service will be subject to corporation tax and will be eligible for capital allowances. The effect of clause 88 is to enable the regional water businesses to benefit significantly from these allowances.
  As for dividends, the companies will face the normal choices whether to finance particular activities by borrowing, by increases in equity, from profits or from cash flows. How they decide to finance particular investment will affect their costs. But, as things are now, the water authorities, as well as paying interest on their borrowing, are required by annual orders to earn a rate of return on their assets, which is reflected in their current

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  charges. What will change when they become public limited companies is that they will substitute for these capital finance costs, the costs of remunerating equity and debt in a new capital structure.
  Mr. Andrew F. Bennett: There is a great deal of concern about clause 7 and the prospect of the water bodies charging for access to the countryside. It has been suggested that there may be charges for rock climbing and getting on to countryside that has open access. Does the Secretary of State expect much money to be raised from that? Can he set people's minds at rest that he does not envisage a new policy of charging for the recreational uses that are at present provided free?
  Mr. Ridley: I do not envisage any such policy, and the matter can be pursued to better advantage in Committee. For many years, water authorities have been asked to sell land and they are selling surplus land all the time. Any land which remains and which their successors want to sell will be subject to the strict planning controls which exist particularly in national parks and areas of outstanding natural beauty. We shall go into the question of access in great detail, but I see no reason why the water companies which retain land would want to change rights of access, nor why they should want to charge for right of access. They charge for many facilities, such as car parking, fishing and yachting.
  Mr. Devlin: Where there is a common law right of way over a piece of land, is it not right that that right of way should continue to exist whether or not ownership changes?
  Mr. Deputy Speaker (Mr. Harold Walker): Before the Secretary of State replies, I wish to point out that many right hon. and hon. Members wish to take part in the debate and, the frequency of interventions will have to be taken into account in determining who shall catch the eye of the Chair.
  Mr. Ridley: My hon. Friend is right. Where there is a right of way it is impossible to charge for access. Where there is not a right of way and it is technically a trespass, it is not possible to charge for access. Access can be charged only where facilities are provided specially.
  The water companies' core activities will be regulated. Regulators will be under a duty to ensure that they can finance their core functions, including a reasonable rate of return on capital. Their ability to pay a reasonable return will depend on their efficiency. The regulator will not ensure rewards for any inefficient company.
  There is much more work to be done before we can take a view on the initial price formula. I have spent some time on cost increases to show why the figures that the hon. Member for Copeland was parading are absolute rubbish. These increases are entirely due to environmental improvements which the Bill facilitates and are in no sense due to privatisation.
  The hon. Member for Dewsbury (Mrs. Taylor) seemed to be getting the wrong end of the stick again in her comments on the statutory water companies in the newspapers this morning. First, they are privately owned and, secondly, their prices are not controlled by the Government. Thirdly, their dividends and reserves are controlled by the Government and, fourthly, the Government have told them that they must stay with the present law and we intend to make no changes. The
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  improvements which this Bill brings will be that these privately owned companies are brought within the price control formula which they are not at present.
  Although the environmental improvements represent extra cost, they are good value for money for the customer. He will be compensated through the benefits of privatisation, the possible lower cost of finance and the greater efficiency which we expect private ownership to deliver.
  In addition, the customer will benefit from higher standards of service and improved safeguards in the delivery of those services. To ensure that customers can rely on the maintenance and improvement of service standards once the industry is privatised, the director general will monitor each company's overall performance against standard indicators of service. As a condition of their appointment companies will be required to set targets for at least three key performance indicators—water pressure, interruptions of supply and foul flooding.
  If the director general thinks that a company is not doing well enough, and cannot agree the necessary improvements, he will be able to ask the Secretary of State at the time to make regulations to specify mandatory performance requirements and a timetable for their achievement. That will ensure that investment is well directed to the localities and aspects of performance which most need attention, and that companies give value for the charges that customers pay. This is a good Bill for consumers, for future shareholders, for taxpayers. for workers in the industry; above all, it is a good Bill for the environment. I commend it to the House.
  5.17 pm
  Dr. John Cunningham: Water is our country's largest natural monopoly. It is the people's most fundamental resource on which their health and well-being depends. We in the Labour party believe that this natural resource and the water industry's assets should be publicly owned and controlled. They should be managed openly and efficiently in the public interest, and the management should be democratically accountable at regional and national levels. Unlike the Tories, we do not believe that an essential resource such as water should be managed and sold for private gain. For us public health and hygiene are not matters to be dealt with by market forces.
  We know that the overwhelming majority of British people share our values on these matters. That was confirmed as recently as last weekend when The Sunday Times recorded the results of a MORI poll, which showed that, by 5:1, people are opposed to the sale of their water to private ownership, with only 15 per cent. supporting Government policy. We know that Ministers take that information seriously, because they have just engaged MORI to advise them on public attitudes to water privatisation.
  Try as he may, the Secretary of State cannot disguise his real motive for this Bill. It is to prepare the nation's water resources for sale and to create circumstances in which water will be sold to every household in England and Wales for private profit. People will have no choice about from whom they must buy their water. Some 99 per cent. of all households will be connected to private monopoly suppliers. Some 94 per cent. of all households are connected to the present public sewerage system. There will be no competition.

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  The Bill sets out to create the most far-reaching private monopoly powers ever conceived by a Government. I make it clear that a Labour Government will not hesitate to eliminate private monopolies to ensure that essential fundamental services are controlled and managed in the national interest—balancing the powers among consumers, employers, Ministers and Parliament. That is the only way to ensure that national interests are served and developed and that consumers have a real voice, real powers and effective protection against natural monopolies.
  Mr. John Maples rose—
  Dr. Cunningham: I shall give way in a moment.
  The Secretary of State lamely excuses private monopoly powers under the Bill by saying that water supply and sewerage disposal will be subject to the disciplines of the private sector—comparative competition, I believe, is the euphemism for that.
  Everyone in the House knows that such disciplines in the private sector exist only where there is competition. They come from the working of market forces. However, under these proposals, there will be no market, no choice and no option. For consumers, no market forces will exist in the supply of domestic tap water or sewerage services. The Secretary of State's argument is built on a transparently false premise. His ridiculous answer to this is, "Let people buy Perrier," which is another sign of his failure to understand the reality of the lives and circumstances of millions of our fellow citizens. Indeed, we understand that Perrier is ideologically unsound in 10 Downing street.
  Mr. Maples: The hon. Gentleman said that it would be inappropriate for the water industry to be under private ownership. He started a paragraph with the phrase, "A future Labour Government would not hesitate", but then he waffled a bit. Is he saying that a future Labour Government would renationalise this industry and, if so, on what basis?
  Dr. Cunningham: I say, without any hesitation, that a Labour Government would not allow private monopolies in water to exist—and we shall take them into public ownership.
  Sir Anthony Grant: rose—
  Dr. Cunningham: No, I shall not give way.
  These proposals are a betrayal of the consumer and of every household in England and Wales.
  Sir Anthony Grant rose—
  Dr. Cunningham: I shall not give way.
  Under this Government, average domestic water bills have already increased by 150 per cent.
  Sir Anthony Grant: Will the hon. Gentleman give way?
  Dr. Cunningham: I have said no.
  That is according to the water industry's own publication, "Water facts".
  Mr. Ridley rose—
  Dr. Cunningham: I am dealing with the point made about prices by the hon. Member for Lewisham, West (Mr. Maples). I shall give way in a moment. I am reminding the hon. Gentleman that prices have already gone up by 150 per cent. as this Government fatten up water for privatisation.
  Even more revealing is the fact that, since the Government made the decision in principle to sell off the water resources, there has been a deliberate policy of increasing water charges well above the rate of inflation. Between 1983 and now, the index of water price charges has increased by more than 20 per cent. above the retail price index. The consumer, indeed, has already been made to pay for Tory dogma and will be forced to do so again.
  Mr. Ridley: I believe that I can stand proxy for my hon. Friend the Member for Cambridgeshire, South-West (Sir Anthony Grant), who was trying to ask the hon. Gentleman whether his recent pledge means that he will nationalise for the first time the statutory water companies which have always been in private ownership. Perhaps the hon. Gentleman could help my hon. Friend, as he did not have the courage to give way to him.
  Dr. Cunningham: As the Secretary of State well knows, it is unlikely that those private statutory water undertakings will even be in existence in a few years' time. It is likely that there will be seven or eight major conglomerates owning and controlling our water resources. Far from there being more competition, there will be even less than there is now—if that is possible.
  Sir Anthony Grant rose—
  Dr. Cunningham: No. I shall not give way.
  Prices will again rise sharply even before privatisation, as a major act of Government policy. We know this from a leaked letter from Ernst and Whinney, the accountants advising the water companies and the Department of the Environment. It was writen on 1 December, marked "Urgent—for immediate attention", and was addressed to the general managers of the water companies. It points out that tariff increases should be planned immediately to the maximum possible level. It says:
  "under the existing regulatory formula prior to the introduction of price cap control"—
  that is prior to that which the right hon. Gentleman proposes—
  "as envisaged by the draft licence. Companies should therefore ensure that the next tariff setting process takes full account of the consequences of future asset management plans and the costs of these, which we envisage may well mean each company raising its tariffs to the maximum permitted under the existing regulatory formula."
  On page 2 it goes on to say:
  "Companies are strongly advised not to suggest that privatisation as such makes these tariff increases necessary."
  That is what is happening in the right hon. Gentleman's Department. That is what he is trying to hide from the public about prices.
  Mr. Ridley rose—
  Dr. Cunningham: I shall give way in a moment.
  I read that from an authentic copy of the letter from the right hon. Gentleman's own advisers.
  Mr. Ridley: The hon. Gentleman does not understand. The private water companies are not allowed to increase their prices for any other purpose than investment. That letter is not a leak. It is from the water companies'

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  accountants and not mine. The water companies have been to my Department and they have been told that they are not allowed to increase their reserves or their dividends. That letter is asking them, therefore, to increase the prices by the maximum possible to finance the investment in environmental improvements. The hon. Gentleman is wrong again. Now he wants to nationalise them, and they will not be able to get the capital from the private sector.
  Dr. Cunningham: The right hon. Gentleman reminds me of a character in Chaucer's "The Canterbury Tales" the Fraudulent Alchemist.
  This letter says:
  "Following a meeting arranged by The Water Companies' Association today with the Department of the Environment".
  It is following the meeting that they are advised. The right hon. Gentleman is now suggesting that somehow all this has nothing to do with privatisation. Frankly, we do not believe him. The letter makes it clear that water charges must increase because the privatisation proposals demand it.
  The preferred method for charging consumers under the Government's proposals appears to be water metering. The full consequences for people involved in water metering trials were revealed to me this morning in a letter from a consumer—or perhaps I should say, a victim—of the proposals who is a resident of Brookmans park in Hertfordshire, which is a metering trial area. He said:
  "I am part of the water meter trials in the Lee Valley area. From next April my water will be metered on a two part tariff basis. Peak rates will occur at 7 am-10 am and 6 pm-9 pm, exactly the time when one uses water for personal hygiene…
  Lee Valley have admitted to me … that because people use less water when metered, they have already raised the charges between 10 and 15 per cent. They also admit that if people are very frugal with their water consumption, prices will be increased further to maintain an 'adequate' revenue.
  By next April I will be paying between 15 per cent.—20 per cent. more for my water and the overall water bill will probably increase by 25 per cent. All this before privatisation. What will the charges be after? Frankly I can only agree with you and say that it will be a 'huge rip-off."
  Presently, the industry makes negligible real profit. There is almost no scope to reduce operating costs. Water supply and sewage disposal offer only low growth prospects in most areas. The bulk of investment will not be revenue-earning. Privatisation will increase the buyers' indebtedness. Companies will be liable to corporation tax, top salaries will rocket, as will management costs and expenses. Shareholders demand dividends, but who foots the bill? The consumer, of course.
  Even water industry chairmen—it is significant that the Government have not appointed a single woman to one of those posts—admit to charges increasing in the range of 50 to 80 per cent. In view of all that has already happened and all the evidence, we stand by our claim that, if this squalid Bill proceeds, domestic water charges will, effectively, at least have doubled as a result of Government policies and almost certainly risen much higher than that.
  The Secretary of State has made another bogus claim by suggesting that the reason for past price increases has been the need, not contested by us, to increase investment in the water industry. But what does the record show? As I said in an intervention, if we compare 1977–78—the last full year of the Labour Government—with the expenditure for 1987–88 and using the water authorities' own figures and the GDP deflator on a 1987–88 price basis, we see that total capital expenditure by English and Welsh water authorities was £1·164 billion in 1978 and £1·187
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  billion in 1988. In every one of the intervening years, however, under this Government, investment was lower than in 1977–78. So much for the boastful record that the Secretary of State mentioned. If the comparison is done using the public works deflator as an alternative, the result is effectively the same.
  Huge conflicts of interest run right through the Bill. The positions of the Government's dogma and of private profit are elevated above the interests of the consumer and the environment. The National Consumer Council shares our view that the arrangements for the protection of consumers in the Bill are "inadequate".
  What of the interests of the taxpayer? The public water authorities are holders of massive assets of buildings and land. Often those public assets are in prime town and city centre sites. We, the people, own an estimated 500,000 acres of land, much of it in national parks and areas of special interest or outstanding natural beauty. Under this Bill, it is all to be sold. What is its cash value? No one knows. I shall come to the incalculable heritage and environmental values later.
  We are aware that the Secretary of State has appointed, at public expense, Schroder Wagg to quantify those public assets, yet he denies Parliament and the people that information. So much for his claim that he puts "evidence before emotion" when deciding policy.
  With the scandal of the Royal Ordnance losses to the taxpayer fresh in our minds, the House is asked to approve proposals to rip off the taxpayer yet again by approving the Bill in complete ignorance of the capital value of our own assets that are to be sold. We simply should not do so.
  Our water industry assets are many times greater than those involved in the Royal Ordnance sale, of which the Public Accounts Committee of this House said:
  "In any similar sales in the future, any feasible planning permissions likely to increase property values should be obtained before offers are invited."
  The Government intend to ignore that advice. Why? How does that decision fit with the Tory claims to protect the taxpayer? If fits like the glass slipper on the Ugly Sisters —it does not fit at all. Of course Ministers know that their defence of all this is simply a fairy story. They intend the public assets to be the prize to induce buyers in the first place.
  Asset-stripping—
  Mr. Ridley: Will I turn into a pumpkin?
  Dr. Cunningham: Wicked Uncle Ebenezer, more like.
  Asset-stripping will be the name of the game. It has been tacitly agreed, and it is inherent in the Bill. Small wonder that the French are falling over themselves to buy into British water along with other predators such as the apparently Australian Mr. Duncan Saville. He has been doing deals with Southern Water and we have discovered that his company, Associated Insurance Pension Fund, is registered, not in Australia, but in the Cook Islands in the Pacific.
  In some places asset-stripping is already taking place. The Countryside Commission, the Council for the Protection of Rural England, the Ramblers Association, the Royal Society for the Protection of Birds, the Royal Society of Chemistry, the National Anglers Council, the National Trust and dozens of other sporting and leisure organisations have all expressed their deep concern, if not open hostility, to the plans. They are rightly alarmed

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  Of the land held by North-West Water, 53 per cent. of it is in a national park or areas of outstanding natural beauty. Northumbria Water holds 37 per cent. of such land, Severn-Trent Water holds 64 per cent. of such land and 30 per cent. of South-West Water land is in a national park or an area of outstanding natural beauty.
  In many cases public access to water authority land has been extended beyond the legal rights of way. That has been achieved through the establishment of permissive paths or access agreements with local authorities. In the Peak District, for example, where 15 per cent. of the land is owned by water authorities, more than 40 miles of permissive paths have been created. In another area, owned by Severn-Trent, more than 50 miles of footpaths run through it, of which only one third are public rights of way.
  Mr. Frank Dobson: Bryngwyn.
  Dr. Cunningham: Yes, my hon. Friend is correct.
  Mr. Edward Leigh rose—
  Dr. Cunningham: I shall give way in a moment.
  After privatisation, the majority of the water authority estate will be transferred to the new private water companies, which may in turn transfer it to subsidiary companies with responsibilities for leisure and recreation or land development. Alternatively, land surplus to requirements may simply be sold of. Both possibilities could jeopardise the continuation of public access and conservation on water authority land.
  Mr. Leigh: In view of the hon. Gentleman's comments about the National Anglers Council expressing its concern about the Government's proposals, it is important to set the record straight. If that is true, why, in a brief to hon. Members, does that organisation say:
  "The National Anglers Council welcomes the proposals to establish a National Rivers Authority".
  Dr. Cunningham: Of course I accept what the hon. Gentleman says. It is true that that council says that, but it goes on to say that it is deeply concerned about access and asset-stripping opportunities in the Bill.
  Specific threats include the intensification of agriculture, afforestation, the establishment of inappropriate recreation developments, the curtailment of existing access provisions and the withdrawal of conservation management.
  The Secretary of State proposes the incredible and bizarre theory that to protect the Lake District we must sell it, to safeguard the Peak District we must "flog it off" and to enhance Dartmoor, we should hand it over to private enterprise.
  That stupefying nonsense undermines national policy to protect our heritage and environment pursued by successive Governments and their agencies throughout the past 50 years. The thought horrifies millions of people of all political persuasions. The results will be to reduce access to the countryside, to increase charges for leisure, recreation and sporting activities and to remove environmental safeguards.
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  The Minister of State bleats like a herdwick about the planning system, but areas such as the Lake District are already under tremendous pressure, and last year 45 per cent. of planning appeals there were successful—higher than the national average for appeals at 38 per cent.
  The planning system, even in designated areas, will not on its own be adequate to guard against those threats. Agricultural improvements, afforestation and some recreational developments are already outside the planning system, as the Minister should know. Similarly, the curtailment of existing access provision and the removal of positive management by new owners fall outside the scope of development control.
  The Water Bill sets out the environmental duties of the water industry after privatisation. Both the National Rivers Authority and water plcs will have a duty to further conservation and have regard to public access in carrying out their functions, as the Secretary of State says. But there are no safeguards covering the activities of subsidiaries —those companies outside the core activities of water supply and pollution control. The Bill provides an open invitation to developers to exploit those assets—our countryside and our green spaces.
  Speaking on "London Plus" on 26 October Michael Carney, secretary of the Water Authorities Association, said it all when he said:
  "If there's something surplus it will be got rid of."
  That sums it up. Private companies will go all-out to ensure the quickest possible return and the taxpayer, the water consumer and the environment will pay the price.
  South-West Water has already sold Brent moor in Devon to a private developer. Planning applications followed. The site was resold and planning appeals are likely to persist. The National Trust offered to buy the land to save it for those who enjoy it at present, but it has simply been priced out of the market.
  In Hertfordshire, Thames Water is cashing in on land at Hemel Hempstead near a reservoir where housing is planned. In the Peak District national park, North-West Water has been disposing of land without any discussion or consultation with the planning board.
  In his vision of the future for privately owned water supplies, Mr. Roy Watts of Thames Water gives the game away. No doubt with the track record of privatised industry bosses in mind—a 160 per cent. wage increase bonanza—he looked into his crystal ball and said:
  "I see a lot of fun—playing hard, working hard—I see a sports ground—I see a training centre—I even see an executive helicopter."
  In other words, he sees large rewards at the taxpayers' and consumers' expense for less responsibility than he has now.
  The most incredible of all the Secretary of State's claims for the Bill is his apparent discovery that the best possible reason to sell off the nation's water and land assets is to protect the environment. The claim is based primarily on the establishment of a National Rivers Authority. The creation of a powerful environmental protection agency, which has long been Labour party policy, would have our support, but like many other of the Government's proposals, something with more appropriate powers could and should be established. It is simply not necessary to sell off the water industry to achieve those objectives. To facilitate the privatisation of water the Secretary of State is proposing an act of nationalisation—the establishment of a National Rivers Authority—the equivalent of a water

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  Property Services Agency, the kind of organisation that all his Back Benchers have been pressing him to get rid of ever since he came to office.
  The National Rivers Authority proposal is a means of taking away from the 10 water authorities their non-profit-making, environmentally necessary functions which, if they had remained with the water authorities, would have deterred investors and prevented a successful flotation.
  Having removed non-profit-making environmental concerns from the sale—destroying in the process the important environmental concept of river basin management—so as to make the sell-off more attractive, the Secretary of State now expects us to believe that he will re-impose those environmental concerns on private owners by regulation. The Blue Book that the Secretary of State has published on the new authority makes it clear that it will be heavily funded—yes, by the taxpayer. So much for freeing essential environmental expenditure from the confines of the PSBR.
  First, the Secretary of State looked for an experienced independent chairman for his powerful new body. He found none other than Lord Crickhowell, an "indepedent" friend of the Prime Minister and former Tory Cabinet Minister. The latter quickly described the existing levels of staff and obligations as "a problem". He confirmed the Government's intention to slim down the authority and contract out much essential work. In other words, redundancies already loom in an area where oversight, scrutiny and control of pollution is woefully inadequate.
  The claims for a powerful new agency are further undermined by the reality that the National Rivers Authority will contract services back to the privately owned water companies. As the very effective report "Liquid Assets" from the Council for the Protection of Rural England and the Royal Society for the Protection of Birds makes clear, private water companies would then be monitoring and analysing their own effluents—the very situation that the National Rivers Authority is said to be intended to avoid.
  The report concludes that the safeguards written into the Bill are not adequate to counter potential threats to the environment. We agree with that. A Greenpeace report entitled "Poisoning the System" demonstrates convincingly that, far from improving the law on pollution control, the Bill is a step backwards. Once the water industry is in private control it will be able to use the same legal loopholes as industry currently uses to avoid detection let alone prosecution. The transfer of sections of the Control of Pollution Act in the Bill ensures that outcome.
  The public register system provides information on all consents to discharge effluent from sewage works and on direct industrial discharges. Data from the public register may well show an industry to be consistently acting illegally, yet the public would be unable to prosecute on that evidence alone. Private water companies would be subject to the same legal loopholes that currently protect industry from prosecution. The Bill will make it almost impossible for an individual to bring a private prosecution against a private water company.
  Throughout the 1980s we have been witnessing a rapid decline in the quality of the United Kingdom's rivers for the first time since national records began being kept in the 1950s. More of our rivers than ever before are simply dead. Yet the Government and the water authorities have a lamentable record on prosecuting in the event of any of those offences.
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  The number of reported pollution incidents on rivers in England and Wales rose from 12,500 in 1980 to 23,000 last year. Yet in 1986 only 254 prosecutions were taken out by water authorities out of a total of more than 20,000 pollution incidents—an enforcement rate of 1 percent.
  In 1985, too, water authorities acting in concert with the Department of the Environment and the Secretary, of State, relaxed many of the existing consent conditions. The Secretary of State revealed that 1,800 sewage treatment works discharge consents were relaxed between 1984 and 1986. The water authorities were thus legally allowed to discharge higher levels of effluent. That, in turn, led to pressure from industrial dischargers to have their consents revised— as happened in the North-West Water area. And in the runup to privatisation the Government are considering requests known as variation orders which would relax consents for about 300 sewage worksin which water authorities are breaking the law.
  The Select Committee on the Environment recommended in 1987 in its report on pollution of rivers and estuaries that subsections of the Control of Pollution Act 1974, dealing with the protection of rivers' flora and fauna from polluting discharge, be implemented. The Government refused to implement that section of the Act.
  There are no integrated proposals in the Bill to deal with the problem of deteriorating water control in England and Wales, and the Secretary of State has no clear national objectives. The Bill contains no river and drinking water quality standards, nor any commitment, in the near term at least, to meet European Community standards.
  Faced as they are with the priority of making profits, it is extremely unlikely that the vigorous policy of environmental improvement that is urgently required will appeal to privately owned water industries. It is also unlikely that a Secretary of State for the Environment who said in a recent "Panorama" programme that it was not worth prosecuting water companies will take the tough stance that is required.
  Nor is it likely that a Secretary of State who has stood by in the face of all the evidence of more than 20,000 people being poisoned by their water supply at Camelford in the south-west—and who has done nothing when he should have set up a public inquiry—is a person who will safeguard, let alone enhance, the environment. That is an appalling omission—
  Mr. Nicholas Baker: On a point of order, Mr. Deputy Speaker. I have the greatest respect for the hon. Member for Copeland (Dr. Cunningham), but he has now exceeded the time for which the Secretary of State spoke. Mr. Speaker said that he was anxious to—
  Mr. Deputy Speaker: Order. Mr. Speaker said that he was invoking the power vested in him to impose a 10-minute limit on speeches from 7 pm to 9 pm, and expressed the hope that before that right hon. and hon. Members would make brief speeches, but there is no power to curtail speeches, and the hon. Member for Copeland (Dr. Cunningham) is under no time limit.
  Dr. Cunningham: The Parliamentary Under-Secretary of State for Health has said a word—or perhaps more than a word—about all this. A little while ago, urging people to adopt better eating and drinking habits, she said:
  "Instead of drinking Coca Colas, turn on the tap and drink what the good Lord gave us."

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  In the light of this Bill, the hon. Lady will have to revise her advice to the people of Britain.
  Shakespeare, on the other hand, wrote in "The Merchant of Venice":
  "There be land-rats and water-rats, land-thieves and water-thieves".
  This Bill is designed for them.
  There is a wide gulf between us and the Government. Tories are legislating today to create private monopolies, and to introduce profit-making into domestic water supply. We reject that idea absolutely. Tomorrow, Tories will vote to put the interests of private monopolies before the interests of families and the environment. They will vote tomorrow to undermine the foundations of policy on our national parks and common heritage.
  More than a century ago William Wordsworth—[HON. MEMBERS: "Oh, no."] Oh, yes. William Wordsworth foresaw the need to create a national park in the Lake District, when he wrote that the British people
  "by their visits, often repeated, to the Lakes in the north of England, testify that they deem the district a sort of national property, in which everyone has a right and interest."
  The people's feelings and the poet's vision were made reality by a Labour Government with their National Parks and Access to the Countryside Act 1949. This Bill erodes that right and denies that interest.
  No resource is more fundamental to the health of the people than water. We stand by our view that a plentiful supply of wholesome water should be available to every household in Britain at the lowest possible cost to consumers and the nation. We believe that there are irreconcilable conflicts between that objective, the demands of good public health and the interests of shareholders and market forces in water provision. It was exactly these conflicts and crucial national issues of water purity—public health, coherent policies for sewage disposal, pollution control, environmental protection and the strategic investment necessary to secure these vital national interests—that led to water becoming a public utility and monopoly in the first place. for us they remain the most fundamentally important objectives, far outweighing the interests of Tory dogma, of private owners and of private gain. That is why we oppose the Bill.
  5.57 pm
  Sir Hugh Rossi: I shall vote in favour of the Bill tomorrow because it contains some of the most advanced measures for the protection of water quality in this country since those of the Control of Pollution Act 1974, in which I was involved as a junior Minister.
  I welcome the fact that the Government have now accepted the need to establish a single independent regulatory authority. It has been wholly unacceptable that the water authorities—owned by the public—have acted in such a way that, for example, in 1986, 22 per cent. of all water treatment plants were polluting water for 95 per cent. of the time. They could not prosecute themselves, and the Department of the Environment could not prosecute another public authority. So it is necessary to devise an arrangement under which the water authorities become subject to the law in exactly the same way as the private sector, and privatisation is one way of ensuring that.
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  The hon. Member for Copeland (Dr. Cunningham) quoted in aid some dubious figures that his research assistants produced for him about capital expenditure. I refer him to a document that he did not want mentioned—
  Dr. Cunningham: I resent the hon. Gentleman's use of the phrase "dubious figures found by my research assistant"; I hope that he will withdraw it—[Interruption.] I understand that Conservative Members are not interested in the truth. My figures were produced by the statistical section of the House of Commons Library and are based on the expenditure figures of the English and Welsh water authorities. I said that when I quoted them. Now I have said it again, so I hope that the hon. Gentleman will withdraw his slur.
  Sir Hugh Rossi: In that case, I suggest that the hon. Gentleman has the figures checked. He was not at all interested when I intervened and tried to suggest that he should look at the report by the Select Committee on the Environment. The figures in that report were carefully examined by that all-party Committee; his hon. Friend the Member for Bootle (Mr. Roberts), who is now sitting at his side, accepted them and was a signatory to the report in which they are contained.
  Let us look at public sector investment in sewerage and sewage disposal in England and Wales between 1958–59 and 1989–90 in the context of 1985–86 prices. If the hon. Member for Copeland looks at that he will see that the peak shown on the chart in the Select Committee report was reached in 1973–74, when the annual investment was approximately £850 million. From then on, under a Labour Administration, there was a precipitous decline to a trough in 1979–80. That was agreed by the Select Committee, which said:
  "As the chart shows, there was a steady drop from the mid-'70s until the early '80s in investment by the water authorities in sewage and sewage disposal.
  Because of the lead time required for investment we are now suffering today".
  That is why the water authorities are in such trouble, with 22 per cent. of them discharging polluted water for 95 per cent. of the time.
  I should like to address some questions to my right hon. Friend the Minister on some aspects of the legislation that cause me a little concern. He has suggested that the National Rivers Authority should be responsible, not only for pollution control, but for flood defence, fisheries, recreation and navigation. We should like to see that authority as a powerful and effective body dealing with water pollution. Is it necessary to lump in these other activities, which would only muddy the water of its main work?
  When the Select Committee considered these matters, it said that either an independent new body should be created to see to these matters or that the inspectorate of pollution should be increased in size, power and responsibility and should be given executive responsibilities for water monitoring and prosecution. Quite clearly, the water authorities were incapable of carrying out those functions because, as they could not control themselves, it was hard to expect them to prosecute the private sector.
  We have heard in recent weeks that the inspectorate of pollution is in some kind of difficulty. In a short time we have seen the resignation of two chief inspectors, which does not bode well for the way in which we monitor water

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  pollution. Can the Minister tell the House about the relationship between the National Rivers Authority and the inspectorate? Will the inspectorate be absorbed into the National Rivers Authority, or will it be outside it? If it is outside the NRA, what will be its function?
  I spoke earlier about my experience in the Department when I was responsible for these matters. At that time, in 1973–74, I was tremendously impressed by the calibre of work and the quality of what was then known as the alkali inspectorate. It had been established for about 125 years and was manned by scientists, people of the highest calibre, who achieved such a relationship with industry that Britain was able to boast of being in the forefront of nations dealing with environmental problems. That was the case under the Clean Air Acts, the Water Acts and many other Acts. We owe the inspectorate a great deal.
  Shortly after I left the Department, in fact in 1975, for reasons that I do not know, under a Labour Government the chief inspector's post was downgraded from under-secretary to grade 4. If the Opposition attach such importance to such matters, why did the Labour Government starve the water authorities of the necessary investment and at the same time downgrade the post of the chief officer in the Department? That downgrading had a tremendous impact on the morale of the Department.
  I understand that the Department is currently reappraising the status and grading of the inspectors and the chief inspector. My right hon. Friend should have regard to the tremendous reputation of the inspectorate. The work that it has done over more than 125 years has been recognised by one Royal Commission after another and it would be a great pity if the ethos of that small unit in the Department were destroyed.
  I find it a little difficult to understand why the person in charge of that unit is an administrator and not a chief inspector. Perhaps some of the problems that we have heard about arose because of a difference of approach and attitude between the scientists, the people at the coal face looking after pollution problems, and administrators in the Department. These are internal matters, but they are within the remit of my right hon. Friend, and I am drawing them to his attention because it is within his power to put them right. I hope that he will do so.
  At the time that my Select Committee reported, there were 11 water inspectors for 10 water authorities. That is 1·1 inspector for each authority. That is totally inadequate in a system where monitoring will be done from outside the water authorities themselves. Within each of the 10 water regions I should like to see a regional office of pollution inspectors who would be responsible for the constant monitoring of waters and rivers within their geographical area. They would need to have the necessary laboratory back-up to test water quality, trace discharges and determine the pollutants going into the rivers. They would also need a legal staff to ensure that prosecutions were followed through from the results of their monitoring.
  I do not know whether my right hon. Friend envisages such a scheme within the National Rivers Authority, or what use he intends to make of the inspectorate. If thoughts along those lines are not already in his mind, I hope that I have put them there.
  The other matter with which I wish to deal was mentioned by the hon. Member for Copeland—the need to have national water quality objectives. The Committee suggested that they were a prerequisite for a planned and
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  costed programme. It suggested that we should have regard to the effects of effluents on flora and fauna when considering water quality.
  I am a little disappointed that under clause 97 the first requirement for water quality—when the mechanism to monitor it is set up—will be to have regard to the purposes for which the water will be used. That is an old-fashioned, cheap approach. The only way in which we can ensure good, clean water in our rivers is to ensure that nothing is put in them that damages life. That must be the aim and final objective. When my right hon. Friend considers the water quality objective, as he will have to before the Bill is enacted, I hope that he will have more regard for life in rivers.
  I shall curtail my remarks, in view of what Mr. Speaker has said, but I should like to mention the loopholes to which the hon. Member for Copeland referred. I draw the House's attention to evidence that the Select Committee received when preparing its third report. We received evidence from the Severn-Trent water authority, and paragraph 102 of the report says:
  "It is possible for a discharger to introduce some new contaminant not envisaged when the consent was granted, and hence not limited, to cause serious pollution and then to claim this protection. Protection should apply only to those components of the effluent which are governed by specific conditions."
  If an industrial plant is given permission to discharge a chemical into a river, but adds another chemical, it is able to say, "I cannot be prosecuted." As the law stands, it has a licence to discharge, and the fact that the chemical that it is discharging is not mentioned in its licence gives it a measure of protection.
  I can give specific examples of where that is happening. My attention has been drawn to this problem by the Yorkshire Post, which has carried out an assiduous campaign. It gives specific incidents of a company discharging cadmium into the River Aire. Cadmium is one of the two most poisonous substances known to man, but a company is discharging 12 kg of it per annum under a licence that does not refer to it. The water authority is unable to prosecute. Clause 100 will make it an offence knowingly to permit any poisonous or polluting matter to enter controlled water. An exception is given in clause 101 for those who have consent.
  I ask my right hon. Friend whether the combination of those two clauses will block the present loophole. I agree with the hon. Member for Copeland that this is a serious matter, which causes great concern. I hope that my right hon. Friend has addressed himself to this problem and will find a solution to it.
  Dr. Cunningham: The hon. Gentleman and I had a disagreement before, but I join him in praising the Yorkshire Post and other newspapers which have drawn attention to the flouting of pollution control law. It is my understanding—I am pleased that the hon. Gentleman asked the Secretary of State this question—that nothing in the Bill will change those circumstances. I should be grateful if the Secretary of State would answer his hon. Friend's question.
  Sir Hugh Rossi: That is the view put forward by Greenpeace. On occasion, the Committee had to question the evidence given by it. It is an effective pressure group, but it tends to get rather excited and, at times, to overstate

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  its case. It has sent me a copy of the document to which the hon. Member for Copeland referred, but I have not had an opportunity to read it in detail.
  Part of the object of Second Reading is to ventilate matters so that when they are considered in Committee and on Report the Government can close any loopholes in the legislation. I should like to think that the Government have directed their attention to these problems and that they may already be covered. Nevertheless, there is no reason why a marker should not be put down, because it is a very serious defect in the law. The problem is that polluters are not acting illegally, If they were, certain consequences could follow. We must therefore ensure that such behaviour is made illegal.
  I hope that I have not kept the House too long. I only wished to ask two or three questions about pollution. I think that there can be a tightening and close examination of pollution controls, and I hope that my remarks will commend themselves to my right hon. Friend. Subject to that, he will receive my support in the Lobby. I shall wait with interest to see how the matter is dealt with.
  Several Hon. Members rose—
  Mr. Deputy Speaker: Order. I remind the House that Mr. Speaker has appealed for brief speeches.
  6.16 pm
  Mr. Richard Livsey: I commend to the House large parts of the speech of the hon. Member for Hornsey and Wood Green (Sir H. Rossi), especially that part relating to pollution control and the pollution inspectorate. I am certain that he is right in saying that powers need to be improved and expert personnel need to be available on the ground.
  The objective of the Bill is quite clear—to dismember the 10 water authorities, which are successors to local authority control, of water resources and supply. They were created to improve standards of public health. We must recognise that, before they were taken into local authority control, there were horrendous problems related to health. In short, the water industry has always been regarded as a service, not an industry suitable for privatisation. We will therefore vehemently oppose the Bill.
  The size of the industry has increased enormously, especially since its reorganisation in 1973. It now has an annual turnover of £3 billion. Water authorities supply water to 75 per cent. of the population and sewerage facilities to 96 per cent. It is a large industry and employs 48,500 people. None the less, it is a service industry and should remain in the public sector.
  The industry's present functions, especially those of river basin management, are important. The effectiveness of its river basin management is admired throughout the world. Its sewerage and sewage disposal responsibilities have been shown to be unsuccessful at present, and it is reckoned that 20 per cent. of sewage disposal units are ineffective. This is a serious problem and will require much more public money if the system is to be effective. It is therefore doubtful whether the private sector will be able to find sufficient resources to bring about more effective pollution control.
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  The water authorities have functions in respect of fisheries, flood protection and drainage—that is especially important for agriculture—navigation, recreation and conservation. Over the past 10 or so years there have been massive efforts to reduce costs in order to improve the efficiency of the water authorities. They are now leaner and fitter. There is no more scope for further cost cuts. This is part of the problem with privatisation of the industry. Profits will come only by increasing the price of water to the consumers and selling off the water authorities' assets.
  The transfer from a public monopoly to a private one does not introduce competition, and that is surprising. The Bill does not apply to Scotland, and we see no reason why it should apply to Wales. The splitting of functions between the National Rivers Authority and water services companies could have been achieved while the water industry was still in the public sector, and we see no reason why that should not have happened.
  Mr. Allan Roberts: What does the hon. Gentleman have against England? He has exempted Scotland and Wales. Why should we suffer?
  Mr. Livsey: I am sure that the hon. Gentleman is well able to make the case for England.
  We are in danger of having a toothless National Rivers Authority, unable to cope with the voracious demands of the water plcs for more profit at the expense of consumers and the environment.
  We are worried about the financial arrangements for the National Rivers Authority. First, there seems no logical reason why the money which the Treasury will pocket from the sale of the water authorities should not be used to meet the set-up costs of the NRA. Secondly, we are worried that the NRA will not be properly financed to meet its day-to-day duties. The NRA's remit and powers are generally satisfactory, but the authority can only be as effective as its budget will allow. It is dependent on the Treasury to fund activities beyond those that its income allows it to undertake. The NRA's regulatory functions rest in the Chancellor's hands.
  We know that the Department of the Environment does not envisage the NRA receiving substantial state support. That will result in a clear conflict of interest. The Chancellor wants to raise as much as possible from the industry's sale, but knows that the greater the regulation through the NRA the lower the industry's value will be. There is a direct incentive for the Treasury to under-fund the NRA. In its general information pack, the DOE said:
  "The general policy of the NRA would be to maximise its cost recovery from charges so as to minimise its dependence on Exchequer grant."
  In a speech on 12 November, Lord Crickhowell, chairman of the NRA advisory committee, said:
  "It cannot be healthy for the NRA to be dependent on hand-outs from the Government."
  Clearly, there is a conflict.
  Thirdly, there is concern about the NRA's long-term financial position. The authority is classified as "non-departmental public body"—presumably, that is Treasury terminology. The authority will have no long-term borrowing powers. I should like the Minister to take serious note of that point. The present water authorities have borrowing powers and massive problems occur in drainage and flood control which require additional finance, often at short notice. In the past, the water authorities have borrowed a great deal.

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  We are worried about the NRA's structure, because we do not want it to become over-centralised. Lord Crickhowell touched on that point in his speech to the national water conference, saying:
  "Within the framework of national policies laid down by the NRA, the regional units shall have the greatest practical degree of independence."
  The NRA should be independent. That point was made by the hon. Member for Hornsey and Wood Green.
  The flotation of the water companies seems to be far removed from consumers and consumer interest. We are not sure why the Government will not consider the consumers' interests more in those areas covered by the plcs, why there should not be participation in share ownership by consumers and why should there not in certain cases be co-operative arrangements with consumers. Surely we need bodies that have consumer interests at heart.
  Dr. D. E. Thomas: On the point about consumer control, my hon. Friend will be aware that the Minister for Water and Planning is a respected fellow countryman. I am certain that he will have carefully considered whether it would be appropriate for the functions of the Welsh water authority to be transferred into the hands of Welsh consumers, should such a co-operative be established. I am certain that my hon. Friend will agree.
  Mr. Livsey: I certainly agree that Welsh consumers should participate in the ownership functions carried out by their water authority. It is questionable whether the functions of the Welsh water authority should be hived off at all, unless it happens in those circumstances.
  Mr. David Ashby: How does the hon. Gentleman propose to ensure that only Welsh people apply for the shares?
  Mr. Livsey: I am sure that, if the Government wished, such a facility could be given in the Bill to the Welsh people. We shall certainly test the Government on that aspect.
  Water consumers are worried. I hope that, at the very least, the Government will make provision in the Bill for the Government to hold a golden share, to ensure that the plcs remain in Britain's hands rather than sold to foreign investors. I am sure that the Government agree.
  It is clear that under the Bill there is no competition. When, on the BBC programme "On the Record", it was put to the Minister for Water and Planning that the consumer would have no extra choice as a result of privatisation, he replied:
  "Yes, that is probably right."
  The Minister admitted that there would not be much competition. The consumer will not have in his house six taps providing water from six plcs. Water is four times more expensive in some parts of France than in others. I trust that the Government will not allow that to happen when the Director General of Water Services is appointed.
  We are worried about what will happen in the Principality of Wales, because water from Wales services the midlands and other parts of England. We hope that the future arrangements will bring us adequate compensation for the export of that water, and that we will be properly reimbursed and not under-sold. That is important.
  The infrastructure of the water industry is in a very bad state in some parts. Many Victorian sewers need to be
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  repaired and new water pipelines installed. That is a massive task. Most estimates of bringing water quality up to EEC standards show that the work could be done at a cost of about £6 billion. We are concerned that the Secretary of State today mentioned a figure of £2·4 billion to put matters right, which is less than half the current estimate. We hope that the Government will reconsider that matter.
  We are also concerned about the current massive land assets of the water authorities. They own 450,000 acres of land and we are not certain what will happen to that land when the industry is privatised. They own 97,000 acres in Wales alone and, in my constituency of Brecon and Radnor, there are 21,000 acres of water authority land in the national park. That is an extremely valuable asset and we should like to know what will happen from the point of view of access and recreation.
  Many farmers on that land are tenants of the water authority. What will be their security of tenure? What will happen to their rents when water is privatised? Will they be able to continue in their traditional farming activities, or will they be priced out? Those are important issues which should be discussed in detail in Committee.
  We regard the Bill as unsatisfactory. Water is not suitable for privatisation. Many hon. Members are involved in the recreation aspects —I am a keen angler—and are anxious to know whether the fishery aspects will be protected and developed at a cost that everyone can afford. We hope that angling, which is the most popular sport in the British Isles, will not be priced out for the ordinary person as a result of the privatisation of the industry.
  We must remind the Minister of the consumer interests that are at stake, particularly in the disconnection of consumers from their water supplies. Last year, disconnections reached an all-time high of more than 9,000. As water is a basic, natural resource, vital for life, consumers should not be cut off in that way.
  The poor and lower income groups are particularly exposed to that problem. Low-income families and individuals have to pay rates and water rates from benefit, and those rates are taking increasingly large proportions of their benefit. In the past six months, the standing charge for those consumers with water meters has risen by 33 per cent. I have been shown such cases, and they are very worrying. We hope that the consumer interest will be taken into account in the Bill. The director general must be effective. I do not believe that the estimate of 80 staff in his office is sufficient to protect the industry and the consumers' interests.
  1 hope that the Minister will take those points into account. The Bill needs amending substantially if it is to make a worthwhile impact. We oppose the principle of the privatisation of water and are glad to say so.
  6.34 pm
  Sir Charles Morrison: In considering the transfer of a utility from the public to the private sector, it is worth remembering that there are two reasons for the existence of the public sector, the one Socialist and the other pragmatic. My right hon. Friend the Secretary of State referred to the Socialist reason when he opened the debate. It is the continuing Socialist conviction that only as a result of the nationalisation of the means of production, distribution and exchange, coupled with all-embracing state provision, can the public good be

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  served. I totally disagree with such ideology. It provided some dream of a solution to the ills of the late 19th and early 20th centuries, but it never succeeded in practice.
  The second reason for the existence of a public sector is the pragmatic one that, at one moment or another in our history, it was seen or believed that the private sector would not, or could not, meet a public need. That is why I do not believe it is a self-evident truth that, automatically, everything in the public sector must be bad or badly run, and everything in the private sector must be good or well run. I hope that the Government do not believe that either. If they do, they should beware, because they would then be in danger of becoming as ideological as the Opposition. Instead of judging issues on their merits, issues would be judged according to the theories of some doctrine or dogma. In my judgment, common sense and pragmatism should be the basis of our thinking about the future of the water industry.
  It is against that background that I want to deal with the Bill, while remembering that water first came under public control, as we were reminded in a letter to The Times earlier this week, as a result of the determination of a leading Conservative. That does not mean that the time has not arrived for water to be transferred from the public sector back to the private sector, but I again emphasise that it is important to adopt a pragmatic approach to the question of how water should be organised.
  The Bill creates a new strategy for water. Given the nature of water and its supply, I cannot see how the Bill can be claimed to provide competition. My right hon. Friend the Secretary of State referred to the concept of "comparative competition." That is all very well, given the 10 water authorities and the 10 plcs that will exist. Standards may be adequately set as a result of their existence, but there will be no competition in any normal sense of the word. The Bill therefore creates the opportunity for public monopolies to become private monopolies. However, as we have heard, those private monopolies will be freed from the financial constraints that they currently suffer as a result of being part of the public sector.
  Undoubtedly, most of the existing water authorities have, at some time or another, been at the receiving end of justified public criticism, but most of the problems that have given rise to that criticism in respect of poor supply, poor water quality, pollution and inadequate sewerage systems have fundamentally stemmed from Treasury meanness, as a result of which water authorities have not been able to invest as much as they would have wished. Privatisation will certainly overcome that difficulty, because the water plcs will be able to go direct to the market to obtain the capital that they believe is necessary. Thus, it should be possible gradually for the water industry as a whole to become more efficient and less open to many of the criticisms that have been aimed at it in recent years.
  None the less, the industry will not be operating as a free agent. It will be subject to regulation by the Director General of Water Services and the National Rivers Authority. It occurs to me that the director general will have to be some sort of Solomon, especially in the early years of his existence. That is if he is to be seen to protect the customer from price rises at the same time as the plcs
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  are investing considerable extra capital to meet the requirements of the director general and of the NRA. No doubt such a paragon can be discovered and appointed.
  The concept of the NRA as a regulatory body is admirable. It will remove the conflict of interests that currently exists, with water authorities being responsible for discharges to water, especially of sewage, and for the control of discharges. I should be happier if the NRA were to be a purely regulatory body, without any functional responsibilities. Fortunately, the Government have decided to retain the existing system river basins as the basic structure for the plcs. It seems, however, that there will be some overlap between the responsibilities of the plcs and those of the NRA. If that is so, the opportunity is created for the buck to be passed—I suspect, particularly from the plcs to the NRA—when a necessary expense arises that can give no extra return to the plcs. I hope that my hon. Friend will be able to allay my fears on that score.
  The interests of anglers must be recognised, and I happen to be a president of their national council. It is clear that fisheries are to be a major responsibility of the NRA, and that is right. Fishing is a major recreation along rivers and around reservoirs, and it seems that there is no safeguard for specific recreational activities that are currently enjoyed on water. It appears that, within the meaning of the Bill, a plc may abandon one recreation in favour of another. As major users, that could be to the disadvantage of anglers. I accept, however, that it could be to the disadvantage of other users of certain stretches of water. I hope that my hon. Friend will be able to reassure me.
  Anglers are concerned about high water quality. Credit can be given to anglers and their various organisations for the way in which they have stressed the importance of water quality in the past. This has resulted in many improvements being made. Anglers fear that the Bill might lower standards of quality.
  Previous legislation promoted a national policy to restore the wholesomeness of rivers. My hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi) said that clause 97 refers to the classification of quality of waters. Apparently, water quality standards are to be related to the use of water. It is felt strongly by anglers, and no doubt by others, that there should be public consultation before water quality standards in any given area are agreed; otherwise, a lowering of standards might occur for cost-cutting purposes, regardless of the interests of users, and anglers especially.
  Given such a consideration, would it not be sensible to have two members representing fisheries on the NRA board, with at least one other representing water recreation? There are 2,700,000 freshwater anglers, and water recreation in its various forms involves about 6 million people.
  The Government should take careful note of the concern that has been expressed about what will happen to the 450,000 acres that are currently owned by water authorities.
  Mr. Cranley Onslow: Before my hon. Friend moves on from his comments on angling, which he has been making so admirably, would he care to add that many anglers are puzzled about why flood prevention committees are to have executive responsibility, whereas regional fisheries committees are not, given that a great deal of the moneys will come from anglers?
  Sir Charles Morrison: My right hon. Friend makes an important additional point, which I did not mention because I was trying to limit myself in time. What he has said is of great importance and I hope that my right hon. and hon. Friends on the Treasury Bench will take careful note of it.
  I was referring to land in the ownership of water authorities, and was about to mention that there is concern about access to it. I shall not expand on that issue, because it has been mentioned several times already. I merely say that it is essential that the Government view the matter sympathetically.
  Overall, anglers welcome the proposals for the NRA. The authority will act effectively, however, only if it has adequate financial resources. Here there is a contradiction in the Bill, and it was referred to by the hon. Member for Copeland (Dr. Cunningham), who spoke from the Opposition Front Bench. The new pies will be freed from Treasury constraints, but the new NRA will be subject to them. I have to admit my worry when I read that grant in aid to the NRA will be paid to the authority
  "subject to the Treasury's approval".
  What guarantee is there that the Treasury will be less mean than usual?
  Mr. Nicholas Soames: Oh!
  Sir Charles Morrison: I know that the NRA will receive income from direct charges, but it was only last week that I was told of a story concerning the grandfather of my hon. Friend the Member for Crawley (Mr. Soames), who always referred to the mean Treasury. I hope that the grandson will learn from the grandfather, rather than seek to correct me when I refer to Treasury meanness.
  The NRA will receive income from direct charges, such as navigation and rod licences, from water extraction and from discharges, but without adequate grants it will not live up to the expectation that many have of it. As a reassurance, the NRA should have a guaranteed grant, which should not be reduced. Without that, and even with the best will in the world, the NRA may not be able to live up to its responsibilities, especially in monitoring the effect of pollution along the 25,000 miles of rivers, in coastal waters, on ground water and in estuaries, for which it will have responsibility.
  The Bill is a mammoth piece of legislation that includes a mass of matters of substance and of detail. It is heading for lengthy consideration in Committee. I hope that my right hon. Friend the Leader of the House will take account of the recommendations of the Procedure Committee and very early on introduce a timetable motion for its consideration in Committee. Only in that way will there be a reasonable time for every part of the Bill to be discussed. Only in that way shall we ensure that it is not only the other place that deals with a great deal of the Bill. I am sure that the Bill will receive a Second Reading tomorrow night. When it is deliberated upon thereafter, I hope that there will be adequate opportunity for consideration of all major aspects of it and time to reassure those who now have reservations about it.
  6.49 pm
  Mr. Peter L. Pike: The Secretary of State for the Environment and the hon. Member for Hornsey and Wood Green (Sir H. Rossi), the Chairman of the Select Committee on the Environment, mentioned the figures for investment in sewerage and sewage disposal functions in
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  England and Wales from 1958–59 to 1989–90. Those figures have been used in a misleading way, as is shown by chart 1 of the Select Committee report, to which they referred. Although it is clear, in constant 1985–86 prices, that spending reached a peak in 1974–75, it is also clear that it is still far below that peak, despite the fact that the Conservative Government have been in power for nearly 10 years.
  It is completely misleading for the Secretary of State and the hon. Gentleman to talk of a long lead-in period when they are considering the present situation. If that were true, they must also accept that the figure that they claim was the peak in 1974–75 was planned during the period of office of the Labour Government under the leadership of Lord Wilson. The Government cannot have it both ways. Although the forecast shows an increase in the next few years, investment will still only reach two thirds of that peak figure. They must put the figures in that perspective.
  I want to refer briefly to an editorial in the Lancashire Evening Telegraph on 1 December which shows the problems of this appalling Bill. There was an article in that paper on the same day about the conflict between the chairman of North West Water and his deputy chairman, who happens to be the chief executive as well. I must point out that the deputy chairman has been involved in the water industry for considerably longer that the chairman. Like many others, George Mann, the previous chairman, was removed because he would not have been politically in favour of the privatisation of water. The Government have ruthlessly removed almost everybody they could from the water industry who might have opposed its privatisation. They have done that extremely skillfully and ruthlessly over the past few years in preparation for their privatisation proposals.
  The deputy chairman of North West Water is quoted as saying that the sell-off is "a waste of time". The chairman of North West Water says that we can disregard that because the deputy chairman is due to retire. The deputy chairman, Bryan Oldfield, has long experience in the industry. It is true that he will retire in a year's time, but Dennis Grove, the chairman, has a short experience of the industry and has been dedicated from the start, like many other chairmen, to carry out the Government's will. Many chairmen and members of water authorities believe that they have the right to make that political decision, and many have played an active part in propagating the Government's views. They have not merely sat back and said that they had to carry out the Government's will, but they have been preparing for privatisation in advance of the Bill, and even in advance of the paving Bill.
  The editorial in the Lancashire Evening Telegraph says:
  "When it comes to the looming privatisation of the water industry, what choice will the public have?"
  I emphasise the word "choice", which is the in-word of the Conservative party at present. The editorial continues:
  "Water, after all, is the stuff of life—a vital commodity that people have no choice other than to use. In essence, it is a natural monopoly and, so, will be seen by millions of people as a fundamental service that should not be cast into the arena of free enterprise, where the making of a profit for investors is the bottom line and where the notion of improved efficiency and service to the customer is inevitably blunted because there will be no risk of them taking their business elsewhere … This is one piece of the Government's privatisation programme that is sure to run into choppy waters. And, at this stage, it would seem that it would have done well to leave the water industry off its list."

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  Those are true words and, even tonight, the Government should think again and drop this nonsensical proposal of privatising an industry that is so vital to all.
  I have said on previous occasions that I would be prepared to support the concept of the National Rivers Authority with a publicly owned water industry. If the National Rivers Authority is given adequate powers and staffing, and is organised on a regional basis to carry out its duties properly, it can play a vital role. I have no objections to the establishment of that body, but I am doubtful that the Government will give it those powers. The Association of District Councils, which is always Tory dominated, also expressed reservations that the National Rivers Authority will have those powers and the teeth to do its job because that may not be in the Government's interests.
  North West Water has the biggest landholding of all —more than 150,000 acres, of which over 53 per cent., 79,519 acres, is in national parks. That land is crucial. Many of us are worried about the possible destruction of our heritage by disposals of land. We all know that it is difficult to value that land. As a water catchment area, it has very little commercial value, but if a small section of land is disposed of and given planning permission, its value could change overnight.
  The Minister says that land will not be allowed to be sold, but the Bill says that land that is considered to be surplus to requirements can be disposed of. It has also been said that land in a national park would not receive planning permission for development. People who say that have more confidence than I have. I am fairly certain that it will be the financial interests of the water industry to find ways, with their Conservative friends in certain positions, to dispose of some of its land to make money out of it and, at the same time, destroy some of our heritage. These are extremely important matters.
  Clause 79 allows the Secretary of State to write off the authorities' debts. The Government are remaining very quiet about their intentions. When I met the chairman of the water authorities who came to the Labour party conference at Blackpool to lobby Members of Parliament —I am sure that they did the same at the Conservative party conference—they told me that they were expecting the Government to wipe off as much as possible of their debts because they would have a new debt, the shareholders' capital within the industry.
  They said that they believed that it was right that if the Government received the money for the shareholdings the debts should be wiped off as well. That is a stupid argument. At present, the Government own the assets of the industry and also the debts. When the debts are repaid by those water authorities, the Government will receive the money. We shall be giving something away just to allow people to make money. I am worried that, in the end, privatisation is about making money and that the quality of water and the problems associated with that will become secondary.
  Many voluntary organisations, such as the National Trust, the Ramblers Association, and other conservation bodies, have considerable reservations about the Bill. They are worried about access to the countryside and about the possibility of charges. Even if access is maintained, there is a duty on the water authority to earn an income from it if
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  possible. My hon. Friends and I believe that access to the countryside should be available to all people and should be available free of charge wherever possible.
  If we do not defeat the Bill tomorrow, we shall have to debate many matters at great length. I doubt whether the Government will recognise the folly of their ways, so the Bill will have to be amended if we are to safeguard some of those important matters.
  Several Hon. Members rose—
  Mr. Deputy Speaker (Sir Paul Dean): Order. I remind the House that the 10-minute limit on speeches is now in operation and I appeal for the co-operation of hon. Members who are called during this period.
  7 pm
  Sir Anthony Grant: During the past year, I have had several meetings with chairmen of water authorities and I assure the hon. Member for Burnley (Mr. Pike) that, far from being docile slaves of the Department of the Environment, they are extremely lively people. I understand that some of the discussions that they have had with Ministers could be described as extremely stimulating. But, like men of sense, they agree with me that there is a powerful case for the Bill.
  My right hon. Friend the Secretary of State made the case devastatingly in his opening speech. The point that I stress most powerfully is investment. After the lamentable failure of investment by the Labour Government, there is now an opportunity to free the industry from all restraints to enable it to compete for investment throughout the market and thereby to increase its efficiency, instead of standing in a dreary queue before the Treasury behind all sorts of other bodies. In addition, we must increase standards of water purity and reduce pollution. The creation of the National Rivers Authority is immensely important in that regard.
  The area that I know best is covered by the Anglian water authority. It is not the north-west authority, but Anglian authority which has the largest land area of the 10 water authorities. It is the fourth largest in the number of customers and in turnover. It has the fastest population growth of any authority, with about 500 new houses every week being connected to the water supply and 600 new houses a week linked to the sewerage system. It used to have the greatest problem with coastal defences, but happily that will become the responsibility of the NRA.
  There is great anxiety in the area of the Anglian water authority concerning nitrates in soil, but the fears have been vastly exaggerated. They are as ludicrous as some of the fears about eggs. On Monday, the hon. Member for Greenwich (Mrs. Barnes) said that the chances of getting salmonella were the same as being hit by a meteorite. The chances of contracting stomach cancer from nitrates in the soil in East Anglia is about the same as my hon. Friend the Under-Secretary of State for Health being struck dumb.
  In my area, water has been supplied excellently for many years by the private Cambridge water company. I tried to intervene in the speech of the hon. Member for Copeland (Dr. Cunningham). Eventually, my right hon. Friend the Secretary of State managed to ask him whether, in the remote event of a Labour Government being elected, they would renationalise the private water companies. The hon. Gentleman dismissed it by saying, "Probably there will be none." The hon. Gentleman would

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  not give way to me. When the Opposition spokesman replies to the debate I hope that he will tell us point blank what would happen to the private water companies in the event of a Labour Government taking office. Perhaps the hon. Lady would like to tell me now. If so, I gladly give way.
  Ms. Joan Walley: I am grateful for the opportunity to answer. The hon. Gentleman said clearly that there will be a Labour Government. Our commitment is clear. Because of this Bill, a Labour Government would ensure proper public control over water, which is God-given.
  Sir Anthony Grant: I assume, therefore, that the hitherto free private water companies will be taken over. We shall take that message back with us.
  The Anglian water authority approaches privatisation with enthusiasm, but it says that the regulatory regime is heavy and complex. It is heavier than that for any previous privatisation, but it says that it will make it work. The regime will certainly deliver the improvements in quality and environmental standards that my right hon. Friend has promised, and any fears to the contrary are entirely fallacious. But costs will be high and can be met only by increased charges. That would have happened irrespective of privatisation. Customers must recognise that higher standards mean higher charges.
  I beg the Government to ensure that the price control mechanism allows those increased costs to be recovered. Absolute clarity on cost time scales and recovery through charges is imperative if the companies are to be floated successfully. Much of the debate has centred on the environment, but we should remember that this exercise is primarily about establishing efficient and profitable public limited companies—[HON. MEMBERS: "Ah!"] That is what it is all about.
  Is it rather naive to assume that there is tremendous scope for offsetting the extra costs by savings made in operational costs. Anglian Water will continue to increase productivity, but since 1980 it has reduced its manpower by 22 per cent. against an increasing work load. All those factors must be taken into consideration.
  I am very much in sympathy with what my hon. Friend the Member for Devizes (Sir C. Morrison) said about the National Rivers Authority. It would be a great pity if the NRA became the poor relation of this exercise. In Anglia we believe that a highly professional, properly resourced NRA will be an essential part of the package embodied in the Bill, and I hope that Parliament will be careful to ensure that the Bill achieves those aims.
  Another reason why I strongly support the Bill is that it is a step along the path towards a wider share-owning democracy. I was a founder member of the wider share ownership movement longer ago that I care to remember —even before it became fashionable in the Conservative party. I have welcomed all the steps that have been taken, of which this is another example. I rejoice that there are now 9 million private shareholders. I hope the Government will ensure that privatisation of water will involve the largest possible circle of investors, so that many people can participate in a vital industry. It is important that the water industry is owned by those who are interested in and wish to be associated with it, rather than by a faceless bureaucracy. I feel sure that that will be the case.
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  I wish the Bill well. It is a formidable document. I weighed it at the post office and it came to about 600 or 800 grams—the post office no longer deals in avoirdupois. It is certainly one of the biggest Bills I have seen, running to 180 clauses. My hon. Friend the Member for Devizes (Mr. Morrison) made the important point that proper arrangements should be made to debate the Bill in Committee, if necessary with a guillotine, at an early stage. The Bill will improve and spread share ownership throughout the land, raise water quality, and increase efficiency. It deserves a resounding Second Reading.
  7.10 pm
  Mr. Gareth Wardell: In the Welsh language there is the phrase "asgwrn cefn", meaning determination, steadfastness, spine and a willingness to do that which is right. For a Government who supposedly pride themselves on their "asgwrn cefn", pulling the plug on the water industry must be one of the most hypocritical acts they have contemplated.
  First and foremost, the sell-off of water is a sell-off of Government responsibility. The Government are shedding responsibility for their policy of imposing such unrealistic financial targets and external financial limits since 1981 that water authorities have been unable to keep up with required levels of maintenance and investment needed to repair and improve basic water functions. Our network of sewage works is old, overloaded and often badly operated. In 1986, 22 per cent. of them poured into our rivers effluent dirtier than regulations allow. Reported river pollution incidents rose from 12,500 in 1981 to 23,253 last year. One sixth of all sewage is poured untreated into the sea and 69 per cent. of outfall pipes are at or near the low water mark.
  The Select Committee on Welsh Affairs, of which I am proud still to be Chairman, conducted an inquiry into coastal pollution. During our investigation, we saw one polluted beach after another. In the United Kingdom as a whole, only 70 per cent. of beaches meet EEC minimum pollution standards, and according to the European Environmental Bureau, only one in eight of Britain's beaches meet the EEC's full pollution standards over the complete range of 20 tests. I make the point that its definition of a beach is not that used by the Department of the Environment for many years to circumvent the EEC's bathing waters directive. According to the Department's definition, not one Welsh beach has a sufficient number of bathers using it to qualify for the tests.
  By imposing artificially low ceilings on water authorities' capital investment and borrowings, the Government have created a backlog of remedial works that will cost enormous amounts of money to clear. The Bill, financially and morally, sells off that responsibility. The Government see the spending forced on us by EEC directives—it is estimated that it will cost about £6 billion to meet EEC standards for drinking water affected, for example, by nitrates, aluminium, lead and chlorine.
  Over the past two months, Mr. Nick Carter, editor of the South Wales Evening Post, has spearheaded a battle to have Swansea bay cleaned of gross pollution so that it may again safely be used for swimming, surfing, fishing and water sports. That campaign has exposed thoroughly and in depth the cause and effect of pollution and the remedies. The campaign has the support of 36,000 residents who have signed the South Wales Evening Post petition, which is not lightly to be dismissed.

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  In response, Welsh Water points out that, for the past five years, it has spent £1 million annually on the bay, which was all it could afford while tackling higher priority pollution at locations such as Tenby and Porthcawl and improved water supplies for drought protection. The chairman says that Welsh Water has been informed that it must bring forward £28 million of planned investment to improve the bay by between one and six years, to 1995. The investment needed to clean up just that one small part of Britain's coastline is £90 million. The scale of pollution there, although totally unacceptable, is not as gross as in areas such as Askham, Cleethorpes or Blackpool.
  While the Department of the Environment has decided to spend £93,000 on much-needed research into the link between infectious diseases and the dangers of bathing in grossly polluted sea water, one is still tempted to say that the evidence is not there. The answer can always be given that no one has undertaken the necesssry research. Meanwhile, the results of a university of Sussex survey undertaken this summer offer good advice. That survey found that bathers who keep their heads above the water while swimming are far less likely to contract various diseases than those who swim with their heads below the waves. I feel sure that the Department of the Environment will confirm that that is good advice.
  Since the Government imposed external financial limits in 1981, water charges have risen from £165 million in 1981–82 to £620 million in 1987–88. Yet, with all those works in the pipeline and growing increasingly urgent, the Government claim that water charges will not increase. That must be double-speak. The Secretary of State really means that it will be water plcs which increase costs and not the Government, because the Government will have sold off their responsibility. Privatisation itself will increase charges. Accountants Arthur Collins and Company put the bill for privatisation at about £850 million per year. Water companies will need about £350 million for corporation tax, £400 million annually for shareholders, and another £100 million for higher management salaries, directors' fees, share registration, services to shareholders, and the National Rivers Authority. That will mean a 20 per cent. increase in charges just because of privatisation.
  The Water Authorities Association does not dispute that estimate. Several estimates, including those made by the chairman of the association, and of Welsh Water, conclude that water charges will increase by another 50 per cent. to meet the costs of improved water quality—and that was before the Government announced their new timetable for improvement works and £3 billion of increased debts for the water plcs to take on board.
  The Government say that they are environmentally aware and point to the National Rivers Authority as proof of a new, responsible approach to environmental issues. It is ironic that the Government can establish such a body only when someone else will pay for it. Polluters will, rightly so, pay—and the water plcs will pay the rest: directly as their share and indirectly, through corporation tax, as the Government's share. The NRA will cost the Government nothing, so their talk of concern for the environment is cheap.
  The Government's talk of being concerned about many thousands of private home owners who unwittingly
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  bought new homes having unadopted or unadoptable sewers is also cheap. The Minister of State, Welsh Office assured me that the Government were concerned that, because of the difference in standards between current building regulations and the conditions of sewers belonging to water authorities, and the inadequate powers of local authorities to insist on section 18 agreements from developers, many householders face potentially huge bills for repairing sewers that water authorities will not adopt. There are more than 2,500 such households in one local authority area in my constituency alone.
  Before privatisation, the Government have talked about introducing new measures to prevent further problems. The Bill makes no such provisions and is a missed opportunity.
  The Government will make a major error of judgment if they go ahead with the Bill, which is ridiculous, unnecessary and expensive. As they are wrapping themselves in their new green cloak, the Government should shoulder their responsibility for restoring our water industry—once the envy of the world—to its premier position as a public utility.
  7.20 pm
  Mr. Martin M. Brandon-Bravo: Of all the privatisation measures, in the public's perception water privatisation is the most difficult to understand and accept. However, its concept is just as right, and it is as much in the long-term public interest as the denationalisations that have gone before and are still to come. British Telecom, steel, gas and so on are easily perceived as commercial enterprises that can be best run and managed in the private sector with parliamentary scrutiny exercised at arm's length, just as we do with the rest of the commercial and industrial life of this country.
  There seems to be some mysticism about water. It is looked on as life itself, which makes it seem to many a sacred trust in the hands of the public sector. I cannot see it that way. Also, it cannot be said that that sacred trust —if it be that—has been so well looked after these past years that another look and approach might not better serve the public interest.
  Before the last general election, before the Secretary of State had a chance to study the feedback on consultation, we did not have a Bill remotely as good or sound as that before the House now. I welcome the fact that my right hon. Friend the Secretary of State has realised the seriousness of the concerns expressed. I fear that much of the present worry is based on hangover impressions of the supposed Bill of the previous Parliament and has not taken into account the fundamental changes that have been made in the Bill now before us.
  Rightly, in recent years, the public have not only realised the need to address green and environmental issues but, happily, have also recognised that such issues have a cost. They may not like paying, but at least the recognition is there.
  The fundamental change in this revised Bill, which answers most, if not all, of those earlier fears and concerns, is the creation of the National Rivers Authority. Those who expressed fears sought public and parliamentary control over water resources, river management, pollution, flood and sea defences, water-based recreation, amenity and conservation. The Bill achieves that aim through the National Rivers Authority. The commercial

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  and industrial aspects of the current scene—water treatment, distribution and supply, and similar functions for sewerage, with some recreation and conservation—are being put into the company framework.
  I am sure that when the public recognise that we are privatising only that which is rightly commercial, and leaving the public sector that which is rightly left there, the Bill will have at least the same measure of support as the other, more obvious privatisation measures that have come before the House.
  Even though we have made the division of function and responsibility, there still remains for me the worry over what landholdings will transfer to the water plcs and what longer-term protection will be in place to ensure that there are no large-scale financial windfalls for the new companies that belong rightly to the public. The new companies will be valued as going commercial concerns with calculations based on return on capital with values for landand buildings at current user values.
  If a company finds that it has a few bits of land or a few buildings that it does not want and makes a few bob by selling them off, I have no objection. However, if those holdings are large, were previously in public ownership and were sold at current user value, there is real public concern about the preservation of the land for its original purpose. 1 would not want to leave it to the whim of a future planning application to protect those landholdings and, in so doing, give the new plcs a reserve pot of gold on which to draw. Surely that is not our purpose and I hope that my hon. Friend the Minister will be able to give a clear steer on that aspect of genuine disquiet.
  There are other points of public concern that we should address. However, I should like to draw the House's attention to some of the more outrageous criticisms in a recent television programme called "Open Space". It might have been fairer had the programme indicated fully that it had been produced by the anti-privatisation lobby. We would then have had the right to claim equal time on which to show the other side of the coin.
  We were treated to graphic examples of what was wrong with the current water authorities. We were told how financial starvation by successive Governments—none worse than the Labour Administration—caused collapsing mains and sewers. We were told that local authorities were allowing dreadful abuses of discharge licences without prosecuting, as they are entitled to do under the present law. We were told about unclean beaches and of rivers being downgraded from category 1 to category 4. The programme was supposed to be a justification for leaving the water industry in the public sector. If that is what happens when it is left to the whim of Government or a particular Chancellor, what is the objection to letting private capital have a go?
  An ex-senior executive of one of the water authorities complained that there would have to be a massive input of investment if we were to meet the aspirations of the public and EC directives. He said that, as a consequence of privatisation,
  "the wretched consumer will have to pay".
  I have to ask: who else? It is dishonest to argue for better standards and the enforcement of those standards and then expect the cost to be borne by others. What we consume, we must pay for and the improvements that we as parliamentarians call for in legislation must also be paid for.
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  The companies meeting the new criteria must have the right to include the cost of those imposed improvements in their charges. It follows that the new companies must have the ability under proper and tight watchdog control imposed by the Bill, to finance the measures to put right what is clearly wrong now and to charge for what we decide the public want in the way of improvements in the future. That cannot be done without a commercial margin of profit. The arguments against profit simply ignore the realities. That is what Greenpeace sought to do in that television programme. Greenpeace has a good case on the quality of life and it should not undermine it with such nonsense as sneering at profit as if it is a great evil.
  Also, it is no good for Labour Members to claim that the costs should be borne through taxation. When taxation was at an all-time high with the standard rate of income tax at 37p in the pound, investment in the water industry was being cut and cut.
  In his opening remarks my right hon. Friend the Secretary of State gave four reasons for privatisation. He spoke about the 25 per cent. of our water that already comes from private sector statutory undertakings. He spoke of less centralisation and the independence of the new bodies. He spoke also about innovation, efficiency and access to capital.
  I shall add a fifth point. In recent years, we have recognised that our state pension has no investment base. An additional or second pension must have a sound raft of gilt-edged or semi gilt-edged stock in its portfolio. My hon. Friend the Member for Cambridgeshire, South-West (Sir A. Grant) spoke of wider share ownership. I entirely support his remarks. But our major privatisations, particularly this one, will provide the blue chip investment base that should be and most certainly will be in all pension fund portfolios, giving future generations confidence in those pensions as the percentage of population of pensionable age increases over the coming years. For those reasons, it is a proper and right decision. Happily, I believe that the Government have got their priorities right.
  7.30 pm
  Mr. Nigel Spearing: For several reasons, I am pleased to follow the hon. Member for Nottingham, South (Mr. Brandon-Bravo). I agree with half of what he said and fundamentally disagree with the other half. I hope that that remark provides the basis for a good debate. The hon. Gentleman was right to be worried about the disposal of land. In London, near the Thames and on the River Lea, large areas of land are owned by the Metropolitan water board, and the Thames water authority or Thames plc might sell that land. That action must be resisted.
  The hon. Gentleman was right, too, about the National Rivers Authority. We needed it for some time. The Secretary of State's argument that it justifies the Bill is nonsense. We should have it, and we should have had it even with the present structure. There is no reason why the proposed national regulatory authority, which we should have had under a central water council or authority, should not regulate existing regional authorities. If it were to do so, many of the Secretary of State's green objectives would be secured without privatisation.
  We are discussing the privatisation of only part of what was public. As the hon. Member for Cambridgeshire,

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  South-West (Sir A. Grant) pointed out, the supply side has partly been in the private sector for some time, and it has been considerably constrained. But the disposal side has never been in the private sector. The worthy Victorians who built the system in London would not have dreamt that it ever should be. Victorian virtues said, "No public ownership of water disposal and purification." That has been the case right from the beginning. The service has been municipally owned—publicly owned—as it should be. Water disposal services and, in some respects, sewerage services are absolutely fundamental for public health, and they determine the purity of our rivers and coasts, or their non-purity as the case may be.
  Conservative Members have not understood what the privatisation of sewerage means. There are drains and sewers under every road in their constituencies. If they, including the hon. Member for Nottingham, South, vote for the Bill, they will put into potential private ownership every sewer and drain in their constituencies. I do not know whether they have thought of that. I have not seen it reported in the papers, and it has not been mentioned by Conservative Members, but that is what the Bill will permit.
  Mr. Leigh: So what?
  Mr. Spearing: "So what?" the hon. Gentleman asks. I shall explain.
  Until 1974, every drain and sewer in the land was managed by local councils and they were integrated with the management of highways and public health. Public health and sewerage go hand in hand. At the moment, many sewers are still run by elected local bodies, to which ratepayers and electors turn, but on agency terms from regional water authorities. They are owned by RWAs, but they are run under contract by district councils. Will that be the case in future?
  I asked the Secretary of State a question earlier today, and he said that he would answer the question shortly. He should do so tonight. Unless there are exclusive powers of contract, the responsibility of running sewers under our towns, cities and villages will be dispersed to private ownership. Conservative Members ask, "So what?" Sewerage is intimately concerned with public health. There might be 3,000 sewerage blockages a year in an outer London borough. Some sewerage system maps are complex and difficult. We must always bear those points in mind when considering disposal.
  I now refer to the structure that we shall have if the Bill is passed without singular amendment. I am glad that the Secretary of State is present, as I shall give way if he wishes to correct anything that I get wrong. We are to have a three-decker structure. The supply side will be partly the responsibility of statutory water companies and partly that of other water enterprises, broken up or wholly run by what was the RWA. If a body wishes, disposal contracts can be split. It is up to RWA plcs, which will initially be Crown-owned, to dispose of them as they so wish, and if they can.
  Above all—Mr. Roy Watts of Thames Water has been clear about this—there will be a regional water authority holding company, which will be the holding company for various subsidiary enterprises. Holding companies—the Secretary of State hinted at this in his opening speech—
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  will not be confined to water services. They can go abroad and they can float all sorts of enterprises because they will have the capital to do so. If there is any restriction on that, I invite the Minister, even within my 10 minutes, to tell me that I am wrong.
  If I am right RWA holding companies will become part of the national and international machine of the movement of capital moneys. They will be quoted on Tokyo, Frankfurt and New York stock exchanges. Their shares will be traded—[Interruption.] So the sewers in every Conservative Member's constituency can be owned by gentlemen in Chicago, Tokyo, or anywhere else in the world. Is that what Conservative Members are saying? The Secretary of State may be quite content for the sewerage structure of Cirencester, Tewkesbury or Lewisham to be traded on international stock exchanges and to be subject to takeover bids. He may be content to have dawn raids, for management to be booted out by some takeover body which sits, perhaps, in a South American capital city. Is that what Conservative Members are saying? Apparently, they are saying that. If that is what they are saying, the British public will not put up with it.
  I doubt whether, at the moment, the British public understand what Conservative Members are about. If they wish to intervene, I shall give way. They do not understand that that is what the Bill means, or could mean. Although bodies such as Thames Water in the south-east might be sold off to people abroad, bodies in the north-west, where things are different, might not be. That is a possibility, but it is in the hands of the Secretary of State and the chairman of RWA plcs to sell off bit by bit.
  How can profits be made? They can be made only by charges. Charges for sewerage, as distinct from water supply, will be linked to meters. It is possible that our water disposal services will be run by a patchwork of private companies whose control can be changed overnight and whose shares are quoted in Tokyo, Berlin, or Moscow. If Conservative Members will permit a flight of fancy, why not Kremlin Overseas Investments plc? That may not be too far away.
  Mr. Leigh: It is a good idea.
  Mr. Spearing: The hon. Gentleman says that it is a good idea. At least the possibility exists. The potential for damage to public health services—that is what our sewerage system is—is enormous, and beyond what the British public have understood so far.
  This Bill is not about providing fresh, pure water. It is about providing worldwide capitalist interests with yet another card that they can play on the international Monopoly board. They will be playing not only for waterworks, but for our sewers and drains which were built by our Victorian forefathers as Victorian virtues. Even they believed in public ownership, and so should we.
  7.39 pm
  Mr. Alastair Goodlad: I welcome the Bill as one of the most important advances in environmental legislation that has yet happened. The framework for quality standards and the provisions for reforming the industry will enable those who work in it to make enormous advances in building on what has been achieved hitherto. It can only be in the interests of consumers to end the present need for water authorities to compete with other public services for limited resources and to finance

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  the enormous investment needed with uninhibited access to capital markets backed by improved private sector efficiency.
  The statutory water companies supply about a quarter of consumers and I should like to deal with the effects of the Bill on those consumers, the people who work in the industry and the shareholders. By and large, these provisions should be beneficial to the companies. They will be subjected to the same forms of regulation as the privatised authorities. Their financial restrictions are to be removed in so far as that is necessary to give shareholders the same protection as they have in a Companies Act company, and they are to be given the opportunity to convert to a public limited companies. These changes are of fundamental importance to the statutory water companies. Because of their system of regulation the interested shareholders hitherto have been limited and the companies have always thought of themselves as being customer-oriented. With the removal of dividend limitation there will be a considerable culture change. The customer will remain all important, but the shareholder will become of increasing significance.
  I am most concerned that in making these historic changes the existing and future employees, shareholders, and consumers have their interests protected by the creation of a regime which allows competition with the authorities on fair and level terms. We are legislating for a unique industry in which a monopoly exists with 25 per cent. of that industry already in private hands. It would be most unfortunate if we were to disadvantage those already in the private sector by our proposals to bring the authorities into the private sector too. We must ensure that in creating the new structure and framework we do not create a situation where the authorities compete unfairly with the companies. We should do so during the passage of the legislation as there is to be no right of appeal against the licences.
  With regard to existing debts, the Bill contains a provision which would enable the Secretary of State to write off or restructure authority debt so as to enable authorities to be floated on the market. Statutory companies, on the other hand, will have to continue to bear their current debt and its consequences. I hope that my right hon. Friend will bear in mind the importance of balancing the interests of the companies with those of the authorities.
  It is likely that if large amounts of authority debt were written off the companies would be placed in a much less favourable position for capital raising than the authorities. It is all very well to argue that on conversion to plc status the authorities will have their capital structures and debt equity ratios in their own hands. There will be a period before which they will have convetred to plc status and there may be great difficulties in achieving that status.
  I hope that my right hon. Friend will be careful to ensure that there is a level playing field at all times. The same argument applies to the terms of flotation of the authorities. It is in the Government's interests that the terms on which the shares are offered fully reflect the prospects of the undertakings, but in setting the flotation terms I hope that my right hon. Friend will ensure that the authorities are not in any way disadvantaged as against the companies.
  That brings me to the question of protection from takeover bids following the flotation. In some privatisations, there have been protections from takeovers. It is
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  undesirable that the authorities should be given protection from takeovers. What is certainly true is that it is not possible to give statutory water companies protection from takeover and that to give it to the authorities would obviously put the statutory water companies at a disadvantage in seeking to defend themselves against acquisition by water authorities. If my right hon. Friend seeks to give authorities some protection against takeover, a restriction should be placed on the ability of the water authorities to acquire statutory water companies. It is inherently undesirable to fetter the market, and I should prefer to see no restrictions whatever.
  Hitherto, the authorities and companies have operated under different financial regimes, both agreed by Parliament. That has led to the authorities having high levels of self-financing and high charges while the companies have had low levels of self-financing and low charges. The system of price increase control proposed in the Bill means that unless some way can be found of enabling the companies to increase their prices to a base comparable with that of the water authorities, they will be in a much worse position to earn a return on their assets in the new environment. That would be most unfair.
  To increase prices for the purpose of achieving comparability with the authorities would be contrary to the law under which statutory water companies operate at present. It follows that a mechanism must be found through the proposed price increase formula which is currently being negotiated. There will have to be a substantial increase in the level of charges levied by the companies which is attributable to the change in form of the regulation and profit control currently operative to the price control envisaged in the Bill for the new plc environment.
  With regard to the timing of the flotation of the authorities and the possible conversion of the companies to plc status, it would be wholly unacceptable if, for whatever reason, there was a period after the authorities were floated but before the statutory water companies were brought into full regulation and could achieve plc status. An even playing field in capital raising could not exist in such circumstances. There would also be serious implications for takeover activity in such a period. Yet under the Bill a small minority of a class of stock in a statutory company could hold up the conversion to plc status for a significant period, if not frustrate it altogether.
  It is likely that the time between Royal Assent to the Bill and the flotation of the authorities will be short. There could be serious consequences if the procedures for converting the statutory companies to plc status took longer. We must consider carefully whether small minorities of classes of stockholders in statutory companies should be able to frustrate the intentions of the legislation and deny the vast majority of stockholders their rights. We should examine whether the Bill can be improved so that such stockholders are entitled to receive financial compensation only if they can be shown in some way to have been unfairly treated.
  At present, water company employees enjoy a pension scheme which was set up under the provisions of the Water Act 1973. It is proposed that, as a consequence of privatisation, that statutory basis should be removed. It seems strange that current statutory water company employees should have their pension rights so fundamentally affected by a measure which is essentially intended to bring the authorities into the private sector. If employees

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  of the electricity supply industry are to continue to have a statute-based pension scheme, it is strange that there should be a difference between the treatment of employees in the two industries. I hope that my right hon. Friend will reconsider that.
  Many of these matters can be addressed in Committee, but the House should bear them in mind, particularly as the licences will not be subject to appeal. The new plc regime will enable the industry to broaden its activities.
  Finally, I should like to mention two ancillary aspects. The first, which is of great interest to many in the industry, is Water Aid. Water Aid began in 1981 as a response to the current Water Decade but intends to carry on after the decade. Currently a million people throughout the world are getting improved water and sanitation from projects supported by Water Aid, some complete and some still under way.
  The necessity of massively improving the availability of clean water needs no repetition. Suffice it to remind the House that whereas in this country 1·2 per cent. of children die before the age of five, the figures in other countries are horrifying. In Sierra Leone, the figure is 30 per cent., in Gambia 29 per cent., in Ethiopia 25 per cent. and in India 15 per cent. The contribution of Water Aid in applying the funds raised from appeals to consumers, community groups and lotteries among water industry staff, together with overseas development agency and European funds, has been significant and something in which the industry can take pride.
  The contribution is being made in rainwater harvesting, tube wells, bore-hole pump refurbishing, sewerage systems and the like, and it means the difference between life and death for many people. Many of the organisations which have created Water Aid, whose income now approaches £2 million a year, will disappear with this legislation. Hitherto, water authorities have been unable to support water aid through their funds. Under these privatisation proposals there will be enhanced opportunities for the work of Water Aid to expand. It is a cause which means a great deal to many who work in the industry.
  Secondly, and finally, it would be open to the industry to set up a jointly owned consultancy organisation, perhaps on the lines of British Electricity International —an enormous commercial and technical success—to bring British expertise in water and sewerage management to a wider and needier world. That could be achieved on an entirely commercial basis with the assistance, where necessary, of the World bank, and European and ODA development funds. I hope that the industry will give this suggestion some consideration.
  I wish the Bill every success.
  7.49 pm
  Mr. David Hinchliffe: The Bill is the most evil measure so far brought before the House by this profoundly evil Government. It strikes at the most basic and crucial of human needs—the need for water. We have been on this slippery slope for a number of years. The passing of the Water Act 1983 was significant in removing democratic involvement in local water provision and, instead, stuffing the water authorities full of Government stooges and enabling them to meet, as they do now, in
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  secret, without the press being present. That is all part and parcel of the problems that have built up in the provision of water and the effects on our environment.
  We have seen, too, the subsequent Government directives to water authorities, such as those lowering the levels of capital spending and borrowing for investment, which has major implications for the environment and pollution. The Government set artificially high profit targets in order to ripen the industry for privatisation and the way in which financial targets, but not targets for services and standards, have been imposed on water authorities certainly worries my constituents.
  The results of those Government policies can clearly be seen. An example is the Yorkshire water authority, which I mentioned in a debate on river pollution about three weeks ago. Yorkshire Water is considered to be one of the most attractive investments for the individual entering into private ownership of water. In the past year, more than three quarters of Yorkshire Water's treatment works failed to meet EC standards, its sewerage works broke pollution inspectorate consents no fewer than 83 times, and it had 811 known breaches of consent. Alongside that must be put the fact that there has been a 40 per cent. increase in its profits, to £81·5 million. That is the contrast between what the Government are aiming for and what is really happening at local level, with the consequential effects on our environment.
  Yorkshire Water's record clearly evidences what the Bill is all about. The Secretary of State's attempt to wrap up the Bill in environmental packaging is like the emperor's new clothes. We can see straight through them and we do not like what we see.
  The idea of the National Rivers Authority was an afterthought, as the Government must concede. It was forced upon them because, with the 1986 White Paper, they were bringing in self-regulation. What absolute nonsense. It was forced on them by the EC, because it was frightened of what the extremists in the Government were proposing.
  For the Government, the Bill is all about one thing, the big "P"—profit. I shall refer to one area that has scarcely been touched on so far, the small "p"—proverty, which does not feature on the Government's agenda.
  I believe that the Bill is probably the most serious attack on the poor by the Government. Conservative Members are laughing, but the implications for low-income families are frightening. In Yorkshire, within the past three years, there has been a twentyfold increase in disconnections. Last year, 560 families had their water cut off. If Conservative Members find that amusing I feel very sad, because the families concerned did not.
  That has not happened only in the north of England. For example, in Bath, in the area of Wessex Water, 35 families were cut off in one day in September including a family with five children—one of them an eight-week-old baby—and a pensioner with a 17-year medical history of depression. That is the reality of what is happening in the water industry, and the situation will clearly worsen under the ownership of private companies.
  Gordon Jones, the chairman of the Yorkshire water authority, who also chairs the national body of water authorities, said:
  "Water bills to double to an average of £200 per annum by 1993."

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  That is under private ownership. The fact is that the 7,000 cut-offs last year will be nothing compared to the number that will be cut off under private ownership, which worries me.
  What will happen to the huge numbers of people on low incomes, who need more water than most, when we have metering, which we surely will shortly after the Bill is passed? What will happen to low-paid industrial workers who, as my father did, come home in their muck and need to use a lot of water at home after carrying out a dirty job? What about those who before April would have had an automatic benefit increase when water rates were increased? What about the 50,000 sick and disabled who receive extra money for laundry and bath costs because of their individual problems? What about the 73,000 one-parent families who previously received assistance? What about the 139,000 pensioners, and the others of the 400,000 people, who received help before it was stopped by the Government?
  As I know from being involved in social services work for many years, it is bad enough to be without heating and lighting, as many families sadly are—living with calor gas and candles is no fun and to see children living in that environment is deeply worrying—but how will those people manage when they do not have water?
  I am sorry that the Secretary of State and the Minister have left. I wonder whether the Secretary of State or the Minister have had young children or have cared for them. Are they aware that babies and young children occasionally soil themselves and need regular baths? Have they ever been concerned with looking after an incontinent disabled or elderly relative, who has needed regular bathing and whose clothes and bedding needed to be put in a washer several times a day? All those examples involve a large consumption of water. If Ministers had that experience they would not be proposing this legislation.
  The Bill is the ultimate in Tory complacency and callousness. It is about people washing less often, cleaning themselves less often and flushing their toilets less often. [Interruption.] That is what metering will mean. Conservative Members laugh because they do not know the realities for many people. It is about people being deprived of their right to the most basic amenity—water. It is about profit and about pollution. It is about dirt, disease and above all, about Tory dogma—free market dogma—which was dead and buried a century ago.
  7.58 pm
  Mr. Roger Knapman: The Opposition Front Bench spokesman, the hon. Member for Copeland (Dr. Cunningham) and the hon. Member for Wakefield (Mr. Hinchliffe) have both said that the Bill is about Tory dogma. Fortunately we have also heard something about Labour dogma. Public control might have something to do with it, but we are not too sure any more about public ownership.
  We have learned enough about Labour dogma, however, to know that the Labour party will be occupying the Opposition Benches for many years to come, especially since the hon. Member for Copeland has suggested that the statutory water companies are not in the private sector. That came as something of a surprise to the Minister and myself, but it will be even more of a surprise to the French water companies which have already invested several millions of pounds in those particular companies. The
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  French are now unique, because they are the first people to want, voluntarily, to invest in a British public sector concern. I believe that Opposition Members are now pro-European Socialists. Therefore, I cannot understand why it is all right in France to have private water companies, but that our services must be administered by a nanny state.
  As has been said, about 25 per cent. of the water industry is in private ownership. In my constituency, the water in one part is controlled by a water authority and in another by a water company. Housewives in Stroud high street may congregate and say, "Gosh, you are lucky, you get your water from the water authority, but I am obliged to have mine from the water company." I do not believe, however, that that is the case.
  I congratulate my right hon. Friend on substantially adopting the 1973 structure of integrated river basis management. That was a great step forward compared with the hundreds of companies that then made up the water boards. I applaud the decision to carry out the privatisation of water on substantially the same geographical basis.
  I have no objection to privatisation—I do not believe that we have enough of it.
  Mr. Allan Roberts rose—
  Mr. Knapman: No. I shall not give way, because we are restricted to 10 minutes.
  I do not believe that we have enough privatisation. We have had a long string of successful privatisation issues, including, of course, the much-quoted Jaguar. If more privatisation had taken place earlier we would not just be talking about Jaguar Cars plc, but MG Cars plc also.
  The objections to the Bill might be summarised by a reference to the briefing from the Council for the Protection of Rural England. That organisation is not run by a bashful crowd, because it says that it forced the Secretary of State to create the National Rivers Authority. I suspect that it was pushing at an already open door. Nevertheless, if the council wishes to put it like that, so be it; at least it says in its briefing:
  "The creation of the National Rivers Authority is an important and greatly desired reform. The CPRE's long-held view is that the water authorities frequently fail to reconcile their role as water and sewerage undertaker with that of water regulator".
  Quite so.
  The first concern mentioned by the CPRE relates to the viability of local authority land assets:
  "very substantial areas of unspoilt land in the countryside and towns are potentially vulnerable to new pressures".
  It does not seem to recognise the Government's record of doubling the size of the green belt in the past few years. It also seems to be unaware that, in due course, a statutory code of practice will be introduced. The water authorities are already subject to the usual planning procedures and their operations in national parks are subject to the scrutiny of the national park committee. I believe that the CPRE's fears are unfounded. If we are not careful it will soon be believed that land must be publicly owned to ensure that it is "safe". That impression is already held by a few, but I do not accept it.
  The CPRE's second concern relates to infrastructure provision and back-door development:
  "Water PLCs may use their control of water and sewerage infrastructure to influence the location and pace of new development".

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  The council must have a low opinion of local councils and councillors, who would resent any such interference. Water authorities can only advise the local authorities where the water and sewerage capacity already exists. That is the present system and it will be the system in the future.
  The third concern of the CPRE is
  "under-investment in sewerage facilities and pollution control."
  Pollution, of course, is the responsibility of the National Rivers Authority. With regard to sewerage there is, at present, more than £5 billion of collective debt. There is a massive debt and no equity. It is hardly surprising that Opposition Members approve of that because that is what they specialise in. I have a letter from the chairman of Severn-Trent Water who points out:
  "debt conversion is bound to be a significant factor … our capital structure, which at present is entirely composed of debt and no equity, already requires the payment of some £90 million per annum in interest".
  The fourth concern of the CPRE is the lack of commitment and control of agricultural pollution. Unfortunately for the council, that fear was put in print just before the announcement from my right hon. Friend the Minister of Agriculture, Fisheries and Food that he would remedy the situation and change the system of grant.
  Over-abstraction of water is another CPRE concern. We are having metering tests in certain areas and no doubt that will be the subject of a contentious debate in due course. It is precisely the investment from private sources that will help to replace pipes in some areas where substantial leaks already occur. That is the best solution to the problem of the over-abstraction of water.
  The most substantial benefit for the industry must be the creation of strong regional companies with a strong regional identity. There is a common thread between the privatisation of the water supply industry, the electricity supply industry and, in due course, the privatisation of, I hope, British Rail, on a regional basis. As a result of the water privatisation, we shall have 10 companies spread around the country and the privatisation of electricity will create 12 new companies. I hope that when British Rail is privatised, four or five more companies are created. All those companies will help to cure one problem about which I constantly hear in my constituency—the feeling that too much wealth and too much influence has gone to the south-east and especially to London.
  I believe that strong regional companies will help to redress that balance. I support the Bill and congratulate my right hon. Friend on the way in which he has put it across.
  8.6 pm
  Mr. Jimmy Wray: Nobody is fooled by the Bill, which is a national disgrace. The robbers of our national resources are sitting on the Conservative Benches. I would not like to be left in the desert with a pail of water and the Conservatives. We know exactly what would happen.
  It is clear to me that no Government would sell for nothing a resource with assets worth £27 billion, 435,000 acres of prime land and an income in 1987–88 of £3 billion
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  gross with a profit of £740 million. Those assets and income are the reason why the Government want to privatise the industry.
  Who are the big buyers? The hon. Member for Stroud (Mr. Knapman) has already said that the French are investing, but what are they investing? Three French companies have already started to invest before the Bill becomes an Act. Générale has already bid £57 million for two of the regional water authorities. Of the 29 private companies in the statutory sector, it has invested in 10.
  Lyonnaise has made a £67 million bid for Essex and East Anglian water companies plus £60 million for the Newcastle and Gateshead and Sunderland and South Shields water companies. SAUR has invested in a joint venture with Trafalgar House. That investment tells a story. If those companies were really interested on British consumers, why have they sold two of the four London companies that they bought not long ago to Générale at a handsome profit? They have agreed to offer another bid of £68 million for three more water companies.
  The hon. Member for Cambridgeshire, South-West (Sir A. Grant) asked what a Labour Government would do. We shall nationalise the water industry and the gas industry. Anything that has been privatised by the Government will be returned to those to whom it belongs.
  The Council for the Preservation of Rural England represents those people with the most experience of the land and it is worried about the Bill. It knows that the private developer will rape the unspoiled landscape of the Welsh valleys and sell out for profit. The National Rivers Authority will have less power than the IRA by the time the private companies have finished with it. They will use the back door methods and the way in which they will do that can be seen when one looks closely at the Bill. They will set up subsidiary companies to which to transfer the land and then sell them off.
  The Central Council of Physical Recreation is also worried about the Bill. Clause 7 says that the Water Bill places a duty on every relevant body. Clause 7(6) defines "relevant body" as the National Rivers Authority, a water undertaker, a sewerage undertaker or an internal drainage board. It says nothing about subsidiary bodies. That is the loophole that the private companies will use.
  The protection of public rights of access is further eroded in clause 7(5), which gives the National Rivers Authority and private water companies an overriding power to charge. That is what this is all about. People will have to pay to go to every park and golf course. All the luxuries of the beautiful rivers and parks will be for the rich—for those who can afford them for themselves and their children.
  I hope that the Central Council of Physical Recreation will be consulted on the environmental and recreational code of practice. It is worried about the lack of consultation so far and it wants to discuss clause 9.
  Another organisation. and one dear to my heart is the National Anti-fluoridation Campaign, which is worried about the standard of drinking water and who will be responsible for it. We now realise why the Government had a large majority when it decided to fluoridate the public water supply. It knew that in two or three years' time a few bucks would be made and that Fisons would be breathing down the necks of the private companies to pollute the water with fluoride. What answers can we give that society about fluorocylisic acid and its dangers and diseases such as skeletal fluorosis, dental fluorosis and

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  chronic fluorine poisoning? Who will be the underwriter? Who will indemnify the consumer? The Bill says nothing about that.
  We recently read in the newspapers of the danger of cancer from London's drinking water and from polycylic aromatic hydrocarbon. Cleaning up would cost £1 billion and who will pay for that—the taxpayer? Nobody wants to privatise the non-profit-making side of water, so we shall end up with the bill.
  The Consumers Association is worried that the Director General of Water Services has insufficient power. The association is worried about the consumer. The Government have proposed a staff of 80, which also includes the support staff for the customer service commmittee. That is not sufficient to enable the director general to investigate consumers' complaints.
  We are worried about the monitoring of pollution in public water supplies. The director general will give that work to private enterprise and we do not trust private enterprise to do the job properly.
  The Bill should end where is belongs—in the dustbin. It is a thieves' charter. It allows the nation's resources to be stolen.
  8.16 pm
  Mr. Keith Raffan: It would not be surprising if, after the over-the-top speech to which we have just been treated by the hon. Member for Glasgow, Provan (Mr. Wray), Glasgow, Provan goes down the drain and joins Glasgow, Govan at the next general election.
  Water, as one may have gathered from the debate, is a highly political and contentious issue in Wales. I am glad to see that colleagues from the Principality are present. In the Principality we sometimes describe it as a "burning" issue.
  The work of the Select Committee on Welsh Affairs in the 1979–83 Parliament was dominated by a two-and-a-half-year inquiry into water in Wales. Water also played a significant part in the Committee's work during the last Parliament when we undertook an inquiry into coastal sewage pollution in Wales.
  During that inquiry in December 1984, following a discussion on the Welsh water authority's capital programme, I asked the chairman:
  "Perhaps you would rather be in the position of a private company so that you would then be able to borrow according to your needs?"
  Mr. John Elfed Jones, the chairman of the Welsh water authority, replied:
  "The proposition has immediate appeal."
  The water industry has for far too long been prevented from raising capital to meet heavy capital expenditure programmes to improve the quality of water and sewage treatment. Privatisation will free the water authorities from the constraint of the Government's external financing limit, enabling them to borrow more money as required, so that they will be able to accelerate their capital programmes.
  That is particularly important for the Welsh water authority. It has the longest coastline of any water authority in the country—1,300 km. It has 130 sea outfalls discharging into coastal waters—over 25 per cent. of the total in England and Wales. Of those 130, only 42 are deemed satisfactory. Only 6 per cent. of them are under 10
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  years old—these figures are well known to hon. Members from Wales—75 per cent. are over 20 years old and 40 per cent. are over 40 years old.
  The virtue of the infrastructure that the water authorities are now providing is its longevity. There is an ongoing benefit of 50 to 100 years from the capital expenditure undertaken. Therefore, there is a strong argument that they should be able to borrow more. Privatisation will allow them to do so.
  Government interference and constraints are not limited to finance. The water authorities are not allowed to engage in profitable business activity unless it is incidental to their main statutory responsibilities. As my right hon. Friend said when opening the debate—other hon. Friends have also mentioned it since—the French water companies have diversified and developed new lines of profit. They have diversified into communications, construction, waste disposal, supplying water internationally, industrial heating, leisure, health services and even funeral services. They have developed worldwide interests in North America, Africa and the far east.
  Privatisation will give the water authorities commercial freedom and allow them to exploit commercially their skills, expertise and experience. In that regard, the Welsh water authority has nothing to fear. It is the only authority with a tidal waters unit, and one of only two with a virological laboratory. It has also developed several computer software packages.
  Privatisation will lead to a new approach based on an imaginative enterprise culture, rather than a stagnant, stale public sector culture such as the present one. There is tremendous scope for international consultancy, especially in the United States, where the water industry is so fragmented. There is scope for international water contracts, and for more local services, particularly in leisure.
  Water authorities must think more commercially about property and about freeing surplus assets. What is so wrong about that? Assets such as old sewage works on the edges of towns may allow houses to be built which might otherwise have to go up in greenbelt areas. Water authorities should also make their remaining assets work harder. Before 1974 the water authorities were responsible for monitoring pollution and the district councils' predecessors were largely responsible for sewage discharges. After reorganisation, the water authorities became responsible for both roles. That prompted the 10th report of the Royal Commission on environmental pollution, which was recently echoed by the Environment Select Committee, to say that water authorities were becoming poachers as well as gamekeepers.
  When the committee of Welsh district councils gave evidence to the Select Committee on Welsh Affairs during the coastal sewage pollution inquiry, it called for an independent authority to assess the discharges that were taking place. That is precisely what the Government are providing by setting up the NRA to take over water authorities' regulatory functions.
  One of the great fallacies of public ownership is the assumption that because an industry is nationalised it will automatically look after the public interest. Labour cuts in the middle of the last decade gave the lie to that. Capital spending in Wales in 1976–77 by the Welsh water authority was £32·9 million. The then Labour Government had to crawl, humiliated, to the IMF, and the hon. Member for Alyn and Deeside (Mr. Jones), who was a member of that

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  Government, tried pathetically to apologise for their bankruptcy in the Welsh Grand Committee and the House.
  By 1987–88, the water authorities' spending had risen to £67·8 million. That is the difference between Labour "caring" and our action, which is action for the people to ensure that they have a clean water supply and that sewage is treated properly. As my right hon. Friend the Secretary of State said, we are making up for the neglect of the last Labour Government—
  Mr. Elliot Morley: Will the hon. Gentleman give way?
  Mr. Raffan: I have no time.
  There will be competition under privatisation—competition for investment funds and competition between water companies to prove which is best. Whatever it may be called—competition by comparison or yardstick competition—it is still competition. Privatisation will achieve an efficient balance between controls and incentives. All the Opposition scares are given the lie by the 29 privately owned statutory water companies, which are both efficient and safe.
  The Opposition have indulged in scaremongering. Yet I was intrigued to read in the newsletter put out by Wrexham Water, one of the 29 companies, the following item:
  "Praise from MPs … Three Clwyd MPs"—
  all of them Labour and one of them a Front-Bench spokesman—
  "praised Wrexham Water Company for the work it does in maintaining the quality and safety of its water supplies to customers."
  If privately owned statutory water companies can be efficient and safe, why cannot the new plcs? If Labour Members are satisfied with the present private water companies, why can they not be satisfied by the highly regulated new water plcs?
  Accelerated capital programmes, greater environmental protection under the NRA, and more commercially minded entrepreneurial water authorities are all sufficient reasons for Conservative—indeed, all sensible—Members strongly to support water privatisation. Nationalisation never served the consumer well, especially under the Labour party, which slashed expenditure on capital programmes for water infrastructure when in power. Privatisation will serve the customers of Britain and of Wales much better.
  8.26 pm
  Mr. Andrew F. Bennett: I was interested to note that the hon. Member for Delyn (Mr. Raffan) did not answer the question of how far the Bill would help to allay the continuing resentment in parts of north Wales about the way in which certain communities were destroyed by drowning their valleys to provide water for the big English cities. The Bill will increase the resentment of many of those communities. Now their homelands will be used not only to provide water but to provide profits. I should have liked to hear how the hon. Member for Delyn would avoid fuelling that resentment.
  I am a little disappointed, Madam Deputy Speaker, to see you in the Chair; I had hoped to see the Chairman of Ways and Means because I wanted to remind him that as
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  a youngster he larked about around the Audenshaw reservoirs in my constituency. The reservoirs there were a monument to the municipal enterprise of Manchester, which developed them and went on to create reservoirs in Longendale at the turn of the century and, just before the second world war, the reservoirs in the Lake district. The other cities and towns around Manchester also developed a series of municipal water undertakings, all of them a monument to the public-spirited investment of local authorities of that time. They provided high quality pure water for the cities and towns.
  Interestingly, those water supplies have lasted well as good investments, but they would not have offered the short-term return that private companies want. Their returns have come in over a long time. In most of those cities, the pure water supply is far better than the sewerage systems, many of which were provided by the local builders who put up the houses. They went for the cheapest systems that they could find and the systems are now in a sorry state because the builders did not share the enthusiasm for long-term investment as opposed to short-term profit.
  I also note that the water undertakings in those big cities protected large parts of the Pennines and Lake district from being built over, and from factories and pollution. It is regrettable that the water authorities did not open up the land sooner to public access for recreation and enjoyment. I understand the problems: at one stage the water was collected and had to be kept as pure as possible because there were no treatment works. Now, in the north-west particularly, and in other parts of the country, the water undertakings protect large tracts of land. About 150,000 acres in the north-west are held by the North West water authority; half of those acres are in areas of outstanding natural beauty or national parks. A considerable number of recreational amenities in the north-west are provided by the water authority. There are many permissive footpaths, picnic areas, viewing points, and so on.
  In the Peak district, about 15 per cent. of the national park is held by the water authority. Around Thirlmere about 10,000 acres of land are held by it and the same pattern applies in Wales around the reservoirs of Brenig, Elan valley and Lake Vyrnwy. The Countryside Commission—I remind the Minister that it is a Government body—is concerned, as are a large number of voluntary bodies, that areas which have been protected by water undertakings will no longer be protected.
  Some hon. Members have spoken about whether we will suffer through intensive agricultural use of the land. I am not sure how much will be intensively cultivated, but I am sure that there will be increasing pressure to afforest much of the land and that much effort will be devoted to getting the trees to grow as quickly as possible. We have seen the indiscriminate use of fertiliser from the air in many afforested areas. If the profit motive enters into the management of the land, it may be spoiled for public enjoyment.
  There will also be pressure to create money-making recreational areas. It is difficult in such areas to separate the recreational demands, but it is likely that the profit-making activities will be high on the list. There will also be pressures to reduce conservation and access. I am worried about clause 7 and I would like the Minister to give a clear undertaking that the Government do not

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  intend to reduce access to areas now owned by water authorities. Perhaps he will explain the meaning of the following words in clause 7(2)(a):
  "to have regard to the desirability".
  We should insist on something much stronger to preserve public rights of way and guarantee access to woodlands, mountains, moor, heath, down, cliff and foreshore. The Bill should not use the wavy word "desirability".
  The Bill puts charges in the negative and says that there will be no requirement to provide items free of charge. When I intervened on the Minister he said that there was no intention to impose charges. He should put on the face of the Bill that there will be no charge for the things that are presently provided. As soon as the profit motive is introduced, there will be a temptation for companies to charge for all sorts of things, and without payment, access to the countryside may be reduced. If the fears expressed by ramblers and members of other organisations are totally unfounded, it would be simple for the Minister to say that an amendment will be made at the earliest possible moment to make it clear that there will be no charges and no restrictions on access. From the way that the Bill is worded, I fear that that will not be the case.
  When I was a youngster, walkers and climbers resented the water authorities which kept people off their land. I should not like to see that conflict returning to the countryside around Greater Manchester in which I walk and climb. It will be a sad day if that happens. At one time when people saw notices saying "Keep out" and were told by the water bailiffs that they were not allowed to walk over certain areas, they took it out on the water authority. They did not stage grand demonstrations, but they showed their resentment of the water authority in what were perhaps silly and petty ways. When I was a kid I was often turned off rock climbing areas by water bailiffs, but as soon as the bailiff's back was turned we returned and made defiant gestures which certainly did not help the purity of the water supply.
  That sort of resentment could easily return to such areas if the new water authorities start to restrict access. I know that they will not do that on a grand scale to start with, but there will be a little erosion here and there. We shall see the removal of the traditional right for people to walk over an area although such an area is not a public footpath. The Minister should get rid of those areas of doubt at the earliest opportunity. He should give an undertaking that there will be no powers in the Bill to allow the new companies to charge for access to their land and that people can continue to use such land for recreation. The Government should say that they will not allow those bodies to restrict access to areas that people have traditionally used and should make it clear that they want to see an expansion of access to water authority land for recreation.
  In our crowded country we need to use every available bit of land for recreation. To have people making profits out of such land is totally wrong. I agree with my hon. Friend the Member for Newham, South (Mr. Spearing), who spoke about what might happen if water companies speculate in international markets. Who will be responsible for sewer rats? Are they to be bought and sold? That could be a major problem, because if people are making profits out of their management there will be a temptation to take short cuts and someone else will be left with the problems. We know that many problems are developing because of decaying sewerage systems. The
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  Minister should make sure that the water companies do not take the profit and leave the local authorities and public health authorities to deal with the problems.
  8.36 pm
  Mr. Dudley Fishburn: Perhaps it is because I am a new boy in the House that I often find that it is Opposition speeches which convince me most about the correctness of the policy pursued by the Government. That has never been truer than on this occasion, given the content of the speech by the hon. Member for Copeland (Dr. Cunningham) on the Opposition Front Bench. He made four points, all of which are splendidly wrong. The first was that because water is a public and universal commodity it should be publicly controlled and supplied. It is precisely because it is so universal a commodity that it should be privately and competitively controlled and supplied.
  There is a case for a Government seeking to control something that is unique or rare, which comes into the country only at great cost and difficulty to the Government. However, there is no case for a Government to seek to control the supply of so natural a commodity as water. The Roman Senate once tried to control the monopoly supply of glass. The policy was not very effective, but at least it had more logic to it than the policy put forward by the Opposition to control the supply of water.
  The second argument advanced by the Opposition is that water is unique in that it is important for the health and well-being of the community—and therefore also should be controlled by the Government. I agree that water is unique in so far as it is essential for the health and welfare of our people. It is for that very reason that its supply should not be under the control of a monopoly. One has only to have a slight sense of history to remember the appalling decision by this House a generation ago to seek control of the supply of salt, a vital commodity in India, and then to tax it. The great Mahatma Gandhi then led his famous march to the Indian ocean to privatise salt by scooping it up with his own hand away from Government control.
  The third Opposition argument was that profit was somehow inherently wrong. How does the hon. Member for Copeland wish our water undertakings to be run? Are they to incur a loss or are they to break even? Does he not realise that a loss by a Government monopoly is a subsidy paid for by a tax on somebody else's profit? When the water undertakings are privatised and are public limited companies, we shall see them making profits, and the Government will reap the benefit in corporation tax. That will be more money to the Exchequer than even the most rapacious Opposition Members could wish for. Nearly £22 billion has been reaped into the coffers of the Exchequer from companies that have been privatised since 1979.
  The hon. Member for Copeland argued that the water industry should remain a public monopoly. He conveyed the feeling that somehow the Government should control the water industry and that the man who sits on the Government Front Bench should be the controller and chief executive of one of Britain's great industries. We well remember Conservative and Labour Governments interfering with British Steel, repeatedly making political judgments, which did so much harm to the company in the 1960s and 1970s.

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  I have great respect for my hon. and learned Friend the Minister for Water and Planning. He is a distinguished barrister, a distinguished parliamentarian and, not least, a distinguished resident of my constituency. He does not have among his skills, nor would he say that he did, the ability to be chief executive of the country's water undertakings. The quicker he talks himself out of that job— I am delighted that he will be doing so over the coming months—the better it will be for us all.
  Finally, we heard about the Opposition's discovery of open spaces and nature. The hon. Member for Copeland quoted, in a hackneyed way, Shakespeare and Wordsworth. It says something of the self-importance of politicians that they do not turn to Evelyn Waugh on such occasions. The great naturalist, Scoop, recalled how
  "feather-footed through the plashy fen passes the questing vole."
  Perhaps these days it should read "passes the quest for votes".
  A bucolic charm has come into this water debate. But I come from an inner-city area, through which no sylvan waters flow. The Kensal canal inks its way along the border of my constituency as a demilitarised zone between the hon. Member for Brent, South (Mr. Boateng) and the Socialist republic of that borough. Yet we, who live in tower and mansion blocks, have as great an interest in clean and pure water being cheaply delivered to our community.
  We are delighted with the increased efficiency of Thames Water as it moves to privatisation. As it does so, we shall have a company that we know about; that we can go along and kick; that as hon. Members we can lobby to ensure not least that those who cannot afford water do not have it cut off; and to make it part of our community. When Thames Water is floated on the stock market, one of the first things that I will do is to request that it supports another float—a float in my constituency's famous Notting Hill carnival.
  8.42 pm
  Mr. Clifford Forsythe: At one time I might have had to declare an interest because I used to be a plumbing contractor. Perhaps the House will forgive me, therefore, if I speak in practical terms.
  Having listened to Conservative Members, the logic of giving a public utility to private companies escapes me. It is a sad reflection on the Secretary of State and the Department of the Environment that they believe that by transferring public utilities to private companies they will be able to make a profit. Why could not the Government get the economics of the public utilities right, and therefore give money to the Exchequer? If the private companies make a profit, they will do so at a cost to some of their other operations.
  As a former plumber, I wonder from where the competition will come. Water mains and service pipes are already in place underground. Will there be different coloured water to show that it is coming from different firms? Will the private companies build new reservoirs or fit new water mains? There will be no competition if there is only one set of water pipes.
  It is at least heartening that a number of restrictions will be placed on the private companies. From a practical point
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  of view, they will need to be tightly controlled. It is also heartening to know that on 1 January 1989 the model byelaws will be implemented by the Government.
  Many new plumbing operations will be introduced. It has been suggested that there will be no more storage tanks and that the single-pipe system will be supplied off the mains. If a private company's water main bursts and is losing a lot of water, what will happen if it decides, to guard its profits, to turn off the water mains to prevent an even more serious leak, leaving householders without water? That possibility must be considered carefully and seriously.
  Plumbing contractors in Northern Ireland formerly came under the control of the Belfast water commissioners. All plumbers working under its auspices had to be licensed. If a plumber did not have a licence he could not work on the water supply. It amazes me that that is not the case in the rest of Britain. There is no compulsory list of plumbers, so private companies supplying water will be entitled to employ anybody to fit plumbing. If there is no compulsory list of plumbers who can show that they know what they are doing, many of the problems of the past will become worse in the future.
  Mr. Ashby: Is the hon. Gentleman aware that the Bill does not apply to Northern Ireland?
  Mr. Forsythe: I am entitled, as an hon. Member, to speak. [Interruption.]
  Mr. Ashby: I do not want to discuss the matter; I merely felt that the hon. Gentleman might be reassured by that knowledge.
  Mr. Allan Roberts: On a point of order, Madam Deputy Speaker. The Government have said that they intend to introduce these measures in Northern Ireland.
  Madam Deputy Speaker (Miss Betty Boothroyd): The hon. Member for Antrim, South (Mr. Forsythe) is perfectly in order to speak on the Bill. He is an hon. Member of the House.
  Mr. Forsythe: I am most disappointed, in this democratic House, that an hon. Member should question another hon. Member's right to speak.
  I was saying that there must be a compulsory register of plumbers or those entitled to work on water undertakings. To put the matter in context, I ask the Minister to give the meaning of clause 180(5), which says:
  "This section and the following provisions of this Act shall extend to the whole of the United Kingdom, namely—

  (a) Schedules 2 and 5 and sections 3, 11 and 22 so far as relating to any scheme under either of those Schedules;

  (b) Section 88; and

  (c) any amendment or repeal by this Act of any provision contained in the Parliamentary Commissioner Act 1967, the House of Commons Disqualification Act 1975 or the Northern Ireland Assembly Disqualification Act 1975."

  8.49 Pm
  Mr. Henry Bellingham: It is a pleasure to follow the hon. Member for Antrim, South (Mr. Forsythe), not least because my party is the Conservative and Unionist party. We should applaud the fact that the hon. Members for Antrim, East (Mr. Beggs)

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  and for Londonderry, East (Mr. Ross) are listening to and participating in the debate. I hope that they will join us in the Division Lobby tomorrow night to support the Bill.
  The Bill has given rise to great interest in west Norfolk, not least because it is the land of Vermuiden. Much of my constituency is land that was reclaimed in the 17th century and drained. Much of it is below sea level, so coastal and sea defence aspects are important. My constituency is dominated by the River Ouse, which has many tributaries. It is part of a large river basin which will form the key to the new local companies.
  Originally, there was some suspicion about the water privatisation proposals. My constituents were under the impression that crucial functions, such as coastal drainage, coastal defence and water pollution control, would be part of the functions of the plcs and were afraid that there would be a conflict of interests. That is why I welcome the Government's moves to separate the two functions, to set up the National Rivers Authority and to take out that part of the industry that can be profitable and sold to the public and to put the other into a new framework. I find that there is now broad support for the Bill and great support for the NRA.
  It is interesting that most, if not all, of those groups and bodies that Opposition Members have cited as opposing the Bill have welcomed the creation of the NRA. This is a move in the right direction. Pollution control is far from perfect. My hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi) said that 20 per cent. of the sewage plants breach the discharge consents laid down by the Department of the Environment. That is a disgrace. The number of reported pollution incidents has increased from 12,000 in 1982 to 23,000. In 1986 there were only 250 prosecutions. The penalties are far too low.
  We have heard about fishing. I understand that the eels caught in 31 rivers were so contaminated by pesticides that they could not be eaten by anyone. My right hon. Friend the Secretary of State is a keen fisherman and is concerned about river pollution and angling. Some rivers are a disgrace. Obviously, the Control of Pollution Act 1974 is not working. If the NRA is to work, it must have sufficient funding and staff, and have deadlines to which to work.
  I am slightly worried about sea defences. Under existing arrangements, borrowing powers can be assumed in a low rateable area. I hope that my hon. Friend the Minister will address himself to this point. What will happen under the new arrangements? We have heard much about the greenhouse effect. If the sea level increases by 2 ft or 3 ft, my constituency will disappear.
  Mr. Paul Boateng: That is the best argument that the hon. Gentleman has made all night.
  Mr. Bellingham: The hon. Gentleman is being unfair. Those psychedelic socks of his are putting me off.
  Most of my constituency would disappear, as would a great deal of the Queen's estate at Sandringham. Water would lap up the front door at Sandringham. That would be a disaster. That is why we must get our sea and tidal defences right. I hope that my hon. Friend the Minister will address himself to those important points. The NRA can work. I hope that those powers vested in the Secretary of State under the Control of Pollution Act will be vested also in the NRA.
  We have a long way to go, but separating these two functions is a crucial move in the right direction. I urge the
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  Government to adopt a more radical stance and to consider the new structure carefully. Her Majesty's inspectorate of pollution is to be restructured and put on a regional basis. There is a strong argument for a new, integrated, pollution control structure. This would mean creating a body along the lines of the United States Environmental Protection Agency. We could have a national EPA, but one with regional centres which would be advised by not only the NRA but by that part of HMIP that deals with air pollution and toxic waste.
  The waste disposal authorities would be integrated into the regional centres. The WDAs have not served this country well. Many have refused to file reports to HMIP. Many are not properly funded, which may be partly the Government's fault. This is an opportunity to set up a more radical structure, whereby functions such as air pollution control and waste disposal are under one roof on a regional basis. I hope that my hon. Friend the Minister will comment on that suggestion.
  Surely, with HMIP being restructured and the WDAs, which are part of local authorities, coming under increased pressure and criticism, the time has come to take these functions from local authorities and give them to regional organisations. That will leave local authorities free to concentrate on planning and on vetting planning applications.
  The new water authorities will have control over the licensing of new waste disposal facilities and will be able to say whether sites may go ahead. They will be able to impose a veto if they are worried about leachates or geological factors. Why not give them more say and control and take that function from the WDAs? Local authorities will be able to concentrate on what they are best at doing—imposing planning controls and considering planning aspects. I hope that my hon. Friend the Minister will take those points on board and put them to our right hon. Friend the Secretary of State. I hope to be a member of the Standing Committee, where there will be opportunities for us to pursue those points. A number of Opposition Members feel equally strongly that this opportunity to introduce an integrated approach is not to be missed.
  I well remember that every time I met the chairman of Anglian Water, Mr. Bernard Henderson, CBE, he said, "We are hamstrung by Treasury controls. Every time we want to invest, we cannot. We have a negative external financing limit. When we want to borrow money for new investment or to put money into new infrastructure and plant, we cannot. When we can, we are hidebound in terms of how much we can borrow and the extent of our capital expenditure." He, among many other water authority chairmen, may welcome water privatisation and these new privatised plcs being let off the leash and able to serve the public as they want by spending sufficient funds on capital investment and, at the same time, not having to worry about some of the other functions that will rightly remain in the public domain.
  I support the Bill because it represents an excellent way forward and a unique step during the Government's tenure in making major progress on the environmental front and, above all, in presenting to the public a better service and a cleaner environment.
  8.58 pm
  Mr. Dafydd Wigley: I agree very much with the hon. Member for Norfolk, North-West (Mr. Bellingham) about the need for a regional, co-ordinated structure. My real fear for Wales—although we look on Wales as a national unit, we regard it in regional terms from an organisational point of view—is that the rivers authority will impose centralisation. We shall lose the river functions that exist on an all-Wales basis and we are far from happy that there are sufficient provisions in the Bill to deal satisfactorily with rivers in Wales.
  The hon. Member for Norfolk, North-West spoke of obtaining more capital, but whether the plcs concerned will be able to afford to attract that capital and at what price will be central to the argument. The hon. Member for Delyn (Mr. Raffan) said that water was a burning issue in Wales. It certainly is and, many years before he came and graced our presence in Wales, we had a very difficult time there.
  The hon. Member for Denton and Reddish (Mr. Bennett) mentioned the considerable controversy involving cities such as Liverpool and Birmingham which took over valleys in Wales to provide reservoirs, as a result of which people were moved out. Legislation was enacted in Parliament, against the united opposition of all Welsh Members, across party lines, but there was still considerable controversy. In the 1960s, there were episodes of water pipelines being blown up. That was a difficult time.
  It is difficult to imagine how much change there has been in perception and understanding since that time. Although Members on both sides of the House will criticise the Welsh water authority from time to time—no doubt there are times when they are right to do so—over the intervening two decades new harmony and planning has come about in the provision of one of the most basic services of the community—the provision of water, including sewerage, flood control and pollution control.
  I fear that we are now moving backwards, not to Victorian times but to a pre-Victorian time. One of the first most exciting steps in municipal development was the provision of water and sewerage services in some of our large cities. I am gravely concerned about the effect of the Bill in Wales. The balance sheet of the Welsh water authority shows that the current cost net asset value is about £2,000 million and the turnover is about £223 million. If we wanted to obtain a return of 10 per cent. on that £2,000 million in the market place, we should be looking for £200 million profit. In other words, we should be looking to increase the turnover from £223 million to about £423 million, which represents a doubling of the total charges. Clearly, that is not on and I am not suggesting that charges will increase by that much, although I have real fears that they are bound to go up a considerable amount.
  If the charges do not go up by that much, the assets of the water authorities, which have a book value of just under £2,000 million, will be sold off for a fraction of that sum. If I understand the position correctly, the Welsh Office is looking for a figure of £250 million to £300 million for those assets. That is one sixth or one seventh of their book value. That is giving away public assets which have been paid for by the water ratepayers of Wales. On what grounds can that be justified?
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  It may be possible to have a write-off which makes it practical to appear to have a reasonable return. Perhaps the £27 million profit last year can be pushed up to £30 million or £40 million and a reasonable return appear on the cost of the shareholding. When we look for additional capital to undertake the sewerage replacement works and all the other works that are needed, there will be no write-up or grant provision. The system will have to stand on its own two feet. That is where the valid comparison comes in for a return on the £2,000 million equivalent that we are now discussing. However, if we dress this up for a one-off sale, to justify increased capital in the future—that is the argument advanced by Conservative Members in favour of privatisation, and I accept the need for additional capital—there will have to be a substantially higher profit margin. That must mean higher prices, and it will hit some of the most vulnerable people very hard.
  The question of answerability and control has also led to much discussion in Wales. At present, we have a quango. I should be much happier if the Welsh water authority were answerable directly to an all-Wales elected body, but that is not on the agenda at the moment, although we are hoping to work in that direction again before too long. In the meantime, if privatisation is to take place—we are unlikely to stop it with the balance of power in this Parliament—what safeguard can be provided to ensure that water consumers in Wales have a dominant part of the equity capital? This issue was raised by the hon. Member for Brecon and Radnor (Mr. Livsey). I understand that the Welsh Office, with the Welsh water authority and institutional investors, has been considering various options.
  Mr. Leigh: Will the hon. Gentleman give way?
  Mr. Wigley: No, I shall not give way as there is a 10-minute limit on speeches.
  Perhaps 60 per cent. of the equity shareholding could be in the form of A shares and designated for consumers. I and others are worried that after consumers have bought the initial share-out the shares will pass into the hands of institutional investors. We know that the television company for which the Minister of State, Welsh Office, formerly worked—HTV—introduced share restrictions to ensure that the shareholding reflected tight control of the company so that the company could maintain the policy which had led to its securing its franchise.
  The Government should find a way of ensuring that a mechanism is found to enable consumers, even those with small incomes, to secure a share so that the overall control of Welsh water is at least indirectly in the hands of Welsh people. Is it practical and feasible—this is an issue that I raised as a member of the Welsh Grand Committee this morning, in response to which the Secretary of State indicated some sympathy—to have a form of a golden share in the Welsh Office to ensure that issues of public concern in Wales are subject to a longstop and are not determined merely by pure market considerations?
  Many bodies have made representations to us on these issues, including those representing anglers, farmers, ramblers, those with an interest in bird life, outdoor educationists and consumers. The Countryside Commission is a specific example. Welsh constituency Members are well aware of the range of problems which arise, including those associated with the water charges, cut-offs, floods, pollution, sewer replacements, inadequate

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  pipes, fish farms and coastal erosion. All these matters will have to be dealt with by the proposed new bodies. My heart tells me that an organisation that is geared to commercial profit only cannot meet the problems that we and our constituents come up against week by week and month by month.
  If I am lucky enough or unlucky enough to be a member of the Committee which considers the Bill—an enormous amount of work will face those Members—I hope that those on the Government Front Bench will be flexible in their response to practical amendments tabled to protect the interests of those who might suffer if purely commercial considerations alone are taken on board. We must not slip back into the days of contention of the 1950s and 1960s in Wales. There must be a structure which ensures that the necessary safeguards are provided.
  9.8 pm
  Mr. David Ashby: I welcome the Bill, and I think that there are many who take the same view. They are unhappy that regional authorities have not fulfilled all that was expected of them. They expect and demand higher standards, and we all recognise that those standards are required regardless of whether there is privatisation. I agree with my hon. Friend the Member for Cambridgeshire, South-West (Sir A. Grant) that fundamentally the Bill is directed to raising standards as well as privatisation. It provides for a massive raising of standards, and we must understand and accept that there is a cost to raising standards. If we are to improve the environment, we must spend more. That is a cost which I am sure we all willingly accept because we want to improve the environment and our standards.
  The Bill recognises the necessity of environmental and regulatory controls. It reflects the need for those controls to remain in the public sector. That need will be met by the National Rivers Authority and the Director General of Water Services.
  I want to speak briefly about the National Rivers Authority. The fight against the pollution of water courses too often makes the headlines only when a disaster occurs. Pollution is a chronic phenomenon and is produced by a combination of sources, as a result of our way of life. In consequence, the fight against pollution must not be limited to ad hoc measures designed to repair extensive and sometimes irreversible damage at great expense. Instead, it must take the form of long-term action to tackle the causes of pollution.
  The pollution of water courses is not caused solely by large industries. It is caused also by the citizens of this country, as consumers and producers of products, or by activities that result in that pollution. The solution must be that we consider not only sanctions, but the education of those people who are involved in activities that could pollute water courses.
  Therefore, I hope that the Minister will take on board the point that the National Rivers Authority must be able, not only to prosecute or impose sanctions, but, equally important, to raise public awareness of these problems. It must have a role in advertising and a role to educate. It must be able to put on exhibitions and to provide advisory services for those who are involved in activities that might cause pollution.
  That is the most important point that I wanted to make. I promised that I would not speak for 10 minutes and I
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  said that if I was called, I could say what I wanted to say in three or four minutes. That is the message that I wanted to put over.
  9.12 pm
  Mr. Paul Boateng: The surest sign of a poor advocate defending an even poorer case is the large number of character witnesses that are traipsed before the court as a sign of the worth of the indefensible. In the course of this debate, we have seen a number of character witnesses traipsed before our eyes in defence of the indefensible. One of those witnesses, bizarrely, was the grandfather of the hon. Member for Crawley (Mr. Soames)—that is, an early right hon. Member for Woodford, Winston Churchill. We were told that, were he alive, he would be a great supporter of water privatisation. His own knowledge of clear white liquids—like that of his distinguished grandson—was limited to those clear white liquids that are produced in vats in Warrington rather than those that descend from heaven.
  Juxtaposed even more bizarrely with the late right hon. Member for Woodford was a contemporary—none other than Mahatma Gandhi. We were told by the hon. Member for Kensington (Mr. Fishburn)—who is now in his place —that the Mahatma, were he alive, would be a supporter of water privatisation. The hon. Member for Kensington has got his gurus somewhat mixed up. The only guru of water privatisation is Professor Milton Friedman. Privatisation is a product of his philosophy and the idea that Gandhi can be prayed in aid as a supporter of this squalid little measure is complete nonsense. The point of the march to the shores that the Mahatma led was to say that salt belonged to the people. He said that salt should not be usurped by the state through the imposition of taxation.
  In opposing the Bill, root and branch, we say that water belongs to the people and should not be given away by the state for the benefit of private enterprise. We say that it belongs to the people and that the true purpose of the Bill is not the greening of England. There is nothing more ludicrous than the suggestion by the Secretary of State in the leaks and press conferences before the presentation of the Bill that it was all about protecting the environment. We were told that this is a green measure. The British people may be getting increasingly greener, but we are not so green round the gills as to believe one word of the Secretary of State's ex post facto justification for the Bill.
  The true purpose of the Bill came out clearly in the speech of the hon. Member for Cambridgeshire, South-West (Sir A. Grant). He had had enough of all this talk about the environment and he reminded everyone that the bottom line was efficiency and profits. We are glad to hear about efficiency, but it is strange to hear the hon. Gentleman talk in glowing terms about the Anglian water authority being a model for private enterprise and attractive to the French, when 35 per cent. of the Anglian authority's consented sewage treatment plants are in breach of their discharge consents. But, above all, the purpose is profit. The interests of the environment and of the consumer will be subjugated to the overwhelming interests of profit. That is the bottom line.
  The select Committee on the Environment has been prayed in aid by people who should know better—I do not include the Secretary of State in that category. In my early days as a member of that Committee, we visited a toxic

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  waste dump in the north country. A man who had been in the business for a long time put his hand on my shoulder and said, "You know, son, where there's muck there's brass." On this Bill, Conservative Members believe, "where there's water, there's dosh". The French would call it "leauds and leauds" of dosh. We must put aside this pretence about care for the environment because it does not feature on the Government's agenda.
  I am glad that the Minister for Water and Planning is in his place because I have several questions to ask him about the role and resources of the National Rivers Authority. An alarming fact that came out from the press conferences, leaks and subsequent statements was that the NRA will be subject to a Treasury regime in terms of staffing and resources. It will also be subject to Department of the Environment guidance in terms of staffing.
  We all know the Department's record in respect of those responsible for monitoring, controlling and trying to abate pollution. During the past four months, two Department inspectors have disappeared from the scene because they were so disgruntled and dissatisfied with the state of staffing and the priority given to adequate resources for the control of pollution. We are supposed to trust our rivers and our patrimony to the tender mercies of the Department of the Environment. We cannot do so. The record of the past nine years is that Conservatives are not up to the job of giving water pollution the priority it deserves.
  As to what is expected of the NRA, it is not only Greenpeace—which has wrongly been subjected to some calumny in this debate—that is concerned about the environment. It is not often that one feels compelled to call on the advice of the Country Landowners Association. Unlike the hon. Member for Norfolk, North West (Mr. Bellingham), I do not wake up in the night in a cold sweat over the interests of country landowners—perhaps I ought to. However, I am interested that the association expresses concern about the NRA's financing:
  "The Country Landowners Association is therefore strongly opposed to the provisions of the Bill which would make the NRA dependent upon Exchequer grant aid to carry out its function and which would prevent it from borrowing to finance capital works."
  That is interesting, and when the Minister responds, I hope he will answer the associations's concerns. If he is not so concerned about the views of Greenpeace or of other groups well known for their work in protecting the environment, perhaps he will answer the concern expressed by the Country Landowners Association, and that of the hon. Member for Norfolk, North-West, which I share, in relation to what will happen to our coastal defences. We do not want to see the hon. Gentleman's constituency disappear under six inches of water—at least, not in the course of this Parliament.
  We must consider also the concerns of the consumers. We have been told that this measure will benefit the consumer. To give Jack his jacket, the Secretary of State has always made it crystal clear that the consumer will have to pay for protecting the environment. There is never any question of the polluter or of those who have profited from the creation of waste having to pay. Let us take it as read that the consumer will pay, because that is entirely
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  consistent with the political philosophy of Conservative Members. Let us instead ask what protection the consumer will have under the new regime.
  The House has been told, and is entitled to clarification of this point, that there will be two parallel and separate committees charged with responsibility for protecting the consumer interests. They are the rivers advisory committee and the customer services committee. May the House be given the assurance that has also been sought by the Consumers Association and by other consumer protection bodies, that both committees will be properly resourced and funded; above all, that they will be given the requisite power for dealing with the problems that the industry has faced in ensuring that those responsible for pollution are brought to book?

  In conclusion, I ask for one further point of clarification. The Secretary of State will understand the confusion that exists in the minds of observers of the environmental scene. At one moment, the Secretary of State makes it clear that it is no part of a water authority's responsibility to impose a level of fine or to prosecute large numbers of defaulters, arguing that in such a situation, money that could be spent on improvements would be spent on implementing fines.
  On the other hand, the acceptable face of the Department of the Environment, in the form of the Secretary of State's junior Minister, tells us that it is important that there be a greater readiness to prosecute and to make more effective use of powers that already exist. Which is the true voice of the Department of the Environment? Let us hear it tonight and let it stop speaking—as we have heard it, and many Conservative Members speak tonight, and as various Ministers have over the past few months—with a forked tongue.
  9.24 pm
  Mr. Edward Leigh: I am grateful to the hon. Member for Brent, South (Mr. Boateng) for allowing me five minutes at the end of the debate in which to say few words.
  I want to say a little about the presentation of the Bill. We must be honest—even among those who are not motivated by party spite there is some concern about the provisions of the Bill. There is bound to be concern about any new aspect of legislation and it has been expressed about many privatisation measures that we have introduced. There is no doubt that, as usual, the Opposition have not attempted to use reasoned argument but have resorted to scaremongering, as my hon. Friend the Member for Pembroke (Mr. Bennett) said.
  I shall return to first principles, as I did to an audience of about 100 people in my constituency last Friday. If one looks at the present situation and what can be done about it and clears one's mind of all the alternatives, one ends up with something remarkably similar to what my right hon. Friend the Secretary of State has suggested.
  The first thing one asks when one talks to ordinary people is, "Are you satisfied with the present water industry?" Of course, the answer is no. Earlier in the debate we heard that the Labour Government cut spending in the water industry by a third. They would have liked to spend more and, if they returned to power and renationalised the industry, they would not want to cut capital spending.

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  Government language, however, is the language of priorities. It is about roads versus pensions. There are no votes in sewerage and water when compared with roads, pensions and social security. That has been the problem underlying public dissatisfaction with the water industry. We cannot deny that. Despite the fact that we have increased capital spending by half, we are still not spending enough. A village in my constituency, Claxby, has been denied an adequate sewerage scheme for 20 years. I have a sheaf of correspondence about that on my desk. My predecessor tried to deal with it and I have tried, but the buck has been passed from the local authority to the water authority and nothing has been done. The present facilities are inadequate.
  If we ask ourselves what to do about the situation, we might come forward with a simple solution. First, why not set up for the first time in our history an environmental protection agency with real teeth? Why not, for the first time, ensure that the gamekeeper is no longer employed by the poacher? That is what is being done in part III of the Bill and it is something of which we should be proud. That is a matter not of presentation but of fact.
  If we were starting from square one and asking what we could do to make privatisation work, the answer might be to create powerful, strong, regionally based water companies free from the day-to-day interference of Ministers, free to invest and attract private capital and to provide villages such as Claxby and others with adequate sewerage systems. That is contained in part I of the Bill.
  Finally, we might say that overlaying that we should ensure that we have the tightest, strongest and most closely regulated industry in the world, which will ensure that despite the monopoly that water companies must have, they will not abuse the monopoly by overcharging, discriminating against certain customers, reducing services and so on. That is all in part II of the Bill. So even if one were not motivated by dogma, as the Opposition say we are, and if one approached the matter from first principles, one might come to the House with something similar to the Bill.
  There are bound to be one or two worries. The National Anglers Council welcomes the Bill but is concerned about representation on the National Rivers Authority. I have no doubt that its concerns will be listened to. There are fears about allowing the water authorities to get on their feet. The golden share has been mentioned and there may be some mileage in that. However, while we ensure that there is a tight regulatory framework, we must remember that water is, and always has been, a business. For all our sakes we have to allow the water companies to invest in the future. They are determined to make privatisation work and I am sure that the Bill provides an excellent way forward. I give it my full support.
  9.29 pm
  Mr. Allan Roberts: The Select Committee report has been quoted at some length to illustrate that the last Labour Government cut capital expenditure on the water and sewerage industry. We accept that that is the case. However, we claim two things: first, that this Government have continued to reduce capital expenditure; secondly, the last Labour Government were in power for five years, and since then this Government have been in power 10 years. Nearly every recommendation in the Environment Select Committee's report is an
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  indictment of the Government's record over the past 10 years. We quote in aid the Select Committee's report. We recommend that greater scope should he given to water authorities to borrow commercially. In the light of the report—an all-party one—such scope does not depend on the privatisation of the water industry.
  The Bill will introduce momentous changes to the management of the water environment. Although the Government have sought to defuse the potential time bomb standing in the way of privatisation, they face major environmental controversies about sewage discharges, the quality of drinking water, and the industry's land assets. It is a 340-page monster, containing 180 clauses and 24 schedules. The Bill must receive Royal Assent next June if the flotation of water authorities, which is currently intended to be at the end of 1989, is not to interfere with the Government's plans for the sale of the electricity industry. The Government want the Bill to be pushed through with unparalleled haste. Opposition Members will not co-operate with their intention.
  In recent weeks, Government and water industry sources have insisted that an extremely tough regulatory regime will be ushered in by the Bill. However, the industry and the Government have been anxious to head off extra controls that could prejudice the chances of a successful flotation. If the National Rivers Authority is to be an effective force in improving environmental standards, it must strengthen its technical, monitoring and scientific capabilities. The National Rivers Authority already faces significant extra responsibilities, before it is properly established. I refer to the need to prepare plans to implement the decisions of last year's North sea conference and the 1990 national river quality survey, and extra monitoring of "red list" substances, all of which could rapidly erode the real value of its resources.
  The Government are yet to work out how to deal with the major threat—it is a major threat—to their privatisation proposals. Ironically, that threat is entirely home-grown. It is posed by the water authorities' own sewage treatment works. The recent public debate about such facilities involved the failure of more than 850 works —or over 20 per cent. of those with numerical discharge consents—to comply with their consent conditions.
  Illegality—and it is illegality—on that scale is a significant obstacle to flotation. Lawyers have already advised senior executives in the water industry that they must not sign prospectuses if their businesses are knowingly committing criminal offences. To date, the Government have responded in two ways. First—the Opposition welcome it—they have provided extra funds for capital investments which, according to different ministerial statements, are intended to ensure that all, or almost all, non-complying works operate within the law by October 1992. Opposition Members doubt that that can be achieved with the amount of extra capital that the Government have allocated.
  They have also said—we regret it—that non-complying works may be given interim relaxed consents to facilitate privatisation, provided that credible improvement programmes are in hand. In preparation for privatisation, more, not less, damage will be done to the environment, which gives the lie to the Government's claim.
  Organisations such as Friends of the Earth and Greenpeace are prepared to apply to the High Court to test any dubious Government decisions. Anything but a small-scale relaxation exercise would certainly drive a

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  coach and horses through the long-established principle of even-handedness, as British industry has never received relaxations for its discharges on the scale now being sought by some parts of the water industry and granted by the Government to facilitate privatisation.
  The Government's arguments pull the Bill in opposite directions. One argument is to provide firm assurances that the Bill contains genuine additional environmental safeguards, and the second argument is to convince the City that there are no destabilising uncertainties about costs attached to environmental controls. That is the Government's dilemma.
  On the first of those counts, the Government are heavily burdened by recent history. Broadly speaking, this is an enabling Bill. Many environmental clauses have to be fleshed out in regulations before they can have any practical effect. Many of the clauses characterised as new by the Secretary of State have been carried forward with some simplification or amendment from the Control of Pollution Act 1974. Developments since 1974 do not inspire confidence that the Government, with a successful flotation uppermost in their mind, will look rapidly to give effect to these provisions. The powers in that Act to introduce protection zones and to impose controls on the storage of dangerous substances have never been invoked. The Government are continuing to display little haste about introducing statutory controls on nitrogen fertiliser applications to agricultural land, using the water protection zone powers that they already have in the Control of Pollution Act. They are backsliding all over the place.
  Last year, the Department of the Environment said that the Bill would give backing for the first time to river quality objectives and provide for deadlines to be set for their achievement. But the Department also said that these would be in place when the Bill was enacted. Now the intention is not to introduce them until 1992. The conflicts are inevitable and the Government's record on the environment is clear.
  One of the Government's main arguments for privatisation is that it will release the water authorities from public sector borrowing requirement controls, but the Government are nationalising many functions of the water industry and giving them to the National Rivers Authority. That does not release water resource planning and licensing, abstracting and monitoring of licences, environmental quality and pollution control, land drainage and flood protection, the maintenance, improvement and development of fisheries and inland waters, conservation and recreation, navigational responsibilities and functions of three water authorities, the functions of Her Majesty's inspectorate of pollution, research, and flood and sea defences.
  None of those will be released from PSBR restrictions. They will be the functions of a National Rivers Authority, and that will not solve any problems. The revenue consequences of all those functions will be paid for by additional, higher charges—it says so in the Government's document—and by taxation. That is not releasing the evironmental functions of the water industry from PSBR constraints. At a stroke, and without privatisation, the Government could release the water industry from the stupid and ridiculous PSBR control.
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  We were asked whether a Labour Government would take the water industry back into public ownership. The answer is yes. We will not nationalise it. It is this Government who are doing the nationalising by setting up the NRA.
  This is absolute nonsense. Let us look at the logic of it. The same organisation, whether in public or private ownership, will borrow the same money on the market from the same people to spend on the same projects. One is bad for the nation's economy because the public sector is doing it, and the other is good for the nation's economy because the private sector is doing it. We are talking about the same money from the same sources for the same purposes. What economic nonsense. If that is the only justification for privatisation, no wonder the public have seen it for what it is—asset stripping.
  Conservative Members laughed when my hon. Friend the Member for Wakefield (Mr. Hinchliffe) spoke about poverty. They think that compulsory water metering and charging people per second per gallon per squirt is good. They do not think that an old-age pensioner will worry about the bill and will continue to flush the toilet as often as now. They do not believe that large families in the poverty trap will stop bathing their children as often as now because they will be worried about how much water they are using and their water bills.
  I would not mind if water metering saved significant sums. The lowest estimate for putting water meters into people's houses is £2 billion—others have been about £3 billion or £4 billion. Having put the meter into a house, it does not matter whether that household uses twice as much or four times less water than it was using before it had the meter, it will still cost the water authority the same to deliver it. Conservative Members do not understand that water is not the same as electricity. Electricity is expensive to produce, but cheap to distribute. Water is cheap to produce—it droppeth, as the quality of mercy, from the heavens—but expensive to distribute.
  Once the pipe has been laid from the reservoir to the house, the cost has been paid. It does not matter how much water is used or is not used, the cost will be the same. If people economise with water—unless there is a drought and people economise on a voluntary basis—the water authorities save nothing, because any water that is saved flows out of the reservoir, back into the rivers and into the oceans. Water—that God—given asset—is freely available, but must be paid for by the gallon and by the pint once the reservoirs have been built and the pipes have been laid to the households.
  Sir Anthony Grant: If that is the case, why did the Labour party, when it was in government, not abolish the water rate?
  Mr. Roberts: What has the water rate to do with water metering?
  I predict that compulsory water metering will be an inevitable consequence of water privatisation. Many members of the public have not realised that, in the interim, while the meters are being fitted—they will be fitted in all commercial and industrial premises in the north-west almost immediately, and automatically into any new dwellings—we shall get rid of water rates and have a water poll tax, which will not be related to the ability to pay, the size of the household or its consumption. That will be on top of the poll tax, and they will be

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  introduced, as they say in the music hall, at one and the same time. The water poll tax, along with the poll tax, will be the end of the Government. The Bill will put another nail in their coffin because water metering—as is the privatisation of water and making a profit from it—is opposed by the public.
  The Government are keen to sell off water, and they do not care who buys it. They do not care if the French buy it. They tell us that the French system is excellent. Some 99·2 per cent. of British households are connected to mains water supplies. In the United States it is 75 per cent.; in West Germany it is 86 per cent.; and in France—where the system is so good—under French privatisation it is only 56 per cent. When I visit France, Spain and many other countries, I must buy my water in bottles, because the tap water is not drinkable. That is becoming the state of affairs in many parts of this country because of the Government's neglect and their ignoring of EEC directives.
  The Australians want to buy into British water. The Australians are interested, and they do not give a triple X for our environment. They certainly do not give a triple X for providing cheap wholesome water for the British people.
  Mr. Roger King: Four X, actually.
  Mr. Roberts: It is the same thing. The Australians are interested in profit, and that will apply to everyone who buys into the water industry.
  It is said that costs will not rise, but there will not only be the extra costs—as the Minister admits—of any pollution control that may be imposed on the water industry by the National Rivers Authority, but there will be the costs arising directly from privatisation. There will be higher directors' fees and top managers' salaries. So far, there have been 85 per cent. increases in managers' pay in the first two years of any privatisation.
  In addition to the National Rivers Authority, there will be the cost of shareholders' registrations and servicing, dividends for shareholders, and corporation tax, which the consumer will have to pay because that will not come out of the profits. An expert on water authority finance has calculated that there will be an increase of 29 per cent. on existing costs. That will inevitably lead to higher charges. After announcing a 39 per cent. increase in profits, British Telecom put rentals up by 8·6 per cent. Many other costs will also he involved.
  What should be done? All the Government's stated aims for privatisation could be achieved without privatisation. The Government could free the authorities from their tight borrowing limits and the stupid restrictions of the public sector borrowing requirement. We will, and the Government could, democratise the water industry and put some accountability back into the way in which it is run regionally. At present the Government contribute no money to water authorities' operating costs, but they take out an increasing amount. That should stop. The present problems that the Government rightly highlight could be dealt with adequately.
  The Labour party and most of the British people are totally opposed to the privatisation of water. We recognise that water is even more essential than food. It should not be subject to the free market or to the profit motive. It
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  should be free and readily available, in public ownership, providing a plentiful supply to all who need it. and it should not be related to people's ability to pay.
  9.45 pm
  The Parliamentary Under-Secretary of State for the Environment (Mr. Colin Moynihan): I have never heard such a fundamental misunderstanding of an industry from a Front Bench spokesman as I have this evening from the hon. Member for Bootle (Mr. Roberts).
  To say that water just trickles down from the sky and appears, without cost, in the pipes and through the taps is a nonsense. It is a highly expensive industry, requiring highly expensive inputs for treatment and preparation. It is also subject to many European directives and many quality objectives. When the hon. Gentleman is on the Committee I only hope that he will pay as much attention to the importance of producing first-rate quality water as he has to the pipes and the supply works that provide water to homes.
  Mr. Allan Roberts: If water is so expensive to produce, why do the Government not take action to stop 30 per cent. of it leaking out of our aging system? From leaving the reservoir to reaching the tap, 30 per cent. of water is lost. How will water metering solve that problem? Will the Minister admit that the major cost to the water industry is distribution and not production?
  Mr. Moynihan: We accept that major capital expenditure is required and that is why we are investing in it, unlike the Opposition who slashed expenditure when investment was required.
  Tonight has also revealed another interesting point that emerged from an earlier and excellent speech from my hon. Friend the Member for Cambridgeshire, South-West (Sir A. Grant). Through his lucid description of the importance of his statutory water company, he identified that we have an interesting framework for the water industry—private companies under public regulation. My hon. Friend challenged the Opposition to inform the House whether it was their intention to nationalise the statutory water companies and to remove, as the hon. Member for Copeland (Dr. Cunningham) had stated, their present private monopoly status.
  The Opposition did not go as far as saying that they want to nationalise the statutory water companies. They accepted that there should be private companies and they welcomed the fact that, if one had private companies, they should be subject to proper and effective regulation. That is what we understood to be their argument. If the Opposition are unhappy about that summary of their argument, I shall give way.
  Mr. Allan Roberts: My hon. Friend the shadow Secretary of State made our position clear. We will take the water industry back into social ownership. That does not mean that a nationalised body will run all the water industry. If nothing has changed and the private statutory companies, which are regulated, still exist, they will not necessarily be taken back. But we predict that they will not, because powerful conglomerates will be running the water industry, and then they will be taken into social ownership.
  Mr. Moynihan: So if they continue to exist they will be private companies under public control and regulation. That is precisely what we are proposing in the Bill.
  We have come before the House with a Bill to create private companies within a strong regulatory regime to protect the customer against general abuses such as excessive charges, reduced service levels and the neglect of assets. Under that regulation individual customers should be entitled to rights and protection. We recognise that on the one hand the water industry can be given tremendous opportunities through the private sector and on the other hand that we need an important regulatory framework to protect customers. That is precisely the position being espoused by the Opposition on statutory water companies and that is exactly what we have produced in the Bill.
  Mr. Allen McKay: Will the hon. Gentleman give way?
  Mr. Moynihan: No. Many other points were mentioned and, out of courtesy to the House, I should like to deal with as many of them as I can.
  We are now halfway through the debate and many important points have been made about the National Rivers Authority. First, let me pay tribute to the work of the Select Committee on the Environment under the Chairmanship of my hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi). It was its report on the pollution of rivers and estuaries in May 1987 that drew attention to the anomaly that the present arangements for the control of water pollution involve water authorities having the dual role of poacher and gamekeeper. That anomaly has been central to our decision to create the National Rivers Authority.
  Let me try to allay the worries that many hon. Members have raised about the structure and organisation of the National Rivers Authority. We are confident that the proposals for the National Rivers Authority combine the best features of the existing system of unified control of the river basin while providing the essential separation of the regulatory functions in the new national body. The National Rivers Authority will retain control over river catchments because it will have all the functions associated with the management of natural waters—abstractions, discharges, pollution control, land drainage, flood protection and conservation.
  Hon. Members have raised an important issue relating to the staff and resources of the National Rivers Authority, a point rightly raised by the Select Committee in its third report. I can assure hon. Members that the Government are fully committed to ensuring that the authority has adequate staff and resources.
  But hon. Members will want me to go further than that. I hope that in the first stage hon. Members will have already drawn comfort from the fact that in the summary schemes of organisation that are now available in the Library it is clear that our commitments at the Dispatch Box are backed up by actions. The National Rivers Authority will have the vast majority of its 6,500 staff in the regions. The schemes show that pollution control and other functions will be carried out by same people who are currently carrying out those functions in the water authorities.
  The National Rivers Authority will inherit from the water authorities the staff needed to carry out all the functions, but—this is an important but—instead of being
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  a small part of a water authority whose primary function is water supply, it will represent the main function of an important national environment body. The creation of that new body is a major component of the Bill which recognises the great importance that we attach to pollution control and the environment.
  Important issues have also been raised on conservation and recreation. The first important point is to promote the good practice that exists already. Over recent years, numerous and varied practices and strategies have been adopted by water authorities in respect of conservation and recreation, some successful, others less so. The time has now come to identify and promote best practice to ensure that the industry learns from experience and to give more meaning and substance to the general duties placed upon it—hence, a code of practice for the first time, to which I shall return.
  The second is to seize the opportunities for conservation and recreation created by the restructuring of the industry. The creation of the NRA is an important milestone. It can take on tasks and functions which could not so readily have fallen to the water authorities, and some of its functions will be new. I shall return to that subject, too.
  Our brief should be twofold: to promote good practice and to seize the opportunities for positive steps forward in conservation and recreation. I shall follow through three aspects of the legislation, the first of which are statutory duties. The Bill imposes on the NRA and the plcs the duties to further conservation, having regard to landscape, natural beauty and public access, and to put their rights and properties to good use for recreation. These are broad and positive duties, which will set the tone for the privatised industry. I know that many people did not believe that we would preserve in a privatised regime the present duty to further conservation—but we have. So the Government are not going back on what has been achieved.
  Secondly, I turn to the code of practice. I hope that hon. Members on both sides who are concerned about the important issue of sport and recreation and conservation will carefully examine the implications of the code and benefit from the discussions about its detailed context that will take place. Early on in our privatisation proposals we suggested that the general statutory duties should be supplemented by a code of conservation and recreation practice. As is clear from much correspondence that I have received, that has received a wide welcome in the sporting world, and clause 9 provides for it.
  We shall shortly publish a first discussion draft of the code so that it can be taken into account at the relevant stages of the Committee proceedings. It will provide guidance on how the general duties, which are enforceable by the Secretary of State, are to be interpreted and applied. The Secretary of State will have to take account of the code and of any failure to observe it when exercising his enforcement powers. We hope that it will provide effective practical guidance to the companies on how the conservation and recreation duties are to be discharged. It will certainly provide them with a clear warning about the essential standards to be observed in this area—on matters concerning recreational duties, ramblers and anglers, canoeists and oarsmen. I have found in discussions with the bodies that represent anglers that they believe the NRA will enhance and protect their interests.

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  Another point mentioned by several of my hon. Friends concerned the importance of not segregating pollution control from recreation duties in the NRA. The two are intermingled in their effects. Anglers and, to a lesser extent, canoeists and oarsmen need pure water, so it is important for the recreation and conservation committees to ensure that all these interests are represented so that we can see the water course in the round and ensure that we enhance the conservation and recreation interest and improve the quality of the waters, thereby reducing the pollution risk.
  The hon. Member for Wakefield (Mr. Hinchliffe) raised one of the most important issues of the debate—disconnections—and I want to allay concerns about them. We shall discuss with the industry how the existing code of practice applying to customers who have difficulty in paying their bills could be strengthened to include additional safeguards. The existing arrangements, whereby debts may be paid off by instalments and people in receipt of income support may have serious debts deducted from benefit by the DSS and paid direct to the water undertaker, will continue. The new companies will be required to prepare or adopt a code of practice on disconnections at least as extensive as the present one.
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  [Interruption.] Opposition Members may laugh, but disconnections are a serious issue and I regret that the Opposition do not regard them as important. We do.
  My hon. Friend the Member for Norfolk, North-West (Mr. Bellingham) asked why there are so few prosecutions for pollution. I agree that there are too few prosecutions of those who pollute our water courses. We shall look to the National Rivers Authority to develop more rigorous and consistent national enforcement policies. Other measures are also needed and that is why we propose new regulations governing the construction of silage and slurry stores and oil storage installations in order to reduce the pollution risks about which my hon. Friend spoke.
  The hon. Member for Copeland spoke about drinking water standards not being in the Bill.
  It being Ten o'clock, the debate stood adjourned.
  Debate to be resumed tomorrow.

  Water Bill

    NEW PARLIAMENTARY BUILDING
    Ordered,
    That this House agrees with the Select Committee on House of Commons (Services) in its First Report of the last Session of Parliament on New Parliamentary Building (Phase 2): The Next Steps (House of Commons Paper No. 561 (1987–88)).—[Mr. David Hunt.]

  Midwives (Grading Review)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. John M. Taylor.]
  10 pm
  Mr. David Alton: I am indebted to you, Mr. Speaker, for this opportunity to raise the manner in which the regrading of midwives has been undertaken. I intend to examine the particular problems that this has caused in the Merseyside area. I am pleased to see that the Minister of State, Department of Health, is in his place to reply to the debate. I am sure that he will not be offended if I say that it might have been more appropriate if his hon. Friend the Parliamentary Under-Secretary of State were present. I understand that she was born in the Oxford street maternity unit which serves much of Liverpool. I am also pleased to see in the House the official Opposition spokesman. Anyone reading the debate will realise that in an Adjournment debate it is not possible for all hon. Members who are present to take part. However, I am glad to see so much interest.
  It is no bad thing to remind the House that 76 per cent. of us were brought safely into the world by midwives acting alone and assuming total responsibility for life and death decisions. Ministers are no exception, and while stridently asserting their claim that the National Health Service is safe in their hands they should pause to reflect that from the moment of birth many of us are safe in the hands of any one of the 32,000 members of the Royal College of Midwives.
  I want to use my time today to do three things. First, I shall set out the background to the present crisis, then I shall rehearse the grievances and finally I shall explore some of the ways forward. For just over 30 years between 1870 and 1902 midwives waged a national campaign to see themselves established as a separate profession and to create better maternity facilities for women. Thirteen Bills were required to be laid before Parliament before their much-prized autonomy was finally conferred. It is that hard-fought-for professional standing that is at the heart of the present dispute, not an avaricious love of money.
  The present Prime Minister established the pay review body for nurses, midwives, health visitors and the professions allied to medicine. In its third report, the review body conceded that the RCM had put forward a well argued case for a separate pay and grading structure for midwives. Unfortunately, both management and staff sides opposed any such development and midwives were simply lumped into the general regrading exercise. Only one of the eight seats for negotiators on the staff side is held by an RCM representative, so the unique and distinctive arguments of the midwives have been pushed to the margins and given a Cinderella status.
  As recently as 30 November, in reply to a letter from me, the Under-Secretary of State was still hiding behind the fig leaf of an agreement. Although midwives were a party to that agreement, it was never directly discussed with their professional body on a bipartisan basis. Two days ago, in answer to a parliamentary question which I tabled, the Secretary of State said:
  "I suspect that much of the sense of grievance felt by some midwives in Merseyside is caused by misunderstanding of the basis of the grading exercise which the Royal College of Midwives and other trades unions agreed to."—[Official Report, 5 December 1988; Vol. 143, c. 86.]
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  I repeat that midwives were never entirely happy about the basis on which the regrading exercise was begun, and as the row simmered over the summer period their unhappiness turned to anger and dismay. The other organisations which made up the staff side understandably concentrated on important issues such as the definition of supervision and continuing responsibility. The midwives were treated as an obscure minority interest.
  What are the midwives' grievances? Guidance on prime care providers was given by the Department to general managers in May and July 1988. The original agreement made between staff and management stated that one of the criteria for being placed on scale E was a requirement
  "to take responsibility as the prime care provider for one or a defined group of patients/mothers, in the hospital setting. He/she works with minimal supervision in the assessment of all relevant care needs, the development, implementation and evaluation of programmes of care. The post holder is able to supervise and teach junior staff including basic and/or post-basic students."
  Subsequently, in evidence to the pay review body on 5 January 1988, the staff stated in paragraph 4.3 that
  "the definition of the prime care provider at Scale E(2) was intended to cover those nurses and midwives carrying high levels of responsibility in relation to patients, clients or mothers, but whose work is so organised that they do not normally take charge of a ward or supervise other staff. There is no dispute that such jobs should be graded on scale E rather than D because of the level of their direct care responsibilities."
  When the Department's guidance to general managers was published, it sought first to limit and then to prevent the use of those criteria for midwives. It inserted double-talk in the form of an interpretative note, which was never agreed with staff, stating that
  "this is a 24 hour responsibility even though delivery of care is assigned to another nurse or midwife when the prime care provider is off duty."
  Clearly, in the context of midwives dealing with women whose labour may be less than eight hours, let alone 24 hours, and who may be discharged within hours of being admitted to the hospital, this is a deliberate exclusion clause. Yet the mother will have been cared for by one midwife throughout, who will have to make critical life-or-death decisions and a series of crucial judgments. The midwife is unarguably a prime care provider.
  The Department proceeded to compound its felony in supplementary management guidance which advised health authorities that the prime care provider criteria applied to a few authorities where primary nursing had been introduced. By implication, it did not include midwives. I hope that the Minister will confirm that health authorities may apply those criteria for midwives, and that he will arrange for written guidance to general managers clarifying this apparent misunderstanding and the 24-hour rule.
  Another grievance concerns the lack of fairness and consistency applied to the regrading exercise. Why has one staff midwife in 10 in England and Wales been placed on scale D, but only one in 500 in Scotland? Why have half the staff midwives in Wales been placed on scale F, but only one in eight in England? Why have 25 per cent. of midwifery sisters in Scotland and England been placed on scale F, but only 8 per cent. in Wales? There are many examples of hospitals where all or virtually all the hospital-based midwifery sisters have been placed on scale F, while in some areas every midwifery sister has been placed on scale G.

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  Funding restrictions are given as the reason for not having graded in accordance with the agreed criteria. Perhaps when the Minister replies he will say what differences exist between the five districts in the Mersey region. Will he say what consideration has been given to the consequences for recruitment and retention of midwives in the Mersey region and when it will be possible for them to move to north Wales and have their clinical skills recognised by higher grades and salaries? The problem cannot be minimised in a profession that already has an 8 per cent. vacancy rate at the sister-midwife level and a 17 per cent. shortfall of sister midwives.
  The Minister will no doubt state, as have his right hon. and hon. Friends, that the sheer size of the award should satisfy midwives. If he or representatives of the regional health authority had been present at a meeting that I addressed on 18 November at the Liverpool Institution, he would realise that the inconsistencies and confusion caused by the grading implementation have far outweighed any so-called benefits. The 130 midwives present at that meeting—even those who had benefited —signed a petition, which I subsequently presented to the House on 23 November, registering their unanimous dismay at the block grading, which they believe has been determined by cash constraints and not clinical considerations. In early day motion 79, my right hon. and hon. Friends and I emphasise our support for their case.
  Midwives at that meeting gave an example of a midwife with 10 or 12 years' service who was still on E grade. She will remain there until she either votes with her feet to leave the area or decides to go back into general nursing or into health visiting. To get to G grade is a near impossibility. Some sisters of 30 years' standing are not on G grade. The midwives told us at that meeting about students cancelling places at training schools. Although in October the Department stated that nurses opting for midwifery training need not be worse off during their training, the ludicrous situation still applies that, once they complete their training, they will be forced to apply for posts at the lower grade D. What sort of incentive is that? No one with a mortgage will be able to afford to take that option, so expenditure on such training will be of no avail. Taxpayers' money will be used to train people who will not be able to afford to take up posts.
  The Merseyside midwives gave an example of one woman who had trained another, yet the trainee had ended up on a higher grade than the trainer. One midwife said, "The Minister seemed to think that just because Lofty could deliver a baby on EastEnders anyone could do it," and that midwives' worth had effectively been downgraded. Experience in other countries shows that fewer midwives leads to more deliveries by doctors, more intervention and more caesarian deliveries—in other words, serious long-term shortages of midwives will be detrimental to care of mother and child and carry grave consequences for maternity services.
  What needs to be done? It is no good the Minister simply telling us that midwives in Merseyside and elsewhere should appeal. For a start, in many authorities the watchdog is too closely identified with the burglar, with the appeals mechanism weighted in favour of the health authorities. It is also a gruesomely long drawn out process, the length of which will turn this issue into a running sore. Before they consider the appeals, the Minister needs to tell the House what instructions he will give health authorities over issues such as prime care
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  provider criteria and on what basis appeals are to be settled. Are they, for instance, to be heard against the agreed grading criteria, or will authorities be expected to apply management guidance which grossly distorts those agreed criteria? The Minister needs to say what funds will be available if authorities decide to set aside their earlier decisions.
  The Government also need to change their attitude. They appear to believe that midwives do not understand the grading structure and that that is responsible for much of the unhappiness in the profession. As midwives see it, the problem is very much the other way around.
  Mr. Nigel Spearing: Does the hon. Gentleman agree that despite the 25 per cent. reduction in staff at Newham general hospital the midwives' diagnosis of the problem is virtually the same as the one that he is outlining, which, I dare say, is found throughout the country? It appears to the staff that the Department does not understand their job or profession.
  Mr. Alton: I am grateful to the hon. Gentleman for that intervention. The Merseyside problem is a microcosm of the difficulties faced all over the country and experienced by hon. Members on both sides of the House.
  It is important for us to recognise that midwives are not arguing that they should all be on the same grade. They believe that those midwives with identical responsibilities should be on the same grade. They cannot accept that it is right for an arbitrary distinction to be made between midwives doing precisely the same jobs. Many are on the sister scale, not because of supervisory duties but because of their clinical expertise and responsibilities. They will not accept being told that only a limited number of them can be paid on the scale appropriate to those skills and responsibilities because the regional health authority Will allow them only a limited number of posts at that grade. They strongly resent that, whether the district authority has selected certain midwives for the higher grade or whether they are all asked to compete for the limited number of scale G posts.
  Similarly, those midwives working in hospitals in ante-natal and post-natal areas cannot understand why they should be graded on lower scales than their colleagues doing similar work but based in the community. Midwives working in the community have a minimum of scale G, yet the Health Department has been advising that, although scale G posts may be in such areas as delivery suites and special care baby units, lower scales are appropriate for those hospital-based midwives who have responsibilities similar to those of their community-based colleagues. That is clearly nonsense. Each and every midwife, wherever she works, is legally accountable as an individual for the decisions that she makes and the actions that she takes. Hospital-based midwives are making crucial decisions without reference to other midwives or doctors every working day. If those decisions turn out to be mistaken, the midwife is liable to be struck off the professional register and be unable to practise. Community midwives find those arbitrary distinctions just as difficult to understand or support as do hospital-based midwives.
  What midwives such as Lorna Muirhead, a local RCM representative who organised the Liverpool meeting to which I referred, cannot understand is how a health department which supports integrated maternity services and therefore flexibility within maternity units and

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  flexibility between hospitals and the community can be seeking to enforce gradings which are having the effect of preventing that.
  All concerned agree that the operation and extension of that flexibility is desirable and in the interests of mothers and babies alike. I hope that I have said enough for the Minister to realise that, on Merseyside and in the country at large, midwives feel a deep sense of grievance and that we owe it to them and to mothers-to-be to come up with something better than the present grading hotchpotch. I hope that the Minister understands that they and their professional body, the Royal College of Midwives, which has today met the Secretary of State, will be awaiting his reply tonight with hopeful anticipation.
  10.15 pm
  The Minister of State, Department of Health (Mr. David Mellor): I am grateful for the opportunity to set the record straight about the grading of midwives both nationally and in the Mersey region because the hon. Member for Liverpool, Mossley Hill (Mr. Alton) is only the last in a long, but perhaps not altogether distinguished, line of people who have said some pretty extraordinary things about this exercise.
  Claims that the midwives have done badly out of this exercise quite simply do not stand up. This is the best deal ever for midwives and the biggest ever pay award for their profession, worth well over 20 per cent. on average. This award gives the profession the highest ever level of real terms pay, higher than the previous high point set by the Halsbury report in 1974 and the Clegg award in 1979. This is a larger award than that enjoyed by any other major staff group in the public sector this year. Midwives have done even better than nurses in the regrading exercise, which reflects their qualifications.
  I should like to bring some figures into this debate that will demonstrate that. As I have said, the average pay award for midwives this year is over 20 per cent. and, for staff midwives, it is over 25 per cent. In each case, these figures are exclusive of the London supplements which will add another 5 per cent. to 9 per cent. for those individuals who work in midwifery in London. Staff midwives have done particularly well. Nine out of 10 have gone on to the higher grades with increases this year of around £2,000, a quite unprecedented sum. The bulk of staff midwives have gone on to scale E with basic pay now of £9,200 to £10,650 a year and almost £2,000 a year more than that in inner London. With additional payments for working unsocial hours and overtime, the average earnings on this scale are likely to rise to £12,500 in the country generally and to around £14,500 in inner London.
  About one in eight staff midwives has been graded at F and received even larger increases of 40 to 45 per cent., an utterly unprecedented sum; that is to say, £2,900 to £3,900 this year. The hon. Member for Newham, South (Mr. Spearing) finds that funny, but he was a supine Back Bencher in the days when Labour Governments were cutting the real pay increases of nurses and midwives by 20 per cent.
  The minority of staff midwives—about one in 10—who have gone on to the lowest grade of D have still received increases this year of 7 to 10 per cent. and have still seen
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  their pay go up in real terms by 30 per cent. since 1979, an arresting contrast with what happened in the preceding years.
  Three out of four midwifery sisters have gone on to the higher grades and will receive increases of £2,000 to £3,000 this year. Their new scales are from £12,025 a year to £13,925 a year with additional payments for unsocial hours and overtime. Earnings for this grade are likely to rise to an average of £16,000 or almost £18,000 in inner London.
  A minority of midwifery sisters who receive smaller increases this year will nevertheless have seen their pay go up by over one third in real terms since 1979. Midwives have gone into the higher grades in even larger numbers than nurses at both levels. This reflects the additional qualifications that midwives must have.
  At staff midwife level, no fewer than 77 per cent. are on grade E, compared with 66 per cent. of staff nurses, and 12 per cent. have gone into grade F compared with 9 per cent. of staff nurses. As for midwifery sisters, 74 per cent. have gone into grade G compared with 58 per cent. of nursing sisters.
  It is not true that midwives have been treated badly during the exercise. Indeed, the exercise will give the nursing profession the greatest shot in the arm that it has had since the National Health Service was founded.
  Mr. Spearing: Will the hon. and learned Gentleman give way?
  Mr. Mellor: No, I shall not give way. If the Opposition want to debate the matter, they have their parliamentary time. I can assure them that my right hon. Friend the Secretary of State and I are only too willing to debate it at greater length, but this is not the occasion to do so. I want to get a few facts on the record in response to what the hon. Member for Mossley Hill said.
  Mr. Spearing: I wanted only to ask a question.
  Mr. Mellor: I understand that there is some misunderstanding in certain quarters within the profession. That is inevitable when a major change is instigated by the unions concerned, which were pressing for regrading. They did not want an across-the-board pay increase. They wanted a regrading that gave nurses and midwives an incentive to stay in clinical medicine rather than go into administration to improve their lot. When half a million people are being regraded in six months—perhaps the most massive industrial relations exercise that has ever been undertaken in Britain—it is inevitable that there will be some misunderstanding. That is why I want to deal with some of the issues that have been misunderstood. A number of points arise from what the hon. Member for Mossley Hill has said.
  We are talking about the greatest change in the way in which nurses and midwives are graded and paid in the history of the NHS. It is clear that some do not fully understand the thinking behind the change, and that is inevitable. We have a task before us to ensure that the reasons for the change are plainly understood. The old grading system was based on qualifications. Under the new structure, posts are graded on the basis of duties and responsibilities. In other words, the basis of grading has been overturned. It follows that some of the issues raised by the hon. Member for Mossley Hill, such as length of time in post and qualifications held, are not in themselves

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  factors that decide grading. That was commonly agreed after two and a half years of negotiations between unions and management.
  Mr. Spearing: Not midwives.
  Mr. Mellor: Midwives absolutely, yes. As usual, the hon. Gentleman is wrong on his facts. The Royal College of Midwives was a party to the agreement, along with the Royal College of Nursing. The colleges actively sought a regrading exercise and sought to persuade the Government that it was not sufficient to think in terms of pay increases. They argued that it was necessary to change the basis of grading, which was entirely archaic. A staff nurse was on one grade and a sister was on another. There was a low plateau of achievement in clinical medicine in terms of salaries and awards. It was time to do better, and I believe that history will show that that is what we have done.
  Inevitably, there is dislocation. The unions and the royal colleges knew when they embarked on the exercise that the basis of the regrading structure made it certain that some who were similarly graded in the past would find themselves in different grades and receiving different pay increases. That was inherent in the scale of the change.
  I appreciate that there are some concerns that are specific to midwives, and I am happy to address them. We know that midwives have long had the ambition that they should have a separate pay and grading structure. They have sought unsuccessfully to persuade the management side and the rest of the staff side of the nursing and midwifery staff negotiating council to accept that. They failed to impress the staff side and they took their case to the review body, which also rejected the idea that midwives, valued though they are—and they are valued enormously within the service—should have an entirely separate grading structure.
  The review body is another innovation of this Administration. Needless to say, the Labour Government were always in far too much economic jeopardy ever to agree to allow anything so radical as nurses' and midwives' pay to be recommended by a wholly independent body, recommendations which the Government would accept unless there were exceptional reasons not to do so. It was an innovation of the Conservative Government in recognition of the services nurses and midwives give to the community, and in recognition also of the happier economic times that allow us to fund increases of a sort that could not have been contemplated previously.
  In its fifth report, the review body said that the new structure, to which the Royal College of Midwives as part of the staff side agreed, would
  "provide a satisfactory basis on which to determine the grading of midwives, taking account of their training, qualifications and the particular responsibilities they carry."
  In determining that midwives should be on the same grading structure as nurses, we were acting on the clear endorsement of the independent review body, which has been established to consider those matters. I understand that the Royal College of Midwives remains attached to its opinions, notwithstanding the fact that it has, thus far, been unable to persuade anyone else, not least its colleagues on the union side, to join it on that point.
  Of course, the vast majority of midwives have to undertake midwifery training after they have completed training as general nurses and some midwives say therefore that they should have a higher level of grading as soon as
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  they have qualified. The management side's view is that the minimum level for midwives should be D—the same as the minimum level for registered nurses although, of course, only a small minority—one in 10—of staff midwives actually start on D. Nothing in the analysis of midwifery posts that was carried out during the grading review indicated that newly qualified midwives were working in a significantly different way from newly qualified nurses. We have to accept that in the modern Health Service of today, with high technology medicine a commonplace, there are many sophisticated practitioners of the arts of nursing and midwifery. Midwives, although vital to the service, are only one of a range of groups that bring additional qualifications and specialisms to the Health Service and that are equally entitled to be graded under this new grading structure, with unprecedented levels of salary and prospects. A sister who was earning £96 a week maxim um less than 10 years ago under the benevolent rule of the Labour Government now stands to earn at least £270 a week and, usually, on higher grades, much more than £300 a week. We would hardly have dared in 1979 to have said that that would be the improved condition of nurses and midwives, but that is what we have achieved.
  I conclude by dealing with the specific problems in Mersey. The hon. Gentleman very properly ranged more widely and I am glad to have had a chance to say something about the national picture. Turning to the outcome of the exercise in Mersey, the grading outcomes are very much in line with the national figures. A large majority of staff midwives and midwifery sisters have gone into the higher grades. That is hardly surprising because, of course, the exercise in Mersey has been carried out in line with the national guidelines. There are 190 different health districts in England and each of them is an independent decision-taker. It is inevitable that there will be differences between one district and another and the only alternative to that is for the man in Whitehall to do the whole job himself, which would lead to an equal range of protest, not more. I can imagine the outcry from the Opposition if there were more attempts by Whitehall to say that each district should come into line with another. We are caught in a Morton's fork. On the one hand, if we intervene too much we are criticised, and if we allow some districts to go their own way, we are criticised for that. It is a no-win situation and we must take much of the criticism with a substantial grain of salt. My hon. Friend the Parliamentary Under-Secretary of State for Health assures me that salt in excess is bad for health.
  To the extent that the pattern of grading differs from that elsewhere, this is likely to be explained by the fact that, under the old grading system, there were 60 per cent. more midwifery sisters than staff midwives in Mersey. That compares with a national pattern where there were about 10 per cent. more midwifery sisters. That is good news for Mersey because it means that the number of experienced midwives in the region is somewhat higher than elsewhere. It also means that sisters in Mersey were doing some of the jobs that staff midwives were doing elsewhere and vice versa, and this will, very properly, be reflected in the grading outcome, which analyses existing jobs and not individuals.
  The newly appointed regional nursing officer in Mersey is keen to develop the educational strategies for midwives in the Mersey region. Plans are in hand for a direct entry midwifery training programme which will deal with some of the problems and anomalies that the hon. Gentleman

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  has identified. It will allow students to follow a three-year course without first having to undertake nurse training and we hope that it will commence in the autumn of next year and will be well supported in the Mersey region.
  There are also plans to extend professional development programmes for qualified midwives and to develop links with universities for an advanced diploma in midwifery course. Work is also beginning in Mersey on an examination of work loads and activity, linked to skill mix, to ensure the best utilisation of valuable midwifery resources. All these developments are to be welcomed and should serve to boost the morale of midwives in Mersey and aid their recruitment and retention.
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  We hope that we have demonstrated in the most practical way possible the high regard in which we hold the midwifery profession. Midwives' pay stands at its highest ever in real terms. The new grading structure is the biggest change in the grading and pay of midwives since 1948. The agreement was reached after very hard negotiations with the trade unions. It provides a structure capable of recognising and rewarding the exciting developments in the maternity services—
  The motion having been made at Ten o'clock and the debate having continued for half an hour, MR. SPEAKER adjourned the debate without Question put, pursuant to the Standing Order.
  Adjourned at half-past Ten o'clock.