§ 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.
§ 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. 337 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 (Copeland)
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 338 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 (Stockton, South)
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.
§ 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. 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 339 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 (Brecon and Radnor)
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 340 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 (Hornsey and Wood Green)
As attention has been drawn to 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 (Burnley)
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 341 in the hon. Gentleman's history are 1974 and 1988—both under Tory Governments. That rather bears out what I said.
§ 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 342 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 343 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 (Denton and Reddish)
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 344 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.
§ Dr. John Cunningham (Copeland)
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. 345 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.
§ 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.
§ Dr. Cunningham
No, I shall not give way.
These proposals are a betrayal of the consumer and of every household in England and Wales.
§ Dr. Cunningham
I shall not give way.
Under this Government, average domestic water bills have already increased by 150 per cent.
§ Dr. Cunningham
I have said no.
That is according to the water industry's own publication, "Water facts".
§ 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.
§ 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.
§ 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' 347 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 £1.187 348 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.
§ 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 349 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.
§ 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.
350 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 351 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. 352 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 (Dorset, North)
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.353 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 peopleby 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.
§ Sir Hugh Rossi (Hornsey and Wood Green)
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.
354 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 355 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 356 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 357 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.
§ Mr. Richard Livsey (Brecon and Radnor)
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.
358 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 (Bootle)
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. 359 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 (Meirionnydd Nant Conwy)
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 (Leicestershire, North-West)
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 360 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.
§ Sir Charles Morrison (Devizes)
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 361 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 362 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 (Woking)
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 authoritysubject to the Treasury's approval".What guarantee is there that the Treasury will be less mean than usual?
§ 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.
§ Mr. Peter L. Pike (Burnley)
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 364 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.365 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 366 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.
§ 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 (Cambridgeshire, South-West)
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 367 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 (Stoke on Trent, North)
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.
368 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.
§ Mr. Gareth Wardell (Gower)
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. 369 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 370 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.
§ Mr. Martin M. Brandon-Bravo (Nottingham, South)
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 371 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.
372 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.
§ Mr. Nigel Spearing (Newham, South)
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, 373 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. 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— 374 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. 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.
§ Mr. Alastair Goodlad (Eddisbury)
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 375 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 376 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 377 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.
§ Mr. David Hinchliffe (Wakefield)
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 378 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 1993.379 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.
§ Mr. Roger Knapman (Stroud)
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 380 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. 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".381 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 isunder-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 (Glasgow, Provan)
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 382 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 383 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.
§ Mr. Keith Raffan (Delyn)
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 10 384 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 385 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. 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.
§ Mr. Andrew F. Bennett (Denton and Reddish)
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 386 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 387 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 388 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.
§ Mr. Dudley Fishburn (Kensington)
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. 389 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 howfeather-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.
§ Mr. Clifford Forsythe (Antrim, South)
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 390 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. 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 (Norfolk, North-West)
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) 391 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 (Brent, South)
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 392 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.
§ Mr. Dafydd Wigley (Caernarfon)
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?
394 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. 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 395 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 (Leicestershire, North-West)
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 396 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.
§ Mr. Paul Boateng (Brent, South)
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 397 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 398 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.
§ Mr. Edward Leigh (Gainsborough and Horncastle)
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. 399 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.
§ Mr. Allan Roberts (Bootle)
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 400 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 401 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.
402 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 403 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. 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 404 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.
§ 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. 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 406 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. 407 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. 408 [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.