THE NATIONAL RIVERS AUTHORITY

HC Deb 04 April 1989 vol 150 cc61-71

Mr. Moynihan

I beg to move amendment No. 55, in page 186, line 23, after '(1)' insert

'The Authority shall be entitled to borrow in accordance with the following provisions of this paragraph but not otherwise.

(1A) Subject to sub-paragraph (1C) below'.

Mr. Speaker

With this it will be convenient to take Government amendment No. 56.

Mr. Moynihan

The amendments set out the circumstances in which it is proposed that the National Rivers Authority will be able to undertake borrowing in relation to its functions. Amendment No. 55 provides that the amount borrowed by the NRA under its temporary borrowing powers, for which paragraph 18 of the schedule already provides, will be subject to the authority's overall borrowing requirement. Amendment No. 56, which is the more significant of the amendments, would give the NRA the ability to undertake long-term borrowing to finance its flood defence functions in certain defined circumstances. It describes the mechanism by which loans would be made to the NRA for that purpose and sets out borrowing limits which would apply.

During discussion in Committee of the NRA's finances concern was expressed on both sides about the fact that the Bill did not provide for the NRA to have long-term borrowing powers in relation to flood defence work. In particular, concern was expressed in Committee about the funding arrangements for flood defence emergencies. As my hon. Friend the Member for Daventry (Mr. Boswell) said: Emergencies may arise which occasion emergency action and it is extremely difficult to budget or save for that in advance."[Official Report, Standing Committee D, 17 January 1989; c. 258.] We have given careful consideration to the arguments that were put in Committee by my hon. Friends and, indeed, to representations received from those concerned with flood defence arrangements and to the views of the Opposition. While we remain firmly of the view, for reasons that I explained at length in Committee, that it is not necessary for the NRA to have long-term borrowing powers to deal with the normal run of flood defence work, we accept the argument that there are some circumstances in which it would be right for the NRA to have such powers.

Accordingly, amendment No. 56 provides the NRA with borrowing powers for use when it is faced with heavy expenditure for which it had been impossible to plan. We therefore do not expect that they will need to be used very often. Long-term borrowing under these powers would require the consent, as appropriate, of my right hon. Friend the Minister of Agriculture, Fisheries and Food or my right hon. Friend the Secretary of State for Wales, together with the approval of the Treasury. We intend that the use of these powers shall be limited to circumstances in which works are urgently needed to avoid the risk of serious flooding, and the flood defence committee cannot defer other planned work to provide the necessary finance.

Mr. Pike

This is an important amendment and, as the Minister said, the subject evoked much concern in Committee. Can he tell us how the £160 million limit was arrived at and what would happen if at some subsequent date the figure proved insufficient? Could it then be changed?

Mr. Moynihan

It is a figure which, after detailed consideration with the water authorities, we felt was a wise, indeed generous, one to cover such unexpected expenditure. There is no doubt that in the event of an appalling tragedy that required substantial expenditure we would need to come to the House anyway. The hon. Gentleman will recall that that matter was argued in Committee. If I recall rightly, one of the examples aired was of an extensive flood in East Anglia and the possibility of substantial expenditure being required. Clearly, that would require parliamentary approval either under the usual procedure or under an emergency procedure.

We think that after lengthy discussions the figures arrived at in the proposal are generous. I am sure that hon. Members recognise that long-term borrowing powers should more than adequately cover the points made by hon. Members when, often vociferously but mainly in a quiet and gentle manner, they expressed their concern about the arrangements for funding flood emergencies. I am confident that the amendments fully meet that concern, and that, with the addition of these powers, the National Rivers Authority will have the full range of powers that it needs to respond to any future flooding emergencies. They will ensure that flood defence committees will be able to carry out their vital work as effectively as they have carried it out in the past. They also provide a clear demonstration that we are determined to give the NRA all the powers that it needs to operate effectively.

Mr. Allan Roberts (Bootle)

The Minister was right to say that the amendments are important. The Government recognised the strength of the case made by Opposition and Conservative Members in Committee when we debated the National Rivers Authority. The main amendment, No. 56, would allow the National Rivers Authority to borrow other than by way of a temporary loan from the Secretary of State or from the Minister of Agriculture, Fisheries and Food money for capital purposes in connection with flood defence. The amendments set up a system for such spending to be subject to review by the Comptroller and Auditor General and for reports and accounts to be laid before Parliament. We do not object to any of those things, but there are certain items missing from the amendments and the Opposition think that such items should have been included to take the amendments further and to provide for a much more comprehensive system of borrowing powers and freedom to borrow for the National Rivers Authority.

The borrowing is related only to the carrying out of flood defence functions and not to the environmental works that will be the responsibility of the National Rivers Authority and with which I shall shortly deal. As my hon. Friend the Member for Burnley (Mr. Pike) has said, sub-paragraph (1C) of amendment No. 56 limits the amount outstanding on the aggregate of loans to the NRA to £100 million or such greater sum, not exceeding £160 million, as the relevant Ministers may specify by order which is subject to affirmative resolution. It would be helpful to know the basis for these broad figures. The Minister touched on that, but I do not think that his answer to my hon. Friend the Member for Burnley was wholly satisfactory. Will the Government guarantee that all flood defence work likely to be considered desirable by the National Rivers Authority will fall within these limits? What provision will be made for updating the figures against inflation?

The fixing of a ceiling in primary legislation effectively constrains the developments in the capital programme of the National Rivers Authority even in the face of unforeseen requirements. Throughout the progress of the Bill when it was a matter of conforming to EC and environmental standards and of imposing controls that benefit the consumer, the Government left everything subject to the Secretary of State for the Environment who can determine the levels, the figures, the dates, the times and the expenditure as he sees fit. However, when it is a matter of setting expenditure and borrowing levels in the public sector the actual figures have been put down in the Bill by way of amendment and it will be difficult to get them changed. We should like to hear more about that.

The Government's proposals are inadequate in the light of the functions of the National Rivers Authority. We are concerned about how the authority will function and how it will be able to carry out the jobs now done by the water authorities that are being handed over to the NRA. Lord Crickhowell, who will be the chairman of the National Rivers Authority, said: Before I leave the subject of charges, I think I should make it absolutely clear that I see it as one of the priority objectives of the new National Rivers Authority to operate a slim, efficient, cost-conscious organisation. The National Rivers Authority will start with a problem. They will inherit existing structures, obligations and commitments to staff. These commitments must be honoured but clearly, as soon as it is in being, it will need to undertake a thorough review of what resources it needs to retain inhouse and what services it might over an appropriate time scale buy in from outside contractors. We are concerned that if the National Rivers Authority is prevented from borrowing the money that it needs to do all the jobs and tasks that it is being given, and not just flood protection and defences, there will be much outside contracting. There will be an inadequate, slimmed-down authority, that has not got the resources, and will not have the borrowing power, to get on with the job that the majority of hon. Members want it to do.

The functions of the National Rivers Authority include water resource planning, licensing of abstraction and the monitoring of licences; there are no borrowing powers for those. Then there is environmental quality and pollution control. Perhaps the Government do not want the NRA to do effective work on environmental quality and pollution control lest it might deter people from buying into the private companies at the time of flotation. There are no borrowing for those functions. Nor are there borrowing powers for the maintenance, improvement and development of fisheries in inland waters, for conservation and recreation, or for the navigation responsibilities of three water authorities. Nor are there borrowing powers for some of the functions of Her Majesty's inspectorate of pollution that are being passed to the National Rivers Authority, or for research.

I have left to the end the question of sea defences. Sea defences and flood defences are similar. Why should sea defences be excluded and flood defences included? That is difficult to understand, especially as the funding for both is similar at the moment, in that the water authorities precept on the local authorities in the areas concerned, and the money eventually comes from rates. Perhaps the Government do not want to give borrowing powers for all the environmental activities that the National Rivers Authority will have to deal with, because they do not want rigorous enforcement imposed on a privatised industry. Perhaps the exclusion of sea defences was an oversight by the Government and they should have been included in the amendments.

The National Rivers Authority will be the only national body engaged in environmental control and monitoring water pollution, yet it is to be given only limited borrowing powers for just one of its functions. Of course, borrowing powers are not much good if the Department of the Environment via the Treasury, or the Treasury via the Department of the Environment, prevents the borrowing because the National Rivers Authority is in the public sector and the borrowing cannot go ahead because of public sector borrowing requirement restrictions, something that the Government have claimed they are getting away from by privatising the water industry. The only justification of substance that they have found for their privatisation proposal is that the privatised water industry will be free from PSBR restrictions. Of course, the water industry could be free from such restrictions without being privatised, and merely by a political decision of the Government.

The National Rivers Authority will remain in the public sector. All the environmentally essential functions of the authority will remain in the public sector and are not being freed from PSBR restrictions. The NRA is being emaciated at birth and strangled by lack of power before it even gets going. With the amendments, the Government have taken a small, tentative step in the right direction. They should move amendments in the other place, if there is not time now, to include borrowing powers for all the functions of the National Rivers Authority. They should give an undertaking that they will release the authority from PSBR restrictions. That can be done in the public sector. British Nuclear Fuels is in the public sector and it does not suffer PSBR restrictions. That precedent could be followed for the water industry, as it will be when we have a Labour Government and we take it back into social ownership.

4.45 pm

We want to know how the borrowing is to be funded. When an organisation borrows it has to pay interest. Is borrowing to be funded by a precept on the local authorities in whose areas the flood defences are situated, or is it to be funded from general taxation? It is ironic that a Conservative Member mentioned comparative competition even in relation to pension schemes. One thing is certain, as is shown by the amendments on borrowing: the legislation will not introduce competition into the supply of water or the treatment and disposal of sewage. Comparative competition is a joke. There will be no competition.

It is amazing. We have in power a Government who are trying to introduce competition into the sale of beer and at the same time private monopolies into the sale of water. The Government will stand condemned because of the inadequacy of the legislation to protect the environment and their inadequate proposals for the National Rivers Authority which they have heralded as a great environmental step forward.

Mr. Malcolm Moss (Cambridgeshire, North-East)

I represent a constituency which must be the most drainage-sensitive area in the United Kingdom, so my constituents are extremely pleased with the Government amendment. I want to take up a point made by the hon. Member for Bootle (Mr. Roberts) about flood defence functions. It is my understanding that, under the Land Drainage Act 1976 sea defences and flood protection of sea defences are in the same category as flood protection and land drainage in internal land areas.

Before the amendment was tabled, there was great concern in the Fens of East Anglia that necessary works might be put back or even deferred indefinitely because of the problems associated with raising finance to do necessary work. The problems arise fundamentally from the need to raise capital to meet emergencies and to do the necessary long-term work. There is an example at the moment at the development stage of Anglian Water for the constituency of Cambridgeshire, Nort-East—the middle and south level barrier banks and Ouse washes scheme. That work is being undertaken by the Great Ouse local land drainage committee. The scheme will cost about £20 million. The main elements will be constructed over a four year period, with expenditure of about £5 million per annum. That compares with the normal expenditure of the committee of an average of £3 million each year, so a colossal increase in expenditure is required.

The Ouse washes scheme is a repair of the magnificent drainage channels constructed by the Dutchman Vermuyden, in the 17th century. They have lasted well from that date, but they are in need of repair. Some seepage is taking place into surrounding farmland which hon. Members will be interested to know is 10 to 12 ft below the water level in the channels. Therefore, it is vital that the necessary remedial work is done on the banks.

If the Government had not come forward with the amendment, there would have been serious implications for the local community in raising the necessary finance. Normally such capital projects are financed by a precept on the county council rate. Under normal circumstances, without the amendment, the increase would have been 34.7 per cent. from 1 April this year. Without the borrowing powers, a further 40 per cent. increase would have been necessary during the period of construction. The effect of the precepts on the internal drainage boards is even more dramatic, because the impact falls on the boards which benefit from the schemes instead of being spread over a much larger area. Increases of up to 90 per cent. would have applied from 1 April this year and further increases of up to 80 per cent. during the period of a scheme's expenditure.

It is obvious that my constituents who pay county council rates and those in the vicinity of the Ouse-Wash banks who pay the necessary drainage rates to their local internal drainage boards are delighted with the Government's amendment. They believe that the amount specified in the amendment of up to £160 million will more than cover the needs of Cambridgeshire and the Fens to the end of this century and beyond. That money also includes provision for considerable flood protection work necessary on the east coast, particularly at Aldeburgh and further north in Norfolk.

The Government have listened carefully to representations from the farming community, from landowners and from my constituents. I know that representations have also been made by many of my hon. Friends and I am grateful to the Government for listening carefully to there and for producing the necessary amendment.

Mr. Dafydd Wigley (Caernarfon)

I am pleased to welcome the amendment. As hon. Members have said, there was pressure in Standing Committee about this point. I was involved in those debates in Standing Committee because of the implications of this part of the Bill for my constituency, which suffers in many ways from problems of flooding.

The hon. Member for Bootle (Mr. Roberts) raised a point which the Minister must clarify. I had assumed that the amendment would cover the effects from the sea. The Minister would help us if he could confirm that when he replies. If the amendment covers flooding from rivers but not from the sea, there will be a ridiculous situation in some estuarial waters where water enters the area during storms from the sea and the river. In that situation there would have to be a demarcation between which water has caused what damage. There would also be questions about the necessary investment to repair that damage. The Glaslyn estuary near Porthmadog in my constituency has a cob which acts as the sea defence works. However, much of the flooding in that area is caused by water from Snowdonia moving down the river. The Minister may be aware of that example and he must consider it when he replies.

The amendment is welcome as far as it goes. It is unnecessary to build into the Bill the requirement for an amendment to primary legislation if in due course there needs to be a figure over and above £160 million. I cannot see the need for that.

An order before the House would be sufficient to raise the figure to the required level. If an order is to be brought before the House, the Government must introduce it and it must have the support of both Chambers. That must surely be sufficient sanction without the need to build in an amendment to primary legislation. I do not see the need for such rigidity in the Bill.

Mr. Pike

The hon. Gentleman is making a valid point. When we consider the approvals which must be secured from Ministers and Treasury, it is nonsense for the limit of £160 million to be included in the Bill, when Ministers must be convinced that that limit must be achieved. We must be able to achieve this more easily.

Mr. Wigley

Exactly. Perhaps the Government will consider whether this part of the Bill can be further amended in another place.

When the Minister responds, will he clarify the Department's responsibilities in Wales even when, at this late stage, the Bill is dripping its way to another place for further consideration?

Schedule 1 refers to the Secretary of State and the Minister". In Wales the Secretary of State and the Minister are the same person. Will the Minister confirm that the Secretary of State for Wales will have responsibility for the whole of Wales, or does he have responsibility only for that part of Wales covered by the regional division of the NRA which is located in Wales? It would be helpful for the people outside this place who must work with this legislation if that point can be clarified. It is not entirely clear now.

Mr. Boswell

My hon. Friend the Minister has already referred to the modest part that I played in Standing Committee on this subject. Those hon. Members who served on the Committee will be aware that I made two speeches about this topic. I introduced an amendment and replied to it at some length. Having expressed my feelings rather strongly in Committee, it would be churlish of me if I did not immediately thank the Government for meeting my substantial concerns which reflected the concerns of many people who have the interests of land drainage at heart by introducing this amendment today.

Although it is inevitable that the Opposition must oppose, they were less than gracious in their welcome for the amendment and in the way in which they sought to use the amendment as a lever to move to further sunlit uplands of unlimited and extravagant Government expenditure.

We remember the economic doctrines espoused by the hon. Member for Bootle (Mr. Roberts) who must not be confused with the distinguished economist, Mr. Roger Bootle. The doctrine espoused by the hon. Member for Bootle was one of limitless Government expenditure, unbridled borrowing and the inevitable consequences. I can understand why the Government have seen fit to impose certain restrictions on the NRA's borrowing powers, even within the concessions that they have announced today.

Those of us with any experience of working in a Government Department and dealing with the Treasury must fully understand the difficulties of making a case for public spending and the absolutely essential role of the Treasury as the thin red line to curtail spending. I believe that the Government have probably got the balance about right in this amendment.

The Opposition expressed particular concern about the sum involved. It is significant that a sum of up to £160 million is not far away from one year's expenditure on land drainage by the existing water authorities. That is a generous and appropriate allocation.

The Opposition also question whether the amendment's scope should be extended beyond the emergency requirements of land drainage. At this stage I believe that that is not necessary. The hon. Member for Bootle did not make the point clearly enough that the bulk of NRA funding will come from grant aid which will be considered by the Treasury and debated in the estimates in this House. That is the proper way to run Government expenditure. I will not complain if the Government have not given us the whole loaf, when they have given us nine tenths of it.

I hope that the Government will pause and consider whether it would be better, as the hon. Member for Caernarfon (Mr. Wigley) suggested, to introduce an order-making power for flexibility. The last thing that Ministers want is to introduce primary legislation.

If the limit of £160 million needed to be breached for good reason, the last thing that they would want is a separate Bill. They would have to wait to tack the measure on to another Bill and there would be an unnecessary delay. The Government's readiness to listen to our arguments in Committee and their readiness to resist any mechanism which might add to delay, has caused them to introduce this amendment today. Let us have the right figure and the right mechanism to increase that figure if that is necessary in future.

5 pm

Mr. Livsey

One of the things one must welcome is that this amendment involves flood defences but, of course, flood defences only. One can just about remember crises as far back as 1953, when there was immense flooding on the east coast. The £168 million ceiling may be adequate in some senses, particularly perhaps in Cambridgeshire, but may not be adequate to cover the whole of England and Wales. That problem may need to be addressed in future. Will the Minister tell us whether this figure will be indexed over the years, or, indeed, as the hon. Member for Daventry (Mr. Boswell) just mentioned, whether there is at least a possibility of bringing in an order to update such a figure for future expenditure? The fact remains that this involves cash limits by the Treasury on the NRA.

A lot has been said by the Government during the course of the Bill about the gamekeeper-poacher aspect of the Bill. Effectively, this places restrictions on the gamekeeper, and we do not want a toothless environmental protection agency.

I believe that more flexibility beyond flood defences in the financing of the NRA is needed. Sea defences have already been mentioned, and I am sure the Minister will be clarifying that in his wind-up on these amendments.

There are extremely important aspects of funding, such as pollution; the environment; fisheries; and indeed, on the River Wyre, which runs through my constituency, navigation. The press release from the Department of the Environment of 15 March on the provisions made in this amendment indicated restrictions on borrowing powers for unplanned expenditure; at least, one could deduce that. Really, loan finance is required for all capital expenditure on a planned basis, and I hope that amendments to this effect will be tabled in the other place to enable adequate funding of the NRA. I would like to test the Minister's attitude to capital as far as aspects other than flood defences are concerned, and see whether there is any flexibility in the Government's attitude towards this type of expenditure.

Mr. Moynihan

On the question of guarantees, the long-term borrowing under this amendment is of course for Government, so there is no question of the Government needing to guarantee it. On the subject of borrowing powers applying to sea defences, the arguments of the hon. Member (Mr. Livsey) were compelling. They are, of course, accurate; it would lead to a number of absurdities if distinction were drawn between sea defences and the problems of flooding from rivers. Sea defences are included.

Mr. Allan Roberts

It is not clear from the amendment. Will the Minister make sure that it is clear and that it does cover sea defences? If not, will he amend the amendment in the other place?

Mr. Moynihan

If further clarification of the words I have just spoken from this Dispatch Box is needed, of course we will seek to clarify that in the legislation. If that satisfies the hon. Member, I will move on to the next issue. I confirm that that is definitely the case, but we will look carefully to see whether any further action is required and, if necessary, bring forward proposals in another place.

As far as the overall funding is concerned, we have said repeatedly that the NRA will be fully funded by Exchequer grant in aid, covering all important areas of work which hon. Members on both sides of the House have mentioned this evening. Of course, they will also be funded by capital grants for flood defence and land drainage projects, as outlined in the financial memorandum at the front of the Bill. These sources of income will be complemented by the borrowing powers this amendment introduces. As I have said, we believe the limit on borrowing will be adequate for the time being. However, if at any time it needs to be raised, we will have to come back to the House.

I appreciate the points mentioned by hon. Members on the possibility of a simpler method to enable swift action. We do not anticipate that that will he necessary, but I will respond to hon. Members if I may have time to consider it. I hope that the House will forgive me for not being in a position to give a more comprehensive answer to that specific point this evening, but I give an assurance that, if we feel action is necessary, we will reflect and come back to the House, or possibly to the other place.

Mr. Allen McKay (Barnsley, West and Penistone)

Is the Minister saying that, on the advent of the NRA, if it finds that the restrictions interfere with its capital planning programme, it could come back to the Department and the Minister will come back to the House to consider raising the ceiling?

Mr. Moynihan

That is right. We are very satisfied that £100 million is a generous limit to NRA borrowing. It can be increased over £160 million by order. We cannot conceive that it will need to be increased to that level, but the point the hon. Member makes is valid. At the moment, the limit could be increased over £160 million only by primary legislation.

I hope I have responded satisfactorily to hon. Members on both sides in saying that if, on reflection, we believe that that is not satisfactory and there could be a simpler way of doing so, we will see if it is workable. Given the very high limits we have looked at, after detailed discussion with the water authorities, we believe that it is accurate.

An important point was made by the hon. Member for Caernarfon (Mr. Wigley) about the Secretary of State's responsibility in Wales, a point to which I am delighted to try to respond, although I am not sure it will meet with his total approval. Suffice to say that for the moment the Secretary of State for Wales will be responsible for authorising loans applied for by the regional flood defence committee based in the area of Welsh Water. That will be the parameters within which he will work. He will not be authorising loans applied for elsewhere in Wales.

I am only sorry that I have not had the opportunity, when reflecting on the important points that the hon. Gentleman made, of actually seeing the Glaslyn estuary myself. I have always enjoyed the privilege and pleasure of going to see Wales, not least because the Wye valley is an important area for me, as I was educated in Monmouth. I am more than confident that the NRA is not only sufficiently financed but, with these powers, will be in a strong enough financial position to carry out the work he envisages.

Mr. Wigley

The point going through my mind was that work in the past has involved local authorities, but local authorities come entirely under the Secretary of State for Wales. The Minister is now saying that the responsibility of the Secretary of State is only in part of Wales, those parts of Wales which come under him for local government purposes, and that those parts which for water purposes come under the Secretary of State for the Environment will in fact come entirely under the Secretary of State for Environment as far as loan permission is concerned. At least we are clear, even if we do not agree.

Mr. Moynihan

I said in my initial response just now that I was not sure whether the hon. Member would be completely satisfied by my words, but the words I have placed on the record are accurate for the position at present.

I hope that that has adequately responded to the various points.

Amendment agreed to.

Amendment made: No. 56, in page 186, line 28, leave out sub-paragraph (2) and insert—

'(1B) Subject to sub-paragraph (1C) below, the authority may borrow, otherwise than by way of temporary loan, such sums in sterling from the Secretary of State or the Minister, as it may require for capital purposes in connection with the carrying out of its flood defence functions.

(1C) The aggregate amount outstanding in respect of the principal of sums borrowed under this paragraph by the Authority shall not at any time exceed £100 million or such greater sum, not exceeding £160 million, as the relevant Ministers may specify by order made by statutory instrument.

(1D) No order shall be made under sub-paragraph (1C) above unless a draft of the order has been laid before the House of Commons and has been approved by a resolution of that House.

(1E) In this paragraph "flood defence functions" has the same meaning as in paragraph 16 above.

Loans to the Authority

18A.—(1) The Secretary of State and the Minister shall each have power, with the approval of the Treasury, to lend any sums to the Authority which the Authority has power to borrow under paragraph 18(1B) above.

(2) Any loan made by the Secretary of State or the Minister under this paragraph shall be repaid to him at such times and by such methods, and interest on the loan shall be paid to him at such rates and at such times as the Secretary of State or, as the case may be, the Minister may with the approval of the Treasury from time to time determine.

(3) Any sums required by the Secretary of State or the Minister for making a loan under this paragraph shall be paid out of money provided by Parliament; and any sums received by the Secretary of State or the Minister in pursuance of sub-paragraph (2) above shall be paid into the Consolidated Fund.

(4) The Secretary of State and the Minister shall each—

1. (a) prepare in respect of each financial year an account of the sums lent by him to the Authority under this paragraph; and
2. (b) before the end of September in the following financial year send that account to the Comptroller and Auditor General;

and the form of the account and the manner of preparing it shall be such as the Treasury may direct.

(5) The Comptroller and Auditor General shall examine, certify and report on each account sent to him under this paragraph and shall lay copies of it and of his report before each House of Parliament.'.—[Mr. Moynihan.]