Water Industry

HC Deb 18 June 1991 vol 193 cc150-203

Mr. Speaker

I have selected the amendment in the name of the Prime Minister.

3.41 pm

Mrs. Ann Taylor (Dewsbury)

I beg to move, That this House notes with alarm the level of profits made by the water companies and the huge salary increases of senior management since privatisation; and condemns Her Majesty's Government for its failure to ensure that the interests of water consumers and the environment are given greater priority than the interests of shareholders. Although Conservative Members may not think so., this debate is important because nowhere can we see more clearly than on the issue of water privatisation the priorities of a Conservative Government. The outrage of vastly increased water bills at a time of scandalous profits and massive leaps in salaries for the top management show that the Government care little for water consumers, just as they care little for the environment. With this Government, profits come first, so that the issues that we shall discuss today are serious.

I hope that the Under-Secretary of State, the hon. Member for Banbury (Mr. Baldry), who must be most grateful to his colleagues for raising points of order until he was able to arrive and who has been left to carry the can, will understand when I say that the debate raises issues that are serious enough to warrant the attention of the Secretary of State and of the Minister of State. Perhaps I should explain to the House why they are absent.

Mr. Tim Smith (Beaconsfield)

Where is the hon. Member for Dagenham (Mr. Gould)?

Mrs. Taylor

The Minister of State telephoned me yesterday to offer his apologies and to say that his absence meant no disrespect to the Labour party. He explained that he could not be present today because of an important engagement. He went on to explain that the Secretary of State could not be present because of an important engagement. In fact, the Secretary of State for the Environment is visiting the Minister of State in his constituency. The absence of the Secretary of State and of the Minister of State may or may not have been intended as a slight to the Labour party; that does not worry us. What matters is that it is a mark of disrespect to the millions of people who face hardship because of their water bills, to the families who are worried about the quality of the drinking water, and to everyone who cares about the environment.

Mr. Dafydd Wigley (Caernarfon)

Does the hon. Lady accept that it would also be in order for the Secretary of State for Social Security to be present in view of the considerable hardship that she has mentioned, and the fact that there is no rebate scheme or element of income support to help those on the lowest incomes who face fixed bills which they cannot afford to pay?

Mrs. Taylor

I am grateful for the hon. Gentleman's intervention, which highlights many of hon. Members' concerns. I hope that Conservative Members, who must have had representations from their constituents, as we have had from ours, will voice the worries and fears of many people.

Mr. Graham Riddick (Colne Valley)

Will the hon. Lady tell us where the hon. Member for Dagenham (Mr. Gould) is? Why is he not here this afternoon?

Mrs. Taylor

As I am responsible for Labour party policies on these matters, it is appropriate that I am here.

Today's debate is not only extremely important, but extremely timely. In recent weeks, the profits of the water companies have been announced. We have heard of the vast increases in salaries for top management. Only today we have had the report of the Director General of Water Services which shows that the interests of shareholders predominate over the interests of everyone else. That cannot be the right priority for an industry that is so fundamental to the needs and interests of everyone.

Mr. Tim Devlin (Stockton, South)

How does the hon. Lady explain the £4 million of investment that Northumbrian Water is putting in to the Teesside area which will be followed by investment all round the country on an unprecedented scale to repair old sewers and water pipes which are falling in because the previous Labour Government slashed investment in the industry?

Mrs. Taylor

I am sure that the hon. Gentleman has read the annual report published today. It shows us in detail the shortfall in investment programmes—and I will come to that point later. I am sure that the House wants to be reminded of the figures for investment under the previous Labour Government compared with the figures for investment under the Conservative Government since 1979. During the period of the previous Labour Government, the average annual investment was £1,254 million a year. During the years of Conservative Government since 1979, the average investment in the water industry has been £922 million. That is the answer to the hon. Member for Stockton, South (Mr. Devlin).

Mr. David Nicholson (Taunton)

I fear that the hon. Lady's figures are grossly misleading. I have the actual figures before me. During the period of the previous Labour Government, investment at 1989 prices fell from £1.4 billion to £1.1 billion. Under the Conservative Government, investment has risen from just under £1 billion to almost £2.4 billion in the current year.

Mrs. Taylor

The hon. Gentleman has proved that he cannot read statistics either. He raises an interesting question. It is not long ago that the water industry was not considered to be part of the realm of party politics and party debate. It is not long ago that the objectives for the water industry were similar among all parties. That has been the case since the Victorian era. I remind Conservative Members that it was the Conservative Joseph Chamberlain—and I am glad to see the hon. Member for Stockton, South nod in agreement—who said of the water industry: It is difficult and indeed almost impossible to reconcile the rights and interests of the public to the claims of an individual company seeking as its natural and legitimate object the largest private gain. Much of the advance in life expectancy and many of the triumphs over disease were as much an achievement of better water supplies and better sewerage systems as an achievement of medical breakthrough. The House should remind itself of what has changed since those days.

In the past few years the Government, hamstrung by their dogma and extremism, have looked round for other industries to privatise. There was little left, so they descended on the water industry. There was a feeling in the water industry that the Conservative Government had deliberately held back investment to pave the way for privatisation.

Some callous remarks of the Ministers of the day should have prepared us for what has happened since. When answering a question about water quality and water bills, the former Secretary of State for the Environment, the right hon. Member for Cirencester and Tewkesbury (Mr. Ridley), uttered the immortal words, "Let them drink Perrier." Given that attitude, what has followed is perhaps not surprising.

Let us consider what has happened to the water industry in the past 18 months. I start with price increases. I remind the House that it was the present Secretary of State for Employment who promised during the Second Reading of the Water Bill in 1988: We are determined to ensure that the customer gets these benefits … in the price that he pays for water".—[0fficial Report, 8 December 1988; Vol. 143, c. 525.] Since that statement, there have been large price increases, such as in the year of privatisation. Water charges have increased by 30 per cent. on average, with every company forcing through the maximum price rises on virtually every occasion. In the past three years, the increases have amounted to more than 50 per cent. for some consumers.

Mr. Robert B. Jones (Hertfordshire, West)

As the hon. Lady is clearly setting her face against the idea of price increases, and as the Labour party is committed to renationalising the water industry, where is the money to come from?

Mrs. Taylor

Many people are worried about where the money is going at present.

The price increases that I have quoted have been the average increases across the country as a whole. The position has been much worse for many people, especially where companies have overloaded their increases on to standing charges, thus often hitting hardest those who can least afford to pay more. Welsh Water has increased its standing charges by 60 per cent., presumably as part of its campaign for a flat-rate charge for every house in Wales, which is what some of my hon. Friends have called "the water poll tax". Other companies have adopted a similar approach.

I am sure that many colleagues have, like me, received letters almost daily from their constituents, especially from pensioners who keep a close record of their spending. A letter from one of my constituents shows that in the past two years the standing charges in the Yorkshire Water area have increased by 125 per cent. for sewerage and by 162 per cent. for water.

At one time, water bills were a relatively minor item of expenditure, but they are now a major problem for many families and cause grave hardship. That is why, in the past year, more than 900,000 summonses have been issued to people who could not pay their water bills.

Mr. William O'Brien (Normanton)

I appreciate my hon. Friend's references to standing charges because of which it is significant to note that the people who use the least pay the most in unit costs for their water. My hon. Friend has referred to what has happened in the Yorkshire Water area in the past 18 months, but if she goes a little further back she will see that standing charges have increased by nearly 400 per cent. in the past five years. She is therefore correct to draw attention to standing charges, on which I hope that she will dwell a little further because they most affect those who use the least.

Mrs. Taylor

My hon. Friend is right. From his long interest in the water industry, I know that he will share my concern about the problems facing many households and families. Indeed, some of his constituents have had extra problems because of metering trials in their areas.

Mr. Alan Williams (Swansea, West)

My hon. Friend has referred to the 900,000 people who have received summonses. Will she remind the House that the hardship that they face is not only the summons itself and the fact that very often the court costs amount to more than the one month's instalment that has been missed, but there is the far more important fact that, once summonsed, those 900,000 people will be placed on credit blacklists, as a result of which people who cannot afford to buy things outright are debarred from credit and even from rentals, and that that punishment stays with them for six years?

Mrs. Taylor

My right hon. Friend is right. The problem causes all sorts of hardship to the families involved. One of the horrors is that many of the families affected previously had no form of debt whatever and had not got into such difficulties.

Mr. Robin Squire (Hornchurch)

I am grateful to the hon. Lady, especially as she has given way several times. Let there be no doubt that hon. Members on both sides of the House are worried about those who find themselves in debt. However, with great respect, the hon. Lady has not yet answered the point made by my hon. Friend the Member for Hertfordshire, West (Mr. Jones). He said that, faced with a £28 billion investment programme and a commitment to nationalise, the Labour party would have to find the money either out of taxation or, in fairness, out of prices. If she would reduce prices, where would the money come from?

Mrs. Taylor

The hon. Gentleman must bide his time. I shall come to the question of profits shortly. Before that I want to talk about some of the other burdens faced by many people, especially those who are worried about the possible introduction of metering, which could have a devastating effect on many families.

The Opposition are totally against universal compulsory metering or, indeed, any form of metering designed solely to enhance the profits of the water companies. No one should be denied access to water simply because of price, not least in view of the public health implications. Those who advocate metering as a solution should look carefully at the trials that have taken place, including those in the constituency of my hon. Friend the Member for Normanton (Mr. O'Brien). Many hardships and problems have been created by metering.

I have dealt with what has been happening to prices. In view of what has happened to prices during the past 18 months, it is perhaps not surprising that profits have rocketed. The profits for this year range from 17 per cent. for Thames Water and 60 per cent. for Southern Water, at the bottom of the list, to 185 per cent. for North West Water, 224 per cent. for Welsh Water and an incredible 369 per cent. forecast profit for Northumbrian Water. Those figures are so staggering that they need little further comment. But they must be seen as a slap in the face to all consumers.

The increased profits have been matched by increased salaries for top management. Many salaries have doubled in the two years or so since privatisation. Figures were published in The Sunday Times last week. Most of them were accurate, although I ought to make one correction. The chairman of Anglian Water has taken a salary cut. His salary has now fallen to £71,000 because he has gone part time. However, for chairmen and top managers that is not the end of the story. As well as huge salary increases, top management has also had very lucrative perks, not least the share options at flotation.

I have here the figures for the gains that would have been made by senior managers if they had taken up their full share option and sold at midday yesterday, which was not when prices were at their peak. Last year's accounts showed that more than 10 million shares were made available to chairmen, executive directors and others in senior management. I shall give a few examples of what that perk could have meant in practice. The chairman of Anglian Water came off worst. His share option would have realised £22,000 if it had been sold yesterday. The chairman of North West Water was given an option on 122,000 shares and would have made a profit yesterday of £74,000. He is not alone in that bracket.

Mr. D. N. Campbell-Savours (Workington)

Will my hon. Friend comment on the observations of many of my constituents in Cumbria and the north-west of England who feel concerned about the figures that were published in The Sunday Times at the weekend? They cannot understand how the water authorities can find money to pay such exorbitant salaries and make investments in companies that have nothing to do with the water industry, while at the same time major works remain outstanding on, for example, sewer outfalls, sewage plants and the relining of sewers. People want the authorities to spend their money in those important areas.

Mrs. Taylor

People in the north-west will be concerned about the chairman of North West Water being able to make over £74,000 from the disposal of his shares. The share option that was made available to senior management should not, in the view of most water ratepayers and consumers, have been a first priority.

Not only has the chairman of North West Water had that advantage. The chairman of Severn Trent Water could have realised £69,000; the chairman of Thames Water, £71,000; and the chairman of Welsh Water, had he sold his shares yesterday, could have realised £78,300. That is all in addition to their salaries. The perks to top management may have brought them in total as much as £10 million, all in addition to their salaries.

Mr. Robert B. Jones

Has the hon. Lady evidence to suggest that any of those people have disposed of their shares, or is she uttering just a nasty little innuendo?

Mrs. Taylor

I wonder what the hon. Gentleman thought was the purpose of the share option at the time. It is common for directors to be given such perks. I am complaining about that type of priority taking precedence over the need for investment in the water industry.

Mr. Jones

rose—

Mrs. Taylor

I have given way once to the hon. Gentleman. [HON MEMBERS: "Give way".]

Mr. Speaker

Order.

Mr. Jones

On a point of order, Mr. Speaker. Do you agree that, when people outside the House are referred to, we have a duty to ensure that what is said is true, since it may be repeated outside? Have you had any intimation from the hon. Lady that what she is saying about people in the water industry is true?

Mr. Speaker

We must all calculate the weight we put on the freedom of speech which we enjoy here. What the hon. Lady has said is not a matter for me, and I have no idea whether or not it is true.

Mr. Devlin

On a point of order, Mr. Speaker. Is it in order for the hon. Lady to say that the perks to which she referred took priority over investment decisions when the water industry currently has a £28 billion investment programme?

Mr. Speaker

It is in order for the hon. Lady to make her own speech in her own way. Thanks to the slightly earlier start that the debate has had, it may be possible for me to call the hon. Member to speak and to make those points.

Mrs. Taylor

I appreciate why Conservative Members are so sensitive on these issues. I should not like to have to defend the situation that the Government have created.

I come to what has happened to services since privatisation. I was struck by a briefing document sent to me today by one of my hon. Friends who represents an area covered by the Severn Trent authority. It said that the briefing was to be used when citing the achievements of Severn Trent since privatisation. On turning over the briefing document, the page was blank. That represents great honesty on the part of that water company.

Mr. Martin M. Brandon-Bravo (Nottingham, South)

I have not seen the briefing paper to which the hon. Lady refers, but if the reverse of the page was blank, I will tell her an item that should have appeared on it. Any company in Britain that could invest in the current year double its profits must be giving priority to investment. I doubt whether that would have happened had it remained in the public sector.

Mrs. Taylor

Severn Trent has invested a great deal of money outside the water industry on acquiring other companies.

Right hon. and hon. Gentlemen will have read reports about the problems that have arisen in the last year or so with Britain's rivers, which are now more polluted with sewage than before privatisation. The number of sewage pollution incidents has increased by 20 per cent., to 6,274. When asked to comment on that aspect, the Minister for the Environment and Countryside—who is not present today—is reported to have said that he would be asking for something to be done. The same hon. Gentleman was a Minister at the Department of the Environment at the time of privatisation, when the Government gave water companies immunity from prosecution in respect of most of the pollution incidents about which the Minister now complains.

The Government themselves must bear much of the responsibility. It will not wash for the Minister to say that something must be done. The Government drew up the rules that make it so difficult for the National Rivers Authority to prosecute water companies.

Sir Peter Hordern (Horsham)

Perhaps the hon. Lady will tell the House what will be the cost of compensating the nationalised companies if Labour was to return to power—because nationalisation is a pledge in its programme? Will she also say what the effect will be on the public sector borrowing requirement, given the present capital expenditure programme of £ 1.25 billion a year, and total capital expenditure programme of more than £20 billion? Has the hon. Lady taken into account the impact of that on the public sector borrowing requirement? What effect does she think that such an absurd programme would have on a Labour Government's economic policy?

Mrs. Taylor

The hon. Gentleman misses the point that I was making, but I will deal with his question. Yes, we still intend to return the water industry to public ownership. Many of the Government's own statements about the public sector borrowing requirement are most peculiar, but in fact the whole of that borrowing would not have to come out of the PSBR. We had confirmation of that from the Library only today.

Pollution incidents have increased dramatically over the past year, partly due to the immunity granted by the Government at the time of privatisation. That problem is made worse because the companies are not meeting their spending targets. Figures published by the Director General of Water Services show that the combined programme for sewage treatment plants is way behind target—by £67.4 million, or 23.7 per cent. of projected expenditure. I hope that does not give any comfort to Conservative Members, because it alarms many people throughout the country.

There is no comfort to be gained either from the situation in respect of drinking water. At the time of the Water Act 1989, we were told that all would be well because of the establishment of a drinking water inspectorate—which turns out to be 20-odd civil servants in the Department of the Environment, whose job it is to collect the information that water companies give them and to visit the companies occasionally after giving an average of five weeks' notice. We have not seen the improvement that could have been made, but instead there have been several worrying incidents.

Mrs. Maureen Hicks (Wolverhampton, North-East)

Will the hon. Lady give way?

Mrs. Taylor

Not for a moment. I have given way rather a lot, and I want to make progress.

One of the most alarming incidents was the outbreak of cryptosporidia in north Humberside between December 1989 and May 1990. It was responsible for 477 cases of infection. Cryptosporidia is a parasite that is often water-borne. A recent independent report by the public health laboratory service shows that that was the case with the incident in north Humberside, but we now also know that the outbreak was caused by the bypassing of slow sand filters at the Barmby water treatment works. It appears that that was done because Yorkshire Water was taking shortcuts to avoid water shortages in the area. There is a direct correlation between the bypassing of filters and the incidence of that illness in the area. Although Yorkshire Water's actions may have protected confidence in its shares for a time, they were carried out at the expense of drinking water in the area.

Section 54 of the Water Act 1989 empowers the drinking water inspectorate to recommend to the Secretary of State that a supplier be prosecuted for supplying water that is unfit for consumption. So far, that has not been done. If the inspectorate does not recommend prosecution when it makes its first report to the Secretary of State in July, we shall be able to draw our own conclusion.

Mrs. Maureen Hicks

Will the hon. Lady give way?

Mrs. Taylor

I am sorry, but I must make progress. This is a short debate, and I have already given way several times.

The director general's report published today shows that water companies are falling behind with their investment programmes for drinking water treatment, so slippage is taking place in that area, too. Indeed, the report shows that there are investment problems in all the important areas and that the water companies never meet their investment targets on water resources, water treatment, water distribution, sewerage or sewage treatment. The only area in which expenditure is higher than planned is "management and general". Perhaps that should not surprise us because, although incidents such as that in north Humberside have taken place, and although sewage pollution is increasing, water companies have been turning their attention to other matters. A chairman of a water company now says that he spends 60 per cent. of his time on water services and 40 per cent. on diversification.

Severn Trent has spent—

Mrs. Maureen Hicks

Will the hon. Lady give way on that subject?

Mrs. Taylor

I have given way enough—[Interruption.]

Mr. Speaker

Order. May I give the hon. Member for Wolverhampton, North-East (Mrs. Hicks) the same message? There may be time for her to raise those matters in her own speech.

Mrs. Taylor

I have given way 11 times, Mr. Speaker, so I need to make some progress.

Severn Trent has spent £212 million on a waste disposal company. A waste subsidiary of Northumbrian Water is trying to obtain planning permission to build incinerators for industrial and clinical waste. Welsh Water is buying hotels and shares in South Wales Electricity. South West Water is part of a franchise for a television company, and other water companies have embarked on land disposal plans.

The case of North West Water and Kingswater Park is causing considerable concern to colleagues in the north-west, especially my right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman) and my hon. Friend the Member for Denton and Reddish (Mr. Bennett). A valuable piece of green countryside—the only piece easily available to those in the eastern part of the inner city of Manchester—is now threatened by development. In today's report, the Director General of Water Services has expressed concern that companies could transfer sites at relatively low values to property subsidiaries for them to develop at a later stage. North West Water's plans seem to fit that description, and I hope that the regulator will examine the case carefully —although, of course, North West Water is not the only company that is disposing of land; Severn Trent and Thames have the highest number of disposals.

I have tried, in the limited time available, to present a picture of what has happened to the water industry's priorities under the Government since privatisation. 'What the industry needs, and what it lacks, are public control, public accountability and consideration of the public interest. We want to see the industry back in public ownership so that the right priorities can be guaranteed. That cannot happen on day one of a Labour Government, but, from that day on, a Labour Secretary of State will use the powers under the Water Act 1989 to instruct the Director General of Water Services and the National Rivers Authority on their priorities as a first step towards putting the interests of consumers and the environment before those of shareholders.

The public are thoroughly fed up with the excesses of the Government. All the worst fears that we felt at the time of privatisation have been confirmed, or worse. Prices have risen by at least 30 per cent.; profits have been scandalous, increasing in one instance by 360 per cent. in a single year. Top management salaries and perks have simply added insult to injury. Moreover, the so-called environmental improvements are not being achieved as they should be. The drinking water inspectorate has proved toothless; the increase in sewage pollution incidents must surely shatter any defence that the Government can mount.

No wonder the Secretary of State chose to hot-foot it to Lancashire today, and the Minister of State with him. They may be avoiding the questions today, but they will not be able to avoid them when the election comes. The scandal of water privatisation will be a nail in the Government's coffin.

4.16 pm

The Parliamentary Under-Secretary of State for the Environment (Mr. Tony Baldry)

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: `welcomes the success which the water industry has achieved in the first full year after privatisation in substantially expanding investment to improve the environment and standards of service to customers; endorses the firm and fair system of regulation that has been established to protect customers; and looks forward to the benefits from this massive investment programme and improved efficiency in the years to come.'. The hon. Member for Dewsbury (Mrs. Taylor) began by complaining that neither my right hon. Friend the Secretary of State nor my hon. Friend the Minister for the Environment and Countryside was present. As my hon. Friend the Minister took pains to explain to the hon. Lady yesterday, my right hon. Friend is in the north-west today, attending a series of meetings with local authorities, many of them Labour controlled. Those meetings were arranged some time ago. On reflection, the hon. Lady will probably decide that her complaint was ungracious, and that that point, like so many of her others, was a bad one.

The House had had to endure a predictable but none the less depressing half-hour diatribe from the hon. Lady, who took the opportunity to attack the water industry and those working in it. She sought to convey the impression that nothing had been achieved in the two years since privatisation and that every challenge currently faced by the water industry had somehow been caused by that privatisation. In short, it was all good, knockabout Opposition day stuff.

If I may be candid, I do not believe that it lies in the mouth of the Labour party to criticise the water industry. Labour cut capital investment in the industry by one third in real terms when it was last in office and cut investment in sewage treatment by a half. In 1976, so desperate was the economy under Labour that it had an overnight moratorium on capital works in the water industry, followed by the stringent financial limitations and Government—imposed cuts in borrowing limits.

It was of little surprise, therefore, that in 1987 the Environment Select Committee reported: …the most immediate reason why water authority effluents fall short of the present consent standards is because from the mid-1970s until the early 1980s there was a steady drop in investment by the water authorities in sewerage and sewage disposal"— a drop which coincided exactly with the period of the previous Labour Government, so we shall take no lectures from the Labour party on enhancing water quality.

Mr. O'Brien

Is the Minister aware of the considerable time and money that was spent by local authorities in establishing ring-main circuits to prevent failures in water and in building sewage works to ensure that such works continued? That was undertaken well before privatisation. Is he aware that, following privatisation, 729 of my constituents are facing compulsory water metering, which they did not want and which is causing problems? That is what privatisation has achieved. What are the Minister's comments on the hardship that has been caused in my constituency by water meters?

Mr. Baldry

The hon. Gentleman cannot find any comment to rebut the assertion that under the previous Labour Government, and during the period of Labour's supposed stewardship, investment in the water industry declined substantially. Under the Water Act 1989, it was no longer sensible for water charges to be related to rateable values, and the water industry has been given some time to devise an alternative system.

We should all be interested to hear whether the Labour party would continue to base water charges on rateable values. We heard little about that from the hon. Member for Dewsbury, who failed to answer my hon. Friends the Members for Hertfordshire, West (Mr. Jones) and for Horsham (Sir P. Hordern) about how she would manage to finance the £28 billion investment programme. Would she do so by increasing prices or taxes?

Mrs. Ann Taylor

rose—

Mr. Baldry

The hon. Lady failed to answer that question.

Mrs. Taylor

rose—

Mr. Baldry

The hon. Lady did not have the courtesy to give way to my hon. Friend the Member for Wolverhampton, North-East (Mrs. Hicks) or to answer the question that was put to her, as Hansard will clearly show. Perhaps she would like to answer now. Does the Labour party intend to finance future investment by increasing prices or taxes?

Mrs. Taylor

I am grateful to the Minister for giving way at last. We shall not waste money on the schemes to which water investment has been diverted. That is the answer to his specific point, but he has not replied to the point that was made by my hon. Friend the Member for Normanton (Mr. O'Brien) about water metering. What is the Government's policy on water metering? Do they believe in choice? The Minister said that he was unaware of our opinion, but we have published our submission to the Director of Water Services on water charges. Will the Minister say whether the Government are likely to do the same, and will he give their attitude to metering? May I remind him of the average figures for investment under Labour and Conservative Governments? Labour spent £1,254 million a year, compared with £922 million under the Conservatives.

Mr. Baldry

I hope that everyone will read Hansard tomorrow, because the hon. Lady has been asked, on occasions too numerous to particularise, how a Labour Government would finance future investment in the water industry. On each occasion, she has refused point blank to answer the question.

The hon. Lady knows the Government's position on water metering because it is enshrined in the legislation. The water industry must now make its own proposals, which it will do.

Mr. Robert B. Jones

We can draw our conclusions from the point-blank refusal of the hon. Member for Dewsbury (Mrs. Taylor) to answer straight questions about where the money will come from. My hon. Friend referred to the Select Committee's condemnation of the last Labour Government's record on water investment. Is he aware that members of the Select Committee were unanimous and that Labour and Conservative Members shared in that condemnation of the Labour Government's record?

Mr. Baldry

My hon. Friend makes a good point. There could not possibly be any defence of the failure of the last Labour Government's stewardship of the water industry. The country should note that when the Labour Government sought to finance investment in the industry out of central Government funds, they lamentably failed to do so. Privatisation of the water industry has opened the way for a dramatic, sustained increase in investment.

Mr. Charles Wardle (Bexhill and Battle)

My hon. Friend is aware that, unlike Opposition Members, Conservative Members welcome water privatisation, especially the greater standards of professionalism among the management. Does my hon. Friend concede that there is concern about the K factor in the pricing formula? Is he aware that, over the past three years, Eastbourne Water increased its charges to customers by more than 100 per cent? Does he think that that is an unreasonable burden to lay on current customers because of persistent underfunding by previous Labour Governments? Will my hon. Friend at least review the K factor at an early opportunity?

Mr. Baldry

My hon. Friend is right to draw attention to the fact that some of the immediate challenges faced by Eastbourne Water are due to lack of adequate investment in the past. I am glad to tell my hon. Friend that I understand that, for the next three years, Eastbourne Water's K factor will drop to 2.5 per cent. and that from 1995–96 it will be zero.

Over the next 10 years, water companies will be carrying out the biggest ever programme of sustained investment.

Mr. Campbell-Savours

Before the Minister moves on, will he deal with the important question asked by my hon. Friend the Member for Normanton (Mr. O'Brien)? The Government wish to convince the nation that they are committed to choice. Why do the constituents of Normanton have no right to choose water metering? Does the hon. Gentleman condemn the water authority for imposing that obligation on my hon. Friend's constituents? Does he believe that they should have the right to choose?

Mr. Baldry

The position on water metering is straightforward. Until recently, local government finance was based on rateable values, as were water charges. As we move from that, it does not seem sensible to continue to base water charges solely on rateable values. For that reason, water companies have come forward with an alternative water-charging system. I do not believe that water consumers have ever had a choice—nor have consumers of electricity or other such facilities—as to how they pay.

Mr. David Nicholson

I am delighted to hear my hon. Friend make the position clear. I am beginning to receive representations from constituents who are paying water rates on the basis of an antiquated rates system. The bulk of them have their water rates based on rateable values set 17 years ago, but, because of flat conversions and such like, the rateable values of a significant number were set recently. The latter group are aware of unfairnesses and of anomalies between what they have to pay and what their neighbours in similar or larger accommodation pay. My hon. Friend must impress on water companies the need to move towards an up-to-date and fair system of water charging.

Mr. Baldry

My hon. Friend makes a good point. I am surprised that Labour Members brought these issues before the House. I suspect that they were thoroughly canvassed before decisions were made on how the Water Bill should be implemented, as well as by the Standing Committee on the Bill.

Some £28 billion will be invested before the turn of the century and the water services associations tell us that more than £3 billion has already been invested to improve water quality. Between now and the turn of the century the water companies will spend £5,000 a minute on rebuilding the water industry's infrastructure, constructing new sewage treatment works and reservoirs, on improving drinking water where it is not yet up to standard, improving bathing waters and raising standards of service for customers.

Mrs. Maureen Hicks

Is my hon. Friend aware of the orchestrated attempts by the hon. Member for Dewsbury (Mrs. Taylor) to put fear and alarm into the minds of constituents? A short time ago the hon. Lady issued press releases in Wolverhampton suggesting that people were receiving a chemical cocktail in the water. I am sure that my hon. Friend will agree that under privatisation we have a duty to monitor water quality and to ensure that lies are not told about the system. I have a letter from the chairman of Severn Trent Water in which he states that the hon. Member's silly reference is best answered by facts … The Wolverhampton area is fed by a number of water sources, ranging from local bore holes to the large river abstraction plant at Hampton Loade. Bacteriology provides the most sensitive tests for quality, and in the Wolverhampton area … we have not had a single failure at source, reservoir or zone … despite the hundreds of samples taken. From a chemical point of view"—

Mr. Speaker

Order. The hon. Lady must not make a speech. In fairness to the House, she should not give a long quotation during an intervention. The usual method is to paraphrase and not to quote.

Mrs. Hicks

The chairman says that during 1990 over 99.9 per cent. of tests undertaken proved satisfactory in meeting today's tough quality standards in Wolverhampton. That gives the lie to the hon. Lady's press release.

Mr. Speaker

Did I hear the word lie coming from the hon. Lady's mouth?

Mrs. Hicks

I apologise for the use of the word lie. I should have said that it was a misrepresentation of the facts by the hon. Lady.

Mr. Baldry

It behoves us all, and especially those of us who have responsible positions on the Front Benches, to address these matters with care. It is not in the interests of the hon. Member for Dewsbury or her party to misrepresent the position, as is sometimes clearly the case. I have absolutely no doubt that those who work in the water industry and understand it will take careful note of the hon. Lady's frequent assertions and will treat them with the contempt that they deserve. Anglian Water, for example—

Mrs. Ann Taylor

Will the hon. Gentleman give way?

Mr. Baldry

No. The House listened to the hon. Lady for more than half an hour and most of her speech consisted of attacks on various people. She must allow other hon. Members to rebut some of the assertions that she freely made.

Anglian Water has a £4 billion investment programme under way. North West Water is investing £4.3 billion, while in Thames investment is not far below £4 billion. Progress is being made everywhere in enhancing water standards and in building structures such as a new ring main circuit round London—[Interruption.] I will set out the position. The hon. Member for Bridgend (Mr. Griffiths) complains about a company spending only £4 billion on investing in enhancing water quality. The Labour party never managed to invest such sums in enhancing water quality. South West Water has completed 89 major projects in the past year and has almost 400 schemes in progress. Welsh Water's overall programme exceeds £1.7 billion, and work has commenced on four projects totalling £25 million which were not in its original programme. In short, companies such as Severn Trent, Thames and others are spending more than £1 million a day on improving water treatment and distribution and sewage treatment—double their rate of profits.

Mr. Campbell-Savours

We are all very impressed by these investment figures, but are all the investments to which the Minister has referred water related?

Mr. Baldry

Yes.

Mrs. Ann Taylor

Will the Minister accept the point that has emerged from the recent figures on investment, which showed that the water companies have spent far more on diversification than on improving water quality?

Mr. Baldry

I shall come to the director general's report on that in a minute. The Opposition do not like the fact that the privatised water companies have managed to spend billions of pounds on enhancing water quality, because those companies' record under privatisation contrasts so starkly with the failure of the Labour party's stewardship to invest adequately in the water industry.

We heard a lot about profits from the hon. Member for Dewsbury today. One can only deduce from her attack on the water companies' profits that the Labour party would have preferred them to make losses. Those more in touch with reality take a more balanced view. The Guardian business page described the figures as relatively modest profit and dividend increases. The Independent said that the division of one third to shareholders and ploughing the remaining two thirds back into the business was a split which is difficult to criticise". Those two thirds ploughed back into the water industry represent part of the water companies' continuing programme of capital investment in the industry—a programme which is massive and unprecedented.

What concerns and interests most people is not the level of profits or the dividends paid on shares but the price of water. To keep matters in perspective, I should point out that water bills in the midlands recently rose by on average 5p a day. Domestic customers of Severn Trent Water are paying an average 38p per day, compared with 33p previously. On average, domestic customers pay 43p a day for their water—a few pennies more than the cost of a daily newspaper.

It is entirely reasonable to expect water consumers to make some contribution towards the costs of paying towards higher water standards, which everyone demands and which the Government are determined shall be delivered.

Mr. Elliot Morley (Glanford and Scunthorpe)

Reasonable people do not object to the price of water increasing to cover the investment programme, but many people on benefit who can receive no help with their vastly increased water charges over the past year, and people who have had to convert to water meters with their high standing charges, complain that they are paying a great deal for their water now. Yet Anglian's profits before tax have risen by 77 per cent., while its investment has risen by 19 per cent. and its dividends by 40 per cent. If that money is to be raised, surely it should be raised for investment, not to fatten profits and boost dividends—that is what people on low incomes object to.

Mr. Baldry

The hon. Gentleman's intervention gives me the chance to explain again. Two thirds of the profits about which he complains go back into investment in the industry. Even papers such as The Guardian acknowledge that the dividends taken from the remaining third are modest. The hon. Gentleman has reinforced my point—the water companies are behaving wholly responsibly by ensuring that large amounts of their profits are reinvested in the industry for the benefit of customers and consumers.

Mr. Simon Hughes (Southwark and Bermondsey)

I should like the Minister to answer the point made by the Director General of Water Services who, only a month ago, wrote to each of the water authorities warning them that he understood their profit declarations to be excessive and commenting strongly that customers would expect to reap the benefits of greater profits. Comment in newspapers such as the Financial Times made it clear at the time that these excessive profits were not going back to investment or to the customers. So the person charged with this responsibility has found profits to be so large that he will take action in the coming months.

Mr. Baldry

I am sure that the hon. Gentleman would not wish, even inadvertently, to mislead the House. The director general has made no criticism of the water companies. He has said that he will look with care at their profits and dividends for this year. I have no doubt that that is entirely proper for a regulator and that is what he is doing. The water companies are reinvesting two thirds of their profits in the industry. If the hon. Gentleman looks back at the pages of the financial press and the financial pages of papers such as The Guardian and The Independent he will see that the way in which water companies have divided their profits and dividends has not been subject to criticism; rather those profits and dividends have been considered modest.

Mrs. Ann Taylor

The Minister will be aware that much of the profits about which he talks has been made as a result of the taxpayers' generosity at the insistence of the Government at the time of privatisation when they put £3.3 billion into the water industry. Has the Minister seen the report from Credit Lyonnais Laing, the City investment analyst, which says: With the benefit of hindsight the financial framework set up at the time of privatisation was rather generous"? Does not that explain why shareholders have been doing so well since privatisation?

Mr. Baldry

I shall explain yet again. The water companies have made profits this year, two thirds of which they are putting back into the industry. The hon. Lady ought to be careful about keeping on jumping to her feet to complain about profits, because every time she does that Conservative Members will simply ask her, "If the water industry is not to be funded from its profits or by its customers, from where is it to be funded?" Once again, I ask the hon. Lady to explain to the House what a future Labour Government intend to do—[Interruption.] The hon. Lady says sotto voce, but I hope that Hansard will record it, "We are not going to say". That is the comment of the Labour party.

Mrs. Ann Taylor

I am sorry that the hon. Gentleman misheard. What I said was that we would not spend money on silly things such as television companies in which water companies should not be investing.

Mr. Baldry

The hon. Lady has still failed to explain how the Labour party will fund future investment in the water industry—[Interruption.] She says, "No, we won't".

Mrs. Ann Taylor

No.

Mr. Baldry

The hon. Lady should be careful about complaining about company profits.

Mr. Richard Holt (Langbaurgh)

I am a former member of the Thames water authority board. It is now very different for people in the situation that I was once in. They now have money available. Too much has been made of the word "profit". What we are talking about is excess income over excess expenditure. We now have a far more efficient and lean water industry which is operating far better and that excess of money has been put back in. It is not a profit in an historical sense, because historically the water boards never could make a profit. Under nationalisation we stripped and tried hard, but we never got enough money out of any Government, Conservative or Labour, to make the investment which is now being made under this Conservative Government.

Mr. Baldry

My hon. Friend makes a good point and I continue to reiterate that privatisation has opened the way to massive investment in the water industry and the bulk of the profits are being reinvested in that industry.

Mr. Campbell-Savours

Will the hon. Gentleman give way?

Mr. Baldry

No, the House clearly wants to make progress and I have much to say.

It is right that the industry should in part be funded from profits and that it is doing.

We must also acknowledge that, even after this year's price increase in water, water in Britain is good value compared with prices charged in other countries. Customers in Germany, France, Italy, Belgium and the Netherlands all, on average, have to pay more for their water than we do here.

Privatisation has not of itself caused an increase in water charges. Privatisation has involved identifying all the requirements to ensure that the water industry meets agreed domestic and European Community standards, and costing those requirements and agreeing a capital programme to put them right. As I have made clear, that capital programme is massive and it is not unreasonable to expect customers who expect higher standards to pay a price for their water that enables the water companies to meet those higher standards.

Mr. Campbell-Savours

Will the hon. Gentleman give way?

Mr. Baldry

No, I do not intend to give way again. I have given way on numerous occasions and I want to make progress.

What are those higher standards that we are achieving and seeking to achieve? The major priority of the water industry is the provision of good quality drinking water. We have set in place a robust regime to promote drinking water quality. That regime establishes an effective system for regulating water quality. It sets exacting standards which drinking water must achieve in order to be regarded as wholesome and specifies in detail the monitoring which water companies must carry out and ensures that the results are available on public registers.

The legislation also provided for the creation of the drinking water inspectorate to check that water companies are carrying out monitoring programmes satisfactorily, making the results available on the public registers, implementing their compliance programmes and achieving all the other standards in the regulations.

I am glad to say that the overall quality of our drinking water is excellent. However, to ensure that all our water supplies satisfy the stringent standards of the EC directive and water quality regulations, the water industry is investing in excess of £2 billion to ensure that, wherever possible, supplies be brought into compliance by 1995. That is a substantial commitment to continuing to strive to enhance drinking water quality.

Mention may be made of pesticides in drinking water. All the water companies with supplies that exceed the pesticide standards are carrying out programmes of remedial action designed to bring supplies into compliance as quickly as practicable. The EC has only once started infraction proceedings against the United Kingdom under the pesticides directive and that case proved unfounded. It has not started formal proceedings in any other case.

Just as the water industry is spending and investing billions of pounds enhancing drinking water quality, it is investing billions of pounds on improving sewage treatment. As the House knows, the Government are totally committed to meeting all the provisions of the EC urban waste water directive by the required dates. Those vary between 1995 and 2005 according to size and other criteria. The United Kingdom was one of those in the lead in pressing for agreement on that directive.

In comparison with many colleagues elsewhere in the Community, we start from a good position in relation to implementing that directive. The United Kingdom has the highest percentage of its population connected to a sewerage system—some 96 per cent.—compared with any of our partners and we achieve a percentage of treatment which stands comparison with any of our partners.

We start from a good position in relation to implementing the directive, but clearly there is more to be done to ensure that we reach and maintain the high standards that we all want. The water industry has already started work on the implementation programme, which it currently estimates will cost about £2.2 billion. However, such a large investment programme cannot be completed overnight. Schemes have to be planned and designed; planning procedures have to be gone through. The water industry is seeking to fulfil its obligations as fast as is humanly possible. On completion of the implementation programme we shall have a sewerage system which is one of the most comprehensive in Europe, and a model for other countries.

It is not possible to make all the improvements to our sewerage system overnight. The schemes often require extensive alterations to earlier systems, or complete replacement. Sites have to be found for new sewage works. Planning permissions have to be obtained. New sewage sludge disposal routes have to be developed.

Anyone who has any appreciation of the scale of the investment being carried out will recognise the practical challenges of completing the comprehensive programme of improvements now under way. Inevitably, given their nature and scale, this all takes time. But the investment, commitment and determination are there to carry out this work as speedily as is humanly possible.

Sewage treatment and disposal have always been at the very core of the water companies' business.

During the early 1980s, it was becoming clear that investment in the water industry had for far too long been depressed—especially during the supposed stewardship of the Labour Government—and that quality had begun to suffer.

The results of the 1985 river quality survey had shown that, while the quality of our rivers remained generally very good, water quality in many areas depended heavily on the quality of sewage treatment. When river quality has improved, this has generally been when improvements to sewage treatment have been carried out.

It was against that background that, in 1986, the Government made sure, with the establishment of Her Majesty's inspectorate of pollution, that, for the first time, central information on the way that sewage works were performing was collected.

The first results were hardly encouraging: in 1986 no less than 23 per cent. of all sewage treatment works tested failed to meet the standards set for their discharges. Such a state of affairs could not continue.

The privatisation of water authorities provided the opportunity to see that things were put right. We therefore agreed with the water authorities that they should draw up accelerated improvement programmes to bring substandard sewage treatment works back into compliance with the terms of their discharge consents.

The objective was to get all the necessary improvements completed by 1992, although we recognised from the outset that some of the projects would involve extensive design and construction work, so that there would be a small proportion of cases in which it would not be humanly possible to achieve a 1992 target.

Much attention has mistakenly, misleadingly or malignly become focused on the temporary consent variations we granted the operation of works in circumstances where their performance could not reasonably be improved until the necessary rebuilding or extension of the works had been completed.

Let there be no mistake or misunderstanding: the object of this exercise is about improving performance, not about relaxing standards. I am thus encouraged by the performance figures for sewage treatment works published within the past few days. In 1986, the failure rate for sewage works was 23 per cent. By 1988 it had dropped to 17 per cent., and on the basis of the figures just announced, during 1990 the non-compliance rate had dropped to just 8 per cent.

Even making allowances for the effects on the figures of the time-limited consent variations which we granted, we believe that the true long-term performance of sewage works had improved to the stage where, in 1990, some 88 per cent. of works were already meeting their long-term performance measures.

Those who seek continually to criticise the water companies might care to reflect that the current investment programme did not get under way until the end of 1989, and it inevitably takes time to plan and to build even a modest improvement scheme; and many of these are major civil engineering projects.

Given that the performance of sewage works is normally assessed over a rolling 12-month period, it not unreasonably takes a little time after the completion of improvements before the results can fully show through as better performance. Every reasonable person should therefore be delighted at the progress that the figures are already showing. Many further new improvement schemes are already being completed and performance will thus have improved still further over the past six months since the latest figures were prepared.

I am, of course, conscious that the annual report of the Director General of Water Services, which was published today, and to which reference has already been made, showed some slippage of the programmes during the first six or seven months to March 1990. That is not surprising. The report covers a period of time that was entirely transitional, before and during the flotation of the new water companies and covering a time when the companies were inevitably coming to terms with the new management structures and new financial regimes. As the director general, Ian Byatt, himself acknowledged earlier today: These figures reflect the progress during 1989–90. This was a difficult time for the companies as they were adjusting to the new regulatory regime and also to planning the large investment programme they have to execute over the next few years. And, as the accompanying press notice makes clear, in its report, OFWAT stresses that one year's figures are unlikely to be material". The director general's report confirms, however, that the spending planned by the water companies during the financial year just ended was expected to reduce the shortfall significantly, and that, in his judgment, the companies were making every human effort to ensure that their improvement programmes were completed on time.

I have spoken about the works being done to enhance drinking water quality and to improve sewage works performance. May I, for the sake of completeness, comment briefly on the works being done to improve the quality of our bathing waters and the work being done generally to promote water resources.

Clearly, a high priority for the water industry is the improvement of bathing water. We are firmly committed to meeting the standards laid down in the EC bathing water directive as quickly as possible.

Progress is being made. In 1986 51 per cent. of bathing waters complied. Last year, by contrast, a record 77 per cent. of our bathing waters complied. This year we have a record 35 blue flag awards in the United Kingdom. Fifteen improvement schemes, affecting 21 bathing waters, are now completed, and many more schemes are scheduled for completion over the next five years.

Last November an accelerated and enhanced programme of improvement schemes was announced, providing for a further £600 million to be spent in addition to the £1.4 billion programme of spending and investment in improving our bathing water already announced in 1989. Again, billions of pounds are being invested to improve standards and fulfil tough regulatory requirements.

The past two or three years of exceptionally dry weather experienced in various parts of the country, especially in the south and south-east, have brought home the fact that water is a valuable commodity drawn from a finite resource.

The proper stewardship of these resources is now the responsibility of the National Rivers Authority. This spring the NRA has published a preliminary report entitled, "Demands and Resources of Water Undertakers in England and Wales", which gives the result of a preliminary survey of the prospects for public water supplies to the year 2011. The report shows that most water companies have the resources and are considering possible new developments sufficient to meet existing and prospective demands.

The NRA has also recently commissioned a study to help investigate a wide range of strategic options for the development of water resources, including major new water transfer schemes. It will take a fresh look at options hitherto considered uneconomic, such as a national grid and desalination.

A massive investment programme is already under way to provide improvements to enable customers to enjoy the water supply they require at all times. For example, London's water supply into the 21st century is being made secure by the construction of the London water ring main, which is currently under way and is due to be completed by the mid-1990s. The first section of the ring main came into service on Sunday, and is providing water to hundreds of thousands of people in south London. It is a major feat of civil engineering, and when completed it will be twice as long as the channel tunnel.

A number of development options for water resources are being explored by individual water companies to meet local shortfalls and deal with prospective additional regional demands. They range from sinking boreholes, to the construction of local pipeline transfer schemes, to the building of major reservoirs. A strategy for developing water resources must not lose sight of the importance of conservation.

I hope that the House will feel that I have been able to put the continuing achievements of the water industry into a somewhat more reasonable balance. Much is being done, massive investment is committed to doing more. In every area of the land, millions of pounds are being invested. If the hon. Member for Dewsbury and Opposition Members visit different parts of the country, they will find that more than 200 projects involving the investment of more than £1 million each have been completed since privatisation. At present, more than 600 projects costing over £1 million each are in progress. Billions of pounds are being spent on enhancing drinking water quality, rebuilding and refurbishing sewage treatment works, improving bathing water standards and guaranteeing future water supplies.

Such a scale of investment would never have been possible under a state-run, state-financed, nationalised industry. It will never be possible under a future Labour-controlled, state-run, state-financed, nationalised industry. It never happened under a state-run, state-financed, nationalised industry. Privatisation has made possible massive investment in water in Britain. I hope that the House will have no difficulty in rejecting the Opposition motion and supporting the amendment in the name of my right hon. Friend the Prime Minister.

5.2 pm

Mr. Andrew F. Bennett (Denton and Reddish)

I feel much sympathy for the Minister. It is bad enough having the Secretary of State and the Minister of State run away from the debate; to be left with such a threadbare speech must seem most unfair.

The Minister suggested that we were being unfair in criticising the Secretary of State for not being here, telling us that the right hon. Gentleman had important meetings with local authorities in the north-west. I have been in the House long enough to know that if Ministers really want to be present in the House, they often press, through the usual channels, for the business to be rearranged so that they can attend. Some of us are sometimes a little unhappy at the prospect of voting at 10 o'clock on a Thursday night and we are often offered the explanation that the debate had to be held on a Thursday so that the Minister in question could reply. It is therefore a little off for the Minister to argue that the Secretary of State had important duties outside the House.

I regard it as an insult not to the Labour party but to Parliament that the Secretary of State was not prepared to come to the House to answer a debate on a matter for which he is responsible. I understand why the right hon. Gentleman does not want to be here: the industry's record is pretty bad, and I suspect that he was not one of the most enthusiastic supporters of water privatisation in the Tory party. Nevertheless, if the right hon. Gentleman has taken a little time to look at some of the problems facing the people in the north-west as a result of the failure of North West Water, I shall be grateful to him for it.

I shall concentrate on North West Water and its disgusting record since privatisation. Almost everything that it has done has borne out the worst fears that the Opposition expressed during the passage of the Water Bill 1988 through the House.

One of the first things that happened following privatisation was that the salary of the chairman, Dennis Groves, doubled, and he is now earning £110,000 a year. As my hon. Friend the Member for Dewsbury (Mrs. Taylor) revealed, he has also done very nicely out of the share option that he was able to take up. The Minister said that we were being unfair, and told us that perhaps Mr. Groves would not be selling his shares. I do not imagine that the shares were given to Mr. Groves so that he could stick the share certificates on his wall. I am sure that, at some point, he will be able to sell those shares.

The Parliamentary Under-Secretary of State for Wales (Mr. Nicholas Bennett)

So that the public are aware of the position, I should explain that people were not given the shares, as the hon. Gentleman suggested: they had to buy them.

Mrs. Ann Taylor

Just about.

Mr. Nicholas Bennett

At market price.

Mr. Andrew F. Bennett

The Minister should restrict himself to considering the fact that, on the basis of the way in which Mr. Groves acquired the shares, if he had got rid of them at midday yesterday he would have made a profit of £74,000. Most of my constituents—especially those on low incomes who are finding it difficult to pay their water charges—will not consider that to be an appropriate use of the water company's money. Mr. Groves has potentially made a profit based on the profits of North West Water, which increased by 21 per cent. this year to £215 million. Those increased profits have meant that the value of the shares has also increased, and to that extent Mr. Groves has been instrumental in increasing the value of the shares that could potentially make him such a large profit.

The Minister said that the profits were modest. Those of my constituents on benefit will not regard them as modest, and they certainly do not regard a 14.7 per cent. increase in water charges as modest. Many of them are receiving transitional relief in respect of their benefit and received no increase in income at all this year, yet they are expected to pay higher charges. The philosophy of North West Water appears to be to take increased payments from pensioners to give Mr. Groves and his shareholders increased profits.

Then there is the whole question of services. Last year, 14 sewage works in the north-west were making illegal discharges. In addition, 602 sewage pollution incidents occurred—a 16 per cent. increase. At many of the sewage works in the north-west discharges are at unsatisfactory levels and the smell coming from them is appalling.

What is North West Water doing in the streets? Last year, North West Water proudly said that it proposed to instal a new water supply pipe in the road in which my mother-in-law lives. It chose one of the worst of the cowboy private contractors to do the work because he put in the lowest tender. He managed to ruin the sewage system for several of the houses in the road, with the result that at least one of the houses had raw sewage underneath it. North West Water now says that it will not use that contractor again. But the water company's determination to try to get the lowest prices and so maximise profit, showing no concern for the effects on householders, appals my constituents.

In Hume road and Thompson road in my constituency, where work has recently been carried out, the quality of the temporary reinstatement carried out by the contractor for North West Water is appalling. Now, North West Water is trying to quibble with the Tameside authority, which has been undertaking the permanent reinstatement, saying that Tameside's charges are too high and that it wants to look for someone who will do the job more cheaply—no doubt at my constituents' expense.

We are told that North West Water has been making great investments, yet it has found £140 million to invest in non-water business. Given all that we are told about the problems facing the water industry in providing pure water and treating sewage, it beats me why the Government are encouraging the water companies to invest outside the industry. It would be far better if they invested any money that they can get in providing a better service for my constituents.

There is appalling pollution in the north-west—not least in three of the rivers that flow through my constituency—the Goyt, the Tame and the Mersey. If North West Water has any money to invest, it should be investing it in better treatment works so that the quality of that water, which passes right through the centre of Stockport, can be improved and made more attractive.

Let me refer to one major problem. Not content with dumping vast amounts of sewage in the Irish sea, contaminating a large number of rivers in the area and contaminating the beaches of the north-west, North West Water wants to vandalise an extremely attractive area—more than 700 acres in the area of Audenshaw. Until 1800, that land was farmland on the outskirts of the growing townships of Gorton and Reddish. With the demands from the city of Manchester for pure water, it seemed the ideal area in which to build reservoirs.

In the early 1800s, two reservoirs were constructed which are now just in Gorton. In the 1860s three more reservoirs were added nearer Denton and Audenshaw. The land in between was earmarked for three further reservoirs, but before they could be built Manchester turned to the Lake District for its supply of water.

Therefore, there are in my constituency two early, small reservoirs and, some distance from them, three larger ones. The land in between has since been open space—some of it has been farmed and some used for two golf courses. To my constituents and to those of my right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman) it has been an open space which makes Debdale Park, which it surrounds, an area in which people can enjoy walking and seeing trees, and can enjoy the view of the water, and an area through which people can walk to listen to birds sing and watch wild flowers grow and where children can let off a bit of steam. They can get up to activities that would cause considerable upset if done in the tightly packed houses that surround the area. Children can let off steam without parents and neighbours saying, "Don't do that. Clear off. Go and play somewhere else."

The land has been an extremely valuable open space. It is not designated as a green belt area, because everyone assumed that it would not be used for anything other than recreation as it was part of the water undertakings. Now, instead of getting on with cleaning water and treating sewage, North West Water is setting up a property development company to try to establish a business park on the land. It claims that that will provide more than 6,000 car parking spaces and 6,000 new jobs.

I should be delighted if there were to be 6,000 new jobs in my constituency, but over the years I have heard far too many claims about the way in which developments will bring new jobs. When one checks those claims two or three years later, one finds that there are very few new jobs. Usually, there have been closures here, there and everywhere and in the end the net gain is almost non-existent. The evidence suggests that if North West Water were allowed to develop a business park on this attractive piece of open space, it would take office jobs out of the centre of Manchester, from other parts of Manchester and from Tameside, but would not bring new jobs to the area.

Even worse is the fact that in east Manchester there are vast areas from which industry has disappeared, leaving derelict sites. Some have been tidied up and are just waiting for industry to come along. If industrialists wanted to come to the area, there would be plenty of opportunities for them to take on those sites. However, North West Water does not want them to do that and is actively discouraging them. It wants to take one of the remaining most attractive pieces of countryside close to the centre of Manchester.

I am delighted that the Secretary of State stepped in and said that there must be a public inquiry. That will at least provide an opportunity for my constituents to put at some length their objections to the proposals. There is something wrong with the idea that some of the money being paid in water charges by my constituents is being used by North West Water to put forward at the pubic inquiry proposals that are totally unacceptable to my constituents. I wish that the Government and the director of the new water industry would direct North West Water to stop getting involved with such property speculation and get back to the basic task of providing pure water and the proper treatment of sewage.

There are six houses in the area in question. It is typical of the high-handed and dictatorial way in which North West Water operates that it made an offer to the owners of those houses, pointing out that it would be extremely difficult for them to sell their houses while the public inquiry continued. With some difficulty, the owners decided to try to purchase other properties, but now North West Water has gone back on its promise and says that it will leave them in continuing uncertainty.

I hope that the message that goes out from this debate to the water companies is that they are not serving the interests of the British people and that they must put their house in order. They must provide pure water for everybody and find ways of treating sewage that do not pollute the rivers and seas. They must concentrate on those activities and not speculate, whether in television stations or in business parks. They should concentrate on providing the services that the water industry has traditionally provided.

5.15 pm

Sir Giles Shaw (Pudsey)

I begin by declaring my interest as a non-executive director of Yorkshire Water. I do not know whether that was the cue for the hon. Member for Dewsbury (Mrs. Taylor) to exit, but she has. Whether she was going to be here when I spoke or whether I was going to be absent when she spoke was a moot point. I am sorry that she has left, but what I say will be on the record.

I am delighted that the Opposition have selected the water industry for debate because, as all hon. Members know, it is rarely a matter for debate and it is such an important industry that it should be debated regularly. I make no bones about the fact that we are having a debate about this industry, especially at this time, and I am sorry that more hon. Members are not present to give their views about the achievements, the record and the problems of the industry. Undoubtedly, there are problems as well as achievements, but great progress has been made.

The state of the water industry is far removed from the appalling anxieties expressed by the Opposition in their motion today. To suggest that the House should note the level of profits made "with alarm" is extraordinary. I suppose that one should be grateful, because the Opposition have been pleading—not only in the speech of the hon. Member for Dewsbury, but in other contributions—for further investment, further improvement, fewer discharges below the threshold, and more accuracy in the measurement and quality of the water. That is a constant plea, and the water industry is more or less dedicated to the elimination of such problems at a cost of £28 billion over 10 years, but it still manages to achieve a profit which approaches an average of 10 per cent. or 11 per cent.

It is a matter not for alarm but for amazement that such an industry can fund those levels of investment and still achieve commercial returns. I should put parentheses around the word "commercial", however, because my colleagues will appreciate that in the commercial sector a return of 11 per cent. on the scale of capital employed in the water industry is very low. The commercial returns of most companies of similar size will be well above that and aiming towards 20 per cent. to ensure that they can replenish their assets in their own time.

The water industry is a fledgling industry insofar as private sector practice is concerned, and I understand the problems that that gives the Opposition, but to note that modest progress with alarm is tantamount to giving the lie once and for all to Labour's understanding of the market. One can forget the views of the right hon. and learned Member for Monklands, East (Mr. Smith) and those of the hon. Member for Dunfermline, East (Mr. Brown) about moving towards an understanding and a use of the market. If that is to be their economic management policy, it is absurdly put to naught in such a motion. We should leave the motion where it belongs—in the margins of history—and concentrate on some of the matters in hand.

There is agreement in the House that the industry has suffered a huge dearth of capital reinvestment for many years. I do not blame only municipal authorities for that. Municipal authorities built most of the major reservoir systems and much of the infrastructure of the water industry over many decades. For a long time, however, benign neglect has been the policy pursued by Governments of various parties and by local authorities of various parties because, as I mentioned to the House on a previous occasion, there are not many votes in spending huge sums of ratepayers' money on sewers.

Mr. Chris Mullin (Sunderland, South)

I listened with interest to what the hon. Gentleman said, and I agreed when he said that the shortfall in capital investment had taken place over a long period and had been the responsibility of Governments of various parties. However, the hon. Gentleman was present, as I was, when the Minister pretended that it was all down to Governments of one party. Will the hon. Gentleman be generous enough to repeat in the presence of the Minister his statement that the shortfall occurred over a long period and under Governments of various parties as cheap political points should not be made out of that?

Sir Giles Shaw

There is nothing cheap about the water industry. I confess to the hon. Gentleman, if it helps his afternoon, that when for two happy years I was a Minister with responsibility for water in this Government, I dented the investment demands made by a number of water authorities. I admit that we operated within constraints known as the public sector borrowing requirement, which affected the rate of capital investment in the water industry. The policy of privatisation has been the one thing that has released the industry from the bondage of governmental restraint on investment. One can now contemplate a 10-year £28 billion investment in infrastructure—in sewers and sewerage systems, in purification and higher standards in water supply, and in new ring mains in the metropolis. I remember opening the first sewage works in the city of Newcastle in 1981. The dearth of modern facilities even in some of our great cities has been tantamount to a public scandal for long enough, and I admit that I played my part in that.

The Labour party is interested in having this debate, but it is concerned about peripheral things such as the level of profits, shareholding and dividends. It is time that the Labour party, and especially the hon. Member for Dewsbury—I am sorry that the hon. Lady is not in her place—recognised what the role of the system is. The hon. Lady does not understand that the shareholders, who on average get a distribution of about one third of the gross profit that the company makes, have put in their money to enable the industry to borrow cash and to fund the borrowing on the back of assets so that it can achieve a £28 billion improvement scheme over 10 years. One cannot have the one without the other—one cannot have the ingredients in the pudding without having the pudding at the end.

The role of the shareholders must be reasonably rewarded. In the case of Yorkshire Water, and I am sorry to mention that company specifically, the shareholders—80 per cent. of whom, I am happy to say, are individual shareholders—live in the area of Yorkshire Water, so they are customers as well. The distribution from Yorkshire Water to the shareholders takes out of the company about £35 million or £40 million. The shareholder investment in the company is worth at least £750 million, so the shareholders get about 6 per cent. That is no Croesus-like dividend distribution, and nor should it be, because the risks of—dare I say it—liquidation of the company are relatively slight and investment in the company is long term and steady.

Mr. O'Brien

The hon. Gentleman says that one third of the profits are distributed among the shareholders. That is about £45 million of the £140 million raised. Is it not right to say that interest on money borrowed must also come out of the profts, so is not the amount available for reinvestment substantially less than the hon. Gentleman implied?

If there were agreement between Conservative and Opposition Members that Government investment should be allowed, there would be no need for private money to be invested, and capital could be raised through European Community money and through monies available on the market without £45 million of profits being hived off. Will the hon. Gentleman address that issue?

Sir Giles Shaw

Interest charges would be dealt with before the distribution. The hon. Gentleman asked what would happen if the Government were benign towards the industry in terms of releasing cash. I remind the hon. Gentleman that the Government's capacity to do that expires every year on 31 March. That is the absurdity of relying on central Exchequer grants. Every five years—even more frequently if the Labour party had its way—there would be an election and a possible change of Government. The main reason why the change to privatisation is a matter not of profit or distribution but of allowing the business to develop is that it can be offered long-term financing under its own control so that it can do the long-term jobs that Government, with all the power that they have to raise adequate funds through taxation, have failed to deliver in the past. The failure of the past explains why there is now, probably for the first time since the 1920s, a real prospect of major investment in the water industry.

I referred to the number of shareholders and to their role in a regional company such as Yorkshire Water. However, I understand that the main factor in the huge investment programme is the need for the programme to be conducted efficiently and speedily. Hon. Members must recognise that, in aiming for higher standards, the existing distribution of pure water—or potable water—and the existing capacity to take away foul water should never be interrupted. It is a remarkable job to try to make renewals of infrastructure without threatening the supply and the existence of the service. Investment must be carefully calculated and cannot be easily speeded up because it is impossible to change overnight from system A to system B. There must be gradual replacement of the various parts of the system until the totality can deliver the efficiency that can be provided by new methods of distributing water and of taking water away.

There has been anxiety about the fact that the industry has been involved in programmes which are not mainstream core activities, but diversification. Purely as a talking point, I wish to say a few words about diversification. The water industry is probably the biggest industry dealing in waste materials. It has the immense problem of taking away foul water, whether rain water through the guttering and street system or domestic foul water through the sewerage system. It has an immense capacity for dealing with waste products and waste resources. It has a technology and capacity to deal with that function probably far greater than that of many other industries which also have major waste product problems.

Under the new arrangements for cleaning up our rivers and seas, and they are admirable arrangements, it is required that the waste disposal system should use methods other than the standard treatment of discharging after primary or even secondary treatment.

Mr. Andrew F. Bennett

I could understand it if the water industries were investigating ways of disposing of domestic and commercial waste, especially if they combined that with sewage sludge to make something which could be used as an alternative to peat. What baffles me completely is why they should be bidding for television franchises. What has that to do with waste?

Sir Giles Shaw

That is not for me to answer, but I have no doubt that someone will be able to answer the hon. Gentleman in due course.

Waste disposal raises a major new industrial opportunity, involving new systems and new technologies such as the high standard of incineration by which sewage sludge can now be disposed of. Those new opportunities immediately bring about the possibility of diversifying substantially—for instance, into waste disposal—so as to establish new technologies which can serve industries other than the water industry. I plead with hon. Members to understand that diversification from the core system into new technologies that could be used for purposes other than those for which they were originally designed is thoroughly sensible and admirable. There could well be other ways of diversifying, such as the modest experiments with wind farms in Yorkshire. As hon. Members know, we have high catchment areas, so there are prospects for windmill generation. Yorkshire Water is interested in that and is involved in a joint venture with Yorkshire Electricity. Its commercial competence may or may not be worth exploring, but from every point of view, including the environmental, it is essential that we look at new systems if they provide an opportunity for development.

The crucial point at issue in the debate is whether, after 18 months of privatisation, the industry has given a fair account of itself. My hon. Friend the Minister dealt admirably with that. The industry has come an immense way in a short time in being able to discharge its public obligations, which have been strengthened hugely over those 18 months.

The water industry is regulated in three dimensions. The first is the National Rivers Authority, which is the arterial system, dealing with discharges and through which licences are granted. Secondly, the Office of Water Services—Ofwat—determines pricing factors. Thirdly, the EEC and the Government jointly provide the statutory framework through environmental directives, and pollution and bathing water standards. There is therefore no question of the industry being footloose and fancy-free to do as it likes. It has to do what it must do to discharge its public responsibilities. In my view, up to now it has discharged those responsibilities with amazing success. It has done so in a short period and while efficiently managing a huge investment programme. It has also had to reorganise its management structures and its skills to meet the demands that have been placed upon it. The water industry today has achieved high standards, and improved its delivery and quality.

However, much remains to be done. I am well aware of the concern about pricing policy and standing charges, upon which the hon. Member for Dewsbury spent a great deal of time. The hon. Lady also mentioned the metering experiments. The water industry is required to examine different methods of charging to find the most effective and the most acceptable to the consumer. I know that the hon. Member for Normanton (Mr. O'Brien) intensely dislikes the metering experiment in his area, but I am sure that he recognises that experimenting with charging systems is essential if we are to find the most equitable way of dealing with water charges, especially if—or when—rateable values disappear in the year 2000.

Mr. O'Brien

Although I accept that there should be investigations into future systems of water charging, such experiments should be voluntary. People should not have imposed upon them a system that they do not want. I am concerned about the evil of the compulsory metering system that operates in my constituency.

Sir Giles Shaw

The problem rests on the experiment being confined to an area that happens to be the hon. Gentleman's constituency. The option of metering has been freely available in most water authorities for some time, and the water companies continue to operate it. While I accept that the experiment has proved irksome to the hon. Gentleman's constituents, I defend the water companies' right to experiment in some way to ensure that we find the best, the most acceptable and the fairest way of charging for water.

On the issue of price, given the quality of the product that the modern water industry now delivers to millions of homes and the wide range of increased uses of water, surely it is not unreasonable or excessive for the price to be roughly 1 per cent. of domestic income. I accept that standing charges account for a high proportion of the domestic charge, but it stands to reason that as the infrastructure has been improved, standing charges have been under pressure. However, the regulations are clear—the price has to be examined, and the pricing formula must be approved.

I have said enough to demonstrate that, although the Opposition may wish to sound an alarmist or envious note which pays scant justice to the realities of the water industry, the fact is that in private ownership the water industry is safe, prosperous and progressive.

5.35 pm

Mr. Simon Hughes (Southwark and Bermondsey)

I welcome this important and interesting debate. I follow the hon. Member for Pudsey (Sir G. Shaw) in saying that we all too rarely have the opportunity to stand back from this issue and to debate it. Pre-privatisation, our only opportunity to debate the water industry was the annual debate on the raising of charges, the external financing limit and all the rest. It was a matter of great controversy, and normally one of embarrassment to the Minister of the day and to everybody else in the House, including for a time the hon. Member for Pudsey, who spoke about his previous role as a Minister responsible for water.

The priorities of the water industry go far further than those that are stated in the motion or the amendment. My colleagues and I will vote with the Labour party—

Mr. Nicholas Bennett

As usual.

Mr. Hughes

No, not "as usual". Perhaps we do so on four out of five occasions, but not "as usual". As most of the ideas coming from a minority Government do not command majority public support, they are therefore opposed. That is why we shall vote with the Labour party, although our arguments will not be entirely the same.

The water industry's first priority should be the conservation of water—to minimise the waste of water. I understand that the average household consumes 136 litres of water per day. We waste an extraordinary and unjustifiable amount of water. Our nation has an enormous amount of rain—perhaps we have not had as much as we would have liked recently, although we have not had any sun either—yet we regularly have droughts. Therefore, the water industry's second priority should be security of supply. Its third priority should be the improvement of quality, and the fourth and final priority should be the minimum necessary cost to the consumer.

We waste about 25 per cent. of our water as it leaks out of the pipes while moving around the system. That is the unacceptable result of the failure to invest over many years. Furthermore, we do not have a national grid. I welcome Ministers' recent suggestions that they are positively looking at the idea of establishing a national water grid. My colleagues and I support that idea.

However, we are still often not responsible consumers. Those of us who were brought up, as I was for a time, in homes without mains water—my mother still lives in a house that has well water, but where the well runs dry for long periods—were brought up to be careful when using water. Many people, however, are often careless about water. I am not talking only about those who self-indulgently hose their vehicles or who water their lawns for extravagant periods, but about the fact that people often let water run to waste. For example, they have baths when they could have showers, which use far less water. Generally, we do not think about our duty to minimise the amount of water that we use. If we wasted less, other people could use some of that water and costs could be reduced.

The last factor that forms the background to the debate is that we have neglected the importance of having clean water. We have not paid a sufficiently high price. Perhaps the best example in Britain is the Mersey. The estuary has been sadly entitled the worst example of an estuarine blackspot in Britain. Fifteen years ago and thereafter enormous amounts of money have been spent by the European Community and the British Government on cleaning up the Mersey.

Mr. Brandon-Bravo

Will the hon. Gentleman give way?

Mr. Hughes

No, I shall not give way.

The practical consequence has been that our objective to convert the Mersey into a grade 2 "fair" river by 1995 has been downgraded because all that we can do now is prevent further deterioration. The Mersey receives more untreated sewage, trade effluent and surface run-off water than any other river. We have committed a crime on much of the water in and around our country. The Mersey is the worst example, but there are others. The ecological capacity of the Mersey and other rivers like it has been exhausted by a sort of environmental grievous bodily harm.

The message of that legacy of pollution is that the precautionary principle of prevention being better than cure is often essential in environmental terms. Unless we prevent water pollution, it is too expensive properly to clear it up.

I have outlined the background to the debate. Water was mostly in the public sector for about 100 years, although many areas had statutory water companies. Some of my predecessors contributed to putting water into the public sector. But we never seemed to have enough money for the water industry. I do not think that Governments would ever have put enough money into it. Other claims on the public purse appeared to have been such that there would never have been enough money for investment.

Perhaps I may be permitted the indulgence—it is a luxury afforded to Liberal Democrats that we can stand aside fairly dispassionately and comment on the record of the other parties—of commenting on the past 15 years. The Labour Government cut pollution expenditure by 50 per cent.. They cut capital expenditure by a third in real terms. The all-party Select Committee on the Environment made it clear that from the mid-1970s to the early 1980s there was a steady drop in investment by the water authorities in sewage treatment and disposal. The Labour Government also failed to implement section 2 of the Control of Pollution Act 1974.

During the first part of the Conservative party's period in office—

Mr. Irvine Patnick (Sheffield, Hallam)

Tell us what the Liberal party would do.

Mr. Hughes

I will tell the hon. Gentleman what we would do. Investment was not significant during the first part of the Conservatives' period in office, although I accept that it then increased. However, it was not nearly as much as it has been since privatisation. The reality borne out by the recent history of investment in the water industry is that it has never been possible for Governments to deliver the investment they needed to deliver when water was in the public sector.

When the proposal to privatise the water industry came before the House I and my hon. Friends, and especially my hon. Friend the Member for Brecon and Radnor (Mr. Livsey) who has the merit of being both a Liberal and a Welshman, argued vehemently against privatisation. We opposed it as a matter of principle. As a matter of principle, then and now, we were unhappy with the content of the legislation because we foresaw how it would allow profits to be made and diversification to take place that would be against the interests of the consumer. Yes, it was necessary to find extra money from elsewhere, but no, it was not necessary to set up a structure that would allow very large profits, large and unjustified salaries, which have been evidenced—unjustifiably high—and sudden increases in cost and expenditure on matters which have little, if anything, to do with the water industry.

So what has happened? Even if we had not seen the picture before, we are indebted to The Sunday Times this week for the "Insight" report which gave a summary of the sort of things that have happened. I shall summarise the three main points that the article made: last year the number of sewage pollution incidents did not fall, but increased by 20 per cent; the newly created water companies underspent on their environmental clean-up programme while they spent twice as much on diversifying into other businesses; and the National Rivers Authority cannot prosecute in all cases because, provided that the number of certain breaches is small, it is prohibited from prosecuting no matter how serious the breach.

We have had a patchy year and a half. We have seen large salary increases. The chairmen of the water companies are paid salaries of the order of £80,000, £100,000 and £120,000. The water companies have made profits of about 14 per cent. Investment has increased—that is good—but prices have increased substantially, in many cases entirely unjustifiably. Across England and Wales the figures that I have—they appear to be accurate—show that there was a 67.8 per cent. increase in domestic water bills between 1987–88 and 1991–92. That is 36.8 per cent. above the retail prices index for the same period.

The average water bill is now about £155, but in some places people pay more for their domestic water than for all the local government services put together. In Wales that is certainly the case. I see that the hon. Member for Bridgend (Mr. Griffiths) agrees. I understand that the average poll tax in Wales was £230 before reduction. The water rates figure was higher. A friend who lives in Westminster told me the other day that the water rate for his flat was more than the pre-reduction poll tax. That seems ludicrous.

We have paid a lot and some people have gained a lot. Some companies have diversified a lot. At the same time the United Kingdom has sought relaxation of some of the standards set by the European Community. We have sought and obtained 719 relaxations of drinking water quality standards. We know that about a quarter of our bathing beaches do not conform to the European Community standard, and have not won the blue flag award.

We are still failing badly in our sewage sludge and other outfall requirements. We are not yet good environmentalists. Much of our water is still filthy and I am afraid that many of the standards are still low.

As the hon. Member for Pudsey said, we have three tiers of authorities controlling water. The inspectorate deals with drinking water. The National Rivers Authority deals with inland waterways. The Office of Water Services deals with regulation of the finances of the industry.

What should be the way forward? Colleagues rightly ask that question. My view is—

Mr. Patnick

Tell us about some of the advantages.

Mr. Hughes

If the hon. Gentleman will be patient, I shall not take long. I shall give my view clearly. My view is that we should be helpfully guided by the warnings of the Director General of Water Services. He has given several helpful warnings to the industry already during his short time in office. I sought to raise this matter during the Minister's speech, but he did not allow me to intervene. The director general warned today that companies should not seek to charge people for improvements that have not been carried out and are not likely to be carried out. He also warned that there is still a high and unjustifiable number of debt disconnections. He has also warned, as we heard before, that excessive profits appear to be either made or anticipated. Lastly, he has warned that to concentrate on diversification—for example, into hotel purchase, as the Welsh water authority is doing—rather than on clearing up coastal estuaries, such as the one around St. David's which was cited in The Sunday Times, is to have the wrong set of priorities. He warned that customers would rightfully complain.

We believe—I say this provisionally, because our conference will decide the matter in September—that it would be appropriate to return to the mechanism of a statutory water company, which would have a corporate structure but would be regulated much more clearly on behalf of the public. It is, of course, proper and necessary to allow additional investment: I have made that abundantly clear. But the present structure clearly is not tilted sufficiently in the interests of the consumer. It is tilted too much in the interests of those who have ended up being the shareholders, the bulk of whom are not domestic consumers. Most of them are the companies, corporate entities and large commercial organisations, not the woman or man in the street who relies on the water supply day by day.

How should we charge for water? Imposing meters—I appreciate that Labour also objects to the idea—seems to be the wrong way forward. But it is important that people should know how much they use and that there should be disincentives to use. That should be an important conservation principle. But the charge should also take account of ability to pay. A high standing charge for low use unjustifiably penalises those in lower income brackets. We should also make sure that the charge is not related to the old-fashioned and increasingly outdated linkage with the rates, which of course may not be appropriate in the future.

Sir Alan Glyn (Windsor and Maidenhead)

Is the hon. Gentleman's party in favour of water meters, by which the charge would exactly reflect the amount used?

Mr. Hughes

My party will debate this subject in Bournemouth in September, when we shall take a decision on this and other linked issues. My personal view is that water meters are a good idea, provided that the cost of installation is not borne by the consumer. They should be provided by the water company. Otherwise customers like the pensioner with a low income would have to pay.

Nor should there be a standing charge. One should pay for what one uses, meaning that the low user pays a small sum. That would create an incentive to minimise rather than maximise usage. My party may disagree with me in September and we may decide that water meters are entirely unacceptable. Perhaps we shall want a water income tax or some other method.

The lesson of the last couple of years has been that investment has been the number one priority of the water industry. Now, its priorities should be to look after the needs of the consumer. The dogma that said "We must privatise because that is the remedy for all evils" has proved to be inadequate, as is always the case. But to pretend that the public purse, without any other money, will always be able to invest, for example, in a ring main for London, in the improvement of our beaches and in clearing up our sewage, is an argument which also does not hold water.

We are dealing with a sensitive and politically controversial issue. It would be better to proceed by seeking agreement than confrontation. We must not continue the present structure by which many people cream off much of the profit. The public are not happy with the existing water system and with the water industry as it is at present organised. The system must be changed, but next time it must be done with public consent.

5.52 pm

Mr. Robert B. Jones (Hertfordshire, West)

I was surprised to discover as I listened to the speech of the hon. Member for Southwark and Bermondsey (Mr. Hughes) that there was much common ground between us on this issue. That was particularly the case when he began by referring to the conflicting claims that are made on the water industry today compared with the demands of the past. Having served for seven or eight years on the Select Committee on the Environment, I assure the hon. Gentleman that we have examined in depth the issues involved in the water industry. We look into its problems at regular intervals and we accept that the industry's problems deserve serious treatment.

I welcomed the hon. Gentleman's speech because it was the first on the Opposition Benches which even began to air some of the issues that must be addressed, rather than simply ducking issues. Indeed, I thought that Labour Members had a brass neck to select this subject for debate. As the hon. Member for Southwark and Bermondsey said, their record in office was absolutely deplorable. Not only did Labour Members cut investment significantly then, but they are now proposing to renationalise the water industry, and the hon. Member for Dewsbury (Mrs. Taylor), who speaks on water issues for the Labour party, did not have the decency earlier to give me a straight answer to my question about how that would be funded. We must know how Labour Members would fund investment in the water industry if they would also take a tough line on prices.

It is obvious that Labour gives the water industry a low priority in its plans. That reflects what happened when Labour was last in office. In that connection, it is deplorable that Labour Members should go in for so much bashing of Britain in terms of water when we have so much of which to be proud. About 95 per cent. of our rivers meet the fair or good standard which is laid down, which is more than can be said of many other European countries. About 96 per cent. of our homes are on main sewerage.

That contrasts with the record of many of our European partners, who are ready to lecture us but who do not do much about their problems. In Italy, for example, the city of Milan discharges all its sewage untreated into the river Po and out into the sea, yet no action is being taken by the European Community on that, I suspect because the EC commissioner for the environment is an Italian. Such a deplorable record leads one to be extremely suspicious of European claims.

If the lessons of the past are the consequences of under-investment, it was clearly not under-investment by chance. Water and sewerage came low down the political pecking order in those days. One can understand why Governments were tempted, when considering their capital programmes each year, to ask which were the most important areas—health, education, defence and so on—with the result that the water industry came low down on the list. That was true of Labour and Conservative Governments. As has been pointed out, there were not in those days many votes in water and sewerage. I suspect that that is changing.

Much has been said about pollution. Only now, with the existence of the National Rivers Authority—the roles of poacher and gamekeeper having been separated—do people seriously think it worth reporting incidents of pollution. I come into that category because, as a constituency MP, I used to think it frustrating to take up a pollution incident concerning, say, the river Gade, and write to the Thames water authority about it, only to discover that the pollution was coming from that authority's own sewage pumping station. The authority was supposed to be responsible for checking the level of pollution in the water and, if necessary, remedying the situation.

I welcome the fact that a major part of the Water Act 1989 involved the creation of the NRA and the separation of the two roles of poacher and gamekeeper. Indeed, I would go further. I have always made it clear that I see that move as a stage towards the creation of an environmental protection agency. I hope that the Minister will consider, in that context, the merging of the drinking water inspectorate into the NRA and eventually into an environmental protection agency.

The NRA is doing an excellent job but, especially as we consider the problems ahead, its role seems too complicated. It is having to deal not only with questions of pollution but with matters concerning leisure and the environment. Rationalisation could take place between the NRA and the British Waterways Board so that, for example, all the leisure functions were enjoyed by the same body. I accept that in its first year or two the NRA should not have a shake-up of functions, but in the long term we should proceed in the way I have described and attain a specialist approach to the various topics.

Much has been made of The Sunday Times article. I read in it the need for more powers to be given to the NRA, and the Minister has responded positively to the issue. If the NRA feels that way, it should say that to hon. Members who are interested in the subject and suggest where it thinks its powers are failing and should be extended. I for one would be sympathetic to a re-examination of its powers, if I thought that necessary.

As to underspending, when one considers the huge size of the capital programme, it is hardly surprising that there should be slippage. Anyone who has had to deal with this country's planning system knows how difficult it is to get projects on stream, on time. I refer not just to obtaining planning permission, but to all the consultations that are involved.

During the Select Committee's consideration of the bathing waters directive, it had an opportunity to examine in detail why there was no water treatment plant on the Fylde coast. It was clear that the rows between different levels of local authority and the water company all contributed to delaying a project that was extremely important to that area's tourist industry.

We must be honest and acknowledge that price and consumer attitudes to the cost of water are problems that we must confront. At least the hon. Member for Southwark and Bermondsey acknowledged those difficulties and suggested how they might be solved. Far too many people think that water is free, conveniently forgetting that it must be collected and transported, that water pipes must be maintained, and that sewage has to be cleansed and disposed of. That is a very expensive exercise. If we and the rest of Europe hold to the polluter pays principle, the polluter in the case of water and sewage is the domestic consumer of clean water and creator of sewage.

The amount that we pay for our .water is small in comparison with other day-to-day commodities and utilities, and even in comparison with our expenditure on TV and on booze. It is also small in comparison with other countries. Our charges are half those made in Germany and less than in almost every other European country.

Some of the legislation coming out of Brussels also presents a problem. Although much of it is welcome, some of it has no proper scientific basis. A great deal of expenditure is being incurred on schemes that would not be justified if the regulations were properly framed. I will cite one example in respect of sewage. The bathing waters directive provides that a water shall fail if there is any instance of salmonella. One third of all seagulls carry salmonella, so every bathing beach on this country and throughout Europe would fail that directive if proper monitoring were undertaken—and it is not, in many parts of Europe. That is the kind of thing that must be changed if European directives are to be taken seriously.

Nitrate levels are another area of concern. The Select Committee remarked that, on the basis of the scientific evidence available to it, existing permissible levels are far too low. If we are to spend large sums of money improving British water standards, there are many more important areas. Heavy metals, for example, present a far more serious problem than nitrates to most people.

The hon. Member for Normanton (Mr. O'Brien) referred to standing charges in his intervention, and I have considerable sympathy with the argument made by him and by the hon. Member for Southwark and Bermondsey. Although it is true that the infrastructure must be in place whether or not one uses water, the same can be said of Marks and Spencer, which incurs overheads regardless of whether one shops at that company's stores. The match between the standing charge and the unit cost is currently out of kilter, and it should be closely examined.

It will be clear from my remarks and from earlier speeches that the majority of the public acknowledge that a huge investment is being made in the water industry. That has only been possible because of privatisation, and it would not have been undertaken if it had been left to the state to find the resources. Because of that, the very least that the House is owed today is a decent, straightforward answer from the Opposition—but the House will have been struck by the deafening silence that greeted my questions to the hon. Member for Dewsbury.

6.4 pm

Mr. Alan W. Williams (Carmarthen)

We oppose the privatisation of water and the creation of private monopolies, for which there can be no economic justification. I point out to the hon. Member for Hertfordshire, West (Mr. Jones) that we shared the Government's view, in their creation of the National Rivers Authority, that the industry needed a separate organisation. However, we would like an NRA that has much wider powers. We resent the amnesty that the Government granted to the water companies, which allows them to carry on polluting—and when fines are imposed, they are far too low. They need to be 10 times higher to have any deterrent effect.

There has been a historic lack of investment in the water industry, from the 1950s right through to the 1980s. The answer was to devote more public money to cleaning up the environment, not to privatising the industry. There is no evidence yet of any environmental improvement following privatisation. As has been said, over the past year, the number of pollution incidents has increased by 20 per cent. The number in the case of Welsh Water is 717, which is an increase of 25 per cent. There is no evidence either of any improvement in respect of beaches or drinking water quality.

However, there has been a dramatic increase in water charges, and that is brought to our attention almost weekly in our constituencies and through the media. There has been a 30 per cent. increase over the past two years, with Welsh Water showing an increase of 16.4 per cent. last year alone.

With the introduction of the poll tax, many water companies are moving towards something like a water poll tax, which has brought a dramatic increase in standing charges, which now account for 60 per cent. of Welsh Water's income. Its standing charges have increased by between 30 and 60 per cent.—which is most unfair to the poor. A different charging system should be devised. The old system, which was linked to rateable values, was generally accepted as fair—and when we get into government and introduce our fair rates policy, we shall want water companies to follow suit and to levy charges in proportion to property values and to people's ability to pay.

Many householders have difficulty paying their water rates. If an individual falls more than two months into arrears, the water companies automatically issue a summons, which incurs legal costs that are often greater than the amount outstanding. I have cases in my own constituency of single-parent families who cannot keep up payments. In one instance, an elderly person who had never been in debt received a summons as a result of an error. When I wrote to Welsh Water, I received a standard reply pointing out that it issued 45,000 summonses last year. Its attitude is nothing short of callous.

What people resent most of all is the enormous profits that the water companies make, and the way that they diversify. Last year, Welsh Water made £128 million on a turnover of just £293 million, so 40 per cent. of its turnover was profit. The salaries of top executives rose by 30 per cent. and Welsh Water has bought 10 per cent. of the shares in South Wales Electricity, which is simply a speculative venture. It is now buying five hotels in Wales, including the largest hotel in Carmarthen, at a cost of £10 million.

The public feel that the water companies are misusing the freedom that they have been given by the Government. The regulator is weak and should examine what is happening in terms of diversification. In turn, the Select Committee should investigate the water companies' profits and see whether they are being used for environmental improvements. If they were, people might be willing to pay the extra water charges, but they are being misused. With the water industry in private hands, such dangers will always exist. The only answer in the long term is to return the industry to public control and public accountability.

6.11 pm

Mr. Richard Alexander (Newark)

I should be interested to know whether returning the industry to public control, as suggested by the hon. Member for Carmarthen (Mr. Williams), is Labour party policy. The history of the Labour party's opposition to privatisation has always been scaremongering and exaggerating the awfulness of what will happen, leaving those who are less able to accept problems unable to see what will happen. Nevertheless, people have learnt that water privatisation is not as the Labour party described it in previous debates. The Labour party did the same in debates on the national health service and British Telecom and is now attempting to blackguard the water authorities. The tragedy is that Labour Members are still attempting to rubbish the water authorities and what they are trying to do, despite the fact that privatisation continues. They no longer come out with the same old exaggerations, saying that footpaths will be closed and areas of outstanding beauty will become yuppie villages or ghettos, but the distortions remain and we have heard some of them today.

Our ideological opponents miss the point. Privatised water authorities are in place to produce water that is as clean as possible, combined with the increasing number of duties imposed on them by Europe to make water acceptable and drinkable. Although returns to shareholders are important, they are not the main object of the exercise. Indeed, because of statutory intervention, they cannot be the most important aspect. In any event, I doubt whether any hon. Member would not rather have our clean water than that of any other European country that preaches at us about improving water standards. One of the many great pleasures in life is to come back from two weeks in, say, Spain and to be able to turn on the tap and find clean, cool, natural drinking water. I wonder whether one can do that in any other country in the world with the same absolute certainty that the water will be pleasant to drink.

This country sometimes does itself a disservice in debates such as this when Opposition Members claim that the current position is unacceptable. Instead of proclaiming the nastiness of our water, we should proclaim its virtues. Instead of complaining that too much profit is being made, we should explain that the investment in the industry is for even greater water quality. We should be able to tell the nation and the world that we bear comparison with any other water-producing country.

Reference has been made to the report of the Select Committee on the Environment. I served on that Committee and helped to produce that report. I remember being briefed by the water authorities, which were tearing their hair out over the inability to invest as they thought best to improve water quality in their areas. I remember their frustration in dealing with Treasury requirements to produce certain returns on their capital, even though they were being starved of capital under a Labour Government and, indeed, under a Conservative Government until privatisation. It was an unsatisfactory time for them all. Public ownership meant that management was limited to damage limitation and political pressure.

Today, water managers are motivated by responsibility to their shareholders and the public at large and by leadership in their industry. Above all, they are now impelled by accountability. They are no longer restricted by Treasury economics, damage limitation and hostility to initiatives.

It is fashionable for the Opposition to campaign on the basis that everything is awful and that they could do much better. However, they are the Government-in-waiting and believe that they will win the next general election. If they are to convince the electorate that they are not just political opportunists, desperate to take office at any cost, they must come clean with the electorate and the House and answer the questions put to them, not least by my hon. Friend the Member for Hertfordshire, West (Mr. Jones). How do they propose to carry out their promises? Will it be through increased charges and taxation or, as the hon. Member for Carmarthen said, will it be by renationalising the water authorities? Labour Members have said nothing precise in this debate. We have had a long tirade of carping, but nothing positive. At this stage, shortly after privatisation, we should leave the water industry alone and let the professionals manage it. They are doing a good job as a result of privatisation and Labour's vindictiveness against the private sector cannot deny that.

6.17 pm

Mr. Peter L. Pike (Burnley)

The debate focuses attention on a problem which lies at the root of privatisation of this essential, basic industry, which is so crucial to our industrial and commercial life. The clash will become increasingly evident as a result of privatisation, due to the need to make profits for shareholders and at the same time to serve the interests of the nation and consumers. The legislation clearly provided for charges to increase by inflation plus a K factor. That was different from all the other privatisations, which provided for charges increasing by inflation minus certain amounts. Therefore, we know that prices will continue to rise by more than inflation.

We must be extremely cautious when considering the installation of meters. I know that the industry is consulting on that matter. One must treat even that consultation with caution, not because I accuse the industry of doing it falsely but because few people will fully understand the implications of metering. One must accept that, however the charge for the capital cost of installing meters is met, it will ultimately affect the charge to be met by the industry. The reading of the meters will also add a revenue charge.

Unlike electricity and gas, the commodity that goes through the system is not the expensive part. Rather, the distribution and treatment—before and after—in the sewage treatment works form the major cost. Therefore, the relative amount that the consumer uses is less influential than in some other industries. We must also recognise that metering may penalise families with young children who use a lot of water for washing clothes. The same applies to people with manual jobs—who will need to do a lot of washing and will need more baths than other workers—and to the elderly, the sick and the disabled.

Much has been said about investment. The Parliamentary Under-Secretary of State described the mid-1970s as the peak period for investment. The issue has been debated for years in the Select Committee and elsewhere, and I have never denied that the decline in investment began under Labour—but it continued and accelerated under a Conservative Government. What the Conservatives fail to point out is that—despite their having been in office for 10 years at the time of privatisation, and despite all the economic miracles for which they claim credit—they have never regained the level of investment that existed in the mid-1970s.

The hon. Member for Hertfordshire, West (Mr. Jones) shakes his head, but he was a member of the Select Committee when I was, and the graph shows clearly that I am right. The key issue was never the ownership of the industry—investment was always the problem. We could have solved that problem if the Government had chosen to remove the industry from such restraints as the public sector borrowing requirement and the external financing limit. We want to achieve the best possible drinking water standards. We also want to avoid the cheapest ways of dealing with sewage, which in the long run will lead to higher costs as they become subject to more and more limitations. That will make it more difficult for us to clear up our beaches.

A secret memorandum from North West Water, dated 30 May, has been—appropriately enough—leaked. It states: Following the latest cut in major capital refurbishment expenditure, I have contacted your works managers and asked them to revise their programmes for the year". That shows that the industry is already experiencing difficulties in dealing with investment problems and tackling the tasks imposed on it, while at the same time meeting the limits on charge increases forced on it by current legislation and making a profit for the shareholders. We believe that privatisation is failing to satisfy the requirements of the public.

6.22 pm

Mr. Martin M. Brandon-Bravo (Nottingham, South)

I think that the whole House will agree with my hon. Friend the Member for Hornchurch (Mr. Squire), who said that no one wanted water to be rationed as a result of price considerations. We all agree that water bills must take into account the impact on, in particular, pensioners and families with low incomes. It does not follow from that, however, that we should emulate the Labour party and criticise the conduct of the water companies. Where does Labour imagine that the money for investment will come from? That question has never been answered.

In an intervention in the speech of the hon. Member for Dewsbury (Mrs. Taylor), I mentioned the pre-tax profits of the water body in my area. It is extraordinary for any company—I refer here to Severn Trent—to plan to spend twice its current profits on investment. I understand that Severn Trent is not only spending £400 million on investment this year, but planning to invest some £4 billion. That would never have happened in the public sector; it is time that we faced up to that.

The hon. Member for Dewsbury avoided my question and promptly suggested that the company was investing outside the water industry. That is perfectly true—it has just bought BIFFA, a major waste disposal company. And why not? The water companies are very much involved in the waste disposal business, and I think that BIFFA fits Severn Trent's plans very well. What the hon. Lady does not want to admit—I have checked this—is that the money for that investment did not come from funds that should rightly have gone to the industry. The company did not use what we called the "green dowry" at the time of denationalisation. It raised the money by using its normal banking facilities and through the issue of bonds. It is diversifying without using funds which ought to be invested in the industry as a whole.

We shall have to check with Hansard tomorrow, but I have the impression—from either her tone or her words—that the hon. Member for Dewsbury believed that the NRA was somehow or other no longer in the public sector. Surely the hon. Lady will be the first to admit that it has remained in the public sector. I hope that my right hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) will not think that I am treating him poorly when I suggest that history will probably record that he made the most important decision of his political career when he decided that the denationalisation of the water industry should involve the separation of the commercial side—now in the private sector—from the environmental side. He rightly believed that that element, along with the NRA, should stay in the public sector, which is what has happened. As has already been said, we have separated the gamekeeper from the poacher.

If there was a mistake in our denationalisation legislation—I hate the word "privatisation"—

Mrs. Ann Taylor

The industry was not nationalised.

Mr. Brandon-Bravo

There they go again—they love it.

I was going to say that I felt uncomfortable about one aspect of our legislation—the size of domestic bills for highway drainage. I appreciate that the cost of highway drainage had to be paid by someone and it was left to the plcs to include it in their charges. Surely, however, it should be paid either through central taxation or through funding for the local authorities or the Department of Transport. I may be guessing, but I suspect that bills in the Severn Trent area would be 8 to 10 per cent. lower if highway drainage costs were not charged to individual households.

6.28 pm

Mr. William O'Brien (Normanton)

The title that Labour has selected for today's debate—"Priorities of the Water Industry"—shows how badly such a debate is needed.

The Yorkshire water authority introduced compulsory water metering in part of my constituency. No joy is involved in compelling people to install water meters. The authority promised that those who used a lot of water because of medical conditions—those who suffered from incontinence or had to use dialysis machines, for instance —would be given special consideration. It reneged on that promise: such people will have to pay like everyone else. That is just one of the injustices that water metering has brought about.

What happens if the water supply is interrupted or if the mains are flushed and some dirty water flows through the system? We questioned Yorkshire Water about how that will be judged and it said that it is subject to negotiation. Imagine what will happen to people who cannot negotiate with professionals when they try to obtain a reduction in their water charges because of dirty water in the system.

What will happen to people who doubt the meter because, for example, they can see it turning when the system and the taps are turned off? If they question the water authority, it will say "We will check the meter, but if it is correct you will have to pay between £20 and £40." Such people will say, "I cannot afford to have it checked." That is what is facing people who are being compelled to have water meters.

I object not to people having water meters—if someone wants a meter, let him have it—but to a water authority saying that everyone must have them, without the authority first considering the implications.

Conservative Members wanted to know what the Labour party's policy is. We oppose compulsory water metering, which is one of the issues on which we shall fight the next election. Conservative Members can be assured that I shall campaign vigorously on the issue because of my constituency experience.

6.31 pm

Mr. Win Griffiths (Bridgend)

It has been an instructive debate. I was not surprised that Conservative Members tended either to ignore the past 10 years or to try to rewrite its history. On the fundamental issue of who spent what on water, the record is plain: the average for the Labour years was £1,254 million but for the Tory years up to privatisation it was £922 million. The graph went down between 1974 and 1979 and continued to go down until 1986, when it began to increase but still did not reach the spending of the previous Labour Government. Those straightforward facts are obtained not from us but from an independent source. [HoN. MEMBERS: "Who?"] The Library produced the figures; Conservative Members can obtain them from there.

Much has been said about the investment programmes of the water companies, but most of that investment was made in response to European Community directives, which for a decade the Government tried to avoid complying with. They complied only when they were threatened with proceedings in the European Court of Justice.

There is slippage in the programmes on water and sewage treatment and 48 per cent. slippage this year in complying with European Community sewage treatment directives. Although they predict a better performance, how can we hope that they will meet their targets when they have begun so badly?

Mr. Roger Gale (Thanet, North)

I am interested in what the hon. Gentleman is saying, but I wish that he would stop running down the United Kingdom compared with Europe. Since denationalisation, Southern Water has spent millions of pounds in my constituency on new sewage systems and on bringing bathing and drinking water up to standard, whereas Brussels, the heart of the European Community, still pours raw sewage into its livers.

Mr. Griffiths

It seems that the hon. Gentleman would like to take charge of Europe, but I have no desire to do so. I have not compared our rates of compliance with another European country. I am considering only the state of play in Britain, which is not good enough given the incredible amounts of money that consumers are having to pay and the profits that are being stuffed into the pockets of shareholders, particularly of directors who have preferential share option schemes, from which they make thousands of pounds. That is the issue, not what is happening in Brussels or anywhere else.

The hon. Member for Hertfordshire, West (Mr. Jones) attacked the record of the Italians, but the European Commission threatened them with action and as a result the River Po is being cleaned up. The hon. Gentleman's comments were true when the Select Committee considered the matter, but they are not true today.

We have created a financial leviathan with a monopoly that allows water companies to ride roughshod over consumers. Is not it a coincidence that in this time of economic recession the companies that are returning massive profits and are buoyant are the privatised companies, such as British Gas, British Telecom and the water industries, whose captive customers have been left unprotected by the Government?

Privatisation cost British taxpayers £3.3 billion. The Government did not find it difficult to provide money for the water industry, but they did not want to do so. They wanted to privatise it and threw money at it, the purpose of which had nothing to do with improving the lot of the customer or the quality of water. That is why headlines appear in our newspapers saying, River devastated by farm pollution", and River poisoned, thousands of fish killed", and Mersey polluters breach limit 859 times in five years", and River Bourne restocked after serious pollution and Swan lakes so polluted that film can be developed from its water". Such headlines appear every week in our newspapers.

Low fines are levied on polluters. Shell justly suffered a massive fine of £1 million, but there seems to be no consistency in the application of fines.

For six years of the Government's term of office, fewer of our traditional beaches met the EC beach water directive than did those in the land-locked state of Luxembourg. In Luxembourg, 38 beaches had to comply, whereas in Britain the figure was 27. Again, because the European Community threatened to take Britain to the European Court of Justice, the Government finally recognised in 1986 that traditional bathing beaches meant about 400 beaches. The Government claim to have achieved 77 per cent. compliance five years after they should have complied with the directives, which shows the effrontery with which they are prepared to behave towards the British public.

There are more beaches in the blue flag scheme. The committee that validated those beaches said that it was shocked at the pollution, sewage and readily identifiable detritus from our sewage works that could be found on beaches that were put forward as being most eligible for blue flag status.

Mr. Robert B. Jones

The hon. Gentleman does not seem to take account of the fact that no correct monitoring takes place in many European countries to judge whether beaches should be passed. Britain has a sophisticated monitoring system. I believe that the hon. Gentleman represents a coastal constituency. Is he saying that people should not go on holiday to his area but should go to the Cotentin peninsula in France, which is knee deep in sewage but has nothing done about it?

Mr. Griffiths

Of course I would recommend that people should come to my constituency. I would not recommend that they risk going in the water in some places. Rest Bay in my constituency was put forward for blue flag status because basically it was a good-looking beach. The committee found that it was full of seaborne pollution and heavy fuel oil. A beach at Dunraven Bay was found to be polluted with fuel oil. After 12 years of Tory rule and nearly two years of privatisation, we still suffer from those problems.

I am sorry that there is not a little more time to consider the Government's devastating, disgusting and disgraceful record on pollution. To protect the privatised companies, many derogations were sought in England and Wales. Well over half the population of Wales drink water that has been allowed derogation from European Community standards, to avoid prosecution of the private water companies. I wish that there was more time to go into specific details.

I tried to find out from the Department of the Environment and the Welsh Office exactly how many people were supplied with drinking water that did not comply with European Community standards. Neither Department could give me any figures. That is not surprising, as they would have to admit that more than half the population of Wales were drinking such water.

Much play has been made of the role of the National Rivers Authority as a public body. My hon. Friend the Member for Dewsbury (Mrs. Taylor) did not talk about it being a private body. When it was created, the Government proudly described it as the strongest environmental protection agency in Europe. Why, therefore, do not the Government ensure that grant-in-aid is at the required level? In the NRA's five-year plan to 1994, it had a £105 million shortfall in grant-in-aid from the Government. In 1991, it asked for £119 million to ensure that it could carry out its functions properly, although it admitted that it would still have difficulty with that amount. The Government chose to give £79 million —a £40 million shortfall. During the year, they stumped up another £26 million because so many bad pollution incidents were hitting the press that they had to do something. The NRA was still left with a £14 million shortfall. The Government have been full of ringing rhetoric about doing something about water quality but have been wretched about resourcing that work. It is a familiar tale of the way in which the Government have approached these matters.

The public are well aware that the Government have failed them. That is one of the reasons why the Government will continue to trail in opinion polls for the rest of their term. Labour will reinstitute public control. The water industry has never been nationalised. It was municipal and then regional and we intend to make it regional again. A Labour Government will first introduce a much sterner regulatory programme. We will make sure that the polluter really pays. Although we will increase the fines, charges and levies on pollution, we will reduce levies on companies that reduce their pollution. We will use that money in the water industry to promote research and development and alternative clean technologies. That will happen not a moment too soon.

We will ensure that there is freedom of information so that people know about the quality of the water which they drink and in which they swim. We will have an environmental protection agency, which was so roundly supported by the Select Committee on the Environment. We will ensure that our water policies are driven by environmental and social priorities. We will truly serve the customers, not the whims of the City or the demands of shareholders for fat profits and dividends. The public are looking forward to that day.

6.46 pm

The Parliamentary Under-Secretary of State for Wales (Mr. Nicholas Bennett)

One would think that the Labour party was approaching this issue with great seriousness, but at the height of the debate four Labour Back Benchers were present and the number has now risen to seven. That is the measure of the importance that the Labour party attaches to the water industry.

Over the past decade there has been a major advance in public awareness of environmental matters and nowhere has that been more obvious than in the public concern about water quality. The Government understand that concern and, as my hon. Friend the Member for Pudsey (Sir G. Shaw) said, no Government have done more than this Government to ensure that water quality is maintained and improved.

We have denationalised the industry to improve the quality of service to customers, as they expect from a private sector company. We have set up the National Rivers Authority. We have established the drinking water inspectorate. We have set up the office of the Director General of Water Services. All three are there to ensure a better service and a better quality of environment. They will ensure that the companies in the water and sewerage industry meet the stringent standards which we have set. We have established standards for drinking water quality that go beyond those required by the European Commission. We have decided that dumping of sewage sludge and industrial waste at sea should stop. We have anticipated the urban waste water directive by deciding that all substantial discharges of sewage should be treated, and we have implemented the agreements reached in the North sea conference and applied them to all seas around Britain.

That is an impressive record. All we heard from the Opposition was a succession of whines. If one looks at Labour's record between 1974 and 1979, one realises that it is not in a position to lecture anyone. The hon. Member for Denton and Reddish (Mr. Bennett) was opposed to employee share ownership in the industry. My hon. Friend the Member for Pudsey pointed out in a lucid explanation the importance of getting a return on assets and the public obligations that the Government have set on the industry through the NRA, Ofwat—the Office of Water Services —and EC and Government statutory regulations.

The hon. Member for Southwark and Bermondsey (Mr. Hughes) made a speech with which I partly agreed. It was right to point out the wastage that occurs, but the first thing that came to mind on listening to the second part of his speech was that the Liberal Democrats have no policies. The hon. Gentleman was challenged by my hon. Friends to give his party's policies. He said, "We will have a conference in September and I shall be able to tell you afterwards." He went on to give us the Simon Hughes manifesto, which appeared to be about a water tax or about water meters. The problem is that the Liberal Democrats do not have enough hands for the different policies that they put forward, depending on the audience that they are addressing. It is a matter of saying, "On the one hand, this; on the other hand, that." The Liberal Democrats have not given any clear view of their policies. That is not surprising, because in two out of the last three general elections the party did not even mention the water industry. It is rather late in the day for the Liberal Democrats to lecture us on water matters.

The hon. Member for Southwark and Bermondsey mentioned an article in The Sunday Times. Before quoting journalists writing in national newspapers the hon. Gentleman should check sources and facts. For example, the article said that Southern Water was responsible for 487 incidents last year. I have checked with the National Rivers Authority and found that that is simply not true. I understand that 233 of the 487 incidents, almost half, were in respect of private work such as septic tanks and that only 186, a little more than one third of the total, were in respect of the water company. However, the crude figures do not tell us whether the incidents were in any way significant. It was dangerous for the hon. Gentleman to quote that article without first checking the facts.

My hon. Friend the Member for Hertfordshire, West (Mr. Jones) was right to speak about international comparisons. It is deplorable that the Labour party sells Britain short and does not look realistically at the facts. In its document entitled "An Earthly Chance", chapter 5, headed "Water", states: We can no longer take the quality of drinking water for granted. Many of Britain's rivers remain severely polluted. This is just one of the reasons why Britain has been labelled the dirty man of Europe. It is the Opposition who have attached that label to Britain, and it is totally untrue. Anybody who examines the quality of drinking water in France, smells the River Rhine in Germany or looks at the pollution of Mediterranean beaches will see that our water industry has a better environmental protection record than those in other countries. It is about time that Labour stopped selling Britain short on this issue.

Some 95 per cent. of the United Kingdom's rivers are of good or fair quality, a record which is not bettered anywhere in the European Community. Some 96 per cent. of Britain's homes are connected to sewers, and that is about the highest percentage in Europe. By 1990, 88 per cent. of the sewage treatment works had already met the long-term performance measures specified in the discharge consents. That compares with 77 per cent. in 1986. The Opposition are prepared to tell untruths about Britain in order to gain some sort of short-term political advantage. I am grateful to my hon. Friend the Member for Hertfordshire, West for drawing this matter to the attention of the House.

My hon. Friend also drew attention to prices. Labour is presently campaigning on the issue of water prices and it is therefore important to get the facts straight. The average price per day per household in the Severn Trent Water area is 38p. The average price across Britain for water per day per household is 43p. Even in Wales, where the price is higher, it is only 55p a day per household. Two pints of milk cost more than the price of the water consumed by each household in Britain in a day. It is half the price of German water, and in France, Italy, Belgium and the Netherlands water costs more than it does in Britain. The British people should know that we get a good bargain for the price that we pay for water and the services that we receive.

The hon. Member for Carmarthen (Mr. Williams) was absent for most of the debate and when he turned up he made a series of allegations about Welsh Water. The hon. Gentleman and I share a local paper to which the hon. Member wrote two weeks ago, making a series of allegations about Welsh Water. Last week that paper published a three-column letter from the head of public relations in that authority. One by one, the letter knocked down the allegations made by the hon. Member for Carmarthen. It contained phrases such as: Dr. Williams was wholly inaccurate and, Dr. Williams is completely wrong and, This is totally untrue". The hon. Gentleman's allegations were wrong then and they are wrong today.

The hon. Member for Carmarthen did not say anything about the good works carried out using the profits made by Welsh Water. For example, we heard little about the fact that last year for every £100 that it collected from customers Welsh Water spent £108 in providing services and investing to improve the quality of services. The hon. Gentleman did not speak about the fact that every day for the next nine years Welsh Water will invest £500,000 in the Welsh water industry. The Opposition do not advance those facts because they do not support the argument that they want to put across.

The hon. Member for Dewsbury (Mrs. Taylor) made snide innuendos about senior managers in the water industry. She spoke about their perks and shares and tried to give people the impression that managers received free shares. She did not say that the shares were purchased by those managers at market price and that by spending their own money they have shown their commitment to the industry. Labour dislikes employee share options and does not like employees to spend their own money buying a stake in their companies. I welcome such participation and we shall certainly make sure that people are aware of Labour's attitude on share ownership.

The barefaced cheek on water matters by the India rubber men and women in the parliamentary Labour party has reached a new level of contortion. The strategy of the new Kinnock model army is to face both ways at the same time. In one breath they call for greater priority for the environment and higher spending and in the next they call for lower prices. Most of them have enough political savvy to advance those competing propositions on separate occasions to different audiences. Sometimes their co-ordination is as good as their clothing, but on other occasions it is not.

The hon. Member for Alyn and Deeside (Mr. Jones), who leads for the Opposition on Welsh matters, was reported in the South Wales Echo of 13 June as calling on Welsh Water to invest more and charge less". He went on to say that the water industry was a priority for a return to the public sector. Perhaps the hon. Gentleman should have a word with his hon. Friend the Member for Derby, South (Mrs. Beckett), because in her guise as a moderate after many years as a left-winger the hon. Lady told my hon. Friend the Member for Stroud (Mr. Knapman): although we think that, in the long term, the water industry belongs in the public sector, it is not one of the policies that we expect to implement soon after coming to power"—[Official Report, 15 May 1991; Vol. 191, c. 314.] However, Opposition Members in the House and in the media express a different view. In "Meet the Challenge, Make the Change" the party claims that there will be no compensation other than paying a fair market price for any equity or other rights that a Labour Government would wish to acquire. On "On the Record" on BBC television on 17 September 1989 the hon. Member for Dagenham (Mr. Gould) said that a Labour Government would take action to regulate the water industry which would reduce the profitability of the privatised companies and would therefore be likely to depress the share price. Investors should take note of that.

Labour wants to depress the industry and the share price and then grab back the shares at an unfair price, having said in its election literature that it would not do that. That shows the dishonesty of Labour over the whole issue. I suspect that the hon. Member for Derby, South might have some trouble with the motion in the City. Month after month, the hon. Lady and her hon. Friends have eaten their way around the banks, discount houses and stockbrokers peddling the line that Labour has reformed. They say "Yes, we understand the need for profits. Of course we recognise the role of the shareholder and, really, you should not take any notice of Labour conference decisions." However, in the motion we find "alarm" about the "level of profits" and allegations that the shareholders' interests are the greater priority. No wonder no member of the shadow Treasury team has signed the motion.

This is the old-style Labour party back in action. It is the party which prefers state losses to private sector profit, and which cut investment in the 1970s. It is the Labour party of the vested interests of the public sector unions and the party which still has clause 4 in its constitution. It is the party which still believes in nationalised industries. Why should we take lectures from the Labour party on the water industry? How green are the credentials of a party whose control of one of our major cities has left it rotting with refuse? Let us remember that this Government have invested heavily in the water industry because we are concerned about the environment. We believe that this is the way forward. The record of the Opposition on the water industry is appalling; their motion is appalling, and it deserves to be defeated. I call on the House to vote for the Government amendment.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 209, Noes 297.

Division No. 176]	[6.59 pm
AYES
Abbott, Ms Diane	Foulkes, George
Adams, Mrs Irene (Paisley, N.)	Fraser, John
Allen, Graham	Fyfe, Maria
Alton, David	Galbraith, Sam
Anderson, Donald	Galloway, George
Archer, Rt Hon Peter	Garrett, John (Norwich South)
Ashdown, Rt Hon Paddy	Garrett, Ted (Wallsend)
Ashley, Rt Hon Jack	George, Bruce
Ashton, Joe	Godman, Dr Norman A.
Banks, Tony (Newham NW)	Golding, Mrs Llin
Barnes, Harry (Derbyshire NE)	Gordon, Mildred
Barnes, Mrs Rosie (Greenwich)	Gould, Bryan
Barron, Kevin	Graham, Thomas
Battle, John	Grant, Bernie (Tottenham)
Beckett, Margaret	Griffiths, Nigel (Edinburgh S)
Beith, A. J.	Griffiths, Win (Bridgend)
Bell, Stuart	Hain, Peter
Bellotti, David	Harman, Ms Harriet
Benn, Rt Hon Tony	Hattersley, Rt Hon Roy
Bennett, A. F. (D'nt'n & R'dish)	Heal, Mrs Sylvia
Blair, Tony	Henderson, Doug
Blunkett, David	Hinchliffe, David
Boateng, Paul	Hoey, Ms Kate (Vauxhall)
Boyes, Roland	Hogg, N. (C'nauld & Kilsyth)
Bradley, Keith	Home Robertson, John
Brown, Gordon (D'mline E)	Hood, Jimmy
Brown, Nicholas (Newcastle E)	Howell, Rt Hon D. (S'heath)
Brown, Ron (Edinburgh Leith)	Howells, Geraint
Bruce, Malcolm (Gordon)	Hoyle, Doug
Buckley, George J.	Hughes, John (Coventry NE)
Caborn, Richard	Hughes, Robert (Aberdeen N)
Callaghan, Jim	Hughes, Roy (Newport E)
Campbell, Menzies (Fife NE)	Hughes, Simon (Southwark)
Campbell, Ron (Blyth Valley)	Janner, Greville
Campbell-Savours, D. N.	Johnston, Sir Russell
Canavan, Dennis	Jones, Barry (Alyn & Deeside)
Carlile, Alex (Mont'g)	Jones, Martyn (Clwyd S W)
Carr, Michael	Kaufman, Rt Hon Gerald
Cartwright, John	Kennedy, Charles
Clark, Dr David (S Shields)	Kinnock, Rt Hon Neil
Clarke, Tom (Monklands W)	Lambie, David
Clwyd, Mrs Ann	Lamond, James
Cohen, Harry	Leighton, Ron
Cook, Frank (Stockton N)	Lestor, Joan (Eccles)
Cook, Robin (Livingston)	Lewis, Terry
Corbyn, Jeremy	Litherland, Robert
Cousins, Jim	Livingstone, Ken
Cox, Tom	Lofthouse, Geoffrey
Crowther, Stan	Loyden, Eddie
Cryer, Bob	McAllion, John
Cummings, John	McAvoy, Thomas
Cunliffe, Lawrence	Macdonald, Calum A.
Dalyell, Tam	McFall, John
Davies, Rt Hon Denzil (Llanelli)	McKelvey, William
Dewar, Donald	McLeish, Henry
Dixon, Don	McMaster, Gordon
Dobson, Frank	Madden, Max
Doran, Frank	Mahon, Mrs Alice
Duffy, A. E. P.	Marshall, David (Shettleston)
Dunnachie, Jimmy	Marshall, Jim (Leicester S)
Dunwoody, Hon Mrs Gwyneth	Martin, Michael J. (Springburn)
Eadie, Alexander	Martlew, Eric
Eastham, Ken	Maxton, John
Edwards, Huw	Meacher, Michael
Ewing, Harry (Falkirk E)	Meale, Alan
Fatchett, Derek	Michael, Alun
Fearn, Ronald	Michie, Bill (Sheffield Healey)
Field, Frank (Birkenhead)	Michie, Mrs Ray (Arg'l & Bute)
Fields, Terry (L'pool B G'n)	Mitchell, Austin (G't Grimsby)
Fisher, Mark	Moonie, Dr Lewis
Flynn, Paul	Morgan, Rhodri
Foot, Rt Hon Michael	Morley, Elliot
Foster, Derek	Morris, Rt Hon A. (W'shawe)

Morris, Rt Hon J. (Aberavon)	Short, Clare
Mudd, David	Skinner, Dennis
Mullin, Chris	Smith, Andrew (Oxford E)
Murphy, Paul	Smith, Rt Hon J. (Monk'ds E.)
Nellist, Dave	Smith, J. P. (Vale of Glam)
Oakes, Rt Hon Gordon	Snape, Peter
O'Brien, William	Soley, Clive
O'Neill, Martin	Spearing, Nigel
Orme, Rt Hon Stanley	Steel, Rt Hon Sir David
Owen, Rt Hon Dr David	Steinberg, Gerry
Patchett, Terry	Strang, Gavin
Pendry, Tom	Taylor, Mrs Ann (Dewsbury)
Pike, Peter L.	Taylor, Rt Hon J. D. (S'ford)
Powell, Ray (Ogmore)	Taylor, Matthew (Truro)
Prescott, John	Vaz, Keith
Primarolo, Dawn	Wallace, James
Quin, Ms Joyce	Walley, Joan
Radice, Giles	Wardell, Gareth (Gower)
Randall, Stuart	Watson, Mike (Glasgow, C)
Rees, Rt Hon Merlyn	Welsh, Andrew (Angus E)
Reid, Dr John	Welsh, Michael (Doncaster N)
Richardson, Jo	Wigley, Dafydd
Robertson, George	Williams, Rt Hon Alan
Robinson, Geoffrey	Williams, Alan W. (Carm'then)
Rogers, Allan	Wilson, Brian
Rooker, Jeff	Winnick, David
Ross, William (Londonderry E)	Wise, Mrs Audrey
Rowlands, Ted	Worthington, Tony
Ruddock, Joan	Young, David (Bolton SE)
Salmond, Alex
Sedgemore, Brian	Tellers for the Ayes:
Sheerman, Barry	Mr. Frank Haynes and
Sheldon, Rt Hon Robert	Mr. Eric Illsley.
Shore, Rt Hon Peter
NOES
Aitken, Jonathan	Butterfill, John
Alexander, Richard	Carlisle, John, (Luton N)
Alison, Rt Hon Michael	Carlisle, Kenneth (Lincoln)
Allason, Rupert	Carrington, Matthew
Amess, David	Carttiss, Michael
Amos, Alan	Cash, William
Arbuthnot, James	Chalker, Rt Hon Mrs Lynda
Arnold, Jacques (Gravesham)	Channon, Rt Hon Paul
Arnold, Sir Thomas	Chapman, Sydney
Ashby, David	Chope, Christopher
Aspinwall, Jack	Churchill, Mr
Atkins, Robert	Clark, Rt Hon Alan (Plymouth)
Atkinson, David	Clark, Dr Michael (Rochford)
Baker, Rt Hon K. (Mole Valley)	Clark, Rt Hon Sir William
Baker, Nicholas (Dorset N)	Clarke, Rt Hon K. (Rushcliffe)
Baldry, Tony	Colvin, Michael
Banks, Robert (Harrogate)	Conway, Derek
Beaumont-Dark, Anthony	Coombs, Anthony (Wyre F'rest)
Bellingham, Henry	Coombs, Simon (Swindon)
Bendall, Vivian	Cope, Rt Hon John
Bennett, Nicholas (Pembroke)	Cormack, Patrick
Bevan, David Gilroy	Couchman, James
Biffen, Rt Hon John	Cran, James
Blackburn, Dr John G.	Currie, Mrs Edwina
Body, Sir Richard	Davies, Q. (Stamf'd & Spald'g)
Bonsor, Sir Nicholas	Davis, David (Boothferry)
Boscawen, Hon Robert	Day, Stephen
Boswell, Tim	Devlin, Tim
Bottomley, Peter	Dickens, Geoffrey
Bottomley, Mrs Virginia	Dorrell, Stephen
Bowden, A. (Brighton K'pto'n)	Douglas-Hamilton, Lord James
Bowden, Gerald (Dulwich)	Dover, Den
Bowis, John	Dunn, Bob
Boyson, Rt Hon Dr Sir Rhodes	Durant, Sir Anthony
Braine, Rt Hon Sir Bernard	Dykes, Hugh
Brandon-Bravo, Martin	Evans, David (Welwyn Hatf'd)
Brazier, Julian	Evennett, David
Bright, Graham	Fairbairn, Sir Nicholas
Brown, Michael (Brigg & Cl't's)	Fenner, Dame Peggy
Bruce, Ian (Dorset South)	Field, Barry (Isle of Wight)
Buck, Sir Antony	Finsberg, Sir Geoffrey
Burns, Simon	Fishburn, John Dudley
Burt, Alistair	Fookes, Dame Janet
Butler, Chris	Forman, Nigel

Forsyth, Michael (Stirling)	Luce, Rt Hon Sir Richard
Fowler, Rt Hon Sir Norman	McCrindle, Sir Robert
Fox, Sir Marcus	Macfarlane, Sir Neil
Franks, Cecil	MacGregor, Rt Hon John
French, Douglas	MacKay, Andrew (E Berkshire)
Fry, Peter	McLoughlin, Patrick
Gale, Roger	McNair-Wilson, Sir Michael
Gardiner, Sir George	McNair-Wilson, Sir Patrick
Gill, Christopher	Madel, David
Gilmour, Rt Hon Sir Ian	Malins, Humfrey
Glyn, Dr Sir Alan	Mans, Keith
Goodhart, Sir Philip	Maples, John
Goodlad, Alastair	Marland, Paul
Goodson-Wickes, Dr Charles	Marlow, Tony
Gorman, Mrs Teresa	Marshall, John (Hendon S)
Gorst, John	Mates, Michael
Grant, Sir Anthony (CambsSW)	Maude, Hon Francis
Greenway, Harry (Ealing N)	Maxwell-Hyslop, Robin
Greenway, John (Ryedale)	Mayhew, Rt Hon Sir Patrick
Gregory, Conal	Mellor, Rt Hon David
Griffiths, Peter (Portsmouth N)	Meyer, Sir Anthony
Ground, Patrick	Miller, Sir Hal
Grylls, Michael	Mills, lain
Hague, William	Miscampbell, Norman
Hamilton, Neil (Tatton)	Mitchell, Andrew (Gedling)
Hampson, Dr Keith	Mitchell, Sir David
Hannam, John	Moate, Roger
Hargreaves, A. (B'ham H'll Gr')	Monro, Sir Hector
Harris, David	Montgomery, Sir Fergus
Haselhurst, Alan	Moore, Rt Hon John
Hawkins, Christopher	Moss, Malcolm
Hayes, Jerry	Moynihan, Hon Colin
Hayhoe, Rt Hon Sir Barney	Needham, Richard
Heathcoat-Amory, David	Nelson, Anthony
Hicks, Mrs Maureen (Wolv1 NE)	Neubert, Sir Michael
Hicks, Robert (Cornwall SE)	Newton, Rt Hon Tony
Higgins, Rt Hon Terence L.	Nicholls, Patrick
Hill, James	Nicholson, David (Taunton)
Hogg, Hon Douglas (Gr'th'm)	Norris, Steve
Holt, Richard	Onslow, Rt Hon Cranley
Hordern, Sir Peter	Paice, James
Howard, Rt Hon Michael	Patten, Rt Hon John
Howarth, Alan (Strat'd-on-A)	Pawsey, James
Howarth, G. (Cannock & B'wd)	Peacock, Mrs Elizabeth
Howell, Rt Hon David (G'dford)	Porter, Barry (Wirral S)
Howell, Ralph (North Norfolk)	Porter, David (Waveney)
Hughes, Robert G. (Harrow W)	Portillo, Michael
Hunt, Rt Hon David	Powell, William (Corby)
Hunt, Sir John (Ravensbourne)	Price, Sir David
Hunter, Andrew	Raison, Rt Hon Sir Timothy
Irvine, Michael	Renton, Rt Hon Tim
Irving, Sir Charles	Riddick, Graham
Jack, Michael	Ridley, Rt Hon Nicholas
Jackson, Robert	Roberts, Sir Wyn (Conwy)
Janman, Tim	Roe, Mrs Marion
Johnson Smith, Sir Geoffrey	Rossi, Sir Hugh
Jones, Gwilym (Cardiff N)	Rost, Peter
Jones, Robert B (Herts W)	Rowe, Andrew
Jopling, Rt Hon Michael	Rumbold, Rt Hon Mrs Angela
Kellett-Bowman, Dame Elaine	Sackville, Hon Tom
Key, Robert	Sayeed, Jonathan
Kilfedder, James	Scott, Rt Hon Nicholas
King, Roger (B'ham N'thfield)	Shaw, David (Dover)
King, Rt Hon Tom (Bridgwater)	Shaw, Sir Giles (Pudsey)
Knapman, Roger	Shaw, Sir Michael (Scarb')
Knight, Greg (Derby North)	Shelton, Sir William
Knight, Dame Jill (Edgbaston)	Shephard, Mrs G. (Norfolk SW)
Knowles, Michael	Shepherd, Colin (Hereford)
Knox, David	Shepherd, Richard (Aldridge)
Lamont, Rt Hon Norman	Sims, Roger
Lang, Rt Hon Ian	Skeet, Sir Trevor
Latham, Michael	Smith, Sir Dudley (Warwick)
Lawrence, Ivan	Smith, Tim (Beaconsfield)
Lawson, Rt Hon Nigel	Soames, Hon Nicholas
Lee, John (Pendle)	Speed, Keith
Leigh, Edward (Gainsbor'gh)	Speller, Tony
Lester, Jim (Broxtowe)	Spicer, Sir Jim (Dorset W)
Lightbown, David	Spicer, Michael (S Worcs)
Lilley, Rt Hon Peter	Squire, Robin
Lord, Michael	Stanbrook, Ivor

Stanley, Rt Hon Sir John	Wakeham, Rt Hon John
Steen, Anthony	Waldegrave, Rt Hon William
Stern, Michael	Walden, George
Stevens, Lewis	Walker, Bill (T'side North)
Stewart, Allan (Eastwood)	Walters, Sir Dennis
Stewart, Andy (Sherwood)	Ward, John
Stewart, Rt Hon Ian (Herts N)	Wardle, Charles (Bexhill)
Stokes, Sir John	Watts, John
Sumberg, David	Wells, Bowen
Summerson, Hugo	Wheeler, Sir John
Tapsell, Sir Peter	Whitney, Ray
Taylor, Ian (Esher)	Widdecombe, Ann
Taylor, Teddy (S'end E)	Wiggin, Jerry
Tebbit, Rt Hon Norman	Wilkinson, John
Temple-Morris, Peter	Wilshire, David
Thompson, D. (Calder Valley)	Winterton, Mrs Ann
Thompson, Patrick (Norwich N)	Winterton, Nicholas
Thorne, Neil	Wolfson, Mark
Thornton, Malcolm	Wood, Timothy
Thurnham, Peter	Woodcock, Dr. Mike
Townsend, Cyril D. (B'heath)	Yeo, Tim
Tracey, Richard	Young, Sir George (Acton)
Tredinnick, David
Trotter, Neville	Tellers for the Noes:
Twinn, Dr Ian	Mr. John M. Taylor and
Vaughan, Sir Gerard	Mr. Irvine Patnick.
Viggers, Peter

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 30 (Questions on amendments):—

The House divided: Ayes 279, Noes 208.

Division No. 177]	[7.15 pm
AYES
Aitken, Jonathan	Carlisle, Kenneth (Lincoln)
Alexander, Richard	Carrington, Matthew
Alison, Rt Hon Michael	Carttiss, Michael
Allason, Rupert	Cash, William
Amess, David	Channon, Rt Hon Paul
Amos, Alan	Chapman, Sydney
Arbuthnot, James	Churchill, Mr
Arnold, Jacques (Gravesham)	Clark, Rt Hon Alan (Plymouth)
Arnold, Sir Thomas	Clark, Dr Michael (Rochford)
Ashby, David	Clark, Rt Hon Sir William
Aspinwall, Jack	Clarke, Rt Hon K. (Rushcliffe)
Atkins, Robert	Colvin, Michael
Atkinson, David	Conway, Derek
Baker, Rt Hon K. (Mole Valley)	Coombs, Anthony (Wyre F'rest)
Baker, Nicholas (Dorset N)	Coombs, Simon (Swindon)
Baldry, Tony	Cope, Rt Hon John
Banks, Robert (Harrogate)	Couchman, James
Beaumont-Dark, Anthony	Cran, James
Bellingham, Henry	Currie, Mrs Edwina
Bendall, Vivian	Davies, Q. (Stamf'd & Spald'g)
Bennett, Nicholas (Pembroke)	Davis, David (Boothferry)
Bevan, David Gilroy	Day, Stephen
Blackburn, Dr John G.	Devlin, Tim
Bonsor, Sir Nicholas	Dickens, Geoffrey
Boscawen, Hon Robert	Dorrell, Stephen
Boswell, Tim	Douglas-Hamilton, Lord James
Bottomley, Peter	Dover, Den
Bottomley, Mrs Virginia	Dunn, Bob
Bowden, A. (Brighton K'pto'n)	Durant, Sir Anthony
Bowden, Gerald (Dulwich)	Dykes, Hugh
Bowis, John	Evans, David (Welwyn Hatf'd)
Boyson, Rt Hon Dr Sir Rhodes	Evennett, David
Braine, Rt Hon Sir Bernard	Fairbairn, Sir Nicholas
Brandon-Bravo, Martin	Fenner, Dame Peggy
Brazier, Julian	Field, Barry (Isle of Wight)
Bright, Graham	Finsberg, Sir Geoffrey
Brown, Michael (Brigg & Cl't's)	Fishburn, John Dudley
Bruce, Ian (Dorset South)	Fookes, Dame Janet
Buck, Sir Antony	Forman, Nigel
Burns, Simon	Forsyth, Michael (Stirling)
Burt, Alistair	Fowler, Rt Hon Sir Norman
Butler, Chris	Fox, Sir Marcus
Butterfill, John	Franks, Cecil
Carlisle, John, (Luton N)	French, Douglas

Fry, Peter	Maples, John
Gale, Roger	Marland, Paul
Gardiner, Sir George	Marlow, Tony
Gill, Christopher	Marshall, John (Hendon S)
Gilmour, Rt Hon Sir Ian	Mates, Michael
Glyn, Dr Sir Alan	Maude, Hon Francis
Goodhart, Sir Philip	Maxwell-Hyslop, Robin
Goodlad, Alastair	Mayhew, Rt Hon Sir Patrick
Gorman, Mrs Teresa	Mellor, Rt Hon David
Gorst, John	Meyer, Sir Anthony
Grant, Sir Anthony (CambsSW)	Miller, Sir Hal
Greenway, Harry (Ealing N)	Mills, lain
Greenway, John (Ryedale)	Miscampbell, Norman
Gregory, Conal	Mitchell, Andrew (Gedling)
Griffiths, Peter (Portsmouth N)	Mitchell, Sir David
Ground, Patrick	Moate, Roger
Grylls, Michael	Monro, Sir Hector
Hague, William	Montgomery, Sir Fergus
Hamilton, Neil (Tatton)	Moore, Rt Hon John
Hannam, John	Moss, Malcolm
Hargreaves, A. (B'ham H'll Gr')	Moynihan, Hon Colin
Harris, David	Needham, Richard
Haselhurst, Alan	Nelson, Anthony
Hawkins, Christopher	Neubert, Sir Michael
Hayes, Jerry	Newton, Rt Hon Tony
Hayhoe, Rt Hon Sir Barney	Nicholls, Patrick
Heathcoat-Amory, David	Nicholson, David (Taunton)
Hicks, Mrs Maureen (Wolv1 NE)	Norris, Steve
Hicks, Robert (Cornwall SE)	Onslow, Rt Hon Cranley
Higgins, Rt Hon Terence L.	Paice, James
Hill, James	Patten, Rt Hon John
Hogg, Hon Douglas (Gr'th'm)	Pawsey, James
Holt, Richard	Peacock, Mrs Elizabeth
Hordern, Sir Peter	Porter, Barry (Wirral S)
Howard, Rt Hon Michael	Porter, David (Waveney)
Howarth, Alan (Strat'd-on-A)	Portillo, Michael
Howarth, G. (Cannock & B'wd)	Powell, William (Corby)
Howell, Ralph (North Norfolk)	Price, Sir David
Hughes, Robert G. (Harrow W)	Raison, Rt Hon Sir Timothy
Hunt, Rt Hon David	Renton, Rt Hon Tim
Hunt, Sir John (Ravensbourne)	Riddick, Graham
Hunter, Andrew	Roberts, Sir Wyn (Conwy)
Irvine, Michael	Roe, Mrs Marion
Irving, Sir Charles	Rossi, Sir Hugh
Jack, Michael	Rost, Peter
Janman, Tim	Rowe, Andrew
Johnson Smith, Sir Geoffrey	Sackville, Hon Tom
Jones, Gwilym (Cardiff N)	Sayeed, Jonathan
Jones, Robert B (Herts W)	Scott, Rt Hon Nicholas
Jopling, Rt Hon Michael	Shaw, Sir Giles (Pudsey)
Kellett-Bowman, Dame Elaine	Shaw, Sir Michael (Scarb')
Key, Robert	Shelton, Sir William
Kilfedder, James	Shephard, Mrs G. (Norfolk SW)
King, Roger (B'ham N'thfield)	Shepherd, Colin (Hereford)
King, Rt Hon Tom (Bridgwater)	Shepherd, Richard (Aldridge)
Kirkhope, Timothy	Sims, Roger
Knapman, Roger	Skeet, Sir Trevor
Knight, Greg (Derby North)	Smith, Sir Dudley (Warwick)
Knight, Dame Jill (Edgbaston)	Smith, Tim (Beaconsfield)
Knowles, Michael	Soames, Hon Nicholas
Knox, David	Speed, Keith
Lamont, Rt Hon Norman	Speller, Tony
Latham, Michael	Spicer, Sir Jim (Dorset W)
Lawson, Rt Hon Nigel	Spicer, Michael (S Worcs)
Lee, John (Pendle)	Squire, Robin
Leigh, Edward (Gainsbor'gh)	Stanbrook, Ivor
Lester, Jim (Broxtowe)	Stanley, Rt Hon Sir John
Lilley, Rt Hon Peter	Steen, Anthony
Lord, Michael	Stern, Michael
Luce, Rt Hon Sir Richard	Stevens, Lewis
McCrindle, Sir Robert	Stewart, Allan (Eastwood)
Macfarlane, Sir Neil	Stewart, Andy (Sherwood)
MacGregor, Rt Hon John	Stewart, Rt Hon Ian (Herts N)
MacKay, Andrew (E Berkshire)	Stokes, Sir John
McLoughlin, Patrick	Sumberg, David
McNair-Wilson, Sir Michael	Summerson, Hugo
McNair-Wilson, Sir Patrick	Taylor, Ian (Esher)
Madel, David	Taylor, Sir Teddy (S'end E)
Malins, Humfrey	Tebbit, Rt Hon Norman
Mans, Keith	Temple-Morris, Peter

Thompson, D. (Calder Valley)	Watts, John
Thompson, Patrick (Norwich N)	Wells, Bowen
Thorne, Neil	Wheeler, Sir John
Thornton, Malcolm	Whitney, Ray
Thurnham, Peter	Widdecombe, Ann
Townsend, Cyril D. (B'heath)	Wiggin, Jerry
Tracey, Richard	Wilkinson, John
Tredinnick, David	Wilshire, David
Trotter, Neville	Winterton, Mrs Ann
Twinn, Dr Ian	Winterton, Nicholas
Vaughan, Sir Gerard	Wood, Timothy
Viggers, Peter	Woodcock, Dr. Mike
Wakeham, Rt Hon John	Yeo, Tim
Walden, George
Walker, Bill (T'side North)	Tellers for the Ayes:
Walters, Sir Dennis	Mr. John M. Taylor and
Ward, John	Mr. Irvine Patrick.
Wardle, Charles (Bexhill)
NOES
Abbott, Ms Diane	Dunwoody, Hon Mrs Gwyneth
Adams, Mrs Irene (Paisley, N.)	Eadie, Alexander
Allen, Graham	Eastham, Ken
Alton, David	Edwards, Huw
Anderson, Donald	Ewing, Harry (Falkirk E)
Archer, Rt Hon Peter	Fatchett, Derek
Ashdown, Rt Hon Paddy	Fearn, Ronald
Ashley, Rt Hon Jack	Field, Frank (Birkenhead)
Ashton, Joe	Fields, Terry (L'pool B G'n)
Banks, Tony (Newham NW)	Fisher, Mark
Barnes, Harry (Derbyshire NE)	Flynn, Paul
Barnes, Mrs Rosie (Greenwich)	Foot, Rt Hon Michael
Barron, Kevin	Foster, Derek
Battle, John	Foulkes, George
Beckett, Margaret	Fraser, John
Beith, A. J.	Fyfe, Maria
Bell, Stuart	Galbraith, Sam
Bellotti, David	Galloway, George
Benn, Rt Hon Tony	Garrett, John (Norwich South)
Bennett, A. F. (D'nt'n & R'dish)	Garrett, Ted (Wallsend)
Blair, Tony	George, Bruce
Blunkett, David	Godman, Dr Norman A.
Boateng, Paul	Golding, Mrs Llin
Boyes, Roland	Gordon, Mildred
Bradley, Keith	Gould, Bryan
Brown, Gordon (D'mline E)	Graham, Thomas
Brown, Nicholas (Newcastle E)	Grant, Bernie (Tottenham)
Brown, Ron (Edinburgh Leith)	Griffiths, Nigel (Edinburgh S)
Bruce, Malcolm (Gordon)	Griffiths, Win (Bridgend)
Buckley, George J.	Hain, Peter
Caborn, Richard	Harman, Ms Harriet
Callaghan, Jim	Hattersley, Rt Hon Roy
Campbell, Menzies (Fife NE)	Heal, Mrs Sylvia
Campbell, Ron (Blyth Valley)	Henderson, Doug
Campbell-Savours, D. N.	Hinchliffe, David
Canavan, Dennis	Hoey, Ms Kate (Vauxhall)
Carlile, Alex (Mont'g)	Hogg, N. (C'nauld & Kilsyth)
Carr, Michael	Home Robertson, John
Cartwright, John	Hood, Jimmy
Clark, Dr David (S Shields)	Howell, Rt Hon D. (S'heath)
Clarke, Tom (Monklands W)	Howells, Geraint
Clwyd, Mrs Ann	Hoyle, Doug
Cohen, Harry	Hughes, John (Coventry NE)
Cook, Frank (Stockton N)	Hughes, Robert (Aberdeen N)
Cook, Robin (Livingston)	Hughes, Roy (Newport E)
Corbyn, Jeremy	Hughes, Simon (Southwark)
Cousins, Jim	Janner, Greville
Cox, Tom	Johnston, Sir Russell
Crowther, Stan	Jones, Barry (Alyn & Deeside)
Cryer, Bob	Jones, Martyn (Clwyd S W)
Cummings, John	Kaufman, Rt Hon Gerald
Cunliffe, Lawrence	Kennedy, Charles
Dalyell, Tam	Kinnock, Rt Hon Neil
Davies, Rt Hon Denzil (Llanelli)	Lambie, David
Dewar, Donald	Lamond, James
Dixon, Don	Leighton, Ron
Dobson, Frank	Lestor, Joan (Eccles)
Doran, Frank	Lewis, Terry
Duffy, Sir A. E. P.	Litherland, Robert
Dunnachie, Jimmy	Livingstone, Ken

Lofthouse, Geoffrey	Richardson, Jo
Loyden, Eddie	Robertson, George
McAllion, John	Robinson, Geoffrey
McAvoy, Thomas	Rogers, Allan
Macdonald, Calum A.	Rooker, Jeff
McFall, John	Ross, William (Londonderry E)
McKelvey, William	Rowlands, Ted
McLeish, Henry	Ruddock, Joan
McMaster, Gordon	Salmond, Alex
Madden, Max	Sedgemore, Brian
Mahon, Mrs Alice	Sheerman, Barry
Marshall, David (Shettleston)	Sheldon, Rt Hon Robert
Marshall, Jim (Leicester S)	Shore, Rt Hon Peter
Martin, Michael J. (Springburn)	Short, Clare
Martlew, Eric	Skinner, Dennis
Maxton, John	Smith, Andrew (Oxford E)
Meacher, Michael	Smith, Rt Hon J. (Monk'ds E)
Meale, Alan	Smith, J. P. (Vale of Glam)
Michael, Alun	Snape, Peter
Michie, Bill (Sheffield Heeley)	Soley, Clive
Michie, Mrs Ray (Arg'l & Bute)	Spearing, Nigel
Moonie, Dr Lewis	Steel, Rt Hon Sir David
Morgan, Rhodri	Steinberg, Gerry
Morley, Elliot	Strang, Gavin
Morris, Rt Hon A. (W'shawe)	Taylor, Mrs Ann (Dewsbury)
Morris, Rt Hon J. (Aberavon)	Taylor, Rt Hon J. D. (S'ford)
Mudd, David	Taylor, Matthew (Truro)
Mullin, Chris	Vaz, Keith
Murphy, Paul	Wallace, James
Nellist, Dave	Walley, Joan
Oakes, Rt Hon Gordon	Warden, Gareth (Gower)
O'Brien, William	Watson, Mike (Glasgow, C)
O'Neill, Martin	Welsh, Andrew (Angus E)
Orme, Rt Hon Stanley	Welsh, Michael (Doncaster N)
Owen, Rt Hon Dr David	Wigley, Dafydd
Patchett, Terry	Williams, Rt Hon Alan
Pendry, Tom	Williams, Alan W. (Carm'then)
Pike, Peter L.	Wilson, Brian
Powell, Ray (Ogmore)	Winnick, David
Prescott, John	Wise, Mrs Audrey
Primarolo, Dawn	Worthington, Tony
Quin, Ms Joyce	Young, David (Bolton SE)
Radice, Giles
Randall, Stuart	Tellers for the Noes:
Rees, Rt Hon Merlyn	Mr. Frank Haynes and
Reid, Dr John	Mr. Eric Illsley.

Question accordingly agreed to.

MR. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved, That this House welcomes the success which the water industry has achieved in the first full year after privatisation in substantially expanding investment to improve the environment and standards of service to customers; endorses the firm and fair system of regulation that has been established to protect customers; and looks forward to the benefits from this massive investment programme and improved efficiency in the years to come.