Water Bill [H.L.]

HL Deb 03 April 2003 vol 646 cc149-202GC

(Third Day)

Thursday, 3rd April 2003.

The Committee met at a quarter before four of the clock.

[The Deputy Chairman of Committees (Lord Brougham and Vaux) in the Chair.]

The Deputy Chairman of Committees (Lord Brougham and Vaux)

Welcome to the Committee on the Water Bill. The usual statement was read out al the beginning of the proceedings of the Committee stage, but perhaps I should remind those who were not here that if there is a Division in the Chamber while we are sitting, we will adjourn as soon as the Division Bells are rung and return after 10 minutes. I believe there will be at least one Division today.

Clause 19 [Form, contents and effect of licences]:

Baroness Miller of Chilthorne Domer moved Amendment No. 56: Page 22, line 21, at end insert— ( ) Every licence under this Chapter shall be subject to a duty to use the water abstracted in an efficient manner, so as to further water conservation.

The noble Baroness said: We believe that the Environment Agency should have the powers to make sure that water that is abstracted is used efficiently. That would enable water conservation to be furthered.

We have discussed this at length before, but I should particularly like the Minister to address the question of where in the Bill the Government's intention that was so clearly stated in Taking Water Responsibly appears. The relevant part of that document says: the Government intends to bring forward legislation, when Parliamentary time allows, which will enable the Environment Agency to make an enforcement order requiring an abstractor to enter into a water resources management arrangement".

It is not clear from the Bill whether the Government are still of that mind but have found some reason why that particular duty cannot now be in the Bill; whether they believe that it is in the Bill in another form; or whether it is not in the Bill, in which case we shall feel encouraged to press the amendment at a later stage.

By supporting the amendment, the Government would simply be returning to their earlier position on the duty of efficient use. Wide support was expressed on Second Reading and earlier during the Committee stage for an efficiency duty. I can only imagine that there must be some impediment that the Government have not yet disclosed as to why that duty should not be in the Bill. I beg to move.

Baroness Byford

I add our support—although perhaps not necessarily to this amendment. I am delighted that the noble Baroness has tabled the amendment, which obviously we support, but if my Amendment No. 3 had been adopted when we began the Committee stage, we would not be having to do what the noble Baroness, Lady Miller, is rightly trying to do to the best of her ability, which is to put in a requirement for efficiency and water conservation wherever it is relevant. I support the thrust behind the amendment, but we wait to hear what the Minister has to say about whether it is necessary. In principle we certainly support the amendment. We want water to be used as efficiently as possible. Obviously, we wish to see water conserved as well.

The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whitty)

We have had a pretty wide-ranging discussion in the earlier days of Committee about the whole issue of efficiency. In this particular context, the Environment Agency has existing powers. It has the power to impose on any abstraction licence conditions relating to the efficient use of water. The Environment Agency also assesses water efficiency in the grant of every new licence as part of the test of "reasonable requirement". It can also take action to prevent profligate use of water if it should occur. However, all those requirements are clearly tailored to the specific case and give the Environment Agency a right to specific intervention, whereas the general reference to efficiency in the amendment may not be tailored to the individual case. Whatever the general arguments, this is not an appropriate or necessary amendment.

Baroness Miller of Chilthorne Domer

I thank the Minister for his reply. I shall read it along with his replies to all the other amendments that the noble Baroness, Lady Byford, and I have tabled on efficiency and then weigh up where further to take the issue. I am still not persuaded that the Government have yet covered the intention expressed in Taking Water Responsibly. I shall return to the issue on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Miller of Chilthorne Domer moved Amendment No. 57: Page 22, line 23, at end insert— (6) All licences which were hitherto expressed under section 46(5) of the WRA as remaining in force until revoked, shall from 15th July 2012 state—

1. (a) the date on which they take effect, and
2. (b) the date on which they expire."

The noble Baroness said: The amendment stands in the name of the noble Lord, Lord Beaumont, who is particularly disappointed that he could not be here to move it himself. He had hoped that we would arrive at it during the previous Committee sitting, but he just missed it, so I am moving it in his name.

The amendment addresses the need for a mechanism in the Bill for the conversion of permanent licences to time-limited status, to introduce greater flexibility into the licensing system. If the system is to take account of such issues as climate change, we need a level playing field for all licences.

On Second Reading it was pointed out that Article 11(3)(e) of the EC Water Framework Directive requires abstraction licences to be reviewed periodically to meet the standards of that directive. The amendment is but one example of where a mechanism is needed to enable compliance with the directive in this country. By including it in the Bill we would be doing the Government a service.

The amendment would simply anticipate the transposition of the Water Framework Directive. It takes account of the fact that the UK needs to address the issue. It would prevent us being open to costly infraction proceedings, as we have been in the past because we have implemented far too slowly. There would then be sufficient notice for licence holders to comply with the Human Rights Act and the amendment would not deprive holders of their right to abstract.

The amendment cannot be used as a mechanism to revoke or vary licences. It is a modernising amendment to allow the effective management of water resources in the uncertain climatic future. I beg to move.

Baroness O'Cathain

My Amendment No. 60 is grouped with this, so I should like to speak to it. It is again to do with licences and licence renewal and deals with Clause 20. It would insert a fifth condition—that the presumption of renewal should be accepted—after the previous four. That should be put on the face of the Bill.

We had a lot of discussion about this last time in Committee. There seemed to be ideas going back and forth and quite a fog about the whole thing. As I read the Bill, the presumption is that a licence will not be renewed.

In consultation, DEFRA had said that the presumption would be that the licence would be renewed. Government policy, expressed several times, echoed that presumption of renewal, for example in the explanation in the draft Bill in November 2002 and in the consultation exercise in May 2002. How come the Bill now has a presumption of non-renewal?

Of course, if there is evidence that the people holding the licence are not doing a proper job and if they are not protecting the waters, the underground strata or any fauna or flora dependent on them from serious damage we would not expect the licence to be renewed, provided there was an appeal mechanism. But the onus should be on the Environment Agency to prove that.

As currently drafted, the burden of proof is on the applicant, which is consistent with a presumption of non-renewal. Clause 13(4) on page 15, line 27, shows what I mean.

Lord Livsey of Talgarth

Our names are also added to Amendment No. 60. We were thinking along precisely the same lines that the noble Baroness, Lady O'Cathain, has outlined in some detail. We strongly support the amendment, because renewal is very important unless there is a good reason to deny it. The reason is clearly closely connected with sustainability of the water supply, which the Environment Agency would obviously take into consideration if it was not going to renew the licence. We wholeheartedly support the amendment.

Lord Howie of Troon

When I arrived today, I promised the noble Baroness, Lady O'Cathain, that I would not speak, but I feel that I have to break my word almost at once in order to support her amendment entirely and wholeheartedly. She is quite right. The onus of proof should be on the agency. I do not doubt that for one minute. The agency has to balance the interests of the environment against those of industry. It is a benign agency, as we know, but it might not always be benign. My experience of it is in relation to coastal erosion, on which it has been adamant in its own views rather than mine.

The onus of proof should be on the agency. That should not be done by nods and winks, as it is at the moment. It should be on the face of the Bill. I hope that the noble Baroness, Lady O'Cathain, is not offended that I have broken my word so soon.

Lord Dixon-Smith

After the remarks that I have made in the past, it does not need saying that I support the amendment. I wonder whether the Minister could go into considerable detail on the way in which the system is supposed to work. As I read my noble friend's amendment, it seems to highlight a problem. The Bill talks about a licence, a licence applicant and the possibility of the rejection of a licence. The problems that arise are very rarely going be the result of the actions of one abstractor. Most of the problems that are likely to arise will be the result of the cumulative actions of a whole lot of abstractors. In some cases it may not be possible to enhance flows and the available water resource. The real question is how we administer equitably the problem that is arising as a result of a cumulative effect. That is a very significant issue. We shall need to deal with it and the industry will require considerable assurance on it.

4 p.m.

Baroness Young of Old Scone

Perhaps I can help with a few examples of the successful operation of licence renewal in the past. There are about 3,500 time-limited licences in England and Wales, some of which stretch back as far as the 1960s. In the east of the country, water company licences have been time-limited and have been renewed for over 20 years. Very often, those renewals take place in a process of negotiation and small-scale adjustment with abstractors, often acting as a group. For example, sometimes groups of farmers come together so that there can be an equitable solution between them. One example was the renewal of a time-limited licence in the Kidderminster area, which enabled a 10 per cent reduction in licensed volumes at the time of renewal. That helped a very water-stressed area but also gave an equitable share of water to meet the needs of the farmers concerned. The NFU was involved in that process of negotiation. That is the sort of renewal process that works well, in those areas in which time-limited licences have operated for some time. In fact, there have been few or no appeals in most of those renewal processes.

Amendment No. 60 worries me considerably because, at the moment, in making renewals of abstraction licences, the kind of consideration that is taken into account is not simply a burden on the applicant. It is a shared burden between the applicants and the regulatory body. There are four major considerations. First, is the abstraction having an environmental impact and, secondly, is it having an impact on other licensed and legitimate abstractors? Those two assessments are for the regulators to make. Thirdly, information is required from the licence holder about the continuing need for the licence and, fourthly, information is required about evidence of an efficiency programme. The process is balanced between the regulator and the regulated.

Amendment No. 60 seems to negate Amendment No. 56, which related to water efficiency. The presumption of renewal, which is so clearly predicated on environmental damage in Amendment No. 60, would strangely enough put in secondary place the very thing for which I have just heard so much support—the need to introduce efficient use as a clear factor in the process of both licensing and renewals.

I hope that my comments have been helpful in giving some examples and background to the way in which the process currently operates, and would continue to operate, under the Bill.

A further point on Amendment No. 60 is that raised by the noble Lord, Lord Dixon-Smith, about multiple abstractors. Under the Water Framework Directive, these abstractions will all have a common end date within a catchment area. The process will involve adjustments and negotiation to increase efficiency, to target abstraction to the least environmentally damaging place and to ensure that there is a fair share for everyone, especially in water-stressed areas.

In our last sitting, we heard of a number of priorities from several Members of the Committee. We heard about priorities for the quarrying industry, the water industry, food production and market gardening. Not everyone can be a priority. In water-stressed areas, the presumption of renewal cannot allow everyone to end up with exactly the same licence as they had before. That process of considering environmental impact, need, efficiency and the impact on other legitimate abstractions must be at the centre of the question, and must be equally balanced. Amendment No. 60 would destroy that balance.

Baroness Miller of Chilthorne Domer

The noble Baroness, Lady Young, made a good point. Amendment No. 60 might be strengthened if we added a couple of the clauses to it that she mentioned. There should be a presumption of renewal, not only when it could be shown that there was no serious damage but also subject to efficiency. To that extent, I agree with the noble Baroness.

There is a difficult balance to strike, given that those who invest in a businesses need certainty, or as much as they can be given in an uncertain world, of how much it will rain. Given the fact that there will be a constant ratcheting-up of efficiency, should the Government choose to accept that that aspect of the Bill should be strengthened and the amendments to that effect are accepted, Amendment No. 60 would be on a much stronger footing. I would be interested in discussing with noble Baronesses. Lady O'Cathain and Lady Byford, how we could amend the amendment further, so that it included the issues of need and efficiency.

Baroness Byford

My name is linked with the amendment, and I accept the comments of my noble friend Lady O'Cathain. I believe that I must go through the Minister, as I am not allowed to address the noble Baroness, Lady Young, herself on this matter. She said that the present system works well, so the question must be, "Why change it?" That is a clear question, to which we need an answer from the Minister. Are we changing the system because there is something in the Water Framework Directive that means that we have to change it?

As for the presumption on renewal of licences, we had a long discussion on a previous Committee day, in which we all showed an awareness of the need or desirability that for businesses of whatever size, large or small, there should be a presumption of renewal. The noble Baroness, Lady Young, said that there would obviously be six-yearly reviews of licences. However, I understand that when regular reviews have happened in the past, it has not necessarily meant that the licence would be withdrawn. There might be a slight fault or something that needed adjusting, and the company may be told of the reasons or the concerns expressed by the operation within which they work. Reviews of consent do not consider removing consent, but usually involve additional constraints on quality, requiring more treatment processes and investment, especially as regards sewerage works. The Environment Agency does not take consent away but considers the way in which the process is working.

If the Minister will bear with us, we should perhaps spread the debate a little wider, because two things are becoming intertwined. It is no use business being unable to invest or to know where it is going in the long term. If through leakage, pollution or for whatever reasons, the Environment Agency has concerns, surely those concerns are best addressed in the review that is done on a regular basis. It will, I understand, be done on a six-yearly basis, but I need clarification on that point. The agency could raise concerns in the review, rather than insisting that presumption of renewal is not in the Bill, as it should be. Otherwise, we are reversing law and making somebody guilty until they prove themselves innocent. We have had that argument at great length with many other Bills. That is one thing that this House is very clear about— innocence is innocence, until the person is proved guilty. I have strong reservations about dismissing the amendment just as it stands at the moment.

My noble friend Lord Dixon-Smith rightly said that a licence granted to one person might have an effect on another person. I accept that, but would it not be possible to adjust to the terms of individual licences, rather than going for complete renewal? Again, I ask through the Minister, because I must. That may have to be done if climatic change happens radically, because renewal would not be possible—it would be an emergency. Perhaps we might consider the matter in that way.

Since our last sitting, I have been concerned about the question of renewals. I refer especially to infrastructure renewals, especially with regard to those with long-term investments, such as water companies. Conventional accounting methods for water companies, estimate a depreciation charge which is one of the costs of the business. Total costs are then set against the business's income to determine the profit or loss for the financial year concerned. Depreciation charges are accumulated in the business's balance sheet where they are set against the replacement costs of the assets to show the net value to the business of its current … assets. The depreciation charge is calculated by assessing the asset's remaining life and the costs of replacing it". Indeed, in our previous debates, we talked about Victorian infrastructure.

The information note continues: There are various ways of making these assessments and calculations. Straight-line depreciation divides the replacement cost of an asset by the number of financial years of its expected useful life to the business. This charge is then allocated to each financial year as a measure of the loss of value to the business of the asset during that year". I understand that a typical period is normally 15 to 20 years. If I were in a business, I might think that rather a short period, but that is the existing situation.

If we are to move from a system whereby the presumption of renewal has been in being to one where it is not, that has huge implications not only for the viability of water companies and others that are concerned in quarries, but also to the way in which accounting is done. How can value be assessed? We are referring not to the freehold value of land but to construction work underneath the soil.

Will the Minister give us a full explanation of the Government's response to the amendment, as so much of it hinges and impinges on future amendments?

Baroness O'Cathain

I appreciate the comments made by noble Baroness, Lady Miller. Perhaps we might cobble together another amendment on Report, which would introduce the efficiency issue. However, the point made by my noble friend Lady Byford is absolutely right. I am standing up to speak only because she did not point out that the cost of water to the consumer would have to increase significantly if the depreciation took place over a shorter number of years. Is that what we want to result from this Bill?

Lord Livsey of Talgarth

The amendment was also tabled under my name. I am interested in what has been said about accounting and write-offs. When I spoke about accounting last week, I said that there was a strong case for a schedule to be produced of write-offs and accounting for different types of investment. Clearly, when there is a water company with major investments of a very expensive type over a long period, the write-off must be over a much longer period. In the case of a bottling plant, one might adopt something different, as the technology would be likely to change more rapidly and the write-off period should be that much greater. Some guidance should be incorporated, and some formula should be drawn up.

Lord Whitty

In a sense, the two amendments move in opposite directions, which makes it interesting that the Liberal Democrats support them both. The first measure would impose a tighter schedule on time limiting, and the second would make any time limiting, whatever the time, subject to automatic renewal except in very limited circumstances. Given the recent exchange between the noble Baronesses, Lady Miller and Lady O'Cathain, about amending the amendment, we may consider a more substantial amendment at a later stage. However, as it stands, renewal would be refused in a limited set of circumstances.

On Amendment No. 57, the Government want all abstraction licences to be subject to a time limit, over time. However, that is best done on a voluntary basis, and we look to the Environment Agency to encourage existing holders of abstraction licences to move to a time-limited basis voluntarily. If we asked them all to do so at 2012, it would create a huge concentrated burden of work on the Environment Agency, which would have to consider all existing licences all at once. But the kind of compensation issues which relate to renewal are also relevant. Converting an existing abstraction licence to time-limited status could, of itself, raise compensation issues. Therefore, it would not only be an extremely time-consuming exercise; it could also be an extremely expensive one if we were to require a mandatory switch to time limits. The aim of the whole policy is to make time-limited licensing and the new system far more attractive.

Most of the discussion has been based on Amendment No. 60. In effect, the amendment would limit to a very narrow set of circumstances the area in which the Environment Agency could refuse a licence. As has already been said, the amendment would affect the agency's ability to manage water supplies sustainably. It would not allow it to take into account issues of efficiency. My noble friend Lady Young— actually she is not my noble friend any more; she will know what I mean—pointed out that there is concern all round on the issue of efficiency and concern that, one way or another, the Bill should deliver efficiency. Yet, on the issue of renewal, the agency would not be allowed to take efficiency into account if we followed this arrangement.

The Environment Agency needs to be able to refuse renewal under a wider range of circumstances. But there is not, as the noble Baroness, Lady O'Cathain, suggested in her first intervention, a presumption of non-renewal. That is not the case. The policy and the framework of the operation provide us with a clear presumption of renewal provided that the three main tests are met.

4.15 p.m.

Baroness O'Cathain

I thank the Minister for giving way. The reality is that if someone had to apply for an extension as if it were a new licence, that would mean that there was no presumption of renewal. That is simple.

Lord Whitty

I do not believe that it is. I would draw the opposite conclusion if it were that simple. In effect, the agency will be considering the licence in the original terms of the licence and according to the three main tests: namely, renewal of the licence would not mean that environmental sustainability was in question; a requirement that the need for the licence is demonstrated; and a requirement that water abstracted under the licence is being, and will be, used in an efficient manner. Those are the same conditions under which the licence was originally granted. Therefore, the presumption is that, provided the licence has been operated in the manner intended, there will be a renewal. That is the opposite of the conclusion that the noble Baroness derives.

With regard to the administrative and legal framework arising under the Water Resources Act, it is also true that that is expressed in terms that licences may be granted unless there is a reason not to do so. That, again, makes a presumption of renewal. In fact, if anything, the renewal process is made easier as a result of the Bill.

The noble Baroness, Lady Byford, asked why we should make changes. One of the changes is intended to make renewal easier so that we are not required to advertise, we are not required to consider protected rights, and we are not required to consider in a formal way any process.

I turn to the question of renewal of a single licence being considered in a broader context—a point raised by the noble Lord, Lord Dixon-Smith. The abstraction management strategies would themselves look at the totality of the licensing system and, in the long run, as my noble friend Lady Young said, the time limits of the abstraction licences in the same catchment area would be coincidental. Therefore, one could consider the totality. In doing so, one needs to take into account the views not only of the other abstraction licence holders but of stakeholders generally. Therefore, it would be an open and public process.

It is also true that, to my knowledge—noble Lords may find some obscure example and I challenge them to do so—in any licence procedure where there is a time limit on the licence, the renewal process may be a presumption administratively and policy-wise, but there is no legislative basis for saying that renewal will be a presumption. That suggests that in such a licensing system, there will be a degree of flexibility and discretion and, in particular, the Environment Agency, when considering a particular renewal, will be able to take all those sustainability arguments into account before making a decision. But provided that all the objectives of the Act are met—

Baroness Miller of Chilthorne Domer

Perhaps l may press the Minister on that point. If he regards the issue of renewal to be so critical to sustainability, I wonder whether Amendment No. 57 does not then become more important in terms of bringing permanent licences into the renewal system. Perhaps, in his reply, he can give me some examples—if there are any— where, over the past, say, five years, licences have been voluntarily converted from permanent to time-limited ones.

Lord Dixon-Smith

I raise a slightly similar point but one that is not quite the same. If we are dealing with the matter of licences and their duration, I believe that a driving licence can now be issued for a very long time. It will be issued until one is either 65 or 70 from about the age of 30.

Lord Whitty

The noble Lord is correct, although, by the time noble Lords who may be towards the top end of that scale reach the age of 70, certain conditions will relate to the renewal. However, if most other licences are subject to a time limit in the renewal process, there is no presumption written into the primary legislation, but there may well be an administrative and a policy presumption, which is exactly what we are proposing the agency should deliver here. But if it were written in tight terms and, in this case, in very narrow terms on the face oldie Bill, that would not give the agency the flexibility to take these wider sustainability issues into account when considering the renewal of any licence.

The noble Baroness asked whether there were any examples of voluntary conversion. I do not know that there are any. I stand to be corrected, but we are talking about an entirely new situation. We are moving into a new management system where, desirably, everything would become part of a time-limited licensing system in the long run. My objection to Amendment No. 57 does not lie in its ultimate intention but in the fact that it would concentrate all that administrative effort, with all the potential compensation issues which arise, in the period running up to 2012. That does not seem to be a sensible way to meet that objective.

I recognise that the industry and potential abstractors will need some clarity in the question of renewal. They will also need to know what reviews can do and what they cannot. The Water Framework Directive requires periodic reviews. We have said that there will be six-year reviews. Incidentally, those reviews could lead to a withdrawal of the licence, although the noble Baroness is correct to say that in most circumstances the review process will mean a change in the terms of the licence and a commitment by the licensee. But, in extremis, it could mean a withdrawal of the licence.

Therefore, a water abstractor must face the possibility that, in certain circumstances, if there is a detrimental environmental effect, the licence might not be renewed or might be withdrawn. That requires a renewal situation in which the Environment Agency has wider and greater flexibility and a greater range of grounds on which to refuse a renewal than would be provided by Amendment No. 60. Therefore, I hope that noble Lords will not pursue the amendment in its present form.

Baroness O'Cathain

I am extremely unhappy with all that. In fact, I shall certainly not press this amendment, but I shall return to the issue on Report with a different amendment. I hope that, before we reach Report stage, the Minister will try to find out why the Government have changed their mind so significantly since the explanation in the draft of November 2002 and the consultation exercise of May 2002.

Baroness Miller of Chilthorne Domer

I believe that when the Minister began his summing up, he said that the Liberal Democrats had taken an opposite position on these two amendments. I do not believe that to be the case. I believe that the Liberal Democrats are looking for the best of all possible worlds.

Noble Lords

Oh!

Lord Livsey of Talgarth

That is a very good philosophy.

Baroness Miller of Chilthorne Domer

I am glad that noble Lords agree with me. When we return to this issue on Report, I believe that, between us, we and the Conservatives will have devised an amendment which will, indeed, introduce the best of all possible worlds into the Bill—at least, in this small but particularly critical area. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 19 agreed to.

Clause 20 [Limited extension of abstraction licence validity]:

The Duke of Montrose moved Amendment No. 58: Page 22, line 28, leave out "whose term exceeded twelve months but

The noble Duke said: In moving Amendment No. 58, I shall speak also to Amendment No. 59. We are still in the throes and machinations of the renewal of licences. Clause 20 implies that it may possibly take the agency longer than three months to determine an application for the renewal of a licence. We are interested to know why licences of less than 12 months are excluded and not allowed a limited extension if there is a failure to extend the licence after an application. Can the Government guarantee that there will be no delay in renewing them, or are the holders of such short licences deemed not to require their renewal?

I turn to Amendment No. 59. The implication of the clause is to transfer the onus of renewal and the burdens of the administrative system of abstraction licensing from the Environment Agency on to the licence holder. This amendment has been tabled at the instigation of the NFU, which is opposing Clause 20 as it moves this burden of responsibility.

Consequently, we seek to ensure that if a licence has not been renewed by the time of its expiry while an application for the renewal of a licence is ongoing, an abstractor will not lose the right to abstract water and the licence will not lapse. Should the Environment Agency take longer than that to determine a licence, the abstraction will still be able to proceed. I beg to move.

Lord Livsey of Talgarth

I believe that the amendment is worthy of support. Clearly, one does not want to see a licence run out and then someone who is really dependent on a source of water to be unable to renew access to that water while there is an administrative delay. I consider that to be an undesirable state of affairs and, for that reason, I support the amendment.

Lord Whitty

Taken together, the amendments would mean that a licence which had been granted for a genuine short-term problem would, in effect, be dealt with for renewal purposes as though it were a long-term licence. That would greatly diminish the attractiveness of giving short-term licences in genuinely short-term situations. It would also impose a substantial administrative burden on the Environment Agency. Explicitly, in effect, Amendment No. 59 would transfer the responsibility for securing the renewal of an expiring short-term licence from the holder of that licence to the agency. That does not seem to me reasonable.

It would also provide no incentive for applicants to assume responsibility or to take action to ensure that the renewal of their licence was dealt with in a timely manner. It would have the rather undesirable effect of requiring the agency to issue a formal notice of expiry even when a valid application to renew the licence had been submitted in a timely manner.

The whole point of short-term licences is that they should deal with short-term situations. It does not seem to me sensible to bring short-term licences into a system which is more appropriate for long-term licences, and it might, in certain circumstances, lead to the agency being less flexible in the granting of short-term licences. That would be undesirable because we need that flexibility, but we need it to grant licences which would not then be capable of being rolled on beyond their initial point of necessity.

4.30 p.m.

The Duke of Montrose

I am interested to hear what the Minister has to say on this. It appears, then, that short-term licences will be considered only in emergency situations.

Lord Whitty

Short-term situations.

The Duke of Montrose

It is possible that short-term or emergency situations might recur annually. I suppose that the Minister is saying that, in such cases, the agency would perhaps like people to apply for a long-term licence. However, many people will have short-term necessities which might recur annually. They would be interested in how to progress their re-applications so that they can be sure of some sort of continuity. We shall look at what the Minister has said and perhaps return to it.

Baroness Byford

Before my noble friend withdraws the amendment, I have a question for the Minister. Will he define "short term", "medium term" and "long term"? As the definitions obviously have implications, it would be helpful to have them.

Lord Whitty

Most short-term licences are granted for a period of, say, 12 months in order to deal with a situation that might arise. Strictly speaking, the situation could be an emergency in which there is a problem handling the water that is causing damage to the abstractor or to others. Or the situation could involve maintenance lasting several months although it is not strictly speaking an emergency. I am not saying that those licences should never be renewed—there is a process for renewing them—but that that process should not be as complicated or open-ended as the renewal process for long-term licences. Those licences are specifically to deal with shorter-term situations. They should therefore be dealt with in a way that presumes that the situation is short term.

The Duke of Montrose

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 59 not moved.]

Baroness Byford moved Amendment No. 60: Page 23, line 15, at end insert— (5) There shall be a presumption that any licence in respect of which the conditions of this section are met shall be renewed unless the Agency is able to show that revocation is necessary in order to protect any waters or underground strata, or any flora or fauna dependent on them, from serious damage.

The noble Baroness said: In an earlier answer—I was writing as quickly as I could—the Minister, if I understood him correctly, said that there is currently no legislative presumption in existing licensing. Is that correct? As I am not sure that I heard him correctly, I wanted to check. I beg to move.

Lord Whitty

I would say two things. First, in the current system under the Water Resources Act, renewal will be granted unless there is a reason not to do so. In a sense, that is close to a presumption. More generally, I was arguing that I am not aware of any statutory licensing system that involves a time-limited licence and a presumption for renewal which—as the amendment proposes—is written into primary legislation. If noble Lords have such an example, I shall consider it. My current legal advice, however, is that there is no such presumption in the terms of this amendment.

Baroness Byford

I am grateful to the Minister. As I said, I was writing quite quickly and it was difficult to get a full note. I thank him for his response and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 61 not moved.]

Clause 20 agreed to.

Clauses 21 and 22 agreed to.

Clause 23 [Transfer and apportionment of licences]:

The Duke of Montrose moved Amendment No. 62: Page 28, leave out lines 1 and 2.

The noble Duke said: Amendment No. 62 is a probing amendment. It would appear that categories of protected rights are defined in new Section 39A(1)(a). The reference to Section 48(1) is given in Butterworth and states: a person who is for the time being the holder of a licence under this Chapter to abstract water shall be taken to have a right to abstract water to the extent authorised by the licence".

If we remove Sections 34 to 45—so that they shall not apply—we will also remove Section 39 which establishes the obligation to have regard to existing rights and privileges. If the clause stands part, it would appear that the holder of a new licence apportioned from the old one will lose his protected rights. I think that the issue needs to be aired. If it is not, people could proceed with an apportionment but discover too late that they have lost more than they have gained. I beg to move.

Lord Whitty

If the licence to be apportioned was an existing licence under the previous legislation, that would have had to have been considered under Sections 34 to 45 during the original grant. The provision under Clause 23 is intended to provide a simple and straightforward administrative division of the licence to ease access or to provide a wider range of abstractors without increasing the total volume of the water to be abstracted. It is intended that the process applied should remain substantially the same as that under the current law. It would be a break-down of the old abstraction licence.

The substance of the concern about the terms of the licence would already have been met because the old licence would have been granted on certain terms. New licences will be considered properly and thorough)/ in that process. Amendment No. 62 would restore a whole range of considerations that would not really be appropriate. As we are talking about a given volume of water, the point is simply that there will be more abstractors. We would therefore riot need to go through all those processes.

As for the issue of protected rights, if the apportionment includes the owner of the original licence, that right is retained. We would not get rid of rights protected under the previous legislation. Although the regulations under this part of the clause will have to make that somewhat clearer, I think that the noble Lord's concern is misplaced in that respect.

The Duke of Montrose

I thank the Minister for his comments. He says that one of those still holding a portion under the apportionment is the original holder and will maintain his rights. However, what happens to the new owners of the new portions of the apportionment? What will they receive?

Lord Whitty

My understanding is that if it had been granted originally on the basis of that volume of water and that attracted a pre-Water Resources Act-protected right, each of the divisors would be protected under those same terms.

The Duke of Montrose

I thank the Minister very much. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Whitty moved Amendment No. 63: Page 28, line 20, after "shall" insert ", if the old licence was a full licence,

On Question, amendment agreed to.

[Amendment No. 64 not moved.]

Clause 23, as amended, agreed to.

Clause 24 [Claims arising out of water abstraction]:

Baroness Miller of Chilthorne Domer moved Amendment No. 65: Page 29, line 31, after ""abstractor")" insert ", such abstraction being subject to licence,

The noble Baroness said: I have tabled this amendment in order to probe whether the Government believe that there should be some sort of de minimis limit below which litigation is not necessary, and also to discover whether the Environment Agency, by granting a licence, is giving any sort of assurance against any sort of damage. Clause 24 is rather broadly drafted. As it stands, it might attract a significant amount of trivial litigation. I should like to explore with the Minister the issue of those who abstract water merely for personal use; whether he believes that 20 cubic metres is a small amount; whether he believes that there might be a more appropriate de minimis limit; and whether he believe that that is an issue at all.

Amendment No. 65 would focus the clause only on those who have an abstraction licence under the Bill and on the particular problem of large-volume abstractions which cause desiccation and subsidence. I beg to move.

Lord Dixon-Smith

I support the amendment so far as it is probing. If he would, I should like the Minister to go into some detail in his response. It is envisaged that someone might be able to sue an abstractor for damages as a result of loss or damage caused by the abstraction. However, we are dealing once again with this business of whether the damage was caused by one abstractor or—as I suspect is more often the case—a group of abstractors. That is fair enough. Then, however, we come back to the business of the 20 cubic metre limit per day per licence. However, to use an old cliché which comes from Scotland, I think, many a mickle maketh a muckle. If you have too many people taking 20 cubic metres per day out of a watercourse, eventually someone at the bottom will have a right to sue. So that is a problem.

There is another problem which I hope the Minister will deal with. If it is licensed abstractors who are causing the damage, would not the Environment Agency as the authorising body for the licence be an accomplice in the action? I therefore wonder whether the suit should involve that agency. It is a very simple and basic point, but it is the sort of point that we should be clear about at this stage. I have therefore raised the point now.

Lord Whitty

I think that the amendment is based on the presumption that small abstractions cannot cause damage. In general, we do not have a de minimis clause in relation to the ability to sue for damages. Regardless, 20 cubic metres per day is a fair amount of water. One can do damage with that amount of water regardless of whether the abstraction is cumulative to those of neighbours who also have that unlicensed right. So I do not think that it is sensible to exclude the ability to sue for non-licensed abstractors. This clause provides the ability to sue such abstractors. As with any claim for damages, the burden of proof in the courts is of course on the litigant/claimants. There is no intention to put that the other way round. However, I think that it would be odd to exclude the smallest abstractors from the ability to be sued for damages.

Baroness Miller of Chilthorne Domer

I thank the Minister for that explanation.

Lord Dixon-Smith

With respect, the Minister did not respond to my point about whether, if a licensed abstractor was causing the problem, the Environment Agency could in any way be involved in the action.

Lord Whitty

I ignored the point because it was not particularly relevant to this amendment. The Environment Agency can conceivably be a party to the action only if it has granted a licence for activity that caused the damage. Even then, one would have to show that it had behaved perversely and unreasonably, which is always the case when contemplating action against a public licensing body. That is not relevant to the issue of small abstractors.

Baroness Miller of Chilthorne Domer

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 24 agreed to.

4.45 p.m.

Clause 25 [Compensation for modification of licence on direction of Secretary of State]:

Baroness Byford moved Amendment No. 66: Page 30, line 34, leave out subsection (2).

The noble Baroness said: With Amendment No. 66, we come back to an issue that is crucial to many, but particularly to those involved in agriculture. The Minister said, in our previous debates, there was a lot of pleading from quarries, from water businesses, from horticulture, from agriculture or whatever. This amendment addresses the needs of agriculture and horticulture. As the noble Lord knows only too well, farmers are being encouraged to diversify and consider different ways of using the land that have, perhaps, not been tried in the past and, because of problems with disease, to look at rotation, which has been four or five years and, on the whole, is now moving up to a recognised six or seven years.

The clause would amend Section 61 of the Water Resources Act 1991, reducing from seven years to four years the period of the non-use of a licence after which revocation or variation did not entitle the licence holder to compensation. Furthermore, Clause 17 removes the protected right under the licence, if unused for four years.

The implication for those who have to manage the land would be that the reduction in the period of nonuse would affect, in particular, the unsupported sectors of the agriculture industry—namely horticulture—that habitually do not use irrigation licences for the seven-year period. There are other sectors of agriculture that would not use a licence on a regular basis as horticulture, in many ways, does.

If the Bill implemented that reduction in period, it would no longer be commercially viable for many businesses to continue to produce irrigated crops. It would not be possible to reduce a crop rotation to only four years, due to the risk of crop disease such as potato cyst nematode and due to the requirements of contracts made under the Assured Produce programme or with customers such as processors or supermarkets. The noble Lord, Lord Carter, will know that the Government are encouraging better assurance schemes, and I hope, therefore, that he will be sympathetic to the amendment, when I move it.

Potato growers from various areas, including Humberside and Lincolnshire, have supplied us with examples of the potential implications for their business. The schedules to the Plant Health (Great Britain) Order 1993 provide for the conditions under which the land can be declared free of potato cyst pest. For seed potatoes, DEFRA's guidance that must be adhered to prior to certification states that there should be a rotation period of a full seven years. Furthermore, the European and Mediterranean plant protection organisations provide a standard that should be used for soil testing for such diseases. That standard confirms that there are cases when land should be left free of crops for at least 10 years to ensure that it is disease-free. I have not pushed for 10 years; the clause refers to a period of seven years. With regard to the requirement of supermarket contracts, I must say that we have received examples of various contracts from growers, including a supermarket contract for onions that required a six-year rotation.

We can see no reason for the clause. The seven-year period is reasonable. In earlier debates, the noble Baroness, Lady Young of Old Scone, argued against the fact of leaving unprotected usage up to seven years. She said that it might deny somebody else the right of access to that. The Bill is a check and a balance of how we have regard to one business to another, so I will be interested to hear the Minister's response to it. The Bill should make provision for longer periods to be negotiated, where required. The introduction of any such measure should be delayed to allow agricultural businesses to make necessary adaptations to their business. I beg to move.

Lord Livsey of Talgarth

Amendment No. 66 also stands in our names. The territory was covered earlier this week in a substantial debate, but I will make a few points to back up what the noble Baroness, Lady Byford, said.

There is no doubt that keeping the period at seven years would allow for effective crop rotation. Four years is too short. Sound rotational practice breaks pest and disease cycles and assists in the maximising of economic yield and the quality of the crop, which is crucial, particularly for supermarket contracts and suchlike. It also reduces the need to use pesticides, fungicides and herbicides and, therefore, reduces pollution. A seven-year licence assists the sustainability of the farming system within a rotation. That is an important point. Increasingly. we want sound crop practice that will result in a quality product. I, too, see no reason why the period is being reduced to four years.

Baroness Young of Old Scone

A few days ago, we set off at a gallop and—inappropriately—discussed the issue in connection with Amendments Nos. 51 and 64. I shall not take up the Committee's time, but I will refer to what I said then, inappropriately, and I hope that it will be taken into account, appropriately, at this point.

Lord Whitty

I am sure that the Committee recalls precisely what the noble Baroness said at that point in a complicated evening.

From the point of view of the Environment Agency, which is responsible for water management, seven years is a long time to allow an unnecessary sleeper licence to operate. The Bill gives a power but does not impose a duty. The clause does not say that the Environment Agency must revoke licences that have not been used for four years, it says that it may do so, in certain circumstances. In doing so, it must be reasonable and take all factors into account. If, for the purposes of water management, rotation, land restoration, soil recovery or disease control, there is a reason why the licence has not been used for more than four years, the Environment Agency should take that into account and would be acting unreasonably, were it to revoke a licence in that knowledge. Were it to act so unreasonably, there is a right of appeal, before any licence is revoked. Seven years is a long time for an unnecessary sleeper licence that prevents companies and households from receiving water and, by its existence, prevents the granting of any new licence. It is a long time to deny the Environment Agency access to that water.

Some of the concerns that have been expressed in this short debate are unfounded. All the situations to which the noble Baroness, Lady Byford, and others referred should be regarded by the Environment Agency as providing good reasons, but there are other situations in which it would be desirable for the Environment Agency to act before the end of seven years, as under current legislation.

The Duke of Montrose

My memory of the inappropriate discussion that we had the other day may fail me, but, as a farmer, I would like to ask what constitutes non-use in a given year. If a licence holder wished to protect his position, would he be able to turn the whole system on for a day? Would that count as use?

Baroness Miller of Chilthorne Domer

I might be able to help the Minister by asking a couple of questions. I am sure that his mathematics is better than mine, but he might be slightly at fault. He said that seven years was a long period, but the amendment would simply add another three years to what is suggested.

Lord Whitty

It is the other way round.

Baroness Miller of Chilthorne Domer

I said that his mathematics was better than mine, so I accept that point.

The amendment should be borne in mind with the one that we discussed earlier about the ability of farmers to impound water for the purposes of irrigating their land. It is not a case of making one amendment or the other, but, if we made the first amendment, which encouraged the impoundment of winter water, the difficulties that farmers would get into because of their need for so much of the other abstracted water would be reduced, and there would be less pressure for this amendment.

Lord Livsey of Talgarth

The Minister maintains that he requires a reduction from seven to four years. He is advocating a catch-all situation, in which those who need a licence for seven years would be equated with those who hold sleeper licences that may, as he said, not be needed. It is important to distinguish between the two requirements. It ought to be possible for those granting a licence to take account of the important aspects that we have discussed.

Earl Peel

I must add to what the noble Lord has just said. If the Minister is, as he seems to be, minded to proceed with the four-year cycle, one possibility would be for the Bill to make provision for longer periods to be negotiated, where required. Would not that be a reasonable compromise?

Lord Whitty

The Environment Agency will not be required to take away a licence that has not been used for four years: it will have a power to do so, if, in all reasonable circumstances, it judges that there is unreasonable non-use of the licence that is either causing environmental damage or preventing access to the water for other potential users. The variation issue does not arise. The agency can use the power in those circumstances. The Environment Agency would need to take into account all the issues of horticultural management, if that is the reason for the non-use of the licence.

In answer the noble Duke's question, I must say that I understand that the position applies if the water has not been used beneficially—the use for which the licence was granted—for that period. Just turning on the tap and letting the water run down the drain would not be using the water, but if it is simply that less water was used or water was used less frequently than was anticipated, that would count as use, if the water were used for the purpose for which the licence was granted.

Baroness Byford

I am intrigued by the Minister's last comment. How would we know where the water had gone? If someone turns the tap on, the water runs away. It does not matter whether it runs into the ground or wherever. Anyway, I digress, which is naughty of me.

I thank the Minister for his response. He said "may", which brings us back to my great dislike of giving powers to an agency not under direct government control that it may or may not use. I read the response made by the noble Baroness, Lady Young of Old Scone, to the previous debate, so I accept what she said. I indicated that in my opening comments.

In the circumstances that have existed in the past two to three years, how many times has the agency been hamstrung and been unable to supply water?

Lord Whitty

I do not know the answer to that question. It might need a longer period to get a proper indication, but, if the information is available, I shall let the noble Baroness have it. We are envisaging a period of greater pressure for water and less supply.

Baroness Byford

I accept that, but I hope that I have made the point that the agency may not have been required to make such decisions. If we accept that, we are starting to get somewhere.

There is nothing else that I can add to the debate at this time. The Minister is aware of the strength of feeling on the issue, and he will not be surprised to hear that we wish to return to it at another time. At this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[The Sitting was suspended for a Division in the House from 5 p.m. to 5.9 p.m.]

Baroness O'Cathain moved Amendment No. 67: Page 30, line 34, at end insert— (2A) After subsection (4) there is inserted— ( ) Subsection (4) above shall not apply while the possibility of the abstraction of water under the licence constitutes part of—

1. (a) any water resource management scheme maintained under section 20, 20A or 20B above; or
2. (b) any drought plan maintained under section 39B above.""

The noble Baroness said: I rise to speak to Amendment No. 67, which again is about abstraction licences, particularly sleeper licences, but from a different angle. This is on the management of water supplies for water companies. The point is that, at the moment, water companies are required to produce plans for long-term planning. in a sense, and to take water resources into account. Sleeper licences are part of the overall plan, the reason being that in this country we can go from periods of deluge to periods of drought, but periods of drought do not necessarily occur every four years. In order to safeguard water resources and their supply for the consumer we need the hack-up of provisional sleeper licences.

On the idea of restricting sleeper licences from seven to four years, or indeed by any other period, we might not be able to produce the water required in a drought period. But the real problem is that, as the licences are already in the plan, companies would have to start new plans excluding sleeper licences. It is the belief that, in order to provide a constant, efficient water service to all consumers, we need sleeper licences to be protected, and we believe that they should be.

To sum up—I shall be as brief as I can [this is one more aspect of the Bill that concerns me, particularly in view of the fact that it seems that short-term planning reigns and long-term planning is not taken into consideration. I beg to move.

Baroness Byford

My name is alongside that of the noble Baroness, Lady O'Cathain, on the amendment. It is a very serious matter, which I hope that the Government might deal with sympathetically. We are moving into times of uncertain climate change, which puts additional strains on those providing water for us all throughout the country. Just because the water has not been called on in the past, perhaps as the Government hope that it will never be called on in the future, does not mean that we should not plan longterm. My noble friend has expressed the point very clearly, so I do not wish to add to it, except to persuade the Minister that it is a very real problem, which I hope he will deal with sympathetically.

Lord Whitty

I am being sympathetic in the same way as I was sympathetic to the previous amendment. In a sense, the issue behind it is the same. There is a power to intervene after four years. But, of course, if a sleeper licence is being used for water conservation as part of a water company's long-term plan, that is a reasonable reason why the licence has not been used. The Environment Agency would therefore have to take that into account, just as it would consider the rotational requirements of the horticultural industry that we referred to under the previous amendment. If the so-called sleeper licence were part of long-term planning and drought planning, clearly the Environment Agency would be acting unreasonably if it tried to revoke it. The same arguments apply, and there should be no anxiety.

We are dealing with a situation where unnecessary, unreasonable non-use of a licence causes damage in one form or another. The Environment Agency should have the right to intervene after a period of less than the current seven years. We are not dealing with a situation where sleeper licences are part of a company's long-term plan.

Baroness Byford

Before my noble friend comes back, the Minister keeps referring to examples of where the agency might have the power, if necessary, to use the licence. What sorts of examples are there of that being a problem? We are not getting such examples at all from the Minister in answer to arty of our questions. With due respect, all he said was that the situation was hypothetical and that he could not answer. A balance must be made. Somebody must carry out a risk assessment on that issue. Will he clarify it for us?

Baroness O'Cathain

To support my noble friend, sleeper licences do absolutely no damage whatsoever to the environment. All they do is ensure, if there is a drought situation, that we will not have these bowsers, or whatever they call them, on the streets.

5.15 p.m.

Lord Whitty

Clearly, if there is no damage to the environment or to access to water, the Environment Agency would be acting unreasonalbly to revoke a licence being used for beneficial purposes.

The noble Baroness challenges me to think of an example. I am not sure whether this is particularly cogent, but one may have an abstractor abstracting water for an industrial purpose, on which basis it quite reasonably received a licence. That industrial process may have closed down but the abstractor has retained the licence in case another investment took place for which they needed the water. However, the water had not been used for that purpose for four years. 'The result could have been one of two things; either the non-abstraction meant that the water levels were different from those that had been planned or that the abstraction was creating a problem downstream. In those circumstances, the Environment Agency would be acting reasonably in intervening and revoking the licence. The only issue that we are changing is to suggest that it should be able to do so after four rather than seven years. The same degree of reasonableness would apply under the existing legislation.

Baroness O'Cathain

Is the Minister aware that these are not that type of licence? These licences are part of a water company's water resources plan, which is signed off by Ofwat. Now the Environment Agency will be saying that we cannot have them. They exist and are included in the water resources planning—the management planning of water companies—in order to provide for the situation. I know that there are certain parts of the country where these issues will never arise—where there is water coming out of their ears—but there are other parts where they do and they have very serious problems.

Is the Minister now saying that there should be no planning at all in this country for drought at any time?

Lord Whitty

That is an absurd conclusion to reach from what I have said. I have said that it would not be reasonable for the Environment Agency to act against a water company if the sleeper licences—if one wants to call them that—were part of a water company's plan. A condition of its licence might be to have the kind of water plan to which the noble Baroness refers. Therefore, the Environment Agency would be managing that licence—if you like—which is held by the water industry in this case, in line with the duties of the Environment Agency on the one hand, but also with the statutory duties of the water company to ensure security of supply of water.

In those circumstances, there would be no reasonable intervention by the Environment Agency. We are talking here about all abstractions of water— all abstraction licences. There must be a right to intervene for unnecessary non-use of a licence that causes damage or uncertainty in the management of that water. That is all that does. The change is to reduce the period from seven to four years.

Baroness Byford

I thank the Minister for explaining the Government's position. I think he accepts the obvious need to conserve water. Water companies cannot supply people if they do not have a water supply themselves. I wonder whether it would be helpful to the Minister if we took this issue away and perhaps returned with an amendment, or the Government might like to come back with an amendment. Water companies, which are the suppliers of other people, should be protected, much more so than individual businesses that might not use it in the way that the Minister suggests. I am uncertain as to how to proceed. Water companies are hugely important. Without them, none of us—whether individuals or businesses—will be able to draw upon that water. It would be immensely helpful if the Minister could consider the matter.

Lord Whitty

We have spoken about the circumstances in which this situation would arise. The point is that at the moment these powers arise under existing legislation after seven years. The only new provision is a four-year one.

I would not be able to give the undertaking the noble Baroness refers to, but I could write down some of the considerations that I have enunciated. I could also consult with my colleagues in order to explain the issue more clearly and to make it clear that the kind of situation the noble Baroness refers to would not be a cause to intervene and revoke a licence in this way.

[The Sitting was suspended for a Division in the House from 5.20 p.m. to 5.28 p.m.]

The Duke of Montrose

I now understand that the licence is primarily for a purpose and secondarily for a quantity. The noble Baroness, Lady O'Cathain, was talking about the sleeper licences that water companies have. Because of the wording of the Bill, if a sleeper licence has not been used for four years, the rights of that licence will be subject to review by the Environment Agency, unless the water company decides to draw a bit of water off under each licence every year.

Lord Whitty

All I am saying is that the intervention is a power in certain circumstances to be exerted reasonably and with due regard to all the other duties and powers in the Bill by the Environment Agency. Most of the discussion seems to suggest that it would be almost an automatic revocation in those circumstances. That is not the intention. It is a power for the agency to deal with particular situations in which the abstractor was behaving unreasonably by not using the abstraction rights.

Baroness O'Cathain

I thank the Minister very much and I thank all those who have taken part in the debate. We have had two interruptions for Divisions, so we are somewhat confused at the end of it. I have some feeling that we might be all right without the amendment being on the face of the Bill, but on the other hand we are talking about deeply concerned water companies that have to produce their long-term plans for water resources management. They feel quite threatened by the provision. I shall take the amendment away, but I cannot promise that I shall not come back to it on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Miller of Chilthorne Domer moved Amendment No. 68: Page 31, line 3, leave out "conditions" and insert "condition

The noble Baroness said: Clause 25 allows the Secretary of State to vary abstraction licences without paying compensation for the sake of protecting water availability. We believe that the spirit of the clause is good, but we wish to explore whether the conditions that would be on the face of the Bill, should my amendments not be included, will undermine its effectiveness.

The clause does not apply to any abstraction licences that currently exist. It will apply only to new licences granted after the Bill becomes law. In other words, it does not apply retrospectively to existing licences. My concern is that licences granted after the Bill comes into effect will not be on a level playing field with those that exist now. The Bill may provide for too long a period during which the variation of licences cannot take place. That may allow unsustainable abstractions to continue at a time when they would be better varied.

Again, we are in an area of difficult balance. In some circumstances we want long licences so that businesses, water companies and individuals can have certainty when they have abstraction licences. However, variation and flexibility are important. The amendment would deal with those longer licences and allow a variation so that the lower limit of water that could be abstracted can be brought into force before the end of the period that the licence has to run for. I beg to move.

Lord Whitty

As I understand them, the amendments would make it easier to intervene with long-term licences by reducing the notice period for variation from six years to four years. The whole point of subsection (3) is to provide the ability to have long-term licences that would be longer than the 12 years. They would relate to developments in which the abstractor would need the confidence that they would have access to the water and a reasonable degree of stability in the conditions for abstracting it.

The six-year period of notice in the Bill is tied into the review frequency of abstraction management strategies. Those strategies would therefore throw up the information on which any variation might be based. It is therefore not particularly logical to reduce that to four years in terms of the basis on which any variation would be proposed. It would increase the uncertainty and the number of licences that could be subject to variation in that way. It is almost the opposite argument to those that have been put on stability and certainty in previous debates. We do not see a reason for it, as the review system is on a six-year cycle.

Baroness Miller of Chilthorne Domer

I thank the Minister for his reply. I am not sure that I am quite clear as to why the conditions apply only to licences granted after the Bill comes into effect. I should be grateful if the Minister could reassure me on that detail.

Lord Whitty

The six-year review applies to all licences. The terms of pre-existing licences will not include this condition, so we are dealing with new types of licence provision rather than retrospectively dealing with old licences.

Baroness Miller of Chilthorne Domer

I thank the Minister for his reply. I shall read it closely in Hansard. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 69 to 71 not moved.]

Clause 25 agreed to.

Clause 26 [Recovery of compensation from new licence-holder]:

Lord Dixon-Smith moved Amendment No. 72: Page 31. line 33, at end insert— ( ) the holder of licence A has been informed of the extra efficiencies which would accompany the granting of licence B, has been given 60 working days to devise a means of matching them and thereafter has been unable to convince the Agency of their viability

The noble Lord said: The clause deals with the recovery of compensation from a new licence holder. The clause envisages that the new licence holder would pay any compensation that was due to the previous licence holder indirectly through the agency—or, at least, the agency would pay the compensation and then recover it from the new licence holder.

This is a probing amendment to explore exactly the process that is going on. Sections 52 to 54 of the Water Resources Act 1991 set up a system for modifying a licence at the agency's request. Any objections of the Secretary of State can be catered for.

The clause refers to complete revocation and sets up a new ground for revoking a licence, relating to, greater efficiency in the use of water resources".

We are talking about a water undertaker, not somebody slinging his hook into a river to extract water for irrigation. We are talking about a serious enterprise. We want to probe what is the exact process. I could envisage a situation in which another water undertaker could devise a zero sum game and, in effect, recycle all the water back into use from the used side back into the supply side. We know that that has happened to a considerable extent and on a number of occasions in some parts of the country. Let us suppose that somebody spots a gap in a particular area and sees that he can do this and as a result reduces the abstraction rate by, let us say, 15 per cent. which might give grounds for the revision of the licence.

What is the process? If a person with a much more economical process tells the Environment Agency that he is making an application for a particular area because he can reduce the abstraction rate, what then happens? Does the Environment Agency get into a discussion with the existing licence holder? It is an extremely delicate situation. If it does not, does the existing licence holder hold no rights? He might have held the licence and been the water undertaker for 50 years and given perfectly satisfactory service. Does he have no consideration in the process?

With that background in mind, I thought that we should table the amendment to try to find out whether there is an element of negotiation and if there is, how far it goes and how far it is a negotiation. It might run some danger of getting into conflict with commercial interests that ought otherwise to be private. It is quite a delicate area.

I have no difficulty with the principle enunciated in the Bill, which is that in that situation, if the agency was required to pay compensation to the previous licence holder, it should reimburse them and the charge would go through the system. I have no difficulty with that, but I am slightly concerned about the process. I wonder whether we are creating vulnerability for water undertakers that is perhaps a little too severe and might give them a degree of uncertainty that we might wish they did not have to suffer. I beg to move.

Baroness O'Cathain

I should like clarification. We are talking about a licence being revoked and saying that the costs will be passed on to the person who gets the new licence. Who bears the cost of that? Is it the customers? If it is in a particular geographical area, does it mean that, in the interests of the environment, the customers in that region are going to have to pay for the Government's policy on the environment in the country as a whole?

Lord Whitty

This part of the Bill deals with a situation in which the Environment Agency is revoking a licence and granting it to another person. The clause deals with the compensation arrangements. I suppose that eventually the customer would pay for those compensation arrangements, but we would have a more efficient system of delivering water. The judgment has to be made on what is the more efficient way of delivering that water.

The intention of the amendment is to give the original company, whose licence is to be revoked, not only compensation, but also the right to argue that they can match the efficiencies of water company B. There is obviously some justice in that, but the whole process, which the noble Lord, Lord Dixon-Smith, asked about, would involve the Environment Agency in extensive investigation and discussion—call it negotiation if you like—with both the original company and the alternative company before it made any decision on revocation. We expect the agency to explore all the options with the parties concerned before it moves into revocation mode, or into any statutory mode. It may be that voluntary arrangements could be made. The process would involve company A knowing what efficiencies were claimed by an alternative arrangement and being given the chance to match those efficiencies.

Even after the revocation, there is an appeal system. The noble Lord seems to imply that his amendment would, in effect, provide another appeal system. The appeal system would already be able to take into account the grounds on which the Environment Agency made the judgment in the first place. We do not need what would amount to another appeal system.

Lord Dixon-Smith

I think I am reasonably happy about that. There was no intention of setting up a second appeal system. I was seeking to determine how far the agency could say, "This is the new situation and that is the end of it", or whether there will be negotiation. I think the Minister has confirmed that the Environment Agency would have to explore all the options with the parties involved. That makes it a considerable negotiation.

The Minister said that greater efficiency in the use of water resources is the criterion—he did not say that it was the exclusive criterion—that the Environment Agency has to use. That causes a little concern because, if it is done regardless of cost, it might be positively disadvantageous for the community. At some point, we must think about the terms of reference. Although I understand that the purpose of the Bill is to have the most efficient possible use of water, a question of economics is wrapped up in it somewhere. I know that people have got used to paying for bottled water in shops at a greater price than one would pay for petrol. But if it were coming through the tap in that way, there might be some complaints. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 26 agreed to.

Clause 27 [Withdrawal of compensation for certain revocations and variations]:

[Amendment No. 73 not moved.]

On Question, Whether Clause 27 shall stand part of the Bill?

5.45 p.m.

Baroness Byford

We have given notice of our intention to oppose the Question of whether this clause shall stand part of the Bill. The effect of the Bill on some companies is quite large, particularly, in this regard, the National Farmers' Union, which raised its concern with me. It is concerned with the Government's intention to fund compensation for the revocation of abstraction licences until 2012. I understand that the Government's intention may be to fund compensation through the scheme of abstraction licence charges. That means that all abstractors with chargeable licences would fund compensation payments.

Obviously, the implications of that are that compensation for the revocation of abstraction licences causing environmental damage should not be recovered from other abstraction licence payers' fees. The environment is a public good; therefore, we believe that the public purse should pay. Surely, it should not be left to a small sector, such as a group of abstractors, when the whole community will benefit. The concept of an abstraction licence fee system is that it recuperates the cost of the administration of the licensing system that controls abstraction. If money is to be taken out of the licence fee system to pay for compensation, it may be found that not only are there insufficient funds in the system for that, but it could jeopardise the efficient management of such a system.

The funding of the Environment Agency also needs to be considered. The Environment Agency's budget is part financed from income raised from the Environment Agency charging schemes, such as the water abstraction licensing system. However, those schemes are subject to the principle of cost recovery, which, if I am right, means that the charges must cover the costs incurred by the agency in running the scheme. We would not consider that payment of compensation comes under this definition of "running" of the abstraction-licensing scheme.

Furthermore, compensation being paid for water abstraction licence fees can be compared to that of the planning application system. Fees for a planning application are charged in order to cover costs of administration of the application. If the local authority charged the fee for an application but then decided that the application should be revoked, the applicant would be entitled to compensation. However, that compensation does not come from the planning fee scheme, but from general local authority funds.

I would like the Government to confirm how they intend to pay for the compensation for the revocation of licences. The effect of the amendment would be to retain the current system where compensation is or would be payable from the Government. Section 63(2) of the Water Resources Act 1991 states that if a licence is varied or revoked and compensation is payable by the agency, the Secretary of State or the National Assembly for Wales has the power to indemnify the agency. Compensation would therefore be funded from general taxation. This should remain the case. I have two questions for the Minister. First, why are the Government considering changing that? I refer the Minister to our first day in Committee. In reply to a previous debate, the noble Lord said that the Environment Agency's resources figures had increased: The figure has risen from £620 million in 1999 to just short of £800 million this year.—[Official Report, 27/3/03; col. GC47.] Secondly, how much of that money will be allocated for this specific purpose?

Lord Livsey of Talgarth

This is a pivotal issue for the Bill. Clearly, grounds to revoke a licence are spelt out in the Bill. It would be appropriate to read one out. Clause 27(1)(d) says that, the ground for revoking or varying the licence is that the Secretary of State is satisfied that the revocation or variation is necessary in order to protect any waters or underground strata, or any flora and fauna dependent on them, from serious damage". I recollect that in another context an earlier amendment used similar wording. I believe that paragraph (d) is a sustainable reason.

On a matter of principle, it may well be unreasonable to pay compensation in those circumstances. One cannot and should not continue receiving compensation if serious damage is being caused. It is illogical to keep paying compensation when substantial damage may be occurring.

I understand the arguments that have been deployed. However, I recognise that the pleading is to get money out of the public purse in order to ensure that compensation is paid. I would merely comment that the Water Resources Act 1991 was enacted 12 years ago. We now understand much more about global warming and the pressures on the water resource. We must tackle this problem head-on and in a responsible way. That may be by sharing the costs among the users of the water in order to ensure that these very desirable objectives are achieved.

Lord Whitty

A number of issues have been raised on the general funding. The Environment Agency has a duty to secure the proper use of water resources. Compensation is a payment to that end. The agency has to recover the cost of executing those duties from all abstractors. So the costs of compensation come out of that fund. That was confirmed in our 2001 policy document. Therefore, we are not talking about a general taxation situation. The clause that the noble Baroness seeks to delete limits the number of occasions that compensation would be payable. Therefore, it would reduce the degree to which any charge would fall on other abstractors.

The noble Baroness asked how much all this would cost. That is currently under review. There will be a consultation paper on it. The clause she seeks to delete would reduce the burden on the Environment Agency's budget because compensation would not be payable in those circumstances. As the noble Lord, Lord Livsey, said, we are talking about a situation where the use of the licence is causing serious damage to water, underground strata, flora and fauna, and so on. There is no particular reason why in future compensation should be paid. That is the clause's intent. By deleting the clause we allow additional compensation to be payable and therefore the problem of that being passed on to other abstractors is greater. I hope, therefore, that we do not pursue the deletion of this clause, either now or at a later stage.

Earl Peel

I seek some clarification from the Minister. I am still not absolutely certain about the situation. The Environment Agency document on compensation guidelines, which I think is what the noble Lord is referring to, states that because the Environment Agency operates from the principle of cost recovery, that will mean that the licence charges must cover the costs of compensation. Therefore, it goes further than the present situation, which is an intention that licence fees should cover the administrative costs. Is it the noble Lord's intention that the Environment Agency will seek to cover the full costs from the abstraction licensing system?

Lord Whitty

Yes. In common with the policy on enforcement regimes generally, the total cost of administering those regimes has to be covered.

Earl Peel

My point is whether it is the Government's intention to cover not only the administration costs but also the costs of compensation if a licence is revoked or amended in any way.

Lord Whitty

Yes. The compensation is part of the administrative cost.

Baroness Miller of Chilthorne Domer

Clause 27 uses the words "serious damage", whereas in the Environment Act 1995 the words "significant damage" are used. Obviously the context is not exactly the same. Is the Minister confident that "serious damage" is adequately defined, or would "significant damage" achieve more efficiently the purpose sought of protecting those items that need protection?

Lord Whitty

The definitions of "serious damage" under this clause and elsewhere will be set out in detailed guidance. The assessment would be on that basis. Clearly, if the noble Baroness proposes an amendment, we shall have to deal with it at a later stage. We consider that the reference to "serious" indicates the type of damage of which we are talking, but it would be subject to guidance.

Baroness Byford

I thank the Minister for that. In no way do I propose that those people who deliberately damage the environment should be compensated. I hope that the noble Lord accepted that from my remarks. The reason for trying to have a debate on this issue is that the system is currently being changed. I think the Minister will acknowledge that. Therefore, I believe that it was quite right to probe and to ask him to clarify one or two issues.

Clause 27 agreed to.

Baroness Miller of Chilthorne Domer moved Amendment No. 74: Before Clause 28, insert the following new clause—

"GENERAL PROVISIONS WITH RESPECT TO WATER In section 6(2)(b) of the Environment Act 1995 (c. 25), at end insert "in particular the efficient use of water by all abstractors".

The noble Baroness said: I do not intend to take up much of the Committee's time with a debate about efficiency. The amendment would insert a clause regarding efficiency in a different place in the Bill, as we seek to find the most appropriate place to introduce this duty. For that reason, I beg to move.

Baroness Young of Old Scone

I shall follow the admirable example of the noble Baroness, Lady Miller, and not repeat some of the points made at several significant stages in the Bill about the right place for an efficiency duty. I shall simply say that, for all the reasons already given, efficiency is important and that would seem to be a good place to put in a provision that makes clearer the statutory basis for the promotion of water efficiency within water resources duties as a regulator.

6 p.m.

Lord Whitty

The Environment Agency is already able to apply conditions such as water efficiency to an abstraction licence. It also must take into account other issues of costs and benefits. Any new duty would have to be consistent with that. This may be one of the more sensible places to consider a duty along these lines. The wording in the amendment referring only to "efficient" would not achieve the purpose. However, I am prepared, particularly in view of the commendably short intervention of the noble Baroness, to take the matter away and, before the next stage, to consider whether we can come forward with anything that would achieve that purpose.

Baroness Miller of Chilthorne Domer

I thank the Minister very much for that reply. I look forward to seeing what the Government produce. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 28 [Water resources management schemes: other abstractors]:

The Duke of Montrose moved Amendment No. 75: Page 32, leave out lines 40 and 41.

The noble Duke said: This is a probing amendment. There is no reference in the Explanatory Notes to requiring payments. Do the Government have any idea what payments the agency might be required to make; for how much and for how long? Are they likely to be or would they be one-off payments? There is such a clause in the Water Resources Act. By putting one in the Bill the Government have opened the door to questions which I suggest should be asked. It is possible that the situations envisaged in 1990–1991, when the Water Resources Act was passing through the House, no longer apply. The clause could be used for all kinds of matters of which this House would not necessarily or readily approve. I beg to move.

Lord Whitty

The clause allows the agency to enter into water resource management arrangements with abstractors other than water undertakers. Abstractors accepting those agreements may incur costs. It is reasonable that the agency should have an ability to cover those costs. The amendment would restrict that ability. It would also put the non-water undertakings abstractors at a disadvantage compared with the water undertakings, to whom compensation can be paid under the provisions referred to by the noble Duke.

If one could not repay those costs, it is unlikely that other abstractors would come forward and take on some management functions as a part of a negotiated agreement with the Environment Agency. Therefore, that would restrict the flexibility of approach to management of water resources as a whole. With that clarification, I hope that the noble Duke will not press the amendment.

The Duke of Montrose

I thank the Minister for that explanation. In the light of it, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 28 agreed to.

Clause 29 agreed to.

Clause 30 [Enforcement notices, and related procedures and offences]:

The Duke of Montrose moved Amendment No. 76: Page 35, leave out lines 27 to 31.

The noble Duke said: This subsection deals with securing compliance with an enforcement notice. The clause already contains various remedies. Why should it be necessary to go to the High Court, with all the expense, delay, extra work and so on? Why not take the offender to an ordinary court, or, as provided for under subsection (3), do the work and then bill him for it? Why is it considered necessary to take powers to go to the High Court?

Lord Whitty

This is about the enforcement of enforcement notices with which the company concerned has not complied. It would relate to the most serious cases, which would be appropriate for the High Court. Clearly, less serious cases may not be. Proceedings in the High Court will be in situations where significant damage to the environment is being caused which must be stopped as rapidly as possible. Such cases would be rare. I have no doubt that the High Court would ensure that they were. I therefore hope that we would not prevent the Environment Agency taking that course in those extreme circumstances.

The Duke of Montrose

Is it the case, then, that an ordinary court would not have powers to act sufficiently quickly? Is that the problem?

Lord Whitty

I think that that is one of the problems. I shall write to the noble Duke as to why it is the High Court. We are talking about the most serious incidents which require quick action. I think that the High Court procedure is the appropriate procedure, principally because the High Court can grant an injunction whereas the criminal courts cannot.

The Duke of Montrose

I thank the Minister for that reply. In the light of it, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 30 agreed to.

Schedule 1 [The Water Services Regulation Authority]:

Lord Dixon-Smith moved Amendment No. 77: Page 121, line 26, leave out "misbehaviour" and insert "inappropriate behaviour

The noble Lord said: We are a little concerned about the language in both Schedule 1 and Schedule 2. Schedule 1 deals with the appointment of members of the water services regulation authority, and Schedule 2 with the appointment of the consumer council for water. Our specific concern arises in the same place in both schedules where the Secretary of State—or, as the case may be, the Assembly—may remove someone from office. We have no problem with removing someone on the grounds of "incapacity", but we think that a provision to allow their removal because of "misbehaviour" is perhaps a bit too broad.

I must say that I cannot help but wonder why I drew this amendment. My notes say that misbehaviour, conjures up short trousers, birthday parties and pulling little girls' pigtails".

Baroness Byford

I beg your pardon.

Lord Dixon-Smith

Granted. One does wonder whether "misbehaviour" is a suitable word to be used in this context. We think that the words "inappropriate behaviour" would be rather more precise. "Misbehaviour" can comprise so many things. I think that "inappropriate behaviour" would tighten up the definition so that the reasons for removing someone from office will be sufficiently clear for everyone to understand. I do not think that "misbehaviour" is sufficiently clear. I beg to move.

Lord Borrie

I wonder whether I might intervene as self-appointed monitor of statutory provisions dealing with regulators who in some way go off the rails. There are various Bills, some recently passed by Parliament, which have used exactly the phrase used in the Bill. I am therefore rather surprised at the amendment.

The words "incapacity or misbehaviour" have long been known to lawyers. They appear in the Courts Act 1971 as the provision for dealing with—if I may put it this way—circuit judges who go off the rails. It appears rather more closely at hand, in the field of utility regulators, in the Utilities Act 2000 and the Enterprise Act 2002. It may be of interest to Members of the Committee to know what a recent Lord Chancellor—namely, the noble and learned Lord, Lord Mackay of Clashfern—commented in 1994 about what "misbehaviour" meant in relation to circuit judges. He said that it could include conviction for drink-driving, any offence involving violence, dishonesty or moral turpitude, behaviour likely to cause offence on religious or racial grounds, or behaviour amounting to sexual harassment.

"Incapacity and misbehaviour" is a very well-tried phrase and I recommend it to your Lordships. I also recommend that the amendment should be dismissed.

Lord Whitty

My noble friend makes the case for me.

Lord Dixon-Smith

It has been worth tabling the amendment if only for the explanation because it has brought a certain amount of joy. But, as a language purist, I could take issue with the noble Lord, Lord Borrie, on this. The fact that something has been accepted throughout the whole of history does not mean that it should necessarily continue. But that is a separate issue. For now, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 1 agreed to.

Clause 34 [Consumer Council for Water]:

Baroness Miller of Chilthorne Domer moved Amendment No. 77A: Page 37, line 10, after "undertakers" insert "and licensed water suppliers

The noble Baroness said: Clause 34 deals with the establishment of the consumer council for water. The Committee will forgive me if I take some time over this group of amendments because some 29 Liberal Democrat amendments are grouped within this clause, plus one tabled by the noble Baroness, Lady Byford, and one tabled by us jointly. As they all refer to the consumer council for water and raise a number of points, I decided that we could discuss them in the same, albeit very large, group, but they all concern the consumer council's powers.

The first group, consisting of Amendments Nos. 77A to 77G, seeks to widen the scope for the consumer council for water from simply "relevant undertakers" to include "licensed water suppliers". I should be grateful if the Minister could say from his point of view why, on the face of the Bill at present, there seems to be a wish to restrict the consumer council to having powers which simply deal with relevant undertakers. It seems to me that if the effort is being made to establish the consumer council, which we certainly welcome very much, it would be useful if its powers went as wide as necessary to gain the confidence of consumers.

Amendment No. 79A would delete the small but confusing statement, unless the context otherwise requires", in subsection (12), which deals with the interests of consumers. This amendment probes what on earth that phrase means. I certainly do not understand what it means and perhaps the Minister could explain it.

Amendments Nos. 85A to 85D have a purpose similar to that of Amendments Nos. 77A to 77G in that they widen the ability of the consumer council's, in this case, regional committees to establish a relationship between the regional committees and the licensed suppliers and not only undertakers.

Amendment No. 126 has been tabled by the noble Baroness, Lady Byford, and I shall leave her to speak to it. Amendment No. 127 requires that the wider range, which would include licensed suppliers, gives the consumer council for water more information. We believe that if the consumer council is to be able to fulfil its role in a meaningful way, then it must be able to obtain as much information as it requires from water companies. If a water company fails to comply with a direction from the consumer council to provide information, then the company can be required by the consumer council to give reasons.

The consumer council for water may then refer the company's refusal to Ofwat to decide whether the company should be ordered to supply the information. I submit that supplying as much information as possible is extremely important to a consumer council for it to be able to fulfil its role. Although the Secretary of State will have a power to make regulations to prescribe a person other than Ofwat to decide whether a water company should be ordered to supply information to the consumer council, it is important that the Bill gives the consumer council as much power as possible. As it stands, the Bill proposes only a restricted power. The boot should be on the other foot; the Government should give us a good reason why they want to restrict the consumer council's powers rather than widening them.

Amendment No. 129 was tabled by both the Conservatives and Liberal Democrats, and involves a discussion of the functions and duties of the water authority and the consumer council. The Bill seems to deny the consumer council the right to require the authority to supply information, although it is not an unreasonable right. The amendment would delete the subsection. Amendment No. 130, tabled by the Liberal Democrats, deals with the same point more simply by simply deleting the word "not".

Amendments Nos. 142 to 145 deal with the issue whether the consumer council can require compensation to be paid to customers. Our amendments are pretty modest, as we would empower it to do so only up to a limit of £5,000. For consumers to have confidence in the consumer council, it needs to have some power of redress that is not too lengthy or bureaucratic. The council will be made up under Nolan rules; it will be a responsible body; and it is reasonable that it should have that power.

Amendments Nos. 163 to 168 insert the consumer council for water in a number of contexts as a body that the Secretary of State must address. It is symptomatic that, although the Government have taken the good step of creating the consumer council for water, they have failed to include it in an extraordinary number of lists throughout the Bill as a body that needs to be consulted in many situations. I shall list those situations.

Amendment No. 163 adds the consumer council to the list of bodies that the Secretary of State must consult before making regulations about the quantity threshold requirements for competition. That seems a fairly fundamental area. The threshold requirement for competition, if the Government believe that competition is at all important, is of great significance, and the consumer council should be able to have a view of it.

Amendment No. 164 adds the council to a long list of bodies to which the Secretary of State must give a copy of a licence or a variation. Surely, if a licence is varied, the consumer council for water would need to know. That omission may simply be a mistake.

Amendment No. 165 adds the council to a list of those to whom the authority must give a copy of a notice of modifications to a water supply licence. The three amendments give some flavour of the idea that the consumer council will be unable to do its job properly unless it is included in the loop of what is happening in the world of water.

Amendment No. 166 illustrates the point particularly well that the consumer council is currently not included in the list of people whom the authority must inform about modifications to standard conditions of licences. Of course, it could be argued the council is there for the end-of-tap users and need not be concerned with the standard conditions of licence. Surely, however, the conditions of the licence are important in helping to achieve the things that consumers will be concerned about.

All these amendments add the consumer council into the chain of information. Amendment No. 168 relates to what happens when the Competition Commission makes a decision after its report. As the Bill stands, there is no requirement for the consumer council to be informed when the Commission makes a decision about matters that concern it.

The amendments show how much the Bill leaves the consumer council out of the loop. These amendments would include it in the loop. I beg to move.

The Deputy Chairman of Committees (Lord Carter)

It might help the Committee to mention that Amendments Nos. 153 and 155, to which the noble Baroness referred, are in later groups.

Baroness Byford

I hope I am correct in thinking that Amendments Nos. 154 and 126 are in this group. When we read the Bill, we found to our surprise that it sometimes referred to water companies alone, although the Government want to open competition so that water suppliers will come in. In some circumstances, water suppliers are not included in responsibilities or consultation, as the noble Baroness, Lady Miller explained. That also works against them in some ways. Why should water companies be required to carry costs that the new water suppliers will not have to carry? There seems to be confusion in the Bill, certainly from my reading of it and also, it seems, from that of the noble Baroness. Lady Miller. We need to clarify those aspects very clearly.

I was formerly a member of the Train Users' Consultative Committee, which became the Rail Users' Consultative Committee, so I have had to handle the kind of thing that the consumer council will have to consider. I suspect that I shall split apart from the noble Baroness, Lady Miller, on the question of how much information the council requires. At the moment, the relevant information goes to Ofwat and will go to the new regulating authority. Wearing the hat that I wore on my previous committee, some of that information may not be relevant to the council. That raises the problem of confidentiality, especially on competitive issues.

I am struggling to know how to tuck in what I want to say without being ruled out of order by the Lord Chairman or by the Minister, because the grouping of amendments is so huge. I apologise to both noble Lords in advance. There are so many aspects involved and it is unfortunate that so many amendments were grouped together, although they cover the same subject. It would have been easier for the Committee to speak to separate groups, as we did earlier, when the noble Baroness, Lady Young, kindly did not repeat what she had said because we had already been over the argument. In many ways, I agree with what the noble Baroness, Lady Miller, is trying to do.

Amendment No. 126 would mean that licensed water suppliers would have to give information to the council. That is necessary if the council is to fulfil its obligations under new Section 27A(12)(a), on page 37 of the Bill. The obligations are described in the definition of a "consumer matter" as, any matter connected with the interests of consumers". Those interests are defined as, the interests of consumers in relation to … the supply of water by means of a water undertaker's supply system to premises either by water undertakers or (unless the context otherwise requires) licensed water suppliers acting in their capacity as such". That relates to new Section 27A(10), which states: The purposes of a regional committee shall be … the provision of advice and information to the Council on consumer matters affecting the areas", represented by water undertakers on that committee. My comments apply to Amendment No. 154 as well.

I find these matters difficult, and other Members of the Committee may wish to contribute. These measures have huge implications. Either water suppliers. having been brought in by the Bill, should be included in all aspects of the Bill, or they should not. Why have they not been? Is there a good reason— perhaps a reason of competition—why they have not been included in regulation or cost bearing? Similarly, is there some reason why they have not been considered and included as consultees? They should be able to get information as regards the council.

I hope that I have reflected a little on the amendments spoken to by the noble Baroness, Lady Miller, and clarified our position, which may be similar in some ways. At some points, we will disagree. The Bill addresses the situation unevenly.

Baroness Miller of Chilthorne Domer

For the record, and to inform the noble Baroness, I actually asked for this grouping to be split into at least three groups when I received the draft groupings. That did not happen, and again it did not happen when I asked once more this morning. I then decided to speak to the amendments as one group. Although some of the amendments that I asked to be degrouped were degrouped, these were not.

Baroness Byford

It is my understanding that it is for the House to decide which groups are taken with which. We try to do that in advance for the ease of the usual channels. However, the Committee may find it easier if we divide up the amendments; I, for one, would find it easier. We would not have to remake our speeches—I believe that we can almost guarantee that. The amendments relate to very different issues. However, I am in the hands of the Committee at this stage.

The Deputy Chairman of Committees

The House can deal only with the question that is before it at the moment.

Lord Whitty

Yes, and both noble Baronesses have spoken to the full group. I accept that the amendments are in a big chunk, but they all deal with the powers of the consumer council, so they interrelate.

I shall give my views on Amendments Nos. 77A to 78A and Amendments Nos. 85A to 85D and then try to break up my speech, because we have already had two speeches referring to the whole grouping. Those amendments are all concerned with the consumer council's regional committees, and seek to allocate licensed water suppliers to them in the same way as occurs with allocation of undertakers.

One question was: why are licensees being treated differently from water undertakers in general? There is a consumer dimension to that. With the consumers and water undertakers, there is no ability to switch, subject to the very large consumers and competition provision that we provide later in the Bill. On the other hand, the rights of licensees' customers are defined in contracts, and they can switch. The power for consumer protection is of a different order in relation to the customers of monopoly suppliers.

6.30 p.m.

Baroness Byford

I am grateful to the Minister for giving way. I realise that we are not talking about domestic customers at this stage. In some ways we are, but in some ways we are not. But the new suppliers will be supplying companies, and presumably the consumer council will want to have regard to them as well. I had assumed that, but perhaps I am wrong.

Lord Whitty

As I said, the undertakers will virtually be in a monopoly situation region by region, as they are now. Some competition is being introduced by the Bill but, in general, commercial and domestic consumers will be faced with a monopoly supplier. In the case of the licensees, there is not a monopoly situation and therefore, as I said, consumer protection is of a different order. Having said that, I believe that we are in a different position in relation to licensees. Indeed, their relations with their consumers will be contract-based.

However, as the Bill is currently drafted, in principle there is nothing to stop the consumer council from allocating licensed water suppliers to be overseen by a regional committee. Indeed, they may wish to adopt that flexible approach. But I do not believe that it is appropriate to impose that on them because licensed water suppliers will be different from undertakers. Effectively, undertakers are regional companies and their operations relate to their region, whereas, with regard to suppliers, the licensees are not necessarily tied to one part of the country. They may well operate in the supply of water in more than one water company area.

Baroness Miller of Chilthorne Domer

Apart from the fact that consumers who get their water out of their taps must write a cheque or send their credit card details to one company or another, will it make a difference?

Lord Whitty

Yes, it will make a difference. The nature of the relationship is different and the nature of the balance of market power is also different. But I am now making a distinct point. I am saying that the water companies are, in effect, regionally based operations which are confined to the old water regions. There may be some cross-ownership but, effectively, they are water companies within a region and therefore would relate to a regional committee very easily.

Suppliers can operate in more than one region and it is therefore not sensible to force the consumer council to allocate them by regional committee. That is the only point that I make at this stage. I made the more general point that consumer protection is a slightly different issue but this group of amendments seeks to say that the licensees should be categorised by region, and that does not seem to be appropriate. However, in some cases it is open to the consumer council to make such categorisation and, in some cases, they may be single-region companies. But that will not be the case in relation to them all.

Baroness Byford

I was a member of the rural trains committee for the Midlands region and we had different services ranging from Midland Mainline to Central Trains to services for the West Country. However, the committee was there to represent all consumers, and I believe that is the point that between us we are trying to establish. It did not really matter whether a company went through part of our area and into another. Our responsibility—I say this in reference to the council—was to represent the views of everyone who used whatever it happened to be in our area. I do not see why there is this "hang up" in the Bill unless there are some things to which I am not privy. I am trying to establish why that has not been included.

Lord Whitty

I do not really follow the noble Baroness's logic. The structure of the consumer council's regional committees is being defined on the basis of the current structure of company areas. As I said, the relationship with the licensees is somewhat different, but theoretically one could also put them into regional areas. However, if one was obliged to do so, that would cut across the fact that a licensee for supply in the Northumbrian region might also have a licence in the Wessex region. Therefore, it would not be sensible to force such a licensee to be overseen by the Northumbrian regional committee simply because that is where it started out.

I believe that we must differentiate the treatment of licensees in certain ways, both for principled reasons, in that they are in a different market position, but also for practical reasons, in that they do not operate in the neat regional structure of the old water system.

Baroness Miller of Chilthorne Domer

As the Minister gives his explanation of each section of amendments, will he say whether his views are also those of WaterVoice and what representations WaterVoice has made to DEFRA about these various issues? After all, it has the greatest expertise in this field at present. Perhaps it knows best how to represent consumers effectively and where the gaps are.

Lord Whitty

I believe that in some areas we disagree with WaterVoice. I do not have its briefing with me in all respects, but obviously we take its views into account. However, I believe that there is a difference in function. I am not sure on which views of WaterVoice the noble Baroness is asking me to say whether I agree or disagree. Perhaps she will clarify that point first.

Baroness Miller of Chilthorne Domer

Obviously, because I do have a briefing from WaterVoice, my understanding is that it believes strongly that licensed suppliers should also be included in this provision. It believes that that is the best way in which consumer interests can be followed. I am still at a loss to understand why the Government are at such variance with the bodies that represent consumers at present.

Lord Whitty

I am not saying that the consumer council should not cover licensees. That is not the point that I am making. I am saying that the role of customers in relation to the licensees is different from that of customers in relation to the water companies. But there is no restriction in the Bill—I go along with WaterVoice to this extent—about the council covering licensees as well.

What I do object to is writing on to the face of the Bill that, in order to cover licensees, we must categorise them by regional committee. That is the only point that I am making at this stage. Most of these amendments relate to the power of the regional committees and simply reflect that. That does not seem to me to be a sensible approach. It may be defensible in some cases hut, in many cases, it will not be sensible to try to allocate the licensee companies by region.

Baroness Byford

I still do not quite understand. From what he has just said, the Minister is virtually inferring that, under the Bill, some people who are supplied by water suppliers rather than by water companies will not have any recourse directly to the council.

Lord Whitty

I am not saying that. The consumer council can cover licensed suppliers as well. I am saying that the relationship is, by its very nature, different. So far as concerns these amendments, we are only talking about regional structures. It is a practical point; it is not a point of principle.

Baroness Miller of Chilthorne Domer

It may assist the Minister if we read what he said about this regional issue. Perhaps he would like to move on to some of the other points that I and the noble Baroness, Lady Byford, raised in our amendments.

Lord Whitty

I am grateful to the noble Baroness, but we are making a slight meal of what was a relatively simple point. Perhaps that is my fault and I apologise to the Committee.

Amendments Nos. 142 and, consequently, 148, 149, 150, 152 and 154 relate to the council's role in handling complaints and carrying out investigations and the mechanism for changing the threshold within the Bill but not for changing the role of the council—it would change the size of the competitive sector. We have some sympathy with what is being attempted here. However, I would have concerns if the council thereby became involved with the content of supply contracts between customers and the licensees, as those are essentially a private matter between the two parties.

Therefore, we need to give some thought as to whether the council should be allowed to require the information set out in Amendments Nos. 126, 127, 129 and 130. We also need to consider naming the council as a compulsory consultee to the exclusion of others. Of course, that does not mean that the council should not become involved in the consultation process. The mechanisms to ensure that that occurs are already in place in the Bill.

However, if it would be helpful to the Committee, I would be prepared to consider whether we should take further the thoughts behind Amendments Nos. 148, 149, 152 and 154 and the original Amendment No. 142—the batch which deals with complaints handling—and also Amendments Nos. 163 through to 168, which deal primarily with the involvement of the council in the consultation process, and if I consider, without commitment, the issues which lie behind that.

I hope that I have dealt with most of the amendments. I shall certainly take away those two batches and consider them again. As I indicated, for practical rather than principled reasons, I am less sympathetic to the first batch of amendments, which deals with the regionalisation of the approach.

Baroness Miller of Chilthorne Domer

I thank the Minister very much for his reply. If he is to return with the amendments, I am sure that we shall all appreciate them being in smaller groupings. I shall read carefully his reasoning about the regional issue, and I thank him for his remarks on the other amendments. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 77B to 77G not moved.]

Baroness Miller of Chilthorne Domer moved Amendment No. 78: Page 37, line 26, at end insert— ( ) Without prejudice to subsections (2) to (4). before—

1. (a) making a modification to the conditions of an appointment pursuant to section 13 of this Act:
2. (b) making a reference to the Competition Commission pursuant to section 14 of this Act;
3. (c) giving any approval pursuant to section 143(6) of this Act;
4. (d) making any decision which falls within paragraphs (a), (b) or (e) of section 195A of this Act; or
5. (e) making any proposal to a relevant undertaker limiting its charges for the supply of water, the provision of sewerage services or the reception, treatment or disposal of trade effluent,

the Authority, the Secretary of State or the Assembly, as the case may be, shall consult the Council, and shall take into account any views expressed by the Council.

The noble Baroness said: Amendment No. 78 is concerned with the duty of the water authority to consult the council. We believe that it is a matter of good practice for there to be a statutory requirement that the water authority must give reasons for its key decisions. We believe that generally that happens already, but it is important that water customers as well as water companies and other stakeholders should have a statutory right to be informed by the water authority of the reasons for its decisions which may affect their interests.

Therefore, our amendment is designed to widen the scope of decisions that the consumer council for water must be consulted upon before the water authority is able to make decisions upon those areas. I beg to move.

Lord Whitty

I do not believe that the amendments are necessary. We obviously share the aim that the new consumer council should be able to contribute to water regulation on behalf of consumers in conjunction with the other bodies. However, new Section 27B already contains a requirement for the various bodies to agree to co-operate and, indeed, to record agreement about co-operation in a memorandum. That agreement is more suitable than the wording of these amendments. In the existing memorandum between Ofwat and WaterVoice, there is already an agreement to consult each other on matters involving the exercise of their respective functions. I should expect that process to be followed in the new structure, without this form of amendment.

6.45 p.m.

Baroness Miller of Chilthorne Domer

I should also speak to my Amendments Nos. 79 and 80, which are grouped with Amendment No. 78.

Amendment No. 79 deals with a small but very important point. I believe that the power is currently restricted to consumers of water. The amendment seeks to broaden that to include, parties with whom the undertakers enter into a contractual relationship". An example might help the Committee. If a landowner gave an undertaker permission to lay a pipe across her land, she would have a contractual relationship with the undertaker, but she may not be a consumer of his water. She might, for example, have her own private water supply. The purpose of the amendment is to cover people in those circumstances. I believe that the Bill as drafted may be excluding many such circumstances. It is a probing amendment to discover why only the consumers of the undertaker's product should be included.

Amendment No. 80 goes to the heart of some of the sustainability issues we have discussed. It requires all the authorities, notably the water authority and the consumer council for water, to pay regard to each others' duties of care to society, the environment and the economy". At this stage in the afternoon, I do not intend to speak to the amendment at length, save to say that we believe that the spirit of the amendment is very important.

Baroness Young of Old Scone

I wonder whether I might depart from the admirable shortness of the noble Baroness, Lady Miller, on Amendment No. 80 and say a few words about the real importance of sustainable development and the equivalent of that for the consumer council for water. If they are to sing from the same hymn sheet, a symmetry needs to be developed between the economic regulator, the environmental regulator and the consumer council. Research done on behalf of the Government, the regulators and the consumer bodies has shown that the public want the consumer council to address not only price and service issues but water companies' environmental performance and what is being delivered on behalf of consumers in terms of environmental impact. I therefore ask the Minister to consider Amendment No. 80.

Baroness Byford

I suspect that the Minister will tell us that the amendment is unnecessary as it is already within the Government's brief. However, I, too, have been particularly taken by the amendment. I think that it is true that members of the general public—all of us—have become much more aware of our environment. Although I am not sure that that needs to be included in the Bill, I should certainly hope that the consumer council will have high regard to it. If it does not, I would be happy to support this amendment.

I dissented earlier from the position laid out by the noble Baroness, Lady Miller, but she has outlined the information that the companies are required to provide. I would be concerned if the companies thought that that information goes beyond the scope of what they usually provide. Such information should be a basic element of what they should wish to provide to the consumer council. If that is not so, I would associate myself with Amendment No. 80.

Lord Whitty

I think that we are becoming slightly messy with our procedure. I have already given part of my reply on Amendment No. 80, which we are saying is not necessary because the companies already cooperate. In that process, I probably did not deal adequately with Amendment No. 79, which would look after the contractors working for the water company. I do not think that that is right. I think that the consumer council should look after consumers, not the contractors. As for licensed water suppliers, they could of course be the undertakers' competitors. It would not be right for them to benefit from the consumer protection part of the Bill.

Baroness Miller of Chilthorne Domer

We could argue some of these points at length. For now, however, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 78A to 80 not moved.]

Clause 34 agreed to.

Schedule 2 [The Consumer Council for Water]:

Lord Livsey of Talgarth moved Amendment No. 81: Page 124, line 14, at end insert"; or

1. (c) reside in a rural area and have a direct relationship with rural interests"

The noble Lord said: Members of the Committee will note that, regarding appointments to the consumer council, paragraph 1(5) of Schedule 2 provides that one or more person must, have experience of work among, and the special needs of, disabled persons"—

which is very laudable indeed—and, have or have had a disability".

The amendment proposes a specific reference to persons in rural areas. We make that proposal on the strength of new Section 27C under Clause 42, on page 48, which is headed "General functions of the Council". New Section 27C refers specifically to the interests of consumers. It states: In considering the interests of consumers, the Council shall have regard to the interests of … individuals who are disabled or chronically sick … individuals of pensionable age … individuals with low incomes; and … individuals residing in rural areas".

The disability issue was certainly addressed in paragraph 1(5) of the schedule that I quoted.

In moving this amendment, I am saying that the consumer council should include at least one person living in a rural area who has a direct relationship with rural interests. We believe that various rural water issues need to be taken into account. An adequate and reliable source of water is of course absolutely vital for rural residents. It is important also that the regulator and the consumer council are aware of the needs of rural businesses in that specific context.

The reliable supply of water to small rural housing developments and small rural businesses may require a more extensive infrastructure. In my work in another place, I came across real hardship in rural areas. I know of cases in which proposals to build just three or four more houses could not be agreed because of an inadequate water supply, which was often the result of an inadequate water infrastructure. Furthermore, residents of rural communities were often asked to pay an enormous bill to increase the availability of water. That stultified much rural enterprise and even the viability of rural areas. Younger couples who would have lived and worked in the area did not do so because of inadequate water supplies.

Although that is a special pleading, it needs to be represented on the consumer council. Rural people will appreciate that point. My experience is that consumer councils dominated by people from urban areas have no idea at all of that type of problem in rural areas. We want to ensure that rural interests are reflected in the business of the consumer council. We should therefore like to amend Schedule 2. We believe that the best place to make the change is in the list of special interest groups to be considered for appointment to the national consumer council or the regional consumer committees. We want to ensure that decision making as it effects the interests of rural consumers is done in an informed way. I beg to move.

The Duke of Montrose

I speak to Amendment No. 82, which is grouped with Amendment No. 81. Although our amendment follows much of what was said by the noble Lord, Lord Livsey, it is perhaps more specifically geared to the question of agricultural and horticultural use of water. Like the noble Lord, we are grateful to see vulnerable groups listed in Clause 42. Their interests must be taken care of. Here, however, we are dealing with the matter of who should be appointed to the regional consumer committees.

In this regard, we are specifically considering the fact that, of the 48,000 current licences, 70 per cent are held by farmers or horticulturists, who account for only 1 per cent of actual water use. Nevertheless, water is a vital component for them. By the same token, their interests are vital in considering the overall interests of consumers as regards water. We have therefore tabled Amendment No. 82, which would incorporate the requirement to include rural interests in the list of special interest groups. In fact, the only special interest groups currently mentioned are disabled persons and persons with such experience. Although we may be introducing another specialist group, I think that the it is sufficiently significant to be considered.

Lord Borrie

I wonder whether I might express some opposition to both amendments. I live in a rural area. Therefore, I fully understand the substantial point of the importance of representation from rural areas on bodies such as the consumer council. However, I am bound to say that perhaps the Government themselves have encouraged these amendments by indicating one special group—the disabled—in the Bill. The noble Lord. Lord Livsey, appropriately cited Clause 42, which we have not yet reached, which specifically lists four special interests. The Government have picked out the disabled. These two amendments pick out yet another group: individuals residing in rural areas.

However, is it not possible for me—especially at my age—to say, "What about individuals of pensionable age?" Although I may not be able to speak from personal experience about individuals on low incomes, I am very conscious indeed that their significance is mentioned in several places in the Bill. Why should they not have representation on the council if they are to be listed for the council in Clause 42?

My point is that I do not like too much prescript ion of that sort, so that all the members of a consumer council sitting round a table have marks on their forehead to show that one of them is rural, one of them is poor, one of them is disabled and so on. I do not know what size the council will be—I am not sure whether the Minister has said what size it will be—but I dare say that it would be able to cover at least those groups and several other groups too. Appointing people because they come from a particular group is not necessarily a good thing, and we should not lay it down in statute. I recommend that the Committee oppose both amendments.

7 p.m.

Lord Dixon-Smith

The noble Lord, Lord Borrie, mentioned Clause 42. I have tabled some amendments to that clause.

The remarks made by the noble Lord, Lord Borrie, provoked me into rising. He described what I have usually had to face from the Minister. The Minister will remember, as will the noble Baroness, Lady Farrington of Ribbleton, several occasions when we were dealing with Bills relating to local government on which we tried to broaden, shall we say, the range of consultation. Generally speaking, the Minister argued that our propositions were fallacious and that it was unnecessary to broaden the range of consultees because there was no bar to it and the Government would do it and so on. We have had that argument from the Government, but, in this Bill, the Minister falls into his own trap by having a degree of over-specification.

I support the noble Lord, Lord Borrie, on the matter. In the words of that wretched television programme, "Allo, Allo", I shall say that only once. I hope that I shall not need to say it again.

Lord Whitty

I am not particularly happy with the amendments, for the very reason that the noble Lord, Lord Borrie, gave: once we start a list, we either extend it hugely or, by exclusion, imply that other groups are not of such importance. We end up with an unrepresentative consumer council. The aim of the amendment is to make it more representative. I am not, at this point, persuaded. I am even less persuaded by the reference to the agriculture sector. It would be difficult to specify one industry, important though it may be in the context, as needing representation before others.

The noble Lord, Lord Dixon-Smith, will recall that, sometimes, I have succumbed to rural arguments and, other times, I have not. For the moment, at least, I object to any addition to the list and am not prepared to look favourably on the amendments.

Lord Livsey of Talgarth

I commend one or two of the things that the noble Lord, Lord Borrie, said. Why should there not be pensioners or people on low income on the council? Perhaps, the noble Lord should have tabled an amendment to that effect. We could have had a general debate about the matter.

I do not accept the arguments that the council might be too big or that people would have marks on their forehead. Water emanates from rural areas, and, often, rural people will barely have a water supply. There may be a well in the back garden, but they may wish to be connected to a mains water supply with a quality of water that may be far superior to what they get out of the well. They deserve that, and there is a health aspect to it.

My experience is that people in rural areas always lose out. They are always told that they must pay vast sums to be connected to services. The same thing applies to supplies of electricity. Outrageous sums are asked from rural people who want to get connected. In one case, a community of 50 people was asked to contribute to a £750,000 scheme to supply that community. That was an unfair burden, especially as the pipeline ran through that community to the urban areas. That is the sort of thing that goes on. There must be people on the consumer council to represent rural people who know of the existence of such schemes. Urban people turning on their taps every day do not think about people in that situation and cannot imagine being in it.

Reluctantly, I beg leave to withdraw the amendment, but I believe that we will come back to the matter, probably on Report.

Amendment, by leave, withdrawn.

[Amendments Nos. 82 to 84 not moved.]

Lord Dixon-Smith moved Amendment No. 85: Page 127, line 1, after "State" insert ", from money collected from the companies holding appointments,

The noble Lord said: This is a probing amendment designed to sort out the financial arrangements behind the consumer council for water.

Paragraph 10 of Schedule 2 states: The Secretary of State and the Assembly shall pay to the Council such sums as he or it thinks lit to enable it to meet its expenses".

As I understand it, existing undertakers pay a sum to the regulator to enable the regulatory functions to be carried out. That is how the regulator is funded at present. Will that still be the case, when the consumer council for water is established?

In the Explanatory Notes, the Government say that the establishment costs for the consumer council will initially amount to £1 million. It is expected that the long-term increase in costs for the new authority will be marginal and that, anyway, the increased costs, if I have understood the Bill, will be covered by an increase in water company licence fees. I want the Minister to clarify the funding mechanism for the council. Will the allocation of funds for the council come directly from the company licence fees, or will it involve additional expenditure by the Government? Will the Government fund it until the additional revenue starts to come through from the licence fees, at which point it will become, in a sense, self-funding?

I may have made a meal of it, but the Bill is not clear on that point. Even if the Bill is clear, it is not clear that we have understood it. I hope that the Minister will not mind giving an explanation. I beg to move.

Lord Whitty

The Bill provides for what the noble Lord seeks through the amendment. Clause 36, which we are about to discuss, provides that an undertaker's conditions of appointment may require the undertaker to contribute to the set-up and running costs of the consumer council.

Baroness O'Cathain

Did the Minister say "Clause 36"?

Lord Whitty

We are talking about Amendment No. 85, but I referred to Clause 36, which provides much of what the noble Lord's amendment would provide.

Baroness O'Cathain

I apologise to the Minister, but I need some clarification. I saw somewhere that Clause 36 had been withdrawn.

Baroness Buford

Amendment No. 86 has been withdrawn.

Baroness O'Cathain

Okay.

Lord Whitty

The essential point is that the mechanism that the noble Lord, Lord Dixon-Smith, seeks is already provided for in Clause 36.

Lord Dixon-Smith

I am grateful for the explanation. Although it sounded simple, I shall need to study it in order to understand it. For now, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 85A to 85D not moved.]

Schedule 2 agreed to.

Clause 35 agreed to.

Schedule 3 agreed to.

Clause 36 [Conditions relating to costs of water regulation]:

Lord Dixon-Smith moved Amendment No. 86A: Page 39, line 20, at end insert— ( ) The granting of a licence to a water supplier may require the payment by the licence holder of sums relating to any of the expenses mentioned in subsection (3).

The noble Lord said: Amendments Nos. 86A and 87 would put a licensed water supplier on the same footing as a water company. It is peculiar that a licensed water supplier would not have to meet some of the costs that any other water company would have to meet. That may be a misapprehension, and I would be grateful for an explanation, if that is not the case. According to our reading of the Bill, that is not so. Amendments Nos. 86A and 87 would clarify the situation.

Amendment No. 88 covers a slightly different issue. It is a probing amendment. The amendment says: leave out 'Before section 193' and insert `After section 192'".

It may just be ignorance, but we are not certain of what I would call the etiquette of placing things in a Bill. The problem is that Section 193 is repealed. I am not sure that it is right to place a section of a Bill before a section of another Bill that is to be repealed. After the Bill is passed, that section will, presumably, cease to exist. If we re-number the whole of the previous Bill, it will make sense, but, otherwise, it will not. We felt that, in the interests of clarity, the phrase "After section 192" was to be preferred to "Before section 193", as Section 193 will not exist after this Bill has come into force. I beg to move.

Baroness Byford

Before the Minister responds to my noble friend, I must re-state the concerns that I raised earlier about the fact that the water suppliers were not included in some things; this is one of them. It seems unfair that a water company that is required to make payments will be treated differently from a new supplier. The water companies will have to meet huge costs, hut, as far as I can see—unless I have read it wrongly again—that is not required of the new water suppliers. I cannot imagine why. Surely, that is unfair competition. I would like the Minister to explain why that decision has been made.

Lord Whitty

Amendment No. 86A would make it explicit that the water licensees shared the expenses, but I can reassure the noble Baroness and the noble Lord. Section 17G(1)(b), inserted by Schedule 4, to which the Committee may not yet have paid huge attention, already provides for a water supply licence to require payments to the Secretary of State of such amounts as may be determined, which could fairly include this. The mechanism is already in the Bill.

I think that I can also reassure the noble Lord with regard to Amendment No. 87. In one sense, Clause 36 provides a transitional power to allow undertakers' existing conditions of employment to be modified. The competition provisions of the Bill are unlikely to come into force before the consumer council is set up. If necessary, licence conditions could reflect from the beginning the need for undertakers to contribute to the council's costs.

I have an explanation for the point raised by Amendment No. 88, but I shall write to the noble Lord about it.

7.15 p.m.

Lord Dixon-Smith

I am grateful to the Minister for his non-explanation of Amendment No. 88. I look forward to receiving his letter, which obviously I shall have to study with considerable care.

On the mechanism that the Minister mentioned in relation to Amendments Nos. 86A and 87, if my memory is correct, he said that the Secretary of State may make charges to licensed suppliers—it is not obligatory. I am aware of the argument about "may" and "shall", but there still seems to be an element of uncertainty about the matter, and we think that it should be certain. We may need to return to the matter. For now, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 87 not moved.]

Clause 36 agreed to.

Clause 37 [Forward work programmes and annual reports]:

[Amendment No. 88 not moved.]

Lord Dixon-Smith moved Amendment No. 89: Page 41, line 14, at end insert— ( ) The Council shall, as soon as is practicable after the end of each financial year, make to the Secretary of State a report (the "annual report" for that year) on

1. (a) its activities during the year;
2. (b) the progress of the forward work programme for that year; and
3. (c) such other matters as the Secretary of State may from time to time require."

The noble Lord said: The Bill provides that the water service regulatory authority must report annually to the Secretary of State. That is absolutely OK, but we find it slightly odd that, from our reading of the Bill, the consumer council for water does not have to so report. We feel that it should. I am happy to be told that I have misread the Bill because I am quite capable of doing that. By the time one has read such Bills a few times, one sometimes finds oneself in a complete fog. I beg to move.

Lord Whitty

Paragraph 7(1) of Schedule 2, at line 25 on page 125, already requires the council to make an annual report.

Lord Dixon-Smith

I am very grateful to the Minister. I apologise for not having read the Bill the whole way through with sufficient care and put two and two together. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 37 agreed to.

Clause 38 [Objectives and duties under WIA]:

Baroness Miller of Chilthorne Domer moved Amendment No. 90: Page 42, line 1, at end insert In a sustainable manner

The noble Baroness said: I shall speak also to Amendments Nos. 91 and 93, which are in the same group. Amendment No. 90 defines the consumer objective. Its aim is to take the consumer objective beyond what is suggested in the Bill as being simply a price issue, extending it to include sustainability. The amendment would add the words "in a sustainable manner" to the consumer objective.

Amendment No. 91 alters subsection (2B), which refers to, the consumer objective mentioned in subsection (2A)(a)", which Amendment No. 90 would change. It would change the meaning of that clause from simply protecting the interests of consumers, which might well be taken to be ostensibly keeping the price down, to ensuring, the best sustainable use of the water resource", in the interests of consumers. That is important in that it would be inappropriate if the Bill could look at consumer interests only as a matter of price. Consumers are often best served when matters are looked at much more broadly, taking into account other issues; for example, the tax burden consumers must pay when the Government need to clean up the environment.

Amendment No. 93 refers to special interest groups. In subsection (2C), the Government have chosen to list a number of special interest groups to which the Secretary of State or the authority shall have special regard. We believe that students in full-time education should fall within that group. That is not only because they have very low incomes, as the Government will be aware. If they must pay the same water bills as everyone else, their situation will be worsened further than it already has been by top-up fees. Some of the work done by consumer associations shows that people in that age group suffer particularly badly with regard to water bills. For those reasons, we would like them included in that group. I beg to move.

Lord Dixon-Smith

My Amendment No. 90A is included in the same group. I have never quite understood what is sustainable and what is unsustainable—it means different things to different people—so I took a different tack. My amendment would add, in the context of best management of the national water resource". We are talking about the objectives of the water services regulatory authority under the Water Industry Act. Subsection (2A) states: The Secretary of State or, as the case may be, the Authority, shall exercise and perform the powers and duties mentioned in subsection (1) above in the manner which he or it consider is best calculated— (a) to further the consumer objective". The description "consumer objective" is very, very wide. The Bill continues.

In the first instance, I seek clarification of what the consumer objective is. If the objective is to bear in mind the interests of the consumer as regards the price of water, and if it was then to decide that it was in the best interests of the consumer to keep the price of water down, we could have a situation where investment was restricted and water supplies subsequently became vulnerable. The other extreme would be where costs were not judged to be a serious problem; in which case, one could take it to the other extreme and have investment that was unprofitable or not good value for money.

I wonder whether "the consumer objective" is sufficiently objective for it to merit being put in this way. That is why I think that some other words need to be added to make it better defined and more understandable. This is a small but important point. At the moment, I regard the Bill as deficient, not because it does not cover what needs to be covered, but because it does not set it out sufficiently clearly in points that can be understood.

Lord Borrie

I wish to latch on to the remark of the noble Lord, Lord Dixon-Smith. If having the lowest possible price for the current consumer were everything, what he said about sustainability is absolutely right—it would go for nothing. We have already been through Clause 34, which inserts a section in the Water Industry Act. Section 27A(12) states that, 'the interests of consumers' means the interests of consumers in relation to— (a) the supply of water by means of a water undertaker's supply system to premises". And, before even saying that, it states: 'consumers' includes both existing and future consumers". There is no way in which future consumers could be best served simply by putting every possible emphasis on the lowest price for current consumers.

Therefore, I am not sure that the amendment of the noble Baroness, Lady Miller, is necessary at all. Surely, the "consumer objective" mentioned on line 1 of page 42 must refer back to Section 27A(12) at the bottom of page 37, where we are talking about future consumers as well as existing ones. It is a most important provision.

Lord Whitty

My noble friend Lord Borrie makes my first point for me. To some extent, the same applies to sustainability, which is written into Clause 38 as a responsibility of the authority. Of course, the other side of the coin of what the noble Lord, Lord Borrie, says is that consumers have an interest in matters that are not related or definable under the term sustainability. Therefore, the consumer interest, while it overlaps with sustainable development, is not coterminous with it. Therefore, we wish to ensure that this body will primarily look after the needs of consumers in their broadest sense. If the noble Lord. Lord Dixon-Smith, thinks that that is too broad, so do consumers. It is reasonable that we would not constrain it. I am concerned that his Amendment No. 90A, and to some extent Amendment No. 90, would constrain it unnecessarily.

On Amendment No. 91, clearly there is a wider range of issues. The Bill is designed to ensure that the Secretary of State takes account of those in defining what consumer interests are, and that should be reflected in the role of the council. I am unclear as to why students should be picked out in Amendment No. 93. They are known neither for their use of water nor for drinking it. If they were low paid, they would fall under one of the other categories. So I am afraid that, on all those grounds, I would refuse to add full-time students to the list.

Baroness Miller of Chilthorne Domer

I am disappointed that the Minister does not think that students should be a special case. If they were, they might be encouraged—

Baroness O'Cathain

To wash.

Baroness Miller of Chilthorne Domer

However, if the Minister assured me that students were covered under subsection (2C)(c), which provides for individuals with low incomes, I might feel happier about it. Perhaps that definition is already in his mind.

I believe that the amendment of the noble Lord, Lord Dixon-Smith, would achieve what I was seeking to do without having the slightly over-used word "sustainable"—I sometimes struggle to avoid using it. He hit on exactly what we are trying to achieve. I do not agree with the noble Lord, Lord Borrie, that the issue is automatically covered by the reference to "future consumers". If price were the issue, one might argue, if parents had to spend less money on water, that one was covering the interests of future consumers.

However, I hope that the Bill looks at the matter in its wider context. Perhaps the noble Lord, Lord Dixon-Smith, and I, if we do not feel that the Minister's reply satisfies what we seek to achieve, will be able to get together before Report stage to try to come up with an amendment that better defines the consumer interest. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 90A and 91 not moved.]

Baroness Miller of Chilthorne Domer

I wish to seek the Committee's opinion. Amendment No. 92 is particularly important to me, and I wish to speak to it at length. Would it be convenient to the Committee if we started with it at the next session?

Baroness Farrington of Ribbleton

I think this may be a convenient moment, by general consent, to adjourn further consideration until Tuesday next at 3.30 p.m.

The Deputy Chairman of Committees (Baroness Cox)

The Committee stands adjourned until Tuesday 8th April at 3.30 p.m.

The Committee adjourned at twenty-nine minutes before eight o'clock.