HL Deb 19 April 1977 vol 382 cc84-117

6.2 p.m.


My Lords, I beg to move that this Bill be now read a second time. Although the Bill before the House is modest and short—unlike the Bill with which we have just dealt—and designed to bring water charges in different parts of the country within a narrower range, it is also, I fear, a very complicated measure. Water, being a force of nature which sparkles in prose and in poetry and which so often forms a wonderfully romantic setting, should be simple to dispose of, use and enjoy. However, alas! life is not like that. Once we no longer gather water individually and directly from a natural source, finance immediately lifts its controversial head. As noble Lords may recall from our deliberations on the Water Charges Act last year, any measure dealing with water finance seems fated to come cloaked in complexity. Before I outline the major provisions of the Bill, it might be helpful if I explain why the Bill is necessary.

The 1973 Water Act placed responsibility for the water services in England and Wales on 10 large water authorities. The water authorities are organised on the basis of hydrological boundaries; that is to say each authority is responsible for the management of the complete water cycle within one or more river basins: this is for water supply, severage and sewage disposal, the prevention of pollution, land drainage, fisheries and recreation. Although this Government cannot claim to be enamoured of each and every feature of the 1973 Water Act, we do support the principle of integrated management of river basins. Water is unfortunately a natural resource that costs money to provide in the right form and at the right place, so there have, alas! as I have indicated, to be water charges. Further, one of the results of water reorganisation was to reveal a quite remarkable variety of different charges. Before reorganisation there were 160 separate water supply undertakings and the water authorities found themselves with a range of charges from 2p in the pound in some areas to over 20p in the pound in others. It was clear then that the reorganisation of water charges was one of the early tasks facing the new water authorities.

The new water authorities thought, quite rightly, that this range of charges could not be allowed to continue, and all of them set to work—eventually—to rationalise the charges they had inherited from their predecessors. Most authorities embarked on a deliberate policy of equalising their charges; that is, of reducing charges to a narrower range by increases in areas where they were low to finance decreases in areas where they were high. Although different authorities went for different types of equalisation, I am pleased to say that most authorities took our advice that equalisation should be gradual and moderate. Sharp and sudden variations in charges must be avoided—and this Bill is fully consistent with our advice that equalisation should be moderate. The policies adopted by the water authorities show that there is no dispute about the principle of equalisation. Therefore, if it is right to narrow the gap between charges in Nottingham and Birmingham, it must also be right to narrow the gap between charges in Birmingham and Swansea. The principle is the same in both cases.

It is no secret that water charges have gone up substantially since reorganisation —we can see that from our accounts. The water authorities have a statutory duty to raise sufficient income from their charges to break even; so if costs go up so must charges. People have rightly been concerned about both the levels of charges and variations in the charges made by different water authorities. There has been particular concern in Wales, where charges have been well above the national average. I thought that that would please my noble friend Lady White. This concern led the Government to set up the Daniel Committee to look at the whole question of disparities of charges between England and Wales. The Committee reported in March 1975 with the main recommendation that: Early action should be taken to reduce the difference in average water charges between the Welsh National Water Development Authority and other authorities". The Government responded to the Daniel Report by bringing forward their promised review of the water industry with particular reference to the question of variations in charges. As a result of preliminary work on the review, the Government published a Consultative Document in March 1976 which announced a firm commitment to a national measure for the equalisation of charges between different water authorities. The Bill before us today provides for an equalisation scheme on the lines of that discussed in the Consultative Document.

We said in the Consultative Document that: Equity and fairness require that domestic average bills be brought within a range more consistent with the need to provide water services at a relatively reasonable cost and without differences of the order that now exist". Noble Lords may be surprised by the sorts of differences that exist at present. As the slow progress of this Bill in another place means that equalisation cannot take effect in the current financial year, this year there will be a variation in average domestic bills for water supply from £25.40 in Wales to £15 in the Thames area. In percentage terms this means a range between 43 per cent. above the national average to 15 per cent. below. Variations like this in the price of a basic human need for every family are quite intolerable, particularly since the domestic householder cannot influence the size of his water bill by changes in his own consumption. The variations are very much wider than those for, say, electricity, where the range is from about 4 per cent. below the national average to 6 per cent. above; or for gas.

The national equalisation scheme contained in this Bill would smooth out the peaks and troughs of variations around the national average. We estimate that, had the Bill been able to affect charges in 1977–78, it would have reduced the range in average bills to one of 24 per cent. above the national average to 10 per cent. below. That of course is in domestic bills. In cash terms, this would have meant at one extreme that the average householder in Wales was paying about £22 and at the other extreme that the average householder in Thames was paying £16. I am sure that many people, particularly those at the higher end of the scale, would have still thought that their bills were too high. but for reasons that I shall explain the Equalisation Bill is deliberately framed as a moderate measure that falls a long way short of a complete and full equalisation of bills.

I should like now to set this Bill in the context of national water strategy. The drought of last year brought home in a forceful way the importance of planning water resources for the country as a whole. Indeed, I think it is the first time for several hundred years that we had to think along these lines so far as water was concerned. It showed the interdependence of water authorities and the need for areas of relative plenty to help areas of relative scarcity. Indeed, a substantial programme of works is now in progress to provide new links between sources. If I may adapt John Donne: No authority is an island, entire of itself; every authority is a piece of the Continent, a part of the main. Ask not for whom the Bill tolls! I am sorry, that is awful. It sounded better before I wrote it down.

A sensible national water strategy must be based on transferring water from areas of surplus to areas of shortage. For understandable reasons, the major concentrations of population—and therefore where there is the greatest demand for water—are not those areas where it is best to build reservoirs or abstract water. Water has therefore to be moved about. Transfers of water between authorities are already a familiar feature in the water world: It is apparent that the North-West-Severn-Trent and Welsh authorities are interdependent. There are also numerous small-scale transfers, for example from Severn-Trent to Anglian. More transfers are inevitable in the future, for example from Northumbria to Yorkshire and on to Anglia, and from Wessex to the South West. Indeed, the old Water Resources Board suggested that, if the Craig Goch project was completed in good time, the best choice for providing a major addition to supplies for the South-East from about 1984 onwards would be by transfers from the Severn to the Thames.

If every water authority tried to be self-sufficient, there would be a very real danger that too many small uneconomic reservoirs would be built in the wrong places. This would mean a substantial waste of scarce resources, environmental damage and, above all, higher bills for everybody. The alternative is to aim at a sensible national strategy. But in developing this strategy it is of cardinal importance that authorities should be able to obtain water from other areas at no more than the price it costs to store and convey the water. The Government's policy is that all water transfers should be made on a "no profit/no loss" basis, and we intend to see that this remains the case. The fact is, however, that there is a genuine sense of grievance in Wales about high levels of charges. We have concluded that if the "no profit/no loss" principle is to be maintained some action is necessary to reduce charge disparities.

Full equalisation of water bills—that is, a standard water bill for everyone—would remove the incentives each water authority now has to manage its own affairs in the most efficient and economical manner. Authorities could in that event simply spend in the knowledge that others would have to foot the bill. There would in fact be good reason to be inefficient because keeping bills below the national average would mean paying money over to other authorities. So for this reason we have deliberately confined our scheme to affect only that part of an authority's costs which is largely outside their control: that is, its legacy of past capital expenditure in the shape of depreciation and interest charges. The scheme is confined to the area where the need is greatest: unmeasured, mainly domestic, water supply.

The Bill does not extend to sewerage charges because standards of this service are nothing like as consistent in different water authorities as are the standards of water supply. Moreover, there is not the same interdependence between authorities for sewerage as there is for water supply. No one transfers sewerage across boundaries. Nor does it include metered water supply because while domestic consumers are a captive market, industry can reduce its bills by using less water. It is important to retain incentives to save water by ensuring that industry pays the full cost of its supply. Moreover, it is in domestic charges that regional variations are most inequitable.

The scheme is, as I have indicated, a complicated one. But broadly what it does is to reduce to a common unit cost for each unmeasured supply the financing charges which each authority is now having to meet as a result of capital expenditure incurred before 31st March 1976 for the provision of unmeasured water supply. We first work out a national unit by adding together all the qualifying financing charges for all authorities and dividing the result by the total number of properties which get an unmeasured supply in the country as a whole. We next work out for each individual authority its own regional unit cost. Regional unit costs are then compared with the national unit cost, and authorities with costs below the national average pay an equalisation levy while authorities with costs above the national average receive an equalisation payment. The size of the equalisation payment or levy is proportionate to the variation of an authority's unit cost from the national unit cost. This complicated process—and I have done no more than outline its most basic features; I can assure noble Lords it is, in reality, far more complicated than that when one gets down to the detail—requires only a computer.

What this means is that, after taking account of the transfers between authorities, each authority has to meet the same average cost for this part of their expenditure. But, of course, they are still responsible for meeting their own costs in other areas—the cost of wages and salaries for example, and the cost of financing capital expenditure undertaken after the qualifying date of 31st March 1976. And because these costs vary between authorities, there will still be differences between the charges which the consumer has to pay in order to cover the authorities' expenditure. As I have already said, if it had come in this year it would still have left a wide range in average bills, but it would still have narrowed the gap substantially, as indeed it will do next year.

The scheme will be self-balancing: payments in by some authorities will be balanced by payments out to other authorities. No Government money is involved. It is an unfortunate fact of equalisation that while some bills go down, others must rise to finance those reductions. The authorities who stand to benefit from the national equalisation scheme are the South-West, Anglian, the Welsh authority and Northumbrian; all other authorities will have to pay into the pool, particularly, I am afraid, Thames.

The effects of the payments will steadily diminish as new spending after 1st April 1976 forms an increasing proportion of authorities' revenue requirements. I must repeat that this is a modest Bill, even if rather complicated and long-winded. If it had come in this year transfers would have totalled less than 2 per cent. of the authorities' revenue requirement, and would have cost the average householder no more than 2½p a week in any water authority area. The benefits to consumers in the areas which will gain under the Bill would have been much greater than this.

During debate on this Bill in another place, there was concern expressed that it did not extend to the private water companies, who supply about a quarter of the population of England and Wales. My right honourable friend agreed that he would like to include the companies within the scheme and explained they had not been included only because the Government regarded it as impractical to do so—particularly if the Bill was to achieve the rapid progress necessary to bring it into force for the present financial year.

For reasons which I shall not delay the House in pursuing it is now too late to achieve that and my right honourable friend undertook to consider the possibility of including the companies in the scheme. This is not an easy matter: the water companies, as private companies, have very different financial arrangements from those of water authorities. My officials are still engaged in discussions with the companies and I do not yet know what the answer will be. But I can assure your Lordships that it is the Government's wish to bring the companies in, as it was the wish of all parties in another place, and I hope to be able to bring forward suitable Amendments at a later stage.

My Lords, I hope that I have made it clear that this measure is essential to the development of a sensible national water strategy, and that it brings some elementary justice to the vexed and difficult subject of water charges, and I commend it to your Lordships.

Moved, that the Bill be read 2a.—(Baroness Birk.)

6.20 p.m.


My Lords, I am sure that all noble Lords are grateful to the noble Baroness, Lady Birk, for explaining the background and purpose of the Bill. I am also sure she is right to recognise that water is an inflammable political substance. Nevertheless, I am glad to welcome the Bill, but not because it has any merits. I welcome it because it exposes and demonstrates with such striking clarity the prejudices, follies and ineptitude of Her Majesty's Government.

It really is amazing that so much can be achieved in six short clauses. The Bill was of course supposed to have had the Royal Assent by February and to have been effective before the current financial year began. Lady Birk did not go into the details of why that has not happened. It does not matter; it has not and the Bill is not effective. It therefore falls to us to be exposing its absurdities in the weeks immediately before the local elections, knowing that it faces the outright opposition of the London Boroughs Association, the Association of Metropolitan Authorities, the Association of District Councils and the Association of County Councils, an almost unparalleled line-up.

We are of course immensely grateful for the political opportunity which is handed to us on a plate. It is also useful to be having such a bad Bill before Parliament during the run-up to a General Election. However, these are windfalls for which it is right to express our gratitude before going on to say more about what we think of the Bill itself and what I think we should do about it. We must send it back to the other place for them to reconsider extensively, and for several reasons: first, because as everyone knows, and Lady Birk said so quite candidly, the Bill is part of the political devolution package for Wales. That is off and it is only right to say so.

Baroness WHITE

My Lords, I interrupt the noble Lord in the hope that he will stick to the facts. There is no direct connection between this Bill and the devolution proposals.


I will not say more than Lady Birk herself said, my Lords. She explained exactly why, in the interests of relations between England and Wales, this Bill has to be presented at this moment, and the attempt was to get it effective this financial year.

Baroness BIRK

My Lords, 1, too, am sorry to have to interrupt the noble Lord, and I had intended to deal with that point at the end of the debate when dealing with some of the other extraordinary remarks he has made. My noble friend is right in the intervention which she just made, and the noble Lord is now dragging me into it by saying that I said something I did not in fact say. What I said—I said it several times, I thought with some clarity—was that Wales had been put in an inequitable position so far as water charges were concerned. It has nothing to do with devolution; it is to do with a water authority. My noble friend is right about that. If the noble Lord intends to make political smears, would he please keep them to water; in other words, would he keep that part inflammable and leave the rest alone for this debate?


Certainly, my Lords. But Lady Birk went a great deal wider than the inequity between charging. She went on to point out, and rightly, that if we are to proceed on the exchange of water between England and Wales on a no-profit, no-loss basis, there must be a sweetener in the package, which is what this Bill is. Clearly, devolution was on the table when the Bill was being discussed, and it is now not on the table. That alone is an occasion for reconsideration. Furthermore, now that the Labour Government rely on the Liberals for their continued existence in another place, it is only right and reasonable that we should give them both the time and the opportunity to develop their concerted approach on these matters. This accord is obviously not going on tonight and it does not appear to have been developed much during earlier stages in another place. I wonder why we are not hearing anything from the Liberal Benches tonight? Perhaps it is because on this Bill in another place four voted in favour, three against and six abstained. Anyway, I am sure that the Labour Government as much as their Liberal supporters would now want to appear in the public eye to be in step on an issue such as this, so we must provide them with the opportunity for reflection together.

I shall have something more to say about the arbitrariness of the Bill, but there are some important principles, I think mostly Socialist principles, behind it. In another place Her Majesty's Government seemed somewhat lacking in conviction about their principles. In fact, they allowed a free vote and some of the voting, so it seemed to me, depended on whether constituencies were to gain or lose under the Bill. I see no reason for us to follow suit and I hope that we will vote according to the weight of the argument, which will I believe be largely on Party lines, and I think we should give the other place another opportunity to do so too. I should have thought that with their present composition, their future prospects, coupled with the fact that the Bill has already "missed the bus" which I do not think it could ever have caught, the other place may now prefer to drop the Bill altogether, and we must give them an opportunity to think about that.

I turn from the present political context of the Bill to its original economic justification. It was, as Lady Birk clearly said, to benefit the water consumers in rural areas, particularly Wales, at the expense of other consumers elsewhere who pay less for their water. All of us on this side are in favour of coming to the aid of the disadvantaged and those who bear unfair burdens, provided the adjustment is properly made and fairly balanced. Our contention is that the method chosen by the Government in this Bill is not fair between either consumers or regional water authorities; that it is arbitrary through and through and that, in addition to imposing further burdens on people least able to bear them, such as low income families in the inner city, it will be damaging to the water industry itself and will increase and perpetuate pettyfogging interference by civil servants and Whitehall Ministers in an industry which is striving to become efficient and more answerable to local democracy.

If, taking all these things together, Ministers conclude that Wales or rural Wales is hard done by and its burdens should be eased, then they can be eased by way of the domestic element in the rate support grant. Having read through the proceedings in another place, it seems to me that Ministers were hard to convince that this could be done. I find that strange because the Daniel Committee, quite clearly and explicitly, explained at length how this had been done, was still being done and, I understand, is being continued in 1977/78 at a differential rate between England and Wales of 17.p in the pound. We shall need to find out later from Lady Birk what is wrong with this established way of giving relief, if relief continues to be justified.

We can begin to judge that by seeing average domestic bills for water in the various regions. I was grateful for the two she mentioned, but I shall be tabling a Question after this debate asking her to furnish us with the most recent figures for all the regions so that we may compare them. The other place had the benefit of figures relating to the previous financial year, and I am sure the noble Baroness would want us to debate the matter on the basis of the latest figures; now that the new demands for the current year have gone out, it should he possible to use those.

Of course we must go further before coming to a proper judgment about these inescapable domestic burdens on the householder in one region as compared with another, because we have to add the prevailing general rate and the prevailing water charges together and then see how the burden falls. I am grateful to my honourable friend the Member for Hampstead for the calculations which I shall quote and which are based on the charges for 1975/76. These were prepared for the Committee stage in another place. I shall summarise rather than quote his argument. The average composite bills for that year—that is, the sum of the general rate plus the water charges—were as follows: in Wales, the average domestic bill was £77; in the English metropolitan districts, it was £107; in the English shire districts, £114; and in the London boroughs, £165. This was more than double the average bill in Wales. Are these really circumstances which justify putting an extra, unrebatable, inescapable levy on every London household, including those with the lowest incomes, in order to relieve every household, rich as much as poor, in Wales? That is why we shall need to go into this matter in much greater detail later on.

However, this is unfair not only as between households in the inner city and the Welsh countryside but also as between regional water authorities. Under the arrangement now proposed, the water authorities that have been thrifty, prudent and efficient, and have in the past provided themselves with proper services and paid their debts from revenue and appropriate charges as they went along, are now to pay again to benefit those that have made less provision and have met their bills mainly by borrowing. There is an unfairness there which the present Bill positively accentuates. Also, the system is not only unfair but is wholly arbitrary too because the equalisation is not comprehensive. It applies only to unmeasured supplies of water and the capital assets—in so far as they can be identified—for providing these. As the noble Baroness explained, up to this moment—we do not know whether or not there will be a change—the water companies, which supply a quarter of all the water which is supplied, are out of the equation. As a result, if one happens to be supplied by them one will be exempt. Her Majesty's Government were quite unable to convince Members in another place that there was any proper way of sorting out these arbitrary distinctions between different assets, different consumers, different rates of appreciation. However, if the noble Baroness can do better, we shall be delighted. We shall certainly give her every opportunity of going into these important details.

Those are the broad objections to the Bill: that it is unnecessary because whatever equity may be needed can be better achieved through the use of the rate support grant—the domestic element: that it is unfair because those thought to need help are to be helped by those who need help even more; and that it is arbitrary because only a few of the relevant factors are ascertainable with certainty and precision. However, I am afraid that we consider the Bill to have several inherent defects of detail on top of these objections of principle. First, it is mistimed. It was the intention of Her Majesty's Government that their equalisation ideas should be in operation during this financial year, but the Bill has only just arrived in this House, about a month after the Budget. To have been effective during this financial year, the Bill would have had to be on the Statute Book by February, several weeks, if not months, before the financial year began, and I do not see how that could possibly have been achieved. This is because the charges proposed by the regional water authorities now have to go to the Price Commission, which will take a month to review them. They will then have to go to the local authorities to be billed with their rate demands and, of course, the rate demands have to go out promptly.

The Bill has "missed the bus" and I do not believe that it could ever have caught it. Now, however, it remains mistimed because, in the unlikely event of the Government surviving the autumn, a White Paper and yet another more comprehensive Water Bill will be upon us before this Bill can be effective in the next financial year. It would, of course, be far better for this Bill, objectionable and without merit as it is, to be incorporated in the wider Bill which is still to come. I am sure that the noble Baroness will tell us as soon as she can when the White Paper which will be the herald of that Bill is to be published.

Secondly, the Bill is incomplete. The noble Baroness admitted that in her last remarks, but she did not make at all clear the obscure reason why in devising the Bill the Government overlooked the water companies, I believe that the Government now recognise their existence and the anomaly of leaving them out. One wonders whether there may be so many anomalies that this one does not matter, but to introduce as an afterthought the element of the water industry which is responsible for nearly a quarter of all water supplied is a most extraordinary blunder. We must welcome the belated attempt to correct the error and hope that it will be successful to the extent of allowing us to see some Amendments in time for us to consider and consult upon them before the Committee stage. However, the other place can legitimately deplore the fact that its only chance to debate this aspect will occur on some Lords Amendments if such Amendments are produced and approved.

The third specific effect which occurs more than once in the Bill—though we shall probably not get on to this until we get to the next stage—is the excessive discretion given to the Secretary of State to delve into and interfere with the internal affairs of the regional water authorities. The noble Baroness called in aid the experience of the drought last year as an example of the need for a national water strategy, but I believe that she will find when the drought report is published fairly soon that the National Water Council will state fairly clearly that the only effective way of managing water supply in drought, as at normal times, is by way of a regional structure, not a national strategy, though I would not rule out certain exchanges between some authorities.


My Lords, I am trying to follow the argument because we are all interested, and I am grateful to the noble Lord, Lord Sandford, for giving way. May I ask whether the noble Lord is objecting to a national strategy for water? I understand that, whether we like it or not, Welsh water comes into the strategy. But I do not call Wales a region; I call it a nation. Some form of national strategy will be needed one day even to bring water from Scotland. I hope that the noble Lord is not objecting to some ultimate formula like that.


I think I am, my Lords. Many people who talk about a national water strategy almost immediately go on to talk as though a national water grid were a feasible proposition, as it is with gas and electricity. That is really not so and that is the reason why, so far—it is conceivable that it might happen one day—water from Scotland, which is in abundant supply, is not transferred to England and Wales. It is not practical to do so. However, I freely admit that certain transfers are possible, and one is the transfer of Welsh water to Liverpool and Birmingham, which have always been very grateful for it. However, I do not believe that the possibility of certain regional transfers should lead us to adopt illusions about a national water grid.

I now wish to return to the point I was considering. I was talking about what I regard as a defect in the Bill in the form of the excessive discretion given to the Secretary of State at many points. In 1973, speaking on, I think, the Third Reading of the Water Bill of that year, the present Minister of State, the right honourable Member for Birmingham Small Heath, waxed passionate about the need for regional water authorities to withstand interference from Whitehall, to be accountable, he said, to their consumers, to be democratically controlled by elected majorities. He got so passionate that he overlooked that that was exactly what we had arranged.

Now the Whitehall mice seem to have been at it and they have prevailed, and the same right honourable Member supports a Bill—in fact, presents a Bill—in which the civil servants have found a way, or rather several ways, of retaining a large staff in the Department to obtain all kinds of information from the regional water authorities, to give all kinds of directions to the regional water authorities, and generally to get up on the backs of an industry well capable of managing its own local affairs, under its own local management, for the benefit of its own local consumers. We look forward to the Committee stage with some relish, and we will do our best to overcome these defects and to return the Bill to the Commons with plenty for them to think about.

6.41 p.m.


My Lords, my noble friend Lady Birk indicated several times that the Bill is short but complicated and she gave eloquent demonstration of the complications in it. I do not like the Bill at all. At first reading of it I was tempted to suggest a sub-title of "Much Ado About Nothing". But after calmer reflection I think that something will result from the Bill—or the Act, if it becomes an Act—but it will be vastly different from what the authors had in mind. It has already been stated by my noble friend that the water industry, a massive, mammoth, natural monopoly, has been subject to massive reorganisation. It has been a traumatic experience for those working within the industry; and I know something of this because for some years I have been a director of a water company, and I have had the opportunity of lecturing at a number of seminars for authorities on the subject of pricing within the public sector. I know that the industry itself is very fortunate indeed in having a most dedicated staff, and I believe that if they can be freed from artificial restraints and undue intervention those within the industry will handle this matter of reorganisation and we shall have a better water industry in consequence.

There is no doubt that any large-scale administration—and, goodness knows, the water industry itself is a large-scale administration—inevitably generates a trend towards waste and inefficiency. The bigger you get, the greater is the danger of that coming about, and therefore to stop that trend demands the highest possible skill. What does it need? In the first place, it needs strict financial discipline; that goes for the water industry as much as for any other nationalised industry. This is a factor that has been recognised by this Government on more than one occasion in their consideration of other nationalised industries. Secondly, it needs effective public accountability, and thirdly, it needs the encouragement of initiative and standards of comparison.

I believe that within the water industry—which is what we are talking about—there should be, so far as possible, built-in standards of comparison. That is vital. Yet what do we get? Here we get a Bill which, for a variety of strange reasons which I could not follow—and those that I could follow I w ill deal with—is a step, admittedly a short step, towards deadening uniformity. It makes absolutely no contribution at all to greater efficiency. I do not know how many thousands of clerical hours must have been spent on preparing the Bill, or the endless discussions that must have taken place with everybody, except the water companies, or the amount of management time that has been concerned with the Bill. My noble friend has stated the complications involved, yet according to the Bill itself the effect on public service manpower would be none. I regret to say, but it must be said, that there is an element of political gimmickry in the Bill, and I do not like it for that particular reason.

Let us examine the background to the Bill. My noble friend mentioned the Consultative Document on the Review of the Water Industry, of March 1976, and I will take the liberty of quoting from it. I cannot quote a more authoritative document. I will refer to where it deals with the general principles concerning equalisation. At paragraph 62 it states that: Proponents of equalisation point to water services as a basic necessity of life That we accept. They emphasise that the costs of supply include financing costs which result, in part, from the accidents of past levels of prices and of interest rates at the different times at which loans were raised. The word "accidents" in itself reflects a very strange philosophy. There is no accident in financial investment policy, whether it be that of a water company, a water authority, or anyone else. Therefore, to consider that any benefit that has flowed from a water authority because of its investment policy was an accident is to my mind a very dangerous philosophy indeed.

But then the same paragraph of the Consultative Document goes on to deal with the arguments against equalisation. I quote from the document itself: It could result in misallocation of resources (both nationally and within regions) because the direct link between costs and charges in a given area would be severed. The salutary discipline on an authority of answering to its own consumers for its own actions would be"—— not "could be"— eroded; there would be"— not "could be"— less incentive for it to conduct its affairs in the most efficient and economic manner. That is what the document on the review, which was published in March of last year, says. Yet despite that we have this Bill.

In addition to that statement the water authorities themselves were consulted, and I wish to quote from the comments of the Southern Water Authority which was asked to comment on the review. This is what that authority said about equalisation: In considering equalisation, the Authority recognises that most forms of equalisation between Regional Water Authorities will lead to some erosion of financial discipline but the method proposed is possibly the least damaging of all those considered. It is noted that, by basing the equalisation adjustments on historic debt, the effects of the scheme will, in any case, lose significance with time as the financing costs of the Authorities' own capital schemes increase and eventually overtake the cost of financial debt which was outstanding at 31st March, 1976. My noble friend herself made comment on that particular point, which indicates that there is all this commotion and yet within a short space of time it will be completely negatived.

Lastly, my Lords, in relation to the quotations, I will refer, if I may, to the comments of the water companies. They drew attention to a matter which I think is exceedingly vital. They drew attention at that time to Section 30(4) of the Water Act 1973, which requires water authorities to fix charges with regard to the costs. That was imposed upon them by the Government—to determine the charges made according to the costs. It therefore seems strange that, in the light of such an incredible indictment of the proposal itself, the Government have proceeded. I would therefore ask the question: Why did the Government proceed in the face of this evidence? On what grounds did they reject the evidence that appears in their own review? Secondly, I would ask the question: Why do the Government reject, as they do in this Bill, the directives that are laid upon most nationalised industries, if not all, that charges should relate to costs?

An important principle is involved here, and I am concerned with it in other industries as well as the water industry. I want to know which road the Government are taking on this matter, because a vital principle is involved. Is the principle to be discarded in other industries? Does it mean that the enforcement in the past of directives which demand that charges should relate to costs is going to go out of the window under some equalisation scheme for electricity, gas or what-have-you? I do not know, but I should like an answer to that particular question, because that is the point of principle that intrigues me in this Bill.

The further criticism, of course, has already been referred to, and that is that, at least in the initial stages, water companies will be left out, which will mean that 12½ million of the population will be left outside. If you are going to have any equalisation at all, it is a strange sort of equalisation which means that you leave out 12½ million people and 22 per cent. of the entire water that is supplied. But I am glad indeed to learn from my noble friend that this matter is under further consideration, and I understand that discussions are taking place. I believe that some good can come from it.

My Lords, I have drawn attention to one or two points of principle. In fact, fundamental principles are involved in this Bill which can escape, can slip through, unless somebody focuses attention upon it. The water companies, of course, render a very useful service, and always have done. They were pioneers in this particular field. But, more important than that—much more important—wherever possible I want to see in this nationalised industry, as in all others, the development and supplement of standards of comparison, so that one is able to compare one district or one activity with another, and not a monolithic organisation where it is impossible to tell whether or not it is truly efficient. However, I am glad that this matter is being dealt with, and I would say that, although I do not like this Bill, if it is to become an Act, as no doubt it will, then, if there be an equalisation scheme, at least let it be truly national.

6.55 p.m.


My Lords, I must first declare an interest in this matter as I am a director of a water company, the East Anglian Water Company, which is one of the 28 water companies forming the Water Companies Association. As your Lordships have heard many times, these companies supply in total a quarter of the population of England and Wales. When the Green Paper, Review of the Water Industry in England and Wales—A Consultative Document, was published early in 1976, one of its proposals was that the historic financing costs attributable to the provision of unmeasured water supply should be equalised. It was also stated that for the time being equalisation could be applied only to the charges of the water authorities themselves, but that as soon as water companies had been brought into the public sector it would be extended to include those consumers who are at present supplied by them.

In its response to the Green Paper the Water Companies Association dealt at length with the decision that the water companies should be nationalised by illustrating, for example, how unnecessary and how unproductive this would be. Not a drop more water would be produced, and something of the order of £350 million would be transferred from the private to the public sector. The Association also commented on the proposal for the equalisation of water charges by stating that, while such a measure could not satisfactorily reflect the cost of supplying water, it could in fact be applied to the water companies without nationalisation but subject to certain specified conditions. The Bill, however, was laid before Parliament without any form of consultation with the water companies, and this was wholly unacceptable. Any policy which seeks to make a major change in the charging arrangements for water cannot reasonably ignore the effect or non-effect it will have on the 22 per cent. of the population supplied by the companies; yet this is exactly what the Bill does.

The water companies, pioneers in the water supply industry in this country, form an integral part of the industry. They work efficiently and harmoniously with the regional water authorities in whose regions they operate. They make an effective contribution to the manning of national and regional committees dealing with the salaries and the conditions of service of the whole industry, including sewage and river operations. They participate in water research and in training, and they bear their full share of the cost of these important functions. During the recent drought none of the companies had occasion to operate standpipes in the streets; and, as full members of the club, they were content to make their proportionate contribution to the cost of the National Water Council's nationwide campaign for saving water, to the tune of about £100,000 of the £450,000 expended on that campaign. Their existence cannot be ignored, and yet the Bill as drafted seeks to do just that. The intention to bring them into the public sector and then extend the equalisation scheme to include the consumers they now supply may take longer than was originally intended. It may even not come about at all. Certainly it will not if the companies themselves or their many supporters have anything to do with it.

The only reason yet advanced by the Government for their nationalisation is that there is a need to correct the anomaly created by the Water Act 1973 in leaving them substantially untouched. This is pure political dogma. How much more would this alleged anomaly be argued if the companies were to be excluded from the effects of this Bill! The claim would be advanced that they were so different from the rest of the industry that they could not even be included in the national measure for the equalisation of water charges, and that wholesale nationalisation of them was the only answer. What would be the effect of this? There would be no additional water, higher public expenditure and no yardstick for comparing charges with the regional authorities. There would be just more nationalisation—and have we not had enough of that by now?

I am glad to hear from the noble Baroness that discussions are taking place to see whether this matter can be satisfactorily resolved. The water companies feel that if some form of equalisation is to take place, they can and should be included. To leave them out would be illogical and unethical, and I hope that means may be found to permit them to maintain their present roles as full participators in the water supply organisation of this country.

7 p.m.

Baroness WHITE

My Lords, I must apologise for intervening without having put my name on the list of speakers. I had not intended to speak. I have missed one train to Cardiff and I am prepared to miss another simply because I felt incensed by the approach of the noble Lord, Lord Sandford, to this matter. He and I have worked very co-operatively together in many spheres; but from the initial remarks that he made on this Bill I would suggest that he should either have renounced his peerage or disclaimed it—he can still, I think, disclaim it—and stand for election to the other place, because I do not think it is helpful in your Lordships' House for hereditary Peers to take the kind of political line which he allowed himself to indulge in. I am moved to make these remarks because many of us have been touched by the attitude of the eldest son of the late Lord Merthyr, Trevor Lewis, who has stated within the last few days that he is not going to take his seat in this House because he does not feel that the hereditary principle is an adequate basis for taking part in our discussions. Although I personally value the contributions of many of our hereditary colleagues, I must say that when one has a contribution such as that we have just heard from the noble Lord, Lord Sandford, I am disposed to sympathise even more strongly with my friend Trevor Lewis.

I do not wish to detain your Lordships for long. I had not intended to speak and, although I took a considerable part in the proceedings on the Water Act 1973, I have not brought myself up to date in this particular matter. Still less would I wish to discuss the position of the water companies. I can understand my noble friend Lord Peddie and the noble Lord, Lord Somerleyton, taking advantage of the opportunity to push out a boat for the water companies with which they are associated; but this Bill is not one that affects—


My Lords, may I say that I am pushing out no boat for the water companies. I have mentioned the water companies and I am proud of the fact of being associated; for that gives me the experience that permits me to speak with some degree of authority on this subject.

Baroness WHITE

My Lords, I am not going to argue the pros and cons of leaving the water companies as they are or of changing their status. I understand that discussions are continuing, hopefully in a helpful spirit, between Her Majesty's Government and representatives of the water companies, on the matter which is included in this relatively narrow Bill.

I just wish to say, so that there is no doubt whatever about the politics of this, that if we had never had any discussions on devolution, if we had never had discussions about a referendum, there would still have been this feeling in the Principality that water is one of our natural assets. It is a renewable one but we must suffer the wet weather which makes it renewable. It is our valleys which are drowned and our farming population which is affected; it is our rural areas which in the past had the, on the whole, benevolent paternalistic intrusion of Liverpool and Birmingham. It has been only recently that we have escaped from the situation in which a large English corporation could promote private legislation in Parliament which gave it powers to regulate the environment, the surroundings and the local life of areas of the Principality without our having any say whatsoever.

There is a long history to this matter. I would not wish anyone in this House to be in the slightest doubt that regardless of one's feelings about the political devolution question—and there is a whole range of opinion in the Principality; there are those of us who would like some form of devolution and who might have some reservations about the measure which was placed before the other House, and there are those who would not want to have anything to do with devolution at all—I think you would nevertheless find that there was (if not universal) a very considerable majority of opinion in the Principality feeling that we should be able to take some advantage of one of our very few natural advantages. That is really the basis of the quite understandable emotion—and we are an emotional people—when we who are within sight of the very reservoirs from which the water is abstracted have to pay considerably larger amounts for our water supplies than do the citizens of Liverpool and Birmingham many miles away. This seems to us to be basically inequitable. It may be a simple philosophy; but there it is.

My noble friend Lady Birk, I am sure, will appreciate that these are among the reasons why there has been pressure from the Welsh authorities that something should be done to rectify this situation.


My Lords, may just interrupt the noble Baroness—not to have any discussion with her about whether hereditary Peers and Life Peers should adopt a different political tone, but to say that we all recognise that point; and I think that I recognised it in my speech. But the point I was making was that if it is so, and if there is a political judgment to reflect this feeling of Wales, why not go on doing it by way of the domestic element of the rate support grant? It has been used before. It is being used now and is going to be continued. It seems fairer to do that than to produce a Bill which has the effect of "caning" the Thames Water Authority and the lower income families in London to meet a grievance felt by Wales. This seems to be quite absurd.

Baroness WHITE

My Lords, we have some low income families, too. It depends partly upon whether one regards water as a commodity or as a service. I was interested in the attitude of my noble friend Lord Peddie. He is a tremendous authority on the affairs of the Post Office. If you regard it as a service rather than as a nationalised industry (which I think is what most of us would do) then, for example, I should have thought that my noble friend Lord Peddie would have been more sympathetic to the proposition that it should be available to citizens in any part of the country at the same level of cost, possibly for the same amount consumed. It is another matter whether or not one should have metering of domestic supplies, and one which would raise a number of other problems.

The philosophy which could be advanced, that there should be differentiation between groups of consumers in different parts of the country, does not seem to me necessarily valid. One might say that because it costs more to deliver a letter to my cottage because the postlady will have to walk a little further, my correspondents should have to pay more in order for that letter to be delivered. If you look at it as a service rather than a commodity there is a great deal to be said for equlisation all over the country for something which we consider to be a basic necessity of civilised existence. My Lords, I have no interest to declare. I pay no water rate. My water comes from a stream. I do not use the sewerage system. I can take a fully objective view.


My Lords, I am sorry to have to intervene again but I have no alternative because of the point put by my noble friend. I would point out that the Post Office is one service. If one is delivering a letter, it relates to the whole service. The Government themselves make it clear that they do not favour cross-subsidisation; so that even within the Post Office there is no cross-subsidisation because of the belief by all concerned that cross-subsidisation of any kind tends to undermine morale and interfere with efficiency. I do not think that there is a parallel case in the Post Office.

Baroness WHITE

My Lords, we can argue that on another occasion; but there were remarks made, including those of my noble friend Lord Peddie, about water authorities being answerable to their consumers. Well, what about the suppliers, my Lords? I am not at all touched by the notion that one should be necessarily answerable to separate groups of consumers in different parts of the United Kingdom who are not self-contained for supply, and who are dependent on those areas where, in the providence of the Almighty, the water appears. So this pseudo-democratic argument that there is some mystic relationship between the water authorities or the water companies and their consumers, as the case may be, does not impress me.

Standards of comparison was another phrase used by my noble friend. Again, I repeat that the Almighty, in his wisdom, has arranged things on an inequitable basis so far as water supply is concerned. So far, at any rate, we do not manufacture, and we have not found a substitute for, natural water. We are dependent on natural supplies. Therefore, this notion of standards of comparison does not seem to me to be valid.

My Lords, I do not wish to detain the House; time is proceeding and I should like to catch my next train to Cardiff. But I feel it would be unrealistic not to draw your Lordships' attention to the fact that there are many in the Principality —and I am glad to have at least two compatriots present—who would support me in this historic argument about Welsh water. It is as much a fact as any of the physical facts that we are discussing. It cuts right across political allegiances in the Principality. You may call it a bit of Celtic emotional aberration, but it is there.

7.12 p.m.


My Lords, before the noble Baroness, Lady Birk, replies, I protest at the remarks of the noble Baroness, Lady White, for whom I have great respect. She used the excuse that she had to jump up and speak for one moment—and she spoke for over 10 minutes—because my noble friend Lord Sandford was a hereditary Peer and had dared to speak his mind in this House, as if in some way hereditary Peers should be treated as emasculated Peers and should not speak their minds. I hope that this will not find an echo in any other part of the House. I should like to make my protest to the noble Baroness, Lady White, for having taken 10 minutes of the time of the House on an excuse for jumping up to protest at an hereditary Peer daring to speak his mind honestly.

Baroness WHITE

My Lords, I was more concerned about Welsh water than even about the hereditary Peerage.

7.13 p.m.

Baroness BIRK

My Lords, I think my noble friend answered very ably for herself. To he fair, she said this had triggered her off, but she then went into the substance of what I thought was an extremely valuable contribution. In order to avoid missing her next train to Cardiff, she may be excused from listening to my reply.

This Bill, which I described when I introduced it as a "modest measure", has caused a reaction which has shaken me. To say that it has been a torrent of adverse water supply against it would he an understatement. The noble Lord, Lord Sandford, amazed me. Even on something which is not as exciting as a rather lively novel one does like to feel that one's words, or at least every other word, are listened to. I had the feeling when the noble Lord spoke that he had not listened to a word I had said—or at least certainly not more than half of it. He seemed to be speaking just in spite of it or obviously to make his political points.

In fact, he rowed us through every irrelevant river there was, he steamed up every trivial stream and tributary and, in the end, he canoed up every controversial creek—and, inaccurately. I can only say that the coming local elections have absolutely gone to his head. I will not say he has water on the knee, but certainly something has happened to him. I think that it was this change from his usual measured, rather grave approach and usually extremely accurate comments, that moved my noble friend to speak. Maybe it is a form of spring fever and perhaps I should not loiter over that.

There is one point that I must make early on: when the noble Lord referred to a free vote in the other place, I took it—and this is why I did not interrupt—that he was referring to his own side, so to speak, who had a free vote and, in the event, divided right down the middle. If that is what they want to do here, let us hope that some of the other side of the middle will be here as the Bill proceeds. We, the Government, certainly did not have a free vote in the other place, and are not having a free vote here. This is a Government Bill, but I hope that the noble Lord will find that some of his colleagues do not agree with him and therefore will vote with the Government on the Committee stage.

I do not intend to take up all the points that have been raised. On the whole, they were either Committee points or some of them were "non-points". The noble Lord, Lord Sandford, raised with my noble friend Lady White the rate support grant. We ought to get that clear. I must say categorically that no account is taken of the incidence of water charges in the determination of the scale and distribution of the rate support grant. In the rate support settlement for 1976–77 and 1977–78, there has never been any question of relative water charges being taken into account by the Government in their decisions on levels of domestic relief. The noble Lord, Lord Sandford, knows this perfectly well, because the Conservative Government took the water services away from local government, and the rate support grant has nothing to do with the water charges.

It is true that there may have been some confusion in that in the exceptional circumstances of the 1974–75 rate support grant settlement with reorganisation of both local government and water authorities an element of additional domestic relief was given to Welsh domestic ratepayers, but this is entirely different. The noble Lord rather disappoints me about this. I am sure that he would not be confused about something as crystal clear as this point. So I want to get that one out of the way.

The noble Lord also referred to there being too much discretion for the Secretary of State. He made rather a meal out of that, but that is always good for a meal in any Bill. It was made repeatedly plain in the other place that it is absolutely essential in a workable scheme that the Secretary of State must have power to make the necessary apportionments. This is general, it does not only apply to this Bill or to water, and it applies to all Governments as well, because circumstances change.

It is also absolutely ludicrous to suggest that the Bill is some Machiavellian attempt to extend the power of the civil servants. It is a small Bill and the vast majority of the information that we will require from the authorities will in any event appear in their annual accounts. As I explained—at rather tedious length I thought, although I was trying to keep it as short and clear as possible—this Bill is about finance. Where the noble Lord slipped up completely and showed a basic confusion was when he was talking about national strategy and trying to contrast national strategy with regional organisation of water. These two matters are not mutually exclusive. He talked as though it was an "either/or" situation. When he brought in the drought to support his case it became even more absurd.

The Green Paper put forward the need for a national water strategy as the main justification for a national water authority. This was not disputed by anyone. I have never heard anyone else dispute the need for a national strategy. He did, as a throwaway line, mutter something about the national water grid. We went through that when we were discussing the drought legislation. What was quite clear was that the problem of a national water grid was one of great expense, and what has happened now is that the reservoirs have filled—largely due, no doubt, to the magical works of my right honourable friend the Minister responsible for water resources—so that it was lucky that we did not extend a great deal of unnecessary money on a water grid. But to have a national water authority together with efficient regional water authorities is a proper mixture. This is a national strategy: they are not contradictory to each other.

My noble friend Lord Peddie did rather disappoint me. I thought he might have some questions and reservations, but I was extremely surprised that he came out so strongly against this Bill. Quite frankly, the Bill is not a gimmick. If one wanted to put up a gimmick one would put up something more interesting, eye-catching, vote-catching and easier to absorb than this. Rather uncharacteristically, I think my noble friend was rather unfair in the way he quoted from the Consultative Document. He was extremely selective in his quotation from paragraph 62, where he quoted the arguments against equalisation. Of course, it is absolutely right and proper that when one is putting forward a Consultative Document, one puts the arguments for and against; and there we put strong arguments for, so of course there are arguments against.

Finally, in paragraph 70, which my noble friend omitted to quote, one comes down, as is the usual process, to explaining that the Government decided that the aim of bringing the average domestic charges within a narrower bracket can best be achieved by an interim equalisation scheme based on historic debt. That is in fact what this is all about. My noble friend declared an interest as being a member of a Southern water board. It is understandable that the Southern area may be self-sufficient but, of course, not all the areas are. It is perfectly true, as I explained, that there will be some who will have to pay out and others who will get payments in. From a point of self-interest, the Southern area of course gets the thicker edge of the stick. However, I should have thought that my noble friend, being a Socialist, would have accepted that equalisation was the fair, equitable and just way of dealing with this extremely difficult problem.

As with other forms of resources, it is true that nothing can be exactly just for everybody, and some people get the thicker end of the stick while others get a better deal. But what this Bill does is to make the situation fairer all round. It makes the balance very much better than it is at the moment. The amount by which the cost to the average householder will go up is something in the nature of 2p per week. So I really think that he was making a great deal of fuss about this and I hope that, on reflection and when we get to the next stage, he will agree—although he may not like the Bill, as he said—to accept the equity of it. Although the medicine may taste worse in one part of the country than another, at least this is a fairer way of dealing with the matter. It is important to keep the Bill in perspective. The Bill is, as I said when I introduced it, a modest one. The total transfers will amount to less than 2 per cent. of the authorities' revenue requirement, and, as I have said, the average householder's bill will be increased by about 2p per week.

The noble Lord, Lord Somerleyton, raised the question of the water companies coming into the scheme. I am not able to lift the veil from those talks. I am not trying to practise any great secrecy or mysticism, but it is too early to add to what I said earlier in the debate. There are still a great mass of unsolved complications. The water companies are very different financial animals, as I know the noble Lord appreciates, from the water authorities. It is perfectly true that it would further complicate the existing scheme if we brought them in. However, my officials have made considerable progress in their talks. What remains necessary is to ensure, first, that all new conventions and apportionments are fair to both the authorities and the companies —that is obviously being watched and argued out on both sides—and, secondly, to ensure that the scheme continues to be one which does equalise. I can repeat my earlier assurance that if it proves practical to tailor the scheme in a way that is fair to both the companies and the authorities with acceptable results, we shall bring in the companies. It was helpful to hear the noble Lord's view on that particular point, since the talks are now going on.


My Lords, I wonder whether I might interrupt the noble Baroness. While she is talking about water companies, can she say how it came about that this Bill was drafted and presented to another place without consultation with the water companies in the first place? I know why they have been consulted now—because her honourable friend was pressed so strongly to do so—but why were they omitted in the first place?

Baroness BIRK

My Lords, they were not. They knew all about it and, as I understand it, they were consulted. The reason they were omitted in the first place was not because it was taken for granted they would be omitted for ever but because it was really felt that this Bill would be able to be got through in time for this financial year, and there was not then time to work out the very complicated arrangements, of which the noble Lord, Lord Somerleyton, is very much aware. It "slipped" for this financial year because of the time it took to get through the other place. When the noble Lord asks me why, again I do not want to make political points out of this, because in a democracy everybody has the right in Parliament, quite correctly, to argue and string things out for as long as they like. However, it was some colleagues of the noble Lord in another place who kept the thing going in Committee, and it kept on losing ground until now we have got it here at this late stage. That is why it was impossible to bring the water companies into the Bill as it now stands.

I think I have now explained this about three times, and since I have given very firm assurances that the consultations are going on and that discussions are being actively engaged in, and that there is a very strong possibility of my bringing in Amendments at Committee stage, I think that enough has been said about this. I think we have worried this particular little dog to death over that. It has had a pretty solid reception, I think, and there has been a lot of heavy weather made of this measure. I wonder whether, if things had been left without the Bill, we might now have heard voices opposite saying how grossly unfair it is that people in different parts of the country should continue to be paying such extraordinarily varied charges for their water. Surely when something needed to be done, the least you could expect would be that a Labour Government would make it more equitable. This is what we are doing. I have never pretended, and will not pretend now, that everyone will gain from equalisation. But there will be substantial benefits in those areas which are being treated unfairly at the present time, and I think it a not unreasonable price to be paid by those authorities which up to now have had the advantage.

I must say that we have had a livelier debate—which made it more interesting—than I had expected on this Bill, and I hope that your Lordships will give it a Second Reading. We can then go on to the Committee stage and I hope that the noble Lord, Lord Sandford, will not keep to his promise. He always keeps to his promises but I shall release him from this one, because when he began it sounded as if he was going to give me a really hard time. But perhaps, having got all this off his chest, he w ill see that there is a great deal to be said for this measure and will help to give it a speedy passage through the House. Otherwise, we shall slip again. There will probably be more complications with the water companies, and I think he will find that any obstruction is counter-productive.


My Lords, before my noble friend resumes her seat may I say this: I must apologise for this further intervention, but if she was disappointed with my comments I was equally disappointed with her reply. I say that just in passing. I should still like an answer to the question which I put, which was whether, in the light of the decision within this Bill, the Government are likely to proceed with varying the directives that are laid upon most nationalised industries, that charges should relate to costs? Does it mean that this principle will be extended to other industries, because if we want equalisation we can get it in many areas.

Secondly, in regard to the criticism that was made of me, may I say that my quotation was made without omission or addition. It was exactly as printed in the review—neither more nor less. Lastly, I was equally disappointed with my noble friend's reference to my Socialist commitment. I have yet to learn —and I should be glad to have my noble friend's views on the matter—that acceptance of a Socialist philosophy means complete equalisation in all matters relating to one's personal affairs. How far does one carry equalisation? I should like to have an answer to that.

Baroness BIRK

My Lords, on the first point I thought that I had answered my noble friend. I thought it was clear that this is not a nationalisation Bill. This is a Bill to equalise the charges for water, which have become very out of gear. This is not a Bill to nationalise the water industry. I know my noble friend is very much aware that, for example, gas and electricity have nothing like the same regional variations as water supply charges. They are quite different. This was also found by the Daniel Committee. So I think that we are discussing—or, I hope, perhaps arguing amicably—differences. We are not discussing like with like.

On the second point, I certainly did not in any way mean to be offensive to my noble friend. When I talked about being selective, I did not mean that he chose the words in that paragraph and I apologise if he took it in that way. I was pointing out, in making the case for the Government and quoting their case, that I felt that paragraphs 62 and 70 were very closely woven together, and that after having weighed up the different sides, both the pros and the cons, the Government came down in favour of what is now in the Bill before us. I felt that my noble friend was, perhaps quite unwittingly, giving the impression that in the Consultative Document the Government were giving a very strong against case, and then in the Bill, somehow out of the blue, coming down with the case for equalisation.

As regards my noble friend's last point, I do not think he should take me too seriously. What I was saying was that to try to get a more equitable distribution of water charges seemed to me to be a process which, in this quite small area, was along the lines of Socialist or Labour philosophy. I accept the right of my noble friend and anybody else to have different views, but it is the view of many of my colleagues, both here and in another place, and myself that this is a way of introducing greater fairness and social justice in charging for water, and I should have thought that this had some tie-up with Socialist policy.

On Question, Bill read 2a, and committed to a Committee of the Whole House.