HL Deb 12 July 1977 vol 385 cc883-90

8.27 p.m.

Bill read 3a, with the Amendments.

Baroness BIRK

I beg to move that this Bill do now pass.

Moved, That the Bill do now pass.—(Baroness Birk.)


My Lords, the past few weeks on this Bill have been useful both in further exposing for all to see the inherent difficulties of the Bill and also the Government's mishandling of it, and I should like to enlarge on those two aspects in a moment. Meanwhile, in our paradoxical House of Lords way, while fervently continuing to hope for the total demise of the Bill, we have nevertheless succeeded in improving it, just in case it does, unfortunately, reach the Statute Book.

Her Majesty's Government have improved it by belatedly remembering the water companies, and rewriting the Bill in this House to embrace them. We have improved it, first, by phasing the intro-ducation of the sharp increases—some of them over 20 per cent.—which many consumers would otherwise have suffered. Secondly, we have made it possible to continue relief by the well-tried way of the domestic element in the rate support grant. Thirdly, we have provided that, if the kind of equity Her Majesty's Government favour is to apply, it is the overall Bill for general rates and water rates combined which should be brought into the calculation, and not just differentials across the country in water rates alone. Fourthly, we have provided time for reflection and discussion, following the publication of Her Majesty's Government's White Paper on the water industry before the Bill is enacted. Incidentally, perhaps the noble Baroness, Lady Birk, could confirm that the same source of inspiration that led the noble Lord, Lord Davies of Leek, who has taken no part in this Bill so far, to ask his Question for Written Answer, will also cause the White Paper to come forth tomorrow.

Baroness BIRK

It is expected tomorrow, my Lords.


My Lords, that is good: I thought, or guessed, as much. Before we let this Bill pass, I must say again how bad and misbegotten I think it is. It is opposed by all four local authority associations: the Association of County Councils, the Association of Metropolitan Authorities, the Association of District Councils and by the London Boroughs Association. That is a rare honour—or dishonour. It is trebly mistimed. It is too late now to have any effect in this financial year, which was originally intended; it is too soon in relation to the White Paper, and it is now totally out of step with Welsh devolution with which it began but which has now stopped marching forward altogether.

As regards the consultation paper, the noble Baroness herself and her right honourable friends before her in another place all attempt to disguise the real political motives behind this Bill by claiming that it has some attributes of equity and fairness hidden away in it, and I should like to spend a moment or two on this final stage in trying to detect where that equity and fairness might lie. When one is talking about this, one is sometimes speaking in the sense that it is fair in that consumers should be charged for what they consume. But, of course, that is not at all the case here. This Bill is confined to domestic un-metered water sevices, and it is well known that charges are not related to what individual householders consume. Furthermore, no adjustment is made as between areas where the average per capita consumption is higher or lower than elsewhere. So there is not that kind of fairness.

The second kind of equity and fairness, which is particularly claimed by Socialists, is that consumers should be charged according to their ability to pay, but that is not the case here. There is, it is true and quite apart from this Bill, the existing inequity, which we have learned to live with of being charged according to the rateable value of one's house. This charge bears only a very limited relationship to the combined income of the members of the household who are using the water. But, so far from mitigating this inequity, which certainly exists, the Bill compounds it, because under the Bill certain households, regardless of their income, are being arbitrarily taxed, without any representation or any reference to their ability to pay, in order to favour certain other households, without any reference to the latter's need for help. So it is not that kind of fairness.

Is there a third kind of fairness which can be claimed as being an attribute of this Bill? There is another kind, and that is that consumers should pay according to the cost of the benefit that they are receiving; in this case, of having a public water supply provided for them. Is that the kind of fairness that can be attributed to the Bill? I do not think so. In fact, this is the element of fairness which prevails now, and is the one which this Bill does most to erode. Furthermore, in eroding it, the Bill runs completely counter to Her Majesty's Government's own White Paper (Cmnd. 3437) of 1967, which was entitled The Review of Financial and Economic Objectives. In that White Paper, the White Paper of a Socialist Government, in a rare flash of common sense they recognised, using their own words, that prices should be related to the cost of supply"; and they were talking not just of water but of a whole group of commodities and services. It is not that kind of fairness.

We have offered the Government an Amendment which would have authorised the payment of explicit selective subsidies by grant out of public funds. The noble Baroness rejected that honest option, and instead continued to pretend, on behalf of her colleagues, to favour a system of cross-subsidies financed by hidden discriminatory taxation on an arbitrary chosen group of consumers, without any regard to their ability to pay, as being a more respectable system. All I can say in bidding this Bill farewell is that, if the noble Baroness claims, as she did on Second Reading, that all this is in the best traditions of Socialism, it does not surprise me one bit that the country is quite fed up.

8.35 p.m.


My Lords, I do not wish to delay the House unduly, but I feel that some comment ought to be made before this Bill passes. I know that I have made comment, and indeed critical comment, during the course of the discussions upon this Bill, and I certainly have no wish to repeat them this evening. I agree that the Bill has been improved during its passage through this House, and not least of the improvements is the recognition of the significance of water companies. But my sole comment, which I now seize this opportunity to place on record, is that there is one aspect which deserves emphasis.

I have said before, and I repeat, that this Bill cuts across the declared policy of the Government on the subject of pricing in the public sector. The Government have gone on record, on more than one occasion, as saying that charges of nationalised industries should be related to costs; and, secondly, that the public should have some recognition of those costs in the prices that they pay. That is almost the same thing. Yet this Bill obscures that whole issue. There is no true relationship between costs and charges.

There is the further aspect of public accountability in nationalised industries. I pay tribute to this Government for their recognition of the importance of that matter. I am a great supporter of State enterprise, but I recognise that one of the disabilities and difficulties lies in perfecting a system where there will be full and complete public accountability. We have the possibility, by having charges in different areas related to costs and efficiency of operation, of at least making some contribution to public accountability, and I regret that this Bill completely obscures that question.

I need say no more. As I have indicated, I have no intention of repeating the criticisms. But I regret very much indeed that a declared policy of the Government and one that offered such considerable possibilities for the better conduct of nationalised industries has been thrust on one side for a pathetic Bill of such litte significance as this.

8.39 p.m.

Baroness BIRK

My Lords, what is quite clear, without any doubt, is that the noble Lord, Lord Sandford, does not like this Bill. In fact, it seems to me that he is consigning it to a very watery grave. We look at it in very different ways. Of course, the Bill was opposed by all four local authority associations. But, if the noble Lord will forgive my saying so, it has nothing to do with them. The noble Lord's Party took water away from local government. That is why most of the Amendments were totally misconceived, since he seems to be living in a world where water is still part of local government. Perhaps it is a kind of Freudian reaction to the 1972 Local Government Act, for which I share his dislike. Nevertheless, the fact that local authority associations do not like the Bill is quite irrelevant. The Water Charges Equalisation Bill is designed to provide a measure of relief for those people who are living in areas with high average domestic water bills. We believe that equity and fairness demand that the present range of average bills should be reduced to a narrower range. The noble Lord has put forward his own definition of equity and fairness. All evening, therefore, the noble Lord and his friends have been running along a different set of tramlines, and never do we meet.

The Bill provides for an equalisation scheme that is based on revenue transferred between water undertakers. No Exchequer funds are involved. The Amendment which the noble Lord was very anxious to press upon me but which I resisted and which he then withdrew would have created a much greater charge on public expenditure and would have been quite the wrong way to deal with it. However, I do not intend to go again over all the arguments. Unfortunately I did not convince the noble Lord last time, so it is quite certain that at this time of night and at this stage of the Bill I shall not convince him now that no Exchequer funds are involved. Since the Government's scheme is restricted to the effects of past expenditure, it cannot erode the incentives to water undertakers to conduct their affairs in an efficient and economical manner.

It is probably with rather more mixed feelings than those of the noble Lord opposite that I say that the Bill has been transformed since it came to your Lordships' House. Another place, having considered and rejected or given leave for the withdrawal of over 100 Amendments, may be surprised by how much the infant has changed or grown since it came to us in March. I very much hope that one or two of the changes will not be permanent because I believe that they are changes for the worse. But many of the alterations are undoubtedly for the better. We undertook in another place, and not belatedly, to incorporate the 28 private statutory water companies if we could find a workable way of doing so. The noble Lord knows as well as I do that the only problem was shortage of time, but directly there was time the water companies were brought in and Amendments were moved in this House. We found a way which was acceptable to both the water authorities and the water company associations. Those are the association bodies which the noble Lord should keep his eye on. On this occasion he should forget about the local government associations.


My Lords, I hope that the noble Baroness is not under any misapprehension that the Association of Water Companies is any less opposed than all of the others, because it certainly is opposed.

Baroness BIRK

My Lords, some members of the Association of Water Companies, depending on whether they are giving or receiving, have a certain attitude towards the Bill. Certainly they are not on record as an association as finding the Bill unacceptable. The companies have been brought within the scope of the Bill. We have also spelled out and clarified what we acknowledged in another place to be a shorthand description of the way that the scheme is intended to operate. The relationship between past capital expenditure, qualifying assets and qualifying financing costs is now, I trust, much more transparent than it was before. At the same time, the Bill has been amended in ways which I know have pleased the noble Lord but which I must warn him the Government cannot accept. As I have frankly indicated, we shall seek to reverse these Amendments in another place. The Amendment about which the noble Lord is so pleased for phasing in the scheme over three years makes the transfers, as I said during the Committee and Report stages, during the first two years derisory. The two Amendments which require relevant financing costs to be adjusted to take account of the level of general rates in each undertaker's area are both unworkable and perpetuate a confusion about the links between the levels of water charges and general rates. This has bedevilled our discussions all the way through the Bill because there are no such links. Two other Amendments requiring equalisation levies to be adjusted to take account of the extent to which rate support grant compensates areas with water charges are again, for similar reasons, redundant; and redundant Amendments, in my view, make very bad law.

My noble friend Lord Peddie once again raised the point which he made on Second Reading. I can only repeat that this Bill is not designed to nationalise the water industry. It is designed to equalise water charges. I do not believe that I can add to my reply to the noble Lord on Second Reading. I believe that the Bill will result in considerable benefits to people who badly need them. Although the Bill has quite obviously not got the completely wholehearted support that I should very much like it to have, I commend it to your Lordships.


My Lords, before the noble Baroness sits down, may I reiterate one point. It is perfectly true that all the water companies will suffer under the Bill to varying degrees, some very severely and others less severely. However, the noble Baroness will not be helping her colleagues in another place if she leaves them in any doubt about the total opposition of the association as a whole to the Bill. I have their explicit authority for stating that.

On Question, Bill passed and returned to the Commons.