§ 3.18 p.m.
§ The PARLIAMENTARY UNDERSECRETARY of STATE, DEPARTMENT of the ENVIRONMENT (Baroness Birk)
My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
§ Moved, that the House do now resolve itself into Committee.—(Baroness Birk.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The Lord ABERDARE in the Chair.]296
§ Clause 1 [Equalisation levies payable by certain water authorities]:
Baroness BIRK moved Amendment No. 1:
Page 1, line 5, leave out ("any financial year") and insert ("the year 1978 or any subsequent year").
§ The noble Baroness said: With the leave of the Committee, I will now move Amendment No. I and speak to Amendments Nos. 9, 13, 20, 29 to 31, and 33 to 38. This is the first of a series of Amendments which would have the effect of extending the equalisation scheme to the private water companies. In order to save time and general discussion on this series of Amendments, I will remind noble Lords of the background to this and put it in the context of the whole Bill.
§ During the Committee stage of the Bill in another place, the Government undertook to consider whether the private companies could be brought in, and I repeated this undertaking when the Bill had its Second Reading in your Lordships' House. There has been general agreement on all sides of both Houses that the principle of equalising unmeasured water supply charges is just as valid for the 28 private companies as for the 10 regional water authorities. Indeed, it is now clear that the range of water company charges is markedly wider than that of water authority charges. This year it goes from 66 per cent. above the national average in mid-Sussex to 38 per cent. below in Hartlepools. So it might be thought that there is an even greater need for some measure of equalisation so far as the companies are concerned than for the authorities.
§ The Government have discussed this matter both with the Water Companies Association and with representatives of the water authorities. We have produced what the companies and the authorities both agree to be a workable method of including the companies in the scheme. Some extra complications to the Bill would be necessary because of such problems as the companies' different accounting years, different both from one another and also from the water authorities. Further problems arise because most water companies treat depreciation in a different way from the water authorities. However, I believe that these problems 297 of different financial practices can be resolved without any need for radical changes in the scheme, and I want to emphasise that in principle the scheme is exactly the same for the companies as for the authorities. While the number of Amendments is considerable, I can assure your Lordships that we have done our best to keep them as simple as possible.
§ The scheme itself remains a modest one, falling far short of full equalisation of bills. The Government have always believed that equalisation should be gradual, and I make no secret of the fact that significant variations in average unmeasured bills will remain. My Department estimates, using the figures for 1977/78, that the scheme including the companies would, if implemented this year, have the effect of narrowing the range of average bills from one of 66 per cent. above the national average and 38 per cent. below to one of 43 per cent. above the national average and 23 per cent. below. Of course, it is much too early to say precisely what the effects will be on next year's charges, but I expect the pattern will be very much the same.
§ However, while the overall picture remains one of a modest scheme, the contributions to the equalisation pool which would be required from some private water companies would be substantial when looked at as a proportion of their revenue requirements. For example, the Newcastle and Gateshead Company would pay £770,000; the Lee Valley and Portsmouth Companies both about £680,000 and the South Staffordshire Company would pay £1.1 million, as compared with £670,000 for the whole of the Severn-Trent Water Authority. The West Hampshire Company's expected transfer of £750,000 would mean a 27 per cent. increase in charges—the highest percentage increase as a result of equalisation in any water company or water authority. These are some edited highlights from my Written Answer in Hansard yesterday which, on the basis of this year's figures, set out what the pattern of transfer to and from the private companies would have been had the scheme come into effect this year.
§ Some companies, of course, would stand to gain from the Bill—those with very high charges like Mid-Sussex—but in aggregate the companies would be net 298 contributors to the scheme to the tune of some £3.3 million. This consequence of extending the scheme to cover the private water companies, which has been accepted by the Water Companies Association on behalf of its members, means that each of the water authorities would be better off than in a scheme restricted to water authorities only. Those which stand to gain would gain more, while those which stand to lose would not have to pay so much.
§ This first Amendment is in substance consequential on the next Amendment, which has the effect of extending the equalisation scheme to the statutory water companies. One of the main practical problems in adapting the scheme to the water companies arises from the fact that they have different accounting years. The water authorities use the financial year ending 31st March for accounting purposes. Some companies use the financial year; others, the majority, have an accounting year ending on 31st December; and two companies have an accounting year ending in September. Although it will be necessary to compute a figure for the opening asset value of each water company as at 31st March 1976, it is not necessary to calculate notional financing costs on the basis of a common accounting period. Instead, while the orders under Clause 1 and Clause 2 will be made in respect of the calendar year, the relevant financing costs which will be equalised by those orders will be those incurred by each authority or company in the accounting year which begins during that calendar year—defined by a subsequent Amendment as the "corresponding accounting period". Thus, the relevant financing costs which Water Authority A will incur during the financial year 1978/79 will be equalized—per unit—with the equivalent costs incurred by Water Company B in the calendar year 1978. This approach is accepted by both the Water Companies Association and the Directors of Finance of the water authorities as being equitable and practical. I beg to move.
§ 3.25 p.m.
§ Lord PEDDIE
At the time of the Second Reading, I was very critical of the Bill, and particularly of the principle upon which it was based. I do not withdraw that criticism, but at the same time I should 299 like to take this opportunity of congratulating my noble friend and the Government on the manner in which they have dealt with the criticisms at that time regarding the non-inclusion of the water companies. I am told that the discussions that have taken place between representatives of the water companies, the authorities and the Government have been most amicable and most useful.
The Amendments which are being presented today by my noble friend are indicative of those useful discussions, and therefore I am sure that the discussions we shall have this afternoon will not take long. However, I should like to take this opportunity of expressing my personal appreciation of the way in which the strict and stern criticism was taken into consideration. In consequence, I think that the Bill, with all its imperfections, is infinitely better than when it was first presented. Once again, I should like to take this opportunity of congratulating my noble friend. I shall certainly give full support to the Amendments that she is presenting.
§ Lord SANDFORD
I too, should like to welcome Amendment No. 1, while at the same time not modifying—or at least not very much—my overall criticisms and general objections to the Bill as a whole. As the noble Lord, Lord Peddie, has said, now that the water companies are in, this is a better Bill than when it began, and one is left wondering how on earth it came about that the Government left them out in the first case. Perhaps we could return to that in a moment.
I should like to concentrate on Amendment No. 1 which is now before us, and to say that I particularly welcome it because it corresponds exactly to the first Amendment moved by my friends in another place on the 1st February, which at that time was resisted hotly by the Government because they were then hanging on to the totally unrealistic objective of having the Bill on the Statute Book by the beginning of this financial year. I cannot retract any of my criticisms of them for seeking to do such a wholly impracticable thing for entirely political reasons.
However, that leads to another reason I have for welcoming this Amendment; that is, it will give another place a further 300 opportunity to discuss at length the mis-timing of the Bill and to expose once again the purely political motives the Government had for trying to enact it in the way that they did. In my view, it is important that there should be a further debate, because the context in which the Bill is going to be put on the Statute Book—if indeed it is going to be put on at all—is so entirely different, financially, politically and in all other respects.
There will be further Amendments to which I will want to speak, about the timing of the Bill and the date on which it is to come into force. All I wanted to stress at this moment was that it was totally unrealistic to expect it to be in force this financial year. The Bill would have had to be enacted about the middle of February for the rating authorities to be able to implement it, and it is for that reason that I am particularly glad that the Government have now taken the view that 1978 is the earliest practical moment when it can come into operation.
§ Baroness BIRK
I should first like to thank my noble friend Lord Peddie for the great generosity of his remarks, because I know that he felt very strongly about the points he made on Second Reading. So I am very grateful, both for his support and for the way in which he expressed it. I am also grateful for the rather more qualified support of the noble Lord, Lord Sandford. I think that the past is water under the bridge, but I would point out that the Government's objective then was not just purely political. Having said that, I would add that I do not believe that political motives are always so impure. There are good political motives as well as bad political motives, and it is a great pity when we get to a situation, which does not do any Party any good, where it is thought that the word "political" should always be associated with something rather dishonest or condemnatory. I am sure the noble Lord did not mean that, and I am equally certain that he will silently withdraw that thought.
The objective of the Government, of getting the Bill through at an earlier stage, was in order to bring about greater equity in water charges more quickly; in other words, to help those people who have been paying more than they will now pay under 301 the new scheme. As the noble Lord is aware, it was due to the lengthy discussions, which in a democracy and a Parliament his Party were quite entitled to prolong, that there was a great deal of delay which meant, in the end, that there was an opportunity to discuss this matter with the water companies. So the noble Lord may agree that it has all turned out in the best possible way, which I hope may affect his approach to the rest of the Amendments in this Committee stage.
§ Lord SANDFORD
We must not spend too long on this one. There are pure and impure political motives, but I was not criticising the noble Baroness and her Government on that score. I was criticising them for the totally unrealistic objective of getting the Bill into operation by this financial year. It is not for me to try to discern what delays occurred in the other place. But the fact is that the Second Reading took place on 24th January, which was not by any means the beginning of the Session, and the Committee stage started on 1st February. However, for the Bill to have been operative this financial year it would have had to be through all stages in both Houses by the middle of February. It had a long Committee stage, but the date at which the Government were aiming was lost long before the Committee stage began.
Also, I think that the Government ought to be very grateful to the Opposition for this delay, because if they had completed the Bill in the middle of February this year they would have left out 22 per cent. of the consumers, who would have had no equalisation of their water charges which appeared to be so desirable.
§ On Question, Amendment agreed to.
§ 3.35 p.m.
§ Baroness BIRK moved Amendments Nos. 2 to 4:
§ Page 1, line 8, leave out ("water authority") and insert ("statutory water undertaker")
§ Page 1, line 9, leave out ("water authorities") and insert ("statutory water undertakers")
§ Page 1, line 10, leave out ("authority") and insert ("undertaker").
§ The noble Baroness said: With the leave of the Committee, I will now move Amendments Nos. 2 to 4 en bloc, and 302 speak at the same time to Amendments Nos. 8, 10 to 12, 14 to 17, 21, 23 to 26, 32, 41 and 43. I will hastily assure the Committee that these are very short Amendments, whose effect is to extend the provisions of the Bill to the statutory water companies. Most of the content I have explained in moving Amendment No. 1, so I will just rest on saying that a "statutory water undertaker" is defined in Section 11(6) of the Water Act 1973 as any water authority, statutory water company, joint water board or joint water committee which are in turn defined as bodies constituted under Section 9 of the Water Act 1945 and on which a statutory water company is represented. However, no undertakers in the latter two categories supply water on an unmeasured basis, and they are therefore effectively excluded from equalisation by the limitation of later provisions of the Bill to the supply of water on an unmeasured basis. In other words, it is the companies dealing with small quantities of water which are excluded from the provisions of the Bill. I beg to move.
§ Lord TREFGARNE
We do not want to prolong the argument on these Amendments, which are in many ways similar in effect to the one which we have already discussed. But it is worth noting, according to my calculations, based upon the Written Answer which the noble Baroness provided yesterday to the noble Lord, Lord Janner, that the inclusion of the water companies in the provisions of the Bill will make available £3,250,000 or rather more in funds for distribution, and I believe that this is an improvement which the Government at least will think satisfactory.
Brief reference was made, in the remarks of the noble Baroness on the earlier Amendment, to the question of consultation with the water companies. As the noble Baroness will know, it transpired after a number of exchanges in the Standing Committee in another place that the water companies had not been consulted on the provisions of this Bill. They had been consulted on a previous discussion paper, but as to the provisions of the Bill and the possibility of their inclusion or exclusion they had not been consulted. It is therefore argued on this side that they should now have a chance of making their views carefully and fully known, both to 303 the Government and to ourselves. As has already been said, they provide some 22 per cent. of the total water supply in this country and cover no fewer than 122 million consumers. Accordingly, we on this side are having consultations with them and, while we welcome the principle of their inclusion in this Bill, we must to some extent reserve our position as to the detailed arrangements that have been made for their inclusion, and may wish to come back to this matter at a later stage of the Bill.
§ Baroness BIRK
I think there is something that I should put right in regard to this matter. As I have already explained to the noble Lord, Lord Sandford, in answer to his comments when the Bill was originally drafted, it was envisaged that it would go through very rapidly. But, as I said, at the end of the day we may have got the best of both possible worlds with the companies included, even though there was a delay in the Bill. But at that time there was no question of private water companies coming in, because there was not time for them to do so, so that there was nothing on which to consult them. As I said when moving Amendment No. 1—and for the benefit of the noble Lord, Lord Trefgarne, I should perhaps repeat the point—the Government have discussed this matter, both with the water company associations and with representatives of water authorities. We have produced what the water companies and the authorities both agree to be a fair and workable method of including the companies in the scheme. That is a statement of fact. It means that not only were the companies consulted but that they agreed to this, so I cannot accept the non-consultation charge. I should be extremely surprised and astonished if the noble Lord and his friends find that they get a different answer from the companies. They have been brought into the Bill as a result of consultation and discussions which ended in the agreement that is reflected in the Bill.
§ On Question, Amendments agreed to.304
§ Moved accordingly, and, on Question, Motion agreed to.
§ House resumed.