HL Deb 16 June 1977 vol 384 cc313-57

Committee stage resumed.

4.3 p.m.

Baroness BIRK moved Amendment No. 5:

Page 1, line 14, leave out subsection (2) and insert—

("(2) Subject to subsection (5A) below, in relation to each statutory water undertaker by which, in the year ending 31st March 1976, a supply of water was provided on an unmeasured basis, the Secretary of State shall determine for the purposes of this Act the amount which appears to him to represent the value at that date of that part of the undertaker's assets which was then referable to the supply of water on an unmeasured basis.

(2A) In this section the "qualifying asset value" of a statutory water undertaker for any accounting period means the amount determined under subsection (2) above in relation to the undertaker, less such amount as appears to the Secretary of State to be appropriate in respect of depreciation for any previous accounting period or periods beginning on or after 1st April 1976.

(2B) Any reference in this Act to the relevant financing costs of a statutory water undertaker for any year is a reference to an amount which is determined by reference to the qualifying asset value of the undertaker for the corresponding accounting period and consists of—

  1. (a) such percentage (in this subsection referred to as "the qualifying percentage") of the interest payable by the undertaker in the corresponding accounting period as appears to the Secretary of State to be referable to indebtedness incurred with respect to assets whose value is reflected in the qualifying asset value for that period; and
  2. (b) so much of the provision for depreciation made by the undertaker in the corresponding accounting period as appears to the Secretary of State to be referable to any such assets; and
  3. (c) in the case of a statutory water company, the qualifying percentage of the franked payments, within the meaning of Part V of the Finance Act 1972, matte by the company in the corresponding accounting period.

(2C) For the purposes of this Act, in relation to the year 1978 or any subsequent year the corresponding accounting period of a statutory water undertaker is the accounting period of the undertaker which is co-terminous with or begins in that year.").

The noble Baroness said: This Amendment is in part consequential on the previous Amendments which extend the Bill to the statutory water companies, but it goes further than is required just for that purpose. Its effect is to expand the existing wording of subsection (2) of Clause 1, both to accommodate the different financial practices of water companies and to eliminate certain ambiguities which caused difficulty in another place.

The main purpose of the revised text, as of the existing subsection (2), is to define the "relevant financing costs" of each undertaker which are to be equalised. Those costs are in principle the same for both water authorities and water companies: the cost of financing the relevant historic debt. Those revenue costs include interest on the outstanding debt; depreciation of the assets in respect of which the debt was incurred; and, in the case of a water company, the appropriate proportion of dividend payments. For both water authorities and water companies some degree of apportionment and the use of broad assumptions is necessary to determine the appropriate cost figures, and the revised text, therefore, maintains the Secretary of State's discretion to decide what he will accept under each head.

The revised subsection (2) requires the Secretary of State to determine for each undertaker a figure representing the value at 31st March 1976 of that part of the undertaker's assets which was attributable to unmeasured water supply. This figure will serve as the basis for the calculation of relevant financing costs each year. It is used in effect as a proxy for the relevant outstanding historic debt at that date. It must, however, reduce from year to year—to reflect the repayment of the historic debt—and subsection (2A), therefore, defines the "qualifying asset value" of each undertaker for subsequent years as that starting value written down by an appropriate allowance for depreciation.

Subsection (2B) then defines the relevant financing costs under the three heads: interest, depreciation, and, in the case of a water company, "franked payments". The latter expression is defined in the Finance Act 1972 to include both dividend payments and advance corporation tax paid in respect of those dividend payments: in effect, the "franked payment" is the gross dividend payment. The Government's equalisation scheme treats these franked payments exactly as if they were interest payments, and the subsection provides accordingly.

Subsection (2C) defines the "corresponding accounting period" for a statutory water undertaker as the accounting period which begins during the calendar year in question. The reason for this I explained in moving Amendment No. 1. I beg to move.


I support this Amendment, but there is one point I should like to make on paragraph (c). I take it that what is meant here is the franked payments that are payable, not made by the company. As it is worded here it is capable of some misunderstanding, and to put down an Amendment to change it is fraught with enormous difficulties in connection with tax. I should like an assurance—and I am sure this must be the case—that it refers to the amounts payable and not to the amounts paid during that year. I think that is what is actually meant. I would not press this point at this moment. It is a somewhat technical point which is important, and I think an explanation now would avoid any amendment.

Baroness BIRK

I can give my noble friend that assurance. He is quite right; it is exactly as he has stated it.

On Question, Amendment agreed to.

Lord SANDFORD moved Amendment No. 6: Page 2, line 9, at end insert ("and less any relief received by premises in the water authority's area to which a supply of water is provided on an unmeasured basis through the rate support grant to the extent that such grant takes account of water supply charges.")

The noble Lord said: I beg to move Amendment No. 6. The Committee will recall that as long ago as September 1974 the Secretary of State for Wales, Mr. Morris, commissioned an inquiry by Sir Goronwy Daniel into water charges in the area of the Welsh National Water Development Authority. If I read two paragraphs from this, I think it sets the scene against which I would invite the Committee to consider my Amendment, No. 6. The Daniel Committee reported in these terms: Both the Conservative and Labour Governments recognised that water service charges would increase severely in some areas and announced their intention to ease the burden on domestic consumers through the appropriate element of the rate support grant system. I should like to stress that both Governments recognised at that moment that that was an appropriate way of dealing with the matter: The Conservative administration proposed a scheme of differential rate relief which they claimed was calculated to take account of all the special factors, including increased water service charges, applying in each district. The amount of the relief proposed for the Welsh National Water Development Authority area varied from 11p in the £ in Cardiff to 39.5p in the £ in Radnor. In Herefordshire the amount proposed varied from 23p to 29p in the £. The Labour Government considered that the differential system proposed had serious defects and replaced it with a flat rate grant of 13p in the £ in England and 33.5p in the £ in Wales. However, they noticed that it was still a differential system.

The next paragraph states: Yet although the domestic rate relief given to Wales is substantial and valuable it has not allayed criticism of the increase in domestic water charges. One reason for this is that despite the clear statement by the Government that they had, among other things, taken into account the relatively higher water service charge increases in Wales, rate demand notes were printed by the local authorities in such a way as to give the impression that all the relief was to be off-set against general rates only. It is unfortunate that [the Welsh] local authorities have made little attempt to explain to their ratepayers that a significant part of the domestic relief in 1974/75 was in compensation for the increased water charges. A second reason is that the relief was given to Welsh ratepayers"— that is under the Labour system— but the WNWDA"— that is, the Welsh National Water Development Area— boundaries do not coincide with those of Wales. Some districts in England suffer from the big increase in the WNWDA charges without getting the high rate of domestic relief given in Wales. The principal sufferers are in Herefordshire where water charges went up by 150 and 200 per cent. and compare with the highest in Wales but where domestic rate relief is at the lower English level".

That is enough to indicate, through the report of the Daniel Committee, the way in which both Governments originally sought to deal with the problem with which this Bill deals by way of the domestic element in the rate support grant. It was used in the areas that we are discussing to deal with the increases in water charges. It was introduced for the first time not according to the Conservative pattern but according to the Labour pattern, and the differential rate is 33p in the pound for Welsh ratepayers compared with 13p in the pound for English ratepayers. That differential has since been maintained, though reduced from 20½p in the pound to 17½p in the pound, and it is being continued this year. I am not sure that it is justified, but I do not want to argue one way or the other about that.

Nor do I want to argue about the merits of the Conservative formula which would have dealt with the injustice in Herefordshire compared to the Labour one which was rather cruder and did not. The process of dealing with this matter by way of the domestic element in the rate support grant which both Governments selected is better than the one proposed in the Bill. If there is to be any method, I should prefer that to be continued rather than have this new system introduced. However, I am sure the Committee will agree that to the extent that domestic rate relief is being employed and might be continued in the future to help householders in Wales, or for that matter in Herefordshire, or in any other regional water authority area, it should be taken into account in calculating the level of levies and payments that will be required if this Bill is enacted. My Amendment so provides. I submit to the Committee that whatever their feelings about the various matters which are debatable here, there is no case whatever for providing relief for the same thing twice over. I beg to move.

4.13 p.m.

Baroness BIRK

Amendment No. 6 is closely related to the next Amendment as each is intended to have the effect of reducing equalisation levies and payments, and each is based on the misconception that water charges are in some way connected with local authority rates. Amendment No. 6, which the noble Lord, Lord Sandford, has just moved, reveals yet again the persisting conception that water service charges are taken into account in the calculation of rate support grant. They are not. Therefore, in substance this Amendment is really quite meaningless.

The noble Lord made great play about the Daniel Committee Report. I would remind him that that Committee reported in 1974 and the report was published in 1975. The Consultative Document on which this Bill is based is the Review of the Water Industry, which was published last year. Therefore—and I am sorry to keep on using this rather hackneyed phrase—once again we are dealing with a great deal of water that has gone under the bridge, but in this case the diversion is quite incorrect. Both these Amendments reflect this confusion which was revealed with tedious repetition both during the Bill's progress in another place—I cannot quite remember how many hours of the nine sittings, comprising 22 hours in Committee, during which this canard kept coming up, being shot down and coming up again—and in the Second Reading debate in this House. I thought, probably, quite immodestly, when I wound up that debate that I had really knocked this one out for good; I thought that mine was an extremely strong, persuasive and absolutely convincing argument. But, no—the noble Lord has evidently either forgotten it or was not listening to me, and it has come up again.

Since the 1973 Act, which was passed during the Conservative Administration, water charges have been quite separate from the general rates. They remain quite distinct. The noble Lord may take the view that the last Conservative Government were quite wrong in their local government reorganisation. I think they were, but for quite different reasons. Nevertheless, that again is past history and the Act is on the Statute Book. General rates are a tax upon the local occupation of property, while water charges are charges to consumers in the same sense as those for gas or electricity. The fact that they take the form of a rate is quite irrelevant. Perhaps at some point someone will just have to change the word, because now we are in the area of semantics.

There is absolutely no real connection between water rates and general rates. Therefore, there is no reason whatever why their levels should be similar or different in any particular place. The factors which influence them also have no connection. Moreover, water rates receive no rate support grant and they are not taken into account in the calculation of rate support grant payments to local authorities. There are no rebates, which is another very important difference. This equalisation measure is therefore the only way in which the Government can bring some relief to those areas where the cost of the basic and essential service of water supply would otherwise impose an unfair burden. As rate support grant has nothing whatsoever to do with water service charges, the practical effect of this Amendment would be nil. It might be that even the noble Lord, Lord Sandford, realises this, given the rather hesitant drafting of the Amendment where it reads: … to the extent that such grant takes account of water supply charges". It does not and should not.

I cannot understand why this confusion about rate support grant has continued to arise, because even before the reorganisation of the water industry the water rates did not directly attract a rate support grant. What happened then was that a number of local authorities, particularly in Wales, to which the noble Lord referred several times, were accustomed to subsidise the water rate out of the general rate and thus, indirectly and of their own volition—and I repeat, of their own volition—to apply rate support grant to the reduction of water rates. In the exceptional circumstances of the 1974–75 rate support grant settlement, with the reorganisation of both local government and the water industry, an element of additional domestic relief was given to Welsh domestic ratepayers. But this was intended to compensate local authorities in Wales for the much greater combined effect which those two reorganisations had in Wales compared with England. The differential between the level of domestic relief in Wales and England was narrowed in 1975–76, and in subsequent rate support grant settlements there has been no question of relative water charges being taken into account by the Government in their decisions on levels of domestic relief. These decisions were based solely on the likely effect of changes in the levels of relief on local authority domestic rate poundages in England and Wales.

I do not think that it will now come as a surprise to the noble Lord that the Government cannot accept this Amendment. I trust that he and his noble friends will now accept our repeated assurance, and my personal repeated plea, that the calculation of rate support grant takes no account whatsoever of water service charges. It has been necessary to intone this so frequently that I begin to despair of the Opposition being prepared to accept facts that appear so unpalatable to them that they think that if they go on saying it often enough the truth will just go away. I am afraid it will not. The reality remains, and that is what I have been explaining.

Let me at least conclude by making a generous offer to the noble Lord. I am prepared to instruct my officials to show the noble Lord the computer programs used in the calculation of rate support grant. If he sees them, he might then accept that the water service charges are not taken into account. In other words, he can see and, as it were, feel the evidence with his own eyes and hands.

4.22 p.m.


I am grateful to the noble Baroness for that generous offer. I doubt whether it will sway me very much because it is not the point I was making. I was resting my case entirely on the Daniel Committee, which her right honourable friend commissioned two or three years ago and which reported in precisely the terms which I read out, and I added very few of my own words to them. They made it abundantly clear that although, as the noble Baroness says, water charges and general rate charges are quite separate—and of course they are—they have one factor in common, in that they are both based on the rateable value of the property, and that nothing that a domestic householder can do by way of private family economies alters the burden that he has to bear. That is the factor which they have in common, though I fully agree with the noble Baroness that they are not the same thing.

If I may say so, she is totally wrong in supposing that the water charge is anything like the electricity or gas charges which are related to what you consume. If you care to economise, you can reduce the size of your bill; you cannot do that with water. If it is to be reduced, it has to be done by some way of relief. I rest entirely on the Daniel Report which makes it crystal clear—I think the rest of the Committee will agree with me—that this was done by way of the domestic element in the rate support grant; that is, domestic rate relief. The Conservative Government proposed one method, the Labour Party proposed and executed another. There is no need for me to say anything more about the fact that it can be done.

When it was done it introduced for the first time a differential rate between England and Wales, and that differential rate has continued. It may be that the noble Baroness could persuade me, by letting her officials show me a lot of figures, that the considerations which have produced this differential rate between England and Wales after 1974–75 have been arrived at by some different calculation in which the existence of the high water charges in Wales has not been a factor, but that does not alter the point that I am trying to make. The point I am trying to make, and which my right honourable friends have been trying to make too, is that this system has been used in the past and it can be used in the future, and it looks as though it is being used at present. I would much prefer it to be used in the future. If it is used in future, then this Bill needs amendment to make sure that the relief is not given twice over for the same burden. That is the purpose of the Amendment, and the noble Baroness has done nothing whatever to persuade me that it does not achieve that purpose.

It has the additional purpose of giving another place another opportunity to look at this issue. It is perfectly true that it has been discussed many times before, but then the proposition that the water companies should be included in this Bill had to be discussed many times before. It was discussed over and over again in the Commons and in the end the Government saw the point. Although we are further on in the Bill, I do not despair of achieving that happy success again, but I doubt whether I shall do it without pressing this Amendment, which I propose to do.

Baroness BIRK

Before the noble Lord presses his Amendment, may I just answer two of the points he made, although I do not know whether it will make any difference. On the point he made about my comparison with gas and electricity, of course I accept the point that one pays for the amount of gas and electricity one consumes. But the general analogy is that they are services in a way that the rate which is levied on the value of the property in which one lives is not. It is quite a different matter.

I am sorry that I have to say this again, but the Daniel Committee was concerned, as the noble Lord is well aware, with Wales and made their report to the Secretary of State for Wales. The rate support grant took account—and I have already said this—of the water charges in 1974 to 1975 and it also did so, to a limited extent, in 1975 to 1976, so that it worked it out on some of the lines of the Daniel Committee but it has not done so since.

Finally, Committees that are set up by any Government make recommendations to a Government, but it does not follow like night following day that the Government have to accept every recommendation made by a Committee, otherwise the Committees would be in the position of the Government and not just advising and making suggestions or recommendations on which it is then up to a Government to decide.

I would finally say that the two things are quite separate, and it would be a completely retrogressive step to try to introduce something which is absolutely cumbersome and wrong into this Bill. When the noble Lord says that it would give another place a further chance to discuss this if he presses this Amendment to a Division—which probably on sheer numbers he would win anyhow—they have spent hours discussing it. There really is no point to this, and just on that basis of good sense, since I know I cannot win this numbers game, I would ask the noble Lord to withdraw his Amendment.

4.28 p.m.


Before the noble Lord withdraws this Amendment, may I say that it is extremely difficult for noble Lords in this House to listen to the Minister and the ex-Minister, both of them knowing how the Department works, flatly contradicting themselves when saying what can or cannot be done in the Department about rate support grants. It is of course possible that the Government may one day change and that the noble Lord, Lord Sandford, may be sitting again—and we hope he will, if he is not higher—in that Department, and he will stick to his view that under the Acts this is a method by which the rate support grant could be used in the future to alleviate this problem.

I should like to mention one point. The noble Baroness opposite said that it would be absolutely wrong to have this principle in the Bill. I wonder whether she can substantiate that claim. Many of us think that, if you wish to equalise charges, it is absolutely wrong simply to take it from one water company, or one water authority, and pay it over to another water authority. It cannot be said that that is an absolutely right principle. What could be an absolutely right principle is that if through good, bad, or indifferent reasons, one authority or company has to charge its consumers too much now, those charges should be ameliorated. It is not absolutely wrong that those charges should be ameliorated by the Government. The way to ameliorate those charges would be through some machinery, such as the rate support grant, and not simply taking from Peter to pay Paul.

This Amendment states: …to the extent that such grant takes account … If it does not take account, it will not be used. What harm can those words do in this Bill? If the Bill ever becomes an Act here will be an alternative means by which charges can be equalised or partially equalised. If the rate support grant or some other machinery were used—of course I believe the noble Baroness when she tells us that it is not done now—the measure would say, in effect, "You will not have to pay twice" In so far as this amelioration is done by Government, by way of the rate support grant, we shall not have to debit London to credit Cardiff; and I do not believe that even the noble Baroness can go home thinking that what is proposed is absolutely right. It is one way of doing it, but it seems to me a rather rough and ready way, and a bad way, of doing it.


My noble friend Lord Waldegrave is absolutely right. He does not have to take my word for the way in which this could be done; he can take the word of the expert Daniel Committee, that relief for exceptionally high water charges can be, and has been, made by way of the domestic element in the rate support grant. The noble Baroness, Lady Birk, has confirmed that it has been done not only in one year but in a second year.

My noble friend is also absolutely right in commending this particular way of doing it. I did so on Second Reading and I have not repeated the arguments today, but one of the strongest ones is that, by using the rate support grant, one is bringing relief to people who need it but one is getting it from those who are best able to pay, namely, the taxpayer. On the other hand, by the system proposed in the Bill one is raising the money, the levies, to make these payments from all and sundry regardless of their ability to pay. The poor family living in Inner London pays the same charge as the rich family, and furthermore such people are unable—the noble Baroness admitted this —to get any sort of rebate to help. I believe the Amendment would introduce the flexibility which my noble friend stressed and would provide for other ways of dealing with this problem, when the Bill is in force, without obliging the Government, whichever Government, to pay the same relief for the same thing twice over. For all these reasons I commend the Amendment to the Committee.


I am at a loss to understand the reasoning behind the comments of the noble Lord, Lord Sandford, particularly in the light of the statements he made on Second Reading and those he has made today. He is against the concept of equalisation. So am I. However, we have modified our view in the light of the concessions that have already been made. If one is against equalisation—and the noble Lord is strenuous in his opposition to it—so be it, but what he is asking us to do is to go even further towards the inequity of equalisation by calling on some other source of revenue to be thrown into the kitty to effect equalisation among those who are to be the recipients.

One cannot have one's cake and eat it. On the one hand we are against equalisation, and fair enough. But, on the other, do not argue against the Bill as drafted by saying, "Here is some other source of income" because, frankly—and I say this in the kindest possible way—it is quite hypocritical and contrary to the point of view of noble Lords opposite. They have consistently been against subsidy of any kind, yet on this occasion they search for some way to attack the Bill. I do not object to that and I join the noble Lord in attacking it, but at least he should do it on fair and equitable grounds. If one is against equalisation, be against it, but the noble Lord should not try to argue that we should introduce some new element by drawing on a source of income from another quarter and try to justify that from his point of view. In my view, on the ground of neither logic nor sincerity, can what the noble Lord suggests support his point of view.


The noble Lord, Lord Peddie, has made a powerful point, but unfortunately in Parliament and in politics, and on this side of the House in the present political circumstances where we have an elected Chamber with our opponents in the small majority, we have to abide by the conventions. If the conventions had allowed us to throw out this Bill on Second Reading we should have done so, but, as Lord Peddie knows perfectly well, the House of Lords cannot do that. My Party, with its inherent built-in majority in this Chamber—which many of us deplore, I particularly—cannot, and do not, use our power in that sort of way. I freely admit that it would be the logical thing to do. What I am trying to do here is to introduce a measure of flexibility into the Bill and, by pressing the Amendment, to secure that another place, where his Party is in control at the moment, has another opportunity to debate the matter. That is the way in which I would justify seeking to improve a Bill which, like him, I object to in principle.

Baroness BIRK

I completely understand. Let me follow through a little further the argument of my noble friend Lord Peddie and ask the noble Lord, Lord Sandford, whether he accepts in pressing the Amendment, should this work its way through—whether through the rate support grant or in some other way; this applies equally to the comments of the noble Earl, Lord Waldegrave—that he is saying in so many words that this means a greater Government subsidy and an increase in public expenditure? Does he agree that that would be the logical outcome of what he is saying and, if so, is he still prepared to press the Amendment?


It does not mean that at all. It simply provides in the Bill for the system of relief which has been used at least twice before to be continued in the future if and when and where it is seen to be a better way of dealing with the matter than the one proposed in the Bill. As my noble friend Lord Waldegrave pointed out, it is not a black and white choice; it could be used to some extent. The point of the Amendment is to ensure that if it is decided to continue the system, where it is decided to continue it and when it is decided to continue it there will be taken into account the way in which the payments and levies are calculated under the Bill. It just introduces that measure of flexibility. In itself it certainly does not call for or involve any extra public expenditure.


I hope the noble Lord, Lord Sandford, will withdraw the Amendment, if only for the sake of the dignity of your Lordships' House. Many of the arguments he advanced—I listened to them with great interest—were indicative of criticism of the Bill and he used the word "political" time and again, as of course he is entitled to do. Political concepts were, according to him, the main inspiration of the Bill, yet now he frankly admits—and he almost shared the view I expressed a few moments ago—that he is using some almost pathetic device to achieve an objective. In my opinion that is not the purpose of this House.

Furthermore, there is the more significant aspect, and my noble friend has supported the point of view which I have mentioned. What, in effect, the noble Lord is saying is to my mind tantamount to a complete change in the whole policy of the Conservative Party. I say to the noble Lord, Lord Sandford, that what he is arguing is that at this moment there will be, as has been stated, an increase in the amount of a public contribution, and that the whole concept of equalisation should be extended and should be drawn from rates or taxes. God forbid that that kind of thing should happen! That is utterly counter to what I believe, and I know that it is counter to what the Conservatives believe. I say to the noble Lord, please do not sacrifice or throw out of the window all your principles, all the arguments that he used at the Second Reading, in order to achieve this. I do not often plead with anybody, but I say to the noble Lord: in your own interests, at least, withdraw the Amendment.


If I felt that any important principles were at stake, I would be swayed by that argument, but I am afraid that I do not. All the Amendment does is to provide for the continuation of a system of relief which each of our two Parties has advocated. There has been a slight difference in detail, but the system has been identical in principle, and it is one which the Labour Government have used at least twice before. It does not oblige any future Government to use this system. It does not oblige anybody to increase public expenditure in paying subsidies, but it enables a system, which up to this moment had been thought perfectly practical by both Parties, to be continued to some extent, in some places, at some time, if thought desirable.

I cannot be persuaded that to press an Amendment which does that involves any serious abandonment of any principles that I hold, the main and relevant one of which, at the moment, is that I dislike the Bill as a whole. All I am doing is to make it more flexible and better, and to give the other House an opportunity to debate it.


As an Independent, I feel that I must say a few words. I have listened very carefully to both sides, and I feel an element of "a curse on both your Houses." As an Independent, I am interested that the Bill should perform its function as equably as possible, whatever Government are in Office and without there having to be a change, as is so constantly necessary nowadays, each time there is a change of Government. Therefore, as an Independent, I would feel unable to do other than support the Government in this particular matter, although it may well be that the system which a new Government of another Party would have then to introduce in order to amend this provision might prove to be more in the interest of the water consumers and payers, than if this Bill goes through as it stands.

It seems to me that what the noble Lord, Lord Peddie, said is true: you cannot have it both ways. If we vote for the Amendment we should in effect be trying to have it both ways in the sense that we would put into a Bill a provision which the Government that would administer it, if still in Office, would find absurd, while a Government which may succeed them, and would wish to change, would have the convenience of not having to introduce amending legislation. I may be quite wrong, but it seems to me that if we pass the Amendment it would be ignored and not used by the present Government, but if they were thrown out and the Conservatives came in, without amending the Act we should be able to go over to the system which the Conservative Party prefers. I should be very grateful if the patient Baroness who has been responding to this proposal would reassure me whether I am right or wrong in this matter.

Baroness BIRK

I think that the noble Lord is right, and, indeed, I think that the matter goes even further than that, because the Bill is concerned only with equalisation of the water charges. The noble Lord, Lord Sandford, said, quite frankly and honestly, that he disliked the Bill altogether, and that he would like the whole Bill thrown out. What would then happen, if one follows the logical argument of the noble Lord who has just spoken, is that it would not be used by this Government, nor be thrown out in another place; or that particular proposition would certainly not be put into force. From what has been said, it does not look as if a Conservative Government, if, God forbid! we have one soon, would in fact want to amend it at all. In the words of the noble Lord opposite, they would want to get rid of the legislation, so in fact nothing would have been gained. This Bill would be made more difficult, or unworkable, or would be ignored.

I entirely agree with the noble Lord who has just spoken, and who has had tremendous experience in this area, that that is a bad thing to do in legislation, and I think that if another Government were in power they would change, or dispense with, the whole thing. I am very grateful for the noble Lord's words, and I think that as an independent point of view on the workings of the Bill they are absolutely correct, without the noble Lord being drawn into the political arguments on both sides of the Committee.


I am grateful to the noble Baroness for what she said, because I am much more convinced by that argument than I was by the argument of the noble Lord, Lord Peddie. As I understand what the noble Lord, Lord Sandford, was moving, he is saying that if we have to have equalisation—which we do not think is necessary—then, for heavens sake! let us use something which he says was used when he was a Minister in the Department, or let us take it into account. But we have now heard from the noble Baroness that if this proposal existed as an optional course her Government would not use it. Therefore, I wonder whether it is any use including an optional provision if the Government say that they are never going to use it. If that has been said, I wonder whether it is worthwhile asking the Committee to insert that provision, because the Government have roundly said, "We are never going to use it".

Like many others, I think that the Bill is such a bad Bill that if, as I hope there will be one day, there is a change of Government it will go out. We shall not want one odd optional provision in it. We shall throw the Bill out. I imagine that it will be one of the first Bills that we shall repeal. So on the basis of that very pragmatic and not very noble kind of argument, I wonder whether we might save your Lordships' time so far as trooping in and out of the Lobbies is concerned, but I must leave that matter to the noble Lord, Lord Sandford, with whom I have not discussed it.


The counsel which my noble friend gives would save us all much trouble because we could just wait for the Government to fall and then start from scratch all over again. But I see it as a duty in this Chamber, and on this

side, that if we cannot actually persuade the Government to drop Bills altogether (though perhaps we can in this case, if we persevere) then we should make them as workable and flexible as we can.

If I may pursue the point made by the noble Lord, Lord Redcliffe-Maud, would say that the Amendment would have no effect so far as this Government is concerned, because they would use the payments and the levies which the Bill provides. But it would enable a system which—I say again—both Parties have found useful on two occasions so far, to be introduced, or re-introduced, at any point, at any time, in any area, to any degree required. That seems to me to be improving the Bill, whatever one may feel about its overall merits. That is the reason why, having listened to all the arguments and suggestions that it is not really worth the candle and so on, I feel disposed to press the Amendment. I am quite convinced in my mind that if we are to have the Bill at all—and it is not our convention to throw Bills out altogether—we must do what we can (though most of the work may prove to be abortive, if we have another Government in a few months' time) to improve the Bill and make it as flexible as we can. To that extent, I want to press the Amendment.

4.49 p.m.

On Question, Whether the said Amendment (No. 6) shall be agreed to?

Their Lordships divided: Contents, 67; Not-Contents, 61.

Abinger, L. Elliot of Harwood, B. Mowbray and Stourton, L. [Teller.]
Allan of Kilmahew, L. Emmet of Amberley, B.
Avon, E. Faithfull, B. Moyne, L.
Balerno, L. Falkland, V. O'Hagan, L.
Barnby, L. Falmouth, V. Porritt, L.
Belstead, L. Gisborough, L. Rankeillour, L.
Berkeley, B. Glenkinglas, L. Rathcreedan, L.
Boothby, L. Gray, L. Ruthven of Freeland, Ly.
Caccia, L. Greenway, L. Sandford, L.
Carrington, L. Haig, E. Sandys, L.
Clancarty, E. Hailsham of Saint Marylebone, L. Selkirk, E.
Colwyn, L. Hatherton, L. Spens, L.
Cork and Orrery, E. Hawke, L. Strathclyde, L.
Cromartie, E. Hornsby-Smith, B. Strathspey, L.
Cullen of Ashbourne, L. Ilchester, E. Sudeley, L.
Daventry, V. Lauderdale, E. Swansea, L.
de Clifford, L. Lindsey and Abingdon, E. Trefgarne, L.
De Freyne, L. Lloyd, L. Vickers, B.
Denham, L. [Teller.] Long, V. Vivian, L.
Derwent, L. Lyell, L. Waldegrave, E.
Drumalbyn, L. Monck, V. Ward of North Tyneside, B.
Eccles, V. Monson, L. Westbury, L.
Elles, B. Morris, L.
Ampthill, L. Henderson, L. Phillips, B.
Banks, L. Henley, L. Pitt of Hampstead, L.
Beaumont of Whitley, L. Houghton of Sowerby, L. Redcliffe-Maud, L.
Birk, B. Hylton-Foster, B. Sainsbury, L.
Boston of Faversham, L. Jacques, L. St. John of Bletso, L.
Brockway, L. Janner, L. Shepherd, L.
Byers, L. Kaldor, L. Shinwell, L.
Caradon, L. Leatherland, L. Sligo, M.
Collison, L. Lee of Asheridge, B. Stedman, B. [Teller.]
Cooper of Stockton Heath, L. Listowel, E. Stewart of Alvechurch, B.
Crook, L. Llewelyn-Davies of Hastoe, B. Stone, L.
Cudlipp, L. Loudoun, C. Strabolgi, L.
Davies of Leek, L. McCluskey, L. Vaizey, L.
Donaldson of Kingsbridge, L. Noel-Buxton, L. Wallace of Coslany, L.
Foot, L. Norwich, Bp. White, B.
Gaitskell, B. Ogmore, L. Wigoder, L.
Gordon-Walker, L. Oram, L. Willis, L.
Goronwy-Roberts, L. Pannell, L. Winterbottom, L. [Teller.]
Greenwood of Rossendale, L. Peart, L. (L. Privy Seal) Wootton of Abinger, B.
Hale, L. Peddie, L. Wynne-Jones,, L.
Hanworth, V.

Resolved in the affirmative, and Amendment agreed to accordingly.

4.58 p.m.

Lord SANDFORD moved Amendment No. 7: Page 2, line 9, at end insert ("multiplied by the appropriate factor. In this subsection "appropriate factor" means the proportion which the average bill for general rates and water services in respect of premises in the water supply area of the water authority to which a supply of water is provided on an unmeasured basis bears to the average bill for general rates and water services to such premises throughout England and Wales.")

The noble Lord said: This Amendment is based on the view that there is no justice in equalising householders' charges for water on its own. The householder who is on an unmetered water supply has two inescapable charges. They differ, as the noble Baroness said, but both relate to the rateable value of the property concerned. Neither is capable of being varied. No personal or family economies can do anything to reduce them. Whatever case may be put forward by the Government for reducing the inequalities in the average domestic bill for water has the same force, or lack of force, depending upon one's point of view, as has that for reducing inequalities in the average domestic bill for the general rate.

The current situation is clearly set out in the Answer that the noble Baroness, Lady Birk, gave me dated 26th April. I should like to take this opportunity of thanking her for it. There, she set out the average domestic water bill between the 10 authori- ties, followed by the average domestic bill for the general rate in the various rating authorities. She makes the point clearly and quite properly that water charges are quite separate from the general rate, as indeed they are, though they are levied in the same way and, to some extent, billed on the same piece of paper. But that is neither here nor there.

That Answer and the Answer given to the noble Lord, Lord Janner, yesterday, make it clear that there is an inequality of about £10 per annum between the lowest average domestic bill for water of £15, in the Thames Water Authority area, and the highest average domestic bill for water, in the area of the Welsh National Water Development Authority, of £25. This Bill seeks to modify that, to get the bill for water more evenly borne between one householder consumer and another, and yesterday's Answer to the noble Lord, Lord Janner, shows how this would work out in the Bill as it is now drafted.

But we have to remember, I believe, that there is a far greater inequality between the inescapable charges for the general rate, which, like the water rate, is directly related to the rateable value of the property. These produce a divergence, not of £10 but of £150, between the average domestic bill in respect of general rates of £185 in Surrey, £166 in Innter London and a mere £36 in Powys and £47 in Dyfed, where we see that the Welsh have the advantage over the English by a very considerable margin. If there is to be a measure of equalisation of water charges, I submit that the bare difference between the average bills for water in one regional water authority and another should be modified to a degree that corresponds with the inequalities that already exist in the average combined bill for water charges and general rates, and it is this modification which my Amendment seeks to bring about. Here, again, I would much prefer not to have a Bill at all, but if we are going to have one I would want to see it improved to this extent and to this extent made fairer, and another place given an opportunity to discuss this way of doing it.

May I illustrate broadly to the Committee how this would work out in one or two cases? I am advised that the average combined domestic bill over the whole of England and Wales might be of the order of £145, and the noble Baroness, Lady Birk, will correct me if I am far wrong. I hope I can take that as an illustrative figure. In the area of the Thames Water Authority, the average combined domestic bill for water and general rates is not £145, it is £172; so to that extent the ratepayers in that regional water authority's area pay considerably more than the average. I would submit, therefore, that the equalisation levy due from the Thames Water Authority area should be reduced—and my Amendment will see that it is effectively reduced —by an amount that reflects the excess of £172 over £145. Let me take another area, that of the Welsh National Water Development Authority. There, the average combined domestic bill for water and for general rates is £112. My Amendment would secure that the payment that would become due to the Welsh National Water Development Authority under Clause 2 of the Bill would be reduced, in effect, to an extent which reflects the difference between the low combined bill of £112 and the average combined bill of £145.

I commend this Amendment to the Committee as an Amendment of merit in itself, but also as a means to invite another place to consider a fairer and more just way of balancing burdens on householders throughout England and Wales if indeed it is thought advisable to attempt to do so at all, although I rather agree with the noble Lord, Lord Peddie, that in respect of water it would be better not to embark on this at all. The Amendment which we have just moved into the Bill provides for the method which has been used so far of a differential domestic element in the rate support grant as between England and Wales. A later Amendment which I shall also move provides for an outright grant to the Welsh National Water Development Authority, which I think is the most open, honest and straightforward way of dealing with this matter and which secures that the burden is borne by all the taxpayers to the extent that each is best able to pay.

There may well be some criticism of me for importing incompatible alternative methods into the one Bill, but I do not think they are incompatible and, anyhow, I trust that there will not be any criticism from the noble Baroness on that score, whose Government are apparently about to introduce a Bill to provide two alternative and entirely incompatible ways of electing members to the European Parliament, and furthermore allowing Cabinet Ministers a free vote on the choice. Once again, I would much prefer that we did not have this Bill, but if we are to have it I think it is our duty to make it as flexible, workable and equitable as possible, and to give another place an opportunity to consider how that might best be done. I think this Amendment is another improvement, and I beg to move.

Baroness BIRK

The noble Lord said that this Amendment is intended to have the effect of linking equalisation transfers to general rate levels in such a way that the levies payable by regions with relatively high average general rates—for example, the Thames, Severn and Trent—will be reduced, and the amount of payments to other authorities will be reduced correspondingly. In fact, it is unworkable since local authority boundaries do not coincide with those of water authorities or, indeed, of the companies; and I am afraid that, once again, at the risk of being repetitious, though I shall try to cut it down, I must say that this Amendment, like the previous Amendment, still reflects the same confusion between water charges and the general rate. I have to say again that they remain quite distinct, though I will not go over the reasons again because I think I have now done that many times.

I think the noble Lord is in a way doing something of a somersault on his own case, because at every opportunity he says how much he dislikes the Bill and would like to throw it out, and then he says, "Let us make it workable". I cannot help feeling that it would be much more logical for him to pursue the path which he has certainly been pursuing, even if unwittingly, of trying to make it as unworkable as possible. This proposal seems to me to be logical politically, but it does not seem to me to be logical if the noble Lord wants to make the Bill work. However, if he hates the Bill so much that he wants to wreck it as much as he can, then of course it does make sense; and it is on that basis, too, that I am resisting him. But not only is this Amendment misconceived; it would also be very difficult, if not impossible—and this is on purely practical grounds—to put into practice, for the reason I have already given; that is, that the boundaries of the regional water authorities and the private water companies are not co-terminous with local government boundaries.

One of the virtues of the equalisation scheme proposed by the Government is that it is easy to administer. I do not expect the noble Lord to agree with me that it has any virtues, but it is certainly easier to administer than what he is putting forward. The National Water Council will be able to implement it using its existing staff complement, and there are no other implications for public sector manpower. But the Amendment as moved by the noble Lord would put someone (and I am not sure who that would be) under a duty to determine the average general rate of unmeasured properties in each water authority and water company area. Such an exercise would certainly require additional staff resources—and now, once again, I come back to the point that I was making on the last Amendment and which was also made very strongly by my noble friend Lord Peddie. Apart from being wrong, as we believe, conceptually, this Amendment, like the last one, would involve an increase in public expenditure, and certainly an increase in personnel. I therefore ask the Committee to resist the Amendment.


Of course, the whole Bill involves an immense amount of extra work and I admit that this is an additional complication. I wish that we could persuade the Government—and we may manage to do so in the end—to drop the Bill altogether, because to do so would certainly constitute a very considerable saving in manpower. If the various regional water authorities were left to get on with things and this relatively minor inequality amounting to scarcely more than £10 a year were tolerated, we should not have any of this trouble at all. Furthermore, we should have no incursion into the autonomy of the various regional water authorities—something which I think both Parties regard as important and desirable.

I cannot admit that this Amendment, although it would involve further complications and some difficulty, adds a great deal to the difficulties that are already added to the work of the regional water authorities by the whole scheme of equalisation. Certainly, if it were to be slightly rough and ready in its operation, it is nothing compared to the roughness of the arrangement here which applies only to householders on unmeasured water supplies and leaves out of account altogether those consumers who happen to be on measured water supplies. That is a tremendous anomaly which the Government seem to be able to tolerate with equanimity.

I base the force of this Amendment chiefly upon the injustice of shifting the burden, by way of the payments, from the Welsh ratepayers who are already enjoying some relief; shifting their light water rate burden, and transferring it to the shoulders of some of the poorest families in the inner city areas of, say, London who can obtain no rate relief or rebate.

In so far as my Amendment does something to mitigate or modify that effect, I should like to commend it to the Committee and accept the small amount of extra work that is involved on top of all the other extra work.

Baroness BIRK

I should like to ask the noble Lord to clarify something; but, before doing so, I must point out that it is not true that the provisions in the Bill would involve any extra work. I repeat that the National Water Council will be able to undertake any changes with its existing personnel. It will not involve any more public sector expenditure and the noble Lord himself agreed that what he is proposing would involve that. The question I should like to ask for clarification is this. Does the combined bill that he is talking about include sewerage charges as well as the general and water rates? If it does not, then why not?


I do not know that we need to bring sewerage into it.

Baroness BIRK

But we must.


The factor that we are considering is the total average bill for general rate and water services (that is, the combined water services) in respect of each householder averaged over the whole area. The main point that I have been trying to make, and which is taken into account by my Amendment, is that although the water supply service charges vary as between £15 in the Thames and £25 in Wales, the variation as between the general rates which covers all the other things is as much as £150. I think that to the extent that that large variation exists, the small adjustments that this Bill secures should be modified.

Baroness BIRK

The noble Lord is either not clear or he has not come to any conclusion as to whether he is going to bring in the sewerage rate (which is also another important charge on people) as well when this apportionment takes place, according to his Amendment.


I shall look at that if the noble Baroness presses it upon me; I do not think it alters the situation at all. It is the large imbalance in the general rate burden which I want to bring into this Bill, to modify the very small inequality in the water rate which this Bill is seeking to deal with. I shall look at the point about the sewerage charge to see whether it makes any practical difference, but I do not think that it does.

5.15 p.m.

On Question, Whether the said Amendment (No. 7) shall be agreed to?

Their Lordships divided: Contents, 66; Not-Contents, 59.

Abinger, L. Falmouth, V. Northchurch, B.
Amory, V. Ferrers, E. Norwich, Bp.
Auckland, L. Gisborough, L. O'Hagan, L.
Avon, E. Glenkinglas, L. Porritt, L.
Balerno, L. Gray, L. Rankeillour, L.
Balfour of Burleigh, L. Greenway, L. Ruthven of Freeland, Ly.
Balfour of Inchrye, L. Haig, E. Sandford, L.
Berkeley, B. Hailsham of Saint Marylebone, L. Sandys, L.
Carrington, L. Hawke, L. Selkirk, E.
Colwyn, L. Hornsby-Smith, B. Spens, L.
Cork and Orrery, E. Ilchester, E. Strathclyde, L.
Cullen of Ashbourne, L. Lauderdale, E. Strathspey, L.
Daventry, V. Lindsey and Abingdon, E. Sudeley, L.
de Clifford, L. Lloyd, L. Swansea, L.
De Freyne, L. Long, V. Trefgarne, L.
Denham, L. [Teller.] Lyell, L. Vivian, L.
Derwent, L. Monck, V. Wakefield of Kendal, L.
Drumalbyn, L. Monson, L. Waldegrave, E.
Elles, B. Morris, L. Ward of North Tyneside, B.
Elliot of Harwood, B. Mowbray and Stourton, L. [Teller.] Wardington, L.
Emmet of Amberley, B. Westbury, L.
Faithfull, B. Moyne, L. Young, B.
Falkland, V.
Ampthill, L. Crook, L. Henderson, L.
Banks, L. Davies of Leek, L. Henley, L.
Beaumont of Whitley, L. Feversham, L. Houghton of Sowerby, L.
Birk, B. Foot, L. Hylton-Foster, B.
Boston of Faversham, L. Gaitskell, B. Jacques, L.
Brockway, L. Gordon-Walker, L. Janner, L.
Clancarty, E. Greenwood of Rossendale, L. Kagan, L.
Collison, L. Hale, L. Kaldor, L.
Cooper of Stockton Heath, L. Hanworth, V. Leatherland, L.
Listowel, E. Ponsonby of Shulbrede, L. Strabolgi, L. [Teller.]
Llewelyn-Davies of Hastoe, B. Rathcreedan, L. Thomson of Monifieth, L.
Loudoun, C. Redcliffe-Maud, L. Vaizey, L.
McCluskey, L. Rochester, L. Wallace of Coslany, L. [Teller.]
Noel-Buxton, L. Sainsbury, L. White, B.
Oram, L. Shepherd, L. Wigg, L.
Pannell, L. Shinwell, L. Wigoder, L.
Peart, L. (L. Privy Seal.) Sligo, M. Willis, L.
Peddie, L. Stedman, B. Winterbottom, L.
Phillips, B. Stewart of Alvechurch, B. Wootton of Abinger, B.
Pitt of Hampstead, L. Stone, L.

On Question, Amendment agreed to.

Resolved in the affirmative, and Amendment agreed to accordingly.

5.25 p.m.

Baroness BIRK moved Amendment No. 8: Page 2, line 10, leave out ("water authorities") and insert ("statutory water undertakers").

The noble Baroness said: I spoke to this Amendment with Amendment No. 2. I formally move.

Baroness BIRK moved Amendment No. 9: Page 2, line 11, leave out ("financial").

The noble Baroness said: I spoke to this Amendment with Amendment No. 1. I formally move.

Baroness BIRK moved Amendments Nos. 10 and 12:

Page 2, line 13, leave out ("water authorities") and insert ("statutory water undertakers")

Page 2, line 18, leave out ("water authorities") and insert ("statutory water undertakers")

Page 2, line 20, leave out ("water authority") and insert ("statutory water undertaker").

The noble Baroness said: I spoke to these Amendments with Amendment No. 2. I formally move these Amendments en bloc.

Baroness BERK moved Amendment No. 13: Page 2, line 21, leave out ("financial").

The noble Baroness said: I spoke to this Amendment with Amendment No. 1. I formally move.

Baroness BIRK moved Amendments Nos. 14 to 17:

Page 2, line 24, leave out ("water authorities") and insert ("statutory water undertakers")

Page 2, line 27, leave out ("authority") and insert ("undertaker")

Page 2, line 29, leave out ("authority") and insert ("undertaker")

Page 2, line 31, leave out ("water authority") and insert ("statutory water undertaker").

The noble Baroness said: I have spoken to these Amendments with Amendment No. 2. I formally move these Amendments en bloc.

Baroness BIRK moved Amendment No. 18:

Page 2, line 34, at end insert— ("(5A) Nothing in this section or section 2 below shall apply to any statutory water under-undertaker whichin the year ending 31st March 1976 supplied less than one hundred million gallons of water.").

The noble Baroness said: The effect of this Amendment is to exclude from equalisation any statutory water undertaker whose supply falls below the prescribed level. All of the water authorities and the 28 water companies who are members of the Water Companies Association supply very much more than this level. There are, however, a number of very small undertakers whom we do not wish to bring into the scheme. One or two of them supply only by meter and would therefore, in any event, be excluded. Others do supply on an unmeasured basis (very small quantities and on a very local basis). Since charges are below average, they would gain nothing from being included while they are too small for any equalisation levy which they might be directed to make to be of benefit to anybody else. The Amendment is therefore designed to secure the exclusion of undertakers in this position in order to avoid the need for pointless work.

5.28 p.m.

Lord TREFGARNE moved Amendment No. 19:

Page 2, line 34, at end insert— ("(5A) In the first financial year in respect of which an order is made under subsection (1) above, the amount of the levy calculated under subsection (4) above shall be reduced by two-thirds and in the second financial year in respect of which such an order is made the said levy shall be reduced by one-third.")

The noble Lord said: On behalf of my noble friend, I move the Amendment to which my name is also appended. I propose to speak also to Amendments Nos. 22 and 27. Clause 1 of this Bill, to which Amendment No. 19 applies, and Clause 2, to which Amendments Nos. 22 and 27 apply, provide, as we have already heard, for levy in the case of Clause 1, and payment in the case of Clause 2, to be made across from one group of water undertakers to another.

I am advised that the likely effect upon, for example, water consumers in the areas served by the Thames Water Authority is an increase in their water charges of about 10 per cent. If the Bill comes into force, this will take place in the next financial year beginning next April. It is surely not beyond the bounds of probability—indeed some of your Lordships may think it quite probable—that inflation generally at that time will be running at at least 10 per cent. and perhaps more. The total increase in water accounts which may therefore fall upon authorities like the Thames Water Authority if the Bill is implemented in full, and as presently drafted, will he at least 20 or 25 per cent. That is more than the consumers in that area can be reasonably expected to bear.

As my noble friend has explained on previous Amendments, their rate accounts are substantially higher in that area than they are in other parts of the country. It is not beyond the realms of posibility that their domestic rate bills will also increase next year by a significant percentage. It is therefore the intention of these three Amendments to phase the introduction of the levy on the Thames Water Authority, and thus consequentially the payments provided for in Clause 2, over a period of three years.

Amendment No. 19 provides that the levy will in the first year—that is to say, the year beginning April 1978—be reduced by two-thirds, and in the following year—that is to say, in the financial year beginning April 1979—be reduced by one-third. Thus it follows that the levy, when calculated for the year beginning April 1980, will be at the level laid down in the Bill but not therefore until that time, namely, April 1980. The effect of Amendments Nos. 22 and 27 is similar, but the wording is such as to apply to the payments made to the receiving authorities and water companies. I beg to move.

5.32 p.m.

Baroness BIRK

These Amendments moved by the noble Lord are identical to ones which were prepared by the London Boroughs Association and they were tabled, but not moved, by the London Labour Members during the Committee stage in another place. As the noble Lord has carefully pointed out, what they seek to do is to phase in equalisation transfers to and from water undertakers in such a way that the scheme will only come into full operation in its third year. In the first and second years, levies and payments will be reduced by two-thirds and one-third respectively. It is true that we advised the water authorities to phase in their own equalisation schemes, but that was when we were talking about full equalisation.

However, as I said during Second Reading—and I emphasised this in moving the first Amendment this afternoon—the Government's equalisation scheme, as expounded in this Bill, is already a modest one and falls well short of full equalisation of bills. It is merely designed to even out peaks and troughs in average bills. Indeed many consumers in area where the charges are now very high—for example, Wales, the South West, East Anglia and some areas served by water companies—would argue, with some legitimacy, that the Government scheme does not go far enough. Even if the scheme had come into force for the current year, it would still have left a range of average bills between different water authorities of from 10 per cent. below the national average to 24 per cent. above it. Taking the companies into account, the range would remain even wider: from 23 per cent. below the national average to 43 per cent. above. Total transfers to and from the water authorities amount to only 2 per cent. of the autho- rities' revenue requirements. To reduce transfers to below what the Government propose would, in the circumstances and in the context of this Bill, make them quite derisory and reduce the scheme to a nonsense.

As Ministers made clear in another place, the scheme proposed in the Bill has a life expectancy of round about five years. In successive years, its significance will diminish as transfers become a smaller proportion of the water authorities' revenue requirements. That is because the financing costs arising from capital expenditure incurred before 1st April 1976 will become a smaller and smaller proportion of authorities' requirements. Therefore, although we shall be equalising the same element of the authorities' revenue requirements each year, that element will become a less and less important one in relation to the factors that make the charges what they are. It is for those reasons that I cannot advise the House to accept these Amendments. They would have the effect of diluting the effect of equalisation to such a degree as to run directly counter to the purpose of the Bill.

5.36 p.m.


I cannot pretend that I am totally persuaded by what the noble Baroness has said. I rather believe that the present Government have demonstrably and lamentably failed in the general battle against inflation, not least because they themselves have contributed so significantly to it. It seems to me that the Government's resistance to this Amendment is simply another example of how they have failed to realise that some of the policies they have advocated have made inflation worse and not better. The percentage figures they play with are often, to say the least, unreliable: and although we may now hear from them that inflation next year will be down to single figures and as from the year after it will be below this or that percentage, they always get proved wrong in the event.

Is it not possible that next year they will be proved wrong yet again? May they then not bitterly regret that they have themselves, by the measures they have introduced, significantly increased the level of water rates payable, for example, by those living in central London?—those people who, as my noble friend has explained in connection with previous Amendments, may be lowly paid and have no means of securing any form of rebate on their water rates and who, willy-nilly, will be required next year to subsidise their colleagues living in Central Wales, for example, who indeed may have somewhat higher water rates but whose domestic rates are dramatically less than those payable in Central London. It is not my intention to press this Amendment this afternoon, but I will consider the matter with my noble friend and I reserve the right to return to it at a later stage of the Bill. In the meantime, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn,

Clause 1, as amended, agreed to.

Clause 2 [Equalisation payments to he made to certain water authorities]:

Baroness BIRK moved Amendment No. 20: Page 2, line 35, leave out ("financial").

The noble Baroness said: I beg to move formally this Amendment. I spoke to Amendment No. 20 in moving Amendment No. 1.

Baroness BIRK moved Amendment No. 21: Page 2, line 37, leave out ("water authorities") and insert ("statutory water undertakers").

The noble Baroness said: I spoke to Amendment No. 21 when I moved Amendment No. 2. I beg to move formally this Amendment.

5.40 p.m.

Baroness BIRK moved Amendments Nos. 23 to 26:

Page 3, line 4, leave out ("water authority") and insert ("statutory water undertaker")

Page 3, line 6, leave out ("water authorities") and insert ("statutory water undertakers")

Page 3, line 8, leave out ("authority") and insert ("undertaker")

Page 3, line 11, leave out ("water authority") and insert ("statutory water undertaker").

The noble Baroness said: I spoke to Amendments Nos. 23 to 26 with Amendment No. 2. With the leave of the Committee, I beg to move them en bloc.

Clause 2, as amended, agreed to.

Lord SANDFORD moved Amendment No. 28: After Clause 2, insert the following new clause:

"Grant in lieu

.—(1) The Secretary of State may, with the approval of the Treasury out of money provided by Parliament, make to the Welsh National Water Development Authority a grant in lieu of the whole or part of an equalisation payment.

(2) Where such a grant is made the amount of the grant shall be deducted proportionately from the equalisation levies to be paid by the water authorities and shall also be deducted from the amount of the equalisation payment to the Welsh National Water Development Authority."

The noble Lord said: This Amendment offers a third way of providing for the financial adjustments which the Government are seeking to make in the new political context in which we find ourselves. As I said when I was dealing with Amendments Nos. 6 and 7, the fact of the matter with which this Bill deals is the Government's wish to make payments to the Welsh National Water Development Authority, and the honest, straight forward and open way of doing it would be as indicated here. It would have the merit of doing what the Government want to do for Wales, though I am not for one moment persuaded that it is justified. But if it is done, it will ensure that the burden falls upon the tax payers and not arbitrarily upon certain householders, many of whom will not be in the best position to pay. Furthermore, it will do it without any of the complexities which the Bill or my Amendments would have, or the objections which the noble Baroness seems to think use of the rate support grant would have. It would be a quite straight forward and open block grant to the Welsh National Water Development Authority, and in many cases this would he the simplest way of proceeding. I shall be interested to hear how the noble Baroness reacts to the idea. I beg to move.

Baroness BIRK

The Amendment is quite clear and self-explanatory. As the noble Lord, Lord Sandford, said, it would allow the payment to the Welsh authority to take the form of a Government grant, instead of a payment from the equalisation pool. Before I get on to the substance of the Amendment, I must draw the attention of the Committee to the point that if it were carried it would undoubtedly be regarded as infringing the privileges of the Commons, since it involves an Exchequer payment and the Bill has no money resolution. Nevertheless, I think it only fair to discuss also the substance of it, which is unacceptable, because both this Government and the previous Government have made it clear that there can be no possibility of Exchequer grants to the water industry.

Apart from the obvious and unpalatable implications for public expenditure—and do not let us get away from the fact that this involves a considerable increase in public expenditure—there is no good reason why water charges should be singled out for subsidy from all the other bills facing households. It would be very dangerous to inaugurate subsidies to an industry whose annual revenue requirement is round about £1,200 million. For these reasons, the Government's equalisation scheme is a self-balancing one, and avoids this ingredient. of public subsidy and, inevitably, increased public expenditure. Payments in from authorities, and now companies, exactly match payments out to other authorities and companies, so that no Exchequer subsidy is involved.

It is not clear why this Amendment should single out one potential beneficiary from Exchequer subsidy. The average domestic bill without equalisation would also be well above the national average in the South-West and in Anglia, as well as in many other water company areas. I should also point out that if this Amendment were pressed and carried, it would frustrate one of the main objectives of equalisation: that of reducing average bills to a narrower range. An Exchequer grant, taking the hypothetical case, would reduce the bills in just one area—that is, in Wales—but would do nothing to make the compensating increases in bills in other authority areas where they are already below the national average. The troughs would therefore remain to a much greater extent than under the Government's equalisation scheme.

I should say—and this applies to the previous Amendment which was withdrawn by the noble Lord—that whatever the rate of inflation, whatever is happening in the economy, not attempting to equalise water charges would still have its impact on those who find it difficult to afford them. There are poor people in the areas where the charges are high, just as there are in the areas where the charges are low, and the same applies to rates. Obviously, everybody will not be satisfied and there will be hard cases, but this applies in the area of rates, in the area of taxation and in every other area.


I am obliged to the noble Baroness for giving way to me. I take what she says, that of course there are poor people in Wales as well as in London. But is it not the case that water consumers are much fewer in number in Wales than in central London? Furthermore, is it not the case that the general rates in Wales are much lower than they are in central London?

Baroness BIRK

Yes, but we are not talking only about Wales and London. We are talking about the whole of England and Wales. What I am saying is that it is not a very good idea to set out on an equalisation scheme, and then pick out certain areas and tie it up with inflation. I can understand the feeling against equalisation, which has been put very frankly by the noble Lord, Lord Sandford, but as the Government's view is that equalisation is the right way of dealing with these anomalies in the water industry, we see it as a leveller rather than as something which will produce greater anomalies in payments.

But the Amendment to make an Exchequer grant to Wales is very odd. All of the Opposition's Amendments to this Bill seem to involve increased public expenditure. It seems to me that the Opposition's stance in this sphere has been to berate the Government, constantly and interminably, on the level of public expenditure, and yet we have had Amendment after Amendment moved this afternoon the result of which would be to increase public expenditure. In this Amendment we now have a straight, flat subsidy to Wales. So that on all those grounds, quite apart from the in appropriateness of the Amendment and its having no meaning in this House, it is one which I am sure the Committee will want to resist.


I am grateful to the noble Baroness for making those points. This Amendment—I do not think this applies to the others—is certainly open to the criticism that it calls for a subsidy to a regionalised industry, and an increase in public expenditure. I am therefore not so enamoured of it as I was of the earlier Amendments, the second of which calls not for any increase in public expenditure but rather for a modification of the payments and levies within the industry.

I put forward this Amendment to hear the reactions of the noble Baroness and to see whether she agrees with me that if the main purpose of the Bill—as I believe it is—is to do something for the Principality, this is a more open and honest way of doing it. I do not think that the question of privilege arises. We are perfectly free to make amendments to the financial provisions of a Bill, although the other place is absolutely entitled to send back objections to those amendments, calling in aid their privilege in financial matters; and that would be the end of it. That is my understanding of the situation, but I do not think that we are debarred from making proposals of this kind.

Baroness BIRK

I am advised that the Bill contains no money resolution. Therefore the noble Lord is introducing this financial ingredient into a Bill which contains no money resolution. With great respect, therefore, I would say that it is out of order. It is an interesting debate, but it will not get us anywhere, even if the noble Lord feels that it will.


No, it will not. My advice is that we are perfectly entitled to do this, although the Commons may reply in the sense I have indicated. However, I do not intend to press the Amendment, so I do not think we need to pursue it any further. I beg leave to withdraw the Amendment.

The DEPUTY CHAIRMAN of COMMITTEES (Baroness Wootton of Abinger)

I understood that Lord Trefgarne moved Amendment No. 28.


Then I will withdraw it, too.

Amendment, by leave, withdrawn.

Clause 3 [Supplementary provisions as to directions and orders]:

5.52 p.m.

Baroness BIRK moved Amendments Nos. 29 to 31 en bloc.

Page 3, line 19, leave out ("financial")

Page 3, line 26, leave out ("financial")

Page 3, line 27, leave out ("financial year")

and insert ("year in respect of which orders have been made under sections 1 and 2 above").

The noble Baroness said: I spoke to these Amendments when I dealt with Amendment No. 1. With the leave of the Committee, I move formally Amendments Nos. 29 to 31 en bloc.

Baroness BIRK moved Amendment No. 32: Page 3, line 29, leave out ("water authorities for that year") and insert ("statutory water undertakers").

The noble Baroness said: I spoke to Amendment No. 32 when I dealt with Amendment No. 2. Therefore I move formally this Amendment.

Baroness BIRK moved Amendments Nos. 33 and 34:

Page 3, line 38, leave out ("financial")

Page 3, line 41, leave out ("financial").

The noble Baroness said: I spoke to Amendments Nos. 33 and 34 when I dealt with Amendment No. 1. With the leave of the Committee, I will move together Amendments Nos. 33 and 34.

Clause 3, as amended, agreed to.

Clause 4 [Impact of equalisation levies and payments on water charges]:

Baroness BIRK moved Amendments Nos. 35 to 38 en bloc:

Page 4, line 12, leave out ("a financial") and insert ("any")

Page 4, line 14, leave out ("that year") and insert ("the corresponding accounting period")

Page 4, line 17, leave out ("a financial") and insert ("any")

Page 4, line 19, leave out ("that year") and insert ("the corresponding accounting period").

The noble Baroness said: With the leave of the Committee, I move formally Amendments Nos. 35 to 38 en bloc. I spoke also to these Amendments when I dealt with Amendment No. 1.

Baroness BIRK moved Amendment No. 39: Page 4, line 20, at end insert—

("(2) Notwithstanding anything in any enactment,—

  1. (a) the amount of any equalisation levy which a statutory water company is required to pay in respect of any year, and
  2. (b) the amount of any equalisation payment which a statutory water company is entitled to receive in respect of any year,
shall be passed on in full, in the form of increased or reduced charges, to the persons to whom water is supplied by the company on an unmeasured basis in the corresponding accounting period.")

The noble Baroness said: Clause 4 deals with the application of equalisation levies and payments. It requires water authorities to apply money received under the scheme for the benefit of consumers of unmeasured water supplies and conversely to recover any equalisation levies through increased charges to such consumers. In the case of water authorities, the clause achieves this by reference to Section 30 of the Water Act 1973. However, these provisions do not apply to water companies, and the Amendment is necessary to ensure that the companies are under the same obligation as the authorities. I beg to move.

Clause 4, as amended, agreed to.

Clause 5 [Information and accounts]:

Baroness BIRK moved Amendment No. 40: Page 4, line 21, leave out from ("to") to ("shall") in line 22 and insert ("the year 1978 and each subsequent year, each statutory water undertaker in relation to which a determination falls to be or has been made under section 1(2) above").

The noble Baroness said: This Amendment is consequential on earlier Amendments. It extends to all those statutory water undertakers to whom this Bill applies the duty to furnish to the Secretary of State such information as he may reasonably require for the purposes of the Bill. I beg to move.

Clause 5, as amended, agreed to.

Clause 6 [Citation, interpretation and extent]:

Baroness BIRK moved Amendment No. 41: Page 4, line 34, at end insert ("and in this Act "statutory water company "and" statutory water undertakers" have the same meaning as in the Water Act 1973").

The noble Baroness said: As I spoke to this Amendment when I dealt with Amendment No. 2, I beg to move it formally.

5.58 p.m.

Lord SANDFORD moved Amendment No. 42:

Page 4, line 34, at end insert— ("( ) This Act shall come into force at the expiration of the period of six months beginning with the day on which it is passed.").

The noble Lord said: I beg to move Amendment No. 42, which is designed to introduce a delay of six months between the enactment of the Bill and its coming into force. I do this because I believe that the Committee will agree with me that it is inappropriate to make this subsidiary but important change in advance of seeing the conclusions of Her Majesty's Government in a White Paper on reorganisation, upon which they initiated consultations a year ago. The last we heard from the Government on this was from the right honourable friend of the noble Baroness, Mr. Howell, the Minister of State, when in the Committee stage in another place on 17th February he used these words: I can confirm that our timetable is well on course for producing our White Paper in the spring. Is it well on course, although we are now in midsummer, and what are we to expect by way of production of a White Paper? It may be that we shall be told, and I hope that we shall.

I submit that we ought not to be enacting this Bill. I still hope that the Government will drop it, as they have so seriously missed the timetable which they originally intended to pursue and thought was important. However, I now submit that in any case the other place must be given an opportunity to debate again many parts of it in the very changed and changing political context in which they find themselves.

I submit also—this is the point to which my Amendment specifically refers—that even if the Bill is enacted it ought not to come into force and be implemented, in whatever form it is passed, until Her Majesty's Government have published and allowed Parliament to see and debate their overall proposals for the water industry. As I say, I remain hopeful that having missed the bus with the Bill, the Government will drop it altogether and let the water industry get on with their job. However, if the Government enact the Bill, it is important to ensure that it is not implemented until it can be implemented in the context of the policies which I understand the Government intend to set out in their White Paper. I beg to move.

Baroness BIRK

Once again the noble Lord brought up the question of the White Paper and this Bill. I can now tell him that the White Paper will be published next month but there is simply no reason to wait for it because, as I have said repeatedly, this is a modest Bill dealing with the equalisation of water charges. It is true that the noble Lord also keeps expressing the hope that the Government will have second, third and fourth thoughts about the Bill. He is a hopeless optimist in regard to this. The two things are not connected. If this Amendment were to be carried it would mean that no order could be made under the Act until six months after Royal Assent. Since the earliest practical date on which we could have Royal Assent is the middle of July, that would mean that no orders could be made until January. But Clause 3(1), as amended by the Government Amendments bringing in the water companies, provides that an order, shall be made before the beginning of the year to which the direction relates". So this Amendment would mean that equalisation could not come in until 1979. I am not sure whether the noble Lord was aware of that or whether he genuinely only wanted to put it off for the six months. Perhaps the noble Lord would like to comment on that?


Certainly I should like to consider the position of the water companies, as the noble Baroness will know. We are now seeing for the first time the Government's proposals about the water companies because they have only just introduced them. The main points I made refer to the importance, as I see it, of not starting to implement the Bill, even if it is enacted, until all concerned have seen the Government's overall proposals for the water industry. I certainly take the point that the effect of this delay is now different inasmuch as we are not dealing with one single financial year.

Baroness BIRK

I thank the noble Lord for those remarks. I wanted to know whether I should accuse him of moving a wrecking Amendment or of accidentally not realising that the Amendment would put off the legislation for two years. I shall give him the benefit of the doubt and explain to him that the Amendment would mean that the Bill which he dislikes so much could not come into effect for two years if this Amendment were passed. The reason is that the slow progress of the Bill in another place obliged Ministers to accept that there was no prospect of the Bill taking effect in the current year. To put off equalisation until 1979—and this really is the point of our resistance to the Amendment—would mean that this measure had been delayed for two full years. Given the large majority for the Bill in another place and the unopposed Second Reading in your Lordships' House, I think perhaps this, possibly rather uncharitably, could be described as a mischievous move. I do not suppose the noble Lord had that in mind.

Subject to the Bill gaining Royal Assent, we shall make orders in November or December in relation to the year 1978. This will allow time for the water companies whose financial year starts on 1st January to take their levy or payment into account when fixing their charges for that year. It will also allow the water authorities to take equalisation into account in the much lengthier process of preparing the submission of their budgets to the Price Commission. It will ensure that those consumers who are now faced with very high charges in Wales, East Anglia and the South-West will get relief at the earliest possible opportunity, and the effect of this Amendment would be to frustrate that. Therefore, I am sure that having explained the effect this Amendment would have, and as we have been over the ground of the private water companies earlier in the Committee stage and it was also discussed at considerable length during Second Reading, there is nothing to be gained, but a great deal to be lost, by waiting any longer. I repeat that the private water companies were consulted, and also the water authorities, and the proposals in the Bill were the result of the agreement with them and with the water authorities. Whether it was meant deliberately or inadvertently, in fact this Amendment would mean that the path of equalisation could not be started on for another two years. For those reasons I hope the Committee will certainly reject this Amendment and I feel it was a pity that such an Amendment was tabled at this stage of the Bill.


Before the noble Lord decides what he wishes to do about this Amendment, I think that the tone of some of the arguments, and the arguments themselves which have been used by the Government to justify this appallingly unthought-out, untimetabled Bill, are quite unacceptable. I am absolutely certain that my noble friend did not intend to bring in a wrecking Amendment—indeed could not because the Amendments tabled by the noble Baroness to bring in the water companies were only tabled and passed this afternoon so the noble Lord could not have brought in a wrecking Amendment until he knew the content of the Amendments that were brought in and passed this afternoon.

That is really going rather far. All the noble Lord said, and I feel quite certain that all he intended, was that the Government had had many second thoughts about this Bill and the timetable of when it was to come in, when the Government would get it through, whether or not to have the water companies in, and so on. He now says that we were promised a White Paper in the spring. It is already June and we are now told that it is coming out some time after midsummer. Although we are having a funny spring this year I do not think that justifies the change of the word, "spring" to "summer" by the Government. The noble Baroness, Lady Birk, must not accuse the noble Lord, Lord Sandford, of bad faith in tabling this Amendment, and it appears that she was so accusing him. Of course, if she was not doing that, I will immediately withdraw but it sounded to me as though she was accusing him of bad faith and of bringing in a wrecking Amendment under the guise of an Amendment to give more time for consideration, and I do not think he was doing that.

Baroness BIRK

I think the noble Earl, Lord Waldegrave, could not have heard what I said when I replied to the noble Lord, Lord Sandford. In fact I interrupted myself when I was replying, in order to ask the noble Lord, Lord Sandford, whether he was aware that the effect of his Amendment would be to delay the implementation of the Bill for two years. I thought I was extremely gentle with him and I said that if he was not aware of the effect of that I would not accuse him of tabling a wrecking Amendment. I think he accepted that.

To say that this had come upon us like a 24-hour wonder is sheer nonsense, if I may say so with great respect. The question of the private water companies coming in was discussed in another place. It was discussed during Second Reading in your Lordships' House; the noble Lord himself and the noble Lord, Lord Somerleyton, and other noble Lords spoke strongly in favour of the water companies coming in. I made it quite clear that my right honourable friend had intended them to come in but at the time there had not been the opportunity for discussion when we wanted to get the Bill in operation during the current year. So this has been discussed exhaustively and I think the noble Lord, Lord Sandford, will agree that it is wrong to say that he was unaware of this until yesterday afternoon. Apart from anything else we have had correspondence about it. He has had notes on the clauses and he himself has certainly not put forward any such idea. I can quite understand the noble Earl, Lord Waldegrave, jumping to the defence of his noble friend, but I think on this occasion he has got it rather wrong.

Nevertheless, to get back to the Amendment, with whatever motives it was put forward—and I repeat that I do not accuse the noble Lord of bad faith: I wanted to try to find out and I probed to see what he was up to—this would be the effect of it, and for that reason the Government must resist it. I am resisting delaying the implementation of this Bill for another two years.


We must not get too cross with each other. I must say that the noble Baroness is provoking me somewhat when she says that all this was fully discussed in another place. I am afraid it was not. All that was discussed was whether the Government had consulted the water companies about their inclusion in this Bill, which eventually wrung from them, more than half way through the Committee stage, an undertaking that they would consult the water companies about the Bill. By the time we had our Second Reading they were committed to doing that and since then it has been done, and because it was being done we have had a very considerable delay between Second Reading and Committee stage here. It has now been discussed and we see the fruits of it; but I have to say that until I saw the fruits of those deliberations in the form of the Government's Amendments I could not tell, and I do not think anybody else could tell, the way in which they would be brought in.

I see now that one of the problems in spatchcocking the water companies into the Bill at this later stage is to take account of the different financial years that they operate. Therefore, my Amendment has an effect different from the one which I had intended. The reason for my Amendment was exactly, no more no less, the one which I gave, namely, that I think that if the Government are committed to producing a White Paper in the spring —and that is all I had to go on until a few moments ago—we ought not to be putting a Bill on the Statute Book and beginning to implement it until all concerned have seen the overall framework in which it would operate.

The noble Baroness can say that equalisation of water charges is one thing; the new policies proposed in the White Paper are another. But there is no doubt at all that the White Paper, if it bears any resemblance to what the Government have led us to expect, is going to produce a changed framework in which this system is going to operate. It seemed to me to be entirely sensible to try to amend the Bill to ensure that, if and when it is enacted, which we hope it will not be, it is not implemented until this White Paper has at least been seen, and preferably debated, and consultations had gone on about it.

The noble Baroness has said two helpful things: first of all, that the White Paper will be out next month, July, not the spring. We know where we stand. And she has said that the first orders under the Bill need to be made in November. That gives a period from July to November in which I can reconsider my Amendment and retable it in a form which secures what I want and does not necessarily involve any delay in bringing the Bill into force. I shall seek to do that, and in the meantime I beg to leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 6, as amended, agreed to.

In the Title:

Baroness BIRK moved Amendment No. 43: line 2, leave out ("water authorities") and insert ("statutory water undertakers").

Title, as amended, agreed to.

House resumed: Bill reported with the Amendments.