§ 3.15 p.m.
§ Lord BellwinMy Lords, I beg to move that this Bill be now read a second time. When my honourable friend introduced this Bill on Second Reading in another place he said that it was short and, in the Government's view, uncontroversial. It is now slightly longer, but it remains, in our view, uncontroversial. As a result of the wide-ranging debate in another place, a number of amendments were made. The Government believe these have improved the Bill. We have it in mind to make a further addition to the Bill—also, I hope noble Lords will feel, an improvement—during its passage through your Lordships' House. I shall say more about that in a moment.
Before I turn to the substance of the Bill, I should like to take a moment or two to put it in context. I want to stress that this Bill is limited in scope—and quite deliberately. Its primary object is to increase the borrowing powers of the British Waterways Board. In addition, we have taken the opportunity to rectify a number of unrelated anomalies in existing water legislation. This is not to say that the Government regard these provisions as unimportant. But it is necessary to understand that this Bill does not, and could not, in view of its nature, affect the structure, powers and duties of the water industry in any fundamental way.
As it stands, the Bill contains four main provisions. First and foremost, it provides for an increase in the borrowing powers of the British Waterways Board; and here I must stress the importance of enacting this provision as soon as possible, for the board's present powers are now all but exhausted. Second, it provides for the exemption from charge of private water supplies for fire-fighting. Third, it amends the powers of statutory water undertakers to insist on separate service pipes to individual dwellings. And, fourth, it raises the limit on the contribution that a local authority may require a house-owner to make towards the cost of installing a supply of water for public health reasons.
I deal first with the borrowing powers of the British Waterways Board. Noble Lords may find it useful if I briefly outline the background to this provision. The board was established under the Transport Act 1962. Its main function is to maintain some 2,000 miles of inland waterways, including some 350 miles of commercial routes, and over 1,100 miles of canals used for pleasure cruising. These figures illustrate 1327 well how the role of the canal system in this country has changed. It was, of course, constructed originally to provide the means of transporting freight from one part of the country to another, from the centres of production to our seaports, for export. As such it played no small part in our nation's industrial success during the 18th and 19th centuries. But with the advent of other forms of transport—in particular, the railways—its role declined and, as a result, large parts of the system were allowed to fall into disuse and disrepair.
Over the last 20 years, however, the canal system has been revived; not this time so much as a carrier of freight, but mainly as a source of great pleasure and relaxation to the thousands of people who every year take to our inland waterways for holidays and leisure. There can be little doubt that this use will increase as the years go by. It is the responsibility of the British Waterways Board to maintain the system largely, but not exclusively, for this new use. And the Government would be the first to acknowledge the work they have done over the years in financial circumstances which have often been less than favourable.
The maintenance work of the board is, of course, paid for out of revenue—that is, the board's income plus an annual deficit grant from the Department of the Environment, which currently amounts to some 60 per cent. of revenue expenditure. It is important to be clear that this Bill does not affect maintenance work. It relates only to capital expenditure by the board on items such as land, buildings, plant and equipment and the one major improvement scheme being undertaken, the Sheffield and South Yorkshire Navigation. The board pays for these works out of borrowing, and it is the power to borrow which Clause 1 affects.
When the board was set up the limit set on its borrowing was £30 million. This figure allowed, however, for a commencing capital debt of some £19.25 million and when, in 1968, the commencing debt was written down to just under £4 million the limit on the board's borrowing powers was also reduced—to £22 million. This limit was last raised by the previous Administration in 1977, when it was set at £20 million. Since then, of course, we have seen inflation take its toll; and, as I have said, the board have begun a major capital improvement scheme on the Sheffield and South Yorkshire Navigation which, in our view, will demonstrate the commercial viability of this canal.
All this has resulted in the board's present borrowing powers being all but exhausted and, if its current capital programme is not to be jeopardised, it is vital that its borrowing powers be extended as soon as possible. The Bill therefore provides for an increase in these powers, from the present £20 million, to £35 million. We propose that the first £5 million of the extra amount should be authorised on Royal Assent and the remainder by subsequent order or orders of my right honourable friend the Secretary of State, subject to Affirmative Resolution in another place.
With your Lordships' permission, I will now turn to the second main provision in the Bill—the exemption from charges of private water supplies for fire-fighting. The Government are dealing here with an anomaly in existing legislation, which was highlighted by the charging practice of the North West Water Authority. 1328 Under Schedule 3 to the Water Act 1945—which has now been applied throughout most of England and Wales—no charge may be made for water taken from public hydrants for fire-fighting purposes. The costs of this service are absorbed in the water undertakers' general charges. The same does not apply, however, when special water supplies for fire-fighting are laid to private premises—to serve say a sprinkler system—as is the case in many factories, shops and offices throughout the country. Here, water undertakers may—and, indeed, have—argued that under Section 30 of the Water Act 1973, they should charge the consumer for the cost of making this service available.
This is an unfortunate state of affairs for, in the Government's view, any specific charges for fire-fighting water supplies can be regarded as a deterrent to the installation of sprinkler systems, and other fire-fighting equipment. The General Secretary of the Trades Union Congress has described these specific charges, as a "tax on public safety". It is in the public interest that the most effective fire-fighting systems be installed in premises to which they, the public—whether as shoppers, employees or visitors—have regular access.
There are two points to add to what I have said. First, I would stress that this provision does no more than put private and public water supplies for fire-fighting on a par. Second, whatever the current law, the fact is that no water undertaker actually levies specific charges at present for water taken for fire-fighting. And only one—the North-West Water Authority—levies a standing charge of any significance for water made available for fire-fighting in private premises. What this means is that the effect of this provision will be to provide in law for the practice which most water undertakers have hitherto followed.
I want to turn now briefly to the third main provision—the change in the power of water undertakers under the Water Act 1945 to insist on separate service pipes to individual dwellings. A service pipe is the one which connects a dwelling to the water mains. Before the 1945 Act came into force many houses in this country were built with a common service pipe—that is, one pipe serving a number of dwellings. Problems can arise with this system when the common pipe needs renewal because the cost must be shared among the various owners. The Water Act 1945 empowered water undertakers to require the owners of houses built after it came into force to install separate service pipes except where a group of houses had a single owner who undertook to pay the water charges for all of them. It also empowered water undertakers to insist on separate service pipes in dwellings built before the Act came into force in cases of operational difficulty—where the existing common supply was defective or insufficient, or a water bill was in arrears, or where a house had been divided into a number of dwellings.
It is generally only local authorities who have continued to build houses on common supplies. This is because it is slightly cheaper to do so. But difficulties can arise where such houses are sold; the new owner can then be faced with a large bill for a new separate supply of water even though the existing common supply is perfectly adequate. The Government believe it is nonsense that any buyer of a house on a common 1329 supply—whether or not it is a council house—should be faced with such expense for no good reason. In one well known case the cost involved was over £2,000. The Bill therefore removes the power of undertakers to insist on a separate service pipe simply because a house on a common supply is sold. But it will allow them to stipulate that all new houses are built with separate supplies; and it will not affect their power to insist on separate service pipes for existing dwellings, where operational circumstances genuinely require this.
I will now move on quickly, to the final provision currently contained in the Bill: the increase in the contribution payable by a house-owner towards the cost of installing a supply of water. Noble Lords who have watched the Bill's progress will know that this provision was added to the Bill by the Government in another place. Under Section 138 of the Public Health Act 1936, local authorities, in their capacity as public health authorities, have a power to require that any house which does not have an adequate piped supply of wholesome water, should be supplied with one. It is the house-owner's responsibility to provide such a supply, but the amount he is required to find has always been limited to a fixed amount, with any residual being paid by the local authority. This limit was originally set, in 1936, at £20. It was raised to £60 under the Public Health Act 1961. The Bill now provides that it be raised again—to £300. This is in line with inflation over the period since 1961. Without such an increase, local authorities may well be discouraged from discharging an important health duty, because of the high costs they inevitably have to bear. We are also making provision for this limit to be varied in future, by order by my right honourable friend the Secretary of State, so avoiding the need for a further Bill when next the limit must be raised.
I am aware that I have spoken at some length on these provisions, but I hope the House will bear with me a little longer, while I say a few words about an important amendment to the Bill, which the Government have undertaken to table in your Lordships' House. It concerns the liability of water authorities for damage caused by escapes from water mains. At present, water authorities cannot be held liable for such escapes, unless it can be proved that they have been negligent. As many noble Lords will be aware, it is often very difficult to prove negligence. In such cases, the individual may be left to bear loss from damage caused by burst water mains, when the fault is in no way his own.
§ Lord Davies of LeekMy Lords, may I stop the Minister there? The noble Lord is dealing with the water mains. I have followed him closely, but I have had the experience of a canal itself bursting. There is doubt in my mind about the responsibility for the bursting of a canal and the flooding over a farmer's field or local cottages. Is there any alteration in the law with regard to that position?
§ Lord BellwinMy Lords, I should not think that was so, but as the Bill proceeds we will take up the point which the noble Lord has made. I was saying that this situation cannot be right. Such loss should really be borne by the community as a whole through the 1330 general water charges it pays. The Government, therefore, intend to table an amendment, in time for Committee stage, to impose on water authorities liability in respect of damage from burst or leaking water mains, whether or not it has been caused by negligence. I commend this Bill to your Lordships and I beg to move that the Bill be now read a second time.
§ Moved, That the Bill be now read 2a.—(Lord Bellwin.)
§ 3.29 p.m.
§ Lord UnderhillMy Lords, I should like, first, to thank the noble Lord, Lord Bellwin, for explaining the Bill so clearly and succinctly. He said that it is a non-controversial Bill, and I think in general it is, although there will be some pertinent remarks that I wish to make, and I hope I may make them as simply and as clearly as the noble Lord the Minister.
There are some items which we believe could have been included in a Water Bill, whereas the Government have taken the opportunity to include a couple or so items in what, primarily, is a British Waterways Board Bill. Naturally we welcome the decision to increase the borrowing powers of the board. We fully support the opportunity for further investment in our waterways. But it is little use to consider the borrowing limit unless the House also looks at the annual grant which is payable to the British Waterways Board and which has been essential since the 1968 Transport Act gave the board the responsibility to which the noble Lord, Lord Bellwin, referred, of the maintenance of the 2,000 miles of waterways, particularly the commercial and the cruiser waterways.
Over the years the board's own income, as the noble Lord said, has been only a small part of the total cost. I think he mentioned that 60 per cent. is now met by the annual Exchequer grant. I have taken the opportunity to look briefly at the history of the grant. I was looking at the report of the Select Committee on Nationalised Industries, which dealt with the British Waterways Board in its report published in February 1978. As far back as 1970 the board advised the DOE that a major programme of engineering work was required for maintenance of the waterways, for which there had been under-expenditure in past years. I think I must make this comment. This is an example of where sometimes a cut in public expenditure is short-sighted, because one has to make good the damage in later years.
Despite that warning, nothing was done for four years, when the DOE then appointed an independent consultant to study what were the maintenance needs of the British Waterways Board. The findings in the Fraenkel Report published at the end of 1977 confirmed the board's view that there was a backlog of maintenance to be carried out, and they valued it then at some £38 million. In the 1979 report of the board, which is the latest report to which I have access, the auditors of the board's accounts, in their report dated June 1980, referred to the Fraenkel Report and they stated that the maintenance backlog on the commercial and cruising waterways alone at 1979 prices would be no less than £77 million. The auditors also pointed out that there was substantial maintenance required in 1331 connection with the remainder waterways of some 600 miles.
So we find that in 1979 the then Government raised the annual grant to £21 million, and the last figure I had was that it was raised further to £27 million. There was an argument in the other place that this £27 million should really have been £32 million at current prices. The Minister there disagreed and said that at current prices it should have been £29.5 million. Even that is in fact a £2½ million reduction of the grant paid to the British Waterways Board. I would ask the Minister who is to reply: How is the Waterways Board expected to make up that £2½ million? When one looks at the problems facing the board, there is no dispute that many of the aqueducts and tunnels and other parts of the waterways system are in need of repair, some of the tunnels being 200 years old. The board has had to face, and still has to face, years of decay and past neglect of the waterways; I think everybody will agree about that. It now has the statutory responsibility of maintaining these important waterways.
I find that the board's report for 1979 showed a loss of £21 million on its operations, which followed a loss of £13.5 million the previous year. But this in no way should be considered another lame duck, because the board's responsibility for maintaining waterways is the greater part of its costs. The maintenance work as such is set against revenue and it is new development and improvement which comes out of the capital borrowing, which in the Bill we are now increasing. By its various activities the board's total net income, as I can work it out from the accounts, produced a sum of £6 million, whereas the board's report says that the cost of operating, dredging and maintaining the waterways was a little over £22 million. Hence the reason for the annual grant of nearly £21 million. On page 63 of the board's report I see there is a total indebtedness of some £14 million, on account of interest charges for the commencing capital, further debts to the Secretary of State, and a substantial bank loan. In 1979 no less than £1 million was paid out by the board in interest charges.
Therefore, while we support the principle of the first clause of the Bill, the more the board borrows the greater will be its accumulated debt and interest charges, and one must query whether this is wise financing in view of the very limited opportunity that exists for revenue. I should like to ask the Minister how much of the backlog of maintenance has been cleared. Is the board only just managing to cope with current needs? It would seem that the board's income on annual grant is too low to enable it to catch up with the arrears which the Fraenkel Report and the Select Committee on Nationalised Industries said must be tackled. That is why I stress that the cut of £2½ million in the annual grant is something which will be a very serious burden on the board.
I pass on to Clause 2, to which the noble Lord referred, dealing with the supply and use of water for fire fighting purposes. As I have mentioned on other occasions, I was in the National Fire Service for five years. Therefore, I recognise only too well the need for efficient fire fighting equipment and for fire protection. What this clause proposes is to exempt 1332 from charges making water available in connection with fire service equipment and the actual supply of water for fire protection. If you are going to cut out charges it means that that income has to be met from somewhere else. There was a long argument in the other place as to whether or not thus was going to penalise domestic consumers. The Minister in another place pointed out that under the terms of the previous Acts the charges would be spread over the same class of consumers, which means in this case over the metered consumers, which would be the commercial and industrial concerns.
There are two points I should like to put to the Minister. First, as he rightly says, only a number of water authorities made any substantial charges. The one which did make a considerable charge was the North-West Water Authority, some £600,000 a year. That sum has to be met from somewhere, if by this clause they are no longer permitted to charge. It is to be spread over all the metered customers. That will include large undertakings and small undertakings. I would ask the Government, is it fair and equitable that a small concern, which cannot afford, say, a sprinkler system, will have to pay more in charges because it is on the meter, in order that the large concern can have its adequate protection from a sprinkler system? This seems to be another instance where the small concerns are to be hit, yet we thought our general objective was to help small businesses. Also I understand that fire insurance companies will give a very generous reduction for a concern which has a sprinkler system. So once again we shall find, under this provision, that the large concern will be helped whereas the small concern which has not got a sprinkler system suffers.
Subsection (2) of this clause provides that the Secretary of State shall determine the method by which a water authority shall calculate the charges where a supply of water to a concern is a common supply, partly for the fire equipment and partly for general service. It would certainly be helpful to me, and I am sure to other noble Lords, to understand what is in the Secretary of State's mind for determining how this will be calculated. Is it to be a hit or miss system, or is he to set up a large bureaucratic apparatus in order to check on the equipment of the various concerns? It would be helpful to know the situation.
It would also be helpful if the Minister could say whether there have been any comments on the principles of the clause and on the proposal about calculating the charges where there is a common supply to a concern. It would be interesting to know whether any comments have been made either by the Water Council or by any of the water authorities. Incidentally, in the debates in the other place it was mentioned that although the Thames Water Authority has not made any substantial charges hitherto, it has budgeted for the current year to raise £1¼million from these charges. If the Bill is passed, of course, those charges will no longer be levied. But it will mean that that water authority will be £1¼ million out in its budget. As I understand that it is the Government's wish that this should come into force on 1st April this year, I should like to ask the Minister whether it would be possible for that particular authority to re-adjust all its charging to cope with that position.
1333 While on the subject of charges, I believe that there is one issue which is missing from the Bill. The Government decided not to make an order this year under the Water Charges (Equalisation) Act 1907. That will mean that the Welsh Authority, for one, will be some £3 million worse off. I should like to know whether the Government are just to let this slide or whether they have other proposals for the equalisation and, if they have, whether this is a matter which could well have been covered in this Water Bill.
The only other clause to which I wish to refer is the one dealing with insistence. Under the present law a local authority can insist that there should be a separate service pipe to an existing dwelling. I should like to know whether any views have been expressed on this change, which is quite an important change, by the local authority associations and by any of the town planning bodies, because there are very acceptable reasons why this provision has been in being for some years and yet it is now to be removed. I should like to know the real reasons for the Government's decision to remove this facility.
It has been said that to insist on this provision if a council house is to be sold, could be extremely unfair. I know that in another place it was mentioned that that was not of itself a reason for saying that we should dismantle the previously agreed system, although I see in the Notes on Clauses that particular reference was made to the need for this change because of the decision to sell council houses. It would be extremely regrettable if a provision which has been widely accepted for so many years as a desirable provision is now to be removed because of the Government's policy on the sale of council houses.
There is just one other matter to which I should like to refer and which I believe is, unfortunately, not dealt with in the Bill; that is the fact that the water authorities now have the responsibility for sewerage and sewage disposal. Previously those services were under the local authorities and covered by a rate rebate scheme. Now, of course, as a separate demand note is sent by the water authorities, it means that those who would have had a rate rebate if those items had been still with the local authorities, will no longer have the advantage of that rebate. It may be argued that those on supplementary benefit would still be able to be covered. However, quite a large number of people obtain a rate rebate but are not necessarily on supplementary benefit. Therefore, once again we have the situation of persons who are very near the limit being hit because they are not on supplementary benefit. As the water authorities are not allowed to discriminate against any class of consumer or to show undue preference, they, of course, are not able under the present law to give a rebate. That is something which I should like the Government to tackle.
The announcement by the Minister that the Government are to introduce an amendment at the Committee stage to deal with compensation for any collapse in the water pipe system is one that we welcome. However, I should like to ask whether there is to be provision—which I do not believe exists at present—should there be any collapse in the sewerage system, which can be as dangerous as any collapse in the water supply.
I hope that the points that I have raised are not 1334 considered too controversial. I believe that the noble Lord, Lord Skelmersdale, who is to reply will be doing so on his first occasion, and I wish him well.