Water Bill

HL Deb 19 March 1981 vol 418 cc913-32

6.56 p.m.

Lord Bellwin

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, that the House do now resolve itself into Committee.—(Lord Bellwin).

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD ALPORT in the Chair.]

Clause 1 [Increased borrowing powers of British Waterways Board]:

Lord Burton moved Amendment No. 1: Page 1, line 8, leave out from ("million") to end of line 10.

The noble Lord said: I rise to move this amendment with not a little trepidation because it deals with figures rather above those which I am accustomed to handling. Furthermore, any suggestion of cuts in public expenditure is never popular and this is certain to be unpopular with the Minister of the Environment, who is hoping to dispense the money. However, my noble friend Lord Bellwin on Second Reading referred to this Bill as being uncontroversial. No doubt he hoped that it would be, but since he made those remarks we have had a tough Budget and clearly figures of £15 million should not be allowed to pass unscrutinised and some consideration should be given to the sort of return which may be expected from such an investment. The Bill authorises borrowing up to £35 million; but to quote from the British Waterways Board's report for 1979, the board were paying over £1 million in interest. However, the board's total net income was only £6 million and the country was having to top up this income with an annual subsidy of £21 million.

The Minister and the speakers from both Opposition parties agreed that this money is mainly for recreational purposes, and I ask your Lordships whether we should go on running up a debt of this nature in the current financial atmosphere to provide recreation for a comparatively small section of the community. Not only that, but as the Caledonian Canal runs past my house I have a golden opportunity of seeing how some of this money is spent, and I do not like what I see. I am not going into details just now, but the British Waterways Board seem to be totally unwilling to accept that there can be anything wrong with their management.

I do not expect an answer just now, but presumably some of this borrowing of £35 million is to be applied to a highly speculative marina planned by the board for Dochgarroch on the Caledonian Canal and perhaps the Minister can let me know before the Report stage how much public money it is intended to devote to this venture and what sort of return is expected from the investment.

I have another suggestion which may appeal to the Minister, though I appreciate that perhaps it has implications beyond the British Waterways Board; indeed, it arose on the forestry debate we had recently when a question was put as to what would happen to receipts for the sale of forestry ground. So far as the British Waterways Board are concerned, they have got surplus property which could well be sold, but the proceeds of this would be paid to the Exchequer and would be lost to the British Waterways Board. At the moment, any revenue received from these properties, such as rents, accrues to the board, so that if they were sold the board would lose net income. This seems illogical. Would it not be possible for any sales to be used to offset borrowing, thereby reducing the board's liability for interest?

Finally, I think it must be agreed that anyone who can afford a boating holiday cannot be among the poorest section of the community. One wonders, therefore, whether it is right to subsidise this comparatively small proportion of the population to the extent of £21 million a year. Perhaps I may just draw one parallel. The petrol duty at an extra 20p per gallon is, I gather, to bring in £910 million; if the British Waterways Board had no annual subsidy (and I agree that is not really feasible) this would mean ½p off the petrol tax, which I suggest would be a very much better way of spending recreational money. I beg to move.

Lord Underhill

At the Second Reading of this Bill I expressed concern as to the indebtedness of the board and also the amount of interest charges that have to be paid by the board. The figures that I have (and I think they are correct) from their 1979 accounts was an indebtedness of £14 million. That may seem very small but in relation to the net income from the board's own activities of only £6 million, it is a substantial amount.

At this stage I must express my warm thanks to the noble Lord, Lord Skelmersdale, who sent me a detailed letter on quite a number of the points which I raised at Second Reading. He will be disappointed, of course, to note that some of the amendments are necessarily still on the Marshalled List. The important thing is that the borrowing, as was made quite clear by the Minister on Second Reading, relates to capital expenditure for buildings, equipment and new developments, and the last thing that we on this side of the Committee would wish to do would be to stop any new developments. Moreover, some of the equipment may be required for maintenance work, even if not actually coining under the heading of maintenance. We should not wish to restrict the board in any possible developments. I would disagree with what the noble Lord, Lord Burton, said, that this is merely for recreation; there is a commercial aspect to it to which we wish to pay a certain amount of attention. Therefore, we should not be in favour of supporting the amendment, even though there are some cautionary words which I have given and would like to add.

The noble Lord, Lord Burton, mentioned the question of the grant, and those noble Lords who were here at Second Reading will recall that there was discussion about the actual level of the grant. I will not argue that tonight, except that it is agreed that there is a decrease in the amount of the annual grant. I believe the Government take the view that it is only a small amount and the board can easily cope with this issue. It may be remembered that I enquired of the Government Front Bench how much of the maintenance arrears, as revealed by the Fraenkel Report, has been cleared, and the noble Lord, Lord Skelmersdale, said 10 per cent. and that if I was patient it could all be cleared within a period of years. Since Second Reading there have been press reports about the backlog. I hope the Committee will bear with me while I raise this matter, because this is the only opportunity we have to raise the question of the British Waterways Board and its financial affairs.

It is stated in that report that the board's officials are now negotiating with the Department of the Environment and the Treasury for up to £100 million to clear the backlog, and another £25 million to do essential work on some of the 90 reservoirs for which the Board is responsible, and for other installations. The report went on to say that because of their poor state of repair six of the reservoirs are being kept only a quarter full as a safety precaution. Therefore, we are talking about money not just for leisure and recreation but for safety, as well as the actual commercial use of the waterways and the water from the reservoirs. It was mentioned in this report that the water level in these reservoirs, with urban development below them, is being kept well down because of this danger. Sir Frank Price, the board's chairman, has stated that as a result the board is short of millions of gallons of water, and should there be a very dry summer, he is reported to have said, there could be a danger of the reservoirs drying out altogether, and even some of the canals in the system which are supplied by reservoirs also drying out and their sides cracking. Therefore, we are talking about serious matters.

Sir Frank has stated that to bring the reservoirs up to standard would cost £9 million, and maintenance of the bridges another £16 million—I understand the board is responsible for something like 1,600 bridges which come under its jurisdiction. He is reported to have said that the cost of the backlog of maintenance is today no less than £100 million at current prices.

At Second Reading I said that whatever case there may be for cuts in public expenditure, there are times when to put off public expenditure only stores up trouble for the future. If what the chairman of the board has said is correct, there is a danger not only in regard to meeting the interest charges from revenue, not only as to whether or not they can proceed with developments, but also, because of the urgency of some of the things Sir Frank Price has mentioned, whether or not they can cope with the backlog of maintenance work. I know it is not competent for this Committee to move anything, but this does bring into question the whole issue of the annual grant. I wonder whether in reply to the amendment moved the Government can say something about the grant in the light of this report about the statements by the chairman of the board.

Lord Skelmersdale

I am grateful to my noble friend, Lord Burton, for moving this amendment and also for the support which it will be seen to have received—if that is the correct English—from the Front Bench opposite. We have really had two points of view about the effectiveness of the operations of the British Waterways Board. I think we can agree that our inland waterways are a national asset which deserve to be preserved and enjoyed for their recreational value, and also, and here I particularly agree with the noble Lord, Lord Underhill, for their transport function. This is the Government's firm intention and we propose to continue to assist the board to maintain the waterways in a useful condition consistent with their status to the extent that national economic circumstances allow.

I appreciate the point that the board's operations are heavily dependent on Government grant to meet the inevitable deficit between the costs of operating and maintaining the waterways and the money that can be generated from their various activities, the income from Government licences, tolls and dues from their freight services, sales of water and so on. I can also understand the point of view that suggests that the board's finances should be kept under close parliamentary scrutiny because of their dependence on Government grant, and that is exactly what Clause 1 of this particular Bill seeks to do. I can assure your Lordships that officials of the department are in close touch with officials of the board, and while they do not seek to interfere with the board's day-to-day management functions—nor do they, of course, with any nationalised industry—they do consider with them in detail the board's financial requirements.

I should perhaps again distinguish, as I did at Second Reading, between the board's revenue requirements and their capital requirements which are the subject of this clause. Their maintenance and operating costs are met from revenue, from income they receive plus grant. Their capital needs are relatively small, and they raise loans to buy new equipment such as dredgers and so on, or for actual waterway improvement, such as the Sheffield and South Yorkshire Navigation. They do not spend money on investments such as marinas, which they prefer to leave to private investors. My noble friend Lord Burton said that one of the intentions behind his amendment was to bring the affairs of the board more closely under the scrutiny of Parliament. I would submit that the clause already provides for the opportunity for debate in another place before any extension of borrowing powers beyond £25 million can be approved, because of the requirement for the Affirmative Resolution procedure.

The noble Lord suggested that if the board disposed of their houses and other assets, probably land and other buildings, they would not need to raise their borrowing limit to the extent proposed in this Bill. The board's annual report for 1979, the most recently published one, shows that they hold freehold land and dwellings put at £14 million. Of this sum, property worth £7½ million was used for their various operations, freight services and so on, £6½, million was the value of their estate strictly surplus to operational needs, which yielded gross revenue of nearly £2 million. After deducting all overheads, including interest, administrative and essential charges, there was a surplus of £670,000, which of course was used to help finance the maintenance of waterways. Without this surplus the board would be forced to look to the department for an equivalent increase in annual grant. If such an increase were not forthcoming, the waterways would, to that extent, be less well maintained, which is to nobody's advantage.

Nevertheless it remains Government policy to encourage nationalised industries to dispose of surplus assets where it makes commercial sense to do so. To that end the board are preparing a list of their assets for purposes of discussion with the Department, and of course will register those properties which fall within the property registration requirements of the Local Government (Land and Planning) Act 1980. Should it prove possible for the board to realise to any appreciable extent its surplus assets, then it could be for consideration by the board, the Department and the Treasury how the borrowing requirement for a particular year would be affected.

With regard to the point raised by the noble Lord, Lord Underhill, on the backlog, the chairman of the British Waterways Board has put the costs for arrears of maintenance at £100 million, plus £25 million for repeairs to major structures. Those are his prices, but we do not challenge them, or the indication of the size of the problem. We know that there is a problem here, and as soon as there is money available to deal with it, over and above the strict safety requirements which the noble Lord mentioned, we will do exactly that and put money into the British Waterways Board. We are currently in discussion with the board about how to tackle these particular problems. I hope that that goes some way at least towards answering the various points that have been raised in the debate.

Lord Underhill

The noble Lord said that as soon as money is available the Government would naturally do what they could to look at the points raised by the chairman of the board. Do I have his assurance that the urgently needed safety measures will be able to be tackled by the present annual grant—that is the important point—without any deterioration of the position?

Lord Skelmersdale

Yes, my Lords, that was what I thought I said, but obviously I did not make myself clear.

Lord Burton

I should like to thank my noble friend for that very lengthy and useful answer to the amendment. First, I should like to say to the noble Lord, Lord Underhill, that I appreciate that of course, there is a commercial use for the canals. In fact, the income, as he probably knows, was £4,335,000 from commercial uses, whereas leisure produced only £1,651,000. I am wondering whether the leisure side is paying as much as it should, because these waterways cost a great deal of money to maintain. Furthermore, the reason why I made remarks about leisure uses as opposed to commercial uses was that the noble Lord, Lord Winstanley, said that my noble friend Lord Bellwin indicated that the main purpose of the inland waterways network was, frankly, recreational.

However, I propose to leave that point. I shall just say that the feeling about the amount of subsidy which has to go to lame duck nationalised industries is really very strong throughout the country at the moment, particularly when industry and private commerce are suffering so severely and having to subsidise those industries out of their taxation. The Government must look at every possible method of restricting the amount of public money that goes to those industries.

Finally, I should like to know when the board's full estate was last valued. Clearly I do not want an answer now. My noble friend gave us figures regarding the value of the houses and the commercial property. Clearly valuing property is quite an expensive business and I would not like to ask the board to incur a great deal of expense by doing that. However, I wonder on what date the valuations were last made.

There is undoubtedly in some cases a surplus of houses on these canals. They have been modernised and the locks can now be operated with far fewer personnel. Of course, the question of where the money is to go is a much wider subject. I do not want to press my noble friend Lord Skelmersdale at this stage because this is the first time that he has spoken from the Front Bench in Committee—and I should like to congratulate him on the way in which he has answered the points which have been raised. However, I think that the Government should look at the question of what happens to the capital assets of nationalised industries that are sold. With those few remarks I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

Clause 2 [Exemption from charges for water for fire fighting]:

7.13 p.m.

Lord Underhill moved Amendment No. 2: Page 2, line 19, after ("purposes") insert ("providing that such criteria impose no additional charges upon domestic users").

The noble Lord said: I beg to move Amendment No. 2. It may be for the convenience of the Committee if I speak also to Amendments Nos. 3 and 4. Clause 2 with which we are now dealing provides for the exemptions from charges of private water supplies for fire-fighting purposes, to serve, for instance, a sprinkler system that may be installed. As was made clear on Second Reading, only a limited number of the water authorities levy such charges and the Minister explained that it is only one, the North-West Water Authority, which has any charges of any significant size. In the last year the total of those charges was £600,000. I think that it is generally agreed that if those charges are no longer to be levied, then that amount of money must obviously be made up from somewhere.

On Second Reading I was very surprised to hear the noble Lord—and the noble Lord, Lord Skelmersdale, has confirmed what he told me in his kind letter—when replying for the Government, state that, based on views which were expressed by the North-West Water Authority, the Government originally took the view that the exemption would be recovered from metered industrial and commercial consumers and that domestic consumers would not be affected. The noble Lord added that, at its meeting on 23rd February the North-West Water Authority changed its plans and proposed to spread the cost of the exemption among all consumers, and therefore domestic consumers would be affected.

I have been studying very carefully the stages in the other place, because they seem to reflect that the Government's attitude was either put badly in the other place or, frankly, was based on a view which the Government sincerely held and which may justify the reason for my first amendment. On 20th January Mr. Giles Shaw, the Under-Secretary of State for the Environment, stated, in column 231: It is not correct … that the burden of the withdrawal of those charges will fall on the domestic ratepayer. It will fall on the same category of consumer as that on which charges are currently levied, namely, the industrial and commercial user". That was quite a definite statement. When the Opposition spokesman challenged the statement, the Minister commented: The right hon. Gentleman is wrong about that, as he was wrong about many other matters". It was not just a view expressed by a particular water authority. In Standing Committee the matter was reopened and there were quite a number of amendments tabled to propose various exemptions when the charges are reallocated. The Minister, Mr. Shaw, said, at column 108: The consequence of the clause will not be to shift a higher burden on to the smaller and more vulnerable consumers and domestic consumers". Again, at column 110, he said: Water undertakers will need to distribute"— note that he said "water undertakers"; he used the plural, he did not refer just to the North-West Water Authority— the loss of income involved in these connection charges among consumers but, as I indicated on Second Reading, I envisage this as falling on the measured consumers—in other words, on the metered sector". Finally, at column 111, the Minister said: If the Bill is passed unamended, as we intend, the redistributed charges will fall on the same category of consumers who currently pay the charges". The important point is that, in view of those assurances, a number of amendments, including the one which I am now proposing to the Committee, were withdrawn. I would again emphasise that these extracts seem to make absolutely clear that it was the Government's interpretation of the proposed clause and the Government's intention that it would apply to all water undertakings and not just to the North-West Water Authority.

The first of the amendments which I am moving is to exempt from any reallocation of charges the domestic consumers. The second is to exempt the small family businesses, and the third is to provide that these charges should not fall at all upon the commercial or industrial consumers employing less than 50 persons, with the proviso where there is not installed equipment for extinguishing fires".

I should like to make a few comments on the consumers' amendment. This amendment will restore to the clause the meaning that the Government, by the Ministers' various statements in the other place, intended. Therefore, we are really asking the Committee to put into the Bill what the Minister in the other place made quite clear should be the position. If he was wrong in making that statement then no doubt we shall be told. It seemed to be based on something more than a statement of the North-West Water Authority.

As regards the two other amendments, can it possibly be justified that a large concern with, say, a sprinkler system, shall be exempt from charges and that small family businesses—to which this Committee always gives considerable attention—should be called upon to help to meet the loss of revenue in consequence of that exemption? The third exemption deals with the firms that may employ fewer than 50 persons. I make it clear that the amendment says: …where there is not installed equipment for extinguishing fires"; that is, equipment such as a sprinkler system. Those last words are important. Can we justify making a small concern employing fewer than 50 persons that has no sprinkler system bear charges in order to afford exemption to the large concerns which, as I made quite clear on Second Reading, already—because they have a sprinkler system—are in a favourable position regarding the small concern, in that they receive a considerable reduction in their insurance premiums? I am concerned that we cannot justify the two points dealt with in Amendments Nos. 3 and 4. Amendment No. 2 seeks to restore the Bill to the position about which the Government in another place gave assurances. I beg to move.

Lord Burton

I should like to make two short points. I am rather at a loss to understand how the North-West Water Authority managed to expend, I think £600,000—not £300,000 as is stated in Hansard—or at any rate a large sum of money, which cannot have been entirely just for the use of water to fight tires. If one installs a sprinkler system, it is presumably largely for the safety of the workers working on that premises; and presumably as the workers live within a reasonable distance, the chances are that they will be the very people who may be charged some of the cost. It will be only a very small proportion when it is distributed among the various domestic houses, but it does not seem to be inequitable that they should be charged a little for their own safety.

Lord Skelmersdale

I, too, with the permission of the Committee, should like to take these three amendments together. The noble Lord, Lord Underhill, has made very clear his view that the cost of exempting charges for water for fire-fighting should not fall on certain categories of consumer, and his amendments are designed to achieve this. None the less, the Government must ask your Lordships to reject them. If accepted, they would impose unnecessary and troublesome constraints on water undertakers in the way in which they structure their charges. Imagine the additional administrative work involved in identifying these categories in each water authority area. The cost of this could well outweigh the relatively small revenue lost by these exemptions and, of course, it would be quite open to the water authority to pass on these administrative costs to all consumers—and I stress "all''.

We have acknowledged that water undertakers will need to re-distribute the loss of income among consumers. But I think that there is danger of making too much of a meal of this. It must be borne in mind that at present no water undertaker actually charges for water taken for fire-fighting and only one levies significant charges for making water available for this purpose. Yet these services have costs which must be recovered. So the vast majority of the water undertakers already absorb the costs of these services in their general charges as, indeed, they absorb the costs of supplying water to public hydrants for fire-fighting purposes. This may mean adding a small extra cost to every consumer's bill, or it may be that some water undertakers choose to recover the cost from certain classes of consumer. But it is certain that the extra costs involved are small.

To be simplistic is perhaps to use the wrong word and eventually the right word will come to me, but I am sure that your Lordships would not be surprised if I were to say that I was not expecting a certain amount of flak as a result of the Committee and subsequent stages on this Bill in another place. But, to be fair, I am sure that the noble Lord, Lord Underhill, will agree that the Government can speak only on the facts as they know them at the particular moment in time that they are speaking. That is exactly what my honourable friend Mr. Shaw did. I, equally, have tried to be as fair as I could with the Committee and with the noble Lord. When I discovered that the facts had changed, I, of course, let him know; and I hope he will agree that that was the right and proper thing to do.

Reverting to what I was saying about the extra costs involved being small, I would point out that if we take as an example the North-West Water Authority—at the moment the only one to levy significant charges for making fire-fighting water available—they have estimated that when they can no longer levy these charges, they will have to levy an extra charge on the community as a whole; that is, on both measured and unmeasured consumers. So far as unmeasured consumers are concerned—the class to which the three categories of consumer in these amendments would normally belong—the authority reckons that the exemption will add, on average, only 11.5 pence per year to every water bill. I would stress that this is the authority's own figure, but I think it serves to make the point. What I must ask your Lordships is whether this is too high a price to expect people to pay for the extra public safety that Clause 2 is intended to secure, and whether amending the Bill to protect certain categories of consumer is worth the extra administrative cost to which I have referred. The Government firmly believe that the answer to both these questions is "No"; but I would add that the community at large, as my noble friend Lord Burton stressed stands to benefit from these proposals which will help protect shops, factories, offices and other buildings which the public frequently use. There is also the point that where no fire occurs anywhere in a local authority area, there is a saving to all the ratepayers in that particular local authority area. Therefore, for these reasons, I hope that the noble Lord will agree to withdraw his amendment.

Lord Underhill

I have already expressed my thanks to the noble Lord, for the letter that he sent me, and on this issue he gave me the full facts concerning the North-West Water Authority. However, the point I was endeavouring to make is that the Government in the other place were so adamant that it seemed to us that it was not just the North-West Water Authority about which they were worried, but the general principle; so much so that the debate went on for many hours and took up many columns.

The only other point I would make is that the noble Lord said that this would be creating an immense amount of administrative work for small sums involved. I shall not be tabling any amendments on the other subsections of this clause, but there is much administrative work involved. I know that the Government say that they will try to keep it down but, because of these exemptions, where there is one common supplier to supply both fire-fighting equipment and general purposes, much administrative work is involved. I should have thought that with the modern computer system, the allocation of charges, whatever they might be, would be very slight. I think that I have made my point quite clear. Therefore, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 3 and 4 not moved.]

Clause 2 agreed to.

Clause 3 agreed to.

[Amendment No. 5 not moved.]

Clause 4 [Separation of common water service pipes]:

On Question, Whether Clause 4 shall stand part of the Bill?

Lord Burton

I should like to raise one point on Clause 4. It is a question of individual water pipes. I believe that this question arose through urban development, particularly where council houses were being sold. Will the Government please look at the rural situation where, when a pipe is renewed, if the public supply is not close enough to the individual dwelling three or four lengths of pipe may have to be used where only one has existed before. I can think of one particular instance of two cottages and a farm building. If these cottages were separated away, it would involve quite a long piece of pipe to reach the individual properties, whereas probably it would be better for the mains to be moved nearer to them. I do not know whether I have made that clear.

Lord Skelmersdale

On that point, Clause 4 says that the statutory water undertaker: shall not require the provision of separate service pipes for those houses until either— one of four conditions has been met. But it does not mean that if one of these four conditions is met, this will necessarily happen on every occasion. I hope that that will satisfy my noble friend.

Clause 4 agreed to.

Clause 5 agreed to.

7.30 p.m.

Lord Skelmersdale moved Amendment No. 6: After Clause 5, insert the following new clause:

("Civil liability of statutory water undertakers for escapes of water

.—(1) Where an escape of water, however caused, from a communication pipe or main of statutory water undertakers causes loss or damage, the undertakers shall be liable, except as otherwise provided in this section, for the loss or damage.

(2) Statutory water undertakers shall not incur any liability under subsection (1) above if the escape was due wholly to the fault of the person who suffered the loss or damage or of any servant, agent or contractor of his.

(3) Statutory water undertakers shall not incur any liability under subsection (1) above in respect of any loss or damage suffered by any excepted undertakers for which they would not be liable apart from that subsection.

(4) The Law Reform (Contributory Negligence) Act 1945, the Fatal Accidents Act 1976 and the Limitation Act 1980 shall apply in relation to any loss or damage for which statutory water undertakers are liable under this section, but which is not due to their fault, as if it were due to their fault.

(5) Nothing in subsection (1) above affects any entitlement which statutory water undertakers may have to recover contribution under the Civil Liability (Contribution) Act 1978; and for the purposes of that Act, any loss for which statutory water undertakers are liable under that subsection shall be treated as if it were damage.

(6) Where statutory water undertakers are liable, under any enactment or agreement passed or made before the coming into force of this section, to make a payment in respect of any loss or damage, they shall not incur liability under subsection (1) above in respect of the same loss or damage.

(7) In this section—

1. (a) "communication pipe" and "main" have the meanings assigned to them by section 1(1) of Schedule 3 to the Water Act 1945;
2. (b) "damage" includes the death of, or injury to, any person (including any disease and any impairment of physical or mental condition);
3. (c) "excepted undertakers" means—
1. (i) statutory undertakers within the meaning of section 290(1) of the Town and Country Planning Act 1971;
2. (ii) any highway authority within the meaning of the Highways Act 1980;
3. (iii) any bridge authority, bridge managers, street authority or street managers within the meaning of section 39(1) of the Public Utilities Street Works Act 1950; and
4. (iv) any person on whom a right to compensation under section 26 of the said Act of 1950 is conferred;
4. (d) "fault" has the same meaning as in the Law Reform (Contributory Negligence) Act 1945; and
5. (e) "statutory water undertakers" has the meaning assigned to it by section 11(6) of the Water Act 1973.

(8) This section shall come into force on such day as the Secretary of State may by order made by statutory instrument appoint.").

The noble Lord said: I must apologise in advance for the length of what I am about to say, but it is an extremely complicated issue. This amendment results from a Government promise in another place that we would bring forward our own proposals to provide for compensation to those suffering damage as a result of burst water mains. If it is for the convenience of the Committee, and particularly the noble Lord, Lord Underhill, I should like, in speaking to this amendment, to deal with his amendment as well.

The present position in law is of long standing and is as follows. As the result of the case Green v. Chelsea Water Works Company, decided by the Court of Appeal in 1894, statutory water undertakers have been under no liability to pay compensation for damage caused by escapes of water from burst water mains, except where it is possible for a plaintiff to prove they have been negligent. Statutory water undertakers have been able to defend themselves on the grounds that, though there are inherent dangers in conveying water through pipes under pressure, nevertheless because they have been authorised by Act of Parliament to lay their mains, and because they have a statutory duty to maintain a continuous supply of water, not for their own purposes but for the purposes of the public, they should not be made liable for any damage if the water escapes.

It is true that they can be held liable if they are shown to be negligent. But this is a very difficult thing to prove. For instance, how old should a pipe be before it is reasonable to expect things to go wrong with it? The courts have had to make decisions on just such a matter. If a pipe is less than the required age, and if there are no other grounds for assuming negligence, it is virtually impossible to prove. Or again, how many degrees of frost should water mains be designed to withstand? If a burst occurs as a result of a cold spell, was it a normal cold spell (in which case negligence might be proved) or something worse than that?

It is unreasonable, in our view, that such questions should have to be considered. If there is an escape of water from a water main, however it may have been caused, the assumption should be that the public, for whose benefit the pipe has been laid, should pay. This can be achieved by making the water undertakers liable, and that is the purpose of this clause.

It may be asked—and has been in some quarters—why confine this amendment to water mains and communication pipes? Communication pipes, incidentally, are the pipes leading off the mains to the boundary of the individual's property and are, like mains, the undertakers' responsibility. Why confine the clause in this way to water pipes? My honourable friend the Parliamentary Under-Secretary of State has already explained the reasons for this in another place. A particular problem for property owners stems from the present law about the laying of water mains. Statutory water undertakers have wide powers to lay mains across private land. These are wider than the powers enjoyed by most other statutory undertakers (for example, the British Gas Corporation).

Water undertakers do not require the owner's consent, and in consequence they do not need to obtain any easement or deed of agreement which (typically) would provide that in the event of escapes of water from the main the owner would be entitled to compensation. So they do not get this. In rural areas, where mains cross individual owners' land for considerable distances, it is impossible for the owners to insure themselves against the risk of damage from escapes of water at anything less than a prohibitive cost. It is equally impossible for the water undertakers to insure themselves since—because of the Green v Chelsea judgment—they have no liability to pay anything. The result is that, when a burst occurs, possibly damaging a farmer's crops, then the farmer has no redress against the water undertakers for the damage caused. This is a real source of grievance. In towns, where it is possible to obtain insurance, the water undertakers in recognition of the present illogical state of the law have agreed to make ex gratia payments to uninsured householders who suffer damage in this way. We understand however that the compensation payable under this arrangement is often only a partial recompense for the damage. We do not in any case feel that it is right to depend on a regular system of ex gratia payments of this kind. There is an inherent oddity in this concept. The principle in our view is—and I repeat it—that the public should pay the private individual who suffers damage in these circumstances.

It seems from his amendment that the noble Lord, Lord Underhill, would extend this principle—the principle of strict liability—to cover escapes of substances from sewers. As my honourable friend said in another place, sewers present a more complicated problem than water mains. The water authorities have no control over the volume of effluent carried by particular sewers. Anyone can connect a drain into a public sewer. That fact, combined with the age of the sewerage system, has led to substantial problems of overloading of sewers, and of decrepit sewers in certain parts of the country. We need to consider whether this should affect the principle of liability, and it if does not, whether liability should be imposed in respect of damage caused directly by collapses, or by leaks of sewage, or in any other circumstances. Many housing and industrial estates are served by private sewers. The noble Lord's amendment would benefit only those whose properties were drained by a public sewer. Is this an appropriate limitation?

When this matter was considered in another place my honourable friend said that he could not easily exclude that the principle of strict liability should be established for the sewerage system, but he did not think it feasible to table an amendment on this subject during the passage of this Bill. I did also try to underline that in my winding-up speech on Second Reading, when I pointed out to the House that this was a Water Supply Bill. However, my honourable friend did agree to a proposal of the Opposition that he should meet an all-Party delegation—later the suggestion was widened to include outside interests such as the National Farmers' Union, the Association of Metropolitan Authorities and others—to discuss the matter further. In our view that is a reasonable position to have reached, and we do not think that we should contemplate extending the principle of strict liability to sewers until more thought has been given to the subject.

I should briefly explain the limits we have imposed on the extent of this clause because I know that there has been a certain concern in various quarters. These limits are not many. We have provided that where it is wholly the fault of the person suffering the damage, or his servant, agent or contractor, that he has suffered this damage, then no liability should rest on the water undertakers (subsection (2)). Where it is partly his fault, subsection (4) provides that the undertakers' liability should be diminished accordingly. Subsection (3) provides that no other statutory undertakers, highway authorities or allied body should benefit under this provision. That is because the relationships between these bodies are governed generally by the Public Utility Street Works Act 1950, and we do not wish to disturb those provisions. It would be unreasonable to put a higher degree of burden onto statutory water undertakers vis-à-vis other undertakers than is already imposed on those other undertakers. Subsection (6) prevents the duplication of payments of compensation.

I hope that with the benefit of these explanations your Lordships will be able to agree that what we propose represents an important measure to help those who at present, through no fault of their own, have to sustain losses and damage which properly should be borne by the public at large. I commend this clause to your Lordships, and I would ask the noble Lord, Lord Underhill—although he has not yet moved it—to consider withdrawing his own amendment for the reasons which I hope I have fully explained and the fact that it goes too wide for the present Bill. I beg to move.

7.38 p.m.

Lord Underhill had given notice of his intention to move as an amendment to Amendment No. 6, Amendment No. 7: Line 2, after ("main") insert ("or escape of any substance from a sewer").

The noble Lord said: I can assure the noble Lord that I shall not move this amendment but speak on his own amendment, for the reason that I shall explain. I am grateful to the noble Lord for the helpful outline and explanation he has given of the Government's amendment. We welcome in general the amendment moved by the noble Lord on behalf of the Government. But the Committee will understand that I only saw this amendment yesterday, and therefore its full implications and the various law points mentioned must be given some study, but in general we welcome it at this stage.

The reason why we wished to add the amendment I had put on the Marshalled List is because everyone would understand that there are as many cases of serious loss and damage arising from leakage from sewers as there are from water. In fact some are so bad that I am certain your Lordships will be aware of the situation. That is why we felt the sewers ought to be covered as well. I thought there would be no danger in putting forward such an amendment because, after all, this is a Water Bill. The Water Act places sewerage and the responsibility for sewers upon water authorities. Therefore, I am certain that it would have been a competent amendment to have moved but for the explanation given by the noble Lord.

The Minister in another place had a good deal of sympathy for including sewers and at one stage promised to look at the matter with a view to introducing a suitable amendment on Report. I readily understand, because of the legal points which the noble Lord explained, that it was impossible for him to do that. However, would it be possible for the consultations which I am pleased are to take place to consider the question of escapes from sewers—in other words, the Government are saying that consideration should be given to the matter and that they wish to look at all the problems—to take place before the Bill leaves your Lordships' House? That is important, otherwise we may find that we have compensation provisions for leakage from water mains but not from sewers, and there may be little chance of including that in legislation for a considerable time.

Have any views on the new clause been received from the National Water Council, which is, I understand, concerned with certain aspects? I am not saying that I support the points about which the council is concerned, but it would be helpful to know if its views have been received. Although the new clause would place some burdens on water authorities, in effect it means placing a burden on the whole of society, because we all pay water rates. However, I welcome the Government proposal, subject to what I said about studying it carefully, and I hope the other consultations will take place before we part with the Bill.

Lord Nugent of Guildford

I thank my noble friend for his lucid exposition of the new clause, an important provision which introduces an important new principle. I can meet the inquiry of the noble Lord, Lord Underhill, about the views of the National Water Council, because I heard their views today. They, like the noble Lord, have found the time all too short because they saw the amendment only yesterday and had not been brought into consultation on its form. They, and the water industry generally, are perfectly willing to accept any liability which Parliament wishes to put on them, and in practice they have been makirg ex gratia payments where anybody has suffered from burst mains; although, following the principle of Green v. Chelsea Water Works Company to which my noble friend referred, they have no legal liability unless negligence has been proved.

Having said that they are in principle willing to shoulder whatever burden Parliament wishes to put on them, I should express their serious anxiety about the form of my noble friend's new clause. It places an almost unlimited liability on the water industry and they feel some doubt as to whether that is sensible. As the noble Lord, Lord Underhill, said, whatever additional costs fall on the water industry have to be paid for by the whole community in increased water charges. Be that as it may, I would call attention to a few aspects of the new clause.

My noble friend explained that subsection (2) reduces the liability on water authorities and water companies where negligence by the claimant has been proved. That is fair enough and it is a useful little concession. But the rest of the liability is enormous—it is virtually unlimited—and such anomalies would occur as where a water main is running in the same trench as a gas main (which is frequently the case, especially in urban areas) and then, if the gas main bursts and bursts the water main, the water industry has to pay, and that is absurd. The other public utilities have no liability in the matter at all; nor, similarly, have the electricity industry, the Post Office or British Railways.

I suggest that this liability, which is probably justified in terms of public policy, needs looking at in the context of the liabilities of the other national utilities which have many similar features. Incidentally, they would also be liable for the act of a third party or an act of God. Maybe Parliament wishes to make them subject to all those liabilities, but they are very great liabilities indeed and the National Water Council, speaking for the water industry, has not yet had a chance of expressing its views on the new clause because, like the rest of us, it has only just seen it. I therefore hope my noble friend will feel that in the points I have made there is sufficient substance to justify another look to see whether the liability has been set just right. My guess is that the right solution would be to make the water industry's liability a responsibility without the claimant's obligation to prove negligence by the water industry. That would of course limit it considerably compared with the new clause.

I was glad to hear my noble friend resisting the blandishments of the noble Lord, Lord Underhill, to extend the liability to sewer mains as well; the liability involved there is a good deal more serious because the water industry has no control over what is put into sewers. It would therefore be unreasonable to make them liable for bursts which occur there. Incidentally, the nature of bursts from sewers is different, in that they are not under pressure. Such an occurrence is much more in the nature of a collapse, especially in urban areas where the original sewer was badly built, the whole structure has worn away and leaked, so that eventually a huge chasm appears under the road and suddenly the whole road falls in, and probably a bus goes down with it. It is a very different liability and I was glad to hear my noble friend resist any extension of that liability.

I hope my noble friend will be willing to take the new clause back for further consultation, perhaps with myself and the leaders of the water industry, to see whether the extension of public liability in this sphere, which I am sure is right in principle, has perhaps gone a little too far in the new clause as drafted.

Lord Burton

I join my noble friend Lord Nugent in welcoming the new clause, on which I have three points to make. The first is that it says the provision shall come into force on a day to be appointed by the Secretary of State. Can my noble friend give any indication as to when it is likely to come into force? Secondly, can he give any indication at all of the extra cost which is likely to Call on water authorities? That may go part of the way to answer what Lord Nugent was saying.

Thirdly, I welcome in some respects what the noble Lord, Lord Underhill, said about sewers. If it is not possible to include sewers in this legislation—and it seems the Government are against doing so—would it be possible to go part of the way by giving water undertakings a directive to the effect that whereas at present they give compensation on an ex gratia basis for water bursts, they might consider giving ex gratia payments to someone who has suffered severely from something going wrong with the sewers? That is just a thought on the matter; a directive might go part of the way towards dealing with the situation.

It seems that no Government when in power devote to the question of sewerage the same amount of energy or finance as they devote to water. I do not know why this should be. Perhaps it is because water, as it goes into a house, is more appreciated. Certainly sewerage does not receive the same priority as water, but I feel that the two are equally important. Perhaps I may be a little personal here. In my own area the sewerage of the whole of Inverness borough still goes crude into the firth, which is really disgraceful. Perhaps that is another matter, but we are, I believe, giving £50 million to Egypt for new drains in Cairo, and yet we cannot spend £7 million on laying new drains in Inverness.

Lord Skelmersdale

It is difficult to know where to start in replying to the points made. With the permission of the noble Lord, Lord Underhill, I should like to refer first to my noble friend, whose experience and expertise in these matters we welcome to our deliberations. Of course, I know about the letter of his successor, Sir Robert Marshall, to my honourable friend Mr. Shaw. In fact, I have a copy of it before me. Perhaps I can tie in this point with something that the noble Lord, Lord Underhill, said. The letter is dated 12th March, and it is now the 19th March. We have already decided to widen the consultations that are to take place, and I do not consider that we are being exactly laggard in how we are dealing with the matter.

My noble friend Lord Nugent has commented on the very wide nature of this provision and on the point that it is possibly an open-ended liability. As he said, the water industry in England and Wales has accepted for some time that the rule in the Green v. Chelsea Waterworks Company case should be reversed. That is to say, it has accepted that it should no longer be necessary to prove negligence where bursts have occurred. This is a very significant element in the new liability that the Bill is imposing. In our view, for practical purposes the clause is not going so very much wider than that. We are not allowing the water undertakers to plead non-liability for bursts caused by an act of God or by a third party. If the industry's wish were observed, both those defences would be open to them. However, we do not accept that an act of God is a common enough occurrence to be concerned about. How many times, for example, has a water main been struck by, say, a bolt of lightning, causing damage? As for the action of a third party, one water authority has estimated that a quarter of its bursts are caused by others; for instance, other statutory undertakers, developers, contractors, and so on.

All the clause provides is that where such an accident occurs the water undertakers should be liable to anyone who suffers damage from the escaping water. We are not reducing the water undertaker's powers to proceed against any third party which may be responsible for the damage, and subsection (5) is intended to make that clear. I hope that my noble friend will be able to take that point.

My noble friend Lord Burton suggested that we should direct water authorities to make ex gratia payments. I regret to have to tell him that there is no way in English law in which that can be done. The noble Lord, Lord Underhill, while generally welcoming the clause, said that he wanted more time to study it, and he asked me about the consultations that had taken place regarding sewers which I mentioned in moving the amendment. The position is that we must get the Bill back to another place in order for it to agree or disagree with any amendments that we may make, and we must bear in mind the question of the Bill receiving the Royal Assent by about the middle of April. I am advised that that would not allow enough time for consultations to be concluded. Of course consultations will begin in the period—I willingly give that promise from this Dispatch Box—but there is really not enough time for them to be concluded.

My noble friend Lord Burton asked about the coining into effect of this clause. Since water authorities have now prepared their budgets for 1981–82, and bearing in mind that these obviously do not take account of the new liability that this provision imposes upon them, we feel that it is therefore totally impossible to bring the provision into force before the 1st April 1982. Our provisional view is that the day appointed should be 1st April 1982, though that will be subject to further consultation with the water industry. I should also stress to my noble friend Lord Nugent that these consultations will continue. I hope that in the light of those answers the Committee will feel able to approve this new Government clause.

Lord Nugent of Guildford

I thank my noble friend for his answer, but I must say that it does not convince me in the least. I consider that the liability being put on the water industry by this proposal is absolutely out of proportion in comparison with those imposed on all other public utilities and is entirely unfair in the instance that my noble friend proposes. The point that my noble friend has made gives water undertakers a course of action, but that is all; there is no question of putting them on the same basis as other public utilities. I am not satisfied with my noble friend's answer. I feel that the consultations have been inadequate. Any liability in this context should be placed equally on all public utilities, and then we could put the matter in the correct perspective. I must advise my noble friends that I shall put down an amendment for the Report stage to accomplish that end.

Lord Burton

I thank my noble friend for his answer to the question about the starting date. If the actual starting date cannot be fixed, can consideration be given to advancing the date of liability, even if payment is to come at a later date? I should like my noble friend to think about that; I do not want an answer at this stage. I gather that we are pressed for time and so I shall raise now a point which I had intended to raise on a later amendment. The Scottish local authorities have apparently been refusing to pay compensation unless the aggrieved person can prove that the authority concerned was negligent. Clearly that is a very hard thing to do. Can the Minister tell me whether or not the Scottish authorities are right in withholding compensation in such cases? If the authorities have a right to withhold compensation unless negligence is proved, can the Government give an assurance that Scotland will be brought into line with England on this matter?

The Minister of State, Scottish Office (The Earl of Mansfield)

Perhaps it will be for the convenience of the Committee if at this stage I intervene in regard to the Scottish interest in this matter. I fear that I have to tell my noble friend that it is not for me to say whether or not Section 10 of the Scottish Act imposes a strict liability on a Scottish water authority. That would be a question for a court to decide, and so far no court has been asked to test the matter. What I can tell my noble friend—and I hope that it may be of some comfort to him—is that, naturally enough, the Government are taking account of this particular amendment which is being inserted in the Bill at the behest of the Department of the Environment, and we shall have to take stock of our own particular Scottish conditions to see whether legislation will be necessary in the future. I say that, bearing in mind that our water authorities are local authorities and their customs are different from those of English water authorities. Similarly, they operate under pressures and constraints which are different from those affecting the English authorities.

We shall have to consider the effects of the amendment of the law on the subject, and then consult the Convention of Scottish local authorities to see what it has to say. I tell my noble friend that because there will not be any question of our coming forward on Report with any kind of amendment in this regard. There simply is not time for the consultation and cogitation that would be necessary. My noble friend spoke about public expenditure and expressed the very laudable desire to contain it. I should tell him that an amendment on these lines which extended to Scotland would, in terms of public expenditure, have the effect of placing new burdens on Scottish local authorities.

Lest, however, my noble friend were to come to the conclusion that the Government are in effect putting off some evil day, what I can say to him is that I give no undertaking but if the Government decide that legislation on these grounds is needed in the future, then I think certain legislative vehicles will present themselves, either perhaps later in this Session or certainly next Session, to bring into the law any desirable reform which the Government may wish to introduce.

Lord Burton

I thank my noble friend for giving a little, perhaps, on this, and for his helpful reply. I only hope that Scottish local authorities are not as unhelpful as my noble friend Lord Nugent seems to have been on the English part.

On Question, amendment agreed to.

[Amendment No. 7 not moved.]

Lord Denham

I think this might be a convenient time to adjourn this Committee stage. I do not know how long the noble Lord, Lord Underhill, thinks the remaining amendments will take but I understand there are points of substance here. I think it might be better to go back to the Companies Bill, unless he violently disagrees with that.

Lord Trefgarne

I beg to move that the House be now resumed.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.