§ 7.53 p.m.
§ Lord Skelmersdale
My Lords, on behalf of my noble friend Lord Bellwin, I beg to move that the House do now again resolve itself into Committee on this Bill.
§ Moved, that the House do now again resolve itself into Committee.—(Lord Skelmersdale.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ The LORD DRUMALBYN in the Chair.]
§ Clauses 1 to 5 agreed to.
§ Lord Underhill moved Amendment No. 8:
§ After Clause 5, insert the following new clause:
§ ("Water charges equalisation
§ . Notwithstanding anything in this Act relating to the charges payable to water authorities, section 1(1) of the Water Charges Equalisation Act 1977 shall have the effect as if before the words ("by order") the word ("may") shall be replaced by the word ("shall").").
§ The noble Lord said: This amendment seeks to insert a new clause relating to the Water Charges Equalisation Act. That Act, which was passed in 1977, provides for payment of equalisation levies and payments by and to water authorities. Section 1 of the Act provides that if in any year it appears to the Secretary of State that the relevant financing cost of a water undertaking are less than the average for all undertakings in England and Wales, he may—and note the word "may"—by order direct the particular undertaker to pay a levy which shall be distributed to other undertakers in the form of equalisation payments.
§ I need hardly stress that water is a basic commodity for the entire community and the purpose of the 1977 Act was to move towards some sense of equalisation of water charges. The Government have announced their intention not to move orders in connection with this Act for the next financial year and this is made possible because of the permissive nature of Section 1 of the Act to which I have referred. The purpose of the amendment is to make it mandatory upon the Secretary of State to make an order in any year, should it appear to him that there is an inequality in financing costs between the various water undertakers.
§ On Second Reading I questioned whether the Government were content just to let this matter slide or whether they had any other plans for the future. The noble Lord, Lord Skelmersdale, was unable to give me any information at that juncture, but he has kindly let me know that the Government have decided to give help to the Welsh Water Authority in lieu of any action under the Water Charges Equalisation Act, and that the Government have no intention of replacing this Act with any other scheme. This is very disappointing because I understand that there are other authorities which could be affected by equalisation, if not now then in the future.
§ The purpose of the Water Charges Equalisation Act was not just to secure fair treatment for Wales; it was also to introduce some form of strategy into water supply and lead towards equalisation of water pricing. It was a step towards removing anomalies. I must emphasise that, although my amendment will make it mandatory for the Secretary of State to make an order, the order need be made only if it appears to him that there is inequality in the cost of the various water undertakings. I hope the Government will feel able to accept this amendment because it still leaves the matter for the Secretary of State to see whether there is any inequality, and if the Government cannot concede this 1131 amendment I hope they will declare what intentions they have towards some form of equalisation on the principles of the 1977 Act. I beg to move
§ Lord Skelmersdale
I must chalk up another failure on my score card. My hope was that I had already explained this to the noble Lord in my letter, but obviously I did not go far enough, and with the permission of the Committee I will make another attempt. This amendment seeks to cover ground which I believe was extensively covered in another place. The amendments discussed there related to the charges payable for bulk supplies of water by one authority to another. As I understand it, the aim of this amendment is much the same; that is, to draw attention to the level of water charges in Wales and to seek some means of offsetting the loss of payment to the Welsh Water Authority following abandonment of the Water Charges Equalisation Scheme.
It is true that the charges made by the Welsh Water Authority for water services, in particular for water supply, are higher than the average, although they are not—and this is a popular misconception—the highest in the country. In 1980–81 the average bill for water supply alone within the Welsh Water Authority area was £30.87. Two English water authorities have charges 8 per cent. and 3 per cent. above those of the Welsh Water Authority. While it is true that charges in Wales are above the average, they are not so fat above the average as charges in some parts of England. However, it was concern about the levels of charge in Wales that led the previous Administration to pass the Water Charges Equalisation Act 1977, which is now the subject of this amendment.
As the Committee will know, the Government do not consider that this Act works in a way that can be justified. It was intended—as the noble Lord has said—to bring the domestic water supply bills of consumers closer to the average, by equalising the historic financing costs of water undertakers. While it succeeded in this objective—to the extent that slightly more than half the consumers affected had bills which move nearer to the average—it failed in that 43 per cent. of the consumers had bills which moved further away from the average. About 18 per cent. of the consumers whose unequalised bills were above the national average were shifted even higher above it. Some 25 per cent. whose unequalised bills were below were shifted even lower. In the Thames Water Authority area, for example, the average bill moved from 12 per cent. above the average to nearly 18 per cent. above. In the Northumbrian area, the average bill went from 18 per cent. below to nearly 25 per cent. below. The Committee will see from this that, although the Act in question is called the Water Charges Equalisation Act, for almost half of domestic consumers it was a disequalisation Act. We could not possibly defend such an arrangement. That is why we decided that there should be no more full orders under the 1977 Act, and indeed that the Act itself should be repealed.
It could well be asked: If the scheme under the 1977 Act worked so badly, could not a better scheme be devised? In the first place, the Act permits only one scheme to be used, the scheme it contains, so there is 1132 no flexibility there. Secondly, no one, not even from Wales or the South West, has so far suggested a scheme which would work better. Thirdly, and most importantly, there is the issue of principle. Should charges be equalised at all? Water charges are charges for services rendered, not a tax. It is, in our view, basically right in principle that costs for services should be paid by those to whom the service is given, subject only to giving through the social security system assistance to individuals in need. We will come on to this in a later amendment. Equally, it is wrong in principle that individuals should contribute to the cost of services they do not receive.
That is not to say that we are not concerned about the level of water charges in Wales; of course we are. The loss of payment under the equalisation scheme amounts to some £3.1 million to the Welsh Water Authority. In our view this requires giving that authority special consideration in view of the effects on its charges. The authority has been given five years, instead of three as in England, to achieve a rate of return of 1¼ per cent. on its net revalued assets. The Government have increased its external financing limit—that is, the amount of money it may borrow—from £21 million to £29 million, an increase of 38 per cent., as compared with an increase of only 13.4 per cent. for the English authorities. This will enable it to carry on with its capital programme with the least effect on annual charges.
I have explained why we can no longer continue to make orders under the 1977 Act. We are, however, aware of the implications of this decision for charges in the Welsh Water Authority's area, and have taken steps to mitigate the situation. It would be wrong to expect the Government to make further orders under this ineffective legislation. I must, therefore, ask the noble Lord to consider these facts—and I hope I have achieved a better explanation this time than I did in the letter to which he referred—and withdraw this new clause.
§ Lord Underhill
The explanation from the noble Lord, far from satisfying me, gives the view of the Government quite clearly, and it is one which frankly we could not accept. The very fact that there are English authorities with charges higher than those in operation in Wales justifies what I said in moving the amendment, that we are not just concerned with the position in Wales. With regard to the statement that the Act does not work, surely nothing can be more equal than to say that there should be some balancing where (I am reading from the Act)the financing costs of a statutory water undertaking are less than the average of the relevant financing costs of all statutory water undertakings in England and Wales".It is related to cost.
I am rather surprised—perhaps I am not really surprised—that the Government should say that they have grave doubt, in fact great objection, as to any suggestion of equalisation of charges at all. Nobody queries that we can post a letter from here to just a mile around the corner for 14p but it is still only 14p to send it up to Orkney. There are many other examples. Surely the principle is that there should be equalisation of charges, because it is easier for some water undertakings to get supplies of water than 1133 for others. That is a very important factor, which was the principle behind the Water Charges Equalisation Act.
It is clear that the Government will not accept the amendment. It is regrettable that the Government have no intention of replacing the Equalisation Act with any other measure. While, in view of the thin Committee, I will not seek to divide on this, I think there is such a principle involved that this amendment must be moved and negatived.
§ On Question, amendment negatived.
§ Lord Underhill moved Amendment No. 9:
§ After Clause 5, insert the following new clause:
§ ("Water rate rebate scheme
. Notwithstanding anything in this Act relating to the charges payable to water authorities, after section 30(6) of the Water Act 1973, there shall be added the following new subsection:—
(6A) Nothing in this Act, or in any enactment passed before this Act in relation to a water authority, shall be deemed to operate in a way which precludes any water authority from undertaking a water rate rebate scheme to alleviate the impact of water rates on such groups and categories of water rate payers who otherwise would be caused personal hardship by the level of water rates they would have to pay.".").
§ The noble Lord said: It may be for the convenience of the Committee if I speak to Amendment No. 10 at the same time, because both these amendments seek to give power to a water authority to operate rebate schemes for its customers. Amendment No. 9 relates to a water rebate scheme and Amendment No. 10 to a rebate scheme in respect of sewerage charges. These amendments are necessary in order to introduce a more equitable basis of charging, because Section 30 of the Water Act 1973 places an obligation upon water authorities not to differentiate in respect of charges between different classes of consumers. This has been held to prevent the operation of any rebate scheme for either water or sewerage rates.
§ I referred to this matter at Second Reading, following which the noble Lord, Lord Skelmersdale, again kindly wrote to me to explain the Government's attitude. He pointed out that a matter of this kind can be best dealt with through the social security or taxation systems. But there are schemes for rent and rate rebates operating through local authorities, so I am not proposing anything new. Moreover, although fuel charges are mentioned specifically in connection with supplementary benefits, I believe I am correct in saying that water charges are not mentioned specifically. There is a legal provision for rate rebates for services operated by local authorities, and but for the establishment of the separate authorities with responsibilities for water supply and sewerage the rate rebate schemes of local authorities would still include rebates in respect of those services. I think it is correct to say that approaching three million ratepayers receive rate rebate, but there are many persons in receipt of rate rebates who do not come within the supplementary benefit schemes. It is these people who are in the poverty trap with which we are concerned.
§ These persons could not be covered by the benefit services as mentioned in the noble Lord's letter. Moreover, over the past few days it has been stated that many additional persons will be caught in the 1134 poverty trap in consequence of the Budget measures to keep benefits below the level of inflation and not to raise tax allowances. This greatly strengthens the arguments I am making. Time and time again there are issues in respect of which people who do not qualify for supplementary benefits get excluded, and hence we have this poverty trap. These are the people with whom we are primarily concerned. They would have qualified, no doubt, for rate rebates if it were not for the establishment of the water undertakings. Therefore, I hope the Government will see the principle involved in this and will accept the amendment. I beg to move.
§ Lord Skelmersdale
I am grateful to the noble Lord, Lord Underhill, for speaking to both these amendments together. It is often suggested that water authorities should introduce a rebate scheme, but this suggestion shows a misconception of the nature of water charges. The general rate is a tax on the beneficial occupation of property; I am sure we would all agree with that. Charges for water services, on the other hand, are raised in respect of services provided, in much the same way as other public utilities raise charges. Within the taxation system it has been the practice to provide rebates to reduce, either wholly or partially, the liability of those on low incomes. Outside that system, however, the suggestion of rebates raises difficult questions. Who should be paying for whose water, and why?
Before I leave that, I have in front of me Social Security Statutory Instrument No. 1299, which came into operation on 24th November last. Paragraph 19 of that says:The amount, calculated on a weekly basis, of the following miscellaneous outgoings payable in respect of the home shall be applicable under these regulations.".Then there are seven or so of these, the second of which is,charges or rates in respect of water, sewerage and allied environmental services".So I think that perhaps on this score the noble Lord has got it a little wrong.
Under Section 30 of the Water Act 1973 water authorities are required to operate charging systems which are cost-related and do not discriminate unduly against, or show preference to, any class of consumer. If there were a rebate system, either the cost of rebates would have to be recovered from other consumers in the form of higher charges for the services which they receive, which would be contrary to the Act, or the deficit in revenue would have to be met by a grant from the Exchequer. This would increase public expenditure and taxes.
There are thus no plans to introduce a rebate scheme. Successive Governments—including the last one supported by the noble Lord—have adopted the policy that if help needs to be given it is done through the social security system and not by subsidising prices. As I have said, the full cost of water services charges is taken into account when calculating supplementary benefit.
A further addition is that a variety of payment facilities is provided by water authorities to help their consumers ease the burden of payment. These include instalment systems and savings stamp arrangements in some areas, and a comparable example would be the 1135 TV licence stamps. The Anglian Water Authority hopes to introduce an instalment plan for domestic consumers who are unemployed or in receipt of supplementary benefit or rate or rent rebates. Those consumers will be able to pay their bills in 10 instalments. All water authorities will enter into special arrangements for cases of real hardship, each case being decided on its merits. Disconnection of supply for non-payment is taken only as a last resort according to the authority's code of practice.
I would emphasise that if relief is needed it should be provided through the social security system. That can be done at present. Any system such as the noble Lord proposes would be complicated and bureaucratic to operate. There is no good case for this proposal which was not supported, as I have said, by the noble Lord's party when in Government. I would, therefore, hope that the noble Lord would feel able to see his way to withdraw the amendment.
Before the noble Lord, Lord Underhill, replies and decides what steps he will take with regard to his amendments, I should like to put one point to him which I think he may not have considered. My understanding of the rules governing supplementary benefit is that any person in receipt of supplementary benefit is barred from receiving a rate rebate or a rent allowance. Indeed, there have been many occasions on which I have had to advise certain elderly people who are in a borderline situation that they are sometimes very much better off by forgoing supplementary benefit and then claiming rate rebates and/or rent allowances. I think that unless this particular matter is cleared up there could be a difficulty.
I am entirely in favour of people in difficulties being assisted with regard to water rates or sewerage rates. But the fact remains that if they are introduced in the same form as a rate rebate or a rent allowance people in receipt of supplementary benefit would automatically be excluded from receiving them. I wonder whether the noble Lord, Lord Underhill, has considered that point.
§ Lord Skelmersdale
Before the noble Lord, Lord Underhill, does so perhaps I should point out that the noble Lord, Lord Winstanley, is talking about the old water rate. At the moment we are talking about something rather different—that is to say, the water charges for services rendered.
§ Lord Underhill
It would appear from the last interchange of views that I shall certainly have to look to see whether the noble Lord, Lord Winstanley, is correct. There obviously seems to be a slight difference about the matter. I am grateful to the noble Lord the Minister for giving me information about the statutory instrument. That shows how much I must improve my own personal research services. I am grateful to him. However, it does not get over the problem to which I have referred—namely, the problem about people who are not in receipt of supplementary benefits. Those are the people about whom we are concerned.
Nevertheless, it is pretty clear that the Government would have some problems if this amendment were 1136 carried. I think that the principle that we are trying to implement is a correct one, and I would be happier if the Government were to make some offer to try to look at the position of these people who are in the poverty trap. However, as we have raised this question as regards so many other issues and received no answer, the only thing that I can do is to beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 10 to 13 not moved.]
§ House resumed: Bill reported with the amendment.