Water Industry: Classification (Hansard, 24 January 1985)

§ Baroness Burton of Coventry
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ Lord Skelmersdale
Yes, my Lords. However, they have regulatory functions in relation to river quality which set them apart from the more typical nationalised industries.

§ Baroness Burton of Coventry
My Lords, is the Minister aware that there seems to have been no definite pronouncement that the water industries are regarded as a nationalised industry? Am I not correct in saying that during the past couple of years regional water authorities have been classified as nationalised industries for public expenditure survey purposes? Also, can the Minister give any information about the consultation proposals recently issued by the Treasury on nationalised industry legislation?

§ Lord Skelmersdale
My Lords, under the Water Acts 1973 and 1983 water authorities are subject to Ministerial appointment, powers of Ministerial direction, and financial controls of the same kind as are other nationalised industries. They are treated as nationalised industries for the purposes of public expenditure controls and financial monitoring. So far as the consultation paper involving my right honourable friend the Chancellor of the Exchequer is concerned, I am afraid that I can give the noble Baroness no information.

§ Lord Ross of Marnock
My Lords, will the Minister make it clear that he is talking about England and Wales? In Scotland, water is a local government service. That may be why it is so much easier for the Secretary of State to reduce rate support grant and thereby pass on the burden of the cost of water to the local authorities.

§ Lord Skelmersdale
Yes, my Lords, I can confirm to the noble Lord that I am talking about water authorities in England and Wales.

§ Baroness Gardner of Parkes
My Lords, does not my noble friend agree that it is rather confusing when we receive our bills to see them described as being for water rates. This tends to make one think that they are like a local authority rate. Would it not be better to change the terminology?

§ Lord Skelmersdale
My Lords, that is the way it has been done heretofore; but, as I and my noble friend Lord Avon have made clear on numerous occasions recently, it is a charge for water.

§ Baroness Nicol
My Lords, does the Minister recall an earlier Question, when he denied that the excessive charges being insisted upon this year were a tax gathering exercise? Does he not agree therefore that the point made by his noble friend Lady Gardner of Parkes is relevant and that this charge should be called a tax? Also, can the Minister say whether he considers it good business practice that today's users should be paying for tomorrow's consumers? That is what is happening, because capital schemes are being financed from the pockets of today's users.

§ Lord Skelmersdale
No, my Lords, I do not believe that that is happening. What is happening is that today's consumers are being asked to reduce the debts which water authorities have brought forward from historical times. With regard to the suggestion that water charges are a tax, I have consistently made it clear that there is no tax element involved, that water has a cost based on collection, storage and delivery, and that this cost is what comes in the water rate.

§ Lord Nugent of Guildford
My Lords, is my noble friend aware that it is common practice for all nationalised industries to provide out of their own resources a proportion of their capital expenditure? That is a normal principle in all nationalised industries and it has been for years. The only difference so far as the water industry is concerned is that it has only recently started on this path. In fact, it is self-financing a far smaller proportion of its capital expenditure than are other nationalised industries.

§ Lord Skelmersdale
My Lords, I am very grateful to my noble friend; he is of course quite right. Last year's average rate of return for water authorities in England and Wales was 1 per cent. This year it is intended that it should be 1.4 per cent; next year, 1.7 per cent.; and in 1987–88, 1.9 per cent. If you compare those figures with, for example, the 9 per cent. for major non-oil industrial and commercial companies, the return in the water industry will remain extremely low.

§ Lord Grimond
My Lords, whether or not this charge is called a tax, does not the Minister agree that even his own supporters have said that it certainly has the effect of a tax? Is there any point in reducing taxation if this highly regressive impost is to be carried out through the nationalised industries?

§ Lord Skelmersdale
My Lords, if the noble Lord, Lord Grimond, is trying to scotch the argument as to whether or not it is a tax, then I would say that surely the point at issue is whether the money raised should come from taxpayers as a whole or from water users. It is the Government's view that it should come from water users.

§ Lord Molson
My Lords, is it not a fact that under the Act of 1983 there are consumer councils which have a right to make representations in respect of charges levied by water authorities? Does the same 379 apply when the Government impose upon the water authorities an extra charge? Will the Government pay attention to representations made to them by the consumers' committees?

§ Lord Skelmersdale
My Lords, we are not yet in a position of knowing what extra charges there will be, because the water authorities will not be deciding until March upon the charges they will be making within the financial limitations laid down by my right honourable friend the Secretary of State. So far as the consumer consultative committees are concerned, my right honourable friend receives the reports, though they are made in the first instance to the water authority concerned.

Lord Wallace of Coslany
My Lords, is the noble Lord aware that the chairman of the Thames Water Authority seems to be in severe disagreement with the Government on this particular issue?

§ Lord Skelmersdale
Yes, my Lords; and I find that particularly difficult to understand, given that he was the chief executive of British Airways, which has a 5.75 per cent. rate of return.

§ Lord Leatherland
My Lords, does not the Minister agree that it is unwise to put up the price of water, because to do so might tend to influence people to drink other liquids where usually they would be satisfied with water?

§ Lord Skelmersdale
My Lords, I simply cannot gree with the noble Lord.

§ Baroness Burton of Coventry
My Lords—

§ Lord Murton of Lindisfarne
My Lords, may I ask my noble friend whether it is a question not only of water that is drunk, but also of the very major problem of expenditure on sewerage repairs? In many towns the sewerage systems are in a very bad state.

§ Lord Skelmersdale
Yes, my Lords, and so we are frequently told. In fact, I am going to Northampton tomorrow to inspect the sewers there.

Noble Lords
Oh!