Welsh Water Authority: Privatisation (Hansard, 5 February 1986)

Viscount Long
My Lords, perhaps we can turn to Wales. With the leave of the House, I shall now repeat a Statement which is being made in another place by 1161 my right honourable friend the Secretary of State for Wales about the privatisation of the Welsh Water Authority. The Statement is as follows:
"With permission, Mr. Speaker, I wish to make a statement about the privatisation of the Welsh Water Authority.
"As my right honourable friend the Secretary of State for the Environment has told the House, the Government have decided to transfer the water authorities in England and Wales to private ownership and a White Paper setting out our proposals has been presented to Parliament.
"The House will be aware that the water authorities in England and Wales were established so that a single body controls water and sewerage in the river catchment areas; and that the Welsh Water Authority excludes that part of mid-Wales which drains into the Severn but does cover those parts of England that drain into the Wye and Dee.
"During the consultation that followed the publication of our discussion paper last April the Welsh Water Authority urged that the present integrated river basin management should continue if the industry was privatised. We agree with that recommendation and the authority will therefore be privatised with its existing boundaries and functions intact, with the exception of the co-ordination and financing of flood defence and land drainage.
"The privatised Welsh water company will operate under a licence from the new Director General of Water Services who will lay down strict conditions on pricing and service standards. The director general will appoint a regional consumer committee representing all consumer interests, and in Wales this committee will be assisted by divisional committees.
"The privatisation of the Welsh Water Authority will for the first time enable employees and customers in Wales to have a direct stake in the industry.
"The regulatory regime will provide general powers with regard to the supply of water in bulk between undertakings. The right of appeal will remain when water undertakers are unable to agree terms for such transfers, but this will be to the director general rather than the Secretary of State. In determining appeals, he will apply the same general principles as apply to other aspects of charging policy in that charges should be cost related and should not be discriminatory.
"Considerable progress has been made since the authority was reorganised in 1982. Services and efficiency have been greatly improved and a large investment programme undertaken. I pay tribute to the chairman, board and employees for these achievements. I believe that privatisation will enable them to get on with their job with greater freedom and without the constraints on financing which public ownership imposes. Customers will benefit from the improving service that will result".

§ Lord Prys-Davies
My Lords, we thank the noble Viscount for repeating the Statement made in another place by his right honourable friend, but we do not welcome it. We deeply regret that another public authority is being dismantled. In his Statement, the Welsh Secretary of State seems to be slavishly following the policy lead proposed by the Department of the Environment. It is a disappointing Statement, and in opposing it one would adopt the whole range of arguments that were advanced by the water experts in your Lordships' House in the debate on 22nd April last; arguments that have been convincingly summarised by my noble friend Lady Nicol.
The Statement pays glowing tribute to the Welsh Water Authority. We say that that authority should be allowed to continue to build on the successes that it has achieved over the past few years, notwithstanding the uncertainties and difficulties of the early years.
Reservoirs in Wales supply water to many consumers in England as well as to the Welsh consumers. The reservoirs and the export of Welsh water have also been the source of major political controversy in the Principality for more than one-quarter of a century. The history of the water industry in Wales has taught Wales of the need not merely for a single authority, which is referred to in the Statement, but also for a single public authority accountable to the Secretary of State and to Parliament. We require that kind of body to assess the needs and to ensure that water developments or developments in water conservation for far away cities are not to the disadvantage of Welsh upland communities, and to ensure also the co-ordination of the wide range of functions that are today entrusted to a water industry. Nowhere in the Statement is there an indication that the Secretary of State is addressing himself to the issues that have been raised in Wales for the past 25 years, or that he is aware of them.
I should like to put a few questions to the noble Viscount on the Minister's Statement. First, we note that the Welsh water company will be answerable henceforth to the new Director-General of Water Services. Will there be a Welsh director general of water services in Wales? If not, will the Welsh water company have a right of appeal to the Secretary of State for Wales against any decision of the new director general? We note that the co-ordination and financing of flood defence and land drainage will not be transferred to the Welsh water company. Which body will undertake those functions in Wales?
The interests of the consumer have already been highlighted this afternoon. Will there be a Welsh consumer council for the water industry in addition to the traditional committees that are mentioned in the Statement? Who will nominate persons for membership of the consumer committees? Will the local authorities have a say in nominating members for those important committees? Bearing in mind that the overall unit costs in many parts of Wales are high, will the progress made to date towards standard tariff arrangements within Wales now be put at risk by privatisation?
Can we have an assurance that no employee who does not wish his services to be transferred to the 1163 Welsh water company will in any way be penalised? Will his entitlement to redundancy pay be fully protected? I shall be grateful if the noble Viscount will clarify the issues that I have raised. I should like to emphasise that whatever replies he may give, they will not modify our basic response to the Statement, which is one of disappointment and regret; regret that another institution that has served Wales well is to be demolished.

§ Lord Lloyd of Kilgerran
My Lords, I follow the noble Lord, Lord Prys-Davies, in congratulating the noble Viscount on the way that he has presented the Statement. I will adopt for my speech all the matters that the noble Lord has raised with the noble Viscount, because we on these Benches are against the Government's proposals in this respect.
The Statement, so far as I can read it, has no Welsh dimension whatsoever. I join with the noble Viscount the Minister in congratulating the chairman of the Welsh Water Authority, Mr. Elfed Jones, whom I know. I am aware of the wonderful work that he has done in Wales, not only in distributing water for the purposes of Welsh men and Welsh women but also in distributing so much water into England. He has had the greatest difficulty in performing his operations. I ask rhetorically: why is that? It is because so often government forget the problems in Wales.
One of the first questions I should like to ask is this: what do the Government intend to do, and what care will they take, to preserve the research team that Mr. Elfed Jones has built up to deal with important problems in Wales with regard to the distribution there of water? I should like to ask the Minister certain technical questions in relation to the proposals in a Welsh dimension. What is to happen, for instance, to the Welsh water boards' debt, which I understand is of the order of £440 million? What will happen about that debt in relation to privatisation? I may say at once that I am extremely sorry that I did not give the noble Viscount the Minister notice of those questions. The last thing that I want to do, when speaking in a Welsh dimension, is to embarrass the Minister too much on this matter. If he cares to write to me, and perhaps also to the noble Lord, Lord Pry-Davies, then I shall quite understand.
What can the noble Viscount tell the House today about the potential price of water to the consumer in Wales? There are many hundreds of farmers who are struggling—as my ancestors did—to make a living out of very poor soil. The cost of water nowadays is a very significant factor in relation to their livelihoods. Perhaps the noble Viscount can tell us something broadly in relation to the price of water, I do not expect him to give an undertaking that the price will be rapidly reduced as a result of privatisation, although I hope that that might happen.
My third question is very important and is in relation to matters which the noble Lord, Lord Young of Graffham, may be concerned with. What are the prospects for re-employment for the present employees? What are the prospects for increasing employment in Wales as a result of privatisation? Or is it merely that privatisation once more will be cast upon us and there will be English conventions or edicts 1164 reducing the number of persons employed in this most important industry in Wales?
I do not want to turn this into a debate. I am asking a few simple questions, and I quite understand that the Government are so often not prepared to answer questions easily and clearly in relation to the Welsh dimension. However, I am grateful to the noble Viscount for repeating the Statement on matters to which we are strongly in opposition.

Viscount Long
My Lords, I am grateful to the noble Lords, Lord Prys-Davies and Lord Lloyd of Kilgerran, for their observations on this Statement. I have to say that it is a Statement on Wales although the previous Statement was on England and Wales; but I am now talking about Wales.
I shall first answer the question put by the noble Lord, Lord Prys-Davies. The director general will be shared between England and Wales. The Secretary of State will be above him to iron out any problems which cannot be solved. Within that—

§ Lord Tordoff
My Lords, I am sorry to intervene, but which Secretary of State does the noble Viscount mean?

Viscount Long
I am sorry, my Lords; I am speaking of the Secretary of State for Wales. When it is broken up into different bodies the administration within Wales will look after the mechanisms, and so on.
The second point which the noble Lord invited me to answer concerned the Welsh Consumer Council. He asked who will nominate these committees? Again, this matter will be under the director general at a later date. Employment will not be penalised and no existing rights—which the noble Lord was worried about—will be taken away.
The noble Lord, Lord Lloyd of Kilgerran, wanted to know about research teams. At this stage they will be remaining. When the break-up of the authority comes about and the different groups are formed no doubt those research workers will remain. They are extremely important and you cannot do away with them, because some of them have been there for many years.
The noble Lord asked about the debt which is to be inherited. This is an historic debt which will come under discussion when the authority takes over. I cannot at this stage tell the noble Lord what will be the price of water. However, if the price of water is increased too much those concerned will find that they cannot sell it so well—

A noble Lord
My Lords, people cannot do without water.

Viscount Long
—so in each way my Lords, they will find it very difficult indeed. Employment will come when the reorganisation takes place. I am not sure whether I have answered all the questions from the noble Lords, Lord Prys-Davies and Lord Lloyd of Kilgerran.

§ Lord Lloyd of Kilgerran
My Lords, I am much obliged to the noble Viscount for allowing me to 1165 intervene again before he sits down. I asked about the prospects for re-employment and about unemploy-ment in the area. I do not know whether he replied to the noble Lord, Lord Prys-Davies. I ought to have said that I have always been brought up to believe that the national drink of Wales is, of course, water coupled occasionally with a little milk—that is, diluted with milk and not the other way round, milk diluted with water. However, the privatisation of water resources in Wales is a serious and important matter.

Viscount Long
My Lords, I could not agree more. The water of Wales is very silky, satiny, soft and beautiful to drink; with other mixtures as well.

§ Baroness White
My Lords, it is also the most inflammable subject in the Principality. I do not know whether the noble Viscount realises that this Statement, particularly regarding the director general and price fixing, takes away the only attraction for privatisation that there would have been. Without that we would have been free to charge the Midlands and Merseyside an adequate price for the water from Wales on which they rely. If that is taken out of the equation, which I understand is the case, and there is to be no discrimination in charges, there will be no welcome whatever in the Principality for this arrangement.
I was also interested to hear the noble Viscount say that the debt which has been the real millstone round the neck of the Welsh Water Authority, which it inherited and which the new authority will presumably also inherit, will be dealt with after the change and not before. Is the noble Viscount quite sure that that is true? The suggestions in the Principality are that the Government will see to it that that matter is dealt with beforehand in order to make the authority more attractive on the market.
In referring to the selling-off process, there have been suggestions that the Government would not wish to put all 10 authorities on the market at the same time; that that might be a little too much. What arrangements have been made, if they are not to be sold off simultaneously, for the order in which they will be sold? Who is to decide where in the pecking order Welsh water might come?
Finally, can the noble Lord tell us whether, even if the Government get this legislation through before the next general election, they also hope to implement legislation before the next election?

Viscount Long
My Lords, I am grateful to the noble Baroness, Lady White. In answer to her first question, the present arrangements under which water authorities negotiate deals with one another for bulk supplies of water, based on an economic price, will continue. Privatisation will not affect the present agreement between the Welsh Water Authority and the Severn-Trent Water Authority for sales of water from the Elan Valley reservoirs.
The noble Baroness took me up on the historical debt. I do not think I have committed the Government or taken any particular line. It is still under consultation because it is a vast debt. As regards selling-off, at this stage it is a question of getting the 1166 priorities right. When we get nearer to the legislation more will then probably be known than I can tell the noble Baroness now. Perhaps the noble Baroness will remind me of her final point.

§ Baroness White
My Lords, I referred to the general election, which does not affect us in this House but might affect the Government.

Viscount Long
My Lords, we hope all this will be through within the next two years.

§ Lord Harvington
My Lords, can my noble friend repeat the undertaking which his noble friend Lord Elton gave when answering questions on the previous Statement: namely, that the interests of inland waterway navigators will be safeguarded? Of course, in Wales the problem is minuscule compared with what it is in England. But in one way the degree of minuteness is in inverse ratio to the glorious beauty that lies therein and they should be preserved safely, so that not only the Welsh themselves but all the British people can enjoy them in their recreation time.

Viscount Long
My Lords, I am most grateful to my noble friend. Of course, recreation is a very important part of the authority's endeavours. The companies will be required, through conditions in their operating licences, to maintain generally the existing range and level of facilities and there will be arrangements for consultation on specific changes.

§ Lord Cledwyn of Penrhos
My Lords, while warmly supporting the tribute paid in the Statement to Mr. John Elfed Jones and the board, would the noble Viscount the Minister confirm that they were in fact strongly opposed to this measure of privatisation? Secondly, as to the new director general, will he make quite plain that this Statement proposes that authority should be moved out of Wales where it now rests with the board and the Secretary of State for Wales, to a director general stationed in England? Thirdly, can the Minister say what measures are being taken to privatise water undertakings in Scotland along the same lines as they are being privatised in England and Wales? Lastly, is the noble Viscount aware that this Statement will be received in Wales with profound disquiet, because it has complex political implications? For that reason, will he please convey to his right honourable friend the Secretary of State for Wales and to the Prime Minister a strong appeal from me and my colleagues to think again about this question?

Viscount Long
My Lords, in reply to the first question of the noble Lord the Leader of the Opposition, I have recently again discussed the Government's case for privatisation with the chairman and he now appreciates the real opportunities that would result from privatisation of Welsh water; that is, removal of the Government's financial controls, the opportunity for wide ownership of shares both among employees and among customers, and the benefit to customers from prospects of higher standards and a charging policy which is designed to pass on efficiency savings and keep down bills.
1167 Furthermore, the chairman of Welsh water would now like the authority to be one of the first to be privatised. This morning I had a personal call which confirmed that they are now in agreement to go in for privatisation. In the beginning they did not want it, but from the call this morning I can assure the noble Lord that they are now in agreement with it.
The noble Lord requested me to make a further appeal so that this transfer would not go through but no doubt my right honourable friend will read about this. He also asked me about Scotland. The director general will be answerable for Wales and for Welsh water. I understand that anything to do with Scotland will come under the Scottish Secretary of State at this stage.

§ Lord Tordoff
My Lords, I apologise again to the noble Viscount for interrupting his initial reply, but I really did want to tease out of him the fact that the director general for the Welsh authority will be serving two masters: one the director general in England and one the Secretary of State for Wales. I think it is important to have that on the record.
I wonder whether the noble Viscount can answer a question in relation to Wales which his noble friend did not answer when the question was put by my noble friend the Leader of the Social Democratic Party; that is, what proposals are being made to ensure the security of the pensions of the present employees of the Welsh Water Authority? Your Lordships will remember that we went through this matter in some detail when we were talking about transport and the Government let those employees down very badly. I believe that there is now the opportunity for the Government to make a statement that the pensions of those employees will be entrenched and will be safeguarded, and I hope that the Government will take the opportunity to make that statement today.

Viscount Long
My Lords, I am most grateful to the noble Lord, Lord Tordoff. The present arrangements are statutory and complicated and this is an area where a lot of work will have to be done. Like the Water Authority Association, I am concerned that satisfactory arrangements should be made for pensions, but I am not able to give any indication of what they will be at this stage.

§ Lord Sefton of Garston
My Lords, I think I heard the noble Viscount say that the question of the residual debt of the Welsh Water Authority would be a matter of negotiation with the new limited company. If that is so, may I ask, how does the noble Viscount expect a company to make an offer for the undertaking if it does not know previously the intentions of the Government as to the residual debt? Secondly, may I ask him for an assurance that the position of the large number of domestic dwellings, smallholdings and farms in the Welsh hills which, up to now, have been drawing water free of charge from natural springs, will not be worsened? Thirdly, what will be the situation in regard to rivers that run over national boundaries? In fact, do we take it that the new authorities will have powers which will cross national boundaries?

Viscount Long
My Lords, the reply to the noble Lord's first question is that the matter will come under 1168 the existing authority at this moment. I am not at all certain about the second question. I think I should like to take it up and write to the noble Lord. I do not think there will be any change in that price, but at this moment I cannot tell him—I am sorry, I have it now: there is no change at this moment. So I was quite right in what I thought.

§ Lord Elwyn-Jones
My Lords, can the noble Viscount say why they are leaving Scotland alone, yet punishing Wales?

Viscount Long
My Lords, those were not my words. There is no punishing of Wales. I am defending Wales.

§ Lord Sefton of Garston
What about the issue of the residual debt, my Lords? Mine was a specific question. Do the Government have any knowledge of what they intend should happen to the residual debt?

Viscount Long
My Lords, it is under consultation at this moment. I cannot answer the noble Lord's question.

§ Baroness White
My Lords, can the noble Viscount say whether any offer has been made to the chairman of the Welsh Water Authority on this matter, and whether that is why he changed his mind?

Viscount Long
My Lords, I think that the board has been brought into the matter, but I am not sure at this moment.

§ Lord Sefton of Garston
My Lords, when I receive an answer to my question perhaps I can cease to ask it. The question was quite specific. Can we have a firm assurance from the Government that at no time in the future under the new organisation will those farms and smallholdings and domestic dwellings to which I have referred be adversely affected?

Viscount Long
My Lords, I thought I had answered the question. I am so sorry and I must apologise to the noble Lord if I have not anwered him sufficiently clearly. I can assure the noble Lord that there will be no change in what he wanted. I thought I said that at first.