Lords Sitting of 17 March 1988

Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Salisbury): THE LORD CHANCELLOR on the Woolsack.

Transport: EC Ministers' Council
Baroness Burton of Coventry Baroness Burton of Coventry asked Her Majesty's Government:
Whether they will make a statement on the main items discussed at the meeting of the European Community Transport Ministers' Council on 14th and 15th March, including any decisions taken and whether any items on the agenda were not discussed.
The Parliamentary Under-Secretary of State, Department of Transport (Lord Brabazon of Tara): My Lords, the main items discussed were: the width of refrigerated vehicles; road haulage tariffs; procedures for checking recording equipment used in road haulage vehicles; and road haulage drivers' hours and related matters; charging transport infrastructure costs to heavy goods vehicles; access to the market for the carriage of goods by road between member states; and the weights and dimensions of commercial vehicles. Reports and statements included one by my right honourable friend the Secretary of State for Transport pressing for progress on shipping cabotage. Two secondary items were not taken.
Baroness Burton of Coventry: My Lords, is the Minister aware that it seems quite incredible that air matters were not discussed at this meeting? Is he further aware that it is difficult to comprehend that no time, however inadequate it might be, was found to discuss competition rules, fares, capacity or access? Can he tell the House whether these matters will be raised at the informal meeting of the Council on 25th and 26th April, or do we have to wait until 20th and 21st June?
Can I furthermore ask him whether he recalls telling the House on 3rd March that he understood that Air Europe would be filing its Paris application shortly? Has that been done?
Lord Brabazon of Tara: My Lords, there are other transport matters that have to be discussed by the Transport Ministers' Council. Aviation has been discussed extensively over the last few years. We finally had agreement to the package only last December. While we still remain committed to making further progress, and we have a commitment from the Transport Ministers' Council to make progress by 1990, other matters sometimes have to be dealt with.
Whether further discussions on aviation will take place at either the informal meeting in April or at the June Council I cannot yet say. It is of course up to the presidency to formulate the agenda.
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On Air Europe's application, that is not a matter for the Transport Ministers' Council. However, I understand that Air Europe is still considering its fare structure for the Paris route.
Baroness Burton of Coventry: My Lords, I am glad that the Minister mentioned the word "package". Is he aware that the four items I mentioned that were not discussed are all included in, and indeed are the main part of, that package?
Perhaps I may ask about one other matter that I hope will be of interest to the House. Is the Minister aware that this morning I spent a long time with his department discussing whether the point concerning any items on the agenda not being discussed could be answered as they were in my Question? I was told that it was not possible to give any response to that because to do so would have extended the length of the Answer beyond 100 words. Is he further aware that I told whoever I was talking to that I was not prepared to be bound by such Civil Service red tape, if he was, and if the matter was not put right I should raise it in the House today. May I ask the Minister—
Noble Lords: No, no!
Noble Lords: Yes, yes!
Baroness Burton of Coventry: My Lords, may I ask the Minister—
Lord Hailsham of Saint Marylebone: My Lords, on a point of order, did not the House only the other day pass a resolution supporting the Procedure Committee in saying that supplementary questions should be limited to two points only?
Noble Lords: Hear, hear!
Baroness Burton of Coventry: My Lords, I am on the continuation of my second point. Perhaps I may ask the Minister this. In connection with the last part of his remarks today which stated that two secondary items were not discussed, why would it have been longer to say that two items, X and Y, were not discussed?
Lord Brabazon of Tara: My Lords, we have a convention that replies should not be longer than 100 words, I think it is, in order not to take up too much of your Lordships' time at Question Time. However, I am happy to tell the noble Baroness and the House the two secondary items that were not taken. When the House hears them, perhaps it will not feel that they were of such great importance.
They were the questions raised by the Belgian, Irish and Netherlands delegations concerning the Community quota for carriage of goods by road between member states. They were concerned with quota allocation among member states. There was also a Commission report on overcapacity in inland waters. The Commission is not yet ready to report.
Lord Taylor of Blackburn: My Lords, perhaps I may ask the Minister who made the rule that an Answer should be no more than 100 words.
Noble Lords: The House!
Lord Brabazon of Tara: My Lords, the House made the rule, I understand, but I merely try to adapt to the wishes of the House.
Lord Underhill: My Lords, in the light of what the Minister said about other important matters that the Transport Ministers' Council has to consider, perhaps I may ask him two questions in his very important role as Minister responsible for shipping. In a very detailed Written Answer on 3rd March his right honourable friend the Secretary of State stated that last October he wrote to the shipping ministers of 10 other European countries proposing co-operation on ferry safety. Can I ask whether that subject was intended to be considered at the last meeting of the Transport Ministers' Council or whether there was any intention that it should be on the agenda of a very early meeting?
Lord Brabazon of Tara: My Lords, we are involved in discussions with other European countries on ferry safety. That extends beyond our EC partners. It involves two countries which are not members of the EC. It is not therefore a matter that was on the agenda for the Transport Ministers' Council, but I can assure the noble Lord that we are still talking with those European countries that have ferry services between ourselves and them.
Viscount St. Davids: My Lords, perhaps I may ask one question on an issue that is raised in the main Question. Can the noble Lord expand his Answer on the subject of cabotage? The present position seems to be a long way from that which is necessary if Europe is to be united. Do we not need to progress much further?
Lord Brabazon of Tara: My Lords, I could not agree more with the noble Viscount. The Government's views on this are quite straightforward. My right honourable friend notified his colleagues of his intention to seek an enabling power in the Merchant Shipping Bill currently before another place to introduce a test of establishment for shipping companies which engage in cabotage trades in United Kingdom coastal waters. He also urged colleagues to find a formula for the liberalisation of cabotage trades so that agreement could be reached on this subject at a subsequent council. I understand that considerable part of the June Council will be devoted to this and other outstanding shipping matters.
Lord Mellish: My Lords, would it not be possible to send the noble Baroness, Lady Burton, to Strasbourg? She would drive them all frantic!
Lord Brabazon of Tara: My Lords, I do not think that I can give any undertaking on that. It is not a matter for me.
Baroness Burton of Coventry: My Lords, is the Minister aware that it will be within the recollection of the House that a great many ministerial answers, I am sure for most excellent reasons, are considerably longer than 100 words? Is he further aware that although I ask a lot of questions they are concise and call for only a concise answer?
Lord Brabazon of Tara: My Lords, that is the point. I try to give a concise answer. If I expanded into matters I am asked to go on to deal with, my answers certainly would not be concise.

Milton Keynes: Road Extension Protest
3.10 p.m.
Lord Perry of Walton Lord Perry of Walton asked Her Majesty's Government:
What are the total costs incurred by the Milton Keynes Development Corporation in developing the Willen lake and park as a public amenity.
Lord Hesketh: My Lords, Milton Keynes Development Corporation has spent £2,020,000 in developing Willen Park as a public amenity. Willen Lake was constructed as a balancing lake for flood control purposes, funded by the Anglian Water Authority.
Lord Perry of Walton: My Lords, I thank the Minister for that Answer. Can he say what further public expenditure will be incurred by the development corporation in destroying much of the amenity in constructing the H5 Portway Road extension across the centre of Willen Lake against the expressed wishes of more than 9,000—
Noble Lords: Reading!
Lord Perry of Walton:—local inhabitants?
Lord Hesketh: My Lords, the proposed road link to which the noble Lord, Lord Perry, refers was first planned in 1971 and planning permission was granted for it in 1978. It has always been part of the plan for Milton Keynes from before the origination of the park. When planning permission was originally granted in 1978, it was well known that the park was also going to be there.
Lord Kearton: My Lords, is the Minister aware that most people in north Buckinghamshire regard Milton Keynes as a great success story, not least because of the efforts of the noble Lord, Lord Perry of Walton, in establishing the Open University so successfully there? Also, is he aware of the vast amount of both domestic and foreign investment in commercial and industrial enterprises? Can the Minister tell the House how much private investment has been made in Milton Keynes?
Lord Hesketh: My Lords, until the end of March 1987 the total investment in Milton Keynes was £1,002 million. Accumulative public sector capital expenditure was some £853 million. The interesting figure for 1986–87 is that public investment was a net £8 million compared with £155 million of private investment.
Lord Perry of Walton: My Lords, in view of the volume of public protest is the Minister willing to request the development corporation to delay what I understand is the imminent beginning to construction of the road, so that alternative arrangements can now be looked at? Is he aware that the change of attitude in Milton Keynes is already very great?
Lord Hesketh: My Lords, when the road was envisaged in 1971 it was considered important. With the growth of traffic and the success of Milton Keynes, I do not think delay will be possible.

Child Pornography: Additions to Bill
3.5 p.m.
Baroness Strange Baroness Strange asked Her Majesty's Government:
What steps they are taking to safeguard the physical and mental well-being of children in respect of pornography.
The Minister of State, Home Office (Earl Ferrers): My Lords, a provision which will make it unlawful to possess indecent photographs, films or videos of children under the age of 16 has been added to the Criminal Justice Bill this week. This will help to reduce the exploitation of children for the making of child pornography. It is also likely to help to protect potential victims of child abuse. A provision to enable trading standards officers to enforce the Video Recordings Act has also been added to the Criminal Justice Bill today.
Baroness Strange: My Lords, I thank my noble friend for his really useful reply. Is he aware that the NSPCC is extremely anxious that the availability of child pornography should be curtailed as much as possible? Does he not agree that although we enjoy liberty, we must not allow the edges of decency to be eroded into licentiousness? Does he also not agree with the NSPCC that access to child pornography for children should be curtailed as much as possible and also the use of films? Does he not further agree—
Noble Lords: Only two questions!
Earl Ferrers: My Lords, I am grateful to my noble friend for pointing out the views of the NSPCC. I agree entirely with her that the availability of child pornography is totally obnoxious. That is why we are endeavouring, with our amendments to the Criminal Justice Bill, to make it an offence to possess, as opposed to just to trade in, pornography. I agree with my noble friend that the availability of pornography to children encourages those children unwittingly to become involved in pornography.
Lord Mishcon: My Lords, is the noble Earl aware that he has the full support of Members on the Opposition Benches in regard to the clause that he mentioned? Indeed it was with pleasure that we agreed to this clause being added in the Commons, even though it did not appear in the Bill here in the Lords despite an undertaking to the contrary.
Earl Ferrers: My Lords, I am most grateful to the noble Lord, Lord Mishcon, for that most helpful intervention. I hope that all other amendments which the Government intend to introduce, not only on this Bill but on all others, will have the sympathetic consideration of the Labour Benches.
Lord Mishcon: My Lords, is the noble Earl aware that he is the greatest optimist in this House?
Earl Ferrers: My Lords, that is a happy position in which to be and in which I shall continue to be.
Lady Saltoun of Abernethy: My Lords, in view of the fact that much of the child pornography on sale in this country comes from the Netherlands, can the Government put any pressure on the Dutch Government to try to curb the trade?
Earl Ferrers: My Lords, I do not think this is a question of a government putting pressure on another government. It is a matter of the law being such that infringement of it can be enforced.
Baroness Faithfull: My Lords, may I ask the Minister whether there has been any research or any survey carried out into the exact effect of pornographic literature, films and books upon children?
Earl Ferrers: My Lords, such research is always very difficult to quantify. I can tell my noble friend—this is not entirely the answer to her question—that in the last two years 42 people have been prosecuted for offences under the Protection of Children Act and 35 of them have been found guilty. In that respect, the amount concerned is not very large. I cannot tell my noble friend of the total effect throughout the country.
Lord Nugent of Guildford: My Lords, is my noble friend aware that one of the most obnoxious aspects of child pornography is the circulation of material among paedophiles and that it is therefore of vital importance to see that this is completely suppressed?
Earl Ferrers: My Lords, I am grateful to my noble friend, Lord Nugent. I entirely agree with him. That is the reason why we believe that the additions to the Criminal Justice Bill will help a great deal. It will now be an offence for anyone to possess any such material and not just to trade in it.
Lord Swinfen: My Lords, may I ask my noble friend whether the Government are satisfied with the workings of the Indecent Displays Act?
Earl Ferrers: That, my Lords, is a totally different question. I should be perfectly happy to answer a separate Question if my noble friend would be good enough to take that course.

Tidy Britain Group: Effectiveness
3.9 p.m.
Lord Hayter Lord Hayter asked Her Majesty's Government:
Whether they are satisfied with the effectiveness of the work of the "Keep Britain Tidy" organisation.
The Minister of State, Department of the Environment (The Earl of Caithness): My Lords, the Government are satisfied with the effectiveness of the Tidy Britain Group, as it is now called, although the group itself would accept that there is always room for improvement.
Lord Hayter: My Lords, as the Government have had this problem in mind for several years, will the noble Earl hazard a guess as to how long it will take before Oxford Street or the King's Road are as clean as all the streets in Singapore, Copenhagen or Moscow?
The Earl of Caithness: No, my Lords, I should not like to hazard a guess. But we have asked the director general of the group to review the group's strategy. We are considering with him the best way forward for the future.
The Earl of Onslow: My Lords, is my noble friend aware that if one drives down any street in Britain the amount of "gunge" on the side of it is quite disgusting? Is my noble friend also aware—I am mindful of the two supplementary questions I am allowed to ask—that if the Oregon bottle law (which means that a deposit is paid on any container) had been introduced into this country, then the urge to throw things on the side of the road would be curtailed and the urge to pick them up and claim the money back would be enhanced, thus making the countryside and the roads much tidier? I have confined myself, I think, to two supplementary questions and one sentence.
The Earl of Caithness: My Lords, I am sure that none of us can be unaware of the litter problem. Had it not been for the community environment programme on which the Tidy Britain Group is working, the problem could be worse because some of the local authorities which have benefited have shown a reduction in litter of up to 30 per cent.
Lord McIntosh of Haringey: My Lords, on a previous occasion the Minister was kind enough to invite me to visit the flow country of Caithness and Sutherland. I should now like to invite him to visit Oxford Circus, which is where I work and where we are frequently ankle deep in litter. Will the Minister consider the degree of support which the Government could give to Westminister City Council in its proposals for a fixed-penalty ticket for dropping litter?
The Earl of Caithness: My Lords, I do not know whether the noble Lord has accepted my offer to visit the flow country but I have already been to Oxford Circus and seen the situation for myself.
Lord St. John of Fawsley: My Lords, I should like to support what the noble Lord said. Is it not right that the best and most immediate solution to the litter problem would be on-the-spot fines for anyone dropping litter in the street?
The Earl of Caithness: My Lords, I know that that view is strongly held by many people including my noble friend. However, there are problems and practical difficulties such as the accounting procedure for fines collected; the risk involved in the police or anyone else carrying substantial cash receipts; and how to deal with offenders who do not have funds available for on-the-spot fines.
Lord Ezra: My Lords, as someone who for many years has been connected with the Tidy Britain Group, I should like to express my appreciation for the kind remarks made by the noble Earl about the activities of the group. Does he not agree that of the many initiatives that it has launched, its community environment initiative and the schools initiative are two especially deserving of support to ensure that local authorities have a clear and defined objective to remove litter and that school children are aware of the problem?
The Earl of Caithness: My Lords, I am grateful to the noble Lord for his remarks. I agree that the community environment programme and the education programme, through which 31,000 primary training kits and science kits have been provided for schools and education authorities, are a good sign of the work of the Tidy Britian Group.
Lord John-Mackie: My Lords, the Minister said that he was satisfied with some of the results. Can he pinpoint an area where one could see the results, because I have not seen any?
The Earl of Caithness: My Lords, I said that I was satisfied with some of the results because of the reduction in litter experienced by local authorities. Had it not been for the action taken we should now be facing an increased litter problem.
Lord Aldington: My Lords, will my noble friend remind British Railways that the tracks running through railway stations are part of Britain and they could be kept tidier and cleaner than they are at present?
The Earl of Caithness: My Lords, I hear what my noble friend has said and I shall pass on his comments to British Rail. However, I am sure that it will read with interest what has been said by noble Lords in respect of this matter.
Lord Monson: My Lords, does the Minister agree that extremely high penalties, whether imposed on the spot or otherwise, are an admirable example set by Singapore, and that because it is easy to avoid dropping litter such high penalties rarely need to be imposed in practice?
The Earl of Caithness: My Lords, the maximum fine under the Litter Act 1983 is £400 and there were 1,500 prosecutions in 1985. It is the duty of us all not to drop litter and there should be no necessity for a fine although it exists.
Lord Hunt: My Lords, does the noble Earl agree that a personal appeal in the form of a public appeal in all appropriate quarters from Mr. Richard Branson, who was appointed by the Prime Minister to head a tidy-up Britain campaign, might have a powerful effect on millions of people who admire his adventurous exploits, some of whom are not among the most tidy in Britain?
The Earl of Caithness: My Lords, there is still a misunderstanding about the role of Richard Branson and the UK 2000 Group, which was established to carry out a wide range of environmental improvement projects. Litter abatement is often an element of the project and, where it is, the Tidy Britain Group, as a participant in UK 2000, has taken the lead on the litter element.
Lord Taylor of Blackburn: My Lords, in view of the number of people putting forward suggestions to the Department of Education and Science as regards which subjects should be included in the core curriculum, does the Minister agree that this subject should be added to the list?
The Earl of Caithness: My Lords, I am sure that my right honourable friend the Secretary of State will look forward to receiving the noble Lord's letter.
Lord Brougham and Vaux: My Lords, is it worth while the Government considering what is done in Germany, where the owner of a property is responsible for the cleanliness of the pavement outside that property?
The Earl of Caithness: My Lords, that suggestion has been made, but difficulties arise in our law and primary legislation would be required.
The Earl of Onslow: My Lords, will my noble friend answer my question about deposit moneys on bottles and so forth?
The Earl of Caithness: My Lords, I did not answer but I shall take the question away and look at it.
Lord Airedale: My Lords, is the noble Earl aware that after Derby Day Epsom Downs looks as though it has been hit by a snowstorm whereas no comparable litter problem arises in the park at Longchamp after the Prix de 1'Arc de Triomphe? Is that not another example of how far we must go in order to catch up with other civilised countries?
The Earl of Caithness: My Lords, yes, but that only serves to prove that there is so much more that we as individuals can do about the problem.

Business
3.26 p.m.
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon, my noble friend Lord Lyell will, with the leave of the House, repeat a Statement that is to be made in another place on the Belfast funerals incident.
It may be for the convenience of the House if I announce that the Committee stage of the Public Utility Transfers and Water Charges Bill will be adjourned at approximately 7 p.m. for approximately one hour and that during this adjournment the Second Reading of the Dartford-Thurrock Crossing Bill will be taken.

Easter Recess
Lord Denham: My Lords, it may also be for the convenience of the House to know that the House will adjourn for the Easter Recess on Thursday, 31st March and return on Monday, 11th April. The House will sit at 11.00 a.m. on Thursday, 31st March.
Matrimonial Proceedings (Transfers) Bill [H.L.]
Read a third time, and passed, and sent to the Commons.
Court of Session Bill [H.L.]
Read a second time, and committed to the Joint Committee on Consolidation Bills.
Multilateral Investment Guarantee Agency Bill
Read a third time, and passed.

Public Utility Transfers and Water Charges Bill
3.29 p.m.
The Earl of Caithness: 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.—(The Earl of Caithness.)
On Question, Motion agreed to.
House in Committee accordingly,
[The LORD ABERDARE in the Chair.]
Clause 1 [Power to act in relation to proposals for privatisation etc.]:
Lord Diamond Lord Diamond moved amendment No. 1:
Page 1, line 6, after ("time") insert ("prior to 1st January 1990").
The noble Lord said: The Committee will recollect that this Bill gives the necessary powers to certain

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utility companies to prepare for privatisation in relation to proposals made by the Secretary of State. The purpose of the amendment is to draw attention to the unnecessarily wide powers taken by the Secretary of State in Clause 1, which provides:
"Where the Secretary of State is at any time proposing".
The powers are not limited even to this Parliament. The provision is totally unlimited and, I suggest, quite unnecessarily so. The Government have made it absolutely clear that they intend to bring in the relevant privatisation legislation at the earliest possible opportunity. We have been told that the Secretary of State has made a proposal and there is every intention on the part of the Government to get on with it, if I may put it in that way.
Why is it necessary for the Government to take powers for the Secretary of State to make a proposal at any time? I suggest that it would be reasonable to give the Secretary of State whatever time he reasonably requires, and I should have thought that the deadline should be 1st January 1990 so that the clause would then read:
"Where the Secretary of State is at any time prior to 1st January 1990 proposing".
I should have thought that that period of time would be more than adequate, and there is no good reason for having the totally unlimited powers which the clause at present provides.
The Bill is about certain privatisation schemes of which we are all well aware. It is not there to provide the Secretary of State with unlimited powers for ever and ever. I beg to move.
Lord Ezra: In supporting this amendment proposed by my noble friend, perhaps I may say that I believe this raises a matter of principle. I do not believe that legislation which comes through this Chamber should give any government unlimited power. If the Government propose to undertake certain measures, they should not only identify the measures but identify the time-span within which they want to take those measures.
This question of being able to introduce the measures indicated at any time does not seem to me to be in line with the normal legislative approach that we should take, and therefore I strongly support the amendment.
Lord Williams of Elvel: This amendment moved by the noble Lord, Lord Diamond, and supported by the noble Lord, Lord Ezra, brings us to the first of a series of amendments designed to modify or in some cases to achieve explanation of the provisions of Clause 1, which I believe is probably the most difficult clause in the Bill.
The noble Lord, Lord Diamond, was quite right to concentrate on this particular point of the time period, because at a later stage, when dealing with other amendments, we shall come to the nature and status of the proposals. We also believe that Clause 1 gives very wide powers and we believe that in some cases those powers need to be curtailed but certainly clarified. We support the two noble Lords who have put their names to this amendment. We believe that
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there should be a time-limit to the powers in the Bill, because if there is no time-limit on the face of the Bill there is no mechanism in the Bill—unless the noble Earl can explain where there is one—for putting a stop to the powers if, for one reason or another, the privatisation measures do not go ahead. That seems to be a good reason for having a timetable in the Bill.
The Earl of Caithness: As the noble Lord, Lord Diamond, said, this amendment seeks to impose a deadline of the end of the calendar year 1989 beyond which the powers to prepare for our proposals, which Clause 1 confers upon the electricity supply industries, would no longer be available. I appreciate the spirit of the amendment, which in effect is telling us, as the noble Lord put it, to get on with the job quickly. That is exactly what we want to do.
We are committed to the restructuring and privatisation of both industries. We intend to introduce the necessary legislation in both cases at the earliest opportunity. If that is during the next Session of Parliament—and we can of course have no certainty of that in advance of the Queen's Speech—then we expect to see the implementation of our proposals under way before the end of 1989. Nevertheless, while we are fully committed to making the best possible progress towards the restructuring and privatisation of these industries, we do not want to reduce the flexibility of this provision by including what would amount to an expiry date which is proposed by this amendment.
Lord Williams of Elvel: The noble Earl referred to a timetable which the Government have in mind. Perhaps he would like to suggest some date other than that mentioned by the noble Lord, Lord Diamond.
The Earl of Caithness: We seek to bring in at the earliest opportunity the Bills which will result from this one. As the noble Lord, Lord Diamond, will know from his experience, I cannot predict whether or not it will be in the Queen's Speech. We hope it will be at an early stage, but we believe that the Bill as drafted gives the Secretary of State the necessary flexibility. However, I assure the Committee that it is something that we wish to get on with quickly.
Baroness Seear: The Minister has not really answered the point. Are the powers to be unlimited in time or does the Minister accept that there must be a limit even if the limit quoted here is not the right one?
The Earl of Caithness: In view of what I said, I do not believe it necessary that there should be a time-limit.
Lord Diamond: This is a very unfortunate situation. Both sides of the Committee are entirely agreed that certain proposals on which the Government have set their heart should proceed. Indeed, both sides entirely agree that these proposals should proceed with due speed. We ask the Government, "How long do you think it is all going to take?" Perhaps they wish to add on a year or two years, but there must be time-limit.

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The Government cannot come before this Committee and ask for powers which will extend to the next government but four, if necessary, with regard to proposals which the present Government have in mind. That is totally unreasonable. Some calculation must be made of what is needed. The Government can add on any possible contingency allowance for time and put that in the Bill, but to say,
"Where the Secretary of State is at any time proposing"
is an affront to the Committee. We are not here to give the Government blank cheques. We are here in order to improve the Bill and to get the business of the Government through. I appeal to the noble Earl to give the matter further thought.
3.38 p.m.
On Question, Whether the said amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 70; Not-Contents, 114.

DIVISION NO. 1

CONTENTS

Airedale, L.

Kilmarnock, L.

Amherst, E.

Leatherland, L.

Ardwick, L.

Listowel, E.

Attlee, E.

Lloyd of Hampstead, L.

Aylestone, L.

McIntosh of Haringey, L.

Banks, L.

McNair, L.

Blease, L.

Mason of Barnsley, L.

Bonham-Carter, L.

Mishcon, L.

Bruce of Donington, L.

Nicol, B.

Burton of Coventry, B.

Phillips, B.

Carmichael of Kelvingrove, L.

Ponsonby of Shulbrede, L.

Cledwyn of Penrhos, L.

Ritchie of Dundee, L.

David, B.

Sainsbury, L.

Dean of Beswick, L.

Seear, B.

Diamond, L.

Seebohm, L.

Donaldson of Kingsbridge, L.

Serota, B.

Elwyn-Jones, L.

Shackleton, L.

Ennals, L.

Shaughnessy, L.

Ewart-Biggs, B.

Somers, L.

Ezra, L.

Stallard, L.

Falkland, V.

Stedman, B.

Gallacher, L.

Stewart of Fulham, L.

Graham of Edmonton, L.

Stoddart of Swindon, L.

Grey, E.

Strabolgi, L.

Grimond, L.

Taylor of Blackburn, L.

Hampden, V.

Tordoff, L. [Teller.]

Hanworth, V. [Teller.]

Underhill, L.

Harris of Greenwich, L.

Wallace of Coslany, L.

Hayter, L.

Wells-Pestell, L.

Howie of Troon, L.

Whaddon, L.

Hunt, L.

Williams of Elvel, L.

Hunter of Newington, L.

Winchilsea and Nottingham, E.

Ilchester, E.

Jeger, B.

Winstanley, L.

John-Mackie, L.

Winterbottom, L.

Kennet, L.

NOT-CONTENTS

Airey of Abingdon, B.

Bessborough, E.

Aldington, L.

Birdwood, L.

Alexander of Tunis, E.

Birk, B.

Alport, L.

Blatch, B.

Arran, E.

Boyd-Carpenter, L.

Auckland, L.

Brabazon of Tara, L.

Beaverbrook, L.

Broadbridge, L.

Belhaven and Stenton, L.

Brougham and Vaux, L.

Beloff, L.

Butterworth, L.

Belstead, L.

Caccia, L.

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Caithness, E.

Lovat, L.

Campbell of Alloway, L.

Lucas of Chilworth, L.

Carnegy of Lour, B.

Lytton, E.

Cayzer, L.

Mackay of Clashfern, L.

Chelwood, L.

Macleod of Borve, B.

Coleraine, L.

Manchester, D.

Constantine of Stanmore, L.

Marley, L.

Cottesloe, L.

Merrivale, L.

Crickhowell, L.

Mersey, V.

Croft, L.

Milverton, L.

Cromartie, E.

Morris, L.

Cullen of Ashbourne, L.

Mottistone, L.

Dacre of Glanton, L.

Mowbray and Stourton, L.

Davidson, V. [Teller.]

Munster, E.

De Freyne, L.

Nelson, E.

Denham, L. [Teller.]

Norfolk, D.

Dundee, E.

Nugent of Guildford, L.

Eccles, V.

O'Brien of Lothbury, L.

Effingham, E.

Onslow, E.

Ellenborough, L.

Orkney, E.

Elton, L.

Orr-Ewing, L.

Faithfull, B.

Pender, L.

Ferrers, E.

Pennock, L.

Fraser of Kilmorack, L.

Porritt, L.

Gainford, L.

Rankeillour, L.

Glenarthur, L.

Renton, L.

Gridley, L.

Richardson, L.

Hailsham of Saint Marylebone, L.

Rippon of Hexham, L.

Rodney, L.

Harvey of Prestbury, L.

St. Davids, V.

Harvington, L.

St. John of Fawsley, L.

Havers, L.

Saltoun of Abernethy, Ly.

Hesketh, L.

Sanderson of Bowden, L.

Holderness, L.

Sandford, L.

Home of the Hirsel, L.

Sandys, L.

Hood, V.

Selborne, E.

Hooper, B.

Selkirk, E.

Hylton-Foster, B.

Sempill, Ly.

Jay, L.

Skelmersdale, L.

Jenkin of Roding, L.

Slim, V.

Jessel, L.

Strathcarron, L.

Killearn, L.

Strathcona and Mount Royal, L.

Kinnaird, L.

Lane-Fox, B.

Thorneycroft, L.

Lauderdale, E.

Trumpington, B.

Layton, L.

Vaux of Harrowden, L.

Long, V.

Vinson, L.

Lothian, M.

Ward of Witley, V.

Resolved in the negative, and amendment disagreed to accordingly.
3.46 p.m.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 2:
Page 1, line 6, after ("proposing") insert ("to Parliament").
The noble Lord said: This amendment questions the status of a proposal by the Secretary of State that the property or functions of an electricity board or water board should be transferred to another body corporate. We believe that the status of this proposal is left unclear and above all that such a proposal ought to come before Parliament.
The amendment is in a very simple form and I have not tried to be at all sophisticated in its drafting. It is up to the Government of course to decide in what form such a proposal might come before Parliament; nevertheless, it is our belief that that should happen.
The powers conferred by the Bill, particularly by Clause 1, are very considerable indeed. Under Clause 1(1) the new functions of the utility or the Electricity Council,
"shall include the power to do anything which in the opinion of the utility … is appropriate for … facilitating the implementation of the proposal for the transfer".

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In practice it appears that the Secretary of State need only form an intention in some manner which is then publicised and which can then be called a proposal for these powers to be triggered without any further recourse to the parliamentary process. As we now know, there is no time limit within which the Bill operates. There is in consequence no guarantee that the powers potentially available will not rest on the statute book for a number of years.
Although the noble Earl said that he wishes to bring forward the privatisation programme as quickly as possible, we on this side of the Committee still feel that it is vitally important that Parliament should have an opportunity to discuss this proposal and, therefore, that the proposal should be laid before Parliament. I beg to move.
Lord Renton: I have some sympathy for the noble Lord, Lord Williams, on this amendment. My problem arises from the fact that the first line of subsection (1) is so uncertain in its expression and effect. It reads:
"Where the Secretary of State is at any time proposing that any property or functions of a relevant public utility should be transferred",
and so on. One wonders to whom the proposing is to take place. Is it to the Secretary of State himself? Is it to his department? Is it to the "relevant public utility" mentioned in the second line of the subsection? Is it to Parliament? Is it to the nation? To whom is it made? We should be given some idea. The noble Lord may have hit the nail on the head but we shall not know until we hear from the Minister.
Lord Ezra: The amendment proposed by the noble Lord, Lord Williams of Elvel, ties in with the previous amendment, which has been rejected by the Committee; namely, that we want to know from this side of the Committee where we stand. The Government are taking such very wide powers under this clause that we feel that some definition is required. Surely it is not unreasonable to suggest under our due processes that the proposal that the Secretary of State might have at any time should be submitted for debate to Parliament. I very much hope that the noble Earl will be able to agree to this amendment.
Lord Diamond: I too should like to fully support this amendment. I am very interested in the comments that have come from the other side of the Chamber. Naturally, we pay more attention to those and I expect that the Government do too. So far as I am aware the only time in which the word "proposing" is used without an object is when the proposer is on his knees with a bunch of flowers and he is making a proposal. I do not know whether that is a further alternative that might be included in the definition of those words. We are all making the same point that the whole of this clause is drafted so widely as to include anything under the sun. We really ought to have some control of it, and the control proposed in this amendment is the natural and obvious one of parliamentary control.
The Earl of Caithness: I should like to thank the noble Lord, Lord Williams of Elvel, and also the noble Baroness, Lady Nicol, for the way in which they have put down these amendments at an early date. Some of his amendments are perhaps more relevant to future legislation and some strike at the very heart of the Bill. The noble Lord said at Second Reading that he dislikes this Bill. These amendments are therefore not surprising. This amendment itself strikes at a fundamental principle of the Bill. The noble Lord, Lord Williams of Elvel, said that it is not sophisticated. If it is not sophisticated, it is done with great charm and it is an absolutely deadly amendment.
The reason why the Bill comes before the Committee is that doubts have been expressed about the powers of the water authorities and the electricity supply industry to co-operate now with the Government as we develop our proposals for privatisation and restructuring. There is a great deal to do in relation to both water and electricity, if the main legislative proposals are to come before Parliament in good order and in good time. We need to be sure that there is no inhibition on the two industries in helping us to draw up that legislation, and in doing so, to anticipate the effects of that legislation. Furthermore, there are matters outside the legislative field where it is important that the industries should be given immediate attention if the privatisation process is to go smoothly and in accordance with our timetable. For example, detailed attention will need to be paid at an early stage to the drawing-up of long-form reports, as a preliminary to preparing prospectuses, well in advance of our introducing the relevant legislation. This will involve expenditure, and quite possibly the exercise of the powers in this Bill.
This amendment is aimed at preventing any co-operation on the drawing up of legislation. It is also aimed at stopping any of the other work from happening until our main legislation is in Parliament. If we were to suppose that the relevant legislation was to be introduced later this year—I said in relation to the last amendment that I cannot anticipate the contents of next session's Queen's Speech—the effect of this amendment would be to delay the planning process on the part of the two industries by some eight or nine months. That would not be acceptable to the Government.
The "proposing" as identified by my noble friend Lord Renton, is proposing to anyone, in particular the utilities. I have given an explanatory statement abut the principle of the Bill which is to clarify the law so that this can proceed. The Committee will know that this was not necessary with the privatisation of other works such as British Telecom and British Gas. Such a Bill was not necessary. It seems that the requirement of this amendment would only seek to delay the process quite unnecessarily.
Lord Renton: My noble friend says that the object is to clarify the law. In doing so, should we not ensure that the law is clear? In view of the statement made by my noble friend that it is not appropriate to insert the words of the amendment—namely, "to Parliament", between now and Report

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stage—perhaps the Minister would consider the possibility of inserting after the word, "proposing" the words, "to any utility or body corporate". That seems to be what the noble Lord has in mind.
The Earl of Caithness: Perhaps I may answer the point raised by my noble friend. Of course one of the great strengths of the Committee is to make legislation clear. That is something I am keen to do with this piece of legislation which is now before us. I will take away my noble friend's comments and look at them between now and another stage.
Lord Williams of Elvel: I am glad that the noble Earl has been impressed by the arguments of the noble Lord, Lord Renton. I also hope that he is going to be impressed by some of the arguments that I am going to make. I do not necessarily believe that the formulation put forward by the noble Lord is the exclusive one. We need to have clear laws, as the noble Lord said. We need to know what a proposal is and not merely to know to whom it is made, with great respect to the noble Lord, Lord Renton. We also need to know in what form it is made and how it is made. Then we can say, "This is a proposal under the Public Utility Transfers and Water Charges Act." If the noble Earl is going to look at the suggestion put forward from his Benches, perhaps he will look at the suggestion of introducing some kind of formulation to describe how we can identify a proposal which is under this Bill. If the Minister can give us that assurance I am quite happy.
The Earl of Caithness: The noble Lord, Lord Williams, is being increasingly ingenious in trying to get me to make commitments and to give assurances to the Committee. What I said to my noble friend was that I would look at the point he was making in order to see whether it needs to be clarified. If so, I would then consider how best to do it. In doing that, I shall bear in mind what the noble Lord says. Of course what I have said is without commitment.
Lord Williams of Elvel: I am grateful to the noble Earl for going, I suppose, half-a-step down the road which I believe both the noble Lord, Lord Renton, and I and others would wish him to go. Let us hope that in the course of his reflections between now and Report stage that he can go further along the way. I hope he recognises that there is a major problem. As the noble Lord said, if we are going to clarify the law let us at least try to make it clear. We from this side would certainly wish to have a clear definition of what constitutes a proposal under this particular Bill. I hope that the noble Earl will be able to come up with one before the Report stage. In the meantime, I beg leave to withdraw this amendment.
Amendment, by leave, withdrawn.
Lord Diamond Lord Diamond moved Amendment No. 3:
Page 1, line 6, after ("that") insert ("as part of a scheme of privatisation").
The noble Lord said: We are essentially on the same point that the Committee has been discussing. I share the view which has been expressed that the
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proposal is in terms which are far too wide for it to be recognised or identified. The noble Lord, Lord Williams of Elvel, wants a proposal under this Bill to be capable of being identified. I could not agree with him more. Any proposal of any kind might come under this Bill the way it is drafted at the moment. The rubric gives some hint as to what it is all about. The rubric says:
"Power to act in relation to proposals for privatisation."
Where in this clause is the word "privatisation" mentioned? It appears nowhere at all. The Explanatory Memorandum says that the electricity supply industry and the water authorities should
"have adequate powers to prepare for privatisation."
We all know that is what it is all about. The Government have produced a White Paper and they have made their intentions very clear both at the general election (so I am told) and subsequently. The Bill is to give powers in relation to a proposal concerning privatisation. Why on earth not say so? That would help to identify what kind of proposals we are talking about. That is why I am proposing that there should be inserted the words:
"as part of a scheme of privatisation"
The first line of the clause will read:
"Where the Secretary of State is at any time proposing that as part of a scheme of privatisation any property or functions … should be transferred"
Property or functions could be transferred in any way and not necessarily as part of a scheme of privatisation. They could be transferred as part of a scheme of reorganisation of a public utility company. There is not a word in the clause itself to say that these powers relate to privatisation. Yet the Government say that that is what it is about; the explanatory clause says that that is what it is about; and the rubric says that that is what it is about. It is a new proposition that the country should be governed by rubric. I have never heard of that one before. I am suggesting that the clause itself should make the position clear.
I cannot simply finish on that point. The rubric goes on, very wisely, to say,
"proposals for privatisation etc.".
That final word is a lovely one to use. It can cover anything that occurs to anybody at any time of the day or night. We wonder what "etc." refers to here. The word makes it perfectly clear that the clause as it exists at the moment is by no means limited to proposals for privatisation. It can be directed to proposals for privatisation and to other proposals which have nothing whatever to do with privatisation. In order to help the Government make it clear to the people of this country what they are about, it is proposed that they should say what they have said from the Front Bench opposite and from the Front Bench in another place. It is proposed that they should say in the Bill itself what they are doing. What they are doing is giving powers in relation to a proposal which is part of a scheme of privatisation. I beg to move.
4 p.m.
Lord Ezra: In supporting my noble friend's amendment, I should like to say that we are doing the

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very task that we have to do in relation to legislation. We are trying to make absolutely certain that what passes through our Chamber is clearly and indubitably understood by those who have to carry out the law. Clause 1 of this Bill is very unclear in many respects. The amendments so far moved have been an attempt to introduce clarity. What my noble friend has just said is precisely devoted to that end. Is this; intended to be a move towards privatisation, or is it not? If it is, what is wrong with saying so? We would then all know where we stand.
Baroness Phillips: I should like to support the amendment. I would have spoken on the other two amendments but that was not necessary because my noble friend stated the case so well. This is a frightening piece of legislation. Apparently so simple, it will give the Government great powers. I notice use of the "in" word, "corporate". We are told that everything is corporate and that a body is corporate. There is nothing in the definition clause to say what a "body corporate" is. It obviously comes under "etc.". If the Government are to hand over our water authorities and electricity boards to the private sector, they should at least have the courage to state it in the Bill. That would spell out exactly what this small and apparently innocent Bill is all about.
The Earl of Caithness: I fully understand the thinking that lies behind this amendment which the noble Lord, Lord Diamond, has moved with his usual clarity. Perhaps I may begin by assuring the Committee that the Bill had its origin in our intention to privatise the water industry and the electricity supply industry and the need as we saw it to confer explicit powers on those industries to co-operate with us in developing our privatisation proposals. That is the purpose of Clause 1, and its purpose will be fulfilled, I have no doubt, within the lifetime of this Parliament. Once the industries become plcs there will no longer be—and I quote—"relevant public utilities" within the meaning of Clause 1, so these powers will have become redundant.
I would, however, emphasise that our proposals for the water industry also include proposals to set up a National Rivers Authority. This proposal has a validity in its own right. I fully accept that it had its origins in our thinking about privatisation. When we concluded that it was not possible for one private body to regulate another we were moving inexorably in the direction of having to establish a National Rivers Authority or something like it.
However, we have also, independently, come to the view that it is becoming more and more difficult to justify the continuing role of the water authorities as one of the polluters and also the regulators of our river system. This is sometimes described as combining the roles of poacher and gamekeeper. The results of the river quality survey, carried out in 1985, show that the long-term improvement in the quality of our rivers and water courses has faltered, and in some cases gone into reverse. I am certainly not blaming the water authorities entirely for that. However, the institutional separation of regulatory
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from utility roles will help combat present difficulties. That separation, I repeat, has a validity in its own right.
Subsection (1) is drafted to encompass proposals for the transfer of property and functions of the utilities to other corporate bodies which may be in the private or public sectors. In the case of the water industry these transfers will be to successor companies which will be privatised and to the NRA, a public sector body. The establishment of the NRA is not part of the privatisation proposals but part of the proposals for restructuring the industry. The effect of the amendment would be to confine the preparatory powers of the water authorities to the transfer of water supply and sewerage functions to successor companies and to prevent them from preparing for the transfers of property and their remaining functions to the NRA.
I do not know where the noble Lords, Lord Diamond and Lord Ezra, stand in regard to their thoughts on the NRA, but we believe that it is necessary and is a move in the right direction in view of the poacher-gamekeeper position in which the water authorities find themselves. That is why the clause is drafted as it is and that is why the noble Lord's amendment is so restrictive.
Lord Williams of Elvel: We are grateful to the Minister for expanding his brief on the intentions behind the legislation. Indeed, he said more or less what the noble Lord, Lord Belstead, said at Second Reading. It is perfectly proper that he should repeat what the noble Lord said. However, if I may say so with the greatest respect, that has nothing to do with the problems raised by the proposed amendment.
If the Government do not accept this or a similar amendment we are left with the Bill as drafted which gives the Secretary of State power for an indeterminate period, without further recourse to Parliament, to act in relation to proposals, to propose (perhaps by lying in his bath and proposing to a dog; we do not know how he will propose) that certain things will be done and that powers will be given for acts to be done by other people for unspecified purposes. That is the point we have reached in the Bill and that is why we dislike this formulation. Between now and Report stage I hope that the noble Earl will think about what I and the noble Lord, Lord Diamond, have said because it is a problem for us if we are to act as a House of Parliament.
Lord Nugent of Guildford: Before my noble friend replies to that point I should like to raise a further matter arising from the short speech he has made justifying the very broad terms in which Clause 1 is drafted. He told us that he will set up the National Rivers Authority. Indeed, he has published a document about it. It would seem to me that the Bill is the natural place in which to take powers to do so. Yet the National Rivers Authority rates a mention only in the Explanatory and Financial Memorandum.
We are told that this is to happen. But when and how will it happen? We know, or we think we know, that in the next Session of Parliament there will be

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major legislation which will set up the new privatised structure of the industry. However, it would hardly seem appropriate that the National Rivers Authority should be part of such legislation, especially as my noble friend is relying on the soon-to-become National Rivers Authority to justify part of his position now. It seems to me that he has some obligation to explain where the powers to set it up will come from. People are most interested in the authority. It is going to be responsible for regulatory, environmental and conservation functions which affect the whole community. We should all like to know just how my noble friend intends to set up this organisation, who the people will be who will run it, how they will do it and what will its constitution be.
It is true that there is a broad outline of those functions in the admirable pamphlet which my noble friend has published, but that has to be put into legislative form before it can become a reality. I should stress that I intended to raise this point on Clause 10 stand part, but as my noble friend has been good enough to give me a hook on which to hang my short point by mentioning the National Rivers Authority and what he intends to do about it, I think that now is the appropriate time to ask him how he proposes to set up the NRA and when he will show those proposals to the world in a piece of legislative machinery.
Lord Renton: I should like to follow up the rather important point just raised by my noble friend Lord Nugent of Guildford. When we have a Bill which needs to have a good deal read into it between the lines, as it were, as happens with Clause 1, it is only right and proper that we should refer to the Explanatory Memorandum, although we have no power over its contents. However, I think in this case we should take note of exactly what the Explanatory Memorandum says in its first sentence. I ask the Committee to take note of the following important words:
"The Bill ensures that water authorities in England and Wales, and the electricity supply industry in England, Wales and Scotland have adequate powers to prepare for".
It then goes on to mention two matters. The first is "privatisation"; the second is:
"for the creation of a National Rivers Authority".
Therefore we are in the rather odd position of being asked to prepare for the creation of something which does not exist; it is not on the statute book or in the Bill. I find that situation rather strange and no doubt my noble friend will wish to turn his very diligent attention to it.
Baroness Phillips: Before the Minister replies, perhaps he could clarify one point. In his speech he rather concentrated on water, using the example of the poacher and gamekeeper; dealing with pollution on the one hand and polluting on the other. How would he apply that argument to electricity? Surely an electricity authority does not pollute at the same time as supply. In my view any comment he makes is tied up with those two matters right throughout the Bill. They may in fact be separated in the
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Explanatory Memorandum but each clause refers, on each occasion to the two matters with which we are concerned: water on the one hand and electricity on the other. Can he explain the poacher and gamekeeper argument in relation to electricity?
4.15 p.m.
Lord Diamond: We are most grateful to the noble Earl for what he said by way of explanation but, unfortunately, there is a lot more explaining to be done. I should like to clear the following point straight away because it may help in the argument. He asked where we stood on the NRA. The answer is that we think it is a very good idea, subject to seeing the details of it. The National Rivers Authority is not a piece of privatisation; it is a reconstruction of a public body as part of a scheme of privatisation. That scheme of privatisation has been made clear by the Government and appears, as the noble Lord, Lord Renton, has just reminded us, in the Explanatory Memorandum as the second of two main objects of the Bill.
I must stress that nowhere in the Bill are the words "National Rivers Authority"—at least, certainly not in this clause—and yet it is an essential part of what is contemplated by the powers being sought under the clause. Nowhere in fact is it mentioned. It is of fundamental importance because the Bill is mainly concerned with giving utility companies the powers to prepare for something definite. They know that something will happen to their industry and they had better get on with preparing for it. I have no objection to that. But what are they to prepare for? No doubt they will assume that they are to prepare for what is described in the statements issued by the Government, but there is nothing in the Bill about that aspect. They can only act wisely and cover themselves with regard to the expenditure they incur if they are preparing for matters for which they have power under the Bill.
Let us then examine a little more closely what has happened so far with regard to water to see whether it might happen in respect of electricity. As regards water, what the Government first proposed—to use the important word in this clause—was complete privatisation; that is, everything owned by the water companies was to be privatised and transferred to plcs. However, they then decided to withdraw all their proposals and subsequently decided to re-introduce such proposals in a very different form because they were not to be entirely for privatisation.
It was proposed that certain very important functions should not be privatised but that they should be retained in the public sector under a new body to be called the National Rivers Authority. We think that that was a very wise alteration of plan, but it was a complete alteration of what was in the Government's mind. I ask the Committee to bear in mind that we are talking about an amendment which proposes a scheme of privatisation—not privatisation in the round—so that the public utilities will know what it is that they are intended to do.
I turn now to electricity. At present the Government's plans—I say at present because they may well change them—are to privatise all the

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electricity functions. We know that one of the important and essential functions of the CEGB is electricity generation. We also know that there is a great argument taking place as to whether its powers should be privatised or retained as a single entity under some public body, serving what would then be privatised industries.
It may be that, just as the Government have changed their mind with regard to the National Rivers Authority, they may subsequently change their mind with regard to electricity generation. Then, because there has been no scheme for privatisation, all the expenditure that these utility companies have incurred in preparing for the privatisation of electricity will to some extent be wasted because there is some different proposal for which they have to prepare. Surely they are entitled to have a scheme of privatisation put before them so that they will know where they are. The proper place for that, I repeat, is not in the Explanatory Memorandum; it is in the Bill itself.
While we are on this, I seek the assistance of the Government on how to deal with the problem of the rubric, which talks about power to act in relation to proposals for privatisation. Unless the Government accept this amendment or something like it which talks about a scheme of privatisation, this is a very misleading rubric. It tells the nation that the Bill is about something when there is not a word in the clause itself to justify it. What if we do not like that? What if the Committee decides that it is not right and proper for a Bill to go from this Chamber which gives a totally misleading impression in a rubric? I do not know how one alters a rubric; I have never had to put down an amendment on one. I have always understood that a rubric just followed the pattern of the Bill. We should certainly want to know a great deal more, if the Government are not going to accept an amendment which justifies the rubric, as to why the rubric should appear.
Lord Renton: Will the noble Lord give way? I think the difficulty which he has expressed and which my noble friend Lord Nugent and I also expressed earlier could be overcome by there being a purpose clause at the beginning of the Bill. It would come before Clause 1 and its substance would be very much what is in the first paragraph of the Explanatory Memorandum. On the Legal Aid Bill recently the Lord Chancellor himself introduced a purpose clause. He had one drafted which helped very much in the interpretation of the Bill. I certainly think that the same solution could well be applied to this Bill.
Lord Diamond: I am grateful to the noble Lord, Lord Renton, who is very well informed on these matters of legislation and procedure. It may be that that is an alternative which will suggest itself to the Government. We do not mind in the slightest whether it is done in the form of this amendment, which has stood the test so far in the discussion which has gone on. It has indicated that what we all need is a scheme of privatisation which shows exactly what is proposed. We do not mind whether it is done in this form or in an intentions clause, which is another way round it.
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At all events, under either alternative we want something in the Bill which we can read and know has legislative effect. So I hope that the noble Earl will give this matter very careful consideration and bear in mind our great anxieties about this misleading rubric and also about powers being granted in this way without at any time referring to Parliament for something which may be privatisation or—although it is not likely—nationalisation, both covered by the Bill in just the same way. If the Government want to introduce schemes of nationalisation I dare say they could summon a certain amount of support from all sides of the Chamber. That is what this clause gives them power to do. I am sure I have made my point sufficiently clear. I hope the Government will respond to it.
The Earl of Caithness: I understand the concern of noble Lords and the noble Baroness on this matter. What the clause is designed to do is to permit my right honourable friend the Secretary of State and the utility companies to start work in preparation for privatisation. The noble Lord, Lord Diamond, knows full well that when those proposals have finally been prepared and submitted they will have to come before Parliament. Again, it is a point which I mentioned earlier that matters such as the exact form of the NRA are for the main Bill. If we were to put a reference to privatisation or to the NRA in the main body of the Bill, it would have to be precise in bringing forward what our proposals will do.
Lord Williams of Elvel: I am sorry to interrupt the noble Earl. A moment ago he referred to proposals coming before Parliament in the form of the main legislation. Are we to understand that the word "proposal" as used in this clause means the main legislation when it comes before Parliament and that is the proposal which the Secretary of State will make?
The Earl of Caithness: That is how it will end up. However, until one can have the powers to start discussions formally with the authorities or with the electricity industry on what is going to happen, it is a chicken and egg situation. When we have presented our proposals and worked them up, we can then present a Bill to Parliament. At the moment we cannot do that. It is a problem with the NRA. It is very much a chicken and egg situation. If it were to be written onto the face of the Bill, we should have to be very precise about what was to be privatised and what was to be the NRA. We cannot do that because we do not have the proposals which this clause enables us to put forward.
Lord Sefton of Garston: If the noble Earl will allow me to intervene, perhaps I may say that I am getting rather puzzled. It seems to me that the principle is that somebody on this side of the Committee is saying that the powers accorded to the Secretary of State in this Bill are not specific and they could be applied to situations other than privatisation. That is what is being said on this side of the Committee. What the Minister has to do is to satisfy the Committee that these proposals are a paving Bill only for

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privatisation and the establishment of the National Rivers Authority. That is the issue.
If the Minister will address himself to that and tell the Committee that the powers in the Bill are specific to those two objects, perhaps we shall be satisfied. At the moment the Minister has got nowhere near understanding the point, let alone replying.
The Earl of Caithness: I am very grateful for that invervention. The noble Lord, Lord Sefton of Garston, has hit the nail on the head. It is in order to bring forward proposals, but not all the proposals necessarily include privatisation. This is for the restructuring of the two industries, but until we get the powers to enable us formally to discuss that we cannot discuss the proposals with the electricity industry or the water industry. That is what is delaying matters. It is a chicken and egg situation.
Lord Sefton of Garston: That makes it worse. If I understand the Minister rightly, he is now saying that the powers may not just be accorded in the Act for privatisation which is contemplated by the Government and there may be something else. If this Bill allows the Government to do something else, it may be that if the Government found undue difficulty in getting somebody to buy the water authority or the electricity authority they would want to change their mind and go for a reorganisation. Under this Bill they would be able to do it and start the procedure for that reorganisation. If they were to do that, I am sure that this Committee would want to know what kind of reorganisation it was. So the Minister must satisfy us that it is specific to those powers.
The Earl of Caithness: That is exactly the point of the main Bill. It will come before noble Lords.
Baroness Seear: Why cannot the Minister say, if this is what he is trying to convey to us, that the proposals to be brought to Parliament are for privatisation and the establishment of a National Rivers Authority? Why cannot he put that in, and then we shall know what he is talking about?
The Earl of Caithness: That is one of the difficulties. Until we get the authority to make the proposals, what we have suggested is that the National Rivers Authority should be set up. But, as the noble Baroness knows, there are two White Papers on the electricity industry, one by my right honourable friend the Secretary of State for England and Wales and the other by my right honourable friend the Secretary of State for Scotland. Some of the thoughts in the White Paper may be changed in view of comments, but this clause and the Bill are what enable us to take matters a stage further in order to bring the main Bill before noble Lords. That will be the moment for the Chamber to decide whether or not what the Government propose as a result of the powers conferred in this Bill is acceptable.
I was interested in what my noble friend Lord Renton said on the intention clause. I should like to look into that to see if it is possible to bring that into
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this legislation given the fact that as I understand it, this matter is slightly different from the Legal Aid Bill. This is a chicken and egg situation. That is one of the points I should like to look at between now and the next stage of the Bill.
To be absolutely clear to the Committee I should say that we are seeking powers in order to enable my right honourable friend the Secretary of State to start discussions in order to bring forward the main proposals.
4.30 p.m.
Lord Diamond: I never expected the Government to bring forward as a reason for this Bill and for the wording of this Bill the fact that they are not ready to put their privatisation proposals to the nation. That has happened once already and the proposals were all withdrawn. We all know that that happened with regard to water.
If the Government are not ready to put forward a scheme for the privatisation of water they should say so and wait until they are ready. It is wholly irresponsible when the Government are not ready to invite the utility companies concerned to incur any expenditure which they like and which the Government wish them to incur and to give them the powers to examine proposals which the Government have not yet clarified in their own mind and which may turn out to be quite different. It is quite wrong that that should happen.
The Earl of Caithness: I shall try once again to get the message through to the noble Lord, Lord Diamond. He would be the first to criticise the Government and the water authorities if there were not a long-term prospectus for the privatisation. He would be the first to get up and say, "This is absolutely wrong. It goes against all the Companies Acts". The noble Lord, Lord Williams of Elvel, would he very close on the noble Lord's heels to tell me that. This clause enables us to fulfil those kinds of requirements.
Lord Diamond: To put it politely, I find it very difficult indeed to accept what the noble Earl has just said. The noble Earl has said a number of things. He has said that it is impossible for the Government to start discussions with the utility companies on the details of the proposals. I find that very difficult to understand. I cannot see why the Government should not go and start discussions with the utility companies here and now. They have the full powers to do that.
Is the noble Earl telling us in one sentence that the main purpose of the privatisation of the electricity industry is to stop government interference—as the Government call it—and at the same time telling us that the Government have no power to talk to the electricity industry about their plans for privatisation? I am afraid that that really is just not tenable. The clear situation as we now find it is that the Government do not have the foggiest idea of what they propose to do. If that be so, that is all right; they should give the matter further examination. It is not the first time that the Government have found

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themselves in this position. It is the second time. That is all right. The Government should give the matter further examination but in the meantime they should take the matter away. The Government should not come to the Chamber with a Bill which is intended to give powers in relation to proposals for precise privatisation schemes for the water industry and the electricity industry when they do not have the foggiest idea of what they want to do.
I repeat what I said previously: we are very unhappy indeed about the rubric and we shall seek to support the noble Lord, Lord Renton, in his examination of this matter and in his proposal that some kind of addition to this Bill should be made, possibly at the start, so that the Bill tells the nation what the Government are intending to do and does not conceal it from the nation.
A number of suggestions have been made. The noble Earl was good enough to say that the suggestion made by his noble friend Lord Renton would be looked at. I think that it is so self-evident that something more should be done that the Government, when they think about this quietly, will come to the conclusion that this clause should be clarified. In the hope of that and on the understanding of what was said by the noble Earl and without putting any additional words into his mouth with regard to the noble Lord, Lord Renton, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hesketh: I beg to move that the House do now resume for the Statement.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Belfast Funeral Incident
4.35 p.m.
The Parliamentary Under-Secretary of State, Northern Ireland Office (Lord Lyell): My Lords, with the permission of your Lordships, I shall repeat a Statement that is currently being made in another place by my right honourable friend the Secretary of State for Northern Ireland. The Statement is as follows:
"With permission, Mr. Speaker, I wish to make a Statement about the attack yesterday upon mourners attending the funeral in Milltown Cemetery, Belfast of the three terrorists killed in Gibraltar.
"Before the funerals, the Roman Catholic Church, local politicians and community leaders had appealed for the occasion to be orderly and without violence. The police had made it clear that they wished this to happen, and would do all they could to assist. Against this background, and in the belief that neither the families nor the community wished to see any exploitation of the funerals for paramilitary purposes, the chief constable decided his dispositions accordingly. His aim was to police the whole area in a sensitive manner, and to avoid
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intervening in a private and solemn occasion. I would emphasise that the funerals were proceeding in a peaceful way until the attack took place.
"At about 1340 hours a man on the fringe of the crowd in the cemetery opened fire with a handgun, and started to throw grenades among the mourners. He was identified, and as he made his retreat he threw further grenades and continued to fire. He was pursued by members of the crowd who caught him at the nearby motorway where he was subsequently arrested by the RUC. He is at present under police guard in hospital recovering from the injuries he received at the hands of the crowd. A second man subsequently arrested by the police at his home is now helping them in their inquiries.
"In the course of this vicious attack, three people were killed, and 68 injured, of whom four have been detained in hospital, one in intensive care. The House will wish to express its sympathy with the relations and friends of those killed and injured in this appalling incident.
"A telephone call was made to the BBC, purporting to be from an organisation calling itself the Protestant Action Force, and claiming responsibility for the outrage, but the accuracy of this claim is not yet clear.
"It was an obscenity that an occasion which, whatever its origins, should have been one for private mourning and grief was brutally and savagely interrupted by such an attack. The events of yesterday only serve to underline the total futility of violence in all its forms. The day began with a blast bomb attack by the IRA on an Army patrol, in which fortunately there were no fatalities, but in which one soldier was injured.
"Even after the incident at the cemetery, and notwithstanding the professed appeals for calm, the IRA tried to launch a mortar attack on a police station in Belfast which was fortunately forestalled by the security forces. There was further violence last night, with hijackings and burning of vehicles, petrol bomb attacks, and a sectarian attack on some Protestant houses.
"We can only be grateful that the violence of last night did not lead to still more deaths and serious injuries.
"Nothing could have demonstrated more clearly that if people's thoughts are only of revenge and retaliation after any incident, then this awful cycle of killing and murder and violence will continue. And yet nothing showed more clearly the total futility of violence and that it offers nothing to any part of the community in Northern Ireland. There are likely to be funerals every day this week in Belfast at which the human suffering and sadness and heartache will be all too plain, and the ultimate tragedy for all the bereaved is that it is all to no purpose. Some 2,500 people have been killed in Northern Ireland in the past 20 years. We know how many of those deaths flow from terrorist action and we know that those killings have not advanced any cause whatever. Instead they serve only to deepen the bitterness and hatred that can divide the communities.
"At this time of great emotion it is now incumbent on everybody in the Province to play their part in ending the cycle of violence and retaliation and further violence. It is not just the politicians, the Church and community leaders, crucial though their role is, but everybody in the Province who has a responsibility to heal, and to calm and to mind what they say as much as what they do. The need once and for all to repudiate violence in speech as well as action and the determination to work positively to build a tolerant and caring society is the message that this House should send today. It is a message that does not seek to judge or to distinguish between one section of the community and another, but one that is deeply important for the future of every single person in Northern Ireland."
My Lords, that concludes the Statement.
4.40 p.m.
Lord Prys-Davies: My Lords, we thank the Minister for repeating the Statement. We are grateful to the Secretary of State for taking the earliest possible opportunity to express his outright condemnation of the appalling atrocity which was committed in Milltown Cemetery, Belfast, yesterday. We also wish to convey our sympathy to the families and friends of those who were killed, to those who were wounded and to the bereaved who wished to bury their dead in dignity.
Sadly, the paramilitary elements in both communities think that they know what is best for the Province. They believe that their aims can only be achieved by mounting fury and violence upon violence. Yesterday's tragedy in Milltown Cemetery may be seen by the Unionist paramilitary forces in Northern Ireland as retaliation in kind or revenge for the atrocity committed by the IRA at the Enniskillen war memorial. But violence from either community is no answer to the problems of Northern Ireland. It is no answer because violence upon violence breeds further violence. Indeed, over time the cycle of violence can eventually lead to the death and become the grave of Ulster itself.
Over the next few days many questions will be asked about yesterday's tragic events. Today, I have only two questions for the Minister. First, while it is appreciated that the RUC and the security forces had been requested by the leaders of the Catholic and nationalist community to adopt a low profile during the funerals—and it appears that they so responded—did the RUC or the security forces have any indication at all that any Protestant paramilitary force or any individuals intended to embark on a course of violence which could in any way disturb the funerals? Secondly, while accepting, as we readily acknowledge, that the problem of Northern Ireland appears to be intractable, do the Government—or indeed both Governments—intend to take any initiative which could bring the cycle of killing and wounding to an end?
Finally, we can only hope with the Secretary of State that all sections of the community in the Province will respond to the earnest appeals from
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Church leaders on both sides of the divide for a period of calm and avoidance of further recrimination.
Lord Donaldson of Kingsbridge: My Lords, first I wish to associate all my friends and colleagues on these Benches with the outrage expressed in the Statement and with the sympathy for the bereaved and the wounded which the Secretary of State and the noble Lord, Lord Prys-Davies, have expressed. Secondly, I wish success to the RUC and the army in their duties, which become more difficult and dangerous with each hateful atrocity committed first by one side and then by the other.
Over the last 12 years, I have had to respond to all too many accounts of atrocities in Northern Ireland. However, this is surely the least excusable, the most inexcusable and the least forgiveable atrocity, even including Enniskillen. I have no questions to ask the Minister. But I stand squarely behind the Secretary of State's brief but powerful statement made over the wireless last night when he appealed to everybody to restrain themselves from the appalling cycle of repeated violence.
That sentiment was gallantly echoed this morning by the mother of one of the dead, as I have seen on the tape this afternoon. She said:
"Please, please, let there be, for once, no acts of revenge, no escalation of these senseless cruelties. Let the ordinary people of Northern Ireland shame their paramilitary factions on both sides into a proper respect for human life".
Lord Lyell: My Lords, the words of sympathy which have been expressed by both noble Lords who have spoken for the bereaved, the dead and the wounded as a result of this appalling incident will be passed to all those concerned. I am sure that those words will be of comfort to everyone in Belfast.
The noble Lord, Lord Prys-Davies, asked if we had had any indication of what might happen and whether it could have been prevented in any way. He also asked whether there was any possibility of an initiative by either the Government of the United Kingdom or that of the Republic of Ireland.
So far as we are aware now, the perpetrator of that appalling deed is presently in hospital and under police guard. The police have been unable to obtain much information from him which is of any use. Nor was there any indication of what might happen. Perhaps it will help the House if I stress that, following assurances that there would be no paramilitary displays at yesterday's funerals, the RUC deliberately kept its distance and did not enter the cemetery. I believe that the House will accept that it is entirely hypocritical of all those who have been loudest in their criticism of the police for the handling of previous funerals to now seek to place the blame for what took place yesterday on the RUC. From the information that we have, there is no indication of how the perpetrator of that foul deed came into the cemetery. However, our inquiries are still continuing.
As regards the second point raised by the noble Lord, Lord Prys-Davies, the Anglo-Irish Agreement is still very much in place. I think that your Lordships will wish to know of the helpful statement which came from the Taoiseach. It was much appreciated.

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He issued his statement at approximately 4.30 p.m. yesterday. Among other things, he stated:
"The anger which this savage attack will cause should not lead to further violence and I appeal to the nationalist people of Belfast and to all the people of Northern Ireland to respond with calm to this outrage and to take no action which might heighten tension or lead to further loss of life.".
Those were the words of the Taoiseach, which I believe should go some way to answering the second point made by the noble Lord, Lord Prys-Davies.
We are grateful for the comments of the noble Lord, Lord Donaldson. I shall see that his kind remarks on the work of the army and the Royal Ulster Constabulary are passed on to the relevant quarters.
Lord Hailsham of Saint Marylebone: My Lords, I do not think that anyone has so far mentioned that this is 17th March, St. Patrick's Day. Is it not possible that the deep sense of shock which all Christians must feel that St. Patrick's Day should be the day upon which we have to record events of this kind and those of the past three weeks could be utilised to bring an end to this appalling reign of hatred and violence?
Lord Lyell: My Lords, my noble and learned friend puts into eloquent words what is felt in your Lordships' House on this day that is so special to Irishmen in Ireland and all over the world, who will feel very much what has been expressed by my noble and learned friend. I am grateful to him for putting that into words. I am sure that it will be noted, not just in your Lordships' House but in Ireland and further afield.
Lord Monson: My Lords, is there any evidence as to the provenance of the grenades used in the cemetery attack? Is there not considerable suspicion that the Libyans have been supplying arms to both sides in the conflict?
Lord Lyell: My Lords, we have no definite information about the provenance nor the types of the weapons that were used in the cemetery. I understand that further inquiries are being carried out by the RUC, but we do not have any definite information on the provenance of those dreadful weapons. They could have come from anywhere.

Public Utility Transfers and Water Charges Bill
4.51 p.m.
House again in Committee on Clause 1.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 4:
Page 1, line 7, after ("transferred") insert ("at fair value").
The noble Lord said: I rise to move Amendment No. 4 standing in my name and that of my noble friend Lady Nicol.
At Second Reading I made a few comments about the principles which will underly the valuation of both the water companies, as they will become, and the electricity companies, as they will undoubtedly
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become. I ventured to put down a marker for the noble Earl when he came to Committee that I should be asking some fairly detailed questions about the nature of the accounting principles and the principles of valuation that the Government propose for both the water and the electricity industries.
The amendment seeks to make operative a restriction on the proposal (which is still undefined) to be brought forward to transfer property or functions of one of the public utilities. If the amendment were adopted the Secretary of State would be obliged to make a proposal for a transfer at fair value. In doing so he would no doubt have to stipulate and make known what fair value meant. At one level this is a wholly uncontentious amendment because no one would suggest that the Secretary of State would transfer at unfair value. Nevertheless, underlying it there is a large slice of the iceberg which is extremely contentious.
Water authorities have had in the past, and continue to have, serious difficulties in deciding the method of accounting to be used in valuing their assets and setting their depreciation charges. That is not surprising because many of their assets are extremely old, particularly underground, sewerage assets, dating back to the 19th century, and to adopt replacement accounting in many instances would be absurd. However, historic cost accounting does not reflect a sensible value of the assets, given that when the transfer to the water authorities was made subsequent to the Water Act 1973 the historic cost was somewhat glossed over. At that time the transfer was within the public sector so that it did not matter very much and no attempt was made to determine a proper historic cost for the assets being transferred.
Although that is understandable in terms of the transfer of assets between one part of the public sector and another, it is less understandable when it comes to transferring assets from the public sector to what will be the private sector. It is at the point of transfer as described by the Bill that I believe the essential criteria for valuation will be set up. Once one transfers into a particular vehicle with the purpose of privatisation and flotation, it is at that point that the balance sheet and the profit and loss is set up and the accounting principles thereby determined.
In replying to the previous amendment the noble Earl referred to long form reports that would have to be made. He is right that long form reports would have to be made on all the companies that the Government would propose to sell in the market. That would be so in order to comply with the Companies Act and with the Financial Services Act. In the case of many water plcs—if I can use that expression—it will be an extremely difficult exercise. The difficulty will not only reside in the fact that the underground assets of the present water authorities are difficult to identify and in many instances have not been identified. It will not only reside in the creation of the National Rivers Authority, which will split off some of the functions of the present water authorities and hence lead to a restatement of the water authorities' own accounts over the past five years, which will be required by the Stock Exchange when we come to flotation.
It will be difficult to decide on the method of accounting for the depreciation of assets and whether that is renewal, replacement, historic or current cost. All these matters will have an impact on the profit and loss account of the companies to be privatised since, as the noble Lord the Lord Privy Seal said at Second Reading, it will be by the profit and loss account that the market will make its valuation of these companies.
The noble Lord the Lord Privy Seal argued at Second Reading that the assets did not matter very much because it is the market which will place a value on the earnings. I do not think that argument will stand up because the depreciation of the assets forms a deduction from the earnings of the company.
All those matters seem to me to be of such importance that in the case of the water industry they have to be established before much further progress is made. Indeed, it is quite possible to conceive of a situation in which the asset register of a water authority is so incomplete—in other words, it does not know where its underground assets are—that it is impossible to get an unqualified audit on that authority should it be transferred to a plc and should it require an audit report for flotation.
The same is generally true of the electricity industry. There are underground assets that the Central Electricity Generating Board still has difficulty in identifying. The problem is exacerbated by the proposed reconstruction of the industry in England and Wales and the scheme proposed in Scotland where parts of various integrated organisations are to be split up. When that is done, serious problems of accounting are introduced which have to be faced now.
Let me take the Central Electricity Generating Board as an example. It is a very complex accounting entity. If it is split into two parts—whether in halves or otherwise makes no difference—one has to determine where the earnings lie, where the assets lie and where the costs lie. And this is on the basis of accounting principles that are at best somewhat sketchy. It does not matter if it is all in the public sector; but it will matter when it reaches the private sector. As I reminded the noble Lord the Lord Privy Seal on Second Reading, Section 47(1) of the Financial Services Act makes it a criminal offence to make any misleading statement knowingly or otherwise to induce an investment. I have said enough, I think, to impress the noble Earl with the seriousness of the problem.
The potential value of these utilities, both electricity and water, will have to be determined at the point of transfer. It is not enough for the Government to say that it can be determined between transfer and flotation. The accounts—the balance sheet—passed across at transfer will determine the balance sheet on flotation. I want to make that as clear as I can in words of one syllable. That is why the fair value concept has to play a part in this Bill and not in the main privatisation Bill.
5 p.m.
Lord Diamond: Perhaps I may expand on what the noble Lord, Lord Williams of Elvel, has referred to.
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I do so without detracting from what he said; I support his sentiments completely.
It is evident that the market will have regard not merely to the value placed upon the assets and to past profit and loss accounts but also to the anticipated return on any investment made by the market. In that connection the market will want to know the extent to which these companies will be allowed to make profits. That in turn will depend on the rules made by the Government at the time of privatisation with regard to the control of prices and other matters that have an effect on profits. I speak here of the profits after privatisation, to which the market will have some regard.
When the Minister is good enough to answer the questions posed by the noble Lord, Lord Williams of Elvel, on balance sheets at the time of transfer to the bodies corporate, which in the main are to be plcs, perhaps he would tell the Committee what is in the Government's mind with regard to the profit potentials of the companies.
The Earl of Caithness: The noble Lord. Lord Williams of Elvel, in introducing the amendment mentioned that it was in his name and in that of his noble friend Lady Nicol. We are sad that the noble Baroness is not in her usual place. I ask the noble Lord to take our good wishes to his noble friend. We look forward to seeing her back in her place fit and well again to participate in other debates.
The amendment seeks to influence our proposals for the restructuring and privatisation of the water authorities. Of course, noble Lords should, and will, have the opportunity to debate those proposals, and to seek to change them, when they come before us in the context of the main legislation. This Bill, however, does not give effect to our proposals. It simply gives an express power to the water authorities, and to the electricity supply industry, to take such steps as they consider appropriate to prepare for our proposals.
Nonetheless, if we look for a moment at the implications of this amendment for our proposals, we can see that the attempt to import the notion of fair value into the proposed transfer of property and functions is misplaced. Let us consider the water industry. There would be considerable difficulties in attempting to establish the value, let alone the fair value, of each of the functions whose transfer we propose. How does one put a value, for example, on maintaining the environmental quality of our rivers?
On the other hand, it is both inappropriate and unnecessary to apply the notion of fair value to transfers of property. It is inappropriate in so far as transfers will take place from one public sector body to another—from a water authority to the National Rivers Authority—since, in accordance with normal practice, there will be no consideration given by the receiving public sector body. The noble Lord referred to this point in regard to the 1973 transfers. It is unnecessary in regard to transfers to successor bodies which will be privatised since the interests of the public purse will rightly be protected by the payment of flotation proceeds into the Exchequer for the benefit of the country as a whole.

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The noble Lord, Lord Williams of Elvel, spoke of the difficulty that he foresaw for the preparation of the accounting information that would be required for the prospectuses for the sale of water services plcs. We are, of course, well seized of the importance of the providing of accurate financial information in the flotation prospectuses, and the accountant advisers to be retained for these privatisations will have this as their objective. We are not less committed to ensuring that we obtain value in transferring utility businesses to the private sector. That value will relate to the business as a whole and will be established by reference to market conditions at the appropriate time, which I understand to be flotation.
I am sure the noble Lord will agree that it would be wrong to seek to settle the value in advance of that moment, but I assure him that we are fully cognisant of the requirements under the Financial Services Act in order to prepare a legal prospectus.
Lord Williams of Elvel: Perhaps I may pursue the argument a little. I think that the noble Earl has not fully grasped what I said. There is of course no intention to set a flotation price at the time of transfers. That would be absurd. I hope that I did not appear to suggest that. Transfers between the public sector bodies— for no consideration, of course as the noble Earl rightly says, are matters that do not require a particular accounting expertise, although a certain expertise is involved.
The point I am endeavouring to get across is that there are two kinds of value. Let us consider a private company—leaving aside flotation—which we want to sell. There are various methods of valuing it: this is not something to sell on the market, but a company that is to be sold from a willing seller to a willing buyer. There are various methods of valuing it. In general, and in normal practice, there is a valuation of the assets—a valuation of the property. There is an audit. As the noble Lord mentioned earlier, there is a long form report, a projection of earnings, and a number of matters which are all wrapped up together. In the end some kind of value is arrived at.
The basis for any valuation that may be arrived at as a result of negotiation between parties is a balance sheet and a profit and loss account. The long form report sets up a balance sheet for the last period—a photograph of the operation as at a certain date—and the setting up of a series of profit and loss accounts over the previous five years. That creates the basis on which the sale can take place. In this instance that will create the basis on which the flotation can take place, and the value, decided by the market, as the noble Earl quite rightly points out. In order to get the latter process right one has to get the former process right. In other words, one has to have a proper balance sheet, with a proper profit and loss account set up according to accounting principles which are clearly understood.
The point that I was making and that I did not get across was that that procedure will be set up under the terms of this Bill inevitably at the point of transfer. It is at the point of transfer that one will have the water authority—less that portion which goes to the National River Authority—going into a
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plc ready for flotation, with a balance sheet and a profit and loss account which have been set up according to certain accounting principles. That will form the basis of the valuation which will subsequently take place on flotation.
The noble Earl argues that one cannot put values on environmental liabilities. But that is what auditors do. There are certain costs associated with this which have to be taken into account. They have been taken into account in the past because water authorities have spent money on these functions. No doubt when they come to make some earnings projections along the lines that the noble Lord, Lord Diamond, has outlined, as they surely will, analysts will seek to include in their earnings projection a cost for the environmental duties that these water authority pies may well have.
The point remains, however, that the initial balance sheet at the point of transfer, and the initial series of profit and loss accounts at the point of transfer, have to be set up according to accounting principles which are understood, and with a register of assets and a register of earnings which are clearly and easily identifiable. It is all very well for the Government to say. "We shall appoint accountants who are fully familiar with these problems". I have talked to a number of accountants who are familiar with these problems. Everyone knows that it is nearly impossible to produce a water authority's balance sheet, even in its present form, before you detach part of the activities to the NRA, because one does not know where a lot of the underground assets are, and the method of accounting, of calculating the depreciation of the assets, is a matter of great controversy in the accounting profession at the moment.
Accepting that these matters have to be resolved at the point of transfer—which is what we are dealing with here—what accounting principles are going to be used? How will all this be established? At the end of the day that is what will affect the fair value at the time of flotation. I hope that the second time around I have made myself clear.
5.15 p.m.
Lord Stoddart of Swindon: My noble friend must surely be right on this point, for two very good reasons. The noble Earl said that these matters can be dealt with when we have the Bill. We passed a Gas Bill and we tried to set out these matters correctly in the Gas Act. We failed miserably in spite of seven long-drawn-out days and nights when we tried to persuade the Government that they should ensure that the taxpayer received a fair and proper price for the assets transferred by the Gas Act. In spite of all our efforts, we made no impression. That is why my noble friend is trying to have an instruction put into this Bill in order that the draftsmen of the next Bill will know exactly what they have to do. That is why my noble friend, with great foresight, is trying to write this provision into this Bill.
He is right to do so (is he not?) because today I believe that the price of a British Gas share stands at 142p for a payment by the shareholder of 95p. Therefore the assets of the gas industry were

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undervalued to the tune of 50 per cent. I feel sure that the Government do not want that to happen. That is why they should take heed of what my noble friend has said this afternoon.
Another reason that we should have these industries correctly valued is that— unlike any other industry which has been nationalised so far—they are both virtually life support industries. There is no way in which people can do without water; and in a modern society there is no way in which they can do without electricity. Civilisation without either would virtually collapse. Those businesses create for private individuals a situation that is virtually unheard of. Whatever happens they are bound to be able to sell their commodity. It is therefore right that the taxpayer should receive a proper and reasonable price for those assets, and for the considerable benefit that will be bestowed on the new owners.
I hope that those comments have been helpful to the Minister in reconsidering his reply to my noble friend. I hope that he will be convinced that there is great merit in this amendment. I should have thought that the least he should do is agree to take it away and reconsider the position.
Lord Diamond: Perhaps I may make one further point before the Minister replies, lest he should be tempted to give us the same reply as last time—that all this can be dealt with in the main legislation.
I am not considering that point, and I am sure that the noble Lord, Lord Williams, is not either. We are asking this. At what stage is it right to trigger off the mechanisms by which utility companies can start preparing for privatisation in the way in which the Government want it done? We are saying that it is no good leaving major questions at large until one is considering the main Bill. One has to know at this stage whether the proposed terms are such as would be considered fair by a vast body of opinion, in particular by parliamentary opinion, before the Government can state with any reliability that they have a scheme which will receive public and parliamentary aproval and that it is therefore appropriate that the utility companies should start preparing for that privatisation scheme.
The noble Lord, Lord Williams, has made it absolutely clear—I am bound to confirm what he said from my minimal professional knowledge—that there are great differences of opinion as to how the assets in balance sheets should be valued in cases such as this. There is enormous difficulty about it. The difference between one extreme of value and the other is enormous. It is one of the major issues—I would not say that it is the whole issue—which has to be taken into account in fixing the price and therefore enabling people to determine whether it is a fair value in terms of the amendment.
The Government should therefore have given great consideration to this and should have decided what kind of basis to use. With the greatest possible respect, in this case as on the previous amendment, if the Government are not ready to do that they are not ready to bring in a Bill inviting public utility companies to go to great expense and upheaval to
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prepare for a scheme which is not a fair scheme and which therefore might not receive approval.
It is the Government's duty to know—not to the last dot on the "i" and cross on the "t"—in fair detail the important parts of the scheme that they are proposing. What the noble Lord has put forward in the amendment is a very important part. I should be grateful if the noble Earl will say whether the Government have given this full consideration and have reached a fairly precise conclusion.
The Earl of Caithness: I agree with the noble Lord, Lord Diamond, that it is important for the Government to know. That is precisely why we seek the powers in the Bill to enable us to know, so that when we bring forward the main Bill—I return to that because that is when the proposals will be laid before Parliament—following the powers under this legislation, we shall be able to bring before noble Lords how the reconstruction is to take place and how the values will be arrived at. However I accept that at vesting the physical separation of assets will be determined as the noble Lord, Lord Williams, suggested.
Accounting for the transfer will be complex but will have as its starting point the accounting procedures which already exist in the water authorities' balance sheet for these assets. When the main Bill comes before Parliament noble Lords will be able to consider it fully, because the proposals in the main Bill will affect the value for the transfer. As a valuer myself, I should tell the noble Lord that to put the word "fair" here is totally inappropriate, if I may humbly say so—
Lord Williams of Elvel: Surely the noble Lord has heard of a true and fair view, which is the normal audit report?
The Earl of Caithness: But that is a combination of valuations of different types. As I have said to the noble Lord, how does one put a value, for example, on maintaining the environmental quality of rivers, let alone a fair value. He carefully listed all the points on which I agreed with him about buying and selling a company where the balance sheets and the profit and loss account are important. The projected earnings are important too because they determine the final value. But we are well aware of our duty to bring the right amount of value by means of money into the Exchequer for the public benefit and for the country as a whole, as we shall seek to do. Much of it cannot be done until we get the main Bill.
Lord Diamond: I am sorry to return to this. We are beginning to realise that the Government put a totally different interpretation on the word "proposal" from our understanding. In fact I would go so far as to say that the noble Earl has misdirected himself in relation to the meaning of the word "proposal".
The noble Earl has said that the Government need these powers to find out all sorts of information so that they can then make a proposal. Not at all. The

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Government have to make proposals before those powers become effective. The Bill says,
"Where the Secretary of State is at any time proposing".
The Secretary of State is making proposals at this time. It is now that he is asking for those powers under the Bill. It is no use the Secretary of State saying that he would like to go on a voyage of discovery to find out what proposals he can bring back to Parliament in a year's time affecting these two public utility industries. He has to make them now and I should be glad if the Minister will direct his mind to that point.
Lord Williams of Elvel: I do not know where we are going in this discussion. The noble Lord, Lord Diamond, has put his finger on the difficult point that we do not quite know what the proposals are. The noble Earl is saying that he cannot make proposals until the Bill is passed. Yet the Bill specifies that the Secretary of State shall make proposals. In these circumstances I do not know what we mean by the word "proposals".
I make a modest suggestion to the noble Earl. Will he tell us, either now or at Report Stage, what principle of accounting— whether renewal accounting, historic cost accounting or current cost accounting—will be used by the water authorities when they are transferred into water authority public limited companies? I start with that simple and basic question.
The Earl of Caithness: As I said, the starting point for the accounting procedure will be that which already exists in the water authorities.
Lord Williams of Elvel: In other words, historic accounting with an addition of current cost accounting. Is that what the noble Earl is saying?
The Earl of Caithness: On that precise point perhaps at Report Stage I shall be able to let the noble Lord know, or even before that time.
Lord Williams of Elvel: Will the noble Earl take my word for it that that is what the water authorities do now? Will he recognise that in historic cost accounting the historic costs which water authorities use in their balance sheets are the historic costs at the time of transfer under the Water Act 1973? Will he also take my word for it that the accounting profession as a whole believes that those historic costs—I will not say that they were mythological or invented—had very litttle to do with the historic costs of the assets being transferred? Will he further take my word for it that the Financial Services Act, no less, will require that if historic cost accounting is to be used, a proper historic cost has to be set up for the assets of the business; otherwise, it will be a misleading document?
Will the noble Earl comment on those few questions?
The Earl of Caithness: This is very interesting, but it brings me back to the comment I made that we are
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well seized of the importance of providing accurate financial information for the flotation procedures. We are aware of these difficulties.
Lord Williams of Elvel: We shall have to return to this at a later stage. I hope that in the meantime the noble Earl will have given a great deal of thought to what we have said this afternoon. As I interpret the mind of the noble Lord, Lord Diamond, and as I know my own mind, I am determined to return to this at a later stage because I am entirely dissatisfied with what the noble Earl has said, however elegantly and courteously he replies. I do not think the content very serious, if I may say so. I believe that before he goes much further the noble Earl and the Government will have to think very hard about the matter. Perhaps the noble Earl will refer to his noble friend sitting on the Conservative Privy Council Bench who probably knows more about water authorities than anybody else and also what historic costs mean in the context of the water industry. I am sure that he will receive benefit and very useful advice. I beg leave to withdraw the amendment.
Amendment, by leave withdrawn.
5.30 p.m.
Lord Diamond Lord Diamond moved Amendment No. 5:
Page 1, line 8, after ("corporate") insert ("in such a way that the value of the nation's net assets is maintained in one form or another").
The noble Lord said: I was very interested and most grateful to the noble Earl for suggesting—in fact, he said it twice in very similar terms—that the proceeds (we were referring on a previous amendment to a fair value) will be paid into the Exchequer for the benefit of the country as a whole. I tried to get the words down as precisely as I could. The proceeds should be paid in for the benefit of the nation as a whole, and we believe that to be the duty of the Government. The amendment suggests that the procedure laid down in the Bill should not be triggered off except where proposals recognise that the proceeds, to which the noble Earl has referred, are dealt with:
"in such a way that the value of the nation's net assets is maintained in one form or another".
We are interested to know what will happen to the proceeds which will have been paid into the Exchequer for the benefit of the country as a whole. They will be the proceeds of the sale of two of the nation's most valuable assets. They can be sold once but they cannot be sold twice. If a future government wish to assist their budget position by selling assets, it will not be possible for them to sell assets which have already been sold.
The Government are in the fiduciary position of any other trustee in maintaining the value of the country's assets. If the Government are selling an asset and paying the proceeds into the Exchequer for the benefit of the country as a whole, they will justify their action only if those proceeds are invested in another asset; for example, if they are invested in public housing or in any of the numerous capital outlays which are crying out for action. They will not be satisfying their duty as a trustee if those proceeds are used, for example, for the benefit of tax refunds or allowances in the Budget.
We are seeking to make absolutely clear the fact that the Government shall undertake that the assets of the country should be maintained in one form or another. There is nothing wrong with selling the family silver and reinvesting it in pictures, new property or any other capital asset. No one has ever criticised the Government for selling the family silver; the criticism has always been for selling it and using the proceeds to pay the bills for the groceries. It has been done for realising capital expenditure and using the proceeds for current expenditure. That has been the burden of the criticism which I have voiced on many occasions and which has been taken up by more important speakers in the Committee.
In my amendment I am not referring merely to assets but I am trying to help the Government as much as possible by referring to net assets, which are the difference between assets and liabilities. It is just as proper for the Government to pay off liabilities as it is to transfer from one asset to another. If the Government state that they will not use the proceeds of the sale of these assets to buy other assets but will use them to pay off liabilities, it comes to the same point: net assets are maintained. We believe that point to be of immense importance not only for the economic policies of the Government but for the honour of the Government. Once they have sold assets belonging to the nation they must recognise their responsibility in maintaining them in one form or another. I beg to move.
Lord Renton: Although I believe that most Members of the Committee will understand the intention of the noble Lord, Lord Diamond, in moving the amendment, with which most of us would agree, I am afraid that he has used a terribly wide phrase. The net assets of the nation are a very large concept and include the gold reserves, the buildings in Whitehall and every pair of boots worn by every private soldier in the armed forces. It is a vast concept and I do not think that such a wide phrase is suitable for use in the context of this subsection. I cannot contemplate my noble friend's acceptance of the amendment.
It is not for me to suggest an alternative, but one was raised in the previous amendment by the noble Lord, Lord Williams of Elvel, to which I thought my noble friend gave a satisfactory reply. I hope that the Committee will not take up too much time in considering Amendment No. 5.
Lord Ezra: The disposal of assets in this way is a subject which we have discussed on previous occasions. I agree that it is difficult to define the nation's assets. However, in the case of the proposed privatisation of the electricity industry in particular, a vastly greater amount of money will be realised than on any previous occasion. Therefore it is not unreasonable to have an indication of how the matter will be dealt with, whether it be the form of words represented by my noble friend or in some other way.
It is not unreasonable for the Committee to state that this transaction is quite exceptional, and therefore the shareholders in the enterprise should be given more of an indication of what will be done with
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the vast amount of money which will flow as a result of the operation.
The Earl of Caithness: In his amendment the noble Lord, Lord Diamond, has challenged the use to which privatisation proceeds may be put by the Exchequer. I am surprised that he did so. He will know far better than I that this matter is not within my departmental responsibility but that it is for my right honourable friend the Chancellor of the Exchequer. I am sure that the noble Lord will be the first to congratulate my right honourable friend on the use to which he has put the proceeds of privatisation for the benefit of this country. As my noble friend Lord Renton has said, the amendment includes a wide-ranging phrase which covers everything which is owned by the country. It is for those reasons that the country is now so much more prosperous than it was nine years ago.
Lord Diamond: I should like to ask the indulgence of the Committee while I wipe the dust from my eyes so that I can see the position more clearly. I have rarely had more dust thrown in my eyes than by the speech made by the noble Earl. Of course I realise the position. It is that ever since this Government came to power they have underprovided by way of capital expenditure for the maintenance of the nation's assets in their variety of forms. That can be seen by anyone using his eyes and common sense when walking through any city and seeing the ways in which it and its infrastructure are run down wherever he looks.
I do not know what the noble Earl was referring to when he spoke of his right honourable friend the Chancellor of the Exchequer. The figures have been published in the Green Book, where every month in the abstract of statistics one can see what the Government have spent. Year after year the Government have spent less than sufficient in order to maintain the nation's assets in the public sector. The excuse sometimes has been that we should look at how well the private sector is doing. That has nothing to do with it. Through the Government, the public own these assets.
If I may say to the noble Lord, Lord Renton, there is no difficulty about definition. There are accounting procedures and accepted definitions for all the matters he mentioned. I can perhaps say by way of illustration that boots are revenue expenditure and not capital expenditure; that is accepted. When you want to compare one country with another, you must have the same definitions. It is for those purposes that these accounting formulae have been agreed.
It is a new proposal that the Government should be introducing a Bill which is not the responsibility of one Minister in particular. That is an entirely novel idea. The Bill only bears the responsibility of the Chancellor of the Exchequer and not the Government as a whole. That is a new idea to me. I am sure that the noble Earl—when he comes to think about this matter again—will decide that he should not insist on that point. It is no use saying that it is simply a matter for the Chancellor of the Exchequer. It is a simple matter for the honour of the Government. Before the Government trigger off the

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mechanism in the Bill and before the powers are granted to public utility companies to undertake activities and expenditure of that kind, are the Government going to make it quite clear that they are proposing that the assets will be used to maintain the net asset position of the Government? As my noble friend Lord Ezra said, the assets of these two public utility industries are of such magnitude that these issues merit reconsideration. Otherwise, the Government must stand committed of wasting the nation's assets.
The Earl of Caithness: I am staggered by the noble Lord, Lord Diamond. He talked about the Government not maintaining the public estate, if I understood him correctly. While at the Home Office, I learnt with great dismay of the reductions in real terms that the Labour Government had made in spending on prisons and with delight how much that spending had increased in real terms under the Conservative Government.
Let us turn to the present and to the water authorities. Perhaps the noble Lord is not aware that between 1980–81 and 1987–88 investment by the water authorities increased in volume terms by over 40 per cent. whereas it declined under the Labour Government. I am sure that I do not need to remind the noble Lord that under the Labour Government it declined by a third.
5.45 p.m.
Lord Mulley: I am surprised that the noble Earl makes the point about the water industry. Indeed, to a greater extent it is true of electricity. The capital value of these industries has been built up by the industries concerned using their monopoly position, usually at the behest of government. With regard to electricity, one now pays an annual tax contribution as well. The capital is paid by the consumers. No other industry expects its consumers to finance capital development. That usually takes place as a result of loans which are paid off over the years.
As regards the electricity industry uniquely, all its capital has been financed by the consumer. If the industry is not to remain a public utility, then the least the Government could do is to give the shares to the consumer and not put them up for sale.
Lord Renton: Does the noble Lord not agree that a very large part of the magnificent development which the electricity industry, on both the generation and the distribution sides, has carried out over the last 20 years has resulted from successive governments giving consent to their public borrowing powers?
Lord Mulley: My recollection is that those industries borrowed very little and that they have been obliged by governments to finance themselves out of charges. I believe this is a very unnecessary Bill in every respect.
Lord Stoddart of Swindon: My noble friend is absolutely right in relation to the electricity supply industry. By the year 1990 or before it will be
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completely free of debt charges. It has paid a lot of money into the Exchequer.
I am surprised that the noble Earl should go back and criticise the Labour Government's record regarding prison building. That is irrelevant to the amendment proposed by the noble Lord, Lord Diamond. We differ slightly perhaps from the noble Lord in our approach. As my noble friend Lord Williams of Elvel rightly pointed out at Second Reading, the Labour Party is diametrically opposed to government policy in relation to selling off the electricity supply and water industries. We believe that these great industries, which are life support and monopoly industries, should remain in the public sector. That is the best place for them; the consumer will receive the best service from the public sector.
Having said that and having reiterated Labour Party policy, perhaps I could go further. The noble Lord, Lord Diamond, makes a very important point. He asks the Government: when you sell these assets—and the electricity supply industry alone is worth £27 billion—what will be done with the assets? Are the Government going to build up new assets which will bring in at least as much from trading activities to the Government? Or are the Government going to spend the money, perhaps over a period of five years, in reductions in taxation with the population using the proceeds to buy imports from abroad which we can only afford at present because of high oil revenue? The noble Lord, Lord Diamond, is saying, if I understand him correctly, that if the Government sell these industries they ought to build up our industry to meet the day when we shall no longer be able to buy abroad the goods which we can now buy through having great assets in North Sea oil. That revenue will begin to slide away after 1995.
The noble Lord, Lord Diamond, is absolutely correct. I believe that at this stage the Government should give some indication of what they are going to do with these huge sums of money. Used wrongly, they could have a catastrophic effect on our whole economy. We already see that the economy is overheating. The Chancellor has had to take certain measures today. Let us think of the overheating which would occur if the Government pushed those vast amounts from those particular industries into day-to-day expenditure. I believe we are entitled to a serious answer from the noble Earl.
The Earl of Caithness: This is where we have a complete difference of opinion between the two sides of the Committee. We believe these industries will do better for the consumer in the private sector. However, how the proceeds of the disposal to the private sector are dealt with is rightly a matter for my right honourable friend the Chancellor of the Exchequer.
When the water privatisation Bill comes before this Chamber it will be a matter for my department but the proceeds are rightly a matter for my right honourable friend the Chancellor of the Exchequer. The noble Lord, Lord Stoddart of Swindon, was absolutely right to say that there is a complete difference in philosophy as to where the benefit lies. We believe that the benefit for the consumer lies in privatisation of both electricity and water.
Lord Diamond: We have got absolutely nowhere. The Minister has not understood the arguments at all. We are not arguing for or against privatisation. On these Benches we are prepared to consider every privatisation issue on its merits. We are not impressed by the argument from the particular to the general, which is what the noble Earl contented himself with on his last intervention when he said "look at this" and "look at that". He gave two examples and said that perhaps I was not aware of the amount spent by the water industry on leaking pipes, or something to that effect.
That does not prove what is the totality of the figures, and the noble Earl knows that full well. We are concerned with the totality. There is no dispute about the figures and the noble Earl should get himself informed about this. We are concerned about how this huge sum of money will be used by his right honourable friend the Chancellor of the Exchequer. Will it be used in current expenditure via tax cuts or in maintaining the nation's assets? It is a simple issue and we shall certainly have to come back to it when we come to the main Bill. We shall try to raise the matter again at a later stage in the hope that the arguments we have put forward will have been considered with a little more care and understanding than they have been given at present.
I have tried to alert the noble Earl to the fact that we consider this a matter of the honour of the Government in their actions regarding assets of which the Government are trustees on behalf of the nation as a whole. That is the issue. How do the Government intend to deal with those assets? Will they deal with them by fully maintaining the body of assets or by dissipating assets and using the money for current expenditure?
I know that at this time of the night the Government will not welcome a Division so I shall not press the matter at this stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Diamond Lord Diamond moved Amendment No. 6:
Page 1, line 8, after ("corporate") insert ("in such a way that the environment and wildlife are permanently protected").
The noble Lord said: We believe that this is a very important issue—so important that it ought to be included in this enabling Bill to make clear the Government's long-term intentions and not wait for the main Bill. We believe it is of enormous importance because, as everyone knows, instead of looking after the public interest the motivation on privatisation is the maximisation of profits and the first victims are the environment and wildlife. Therefore, I have used those terms to cover what we are all familiar with.
There is no dispute that it is in the best interests of this nation that we should maintain our environment. Indeed, there is a Government department charged with the responsibility of maintaining the environment and the wildlife of the country. We all know that there is great anxiety in the country and in those bodies which are mainly concerned with protection. There is great anxiety about what will happen once the responsible attitude of public bodies is replaced
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by the commercial attitudes of private companies to which it is the intention of the Government to transfer these assets.
My amendment has been worded:
"in such a way that the environment and wildlife are permanently protected".
The reason I say "permanently" is that once a utility is in the hands of a private company it is completely out of the Government's control. It may be that the Government will obtain an undertaking from the first purchaser—the first transferee of these assets—that of course they will respect the environment and wildlife to the same extent as the utilities to which they are succeeding have done so. However, that will have no effect on subsequent owners.
There is nothing to prevent a company to which these assets have been transferred in the course of time transferring them to other companies, with continual changes in ownership taking place in private industry and with takeovers of one kind or another. Those eventually in charge may have a totally different view about protection of the environment from those in the private sector who first became entitled to the assets. Therefore, it is essential that the Government should make absolutely clear that the powers in the Bill will become exercisable only when there has been a clear statement of the determination to protect the environment and wildlife in such a way that it is permanent, irrespective of how many bodies are the ultimate owners of the assets which the Government propose to transfer. I beg to move.
Lord Nugent of Guildford: I make one comment which might give some comfort to the noble Lord, Lord Diamond. The concept of a National Rivers Authority will be to safeguard the future. We hope that will be the case but it remains to be seen just how that body will be constituted. However, if it is constituted in the way that we expect, it will have statutory obligations under the Prevention of Pollution Act 1974, which are considerable.
Additionally, there is a range of EC directives for the protection of the environment which we have a legal obligation to observe. Therefore, for the water industry it seems that the safeguards will be substantial and that the new water plcs which will operate the supply and disposal industries will have obligations on standards, and on river quality objectives in particular, which the NRA will be monitoring and will have the power to enforce. The prospects for the conservation of what we already have and its continuing improvement will therefore be greatly strenghtened by this structure when it comes into being.
Lord Diamond: Perhaps the noble Lord will permit me to intervene. The noble Lord knows that I always listen with the greatest care to what he says, and with the greatest respect, especially in this area where his knowledge is deep and wide. I agree that the NRA will be a very helpful body. However, the trouble is that nowhere in this Bill is there a single mention of the NRA.
Lord Nugent of Guildford: I sympathise with the noble Lord, Lord Diamond, on that point. I, too, should like to see the NRA mentioned in the Bill. However, I believe and trust my noble friends that we shall see it enacted in due course and that the NRA will perform the functions that we expect of it. Therefore, the points that the noble Lord rightly emphasises will be adequately catered for.
I just add one footnote, going back to the previous amendment when the noble Lord, Lord Williams, with his great and expert knowledge pointed to the difficulties of valuation. When future purchasers of the water industry try to assess what the cost of the environmental obligations may be in the future—there are always fresh problems arising with regard to pollution—it will be another considerable question as to what the private shareholder is prepared to pay. That situation does not arise here. So far as concerns the noble Lord, Lord Diamond, and the amendment he has tabled, it is really copper-bottomed and far better than in the past. I believe that my noble friend Lord Caithness has a good answer to this.
6 p.m.
Lord Williams of Elvel: I am sure the whole Committee will sympathise with the thrust of the amendment moved by the noble Lord, Lord Diamond. We certainly do. I recognise what the noble Lord, Lord Nugent, has said about the future arrangements for controlling the environment in respect of the water industry and related matters such as sewage. Nevertheless, the Bill covers not only the water industry but the electricity industry as well. Lord Diamond's amendment will embrace both. The electricity industry gives rise to a whole host of environmental problems, and only recently we have had very direct experience with one example. Perhaps I may speak parochially for a moment and mention the subject of Welsh sheep. The explosion of Chernobyl affected us particularly badly in that respect.
It is in this area where I believe the noble Lord has his most serious point. The Government have to take quite a clear stand. The environment and wildlife—perhaps I may also bring Welsh sheep into the amendment—must be properly protected by any measure that the Government make to change the ownership of these particular industries. That is why I support the amendment tabled by the noble Lord, Lord Diamond.
The Earl of Caithness: This Chamber is noted for the concern which it has always shown for the protection of the natural environment in this country, and in particular for wildlife and other conservation. Those members of the Committee who recall the passage of the Wildlife and Countryside Bill in 1981 will recognise the truth of that point. From what the noble Lord, Lord Diamond, said it seemed that he had forgotten some of the powers that the Government have under that Act. It is therefore with some reluctance that I cannot accept this amendment on behalf of the Government. As a Minister for the environment I am very concerned about this area. I fully recognise that the noble Lord has the best of
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intentions in moving it. But my simple point is that this is not the place to debate this issue. The time to do that will be when the main legislation privatising and restructuring these two major industries comes before the Committee. The functions of the water industry are of considerable environmental importance. It is already subject to tough statutory duties in respect of protecting the environment.
My noble friend Lord Nugent of Guildford mentioned the Control of Pollution Act of 1974. I also draw the attention of the Committee to Section 22 of the Water Act 1973, as amended by Section 48 of the Wildlife and Countryside Act 1981, to which I have already referred. Ministers, water authorities and internal drainage hoards are under a duty to exercise their functions, when they formulate or consider any proposals, as to
"further the conservation of flora, fauna and geological or physiological features of special interest".
There are related duties about protecting buildings and so on, taking into account the effect of proposals on natural beauty or amenity and protecting areas of special scientific interest.
I can tell the Committee that it is our intention to retain these duties, and to impose them on the successor plcs and indeed on the National Rivers Authority. We have indicated, in a paper produced in 1986 entitled The Water Environment: The Next Steps, various ways in which we intend to improve protection of the water environment. In particular, we intend to produce a code of practice dealing with conservation as well as recreation matters which will provide more specific obligations on the plcs and the NRA. We are in continuing discussion with the Nature Conservancy Council, the Countryside Commission and others about the preparation of this code. I am pleased to tell the noble Lord, Lord Williams of Elvel, that the Government also recognise the responsibility of the electricity supply industry towards the environment.
I am sure he will have noted with satisfaction that the White Paper Privatising Electricity stated that standards of safety and environmental protection are vigorously enforced now and will be no less vigorously enforced in the future.
Lord Sefton of Garston: I do not believe that anyone in this Committee would wish to detract from the statement which the Minister has given. He said that he was concerned about the environment. That has nicely wrapped up the question of water. I have no doubt that the noble Earl is satisfied that the National Rivers Authority will look after that problem which may arise from privatisation. I am not satisfied. Does that lead us to the conclusion that when the main Bill comes before this Chamber that the Minister will support the idea of a body similar to the river authority and responsible for the protection of the environment in regard to the electricity industry?
If the Minister can give us that assurance, I am sure that all noble Lords in this Chamber would be very happy. I know such an assurance would not be included in any brief which he receives from his advisers. If the Minister is genuine about his desire to improve the environment (in view of the problems of

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fly ash and pylons and other factors which arise from the electricity industry) will he give his personal support to the establishment in the Bill of a body responsible for protecting the environment arising from the privatisation of the electricity industry?
The Earl of Caithness: There is a major difference between the water industry and the electricity industry. I am one of many people in this Committee who is keen to improve the environment. On Monday I go to Brussels to discuss the large plants' directive. It is the emission from power stations that is of concern throughout the whole of Europe. I believe that the water industry is very different. The reason why we have set up the NRA is because not only is the water used by consumers extracted from rivers or reservoirs, but the water is then put back into the rivers or the sea. That is very different from the electricity industry.
Lord Sefton of Garston: I know all about water and of course it is very different from electricity. We are trying to impress on the Minister what our views are. He should not come back and tell us what we have already told him. In view of some of the rumours circulating about the attempt to demolish the shire counties following on the abolition of the metropolitan counties, that means this country will be faced with a situation where there will be no locally elected bodies responsible for the environment over wider areas. With that situation it is important that there should be a body which is given the responsibility of overlooking any damage to the environment arising from the privatisation of the electricity supply.
I make no apologies for putting the question directly to the Minister. Will he give his personal support to the contention that there should be that kind of body responsible for looking after the environment following the privatisation of electricity? I ask the Minister not to come back and talk about water because we are talking about electricity. There is a body responsible for the environment in the water proposals. Will the Minister lend his support to a body similar to that but applicable to the electricity industry?
The Earl of Caithness: I support the proposals that my right honourable friend the Secretary of State has put forward and the commitment that is in the White Paper. Those will be to the benefit of the environment.
Lord Diamond: I thank the noble Earl for what he has said about the environment. There is only one difference between us now. The question is whether the appropriate time and place for dealing with it is on this occasion and in respect of this Bill or during the passage of the later Bill. That distinction is not of such great importance provided we have the same government. We shall take that as one of the unfortunate probabilities; namely, that the same government will be in power in the next few months while it introduces the new Bill. That being so, it is of considerable satisfaction to hear from his own mouth
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how anxious he is about protecting the environment and wildlife and all the powers that already exist.
There are one or two small points that I would ask him to bear in mind before I seek permission to withdraw the amendment. First, the noble Earl said that the Government were going to be good enough to insist on these responsibilities being taken over by the successor companies. I am grateful for that most important statement.
I was also seeking to impress upon the Minister that we are concerned not only about the successor companies but about the successors to those successor companies. I recognise that the Government can impose terms which affect the immediate successor companies, but once they are in the private sector they will have freedom to move around (if I may put it that way) to change their ownership, to amalgamate, to sub-divide, and so on. Therefore it is essential that those responsibilities, which the Minister himself has said the successor companies should undertake, should be of such a form as to be permanent or as near permanent as the law can provide. I am asking him to be good enough to take that point on hoard in considering all these matters.
The Minister heard what the noble Lord, Lord Nugent of Guildford, said about the shareholders perhaps having to consider all the costs of protecting the environment. That is why it is appropriate that it should have been brought in at this stage when it is intended that commercial incentives and the attitudes that go with them shall replace public holdings. It is this drive for maximisation of profits, which is a perfectly proper activity in the commercial sector, that militates against incurring expenditure on maintaining wildlife and the environment. That is why it is so important that at this juncture special attention should be given to that point.
I conclude by repeating my thanks to the noble Earl. He has taken on hoard the main thrust of this amendment and made it clear that he is very interested in seeing that the environment is fully protected. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Ezra Lord Ezra moved Amendment No. 7:
Page 1, line 9, after ("Wales") insert ("which takes full account of the long-term interests of the British coal industry").
The noble Lord said: I realise that this issue could be raised on many future occasions during the course through Parliament of the proposed legislation on the privatisation of electricity. Nevertheless, this is a paving Bill. It sets the scene, and it is appropriate therefore to raise what we feel are likely to be the major issues. As the noble Lord, Lord Peyton, made clear in a Question he asked in the Chamber the other day, when one talks about changing the structure and ownership of the electricity industry, inevitably it brings in the question of the future of the coal industry.
I have had certain experience in that sector and there is no doubt that over the years coal and electricity have been closely bound together. Even now 70 per cent. or more of coal production goes into

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the generation of electricity. It is not unreasonable that attention should be drawn to the link between these two great industries.
I have all the more reason for making this proposal because from time to time when the coal industry is referred to in this Chamber the Government say that they fully support it. That is exemplified by the substantial investment made available and by the hopes expressed by the Government, which I fully share, that sooner or later that great industry will become viable and revert to being a profitable enterprise. It is in the spirit of wishing to ensure that its present efforts, which have been very successful in improving productivity, should in no way be impaired by these measures that I seek leave to move the amendment. I beg to move.
6.15 p.m.
Lord Williams of Elvel: We support the thrust of the noble Lord's amendment. In my Second Reading speech I made certain comments about the South of Scotland Electricity Board and its apparent desire to ask for tenders for supplies from foreign coal producers. If those tenders were accepted by the South of Scotland Electricity Board the remaining part of the Scottish coal industry could be put out of business, with a consequential serious loss of jobs.
If it turned out that foreign coal was cheaper for a time and then became more expensive, as the noble Lord, Lord Ezra, will know far better than I, one cannot recreate a coal industry once it has shut down and the mines have tilled in. If an industry such as the electricity generating industry—be it in Scotland or England and Wales—is privatised there may be a temptation to try to reduce the short-term input costs in the hope of making a short-term profit, and in that way damage could be caused to the long-term interests of another great industry in the United Kingdom.
I argued in my Second Reading speech that the proper way for coal-consuming utilities such as the electricity generating industry to behave is to base their input costs on long-term marginal costs rather than short-run marginal costs. My worry and the worry of the noble Lord, Lord Ezra, is that on privatisation there would be a concentration on short-run marginal costs at the expense of long-run marginal costs to the detriment of the British coal industry. That would be a complete disaster. I hope very much that the Government accept that it would be a complete disaster. In either accepting the amendment or by taking some equivalent action I hope that the Government will accept the case made by the noble Lord, Lord Ezra.
Lord Diamond: I should like to add one or two words in support of what my noble friend, with his deep knowledge of the coal industry, has already said. We are concerned with the transfer of assets from the public sector to the private sector. In the public sector it is proper to take account of a variety of costs. For example, it is proper to set down the cost of a public corporation buying coal at a greater price than need otherwise have been the case. It is proper to take into account in that same assessment what would have to be paid in unemployment relief to
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miners who were thrown out of work if mines were closed down as a result of going, as the noble Lord, Lord Williams of Elvel, said, for the cheapest temporary price.
It is proper for those considerations to be taken into account when they are all in the public sector. A country can sensibly carry on a coal industry which at the time is not producing coal quite as cheaply as it is being produced abroad because it can set off against that what would otherwise be the cost to the public purse of paying unemployment relief to miners, quite apart from the human misery of unemployment itself.
Under the Government's proposals the cost of paying unemployed miners would fall on the public purse but the benefit of paying cheaper prices for coal would enure to the shareholder in the private sector. Where you now have that distinction you can no longer set one saving against another additional cost; in other words, it will all be additional cost and the saving would be to the public sector and to the Government. The plc—the privatised electricity industry—would say, "Why should I take account of the cost of paying unemployed miners the wherewithal to live? It is no part of my responsibility. I owe a duty to my shareholders to provide them with a maximum profit and therefore to provide my customers with the cheapest possible coal. I have no interest whatsoever in the cost falling on the public purse—it is nothing to do with my shareholders." So one will get into that difficulty.
Therefore it is right that at this point in time the Government should make it absolutely clear that they take account of the long-term interests of the coal industry, in just the same way as if it were still the case that both industries—the coal industry and the electricity industry—were in the public sector and the same accounting rules applied. Therefore it is for the Government to say, as it has broadly indicated, although it has not come absolutely clean—this. They propose to wash their hands of any responsibility in regard to the future price of coal; that they will leave it for the future privatised owner of the electricity industry to buy coal at the cheapest price and, if the coal industry cannot meet that price, then it is just too bad: "We will buy it elsewhere, without taking account of what is a cost falling on the nation, because we have a public and a private sector which cannot be offset one against the other." I asked questions about this when a recent Statement was made from the Government Front Bench. This is a very serious point and I hope that the Government will make it absolutely clear that they support the amendment.
Lord Stoddart of Swindon: I should like to make one short point. The long-term interests of the coal industry are of course very much bound up with the security of supply in the electricity industry. One has to have an assured supply of fuel in the electricity industry and that, as the Government recognise, is going to be coal in the foreseeable future. As I have understood it throughout my lifetime, an assured supply of electricity in this country is dependent upon an equally assured supply of coal.

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If one starts closing coal mines and thereby reduces the capacity of the coal mines to below, say, 75 million tonnes of coal a year, then one no longer has security of supply; security of supply depends not on activities in this country but on activities abroad, and perhaps the activities of shipping companies. Therefore security of supply is of the utmost importance and in my view it can only be assured providing we have a secure supply of coal.
The question I should like to ask the noble Earl is this: at what point would the Government intervene if the privately-owned generating companies decided to buy their coal abroad? When would the Government say, "Well, now it is our duty, as a Government, to ensure the supply of a life-support service which is electricity."? I have already mentioned that civilisation would be gone without electricity. Furthermore, how many million tonnes would the British coal industry have to decline to before the Government would intervene? Those are important questions which I hope the noble Earl will be able to answer.
Lord Rees: I hope I may briefly intervene on this particular amendment in the light of the insidiously attractive arguments advanced by the noble Lords, Lord Ezra and Lord Diamond. There may be a case for supporting the coal industry as a whole and even a case for supporting an individual pit on social grounds, but I shall not detain the House by debating the merits of that particular proposition. However, what I do suggest to the Committee is that it would be quite wrong that a major subsidy such as has been suggested—either in the coal industry as a whole or to an individual pit—should be borne by the electricity industry by means of an uneconomic pricing policy.
I disregard for the moment the argument put forward by the noble Lord, Lord Stoddart of Swindon, because I can see that there may well be a case for paying a slightly enhanced price for British coal if it is going to secure a long-term supply. Whether it is true in this particular case is of course a different argument and one which I shall not pursue, although I recognise the merits of it. But so far as saddling the electricity supply industry with the cost of subsidising either the coal industry as a whole, or a particular part, I believe that that is quite wrong. However, if the government of the day—whatever particular complexion—feels on social, economic or on any other ground that a particular form of social or economic activity should be supported, then it should be by a clearly identified public subsidy. We can then debate the merits of it.
Over the years, the public sector's performance has been bedevilled by the fact that too many of those concealed social and political costs have been built in. I believe that that has damaged the performance of the public, and to a degree the private sector. For example, the private sector may have had to purchase coal at a price which has been determined by other than economic factors. Therefore I hope that my noble friend, when he replies, will in fact reject those arguments—insidiously attractive though they may be—and perhaps on another occasion we can debate
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the merits of supporting the coal industry in a more direct and open way, when social factors can be taken into account and the economical performance of the coal industry can be judged with greater clarity.
Lord Ezra: Before the noble Earl replies, I should like to comment on the remarks made by the noble Lord, Lord Rees, whose views I greatly respect. However, having said that, in the case of the electricity industry, as the noble Lord, Lord Stoddart of Swindon, has mentioned, it is indissolubly linked with the feedstock; you cannot generate electricity unless you have something to generate it with. The Government have already decided that in respect of one of our national feedstock elements—namely, nuclear—there should be some degree of safeguard. I find it somewhat illogical that in the case of another source of that nature there should not also be written in some safeguard.
The amendment I have moved does not refer in any shape or form to subsidy. The words used are:
"takes full account of the long-term interests".
At present, as the noble Lord, Lord Williams of Elvel, has rightly pointed out, coal can be imported much more cheaply, not only because the world demand for energy is debased but because the rate of the dollar (in which this product is quoted) is very low and the rate of sterling—due to some apparent disagreement in government circles—is very high. That situation is an accident. Should we allow ourselves to lose the long-term benefit of a great national asset on the basis of such a temporary accident? That is the principle behind the amendment proposed. It is not talking about subsidy, or about building a ring fence around coal as the Government propose to do around nuclear; it is merely pointing out that coal and electricity are very closely interwoven. It is implying that the present situation of world coal is of a nature which is probably very temporary and that we need also to have regard for the longer term. That is what underlies the amendment.
6.30 p.m.
The Earl of Caithness: The literal implication of this amendment, as a result of where it would be placed in Clause 1, would be to limit the granting of the express powers under Clause 1 to the Electricity Council to circumstances in which a transfer from an electricity board in England and Wales took full account of the long-term interests of British Coal. It is clear however that in moving his amendment the noble Lord, Lord Ezra, was in fact seeking to give it a somewhat broader application. I believe that it would be quite wrong to restrict the express powers given to the electricity supply industry under Clause 1 by requiring a proposal for transfer of property or functions to take full account of the long-term interests of the British coal industry.
First, the proposed qualification is much too imprecise. It would be impossible to demonstrate what the long-term interests of the industry might be in different circumstances in the future. Even if it were possible to do so, it would then be impossible to demonstrate that those interests had then been taken fully into account.

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Secondly, the amendment is seeking to secure for the British coal industry something which British Coal, like any other business, needs to secure for itself and by its own means. The industry is a commercial enterprise, and it must take its own view of its long-term interests and seek to secure them by commercial means in its own markets.
In the light of the nature of the amendment I hope your Lordships will forgive me if I respond with some brief general comments about the coal industry. Electricity privatisation will present the industry with a challenge, but it is clear that coal will continue to be the main source of fuel for power generation in the foreseeable future. The need for domestic coal production is clear, and the industry needs to respond in securing its interests by providing coal reliably and competitively.
As the noble Lord, Lord Ezra, said, we are investing very large sums in the coal industry, some £2 million a day. This shows that the Government have considerable confidence in the industry's future and that it will be able to compete effectively. We certainly agree that security of supply is vital; that is why we say it is important for British Coal to supply coal reliably. My right honourable friend the Secretary of State for Energy has made it clear that it would not be right to limit coal imports, but in the foreseeable future there will be a substantial market for British coal. The price of coal paid by the electricity supply industry will be a matter for commercial negotiation. I have no doubt that British Coal will be negotiating effectively on that grant.
However, I would agree with my noble friend Lord Rees that it would not be right in the context of this narrow enabling Bill to pre-empt either the debate which I understand your Lordships are likely to have in due course on electricity privatisation or the debates during the passage of the main electricity privatisation legislation. The substance of the amendment is clearly more suited to those occasions, and I do not believe that it is appropriate to this Bill.
Lord Sefton of Garston: On the one hand we have the Minister replying that the amendment is imprecise and then on the other hand he is refusing to reply to a request for some precise information from the noble Lord, Lord Stoddart. The fundamental problem with coal, contrary to what the noble Earl has just said, is that it cannot compete successfully because there are two things which the British coal industry does not have; namely, vast surface mining of coal and the availability of cheap child labour in the exploitation of coal resources. So it is impossible.
However, I have no doubt that the advisers on this Bill and the Government have the figures to hand because they say that British Coal can compete successfully. Perhaps they will give us the real figures for the cost of production and shipping of coal from Colombia or Australia. Perhaps they will compare that with the cost of mining coal in Great Britain. They should have those figures, so perhaps the Minister can be precise instead of criticising the amendment for being imprecise.
Perhaps I may now address myself to the remarks of the noble Lord, Lord Rees. The fundamental
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nature of the amendment is not a question of the electricity industry subsidising the coal industry; it is a question of this community handling its energy resources in a commonsense fashion. If the Government are saying, as they will—and there is no doubt about what the Minister is saying—that quite clearly it will be left to market forces to determine the future of the British coal industry, then there will be a very poor outlook, once all control has gone, for the British coal industry. There is no doubt, if my assessment is right, that there is no way in which the British coal industry can compete with foreign coal mined in the way in which I have described. That is hard luck for the British coal industry.
The real issue is that we are not handling our scarce—and I say "scarce" advisedly—energy resources by going through this exercise at all. The more we go on with this paving Bill the more it proves the stupidity of the main Bill. The real truth is that the whole community must make its mind up as to whether, on the one hand, we shall have an electricity industry which will ultimately be dependent upon the cheapest source of fuel or whether, on the other hand, we are going to plan the proper use of all our resources which include coal. That is the fundamental issue.
Perhaps I may request the noble Earl to reply to the question raised by my noble friend Lord Stoddart on the stage at which the Government will intervene. It concerns whether it is in the form of a subsidy measured in cash or in the form of a limited amount of coal. We are entitled to an answer. The question is: at what stage will the Government intervene to ensure the long-term prospects of the British coal industry, if that is what they have in mind, either by the establishment of a subsidy or by the extent of production insisted upon the Government which should be bought by the electricity industry? We are entitled to that reply and furthermore the Government's own friends in the private sector are entitled to that reply before they start putting the money forward.
The Earl of Caithness: Detailed figures can be provided. Unfortunately I have to say to the noble Lord, Lord Stoddart of Swindon, that I cannot produce them just at the moment. However I shall be glad to do so at the earliest opportunity. I emphasise again to the Committee that these matters are perhaps more appropriate for discussion in another context. As I said earlier, it will be for British Coal to compete in its markets and secure its own future.
Lord Ezra: I think it is right that we should raise this important issue at this stage. Noble Lords have expressed their opinions on the subject and I was glad to note that among his remarks the noble Earl has reiterated the Government's strong support for the coal industry and the strong investment which they intend to continue to put into it. I believe that we should come back to this at a later stage. On this occasion we on these Benches have made known our views on the subject. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 8:
Page 1, line 13, after ("of") insert ("or securing the modification of").
The noble Lord said: I beg to move Amendment No. 8 standing in the names of my noble friend Baroness Nicol and myself. This is a relatively simple amendment which does not contain great complexities of public policy. It is designed to ensure that the utilities or electricity boards which receive proposals from the Secretary of State about transfers can use whatever means they deem appropriate to secure a modification of those proposals. The wording tracks the wording in subsection (1)(a) and (b) where the utilities or boards can use resources to secure modification of related proposals. We shall come soon to the point of what the difference is between proposals and related proposals. But it seems to me to be logical that if they can secure or try to secure modification of related proposals they should be able to secure a modification of the proposals themselves.
I imagine that the schemes that may be put forward by the Secretary of State either in relation to the electricity industry or in relation to the water industry could be the object of serious representations by those who are actually operating the businesses concerned. It would seem perfectly sensible to give them power to use their best efforts to secure modifications they might feel to be appropriate. I beg to move.
The Earl of Caithness: I recognise that this amendment would make the Bill in some respects more flexible, but I do not believe that such flexibility is acceptable in the present case.
What we have in subsection (1) is a distinction between two types of proposal. In subsection (1)(a) we find that the water authorities and the electricity supply industry are empowered to facilitate the implementation of government proposals to transfer property or assets. This means that the Government must first trigger the operation of the clause by making proposals. The proposals in question are what I may term basic proposals—in the case of water that there should be utility plcs and the National Rivers Authority, for example, and in the case of electricity that the CEGB's operation should be divided and that there should be a separate company to look after the national grid and separate distribution companies.
Subsection (1) also empowers the industries to facilitate or to secure a modification of related proposals. These are defined in subsection (2). They are in essence more detailed proposals. For example, under paragraph (a) of that subsection, we may envisage the preparations which will have to be made for transfer of undertakings to successor bodies and for their management after transfer. Under paragraphs (b) and (c) we find references to the regulatory regime, finances and staffing, and flotation issues. The list is not exhaustive. The essence of related proposals, I repeat, is that they are more detailed than basic proposals.
In our view it is quite appropriate for the industries to comment in any way they wish on related
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proposals. If they wish to change them, or rather to persuade us to change them, I have no difficulty with that. We do not pretend that all the proposals we make will be right in every particular.
But it is essential that all endeavours, both of the industries and of the Government, should be bent towards achieving our central objectives which are represented in the basic proposals for privatisation and restructuring. It is for the Government to establish and make clear what those proposals are to be. In due course it will be for Parliament to consider them. The time for major debates with the industries in the shape which, when privatised, they must take is now past. It would not be appropriate for the Government to sanction the exercise of the powers in the way that the Opposition propose, and I may say therefore that the amendment, in the Government's view, is not acceptable and is at variance with the main purpose of the Bill.
6.45 p.m.
Lord Williams of Elvel: I am grateful to the noble Earl. Do I now understand that there are three things: basic proposals, proposals and related proposals? That is what the noble Earl seemed to imply. The basic proposals have already been made. The industries have been consulted and therefore they are not allowed to do anything more about that. The Bill also mentions the Secretary of State making proposals and then there are other things called "related proposals" which are more detailed in the words of the noble Earl. I hope that my understanding is correct. I am bound to say that I am slightly confused about the various natures of the different types of proposals that we now have on offer.
It is perfectly clear that up to the publication of the various White Papers to which the noble Earl has referred representations were made, not least by certain Members in this Chamber, to the Government about, for instance, the structure of the electricity generating industry. Other people, for instance, the chairmen of water authorities, have made representations about the structure of the water industry post-privatisation. As I understand it, the noble Earl is now saying that that chapter is finished and that the basic proposals have now been made in the White Paper.
Nevertheless, I am sure that the noble Earl will concede that in the White Paper on the privatisation of the Scottish electricity industry, which we shall come to in due course, there is a certain amount of vagueness and a number of decisions remain to be reached about the structure of the industry post-privatisation. It seems there that the basic proposal has not fully been made. Part of the basic proposal remains to be made. Under those circumstances, according to the logic of the noble Earl, it seems that it would be proper for the chairman of the South of Scotland Electricity Board or the chairman of the North of Scotland Hydro-Electric Board to make representations.
It is only when we come to a proposal under the Bill in front of us, which is not a basic proposal nor a related proposal, that the same people—it is all the same players in the game—are not allowed to try to

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secure a modification. Given the vague status of the proposal—we do not quite know what it contains—I find this somewhat unfair and somewhat illogical.
I should be grateful if the noble Earl could confirm that my understanding of these three types of proposal: basic proposal, proposal and related proposal is right before I decide what I shall do with the amendment.
Lord Ezra: I, too, feel a certain degree of confusion in trying to understand what the words "proposal" or "proposals" mean. There is an apparent distinction between "proposals" in subsection (1)(b) and "proposal" in subsection (1)(a). I fear that this adds to our sense of difficulty in following the drift of what should be a very simple piece of legislation.
Lord Diamond: The beginning of subsection (1) states:
"Where the Secretary of State is at any time proposing".
The noble Earl has referred to the proposals which the Government have already made. He has referred to the form in which electricity is proposed to be privatised. He has referred to the form in which part of the water industry is proposed to be privatised excluding those elements which go under the NRA. Is the status of those proposals that they are already made so that these powers, once the Bill is passed, are triggered off?
The Earl of Caithness: I am saddened that the noble Lord, Lord Williams of Elvel, is not clear. I hope to clarify things for him and to reduce his problems by a third by saying that there are two proposals and not three. The proposals which I mentioned and enlarged upon I have described as the basic proposals. Those are the basic framework on which we would take forward and hope, in due course, to bring forward legislation. Then there are the related proposals on which further comment is still to be made. Much of that will arise as a result of passing this legislation. A lot of discussion is then triggered. I hope that that clarifies the point for the noble Lords, Lord Diamond and Lord Williams of Elvel.
Lord Williams of Elvel: At this point I must intervene. Do I understand the noble Earl to say that the basic proposals—that is, the proposals that the Government have already made in the White Paper—constitute proposals under this Bill?
The Earl of Caithness: There will be proposals for the restructuring of the industry. But there are indeed additional proposals which we will need to put forward to the authorities and to the supply industry. It is those proposals, as I understand it, that they will obviously be allowed to comment on.
Lord Williams of Elvel: I understand the latter point. I am referring to Clause 1(1)(a) where there is a proposal for the transfer. Can the noble Earl confirm my understanding of this matter? He is trying to eliminate one set of proposals, and I am very grateful because we have enough sets of proposals. Can he confirm my understanding that the suggestions that have been made by the Government
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in the various White Papers that have been published constitute a proposal under Clause 1(1)(a) of this Bill?
The Earl of Caithness: I understand that they do.
Lord Williams of Elvel: I am grateful to the noble Earl. We are now getting somewhere in understanding what this is all about. In other words, we are saying that the period of consultation is over, that the deed has been done and that the proposal—since there is one proposal in Clause 1(1)(a)—has been made in respect of the electricity industry in England and Wales, the electricity industry in Scotland and the water industry in England and Wales. Those proposals are unalterable in the Government's mind because the Bill as drafted does not allow utilities to argue against them. Those proposals having been made, there will be other related proposals which will come and which will be of a rather more detailed nature.
As I read the White Papers, they do not constitute, in plain English, a proposal for a transfer because there is no clear indication in the White Papers of exactly to what entity a transfer will be made and where the transfer is. I may be wrong about that. There may be a general statement of policy. However, it does not seem to me to be a proposal for a transfer.
We shall have to read what the noble Earl has said on the matter, and perhaps the noble Earl will read what we have said about it. We shall make sure that we are absolutely clear and come back to the matter at a later stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 9:
Page 1, line 17, after ("proposals") insert ("of the Secretary of State").
The noble Lord said: I hope with this amendment to clarify the status of related proposals. Under Clause 1(1)(b), related proposals can be modified by representations from the utilities or the electricity board. I assume those are proposals emanating from the Secretary of State and not from anyone else. However, the Bill as drafted seems to allow proposals emanating from someone else which could be related to a proposal from the Secretary of State but not necessarily coming from the Secretary of State. I should have thought that all related proposals should come from the Secretary of State and I think that the Bill should say that. I beg to move.
Lord Ezra: Following on the elucidation for which the noble Lord, Lord Williams, has asked, perhaps I may ask whether the proposals in Clause 1(2) are the related proposals referred to in Clause 1(1)(b).
The Earl of Caithness: As I understand it, the noble Lord, Lord Ezra, is absolutely right. That is why there is no need for the clarificatory amendment of the noble Lord, Lord Williams, in which he wants to insert the words "of the Secretary of State". Clause 1(1)(b) makes it quite clear that related proposals are indeed proposals made by the Secretary of State.
Lord Williams of Elvel: I am grateful to the noble Earl. That was the clarification which I was seeking. This is a confused clause. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 10:
Page 1, line 20, leave out ("or to any matter connected with").
The noble Lord said: Again, this is a probing amendment. Perhaps the noble Earl will expatiate on what the Government mean by "any matter connected with". That is a wide expression, and I should be grateful if we could have some explanation of what the Government mean by it.
The Earl of Caithness: Subsection (2) of Clause 1 deals with the concept of a related proposal which first appears in subsection (1)(b). Paragraphs (a), (b) and (c) of subsection (2) set out examples of a range of matters which it will fall to the relevant public utilities to deal with in the preparations that they will need to make as a consequence of our proposals for the restructuring and privatisation of their industries. An obvious example is the matter of future arrangements for the utilities' employees, which need to be addressed now and on a continuing basis, and not left until the utilities have been replaced by the successor bodies which we propose.
As we make clear in the Notes on Clauses for this Bill, the list of related matters in subsection (2) is not exhaustive. There will no doubt be other matters not listed out here which will also need timely attention from the relevant utilities. The words "or to any matter connected with" indicate that related proposals may be concerned with matters not explicitly itemised in the subsection but which are associated with those matters. To omit these words would create uncertainty as to the extent of the powers of the water and electricity supply industries to prepare for their future.
Lord Williams of Elvel: I am grateful for that response. It does not get us much further. However, I understand that the Minister has difficulty in explaining exactly what "matters connected with" means other than saying that they are "matters connected with". The explanations become slightly tautological.
Perhaps I may return to our earlier discussion and draw the attention of the noble Earl to the fact that we are dealing with very wide powers. They are powers which have no time-limit and which do not come back to Parliament. We are therefore anxious to make sure that every phrase which widens those powers should be explained and that the Government should understand that the Opposition are concerned that we are giving to the Secretary of State powers which are wider than usual. Having said that, I understand that the noble Earl has difficulty in doing any more than he has done in explaining the matter and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Hesketh: I beg to move that the House do now resume. We shall not resume the Committee stage of the Bill before eight o'clock.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Dartford—Thurrock Crossing Bill
7 p.m.
Lord Brabazon of Tara: My Lords, I beg to move that this Bill be now read a second time.
The purpose of this Bill is to authorise the construction of a new bridge across the Thames between Thurrock and Dartford; to transfer the existing two tunnels to the Secretary of State; and to provide for the arrangements for financing the construction of the new bridge and the residual debt on the tunnels.
The Dartford tunnels were completed in 1963 and 1980 and were originally designed to serve local needs. They now form the link between the M.25 to the north and south of the River Thames. The tunnels are owned and operated jointly by Essex and Kent county councils. They provide two lanes of traffic in each direction.
In 1985 the report of consultants appointed by the Government predicted that in the early 1990s there would be serious congestion at the tunnels. In 1985–86 the average daily traffic at the tunnels was 60,210 vehicles. With the completion of the south-eastern part of the M.25, it was predicted that the average would rise to 67,500 in 1986–87 and 77,500 in 1990–91. In practice, the 1986–87 daily average was higher at 69,000, despite the abnormal weather that winter. The latest figures indicate a further increase. The daily average for April to December last year was over 75,600—a 7 per cent. increase over the corresponding months in 1987. Extra capacity across the Thames is needed urgently and the purpose of this Bill is to provide it.
My right honourable friend, the present Secretary of State for the Environment suggested in July 1985 that urgently required infrastructure of this kind might be provided by the private sector. Guidelines to intending promoters were published in March 1986. It was left to bidders to propose the appropriate engineering solution. Bids based on both public and private finance were invited. After careful examination of the bids, on 29th September 1986 my right honourable friend the then Secretary of State for Transport announced that he had selected the proposal by Trafalgar House to build a bridge with private finance, the costs to be recovered from tolls paid by users. To carry out its proposals, Trafalgar House and its financial backers formed a company, Dartford River Crossing Ltd, with which the Secretary of State concluded, last April, a concession agreement.
The bridge will carry four lanes of traffic southbound. The tunnels will then take all the northbound traffic. The bridge will be built just downstream of the present tunnels. At approximately 450 metres, the main span will be one of the longest in the world for a cable stayed bridge.

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We selected this project for a number of reasons. It offered an earlier solution to the problem than any other project. Its total costs were lower than the other proposals submitted. The major financial risks would be borne by the private sector, which would relieve the roads programme of the burden of paying for it. That means we can use the money we would have had to devote to it for other urgently needed road improvements, thus reducing the risk of delay to the many schemes due to start in the coming financial year. Those advantages could be obtained without extending the period during which tolls needed to be charged greatly beyond what would have been necessary to recoup the cost if the project had been built in the conventional way by the department.
We propose to take the tunnels into the national road network and lease them to DRC so that the company can operate them jointly with the bridge. Essex and Kent County Councils have done excellent work for 50 years or more in getting those tunnels constructed and managing them with prudence and considerable success. But the counties fully accept that the tunnels, which provide an essential link in the M25, should now be made a national responsibility.
The arrangements for financing the new crossing, the dealing with the debt outstanding on the tunnels and costs of maintenance during the toll period are novel. DRC will finance expenditure which is not immediately met from revenue by borrowing privately. It will have a maximum of 20 years to pay off its borrowings, but we expect that to happen after 14–15 years at which point the crossing will be transferred to the Secretary of State and tolls can end.
DRC will not pay dividends on its small equity capital of £1,000. The Trafalgar House construction companies will look to make a profit from the agreed price DRC is to pay them for building the bridge. They have taken on the major risks—costing of the design, delay in completion and unforeseen ground conditions—associated with this kind of project. If they have misjudged these elements, they will see their expected profits reduced. If costs go up for those reasons the motorist will not have to pay for the increases through tolls. The lenders will receive the return specified in their loan agreements with DRC—but only if DRC's revenues are sufficient to meet them.
There has been some criticism that we are trying to cut corners by asking Parliament to approve the construction of this bridge through a hybrid Bill. This is misconceived. Legislation is required to levy tolls on a highway. We need a new tolls regime covering the tunnels and the bridge as a combined crossing. We have to make clear to whom the tunnel undertaking is to be transferred and who will employ the tunnel staff. We cannot leave the counties' ratepayers to pick up the liabilities which are still outstanding from the building of the tunnels. It is necessary to confer on the Secretary of State the special traffic management powers which are necessary for public safety, particularly in respect of the tunnels, and which for normal highways are exercised by the local authority. He must also have power to delegate operation and maintenance of the crossing. All those matters require legislation.
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We are asking Parliament to approve the bridge and the essential approach road works in the Bill as well. Although some of this work could have been authorised by different procedures under existing legislation, it would be inefficient and time-consuming to ask the House to approve a Bill containing some of the necessary powers and to deal with the remainder by external procedures. Since the toll regime should produce sufficient revenue to fund the construction of the bridge, the two ought to be approved at the same time.
We have not, however, neglected to consult all those concerned with the scheme. Although we have had our differences with Essex and Kent County Councils, we have had regular meetings with them and have agreed a whole range of issues. There have been consultations with the borough councils too. The staff at the tunnels were told, by our officials, about the proposals on the day they were announced and their employers consulted the relevant unions very soon thereafter. There have been regular contacts since. In order to inform the public we organised exhibitions in Dartford and Thurrock in January 1987 and we have tried to deal with inquiries promptly and courteously since. There are a number of petitions to this House. We are conducting negotiations with all the petitioners to see how their anxieties can be accommodated and allayed and I hope at least to lighten the load of the Select Committee before it meets. I would rather not say any more about that now.
I should briefly describe some of the detailed provisions of the Bill. It is a surprisingly long Bill but much of it is concerned with technical matters which nevertheless need to be clearly and unambiguously dealt with. Clauses 1 to 3 of the Bill authorise the construction of the bridge and the approach road works and the acquisition of land for those purposes. The bridge itself will be cable stayed—that is with the 450 metre main span suspended from cables affixed to towers. Its total length with approach viaducts is some 2,800 metres. Its original cost was estimated at £86 million at 1986 prices but there will be some additional expenditure as a result of modifications requested by petitioners.
The roads immediately to the north and south of the Dartford Tunnels are not part of the M25. The Bill will make them become trunk roads. They are inadequate for the long term and require widening to four lanes in each direction. It is therefore essential to widen them before the bridge is opened. We have kept the works in the Bill to the minimum. The cost of the work on the approach roads will be met from the road programme, not from tolls.
During the proceedings in Select Committee in another place, Dartford Borough Council made a good case for further work in the mid-1990s to improve access to the borough and to increase the capacity of the A2. The Government persuaded the Select Committee that it would be wrong to do that in this Bill but we accept the commitment. The first stage of studies leading to a solution to this problem had by then already started and was completed by Kent County Council on 18th January. In consultation with them and with officers of the borough council, we are now considering the next

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steps to be taken. It could well be that the improvements will not lie on the immediate approaches to Dartford. The real problem is the capacity of the A2 and the need to remove traffic from it.
Part II of the Bill trunks the highways in the existing crossing and transfers the land in the undertaking to the Secretary of State and the rest of the property to the person he appoints—DRC. It also relieves the councils of all the outstanding liabilities related to the tunnels which would otherwise have been met from tolls. Those costs will be met by DRC as a consequence of the relevant part of the agreement with the company.
We have made provision for the 220 or so staff working at the crossing. They will transfer to DRC. Staff matters in legislation have in the past raised difficult issues. This Bill provides for staff to transfer to DRC on terms and conditions, including pensions, which will be broadly equivalent to those they enjoy at present.
Part III of the Bill deals with the regime for tolls and the operation of the combined crossing. The tolling powers are at Clause 11, revision of tolls is dealt with at Clause 17, and Clause 16 and Schedule 6 deal with the way tolls come to an end.
Our intention is that DRC should take over the tunnels on a day to be appointed by the Secretary of State. That will be as soon after Royal Assent as everyone is ready to transfer the tunnels and to start building the bridge. We expect the gap between Royal Assent and transfer to be no more than a month. The Bill provides that tolls will be levied at present rates and for present classes of vehicle. They will be adjusted to keep pace with inflation, using the tolls at 1st January 1986 as a base. DRC—the person appointed in the language of the Bill—will stop taking tolls for itself after 20 years or when its loans are paid off if that is sooner. The Secretary of State will receive information throughout the concession period enabling him to determine whether tolls should be ended early.
The Bill would give the Secretary of State a power to ask DRC to extend tolling for up to a year in order to provide a fund for future maintenance of the crossing, but he will be able to do this only if the period of extension can be fitted into the 20-year maximum period for tolling. The Bill also provides for what happens after tolls come to an end. At that point DRC's appointment will be terminated. All the property at the crossing will be transferred to the Secretary of State. The staff will be transferred to him on their then existing terms and conditions, including pensions. All this must happen instantly, since there must be no gap in the safe operation of the crossing.
The remainder of the Bill is largely technical. It provides, for example, for the delegation of the operation and maintenance of the whole crossing during and after the toll period, for the management of traffic in the crossing and on the approach roads and for financial information to be available to Parliament about the operation of tolls.
Copies of the agreement with DRC are in the Library. Since the company is providing the finance
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and taking many of the risks, DRC is allowed as much freedom of action as possible in constructing the bridge, running the crossing and managing the affairs of the company. Nevertheless, the crossing will be a vital part of the public road network for which the Secretary of State is statutorily responsible. The agreement gives him powers to ensure that DRC build the bridge that it has promised to build and that any changes of plan are shown to be necessary. He can make sure that DRC maintains the crossing properly and he has powers of intervention if it does not. In return, DRC can expect him not to interfere with what it is doing.
This Bill is designed to fulfil an urgent need. It does so in a novel way. The Government are convinced that the scheme, taken as a whole, is in the best interests of the taxpayer and the motorist. I hope it will receive as swift a passage as possible. I beg to move.
Moved, That the Bill be now read a second time.—(Lord Brabazon of Tara.)
7.11 p.m.
Lord Underhill: My Lords, I am grateful to the Minister for his explanation of the Bill. I can assure him and the House that the Opposition fully support and appreciate the purpose of the Bill, although we have certain points that I shall raise in the course of my few remarks.
I appreciate the novel nature of the Government's approach to providing this additional much needed crossing. I fully concur with the Minister's figures as to the necessity for it because of the increase in traffic and the present congestion. However, this is the first time that such a procedure has been put before Parliament for private sector financing of what is an important public works project. In view of the Minister's interest in Treasury matters as well as transport, perhaps I may be permitted to say that for a long time many of us have been concerned that publicly-owned industries have been unable to raise finance in the open market. The argument has always been put before us that this raises a problem with PSBR.
This is a public works project that is being financed through private finance. I do not at all decry the methods that the Government are using to get ahead with the project, but in future it may give rise to certain questions when other matters come before Parliament requiring finance by publicly-owned industries.
I appreciate some of the important factors that the Minister has outlined; namely, that the existing liabilities of the two county councils of Essex and Kent are to be discharged by the Government and that both county councils accept that this should be part of the national network. I appreciate also that the maximum period of repayment is up to 20 years. I note the definite statement by the Minister that, in the event of the company having misjudged its costs, it will itself have to bear the liability and there will be no bailing out by the Government. The Minister made the point that the present tolls will continue with increases based on the then RPI.

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I am pleased to note what the Minister said about the transfer of existing staff on their present conditions. When the whole project reverts to the Secretary of State either before or at the end of 20 years, the conditions of reversion to the staff are adequately provided for in the Bill.
The question of tolls is important. The Select Committee appointed by the other place to examine the Bill was not allowed to consider evidence on this matter. However, we know that in 1986 the Select Committee on Transport of the other place recommended the abolition of tolls on all estuarial crossings. In principle I can see the case for removal of tolls on estuarial crossings. I realise that there are some problems. Living as I do in metropolitan Essex, I travel on the M.25 periodically, and it is frequently necessary for me to use the existing Dartford tunnel. To have tolls, whether for a bridge or a tunnel on an important orbital motorway is a matter to which we should give special attention.
On Second Reading in another place on 9th July the question of windshielding arose. The Minister for Roads and Transport, Peter Bottomley, at column 609 said:
"There is little experience of putting windshielding on high bridges".
He continued:
"However, there is insufficient experience to be able to state precisely the type of windshielding that would work."
Nevertheless, the Government went straight ahead on the nature of the crossing to be constructed even though the Minister on Second Reading said that there was insufficient experience. The Minister said that these matters could be discussed during the later stages of the Bill.
The Select Committee of the other place issued a special report on the Bill, which dealt with windshielding. After hearing a substantial amount of evidence, the Select Committee recommended that the construction of the bridge should be changed to provide for windshielding. The recommendation was carried by a majority of five to one. The Committee concluded that the benefits to be gained by windshielding were sufficient to compensate for the delay and increased costs. A matter that your Lordships will wish to consider is whether the problem is so urgent and the congestion so bad that any delay should be avoided. The Government response to the special report devoted a considerable number of paragraphs to the matter. It rejected the Select Committee's decision on the question of windshielding.
On Report in another place, a government amendment to remove the requirement for windshielding was the only amendment considered. There was a three-hour debate on the amendment. By a majority of 131 votes to 34, it was decided that the amendment to provide windshielding should not be made to the Bill.
I refer now to paragraph 7 of the special report regarding the presentation of the case for windshielding, which states:
"We were greatly concerned about certain aspects of the evidence presented to us. We felt there was a lack of readiness by the Promoters—that is to say, the Governent and the concessionaires—to
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make available necessary technical and financial information which would have greatly assisted the Committee in its deliberations, even allowing for the fact that some of this information was of a commercially confidential nature. In view of the above, we request the Secretary of State to enquire into the way this case has been presented to us".
It is very difficult to understand how a Select Committee could go into the question of what kind of project the bridge should be if certain matters were denied to them because of commercial considerations.
In the Government Response, at paragraph 17, it states:
"The Government, as promoters of the Bill, assisted by the concessionaires, presented the case in the way they thought most helpful to the Committee. This reflected the obligation the Government felt to safeguard information which the concessionaires considered would be of commercial value to a competitor. Nonetheless the Government regrets that the Select Committee considered that the handling of the case caused them to experience difficulties in obtaining relevant information. The Secretary of State has already begun an enquiry into the way in which the case was handled and will ensure that this enquiry includes consideration of ways in which difficulties might be avoided on any future occasion".
We have the Government recognising the problems of the Select Committee of another case in considering some of these important matters.
That leads me to quote the final paragraph of the special report of the Select Committee of another place which is rather important. It states:
"We wish to record our concern about the difficulties we faced as a Committee composed mainly of laymen. The evidence produced by both the Government and the Petitioners on the issue of windshielding was highly technical and the expert witnesses fundamentally disagreed with each other on nearly every aspect of the subject. We believe that this Committee is almost unique both in the detail and complexity of the technical evidence given and in the depth of the disagreement between the expert witnesses.".
I shall not attempt to go into the technical matters of windshielding. But it is interesting that at Second Reading in another place the Minister said that there was not sufficient evidence to know what to do. We have the Select Committee saying that the matter was presented to them in a very complex way, and that the people who gave expert evidence disagreed with each other on every point. Yet we now have a firm decision taken by the Government on the question of windshielding—and a three hour debate in another place.
The only other point that I wish to consider is the naming of the bridge. I gather that the Select Committee decided to name it the Dartford Bridge. However, the Standing Committee on the Bill in the other place deleted that amendment, the Government adopting a neutral attitude. I propose to adopt the same neutral attitude; but there are one or two points with which I should like the Minister to deal in his reply.
First, we have to bear in mind that it is proposed that the bridge will consist of four lanes going southwards. People coming from the north of the river will wish to be given directions—but to where? One must bear in mind that they may begin their journey at a point on the north of the river travelling towards Dartford on the south. I do not know what the Government's explanation is. Paragraph 21 of the Government Response states that it is intended to change the signs (which at the moment show "Dartford Tunnel") to simply show "Dartford". As

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the tunnels are to be used by those travelling from south to north, if I am travelling through Kent I wish to know directions to the Dartford Tunnels, and not to Dartford. I wonder whether the Government have considered that aspect.
I appreciate the point made by the Government in their response that there might be times when the bridge has to be closed—perhaps because insufficient attention has been given to this question of wind shielding—and the tunnels may have to be used. But what will be the name of the bridge? I do not believe that it is provided for in the Bill at present. Will this be determined by order? Will there be further discussions? The decision of the Select Committee to name it the Dartford Bridge has been turned down by the Standing Committee on the Bill. Therefore at the moment I gather we do not have a name for the bridge. Is it to be the Thurrock Dartford Bridge? Is it to be the Thurrock Bridge because people coming from the north of the river will wish to go to Thurrock to get through to the tunnel? Will it be called the Dartford Bridge?
Whatever the name of the bridge, there have to be adequate, effective signs so that people who wish to go to the bridge, north to south, will know exactly where they are going, and those who still have to use the tunnels, south to north, will know that they are going to the Dartford Tunnels.
The points that I have made may seem minor criticisms. Many of them refer to the way in which the Bill was handled in the Select Committee. By and large, we support the principle of the Bill. We hope to see this construction at a not too distant date.
7.26 p.m.
Lord Lucas of Chilworth: My Lords, I start at the point at which the noble Lord, Lord Underhill finished: on the question of a name. I would say that a rose—in this case a bridge—by any name would smell very sweet because this matter has been outstanding for such a long time. I do not think the name matters a great deal. The noble Lord, Lord Nugent of Guildford, in a recent Question in your Lordships' House on road signs, illustrated the fact that we have a fairly deplorable system of road signing in this country. Perhaps the Minister's endeavours will be charged with greater urgency when this bridge opens.
I should like to thank my noble friend for his very lucid introduction of this Bill to your Lordships' House. I believe that it is unique. It is certainly unique in modern times that a crossing of this nature—a cable-stayed bridge—has been proposed and is to be financed for the benefit of the public road system by the private sector. Although the Bill provides for the profits, and indeed the losses due to unforeseen circumstances, one is bound to ask who, in the financial field, is the longstop? Somewhere along the line for quite unforeseen, and I hope improbably impossible conditions, there may be a collapse of funding, or a collapse that would be beyond he resources of the Dartford River Crossing Company Limited to fund. We ought to know that answer.
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On engineering design and construction, I listened with interest to what the noble Lord, Lord Underhill, said with regard to wind shielding. From my limited knowledge, the design is tremendously exciting. It is undertaken, and will be confirmed by leading designers and builders—leaders in the world for this type of construction. I do not share the same fears on the pedigree of those designers that the noble Lord, Lord Underhill, and perhaps some Members in another place, may have felt.
I said that the engineering design and construction is exciting. It is exciting in two areas: one is the engineering, purely and simply, but the other excitement is the 5,000 man years' worth of work that will be created. Much of this work, particularly the heavier engineering, such as steelwork, will, I hope, be in areas of the United Kingdom which are desperately in need of work. It is so good (is it not?) that this should be home produced.
I ask a question which may sound frivolous to my noble friend, but it has a serious note. In the contract—of course I do not see it in the Bill—is there any desired local UK content? In other words, I hope that we shall buy our steel and our fixtures and fittings in the United Kingdom and discourage the contracting companies from buying in other competitive markets.
Turning now to tolls, I do not discredit the two county councils, who, admittedly at their own behest some 50 years ago, took on the burden of the costs of the existing tunnel crossings. They have done a very good job. I am glad to see that my noble friend's department has now recognised that the existing crossings, coupled with the new crossing, should be part of the motorway and trunk road system.
I am equally glad that in the Bill—I believe it is in Schedule 6; but perhaps my noble friend will confirm that—there is an absolute cut-off date. It is 20 years' maximum for the tolls, and then the tolls cease. The costs of operation will then fall upon the road programme expenditure. This is welcome because many of us on both sides of the House have been opposed to the principle of tolls where the crossing is part of the major network.
I do not think that there is anything else that I really want to say. What remains is for those involved, the parliamentarians together with the petitioners, to deal with the Bill with as much dispatch as possible because undoubtedly if we delay—either in Select Committee or in proceedings in your Lordships' House which necessitate further consideration in another place—the target date will be missed. In any construction job, as soon as target dates are missed the costs escalate. We shall then be under pressure to increase tolls above the levels of RPI. That would be quite disastrous. We must allow the innovative companies to get on with the job as fast as we can. Like the noble Lord, Lord Underhill, I very much welcome the Bill and hope that Parliament will dispatch it as fast as possible.
7.36 p.m.
Lord Brabazon of Tara: My Lords, I am grateful for the welcome the Bill has been given by the noble Lord, Lord Underhill, and by my noble friend Lord

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Lucas of Chilworth. We have had a useful short debate on the matter. We are certainly all agreed that we want further capacity at this crossing by the earliest possible date.
A number of points have been raised in this short debate. I agree with my noble friend Lord Lucas that the bridge represents an opportunity for British industry to produce much work particularly in those regions which specialise in the production of steel. However, we have not put anything in the contract to say that British-produced steel should be used. I have every confidence that British steel producers will be able to match any competition. We could not put anything in the contract because that would not conform with our EC requirements. However, we look to British firms to tender competitively.
Two main issues have been mentioned this evening, one of which is the policy on tolls. Successive governments have taken the view that these estuarial crossings should be paid for by users who enjoy substantial savings in time and money over untolled alternative routes. The Government's response to the Commons Select Committee in July 1986 rejected the Committee's recommendation that tolls should be abolished and debts written off. It was argued that debts on toll crossings were freely incurred by the authorities concerned and that they could not be written off without financial penalty. Above all, there were more pressing demands on government resources. I should perhaps tell the noble Lord, Lord Underhill, that the Select Committee in another place was not prevented from discussing tolls as such, but they were not opposed in principle by any of the petitioners.
I confirm to my noble friend Lord Lucas that the maximum length of time that tolls can be levied is 20 years, but as I said in my opening speech we expect the time to be considerably less than that.
Wind shielding, as the noble Lord, Lord Underhill, said, was a subject that was dealt with very thoroughly in the other place. The county councils who raised it in their petitions to the other place are satisfied that the matter has been pursued and examined further by the Government. They have therefore decided not to petition in this House. The noble Lord was aware that the Government have published the detailed response to the special report of the Select Committee in the other place explaining why wind shielding was not justified on this bridge. Further consultations are taking place on alternative traffic management measures, in particular the use of the east tunnel on the rare occasions when the bridge is closed to vehicles endangered by high winds.
As to the name of the bridge—I am conscious of the presence of the noble Lord, Lord Irving of Dartford, on the Front Bench opposite—the Government have no strong views. That is why my honourable friend the Minister responsible for roads and traffic abstained when the Bill went to a Division in another place. However, we are content to erect near the bridge a sign bearing the name which is decided upon, if any. That name, however, will not be repeated all over the primary route network. The names on the green primary route and blue motorway signs are chosen to provide navigational
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assistance for the motorist. Confusion would abound if signs directed motorists either to two geographical names, Dartford and Thurrock, or to "tunnel" or "bridge", especially on an orbital motorway.
When the new bridge is built we shall remove references to the tunnel on the present green-backed and blue-backed signs and Dartford will become the key primary route and motorway destination. I do not believe that it would be practical to differentiate between tunnel and bridge. That is the Government's view on that matter.
The Earl of Kinnoull: My Lords, perhaps I may remind my noble friend that the Forth Bridge is called the Forth Bridge with some pride, and it is part of the M.90 as well. From what my noble friend said, the Government have not decided on a name, if any. It sounds as though there will never be a name.
Lord Brabazon of Tara: My Lords, perhaps there will not. As I have said, the bridge does not have to be named. What is important is the signposting on the primary route network. I believe I have dealt with that matter.
Lord Underhill: My Lords, what consultation has the department had with the road user bodies such as the motoring organisations, the road haulage and freight transport associations, on the matter of signing? This will be the most important thing. I agree with the Minister that it is not the name of the bridge that matters but whether people will have correct signs on the roads. If they want to go to the bridge, they should know they are going to the bridge, and if they have to go northwards to the tunnels they should know they are going to the tunnels.
Lord Brabazon of Tara: My Lords, at the moment I cannot answer the question about consultations. However, I should like to remind noble Lords that motorists are used to following signs to Dartford Tunnel, in whichever direction they are travelling. In future the signs will say "Dartford" rather than "Dartford Tunnel" or "Dartford Bridge". I believe that that is a minor adaptation for motorists to make rather than changing the signs to "Dartford Bridge" or "Dartford Tunnel" or to any other name which may be chosen.
My noble friend Lord Lucas of Chilworth asked what would happen if the arrangements fold. We do not expect that the arrangements will fold; but the unexpected could happen. If the DRC should fail in its obligations the crossing would immediately be transferred to the Secretary of State. If, at that point, the Secretary of State faces costs to complete the construction, for example, the Bill allows him to take tolls until he has recouped those costs. He would be subject to the same maximum period for tolls but could come to the other place just once for an affirmative resolution extending the tolling period by five years. Should more time be needed to recover public money he had had to invest in the bridge, the Secretary of State would not be allowed to take tolls if the DRC's appointment came to an end because he was in breach of his contract with the company. This

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is a complicated matter but it is dealt with in the agreement with the DRC. That document is placed in the Library.
The noble Lord, Lord Underhill, asked about private finance in public works projects. This Bill, like the Channel Tunnel Bill, marks one of the first ventures into private sector provision of public works. The new bridge will provide a vital link in our motorway network. We certainly hope that it will pave the way for other projects on similar lines. We have learned lessons from this exercise and I hope that the private sector will also have done so. Most of all, as the Government made clear in the roads White Paper last April, we are interested to hear suggestions for other ventures of this kind, perhaps to supplement the road network in novel and ingenious ways. Some ambitious proposals of that kind have been outlined by one of our major construction groups.
Private investment looks for a way of recovering its money and, in the case of Dartford, earning a return. Therefore, projects financed in this way may involve some form of charge to the user. We have not yet decided whether the second Severn crossing should be provided in the same way as the Dartford project. Our options are still open.
Proposals of this kind must be judged by the criterion: do they represent the most cost-effective way of carrying out the project? We believe that, given the freedom to design, build and operate a piece of infrastructure such as this, the private sector is well placed to do so more efficiently and economically than the traditional method. I regard this bridge as an imaginative concept both in its design and financing. I am sure that it is destined to become a notable landmark in many ways. I join with other noble Lords and hope that the Bill will see speedy progress so that construction can commence. I beg to move.
On Question, Bill read a second time, and committed to a Select Committee.
Viscount Davidson: My Lords, I beg to move that the House do now adjourn during pleasure until 8 p.m.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 7.43 to 8 p.m.]

Public Utility Transfers and Water Charges Bill
House again in Committee on Clause 1.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 11:
Page 1, line 21, leave out ("property, rights") and insert ("assets").
The noble Lord said: I beg to move Amendment No. 11 standing in my name, and it may be for the convenience of the Committee if I also speak to Amendment No. 12. This amendment is in the nature of a probing amendment. It has the effect of narrowing the scope of property or functions in relation to which a proposal from the Secretary of State would activate the clause. The amendment
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would replace "property, rights" with "assets", which in accounting terms is a more precise definition. However, we recognise that the definition of assets, to which I referred earlier in Committee, may well exclude certain legal rights that have no particular value although again that raises accounting problems to which I have referred.
The amendment seeks to clarify the extent of the proposed transfer and there are certain questions which need to be answered by the Government on that matter. To what extent will the Secretary of State have to form a proposal which relates to all property rights and liabilities before the provision of the clause is operative or will its provisions take effect when the proposal is formed in a rather generalised way without relating to specifics such as property rights and liabilities? In other words, can a proposal be partial or must it be total in respect of a certain group of assets? What steps does the Secretary of State propose to establish the extent of property, rights and liabilities before announcing the intention to transfer? Again, we come back to the question of what is the proposal. At what point does the Secretary of State specify exactly what he is proposing to transfer? Will the timing of any such announcement be affected by possible developments in relation to those properties or rights which may take place? Indeed, we discussed some of those earlier in the discussion about the National Rivers Authority.
Subsection (2)(a) of Clause 1 refers to property, rights and liabilities which would be affected by transfer. Can the noble Earl give some clarification as to whether that relates only to the properties and rights which will actually be transferred or to any such property which may need, in some sense, to be accounted for, disposed of or otherwise allocated as a result of loss of functions on the separation of the water authorities from the National Rivers Authority. To put it in another way, what is required to trigger the conferring powers under the clause? Do the property and rights, which are mentioned here, have to be specified in order to trigger the powers in the clause?
"Assets" is a clearly defined accounting phenomenon and one with which we can deal. "Property and rights" is a slightly open-ended expression which needs further clarification in order to see at what point the powers would be triggered. The potential issue raised by my amendment is the degree to which a proposal from the Secretary of State will need to take into account and, indeed, will take into account in the formulation of the proposal, the full consequences in relation to all the property, all the rights and all the liabilities involved; or at what point a generalised intention to transfer whatever may be there, as it were, becomes a proposal which triggers off the powers.
The Earl of Caithness: With the leave of the Committee I shall also speak to both these amendments. I can understand the temptation to attempt to improve the drafting of this provision by using the familiar concept of assets and liabilities instead of the existing wording. However we do not regard the amendment as an improvement to the Bill.

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The objective is that if the main legislation is enacted by Parliament, all the property and rights of the existing water authorities together with liabilities will be transferred to the successor companies or to the NRA.
The noble Lord, Lord Williams of Elvel, said that the words need clarification. I remind him that the words widely used in existing legislation to give statutory authority for such transfers or to describe such transfers are the words "property, rights or liabilities" used in the Bill. I refer the Committee, for example, to Section 60 subsection (1) of the Telecommunications Act 1984; Section 100 subsection (1) of the Local Government Act 1985; Section 3(1) of the Trustee Savings Bank Act 1985 and Section 49 subsection (1) of the Gas Act 1986. It is well-precedented wordage.
The reason those particular words are used is that they are the words with the widest meaning and are legal concepts. The word "asset" is more frequently used in the fields of business and accountancy than in legislation, as the noble Lord, Lord Williams of Elvel, quite rightly said. When it is used in legislation it normally requires to be defined to ensure that it has a precise meaning. Indeed, in that case "assets" needs clarification.
If the Committee were minded to pass this amendment the words would have to be defined to mean "property and rights". Clearly the use of the existing words avoid the need for such a definition. I hope that that clarifies the situation for the noble Lord.
Lord Williams of Elvel: I am grateful to the noble Earl for his response, which clarifies the matter in part. Will he enlarge a little on his response and answer my first question? Let us take the water authorities, and let us suppose that the water authorities and the NRA split up a function and the Secretary of State makes a proposal. In order to trigger the powers under the Bill, to what extent will he have to define those rights and liabilities which are transferred from water authorities to the NRA or alternatively from water authorities to the new plcs?
The Earl of Caithness: Those will be the related proposals which we discussed earlier. The principle is quite clear; all the items that form the property and rights of the existing water authorities must be transferred either to successor companies or to the NRA. The exact split will be much clearer when we come to the main Bill, because that could change as it goes through this Chamber.
Lord Williams of Elvel: I am grateful to the noble Earl. Perhaps I may ask a supplementary question. Given that the relevant utilities are able to influence or secure modifications of the related proposals with which I understand we are now dealing, will the result of their attempts to secure modifications be published in some manner before the legislation comes before Parliament or will we not know what is happening until the main legislation comes before the Chamber?
The Earl of Caithness: The timescale on which we are working is that when this Bill has received Royal
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Assent we will be able to put forward proposals to the water authorities requesting them to give information to the Government so that we can flesh out our proposals. There are bound to be certain assets or properties that are at the moment occupied by a water authority that might have to be jointly occupied by NRA and the plc for a time; or one future plc may take a property and the NRA another property.
This will emerge over time, following the continuation of our proposals. Whether this will be made public, to answer the noble Lord, is something on which I should like to reflect given the timescale on which we propose to work.
Lord Williams of Elvel: I am most grateful to the noble Earl. I understand now—it is only when one gets into the detail of the Bill that one starts to understand—that these are part of the related proposals and, therefore, clearly for discussion and negotiation between the different parties involved.
I hope very much that there will be public discussion of the issues involved. These are matters of interest to the public. I note that the noble Earl will take a note of what we have said. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 12 not moved.]
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 13:
Page 1, line 24, after ("function") insert ("or responsibility")
The noble Lord said: The Bill, it seems to us, is not entirely clear on where the responsibilities, at the moment with the water authorities in Wales and with the electricity boards in England, Wales and Scotland, will lie. We have had some discussion but the amendment seeks to make sure that not only the rights but also the responsibilities and functions should be properly transferred.
The Water Act 1973 and the Electricity Act 1957 place very firm responsibilities on authorities and statutory undertakers in regard to conservation of the environment, as we have discussed earlier. In addition, the Water Act 1973 carries forward responsibilities for the use of land and water for recreation; for example, navigation, rights of access and a number of other aspects. It seems from earlier consultation papers that reservoirs and associated land holdings are to be vested in the water plcs. I may be wrong and if so perhaps the noble Earl can correct me.
In our view, it is important that the interests of recreation and conservation, to which I have referred, laid on the water authorities by the Water Act, should be remembered at all stages. Indeed, land owned by the new electricity privatised bodies should be open as under the present boards.
We believe that discussions and consultations on these matters should properly take place before the main privatisation Bills come before Parliament. I hope very much that the noble Earl will confirm that and also that the responsibilities, as I have defined them, are placed in the area that I believe should be the case. I beg to move.
8.15 p.m.
The Earl of Caithness: I fully accept the underlying purpose of this amendment which seeks to ensure that all the powers and duties of the utilities which it is proposed to transfer to the successor corporate bodies are included in subsection (2)(b) as related proposals.
I am advised that the word "function" used in that subsection and elsewhere in the Bill is the right word to cover all the powers and duties of the existing utilities. The word "responsibility" would add nothing to the meaning of the paragraph. It might well have the unfortunate effect of casting doubt on the breadth of meaning of the word "function" where it is used elsewhere in the Bill. I am sure the noble Lord, Lord Williams, agrees that that would be the opposite intention of the amendment.
I can confirm that it is our intention to transfer the reservoirs to the plcs. However, the noble Lord, Lord Williams, went on to mention related land. It depends where that land is. Obviously this will be one of the related proposals that will emerge in further discussions with the utilities. It will become clear, as our discussions continue, in time for the main Bill.
Lord Williams of Elvel: I am grateful to the noble Earl. That clears up the major point that I wished to raise. But, as the noble Earl said, it does not clear up the minor point. That is a matter which will come forward in the main legislation.
I am glad to learn that our interpretation of the word "function" as not including "responsibility" is wrong and that "function" does include responsibility. In the light of the assurance from the noble Earl that that is the case, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 14:
Page 1, line 25, leave out ("or otherwise vest in").
The noble Lord said: This amendment is designed to question the wording in subsection (2)(b) which again refers to functions which are transferred and, as the Bill states,
"otherwise vest in that body corporate".
What is the intent of the phrase "otherwise vest in"? Do the Government envisage the creation of new functions for a body corporate to which property rights and liabilities are transferred? Will a vesting process be set up under the provisions of the main privatisation legislation which will perhaps avoid the need, in certain cases, for a transfer order? Is this a different mechanism to the one we discussed earlier?
In relation to the powers conferred by Clause 1, will a proposal—I use that expression in the way that the Bill uses it—to transfer or vest a series of functions over a period give a similar disaggregated conferral of powers on public utilities, or will additional powers flow straightaway on the announcement of a proposal irrespective of the fact that vesting may take place over a much longer timescale depending on the property rights or liabilities involved?
I am afraid there are a number of rather niggling little problems here, but I should be grateful if the noble Earl could clear them up. I beg to move.
The Earl of Caithness: There is a technical justification for the existing drafting of paragraph (b). The main legislation will provide that certain of these existing functions will be transferred to the successor bodies by way of amendment. That legislation will also re-enact certain functional legislation such as the water supply duties. In such cases the technical effect will be not that these functions are transferred but that upon re-enactment they are conferred upon the successor bodies. The amendment would restrict the ability of the water authorities to act in relation to the functions which are to receive this legislative treatment. We have catered for the situation in the broad scope of the amendment in order to cover all the responsibilities, duties and functions.
Lord Williams of Elvel: I am grateful to the noble Earl. I understand him to say that it is a technical necessity to have this particular wording. Can the Minister respond again to my initial question? Do the Government envisage the creation of new functions for a body corporate in which certain property rights and liabilities are vested? That is a possibility. It is not a possibility if a simple transfer takes place. I hope that the noble Earl understands the thrust of my question. We start off with a water authority. The water authority has certain properties, rights and liabilities. These are transferred to a company. That is a very simple and straightforward transaction. The successor company exercises rights over the properties and it fulfils responsibilities. It has rights and liabilities.
When we discussed the question of vesting, that seems to us to open up the possibility that the successor company does not simply accept the activity, property rights, liabilities and responsibilities of the authority, but it does other things and it is allowed to do other things. If that is what the Government have in mind, perhaps they will say so. On the other hand, is it simply a piece of technical drafting as I believe the noble Earl seemed to imply when he responded to my initial intervention?
The Earl of Caithness: I am grateful to the noble Lord for further clarification of his point. There is the technical point and there is also the point that he covered. I would not say that it was so much the transfer of the water authorities to the plcs. Perhaps I may give an example of possibly adding further functions to the NRA. We may very well want to strengthen the role of the NRA by adding other duties which do not exist at the moment under the water authority's responsibilities. That is an added reason for this provision.
Lord Williams of Elvel: I am most grateful to the noble Earl. May I make sure that I have the situation absolutely right so that it is beyond peradventure of misunderstanding. The Government do not envisage other functions for the water plcs other than those

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activities which are transferred as a result of the legislation which is going to come in stages before Parliament. On the other hand, the Government by introducing this wording into the Bill envisage possible other functions for the NRA. The Government may wish it to engage in other activities which we may be unable to foresee at the moment. I agree that they may be necessary for the proper functioning of the NRA. Is that a correct understanding of what the noble Earl has said? It is a very important point.
The Earl of Caithness: It is an extremely important point on which to be absolutely clear. I believe that the noble Lord, Lord Williams of Elvel, was trying to tie me down too much. The wording makes provision to enable us to add other activities. It might well be that when we get into further detail on the proposals, when we receive evidence from the water authorities or there is an amendment in your Lordships' Committee as regards certain aspects of the duties and functions of the plc or the NRA, nothing additional is needed. However, it may be that something is needed. This provision allows us to add that something if the event occurs.
Lord Williams of Elvel: I am grateful to the noble Earl. I would not try to tie him down more than I can possibly achieve at this point. I understand what he is saying. I believe he has added a very interesting gloss to the provisions of the Bill. It is not the intention of the Government at present to do certain things; namely, to widen the functions. Obviously Parliament can pass what amendments it likes to the main legislation to ensure that other functions are added on. As I understand the noble Earl, it is not the present intention of the Government that water plcs should do more than accept the property rights, responsibilities and liabilities that are transferred from the water authorities at present. I am most grateful for that clarification. I will certainly remember it when we come to debate the main legislation as I am sure we will in the course of time. In the meantime—
The Earl of Caithness: Before the noble Lord does withdraw the amendment, the clarification is at 8.25 p.m. on the 17th March.
Lord Williams of Elvel: I was not aware that the Government took such careful note of the time and date in which they made clarification of their own legislation. At whatever time it is, the Government speak for the Government. It is always interesting to hear these particular nuances added to what has already been said. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 15:
Page 1, line 26, leave out from ("corporate") to end of line 5 on page 2.
The noble Lord said: The thrust of this amendment is to remove paragraph (c) from subsection (2) and to remove it from the ambit of proposals which give rise to additional powers conferred by Clause 1. In
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particular, this refers to the establishment or flotation of a body corporate to which functions might be transferred. The paragraph as currently drafted also includes within the ambit of the Bill a possible transfer relevant for the purposes of the clause to the creation or flotation of another company such as a holding company or a subsidiary to which functions may also be transferred.
We find difficulty in understanding why the proposals relating merely to the creation of a body corporate to which functions may be potentially transferred should be a relevant consideration in adding additional powers at this stage to the public utilities. Subsection (2) states that proposals for this purpose may relate to any of the property rights or liabilities of the utility or the exercise of any of its functions by virtue of paragraphs (a) and (b) respectively.
Within the context of this legislation, there may be legitimate matters to include within a proposal. They may relate to existing rights, properties, obligations, or functions of an existing body. We are still dealing with a public utility and it is difficult to see why a public utility should require additional powers in relation to the creation of a new body corporate to which—I have to remind the Committee—Parliament has not yet agreed to transfer functions. To a certain extent this is a question of the principle of the Bill.
The problem also arises as to the degree to which it is legitimate to confer functions on public authorities which in practice will be required to be undertaken with a view to promoting the interests of a private company. Subsection (3) refers to a possible private company and a body corporate which may become a member of a group. I believe there is a point where public utilities, given powers to promote the interest of a private company, spending national resources and undertaking activities, could be of doubtful constitutionality. It is certainly of doubtful benefit to the ultimate owners of the utility, who are the public at large in the form of the taxpayer and the nation.
My subsidiary point relates to whether the Bill goes too far in extending to flotation itself the powers that are conferred by Clause 1. It is legitimate in the context of Clause 1, although we would argue against it in the Bill as drafted, to go as far as the transfer. However, subsequent to the transfer, whether or not the transferee company will be floated is another matter entirely. The expenses should properly fall on the transferee company when it comes to be floated.
I recognise that these are slightly niggling points but they need to be clarified by the Government when they are dealing with this Bill. I beg to move.
8.30 p.m.
The Earl of Caithness: As the Notes on Clauses which have been made available to the Committee explain, paragraph (c) lists a number of matters arising out of our proposals for these important industries which the industries will need to act on if their restructuring and transition into the private sector is to be carried out in an expeditious and effective way.

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I have already given the example of the arrangements that will need to be made in respect of the people who will work in these industries after restructuring and privatisation. The 10 water authorities currently employ some 50,000 people. We propose that the water authorities' utility functions should be transferred to 10 water service plcs and their other functions to the National Rivers Authority. The total staff numbers of these successor bodies will be equally large, and it must be right that the water authorities can take timely action to help us ensure that staffing arrangements are sensible and effective.
The noble Lord, Lord Williams, referred again to the fact that we do not have the main Bill and we will not know the full details until we have it. I explained that position in detail earlier this afternoon. Parliament will have the opportunity to debate our proposals when we bring forward the main legislation. What this Bill does is to ensure that, if it is the will of Parliament that these privatisations should proceed, the industries concerned will have been able to make the necessary preparations so that the privatisations can then move ahead quickly and effectively.
Lord Williams of Elvel: I am grateful to the noble Earl. Can he respond to my two points? First, there is a question of doubtful constitutionality in a public utility being given powers to promote the interests of a private company which may at the end of the day become part of a water plc or an electricity plc. Secondly, can he say whether it is right that a public utility, as a public utility and before the transfer takes place, should be preparing the flotation of the transferee company?
The Earl of Caithness: This Bill will clear the way for the public utility to take the necessary action to take forward our proposal. It is quite right that, having received the proposal from the Secretary of State, the public utility should take the necessary action to make the transfer as smooth and as expeditious as possible. That is why the water and electricity supply industries will need to act on all the matters listed in paragraphs (a), (b) and (c) of subsection (2). To strike out any of those paragraphs would create a great deal of uncertainty and so hamper those preparations.
Lord Williams of Elvel: I am sorry to press the noble Earl, but I do not seem to be getting answers to the two questions that I asked. Perhaps I can put them in a different way. Let us suppose that, with the best will in the world, privatisation does not take place. Perhaps the market is not ready and nobody wants to buy. For one reason or another the selling of the water authorities or the electricity boards does not take place. Who will pay for the preparation for flotation of a successor company that is not floated?
Who will pay for the promotion of the interests of a private company which in the event does not become part of the group in which this privatisation scheme is involved? Will it be the Government? Will it be the consumer or the water authority which still
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remains? Who will pay? That is putting the question round the other way. By doing so I hope the noble Earl understands the point that I am trying to make.
The Earl of Caithness: I understand the noble Lord's question. I had hoped that I had answered him specifically. However, I fear that he was not satisfied and I shall try again. If costs are incurred in preparing for full flotation, ultimately they will fall on the Government. If significant, they will be reflected in the flotation proceeds.
Lord Williams of Elvel: I understand all that; but what if the flotation does not take place? Who will then pay? Will the consumer of water or electricity pay, or will the Government offer some form of indemnity and reimburse the utility?
The Earl of Caithness: The costs will be borne by the water authorities and the electricity supply industry. That has happened in all previous privatisations. We do not believe in looking at it in the negative way. I believe that it will be a success.
Lord Williams of Elvel: I am not looking at it in a negative, a positive or a neutral way. I am trying to understand why Parliament should be invited to give powers to utilities to spend money for purposes which may be desirable or undesirable—the noble Earl and I have strong political differences on that point—but which, nevertheless, are in the hands of fate, the stock market, and so on. That is the point I am trying to make.
The Earl of Caithness: I realise that that is the point the noble Lord is trying to make. I think I have answered the noble Lord on that point.
Lord Diamond: The noble Lord himself may be satisfied because his intelligence is immensely greater than mine. However, I could not follow and I have listened to every word. It is a simple point. What will happen if privatisation does not go through? Under the powers of this Bill the utility companies will have done certain things at the request of the Secretary of State and will have incurred costs. Let us assume that the Government change their mind. Perhaps they will say with regard to water, "Sorry, we are not ready. We have considered the matter further and as a result of all the information that has come in we have decided to give the matter another six months' consideration. We are not going ahead with it in this Session". In the meantime all this expenditure has been incurred. My reading of the Bill is that, as one would expect, it is the consumer who will pay. We want to know from the Government whether that is right. Does it fall on the consumer of the relevant utility?
The Earl of Caithness: I answered that question when I said that it was the responsibility of the utility. In the example that the noble Lord gave it might well be that some costs will be the responsibility of the underwriter.
Lord Williams of Elvel: Clearly if there is no underwriter, because there is no flotation, then it cannot be the responsibility of the underwriter.

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Therefore what the noble Earl is saying is that if there is no flotation and no underwriting, then no costs fall on the underwriter and it is the responsibility of the utility; in other words, as the noble Lord, Lord Diamond, rightly pointed out, it is the consumer who will end up paying. I think we have now established that as a matter of fact. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 16:
Page 2, line 11, leave out from ("functions") to end of line 15.
The noble Lord said: I beg to move this amendment standing in my name and that of my noble friend Lady Nicol. This is a slightly complicated area which brings us to the question of holding companies and subsidiaries. The amendment would exclude the requirement for a public utility to exercise its powers with a view to promoting the interests of a holding company or subsidiary—which is in the Bill as drafted.
The amendment would not affect the exercise of powers such as to promote the interests of a body corporate to which the function will actually be transferred. The issue that the amendment seeks to elucidate—it is in the nature of a probing amendment—is why a body to which functions will not be transferred should be a beneficiary by statute as a result of the exercise of additional powers by a public body. Can the Government give examples of situations—before we come to the question of Scotland—where the operation of subsection (3)(b) is necessary and is therefore a desirable use of public utility funds in order to secure the efficient transfer of functions? I beg to move.
8.45 p.m.
The Earl of Caithness: In responding to the amendment, I think it might be helpful if I were to explain a little about the corporate structure which we expect to be adopted by the water service plcs which will take over the utility business of the water authorities.
We envisage that those plcs will not be monolithic entities but that, in line with common commercial practice, they will consist of a holding company standing above at least one subsidiary, and possibly several. It will be the holding company whose shares will be offered for sale at the time of flotation. The holding company will wholly own a subsidiary company which will be responsible for the utility functions to be transferred from the water authority.
It may he that, in time, the holding company will choose to set up further subsidiary companies to handle other activities. The initial pattern, of holding company and so-called "core" subsidiary, is however in our view a necessary and appropriate structure which gives the important water utility functions a distinct place within a group which may well accommodate other activities.
If paragraph (b) of subsection (3) were deleted, as this amendment proposes, the subsection would provide, in the case of water, that the water authorities could act in the interests of the core subsidiary which I have described; but it would not
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similarly provide in respect of the holding company. That would be a lopsided and confusing provision. The amendment would therefore be very detrimental to the proposal for the structure of the plcs. I hope that that explanation clarifies the situation for the noble Lord.
Lord Williams of Elvel: I am sorry to press the noble Earl on this matter but it is possible for a body corporate—which for the purposes of argument we shall call a company—when the water authorities' activities have been transferred to it, to turn itself into a holding company, create subsidiaries and then to create sub-subsidiaries or to engage in joint ventures, because all companies do this. It does not seem to be necessary to provide for this situation before a transfer takes place because, unless there is some catch which I do not understand, a body corporate—properly constituted under the Companies Act—can be any number of things and spawn any number of subsidiaries after the event.
The problem with the Bill as drafted is that there are, or may be, bodies corporate which are not members of the group to which those activities are being transferred whose interests may be promoted by the use of what is still, after all, public money and which subsequently may or may not be used. It may even go off and do something different and ultimately be liquidated. I should have thought that it is possible for paragraph (a) to remain, and for us to understand the normal corporate practice: that any body corporate can become a holding company; spawn subsidiaries; reconstruct itself and do whatever it likes—so long as it does not contravene the Companies Act.
The Earl of Caithness: As I understand it, the Bill is drawn specifically to enable the structure that we propose (the holding company and core subsidiary) which I just mentioned to the Committee. If the noble Lord's amendment is accepted, it would mean that water authorities could act in the interests of the core subsidiary of the plc, but not the holding company itself. That is where there seems to be a difference of opinion between myself and the noble Lord. Therefore, if that is the case, since it is the holding company that is to be floated the amendment would surely hamper the process of flotation.
Lord Williams of Elvel: It is possible—indeed, it happens every day of the week—for a company to turn itself into a holding company and form what the noble Earl has referred as a core subsidiary. It is a very simple procedure, so long as one has 100 per cent. of the shares, and it takes about half an hour. I see no difference in what the noble Earl is saying, that we must have the core subsidiary empowered to be promoted, and so on, and also the holding company. If you put the activities of a water authority or an electricity board—or whatever it may be—into a company, that company (provided it is a company properly constituted under the Companies Act) can turn itself, as long as it has the approval of its shareholders, into whatever it wishes. For example, it can be a holding company; it can form a core subsidiary, a core sub-subsidiary or even form 100 core subsidiaries, should it wish to do so. So in

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that regard the Companies Act is very flexible. I do not see why utility money should be spent on this structure just because the White Paper says that this is the structure that we are going to adopt. However, I am not going to press the noble Earl at this time of night because we should like to get on with the proceedings, although it does seem to be illogical. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 17:
Page 2, line 15, at end insert ("or
(c) consumers.")
The noble Lord said: I think this amendment is almost self-explanatory. I beg to move.
The Earl of Caithness: The purpose of subsection (3) of this clause is not relevant to protecting the interests of consumers. It makes it clear that where new powers are conferred by Clause 1 on the water authorities and the electricity supply industry, those powers extend not merely to protecting or promoting the interests of themselves as water authorities but also to parts of the electricity industry.
The main object of our policy is that the water authorities, the area electricity boards and so on will not exist as such for much longer. Therefore subsection (3) ensures that those bodies can use their new powers to promote the interests of their successors; that is, the water plcs, the National Rivers Authority and the new generating, grid and distribution companies in the electricity industry. Subsection (3) is therefore essentially an internal provision to ensure that the clause gives the industries the powers that they need.
Protecting the interests of consumers is a vital part of our proposals which we shall bring forward in due course. In the water industry, for example, there will be customer service committees appointed by the director general of water services and playing a vital role in the handling of complaints and in the representation of customer interests, both to the privatised utility companies and to the director general, who will have power to follow up many of their recommendations.
That point will not have been lost on the Committee. It is for the Government to protect the customers of those industries and to make sure that the mechanisms for protection are adequate. That is not a function of the water authorities nor of the electricity supply industry as they help us to draw up proposals for the industry. One could not expect these industries to devise a set of proposals which could ultimately be used for their own disadvantage. That is our responsibility, and in due course it will be Parliament's responsibility to ensure that our proposals are adequate.
As I have assured the Committee, the need for customer protection is very much in our minds as we develop our proposals. I can but refer the Committee to Amendment No. 33 in my name. I am sure the noble Lord has looked at it and will approve it with satisfaction. I hope that the assurance I have given the noble Lord will satisfy him on this point.
Lord Williams of Elvel: I am grateful to the noble Earl. As I said, the amendment is self-explanatory. The consumers seem to be rather sadly ignored in much of this legislation. We should like to see them put into Clause 1.
Nevertheless, I found rather odd the noble Earl's submission that it was up to the Government to protect the consumers and that the companies would not be proposing things to their own disadvantage. I understood the virtues of privatisation as put forward by the Government to be that privatised companies paid more attention to consumers, because it was in their interests to do so. Maybe I have the propaganda wrong, but that is what I have been told. It may not actually be borne out by events; witness Telecom and other matters which we have discussed. But I should have thought it was in the interests of the companies themselves to make sure that their consumers were properly protected, as it is with any company which sells goods, products and services, and to make sure that their customers are satisfied. So I do not see any real reason why the noble Earl made the assertion that it was not for the companies to put up schemes to their own disadvantage. I do not believe it would be to the disadvantage of companies to protect their own clients. However, if that is what the noble Earl thinks, that is what he thinks.
I am sorry that the noble Earl feels that consumers should not come in at this point of the Bill but should come in later. I have read the noble Earl's amendment. I am glad that we have some measure of agreement that this subject is important. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 18:
Page 2, line 15, at end insert—
("( ) The powers conferred by this section shall not include the right to advertise other than in the normal course of business, or for the purposes of informing the public of proposals implementing sections 2, 3, 4 and 5 of this Act.").
The noble Lord said: I beg to move Amendment No. 18 standing in my name and that of my noble friend Lady Nicol. This amendment seeks to address the question of advertising. We are concerned that the powers conferred by Clause 1 of the Bill would allow utilities or electricity boards to advertise in a manner which is outside their proper function under the transfer of property rights and liabilities to private companies. In so far as there is information to the public about what is going on, in our view that is a perfectly proper subject for advertisement. In so far as they advertise in the normal course of business, again that seems to be perfectly proper.
However, there have been occasions in the run-up to privatisation when (how can I put it delicately?) public funds, funds of organisations about to be privatised, have been used for extensive advertising campaigns. We should like to make sure that at least in the initial stage—because we understand that we are dealing here with the initial stage—those utilities and electricity boards which are still in the public sector should not be allowed to advertise other than for the purposes specified in the amendment. If the noble Earl can persuade me that that is already in the

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Bill, I shall be very happy about it. Otherwise I think this is quite important matter which we ought to be debating. I beg to move.
The Earl of Caithness: I have to say to the Committee that I found this amendment somewhat confusing. It bears on Clause 1, which gives powers to the water and electricity supply industries, and yet one of its effects would be to state that these industries may advertise to inform the public of the charging and metering provisions of the Bill, which are concerned with the water industry only.
However, I understand the intention of the amendment, as the noble Lord, Lord Williams of Elvel, has explained, to be that the powers conferred on the water and electricity supply industries by Clause 1 should not include the ability to advertise in support of the Government's proposals for the restructuring and privatisation of those industries. It is a standard feature of the privatisation of industries formerly under state control that there is a campaign to advertise the flotation of those industries. Such campaigns take place in the immediate run-up to the flotation, however, and the process of selling the water and electricity industries into the private sector can begin only if and when Parliament has approved the main legislation.
Advertising for the offers for sale of successor bodies to the water and electricity supply industries is therefore not in prospect for some time yet. It may be, however, that those industries will wish to act sooner than that to explain to their customers and to others the way in which they expect their businesses to be run once our proposals are implemented. This amendment would provide that, in exercising the powers conferred on them by Clause 1, those industries could undertake advertising only so far as it served what is termed the normal course of their business. The precise scope of this concept would, I venture to suggest, be very difficult to establish, and I fear that it would lead to considerable uncertainty and confusion. It would certainly be wrong, in our judgment, to exclude the sort of explanatory advertising to which I have just referred.
Lord Williams of Elvel: I am sorry if the noble Earl found this amendment confusing. I hope he understands that when drafting amendments we do not have the services of a battery of civil servants. We try our best to convey to the Government exactly what our intentions are, without having the services of officials. In my introducton I tried to explain exactly what our intention was.
The problem, which I do not think has gone away as a result of what the noble Earl has read out, is that the utilities, as I understand it, can still advertise the way they are going to be run after privatisation. Therefore they spend money—again I have to remind the noble Earl—which if the flotation does not take place and the privatisation does not take place will be recovered in the end from the consumers of the utility. This amendment was seeking to limit that activity. If the Government are determined that consumers of water or electricity shall pay for failed privatisations there is not much I can do about it.
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However, I am disappointed that the point has not been registered by the noble Earl. I may well come back to this and I shall try my best, with the assistance that I can conjure up, to draft the next time round an amendment that is perhaps slightly less confusing for the noble Earl. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Chairman of Committees (Lord Ampthill): Before calling Amendment No. 19, I should remind the Committee that if it is agreed to I cannot call Amendment No. 20.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No.19:
Page 2, leave out from beginning of line 17 to ("shall") in line 18.
The noble Lord said: In view of what the Deputy Chairman has said, and indeed by prior agreement, it would perhaps be for the convenience of the Committee if I spoke to Amendments Nos. 19 and 20 together.
This amendment, as well as the amendment to be moved by the noble Lord, Lord Diamond, goes to the root of the powers conferred by Clause 1. The provisions of subsection (4) are sweeping. They encompass two possibilities. First the situation where Parliament has not been asked to approve the implementation of the transfer proposals or is in the course of doing so but has not given its final approval. Secondly, the situation where Parliament has rejected the legislation which has been put before it.
The possibility would appear to exist that powers available to the public utilities could remain on the statute book even after the rejection of the main legislation. In that situation the Secretary of State would merely need to formulate a new proposal in his bath—as we discussed earlier—for the powers to be triggered under Clause 1.
I accept the good faith of the Government and the noble Earl when they say that they wish to proceed with privatisation as soon as possible. I accept absolutely that there is a majority in both Houses of Parliament for the main legislation to go through. Nevertheless there is many a slip twixt cup and lip. It may be that the legislation does not go through. Under those circumstances we are left with the problem that I have just outlined.
The effect of that, given that the Government have this evening rejected all the amendments moved from this side of the Committee and by those Members of the Committee on my right—amendments which tried to restrict or modify the powers in Clause 1—is that we could have a ludicrous situation where one paving Bill remains on the statute book and the main legislation is rejected by Parliament. That would be a constitutional nonsense. I beg to move.
9 p.m.
Lord Diamond: I wish to add a word in explanation of the amendment which appears in the name of the noble Lord, Lord Ezra, and myself. I am most grateful to the noble Lord, Lord Williams of Elvel, for having explained his amendment and particularly for having underlined the point which must exercise

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the mind of everybody who looks at the wording of the Bill. That is:
"whether or not Parliament has given any approval".
That is fighting language in this place as is evidenced by one glance round the Chamber. We could not possibly allow this provision to go through without being satisfied as to the reason for it.
At the moment I can see no good reason for it. Of course the Government want to get on with their legislation and we want to assist the Government in getting on with good legislation. The matter of whether or not Parliament has given any approval—I know that that refers to the implementation of the proposal—is consistent with the rest of the Bill in being drawn far too widely and unnecessarily so.
As the noble Lord, Lord Williams of Elvel, has said, the provision contemplates not only the negative situation where Parliament has not given approval, but also the positive situation where Parliament has given disapproval. This matter is not only relevant to passing the legislation when it comes along. Let us suppose that there has been a Motion in another place or in this place—One does not have to wait for legislation—or some appropriate procedure which relates to the wisdom of carrying out this measure and Parliament has voted against it. The provision still allows the Government to carry on with this Bill in triggering off the powers of the utility companies to incur expenditure in connection with something of which Parliament has openly voiced its disapproval. Surely that cannot be right?
I repeat that this is not necessary. Of course the Government want to get on with their legislation but it is not necessary that the Government should take these powers immediately and in the face of parliamentary disapproval. Therefore I am suggesting in my amendment a step which I hope the Government will regard as a very constructive attempt to provide a suitable half-way house. I am suggesting in my amendment that there should be inserted the words:
"as soon as the House of Commons has given a second reading to a Bill for the privatisation of the electricity and water industries".
One need not wait, therefore, for the whole process of a Bill going through both Houses. I venture to think that when this Bill comes along it will not have the speediest possible passage through both Houses of Parliament. There is no need for the Government to wait for the completion of those procedures. My Amendment says:
"as soon as the House of Commons has given a second reading"
the principle of a privatisation Bill is approved and the Government would be justified in saying that it is now proper that they should trigger off those powers contained in the enabling Bill and invite the utility companies to give them the information that they want.
In my view that is a very adequate half-way house and the Government should be satisfied with that. It means that Parliament is being consulted, which I know is a novel idea to the Government, but it is a good thing to do from time to time. Parliament will be consulted and also time will not be wasted. The Government will have plenty of time in which to do
1336
whatever they want to do before the Bill has gone through both Houses and received Royal Assent. That is the reason why I have put down the amendment.
The Earl of Caithness: I regret to have to say to the Committee that there is not much that I can add to what I said when responding earlier to Amendment No. 2. It would be wrong for me to repeat what I said then.
These two amendments, if I understand them correctly, would delay matters even more than the previous amendment. Amendment No. 2 would have provided that before the water authorities and the electricity supply industries could enjoy the powers conferred on them by Clause 1 my right honourable friends would have had to have brought their proposals for privatisation and restructuring before Parliament.
These two amendments would require my right honourable friends not merely to have brought proposals before Parliament but to have obtained a Second Reading or possibly in the case of Amendment No. 19 to have taken their proposals through to Royal Assent.
Indeed I would therefore agree with the noble Lord, Lord Diamond, that his amendment is as I understand it rather less of an Exocet than the first one. For all the reasons which I expounded earlier, this is unacceptable to the Government. We could not be sure of drawing up adequate legislation let alone starting the many processes which will eventually lead to the flotation of these industries without the full-hearted co-operation of the industries themselves. The timetable for those two major proposals, which were in our manifesto and which were endorsed in the general election, would be seriously jeopardised if we were to accept either of the amendments.
Lord Williams of Elvel: I am sorry that the noble Earl does not accept any of the arguments which the noble Lord, Lord Diamond, and I have advanced. If I may say so, he seems to be in a very negative mood this evening. He no doubt has "resist" or "reject" written across all his briefs. It is an important point that if the main legislation is not approved, for whatever reason, we shall have a Bill on the statute book which is complete nonsense if our amendments are not considered. However, I shall not press my amendment and I beg leave to withdraw it.
Amendment, by leave, withdrawn.
Lord Diamond Lord Diamond had given notice of his intention to move Amendment No. 20:
Page 2, line 17, leave out from ("exercisable") to ("and") in line 18 and insert ("as soon as the House of Commons has given a second reading to a Bill for the privatisation of the electricity and water industries").
The noble Lord said: Perhaps I may say one further word about the amendment. I hope that the Minister will be good enough to reconsider what has been said about the words:
"whether or not Parliament has given any approval".

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I hope that he will consider that those words mean: "in circumstances in which Parliament may have given direct disapproval". That is the form of the wording. I do not wish to delay the Committee unduly. However, as I see it, that is the interpretation to be placed on those words and I hope that the Minister will take that point into account.
[Amendment No. 20 not moved.]
[Amendments Nos. 21 and 22 not moved.]
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 23:
Page 2, line 37, at end insert ("related")
The noble Lord said: Perhaps it will be for the convenience of the Committee if, in moving Amendment No. 23, I also speak to Amendment No. 24. They are drafting amendments and the assumption is that a proposal from the Minister of Agriculture, Fisheries and Food is a related proposal and therefore the words should properly be "proposals" and "related". There may be a point of substance in that which I have missed. However, it seems that if MAFF are to make proposals, they are essentially related rather than basic proposals, if I may I use the noble Earl's term. I beg to move.
The Earl of Caithness: The effect of Amendments Nos. 23 and 24 is to provide that related proposals by the Secretary of State shall include proposals by the Minister of Agriculture. The Committee will know that in England ministerial responsibility for the water authorities is shared between the Secretary of State for the Environment and the Minister of Agriculture. The division of responsibilities is set out in Section 1 of the Water Act 1973, under which water authorities were set up. Responsibility for land drainage and fisheries functions rests with the Minister of Agriculture. Responsibility for the other functions rests with the Secretary of State.
That division of responsibilities will continue to obtain after the restructuring which we have proposed for the water authorities. In particular, the functions of land drainage and fisheries will be transferred to the National Rivers Authority as an integral element of the overall transfer of functions which will form the basis of the new structure. Those are our basic proposals for the water industry which have been settled and which the water authorities are empowered to help implement by this Bill. The Bill also empowers them to help implement or to seek to modify related proposals which may include the matters listed in subsection (2) of Clause 1.
The amendments would mean that any proposals by the Minister of Agriculture would be regarded as a related proposal by the Secretary of State. We believe that to be unacceptable as the Minister of Agriculture is responsible for basic proposals for the transfer of functions which are as fundamental to the proposed new structure of the industry as are the basic proposals by the Secretary of State. The noble Lord, Lord Williams of Elvel, has accused me of being rather negative. However, I hope that he will feel, in the light of my explanation, that the provision is beneficial.
Lord Williams of Elvel: I am grateful to the noble Earl for his explanation of the intricacies of ministerial responsibility. It complicates the implementation of the Bill. Nevertheless, I am content to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 24 not moved].
Clause 1 agreed to.
Clause 2 [Charges by statutory water companies]:
[Amendment No. 25 not moved.]
Clause 2 agreed to.
Clause 3 [Provisions regulating the charges of all water undertakers]:
[Amendments Nos. 26 to 28 not moved.]
9.15 p.m.
The Earl of Caithness The Earl of Caithness moved Amendment No. 29:
Page 3, line 47, at end insert—
("(4A) Subsection (6) of section 12 of the 1973 Act (right of statutory water company to reasonable return) shall apply in relation to the giving by the Secretary of State of a direction under subsection (4) above to a statutory water company as it applies to the settlement or variation of arrangements under that section.").
The noble Earl said: During the course of the debate on the Second Reading of this Bill in your Lordships' House, my noble friend the Lord Privy Seal gave notice that the Government would table an amendment to make it clear that the Secretary of State's power of direction under Clause 3(4) does not prejudice the ability of statutory water companies to provide a reasonable return on capital, so long as they remain under their present financial framework. Clause 3(4) as presently drafted requires water undertakers to comply with directions from the Secretary of State about the matters by reference to which their charges are fixed and the methods and principles to be adopted in calculating and imposing the charge. This amendment fulfils my noble friend's undertaking.
During the course of their discussions with my department about the need for this reserve provision, the Water Companies Association pointed out that similar protection is already available to statutory water companies in Section 12(6) of the Water Act 1973. The provision was inserted in the 1973 Act at the Water Companies Association's request because of similar fears that the Secretary of State might settle or vary arrangements between water authorities and water companies which would affect their ability to provide a reasonable return on capital to their stockholders. Section 12(6) was in turn derived from the proviso to Section 40(1) of the Water Act 1945. It was also pointed out that because investors have got used to seeing references to Section 12(6) in the prospectuses of water companies, they will look for similar protection and similar wording in this case.
I am sure the Committee will agree that the drafting of this amendment meets the Water Companies Association's requirements in every way. I beg to move.
On Question, amendment agreed to.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 30:
Page 4, line 5, after ("liable") insert ("if the premises are occupied by another without his permission or").
The noble Lord said: Amendments Nos. 30 and 31 are intended to deal with the problem of squatters and what happens to water charges after the death of an occupier. It may be that the noble Earl can explain that the amendments are not necessary; but certainly in the case of squatters I can see no reason—the noble Lord, Lord Hesketh, finds it extremely amusing but I do not find it amusing because I have had problems with squatters. They use water where premises are occupied without permission. This creates a problem and, in case the noble Lord had not noticed, quite a major problem.
A second problem concerns what happens when an occupier of premises dies and the water bill under the scheme as proposed is submitted and continues to be submitted. Who is liable and what happens afterwards? Is there not an area here which needs to be clarified?
The amendments are probing amendments designed to see what will happen in the real world when the metering schemes or trial schemes are put into effect. I beg to move.
The Earl of Caithness: I should like to deal with Amendment No. 31 first. As I understand it, the purpose of the amendment is to cover the situation where a person quitting a metered property fails to give the undertaker the necessary two working days' notice, then sadly passes away before his liability for future charges under Clause 3(5)(b) is determined. The Committee will be aware that it is a general legal principle that liability of this kind would pass to the deceased's estate; it would not end on the death of the former occupier. Although quite naturally we would not want to increase the distress on such a person's dependants, there are precedents in the legislation of the other utilities, most recently the Gas Act 1986 which did not make a special case of the kind envisaged by this amendment. In any event, as I shall explain later, the potential liability of the deceased's estate is not open-ended but limited in the way set out in Clause 3(5)(b) of the Bill.
As regards Amendment No. 30, provided that water service customers who are due to give up occupation of a property give water undertakers the necessary two working days' notice, they will not be liable for measured charges after they have left, regardless of whether or not new occupiers have their permission to move in.
Even in those cases where the person vacating the property, for some reason, fails to give the two working days' notice of his intention to quit, that person's liability will be determined by the earliest of the following three dates. The first is the 28th day after giving notice, if such a notice is given fewer than two working days before leaving or is given after the occupier has left. The second is the day on which the meter would normally have been read next and the Third is the day on which a new occupier informs the undertaker that he has moved in and wants to be supplied with water services. Although I admit that in the last case it is unlikely that a group of squatters will inform the undertaker of their own accord, it is clear
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that there are are adequate arrangements to prevent an unlimited liability for charges, even where a customer does not follow the quite reasonable rule for giving two days' notice of quitting.
Finally, as a further safeguard, my right honourable friend the Secretary of State intends to make a regulation under Clause 5 of the Bill to require undertakers in the bills that they send out to their measured customers to explain about the need to give two working days' notice of their intention to quit a property if customers are to avoid liability for charges. Given this assurance, the noble Lord may wish to withdraw the amendment.
Lord Airedale: A completely different situation may arise with squatters. The occupier has no intention of giving any kind of notice. He goes abroad for six months. Squatters break in in the winter months. They use a large quantity of water. The weather improves and the squatters leave to live an open-air life. The occupier returns to his property, never having given any kind of notice because he was always going to return. What happens about payment for the water that the squatters used for the period that he was away?
The Earl of Caithness: I should like to check on that, but presumably the same as now.
Lord Williams of Elvel: Does that mean that the occupier is charged for the water that the squatters have used?
The Earl of Caithness: I understand that, if an occupier is away and somebody occupies his premises with or without permission, the occupier can be charged for any electricity, water and gas that may be used by whoever has occupied the premises. It is the occupier's responsibility.
Lord Airedale: Does the Minister think that that is a fair arrangement, or ought better arrangements to be made while we have the opportunity?
The Earl of Caithness: With respect, I think that the noble Lord is opening out a huge new argument that goes much wider than the scope of the amendment.
Lord Williams of Elvel: I am sorry to differ from the Minister; it is exactly the scope of the amendment. The noble Lord, Lord Airedale, has put his finger on the problem. However, I can see that the Minister is not prepared to enter into the discussion now, so we shall have to refer to it again at a later stage.
I am grateful to the Minister for having explained in a serious manner what happens on the death of an occupier. The question of squatters will have to be addressed in some way or other, as it is clearly not addressed here. I hope that the Government will give the matter further consideration before Report, as we shall. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 31 not moved.]
On Question, Whether Clause 3, as amended, shall stand part of the Bill?
Lord Renton: I wish to raise a small point that may prove be a quite big one. Clause 3(1) refers to Section 30 of the Water Act 1973. The Explanatory Memorandum states:
"Clause 2 confers charging powers on statutory water companies similar to those of water authorities under section 30 of the Water Act 1973".
When considering Section 30 of the 1973 Act, we should hear in mind that a number of cases going right up to the House of Lords the interpretation of the section has caused difficulty. There was one case where the ratepayer objected to paying a water rate merely because the water company took the water off his corrugated iron roof, did nothing about it except to let it run into a sewer, and he was made to pay a water charge for that. That kind of thing has happened under Section 30. Between now and Report stage, as we are extending and amending this part of the law, I was wondering whether we might consider whether it is right, or whether we might improve the Section while this Bill is passing through.
The Earl of Caithness: In view of the legal knowledge that my friend has on these matters, I think that it would be right to reflect on what he has said when I read it in the Official Report. However, when it comes to interpretation, Section 30 of the 1973 Act will be reviewed in the main privatisation Bill. Perhaps that might be the place for such consideration rather than in this Bill.
Lord Renton: If that were done, it would be the next best thing. However, I would prefer to see it considered sooner.
Clause 3, as amended, agreed to.
Clause 4 [Metering trials schemes]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 32:
Page 5, line 14, at end insert—
("(b) any financial disadvantage that such persons incur by virtue of their inclusion in the scheme; and").
The noble Lord said: We are dealing here with metering trials schemes. The purpose of the amendment would be to require the Secretary of State to have regard to the financial disadvantage of any consumer by their inclusion in any metering trials scheme. This is not a permanent metering scheme but a trial one. Certain categories of households are likely to be high users of water for basic personal health needs. The registered disabled, the elderly, the physically or mentally handicapped living in residential, voluntary or local authority homes or hostels are apparently liable to have a water usage two or three times that of the average consumer. It seems to us to be somewhat unfair that a consumer should lose financially during the trial period by an accident of geography, if the trial is selected for a specific area and someone happens to be within the area rather than just outside it. They have obviously not given consent for these trials. The amendment will allow the Secretary of State to ensure that such financial disadvantage is avoided. I beg to move.
The Earl of Caithness: As the Bill is presently drafted, under clause 4(3), my right honourable friend the Secretary of State is required, when considering a proposed metering trial scheme for approval, or any conditions he might impose on it, to have particular regard to the interests of those customers who will be charged under the scheme, and whether certain other matters, set out in subsection (4), have been satisfactorily provided for in connection with the scheme. These matters include in Clause 4(4)(a) the methods and principles on which charges will be calculated and imposed. Taken together, these provisions will enable the Secretary of State to consider the structure of charges to be used in the trials and the implications, including financial ones, for the customers taking part.
Also, as a result of the second limb of Clause 4(5), which incidentally the noble Lord, Lord Williams of Elvel, tabled an amendment to delete, my right honourable friend the Secretary of State, may, in considering a scheme for approval, take into account whether or not the proposed charges are within the constraints of the experimental nature of the trial to be cost-related, or whether a proposed charging system would result in undue preference or discrimination between classes of customers. Thus if the Secretary of State thinks that a proposed experimental tariff would lead to serious inequities to customers taking part in the trial, the Bill provides the Secretary of State with the means either of rejecting the proposed scheme outright or of proposing conditions designed to rectify the inequities. The latter can only be done after consulting the undertaker who submitted the scheme. This ensures that any conditions that the Secretary of State might impose are workable. I hope that goes a long way towards clarifying the situation and also settling the noble Lord's concerns on this matter.
9.30 p.m.
Lord Renton: I support my noble friend in what he has said. I speak from personal experience. Somewhat unusually, the house in which I live in Huntingdonshire, right out in the country, has for many years had a metered supply. The reason is that it is part of the supply to a farm owned by my neighbour. It was found by the water authority, by my neighbour and by me that a joint meter would be convenient. I have no doubt that there are many of these all over the country. The fact that they exist supports the view that conclusions can be drawn from these schemes.
The Earl of Caithness: I am extremely grateful to my noble friend for his support.
Lord Williams of Elvel: I am grateful to the noble Earl for his reply. As he said, he goes a long way towards satisfying our concerns. They are genuine concerns that people who have not given their consent to these trial schemes should be caught up in something that is not their fault. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Earl of Caithness The Earl of Caithness moved Amendment No. 33:
Page 5, line 34, at end insert ("and with any bodies representing the interests of those persons").
The noble Earl said: The Government gave an undertaking during Report stage in the other place that they would table a suitable amendment in this Chamber to ensure that consumer bodies representing the interests of those affected by the trials, are consulted.
I now have pleasure in proposing to the Committee that Clause 4 should be amended so that one of the matters to which the Secretary of State must have regard in considering whether to approve a metering trials scheme—in addition to consultation with those affected or likely to be affected by the scheme—should be consultation with any bodies representing their interests. Thus consultation may be extended to include, for example, such bodies as the National Consumer Council, Citizens' Advice Bureaux and such organisatons as local branches of the RNIB, Age Concern and Help the Aged. I stress that these are purely examples. It will be up to each undertaker to consider which bodies it would be appropriate to consult in each case, and for the Secretary of State to decide whether that consultation appeared appropriate. This provides for a commonsense view, in all the circumstances, of which representative bodies it is reasonable to consult.
The amendment, by referring simply to bodies rather than consumer bodies representing the interests of those persons affected by the scheme, goes wider than the amendment originally proposed by Opposition Members in the other place. This is because we felt that the term "consumer bodies" was imprecise, or, to put it another way, a bit woolly. Some important bodies which the Government would expect water undertakers to consult, might not always fit such a description. A notable example is a local authority representing the interests of its tenants. Clearly local authorities are not consumer bodies but they do, or at least I hope they do, represent the interests of their tenants.
This amendment is not complex; nor will it change the Bill radically. It does, however, serve to emphasise the importance that the Government attach to full and proper consultation on the trials. I beg to move.
Lord Williams of Elvel: The noble Earl refered to this amendment earlier. We agree that it is obviously a desirable amendment to make. It does not, of course, fulfil the purpose of the original amendment that we were discussing on Clause 1. Nevertheless, I believe it shows willingness to move in the direction of the general philosophy that the noble Earl was advancing. The Government are sensitive to the requirements of consumers and we shall not oppose the amendment.
On Question, amendment agreed to.
[Amendment No. 34 not moved.]
Clause 4, as amended, agreed to.
Clause 5 [Provisions relating to meters etc.]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 35:
Page 7, line 17, at end insert—
("( ) provide for regular testing of the accuracy and proper functioning of meters;").
The noble Lord said: This is a simple amendment. It is self-explanatory. In our view it should be the duty of the supplier to make sure that the meter is regularly tested and that it functions properly. That should not be the duty of the consumer. I speak as one who has a metered supply of water in Wales. My meter malfunctioned and I had to pay an extra £220. The Welsh Water Authority failed to recognise the fact that it was a malfunction of the meter and claimed that it was my fault because I had had too many baths. I was innocent of that particular charge. I believe that the Welsh Water Authority should have taken the responsibility because the meter was its property. The dividing line—where their responsibility ends and mine begins—is on the house side of the meter.
I do not put forward the amendment for entirely personal reasons. I believe it to be a general principle that if meters are introduced by companies they should be paid for and properly maintained by the companies. With this amendment, I am also speaking to Amendment No. 36. I beg to move.
Lord Renton: Of course, meters ought to function properly. But if they do not appear to do so, it is only right that the water authority, or whichever body is involved, must test the meter when a complaint is made. It ought to be sufficient to leave the matter there rather than to provide for regular testing in a statute. Such testing over a wide area containing many people who have meters may be an expensive excess of zeal. I doubt whether the amendment is necessary or desirable.
If a water authority fails to respond to a complaint, that should be sufficient. In those circumstances, I believe that the consumer would be perfectly entitled to refuse to pay his water rates and that he should make a complaint to a higher authority. At present that would be one of the area boards. I suspect that it might be a little over-zealous to require regular testing of all meters.
The Baroness Seear: Since we are all being reminiscent, perhaps I may mention something that happened to me. Let us suppose that it is not the meter that goes wrong but there is a fault in the water pipe and the water leaks out of the cistern of the house occupant. Obviously if there is a leak in the cistern the water empties out. It empties one's cistern but one is being charged for the water. If the water is metered and the water has disappeared out of one's tank, not because one has drunk it or bathed in it but because there is a hole in the pipe, one should not have to pay for it.
Lord Airedale: I do not join with the noble Lord, Lord Renton, in finding any difficulty with regular testing. I should have thought that regular testing merely means that you have to test the meter at the end of the time when experience shows that an inspection is necessary. No piece of machinery can be

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expected to last forever. I dare say that a good water meter can be expected to run satisfactorily for perhaps seven years, and regular testing in that case would mean testing the meter after it had been in use for seven years. It would not mean testing it every year or at very frequent intervals.
Lord Renton: We do not know about that. Perhaps the noble Lord, Lord Williams, could tell us.
Lord Williams of Elvel: I use the expression "regular" because I mean regular. Regular can mean once every week, every year or every five years; but it must he regular. That is the point I was making—that there should be some sort of mechanism. If the noble Lord, Lord Renton, went into the matter he might find that with modern meters it is possible to test much more easily than with old-fashioned meters. Indeed, that is what will make metering viable, because there are electronic methods of testing.
I believe I can answer the noble Baroness, Lady Seear, because I have had that problem. Anything that is on your side of the meter is your responsibility and you pay, whatever happens. Anything that is on the water authority's side of the meter is its problem and it pays.
I do not intend to press this matter if the noble Earl feels there is a difficulty, but I should like to hear the response from the Government about these various problems which are all part of the difficulties that people have in adjusting to meters. Meters are not the easy solution that many people seem to think and it seems to me that there are serious problems which the Government must address.
The Earl of Caithness: Perhaps I may first deal with the point raised by the noble Baroness, Lady Seear, which was answered for me by the noble Lord, Lord Williams of Elvel. The industry is considering a code of practice for high bills due to leaks that would enable bills to be reassessed according to normal usage. That may be some comfort to the noble Baroness. However, I am sure that she would join me in saying that that must not undermine the customer's responsibility to maintain the pipes in good working order.
As regards Amendments Nos. 35 and 37, in normal conditions modern water meters are reliable and accurate. When they have been proved to be inaccurate they are usually found to be under-reading, thus favouring the customer. Most tests of suspect meters in use reveal that there are problems with the plumbing—for example, dripping taps, over-flowing cisterns and leaking supply pipes—not with the meter, although the example that proves the exception to the rule is of course that given by the noble Lord, Lord Williams of Elvel, in his house in Wales.
Nevertheless, the Government agree that it is very important that customers should have full confidence in the accuracy and reliability of water meters, and that there are proper procedures in place for getting them tested in use and for adjusting bills in the event of meters being proven to be inaccurate. With this in mind the Department of Trade and Industry intends
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to make regulations under the Weights and Measures Act 1985 to control the accuracy of cold water meters used for domestic purposes. Consultation on these regulations has already taken place, and my right honourable friend the Secretary of State for Trade and Industry intends to make them as soon as possible, subject to the necessary clearance from the Commission of the European Communities. All meters used in the metering trials under Clause 4 of this Bill will have to comply with these regulations, which will eventually be extended to cover all meters used for domestic purposes, which includes those used outside the trial areas.
The proposed regulations under the Weights and Measures Act provide for control in two parts. First, the design of each meter type will be approved to ensure inherent reliability, accuracy and general suitability for use. Secondly, each meter made will be tested for conformity with the approved design and accuracy within agreed limits of error then "stamped" to indicate that it conforms. The Committee will want to know that testing of meters under these regulations will be carried out by trading standards officers.
The DTI's regulations will also cover the testing by trading standards officers of meters in use in accordance with a procedure to be set out in the regulations. Trading standards officers may charge for this work. However, the Government and indeed the local authorities' co-ordinating body on trading standards, see the involvement by trading standards officers in carrying out in situ tests of the accuracy of meters very much as one of last resort. Any domestic consumer will be able to ask that a trading standards officer tests his meter, but day-to-day testing will, however, continue to be carried out by the water undertakers themselves. With this in mind my right honourable friend the Secretary of State for the Environment will make regulations under Clause 5 of this Bill covering the procedure for testing meters by water undertakers, which will be consistent with the procedure to be adopted by trading standards officers under DTI regulations.
Regulations will also be made under Clause 5 of the Bill specifying how bills will be adjusted if meters are found to register inaccurately; that is to say, if they register outside specified limits of accuracy. Such regulations will also provide for payment in respect of the meter accuracy test. As regards the latter, I expect that the present arrangements will continue whereby the customer will pay for the tests only if the meter is proven to be accurate.
The Government do, however, recognise the concern expressed by the Committee and by Members of the other place about the need for special arrangements for testing of meters during the course of the trials. I am pleased to announce to the Committee that the industry has agreed that customers taking part in the trials should be offered at least one free "confidence" check of the accuracy of their meters.
The test will be carried out by an employee of the water undertaker. It will consist of a basic check for leaks on the consumers' supply pipe; for example, by checking to see whether the meter still registers

1347
when all taps are turned off. That will be followed by a basic check on the accuracy of the meter by drawing off a measured quantity of water. The industry expects that such confidence checks will, in the majority of cases where customers have complained about higher than expected charges, identify faulty plumbing rather than faulty meters.
Given these assurances, I hope that the noble Lord, Lord Williams of Elvel, will agree that full confidence is there and will withdraw the amendment.
Lord Williams of Elvel: I am grateful to the noble Earl for what he has said. It certainly goes a long way to satisfying our concerns in moving these amendments. There has been, I am afraid, some confusion on the groupings. My list is different from the list of the noble Lord the Deputy Chairman of Committees, but no doubt that will be rectified in due course. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 36 and 37 not moved.]
Clause 5 agreed to.
Clauses 6 and 7 agreed to.
Clause 8 [Short title, commencement and extent]:
[Amendment No. 38 not moved.]
Clause 8 agreed to.
Schedules 1 to 3 agreed to.
In the Title:
On Question, Whether the Title to the Bill shall be agreed to?
Lord Renton: My noble friend was good enough to say at the start of our discussions on the Bill that he would consider a purpose clause. Probably it needs only to be a purpose subsection to Clause 1. I have already attempted to draft one which I intended to hand to my noble friend on Monday, but in doing so I find that it is not consistent with the Long Title to the Bill. I do not think that my purpose clause is wrong. I believe that the Long Title needs to be reconsidered and I ask the Minister if he will do so.
The Earl of Caithness: When I receive the proposal of my noble friend I shall look at a consequential amendment to the Title.
Title agreed to.
House resumed: Bill reported with amendments.
House adjourned at ten minutes before ten o'clock.