HL Deb 17 March 1988 vol 494 cc1319-48

House again in Committee on Clause 1.

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 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. 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 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 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 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 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 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 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.

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 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. 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 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 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 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 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 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 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.

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 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 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 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 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". 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 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 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 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 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 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 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 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 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 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 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.