Lords Sitting of 6 June 1989

Preamble
The House met at half-past two of the clock: THE LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Chichester.

The Lord Chancellor: Leave of Absence
The Lord Chancellor (Lord Mackay of Clashfern):My Lords, before the commencement of business, I take the opportunity to inform the House that I have accepted an Honorary Fellowship from the Royal College of Surgeons of Edinburgh. The diploma ceremony will take place in Edinburgh on Friday, 9th June. Accordingly, I trust that the House will agree to grant me leave of absence for Friday, 9th June.

ILO Conventions: Alleged UK Breaches
Lord McCarthy: My Lords, in the absence of my noble friend Lord Dean of Beswick, I have been requested and authorised to ask the Question standing in his name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether the International Labour Organisation, the United Nations committee responsible for employment matters, has held Her Majesty's Government to be in breach of normal conventions on eight counts, and if so, what they are doing about it.
The Earl of Dundee: My Lords, the United Kingdom reports at specified intervals on the conventions of the International Labour Organisation which it has ratified. Following these reports and other documentation such as criticisms from trade unions, the Committee of Experts has questioned aspects of the United Kingdom's application of various conventions. The United Kingdom Government will be responding to these points.
Lord McCarthy: My Lords, does the noble Earl agree that the Committee of Experts has done more than that? It has stated that the Government are in breach of eight specific conventions: on the GCHQ unionisation, the teachers' negotiations, sympathetic strikes, dismissals for breach of contract and a series of other issues. We are already behind Libya and South Africa. Unless the Government are prepared to do something about this we shall take our place with Chile, Haiti and Saudi Arabia.
The Earl of Dundee: My Lords, the noble Lord paints a rather pessimistic picture. The one matter that the ILO committee fully recognises is that these are complex legal issues. The Government of the United Kingdom are fully confident that we have in no way breached Convention No. 87, or indeed Convention No. 93, which is the other convention referred to.
Lord Molloy: My Lords, does the noble Earl agree that there is an extremely serious element to this Question; namely, that there are a number of communist and fascist type countries which would find nothing good to be said about the ILO? Does he also agree that, if a nation pretends to support the ILO and then cheats, that is almost as deplorable?
The Earl of Dundee: My Lords, I fully agree with the noble Lord that nations should not cheat or be seen to be cheating with regard to the ILO. Fortunately Her Majesty's Government are in a very strong position because our record on employment matters is extremely good. I remind the noble Lord of some of the Government's reforms on industrial relations and trade union law since 1979 which have contributed to the significant improvement in our country's economic performance and growth of jobs in recent years. The results are apparent in the immense improvement to our country's reputation overseas, not least with investors and potential investors.
Lord Molloy: My Lords, what do the Government intend to do about the lapses that have been reported? Do Her Majesty's Government intend to put these matters right?
The Earl of Dundee: My Lords, will the noble Lord repeat the report that he has just mentioned?
Lord Molloy: My Lords, the report indicates that there have been several indications where Her Majesty's Government have not supported the International Labour Organisation's rules on those eight counts. Now that they are aware that these lapses exist, will Her Majesty's Government be putting matters right to erase the almost bad name that we are building up for ourselves in the free world?
The Earl of Dundee: My Lords, as I said in my earlier remarks, Her Majesty's Government will be responding in detail in due course to the ILO.
Lord Bruce of Donington: When, my Lords?
The Earl of Dundee: My Lords, "when" is always a good word to interject. My understanding is that our response, in writing, will probably be timed for our next report on the convention concerned.
Lord Stoddart of Swindon: My Lords, the noble Earl referred to the Government's employment policy leading to a successful economic performance. Do a balance of payments deficit of £15 billion and interest rates of 14 per cent. denote success?
The Earl of Dundee: My Lords, I was referring to employment matters. I have given an indication of the overall and consistent success that we have had. The noble Lord may enjoy referring to some difficulties about which we all know. However, I have every confidence—and I am sure that the majority of your Lordships' House will share that confidence—that these matters will be solved before too long.
Lord Campbell of Alloway: My Lords, does the Minister agree that the breaches alleged are of provisions that are complex and technical and that there is no substantive derogation from the main provisions of the ILO Accord?
The Earl of Dundee: My Lords, I am always very happy indeed to have support from my noble friend. I thank him for backing my earlier remarks about the complex legal issues.
Lord McCarthy: My Lords, the noble Earl cannot get away with that, can he? The fact is that the Government made representations to the Committee of Experts, which turned the Government down. It has considered the Government's case and has turned them down. The matter will now be referred to the annual conference of the ILO. If the ILO turns the Government down, will they act?
The Earl of Dundee: My Lords, the International Labour Organisation's conference opens in Geneva tomorrow, Wednesday, 7th June. One of its committees is the committee on the application of conventions and recommendations. It discusses the experts' report and is likely to debate some of the eight criticisms. The United Kingdom will respond to all the criticisms in writing, as I said earlier, probably when we submit our next report on the applicable convention.

Advance Factories: Northern Region
2.43 p.m.
Lord Dormand of Easington Lord Dormand of Easington asked Her Majesty's Government:
What action is being taken to increase the number of advance factories in the northern region.
The Secretary of State for Trade and Industry (Lord Young of Graffham): My Lords, in the last financial year English Estates spent over £16 million in the northern region on the provision of industrial premises. A further substantial programme is planned for this year. But the Government cannot be the only provider of industrial premises. The strong demand for industrial space at rising rental levels should also encourage renewed private sector provision wherever possible in the assisted areas, thereby promoting the creation of a properly functioning property market.
Lord Dormand of Easington: My Lords, will the Secretary of State comment on the fact that when he answers the questions I ask—as I do quite frequently, as he is aware—on the northern region the information he provides is invariably different from that which is provided from the region itself? Is he aware that the Question I asked today is based on information I have received from the Northern Development Company and the Northern Regional Councils Association, organisations I know he holds in high regard? They are saying that there is a great
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need for further provision of advance factories. Will he bear in mind that the northern region still has by far the highest unemployment rate of mainland Britain?
Lord Young of Graffham: No, my Lords. The noble Lord, Lord Dormand of Easington, and I are discussing two sides of the same coin. I welcome the fact that there is increased demand for industrial accommodation in the North-East of England. It is a sign that industrial recovery is accelerating there, but if the Government were to be the only provider of industrial accommodation in the North-East the pace of that expansion would be dictated by the rate at which English Estates could build new industrial premises.
We have followed a policy over the last two years, as the industrial recovery has proceeded, for English Estates to retreat from those areas where demand is such that the private sector will come back to fill that demand. This year alone, 1988–89, we are seeing a substantial increase of some £16·2 million being spent by English Estates in the northern region, and this coming year the amount will be £19·3 million. I suspect that the demand for industrial accommodation is for tens of millions of pounds above that. That is something that the private sector should and will provide.
Lord Williams of Elvel: My Lords, is the noble Lord aware that the Centre for Local Economic Strategies in Manchester complains that the responsibility for providing factory space for incoming investors in the North is diffused among a number of bodies? What is the role of the DTI in co-ordinating that?
Lord Young of Graffham: My Lords, the DTI has no responsibility for co-ordinating the provision of factory accommodation in the private sector. I welcome the fact that a number of bodies provide industrial accommodation. The longer we see government as being the only provider of industrial accommodation the more we shall retard the development of the North-East or the northern region itself.
Lord Dormand of Easington: My Lords, is the Secretary of State aware that some of us find it very interesting that when there is credit to be claimed, the Government claim the credit for the northern region, but if anything is not quite right the Minister places the onus on something else, in this case the private sector? How much importance does the Secretary of State place on the quality of such buildings? Is he aware that the latest report on this matter, when locational and environmental factors are taken into account, shows that only 30 out of 239 individual premises are not felt to be of high quality?
Lord Young of Graffham: My Lords, I am always suspicious of such surveys because they invariably contain subjective definitions of high quality. Over the last 33 months I have seen the overall fall in unemployment being led by the fall in unemployment in the northern region. I am fully

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aware that general unemployment still remains high, but it is a vastly different picture today. What we have seen in parts of the North-East is a recovery making it more like the rest of the country. English Estates will continue to provide more factories in areas where the private sector will not normally go. That seems to the Government to be its proper function.
The Earl of Onslow: My Lords, with the choking up of the availability of employment, labour and factory space and the very high costs in the South of England, is not this the greatest opportunity for the North, where sites will be cheaper and labour more available to solve its obviously serious problems?
Lord Young of Graffham: My Lords, as we have seen over the last two or three years, property values rise in the southern part of our country. We have seen employment rise and costs escalate to a level at which employment has been moving steadily northwards. That is evidence of the market at work. Now as one travels north in our country one finds that the employment divisions which used to exist between the North and the South are steadily eroding. That is something that all in your Lordships' House should welcome.

Electricity: Cross-Channel Link
2.48 p.m.
Lord Campbell of Croy Lord Campbell of Croy asked Her Majesty's Government:
What arrangements are being made to increase the capacity of the electricity link between the United Kingdom and France.
The Parliamentary Under-Secretary of State Department of Energy (Baroness Hooper): My Lords, there are no present plans to increase the capacity of the cross-Channel link. It will be for the industry to decide whether it wishes to increase trading links with France.
Lord Campbell of Croy: My Lords, I am grateful to my noble friend for her reply. While no doubt this link has been most useful in helping at peak hours, can my noble friend confirm that the electricity received at this end has been cheap, bearing in mind that about 70 per cent. of the electricity generated in France comes from nuclear sources, much of it from PWR reactors?
Baroness Hooper: My Lords, I can confirm to my noble friend that electricity imported from France is competitive with that produced in large coal-fired power stations in the UK. That is in part due to the fact that it is an interruptible supply. However, the detailed pricing arrangements are commercially confidential to the utilities concerned. I emphasise that the link is used to supply electricity not only at peak times but at other times as well.
Lord Taylor of Gryfe: My Lords, is the Minister aware that with the opening of the Torness power
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station in Scotland the present power line capacity for exporting to England is inadequate? That prevents the Scottish electricity authorities exporting electricity as cheap as the French and it prevents the English consumer taking advantage of the Scottish enterprise.
Baroness Hooper: My Lords, that is not the same question as that on the Order Paper. However, I am aware that investigations are being carried out on routeing and any necessary reinforcement which may be required to upgrade the Scottish inter-connector to provide for a potential increase in capacity.
Lord Renton: My Lords, can my noble friend say how the amount of electricity supplied by France compares with the amount of electricity which Britain has supplied to France?
Baroness Hooper: My Lords, the balance is in favour of imports from France. In 1986–7 we exported 188 gigawatt hours.
Lord Williams of Elvel: My Lords, are the South and South-Eastern Electricity Boards negotiating with Electricité de France for a new link after privatisation?
Baroness Hooper: My Lords, the current contract between the CEGB and Electricité de France is due to expire at the end of this year. That contract is currently being renegotiated by the national grid division of the CEGB. I am unaware of other separate negotiations, but it is open to the industry to negotiate direct.
Lord De Freyne: My Lords, can my noble friend say how much it has cost this country to import electricity from France?
Baroness Hooper: My Lords, no, not without notice.

UK Productivity: Comparisons
2.53 p.m.
The Viscount of Oxfuird The Viscount of Oxfuird asked Her Majesty's Government:
How absolute levels of United Kingdom productivity compare with those in Japan and the Federal Republic of Germany.
Lord Young of Graffham: My Lords, the April 1989 Treasury economic progress report shows that output per hour worked in the UK economy in 1986 was about 50 per cent. higher than in Japan and about 5 per cent. lower than in Germany.
The Viscount of Oxfuird: My Lords, I thank my noble friend for that Answer which must please everyone in this country, in particular entrepreneurs. Can he advise how such a dramatic change has taken place? The debate instigated by my noble friend Lord Joseph last year on productivity and jobs indicated a differential of about 25 per cent. between the productivity of this country and West Germany.
Lord Young of Graffham: My Lords, there is no doubt that during the decades after the war the productivity of the United Kingdom was such that we were consistently bottom of the top G7 countries in the 1960s and 1970s. During the 1980s we have been top and we are catching up on many of the years of decline. If my noble friend were to ask me for the reason, I suspect that it may be some of the practices referred to by the noble Lord, Lord McCarthy, in the first Question this afternoon.
Lord Peston: My Lords, we are aware of the Treasury's latest figures. Of course, one possibility is that they are wrong. However, if we accept them, does the noble Lord have an explanation for the fact that we have an enormous balance of payments deficit, including an even larger balance of trade deficit, while the Germans and Japanese have a massive balance of payments surplus? Does the noble Lord or the Treasury have any explanation of how that is compatible with the alleged figures?
Lord Young of Graffham: My Lords, the noble Lord, Lord Peston, is a distinguished economist, and surely he knows that one cannot go around comparing apples with oranges. However, the noble Lord queries the Treasury's figures. It is OECD data which shows that if one takes the GDP per hour worked in the United Kingdom at 100, the figure in Japan is 67 and in Germany it is 105. They are OECD figures. If one takes the GDP per head of population in the United Kingdom at 100, then for Japan it is 106, and for Germany it is 110. We have a change of direction; the United Kingdom is catching up.
Baroness Seear: My Lords, I ask a genuine question to seek information. Are the figures relating to Japan based on the Japanese manufacturing industry or do they include the large number of small industry and craft-based workshops in Japan? In those one would expect productivity rates to be very low.
Lord Young of Graffham: My Lords, I am grateful to the noble Baroness. If one looks at the output per person employed in the manufacturing industry, isolating it to the manufacturing industries only, then during the 1960s the United Kingdom output per person increased by 3 per cent. per annum and that of Japan by 8·8 per cent. per annum. During the 1970s we were bottom of the growth list of the G7 countries. During the 1970s we were at 1·6 per cent., while Japan had fallen to 5·3 per cent. We continued to be at the bottom. During the 1980s we are at 5·2 per cent. while Japan has fallen to 3·1 per cent. Now we are top. We have a long way to go to climb back but we are doing so.
Lord Morris: My Lords, does my noble friend agree that his figures clearly demonstrate the remarkable success story because record productivity has grown in parallel with a record fall in unemployment?
Lord Young of Graffham: My Lords, during the past 33 months we have seen unemployment
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consistently fall in the United Kingdom. Today it stands at 6·5 per cent. Compared with the other major economies, in the European Community, with the exception of Germany, we are by far the lowest. Indeed, there may be a dispute about Germany's position.
Lord Peston: My Lords, I should like to return to my theme. I am well aware that people in the Treasury can do elementary arithmetic, and no doubt the figures are as they stand. However, the fact remains that before the noble Lord goes around trumpeting this success he must look at the whole picture and answer the question that I asked. Will he comment on the fact that the latest Treasury figures show that our productivity has ceased to grow?
Lord Young of Graffham: My Lords, the measure of productivity over the whole economy is always a difficult matter. I was asked for productivity in the manufacturing industry to be isolated. However, if one looks at the whole economy, which is a different and more difficult figure to measure, the United Kingdom stands at 2·5 per cent. growth during the 1980s. It is well ahead of that of the United States at 1·2 per cent.; of Germany at 1·8 per cent.; of France at 2 per cent.; of Italy at 2 per cent.; or of Canada at 1·4 per cent. However, I agree that it is beneath that of Japan which stands at 2·9 per cent. for the whole economy. At the end of the day the growth in productivity in this country is responsible for the massive increase in the number of jobs.
Baroness Seear: My Lords, does the Minister agree that the important point to make is that the growth rate can be expected to be higher when one starts from a very low base? Does he also agree that one may give the wrong impression if one takes productivity rates year by year and compares country with country? When you start from a low base it is far easier to have a high growth rate than if you start from a high base.
Lord Young of Graffham: My Lords, I do not agree with the noble Baroness's words "a very low base". Undeniably, the productivity is lower than that of Germany. We fell back during the decades after the war. However, it is not so different from that of France, although we are still beneath that figure. The point is that we are catching up. I notice that the Treasury paper refers to an entry made by Samuel Pepys in his diary on 13th February, 1665. He said:
"How despicably they speak of us for using so many hands more to do anything than they do—they closing a cable with 20, that we use 60 men upon".
This debate has been going on for at least 330 years. At the end of the day it is jobs that matter and we are demonstrating that our policy works.
Lord McCarthy: My Lords, does the noble Lord not agree that the only practice to which I referred was the practice of the Government in breaking conventions and not owning up? To that I now add the practice of blinding us with history.
Lord Young of Graffham: My Lords, I am not sure whether one calls the decade of the 1970s history. It is very vivid in the recollection of many of your Lordships.

Business
2.59 p.m.
Lord Denham: My Lords, at a convenient moment after 3.30 p.m. this afternoon, my noble friend Lord Glenarthur will, with the leave of the House, repeat a Statement that is to be made in another place on the events in China and the implications for Hong Kong.
It may be for the convenience of the House if I announce that the Report stage of the Water Bill will be adjourned at approximately 7.30 p.m. for approximately one hour and that during this adjournment the Committee stage of the Licensing (Amendment) Bill will be taken.

Vale of Glamorgan (Barry Harbour) Bill [H.L.]
Read a third time, and passed, and sent to the Commons.

Business of the House: Debates, 21st June
The Lord Privy Seal (Lord Belstead): My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the debates on the Motions in the names of the Baroness Ewart-Biggs and the Baroness Turner of Camden set down for 21st June shall each be limited to 2½ hours and that Standing Order 35 and paragraphs 10 to 13 of the Rules for the Conduct of Short Debates shall apply to each debate.—(Lord Belstead.)
On Question, Motion agreed to.

Water Bill
3 p.m.
Report received.
Clause 1 [The National Rivers Authority]:
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 1:
Page 2, line 11, at end insert—
("(1A) The functions assigned to the Authority shall include responsibility for the prevention and reduction of pollution in or arising from controlled waters in England and Wales (including coastal waters and adjacent relevant territorial waters) in accordance with the provisions of this Part and Part III below.").
The noble Lord said: My Lords, we return to the Water Bill after a very short gap which I hope has been enjoyable as well as profitable for your Lordships in all parts of the House. We return at once to what is recognised by everybody to be one of the most important issues facing this country; that
hall apply to
is, the question of water quality. I refer not so much to drinking water because that issue, if by no means resolved, was debated to some effect by your Lordships' Committee but raClause 1 [The National Rivers Authority]:
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 1:
Page 2, line 11, at end insert—
("(1A) The functions assigned to the Authority shall include rent to our beaches.
Your Lordships' Committee decided last month that it was appropriate to have on the face of the Bill a commitment that the Government have a timetable for adhering to European Community directives on the quality of drinking water. The purpose of today's amendment is to secure that the Government have an obligation to conform with any relevant directive of the European Community on the quality of water used for bathing and other forms of recreation. In introducing this amendment, I should have said that I am also speaking to Amendment No. 71 which covers the point to which I have just referred.
The Bill, as amended in Committee and following its passage through another place, still contains no clear statement of the responsibilities of the National Rivers Authority for the control of pollution. Such a general statement of its obligation should appear in Part I of the Bill. A general statement in respect of its recreational and environmental obligations does appear. It was the subject of considerable debate in Committee and no doubt will be the subject of further debate on Report. To balance that very proper general statement of environmental and recreational obligations there should be a general statement of the obligations of. The purpose of today's amendment is to secure that the Government have an obligation to conform with any relevant directive of the European Community on the quality of water used for bathing and other forms of recreation. In introducing this amendment, I should have said that I am also speaking to Amendment No. 71 which covers the point to which I have just referred.
The Bill, as amended in Committee and following its passage through another place, still contains no clear statement of the responsitract an incurable disease. The stench from those rivers is such that one cannot build anywhere near them. As I say, this is not an academic or legalistic point but a point of such seriousness that it deserves the same kind of consideration which the Bill properly gives to other environmental factors.
As the Bill stands it is almost impossible to say that the NRA has any clear and unambiguous duty to prevent and reduce pollution. I say "reduce pollution" deliberately because the situation in many of the waters for which the National Rivers Authority will be responsible is such that the reduction of pollution is absolutely essential. There is a curious and apparently ill-thought-out division of responsibility between the Secretary of State and the National Rivers Authority. The Secretary of State has responsibility for classifying rivers and setting water quality objectives but the National Rivers Authority produces the environmental codes and has all the responsibilities under Clause 8 of

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protecting and promoting the environment and recreation. What is never clear is a single point where the buck stops. That is what Amendment No. 1 provides. The amendment is also an essential precondition of Amendment No. 71 which requires that the National Rivers Authority shall have responsibility for,
"the maintenance and improvement in accordance with any relevant Directive of the European Community of the quality of waters used for bathing and other forms of recreation".
We know that there has been a letter from the European Environment Commissioner to the Government threatening to take action on some of our beaches. I have not seen the letter. I should be grateful if the Minister in replying could tell us what it contains. I understand that unless something drastic is done about beaches at Southport, Formby and Blackpool, action will be taken against the British Government. I should be grateful if the Minister could tell me whether that is the case and whether there are other beaches against which action is threatened by the European Community.
Many figures have been floating around in the past 36 hours about the quality of our beaches. There has been correspondence between my honourable friend Dr. Cunningham and the Minister for water in another place. I have had the pleasure of reading the letter from Mr. Howard to Dr. Cunningham. I do not believe that its tone is appropriate to be read in the civilised surroundings of your Lordships' House. Clearly, what Dr. Cunningham said at his press conference yesterday has touched the Government very much on the raw. They are aware that something drastic has to be done; even Mr. Howard recognises that towards the end of his extended vituperation.
We have evidence that the beaches of this country fail to reach the standards of the European directives. In some cases the figures are very good. For example, in Yorkshire only 5 per cent. of beaches fail to reach the European Community directive standard. That means in fact only one beach. However, in the North-West there are 27 beaches which have failed; and that means that 82 per cent. of beaches failed to reach the standard. The figures cover a whole range. Admittedly there are very few beaches concerned. The Thames Water Authority has two beaches and both have failed to reach the European Community directive standard.
The Minister of State for water yesterday took great pride in announcing this year's blue flag scheme for clean beaches. Let us be clear: clean beaches includes the cleanliness of the beach from litter, which is the responsibility of local authorities, as well as the cleanliness of the water. Therefore it is not a simple case of the responsibilities of the National Rivers Authority. The situation is that a very low proportion indeed of our beaches qualified for the European blue flag, and the director of the blue flag scheme has said that if the new standards which have been announced by the European Commission are imposed none of our beaches will qualify for the blue flag next year. Therefore there cannot be any doubt that there is much more work to be done on improving the quality of our river water and inhe 728
particular improving the quality of our bathing water.
I could go on at some length about the dispute on the use of outfalls into the sea for the disposal of raw sewage. The Government seem to think that provided there is a long outfall there is no real problem. Mr. Howard seems to think that unless water is so evidently disgusting that you would not want to swim in it, it is perfectly safe to swim in. I can only say that that is not the view of international experts on water pollution. They take the view that even with long outfalls the micro-organisms contained in raw sewage are damaging to health and that the significant proportion of our sewage disposal which takes place through outfalls to the sea ought not to take place. I believe that they are right and that the time will come when it will be universally recognised that disposal of raw sewage off our beaches is not an acceptable policy and not an acceptable health risk.
We have therefore a very serious problem whichever set of figures one takes. This Bill, although it is not intended for the purpose, with the establishment of the National Rivers Authority provides an opportunity for the Government, if they wish, to take their responsibilities seriously. It provides the Government with an opportunity to give the National Rivers Authority—the establishment of which has been welcomed on all sides of the House—a general responsibility for preventing and reducing pollution in our controlled waters. I urge the House to accept this amendment. I urge the Government to accept it. If necessary, I shall ask the House to approve the amendment, which would, together with Amendment No. 71, give real effect to that aim and real assurance to our people that our rivers and beaches are safe. We have no such assurance from the Bill as it stands. I beg to move.
3.15 p.m.
Lord Renton: My Lords, the noble Lord, Lord McIntosh, is inviting us to do something that we have already done. He is inviting us to put into the beginning of the Bill a responsibility—a very laudable responsibility—for the National Rivers Authority on the control of pollution which is set out very fully indeed in Part III of the Bill, and in particular in Chapter I of Part III, on page 111. Indeed, the noble Lord's own amendment refers to Part III and states that the National Rivers Authority shall perform the duties which arise under Part III. The amendment would be an unnecessary piece of repetition.
We can all rejoice that for the first time we are to have a National Rivers Authority in this country. We should also rejoice that certainly in 19½ pages of the Bill the duties of the authority and other duties in relation to pollution are set out in very great detail. Quite frankly, it would be an appalling excess of zeal, to put it as kindly as one can, if we accepted this amendment as well.
The noble Lord referred to Amendment No. 71, which is an amendment to Clause 8. I am a little surprised that we are being invited to consider that

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amendment in connection with Amendment No. 1 because it raises a somewhat different and more detailed point. Frankly, that is a point which I would rather leave to be dealt with by my noble friends on the Front Bench, either on this amendment or on Amendment No. 71 if it is taken at a later stage. However, although one always applauds zeal, this really is excessive.
The Minister of State, Department of the Environment (The Earl of Caithness): My Lords, I agree with the last part of what was said by my noble friend Lord Renton but I shall deal later with the first part of his comments. The noble Lord, Lord McIntosh, wanted to group Amendment No. 71 with Amendment No. 1. That is entirely his privilege and I am happy to deal with that grouping, but I agree with my noble friend that Amendment No. 71 is not consequential on Amendment No. 1.
The Government yield to no one in their commitment to controlling and reducing pollution in our rivers, estuaries and coastal waters. The evidence for that is before us and is irrefutable. It is there in this Bill, in the complete overhaul of pollution control machinery in the establishment of the NRA; and it is in Part III, in the complete and indeed dramatic extension of the legislation for controlling pollution. Throughout the Committee stage the party opposite could come forward with not one single proposal for major extension to those powers. The fact is that what is in the Bill in respect of pollution control is comprehensive and complete.
What then are we to make of these amendments? I shall deal with the amendment in respect of bathing waters in a moment, but let me deal first with the main amendment before us. This does two things. First, it singles out pollution for special mention as a function of the NRA. Secondly it enshrines controlling and reducing as the purpose to be pursued. The first is mistaken and the second unnecessary.
Let me deal first with the special mention of pollution control as an NRA function. The reason we should reject this is because it unbalances the overall design of the Bill and involves a complete misunderstanding of the nature of management of our water environment and the role of the NRA within it. The essence of the NRA is that we are concentrating within it the whole range of functions related to the water environment, which are inextricably linked. The fact is that one cannot separate water quality management from the management of water resources. Dilution is the essential factor linking the two, for the quality of our rivers abstractions is as important as discharges. Nor can one separate these matters from the management of drainage and flood prevention works.
e us. This does two things. First, it singles out pollution for special mention as a function of the NRA. Secondly it enshrines controlling and reducing as the purpose to be pursued. The first is mistaken and the second unnecessary.
Let me deal first withapproach. It is inconsistent with the philosophy of water environment management notej 730
use it unbalances the overall design of the Bill and involves a complete misunderstanding of the nature of management of our wat
Let me now turn to the second feature of the amendment, for it may be that the noble Lord, Lord McIntosh, is more concerned to insert in the Bill the commitment to prevention and reduction of pollution. If so, that is equally unnecessary for reasons which were considered at length in Committee. My noble friend Lord Renton has just reminded the House that your Lordships will know that all the powers on pollution control in Chapter I of Part III are deliberately and specifically geared to the maintenance and improvement of the quality of controlled waters, and that is inescapably to the reduction of pollution.
How does it achieve that? Clause 104 provides for the Secretary of State to set water quality objectives, but to do so for the purpose of maintaining and improving water quality. Clause 105 then requires the Secretary of State and the NRA to exercise all their powers and duties in the relevant chapter of the Bill so as to achieve those objectives so far as it is practicable to do so. So this pan of the Bill is a carefully constructed whole. It sets out the duty; namely, the maintenance and improvement of water quality. It makes clear how, through the quality objectives, that duty is to be given real substance and meaning. Finally it requires that all pollution control powers be used to achieve these. This is a complete and full framework, providing the critical linkages which have been absent in previous legislation. I suggest to the House that there also is nothing in this aspect of the amendment which is necessary or desirable.
Nor is there anything of substance in the second amendment which would add to Clause 8 a duty to promote the quality of bathing waters. The reason why is this is so simple and goes back to the points that I have already made. First, let me assure the noble Lord, Lord McIntosh of Haringey, that coastal waters are among the controlled waters for which objectives for the maintenance and improvement of water quality are to be set and for which all the powers in Chapter I of Part III of the Bill are to be applied. Inescapably, therefore, the NRA already has under the Bill a duty to promote the quality of bathing waters and of other waters and to do so for all the purposes, including recreation, to which those waters may be put. It goes without saying that in doing this we shall of course discharge our commitment under European Community directives.
From these detailed arguments let me turn to the wider canvas. It may be that the purpose of the amendment was simply to provide an occasion for us to debate pollution once more and to go over again matters not just from the Committee stage but from Second Reading. I must detain your Lordships a little to set the record straight on the quality of our rivers, estuaries and coastal waters, especially in view of the errors and distortions that the recent 36 hours, including some comment from the Labour Party, have brought forward on this issue. Perhaps I may emphasise some fundamental points.

731
The first concerns the actual state of our rivers and estuaries. These are not as good as any of us would like—of course they are not. But they never could be. They are of good and fair quality. Our rivers are among the cleanest of any in the European Community, with 95 per cent. in good or fair condition. But we want to improve them even further. And that is what much of this Bill is about.
e turn to the wider canvas. It may be that the purpose of the amendment was simply to provide an occasion for us to debate pollution once more and to go over again matters not just from the Committee stage but from Second Reading. I must detain your Lordships a little to set the record straight on the quality of our rivers, estuaries anAt this moment I wish to draw your Lordships' attention to the third report from the Environmental Committee of another place in the Session 1986–87 on the pollution of rivers and estuaries. In particular I draw attention to paragraph 27:
"There are a number of reasons why water authority effluents fall short of the present consent standards. The most immediate reason is because from the mid-1970s until the early '80s there was a steady drop in investment by the water authorities in sewage and sewage disposal".
Chart 1 on the opposite page provides a graphic illustration of the desperate and detrimental cut in investment that the Labour Government undertook during their term of office. The fact is that available evidence suggests that since 1985 any such decline has been halted. There is no sound evidence that overall over the past decade the quality of our rivers and estuaries has declined. They remain good. But of course we want to improve them further and that is what much of this Bill is about.
I turn now to our beaches and coastal waters. Every year our 403 coastal bathing waters are tested to assess the water quality in relation to Community standards. In 1988, 67 per cent. of our identified bathing waters met the mandatory coliform standards, which is a marked improvement upon recent years. When the European Commission publishes the results of the 1987 survey of Community bathing waters, we would expect to be in the middle of the European league. We must remember that all popular coastal resorts in the United Kingdom are identified, whereas some other member states have been criticised by the Commission for identifying only waters which are guaranteed to meet the directive's standards and not identifying any which are known to be dirty. Others have not reported their results. We are undoubtedly doing better than many of the member states in upgrading our bathing waters.
Although the Commission has raised a number of complaints in respect of the application of the directive to the United Kingdom, it has, as far as we are aware, been satisfied with the detailed responses that we have sent. And it is worth noting that the Commission is pursuing complaints against five other member states over the implementation of the directive. Our story here is not one of failure but of vigorous and sustained improvement.
I met the Commissioner this morning for a long session at the department. I told him that I would
732
chase up what the Commission is doing to bring other member states up to the standards that we have reached and to provide information on the standards we have reached. Unfortunately we cannot get a fair comparison at the moment as regards what other states are doing because of the reasons that I have already given. I said that this was an unfair situation where Britain is producing all the information that is required whereas many other states are not.
The noble Lord, Lord McIntosh of Haringey, touched on the point of long sea outfalls. I was very surprised that, without any substantiating evidence, he totally rubbished the recent report of the Royal Commission on Environmental Pollution. That Royal Commission is highly respected throughout the world and it said that a long sea outfall discharging sewage was the best environmental option. I believe the point that the noble Lord made should be rephrased in this way. A long sea outfall will always be necessary regardless of whether you have primary, secondary and/or tertiary treatment of a sewage works on the coast. The question is whether it is better to put down that outfall the screened sewage that occurs in some cases at the moment or whether we put down a considerable amount of acid which is used in the secondary treatment and which is very harmful to marine life. I know that the noble Lord, Lord Addington, will be aware, with his concern for the environment, that to put down chlorine or paracetic acid—which I believe is the other material used in cleansing sewage—is very detrimental to all forms of marine life.
Finally what of investment and resources? I remind the House that it was this Government who initiated and are carrying forward the enormous investment programme to restore the Mersey, which in its scale and significance must have few parallels anywhere in the world. And we have further announced a billion pound programme to overcome decades of neglect in our sewage treatment works. But it is not only in this respect that this Government have, by comparison with many of their predecessors, a proud record in this area. It shows itself quite as clearly in the area of legislation. It was, after all, this Government who between 1983 and 1987 implemented Part II of the Control of Pollution Act, enacted by a Labour Government in 1974, but their commitment to the environment then was such that they did not implement this important part of the Act.
In this Bill we now bring before the House perhaps the broadest and most substantial legislative measure for water pollution control ever undertaken. That is the background against which these amendments must be seen. I reiterate the points I made initially. These amendments are both unnecessary and undesirable. They are unnecessary because the Bill already ensures that control and reduction of pollution are among the functions of the authority for coastal waters as well as for the other controlled waters. They are unnecessary because it is the explicit duty of the Secretary of State and the NRA to use their powers for the purpose of improving water quality and only for that purpose. More than that, and for the first time, the Bill gives them the means to achieve it.

733
Finally, the amendment is undesirable because to single out in Clause 1 a specific function in isolation from all those other functions in the Bill to which control of water quality is inextricably linked is to undermine the essential integrated philosophy of water environment management developed over the past 20 years, of which the NRA is itself the culmination and to which the Bill before the House is a major contribution.
3.30 p.m.
Lord McIntosh of Haringey: My Lords, there are two strands to the Minister's reply, both of which seem to me to be unsatisfactory. The first is what one might kindly call architectural in the sense that it is concerned with the structure of the Bill. Any attempt to amend the Bill is criticised on architectural grounds rather than on the grounds of the substance of the amendments. I make no apology for seeking to bring into Part I of the Bill a general duty to control, prevent and reduce pollution in our waters. Such a general duty for recreational and environmental matters is contained in Part I. It is not contained in Clause 1, but the noble Lord, Lord Renton, seemed to think that it is adequate to have many specific duties in Part III. That is not the case for environmental duties and it should not be the case for the control of pollution.
The trouble with the Bill as it is constructed—I do not deny that there are complex linkages throughout the Bill; that is very clear—is that it does not set out in one place and in unambiguous terms the duty which ought to be the overriding duty of the National Rivers Authority to control and prevent pollution of our waters.
Lord Renton: My Lords, if the noble Lord will look at Clause 105 he will see that it does just that.
Lord McIntosh of Haringey: My Lords, Clause 105 and the surrounding clauses contain a number of references to the duties of the National Rivers Authority. That is absolutely true. But the analogy I have made is with the environmental and recreational duties, which are treated as general duties of the National Rivers Authority and of the Secretary of State and the Director General of Water Services. We are seeking to secure that the control of pollution is recognised as being of equal importance to those important recreational and environmental duties and is not relegated to Part III. That is the purpose of this part of our argument.
In the second part of his argument the Minister seeks by historical references to show that the Government's record on pollution is good. Let us start from common ground. We all agree that a great deal has still to be done. The Minister and Mr. Howard have said that and I am sure that my honourable friend would agree. We all agree that in past years no government, Labour or Conservative, paid as much attention to environmental matters as is paid now. In recent years the climate of opinion has changed dramatically. But it is not enough to pick out a period of years from the previous Labour Government or from the early years of the present
734
government to advance the argument that enough is being done now and that the Government's plans are satisfactory for our purpose.
Perhaps I may give a few examples of that, and I could give many more. The Minister repeated the argument made by Mr. Howard that the Labour Government had reduced expenditure on investment in sewerage. It is certainly true that between 1974 and 1979—the time when the oil crisis had caused economic problems in all developed countries of the world—investment in sewerage declined. However, the low level reached in 1979 was maintained and not increased by the Conservative Government for all but the past two years. In other words, for eight years of Conservative Government investment continued at the lowest level reached by the Labour Government. Until two years ago the average investment by the Labour Government was higher than the average investment by the Conservative Government.
The Earl of Caithness: My Lords, I must correct the noble Lord on that point. If he turns to the chart of the Select Committee's report he will quite clearly see that in 1980–81 the steep and almost straight decline in investment from 1974 onwards turns around and goes back up.
Lord McIntosh of Haringey: My Lords, I do not have the figures in front of me. If I have quoted them incorrectly I apologise. The fact remains that the average level of investment in the first five years—and almost certainly for longer than that—of the Conservative Government was lower than the average level of investment under the Labour Government. I do not think that the noble Earl will deny that side of it.
In order to show, or in order to purport to show, that our river quality is good the Minister said that 95 per cent. of our rivers are in good or fair condition. In writing to my honourable friend, Mr. Howard did not say that. He said that 95 per cent. of river length is in a good or fair condition, which is not the same thing at all. Of course a high proportion of river length upstream of residential or industrial development is of good or fair quality. That must be the case. The fact of the matter is that downstream, where large numbers of people live and where there is a large amount of industrial development, our rivers are simply not good enough. That is clear.
The Minister chose to refer to the mandatory coliform standard, one of the many standards controlled by the European Community directive. Two can play at that game. The Minister failed to tell us about pesticide residues in drinking water in the Thames Water Authority area. For Simazine, of the samples taken 100 per cent. failed; for Atrazine, 75 per cent. of the samples failed; and for Polycyclic aromatic hydrocarbons, to which reference was made in Committee, 25 per cent. of the samples failed.
The Minister referred to long sea outfalls. I agree that there is no simple solution to this problem. I was referring to the disposal of raw sewage. It is certainly true that if one then insists on disposing of treated sewage, there are unfortunate side effects in

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relation to acids getting out into the sea. That does not affect the fundamental point that is being made. This country is the only one in Europe which disposes of raw sewage on a significant scale into the sea. A high proportion of it goes through short sea outfalls which are undeniably damaging to health and to bathing water quality. Even the long sea outfalls have undesirable side effects.
Both on the architectural side and on the historical side the Government's analysis is partial and their conclusions are unjustified. The conclusion that we must reach from this debate is that the Government are not prepared to be committed to an overriding obligation to control pollution in controlled waters. That is the inescapable conclusion to which the House must come. It is on that basis that I seek the opinion of the House on the amendment.
3.40 p.m.
On Question, Whether the said amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 80; Not-Contents, 132.

DIVISION NO 1

CONTENTS

Addington, L.

Leatherland, L.

Airedale, L.

Lloyd of Hampstead, L.

Amherst, E.

Lockwood, B.

Ampthill, L.

Longford, E.

Ardwick, L.

Lovell-Davis, L.

Birk, B.

McIntosh of Haringey, L.

Blackstone, B.

McNair, L.

Blease, L.

Molloy, L.

Bonham-Carter, L.

Mountevans, L.

Bottomley, L.

Mulley, L.

Briginshaw, L.

Nicol, B.

Brooks of Tremorfa, L.

Ogmore, L.

Bruce of Donington, L.

Parry, L.

Burton of Coventry, B.

Peston, L.

Callaghan of Cardiff, L.

Phillips, B.

Campbell of Eskan, L.

Ponsonby of Shulbrede, L.[Teller.]

Carmichael of Kelvingrove, L.

Ritchie of Dundee, L.

Cledwyn of Penrhos, L.

Rochester, L.

Cocks of Hartcliffe, L.

Ross of Newport, L.

David, B.

Sainsbury, L.

Davies of Penrhys, L.

Saint Brides, L.

Dormand of Easington, L.

Scanion, L.

Elwyn-Jones, L.

Seear, B.

Ewart-Biggs, B.

Sefton of Garston, L.

Fisher of Rednal, B.

Serota, B.

Gallacher, L.

Shepherd, L.

Galpern, L.

Soper, L.

Gladwyn, L.

Stallard, L.

Graham of Edmonton, L. [Teller.]

Stoddart of Swindon, L.

Strabolgi, L.

Gregson, L.

Taylor of Blackburn, L.

Grimond, L.

Taylor of Mansfield, L.

Hanworth, V.

Underhill, L.

Harris of Greenwich, L.

Wallace of Coslany, L.

Hughes, L.

Whaddon, L.

Jeger, B.

White, B.

John-Mackie, L.

Williams of Elvel, L.

Kagan, L.

Willis, L.

Kearton, L.

Winchilsea and Nottingham, E.

Kennet, L.

Kilbracken, L.

Winstanley, L.

NOT-CONTENTS

Abinger, L.

Allerton, L.

Alexander of Tunis, E.

Annaly, L.

Allenby of Megiddo, V.

Arran, E.

736

Balfour, E.

Joseph, L.

Bellwin, L.

Kaberry of Adel, L.

Belstead, L.

Killearn, L.

Birdwood, L.

Kinloss, Ly.

Blatch, B.

Kinnoull, E.

Blyth, L.

Lauderdale, E.

Bolton, L.

Layton, L.

Borthwick, L.

Long, V.

Boyd-Carpenter, L.

McFadzean, L.

Brougham and Vaux, L.

Mackay of Clashfern, L.

Bruce-Gardyne, L.

Macleod of Borve, B.

Caccia, L.

Manton, L.

Caithness, E.

Marley, L.

Campbell of Alloway, L.

Masham of Ilton, B.

Campbell of Croy, L.

Massereene and Ferrard, V.

Carnegy of Lour, B.

Maude of Stratford-upon-Avon, L.

Carnock, L.

Carr of Hadley, L.

Merrivale, L.

Clinton, L.

Mersey, V.

Constantine of Stanmore, L.

Middleton, L.

Cottesloe, L.

Monteagle of Brandon, L.

Cranbrook, E.

Morris, L.

Crickhowell, L.

Moyne, L.

Darcy (de Knayth), B.

Munster, E.

Davidson, V. [Teller.]

Norrie, L.

Denham, L. [Teller.]

Nugent of Guildford, L.

Derwent, L.

Onslow, E.

Dilhorne, V.

Orkney, E.

Dundee, E.

Orr-Ewing, L.

Effingham, E.

Oxfuird, V.

Elibank, L.

Pender, L.

Elles, B.

Porritt, L.

Erroll of Hale, L.

Radnor, E.

Faithfull, B.

Reilly, L.

Fanshawe of Richmond, L.

Renton, L.

Ferrers, E.

Rippon of Hexham, L.

Foley, L.

Rugby, L.

Forbes, L.

Russell of Liverpool, L.

Fortescue, E.

Saltoun of Abernethy, Ly.

Fraser of Carmyllie, L.

Sanderson of Bowden, L.

Fraser of Kilmorack, L.

Seebohm, L.

Gainford, L.

Selkirk, E.

Gardner of Parkes, B.

Sharpies, B.

Geddes, L.

Shaughnessy, L.

Gisborough, L.

Skelmersdale, L.

Greenway, L.

Somers, L.

Grimston of Westbury, L.

Stanley of Alderley, L.

Grimthorpe, L.

Stodart of Leaston, L.

Hailsham of Saint Marylebone, L.

Strathclyde, L.

Strathspey, L.

Halsbury, E.

Sudeley, L.

Hardinge of Penshurst, L.

Terrington, L.

Harmar-Nicholls, L.

Teviot, L.

Harvington, L.

Thomas of Gwydir, L.

Havers, L.

Thurlow, L.

Henley, L.

Trafford, L.

Hesketh, L.

Tranmire, L.

Hives, L.

Trefgarne, L.

Holderness, L.

Trumpington, B.

Hooper, B.

Vaux of Harrowden, L.

Hunter of Newington, L.

Waldegrave, E.

Hylton-Foster, B.

Whitelaw, V.

Ironside, L.

Wynford, L.

Johnston of Rockport, L.

Young of Graffham, L.

Resolved in the negative, and amendment disagreed to accordingly.
3.47 p.m.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 2:
Page 2, line 11, at end insert—
("(1A) In respect of any of the functions assigned or transferred to it, the authority may not subcontract any such function to any person, except in accordance with regulations made by the Secretary of State under section (regulations on contracting out of functions) below.").
The noble Lord said: My Lords, in moving Amendment No. 2 I should like to speak also to

737
Amendment No. 21. In Committee we discussed the issue of what came to be known as the poacher and the game keeper; in other words, the issue of whether the National Rivers Authority could properly and effectively exercise its function if it had to subcontract some of the measurement activities and some of the research activities in particular which it has to undertake in order to control the activities of the water and sewerage undertakings to those very same water and sewerage undertakings.
We argued by way of amendments in Committee that it was not possible for the National Rivers Authority to do the job which it will have to do with the full independence which it will need if it is to be subject to the necessity to subcontract those very important activities to the bodies which it is responsible for controlling. A good deal of debate took place with the assistance of the noble Lord, Lord Crickhowell, the chairman of the National Rivers Authority Advisory Committee, about those parts of the National River Authority functions which could properly be subcontracted and those which could not.
The argument put forward by the Government was that certainly at the outset it would not be possible for the National Rivers Authority to do without the research functions in particular—and the computing functions were also mentioned—of the regional water authorities and therefore of the successor water and sewerage undertakings.
A number of years were bandied about, but I believe that when the noble Lord, Lord Hesketh, replied the ultimate figure was that for the first two years at any rate it would be necessary to sub-contract those functions to those bodies already doing the work because it would be impossible, or at least uneconomic and inefficient, to set up facilities to do the work completely separate from the new water and sewerage undertakings. The noble Lord, Lord Crickhowell, said that the advisory committee felt that it should have access to the computers maintained by the plcs. He used the phrase "for a time". I do not know what he meant by "for a time", but he had a valid point when he said that, as he did when he referred to the plcs' laboratories.
We are not bringing back the original amendment, which sought to change at a stroke the responsibility for carrying out those laboratory and computing facilities. We are seeing that it does not continue for ever and that we do not have, for any longer than is strictly necessary or that the Secretary of State considers strictly necessary, the NRA being forced to sub-contract the work to those whom it has the responsibility of controlling.
The dangers of such sub-contracting were fairly obvious. I do not believe that they were seriously questioned in Committee. In that supervisory and regulatory work, samples have to be taken in accordance with proper scientific procedures. They may well be used in evidence in court if the NRA pursues its regulatory function to the ultimate degree of taking water and sewerage undertakers to court for any defects which it finds. The difficulty with
738
that is that the people who take the sample may well be called upon to give evidence. In effect, they will be called upon to give evidence against their own employer.
Perhaps they can erect Chinese Walls in their own minds. They will certainly act as honourably as they possibly can. I do not deny that they will do an honest job of representing the results of their scientific activities; but the fact remains that it is an unfair burden to place upon them, because inevitably their position as officers of the plcs (the water and sewerage undertakers) will be weakened if a significant part of their time is taken up by attacking their bosses on behalf of the NRA.
There is potential for a conflict of interest. That is why we have regulations. It is not fair to place that conflict of interests upon the heads of individual employees of the water and sewerage undertakings. The right thing to do is to resolve that conflict of interest as soon as possible by giving the NRA responsibility for carrying out its own scientific and sampling inquiries and computing activities.
We accept that there needs to be an introductory period. It is for that reason that the amendments are phrased as they are. The second amendment is a new clause after Clause 3. It specifies the regulations. The Secretary of State will have the power under the new clause to specify what functions shall be sub-contracted, because they need to be sub-contracted, and that,
"the transitional period shall be two years, or such other period as the Secretary of State may by Order specify".
That does not give an opportunity for the NRA or the water and sewerage undertakings to be forced into the absurd position of having to cease sub-contracting before it is economically sensible to do so. However, it says that there must be a time, which must be determined by the Secretary of State by order—in other words, by Parliament—when that dangerous and damaging mixing of the roles of poacher and gamekeeper comes to an end.
Our amendments answer the criticisms which were made of previous amendments in Committee. They are designed to do so, but they maintain the principle of separating the role of the poacher from that of the gamekeeper while yet retaining all possibilities for the NRA and the water and sewerage undertakings to continue with the existing arrangements while it is technically necessary for them to do so.
I hope the Government will feel, as I do, that this is a proper reaction to the debate which took place in Committee, and a proper matter on which they could advise the House, even if the wording of the amendment is not exactly right, that the principle behind it is a sound one. I believe it to be so. I beg to move.
Lord Addington: My Lords, I support the amendment. It is a sensible measure. It will give the NRA time in which to get its house in order. There will then be no mixing of the poacher and gamekeeper principle. The NRA should be independent in all its functions if it is to have the maximum effect. I therefore recommend that the amendment be seriously considered.
Lord Renton: My Lords, I take a completely contrary view. I think that it would be an obstacle to progress and achievement on the part of the NRA if we were to accept Amendments Nos. 2 and 21. We are building great hopes on what may be done by the NRA—the first body of its kind that we have had for all our rivers. It is given specific responsibilities under the Bill. They are clearly set out and I shall refer to them in a moment.
In order to discharge those responsibilities, it must either have a huge technical and practical operative staff of its own, so that it does everything by direct labour, or it must be free to employ various companies and agencies in order to do the work that it has to do. I shall give some examples by referring to Clause 8(4) where it says:
"Without prejudice to its other duties … it shall be the duty of the Authority, to such extent as it considers desirable, generally to promote"—
and we all want this—
"the conservation and enhancement of the natural beauty and amenity of inland waters and of land associated with such waters".
Under that heading it may wish to do some tree planting. It may wish to have some awful old tip or refuse dump cleared away. Is it to do it by direct labour itself or can it employ somebody else to do it? Surely it should be free. We then come to,
"the conservation of flora and fauna which are dependent on an aquatic environment".
That would be essentially technical work. There are experts in the laboratories of universities. I think particularly of the marine biology laboratory at Plymouth, where I twice went on a course, which would be most valuable in helping it; but that used to be (and I suppose that it still is) an independent agency and not a government one. In any event, there is a tendency for us to treat the various government agencies, like the National Environmental Research Council, as bodies which do things under contract. If these amendments were accepted the NERC would not be able to act unless regulations made by the Secretary of State had in some way enabled it to do so.
As we discussed on the last amendment, under Part III of the Bill and particularly Clause 105 the National Rivers Authority will have general duties as well as specific responsibilities with regard to pollution. In that connection we may find that the work required to be done is not such that we could expect the National Rivers Authority to keep a large staff all over the country in order to do it. It is bound to have to employ local people who would be able to carry out the work.
Perhaps I may go back to recreational facilities. Clause 8(4)(c) states that the authority is to promote,
"the use of such waters and land for recreational purposes".
That may sometimes mean—as, for example, on the River Nene at Peterborough—building a dam across a river and flooding meadows which are not useful for any other purpose so as to create a lake for recreational purposes. Is the authority to have the manual staff and all the equipment for doing that itself by direct labour? No, quite frankly, this is misconceived.
In any event, one wonders exactly what is implied in the expression "subcontract". We have
740
contractors and subcontractors, but here it is subcontractors only who are singled out. Amendment No. 21 refers in subsection (2) to the transitional period. It may be here that my own ignorance leads me to a misunderstanding but I do not know what the transitional period referred to is. It may be mentioned elsewhere in the Bill but at the moment I cannot find it.
Are we really to have the operations of the National Rivers Authority (from which we expect so much) wait upon the bureaucratic making of regulations covering all kinds of subcontracting of its functions? Even then, only those functions relating to computing facilities and information technology, sampling and laboratory analysis, are to be considered as subcontracting possibilities. No, I hope that noble Lords who had thought of supporting the amendment will on reflection realise that it is simply not on.
4 p.m.
Lord Ross of Newport: My Lords, I feel that the noble Lord, Lord Renton, is making a mountain out of a molehill. The wording here may not be entirely accurate. We are trying to make sure that the National Rivers Authority will not contract out to the water plcs the job of testing their own sewerage and the pollution of their own rivers after a certain period of time.
It is clearly understood that the water authorities have the expertise to carry out these functions although they are usually done by the local authorities and by their environmental health officers. Yes, the water in my own area has been tested by the local authority, as I am sure is the case in the area where the noble Lord, Lord Renton, lives.
Many private operators could do these things—universities and other establishments. All we are saying is that after a reasonable period of time the NRA should be obliged by regulation to put the functions out elsewhere, but not the plcs. If noble Lords want an example, for goodness' sake one has only to look at the City of London when we talk about Chinese walls that do not work. I believe the amendment to be eminently suitable. It should be taken on board even if the wording is not quite correct.
Lord Trafford: My Lords, despite the passionate intervention of the noble Lord, Lord Ross, it is clear that the case which my noble friend Lord Renton made against the amendment stands. It is impractical and, if I may use the word, somewhat stupid. It must be absolutely evident that the National Rivers Authority will have to do this, not only for the transitional period mentioned in the amendment.
There is one other point which my noble friend did not raise but which is pertinent. It is very curious that those who support the amendment, particularly the noble Lord, Lord Addington, make a plea for the independence of the NRA. They go on to suggest—the noble Lord, Lord McIntosh, talked about poachers and gamekeepers, a point which I think everybody accepts—that the amendment would require that independence be compromised

741
through constant referral to regulations by the Secretary of State. That is something I should have thought we would want an independent National Rivers Authority to avoid.
So, on both theoretical and practical grounds, the wording of the amendment seems to be misconceived. The noble Lord, Lord Ross, raised the point that we do not want the water authorities testing themselves. I should have thought, from the general tenor of the amendment, that that was one of the precise reasons why the National Rivers Authority was established in the first place. It is to see that this sort of thing does not happen and that it carries out its functions properly. Therefore, although one has complete sympathy with the remarks made by the noble Lord, the amendment as written cannot apply, both for the practical reasons which my noble friend raised and for the theoretical reasons in regard to the authority's independence which I have raised.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Hesketh): My Lords, these amendments go a little further than the amendments put down by the noble Lord, Lord McIntosh, at Committee stage in that they now recognise the necessity, in the short term, for the NRA to be able to contract out certain work, including computing and laboratory services to the plcs if it is to be able to carry out its functions properly. They thus provide for a transitional period of two years during which such contracts would be permissible, and to that extent are to be welcomed.
However, they go on to propose that no computing or laboratory work should be able to be subcontracted beyond that period. Even though the amendments make provision for that period to be extended, I am afraid I must part company with the noble Lord. Although I am determined as he is, if I may say so, that the NRA's independence should not be compromised, I do not see that contracting out of some parts of the kind of work mentioned in the amendments poses any threat whatever to that independence. My noble friend Lord Crickhowell has also made it clear during the earlier debate that he and the rest of the NRA Advisory Committee fully share that view.
In one region the NRAAC has proposed that analysis of water samples should be carried out by the plc laboratory for considerably longer than two years, as being the most cost-effective of the available alternatives. In most other regions it is not intended that there should be long-term reliance on the plcs for routine bulk analysis, but even so there is likely to be specialist work such as virological analysis which cannot be done in-house by the NRA except at disproportionate cost.
These amendments would forbid such work being contracted out to any other person, which seems to me to be rather unrealistic and to run counter to the Government's view that the NRA should be encouraged to subcontract as much of its operational work as possible. But I would also oppose these amendments even if they only debarred contracting out to the plcs because, like my noble friend Lord
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Crickhowell, I simply do not accept the view that this would pose any substantial threat to the NRA's independence. It would merely limit its ability to secure the best value for money.
During the debate in Committee some stress was laid on the position of a plc employee who might have to give evidence against his employer. Again, today, stress was laid on it by the noble Lord, Lord McIntosh. I acknowledge the concerns expressed on this side of the House as well as by noble Lords opposite, but let us look at the actual situation. A water sample would come in to a laboratory, completely unmarked as to its origin—one of dozens. The laboratory technicians would put it through a routine series of tests and processes and then enter the results, probably in a computer file, for more or less immediate onward transmission to the National Rivers Authority. If it turned out that the sample was outside the permissible pollution limits and that that was the fault of the very company which employed the laboratory technicians in question, then in one sense perhaps that would be embarrassing. But how does it affect the independence of the NRA?
Having been alerted to it by the laboratory, the NRA will then ensure that further samples from the waters concerned are dealt with by another laboratory—normally one of its own laboratories in another region altogether, once these are in operation—and certainly not by a laboratory owned by the offending plc. Meanwhile, in order to ensure that the plc is not indulging in manipulation of sample results, there will of course be continuous random cross-checks using third party laboratories. I have dwelt on this point at some length because it is an important one and because I would like to put it in its true perspective, as I see it.
My noble friend Lord Nugent of Guildford, who is sadly not here today, in his speech in Committee urged the Government to stipulate that when the National Rivers Authority wants to contract out to the plcs it must obtain ministerial approval. The laboratory and computing contracts will in fact be approved by the Secretary of State as part of the schemes of transfer under Schedule 2, and my department is in constant contact with the NRAAC to ensure that the contracts proposed do in fact satisfy the future NRA's vital needs for security and independence.
The Government and the NRAAC have both given this problem very careful consideration and are unable to agree with the views of those who see dangers in either the laboratory or the computing work being contracted out to the plcs or, as my noble friend Lord Renton pointed out, to any other competent party at any time in the future. As my noble friend Lord Nugent so rightly pointed out in Committee, needless duplication of facilities is a practice which could cost a very great deal of money, and consumers will not thank us if we oblige the NRA to spend money in this or any other way. I respectfully suggest therefore that these are matters not for legislation but for the management of the NRA, who will clearly be extremely sensitive to the need to be sure that the service it gets on these functions is entirely reliable and untainted. Tying

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its hands in the way suggested in these amendments seems wrong both in principle and as a matter of practice. That is why I urge your Lordships to resist these amendments.
Lord McIntosh of Haringey: My Lords, I wish to say straight away that I acknowledge the force of the points made by the noble Lord, Lord Renton. In seeking to accommodate the very reasonable concerns expressed by the noble Lord, Lord Crickhowell, and others to secure that sensible arrangements were possible in the opening years of the life of the National Rivers Authority we have gone too far. We have sought in the text of these amendments to do something that we did not intend to do in our minds, which was to prohibit all subcontracting, whether to the plcs or to anybody else. To that extent, the amendments are not only defective but are gravely defective. I shall not ask the House to divide on them.
I apologise partly for having taken up some of the time of the House with defective amendments. I say partly because the response of the Minister is of great interest to us. I listened carefully to what he said in his argument against any restriction of subcontracting to the plcs. He will understand that, whatever the amendment states, I do not agree with that.
I listened in particular to what the Minister said about the safeguards which will be incorporated in the schemes of transfer under Schedule 2. That seems to me to offer some hope that we might reach an acceptable compromise between now and a later stage of the Bill which would protect the distinction between poacher and gamekeeper. That is, after all, at the heart of the establishment of the National Rivers Authority. It is a gamekeeper authority called into being because the water and sewerage undertakings are to be privatised and are to be removed from other controls. To that extent, I believe we are all in agreement that there must be this separation of powers and responsibilities.
However, I do not think I go along with the noble Lord, Lord Trafford, in what he called his theoretical argument. I shall have to think about that and read his speech with some care between now and a later stage. However, it is clear that what we want to do, which is to maintain the independence of the National Rivers Authority from the plcs that it is supposed to be controlling, is not achieved by these amendments. As I said, we may have to look at other ways of achieving what we want between now and Third Reading. However, in the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Earl of Arran: My Lords, I beg to move that further consideration on Report now be adjourned.
Moved, accordingly, and, on Question, Motion agreed to.

Events in China: Implications for Hong Kong
4.15 p.m.
The Minister of State, Foreign and Commonwealth Office (Lord Glenarthur): My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable and learned friend the Foreign and Commonwealth Secretary on events in China and their implications for Hong Kong. The Statement is as follows:
"With permission, Mr Speaker, I should like to make a statement about events in China in recent weeks.
"During the last few days units of the Chinese Army have been engaged in the violent suppression of peaceful and popular demonstrations in the streets of Peking. The indiscriminate and unprovoked use of military force has caused the death or injury of thousands of students and other innocent civilians. I am sure that all Members of the House will share the worldwide sense of horror and join in the international condemnation of the slaughter of innocent people.
"I summoned the Chinese chargé d'affaires yesterday. I told him that the British Government and people were united in condemning the merciless treatment of peaceful demonstrators, and deeply deplored the use of force to suppress the democratic aspirations of the Chinese people. I told him that the British Government looked to the Chinese authorities to fulfil their obligations to Hong Kong in the joint declaration.
"I reminded him of the responsibilities of the Chinese Government to ensure the safety of British citizens and Hong Kong residents. I expressed concern at the maltreatment of British journalists, particularly Michael Fathers of the Independent and Johnathan Mirsky of the Observer. We have since seen disturbing reports of the ill-treatment of Kate Adie of the BBC.
"Our ambassador in Peking and his staff have been working round the clock to ensure the safety of British citizens and Hong Kong residents in Peking and as far as possible in other parts of China. The embassy has advised against travel to any part of China. They have also advised those who are concerned about their safety and have no pressing need to remain in China to leave immediately.
"Since the Cultural Revolution there has been a substantial improvement in relations between the United Kingdom and the People's Republic of China as the Chinese Government have sought to broaden their contacts with the international community and to introduce economic and other reforms. Friends of China in this House and around the world must share the hope that sane and balanced government will be swiftly and securely restored in Peking. In present circumstances, however, there can be no question of continuing normal business with the Chinese authorities.

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"Her Majesty's Government have therefore decided on the following action. All scheduled ministerial exchanges between Britain and China have been suspended. The visit of the Chinese Minister of Justice, who was due to arrive here tomorrow, has been cancelled. My right honourable friend the Minister of Agriculture, Fisheries and Food has also cancelled his forthcoming visit to China.
"The proposed visit of Their Royal Highnesses The Prince and Princess of Wales to China in November clearly cannot take place so long as those responsible for the atrocities over the past weekend remain in control of the Chinese Government. All high-level military contacts with China have been suspended. All arms sales to China have been banned. At the same time the Government are examining how we can respond to any requests for humanitarian assistance from non-governmental organisations.
"The whole House will share the Government's special concern about the implications for Hong Kong of what has been happening in Peking. The Government understand and share the grave concern felt by the people of Hong Kong. We have all been deeply impressed by the strength and restraint of their response to what has happened.
"Everything that has been accomplished in Hong Kong has been achieved in the unique context of the geography and history of the territory, and by the talent and enterprise of its people. All that underlines the extent to which the future prosperity of Hong Kong must depend upon a successful and secure partnership with the Government and people of China. That objective is enshrined in the commitments made by the British Government and the Government of China under the joint declaration. Those commitments were reaffirmed by the chargé d'affaires when he called on me yesterday. But it is self-evident that if we are to have confidence in the commitment of the Chinese Government to their obligations, there must be a stable and responsible government in Peking. The British Government will stand by its obligations under the joint declaration. The Government and the House look to the Government of the People's Republic of China to live up to that international commitment as well.
"The events in Peking must affect the prospects and procedure for implementation of the joint declaration. Consultations about the second draft of the Basic Law for Hong Kong have been suspended. It is also difficult to see how our own contacts with the Chinese Government about the future of Hong Kong can continue in present circumstances.
"Meanwhile, I can assure the House that we shall be conducting a thorough examination of the programme for advancing and consolidating effective democracy in Hong Kong. We are considering urgently what further steps can be taken to enshrine and protect Hong Kong's freedoms and way of life after 1997.
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"All of us in this House are acutely conscious of the wish of the people of Hong Kong to secure some form of assurance for themselves and their families. I know that this has been one of the issues studied by the Select Committee on Foreign Affairs. Some commentators have recommended that a right of abode in this country should be given to the 3¼ million people in Hong Kong who hold British nationality. We share the desire of the House to do everything we can to enhance the security of the people of Hong Kong. On that basis, the Government are looking urgently and sympathetically at the scope for flexibility. But the House will appreciate the reason why we could not easily contemplate a massive new immigration commitment which could—and the possibility cannot be disregarded—more than double the ethnic minority population of the United Kingdom. Our overriding aim must be to do everything possible to secure the continuation of those conditions in Hong Kong that have led to its outstanding success over the last century. I hope the House will send a message to the people of Hong Kong, reaffirming our commitment to their secure, stable and prosperous future.
"The Chinese people are seeking from their communist leadership rights and liberties which are taken for granted in the free world. The slaughter in Peking is a tragic setback to the campaign for democracy but I hope this House will send a united message. China cannot ignore the lessons which are being learnt elsewhere in the world. Economic prosperity and personal liberty go hand in hand. People will not forever tolerate government by repression".
My Lords, that concludes the Statement.
4.24 p.m.
Lord Cledwyn of Penrhos: My Lords, we thank the noble Lord for repeating the Statement. As the Statement says, we have all been profoundly shocked by the deplorable and distressing events in Tiananmen Square over the weekend. We condemn such action without reservation. It would be a mistake at this stage to attempt to make any judgment or prediction as to the consequences of recent developments in China. We and other countries must wait to see how matters develop and whether the present government or some other administration emerges from the present chaos. This seems to me to be the only practical and sensible stance at this moment.
We note the advice that the Government are giving to British nationals in China. Can the Minister say what assistance is being offered to them if that may be required? In particular, there is concern about the large number of British students in China. Perhaps the noble Lord could confirm the situation with respect to the students in the light of recent press reports about the dangers to their safety. We also note the remarks in the Statement about British journalists. I should like to pay a tribute to them for their courage in dangerous circumstances and also for the quality of their reporting.

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We have noted that President Bush has announced an embargo on the sale of arms and we support the Government's decision to ban arms sales to China as well as the other measures listed in the Statement.
As the Foreign Secretary has said, we are all very conscious of the implications of these events for Hong Kong and for the Sino-British joint declaration. We can understand the natural apprehensions of the people in Hong Kong about their future. I am sure that the Government are studying those implications very carefully indeed. We support the short-term measures which the Government propose in relation to the second draft Basic Law and the undertaking to conduct a thorough examination and programme for advancing democracy in Hong Kong. Can the noble Lord say who will be conducting that examination? Will it involve the Legislative Council as well as the Hong Kong Government and Her Majesty's Government?
We note what the Foreign Secretary says about extending the right of abode and the Government's intention to look at the scope for flexibility. That is a significant part of the Statement and we shall need to return to it in detail in due course.
Finally, we support the Government's message to China. We want to see a resolution of the current crisis there without further bloodshed and we hope that Her Majesty's Government will do everything in their power to facilitate that.
Lord Bonham-Carter: My Lords, I should like to associate myself with what the noble Lord, Lord Cledwyn, has said in response to the Statement repeated by the noble Lord and which was made by his right honourable and learned friend in the House of Commons. We on these Benches should also like to associate ourselves with all those who have condemned the savage killings which have taken place and the tragic state of affairs that we are witnessing.
I should like also to associate myself with what the noble Lord, Lord Cledwyn, said about the courage of British journalists and BBC and other television reporters and the admirable nature of the reports which we have received from them, at great risk to themselves.
As has been said, the situation in China is extremely difficult to read. I think that everyone would agree that it is most unwise to come quickly to conclusions which have to be qualified by the ignorance in which we find ourselves. However, it appears to be clear that there are divisions within the party, and there may be divisions within the army. Therefore all may not necesarily be lost and the sacrifices which have been made may not have been in vain. But it is obviously right for the Government, as the Statement indicates, to take into account the possibility that the situation may not improve. Therefore consideration has to be given to the measures which would have to be taken in those circumstances. I should like to associate myself with the measures which have already been taken and which are set forth in the Statement.
I suppose that we should be considering whether there is any possibility of devising means which
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would preserve some of the position of Hong Kong in the future, if necessary by means of international safeguards, since it would be in the interests of China for that position to be maintained. I should like to agree with the noble Lord, Lord Cledwyn, on the need to introduce democratic elections within Hong Kong as soon as possible.
The most urgent question which arises is the need to give reassurances to the inhabitants of Hong Kong as to their future. While recognising the difficulty of opening the gates to all, once again perhaps I may suggest to the Government that this is a case in which the problem can only be dealt with by international action; namely, by gathering other states together to express a willingness to take in quotas of inhabitants of Hong Kong. We should take the lead by expanding and liberalising our attitude to those people, as some of us have been urging in this House these last few months.
I am most grateful to have had this Statement. As the noble Lord, Lord Cledwyn, said, we shall want to consider it in more detail when the situation becomes clearer.
4.30 p.m.
Lord Glenarthur: My Lords, perhaps I may first respond to the noble Lords, Lord Cledwyn of Penrhos and Lord Bonham-Carter, and thank them both for their comments in support of the Statement that I have repeated and, indeed, the steps contained within it. I am grateful for that support. Like the noble Lord, Lord Cledwyn, I believe that, at what amounts to a fairly early point in this tragic tale, it is difficult, and would be a mistake, to make judgments about what is likely to happen in the future or to try to predict a scene which changes more or less by the minute.
However, perhaps I may try to give some reassurance to the noble Lord, Lord Cledwyn, about assistance that is being provided. I realise that the House will be concerned for the safety of British citizens in China and of British students in China to whom the noble Lord particularly referred. The embassy has put great efforts into establishing contact with all British nationals and Hong Kong people in Peking. There have been no difficulties involving British citizens or Hong Kong people so far, apart from the manhandling by Chinese security personnel of British journalists to which I referred. I explained that our very firm advice is that all travel to China should be postponed until the situation becomes clearer.
So far as concerns evacuation, we have already advised British nationals and Hong Kong people in those areas where there has been trouble and who are concerned for their safety to take the opportunity to leave by commercial means. Arrangements have been made for special flights to evacuate British and Hong Kong people. We shall keep under review the need to charter further aircraft to help ease the pressure that exists on ordinary commercial flights.
So far as concerns students, a special British Airways flight is due to arrive in Peking at 2300 hours local time and leave at midnight local time, today, 6th June, for Hong Kong. A convoy with

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some 120 British and Commonwealth students on board has been dispatched to the airport to catch that plane.
There are about 860 British subjects in China, nearly 500 of whom are in Peking and Shanghai. We do not know how many Hong Kong people there are in China because they rarely register with the British embassy.
I certainly agree with both noble Lords that the reporting that we have all seen on the BBC and in the papers has been absolutely first-class. I too join with those who praise the bravery of those journalists who have undertaken that reporting.
So far as concerns further consideration of the position of Hong Kong, I note what the noble Lord, Lord Bonham-Carter, suggests about an international mechanism to look at the process for taking Hong Kong forward in the light of recent developments. I believe that there are difficulties in that respect because, irrespective of what has happened over the last few days, both sides are committed to the joint declaration and to how that should be taken forward.
So far as concerns the right of abode here or anywhere else—another point raised by the noble Lord, Lord Bonham-Carter—we all sympathise deeply with the people of Hong Kong at this particularly worrying time and understand their anxiety to secure some form of ultimate assurance for themselves and their families. So far as concerns the establishment of some sort of wider international mechanism to take those people, that is an interesting proposition, but it nevertheless poses problems. We shall have to consider that matter, as we consider other matters, during a period of careful and sympathetic consideration as to whether anything can be done to meet those concerns.
So far as concerns the review of the Basic Law and other aspects which the noble Lord, Lord Cledwyn, raised, these are matters that we shall have to look at in the light of the circumstances that prevail. Naturally, we shall need to consult the governor—who has postponed his visit to this country but may nevertheless be able to come in the not too distant future—before any mechanism can be established. But I assure the noble Lord that the point that he has made will be fully taken on board.
Lord Wyatt of Weeford: My Lords, perhaps I may thank the noble Lord for his welcome indication that there will now be greater flexibility in granting passports with the right of abode to Hong Kong citizens. However, will he bear in mind that it is quite absurd to suppose that 3·2 million people would come here? They want those passports with the right of abode as an insurance against the Chinese turning nasty. Is the noble Lord aware that the possession of those passports will be a great bar to the Chinese turning nasty and that they may never be used at all? They are only an insurance policy. It is not an opening of the flood gates to mass immigration here.
Lord Glenarthur: My Lords, the noble Lord, Lord Wyatt of Weeford, has made that point on a number
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of occasions and I am well aware of it. As I have said to him in the past, and while not failing to grasp for one moment the significance of what has happened in recent days, it is difficult to contemplate legislation on the basis that it would never be used. That is the point that I hope the noble Lord will understand. I think that my right honourable friend's Statement is quite clear as to the views which will be taken and have been taken over successive Parliaments of the immigration policies that have been pursued and the significance of the fact that the proposal would more than double the ethnic minority in this country. Nevertheless, as I have said, we shall have to consider in the light of the circumstances that prevail whether or not something else can be done to meet the concerns of the Hong Kong people. I hope that the noble Lord will take that assurance as it is meant.
Lord Walston: My Lords, perhaps I may first thank the noble Lord for repeating the strong and forthright Statement of his right honourable and learned friend; it is good to listen to it. Perhaps I may also support the plea of the noble Lord, Lord Wyatt of Weeford, concerning the right of abode in this country. There is a great deal of force in what he says. I am quite sure that the granting of the right of abode would have a significant effect upon the way that the Chinese will treat the Chinese residents of Hong Kong.
At the risk of perhaps speaking unduly frankly, I cannot help feeling that the statement that:
"We share the desire of the House to do everything we can to enhance the security of the people of Hong Kong",
verges on the hypocritical. They are not doing "everything we can". To do "everything we can" would be to grant the right of abode. The Statement would perhaps be more accurate if it were to say that we share the desire to do quite a lot of things that we can, but not all of them. I urge upon the noble Lord the arguments of both the noble Lords, Lord Wyatt and Lord Bonham-Carter, to look seriously and urgently at the possibility of making some serious concession in that direction.
I should like to ask the Minister one rather small question which he may or may not be able to answer. I do not know whether he or other noble Lords watched breakfast television on the BBC this morning in which there was a short interview with a Chinese student from Hong Kong who had serious complaints about the failure of the British embassy in Peking to help her when she appealed to it for help. I am well aware of the enormous burden that must be placed on the embassy and its staff, and I am sure that they are responding admirably. However, it is disturbing when somebody from Hong Kong comes on television in this country and says that she met with far less help than she had hoped for when she was in dire difficulties. Perhaps the noble Lord could take a look at that matter if, as I suspect is the case, he does not know about it already.
Lord Glenarthur: My Lords, on the first point which the noble Lord raised, I do not think that I can add to what I have already said in answer to the noble Lord, Lord Wyatt of Weeford. As is made

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plain in the Statement, the granting of right of abode to all those whom the noble Lord wishes to see with that right of abode means more than doubling the ethnic minority population of the United Kingdom. As he will be aware, there has been an expression of view by successive governments on immigration matters which encompasses that wish which the noble Lords, Lord Walston and Lord Wyatt of Weeford, have just expounded. There is a very real practical difficulty involved which I do not think anyone minimises. It is important to see whether or not we can find other means of reassurance for the Hong Kong people, the plight of whom under present circumstances I certainly appreciate.
At the same time, it is extremely important to bear in mind the need to secure the future of Hong Kong as the thoroughly outstanding place that it has been over the years, and which we sincerely hope we can bring about in the future, post-1997.
The noble Lord, Lord Walston, mentioned somebody claiming to have been turned away by the embassy in Peking. Perhaps I may reassure the noble Lord that that is not in fact the case. There was no truth in that report or in what was said. The individual concerned, Mabel Chan, who is a Hong Kong TV reporter, was not told that the embassy could not accept her. She was advised to stay in her hotel until the situation on the streets improved slightly, and other British people staying in the same hotel were given the same advice; Mabel Chan and other Hong Kong journalists would be able to make their way safely to the airport and to other places of safety once the immediate threat had lifted.
Lord MacLehose of Beoch: My Lords, I should like to thank the Minister for the excellent statement, for the horror that he has expressed about events in China, for his sympathy for the people of Hong Kong, and for his detailed account of the action which the Government have taken.
With the rapidly changing events, the exact details of which we do not know at present, I am sure that he is absolutely right to have held fast to the very detailed international agreement, the whole sense of which is to ensure that what has happened in China, what has happened in the past and what is happening today, does not happen in Hong Kong. It is very wise to have acted in that way and not to have followed the advice which some have given, in dismay, to tear up that excellent agreement.
With regard to the concern that I have expressed in your Lordships' House before, and which the noble Lord, Lord Wyatt, has expressed today, about reassuring the Hong Kong people about their future, about nationality or other arrangements in the United Kingdom, I ask the Minister to reconsider whether a home of last resort is not a rather different proposition from the issuing of British Nationality to 3½ million people. The circumstances in which that would arise would be quite different and I think would be better understood in this country.
Having said that, I realise that this is an issue which will have to be discussed on another occasion and as events unfold. Meanwhile, I should like to congratulate the Minister and thank him for his Statement.
4.45 p.m.
Lord Glenarthur: My Lords, I am grateful to the noble Lord, Lord MacLehose, for those comments, and particularly for his support of the main issue, which is that tearing up the agreement would really be disastrous. Whatever the circumstances, it is much better to do all that we can to build upon what has been achieved, which has been so widely acclaimed in the past. That does not lead me to underestimate the difficulties in taking matters forward.
So far as the question of reassurance to the people living in Hong Kong is concerned and the idea of a home of last resort, which is very much picking up the theme of the noble Lord, Lord Bonham-Carter, of course I take that point. The noble Lord will not be surprised if I point out to him the difficulties that such a proposition brings forward, but nevertheless these and other issues will have to form part of our consideration over the coming weeks.
The Earl of Onslow: My Lords, I should like to ask one question, and also to thank my noble friend for something. First, does the Minister not recall, when Amin was particularly brutal, that ultimately we had to take British passport-holders from East Africa? Surely that is a parallel to the home of last resort. Surely that is the precedent. It would be much better to admit them now rather than when everything has gone totally wrong. Let us hope that matters will not go totally wrong, but if there were to be large numbers of people floating about the China Sea clutching worthless British passports we should have to take them in anyway. Is it not better to do that before rather than after it becomes inevitable, because then one gets the reputation for being statesmanlike?
Secondly, I should like to thank his office for being so kind and helpful with regard to my daughter. She has now sent me a telegram that she is safe and well in Xian.
Lord Glenarthur: My Lords, I am glad to hear from my noble friend that his daughter has reported that she is safe and well. I am glad that we were able to help over that.
So far as comparison with other events are concerned, whether it be Amin or anybody else, it is easy to draw those sort of comparisons but the fact is that the figures that we are talking about are quite colossal. While not wishing to develop the theme in too great a detail because it is really impossible to do so at present, all I can say to my noble friend is that he must be aware of the fact that some might not find it as easy to accept those large numbers as he might be. Nevertheless, as I have said, we shall look at everything and see what can be done.
Lord Molloy: My Lords, will the Minister not agree that the free world will now know the grave concern that this nation has for the people of Hong Kong? That being so, ought we not to hasten to pursue all the measures that are required to make Hong Kong a member of the comity of free nations so that democracy can be introduced there? I am sure that the Hong Kong people and the free world will

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appreciate that, and it will be one of the best things we could do to safeguard Hong Kong, particularly in regard to future relationships with China.
Lord Glenarthur: My Lords, so far as the introduction of a greater degree of democracy into Hong Kong is concerned, over recent months we have been trying to introduce representative government in Hong Kong at a pace which commands the widest possible support in that territory. Clearly opinion in Hong Kong is now evolving. We shall need to respond to that. A number of suggestions have been made. Under the present circumstances we could not ignore a clear call from the community there for a faster pace of development than that which has hitherto been envisaged.
Lord Elwyn-Jones: My Lords, in addition to the actions that the Government have outlined, which we on this side of the House fully support, has consideration been given to the involvement of the United Nations in this matter? What has happened in China is a flagrant and outrageous breach, not of ordinary basic human rights of protest but the right to live. The turning of tanks and guns against students in peaceful protest has outraged the conscience of the world, I venture to think.
China is a member of the United Nations; I am not sure that it is not a member of the Security Council. Accordingly, is it not imperative now that instead of the deafening silence from the United Nations, we should enlist and seek the involvement of the UN itself in this grave current crisis in world affairs? That is what it is.
Lord Glenarthur: My Lords, I certainly agree with all that the noble and learned Lord says about the conscience of the world being outraged by what has been seen. I can tell him that a Statement was issued on 5th June on behalf of the United Nations Secretary-General which I shall certainly read out if that would be the noble and learned Lord's wish.
The Statement states:
"The Secretary-General is greatly saddened that it was felt necessary to resort to force in Beijing over the weekend and that, as a result, many civilian lives were lost. The Secretary-General is most mindful of the Charter's requirement that the United Nations should abstain from intervention in regard to matters that are essentially within the domestic jurisdiction of states. He very much hopes, however, that utmost restraint will be exercised in the difficult situation that prevails".
I believe that that is the answer to the noble and learned Lord, although I understand the force of the point that he raises: that normally the Security Council addresses itself only to conflicts between states which might lead to a threat to international peace and stability.
Lord Geddes: My Lords, I warmly welcome and fully endorse the remarks by my right honourable and learned friend in another place as repeated by my noble friend this afternoon.
The word that comes to my mind, as indeed it came to the mind of the Governor of Hong Kong on Sunday, is horror at the appalling performance by
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the troops of the People's Republic of China last Saturday and Sunday and subsequently.
The point on which I wish to dwell extremely briefly is the very positive comment that my noble friend repeated in the Statement—I hope that I have his words correctly—of there being scope for flexibility regarding the right of abode of BDTC and BN(O) Hong Kong citizens. Several comments have been made by noble Lords this afternoon regarding right of abode. I am not trying to go on to too fine a point of law. However, I am aware that Mr. John Swaine of Amalco, in evidence to the Foreign Affairs Committee in Hong Kong, put forward the proposal that holders of those passports should have the right of multiple entry into the United Kingdom, thereby giving them the opportunity to acquire the residential qualification for full British citizenship.
Indeed, my noble friend (in col. 880 of Hansard) on 23rd March stated—and this is perhaps significant in this context:
"By far the most common basis for granting British citizenship is that the people concerned are already resident in Britain and have met the residence requirements set out by law".
Is this perhaps an area where—again if I have his words correctly—there is scope for flexibility regarding right of abode? It is of enormous importance to the citizens of Hong Kong to give them, in particular at this time, this lifeline on which to cling.
Lord Glenarthur: My Lords, yes. I note the views of my noble friend on that. I can tell him that his memory of the words used in the Statement is correct. We shall look urgently and sympathetically at the scope of flexibility. I am quite sure that the question of multiple entry is a matter that can form part of that examination.
Lord Morris: My Lords, I thank my noble friend for repeating the Statement. Is there any truth in reports that there have been attempts to block broadcasts by external services of the BBC—that is the World Service, and in the vernacular—by the Chinese authorities? Is my noble friend aware that on my numerous visits to the People's Republic of China these broadcasts count as a critically important window to the outside world? Will my noble friend do everything that he possibly can to ensure that these broadcasts are heard as audibly as possible?
Lord Glenarthur: My Lords, there were earlier reports that there had been some jamming. I believe that these have not been validated. I can also tell my noble friend that the external services of the BBC have increased the amount of broadcasting in Mandarin that is taking place at the moment.
Lord Parry: My Lords, before the House leaves this very important Statement about this awful international event, is the Minister able to give us a little more information about a very important aspect of the Statement which talked about the Government's intention to see how they could co-operate with humanitarian agencies in relieving the immediate pressures? Will he accept that quite often in these situations it is what one is able to do

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immediately and practically that achieves the general aim more quickly than the policies that are sometimes outlined?
Lord Glenarthur: My Lords, I am afraid that I cannot give the noble Lord chapter and verse on precisely where we stand. That is obviously a most important matter. We shall be considering ways of trying to meet the concern that he raises.
Lord Fanshawe of Richmond: My Lords, will my noble friend again consider the point made by the noble and learned Lord, Lord Elwyn-Jones, about the United Nations? This is not just an internal matter that is taking place in Peking. There is a fall-out in a wider field. We have seen events taking place in Tibet in the past six months. This could also fall out in a major way on the position of Hong Kong which has been indicated by previous questions put to my noble friend this afternoon. I should be grateful if he could consult with his right honourable friend the Secretary of State to see whether or not further measures can be taken to follow up the point made by the noble and learned Lord, Lord Elwyn-Jones.
Lord Glenarthur: My Lords, I certainly shall do that. As I said, the Security Council normally addresses itself only to conflicts between states. Of course it is a fact that China is a permanent member of the Security Council and could exercise her veto against any attempt by that body to criticise her action. However, action in the United Nations human rights machinery is another matter. We shall certainly be considering that with our European Community colleagues.

Water Bill
4.58 p.m.
Consideration of amendments on Report resumed on Clause 1.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 3:
Page 2, line 15, at end insert ("and shall include persons representative of—

(i) conservation and environmental organisations;

(ii) recreational and sports organisations;

(iii) consumers; and

(iv) local authorities").

The noble Lord said: My Lords, perhaps I may help the House by making a brief reference to page 2. Clause 1 sets out the composition and some of the functions of the National Rivers Authority. The House is well aware that the National Rivers Authority is crucial and important. We are inviting the Minister to say something helpful about how important it is. Subsection (2) states:
"The Authority shall consist of not less than eight nor more than fifteen members of whom—

(a) two shall be appointed by the Minister; and

(b) the others shall be appointed by the Secretary of State".

We understand the significance of that.
This amendment returns to the issues which were raised on Amendments Nos. 5 and 7 at the Committee stage. At that stage the Opposition moved an amendment to establish a different representational structure for the National Rivers Authority. I remind the House that at that stage two objections were raised to the amendment. The first was that it would enable direct appointments to be made to the NRA, and that would slightly enlarge the size of the NRA from a maximum of 15 to a maximum of 18 persons. The noble Lord, Lord Renton, who is very assiduous in these matters said on 2nd May at col. 70 of the Official Report that it would be a possible alternative structure for appointees, but he voiced doubts about a body to which representatives were appointed directly by other organisations.
The amendment seeks to meet the detailed objections that were raised. We want to include persons representative of conservation and environmental organisations, recreational and sports organisations, consumers and local authorities. All those appointments would be made by the Secretary of State. We ask that he will be required to include persons representative of such groups; that is, suggested to him by or appointed by him from among the conservation groups, recreational and sports organisations, consumers and local authorities.
The purpose of the amendment is to seek a statement from the Government that they intend to have a proper range of persons on the National Rivers Authority board. The Government may point out that it is their intention to appoint from environmental interests and recreational groups anyway. But the Minister and his advisers will have noted from what has been said so far that it is not clear that there is an intention that the voice of the consumer and local authorities be heard on the board of the National Rivers Authority.
I am sure that the Minister will be pleased that we are mindful of the helpful attitude that the Government have displayed over representation on the regional rivers, fisheries and flood defence committees and that they have some independent standing within the NRA. The joint membership of such bodies will be incompatible with such a role. I hope that the Government will go further than they have to date in confirming their intention to ensure that the NRA reflects the main areas of interest and concern, even if the persons appointed to it are not direct representatives of any constituent interest. I am well aware that the Minister is likely to jib at what he might say would be reserved places on a body of this kind in the gift and the fiefdom of the interests that we have listed.
We want the Minister to tell us that there is a clear intention that the bodies, the groups or the areas of interest that we have specified are among those that he intends to see represented on the NRA. I beg to move.
The Earl of Balfour: My Lords, I am concerned about this amendment. I feel that the National Rivers Authority's fundamental principle is to deal with water quality objectives and control of pollution. The conservation and environmental

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organisations and the recreational and sports facilities are surely already fully covered under Clause 8. I do not believe that we should unduly strengthen the powers of that important Clause 8 in dealing with the environmental and recreational duties. Equally I must query the expression "consumers". Consumers of what? Except in Chapter IV of Part III under Clause 140, which deals with salmon and freshwater fisheries, I do not think that the National Rivers Authority has anything to do with consumers in that sense of the word. Consumers of water are dealt with by the water undertakers. The local authorities are already very much involved in everyday matters, but I believe that this important body, the National Rivers Authority, must have people on it who are experienced in water quality and control of pollution more than anything else. It will be only a small body. That is why I cannot support the amendment.
Lord Addington: My Lords, I should like to support the amendment for the simple reason that the four groups mentioned on the Marshalled List are directly concerned in what the NRA is doing: that is, ensuring water quality. The conservation and environmental organisations surely should have at least a representative on this body. I hope that there will be more than one. The recreation and sports organisations have a direct role to play. I suggest that in a Bill dealing with the privatisation of water some provision should be made for the consumers of water to have some form of representation either from a consumer body or from some other body.
The local authorities will be involved in every single aspect of providing a water authority for the people by whom they are elected. I suggest too that they deserve to be represented. I give my support to the amendment.
The Earl of Caithness: My Lords, we have made it clear on a number of previous occasions that our intention will be to appoint to the NRA board members with knowledge relevant to the functions of the NRA. Last week, my right honourable friend the Secretary of State announced the names of 12 people who will in due course be appointed to the NRA board under the chairmanship of my noble friend Lord Crickhowell. I am sure that your Lordships will accept that we have in these people brought together a team with a wide variety of experience who will be able to speak authoritatively on the important issues with which the NRA will be concerned.
However, this amendment would impose a statutory requirement on the Secretary of State to appoint members representing specific interests. Such a requirement would lead to members feeling mandated to represent a particular interest which is something we feel strongly should be avoided.
For that reason I disagree with what the noble Lord, Lord Addington, has said. Your Lordships will be aware that our aim is to have an NRA board where all members take a broader interest than any specific expertise or background that may have led to their appointment. I am confident, and I am
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sure your Lordships will join me in sharing this confidence, that the people we have now selected will successfully carry forward the NRA's tasks in the months ahead.
Lord Graham of Edmonton: My Lords, I am grateful to the Minister for indicating that the 12 members of the board have been named. Unfortunately I have missed the appointments. Can the noble Earl tell us whether there are 12 men or a mixture of men and women? I do not doubt their integrity or their ability to do the job for which they have been appointed, but it would be helpful to me later to study their backgrounds. Clearly there will be a biographical line or two about all of them.
There is a fundamental difference here. The Minister fell into what I would call a trap. We are not asking that these people will represent, but that they will be representative of. There is a distinction. I can understand why the Minister jibbed on a previous occasion when it was suggested that these people should represent the views of their respective bodies. That is why we have changed this slightly to give more flexibility. I listened carefully to what the noble Earl, Lord Balfour, said. There is a clear difference of philosophy between what he said and what we are suggesting. He was man enough to say that he disagreed with our approach completely. In his view the only qualification there should be is that the board should be capable of managing water control and that they should know something about water and its qualities.
I imagine that there is not a person in the land who could not claim to know something about water and its qualities. It is a question of degree and giving confidence to the people of the land. I am certain that the Minister and his colleagues will be satisfied that the newly appointed embryo members of the National Rivers Authority will be competent businessmen and businesswomen who will all have a background of some kind. Collectively they may be capable of saying that they represent the views of these people. But I do not think it is helpful to consumers to say that someone who is seen to be specially interested and experienced in one subject can represent the views of consumers in general. The noble Baroness, Lady Oppenheim-Barnes, has spoken with great authority because she is the chairman of the Consumers' Council. In their wisdom, this and previous governments have believed that the voice of the "consumer" should be heard in the land. To dismiss local authorities as having a special role to play by not giving them a voice and by saying that they have much on their plate shows a difference in attitudes.
Can the Minister say a little more about the appointees? It would be helpful to me before I conclude my suggestions.
The Earl of Caithness: My Lords, with the leave of the House, the noble Lord will find a copy of the press release in the Library. The Secretary of State has said that the following people will be appointed. Dr. John Bowman, who is secretary to the Natural Environment Research Council. Peter Brandt, who was a merchant banker. Peter Coverdale, who has enormous experience of land drainage work. Lady

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Digby, who has been a valuable member of the Wessex Water Authority. Professor Ronald Edwards, who is professor of applied biology at the University of Wales Institute of Science and Technology and a member of the Welsh Water Authority. Sir Hugh Fish, who has been chairman of the Natural Environment Research Council since 1985. David Kinnersley, who is a former chief executive of North West Water Authority and from 1970 to 1973 was director of the Association of Rivers Authorities. The noble Lord, Lord Mason, Lord Graham may have met on previous occasions. He is well known in your Lordships' House. He is a particularly good sportsman and was a well-known Labour Party spokesman on agriculture, fisheries and food. Dennis Mitchell, who is chairman of the Regional Fisheries Advisory Committee and Environmental Panel for the South West Water Authority. Mrs. Karen Morgan, who is managing director of Marine Logic. John Norris, who is also well experienced in flood defence and land drainage in the Anglian Water Authority since 1971. John Wheatley was director of the Central Sports Council from 1983 to 1988.
Noble Lords will see a wide range of interests covering all the functions of the NRA. I am sure that we shall have every confidence in those people to take forward the valuable work of the NRA.
Lord Graham of Edmonton: My Lords, I listened carefully and tried to pick holes in what the Minister said. But when he came to the name of "Fish" representing water interests I gave up. Obviously, Sir Hugh Fish has a great contribution to make.
The Minister has been helpful. I am sure that the interests which I sought to be represented on the committee will, on close analysis, be seen to be fairly faithfully represented by those men and women. I am glad that the appointees are men and women. I also detected a good geographical spread of representatives around the country. It is important that outside the basic opposition or support for the privatisation of water people have confidence that such powerful committees are guided by men and women capable of drawing on their experience. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
5.15 p.m.
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 4:
After Clause 1, insert the following new clause: ("Regional Divisions of Authority
.—(1) it shall be the duty of the Authority—

(a) to establish and maintain regional divisions of the Authority for the different regions of England and Wales;

(b) to consult the regional division for any region as to any proposals of the Authority relating generally to the manner in which the Authority's functions in that division are to be carried out;

(c) to consider any representations made to it by the division for any region (whether in response to consultation under paragraph (b) above or otherwise) as to the manner in which the Authority's functions are carried out in that region; and

(d) subject to the overall policy and financial control of the Authority to delegate to the division its functions as they relate to that region.

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(2) The duty to establish and maintain regional divisions imposed by subsection (1) above is a duty—

(a) to establish and maintain a regional division consisting of not less than six nor more than ten members for each area which the authority considers it appropriate for the time being to regard as a region of England and Wales for the purposes of this section; and

(b) to ensure that the persons appointed to each such division include persons—

(i) representative of local authorities situated in whole or part within each said region; and

(ii) who appear to the Authority to have an interest in matters likely to be affected by the manner in which the Authority's functions are carried out in the region in question and are persons who have experience of and have shown capacity in some matter relevant to the functions of the Authority.

(c) to ensure that the persons appointed in accordance with paragraph (b) above are not members of the Authority.").

The noble Lord said: My Lords, this new clause seeks to redefine the concept of the regional divisions of the authority. The amendment returns to the issues which were raised in Amendment No. 41 tabled in Committee. In the light of a document produced by Ministers at the last moment, my noble friend Lord McIntosh declined to move it at that stage. It was from the NRA advisory committee covering a number of its functions. The amendment is not identical to Amendment No. 41 but sets out a less-ambitious structure for local representation.
Its purpose will be apparent. The Government have argued that the NRA will be a relatively decentralised body operating through divisions corresponding with the existing water authority regions. It has established a structure of advisory committees to correspond with these regions. They will work with the NRA and provide it with valuable advice from outside interests as to the carrying out of its functions.
In Committee the Government have made clear that the structure of regional river advisory committees will include representatives of local authorities; agricultural, forestry and land-owner interests; conservation and landscape interests; industry and commerce; the national parks authorities and other public bodies. There is some hope that the regional committees will be bodies with a proper and balanced view of the business before them. Nevertheless, they will be advisory.
The amendment seeks to complete the jig-saw puzzle by setting out clearly a possible structure for the regional divisions of the authority to which the Government have referred. It will require the authority to delegate its powers and duties to the regional level rather than the uncertainty of the clearly administrative arrangements which are apparently proposed and which will have no place in the Bill. Furthermore, each regional division will have its own board of members to oversee its operations.
Members of the main NRA should be persons with experience relevant to the functions of the divisions. The new clause calls for at least one person to be appointed to the division which will have six to 10 members to represent local authority interests. However, all appointments will be made by the authority. The only constraints on membership of a division will be the one now recognised by the

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Government; that none of its members should also be members of the main NRA.
In my view, this is an opportunity for the Government to put flesh on the bones of a brief statement about the likely profile of the NRA. A body with a local board with which people can identify and feel a closer connection is more likely to be successful and popular than a remote body based in one place. The national body will be free to pursue overall strategic objectives and to allocate resources and priorities between the regions. Each region will develop a close and detailed knowledge of rivers, coastal areas and other waterways in its area. There will also be a closer monitoring relationship with industry and the relevant water plcs. The infusion of an appointed board to oversee the work of the division will prevent it from becoming too narrowly specialised in its management and outlook.
It was over 100 years ago that the great constitutional writer, Walter Bagehot, pointed to the advantages of an outsider in a bureaucracy, such as a Minister or other appointee, who could take a slightly detached and sceptical view of the expert considerations of the senior officers, see their needs with greater clarity and apply common sense and a little urgency to its activities. At page 199 of The English Constitution he wrote:
"The intrusion from without upon an office of an exterior head of the office, is not an evil, but that, on the contrary, it is essential to the perfection of that office. If it is left to itself, the office will become technical, self-absorbed, self-multiplying. It would be likely to overlook the end in the means; it will fail from narrowness of mind; it will be eager in seeming to do; it will be idle in real doing. An extrinsic chief is the fit correcter of such errors".
The amendment seeks to carry into effect much of the philosophy behind that quotation. I beg to move.
Lord Renton: My Lords, yes; but I wonder what Bagehot would have said if he were asked to contemplate the duality which this amendment would create because Clause 2 of the Bill which is not to be repealed—and the noble Lord obviously intends from what he said that it should be left on the statute book—establishes advisory committees in different regions.
Then we have the amendment which as well as having advisory committees is to establish regional divisions of the authority itself. I am not at all sure how that would work. You would have board members of the regions appointed for the regions who are presumably to be members of the board at the centre as well. They would have to sit with the advisory committees which are established under Clause 2. It seems to me that there would undoubtedly be overlapping and there would be doubts as to the respective authority of regional board members and members of the advisory committees. They would have to separate their functions somehow or combine them somehow.
I should have thought it was much better—and this is a centralised situation and the noble Lord, Lord Graham, was using Bagehot to try to justify that—to keep the centralised authority under the statute of the National Rivers Authority; but in
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exercising their centralised authority, let them be advised by committees of local people at the regional level who could then enable the NRA to carry out its responsibilities in the light of that advice.
Having spoken in a general way in an attempt to answer the interesting speech made by the noble Lord, Lord Graham of Edmonton, perhaps I may point out that it is really rather interesting to compare the new clause which he has set out with Clause 2 of the Bill. Subsection (1) of the new clause starts:
"It shall be the duty of the Authority"
and then goes on in the case of the Bill to say:
"to establish and maintain advisory committees"
whereas in the new clause it states:
"to establish and maintain regional divisions".
Three paragraphs of the new clause are exactly the same as are in the Bill. However, paragraph (1)(d) is added in the new clause which states:
"subject to the overall policy and financial control of the Authority to delegate to the division its functions as they relate to that region"
and the Bill does not have that.
I grant your Lordships that in the Tory Party I believe we tend to be non-centralisers. However, here for the first time we have a National Rivers Authority. As I understand it, it would be contradictory to its real purpose, which is to have a policy which is common to all the rivers of this country, subject to advice from local committees, and ensuring that the standards that are maintained throughout the rivers system of this country are consistent. Surely it is best to have that responsibility by statute centralised but carried out in each region in the light of advice from the advisory committees.
We go on to subsection (2) of the Bill and subsection (2) of the clause. Again, it starts off with a similarity subject to the change from regional division to advisory committee and it goes on to say in the case of the Bill that the people appointed are those:
"who appear to the authority to have an interest in matters likely to be affected by the manner in which the Authority carries out any of its functions in the region in question; and (ii) consist wholly or mainly of persons who are not members of the Authority".
That seems sensible. However, here we find that the regional divisions are to be representative of local authorities which have very limited responsibilities regarding rivers under the Bill and which appear to the authority also to have that interest which I have described so far so similar.
However, when we come to paragraph (c), we again find that the persons appointed in accordance with paragraph (b) are not members of the authority. The regional people who are to be established under the amendment will not have the advantage of holding responsibility at the centre where the statutory responsibility is to lie. I am sorry that this matter is rather complicated, but I am trying to make it clear.
As to subsections (3) and (4) of Clause 2 of the Bill, there is no arrangement in the new clause; but that is rather important because in subsection (3) we find the arrangements to be made for paying the

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chairman and other members of the advisory committee whereas there is no arrangement put forward in the clause for paying the members of the regional divisions who are not to be members of the board. So that would seem to be a gap in what the noble Lord has proposed. These days we cannot expect suitable people to do that sort of important work for nothing.
I do not believe that I need refer to subsection (4) because that refers to Scotland. The Bill states:
"carried out in any area of Scotland or of the territorial sea which is adjacent to any region".
Those are the functions of the authority referred to. I am sorry that this is rather laborious, but the argument I am trying to put forward is this; namely, that if this amendment were to be accepted, it would alter completely the scheme which has been put forward in the Bill for us to have a National Rivers Authority for the first time with its responsibility at the centre but obtaining advice from local people as should be the case. I should not have expected my noble friend to accept this amendment.
5.30 p.m.
The Earl of Caithness: My Lords, I am grateful to the noble Lord, Lord Graham of Edmonton, for mentioning Walter Bagehot. It enables me briefly to reminisce. I remember studying Walter Bagehot for British Constitution A-level and I find that I still have some of his books on my shelves at home. However, I must not digress into those increasingly long ago days.
As your Lordships will know, and as my noble friend Lord Renton has reminded us, the NRA will be a major new national body. I stress the word "national", as did my noble friend. Since the December 1987 government Statement setting out our proposals for the NRA we have received overwhelming support for the concept of a single national regulatory body as provided for in the Bill.
It is of course true that the NRA will have a strong regional presence. Initially, the NRA will be organised into 10 regional units based on existing water authority boundaries and most of its functions will be carried out in these regions which will be headed by a regional general manager. The Bill also provides that each region will have three committees—an executive flood defence committee, a fisheries advisory committee and a river advisory committee. The NRA Advisory Committee envisages that the chairmen of these regional committees should meet with the regional general manager under the chairmanship of an NRA board member, who would be given specific oversight of that region, to form a regional advisory board. The purpose of the regional advisory board will be to assist the regional general manager in resolving any difficulties at local level and to enhance other links between the NRA centrally and its regions.
However, we strongly oppose any suggestion that there should be an executive board in each region as this amendment would provide. The mischief behind such an arrangement would seriously confuse lines of responsibility between the NRA board and its regional staff and undermine ministerial
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accountability to Parliament for NRA functions. It would also seriously diminish the ability of the NRA to carry out its statutory duties.
As regards local authority involvement at regional level, local government interests will continue to be fully represented on the regional flood defence committees where local authorities will retain the majority membership. This is only right and proper because flood defence is funded by a precept on local authorities. A committee with a local authority majority should therefore—as happens at the moment and as we propose should continue—determine the precept and the flood defence programme for its area. The consultative document prepared by the NRA Advisory Committee also made it clear that local government would be one of the interests represented on the new regional rivers advisory committees. These advisory committees need to reflect local interests but are not answerable to them and a greater role for local government in NRA's affairs at regional level is not appropriate.
Lord Graham of Edmonton: My Lords, I am grateful to the noble Lord, Lord Renton, who has taken great care in pointing out the conflict or dilemma between my new clause, after Clause 1, and leaving Clause 2 in the Bill. He drew attention to those parts of the existing Clause 2 which, if left in the Bill, would be substantial additions to the new clause. He referred to the question of payment which we certainly accept is a proper part of the Bill and part of the nexus of managing these affairs.
I had to smile when the noble Lord said that the Conservative Party is a decentralising party. He could have fooled me. Over the past five, six or seven years no government have been more centralising or autocratic than the present Government in respect of powers. He should tell local government, doctors, teachers and a whole range of people in British life that this Government believe in decentralising, leaving to the perimeter, and releasing power from the centre. The Bill is contrary to that concept. But the fact that the Government are putting into the hands of a few people at the centre powers that, in our view, could properly be given to the perimeter is nothing new to us. It is a surprise to the noble Lord but not to many of us.
I take the point the noble Lord made that there could well be conflicts between the powers, or centres of power, which my new clause would undoubtedly set up. But, as Walter Bagehot was pointing out, the possibility of friction is no bad thing.
However, the Minister has been very fair in pointing out—it is one of the values of the later stages of a Bill that more goes on record—how he sees the functions of these bodies working. He has done good service to the House and to a great many other people in pointing to the limited powers that will be given to the regional rivers advisory committees and also the manner of bridging the gap between the national body, which obviously must have power, and the local people. If that works it will certainly be in the interests of the NRA to have a working arrangement—a good working arrangement—with local people at the periphery.

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However, I am satisfied that the Minister believes that this will work. We certainly hope that it will. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 1 [The National Rivers Authority]:
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 5:
Page 191, line 39, leave out sub-paragraph (4).
The noble Lord said: My Lords, this amendment in the name of my noble friend Lord McIntosh of Haringey will be familiar not least to the noble Lord, Lord Ezra. The genesis of the amendment is substantially that of Amendment No. 15 to which the noble Lord, Lord Ezra spoke in Committee on 2nd May at col. 103. On that occasion he argued that the approval of the Treasury should not be required for the details of remuneration and pensions paid by the NRA or for detailed staffing arrangements. In support of his case the noble Lord, Lord Ezra, quoted the noble Lord, Lord Crickhowell, who said at Second Reading:
"We have been repeatedly told by Ministers that the NRA is to be a strong and independent body. Yet the Bill provides that its management arrangements should all be subject in some detail to the approval of the Secretary of State and the Treasury, which in practice means their officials. I am talking about what may be described as pay and rations matters … We face a situation that those responsible for running the NRA are to be second guessed by the officials on a whole range of day today matters … I have asked that the whole issue should be looked at again".—[Official Report. 17/4/89; col. 582.]
In reply, the noble Lord, Lord Hesketh, rejected at col. 104 the suggestion that civil servants would "second guess" the decisions of the NRA. He said that he accepted the views of the noble Lord, Lord Crickhowell, that the NRA should be a strong and independent body with proper management responsibilities. It was also, however, the case that parliamentary accountability for the use of public funds required Treasury control. The right balance would be struck in the financial memorandum to be drawn up between the department and the NRA.
The amendment is tabled again to hear more details about the contents of the financial memorandum. Without these the House may feel that it has not heard enough about how this small but nonetheless significant matter is to be handled. If parliamentary accountability is now being used as the justification for all the powers which have accrued to Ministers in the course of the past 10 years, notably of course in local government, then this is a novel argument from a Government which used to pride themselves on reducing government controls. I detect in that sentence echoes of the debate we have just concluded.
It seems strange that the Government are determined to keep detailed control over the salaries and expenses of the members of the board yet have refused so far to allow the NRA to borrow, even with constraints set by the Secretary of State, for a planned programme of environmental works. In the same way a surplus from the NRA in any year is to be carried back to the Treasury. The Government display a clearer idea of how they want to run
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the NRA as regards the bureaucratic details than concerning its wider environmental functions and the means by which they will be carried out. The Minister stated that there would be no second guessing of NRA decisions, but he did not explain how that will be achieved. This amendment is asking for further details of how that will be done. I beg to move.
Lord Ezra: My Lords, as my name has been mentioned and as I moved a similar amendment at the previous stage, I wish to say that this is a matter of some concern to many of us in this House. We have welcomed the establishment of the NRA and we believe that it is going to do a very useful job. But as the noble Lord, Lord Crickhowell, himself said, there seems to be some doubt as to the freedom with which it can operate. If such detailed matters as are indicated here are to be dealt with by the government department responsible and the Treasury, it is to be doubted that in more important matters it will not also be supervised.
If this body is to become merely an emanation of a government department, let it be stated very clearly and then we shall all know where we stand. However, if it is to be a body which it is intended should operate independently to safeguard the environmental interests of the nation as regards the water supply industry, then I believe that this kind of control by government should be reduced to the absolute minimum. The noble Lord, Lord Hesketh, has said that there is to be a financial memorandum which will lay down the details of how this control is to be exercised. He now has the opportunity to tell us what is in this financial memorandum. Will it in fact limit the intrusion of the government department and the Treasury in the conduct of the affairs of the NRA or will it be drawn up as broadly as the Bill itself? I believe that these are matters of legitimate concern to this House, bearing in mind that we wish to see the NRA succeed.
Lord Renton: My Lords, I wish to support this amendment. There may be a mistake in the list of groupings because it seems that this amendment should clearly be taken with Amendment No. 7, which proposes to leave out sub-paragraph (6) of paragraph 3 in Schedule 1. Paragraph 6 reads:
"The consent of the Treasury shall be required for the giving of an approval under this paragraph".
It is almost the same point. On previous occasions on other Bills I suggested that it is sheer nonsense, in these days of collective Cabinet responsibility and with all the palaver that we know takes place as part of the machinery of government, that in addition to a Secretary of State and the Minister of Agriculture being involved, the Treasury shall also be involved. I am open to correction by my noble friend on the Front Bench but, as I understand it, the estimates and the expenses of the National Rivers Authority are to be carried on the estimates and accounts of the Minister of Agriculture or those of the Secretary of State for the Environment. I am not sure which it is; perhaps it is somehow divided between the two.
Bearing in mind that there is that ministerial responsibility and that such responsibility is

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mentioned at almost every turn in establishing the National Rivers Authority, it seems quite absurd and redundant that the clammy hand of the Treasury should be placed on it as well. I hope that one day the Government will get rid of this nonsense and that we shall not see reference to the consent of the Treasury appearing in Bills quite so often. I had hoped that wisdom had already been seen in this respect because we have had several Bills in this Session in which the expression has been omitted. I hope that even yet it may be omitted on this occasion.
5.45 p.m.
Lord Hesketh: My Lords, I believe that there is a slight problem here because we have finished up by speaking to two amendments; namely, Amendments Nos. 5 and 7. After this amendment, I am proposing to move Amendment No. 6 and to speaks the same time to Amendment No. 7. The issue is considerably narrower as regards Amendment No. 5, which addresses itself purely to matters concerning the members of the board of the NRA.
I made clear in Committee that it is standard practice for all non-departmental public bodies that if the chairman and members who are appointed by Ministers are to be paid, then their level of remuneration must be determined by the Ministers concerned with Treasury approval. I see no reason to depart from what is normal practice for bodies and, indeed, water authorities, that the Ministers who will appoint members to the NRA Board should be required to seek the approval of the Treasury. I cannot accept that it detracts from the independence or strength of the NRA for it to be required to secure the agreement of the Treasury to the pay and pensions of members of the NRA board. It is surely reasonable that the Treasury should seek to maintain some consistency and compatability between different NDPB boards.
As regards the remarks made by my noble mend Lord Crickhowell at Second Reading, at the Committee stage I clearly pointed out that we were listening to what my noble friend had to say. As regards the question of pay and rations, I would like to think that we have been more flexible concerning the rations, but we are unable to abolish the quartermaster.
Lord Graham of Edmonton: My Lords, I am disappointed at what the Minister has said. He rests his case on the fact that what we have said is not new and that it is standard practice besides being normal. I wonder when the Minister and others will feel that it is proper to break away from precedent. Surely that is done after having listened to the arguments. If the arguments have failed that is one aspect, but the Minister substantially rested his arguments on the questions of precedent, custom and practice. The Minister certainly has not satisfied me.
We listened very carefully to what the noble Lord, Lord Crickhowell, said, and those of us on this side of the Chamber will have seen him nodding his head at one or two of the points that were made during this short debate. I am not minded to leave this
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matter alone as we have done in other circumstances. I believe that the House should be invited to express an opinion. We desire to give not just more power but more power over a very limited range of functions. This new body should be treated with respect and given stature. In many places stature is measured not only by the size of the salaries but also by the ability of the people at the top to make decisions of this kind. The noble Lord, Lord Renton, used the phrase, "the clammy hand of the Treasury". As a Minister many years ago he probably speaks with more authority than I as regards the machinations of those in the Treasury with clammy or other hands when they are dealing with such issues.
Lord McIntosh of Haringey: My Lords, sticky hands.
Lord Graham of Edmonton: My Lords, perhaps I should say sticky fingers, but I shall not go to the extremities. I believe the case has been made in that the Government have been invited to make a small relaxation from custom and practice but they have decided not to do so. I intend to invite the House to express a view.
5.49 p.m.
On Question, Whether the said amendment (No. 5) shall be agreed to?
Their Lordships divided: Contents, 75; Not-Contents, 133.

DIVISION NO 2

CONTENTS

Addington, L. [Teller.]

McNair, L.

Amherst, E.

Masham of Ilton, B.

Ampthill, L.

Mason of Barnsley, L.

Ardwick, L.

Molloy, L.

Auckland, L.

Nicol, B.

Aylestone, L.

Northfield, L.

Blease, L.

Ogmore, L.

Blyth, L.

Parry, L.

Brooks of Tremorfa, L.

Perry of Walton, L.

Callaghan of Cardiff, L.

Phillips, B.

Carmichael of Kelvingrove, L.

Pitt of Hampstead, L.

Ponsonby of Shulbrede, L. [Teller.]

Carter, L.

Cledwyn of Penrhos, L.

Prys-Davies, L.

Cocks of Hartcliffe, L.

Rea, L.

David, B.

Renton, L.

Davies of Penrhys, L.

Rochester, L.

Dean of Beswick, L.

Ross of Newport, L.

Dormand of Easington, L.

Russell, E.

Elwyn-Jones, L.

Scanion, L.

Ewart-Biggs, B.

Seear, B.

Ezra, L.

Serota, B.

Fisher of Rednal, B.

Shepherd, L.

Gainsborough, E.

Stedman, B.

Gallacher, L.

Stoddart of Swindon, L.

Galpern, L.

Strabolgi, L.

Glenamara, L.

Taylor of Blackburn, L.

Graham of Edmonton, L.

Taylor of Gryfe, L.

Grey, E.

Taylor of Mansfield, L.

Harris of Greenwich, L.

Tordoff, L.

Howie of Troon, L.

Underhill, L.

Hughes, L.

Walston, L.

Hunter of Newington, L.

Whaddon, L.

Jeger, B.

White, B.

Listowel, E.

Williams of Elvel, L.

Lockwood, B.

Willis, L.

Lovell-Davis, L.

Winchilsea and Nottingham, E.

McCarthy, L.

McIntosh of Haringey, L.

Winstanley, L.

769

NOT-CONTENTS

Abinger, L.

Joseph, L.

Aldington, L.

Kaberry of Adel, L.

Alexander of Tunis, E.

Kimball, L.

Allerton, L.

Kinloss, Ly.

Arran, E.

Lauderdale, E.

Balfour, E.

Layton, L.

Beaverbrook, L.

Long, V.

Belstead, L.

McFadzean, L.

Bessborough, E.

Mackay of Clashfern, L.

Blatch, B.

Macleod of Borve, B.

Borthwick, L.

Margadale, L.

Boyd-Carpenter, L.

Marley, L.

Brain, L.

Marshall of Leeds, L.

Brookeborough, V.

Massereene and Ferrard, V.

Brookes, L.

Merrivale, L.

Brougham and Vaux, L.

Mersey, V.

Bruce-Gardyne, L.

Middleton, L.

Caithness, E.

Monson, L.

Campbell of Alloway, L.

Morris, L.

Campbell of Croy, L.

Moyne, L.

Carnock, L.

Munster, E.

Carr of Hadley, L.

Nelson, E.

Clinton, L.

Norrie, L.

Clitheroe, L.

Nugent of Guildford, L.

Constantine of Stanmore, L.

Onslow, E.

Cork and Orrery, E.

Orkney, E.

Cottesloe, L.

Oxfuird, V.

Craigmyle, L.

Pender, L.

Craigton, L.

Peyton of Yeovil, L.

Crickhowell, L.

Radnor, E.

Cross, V.

Rankeillour, L.

Darcy (de Knayth), B.

Renwick, L.

Davidson, V. [Teller.]

Rippon of Hexham, L.

Denham, L. [Teller.]

Rochdale, V.

Dilhorne, V.

Saint Brides, L.

Dundee, E.

St. John of Bletso, L.

Eden of Winton, L.

St. John of Fawsley, L.

Elibank, L.

Saltoun of Abernethy, Ly.

Elles, B.

Sanderson of Bowden, L.

Faithfull, B.

Seebohm, L.

Fanshawe of Richmond, L.

Shannon, E.

Ferrers, E.

Sharpies, B.

Foley, L.

Skelmersdale, L.

Fortescue, E.

Somers, L.

Fraser of Carmyllie, L.

Stanley of Alderley, L.

Fraser of Kilmorack, L.

Stodart of Leaston, L.

Glenarthur, L.

Strathcarron, L.

Gray of Contin, L.

Strathclyde, L.

Greenway, L.

Sudeley, L.

Grimston of Westbury, L.

Swinfen, L.

Grimthorpe, L.

Teynham, L.

Hailsham of Saint Marylebone, L.

Thomas of Gwydir, L.

Thurlow, L.

Halsbury, E.

Torrington, V.

Hardinge of Penshurst, L.

Trafford, L.

Harmar-Nicholls, L.

Tranmire, L.

Harvington, L.

Trefgarne, L.

Havers, L.

Trumpington, B.

Henderson of Brompton, L.

Vaux of Harrowden, L.

Henley, L.

Vinson, L.

Hesketh, L.

Waldegrave, E.

Hives, L.

Wise, L.

Holderness, L.

Wyatt of Weeford, L.

Hooper, B.

Wynford, L.

Hylton-Foster, B.

Yarborough, E.

Jenkin of Roding, L.

Young of Graffham, L.

Johnston of Rockport, L.

Zouche of Haryngworth, L.

Resolved in the negative, and amendment disagreed to accordingly.
5.57 p.m.
Lord Hesketh Lord Hesketh moved Amendment No. 6:
Page 191, line 43, leave out ("numbers and").
The noble Lord said: My Lords, in moving this amendment I should like to speak also to Amendment No. 7. Amendment No. 7 would remove the requirement for the Treasury to approve
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the numbers and terms and conditions of service of NRA staff. As I made clear in Committee, it is normal for staff of a non-departmental public body to have terms and conditions subject to the Secretary of State's approval, with the agreement of the Treasury. The main responsibility for control and accountability for questions concerning a non-departmental public body's staff, pay and conditions rests with the sponsor department.
However, we recognise the importance of giving the NRA proper management responsibility, and have taken very careful note of the comments of my noble friend Lord Crickhowell at Second Reading.
That is why we have brought forward government Amendment No. 6 which removes the requirement for the approval of the Secretary of State—and the Treasury—to the numbers of staff employed by the NRA. This is not of course the same as Amendment No. 7 which would also remove the requirement for the Treasury's, although not the Secretary of State's, approval to the terms and conditions of staff. We could not accept the removal of the whole of this subparagraph relating to Treasury control, because, as I made clear at Committee stage, Ministers are ultimately answerable for the use of public funds by the NRA, and this must include the terms and conditions on which it employs staff.
However, we recognise that it is important to avoid unnecessary controls. The control on the numbers of staff does seem to be an unnecessary control. What is important is that there is a proper control on the total running costs of the NRA. We accept that, within that total cost, it is entirely reasonable for the NRA management to decide on the precise numbers of staff that it employs. Again, as I made clear at the Committee stage, we would hope to ensure that the detailed arrangements between the NRA and the department strike the right balance between public accountability and the need to encourage mangement responsibility. The existence of a requirement for ministerial approval of terms and conditions of NRA staff does not mean that Ministers and civil servants will be second guessing all the decisions of the NRA on these matters. I am quite sure that workable arrangements can be devised that meet both the requirements of public accountability and, importantly, the requirements for the NRA to manage its own organisation with the necessary degree of autonomy and independence. I beg to move.
6 p.m.
Lord McIntosh of Haringey: My Lords, the Minister did not read that speech with a great deal of conviction and I can understand why. The fact of the matter is that by agreeing—and we welcome his agreement—that the Treasury and the Secretary of State should no longer have control over the numbers of National Rivers Authority staff, he has blown a gaping hole in his case against Amendment No. 7. That amendment says that the Treasury should not have control over the terms and conditions of service of staff.
The only conceivable point for retaining Treasury control over the terms and conditions of service is the control of public expenditure. But as soon as the

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Government have agreed that the numbers of staff are not to be controlled centrally by the Treasury and by the Secretary of State there is no longer any control over the aggregate amount of public expenditure. Therefore the argument against Amendment No. 7 disappears.
Amendment No. 7 says that the Treasury should no longer have control over the terms and conditions of service; in other words, it is trying to avoid a particularly useless and even nasty little piece of interference by the Treasury in what should be a proper management responsibility of the National Rivers Authority. The authority is recruiting staff and has already named the staff who will form part of the authority when it is established all over the country.
Such staff possess a wide variety of technical and scientific skills and also have local knowledge of managerial ability. Therefore Civil Service scales are not appropriate for such staff. Such terms and conditions must be negotiated according to the needs of the National Rivers Authority. It is a new kind of authority as the Government continually remind us; it is a new regulatory body and is a more detailed body than there is for any other privatised industry. However, according to the Government, we must still have Treasury control over the terms and conditions of service.
If the Government had continued to resist the urging of the noble Lord, Lord Crickhowell, on Second Reading—and of other noble Lords who spoke on Second Reading and also in Committee—and had not agreed to bring forward Amendment No. 6, we would not have agreed with them but we would at least have seen the logic of their position. However, now that they have agreed to lose control over the aggregate expenditure of the National Rivers Authority on its staff, what on earth is the point of them keeping control of the terms and conditions of service? I urge the Government to think again on the matter. I think that they have got themselves into an impossible position in this respect.
On Question, amendment agreed to.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 7:
Page 192, line 24, leave out sub-paragraph (6).
The noble Lord said: My Lords, I think the right thing for me to do in the circumstances is to move Amendment No. 7 in order to receive a Government response. Although Amendments Nos. 6 and 7 were grouped together, the debate took such a truncated form that there was no opportunity for the Minister to reply to the issue of the relationship between the two. I beg to move.
Lord Renton: My Lords, again I support this amendment. I shall, however, be interested to hear what my noble friend says in response. It seems to me that the principle involved is almost the same—although not quite—as it was on Amendment No. 5 where the Government won a handsome majority. Therefore it would be a waste of time to vote again on this amendment, but the principle is
772
established and we shall be interested to hear what the Government have to say on the matter.
Lord Howie of Troon: My Lords, I should like to support my noble friend on Amendment No. 7. What worries me about the Government's reply on the matter is that if sub-paragraph (6) remains, which requires "the consent of the Treasury", what is there left for the Secretary of State to do? There are various references to him in this part of the schedule, including sub-paragraph (3), where it specifies that certain actions are to be carried out with his approval or consent. However, what is the point in the Secretary of State giving his approval or consent to such matters if at the end of the day the Treasury has the final say?
There is little point in the Minister saying, as I think he said—although I may be mistaken—that the Treasury will not ask to second guess; but, of course, it is asked to do so. Indeed it is inherent in and central to the manner in which sub-paragraph (3) is drafted. I agree with what the noble Lord, Lord Renton, said about voting again on the matter so soon after the last Division; there seems little point in so doing. However, in my view the Minister should take the matter away and look more closely at it. I hope that he has listened to what my noble friend Lord McIntosh and the noble Lord, Lord Renton, said about such matters and that he will realise that second guessing is inherent in this part of the Bill and therefore should be removed therefrom.
Lord Crickhowell: My Lords, I hesitated throughout the debate on the Bill to speak about the powers to be given to an authority which it is intended that I should chair. It seemed to me that that course of action was the right one. However, on Second Reading—and, indeed, when speaking on an earlier amendment—I sought to give guidance to the House about the advice given to the Government by the advisory committee. As my words have been quoted back to me on many occasions during this debate, I think that it would be right if I gave some clarification on the views of the NRA Advisory Committee in the matter.
The truth of the matter is that the amendment put forward by the Opposition, which was defeated earlier today, did not really address the issue which is now being debated; it addressed the issue of whether the pay and pensions of the members of the authority should be supervised. I have no objection to the principle that the pay of the members of the authority should be decided by the Government, along with members of other such authorities.
The issue I raised on Second Reading was a separate issue to which this sub-paragraph refers. It is what I described as a pay and rations matter. I do not disguise the fact that the advice which the NRAAC has given is that it would have preferred to have had a more relaxed regime than is contained in the Bill. There are precedents elsewhere; for example, the Civil Aviation Authority is treated as a nationalised industry and controls such matters itself. However, we are far too late in the proceedings of this Bill to follow that particular route. Nevertheless, I have taken comfort from the progress which has been made.

773
I welcome the fact that the control over numbers has been deleted by the Government by way of amendment and I am very much encouraged by the words used by my noble friend, when responding earlier, about the terms of the financial memorandum. I say that because if the Bill were to pass through this place unamended, the terms of that memorandum would be most important.
There have been published documents issued by the Government about the arrangements for non-departmental public bodies. There was such a major document issued in 1985. That document makes clear that where less than 50 per cent. of the finance of a public body comes from public funds, there should not be detailed control over such matters. Therefore, I am increasingly optimistic that what my noble friend is saying is that the financial memorandum will be drafted in such a way so that the NRA will indeed be able to control the pay and the terms and conditions of service of its employees, its directors and its senior management, and that it will have reasonable management flexibility for so doing. However, such issues are not being settled and are not dealt with in this amendment. I do not support the particular amendment because that does not seem to me to be the point here.
The advice being given to the Government at present by the NRAAC is that the financial memorandum should be drafted in a way which allows the NRA to have the fullest possible control over the management of its own affairs. That seems to the NRAAC to be sensible, both from the point of view of managing a large and important public body and from the point of view of the government department which should not be wasting a great deal of time deciding whether an individual should have one type of car or another or whether management should, or should not, be able to pay £1,000, more or less, to recruit someone. It is unlikely that those decisions will be taken better in the department. In the light of what my noble friend has said, I hope that when we come to agree the financial memorandum, the Government will accept the advice of the NRAAC.
Baroness Blatch: My Lords, I sympathise entirely with the sentiments expressed by my noble friend Lord Renton and Lord Crickhowell. I invite my noble friend the Minister in his reply to the amendment to give us an assurance that the terms of reference for the financial memorandum will reflect the widest degree of operational management consistent with good management, given that the Government have to have a view about the overall financial parameters. One would expect that to be so.
To add to the example of deciding on one make of car or another, it is also possible to envisage bonus packages and so forth. So long as the overall financial parameters are not breached, we should go for the maximum possible managerial freedom. I hope that my noble friend's reply will contain some assurances that the financial memorandum will reflect the NRA's wide managerial control.
Lord Ezra: My Lords, so far as pay and rations are concerned, there is no doubt that on a reading of this paragraph of the schedule, the Treasury will have the last word. If the financial memorandum is to modify that, all well and good. However, the schedule, and after all this is what the Government propose should be enacted, says:
"The Authority may pay such pensions, allowances or gratuities…in respect of …its officers or employees as it may, with the approval of the Secretary of State, determine".
The final sub-paragraph provides:
"The consent of the Treasury shall be required for the giving of an approval under this paragraph"
As far as I can see, what that says is that once the NRA has recruited its staff and has decided what it would like to pay them, how it would like to grade them and what conditions of service it would like to offer, it would then have to negotiate with the Secretary of State. He, in turn, would have to pass a memorandum to the Treasury which would go through it with a fine toothed comb and either agree or disagree. That is what the Bill says.
If the financial memorandum is going to say something different, let us hear about it. As things stand, the subject about which the noble Lord, Lord Crickhowell, has complained is precisely what the Bill says should be done; namely, that the Treasury should determine pay and rations.
6.15 p.m.
Lord Hesketh: My Lords, as always, the noble Lord, Lord McIntosh, has produced a seductive argument. He says that even though this is a non-departmental public body it is a different kind of non-departmental government body, so the Government's argument that there should be parity of arrangements with previous non-departmental bodies should not apply. The noble Lord will not be surprised to find that I do not agree with that analysis.
The terms and conditions of service of people in the public service are properly matters in which Ministers and the Treasury can have an interest. However, that does not mean that Civil Service terms and conditions must be applied. What the sub-paragraph provides for is that the terms and conditions of NRA staff must be agreed by Ministers. We are not saying that they have to fulfil Civil Service conditions.
I agree entirely with my noble friend Lady Blatch that the Government's primary concern is to control overall financial parameters; it is not to encumber the NRA with bureaucracy and red tape. My noble friend Lord Crickhowell clearly set out what he felt was the right way to approach the matter. I can only say that I agree with what he said. He was clear in what he required to be done. The control and responsibility at the end of the day must rest with Ministers. That is a fact that we shall not be able to get away from. We cannot avoid it. Because of that, I am unable to shift my position as much as the amendment would require me to do. I am sure that the noble Lord, Lord McIntosh, will understand why. If he were at this Dispatch Box he would be saying exactly the same.
Baroness Carnegy of Lour: My Lords, before my noble friend sits down can he say whether we shall know before Third Reading what is in the financial memorandum? I intervened in Committee to say that the argument that we have always dealt with non-departmental public bodies in a certain way is no argument at all. Unless the financial memorandum is satisfactory and there is some independence so that this type of arguing with the Treasury is avoided. I do not believe that the House will want to accept the Bill as it stands. It may at the next stage accept an amendment of the kind moved by the noble Lord.
Lord Hesketh: My Lords, discussions are taking place with the department, the NRAAC and the Treasury. We are satisfied that the arrangements will provide what we propose—a sensible basis for NRA management independence together with a recognition that the NRA will be responsible for spending money which is voted by Parliament. That is what I was trying to say. I have said it again. I hope that it has partically satisfied my noble friend Lady Carnegy of Lour.
Lord Renton: My Lords, if I may have the leave of the House to speak again, perhaps I may ask my noble friend before he sits down why, if that is so, we need sub-paragraph (6) which says:
"The consent of the Treasury shall be required for the giving of an approval under this paragraph"
Lord Hesketh: My Lords, with the leave of the House, we return to the position that I took three amendments ago which is that we cannot abolish the quartermaster.
Lord McIntosh of Haringey: My Lords, as a former quartermaster's clerk, never having aspired to the rank of quartermaster, I wonder whether the Minister appreciates a quartermaster's range of activities. One thing that quartermasters do not cover is pay, although they do cover rations.
Leaving aside the arrangements within the Royal Artillery, which is the only part of the Army I know, the Minister has not responded adequatley to the concerns which have been expressed, principally from his own side of the House. When we have the noble Lords, Lord Crickhowell, and Lord Renton, and the noble Baronesses, Lady Carnegy of Lour and Lady Blatch, all asking him to think again about this matter—there was not one voice raised in his support—I wonder whether he would not be well advised to give a little more than he has done so far.
The noble Lord, Lord Ezra, made the point clearly. Whatever may be in the financial memorandum—we do not know that—the Bill is clear. The Bill, as amended, says that the Treasury and the Secretary of State have no control over the numbers of staff, so they have no control over the amount of money being spent; but they have control over the terms and conditions of service, which is the detail upon which the staff are to be appointed. That is patently absurd. It is a failure of logic with which the Government have not caught up on their thinking. I do not blame them. It is a complicated
776
Bill. I can see how they have got themselves into this trap. They are in a trap, and they must find some way out of it.
If the Minister wishes to stop me dividing the House, he will have to come up with something better than that and take advantage of the leave which I am sure the House will give him. As things stand, this is not a satisfactory situation, and as amended the Bill is not satisfactory; it is not coherent as amended. I ask the Minister whether there is anything else he can say to us.
Lord Trafford: My Lords, before the noble Lord sits down, he said just now that it was contradictory to free the number of employees but to control the remuneration terms and all the rest of it. We had the example of cars. In many circumstances in the public sector or the quasi-public sector numbers are very often not dictated by the Treasury—although they are paid by the Treasury—where the total global sum is distributed by the authority concerned, usually on a fixed rate of the basis of remuneration, terms and conditions, but not specifying numbers.
Although I accept much of what the noble Lord says, I hope he will accept that it is not always true that it is necessarily an anomaly. I might add in parenthesis that it would seem that there is some confusion here between the argument which the noble Lord is putting forward and what my noble friend the Minister is saying. The confusion appears to be that my noble friend says that there will be a global sum, subject to Treasury approval, and many other noble Lords, including the noble Lord, Lord McIntosh, say, "Ah, but what we want is to have that control removed". If I am right—and I am asking whether that is what my noble friend is saying—it would seem to me that there is less argument than there would appear to be. Provided the Treasury approval goes only to the global sum but allows the NRA the other independence with regard to numbers, managerial control and so forth, I cannot see that I or my noble friends would have any difficulty in understanding that the ultimate control of the distribution of public money—that is the global sum—must lie with the Treasury.
Lord McIntosh of Haringey: My Lords, I am very glad that I had not sat down before the noble Lord intervened because he made my point very clearly. The point is that there is no global sum laid down in the Bill. A global sum was in effect laid down in the Bill previously because there was Treasury control over numbers and terms and conditions of service. But now that the control over numbers has been removed, there is no global sum left in the Bill.
Therefore the noble Lord's very quarter-hearted support of the Government fails completely. The plain fact is that if we have removed control over one part of it, we cannot have a global sum. If we have a global sum we cannot remove one element of the control and leave the other element untouched.
Lord Trafford: My Lords, I am sorry to interrupt the noble Lord again but, with respect, what he is saying is not so. This is the method by which large parts of the public sector expenditure are controlled.

777
They are given this money and told to get on with it, so to speak. The numbers, the decisions, the executive freedom and all the rest of it lie with them. In that sense this has not changed. It does not alter the fact that ultimately the Treasury has control. What it does alter is merely the freedom to employ the numbers appropriate to the management considerations which the NRA may exercise.
With respect to the noble Lord, I think he has misinterpreted my remarks. They were not supposed to be half-hearted, quarter-hearted or anything else in support of the Government. I hoped that I was trying to clarify the position. I was asking both the noble Lord, Lord McIntosh, and my noble friend about this. So long as we are arguing on the question of whether or not it is within a global sum that the control of the Treasury is exercised, or whether that will be the intention of the Government, that is quite a different kettle of fish from the position for which the noble Lord is at present arguing.
Lord McIntosh of Haringey: My Lords, the answer is very simple: there is no global sum anywhere on the face of the Bill. We are asked to rely on a financial memorandum which we have not seen. I suggest to the House and to the Government that it is not adequate to rely on a financial memorandum which we have not seen. Unless it can be shown clearly to the contrary, the concerns of noble Lords on all sides of the House that what is being maintained here is a control of the detail of employment without a control on the total sum of money involved will not go away. I believe I was asked to give way to the noble Lord, Lord Boyd-Carpenter.
Lord Boyd-Carpenter: My Lords, I was not asking the noble Lord to give way. When he has finished his observations I shall say a few words too.
Lord McIntosh of Haringey: My Lords, I think that the noble Lord will be out of order. It is my amendment and I am supposed to be winding up on it. We are at Report stage.
Lord Boyd-Carpenter: My Lords, then perhaps the noble Lord will give way, with his habitual courtesy and adroitness. He stung me into an intervention simply by the observation he made that the Minister was faced with a debate in which there had not been a single speech in support of the Government. As I understood the speech of my noble friend Lord Trafford, it was broadly favourable to the Government. I think it would be quite wrong for my noble friend the Minister to go back to his department and say that there was no support for these words in your Lordships' House.
These words are frequently used in statutes. They are a common form where one is dealing with the employment of people in what one may call the public sector. There is nothing unusual about them. Therefore the onus is perhaps on the noble Lord opposite to say why the NRA should be exempted from a control which applies to a great many other people in the public sector.
778
I should like to widen the debate a little because I think there is a real point of substance and of principle here in the way that we work government. In the public sector, if one section of workers obtains an advance in pay quite out of line with what the main body of people in the public sector receive, that is then used as grounds for agitation, for action of all sorts, to try to upgrade all the rest to the level of those who, because there has been no Treasury control, have received an increase.
I cannot remember whether the noble Lord faced these problems in government, as I did. If he did have to face the problem of very high totals of expenditure on the public service, of the inflationary effect of large increases in pay in the public service, I think he would realise the very natural and proper concern of the Treasury to keep some control over it. Of course, it is money for old rope for leaders of the trade unions concerned because they are able to say, "Look, the NRA has got this wonderful settlement. The whole of the Civil Service should have it". It is only too easy for them.
However, if we look at it from the point of view of those who have to conduct the affairs of state and manage the public economy, the picture is very different indeed. The Treasury has always—in my view rightly—taken the view that strict control of rates of remuneration in the public sector should remain in the Treasury. If there is an overwhelming case it can agree to an exception. But in general the idea is to prevent increases out of line with the rest of the pay of the service. Those can and will, from all experience, be used to undermine the existing rates and to support increases.
Therefore I say with great respect to the noble Lord that the Government are not without support on the matter. Those of us who served at the Treasury—and I had the honour of doing so for two stints—know that there are real and valid reasons for maintaining this control. I know, equally from experience, that it is all too easy to say, "Oh, the Treasury is restrictive, and all the rest of it; why should it have these powers?", but the noble Lord, like your Lordships, knows that it is upon the Treasury's management of the economy that the well-being of our country depends.
Lord Renton: My Lords, before my noble friend——
Noble Lords: Order!
Lord McIntosh of Haringey: My Lords, I do not think that an intervention can be intervened in. There can be one intervention at a time. I had better maintain my position at this Dispatch Box without sitting down and let other noble Lords come in, one after another, rather than together.
The noble Lord, Lord Boyd-Carpenter, has given renewed evidence of his three most distinctive and endearing characteristics. First, he has given evidence of his outstanding skill as a debater; secondly, he has given evidence of his Treasury experience; and, thirdly, he has given evidence of his unalterable loyalty to the Government in all circumstances. That has never yet been breached to

779
my knowledge. As I believe the noble Lord knows, I have never held a position in government, but I have met a payroll for nearly a quarter of a century. When one meets a payroll one sets oneself a budget which covers not only pay but all the activities of one's company or organisation. In doing so, one takes into account how much one can allow oneself for manpower and how much one can allow oneself for other things.
Earlier we debated the issue of subcontracting. It was pointed out with some reason, particularly by the noble Lord, Lord Renton, that the NRA should have the power to subcontract some of its activities where they were not suitably carried out by the permanent staff. Therefore the NRA must have the power to strike a balance on any occasion between non-direct manpower costs and the manpower part of its total budget. Therefore the argument of the noble Lord, Lord Boyd-Carpenter, that it may be tempted, without Treasury control, to run amok, so to speak, and to break public pay guidelines falls to the ground.
I forget who mentioned the Civil Aviation Authority. However, there are previous examples of public bodies which do not have this detailed control over pay and conditions.
6.30 p.m.
Lord Boyd-Carpenter: My Lords, when the Civil Aviation Authority was set up, originally the pay scales in the authority were determined by the Department of Trade, under which it worked. However, after a year or two, no doubt partly as a result of education by the then chairman of the CAA, we got rid of that and obtained freedom.
Lord McIntosh of Haringey: My Lords, I am delighted to have the noble Lord's confirmation. Perhaps the noble Lord now regrets that he was not in his seat when his noble friend Lord Renton referred to the clammy hand of the Treasury. The situation is as it was before these interventions, all of which I may say I very much welcome. The situation is that the Government are in an impossible position. If the Minister is to avoid a vote which will depend, with the exception of the noble Lord, Lord Boyd-Carpenter, for a majority for the Government on those who have not heard the debate, he should intervene and say he will think about the matter again before Third Reading.
The noble Lord, Lord Renton, said that a second Division would be undesirable and unnecessary. However, as has been made clear by the noble Lord, Lord Crickhowell, the point on which we divided before was a different point. It was concerned with the pay of the members of the authority. The noble Lord, Lord Crickhowell, quite understandably said that he had no strong feelings on that matter. We are now concerned with a much more important issue than the pay of members of the authority. We are now concerned with the managerial responsibility of the National Rivers Authority and its ability to construct a budget encompassing manpower and other costs in a sensible and independent way. This is a very important matter and a much more important one than that contained
780
in Amendment No. 5. I suggest to the Government that they would be well advised to have second thoughts on this matter before I am forced to sit down for the final time.
Lord Hesketh: My Lords, with the leave of the House, I shall again rise. It is interesting that we have turned round 180 degrees. I was addressed by the noble Lord, Lord McIntosh, as regards the fact that he felt the NRA was unable to fix its own rates of pay. When I rose finally to point out to the noble Lord, Lord McIntosh, that that was far from the case, and that with the passing of Amendment No. 6 we had also removed any control on numbers of employees of the NRA thereby, I believe, satisfactorily answering his point in that area, the noble Lord then turned the agrument round and said we were not talking about that. He said we were talking about global control.
The noble Lord, Lord McIntosh, may believe he has a run going for him on this side as well as on the other side of the House. However, he cannot expect me to stand here and say that the Treasury is willing to abrogate all responsibility for expenditure. I cannot do that and that is why I am not willing to give him what he is asking of me now.
Lord McIntosh of Haringey: My Lords, the noble Lord leads the interventions of other Ministers who have not heard the debate. I suppose that the right thing for me to do is to seek an opportunity to discuss the matter with the noble Lord between now and Third Reading. I do not think his response has adequately reflected the arguments that have been made.
We all agree, of course, that the National Rivers Authority has to have a budget. However, we are saying that within that budget, particularly now that controls over the numbers of employees have been removed—in other words, the head count has been removed—this vestigial control over terms and conditions of service is simply out of keeping with the rest of the Government's intentions. That is where we stand. Without in any way withdrawing the arguments that I have made and which have been so widely supported by noble Lords on all sides of the House, I think it is best that I withdraw the amendment and seek an opportunity to discuss the matter.
If, on the other hand, Ministers are now indicating that they will not give me permission to withdraw the amendment, I must say three things. First, there are other ways of raising this matter than the form of words used for this amendment. The issue will not go away simply by denying me permission to withdraw my amendment. Secondly, I think it is an abuse of the procedures of this House not to allow me to withdraw my amendment simply because the Government are embarrassed by the argument. Thirdly, the clear intention in denying me the right to withdraw my amendment is to avoid discussions between now and a later stage. I reject all of those three suppositions. I beg leave to withdraw the amendment.
The Deputy Speaker (The Earl of Listowel): My Lords, is it your Lordships' pleasure that this

781
amendment be withdrawn? As many as are of that opinion will say, "Content"; to the contrary, "Not-Content". I think the Not-Contents have it. Clear the Bar.
6.37 p.m.
On Question, Whether the said amendment (No. 7) shall be withdrawn?
Their Lordships divided: Contents, 69; Not-Contents, 111.

DIVISION NO 3

CONTENTS

Addington, L.

Kagan, L.

Airedale, L.

Listowel, E.

Ampthill, L.

Lockwood, B.

Aylestone, L.

Lovell-Davis, L.

Birk, B.

McIntosh of Haringey, L.

Blatch, B.

McNair, L.

Blease, L.

Mason of Barnsley, L.

Blyth, L.

Molloy, L.

Bottomley, L.

Mountevans, L.

Brain, L.

Nicol, B.

Brooks of Tremorfa, L.

Northfield, L.

Bruce of Donington, L.

Ogmore, L.

Callaghan of Cardiff, L.

O'Neill of the Maine, L.

Carmichael of Kelvingrove, L.

Parry, L.

Pitt of Hampstead, L.

Carnegy of Lour, B.

Ponsonby of Shulbrede, L. [Teller.]

Carter, L.

Cledwyn of Penrhos, L.

Rea, L.

Cocks of Hartcliffe, L.

Renton, L.

David, B.

Ross of Newport, L.

Davies of Penrhys, L.

Russell, E.

Dean of Beswick, L.

Serota, B.

Dormand of Easington, L.

Stedman, B.

Elwyn-Jones, L.

Stoddart of Swindon, L.

Ewart-Biggs, B.

Strabolgi, L.

Ezra, L.

Taylor of Gryfe, L.

Forester, L.

Taylor of Mansfield, L.

Gallacher, L.

Tordoff, L. [Teller.]

Galpern, L.

Underhill, L.

Glenamara, L.

Walston, L.

Graham of Edmonton, L.

Whaddon, L.

Grey, E.

White, B.

Harris of Greenwich, L.

Willis, L.

Houghton of Sowerby, L.

Winchilsea and Nottingham, E.

Howie of Troon, L.

Jeger, B.

Winstanley, L.

NOT-CONTENTS

Ailesbury, M.

Cross, V.

Allerton, L.

Davidson, V. [Teller.]

Arran, E.

Denham, L. [Teller.]

Ashbourne, L.

Dilhorne, V.

Balfour, E.

Dundee, E.

Beaverbrook, L.

Eden of Winton, L.

Belstead, L.

Elibank, L.

Bessborough, E.

Elles, B.

Borthwick, L.

Elliott of Morpeth, L.

Boyd-Carpenter, L.

Faithfull, B.

Brookeborough, V.

Ferrers, E.

Brookes, L.

Fortescue, E.

Brougham and Vaux, L.

Fraser of Carmyllie, L.

Caithness, E.

Gisborough, L.

Campbell of Alloway, L.

Glenarthur, L.

Campbell of Croy, L.

Gray of Contin, L.

Carnock, L.

Grimston of Westbury, L.

Clitheroe, L.

Hailsham of Saint Marylebone, L.

Colwyn, L.

Constantine of Stanmore, L.

Halsbury, E.

Cork and Orrery, E.

Hardinge of Penshurst, L.

Cottesloe, L.

Harmar-Nicholls, L.

Craigmyle, L.

Harvington, L.

Craigton, L.

Havers, L.

Crickhowell, L.

Henley, L.

782

Hesketh, L.

Pender, L.

Hives, L.

Radnor, E.

Holderness, L.

Rankeillour, L.

Hooper, B.

Renwick, L.

Hylton-Foster, B.

Rochdale, V.

Jenkin of Roding, L.

Saltoun of Abernethy, Ly.

Johnston of Rockport, L.

Sanderson of Bowden, L.

Joseph, L.

Sharples, B.

Kaberry of Adel, L.

Skelmersdale, L.

Lauderdale, E.

Stanley of Alderley, L.

Layton, L.

Stodart of Leaston, L.

Long, V.

Strathclyde, L.

Macleod of Borve, B.

Sudeley, L.

Margadale, L.

Swinfen, L.

Marley, L.

Teynham, L.

Marshall of Leeds, L.

Thomas of Gwydir, L.

Massereene and Ferrard, V.

Thomas of Swynnerton, L.

Merrivale, L.

Torrington, V.

Mersey, V.

Trafford, L.

Middleton, L.

Tranmire, L.

Monk Bretton, L.

Trefgarne, L.

Morris, L.

Trumpington, B.

Moyne, L.

Vaux of Harrowden, L.

Munster, E.

Vinson, L.

Nelson, E.

Westbury, L.

Norrie, L.

Wise, L.

Nugent of Guildford, L.

Wyatt of Weeford, L.

Onslow, E.

Wynford, L.

Orkney, E.

Yarborough, E.

Orr-Ewing, L.

Young of Graffham, L.

Oxfuird, V.

Zouche of Haryngworth, L.

Resolved in the negative, and Motion disagreed to accordingly.
6.47 p.m.
On Question, Whether the said amendment (No. 7) shall be agreed to?
Their Lordships divided: Contents, 60; Not-Contents, 106.

DIVISION NO. 4

CONTENTS

Addington, L.

Jeger, B.

Airedale, L.

Kagan, L.

Ampthill, L.

Listowel, E.

Birk, B.

Lockwood, B.

Blatch, B.

Lovell-Davis, L.

Blease, L.

McCarthy, L.

Brain, L.

McIntosh of Haringey, L.

Brooks of Tremorfa, L.

Mason of Barnsley, L.

Bruce of Donington, L.

Molloy, L.

Callaghan of Cardiff, L.

Mountevans, L.

Carmichael of Kelvingrove, L.

Nicol, B.

Northfield, L.

Carnegy of Lour, B.

Ogmore, L.

Carter, L.

Parry, L.

Cledwyn of Penrhos, L.

Pitt of Hampstead, L.

David, B.

Ponsonby of Shulbrede, L. [Teller.]

Davies of Penrhys, L.

Dean of Beswick, L.

Rea, L.

Dormand of Easington, L.

Renton, L.

Elwyn-Jones, L.

Ross of Newport, L.

Ewart-Biggs, B.

Russell, E.

Ezra, L.

Serota, B.

Forester, L.

Stedman, B.

Gallacher, L.

Stoddart of Swindon, L.

Galpern, L.

Strabolgi, L.

Glenamara, L.

Taylor of Gryfe, L.

Graham of Edmonton, L.

Tordoff, L. [Teller.]

Grey, E.

Underhill, L.

Harris of Greenwich, L.

Whaddon, L.

Houghton of Sowerby, L.

White, B.

Howie of Troon, L.

Winstanley, L.

783

NOT-CONTENTS

Ailesbury, M.

Kaberry of Adel, L.

Allerton, L.

Kenilworth, L.

Arran, E.

Lauderdale, E.

Balfour, E.

Layton, L.

Beaverbrook, L.

Long, V.

Belstead, L.

Macleod of Borve, B.

Bessborough, E.

Margadale, L.

Borthwick, L.

Marley, L.

Boyd-Carpenter, L.

Marshall of Leeds, L.

Brookeborough, V.

Massereene and Ferrard, V.

Brookes, L.

Merrivale, L.

Brougham and Vaux, L.

Mersey, V.

Caithness, E.

Middleton, L.

Carnock, L.

Monk Bretton, L.

Clinton, L.

Monson, L.

Clitheroe, L.

Morris, L.

Colwyn, L.

Munster, E.

Constantine of Stanmore, L.

Nelson, E.

Cork and Orrery, E.

Norrie, L.

Cottesloe, L.

Nugent of Guildford, L.

Craigavon, V.

Onslow, E.

Craigmyle, L.

Orkney, E.

Crickhowell, L.

Orr-Ewing, L.

Cross, V.

Oxfuird, V.

Darcy (de Knayth), B.

Pender, L.

Davidson, V. [Teller.]

Radnor, E.

Denham, L. [Teller.]

Rankeillour, L.

Dilhorne, V.

Renwick, L.

Dundee, E.

Rochdale, V.

Elibank, L.

Saltoun of Abernethy, Ly.

Elles, B.

Sanderson of Bowden, L.

Elliott of Morpeth, L.

Sharpies, B.

Faithfull, B.

Skelmersdale, L.

Ferrers, E.

Stanley of Alderley, L.

Fortescue, E.

Stodart of Leaston, L.

Fraser of Carmyllie, L.

Strathclyde, L.

Gisborough, L.

Sudeley, L.

Glenarthur, L.

Swinfen, L.

Gray of Contin, L.

Teynham, L.

Grimston of Westbury, L.

Thomas of Gwydir, L.

Hailsham of Saint Marylebone, L.

Thomas of Swynnerton, L.

Trafford, L.

Hardinge of Penshurst, L.

Tranmire, L.

Harmar-Nicholls, L.

Trefgarne, L.

Harvington, L.

Trumpington, B.

Havers, L.

Vaux of Harrowden, L.

Henley, L.

Vinson, L.

Hesketh, L.

Westbury, L.

Hives, L.

Wyatt of Weeford, L.

Hooper, B.

Wynford, L.

Hylton-Foster, B.

Yarborough, E.

Jenkin of Roding, L.

Young of Graffham, L.

Johnston of Rockport, L.

Zouche of Haryngworth, L.

Joseph, L.

Resolved in the negative, and amendment disagreed to accordingly.
6.54 p.m.
Lord Gallacher Lord Gallacher moved Amendment No. 8:
Page 195, line 1, leave out sub-paragraph (3).
The noble Lord said: My Lords, in moving this amendment on behalf of my noble friend Lord Mclntosh of Haringey, I shall speak also to Amendment No. 9. The amendment returns to concerns raised at the Committee stage by the noble Lord, Lord Moran, and others. The issue is the removal of the funding constraint on the NRA Whereby the Secretary of State may require any surplus held by the authority, whether on capital or revenue account, to be paid to the Treasury. The amendment would remove that power.
The noble Lord, Lord Moran, spoke in detail at he Committee stage about the functions of the NRA
784
and its likely expenditure profile. He pointed to government assurances that the NRA would be given all the resources that it needed but drew attention to the fact that such resources were vulnerable to the extent that they relied on the Exchequer grant. I made a similar point on Second Reading. So did other noble Lords.
In the view of the noble Lord, Lord Moran, the scope for the NRA to raise funding through charges to a greater extent than presently envisaged would be preferable. However, the fact that any surplus might be appropriated by the Treasury would make it more likely that it would be spent before the end of the financial year. Equally, the opposite view could be taken; namely, that any balance should be spent on the environment before being taken back to the Treasury and that any other policy on the part of the Government would be at the expense of the environment. A rush to spend balances before appropriation is not conducive to planned expenditure.
If the Government's objective is to exercise a financial discipline on the NRA and not allow it to become profligate in spending grant, it would surely be possible to devise a system whereby, if the authority becomes regularly and substantially profitable after the initial years, its grant could be progressively adjusted over a period of time. What is undesirable is that unspent funds, which could be put to good use, should have to be given to the Consolidated Fund. The Government say that they do not require the NRA to make a profit. The issue is that an increase in income for the NRA from various water users is a possible source of spending on the environment.
Much has been made of the need to raise water charges to consumers to cover that spending. Although the amounts involved may not be substantial, designated schemes under the particular control of the NRA could benefit directly from relatively small amounts of well targeted expenditure. That point was also made by several noble Lords at the Committee stage. If the Government are concerned that the money might be spent other than wisely on environmental projects, it would presumably be within their power, either by amendment to the Bill or by direction to the NRA, to establish the basis on which the money should be spent or invested.
As I have said, that is the purpose of Amendment No. 8. Amendment No. 9 is consequential. I beg to move.
The Earl of Arran: My Lords, as the noble Lord, Lord Gallacher, has pointed out, this amendment and the principles and policies behind it were very well aired in Committee by my noble friend Lord Hesketh who said that the NRA will be a public sector body exercising monopoly powers in respect of some of its functions. It must therefore be subject to the financial controls appropriate to a body responsible for voted expenditure. These controls do not allow the carrying over of large surpluses or deficits from one year to the next. We have made clear that the right way for a national body like the NRA to be funded is by grant-in-aid from the Exchequer.

785
Part of the planning process required for deciding the necessary levels of grant-in-aid for the NRA will involve the NRA in providing accurate and reliable forecasts of its income and expenditure. We accept that it may sometimes be necessary for the NRA to carry over relatively small amounts of cash at the end of a financial year to allow for the normal flow of business. We do not anticipate that the NRA will carry forward deficits on the majority of its functions. With proper planning the NRA should be able to work within its budgets. If cash-flow requirements so dictate, there is provision under paragraph 18 of Schedule 1 for the NRA to undertake temporary borrowing within the year concerned. In an extreme case, there could be an application for additional grant-in-aid.
We must make it absolutely clear that if a large surplus were to arise that would indicate that grant-in-aid had been given to the NRA in advance of need; taxpayers would have contributed more than was necessary towards its funding. The only other way in which the NRA could generate such a surplus would be if, at some time in the future, it was in a position to raise more in charges than it needed to finance its activities and did so—in other words, that it began to make a profit. In either of these situations, the appropriate course must be for the Exchequer to recover the surplus. The fact that the NRA depends for its funding on the Treasury must mean that any surplus should be returned to the Treasury. I should emphasise that the position with regard to flood defence is rather different. First, it will not require the support of grant-in-aid as the costs of the NRA's flood defence work will be met entirely through local authority precepts and MAFF and Welsh Office capital grants. Secondly, we recognise that with this major area of NRA activity factors such as the weather may sometimes lead to significant disruptions to planned work programmes or to the need for extra work. Provision already exists with Section 47 of the Land Drainage Act 1976 for the carrying forward of any excesses or deficiencies that may arise on water authorities' land drainage accounts as a result of changes to the planned annual programme of works. That power will transfer to the NRA when it takes up the water authorities' responsibilities for flood defence.
I hope that what I have said has convinced your Lordships that Amendments Nos. 8 and 9 are undesirable. The power to recover surpluses which is set out in sub-paragraph (3) of paragraph 15 of Schedule 1 is well precedented. It is a discretionary power that could be used only after consultation with the NRA.
I should like to repeat once again, as we have so often done in the past, the firm undertaking that the NRA will be provided with the resources it needs to carry out its functions. There is absolutely no need for it to create surpluses to fulfil its duties.
With that particular explanation of the amendment, I hope that the noble Lord may see fit to withdraw it.
7 p.m.
Lord Gallacher: I am grateful to the noble Earl, Lord Arran, for the reply he has given on
786
Amendments Nos. 8 and 9. There is a point on which the Government's case is rather weaker than he made out; this emerged in some detail during our deliberations in Committee. It is that the NRA could cater for a wider range of activity than its grant will allow by raising modest charges on a number of activities on the strict understanding that those charges would be devoted to environmental purposes, and in that way the environmental aspect of the NRA's work would be strengthened. Indeed, the Minister did not rule out that possibility in his reply.
However, it would be a major disincentive, both now and in the future—if such a policy were to be pursued by the NRA and responded to in measure by those who were making a contribution towards those environmental improvements—if the basis of contribution was that there was a strong likelihood that, as a result of creating a surplus at year end, whether on revenue or capital account, the money so subscribed would fall to the Consolidated Fund. That seems to be a disincentive of a major kind. From our point of view it means that the NRA is going to be circumscribed in that particular respect, even though I accept the Minister's assurance that for its normal functions the NRA is going to be amply funded by the Government. That is a welcome announcement and confirms what we were told at Second Reading and at the Committee stage.
In addition, we should take note of the fact that the flood expenditure of the NRA is excluded from the possibility of appropriation of surplus. As the noble Earl has said, that also is covered by existing legal provisions.
On the question of recovering surpluses, I particularly welcome the assurance which the Minister gave me that this power will not be used in respect of main grant; he said, first, that it is a discretionary power and that it certainly will not be used even if surpluses begin to emerge without extensive and prior consultation with the NRA. I am sure that that assurance will be welcomed by the NRA and by those who are charged with the responsibilities which the Bill will place upon that body. In that light, and given that assurance, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 9 not moved.]
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 10:
Page 196, line 31, after ("loan") insert ("and with the consent of the Treasury").
The noble Lord said: With Amendment No. 10 I should like to speak also to Amendments Nos. 11 and 12.
These amendments concern a matter which was debated at some length in Committee but which deserves a further airing in the rather different form that we have now put it forward because of the concerns which were expressed about the amendments brought forward by the Government at Report stage in another place. The House will recall that the Secretary of State introduced amendments at Report stage in another

787
place—which I say at once were intended to be helpful—which gave the National Rivers Authority the power to borrow for unplanned expenditure on flood damage. The words which the Secretary of State used were expenditure:
"for which it had been impossible to plan".
We argued in Committee that that did not make very good sense because experience in the recent past had been that there were a substantial number of items of flood relief expenditure which ought to be planned and which ought not to be treated as an emergency. The money would be more effectively spent if such items were planned rather than treated as an emergency. Yet they were of such a size that to finance them out of current expenditure rather than out of borrowing would be a big mistake financially. The particular example which was given was the Thames Barrier which cost £105 million. If similar expenditure had to be financed without borrowing, it would have to come from the precepts of the regional land drainage committees and therefore from the county councils or metropolitan borough councils in the area.
The point about very large items of flood relief expenditure is that if they are any good they have a very long pay-back period. They are supposed to provide benefits over a very long period of time. In any other kind of business it would be thought to be proper for this to be treated as capital expenditure on which borrowing is possible rather than treated as current expenditure and required to be recouped entirely from precepts over the year or perhaps two or three years in which the expenditure actually occurred. The effect of treating it as current expenditure would be that there would be very large increases in the precepts on local authorities. This would start to cause a great deal of damage to the Government's control of local authority expenditure to which we know the Government pay so much attention.
The noble Lord, Lord Crickhowell—I am sorry to introduce his name again—in his Second Reading speech questioned whether the Secretary of State's restriction to expenditure for which it had been impossible to plan was wise. I agree with him. From the point of view both of sensible thinking about flood relief expenditure and the sensible financing of very large projects it is desirable that the expenditure should be based on borrowing powers and that it should be possible for it to be spread over a considerable period of time.
I am well aware that once one starts this line of argument one comes up against the clammy hand of the Treasury, as the noble Lord, Lord Renton, has so recently and felicitously put it. One comes up against the argument that one cannot have uncontrolled borrowing because that affects the public sector borrowing requirement even at a time when, as at present, we do not have any public sector borrowing requirement. We have only a public sector debt repayment.
Therefore in Amendment No. 10, instead of taking the phrase out, we have inserted, "with the consent of the Treasury". I can see that the noble Lord, Lord Renton, does not like it. However, if the noble Lord,
788
Lord Boyd-Carpenter, were in his place, he might agree that substantial amounts of borrowing ought not to take place without the knowledge of the Treasury. I can well understand the argument that it should be with the consent of the Treasury.
In Amendment No. 11 we are talking about the planned programme of works or emergency measures. In Amendment No. 12 we are widening it somewhat to talk about "programmes for the improvement of the environment". These are already the functions of the National Rivers Authority under Parts I and III of the Bill. The programmes for both flood relief and improvement to the environment are the proper concerns of the National Rivers Authority. We are not proposing in any way to extend the functions of the National Rivers Authority. The programmes may involve substantial amounts of expenditure with a very long pay-back period for which in any normal business borrowing would be right; they should be treated as capital expenditure. We are providing that the Treasury should have an overall control in order to maintain its control of the public sector borrowing requirement.
I believe that these amendments are a responsible reflection of the discussion that took place at Committee stage. I believe that they make good business sense for the National Rivers Authority. They reflect the concerns expressed at Second Reading by the noble Lord, Lord Crickhowell, and others. They do not involve any threat to public expenditure controls because of the requirement for Treasury consents. I commend the amendments to the House.
7.15 p.m.
Lord Renton: My Lords, I am surprised that the noble Lord should move Amendment No. 10. He will not be surprised that I oppose his amendment very strenuously. In Schedule 1 we already have the nonsense of the consent or approval of the Treasury being required on nine different occasions. I need not take up time referring to them. However, there are nine of them. If we add what is in paragraph 15(3) we bring it up to 10 because sub-paragraph (3) refers to "consultation with the Treasury".
The noble Lord, Lord McIntosh, wishes to bring the score to a total of 11. If I may say so, the one to which he has spoken is most inappropriate to the circumstances that we find here. It is a question of the authority being given power to borrow otherwise than by way of temporary loan—the implication there is that for temporary loans it does not need the consent from anyone; it can obtain them—such sums in sterling from the Secretary of State or the Minister as it may require for capital purposes in connection with flood defence functions.
Any loans obtained from the Secretary of State or the Minister have to appear on the accounts presented by the Secretary of State or the Minister to Parliament. That the consent of the Treasury should also be required is overdoing it. It is redundant. It is unnecessary. The Secretary of State or the Minister will have to take responsibility for

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presenting their accounts to Parliament and receiving ex post facto approval for the loans that they have made to the National Rivers Authority, to do work which Parliament says that it has to do.
Why should we bring in the Treasury yet again? It is quite unnecessary. What is more, all these references to obtaining the consent of the Treasury are an adverse reflection on the machinery of Government. If the machinery of Government is working properly—as it normally does—the consent of the Treasury is quite unnecessary. I do not wish to use too strong an expression; but it is not very complimentary to Ministers, including the whole of the Cabinet, to keep on putting into a statute that they shall obtain the consent of the Treasury.
One of these days I hope that the Government on both Front Benches in both Houses will wake up to the poor compliments that they are being paid by having to have these words constantly inserted in statutes. The fact that they have been inserted for years—and we know that they have—does not mean to say that they should be inserted for the rest of time.
I hope that on reflection the noble Lord, Lord McIntosh of Haringey—who showed great wisdom earlier on this matter—will say to himself, "No, perhaps this is not an amendment that I ought to press."
Lord McIntosh of Haringey: My Lords, before the noble Lord sits down—since he will not have another opportunity to answer although I shall—I observe, first, that he makes these comments about the Treasury in the absence of his noble friend Lord Boyd-Carpenter. Secondly, would he care to pass a judgment—that I would much respect—on my other amendments, Amendments Nos. 11 and 12 which are substantive amendments.
Lord Renton: My Lords, I had not taken up time. I have considered them. The noble Lord's other amendments make it even worse. I shall say why in relation to one of them. The noble Lord wants the consent of the Treasury to be obtained for a loan for emergency measures in pursuance of these functions of flooding control. Goodness me, my Lords, the Treasury can take a long time! It therefore makes matters worse.
Baroness White: My Lords, I am still a little unclear about the attitude of the noble Lord, Lord Renton. I can understand, and to a great extent share, his feelings about the Treasury. Anyone who has been the chairman of even the most modest quango knows how infuriating the Treasury can be. I am all for freeing oneself from the clammy hand, or what I would call the Gladstonian dead hand of the Treasury, wherever possible. However, I am very much concerned about Amendment No. 12. There could well be a situation in which it could be to the advantage of environmental interests if the borrowing powers of the National Rivers Authority were possibly extended, not necessarily including the Treasury. I hope therefore that serious consideration will be given to Amendment No. 12, in addition to
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the difficulty about Amendment No. 10. I must admit that I was not here for the Committee discussion on this matter. Therefore I hesitate to do more than draw attention to what I suppose to be a highly desirable amendment at this stage of our deliberations.
Lord Renton: My Lords, before the noble Baroness sits down, I agree that it would be less harmful if the consent of the Treasury did not have to be obtained. Therefore if Amendments Nos. 11 and 12 were moved without Amendment No. 10, that might be a little less harmful.
The Earl of Arran: My Lords, as the noble Lord, Lord McIntosh of Haringey, pointed out, the substance of the amendments had a good airing in your Lordships' House during the Committee stage. They were given a somewhat draughty reception by my noble friend Lord Caithness.
Amendment No. 10 would require that borrowing by the NRA, other than by way of temporary loan and as set out in the remainder of paragraph 18, shall be subject to the consent of the Treasury. It is perhaps difficult to reconcile the Opposition's usual aversion to the Treasury's involvement in matters affecting the NRA's financial arrangements with the wording of Amendment No. 10. But I should point out that as the making of loans will be subject to the Treasury's approval, as my noble friend Lord Renton has already pointed out, under Schedule 1, paragraph 19(1), Amendment No. 10 is unnecessary. Amendments Nos. 11 and 12 have the more substantial effects of enabling the NRA to borrow for a planned programme of flood defence works, and for its environmental improvement programmes.
As my noble friend Lord Caithness explained in Committee, we considered very carefully the extent to which the NRA would need borrowing powers before amending the Bill in another place so as to provide for the possibility of borrowing in respect of its flood defence function. As my right honourable friend the Secretary of State made clear when these amendments were introduced, the use of borrowing powers for flood defence is normally intended to be restricted to circumstances where works are needed for which it had not been possible to plan. This is because water authorities have generally managed without significant new borrowings in respect of flood defence in recent years. There is therefore no reason why the NRA should not be able to provide for the normal run of its flood defence works without recourse to borrowing. The possibility of an unexpected need for major expenditure—as could occur after a major flooding emergency—is the main reason we consider that it is right for the NRA to have borrowing powers.
However, we noted the point made by the noble Lord, Lord McIntosh, in Committee that when there was an extensive programme of flood protection works it could be difficult for local authorities to fund the NRA's precept out of a single year's revenue income. We accept that there are circumstances where this could be the case. But we do not consider it right that it should be the NRA that should borrow

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in these circumstances. It must be right for the authorities themselves to take decisions to defray expenditure, given that the NRA's flood defence work will be carried out ultimately for them and paid for by them. It will be possible for local authorities to receive credit approvals to cover such borrowing under the new capital finance system.
We see no case for borrowing for the remainder of the NRA's functions. These functions are generally supported by Exchequer grant-in-aid, or there is the facility in the Bill to pay grant-in-aid in respect of these functions. This means that it will always be possible to take account of the need for major capital expenditure in the public expenditure survey bids submitted by the NRA. On the rare occasions when a major capital project was required, increased grant-in-aid could be paid to finance it. There is therefore no need for the NRA to borrow on these functions. In this respect and with these arguments I ask the noble Lord to withdraw the amendment.
Lord Crickhowell: My Lords, perhaps I may say how much I welcome the recognition by the Government of the advice given by the NRA that there might be a problem over local authority precepts. It was our principal remaining point of concern, particularly in the light of the fact that the amendment moved in another place is entirely satisfactory as a clause. The only issues that concerned us were the statements made by Ministers at the time about its application. I do not understand the details of the local authority borrowing mechanisms enough to comment about the way in which this will work, but it is a recognition that will be welcomed throughout all the organisations involved in the flood defence work around the country, among which there was great anxiety about these points.
The fact that the Government have recognised this problem and believe that they have brought forward a solution will be particularly welcome, especially as the clause as it stands is satisfactory, so long as the Government recognise that there is a problem and interpret the matter in the most reasonable and practical way.
Lord McIntosh of Haringey: My Lords, two issues have been raised in the debate. If the noble Lord, Lord Renton, will forgive me, there was the minor or secondary issue, and the other was the substantive issue of how to secure major capital works and planned programmes for flood relief and for environmental improvement, paid for sensibly. On the first issue, which is Treasury consent, I should have been prepared if necessary to withdraw that amendment and to pursue Amendments Nos. 11 and 12. The noble Lord, Lord Renton, has a point about the need for Treasury consent. All I can say is that introducing Amendment No. 11 is evidence, if evidence were needed, of my concern for the proprieties, my moderation, my anxiety to achieve results by agreement rather than by confrontation, which has always been a feature of my approach to these matters. But if I find myself criticised from the left by the noble Lord, Lord Renton——
Lord Dean of Beswick: From the left, my Lords?
Lord McIntosh of Haringey: From the left—then I listen very carefully to what he says. However, the question does not arise because the noble Earl, Lord Arran, has made what appears to me on the face of it a very useful reply. I should like to read it carefully before deciding whether any further action is required at another stage.
As I understand what the Minister has said, where substantial items of expenditure ought to be spread over a number of years the local authorities may—I can understand why he cannot say "shall", because not all proposals for capital expenditure are of equal value—be given the credit authority to borrow money for the purpose. It is better that such borrowings may be eligible for Exchequer grant, which would not otherwise be the case. If that is so, and if having studied the Minister's words carefully the local authorities are satisfied that this is an adequate protection, I merely thank him and I shall not return to the matter. If there are any other concerns on reading the Minister's remarks, I am sure he will understand that I shall feel obliged to return to the matter.
The Minister has shown a recognition of the issue at stake. It is on that basis that it is appropriate that I should seek the leave of the House to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 11 and 12 not moved.]
The Earl of Arran: My Lords, with your Lordships' agreement, this may be an appropriate stage at which to break for dinner. I suggest that we return to the Report stage at 8.30 p.m. I beg to move that further consideration on Report be now adjourned.
Moved accordingly, and, on Question, Motion agreed to.

Fair Employment (Northern Ireland) Bill
Brought from the Commons; read a first time, and to be printed.

Licensing (Amendment) Bill [H.L.]
7.30 p.m.
Lord Brooks of Tremorfa: 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—(Lord Brooks of Tremorfa.)
On Question, Motion agreed to.
House in Committee accordingly.
[The Baroness Serota in the Chair.]
Clause 1 [Modification of permitted hours]:
Clause 1 agreed to.
Clause 2 [Short title and extent]:
Lord Brooks of Tremorfa Lord Brooks of Tremorfa moved the following amendment:
Page 1, line 7, at end insert—
("( ) This Act shall come into force at the end of the period of two months beginning with the date on which it is passed.").
The noble Lord said: I wish to express my thanks to all noble Lords who supported me on the Second Reading of the Bill. The purpose of the amendment is simple. It was suggested to me that after the Bill receives Royal Assent some time will be necessary in order for the licensing authorities and the clubs to prepare themselves for its provisions. I beg to move.
Lord Dean of Beswick: From these Benches I wish to express support for the amendment. It is a tidying-up amendment which makes sense. It makes the Bill workable by giving the time needed for people to become organised. On that basis we support the amendment.
On Question, amendment agreed to.
Clause 2, as amended, ageed to.
House resumed: Bill reported with the amendment.
Lord Henley: My Lords, I beg to move that the House do now adjourn during pleasure until 8.30 p.m.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 7.33 to 8.30 p.m.]

Water Bill
Consideration of Amendments on Report resumed.
Clause 2 [Regional rivers advisory committees]:
The Earl of Radnor The Earl of Radnor moved Amendment No. 13:
Page 2, line 34, after ("committees") insert (", consisting of persons who are not members of the Authority,").
The noble Earl said: My Lords, I shall also speak to Amendment No. 16 which is consequential and to Amendment No. 135 which is of a similar nature. I do not believe there is need to spend too much time on the amendments. They are entirely to do with the advisory committees which the NRA is obliged to form: first, the regional advisory committees and secondly, under Clause 135, the fisheries advisory committees.
Under the Bill it is possible for the NRA to place some of its own members upon the committees although the legislation says that they are not, so to speak, to stack the committees with them. I feel very strongly and others, including the noble Lord, Lord McIntosh of Haringey, agree, I believe, that the effectiveness of these advisory committees will to a certain extent, perhaps to a fairly large extent, be spoiled if they have members of the authority upon them. It will produce a rather strange situation of people sitting on an advisory committee advising another committee on which they also sit.
I am sure that both the regional and the fisheries committees will be of very considerable importance in the passing of information and ideas to the NRA. It is far better that they should be kept at arm's length. This will sharpen the impact of their advice. I am certain that liaison can be arranged in some more informal way than having NRA members upon those committees. Therefore, the amendment simply precludes members of the authority from sitting on the regional advisory committees and on the fisheries advisory committees. I beg to move.
The Earl of Caithness: My Lords, when the Committee considered Clause 2, I undertook to reconsider the points put forward by noble Lords in support of a similar amendment. We have always made clear that the members of these committees should generally be outsiders. The reason for allowing for the possibility of a member of the NRA board being on a regional committee was that this could be useful in some very limited circumstances.
However, we have reflected further on this point and also consulted with the NRA Advisory Committee. We accept that there would be no particular difficulties in providing—as these amendments now do—that membership of the NRA board should not overlap with membership of any of the NRA's regional committees and that there would be positive advantage in the NRA's regional committees being made up entirely of non-board members. Consequently when the Committee was considering amendments to the fisheries provisions, my noble friend Lady Trumpington announced our intention to bring forward amendments for consideration on Report which would not permit NRA board members to serve on any of the three types of regional committees.
I am therefore grateful to my noble friend Lord Radnor for putting forward Amendments Nos. 13, 16 and 135 which deal with the regional rivers advisory committees and the regional fisheries advisory committees. I commend these amendments to the House together with my Amendment No. 133 which has the similar effect for regional flood defence Committees.
The Earl of Radnor: My Lords, I should like to thank my noble friend, first, for saying that he would come forward with something and then for being as good as his word and, secondly, for filling in the gap of the flood relief committees which I had missed. I am sure that this is an improvement to the Bill. I am very grateful.
On Question, amendment agreed to.
Lord Gallacher Lord Gallacher moved Amendment No. 14:
Page 2, line 39, leave out ("consider") and insert ("have regard to").
The noble Lord said: My Lords, this amendment seeks to leave out the word "consider" at line 39 and to insert in place of that the words "have regard to". The amendment repeats an amendment moved by my noble friend Lord McIntosh in Committee when he argued that the word "consider" was close to the bottom of the range of notice which had to be taken by a body such as the National Rivers

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Authority or another organisation. The words "have regard to" are in our view at least one step further up the ladder. We argued then that it was important to have people of ability serving on the regional rivers committees and that they would need to be assured that the National Rivers Authority was paying serious attention to the advice which was coming forward. The amendment did not go one stage further in asking the National Rivers Authority to "take into account" the views of the regional rivers committees. It was put forward as a sensible proposal.
Furthermore, the document issued that day by the National Rivers Authority Advisory Committee setting out details of its work appeared to make no reference to the recommendations of the RRACs in the way in which they would be treated by the authority. It was also the case that the Government seemed to be considering their position in relation to the proper role of RRACs given the existence of the document and their willingness to set out in response to an earlier amendment that RRACs would include important river interests such as recreation, conservation, industry, local government and agriculture.
The noble Earl, Lord Caithness, said at col. 129 that the NRA Advisory Committee would be giving careful consideration to the terms of reference and composition of the RRACs and would be issuing the document referred to. The noble Earl said that he was confident that the NRA would pay careful attention to the points made in Committee about the role of the RRACs and would also welcome comments from interested parties. It is in those circumstances that this amendment is re-submitted in order to obtain a more considered response from the Government and, secondly, to underline to the advisory committees the need to pay serious attention to advice from the RRACs. We consider that the best way to do that is by amending the Bill rather than leaving the lax requirement of "consider" as an impediment to closer working relationships on the face of the Bill. I beg to move.
Lord Hesketh: My Lords, this amendment which is very similar to an amendment moved in Committee would require the NRA to "have regard to" rather than to "consider" any representations made to it by an advisory committee. By now noble Lords will have had the opportunity to study the consultative document prepared by the NRA Advisory Committee on the NRA's regional committee structure. It will be clear from this document that the NRA Advisory Committee has already given considerable thought to establishing the right balance of membership and sensible terms of reference for the NRA's committees. I know too that the NRA Advisory Committee whose members have all now been offered appointments to the NRA board on its establishment takes very seriously the role of the regional committees and will note the concerns expressed by noble Lords.
However, as I made clear in Committee, this amendment would not affect the duties of the NRA with regard to representations of advisory committees. The words "to consider" are the
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appropriate words to use in this context and are used in relation to representations in many other clauses of this Bill and in other legislation. Indeed, earlier today I noted that in his Amendment No. 4 the noble Lord, Lord McIntosh of Haringey, would have the NRA "consider" the representations from his proposed regional divisions.
Clause 2 makes it a duty of the authority to consult its regional rivers advisory committees and to consider any representations made by those committees. Indeed, these important committees will be the focus for consultation by the NRA about all matters affecting river catchments at the regional level. Of course, the NRA will give reasonable consideration to any representations made to it by these advisory committees. It must be in the authority's own interests to do so. Indeed, these important committees will be the focus for consultation by the NRA about all matters affecting river catchments at regional level.
The NRA will give reasonable consideration to any representations made to it by these advisory committees and it must be in the authority's own interests to do so. Furthermore, as I made clear, Ministers will expect the NRA to comment in its annual report on the functioning of the regional rivers advisory committees and in particular to indicate the major issues on which the committees have been consulted or have offered advice, and the action taken on them by the NRA. Indeed, under Clause 149(4) the Secretary of State can require the NRA to include all such information in its annual report.
I am satisfied therefore that the Bill already satisfactorily provides for the views of the regional rivers advisory committees to be given appropriate consideration and publicity. It is for that reason we do not believe this amendment would add to the Bill and I therefore hope that the noble Lord, Lord Gallacher, will see fit to withdraw it.
Lord Gallacher: My Lords, I thank the noble Lord, Lord Hesketh, for his reply to the amendment and the further information that he has given regarding the obligation which the NRA will have, first, to comment in its annual report on the work of the RRACs and, secondly, to give in some detail its response to initiatives by the RRACs during the year in which the NRA is reporting. The fact that the Minister is looking for this to be done ensures, I believe, that it will be done and that due publicity will therefore be given to the work of these important river committees. For that reason it is appropriate for us not to quarrel excessively on whether the word "consider" would be better replaced by the three words "have regard to". As I said, I think the assurances are in the main satisfactory and for that reason I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Gallacher Lord Gallacher moved Amendment No. 15:
Page 3, line 12, after ("question") insert ("including persons
representative of environmental and recreation organisations and
of local authorities in the region").
The noble Lord said: My Lords, this amendment also returns to issues debated in Committee. An

797
amendment then asked specifically for representation on the regional rivers advisory committees nominated by or representing voluntary conservation and recreation bodies. At that time the noble Earl, Lord Caithness, indicated that the RRACs would have a membership of 15 to 20. Members would be selected from the following areas of interest: agriculture, forestry and landowner interests; conservation and landscape interests, including statutory and voluntary bodies; industry and commerce, including abstractors and dischargers and river dependent industries generally; local government; national parks authorities; and recreational interests, including sports councils. Water service and other interest groups would also be represented.
This range of representation set out by the Minister clearly goes wider than this specific amendment. The purpose of the amendment, however, is twofold. First, it is to argue that on the face of the Bill we should have reflected the statements, at least in outline, that Ministers made in Committee and which although welcome extend only to the initial appointments to the RRACs. There is nothing in the Bill to prevent a different structure of appointments at a later stage if the NRA so decides. To highlight the particular need for representation of environmental and recreational organisations as suggested by an earlier amendment in Committee, and of local authorities in particular, it would be helpful if the Minister could state the means by which suggestions are likely to be sought from these two groups of organisations as to the representation envisaged.
For local authorities, for example, there will clearly be a need for some sort of selection to enable a small number of persons—perhaps two or three—to represent the local authorities in a substantial region covering broadly one-tenth of the country in each case. For example, does the Minister envisage discussions with local authority associations in seeking suggested names?
Whether or not this amendment is acceptable it would be helpful if the Minister would undertake to seek to find a form of words which, while not constraining the necessary flexibility in future years to vary in detail the balance of organisations appointed to reflect changing needs, nevertheless meets the broad purpose of the RRACs as advisory bodies representing the main interest groups involved. We believe that such formulation should be placed on the face of the Bill and in our view it would not inhibit the NRA if it were so included. For those reasons I beg to move.
8.45 p.m.
Baroness David: My Lords, I believe it was suggested that my Amendments Nos. 17 and 18 should be grouped with this amendment. I decided that I would prefer to discuss my amendments separately because the amendments are trying to do marginally different things and I thought it would be a good idea to hear what was said on this amendment. I support this amendment, but it mixes the environmental, recreational and local authority
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interests whereas my amendment specifically deals with the conservation aspect. Therefore although I should be delighted if the Government were to accept this amendment I felt I should give the reasons why I preferred to have my own amendments debated separately.
The Earl of Arran: My Lords, on this amendment I make it quite clear from the outset that the regional rivers advisory committees will be important committees advising the NRA on its river basin management function. In the December 1987 policy statement, and repeatedly since, we made it clear that the committees will need to have members representative of all the main interests concerned in using and conserving the rivers, including the environmental, recreation and local government interests identified in this amendment and also industry and agriculture.
As the noble Lord knows, the NRA Advisory Committee has been giving considerable thought to the composition of these committees and to how they should be appointed and its views are set out in the consultative document issued on 2nd May. This document states that members would be selected from a list of areas of interest which include those specified in the amendments. The document goes on to state that, although the NRA will inevitably need to retain sufficient flexibility to make the membership appointments in each region reflect local circumstances and the regional balance of particular interests, such flexibility should operate within the constraints set down in the document which will constitute national guidelines on the role and composition of these committees.
The NRA Advisory Committee is already therefore in the process of drawing up national guidelines for its regional committees which wholly meet the provisions in Amendment No. 15. But I must emphasise again that these are committees of the NRA and it must be for the NRA to devise comprehensive guidelines for its own committees. It does not seem appropriate to include in the Bill a provision covering one of the many issues to be considered by the NRA in appointing its regional rivers advisory committees. For those reasons I ask the noble Lord, Lord Gallacher, to withdraw his amendment.
Baroness Lockwood: My Lords, can the Minister assure us that the guidance notes which he mentioned will provide sufficient scope for the voluntary conservation societies, which are perhaps not represented on the advisory bodies, to make their views adequately known? There is some concern among the voluntary organisations, particularly those which have representation on the consultative committees at present, that the umbrella organisations mentioned in the consultative document will not provide sufficient scope for individual bodies that may have a particular point of view, which it is important should be made known, to express themselves. Therefore this would need to be covered by the guidance notes to ensure that these organisations have some means of directly making their views known. Can the Minister assure us on that point?
The Earl of Arran: My Lords, this particular policy document is all-embracing. I can assure the noble Baroness that the membership will be selected from both statutory and voluntary bodies as is clearly laid out in Annex C. The noble Baroness has my assurance.
Baroness Lockwood: My Lords, perhaps I may clarify the point. I do not need assuring on that point because I was perfectly aware from the consultative document that that would be so. But not all of the organisations that are currently represented on the committees will necessarily be represented on the new advisory committees. We wish to have an assurance that there will be some means by which they can make their views known, even if it is only through representation; but an adequate channel representing their views other than membership of the committees. That will need to be specified quite clearly in the guidance notes which the Minister mentioned in his speech.
Lord Crickhowell: My Lords, as the chairman of the body responsible for drawing up this document that has been referred to and as someone who has been told that he will be taking over the responsibilities of the NRA if this Bill is finally passed, would it be helpful to say that we fully understand and appreciate the point that has just been made? These documents are not in their final form. We are consulting and listening to representations about them. We have yet to receive large numbers of the representations.
What has been said by the noble Baroness indicates the need to have a flexible structure. One of the points of which we are acutely aware is that there are a very large number of individual organisations: both those which come under the umbrella organisations and other voluntary organisations. There is no conceivable way in which each and every one of them can be represented on the committees if we are to have committees that are manageable.
Therefore we contemplate that regarding those organisations that are answerable through the umbrella organisations, it will be necessary for those umbrella organisations, assisted in any way that seems practicable by the NRA, to have arrangements for consultations with their constituent bodies. One must remember that the individuals who will actually sit on the regional rivers advisory committees will be representing a broad spectrum of interests and not just the interests of the particular body of which they are a member. That is a point which is not always borne in mind by the representatives of such organisations.
Concerning the wider circle of voluntary bodies, we are acutely aware of the need for the regional rivers advisory committees themselves to think of ways of making sure that they know the views of that wider constitutency. I hope the House will think that it is proper that in each region according to the circumstances and the situation there (they differ enormously) it would be right for those committees to think of the practical ways of getting the flow of information rather than to seek to impose any rigid structure in the Bill.
800
I give the assurance that my committee is very much aware of that particular problem. It has considered it at the meetings of the advisory committee and will consider it again when we have the representations to hand. We shall be most anxious to arrive at working arrangements that make people feel that the regional rivers advisory committees are indeed listening to the points that they have to make, and that they are also making sure that they are fully and adequately considered by the NRA in its decision-making process.
Lord Gallacher: My Lords, I am grateful to the noble Lord the Minister for his reply; and I am equally grateful to the noble Lord, Lord Crickhowell, for his answer. I hope that it will not be taken amiss on the Government Front Bench if I say that I am more reassured by what the noble Lord, Lord Crickhowell, had to say than what was said by the Minister. However, that is a common complaint these days.
I believe the fear that is perhaps underlying this amendment is the experience that organisations have had—not of course with these new bodies which are yet to be tried and tested regarding composition and effectiveness—but concerning existing bodies; namely, consumer protection machinery and what remains of the nationalised industries besides the transport users' consultative committees and the like. I fear that the experience over the years of organisations that are "consulted" has been that a great deal of time and trouble have been taken in order to submit particulars of very worthy people who have a contribution to make, according to the proposing organisations, and then nothing more is heard of these nominations. Yet when the matter is raised face to face, as it were, with Ministers of all political complexions, we are often confronted with the assurance that they are desperately short of names and unable to get suitable people. Therefore, there is a credibility gap between the fact that names are submitted and the assertion that when it comes to appointments there is a shortage.
Judging by the spectrum of bodies mentioned by the noble Lord, Lord Crickhowell, and by the Minister himself, there is certainly going to be no shortage of nominations regarding the RRACs. However, I should like to feel that the process of consultation will be thorough and that in point of fact those organisations that are submitting names will believe, and be seen to believe, that the names they are submitting are given serious consideration by the NRA. As a consequence, we shall then have in perpetuity, so to speak, broadly-based RRACs taking account of all the interests concerned besides committees that are not only broadly based but well composed and able to discharge the important functions which the noble Lord, Lord Crickhowell, has described to us. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Speaker (Baroness Serota): My Lords, in calling the next amendment I point out to the House that if it is agreed to I cannot call Amendment No. 17 in the name of the noble Baroness, Lady David.
The Earl The Earl of Radnor moved Amendment No. 16:
Page 3, line 12, leave out from ("question") to end of line 14.
The noble Earl said: My Lords, this amendment is consequential on Amendment No. 13. I beg to move.
On Question, amendment agreed to.
[Amendment No. 17 not moved.]
Baroness David Baroness David moved Amendment No. 18:
Page 3, line 14, at end insert ("and

(iii) include at least one person nominated by the Nature Conservancy Council, one by the Countryside Commission and at least three persons appointed after consultation with voluntary conservation, landscape and amenity bodies;").

The noble Baroness said: My Lords, my Amendment No. 17 has gone, but I do not believe that that matters very much. The substantive one is Amendment No. 18. At Committee stage I moved Amendment No. 23 which appeared in the Official Report on 2nd May at col. 128. The aim of the amendment was to provide for statutory guidance to be made available to the National Rivers Authority on the appointment of members to the regional advisory committees. In responding, the Minister announced that the NRA had that day published draft guidelines concerning the membership of the regional rivers advisory committees, flood defence and fisheries committees. That resulted in the withdrawal of amendments promoted by both sides of the Chamber. These amendments were promoted by me on this side of the Committee and also by the noble Lord, Lord Norrie, on the other. We believed that they would strengthen and improve the Bill.
I shall restrict my immediate concerns to the regional rivers advisory committees, which are dealt with in Clause 2. The draft guidance that was published by the NRA on 2nd May provides some idea of the possible shape of membership of the RRACs. But it offers no assurance that conservation interests will be properly represented. In particular the NRA's guidance does not recognise the separate responsibilities and locus of the statutory versus the voluntary bodies. The Nature Conservancy Council (which are the Government's statutory advisers on nature conservation) consider that it is important for the new RRACs to include members from the statutory bodies—namely, the NCC and the Countryside Commission—besides the voluntary conservation bodies such as the RSPB, the Royal Society for Nature Conservation and the CPRE.
The voluntary conservation movement has developed a strong working relationship with the water authorities on water resource management and wetlands conservation. The RSPB is represented by its professional staff on seven out of nine existing regional recreation and conservation committees and has found its representation on those committees to be invaluable. The RSPB has a wealth of expertise located in regional offices throughout Great Britain and Northern Ireland. Its expertise and professionalism are reflected in its rivers and wildlife handbook. I am sure that most Members of the House will have seen and studied it and realised its great worth. It provides detailed advice to river
802
engineers on river management. Continued representation on the RRACs by interest groups such as the RSPB will help to ensure that good practical conservation advice is available to the NRA.
The angling interests will in future be represented by the new regional fisheries advisory committees established under Clause 140 and as such will leave more scope for conservation and other amenity interests to be represented on the RRACs. By providing for five RRAC members from statutory and voluntary bodies, up to 15 places will remain to represent the interests of local authorities, farmers and landowners, industry and other interest groups. The Minister has tried on several occasions to assure Parliament that voluntary bodies are likely to be included on the RRACs but those are false assurances. Is he aware of the draft NRA scheme published by the Yorkshire Water Authority which excluded all voluntary conservation and recreation groups from its proposed RRAC?
By adopting the amendment on the Marshalled List, which does not mention any specific voluntary bodies, adequate representation of statutory and voluntary conservation and amenity interests will not be left to chance. The NCC, the RSNC and the CPRE all support the amendment and all would wish to carry on the excellent relationships that have been created.
I have listened to the noble Lord, Lord Crickhowell, and I am delighted by his assurances. But they are only assurances. We want something on the face of the Bill. I totally understand his view that representatives should not speak for their organisations but should be present as individuals. That I totally appreciate and approve of. However, they still wish that the voluntary bodies should be represented. I have of course read the document and the annexes too, and I think I have understood them. But we want something on the face of the Bill. I beg to move.
Lord Ross of Newport: My Lords, when I speak in support of the amendment I do not rise as the late Willie Ross and I apologise to his descendants for any offence that may have been taken. It was supposed to be me who supported the noble Baroness, Lady David. She has put the case very well indeed.
I am delighted that the noble Lord, Lord Crickhowell, is present because I do not quite understand—the point has already been made by the noble Baroness—just exactly how the membership of the RRACs is to be decided. Perhaps I may throw the question to him over the Minister's head. Will he ask the water authorities to nominate who those people should be, or will the decision come from him and the NRA? That is the point which the noble Baroness made about Yorkshire.
I would draw the attention of the Minister to the leading article in today's Guardian. We in this House must take note of the strength of the voluntary bodies about which we are talking. There has been a phenomenal growth in the membership of green groups. The top 15 organisations involved with environmental problems already have a higher income than the trade union movement and on

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present trends will have overtaken its membership by the 1990s. We are talking about bodies with enormous support in this country.
I am honoured to be chairman of Wildlife Link. I did not seek the position but I was delighted to be asked to do it. It provides an umbrella movement for more than 40 environmental organisations, including the CPRE, the National Trust and so on. I take on board the point that the noble Lord, Lord Crickhowell, makes. One cannot have every individual voluntary body demanding to be represented on these various committees. However, I have managed to take delegations representing that whole cross-section to see Ministers. They have been able to put forward views which have been accepted right across the board.
This amendment should not be ignored by the Government but should be taken on board. The voluntary bodies can come together and nominate worthwhile people who can contribute the kind of information which I am sure the noble Lord, Lord Crickhowell, would want. I hope that a provision of this kind will be written into the Bill. Surely the Nature Conservancy Council and the Countryside Commission are the recognised bodies. Surely a way can be devised whereby the three other nominations can be arrived at without any real problem. They have already contributed a great deal of knowledge to the existing bodies.
I come back to the fact that these organisations have enormous support in the country. The RSPB, the CPRE and the World Wildlife Fund have huge memberships and great support. It is important that this point is acknowledged. I take on board what the noble Lord, Lord Crickhowell, said—he does intend to have these people—but we really want slightly more than that. That is why I support the amendment.
The Earl of Balfour: My Lords, by all means specify who should be on the committee but I do not think that that should be in primary legislation. It should be remembered that primary legislation will be needed to make any alterations. I am all for such a provision in guidelines or recommendations because those are much easier to change but I am against specifying the bodies, as is proposed in Amendment No. 18. One would restrict a wide choice. Other bodies will appear and other circumstances will arise. The National Rivers Authority will have all these thoughts very much in mind.
If the amendment is accepted we will have laid down in this one subsection that there shall be these five people on the committee. Therefore one could end up with committees which are too big. I am most concerned about the matter.
Lord Brain: My Lords, I am also most concerned about the amendment. I think in particular the wording is a little difficult. It includes the words,
"at least one person nominated by the Nature Conservancy Council".
Is it intended to nominate one person only for one committee, or will a broad band be put forward from which the authority would be allowed to select? It seems to me that the wording is a little faulty in that
804
respect. Like the noble Earl, Lord Balfour, I believe that these committees must be totally flexible. I have a suspicion that if we do not have nominated representatives on each committee, the lobbying by the Nature Conservancy Council could be much stronger because it could convince a wide range of people. But if there is a nominated member that person is already seen to be parti pris and therefore his force on the authority is much weaker.
I wholeheartedly support the principles behind the amendment. All this information needs to be considered actively by the National Rivers Authority. However, I do not think that this is the right way to do it.
Lord Crickhowell: My Lords, I hesitate to speak because I feel I am treading a tightrope. I have to avoid answering points which should properly be answered by Ministers and commenting upon an advisory document issued by the committee which I chair. I hope that I do not fall off that tightrope.
I agree very much with my noble friend who spoke about the problem of writing constraints into primary legislation and the rigidities that that creates. I agree also that the clause as drafted would commit us to having five people in every case on each committee around the country whatever the circumstances may be.
However, there is another point which has not yet emerged. That is the suggestion implicit in the amendment that the persons nominated—a list of names may well be put forward from which individuals will be selected—by the Nature Conservancy Council and by the Countryside Commission will be different and separate from those of the voluntary bodies. It may be that in some cases the Nature Conservancy Council and the Countryside Commission will nominate members who directly represent those organisations. However, I believe that it is far more likely that the generality will be that they will be nominating the representatives of voluntary bodies themselves. For example, the Nature Conservancy Council may well put forward a name from the RSPB.
That example illustrates that we are not talking about separate bodies. But, having said that, we are equally clear that once the Nature Conservancy Council and the Countryside Commission have put forward names many voluntary bodies will rush forward and say, "We have not been chosen; we want to be there by right and individually." Indeed, I have already received representations from very important bodies implying that they should be there whatever the other nominations may be.
I believe it highly likely that in many cases an organisation such as the RSPB would be represented and would make a most valuable contribution. However, I think that my committee would be most concerned if rigidities written into the Bill meant that it was not able to respond to the list put forward. The committee must have a certain amount of flexibility in making the choice, bearing in mind the need to retain manageable bodies. To have very large and cumbersome representative bodies runs the risk of failing to represent effectively the interests of any organisation.

805
The committee has issued a consultative document and we are listening to representations. Of course members of the committee will take careful account of what is said in this House. I believe there would be concern—and it is right to say this—among members of my committee if they found themselves confronted with a clause which, whatever the good intentions behind it, created a rigidity of structure which later we might regret.
At the end of the day the NRA will be a public body answerable to this House and producing a report which I have no doubt will come under most critical examination by the public. If it failed to respond to genuine representations it would be a very foolish body.
There is a large number of such organisations. A certain discretion must be left to the NRA to get a broadly representative group of people, suitable for the region in which it is operating, so that those matters can be properly looked at. There might be difficulties in following what I hope is a sensible course if a rigid structure were imposed on the committee by legislation.
Lord Ross of Newport: My Lords, before the noble Lord sits down, perhaps he will answer the question that I put to him. I do not understand why Yorkshire Water can recommend people for membership of an RRAC, which presumably then goes to the NRA for approval, which excludes voluntary bodies. Do he and his committee make the final decision—that would be reassuring—as to the membership of such bodies and not the water plcs?
Lord Crickhowell: My Lords, let me deal instantly with that point which has created a misunderstanding. The water plcs have nothing to do with the matter at all. At the moment, the shadow NRA units are still employed by the water authorities, and until the Bill passes they will remain in that position. All that has happened here is that many months ago, early in the proceedings, one individual in the Yorkshire authority produced by way of local discussion a paper suggesting the kind of structure that he thought might be appropriate. It was circulated in Yorkshire long before the issue had been considered by the advisory committee. It now happens that that individual, I am glad to say, is a member of the advisory committee and will be playing a part in its deliberations. That was very much an initial shot by someone involved in the industry who was having local consultation on this difficult issue. It does not represent the advisory committee's final views. It considered the matter only a short time ago in time to produce the document that your Lordships have seen.
We now effectively have a consultation agreement. The NRAAC will be considering the representations made. The final choice will be made by the NRA when it formally comes into being, having consulted all those organisations, including the Nature Conservancy Council and the Countryside Commission.
9.15 p.m.
Baroness Nicol: My Lords, the noble Lord, Lord Crickhowell, will be aware that whatever the reason for that draft it caused anxiety among conservation bodies. The RSPB in particular was concerned by the exclusion. It feels that such exclusions, if carried through all the RRACs, would lead to a wide gap in the expertise available to them. The conservation bodies also feel that statutory provision for conservation experts should be made or the RRACs may not obtain the level of expertise which they have so far enjoyed under their present title.
I would make just one further point, because all the arguments have been made. It is one made by the noble Earl, Lord Balfour, and the noble Lord, Lord Crickhowell. The assurances which have been given by the noble Lord today are invaluable. The bodies which are now being formed consist largely of personnel who have experience of dealing with voluntary conservation organisations The personnel may therefore look kindly on arrangements which include voluntary organisations.
We are anxious that when the personnel of the NRA and the RRACs change in the future, as they must, there is a statutory requirement that they should carry on dealing with voluntary conservation organisations. I am sorry if it is felt that that requirement is restrictive. I cannot see why it should be a worry. We are not at the moment laying down any numbers, nor is there any limit on the size of the committee. I cannot see why we cannot make this provision secure for the future. I accept the assurances given by the noble Lord, Lord Crickhowell. I am sure that he and the present NRA will be kindly disposed towards the people who have worked with them so far, but I feel that a statutory requirement is needed.
Baroness Lockwood: My Lords, I too support the amendment, notwithstanding what the noble Lord, Lord Crickhowell, said. I underline how valuable his assurances have been. Nevertheless, the fact that the Yorkshire Water Authority could put round a paper showing the kind of bodies that should be represented on the RRACs, which left out the voluntary conservation bodies, is an indication of how insecure their position could be.
The amendment which we are consi dering has two features. One is to give direct representation to two of the statutory bodies, the Nature Conservancy Council and the Countryside Commission; and the other is to give three representatives to the voluntary conservation and other amenity bodies. It does not tie the National Rivers Authority down to any particular organisation; it just specifies three representatives from those bodies. They would be selected and appointed by the NRA.
So I do not think that the amendment is in any way restrictive. It gives the right of representation to two statutory bodies and then the choice remains with the National Rivers Authority. Like other noble Lords who have spoken in support of the amendment, I think it would be reassuring in the light of the very great concern that has been created by the action of the Yorkshire Water Authority.
The Earl of Arran: My Lords, we have already discussed at some length this evening the composition of the NRA regional advisory committees in the context of Amendment No. 15. I know that my noble friend Lord Crickhowell and his colleagues on the NRA Advisory Committee are fully persuaded of the important role not only of the Nature Conservancy Council and the Countryside Commission but also of the voluntary environmental bodies in relation to the NRA regional committees. This is a point on which my noble friend Lord Crickhowell has elaborated. It is very helpful and useful for all sides of your Lordships' House to have my noble friend's advice and the information and assurance on various aspects of the NRA. The NRA Advisory Committee's consultative document makes it quite clear that some members of the regional rivers advisory committees will be selected from conservation and landscape interests, including statutory and voluntary bodies.
As we have said previously, and as has been outlined again tonight, not only by my noble friend Lord Crickhowell but also by the noble Lord, Lord Brain, and by my noble friend Lord Balfour, it would be inappropriate to impose on the NRA a statutory requirement to include specified numbers of particular interest groups on its committees. I must repeat that this is a matter which should rightly be left to the NRA to decide—a point which my noble friend Lord Crickhowell has so rightly outlined. The NRA Advisory Committee has already given a clear indication that it will take appropriate steps to ensure that environmental interests are appropriately represented.
As regards the situation in Yorkshire, perhaps I may lay that particular concern to rest. The Yorkshire Water Authority scheme was an early draft; it had no status. Noble Lords can be assured that the NRA will construct its committees in line with the consultative document, following consideration of the views that are put forward. It is on the basis of these arguments that I hope I can persuade the noble Baroness to withdraw the amendment.
Baroness David: My Lords, I am very glad of the support which I have received from a number of Peers, if not from all of them—particularly the voice, not from the grave, but from the noble Lord, Lord Ross of Newport. The NRA's own document says that members of the regional advisory councils will be selected from among the following areas of interest, one of which is conservation and landscape interests, including statutory and voluntary bodies. Our amendment simply spells out that provision a little more clearly. It does not change it.
The noble Earl, Lord Balfour, said that the committee might become enormously large. However, we are very happy for it to contain 15 to 20 members, as has been suggested. If only five are to come from this area, 15 will come from other places if the committee is to have 20 members. I do not think a committee of 20 is an unmanageable number.
I quite understand that it would be nicer for the noble Lord, Lord Crickhowell, to choose exactly who
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he wants. However, these very important voluntary bodies feel very strongly about representation. I know the Yorkshire example has been cried down, and that it has been said that a mistake occurred there. However, that is typical of the kind of thing that can happen. If some provision is not written on the face of the Bill, that kind of thing could occur when we do not have such a well-meaning person with good intentions in charge of the NRA as I have absolutely no doubt the noble Lord, Lord Crickhowell, will be.
Lord Crickhowell: My Lords, I am most grateful to the noble Baroness for giving way. She says that we are only dealing with five people; but what would happen if, as it seems to me is quite likely, the Nature Conservancy Council and the Countryside Commission nominated two, three or four extremely suitable candidates, including those from voluntary bodies, all of whom one was minded to accept? As I understand this clause, one would either have to reject some of them, or accept them and then accept at least three more from the voluntary bodies too. I think the noble Baroness is overlooking the fact that the Nature Conservancy Council and the Countryside Commission will themselves be nominating the representatives of voluntary bodies.
Baroness David: My Lords, that is not how I read my amendment. There is obviously a difference of opinion about that. The amendment states that each committee will:
"include at least one person nominated by the Nature Conservancy Council, one by the Countryside Commission and at least three persons appointed after consultation with voluntary conservation, landscape and amenity bodies".
The Nature Conservancy Council and the Countryside Commission are statutory bodies. I do not feel that I have obtained a very satisfactory response, and in the light of that I wish to test the opinion of the House.
9.27 p.m.
On Question, Whether the said amendment (No. 18) shall be agreed to?
Their Lordships divided: Contents, 33; Not-Contents, 55.

DIVISION NO. 5

CONTENTS

Addington, L. [Teller.]

Lockwood, B.

Airedale, L.

Lovell-Davis, L.

Blease, L.

McIntosh of Haringey, L.

Callaghan of Cardiff, L.

McNair, L.

Cocks of Hartcliffe, L.

Masham of Ilton, B.

Darcy (de Knayth), B.

Nicol, B.

David, B. [Teller.]

O'Neill of the Maine, L.

Dean of Beswick, L.

Parry, L.

Falkland, V.

Pitt of Hampstead, L.

Gallacher, L.

Ponsonby of Shulbrede, L.

Graham of Edmonton, L.

Ross of Newport, L.

Grey, E.

Russell, E.

Hatch of Lusby, L.

Seear, B.

Houghton of Sowerby, L.

Serota, B.

Howie of Troon, L.

Strabolgi, L.

Kagan, L.

Tordoff, L.

Lawrence, L.

809

NOT-CONTENTS

Alexander of Weedon, L.

Henley, L.

Arran, E.

Hesketh, L.

Balfour, E.

Hives, L.

Belstead, L.

Hooper, B.

Blatch, B.

Jenkin of Roding, L.

Blyth, L.

Johnston of Rockport, L.

Borthwick, L.

Long, V.

Brain, L.

Mersey, V.

Brookeborough, V.

Monk Bretton, L.

Brougham and Vaux, L.

Munster, E.

Bruce-Gardyne, L.

Nelson, E.

Caithness, E.

Norrie, L.

Carnegy of Lour, B.

Oxfuird, V.

Carnock, L.

Radnor, E.

Cork and Orrery, E.

Renton, L.

Craigavon, V.

Rochdale, V.

Craigmyle, L.

Saltoun of Abernethy, Ly.

Crathorne, L.

Sanderson of Bowden, L.

Crickhowell, L.

Skelmersdale, L.

Davidson, V. [Teller.]

Stodart of Leaston, L.

Denham, L. [Teller.]

Strathclyde, L.

Dundee, E.

Thomas of Gwydir, L.

Ferrers, E.

Trafford, L.

Forester, L.

Trumpington, B.

Fortescue, E.

Wise, L.

Fraser of Carmyllie, L.

Wynford, L.

Gisborough, L.

Zouche of Haryngworth, L.

Harvington, L.

Resolved in the negative, and amendment disagreed to accordingly.
9.35 p.m.
Lord Gallacher Lord Gallacher moved Amendment No. 19:
Page 3, line 17, at end insert—
("(2A) Any meeting of an advisory committee established under this section shall be open to the public, except to the extent that the Chairman of the committee specifies that any item shall be discussed as confidential business.
(2B) Any person attending a meeting of a committee shall be entitled to a copy of any document made available to the committee in relation to business other than confidential business, and any such document shall be made available wherever reasonable free of charge.").
The noble Lord said: My Lords, on behalf of my noble friend Lord McIntosh of Haringey, I wish to move Amendment No. 19 and at the same time to speak to Amendments Nos. 134 and 137 with which Amendment No. 19 is grouped.
Amendment No. 19 follows on from a Government concession announced in the context of an amendment moved in Committee by the noble Lord, Lord Ezra. That amendment sought to open up the NRA to the access to information requirements set out in the Local Government Act of 1972 as amended by the Local Government (Access to Information) Act 1985. The Government resisted the amendment of the noble Lord, Lord Ezra. They pointed to the NRA's duty to produce an annual report and other duties including that to maintain public registers of certain matters such as water quality objectives and water samples.
The Minister announced, however, that the NRA Advisory Committee had recommended that the three regional committees in each NRA area—that is to say, the regional rivers advisory committees and the flood defence and fisheries advisory
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committees—should be open to the public except in respect of confidential items.
This amendment seeks to place that provision—namely, that those three committees should be open to the public—on the face of the Bill in respect of the regional rivers committee, which is covered by Amendment No. 19, and the other two committees, which are covered by Amendments Nos. 134 and 137. The amendment enables the chairman of any committee to specify that an item to be discussed is confidential business. It entitles any person attending such meetings to a copy of a document made available to the committee, again, other than a confidential document. It also provides that such documents which are made available should, wherever reasonable, be given free of charge to people attending those meetings. In other words, all but expensively produced or very substantial documents should be made available free.
The amendment suggests that the right of public access is sufficiently important to be included in the Bill rather than, welcome though it is, being the subject of advice from the NRA Advisory Committee and therefore of discretion in the future. We feel that such a provision in the Bill is justified. That is the purpose of Amendment No. 19. I beg to move.
Lord Hesketh: My Lords, the purpose of Amendment No. 19 is to provide that any meeting of a regional rivers advisory committee should be open to the public except for any business identified by the chairman as confidential. The amendment also provides that any person attending a meeting of a committee shall be entitled to receive a copy of any document made available to the committee in relation to any business other than confidential business and that any such document shall be made available, wherever reasonable, free of charge.
Amendment No. 134 applies the provisions of Amendment No. 19 to the NRA's regional flood defence committees. Amendment No. 137 applies the same provisions to the NRA's regional fisheries advisory committees.
In its consultative document on the NRA's regional committee structure, the NRA Advisory Committee has made it clear that meetings of the NRA's three regional committees would be open to the press and the public except for the discussion of confidential items. That is as it should be and neither I nor the NRA Advisory Committee would have any difficulty in accepting that part of the amendment. I am therefore happy to arrange for a government amendment to that effect to be tabled at Third Reading.
I also have sympathy with the intention behind the second part of the amendment. But to impose a statutory requirement on the NRA to produce sufficient copies of any document prepared for any committee item excluding confidential business for all members of the public who chose to attend these meetings could be unreasonable. How will the NRA know how many members of the public are going to attend?

811
I accept, however, that at least one copy of all documents discussed at those meetings—excluding confidential matters—should be available for the inspection of members of the public who choose to attend such meetings. I am therefore prepared to consider introducing a government amendment at Third Reading to ensure that at least one copy of relevant documents is available for the public at the meetings. I recognise that, in most cases, the NRA will be able—and will want—to go further than such an amendment would require. I am sure that it will take note of noble Lords' common concern on this matter, and do as much as possible to make papers relating to the deliberations of such committees as widely available as possible. I hope that on that basis the noble Lord, Lord Gallacher, will feel able to withdraw his three amendments.
Lord Gallacher: My Lords, I am grateful to the noble Lord, Lord Hesketh, for the response he has made to this amendment, which I accept in respect of the first part and also the second part of Amendment No. 19. I take it that similar assurances will be forthcoming when we get to the other two amendments which I spoke to at the same time. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 20:
Page 3, line 30, at end insert—
("(4A) No appointment shall be made by the Authority under this section unless the Authority has carried out consultation with the local authority associations.").
The noble Lord said: My Lords, this amendment comes back to an issue which was not raised at the Committee stage because the NRA Advisory Committee document had only just been produced and we had not had adequate time to study it. Therefore it did not seem appropriate to discuss it at the Committee stage and we left it over until Report stage. We have had a lot of discussion about consultation this evening. I do not want to raise all of the issues which have been raised so ably by my noble friends and others, but it appears to us that there is one omission from the provision which has been made. Perhaps it is something on which the noble Lord, Lord Crickhowell, may feel able to enlighten us.
Clearly local authorities have a significant role in the work of the regional rivers advisory committees. After all, they retain very substantial related functions. Equally clearly it would be very complicated if the regional rivers advisory committees and the NRA were required to consult a wide range of individual local authorities in their areas when the boundaries of the advisory committees may well not coincide with the boundaries of the local authorities. In these amendments we are proposing that the onerous task of dealing with individual local authorities be undertaken by the local authority associations which
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perform the task in relation to many other outside appointments, and that therefore the local authority associations should be consulted on such appointments.
It may seem draconian to say that no such appointments shall be made unless the authority has carried out consultation with the local authority associations. I can assure the Government and the House that local authority associations are not going to have any interest in intervening in any appointments other than those with which local authorities are concerned. They are certainly not going to intervene in appointments made in consultation with the Nature Conservancy Council or any other voluntary or statutory bodies. However, since there is no specific provision for local authority representation the only way to secure a sensible reference to local authorities is to do it in this way through the local authority associations and have it apply, in theory at any rate, to all appointments.
It may well be that the wording of the amendment could be improved, but I hope that the principle behind it will find favour with the Government and with the House. I beg to move.
9.45 p.m.
Lord Hesketh: My Lords, the purpose of this amendment is to require the NRA before appointing members of the regional rivers advisory committees to consult with the local authority associations.
At the regional level, local authorities have a very important role on the NRA's regional flood defence committee where they retain majority membership. This is where their primary interest lies. However, local government is only one of the many interests with a legitimate claim to be represented on the regional rivers advisory committees.
Nevertheless, in its consultative document, the NRA advisory committee makes it clear that local government will be represented on the regional rivers advisory committees and that nominations will be invited from interested organisations. But we do not consider it appropriate to build in any formal requirement for consultation before appointments are made or specifically to single out local authority associations as organisations to be consulted. The arrangements for these committees in the various regions should rightly be a matter for the NRA itself to decide. That is why we urge resistance to this amendment.
Lord McIntosh of Haringey: My Lords, the Government are making life more difficult rather than less difficult for the NRA and its regional advisory committees. What is proposed is a helpful way of shortcutting what might otherwise be complicated negotiations and consultation with different local authorities in the area of a regional advisory committee and with different levels of local authority; for example, between county and district councils. It would have been easier if the Government had at least accepted the principle of dealing through local authority associations.
Lord Crickhowell: My Lords, would the noble Lord find it helpful if I were to say that he has made an interesting and helpful suggestion on nominations? These are obvious bodies who can put forward nominations without having the restrictive clause that he has proposed.
Lord McIntosh of Haringey: My Lords, I find that comment helpful. I am grateful to the noble Lord for it. It is one suggestion that I shall discuss with
814
the local authority associations which are evidently supporting this amendment.
On the basis of considering how we might proceed by dealing with nominations rather than by consultation, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 21 not moved.]
Clause 4 [Transfer of the water authorities' functions etc.]:
The Earl of Arran The Earl of Arran moved Amendment No. 22:
Page 4, line 10, leave out subsections (2) and (3) and insert—
("(3) The Secretary of State shall, by order made before the transfer date, nominate a company in relation to each water authority as that authority's successor company; but a company shall not be so nominated unless it is a limited company and, at the time when the order is made, is wholly owned by the Crown.").
The noble Earl said: My Lords, I speak on behalf of my noble friend. In moving Amendment No. 22, we have been looking at the relationship of Clause 4, which provides for the transfer of water authority functions to successor companies, and Clause 11, which deals with the appointment of undertakers.
Clause 11(4) imposes a duty upon the Secretary of State to appoint on the transfer date the statutory water companies as water undertakers and the successor companies as water undertakers and sewerage undertakers so that for every area of England and Wales an undertaker will be appointed.
We have concluded that given the duties in Clause 11, the existing provisions in Clause 4(2) which relates to the appointment of the transfer date are overelaborate and unnecessary. This amendment simplifies the provisions for making the transfer date and improves the Bill. I beg to move.
Lord McIntosh of Haringey: My Lords, I am puzzled by the numbering. If subsections (2) and (3) are to be taken out, surely the numbering of the new subsection should be (2) rather than (3) otherwise there will be a gap between subsections (1) and (3).
Apart from that, I find the content of the amendment a little strange. I have no objection to the process of nomination being simplified. However, subsection (2) contains a number of safeguards that the transfer date shall not be determined until Section 1—the establishment of the NRA—has come into force; that the Director General of Water Services has been appointed; that transfer schemes under Schedule 2 have been made; and that arrangements have been made for appointments of water plcs' successors to come into force in all areas.
The Bill as at present constituted provides that the Secretary of State can nominate the successor companies. It is satisfactory to have the proviso that it should be a limited company and wholly owned by the Crown. But what happens about the other provisos contained in the new subsection (2) regarding the establishment of the NRA and the role of the director general, for example? I wonder whether the Minister can help me, first, on my numbering point and, secondly, on the substantive points.
The Earl of Arran: My Lords, first on the numbering point, I confess that there is an error in numbering and it should be subsection (2). As regards further elaboration, the proposed amendment is one of practicality and will allow the Secretary of State to make an order for the transfer
816
date without the need to be satisfied at that stage that appointments will be made for every area in England and Wales at transfer date. That means that any potential delay, perhaps for example in agreeing conditions of appointment, in making an order to nominate a company will not also delay the timing of making the order for the transfer date, but it is only to ensure that the timing is unaffected.
Clause 11 still imposes on the Secretary of State a duty to ensure that companies will be holding appointments as water and sewerage undertakers for the whole of England and Wales at all times from the date of transfer.
On Question, amendment agreed to.
Schedule 2 [Schemes providing for the Initial Transfers]:
The Earl of Caithness The Earl of Caithness moved Amendment No. 23:
Page 199, line 35, leave out ("on coming into force on the transfer date, have effect so as, in accordance with its other") and insert ("come into force on the transfer date.
(1A) Where such a scheme comes into force in relation to the property, rights and liabilities of a water authority, this paragraph shall have effect so as, in accordance with the scheme's").
The noble Earl said: My Lords, in moving Amendment No. 23, I speak to Amendments Nos. 29, 30, 104 and 105 at the same time.
The amendments are of a technical nature connected with the schemes of transfer under Schedule 2 prepared by the water authorities for the division of their property, rights and liabilities between the NRA and the successor companies and which will be subject to the approval of the Secretary of State.
I am happy to go into whatever detail your Lordships may require; but, in summary, without the amendments it would be impossible to achieve a transfer of all the property rights and liabilities from the water authorities to the NRA and the successor companies. It would be impossible to negotiate the transfer of the thousands of contracts, agreements, leases and conveyances. That is why statutory transfers, which is what the Bill provides, normally have the effect of overriding third-party rights, but only for the occasion of a statutory transfer. I beg to move.
On Question, amendment agreed to.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No.24:
Page 199, line 38, leave out ("such of).
The noble Lord said: My Lords, in moving Amendment No. 24, I speak also to Amendments Nos. 25 to 28. Your Lordships will recall that on the first day in Committee we had a substantial debate on an amendment, the intention of which was to transfer to the NRA all the freehold land, which would otherwise be transferred to the water and sewerage undertakings and to enable the NRA to transfer operational land and any land required for future operational requirements to the water companies. The Committee rejected that suggestion, partly because the Government objected to the whole

817
idea of the NRA holding land—I recognised that fact—but also partly because there were objections concerning the fact that it was not very complimentary to the water and sewerage undertakings to think that they could not have responsibility for holding freehold land, particularly the land required for operational purposes.
We have taken those observations into account in preparing this new and much more limited set of amendments. They relate to Schedule 2 on page 199 referring to the initial transfers, and to that part of Schedule 2 which refers to the transfers scheme. To simplify them, they provide that the land which is required for operational purposes shall be transferred to water and sewerage undertakings. Therefore, they will have the freehold of the land that they need for operational purposes. The land which is not required for operational purposes shall instead be transferred to the National Rivers Authority.
Amendment No. 28 adds an additional subsection to provide that if there is any future requirement for operational purposes for the land which has been transferred to the NRA under previous amendments, the transfer scheme set up under the schedule shall make provision for the subsequent reallocation when necessary.
I hope that that brief explanation is clear. I could go through the wording of Schedule 2(2) if necessary but I believe that the intention behind it is clear. We are not now proposing the transfer of the freehold of all land. However, we are still concerned about the issue to which we paid the greatest attention in Committee. It is the problem of plcs being given land on transfer which they do not need and then being able to sell off that surplus land for other purposes. They will be able to make profits which are not related to their activities but to their ability to dispose of surplus land.
I appreciate that to some extent I am anticipating, as I am bound to, a debate which will take place on Thursday afternoon. The Government have put forward complicated proposals for the disposal of surplus land and I do not wish to anticipate the detail of that argument. A substantial number of amendments have been and will be tabled and the debate will be complicated. However, as regards these amendments I should like first to reiterate the view which we strongly hold before talking about the issue of the division of the spoils, which is the concern over the government amendments. It is that surplus, non-operational land ought not to be transferred to profit-making commercial undertakings; it ought to remain in the public sector.
Over many years that land has been built up for historical reasons. At one time it may have had operational significance. Some has never had operational significance in the sense that it was bought as part of a package with land which was required for operational purposes. In many cases the land is of significant value, particularly the Thames Water Authority land in London which was required for operational purposes but is no longer because of the establishment of the ring main system in London. It may or may not have conservation value but
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that is beside the point in this respect. However, it belongs to the public and has been paid for by the public. It is not part of the water industry which is to be privatised. It is only by accident under the ownership of the regional water authorities which took over the land from local authorities under the 1973 Act. It ought not now to be privatised; it ought to be part of the public sector, as it has always been.
I appreciate that on this matter there are major differences of principle between us and the Government. We are not under any illusion about that. However, once the objection about the freehold of operational land, which was raised quite strongly against our previous amendments, has been removed by the redrafting of the amendments, it will be interesting to see what effective response the Government can make to the issue of principle raised by these amendments which, in my judgment, is not dealt with by the amendments tabled by the Government to Clause 7 and to later parts of the Bill for debate on Thursday.
I believe that it is important that we should establish our position here as clearly as we can without the irrelevance of the freehold of operational land. Non-operational land which is not part of the water industry should not be privatised with the water industry but should remain in public ownership. That is the purpose of these amendments. I beg to move.
10 p.m.
The Earl of Caithness: My Lords, Schedule 2 describes the arrangements for dividing the water authorities' property, rights and liabilities between the National Rivers Authority and the successor companies. As it is drafted, a scheme of transfer will detail the property, rights and liabilities to be transferred to the National Rivers Authority; the remainder, without the need for detailed listing, will be transferred automatically to the successor companies. The effect of these amendments is to reverse this arrangement with only as much of the property, rights and liabilities being transferred to the successor companies as is necessary for the fulfilment of its functions.
Apart from causing severe difficulties of a practical nature, there are two reasons why I consider that this proposal should not be accepted. First, it is contrary to the intended operation of the National Rivers Authority. Water authorities are substantial landowners. The NRA is planned as a slim, efficient organisation with only sufficient assets to carry out its functions. Some of the water authorities' land is likely to be surplus to the operational requirements of the core water and sewerage business. Some of it may become operationally redundant in the short to medium term as a result of new investment or scope for rationalisation. But much of the land is likely to be needed for operational purposes indefinitely and must rightly remain with the water undertakers. The NRA will not have the spare capacity available to manage large areas of land which it does not need for its own purposes.
The National Rivers Authority would therefore find the additional land an encumbrance whereas its

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transfer to the successor companies will result in considerable benefits to the customers. My noble friend Lord Hesketh will be explaining that in more detail when we come to Amendment No. 48 together with our proposals for arrangements in which customers will share the proceeds of land disposal. That is the second reason for my resisting this amendment. The proper treatment of land which is surplus to the functions of the water companies must be to provide sufficient incentives for them to dispose of land rather than arranging for either the NRA or the utility undertaker to sit on it when it could be put to more constructive use by another owner.
The government amendments will combine a means to provide long-term protection for conservation and public amenity if the water companies sell land in national parks or areas of outstanding natural beauty, with an incentive to dispose of land which can be sold profitably, and arrangements must be made to ensure that the customer benefits from a share of the proceeds. Ironically, the opportunity for those financial benefits to customers would be missed if the present amendments were accepted.
Perhaps I may just spend a moment looking forward to Amendment No. 48 and related government amendments. These have been brought forward as a result of listening to what your Lordships said in Committee and the concerns raised then as well as other concerns raised in another place and outside the House. They are a comprehensive list of amendments and I am glad to be able to tell your Lordships that they have been widely welcomed by many of those interested, particularly the voluntary bodies and others who have written to me to say how pleased they are that we have come forward with the amendments. I understand that the noble Lord, Lord McIntosh, is concerned and has put down numerous amendments to keep your Lordships employed on Thursday afternoon and obviously we look forward to discussing those in detail.
I take this opportunity of apologising to the House as I shall not be here on Thursday. I shall be in Luxembourg convincing other environment Ministers that we in this country are doing a much better job for water, sewerage and bathing beaches than they are and that it is time they caught up with our good work.
Lord McIntosh of Haringey: My Lords, it is only because of our admiration for the persuasiveness of the Minister and particularly of the difficult task he is setting himself in attempting to put himself above the other environment Ministers in Europe that we excuse him for what is, after all, a breach of the proprieties of this House in anticipating a future amendment because he cannot be here to move it himself. It is not the right way to go about these matters. The noble Lord, Lord Hesketh, must feel that some of his thunder is being taken from him. We do not mind, and I am sure he does not mind. He had better not, because he is a junior Minister!
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The Minister has attempted to do what his honourable friend the Minister for water is undoubtedly attempting to do at the same time, and no doubt will be doing again on Thursday. He has sought to make a propaganda coup out of the very imprecise and modest amendments to be brought forward by the Government. He chose to run a trailer campaign for those amendments rather than answer the substantive points behind my amendments. I think that is a pity.
On the whole it would have been better if he had taken the amendments seriously and recognised that they deal with some of the problems that were unnecessarily aroused by the amendments we put forward in Committee. It would have been better to deal with what is, after all, a fundamental defect of this Bill—the fact that in the course of privatising the water and sewerage industries we are also transferring to private ownership, with inadequate compensation for the taxpayer and customers, a great deal of land which is not necessary for the plcs' purposes. That is what is happening and it ought not to be happening. I suggest that it is one of the reasons why water privatisation is such an unpopular measure in the country and why the Government are taking so much political flak as a result of the water privatisation measure.
It is interesting that the Minister speaks about operational difficulties. He does not say that a large part of the complex regulatory mechanism which is necessary as part of this Bill is necessary because the Bill transfers this non-operational land to the private companies. That is one of the reasons why we have such an elaborate regulatory mechanism in the Bill and why further regulatory mechanisms are being proposed in the Government's amendments which are to be debated on Thursday. I suggest that any operational difficulties that may arise in listing the non-operational land to be retained for the NRA, rather than the other way round, are vastly outweighed by the unnecessary complexity of the regulatory system. I do not mean that the regulatory system is too complex for what it does; I mean that what it does is too complex for any regulatory system adequately to control.
I note that all of this is done without any figures being given to the public about what proportion of the land being transferred from the water authorities is operational, what proportion of the land is being transferred to the plcs and what proportion is being retained for the NRA; and whether indeed there are any specific examples of land which is being retained for the NRA. On all these matters the Government have been silent despite repeated requests during the months that the Bill has been under discussion.
It is clear that the Government are not going to move on this matter, and that our pleas to have water privatisation restricted to water and not include the sell-off of land are not going to be listened to by the Government. At this time of night there is no point in pursuing the matter to a Division. The answers that the Minister has given and that the Government have given consistently throughout the passage of this Bill will be noted. They provide further fuel for the campaign that has already started and which

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will reach fruition with the election of a Labour Government to restore the water industry to public control. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 25 to 28 not moved.]
The Earl of Caithness The Earl of Caithness moved Amendments Nos. 29 and 30:
Page 200, line 8, leave out ("by means of) and insert ("in accordance with").
Page 200, line 37, leave out sub-paragraph (5) and insert—
("( ) For the avoidance of doubt, it is hereby declared that the transfers authorised by paragraph (a) of sub-paragraph (3) above include transfers which, by virtue of that paragraph, are to take effect as if there were no such contravention, liability or interference with any interest or right as there would be, in the case of a transfer or assignment otherwise than by virtue of this Schedule, by reason of any provision having effect (whether under any enactment or agreement or otherwise) in relation to the terms on which a water authority is entitled or subject to the property, right or liability in question.
( ) Where apart from this sub-paragraph any person would have power, in consequence of anything done or likely to be done by or under this Act, to terminate or modify an interest or right which is vested in a water authority at the passing of this Act, then—

(a) for the purposes of the transfer of the interest or right in accordance with a scheme under this Schedule, that power shall not be exercisable in relation to that interest or right at any time before its transfer in accordance with such a scheme; and

(b) without prejudice to the preceding provisions of this paragraph or to paragraph 3(2)(a) below, that power shall be exercisable in relation to the interest or right after its transfer only in so far as the scheme provides for it to be transferred subject to the power.").

On Question, amendments agreed to.
Schedule 3 [The Director General of Water Services]:
Lord Graham of Edmonton Lord Graham of Edmonton moved Amendment No. 31:
Page 202, line 37, at end insert—("Pension benefits
1A. A scheme under this Schedule shall provide that where persons who immediately before transfer were contributing to the Water Authorities' Superannuation Fund and were employed by a successor body, it shall be the duty of that body to provide pension benefits that are no less favourable (including any provision for increasing pensions already in payment) than those which would have been enjoyed under comparable arrangements with the Local Government Superannuation Scheme.").
The noble Lord said: My Lords, I beg to move the amendment standing in the name of my noble friend. It deals with a very important matter especially regarding the employees in the existing undertakings. I wonder whether the Minister is in a position to help me to short-circuit the matter. I wrote to the Minister concerning this question following the Committee stage of the Bill. I was hoping that he would give me some indication of a response to the requests for clarification of this issue. The Minister will recall that in the Official Report of 4th May, at cols. 302 to 304, he went a considerable way to satisfying the points that I raised. I know that the Minister is not only very well briefed but also very
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knowledgeable on these matters. He will recall that I raised these matters at the suggestion of the trade union directly involved; namely, NALGO.
The matter was left at the end of the previous discussion in terms of the mirror arrangements that were to be set up. There were to be two employees who were trustees. I am sure that the Minister will be helpful to me; but perhaps I need to make a little more of the case. The Minister's advisers will undoubtedly have seen that the amendment is substantially but not quite the same regarding the wording. The amendment that I moved at an earlier stage was that,
"where persons who immediately before transfer were contributing to the Water Authorities' Superannuation Fund and employed by a successor body, it shall be the duly of that body…"
This amendment states:
"A scheme under this Schedule shall provide that where persons who immediately before transfer were contributing to the Water Authorities' Superannuation Fund and were employed by a successor body,"
and so on.
What the employees in the industry want is that there shall be no detriment to their existing pension conditions and that the conditions that they enjoy at the moment shall go with them to the new employers. In addition, not only will there be no detriment, but there will also be protection. On the previous occasion I alluded to what I thought had been the way in which the employees in previous state undertakings had been let down on the transfer of ownership. I refer to the dockyards and to the small arms factory. I dealt with these matters in the House for the Labour Party and there was dissatisfaction with the undertakings.
Can the Minister tell me whether since the Committee stage there has been any reflection on the point? If my letter has not reached the Minister, that may be the reason why there has been no reply. Even so, can the Minister tell me whether the amendment that I move is any more acceptable than the previous one? The employees are asking that there should be written on the face of the Bill the kind of undertakings that the Minister gave me verbally in replying to the amendment on the previous occasion. I beg to move.
10.15 p.m.
Lord Renton: My Lords, it is very important that there should be continuity of pension rights between those who have been contributing to the water authorities' superannuation fund and the people who will take over responsibility as employers in the future. I do not know whether the amendment is technically the right way of achieving that. All I say is that it is an object which must be achieved. On the face of it this looks a rather sensible way of achieving it, but I do not know. In any event I hope that my noble friend will be able to give either a sympathetic response or an undertaking.
The Earl of Caithness: My Lords, I found it difficult to understand why this amendment had been tabled because is is similar to one that we discussed in Committee. However, that has been cleared up by the careful explanation of the noble

823
Lord, Lord Graham of Edmonton, in moving the amendment. I have to tell the noble Lord that I have not received his letter: for that reason he has not had a reply. However, it may help me to settle his concerns.
We have repeatedly given assurances that the trust deed, the form of protection customary in the private sector, for the mirror image scheme, will contain adequate safeguards. However, now that all the interim trust deeds and announcements to staff concerning the mirror image scheme have been sent to the department for consideration, I can provide further assurance which I hope will be satisfactory. All the announcements to staff demonstrate the employers' commitment by including specific mention of the two provisions which I described last time this amendment was debated. These are, first, that the trustees of the mirror image scheme shall include at least two representatives of members; and, secondly, that while there remain potential beneficiaries of the mirror image scheme it shall not be wound up or its benefits altered if any trustee objects. Furthermore, these provisions have now been included in the interim trust deeds for nine out of 10 authorities. The tenth will be submitting its revised draft shortly. It will contain these safeguards. I hope that that satisfies the noble Lord's concerns.
Lord Graham of Edmonton: My Lords, I apologise to the Minister for having caused a slight hiatus. I shall check my correspondence and have discussions with those outside the House who have sought to give me advice on the matter. We are talking about the trust deed and the protection that the trust deed will contain. Does the Minister know of any unease among the trade unions about the arrangements that have been made? I am expressing unease; I have put down amendments at the behest of trade union members. It is a proper thing to do. I am asking the Minister whether this unease has manifested itself in discussion with his officials.
I may be stating a case that need not be stated; alternatively the Minister may not be aware of the unease that I am expressing. He seemed to satisfy the point made by the noble Lord, Lord Renton. The trust deed will be part of the arrangements for each of the successor bodies. And that trust deed will contain the provision that on each of the boards of trustees there shall be two employees. If the interests of the current employees are alive and some beneficiaries are still waiting to be paid out, one trustee, never mind two, will have the right to veto any detrimental action to it. That seems eminently satisfactory. Is the Minister aware of any unease among the employees about the arrangements he has explained to the House?
The Earl of Caithness: My Lords, of course I am aware of the unease which surrounds any transfer; that is quite a legitimate concern; indeed people are always concerned about such matters. I am sure that all of us have been concerned at one stage in our lives when we have moved from one pension scheme to another. However, nothing specific on the matter has been brought to my attention nor to the attention of my officials, but I can tell the noble Lord and my
824
noble friend Lord Renton that I had realised what an important matter this is. It is of course of great concern to those involved. If the noble Lord is not happy with the situation, I shall be happy to pursue the matter with him between now and the next stage of the Bill's proceedings.
Lord Graham of Edmonton: My Lords, that is more than a fair offer and I am most grateful to the noble Earl. I shall withdraw the amendment and it may be that I shall wish to return to the matter at a later stage. However, the offer made by the Minister, that he is willing either to listen to me or read what I may put in a letter in order to clarify any remaining doubt (which could be removed to obviate cluttering up the programme at the next stage), is one which I shall certainly take up. In the circumstances, therefore, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 3 agreed to.
Clause 6 [Customer service committees]:
The Earl of Arran The Earl of Arran moved Amendments Nos. 32 to 34:
Page 5, line 20, leave out subsection (1).
Page 5, line 27, leave out from ("maintained") to end of line 29 and insert ("by him for the purpose, in relation to such companies as may be allocated to it, of carrying out—

(a) the functions assigned by this Act to such a committee; and

(b) such other functions as the committees established and maintained under this section may be required to carry out by the Director.

( ) The committees established and maintained under this section shall be known as customer service committees.").
Page 5, line 32, after ("section") insert ("to establish and maintain customer service committees and to allocate companies to those committees").
The noble Earl said: My Lords, on behalf of my noble friend I should like to move Amendments Nos. 32 to 34 en bloc. The purpose of these amendments is further to clarify the fact that customer service committees will be established. As your Lordships will remember, we had considered that this clause already achieved the desired effect. However, as my noble friend Lady Strange—who sadly is not present this evening—so eloquently pointed out in Committee, it is important that the wording should be absolutely clear so that there can be no doubt in the public's mind that such committees will be established. The amendment therefore makes clear that it is a duty of the director general to establish and maintain customer service committees and to allocate companies to those committees. I beg to move.
Lord McIntosh of Haringey: My Lords, I know that the noble Baroness, Lady Strange, would have been happy to welcome these amendments had she been here this evening. I am a poor substitute; I cannot be anything like as poetic as she would be in support of the amendments. Nevertheless, I wish to welcome them wholeheartedly and to pay tribute not only to the noble Baroness who urged the case, but also to the consumer associations involved. I should especially like to pay tribute to the National

825
Consumer Council which put forward this point of view unsuccessfully throughout the progress of the Bill and which has only now achieved success, at almost the last stage.
The Government now recognise that the Bill was deficient in that it did not make sufficiently clear the obligation to set up customer service committees. That has now been put right, although it could have been put right much earlier. However, we must be grateful for the change of heart and for the fact that customer interests must be better protected as a result of the amendments proposed.
Lord Renton: My Lords, although the Government have dealt with the matter in a way which is slightly different from that proposed by my noble friend Lady Strange in Committee, I think that the method which they have chosen achieves the purpose which she had in mind. As the noble Lord, Lord McIntosh, said, if the noble Baroness were here, she would be glad to support these amendments.
On Question, amendments agreed to.
Lord Gallacher Lord Gallacher moved Amendment No. 35:
Page 6, line 3, at end insert—
("(4A) In appointing persons to be members of a customer service committee the Director shall secure, so far as reasonably practicable, that one third of the members are persons representative of each of the following—

(a) domestic consumers;

(b) industrial, commercial and fanning interests; and

(c) local authorities.").

The noble Lord said: My Lords, this amendment, standing in the name of my noble friend Lord McIntosh of Haringey, seeks to write into the Bill provisions regarding the categories from which the director shall draw representation to man the customer service committees which he is empowered to establish under this legislation.
The categories which we specify in the amendment—that is to say, domestic consumers, industrial, commercial and farming interests and local authorities—are not merely sufficiently broad to ensure representative consumer service committees but encompass the kind of committee envisaged by the Government when we discussed similar amendments in Committee. The director will probably welcome such guidance being written into the Bill because it does not merely provide him with an appropriate benchmark; it enables him to respond to any pressures that may be placed upon him at any time with regard to the composition of those committees. The appointment of the chairman is a joint appointment by the Secretary of State and the director, but the membership of the committees is entirely within the director's sphere of action.
As I said, I feel that what is proposed here is fair and reasonable. It is desirable to include it in the Bill rather than to leave it merely as something that has been talked about at various stages during the Bill's consideration. I feel that we have drawn the categories sufficiently broadly to ensure that we produce committees which will be representative and efficient in the discharge of the duties envisaged for the customer service committees. I beg to move.
Lord Hesketh: My Lords, Amendment No. 35 would require the director, as far as reasonably practicable, to secure that there was one-third representation on the customer service committees from each of three main groups; namely, domestic customers; industrial, commercial and farming interests, taken as one group; and local authorities.
As the noble Lord, Lord Gallacher, is no doubt aware, the director general designate has annnounced that in making appointments to the customer service committees he would draw members from broadly the same groups as the present consumer consultative committees and intends to allocate three or four places to each. Those groups are indeed the same as those stated in this amendment and representation of this threefold balance of interests is consistent with statements I made in Committee and statements my honourable friend the Parliamentary Under-Secretary of State for the Environment made in another place. There is therefore no difference between us, the director general designate and the noble Lord, Lord Gallacher, in what the composition of those committees should be.
We do not, however, consider that it would be right to make it a rigid statutory requirement that there should be a one-third representation from each of those groups. I appreciate that the noble Lord's amendment contains a reference to as far as reasonably practicable, but that would exclude adjustments to the representation where the director general felt that having regard to the particular characteristics of any region and of the relevant expertise and knowledge of those nominated, there should be a different weighting of those three groups. In other words, it is our view that the arrangements for determining the particular balance between those interest groups on any individual customer service committee should be left to the discretion of the director general. It is for that reason, and that reason alone, that we disagree with the noble Lord and hope that he will feel able to withdraw the amendment.
Lord Gallacher: My Lords, I thank the Minister for that reply, disappointing though it was. We thought in our innocence that by drafting such broad categories, which are already the subject of agreement between us, we would have fully accommodated the present and the future so far as concerns the director. I understand that in respect of local authority representatives consultations have already begun with the local authority associations with a view to suggesting names for representation.
One can never predict the future, and one does not know whether the water authorities and the customer service committees which are being set up under the Bill will have a long or particularly happy life. I should have preferred to see this point in the Bill rather than merely well evidenced by our discussions in Committee and on Report.
As I said when moving the amendment, I should have thought that the director would welcome those broad categories because it would not merely have enabled him to appoint representative committees but would have given him some protection against any pressures that may be placed upon him as regards

827
representation on the committees. Nevertheless, in view of what the Minister has said, I shall seek leave to withdraw the amendment. On the whole, I feel that we are making the wrong decision, because by including those categories in the Bill we should not have inhibited anyone but we should have protected the Director General of Water Services. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
10.30 p.m.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 36:
Before Clause 7, insert the following new clause:—
("Transfer of functions relating to planning etc.
Functions relating to consultation with regard to planning and environmental assessment matters which prior to the transfer date were carried out by a water authority shall, from that date, be transferred to the Authority and no water or sewerage undertaker shall undertake such functions from that date.").
The noble Lord said: My Lords, this amendment is concerned with issues which were debated at some length at the Committee stage under Amendment No. 73 proposed by the noble Earl, Lord Onslow. He raised a concern which was shared by many noble Lords in all parts of the House about the consultative role of the water industry in land use planning. The concern that he specifically expressed was that while a statutory consultative role was appropriate for the water and sewerage industry, while it is in the public sector, it is totally inappropriate when the water and sewerage industries are transferred to the private sector. What he sought in the amendment was that the consultative role in land use planning should be transferred to the National Rivers Authority. I believe that the noble Lord, Lord Renton, supported that argument.
The Minister gave an answer which appeared promising in the sense that he reminded the Committee that Article 18 of the General Development Order could be amended. He then said that it would be amended to provide for the NRA to be consulted in all cases where water authorities were consulted at the moment. Concerning one side of the equation, ensuring that the public sector of water and sewerage still has consultation rights, then we are entirely happy with that.
However, what is not clear from what the noble Earl, Lord Arran, said in his reply, is whether the plcs, the water and sewerage undertakings, would retain a statutory consultative role. That is the other part of the equation. My understanding was that the noble Earl, Lord Onslow, wanted the statutory consultative role transferred entirely from the plcs to the NRA, and that the plcs would therefore be in the same position as any other private companies. They would not have special privileges that no other private companies would have, and the NRA would exercise all the consultative rights and obligations concerning land use planning.
I am still not clear from the noble Earl's reply to the debate whether that is the case or whether it is proposed that the water and sewerage undertakings
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should retain statutory consultative rights. We do not think that they should. We have put down this amendment in order to secure that they do not. But it is primarily a probing amendment to establish the Government's intentions. If the Government confirm that it is not intended that the undertakings should continue to have these consultation rights, then we shall be very happy to withdraw the amendment. In the meantime, I beg to move.
Lord Renton: My Lords, the noble Lord, Lord McIntosh, is quite right in saying that at the Committee stage my noble friend Lord Onslow moved an amendment which would have had the effect of placing upon the NRA duties relating to consultation regarding planning and environmental assessment matters, as defined by Article 18 of the General Development Order. That is so, and I supported that proposition.
However, I think that the noble Lord, Lord McIntosh, has overlooked the fact that at the Committee stage, in order to maintain that continuity in planning matters which I said was important, my noble friend Lord Arran was able to assure us that to maintain the present statutory provisions the Government intended to amend Article 18 of the GDO:
"to provide for the NRA to be consulted in all cases where water authorities are consulted at the moment".
That would automatically ensure that the NRA was involved as a consultee under the environmental assessment regulations. My noble friend Lord Onslow then asked the following question:
"Is my noble friend saying that basically he agrees and that we do not need to do anything about the matter because it can be achieved by other means"?—[Official Report, 4.5.89; col. 349.]
My noble friend Lord Arran replied, "Yes". My noble friend Lord Onslow then said, "That is terrific".
I think it is best to leave this matter to be dealt with by amending Article 18 of the GDO in order to achieve the purpose which we all have in mind. If I may say so with respect to the noble Lord, Lord McIntosh, I think it is better to do that than to accept his new clause because, quite frankly, I do not see his new clause fitting comfortably into the present law. I think it is better to amend the present law in the simple way proposed than to accept this new clause which would clearly overlap with the present law. I shall be interested to hear my noble friend on the Front Bench give a reply, but I should have thought this amendment would not really achieve a useful purpose.
The Earl of Arran: My Lords, I am of course a little disappointed that the noble Lord, Lord McIntosh, did not find my answer in Committee a little more than just promising. I hope I can be a little more convincing this evening.
Local planning authorities are currently required to consult water authorities before granting planning permission where the application concerns the types of development specified in Article 18 of the Town

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and Country Planning General Development Order 1988. The types specified are development which may affect rivers, streams or ground water and most development relating to the retention, treatment or disposal of sewage, trade waste, slurry or sludge. These relate to water authority pollution control functions which would be transferred to the NRA.
The Town and Country Planning (Assessment of Environmental Effects) Regulations 1988 require certain projects which are likely to have significant environmental effects to be subject to an assessment of those effects before planning permission may be given. The procedures require the developer to prepare an environmental statement, making use, when appropriate, of information in the possession of relevant public authorities. On receipt of this statement, the local planning authority must consult on it, as it does on the related planning application. The 1988 regulations specify that the bodies which must provide information and must be consulted shall be the statutory consultees specified in the General Development Order together with one or two others, including the Nature Conservancy Council, the Countryside Commission and Her Majesty's Inspectorate of Pollution.
As I explained before, the new clause is unnecessary. As I have already said in Committee, we intend to amend Article 18 of the General Development Order to provide for the NRA alone to be consulted in all cases where water authorities are consulted at the moment. This amendment to the GDO will also automatically ensure that the NRA is involved as consultee under the environmental assessment regulations. I hope that this is a more promising reply for the noble Lord, Lord McIntosh, and that it will convince him of the need to remove the amendment.
Lord McIntosh of Haringey: My Lords, I am completely satisfied by that answer. The amendment was intended as a probing amendment. It has achieved the statement by the noble Earl that the NRA alone will be consulted. If I missed that in Committee, I apologise. However, I do not think the noble Earl said that before. I think that what he said previously left open the possibility that the plcs would also be consulted. He has now made it crystal clear that the functions, responsibilities and rights will be transferred only to the NRA and will not be retained in any way by the privatised plcs, which is what we would have intended. I am very happy for that to be done by an amendment to the general development order rather than by amendment on the face of the Bill. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 7 [General duties with respect to water supply and sewerage services]:
The Earl of Caithness The Earl of Caithness moved Amendment No. 37:
Page 6, line 27, after ("exercise") insert ("the following powers and perform the following duties, that is to say").
The noble Earl said: My Lords, in moving Amendment No. 37 I wish to speak also to Amendments Nos. 38, 39, 40 and 46. Clause 7 is concerned with the general duties of the Secretary of State and the director. These amendments to the clause are essentially technical and consequential on the amendment to Clause 20 passed by your Lordships at Committee stage. I beg to move.
On Question, amendment agreed to.
The Earl of Caithness The Earl of Caithness moved Amendments Nos.38 to 40:
Page 6, line 28, leave out ("conferred") and insert ("and duties conferred or imposed").
Page 6, line 31, leave out ("conferred") and insert ("and duties conferred or imposed").
Page 6, line 35, leave out ("the powers") and insert ("and perform the powers and duties").
The noble Earl said: My Lords, I beg to move Amendments Nos. 38 to 40 en bloc.
On Question, amendments agreed to.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 41:
Page 6, line 38, leave out ("properly").
The noble Lord said: My Lords, in moving Amendment No. 41 I should like to speak also to Amendments Nos. 42, 43, 45, 47 and 49. These are amendments to Clause 7 of the Bill. They return, in a different form, to a theme which took up a good deal of time when the matter was considered in Committee. They took up a good deal of time because they are of absolutely fundamental importance to the Bill and to the credibility of the Government in putting forward water privatisation as a matter which benefits consumers and the environment.
The trouble with Clause 7 of the Bill is that that is not what the Bill now says. Subsection (2) of the clause places overriding obligations on the Secretary of State and the director, first, to secure that the functions of a water undertaker and a sewerage undertaker are properly carried out—in other words, presumably, to see that the service is maintained—and, secondly, to secure that the undertakers make reasonable returns on their capital. I shall deal with the matter of reasonable returns on capital when I come to Amendment No. 44. In the meantime this group of amendments seeks to ensure that the interests of consumers are promoted to the same level as the interests of the privatised undertakings and of their shareholders. If that is not the case the Government are not carrying out the policy which they have proclaimed as being the primary justification for the Bill.
Amendments Nos. 41 and 42 add to the functions of the water undertaker and sewerage undertaker the proviso that those functions should be carried out in the interests of consumers. If that is the case, the word "properly" is no longer necessaiy.
Amendment No. 43 makes the duty to make a profit subject to the need to run a proper service in the interests of the consumers. It removes what is otherwise a tension between service quality

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standards on the one hand and profitability on the other which are at the moment given equal weight in paragraphs (a) and (b) of subsection (2) of Clause 7.
Amendment No. 45 takes the duty to defend the interests of customers in respect of charges and service quality and links it to the general duty to run the industry in the interests of consumers. The present wording says that the duty to protect consumers is explicitly subject to the duty to run the industry and to make a profit.
I am not under any illusion that the primary interest of consumers is to ensure that the water and sewerage undertakings survive. There is no dispute about that. But the conditions on which they survive and make a profit must be in the interests of consumers. The Government's propaganda for the Bill and the propaganda from the Water Authorities Association which is already starting can be given effect to only if these amendments are agreed to.
Amendments Nos. 47 and 49 make the duties of promoting economy and efficiency and facilitating effective competition in paragraphs (c) and (d) of subsection (3) subject to the requirement to run the industry in the interests of consumers. What we are doing here is taking away the provisions whereby the primary duties on the Secretary of State and the Director General of Water Services are to the privatised companies and their shareholders and replacing them with primary duties to the consumers. That is what the Government have said the Bill is about. That is what the Bill should be about, if we accept the original intention to privatise water. That is what these amendments seek to provide.
I said that I would have to come back to this point at a later stage and I make no apology for doing so. The Minister himself said that this is, in effect, the most important clause in the Bill. He said:
"It is this clause which will determine the relationship between the Secretary of State and director general on the one hand and the new water and sewerage undertakers on the other. This clause is crucial as it determines the climate for the water industry after privatisation".—[Official Report, 4/5/89; col. 354.]
I agree entirely with that comment. I believe that that is a correct way of describing the primary duties of the Secretary of State and the director general, but it is necessary—indeed it is essential if public confidence in the water and sewerage industry is to be restored and maintained—that the interests of consumers should be paramount. That is what these amendments seek to achieve. I beg to move.
10.45 p.m.
The Earl of Caithness: My Lords, in Clause 7(2)(a) there is a duty on the Secretary of State and the director general to exercise their powers in the way best calculated to secure that the functions of water and sewerage undertakers are properly carried out everywhere. Amendments Nos. 41 and 42 would make the duty narrower. The role of the Secretary of State and the director general would be limited to securing that the functions were carried out in the interests of consumers.
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With respect, I question whether the noble Lord has fully thought through these amendments. They would mean, for example, that the Secretary of State or the director general would not be under a duty to enforce statutory and licence requirements on water and sewerage undertakers not directly related to the interests of consumers. I fear that that would cast substantial doubt, for example, on the duties in Clause 8 to further the conservation and enhancement of natural beauty. Those duties might not always be strictly in the interests of the consumer. I am sure that that weakening of the duty is not what the noble Lord seeks. We must therefore strongly resist this attempt to constrain the Secretary of State and the director general, which may be well motivated but is certainly misconceived.
Amendments Nos. 43, 45, 47 and 49 would all change the priority of the duties in Clause 7 in one way or another. Amendment No. 43 would make the duty to secure that companies are able to finance the proper carrying out of their functions subordinate to the duty to ensure that those functions are carried out. Amendment No. 45 is a consequential amendment, maintaining the existing relationships between the primary duty in subsection (2)(a) and the secondary duties in subsection (3), but leaving in limbo the relationship of subsection (2)(b) and subsection (3). Amendments Nos. 47 and 49 would then take the secondary duties in subsection (3) and rank those. The overall effect would be to leave the Secretary of State and the director general with a duty to exercise powers by reference to four divisions of priority. I contend that it would amount to a recipe for confusion or what my honourable friend the Minister of State for Water and Planning, Mr. Howard, called in another place something resembling
"one of those games on breakfast cereal packets, requiring a contestant to use his skill and judgment to rank a series of qualities in descending order of importance".
Let us consider first Amendments Nos. 43 and 45. They seek to subordinate the financing of the proper carrying out of functions to the duty to secure that those functions are properly carried out in all of England and Wales. I had suspected that the slogan "People before profit" might be used in the Chamber tonight, but it has not been so far. The fact is that these primary duties go hand in hand. They are in a symbiotic relationship. I explained this in Committee—the Hansard reference is cols. 354 and 355—and concluded that the creation of the dual framework was quite deliberate, reflecting the paramount importance for customers that companies are not only obliged to carry out their functions properly but must be capable of financing those functions.
Amendments Nos. 47 and 49 seek to place the protection of customers in relation to charges and other service standards as of greater importance than the promotion of economy and efficiency and the facilitation of effective competition. The difficulty here is that the promotion of economy and efficiency and effective competition are all in the interests of customers. These latter two amendments would make very little difference to the way in which the

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Secretary of State and the director exercised their powers, but I have to say that they would add confusion as to the purpose of the ranking.
I have taken some time to go very carefully through these points for, as the noble Lord, Lord McIntosh of Haringey, reminded us, Clause 7 is one of the most important clauses of the Bill, and I wanted to set out very clearly why we had set out the Bill in the way that we have.
Lord McIntosh of Haringey: My Lords, I am grateful to the Minister for that clear reply. I must say that I think he is putting a great deal of significance on to the one word "properly". All that paragraph (a) says is that it is the duty of the Secretary of State or the director
"to secure that the functions of a water undertaker and of a sewerage undertaker are properly carried out as respects every area of England and Wales".
The Minister is saying that all the specific duties set out in Clause 8 depend on the word "properly" and that if that word is not there none of the protections in Clause 8 will have adequate effect. I find it very far-fetched to say that to take out the word "properly" has all that significance. As the Minister well knows, it certainly was not our intention that the specific environmental and recreational duties set out in Clause 8 should be in any way weakened. We do not believe that our amendments have that effect. Their effect is to change the hierarchy of priorities in the duties.
Judging from his reply, the Minister seems to think that what we are doing is proposing for the first time a hierarchy of duties which is going to cause difficulties. Nothing could be further from the truth. The truth is that the hierarchy of duties is already well established in the Bill as drafted. The hierarchy is only too clear: it is in the interests of the shareholders, the water undertakers and sewerage undertakers to secure a reasonable return on their capital to finance the proper carrying out of the functions of these undertakers, which is the primary duty of the Secretary of State and the director. The hierarchy is well established. It is shareholders and private companies first and consumers second. What we are trying to do is to put it the other way round and put the consumer first.
I have said that it was not our intention in these amendments in any way to weaken the duties set out in Clause 8. The Minister says otherwise, and I have to listen to what he says because, after all, he has been concerned with the complex structure of the Bill and with the linkages between the different parts of the Bill.
For that reason alone, I shall beg leave to withdraw the amendment. However, it does not take away from the fundamental difference that we find between the Bill and the statements made by Ministers and spokesmen on all sides, including those speaking for the Conservative Party at the European elections. They are claiming that this is a Bill to protect the consumer and the environment. The truth is that this is a Bill which puts the interests of the private companies and their shareholders first and the interests of consumers second.
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For that reason we adhere to the view that our amendments are essential if the claims made for the Bill are to be sustained. However, if they prove to be defective in drafting, it may be appropriate if I beg leave to withdraw the amendment at this stage.
Amendment, by leave, withdrawn.
[Amendments Nos. 42 and 43 not moved.]
11 p.m.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 44:
Page 6, line 45, at end insert—
("(2A) For the purposes of subsection (2)(B) above, a reasonable return on capital shall not exceed 5 per cent. per annum, or such other percentage as may be determined by the Secretary of State within two months of the passing of this Act or varied in a subsequent year in accordance with subsection (2B) below.
(2B) The Secretary of State may, in any subsequent year after the first year in which the provisions of this section apply in respect of the return of capital of any undertaker, vary the figure specified in subsection (2A) above or, as the case may be, the figure determined by him within the period therein specified.
(2C) Where any other figure than 5 per cent. is determined in respect of any year, the Secretary of State shall at the time of such determination issue a statement as to the likely effect on charges to domestic and non-domestic consumers in the area of each undertaker of the level determined as compared with a return of 5 per cent. per annum in respect of that undertaker.").
The noble Lord said: My Lords, the House will have to forgive me. This is a complicated matter and it deserves a certain amount of exposition which I cannot very well cut short.
The purpose of this amendment is to put some real meaning into the phrase in Section 7(2)(b) of "reasonable returns". There are various ways in which a reasonable rate of return might be calculated bearing in mind that the two primary objectives must be, first—I am not putting forward a revolutionary Socialist view—that the Government have to secure that the prices which the water and sewerage undertakings can charge are enough to obtain investors at the time of the flotation. Secondly, they have to secure that the prices are not so high that the water and sewerage undertakings are achieving what is in effect monopoly rent; in other words, that they are taking advantage of the fact that they are natural monopolies in order to charge higher prices than would otherwise be justified. That is the balance that has to be made.
The Bill as drafted makes no attempt to set out either the conclusion or the argument leading up to that conclusion. We believe that it is important—and it is only at this stage that we have been able to get anywhere near achieving it—that Parliament should say what the rate of return should be in order to ensure that any flotation is fair not only to the investors but, more importantly, to the taxpayers and to the customers.
We are proposing that a reasonable rate of return on capital should be defined as being 5 per cent. per annum but that the Secretary of State should have the power to vary that. When he varies it, he should specify the reasoning behind it and everything should be made clear.
Let me make it clear straight away that by 5 per cent. I mean 5 per cent. on a current cost accounting basis. If we look at the 1987–1988 accounts of the water authorities—which are the most recent accounts available—we see that the assets of the authorities amount to £27·1 billion.
If any calculation of rate of return were to be on the basis of that £27·1 billion, and if the Government were to say for the sake of argument that the rate of return should be 8 per cent.—and that is the figure that has been suggested, because it falls roughly between a pure equity figure and a public utility figure—then the increase in cost of an 8 per cent. return, or even a 5 per cent. return, on that £27·1 billion, would be horrific, as would the increase in prices which would have to be charged in order to meet that figure. To meet an 8 per cent. return there would have to be profits of £2·4 billion, which would require an increase of 58 per cent. over the 1987–88 levels. To make a 5 per cent. return—which is what we are talking about—would require profits of £ 1·35 billion, which would mean price rises of 27 per cent. above the 1987–88 level.
However, we can put that on one side, although it is theoretically possible, because the Minister, Mr. Michael Howard, has said that the rate of return would not be on the net value of the physical assets, but on the rate of return on the money paid for the industry—that is a figure of more like between £5 and £7 billion, which is what is currently estimated—plus any new investments or new money put into the industry.
If we then consider what that means, the Water Authorities Association seems to think that £1·6 billion investment would be required to put things right. Warburgs, which are the Government's advisers in this matter, think that the investment in environmental improvements would be of the order of £7·1 billion. Whichever figure one takes has to be in some kind of range; but it looks as if the financial capital of the industry, on Mr. Howard's definition, would be of the order of between £14 and £16 billion. That means that at an 8 per cent. rate of return, the increases required over the next decade would be between 14 and 20 per cent.
The further complication—I apologise for this, but it is essential—is the issue of writing off debts. The Minister referred at Committee stage to the intention of the Government to write off the debts to the public loans board, and said that those debts would be replaced by a new capital structure involving equity and debt. What he did not say was what proportion of it would be equity and what proportion of it would be debt. He left open the possibility that there would be no writing off of debt at all, and only a restructuring of debt among the different water undertakings. Clearly such a restructuring would be essential if they are all to be privatised. He has also left open the possibility that a substantial part—or even all—of the £5·5 billion debt would be written off.
If we can estimate that debt charges are of the order of £550 million a year at present and all that debt is written off then the prices to customers would
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fall and the increases that I have talked about as a result of the required reasonable rate of return to the shareholders would be significantly greater.
The second complication we have to take into account is the conversion between current cost and historic cost accounting. The money markets at the moment are accustomed to dealing with historic cost accounting, mainly because agreements on current cost accounting standards are by no means universally accepted. The difficulty with conversion is that it would have to be on the basis of the price indices related to the capital cost of the water industry and not related to any other factor. So it is not a simple matter of using the RPI as a basis for conversion. One has to do so by looking at the capital costs of the water industry. The 1987 to 1988 accounts show that the water industries made 15·6 per cent. on historic cost. The best estimate that one can make is that 5 per cent. on current cost, which is proposed in the amendment, is equivalent to 18·4 per cent. on historic cost.
Let us accept that the 15·6 per cent. on historic cost is not good enough to secure an adequate flotation. A figure of 18·4 per cent. on historic cost, which is what our amendment means, is adequate for flotation. However, a figure of 8 per cent. on current cost, which is the best estimate of the Government's figure, would mean a rate of return on historic cost of 29·4 per cent. That is a grossly excessive figure for the purpose of the flotation and will amount to a windfall for the shareholders at the expense of the consumers. That is because the consumers would have to pay higher prices in order to meet those dividend payments.
I accept that there are further problems and complications, even after nine minutes. One cannot summarise these matters in no time at all. The issues have been under debate in the department and with its financial advisers for at least six months and probably a good deal longer. I accept that on day 1 current cost will, by definition, be equal to historic cost. But the situation will change rapidly after day 1. I accept also that the historic cost which I have been quoting on the real assets is not necessarily the same as the historic cost that there would be on the financial assets as defined by the Minister for water and planning in the future.
The point of this complicated analysis is that if taxpayers are to be reassured that they are not being cheated by the privatisation deal and customers that they are not paying an excessive price, the Government must put their money where their mouth is. They must say what is the figure to which they are working and what is the effect of that on prices and on the return to shareholders after flotation.
The amendment and my exposition of it are intended to argue that 5 per cent. on current cost is enough and not too much to secure a successful flotation. At the same time it is enough and not too much to secure that there is no need for a write-off of debts. We shall see whether the Government are prepared to say what their figure is likely to be, but any more than that would result in a windfall to shareholders and excessive price rises for water

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customers. In our view, that would not be acceptable. It would not be in the spirit of the arguments which the Government have been putting forward for the Bill.
If the Government are not prepared to respond and put their figure on the costs, then it can only be said—as I said earlier in Committee—that this is a hollow Bill. It deals with the formulae for water privatisation but not with the real facts about it. It is essential that Parliament should take part in a debate on the real facts of water privatisation. That is what our amendment seeks to do. I beg to move.
Lord Renton: The noble Lord, Lord McIntosh, is suggesting that under the Bill no more than 5 per cent. should be earned on the capital to be raised by the water and sewerage undertakers. He has been very ingenious but, of course, this is a transparent attempt to achieve by another means what my noble friend Lord Nugent tried to achieve at the start of the second day of our Committee when he suggested that, instead of having plcs which would be free to raise capital without fixed dividends on the market, we should have the old type of water companies under the companies consolidation Act under which the capital has to be raised with fixed dividends.
I do not believe that there is—and perhaps I may borrow an expression used a long time ago by a famous Chancellor of the Exchequer—a cat in hell's chance of raising the capital if we were to have fixed dividends. In the nature of things, there has to be an opportunity to raise ordinary capital on the basis of what profits can be reasonably achieved.
There is no doubt that this is a difficult Bill. It is a difficult and brave concept. However, bearing in mind all that needs to be done which can only be achieved by raising capital, which can only be raised on the open market, I believe that the Government are right to stick to the view that there must be an opportunity to have variable dividends, and it should not be limited to 5 per cent. or any other reasonably low percentage.
Quite frankly, to think otherwise is to be living in an unreal financial world. The markets of this country would just not provide the capital—and I am talking of the financial markets—if the scheme put forward by the noble Lord in his amendment were to be accepted. Quite frankly, I do not believe that one needs to say any more.
11.15 p.m.
The Earl of Caithness: My Lords, I am extremely grateful to my noble friend Lord Renton for that constructive intervention. That answers many of the points of the noble Lord, Lord McIntosh, and sees straight through the true meaning behind the amendment. I am tempted to give a short reply to the noble Lord, but this is an important matter; I believe that it is surrounded by considerable confusion and that the waters have now become rather muddied. I believe that a full clarification is needed. I hope that your Lordships will bear with me. I know that those on the Liberal Benches who are so keen to go home will be very happy to stay so that their minds can be put at rest before they do so.
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These amendments to Clause 7 are designed to enable the Secretary of State to fix a maximum ceiling on the rate of return on capital of the new water and sewerage undertakers. The ceiling is to be 5 per cent., or a figure to be set by the Secretary of State for later years. And where a figure different from 5 per cent. is set, the Secretary of State is to be obliged to issue a statement describing the effects on charges of that decision. In other words the Secretary of State is to be able to deprive companies of their right to earn a return on capital, so long as he justifies it by explaining how much his decision will reduce charges for customers.
For complete clarity, I think I should first stress that this amendment would not impose a direct mechanism for limiting profits, as some might suppose. This amendment simply refers to the rate of return on capital employed. We do not believe that there is any case for an arbitrary limitation of the type proposed. The director general simply needs to ensure that efficient companies will provide reasonable remuneration on capital. That is needed so that the companies are able to raise finance, and are thus able to finance the proper carrying out of their functions.
However, this debate has gone rather wide. We have listened with interest to arguments about the rate of return for investors in this industry. We have listened too to the emotional appeal raised at an earlier stage that water is somehow too special a raw material, for its treatment and distribution to be a business for profit.
In Committee, one of the most stimulating debates concluded in the decision not to amend the Bill to provide controls over dividends and reserves, as my noble friend Lord Renton reminded us. That was the occasion when the Opposition parties voted against the director general and the price control mechanism.
On this side of the House we do not believe that controls on dividends will deliver the efficient private sector businesses from which both customers and shareholders will benefit. I have said it before—but it is worth repeating—that it is the director general who will be the economic regulator for this industry and who will ensure that the new water and sewerage undertakers do not exploit their near monopoly at the tap. He will have all the powers necessary to protect all the customers and potential customers of all the companies. In particular, he will regulate charges by setting a ceiling for price increases and in doing this he will have the major advantage of being able to compare up to 39 different companies. No other director general will have this advantage of comparative competition.
We strongly believe that there should be control over prices rather than dividends. The director generals of gas and telecommunications have already shown how customers' interests can be well served through a price control system: one that allows the industry to be profitable if it is efficient, but does not guarantee dividends if it is inefficient. It would be as inappropriate to put a ceiling on dividends as to put a ceiling on potential efficiency improvements.

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This brings me to the heart of what is wrong with this amendment; for the noble Lord, Lord McIntosh, seems to assume that the Secretary of State and director general must guarantee a rate of return on capital employed and this leads him to assume that they need to have some ceiling on what they guarantee. In fact, the clause refers to a duty to secure that undertakers are able—and I must stress these words "are able"—to finance the proper carrying out of their functions. There is no obligation here on the Secretary of State or director general to ensure that inefficient companies deliver the reasonable return, or indeed make a profit.
As we have already said today, this is the most crucial area of customer protection. Proper provision of services depends on the companies being able to finance those services; without the finance the services will be at risk. Inserting the amendments before the House today would threaten unnecessarily the long term financial stability of the water and sewerage businesses. Perhaps ironically—though I could not vouch for that—it would put at risk the very services the proper provision of which the noble Lord sought earlier to persuade us he aimed to protect.
The 8 per cent. mentioned by the noble Lord, Lord McIntosh of Haringey, is not a final proposal by the Government. The eventual figure may be lower. The noble Lord has offered a range of possibilities for the capital on which the rate should be earned. His figures are speculative. They are not government figures; but as he has raised a number of points, it may help if I explain to the House what the reference to "reasonable rates of return" means and does not mean.
First, let me make clear that the expression does not relate directly to returns to be received by investors. Such returns will depend, whether with equity stock or with debentures, on the price at which investors bought. That is a matter for them. The director general is concerned more with the relationship between the underlying profits of the utility and the capital employed. He needs to ensure that, if the utility is run efficiently, the company will provide reasonable remuneration of capital, thereby allowing it to raise finance. If it cannot raise the finance, it will not be able to provide the services properly, as I have said.
Secondly, this concept of underlying profitability is essentially no different from that which applies to nationalised industries while in the public sector. Were the water authorities not to be privatised, the Government would expect them to earn a return of 8 per cent. real on new investment. This does not of course mean they would have to borrow at that rate of interest. Nationalised industries are at present able to borrow from the National Loan Fund at finer rates, but that ability to borrow more cheaply does not alter the requirement to produce an 8 per cent. return. Effectively it becomes possible to finance some capital investment from charges rather than borrowing, with a strengthening of balance sheets.
Thirdly, a distinction can be made—and is made while in the public sector—between the return
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required on existing and on new assets. With new assets it is necessary to raise finance at the margin and if the rate of return is not high enough new investment will simply not happen. With existing assets the considerations are very different although regard must clearly be had to the overall financial profile after the two are considered together.
Fourthly, in judging what rate of return is reasonable after privatisation, it is misleading to distinguish, as did the noble Lord, Lord McIntosh, during Committee, between utilities and equities as if the two were mutually exclusive. Risk varies greatly between different types of equity stock. Some equities are utilities, and risk tends to be at the lower end of the spectrum given the nature of the business. In the case of the water utilities, it will be necessary to assess what risk attaches both to the nature of the business and the nature of the regulatory environment.
That is something that needs careful study, in the first place by the Secretary of State and subsequently, in the light of experience, by the director general. There is, however, no reason of principle why a water utility trading in the private sector should require rates of return on new investment substantially different from that currently demanded in the public sector.
Fifthly, following on from this last point, there is no sense in which extra profits need to be made in the private sector to fund dividends. Profits need to be enough to provide a reasonable return, and that return will be split between interest payments for debenture holders, dividend payments for equity holders, and retention for further investment. With privatisation there will be a different carve up of the cake. The cake itself is not necessarily larger or smaller.
Finally, I should stress that the Secretary of State has yet to come to a firm view on what rate of return is appropriate for water utilities. Obviously, advice and research has been commissioned. We are and shall be studying with care what we receive. However, it is most certainly the Government's belief that the price of water to consumers will not be higher than it would be without privatisation, except to meet the high standards that we all seek but especially when we bear in mind that we can allow for efficiency savings that can be achieved in the private sector.
I am grateful to your Lordships for bearing with me, but I thought that it was important to give the noble Lord a full answer.
Lord McIntosh of Haringey: My Lords, I hope that I am not alone in being sincerely grateful to the Minister for giving a full answer and for giving us the benefit of the best explanation that we have yet had from the Government of current thinking as regards the reasonable rate of return which is specified in the Bill. Perhaps I may make it clear to the noble Lord, Lord Renton, in particular, that my

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amendment is not an attempt to bring in dividend control by the back door. The phrase "reasonable rate of return" comes in the Bill and it was not invented by me.
I am trying to get the Government to say rather more clearly than they have done in the past what is meant by a reasonable rate of return. The answer that we have been given by the Minister is that the Secretary of State has not yet come to a conclusion on the matter. He has not said that the Secretary of State will not come to a conclusion. However, what is the case clearly and transparently for the first time is that the Secretary of State will reach a conclusion but that Parliament will have no part in that conclusion. In other words, the conclusion will not be reached until the Bill has concluded its passage through Parliament.
That is what is so unsatisfactory about this Bill and that is why it is a hollow Bill. It is also why it is necessary to move an amendment of this kind in order to attempt to force the Government to come clean on the matter. I readily accept that some of the figures I have been quoting in defence of the figure of 5 per cent. are best estimates. They are not based on government figures at all, but on an analysis of the 1987–88 accounts of the water authorities. It may well be that the 1988–89 accounts of the water authorities, when produced, will show different figures and then we shall have to do the sums all over again, as will the Secretary of State.
The important fact to show is that on the best figures available to us—if the Secretary of State has better ones, let us hear them—the current suggestion, and not the final one, of an 8 per cent. return on capital is going to produce excessive cost to consumers and an excessive return to shareholders. That is the point that we have demonstrated by these amendments and that is the point that has not been effectively denied by the Minister despite a long and helpful explanation of the Government's current thinking.
The amendment is not one that I wish to pursue in the Division Lobbies because it is not that kind of amendment. It has produced a better understanding than we have had before of government thinking, and for that I am grateful. It has at the same time revealed the fundamental danger of the Bill that the real decisions will be taken by the Secretary of State after the Bill has passed through Parliament and will not be considered by Parliament. That is one of the many reasons why this is a grossly unsatisfactory and dangerous Bill. It is appropriate, however, that I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 45 not moved.]
The Earl of Caithness The Earl of Caithness moved Amendment No. 46:
Page 6, line 47, leave out ("the powers") and insert ("and perform the powers and duties").
On Question, amendment agreed to.
[Amendment No. 47 not moved.]
The Earl of Arran: My Lords, I beg to move that further consideration on Report be now adjourned.
Moved accordingly, and, on Question, Motion agreed to.
House adjourned at twenty-six minutes past eleven o'clock.