Water Bill

HL Deb 06 June 1989 vol 508 cc793-842

Consideration of Amendments on Report resumed.

Clause 2 [Regional rivers advisory committees]:

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 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 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

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 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 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 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.

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 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 moved Amendment No. 18: Page 3, line 14, at end insert ("and

1. (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 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 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 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.

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 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.

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 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 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?

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 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 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 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 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 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 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 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 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 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 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!

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 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 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—

1. (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
2. (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 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 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 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 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 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—

1. (a) the functions assigned by this Act to such a committee; and
2. (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 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 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—

1. (a) domestic consumers;
2. (b) industrial, commercial and fanning interests; and
3. (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 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 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 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 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 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 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 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 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.

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 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.

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 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 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 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.

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.

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 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 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 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.