Water Bill

HL Deb 12 June 1989 vol 508 cc1197-256

Consideration of amendments on Report resumed.

Clause 54[Offence of supplying water unfit for human consumption]:

Lord Addington moved Amendment No. 109: Page 64, line 15, at end insert ("or by the Customer Services Committee for the area affected").

The noble Lord said: My Lords, the aim of this amendment is to try to give a little more power to local areas as regards the right to prosecute an

undertaker supplying water that is unfit for human consumption. When this matter was considered in Committee the Government were successful in a Division over whether anyone could prosecute an undertaker for supplying that water. However, this amendment means that the customer services committees of the local areas will be allowed to undertake prosecutions on behalf of local people. The consumers will then have a local representative capable of taking some positive action as regards someone who has provided water that is unfit for human consumption. I suggest that the customer services committee is a far more suitable body as it will mean that local people will not have to go to the far too bureaucratic machinery in Whitehall and will thus be more in contact with their desires and aspirations and also with local problems. I beg to move.

Lord Graham of Edmonton

My Lords, this seems to be an eminently sensible amendment. Anything that can be seen by local people to be giving them an entrée into what will be a radically changed situation is to be welcomed. I take note of what the Minister and his colleages have said that there will be little change except improvement. Nevertheless, there will be a great deal of apprehension and I believe that this amendment will go a long way to help to ease that apprehension out of the minds of a great many water users.

Lord Ross of Newport

My Lords, it seems to be a sledgehammer to crack a nut that one has to leave prosecution solely to the Secretary of State or the Director of Public Prosecutions. I should think that this is one way in which at local level people can react and get others to act on their behalf when a disaster occurs such as that which happened recently in Cornwall and elsewhere in the western region. I hope very much that the Government will consider this amendment seriously.

Lord Hesketh

My Lords, the effect if Amendment No. 109 would be to enable the customer services committee for the area affected to institute proceedings where it believes a water undertaker has supplied water unfit for human consumption. Clause 54 as it stands restricts the power to prosecute to the Secretary of State and the Director of Public Prosecutions. We discussed a similar amendment during the Committee stage of the Bill and while I understand the good intentions of the noble Lord, Lord Addington, in tabling this amendment I must reiterate what I said then. The Government believe that the power to prosecute should rest with the public authority which is charged with enforcing quality standards. For public supplies the Secretary of State is the enforcing body. The prosecution power in Clause 54 is one of the weapons he can use to carry out that responsibility.

One of the key tasks of the customers services committees will be to investigate matters raised by individual customers and they will have an important role in following up customer complaints about drinking water quality. However, they will have no right to prosecute undertakers for failure to meet level of service standards with regard to their other duties. Therefore to give CSCs the right to prosecute under Clause 54 would give them an unprecedented power not echoed in the rest of the Bill.

The CSCs will try to resolve complaints with the undertaker and in the case of drinking water complaints will consult the relevant local authority. Where a CSC considers that the undertaker is unreasonable it can then refer the matter to the director general. To give them an independent power of prosecution would be wholly inappropriate to the structure of customer protection in the Bill whereby they report to and advise the director general.

Where a drinking water complaint was referred by a CSC to the director general then certainly where it concerned the possibility of water having been supplied unfit for human consumption he would be expected to refer it to the Secretary of State for possible prosecution. It is of course open to a customer to complain to the Director of Public Prosecutions. The power of prosecution under Clause 54 extends to him as well as to the Secretary of State. He represents the public interest and his inclusion in this clause enables the public to complain to someone other than the Secretary of State. Indeed it is open for anyone to request either of the prosecuting bodies to institute proceedings against an undertaker.

Supplying water unfit for human consumption is a very serious matter; hence the penalties for doing so may be substantial. I can assure noble Lords that the Government would not shirk from their responsibilities in prosecuting an undertaker under Clause 54 if it did indeed supply water unfit for human consumption. With that assurance, I hope that the noble Lord will feel able to withdraw his amendment.

Lord Graham of Edmonton

My Lords, before the noble Lord sits down, will he say more about the powers of customer service committees before matters are passed higher up the chain to the director or to the Secretary of State? Local people may persistently put forward evidence on which no action is taken. The Minister says that the director will be one stage removed from the Secretary of State. The noble Lord should be encouraging the local committees to be vigilant and to use their opportunities to put evidence before those who are above them.

Lord Hesketh

My Lords, the customer service committees will report directly to the director general. They will have an important job, which is to be vigilant. We expect them to be so, as the noble Lord also wishes. On that point I feel that there is agreement on both sides of the House.

Lord Addington

My Lords, I still would have liked to see some local representation and someone lower down the scale being able to take this action. However, having heard what the Minister has said, I can see that we shall not get that concession. I can only hope that the bodies in question will be rather more active and vigilant than they have been in the past. There is considerable room for improvement. I am not prepared to divide the House. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

8.15 p.m.

Clause 55 [Provision of water where piped supplies insufficient or unwholesome]:

Lord McIntosh of Haringey moved Amendment No. 109ZA: Page 64, line 35, after ("premises") insert ("in replacement of a private supply to those premises")

The noble Lord said: My Lords, Clause 55 is concerned with the provision of water where piped supplies are insufficient or unwholesome. Subsection (1) is concerned with circumstances in which it is not practicable to supply water in pipes but where it is practicable to supply water other than through pipes. Where the water is inadequate in quantity or too unwholesome for life or health the local authority may notify the undertaker of the danger to health and require it to provide a supply other than in pipes.

Under subsection (2) a local authority that gives notice in that way has to pay all the costs. It will be noted that subsection (1) does not specify why the water should be insufficient or unwholesome, whether it is through the fault of the undertaker or for any other reason. In effect this means that the only risk to a water undertaker which fails to provide an adequate supply of wholesome water is a fine of £5 a day. On the insistence of the local authority this supply has to be met other than in pipes—presumably by tankers. The local authority has to pay the costs but does not have any special resources from which to find the money. The charges therefore fall on the local residents.

Under our amendment this extraordinary provision that the local authority should always pay the costs of the replacement supply is restricted to a private supply. Where we are dealing with a former private supply what in effect we have is a new public supply. It seems just about reasonable that the costs of that should be borne by the consumers. In Committee the noble Lord, Lord Hesketh, called this a private private supply. However, where the failure is within the public supply, surely, unless it can be shown to the contrary, the failure is the responsibility of the undertaker. It is the undertaker's failure, and the cost of the tanker or the replacement supply ought not to be charged to the local authority and to the local authority's ratepayers.

I said that local authorities have no resources for this purpose. Perhaps the Minister will indicate that resources may be available. I understand that Clause 125 of the Local Government and Housing Bill now before another place provides for reimbursement of costs of this kind. Will Clause 125, or whatever clause it turns out to be when the Bill reaches us, be applicable in this case? We seem to have another case where the privatised water companies are to be unduly protected against what would otherwise be properly described as commercial risks. The risks,

which are the only justification for profits, ought to be charged to the undertakers and not to local authorities and thence to local people. I beg to move.

The Earl of Balfour

My Lords, I have studied this clause carefully because paragraph 76C of Schedule 22 has almost identical words applying to Scotland. The supply in question could come from a well. It might be found by the local authority environmental health department to be unfit to drink. In that case the water undertaker, or in the case of Scotland the water board, might be approached to supply water. As the clause is worded the local authority may pass on the cost to the person concerned; it may bear the cost itself; or it may ask the undertaker to carry out a certain amount of the work.

I envisage the case of a hill village in Wales which draws a good supply from a well. The well then runs dry or becomes polluted. Water does not run uphill and the undertaker may well have a difficult job to get a pipe to go up to that hill village under any sort of pressure without putting in a pump. That, so far as I can see, is the reason for the provision in this clause. With very great respect, I argue with the noble Lord, Lord McIntosh, on this issue and I say that his amendment is unnecessary.

The Earl of Arran

My Lords, perhaps I may expand upon the background relating to this amendment. Clause 55 provides that, in certain cases, where it is not practicable at reasonable cost for a water undertaker to provide or maintain a sufficient supply of wholesome water for domestic purposes to particular premises through its pipes, it may be obliged to provide a supply of water by alternative means. This would normally mean providing a supply of water by means of a tanker or standpipe. A local authority is required to notify the undertaker of premises in its area where the insufficiency or unwholesomeness of the existing water supply is such as to be a danger to health. The local authority would be liable to meet the undertaker's charges for providing an alternative supply but would be able to recover them from the owner or occupier provided with the supply of water.

As my noble friend Lord Hesketh explained when we discussed this clause in Committee, the circumstances when an undertaker would be required to provide a supply of water other than by pipes would generally involve the failure of a private water supply. A private supply may become unwholesome or insufficient for domestic purposes and thereby constitute a danger to health. Because of the location of the properties served by the private supply it may not be feasible for the undertaker to provide a supply of water for domestic purposes by pipe. In these situations the undertaker would be required to provide a supply of water by alternative means, usually by standpipe or tanker.

The purpose of the amendment tabled by the noble Lord, Lord McIntosh of Haringey, is to limit the ability of the undertaker to recover his expenses in providing an alternative supply to those cases where the supply was necessary as a result of the failure of a private supply to those premises.

The amendment is wholly unnecessary. Any concern that the undertaker would be able to recover his costs in providing an alternative supply as a result of his failure to maintain a piped supply is misplaced as I will explain. Subsection (l)(a) provides that where it is not practicable at reasonable cost for an undertaker to maintain a supply of water by pipes a local authority is able to require the undertaker to provide a supply by alternative means.

Lord McIntosh of Haringey

My Lords, I hope the noble Earl will permit me to intervene here. Subsection (l)(a) does not say "to maintain", it says: to provide or maintain such a supply".

The Earl of Arran

My Lords, perhaps I may continue with my response and return later to the point made by the noble Lord.

The provision in subsection (l)(a) is essentially to cover cases of temporary supply failure—for instance, due to frozen pipes—when it would be unreasonable to require the undertaker to lay replacement pipes in order to maintain the piped supply. The undertaker would not pass on his charges in these circumstances since the owner or occupier would already be paying for a supply of water. Indeed, the provision in subsection (2) enabling a water undertaker to recover its costs is limited to cases where the undertaker is unable to provide a piped supply and is required by a local authority to provide a supply by alternative means. It does not extend to those cases where the water undertaker is unable to maintain a piped supply and is required to provide a supply by alternative means.

As regards the point made by the noble Lord, Lord McIntosh, in relation to subsection (1)(a), the words "supply" or "maintain" are the alternatives.

Lord McIntosh of Haringey

My Lords, this argument is going from bad to worse. What Clause 55(l)(a) says is, to provide or maintain such a supply". The noble Earl rests his case on the fact that subsection (2) then says: Where under subsection (1) above a local authority require the provision by a water undertaker of a supply of water to any premises", and so on. What is the distinction between "provide or maintain" in subsection (1) and "provision" in subsection (2)? Is the noble Earl saying that subsection (2) relates only to a temporary matter and that it is provision only for a short time? Further, if it is for a short time, how short is that time? There is a difference in the wording but it is very difficult to work out the distinction between the words. I wonder whether the noble Earl can help us on the issue. My specific question is this: if "provision" means for a shorter time than "provide or maintain", then how short a time will that be?

The Earl of Arran

My Lords, there is provision in subsection (l)(a). It lists the alternatives as provision or maintenance.

Lord McIntosh of Haringey

My Lords, I do not think that we are getting anywhere on this issue. I say that because subsection (1) specifies "provide or maintain", whereas subsections (2) and (3) refer to the "provision" of supply. If subsections (2) and (3) are referring to a short-term provision and therefore the burden on the local authority and on the occupiers is limited in that way, then the Government's argument may have some force. However, if that is so, the Government should write to me between now and the next stage of the Bill's proceedings to explain the reason for the wording. In my view the wording is somewhat obscure. Perhaps the noble Earl will agree either to write to me on the matter or to discuss it with me between now and a later stage.

The Earl of Arran

My Lords, with the leave of the House, I must say that I do not think the noble Lord, Lord McIntosh, is quite correct when he talks about obscurity here. However, in the circumstances, I undertake to write to him on the matter between now and Third Reading.

Lord McIntosh of Haringey

My Lords, these are major concessions which we are extracting from the Government and we fully appreciate them. In the circumstances, without in any way claiming to understand the phraseology of the clause or in any way going back on my accusation of obscurity; and moreover, without accepting also that it would be right for the local authority and the occupiers to pay the cost of replacing piped supply which is not available because of the fault of the undertaker, I think my only option now is to beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

8.30 p.m.

Clause 56 [General functions of local authorities in relation to water quality]:

Lord Middleton moved Amendment No. 109A: Page 65, line 34, at end insert ("; and") (c) the matters which should be taken into account in the exercise of those powers").

The noble Lord said: My Lords, in Committee my noble friend Lord Renton moved an amendment to Clause 57 which would have required local authorities, when exercising their powers under that clause, to take account of the rights and obligations of the relevant persons under contracts or agreements regarding private water supplies. In reply my noble friend Lord Hesketh gave a sympathetic response and the amendment was withdrawn.

The purpose of this amendment is to elicit a response from the Government—if this amendment be not accepted—as to whether a direction will be given to local authorities (with which they will be required to comply under Clause 56(4)) when they exercise their remedial powers given to them under Clause 57 in cases where the private water supply is not satisfactory.

My noble friend Lord Caithness has been kind enough to write to me and to other noble Lords who voiced their concern in the matter, and I am encouraged to believe that a direction which may take account of that concern may be made. Therefore I look forward to hearing what the Government have in mind. I beg to move.

Lord Renton

My Lords, I should like to support the amendment. We are grateful to my noble friends for the consideration that they have given to this matter since the Committee stage, and for letting us have a letter containing their views. What was suggested in the letter was acceptable up to a point, but I should have thought that it was better to write into the Bill the words of this simple amendment, which is much shorter than the one we moved in Committee. In saying that, I ask my noble friend to bear in mind two matters in particular, without going over all the ground we covered fully in Committee.

The first point is that a departmental directive is not part of the law. It can sometimes be prayed in aid when a dispute comes to court, but it is not part of the law. It does not create in itself any obligation upon the local authority to take account of the matters which are relevant; but by writing that simple paragraph into the statute we can achieve the same as a ministerial directive, with the satisfaction of knowing that it becomes part of the law and is enforceable.

The other point is that there is provision in the Bill for an individual landowner, or other person concerned, to appeal to the Secretary of State if he is not satisfied with the way that the local authority has handled the matter. However, appeals involve administrative costs to the Government as well as to the individual, and to the extent that appeals can be saved it would be a great advantage. By making a local authority take those matters into account we may avoid the need for further appeals, so from both the public and the private point of view there would be an advantage.

The Earl of Radnor

My Lords, I support the amendment. It is a simple one which should be acceptable. If it is not acceptable, I hope that my noble friend will be able to produce something which will have the same effect.

The Earl of Caithness

My Lords, I understand my noble friends' reasons for tabling this amendment but we consider the points that they raise to be fully covered by the existing words in the subsection. Subsection (4) states that directions may be given concerning the cases and circumstances in which authorities are or are not to exercise those powers and the manner in which those powers are exercised. I am advised that that fully provides for directions to be given requiring local authorities to have regard to existing contracts, licences and agreements governing private supplies when requiring improvements to any such supplies. I have written to my noble friends, as they kindly said. I confirm my undertaking that such a direction will be given and to consult on its terms.

My noble friend Lord Renton raised two matters that he asked me to take into account. I note what he said. I ask him to take into account one matter in return. There are other provisions in the Bill enabling the Secretary of State to make directions, drafted in terms somewhat similar to this subsection. If the amendment were made here, it could throw doubt on the scope of those other provisions. My noble friend, with his legal training, will understand more clearly than I do the implications of that. I feel sure that the right way is to proceed as I have said. I renew my confirmation of the undertaking that a direction will be given.

Lord Middleton

My Lords, I am grateful to my noble friend for giving that undertaking. It would be an advantage and helpful if a direction were to be supplemented by a circular giving more details to local authorities. My noble friend has also said that he will consult the relevant interests about the direction and, I hope, about a circular as well. That being so, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Gallacher moved Amendment No. 109AA: Page 66, line 10, at end insert— ("(e) provide for the notification by the authority to the Secretary of State of any additional costs, to the extent that those costs are not met from revenue, arising from this section, for the purposes of the payment to the authority of an equivalent amount in grant.").

The noble Lord said: My Lords, the amendment returns to issues which were raised by my noble friends Lady White and Lord Graham of Edmonton when we were discussing the Motion that Clause 56 stand part of the Bill. The noble Lord, Lord Hesketh, was then pressed on how costs might be recovered where they had fallen on local authorities as a result of complying with requirements laid upon them in Clause 56. The noble Lord said, at col. 1344 of Hansard for 18th May, that the rate support grant levels would need to take account of extra costs on local authorities arising from the Bill, and that there would be additional revenue from testing of private supplies.

The amendment is tabled to enable the Minister to confirm that his response to questions, of which he may not have had notice, reflected the position under the clause. The amendment suggests that it would be helpful for the Bill to contain a provision whereby there is a standard notification procedure by local authorities to the Secretary of State of additional costs incurred, and that they should be calculated less any revenue arising under the section from the private supply, sampling and so forth.

The amendment assumes that, as the Minister stated, the authority would then be entitled to an equivalent amount in grant. It would be helpful if the Minister could confirm that that is the position, as is understood. His comments would be welcome on the process by which that information will be incorporated in the rate support grant calculations. I beg to move.

Lord Hesketh

My Lords, the amendment would enable the Secretary of State to make regulations requiring a local authority to notify him of any additional non-revenue costs arising from Clause 56 so that he could provide a grant to cover those costs. The noble Lord, Lord Gallacher, will not be surprised to hear that the Government do not support the amendment.

I should like to take issue with him on several counts. First, I question whether any such additional costs will arise as a result of this clause. Local authorities have for many years had a duty to check on the wholesomeness and sufficiency of water supplies in their area. I quote from the Public Health Act 1936: It shall be the duty of every local authority to take from time to time such steps as may be necessary for ascertaining the sufficiency and wholesomeness of the water supplies within their district". That provision was re-enacted in Section 11 (1) of the Water Act 1973 and reappears in subsection (1) of this clause. The changes in wording in the Bill from the 1973 Act are solely for clarification.

Local authorities must also continue: to inform the water undertaker when the water is unwholesome or insufficient. In addition, they must notify water undertakers if there is a general deterioration in the quality of a supply. The 1973 Act power to refer disputes with the undertaker to the Secretary of State is replaced by a duty to notify the Secretary of State if they are not satisfied with the remedial action proposed. None of that will involve additional expenditure.

Indeed, local authorities will be able to exercise their duties much more easily in future because of the steps we are taking to remove vague generalities about wholesomeness and substitute very precise legal standards. If the water complies with the standards, it is wholesome. If it fails to do so, it will be unwholesome unless a special relaxation has been authorised. Water undertakers will be required by regulations to provide regular reports to each local authority on the quality of their supplies. Those will have to be set out in a prescribed form which shows clearly whether the water is wholesome and whether there has been any deterioration in quality. All this means that no longer will the local authority have any problem in knowing whether water is unwholesome. There can be no dispute about that.

Those provisions will therefore help the local authorities carry out their long-standing functions in the sphere of water quality much more easily and effectively and with consequential cost savings. It is true that some local authorities may spend slightly more time on private supplies, in monitoring and securing improvements to them. However, under Clause 56(6)(d) local authorities may recover expenses reasonably incurred on such functions in accordance with regulations made by the Secretary of State.

In the unlikely event of some future Secretary of State imposing costly new burdens on local authorities under his regulation-making powers in this clause they could collectively ask the Secretary of State for an increase in the revenue support grant for that revenue expenditure which is not recoverable by such charges or fees or from other income or grant. That would form part of the annual discussions on revenue support grant for all local authority services. I hope I have convinced noble Lords that the amendment is quite superfluous. For the reasons I have laid before your Lordships' House, we believe that this amendment is unnecessary.

Lord Gallacher

My Lords, I thank the noble Lord, Lord Hesketh, for that reply, dismal though it is, in response to what we regard as a fairly modest amendment. If I may say so, the reply sounds as though the discussion on Clause 56 stand part never took place, because that was the discussion which gave rise to the amendment. We were frankly seeking to put into the Bill, quite fairly, the gist of what the Minister then told the Committee. We now have a different situation in which an attempt to bring this into the Bill is resisted on the grounds that local authorities already have that duty and that the tasks which they have to undertake, as regards the Bill, are on balance lighter than the duties which they already have. Presumably if they are lighter, then the task of enforcing those lighter duties will be less costly than at present.

I think that local authorities will take note of that and will wonder, as I wonder, how it can be that at one stage of the Bill we proceed on assurances that there is a possibility of an offset against costs less income from private work. Yet at another stage of the Bill we discover that there is no possibility whatsoever. With those remarks which I think contain something of the disappointment which we feel and which local authorities will feel, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

8.45 p.m.

Clause 60 [Assessors for the enforcement of water quality]:

Lord Gallacher moved Amendment No.109AB: Page 70, leave out lines 18 to 20 and insert— ("(1) The Director shall for the purpose of this section appoint persons to act on his behalf as assessors of drinking water quality in relation to—").

The noble Lord said: My Lords, on behalf of my noble friend Lord McIntosh of Haringey I move Amendment No. 109AB and speak at the same time to Amendments Nos. 109AC and 109AD.

These amendments return to the issue of the drinking water quality inspectors. It was debated particularly in cols. 1355 and 1356 of Hansard at the Committee stage on 18th May. In that debate, the Government did not wish to go into any level of detail about the composition of what they are now calling the drinking water quality inspectorate. It is however clear that these inspectors or assessors will be under close Department of Environment control. The Minister was not able to give further details as to whether they would be based in Marsham Street or have a regional structure.

The amendments therefore attempt to fill the gap as well as postulating alternatives. Amendment No. 109AB proposes that the drinking water quality assessors will be appointed by the director rather than the Secretary of State, to give them a measure of independence and ensure professional integrity. The amendments go on to require the director to establish local divisions for the purposes of assessing drinking water quality. A divisional structure will be necessary for the inspectorate in any case, if only because the plcs will themselves be regional undertakings. Most important, they will give the individuals appointed the right to report directly to the director on any occurrence or on the reasonable apprehension of such an occurrence or a matter which in their opinion may lead to a breach of the drinking water quality standards.

We believe it right to divorce the enforcement function from central government so the Minister should at least accept that an independent professional team of scientifically trained assessors is the minimum which public confidence requires in the present state of uncertainty about the quality of Britain's water. I hope that the Government will accept that an independent reporting right for someone with professional scientific status is desirable. It is also hoped that the Government will be able to move some way towards this amendment, particularly since their thinking in this area appears to be still under development. I beg to move.

Lord Hesketh

My Lords, we return to the subject on which I believe the noble Lord, Lord McIntosh, at an earlier stage of the Bill questioned me as to whether a lot of gentlemen in bowler hats would be emerging on a daily basis from Marsham Street in order to inquire into matters concerning drinking water.

Lord McIntosh of Haringey

And celluloid collars.

Lord Hesketh

The noble Lord is entirely correct. These amendments would require the Director General of Water Services to appoint technical assessors of drinking water quality, instead of the Secretary of State. They would also require him to establish local divisions of assessors and enable the assessors to report to the director on any breach or likely breach of the drinking water quality standards.

I have already explained in Committee the reasons why the Secretary of State and not the director general is in our opinion the right person to have responsibility for assessing drinking water quality. The Secretary of State is responsible for the quality and monitoring regulations, for agreeing improvement programmes and for enforcing compliance under Clause 20. The director general is concerned essentially with economic regulation such as the charges an undertaker may make. To give him responsibility in this area of public health alongside the Secretary of State would greatly modify the nature of his work and lead to overlap and confusion with the Secretary of State's responsibilities.

I agree with the noble Lord, Lord Gallacher, that the technical assessors should not be lost in the vastnesses of the Department of the Environment. They do not need to have an arm's length relationship with those who exercise political responsibility, so that they can exercise their professional judgment fully. This is certainly the Government's intention and we are now considering precisely how that arm's length relationship should be formed. We have for example the options of a free standing agency, or an inspectorate within the department rather like Her Majesty's Inspectorate of Pollution. Whatever the decision, I can assure your Lordships' House that the body will have a definite and distinct form of its own.

As I have said, we are currently considering the constitution and composition of this body, and that includes manpower, location, and relationships with local authorities and others. But first it has been necessary to decide on its tasks and this has been partly dependent on the drafting of the water quality regulations on which a consultation paper was published in February. These regulations are being finalised and it is now possible to turn our attention to the establishment of the body which will supervise their implementation.

The inspectors' main job will be to carry out a thorough technical audit of each undertaker's compliance with the water quality regulations. They will monitor the progress of improvement programmes. They will of course check for failures to comply with standards. They will also check for deterioration in quality. They will have to assess the adequacy of the undertaker's sampling and analysis arrangements and the quality of laboratory results. If they are not satisfied on any of these counts they will obviously need to discuss corrective action with the undertaker. They will advise the Secretary of State on the use of his enforcement and prosecution powers. They will also need to produce regular published reports on their assessments. Clearly a considerable amount of information will have to be assessed by the inspectors, for which computing and statistical expertise will be required.

We have still to take decisions on the constitution and organisation of this body and that includes, as I said earlier, location, size, relationships with other bodies and extent to which work will be done by consultants.

I apologise for not being more forthcoming at this stage. I hope it will be possible to say more in the next few weeks. For the reasons that I have put before your Lordships' House, I hope that the noble Lord, Lord Gallacher, will find it possible to withdraw his amendment.

Lord Gallacher

My Lords, I thank the Minister for that reply, for the detail which it contained and the promise of a further instalment to come. This matter is of considerable importance to the function of assessing water quality in the context of the Bill.

I note that the main plank of the Minister's refusal to accept any change from the present arrangement whereby the Secretary of State will have responsibility for this service to one in which the Director General of Water Services will take it over, is that to do so would unnecessarily complicate the Bill. It would result in duplication because elsewhere in the Bill the Secretary of State has responsibilities of this kind which would be at variance with the switch of his inspectorate from his oversight to one in which they were responsible to the Director General of Water Services. That point is taken and seems to me to be reasonable.

I welcome in particular the assurance by the Minister that the Secretary of State intends an arm's length relationship with his inspectorate. When further announcements are made concerning this matter, perhaps the Minister will make a point of telling us—and the world at large—in so far as appointments are made to this important body rather than the use of consultants, whether the appointments will be within the jurisdiction of the Civil Service Commission rather than of the Secretary of State himself. We feel that a Civil Service Commission appointment would be preferable because of the importance which is being laid on the independence of the body, even though it is under the control of the Secretary of State. I have also noted the other functions which the Minister has kindly outlined to me. On the basis of that information, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 109AC and 109AD not moved.]

Clause 62 [Regulations for preventing contamination, waste etc. and with respect to water fittings]:

The Earl of Arran moved Amendment No. 109B: Page 72, leave out line 23 and insert ("any water at any time after it has left the pipes of a water undertaker for the purpose of being supplied by that undertaker to any premises;").

The noble Earl said: My Lords, on behalf of my noble friend Lord Caithness, I beg to move Amendment No. 109B. Clause 62 empowers the Secretary of State to make regulations for the prevention of contamination and waste of water. Amendment No. 109B is a technical amendment to make it clear that the regulations are intended to provide for the prevention of contamination and waste of water in pipes for which the consumer is responsible. I beg to move.

On Question, amendment agreed to.

Lord Graham of Edmonton moved Amendment No.109C: Page 72, line 28, at end insert— ("(1A) No cost arising from the remedying of any contamination or other defect to which subsection (l)(b) above relates shall fall on the consumer except in circumstances where such contamination or other defect arises as a consequence of a defect in a pipe for which he is responsible").

The noble Lord said: My Lords, I beg to move Amendment No. 109C standing in the name of my noble friend Lord McIntosh of Haringey who dealt with this matter at an earlier stage. As the Minister is aware, there has been some correspondence between my noble friend and his department. We look upon this amendment as clarifying regulations under Clause 62 which deal with contamination in pipes. The amendment would not place any cost upon the consumer in respect of contamination of pipes, except in circumstances where the defect arose as a consequence of a problem in a pipe for which the consumer was responsible.

I am certain that in his zealousness to protect the interests of the undertakers in the early stages—a number of illustrations of that have been drawn to his attention—he will understand that we are equally anxious to ensure that he takes advantage of every opportunity to protect the interests of the consumer where there is evidence of unfairness and a burden of cost upon the consumer. We think that that is a possibility. Such occurrences could be costly; and in the interests of justice and Tightness we believe this amendment is justified. I beg to move.

The Earl of Caithness

My Lords, as I explained when I wrote to the noble Lord, Lord McIntosh of Haringey, recently, subsection (l)(b) of Clause 62 provides for regulations to be made to secure that water that has been supplied to any premises is not contaminated, or its quality prejudiced before it is used. For water to have been supplied by the undertaker, it has to have left the pipes of the undertaker and be in the pipes for which the consumer is responsible. I hope that provides the reassurance that the noble Lord, Lord Graham of Edmonton, seeks.

Lord Graham of Edmonton

My Lords, I am not sure whether that provides me with the reassurance I seek. I accept that the Minister believes what he has said should satisfy the point I am making. Is the Minister saying that in the case of pipes which are the responsibility of the consumer, any hurt which is suffered as a result of consuming water which went through those pipes where contamination was found, will not result in a charge on the consumer? However, if the contamination occurs in pipes which are not the responsibility of the consumer, is the Minister saying that the undertaker will have to bear any costs that arise from that situation? I hope the Minister can state that that is the case, as I cannot repeat it myself. If he can confirm that that is the general gist of what he was saying, I shall be happy to withdraw the amendment.

The Earl of Caithness

My Lords, I believe the noble Lord is correct. However I shall want to see what the Official Report states, and then I shall write to the noble Lord in case I am incorrect.

Lord Graham of Edmonton

My Lords, I am sure that we are both agreed that we shall read the Official Report and examine what we have both said. I am sure we have both meant the same thing.

Lord McIntosh of Haringey

My Lords, is my noble friend sure that he knows what he means before he reads what he has said?

Lord Graham of Edmonton

My Lords, I believe the answer is in the pipeline! I shall just have to wait until I examine the pipe. I shall pipe down and beg leave to withdraw the amendment!

Amendment, by leave, withdrawn.

Clause 67 [General Sewerage functions]:

The Earl of Shannon moved Amendment No. 110: Page 78, line 20, at end insert— ("(1A) It shall be the duty of a sewerage undertaker in performing its duty under subsection (1) above to have regard—

1. (a) to its existing and likely future obligations to allow for the discharge of trade effluent into its public sewers; and
1212
2. (b) to the need to provide for the disposal of trade effluent which is so discharged.

(1B) In subsection (1A) above "trade effluent" has the same meaning as in the Public Health (Drainage of Trade Premises) Act 1937.").

The noble Earl said: My Lords, in moving this amendment, I wish to express my gratitude to the Minister for his kind consideration in correspondence, and for his department's help in redrafting my amendment. I shall not here further dilate on my reasons for this amendment, which I gave in detail both on Second Reading and when moving an amendment to the same effect in Committee, save to say that industry—and especially those companies with no other practicable means of disposing of consented trade effluent, except through the sewerage system—could be severely handicapped by the Bill in its present form. The amendment merely seeks to preserve the present situation as provided in the Public Health (Drainage of Trade Premises) Act 1937. I beg to move.

The Earl of Cranbrook

My Lords, clearly the undertakers cannot ignore the need to provide for trade effluent. However, there could be problems with the undertakers if an industrialist can demand additional sewage treatment capacity, and if the undertakers were obliged to receive this additional effluent. Environmental protection can only be obtained by the control of emissions into the sewage system. There are certain serious contaminants that cannot be abstracted from the sewage sludge once they are present. It will be increasingly imperative for this country to meet the international obligations to which it has agreed, to be able to control the composition of sewage sludge; and in particular to eradicate pollutants from it.

It is therefore important that there should be a clear duty on the discharger to control the qualities of effluents. There should be no possibility of overwhelming a sewage system and of creating an adverse and difficult disposal of sewage sludge by giving industrialists free access to the system.

Lord Graham of Edmonton

My Lords, does the Minister understand that there are situations where industrialists could be assisted more than it appears they are at present in order to ensure that the effluent which they discharge is not likely to cause the problems that the noble Earl, Lord Shannon, is addressing? The other day I attended a conference of abattoir owners. They discharge effluent which is perhaps at times of a particularly obnoxious nature. Those abattoir owners form an essential and crucial sector of the community. They are particularly concerned about their responsibilities as they play a part in the food chain. Their concern is that grants are made available by the Ministry of Agriculture, Fisheries and Food for a range of things. They drew my attention to the grants which are available to farmers from MAFF for storage tanks, anaerobic digesters, treatment plants, manure stores, disposable facilities, safety fencing and other matters. I told the abattoir owners that I might have an opportunity to raise legitimately such concerns. That opportunity has now arisen.

If the Government are serious about trying to guard 101 per cent. against the possibility of something going wrong, they should be able to look sympathetically at the problems of people like abattoir owners who face the problem of sewage and effluent disposal as part of their daily lives. I am sure the Minister will understand that with the regulations of the EC and with the need for abattoirs and other establishments—I speak particularly of abattoirs, however—to match up to the competition that the single market will bring, their budgets will be placed under severe pressure. It may well be that the Government could ease their problems by taking a sympathetic view of the difficulties I have outlined. I should welcome it if the Minister in replying could make some reference to those points.

9 p.m.

The Earl of Arran

My Lords, we feel that the amendment tabled in the name of the noble Earl, Lord Shannon, more clearly defines the general duties under this clause and adds to the provisions concerning trade effluents elsewhere in the Bill, in particular in Schedules 8 and 9. In the light of my noble friend's undertaking, therefore, I am pleased to commend the amendment to your Lordship's House.

Lord Graham of Edmonton

My Lords, before the noble Earl sits down, perhaps I may say that I spoke for a little longer than I might have done in order that his staff in the Box could supply the magic words. The amendment refers to, the need to provide for the disposal of trade effluent which is so discharged". The point which I raised, and to which I believe the Minister has an obligation to reply, is that in the circumstances which I outlined abattoir owners and managers are under an obligation. What can the Minister say to help them to improve the manner in which effluent is discharged? That is a very real point to the farming community if to no one else. I am sure that that is a trigger word which will galvanise the Minister into responding with alacrity.

The Earl of Arran

My Lords, with the leave of the House, I can tell the noble Lord, Lord Graham of Edmonton, that in general we expect industry to bear its own costs. I cannot comment on grants by MAFF but I undertake to write to the noble Lord, Lord Graham.

Lord Graham of Edmonton

My Lords, even more importantly, will the Minister undertake not only to write to me but also to consult MAFF to see whether there is any possibility of assistance?

Baroness Carnegy of Lour

My Lords, I am not sure whether I am in order in asking the Minister before he sits down to reply to my noble friend Lord Cranbrook, who made one or two rather important points. Has the Minister anything to say about what the noble Earl said?

The Earl of Shannon

My Lords, I am grateful to the Minister for his kind commendation of my amendment. With regard to the question of the noble Earl, Lord Cranbrook, I believe that the noble Earl misheard one word of what I said earlier. I referred to consented discharges. Quality and quantity form part of the consent. The amendment does not in any way attempt to alter that or to give a totally free hand to industry to put anything it wants down the sewers. It relates only to consented discharges. If the noble Earl is worried about certain things finding their way into the environment it is at the consent stage that that question should be sorted out, not after consent has been given. The amendment merely provides that a sewerage undertaker cannot pick and choose among such consented discharges as he wishes to take because he may be able to make more profit on some than on others.

On Question, amendment agreed to.

Clause 68 [Standards of performance in connection with provision of sewerage services]:

Lord Graham of Edmonton moved Amendment No. 110ZA: Page 79, line 8, at end insert— ("(3A) Regulations under this section shall require an undertaker to review annually levels of performance and anticipated performance in relation to the prescribed standards, including,

1. (a) the physical condition of sewers in their areas, by reference to any current asset management plan;
2. (b) any potential danger to health in their area, whether arising from blockages, rodent infestation or other causes; and
3. (c) target levels of performance and investment over the following two years.")

The noble Lord said: My Lords the Minister may recall referring earlier to obligations that would be laid upon undertakers to report progress towards compliance with standards. Perhaps he is in a position to say a little more about that in relation to this amendment. We ask that an obligation should be laid upon an undertaker to review annually levels of performance and anticipated performance in relation to the prescribed standards.

We have gone out of our way to be specific about the matters which are covered by prescribed standards. We are particularly concerned with respect to the state of the sewers in certain parts of the country. I remind the House that in 1986 the Department of the Environment issued a document in which it indicated that 5,000 repairs were made to sewers as a result of collapses and blockages. That was not 5,000 repairs in the course of normal maintenance but 5,000 repairs arising from serious defects. Within the Thames Water area alone 13,000 homes are regularly flooded with raw sewage. In Greater Manchester 36,000 sewerage problems are reported every year. Those are catastrophic occurrences for the individuals involved. They are only the top of the iceberg.

It has been an impossible task for water authorities and local authority agencies over the years to maintain, let alone improve, levels of service and performance standards because of the restrictions on capital and revenue expenditure. We say that there is therefore a paramount need for tight well-defined regulation of the sewerage undertakers involving detailed specification of required standards of performance and monitoring and control of actual performance. Setting aside the rising standard of expectation or duty resulting from EC directives, I believe that in this enlightened age, which is due partly to the Government's determination to tackle the problem, there is an obligation to match that with legislation.

The amendment also deals in particular with the problem of rats. We ought to recognise that the situation is very serious indeed. We can anticipate a report by the Institution of Environmental Health Officers on rodent infection. The noble Lord, Lord Hesketh, who dealt with this amendment at an earlier stage, had some interesting things to say. He said at col. 1387 of Hansard for 18th May: It would be inappropriate to insert a specific duty within a general clause of this nature".

Perhaps the Minister or his colleague who may reply would care to define or redefine the word "inappropriate". The Minister in effect said that it is inappropriate to require provision to ensure that sewerage undertakers take seriously the matter of increasing rodent infestation. Surely he ought not to be able to leave those words unsaid.

At col. 1387 the Minister went on to say: It is undeniable that numbers of rats have increased following two fairly mild winters".

The last two winters have been fairly mild. Last winter was the second mildest on record since statistics began to be compiled in 1659; and I do not mean a minute to five! That was 330 years ago. Last winter was the second mildest winter during that period.

That mildness of the winter is undoubtedly a relevant factor. But my evidence is that the reduction in the amount of money that the authorities and local authorities have received has certainly been a factor too. At col. 1387 the noble Lord, Lord Hesketh, also said that, there is no evidence that poor control within sewers has contributed to this". When he sees the report to be issued by the Institution of Environmental Health Officers, he may have cause to reflect upon those words. A direct relationship will be shown in that report between cuts in funding and the increase in the rodent population.

These are matters of concern. The department and the Minister are far too complacent in dealing with them. They are very worrying and can be frightening to the general public. The Minister should recognise that he is able to do a great deal. He cannot perhaps accept the amendment. But he can be much more helpful in saying what he intends to do to see that the problem is dealt with. There is a serious dereliction of duty so far as concerns sewers. There is also a dereliction of duty so far as concerns tackling the serious problem of rats. The Minister has an obligation at least to put the public's mind at rest by doing all that he can within his powers to ensure that the undertakers tackle the matter vigorously.

The amendment is an attempt to include on the face of the Bill an obligation for undertakers to report annually on the physical state of their sewers and what they are doing, particularly in respect of investment. The investing public will be interested to know how much the undertakers are obliged to invest in that respect. It may be that the Government are anxious not to lay too many obligations of that kind on the undertakers. However, we do not speak for the investors but for the consumers. I beg to move.

Lord Hesketh

My Lords, I always try to be as helpful as possible to the noble Lord, Lord Graham, but he will understand me when I say that I cannot be of any assistance in trying to legislate an improvement in the weather or a colder winter. The purpose of Amendment No. 110ZA is to amend the regulation-making powers set out in subsection (1) of Clause 68. Clause 68 has two purposes. The first is a reserve power enabling the Secretary of State to make regulations at the director's request establishing certain service requirements which undertakers must meet, as set out in subsection (1). If those requirements are not met, they will amount to breaches of the sewerage undertakers' general duty as set out in Clause 67. The second is to enable regulations to be made by the same procedure to prescribe standards in the day-to-day relations between sewerage undertakers and individual customers as set out in Clause 68(2). That is the guaranteed standards scheme.

Amendment No. 110ZA is intended to refer to the first category of regulations and seeks to require regulations to be made under those powers requiring the undertaker to review annually its levels of performance and its projected performance in relation to the prescribed standards. Those standards are required to include physical condition of assets, risks to health and target levels of performance and investment for the following two years.

The regime that we propose goes much wider than this and is set out in, and operates through, the model instrument of appointment with which your Lordships are familiar. Arrangements for the director general to monitor general standards of performance by the undertakers are provided for in Condition 1 of the model instrument of appointment. That condition also imposes a duty on the undertaker to advise the director general of its intended levels of service, including three key aspects: interruptions to supply, water pressure and foul flooding. Companies will report that performance to the director general each year against the target levels of service that they aim to achieve.

We expect that the undertakers will make every effort to achieve those targets. However, if the director general is not satisfied with a company's performance and agreement cannot be reached to secure improvement, the enforcement powers under Clause 38(1) or Clause 68(1) as appropriate would be invoked. Those powers enable the Secretary of State, upon written application by the director general, to make regulations on standards of performance which, if they were not achieved, would count as breaches of the undertakers' general duties under Clause 37 or 67 as appropriate. It would not be appropriate to have specific regulations to govern service standards in the Bill as this would reduce the flexibility that the director has to add to or amend any company's service standards, backed by the reserve powers of the present regime. The service standards have been widely publicised and we do not consider the specific regulations proposed to have any particular merit over those that we have already set out.

The physical condition of the sewers is a matter for the management of the company within its overall asset management plan, progress on which it will be required to report annually to the director under the terms of Condition K of the model instrument of appointment.

On health, Clause 67 already imposes a duty on the undertaker to provide a clean and well maintained sewerage system and it would be inappropriate to add a specific duty within a general clause of this nature.

Target levels of performance and investment are provided for within the instrument of appointment and, as I have explained, it would be inappropriate to place them on the face of the Bill.

We believe it to be more important and effective to have the undertakers' voluntary co-operation and would expect companies to achieve and maintain satisfactory levels of service. The regulation-making powers provide a reserve power for the director and the Secretary of State to act if they do not do so.

The noble Lord, Lord Graham, asked me whether I could define the word "appropriate". I should like to think that we have now defined "appropriate".

9.15 p.m.

Lord Graham of Edmonton

My Lords, I listened very carefully to the Minister, but I had to wait a long time before I could detect the premises upon which he rested his case. There were two matters which I raised. First, there is the horrendous state of the sewers of the nation. I cast no aspersions on who is responsible for it; nonetheless they are in a horrendous state. I also drew the attention of the Minister to the very disturbing situation with regard to rodent infestation. I waited to hear whether the Minister was satisfied that those two matters would be dealt with vigorously and urgently in what is a situation of emergency. The picture that I painted indeed shows an emergency situation.

The noble Lords, Lord Elliott and Lord Dormand, are both familiar with the Newcastle district. So indeed am I. However, they continue to enjoy it as I no longer can do because they continue to live in the area whereas I can only return to it. In the period 1986–1988 Newcastle saw a 50 per cent. increase in its rodent population. At Wakefield, in the same period the rat population doubled. Even in places as wide apart as Dudley, Wigan, Barnsley and Barnet there has been an increase in the rat population of 30 per cent. in the past two or three years.

The Minister may say that he has a plan and a scheme to deal with this situation and that people will be expected to take action of various kinds but will he tell the House how he will begin to tackle the situation should there be in two years' time a doubling of the rat population in any of those areas?

Someone will say that this is unacceptable. Will the reply be that a plan is being produced and so much money is being spent, but that there is a long way to go and in the meantime the Government will do their best? Whose responsibility will it be to ensure an improvement in the situation?

Over the past seven years in Manchester the responsible authority has undertaken a colossal capital investment programme in an attempt to stop the collapse of sewers in the Manchester area. After seven years it is still only 50 per cent. of the way toward achieving that target.

Will the Minister say something not about his concern, because I am sure he must be concerned, but about the action that he knows can be taken by the Government to make sure that money is spent on this matter. I hope that he will not tell the House that a plan will be produced but that it is so flexible that it is possible for the money to be spent otherwise than on improving the sewers and getting rid of the rats so that we are left with the worries of the public.

Lord Hesketh

My Lords, with the leave of the House, perhaps I may say that the problem of rats as a result of two warm winters goes far beyond the reach of the sewers and the water industry. There has been a huge increase in the rat population in the countryside. At the end of the day the fact of the matter is that wherever that has occurred, good management is required to curb the population.

The asset management plans provide for orderly planning in the improvement of quality of service, which of course includes controlling rats. The noble Lord, Lord Graham, spoke of disaster in the North-West and North-East with collapsing sewers. All I can say to him is that on my last visit to the North West Water Authority I was told that the authority was finding it harder and harder to find a hole to let the ministerial car to fall into, which the authority was able to do with great ease years ago.

Lord Graham of Edmonton

My Lords, perhaps members of the authority ought to visit this Chamber more often to see the holes that the Minister digs for himself! If the Minister is telling me that the North West Water Authority informs him that there is a shortage of holes into which the ministerial car can go—I think that that is what he said—then it flies in the face of the evidence that I have. It may have been a flippant remark. However, perhaps I may inform whoever made it to the Minister that I have the evidence which I shall send to him. In the centre of Manchester buses have collapsed into large holes; That was four or five years ago. Perhaps the authority has solved the problem as the Minister has implied. However, the evidence that I have received from the AMA this week is that its survey indicates that 50 per cent. of the aim has been achieved. One may have to be very careful where one looks for a hole in Manchester. I am told that there are still some there.

The Minister has been as helpful as he can to the House tonight. I shall read very carefully what he has said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Earl of Shannon moved Amendment No. 110A: Page 218, line 18, leave out paragraph (c) and insert— ("(c) in subsection (5), for the words from "the occupier" to the end of that subsection there shall be substituted the words "such contravention shall be actionable as a breach of contract between the discharger and the sewerage undertaker." ").

The noble Earl said: My Lords, this amendment relates to a most important point to which I referred in detail on Second Reading and when moving a similar amendment during the Committee stage. Essentially it refers to the fact that one limited company should not have the right or power of criminal prosecution against another limited company. This is clearly wrong and although I was reminded at Committee stage that Associated British Ports, Sealink Ltd., and the Felixstowe Dock and Railway Company have such powers, this can hardly be relevant because a customer of those companies can always use another port or travel by another ferry company. We have here a private monopoly. In such an atmosphere it is essential that industrial discharges to sewers should be covered by normal commercial contractual arrangements, with damages payable should there be any transgression on the part of the discharger.

I accept what I was previously told during Committee: there was no intention on the part of Government to give the new undertaker plcs an unfair commercial advantage by means of this Bill. However, that is exactly what it does. It does not require much imagination to see that an undertaker plc, out of duty to its shareholders, will use its unique expertise to enter the pollution abatement equipment market. With their powers of criminal prosecution, how will this not affect adversely those already in the market? Of course it is unintentional; but inevitably purchasers will feel that to obtain their equipment from the company which has the power to prosecute them will have great, if very much unadvertised, advantages, almost equal to the payment of protection money.

If the water and sewerage plcs are to divert into other areas of commerce, even to the taking over of other companies, they must be seen to do so under fair and not advantageous conditions. This Bill is to privatise the sewerage services and put them into the private sector. Therefore let us do it properly and let them perform in the usual way in the private sector; namely, by contracted arrangement.

If the Minister declines to accept this view, perhaps I may invite him to rehearse the reply that he or his successor will have to give from the Dispatch Box to questions of advantageous trading position which will inevitably arise if the chief executives of the new plcs are doing their jobs properly and making the best use of the facilities at their disposal in the interests of their shareholders.

As the Bill stands—again I say albeit unintentionally—these situations are bound to happen. The Minister might like to take the opportunity of avoiding difficulties for himself and his successors in office when they have to explain away or excuse the potential lamentable results occasioned by this fault in the Bill. I beg to move.

Lord Stanley of Alderley

My Lords, I support the amendment. It concerns a similar problem to that debated at considerable length earlier. Now that the water authorities are to be public liability companies, the old existing practices that worked well enough in the past need careful consideration where the new authority is to be a public liability company, driven by profit and competitiveness, as the noble Earl said, with other commercial bodies. The whole matter needs careful consideration by my noble friend because it is in line with a problem that comes up time and again. I hope that my noble friend accepts that.

Lord Renton

My Lords, perhaps on one point it is possible to set at rest the mind of the noble Earl. There is no need to put provision for breach of contract in the Bill. All breaches of contract are actionable at common law whether put in a statute or not. We do not need anything in the Bill in terms of this amendment so far as it affects the right of breach of contract. But the noble Earl's amendment does more than that. By leaving out the newly written Section 3(1)(c) of the 1937 Act, he abolishes the power to prosecute for a criminal offence.

I can well understand the noble Earl's desire that two trade competitors or people in contractual relationships with each other should normally resort to civil remedies rather than to criminal remedies. However, by abolishing the contravention he removes the penal sanction—which in the public interest there really must be—in the circumstances envisaged in the amendment to the 1937 Act. Therefore I should have thought that my noble friend on the Front Bench would be in great difficulty about accepting the proposal.

Lord Hesketh

My Lords, the noble Earl, Lord Shannon, moved a similar amendment in Committee. Its effect is to amend paragraph 3(c) of Schedule 8 concerning legislation governing the discharge of trade effluents into public sewers so that where such discharges are made without the consent of the sewerage undertaker, or in breach of the terms of a consent, there would no longer be a criminal offence as there has been for over 50 years, as my noble friend Lord Renton pointed out. Instead the only control over what effluents from trade processes may go into a public sewer would be civil action for damages against the persons responsible.

The central proposition which has led the noble Earl to pursue his amendment is that it is wrong in principle for the sewerage undertakers to be able to prosecute their customers. That is a somewhat narrow description of the effect of the Bill's provisions in several respects which I shall come to but because of the importance he attaches to this central point I should also like once more to attempt to allay his concerns by exploring why we believe sewerage undertakers, or any other person, should be able to prosecute breaches of the trade effluent requirements.

The reception, treatment and disposal of trade effluents by the sewerage undertakers is in some respects like the normal commercial business of any company. However, there are important differences. One of these is the monopoly position held by an appointed undertaker and this has led us to continue to provide for appeals where a discharger cannot secure a consent which he regards as satisfactory. Such appeals to the director general mean that it is not ultimately for sewerage undertakers to say what shall or shall not be discharged into public sewers. That is not a normal contractual relationship.

Secondly, as we have emphasised in earlier debates—and I do not propose therefore to dwell on the point—the consequences of making discharges into public sewers with which the sewerage system cannot cope potentially go much wider than harm to the undertakers' business. If sewers or treatment works are overloaded, or if dangerous substances are present, various forms of nuisance, damage and environmental harm could occur affecting the environment, the public or employees of the undertakers. There is a public interest in effective enforcement of the requirement that only acceptable discharges are to be made.

The noble Earl has suggested that we should focus on a contractual relationship between discharger and undertaker. In the case of discharges made without a consent there is in fact no relationship established between them. If there is no criminal offence why would any discharger then think it worth his while to bother applying for a consent to discharge? Even if consent is obtained why would the discharger bother, for example, to comply with any monitoring requirements? Relying upon civil remedies would rapidly lead to the consent requirements becoming ignored and unenforceable.

Finally, on the question of prosecutions of customers who refuse to comply with their consents, let me remind your Lordships that non-customers without consents would also face prosecution. However, there is no reason to deny sewerage undertakers (who will be required by law to discharge their sewerage functions and to observe the trade effluent duty clarified in Clause 69 at the noble Earl's instigation) the protection of criminal sanctions against those who are willing to risk damage to the assets needed to discharge those functions. For that is what breaches of the requirements included in a consent amount to. There is no reason for dischargers to break the law and if they comply with it they will find we have provided ample safeguards for their interests in the regulatory framework.

I should add that powers for private companies which operate statutory undertakings to be protected by criminal sanctions are well precedented; for example, controls over oil discharges by vessels using harbours. It is a principle of English law that unless an offence is an individual grievance and is a matter of public policy and utility and concerns public morals, any person (which can include a company) has a general power to prosecute unless the statute creating the offence contains some restriction of this right. We consider that it would be quite wrong to exclude the appointed undertaker from prosecuting breaches under legislation which requires that undertaker to discharge statutory functions.

For those reasons I urge the noble Earl to withdraw his amendment.

The Earl of Shannon

My Lords, I thank the Minister for that long and helpful reply. Although this is the second time on which I have raised the issue it is the first time I have been told that I am totally removing the right of prosecution. In Committee I said that prosecution should be in the hands of authorities and not public companies. Therefore, I did not believe that I was removing prosecution entirely. Much of the Minister's response was related to the fact that I was suggesting that there should be no prosecution. That is not so. I was merely suggesting that prosecution should be in the hands of authorities and not commercial companies. I am grateful to the noble Lord, Lord Renton, for searching that out.

It appears that I shall not get much further with the issue. However, Ministers should be forewarned that when questions of commercial advantage arise, I, as a Cross-Bencher, shall never be in the unfortunate position of having to stand at that Dispatch Box to answer them. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 71 [Requisitioning of sewers]:

[Amendment No. Ill had been withdrawn from the Marshalled List]

Clause 72 [Financial conditions of sewers requisition]:

The Earl of Cranbrook moved Amendment No. 111A: Page 83, line 19, at beginning insert— ("Subject to subsection (3A) below").

The noble Earl said: My Lords, I beg leave to move the amendment standing in the name of my noble friend Lady Blatch. This amendment covers a new issue which has arisen from an increasingly close examination of the terms of the Bill by the water authority.

Section 16 of the Water Act 1973 provides for the requisitioning of a sewer to be used for domestic purposes in the following terms: A sewer shall be treated for the purpose of this section as used for domestic purposes if it is used for removing the contents of a lavatory or removing water used for cooking or washing other than water used for the business of a laundry or a business of preparing food or beverages for consumption otherwise than on the premises".

Under the existing Act, therefore, a surface water sewer cannot be requisitioned. The new Bill introduces an additional facility by which under Clause 71 sewers can be requisitioned both for the purposes given above and in Clause 71(2)(a)(iii) also for the removal of surface waters.

When this Bill comes into force Clause 72 will cover the financial conditions of sewer requisitioning. Clause 72(2), (3) and (7) contains the complicated formula by which the sum is payable by the person making the requisition to the sewerage undertaker and is calculated in terms of a relevant deficit in relation to a drainage charge. The particular problem which has prompted the tabling of this amendment is how this formula would apply to properties which have existing foul water sewerage and where a surface water sewer is requisitioned, and vice versa—properties having a surface water sewer for which a foul water sewer is requisitioned.

Anglia Water Authority and, I understand, other water authorities make the same sewerage charge regardless of whether a person has foul water sewerage, surface water sewerage or mixed sewerage. Obviously, the lower the drainage charge for the purpose of Clause 72(3), the larger will be the difference between the drainage charges and the annual borrowing costs, and thus the larger the sum paid by the person who is making the requisition.

It is not clear from the words of the Bill how the formula will apply to a person whose property is already served by a foul water sewer but who requisitions a surface water sewer, or a person who already has a surface water sewer but who requisitions a foul water sewer. The amendment suggests one means of tackling that problem. The amendment does not cover a third eventuality which arises when separate sewers are provided for surface foul waters and are subject to a requisition.

I look forward to hearing the comments of the Minister and I hope that he will agree that this is a problem that needs tackling.

Lord Ross of Newport

My Lords, I hope that I have understood this amendment properly. I have listened very carefully. I can say, from the point of view of someone who pays sewerage and water charges, that it has always annoyed me intensely that on a building in which I have no water connection and no sewerage I pay a charge to the water authority for taking my rainwater.

I do not know whether the noble Earl is saying that there is a difference in the way the charges should be made. Anglia Water may have a different method of charging from Southern Water. It seems very hard that one pays a substantial sum because the rain from the gutters and roofs goes into the sewer. I suppose that the ideal situation would be for it to go into separate sewers.

It will be interesting to hear the response of the Government. Have they any intention of bringing in a separate basis upon which charges are made either for foul water sewerage or for purely rainwater? Can the subsequent plcs make these charges legally? I think it is wrong that I have had to pay that figure for so many years.

The Earl of Caithness

My Lords, Clause 72 sets out the financial conditions that have to be satisfied before a sewerage undertaker is required to respond to a requisition for a public sewer under Clause 71. The person requisitioning the sewer has to undertake to pay the relevant deficit on the sewer for each of the 12 years following the provision of the sewer. The relevant deficit is the difference between the income to the undertaker each year from certain charges for the use of the sewer and the annual borrowing cost of a loan equivalent to the costs incurred by the undertaker in providing the sewer.

I am grateful that my noble friend has raised this point. As he said, it is a new point. I ask my noble friend to turn to Clause 72(3) which provides that the drainage charges taken into account in the relevant deficit calculation are those payable for the use during the year of the requisitioned sewer. It will therefore be only those charges directly attributable to the requisitioned sewer that are taken into account in the relevant deficit calculation. The circumstances included in the amendment would involve premises served by separate foul and surface water sewers. In these cases, the undertaker would be required to break down the sewerage charges between those in respect of foul and surface water to enable him to determine the element to be taken into account in the relevant deficit calculations.

I tried to follow with care my noble friend's argument. As your Lordships will be aware, these amendments were seen by my department only this morning and if I have missed a point my noble friend can rest assured that I will write to him between now and the next stage of the Bill.

The Earl of Cranbrook

My Lords, it seems clear from my noble friend's reply that any sewer can be treated as a separate exercise and, whether or not there was an existing sewer, the new sewer would require a separate charge and a separate calculation. As I said earlier, this is different from the present custom of existing water authorities but no doubt they could accommodate it.

I should point out to the noble Lord, Lord Ross, that the circumstances are such that if these clauses were to be in operation he could have required the undertaker to provide the sewerage that he wants. It would not be an imposition but a way by which he would finance the requisition. However, having heard what my noble friend on the Front Bench said, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 11IB not moved.]

Clause 73 [Performance of sewerage functions by local authorities etc.]:

Lord Graham of Edmonton moved Amendment No. 111C: Page 85, line 19, at end insert— ("(2A) Any termination of arrangements under this section shall be made in accordance with paragraph 15 of Schedule 26 below.").

The noble Lord said: My Lords, I move this amendment on behalf of my noble friend Lord McIntosh of Haringey. The amendment deals with Clause 73, which is headed: Performance of sewerage functions by local authorities etc.".

Subsection (2) refers to arrangements that are made by a sewerage undertaker and a local authority. We seek to insert a new subsection (2A) which reads: Any termination of arrangements under this section shall be made in accordance with paragraph 15 of Schedule 26 below".

The noble Lord, Lord Hesketh, said in Committee: I should say, by way of introduction, that we do not differ at all… in wishing to see a continuing role for local authorities in this field where they provide a cost-effective service".

He went on to say: We accept—and I must stress this—that there is a good case for local authorities carrying out sewerage work by arrangement with sewerage undertakers if both parties are agreeable".—[Official Report, 22/5/89; col. 13.]

Clearly, there is no basic disagreement on the point of principle. It is common ground that there are obvious advantages to the undertaker, which I do not need to reiterate, in retaining the skill and expertise of the local authorities in this vital service—an important area of public health. I remind the noble Lord, Lord Hesketh, that his ministerial colleagues in another place are on record as endorsing those opinions. Therefore, I assume that there is no objection to having the words of my amendment on the face of the Bill.

Government Ministers have been entirely consistent in wishing to give the greatest degree of flexibility to any parties joined in sewerage arrangements. The Bill as it stands enables sewerage undertakers to adopt any appropriate arrangements in the interests of providing sewerage services in their respective areas. The main point is that this amendment does not seek to change that position. It simply restores the right of appeal to local authorities, and that is a right currently available to them as sewerage agents under the provisions of the Water Act 1973. That is a right that this Bill has omitted to provide.

It is widely believed by Government Ministers that there will be a continued involvement by local authorities. Therefore there should be a ready appreciation of this amendment to avoid what would otherwise become the unilateral termination of agency agreements. In keeping with the spirit of the Bill that is a situation that should not arise. The noble Lord, Lord Nugent, said on 22nd May at col. 15 of the Official Report concerning the matter of appointment: the sewerage undertaker must be the ultimately responsible body which has the final decision".

I simply say that cannot be acceptable where there is a potential risk of arbitrary and unilateral termination. It is agreed that the sewerage undertaker must always be in control but it must be a control that is fairly exercised.

Many local authorities are aware that cost comparisons of the performance of themselves as sewerage agents are not made from the same common base, thereby favouring some at the expense of others. The present arrangements provide the right of appeal under the provisions of the Water Act 1973 for an industry operated within the public sector. We can see no harm in applying the same provisions to a privatised water industry. I beg to move.

9.45 p.m.

Lord Ross of Newport

My Lords, I shall speak very briefly before the Minister replies. He will be delighted to know that I do not intend to move Amendment No. 112 but to withdraw it because I believe it is defective. In that amendment we thought very much on the same lines as the noble Lord, Lord Graham, except that we considered the appeal should be to the director of water services and not to the Secretary of State. Where there is a dispute as regards an agency contract between an undertaker and the authority which is cancelled and the undertaker decides either to put it out elsewhere or to do it himself, we feel that the appeal should be to the director. In 99 cases out of 100 the local authority would normally be the authority involved and it should at least have a chance to state its case to the Director of Water Services. If he thinks that the scheme or the quality of work is not up to standard and comes down in favour of the undertaker, that is fair enough. But there should be that reference. My amendment suggests that it might go to the director of water services rather than to the Secretary of State.

Lord Hesketh

My Lords, these amendments would maintain a right of appeal to the Secretary of State for local authorities virtually identical to that of the Water Act 1983, following notice of termination of existing sewerage arrangements from an undertaker. The Secretary of State would then have the power to confirm, vary or terminate arrangements as he saw fit. This amendment is based on a refusal to recognise two guiding principles of the Bill.

First, the undertaker will have to meet specific standards of service, which will be monitored by the director general, within a strict limit on the charges which he can raise. Secondly, within these constraints the undertaker should have the maximum commercial freedom to manage his business efficiently, in the interests of both shareholders and customers. We believe that the proposed amendment is quite inconsistent with these principles. We are not insensitive, however, to the need for a transitional period during which all parties can adjust to the changed circumstances brought about by the Bill. Consequently, reasonable notice has to be given of termination, and undertakers will be unable to give notice which expires before 1st April 1992.

That is not arbitrary or unilateral. I stand entirely by the words that the noble Lord, Lord Graham, repeated to me from the other side of the Dispatch Box at an earlier stage of this Bill. But there is a different approach from the two sides of the Dispatch Box on this point. I have put the Government's position and that is why we do not accept the amendment moved by the noble Lord, Lord Graham of Edmonton.

Lord Graham of Edmonton

My Lords, the 1973 Act provides a right of appeal in the event of a proposed termination. Can the Minister explain why that provision is not considered appropriate to be included in this Bill? The noble Lord put this against the two imperatives which he set out at the beginning of his short speech. Surely, in common justice, never mind business or financial imperatives, an authority which has satisfactorily undertaken a function is at least entitled to a period of grace when it is told that somebody else will undertake it.

Local authorities have a good record. They are entitled to what I call common justice. While it is in the gift of the undertaker to decide who shall undertake these functions, why does the noble Lord resist an amendment which asks only for fair play and common justice?

Lord Hesketh

My Lords, the noble Lord, Lord Graham, will be aware of our position. We believe that the companies should be allowed to make arrangements which they consider to be entirely satisfactory. We believe that a great number of local authorities will continue to carry out the job which they have done satisfactorily to date. We do not believe, however, that the undertakers should be shackled. The noble Lord referred to the 1973 Act. It was drawn up when there was no concept of water privatisation. That is why it is not entirely relevant to this debate.

Lord Graham of Edmonton

My Lords, the noble Lord is saying that for the Secretary of State to have drawn to his attention by an appeal the breaking of an arrangement, which in the eyes of the authority might be damaging to the public and to the consumer, will shackle the new plcs. That is a strange concept. We do not envisage the new privatised companies not being able to do what they want. However, in equity and justice, local authorities should be able to draw attention to the breaking of an arrangement so that the Secretary of State is able to take a view. He may well decide that he does not want to be involved. In that case, should there be a tragedy under the new arrangements, he will have washed his hands of it before it happens. However, there could be circumstances in which the Secretary of State will ask the plc to reflect on what it wants to do. Can the Minister say anything more helpful?

Lord Hesketh

My Lords, with the leave of the House, as I made clear in my first reply, nothing will happen before 1st April 1992. If a water undertaker is not happy it will discuss the matter with the agent which may be a local authority. It may not be fulfilling the job which the undertaker wants doing at the price it wants it done. All the mechanism is there for allowing the local authority to agree to a new set of arrangements. Nowhere else in the kingdom does one find a commercial company having to comply with a reference to the Secretary of State if the authority is not happy with a commercial undertaking. That is why we are resisting the amendment.

Lord Graham of Edmonton

My Lords, the noble Lord has said enough. Water and sewerage are unique. Public health is unique. The noble Lord indicated that the period of grace could be used by a plc to lay down what it was prepared to pay, which could be far less than would be economical. It could then say that if the authority was not prepared to provide a service—whatever that might mean and however many corners might have to be cut—it would voluntarily put itself outside the tendering arrangement. The Minister has said sufficient to indicate the genesis of this matter, which is that the services will be provided as cheaply as possible and that on the margin public health will be at risk. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 112 not moved.]

Clause 76 [Charges schemes]:

Lord Stanley of Alderley moved Amendment No. 113: Page 88, line 6, at beginning insert ("subject to charges for domestic consumers being at the same level for the same level of service throughout the area supplied or serviced by the undertaker,")

The noble Lord said: My Lords, we debated this amendment at some considerable length when we discussed Amendment No. 108ZC, which was moved by the noble Lord, Lord McIntosh of Haringey. Since then I have had "tea" with my noble friend Lord Caithness, except that we did not in fact have any tea. I must say that he has been most helpful in this connection.

However, I should like to ask my noble friend first whether the Government agree with the principle that rural consumers should not be discriminated against. This non-discrimination has, as he and I both know, long been the practice of water authorities in the past. Secondly, although I am not sure which word to use here—for example, whether to use the word "rules" or the word "game"—do the Government accept that things have now changed because of privatisation and that the new public liability companies could in theory—although it sounds awful—discriminate against rural areas?

My noble friend was kind enough to say in relation to the last amendment that he would look at the problem. I wonder whether he could now give me an assurance that it is his hope to be able to put some provision on to the face of the Bill which would meet the concerns which were so forcefully expressed by Members on all sides of the House when we discussed this amendment earlier today. I beg to move.

Lord McIntosh of Haringey

My Lords, I intervene not to repeat the arguments which were, as the noble Lord, said, rehearsed at some length earlier this afternoon, but to make clear that in our view this is not a private discussion between the Front and Back-Benches of the Conservative Party; this is something about which we on these Benches feel most strongly. We feel that the protection of those who happen to live in areas where the cost of supply may be greater should not be taken away simply as a result of privatisation. The principle of an equal basis of charging throughout the country in all localities is most important. It is one which exists in the public utilities and one which should be carried over even after privatisation.

The Earl of Caithness

My Lords, although I did not have time to take tea with my noble friend, I hope that he has found an opportunity to refresh himself both with food and liquid since we spoke.

Perhaps I may first deal with his last point. I have said that I shall be prepared to meet my noble friend to discuss the matter. As he well knows, I should not have agreed to do so unless I thought that such a meeting would be constructive. I do not rule out the possibility that we may be able to clarify the Bill in some way so as to satisfy your Lordships on this point. However, I cannot give any guarantee on the matter because we would not want to risk disadvantaging some other equally worthy classes of customer; but I can say that we are at one on principle.

The Bill and the licence will continue to provide that there shall be no undue discrimination. In that way I can agree with my noble friend's first point that rural customers should not be unduly discriminated against in future any more than they are now. Certainly the contents of Clause 7(2) will not alter the position with relation to rural consumers. I think that perhaps we should go no further on the issue today and that we should defer our debate until another occasion.

Lord Stanley of Alderley

My Lords, I thank my noble friend for that assurance. I fully understand that he cannot say precisely what he will put in the Bill because neiher he nor I know exactly what he could put forward. However, I must remind him that like the noble Lord, Lord McIntosh, I feel most strongly about this matter; indeed, the whole House feels strongly about it and I know that my noble friend is aware of that fact. I am not threatening him in anyway; but if he is unable to put something on the face of the Bill, then I shall have to return to the matter on Third Reading. I have checked with the Clerk of the Parliaments to ascertain whether that would be in order because I cannot let down those who have supported me so loyally. I thank my noble friend, and I hope that we can see our way to putting something in the Bill. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

10 p.m.

Clause 77 [Liability of occupiers etc. for charges]:

Lord Renton moved Amendment No. 113A: Page 89, line 25, leave out subsections (5) and (6).

The noble Lord said: My Lords, Clause 77, which deals with the liability of occupiers etc. for charges, follows the General Rates Act 1967. That Act places the interest of the public purse above justice to the individual, however humble the individual may be and however unjust it may be to pursue him for debts incurred by somebody else.

It is in Clause 77(5) and (6) that that rather unattractive anti-social principle is repeated. Perhaps I may give one or two examples of how it operates. Where a tenant is not responsible for rates, but under his agreement with the landlord the landlord is responsible for the rates, if the landlord, having been paid by the tenant, fails to pass them on to the water undertaker, formerly the water company, or whatever it might be, then the water company can sue the unfortunate tenant. That is only one example. It gets worse, because owing to the reference to "any occupier" it could mean that a new tenant, who did not enjoy the water in respect of which the charges are made, could be sued under the provision.

Indeed, the provision means that the original landlord could be sued; the new landlord could be sued; the original tenant could be sued, even though he was not obliged to pay the rates; or the new tenant could be sued—any occupier or any landlord. That is not justice. We ought to do better than that.

I believe that it is relevant also to point out that since the General Rates Act was passed—of course it is still in operation and will remain so until we have the community charge in force—we shall have abolished the system of general rates and we shall have replaced them with the community charge plus water charges. There is a change of circumstance which would make it wrong to continue with the previous law.

There is another factor. Under the Housing Act 1988, security of tenure has changed. Particular landlords of tenancies and assured shorthold tenancies—for example, six-month tenancies—can review the tenancy every six months and may end it for any reason. That intensifies the possibility of injustice under these provisions. At this late hour, I do not wish to deploy as full a case as one could. I think I have said enough to make it clear that the Government should reconsider this matter and replace subsections (5) and (6) with something which is more up to date and fairer and which will avoid causing the kinds of injustices I have mentioned. I beg to move.

Lord Wise

My Lords, I wish to speak briefly in support of my noble friend's amendment. Surely all commercial businesses have to rely upon the courts for the collection and enforcement of all outstanding debts. I cannot see any reason why the water and sewerage businesses should be an exception to this rule. If a retailer is in debt to a wholesaler, then the wholesaler is not entitled to try to collect the debt from the customers of the retailer. This seems a similar situation.

I can see many difficulties arising. For instance, what would happen in the case of multiplicity of bedsits in one establishment if the landlord defaulted? Who would have to pay? How would the water authorities and water companies charge the tenants then? I do not see why they should be harassed at all by the water companies, if, as my noble friend Lord Renton says, it is possible that the debt was incurred long before they became tenants. I think that these amendments will remove the power of undertakers to hold occupiers liable for charges where another person has agreed with the undertaker to meet those charges. I hope that the Government will look favourably upon my noble friend's amendments.

Lord McIntosh of Haringey

My Lords, in the short version of his speech it seemed to me that the noble Lord, Lord Renton, deployed his arguments to great effect. I wish to add my support to them and to say also that it seems that those who are already worse off—that is the tenants, the people who are in the least favourable economic and financial situation—are most likely to suffer from the provisions. They pay their water bills as part of their rent. They fulfil their contract with their landlords. So far as they are concerned, it is undoubtedly difficult enough to achieve that. For them then to find that the law provides that they can be pursued simply because the landlords have not handed over the money to the water companies, or because some other tenant or some other landlord at some other period of time has not handed over the money, seems to us to be grotesquely unfair. I hope that the Government will be able to respond sympathetically to the amendments.

The noble Lord, Lord Renton, suggested that if the two subsections were taken out, other subsections might have to be substituted. I assume that on that basis this is a probing amendment which will require further thought before Third Reading. If that is the case, we wish to be associated with any further thought that is possible or necessary.

Lord Trafford

My Lords, I support my noble friend Lord Renton in putting the amendment forward if the argument he has deployed with regard to what we might call secondary charging is valid under subsections (5) and (6).

The wording of these two subsections is extremely obscure. It does not necessarily seem to me to bear the full interpretation which my noble friend and all noble Lords have put upon it. If I am wrong and that interpretation is correct, then one should support the amendment. However, I wish to hear from my noble friend on the Front Bench whether I am right in believing that there are covering points which may not totally support my noble friend's argument. I am hesitant in saying that because my noble friend Lord Renton is usually so accurate on these matters.

Lord Renton

My Lords, I have it right on this occasion too.

Lord Trafford

My Lords, my noble friend assures me that he has it right on this occasion too.

Lord McIntosh of Haringey

My Lords, surely the obscurity of subsections (5) and (6) is an additional reason for removing them. It is rather like Groucho Marx's contract.

Lord Trafford

My Lords, it is a perfectly valid point that improvement of the verbiage of these particular subsections may be possible. However, Groucho Marx also said that he would not be prepared to belong to any club that would accept him as a member.

The Earl of Caithness

My Lords, I have listened with care to my noble friends. I believe they have a very good point. I accept that the issue of such notices on tenants under subsections (5) and (6) might cause considerable distress to the more vulnerable members of the community. I also accept that the water undertaker will always have the option of seeking to recover bad debts from previous landlords through the courts, and that risk of disconnection has been substantially reduced now that in virtually all cases the customer in arrears will have the protection of county court scrutiny of his circumstances before disconnection can take place.

I say to my noble friend Lord Renton that I am happy to consider this amendment with a view to seeing whether we can amend the Bill at another stage. I shall be happy to enter into discussions with him before then.

Lord Renton

My Lords, I am sure that all noble Lords will greatly appreciate the undertaking which my noble friend has given, and for which we are deeply grateful. I am sure that the National Consumer Council, which inspired my noble friend Lord Wise and myself to move this amendment, will also be appreciative. I look forward to Third Reading. If my noble friend wishes to discuss the matter with me and the noble Lord, Lord McIntosh, between now and then, I am sure we are at his disposal. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 113B: After Clause 78, insert the following new clause:

• ("Prohibition on unlicensed supply.

.—(1) A person who—

1. (a) supplies water or sewerage services to any premises, house or building; or
2. (b) charges for water or sewerage services supplied to any premises, house or building;
3. shall be guilty of an offence unless he is authorised to do so by an appointment made under section 11 of this Act, or an exemption.").

The noble Lord said: My Lords, in moving this amendment, I wish also to speak to Amendment No. 113C. Indeed, it is essential that I do so, because Amendment No. 113B appears to introduce a prohibition on unlicensed supply. That is by no means our intention with these amendments. The meat of the amendments, as it were, is contained in Amendment No. 113C which concerns the exemptions from the prohibition on unlicensed supply. Let me make it clear that it is not in any way our intention to interfere with the many small cases of private supply, for example, from wells, particularly in rural areas. We do not wish to interfere with someone who happens to have a well and who happens to supply his neighbours, tenants or anybody else in the vicinity.

This amendment was, like the previous amendment, originally envisaged by the National Consumer Council. We are concerned at the lack of regulation for supply, other than by appointed undertakers. I am not saying that it is not deliberate, but the Bill has the curious effect that there is a definition of private supply in Clause 66, and there is some regulation of private supply by local authorities in Clauses 56 and 57. They are responsible, for example, for ensuring the wholesomeness and sufficiency of water that is supplied privately. However, private supply in general is not covered by any of the redress provisions for consumers which exist for appointed undertakers. The examples I would give of this are Clause 22(5), Clause 38(2), Clause 40(6), Clause 44(1), Clause 45(7), Clause 49(3), Clause 51(7), Clause 68(2), Clause 71(7) and Clause 78(3)(f). It will be seen that there is substantial protection and substantial redress for those who are badly treated by companies holding an appointment. However, no such protection and no such redress exists for those who receive a private supply.

As I have already said, it is not our intention that small, local, private supplies should be covered by this provision. It is perfectly possible for such supplies to be granted either in a particular case or by a class protection by the Secretary of State under subsection (2) of Amendment No. 113C. We are concerned about the risk that the appointed water undertakings could have subsidiaries which are not themselves appointed and which therefore do not provide the redress and the protection for the consumer which is a feature of the Bill—and of which the Government are very proud.

In other words, it is when supply other than by appointed undertakers is a commercial business or is a device by appointed undertakers that we start to be concerned, and we feel that consumers need the protection which is afforded elsewhere in the Bill. Therefore Amendment No. 113C requires that there should be exemption from the prohibition on unlicensed supply but that that exemption should be in accordance with any terms contained in the exemption and should continue in force for such period as may be specified in, or determined by or under the exemption.

That may seem a curious way to attack what appears to us to be a gap in consumer protection. I hope that we have formulated it correctly, that the Government recognise the justice of the case and will feel able to support the two amendments. I beg to move.

The Earl of Balfour

My Lords, perhaps I may comment because I am very concerned by what has been said. Although I sympathise with the principle behind the amendment of the noble Lord, Lord McIntosh, and recognise that people who receive water from private supplies need protection, it is worth pointing out that under the provisions of this Bill local authorities have a distinct responsibility to check private supplies with regard to both wholesomeness and quantity of water. That is clearly made out and I feel that in that respect much of the noble Lord's concern is covered by the functions of the environmental health department of a district council. I think that that applies to both England and Scotland.

I should like to quote a personal example to illustrate my concern. At my home most of the estate is served by a private water supply from a very good spring. It supplies one farm and about 40 houses, so it is not exactly small. My next door neighbour—by which I mean someone who lives two miles away—has a similar system. At present I am having the system analysed by the local authority to ascertain the quality of the supply. The last time that was done was 20 years ago.

The amendment states that a person who supplies water to any house or charges for water shall be guilty of an offence unless he is authorised to do so by an appointment or an exemption.

Normally, I have never charged for water, but the pipe goes off into three branches. Just a year ago, I took advantage of a Government grant to replace lead pipes with pipes of other materials. It was a 75 per cent. grant which is available to anyone. For the nine houses involved—of which only one belonged to me; that was house No. 9, the last one—it worked out at about £1,000 per house. The grant covered three-quarters of the cost, but that was the first and, I hope, will be the only occasion when I have had to charge the occupiers of the other eight houses approximately £250.

Under the wording of the proposed new clause, if I made that charge, I should be guilty of an offence unless I was licensed to make such a charge. That is where the second new clause to be considered comes into effect. It states: The Secretary of State may … grant exemption from [the] section…above, but subject to compliance with such conditions as appear to the Secretary of State to be appropriate". Let us suppose that the Secretary of State decides that one may charge for the water, but that the cost will be spread over 10 years. In that case, not only would I want to register as a water supplier, but I should have to bring in the question of interest. If I had to spread that cost over 10 years, I would charge not £25 a year but £29 a year to cover my costs. If the amendments were accepted, and I were involved in such matters, it would pay me to make certain that in future I charged for water and was licensed. I do not think that the amendment will have the desired effect.

The Earl of Caithness

My Lords, I have listened with care both to the noble Lord, Lord McIntosh, and to my noble friend Lord Balfour. What my noble friend has said reinforces me in my contention that the amendments would introduce heavy-handed regulatory powers which are not needed.

Clause 11 requires the Secretary of State to ensure that there is at all times after the transfer date an appointed water undertaker and an appointed sewerage undertaker for every area of England and Wales. Those undertakers will thus have a monopoly over the powers given to undertakers under the terms of Clause 11. Similarly, they will be uniquely obliged to meet all the obligations of water and sewerage undertakers. The powers of undertakers include all the powers needed to discharge their functions, for example, concerning laying mains and sewers in streets or fixing water charges in charges schemes. Their obligations include providing services to customers connecting to the public mains and sewer networks and extending those networks to serve new customers. Private services are numerous for both water supply and sewerage. Although a high proportion of households is connected to the mains and sewers of the undertakers, there are still a large number who are not. It would be quite wrong at this stage of the Bill to introduce unlimited powers for the Secretary of State to ban or regulate the continued provision of services to those customers.

So far as concerns new customers, we have not intended to prevent the occasional case in which private services may also be provided by someone other than the appointed undertaker in the future. Clause 12(2)(c) provides for variation of appointments in areas where the undertakers currently serve no customers so that a different company could be appointed as the undertaker. In such areas, it is likely that the existing, or a new, undertaker would become the supplier of new customers both because the powers of undertakers will be needed to provide the necessary infrastructure and because customers will expect the certainty that goes with requiring services from the appointed undertaker.

However, it is possible for new appointees to take on appointments in such areas. Also, in marginal cases, it is possible, for example, for a company to obtain an extraction licence and to provide water for a group of industrial users on an industrial estate on a wholly commercial basis. We have no reason to prevent that taking place. Providers of services other than appointed undertakers will be subject to abstraction licensing, a requirement to provide wholesome drinking water and to obtain consents for any discharges that they make to the environment. We do not believe that there is a need for another tier of regulation.

Lord McIntosh of Haringey

My Lords, in responding, let me start by putting at rest the mind of the noble Earl, Lord Balfour. Even the first amendment does not make any distinction between anybody who supplies without charging and anybody who supplies and makes a charge. It says: (a)… or (b)". The exemption or regulation provisions of Amendment No. 113C apply in either case. So it does not matter from the point of view of these amendments whether or not he makes a charge.

In introducing the amendments, I did not make clear that it was not our intention in any way to ban private supplies; but it was our intention to ensure that those water users who are under private supply have the same means of redress against their suppliers as those who are not. That is the purport of Amendment No. 113C.

It is difficult—in fact impossible—for us approaching this matter at a late stage in this Bill to do anything other than say that the Secretary of State shall have the responsibility of granting exemptions under such conditions as he thinks fit. We are certainly not in any position to rewrite the whole Bill in order to ensure that the consumer protection that is written into it so far as concerns the appointed undertakers applies to all consumers.

However, I think that it is not too difficult to see that there is a problem in this respect. There are some consumers who are losing the protection or failing to gain advantage from the protection which is provided to all the other consumers. They may not comprise a very large number and it may be that the regulatory system will have to be simplified because of the small number of people concerned. Certainly it is highly likely that local supplies such as those to which the noble Earl, Lord Balfour, referred on his own estate would be automatically exempt from the provisions of these new clauses simply on the grounds that the number of people concerned was too small.

There are protections. They ought to be available to all consumers but they are not available to all consumers. If we have inadvertently proposed a regulatory regime which, as the Minister said, is too harsh, we shall have to think again about this matter. These are not amendments that I wish to press to a Division. However, I hope that as the Minister reads the Official Report he will recognise that, however defective the wording, behind it is a real concern for people who would otherwise not be adequately protected. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 113C not moved.]

Lord McIntosh of Haringey moved Amendment No. 113D: After Clause 78, insert the following new clause:

• ("Re-sale of water and sewerage services.

—(1) This section applies to water and sewerage services supplied to a consumer's premises by a person who is authorised by an appointment or exemption to supply water or sewerage services. (2) The Director may from time to time fix maximum prices at which water and sewerage services to which this section applies, may be resold, and may publish the prices so fixed in such manner as in his opinion will secure adequate publicity for them. (3) The Secretary of State may by regulation make such provision concerning the re-sale of and charging for water and sewerage services as he considers appropriate. (4) If any person resells water to which this section applies at a price exceeding the maximum price fixed under this section and applicable thereto, the amount of the excess shall be recoverable by the person to whom the water was resold.").

The noble Lord said: My Lords, in moving Amendment No. 113D, with the leave of the House, I should also like to speak to Amendment No. 118A tabled in the name of the noble Baroness, Lady Blatch. That amendment appears to overlap our amendment, if I may put it that way, in that two of the subsections are the same. There is some variation for reasons of which I am unaware.

Again let me make it clear that the purpose of this amendment is not to prohibit the resale of water. That would be absurd and impossible. It is to ensure that there is adequate control of the prices at which water and sewerage services are resold in order to avoid exploitation. This is not a completely new or surprising provision. The Electricity Bill that is under consideration in Committee in your Lordships' House includes in Clause 40, provisions for setting maximum resale prices. Section 37 of the recent Gas Act provides similarly that there should be powers to fix maximum retail prices.

As with the amendment moved by the noble Lord, Lord Renton, we are concerned principally with tenants, with those who are likely to be less advantaged people in our society. One can think of tenants of caravan sites, of hostels; and possibly of people who may not be less advantaged such as those in new housing estates whose landlords or developers decide to take on the prime responsibility for the provision of water and sewerage services on a resale basis from the appointed undertaker.

I confess that I am not much of a supporter of the resale of water for profit. It does not strike me as a very attractive proposition. However, that is not what the amendment states. We are not trying to ban resale. We are saying that the director general should have the power to fix a maximum price which would be comparable to the rights of tenants to which the noble Lord, Lord Renton, referred in a previous amendment.

The people who are likely to be affected by this amendment are those who suffer from many other disadvantages. They are likely to be in less satisfactory accommodation and to have less security of tenure. The Gas Act goes some way to providing that their landlords should not cheat them on the gas meter. The Electricity Bill contains comparable provisions. We are asking for the same rights to be conferred on them in the Water Bill with regard to their water supply. I beg to move.

10.30 p.m.

The Earl of Cranbrook

My Lords, Amendment No. 118A, put forward by my noble friend Lady Blatch and myself, deals, as the noble Lord, Lord McIntosh said, with very much the same subject. Perhaps I can bring it down to ground level by saying that there has been a problem in the Anglian Water Authority area where a few weeks ago a trading standards officer received a query from a mobile home owner who felt that he had been overcharged for supply of water. This amendment refers to tenants who have sub-meters. It will be a more frequent occurrence as metering becomes more widespread in the country. It applies to any caravan site and no doubt also to marinas.

As the noble Lord, Lord McIntosh, has pointed out, there are provisions in Section 37 of the Gas Act, and in the Electricity Bill at present going through this House, for controlling the resale. There is no animadversion whatever to those who sell on water. In many cases, such as caravan sites, it may be an essential part of the administration of the site. However, our proposal—which is identical in intent—is that there should be restrictions on the maximum prices that can be charged.

The Earl of Caithness

My Lords, I am beginning to be concerned about the similarity of the amendments of the noble Lord, Lord McIntosh of Haringey, and those of my noble friends Lady Blatch and Lord Cranbrook. I hope that this will not continue for too long. However, I am glad to note that it is the noble Lord, Lord McIntosh, who on this occasion has a starred amendment. He has obviously been influenced by my noble friend Lady Blatch. I think that gives me greater comfort than a moment ago.

Although the Government have very little evidence to suggest that the resale of water by unscrupulous landlords is a problem—notwithstanding what my noble friend Lord Cranbrook has just said—I agree that in order to prevent such a problem occurring in the future it would be useful to give the director general powers to fix the maximum price of water and sewerage services that may be resold. I am happy therefore to give an undertaking that the Government will consider the points made by the noble Lord, Lord McIntosh, and my noble friend Lord Cranbrook about the resale of water by landlords with a view to coming forward with an amendment at a later stage.

Lord McIntosh of Haringey

My Lords, I am entirely happy with that assurance, although I am conscious that there is only one later stage at which the Minister can come back. I am grateful to the Minister and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 79 [Restrictions on power to make connection and certain other charges]:

Lord Ross of Newport moved Amendment No. 114: Page 91, line 14, at end insert ("; or(c) the person providing any recreational facility or service.").

The noble Lord said: My Lords, Clause 79 provides that the water or sewerage undertaker should not, demand or recover an initial charge for its becoming, or for its taking steps for the purpose of becoming the person who provides a supply of water for domestic purposes or the person who provides sewerage services".

Presumably that means that the undertaker shall not charge a premium or anything of that kind for taking over the provision of these services. The amendment seeks to add that it should not charge an extra sum of money for taking over any recreational facility or service. I have in mind particularly fishing and possibly also boating and water-skiing.

There is no attempt to tie down the water or sewerage undertaker to keep the same charges for ever more. Nobody is suggesting that. But there should not be some kind of premium charge for taking over provision of these services. I hope that the Government will take this on board. The authorities have been very forward looking and co-operative in their provision of these services, certainly boating, water-skiing and fishing. They have been receptive—especially to myself when I was in the other place—to pleas on behalf of constituents to provide fishing facilities. And they certainly did not overcharge. That is good and we want it to continue. I beg to move.

Lord Hesketh

My Lords, the effect of the amendment is to prevent a water or sewerage undertaker levying an initial charge on a person for whom the undertaker is becoming the provider of recreational facilities or services. I expect many of your Lordships will find my account of the effect of the amendment rather obscure. The obscurity we believe is unavoidable. The amendment deals with charging for recreation, while Clause 79, to which it applies, is about charging for connecting premises to water and sewerage services. Undertakers will not be connecting anyone to their recreational facilities.

I suppose the nearest analogy to a recreational connection charge is a membership fee levied on joining a boating club run by an undertaker. However, I do not think this analogy is worth pursuing. The fault behind the amendment is hardly to outlaw the levying of fees for joining boating clubs.

The amendment should not be accepted, not just because it is difficult to attribute any clear meaning to it, but also because the thought behind it—that the right of the undertakers to charge for the provision of recreational facilities and services should be controlled—is something we discussed and rejected when considering Clause 8(6) which permits undertakers to charge for recreational facilities. If any undertaker cannot recover its costs for connecting a person to recreational facilities from the person so connected—I am not sure what that means—then the public at large will have to meet the costs through higher water charges.

We do not believe that the amendment should be accepted.

Lord Ross of Newport

My Lords, I am afraid I do not see the word "connection" in this first part of Clause 79. There is no mention of connection. The clause reads, shall entitle any water undertaker or sewerage undertaker to fix, demand or recover an initial charge for its becoming, or for its taking steps for the purpose of becoming". That could be read as meaning that when the undertaker takes over, as a plc, those services, it could say to us, the customers and consumers, "We are not going to provide them until you pay us an initial cost for taking over". That may be far-fetched, but the Bill does not actually say "connection". That is why the amendment has been tabled.

I wish that the Minister would say more to reassure the people dependent on water authorities for fishing and other recreational purposes that it is not in the mind of the Government that any initial charge should be made for carrying on those facilities when the privatisation of water takes place. Certainly, in the longer term, the charge for the provision of fishing facilities should go up with inflation. But a fishing organisation should not be told. "We cancel that contract and if you wish to take it on you have to pay us a premium." Premiums involving enormous sums of money have been paid in the commercial field over the past few years.

Lord Hesketh

My Lords, with the leave of the House, I have not fully understood the point made by the noble Lord, Lord Ross. It would be best if I read the Official Report. If I see that we are diverging on to two different tracks I shall write to him in order that we can return to the same track.

Lord Ross of Newport

My Lords, I am grateful to the Minister and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 81 [Exemption from charges for water for fire fighting]:

Lord Gallacher moved Amendment No. 115: Page 92, line 28, leave out from ("or") to end of line 30 and insert— ("taken by a fire authority for any other emergency purposes;

1. (b) water taken for the purpose of testing apparatus installed or equipment used for extinguishing fires or for the purpose of training persons for fire-fighting; or
2. (c) the availability of water for any purpose mentioned in paragraph (a) or (b) above.").

The noble Lord said: My Lords, I should like to speak also to Amendments Nos. 116, 117 and 118. The amendments reopen a matter which was discussed briefly in Committee. It concerned the charging arrangements for water supplied for fire services.

At present the legislation in the Bill exempts from charging arrangements water supplied not only for extinguishing fires but also for testing apparatus. When the legislation was originally drafted, firemen did little more than hold a hose from which water was emitted. We are told that the situation is now quite different. Different types of fires require different treatment. While they are all water based there are many different methods of mixing chemicals with the water and applying the resultant mixture to the fire in question.

That has meant that recently fire services have had to undergo a much higher level of training. Following the analogy that has always been accepted—that it is acceptable for water to be supplied free of charge for the testing of equipment—it seems to us that there can be little argument against a similar activity of training or testing the firemen who must operate the equipment. In any case, the water so used is almost immediately returned via the drainage system to the water authority. We submit that it is wasteful of public money to require the additional equipment and administration necessary to raise charges for this insignificant field of activity. I beg to move.

The Earl of Arran

My Lords, I am pleased to say that, following the undertaking given by my noble friend Lord Hesketh during the Committee stage of this Bill, the Government accept these amendments which extend the prohibition on charging for water for fire-fighting to include that taken for fire-fighting training and for other emergency purposes provided by a fire authority.

Noble Lords will be pleased to note that the prohibition on charging will also cover water used for fire-fighting training purposes by the owners of private fire-fighting equipment as well as that used by fire authorities. In consequence, the amendment goes rather wider than that originally proposed by the noble Lord, Lord Graham, on behalf of the noble Lord, Lord McIntosh, during the Committee stage of the Bill. We commend the amendments to your Lordships.

Lord Gallacher

My Lords, I am extremely grateful to the Minister for not merely accepting the amendments but for extending their scope. The hour is late and I do not know in what fashion I can celebrate. A cold shower is the best I can think of at this point.

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendments Nos. 116 to 118: Page 92, line 33, after ("(a)") insert ("or (b)"). Page 92, line 36, after ("(a)") insert ("or (b)"). Page 92, line 39, at end insert— ("() In this section "fire authority" has the same meaning as in the Fire Services Act 1947."). On Question, amendments agreed to.

Baroness Blatch had given notice of her intention to move Amendment No. 118A:

After Clause 81, insert the following new clause:

• ("Fixing of maximum charges for reselling water.

.—(1) The Director may from time to time fix maximum prices at which water supplied by water undertakers may be resold, and may publish the prices so fixed in such manner as in his opinion will secure adequate publicity for them. (2) Different prices may be fixed under this section in different classes of cases which may be defined by reference to areas or any other relevant circumstances. (3) If any person resells any water supplied by a water undertaker at a price exceeding the maximum price fixed under this section and applicable thereto, the amount of the excess shall be recoverable by the person to whom the water was resold.").

The noble Baroness said: My Lords, I should like to admit to my old friend the Minister that there was no collaboration between the noble Lord, Lord McIntosh, and myself in respect of Amendments Nos. 113D and 118A. Perhaps the noble Lord could have added his name to my amendment, but I shall not move it.

[Amendment No. 118A not moved.]

Clause 82 [Initial Government holdings]:

10.45 p.m.

Lord McIntosh of Haringey moved Amendment No. 118B: Page 93, line 24, leave out ("and on such terms").

The noble Lord said: My Lords, I should like to speak also to Amendment No. 118C. This is the wrong time of night to be dealing with a matter of this kind. I hope that the amendment will be treated with the seriousness that it deserves.

The background of this matter is the history of privatisation over the past few years. Although all the privatisation initiatives of this Government have, taking the most narrow definition, succeeded in the sense that everything has been privatised, there has been a full gamut of types of success, if one may put it in that way. There have been those which have been grotesquely underpriced and those which have been so heavily priced that it has been necessary for them to be taken up by the undertakers rather than by the investors.

With regard to water, the risks of getting the flotation price wrong are not only very great but they virtually become certainties. We have discussed the question of the net asset value of the water and sewerage undertakings. It is well recognised that the figure is of the order of £27 billion. Even on a historic cost basis it is likely to be £8 billion. However, the best estimates available for the proceeds from privatisation are between £5 billion and £7 billion. On whatever basis it is taken, the privatisation of water will be an enormous give-away of public assets. The figures do not allow of any other interpretation.

That deals only with the privatisation itself. We do not yet know, and the Government refuse to say, how much of the existing debt of the water authorities, which accounts for more than £5 billion, will be written off. If the whole amount were to be written off, the loss in debt would nearly equal the receipts from the flotation, and the give-away would be complete. At best it is unlikely that the taxpayers will get more than £3 billion or £4 billion for assets which are valued at approximately £27 million. The case of water privatisation is the worst possible case for taxpayers getting a good return on a privatisation venture.

What we propose is something very simple, although one can see that its implementation might not be all that simple. Instead of being allotted under the traditional formula, there should be a tendering procedure. I have no doubt that the Minister will find many practical difficulties in that proposition. It has never been done before, and I have no doubt that it would cause great difficulty in the City, not least because many of the enormous fees which go to financial institutions for underwriting and supporting the privatisation would no longer be available in the same terms. I am sure that they will find very good reason for saying that it cannot be done because it has never been done before.

The amounts of money involved are so great that a serious effort must be made to avoid privatisation being the fiasco which we can confidently predict that it will be for the taxpayer. It will not be a fiasco for the financial advisers. It may not even be a fiasco for the investors, although that is a very fine line. The one group of people who we know will lose from privatisation will be the taxpayers and the water consumers.

This is a serious attempt to remedy part of that situation. It does not mean that we are converted to privatisation or that we are in favour of what the Government propose. It means that we show a serious determination to protect the taxpayer from some of the worst effects of privatisation. I beg to move.

The Earl of Caithness

My Lords, I offer my congratulations to the noble Lord, Lord McIntosh of Haringey. As your Lordships know, he has an unrivalled ability either to bring forward a debate or introduce a further debate at a later stage in the Bill, and he has done so again tonight. Tribute is due to him as it keeps us all very much on our toes.

Before I reply to the amendment perhaps I might point out what I believe is an error in Amendment No. 118C. I think that the reference to "subsection (1)" should read "subsection (2)". While the noble Lord considers that, I shall answer the amendment.

Contrary to what the noble Lord said, in the past on such occasions the Government have chosen to sell businesses by tender where it was felt that that would ensure the best price. However, tenders are sensitive to market conditions. Before the noble Lord jumps up to ask me what we have sold by tender, let me add that part of the British Airports Authority was for sale by tender. It was a Bill that I had the pleasure of taking through your Lordships' House and I am glad to see the effect of that has been so productive.

While not ruling out the possibility of such an approach in the privatisation of water, my concern with these amendments is that they seek to write on the face of the Bill an obligation to sell by tender. A decision on the best method of sale will be taken closer to the date of flotation, in the light of market conditions likely to be prevailing at the time of sale, to ensure a proper return to the Exchequer. Tenders may or may not prove to be the most effective means of doing that, as there is no certainty that sale by tender would lead to higher proceeds than other methods. In short, it would not be appropriate to legislate the means by which the sale should proceed as flexibility is necessary on these issues.

That is perhaps not quite the reply that the noble Lord, Lord McIntosh, was expecting; but I hope I have dealt with the amendment with the due seriousness he would expect from me.

Lord McIntosh of Haringey

My Lords, I can certainly confirm that the Minister treated the amendment with seriousness, though I do not think he appreciated the full significance of what is being said.

I have looked at whether the amendment should refer to "subsection (1)" or "subsection (2)". This is a multi-stage process and it looks as though the Minister is right that it is the second stage of the allotment of shares with which we should be concerned rather than the first stage. I am grateful to the noble Earl for that correction. That alone, apart from the lateness of the hour, would be enough to convince me not to press the amendment.

However, what the noble Earl says about previous flotations—excepting the British Airports Authority—does not give us confidence that water privatisation will produce the best value for taxpayers. Time after time the short-term gains on privatisations have been the result of the flotation price being set too low and substantial short-term gains being made by speculators. In this case I use "speculators" rather than "investors" advisedly.

Those gains were made at the expense of the taxpayer. When Amersham was floated, the price at the end of the first day represented a gain for speculators of 32 per cent. The figure for Associated British Ports was 23 per cent.; for British Aerospace, 14 per cent.; British Airways, 68 per cent.; British Gas, 25 per cent.; British Telecom, 86 per cent.; Cable and Wireless, 17 per cent.; Jaguar, 8 per cent.; and Rolls-Royce, 68 per cent. Some of these, I hasten to say, were on a part-paid shares basis. The only example of the Government not enriching the speculators was the selling off of the state-owned oil companies.

The history of privatisations from the point of view of the profit for the taxpayers' pocket is not a happy one. Many billions of pounds have been put directly from the taxpayers' pockets into the pockets of speculators. We have proposed a way of avoiding that. I suppose that it is encouraging even at this stage to learn that the Government have not set their face against sale by tender and that this may still be considered. I do not believe in his response to the amendment that the Minister has given full recognition to the dangers that exist in the privatisation proposals as they stand. I do not believe that taxpayers are going to be very reassured by the argument that the details should not find their way on to the face of the Bill. Because of the defect in the amendment, I beg leave to withdraw it.

Amendment, by leave, withdrawn.

[Amendment No. 118C not moved.]

Clause 85 [Conversion of certain loans]:

Lord Graham of Edmonton moved Amendment No. 118E: Page 95, line 17, at end insert— ("(1A) No order under subsection (1) above shall have the effect of so increasing the projected yield on any shares at issue beyond that projected from financial capital anticipated in accordance with the requirements of section 7(2Xb) above.").

The noble Lord said: My Lords, I beg to move the amendment standing in the name of my noble friend Lord McIntosh of Haringey. As the Minister will appreciate, we are on the same theme, but approaching it from a different angle. The effect of this amendment is to limit the yield in general terms rather than in the technical sense, on shares in water supply plcs after privatisation in such a way as to determine ex post facto that the net receipts of the flotation to the Treasury were maximised.

Its purpose is to prevent a repetition of using debt write-offs to produce the massive giveaways to investors that have been a feature of many previous privatisations. In this way it shall be possible to ensure that the flotation is not a vehicle whereby the taxpayer can be expected to further contribute to making the industry saleable. Only if this is done can fears be allayed that this privatisation is not to do with improving the standards and quality of water and sewerage services, but in fact refers to selling off public assets to allow private investors to make substantial speculative gains.

Much has been said about the proposed level and purpose of the intended write-off of loans to the water industry. For the moment it is accepted that the Government do not yet know what that level of write-off will be. There has thus far been little debate concerning the share price at which the water industry will be sold off. That is not wholly surprising since the Government have not even decided how many of the shares to sell off let alone at what price to do so. Doubtless the Government will say that it is too early to decide what price to put on the shares and that, even if they had done so, it would not have been within keeping of the normal practice to tell Parliament what that share price was to be.

As much was said to a Standing Committee in the other place by Mr. Michael Howard who claimed that while Parliament could decide on the principle of privatisation, it was for the Government to decide the mechanics and deal with matters of financial detail. That may well have been true of previous privatisations, but the Government should no longer be given such a free hand in the matter. Their record of privatisations and particularly as regards debt write-offs and pricing privatisation shares, is such as to warrant increased accountability to Parliament in relation to matters of mechanical and financial detail.

My noble friend Lord McIntosh has just given to the House a record that is absolutely lamentable. It is a record of substantially underpricing the flotation issues to the detriment of the taxpayer. In many cases there has been the write-off of substantial debts. My noble friend referred to a series of privatisations and indicated the percentage at which the shares had been sold at less than the public valued them. He mentioned Amersham and he gave the figure in percentage terms. The figure was £23 million; Associated British Ports, £5 million; British Aerospace, £21 million; British Airways, £317 million; British Gas, £503 million; British Telecom, £973 million; Cable and Wireless, £39 million; Jaguar, £24 million; Rolls-Royce, £465 million. That is a total of almost £2,400 million that the Treasury was gainsaid by the manner in which the shares were disposed of.

I remind the House that it is not only by adopting that method that money can be given away. I live in Enfield, and the Royal Small Arms factory there was the subject of a global sale by the Government of the ordnance factories to British Aerospace. The valuation put on the Enfield small arms factory and the explosives unit at Waltham Abbey was £1.5 million. The factories stand in hundreds of acres of land with a development potential. British Aerospace has now closed down those factories and is seeking planning permission which if granted—that is a matter for the local council—will make the land worth anything up to £100 million. It may come as a surprise to the Minister and his colleagues, but that valuation was made by Jack Dromey on behalf of the shop stewards and the workers. All that has come to pass was predicted.

The sale was stoutly defended by the noble Lord, Lord Trefgarne, when I raised the matter at that time. At the end of the day the taxpayer will receive £1.5 million for assets which will eventually be seen to be worth £100 million. British Aerospace will recoup what it paid for 12 factories from the sale of one. My noble friend Lord McIntosh has pointed out who gains—the financial advisers, the investment brokers and the public relations firms. The shareholders who buy may very well gain. But the taxpayer whose assets are being sold will be the prime loser.

The Minister will tell us that what we propose is not technically possible or that the amendment is in some other way defective. The noble Earl must explain how he will stop the haemorrhaging of money from the public purse. The investing public may make a killing or the company itself may make a killing. We say that public assets which are being sold against our will should be sold at a fair and proper price. I beg to move.

11 p.m.

The Earl of Caithness

My Lords, it is essential that the Government have the flexibility to create a capital structure which best suits the requirements of a successful flotation and reflects the market conditions at the time. In exercising the powers provided by the Bill to create an appropriate capital structure Ministers will act properly and they will be accountable to Parliament for the results. One dimension of this will be assessing the appropriate level of debt in the opening balance sheet.

I make these points generally because, although the noble Lord's words were helpful in explaining his intention, I still do not feel it is certain what effect the amendment would have. It seems to make it impossible to privatise the water plcs because it would appear to limit the extent of writing off debts owed to the National Loans Fund. The noble Lord did not comment on that but that is how I interpret the amendment.

All such debts must be extinguished before the water industry passes into the public sector. That does not mean that all the £5.5 billion of debts will be substantively written off, because we will create new securities in the form of shares and debentures which will take the place of national loans fund lendings. But as I have said before, all NLF debt must be extinguished and any provision which seeks to constrain that operation puts the flotation at risk.

In summary, I return to the assurances we have given before. In making what will undoubtedly be difficult judgments about capital structure we shall strike a balance which protects the interests of investors, water users, the taxpayer and the company managements. We shall have to justify our decisions to Parliament but the restriction proposed here would not help us to get that decision right.

Lord Graham of Edmonton

My Lords, I know that the Minister will rest his case on the fact that he has taken the best available advice. He will be advised to do things in a certain way. I simply draw to his attention the fact that the advice which the Government sought in the case of Amersham, the British Airports Authority, British Aerospace, and so on, resulted in the taxpayer being denied more than £2 billion which went into the pockets of investors.

In the political philosophy of the Minister, he may think that it is not unreasonable for those who are prepared to risk a little of their own money to receive a great deal of public money for so doing. But it is anathema to those on this side of the House. Moreover, the Minister may think that it is reasonable in the case of the sale of the ordnance factories, to which I referred, that the authorities were advised that the value they should place on the sale of the Enfield and Waltham Abbey factories was £1.5 million.

I turn now to the Government's record in connection with the £2.5 billion received from the privatisations and also in connection with the potential sale of a site in Enfield which they sold for £1.5 million and which now turns out to be worth £100 million. Can the Minister say what action the Government intend to take, or the kind of apology they will make to the House and to the taxpayer, if comparable circumstances emerge on the sale of water?

By his eloquent silence the Minister has expressed more than perhaps any words could convey. In fact, there will be no explanation and no apology; the public is being invited to read that the Minister said it would be most difficult to stop the haemorrhaging of public assets into private pockets—some of them individual, some of them companies—and in fact it will be impossible to do so. In other words, the picture which my noble friend and I have painted reflects the facts of life which cannot be changed.

I think that it is a disgraceful defence of the public interest in these matters; but that is the justification by the Minister for rejecting the amendment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Hooson moved Amendment No. 118D: After Clause 99, insert the following new clause:

• ("Local access to fishing.

It shall be the duty of all water companies when disposing of land adjoining lakes, reservoirs, rivers, streams or otherwise, or when disposing of fishing rights themselves, to take proper and reasonable steps to ensure that they safeguard customary local access to fishing along the lines practised by the water authorities themselves hitherto.").

The noble Lord said: My Lords, I beg to move this amendment standing in my name and that of my noble friend Lord Ross of Newport. I know that the question of fishing rights was raised in Committee, but I am anxious to discover what the Government's attitude is towards safeguarding what may be described as the customary rights of access of local people to fishing.

It so happens that the water supplies of this country are situated largely in sparsely populated areas. The reservoirs which were built in the last century, and some in this century, were of necessity in country areas where among the few enjoyments which people had were the customary rights of fishing. Such rights were dealt with in various ways; indeed, different public authorities dealt with them in different ways. Some dealt with them sensitively and in a most civilised way, while others did not.

However, by and large throughout the country there was a general recognition that customary rights of local people to fishing access should be safeguarded, otherwise fishing was in danger of becoming the simple prerogative of the rich—or, at least, of the very rich suburban and urban angling clubs. Therefore, this is a matter of great importance to those areas where most of our water comes from.

It was about 27 years ago now that I moved an amendment in another place to the Clywedog Reservoir Bill. I believe that the noble Lord, Lord Harmar-Nicholls, was there and, indeed, I see that a few more of my present colleagues were also there. The amendment was to provide the local people with preferential rights regarding fishing. That was dealt with by the then river authority, and was subsequently continued by the Severn Trent authority, by granting fishing rights in that particular instance to the local angling association. Therefore people who wanted to fish simply joined the local angling association and achieved access in that way. There was a differential fee as between local people and visitors.

In other authority areas it was done by having one fee for local people and a different one for visitors. It is an important amenity in country areas. If one is merely to maximise the profit from the sale of water rights in that way on privatisation, it could be argued that because fishing rights are an important amenity they should go to the highest bidder. That would not be the desire of most citizens in this country. Generally a sense of fair play and civilised behaviour would dictate that it is desirable to continue what has been the practice, manifested in a variety of different ways, which is why I have couched the amendment in the way that I have. It will ensure that those rights are safeguarded.

The purpose of moving the amendment is to probe the Government's mind on this matter. I have looked carefully at Clauses 7 to 11 inclusive. They lay general duties on the Secretary of State and other people in respect of various rights. A good deal of time has rightly been spent on safeguarding environmental rights, flora and fauna and so on, but there is no provision to deal with fishing rights. It is an important human right in those areas.

I happen to come from an area which supplies a great deal of water through the Welsh Water Authority and the Severn Trent Authority. My old constituency had two of the largest reservoirs in the country, and I border the constituency that contains the Elan Valley which has many more reservoirs. It is a matter of great public concern. I am seeking to direct the Government's mind to a problem which needs to be dealt with sensitively and in a civilised way. I hope that the Government can give an indication that they regard the way in which the amendment is drafted as providing at least a desirable code of practice for the future authorities that will control the water. I beg to move.

Lord Hesketh

My Lords, the purpose of the new clause moved by the noble Lord, Lord Hooson, is to ensure that the successor companies of the water authorities, when disposing of land adjoining water or when disposing of fishing rights, give the same importance to preserving local access to fishing as the water authorities do now. It is the Government's policy that the Bill must contain sufficient safeguards to ensure that recreation is in no way adversely affected by privatisation. Hence the provisions in Clause 8 which impose on the privatised water industry the existing statutory obligations of the water authorities to provide for recreation.

It is, however, our view that the amendment should not be accepted. There are two reasons for this. First, the requirement in the amendment that the companies take proper and reasonable steps . . . along the lines practised by the water authorities themselves hitherto is too loose to have any impact in practice. I may say that I fully understand the difficulty confronting anyone trying to enshrine in legislation rules designed to perpetuate existing practices.

The second reason why the amendment should not be accepted is that what it attempts to achieve will in fact be more adequately provided for through the new clause inserted on Thursday after Clause 150 as a consequence of a government amendment. Because of this clause the companies will have to secure the Secretary of State's consent before disposing of any lands, including fishing rights, which they inherit from the water authorities. Furthermore, in the case of lands of special amenity value—that is, land in national parks, areas of outstanding natural beauty, the Broads and other areas designated by the Secretary of State—any consent by the Secretary of State may be subjected to conditions designed to protect the amenity value to the public of the lands and waters.

However, we shall consider whether in a code of practice on recreation and conservation we can say anything helpful about the preference for local people in respect of fishing rights. I hope that with those remarks the noble Lord, Lord Hooson, will consider withdrawing his amendment.

Lord Hooson

My Lords, I am grateful to the noble Lord for the indications he has given. It was not my intention to press the amendment; it was really a probing amendment. It is, however, important that in their code of practice the Government should give a clear indication. I do not believe that anything less would suffice. It is not enough to rely upon the reservoirs being in the national parks. It so happens that the areas I have mentioned, although beautiful, are not national parks.

It is not a simply a question of safeguarding the amenity but of safeguarding local rights. I can see that the noble Lord has taken the point on board. I hope that mature thought will result in clear guidance in the code of practice or through whatever means the Government decide for dealing with the matter. On the basis of the reply, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

11.15 p.m.

Clause 100 [Registration of statutory water companies under the Companies Act 1985]:

Lord Elliott of Morpeth moved Amendment No. 118F: Page 108, line 6, after ("being") insert ("or will be, subject to the issue of a certificate under section 688 of the said Act of 1985").

The noble Lord said: My Lords, in moving this amendment, I wish also to speak to Amendments Nos. 118G, 119, 120 and 120A. The purpose of the amendment is to ensure that a statutory water company can make a decision to convert to a plc, adopt a memorandum and articles of association and seek the Secretary of State's approval to that adoption at one and the same time. I believe that that was the original intention of Clause 100, but as drafted it could be interpreted as requiring a statutory water company to convert to plc. In so doing it would become a company governed by the Companies Act 1985 before it was able to propose the adoption of a memorandum and articles and seek the Secretary of State's approval to them.

In certain circumstances, that could leave the statutory water company in an unsatisfactory constitutional position if the proposed memorandum and articles were not then adopted for any reason. The subsequent amendments are of a technical and drafting nature. I believe the amendments are sensible. I commend them to the House. I beg to move.

The Earl of Caithness

My Lords, my noble friend is absolutely right in drawing to the attention of the House the undoubted practical advantages envisaged from these amendments. I have to say that I am taking advice on them because they are quite complicated and raise drafting and procedural problems. It is for that reason that I fear that I cannot accept them as they stand. I have to say to my noble friend that it is not clear that the complexities arising from a concept of a conditional resolution can be overcome.

Notwithstanding that, perhaps I may say to my noble friend that I shall look carefully at the arguments which he has adduced in support of the amendment. I should be happy to meet him between now and the next stage to see whether we can overcome the difficulties. There are legal problems, so I cannot give him too much hope that we shall be able to meet his concerns. We register them and I hope that he will take the opportunity of meeting me between now and another stage.

Lord Elliott of Morpeth

My Lords, I am most grateful to my noble friend for his response, although somewhat disappointed. I am grateful for his assurance that he will give further consideration to these important points. In consequence, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 118G, 119, 120 and 120A not moved.]

Lord Elliott of Morpeth moved Amendment No. 120B: After Clause 100, insert the following new clause: ("Replacement of borrowing powers of registered water companies. .—(1) Where—

1. (a) provision relating to borrowed monies of a registered water company is for the time being contained in local statutory provisions; and
2. (b) the company for the time being holds an appointment under Chapter 1 of this Part,

that company may subject to the following provisions of this section by special resolution propose that those local statutory provisions shall cease to have effect and that other provisions shall have effect in substitution for them. (2) If the Secretary of State by order approves proposals by a registered water company in accordance with subsection (1) above, the local statutory provisions in question shall cease to have effect and any provision to be substituted therefore shall have effect on such date as may be specified in the order. (3) The Secretary of State shall not make an order under subsection (2) above in relation to a registered water company unless it appears to him—

1. (a) that neither an application under section (procedure for replacing borrowing powers) below with respect to the company's proposals nor an appeal with respect to the subject-matter of such an application is pending and that the time within which any such application or appeal may be made or brought has expired; and
2. (b) where there is—
1. (i) a division of the mortgages, debentures or debenture stock of the company into different classes; and
2. (ii) that the local statutory provisions which are to cease to have effect will be replaced by other provisions which will replace, vary, modify, compromise or release the rights attached to any such class or by obligations to repay or redeem the said mortgages,debentures or debenture stock,

that a consent to or approval to such proposals has been given under subsection (4) below in respect of each class the rights attached to which would be so replaced, varied, modified, compromised or released if the order were made. (4) A consent or approval of a proposal is given for the purposes of subsection (3Xb) above in respect of a class of mortgages, debentures or debenture stock if—

1. (a) consent in writing to the proposal has been given by the holders of not less than three-quarters, in nominal value, of the issued mortgages, debentures or debenture stock of that class; or
2. (b) an extraordinary resolution approving the proposal is passed at a separate general meeting of the holders of mortgages, debentures or debenture stock of that class;

and for the purpose of determining whether the requirements specified in subsection (3)(b) above are satisfied in relation to any two or more classes of mortgages, debentures or debenture stock in a registered water company, it shall be immaterial that consents and approvals have been given in respect of different classes in accordance with different paragraphs of this subsection. (5) The provisions of the company's registered memorandum and articles (in the case of a registered water company) or the provisions of Table A as prescribed by regulations having effect under section 8 of the Companies Act 1985 (in the case of a statutory water company not registered under Chapter II of Part XXII of the said Act of 1985) shall extend mutatis mutandis for the purpose of convening and regulating separate general meetings of holders of mortgages, debentures or debenture stock and the passing of extraordinary resolutions thereat as if the said holders were members of the company and the meetings were meetings of the company. (6) Where the Secretary of State makes an order under subsection (2) above in relation to any company and it appears to him to be appropriate to do so for the purposes of, or in consequence of, the approval contained in the order, he may by order repeal or amend any local statutory provision. (7) The power to make an order under subsection (2) or (6) above shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament; and an order under subsection (6) above may—

1. (a) make different provision for different cases, including different provision in relation to different persons or circumstances; and
2. (b) contain such supplemental, consequential and transitional provision as the Secretary of State considers appropriate.

(8) Sections 239 and 245 of the Insolvency Act 1986 shall not apply to anything done in connection with or pursuant to the provisions of this section. (9) In this section and section (procedure for replacing borrowing powers) below— debenture" and "extraordinary resolution" have the same respective meanings as in the Companies Act 1985; registered water company" means any statutory water company to which a certificate under section 688 of that Act has been issued (whether before or after the transfer date).").

The noble Lord said: My Lords, in speaking to this amendment I should like also to speak to Amendment No. 120C. It may be recalled that during the Committee stage I moved clauses similar to these. My noble friend Lord Hesketh expressed at that time general sympathy with the aims of the clauses but had some reservations. In the light of those reservations I have since carefully examined the clauses with the assistance of advisers to the Water Companies' Association. The result is now before your Lordships.

I am advised that, as presently drafted, the Bill could leave a statutory water company which converts to a plc in an impossible constitutional position. The Bill provides procedures for a statutory water company to move away from its present constitution based on local acts and orders to a plc structure under the Companies Act 1985. Notwithstanding this, the new plc would still be subject to local statutory provisions governing its borrowings and borrowing powers. It is the interaction of those provisions together with new powers which will have been obtained under the memorandum and articles of association adopted under the provisions of Clause 100 which gives rise to the impossible constitutional position.

These new clauses are intended to rectify that situation by providing a procedure under which a company can make a proposal to its lenders to replace by other provisions the rights and documentation relating to those loans. Any such proposal to lenders would require the approval of each class of lenders affected and give minorities the same rights to apply to the High Court as if they were a member of a statutory water company considering conversion to a plc. The new clauses disapply certain provisions of the Insolvency Act 1986 which were not designed to apply to this sort of situation but which would otherwise place lenders in a position of some jeopardy. If the approval of lenders is obtained and the company so approves by special resolution, the new clauses require an order from the Secretary of State to approve the new provisions and then to repeal the redundant local statutory provisions.

I cannot believe that it is the intention of the Bill to place statutory water companies which wish to convert to plcs in a position of constitutional disadvantage. I therefore hope that these amendments will receive the support of the Government. I commend them to the House. I beg to move.

The Earl of Caithness

My Lords, I am grateful to my noble friend Lord Elliott of Morpeth for taking on board so much of what my noble friend Lord Hesketh said at an earlier stage. My noble friend undoubtedly has some very sound arguments. However, I must say to my noble friend that I still have some important reservations on his proposals. For example, while shareholders are jointly members of the company and it is therefore appropriate to consider changing their rights by majority vote, debenture holders have an individual relationship with the company and it is far from clear that a majority vote should override the rights of minorities unless the debenture holders have individually agreed to accept such voting provisions.

Despite these difficulties, I repeat that my noble friend has some very good arguments which I should like to consider further with him. If we got together, we may be able to resolve the problem. If my noble friend will withdraw the amendments, I shall certainly meet him between now and another stage to see if we can reach agreement.

Lord Elliott of Morpeth

My Lords, I am again most grateful to my noble friend for his reception of this proposal. I shall be more than happy to meet him in the interim. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 120C not moved.]

Clause 101 [Procedure for cancelling resolutions for substituting memorandum and articles]:

Lord Elliott of Morpeth moved Amendment No. 121: Page 110, line 10, leave out from ("value") to end of line 12 and insert ("of the company's issued share capital or issued stock;

() by the holders of not less, in the aggregate, than fifteen per cent., in nominal value, of the issued shares or stock of any class in respect of which a consent to or approval of the proposal to which the resolution relates is required for the purposes of subsection (4)(b) of that section; or").

The noble Lord said: My Lords, in moving this amendment, I wish also to speak to Amendments Nos. 122 and 123. Noble Lords may recall that in Committee I moved an amendment to this clause—Amendment No. 99—which sought to remove the possibility of damaging and long delays in the conversion of statutory water companies to plcs. The clause as originally drafted would have enabled a minority of shareholders to block the conversion process, at least temporarily, even though an overwhelming majority of shareholders had given approval to the conversion proposals. It was that situation which my amendment sought to rectify. I withdrew that amendment following an assurance from my noble friend Lord Hesketh that what I had said would be considered most carefully.

It is following that consideration that I have put down the amendment to line 50. It will enable the court to order an award of compensation if it finds that the interests of a minority have been unfairly prejudiced. Previously its only powers would have been either to set aside the resolution passed by the overwhelming majority of shareholders or to order the purchase of shares, thus delaying the process of conversion. This additional power substantially diminishes that possibility while still enabling the court to set aside a resolution in extreme cases.

My noble friend also undertook at Committee stage that amendments would be tabled to bring the rights awarded to minorities to access to the courts more closely into line with the Companies Act. The amendments to lines 10 and 18 have that effect.

I hope that these amendments will receive the support of my noble friend and I commend them to the House. I beg to move.

The Earl of Caithness

My Lords, the amendments moved by my noble friend Lord Elliott of Morpeth show that if one perseveres one will succeed. It is third time lucky. We are always keen to improve the Bill and we end today's proceedings as we began, by recommending acceptance of the amendment and the two consequential amendments.

Lord Elliott of Morpeth

My Lords, I am most grateful to my noble friend.

On Question, amendment agreed to.

Lord Elliott of Morpeth moved Amendment No. 122: Page 110, line 18, leave out ("under that subsection or for the purposes of) and insert ("for the purposes of subsection (2) or").

On Question, amendment agreed to.

Lord Elliott of Morpeth moved Amendment No. 123: Page 110, line 50, at end insert ("or for the payment of compensation to such members").

On Question, amendment agreed to.

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-nine minutes past eleven o'clock.