HL Deb 22 May 1989 vol 508 cc10-23

3.4 p.m.

The Earl of Arran

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(The Earl of Arran.)

On Question, Motion agreed to.

House in Committee accordingly.


Clause 72 [Performance of sewerage functions by local authorities etc.]:

Lord McIntosh of Haringey moved Amendment No. 340ZA: Page 83, line 26, at end insert— ("Provided that where any relevant authority expresses a desire to carry out sewerage functions in its relevant area the sewerage undertaker shall make arrangements with that relevant authority to discharge the necessary sewerage functions.").

The noble Lord said: In moving this amendment, I should also like to speak to Amendments Nos. 340ZB, 340ZD, 446A and 446B. These amendments all raise the issue of the role of local authorities in carrying out the function of sewerage undertakers. Although to some extent they have a somewhat different thrust from each other, none of these amendments calls into question the basic object of the Bill which is to privatise the sewerage authorities along with the water authorities.

Perhaps I may remind the Committee as briefly as possible of the history of the sewerage undertakings in this country and then go on to explain why we think that these amendments are necessary. In order to do that, I need to go back at least to the Public Health Act 1872 and possibly to a much earlier period. I refer—the Committee will forgive me—specifically and briefly to the sewerage undertakings of our major cities and in particular those major cities which grew up in the 19th century. In the period before that, concentrations of population were such that complicated sewerage undertakings were not necessary. It was with the industrial revolution and the growth of the large industrial cities that it became necessary for sewerage undertakings to act like water undertakings on a very large scale.

This is an issue of public health and it was an issue of public health throughout the 19th century. Throughout that century, continual efforts had to be made by Parliament and by local authorities to secure public health by improving the standards of sewerage undertakings. The quality of urban life depended on having good housing, a clean water supply and a sewerage system that did not simply mean that raw sewage was pumped out from the conduit into the nearest river. It can be argued that the improvement in the quality of life in our big cities owed as much to the improvements in the sewerage system and in public health generally as it did to advances in medical science.

However, what is common to all those advances in public health is that they were undertaken by our local authorities. That was the case right up to and including the two most recent pieces of legislation on water and sewerage. Under the Water Act 1973, when the regional water authorities were set up, agency agreements were set up under Section 17. That meant that the local authorities had responsibility for 100 per cent. of the sewerage functions in our cities and our country as a whole. That was at a time when 25 per cent. of our water undertakings were, as they are now, in private hands. But Section 15 of the 1973 Water Act secured that the district councils should continue to manage the sewerage functions. Indeed, in introducing the Water Act 1983, depite the considerable pressure from the Water Authorities Association, the Government continued with that policy. The noble Lord, Lord Bellwin, who was then the Minister of State at the Department of the Environment, said on 8th March 1983: We have never envisaged any general termination of sewerage agencies. We want them to continue unless there are good reasons why, in specific cases, they should end".—[Official Report,8/3/83; col. 182.]

The result of that Act, as of the 1973 Act, has been that sewerage functions have continued to be carried out by local authorities.

Noble Lords paid some attention in earlier sittings of this Committee to the work of the Monopolies and Mergers Commission when they were discussing the commercial viability and suitability of statutory water companies. In November 1982, the Monopolies and Mergers Commission issued a report on sewerage function of the Anglian Water Authority and the North West Water Authority. The water authorities had recommended to the commission that all existing Section 15 arrangements should be ended by legislation. They thought that it would be cheaper if done directly rather than by working through district councils acting under agency agreements.

The Monopolies and Mergers Commission ruled firmly against those proposals and the government at the time—a government of the same political persuasion as this Government—ratified the ruling in the Water Act 1983. So the historical evidence, extending from the 19th century until right up to date in the 1980s, including the policies of the Government before the introduction of this Bill, has been that sewerage functions are best undertaken by local authorities. There are very good reasons; it is not pure chance. The local authorities have so many responsibilities in the area of public health, environmental protection, rodent control and so on, that to separate the sewerage function (which is a critical element in public health) from those other local authority functions would be an absurdity.

Local authorities have responsibility for dealing with the wide range of problems which might occur given a collapse in the sewerage system. There could be public health problems; there could also be traffic problems when, as often happens, sewers collapse underneath public roads. Local authorities have many other functions closely related to sewerage functions: housing, industrial and commercial development, building and development control, highway drainage and so on. If there were to be a different agency carrying out the sewerage work, then there would be overlapping and repetition.

Let us take a specific example: flooding from sewers. That is the nastiest kind of flooding. It causes great distress and inevitably involves housing and social services staff, the emergency fire service, which is responsible for pumping out flooded premises, and other local authority services from a wide range of departments. Another important reason for involving local authorities is that they are accessible to the public. It is important that all incidents of failure of the sewerage system should be reported to the local authority. It is important that people in a local authority area should know what is going on and should have an opportunity to report defects in the system which are apparent to them but not necessarily important to the sewerage undertakers.

So the case for local authorities, as a general rule, continuing to be the agencies for the sewerage function which is to be privatised under this Bill is overwhelming. In Amendment No. 340ZA we provide that if any local authority, expresses a desire to carry out sewerage functions in its relevant area the sewerage undertaker shall make arrangements with that relevant authority to discharge the necessary sewerage functions".

The Committee may feel that such an open-ended commitment to local authorities' right to carry out sewerage functions if they want to, whether or not the sewerage undertakings want them to do so, is a more radical change than might be desired. I hope that what I have said in support of the role of local authorities as regards sewerage is sufficient argument for it. However, just in case it is not, these Benches have prepared in Amendment No. 340ZB an alternative means of securing the continued involvement of local authorities. Under the amendment the undertakers would control their expenditure and costs and the local authorities would be required to give a commitment that they are willing and able to do all the necessary work to meet the requirements of the sewerage undertaker. In other words, we are trying to strengthen the power to secure the local authority position but at the same time not infringe in any way, in spirit or by letter, the intention of the Government in privatising the sewerage function. In contrast to the previous amendment, this is certainly not radical and certainly not threatening. It reflects the nature of the sewerage business and its relationship with local authorities.

Amendment No. 340ZD is simply a consequential amendment which deals with the situation where the boundaries of the local authorities do not coincide with the boundaries of the sewerage undertakings and where it is necessary to go outside them on certain occasions.

Sewerage is not the most politically glamorous of all the subjects we deal with in this Chamber, but it is one that is very close to the lives of all the people of our country. It is of great importance to public health and to the quality of the lives of our people. Any change to a system which has been built up successfully over a period of more than a century deserves to be considered extremely carefully and justified very fully

I know that the Government wish to see a substantial involvement of local authorities in carrying out sewerage functions on an agency basis. They said so on a number of occasions during the Bill's passage through another place. In these amendments we propose that there should be real strength behind that commitment and a real opportunity for local authorities to provide the service that we and they know they can provide. I beg to move.

3.15 p.m.

The Parliamentary Under-Secretary of State, Department of the Environment (Lord Hesketh)

I am in slight confusion. In the grouping list, which was changed, Amendments Nos. 340ZA, 340ZB and 340ZD were placed on their own. In fact the noble Lord, Lord McIntosh, said that he would speak to two other amendments, which I missed out on.

Lord McIntosh of Haringey

I must apologise to the Committee. I said that I would speak to two other amendments and I did not. I wished to speak only to Amendments Nos. 340ZA, 340ZB and 340ZD.

Lord Hesketh

I apologise to the noble Lord, Lord McIntosh, for having misinterpreted him. These three amendments bring us to a series of amendments on this clause which try to ensure a continuing role for local authorities in sewerage work. I should say, by way of introduction, that we do not differ at all from the proposers of these amendments in wishing to see a continuing role for local authorities in this field where they provide a cost-effective service. I am concerned, however, with the rigidity which these amendments would introduce into arrangements between sewerage undertakers and local authorities.

I shall deal first with Amendment No. 340ZA. The purpose of this amendment is to oblige the undertaker to enter into sewerage agency arrangements with the relevant local authority where that authority expresses a desire to carry out the sewerage function. It would take us back to the type of sewerage arrangements set up by the Water Act 1973 where a water authority was virtually obliged to use a local authority as an agent whether the local authority could provide an efficient service or not.

Moreover, one of the purposes of this Bill is to place in the private sector those activities which in the past have had to be borne by the public sector. 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. That, after all, is precisely why we have included this clause in the Bill. But these amendments are obviously designed to try to force the hand of the undertaker, and go against the spirit of the clause which aims to allow both parties as much freedom as possible.

Amendment No. 340ZB is an alternative amendment but I very much regret that it is in the same spirit as the previous one. This amendment would force the undertaker to use the local authority as an agent if the local authority could commit itself to performing what is described as, the appropriate level of work necessary", within the authority's budget for that work. I do not think that this is an entirely satisfactory justification for yoking the undertaker to the local authority. We want undertakers to use the best agent for their purposes—which can of course include doing the work themselves—and we have no desire to prevent this.

That brings us to Amendment No. 340ZD which refers to and is entirely dependent on Amendment No. 340ZB. It enables the undertaker to enter into appropriate arrangements jointly with local authorities where there is more than one authority in the relevant area in the circumstances envisaged in that amendment.

As I have explained, we cannot accept the arrangements which the first two amendments would seek to impose on sewerage undertakers. They are quite out of keeping with our intentions to extend the options open to undertakers. I hope that the Committee will note that we have also extended the options open to local authorities by accepting an amendment at an earlier stage of the Bill which will enable local authorities to operate as agents in parts of adjacent local authority areas.

The noble Lord, Lord McIntosh, also argued that because local authorities are the primary point of contact for public health issues they should retain sewerage agency work. If this argument were correct, no re-organisation or improvement of any essential services would be possible. All bodies with responsibilities for public health and safety would have an appropriate set of contacts and procedures to deal with emergencies. I cannot see that the need for these provides any conclusive argument for local authorities to have a presumptive right to sewerage work.

Perhaps I should add here that the last Labour Government, in Cmnd. Paper 6876 The Water Industry in England and Wales: the Next Steps published in 1977, recognised the weaknesses of the sewerage agency arrangements set up under the 1973 Act. They proposed that water authorities should have a permissive power rather than a duty to make arrangements. This change was implemented in the Water Act 1983. Perhaps there is some confusion in the Labour Party on that point. I urge Members of the Committee to reject these three amendments.

Lord Nugent of Guildford

Perhaps I may add one word of support for my noble friend. Discussion has been continuing ever since the 1973 Act as to whether the balance was right between the water authorities and the local authorities. The discussion is understandable for the very good reasons that the noble Lord, Lord McIntosh, put so clearly before us. There are many local responsibilities of the local authority which key in with the sewerage function.

On the other hand, one must not forget that at the end of the day it is the regional water authority as of now and the water company in the future which are responsible for the discharge of sewage. Therefore the existing balance which leaves the decision with the company of the future—the water authority as it is now—is about right. It would be a mistake to throw the balance out by strengthening the position of the local authority. I am sure that the noble Lord, Lord McIntosh, is aware that, while these agency arrangements work very well and to the benefit of both parties, they have not always been so good. Some local authorities have not been satisfactory as agents and have given a good deal of trouble to the water authorities in carrying out their work. That stresses the point that the sewerage undertaker must be the ultimately responsible body which has the final decision.

There is one final point on technology. On sewerage, technology is advancing rapidly. I am sure that the noble Lord, Lord McIntosh, is aware of it. With the new trenchless technology, holes in the road can be made to a large extent without disturbing the surface. The apparatus for such technology is immensely expensive. Therefore few local authorities will be able to set it up. However, we are trying to foresee beyond the time that problems are settled by men with picks and shovels to when it is possible to repair or recondition without resurfacing with the fearful traffic delays that that involves. That is a development that we would welcome.

It is most important that the sewerage authority should have the ultimate decision. I would hope to see the balance maintained for the agency roughly as it now is. That has not worked badly in all the circumstances. I believe that it would be a mistake if the noble Lord, with his customary forcefulness, presses his amendment. I hope that he will not do so.

Lord McIntosh of Haringey

The Minister and the noble Lord, Lord Nugent, have spoken more against Amendment No. 340ZA—which would give the local authorities a prescriptive right to carry on the agency agreements—than Amendment No. 340ZB. In abandoning my argument for Amendment No. 340ZA, perhaps I may remind the Committee what Amendment No. 340ZB states. I shall then put it in the context of what is stated in Schedule 25 to the Bill. Amendment No. 340ZB states: In deciding whether to enter into arrangements with a relevant authority"— that is the local authority— a sewerage undertaker shall (a) determine the appropriate level of annual planned expenditure necessary to ensure the proper discharge of its sewerage functions . . . and (b) seek a commitment from the relevant authority that it is able to perform the appropriate level of work". Three things need to be said about that. First, it is the sewerage undertaker that makes the decision under Amendment No. 340ZB and not the local authority. In other words, the incentive and final decision rest with the sewerage undertaker, as I know the Government wish.

Secondly, the sewerage undertaker retains control over the expenditure level—the investment level—that is considered to be necessary and is therefore exercising its managerial functions as it should do according to the Government's prescription for privatisation. I am not implying any support for the concept. I am saying that that is what the Government wish, and our amendment enables the undertaker to do so. Thirdly, the sewerage undertaker has the ability to demand from the local authority a firm commitment that it can and will carry out the appropriate level of work. Only under those circumstances is it proposed that the sewerage undertaker should enter into appropriate arrangements with the local authority.

I remind the Committee that all of this will not happen immediately. There is plenty of time for the scheme to be worked out. Schedule 25 states that the existing agency arrangements shall not be discontinued without reasonable notice. It suggests that they should continue until 1st April 1992. We are therefore a long way from any dramatic change in the relationship between local authorities and sewerage undertakings. We are proposing a rational and modest protection for local authorities: that they will be considered on a business-like basis by the sewerage authorities when the agency arrangements are reviewed in due course. That argument has not been effectively countered by the Government.

If the Committee will permit me to do so, having debated these three amendments together, I beg leave to withdraw Amendment No. 340ZA. I shall seek the Commmittee's decision on Amendment No. 340ZB.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 340ZB: Page 83, line 26, at end insert— ("1A) In deciding whether to enter into arrangements with a relevant authority in accordance with this section a sewerage undertaker shall—

  1. (a) determine the appropriate level of annual planned expenditure necessary to ensure the proper discharge of its sewerage functions in the relevant area and
  2. (b) seek a commitment from the relevant authority that it is able to perform the appropriate level of work necessary to secure the discharge of all the relevant functions within the planned expenditure level determined under paragraph (a) above
and where the relevant authority is able to provide such a commitment in writing the sewerage undertaker shall enter into appropriate arrangements with that relevant authority.".

3.30 p.m.

On Question, Whether the said amendment (No. 340ZB) shall be agreed to to?

Their Lordships divided: Contents, 74; Not-Contents, 117.

Addington, L. Lockwood, B.
Amherst, E. Longford, E.
Ampthill, L. McGregor of Durris, L.
Ardwick, L. McIntosh of Haringey, L.
Bonham-Carter, L. Mais, L.
Boston of Faversham, L. Mason of Barnsley, L.
Broadbridge, L. Mayhew, L.
Bruce of Donington, L. Meston, L.
Carmichael of Kelvingrove, L. Milner of Leeds, L.
Mishcon, L.
Cledwyn of Penrhos, L. Molloy, L.
David, B. Nicol, B.
Davies of Penrhys, L. Northfield, L.
Dean of Beswick, L. O'Neill of the Maine, L.
Dormand of Easington, L. Paget of Northampton, L.
Evans of Claughton, L. Peston, L.
Ewart-Biggs, B. Phillips, B.
Fitt, L. Ponsonby of Shulbrede, L. [Teller.]
Foot, L.
Gallacher, L. Rochester, L.
Gladwyn, L. Ross of Newport, L.
Glenamara, L. Sainsbury, L.
Gregson, L. Serota, B.
Grey, E. Shackleton, L.
Grimond, L. Shepherd, L.
Hanworth, V. Soper, L.
Hayter, L. Stallard, L.
Hirshfield, L. Stewart of Fulham, L.
Hooson, L. Stoddart of Swindon, L.
Houghton of Sowerby, L. Strabolgi, L.
Hunt, L. Taylor of Gryfe, L.
Irving of Dartford, L. Taylor of Mansfield, L.
Jeger, B. Tordoff, L. [Teller.]
John-Mackie, L. Underhill, L.
Kilbracken, L. Wallace of Coslany, L.
Kinloss, Ly. Walston, L.
Leatherland, L. White, B.
Listowel, E. Williams of Elvel, L.
Allerton, L. Ferrers, E.
Annaly, L. Foley, L.
Arran, E. Fraser of Kilmorack, L.
Atholl, D. Gainford, L.
Auckland, L. Gibson-Watt, L.
Balfour, E. Gridley, L.
Belhaven and Stenton, L. Grimthorpe, L.
Beloff, L. Hailsham of Saint
Belstead, L. Marylebone, L.
Bessborough, E. Halsbury, E.
Birdwood, L. Havers, L.
Blatch, B. Henley, L.
Blyth, L. Hesketh, L.
Borthwick, L. Hives, L.
Boyd-Carpenter, L. Hood, V.
Brabazon of Tara, L. Hooper, B.
Brougham and Vaux, L. Hylton-Foster, B.
Butterworth, L. Ironside, L.
Caithness, E. Jenkin of Roding, L.
Campbell of Alloway, L. Johnston of Rockport, L.
Carnock, L. Kaberry of Adel, L.
Cawley, L. Killearn, L.
Clitheroe, L. Kimball, L.
Constantine of Stanmore, L. Long, V.
Cottesloe, L. Mackay of Clashfern, L.
Cox, B. Macleod of Borve, B.
Cullen of Ashbourne, L. Macpherson of Drumochter, L.
Daventry, V.
Davidson, V. [Teller.] Malmesbury, E.
De Freyne, L. Mancroft, L.
Denham, L. [Teller.] Manton, L.
Donegall, M. Margadale, L.
Eden of Winton, L. Marley, L.
Effingham, E. Maude of Stratford-upon-Avon, L.
Ellenborough, L.
Elliott of Morpeth, L. Merrivale, L.
Faithfull, B. Mersey, V.
Middleton, L. Saltoun of Abernethy, Ly.
Milverton, L. Sanderson of Bowden, L.
Mountgarret, V. Seebohm, L.
Murton of Lindisfarne, L. Sempill, Ly.
Nugent of Guildford, L. Skelmersdale, L.
O'Brien of Lothbury, L. Somers, L.
Orkney, E. Stanley of Alderley, L.
Orr-Ewing, L. Strange, B.
Oxfuird, V. Strathcarron, L.
Pender, L. Strathclyde, L.
Penrhyn, L. Strathspey, L.
Porritt, L. Sudeley, L.
Pym, L. Suffield, L.
Quinton, L. Swansea, L.
Radnor, E. Terrington, L.
Rankeillour, L. Teviot, L.
Reigate, L. Thomas of Gwydir, L.
Renton, L. Thurlow, L.
Renwick, L. Trumpington, B.
Richardson, L. Vaux of Harrowden, L.
Romney, E. Westbury, L.
Russell of Liverpool, L. Wolfson, L.
St. Davids, V. Wynford, L.

Resolved in the negative, and amendment disagreed to accordingly.

3.38 p.m.

Lord McIntosh of Haringey moved Amendment No. 340ZC: Page 83, line 26, at end insert— ("(1A) In determining whether to enter into arrangements with a relevant authority in accordance with this section a sewerage undertaker shall ensure that the relevant authority is notified of any decision to seek tenders for any work connected with the discharge of its sewerage functions and in any event shall ensure that design work comprising forward planning of schemes, preparation of contracts, and site supervision and work incidental and ancillary thereto shall be subject to a tendering process which shall include participation by the relevant authority if it so wishes. (1B) Any tender for design work sought under subsection (1A) above shall be for a minimum period of five years and the procedure for seeking such tenders shall be determined by the Secretary of State and specified in Regulations.").

The noble Lord said: I hope that the Committee will not feel that we are going over the same ground. This is a different amendment; it is significantly more modest. The Government did not argue against my previous amendment and the Committee did not care for it. I hope therefore that both the Government and the Committee might find this amendment more acceptable. I am speaking also to the amendment of the noble Lord, Lord Ezra, Amendment No. 340A and to Amendments Nos. 346A and 346B.

All we are asking is that local authorities should be notified of a decision to put sewerage work out to tender so that they can be involved in the process. The amendment specifies that certain kinds of work shall be put out to tender—design work, forward planning of schemes, preparation of contracts, site supervision and work incidental and ancillary to design work. We suggest that this kind of work should be tendered for a minimum of five years. And we propose that the Secretary of State should be able, through regulation, to specify the procedure for issuing tenders.

The Government supported by the noble Lord, Lord Nugent, have said that they wish, broadly speaking, to see a continuation of the division of responsibility as it is now between the regional water authorities and the local authorities. The noble Lord, Lord Nugent, was fairly precise. He thought that the same kind of balance ought to pertain after privatisation.

Will the Minister give a guarantee that local authorities will have a right to tender? If he is prepared to give that guarantee, then some of the justification for the amendment disappears. If it is intended that the private sector shall have the opportunity to tender for work, surely local authorities should have the same right in the areas in which, perhaps for many years, they have provided a service.

In the amendment we suggest that local authorities are particularly appropriate to tender for the design work, contract preparation and site supervision. In asking for the guarantee we should be happy to accept it from the mouth of the Minister rather than seeking the view of the Committee. I hope that it will be felt that the amendment is in line with government policy; and moreover, that it will be felt that it provides a measure of protection for local authorities so that they will at least be considered when the tendering process is undertaken. The tendering process should include them.

Amendment No. 446B, tabled in my name, is concerned with the continuation of employment rights when agency arrangements are terminated by the contractor. That means that perhaps some local authority staff will lose their jobs as a result of the termination of the tendering and agency process and they may not be offered jobs by the successor to the local authority as agents for the sewerage work. The amendment proposes that such people shall be eligible to receive compensation in accordance with regulations made by the Secretary of State.

The matter arises in respect of almost every proposal for privatisation. It is a matter about which the trade unions concerned have a right and proper concern for the interests of their members. I hope that the Government will consider that it is in line with the practice which has been adopted in previous privatisation proposals. Also, I hope that there will be no difficulty about securing the ability of the Secretary of State to make regulations—which is all we ask—to secure that compensation will be available for those who lose their jobs as a result of the privatisation process. I beg to move.

Lord Renton

Is it really necessary for the Committee to write such details into this already lengthy statute? If the seeking of tenders is to be published, the local authority has only to look out for the advertisement and to tender. If tenders are not to be published, I believe that it will be simple for the local authority to let the sewerage undertaker know that it would like to tender if the need for tenders should arise. Surely it is better to leave it to those two alternatives than to have to write this further detail into the Bill.

Lord Ross of Newport

It may be the case that Amendment No. 340A will appeal to the noble Lord, Lord Renton. I wish to speak to that and also to Amendment No. 446A. If the sewerage undertaker refuses to continue with an agency agreement, it should at the very least be required to show why it has taken the decision. The decision should be justified, first, in terms of proper value for money—and that should appeal to a cost-conscious government. Secondly, the decision should be justified in terms of the advantages and disadvantages of the sewerage functions being carried out either by the undertaker inhouse, if it does not wish to go to the district council, or of putting them out to an outside contractor. In Amendment No. 340A we ask that the local authority should be told why the undertaker wishes to do the job himself or put it out to an outside contractor. In a subsequent amendment we ask that the local authority should be allowed to tender.

That seems to be only common sense. I listened with great interest to what was said by the noble Lord, Lord Nugent of Guildford. I understand that approximately 85 per cent. of the district councils carry out agency work. Therefore, there must be some which do not. However, they have all the plans. It will lead to an appalling mess if undertakers are to be allowed to set up their own inhouse contracting teams and if they demand from local authorities all the plans of the sewers, and so forth. The job has been carried out by the local authorities in one way or another for over a century. They are the natural people to do it. Obviously, it is right that they should do it as cheaply and efficiently as possible, and that is what the amendment is about.

Amendment No. 446A has been moved at the suggestion of the Association of District Councils. We are saying that 1992 is a little too early to get all the act together, and that the time should be extended to 1995. If they so wish, the water authorities can give notice of termination in April 1993, and that will come into effect in April 1995.

For the reasons I have mentioned concerning the difficulties about the plans for the sewers and so forth, it is only common sense to allow more time for the authorities to put their house in order. I shall be interested to hear the Minister's reply to the suggestion.

3.45 p.m.

Lord Hesketh

Amendment No. 340ZC requires the undertaker to notify the authority of any decision to seek tenders for work connected with the discharge of its sewerage functions. I shall deal with it together with Amendment No. 340A which requires the undertaker to give the authority an opportunity to tender for those functions where a sewerage undertaker refuses to enter into an arrangement with a local authority which that authority has indicated that it wishes to retain or to undertake for the first time.

I assume that, in drawing up these amendments, Members of the Committee had in mind the Government's support for certain public sector activities being put out to tender. This initiative, however, has been introduced because there are not satisfactory mechanisms to encourage efficiency in all areas of public sector activity. Tendering in these areas provides a spur to greater efficiency through allowing competition. But the sewerage undertakers will by definition be in the private sector where the profit motive will give the necessary incentive to efficiency. We cannot see that any practical purpose would be served by requiring an undertaker to seek a tender from an authority which, as Amendment No. 340A suggests, the undertaker does not intend to employ. It would make no more sense to oblige the undertaker to notify a local authority that work was being put out to tender, as Amendment No. 340ZC would require. Undertakers must be free to seek tenders from whatever parties they wish. As I said in replying to earlier amendments today, there is no doubt that many undertakers will be keen to continue existing arrangements with local authorities.

The effect of the next amendment, No. 446A, which relates to paragraph 15 of Schedule 25, is to ensure that any notice to terminate, which sewerage undertakers serve on local authorities who currently act as their agents, could not take effect before 1st April 1995, instead of 1st April 1992 as the Bill proposes.

The effect of the provisions of Schedule 25 is that, unless otherwise agreed, any termination arrangements in existing agreements will continue to apply to agency staff; so from that point of view there is no case for postponing the date. I should be very reluctant to believe that where there are to be changes, local authorities' agents need the extra three years to prepare to relinquish their agency functions. They have already had three years or so to prepare for possible changes, because our consultation paper which set out our proposals for the sewerage agency arrangements appeared in 1986. They still have another three years to prepare before 1992. In allowing this period of time we have had full regard to the need to ensure that transitional arrangements are handled sensitively. Any undertaker who does give notice to a local authority agent will be responsible for ensuring that the new arrangements work properly from day 1, so notice will certainly not be lightly given. In the circumstances, I hope that noble Lords will agree that this amendment constitutes delaying the day.

The last amendment, No. 446B, has the effect of making local authority sewerage agency staff eligible for compensation where the agency arrangements are terminated by the undertaker and where the undertaker does not offer them employment. It could presumably affect either existing agency arrangements or new arrangements entered into under Clause 72 of the Act. However, in neither case does the amendment serve a useful purpose.

Clause 72, which enables authorities to enter into agency arrangements with undertakers, specifically provides that these arrangements may contain: any such provision as may be agreed", between the parties. So any authority negotiating a new arrangement can itself decide what compensation provisions it wants. As I have already said, the clause is designed to give both parties as much freedom as possible. We certainly do not wish to hamper them by imposing restrictions of this nature.

That leaves existing arrangements between undertakers and authorities. I have already mentioned that the termination provisions in existing agreements will continue to apply to agency staff. That is only fair to all parties. The extent to which undertakers provide compensation is covered by these freely negotiated agreements. Payment of compensation by local authorities is covered by local authority conditions of service. There is no role here for the Secretary of State, and we do not wish to impose standard compensation provisions on the parties. For those reasons, I hope that the Committee will resist these amendments.

Lord McIntosh of Haringey

The noble Lord, Lord Renton, made an effective intervention against only one part of my principal amendment. If my amendment said only that local authorities had to be notified of any tendering arrangement, I should agree with him that it is their responsibility to read the newspapers and to find out whether there is a tendering arrangement in their area and to tender if that is felt necessary. If they fail to do that, it is rather their own fault. However, that is not only what the amendment says. It states further that in any event the sewerage undertaking shall ensure: that design work comprising forward planning of schemes, preparation of contracts, and site supervision and work incidental and ancillary thereto shall be subject to a tendering process which shall include participation by the relevant authority if it so wishes". That goes slightly further than the part of the amendment to which the noble Lord refers and I believe that he would agree that he might not like that but it is not redundant in the Bill.

Lord Renton

Surely it comes to this: that the two parts of the noble Lord's amendment are interdependent. I seem to have turned his amendment into a sort of curate's egg.

Lord McIntosh of Haringey

It is necessary that the relevant authorities should be notified of the decision in order to achieve the full and proper tendering process which we require, particularly for design work and forward planning—and that is something which I should have thought would be attractive to Members of the Committee on the Government Benches. The result of that seems to me coherent and not at all a curate's egg.

Also subsection (1B) of my amendment proposed that the tender for the design work should be for a minimum period of five years. Again, I believe that that is justifiable in business terms and it does not require any political ideology to see the justification for it. You clearly do not want to go changing the design work and forward planning of a sewerage system at frequent intervals. You want to have a contract which is long enough to take effect in a business that is as capital intensive as the sewerage business.

Therefore, I do not feel that Amendment No. 340ZC is either redundant or is contrary to the spirit of the Bill. However, the Government seem to have set their face against it and I very much regret that.

As regards Amendment No. 446B, the Government seem to think that agreement between the local authority holding the former agency and the sewerage undertaking is a satisfactory protection for those members of staff who will lose their jobs. I simply point out that there is an inevitable conflict of interests between the sewerage undertaking reallocating the agency contract and the previous agent. The sewerage undertaking is concerned to save as much money as possible and the local authority, quite reasonably, is concerned to protect the interests of those members of its staff losing their jobs. I do not believe that compensation by agreement under those circumstances makes any sense whatever. This is a matter to which we may have to return at a later stage, but in the meantime, for the reasons suggested, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Belstead

I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.