HL Deb 22 May 1989 vol 508 cc28-71

4.12 p.m.

House again in Committee on Clause 72.

[Amendments Nos. 340ZD and 340A not moved.]

Lord Ross of Newport moved Amendment No. 340B: Page 83, line 45, at end insert— ("(4A) Where a sewerage undertaker refuses to enter into an arrangement with a relevant authority to carry out on behalf of the undertaker such of that undertaker's sewerage functions which the relevant authority has indicated that it wishes to retain or to undertake for the first time, the sewerage undertaker shall publish the reasons for its refusal, and in so doing, shall make reference to a comparison, based on the criterion of value-for-money, of the relative ability of the sewerage undertaker and the relevant authority to carry out the sewerage functions.").

The noble Lord said: We are trying another refrain on the same theme as was being pursued before we adjourned for the Statement to be taken. Before I deal with the amendment itself perhaps I may say that I am sure Members of the Committee appreciate that local authorities and water undertakers are inexorably linked in all ways. It is normally the district council that is the planning authority and it is that authority that will want to bring land into use and have houses built besides having sewers laid. Therefore there must be the closest co-operation between the water undertakers and local authorities. As regards this amendment we are being consistent, because we suggested it in an earlier amendment, which I believe was discussed the week before last, that some of the work that needed to be done should go out to tender.

In this amendment we are saying that where undertakers decide not to continue on an agency basis with the local authority they should publish their reasons for so doing. In addition, they should also make reference to the cost comparisons so that the public will know that the undertakers are doing this work in the most efficient and cost-effective way. The public will want to know why it is that local authorities are not being employed. That is perfectly fair and a statement can be made to that effect. In addition some indication of the difference in costs should also be made public. I beg to move.

Lord Hesketh

Amendment No. 340B would have effect where a sewerage undertaker refused to enter into an arrangement with a local authority which wished either to retain the agency function or to undertake it for the first time. It is an alternative to Amendment No. 340A and requires the undertaker to publish the reasons for its refusal, with reference to a value-for-money comparison of the relative ability of the undertaker and the authority to perform those functions.

I must stress that the Bill ensures that the undertakers will be answerable to the Secretary of State for failure to meet specified standards of service. Undertakers, who will be limited on the charges they can make, will have every incentive, when considering how to deliver these standards, to base their decisions on the grounds of efficiency and value for money. Nothing would be achieved by requiring them to publish their reasons for not choosing to use a local authority as sewerage agent. The amendment itself does not require any action to flow from the publication of this information. For this reason I urge the Committee to reject the amendment.

Lord Ross of Newport

I am not surprised by that answer. However I do not believe that the Government are being consistent in their attitude to the public or the private sector. I believe that when the Government privatise this industry some of the authorities should be obliged to go out to tender. I did not expect a different answer and therefore I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 340C: Page 84, line 32, at end insert— ("For the purposes only of section 1 of the Local Authorities (Goods and Services) Act 1970 the definition of a public body shall include a sewerage undertaker.").

The noble Lord said: This amendment does not in any way go over the ground that has already been covered as regards existing amendments. It seeks to make a specific change to the Local Authorities (Goods and Services) Act 1970 in order to accommodate the possibility that, even under this clause, as it has now been agreed, the local authorities will be able to take on the role of sewerage agent for the sewerage undertakers. Section 1 of the 1970 Act allows local authorities to enter into contracts with other local authorities and public bodies. As regards those bodies it allows them to supply goods and materials; administrative, professional and technical services as well as vehicles, plant and associated staff and to carry out maintenance works. If the agency agreement is to continue after privatisation, then local authorities must have the ability to provide those services trading with private bodies, as the sewerage undertaking plcs will be. At the moment it would be ultra vires for them.

The amendment is very narrowly phrased. It refers only to the functions under subsection (1) of the clause and it does not seek to open up a whole new range of opportunities for local authorities. We argue that this amendment is consistent with the Government's intention and it should not in any way endanger the rights of the sewerage undertakers who will be formed under the Bill. It regularises the position of local authorities who, under the conditions of Clause 72, in the end continue as agents for the sewerage undertakers. I beg to move.

Lord Renton

Is not this amendment rather restrictive? For many years I have had a metered water supply and that is more common in rural places than elsewhere. Next door to me is a farm where the water is metered in several different places and in several different ways. Amendment No. 348A is the operative one and the amendment actually being moved by the noble Lord is merely a paving amendment.

Lord McIntosh of Haringey

I believe that the noble Lord is under some misapprehension. I am moving only Amendment No. 340C. Amendment No. 348A is grouped with Amendment No. 345ZA.

Lord Renton

I am sorry, I misheard.

Lord Hesketh

We now reach Amendment No. 340C which enables local authorities, through a widening of a definition of public bodies under the Local Authorities (Goods and Services) Act 1970, to enter into arrangements to provide all water and sewerage undertakers with goods or services or to carry out works and maintenance in connection with land or buildings for which the undertaker is responsible.

If this amendment had any useful purpose, it would have been in relation to the clauses about the role and functions of sewerage undertakers. Placed in Clause 72, it is not relevant, because subsection (2) of the clause plainly states: Arrangements entered into for the purposes of this section may contain any such provision as may be agreed between the relevant authority and the sewerage undertaker". Local authorities which are agents can exercise enacted powers on the undertaker's behalf. When the clause itself ensures that there is no restriction on the form of sewerage agency agreements, an amendment aimed at removing the restrictions is not necessary. It is for this reason that we ask the noble Lord to withdraw his amendment.

Lord McIntosh of Haringey

I am grateful for that explanation. Is the Minister saying that the restrictions of Section 1 of the Local Authorities (Goods and Services) Act do not apply not just in Clause 72 but elsewhere in the Bill? In other words, is he saying that no danger arises from conflict between this Bill and the 1970 Act?

Lord Hesketh

I specifically referred to this clause and to the arrangements, and not to other clauses.

Lord McIntosh of Haringey

Is the Minister able to give a comparable assurance for other parts of the Bill? I noted carefully that he referred only to Clause 72, which is why I am raising this question now and giving him time to obtain an answer.

Lord Hesketh

I can go no further than repeat exactly what I said before. It is a reference purely to this clause.

Lord McIntosh of Haringey

Will the noble Lord therefore be good enough to write to me and tell me whether there is any potential for conflict between the 1970 Act and this Bill? Will he do so in time to allow me, if necessary, to move another amendment at a later stage? On that understanding, which I wish to record in Hansard as being given by the Minister, I thank him for his explanation about Clause 72 and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 72 agreed to.

Clause 73 agreed to.

Schedule 9 [Control of Exercise of Trade Effluent Functions in certain Cases]:

[Amendments Nos. 341 to 345 had been withdrawn from the Marshalled List.]

Schedule 9 agreed to.

Clause 74 [Powers of undertakers to charge]:

Lord Gallacher moved Amendment No. 345ZA: Page 85, line 1, after ("charges") insert ("in accordance with section 77(1A) below").

The noble Lord said: On behalf of my noble friend Lord McIntosh of Haringey, I wish to move Amendment No. 345ZA and speak at the same time to Amendment No. 348A. Amendment No. 345ZA is by way of a paving amendment. The key intention is contained in the words of Amendment No. 348A. We are here concerned with the question of metering. The effect of Amendment No. 348A, if it were accepted by the Committee, would be as follows: In determining any such charges, every undertaker shall offer to each domestic consumer at least one option for arrival at such a determination which does not entail measurement by volume of water supplied to, or of effluent discharged from any premises".

As the Bill stands, under Clause 74(3) the public companies to be set up under the Bill will be allowed to, adopt such methods and principles for the calculation and imposition of the charges, as appear to the undertaker to be appropriate".

There are two qualifiers to this power. Water meters will be available on request to individuals, which is the case at the present time, and charges cannot be fixed by reference to the rateable value of a property after 31st March 2000. In effect the new water companies will be able to decide how they charge for water. In some areas it seems likely that there will be a switch to universal metering. Not all companies will want to switch to metering, however. For example, the Welsh Water Authority has said that it would prefer a flat rate charge, rather like a licence fee.

Our concern with the principle of metering, which, as I have said, is likely to be the method chosen by the plcs for charging, is that it will bear disproportionately hard on those members of the community who have to exist on low incomes. Many such people draw benefits of one kind or another. There are also people in employment who draw benefit. The Government's proposal to abolish wages councils will remove from a very large section of the working population the protection which they currently enjoy as regards minimum wage rates. If enacted one can expect a large increase in the number of people who will be consumers of water but who will not be protected as regards wages.

In addition, all the available information—I think this is common ground—shows that there is likely to be a substantial increase in the price of water both in money terms and in real terms. I do not believe there is any dispute that the requirements which are to be placed on the plcs are such that they will need substantially to increase their charges. To that extent metering will reflect accurately the costs which have to be borne by the users of water. We are of the opinion that some protection is necessary in these circumstances because very often people in low income groups are substantial users of water. They may be families with fairly large numbers of children or families which, as a result of handicaps of one kind or another, also require to use substantial amounts of water. For these reasons we believe that some form of protection is necessary.

At the present time 99 per cent. of consumers pay for their water through the rating system. That system will end next year when the community charge is introduced. Most people who have been asked about this subject are of the opinion that the rating system is a fair basis of payment for water. Any switch from rating to metering, leaving aside the cost of installing the meter, which is likely to be borne by the consumer over the long term, is likely to bear disproportionately hard on those people least able to bear it.

There are also technical problems. First, leaks may have an effect on the meter reading. I understand that the water authorities will accept any difference arising from a leakage once from the company's main to the consumer but that thereafter, if there are substantial leaks resulting in an increase in water consumption as recorded by the meter, the consumer will have to pay. This introduces, under a system of metering, a new hazard for the consumer and one against which we feel he or she should be protected.

In addition, the health dangers which may arise if the consumer decides to economise by underconsuming water are fairly considerable. In recent months we have been made well aware of the scares concerning food hygiene, and of the advice given by the authorities to consumers in the matter of domestic hygiene. They have been told that all surfaces must at all times be clean; and, for example, they must not mix uncooked food with cooked food. The whole of the emphasis is that in the home at least protection for consumers is bound up with the extent to which consumers are able to practice good hygiene methods at all times. For people in low income groups this may not be consistent with a system of metering.

The experience in this country of charges by metering for domestic consumers is minimal. I understand that in the town of Malvern it has been in use for more than 100 years. However, in the vast majority of areas no such experience exists, and such experiments as have taken place of which we have any information do not lead us to believe that it is likely to be a satisfactory method applied universally.

In Scotland I am told that a water poll tax operates, although given the well documented problems of the polls tax we are not suggesting that this course is necessarily to be recommended. In Wales the single standard property charge is to apply. In the North-East, the Northumbrian area water consumers panels have proposed a banded property charge. Any property charge would of course have to be structured in such a way as to avoid falling foul of Clause 78. Therefore, looking at the problem in the round so to speak we feel that there is a case for giving the consumer an option other than a meter and that would be the purpose that we envisage under Amendment No. 348A.

I hope therefore that the Minister will be able to look sympathetically at this issue, which, as I have said, is of concern to low income groups. I also hope that he will be able to give us a response which encourages us to believe that there is a solution other than that which is currently in the Bill. I beg to move.

4.30 p.m.

Lord Renton

The noble Lord has made a very informative speech for which we should be grateful. He has convered an interesting and quite controversial topic in a succinct way. I tend to agree with him that for many people—that is, people of modest means—compulsory metering could be a bit of a burden. But, on the other hand, we do not want to go to the other extreme, which this amendment would do.

As I was saying when I wrongly spoke to this amendment prematurely, I have been on a metered supply for many years. I hope that that has not caused me to economise in personal hygiene in any way. However, in household work people just do not think about using the necessary amount of water; it has to be used, and it is used.

We have not been told of any intention to encourage the new undertakers to go for metering in a general way and there is no suggestion of that in the Bill. Moreover, I do not suppose that they will do so. However, I see no harm in experiments being carried out locally. Also, as I was saying, many houses, especially in rural areas, are already on a metered supply. Many farms are also on a metered supply, partly because they prefer it. On farms and dairies where there are cattle and where large quantities of water are used, there is a preference for metered supplies.

Therefore, let us not write into the Bill anything quite as restrictive as this amendment appears to me to be. I do not think that it is necessary or desirable. But, having said that, I shall be most interested to know what the Government's attitude is to the possibility of metering.

Baroness White

I should like to support the remarks made by the noble Lord, Lord Renton. He said that so far as concerns farms—which are businesses, after all—metering is obviously the most appropriate method of determining payment. However, I think that I am correct in saying that one reason for the position in Wales being determined on a different basis is that the water authority has found in its experiments with metering so far that it has been losing money rapidly due to the economies observed by some of the people being metered. It has therefore been decided that it is not a very good bargain for the water authority. I do not say that that condition necessarily applies in other parts of the country. However, I strongly support what my noble friend Lord Gallacher said; namely, that to insist upon compulsory metering in all circumstances is not socially a desirable or beneficial procedure.

Experimenting is one thing, but there are many circumstances in which a family needs to have a larger supply than its level of income can possibly afford. In families with large numbers of children, or in the case of people with elderly relatives who have problems of incontinence, laundry and so on, it can cause real hardship. I am all for anything to do with a commercial aspect of life being metered. That seems to me to be proper and business like. However, one must be careful about the social arrangements. I hope therefore that the Government will encourage the water undertakers to adopt a more flexible policy in this respect such as that suggested in the amendment.

The Minister of State, Department of the Environment (The Earl of Caithness)

If one thinks about it giving customers the option of not being metered or switching from paying on a measured basis to an unmeasured basis is clearly not a practical proposition. Each undertaker should have, within the constraints imposed by the conditions of the licence, freedom to charge its customers on whatever basis it considers most appropriate. The noble Lord, Lord Gallacher, mentioned but a few of the various alternatives.

The fairness of widespread metering as a charging system clearly depends on metering being applied to those customers who may lose as well as those who may gain financially. The Government cannot accept that widespread compulsory metering should be ruled out on grounds that customers should not pay more if they use more water. We all accept that it is perfectly reasonable to pay for what you use in the case of gas, electricity and other essential commodities such as food.

Therefore I ask the noble Lord why water should be any different. Further, experience indicates that metering does not lead to a decline in health standards and there is no reason to suggest that it will do so in this connection.

On a technical point, perhaps I may point out that the term "domestic consumers" which appears in Amendment No. 348A is not used in the Bill. The Committee will not find a definition of that term in the general interpretation clause, Clause 182. Therefore that would lead to confusion. It is not clear whether it would extend to customers who received a supply of water for domestic purposes. Many supplies to offices and industrial premises fall within that definition. In consequence, the amendments may have the effect of prohibiting undertakers from metering compulsorily many of their non-domestic customers.

Perhaps I may pick up some of the points which have been raised. The noble Lord, Lord Gallacher, was most concerned about low income families. This is a concern shared by all Members of the Committee. Of course trials have been carried out throughout the country—indeed, there are 12 areas in which such trials are being undertaken—and that will help to assess what impact metering has on people.

However, the noble Lord was right to point out that there has been metering for some considerable time, starting in the last century, in Malvern, where most people, although they have been offered alternative sources of charging, find that metering is the preferable way forward once they are used to it and have familiarised themselves with it.

No one speaks with more authority in this Chamber than my noble friend Lord Renton, who from his own experience knows the benefits that metering can bring. The noble Lord, Lord Gallacher, said that the price of water would increase. Yes, it will increase; but that will be due to meeting higher standards which we now wish to meet, and it will not necessarily be due to metering, a flat charge or any other form of charging.

The noble Lord, Lord Gallacher, also mentioned leaks from the point of the meter to the stopcock in the house. It is interesting to note what has happened in the Isle of Wight. I see that the noble Lord, Lord Ross of Newport, is now back in his place. I had thought that he might join in this discussion on metering as the whole of the Isle of Wight is being metered. There it has been found that only a small percentage of houses—much lower than expected—have such a leak in the short area of pipe between the meter and the stopcock. Therefore there is encouragement in that direction.

Lord Ross of Newport

I am most grateful to the noble Earl. I understand from my ex-constituents that one can in fact put a separate meter in between the boundary where the undertaker provides the water supply to the house at a cost of £15. In that way one can check whether there is a leak in the pipe between the mains and where the water comes into the house.

The Earl of Caithness

I am grateful for the noble Lord's contribution. We must realise that water is a cheap commodity in this country, although it will inevitably, for the reasons which I have given, become more expensive. For a 10-litre flush on a lavatory it costs 0.6p or thereabouts; for a shower one might use 30 litres and the cost is 1.9p; and for a washing machine the cost is 4.9p.

Baroness Lockwood

I am very disappointed in the Minister's response. When I raised the question on metering on Second Reading he said that I had made the mistake of linking it with the privatisation of water. It is quite clear from the discussion which has taken place that there will be an increase in metering as a result of the privatisation of water and the introduction of the community charge. I think that the Minister is underestimating the effect that this is likely to have on consumers.

I understand that the noble Lord, Lord Renton, has not economised in the use of water in his household in any way which would affect hygiene. However, I wonder whether this will apply in all cases. For example, the Wakefield district is one of the areas where a trial of water metering is taking place, and it has been found that the cost to a family of four is likely to increase by £50 per annum and to a family of five by £100. In the context of the low income groups, this will be a very considerable problem.

In Yorkshire and Humberside, despite the decline in coal mining and steel manufacturing, there is still a high preponderance of that type of industry. That has led to a greater use of washing machines in the Yorkshire region than the national average. On the other hand, within Yorkshire and Humberside the average income is 17 per cent. below the national average.

There is also a problem for people who are on income support. Under the old scheme they were given an allowance for the water that they used, but under the new scheme an allowance is supposed to be built in to the basic rate. Nevertheless, there is the difficulty of the allowance keeping pace with the rise in the cost of living. If there is to be an increase in charges for water as everyone seems to accept will be the case, that will be reflected in the inflation rate. Nevertheless, it will bear more heavily on those who are in need of income support, and they will not get the full effect of the extra charge as they would under the old system.

This amendment would provide one of the answers to the problem. It would ensure that there was an alternative. I think that the flat rate alternative, or the licence, as my noble friend called it, is the kind of alternative that we should have, particularly for those people who cannot afford to pay both the higher charges and perhaps a metering charge for what is an essential commodity not only in the interests of a particular household but in the interests of the community.

Lord Lloyd of Kilgerran

I support these amendments in a Welsh context. I was very disappointed to hear the Minister's reasons for rejecting these two amendments. The first reason was that it was not a practical proposition. When the noble Lord said that, I thought that we might hear something really profound, perhaps from a technological point of view, which would show why this was not a practical proposition. However, the noble Lord's support for that statement was the general remark: We all, on whatever side of the House we care to sit, are in sympathy with the low income group". However, he implies that it does not matter about these low income groups, of which there are thousands in Wales.

Last weekend when I was in Pembrokeshire I was asked what would happen in relation to metering and the supply of water. Many people there should be protected from general metering which might be imposed for practical reasons of raising money.

The Minister said that experiments were being carried out in some parts of the country to discover whether the low income groups would be affected by general metering. I should be grateful if he could tell us more about that matter because the information might be of some use to us in this debate.

This amendment is designed to assist those in the low income group and to protect them against wholsesale metering. We have no reason to believe that there would not be wholesale metering. The noble Lord, Lord Renton, was good enough to say that he thought that there would not be wholesale metering. I do not know upon what evidence he bases that statement. From my experience in Wales there is a fear among the thousands of people in the low income group that metering will impose a very great charge on them which is totally disproportionate to their position.

4.45 p.m.

Lord Trafford

I am puzzled by one factor which has been put forward by both Benches opposite, and that is the assumption that if one meters the amount of water which is consumed, it will inevitably cost more than a flat rate. It would not be very difficult for a water undertaker to set two rates, one a flat rate and one a metered rate. The only rate that the consumer could control in any way would be the metered rate.

One noble Lord said that in Wales, where they had put in meters, it had been detrimental to the water authority because the amount consumed had decreased. Whether that was so or not, the point is that there is an option in the meter system as to how much one consumes. With a flat rate system there is no option.

I am not certain, with due respect to the noble Baroness and the noble Lord, why, leaving aside any question of the built-in charges to benefits, it is automatically assumed that a flat rate system is more beneficial to the consumer. My experience of water metering is strictly limited but it would seem to me that some people gain from it and some people lose. I suppose that that is true of most systems of charging. What is the basis of the assumption that the fixed rate would be more or less beneficial to lower income people, or anybody else come to that, than metering?

Baroness Lockwood

I should like to say to the noble Lord, Lord Trafford, that I pointed out in my comments that a trial had been undertaken in Wakefield which had shown that a family of four was likely to have to pay an increase of £50 per annum for its water bill and a family of five would have to pay an increase of £100.

Lord Trafford

With due respect to the noble Baroness, I am sure that she is right in what she says, but one would like to know the basis of this so-called experiment or test. Is the comparison being made with current water rate charges? Is it being made on the assumption that Wakefield would charge a specific flat rate? There are so many difficulties. My question was not designed in that way; it was a simple one. Why is it automatically assumed that a consumer regulated metering of water will be that much more expensive than an across-the-board flat rate?

Lord Lloyd of Kilgerran

I should like to be quite clear about the noble Lord's position in this debate. The amendment suggests, that there should be at least one option given to the consumer. The noble Lord, Lord Trafford, refers to a flat rate and a metering rate. Would that not be support for this amendment—that there is an option given to the consumer as to whether they should go on a flat rate or a metering rate?

Lord Jenkin of Roding

There is one aspect of this debate which—

Lord Lloyd of Kilgerran

I asked the noble Lord, Lord Trafford, a question but I assume that he does not want to reply.

Lord Trafford

My noble friend was far more athletic than I and was on his feet in a flash. The reason why I asked a specific question was not because it was relevant to whether you have choice. I always tend to favour choice when this can be exercised. My view is that, in practical terms, exactly what the noble Lord has described is going to arise.

Lord Jenkin of Roding

I apologise to my noble friend if I pre-empted his answer to the noble Lord, Lord Lloyd of Kilgerran, but there is one aspect of the debate which I think has been lost sight of. When the Government instituted the metering experiments in the Isle of Wight and a number of other areas it was widely believed that there was a lot of extravagant use of water not just by industrial and commercial users—the overwhelming majority of whom are already metered—but by domestic consumers. As a result not only was there the need for extra investment to meet the demand for water and all the consequences of that; there was also notably the need to flood areas of the country in order to provide extra reservoir capacity to meet the demand.

Noble Members of the Committee will be aware that there are few planning decisions which arouse greater fury from a local community than a decision that an area has to be dammed and flooded in order to provide additional reservoir capacity. I had to deal with some of the problems affecting Dartmoor, where an extremely well organised and powerful anti-reservoir lobby actually succeeded in holding up developments for many years, and there was considerable shortage of water.

There is also a conservation argument here. It is thought—this is what the experiments will be intended to establish—that if average consumers are aware of the additional cost of consuming additional water they will find that at very little inconvenience they can make a considerable reduction in the total amount of water that they consume.

To give one example, there are on the market forms of toilet flush which allow the consumer to opt for what I might call a large flush or a small flush. I do not think I need to go into further details as to which would be appropriate in which circumstances. The fact is that the small flush is perfectly adequate for the purpose for which it is intended and it uses less than half the amount of water of the large flush. At present there is absolutely no incentive for people to incur the cost of installing such a device in their own house. They pay a flat rate water charge based on rateable value, so why should they bother? No less a person than the Duke of Edinburgh has drawn attention to the considerable waste of water. He put it rather bluntly when he said: "You do a pint and flush away five gallons". That seems to me to say it all.

If supplies were metered, every consumer would have an incentive to be cautious in the use of water. Therefore, over a period this might avoid not only the extra cost of substantial investment but also the destruction of the countryside as more areas have to be flooded in order to provide reservoirs for extra supplies. It seems to me that it is in that context that one should be looking at metering.

I entirely agree with the point made by my noble friend Lord Trafford that it is very difficult to compare what individual householders would pay with what is the benchmark: what would they be paying under a flat rate system which has not been introduced yet, or under some other system which has to be provided for by the year 2000 under this Bill, if water were not metered?

I am an unashamed advocate of metering because I believe that it will be a most valuable way of providing an effective nexus between supply and demand, and that in the long run it will be in the interests of consumers of this country as a whole.

Lord Stoddart of Swindon

It has been very interesting to hear the argument put forward by the noble Lord, Lord Jenkin, that metering would be good for conservation. In fact, I wondered why the Minister had not raised that argument. Perhaps the reason was that he saw the report that I did a week or two ago which said that the amount of water used now per head is very little different from what it was 25 years ago. Although, generally speaking, we have had a flat rate water charge over the last 25 years, the actual amount of water used per person has hardly increased at all. I think the argument on conservation grounds is perhaps weakened by that item of news.

The argument is not a new one. It has been going on for many years. Indeed, it existed when I was the chairman of the land and works committee of the Thames Valley Water Board. Well over 20 years ago we considered whether we should install meters. There were many arguments for and many arguments against. We came down in favour of not installing meters because, on balance, the argument was against. One of the reason was that the water meter, being a mechanical device, first, is quite expensive to install; secondly, it is expensive to maintain; and, thirdly, it has to be read. Therefore, it would be a very costly exercise, (a) because of the expense of installing, (b) because of high cost of maintenance, and (c) because of the large administrative cost of reading meters.

The situation may have moved on from there, but I have seen a recent estimate that installing meters throughout the country would cost about £1.3 billion. That is in addition to the already additional charges which will have to be borne in order to bring our water and sewerage systems up to date and to meet international standards.

There is also the public health argument. Water is unlike electricity or gas. It is unlike any other commodity because it is essential. We have heard this argument repeatedly during the debates on various clauses of the Bill. Water is a different commodity; it is a life support service, and it has very important public health implications.

Although we are now living in 1989, let us cast our minds back to the end of the last century when many people did not have metered supplies, or did not have any water supplies at all. At that time the incidence of cholera in this country was quite high. The Minister grins. He does not think that is relevant. The fact of the matter is that it was because there was no free-flowing, wholesome, good water that many diseases occurred in this country.

It is true that many families of five, six or seven will have to pay very much higher costs if supplies are metered. If they are poor people that is bound to have an effect on the amount of water they use for their personal hygiene and for washing clothes. I believe therefore, from a certain amount of background and experience, that there ought at least to be the option. People should at least to be able to maintain the present system which has lasted a long time and which has proved eminently satisfactory. I urge the Minister to accept the amendment or at least to say that he will take it away and give it some consideration.

5 p.m.

Lord Ross of Newport

Perhaps I may make one or two remarks. The Isle of Wight has been mentioned in connection with the experiment—one of 17—taking place. I believe that it is too early to answer the questions being raised because the trials are only just getting under way.

The point I was trying to make to the Minister earlier is that in some cases the meter is being put in the street, in others in the house. Meter sites vary in different roads. When people are concerned that there might be a leak in the pipe between the mains and where the water comes into the house, a separate meter can be put in at a cost of £15. Previously consumers would write to me complaining bitterly about water charges. If they wished to be metered the cost for the meter was about £60.

I agree with the noble Lord, Lord Jenkin, that the case for paying for water actually used is unanswerable if we could only meter satisfactorily. We ought to go for it. However, there are many problems. What is to happen in sheltered accommodation blocks? There may be one meter where the water comes into the block and the housing association representative has to sort out the costs between the various tenants. That is not easy, particularly with ladies who leave the bathwater running all night. We cannot meter the tenants separately.

The person able to invent the ball-valve on a WC system which did not allow the water to overflow would make a fortune. All over the country we see water spouting out of WC systems which go on running; it even ruins the walls in many places. Some action might be possible. If people were metered, perhaps they would move quicker. I have never been able to discover why we cannot have a fail-safe ball-valve system.

I object to paying a sewerage charge on a building that is not even on a sewer and has no water, but apparently because rain water enters the pipe which goes into the soil pipe there is a charge. I consider that unfair.

Having said that, I suppose Members of the Committee wish to know my views. The only business of which I am aware that has compared the costs before being metered and since was a semi-commercial building, a restaurant. The charges doubled. It is not fair to say, however, that that would necessarily be the case everywhere. I agree that if water can be metered adequately, that is the right way to go about it.

Lord Howie of Troon

I find myself, as I often do, seeing both sides of the question. Temperamentally, I am strongly in favour of metering. As the noble Lord, Lord Jenkin, has pointed out, metering is one way of conserving a scarce resource for which it is difficult and expensive to obtain the capital investment stake. In theory I would welcome turning over to metering.

However, my noble friend has just drawn attention to the major problem which lies ahead—the cost of it all. The cost of changing to a metering system is quite enormous. Were the cost to be carried by the public purse, it would not bother me greatly, except in my guise as a taxpayer. However, in a situation where the water industry will be governed by a dozen or so plcs, the cost will be borne by the consumer, the customer. This will bear very heavily on some parts of the community identified by my noble friend Baroness Lockwood. That is the answer to the question raised earlier by the noble Lord on the Government side, Lord Trafford, when he asked what was wrong with the flat rate system. The answer is that the flat rate system works, admittedly in a rough and ready, imperfect way, as a system of redistribution in the sense that the strong carry the weak. In a rough and ready way that is a socially desirable, though imperfect, way of paying for something such as water.

Metering is a good idea. We must, however, come up with a scheme the cost of which lies fairly on the community as a whole. The poorer members of the community should not be put at a serious disadvantage. My noble friend Lord Stoddart has shown how they would be put at a serious disadvantage and that cannot be ignored.

I have only one further point to make to my old friend and antagonist, the noble Lord, Lord Jenkin. He was quite right in saying that when the valleys were flooded there was a great hullabaloo. Afterwards they became known as great natural amenities. The noble Lord knows as well as I do that if anyone were to suggest taking away any of the great Victorian reservoirs there would be as great an outcry against their removal as there might be at the suggestion that we make yet another reservoir.

The Earl of Caithness

The noble Lord, Lord Stoddart of Swindon, said that the reasons why I did not use the conservation ground argument, as I might term it, which was so ably put by my noble friend Lord Jenkin of Roding, was that I had seen some article that he had read. No, that was not the reason. The reason was that I was dealing with the amendment and not entering upon a general debate about metering which the discussion on the amendment has inevitably turned into, as was perhaps only to be expected.

The noble Baroness, Lady Lockwood, raised some quite important points about the scheme at south Normanton, Wakefield, which is one of the trial areas. For the record I should point out that the trial has not yet been approved; therefore, the figures which the noble Baroness has quoted are not be relied upon. When the Secretary of State has approved the scheme we shall be able to take some realistic figures from the trial area. At the moment it is premature to do so.

Many Members of the Committee again quite legitimately raised a point which we had covered previously—the cost of water to the low income family groups if the water were to be metered. The great advantage of meters is that we can change the tariff. We can have a tariff designed to encourage the use of water for essential health reasons. We can have a different tariff above that for consumption of water and a much greater tariff yet again for those who wish to water their lawns in the middle of a drought and those who wish to wash their car every day of the week. That is only right because we are using exactly the same water which it has been very costly to purify and to bring up to the right standard—drinking water standard—for the watering and the washing of a car.

So metering has an in-built flexibility which the flat rate does not have because we. can alter the tariffs. That is one of the things which we anticipate learning from the trials that are taking place.

That brings me to the point raised by the noble Lord, Lord Lloyd of Kilgerran, on trials. He wished to know more about them. Perhaps I may refer back to last year when we discussed the Public Utility Transfers and Water Charges Bill. I seem to recall that the noble Lord took part in the debate on that Bill. We discussed metering quite extensively because the Bill allowed us to carry out the metering trials. Those trials are not intended to show whether metering will be more or less efficient than any other non-metering charging system such as a flat rate charge. Among the aspects being examined in the trials are different meter locations, meter reading technology and billing systems, how customers react to a variety of tariffs, including the effect meter charging has on demand, public relations and the costs of setting up and operating a large scale metering system. Information on the latter will largely come from the Isle of Wight trial scheme because it covers the largest number of properties. It covers something over 52,000 properties. The trials will run for three years. So much of what has been said about the effect of metering can be substantiated only when the trial period has come to an end.

The noble Lord, Lord Ross of Newport, said that from his experience in his former constituency metering is a good idea but there are problems. The trials will sort out many of the problems which he mentioned. That is why it is right that the authorities should be the ones to decide at the end of the day which system they consider to be the right one for their area or part of their area.

The noble Lord, Lord Lloyd of Kilgerran, was very concerned about the effect on Wales. However, I believe that I am right in saying that it was the noble Baroness, Lady White, who said that her information, which is also my information, is that Welsh Water had opted for a flat rate charge. Of course that too has adverse distribution effects. If we were to consider rateable values in Wales, something like 60 per cent. of the people would be worse off on a flat rate charge based on rateable values. Three cheers for getting rid of rates, so the people in Wales may not have to suffer the penalty of rates any longer than is necessary. The department receives far more letters from those who complain about their water rates being linked to the rating system than from those who realise that it is a much fairer system, depending on the tariff, to pay for the water they consume.

I think that there is one point that has not yet been covered, which is that to offer alternative systems to those who are on meters would be very costly. Further, if we offer an alternative system to those on meters, surely we should offer the alternative of meters to those who are on a flat rate charge or other system. That would lead to additional costs. The costs would undoubtedly have to be taken up by the customer. That additional cost and the cost of the bureaucracy involved is a figure that I cannot quantify. It would be extremely difficult to do so. However, I do not think that the Committee should be under any illusions; the costs would arise. As I understand it, the costs of meters are coming down. However, the longer the trials continue and the greater the number of people who transfer to metering, so the technology will improve and so the cost will come down. Metering is not the complete answer for everybody. Surely it is right that we leave it up to the water authorities to decide this matter.

5.15 p.m.

Lord Gallacher

We have had an extended debate. I thank all those who have taken part in it, and particularly of course those participants who supported the views expressed in both the amendments I moved. I hope that the Minister will not be surprised but nevertheless disappointed if I say that both his interventions seemed to me to be thoroughly unconvincing. The fact of the matter is that whether or not giving people a choice is practical, they have such a choice now. One can opt, if one wishes as a domestic consumer, to have one's supply, metered. The water authorities very kindly and very helpfully will tell one in what circumstances it is wise for one to pay the cost of installing a meter and to switch to that basis of charging.

When so many claims are being made as regards the advantages of the Bill now before the Committee, we cannot see why it is wrong to take away a choice, and in particular to take it away in circumstances in which it may disadvantage low income groups. The Minister expressed his concern about the impact that the metering system may have on low income groups. That in itself was an acknowledgement that there is a substantial possibility that, given the necessity for raising the quality of water, low income groups, particularly those with large families, will find themselves at a disadvantage. It is partly to minimise the scope for disadvantage that we have tabled our amendments this afternoon.

One cannot escape the conclusion, especially when the Minister said that we should give three cheers for getting rid of rates, that consumers are losing choice simply because the introduction of the community charge as a replacement for domestic rates eliminates the possibility of giving them a choice for the way in which they pay for their water. One should acknowledge that. We do not accept that because a community charge has been introduced, that fact alone justifies the withdrawal of choice in this important area.

The Minister referred to the fact that gas and electricity are metered and expressed the view that, because of that, water similarly should be metered. It is true that gas and electricity are metered and always have been. It is equally true that as regards the cost of metering and the reading of meters, even after privatisation British Gas plc has followed the practice of the former nationalised industry in reading meters only twice a year. On the other two quarterly occasions, gas consumption is estimated. I can only assume that that practice has been continued because there is a very sizeable charge involved in calling at every household in order to read the meter. That point was brought out in some detail by my noble friend Lord Stoddart of Swindon. He talked from the basis of his experience some 20 years ago at Thames Water.

Not all services are metered in this fashion. As regards postage, for example, there is a flat rate for a letter whether it goes to the London area or to the north of Scotland. Some of us feel that water is as important a public service as postage, and that therefore the charge should remain. The argument advanced by the noble Lord, Lord Jenkin of Roding, that metering will reduce consumption or make consumption a more carefully considered factor, and therefore will have a spin-off in environmental terms because less provision will need to be made for water supply, indicates quite clearly that in his view meters are likely to make the bill for the use of water dearer. His partial palliative, if one can so describe it, of having two kinds of flush in the lavatory, a full flush and a semi-flush, may be all right for those people who can look to the capital cost of doing that. However, these things all cost money. Again we come back to the argument that the lower paid are likely to lose out in this regard.

The Minister also said that one of the advantages of metering was that it was possible to change the tariffs for water. He mentioned changes of tariffs in periods of drought. In the light of that reply from a Minister of the Crown, I ask myself how much notice the water plcs will give of intended changes of tariff. Will they anticipate drought? If they are not to give adequate notice of changes of tariff, how will the consumer adjust to such changes? If the notice which the water plcs are to give is so far extended that factors such as the weather and the availability of supplies do not come into it, what advantages are there in changes of tariff? To what extent will the consent of the Director General of Water Services be required for changes of tariff of that kind?

The Earl of Caithness

I fear that I did not make myself clear. I was trying to give the Committee a general idea of the possible nature of a system of tariffs. A low tariff could be designed for the essential use of water. Then I gave the example of an intermediary tariff and a high tariff. The high tariff would catch those who used an excessive amount of water. I merely used the example of drought to illustrate a situation where someone was using a larger than normal supply of water because he was continuing to water his garden in drought circumstances. I did not refer to a drought per se. I merely used a period of drought as an example.

Lord Gallacher

I thank the noble Earl for that explanation. I grasp something of what he is trying to tell us. However, if the inference is that one can have a similar system for water to the white meter for electricity, we are drawing analogies which cannot be justified in practical terms. The noble Lord, Lord Ross of Newport, in referring to the Isle of Wight accepted that it was early days to be drawing conclusions from the experiments there. I do not wish to place too much emphasis on experiments anywhere because I think it is early days to assume that the experiments, some of which are unofficial, can point conclusively to one benefit or another in this area.

However, the noble Lord mentioned some of the problems of metering, such as in the case of buildings in multi-occupancy where there is one meter and the total meter reading has to be apportioned between the tenants of the building. On the other hand, if every tenant had an individual meter the problems of capital cost and revenue cost in reading and billing would be correspondingly greater.

I believe that the Minister has not looked sympathetically at the problems which will arise, in particular for lower income groups. I believe that we on this side of the House have a duty to make our concern about that aspect of this serious problem fully known. For that reason, I propose to divide the Committee on this question.

5.20 p.m.

On Question, Whether the said amendment (No. 345ZA) shall be agreed to?

Their Lordships divided: Contents, 73; Not-Contents, 133.

Addington, L. John-Mackie, L.
Ampthill, L. Kearton, L.
Ardwick, L. Kennet, L.
Attlee, E. Kilbracken, L.
Birk, B. Listowel, E.
Blackstone, B. Lloyd of Kilgerran, L.
Bonham-Carter, L. Lockwood, B.
Boston of Faversham, L. McIntosh of Haringey, L.
Brooks of Tremorfa, L. Mason of Barnsley, L.
Bruce of Donington, L. Milner of Leeds, L.
Carmichael of Kelvingrove, L. Monson, L.
Mulley, L
Cledwyn of Penrhos, L. Nicol, B.
Cocks of Hartcliffe, L. Peston, L.
David, B. Phillips, B.
Davies of Penrhys, L. Pitt of Hampstead, L.
Dean of Beswick, L. Ponsonby of Shulbrede, L [Teller.]
Dormand of Easington, L.
Elwyn-Jones, L. Rochester, L.
Ennals, L. Ross of Newport, L.
Ewart-Biggs, B. Serota, B.
Falkender, B. Shepherd, L.
Foot, L. Stallard, L.
Gallacher, L. Stewart of Fulham, L.
Galpern, L. Stoddart of Swindon, L.
Gladwyn, L. Strabolgi, L.
Glenamara, L. Taylor of Blackburn, L.
Graham of Edmonton, L. Taylor of Mansfield, L.
Grey, E. Tordoff, L. [Teller.]
Halsbury, E. Turner of Camden, B.
Hanworth, V. Underhill, L.
Harris of Greenwich, L. Wallace of Coslany, L.
Hayter, L. Walston, L.
Hirshfield, L. White, B.
Howie of Troon, L. Wigoder, L.
Hunt, L. Williams of Elvel, L.
Irving of Dartford, L. Winstanley, L.
Jeger, B.
Alexander of Tunis, E. Cross, V.
Alexander of Weedon, L. Cullen of Ashbourne, L.
Allerton, L. Daventry, V.
Arran, E. Davidson, V. [Teller.]
Atholl, D. Denham, L. [Teller.]
Auckland, L. Dilhorne, V.
Balfour, E. Donegall, M.
Beloff, L. Dundee, E.
Belstead, L. Eden of Winton, L.
Bessborough, E. Ellenborough, L.
Blatch, B. Elliott of Morpeth, L.
Blyth, L. Ferrers, E.
Bolton, L. Foley, L.
Borthwick, L. Fraser of Carmyllie, L.
Boyd-Carpenter, L. Fraser of Kilmorack, L.
Brabazon of Tara, L. Gibson-Watt, L.
Brougham and Vaux, L. Gray of Contin, L.
Butterworth, L. Greenway, L.
Caithness, E. Grimthorpe, L.
Campbell of Alloway, L. Hailsham of Saint Marylebone, L.
Campbell of Croy, L.
Carnock, L. Harmar-Nicholls, L.
Carver, L. Havers, L.
Cawley, L. Henley, L.
Clinton, L. Hesketh, L.
Clitheroe, L. Hives, L.
Colwyn, L. Hood, V.
Constantine of Stanmore, L. Hooper, B.
Cottesloe, L. Hylton-Foster, B.
Cox, B. Jenkin of Roding, L.
Craigavon, V. Johnston of Rockport, L.
Craigmyle, L. Kaberry of Adel, L.
Crickhowell, L. Killearn, L.
Croft, L. Long, V.
Lyell, L. Renton, L.
Mackay of Clashfern, L. Renwick, L.
Macleod of Borve, B. Romney, E.
Malmesbury, E. Rugby, L.
Manton, L. Saint Albans, D.
Margadale, L. St. Davids, V.
Marley, L. St. John of Fawsley, L.
Marshall of Leeds, L. Saltoun of Abernethy, Ly.
Maude of Stratford-upon-Avon, L. Sanderson of Bowden, L.
Seebohm, L.
Merrivale, L. Selkirk, E.
Mersey, V. Shannon, E.
Middleton, L. Shaughnessy, L.
Monk Bretton, L. Skelmersdale, L.
Mountgarret, V. Slim, V.
Murton of Lindisfarne, L. Somers, L.
Norfolk, D. Stanley of Alderley, L.
Norrie, L. Strange, B.
Nugent of Guildford, L. Strathcarron, L.
O'Brien of Lothbury, L. Strathclyde, L.
Onslow, E. Strathspey, L.
Oppenheim-Barnes, B. Sudeley, L.
Orkney, E. Swinfen, L.
Orr-Ewing, L. Teviot, L.
Oxfuird, V. Thomas of Gwydir, L.
Pender, L. Trafford, L.
Penrhyn, L. Trumpington, B.
Porritt, L. Vaux of Harrowden, L.
Pym, L. Willoughby de Broke, L.
Quinton, L. Windlesham, L.
Radnor, E. Wolfson, L.
Rankeillour, L. Wyatt of Weeford, L.
Reay, L. Wynford, L.
Reigate, L.

Resolved in the negative, and amendment disagreed to accordingly.

5.28 p.m.

Lord Gallacher moved Amendment No. 345ZB: Page 85, line 7, at end insert— ("(1A) Any scheme for charges in respect of domestic consumers shall be made in accordance with section 77(3)(dd) below").

The noble Lord said: In moving Amendment No. 345ZB on behalf of my noble friend Lord McIntosh of Haringey, I wish to speak at the same time to Amendment No. 349ZA. I understand that a further amendment is grouped with these two amendments which will be spoken to by the noble Lord in whose name the amendment stands.

The purpose of the amendments is to make provision for people who wish to pay water bills by instalments so to do. We have received representations from a number of very responsible bodies, notably the National Association of Citizen's Advice Bureaux, advising us that there is substantial concern on the part of a large number of people who in the past have had the opportunity to pay their water rates as part and parcel of their rents on a weekly or fortnightly basis but who will now have to pay directly themselves. As a consequence, they are asking for advice as to how that should be provided for.

There is a consequential problem that, even where provision is made for such payments, the cost of so doing, particularly for people who do not have bank accounts and the like, is an additional charge. For example, I understand that customers have to pay 25p per Giro payment if they wish to pay by that method. There is a list of CABs up and down the country which have had experience of that problem and therefore believe that a statutory right to pay by instalments should be written into the Bill rather than left to a code of practice.

There is some indication that the present position differs from regional water authority to regional water authority. Some encourage customers to pay in that fashion by monthly payment by direct debit or whatever. Others are more muted about the arrangement. Presumably, if those disparities exist now, they are likely to be carried over into the new regime when the Bill becomes law. In consequence, we believe that there should be a specific provision for that. For example, so far as concerns payments, the draft code of practice on disconnections envisages that facilities will be offered at the discretion of the water supply plcs only to certain groups specified in the code and only in the context of those who are already "in trouble", as the draft code puts it, in paying their bills.

Given that we have already agreed in the discussion on the previous amendment that the water bill for most consumers is likely to increase quite substantially, we believe that a system for payment either fortnightly or monthly is highly desirable. The purpose of Amendments Nos. 345ZB and 349ZA is to write something positive into the Bill in that regard. I beg to move.

5.30 p.m.

Lord Winstanley

Perhaps I may say a word about Amendment No. 345C which stands in my name and that of my noble friends Lord Ross of Newport and Lord Addington and is grouped with the amendment that has just been moved. This amendment is similar in its purpose, although it is perhaps more specifically and narrowly focused. I am glad that it does not say anything at all about metering and meter charges, which are a complex matter. The arguments are bedevilled by the fact that the cost of water charges at the moment is distorted by their linkage with rates so that the only people who benefit from having meters are rich people who live in highly rated properties. That is a separate matter. The amendment deals purely with the way in which water rates or charges are paid.

The present practice of monthly direct billing causes great difficulty to some low paid people or people with low incomes. This amendment seeks to make it possible for people to pay their water charges by weekly payments. I accept that if everyone did that it might be very onerous and even costly to the water plcs and to others, but I very much doubt whether many people would choose to do that. Most people will want to pay over longer periods, as they now do. But there is no doubt that two groups of people in particular—pensioners and the disabled—would greatly prefer to pay weekly, which is of course the same basis on which their income is paid to them. To allow them to do so would be a great convenience. It would not distort matters in other ways and it would be very helpful.

Proposals have been made to the existing water authorities in that regard. I understand that a proposal was recently put to Welsh Water to discover whether it was willing to make an arrangement to allow certain people to pay weekly and it refused. I am not entirely sure what the practice is among the other water authorities at the moment. Nevertheless, I believe—and there is substantial evidence to this effect—that the ability to pay water charges weekly, whatever they may be and however they are computed—whether on a block system or by meter—will be of immense benefit to the low paid and particularly to pensioners and the disabled whose incomes are paid weekly and who are used to paying their outgoings weekly.

Lord Hesketh

As noble Lords have pointed out, this group of amendments concerns payments by instalments. Amendment No. 349ZA would provide for optional arrangements for payments of metered supplies by instalments under regulations made under subsection (2) of Clause 77. Amendment No. 345ZB would extend that provision to cover any scheme for charges in respect of domestic customers made under Clause 74. Amendment No. 345C would require water and sewerage undertakers to make provisions to enable payments of charges to be made on a weekly basis.

I quite agree that it is important for undertakers to provide arrangements through which all their domestic customers can pay their water and sewerage charges by instalments, and I am aware that practice varies within the industry. Under condition F of the licence, each appointed company will be required to include details of the arrangements for payment of bills by domestic customers in its general code of practice, including details of payments by instalments and budget plans. Since that code now has to be approved by the director general, he will be in a position to promote best practice in instalment arrangements and indeed encourage its development if appropriate.

Most importantly of all, following the announcement last Thursday during the Committee stage of the Bill in this House, that in virtually all cases the undertaker will have to go through the county courts for recovery of arrears of debt, there will be a very real incentive to introduce instalment and budget plans to ensure that customers do not fall into arrears of debt. That provision will be written not only into the disconnection code, but also into condition G of the licence.

We believe that we have now provided for every encouragement to ensure that arrangements for all domestic customers are introduced whereby they can pay their charges in instalments or through budget plans. We believe that to go further than that would be unnecessary and would amount to over-regulation. For that reason, I urge the Committee to reject these amendments.

Lord Gallacher

I thank the noble Lord for his reply and for setting out the position so far as concerns payment by instalments at the present time. This question is one of considerable importance not least, as I have already said in moving the amendment, by reason of the size of water bills in the future, but also for an additional reason; namely, that unless there is a system for easy payments—by "easy payments" I mean not only payments which are easily made but payments made without cost to the customer—there could be an increase in problems regarding non-payment of bills. Although they are now covered by the code of practice and the amendments thereto which the noble Lord announced the other day, they are still likely, even though county court procedures are involved, to be invoked from time to time. That seems to us to be an additional reason for giving further thought to the matter.

The noble Lord said that, given that conditions F and G of the licences will be structured in such a way and subject to approval by the Director General of Water Services, those provisions are almost certain to be available. We should sooner see that assurance written into legislation. Another important point is that, unlike gas and electricity authorities, water boards are not particularly conspicuous on the ground; that is to say, they do not have showrooms and offices in most towns to which customers can go and pay bills. So any arrangement that is made for payment by instalments will need to be carefully thought out and worked out. Given the freedom that the Bill currently gives undertakers, it is just possible that some of them may take the view that it is not worth doing. As we believe this matter to be of such importance and, as I said, in view of the representations that have been made to us, I feel that we should test the opinion of the Committee.

5.40 p.m.

On Question, Whether the said amendment (No. 345ZB) shall be agreed to?

Their Lordships divided: Contents, 61; Not-Contents, 123.

Addington, L. [Teller.] John-Mackie, L.
Ardwick, L. Kilbracken, L.
Attlee, E. Listowel, E.
Birk, B. Lloyd of Kilgerran, L.
Blackstone, B. Lockwood, B.
Bonham-Carter, L. McIntosh of Haringey, L.
Brooks of Tremorfa, L. Mason of Barnsley, L.
Bruce of Donington, L. Milverton, L.
Carmichael of Kelvingrove, L. Mulley, L.
Nicol, B.
Cledwyn of Penrhos, L. Peston, L.
Cocks of Hartcliffe, L. Phillips, B.
David, B. Pitt of Hampstead, L.
Davies of Penrhys, L. Ponsonby of Shulbrede, L. [Teller.]
Dean of Beswick, L.
Dormand of Easington, L. Ross of Newport, L.
Elwyn-Jones, L. Shepherd, L.
Ennals, L. Stewart of Fulham, L.
Ewart-Biggs, B. Stoddart of Swindon, L.
Falkender, B. Strabolgi, L.
Gallacher, L. Taylor of Blackburn, L.
Galpern, L. Taylor of Mansfield, L.
Gladwyn, L. Tordoff, L.
Graham of Edmonton, L. Turner of Camden, B.
Grey, E. Underhill, L.
Hanworth, V. Wallace of Coslany, L.
Harris of Greenwich, L. Walston, L.
Hayter, L. White, B.
Hirshfield, L. Wigoder, L.
Hughes, L. Williams of Elvel, L.
Irving of Dartford, L. Winstanley, L.
Jeger, B.
Alexander of Tunis, E. Lyell, L.
Alexander of Weedon, L. Mackay of Clashfern, L.
Allerton, L. Macleod of Borve, B.
Arran, E. Malmesbury, E.
Atholl, D. Margadale, L.
Balfour, E. Marley, L.
Beloff, L. Marshall of Leeds, L.
Belstead, L. Maude of Stratford-upon-Avon, L.
Bessborough, E.
Blatch, B. Merrivale, L.
Blyth, L. Mersey, V.
Bolton, L. Middleton, L.
Borthwick, L. Monk Bretton, L.
Boyd-Carpenter, L. Mountgarret, V.
Brabazon of Tara, L. Murton of Lindisfarne, L.
Brougham and Vaux, L. Norfolk, D.
Butterworth, L. Norrie, L.
Caithness, E. Nugent of Guildford, L.
Campbell of Alloway, L. O'Brien of Lothbury, L.
Campbell of Croy, L. Onslow, E.
Carnock, L. Oppenheim-Barnes, B.
Carver, L. Orkney, E.
Cawley, L. Orr-Ewing, L.
Clinton, L. Oxfuird, V.
Clitheroe, L. Pender, L.
Colwyn, L. Penrhyn, L.
Constantine of Stanmore, L. Pym, L.
Cottesloe, L. Quinton, L.
Craigavon, V. Radnor, E.
Craigmyle, L. Rankeillour, L.
Crickhowell, L. Reay, L.
Croft, L. Reigate, L.
Cross, V. Renwick, L.
Daventry, V. Romney, E.
Davidson, V. [Teller.] Rugby, L.
Denham, L. [Teller.] Saint Albans, D.
Denman, L. St. Davids, V.
Dilhorne, V. St. John of Fawsley, L.
Donegall, M. Saltoun of Abernethy, Ly.
Dundee, E. Sanderson of Bowden, L.
Eden of Winton, L. Seebohm, L.
Ellenborough, L. Selkirk, E.
Elliott of Morpeth, L. Shannon, E.
Ferrers, E. Skelmersdale, L.
Fraser of Carmyllie, L. Slim, V.
Gibson-Watt, L. Somers, L.
Gray of Contin, L. Stanley of Alderley, L.
Grimthorpe, L. Strange, B.
Hailsham of Saint Marylebone, L. Strathclyde, L.
Strathspey, L.
Halsbury, E. Sudeley, L.
Harmar-Nicholls, L. Swinfen, L.
Havers, L. Terrington, L.
Henley, L. Thomas of Gwydir, L.
Hesketh, L. Thurlow, L.
Hives, L. Trafford, L.
Hood, V. Trumpington, B.
Hooper, B. Vaux of Harrowden, L.
Hylton-Foster, B. Willoughby de Broke, L.
Jenkin of Roding, L. Windlesham, L.
Johnston of Rockport, L. Wyatt of Weeford, L.
Kaberry of Adel, L. Wynford, L.
Long, V.

Resolved in the negative, and amendment disagreed to accordingly.

5.48 p.m.

Lord McIntosh of Haringey moved Amendment No. 345ZC: Page 85, line 7, at end insert— ("(1A) Any charges under subsection (1) above shall be fixed in accordance with any formula determined by the Director and for the time being applicable to charges of that description, and before approving any charges scheme, he shall consult the relevant customer services committee.").

The noble Lord said: In moving this amendment I should like to speak also to Amendment No. 345A. We have referred to this matter already in Committee when considering the model appointment for the water and sewerage undertakers. We have already expressed the view, which I reiterate, that the arrangements proposed for the setting of the initial charges are totally unsatisfactory in two specific ways. First, they involve a misunderstanding on the part of the Government of the true or proper nature of the role of the Director General of Water Services as opposed to the Secretary of State. Secondly, under the Bill the initial formula for charges is not a matter of record in the Bill but is left to the model appointment, which is not part of the Bill and therefore not debatable or decided by Parliament.

On the first issue, the Bill provides that the price of water as established under the Bill should be the basis of a contract between the Secretary of State and the undertaker. Nothing could be further from the way in which prices ought to be set. The Secretary of State quite rightly has a political responsibility to Parliament. However, the setting of the price of water ought not to be a political decision. It ought to be a decision by the director general who is himself responsible for maintaining a regulatory balance between the different participants in the water industry. He has a duty to maintain the industry and to ensure that it is viable; but he also has a duty to improve the quality of water and to ensure that the consumer interests are protected. Those three interests are necessary if a proper price of water is to be arrived at.

The Bill provides that after the initial price setting, subsequent adjustment shall be the responsibility of the director general. I can see no good reason why the initial price of water ought not to be subject to the same regime. If it is correct for revisions to be the responsibility of the director general, so then the initial price should be the responsibility of the director general. That is what our amendment provides.

Our second objection is that the arrangements for initial price setting do not appear in the Bill. We have to raise amendments that consider the detail of the model appointment to enable the arrangements to be discussed. That is unsatisfactory. Parliament would be lacking in its duty if it did not seek an opportunity to discuss the price of water when it is considering the Water Bill. After all, the consumers and electors are interested in the adequacy and quality of the water with which they are being supplied; but they are also deeply interested—as Members of the Committee and Members of Parliament on the Government Benches will know—in the price of water.

A Member of Parliament or a noble Lord who supports the Government, faced with questions about the price of water, might simply say, "I know nothing about it. It is not dealt with in the Bill. It is a matter between the Secretary of State and the undertakers in which Parliament has no say". I do not think that constituents or friends of noble Lords will take kindly to that reply. They will feel that Parliament is neglecting its responsibilities if it does not seek to secure that a proper pricing system is provided, and that it is operated by the director general who is appointed under the Bill by Parliament to do a regulatory job, and appointed therefore to take account of the interests of consumers. That would be a correct and justifiable response to any criticism about the role of Parliament.

The present drafting of the Bill provides no such defence. I suggest to the Committee that in those two major respects the present arrangements for the initial setting of water charges are unsatisfactory. I beg to move.

Baroness Phillips

I should like to support my noble friend and to introduce a slightly different note. Water companies will be handed over to private enterprise. I have a splendid example of one of the privately owned water companies whose charges were increased by 41 per cent. Not unnaturally a number of customers questioned that. The explanations are fascinating. It was asked whether the increase was to meet requirements of privatisation, a view that had been circulated. The water company denied it. Members of the Committee will note that I speak of a private water company. However, some of the charges in which it has had to indulge are very curious. It required substantial sums to meet expenses incurred in connection with an abortive takeover bid from the Cook Islands. I find it fascinating that islands on the other side of the world want to take over the water in west Kent. Further expenses were incurred in relation to the purchase of the company's shares by a French undertaking; and so one goes on. The increase was nothing to do with the improvement of the quality of the water or the treatment of sewage, but with bad business handling.

Those are the people to whom we shall hand over our water services. Not only is one concerned about how they will handle it, but about the way in which we shall be charged. If those are the explanations that are offered to customers, it is increasingly clear that it is no good having voluntary codes of practice, which may or may not be operated. Any matter connected either with the charging, or with the carrying out of the water undertakings, must be written on the face of the Bill.

Lord Hesketh

The noble Lord, Lord McIntosh, is absolutely right to say that we have travelled over a certain amount of this ground before. I quite understand why he wishes to go over it again.

Amendment No. 345ZC would insert in Clause 74 a new subsection requiring charges fixed under the clause to comply with any formula determined by the director which applied to such charges, and require the director to consult the relevant customer service committee before approving any charges scheme.

Amendment No. 345A would amend Clause 74 so that in place of the power of water and sewerage undertakers to decide the basis on which they shall fix charges in their charges schemes, the director would determine the basis of the charges, and be required to consult the relevant customer service committee before approving the scheme.

Clause 74 provides general powers for the undertakers to charge customers for the services they receive. These charges may be fixed under agreements with individual customers or in charges schemes setting out the standard tariffs.

The principle which the Bill follows on charging matters is that powers to charge are set out on the face of the legislation. Regulation of those powers is made the responsibility of the Secretary of State and the Director General of Water Services under Clause 7 and Chapter I of Part II of the Bill.

The noble Lord, Lord McIntosh, takes great exception to the role of the Secretary of State in setting the initial Ks. We do not believe that it is just a contractual matter settled by the Secretary of State, and that that is the end of it. It is part of the discharge of his statutory functions under the Bill, guided by precisely the same duties under Clause 8 that the noble Lord, Lord McIntosh, is commending for the director general. The Secretary of State has been responsible for the industry hitherto and it is right that he should be responsible for the transition to the newly regulated regime.

Condition B in that model, to which I have referred, provides for an overall limit on increases in charges at standard rates, the so-called RPI + K. formula. Condition C requires undertakers to have charges schemes setting out standard tariffs for their domestic water supply and sewerage services. The Bill provides for charges for non-domestic supplies (Clause 46(6)) and trade effluent consents (Schedule 8, paragraph 3(4)) to be subject to appeal to the director except in cases for which a charges scheme has been made, setting out the charge to be paid. Condition D requires that charges shall show no undue discrimination between different classes of customer.

Amendment No. 345ZC would take a quite different approach, but the noble Lord, Lord McIntosh, has indicated before that he has no fears about proposing his own regulatory regime. What the amendment provides is an unfettered power for the director to impose charging formulae on charges made under Clause 74. We believe in firm regulation. The noble Lord, Lord McIntosh, we think, believes in central control.

Amendment No. 345A goes further. It provides for every individual tariff to be controlled by the director. We do not believe in removing every last vestige of management freedom from the undertakers. It is altogether unreasonable for the director to settle the detailed basis on which individual tariffs are fixed.

Setting a limit on increases, requiring published standard tariffs, as we shall require in conditions of appointment, and banning unduly discriminatory tariffs, as we propose, is a sound basis for customer protection. Customers will be able to draw attention to any failure to observe those and any requirements, and the director will be able to enforce them under Clause 20.

It is for those reasons that I hope that Members of the Committee will resist the amendments.

6 p.m.

Lord McIntosh of Haringey

That was an extremely disingenuous reply and, I suspect, deliberately so. The noble Lord seems to set up a contrast between regulation proposed by the Government and central control proposed by the Opposition. He seems to suggest that what we are proposing is in conflict with the present regime whereby the Secretary of State, he says, sets the prices for the water industry.

There are rather profound differences between the present regime where the water authorities are publicly owned and the regime proposed by the Bill where the water undertakings are privately owned with the prime obligation that they maximise the return on their assets as laid down in Clause 7. The conflict between the Secretary of State and the water undertakings is a new one introduced by the Bill and by the fact of privatisation. Neither the initial conflict nor the need for this complex regulatory system exists at present. It is only privatisation which forces us into this extraordinarily complex and difficult regulatory regime. Every commentator who has considered the water industry as a candidate for privatisation—including people such as Professor Littlechild, who is generally in favour of privatisation—has observed that the regulatory regime which will be necessary for water as the quintessential natural monopoly will have to be more detailed and more severe than for any other privatised industry.

All these conflicts, differences and objectives and all the resulting complexity of regulation are forced on the country by the privatisation proposal. They are not in the nature of the water industry as such. When the noble Lord says in response to these amendments that what we are proposing is central control as opposed to regulation, he is in effect setting up his own Aunt Sally in order to knock it down. There is no rationale behind the argument that he is putting to the Committee.

We shall certainly have to return to this matter at a later stage. We shall have to try to secure a greater say for Parliament in what the electors as well as water consumers require as a result of privatisation and what protection is to be afforded them. At the moment the Bill provides them with virtually no protection. Now is not the occasion to pursue the argument. With the assurance that this matter will be returned to at Report, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 345A not moved.]

The Earl of Caithness moved Amendment No. 345AB:

Page 85, line 27, leave out subsections (5) and (6).

The noble Earl said: With leave of the Committee, I shall speak also to Amendments Nos. 350A and 450A. Much of what I have to say is relevant to Amendment No. 355B in the names of my noble friend Lord Jenkin of Roding, Lord Elliott of Morpeth and Lord Nugent of Guildford. Indeed, they may wish to discuss their amendment now; the Committee, I am sure, would find that acceptable.

During the consideration of the Bill in another place the Government undertook to consider evidence about the basis on which infrastructure needed to provide water services to new customers is funded. In reply to a question from my noble friend Lord Kimball I announced on 11th May that the Government have concluded that a right to charge at the time new connections are made to water mains and public sewers would provide a clearer, fairer and more certain basis for ensuring that infrastructure is provided. These amendments are intended to provide for such charges to be made. As I also announced, we intend to impose a ceiling on the level of charge that can be made, related to the investment costs of the companies.

The principal amendment is Amendment No. 350A which inserts a new clause after Clause 77 bringing together restrictions on the powers in the Bill to make charges. Thus subsections (3) and (4), concerning restrictions on requiring payments for vesting declarations under the Public Health Act 1936 and for highway drainage respectively, replace similar provisions in subsections (5) and (6) of Clause 74 which are therefore deleted by Amendment No. 345AB.

Subsection (1) of the new clause clears the deck for the new power by providing that no other enactments are to entitle water or sewerage undertakers to make initial charges for becoming the provider of domestic water supply or sewerage services to new customers. Subsection (2) then provides that the restriction in subsection (1) shall not prevent charges for connecting premises to water supplies or to public sewers for the first time.

Subsection (5) provides that charges under other powers to recover expenses in carrying out works are unaffected, as are the powers in Clause 74(3) to fix the amount of any charge not restricted by the new clause by reference to such matters as the undertaker considers appropriate. Thus, for example, charges may be made for the expenses incurred by a water undertaker in making the actual connection between a customer's supply pipe and water main.

The new clause also leaves unaffected the provisions in Clauses 40, 41, 70 and 71 for requisitioning new water mains and sewers. Our intention in placing a ceiling on the charges that may be made under the new power is to see that, through the charge, newly-connected customers for domestic water supplies or domestic sewerage services, as a group, meet the investment costs of the undertakers in providing additional capacity at treatment works, in reservoirs and trunk mains, and so on, incurred because of the additional demand from these new customers. Any items of investment covered by the requisitioning provisions will be excluded from the assessment of the costs to be recovered.

In the case of new development, it will be the developer who has to pay the charge at the time the connection is made to the main or sewer. The ceiling will be set, in a condition of appointment, as a maximum amount for connected premises, an amount per dwelling in the case of residential property such as a block of flats. In the case of existing properties, an option to pay the charge over a period of years will be available. The level of the ceiling will be reviewed from time to time by the director. In both cases the charge should help to ensure restrictions on finance are no longer seen as a reason for delay in providing infrastructure to serve new customers. It will also be clear that existing customers are not providing a subsidy. Furthermore, the need for individual agreements to pay for infrastructure associated with the granting of planning permission will be unnecessary.

Amendment No. 450A amends Clause 187 to provide for the new clause to be brought into effect by a commencement order under Clause 187(4). Our intention is that the power to charge in respect of new connections should come into effect on 1st April 1990. I beg to move.

Lord Jenkin of Roding

I must immediately express my thanks and those of my friends Lord Nugent of Guildford and Lord Elliott of Morpeth that the Government have moved so swiftly and so decisively to accept the main point of the new clause which we tabled to provide for what used to be called a connection charge but which I believe is better called an infrastructure charge, because that describes more accurately what this is about. I can be exceedingly brief, much briefer than I should have been had I been moving my new clause.

I have felt for a number of years that the apparently arbitrary incidence of charges which can be made for the connection of new premises is most unfair. In many cases substantial capital expenditure is imposed on a water or sewerage undertaker by reason of new development. Much of the cost of that has to fall on existing consumers. Only in the last two or three months have I become aware of this, if I may make a personal point. At my house in Essex the charges by the local water company have increased very sharply. The reason given is that heavy costs are being incurred because of the need to extend supplies to the development around Stansted airport. Not only are the local inhabitants having to endure the additional noise overhead, they are also having to pay for all the additional expenditure under ground as well. That does not seem to be fair.

There have been provisions under the Section 52 agreements and in other parts of the planning legislation whereby local authorities have been able to insist on certain charges being paid. However, if the local authority chooses not to do so there is nothing which the water undertaker can do. It must connect and provide the facilities to connect the new development and then recoup the cost by increasing the charges to its existing consumers.

Although worded in a negative and somewhat upsidedown way, my noble friend's new clause meets that point completely and we welcome it. It will prove to be a much fairer way of covering the cost. To a modest extent it will also reduce the value of the factor K in the pricing formula that will be applied under the Bill. I warmly support the Government's amendment. When we reach the amendment tabled in my name and that of my noble friend I shall not move it.

Baroness Phillips

I should like to ask the noble Lord, Lord Jenkin, one question. As I understand capitalism in operation, if you instal more outlets, the product eventually becomes cheaper because more people take it. Why does that not operate in the case of water? If more people are drawing off water and using the sewerage, surely it should become cheaper and not more expensive. The noble Lord appears to advance a strange argument; that because he personally had to pay the charge there is something most unfair about it. The whole system under which we shall operate is unfair; therefore it is curious to try to single out one example. I am interested to know why he does not argue his own case. As I understand it, Marks and Spencer's goods become cheaper as it makes larger quantities to sell to customers. Why does that not apply to water?

Baroness Nicol

I hope that the Committee will forgive me if the answer to my question is included in the amendment and I have not spotted it. Can the noble Earl say what will happen to a single rural consumer living in a cottage who wishes to be connected to the mains supply? Does the amendment mean that he must pay the entire cost of having water piped to him in the cottage?

Lord Jenkin of Roding

In response to the noble Baroness, Lady Phillips, I understand that exactly that problem arises under the present rather haphazard scheme. Some local authorities will oblige a developer to pay an infrastructure charge when the water authority first installs a new facility. Thereafter new developers will argue that the facility already exists and that they do not need to contribute. The cost will be put on to some other new developer only when a further extension is required.

The result is that the impact of costs between successive developers, which may be nappening in the growth of a new town or the expansion of an existing town, falls in a totally haphazard way on the successive developments and therefore on the purchasers of the buildings in those developments. This system will allow an area-wide connection charge. That perhaps meets the point made by the noble Baroness, Lady Nicol. It will not relate to the individual charge but there will be a charge over an entire locality which will stand for a number of years. That is as I understand the scheme proposed in the Government's amendment. In that case it means that it will not be arbitrary except in the sense that it will be a flat rate charge per dwelling for the connection of water and sewerage. In that respect it will be a much fairer and certain way of removing the uncertainty which has surrounded the entire subject over many years.

Lord Ross of Newport

I have a great deal of sympathy with what has been said about the new development. However, one would be more at ease if one knew the rate of charges about which we are talking. For example, I had a commercial building in which there was a burst pipe. We could not replace the pipe because it would have meant digging up the concrete foundations. Therefore I had to pay over £300 to the water authority in order to make a new connection. At least I knew what the charge was; it was a fixed charge of £300 before it would open up the mains and I could obtain an outside contractor to put in a new supply. I am wondering which charge we are discussing.

The noble Baroness, Lady Nicol, asked a question. The clause talks about individual properties being connected for the first time, but I believe that the noble Lord, Lord Jenkin, was talking about developments. I have great sympathy because I believe that the developers should pay where there is a need to extend sewers and water supplies to new buildings.

It would be helpful to have an idea of the additional cost. I do not imagine that the Secretary of State can tell us because it has yet to be fixed by the Director General of Water Services or the Secretary of State—I am not entirely sure. It would be interesting to have an idea of the ranges of finance about which we are talking.

6.15 p.m.

Lord McIntosh of Haringey

I should not rise at all because clearly I am exposing my ignorance. I read the new clause in Amendment No. 350A as being a restriction on the power to make connection charges. It is described as such in the side heading. As a result of the Minister's speech I was not clear that the opposite was the case.

The noble Lord, Lord Jenkin, is describing it with pleasure as being a clause which permits the making of connection charges or, as he calls them, "infrastructure charges". I have tried hard to understand the basis of the new clause in Amendment No. 350A. I should like to test my understanding on the Minister to see whether I am right. Am I right in believing that under the clause it is not possible to make a connection charge where there has already been water or sewerage supply and that it is possible only where there is a completely new supply of water or a connection for drainage purposes? Therefore, developers of new property and new estates will be charged the full cost of connection and existing water consumers and users of sewerage facilities will not be charged for them. If that is the case, I believe it to be right. It is correct for developers to be charged and not existing consumers. However, I could not read that in the clause.

The Earl of Caithness

I am grateful for the words of my noble friend Lord Jenkin of Roding and also for his indication that he will not move his amendment, which tries to achieve the same as the Government's amendment. I am grateful to him for his support.

The noble Baroness, Lady Nicol, raised the question of the isolated rural cottage. Yes, there will be a connection charge when one is taking on a new supply because one is extending the existing system. I believe that that reply also meets the point made by the noble Lord, Lord McIntosh.

The amendment is talking about either existing properties which have not been connected and wish to be so under a requisition order or a new development. It is difficult—almost impossible—to imagine a situation where the connection to one isolated rural cottage will mean anything other than an extension of the existing system. However, one can well imagine the situation on which my noble friend Lord Jenkin and the noble Lord, Lord McIntosh, wish to concentrate. For instance, the large amount of development at Stansted may well necessitate not only an extension to the existing system but new facilities, new sewerage works and an increase in the water supply, involving additional capital costs. I believe that that covers the point and meets the concerns. That is why it is so difficult for me to tell the noble Lord, Lord Ross, what sort of figures we are talking about. With capital works of this kind, until one knows the size of the works and what is involved it is very difficult to give any sort of charge for the connection to be made.

Lord Stoddart of Swindon

I am still rather puzzled as to what this really means. We hear about connection charges; then we hear about infrastructure charges. Exactly what is meant by that? How are the charges to be levied and assessed? I understand that when new development takes place in an area, it may well be that it is not just a question of connecting up to the existing mains: it may be that new sources of water have to be developed and new storage capacity and new treatment works provided. Is it the case that under those circumstances, if they have to be provided, the developer will be required to make a contribution through a connection charge, or whatever other means, to those works? Is that what this is all about? Perhaps the noble Earl can enlighten me.

Lord McIntosh of Haringey

While the Minister is considering that, I am still concerned by his response to the noble Lord, Lord Ross. I quite understand that it is not possible to put a figure on this matter, but the question then arises as to whether there is any limit. That is a rather different question. Is there not a risk in this new clause that the water and sewerage undertakings might be in a position to hold to ransom those who wish to have supplies to individual properties or to estates?

The Earl of Caithness

The noble Lord, Lord McIntosh, raises an important point to which I shall return in a moment. I believe that the noble Lord, Lord Stoddart of Swindon, is absolutely right in what he says as regards the great majority of cases. When we are talking about a new development involving increased infrastructure costs, those will have to be paid. However, as I explained to the noble Baroness, Lady Nicol, where somebody is not on an existing mains supply but is possibly on a private supply or is connected to a cesspit or a septic tank then there will be a connection fee. Therefore, we are talking about two matters. The great majority of what we are talking about will be new infrastructure costs.

I should say to the noble Lord, Lord McIntosh, that there is a limit, as I said when I spoke on the amendment, as to how much can be charged. That is specifically so that we do not have the ransom situation of which he spoke.

Baroness Phillips

Can I ask the Minister another question? Throughout London we are cursed—I hope to mention this in Wednesday's debate on traffic—with property developers. In practically every street in the centre of the city, buildings are being pulled down and larger and higher buildings built. Therefore, more electricity, water and gas are used because there will be more tenants. There is no new infrastructure apart from being new in the sense that it has replaced the old. Let us take Grand Buildings at Trafalgar Square. An enormous superstructure has been built. I should be interested to know whether new sewers are to be built. I doubt it. Is a different sort of water system to be installed? I doubt that. Is that regarded as something new for which a charge will have to be made?

The Earl of Caithness

Although the noble Baroness despises the development, it is a sign of the growing prosperity of the country. Surely, in some cases that is to be welcomed. As housing Minister, I am very pleased to see some houses demolished to give way to new houses better suited to the accommodation of people's needs.

Baroness Phillips

Perhaps the Minister will give way. These are not houses but offices which are sold at a ridiculous price—something like £44 per square foot. I am not talking about houses and the Minister knows that. I am talking about blocks of offices which grow higher and higher, are occupied by more tenants and therefore use more water and require more sewerage.

The Earl of Caithness

The noble Baroness clarifies her remarks. But offices do provide opportunities and jobs which people want. Therefore, there are both sides to that argument. Of course, if there is an increase in the use of facilities, which will be the case in some instances, leading to a further capital cost, then that will be taken into account. The powers by which the non-domestic water supply and trade effluent services are provided, which is very much what the noble Baroness is talking about, are sufficiently flexible to ensure that new customers for those services pay their way. Like customers for domestic water services, that is, water for cooking, hygiene, and disposal of domestic sewage, new industrial and commercial connections will pay a charge.

Lord Stoddart of Swindon

I believe that my noble friend Lady Phillips has raised a most important point. It could very well be that a block of offices rises from five storeys to 15, 20 or 25 storeys, in which case considerably more water will be used. That will involve infrastructure costs, not necessarily at that site or even in the vicinity. It could happen at the Kennet Valley, for example, where additional pumping may have to be installed to pump even more of our sweet water out of the green sand and chalk of that beautiful valley into the River Thames, drying up all our rivers and otherwise hurting the environment and the wildlife, merely to supply those 15 or 25 storey office blocks. That is an infrastructure charge; it is also a charge on the environment. I believe that my noble friend asked the Minister whether those people will be made to pay the costs of the infrastructure and also the costs of restoring the environment.

The Earl of Caithness

It may very well improve the environment because it may lead to a new reservoir, which the noble Lord wants, on the flight path of a rare species of duck or geese which will winter there. However, the noble Lord has a valid point. I repeat what I said to the noble Baroness. Those people will have to pay the costs.

On Question, amendment agreed to.

Lord Addington moved Amendment No. 345B: Page 85, line 38, at end insert— ("(6A) The Secretary of State may by regulations make such provision supplementing the provisions of this Act, as appears to him appropriate, with respect to charges by undertakers and in particular to require water undertakers and sewerage undertakers to include with any demand for payment such information about the fixing of charges as may be specified in the regulations.").

The noble Lord said: The principle behind this amendment is simple and straightforward; namely, consumer information. The amendment seeks to require the Secretary of State to make regulations about water charges and the particulars of those charges and to make the information available to the customer when he receives his bill.

I do not believe that it is at all unreasonable that someone should know exactly what he is paying for. I cannot think of any other sphere of goods and services required—in this case, the good of the water itself, piping and sewerage—where one would not know exactly what one had purchased. I beg to move.

The Earl of Arran

This amendment, proposed by the noble Lord, Lord Addington, seeks very wide powers indeed. No limit is placed upon the regulatory content of the regulations that could be made. There is no distinction drawn between regulations applying when initial appointments are made and subsequent regulations amending the framework of charging for existing appointees. The amendment ignores the role of conditions of appointment which we debated during consideration of Part I of Chapter II of the Bill: regulations would in fact cut across the role of the director general in regulating charges.

Clause 7 requires the Secretary of State and the director general to use the powers in Chapter I of Part II in the manner best calculated to ensure that the functions of the undertakers are properly discharged and that customers' interests are protected. That is to be achieved through conditions of appointment which the director is to enforce and to keep under review, modifying them where necessary either by agreement or following a reference to the Monopolies and Mergers Commission. Those parts of the Bill have already been debated and stand part of the Bill. This amendment takes us right back to the earlier debate about which model to follow for regulations. In effect, this is a proposal to make the Secretary of State responsible for economic regulation, a proposal which we should again reject.

Conditions of appointment will provide a sound framework for regulation of the powers in Clause 74, allowing full protection of customers' interests. Such conditions can in particular provide for information which customers should receive. It is for those reasons that I ask the Committee to reject this amendment.

6.30 p.m.

Lord McIntosh of Haringey

Before the noble Lord, Lord Addington, decides what to do about the amendment perhaps I may intervene. The Minister has picked on what I take to be a defect in the wording of the amendment, which states: The Secretary of State may by regulations make such provision & as appears to him appropriate, with respect to charges by undertakers". It is that final phrase that the Minister is using to say that the amendment re-opens the whole question of the relationship between the Secretary of State and the undertakers on charging. In so far as the amendment seems to extend the role of the Secretary of State as opposed to that of the director general in regard to charging, I support the Government and not the amendment. However, in moving the amendment the noble Lord, Lord Addington, ignored that phrase and spoke about the requirement for water and sewerage undertakers to include with any demand for payment information about the fixing of charges. That seems to me an entirely reasonable point to which the noble Earl did not reply. Perhaps he will feel able to do so before the debate is concluded.

The Earl of Arran

If it will help the Committee further, I shall expand on the provision of information which the noble Lord, Lord McIntosh, seeks.

The existing regulations (Statutory Instrument No. 1048 of 1988) made under Section 5 of the Public Utility Transfers and Water Charges Act 1988 about information to be provided with bills to metered customers will be saved by virtue of paragraph 16(6) of Schedule 25 of the Bill. The information to be provided includes any code of practice adopted by the undertaker, conditions relating to the testing of the accuracy of meters and a statement about the method of proof and effect of meter reading, liability for charges after ceasing to occupy metered premises and offences of tampering with meters. The need for a specific provision in the Bill to provide information is no longer necessary because it will be a requirement under condition F of the instrument of appointment. This requirement provides for each company to prepare a code of practice containing details of tariffs, the payment of bills, procedure for handling complaints and various information about metering, including the statutory responsibilities of metered customers. I hope that information will assist the noble Lord.

Lord McIntosh of Haringey

I have no responsibility for this amendment. I shall have to read carefully what the Minister said. On the face of it, his reference to last year's Bill refers only to metered customers, but if I discover that there is something in Schedule 25 to the Bill which refers, as I understand it, to transitional provisions and savings which gives the assurance that I seek, I shall be happy to agree to that. However, I should have preferred an assurance from the noble Earl that the Government are sympathetic to the idea not just for metered customers and on a transitional basis but for information about the basis on which charges are fixed to be disclosed to customers with their bills. Can he give that assurance?

Lord Ross of Newport

That is exactly what we are seeking in this amendment. I accept the earlier comment by the Government that we are going back to the Secretary of State and to regulations and I accept that that is not what we are after. We are looking to what happens when the local authorities send out rate demands. They pinpoint on that demand where the money has gone—how much to the county council, how much on education, how much spent by the borough or district council making the rate demand and so on. We are seeking assurances that when the water undertakers send out their bills similar information will be given to consumers so that they know exactly how the charge is made up.

The Earl of Arran

I do not think that I can add to what I have said; that is, that the need for a specific provision in the Bill to provide information is not necessary because there will be a requirement under condition F of the instrument of appointment.

Lord Tordoff

I am sorry to tell the Minister that that does not touch on either of the points made by the noble Lord, Lord McIntosh, or by my noble friend in relation to the way in which charges are made up. His reply goes back to the answer given by him earlier which does not deal with the fundamental issue we seek to raise on this amendment. Can he think again?

The Earl of Arran

Perhaps I can encapsulate this matter and say that the code of practice must be approved by the director general.

Lord McIntosh of Haringey

Do the Government believe that it is a good thing for consumers to be told the basis on which their water and sewerage charges are fixed?

The Earl of Arran

Obviously as much information as possible for customers is a necessary state of affairs, but the point is that we feel that sufficient information is already contained under the instrument of appointment.

Baroness Blatch

Is it not true that the code of practice referred to by my noble friend the Minister will include information about tariffs and such other terms on which those services are provided? This includes information about payment of bills, about handling complaints, about testing and accuracy of meters, about emergency procedures and about the functions of the service committees, and there will be a requirement to put all this information to the director, and in addition to the customers when charges are sent out.

It seems to me that the Bill contains a comprehensive set of information data for the customer which includes much of what the noble Lord, Lord McIntosh, is asking for.

Lord McIntosh of Haringey

I do not have the draft code of practice in front of me and I bow to the noble Baroness who has that document in front of her. I certainly agree with her that it contains the information to which she referred, but I did not understand that all these matters must be provided to customers with their bills. If that is the case, we shall not raise the matter again.

Lord Addington

Having listened to what has been said by the Minister I am not entirely happy with the situation. I still feel that there should be a right to have a full breakdown. However, as there is an error in the drafting of the amendment, I should like to read what has been said and reserve the right to return to the matter at a later stage. In the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 74, as amended, agreed to.

Clause 75 [Charges schemes]:

[Amendment No. 345C not moved.]

Lord Stanley of Alderley moved Amendment No. 346: Page 86, line 28, leave out ("or localities").

The noble Lord said: With permission, I shall speak also to my Amendment No. 348. The purpose of these amendments is to ensure that when setting charges the new plcs will not discriminate against rural consumers—or, indeed, consumers at the end of a long line—compared to others in the same water plc because it costs more to supply them.

In a preamble to this problem on my Amendment No. 85, my noble friend Lord Caithness drew my attention to model instrument condition (3). I believe that we both made a mistake and that it is in fact condition D(2). I fully accept that this condition is helpful; but, sadly, it is not as helpful as my noble friend tried to tell me that evening because of the reasons kindly given in another place by my honourable friend Mr. Howard. The Minister said: If there is a pattern of wide differences in the cost of providing services, we do not propose a ban on recognising those differences in the standard tariffs for different areas, but if there are greater increases in charges in one area, there will have to be smaller increases elsewhere to comply with the conditions of appointment. The differences must be justifiable. It will not be possible simply to pick off arbitrary groups of customers for unjustifiable price increases".—[Official Report, Commons, 21/2/89; cols. 1263–4.]

Perhaps I may point out that earlier in that debate in another place my honourable friend said that he would be very concerned if rural areas were discriminated against. But his statement that I have just read out makes it crystal clear that, despite model clause condition D(2), it will be possible for water plcs to raise their charges to cover additional costs—for example, in the case of a long service pipeline to a village on a hill—so long as those increases are not arbitrary and are offset by lesser increases elsewhere. I require two assurances from my noble friend on the Front Bench. The first is that I have misinterpreted or misread my honourable friend's remarks in another place. The second is a commitment that the smaller, faraway places are vitally important to this country as a whole to maintain and not to price against. To be fair to my noble friend, perhaps I may say that on this occasion I feel quite strongly about this matter. I beg to move.

Baroness Nicol

I support the noble Lord, Lord Stanley, in this amendment. Rural communities are already disadvantaged in many ways regarding urban dwellers. They have seen the collapse of the public transport system in many rural areas. They have seen house prices soaring as car-borne workers from the cities come to buy houses and put them beyond the price affordable by residents in rural communities. The Government are constantly arguing that water is no different from any other commodity. We have tried to prove otherwise, but the Government have refused to accept it.

A rural community dweller can post a first-class letter for 19p and no one considers that it should be otherwise even though the postman has to go a long way. He also pays roughly the same per unit of electricity (though that may change) and per therm for gas. There seems to be a very strong argument for saying that once the rural dweller has met the initial higher cost of providing water (which we are told he will have to do from now on) the charges he has to pay for that water should not be any greater than for those who live in an urban area. I am glad to support the amendment.

6.45 p.m.

Lord Walston

I support both the amendments on the grounds that the noble Baroness has so ably put before the Committee. Throughout the British Isles the rural community as a whole is in a state of flux at the moment. There are enormous changes taking place in their main source of income, which is agriculture. There is also an enormous decrease in the number of people needed to produce food. As the noble Baroness has said, there is an enormous increase in the number of people coming into rural areas who are not necessarily turning villages into dormitories; but because their resources are greater, they are making it very difficult, if not impossible, for those people born in the villages to acquire houses there as they grow up, marry and wish to bring up a family. From time to time (perhaps not often enough) the problems concerning rural depopulation, the closure of village schools, and matters of that kind, are discussed by Members of the Committee.

It is imperative that we have in this country a real policy for rural renewal depending on which part of the country it is; namely, whether it is Wales, Scotland, the Peak District or in certain areas of East Anglia. There should be a policy to ensure that these vital areas for the national life as a whole are given the opportunity to change according to changing economic circumstances. A new form of viable economic and social life should be created.

Water is only one example, but a very significant one. To make different and higher charges for those who happen to live in remote areas—particularly those areas which we all wish to see encouraged to maintain their populations and to expand the opportunities for worthwhile employment—will be to put increasingly adverse handicaps on those areas. I hope that is being done without realising it; but in doing so, we are doing a grave disservice to the general policy which I believe to be shared by the Government, by all sides of the Committee and throughout the whole country. The two amendments appear to be a vital part, but a relatively small part, of ensuring that the process that we all deplore does not accelerate in years to come.

Lord Middleton

I join with the noble Lord and the noble Baroness who have just spoken in expressing anxiety regarding Clause 75(3)(a). I agree that it would not be right for a water undertaker to use this clause to vary its charges by making, in the words of the Bill, different provision in relation to different circumstances or localities", so that higher charges are imposed on rural consumers. When I referred to this matter during the Second Reading debate, I compared such action as being just as wrong as making persons in remote areas pay a higher charge for postage because the postman had further to travel. I recognise that that was not a very accurate comparison. I see force in the argument that consumers in rural areas, by excessively high differential pricing for water, might be driven back to traditional but less reliable sources. Some of the old private supplies are first-class but some are not. The increased use of them would carry with it the need to monitor and remedy faults at a multitude of sources with all the costs that will arise as quality standards are tightened. The water companies' supplies will have to be pure and reliable, and people in remote areas should be encouraged to use them and not be priced out of using them.

Lord Renton

I certainly believe that for domestic consumers there should be a flat rate in each area, and I do not see anything to stop it. As regards industrial and other users, I can see that if it is a very distant place from the main places to which water has to be supplied, the cost of taking it to that very distant place may be considerable. For a particular industry, factory or undertaking, the consumption of water could be quite considerable. Even so, as regards domestic consumers even though it may be a long distance away, there should be a flat rate.

The Earl of Caithness

My noble friend Lord Stanley said that he feels quite strongly about these amendments. I have never known him to move an amendment about which he did not feel strongly. Both the amendments would have quite an effect. The major concern has been voiced about rural areas, but I think that it is wise to draw to the Committee's attention the full consequences of the amendments.

The effect of both amendments is essentially the same. Amendment No. 346 would remove the ability of an undertaker to make a charges scheme which would make different provision for different localities. Subsection (3)(a) echoes Section 3(2) of the Public Utility Transfers and Water Charges Act 1988. That Act provides that the companies, may make different charges for the same service, facility or right in different cases". That was agreed by noble Lords.

Subsection (3)(a) simply makes explicit an existing implicit provision to differentiate charges by area, under which power some authorities already make different charges in different divisions of their regions to reflect different average rateable values. This power is used to even out the charges made to customers in similar properties throughout the authorities' areas. I take it that my noble friend would not wish that practice to cease.

Amendment No. 346 refers to subsection (4), which provides that charges schemes should not prevent an undertaker from entering into agreements with customers or potential customers to determine charges for services or for agreements concerning trade effluents. The amendment would require that such agreements should be at the same level for the same level of service throughout the undertaker's area.

Subsection (4) ensures that charges schemes do not interfere with the powers of undertakers to enter into agreements individually; for example, where they have special needs. The service provided will be tailored to suit each customer's needs and may in some circumstances require a capital contribution from the customer in order that a suitable service might be provided. It will be very hard to judge how the amendment could apply fairly in the case of a very large supply of water to an industrial customer, a point so well made by my noble friend Lord Renton.

The services provided by agreement by their very nature tend to be different and therefore the charges must be different to reflect those different circumstances, but they are not so different that the amendment would not impede agreement of sensible terms. In the case of large customers I see no reason why the charge should not reflect the specific cost of providing the service.

Those are some consequences of the amendment to which no noble Lord, apart from my noble friend Lord Renton, made reference. There was concern that the provisions of the Bill could lead to unfair increases in charges to rural customers. This is not the case. The answer lies partly within Clause 7 and partly in the model instrument of appointment. Condition B of the model instrument of appointment contains a charging formula which requires that increases in charges for a basket of services must not increase by more than an amount linked to the retail prices index. The basket comprises water supply and sewerage services and trade effluent services set at standard rates. Condition D prohibits undue preference or undue discrimination between classes of customer.

This means that if there are variations in the cost of providing services in different areas, although we would not propose a ban on recognising those differences, because of the fixed size of the basket, if charges were increased in some areas there would have to be a relative decrease in other areas to comply with the conditions. Any differences that arose would have to be justifiable and it would not be permissible to discriminate against a particular group or groups of customers for unjustifiable increases.

I think that my noble friend's concern is met by that point because he is worried about an arbitrary decision against a rural area; a farmer in a rural area is particularly on his mind. It has to be justified and a differential cannot arise for any unjustifiable increase. Taken together, therefore, the general duties under Clause 7 and the conditions of appointment provide a clear and unambiguous protection of customers', including rural customers', interests.

Lord Renton

My noble friend has referred to Clause 7. I have looked back to it but I cannot see anything in the clause which specifically carries out the obligation to have what I can only describe as even dealing between different types of consumer in the same locality.

The Earl of Caithness

It is not Clause 7 on its own but a combination of Clause 7 and the model instrument of appointment. My noble friend is right. Clause 7, which we debated at length earlier in the Committee stage, deals with general duties with respect to water supply and sewerage services. One has then to look at the model instrument and at conditions B and D to tie the whole thing together.

Lord Wise

Perhaps I may make one point for clarification. I am still not absolutely sure whether as a consumer living in a cottage on top of a hill I could pay more for the water that I consume than a friend living in a town 10 miles away. I am not sure about that.

The Earl of Caithness

My noble friend might be paying more or might be paying less at the moment.

Lord Stanley of Alderley

We have made progress because we have now had an absolutely categoric statement from the Minister that we might pay more or we might pay less and that we could be differentially charged against. This is very different from the story we had when the matter came from another place. We have achieved something. At least we know where we are. It is quite clear that the plcs will be able to charge more for rural, outlying places than for towns, a point raised by my noble friend Lord Wise. Consumers may well pay more because, as my noble friend Lord Middleton said, the cost is so high that a great many people will go onto private supplies and the matter will become even more difficult. That is why I bring up my next point. I understand that the large consumer may have to pay different charges but I suspect that the plcs will prefer to make more money out of a large consumer of water than a small one.

My noble friend brought me back to this wretched model instrument over which we had such ado when we discussed Clause 7. It does not help me very much. The worst part of condition D(2) is the word "undue". It means anything you like to make it, as he honestly replied. I am surprised that my noble friend mentioned Clause 7 because it is the clause I dislike intensely. It gives the director a prime responsibility for ensuring a return on capital rather than for the interests of me, the consumer. I am not talking about the farmer. I am talking about a small village up on the hill. If my noble friend would like to take that out on Report I shall go away perfectly happy and not bother him at all for the rest of the time.

I know where we stand. I am grateful to the Minister for being so straightforward and for answering those questions. I shall come back to it at Report because I am not happy. I am grateful for the help of the Committee and I thank my noble friend for making it quite clear to me where I stand.

The Earl of Caithness

With respect, I think that my noble friend does not know where he stands. He is deliberately misinterpreting what I said. Condition D prohibits undue preference and undue discrimination among classes of customer. I repeat that the charge to the village on the top of the hill cannot be varied unjustifiably from what it is at the moment, because of the basket in model conditon B. That is his safeguard. It is the one thing that he dislikes but it is the one thing that safeguards him.

My noble friend now dislikes Clause 7. That would leave the people on top of the hill in an even worse situation. If we were to delete Clause 7, we should delete subsection (2)(a), the purpose of which is, to secure that the function of a water undertaker and of a sewerage undertaker are properly carried out". I pity the poor people in my noble friend's village if we were to delete that clause.

7 p.m.

Baroness Nicol

Before the noble Lord withdraws his amendment, can the Minister enlarge a little upon what he considers to be a "justifiable" expense in this case? I am not at all clear as to what he means. If one looks at the matter coldly, it would be justifiable to say that because the water has to be pumped a few miles without anyone taking anything off and paying for it, the undertakers are justified in charging very much more per gallon, per litre, or however the cost will be assessed. What is a "justifiable" increase, therefore?

The Earl of Caithness

That is linked in the basket to the Retail Prices Index. I believe that it would be a matter for discussion with the director general, who has a duty under Clause 7(3)(a) to try to avoid undue discrimination, which is the concern of the noble Baroness. However, let us not forget that the village on the hill might well be benefiting and have a lower charge at present than is the case in the urban situation.

Lord Tordoff

Before the amendment is withdrawn, perhaps I may draw the noble Earl's attention to a phrase which he used just now. He suggested that his noble friend had deliberately misunderstood something which he said. In my view that is not a very felicitous phrase to use in this House. I wonder whether he might reconsider the matter. I know that it was said with the best of intentions, but I think that it will perhaps not look too well on the record.

The Earl of Caithness

Perhaps it was not a very felicitous phrase to use; I withdraw it unhesitatingly, and apologise to my noble friend.

Lord Stanley of Alderley

I very much regret the fact that my noble friend is withdrawing that phrase. I expect that kind of remark. I also expect that I am sometimes somewhat naughty in trying to put words into his mouth which he does not really want to have put there. In conclusion all I say to my noble friend is this. I suggest to him that, if he will take out Clause 7(2)(b) as opposed to Clause 7(1)(a), then I may be just a little happier. We cannot go futher on the matter at this stage but I hope that my noble friend and I shall be able to discuss the matter between now and Report stage. Perhaps we can introduce something better into the model clause, especially in regard to condition D(2). In the meantime, I thank Members of the Committee for their help and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Earl of Arran

Members of the Committee may consider that this is an appropriate moment at which to break for dinner. I suggest that we return to the Committee stage of the Bill at 8.5 p.m. I beg to move that the House do now resume.

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

House resumed.