§ 4.8 p.m.
§ The Parliamentary Under-Secretary of State, Scottish Office (Lord Sewel)
My Lords, with the leave of the House, I will repeat a Statement which has been made in another place by my right honourable friend the Secretary of State for Scotland. The Statement is as follows:
"With permission, Madam Speaker, I wish to make a Statement about the outcome of the Government's review of the Scottish water and sewerage industry.
"As honourable Members will know, our manifesto contained a commitment to return the Scottish water industry to local democratic control. In my Answer of 5th June, I said that I had asked my officials to conduct a review of the water industry and to report to me by November, which they have done. The review team had extensive consultations with the three water authorities, CoSLA and the Scottish Water and Sewerage Customers Council. We also issued a public consultation paper, which produced 91 responses. I am very grateful to all who responded so constructively, and I shall place their responses in the library of St. Andrew's House. The review team also held discussions with a variety of other interests and commissioned research into water industry models across the world. We listened very carefully to what has been said before reaching our conclusions.
"In conducting the review we were guided by a number of important principles. Apart from the central theme of improving democratic 520 accountability, we also wanted to facilitate investment, promote efficiency, ensure continuity of public water supplies, protect public health and minimise disruption to the industry. The importance of these principles, and the importance the industry has for all of us in our day-to-day lives, has been demonstrated only too dramatically by events in recent days in the West of Scotland. These events are very serious, not least in terms of the severe dislocation caused to everyday life for some 60,000 people. I can announce today that Mr. Robert Fraser, a distinguished figure in the water industry and until recently Director of Water and Drainage for Borders Regional Council, will lead an exhaustive enquiry into the circumstances. I have asked Mr. Fraser to address the following points: first, to review the causes, nature and extent of the disruption to public water supplies in the area served by Burncrooks water treatment works, including the impact on the vulnerable sectors of the population, food industries and other water users; secondly, to review West of Scotland Water Authority's response to the incident; thirdly, to consider the lessons to be learned for the future from such an event. In particular, whether advice to the public needs to be given at an earlier stage, whether better arrangements need to be made for the provision of alternative supplies of drinking water, and whether improved arrangements are required for co-ordination within the public authorities, and with the media; and, fourthly, report and make recommendations.
"I fully understand the great public concern and the sense of irritation over this incident. I have spoken personally to both the Chief Executive and Chairman of West of Scotland Water today. Contamination levels are falling steadily, and I understand that 17,000 out of the 22,000 households originally affected now have clean water. I have been assured that lessons will be learnt, but I shall want to look hard at Mr. Fraser's report. Because of the urgency of getting the facts and learning the lessons, I am anxious to have a tight but realistic timetable, and have therefore asked for the report to be completed by the end of March. I shall not make judgments before I see the report, but if further action is required I shall not hesitate to take it.
"This episode does, nevertheless, serve to remind us that the water industry faces two immediate and major problems. First, there is the question of water purity, with the stark fact being that the purity of Scottish water is far down the UK league; indeed, the three authorities are in the bottom five when comparisons are made across the UK. The second is the chronic need for investment, especially in sewerage, to meet the requirements of European directives. The fact is that while the period of local authority control is looked back on as a period when the ownership of the industry was most generally acceptable, we have to accept that the infrastructure, often Victorian, was allowed to decay, and the consequences now mean that very great sums are required to bring the industry to a satisfactory level. 521 We have to consider how we can best assist the industry in the task it has to meet the real demands ahead.
"I turn now to the various options which emerged during the review. We looked carefully at a wide range of proposals for the industry. Splitting the three authorities up between the 32 separate unitary councils was quickly ruled out. It is clear that disturbing the three authority structure would have disproportionate costs.
"A leading option, however, was to seek to improve accountability by transferring responsibility for water and sewerage services to joint boards of local authorities. Joint boards can be an effective way of providing strategic services, and the water authorities undoubtedly provide a vital public service. However, the water authorities are also large businesses with massive investment requirements, and just three authorities cover Scotland's 32 local authorities. I have therefore had to reject this approach. The last local government reorganisation made these options virtually impossible.
"We also carefully considered the imaginative case advanced by some consultees to convert the public water authorities into private, non-profit distributing companies such as mutuals. Such bodies would be freed from the capital controls of the public sector. But at a cost. That cost would be freeing them from answerability to any democratic body. I do not believe that is what the Scottish people want. It would be entirely outside the public sector—effectively it would be privatised. A mutual would be nominally controlled by its membership, but how effective control over the boards would operate is much less clear. I am also not convinced that a mutual, monopoly water authority would be under sufficient pressure to be efficient, as all experience tells us that individual customers would not be motivated to protect their interests. Nor am I convinced that unwelcome pressures to demutualise could be avoided. In the short term it would be very disruptive for the industry. I have therefore also had to reject this way forward.
"Despite this, it is clear to me that, if the investment needs of the Scottish water industry are to be met at a cost the consumer can afford, we shall need to harness private capital and expertise, within a framework of continuing public accountability. Let me first deal with the crucial issue of accountability.
"Since we launched the review, the Scottish people have given a resounding endorsement to the parliament. Our White Paper on Scotland's parliament made clear our concerns about the number of public bodies in Scotland being run without clear democratic oversight. It said that we saw the new parliament as the means of bringing them under strengthened democratic accountability. Responsibility for the water and sewerage industry will pass to the Scottish parliament. In the longer term it may wish to look again at some of the arrangements for change, but these could not and should not be 522 options for today and tomorrow. In any event. I would expect that it will wish to allow the system to settle and perform before considering any further options.
"The Scottish parliament will be able to bring the water authorities under the proper level of scrutiny that a modern democracy demands through its oversight of the Scottish executive. This is the best way of delivering the will of the Scottish people for their water industry to remain unambiguously in public ownership and to be clearly democratically accountable.
"As well as becoming more accountable, I wish to see the water authorities become more responsive at a local level. As part of developing local responsiveness I shall ask the water authorities to build further on their links with the local authorities and community councils in their areas, which will be helped by the community planning system we are shortly to introduce. I also look to the water authorities to get closer to their customers and to other important local stakeholders including environmental interests. I shall very shortly issue a direction to the water authorities to review their systems for involving local interests, particularly local authorities, and to improve and strengthen these systems. I also propose to place a statutory duty on the water authorities to consult with the local authorities whose electors would be affected by major decisions. This should improve the water authorities' responsiveness to the concerns of local communities.
"Moreover, I can today announce new appointments to the water authority boards. Ian Preston and John Robertson. chairmen of the East and North Water Authorities respectively, will demit office at the end of March. I am very grateful to both of them for their good work and public service. In the east, Councillor Robert Cairns will take over, and in the north, Councillor Colin Rennie. John Jameson remains chairman of the west authority. In addition to the two new chairmen, I am appointing as new members in the east Councillor Jeanette Burness, Councillor Thomas Dair, David Bleiman, and John Broadfoot; new members in the west are Councillor Gerald Carroll, Councillor David Munn and Jane McKay; and in the north I am appointing Nigel Hawkins as a new member. I am also reappointing a total of seven current members to the boards. These appointments bring the number of local councillors on boards up to 16 out of the 33 members, excluding chief executives—i.e. roughly half the total. Of these 16, six are Labour councillors. I have made full details of the appointments available in the Library.
"One aspect of local responsiveness I wish to explore further is how best to help with the problems of water supply and sewerage faced in many of our remoter rural areas. I have therefore asked officials to review whether or not there is a case for reintroducing rural grants to help with such problems.
"As I have already said, the water industry review has again emphasised that the industry is in need of very substantial investment if the Scottish people are to have the quality of water industry that they deserve. 523 But that investment will have to be paid for. Put simply, this means that all of us who are water consumers will have to pay more in the years ahead. Let me be quite clear. This investment is needed to bring the quality of our water up to the standards south of the border, to protect our beaches, rivers and seas, and to renew the infrastructure gifted us by previous generations which more recent generations have neglected.
"The private finance initiative is paying off by helping us to acquire additional resources to meet EC environmental deadlines, and in identifying innovatory ways of making savings in the capital and operating cost of projects. The water authorities have substantial plans for PFI projects, amounting to some £600 million, to help meet their investment needs in the years ahead. This Government are committed to developing opportunities for public private partnerships. I encourage the water authorities to be innovative with such partnerships while working within the framework of strengthened democratic control I have outlined.
"The Scottish people will need safeguards to ensure that money raised is well spent. There was consensus amongst the major consultees that the current division between price regulation by the customers council and efficiency regulation by the Scottish Office has proved untenable. I propose to create a new position of a regulator responsible for all aspects of economic regulation and for promoting the customer interest.
"The water authorities will be under legitimate democratic oversight, but they are still monopolies, and the new regulator will have operational independence to ensure that the customer gets the best possible deal. The regulator will be accountable to the Scottish parliament through the Scottish executive. To safeguard the independence of the regulator's role, the position will be established in statute.
"The functions of the current customers council will be transferred to the new unified regulator, and the council in its current form wound up. However, it is essential that customers continue to have a strong independent voice. I therefore propose to develop the role of the three customers council area committees as the champion of the individual customer. These committees in their developed form will be accountable to the new regulator, and will provide a point of contact for the public.
"I have also listened carefully to representations made about the damaging uncertainty for the industry of the current one year time horizon for price and EFL decisions. I therefore propose that there should be a longer-term pricing framework, and we should aim to ensure as stable a borrowing framework as possible, despite changing circumstances in successive public spending plans.
"Finally, I have also listened carefully to the views expressed to us during the review about the contribution that people with business experience have made to the boards of the new public authorities, alongside councillors. As will be clear from the appointments I am announcing I judge it essential that 524 we continue to draw on the expertise that the private sector can offer to ensure well balanced and effective boards.
"In sum, my proposals represent real local responsiveness, and real democratic control. They show that we have listened very carefully and thoughtfully to what has been said during our extensive consultations. We are seizing the opportunities created by the Scottish parliament to have more democratic control of the industry, and to find the best way forward given the particular sensitivities of this industry. We shall not play politics with Scottish water.
"My proposals to change the system of regulation will require legislation, and the Government will look for an appropriate opportunity to legislate. I am also publishing today a factual document that I asked the review team to prepare setting out in more detail the outcome of the review. Copies will be available from the Printed Paper Office".
My Lords, that concludes the Statement.
§ 4.25 p.m.
§ Lord Mackay of Ardbrecknish
My Lords, I am grateful to the noble Lord, Lord Sewel, for repeating the Statement made by his right honourable friend Donald Dewar in the other place. I must say that the 16 minutes of Statement could perhaps be encapsulated in two words, "about turn", because that is exactly what this Statement is.
Before I turn to the "about turns" perhaps I may welcome the part of the Statement which is slightly aside from the framework for Scottish water; that is, the appointment of Mr. Robert Fraser to inquire into the circumstances surrounding the problem of the water supply in north-west Glasgow and the Bearsden area, and so on, where diesel was spilt into the supply system. That has meant that a number of people have discovered that water is an essential part of our everyday life. We have come to take it very much for granted. I am therefore extremely pleased to hear that the Secretary of State is setting up an inquiry because, without going over the issue at all and pre-judging it, there seems to have been something of a time lapse between the incident happening and consumers being warned that their water may well not be drinkable due to contamination by diesel.
The second small point with which I shall deal now is the question of the regulator. Towards the end of the Statement, the Minister announced the creation of the position of regulator. I presume that is rather similar to the Ofwat appointment that we made when we privatised water in England. To that extent, I welcome the Government's conversion to the importance of regulation. I believe that that indicates that they do not have a great deal of faith in democratic accountability by councillors, which is what they preached before the election. Indeed, it is the contrast between this Statement and what the Government were saying before the election which struck me most as I sat listening to the Minister.
525 I remind your Lordships of some of the things that were said before the election by the party opposite. In 1995 the Scottish Labour Party's manifesto for the Scottish unitary party elections stated:The next Labour government will return water to directly elected control. Labour will not nominate people to serve on these new water boards unless plans are changed so that they are run by elected councillors".In a speech that year to the Scottish Labour Party Conference at Inverness, George Robertson, the then shadow Secretary of State—I suspect well out of the way, probably in a tank with the hatches battened down in an exercise in some far off land at this very moment—said:I make this clear pledge to the Scottish people. On my first day in St. Andrew's House I will end this undemocratic farce. All the Water Quango Appointees—whoever they are—will be told to clear their desks, and I won't take no for an answer. Labour will then replace them with locally-elected councillors, chosen by their locally elected councils. Scotland's water will be back where it always should be—in local democratic control".Just to show that it is not just history, earlier this year the 1997 Labour Party manifesto stated:We will return Scotland's water services to local democratic control".Of course, we all remember that in 1994 the party opposite, egged on and helped by its friends in the Strathclyde region, conducted a referendum, at great public expense to those of us who are council taxpayers in Strathclyde, on whether the people approved of the three water authorities then being set up by the Conservative Government. The poll was fairly overwhelmingly against the then government's plans-97.2 per cent. against and 2.8 per cent. in favour. Now that there has been this great turnabout and the structure is to be kept, I wonder whether the Government will fund another referendum in Strathclyde so that we can all have an opportunity to see what people think about the new structure. It really is amazing. It is not long since the position of the party opposite in Scotland was that frankly nothing was more for the best in the best of all possible worlds than local government control of water. Certainly in comparison to all the horrors of privatisation, Scotland was in an enviable position—or was it?
Is the Minister really able to read out the words in the Statement with a straight face? First, he said, on the question of water purity,with the stark fact being that the purity of Scottish water is far down the UK league; indeed the three authorities are in the bottom five when comparisons are made across the UK—and I thought that the privatised water authorities in England were the absolute pits so far as the Labour Party was concerned. It would appear that they are a great deal better and have been a great deal better than the local authority-driven water authorities in Scotland. A chronic need for investment was referred to, especially in regard to sewage. Anybody who walks along some Scottish beaches will know that is the case.
Then came what I thought was the gem: the Minister managed to say with a straight face: 526while the period of local authority control is looked back on as a period when the ownership of the industry was most generally acceptable, we have to accept that the infrastructure, often Victorian, was allowed to decay"—and this under the control of the blessed local authorities! It is no wonder that we are doing an about-turn today and the Government are accepting that the water authority situation in Scotland set up by the previous government is the best way to deliver water services to the people of Scotland.
We go further. The Government are now saying that, thanks to the under-investment by local authorities in all the years they ran water, water consumers will to have to pay a great deal more in the years ahead. Let me be quite plain with the Minister: this investment is needed to bring the quality of our water up to the standards south of the Border. And south of the Border is where water is privatised, and it is supposed to be awful. So in fact the Government are accepting—and their English colleagues ought to be accepting also—that water privatisation has been a success. I wonder why they did not think about this in Scotland—after all, New Labour, new ideas.
Is the Minister now satisfied that, even returning it to semi-local authority control—or 16 out of 33, which seems to me a long way short of what they originally said they were going to do—this would actually precipitate the water authorities back into the position which he himself has said was totally unsatisfactory, with the infrastructure allowed to decay? I notice with interest that he has rejected any return to local authority control as such; and I think that is gratifying. However, will he now say that the Labour Party's position in 1994, when it instigated the referendum I mentioned earlier, was entirely wrong and that it was wrong to attack the proposals then being made by the previous government? That is in fact what this Statement is saying today. So they are either wrong now in keeping the three authorities or they were wrong then in opposing them. I must say that a number of my colleagues and ex-colleagues will be gratified today to have this ringing endorsement of the policy of having three water authorities.
Turning to the question of the appointments, I am interested to see that people with business experience have made a contribution to the boards. That was not what the party opposite said when the people of business experience were being appointed to the boards in 1994. But we will leave that to one side. Perhaps the Minister will tell me this. If people with business experience have a lot to contribute, why have two eminent Scottish businessmen like Ian Preston and John Robertson been removed from chairmanship of their two boards? Perhaps he will also tell us what are the business qualifications—I know they are councillors—of Mr. Robert Cairns and Mr. Colin Rennie that make them suitable to be chairman of these two very big industries on which all of us in Scotland depend. Perhaps he will explain that.
Coming lastly to the question of the Scottish parliament, I could not quite understand that. Is there just a suggestion here that the Scottish parliament may well take over control from the water authorities and in 527 fact run Scotland on an all water authority basis? That possibility exists. Does it not in fact keep the very uncertainty that the Minister later in the Statement said he wanted to avoid?
The Minister freely admits in the Statement again—surprise, surprise—that private finance will be needed to improve Scottish water and sewerage. That is another welcome conversion. He might point out to one or two of his colleagues in the ministerial team that they ought to stop their antagonism to the private finance that built the Skye Road Bridge if they are actually going to embrace private finance when it comes to the water industry.
The final piece—and I think the Minister deserves a prize today—was to listen to him reading out with a straight face the words:We shall not play politics with Scottish water".What was the Labour Party doing in 1994 with its referendum in Strathclyde? What was it doing at the Labour Party Conference? What was it doing in the manifesto? I welcome the Labour Party to its new realisation that indeed you cannot play politics with Scottish water. It is the Labour Party which has been playing politics with Scottish water, and we welcome its conversion to having three water authorities and its at least partial conversion to the fact that businessmen have a significant role to play in the delivery of water services in Scotland.
§ 4.36 p.m.
§ The Earl of Mar and Kellie
My Lords, I thank the noble Lord, Lord Sewel, for repeating the Statement made in another place and I had better declare an interest in that I am not just an East of Scotland water customer. I also receive wayleave payments from that board.
The Scottish water industry may have been expecting a rather more vigorous shake-up than what is actually going to happen, but I suppose this has to be good for continuity. Ultimately the question must be about the ability to deliver services to the right quality, to the current standards and with appropriate efficiency and safeguards. The three authorities have a considerable duty to the 98 per cent. of Scots who receive water services and to the 95 per cent. who use the public sewers. The ability to invest in infrastructure is clearly critical. That opportunity to replace and develop infrastructure is limited by the ability to borrow. The Statement describes the limited borrowing opportunities which will be allowed. These seem to be less than the water charges paid by consumers would stand.
The noble Lord, Lord Sewel, outlined how local democratic control will be re-instituted. I am grateful for the assurance about continued public ownership. I welcome the opportunity for more elected local councillors to be on the three authorities, although they do remain quangos. I am glad that Labour councillors have now got over their squeamishness about sitting on quangos and I hope that the new members will be well acquainted with the needs of the water industry.
528 On these Benches we would have preferred the option of three joint boards drawn from all the councils covered by the joint board areas and constituted proportionately. That way accountability for water and sewerage would be at the ballot box. The creation of a Scottish water regulator will bring together the supervisory powers of the Scottish Office and the Scottish Water and Sewerage Customer Council.
Clearly, the three monopolies—and after all that is what they have to be—need to be regulated. I welcome the promised creation of the three area consumer councils which are to champion the interests of local consumers. The measures intended to deal with the ongoing west of Scotland diesel and water problem are welcomed, and I wish Mr. Ronald Fraser well with his inquiries. Water is such a fundamental commodity that this is a most regrettable event. Clearly, this will be an incident for a regulator to deal with. Penultimately, the attention which will be given to the remoter rural areas is welcomed, particularly the possibility of rural grant aid. I am glad that that has been included in the considerations. Finally, I am glad to hear that the Scottish parliament will supervise the Scottish water industry and possibly reshape it as required in the near future.
§ 4.40 p.m.
§ Lord Sewel
My Lords, the noble Lord, Lord Mackay of Ardbrecknish, has had his bit of fun. I do not begrudge him that at all. However, we have done what we said we would do. We said in the manifesto clearly and absolutely without any reservation that we would return Scotland's water authorities to local democratic control, and that is what we have done. I am afraid that the noble Lord still does not understand the basis and the whole emphasis that the Scottish parliament will have in the public life of Scotland. It is through the Scottish parliament and through accountability to a Scottish parliament that we have addressed the democratic deficit that was established by the previous administration in setting up water authorities which were completely lacking in any form of democratic accountability within Scotland. We have put that right and we have done it through the Scottish parliament. I hope that the noble Lord opposite will finally recognise the constructive role that the Scottish parliament can play in bringing about and enhancing democratic accountability in the institutions of government in Scotland.
As I said, we considered bringing the water authorities back under joint boards. If we had been in the situation that the noble Lord, Lord Mackay of Ardbrecknish, described prior to local government reorganisation, a strong case could have been made for that because we had a limited number of regional councils which had previously been water and sewerage authorities. The re-organisation of Scottish local government which created a plethora of smaller authorities made that option impossible because when you sat down and decided what the composition of those joint boards would be in order to recognise the population weight of the constituent authorities, you finished up with large and unmanageable boards. We did not think that that was a way forward in terms of 529 good and effective management. The noble Lord, Lord Mackay of Ardbrecknish, sang long and loud the claims of privatised water. Do I take it that it is now his policy to advocate the privatisation of the Scottish water industry? I think we deserve clarification.
I turn to the points made by the noble Earl, Lord Mar and Kellie, on the composition of the authorities. I wish to stress that all those who applied for membership of the authorities, and indeed those who indicated a wish to serve as chairmen of the authorities, were subject to the full rigour of the Nolan procedures. There can be no claim that those people who are now serving on the water authorities do not deserve to be there and do not measure up to the task; they do, and I am sure that they will do a good job.
§ 4.43 p.m.
§ Lord Monro of Langholm
My Lords, as the Minister responsible for the water section of a local government Bill, I remind the noble Lord that I spent hour after hour after hour in Committee listening to Members of his Front Bench—mainly George Robertson and Mr. McLeish—saying exactly what they were going to do the day after the election, and how they were going to return to the situation of 12 local authorities managing water. That is very different to the democratic method that the Minister is trying to promote in the proposals he has mentioned today. I congratulate the Minister on doing a complete U-turn with regard to what Members of his Front Bench said in the run-up to the election and during the Committee stage of the Bill.
Does he also agree that we were absolutely clear—I was clear about it throughout all stages of the Bill—that we were not privatising water in Scotland but we were providing the opportunity for investment in the water and sewerage industry which was absolutely essential? I am glad that what we proposed and what we carried out has proved to be so successful. I am glad that the present Government are following our lead.
§ Lord Sewel
My Lords, I accept that the noble Lord listened to what my colleagues in another place said about water at the time that the legislation was going through Parliament. However, more recently, I remember listening for many hours to Members of the Front Bench opposite speak on the evils of devolution. Things have changed on that side of the House too. The point we are trying to make is that the previous structure of the water industry in Scotland had a hole in it; there was a leak. That leak was the lack of democratic accountability within Scotland. We have addressed that matter. We looked at the options. We looked at the direct local government option of joint boards and we rejected that. It was unworkable because of the increase in the number of authorities brought about by re-organisation. It is absolutely clear that making the water authorities directly accountable to a Scottish parliament gives you that degree of democratic accountability and gives you an effective and real link of democratic accountability to a Scottish institution.
§ Lord Hogg of Cumbernauld
My Lords, I welcome today's Statement, and I am sure that it will be 530 welcomed throughout Scotland. Whatever may be said about the Benches opposite, they cannot claim to represent Scotland in any way whatever. It is particularly welcome that we are to have an inquiry into what happened in north-west Glasgow in Milngavie and Bearsden. I represented Bearsden in another place in the early 1980s. What happened there is indicative of some serious flaw in the industry which may be related to the need for major capital investment. Can my noble friend tell the House what is the scale of capital investment that this industry requires in the short term to ensure that essential water supplies are maintained? What is the capital investment required in the long term? Is it not the case that whether the money is raised through taxation or from the private sector, at the end of the day the consumer will have to pay for that? The sooner the Government and the Opposition are prepared to say to the public that this will have to be paid for by them, the consumers, and there is no way round that, the sooner we will create the environment that will make water reorganisation far better understood.
I welcome the fact that the Scottish parliament will take responsibility in future for the structure and organisation of the water supply industry in Scotland. That has to be right. There can be no industry in the country which is more important to the public than the water supply industry. It is right that we should maximise democratic control over that industry while recognising, of course, that there is a clear place for private sector finance.
§ Lord Sewel
My Lords, I thank my noble friend for a characteristic and realistic assessment of the Statement. On a number of occasions I have made comments that have been reported in the Scottish press to the effect that we as water consumers face an increase in charges to ensure that our infrastructure is improved, not just maintained. I can give some indication of the scale of investment that is required. Up until the year 2000 it is envisaged that something like £1.5 billion of capital investment will be necessary to maintain the infrastructure and to meet the requirements of the EU directives. That gives some indication of the scale of the problem we face.
§ Lord Steel of Aikwood
My Lords, the fact that thousands of homes in the west of Scotland were deprived of a clean water supply was very serious and merits the appointment that the Minister has announced. Robert Fraser ran in the Borders a water authority for which we paid high charges but which was not allowed to decay as happened in some other areas. He is a very suitable person to conduct the inquiry.
Secondly, I wonder whether I might entice the Minister to say more about the prospect of the re-introduction of rural grants for water supplies. That would be very welcome were it to come into being.
As for the bulk of the Statement, I must say that the Secretary of State listed all the difficulties for every solution. When I look back to the rhetoric prior to the election on local democratic control—one point which the noble Lord, Lord Mackay of Ardbrecknish, managed to omit from his litany—it was Mr. George Robertson 531 who promised that following the election there would be a "bonfire of the quangos". Instead, we see the creation of a few warm nests into which a few Labour councillors will be inserted. The gap between rhetoric and action is there for all to see.
§ Lord Sewel
My Lords, I do not know so much about the bonfire of the quangos, but I hesitate even to suggest the bonfire of the vanities. I thank the noble Lord for drawing our attention to the contribution and qualities of Mr. Fraser. I look forward, as I know my right honourable friend does, to the report. We will study it and act upon it, and act decisively if such a course is indicated.
I am afraid that I cannot say any more on the introduction of grants for rural areas. I shall want to see the outcome of advice and consultation.
§ Baroness Carnegy of Lour
My Lords, will the Minister tell the House simply and clearly why the addition of extra local government councillors is going to improve the management of this large industry, if important investment is thus kept to a minimum?
§ Lord Sewel
Yes, my Lords. The water industry is both an industry and a service. It must be responsive to the needs of the local population. One of the best ways of achieving that is through having the elected representatives of local communities on the water authorities themselves. We place very great emphasis on making sure that the authorities, as they are re-formed, are indeed responsive to their local communities.
§ Lord Monkswell
My Lords, in thanking my noble friend for repeating the Statement, perhaps I may chide him on the way in which he "let off" the noble Lord, Lord Mackay of Ardbrecknish, after his contribution. We all recognise that some of the problems of the Scottish water industry, as he pointed out, are due to lack of capital investment. It was the Front Benches opposite who presided over that lack of investment over the past 18 years. Local authorities may have been responsible; but it was central government who set the capital expenditure limit. I chide my noble friend for letting the noble Lord off too lightly.
What will be the position of the Scottish parliament? My understanding is that the UK Parliament will set up the office of the regulator for the Scottish water industry. Will the Scottish parliament, once it is set up, be able to change the legislative framework under which the water industry will operate and be able to reorganise the delivery of water services at more local level?
Finally, the Minister pointed out that if water authorities intend making any significant changes, they will be under a duty to consult with the local authorities. Will it be possible, through administrative means, for the water authorities to report annually to their local authorities on what has been going on—not merely on significant changes but on the conduct of their 532 operations in the local area? That might bring about a closer connection between local democratically elected representatives and the operation of the water industry.
§ Lord Sewel
My Lords, I am nearly always happy to be chided by my noble friend. In this case I am utterly delighted. Perhaps I may make clear the point of the legislation. The role of the regulator will be established through legislation passing through this House and another place. However, once devolution is in place, water is a devolved area. It would be open to a Scottish parliament to pass whatever legislation it wished. We have indicated that we think it would be sensible for the parliament to stay its hand and see how what we are proposing settles down and how it works.
As to the relationships with local authorities, that is an area where we wish to encourage close participation and collaboration. I am happy to examine all means by which that can be furthered.
§ Lord Rowallan
My Lords, the Minister made great play of democratic accountability and a Scottish parliament. However, there is one problem. The Scottish parliament will not be in existence until 2000; the site for it has not yet even been chosen. Therefore there is a problem as to how democratic accountability can exist between now and then. The situation involving quangos will undoubtedly continue.
There is one small point that I wish to put to the Minister. Is he considering selling off the vast tracts of land that the water boards own, together with their sporting rights, which would raise a considerable amount of money to help pay for all the things that should have been done and have not been done? The disgusting state of most beaches along the west coast of Scotland is clear for anyone to see.
§ Lord Sewel
My Lords, it is nice to hear a concern for democratic accountability expressed from the Benches opposite. All I can say is, yes, it will most likely be the year 2000, or 1999, before a Scottish parliament is in place. But we are going down that road. We are going to get there. It will be real. We shall then have the proper relationship in place.
In relation to selling off land, it is not for me to tell the water authorities what to do with their assets. The property vests in them.