Water Industry Bill

HL Deb 04 March 1999 vol 597 cc1856-78

7.10 p.m.

Lord Whitty

My Lords, I beg to move that the Bill be now read a second time.

I appreciate that we have reached this business later than we had intended and I hope it does no harm for me to thank the noble Baroness, Lady Miller, for her co-operation through the usual channels. I am afraid that matters have not worked out as we had thought, but we appreciate her co-operation nevertheless.

Although the Bill covers England, Wales and Scotland, the respective water industries operate in different ways. There are therefore separate provisions relating to England and Wales and to Scotland.

Immediately after the general election in 1997 we held a water summit and set out a 10-point action plan for a better water industry. Since then we, together with the water companies and the Office of Water Services, have made substantial progress in a number of key areas.

A significant area of public concern in the water-charging field is the level of overall costs which fall on customers. It may be helpful, therefore, if I start by putting our proposals in the context of the current periodic review of water prices, which will set price limits to apply from April 2000 to 2005.

Since privatisation in 1989, customers have seen water bills in England and Wales rise by over a third in real terms. There have been significant improvements in water quality and the water environment in this time, but there is still some way to go.

We therefore want to see an ambitious programme of investment to protect our beaches and rivers, make further improvements to our drinking water and protect our precious nature conservation sites. But, at the same time, we want to ensure that hard-pressed customers are not faced with unreasonably high bills. We have given guidance to the Director-General of Water Services on the environmental and quality objectives to be achieved by the water industry in England and Wales. That involves an improvement programme, costed at between £8 billion and £8.5 billion, to be undertaken by 2005. The Director-General has confirmed that our programme could he afforded at the same time as substantial price cuts. We believe that this strikes the right balance between protecting and improving the environment and safeguarding the interests of the consumer.

The proposals before the House are designed to ensure that there is also in place a system of fair and affordable water charges, particularly for vulnerable customers, protecting public health while ensuring that water supplies are used in a sustainable way and protecting the aquatic habitat. The proposals are based on a consultation exercise carried out last year.

The Bill, as it relates to England and Wales, therefore has three key aims: The first is the prevention of disconnection for households and those providing certain vital community services. I think we would all agree that water is essential for life and health, and the Government do not believe that it can be right to deprive anyone of access to clean water because they cannot afford to pay a bill. The Bill will therefore prohibit the disconnection of people's homes and certain premises providing community services and is an important measure in protecting private and public health.

The Bill will also ensure that water companies cannot use other methods short of disconnection for depriving people of an adequate water supply in order to force them to pay a bill, such as devices which severely restrict the flow of water available to them.

The second objective is the protection of vulnerable groups. We are concerned to ensure that vulnerable groups with high essential water use are not faced with hardship when they move into a home with a water meter. So that we can ensure that this does not occur, the Bill contains a power for the Secretary of State to make regulations about the bases of charging that must be offered to certain customers. We intend to use this power to ensure that large families with low incomes and people with medical conditions requiring high water use who live in a home with a water meter are offered a bill based on average measured use rather than on their own unavoidably high use.

The third objective is promoting customer choice. At present most people—around 86 per cent. across the country—pay for their water on the basis of an unmeasured charge, usually referring to rateable value. That will continue to be the dominant form of charging for many years to come. The number of metered households is increasing steadily, however, by around 3 per cent. a year. There is an important role for measured charges to play in our water-charging system. Those paying on this basis tend to conserve water and to be more aware of the value of the resource they are using. At the same time, many customers do not wish to pay on that basis and could find their bills significantly increased were they forced to do so. Others, who would prefer to pay on the basis of a meter, find that the water company has hitherto charged up to £250 in up-front installation charges. The situation varies widely across the country, depending on the policies of the water company involved.

The Bill will put charging arrangements across the country on an even footing. It will ensure that customer choice plays a central role in the water-charging system, rather than being a footnote to it. It will give customers new rights to remain on an unmeasured basis of charging in their current home where they are using water for normal household purposes only or to pay for their water on a measured basis. To make this a real right, the Bill also ensures that companies will no longer be able to charge for the installation of a meter. So that there continues to be a basis for unmeasured charging, the Bill removes the deadline of 31st March next year for the use of rateable value in water charging.

Part I of the Bill relating to England and Wales delivers our commitment to introduce a system which provides for fair and affordable water charges, particularly for vulnerable customers, while ensuring the sustainable use of water supplies and protection of the aquatic environment.

I turn now to the Scottish provisions in Part II of the Bill, which deals with arrangements for regulating Scotland's three publicly-owned water authorities. It provides for improvement to the regulatory system by creating a water industry commissioner for Scotland who will replace the Scottish Water and Sewerage Customers Council. It will give the commissioner the general function of promoting the interests of water customers and the particular function of advising Ministers about water charges, and will create three water industry consultative committees to support the commissioner.

The need for a better system was identified in the review of the Scottish water industry carried out by the Scottish Office in 1997. That review found a consensus that the arrangements in place for regulating the water authorities had proved untenable. This reflected concern in particular about the current division of responsibility for economic regulation between the customers council and the Scottish Office. It recommended that a new professional regulator should be responsible for all aspects of economic regulation and for promoting the interests of water customers. The Bill provides for the commissioner to take on those roles.

In effect, the commissioner will therefore take over most of the existing duties of the customers' council and assume the duty of advising Scottish Ministers on water charges. He will not be a civil servant but will operate independently of government within a framework of accountability to Scottish Ministers and, through them, to the Scottish Parliament.

The Bill also establishes water industry consultative committees for each water authority. They will advise the commissioner on the customer-service performance of their respective authorities and on other issues of concern.

To the devolution question raised by the noble Earl, Lord Mar and Kellie, in relation to the previous business, by legislating now the Government are ensuring that the new Scottish Ministers will have the opportunity, should they wish it, to introduce quickly a regulatory system that is markedly better than the one in place at present. However, they will not be bound to do so. The decision to implement the legislation will be entirely a matter for them. Given the broad support that exists for the policy in Scotland, we are confident that they will wish to do so.

The provisions of this part of the Bill will greatly improve the regulation of the water industry in Scotland in the interests of all its customers and by achieving the other objectives I have outlined. I believe that the provisions of Part I will do the same for England and Wales. I commend the Bill to the House.

Moved, That the Bill he now read a second time.—(Lord Whittv.)

7.19 p.m.

Lord Elliott of Morpeth

My Lords, I am grateful to the Minister for having succinctly outlined the proposals in the Bill. I should like to make some comments on the effects on the proposed legislation in England and Wales. First, I comment on the noble Lord's explanation about the disconnection powers for non-payment. I declare an interest. For 10 years I was chairman of a water company and for 14 years I was president of the Water Companies Association. Therefore, I know quite a bit about cut-offs. I assure the Minister that the water companies that I knew—and I knew them well—used the power of cut-off only as a very last resort. I am aware that in the past water companies have been heavily criticised for cutting off supply.

Those who did not pay their bills fell into three categories: first, those who believed that as water came from heaven it should not cost anything at all; secondly, those who would pay for anything only as a last resort; and, thirdly, those referred to by the noble Lord, the most vulnerable, who were on low incomes and for whom payment for water was very low on their list of priorities. As chairman of a water company, I had some very peculiar experiences. A farmer who lived close to me in the countryside telephoned me on one occasion. Having tried everything else he thought that he would contact the chairman. He accused me of being cruel to his animals. He then took his telephone to the window and opened it so that I could hear the bellowing of his dairy cows. I asked him how much he owed the company and his response was, "Just £57". He was by no means a small farmer. I told him what to do. I said that he should go the nearest branch office—I told him where it was—pay the bill, the water would be turned on immediately and he could get on with his milking. There were quite a number of people like that. However, I agree with the Minister in respect of those who fall into the vulnerable category.

Most companies had a number of flexible schemes. We cut off supply only as a very last resort. For example, there was a direct payment scheme administered by the DSS. That scheme allowed customers to pay directly from income support payments. I hope that might be amended to give water a higher priority. When one looks at the whole political and commercial scene, water is always well down the list.

Looking back to my days as chairman, I also recall great difficulty in recovering debts from properties in the rental sector, in particular in the city as opposed to the countryside. There are a lot of rented properties in cities. There must he a very strong case for placing responsibility for water payments upon the landlord, particularly in catchment areas where there is a university. It was quite remarkable to note how many students who were responsible for water charges under agreements with landlords simply left and we had no means of pursuing them. This is a very important point. It would be most helpful if landlords were made responsible for water charges for lettings of 12 months or less.

The right to cut off supply did work. In certain cases where there was a determined intention not to pay, that power could be very effective. The proposals in the Bill concerned with cut-off may well be seen as a charter for non-payment, which will be a great difficulty.

I comment briefly on Clauses 4 and 5. At present Ofwat advises on charges. Under the Bill in future companies' charges will be modified in response to regulations set out by the Secretary of State. That is a major, and somewhat dangerous, change in the way that the industry is regulated. I hope that before the regulations come into being they will be very carefully considered and will be made subject to advice from people and bodies with experience of the industry.

I turn to Clauses 6 and 7. There has been an enormous amount of discussion on metering over the years. In most areas all new properties are automatically fitted with meters. The company for which I was responsible fitted meters in older properties on request. Metering in certain areas can aid conservation of supply. In the north east of England, where I come from, there is no shortage of supply. Therefore, I warmly welcome the proposal in the Bill to continue to charge on the basis of rateable value. Universal metering has always been an extremely expensive proposition. Therefore, it is very sensible to use rateable value as a means of fixing charges.

Finally, in Clause 8 there is a proposal to extend the use of the rateable value of properties to assist in calculating charges. That is most sensible. As I recall, information about rateable value is available to companies for particular properties but access to council tax data would be most helpful. The availability of rating bands would very much assist in providing flexibility in charging. Those are the only comments that I make on the Bill and I look forward to taking part in the further stages.

7.27 p.m.

Baroness Young of Old Scone

My Lords, I declare an interest as chairman of English Nature and a non-executive director of Anglian Water. Water resources in this country are coming under increasing pressure. Demand is going up. With another 4.4 million houses and climate change demand will increase further. Climate change will also have an impact on supplies. We already see the impact on our wetlands. Over 50 SSSIs and 60 other nature conservation sites are threatened by water abstraction. The Environment Agency has done some work which shows that by 2021 the gap between availability and demand for water will total about 4,000 megalitres per day. For those whose eye immediately passes over any figure that has three noughts and is expressed in megalitres, that is a lot of water. Two-thirds of the gap between supply and demand can be closed by leakage control. However, one-third needs to be met by managing domestic demand in particular. It is necessary to have a package of measures that includes not just leakage reduction programmes but two other matters: educating customers to save water and giving them incentives to save water.

At this point I heap obsequious praise on the Government, particularly the Deputy Prime Minister and the Minister for the Environment, Michael Meacher. I believe that great progress has been made by way of the Water Summit, work on leakage control, the huge programme of investment that has been announced as part of the water price round and the work that is currently going on in the abstraction review. But action on educational programmes for demand management and incentives for water saving is very slow. The Water Industry Bill could provide an opportunity for the Government to deliver an incentive for water efficiency by encouraging payment by volume. However, the Bill before us is not necessarily an initiative for which I heap praise on the Government. The Bill misses an opportunity to tackle the environmental issues I have outlined.

The Minister pointed out that the Bill has three key aims: preventing household and community service disconnections; protecting vulnerable groups; and promoting increased consumer choice. The first two social objectives are vital and I support them entirely, but they are not enough. The Government are committed to the principle of sustainable development and to achieving economic, social and environmental objectives through the same policies by integrating all three key objectives. However, if we are in earnest about incentives to save water, increasing consumer choice makes current metering policy somewhat flabbier and it is unnecessary as other provisions in the Bill protect vulnerable households.

Water metering is a key tool in reducing the demand for water. However, "metering" seems to be a dirty word in some quarters. I assert that metering is not intrinsically bad; it can reduce environmental pressures and help to save consumers' money by reducing the economic costs of building more reservoirs. The only bad aspect of metering is that it places unacceptably high costs on low income families or those who use large quantities for medical reasons.

Apart from promoting the social objectives outlined, the Bill, if it took on board three elements, could also produce an environmentally effective metering strategy. First, it could target metering to areas where there is water stress, where demand outstrips supply, which is not the whole country, as pointed out by the noble Lord, Lord Elliott. The Bill already allows companies to meter on a compulsory basis consumers with high non-essential demands, such as people who use water for swimming pools and garden sprinklers. That could be extended to allow water companies compulsorily to meter customers who live in areas of high water stress without necessarily impinging on the vulnerable households who are protected by the other measures in the Bill.

The Bill could also promote water efficiency measures. Water companies already have a duty to promote the efficient use of water among their customers. Some do so in a rather cursory way by sending out leaflets; others have active and well-thought-through programmes. We need measures which encourage those more effective programmes to be spread more widely. The Bill could do that if it required water companies to set targets for the impact of their water efficiency programmes on actual water savings.

Perhaps most importantly, the Bill could encourage innovative tariff design. In the majority of companies, tariffs hinder voluntary water metering as about 65 per cent. of vulnerable households would be worse off if they switched to a meter under present circumstances. However, some companies have done excellent work in developing innovative tariffs which mean that metering can both benefit the majority of vulnerable households financially and encourage water efficiency by as much as 20 per cent.

The Bill gives stronger powers to the water regulator in approving tariffs but in doing so it gives no incentives to water companies to develop the more innovative tariffs. Alas, the regulator is an economic regulator of the water industry and in approving charging schemes is likely to consider only how they meet economic objectives. I am afraid that the water regulator's track record on innovative tariffing is not good, so the guidance given by Ministers to the regulator is crucial. That guidance needs to ensure that the regulator takes account of social and environmental objectives as well as economic ones as part of joined up sustainable development thinking. It might also be appropriate to give companies performance grades in tariff innovation in the same way as they are assessed for performance in other ways.

I conclude with two other issues raised by the Bill. The first is the issue of switching back. Customers who opt for metering can switch back within 12 months.

There are also provisions for what may happen when premises change occupancy. If the period within which switching back is allowed were to be extended, as was pressed in another place, we would have to ask serious questions about a real commitment to metering, conservation and the environment. Apart from the missed environmental opportunity which would be represented by that, it would also be extremely wasteful if meters were installed and not used.

The importance of the regulations and guidance which the Bill allows the Secretary of State to make is fundamental. There will be guidance on vulnerable households and on tariffing for environmental outcome. I believe that if we are to avoid the dead hand of economic regulation, we need wide consultation with social and environmental groups about the regulations.

During the past 18 months, the Government have demonstrated a clear commitment to addressing environmental impacts on water resources. The Bill is vital in its social provisions to protect vulnerable households. It would be a real shame if we could not have the modest changes which would make it right for the environment too.

7.35 p.m.

Lord Addington

My Lords, the noble Baroness, Lady Young of Old Scone, addressed many of the environmental issues that I noted when reading the Bill. Whether we on these Benches would go so far as she suggests is another matter, but we share certain of her concerns.

I was first attracted to the social factors in the Bill. The Government can take some credit for ensuring that those vulnerable people who need extra water because of a disability—for instance, someone who has lost control of his bladder and bowel or who regurgitates food more often than is to be desired—will find the Bill of great benefit, provided that the regulations allowed for are sufficiently supported. Such people use four or five times more water simply by having to use the washing machine several times a day. Unfortunately, washing machines are not the most efficient conservers of water, especially if they are dealing with unpleasant matter which cannot be washed away quickly. If someone has discharged his bowel, he cannot wash the affected clothes with others. They must be washed separately, at higher temperatures and for longer. Such people need support and I hope that the Government will press ahead with these measures.

As regards the non-disconnection of all water facilities, it is the basis of all good public health. Everyone knows that a clean water supply saves far more lives than any amount of money spent on the health service. The best way of ensuring good public health is to have a clean water supply. If small groups in society are denied that, diseases and general ill-health will he given a tremendous foothold. If someone cannot use a lavatory and has to get rid of human waste by throwing it out of a window, as has happened in certain tower blocks, that will create a public health hazard of phenomenal proportions. As regards that, the Government have acted correctly.

However, I do not like metering because no matter how one looks at it and no matter how much money is put into education, the poorest will pay more as a percentage of income. That cannot be avoided. Unless that problem is addressed, those with the least disposable income will be forced to use water only as a necessity. I hope that everything that has been said today reinforces that point. If the Government press on with metering, the second most fundamental necessity for existence—water, after air—will cost money from the consumers' pockets. I suggest that the Government introduce a flat rate charge based on council tax bands, which is a fairer way of progressing with water reforms.

The noble Baroness, Lady Young of Old Scone, mentioned meters for swimming pools. Of course, an enhanced flat rate charge could have been introduced for such users. I believe that if we go down the path of metering, the poorest will always be hit first and that is not something we would want to encourage.

7.40 p.m.

The Earl of Mar and Kellie

My Lords, my noble friend Lord Addington mentioned the end of disconnection. I am extremely glad to hear that England and Wales propose to catch up with Scotland in that respect.

The Bill has limited implications for Scotland. Those are, of course, contained in Part II. The Bill sets out on the intriguing road to the establishment of a public sector regulator for a public sector industry. It proposes to amalgamate the task of consumer representation with that of economic regulation.

It is certainly right that the water industry in Scotland should be legislated for totally independently of the other constituent parts of the United Kingdom. It is an important part of the Scottish political psyche that the provision of clean water and the effective treatment of sewage should be a public sector activity. It is also important that the industry's three monopoly public sector businesses should operate efficiently and observe the highest standards of production, service delivery and environmental protection. In other words, the industry must deliver in a sustainable manner.

The Bill intends to abolish the Scottish Water and Sewerage Customers Council. I say "intends" because the Act will only be implemented if the Scottish Parliament chooses to do so. So, in this transitional period, we have the interesting constitutional situation of legislating hopefully rather than definitely.

In place of the customer council will be a commissioner and three water industry consultative committees, one for each of the three water authorities. I should declare a current interest as a customer of the East of Scotland Water and Sewerage Authority and the anecdotal interest that my family enabled the public supply of water to the town of Alloa in 1802 from the Gartmorn Dam, the first reservoir in Scotland dating from 1713. The much-applauded city fathers of Glasgow and their 150 year-old Loch Katrine scheme can always benefit from advice, guidance and example from Clackmannanshire!

The commissioner—if the Scottish Parliament likes the idea—will combine the roles of customers' watchdog and industrial regulator. That has caused concern to the Scottish Consumers Council. It feels—I will go along with it in this—that the range of considerations will be too wide for any one office, and that consumers' concerns may be submerged in the welter of undoubtedly heavy-duty, industrial, environmental and economic issues. I suspect that they have a point.

Also, exacerbating the situation somewhat, will be the commissioner's role in the appointment of all the members of the three water industry consultative committees. No doubt that will be done in accordance with the current rules about public appointments, but my own concern is about issues surrounding re-appointment. Will the system seek to retain outspoken members or discriminate against them? In such a vital industry as water, the councils will need to be seen to be robust defenders of consumers' interests. There is a worry that the commissioner's statutory duty to chair each of the three councils or consultative committees will be symbolic of the downgrading of the consumer protection role. A way out of that perceptual and possible issue might be the overt appointment of three distinctly consumer-orientated deputy chairmen.

My noble friends are generally in favour of returning the water industry to local democratic control in Scotland. The Bill retains control at central government level and then devolves it. I do not seek to have 32 water and sewerage authorities in Scotland. I am reasonably content with the regional approach which is being retained. After all, substantial economy of scale issues are involved and the industry is having to face up to expensive renewals of the pipework infrastructure. Anyone travelling through Alloa recently will be aware of the traffic jams caused by the renewal of the water mains.

The issue of democratic control is quite significant. I do not see this Union Parliament as being capable of supplying real democratic scrutiny and accountability to the three Scottish authorities, on the grounds that all the Scottish representatives with real grievances to be dealt with can be overruled by the superior numbers of those from elsewhere who cannot have those grievances because they do not live within the jurisdiction. I am, however, content that the Scottish Executive could be held to account because all the representatives are personally and officially involved in the industry.

There is, of course, an alternative model of local democratic control, by means of joint boards. I believe that they would be rather unwieldy, with between eight and 12 local authorities involved. Your Lordships will be pleased to know that I do not support their creation. However, I should like to praise the work of the old joint board made up of Perth County Council, Clackmannan County Council and Grangemouth Large Burgh, which successfully organised the Loch Turret scheme in the 1950s.

I am concerned about the position of the commissioner vis-à-vis the Secretary of State and subsequently the First Minister. Although I can go along with the transparency laid down in the Bill whereby the advice given by the commissioner will be published—as will the response of the Secretary of State or First Minister to that advice—I am concerned about the position of the commissioner if the Secretary of State decides to reject the advice. Will that not become resignation time for the commissioner? Will the position of the commissioner be sustainable in such circumstances?

In the final analysis, we need to focus on outcomes rather than organisational structures. The Scottish public need to know that these legislative changes will make a useful difference and improvement to the delivery of water and sewerage services. A few citizens in remote areas of Scotland are not consumers of the three authorities. However, the vast majority are totally dependent upon the three authorities for these vital public health measures. The public need to know that there is effective supervision of the industry which supplies their water and sewerage and that those who govern the industry are motivated by the highest standards of public service taking into account the wide-ranging criteria upon which they must be judged.

7.47 p.m.

Lord Ahmed

I congratulate the Government on delivering its manifesto commitment by ensuring that the water companies improve service, tackle leakage and reduce prices.

The Minister stated that since privatisation in 1989, water bills in England and Wales have risen by more than a third in real terms. Since 1990–91, total profits have risen from £1.3 billion to over £2 billion at current prices. Although some improvements have been made, I believe that significant improvements need to be made in re-investment into the infrastructure, quality of water and water environmental schemes. We need to protect and improve our environment.

Like other noble Lords, I am pleased that the Bill gives new rights to the consumer relating to disconnection. I am particularly pleased that the Bill will remove the powers of the water companies to disconnect, for non-payment of bills, the supply of water to private dwelling-houses and houses in multiple occupation. It also protects vulnerable persons such as children, and nursing and residential care homes. Another important issue relates to the option that rateable value should continue to be used as the basis for unmeasured charges after 31st March 2000.

I should like to draw the attention of my noble friend the Minister to Yorkshire Water's policy of installing water meters in places of worship. My noble friend Lady Young of Old Scone said earlier that "metering" is a dirty word. It certainly is in the faith communities. That policy of installing water meters in places of worship is causing hardship to those communities.

I should like the Government to consider the exemption of all places of worship from water meter installation and to enable places of worship that have had meters installed to have them removed and to revert to being charged according to rateable value or on some token standing charge.

I have had representations from many mosques and Sikh temples. As your Lordships are aware, both the Moslem and Sikh faiths require the use of water in their rituals. Moslems are required to perform ablution and Sikhs are required to cook food for their community. It is not possible to worship properly as a Moslem or a Sikh without the use of water. That means that the high cost of metered water is unavoidable for temples and mosques.

This morning I received a faxed letter from two Kirklees councillors, Councillors Annie Smith and Mahboob Khan. Both stated that Birkby Ward in Huddersfield has three mosques and one Sikh temple. The temple and one of the mosques have had water meters installed. They did not ask for the meters to be installed; they were told that the water company had the power to instal them and that they could not stop it. The mosque installed water-saving devices, but still gets water bills totalling more than £1,000 a year while the Sikh temple's bills are £1,000 a quarter.

Birkby Ward has seven churches. They have not been targeted by the water company, but some have chosen to have water meters. The Christian faith does not require large quantities of water in its worship, so water provision is not an issue. Both councillors have pointed out that their community is not rich and therefore cannot afford the extra expense. I know that other communities throughout Britain have expressed similar views: that they cannot afford these charges in their mosques and temples.

Finally, I welcome the Bill in principle, with the request that the Government include exemption from water meters for all places of worship.

7.52 p.m.

Baroness Hamwee

My Lords, I too thank the Minister for his introduction of the Bill. When I heard that we were to have a Bill on this topic, I thought for a while that it would be a DTI Bill, especially as this Bill rather leaves the needs of the environment to one side. Indeed, perhaps the Bill reads rather more like a DTI Bill than a Bill from the DETR.

I have referred to "reading" the Bill as I should like to make a particular point and to say how helpful it has been to have the Explanatory Notes published alongside the Bill, given the large number of amendments that the measure proposes to make to earlier legislation. The notes set out the provisions in the form in which they will be amended although I find it a little curious that they are accompanied by a health warning about their authority. Nevertheless, we have had the benefit of the notes and I hope that the style that we use in our legislation may advance to the point where we have schedules to the legislation setting out the new provisions in a similarly helpful way.

Turning to the detail of the Bill, as has been said the issue of water raises very many different concerns. It is not just about what comes out of the tap; it is also about what goes down the drains, where it comes from, and where it is abstracted. My noble friend Lord Addington referred to water's obvious relevance to health. Calling water a "utility" perhaps fails to address the fact that water is more than just useful; it is essential.

The Bill addresses some social and economic issues rather than environmental matters. Being naturally more diffident than the noble Baroness, Lady Young of Old Scone, I shall not repeat her "obsequious praise" of the Government with regard to leakages. However, the House may find it helpful if the Minister can tell us what progress has been made in reducing leakages. I understand that the target was a 20 per cent. reduction by May of this year. As has been said, we cannot expect users of water to control their use when they know that so much is literally seeping away. If the Minister can give any news on progress in that regard, it would be welcome.

The Bill—at any rate, a Bill—is obviously needed; otherwise there would be no basis on which to charge non-metered customers in a year's time. That is why I turn first to Clause 8 although it is the shortest clause and buried precisely halfway through the Bill. Indeed, although it does not cover any of the objectives identified by the Minister in his opening speech, it is obviously a most important provision.

I know that the Government recognise the problem of using rateable values as a basis for charging. We on these Benches take the view that it would be appropriate to base charging on council tax bands. I am aware that the Minister in another place addressed that point at various stages of the Bill's progress. At Second Reading, the Minister said: there is no firm evidence that a system that relates charges to council tax bands is inherently or automatically related more closely to consumption or the ability to pay than a system based on rateable values".—[Official Report,> Commons, 7/12/98; col. 47.] That raises many questions about the council tax itself. We agree that it is too far removed from ability to pay. However, although I recognise that issues relating to council tax benefit are not for now, there is a benefit scheme which applies to council tax and it seems to me that there is no reason why there cannot be a similar scheme for water to benefit those who are the most vulnerable or who find it hardest to pay. That could apply whether the basis for charging was the council tax or metering. On that occasion, the Minister referred to council tax bands. In the case of single-person households, the actual amount of council tax payable reflects the demand for services which are paid for in part by the council tax. We take issue with the Government in this area.

The point for now is that the Government say that it is for the water industry to find new methods of charging. We support work within the industry on that. However, for that the industry needs information and it needs it in an appropriate format. I understand that it is possible to ascertain the council tax banding of an individual property but only on an individual basis. In other words, to find out the banding of 10, 100 or 1.000 properties would require 10, 100 or 1,000 individual inquiries. If the Government can assist the industry and enable it to make progress in that area, that would be welcome.

Accepting that much of the thrust of the Bill and its context is about metering, I suspect that we shall need to spend a little time in Committee looking at how the provisions will operate, including the obligation on water companies to publicise free meters perhaps, and issues concerning the reversal of metering. I share some of the concerns expressed about what the noble Baroness referred to as "switch back." I also wonder whether 12 months is a sufficiently long period to enable customers to assess the position. I share the deep concerns about customers likely to switch back probably being those whom the industry would least want to do so.

I agree with the point made about the importance of dealing first and most importantly with areas where water is in short supply. Within each water company's area I should like the companies to have greater discretion than the Bill may allow in organising the provision of meters. It seems to me a very expensive proposition to require them to respond to the measured charges notices which customers can give in the way that is proposed.

In preparing for today I have been impressed by the suppliers' acceptance of the principle of the Bill and their real concern that the practicalities may not have been taken into account. We welcome precluding disconnections. As regards the enforcement of payment and the groups referred to by the noble Lord, Lord Elliott of Morpeth, but not those who cannot afford to pay, it seems odd that the direct payment scheme, which I understand is in force, puts payment some way down the list below payment for television licences. I should have thought water should be at least equal with other utilities. As the noble Lord, Lord Elliott of Morpeth, said, there are issues concerning landlords' liability as well. I hope that we shall return to them in Committee.

As regards charging fees for disadvantaged people, while welcoming the principle I hope that the Government will insist on very wide consultation on the regulations. It was the water companies themselves who made the point to me that health and social justice groups need to be included in the consultation.

Of course, we are concerned about affordability for everyone. We do not want to see water made difficult to afford for those outside the particular categories which will attract special assistance. There are widespread concerns about near universal metering because of the vulnerable groups. One might say that it is cynical not to believe that vulnerable people would not be protected if there were universal metering. I fear that it is experience over the years of our society failing to give that protection that gives rise to that concern.

I was most struck by the comments made by the noble Lord, Lord Ahmed, who appears to have left his seat. He spoke about mosques and temples. It is an important point. I say for the record that I hope he will table some amendments to enable us to explore those issues to a greater extent in Committee.

My noble friend Lord Mar and Kellie dealt with Scotland. I appreciate that there has been consultation there and that the provisions reflect that. But so close to the inception of the Scottish Parliament, it seems a little odd and possibly even a little arrogant to be legislating to allow the Scottish Parliament to take up what we in London are proposing. I rather liked his concept of legislating hopefully.

Finally, we shall welcome something on the statute book which is very much like this Bill. I hope that the Government will not resist some adjustments to it. Not in this Bill, but at another time, we would welcome more environmentally based focus on how best to deal with this important resource.

8.3 p.m.

Baroness Miller of Hendon

My Lords, I, too, am grateful to the Minister for the clear and concise way in which he introduced this Bill. Every Member of your Lordships' House is a user of water supplies and has to decide, if he or she has not done so already, whether or not those supplies should be metered. In my own case my husband and I have had alternative conflicting decisions to make. We are fortunate enough to own a second home, used for holidays, where a metered supply was an obvious choice on economic grounds.

Similarly, in our London home, with four adults taking baths or showers every day; with washing machines, dishwashers and the numerous visitors coming to the house, one way or another we use such a lot of water that the flat charge based on rateable value appeared to us at the time to be better, although that will shortly change when we complete the installation of an irrigation system in our garden.

I did not intend to bore your Lordships with details of my domestic arrangements, but I wanted to point out that of the 30 million or so households there are many differing factors affecting what is best for them as regards their water bills. For that reason we congratulate the Government that the choice of metered supply or a flat rate charge should be continued by this Bill. That was our view. Indeed, the Conservative Party does not oppose this Bill in general principle because it is very similar to the one we would have introduced ourselves. We have some concerns over some of the details.

For example, Clause 9 provides that consumers in private dwelling houses who elect to pay for water by volume are entitled to have the meter installed free of charge. However, Clause 6(3) allows the company to refuse to install a meter if it would involve the supplier with what is called an "unreasonable cost". I ask the Minister how a genuine "unreasonable cost" will be ascertained. If it is not properly monitored, might there not be more cases like that of Mr. Paul Slawson-Price whose water bill, on moving from Kensington where he had a metered supply, to Chelsea where the water company refused to instal a meter on the ground of cost, jumped from £120 to over £1,055.

When the Bill was first introduced in the other place we were also concerned with the provisions against disconnection in Clause 1. The Government had produced a very large sledgehammer to crack a very small nut. In the end, the arbitrary list of exemptions was insufficient. In other words, the sledgehammer—if there had to be one—was itself too small. I am now pleased to congratulate the Government on having listened to the voice of reason despite their earlier reservations and have extended the list of exemptions, now set out in Schedule 1, to cover all of the cases that we argued for.

Let me make it unequivocally clear that we do not lack sympathy for those whose supply is disconnected because they cannot pay as distinct from those who simply will not pay or who usually, for reasons of carelessness or neglect, do not pay on time. But the fact is that these restrictions on disconnection are in a sense still cosmetic because it transpired from the debates in the other place that the total number of disconnections in the first half of 1998 numbered a mere 640 out of 30 million households.

Without going into the details extracted, perhaps appropriately in a Bill about water supply, drip by drip, by my honourable friends in the other place, it seems that all but 264 were reconnected between a day and a week. Some of the 264 were clearly empty houses and second homes. But the number, 640, was a decrease on the last full year of 1997–98. It is a stunning decrease on the figures for the last year in public ownership and compliance with Treasury controls. That year was 1988–89 when the figure was 15,255.

I remember during the power cuts in 1973–74, occasioned by the miners' strikes, coming to the conclusion that, faced with the choice of having the electricity or the water supply cut off, there was simply no contest. There is always a way to cope without electricity, but no way to manage without the most important symbol of a civilised society; namely, running water and a proper sewerage system.

There is no doubt that some of those 640 disconnections were major personal traumas to those involved. I do not detract from the problems of those who find it difficult to pay. There are processes in place to minimise that problem and to help those involved. I hope that the water industry will continue voluntarily to seek and to encourage ways to alleviate by such methods as prepayment and pay-as-you-go, monthly instead of half-yearly bills, and through the charitable trusts which have been set up by some of the water companies.

The Bill prevents the disconnection of customers who do not pay and some vulnerable groups must be protected. But that should not be regarded as a licence to others to default. It is unfair that the majority of customers who do pay should subsidise those who do not; not because they cannot do so, but because they will not do so. My noble friend Lord Elliot explained that very well. The Government must ensure that water companies are not hit by a new crop of bad debts which will inevitably be passed on to the honest customers. I hope the Minister will consider that matter carefully.

I should now like to turn to another topic. It is a small matter, another anomaly in fact which we hope the Government will agree to correct at the next stage. Under Clause 6, as I have already pointed out, the customer has the right to elect to have a metered supply, and then under subsection (5), to change his mind within 12 months and revert to being charged according to the rateable value. My honourable friend, the Member for Chelmsford West, asked, if a household installs a meter and then moves to another home after 12 months, will the new owner have the option of reverting to the rateable value system?".—[Official Report, Commons, 7/12/98; col. 59.] The Minister for the Environment said that he would not. That is fair enough; caveat emptor.

It is at this point that I must declare a small personal interest. I am part owner of two rented residential properties and a shareholder in a family investment group which owns another two. I play absolutely no part in the day-to-day management of those properties. However, I have to ask what is the position of the landlord of a rented house or flat where the tenant opts for a meter? By Clause 11 of the Bill, a landlord is not entitled to prohibit his tenant from opting for a meter. But if the tenant stays for more than 12 months, then it would seem that the landlord is committed for ever. That cannot be right.

I am only talking about short tenancies, not long leases. If the landlord cannot prevent the exercise of the option, then he ought to have the right to cancel the meter within a reasonable time after recovering possession. The same period of 12 months would be fair, but I am open to any reasonable counter offer. I hope that the Minister will tell us in his reply that the Government will give serious consideration to that matter.

Finally, at this stage I must express some puzzlement at an apparent contradiction between Clauses 4 and 5. Under Clause 4 the Secretary of State may give what is called "guidance" to the Director of Ofwat. We all know what guidance means when it is given by the person who has your job in his hands. However, Clause 5 gives the Secretary of State power to make regulations which effectively control the charging regime of the water industry. If the Secretary of State wants to take charge of the water industry, why do we need the director and indeed the whole paraphernalia of Ofwat, except to be there to be shot at, instead of the Secretary of State if something goes wrong. I hope that the Minister will be able to clarify this in his reply; otherwise we can explore the matter further at a later stage.

If I may, I should like to mention the second part of the Bill which relates to Scotland. My noble and learned friend Lord Mackay of Drumadoon and my noble friend Lord Mackay of Ardbrecknish expressed surprise to me that there is any Scottish content in this Bill, given that water is about to be devolved to the Scottish Parliament. Any changes in the way the water industry is run in Scotland should be left to that parliament.

In Scotland the Government propose to bring closer together economic regulation and consumer interest. The new water industry commissioner will combine the functions of economic regulation with that of consumer representation. The current area committees are to be replaced by three consultative committees with a reduced number of members and chaired by the water industry commissioner. That does not seem to us to be wise; indeed, I believe that concern is shared also by the noble Earl, Lord Mar and Kellie. My two colleagues will be tabling amendments to keep the two roles separate. They will be looking at ways to strengthen consumer interests in representing the domestic consumer both to the water authorities and to the regulator.

I do not propose to take up any more of your Lordships' time. As I said, in principle we support the aims of the Bill and any amendments that we find it necessary to table will be entirely non-partisan and constructive. We hope that the Government will treat them as such.

8.14 p.m.

Lord Whitty

My Lords, this has been an interesting debate covering a wide range of issues and one in which a number of differing opinions have been expressed. I shall try to deal with them.

I agree that the Bill is relatively straightforward and does not of itself tackle all the issues referred to today. I agree with my noble friend Lord Ahmed and others that a substantial amount still needs to be done on other fronts. But I take issue with the noble Baroness, Lady Hamwee. She may be looking for the whole of our environmental programme in this Bill, but that is not what the Bill is about.

The Government have demonstrated their commitment to a whole range of issues dealing with environmental matters. For example, in the measures to tackle leakage, to which the noble Baroness referred, it is true that progress has been patchy and pressure will continue to be placed on companies to deliver over the coming years the targets that we set at the water summit on leakage. But, with the water companies, we are encouraging an £8 billion programme to improve the environment. That is through the guidance we have given and the periodic review that we undertake of the water services, covering issues like significant sewage discharges which should all receive secondary level treatment; and covering improvement of unsatisfactory sewer overflows, improvement in river quality objectives, reaching the standards of the EC drinking water directive and dealing with adverse effects on habitats, and so forth. A whole new strategy on the environment lies behind our total approach to water policy.

However, this Bill has more limited objectives which are not incompatible, and in some ways support, those environmental objectives. Perhaps I may deal with those points legitimately raised within the Bill and put them within a wider context. The first issue concerned disconnection. I understand what the noble Lord, Lord Elliot, says about the problems of collecting money from those who abuse the system. As the noble Baroness, Lady Miller, said, it is true that under public ownership there were 15,000 disconnections. That actually rose in the first year of privatisation to 20,000, but has come down sharply over the past two years. Last year the total number was less than 2,000.

It is clear that water companies—this is what they tell us—have made great progress in finding other ways of pursuing their debtors without depriving them of access to clean water. That involves not only the kind of schemes to which the noble Lord, Lord Elliot, and others referred in terms of ease of payment, but also using the courts where appropriate. We do not believe that anybody should be deprived of water. But our policy does not mean free water for anyone who does not wish to pay. The water companies have the right to pursue customers who, as the noble Lord said, believe that water comes from heaven straight into their taps with no intervening powers.

Companies should find other ways of obtaining their money and in most cases are doing so. Moreover, the protection we are introducing is not new. In law and practice, in Northern Ireland and Scotland, there are not now and never have been disconnections. In England and Wales, in practice, four of the private water companies already have a policy of no disconnection. An additional five, in practice, carried out no disconnections in the first six months of this year, which led to the figure of only 640 disconnections referred to by noble Lords. So the reality is that we are tackling an historic problem which is now much reduced. We must retain the principle that nobody should be disconnected for not paying their bill, but it must also be the case that the company should have the means of obtaining its returns.

The noble Baroness, Lady Miller, indicated that she approved of the list of premises which would be protected from disconnection and the related use of limiting devices. We probably met all the concerns expressed in another place on that front.

The noble Lord, Lord Addington, raised the issue of protecting vulnerable groups. Perhaps I may clarify that. We propose to offer protection to two fairly broad groups; first, large families on low incomes; and, secondly, those with medical conditions requiring a high use of water. Those on benefits, where they have three or more children, would include those on income support, income-based jobseeker's allowance, family credit, disability allowance, housing benefit, council tax benefit, and so forth. We are therefore talking about protecting a very large number of people who are dependent on benefits.

There is a second group—those with medically related conditions—which I think was the noble Lord's main concern. We are specifying at the beginning such conditions as weeping skin disease, incontinence, abdominal stomas and renal failure which requires home dialysis. We will be setting in place expert groups to advise us on whether we should further extend such groups. In practice, those who are heavily dependent on water should be covered by these exemptions.

On the issue of customer choice and metering, we had some fairly wide-ranging views: from the noble Lord, Lord Addington, who was fundamentally opposed to metering, to my noble friend Lady Young of Old Scone, who was clearly promoting metering as an environmental device. I would probably agree with the noble Baroness, Lady Miller, that providing choice in this area is important; it also provides balance between customer requirements and environmental concerns.

We are intent on putting in place a fair and just framework for water and sewerage services. Nevertheless we do have to observe the environmental impact and we should send out the right signals. In relation to the concerns raised by my noble friend Lady Young. we do provide some incentives by allowing customers to choose metering and companies to provide metering. Every customer will now have the right to pay on the basis of volume. Many people will choose this option because they will save money. We have found that households which choose meters cut down their water use by an average of at least 10 per cent., with a concomitant reduction in their bills. That is one fairly hefty incentive.

We have also removed a substantial disincentive, which is the right of water companies to apply charges. There have been charges of up to £250 simply to install a meter. There is a small protection to companies in limited circumstances, as the noble Baroness, Lady Miller, indicated, where there are disproportionate costs. By and large, that would relate to multi-occupied premises. In that context, a number of noble Lords have raised the issue of landlords and, in particular, short-term lets in multi-occupied premises.

The Government would agree that only tenants who pay their own bills will have the right to request a meter, and short-term tenancies are excluded. However, longer-term tenants will be in the same position as other consumers. In many ways the water companies will have the ability to define who, in the short-term let situation, is the supplier; the landlord would then pass on the bills in the normal way, rather than it being the responsibility of the company to collect.

I therefore think that metering and the attractiveness of metering to many groups will lead to a reduction in water use, although, in terms of volume of water, the saving is significantly more important in the area of tackling leakages—something to which the noble Baroness, Lady Hamwee, referred.

There will be a number of customers, however, who will continue to choose a flat charge: currently a charge based to a large extent on rateable value. We continue to leave that option available to those in their current homes.

There have been suggestions by the noble Lord, Lord Elliott, and the noble Baroness, Lady Hamwee, and others that we should move, in principle at least, to a council tax-based system of charging, or at least that water companies should have access to council tax data or order to set their own charging. We have closely examined the proposals that have been made for the use of council tax data or for a more principled approach on that front. A straightforward move to a council tax base would leave a very high number of winners and a very high number of losers, not necessarily related to any economic use of water or to any beneficial social effect. Therefore, we have not yet become convinced, that we should move directly to a council tax-based form of charges, but we are prepared to consider sympathetically any proposals which might move in that direction in a limited way and which reduce the concern about the extent of winners and losers.

Likewise, we are prepared to consider and not to inhibit—as my noble friend Lady Young suggested—the moves of water companies themselves toward innovative tariffs, related both to metered and non-metered consumption. Indeed, we would encourage such innovation, provided it was directed to water savings.

Particular concerns about metering have been expressed. My noble friend Lord Ahmed was concerned with non-domestic premises. The water companies do have the right to install water meters in all non-domestic premises of whatever description. We would expect them in those circumstances to apply equal treatment to all non-domestic premises that use broadly equivalent amounts of water. I understand that Yorkshire Water have a policy of metering all non-domestic premises using over 30 million cubic metres—that sounds like an awful lot of water. That cannot be right—I have got the noughts wrong here! I will write to the noble Lord in that respect.

The water companies do not have any discrimination in seeing premises either in terms of the use to which those premises are put or, indeed, in terms of the suggestion that there would be discrimination in relation to faith. Nonetheless, I recognise that some religions require the use of water more than others. If there is a concern about the consistency in Yorkshire Water's charging, then, in the first instance, that is a matter for the Regional Customer Services Committee. I would be very happy to pass on those concerns, if the noble Lord will provide me with the details.

My Lords, I have just had a flash of inspiration! The limit beyond which Yorkshire Water install meters in non-domestic premises is 30 cubic metres.

Regarding the regulation of powers, there have been some slightly contradictory concerns about the balance between the powers of the regulator and those of the Secretary of State. These powers will allow a Secretary of State to make regulations on social grounds, to protect the most vulnerable members of our society, and on various environmental grounds. The key role of the regulator in England and Wales is in relation to economic and consumer and customer protection grounds.

There is always a balance in these matters. It has been suggested that the regulation-making powers in Clause 5 are too broad. Subsection 4, however, limits the regulations, in the sense that regulations being made for the purpose of limiting the total revenue of water undertakings would not be admissible under that clause. The effect of the constraint is that, in preparing regulations, where ministers have a legitimate interest, they will be concerned about the distributional effects between consumers or the effect on the environment but they will not be concerned with the overall burden: that is a matter for the regulator. There is, however, a wide range of issues in relation to the structure of charging in which the Government do have a legitimate concern.

I believe that that deals with most of the issues raised in relation to England and Wales. As regards Scotland, first of all, may I indicate, rather diffidently, that we are not being arrogant in relation to our Scottish colleagues. We are providing for the incoming Scottish Parliament a set of amendments which they can adopt or not, but which would be ready-made should they wish to adopt them. Given the consensus in Scotland to engage in a fairly systematic consultation process, it would appear that they have substantial support there. I therefore expressed confidence which was in no sense intended to be instructive or mandatory on the Scottish Parliament. The Scottish Parliament is completely free to reject these. Since we have put them on the statute book, however, they will be available if triggered by Scottish Ministers in the Scottish Parliament.

The role of the commissioner in Scotland reflects the different circumstances in Scotland, where the water industry remains in public control. The commissioner will be accountable to the Scottish Ministers and, through them, to the parliament. His responsibilities will be to improve the system of regulating water prices, to create greater financial stability, to strengthen pressure for efficiency in the Scottish water industry, and to retain and reflect a strong independent customer voice through the customer committees to which the noble Earl referred.

The noble Earl also asked whether the commissioner can in fact handle the combined role of customer and economic regulator. We believe that he can. The commissioner will be a professionally qualified individual, skilled in economic analysis and will work to a clear remit which will he set in the Bill by the Scottish executive. Of course, he will be supported by skilled staff drawn from the existing customer councils' staff, who are already skilled in the area.

I was quite glad that the noble Earl did not advocate going back to the 32 authorities in Scotland. The system of democratic accountability is clearly established here, with Ministers, accountable to the Scottish parliament, making the ultimate decision on charge levels. The role of the commissioner in this is that he will put his recommendations to the Minister. In doing so, the Minister may accept the commissioner's advice as delivered; amend it or substitute for it advice of his own. The noble Earl suggested that that could put the commissioner in an impossible position in relation to a dispute. I am glad to say that there are plenty of advisers to Ministers who may potentially find themselves in such a situation without resigning.

However, the Bill also requires the commissioner to publish the initial original advice, along with any changes that Ministers make to it, and Ministers must give their reasons for making the changes. That means that the process of setting water charges is available in transparent information to Parliament and the general public. Of course, in acute situations it may still be a personal matter for the commissioner as to whether or not he wishes to resign. But he cannot complain that his arguments have not been seen, put and considered by all the relevant authorities.

I believe that many of these issues will need to be discussed further. Although there are conflicts of philosophy I do not think there is much conflict as regards objectives. Overall there is support for the general objectives of the Bill, but we will need to discuss them further in Committee. I understand from the usual channels that some discussion is taking place about whether we should consider the Bill further in Grand Committee. While I might welcome that myself, as indeed might other noble Lords, that is a matter for the usual channels.

As I said. I believe there is much to discuss in Committee. Indeed, we need to take such matters further. I thank all noble Lords who have contributed to the debate and commend the Motion that the Bill be given a Second Reading.

On Question, Bill read a Second time, and committed to a Committee of the Whole House.