§
1 The following definitions shall be adopted for the purpose of this Act and shall supersede all previous definitions in the Environment Act 1995 (c. 25), the Water Resources Act 1991 (c. 57) and the Water Industry Act 1991 (c. 56)—
surface water" means inland waters, except groundwater; transitional waters and coastal waters, except in respect of chemical status for which it shall also include territorial waters;
groundwater" means all water which is below the surface of the ground in the saturation zone and in direct contact with the ground or subsoil;
inland water" means all standing or flowing water on the surface of the land, and all groundwater on the landward side of the baseline from which the breadth of territorial waters is measured;
river" means a body of inland water flowing for the most part on the surface of the land but which may flow underground for part of its course;
lake" means a body of standing inland surface water;
transitional waters" are bodies of surface water in the vicinity of river mouths which are partly saline in character as a result of their proximity to coastal waters but which are substantially influenced by freshwater flows;
coastal water" means surface water on the landward side of a line, every point of which is at a distance of one nautical mile on the seaward side from the nearest point of the baseline from which the breadth of territorial waters is measured, extending where appropriate up to the outer limit of transitional waters;
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artificial water body" means a body of surface water created by human activity;
heavily modified water body" means a body of surface water which as a result of physical alterations by human activity is substantially changed in character, as designated by the member State in accordance with the provisions of Annex II of the Water Framework Directive;
body of surface water" means a discrete and significant element of surface water such as a lake, a reservoir, a stream, river or canal, part of a stream, river or canal, a transitional water or a stretch of coastal water;
aquifer" means a subsurface layer or layers of rock or other geological strata of sufficient porosity and permeability to allow either a significant flow of groundwater or the abstraction of significant quantities of groundwater;
body of groundwater" means a distinct volume of groundwater with an aquifer or aquifers;
river basin" means the area of land from which all surface run-off flows through a sequence of streams, rivers and, possibly, lakes into the sea at a single river mouth, estuary or delta;
sub-basin" means the area of land from which all surface run-off flows through a series of streams, rivers and, possibly, lakes to a particular point in a water course (normally a lake or a river confluence);
river basin district" means the area of land and sea, made up of one or more neighbouring river basins together with their associated groundwaters and coastal waters, which is identified under Article 3(1) of the Water Framework Directive as the main unit for management of river basins;
competent authority" means an authority or authorities identified under Article 3(2) or 3(3) of the Water Framework Directive;
surface water status" is the general expression of the status of a body of surface water, determined by the poorer of its ecological status and its chemical status;
good surface water status" means the status achieved by a surface water body when both its ecalogical status and its chemical status are at least 'good';
groundwater status" is the general expression of the status of a body of groundwater, determined by the poorer of its quantitative status and its chemical status;
good groundwater status" means the stat as achieved by a groundwater body when both its quantitative status and its chemical status are at least 'good';
ecological status" is an expression of the quality of the structure and functioning of aquatic ecosystems associated with surface waters, classified in accordance with Annex V of the Water Framework Directive;
good ecological status" is the status of a body of surface water, so classified in accordance with Annex V of the Water Framework Directive;
good ecological potential" is the status of a heavily modified or an artificial body of water, so classified in accordance with the relevant provisions of Annex V of the Water Framework Directive;
good surface water chemical status" means the chemical status required to meet the environmental objectives for surface waters established in Article 4( I )(a) of the Water Framework Directive, that is the chemical status achieved by a body of surface water in which concentrations of pollutants do not exceed the environmental quality standards established in Annex IX and under Article 16(7) of the Water Framework Directive, and under other relevant European Community legislation setting environmental quality standards at a Community level;
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good groundwater chemical status" is the chemical status of a body of groundwater which meets all the conditions set out in table 2.3.2 of Annex V of the Water Framework Directive;
quantitative status" is an expression of the degree to which a body of groundwater is affected by direct and indirect abstractions;
available groundwater resource" means the long-term annual rate of overall recharge of the body of groundwater less the long-term annual rate of flow required to achieve the ecological quality objectives for associated surface waters specified under Article 4 of the Water Framework Directive, to avoid any significant diminution in the ecological status of such waters and to avoid any significant damage to associated terrestrial ecosystems;
good quantitative status" is the status defined in table 2.1.2 of Annex V of the Water Framework Directive;
hazardous substances" means substances or groups that are toxic, persistent and liable to bio-accumulate, and other substances or groups of substances which give rise to an equivalent level of concern;
priority substances" means substances or groups of substances identified in accordance with Article 16(2) and listed in Annex X of the Water Framework Directive. Among these substances there are 'priority hazardous substances' which means substances indentified in accordance with Article 16(3) and (6) of the Water Framework Directive for which measures have to be taken in accordance with Article 16(1) and (8) of the Water Framework Directive;
pollutant" means any substance liable to cause pollution, in particular those listed in Annex VIII of the Water Framework Directive;
direct discharge to groundwater" means discharge of pollutants into groundwater without percolation throughout the soil or subsoil;
pollution" means the direct or indirect introduction, as a result of human activity, of substances or heat into the air, water or land which may be harmful to human health or the quality of aquatic ecosystems or terrestrial ecosystems directly depending on aquatic ecosystems, which result in damage to material property, or which impair or interfere with amenities and other legitimate uses of the environment;
environmental objectives" means the objectives set out in Article 4 of the Water Framework Directive;
environmental quality standard" means the concentration of a particular pollutant or groups of pollutants in water, sediment or biota which should not be exceeded in order to protect human health and the environment;
combined approach" means the control of discharges and emissions into surface waters according to the approach set out in Article 10 of the Water Framework Directive;
water intended for human consumption" has the same meaning as under Directive 80/778/EEC of the European Parliament and of the Council, as amended by Directive 98/83/EC;
water services" means all services which provide, for households, public institutions or any economic activity—
- (a) abstraction, impoundment, storage, treatment and distribution of surface water or groundwater;
- (b) waste-water collection and treatment facilities which subsequently discharge into surface water.
water use" means water services together with any other activity identified under Article 5 of the Water Framework Directive. This concept applies for the 163 purposes of Article 1 and of the economic analysis carried out according to Article 5 and Annex III, point (b) of the Water Framework Directive;
emission limit values", subject to paragraph 2 to 4, means the mass, expressed in terms of certain specified parameters, concentration or level of an emission (or both), which may not be exceeded during any one or more periods of time;
emission controls", subject to paragraph 5, are controls requiring a specific emission limitation, for instance an emission limit value, or otherwise specifying limits or conditions on the effects, nature of other characteristics of an emission or operating conditions which affect emissions.
2 Emission limit values may also be laid down for certain groups, families or categories of substances, in particular those identified under Article 16 of the Water Framework Directive.
3 The emission limit values for substances shall normally apply at the point where the emissions leave the installation, dilution being disregarded when determining them.
4 With regard to indirect releases into water, the effect of a waste-water treatment plant may be taken into account when determining the emission limit values of the installations involved, provided that an equivalent level is guaranteed for protection of the environment as a whole and provided that this does not lead to higher levels of pollution in the environment.
5 Use of the term "emission control" in this Act in respect of the provisions of any other European Parliament and Council Directive other than the Water Framework Directive shall not be held as reinterpreting those provisions in any respect.
§ The noble Baroness said: My Lords, the amendment places in the Bill definitions that the Water Framework Directive, which must be enacted in international law by the end of the year, sets out as the definitions that should be used in discussing water issues.
§
I believe that the Government feel that it is acceptable to have different definitions within the water world, but that will simply lead to confusion and difficulty. I have not been convinced of a good reason why we should continue without firm definitions that look to the future. I quote from New Civil Engineer magazine of 22nd May—not a magazine known for being at all political, but which is entirely practical:
It may seem as if there is plenty of time to implement the European Water Framework Directive (WFD), as every EU country has until 2015 to comply. But time is actually quite tight when the philosophy behind water supply and management is to be radically transformed".
§ The first thing in a tight time-scale is that people need to know exactly what they are talking about. By adopting my amendment the definitions will make life much easier for all concerned and avoid confusion. I hope that the Government will be minded to be positive about setting down a clear guideline as to what means what and that they will not leave the agencies and the public in a state of confusion when dealing with water issues. I beg to move.
§ Lord WhittyMy Lords, this is a substantial amendment which aims to translate the terms of the Water Framework Directive into the Bill. We have had this discussion on several occasions during debates on the Bill, in which we have indicated that we intend to transpose the Water Framework Directive in due course following the consultations we are engaged in. 164 For those purposes the definitions in the directive will be appropriate. But by incorporating those definitions in the Bill they alter the existing definitions in the Bill and earlier legislation in a way that can be confusing.
For example, the definition of groundwater in the directive is different and narrower than that in the Water Resources Act 1991. Incorporating it into that Act would therefore limit the ability of the agency to control current and known pollution. In order to control pollution of a saturated zone—for example, as a result of indirect, diffuse discharges—it is necessary for controlled waters to include water in transit as it percolates from the surface through the unsaturated zone; that is, to include all groundwater in underground strata, whereas this definition does not. It is therefore important that for the purposes of the Water Industry Act 1991 the existing definition stands.
Another example is "river", which we have also debated in passing. If we substitute the Water Framework Directive definition of "river", the current distinction between main and non-main rivers could be compromised. That would give rise to considerable confusion in domestic legislation; in particular, in relation to flood defence. The Water Resources Act defines "main river", and that Act generally sets out the permissive powers available to the Environment Agency to undertake work on such rivers. As noble Lords will know, all other watercourses are the responsibility of local authorities and internal drainage boards under the Land Drainage Act 1991, in which they are referred to as "non-main rivers".
If we no longer had that distinction then we would need an alternative legal mechanism to show which watercourses were the responsibility of the agency, and which were for local authority internal drainage boards. The effect of transposing the directive prematurely into the Bill would be to introduce confusion in the previous definitions.
Similar problems arise more directly in relation to water services. Throughout the Water Industry Act, the drafting and structure of the legislation is based on the distinction between sewerage services and the supply of water. The word "water" is used only in the context of the provision of fresh water. The framework directive definition of water services is different in that it covers both functions.
In those three respects and, I believe, some others, it would obviously cause considerable confusion to introduce the water framework definitions into this Bill to apply retrospectively to earlier legislation. Of course, we will need to transpose the directive and, as we have explained, we intend to do so. Where the powers are not already in place, the directive powers will be transposed, reflecting the framework directive definitions. To do so in this Bill would confuse the issue.
§ Baroness Miller of Chilthorne DomerMy Lords, what time scale are the Government considering to transpose those parts that will need to be redefined, given that the framework is to take effect by the end of the year? Will the transposition start then? I can 165 understand some of the technical reasons that the noble Lord has given me, but he has just illuminated my point that there will be a good deal of confusion between those who are working to the water framework directive definitions and those who are working to historic English definitions.
§ Lord WhittyMy Lords, as we have explained at earlier stages, we are involved already in the consultation on the transposition of the directive. It is intended that the directive will be transposed before the end of the year. Obviously, some parts of it will come into play later down the line, and the full effect does not come until 2015.
The noble Baroness is right in the sense that there will be new definitions relating to new duties and responsibilities, which would not have existed before we transposed the directive. However, the old definitions will continue to apply in relation to the powers and duties that have existed through various stages of water legislation. To alter them in this context would distort the current understanding of those definitions shared by the water industry and everyone else.
The noble Baroness will no doubt argue for the consolidation of everything into one big Bill. In this Bill, as with other legislation, the definitions involved relate to the powers in this Bill and not to some future piece of legislation, however we enact it. In the case of the Water Framework Directive, we will be enacting it in a very specific piece of transposition under the European Communities Act 1972.
§ Baroness Miller of Chilthorne DomerMy Lords, I thank the Minister for his reply. However, it is a great shame that the Government have not got their act together sufficiently to enable this sort of issue to be cleared up at this stage. I look forward to debating the consolidation issue, under the amendment to be moved by the noble Baroness, Lady Byford.
I have listened carefully to the Minister. I propose to take further soundings from the water industry and environmental bodies. I may well return to the issue at Third Reading. In the meantime, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§
Baroness Byfordmoved Amendment No. 39:
Page 37, line 35, at beginning insert "regional
§ The noble Baroness said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 40 and 41.
§ Having studied the Hansard report covering this area of debate in Committee, I have concluded that the main reason for our concern is that the Bill limits the official committees of the Consumer Council to regional committees. Our amendment would free the logjam and allow flexibility where it is necessary, so that the council may operate more effectively. We feel that sound mechanisms are needed to control the 166 licensed water suppliers. As it stands, the Bill seems to place all the burden on water undertakers and all the privileges with water suppliers.
§
This is as good a point as any at which to seek further clarification of the Government's intentions. What really lies behind the creation of licensed water suppliers? In our debate on 10th April, the noble Baroness, Lady Farrington, stated:
At present, undertakers have a duty to supply customers outside their area for domestic purposes but not for non-domestic purposes. We have sought to simplify the situation and provide clarity by removing this distinction".
§
She went on to explain that,
undertakers will compete only outside their areas through their associated companies and not directly".—[Official Report. 10/4/03; col. GC82.]
§ Will the Minister confirm that associated companies may not be water undertakers? If so, why is that so? Why have the Government not opened the water market to competition between water undertakers? If licensed water suppliers can demand access to an undertaker's pipework, why should not another undertaker? What do the Government imagine a licensed water supplier will look like? With a potential market of some 2,000 customers throughout the country, will he have an office in a tower block with a telephone line? How will the supplier operate? Will he operate regionally?
§ I should be grateful for further clarification on some further questions. Will it be possible for there to be 2,000 licensed water suppliers—each of the largest companies—which form a water supplier subsidiary to supply itself, for example? That is a possibility. Will it be allowable for such a subsidiary in a loss to claim tax relief?
§ Those are very specific questions, so if the Minister needs a longer period in which to consider them, I am happy that he does so. However, we do need greater clarification. I beg to move.
§ Lord WhittyMy Lords, the noble Baroness raised some wider questions, but the amendments have two effects. First, they would allow the Consumer Council for Water to establish non-regional committees. We accept that it is necessary for the council to decide its own organisational structure and, in Schedule 2(15), that power can be used to consider licensee issues generally. There is no limit on how the council can use the power.
The second aim of the amendment is to allow the council to allocate licensed water suppliers to any regional or non-regional committee. We discussed the matter in Committee, and I agreed to investigate the role of the council in relation to licensed water suppliers. We have tabled government Amendment No. 42, which makes it clear that the council will have the same powers for licensed water suppliers as it has for undertakers. The amendment aims to confirm that the customers of licensed water suppliers can also be looked after by regional committees. The second point is therefore taken care of by government Amendment No. 42, although some water suppliers will not necessarily be easily allocatable region by region.
167 We shall discuss the issue of associated companies at a later stage. It is a little complicated. Perhaps I may reserve that until later unless the noble Baroness wishes to press me now.
§ Baroness ByfordMy Lords, I am grateful for that response, and I shall be telling the noble Lord shortly that I am grateful for government Amendment No. 42. This can be a difficulty when one tables amendments between Committee and Report stages—clearly the Government have already responded to them in this case. I accept the Minister's comments on paragraph (b) of Amendment No. 41. I am happy for him to give me further detail between now and Third Reading. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 40 and 41 not moved.]
§ 5 p.m.
§
Lord Whittymoved Amendment No. 42:
Page 38, line 10, leave out "(unless the context otherwise requires)
§ The noble Lord said: My Lords, in moving Amendment No. 42, 1 wish to speak also to the amendments with which it is grouped.
§ In Committee we said that we would consider extending the council's remit to monitoring licensed water suppliers, as I have just said. The government amendments in the group I am discussing take forward that commitment. We have come to the conclusion that there will be a need for the council to monitor licensed water suppliers and to look after the interests of their customers. These amendments will enable the council to investigate complaints concerning licensed water suppliers, obtain information on them and investigate the interests of their customers.
§ Given that we all have the same objective, I hope that noble Lords will give a favourable wind to this group of amendments. I beg to move.
§ Baroness ByfordMy Lords, I am grateful to the Minister. He was well aware of our disquiet at the way in which the associated companies were being dealt with. We are dealing now with a whole group of amendments. I therefore wish to speak to Amendments Nos. 75 and 77 which stand in my name. I am grateful to the noble Lord, Lord Whitty. He has kindly added his name to Amendment No. 77, for which I am grateful. Amendment No. 75 has been overtaken by other government amendments. I am grateful for that. Government Amendment No. 94 seeks to insert the words "in any other case". Will the noble Lord, Lord Whitty, explain the reason for that?
§ Baroness Miller of Chilthorne DomerMy Lords, we on these Benches also welcome the Government's move in the direction the Minister mentioned. Will he clarify whether my Amendment No. 88, which is included in the group we are discussing, is one that the 168 Government are minded to accept? If not, will the Minister say why not? I, too, welcome the group of amendments.
§ Lord WhittyMy Lords, I should like to take away the amendment of the noble Baroness, Lady Miller, as it contains a definition which I do not think entirely relates to our definition of "relevant company". I shall come back to the noble Baroness on that matter.
Government Amendment No. 94 seeks to insert the words "in any other case" in order to cover licensees and undertakers. It seeks to clarify that the measure extends to everyone who is covered by the remit of the council.
§ On Question, amendment agreed to.
§
Baroness Miller of Chilthorne Domermoved Amendment No. 43:
Page 38, line 15, at end insert—
(13) The Council shall exercise and perform its powers and duties so as to contribute to the achievement of sustainable development.
§ The noble Baroness said: My Lords, this amendment seeks to ensure that the consumer council for water has a sustainability duty. We believe that it should have that duty. If it does not, we are concerned that it will not be able to justify spending time on sustainability issues. This is an important issue and one that rightly recognises the fact that the consumer interest extends far beyond just the price of water to issues such as the state of the water environment, rivers, wetlands and coastal waters. Indeed, surveys show that consumers rank concern about the environment high among their priorities. For those reasons I hope that the Government are now minded to accept the amendment. I beg to move.
§ Lord Dixon-SmithMy Lords, I wish to place on the record the fact that in principle we on these Benches support the amendment.
§ Baroness Farrington of RibbletonMy Lords, I thank the noble Baroness and the noble Lord, Lord Dixon-Smith, for their comments. We should like to take the issue away and consider it between now and Third Reading.
§ Baroness Miller of Chilthorne DomerMy Lords, I thank the noble Baroness for that reply. I hope that means that the Government will consider the amendment favourably. In the light of that reply, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§
Baroness Miller of Chilthorne Domermoved Amendment No. 44:
Page 38, line 39, at end insert—
( ) Without prejudice to subsections (2) to (4) above, before—
the Authority, the Secretary of State or the Assembly, as the case may be, shall consult the Council, and shall take into account any views expressed by the Council.
§ The noble Baroness said: My Lords, this amendment seeks to ensure that the consumer voice is heard and that the consumer interest is balanced against other interests. It will be the purpose of the council to identify and represent consumers' concerns and it is therefore essential that decisions that affect consumers should be the subject of consultation with the council. At present consultation with the consumer body, Water Voice, is a matter of good practice. It is logical and appropriate that with the setting up of the council such good practice should be enshrined in legislation on the face of the Bill.
§ I believe that in Grand Committee the Minister was still of a mind that such an amendment was not necessary because there would be a memorandum of understanding. I hope that the Government will have reconsidered the matter and are minded to include it on the face of the Bill as it would greatly strengthen the standing of the consumer council for water with consumers and its power. I beg to move.
§ Lord Dixon-SmithMy Lords, I wish to put on record the general support of these Beeches for the amendment.
§ Baroness Farrington of RibbletonMy Lords, I am sure that both the noble Baroness and the noble Lord will be pleased that we are prepared to take the matter away and reconsider it. We may prefer to look at a general requirement to consult where appropriate rather than specifying particular circumstances which may on reflection not keep up to date with regulatory developments. But I do not think that there is a drop of water between us and I am quite sure that we shall be able to resolve the matter at Third Reading.
§ Baroness Miller of Chilthorne DomerMy Lords, a general power sounds most promising. I look forward to seeing the Government's proposition. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Schedule 2 [The Consumer Council for Water]:
§
Lord Dixon-Smithmoved Amendment No. 45:
Page 124, leave out lines 9 to 12 and insert "a representative of each of the four groups listed in section 27C.
§ The noble Lord said: My Lords, it would be nice if the Government's gramophone needle became stuck in the groove as regards this amendment but I suspect that it will not work quite like that.
§
In moving Amendment No. 45 I should say that we understand the way in which modern society seeks to take into account people who suffer from any kind of
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disability or disadvantage whenever it is necessary to do so. However, we believe that the specific reference to the desirability of including a disabled person or someone who has experience of the needs of disabled persons among the membership of the council is not necessary. The Bill states:
The council shall consist of—
§ That seems to me to be such an open and inclusive method of appointing the membership that I do not see the need for further description. Therefore, the amendment seeks to delete lines 9 to 12 on page 124 and insert the words included in the amendment. I beg to move.
§ Lord WhittyMy Lords, we come back to the problem of lists here. I understand the intention behind the amendment but it is not necessary as it is implicit that for a member of the council to be effective he or she must have regard to the interests of all the groups listed in new Section 27C, to which the amendment refers. That is central to the mainstream functions of the council. Those of pensionable age or on low incomes or those in rural areas all share general concerns about the supply and quality of water. On the other hand, disabled groups have particular needs which are unique to them. That is why the disabled groups are listed in terms of membership, but other vulnerable groups or potential interest groups that might have a claim to representation on the council are not. The main point of the council is to have members who pay attention to the needs of all consumers, including the vulnerable groups referred to in Clause 27. That is why we need to provide special understandings of the interests of the disabled or chronically ill when we make appointments. There is a difference between them and other vulnerable people. Therefore, I hope that the noble Lord will not pursue his amendment.
§ Lord Dixon-SmithMy Lords, I cannot say that I am happy about the Minister's response. We have faced each other across these Dispatch Boxes from time to time on other Bills, and I am bound to say by observation that the Government argue the case whichever way they please, depending on the circumstances and the Bill. There is no consistent track record on the matter. That said, I do not know that the issue is fundamental. I am sorry that the Minister does not feel that he can act on the issue by exercising his power properly, without needing the added authority of a specific description, but I am not prepared to die for that cause. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 36 [Conditions relating to costs of water regulation]:
§
Baroness O'Cathainmoved Amendment No. 46:
Page 39, line 27, at beginning insert "Subject to subsection (2A) below,
§ The noble Baroness said: My Lords, the amendment is grouped with Amendments Nos. 47 to 49. I shall speak to Amendments Nos. 46 and 48 together.
§ As we know, the Bill establishes a new consumer council for water and a mechanism by which companies must pay its expenses, but no limit is placed on the council's costs. The amendment tries to rectify that. Let us bear in mind that the costs of Ofwat are currently constrained by a condition in the company's licences. However, if the amendment were made, the payments that companies were required to pay to the council would be able to increase only in proportion to the increase in prices that they were able to charge.
§ The amendments are simple. They would preclude the consumer council going mad—Well, not going mad, but spending an enormous amount of money on research into areas where it was not necessarily essential, and putting all the costs on the water companies. There has to be some constraint. One cannot have a body such as a consumer council without constraints, particularly if the costs are borne by, in this case, the water companies. I beg to move.
§ Lord Dixon-SmithMy Lords, in supporting my noble friend on the amendments, I again refer to the debates on them in Grand Committee. The Minister was very clear that it would be explicit that water licensees would share the expenses. His response specifically was:
Schedule 4 … provides for a water supply licence to require payments to the Secretary of State of such amounts as may be determined, which could fairly include this".He went on to point out that:In one sense, Clause 36 provides a transitional power to allow undertakers' existing conditions of employment to be modified".—[Official Report, 3/4/03; col. GC 197.]Our point is that it should be mandatory for the licensed water suppliers to pay their fair share of the costs of regulating the water industry.
§ Lord WhittyMy Lords, Amendments Nos. 46 and 48, which are in the name of the noble Baroness, Lady O'Cathain, are intended to tie the fees paid by each undertaker to each year's price limit in the periodic review. I understand that she wishes to be assured that regulatory bodies should not become a financial burden on the companies that they regulate, but the safeguards to prevent that are already in place. Undertakers' conditions of appointment already contain a cap on the level of fees payable, and Ofwat currently levies less than it is entitled to.
As regards the consumer council, paragraph 10 of Schedule 2 gives the Secretary of State the power to decide how much money the council needs to run its operations. The Secretary of State therefore has the power to prevent the consumer council from going mad, as the noble Baroness said and then withdrew the remark. We therefore rely on—it is certainly in the interests of the Government to ensure it—the consumer council to be a cost-effective body and not one that runs away with the industry's money.
§ 5.15 p.m.
§ Baroness O'CathainMy Lords, would that mean that the water companies could liaise with the Secretary of State and have discussions about the costs of the council? If they felt that the council's plans were going into the stratosphere and were far too expensive, and that the costs of running the council were far too expensive and bearing down on them, could they have an appeal to the Secretary of State?
§ Lord WhittyMy Lords, the noble Baroness mentions a formal appeal. I am not sure that that is provided in legislation. It certainly must be the case that the water companies would have the right to say to the Secretary of State, "Look, this consumer council is behaving extremely irresponsibly with money that it raises from us. Can you do something about it?", and the Secretary of State would have the power to do something about it. The problem with the amendment is that it limits the inflation of the costs to the fees in any given year. whereas the Secretary of State would take a view over a number of years and over the general strategy of the consumer council, rather than linking it to the regulated price.
The amendment has the potential to have a perverse effect, as in one sense it would give Ofwat an incentive to allow a higher price rise if it felt that that was the only way to escalate its own costs. That is probably a remote possibility. Nevertheless, one has to bear it in mind if too mechanistic a relationship is made between the price rise and the cost of the council.
Amendments Nos. 47 and 49 are designed to ensure that water licensees share the expenses of the consumer council. We would certainly expect them to do so. Schedule 4, to which the noble Lord referred, would allow a licence to require that such payments shall be made. He wishes to make that mandatory, which relates to that schedule rather than to Clause 36. The clause is a transitional power. Its purpose is to enable the regulator to change undertakers' conditions of appointment so that they would continue to pay for the consumer council, which will be set up in April 2005.
We would not expect the regulator to grant licences to new suppliers until after April 2005 anyway, so the transitional power will not be needed for licensees. Instead, the power beyond that point in Schedule 4 would be the appropriate one. Although I would resist the amendments to that schedule, it is probably where any discussion of mandatory provisions rather than those on power for a licence to require should appropriately be discussed.
§ Baroness O'CathainMy Lords, I cannot say that I am ecstatic about the Minister's response, but he does not expect me to be. Would it be feasible for him to have another look at the matter? There is some merit in making a cap related to the price increase.
My experience of a lot of industries—not water companies, I hasten to add—is that if one gives a marketing body or department a free rein, the money goes so rapidly that one cannot understand where it has gone to. The consumer councils are a little like 173 marketing bodies. They are full of people who want to do research and ensure that they get the best possible information. In some cases, they overdo it. I fear a situation in which the water companies will be placed under severe financial constraints if there is no cap related to the price. I beg leave to withdraw the amendment, but in doing so I ask the Minister to reconsider it.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 47 to 49 not moved.]
§ Clause 38 [Objectives and duties under WIA]:
§
Baroness Byfordmoved Amendment No. 50:
Page 43, line 8, at end insert—
( ) any interests of consumers in relatior to the possible effects of effective competition over an extended period of up to twelve years,
§ The noble Baroness said: My Lords, in moving this amendment, I shall speak also to my Amendment No. 51 and to Amendment No. 53. The Government have tabled two amendments on this matter, Amendments Nos. 52 and 55. I am grateful to the Minister for coming back with amendments which I believe have to some extent met some of our concerns.
§ I shall speak to Amendment No. 50 first. In the runup to the Bill, we received information and opinions from a variety of sources. It has been extremely difficult to determine what a licensed water supplier will be, how big, how competitive and how effective. Nevertheless, it seems fairly obvious that, by taking away the 2,000 largest customers from the water undertakers, there is a strong possibility that the latter will be less profitable. If that is so, there is also a possibility that it may be necessary for prices to the remaining customers to rise in order to protect water supplies. The regulator would have little room for manoeuvre and the 2, D00 industrial and commercial customers would benefit at the expense of everyone else—a point about which I believe all noble Lords would be concerned.
§ A further aspect concerns us. The figures for rainfall, county by county, used in an article in the Daily Telegraph gardening supplement at the end of May make it clear that sizeable areas of England are short of water. In several cases those areas are also under huge development pressure. As matters stand, new water supplies, whether piped or delivered by some other means, will be charged for across all users.
§ If the largest customers are supplied even more cheaply than now, from another source Than of now, they will not be available to pay a share of the new supply charges from the water undertakers. This must surely result in higher charges than would otherwise be the case for the rest.
§
Amendment No. 51 was debated in Committee. The noble Baroness, Lady Farrington, replied for the Government and explained that if it were to be accepted the effect would be to remove the ban on licensed water suppliers operating in the same area as an associated water undertaker. Apparently, this would be anticompetitive in that the water undertaker might,
find ways of encouraging customers to transfer to its associates in order to remove them from their regulated activities and the price control mechanism".
§ On reflection, we find this an astounding statement and one which needs to be explored more thoroughly. Water undertakers will, apparently, be allowed to form subsidiaries which may apply for and be granted a licence to supply water, but only in another water undertaker's area.
§
Only the largest of 2,000 or so customers will qualify for transfer to a licensed water supplier. They are, however, apparently so naive that the effect of allowing an associated water supplier to operate in the same area as its parent water undertaker will be to encourage the undertaker to use means to persuade them to transfer. It would seem that the Government are acting more out of animus against the water undertakers than out of a true desire to open up the water industry to competition. At this point, the noble Baroness, Lady Farrington, said:
This could be done only at the expense of the customers remaining with the regulated business".—[Official Report, 8/4/03; col. 13.]
§ From this short exchange it would appear that the introduction of licensed water suppliers will indeed be bad news for those customers, including domestic consumers, who will not be eligible to move from a water undertaker to a licensed water supplier. I am sure that this is not what is intended and I should be glad if the Minister would clarify the position and explain in different terms why a licensed water supplier may not operate in the same area as its parent or associated water undertaker.
§ I turn to Amendment No. 53, which I moved in Grand Committee. Subsequently, the Government have kindly come up with Amendment No. 52 which, on reflection, I believe deals with the concerns expressed in our amendment. Therefore, I shall not set out in detail the reasons why we promoted Amendment No. 53.
§ In moving Amendment No. 50, 1 have spoken to Amendment No. 51 and I commend our Amendment No. 53, which I believe we shall withdraw in the light of Amendment No. 52 tabled by the noble Lord, Lord Whitty. I beg to move.
§ Lord Livsey of TalgarthMy Lords, I am interested in the fact that the noble Baroness is to withdraw Amendment No. 53 in the light of the Government's introduction of Amendment No. 52. I think I understand the reasons for that. I mention in passing that one of the problems in the situations in which we find ourselves is that the water companies obviously have to produce sufficient profit to satisfy their shareholders. The possibility of opening up the markets further is one about which one might have reservations, given that water is such a scarce resource.
We have a non-profit-making company in Wales, Glas Cymru, which could perhaps show the way in some respects in that it reduces the amount that consumers have to pay at present because it is funded in a different way. I shall refer to that in speaking to a later amendment. Therefore, I am pleased that it looks as though government Amendment No. 52 will go 175 ahead and that best regulatory practice will be transparent, accountable and proportionate. This is a desirable objective and one that we support.
§ Lord WhittyMy Lords, in reference to Amendment No. 50 relating to a proposed period of 12 years, the Bill places a primary duty on the Secretary of State and the authority to further the consumer objective, which includes promoting effective competition where appropriate. In fulfilling that duty, the Secretary of State and the authority would need to consider the effects of competition on the interests of consumers, not just in the short term but in the medium and long term. Therefore, it seems to me that a 12-year period creates an unnecessary and artificial constraint on those decisions.
In regard to Amendment No. 51, new Section 2(2C) also requires the Secretary of State, when furthering the consumer objective, to have regard to the interests of customers who are not eligible to be supplied by licensed water suppliers—thereby increasing the protection of undertakers' retained customers' interests against any possible unwanted and detrimental effects of competition.
When noble Lords tabled a similar amendment to Amendment No. 51 in Grand Committee, I think that the main aim was to seek clarification on the restrictions under which associated licensed water suppliers can operate. The noble Baroness referred to that, as she did in relation to an earlier amendment today. The position is that undertakers can already carry out activities, apart from their regulated business, through associated companies. Under this legislation they cannot operate as licensed suppliers to themselves, and associated licensed water suppliers' activities must be at arm's length from those of their parent companies.
Another sensible regulation is that licensees owned by undertakers can operate anywhere except in their own parent undertakers' areas. If the undertaker and the licensee operated in the same area, in theory that would allow the same company to compete for a customer and possibly effectively cut off all other competition for that customer. It would be an incentive for the undertaker to remove all its eligible customers from its regulated business into its licensed business—a point that I raised in Grand Committee—because the regulated business would be price—capped, whereas its licensee would not be price-capped in that way. When we discussed this matter, I believe that all consultees were in favour of that restriction in relation to the operation of associated companies.
I turn to my Amendment No. 52, which, again, has been tabled in response to an amendment in Grand Committee. The amendment would have the effect of requiring the Secretary of State and the new regulatory authority to have regard to the principles of better regulation when carrying out their functions. There is a difference between my Amendment No. 52 and Amendment No. 53, which includes some other aspects of the Better Regulation Task Force.
176 In order to clarify matters, I still have some concerns about spelling out the issue in the way that Amendment No. 53 would do—in particular, the implications of paragraph (b)—in that this industry is predominantly monopolistic. Therefore, regulation of the quality of supply or pricing is crucial, both in terms of all the sustainability objectives and public health. It is difficult to see that self-regulation in this industry would have the same appeal as it might in industries where wider competition exists. Incidentally, I would also argue that paragraph (e) of Amendment No. 53 is already covered by the Bill.
Therefore, I believe that Amendment No. 52. which is worded in slightly more general terms, is the more appropriate. When we reach it, I shall wish to move that amendment in preference to the noble Baroness's amendment.
§ 5.30 p.m.
§ Baroness ByfordMy Lords, I am grateful to the Minister for his response to these various amendments. We believe that the Government's Amendment No. 52 covers some of our anxieties and that is why I indicated that we would not press Amendment No. 53. In particular, there is always an argument as to whether self-regulation is or is not appropriate. Having heard what the Minister said, I am satisfied on that point.
The Minister said that paragraph (e) in Amendment No. 53 is already covered. I shall need to ensure that we are fully satisfied on that point. However, at this stage, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 51 not moved.]
§
Lord Whittymoved Amendment No. 52:
Page 43, line 40, at end insert—
(4) In exercising any of the powers or performing any of the duties mentioned in subsection (1) above in accordance with the preceding provisions of this section, the Secretary of State and the Authority shall have regard to the principles of best regulatory practice (including the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed)."
§ On Question, amendment agreed to.
§ [Amendment No. 53 not moved.]
§
Lord Whittymoved Amendments Nos. 54 and 55:
Page 43, line 48, leave out "(unless the context otherwise requires)
Page 44, line 9, leave out ", 66G" and insert "to 66H
§ On Question, amendments agreed to.
§ Clause 39 [Guidance to Authority on social and environmental matters]:
§
Baroness Farrington of Ribbletonmoved Amendment No. 56:
Page 44, line 35, at end insert—
( ) In formulating guidance, the Secretary of State and the Assembly shall, where practicable. have regard to the costs and benefits which may be expected to result from the guidance.
§ The noble Baroness said: My Lords, in moving Amendment No. 56, I shall speak also to Amendment No. 58. The issue dealt with in this amendment was raised in Grand Committee when the noble Baroness tabled an amendment which had a similar intention to Amendments Nos. 56 and 58. The intention of both amendments is to set out in statute the requirement for an analysis of the costs and benefits that could be expected as a result of issuing guidance under this clause. We agreed to take away the idea and give it further consideration, as a result of which we have tabled Amendment No. 56.
§ I believe that these two amendments are closer than they may seem to be on the surface. We would, of course, expect to publish our consideration of costs and benefits, as is standard practice with new regulatory proposals. The process of preparing a regulatory impact assessment also recognises that there will be cases when it may not be practicable to identify or evaluate fully all costs and benefits. That is expressly catered for in the government amendment. Therefore, I hope that the noble Baroness will feel that it is not necessary to press her amendment. I beg to move.
§ Baroness ByfordMy Lords, I am grateful to the noble Baroness, Lady Farrington, for proposing Amendment No. 56, which comes in response to the long debate that we had in Grand Committee. I have prepared a speech. which I shall willingly repeat, on my Amendment No. 58 but, at this stage, I shall happily support the government amendment and thank the Minister for putting it before us on Report.
§ On Question, amendment agreed to.
§
Baroness Miller of Chilthorne Domermoved Amendment No. 57:
Page 44. line 35, at end insert—
(1A) In particular. before any alteration to the water pricing or consumer charging regimes, the Authority shall receive guidance to—
§ The noble Baroness said: My Lords, in this amendment I return to the issue of water affordability. I make no apologies to the House for taking a little time on this matter because I consider it to be very important. Indeed, I believe that it is perhaps the most important issue that we still have to discuss on Report.
§ The first part of the amendment seeks to ensure that the Government address the issue of defining water affordability. The second part seeks to ensure that the Government do something to address the difficulties raised by the rising levels of debt. I believe this issue to be of equal interest to water companies, which are concerned about the high levels of debt, and to the groups which struggle to represent individuals with water bill debts and the individuals themselves.
178§ The fact is that levels of debt are rising. I remind the House that some 19 per cent of British households are now in debt in respect of their water bills. The Water Framework Directive will require changes to the way that water is charged for, and therefore it is possible that its implementation will increase levels of debt. I believe that the Government must do something to address this issue. Water UK estimates that annually at least £10 is added to every water bill for every household through people defaulting on their water bills. There is a clear need to separate the two groups. First, there is the "can't pay" group and, secondly, the "won't pay" group.
§ I tabled a similar amendment in Grand Committee and I have taken the Minister's reply into account. At that stage he said that the amendment should relate more to the purpose that it sought to address. He said that the approach in the amendment that I tabled on that occasion was entirely in isolation. I hope that the new amendment relates to the activity of the regulator.
§ This amendment further takes into account the Minister's comments in Grand Committee that the amendment would not have any effect beyond pure symbolism. The new amendment encourages the Secretary of State, when issuing guidance to the regulator on pricing, to be precise about what Clause 39 means. The regulator must have regard to individuals with low incomes, as specified in Clause 38(2C)(c). This amendment seeks to help further by ensuring that it is clear what a low income is with regard to water charges.
§ Paragraph (b) of the amendment encourages the Secretary of State to think beyond the unsuccessful vulnerable groups regulations scheme. It is reasonable to praise those water companies that helped to advance work on that scheme in order to make it more successful. I refer in particular to the Severn Trent Trust Fund and the Anglia Water Trust Fund. The Government must come up with something that is more country-wide because at the moment the applications of the scheme are geographically arbitrary and inequitable. The take-up of the scheme is absolutely pitiful. According to government figures, it is 0.6 per cent and according to the Chartered Institute of Environmental Health, it is 0.4 per cent. Whichever of those figures is correct, vulnerable groups are not being dealt with in a meaningful way.
§ I remind the Minister of the reasons why the tax and benefits system fails to tackle water affordability. There is a problem with water affordability that affects more consumers than are assisted by vulnerable groups regulations, no matter how they may be amended. The Government made clear their view that such customers are struggling with affordability and should be helped through the tax and benefits system. However, that is far from the solution of tackling the problem of the affordability of water, for various reasons. First, the notional element of income support that is intended to cover water bills has not kept pace with those bills. Between 1988 and 1997, the amount of that benefit fell from 80 per cent of the average water bill to just 55 per cent.
179§ Secondly, some groups of vulnerable consumers on means-tested benefits, particularly households without children, spend a far greater proportion of their income on their water bill than others. The average unmeasured household bill for 2001–02 amounts to 8 per cent of the income of the single person on jobseeker's allowance, 5 per cent for a couple on the jobseeker's allowance and 4 per cent for a pensioner on the minimum income guarantee. Those figures are similar for measured bills: 7 per cent, 4 per cent and 4 per cent respectively. Defra developed its own yardstick of 3 per cent, so it is aware that there is an issue. I am not clear why the Government will not therefore include the amendment in the Bill. Those consumers are paying unacceptable and unsustainable amounts for their water.
§ As noble Lords said, the size of water bills varies hugely, depending on regions, but the amount of means-tested benefits does not. In Plymouth, for example, a single person on the jobseeker's allowance paid a massive 13 per cent of their income on the average water bill in 2000–01.
§ It is time that the issue was addressed; I also refer to individuals who cannot afford their water and to water companies, which must struggle with the "won't pay" section of society, whom they are now unable to disconnect from the water supply. We heard at length in Committee that people who choose not to pay their water charges, even though they could, rank paying their water bill below paying for goods from catalogues, satellite dishes and so on. The Government must address the issue from everyone's point of view. I beg to move.
§ 5.45 p.m.
§ Lord WhittyMy Lords, as I said in earlier debates, the Government take this subject very seriously. We estimate that vulnerable groups constitute up to 1.5 per cent of eligible customers—currently, about 5,000. The recent consultation paper addressed issues of take-up. We are involved in that consultation.
I do not believe that the amendment would deliver what the noble Baroness seeks. It would be possible to have a theoretical, mechanistic ratio between income and water charges, which could be supplied to the regulator and the companies. However, applying that ratio in particular circumstances would be extremely difficult, not least because income information is inevitably sensitive and is not normally in the public domain. Customers might be reluctant to declare their income to a private sector company. We are not currently happy to encourage a system that was based on that; in other words, on asking a company to check on its customers' income details.
The Government have taken a number of steps to alleviate water poverty and we are consulting further. We already have the proposals about disconnection and the protection for vulnerable groups, which is in the Bill but was available earlier. The noble Baroness 180 may be right to say that awareness of the situation needs to be improved, but I do not believe that the additional system that she would impose on the regulator and the company is deliverable in terms of the aim that she seeks to achieve. I therefore maintain that we can better deal with the matter when we have fully assessed the consultation on water poverty; the consultation period has just finished and we are now considering the responses. It would not be appropriate for us to adopt the noble Baroness's proposal in any case before we have considered those responses. It is not operationally possible to do that without involving vast sensitivities, which we do not wish to encourage.
§ Baroness Miller of Chilthorne DomerMy Lords, I thank the Minister for that reply. I am slightly surprised by it because my amendment simply asks that the authority should receive guidance to define a household income. It does not ask individual households what their income is. It therefore does not involve developing a mechanistic ratio, as he called it. It simply asks for a definition and leaves the Secretary of State to set out such measures.
I understand that there is currently a consultation. The fact is that the responses will be received too late to be incorporated in the Bill, even if the Government were minded to do so. We might well be left to drift for several more years in this unacceptable position.
I was saddened not to have the support of the noble Baroness, Lady O'Cathain, from the water industry's point of view. The industry also feels that something must be done to address the levels of debt, which it, too, finds difficult.
§ Baroness O'CathainMy Lords, I thank the noble Baroness for giving way. I was tempted to speak earlier but we have gone over this piece twice already and measures are currently being considered. I was going to ask the Minister a question on another occasion but, while I am on my feet, I may as well ask him it now.
§ Baroness ByfordMy Lords, I am afraid that my noble friend cannot.
§ Baroness O'CathainNo, my Lords, I cannot. Isn't he lucky?
§ Baroness ByfordMy Lords, my noble friend could write to the Minister.
§ Baroness O'CathainI will, my Lords.
My issue on debt is different from that discussed by the noble Baroness. I wanted to keep them separate.
§ Baroness Miller of Chilthorne DomerMy Lords, I thank the noble Baroness for her explanation that she regards the matter as a different issue. I am disappointed by the Government's response. I remember that a number of the Minister's colleagues in another place, and indeed in this House, were a vociferous part of the national forum on water poverty. The measure that I have set out would move the matter forward, and I had hoped that the 181 Government would have taken it on board. They clearly are not minded to do that, so I shall test the opinion of the House.
§ 5.49 p.m.
§ On Question, Whether the said amendment (No. 57) shall be agreed to?
§ Their Lordships divided: Contents, 45; Not-Contents, 126.
182| Division No. 2 | |
| CONTENTS | |
| Addington, L. | Michie of Gallanach, B. |
| Alderdice, L. | Miller of Chilthorne Domer, B [Teller] |
| Alton of Liverpool, L. | |
| Avebury, L. | Newby, L. |
| Barker, B. | Northover, B. |
| Bradshaw, L. | Oakeshott of Seagrove Bay, L. |
| Clement-Jones, L. | Perry of Walton, L. |
| Craigavon, V. | Razzall, L. |
| Darcy de Knayth, B. | Redesdale, L. |
| Dholakia, L. | Rennard, L. |
| Finlay of Llandaff, B. | Rodgers of Quarry Bank, L. |
| Goodhart, L. | Russell, E. |
| Hamwee, B. | Sandberg, L. |
| Harris of Richmond, B. | Sandwich, E. |
| Howe of Idlicote, B. | Scott of Needham Market, B. |
| Hylton, L. | Sharp of Guildford, B. |
| Linklaterof Butterstone, B. | Shutt of Greetland, L. |
| Livsey of Talgarth, L. [Teller] | Smith ofClifton, L. |
| Mackie of Benshie, L. | Steel of Aikwood, L. |
| Maclennan of Rogart, L. | Thomas of Walliswood, B. |
| McNally, L. | Tordoff, L. |
| Maddock, B. | Walmsley, B. |
| Mar and Kellie, E. | Williams of Crosby, B. |
| NOT-CONTENTS | |
| Acton, L. | Donoughue, L. |
| Ahmed, L. | Dormand of Easington, L. |
| Alli, L. | Dubs, L. |
| Amos, B. | Elder, L. |
| Andrews, B. | Evans of Parksids, L. |
| Ashton of Upholland, B. | Evans of Temple Guiting, L. |
| Barnett, L. | Farrington of Ribbleton, B. |
| Bassam of Brighton, L. | Faulkner of Worcester, L. |
| Bernstein of Craigweil, L. | Filkin, L. |
| Billingham, B. | Fyfe of Fairfield, L. |
| Blackstone, B. | Gale, B. |
| Borrie, L. | Gibson of Market Rasen, B. |
| Boston of Faversham, L. | Golding, B. |
| Brennan, L. | Goldsmith, L. |
| Brooke of Alverthorpe, L. | Gordon of Strathblane, L. |
| Brookman, L. | Gould of Potternewton, B. |
| Brooks of Tremorfa, L. | Graham of Edmonton, L. |
| Campbell-Savours, L. | Grocott, L. [Teller] |
| Carter, L. | Hardy of Wath, L. |
| Chan, L. | Harris of Haringey, L. |
| Clark of Windermere, L. | Harris of High Cross, L. |
| Clarke of Hampstead, L. | Harrison, L. |
| Clinton-Davis, L. | Haskel, L. |
| Cohen of Pimlico, B. | Hayman, B. |
| Corbett of Castle Vale, L. | Hilton of Eggardon, B. |
| Craig of Radley, L. | Hogg of Cumbernauld, L. |
| Crawley, B. | Hollis of Heigham, B. |
| David, B. | Howells of St.Davids, B. |
| Davies of Coity, L. | Howie of Troon, L. |
| Davies of Oldham, L. [Teller] | Hughes of Woodside, L. |
| Desai, L. | Janner of Braunstone, L. |
| Dixon, L. | Jones, L. |
| King of West Bromwich, L. | Radice, L. |
| Kirkhill, L. | Ramsay of Cartvale, B. |
| Layard, L. | Randall of St. Budeaux, L. |
| Lea of Crondall, L. | Rendell of Babergh, B. |
| Lipsey, L. | Renwick of Clifton, L. |
| Lockwood, B. | Richard, L. |
| Lofthouse of Pontefract, L. | Scotland of Asthal, B. |
| Macdonald of Tradeston, L. | Sheldon, L. |
| McIntosh of Haringey, L. | Simon, V. |
| McIntosh of Hudnall, B. | Slim, V. |
| MacKenzie of Culkein, L. | Smith of Leigh, L. |
| Mackenzie of Framwellgate, L. | Stallard, L. |
| Mallalieu, B. | Stone of Blackheath, L. |
| Marsh, L. | Strange, B. |
| Mason of Barnsley, L. | Symons of Vernham Dean, B |
| Massey of Darwen, B. | Taylor of Blackburn, L. |
| Merlyn-Rees, L. | Temple-Morris, L. |
| Milner of Leeds, L. | Thornton, B. |
| Mitchell, L. | Turnberg, L. |
| Morgan, L. | Turner of Camden, B. |
| Morris of Manchester, L. | Walker of Doncaster, L. |
| Nicol, B. | Warner, L. |
| Orme, L. | Warwick of Undercliffe, B. |
| Parekh, L. | Weatherill, L. |
| Patel of Blackburn, L. | Whitaker, B. |
| Paul, L. | Whitty, L. |
| Pendry, L. | Williams of Elvel, L. |
| Peston, L. | Williams of Mostyn, L. (Lord President of the Council) |
| Pitkeathley, B. | |
| Plant of Highfield, L. | Williamson of Horton, L. |
| Prys-Davies, L. | Woolmer of Leeds, L. |
§ Resolved in the negative, and amendment disagreed to accordingly.
§ 6 p.m.
§ [Amendment No. 58 not moved.]
§
Lord Dixon-Smithmoved Amendment No. 59:
After Clause 39, insert the following new clause—
§ "COORDINATED REGULATION
§ After section 5 of the WIA there is inserted—
§ "PART IA COORDINA TED REGULATION
§ COORDINATED REGULATION
§ (1) In this section the Agency, the Authority, the Chief Inspector of Drinking Water and (if separately appointed) the Chief Inspector of Drinking Water for Wales and the Consumer Council for Water shall together be referred to as "the regulators".
§ (2) The Secretary of State, the Assembly and the regulators shall exercise all their statutory powers and duties, which relate to or may affect the water industry, in a coordinated manner.
§ (3) To that end, the Secretary of State, the Assembly and the regulators shall consult and cooperate with one another."
§ The noble Lord said: My Lords, Amendment No. 59 deals with co-ordinated regulation. We debated the matter in Grand Committee on Amendment No. 102. The amendment was supported by the noble Baroness, Lady Miller of Chilthorne Domer, and the noble Lord, Lord Borrie. That amendment was criticised because it was exceedingly long, taking up one and a half columns of Hansard. Amendment No. 59 is the former Amendment No. 102 stripped down to its bare essentials.
183
§
The Minister concluded his remarks in Grand Committee by inviting other Members to bring forward a more appropriate amendment. He said:
Perhaps I may leave it to other noble Lords to bring forward a more appropriate amendment".—[Official Report. 8/4/03; col. GC29.]
§ That leaves us with the burden and we have done our best. I hope that it satisfied the Minister and that he is pleased with the result; otherwise we shall have to invite him to take it away to improve on it.
§ It is a sensible amendment in principle and I ask the Minister to consider it seriously. I beg to move.
§ Baroness Miller of Chilthorne DomerMy Lords, we support the idea of co-ordinated regulation. Although the Minister may point out some way in which the amendment can be improved, it seems to do the job.
§ Lord BorrieMy Lords, I gave a word of support for the amendment in Grand Committee. However, when I read it now, because of the very fact that it has been simplified, it looks like motherhood and apple pie. I say to myself, surely sensible regulators will get together and co-ordinate their activities. They will not live in separate ivory towers. Do we really need to have on the statute book that they should co-operate with one another? I now question the necessity of the amendment.
§ Baroness ByfordMy Lords, the noble Lord, Lord Borrie, has more faith than we do and this is why we recommend the amendment. We hope that the Government will deal with it sympathetically.
§ Baroness O'CathainMy Lords, I, too, recommend the amendment. In my experience people like to live in silos and do not communicate. The noble Lord, Lord Borrie, grimaced but that is the reality. People build up empires and say, "No one can come near me. I'm king of my castle so forget it". I support the amendment.
§ Lord WhittyMy Lords, we are all in favour of cooperation, co-ordination and communication between regulators. This amendment is better than the previous one, but it is not quite there yet. The problem is that, in one sense, it is so simple. That is not the motherhood and apple pie objection, but the amendment proposes that the regulators shall exercise all their statutory powers and so forth "in a co-ordinated manner".
Each regulator has a separate and distinctive role and to co-ordinate on every exercise of power with the other regulators is not particularly appropriate. To provide for that in a general way in subsection (3) is clearly highly desirable, but subsection (2) might be over-prescriptive.
However, I share the noble Lord's general objectives and I shall take the matter away and consider whether we can move some way down this road without unintended side effects.
§ Lord Dixon-SmithMy Lords, I am grateful to the Minister for that helpful reply. It removes from me the obligation to remind the noble Lord, Lord Borrie, of his remarks in Grand Committee. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§
Baroness O'Cathainmoved Amendment No. 60:
After Clause 39, insert the following new clause—
§
"REGULATORY METHODOLOGY
After section 2 of the WIA there is inserted—
§ "2C REGULATORY METHODOLOGY
§ (1) The Authority shall prepare and publish a statement of policy with respect to its determination of charges in periodic reviews and interim determinations under all or any of the instruments of appointment of companies as relevant undertakers made by virtue of Part II of this Act.
§ (2) The Authority's statement of policy under this section shall include a statement of its policy with regard to the following matters—
- (a) the carrying out of its duties under this Act insofar as they relate to its determination of charges;
- (b) the matters to be taken into account and the methodologies to be applied in its determination of charges; and
- (c) the extent to which the performance of functions by persons with powers and duties conferred or imposed by or under this Act or any other enactment are relevant to its determination of charges.
§ (3) The Authority shall determine charges in periodic reviews and interim determinations under a company's instrument of appointment as a relevant undertaker on the basis of the most recently published statement of policy.
§ (4) The Authority may revise its statement of policy and where it does so shall publish the revised statement.
§ (5) Publication under this section shall be in such manner as the Authority considers appropriate for the purpose of bringing the matters contained in the statement of policy to the attention of persons likely to be affected by them and shall not be made less than twelve months before a periodic review.
§ (6) When preparing or revising its statement of policy under this section, the Authority shall consult relevant undertakers and such other persons as it considers appropriate, subject to the requirements of subsection (7) below.
§ (7) For the purposes of subsection (6) above—
- (a) consultation shall be by way of written notice given by the Authority not less than six months prior to the publication of the statement of policy which it is preparing or revising;
- (b) such notice shall state—
- (i) the matters which the Authority proposes to publish in its statement of policy and its reasons for including them in the statement; and
- (ii) a period of not less than three months within which that person may give written notice of objection with respect to the matters referred to in the notice; and
- (c) the Authority shall give each person a reasonable opportunity to make oral representations to it on the matters referred to in the notice.
§ (8) The Authority shall not issue or publish a statement of policy unless—
- (a) no notice of objection to the policy is given to the Authority within the time period specified in its notice under subsection (7); or
- (b) one or more relevant undertakers gives notice of an objection to the Authority within that time and—
- (i) the proportion (expressed as a percentage) of the relevant undertakers who have given notice of an objection is less than such percentage as may be prescribed; and
- (ii) the percentage given by subsection (9) is less than such percentage as may be prescribed.
§ (9) The percentage given by this subsection is the proportion (expressed as a percentage) of the relevant undertakers who have given notice of objection, weighted according to their market share in such manner as may be prescribed.
§ (10) If the conditions referred to in subsection (8) are not met, the Authority shall (within three months of its receipt of the first or only notice of objection) refer the policy to the Competition Commission for review.
§ (11) Where a reference is made to the Competition Commission under this section, it shall be the duty of the Competition Commission to determine whether the policy which is the subject of the reference operates in a manner best calculated to fulfil the duties of the Authority arising under this Act.
§ (12) Where a reference is made to the Competition Commission under this section, the Authority shall not prepare or revise its statement of policy other than on the basis of the determinations of the Competition Commission.
§ (13) The Secretary of State may by regulations make such provision as he considers appropriate for regulating the procedure to be followed with respect to any reference to the Competition Commission under this section.
§ (14) Without prejudice to the generality of the power conferred by subsection (13) above, regulations under that subsection may, in relation to any such reference, apply (with or without modifications) the provisions of any enactment relating to the references to the Competition Commission under the provisions of this Act, the Fair Trading Act 1973 (c. 41) or the Competition Act 1998 (c. 41).""
§ The noble Baroness said: My Lords, Amendment No. 60 requires the water regulator to consult on and publish on a timely basis a statement of policy on how the regulator plans to conduct a price review; and also to state the methodology that it will use to set prices.
§ If a water company feels that there are some elements of methodology with which it is unhappy, the clause then allows the company to appeal to the Competition Commission for a strictly limited time period. The review which a company can seek must be of the whole of the methodology, to recognise that the methodology must be internally consistent. There cannot be cherry picking. All of this would take place well before a company submits a detailed business plan to the regulator, with detailed numbers to be used in price setting.
§ The purpose of the amendment is to achieve better decision making by the water regulator. It seeks to ensure that the regulatory mythology—that was a Freudian slip!—methodology is well-based and agreed long before discussion of detailed plans and numbers takes place under the periodic review.
186§ At the moment, a company can appeal against a defective regulatory methodology only right at the end of the process, when it can appeal to the Competition Commission. This is far too late in the process.
§ In the past, Ofwat has used defective methodologies that have been criticised by the Competition Commission. In the previous price review, the Competition Commission rejected an adjustment that Ofwat had made to depreciation allowances to align them with expected maintenance expenditure—the so-called "broad equivalence" rule. It also criticised a number of other detailed elements of the methodology. The Commons Environmental Audit Committee believed that the insufficient attention given to capital maintenance amounted to "intellectual neglect" on Ofwat's part. That appeared in the 7th report, Water Prices and the Environment.
§ An appeal mechanism at the methodology stage could have picked this problem up and resolved it before further detailed numbers work. So the benefits of getting the methodologies right at an early stage would be substantial.
§ In Grand Committee, the Minister said he thought that it was somewhat bureaucratic and would not improve the conduct of price reviews. Only one extra step is introduced into what is already a complicated process—that is, the referral to the Competition Commission on a strictly time-limited basis of the defective methodologies.
§ The benefits of getting the methodologies right early on greatly exceed the costs of this process, and introducing this referral provides an important incentive to the regulator to get the methodologies right.
§ The Minister also felt that it would greatly limit the flexibility of the regulator and his opportunities to innovate and would give companies the right to obstruct policies. Companies cannot obstruct policy. All they can do under the clause is to ask for a review. The amendment ensures that the regulator follows due process and consults properly, and enables peer review of methodologies by the Competition Commission. It builds on existing practices; it does not attempt to overturn them.
§ The final objection raised by the Minister was that the balance of influence between the companies and the consumers is disturbed. This is simply nonsense. The regulator's new duty to pursue the consumer objective is not altered in any manner whatever. I beg to move.
§ Lord Livsey of TalgarthMy Lords, in general, we agree with the principle of the amendment. However, I should be grateful if in summing up the noble Baroness could explain subsection (9), which states:
The percentage given by this subsection is the proportion (expressed as a percentage) of the relevant undertakers who have given notice of objection, weighted according to their market share in such manner as may be prescribed".Does that place the larger companies at an unfair advantage? If so, why does the mover of the amendment wish to create inequality of this kind? Is 187 not there a case for treating all companies in an equal way, or is there some agenda here that has put subsection (9) into this? I merely seek information and an explanation which perhaps the noble Baroness will address when she has had a look at it.
§ Lord WhittyMy Lords, I still cannot accept the amendment. Clearly, the company should have an early opportunity to make representations to the regulator, and Ofwat should—and does—provide constructive occasions for such dialogue on the methodology for the periodic review. However, this amendment says that the authority must issue a statement of policy at an early stage in the periodic review, that that could be challenged, and that the Competition Commission could be brought in at that stage to determine whether that policy should he pursued. That could slow down the process, but it could also give additional powers to the company to upset the intentions of the regulator before any final determination is reached, and therefore before the company would suffer any detriment—at which point they can call in the Competition Commission.
The time restrictions implied by this measure would help make the process more static and inflexible, reducing the ability of the regulator to respond to changing circumstances. That is completely contrary to what the industy usually says about the regulator; namely, that it should operate much more flexibly.
I know that the noble Baroness denies this, but the amendment would enable undertakers to drop or at least delay the statement of policy, and shift the balance of power and influence between companies and consumers, because consumers have no equivalent rights to make an outside appeal at this point in the process. It would also, as the noble Lord, Lord Livsey, says, shift power from the smaller companies to the larger companies, in that the effectiveness of any such appeal-blocking mechanism with reference to the commission would be dependent on the market share. That does not seem to he an equitable treatment, even within the company.
This amendment therefore implies two shifts of power with which I am not prepared to go along. I regret that I continue to oppose the amendment.
§ Baroness O'CathainMy Lords, I thank the noble Lord, Lord Livsey, and the Minister for his comments.
The process of doing the periodic review is extraordinarily, excruciatingly long and detailed. It takes an enormous amount of management time. The idea of this amendment is to halve the process; to do the methodology and have it fixed in stone. In the past, the methodology has been found to be faulty, and the next stage, at which prices are set, is then faulty as a result.
If the methodology is signed off, such a problem will not occur in future. The water companies want some certainty. They look back over their shoulders at what happened at the last periodic review. I thought that by putting a time-limited clause into the amendment it 188 would help in that direction. They could not allow negotiations on the methodology to go on and on; there would have to be a cut-off point. We might review that to see whether the period specified is too much or too little.
There is no hidden agenda as regards subsection (9), but I will certainly consider the point about the balance of power between larger and smaller companies. I was convinced of the validity of this one. I am a member of a very small water company, and I saw that in the interests of the company that I knew, the amendment would remove much uncertainty and cut down on the puzzlement of those who. after Ofwat's price findings were given, scratched their heads and wondered whether they could question the methodology and what result another might have yielded. It would put a stop to all that questioning if they knew once and for all that the methodology was correct and had been agreed.
The amendment was in the interests of making the periodic review as efficient and effective as possible; to ensure that once the determination was given, there might be quibbles about price but there could be none about the methodology; to remove uncertainty; and above all, to recoup the management time that has been involved in all of this. It is difficult for people who are supposed to produce lots of clean, potable water and ensure consumer supply to spend so much management time on looking through the methodology ad nauseam. The amendment would have been a good counter to that.
I am disappointed by what the Minister said. I will probably come back to it at Third Reading, but in the mean time, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ 6.16 p.m.
§
Baroness O'Cathainmoved Amendment No. 61:
After Clause 39, insert the following new clause—
§ "LICENCE MODIFICATIONS
§
In section 14 of the WIA, after subsection (1) there is inserted—
(1A) Where a company has requested the Authority to modify the conditions of its appointment and the Authority has not consented to making the modifications, the Authority shall make to the Competition Commission a reference which is so framed as to require the Competition Commission to investigate and report on the questions in subsection (1).
(1B) Before making a reference under subsection (1) or (1A), the Authority shall give notice of the matters specified in the reference to the company to whose conditions of appointment the modification relates and shall take into account any representations or objections which are duly made and not withdrawn.
(1C) Notice under subsection (1B) shall be in writing and shall specify a period of not less than 28 days from the date of receipt of the notice within which representations or objections with respect to the matters proposed to be specified in the reference may be made."
§ The noble Baroness said: My Lords, this is a new clause on licence modifications. Its purpose is to enable a water company to appeal to the Competition Commission against a refusal by Ofwat to modify the terms of its instrument of appointment, namely its licence. At the moment, only Ofwat has the right to 189 initiate alterations to licences. The amendment lends a more even-handed approach to the issue. I beg to move.
§ Lord WhittyMy Lords, the amendment would create an automatic appeal to the Competition Commission against any refusal to amend conditions of appointment if requested to do so by the undertaker holding an appointment.
The amendment would take no account of the issues in each case and would mean that relevant precedents would have to be ignored. It would not even allow the company concerned to withdraw its request, even if it agreed with the authority's decision. The amendment contains several rigidities and technical problems, in any case.
The amendment would require the authority to consult and take into account the views of the company concerned on the terms of reference of the referral. It does not give the same rights to any other stakeholders or consumer groups.
The amendment would also introduce a potentially bureaucratic appeal system which would unsettle the balance between the company and the regulator, and clearly disadvantage consumers. Therefore, I cannot accept the amendment.
§ Baroness ByfordMy Lords, before Cle noble Lord sits down, could he explain to the House a little more about this amendment? Is he completely happy with the situation raised by my noble friend Lady O'Cathain as regards the Bill? Does he not feel that there should be a right of appeal?
Does the Minister purely find fault with the words of this amendment, or is there a closed door; namely, that he feels that undertakers or water suppliers have no right to appeal directly themselves?
§ Lord WhittyMy Lords, the amendment relates to an appeal when an authority has refused a request from a company to modify its conditions of appointment. In those circumstances I would not look for any system of appeal. This particular system has additional problems in terms of its rigidity. Nevertheless I am not persuaded that we would need an appeals system in those circumstances.
§ Baroness O'CathainMy Lords, I thank my noble friend for asking for clarification, which we now have. I also thank the Minister. He more or less suggested that the amendment is fatally flawed. I was interested in what he had to say. Not being a shorthand writer I was not able to take down what he said, so I shall read what he said in Hansard tomorrow. In the mean time, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 40 [Standards of performance in relation to water supply]:
§
Baroness O'Cathainmoved Amendment No. 62:
Page 46, line 30, after "research" insert "and regulatory impact assessment
§ The noble Baroness said: My Lords, in moving Amendment No. 62 I shall speak also to Amendments Nos. 63, 64, 65, 66 and 67. They all relate to standards of performance and to Clauses 40 and 41.
§ The amendment places on the face of the Bill requirements to conduct a regulatory impact assessment in order to provide cost benefit analysis when standards of performance are set. Clauses 40 and 41 enable the Secretary of State to initiate regulations setting new or amended standards of performance in relation to water supply and sewerage services. The regulator can do so in order to pursue policy objectives relating to public health and the environment or otherwise, where the regulator considers such regulations to be in the public interest. The clauses also set out the process for making such regulations.
§ At the moment the Secretary of State can make regulations setting standards of performance only if the regulator receives an application from the Director General of Water Services. That is in the Water Industry Act 1991, Sections 38, 39 and 95.
§ Standards of performance are usually set by Ofwat. The main means are setting water quality programmes under the quinquennial periodic review process, the overall performance assessment and setting targets for water leakage. But the considerations that it must take into account are defined in statute. And the process, the financial (cost) calculations and timetable for the price reviews and its policies on security of supply, water quality and the environment that are available to the public are often subject to consultation. Otherwise standards of performance are set through European Union and UK legislation; for example, the EU Drinking Water Directive.
§ Ministers want a reserve power to regulate the industry if they consider it politically necessary and/or if the water regulator is too slow to develop solutions to particular issues that arise. So companies need to be protected from the risk of responding to short-term political pressures without proper consideration of the costs to customers. One such safeguard is to have some kind of assessment in financial terms about whether benefits to the customer or the environment outweigh the costs. A balance needs to be struck. I beg to move.
§ Baroness ByfordMy Lords, I want to add my weight to this set of amendments. So often legislation comes through and we do not always look at the regulatory impact. These amendments ask that this matter should be on the face of the Bill and that research and regulatory impact assessments be carried out automatically. I had hoped that the Government would welcome this. As this is not Committee stage, I cannot speak on this again, so I hope that the Minister will deal fully with the point.
I have a couple of questions on the regulatory impact assessments as laid down in the amendments. If the Government say that the amendments are not necessary, could they identify where, within the Bill, the matter is dealt with in a satisfactory manner? If the Government are to say "No" to these amendments, we need to know whether they are saying "No" to the 191 individual amendments or whether the Minister feels that the matters are already covered in the Bill. If so, perhaps he could say where they are dealt with in the Bill.
§ Lord WhittyMy Lords, I have some sympathy with the aims of the noble Baroness, but I do not believe that it is appropriate to write the RIA on the face of the Bill for wider consideration. As I have indicated, the Government are already committed to produce an RIA whenever these clauses are used to propose standards of performance. The Prime Minister made a Statement to that effect—nothing is more important than the Prime Minister's Satement. More relevantly, the commitment to RIA that accompanied the Bill stated that a separate RIA would be prepared on each occasion that the order-making power is used. Therefore, we have that in the process of the Bill. It is not in the Bill itself, but it is in the RIA produced with the Bill.
I am opposed to prescribing the form of the RIA on the face of the Bill because it would limit the development of the RIA process, which has been evolving over the past few years. It has brought in other matters such as environmental appraisals, rural proofing, equal treatment and so on as well as the more traditional areas of cost and benefit. Therefore, to prescribe it would set it in concrete, whereas the RIA process is evolving all the time.
Equally importantly, stating on the face of this Bill that an RIA is required every time an order-making power is used, would imply that where it is not so stipulated—despite the Prime Minister's Statement and other assurances by the Government—it may not be required. I am sure that this Government and any government of a party represented here would probably reassert that necessity. However, the fact is that in the courts, if it is stated in one place and not in another, that other place could say that it does not need an RIA to issue an order-making power under an Act, unlike under the Water Act which requires it to be done.
For that reason of precedent, I am opposed to putting the RIA on the face of the Bill, although we are very committed to ensure that no orders in this context under it would be issued without such an assessment.
§ Baroness ByfordMy Lords, before the noble Lord sits down, if such a matter had come through in the form of an order, which I presume he is inferring, would it be a negative or an affirmative order? That is of interest to us. Clearly, we have here the opportunity to debate the matter more fully. If it comes through as an order we have no power to stop it happening in the way in which the Government may wish it to be interpreted. I believe that clarification on that is important.
§ Lord WhittyMy Lords, a number of amendments in the group relate to different clauses. In some cases they are indeed negative procedures, but I am not sure that that is so in all cases. The objective of the 192 amendment was to ensure that in all cases, in this context, the order-making powers, whatever the procedure within the House, should be accompanied by an impact assessment. I accept that principle, whatever the parliamentary process.
§ 6.30 p.m.
§ Baroness O'CathainMy Lords, I thank my noble friend for her support and I thank the Minister for his conciliatory attitude for which I am grateful. He quotes the Prime Minister on the importance of an RIA. The Minister said that if you put it in one Bill you would have to put it in all Bills, as lawyers would have a field day if it was not in one Bill. People would say, "Why not when it is in the Water Act? Why not have an RIA on every Bill, if the Prime Minister is so for an RIA?" I take the Minister's point that it could limit the development of the RIA, because it is an evolutionary process, but practically every business process is an evolutionary process. It is not necessarily fixed in concrete. Perhaps we could do something with the amendment. I will take another look at it to see whether we could cover that valid point.
One does not want to be fixed, but on the other hand, one wants to ensure that the impact assessment is made. I thank the Minister for his constructive comments. I will read them tomorrow, but I will probably come back at Third Reading. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 63 and 64 not moved.]
§ Clause 41 [Standards of performance in relation to sewerage services]:
§ [Amendments Nos. 65 to 67 not moved.]
§ Clause 42 [General functions of the Council]:
§
Baroness Farrington of Ribbletonmoved Amendment No. 68:
Page 49, line 8, leave out "and
§ The noble Baroness said: My Lords, Amendments Nos. 68, 69 and 70 extend the list of groups to which the council must have special regard. It adds customers of undertakers that are not eligible to switch suppliers under the Bill's competition measures. It matches a similar duty on the authority and is part of a package of government amendments that increase the council's influence on the development of competition. I beg to move.
§ Baroness Miller of Chilthorne DomerMy Lords, I welcome this group of amendments and the fact that the Government have chosen to strengthen the role of the council in this regard at least. I look forward to seeing that enacted.
§ Lord Dixon-SmithMy Lords, like the noble Baroness, Lady Miller of Chilthorne Domer, we welcome the amendments. We think that the consumer council should be looking in this area, and it is helpful.
§ On Question, amendment agreed to.
193
§
Baroness Farrington of Ribbletonmoved Amendments Nos. 69 and 70:
Page 49, line 9, at end insert ";and
(e) customers, of companies holding an appointment under Chapter 1 of Part 2 of this Act, whose premises are not eligible to be supplied by a licensed water supplier,
Page 49, line 11, at end insert—
( ) For the purposes of subsection (1) above, premises are not eligible to be supplied by a licensed water supplier if—
§ On Question, amendments agreed to.
§
Baroness Miller of Chilthorne Domermoved Amendment No. 71:
Page 49, line 29, leave out from beginning to end of line 6 on page 50 and insert—
( ) Subject to subsection (7) below, in the exercise of its function under this section, the Council shall have regard to the need for excluding from such proposals, advice, information and views, so far as practicable—
§ The noble Baroness said: My Lords, this group of amendments expresses why my pleasure in the previous group of amendments is slightly alloyed. We must return to the fact that in this Bill the Government have created a consumer council for water but in some areas of activity they have already drawn the teeth of that consumer council before it has had a chance to bite.
§ The Minister made a comment earlier this evening, when speaking to Amendment No. 53, about the monopolistic structure of the water industry, which is correct. The difficulty that the Government have had with the Bill is that they have modelled many of the clauses about the consumer council for water on the Utilities Act 2000. These amendments take us back to the unsatisfactory nature of those issue; and the fact that we did not get much response in Committee, beyond the fact that the Utilities Act 2000 had been the model for them.
§ Amendments Nos. 71 and 72 are concerned with the powers of the council to publish information about water companies. I will return to them in more detail in a moment. Amendment No. 76 leaves the council with a more definite remit to specify its needs for information. As much wrangling could happen over the word "reasonably; that amendment seeks to delete "reasonably" from the Bill. I do rot think that the council would wish to act unreasonably, so I do not see any reason to have "reasonably" in the Bill.
194§ Amendments Nos. 78 and 79 concern provision of information to the council. Amendment No. 80 deletes the part of the Bill that creates what I call the "round the houses effect", where if a person fails to supply information to the council, that failure is referred to the authority, and the Secretary of State can make regulations about that failure and so on. This deletion enables the council to have a more direct approach.
§ Amendments Nos. 100, 101 and 102 give the council a duty to have regard for issues of individual or commercial confidentiality. The reason for including those in the Bill is that if the council is going to have a power to collect information, it must have regard to the fact that it is not going to abuse that power. In accepting the fact that it should have wider powers to collect information, it is sensible to table these amendments, which confine that power so that it cannot do anything that would damage either individuals or companies in a commercial manner.
§ I will return in more detail to Amendments Nos. 71 and 72. We accept that water companies are monopoly suppliers and consumer protection relies on close scrutiny by the regulator and the consumer body. An independent consumer body will be able to publicise information about a company where the council has evidence that the company is causing consumer detriment.
§ However, as currently drafted, the Bill can prohibit publication by the council of a water company's incompetence. That restriction is inconsistent with the Freedom of Information Act 2000. It is modelled much more on the Utilities Act, which supposes a structure that is not monopolistic. The Freedom of Information Act gives the presumption that a body can publish rather than cannot publish. As far as the consumer council for water goes, the whole Bill has been drafted in the negative with regard to publication issues. It cannot publish anything unless certain conditions are met. This group of amendments seeks to turn that around to a positive, so that it can publish everything, unless there is a good reason not to. I beg to move.
§ Lord Dixon-SmithMy Lords, the publication of information that anyone has the right to collect is always a problem area. I sympathise with the noble Baroness, Lady Miller of Chilthorne Domer, in putting down these amendments. She enunciated the correct principle towards the end of her remarks when she said that, in principle, everything that can be published should be published.
That still leaves one with a problem as to where the boundary line lies. If the boundary lies in one place, particularly where it might concern individuals, it might well lie in a different place, or be considered to lie in a different place, if one was dealing with a registered water supplier or a major water company. There is a difficulty of definition, but the principle of publishing as much as can be published is one that we support.
§ Baroness Farrington of RibbletonMy Lords, Amendments Nos. 71, 72, 79, 100, 101 and 102 are concerned with the consumer council's powers to publish information. The council is required to have regard to any opinion expressed by the authority about any serious and prejudicial effect of publishing or about the desirability of publishing. The amendments raise two issues: the level of protection of the individual or body and the extent to which the council can act on its own. We recognise the need for the council to be independent from the authority, but in this case it makes sense for the council to have regard for the authority's opinion. It is important to note that it will still be for the council to take the final decision.
Assessing whether publishing information may have serious or prejudicial effects on a company may mean examining quite technical issues involving the financial markets, for example. Therefore, it would be better for the council to have to draw on the greater expertise of the regulator in those matters and then to have regard to the opinion.
The legislation should also keep a balance between human rights of individuals and bodies and the public's right to information. We believe that the Bill as drafted strikes that right balance between those two concerns, whereas the effect of the amendments could be that an individual has no knowledge of the possibility of being named in a publication before it is printed.
We support the aim of Amendment No. 76 to require the council to act responsibly and to avoid imposing an unnecessary burden. However, we do not believe that the amendment would add anything. It can require only information that it needs for the purpose of exercising its functions. Any such request would be reasonable.
Amendments Nos. 78 and 80 would replace the dispute resolution procedures in the Bill and enable the consumer council to enforce its own directions when the authority or company refused to supply it with information. If an undertaker or the authority refuses to provide information to the council, it will need to provide reasons for its failure. The council will be able to assess those and publish them. Any refusal would therefore have to be backed up by very good reasons.
If there is a dispute, it will be for the authority, or such other person as the Secretary of State prescribes, to decide whether the information should be provided. Reasons for refusal to comply may be technical; for example, commercial confidentiality. The authority, with its detailed knowledge of the water industry, is better placed than the Secretary of State or a third party to judge whether those claims are justified.
We do not believe that it is appropriate to give the council enforcement powers, as it is a representative body for consumers, not a regulator. We should bear in mind the detailed procedures and safeguards that the regulator must observe if it takes enforcement action. That is not provided in these amendments. The consumer council should not be able to act without at least the same level of protection for the bodies that it proposes to act against.
196 Incompetence is very likely to lead to complaints. There is no restriction on publishing information about complaints. I refer to Clause 45. I shall read carefully the point made by both noble Lords—about everything being published that can be—without any commitment. In the mean time, having given quite a full answer, I hope that the noble Baroness will feel able to withdraw her amendment.
§ Baroness Miller of Chilthorne DomerMy Lords, I thank the Minister for the detail of her reply, but I am not sure yet whether I should thank her for the spirit behind it. She says that she will consider carefully the need to enable the publication of more information; in other words, the premise is a support for publication rather than against it. Perhaps in discussions before Third Reading we can have a clearer idea as to whether the Bill could be improved in that regard.
The Minister tempted me earlier in her reply to test the opinion of the House on whether the consumer council should, in some ways, remain subservient to the water authority. The consumer council could draw on enough expert opinion to give it the authority and expertise that it needs. I shall study the Minister's reply in detail. In the meantime, I look forward to more discussions and beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 72 not moved.]
§ Clause 43 [Provision of information to the Council]:
§
Lord Whittymoved Amendments Nos. 73 and 74:
Page 51, line 40, leave out "or
Page 51, line 42, at end insert "; or
§ On Question, amendments agreed to.
§ [Amendments No. 75 to 80 not moved.]
§
Lord Whittymoved Amendments Nos. 81 and 82:
Page 53, line 35, after "company" insert "holding an appointment or a licensed water supplier
Page 54, line 6, after "company" insert "holding an appointment and a licensed water supplier
§ On Question, amendments agreed to.
§ 6.45 p.m.
§ Clause 44 [Provision of statistical information to consumers etc]:
§
Lord Whittymoved Amendment No. 83:
Page 54, leave out lines 19 to 21.
§ The noble Lord said: My Lords, in moving Amendment No. 83, I shall speak to the remaining amendments in the group. They follow up the commitment I made in Committee to reconsider the duty placed on the consumer council to publish statistical information about undertakers' levels of performance. I reconsidered the matter, and the outcome is as noble Lords wished and is supported by Ofwat and WaterVoice. Amendments Nos. 83, 86 and 87 remove the duty from the council and leave it with the regulatory authority, where it currently resides. The other two amendments are consequential.
197§ Amendments Nos. 84 and 85 place on the consumer council a duty to publish information about complaints against licensed water suppliers as well as undertakers. There is a general consensus that we should move in that direction. I beg to move.
§ Baroness ByfordMy Lords, I am grateful to the Minister for tabling this set of amendments. In Committee we had a long debate about treating water suppliers fairly. The Government were taxed by our suggestions then. We support the amendments.
§ On Question, amendment agreed to.
§
Lord Whittymoved Amendments Nos. 84 to 87:
Page 54, line 23, after "undertakers" insert "or licensed water suppliers
Page 54, line 26, after "undertakers" insert "or licensed water suppliers
Page 54, leave out lines 34 to 36.
Page 54, line 44, leave out subsection (3).
§ On Question, amendments agreed to
§ Clause 45 [Consumer complaints]:
§ [Amendment No. 88 not moved.]
§
Lord Whittymoved Amendments Nos. 89 and 90:
Page 55, line 6, after "undertaker" insert "or a licensed water supplier
Page 55, line 7. at end insert "or the services provided by that licensed water supplier
§ On Question, amendments agreed to.
§
Baroness Miller of Chilthorne Domermoved Amendment No. 91:
Page 55, line 13, after "subsection" insert"(2A) or
§ The noble Baroness said: My Lords, the consumer council for water has a duty to investigate consumer complaints but has no power to resolve complaints. The amendment proposes that that power lies rightfully with the council.
§ When we debated the matter in Grand Committee, the Minister said that, although the consumer council for water should have the duties of a representative, they should not be confused with those of an adjudicator or enforcer. He pointed to the "binding mediation agreements" between some WaterVoice regional committees and water companies whereby voluntary compensation can be made payable. He also noted that Energy—watch the equivalent of the consumer council, but for gas and electricity—did not have statutory powers to seek compensation for complainants, and did not seek them.
§ As I mentioned previously, the comparison with the energy sector is misleading and irrelevant. Dissatisfied customers in gas and electricity can always switch suppliers, but in the water sector all household customers and most business customers will continue to be served by monopoly water companies.
§ The amendment addresses the possibility that the consumer council for water, as the customers' representative, might be the right body to have a compensation power. Will the Minister explain in 198 much clearer terms why the Government are giving the council a duty to deal with customers' complaints but no means of resolving them? Perhaps there should be another body, possibly the authority, which would have the power to fine companies and also the power to require compensation to be paid to customers following an investigation of their complaint. This is still one of the most unsatisfactory areas of the Bill in terms of consumers' rights; it will not make them feel very confident in the new consumer council. I beg to move.
§ Lord BorrieMy Lords, I oppose this amendment. As the noble Baroness knows, I did so in Grand Committee. I do not rely on the point with which she is quarrelling, as it were, with the Minister. Of course, I accept her point that there is a great difference in the water world compared to the energy world where, as she rightly said, if a customer is dissatisfied he can switch supplier. In the water world, ordinary consumers cannot switch suppliers although, to a limited degree, commercial consumers can.
However, it is important to say that the water consumer council, or WaterVoice, should it continue to call itself that—I think it a very good name—has a great deal more to do in terms of representing the consumer, as it has done so well for many years nationally, locally and regionally. Its work is well recognised, particularly by the Government in this Bill. I am sure that the noble Baroness welcomes that it is given a degree of independence in the Bill that it did not have previously.
The Bill establishes the consumer council for water, or WaterVoice, firmly as a representative of the consumer. One could use the word partisan. It is entitled to be partisan on behalf of the consumer. But to do the job of being partisan and representative would be very difficult if it involved also, from time to time, adjudicating upon a complaint made by a consumer against a water company and trying to judge impartially the arguments on both sides. It is very likely that lawyers would have to be involved, it is very likely that there would have to be a panel, or whatever, to do that particular job because the noble Baroness is suggesting that considerable penalties should be imposed. Water companies will not just go along with that without argument. I doubt that the noble Baroness expects them to do so. The jobs of adjudication and imposing penalties are very different from being representative. To try to do both would not be a good idea.
§ Lord WhittyMy Lords, my noble friend Lord Borrie has by and large made my arguments for me. The point is that we cannot confuse the role of advocate with the role of judge and jury. The council exists to represent the views of consumers in their widest sense. It cannot therefore adjudicate between consumers and undertakers or licensees. To do so would be to unbalance the situation. The alternative approach would be to give it some duty in relation to undertakers, but that is not its role. Its role is a representational role. In pursuit of that representational role it can make approaches to the water 199 companies. Without formal powers, the present structure has led to a number of binding mediation agreements, but the consumer council is not actually doing the arbitration.
The council can also revert complaints to Ofwat to enforce against a company using its existing powers. For the consumer council to have enforcement powers is not only unprecedented, it would also greatly confuse its role. Normally the Liberal Democrats are great advocates of separation of powers. In this context, the logic of the position of my noble friend Lord Borrie and mine would eventually persuade them that this is not a sensible course to pursue.
§ Baroness Miller of Chilthorne DomerMy Lords, I thank the Minister for his reply and for the contribution made by the noble Lord, Lord Borrie. I welcome the fact that the Bill gives the consumer council a degree of independence. I can see that the Bill, as drafted, does not give it the role of adjudicator although, of course, it could have chosen to do so. I know that I am barking up a tree on which the Government are not minded to give in. At this stage, I am content to look to the future and see how the consumer council for water works. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 92 not moved.]
§
Lord Whittymoved Amendments Nos. 93 to 98:
Page 55, line 27, after "Wales" insert "or to services provided by a licensed water supplier using the supply system of a water undertaker whose area is wholly or mainly in Wales
Page 55, line 28, leave out from "State," to end of line 29 and insert "in any other case.
Page 55, line 41, at end insert "or the licensed water supplier
Page 55, line 42, after "undertaker" insert "or the licensed water supplier
Page 56, line 4, after "undertaker" insert "or the licensed water supplier
Page 56, line 11, after "undertaker" insert "or the licensed water supplier
§ On Question, amendments agreed to.
§ Clause 46 [Investigations by the Council]:
§
Lord Whittymoved Amendment No. 99:
Page 56, line 36, leave out from first "consumers" to end of line 37.
§ On Question, amendment agreed to.
§ [Amendments Nos. 100 to 102 not moved.]
§
Lord Whittymoved Amendment No. 102A:
Page 60. line 28, at end insert—
( ) The power of the Secretary of State to make an order under subsection (11) above shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.
§ The noble Lord said: My Lords, Amendment No. 102A in a sense is in response to Amendment No. 103. It relates to the power to make an order for determining a company's turnover, which is the means of limiting the penalty which may be imposed. We 200 always intended that this power would be exercised through the negative resolution procedure. I am grateful to the noble Baroness for drawing it to our attention that the Bill, as drafted, does not achieve this. For technical reasons the provision needs to make reference to the order being a statutory instrument and the amendment that I have tabled does this. I shall respond to the noble Baroness's amendments where appropriate. I beg to move.
§ Baroness ByfordMy Lords, I am grateful to the Minister for having listened to our arguments in Committee and for tabling the amendment. As I explained earlier, between Committee and Report it is necessary to table amendments, as the noble Lord knows so well. On this occasion, the amendment moved by the Minister is slightly longer than ours—usually it is the other way around. I am grateful to him for coming back with Amendment No. 102A and should like to record my thanks.
I turn now to Amendments Nos. 104, 105 and 106. Amendment No. 104 proposes that we include slightly greater protection in that the imposition of a penalty was based on an error of law or fact and that the amount of penalty was unreasonable. Because this is Report and not Committee obviously I cannot come back again. If the Minister is unable to accept, I hope that he will give full reasons for the reluctance of the Government to accept these reasonable amendments.
Amendments Nos. 105 and 106 return to an issue which I raised in Committee. I found the Minister's response to this amendment in Committee intriguing. He said:
The Bill is drafted so that the court will be able to set the level of interestHe continued:The effect of the amendment would be that the court would be tied to the same decision whenever there was a successful appeal. regardless of the seriousness of the company's failure or of the merits of the case".—[Official Report, 8/4/03; col. GC 55.]It was my impression that the debate we had on penalties of up to 10 per cent of turnover hinged on the seriousness of the company's failure. The interest charge relates to the interest to be charged on a charged penalty—it gets a bit tongue-tying. It does not matter which party has to pay, the rate should be uniform. That is what we are trying to establish.From the Minister's explanation, we may infer that as the Bill stands the courts might award interest to water undertakers at rates below bank rate, but where fault is proven against them at rates well above bank rate. That action could be the result of rulings from other departments, notably the Home Office. We bring this issue back to your Lordships today, it is to be hoped, to take it a little further.
§ 7 p.m.
§ Lord WhittyMy Lords, in responding to the noble Baroness I shall continue speaking to the lead amendment, unless other noble Lords wish to speak.
§ Lord Livsey of TalgarthMy Lords, I want to respond to Amendments Nos. 105 and 106. I was 201 intrigued by what the noble Baroness, Lady Byford, said about the Minister's response in Committee. I would like clarification as to whether there is a difference in penalties in relation to the severity of the offence. New Section 22E(6) on appeals states:
Where the court substitutes a penalty of a lesser amount it may require the payment of interest on the substituted penalty at such rate, and from such date, as it considers just and equitable".The Minister and the noble Baroness may prove me wrong, but it seems better for the court to decide rather than for there to be a fixed rate. I ask the Minister if there is no difference between the severity of the offence on the one hand—as the noble Baroness said, in quoting from Committee—or whether different levels of penalty will be applied in relation to the severity of different types of offence. I am not clear about that point, but if there is a substantial difference between the severity of the offences and penalties are applied accordingly, surely the court should decide. If what the noble Baroness said is correct, maybe she has a point.
Lord WhinyMy Lords, there seems to be a consensus in favour of my Amendment No. 102A. I want to comment on Amendments Nos. 104, 105 and 106. Amendment No. 104 is unnecessary. It deals with the reasons why a court can quash or reduce a financial penalty on grounds of either error of law or fact, or of unreasonableness. But both those criteria are built into the Bill.
The enforcement authority has power under new Section 22A to impose a penalty only as is reasonable and it must act in accordance with the law. There is also notice before a penalty can be imposed, so there is an opportunity to point out an error of fact or law, or to contend unreasonableness given all the circumstances. The enforcement authority is required to consider such representations. If it fails to do so, then there is authority for it to be overturned.
I turn to interest. We are dealing with a case where the court has substituted a different penalty to that imposed by the regulator. It may impose interest as it considers just and equitable, as currently drafted. The noble Baroness, Lady Byford, seeks to restrict that provision in relation to the bank rate. My view, which I believe is shared by the noble Lord, Lord Livsey, is that the issues must he left to the court, as they would be in other circumstances, to consider the reason for the modification of the penalty, the severity of the offence and the circumstances of the company and the complainant. Therefore it is important that we leave that discretion with the courts rather than attempt to set down a rigid formula in statute.
§ Baroness ByfordMy Lords, our argument is not that the courts should be able to decide differently and impose different penalties. The argument is that they should not be deciding on different interest rates. I do not think the Minister has addressed that point, although it is clear in our amendment.
§ Lord WhittyMy Lords, I thought I was addressing it. We start with a situation where the court varies the 202 penalty, and it is a question of whether there is interest for one or other of the parties involved. As with other cases where the courts have the ability to apply interest, discretion should be left to the court as to the appropriate level of interest taking into account everything in the case. I believe I am right that there is not normally a formula laid down and that the courts' discretion applies.
§ Baroness ByfordMy Lords, I am greatly puzzled. I heard what the Minister had to say and at this stage I shall not pursue it further. But I need to read Hansard carefully. Perhaps between now and Third Reading we can have a conversation to clarify the matter.
§ On Question, amendment agreed to.
§ [Amendments Nos. 103 to 106 not moved.]
§ Clause 48 [Enforcement of certain provisions]:
§
Baroness Byfordmoved Amendment No. 107:
Page 63, line 10, leave out subsection (2).
§ The noble Baroness said: My Lords, our argument for the amendment is based on our belief that it is not possible to be consistent, fair and right in assessing the likelihood of future transgression with no past wrongdoing to point the way.
§
In Grand Committee the Minister made our point for us in his reply on 8th April. I quote from four sentences taken in sequence from an uninterrupted response:
so that the enforcement authorities … are able to take action before something goes wrong … the order itself is first and foremost to tell the recipient what action they must take to rectify a situation that has gone wrong.
If it is apparent that a contravention is about to happen … The reason for this change in the Bill is to reduce the time in which further harm can occur".—[Official Report, 8/4/03; col. GC 56.]
§ If the clause causes that much confusion in the place of its birth, I imagine that it will become a lawyer's meal ticket for the courts. I beg to move.
§ Lord WhittyMy Lords, the noble Baroness is picking me up on my tenses and syntax. The point is that Clause 48 enables the enforcement authority to take precautionary action and reduces the timescale of its notice. The amendment would remove from the regulator the ability to take action before a contravention occurred. An enforcement order in that context would require a company to alter its operations to address a potential contravention. The enforcement authority would need to see clear evidence of circumstances where a contravention was likely to occur. The decision to impose an enforcement order in those circumstances would not be taken lightly, but it would be taken ahead of any damage being done to a third party.
It would be the judgment of the regulator that the contravention would take place unless the undertaker altered its behaviour. One could think of several circumstances where that might happen. In all circumstances, we need to provide a precautionary power for the regulator to instruct a company to alter its operations in advance of a formal contravention having taken place. We should not have to wait for 203 something to go wrong before the regulator acts. I hope that, after that explanation, the noble Baroness will not pursue the matter.
§ Baroness ByfordMy Lords, the noble Baroness struggles to thank the Minister for his response, as she is not at all happy with it. The measure makes someone guilty before they have committed an offence, which is not desirable in law. It seems to prejudge them to have done something that they have not done—unless I have totally misread the clause and misunderstood the arguments we had in Committee. I am unhappy with the Minister's response. I shall certainly return to the issue at Third Reading, and I hope that between now and then we can come to a greater understanding on the matter. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 52 [Determination references under section 12 of the WIA]:
§
Baroness O'Cathainmoved Amendment No. 108:
Page 66, line 39, at end insert—
(3C) For the purposes of subsection (3)(b)(ii) the principles there referred to shall permit, but not require, the Competition Commission, in re-determining any disputed price limit which a relevant undertaker had required the Director to refer to it, to include in that re-determination any allowance for all or part of that relevant undertaker's costs.
(3D) In subsection (3C) above "relevant undertaker's costs" means—
§ The noble Baroness said: My Lords, the amendment deals with the issue of who pays for the costs of a re-determination of price limits by the Competition Commission where a company has appealed to the commission against the decision of the authority on its price limits. The amendment would give powers to the commission to allocate costs fairly between the company's customers, its shareholders and the customers of other regulated companies and taxpayers.
§ Under existing law, when a company appeals to the Competition Commission and the commission re-determines price limits the costs of the appeal are included in the new price limits. The costs therefore fall on the customers of the company that appealed. In the two price limit inquiries held by the commission in 2000, for Mid Kent Water and Sutton and East Surrey Water, the commission followed the current law but questioned the desirability of invariably having to permit costs in such inquiries to be recovered from customers. In part that was because the costs appeared to be particularly onerous for the customers of the two relatively small companies involved.
§ The amendment would therefore permit the commission to allocate costs fairly. We have tabled the amendment proposed by the noble Lord, Lord Borrie, 204 in Committee. It is supported by Ofwat, Water Voice and Water UK. In Grand Committee, on 8th April, the Minister agreed to take away the two amendments proposed there on the matter and said that he hoped to return on Report with a government proposal. I tabled the amendment because no such proposal has yet appeared. I beg to move.
§ Lord WhittyMy Lords, the noble Baroness referred to my commitment in Committee to introduce an amendment to the same effect as hers on Report. It has proved difficult to draft that amendment, but with respect I cannot accept her drafting. However, it remains my intention to table an amendment at Third Reading.
§ Baroness ByfordMy Lords, I fully support the amendment. The Government suggested that they would introduce an amendment, and this amendment was tabled to ensure that happened. The Minister has kindly indicated that the Government will do that, for which I thank him very much.
§ Baroness O'CathainMy Lords, I echo what my noble friend said. I thank the Minister very much. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Schedule 4 [Licensing of water suppliers]:
§
Lord Dixon-Smithmoved Amendment No. 109:
Page 131. line 5, at end insert—
In section 3(1)(d) after "undertaker" there shall be inserted "or licensed water supplier".
§
The noble Lord said: My Lords, Amendments Nos. 109 to 113 relate to an exchange in Grand Committee at col. 72 on 10th April. The noble Baroness, Lady Farrington, assured my noble friend Lady Byford:
In supplying the water to licensed water suppliers, undertakers will remain under their existing duty under Section 3 of the Water Industry Act to further environmental objectives".—[Official Report, 10/4/03; col. GC 72.]
§ In response to a query as to whether licensed water suppliers would be equally affected by that clause, the Minister's reply was, "Yes, I believe so". We felt that the matter should be definite and not a matter of belief. That is no disrespect to the Minister who may tell us that it is definite in which case we should be happy to withdraw the amendment. We felt obliged to table the amendments for the sake of certainty.
§ Amendments Nos. 133 and 134 have been grouped with the first set of amendments, although they do not sit particularly easily with them. The Government stated that they did not want a removal of requirements on water undertakers to lay pipes to connect licensees to the system. All sorts of people have to lay pipes, cables, drains and heaven knows what else, with good will, gusto and great abandon and, of course, driven by absolute necessity. However, wherever it is practical to do so, those people should 205 have particular regard to green belt land or property dedicated under a conservation notice as an area of outstanding natural beauty. I beg to move.
§ Baroness Miller of Chilthorne DomerMy Lords, I am grateful to the noble Lord for introducing the first group of amendments for the sake of clarification, as the issue is important.
Under Amendments Nos. 133 and 134, I agree that we need to know about land that is under a special conservation notice. Indeed, that may be more crucial than the general blanket green belt land designation. I should like to hear from the Minister on the subject of land under a conservation notice for environmental reasons.
§ Lord WhittyMy Lords, the noble Lord seeks clarification, but his amendments would instil a degree of confusion. Clearly, we want licensees' development activities to be subject to general environmental duties. However, they will already be subject to the same environmental controls as any other developer of land. Where undertakers exercise powers on licensees' behalf, they will be carrying out a function placed on them by the Bill and subject to the environmental requirements that apply when they carry out their other functions. Therefore, the amendment is unnecessary.
Amendments Nos. 109 to 113 would require licensees to have regard to the desirability of protecting the environment, and so forth, when they formulate or consider proposals relating to undertakers' functions—but not, for some reason, their own. That would introduce a note of serious confusion, and the proposal is anyway unnecessary because that issue is covered under the general duties.
Amendments Nos. 133 and 134 seek to introduce a condition before undertakers take steps to facilitate supplies by licensees not to damage or disturb green belt land or property designated under a conservation notice. However, control of development within the green belt is concerned only with the openness of the green belt, and Section 3 of the WIA already requires undertakers to have regard to protecting buildings and sites of special interest. The amendments would introduce a completely new restriction for licensed water suppliers that would not apply to any other company or person.
The area is confusing. However, in short, when undertakers carry out functions, including exercising works powers in response to a request from a licensee, the general environmental duty under Section 3 will apply. If licensees carry out activities themselves, they will be subject to normal development controls and would need planning permission, together with any specific consents with respect to protected land or buildings, as well as needing to reach agreement with the landowners in the first place.
206 I share the objective behind the amendments, which is to protect the environment without obstructing the path of licensees to the supply system. However, the amendments would confuse the situation, as almost all their intention is covered by other parts of the Bill or by general planning law.
§ Lord Dixon-SmithMy Lords, I am grateful to the Minister for his reply. I am not particularly surprised by it as I have had enough experience of general planning law to know what is involved. As regards the first four amendments in the group in particular, it is good to have the assurance that they are unnecessary and that the noble Baroness, Lady Farrington, was right in her presumption, even though at that stage it was a presumption and she could not define it as a fact. Although we shall need to study the Minister's reply with care I am grateful for it. It seems to me that it is a satisfactory explanation. Certainly it is satisfactory for now. With that I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 110 to 113 not moved.]
§ The Deputy Speaker (Viscount Simon)My Lords, in calling Amendment No. 114, I advise your Lordships that if it is agreed to I cannot call Amendment No. 115 due to pre-emption.
§
Lord Whittymoved Amendment No. 114:
Page 132, leave out lines 3 to 5.
§ The noble Lord said: My Lords, this rather lengthy series of amendments relates to the competition provisions of the Bill. These are largely technical and consequential amendments. However, there are four amendments to which I should like to draw your Lordships' attention.
§ I agreed in Grand Committee to take away and consider the restriction on licensees' ability to reintroduce water supplied to a customer into the distribution system. Amendment No. 114 removes new Section 17A(6). The subsection prohibits the reintroduction of water by a licensee to an undertaker's supply system after that water had already been provided to a customer's premises by a licensee. After the discussion in Committee and further consideration, we now consider that the need to meet undertakers' water quality requirements for water input into their systems, in accordance with access agreements, and the likely cost of any necessary retreatment and of making a connection would make such a reintroduction very unlikely in practice; the subsection is therefore unnecessary.
§ Amendment No. 148 ensures that the powers currently available to undertakers to carry out works to install, repair or replace meters continue to be available to them when a licensee rather than an undertaker uses a meter. Amendment No. 149 extends to meters used by licensees the offence of tampering with a meter so as to prevent it from showing an accurate reading. Amendment No. 151 provides for the exchange of information about pollution incidents between the Environment Agency and licensees in order to protect the public water supply system and the environment.
207§ The remaining amendments are technical. Unless noble Lords have particular concerns I shall not expound on those in detail. I beg to move.
§ On Question, amendment agreed to.
§
Lord Corbett of Castle Valemoved Amendment No. 116:
Page 133, line 45, leave out "50" and insert "25
§ The noble Lord said: My Lords, I was encouraged to raise the issue of the threshold requirement by WaterVoice, the body representing water customers, and Aqua Resources Ltd, which feels that, given the privatisation of the water industry, every consumer should have a choice of supplier.
§
At least one of the industry regulators—I do not know which although the Minister does—believes that the threshold figure should be different from the 50 megalitres in the Bill; that is, either higher or lower. The Government argue—as the Minister did in a letter to me dated 22nd May 2003—that,
the threshold is a vital element in ensuring effective implementation of the competition regime".
§ That is not the whole story because the effect of the present threshold is to limit competition and in turn distort the market because it shields a clutch of monopoly water suppliers from full competition. While they enjoy that protection they can use that monopoly position to offer, for example, gas and electricity services in markets more liberalised than the protected water market.
§ There are other companies such as Countryside Energy, part of Countrywide Farmers plc, which offers a range of services including the supply of mains gas and electricity but is unable to do the same with water although it believes that extra competition would benefit its customers.
§ The 50 megalitre threshold would provide choice to just 2,000 non-domestic customers compared with the 30,000 in the first phase of competition in the energy sector. Perhaps the Minister will be good enough to explain why that is so.
§
If the threshold was set at 20 megalitres, about 5,500 customers would be eligible, rising to about 12,000 if set at 10 megalitres. Customers with water consumption of 20 megalitres pay bills of about £10,000 a year and those who use 10 megalitres about £5,000. As WaterVoice comments:
We believe bills of this amount are large enough to make the prospects of a better deal in terms of price and service in a competitive market attractive to these customers".
§ It worries that new entrants will not be attracted and wants a 10 millilitre threshold.
§
I understand the need for extra caution with water because of public health concerns but that does not dictate a particular threshold number. There is also the need to do nothing to impair the viability of service
208
providers as competition is rolled out. So there are costs and benefits and, as the Minister has said, a balance to be struck—again I quote from his letter of 22nd May—
which allows the increase of competitive activity in a controlled manner to ensure that the regulatory regime is robust, and the effects of competition are consistent with a sustainable water industry".
§ I anticipate that the Minister will not feel able to accept the amendment although perhaps when he replies he will make clear when the threshold level will be reviewed, and by whom, and whether he can say that it need not last for ever. I beg to move.
§ Baroness Miller of Chilthorne DomerMy Lords, I have an amendment grouped with the one we are discussing to which I should like to speak. I want to hear the Minister say a little more about the threshold limits. They are set at a level which results in competition not being a reality for most consumers. There is a vast amount of water regulation relating to competition when that is not a reality.
What happens when a 50 megalitre user becomes more efficient in his use of water and becomes a 10 megalitre user? Does the Bill provide for that? We have talked a lot about efficiency and we have heard some good examples of companies that have saved vast amounts of water but does that mean that they can no longer enjoy the possibility of choosing between suppliers? At the moment we are dubious that the current proposals will stimulate any energy savings or produce innovations. The proposals certainly allow new entrants to cherry pick the larger use customers that they will supply.
Under the proposals in the Bill there is a perverse incentive for new entrants to select customers that are cheap to supply so, far from benefiting all customers, that may well have a negative effect on existing suppliers' finances and increase customers' bills. I should like to hear the Minister's comments on those issues. I have become more concerned about the matter as the Bill has progressed through its stages.
§ Baroness ByfordMy Lords, I express my concerns and reservations about these two amendments. My reservations are not just my own but are shared by the National Consumer Council, which does not support the amendments. My fear is that the more the numbers are increased to go into competition, the greater the likelihood of the increase in domestic bills. If people keep being taken out of the existing system, obviously the cost to those left in the system will increase. I shall be interested to hear what the Minister has to say. The National Consumer Council believes that the initial 50 megalitre threshold for competition for large users is set at the right level and should not be lowered at this early stage. The legislation provides for the threshold to be varied by regulation in Schedule 4, under proposed new Section 17D(8), once the effects of competition are better understood.
Although household customers enjoy some protection from the additional costs of the introduction of the competition regime, it is generally 209 agreed that the bills of household customers will rise. The costs of the competition have yet to be quantified, but will include existing supplier revenue losses, the development of access codes, the increased regulatory pressures, IT systems, data management and the increased cost of capital. The consumer council firmly believes that the 50 megalitre threshold should be tested and the impact of the competition on household customers fully assessed before any moves are made to lower the threshold for water competition. We share its concerns.
§ 7.30 p.m.
§ Lord WhittyMy Lords, noble Lords who have spoken recognise that this is our initial move into competition, and it is a cautious one. It seeks to balance the aim of creating opportunities for competition with other, wider government objectives including public health, the effect on smaller domestic and commercial consumers, and protecting the wider environment. We consulted pretty widely on the threshold to be chosen. Although there were different views, the majority favoured a threshold of 50 megalitres or higher. That included the Environment Agency and the Drinking Water Inspectorate, with its concerns and responsibilities, as well as the National Consumer Council, to which the noble Baroness, Lady Byford, referred.
Reducing the 50 megalitres to 25 or 10 megalitres would not fundamentally change the range of customers eligible, but it has a greater risk of impacting on the other objectives and other customers. Concern for any knock-on effect on the bills of smaller consumers must be greater where the threshold was moved down, particularly if it were moved down rapidly to the 10 megalitre level.
Nevertheless, this is the start of a process, and we have plans in place to review the competition framework once it is in operation and its effects can be assessed. At Second Reading, I said that there would be a review of the whole competition framework within three years of its operation, to answer my noble friend on time scale. At that point, the Government will ask all three regulators—Ofwat, the water inspectorate and the Environment Agency—to report on the effectiveness of the regime. That will include reference to the threshold. The mechanism for changing the threshold is in the Bill, and the parliamentary process is the affirmative resolution.
We certainly foresee the ability to reduce the threshold of such an order. However, we do not think it sensible. It is prudent to go in at the 50 megalitre mark and review the situation in three years' time. I hope that neither my noble friend nor the noble Baroness will pursue their amendments, in recognition that the Bill provides for change in future.
§ Lord Corbett of Castle ValeMy Lords, I thank the Minister for that comment, and other noble Lords who have taken part in the debate. I must say to the noble Baroness, Lady Byford, with the deepest respect, that I find her remarks quite amazing. I find it quite extraordinary for the party that put water 210 privatisation on the statute book, the better to deliver competition and to give a better service to consumers, now to argue that it did not really mean that but meant limited competition instead.
§ Baroness ByfordMy Lords, actually I did not say that at all. We are dealing with the Bill, which at the moment has taken out a lot of people from the original water supply system in the licences, so far as farming and agriculture are concerned. We are looking at the suggestion in the Bill that in the early stages there is a limit. That seems sensible; the noble Lord says that it is not. If we took matters to that extent, I should say that there should be no limit whatever, and I hope that he is not suggesting that.
§ Lord Corbett of Castle ValeWell, my Lords, it is not my memory that, when the government whom the noble Baroness supported went ahead with water privatisation, any limit was put on competition. I understand the reasons that my noble friend gives for being cautious about the introduction of the competition. To claim to be on the side of the consumer when that never crossed the minds of anyone who privatised what I would argue—I do not want to start the argument tonight, but merely to mention it in passing—
§ Baroness ByfordMy Lords—
§ Lord Corbett of Castle ValeMy Lords, I shall give way in a moment. Some of us regard water, as with other utilities, as a natural monopoly, but the point of saying, "No, we don't believe that", has been crossed and we have gone somewhere up that road. That is where the noble Baroness, Lady Miller, and I agree. The classic answer is, "You can't be a little bit pregnant".
§ Baroness ByfordMy Lords, the noble Lord may be going down the line of a Commons debate in style. I do not agree with what he has said at all. As I said, we are dealing with the Bill as it stands at present. It would be foolish not to listen to what others have to say. One could say that one believed in something five minutes ago, and would never change one's view—never. That is a foolish thing to say as well. I hope that he would at least acknowledge that I have repeated what the National Consumer Council has said, so I think that his remarks are a little out of order.
§ Baroness Farrington of RibbletonMy Lords, I remind noble Lords that we are on Report speaking to the amendment. With the greatest respect, it is not my job to judge between the red corner and the blue corner, particularly when people are waiting for the Unstarred Question.
§ Lord Corbett of Castle ValeMy Lords, I do not want to prolong matters. I simply make the point that the assertion is made by the National Consumer Council, and picked up by the noble Baroness, that complete competition would mean higher bills for 211 consumers The whole basis for water privatisation was that competition would lower prices. That is all that I am drawing attention to, but let us not delay on it. It is an assertion by the National Consumer Council that is not proven. I understand its concern about it, and of course about those in water poverty, but it is a big assertion for it to make.
The point made by the noble Baroness, Lady Miller, about encouraging efficiency in the industry and then, in terms of how the Bill stands, perhaps getting rid of the trap of punishing people who are efficient and reduce water consumption—that is what we want—is one to which I hope the new body will pay some attention.
I thank the Minister for making it clear that the threshold will be reviewed within three years. To that extent, it can be changed and we can introduce more competition over time. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 117 not moved.]
§ Baroness Farrington of RibbletonMy Lords, I beg to move that further consideration on Report be now adjourned. In moving the Motion I suggest that the Report stage begin again not before 8.40 p.m.
Moved accordingly, and, on Question, Motion agreed to.