Water Bill [Lords]

Public Bill Committee, 14 October 2003.

Standing Committee D

Clause 33 - Appeals against enforcement orders

Norman Baker (Liberal Democrat, Lewes)

I beg to move amendment No. 208, in

clause 33, page 37, line 43, at end insert

'and at the end of paragraph (b) of subsection (1) there is inserted ''or''.'.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following:

Amendment No. 209, in

clause 33, page 38, line 3, leave out 'or'.

Amendment No. 210, in

clause 33, page 38, leave out lines 4 and 5.

Clause stand part.

Norman Baker (Liberal Democrat, Lewes)

I am delighted to see you back after the conference break, Mr. Amess. We left before Brent, East and the party conferences. [Hon. Members: ''Get on with it.''] Within one minute, I am being heckled from both sides, so I must be doing something right.

The Government have tabled an amendment to leave out clause 33. That goes even further than amendments Nos. 208, 209 and 210, which would leave out part of the clause. Our preference is to leave out the entire clause, but we did not think that the Government would buy that, so we tabled the amendments to limit it. We are perfectly happy with the Government's proposal, so I need not speak in great detail. I will leave that to the Minister.

Sir David Amess (Conservative, Southend West)

Is the hon. Gentleman continuing to move the amendment? I am a bit confused.

Norman Baker (Liberal Democrat, Lewes)

I am happy not to continue to move the amendment, but I do not want to prevent another hon. Member from making a contribution on clause stand part or the other amendments, so I will seek leave to withdraw it later.

Sir David Amess (Conservative, Southend West)

Clearly, we are somewhat rusty after being rudely interrupted in September.

Bill Wiggin (Conservative, Leominster)

As I know that the hon. Gentleman intends to withdraw the amendment, I will just draw the Minister's attention to the wishes of Water UK, which felt that the clause should be included in the Bill, but perhaps in part 3, which is headed ''Miscellaneous''. It rightly felt that part 1 deals with the Water Resources Act 1991, whereas the clause deals with the Water Industry Act 1991. Water UK feels that it would be sensible to move the clause to the end of part 3. I know that the Minister proposes to withdraw the clause altogether. Although we would not have a problem with moving the clause elsewhere, I hope that the principle behind it will not be lost.

Elliot Morley (Labour, Scunthorpe)

It is nice to see you again, Mr. Amess, and I welcome the Committee back.

We want to remove the clause. It might be useful for the Committee if I explain the problem, which has been touched on by previous speakers. Basically, Conservatives in the Lords mistakenly inserted the clause into part 1. The clause refers to the powers of Ofwat, but because of the error and the position of the clause in the Bill, a number of speakers thought that it created a right to appeal against decisions made by the Environment Agency.

The clause widens the scope for companies to question the validity of enforcement orders issued by Ofwat or the Secretary of State when conditions of appointment or relevant statutory duties have not been met. Subsection (3) might appear to be a major change, but it adds nothing. The company can already appeal if Ofwat makes an order that is not within its powers. That could be due to a mistake either in law or in the application of law to the facts. Therefore, there is no need for the first addition of the grounds of appeal.

With regard to the second addition, that of a reasonableness requirement, that is already implicit, in that the Water Industry Act 1991 gives details of the procedures that must be followed, which include appropriate safeguards. Ofwat is already required to give notice of the terms of a final order and any provisional order that it intends to confirm, and it must consider any representations made. Ofwat is then required to give further notice of its decision and consider further representations, if it decides to issue the final enforcement order or to confirm a provisional order in a different form following the first representations. If the regulator then failed to take account of material representations, it could provide grounds for the company to challenge the enforcement order. The company can rely on the existing grounds of appeal that the safeguards already set out in the Act have not been complied with.

Existing provisions already give Ofwat a discretion not to issue an order if the breach was trivial or if the company had given undertakings to Ofwat to remedy the breach. There are already extensive and transparent safeguards to protect against arbitrary action by the regulator.

I am pleased that the hon. Member for Lewes (Norman Baker) will not press the amendments, because they would not help the situation. In fact, they do not go far enough, as he rightly said.

There is a problem in respect of whether the clause should be inserted elsewhere in the Bill, because subsection (4) would allow the High Court to vary an enforcement order if a complaint is upheld. That would include parts of the order that had not even been the subject of the company's application, which would not be appropriate. The court already has the power, wholly or partially, to quash an order because it is unlawful, but it would be unusual to ask the court to substitute its own interpretation of the technical issues involved in the contravention, especially if they were not the subjects of the application in the first place. That is one of the problems the clause, apart from the fact that it was inserted in the wrong part of

the Bill. With that in mind, I invite the Committee to disagree to the clause and ensure that the issue is dealt with properly.

Bill Wiggin (Conservative, Leominster)

My noble Friends did a good job in including this part of the Bill, because it allows a judicial review, which deals only with procedure and not with substance, and clause 33 creates the possibility of an appeal on the substance of the case. I accept the Minister's reservations about the elements that are not included in the application to the court being a problem, but I hope he will take on board the possibility that an appeal should be based on the substance of the case.

As for it being in an inappropriate part of the Bill, I suggest that the fluoridation debate is also in an inappropriate part—we will deal with that in due course. If the Minister will take note of the possibility of an appeal on the substance of the case, we will be delighted if he can find a way of including it later in the Bill.

Norman Baker (Liberal Democrat, Lewes)

The Minister's contribution was terribly well read out and awfully convincing. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 33 disagreed to.

Clause 37 - Water Services Regulation Authority

Bill Wiggin (Conservative, Leominster)

There is a little anomaly here that I should like to have clarified. The clause states that the Water Services Regulation Authority shall be known as that, but when it comes to the Welsh version is states that the authority ''may be known as''. I wonder why we cannot have the same application for the same name.

Elliot Morley (Labour, Scunthorpe)

The clause adds a new section to the Water Industry Act 1991 and repeals section 1 and schedule 1 of that Act. It establishes a new corporate body to be known as the Water Services Regulation Authority. The office of the director general of water services is abolished. It is possible that the new authority will still be commonly known as Ofwat. There is nothing to stop that. That is not a problem. The Government believe that having a regulatory board will reduce the chance of shifts of policy or approach resulting from the changeover of individual directors general and will encourage consistent and transparent regulation. The Better Regulation Task Force reached the same conclusion in its report on the economic regulators in 2001. In Wales, both the English and the Welsh versions will be used. I hope that that answers the hon. Gentleman.

Bill Wiggin (Conservative, Leominster)

I am grateful to the Minister. I hoped that he might attempt to pronounce the Welsh, but seeing as I did not dare to do so myself, I am grateful for that explanation.

George Osborne (Conservative, Tatton)

The Minister did not answer my hon. Friend's very pertinent question. The clause says that in England the body will be known as the Water Services Regulation Authority, whereas the Welsh language version is merely optional, as it states:

''In Welsh the Authority may be known as''—

I will not attempt to read out the Welsh name.

Bill Wiggin (Conservative, Leominster)

To speak in defence of the Minister, which I am not likely to do again, he gave the bilingual option as an alternative.

Simon Thomas (Plaid Cymru, Ceredigion)

There are some words that dare not speak their name here. Hon. Members are trying to comment on the Awdurdod Rheoleiddio Gwasanaethau Dwr. I accept the point that has been raised by the hon. Gentleman. The answer lies with the Welsh Language Act 1993, rather than this Bill. It will be vital that the organisation in Wales not only has a Welsh name but provides services in Welsh to consumers who so choose.

There is another point on clause 37 that I should like the Minister to address. The body, whether one calls it the awdurdod or the authority, will have members appointed by the Secretary of State in consultation with the National Assembly. I should like to know a little more about the phrase ''in consultation''. Later in the Bill we transfer significant functions relating to reservoirs, for example, to the National Assembly, which we would all welcome. In that context, one would expect the National Assembly to have quite a significant role in the work of the authority, and—

Sir David Amess (Conservative, Southend West)

Order. I am sorry. The hon. Gentleman is talking about something that is not relevant to the clause. It is in schedule 1. If he could be a little patient, we will come to that shortly.

Elliot Morley (Labour, Scunthorpe)

Just to clarify the point about ''shall'' and ''may'', it is simply so that both Welsh and English can be used. If the word ''shall'' were used it would not be possible to have an English version. In relation to the appointments, the Secretary of State has responsibility—

Hugo Swire (Conservative, East Devon)

The Minister is wrong about that. It says ''in Welsh'', rather than ''in Wales''.

Elliot Morley (Labour, Scunthorpe)

I am not going to argue about Welsh and Wales. The issue about the appointments is that the Secretary of State has responsibility in relation to this issue as she does for a number of appointments. It is normal where there is a Welsh interest and where legislation covers England and Wales for the Welsh Assembly to be consulted. In—

Sir David Amess (Conservative, Southend West)

Order. I am reluctant to interrupt the Minister, but again I am afraid that he is talking about schedule 1, to which we shall come shortly.

Question put and agreed to.

Clause 37 ordered to stand part of the Bill.

Schedule 1 - The Water Services Regulation Authority

Andrew Lansley (Conservative, South Cambridgeshire)

I beg to move amendment No. 239, in

schedule 1, page 133, line 8, after 'Chairman', insert 'a Chief Executive'.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following amendments:

No. 240, in

schedule 1, page 133, line 8, leave out 'at least two' and insert 'no fewer than four'.

No. 241, in

schedule 1, page 133, line 9, at end insert—

'(1A) Including the Chairman, the majority of members of the Authority shall be nonexecutive members.'.

No. 69, in

schedule 1, page 134, line 15, at beginning insert—

'(1) The Secretary of State shall, after consulting the chairman and the Assembly, appoint a person (who may, subject to subparagraph (2), also be a member of the Authority) to act as chief executive of the Authority on such terms and conditions as the Secretary of State may think appropriate.

(2) A person appointed as chief executive may not at the same time be a chairman.'.

Andrew Lansley (Conservative, South Cambridgeshire)

In approving clause 37, the Committee has just agreed to the proposal that the director general's office as an individual appointment should be abolished and a body corporate established. If one can characterise it in this way, that is the current best practice in terms of regulatory authorities and bodies. The form in which schedule 1 and the parts of it to which the amendments relate set up the Water Services Regulation Authority is very like the Utilities Act 2000. There is pre-history of this legislation there.

My hon. Friend the Member for Leominster (Mr. Wiggin) will speak to his amendments, but I think that we are of the same mind. The purpose of amendment No. 239 is to establish whether the Government intend, in establishing the Water Services Regulation Authority, to follow a further element of best practice: that the chairman and chief executive of the authority should not be the same person. That is a matter not simply of regulatory good practice but of good corporate governance as experienced in the private sector.

The Better Regulation Task Force report of July 2001 on economic regulators refers in page 33 to the response of stakeholders to economic regulation. It says that the stakeholder consultation gave rise to the view that most stakeholders

''felt the roles of chairman and chief executive of the board should not be combined. This is not best practice in public companies or in other public bodies. Postcomm, for instance''—

that is the new postal services regulator—

''has been set up with a board of seven commissioners, one of whom is part-time chairman and another is full time chief executive.''

Amendment No. 239 is pretty straightforward. It would put into the legislation a structure that requires that there be both a chairman and a chief executive.

Amendments Nos. 240 and 241 address the question of how many members the authority should have. Although schedule 1 is very like the Utilities Act 2000, for reasons that I do not understand, instead of saying ''no fewer than two'' it says ''at least two''. Amendment No. 240 is designed to examine whether there should be no fewer than four additional members, rather than at least two. Obviously, in the absence of amendment No. 239 that would be four in addition to the chairman. That would give the potential for there to be a non-executive majority while the chairman and at least one other member of the authority were executive, or regarded as tantamount to executive, members.

Amendment No. 240 is designed around the proposition that the chairman is effectively an executive member of the authority and that at least one other executive member is appointed, presumably a chief executive, even if that is not required in the legislation. There would therefore need to be three other non-executive members to make up the authority with a majority of non-executive members.

The point in amendment No. 240 is made more explicitly in amendment No. 241. The question is whether the non-executive members include the chairman—in my view, the chairman should be a non-executive member. The Minister may well draw the conclusion that the authority could have just three members: the chairman as a non-executive member, one other non-executive member and one executive member, who would be the chief executive of the authority. That would constitute a majority of non-executive members and be consistent with the structure in the schedule.

If the amendments are all rejected, we would need an assurance from the Minister on the Government's intentions. Otherwise, much of the good practice in corporate governance currently being followed in the private sector would not be reflected in the Bill, and many of the developments in best practice in relation to regulatory bodies in the public sector would also not be replicated.

I confess that I should have gone away and checked this, but from memory—the Minister will no doubt correct me if I am wrong—although Ofgem can consist of a chairman and no fewer than two other members, in practice it has a larger number of members. I think that it has seven members—the Minister's advisers will tell him if I am wrong—but the figure is either five or seven. Ofgem certainly operates on a corporate basis with a majority of non-executive members, and from this autumn it will operate with a chairman and a chief executive. Under Callum McCarthy, there was a chairman who was also effectively the chief executive. The principles have been introduced to Ofgem, which has the same structure that the Government are proposing.

The Minister could easily to say to me, ''Well, Ofgem has adopted those best practices and has done so with a legislative structure that is no different from that proposed in the Bill.'' However, the Bill should reflect our current understanding of best practice in regulatory structures. The way in which other utilities are regulated has moved on since the Utilities Act

2000, and it would be desirable to change the schedule to reflect those developments.

I commend amendment No. 239 to the Committee and am happy to acknowledge that the other amendments were tabled to explore the Government's intentions.

Norman Baker (Liberal Democrat, Lewes)

I concur with the hon. Gentleman's eloquent and convincing comments.

The evidence from other bodies, including Ofgem, is that it is generally regarded as healthier to have a separate chairman and chief executive. No matter how talented a person may be, combining the two posts risks concentrating too much power and authority in one person. Generally speaking, a critical mass of people who can exchange views and work together is a safeguard for anybody performing such a function. Once the number of members falls below that critical mass, there is the danger that one personality might dominate, which may not be helpful and may be contrary to the effective operation of that authority.

As a matter of practice, it is right to separate chairmen and chief executives. Some of the best organisations such as the Environment Agency do that very successfully. Although I have great respect for both the people at the top of the Environment Agency, I would not like to see one of them carrying out a dual function, which would be detrimental to both their performance and that of the agency. The same principle applies here: the division of roles between the chairman and chief executive should be generally endorsed as a matter of course in Government bodies, and it seems entirely proper to put that in the Bill.

It is wrong and potentially dangerous to permit as few as two members. The Minister may say that practice suggests that there will be more than two members. If that is the case, however, why not increase the number? There is nothing to be lost by that. Keeping the figure at two suggests that it is permissible but undesirable; if it is undesirable, we should increase the number.

I have one more point on staff matters. I notice that paragraph 3(2)(b) says:

''A person holding office as chairman or other member . . . may be removed from office by the Secretary of State on the grounds of incapacity or misbehaviour.''

One would not want any Secretary of State to be able to remove someone because they did not agree with what that person was doing, rather than because of incapability, so the word ''incapacity''—whatever it means in this context—is important.

I notice that there is the safeguard that there must be consultation with the Welsh Assembly, so if we believe that the Secretary of State is behaving inappropriately, we have to rely on the Assembly to protect us. That is not an appropriate mechanism.

Hugo Swire (Conservative, East Devon)

The hon. Gentleman is being a little pedantic. Presumably, if the chairman is dismissed by the Secretary of State on the grounds of misbehaviour

or incapacity, he can challenge that dismissal in the normal way. New legislation is not necessary for that.

Norman Baker (Liberal Democrat, Lewes)

The chairman may be able to challenge the decision, but that does not mean that he or she will be reinstated. I want to draw attention to the need for a safeguard to prevent a theoretical Secretary of State from behaving inappropriately, although it is highly unlikely and I am not suggesting that it is on the horizon. The Welsh Assembly has to be consulted with regard to Wales, but no similar safeguard exists in England, because the Secretary of State is the authority.

Simon Thomas (Plaid Cymru, Ceredigion)

Without getting ahead of myself too much, as I did last time, I assume that we will have a debate on whether to agree to schedule 1, and I will reserve my comments on the appointment process for that debate. I will confine my remarks to the amendment.

I am reminded of a similar debate that we had in the Standing Committee on what became the Communications Act 2003 on the number of members of such bodies. I support the remarks of the hon. Member for South Cambridgeshire (Mr. Lansley) and the hon. Member for Lewes. We must depersonalise the issue of water regulation. If Committee members examine the reports of the Environmental Audit Committee, on which I have served, they will see its members' frustration at the attitude to the directors general of both Ofwat and Ofgem. There has been an inability to make individuals see the bigger picture, particularly in view of that Committee's interest in sustainable development.

Sustainable development was not part of the initial legislation that established those bodies, although I accept that the Bill will change that. However, Governments have moved on and have a wider context for the work of regulation in the water industry as well as the electricity and gas industries. Therefore, as sustainable development has become more important, entrenchment has increased on the part of the personalities who single-handedly led regulatory bodies and said, ''I am interpreting the law in this way. It is my decision and I stand or fall by it.''

Those people were perfectly at liberty to do that, but a more corporate body would allow for greater variation of discussion. It certainly requires more than two members to achieve that, and the fact that one of them may be appointed in consultation with the National Assembly introduces a strong geographic and national interest in relation to England and Wales. Wales produces a lot of the water consumed in England, and that important element must be considered.

What water industry regulation do we want? Do we want an individual to be the sole arbiter of what goes on in the industry? They might take a limited view of changing situations and Governments, and how Parliament changes its view on regulation. Their view would be set in stone, and the only option for change would be to sack that person. If policy priorities changed, the option of sacking an

individual would not be useful. Surely it would be better to have a more corporate body with several individuals and a wider range of opinions. Later we will discuss disability, which is an important issue for the water industry, as are low incomes and affordability. We need more than one or two people to weigh up all the issues in a measured debate, fully taking into account the social, environmental and economic considerations of an important industry. I support the amendment and the tenor of the debate so far.

Bill Wiggin (Conservative, Leominster)

It is an important part of our duty as parliamentarians to hold the Government to account because of the particularly large number of powers in schedule 1. The Secretary of State not only appoints officials, but sets the pay scale, and if he decides to dismiss someone, he sets the golden farewell payment as well. That is a lot of power for a Bill to give the Secretary of State.

I am grateful to all Members who have contributed to the debate, and in particular to my hon. Friend the Member for South Cambridgeshire. Not only do his amendments show a great depth of understanding of how such legislation should be worded, but amendment No. 241 contributes a great deal of breadth and depth to how the authority will proceed.

I am particularly concerned to ensure that the chief executive and the chairman are separate people and, indeed, that there is a chief executive. Given the Government's record on cronyism, we are keen to see that it is not the same bloke; otherwise, we could very well see the reappointment of the right hon. Member for Hartlepool (Mr. Mandelson). We are doing our duty by tabling the amendments, and I hope that the Government will not only take them on board, but ensure that they are adopted in any other legislation that they propose.

Elliot Morley (Labour, Scunthorpe)

On that last point, I should remind the hon. Gentleman that the Government introduced the Nolan principles of appointment, which are far more open and transparent than any that existed before.

Bill Wiggin (Conservative, Leominster)

Stay with it.

Elliot Morley (Labour, Scunthorpe)

The Nolan principles will apply to any appointments, including these ones.

I do not necessarily disagree with the case that has been made by hon. Members. They will be aware that the Bill provides flexibility to decide whether there will be one executive director or whether the post will be split into two, with a chairman and chief executive. The important test will be what constitutes the most efficient structure for the regulatory authority. Therefore, there is no problem with the principle, and if it is felt that the post should be split, the Bill provides for that.

Andrew Lansley (Conservative, South Cambridgeshire)

By extension, the Minister's argument is that the Bill contemplates the possibility that the chairman of the authority should also be the chief executive, which is the option that we seek to preclude rather than include.

Elliot Morley (Labour, Scunthorpe)

Of course, I appreciate that point. If the hon. Gentleman had allowed me, I was about to argue why there should be some flexibility.

The main argument is that Ofwat is a much smaller organisation than some of the other regulators. By way of comparison, for example, Ofwat's budget is about £8.5 million, while Ofgem has £39 million and the Office of Fair Trading has £54 million. They are much larger organisations. However, that does not mean that there must be one person in the two posts. There should be some flexibility to decide what is most appropriate.

In a smaller organisation, we should also bear it in mind that we want to attract candidates of the highest quality, and if we have two posts that may be a problem. It may not be a problem, but the Bill provides the flexibility to approach the issue in the most efficient way.

Paddy Tipping (Labour, Sherwood)

The Secretary of State will appoint this body, but the Minister asks for flexibility. Which is his preferred option?

Elliot Morley (Labour, Scunthorpe)

I am grateful to my hon. Friend for his intervention. In all honesty, my preferred option, once the board is appointed, is to consult it on the most appropriate way forward and determine whether there is a desire to split the two roles.

I must correct the hon. Members who suggested that the unanimous feeling that emerged from the stakeholder consultation is that there should be two posts. I understand that Water UK, for example, has never expressed an opinion on the matter. Some water companies, such as Kielder and Wessex, have a combined chairman and chief executive, so the model is not unknown in the water industry. However, I emphasise again that that is not necessarily an argument for having one position. I am fairly relaxed about the matter.

Simon Thomas (Plaid Cymru, Ceredigion)

The Minister says that he is relaxed about the matter, and he mentioned earlier the size of Ofwat in comparison with the other regulatory bodies. However, the size of those bodies and the money that they spend is unimportant—what is important is the regulation that they undertake, its nature, and its daily effect on ordinary people's lives. There is no issue more important than water. People can do without gas and electricity, at least for a certain amount of time, but they cannot do without water. Even David Blaine cannot do without water. We must therefore ensure that the Bill is right.

I do not think that the Minister has answered the hon. Member for Sherwood (Paddy Tipping) yet, but when he does so, will he also take into account that he must consult the National Assembly for Wales on such matters? Has the Assembly said anything about the separation of posts?

Elliot Morley (Labour, Scunthorpe)

I am not aware that the Assembly has expressed an opinion on the separation of the posts. I am a bit surprised at how passionately some hon. Members feel, bearing it in mind that we will replace one person—the current regulator—with a proper board.

On amendments Nos. 240 and 241, I do not disagree that the board should be of a reasonable size. The current wording is in line with that of the Utilities Act 2000, which covers Ofgem and other regulators. The current non-statutory advisory board put in place by Ofwat consists of the director general, four executive directors, and four non-executive directors. That is Ofwat's current structure, but it is non-statutory. Ofwat took the voluntary decision to set up that structure, and we support it.

If hon. Members want guidance from me on that matter, I can tell them that we would expect to see similar numbers and a similar structure in the new board—it is a good model.

George Osborne (Conservative, Tatton)

No one is against flexibility, but we are trying to set the parameters of that flexibility. The model preferred by the Minister still comfortably exceeds the proposal made by my hon. Friend the Member for South Cambridgeshire of a board with at least four members plus the chairman. Given that the Minister has a preferred model in mind, I find it difficult to understand why he cannot slightly tighten up the flexibility being given to the Secretary of State, so that we do not end up with a board of only three people, as could happen in theory.

Elliot Morley (Labour, Scunthorpe)

I do not know whether the hon. Gentleman heard what I said earlier, which was that the Bill is worded to be consistent with the Utilities Act 2000.

Hugo Swire (Conservative, East Devon)

Unless I have got it wrong, we are discussing a new legislative framework. The Minister seems to be conciliatory towards the approach of my hon. Friend the Member for South Cambridgeshire. We seek to expand what is written in the Bill, so as to give the Secretary of State flexibility at a later stage.

Elliot Morley (Labour, Scunthorpe)

I would argue the opposite. If prescriptive procedures for appointments were included in the Bill, which would be the effect of the amendments, that would not give flexibility, but remove it. I reiterate to the Committee that I do not disagree with the points that have been made in the discussion. There may well be a case for separating the posts of chairman and chief executive, and that should be examined. I do not disagree that the Water Industry Act 1991 stipulates a minimum number, not a maximum, and a non-statutory board seems a good model to me.

Andrew Lansley (Conservative, South Cambridgeshire)

One of the points is that amendment No. 241 reflects a separate issue—the point that the majority of the authority's members should be non-executive. The Minister is disclosing some ideas, as it were, and he talks about the advisory board having a director general, four executive members and four non-executives. That is a majority of executive members. The Minister is already contemplating an outcome separate from the purpose of the amendment and, I would submit, contrary to what is increasingly regarded as best practice in corporate governance.

Elliot Morley (Labour, Scunthorpe)

Hon. Members invite me to give an opinion and suddenly the matter seems to be set in stone. I am only giving my opinion on the issues. I

return to the point that the Bill provides flexibility concerning the structure, shape and size of the committee. That is most appropriate and it is, incidentally, in line with the recommendations of the Better Regulation Task Force. I find it quite ironic that the Conservative party, which claims to be against bureaucracy and too much regulation, is arguing for tight restrictions and against the idea of flexibility. The Government are interested in what makes the most effective structure, not in setting matters out in stone as has been suggested.

Norman Baker (Liberal Democrat, Lewes)

I am grateful to the Minister for his remarks, knowing that his Department wants separation of powers to ensure that one person does not have too much power. The Secretary of State seems to accept that there should be four or more people on the board. He also has time for the idea of separating the posts of chairman and chief executive.

The Minister's argument for keeping the wording is not so much to do with flexibility as I understand it, but because it is taken directly from the Utilities Act 2000. A lot of this Bill is recycled from that Act. Why bother repeating wording just because it is in the 2000 Act? We have a consensus in the Room that the number of board members in the Bill is not right; people think that it ought to have more members. Why include that number because the 2000 Act has it? What has that got to do with anything? We are discussing the Water Bill. Does the Secretary of State believe that a board of three can ever be appropriate?

Elliot Morley (Labour, Scunthorpe)

In some circumstances, a board of three may be appropriate. I am a bit surprised about how excited some hon. Members are getting. If we stipulate numbers we then start arguing about whether it should be four, six, eight, 10—who knows?

Norman Baker (Liberal Democrat, Lewes)

You stipulate numbers.

Elliot Morley (Labour, Scunthorpe)

A minimum must be laid down, and that is stipulated in the Bill, but the point of the drafting is that there must be flexibility in the structure of the body because there may be regulation at some future date. The board may expand and take on more responsibilities. There may be an argument for a bigger board or a smaller one. If a number is stipulated, that flexibility is taken away.

Hugo Swire (Conservative, East Devon)

I do not follow the Minister's logic. If in future there was a requirement to expand or contract the board because of the pressures of more legislation, the Bill would have to be revisited anyway.

Sitting suspended for a Division in the House.

On resuming—

Elliot Morley (Labour, Scunthorpe)

Perhaps I can bring the argument to a conclusion. I am trying to take into account hon. Members' views, with which I do not necessarily disagree. The argument comes down to the fact that the Bill stipulates a minimum structure for the board, which of course is the minimum protection. I do not disagree with many of the arguments advanced by hon. Members—they are perfectly reasonable points. The Bill allows flexibility in the size of the board and

what is most appropriate with regard to a chairman and a chief executive. Our guideline should be what is most effective.

Richard Burden (Labour, Birmingham, Northfield)

There does not seem to be a huge difference between what is being said on either side of the Committee. It is fair to say that Government Members would wish to adopt some of the principles of good corporate governance that were advanced by Opposition Members. I think that my hon. Friend the Minister would as well. Many of us would feel reassured if he could suggest to the Committee that before the later stages of the Bill, some of the principles that have been outlined could at least be seriously considered.

Elliot Morley (Labour, Scunthorpe)

The procedure will be that the appointments will be made by the Secretary of State. The size of the board will be agreed in consultation with the appointed chair and/or chief executive and in consultation with the Welsh Assembly. I will consult the Secretary of State to see whether we can give clear guidelines on Report on exactly what the thinking is on the structure in relation to the representations that we have received. We need to get the view of the Welsh Assembly on that as well, which I do not have at present. It may wish to express a view. That may help Committee members on Report. I am trying to take on board the concerns that have been expressed, while maintaining the flexibility that I think is important.

Andrew Lansley (Conservative, South Cambridgeshire)

In the spirit in which the Minister is responding to the hon. Member for Birmingham, Northfield (Richard Burden), will he undertake to go a little further and consider not only giving guidelines on Report but whether the Government wish to table amendments to achieve some of the objectives of good corporate governance that have been discussed?

Elliot Morley (Labour, Scunthorpe)

As the hon. Gentleman will appreciate, I cannot give guarantees on such matters at this stage. However, I can tell him that I will reflect on this discussion and consider that point.

Andrew Lansley (Conservative, South Cambridgeshire)

In one respect, I acknowledge that there is an argument for flexibility, particularly with a small regulatory authority such as this: it does not necessarily follow that one needs a large number of members of that body. However, when there is a shift from an individual to a corporate decision, by its very nature, that is an attempt to move from a position where the industry and stakeholders can speculate on the personality and character of the authority to one where corporate decisions are more transparent and there is greater continuity in the authority even when individuals change. If the body went down to three members, it is arguable that there would be continuing speculation by the industry on the balance of decisions inside the authority each time one member changes. I would personally argue for a minimum membership of five rather than three, but I shall not press amendment No. 240, because there is an argument for flexibility in the absolute number of members of the authority.

Amendment No. 239 is about the principle of separating the role of chairman from that of chief executive. It may be true that Water UK did not express a view on that when the Better Regulation Task Force undertook its review of economic

regulators, but it is not the view only of the BRTF, encapsulated in its report, that stakeholders found that to be the right way of proceeding. The hon. Member for Birmingham, Northfield and I currently serve together on the Trade and Industry Committee and we have taken evidence from the Higgs review of corporate governance. Not everything that Higgs said was non-controversial, but the desirability of separating the chairman and the chief executive is generally acknowledged and is increasingly included in codes. Likewise, the requirement for a majority of members of boards to be non-executive rather than executive is generally accepted.

In neither respect has the Minister set our minds at rest.

Paddy Tipping (Labour, Sherwood)

I have a great deal of sympathy with what the hon. Gentleman says, but the Minister has said that he will reflect on the Committee's views. Some of us know that we should quit when we are winning.

Andrew Lansley (Conservative, South Cambridgeshire)

I am grateful to the hon. Gentleman, but I am going to make the point. In his discussion if not in his conclusion, the Minister clearly contemplated the possibility that the chairman would be the chief executive. He repeated that more than once. In his discussion, he clearly contemplated the possibility that the current structure of Ofwat's advisory group would be reflected in the composition of the authority; that is, on the basis of a majority of executive rather than non-executive members.

It is down to me to see where we go with this. I shall not press the amendment to a vote, but it should be understood that the two issues raised by this group of amendments are important. The fact that the legislation looks the same as the Utilities Act 2000 is not a persuasive argument, because the regulators governed by that Act have changed their practice since 2000. The Higgs report on corporate governance has changed the wider environment within which corporate governance works. Therefore, it is entirely right to incorporate the best principles of current and prospective corporate governance in the legislation that governs the Water Services Regulation Authority.

Apparently size does matter, but the fact that a regulator is a small organisation—many in private industry would regard £8.5 million of expenditure as not necessarily small in corporate governance terms—is not the point. It is not how much the regulator spends but what influence it wields. The structure of competition in the water services industry may develop over time, and the issues are certainly of considerable importance to our constituents. The regulator itself may grow. It would not be the first such body to grow as it goes along. The Minister may not have the figures to hand, but I reckon from my experience that Postcomm probably does not spend much more than about £8 million or £10 million a year—I would be happy to be told if I am wrong about that—but it has adopted the two principles of a majority of non-executive members and a separation of chairman and chief executive.

It is not for the first time that Opposition Members have to do the job of connecting up bits of

Government that appear to be behaving in different ways on similar issues. The Department for Environment, Food and Rural Affairs, has not kept up with best regulatory practice as enshrined in, for example, the practice introduced for Ofcom by the Department for Culture, Media and Sport and the Department of Trade and Industry. Not only were both principles reflected in the Communications Act 2003 but there was even a long and serious debate about precisely how many members should be on the board, not a sweeping assertion that it should be a matter of flexibility to be determined after Parliament no longer has any influence. Such matters should be determined by discussion of the legislation on the basis of a set of principles.

The principles should be reflected in amendments that the Government table on Report. If they are not, I suspect that Opposition Members and one or two Government Members who recognise the force of the argument might have to try to persuade the Government to see things differently. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 121, in

schedule 1, page 133, line 33, after 'State', insert 'and published'.

In the last debate, the Minister mentioned the Utilities Act 2000, the Nolan principles, the Better Regulation Task Force but, most of all, transparency. The amendment, which is not enormously complicated, seeks transparency. I hope that the Minister will agree with the principle behind it.

Elliot Morley (Labour, Scunthorpe)

Again, I do not necessarily disagree with the intention. I just do not think that it is necessary to include in the Bill a requirement to publish the remuneration figures, because such issues are already covered by best practice.

The code of practice of the Office of the Commissioner for Public Appointments makes it clear that all levels of remuneration should be publicised. The Cabinet Office also publishes those details for all public bodies and expects openness and transparency across Whitehall. I surely support that, and I assure the Committee that DEFRA will apply best practice when it comes to remuneration of the new authority. I do not disagree with the hon. Gentleman's sentiments, but the figures will be made available under existing procedures and codes of best practice that are applied by the Government.

Bill Wiggin (Conservative, Leominster)

If I have understood the Minister correctly—it is possible that I did not hear the words exactly—the information is already made public, so the amendment is superfluous. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 56, in

schedule 1, page 134, line 29, at end insert—

'7A(1) Minutes shall be kept of meetings of members of the Authority.

(2) Subject to subparagraph (3), such minutes shall be available for inspection by any person, and a copy of them, shall be given to any person who requests one.

(3) There shall be excluded from the minutes to which subparagraph (2) applies such parts of the minutes—

(a) as may disclose the identity of any individual other than a member of the Authority or its chief executive;

(b) as contain information which the Authority is prohibited from disclosing by section 206;

(c) as require to be protected from disclosure in order to safeguard national security (which includes security of the provision of water supplies and sewerage services);

(d) as relate to the investigation of crime;

(e) as contain information in respect of which a claim to legal professional privilege could be maintained in legal proceedings;

(f) as contain price sensitive information (but so that such information shall not be excluded when it is no longer price sensitive); and

(g) as contain information the disclosure of which is prohibited by any rule of law.'.

The amendment outlines the minutes that should be kept by members of the authority. There are various disclosures and regulations that go with them. In a way this theme runs through a whole series of amendments. I hope that the Government will accept the amendment. It is not necessary to speak for a long time on it, because the information is pretty clear. I am simply curious to see what objection the Government can possibly have to such clarity and transparency.

Norman Baker (Liberal Democrat, Lewes)

It is important to get a clear steer from the Government on this. They may reply that code of practice X requires Y and that it is all taken care of anyway. Practice varies across different arm's-length elements of government and across quangos. Some are very good and hold their meetings in public. They even hold public question times and publish their minutes. Others are far more secretive in their arrangements. There may be codes, but they are not conformed to with any kind of commonality across the different bodies.

When we are talking about something as vital as water—the key natural resource—and a body with the powers of the authority proposed here, the public are entitled to know what is done, not just with their money but with their resource. Minutes should be published and meetings should be open. That is not included in the amendment. Perhaps the Minister could say something about that. The public should be entitled to attend at least one meeting a year, the AGM. That is not an unusual arrangement for bodies such as this.

The amendment may not be perfect, but as far back as 1960 and the Bill that opened up local government introduced by Mrs. Thatcher, the principle was established that public bodies should be open and accountable and that minutes should be published. It is also standard practice in local government, for example, to have a two-part agenda. Parts of the meeting are open and parts are closed. The minutes reflect that. Undoubtedly minutes can be published that convey real information without infringing commercial confidentiality. That is perfectly possible—it depends how one structures the minutes.

I hope that the Minister can say that he is committed to that concept and that minutes will be produced in line with the amendment, although not necessarily following it exactly. I hope that he will also say something about meetings being open.

Robert Key (Conservative, Salisbury)

This excellent amendment contains many echoes of the points I made earlier about the need for open government. I have pressed for this consistently. The amendment says

''such minutes shall be available for inspection by any person, and a copy of them, shall be given to any person who requests one.''

That little verb ''given'' is rather important. It raises the question of the cost of documents that are to be made available to the public. The price of the documents may be out of all proportion because of the very small print runs involved, which may amount to no more than photocopying.

For example, there is currently a dispute in the village of Stapleford in my constituency about a road extension. It is controversial, and unsurprisingly the 250 or so local residents want to know in great detail about the decision making in the process. However, they can access the information only by paying the price of £56 for a document, which is prohibitive for most of my constituents.

The Government should consider seriously the options concerning the enormous cost of documents. After all, we represent increasingly well-educated and articulate constituents, many of whom—soon it will be most of whom—have access to the internet. So, is there not an answer in the internet? We should perhaps amend the amendment to ensure that all minutes of authority members' meetings are available on the internet. The Government may already intend that to happen or have a code to ensure that it does, but it is an increasingly cheap option for local and central Government and their agencies to put information on the internet, and they can often do it within 24 hours. If the House of Commons can get Hansard on to the internet by 11 o'clock—although we have the privilege of having Hansard printed overnight—surely in the interests of good and open government, and e-government, we should ensure that minutes are available on the internet within 24 hours of a meeting.

Elliot Morley (Labour, Scunthorpe)

It is a funny evening, as I do not disagree with many of the points made on this topic either. However, we must be serious about some of the issues, and I accept the hon. Gentleman's point about the cost of documents. There was a big debate in relation to the Freedom of Information Act 2000 about the fact that although people have the right to information in return for a modest payment, the costs of providing that information can be enormous. Any responsible Government must balance potentially exorbitant costs to the taxpayer and the not unreasonable right of people to see documents.

One way of achieving that balance is to use the internet. How the new board conducts itself will be a matter for it, because it will be an independent body, but there is good practice to follow. Every document produced by my Department now goes on to the

DEFRA website, which has subsequently become an international resource. People from all over the world access the website because of our research and discussion documents, and there is huge interest in the GM debate at the moment. We follow that good practice, and that gives enormous access to everyone. I accept that not everyone has internet access, but they can go to a library and use its computers. I also think that it is good practice to publish minutes on the internet.

On amendment No. 56, I can reassure the Committee that clause 42(4) already places a statutory requirement on the authority to produce minutes of board meetings, and Ofwat's code of practice already commits itself to doing that. Most of our bodies conduct open AGMs, including, for example, the Environment Agency—I have been to a few myself. Again, that will be a matter for the board, because it will be an independent body, but it is good practice, and I am sure that the comments made in Committee will be noted by the new board when it is up and running.

Hugo Swire (Conservative, East Devon)

The Minister just said that clause 42(4) contains a statutory requirement. Can he point out exactly where?

Elliot Morley (Labour, Scunthorpe)

Clause 42(4) says that the authority should act in a spirit of being ''transparent'' and ''accountable''. That includes making minutes available. Members will know that what is emphasised and clarified in Committee counts. The Government's interpretation of clause 42(4)—the Government are the promoters of the Bill—includes the publication of minutes. That is on the record and I have made it absolutely clear. I hope that I have provided the assurance that Members seek. I do not disagree with the principles. The body is independent, but we are talking about good practice and we expect it to abide by good practice.

Bill Wiggin (Conservative, Leominster)

I am grateful to the Minister for that constructive and helpful reply. As I said, this is a probing amendment. The Minister will be aware that we are particularly sensitive about the keeping of minutes after the Hutton inquiry, when we discovered that the Prime Minister is not quite so keen on keeping minutes as perhaps the Minister is.

It is important that the schedule 1 makes it perfectly clear how the proceedings should be carried out. The amendment is constructively worded, but as the matter is being given proper consideration by the Minister—

Ian Liddell-Grainger (Conservative, Bridgwater)

My hon. Friend is making interesting points, but could we just consider clause 42(4) again? Is the Minister utilising the Companies Acts to force the authority to keep minutes and amendments to minutes? That is not the same as publishing minutes within 24 hours. There is no statutory limit. If I remember rightly from my time in companies, the time allowed was 28 days. In reply to my hon. Friend the Member for East Devon (Mr. Swire), I do not think that the statutory requirement is included in the Bill.

Bill Wiggin (Conservative, Leominster)

In that case, I am afraid that I am the wrong person to intervene on. However, the Minister

was listening carefully and I hope that he will intervene to answer that point.

Elliot Morley (Labour, Scunthorpe)

I will return to it later.

Bill Wiggin (Conservative, Leominster)

I am grateful.

The key point is that we are trying to get a consensus organised so that the Bill does a proper job. It is not fair to say that clause 42(4) alone is sufficient comfort for those of us who want proper limits. The Minister's reply led the Committee to believe—I was grateful for this in some respects, but not completely happy with it in others—that remarks made in Committee would influence the interpretation of the Bill. If that is the case, splendid, but if we are seeking to influence the interpretation of the Bill, such points should be included in the Bill.

Elliot Morley (Labour, Scunthorpe)

The matter is one of best regulatory practice, which is covered by clause 42(4). Page 46 refers to that as including

''the principles under which regulatory activities should be transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed''.

I must add the caveat that the body deals with many regulatory and economic issues. The amendment makes it clear that confidential issues would be excluded from the minutes. That would certainly have to be the case. To answer one of the questions about why some bodies are more open than others in the publication of minutes, I can tell the Committee that in the case of a body such as this, where there are an awful lot of commercially sensitive issues, such as merger, economic and pricing policies, the danger is that if we are too stipulatory about minutes, that would be an encouragement to use the confidentiality issue quite commonly. That would move away from the principle that we want to establish, which is to be as open and transparent as possible. I believe that, in this case, transparency involves the availability of minutes, but we should also recognise that an independent body that deals with economic and sensitive issues needs to have some discretion.

Bill Wiggin (Conservative, Leominster)

I think that we all agree with the Minister, but the question whether the Bill puts it in the best possible way will have to be left, perhaps until Report. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Andrew Lansley (Conservative, South Cambridgeshire)

I beg to move amendment No. 242, in

schedule 1, page 134, line 36, at end insert—

'(1A) The Code shall indicate, insofar as the objectives and duties of the Authority may be regarded as potentially coming into conflict, how the Authority intends to interpret and discharge its objectives and duties.'.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following:

Amendment No. 243, in

clause 41, page 43, line 25, at end insert—

'(2A) That description must include, so far as the Authority believes it to be relevant for the financial year in question, a statement concerning how the Authority intends thereby to meet its objectives and duties.'.

Amendment No. 244, in

clause 41, page 44, line 15, at end insert—

'(bb) an explanation where relevant of how the Authority has reconciled any significant conflicts between the respective objectives and duties laid upon the Authority;'.

Andrew Lansley (Conservative, South Cambridgeshire)

To correct the record, may I refer back to the previous debate, in which I discussed Postcomm's expenditure? Postcomm, as hon. Members will recall, is a regulator with a chairman and a chief executive, seven members and a majority of non-executive members. I suggested that its expenditure might be comparable to that of Ofwat, at about £8 million or £10 million, but I was inaccurate; the figure is £5.8 million. That does not weaken my argument; it reinforces it. I just wanted to be completely accurate.

The three amendments relate to three separate areas of activity of the new authority. This is about making clear the way in which the objectives and duties of the regulator will be reconciled if they come into conflict. Clearly, if they do not come into conflict, stakeholders and the industry will not find it difficult to see what the purposes and activities of the authority are.

Where does the problem come from, and what problem are we trying to address? That question requires us to return to the Better Regulation Task Force. Of course, the report to which I am referring was published in July 2001 and therefore post-dates the Utilities Act 2000, so the fact that the Bill is in line with the Utilities Act is something of a non-argument. The question is what we are now trying to achieve.

The taskforce specifically addressed the question of prioritising objectives and the way in which economic regulators dealt with conflicting objectives and duties. The report said that

''the priority given to the regulators' different objectives . . . emerged as a key issue in our stakeholder meetings and written submissions.

We acknowledge that regulators have to make their most difficult judgements and trade-offs when addressing contradictory duties and objectives. But this is also when stakeholders most need assurance about how decisions were reached and implemented. At present stakeholders feel unable to predict how competing objectives might be reconciled, and what practical outcome will follow. This was described as a major cause of regulatory uncertainty.''

It might be argued that that did not necessarily relate to the water industry, but the taskforce also considered the duties of the director general of water services. It said:

''The duties of the director general of water services are clear in the present legislation. But this clarity may be lost given two changes proposed in the draft water bill.''

That was just after the Utilities Act had been changed and the Bill was in consultation form. The taskforce referred to

''an additional primary objective to protect the interests of consumers''—

that relates to clause 42, which we have yet to reach—

''and powers for the secretary of state to give guidance to the director on social and environmental matters.''

We shall come to that when we discuss clause 43.

The Bill will give rise to precisely the circumstances in which the taskforce concluded that the present clarity about the duties of the director general of water

services would become uncertain. People cannot say, ''Everything is fine at the moment and it will be fine in future.'' We need to see how the duties will be combined. The consequent recommendation made by the taskforce stated:

''Regulators' annual business plans should include a clear explanation of how they will prioritise their different objectives. Regulators should also explain how the decisions they take relate to their objectives.''

I hope that the Minister will, in the spirit of this afternoon's discussions, agree with the argument and explain how he will think about doing what is suggested, because the Bill does not set out how the authority will demonstrate to stakeholders how it reconciles its conflicting duties and objectives. We tabled three amendments because there are three possible ways of doing that, but they are probably not all necessary.

Amendment No. 242 relates to schedule 1 and the code by which the authority will set out how it conducts its business. The Minister might believe that the code is more concerned with the corporate process of governance than with reconciling policy objectives, in which case I would not press the amendment.

Amendment No. 243 relates to the forward work programme, which we shall discuss when we come to clause 41 and is expressly the equivalent of the annual business plans which the Better Regulation Task Force recommended as the place where those duties should be reconciled. It would give the authority the flexibility to include only those conflicts or questions relating to the objectives and duties that it sees as relevant to the annual business plan. That is precisely how that should be done.

Amendment No. 244 is about annual reports. In practice, it would be reasonable for stakeholders to be able to see two things happening. First, how does the authority expect to reconcile its policy objectives in the future and in the financial year in question in so far as it sets out what it wants to achieve? Secondly, a precedent being relevant in this context, when there are significant conflicts of interest, it should be set out clearly in the annual report how those duties have been reconciled so as to give guidance to stakeholders in future.

There are compelling arguments for including amendments Nos. 243 and 244 in the Bill, but amendment No. 242 is our first preference, to show how the argument runs from the code through to the annual business plan to the forward work programme and then to the annual report. I hope that the Minister will accept our arguments and perhaps also accept amendments Nos. 243 and 244 in due course.

Elliot Morley (Labour, Scunthorpe)

I certainly accept the argument about good practice in relation to how the bodies should operate. However, the amendments are unnecessary, bearing in mind the fact that the Better Regulation Task Force said that we should look at regulation and whether it is absolutely necessary. I do not believe that it is necessary, and I am happy to try to explain my reasons.

I recognise that the authority will have a wide range of duties that at times may throw up conflicts. That is inevitable, and no different from any other regulatory body or the structure of Ofwat, which already has a wide range of duties and functions. The problem when trying to write into legislation what those conflicts and resolutions will be is that they depend on individual circumstances. I do not believe that it is in the authority's interest or to the benefit of the industry or consumers for the authority to pretend that it can set out in advance all the various conflicts that might arise and how it can deal with them, because that would be too restrictive and difficult.

Publishing potential conflicts in a code, which is what amendment No. 242 proposes, would not reflect the true nature of the authority's functions and the complexity of its decisions. Good practice, as the hon. Gentleman said, is the way in which to deal with the matter.

Turning to amendment No. 243, assessment of how the authority's work programme will contribute to its overall objectives and duties is good practice. I do not dispute that, but it is not necessary to put it in the Bill. The authority would not have the power to carry out any activity that did not contribute to its overall objectives and duties. In addition, Ofwat has already committed itself to carrying out regulatory impact assessments of its policy initiatives, which will mean measuring them against its objectives. That is good practice, which we expect to see.

Amendment No. 244, which requires the authority to include in its annual report an account of how the conflicts were resolved, is also not needed, because the clause, along with clause 54 on the reasons for decisions, already achieves that. The authority is required under new section 192B(2)(a) to report on regulatory developments, which would include the reconciliation of significant conflicts. That is in the Bill. Under new section 192B(2)(b), the authority must report on the progress of projects described in its forward work programme, and it must report on its enforcement activity under 192B(2)(c). That connects with clause 54, which concerns publishing reasons for decisions, and it would also ensure that the authority accounts for how it reconciles its various duties, where relevant.

For all those reasons, I hope that the hon. Gentleman will accept that the reconciliation of conflicts is already covered in the legislation. I do not disagree with the points that he has made, but his amendments are unnecessary.

Andrew Lansley (Conservative, South Cambridgeshire)

I am content that the code of practice does not necessarily represent the best place in which to try to set that out. On the annual report, I accept that it is perfectly possible that new section 192B(2) should in all reasonableness require the authority to set out the development of regulation over the course of the year in question.

That brings me back to the particular recommendations of the Better Regulation Task Force. I understood that the Government had accepted that regulators should set out how they intend to prioritise their different objectives in their

annual business plans—the equivalent of the forward work programme. The Minister's argument that that was somehow an unnecessary regulation, and that it should not be included, as it is contrary to the best regulatory principles, does not wash. It is necessary in order to deliver best regulatory practice. The regulatory principles of the Better Regulation Task Force are not designed to protect the regulators from delivering the certainty that their stakeholders seek.

Elliot Morley (Labour, Scunthorpe)

The Government have responded to the Better Regulation Task Force, and it is for the regulators to determine how to prioritise and balance objectives within their statutory frameworks, which is not unreasonable.

We also agree that the annual business plan should include a clear explanation of prioritisation, but it must take account of how the body must operate. When we consider the objectives of the amendments, we are not very far apart, but we do not believe that the amendments themselves are necessary.

Andrew Lansley (Conservative, South Cambridgeshire)

Clearly, we are not very far apart, but prioritisation is not in the legislation. In so far as it is not therefore part of the statutory framework for the new authority, it is conceivable that when it considers the range of objectives and duties that it must meet for the financial year ahead, its annual business plan might not set out with sufficient clarity how its forward work programme relates to those objectives and duties and how it intends to prioritise between them.

I agree that it is reasonable to suppose that an effective authority would do that. Harking back to my earlier point, it is also entirely reasonable to include it in the legislation as one element of best practice for a regulator. It has been increasingly incorporated into best practice for economic regulators generally since the Utilities Act 2000. Again, it is a case of the legislation reflecting the 2000 Act rather than other legislation on economic regulators that has been introduced in the intervening period.

I will not press amendment No. 242; the amendment about which the Minister and I disagree is No. 243. The spirit of the debate is that we tend to agree but we are discussing the extent to which it is proper for certain things to be set out in the Bill. In this case, the Minister should reconsider whether the forward work programme should have an explicit objective. People will look at the structure of the authority and the additional duties and want to know how the authority proposes to reconcile and prioritise the consumer and competition objectives and how they will relate to the social and environmental objectives. The forward work programme is the best place for that to be done.

I hope that the Minister will decide that the proposal has the merit to be included on Report. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That this schedule be the First schedule to the Bill.

Simon Thomas (Plaid Cymru, Ceredigion)

We return to where we were an hour ago. I half asked a question and got half a response from the Minister. I hope for a fuller response now.

I want to know the nature of the relationship between the new authority, the Minister exercising his powers in the name of the Secretary of State, and the National Assembly for Wales. It is clear from the schedule that the Assembly will have a consultative role in the appointment and de-appointment, as it were, of members of the authority and on the code of conduct that is to be devised for the working of the authority.

The Minister suggested in earlier debates that the Assembly's views would be taken into account, for example on the number of executive and non-executive roles and whether there should be a chairman and chief executive as one. I want to know how the Minister envisages that process taking place. We are discussing a measure that has significant effects for Wales, which has great water resources that we are delighted to share. However, there is a real impact on the communities that live near those resources. There is a significant element of devolution in the Bill in respect of reservoirs and their construction in Wales to meet not just Welsh needs but the general needs of the United Kingdom. Therefore, I would like to believe that the Minister wants the Bill to achieve a partnership of equals between the Assembly and his Department.

The consultation can be superficial or not, as the case may be; much will depend on the way in which it is undertaken, and I want to probe the Minister about the nature of that consultation. For example, in the appointment of members to the authority, will he suggest names that the Assembly can consider and comment on, or will there be a two-way process, in which the Assembly can make suggestions—I do not mean nominations—to him about super-members of the authority? Is it foreseen that a person on the authority would have a responsibility for Wales? In other words, if there is a four or five-member authority, will one of them, as well as being an England and Wales member, have a particular responsibility for or interest in Wales? The analogy is with the disability interests, which we shall discuss later. Disability interests will be taken into account; the question is how Welsh interests will be taken into account.

The second element relates to the exchange and processing of information. We have just had a debate about information for the public, and it is right and proper that minutes and so on should be made available. However, we acknowledged in that debate that certain information is perhaps not publicly available. A third type of information is highly relevant to the Department, which would want to see it, and I argue that it is also highly relevant to the workings of the Assembly. I would like to think that any information that the Department sees is available to the Assembly to consider as well.

Norman Baker (Liberal Democrat, Lewes)

Does the hon. Gentleman recognise a further problem from an English perspective? At least the Welsh Assembly may have those documents to share with its Members; we are not necessarily in

the same position. As English Members, we may have to look to the Welsh Assembly for information.

Simon Thomas (Plaid Cymru, Ceredigion)

Indeed, as often we look to the United States and its Freedom of Information Act for information on what our country is now doing, and as we looked to Romania to find out what Mittal was really doing—but there we are. We shall discuss such points later.The hon. Gentleman raises a useful point, but I must say to him that I am trying to probe the relationship between the Executive of the National Assembly and the Minister's Department, to which they are analogous. Before the Minister says anything, I am talking not about publicly available information but about the sharing of information. For example, if the National Assembly is to be consulted over the deselection of a member of the authority, surely that raises the question of what information Assembly Executive members will have about that person. They would surely have the same access to that information as the Department. It would be ridiculous to consult the Assembly Executive and simply say, ''This is what I think, do you agree?'' rather than sharing all that information.

Kevin Brennan (Cardiff, West) rose—

Sir David Amess (Conservative, Southend West)

I call Mr. Andy King.

Kevin Brennan (Labour, Cardiff West)

I am Mr. Brennan.

Does the hon. Gentleman not agree that he is making a compelling argument for the unified United Kingdom civil service, which works in the National Assembly? The sort of matters that he is discussing are governed by protocols between civil servants in DEFRA and civil servants in the National Assembly. That means that information is already shared in exactly the way that he is arguing for.

Simon Thomas (Plaid Cymru, Ceredigion)

I am grateful to the hon. Gentleman who, of course, we in Wales recognise, even if not everyone does.

Protocol is the next thing on my list. What sort of protocol is envisaged for the work? I agree with the hon. Gentleman about a unified civil service, although that is possibly beyond the scope of this measure. That is improving in Wales, and we are trying to make it work better. What sort of protocol will there be between the Department and the National Assembly Executive on this matter?

I want to understand from the Minister's comments, which I hope that he will make in a second, that this will be a true partnership of equals. If that is to work, there must be an equal sharing of information and of ideas and suggestions. I understand why he has taken his approach, although I reserve my right to do something on Report if I am not happy with his reply now. I want him to have the opportunity to put on record how he foresees this relationship working and how we can be sure that in the Welsh context our real concerns and ideas about the use of a valuable resource will be reflected in the new Water Services Regulation Authority.

Elliot Morley (Labour, Scunthorpe)

I can make it clear that the appointments to the new board will go through the Nolan procedures, which means that they will be

advertised in England and Wales. People will be able to apply. There will then be an implementation group to set up the new structure, which will consist jointly of DEFRA, the National Assembly for Wales and Ofwat. The Assembly will be a partner at every stage of the process.

The hon. Gentleman asked if the Assembly will be able to propose names. Yes, it will. I will go further. When the drawing up of a shortlist is proposed, the Assembly will be involved in that. It will be involved in the consultation on the appointments. When the full proposed board has been finalised, it will be consulted on whether it accepts it. The Assembly may have some nominations that reflect particular Welsh issues. It is free to make those and we would always be sympathetic to that. The Welsh Assembly may nominate some people who are not from Wales but have particular skills that are of interest and that it feels should be represented on the board. We are sympathetic to that as well.

I can assure the hon. Gentleman that the Assembly will be involved in every step of the process, as it is now. That is not the only structure that we put in place in consultation with the Assembly, because a lot of legislation concerns England and Wales, as he knows. In some cases responsibilities are split, and in others the Secretary of State takes the lead. Whatever the structure, we are keen to involve the Assembly as a partner, to listen to their views and to take those views into account and ensure that they are represented. In my time as a Minister, I can honestly say that I do not believe that I have ever had a disagreement with the Assembly on a point concerning the procedures or the final structures that the Department has put in place.

Andrew Lansley (Conservative, South Cambridgeshire)

It may be that I have missed something and the point has been covered, but will the Minister confirm that it is not the intention subsequently to confer order-making powers on the new authority? If it is the intention for it not to have such powers, I understand why the corporate structure set out in schedule 1 does not give any power of delegation to committees to make statutory instruments. I wanted to make sure that that was the case, otherwise there would be something missing from the structure as it applies to other utility regulators.

Elliot Morley (Labour, Scunthorpe)

I can assure the hon. Gentleman that that is indeed the case. There are no proposals to do that. As a final point, I would say that clause 55 requires a memorandum of understanding between the Secretary of State and the National Assembly for Wales. There is a statutory requirement for such an understanding, apart from the fact that we enjoy good and constructive relations.

Question put and agreed to.

Schedule 1 agreed to.

Robert Key (Conservative, Salisbury)

On a point of order, Mr. Amess. Given that the hon. Member for Falmouth and Camborne (Ms Atherton) is about to propose an amendment opposing Government policy, and given that she is very much feeling the cold, would it be in order for her to join us on this side, where it is warmer?

Sir David Amess (Conservative, Southend West)

I think it best if I do not comment on that point of order.Clause 38 Consumer Council for Water

Clause 38 - Consumer Council for Water

Candy Atherton (Labour, Falmouth and Camborne)

I beg to move amendment No. 230, in

clause 38, page 41, leave out lines 4 to 6 and insert—

'(12) The Council shall exercise and perform its powers and duties so as to contribute to the achievement of sustainable development.'.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss amendment No. 245, in

clause 38, page 41, line 5, leave out from 'to' to end of line.

Candy Atherton (Labour, Falmouth and Camborne)

Thank you, Mr. Amess, and may I say that, cold or otherwise, I shall not be crossing the Floor?

The amendment is designed to clarify the Government's commitment to sustainability. It is a probing amendment, and I look forward to hearing the Minister's response. It would place a requirement on the Consumer Council for Water to

''exercise and perform its powers and duties so as to contribute to the achievement of sustainable development.''

That goes a little further than the Government allowed with an amendment in the other place, which my amendment would replace.

Sustainability is very relevant to consumers. It is central to the approach favoured by the Government, which combines economic, environmental and social concerns in the long-term interests of consumers. Last year, research by MORI showed that consumer interest in water went beyond price and included the quality of bathing water, cleaner beaches and protecting our environment. However, we all know that such programmes come at a cost. That is part of the wider debate about how we pay for our water. For consumers and the council that represents them it is vital that those issues are central to the wider debate—the big picture concerning water.

As I represent constituents in a low-income area with the highest water bills in the country, I believe that the wider picture is vital. I am anxious that we link the interests of consumers with that wider agenda, linking sustainability with affordability, and we could strengthen that link via the amendment. Only by addressing the wider issues can we properly tackle the question of how we pay for our water while dealing with problems such as water scarcity in East Anglia, or cleaning up the vast coastline of the south-west and polluted rivers throughout the country.

The Committee will note that the wording of the amendment echoes the requirement that page 46 of the Bill places on the regulator regarding sustainable development. It would add welcome consistency and coherence to the Bill. On Second Reading the Minister said:

''Both the new regulatory authority and the council will have a duty to contribute to sustainable development''—[Official Report, 8 September 2003; Vol. 410, c. 60.]

That is a little more than the Bill says, and I thought it important to clarify the point. I should welcome my hon. Friend's comments.

Hugo Swire (Conservative, East Devon)

I am extremely grateful to be called to speak to this amendment. It has been tabled by a fellow west country MP, albeit one of a different political persuasion. The clause is weakly worded. It says that the council shall have regard to sustainable development, and the amendment would go some way to tightening it up.

I am very supportive of the amendment, and I believe that the hon. Lady made some extremely pertinent points. People in the south-west have a sense of great and increasing injustice as we look forward to incredible rises in water prices over the next few years.

I agree with Water Voice, which will soon be replaced, when it says that the whole structure of charging is unsustainable and needs to be looked at. We in the south-west are in an invidious position. We have a small population who must not only pay for the restructuring of our water and sewerage infrastructure system, but comply with an increasing number of directives from the EU such as the water bathing directive. We have to meet a disproportionate amount of those costs. Every study shows clearly that the south-west has to pay way and above what the rest of the country pays. The recent statistics, if I can find them, make for difficult reading.

Ian Liddell-Grainger (Conservative, Bridgwater)

I may have intervened at the right time. My hon. Friend makes a valid point. Like the hon. Member for Falmouth and Camborne (Ms Atherton), I am a south-west MP. I know that the interface between sustainable development on surface water and on groundwater has changed. The Minister made a pertinent point about Wessex Water. I agree with my hon. Friend that our long-term commitment to sustainability will be instrumental in the long-term implementation of the Bill.

Hugo Swire (Conservative, East Devon)

My hon. Friend makes an excellent and timely point. Another problem that we have in the south-west is flooding, although we will not discuss that at this point. We also have the problems of our extensive seascape, the need to clean up the water along our beaches and the very high water charges.

Miraculously, I have now found the statistics that I mentioned. They show that the annual household bill for 1997–98 in the south-west was £352, whereas the bill for Thames Water—the Government Whip nearly leapt into the waters of the Thames a few minutes ago—was £191. In the east of Scotland, if we are prepared to go that far, the bill was £109. That clearly shows the large burden that the south-west has to bear.

The tourists who flock to our beaches—I hope that many Committee members visit the south-west on a regular basis and I would seek to do nothing to dissuade them—come to enjoy our excellent water and our excellent sea. Yet we in the south-west are left with the bill. There is also the sense that we suffer from our geographic position in the peninsula; people believe, rightly or wrongly, that decisions are made far away and somehow we are disadvantaged.

In the south-west, we will benefit from anything that gives the council greater transparency and more teeth, and leads to a greater requirement to take all elements into account and discuss them under the umbrella heading of sustainable development. We may benefit as disproportionately as we currently suffer under current water charges.

Simon Thomas (Plaid Cymru, Ceredigion)

I, too, support the amendment. I am sorry that it is a probing amendment because it is a lot better than the current wording. What the Government have decided on, and achieved through an amendment in the other place, has more hedges than Hampton Court. The provision says:

''In the exercise of its functions the Council shall have regard''—

that is the first hedge—

''where relevant''—

that is another hedge—

''to any benefits''—

that is a bit vague, so I think that it is another bit of hedging—

''to consumers''—

which limits it to people paying the bill rather than society as a whole.

That is a mealy-mouthed attempt to include sustainable development in the Bill. Can the Minister name one achievement of sustainable development that does not bring benefits to consumers? When it is considered from that perspective, the Government's attempt to achieve sustainable development is a load of rubbish and makes no sense. They are really saying, ''Yes, we will have sustainable development, as long as it doesn't cost too much.'' That is a disastrous approach to the water industry.

One of the huge problems facing us—perhaps not in the next five years but certainly in the next 20—is the decline of our Victorian sewerage system. It is already collapsing all over the place—in Aberystwyth and London—and will need huge investment. There cannot be a better example of sustainable development than ensuring that sewage is properly treated and disposed of in a way that does not affect the environment or the health of those who live in that environment, as we all do. How can we achieve that with cheapskate measures for sustainable development? We cannot.

We must adequately consider those in low-income groups, and we must examine the disproportionate water costs for people in some parts of the UK. I accept what has been said about the south-west of England, and considering the amount of water that Wales has, water bills there are also high.

Candy Atherton (Labour, Falmouth and Camborne)

We will swap you.

Simon Thomas (Plaid Cymru, Ceredigion)

I am sure that the hon. Lady is prepared to swap bills.

Water is, of course, free. The water is not the problem; it is storing, transporting and cleaning water and dealing with sewage that costs money. There is also the effect of tourists in some parts of the country. If there is to be a real sustainable development

approach to the problem, we cannot cut corners. We must place sustainable development firmly in the Bill, without caveats, without hedging about and without trying to restrict the benefits to one section of the population—namely consumers. The authority has the over-arching aim to achieve sustainable development, and it is important that the consumer body works in the same way.

The Government have been half-hearted. I am disappointed because, although the Minister has been a champion of sustainable development in many other respects, the Government have included it in the Bill in this narrow, hedged-about way. They could be more generous with sustainable development, and they could be more honest with consumers and the water companies about the task facing us in ensuring that our beaches remain clean, our sewerage system keeps going and our water remains clean and healthy. That does not come cheap, and every one of us will bear the responsibility for that. Together, that is sustainable development.

There is no achievement of sustainable development that does not bring benefits, and the way that the concept has been included in the Bill makes a nonsense of the Government's other laudable aims. I hope that they will reconsider the matter and return, if not today then on Report, with a better form of words.

Sue Doughty (Liberal Democrat, Guildford)

Because these are substantial issues we tabled an amendment similar to the one moved by the hon. Member for Falmouth and Camborne. She rightly drew attention to the huge tensions between the investment required to provide sewerage services and clean water in the south-west, and the desire for an affordable price. We are also seeing problems in other parts of the country such as south-east England.

People think that there is special pleading from Liberal Democrats about the Thames gateway. Let me assure hon. Members that the Thames gateway is a long way from Guildford—I do not hold a special brief for it. However, it is common sense to be concerned about large-scale developments. Somehow, the water has to get there, and, if rainfall is very low, the sustainability and cost of water supplies become a major issue.

The problems of the south-west's geography include not only those concerning infrastructure but the additional demands that will be placed on a dwindling resource and the effect of abstraction. In earlier sittings, we discussed at length the sustainability requirements to be taken into account when licences are issued and the problems that must be faced.

I, too, am very disappointed with the half-hearted comment in the clause. It is not even consistent with clause 42, which gives water companies a responsibility for sustainability. That is right—we debated it at length and agreed to it. However, the matter comes up again in the sloppy little statement in this clause, which really does not ask for much apart from stating that the council ''shall have regard'' to sustainable development.

Yes, we must represent consumers. Yes, there are injustices in water pricing. Yes, poverty and the price of water are desperately important. As we go through the Bill, I hope that we will spend a lot of time discussing those real problems, but we cannot go for the quick buck. The water companies need to know where they stand. We are requiring them to invest for long-term as well as short-term benefits and for sustainability. Therefore, we cannot say that sustainability only matters as a last resort, if everything else is all right. We must balance the tensions, and we must take such matters into consideration.

I, too, hope that the Government will see fit to amend the wording in the clause, either by accepting the amendment or by proposing on Report stronger wording that is consistent with what we are requiring of the water companies.

Bill Wiggin (Conservative, Leominster)

The amendment is excellent. I am sorry that I did not write it myself, and I am also sorry that more Labour Members have not risen to support it.

My understanding of sustainability is ensuring that our needs today do not ignore the needs of consumers tomorrow. In other words, for the sake of our children, we should not screw up the planet. What better way is there to ensure that that is what we mean than to have it in the Bill, not in the wishy-washy way in which the Government have included it but in terms of the social, economic and environmental benefit that the Government talk about but singularly fail to deliver?

The amendment is first-class, and I urge the Minister to open his arms not only to the hon. Lady but to her amendment.

Elliot Morley (Labour, Scunthorpe)

My hon. Friend the Member for Falmouth and Camborne has a great deal of knowledge, involvement and interest in water, the environment and sustainability, as do many members of the Committee. That has been one of the strengths of hon. Friends who have supported me in this process, and I know that there is genuine interest on both sides.

I have been reflecting on what my hon. Friend said. She made a very powerful case, even though she was obviously a bit chilly sitting next to the window. My hon. Friend the Member for West Carmarthen and South Pembrokeshire (Mr. Ainger) was induced to rush to her aid. I thought that he was going to fling himself into the Thames because he was upset with progress, and therefore was relieved to see that he was rushing to assist her.

We are serious about sustainability, which is why we have included it in the Bill as a requirement on the regulatory body. I understand that before the current duty was placed on the Consumer Council for Water in another place, there was consideration of the formulation that should be applied and the form of wording that should be used. It is not very different from what my hon. Friend said. It was considered at that time that the wording in the Bill

was more appropriate given the CCW's purpose and functions. I can understand that; my genuine difficulty with it is that the issues of economic, social and environmental development cannot be separated from consumer and regulatory issues. In that sense, she makes a good case.

We must recognise that the CCW's functions are fairly narrow in relation to its objectives. It does not have the responsibility of dealing with planning issues at Thames gateway, for example. However, there are issues in relation to water supply and costs in which it would be interested. The three strands cannot be separated, and I am a firm believer that they should be at the heart of policy, and although my hon. Friend will appreciate that I am not in a position to make promises or give guarantees, in that respect she has made a very powerful case on which I shall reflect before Report.

Bill Wiggin (Conservative, Leominster)

The Minister is very kind to the hon. Lady, but unfortunately for him this is not about considering whether the wording is strong enough but about delivering on sustainability. By going away and thinking about the matter, he is not doing so. We want the proposal to be in the Bill, and I hope that that is what the hon. Lady is about to tell us.

Candy Atherton (Labour, Falmouth and Camborne)

I am pleased that we have had such a good debate, although I am not sure that all hon. Members are thrilled that it is taking place at this late hour.

I always take the opportunity to make the case for South West Water customers and it is appalling that pensioners in the south-west can spend 10 per cent. of their pension on their water bill. If water bills increase £10 to £15 per year every year for the next five years on top of that, many of my constituents and those of the hon. Gentlemen who supported my argument will not be able to pay, and the CCW needs to consider the big picture in that context.

Simon Thomas (Plaid Cymru, Ceredigion)

For the information of the Committee and for the Minister to reflect on, it may have escaped hon. Members' attention that the Welsh translation of the Consumer Council for Water is Cyngor Defnyddwyr Dwr, which means water users rather than consumers, which gives precisely the wider consideration that the hon. Lady said was needed. We should bear it in mind that some things are not precise and there will be more who benefit from the council than just those who pay the bills.

Candy Atherton (Labour, Falmouth and Camborne)

My Welsh is not good so I will not pursue that matter, but I am grateful to the hon. Gentleman for raising it.

I have made my case. I speak as chair of the parliamentary water group, to which the Minister, for whom I have great respect, is a regular visitor. I hope that he will reflect positively on the proposal and that it will return at a later stage. I beg to ask leave to withdraw the amendment.

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 70, in

clause 38, page 41, line 23, at end insert—

'(d) the Council and the Scottish Parliament.'.

The amendment is not about devolution. The Bill seeks to ensure that there is co-operation between the council and other authorities. It strikes me as remiss not to include the Scottish Parliament among those authorities simply because none of us knows over what issues there may not be co-operation. It is ridiculous to ignore such a large part of the British isles. The amendment would not interfere with the operation of Scotland and is not in any way a challenge to the Scottish Parliament. It is about ensuring that the council co-operates and vice versa.

I hope that this useful amendment will be accepted, because it would not be destructive. Obviously, I am eager to hear whether the Minister can think of any reason why Scotland should not co-operate with the rest of us on something as fundamental as water.

Elliot Morley (Labour, Scunthorpe)

There is a problem with the hon. Gentleman's amendment—the provisions of the Water Industry Act 1991 do not apply to Scotland. The regulatory functions of the Secretary of State, the National Assembly, the authority and the council do not extend beyond England and Wales. The Scottish Executive also has no functions under the 1991 Act, and it is unnecessary for it to be covered by the duty to make arrangements to co-operate, because there is nothing for it to co-operate on.

A trans-boundary water supply is the only area in which there might be some issues concerning co-operation, but such an eventuality is covered by the Bill. However, the regulatory functions to which the hon. Gentleman referred do not extend to Scotland and are not included in the legislation.

Bill Wiggin (Conservative, Leominster)

I am grateful to the Minister. He is right to state that a later clause considers areas in which Scotland and the rest of the UK interact. The amendment is not about to whom the Bill applies—it is about co-operation, which is a very different thing. The amendment was not drafted to make the Scottish Parliament co-operate, but it would have been helpful to have found a way to ensure co-operation rather than adopting the Minister's dogmatic approach.

Elliot Morley (Labour, Scunthorpe)

It is the law.

Bill Wiggin (Conservative, Leominster)

It is not the law but the Bill that we are debating.

Sir David Amess (Conservative, Southend West)

Is the hon. Gentleman seeking the Committee's leave to withdraw the amendment?

Bill Wiggin (Conservative, Leominster)

I did not say that, Mr. Amess. I should like to know—I hope that the Minister takes this on board—the problems that accepting the amendment might cause. It would have been helpful, and we should not dismiss co-operation so lightly. Although I accept that he feels that the matter is not in his remit because the Bill concerns only England and Wales, I believe that the co-operation could have been cross-border. If I am to withdraw my amendment, I hope that he will accept that I seek to amend the Bill in a constructive way, and that if it is possible to include provision for some sort of cross-border co-operation, he will consider that.

Elliot Morley (Labour, Scunthorpe)

The one area of cross-border co-operation—an important area—would be in water transfer, and that is dealt with in the Bill. We consult the Scottish Executive on water resource management, because that issue is of interest to all of us. However, the hon. Gentleman must remember that the legislation gives powers that apply only to England and Wales. If he wants an assurance that we will talk to the Scottish Parliament on general water issues and that there will be exchange of information and co-operation on such issues, I can give him that assurance.

Bill Wiggin (Conservative, Leominster)

I am grateful for that assurance, and if I wish to fight this battle any further, I shall do so when we discuss the next amendment. I therefore beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 38, as amended, ordered to stand part of the Bill.

Schedule 2 - The Consumer Council for Water

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 122, in

schedule 2, page 136, leave out lines 10 to 12 and insert 'understands disability'.

On page 136, the Government have sought to include disability as one of the criteria that would be constructive. Although I am in favour of taking all factors into consideration when appointing people, I am concerned that there is the potential for positive discrimination to creep into this provision. I therefore seek clarification by suggesting that the subsection should be omitted.

I hope that the Secretary of State would appoint the best person, and would consider that if they were disabled, that could be advantageous in terms of their viewpoint and experiences. However, I do not believe that it is helpful to include a provision regarding disability in the Bill. During much of the debate that we have had this evening, we have trusted that the Secretary of State would do the right thing and, in this case, that is the right way to proceed. The matter

should be addressed through a code of conduct, rather than by requiring a person to have a disability.

Most importantly, we are expecting the person in question to contribute in terms of their abilities and knowledge, but that contribution will not necessarily relate only to their ability, but to their experience on water. I therefore feel that this may be an inappropriate use of positive discrimination, and seek to clarify it with this amendment.

Elliot Morley (Labour, Scunthorpe)

The Bill recognises that disabled people have special needs in relation to water supply. They are a special group, and need to have a reliable supply of water—an example of that would be people who are on dialysis. There are technical factors that must be understood, in addition to the problem of affordability, which is universal.

The issue of disability and water supply is important. I know from my experience as a constituency Member that when there was a debate about compulsory water metering in my area, affordability and water cost were raised as key issues for people who were chronically sick and disabled.

The problem with the amendment is that it is vague. It could make it more difficult for the Secretary of State and the Assembly to ensure that the candidates under consideration had a sufficient depth of knowledge fully to promote the needs of people with disabilities within the consumer council. In the Bill as currently drafted, the Secretary of State will ''have regard to'' the matter—it is not compulsory. However, if there is a good candidate, who has a great deal of experience of consumer issues and a great deal of credibility in relation to their own background, and also has experience of disability, it is not unreasonable to take that into account when making the appointment.

Simon Thomas (Plaid Cymru, Ceredigion)

I must confess that I tend to the Minister's view rather than to that of the hon. Member for Leominster; but does the Minister not think that that is an excellent reason to have at least five members on any such board, because about 20 per cent. of the population suffer from a disability?

Elliot Morley (Labour, Scunthorpe)

That was a really good attempt. Of course that would reflect the issues, and there is an argument for having a reasonably sized board to include a cross-section of opinions, experience and skills. I take that point, and I fully expect the board to reflect that. I hope that the hon. Member for Leominster will accept my explanation, which, I think, demonstrates that the Bill's drafting gives much more emphasis to the needs of the disabled than his amendment, which is a bit on the baseline.

Bill Wiggin (Conservative, Leominster)

I accept everything that the Minister has said, but there is one thing that I should like him to do as well. I recognise that in drafting the Bill the Government felt that it would be particularly important to give extra emphasis to disabled people, and I welcome that. However, the purpose of my amendment is to ensure that should an appropriate person not be available or not wish to serve, that would not in any way slow down or prohibit the

appointments taking place. It is not compulsory in the wording, but I want to ensure that we are not insisting on something that might not be possible.

I take the point that the hon. Member for Ceredigion (Mr. Thomas) made, but I do not necessarily feel that this wording is the most appropriate for what the Government seek to do. With that in mind, providing that I have the assurance that the measure will never be held against the appointments procedure, I will have no problem withdrawing the amendment.

Elliot Morley (Labour, Scunthorpe)

I can confirm that, as the Bill is drafted, there is no compulsion. The measure ensures that the needs of disabled people are fully taken into account in the appointments and that where there is an opportunity to reflect those needs through appointments to the board, that should be done.

Sue Doughty (Liberal Democrat, Guildford)

I, too, thought that I would listen to the argument first and examine the schedule. The more I read it, the more I think that it deserves its place in the Bill as it stands. It is important that there are people to champion the cause of the disabled. It may be very difficult to recruit for the post from among the disabled, but this measure puts rights some of the problems of the past when the needs of disabled people have been considered by those who have very little personal experience or understanding. The schedule says ''shall have regard to''. It may not be possible to appoint such a person, but it says that the requirements of people with disabilities must be considered. If someone with deep knowledge cannot be appointed, it is still a useful reminder not to consider matters that may have an impact on disabled people without at least seeking advice and, for preference, having someone there with the knowledge. We would certainly not support the amendment.

Bill Wiggin (Conservative, Leominster)

As I said, I have no problem withdrawing the amendment now that the Minister has duly given me the assurance that I sought. I am grateful for the debate that we have had, because it is easy to misinterpret an amendment of this sort. In no way did I wish to do anything that would disadvantage people with disabilities; on the other hand, it is important to use our scrutiny to ensure that we do not have the wrong sort of discrimination. My probing amendment has succeeded there, and I am grateful to the Minister for his answer. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 63, in

schedule 2, page 137, line 29, leave out from 'Council' to end of line 7 on page 138 and insert

'may include any information which relates to the affairs of any particular individual or body of persons (corporate or incorporate) if—

(a) the individual or body has consented to the disclosure; or

(b) the benefit to the interests of consumers from publishing the information would, in the opinion of the Council, be greater than any prejudicial effect to the interests of the individual or body.'.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following amendments:

No. 58, in

clause 46, page 52, line 44, leave out from 'unincorporate' to end of line 20 on page 53 and insert

'may be disclosed in the exercise of the Council's function under this section if—

(a) the individual or body has consented to the disclosure; or

(b) the benefit to the interests of consumers from publishing the information would, in the opinion of the Council, be greater than any prejudicial effect to the interests of the individual or body.'.

No. 59, in

clause 46, page 53, line 30, leave out 'to' and insert 'and'.

No. 60, in

clause 46, page 54, line 13, leave from 'unincorporate)' to end of line 24 and insert

'may be published in the exercise of the Council's function under this section if—

(a) the individual or body has consented to the disclosure; or

(b) the benefit to the interests of consumers from publishing the information would, in the opinion of the Council, be greater than any prejudicial effect to the interests of the individual or body.'.

No. 61, in

clause 47, page 55, line 42, leave out from 'unincorporate)' to end of line 20 on page 56 and insert

'may be published in the exercise of the Council's function under this section if—

(a) the individual or body has consented to the disclosure; or

(b) the benefit to the interests of consumers from publishing the information would, in the opinion of the Council, be greater than any prejudicial effect to the interests of the individual or body.'.

No. 62, in

clause 50, page 60, leave out from beginning of line 25 to end of line 3 on page 61 and insert

'may be in a report under subsection (4) if—

(a) the individual or body has consented to the disclosure; or

(b) the benefit to the interests of consumers from publishing the information would, in the opinion of the Council, be greater than any prejudicial effect to the interests of the individual or body.'.

Bill Wiggin (Conservative, Leominster)

Once again, we are examining the gist of the Bill. We are considering the huge amount in pensions, gratuities and other funding that the Secretary of State may determine, and suggesting replacing that with the benefits of the disclosure. Quite a large body of text would be replaced with the wording in amendment No. 63. I look forward to hearing from the Minister how detrimental that may or may not be to his Bill.

Elliot Morley (Labour, Scunthorpe)

The amendments are concerned with the CCW's powers to publish information and raise two key issues—the protection for the individual or body and the extent to which the CCW can act on its own.

I do not disagree with the hon. Gentleman's concern about the restriction on the publication of information that might seriously and prejudicially affect the interests of water companies or individuals—unless they agree to publication—but I want to assure him that the clause is not intended to protect poorly performing water companies.

The Bill aims to protect the privacy of the individuals involved. When we legislate, we have a duty to find the right balance between an individual's rights and the public's need for information, and the Bill strikes the right balance between the two concerns. Under the amendments, however, the individual would not even have to be consulted, and they would have no knowledge that they might be named in public until it was too late. The individual would then have no redress or right of appeal. The balance of the amendments is wrong.

I note the hon. Gentleman's concerns about the need for the CCW to be independent from the authority, but in this case it is right for it to have regard to the authority's opinion. Assessing whether publishing information may have serious or prejudicial effects on a company is bound to mean the examination of technical issues involving the financial markets. It would therefore be better for the CCW to make use of the greater expertise of the regulator in those matters and to have regard to their opinion. It is worth noting that it will still be up to the CCW to take the final decision. In taking account of those concerns, I hope that the hon. Gentleman will withdraw the amendment.

Sue Doughty (Liberal Democrat, Guildford)

I am not entirely happy with the Minister's response. The provision favours the water companies and fails to emphasise transparency of information. Sometimes we need to know what is going wrong. The amendment states:

'''publishing the information would, in the opinion of the Council,''—

that would give the CCW the opportunity to moderate what is done—

''be greater than any prejudicial effect to the interests of the individual or body.''

Sometimes companies get things wrong, at which point the CCW must represent consumers. The CCW must be able to ask questions, to get answers and to publish those answers. There are times at which it will be inappropriate to publish such answers, but the balance of the Bill favours companies and is prejudicial to the consumer getting a straight answer.

Sometimes it is difficult enough for consumers to get straight answers, and all of us know that from our constituency surgeries. The Bill gives companies lots of opportunities to hide behind it. It will encourage the CCW to say, ''Well, we are not going to tell you much about this, but it will all come out later with the regulator.'' The CCW's purpose is to defend and to pursue the rights of the consumer, and to publish the results of those activities.

The Freedom of Information Act 2000 will become law in January 2005. It contains a presumption that a body can publish rather than not publish. That is a less restrictive test of publication, which balances the public interest in disclosure against the public interest in non-disclosure. The Bill should be amended to align the provisions on the publication of information by the CCW with the 2000 Act.

Bill Wiggin (Conservative, Leominster)

The hon. Lady makes good points. I would be grateful if the Minister answered them, but at this stage I intend to withdraw the amendment.

Elliot Morley (Labour, Scunthorpe)

We are back to the balance argument. There is a human rights legislation issue, which must be taken into account. A balance must be struck between the rights of the individual and the importance of making information available for scrutiny. The Bill attempts to get that balance right.

Bill Wiggin (Conservative, Leominster)

I am grateful to the Minister. The matter is difficult. I agree with the hon. Member for Guildford (Sue Doughty) that this is a wording issue, and I am grateful to her. I do not think that it is worth pressing the amendment to a vote. We may need to talk about the matter again on Report. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 2 agreed to.

Clause 39 ordered to stand part of the Bill.

Schedule 3 agreed to.

Clause 40 - Conditions relating to costs

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 103, in

clause 40, page 42, line 28, at beginning insert—

'Subject to subsection (2A) below,'.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following:

Amendment No. 104, in

clause 40, page 42, line 31, at end insert—

'(2A) The total payment that may be required of any company pursuant to section 11(1)(c) of the WIA and under this section shall not be increased by more than the amount by which that company is permitted to increase its regulated prices under its appointment.'.

New clause 5—Regulatory methodology—

'After section 2 of the WIA there is inserted—

''2B. 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) if one or more relevant undertakers gives notice of objection to the Authority within that time—

(i) the proportion (expressed as a percentage) of the relevant undertakers who have given notice of 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).''.'.

Bill Wiggin (Conservative, Leominster)

It is essential to consider amendment No. 104 as well because amendment No. 103 relates to it. We are talking about the minimum value requirement. Amendment No. 103 refers to subsection (2A). That is inserted by amendment No. 104, which is intended to ensure that the total payment required of any company

''shall not be increased by more than the amount by which that company is permitted to increase its regulated prices under its appointment.''

We are just trying to ensure that the penalties are in line with the price increases that the company is

entitled to make itself. The point is quite technical, but I hope that the Minister can throw some light on this probing amendment.

New clause 5 is intended to add to the regulatory methodology and orders the authority to

''prepare and publish a statement of policy with respect to its determination of charges in periodic reviews''.

There is a whole debate to be had on water pricing. The hour is late, so at this stage I shall just probe the Minister about my initial amendments. I might have to return to the matter later this evening, if need be.

Elliot Morley (Labour, Scunthorpe)

I understand that the intention behind new clause 5 is to give companies greater certainty by placing a duty on the authority to produce and consult on a statement of policy before the periodic review. To that extent, it is good practice and we do not disagree with that. Ofwat already produces a detailed methodology for the periodic review, which is open for consultation. However, the new clause goes beyond that and tries to set in concrete a process that the regulator must follow. It sets a rigid timetable for consulting on, and publishing the statement of policy before, the periodic review.

Other deadlines in the new clause greatly restrict the flexibility of the review procedure and its ability to develop over time. At some point, it may be desirable to change the process. The chief executive of Water UK said to the Institute of Water Officers in April that

''the Periodic Review is no longer fit for purpose and should be reformed or replaced with something more suited to modern needs.''

There is an argument about whether that is the right way forward. However, if we wanted to change the periodic review process, the new clause would prevent that because it puts in place a rigid structure. The new clause would also lengthen the recently shortened review process against the recommendations of the Environmental Audit Committee.

Although the change would provide extra powers for the water industry, it would do nothing for the consumer. Measures are already in place for the industry to appeal against price determinations through the Competition Commission. Any increase in the powers would risk shifting the delicate balance of interests against consumers. We must balance the interests of the industry and consumers.

We agree on the importance of best practice, but the new clause is an example of how writing it down in statute can work against those laudable aims. Amendments Nos. 103 and 104 are intended to tie the fees paid by each undertaker to each year's price limit as set by Ofwat in its periodic review. I understand the concern that regulatory bodies should not become a financial burden on the regulated companies, but safeguards to prevent that are already in place. The conditions of appointment already contain a cap on the level of fees payable to Ofwat and the regulator levies less than it is entitled to.

Paragraph 10 of schedule 2 gives the Secretary of State and the National Assembly the power to control the consumer council's budget. I can assure the hon. Gentleman that the Government are determined that

the CCW will be an efficient organisation—I know that will be its objective as well—and it will not be allowed to become a financial burden on the industry. We have recently let a consultancy contract to examine the internal and regional structure of the proposed new consumer council and that will help to ensure that the CCW combines effective use of its powers with an efficient operation. I hope that that deals with the hon. Gentleman's points.

Bill Wiggin (Conservative, Leominster)

The Minister dealt with the first two amendments extremely nicely, and I am grateful to him for that. However, new clause 5, which we are also considering, concerns the methodology. In his reply, the Minister did touch on what we are trying to achieve. We want to make the thinking of the regulatory authority very clear to companies before they digress. It is a cart and horse situation. We are trying to ensure that people know how the thinking will take place before they challenge it.

The long and complicated new clause is designed to do something fundamental and extremely important. I know that the Minister's Whip is rushing around pressing us on the question of timing. Like all Committee members, I seek to scrutinise the Bill properly. I feel that I am doing my best when I proceed through a new clause as long as this one as quickly as I have been. I am not seeking to press the matter to a vote, but I want the Minister to go away and consider the methodology argument.

When drafting the clause, we were looking for a clear steer on how a regulatory body will be thinking before it has to be tested. In the same way that hon. Members are not allowed to seek legal advice when putting together parliamentary questions, the new clause would mean one could avoid having to seek legal advice before one gets into hot water—to make an appalling pun for which I apologise. The new clause is important, and if the Minister will confirm that he will seek to advise on the best way to get the methodology over to the people to whom it applies, I would be grateful.

Elliot Morley (Labour, Scunthorpe)

I can certainly assure the hon. Gentleman that the methodology is important. It is important that it is in the public domain and there is the opportunity for people to comment and consult on that. That is the Government's position, it is Ofwat's position and I am sure that it is the position of the consumer council as well. We have returned to the fact that the hon. Gentleman's new clause is very long and complex and therefore very restrictive. Ofwat already produces a detailed methodology on how it will carry forward the periodic review. It consults on that, as I mentioned, which therefore influences the regulator's thinking. I hope that that is adequate reassurance for the hon. Gentleman.

Bill Wiggin (Conservative, Leominster)

I am grateful to the Minister, and that is adequate reassurance at this stage. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 40 ordered to stand part of the Bill.

Clause 41 - Forward work programmes

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 73, in

clause 41, page 44, line 6, leave out

'make to the Secretary of State'

and insert

'lay before each House of Parliament'.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following amendments:

No. 74, in

clause 41, page 44, line 20, leave out from 'require' to end of line 22.

No. 75, in

clause 41, page 44, leave out lines 28 to 32.

Bill Wiggin (Conservative, Leominster)

The authority shall as soon as is practicable after the end of each financial year make an annual report to the Secretary of State. I think that it would be helpful if that report were laid before the House. Amendment No. 73 would provide for that. It plays very much into the Minister's hands because, as we have heard so many times this afternoon, he is mustard keen on proper scrutiny and clarity. Who could argue that the amendment could do anything other than add to that clarity? Therefore, will he tell me how I could possibly be wrong with such a helpful amendment?

Elliot Morley (Labour, Scunthorpe)

I am sorry, but I will have to disappoint the hon. Gentleman.

Amendments Nos. 73 and 75 would transfer the responsibility for laying the report from the Secretary of State to the authority, which would take the Secretary of State completely out of the reporting line. That would weaken the line of accountability to Parliament. I know that that is not what the hon. Gentleman wants to do, but that would be the effect of the amendments.

Bill Wiggin (Conservative, Leominster)

So am I right in thinking that new section 192B(5) on page 44, which says that the Secretary of State shall lay the annual report before Parliament, will get us round the difficulty?

Elliot Morley (Labour, Scunthorpe)

The Secretary of State lays the report before the House, the provision for which the hon. Gentleman will find on page 44, lines 28 to 32.

Amendment No. 74 would remove the Secretary of State's right to request that certain matters or information should be included in the annual report. Our Welsh colleague has gone, but he would be interested to know that, if the amendment were passed, the Welsh Assembly Government would still be able to instruct the authority to include certain matters even though the Secretary of State could not. It seems a bit of a Welsh-ist amendment, which would create an imbalance between the roles of the Assembly and Parliament.

While the authority is the economic regulator of the water and sewage industry—[Interruption.] Every dog in Lambeth is on its way here now—that was the most piercing alarm that I have ever heard. Anyway, while

the authority is the economic regulator of the water and sewage industry in England and Wales, the Secretary of State has a broader responsibility for water policy, including responsibility for the new authority itself. The Secretary of State will be responsible for the appointment of the new authority board and have overall accountability for the authority to Parliament. It is only right that she should continue to be able to request that information should be in the report and present the authority's annual report to Parliament.

I understand the hon. Gentleman's point, but the report will be presented to Parliament through the Secretary of State, which provides the line of accountability.

Bill Wiggin (Conservative, Leominster)

I am grateful to the Minister for his reply, which was more than satisfactory, and for taking us through the proper procedure. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Sue Doughty (Liberal Democrat, Guildford)

I beg to move amendment No. 277, in

clause 41, page 44, line 20, leave out 'and'.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following amendments:

No. 278, in

clause 41, page 44, line 22, at end insert—

'and

(f) an environmental audit of the Authority's activity including its contributions towards water conservation and sustainable development.'.

No. 279, in

clause 42, page 45, line 18, leave out 'and'.

No. 280, in

clause 42, page 45, line 21, at end insert—

'and

(e) to contribute to the achievement of sustainable development.'.

No. 282, in

clause 42, page 46, leave out line 40.

Sue Doughty (Liberal Democrat, Guildford)

We are returning to the problems about sustainability. We had an interesting discussion earlier, some of which presaged what we are coming to with these amendments. We are setting up a body and giving it requirements—primarily for consumers, but it is also a public body—and we are starting to require that public bodies have regard for sustainability and the environment.

The amendments would move the authority towards conducting an environmental audit of its activities, including its contributions towards conservation and sustainable development. We want to see that from other organisations, but it will be particularly important for the authority. It would be good to have such an environmental audit, and we are asking much more of other organisations. The Government have already stated that they want organisations to take environmental reporting much more seriously, and this is an opportunity for a public authority to lead the way. There is a connection with water conservation and other organisational issues.

What about energy efficiency? What are they doing about waste and recycling? We would like that to be embodied into the way in which they conduct their affairs.

The other amendments would change the sustainability duty on the Secretary of State or the authority from a secondary to a primary duty, and the requirements of new subsection (3) would all be subject to the sustainability duty. We want the promotion of economy and efficiency, and to ensure that, when there is conflict, the environment is taken into account when decisions are made. We want to make sustainability a primary duty to ensure that the environment will not suffer unnecessarily at the expense of market efficiency. Our concern is that we are discussing the water industry with very little regard to the environmental behaviour of the bodies running the water industry, and that should be a core duty on the authority.

Elliot Morley (Labour, Scunthorpe)

Again, I do not disagree with the reasoning behind the amendments. I assure the hon. Lady that the Bill already specifies that the authority must include in its annual report a general survey of developments in respect of matters falling within the scope of its functions. Those include a duty to contribute to sustainable development, and we have discussed that. That obligation is already in the Bill. If at any time it were thought that the report provided by the authority needed to cover more detail or was inadequate in relation to sustainable development, both the Secretary of State and the Assembly could require such information to be included in the report. Those powers already exist in the Bill.

Amendments Nos. 279, 280 and 282 would give greater prominence to the authority's sustainable development duty. In the Bill as drafted, the duty to contribute to the achievement of sustainable development is secondary to the authority meeting its primary duties. This group of amendments would make that sustainable development duty a primary objective of the authority. Again, a balance is necessary. The authority is an economic regulator. Sustainable development is an important part of that. No one disagrees with that argument—I fully subscribe to it—but we must get the correct balance between its functions: its economic function of price setting and the important function of sustainable development and its promotion. The balance in the Bill is right and I am not sure that the hon. Lady's amendments would maintain the correct balance.

Sue Doughty (Liberal Democrat, Guildford)

I am disappointed with that response. The Government have a commitment to the environment and to better environmental reporting. The amendment provides a good opportunity to put that in the Bill. I heard what the Minister said about various requirements in other areas, but any organisation should, in its environmental reporting and auditing, be asked how it is conducting its affairs, whether it has taken account of the environment and what is happening to the environment as a result of its decisions.

That does not require every decision to be changed so that consumers are left behind in favour of the environment. The organisation should report on what

it is doing and put on record the effect of what it is doing. We want more transparency and accountability on sustainability and the effects of the organisation's activities.

Elliot Morley (Labour, Scunthorpe)

I repeat that nothing in the Bill prevents that. The hon. Lady made reasonable points, but they are catered for in the Bill, so the amendments are unnecessary.

Sue Doughty (Liberal Democrat, Guildford)

There is a world of difference between can and will. I am sure that Woolworth could report if it wished, and if it is still part of Kingfisher it may do so. Any organisation can report on such matters. The point is whether they will do so. That is what we are driving at. We are interested not in the possibility but in the actuality.

Sir David Amess (Conservative, Southend West)

Is the hon. Lady pressing her amendment or withdrawing it?

Sue Doughty (Liberal Democrat, Guildford)

Given the discussion that we have had, and the fact that we may consider the issue again on Report, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 41 ordered to stand part of the Bill.

Clause 42 - Objectives and duties under WIA

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 76, in

clause 42, page 45, line 17, after 'capital', insert

'in line with market expectations'.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss amendment No. 93, in

clause 42, page 46, line 10, at end insert—

'(2F) In performing the duty under subsection (2A)(c) above, the Secretary of State or, as the case may be, the Authority shall—

(a) have regard to the arrangements entered into under section 55 of the Water Act 2000;

(b) have regard to the longterm interests of consumers;

(c) ensure that appointed companies are able to fund on reasonable terms all required investment programmes and the longterm maintenance of their assets;

(d) apply to all appointed companies all determinations and conclusions of the Competition Commission (including all methodologies adopted by the Commission) which relate to any such company.'.

Bill Wiggin (Conservative, Leominster)

Amendment No. 76 is extremely important and I am sorry that we have to debate it at such a late hour. It would ensure that what the Government regarded as a reasonable return on capital was in line with reality, because I have tied that in with the term ''market expectations''. That is a fairly general term. It may not be the most precise one, but it would ensure that the Secretary of State did not choose an arbitrary figure to suit budgetary pressure, but considered a figure in line with what companies might reasonably expect to raise on their capital if they had invested it in other markets. It is vital that the legislation takes into account proper returns on capital.

Amendment No. 93 would take things further. It would take performance into consideration and perhaps change the emphasis of the Bill slightly.

Hon. Members will recall from earlier debates that the time scale envisaged by Government is different from that on which water companies, and indeed quarrying and bottling companies normally base their capital projections. Both amendments would be extremely helpful in providing stability and a realistic business basis for anyone investing in water companies.

David Drew (Labour/Co-operative, Stroud)

I rise on a point of clarification, because I am not sure whether what the Opposition spokesman intends is possible with the amendment, inasmuch as his wording is predictive. I understand how we can measure the rates of return according to the capital that a company has accumulated, but if we are considering market expectations, who judges what those expectations are? The company may be performing as well as it can.

Bill Wiggin (Conservative, Leominster)

I am grateful to the hon. Gentleman for the point that he is making. He is right: who can tell? The Bill contains phrases such as ''securing reasonable returns'', but reasonable to whom? That is the nub of the problem and I would be interested to hear how he would address it.

David Drew (Labour/Co-operative, Stroud)

I am certainly not going to answer for the Government—I am sure that the Minister will do that. I am merely saying that I am not sure whether the amendment would help. If anything, it would further muddy the water. We should be considering how we expect water companies to make sufficient returns. There have been allegations in the past that they have failed to do that. If the Government tidy up the wording I may further question it on Report, but the amendment might make the situation worse rather than better.

Elliot Morley (Labour, Scunthorpe)

I concur with my hon. Friend that amendment No. 76 is not helpful, because there is a big problem with it. It is not unreasonable to take into account the return on capital for the companies. The regulator, not the Secretary of State, takes the lead in considering what a reasonable return is. It is done in a thorough and sophisticated way in a periodic review. The regulator has the knowledge and experience to do that, which is the whole point of that role.

Although the hon. Member for Leominster is worried about the definition of ''reasonable returns'', I am just as worried about the meaning of

''in line with market expectations.''

How would that be interpreted by shareholders and investors?

Bill Wiggin (Conservative, Leominster)

I can help the Minister with his worry. Market expectations are a common phenomenon. The Chancellor has a team of analysts, and whenever he does his Budget—I am sure that the Minister has heard more than I have—there is an estimate of where the market expects various indicators to be. A return on capital is well known and publicised, and many analysts predict all sorts of returns on capital, according to types of business. I am sure that the Treasury will be more than willing to provide him with that information.

Elliot Morley (Labour, Scunthorpe)

Well, I guess that the Polly Peck shareholders had aspirations due to market expectations, and we all know what happened in that case. We have to be careful on the issue. My worry is that, if it is written into the Bill, there is enormous potential leverage to companies. We have to take consumers into account. The idea of the Bill is to have a balance between the needs of companies and of consumers. The amendment does not take into account the needs of consumers, because it alters the balance in favour of the companies because of the difficulty of interpretation, the demands that the companies might make, and what could be a blank cheque.

Hugo Swire (Conservative, East Devon)

I understand the Minister's reservations. However, if companies are obliged to perform in line with market expectation, which my hon. Friend the Member for Leominster pointed out is easy to follow for any analyst in the sector, it ensures good governance and optimum performance. That is surely the incentive that they need. Otherwise they will get away with under-performing because there is no requirement for them to perform to market expectations. It is another discipline that would, in the long term, benefit companies, investors and the public, for whom we are trying to provide a level playing field.

Elliot Morley (Labour, Scunthorpe)

With respect, I do not think that the amendment would give equal consideration to consumers and companies. Market expectation is not a precise science, and there are different forces and influences to those in projections. It is the regulator's role to determine the rate of return. The danger of the amendment is that it would remove the regulator's opportunity to analyse and would not allow his opinion of a reasonable return, which can be different from market expectations, to be taken into account.

Hugo Swire (Conservative, East Devon)

Yes it is, and no it isn't. The projection will surely be based on an element of market expectation.

Elliot Morley (Labour, Scunthorpe)

We are into hair-splitting. There is a fundamental difference with the reasonable retainer. The regulator is charged to take market expectation into account. I much prefer the reasonable retainer because the balance is right.

Amendment No. 93 is concerned with the long-term issues, which are quite important. There may be short and medium-term issues that must be taken into account, and we should not tie the regulator's hands. I assure the hon. Gentleman that the guidance issued by the Secretary of State to Ofwat about the periodic review is a good example of that. It states:

''The Government would expect regulators and companies to take a long view, not confined to the limits of the periodic review cycle, in devising or recommending solutions''.

We understand that there is a long view that may go beyond the five-year period in what is a very long-term business. There are problems with how the amendments might be interpreted. I invite the hon. Gentleman to withdraw the amendment.

Bill Wiggin (Conservative, Leominster)

I am always grateful to get an invitation from the Minister. Looking around me, I

see there is a certain humanitarian streak in him, but that urges me to carry on talking so that Labour Members recognise the importance of the Bill.

There is a problem with the phrase

''in line with market expectations.''

I would have liked to use a more precise term, but, as the Minister said, it was helpful to avoid tying the hands of the regulator, the Secretary of State or, as the case may be, the authority. It is important that the regulator or the Secretary of State does not think that there is a difference between investment in water companies and investment in anything else. If businesses decide that it is not worth investing in the water sector, there is a risk of long-term problems.

The amendment, and those grouped with it, sought to clarify that. I concede that perhaps the wording is inadequate and—I am humble about this—I am more than happy to withdraw it. The concept behind it is of great importance. When we have regulators choosing rates of return, provided they get it right, there will be no problem.

Hugo Swire (Conservative, East Devon)

My hon. Friend touches on a very proper point. When investors are considering companies in which to invest, they must base those decisions on market forces and market expectation. That is the only way in which they will do it, and the Government are living in a fool's paradise if they think that it can be done in any other way. Although my hon. Friend is willing to alter his wording, I urge him not to concede his very valuable point.

Bill Wiggin (Conservative, Leominster)

I am grateful to my hon. Friend, and he is right. I will not concede the point but I will withdraw the amendment.

Sue Doughty (Liberal Democrat, Guildford)

I have listened with great fascination, because the whole point of a regulated business and, in particular, a business in the water industry, is that part of that business is regulated. A company that has a regulated element, such as the supply of water with set prices and investment, is run on a far more tangible basis than most businesses because it has a fixed market base.

I do not sympathise with the view advanced, because such companies also have the non-regulated side where they are free to make such profits as they wish, and they do so very successfully in this country and overseas.

If the hon. Gentleman has information about financial expectations and they are as reliable as he implies, will he let members of the Committee have a copy? If we have any spare cash to invest, we would like to know where the good information comes from.

Bill Wiggin (Conservative, Leominster)

The hon. Lady sought to make the important point that there is an element of security in that type of investment. She is right, but it would be included in any market expectation. Therefore, there is no panacea for her pension plan or any other investment she seeks to make, and I do not have a sheet of market expectations for her. However, should she want to obtain market expectation, it is widely available.

Sue Doughty (Liberal Democrat, Guildford)

The hon. Gentleman referred to our pension plans and investments. My pension plan is, as I have declared to the Committee, partly with a water company from the time when I worked for the regulated side of that business, although I worked for the non-regulated side as well. Investors in the water business understand the balance between the regulated and the non-regulated side. There is not much more that can be said about that.

Bill Wiggin (Conservative, Leominster)

I am delighted to hear that, and I believe that I speak for the whole Committee. My hon. Friend the Member for East Devon made the important point that, no matter which way we cut it, investors will have to take into consideration more than just their own reasonable estimate of returns. Without further ado, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Further consideration adjourned.—[Mr. Ainger.]

Adjourned accordingly at twenty minutes to Eight o'clock till Thursday 16 October at five minutes to Nine o'clock.