Water Bill [Lords]

Public Bill Committee, 16 October 2003.

Standing Committee D

Clause 42 - Objectives and duties under WIA

Norman Baker (Liberal Democrat, Lewes)

I beg to move amendment No. 281, in

clause 42, page 45, line 23, after 'the', insert 'immediate and long term'.

Good morning, Mr. Amess. I happy to say that I am in fuller breath than I was during several earlier sittings. I am pleased to move the amendment, in my name and that of my hon. Friend the Member for Guildford (Sue Doughty). It relates to the objectives and duties under the Water Industry Act 1999. The amendment would insert the words ''immediate and long term'' in relation to the interests of consumers, and there is a good reason for doing that.

New subsection (2B) talks about consumers' interests being promoted by ''effective competition''. I do not think that anyone would deny that effective competition has a role to play, but on its own it cannot deliver on the long-term interests of consumers. Indeed, competition tends to operate on the basis of short-term rather than long-term advantage. In other words, what consumers say they want, by and large, if they are asked, is to have water at the cheapest price possible. They would regard that as an advantage to protect consumers, and they would say that competition was about that in so far as there is competition in a monopolistic industry such as water.

That is not necessarily in consumers' interests in the longer term, however. Water prices are in the news, because there has been a clear indication that they will rise above inflation, and there is a necessary objection to that from consumers and others who feel that prices are rising beyond what is reasonable. The interests of consumers in the longer term require, for example, investment in long-term infrastructure works to ensure that there is no water shortage, that there is adequate reservoir capability, that any pipe work to transfer water from one area to another is done, that the environment and the quality of water are satisfactory, that any concerns about pathogens, bacteria or whatever in water are dealt with satisfactorily, that water is of a satisfactory standard for drinking and so on. That requires long-term investment, but I am not confident that the clause takes account of those wider factors beyond competition and ensures that consumers' long-term interests are addressed.

I do not want to stray too far from the clause, but there is also an issue about the relative costs of water, which vary from one part of the country to another. We had a discussion about the south-west the other day. It is difficult to defend a situation that happens to have been inherited from privatisation whereby water

prices vary widely between different parts of the country.

It could be argued that the prices for water consumers in one part of the country should reflect the costs that apply to their supply, and the costs of supplying water in the south-west will differ from the costs of supplying it in, say, Northumberland. Nevertheless, the wide variation does not necessarily relate simply to geographical necessity; it relates also to the rather curious and flawed arrangements for privatisation. Those were put in place by the last Conservative Government to privatise the then 10 public companies, with a green dowry to help them along the track. Those flawed arrangements have been perpetuated through the K factor subsequently and have never really been examined since, so they are still in place many years on.

That is not dealt with in new subsection (2B), which talks about promoting effective competition. The needs of the consumer must be addressed in many different ways, which go beyond that narrow aspect. It would be wrong if the objectives and duties under the WIA simply related to promoting competition and failed to take into account the myriad other factors that I have referred to.

I hope that the Minister will accept that there is good reason for the amendment. He may have been advised that there is a problem with it; for example, that it relates to the wrong part of the Bill. If so, will he explain how the wider objectives of ensuring that water is drinkable and there is proper long-term investment, which I am sure that he recognises are for the consumers' benefit, will be reflected in the objectives and duties under the WIA?

Andrew Lansley (Conservative, South Cambridgeshire)

I can be very brief. In the absence of the words proposed in the amendment, the duties would none the less embrace both immediate and long-term consumer objectives. They must be balanced in any case, so the amendment has no purpose.

Elliot Morley (Labour, Scunthorpe)

I could just leave it at that, because that is true. There is no purpose in the amendment, because there is already an obligation on Ofwat to consider the full range of consumer interests. That includes the immediate, long-term and, for that matter, medium-term interests.

In the broader sense, the amendment would have no effect. In the literal sense, it deals only with the immediate and long term and does not mention the medium term. We must consider the whole range of interests, and the danger of such a specific amendment is that it does not. It fails to mention the medium term, and if we were to interpret it literally, we would have some difficulties with it.

The main point is that there are obligations on Ofwat. New subsection (2C)(e) concerns competition, and the proposal as a whole mentions competition where appropriate. The Bill is balanced and recognises that consumer needs must be taken into account when considering any potential benefit of competition. I do

not disagree that competition is only one element of consumer interest, and we must take a broader view. However, the amendment is unnecessary, and I urge the hon. Member for Lewes (Norman Baker) to withdraw it.

Norman Baker (Liberal Democrat, Lewes)

I am grateful that the Minister recognises that these issues should properly be taken into account. One reason that we tabled the amendment was that we are not convinced that Ofwat's approach to date has appropriately reflected the long-term considerations.

One of my concerns about the regulation of the water industry in general is the justified complaint that the consumer element has not had proper regard to environmental necessities and that, equally, the Environment Agency has not paid enough attention to the consumer element. The Bill is trying to address that, and the problem has been recognised implicitly, but we tabled the amendment to make the position clear.

I am grateful to the Minister for recognising that consumer interest is not merely about competition. I am not convinced that Ofwat takes that into account, and I hope that the new arrangement will improve that. I am happy to withdraw the amendment on the basis of the Minister's comments, but I put down the marker that there is a problem. The new arrangements must be better than the present ones. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 77, in

clause 42, page 45, leave out lines 26 to 36.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following:

Amendment No. 82, in

clause 46, page 52, leave out lines 6 to 24.

Bill Wiggin (Conservative, Leominster)

I hope that the Committee is a little warmer this morning.

These are sensitive amendments. The Government have done a good job in listing the groups of people whose interests should be considered, and the amendments are designed not to withdraw that list in toto, but to ensure that all the right people are included. By including in the Bill a prescriptive list of people whose special interests must be considered, we may miss some out.

Norman Baker (Liberal Democrat, Lewes)

Does the hon. Gentleman suggest, as a parallel, that that would be like including the phrase ''immediate and long term'' and missing out ''medium term''? The Minister might draw that comparison.

Bill Wiggin (Conservative, Leominster)

I am sure that the Minister is doing everything he can to ensure that the medium term is considered.

The hon. Gentleman is right in that when a Bill carries lists or terms that can be checked off, people immediately fall into the gaps. Ethnic minorities, victims of crime or people from other worthy groups

that need special consideration may be missed out because of the prescriptive list.

Another group of consumers to consider—not in a positive way as the list suggests—are those who are able to pay their bills but knowingly avoid doing so because they know that they cannot be cut off, as opposed to those who cannot pay because of their low income. I am nervous when a list of worthy people is included in a Bill, and what we really want is a catch-all phrase or code of conduct.

George Osborne (Conservative, Tatton)

I am studying the Bill more closely than I have previously been able. It is strange that the new subsection states that

''the Authority shall have regard to the interests of''

a group of worthy people, but then says that that does not mean that it cannot have regard to the interests of everyone else. Is the subsection's purpose clear? It says that particular groups of people should be taken care of, but the last line of the subsection states that

''that is not to be taken as implying that regard may not be had to the interests of other descriptions of consumer.''

The subsection has no purpose. [Interruption.]

Bill Wiggin (Conservative, Leominster)

I agree with my hon. Friend, who put it succinctly, and that is why the amendment would withdraw those terms. However, that alone would be unsatisfactory, because we want worthy groups of people to be considered. I feel that the wording requires tightening up. The Minister's words will provide clarification for those who read the Hansard report of the Committee sitting, and I hope that we can prevent the exclusion of worthy groups of people.

Hugo Swire (Conservative, East Devon)

I want to follow up on that point. Every paragraph refers to ''individuals'' who are, for example, ''disabled or chronically sick''. However, bills are sent to households, so what about couples who are, ''disabled or chronically sick'', ''of pensionable age'' or who receive ''low incomes''? The wording is bad.

Bill Wiggin (Conservative, Leominster)

My hon. Friend makes an extremely good point.

Elliot Morley (Labour, Scunthorpe)

It is plural.

Bill Wiggin (Conservative, Leominster)

The Minister has made two valid sedentary interventions. Yes, the word used is plural, and he also mentioned a moment ago that the interests of all other consumers may be considered. However, both those points suggest that the wording is not as tight as it should be. Therefore, I move the amendment, with the hope not of excluding worthy proposals, but of tightening up the wording so that nobody falls into the gaps and is excluded.

Elliot Morley (Labour, Scunthorpe)

I understand the hon. Gentleman's point. However, he has conceded that, although five vulnerable groups are identified, that does not preclude other groups or individuals with particular needs. He is wrong in saying that he does not want to withdraw recognition for those groups, because his amendment would do precisely that. The whole point of the amendment is that those groups would be deleted from the Bill. Water is a special service with implications for public health and monopolies, and it is important to take into account the needs of

vulnerable groups. Some of those groups are often overlooked and find it difficult to make their own case.

Hugo Swire (Conservative, East Devon)

Would it not be simpler if the Minister conceded that the Opposition have made a good point and proposed wording such as ''the Secretary of State or, as the case may be, the Authority shall have regard to the interests of all consumers''? Surely that is the basic point.

Elliot Morley (Labour, Scunthorpe)

But that is already implicit in the Bill in the duty that is being placed on Ofwat—a stronger duty than previously existed—to take into account and promote the interests of consumers. Let us remind ourselves what the amendment would do. It says that we are not interested in the needs of disabled or chronically sick people, the elderly, those on low incomes, rural consumers or those outside the competitive market.

I would not be so unfair as to accuse the hon. Member for Leominster (Mr. Wiggin) of wanting to persecute pensioners, the sick and the disabled—that would seem a rather nasty position for any party to adopt—but the report of these discussions is read outside the Committee. I come back to the point that the amendment would delete the part of the Bill that recognises those vulnerable groups. [Laughter.] Some Opposition Members find that amusing, but I think that it is important to recognise the needs of vulnerable groups.

Norman Baker (Liberal Democrat, Lewes)

Perhaps I may come to the aid of the Conservatives—although God knows why. In the debate on the last amendment the Minister objected to the phrase ''immediate and long term'' because he said that it was implicit in the Bill and therefore unnecessary. That was the argument advanced by the hon. Member for South Cambridgeshire (Mr. Lansley). Here the Minister says that it is not implicit in the Bill and that we must list it. Why are some things implicit and others not?

Elliot Morley (Labour, Scunthorpe)

Because these groups are recognised as vulnerable by organisations such as Water Voice and the Consumer Council for Water. The representations that we have received from various organisations that represent vulnerable groups show that water supply for those groups is an issue. I concede that other groups may have needs, and that is why the Bill is drafted as it is. It does not preclude other groups of individuals who may have special needs. The wording covers an awful lot of people.

Hugo Swire (Conservative, East Devon)

That is exactly the point. It covers an awful lot of categories, but not all categories, which is why the Minister has had to add:

''that is not to be taken as implying that regard may not be had to the interests of other descriptions of consumer''.

Perhaps the Minister could just insert the phrase ''vulnerable groups'' and leave it to others to decide who falls into that category. Spelling things out in the new subsection and then saying that there additional vulnerable groups makes a mockery of the drafting.

Elliot Morley (Labour, Scunthorpe)

I do not believe that at all. It is important to spell out how vulnerable groups are defined; otherwise we will get arguments about who is a vulnerable group. We have already had a discussion

about golf courses. There seem to be a lot of golf course fans on the Opposition Benches. We could have arguments that golf courses are some kind of vulnerable group when it comes to water supply.

Bill Wiggin (Conservative, Leominster)

On a point of order, Mr. Amess. This is about vulnerable groups, not golf players, and the Minister is being rather disingenuous in suggesting otherwise.

Sir David Amess (Conservative, Southend West)

Order. That is not a point of order, but a matter for debate.

Elliot Morley (Labour, Scunthorpe)

Thank you, Mr. Amess. These are well-understood categories of vulnerable groups. No member of the Committee would seriously argue that the categories set out in the list are not vulnerable groups. The list covers the main categories of people about whom we should be concerned, and I strongly advise Opposition Members not to argue for its deletion.

Andrew Lansley (Conservative, South Cambridgeshire)

The reason that I was slightly amused by the Minister's argument is that I recall sitting in this seat earlier in this Session during the proceedings on the Health and Social Care (Community Health and Standards) Bill. I moved an amendment to require the independent regulator of foundation hospitals to have regard to the interests of certain vulnerable groups, including children and people residing in rural areas. I was told by Ministers with great confidence that it was unnecessary because the independent regulator's duties applied to all patients and all those whom the NHS had an obligation to serve. I have a 180º feeling about the Government's argument here.

Elliot Morley (Labour, Scunthorpe)

That is a really weak argument and a very poor point. There is no comparison between hospital provision, which is free and available to all, and the provision of water services, which have costs that can fall on vulnerable groups. I am surprised at the hon. Gentleman for making such a fatuous point; it is one of the weakest that he has made in the Committee. Generally, he makes good points.

Norman Baker (Liberal Democrat, Lewes)

On a serious point, I understand and sympathise with the Government's wish to have regard to special groups, although it might have been better to put ''particular interests'' in line 27 and delete lines 35 and 36.

Will the Minister say something about subsection (2C)(d)

''individuals residing in rural areas'',

a gigantic group of people, many of whom are not vulnerable? Pensioners, disabled people or those on a low income are covered by the three previous paragraphs. I do not think that many people are vulnerable just because they live in rural areas, one of which I represent, and it is rather patronising to suppose that they are.

Elliot Morley (Labour, Scunthorpe)

Of course, as the hon. Gentleman points out, many people in rural areas are not at all vulnerable but there are isolated rural communities that are not on water mains and do not have main sewerage systems. I have had many representations from hon. Members about the problems in rural areas with water and sewerage services.

We are not saying that everyone in rural areas—or, indeed, everyone who is disabled—is in a vulnerable group and has problems, but such groups are recognised by the regional consumer organisations and the regional Water Voice organisations. In some water companies there are structures and funds to help vulnerable groups, many of which are defined in the Bill. It is undesirable and unnecessary to remove the categories; just because certain groups are in the Bill does not mean that there are not other categories that need special consideration, and they are catered for. But the main groups are in the clause and I strongly urge the Committee to leave it as drafted.

Bill Wiggin (Conservative, Leominster)

The Minister is in fighting form this morning. He has probably been listening to the GM debate on the radio. I agree with him that my amendment would not necessarily provide the best protection for the people I want to protect. But he was being disingenuous when he attacked me; perhaps he was trying to stir up his frozen supporters. I urge him to think about amending the proposal to include vulnerable groups, which is the phrase that he used, and which I think the Committee would agree to. Those are the people that we want to support.

David Drew (Labour/Co-operative, Stroud)

I have some sympathy with the hon. Gentleman's remarks. I, too, represent a rural area; I would not describe most people in my constituency as vulnerable but they are a disadvantaged group. Water companies have only recently begun to take cognisance of the fact that people who are not on mains sewerage need additional facilities to remove waste. It is dangerous to use the word ''vulnerable'' in an exclusive sense because it is not as simple as that.

Bill Wiggin (Conservative, Leominster)

I take the hon. Gentleman's point. I am not suggesting that the words ''rural areas'' should be removed. However, families with children under five are extremely vulnerable, particularly if they do not have any water. As people will be missed out, it would be constructive and sensible to include the words ''vulnerable groups'' in the categories. If the Minister considers that suggestion, I will have no problem in withdrawing the amendment.

Elliot Morley (Labour, Scunthorpe)

There is no need to do that because the clause as drafted takes into account all groups; it is implicit in the proposal. It is often more expensive to provide water and sewerage services in rural areas than it is in urban areas, for obvious reasons. It is necessary to ensure that a two-tier pricing system could not emerge within one water or sewerage company. That is another consideration that should be taken into account in rural areas. These are all perfectly valid reasons. The measure does not exclude any other category that needs proper consideration by the regulator or the Consumer Council and in that respect I urge the hon. Gentleman to withdraw his amendment.

Bill Wiggin (Conservative, Leominster)

I shall withdraw my amendment, but I do not think that the Minister has done us proud, as he usually does. He is clearly not himself this morning and has fallen into a dilemma—pointed out by my hon. Friends—that one cannot say that the measure is

inclusive and write a list, and then say that the inclusion of everyone else is implicit. There is a lack of logic about that. I do not wish to vote on the amendment because I am not against such groups of people being included but I feel very strongly that others will regret that words like ''vulnerable groups'' were not included in the Bill. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 254, in

clause 42, page 47, line 5, after 'or', insert 'by'.

No. 255, in

clause 42, page 47, line 22, leave out '(3)' and insert '(4)'.

No. 256, in

clause 42, page 47, line 24, leave out '(3)' and insert '(4)'.

No. 257, in

clause 42, page 47, line 26, leave out '(3)' and insert '(4)'.—[Mr. Morley.]

Clause 42, as amended, ordered to stand part of the Bill.

Clause 43 - Guidance to authority on

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 78, in

clause 43, page 47, line 36, leave out 'or mainly'.

This is another probing amendment. The clause refers to guidance on social and environmental matters

''by the Assembly, with respect to appointment areas which are wholly or mainly in Wales''.

My constituency is on the Welsh border, but it is not in Wales. We are lucky to have Welsh water and we are governed by the Environment Agency, which reports to the Welsh Assembly, so there are difficult devolutionary problems for people living in Herefordshire. That is why I seek guidance from the Minister on why

''wholly or mainly in Wales''

is written into the Bill. Unless the area is wholly in Wales, it should not necessarily come under the guidance issued by the Assembly.

Elliot Morley (Labour, Scunthorpe)

I can explain. Amendment No. 78 would restrict some of the National Assembly's functions with regard to water undertakers operating entirely within Wales. The problem is that I do not think that there is an undertaker operating entirely within Wales, because the boundaries of the current English and Welsh undertakers are based on the old water board areas prior to privatisation. They were based on the natural river basin catchment areas, which of course is logical. As a result, some of the catchments cross the border, as the hon. Gentleman rightly states. It would create confusion and cause a number of practical problems if the Secretary of State and the Assembly had jurisdiction over their national areas, because there would be splits on the boundaries.

For that reason, the devolution settlement for water regulation provides for jurisdiction to follow company boundaries. That is the logic and the Bill follows that entirely practical precedent. Because no undertaker

serves an area that is wholly within Wales, the technical consequence of the amendment is that the Assembly would be excluded, and the Secretary of State would have to exercise those powers throughout England and Wales. It is practical management to base the boundaries on catchment areas and not to use political boundaries.

Bill Wiggin (Conservative, Leominster)

Will the Minister confirm that if an English person were unable to obtain satisfaction from the Assembly because they lived in England, they would be able to appeal to the Secretary of State? If so, I shall have no problem in withdrawing my amendment.

Elliot Morley (Labour, Scunthorpe)

Generally speaking, the line of complaint about water is to Ofwat, which covers both England and Wales. There is no distinction. If someone was unhappy, they could go to their Member of Parliament or local councillor.

Bill Wiggin (Conservative, Leominster)

The Minister should have had his Shredded Wheat or Weetabix this morning because he will know that I am probably the only Conservative Member of Parliament with a pass to the Welsh Assembly and I am probably one of the only ones whose constituency also has a Welsh name; Llanllieni.

The Minister's explanation is all right for me, but may not be for others who may wish to seek the guidance of the Assembly. However, the amendment would raise a problem and in the interests of being constructive and allowing the Assembly its full range of powers and abilities in the Bill, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Norman Baker (Liberal Democrat, Lewes)

I beg to move amendment No. 142, in

clause 43, page 47, line 41, at end insert—

'(1A) In particular, before any alteration to the water pricing or consumer charging regimes, the Authority shall receive guidance to—

(a) define a household income to water charge ratio below which consumers will be regarded as likely to have difficulty paying such charges; and

(b) report on such new measures to be considered by the Secretary of State or the Assembly as will address such difficulties.'.

This amendment is about water poverty and charging mechanisms. The Minister is aware of amendments covering water metering so I shall not stray into that territory today. I want to raise the general issue of water poverty and to try to establish what the Government are doing about that. Guidance to an authority on social and environmental matters should take account of alterations to the water pricing and consumer charging regimes by means of the proposals in the amendment.

I am sure that the Minister knows that between 2 million and 4 million people in this country spend more than 3 per cent. of their income on water and that, in 2002, 4.7 million households in England and Wales were in debt to water companies. That is an increase of 11 per cent. since 1998–99. He will also be aware that debts have increased since the water companies' right to disconnect was ended. I am not

suggesting that that right should be restored because it caused great hardship and many problems.

We must recognise that water debt is rising not because people are wilfully not paying their water bills because they know that they will not be disconnected, although there may be some people in that category and we should deal with them in a different way. Some people simply cannot manage and have problems with their accounts and general management of their finances. When they finally seek advice from the citizens advice bureau or elsewhere—often late in the day when debts of £15,000 or £20,000 have built up—they are advised that the debts should be paid in a particular order. Water bills are low in that order because disconnection is not an option, which is partly why water bills are not being paid and debt is rising. People are genuinely having difficulty with water poverty as a consequence.

The Minister may tell me otherwise, but I am not aware of any Government strategy to tackle water debt and they certainly have not used the Bill to do anything about that, which is a pity. I referred earlier to people who spend more than 3 per cent. of their income on water. That figure is important because it comes from the Department for Environment, Food and Rural Affairs. The Minister's own Department has set 3 per cent. of household expenditure as a measure of affordability in its sustainable development indicators and failing to do anything about the fact that that is being exceeded by between 2 million and 4 million people is a failure to follow through their own indicators.

Our amendment would go some way to addressing that, but I confess that it is not the be all and end all or the final solution to the problem. However, it will help in the discussion this morning and, were the amendment to be adopted, it would improve matters. I believe that water poverty is the sort of issue in which Government Members should be interested; some of them are interested in it, judging by what they have said in this and previous Sessions. I hope that there will be some sympathy towards the aims of the amendment.

The Minister needs to deal with the broader poverty issue not simply as part of the water regime but in conjunction with his colleagues at the Treasury and the Department for Work and Pensions. It should not be left to water companies to cross-subsidise to ensure that water is affordable by the poorest in society. The Minister and the rest of the Committee will know that water companies glide over such matters and subsidise people who do not pay their bills; they try to find creative ways of ensuring that people are not disconnected and that water is continually supplied. However, it is not the water companies' job to do that; the problem should be dealt with by the benefits system, but currently that is not the case. That matter could have been included in the Bill, but has not been.

Bill Wiggin (Conservative, Leominster)

The hon. Gentleman makes an interesting and valid argument. He will be aware also that the amount of debt owed to water companies is in the region of £700 million and rising fast. That means

that honest consumers who pay their bills are subsidising both those who cannot pay their bills and those who could, but will not do so. If the hon. Gentleman's amendment were accepted, what would he do about the problem of people who live above properties that are not residential, such as pubs or shops, because they can still have their water supply cut off?

Norman Baker (Liberal Democrat, Lewes)

Mixed hereditaments present a problem. If there is a residential element in a building, the prohibition on disconnection should also apply. That is the socially desirable outcome, although it could make the debt problem worse.

We must adopt a two-strand philosophy: first, to ensure that people have water, can afford it, and are not disconnected; secondly, to introduce provisions to ensure that the benefit system and other appropriate Government measures can alleviate the problems. That second element is missing from the Government's strategy.

After we had tabled our amendment, I received a letter from the National Consumer Council, warmly endorsing it. It said that the

''NCC believes that affordability of water bills is a serious problem for many households with 18 percent of households spending more than Defra's own sustainable development indicator.''

That is another way of expressing the £2 million to £4 million. The letter continues:

''Severn Trent and Anglia Water Trust Funds report customers approaching their charities have the water bill as just one bill in many, and are struggling to meet their basic needs.''

That reinforces the point that some people dealing with their own accounts have problems with multiple bills. The National Consumer Council also says that there is

''a problem with water affordability that affects more consumers than are assisted by the Vulnerable Groups Regulations.''

The Minister may say that those regulations provide a safety net. If the Minister has talked to Water UK, Water Voice and other representatives of the water industry, he will know that the general consensus is that the vulnerable groups regulations do not work. That is partly because no one knows they exist, partly because the criteria are so tightly drawn that no one qualifies under them and partly because people cannot face the amount of paperwork and other paraphernalia that must be gone through to qualify. The vulnerable groups regulations may be a good idea, but they are not working. What does the Minister intend to do about those regulations? That issue should be addressed in any discussion of water poverty and its alleviation, but I have heard no mention of it in discussion of this amendment, although vulnerable groups were mentioned earlier in the debate.

The Government say that customers struggling with affordability should be helped by means of the tax and benefits system. Potentially, that is the proper way of dealing with it, rather than expecting the water companies to find creative ways of solving the problem of water poverty. However, at present that is not the case. That is key to the amendment but goes

beyond the Minister's brief, which is why I suggested to him that he must discuss the issue with his colleagues in the Treasury and the Department for Work and Pensions.

First, the notional element of income support that is intended to cover water bills has not kept pace with increases in those bills. Between 1988 and 1997, the benefit provided fell from 80 per cent. of the average water bill to just 55 per cent.

Secondly, some groups of vulnerable consumers on means-tested benefits, notably households without children, spend a greater proportion of their income on their water bill than others. The average unmeasured household bill in 2001–02 amounted to 8 per cent. of the income of a single person on jobseeker's allowance, which is a significant amount for someone who has not got very much to start with. The average water bill consumed 5 per cent. of the income of a couple on jobseeker's allowance and 4 per cent. of the income of a pensioner on the minimum income guarantee. The figures for measured bills are not dissimilar; 7 per cent., 4 per cent. and 4 per cent. respectively. Again, I return to the Department's 3 per cent. yardstick. In all those cases, people on low incomes, whom one can describe as vulnerable if one wants to, are paying way in excess of the Government's own 3 per cent. yardstick, or metrestick if they have gone metric.

There are variations between regions. This morning, the Minister pooh-poohed the idea of excluding rural areas from an earlier provision. One of his justifications was that water companies might develop differential charges between rural and urban areas in their own regions. I agree with him that we do not want such a situation to arise. However, he does not accept that there is already a massive variation between rural and urban areas. It is possible for a person living on one side of the street to live in an area serviced by one water company and for a person on the other side of the street to receive a much larger bill from another water company.

The existing huge variation in water company bills exacerbates water poverty. From memory—I apologise if this is wrong—Tendring Hundred has the highest average water bill in the entire country, and it represents some rural consumers.

Hugo Swire (Conservative, East Devon)

I ask the hon. Gentleman to consider that remark. I understand that the highest water charges in the country are in the south-west.

Norman Baker (Liberal Democrat, Lewes)

That is not true. I do not have the figures, but I will happily supply them. I received a written answer from the Minister giving the average unmeasured and measured charges for each water company in the country, and I am certain that Tendring Hundred was top of the list. The south-west featured highly, but it was not top. I know that is definitely true because I discussed the matter with one of my south-west colleagues, who made a similar point until I produced the figures. However, it is a side issue. The point is that there are wide variations between Tendring Hundred and the south-west at one end of the scale and Portsmouth Water, which provides water at a cheap rate, at the other.

George Osborne (Conservative, Tatton)

Where is Tendring Hundred?

Norman Baker (Liberal Democrat, Lewes)

I refer the hon. Gentleman to the map of Great Britain.

Bill Wiggin (Conservative, Leominster)

The hon. Gentleman does not know either.

Hugo Swire (Conservative, East Devon)

The point is difficult to illustrate in Committee. Most Members in the Room will be interested to learn which part of the United Kingdom Tendring Hundred is in.

Norman Baker (Liberal Democrat, Lewes)

I can make a reasonable guess. I think that I am right in saying that it is in Essex, but I stand to be corrected on that point.

If vulnerable groups are paying in excess of DEFRA's 3 per cent. yardstick, the situation will be exacerbated by wide variations in water prices across the country. It is roughly twice as expensive to get water in Tendring Hundred than it is in Portsmouth.

Bill Wiggin (Conservative, Leominster)

Wherever it is.

Norman Baker (Liberal Democrat, Lewes)

Wherever it is. That makes the situation worse for consumers. A water poverty strategy should be on the Government's agenda.

Sir David Amess (Conservative, Southend West)

Order. I ask the hon. Gentleman to draw his remarks more closely to the amendment. This is developing into a general debate on water prices, which would have been more suitable on Second Reading.

Norman Baker (Liberal Democrat, Lewes)

I shall try to do that. I was distracted, as you will appreciate, Mr. Amess.

The reason why I mentioned water charges—this is relevant to the clause and the amendment—is that if people paying way more than DEFRA's yardstick of 3 per cent., the problem is exacerbated by the difference between water company charges across the country. If the Government have a water poverty strategy, which they ought to, and want the 3 per cent. figure to be adhered to, they could try to eliminate the differences in water prices between water companies. That is why I raised that particular point.

The National Consumer Council has another point. I agree that

''a perverse cross-subsidy exists through optional metering''.

I do not want to go into metering in any great detail, but some of the country has been metered by stealth while other areas have not been metered. The Government intend to introduce metering but they do not want to say so, so they let the water companies and individuals introduce metering over a long period. I ask them to recognise that a strategy that fails to introduce one thing or the other leads to perversity in the system, which makes the situation even worse.

Bill Wiggin (Conservative, Leominster)

Will the hon. Gentleman confirm that the Liberal Democrats' policy is to introduce compulsory metering?

Norman Baker (Liberal Democrat, Lewes)

Our policy is to have universal metering. I shall be happy to discuss our policy in the context and terms of the new clause, which is probably due for discussion at the next sitting.

The present mix-and-match arrangement is making matters worse and leading to water poverty. I hope that the Minister will accept that we have a real

problem because some people are unable to meet their water bills, and that the problem is exacerbated by the current charging arrangements, which have allowed wide variations between water companies, the failure of income support measures notionally to take account of water bills and the failure of the Bill to address any of those issues.

The amendment goes some way to dealing with that. If the Minister does not like that—I suspect that he does not as he does not like any amendments from Opposition Members, or Government Members judging by last week—I hope that he will state the Government strategy on water poverty because so far he has not done so.

Elliot Morley (Labour, Scunthorpe)

Water poverty is a very serious issue, and the Government and DEFRA take it seriously. There is the wider issue of debt, which we need to understand. It is probably too wide and complex an issue for the Bill.

The amendment is technically deficient. I do not want to go into too much detail because I suspect that the hon. Gentleman wishes, perfectly legitimately, to use the amendment to raise the issue of water poverty. Briefly, the amendment does not, for example, say from whom the authority is required to receive guidance and it does not appear that anyone has a duty to provide it. There are technical problems but that is not the issue. I will concentrate on water poverty because it is important, and Opposition Members and the Government are very interested in it.

First, I urge caution on DEFRA's figure of 3 per cent. of household income. As mentioned, we use it as a sustainability indicator, so that we can judge whether the trend is up or down. There has not been a huge amount of detailed work on whether the 3 per cent. figure is valid. It is more of a guideline and is not very sophisticated, although it is useful. I urge caution, however.

On water poverty, we recognise that water is of particular importance. We have already debated vulnerable groups, and, as mentioned, water is the only utility that cannot be disconnected. That recognises the fact that, where there are low-income groups and poverty, it is important to maintain that basic, essential service.

I concede that, as always in life, some people take advantage of facilities designed to help the vulnerable, and there are people who can pay but will not. More can be done to force them to pay, and we are having an ongoing discussion with the water companies about collecting that money.

Hugo Swire (Conservative, East Devon)

It is reassuring that the Minister is having discussions with the water companies about the extremely high level of water debt; the figure mentioned is around £700 million or £800 million. However, is it not the case that the high level of debt penalises water payers in my part of the country who have to spend an enormous amount of their disposable income on water? What are the Government doing to ensure that those who can pay do pay, so that those who pay but find it difficult are not penalised?

Elliot Morley (Labour, Scunthorpe)

It is unacceptable that those who struggle, but nevertheless pay their bills, are paying for those who can but will not. We must disentangle from that figure those who deliberately abuse the system and those with genuine problems. That work can be difficult and forms part of the ongoing discussions with the water companies. There is a range of options that water companies can take, but that goes beyond this discussion. I emphasise to the hon. Gentleman that we take the matter seriously. We want progress to be made in reducing that figure, and are talking to Ofwat and the water companies about that.

I want to return to the issue of debt. We should approach debt in relation to our benefit systems and benefit support, taking into account both direct support—for example, housing benefit—and average family income and demands. That is part of the calculation done, for example, when pension levels are set, and it is related to the retail prices index and average inflation. A range of indicators on household and family income is taken into account. That should be dealt with by the DWP, and some complex, difficult issues must be addressed. However, the Government have done a lot of work on poverty alleviation through changes to the benefit system—for example, family tax credits—and have had considerable success in taking 1.5 million children out of poverty.

That does not mean that I am complacent; more needs to be done. There are sensitivities on the subject of water prices, and we are at the beginning of the next five-yearly periodic price review. There are implications for consumers and areas with a legacy from privatisation of disparity of costs. We are sensitive to those issues and must take them into account.

Hugo Swire (Conservative, East Devon)

If the Government are looking at the ratio of affordability of water prices, will the Minister, when examining the figures, take into account working families tax credit and not unemployment in a region? By using one but not the other, we in the south-west have been penalised through our council tax by the new grant resource allocation. There is not a tradition of unemployment in the south-west, but there are a lot of low-paid people in seasonal jobs, and the working families tax credit is a better indicator of poverty in my part of the country than anything else.

Elliot Morley (Labour, Scunthorpe)

That is a possibility. The point again goes beyond the discussion of the Bill, but the hon. Gentleman must understand that the use of unemployment figures as the criteria is well established. That is not to say that, as with all matters, there should not be periodic assessments of the calculations and figures used, and I have an open mind on that. There may be better indicators that could be used in a range of calculations. I do not close the door on that, but it is probably not for me to say because those are wider issues.

I return to the point that debt itself is a wider issue. We might be able to take some steps on water, but I think that it is probably best tackled by trying to understand the whole basis of debt. The Government are currently sponsoring several studies to examine the whole issue of debt, including what groups are

particularly vulnerable, how debt arises and what steps can be taken to combat it.

Norman Baker (Liberal Democrat, Lewes)

I am grateful to the Minister, who is giving a measured and helpful response. He is right that the general issue of debt goes way beyond this Bill, but he will also accept that there are particular circumstances that relate purely to water, including the charging regimes, the distribution of water and the notional element in income support. As part of the Government's overall debt programme, what steps is DEFRA taking to ensure that the Department for Work and Pensions and the Treasury are aware of the specific issues relating to water debt?

Elliot Morley (Labour, Scunthorpe)

I shall come to that in a moment. We are taking a very specific step, and I shall outline exactly what it is. I should also point out that there are considerable differences in debt between companies. We need to look at why there are such differences. Some companies are better at collecting debt than others. That deals with the point that there are some people who are not paying who should be. The courts often have to be used. We need to understand why there are disparities and why some companies have less of a problem than others. We are looking at that. Water Voice feels that many companies could be doing much better at debt collection.

Specifically, at the beginning of this year, DEFRA held a public consultation on extending protection for vulnerable households. That consultation ended in May and the responses are currently with the Department. We are examining them to see what steps we could apply. It is a little difficult at this stage to pre-empt in the Bill some of the work that is being done because it is not straightforward. There is a wide range of issues, forces and pressures here, some of which go way beyond utility bills, including the nature of the support mechanisms in this country and the nature of the debt pressures that there are on people.

Brian Iddon (Labour, Bolton South East)

United Utilities told me on Monday that the scale of the debt in the north-west adds £10 on average to everyone's Bill, including those with a debt. It also told me that in areas that have been left in a bad condition by the industrial revolution, water companies have to spend significantly more clearing up the aftermath. It is those areas that have high unemployment because the development of new industries has left those people behind. Will my hon. Friend the Minister bear that in mind when looking at water bills?

Elliot Morley (Labour, Scunthorpe)

Yes, that is a fair point. It is true that many industrial areas have legacies of heavy industry and old, Victorian infrastructure that needs to be replaced. That is not unique to the north-west and north-east. I can assure my hon. Friend that we take that seriously. It is one consideration in the periodic price review. To keep costs down, we recognise that the water industry is a long-term business. We have had some discussion on that. It is about long-term asset management and long-term borrowing. The longer the term over which planning can take place, the lower the costs and impacts on consumers. That is an issue for the regulator; in the end, it is the regulator who will determine prices. The regulator is

independent. We as the Government will make our submission to it, including the issues that concern us, and many of the points that have been raised, including my hon. Friend's, will be in our submission. Water quality is a very serious issue.

The amendment is flawed, but the debate has been useful, because it has allowed the Committee to explore the pressures and problems, and the fact that there is a wider issue, what steps we can take and that there are disparities in debt. If there are high levels of debt in a region, it falls on consumers. We do not like that very much and we are considering what we can do about it and why there are disparities in particular regions. There is a consultation, which we are considering now, about what steps we may be able to take to assist vulnerable groups that come into the category of water poverty. That is not a pressing measure in relation to the Bill. Those are issues that we will apply later on, when we have had a chance to consider them in some detail.

I hope that I have reassured the hon. Member for Lewes that I agree with him. Water poverty is a serious issue and the Government take it seriously.

Norman Baker (Liberal Democrat, Lewes)

I am grateful for the reassurance that the Minister takes the issue seriously. I take it that by ''consultation'', he is referring to potential amendments to the vulnerable groups regulations.

Mr. Morley indicated assent.

Norman Baker (Liberal Democrat, Lewes)

That is useful. However, we have not heard anything from the Government about any measures to eliminate not only disparities in collection, to which he has referred, but disparities in water charging and the basic rate, which is still based on the privatisation arrangements, the K factor and all the problems that were inherent at that time. I should like to see a commitment from the Government to try to even out water prices across the country, rather than continuing in perpetuity the flawed privatisation arrangements. I know that the problem is difficult and the solution will not be easy to find, but there are inadequacies and unfairness in the present arrangements that should be addressed.

The Minister is right to refer, as I did, to the upward pressure on water prices, not least today. I urge him to find a way to deal with water poverty quickly. There are conflicting pressures. People such as me and probably most of the Committee will agree that it is proper to invest, for environmental reasons, in the longer term, which may require water bills to rise above inflation. No one likes that, but we accept that it may be necessary. Equally, if water bills rise above inflation, that potentially makes debt and water poverty worse. As a result, understandably, there is a pressure to keep bills down, so that people are not adversely affected when they are most vulnerable.

The way to deal with the matter is to recognise that investment is needed from those who receive the water—the consumers—but that that has to go hand in hand with a proper mechanism to ensure that those who are most vulnerable at the bottom end are not adversely and unfairly affected by the increases. That is why the matter is urgent—water prices are rising—and why it is important that a mechanism is found in

the short term to deal with the problem. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 79, in

clause 43, page 48, line 12, at end insert—

'(g) the public.'.

I am pleased with the amendment, because it is extremely inclusive and very short. It would ensure that, on subjects of environmental importance, the public were included in the consultation. It would be wrong of the Minister to misinterpret that and think that the public, in the form of every voter, had to be consulted widely. The clause states that the Secretary of State shall consult the authority, the council, relevant undertakers, licensed water suppliers and such other persons as the Secretary of State or the Assembly considers it appropriate to consult in relation to the guidance. My amendment would clarify that and just say ''the public''. There is no point in speaking for hours about the benefits of including the public, except to say that, on this sort of issue, they are generally very sensitive, rather sensible and well worth consulting.

Elliot Morley (Labour, Scunthorpe)

It is of course important to ensure that there is public consultation. However, the Secretary of State and the Assembly already have an obligation to consider persons whom they think appropriate, and I think that the public are pretty appropriate in this respect. I make that absolutely clear. Furthermore, it is the Department's practice to put consultation papers about whatever it is doing on its website, so that they can be accessed by the public.

The problem is that we cannot be sure of the implications of including the amendment. The hon. Gentleman accepts that it would be excessive to send someone around to every house, knocking on doors and asking for opinions. The Consumer Council for Water is already a statutory consultee in the process and is responsible for representing the interests of water consumers in such consultations.

We are back to the question of balance. I do not disagree with the hon. Gentleman's points. The provisions do not rule out a full public consultation, if Ofwat felt it appropriate. It is important that the public have access to information through the websites and the consultation process, and we believe that the Bill caters for that.

Bill Wiggin (Conservative, Leominster)

I am grateful for that answer, which was pretty much what I expected from the Minister. There is always a danger when we include a provision referring to

''such other persons as the Secretary of State''

considers appropriate. We are going around in a circle, to some extent. It is the Secretary of State who decides everything in that respect. Therefore, by including the public in the clause, we would have circumvented his or her ability to avoid consulting people who might have turned up and been difficult. However, it will be like pushing water up a hill to get the Government to concede on that point. As I have other important

amendments that I wish to get to, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 43 ordered to stand part of the Bill.

Clause 44 - Standards of performance

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 80, in

clause 44, page 49, line 5, leave out from 'Council' to end of line 7.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss amendment No. 81, in

clause 45, page 50, line 32, leave out from 'Council' to end of line 34.

Bill Wiggin (Conservative, Leominster)

This is a probing amendment. The bits of the Bill that the amendments would leave out are not particularly contentious, but they seem unnecessary because section 39 of the Water Industry Act already includes

''persons or bodies appearing to the Secretary of State to be representative of persons likely to be affected''.

Therefore, we do not need new subsection (1)(b)(iv), which specifies

''other persons or bodies as the Secretary of State may consider appropriate''.

They are already included. The purpose of the amendment is to find out why we need all the extra paragraphs in this part of the amendment to the Water Industry Act.

Elliot Morley (Labour, Scunthorpe)

I can explain that. The amendments would remove the requirement for the authority to serve a copy of the application on

''such other persons or bodies that the Secretary of State may consider appropriate''.

The authority would have to consult only the undertakers on the council and representative bodies.

The new provision was placed in the Bill primarily to account for changes that would come in with the new competitive markets. There may be occasions when proposed new standards of performance will have a direct impact on licensed water suppliers in the competitive market. Naturally, in such cases the licensees would have to be consulted, because they would be affected.

On the other hand, new standards may only be relevant to domestic consumers. Those new standards will not be of interest to licensees who cannot operate in the domestic market. Therefore, it would not be sensible to list licensees as statutory consultees for all occasions, although there may be times when a wider area of consultation is considered appropriate.

The Bill ensures that the Secretary of State gives consideration to wider consultation, depending on the circumstances. The amendment would remove that requirement. The reasoning behind the clause is to account for different circumstances and groups, and to give the Secretary of State flexibility in how she addresses the issue.

Bill Wiggin (Conservative, Leominster)

I am grateful for that reply. I suspected that that might be the case but I needed that to be confirmed. I am grateful for that. I have no wish to tie the Secretary of State's hands with regard to consultation, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Sue Doughty (Liberal Democrat, Guildford)

I beg to move amendment No. 283, in

clause 44, page 49, line 32, leave out from 'environment' to end of line 35.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following:

Amendment No. 285, in

clause 45, page 51, line 13, leave out from 'environment' to end of line 16.

Sue Doughty (Liberal Democrat, Guildford)

Our amendment is another probing amendment. The Liberal Democrats are happy for the Secretary of State to make regulations in the interests of public health or the environment. However, the legislation gives additional powers to the Secretary of State. If we look back at section 39, we see that those powers are strengthened. We do not understand why those extra powers are necessary. Structures already in place do that job anyway. In what circumstances would the Minister expect those powers to be used?

Elliot Morley (Labour, Scunthorpe)

I can answer that point. The amendments would limit the power given to the Secretary of State by the Bill to propose performance standards without first having to be in receipt of an application by the authority. One reason for the new powers is to provide an opportunity for the Consumer Council for Water, the Environment Agency and the drinking water inspectorate to approach the Secretary of State if they feel that he or she should intervene on a particular problem.

Simon Thomas (Plaid Cymru, Ceredigion)

Would the Minister add the National Assembly for Wales to the list of bodies that could suggest such intervention?

Elliot Morley (Labour, Scunthorpe)

The Bill will have the same effect. For example, any of those bodies—the Consumer Council for Water, the Environment Agency or the drinking water inspectorate—may approach the Welsh Assembly on a Welsh issue, if appropriate, in relation to the line of accountability. There is no problem with that, and I can give that assurance.

The drafting is difficult as it applies to the consumer council because its powers will be wide-ranging, not restricted to environmental or public health matters. It will be empowered to represent a wide range of issues and consumer interests. We want to ensure that such bodies are strong and independent. We do not want to reduce the council's ability to be a forceful advocate for consumers. However, the amendment would restrict the council's powers to ask the Secretary of State to intervene. The measure is not simply to allow the Secretary of State to say, ''I do not like the look of that''; it is to allow other bodies to approach him or her to make representations if they feel that there is a problem and intervention is necessary.

Sue Doughty (Liberal Democrat, Guildford)

I thank the Minister for that clarification. A couple of small points arise from it. First, there is a mechanism whereby organisations

such as the Consumer Council can go to big brother to ask him to intervene. Does the Minister expect to make a judgment internally as to whether it would be worth intervening, or would he pass concerns straight through? Secondly, are there any additional reasons why the Minister might intervene that would not result from a request from another body?

Elliot Morley (Labour, Scunthorpe)

The answer to the second question is that there may be. It is about accountability and the powers of the Secretary of State, which he holds on behalf of Parliament. There may be occasions when issues are raised with him through Parliament. It is difficult to give specific examples. In my experience, representations are received from all sorts of groups for intervention on issues—not just water, but a range of issues for which DEFRA has responsibility. I confirm that when representations are received there must be consultation with specialist technical and scientific advisers, depending on the situation. If there is a complaint about a particular issue, one must hear both sides of the story. Such things go on all the time in the Department, both informally and formally. Issues are often resolved by informal discussion, but the Bill contains a safeguard. If a matter cannot be resolved by discussion and if the Secretary of State comes to the conclusion, after due discussion and legal and technical advice, that there may be a case for intervention, there is the power to intervene.

Sue Doughty (Liberal Democrat, Guildford)

I thank the Minister for that further clarification. Now that that information has been provided to the Committee, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 94, in

clause 44, page 49, line 39, after 'research', insert 'and regulatory impact assessment'.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following:

Amendment No. 95, in

clause 44, page 50, leave out lines 1 to 4 and insert—

'(7) Before giving notice under subsection (5)(a) above, the Secretary of State shall arrange for—

(a) such research as he considers appropriate with a view to discovering the views of a representative sample of persons likely to be affected; and

(b) a regulatory impact assessment of his proposals to be carried out for the purpose of assessing the likely quantitative and qualitative environmental, public health, economic and social impacts of his proposals.'.

Amendment No. 96, in

clause 44, page 50, line 4, at end insert—

'(7A) The Secretary of State shall not proceed with any proposal for the making of regulations under subsection (4) above where it is apparent from the regulatory impact assessment carried out under subsection (7)(b) above that the adverse effects of the regulations would outweigh their benefit.'.

Amendment No. 97, in

clause 45, page 51, line 20, after 'research', insert 'and regulatory impact assessment'.

Amendment No. 98, in

clause 45, page 51, leave out lines 30 to 33 and insert—

'(7) Before giving notice under subsection (5)(a) above, the Secretary of State shall arrange for—

(a) such research as he considers appropriate with a view to discovering the views of a representative sample of persons likely to be affected; and

(b) a regulatory impact assessment of his proposals to be carried out for the purpose of assessing the likely quantitative and qualitative environmental public health, economic and social impacts of his proposals.'.

Amendment No. 99, in

clause 45, page 51, line 33, at end insert—

'(7A) The Secretary of State shall not proceed with any proposal for the making of regulations under subsection (4) above where it is apparent from the regulatory impact assessment carried out under subsection (7)(b) above that the adverse effects of the regulations would outweigh their benefit.'.

Bill Wiggin (Conservative, Leominster)

The amendments deal with regulatory impact assessments. In the current climate, that is popular and sensible. The amendments are constructive because we are dealing with the quality of standards of performance in relation to water supply and sewerage services. The hon. Member for Stroud (Mr. Drew) mentioned the difficulties that some of his constituents have had. It is helpful to everybody concerned in the industry, whether they are consumers or suppliers, to ensure that any change in the regulations is tested fully by an impact assessment.

Given the spirit of the Bill, the Secretary of State would want appropriate research to be carried out to discover the views of representative samples of persons likely to be affected. We must consider how right he or she is to do that, and we must ensure that the views considered are fully informed. The people concerned would need to know the results of a regulatory impact assessment. The amendments are intended to include such an assessment in the Bill.

Elliot Morley (Labour, Scunthorpe)

I do not disagree with the hon. Gentleman's argument for a regulatory impact assessment. He will be aware that it is the norm these days to apply such assessments. Although we support his intention, again we do not think that the point needs to be spelt out in the Bill because it is implicit. Government policy clearly states—the Prime Minister clearly outlined this in August 1998—that no proposal for regulation that has an impact on businesses or charities will be considered without a regulatory impact assessment. Government policy applies to the Bill.

Andrew Lansley (Conservative, South Cambridgeshire)

Does the Minister recognise that the policy to which he referred relates to Departments and Executive agencies, but does not apply as a matter of course to regulatory agencies operating as public corporations, such as the Water Services Regulation Authority?

Elliot Morley (Labour, Scunthorpe)

We consider that the policy does apply to such bodies, and we would expect them to conform to it, as they do when they introduce proposals.

The process must be flexible enough to respond to new developments, such as equal treatment, environmental appraisals and rural-proofing, which could be overlooked if we started to specify regulatory impact assessments in great detail.

Amendments Nos. 96 and 99 would prevent the Secretary of State from making regulations if the regulatory impact assessment showed that the costs outweighed the benefits. Of course, the whole point of

a regulatory impact assessment is to consider that aspect. If the costs did outweigh the benefits, alternative mechanisms would have to be taken into account. That is part of the process. I believe that the matter is covered in the Bill. I do not disagree with the thrust of the argument put by the hon. Member for Leominster, but I do not believe that there is a need to apply the provisions in the amendments. The clause applies only to the Secretary of State; it does not apply to the regulatory authority. Nevertheless, those impact assessments are what we expect, and that is implicit in the Bill.

Bill Wiggin (Conservative, Leominster)

I am grateful to the Minister for that response, and I accept that we have a difficulty—we have had it all the way through consideration of the Bill, but particularly this morning—with what is implicit and what is not. I feel strongly that every time we are constructive in our amending, we are told it is implicit, and when we put our finger on something that the Government might have missed we are told that we are out of order.

The other change that it would have been useful to include in the Bill was that in amendment No. 95(b), which put into words the elements of sustainability. That would have added weight, and would have dealt with the argument that we all agreed with when the hon. Member for Falmouth and Camborne (Ms Atherton)—who is not in her place today—introduced the issue of sustainability in an earlier amendment. [Interruption.] We voted to keep it in the Bill, the Minister will recall. It was he who voted against it.

I had expected the Minister to object to the impact assessment proposals in the amendments on the basis of unnecessary cost. I am glad that that was not his argument. He instead chose to say that such measures were implicit in the Bill. The amendments were never intended to reduce the Minister's flexibility. We are faced with a difficult dilemma as to whether we believe sustainability is worth including in the Bill, or whether it is implicit that the Government would carry out impact assessments.

We were also told that the Government had no proposals to increase taxation despite 60 subsequent tax rises. I am not sure that believing the Prime Minister is necessarily the wisest course for the Committee to follow. It does not give me a great deal of comfort to know that the provision is implicit, particularly as a change of Prime Minister could result in very different implicit procedures for Secretaries of State. I hope that the Minister will explain further whether, if he became Secretary of State, the proposals would still be implicit if the Chancellor became Prime Minister.

Elliot Morley (Labour, Scunthorpe)

It goes beyond implicit in the sense that any Bill must have a regulatory impact assessment.

Bill Wiggin (Conservative, Leominster)

The Minister has risen to the challenge, and I am grateful to him for trying to set my mind at rest. It is only fair at this point that I withdraw my

amendment. I hope that in future, if there is an opportunity to include the matter in the Bill, he will grasp it. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Sue Doughty (Liberal Democrat, Guildford)

I beg to move amendment No. 284, in

clause 44, page 49, line 44, leave out 'summarise' and insert 'detail'.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following:

Amendment No. 286, in

clause 45, page 51, line 25, leave out 'summarise' and insert 'detail'.

Sue Doughty (Liberal Democrat, Guildford)

The Minister has given us various assurances about what will or will not happen. We have felt that good things could happen, but they are not being included in the Bill. I share the concerns previously outlined by the Conservative spokesman.

Under the proposals, the word ''summarise'' would be used to give reasons instead of details. Subsection (5)(b) says that in new subsection (3)(a)

''for 'the provisions proposed by the Director in his application or those provisions' there is substituted 'those which in the opinion of the Secretary of State give effect to the proposals set out in the Authority's application or to those proposals'''.

We have heard that the Minister will have regard to representations and will take the information on board, but we will have only a summary. People or groups who want to make representations, especially if they have alerted one another to a particular problem, will want to know more about the background to the problem that gave rise to the situation. They will want to know why the Secretary of State is taking action. They will want more detail to enable them to decide whether they have a good case before they go to the expense and worry of pursuing it. They will want sufficient information to be able to decide what applies to their organisation, although it may not apply to others.

In the interests of transparency, and to provide support for the organisations, the Minister has already said that he is anxious that information should be available to the people and organisations concerned, and that is why we want the detail rather than a summary to be in the Bill.

Elliot Morley (Labour, Scunthorpe)

I can reassure the hon. Lady, as there is a slight misunderstanding of how the notices are used. It is basically a matter of process, because issuing a notice is a formal exercise to inform stakeholders of the existence of the proposal, rather than a means of providing for detailed analysis. It is a formal process to make people aware that discussion is under way.

The notice is not designed to be a discussion of the merits of the regulatory proposal. The details would be set out in a consultation paper and a regulatory impact assessment for people to comment on and discuss.

I have already made it clear that the Government are committed to producing a new regulatory impact assessment every time the powers are used. The RIA will set out the assessment of options that could be employed to achieve an outcome and provide a detailed explanation of the choices. The full details will be spelt out for people to consider the options.

Sue Doughty (Liberal Democrat, Guildford)

The Minister has given further pointers about the information that will be provided, and we will need to consider that. I am happy that the regulatory impact assessment provision is there, but I still have some anxieties. However, we will leave the matter there, and may return to it on Report if we have anything further to say. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 44 ordered to stand part of the Bill.

Clause 45 ordered to stand part of the Bill.

Clause 46 - General functions of the Council

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 83, in

clause 46, page 52, line 26, after 'obtaining', insert 'publishing'.

This is not a particularly difficult proposal. It relates to the interests of consumers and the general functioning of the council, especially the acquisition and review of information. Like all members of the Committee, I am keen on transparency, which is a word the Minister uses almost as much as proportionality. The amendment would ensure that once the information is obtained, it will be available to the public because the council will be forced to publish it. Of course, sensitive information should not be published, but the amendment seeks to tease out the Government's thinking and to ensure that the Bill provides that information that can be published will be published. The amendment is intended to provide transparency, and I hope that the Government will take it in that way.

Elliot Morley (Labour, Scunthorpe)

We do not disagree with that; we are committed to openness and transparency. However, the effect of the amendment is already covered in new section 27F in clause 46, which expressly provides for publication. We do not disagree, but the provision is already in the Bill. I hope that that addresses the hon. Gentleman's concern.

Bill Wiggin (Conservative, Leominster)

Yes, it does. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Simon Thomas (Plaid Cymru, Ceredigion)

Clause 46 is important, as it sets up the new consumer council, providing for its remit and way of working. Clause 46 makes it clear that the new council will have offices in England and Wales, which will allow consumers in both countries physically to access its services. I am sure that they will also be able to have virtual access through a website and all the other things we do today, although that clearly does not have to be defined in the Bill.

However, in Wales we have always ensured that such bodies work under the aegis of the Welsh Language Act 1993. Will the Minister confirm that, when the council is working in Wales, it will make its services available and provide its information in both English and Welsh? My recollection is that we have had to amend the 1983 Act to ensure that such a body comes under its aegis. The Minister may have been

advised that we do not need to do that, but it is worth asking to ensure that the 1983 Act applies to the new consumer council.

Elliot Morley (Labour, Scunthorpe)

We would expect that bodies operating in Wales would follow the normal and well-established patterns of that place. Those issues are more for the National Assembly for Wales, but I will ensure that the hon. Gentleman's point is drawn to its attention.

Question put and agreed to.

Clause 46 ordered to stand part of the Bill.

Clause 47 - Provision of information to the Council

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 64, in

clause 47, page 55, leave out lines 31 to 34 and insert—

'(3) Before giving a direction under this section and in specifying the form in which any information is to be supplied the Council shall have regard to—

(a) whether in respect of a direction to a body (other than the Authority) the same or similar information in the form required may be held already by the Authority,

(b) whether the cost or other burden to the body in supplying the information may be excessive in relation to the benefit to and purpose for which the information is required by the Council,

(c) whether the information falls within the scope of section 27K(1).'.

The amendments that we have tabled to this clause relate to the provision of information to the council. Like the National Consumer Council, we welcome the changes to the Bill to ensure that the new council will have access to information about licensed water supplies, but we are concerned that the current proposals for information to be made available to it may be too restrictive.

Under the Bill, the Secretary of State has the power to make regulations prescribing information or circumstances in which a water company or licensed supplier may refuse to supply information to the council. We are concerned that that could entail narrower duties to provide information than in the Freedom of Information Act 1997, which would act against the interests of consumers and create confusing anomalies. We want to view the criteria for the refusal to supply information, and that should be in the Bill.

In any test of reasonableness relating to the refusal to give information or non-disclosure against the public interest, accurate and up-to-date information will be essential if the council is to be an effective voice for water consumers. When something goes wrong, information helps consumers to find out what happened and why. Due to the natural monopolies in the water industry, domestic consumers are in need of robust protection, as they have no choice of supplier. Moreover, considerably less commercial sensitivity and risk is associated with information relating to water companies' business than in other industries. I hope that the Minister will agree that that is fair.

The National Consumer Council is also concerned that refusals to supply by a company are referred to the new water services regulation authority for a decision, but that authority is one of the bodies from which the new council can request information.

Elliot Morley (Labour, Scunthorpe)

I apologise for interrupting, but I have a feeling that the hon. Gentleman is speaking to amendment No. 65

Bill Wiggin (Conservative, Leominster)

My comments are general—[Laughter.] They reflect the views of the Consumer Council for Water and the National Consumer Council and apply to the whole series of amendments. If the Minister is lost, I shall be more precise, because my intention has always been to be constructive in my comments. It fits in well to omit lines 31 to 34 and insert:

''Before giving a direction under this section and in specifying the form in which any information is to be supplied the Council shall have regard to''.

I have no interest in losing the Minister on this important series of amendments, but I want to make some basic comments that have come from the Consumer Council for Water because they are relevant and important. Essentially, the creation of an independent consumer council is welcome, but independence is not necessarily enough. It must have the right powers and resources to improve on the current system of consumer representation. Amendment No. 64 seeks to do that by requiring the council to have regard to

''whether in respect of a direction to a body (other than the Authority) . . . similar information in the form required may be held already by the Authority''.

In addition, it specifies that

''the cost or other burden to the body in supplying the information''

may not be excessive.

I hope that that comment sets the tone for the Minister's response. All the amendments to clause 47 fit in with what we are trying to achieve: an improvement in the current situation.

Elliot Morley (Labour, Scunthorpe)

I do not disagree with the principle behind amendment No. 64. It would ensure that information is readily available, but I assure the hon. Gentleman that the Bill already contains a suitable vehicle in clause 38. Under new section 27B of the WIA both bodies must make arrangements to exchange information between them. That will be agreed in a memorandum of understanding and the points raised by the hon. Gentleman can be dealt with under that. I hope that that reassures him.

On the other points raised by the hon. Gentleman, I shall be happy to reply when we come to amendment No. 65.

Bill Wiggin (Conservative, Leominster)

I am grateful to the Minister for his reply. We should come to amendment No. 65 as quickly as possible and, to be helpful, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 65, in

clause 47, page 55, line 37, at end add—

'(5) On receipt of a notice given to it under subsection (4), the Council may refer the failure to a person appointed under section 27K(3).'.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following:

Amendment No. 67, in

clause 47, page 57, leave out lines 13 to 16.

Amendment No. 68, in

clause 47, page 57, line 22, leave out

'whether under subsection (2) above or'

and insert 'under'.

Bill Wiggin (Conservative, Leominster)

Now I can look forward to the Minister's reply to my earlier comments. We have tried in these amendments to provide freedom to act on available information, which is not in the Bill as drafted. It will be helpful to hear from the Minister exactly how the provision will work.

Elliot Morley (Labour, Scunthorpe)

I am happy to explain how the provision will work and the reasoning behind it.

The amendments would stop the authority hearing cases when companies refuse to supply information to the council. I understand the reasoning behind that, but they would also require the Secretary of State to appoint an independent adjudicator regardless of whether there was a need for one. We do not want to do that unless there is a case for it, because it would create expensive bureaucracy.

I absolutely accept that it is necessary for the council to be independent of the authority and for it to be able to decide what its own information needs are. However, I do not accept that giving the authority a role in adjudicating disputed cases of access to information in any way impairs the independence of the council.

It is right that the authority should be available as a body to hear such cases. It is the expert on the water industry and is in the best possible position to judge the merits of individual cases. That is one of the reasons for setting it up. It is also best placed to enforce information requests on companies in the same way that it enforces licence conditions. It is worth stressing the power to enforce information requirements if there is a request for information and a company is reluctant to provide. That is a safeguard. I hope that my comments reassure the hon. Gentleman and that he will withdraw his amendment.

Bill Wiggin (Conservative, Leominster)

The Minister is getting to the reassurance that I need. In some of the amendments we have tried to specify what opt-outs may be available when we are dealing with sensitive information. I am glad that we agree that an improvement is desirable because the information that is being withheld can then be demanded. That is the sort of protection that the Bill should give to consumers, and I am reassured to hear that that is happening. The amendments resulted from the desire better to protect the consumer. I am glad that that is how the Minister, too, sees the matter. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 66, in

clause 47, page 57, leave out lines 8 to 12 and insert—

'(1) The body to whom a direction is given may refuse to supply information which relates to—

(a) national security,

(b) court proceedings,

(c) internal discussions or deliberations.'.

Again, this is about protecting the consumer and ensuring that quality information is provided when it is needed and that it can be acted on. This time we have looked at occasions when it would be unacceptable to supply information and national security is obviously paramount.

Elliot Morley (Labour, Scunthorpe)

The hon. Gentleman is quite right that there may be occasions when information should not be in the public domain. The amendment would remove the Secretary of State's powers to add or remove classes of information that may or may not be obtained by the council from the companies or the authority. The problem is that it is difficult to list all those classes of information. The amendment tries to do that, but there is no provision for the removal or addition of future classes, so it is very prescriptive. There might be categories of information which, for whatever reason, it is in the public interest to withhold. Security and commercial confidentiality are classic reasons.

The hon. Gentleman might be reassured to know that the Bill does not restrict the council's ability to collect information from companies that is relevant to its duty to collect and to publish data about complaints under clause 48. We will also ensure that there are no restrictions on its obtaining information that is relevant to the investigation of a complaint to which clause 49 applies. That will be done by secondary legislation.

Sue Doughty (Liberal Democrat, Guildford)

We support this useful amendment. Although I hear what the Minister says, it would prevent someone from saying, ''Oh, we could not give you the information because of this or that reason.'' It takes away all those grounds. I appreciate that there will be powers to get the information, but we are trying to get much more openness and clarity about the grounds on which people can refuse to provide it. Let us get those out of the way. Let us get all the rest of the information so that we avoid hiding behind such excuses, except where there are genuine reasons for not providing the information.

Elliot Morley (Labour, Scunthorpe)

I do not disagree with that. I do not want any wording that would supply a loophole for companies to exploit when there is a legitimate reason for providing the information. Under the Bill the authority can obtain information from companies if it is relevant to the complaint. The problem with the amendment is that it would remove the power to add information as well as the power to remove it. The Bill already provides for regulations that will mean that everyone is clear about what can be withheld. That will be spelled out so that people can see that there is a valid reason for it. Companies will not be allowed to withhold information unreasonably.

Norman Baker (Liberal Democrat, Lewes)

I listened carefully to the Minister. Earlier he used the phrase ''commercial confidentiality''. Can he explain to me—I may have misunderstood what he said—what would happen if a company believed that a matter was commercially confidential but the council did not?

Elliot Morley (Labour, Scunthorpe)

The council would appeal to the authority, which would make a judgment. If the authority agreed with the council, the information

would be obtained. There might be commercial information to which it would be important to have access to resolve a complaint. The council could make other appeals if it was dissatisfied. Nevertheless, I believe that the authority would respond to the consumer council, unless there was a good reason for the information not to be provided. Commercial confidentiality would not, in all cases, be an adequate reason.

Bill Wiggin (Conservative, Leominster)

I am grateful to the Minister, and to the hon. Members for Guildford and for Lewes for their comments. If the consumer council cannot get the information, it will be difficult for it to do its job. The Minister said that the council will be able to get that information, so perhaps our amendment is less necessary than I first thought. If the new consumer council is to be able to do more than is possible in the current situation, it may wish to have further powers to fight on behalf of consumers, and to do that successfully it will need such information to be available. We must therefore get the balance right. However, I feel that we have discussed the matter adequately, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: No. 258, in

clause 47, page 57, line 36, leave out 'such'.—[Mr. Morley.]

Clause 47, as amended, ordered to stand part of the Bill.

Clause 48 ordered to stand part of the Bill.

Clause 49 - Consumer complaints

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 57, in

clause 49, page 59, line 39, at end insert—

'(12A) Where a report is made to the Authority pursuant to subsection (10), and the report shows that, in the opinion of the Council, the relevant undertaker (in respect of any matter relating to its functions) by failing properly to consult the complainant, or by acting unreasonably caused the complainant to suffer loss or damage or be subjected to inconvenience, the Authority may direct the relevant undertaker to pay to the complainant an amount, not exceeding £5000, in respect of that loss, damage or inconvenience.

(12B) The Authority shall not direct a relevant undertaker to pay an amount to a complainant pursuant to subsection (12A) in respect of any loss, damage or inconvenience for which compensation is recoverable under any other enactment except in so far as it appears to be appropriate to do so by reason of the failure of the amount of any such compensation to reflect the fact that it was not reasonable for the relevant undertaker to cause the complainant to sustain the loss or damage or to be subjected to the inconvenience.

(12C) The Authority shall not make a direction pursuant to subsection (12A) unless it has given the relevant undertaker and the customer the opportunity to submit evidence and make representations.

(12D) A person to whom any amount is directed to be paid by a direction under this section shall be entitled to recover that amount from the relevant undertaker against whom the direction is made by virtue of this section.

(12E) The Secretary of State may by regulations substitute a different amount for the amount for the time being specified in subsection (12A).'.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following:

Amendment No. 154, in

clause 49, page 59, line 39, at end insert—

'(12A) Where a report is made to the Authority pursuant to subsection (10), and the report shows that, in the opinion of the Council, the relevant undertaker (in respect of any matter relating to its functions) by failing properly to consult the complainant, or by acting unreasonably caused the complainant to suffer loss or damage or be subjected to inconvenience, the Authority may direct the relevant undertaker to pay to the complainant an amount, not exceeding £5000, in respect of that loss, damage or inconvenience.

(12B) The Authority shall not direct a relevant undertaker to pay an amount to a complainant pursuant to subsection (12A) in respect of any loss, damage or inconvenience for which compensation is recoverable under any other enactment except in so far as it appears to be appropriate to do so by reason of the failure of the amount of any such compensation to reflect the fact that it was not reasonable for the relevant undertaker to cause the complainant to sustain the loss or damage or to be subjected to the inconvenience.'.

Bill Wiggin (Conservative, Leominster)

We have a curious anomaly in which my amendment and that tabled by the hon. Member for Lewes are very similar. In fact, mine goes just a bit further, but that is the good thing about being a Conservative. I hope that the points that I make, and those made by the hon. Member for Lewes, will be taken into account by the Government, because the amendments concern money, consumer complaints and the authority's behaviour.

We seek to change the way in which the authority reports, and to ensure that there is a certain amount of proportionality—I am beginning to get addicted to that word—in its behaviour. We seek to add provisions that prevent it from doing more than it should.

Proposed new subsection (12D) states:

''A person to whom any amount is directed to be paid by a direction under this section shall be entitled to recover that amount from the relevant undertaker against whom the direction is made by virtue of this section.''

I agree that that is pretty wordy stuff, but we are trying to build in a proper sense of balance. I hope that the amendment will be acceptable to the Government and, if it is not, I am keen to hear why that is the case, so I will take up no more time. I also know that the hon. Member for Lewes will be keen to make his own points.

Norman Baker (Liberal Democrat, Lewes)

It is spooky, as not only have we used the same words in the amendments, arrived at by some process of synchronicity or telepathy—

Bill Wiggin (Conservative, Leominster)

Good judgment.

Norman Baker (Liberal Democrat, Lewes)

Indeed. Moreover, the comments that I was intending to make are almost word for word those that we have just heard. If two parties independently reach the same conclusions, that suggests to me that we are making a strong case. I therefore commend the amendment to the Minister.

Simon Thomas (Plaid Cymru, Ceredigion)

Not having tabled my own amendment, I support one or other of the two under discussion.

The central case addressed by the amendments—redress to the consumer, and how the council will operate—is important. I am concerned that if the

amendments are not accepted, or if the Government do not adopt a similar approach, the new consumer council will be no more powerful than an MP is when he intervenes on behalf of a voter. What would then be the point of the consumer council? Any MP can do what the consumer council would do under the Bill: intervene, intercede, exchange letters, write to authorities, water companies or the National Assembly, publicise the issue in the local press or gain information. We are ultimately talking about how we ensure that those who have not undertaken their duties correctly are in some way brought to book.

It was interesting to hear the Minister reply to the earlier debate on clause 47 when the hon. Member for Lewes asked what would happen if there were a disagreement about commercial confidentiality. He answered that there would be an appeal to the authority—so the Government have already acknowledged that the authority can be an arbiter between the consumer council, or consumers and general society as a whole, and the water companies. It is the authority that can say what is or is not commercially confidential information.

The amendment quite correctly brings in the authority as a third party arbiter where there are disagreements about whether a consumer's complaint has been successfully resolved. It is to be commended, and I hope that the Government will have an amazing change of mind and introduce a similar set of words, perhaps on Report.

Elliot Morley (Labour, Scunthorpe)

Of course it is right that the consumer bodies should, on occasion, press for compensation from the water companies. What is important is the mechanism for doing that. The authority and the consumer councils have powers that MPs do not, particularly the power to obtain information. We can ask companies for information, but we cannot force them to give it to us. There is empowerment in the legislation. That is one of the slight differences.

The consumer councils have been very successful in pursuing claims on behalf of consumers. They do that by negotiations with the company. Formal powers are not needed for negotiations with companies and the taking up of consumer complaints. Water Voice has been successful in negotiations. In 2002–03 alone, it obtained something in the region of £535,786 in compensation and rebates for consumers. That was quite an achievement. I understand that since 1991 Water Voice has managed to obtain compensation and rebates to the tune of £8.1 million.

I have no problem with the principle of compensation, which is right and proper, or with the idea that the consumer body should pursue that on occasion when consumers make complaints. That, too, is right and proper. But the problem with the amendment is that we get into difficult legal waters when we give the authority the power to impose compensation on companies. There may be situations in which companies are adamant that they are not responsible. Such cases are quasi-judicial and the authority is not really geared up to handle those.

The proper procedure is for the consumer council to approach the water companies. We have already

discussed how they can appeal to the authority, and how, if the council wants more information, the authority will back it up, take care of negotiations and, hopefully, come to a conclusion. If there were a real dispute, however, it would probably be most appropriately dealt with through the courts, because they are geared up for such disputes.

Andrew Lansley (Conservative, South Cambridgeshire)

Just so that I do not misunderstand the Minister, is he referring to circumstances other than when the company is in breach of its performance standards?

Elliot Morley (Labour, Scunthorpe)

Yes, I can confirm that, because it is quite clear under statutory regulations. I am referring to a wide variety of individual complaints, which we have all come across as MPs and perhaps referred to consumer bodies for assistance and advice. It is a familiar process.

The process falls into a very difficult legal area, which I am not entirely sure the authority is geared up for. Specialists must be brought in, which causes problems, and one duplicates the procedure that exists in the small claims court. The potential negative effect of the amendment would be to give customers a financial incentive to make frequent complaints in the hope of receiving compensation without any risk of loss if they were unsuccessful. They could make complaint after complaint at no cost.

One should not take away the right to press compensation cases because a minority might abuse the system. I am not sure, however, that the authority is geared up for potentially complex legal arguments.

Norman Baker (Liberal Democrat, Lewes)

To be clear about the Minister's reference to the courts, is he suggesting that the council will simply say, ''Well I'm sorry, we have tried our best, it's over to you,'' and leave individuals to pursue the matter in court? Or does he imagine the council taking cases to court, acting as an advocate on points of principle and pursuing the matter on behalf of the consumer?

Elliot Morley (Labour, Scunthorpe)

Yes, there is nothing in the Bill to stop the council assisting the customer, providing advice and preparing and pressing a case in the small claims court. That is not a problem.

Bill Wiggin (Conservative, Leominster)

The point on which the hon. Member for Lewes has asked for clarification is extremely important. Up to £500 can be claimed in a small claims court, but because of the size of water companies it would be very easy for them to enlarge the case and prevent a consumer from pursuing them. It would leave such a trail of costs that it would be impossible for a consumer to afford to pursue a major company.

Elliot Morley (Labour, Scunthorpe)

If it were a larger amount, it would have to go to a higher court. There is nothing to stop the consumer council assisting a consumer to pursue a case in a higher court. Cases are not restricted to the small claims court, although it is likely that a lot of cases will remain at that stage, because it is a simpler, cheaper system and a lot of the claims would fall within that category.

Norman Baker (Liberal Democrat, Lewes)

I would like clarification of ''assisting''. When the Minister says that the council could assist a consumer, does he mean by providing an

opinion and advice, or by championing the case and taking it to court on behalf of the consumer?

Elliot Morley (Labour, Scunthorpe)

Generally, assisting would mean advice, but that would be a decision for the consumer council. It might want to pursue a case because it is a very important test case, for example.

We are discussing cases where agreement cannot be reached. Generally, agreement is reached and the companies accept that there has been a problem. Their repayments of £8.1 million have demonstrated that the system works. There is a danger of giving inappropriate responsibility to the authority and overloading it with distractions and work that it is not geared up for or designed to deal with.

With support from the consumer council and, if required, fall-back to the courts, the right balance is provided for consumers.

Simon Thomas (Plaid Cymru, Ceredigion)

The Minister spoke about the current success of Water Voice, but will he accept that Water Voice says that it needs such a redress? On the basis of its present success it has a different interpretation of the need for arbitration from that of the Minister.

Does the Minister also accept that, with other regulatory bodies in gas, electricity or telecoms, consumers have a choice? They can say, ''I've had enough of that company, I'm shifting to another.'' In the water industry, the average consumer does not have that choice; only a few consumers, who deal with huge amounts of water, have the choice to switch their water supply company. We must seriously consider that particular aspect.

Elliot Morley (Labour, Scunthorpe)

I understand Water Voice's views on the matter. It is a fine organisation, which I respect. However, responsibility falls on the authority and not Water Voice, and I have outlined the problems associated with that. There are risks of overwhelming the authority with work for which it was not set up and does not have the appropriate facilities. That is what the small claims court and its procedures are for. On that basis, although I understand the reasoning behind the amendment, it is not practicable. It is important that the consumer council is given the necessary support to pursue cases on behalf of consumers, but the most appropriate place for the resolution of disputes is in the courts.

Bill Wiggin (Conservative, Leominster)

The Minister has done all that he was supposed to do, but it is a shame because the amendments would have strengthened Water Voice and the consumer council, and improved the Bill. The amendments in my name would have gone further, and it is a shame that the principle has not properly been addressed.

At least the Minister is sympathetic to the views expressed today. As he said, the authority will not have the resources or manpower to support consumers as consumer bodies would want. We must acknowledge the difficulties that water companies face, because they are not a cheque book into which anybody can dip when they feel like it. We need a degree of proportionality that we do not yet have. I hope that the Minister will consider our discussions and, if possible, re-examine the issue. I will not press

for a vote as we may bring up the matter on Report. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 49 ordered to stand part of the Bill.

Clause 50 - Investigations by the Council

Clause 51 - Financial penalties

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 84, in

clause 51, page 62, line 6, leave out from 'penalty' to end of line 7.

I have been looking forward to this amendment, because the idea that a penalty should be

''of such amount as is reasonable in all the circumstances of the case''

should be implicit. My amendment would ensure that it was implicit. I do not understand how a penalty of ''such amount'' could be unreasonable. All penalties should of course be reasonable in the circumstances of the case; that should be fundamentally implicit.

Having been told all morning that various things are implicit, I think that the amendment would delete some unnecessary verbiage from the Bill and ensure that all penalties were naturally balanced, reasonable and took into consideration all circumstances of the case.

Elliot Morley (Labour, Scunthorpe)

I take it that the hon. Gentleman thinks that the penalties should be unreasonable, which does not seem very user-friendly in relation to business. The amount that is reasonable in the circumstances of the case is spelt out very clearly in the Bill. We would expect the authority to follow such principles of natural justice, but it is important to provide in the Bill a safeguard for the company. That would ensure that a failure by the regulator to apply the provision would be grounds for appeal under new section 22E. We return to the question of balance. Consumers have rights, as do companies, and we are trying to reflect both. That is the principle behind the clause.

Bill Wiggin (Conservative, Leominster)

I am grateful to the Minister for that reply, but it did not address the problem of that being implicit in the Bill. We have had to put up with that attitude all morning, and for once he should have been more willing to give ground. I know that it is very difficult to get a Minister to give an inch, particularly the Minister in these circumstances, but I do not feel that this is a make or break part of the Bill, nor is it a wrecking amendment. It would have improved the wording under some interpretations. It is not a die-in-the-ditch amendment at all; it is satisfying for me to tell the Minister that something should have been

implicit, but it is not. 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. 85, in

clause 51, page 65, leave out lines 2 to 5.

The amendment would clarify the wording in the Bill. The clause states:

''If the whole or any part of a penalty is not paid by the date by which it is required to be paid, the unpaid balance from time to time shall carry interest at the rate for the time being specified in section 17 of the Judgments Act 1838.''

I suspect that that is normal, but it seems to be a little draconian in relation to what we are dealing with. It is not a question of a court case, but how the authority shall behave. I do not know if anyone has ever been forced to pay an unpaid balance at the interest rate specified in section 17 of the 1838 Act. It is an interest rate very different from the one that the Chancellor will no doubt be trumpeting this afternoon. I suspect that the provision is unduly harsh, which is why I sought to have it withdrawn.

Elliot Morley (Labour, Scunthorpe)

The hon. Gentleman is nothing if not even-handed. We are veering from being nasty to companies to being nasty to consumers. If there is an outstanding balance on a penalty that is being repaid to the company in sums, it is not unreasonable that there should be a charge of interest. The proposed change to clause 51 would remove an incentive for the company to pay a penalty on time, which is very important.

Hugo Swire (Conservative, East Devon)

Referring back to an earlier discussion, when we talked about people who default on their water bills, would the Minister explain what penalties defaulters will be encouraged to pay in terms of interest when they are chased up by the Government, as he promised earlier?

Elliot Morley (Labour, Scunthorpe)

At present, it is open to the companies to take court action against their defaulters. If the court thinks that there is no good reason why people have not paid, it could apply penalties, including interest. That is a matter for the courts, and the provision is there. However, that is not an excuse, because if people are deliberately withholding payment it is reasonable to impose some penalty. I do not disagree with that, but one cannot then argue that we should remove the similar provision in relation to companies. If they have to pay a penalty, they should pay it on time. If they do not there is a charge of interest. It is also established practice that an appropriate rate of interest should apply in the event of late payment of a penalty or fine imposed on a corporate body, which is covered in the Utilities Act 2000. The provision is in line with existing legislation and practice.

Norman Baker (Liberal Democrat, Lewes)

The question of interest is not controversial, at least to my hon. Friends and me. In his introduction, the hon. Member for Leominster made the point that the provision is unduly harsh. I do not know whether that is true, because I am not familiar with section 17 of the Judgments Act 1838. Is that true or is the provision a standard condition of the 1838 Act?

I should point out in passing that there is an ambiguity in the third line. Does the wording need to be clarified?

Elliot Morley (Labour, Scunthorpe)

Until the hon. Gentleman raised the matter, it seemed clear to me.

The current rate is 8 per cent., which is in line with the calculation and application of rates in the Utilities Act 2000. There is nothing exceptionally different about the provision. One can, as the hon. Gentleman has done, argue about whether interest should be applied, but it is not unreasonable to include an incentive to pay on time.

Bill Wiggin (Conservative, Leominster)

I agree with the Minister that it is not unreasonable to have an incentive to pay on time. He will find that 8 per cent. is 4 per cent. over the base rate, which is particularly high for an area such as water payments, where defaulters sometimes do not have to pay their bills and the item is essential. We will not make any progress because the debate is about the amendment rather than the Judgments Act 1838. My amendment has done everything that I had hoped that it would by allowing me to make my points and by instigating the debate. I have no problem with withdrawing it, so I beg to ask leave to withdraw the amendment.

Amendment, but leave, withdrawn.

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 100, in

clause 51, page 65, line 41, at end insert—

'(ab) that the imposition of the penalty was based on an error of law or fact;

(ac) that the amount of the penalty was unreasonable;'.

The nature of this amendment is different because it attempts to clarify and to tidy up the wording. When a mistake has been made, the amendment would ensure that it was rectified speedily.

Elliot Morley (Labour, Scunthorpe)

The amendment would expand the grounds of an appeal against the imposition of an unreasonable penalty or an error of law or fact. That is perfectly reasonable, but the Bill already covers those grounds for appeal. An error of law means the authority going beyond its powers or non-compliance with the notice procedure. The clause contains detailed procedures on errors of fact, including consultation with a company. That means that errors of fact can be pointed out, and it would be unreasonable for the regulator not to take them into account. If the error of fact were such that it took the matter outside the provisions on financial penalties, it would also be outside the powers of the enforcement authority. With regard to reasonableness, proposed new section 22A requires the penalty to be reasonable—unless, of course, we had accepted amendment No. 84. In opposing an unreasonable penalty, the authority would also be going beyond its powers. The Bill contains those safeguards, and I hope that that reassures the hon. Gentleman.

Bill Wiggin (Conservative, Leominster)

I am relieved that those matters have been addressed in other parts of the Bill. If the authority imposes a penalty, I wonder whether the interest will also be paid at the rate that we discussed earlier. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 86, in

clause 51, page 65, line 47, leave out

'or any portion of it'.

This is a probing amendment. If it is unreasonable for the enforcement authority to require the penalty imposed to be paid, why should it unreasonably require any portion of it to be paid? I am seeking clarity on the phrasing.

Elliot Morley (Labour, Scunthorpe)

I can explain that. As drafted, the clause allows a company to appeal against not only the date for full payment of the penalty but the instalment dates. A company may opt to spread the cost—that is not unusual. The effect of the amendment would be that companies would not be able to appeal against the terms set out for the payment of a penalty by instalments—the length of the repayment or the number and frequency of instalments. In other words, the circumstances in which the company could appeal the spreading of cost would be reduced. The Bill includes a provision for payment by instalments.

Bill Wiggin (Conservative, Leominster)

Again, I am grateful for that answer. The Minister's extremely helpful comments satisfy me, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Simon Thomas (Plaid Cymru, Ceredigion)

I have listened to the past few minutes of discussion about whether reasonableness is implicit in the Bill. We had one amendment that took it out of the Bill and another that put it back in. My general point is that, for simpletons like me, it is better that everything is stated in the Bill.

Elliot Morley (Labour, Scunthorpe)

It is important that a Bill states as much as it needs to in order to be clear about the intentions and circumstances, but it is a difficult problem. If we tried to put in a Bill every single circumstance, exemption and issue for consideration, we would be walking around with volumes the size of the Encyclopaedia Britannica. There must be a balance. A Bill has to be drafted in a way that is clear and not open to misinterpretation, but there must also be an element of flexibility to deal with issues that are difficult to predict. I do not disagree with the hon. Gentleman's general point, but we must be realistic about the way in which legislation is formulated.

Question put and agreed to.

Clause 51 ordered to stand part of the Bill.

Clause 52 - Enforcement of certain provisions

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 87, in

clause 52, page 66, line 40, leave out subsection (3).

Bearing in mind the Minister's comments about a Bill the size of the Encyclopaedia Britannica, I have to say that the Government did their best with this 232-page special. However, having gone through it with a fine-tooth comb—as we all did, of course—I could not help but be curious about why the Government should want to reduce ''twenty-eight''

to ''twenty-one''. The purpose of this probing amendment is to find out why they chose to do that.

Elliot Morley (Labour, Scunthorpe)

There is a fairly simple explanation, although there has been some confusion about the matter. A period of 21 days would bring the Bill in line with the provisions for other utilities and make legislation consistent.

Bill Wiggin (Conservative, Leominster)

I suspected that. That is a shame, because the clause deals with the enforcement of certain provisions, and 28 days seems more reasonable. However, as this Bill by its nature tidies up other legislation, there is a limit to our ability to alter the wording—not that I wish to stand in the way of that. Therefore, I am again grateful to the Minister for his reply and beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 52 ordered to stand part of the Bill.

Clause 53 - Links between directors' pay and

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 88, in

clause 53, page 67, leave out lines 29 to 36.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to take amendment No. 89, in

clause 53, page 67, leave out lines 37 to 43.

Bill Wiggin (Conservative, Leominster)

We are galloping along this morning, which should warm the cockles of the Minister's heart. [Interruption.] Apparently he has warm cockles, but he may be the only one.

The purpose of the amendments is to withdraw large chunks of the Bill that deal with remuneration and standards of performance. Again, I want clarification from the Government. I want to know why certain chunks have been included in the Bill. The text states:

''(a) whether or not there are in force in respect of the financial year during which the statement is made arrangements falling within subsection (3) above; or

(b) if not, whether the company intends that such arrangements will be in force at some time during the financial year''.

I find that slightly muddling. I hope that the Minister can clarify what is going on.

Norman Baker (Liberal Democrat, Lewes)

I must part company with the Conservative spokesman on this point. We appear to have a fat cats' charter: an attempt to let people be paid what they want and to cover it up by removing freedom of information provisions in the clause. I can only think that the amendment was drafted by the Institute of Directors, because it certainly was not drafted by consumers. The hon. Member for Leominster is a jolly good chap. I can only assume that he did not understand his amendment when he tabled it.

Elliot Morley (Labour, Scunthorpe)

The amendments relate to the duty to publish links between directors' pay and standards of performance that clause 53 places on the undertakers.

They would remove the duty to include in statements the arrangements that are planned for the current financial year. The hon. Member for Lewes made that point.

The amendments would mean that the statement would be retrospective. That goes against the concepts of openness and transparency, and would considerably reduce the value of the statement. We have been talking about holding companies to account, being open and transparent, and making information available. I am not clear that the amendment progresses those objectives because it restricts the information by making it retrospective. Following that explanation, I hope that the hon. Gentleman will withdraw his amendment.

Bill Wiggin (Conservative, Leominster)

I am grateful to the hon. Member for Lewes for his compliment, but he should have stopped there instead of putting the boot in later.

This was a clarifying amendment. I am not sure that I agree with the hon. Gentleman about the fat cats' charter. We must ensure that there is a proper incentive for all workers in the sector to work as hard as they can, and that they are remunerated properly. The probing amendments sought to do that. Sometimes we go too far in the interests of transparency, and that was what I was probing. The Government have not done a great deal to change my mind, but I do not wish to press the amendment at this stage. If necessary, we can always bring it back on Report. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 90, in

clause 53, page 68, line 6, leave out from 'it' to end of line 8.

The amendment relates to the provision that states that the statement

''may be published by the Authority in such manner as it may consider appropriate.''

That is not the right sort of freedom to allow. If the Bill specifies that the authority must publish a statement, we should at least guide the authority about the way in which to do that. I know that the Minister will say that the authority could publish the statement on its website, but I hope that we will be a little more prescriptive, or remove the provision and not be prescriptive at all. We should be one or the other.

Simon Thomas (Plaid Cymru, Ceredigion)

I respect what the hon. Member for Leominster has been trying to do, but he goes too far in this case. How can transparency be taken too far? I just do not accept that as a principle. The information is vital. Consumers pay their water bills—we want them to do that, of course—and therefore there must be a sense of trust and an exchange of information between the consumer and the water company. One of the central parts of that must be that when I pay my water bill I know what remuneration the director is getting compared with their standards of performance during that year. In Wales, we can do that in a slightly different way because Glas Cymru is a different sort of water company.

Bill Wiggin (Conservative, Leominster)

I think that we have moved on from that debate. We are now discussing amendment No. 90, which concerns publication of the authority's statements. I am sure that the hon. Gentleman is making helpful points, but he may find that it is too late, although it is not for me to decide that.

Simon Thomas (Plaid Cymru, Ceredigion)

My understanding of amendment No. 90 is that the hon. Gentleman is absolutely right.—[Laughter.]

Elliot Morley (Labour, Scunthorpe)

That is a first for the day.

There is a general issue about transparency. Amendment No. 90 relates to the duty to publish information about links between directors' pay and standards of performance. The intention is to go a little further than the hon. Gentleman is assuming in the publication and availability of that information. It is also the intention to publish statements so that it is easy to compare the arrangements with the performance of each company. The amendment would make it much more difficult for shareholders and customers to hold companies to account, because they would have to approach each company separately to collect the necessary information. The purpose of the provision is to make it easy to compare the information and have it available, and to provide the authority with the flexibility to do that.

Bill Wiggin (Conservative, Leominster)

I am grateful to the Minister and to the hon. Member for Ceredigion (Mr. Thomas), and for the interventions. I hope that the hon. Member for Workington (Tony Cunningham) will ensure that his Minister has a good lunch so that when he returns this afternoon he is in a more charitable mood. I know that the Minister is generally a better bloke than he has been this morning. That apart, I am more than willing to show my charitable side by withdrawing my amendment, because I have no wish to prevent information from being published. However, the provision is not as clear as other parts of the Bill. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 53 ordered to stand part of the Bill

Clause 54 - Reasons for decisions

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 91, in

clause 54, page 69, line 11, leave out from 'decision' to end of line 13.

The amendment would omit the words

''in such manner as it considers appropriate for the purpose of bringing the matters to which the notice relates to the attention of persons likely to be interested.''

I did not understand those words, and I hope that the Minister can explain what they mean.

Elliot Morley (Labour, Scunthorpe)

Clause 54 is intended to increase regulatory transparency, openness and certainty. It requires the authority, the Secretary of State and the National Assembly for Wales to publish and disseminate reasons for decisions taken in relation to

undertakers' conditions of appointment and the licences of licensed water suppliers. I would not have thought that that was controversial, because it is important to have information. It is necessary to prescribe a minimum acceptable level of publicity to ensure that the provision achieves its aim and continues to do so. The purpose of the amendment may be to promote a more general responsibility or approach to publishing decisions, but it would risk reducing the openness of the process by removing that part of the provision which forces a reasonable level of publication. The provision provides a minimum safeguard to ensure that the information is in the public domain.

Bill Wiggin (Conservative, Leominster)

I am grateful for the Minister's reply and I am very keen to withdraw my amendment so that we can move on to the next one. I beg to ask leave to withdraw the amendment

Amendment, by leave withdrawn.

Clause 54 ordered to stand part of the Bill.

Clause 55 - Co-operation between water regulators

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 92, in

clause 55, page 69, line 32, at end insert—

(e) the Drinking Water Inspectorate'.

Why are we not encouraging co-operation between the Secretary of State, the Welsh Assembly, the Environment Agency, the Water Services Regulation Authority and the drinking water inspectorate? Why have they been omitted from this important part of the Bill, which encourages co-operation? It would have been helpful if they had been included, which my amendment would do.

Elliot Morley (Labour, Scunthorpe)

I agree with the hon. Gentleman, but those organisations have not been left out. They are covered in clause 55. The drinking water inspectorate is the responsibility of the Secretary of State and acts on her behalf, so the inspectorate will be bound by the same duty that is already imposed on the Secretary of State and will be covered by the memorandum of understanding between the Secretary of State and each of the other water regulators. The hon. Gentleman made a fair point, but it is already covered.

It being twenty-five minutes past Eleven o'clock, The Chairman proceeded, pursuant to Sessional Order C [29 October 2002] and the Order of the Committee [16 September 2003], to put forthwith the Question already proposed from the Chair.

Amendment negatived.

The Chairman then proceeded to put forthwith the Questions necessary to dispose of the business to be concluded at that time.

Clauses 55 to58 ordered to stand part of the Bill.

Adjourned till this day at half-past Two o'clock.

Standing Committee D

Water Bill [Lords]

Schedule 4 - Licensing of water suppliers

Bill Wiggin (Conservative, Leominster)

I beg to move amendment No. 123, in

schedule 4, page 143, leave out lines 27 to 30.

Sir David Amess (Conservative, Southend West)

With this it will be convenient to discuss the following:

Amendment No. 248, in

schedule 4, page 143, leave out lines 27 and 28.

Amendment No. 124, in

schedule 4, page 145, leave out lines 17 to 34.

Amendment No. 125, in

schedule 4, page 145, leave out lines 39 to 42.

Amendment No. 249, in

schedule 4, page 146, line 42, at end insert—

'(2A) For the purpose of calculating the threshold requirement in subsection (2) above, supply to household premises may be aggregated in circumstances where the households share their facilities for the supply of the water.'.

Bill Wiggin (Conservative, Leominster)

I am grateful to you, Mr. Amess, for taking your time, though not as grateful as I would have been had you taken a moment or two longer. We have tried to clarify one or two points in schedule 4, rather than change it significantly. [Interruption.] I shall find my amendment paper in a moment.

Norman Baker (Liberal Democrat, Lewes)

If I speak for 30 seconds, I shall be doing the hon. Gentleman a considerable favour, because by that time he will have found his place in the notes. He can return the favour to me next time I come into the Committee Room and am rather out of breath.

Bill Wiggin (Conservative, Leominster)

I am more than grateful to the Liberal Democrat spokesman. He was absolutely right. The purpose of the amendment is to find out why home owners are, to some extent, being persecuted—perhaps that is too strong a word—by the way that the Bill is structured. We are seeking to find out who the licensed water suppliers are. At the moment, it is far from clear what sort of institution could become a licensed water supplier. For example, a hospital is not a residential home—it does not have anyone living in it—but it could run a licensed water supply as a business, perhaps even at a loss as an offset against tax. Other big companies could perhaps do that also. The amendment is designed to tease out who the Government envisage a licensed water supplier will be and who it will not be. I hope that the Minister can clarify that definition.

Andrew Lansley (Conservative, South Cambridgeshire)

You will observe, Mr. Amess, that amendments Nos. 248 and 249 appear in my name. It may be helpful to the Committee if I explain why I tabled amendment No. 248 as, on the face of it, it appears merely to be a subset of amendment No. 123, moved a moment ago by my hon. Friend. As he made clear, that amendment was tabled to enable the Committee to explore some issues, but in practice it would have the effect, on the licensing of additional water suppliers, of removing both the requirement that premises are not household premises and the threshold requirement. In effect, one might say that there would no longer be a threshold requirement.

I am sure that, as I do not think that my hon. Friend intended his drafting to be complete, he recognises that if one wanted there to be no threshold requirement, new section 17D relating to the threshold requirement to be inserted into the Water Industry Act 1991, which begins on page 145 later in the schedule, would need to be removed. My two amendments therefore go a little further and are intended to permit competition of water supply to be extended to the household sector. It is not a question of definition, but of how much competition there is and where it should go.

It seems clear to us all that the idea of permitting competition in supply to individual household premises would be a step too far and, given the relatively low cost of water as opposed to the cost of providing the network, it would not attract water suppliers. However, if supplying large water consumers in industrial premises is attractive, there is no reason why a set of aggregated premises could not be part of the competitive market. The issue is about bringing together a sufficient volume of demand to justify the supplier's intervention to sell to the market, and that would require groups of premises to come together.

We have examined that idea in other contexts. In the case of gas supply, a provision enables new settlements to contract other than with the Transco network, which is almost the monopoly supplier of the network for other purposes, when a new infrastructure exists for them to enter the market place. That has happened in one or two areas, including my constituency.

The question is whether competition should be introduced if premises can be aggregated to meet the threshold requirement for water. No doubt we will debate what that threshold should be separately, and I am not trying to interfere with that now. If household premises aggregate their demand, for example in a new settlement or in an area with premises supplied with a discrete water supply, why not make it available for competition in the same way as industrial premises? The only substantive difference would be the need to install charging mechanisms, but if the premises are metered, that should not present an insuperable problem.

Amendments Nos. 248 and 249 would remove the requirement for household premises so that they were not precluded from entering the competitive market. Amendment No. 249 would clarify that the threshold

requirement is what really matters, and that the market should exist for the supply of relatively large amounts of water rather than small amounts to individual, household premises. The amendments would also offer the industry the opportunity to create a competitive market in the household sector.

Elliot Morley (Labour, Scunthorpe)

The amendments concern thresholds and the eligibility of those who could benefit from competition, and the hon. Member for South Cambridgeshire (Mr. Lansley) asked who could be suppliers. The answer is companies that meet the requirements laid down by the regulations, and we will consult on the detail of that. The companies must also have customers who use more than 50 megalitres a week. He is right to say that that applies not only to companies, but to large public bodies such as hospitals, prisons and large departments. In total, around 2,300 customers would fall into that category.

The threshold was set after considerable discussion and consultation. Although we accept that there may be advantages to customers from competition, we do not believe that a complete free-for-all or liberalisation of the market is necessarily in the interests of consumers. It may have detrimental effects on both prices and supply.

That was the difference between the Government and those, including the right hon. Member for Wokingham (Mr. Redwood), who argued on Second Reading for unrestrained competition. There might be negative aspects to that. We have approached this in a pragmatic, cautious way. Setting the threshold at 50 megalitres brings in a considerable number of potential customers—2,300—but it does not completely distort the market with potential negative effects such as stranding assets. That enables us to evaluate the effect of the competition.

We have already given a commitment that we will look at the effects of the competition after three years and consider extending it if it has been successful. We would consider extending it to the domestic sector if it was felt that that would be in consumers' interests. Allowing domestic consumers to come together to get over the 50-megalitre threshold is such a complex way of doing it. One might as well simply include domestic users rather than have the complication of them coming together. That would be hard to administer; effectively one would have no threshold.

Andrew Lansley (Conservative, South Cambridgeshire)

Can the Minister address his mind to the point relating to new settlements? I do not have the reference, but one of the changes introduced in legislation on the gas industry was a regulation designed to allow new settlements to choose from whom they took their gas supply. That is rather a special case. Is there not a case here for considering that in the first instance as a means of seeing how the mechanics of household domestic water supply by new suppliers might be introduced into what is otherwise a monopoly?

Elliot Morley (Labour, Scunthorpe)

That is an interesting point. Gas and electricity supply are different because they have been

set up in a way that allows open competition. It is not quite the same with water at present. However, for new developments, competitors may seek to serve any greenfield site under inset appointment arrangements. There is an element of competition in greenfield sites. It is not quite the same system as that which applies to the gas supply but the potential for competition is there.

We want to protect the interests of consumers, both large and small. Competition may have beneficial effects in the supply of water but water is an important utility, and we do not want to jeopardise the effects on consumers. We have already talked about vulnerable groups, costs, prices and things like that. Sometimes competition can have negative as well as positive effects. We should therefore take a cautious and balanced approach.

Bill Wiggin (Conservative, Leominster)

I accept what the Minister says about having the best interests of the consumer at heart, but he has put his finger on a danger. If one starts with the biggest consumers, there is a danger that one can take out quite a solid income stream by allowing the large consumers to buy discounted water. It makes it harder to push the benefits down the pyramid to the household consumers because one has removed a large quality income flow from the whole industry. Although I agree with what the Minister intends to do, I think that he has started this the wrong way round.

Elliot Morley (Labour, Scunthorpe)

I would disagree. We have started this the right way round. There is indeed an issue that the hon. Gentleman has mentioned. There can be a consequence if a company begins to lose big customers to competitors. The whole idea is that companies will strive to be efficient in delivering their service. The threshold has been set at 50 megalitres because we believe that 2,300 potential customers is sufficient to attract new competitors, but is not a great enough number to have the distorting effect mentioned earlier. It strikes a cautious balance, which will allow us to get some experience of competition in the water sector. We will review the situation in three years, and there is the potential to extend it if it is a success. However, if there are problems, we will not cause catastrophic consequences by going too far too fast.

Sue Doughty (Liberal Democrat, Guildford)

I have been following the argument with interest, and sympathise with some of the views put forward. What if this is not a success? What would happen if a company changed its supplier to one that was more competitive but found that the arrangement did not work? If that company was not happy with the supplier because, for example, the supply was intermittent or there were shortages of water, would the proposed three-year review suggest any way back from that situation?

Elliot Morley (Labour, Scunthorpe)

I think that there would be a way back. In the electricity and gas industry it is normal for large users to sign contracts, some of which are for a fixed term. At the end of the fixed term customers are able to review the deal, so it is possible to change the situation, although the disruption of the relationships entered into by the large user must be taken into account.

Paddy Tipping (Labour, Sherwood)

It is important both to get some experience and to be cautious about this approach. Must it not be the case that a limited experiment that allows the bigger customers to make some choice will inevitably lead to efficiency and economies right down the chain? I welcome the Government's proposal, but we need to go cautiously. I expect that we will want to extend the experiment after three years, but I would be cautious about extending it into the domestic sector.

Elliot Morley (Labour, Scunthorpe)

My hon. Friend is absolutely right. There is every likelihood that competition will bring about beneficial effects, as competition often does. However, I reiterate that it can sometimes have negative effects. Proceeding in this way allows us to examine progress cautiously, and in three years we can evaluate the pros and cons of the situation.

Brian Iddon (Labour, Bolton South East)

Further to that point, will the Minister bear in mind what has happened to research in the electricity and gas supply industries? Competition has driven prices down to such an extent that research will no longer be possible on the scale that it was previously. I was at Loughborough university last week, where I saw a very large building in which British Gas used to do all its research. Except for one small corner, that building is now empty.

Elliot Morley (Labour, Scunthorpe)

My hon. Friend demonstrates one of the potential negatives, but it is a matter for speculation as to whether we will see that outcome. We have the opportunity to see how this measure works and, if it is successful, there is the opportunity to extend it.

Simon Thomas (Plaid Cymru, Ceredigion)

I seek clarification from the Minister on that point. I understand from the Bill that, in future, the threshold could be lowered by means of a statutory instrument. Would further primary legislation be needed to introduce competition into the household sector? If so, will the Minister comment on what the Government's approach to any future legislation would be?

It would be relevant to our current scrutiny to know whether the extension of the scheme to the household sector is a serious option. We must also bear it in mind that we are discussing the delivery of potable water only. The water industry is much bigger than that; it includes sewerage and infrastructure investment. We must therefore take into account the dangers for the entire water industry of extending competition to the household sector.

Elliot Morley (Labour, Scunthorpe)

I am sure that many large companies can provide their own sewerage infrastructure now; there is no restriction on that. I can confirm that if we wish to extend competition in the water industry to the domestic sector, primary legislation will be needed. The matter would therefore have to return to the House, so that there could be proper scrutiny and the House could have the opportunity to weigh up the pros and cons. The position that we have taken in the Bill is perfectly reasonable, and on that basis I hope that the hon. Member for Leominster (Mr. Wiggin) will withdraw the amendment.

Bill Wiggin (Conservative, Leominster)

There are several misunderstandings, which I shall seek to clarify. First, if we can agree that competition is successful at any stage, we can fulfil the desire that we share to allow small consumers, including households, to have cheaper water.

Amendment No. 123 would remove the need for the word ''household'' to be in the Bill. That would mean that we did not need primary legislation, particularly if amendments Nos. 124 and 125 were also taken on board. Amendment No. 125 really tackles the issue of the large customers—the 2,300 over-50 megalitre customers to whom the Minister referred earlier. The danger is that they will not be a pilot scheme for the concept because they are not all in the same area and they are not similar companies. Without doubt, they will all say that the scheme is successful, because they will be having cheaper water, but that will not necessarily have the positive impact that the Minister is looking for in this experiment. Although he is right to be cautious, he is being cautious at the wrong end of the market.

Andrew Lansley (Conservative, South Cambridgeshire)

Does my hon. Friend agree that, even though the Minister seeks to be cautious, he clearly shows a willingness to consider extending competition to large non-domestic consumers of water? However, he is not willing to consider in the same way the extension of competition to the domestic sector, even though he told us that he was. Leaving in the Bill the prohibition on competition in the domestic sector is a substantial constraint, regardless of what the review might say in three years.

Bill Wiggin (Conservative, Leominster)

I agree. My hon. Friend's amendment No. 248 was also designed to do what I have described, for which I am extremely grateful, because we should be paving the way for cheaper water for domestic consumers. There has been a huge amount of debate about disadvantaged and vulnerable groups, and those are the people who would benefit from cheaper water—

Elliot Morley (Labour, Scunthorpe)

Maybe, maybe not.

Bill Wiggin (Conservative, Leominster)

Yet in a bizarre volte-face, the Government have done everything that they can to preclude those people. I accept the Minister's caution, and I am not saying that we must proceed with all customers at once. There is nothing preventing the Government from proceeding with pilot schemes and doing different things in different areas. By its very nature, the supply of water falls tidily into that type of pilot scheme, because one cannot have Scottish water in London; it just does not get here. It would therefore be a much easier material with which to experiment, if that is what the Minister sought to do.

The Government's method works against smaller customers and vulnerable groups. Although I agree that the Minister is right to be careful, that is not the right way to proceed. The hon. Member for Ceredigion (Mr. Thomas) mentioned that electricity and gas prices had been driven down. I should imagine that that is a welcome change of events, particularly for vulnerable groups.

The rest of the debate is in Hansard.