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Sir Charles Morrison (Devizes) : In considering the transfer of a utility from the public to the private sector, it is worth remembering that there are two reasons for the existence of the public sector, the one Socialist and the other pragmatic. My right hon. Friend the Secretary of State referred to the Socialist reason when he opened the debate. It is the continuing Socialist conviction that only as a result of the nationalisation of the means of production, distribution and exchange, coupled with all-embracing state provision, can the public good be

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served. I totally disagree with such ideology. It provided some dream of a solution to the ills of the late 19th and early 20th centuries, but it never succeeded in practice.

The second reason for the existence of a public sector is the pragmatic one that, at one moment or another in our history, it was seen or believed that the private sector would not, or could not, meet a public need. That is why I do not believe it is a self-evident truth that, automatically, everything in the public sector must be bad or badly run, and everything in the private sector must be good or well run. I hope that the Government do not believe that either. If they do, they should beware, because they would then be in danger of becoming as ideological as the Opposition. Instead of judging issues on their merits, issues would be judged according to the theories of some doctrine or dogma. In my judgment, common sense and pragmatism should be the basis of our thinking about the future of the water industry.

It is against that background that I want to deal with the Bill, while remembering that water first came under public control, as we were reminded in a letter to The Times earlier this week, as a result of the determination of a leading Conservative. That does not mean that the time has not arrived for water to be transferred from the public sector back to the private sector, but I again emphasise that it is important to adopt a pragmatic approach to the question of how water should be organised.

The Bill creates a new strategy for water. Given the nature of water and its supply, I cannot see how the Bill can be claimed to provide competition. My right hon. Friend the Secretary of State referred to the concept of "comparative competition." That is all very well, given the 10 water authorities and the 10 plcs that will exist. Standards may be adequately set as a result of their existence, but there will be no competition in any normal sense of the word. The Bill therefore creates the opportunity for public monopolies to become private monopolies. However, as we have heard, those private monopolies will be freed from the financial constraints that they currently suffer as a result of being part of the public sector. Undoubtedly, most of the existing water authorities have, at some time or another, been at the receiving end of justified public criticism, but most of the problems that have given rise to that criticism in respect of poor supply, poor water quality, pollution and inadequate sewerage systems have fundamentally stemmed from Treasury meanness, as a result of which water authorities have not been able to invest as much as they would have wished. Privatisation will certainly overcome that difficulty, because the water plcs will be able to go direct to the market to obtain the capital that they believe is necessary. Thus, it should be possible gradually for the water industry as a whole to become more efficient and less open to many of the criticisms that have been aimed at it in recent years. None the less, the industry will not be operating as a free agent. It will be subject to regulation by the Director General of Water Services and the National Rivers Authority. It occurs to me that the director general will have to be some sort of Solomon, especially in the early years of his existence. That is if he is to be seen to protect the customer from price rises at the same time as the plcs

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are investing considerable extra capital to meet the requirements of the director general and of the NRA. No doubt such a paragon can be discovered and appointed.

The concept of the NRA as a regulatory body is admirable. It will remove the conflict of interests that currently exists, with water authorities being responsible for discharges to water, especially of sewage, and for the control of discharges. I should be happier if the NRA were to be a purely regulatory body, without any functional responsibilities. Fortunately, the Government have decided to retain the existing system river basins as the basic structure for the plcs. It seems, however, that there will be some overlap between the responsibilities of the plcs and those of the NRA. If that is so, the opportunity is created for the buck to be passed--I suspect, particularly from the plcs to the NRA--when a necessary expense arises that can give no extra return to the plcs. I hope that my hon. Friend will be able to allay my fears on that score.

The interests of anglers must be recognised, and I happen to be a president of their national council. It is clear that fisheries are to be a major responsibility of the NRA, and that is right. Fishing is a major recreation along rivers and around reservoirs, and it seems that there is no safeguard for specific recreational activities that are currently enjoyed on water. It appears that, within the meaning of the Bill, a plc may abandon one recreation in favour of another. As major users, that could be to the disadvantage of anglers. I accept, however, that it could be to the disadvantage of other users of certain stretches of water. I hope that my hon. Friend will be able to reassure me.

Anglers are concerned about high water quality. Credit can be given to anglers and their various organisations for the way in which they have stressed the importance of water quality in the past. This has resulted in many improvements being made. Anglers fear that the Bill might lower standards of quality.

Previous legislation promoted a national policy to restore the wholesomeness of rivers. My hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi) said that clause 97 refers to the classification of quality of waters. Apparently, water quality standards are to be related to the use of water. It is felt strongly by anglers, and no doubt by others, that there should be public consultation before water quality standards in any given area are agreed; otherwise, a lowering of standards might occur for cost-cutting purposes, regardless of the interests of users, and anglers especially.

Given such a consideration, would it not be sensible to have two members representing fisheries on the NRA board, with at least one other representing water recreation? There are 2,700,000 freshwater anglers, and water recreation in its various forms involves about 6 million people.

The Government should take careful note of the concern that has been expressed about what will happen to the 450,000 acres that are currently owned by water authorities.

Mr. Cranley Onslow (Woking) : Before my hon. Friend moves on from his comments on angling, which he has been making so admirably, would he care to add that many anglers are puzzled about why flood prevention committees are to have executive responsibility, whereas regional fisheries committees are not, given that a great deal of the moneys will come from anglers?

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Sir Charles Morrison : My right hon. Friend makes an important additional point, which I did not mention because I was trying to limit myself in time. What he has said is of great importance and I hope that my right hon. and hon. Friends on the Treasury Bench will take careful note of it.

I was referring to land in the ownership of water authorities, and was about to mention that there is concern about access to it. I shall not expand on that issue, because it has been mentioned several times already. I merely say that it is essential that the Government view the matter sympathetically.

Overall, anglers welcome the proposals for the NRA. The authority will act effectively, however, only if it has adequate financial resources. Here there is a contradiction in the Bill, and it was referred to by the hon. Member for Copeland (Dr. Cunningham), who spoke from the Opposition Front Bench. The new plcs will be freed from Treasury constraints, but the new NRA will be subject to them. I have to admit my worry when I read that grant in aid to the NRA will be paid to the authority

"subject to the Treasury's approval".

What guarantee is there that the Treasury will be less mean than usual?

Mr. Nicholas Soames (Crawley) : Oh!

Sir Charles Morrison : I know that the NRA will receive income from direct charges, but it was only last week that I was told of a story concerning the grandfather of my hon. Friend the Member for Crawley (Mr. Soames), who always referred to the mean Treasury. I hope that the grandson will learn from the grandfather, rather than seek to correct me when I refer to Treasury meanness.

The NRA will receive income from direct charges, such as navigation and rod licences, from water extraction and from discharges, but without adequate grants it will not live up to the expectation that many have of it. As a reassurance, the NRA should have a guaranteed grant, which should not be reduced. Without that, and even with the best will in the world, the NRA may not be able to live up to its responsibilities, especially in monitoring the effect of pollution along the 25,000 miles of rivers, in coastal waters, on ground water and in estuaries, for which it will have responsibility.

The Bill is a mammoth piece of legislation that includes a mass of matters of substance and of detail. It is heading for lengthy consideration in Committee. I hope that my right hon. Friend the Leader of the House will take account of the recommendations of the Procedure Committee and very early on introduce a timetable motion for its consideration in Committee. Only in that way will there be a reasonable time for every part of the Bill to be discussed. Only in that way shall we ensure that it is not only the other place that deals with a great deal of the Bill. I am sure that the Bill will receive a Second Reading tomorrow night. When it is deliberated upon thereafter, I hope that there will be adequate opportunity for consideration of all major aspects of it and time to reassure those who now have reservations about it.

6.49 pm

Mr. Peter L. Pike (Burnley) : The Secretary of State for the Environment and the hon. Member for Hornsey and Wood Green (Sir H. Rossi), the Chairman of the Select Committee on the Environment, mentioned the figures for investment in sewerage and sewage disposal functions in

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England and Wales from 1958-59 to 1989-90. Those figures have been used in a misleading way, as is shown by chart 1 of the Select Committee report, to which they referred. Although it is clear, in constant 1985-86 prices, that spending reached a peak in 1974-75, it is also clear that it is still far below that peak, despite the fact that the Conservative Government have been in power for nearly 10 years.

It is completely misleading for the Secretary of State and the hon. Gentleman to talk of a long lead-in period when they are considering the present situation. If that were true, they must also accept that the figure that they claim was the peak in 1974-75 was planned during the period of office of the Labour Government under the leadership of Lord Wilson. The Government cannot have it both ways. Although the forecast shows an increase in the next few years, investment will still only reach two thirds of that peak figure. They must put the figures in that perspective.

I want to refer briefly to an editorial in the Lancashire Evening Telegraph on 1 December which shows the problems of this appalling Bill. There was an article in that paper on the same day about the conflict between the chairman of North West Water and his deputy chairman, who happens to be the chief executive as well. I must point out that the deputy chairman has been involved in the water industry for considerably longer that the chairman. Like many others, George Mann, the previous chairman, was removed because he would not have been politically in favour of the privatisation of water. The Government have ruthlessly removed almost everybody they could from the water industry who might have opposed its privatisation. They have done that extremely skillfully and ruthlessly over the past few years in preparation for their privatisation proposals.

The deputy chairman of North West Water is quoted as saying that the sell- off is "a waste of time". The chairman of North West Water says that we can disregard that because the deputy chairman is due to retire. The deputy chairman, Bryan Oldfield, has long experience in the industry. It is true that he will retire in a year's time, but Dennis Grove, the chairman, has a short experience of the industry and has been dedicated from the start, like many other chairmen, to carry out the Government's will. Many chairmen and members of water authorities believe that they have the right to make that political decision, and many have played an active part in propagating the Government's views. They have not merely sat back and said that they had to carry out the Government's will, but they have been preparing for privatisation in advance of the Bill, and even in advance of the paving Bill.

The editorial in the Lancashire Evening Telegraph says : "When it comes to the looming privatisation of the water industry, what choice will the public have?"

I emphasise the word "choice", which is the in-word of the Conservative party at present. The editorial continues :

"Water, after all, is the stuff of life--a vital commodity that people have no choice other than to use. In essence, it is a natural monopoly and, so, will be seen by millions of people as a fundamental service that should not be cast into the arena of free enterprise, where the making of a profit for investors is the bottom line and where the notion of improved efficiency and service to the customer is inevitably blunted because there will be no risk of them taking their business elsewhere This is one piece of the Government's privatisation programme that is sure to run into choppy waters. And, at this stage, it would seem that it would have done well to leave the water industry off its list."

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Those are true words and, even tonight, the Government should think again and drop this nonsensical proposal of privatising an industry that is so vital to all.

I have said on previous occasions that I would be prepared to support the concept of the National Rivers Authority with a publicly owned water industry. If the National Rivers Authority is given adequate powers and staffing, and is organised on a regional basis to carry out its duties properly, it can play a vital role. I have no objections to the establishment of that body, but I am doubtful that the Government will give it those powers. The Association of District Councils, which is always Tory dominated, also expressed reservations that the National Rivers Authority will have those powers and the teeth to do its job because that may not be in the Government's interests.

North West Water has the biggest landholding of all--more than 150, 000 acres, of which over 53 per cent., 79,519 acres, is in national parks. That land is crucial. Many of us are worried about the possible destruction of our heritage by disposals of land. We all know that it is difficult to value that land. As a water catchment area, it has very little commercial value, but if a small section of land is disposed of and given planning permission, its value could change overnight.

The Minister says that land will not be allowed to be sold, but the Bill says that land that is considered to be surplus to requirements can be disposed of. It has also been said that land in a national park would not receive planning permission for development. People who say that have more confidence than I have. I am fairly certain that it will be the financial interests of the water industry to find ways, with their Conservative friends in certain positions, to dispose of some of its land to make money out of it and, at the same time, destroy some of our heritage. These are extremely important matters.

Clause 79 allows the Secretary of State to write off the authorities' debts. The Government are remaining very quiet about their intentions. When I met the chairman of the water authorities who came to the Labour party conference at Blackpool to lobby Members of Parliament--I am sure that they did the same at the Conservative party conference--they told me that they were expecting the Government to wipe off as much as possible of their debts because they would have a new debt, the shareholders' capital within the industry. They said that they believed that it was right that if the Government received the money for the shareholdings the debts should be wiped off as well. That is a stupid argument. At present, the Government own the assets of the industry and also the debts. When the debts are repaid by those water authorities, the Government will receive the money. We shall be giving something away just to allow people to make money. I am worried that, in the end, privatisation is about making money and that the quality of water and the problems associated with that will become secondary.

Many voluntary organisations, such as the National Trust, the Ramblers Association, and other conservation bodies, have considerable reservations about the Bill. They are worried about access to the countryside and about the possibility of charges. Even if access is maintained, there is a duty on the water authority to earn an income from it if

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possible. My hon. Friends and I believe that access to the countryside should be available to all people and should be available free of charge wherever possible.

If we do not defeat the Bill tomorrow, we shall have to debate many matters at great length. I doubt whether the Government will recognise the folly of their ways, so the Bill will have to be amended if we are to safeguard some of those important matters. Several Hon. Members rose --

Mr. Deputy Speaker (Sir Paul Dean) : Order. I remind the House that the 10-minute limit on speeches is now in operation and I appeal for the co -operation of hon. Members who are called during this period.

7 pm

Sir Anthony Grant (Cambridgeshire, South-West) : During the past year, I have had several meetings with chairmen of water authorities and I assure the hon. Member for Burnley (Mr. Pike) that, far from being docile slaves of the Department of the Environment, they are extremely lively people. I understand that some of the discussions that they have had with Ministers could be described as extremely stimulating. But, like men of sense, they agree with me that there is a powerful case for the Bill.

My right hon. Friend the Secretary of State made the case devastatingly in his opening speech. The point that I stress most powerfully is investment. After the lamentable failure of investment by the Labour Government, there is now an opportunity to free the industry from all restraints to enable it to compete for investment throughout the market and thereby to increase its efficiency, instead of standing in a dreary queue before the Treasury behind all sorts of other bodies. In addition, we must increase standards of water purity and reduce pollution. The creation of the National Rivers Authority is immensely important in that regard.

The area that I know best is covered by the Anglian water authority. It is not the north-west authority, but Anglian authority which has the largest land area of the 10 water authorities. It is the fourth largest in the number of customers and in turnover. It has the fastest population growth of any authority, with about 500 new houses every week being connected to the water supply and 600 new houses a week linked to the sewerage system. It used to have the greatest problem with coastal defences, but happily that will become the responsibility of the NRA.

There is great anxiety in the area of the Anglian water authority concerning nitrates in soil, but the fears have been vastly exaggerated. They are as ludicrous as some of the fears about eggs. On Monday, the hon. Member for Greenwich (Mrs. Barnes) said that the chances of getting salmonella were the same as being hit by a meteorite. The chances of contracting stomach cancer from nitrates in the soil in East Anglia is about the same as my hon. Friend the Under-Secretary of State for Health being struck dumb.

In my area, water has been supplied excellently for many years by the private Cambridge water company. I tried to intervene in the speech of the hon. Member for Copeland (Dr. Cunningham). Eventually, my right hon. Friend the Secretary of State managed to ask him whether, in the remote event of a Labour Government being elected, they would renationalise the private water companies. The hon. Gentleman dismissed it by saying, "Probably there will be none." The hon. Gentleman would

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not give way to me. When the Opposition spokesman replies to the debate I hope that he will tell us point blank what would happen to the private water companies in the event of a Labour Government taking office. Perhaps the hon. Lady would like to tell me now. If so, I gladly give way.

Ms. Joan Walley (Stoke on Trent, North) : I am grateful for the opportunity to answer. The hon. Gentleman said clearly that there will be a Labour Government. Our commitment is clear. Because of this Bill, a Labour Government would ensure proper public control over water, which is God- given.

Sir Anthony Grant : I assume, therefore, that the hitherto free private water companies will be taken over. We shall take that message back with us.

The Anglian water authority approaches privatisation with enthusiasm, but it says that the regulatory regime is heavy and complex. It is heavier than that for any previous privatisation, but it says that it will make it work. The regime will certainly deliver the improvements in quality and environmental standards that my right hon. Friend has promised, and any fears to the contrary are entirely fallacious. But costs will be high and can be met only by increased charges. That would have happened irrespective of privatisation. Customers must recognise that higher standards mean higher charges. I beg the Government to ensure that the price control mechanism allows those increased costs to be recovered. Absolute clarity on cost time scales and recovery through charges is imperative if the companies are to be floated successfully. Much of the debate has centred on the environment, but we should remember that this exercise is primarily about establishing efficient and profitable public limited companies--[ Hon. Members :-- "Ah!"] That is what it is all about.

Is it rather naive to assume that there is tremendous scope for offsetting the extra costs by savings made in operational costs. Anglian Water will continue to increase productivity, but since 1980 it has reduced its manpower by 22 per cent. against an increasing work load. All those factors must be taken into consideration. I am very much in sympathy with what my hon. Friend the Member for Devizes (Sir C. Morrison) said about the National Rivers Authority. It would be a great pity if the NRA became the poor relation of this exercise. In Anglia we believe that a highly professional, properly resourced NRA will be an essential part of the package embodied in the Bill, and I hope that Parliament will be careful to ensure that the Bill achieves those aims.

Another reason why I strongly support the Bill is that it is a step along the path towards a wider share-owning democracy. I was a founder member of the wider share ownership movement longer ago that I care to remember--even before it became fashionable in the Conservative party. I have welcomed all the steps that have been taken, of which this is another example. I rejoice that there are now 9 million private shareholders. I hope the Government will ensure that privatisation of water will involve the largest possible circle of investors, so that many people can participate in a vital industry. It is important that the water industry is owned by those who are interested in and wish to be associated with it, rather than by a faceless bureaucracy. I feel sure that that will be the case.

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I wish the Bill well. It is a formidable document. I weighed it at the post office and it came to about 600 or 800 grams--the post office no longer deals in avoirdupois. It is certainly one of the biggest Bills I have seen, running to 180 clauses. My hon. Friend the Member for Devizes (Mr. Morrison) made the important point that proper arrangements should be made to debate the Bill in Committee, if necessary with a guillotine, at an early stage. The Bill will improve and spread share ownership throughout the land, raise water quality, and increase efficiency. It deserves a resounding Second Reading. 7.10 pm

Mr. Gareth Wardell (Gower) : In the Welsh language there is the phrase "asgwrn cefn", meaning determination, steadfastness, spine and a willingness to do that which is right. For a Government who supposedly pride themselves on their "asgwrn cefn", pulling the plug on the water industry must be one of the most hypocritical acts they have contemplated.

First and foremost, the sell-off of water is a sell-off of Government responsibility. The Government are shedding responsibility for their policy of imposing such unrealistic financial targets and external financial limits since 1981 that water authorities have been unable to keep up with required levels of maintenance and investment needed to repair and improve basic water functions. Our network of sewage works is old, overloaded and often badly operated. In 1986, 22 per cent. of them poured into our rivers effluent dirtier than regulations allow. Reported river pollution incidents rose from 12, 500 in 1981 to 23,253 last year. One sixth of all sewage is poured untreated into the sea and 69 per cent. of outfall pipes are at or near the low water mark.

The Select Committee on Welsh Affairs, of which I am proud still to be Chairman, conducted an inquiry into coastal pollution. During our investigation, we saw one polluted beach after another. In the United Kingdom as a whole, only 70 per cent. of beaches meet EEC minimum pollution standards, and according to the European Environmental Bureau, only one in eight of Britain's beaches meet the EEC's full pollution standards over the complete range of 20 tests. I make the point that its definition of a beach is not that used by the Department of the Environment for many years to circumvent the EEC's bathing waters directive. According to the Department's definition, not one Welsh beach has a sufficient number of bathers using it to qualify for the tests.

By imposing artificially low ceilings on water authorities' capital investment and borrowings, the Government have created a backlog of remedial works that will cost enormous amounts of money to clear. The Bill, financially and morally, sells off that responsibility. The Government see the spending forced on us by EEC directives--it is estimated that it will cost about £6 billion to meet EEC standards for drinking water affected, for example, by nitrates, aluminium, lead and chlorine.

Over the past two months, Mr. Nick Carter, editor of the South Wales Evening Post, has spearheaded a battle to have Swansea bay cleaned of gross pollution so that it may again safely be used for swimming, surfing, fishing and water sports. That campaign has exposed thoroughly and in depth the cause and effect of pollution and the remedies. The campaign has the support of 36,000 residents who have signed the South Wales Evening Post petition, which is not lightly to be dismissed.

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In response, Welsh Water points out that, for the past five years, it has spent £1 million annually on the bay, which was all it could afford while tackling higher priority pollution at locations such as Tenby and Porthcawl and improved water supplies for drought protection. The chairman says that Welsh Water has been informed that it must bring forward £28 million of planned investment to improve the bay by between one and six years, to 1995. The investment needed to clean up just that one small part of Britain's coastline is £90 million. The scale of pollution there, although totally unacceptable, is not as gross as in areas such as Askham, Cleethorpes or Blackpool.

While the Department of the Environment has decided to spend £93, 000 on much-needed research into the link between infectious diseases and the dangers of bathing in grossly polluted sea water, one is still tempted to say that the evidence is not there. The answer can always be given that no one has undertaken the necesssry research. Meanwhile, the results of a university of Sussex survey undertaken this summer offer good advice. That survey found that bathers who keep their heads above the water while swimming are far less likely to contract various diseases than those who swim with their heads below the waves. I feel sure that the Department of the Environment will confirm that that is good advice.

Since the Government imposed external financial limits in 1981, water charges have risen from £165 million in 1981-82 to £620 million in 1987-88. Yet, with all those works in the pipeline and growing increasingly urgent, the Government claim that water charges will not increase. That must be double-speak. The Secretary of State really means that it will be water plcs which increase costs and not the Government, because the Government will have sold off their responsibility. Privatisation itself will increase charges. Accountants Arthur Collins and Company put the bill for privatisation at about £850 million per year. Water companies will need about £350 million for corporation tax, £400 million annually for shareholders, and another £100 million for higher management salaries, directors' fees, share registration, services to shareholders, and the National Rivers Authority. That will mean a 20 per cent. increase in charges just because of privatisation.

The Water Authorities Association does not dispute that estimate. Several estimates, including those made by the chairman of the association, and of Welsh Water, conclude that water charges will increase by another 50 per cent. to meet the costs of improved water quality--and that was before the Government announced their new timetable for improvement works and £3 billion of increased debts for the water plcs to take on board.

The Government say that they are environmentally aware and point to the National Rivers Authority as proof of a new, responsible approach to environmental issues. It is ironic that the Government can establish such a body only when someone else will pay for it. Polluters will, rightly so, pay--and the water plcs will pay the rest : directly as their share and indirectly, through corporation tax, as the Government's share. The NRA will cost the Government nothing, so their talk of concern for the environment is cheap.

The Government's talk of being concerned about many thousands of private home owners who unwittingly

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bought new homes having unadopted or unadoptable sewers is also cheap. The Minister of State, Welsh Office assured me that the Government were concerned that, because of the difference in standards between current building regulations and the conditions of sewers belonging to water authorities, and the inadequate powers of local authorities to insist on section 18 agreements from developers, many householders face potentially huge bills for repairing sewers that water authorities will not adopt. There are more than 2,500 such households in one local authority area in my constituency alone. Before privatisation, the Government have talked about introducing new measures to prevent further problems. The Bill makes no such provisions and is a missed opportunity.

The Government will make a major error of judgment if they go ahead with the Bill, which is ridiculous, unnecessary and expensive. As they are wrapping themselves in their new green cloak, the Government should shoulder their responsibility for restoring our water industry--once the envy of the world--to its premier position as a public utility.

7.20 pm

Mr. Martin M. Brandon-Bravo (Nottingham, South) : Of all the privatisation measures, in the public's perception water privatisation is the most difficult to understand and accept. However, its concept is just as right, and it is as much in the long-term public interest as the denationalisations that have gone before and are still to come. British Telecom, steel, gas and so on are easily perceived as commercial enterprises that can be best run and managed in the private sector with parliamentary scrutiny exercised at arm's length, just as we do with the rest of the commercial and industrial life of this country.

There seems to be some mysticism about water. It is looked on as life itself, which makes it seem to many a sacred trust in the hands of the public sector. I cannot see it that way. Also, it cannot be said that that sacred trust--if it be that--has been so well looked after these past years that another look and approach might not better serve the public interest.

Before the last general election, before the Secretary of State had a chance to study the feedback on consultation, we did not have a Bill remotely as good or sound as that before the House now. I welcome the fact that my right hon. Friend the Secretary of State has realised the seriousness of the concerns expressed. I fear that much of the present worry is based on hangover impressions of the supposed Bill of the previous Parliament and has not taken into account the fundamental changes that have been made in the Bill now before us. Rightly, in recent years, the public have not only realised the need to address green and environmental issues but, happily, have also recognised that such issues have a cost. They may not like paying, but at least the recognition is there.

The fundamental change in this revised Bill, which answers most, if not all, of those earlier fears and concerns, is the creation of the National Rivers Authority. Those who expressed fears sought public and parliamentary control over water resources, river management, pollution, flood and sea defences, water-based recreation, amenity and conservation. The Bill achieves that aim through the National Rivers Authority. The commercial

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and industrial aspects of the current scene- -water treatment, distribution and supply, and similar functions for sewerage, with some recreation and conservation--are being put into the company framework.

I am sure that when the public recognise that we are privatising only that which is rightly commercial, and leaving the public sector that which is rightly left there, the Bill will have at least the same measure of support as the other, more obvious privatisation measures that have come before the House.

Even though we have made the division of function and responsibility, there still remains for me the worry over what landholdings will transfer to the water plcs and what longer-term protection will be in place to ensure that there are no large-scale financial windfalls for the new companies that belong rightly to the public. The new companies will be valued as going commercial concerns with calculations based on return on capital with values for landand buildings at current user values.

If a company finds that it has a few bits of land or a few buildings that it does not want and makes a few bob by selling them off, I have no objection. However, if those holdings are large, were previously in public ownership and were sold at current user value, there is real public concern about the preservation of the land for its original purpose. I would not want to leave it to the whim of a future planning application to protect those landholdings and, in so doing, give the new plcs a reserve pot of gold on which to draw. Surely that is not our purpose and I hope that my hon. Friend the Minister will be able to give a clear steer on that aspect of genuine disquiet.

There are other points of public concern that we should address. However, I should like to draw the House's attention to some of the more outrageous criticisms in a recent television programme called "Open Space". It might have been fairer had the programme indicated fully that it had been produced by the anti-privatisation lobby. We would then have had the right to claim equal time on which to show the other side of the coin.

We were treated to graphic examples of what was wrong with the current water authorities. We were told how financial starvation by successive Governments--none worse than the Labour

Administration--caused collapsing mains and sewers. We were told that local authorities were allowing dreadful abuses of discharge licences without prosecuting, as they are entitled to do under the present law. We were told about unclean beaches and of rivers being downgraded from category 1 to category 4. The programme was supposed to be a justification for leaving the water industry in the public sector. If that is what happens when it is left to the whim of Government or a particular Chancellor, what is the objection to letting private capital have a go?

An ex-senior executive of one of the water authorities complained that there would have to be a massive input of investment if we were to meet the aspirations of the public and EC directives. He said that, as a consequence of privatisation,

"the wretched consumer will have to pay".

I have to ask : who else? It is dishonest to argue for better standards and the enforcement of those standards and then expect the cost to be borne by others. What we consume, we must pay for and the improvements that we as parliamentarians call for in legislation must also be paid for.

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The companies meeting the new criteria must have the right to include the cost of those imposed improvements in their charges. It follows that the new companies must have the ability under proper and tight watchdog control imposed by the Bill, to finance the measures to put right what is clearly wrong now and to charge for what we decide the public want in the way of improvements in the future. That cannot be done without a commercial margin of profit. The arguments against profit simply ignore the realities. That is what Greenpeace sought to do in that television programme. Greenpeace has a good case on the quality of life and it should not undermine it with such nonsense as sneering at profit as if it is a great evil.

Also, it is no good for Labour Members to claim that the costs should be borne through taxation. When taxation was at an all-time high with the standard rate of income tax at 37p in the pound, investment in the water industry was being cut and cut.

In his opening remarks my right hon. Friend the Secretary of State gave four reasons for privatisation. He spoke about the 25 per cent. of our water that already comes from private sector statutory undertakings. He spoke of less centralisation and the independence of the new bodies. He spoke also about innovation, efficiency and access to capital.

I shall add a fifth point. In recent years, we have recognised that our state pension has no investment base. An additional or second pension must have a sound raft of gilt-edged or semi gilt-edged stock in its portfolio. My hon. Friend the Member for Cambridgeshire, South-West (Sir A. Grant) spoke of wider share ownership. I entirely support his remarks. But our major privatisations, particularly this one, will provide the blue chip investment base that should be and most certainly will be in all pension fund portfolios, giving future generations confidence in those pensions as the percentage of population of pensionable age increases over the coming years. For those reasons, it is a proper and right decision. Happily, I believe that the Government have got their priorities right.

7.30 pm

Mr. Nigel Spearing (Newham, South) : For several reasons, I am pleased to follow the hon. Member for Nottingham, South (Mr. Brandon- Bravo). I agree with half of what he said and fundamentally disagree with the other half. I hope that that remark provides the basis for a good debate. The hon. Gentleman was right to be worried about the disposal of land. In London, near the Thames and on the River Lea, large areas of land are owned by the Metropolitan water board, and the Thames water authority or Thames plc might sell that land. That action must be resisted.

The hon. Gentleman was right, too, about the National Rivers Authority. We needed it for some time. The Secretary of State's argument that it justifies the Bill is nonsense. We should have it, and we should have had it even with the present structure. There is no reason why the proposed national regulatory authority, which we should have had under a central water council or authority, should not regulate existing regional authorities. If it were to do so, many of the Secretary of State's green objectives would be secured without privatisation.

We are discussing the privatisation of only part of what was public. As the hon. Member for Cambridgeshire,

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South-West (Sir A. Grant) pointed out, the supply side has partly been in the private sector for some time, and it has been considerably constrained. But the disposal side has never been in the private sector. The worthy Victorians who built the system in London would not have dreamt that it ever should be. Victorian virtues said, "No public ownership of water disposal and purification." That has been the case right from the beginning. The service has been municipally owned--publicly owned- -as it should be. Water disposal services and, in some respects, sewerage services are absolutely fundamental for public health, and they determine the purity of our rivers and coasts, or their non-purity as the case may be. Conservative Members have not understood what the privatisation of sewerage means. There are drains and sewers under every road in their constituencies. If they, including the hon. Member for Nottingham, South, vote for the Bill, they will put into potential private ownership every sewer and drain in their constituencies. I do not know whether they have thought of that. I have not seen it reported in the papers, and it has not been mentioned by Conservative Members, but that is what the Bill will permit.

Mr. Leigh : So what?

Mr. Spearing : "So what?" the hon. Gentleman asks. I shall explain.

Until 1974, every drain and sewer in the land was managed by local councils and they were integrated with the management of highways and public health. Public health and sewerage go hand in hand. At the moment, many sewers are still run by elected local bodies, to which ratepayers and electors turn, but on agency terms from regional water authorities. They are owned by RWAs, but they are run under contract by district councils. Will that be the case in future?

I asked the Secretary of State a question earlier today, and he said that he would answer the question shortly. He should do so tonight. Unless there are exclusive powers of contract, the responsibility of running sewers under our towns, cities and villages will be dispersed to private ownership. Conservative Members ask, "So what?" Sewerage is intimately concerned with public health. There might be 3,000 sewerage blockages a year in an outer London borough. Some sewerage system maps are complex and difficult. We must always bear those points in mind when considering disposal.

I now refer to the structure that we shall have if the Bill is passed without singular amendment. I am glad that the Secretary of State is present, as I shall give way if he wishes to correct anything that I get wrong. We are to have a three-decker structure. The supply side will be partly the responsibility of statutory water companies and partly that of other water enterprises, broken up or wholly run by what was the RWA. If a body wishes, disposal contracts can be split. It is up to RWA plcs, which will initially be Crown-owned, to dispose of them as they so wish, and if they can. Above all--Mr. Roy Watts of Thames Water has been clear about this--there will be a regional water authority holding company, which will be the holding company for various subsidiary enterprises. Holding companies--the Secretary of State hinted at this in his opening speech--

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will not be confined to water services. They can go abroad and they can float all sorts of enterprises because they will have the capital to do so. If there is any restriction on that, I invite the Minister, even within my 10 minutes, to tell me that I am wrong.

If I am right RWA holding companies will become part of the national and international machine of the movement of capital moneys. They will be quoted on Tokyo, Frankfurt and New York stock exchanges. Their shares will be traded-- [Interruption.] So the sewers in every Conservative Member's constituency can be owned by gentlemen in Chicago, Tokyo, or anywhere else in the world. Is that what Conservative Members are saying? The Secretary of State may be quite content for the sewerage structure of Cirencester, Tewkesbury or Lewisham to be traded on international stock exchanges and to be subject to takeover bids. He may be content to have dawn raids, for management to be booted out by some takeover body which sits, perhaps, in a South American capital city. Is that what Conservative Members are saying? Apparently, they are saying that. If that is what they are saying, the British public will not put up with it.

I doubt whether, at the moment, the British public understand what Conservative Members are about. If they wish to intervene, I shall give way. They do not understand that that is what the Bill means, or could mean. Although bodies such as Thames Water in the south-east might be sold off to people abroad, bodies in the north-west, where things are different, might not be. That is a possibility, but it is in the hands of the Secretary of State and the chairman of RWA plcs to sell off bit by bit.

How can profits be made? They can be made only by charges. Charges for sewerage, as distinct from water supply, will be linked to meters. It is possible that our water disposal services will be run by a patchwork of private companies whose control can be changed overnight and whose shares are quoted in Tokyo, Berlin, or Moscow. If Conservative Members will permit a flight of fancy, why not Kremlin Overseas Investments plc? That may not be too far away.

Mr. Leigh : It is a good idea.

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