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When will the Minister of State make a statement on the impact of the changeover on Welsh industry? Industrialists in Wales will be under pressure on prices from day one. Privatisation could mean that the control of water supplies and sewerage services to Welsh customers will, for the first time, pass to non-Welsh organisations, chiefly because the shares in the new water company are likely to be held by finance houses in London or abroad. Welsh public opinion will not accept that.
Last year the Welsh water authority was top of the league for cutting off water supplies to defaulting families. Between 1984-87 and 1987-88, the cut -off rate escalated. That came through with startling clarity in an answer to a question tabled by my hon. Friend the Member for Cynon Valley (Mrs. Clwyd). Our fear is that the new company, driven by profit reasons, will drive up the cut-off rate dramatically. I remind the House that Wales manages to top the league tables of poverty, ill health, pollution and dereliction, and that there is a public health consequence in respect of cut-offs, as there is in respect of the imposition, should it occur, of metering. I should like to set out the size of the task ahead of us if the measure goes forward. There are 10 Welsh lakes and 90 miles of Welsh rivers without fish. The Welsh water authority has more coastal sewage discharges than any English water authority region. The majority of the authority's discharges to tidal waters are short outfalls discharging crude, untreated sewage. Some 40 per cent. of these outfalls are more than 40 years old and a few date from the 19th century. The Welsh water authority has a greater number of small, older outfalls than any other water authority, and many of them were designed with little attention to environmental effects. In Wales, there are also hundreds of private sewage discharges, but these now come under the control of the water authority.
Column 471says is true, does it not make sense to separate the function of licensing pollution discharges and being the water authority? Is that not what is achieved by the Bill?
Mr. Jones : The point that I am making, by giving highly relevant and impartial information, is that we do not believe that the great task ahead can be tackled by the plans which the Government have so far outlined, and which the Minister adumbrated with regard to Wales.
The Wrexham and East Denbighshire water company is a statutory water company. I make my remarks about it in the knowledge that in Wales even the remotest prospect of our most basic commodity falling under foreign control will raise the nation's hackles. Does the Welsh water authority have any shares in the Wrexham water company? Does that authority harbour the objective of taking the Wrexham water company over on privatisation? Are any of the French water companies negotiating with the Wrexham water company for the possession of shares? I have established that Wrexham water company shares have increased in value since December 1987. The 4.9 per cent. consolidated ordinary voting stocks have increased in value by nearly six times this year.
These are the justifiable queries of those who have a care for this statutory company. I hope that before the end of the debate there will be some answers. I also want to know whether the Wrexham water company is vulnerable to a stock market raid during the complex flotation period.
I can illustrate my case against this privatisation by the briefest of references to a previous privatisation measure--the selling off of the bus industry. Examples may be drawn from the lamentable consequences of the Government's legislation on that. I shall attempt to illustrate the defects of this legislation by telling the House that shareholders of Crossville Wales are being asked to back a £6 million takeover of the North Wales Bus Company, a bid that will earn them a massive 300 per cent. profit on every share. This company was privatised for around £3 million, and 15 months later it will be sold off for around £6 million.
National Express, the country's biggest operator of long-distance coaches, has offered to buy Notiontreat Limited, the holding company of Crossville Wales, for £30 cash for every £1 ordinary share. The three directors, who own just over half Crossville Wales ordinary shares, are recommending that the offer be accepted. They have irrevocably undertaken to accept the offer. The chairman of the company has 48,000 shares, the commercial director and the engineering director have 26,000 shares. A sale at £30 a share would make the chairman's holdings worth, instead of £48,000, £1.3 million. The other two directors would see their holdings worth £754,000. Let me give the House a warning about why this privatisation legislation should not be accepted. The fourth director of Notiontreat, who took no part in the board's deliberations on the offer, is not joining in the board's recommendation to accept the offer, as he is also a director and chairman of National Express, which is making the takeover offer. However, that member had more than 4,000 ordinary shares in the North Wales company and I understand that they have been transferred to close family. They will be worth about £122,000 if the annual general meeting accepts the offer.
Column 472Why do I refer to that effect? My reason is summed up by the divisional officer of the Transport and General Workers Union, Mr. Jim Morris, who said :
"I don't blame individuals, but the Government who created such a situation. This is privatisation at any price. We always said National Bus Company was being sold at a knock down price. The price being asked for individual companies was giving them away." That must be the case in the bus industry, and we fear that it may be the case with the water industry. We fear a rip off, and the Daily Post of today was doing a public service in publishing that information.
This is a land Bill. The Welsh water authority owns over 91,000 acres. When last in Wales was such a huge acreage sold off in one fell swoop? In the history of Wales, this proposal is of considerable social and economic importance. It is offensive to Welsh people that a great, successful and viable utility, a strategic resource, is to be sold. Some 9,700 acres make up the water surface. Approximately 63,000 acres surround the lakes and reservoirs. The Welsh water authority owns some of the wildest and grandest land imaginable, and the authority also owns 385 acres of important and valuable urban land. It has planning consent for nearly 10,000 acres across Wales. At the moment it is seeking planning consent for another 2,000 acres. There may be a number of other sites for which planning consent will be sought in due course. The Welsh water authority owns land worth tens of milions of pounds, and I want the Minister to tell us how much, on the basis of its land holding alone, the authority is worth.
Land with planning permission is worth a fortune. Land of scenic beauty in the late 20th century is worth a fortune. Land with scenic beauty alongside water reaches is worth even more. At the moment the authority is a sensitive developer and exploiter of the land, but the Bill opens up the possibility of speculation by people and forces with fewer scruples. There is even the prospect of windfall profits for the new owners. I remind the Minister that the Brecon Beacons have breathtaking beauty. Snowdonian scenery is awesome, and the Welsh marches are charming walking countryside. There is a welcome in our green valleys. There is access to the hillsides as well as a welcome, and we are telling the House, "Do not change a successful formula." I think that the people of Wales should know that the Labour party will return the water companies to social ownership. There is widespread dismay in Wales that the Government have arrogantly proposed this measure without a shread of support from our people. Welsh consumers expect a surge in the price of water. We are contemptuous of a Government who impose the measure on Wales but not on Scotland. We support the environmentalists, who fear commercial pressures on the landscape. The Bill sets up a monopoly that will have no competition. The Bill appears to set no specific water quality standards. It hands over some of the most important assets in Wales to private enterprise, and probably at a rip-off price. Nobody believes that there will be sufficient capital investment to tackle outstanding pollution problems. Even at this late stage, I ask the Government to omit Wales from the legislation. For the people of Wales, this legislation is retrograde. Everybody expects the new company to put profit before investment and exploitation before quality. No local authority, no church, and no voluntary
Column 473organisation in Wales supports the Bill. It is completely friendless. The Bill is a 343-page long political suicide note. It will cost the Government dear in Wales. We know that it will lose them national political power. We have no hesitation in urging all hon. Members to vote the Bill down tonight.
Mr. Andrew F. Bennett : On a point of order, Mr. Deputy Speaker. I believe that you have a responsibility to safeguard the interests of individual hon. Members. As no Conservative Member has risen to provide an alibi for the Secretary of State for Wales, I wonder whether you have been told why he is not here to defend the contrast between his 1971 position and his position today.
Mr. Chris Butler (Warrington, South) : Most of my remarks are not concerned with Welsh Water at all, but I listened carefully to the speech by the hon. Member for Alyn and Deeside (Mr. Jones) and I found it interesting. He called for a Welsh National Rivers Authority, which would cover the whole of Wales. I remember the passage of the Wales Bill--of which the hon. Gentleman was an enthusiastic supporter--through the House. It proposed that the Welsh assembly should deal only with the area covered by the Welsh water authority, not with the area covered by the Severn-Trent water authority. Therefore, the hon. Gentleman appears to have changed his mind on the matter of Welsh Water.
He also advanced a new concept, which was that the Welsh water authority was a popular establishment in Wales. That is certainly news to me. I understood his point about the history of the planning of water and that the establishment of a water supply was tainted with incidences of disease, because I remember my father telling me when I was young of his experience as a GP in the south Wales valleys. However, the quality of water depends not so much on its ownership, but on the statutory framework within which the relevant authorities are run.
In 1886 there was a cholera outbreak associated with a bakery that was noted for its especially fine quality bread. Sanitary inspectors were called in. They found that there was a connection between the local privies and water reservoirs that were used in the bakery. They closed off the connection and the cholera outbreak subsided. However, this was followed by public outrage because the quality of the bread deteriorated.
My hon. Friend the Under-Secretary of State for the Environment told me in a written answer :
"All public supplies of drinking water in the United Kingdom are safe to drink."--[ Official Report, 26 October 1988 ; Vol. 139, c. 228.]
On the very next day, in The Daily Telegraph, it was reported that Thames Water admitted that its water contains five times the legally permitted level of polycyclic aromatic hydrocarbons, which are well known carcinogens derived from the coal tar linings of water pipes. Thames Water said that it would cost £1 billion to put right, and a sombre official admitted, "Someone's got to pay for this".
Column 474My hon. Friend the Under-Secretary of State for the Environment in a reply on 3 November said that there was unlikely to be
"any significant health risk from drinking water which occasionally exceeds the standards".
But how significant is significant? After all, the levels are five times those permitted by European Community law and presumably those standards are devised on the advice of experts. How occasionally is occasionally? After all, the coal tar is in the pipes all the time. The North West water authority is engaging in urgent research to find out whether its water, too, is contaminated with PAHs.
I question whether all public supplies of water are safe to drink. We know that 85 water supplies in Scotland exceed the European Community lead limit, that in 61 out of 168 samples the carcinogen trichloroethylene was found at levels above the World Health Organisation's permitted limits, and 4 million people in this country drink water contaminated with nitrates at above the limit permitted by the European Community maximum of 50 mg per litre.
I am especially worried about the quality of water in the London area. I try not to drink London tap water. I find it rather disgusting. I drink mineral water and I believe that my habit is shared by many others because sales of mineral water keep rising dramatically. The Select Committee on the Environment took evidence that 30 per cent. of people have water which is extracted from lowland rivers. We use our rivers as sewers, so those poor people are drinking water which is 10 per cent. sewage. The Thames, too, is used as a sewer. We know of sewage works which are so old and decrepit that they disgorge their contents directly into the Thames. There are also doubts about the quality of the ground water in the Thames valley area, which is used for gravel and sandpit digging. Once those pits are dug, they are filled with domestic and building refuse. The end result is that the dilute and disperse policy in this very permeable area is a recipe for pollution of our ground water with leachate. Increased extraction of water from the upper Thames area will only add to the strong pressures of ground water running through landfill areas. There were no controls on leachate dumping prior to 1974 and cowboys were rife in that area. There is still inadequate control of building rubble, which produces methane and also contains nasties such as lead and asbestos, which themselves can leach out. We know of landfill areas that are leaching direct into water courses that lead to the Thames. The Halcrow report, published last week, said :
"Landfill sites continue to be a major potential threat to ground water quality."
In my constituency there is a 390 acre landfill site just opened by Cheshire county council. It will have a clay bund which is meant to contain the many millions of gallons of leachate that it will produce. However, I question the sense of Cheshire county council in placing that site where it has, because it is directly between the two major water courses of the north-west--the Mersey and the Manchester ship canal. Worse than that, Cheshire county council has placed it directly over a major aquafer which feeds a large part of the north-west. I believe that it feeds part of Wales, too. The North West water authority sent me a letter saying : "It is recognised that landfill sites always produce leachate and that even engineered sites can and do leak It is considered better to risk the resources in one area for a long period rather than have several short-term risks scattered about."
Column 475That is hard cheese for Warrington, which must shoulder the risk for many other areas.
It is against that general background that I welcome the establishment of the National Rivers Authority. I welcome the appointment of my old boss, Lord Crickhowell. Those who know Nick well will realise that bureaucratic incompetence and insensitivity will wither before him. He has an immense task. The river quality survey on which the Select Committee on the Environment reported said that the quality of rivers over the past five years had deteriorated. The DOE expects no change in that before 1990.
In the North-West water authority, area between 1980 and 1985, 266 km of river length deteriorated in quality. The Mersey remains probably the most polluted estuarial area in Europe. In 1986, 22 per cent. of all sewerage works were breaking their own sewage discharge consents for 95 per cent. of the time.
In many respects the Halcrow report is extremely disturbing. It says that monitoring and investigation are insufficient to enable an understanding of the distribution and behaviour of many important contaminants. It says that the level of nitrates in water is likely to rise and that the level of pesticides in water will be a serious problem.
In my view :
"The creation of a National Rivers Authority within a privatised water industry offers excellent opportunity for conservation, protection, monitoring and overall management of ground water resources to be co- ordinated nationally."
Those are not my words but those of Sir William Halcrow, and I agree with him.
The public sector's record of protecting our water is not one of which we can be proud.
Several Hon. Members rose--
Mr. Deputy Speaker (Mr. Harold Walker) : Order. It being 6 o'clock, speeches between now and 8 o'clock must not exceed 10 minutes, and I very much hope that those following will not exceed 10 minutes either.
Mr. Roy Hughes (Newport, East) : So far this debate has tended to have a Welsh flavour, which is understandable because water has always been an emotive subject in Wales. As a consequence, I feel that we have a right to expect the organ grinder himself to be present rather than to leave the debate to the Minister of State, Welsh Office.
I believe that the Bill is summed up by a cartoon that I saw in one of the newspapers a few days ago. The caption posed the question, "Who owns the rain?" That cartoon illustrates the absurdity of the Government's proposals. Water is essential to life on this planet. Surely it is logical and sensible for it to be in public ownership. Nevertheless, we must face the situation and ask what the future pattern of ownership is likely to be.
We already know that three French water companies have taken substantial holdings in 28 statutory water companies. There is little doubt that their attention will now turn to the privatised water authorities. My hon. Friend the Member for Alyn and Deeside (Mr. Jones) has already said what could happen to the Wrexham water company. What will the Government do to prevent takeovers and asset-stripping? If the Government's past record is anything to go by, it will be precious little.
Column 476We are told that water authority land holdings throughout the country amount to 435,465 acres and that 97,000 acres of that land is in Wales. Much of it is unspoilt. It is not difficult to reach the conclusion that that land will be vulnerable to new pressures. The report published by the Council for the Protection of Rural England and the Royal Society for the Protection of Birds has said : "Following privatisation, pressure for residential, commercial and recreational development is likely to increase very sharply." It would seem that with the privatisation of water, as with Royal Ordnance, the Government are selling a property portfolio, not an industry.
There is already talk of development and windfall profits. It has not escaped my notice that the Government are proposing to write off no less than £5 billion debt from water undertakings. In other words, that will be a gift to future shareholders. For years I have campaigned for the writing-off of the paper debt on the Severn bridge, the very gateway to Wales. But that campaign has been like knocking one's head against a stone wall. When I compare the Government's skinflint attitude with the generosity that is being shown to future shareholders in the water industry, it makes me cynical about their intentions.
We know that when water is privatised there will be no competition. Therefore, what will happen to prices? In recent years the Welsh people have been plagued by rocketing water charges. Now there is speculation about a further 50 per cent. increase, and Ministers have made little, if any, attempt to refute such a suggestion. Stemming from such price increases there is every likelihood of a marked upward trend in disconnections.
The Government have said that privatisation will lead to a boost in investment. But there is a big question mark about that. In any case, such arguments come a bit rich from a Government who have set such tight external financing limits for the water industry that they have had the effect of forcing up prices and curtailing urgently needed investment.
Britain has been named the dirty man of Europe. In recent months there have been revelations about sewage, pesticides and nitrates gushing out into our water. In turn the Government, not before time, have shown concern about the environment. Perhaps the threat of European prosecutions has had something to do with that. Likewise, that newfound Government concern may assist the salesmanship needed to convince the public of the merits of privatisation.
Admittedly, the Government propose the establishment of a National Rivers Authority, but it is, of course, a 6,000-strong quango. Among other things, the NRA will seek to control water pollution ; yet environmental groups, whose interest in such matters goes back a long way, say that it will have neither the regulatory teeth nor the resources to do that job properly.
It is suggested that clauses 49 and 50 are vague and imprecise and that no specific water quality standards have been written in. The Government's proposals, enshrined in the Bill, are littered with contradictions. Water is a natural monopoly, and there can be no competition within any water authority area. That monopoly should provide for guaranteed profits, but massive investment is needed. There is a public demand for improved drinking water quality ; likewise, there is an urgent need to repair and replace our crumbling sewerage system. The NRA will not be able to prosecute the water companies until 1992, but 20
Column 477per cent. of sewage treatment works currently break the law. The Government recognise that immediate insistence on higher standards would frighten off investors.
The overriding motive of every private company is profit for the shareholder. It is argued that capital will be easier to raise on the private market, but such funding will require quick and massive return. With the Government's proposals, reluctant investors will be concerned about the costs that face the industry ; and increasingly hostile consumers will be faced with ever-growing bills.
Proper investment could be provided by the taxpayer at less cost than raising capital on the private market, and control would rest directly with the Government. We are fully committed to the social ownership of the water industry, with proper provision of local services and accountability to the consumer. Water is a vital natural resource that should remain in public hands. The Bill is an abomination. It is bad for the environment and for the customer. If Wales cannot be omitted from it, the Bill should be thrown out this evening.
Mr. Nicholas Baker (Dorset, North) : All who speak in this debate will be heavily influenced by their local experience of the water industry, and none more so than the hon. Member for Newport, East (Mr. Hughes), who spoke mellifluously and passionately. As a mere Englishman, I feel somewhat of an intruder into a Welsh day on the Water Bill.
I appreciate the opportunity of contributing to a debate on privatisation. I support the concept of privatisation for no reasons of dogma. I believe that it will enable us to run businesses in a better way, to provide better services to the customer, and those who run the businesses will suffer less interference from politicians. I resent the suggestion that private companies are less able to perform key functions in our society than publicly-owned companies. Companies engaged in defence contracts and companies that now participate in the previous 18 areas of privatisation are good evidence of the wrongness of that view.
It is easy for us in Parliament to set out a system for regulating and controlling private companies which are engaged in areas of activity, such as the water industry, and I am glad that the Bill is setting about that task. But there is another reason why I am in favour of privatisation where it is appropriate, and it is one that I have not heard mentioned so far. I believe that companies in the private sector are better able to accommodate change than public sector undertakings. They are better and quicker at expanding and contracting, as the need for their services or as the market for their product demands. We have the history of nationalised industries. A recent example is the sad tale of British Shipbuilders. I think that the House will recognise the truth of what I am saying. At various times all businesses need to expand and contract. If they operate in a private capacity, they are better able to do so. Our company law provides a framework that is designed to enable companies to grow and contract. Large national undertakings, by their very structures, are less able to do so. Therefore, I welcome this further measure of privatisation. The advantages enjoyed by private companies will apply in this instance. In addition, they have the advantage of being able to raise
Column 478capital on the market. I am less terrified by the prospect of publicly-owned water companies than some Labour Members. That is because the water to my house is supplied by a private company. Water in Dorset is provided by the Bournemouth District Water Company, and it does an extremely good job. It does so safely and securely in conjunction with Wessex Water.
I have some worries about the Bill, and I shall present them to my right hon. and hon. Friends on the Treasury Bench. First, I hope that we shall not over-regulate water companies to the extent that they are not marketable. It would be extremely dangerous to the supply of good quality water if the shareholders did not wish to invest in the companies on privatisation day.
Secondly, I am worried about price increases. Whether we pay for water services and necessary environmental controls as taxpayers or as consumers, it is necessary for charges to be increased, irrespective of whether the undertakings are privatised. The water industry has suffered from a lack of investment over many years. Indeed, that was a subject of our discussion yesterday. There is an urgent need for more investment, and that has been recognised by Labour Members. Of course, we shall have to pay for that investment. I hope that we shall not be too timid about facing the prospect of price increases. If the water industry is in private hands, it should be possible to keep necessary price increases lower than would otherwise be the case. That is another reason why I favour the privatisation of the industry.
My third worry is based on the need for a special share. Wessex Water, the authority that has overall responsibility for the water that is supplied to and around my home, has efficient management, effective controls and good assets. I suspect, however, that it and other water authorities will be especially vulnerable in the period following the flotation. There should be a special share to enable the authorities to overcome the flotation and the move into the private sector. The special share could be of infinite duration, subject to revocation by the Government if that is considered to be in the public interest.
Fourthly, I am troubled about connection charges. I live in an area with a high-growth population, and the infrastructure has not been properly planned to accommodate the growth. Water consumption is increasing at a dramatic rate. The efforts of the water authorities to accommodate the increased demand are laudable, but they have been maintained only with the greatest difficulty. Water authorities have no control over development and the plcs will not have that control in future. If the infrastructure is inadequate, planning authorities should reject applications for development unless the developer is willing to finance the cost of new sewers and water supply. My right hon. and hon. Friends should maintain a connection charge to ensure that developments in areas with a high-growth population, such as the one that I represent, do not outstrip the ability of the water companies to supply proper services.
Fifthly, great fears have been expressed about the sale of assets. Mention has been made of 450,000 acres of land. I have no objection to the assets being sold. That may be in the interests of maintaining, if not improving, the quality of the job that is done by the water authorities, which are required to provide a good supply of high-quality water and other services. However, the assets must not be sold in defiance of existing planning procedures. I hear the fears expressed by the Council for
Column 479the Protection of Rural England and the Royal Society for the Protection of Birds. If I thought that there was any ground for believing that the normal planning procedures would somehow be avoided, I would be seriously concerned. I hope that those of us who have mentioned this issue will be given the assurance that we seek. The Bill is an environmental measure. I welcome the creation of a National Rivers Authority. Our former colleague Sir Phillip Holland may wince at the creation of another quango, but the NRA is necessary, and it will have a very important job to do.
I end on a local point, which I believe has national applications, with which the NRA will have to deal. The demands on our rivers and water resources have increased and are increasing so greatly that in some parts-- and my area is one--the ecology and environment of rivers is under threat. Water authorities have so far coped quite well. In 1969 the River Allen where I live in Barnsley--which, as everyone will know, is in the county of Dorset--had a water abstraction rate of 1.5 million gallons a day. This year, the abstraction rate is 5.5 million gallons a day. Of course, the river level has fallen. The ecology and the natural environment of the wildlife that depends on the river are being depleted and there is a threat of damage. There is a very strong need for an NRA. Its enforcement powers must be strong. If I were selected to serve on the Standing Committee--
Mr. John Cartwright (Woolwich) : I want to register a very strong objection about the basis on which water authority assets are to be sold off under the terms of the Bill. In 1974 local authorities saw their water service assets transferred to the new regional water authorities without receiving a penny in compensation. They received only an assurance that there would be a majority of local authority representatives on the boards of the new authorities. That assurance from a Conservative Administration was torn up in 1983 by another Conservative Administration when the so- called commercial business men's administrations took over the water authorities.
The privatisation that we are discussing will remove the last vestige of any democratic involvement in the running of those essential services. More important, it will put the Government in the very happy position of selling for billions of pounds valuable assets for which they paid absolutely nothing. Conservative Members often quite rightly object to the concept of nationalisation without compensation. I suggest that privatisation without compensation is just as unacceptable.
The case in principle for privatisation rests on the belief that market forces will generate greater efficiency by ensuring that competition makes management more sensitive to the needs of the consumer, makes it improve its service to the consumer and makes it hold down prices to retain the loyalty of its customers. That may work in many areas of industry and commerce, but, as we know, it is absolutely impossible to achieve that in terms of water and sewerage services.
The Government accept that there is no possibility of genuine competition in water and sewerage services. Therefore, they dreamed up the concept of what they call comparative competition. Yesterday the Secretary of State for the Environment said :
Column 480"the customer will be able to make comparisons between each of the companies."
That produces a marvellous mental picture of a typical constituent in a high-rise block of flats in my constituency staying up late at night poring over the detailed figures trying to decide which company can offer, in the words of the Secretary of State,
"the best management to deliver exacting environmental and water quality standards at a lower price."--[ Official Report , 7 December 1988 ; Vo. 143, c. 338.]
Anyone who believes that that will happen is not living in the real world.
Even if my mythical constituent, gazing at the world from his 24th storey flat in his tower block, bothered to take an interest in the concept of comparative competition, what possible good could that do him? If he finds that he is being badly served by Thames Water plc, he cannot switch his water suppliers like he changes his supermarket or pub. He certainly will not have any power to influence the operation of water plcs. Under the Bill, customers will be completely captive, bound hand and foot, to a private profit-making monopoly. The Bill bestows on private companies an effective power to levy taxes. That is a distinctly medieval concept. However, since that is brought to us by the same team that gave us the poll tax, perhaps I should not be surprised by that approach.
This debate has already generated a good deal of concern about the impact of privatisation on the level of water charges. Yesterday the Secretary of State spoke about a 7.5 per cent. to 12 per cent. increase in prices in order to fund the capital improvements. On television a couple of weeks ago the Minister of State did not deny that the overall price increases would be between 50 per cent. and 90 per cent. by 1993. The Minister appears to be showing dissent. However, he is quoted to that extent in the Daily Mail which is not known for its virulent opposition to this Administration. Other people have suggested that the price increases will be a great deal more. We know that consumers will have to meet the costs of renewing aging Victorian systems, improving water quality and providing higher environmental standards. In addition, they may well have to meet the overall costs of water meter installation. Privatisation will bring the added burdens of having to pay dividends to shareholders and to meet the cost of corporation tax. Against that background, only the Secretary of State would have the nerve to say that this is a good Bill for the consumer.
Like Opposition Members, I am concerned about the impact of rising prices on the poorest families. We know that the social security changes have brought problems because there is no longer a specific allowance for water charges which must be met from the general social security benefit. We know that some poorer consumers have difficulty paying by instalments because the existing water authorities are not flexible about accepting instalments from those who do not have bank accounts.
The most worrying spectre of rising prices is the prospect that there will be more water disconnections for non-payment. We have already experienced an increase in the number of disconnections. If the consumers advice bureau in Bath, not an area noted for being deprived, can report 35 disconnections in one week in September, we know that the situation is serious. Given the risks to health
Column 481and the obvious hardship, we simply cannot accept that private profit-making companies should be given unfettered power to disconnect consumers.
In the 1970s I was involved in the battle to stop gas and electricity disconnections. Major hardships were involved. However, at least there was the possibility of an alternative in terms of heating or lighting one's home if one was disconnected by a fuel board. However, there is no possible replacement if one is deprived of one's water supply.
Last night the Parliamentary Under-Secretary of State tried to assure us that a code of practice would be at least as extensive as the present one. That simply is not reassuring. The present arrangements do not stop vulnerable families from being disconnected from their water supplies. Our experience of the gas and electricity authorities shows us that codes of practice are simply not the answer. They do not prevent hardship.
Water disconnection is a massive power. It is a much more severe punishment than many meted out by the criminal courts. It simply must not be exercised by junior officials in water companies. Water debt should be pursued through the courts like other debts and disconnection should be considered only in the most rare and extreme circumstances.
I want to consider now the consumer protection machinery. The Minister of State, Welsh Office who opened the debate today tried to suggest that the Bill represented a universal and very effective system of consumer protection. I dispute that. The concept of a director general who has the twin roles of regulating an industry and trying to protect consumers has not worked well so far for British Telecom. That model does not inspire a great deal of confidence in the hearts and minds of consumers. The arrangements for a chain of consumer committees takes us back to the consumer consultative committees of the old nationalised industries. There was no great public confidence in those either.
Given the monopoly of water plcs and their tremendous powers, it is essential that consumers feel that they have a genuine body, free and independent of the industry and properly resourced, which can fight on their side--a watchdog that has the power to bite as well as to bark.
In many ways the Government's case has not been made out. They have not been able to show that, simply because they are private, the water companies will be able to offer any better service to consumers than we now enjoy. The improvements that we shall see in water quality and environmental standards are welcome, but the Government have not shown that those improvements cannot be achieved by the existing water authorities.
The Bill offers no guarantee of effective competition. It offers no guarantee of effective protection for the consumer. It involves real danger for the poorest families in our society and I and my right hon. and hon. Friends will oppose it in the Lobbies tonight. 6.31 pm
Sir Giles Shaw (Pudsey) : I cannot follow the hon. Member for Woolwich (Mr. Cartwright) in his antagonism to the Bill. My hon. and learned Friend the Minister for Water and Planning will, I trust, accept that I shall be a strong supporter of it, despite some of the difficulties that
Column 482have been associated with it. Let me declare at the outset an indirect interest in so far as one of the companies to which I am a consultant numbers among its clients the Water Authorities Association. However, my direct interest in the industry stems from a long time ago.
Private sector involvement in water supply has probably been one of the most consistent influences whoever happened to own or direct the water authorities. Private sector involvement came very much through the municipalities and the cities ; from councillors who took an active part in ensuring that their particular city had a substantial and effective water system.
That was certainly so in the West Riding of Yorkshire where, for example, the city of Bradford was run by citizens who, as elected councillors, came from the wool industry and created the massive reservoir system, scouring industry and all the other essential ingredients to form the basis of the textile industry in West Yorkshire. They were essentially private sector individuals taking a role in municipal supply.
When I joined a rural district council in West Yorkshire I remember being told by a local councillor, "Right lad, there's a lot in't drain, but remember there are no votes in it". To a certain extent he was right because the problem with the municipally-owned water industry is that since the 19th century, when the citizens who made the big decisions to invest in public water supply had all the infrastructure put in, there has been little reassessment, replacement and replenishment of the infrastructure. So it was that after the period between the wars and immediately after, the municipal owners of the public water supply found a run-down system. Then followed the reconstruction of the water industry through statutes passed by the House, in which my right hon. Friend the Secretary of State for Wales played a major part. The current water authorities who invested in replenishment, struggling within the public sector to try to find sufficient resources within the external financing limits and Treasury restraints, have done as well as they reasonably could. If we want major changes in water and sewerage standards, better control of pollution and the environment, and better conservation, new sources of capital investment must be found and a speedy and effective solution found. The Bill provides a balanced arrangement for achieving that.
I say "balanced" because the crucial element is the setting up of public sector control--the National Rivers Authority--in such a way that the private sector can flourish to the extent required to maintain the investment level in the improvement of the assets. In my judgment, the balance is just, but only just, there. My hon. Friend has designed a system of control of the water industry through the NRA which is infinitely more rigid than it is for any industry that has so far been privatised.
My hon. Friend will share my anxiety about whether shareholders will have sufficient confidence to ensure that the industry has the asset backing that it most sorely needs. If there is to be such confidence, the operations of the NRA must be sensitive to the costs being imposed upon the industry by statute, EEC directive, the director general and the reasonable public accountability process that has been built into the NRA and the advisory committees so that the monopoly that remains does not abuse its power. The power of the NRA, a monopoly in its own right, must not abuse the private sector either which is struggling to provide a public utility for all our citizens.
Column 483I want to ask some direct questions. The first is in relation to the cost pass through provisions, which have been, I think, adequately dealt with in the Bill. However, I noted from what my right hon. Friend the Secretary of State said yesterday that he was anxious to demonstrate that the major cost for the revised anti-pollution programme would have to be carried by the plcs. He pointed out that the £2.4 billion was part of the pollution programme.
I am sure that neither my hon. and learned Friend the Minister nor my right hon. Friend the Secretary of State would wish the House to assume that the only significant increase in costs would come from those programmes which would be costed out at between 7.5 per cent. and 12.5 per cent. total increase in charges. That surely is not so. The cost associated with the pollution programmes, which, as is shown in Hansard, run on different time grades--1992, 1995, and the year 2000--may enter the industry's price stream at that level. But the industry, under direct Government pressure, has started to make significant improvements in its investment, all of which will have to be paid for through the cost price mechanism. We should be under no illusion that, although the pollution programme may cost £2.4 billion, significantly more millions of pounds require to be spent to maintain the existing system of supply, to improve the investment record and to cure a number of the problems already associated with a system that still shows signs of strain when under pressure. The NRA is to be responsible for land drainage operations and coastal defence work. The House may well be aware that those two important responsibilities have to date been carried by the water authorities. In most areas, certainly those with long coastlines such as Yorkshire, the problem of coastal erosion and the massive danger of inundation or other such disasters results in an authority having to have flexible borrowing powers and usually substantial reserves. The same could well be true of land drainage. I think particularly of the problem in Anglia. It is also true in parts of Yorkshire and parts of north Lincolnshire. Will the NRA's borrowing powers be sufficient and sufficiently flexible to deal with those issues? Schedule 1, paragraph 18, says :
"The Authority may, with the consent of the Secretary of State or the Minister and the approval of the Treasury, borrow temporarily in sterling by way of overdraft or otherwise from a person other than the Secretary of State or the Minister, such sums as it may require for meeting its obligations and carrying out its functions The Authority shall not be entitled to borrow otherwise than under this paragraph."
May I have an assurance from my hon. and learned Friend the Minister that that borrowing power is comparable in every way to that currently enjoyed by water authorities in discharging the same functions ; for example, land drainage investment and cost, and flood protection investment and cost? I detect in schedule 1(18) the mortmain of the Treasury having rather more inflexibility than that function of the National Rivers Authority deserves.
Much has been made also of the fact that under the new regime, which we hope will be successful, companies can be more flexible in what they do, can extend their operations to a number of other activities, and can generally behave like the French. I am all in favour of that but hope that my right hon. Friend the Secretary of State and my hon. and learned Friend the Minister will take note of one further point. If that objective is to be realised, it is