House of Commons Hansard Debates for 21 Mar 1989

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Wales, he has refused to give the answer, no doubt to cover up his and the right hon. Lady the Prime Minister's embarrassment about this matter.

Mr. Tony Marlow (Northampton, North) : Since the burden of the hon. Gentleman's remarks is that he would like to see higher standards, I presume that he accepts that that will obviously cost more money. The Government have a system for bringing that about. The hon. Gentleman is bringing forward some amendments which would make life even more complicated and bureaucratic. He is asking for even higher standards, which of course will cost even more money. Can he tell the House how much he believes that these new clauses would cost, first, British industry and, secondly, the National Rivers Authority?

Dr. Cunningham : I am willing to set out all the answers to all those questions in a speech which I shall be making in a few weeks' time. But, yes, I agree that these things will cost money, and a great deal of money, and that the British people will need to pay. I also believe that, overwhelmingly, they are willing to pay. It is not necessary to sell off the nation's water resources to achieve these objectives. The British people recognise that quite clearly and in overwhelming numbers, as they continue to demonstrate.

Sir Anthony Grant (Cambridgeshire, South-West) rose

Mr. David Ashby (Leicestershire, North-West) rose

Dr. Cunningham : No, I am not giving way. Sit down. I am answering the hon. Member for Northampton, North (Mr. Marlow).

The British people are not willing either to pay unnecessary charges such as those set out by the West Kent statutory water company when it announced a 42 per cent. increase for consumers, half of which, it pointed out, was due directly to the cost of privatisation, or to accept unnecessary additional costs to pay for dividends and high directors' fees, salaries and expenses, because they regard that as irrelevant to the need to improve and enhance the water environment of this country.

Mr. Rhodri Morgan (Cardiff, West) : Does my hon. Friend agree that the Prime Minister was obviously not aware that when raw sewage is discharged even through long sea outfalls at the south Wales coast, where there are many popular tourist beaches, it goes into the Bristol channel and the Greater Severn estuary and then enters that same body of water, 5 cubic km of sea water, that swishes up and down the channel twice a day, so that it has now become one of the world's largest flush lavatories? The volume of sewage that it takes is not discharged into the open ocean because, by and large, it is the same body of water that goes up and down the channel ; therefore, the sewage is not dispersed into the ocean.

Dr. Cunningham : My hon. Friend is absolutely right. If the Prime Minister, after her speech in Scarborough on Saturday, had walked out of the Spa hall and looked at the beach and the sea in front of her she would have seen the outfall discharging untreated raw sewage into the marine environment. It is a pity that she so averts her gaze from the reality of environmental pollution in Britain that she cannot see what is obvious to so many people.

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Mr. Ashby : The hon. Gentleman discloses a rather worrying state of affairs in Wales. I accept that and I think that all my hon. Friends would accept it. But that discloses that there has been a lack of investment over the years. Can the hon. Gentleman tell us what the level of investment was in the 1970s when the Labour Government were in power? Will he point out that it went down 50 per cent. under the Labour Government, that there was 50 per cent. less investment?

Dr. Cunningham : I can give the hon. Gentleman the figures at constant prices. The water authorities' capital expenditure in England and Wales set out the figures in water statistics. The average during the five years of Labour government from 1974 to 1979 was £1,344 million per year, and the average in the period of Conservative government has been £1,014 million--lower than in the five years of Labour Government during a period, apparently, of economic success.

7.15 pm

We know what is happening on the Conservative Benches. Hon. Gentlemen are unwilling to strengthen the environmental protection safeguards in this Bill because they realise that it will create a huge dilemma for the private enterprise monopolies they seek to create. They are planning to cosset those private enterprise monopolies. The Secretary of State has already, unprecedentedly, guaranteed them immunity from prosecution. That is an on-the-record statement. We know, because of our possession of the leaked memorandum from Mr. Michael Carney, the secretary of the Water Authorities Association-- [Laughter.] That is true. We know only because it was leaked ; he was telling a different story in public from the one he was telling in private. I do not see what hon. Gentlemen find so funny about that ; it is a statement of the truth. Mr. Carney said :

"Any further strengthening of the regulatory framework now put forward would have significantly adverse consequences for the successful management of the privatised [water] companies." That is why the Government have rejected all attempts to strengthen the provisions in the Bill to safeguard the environment and enhance the role of the NRA.

Sir Anthony Grant : The hon. Gentleman has not really addressed himself to the question quite rightly posed by my hon. Friend the Member for Northampton, North (Mr. Marlow). He has come to the House with a series of new clauses and a determination to strengthen the Bill, but he must tell the House what additional cost there will be. It is no good his saying he will make a speech about it at some obscure place in three weeks' time. The House wants to know now. Surely he has not put forward these proposals without doing some arithmetic. If he has done his arithmetic, will he let us know what it is?

Dr. Cunningham : I have a copy of the Tory Central Office brief about this as well. Since the hon. Gentleman fleetingly shows an interest in these matters, I have to tell him that his right hon. Friend the Secretary of State can only guess at the number of billions of pounds that it will cost to make the necessary improvements, and we are in a similar position. My guess is that the Secretary of State's proposals have no hope of reaching fruition under private enterprise. So, if the hon. Gentleman wants more precise figures, perhaps he would ask his right hon. Friend to give the House more precise figures so that we can all enjoy the

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debate. [An Hon. Member :-- "He does not know."] That is true. That is what I have said, and, what is more, the hon. Gentleman's right hon. Friend does not know either.

We need to recognise that pollution cannot be controlled, our rivers and other water resources cannot be protected from further pollution and the existing polluted rivers, streams, brooks and ponds will remain polluted and dead if financial resources are not devoted to them. The purpose of the new clause is to make it a primary responsibility of the NRA to control the pollution as the first step and then to start reducing the pollution of our water resources. The aim of new clause 2 is to expose, as it does quite clearly, one of the most blatant flaws in the Government's case. It shows that the existing situation whereby the water authorities police themselves in respect of pollution is wrong. That is what the Goverment say, and we agree. They omit to say that the status quo results from Conservative Government legislation in the first place. The Government claim that the Bill will--to use the Secretary of State's phrase--separate the poachers from the gamekeepers. However, he neglects to emphasise that the National Rivers Authority can and, as Ministers have admitted, will contract back many of its functions--including regulatory ones--to the private water plcs. That will take place principally because the NRA will have inadequate resources to perform all the functions itself.

Far from freeing these constraints from the public sector borrowing requirement--which the Secretary of State has always argued is one of the fundamental reasons for them--the proposals leave the financing of the National Rivers Authority fairly and squarely in Treasury control.

Mr. Tim Boswell (Daventry) : Will the hon. Gentleman say, with regard to the problem of contracting back, whether the duties imposed on the National Rivers Authority by the Bill will be waived--or diluted--by any contracting which the authorities may decide upon for sensible operational or other reasons?

Dr. Cunningham : Yes, it will be weakened because it will not be independent. Any work done by the very organisations that are supposed to be policed, monitored and controlled will be less than satisfactory. That is the point that I have been making, and I stand by it.

Mr. Boswell : I must press the hon. Gentleman on this point. Certain general duties have been laid on the authority by the Bill. If the authority chooses to contract out of certain of those functions, will the duties be in any way amended or reduced?

Dr. Cunningham : I refer the hon. Gentleman to the now infamous quotation of Mr. Keith Court, the chairman of the South West water authority, who said that after privatisation it would be the responsibility of his managers and scientists "to outwit the regulators". Those are the circumstances that we face.

Mr. Ashby : That is not an answer at all.

Dr. Cunningham : It is.

New clause 15 would lay a duty on the NRA to prepare and publish a national plan for the promotion of clean river water and the conservation and enhancement of the natural environment. Specifically, it would require the NRA to do so in respect of

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"(a

(the state of cleanliness of waters in England and Wales, including their chemical quality and levels of compliance with notified water quality objectives ;)

(discharges of sewage effluents and trade effluents in breach of consent levels and the monitoring of compliance in respect of all such consents ;)

(the prescription by the Authority of precautions to be taken by specified persons for the prevention of pollution ;)

(a programme of works and operations to prevent, remedy, or mitigate pollution ;)

(levels of charges to be imposed by the Authority on persons in respect of discharges and the creation of pollution ;)

(the conservation and enhancement of sites of natural beauty or amenity, and the conservation of flora and fauna ;)

(the preservation and promotion of public access to waters in areas of natural beauty or amenity, and their use for recreational purposes ;)

(the conservation, redistribution and augmentation of water resources ;)

(the general supervision of land drainage and flood protection including a programme of works on designated main rivers and sea defences ;)

(the conservation, maintenance, improvement and development of salmon, trout, freshwater and eel fisheries in inland waters ; and,)

(the carrying out of navigation, conservancy and harbour authority functions".)

In other words, new clause 15 makes the National Rivers Authority a far more comprehensive and wide-ranging environmental protection agency than is envisaged by the Secretary of State.

New clause 20 would transfer all the land of the existing water authorities to the National Rivers Authority, ensuring that it remained in public ownership and control. It would similarly transfer buildings, machinery and other rights, where necessary on operational grounds, so that they could be leased to the companies. The land could be leased back to water undertakers where necessary for their functions. No development on, or use of, the land would be permitted which damaged the environment, and no interest in land could be sold by the lessee without the consent of the National Rivers Authority. The Government's proposals contain no justification of why the freehold of all the land currently in public ownership--owned by water authorities--should be sold. Technically, plcs would only need control over the necessary rights to fulfil their statutory responsibilities, which might include rights of access to land, right of water gathering and abstraction. The transfer of the freehold opens up the possibility of land exploitation and development, which runs counter to the best interests of land management and conservation. The code of practice under which the Government claim that public interest is to be protected does not apply to subsidiary companies that will undoubtedly be created by water plcs.

Mr. Ridley : If the hon. Gentleman wants all the land to be vested in the NRA, what is there to stop the NRA from developing it as it surely should in order to maximise its assets?

Dr. Cunningham : Because that is not the duty of the NRA, which, as the right hon. Gentleman knows, will not have development powers. The aim of our amendment is to safeguard our national parks, areas of outstanding natural beauty and sensitive habitats from development. That is what people concerned with the countryside and

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our natural heritage overwhelmingly want to see. They do not want to see what the Government propose, which is

Mr. Ashby rose--

Dr. Cunningham : No, I shall not give way. The people do not want to see what the Government are proposing allowing or what, with a wink and a nod, they are hinting at to beef up interest in the flotation of the water industry--which is that people can make a quick buck by selling off land or developing or changing its use and using it for other commercial purposes.

Mr. Marlow rose

Dr. Cunningham : I shall give way in a moment. I wish to develop this point because it is important.

Mr. Ridley : It is a rotten point.

Dr. Cunningham : I wonder whether the Secretary of State has had the benefit of re-reading recently the letter of 6 February 1989 of his Minister of State to Mr. Jack Jeffrey, the chairman of the Statutory Water Companies Association. In the letter, the Minister of State refers to pathetic failed attempts to keep down price increases in the statutory water companies. He says that by agreeing to increases of 22 per cent. on average--three times the inflation rate--he has actually saved consumers money. That is a preposterous and pathetic claim.

In his letter, the Minister laid bare the Government's ideas about all this. Talking about ways of trying to avoid price increases and costs, he said :

"These should come out of dividends or reserves or proceeds of asset sales".

There is no doubt about the Government's view. They are encouraging people to realise the assets that they will acquire after flotation--if a successful flotation ever takes place. People in the City know that very well. A brief on the future of the water industry has been prepared by Seymour Pierce Butterfield Ltd. It was written by Mr. Nigel Hawkins, who, when approached by a research assistant in my office today, declined to talk to her on the ground that it might get him into trouble. I am not sure what he meant by that, but it turns out that he is an aspiring Conservative parliamentary candidate.

7.30 pm

As Mr. Hawkins was unwilling to discuss his proposals in the document, I shall mention a couple which are germane to this part of the debate. Referring to land and assets, Mr. Hawkins writes : "Given the heavy dependence of Water Authorities upon their core' activities, it will be extremely difficult for most to expand the non core' sector at anything like an acceptable rate To compensate for this expected shortfall in growth, some Water Authorities with significant amounts of surplus land may well realise sizeable capital gains by selling it."

He goes on to speculate about exactly who will be interested in acquiring assets in such a way :

"Companies in the chemical, waste disposal and heavy construction sectors might find particular attractions in bidding for privatised Water Authorities."

There is no doubt in the City about the opportunities for exploitation in the proposals. They are vast, and they threaten much of our most priceless national heritage.

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For all those reasons--because of the need to strengthen the Bill and to remove the gaping holes, weaknesses and inadequacies--I commend the new clause to the House.

Mr. Rupert Allason (Torbay) : I know that time is short, but I must say that I find much to commend in new clause 1. It attacks the basic problem of pollution, about which--and about the source of which--there is much anxiety. The new clause imposes a direct duty on the Secretary of State to ensure not only that a National Rivers Authority is set up but that those who pollute our rivers and coastlines are held responsible and have to pay to put matters right. That strikes me as entirely acceptable.

I speak from some personal experience. Although Torbay's beaches are regarded as some of the best in Europe and have received prizes, I am afraid that the same cannot be said of South West water. I very much doubt that it would win any prizes in a European contest. Parts of the north Devon coastline are quite simply a disgrace--and, indeed, a health hazard where there are short outfalls into the sea. When people talk about treated or untreated sewage, they often use the term "macerated". It is not generally known that maceration is no more than a mincing process --by and large, the material is untreated and its strength is not bacteriologically reduced. It is a vile experience for people to go swimming and come across sewage, whether macerated or not. New clause 1 would go some way to improving the current position.

In my constituency, just off the coastline, there is a beauty spot called Thatcher Rock, a popular site for divers. I know that we are urged to wear condoms as frequently as possible, but the experience reported to me by divers of emerging off Thatcher Rock with condoms on their heads is pretty unpleasant. I also consider it entirely unacceptable that 27 per cent. of all sewage sludge is disposed of at sea. It is said that the position will have been improved by 1995, but that is six years too late for me.

I am concerned about Devon's position for two reasons. First, since 1980-81 our water rates have risen by just over 90 per cent. It is currently proposed that they should rise again by a staggering 13 per cent., which I believe to be the largest increase in the country. Two messages come back to me--first, that such increases are entirely unacceptable and an appalling burden on water rate payers and, secondly, that they are an indication of crisis management in the past, particularly at the time of the 1974-79 Administration. We know from the figures that in that period capital investment was cut dramatically--and capital investment, surely, is the key.

What is the capital structure for the new water authorities? Will there be a continuing burden on water rate payers? A scheme that has commended itself to me is one advocated in the Financial Times --a diversion of flotation revenue during privatisaton to the water companies rather than the Treasury. I accept that the Bill does not cover that, but I nevertheless regret that it was not considered because it would have got us off a particularly unpleasant political hook. Certainly capital is the key to the future--we cannot expect high standards without a satisfactory level of capital investment. The answer, in my view, would have been to allow the flotation revenue to go to the companies to provide a satisfactory capital basis. That would have been a neat solution and, I think, widely acceptable, along the lines of the TSB flotation. I am not

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arguing against the principle of privatisation, which I have always advocated strongly. No doubt the Secretary of State is gazing into his crystal ball and will tell us that it means more efficiency in the future. I know, too, that the NRA will be an important development.

Let me indulge in one of my occasional lapses into a history lesson. I remind the House that, when the water assets were taken over by the Government as a trustee, undertakings were given--not only about debt-- implying that the Government would continue to look after those assets, which would be managed on behalf of the boroughs that had previously owned them. My constituency contained a particularly impressive water system, with two reservoirs. In some respects we are in competition with Bournemouth, which has retained a private sector system and where water rates are about 40 per cent. below those of Torbay. That, of course, is an argument in favour of private companies and privatisation.

It may well be too late to consider any diversion of the funds realised from the flotation to the water companies and not to the Treasury, which we know from the Budget is brimming over with funds and does not need the money. I seek an assurance from my right hon. Friend the Secretary of State that after privatisation there should not be a continuing burden on the water rate payers, and that there should be a proper capital structure for the industry so that we are not burdened with further rate increases. I remind the House that the water rate increases in Devon have been just over 90 per cent. since 1981, and that the current increase, which my constituents consider totally unacceptable, is just over 13 per cent. I hope that the Secretary of State will provide that assurance and give great relief to the people of Devon.

Mr. Peter L. Pike (Burnley) : The group of amendments and new clauses that we are debating touch on some important fundamental issues. Despite the many hours that we have spent debating the Bill, we are still far from satisfied that it contains adequate safeguards to protect the environment. Our fears are fully justified by the post that we continue to receive from organisations representing those involved in conservation, access to the countryside and other interests which still do not believe that the Government have got the Bill right.

The hon. Member for Torbay (Mr. Allason) touched on some vital matters. It is a pity that he was not on the Committee considering the Bill as he could have made some important contributions to those debates. He is absolutely right to say that even if the necessary safeguards were written into the Bill--we very much doubt that they are, which is why we have tabled new clauses and amendments--the problems could not be resolved without capital investment. That raises the argument as to whether the public sector or the private sector is better able to raise capital.

It is important that the National Rivers Authority should have sufficient powers and use them to deal with such matters. There is fear that that will not be done because it requires massive investment from the private sector. We can envisage that, having invested in the shares, the private sector will not be prepared to deal with the problems of pollution, sewage works, or the transfer of sewage out to sea. The money may not be available because investment in such basic requirements will not necessarily provide an adequate profit or return.

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My hon. Friend the Member for Copeland (Dr. Cunningham) referred to the Select Committee report on toxic waste. I served on that Select Committee which agreed that the National Rivers Authority should have been the basis of creating an environmental protection agency. I believe that the Secretary of State would do better to ignore the privatisation clauses of the Bill that we are to debate later, and allow us to have a constructive debate on how to make part I work in a positive way. That would be welcomed in the House and by many interested organisations. I hope that the Secretary of State will think again, although that is unlikely. I hope that he will recognise that there is genuine concern on the issues raised in the amendments and new clauses that we are discussing.

New clause 20 deals with the ownership of the land and suggests that it should be vested in the National Rivers Authority. We recognise that under the Bill as drafted the water authorities will become plcs and decide what is and is not operational land and will be able to dispose of the non- operational land. Historically, the water authorities own a great deal of land in towns and city centres that easily could be designated non- operational and could be disposed of, with large amounts of profit accruing to the privatised water authorities. More important still, the water authorities own land in areas such as the Lake district, the Peak district and, in my constituency, the Pennines, Worsthorne moor and many water catchment areas surrounding Burnley and other towns on both sides of the Pennines.

7.45 pm

The water authorities own acres of valuable land which are water catchment areas but are easily designated as non-operational. If a water authority were to dispose of some of that land to raise money to fund some necessary work, it would cause tremendous damage to our heritage in many of the most beautiful areas of the country. We do not want that to happen, so we believe that new clause 20 should be added to the Bill. Many organisations take that view. The North West Council for Sport and Recreation sent me a fairly long brief expressing those fears. It says :

"We consider that the Water Bill, when enacted, will represent a major threat to recreational interests".

It goes on to discuss the status of land sold off or not directly related to the water supply. It feels that land will be disposed of, that we shall destroy our heritage, remove recreational facilities, and access to the countryside will be lost. It goes into great detail as to why it takes such a view.

The Burnley borough council planning officer, Mr. Andrew Walker, has written a detailed letter to the Secretary of State expressing similar fears about the code of practice and the ownership of land, with particular reference to the catchment areas. He stresses that not all the land will be alongside a river and that in moorlands and other areas there will not be a river in the immediate vicinity, but it is important that those moorlands should be retained for public access and to protect the birds and animals in their natural habitat. He explained why the Government have got it wrong, and that one acceptable improvement would be for the Government to accept new clause 20.

The Greater Manchester countryside unit also expressed concern. Locally and nationally anglers have written expressing their concern about the future ownership of the land. I hope that the Secretary of State recognises that the Bill as drafted raises great fears that the

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land will be developed. Even if only small sections of the Peak district or the Lake district are sold off and developed for exclusive housing, which will be extremely valuable, the whole nature of such areas and our heritage will be destroyed.

It is no use Ministers saying that this will be dealt with by planning laws. Hon. Members on both sides of the Committee read submission after submission and saw evidence from many organisations demonstrating that there were not sufficient planning safegurds to deal with possible development.

On new clause 1, it has been said that the polluters should pay. I agree that polluters should be made to pay more for the problems of agricultural or industrial pollution, and we have to consider that. It is not good enough that new sewage treatment works are being built at Bootle, in the constituency of my hon. Friend the Member for Bootle (Mr. Roberts), to deal with the sewage from Manchester, which will go along a pipeline instead of by sludge boat along the ship canal, and to deal with the sludge from the Liverpool area, because when those works become fully operational they will merely take sludge out into the Irish sea and dump it. We need more thought and investment to deal with such problems.

The North West water authority is extending the sewage pipe at Rossall near Fleetwood and dumping sewage a little further out into the Irish sea. The hon. Member for Torbay made the point that the coast of Devon is not suitable for swimming because of the sewage being pumped out into the sea. The sea at Blackpool, Morecambe and other places in the north-west is not suitable for swimming, either. The amendments are positive improvements to the Bill. The Government must recognise that the Bill contains too many loopholes to deal with pollution, river quality, sewage treatment works or drinking water quality. If more safeguards are not written into the Bill, we know that the Government will make exceptions, give derogations and extend the periods of time for compliance. Drinking water quality and river quality will not be dealt with and we shall have pollution for many years. Those are the reasons why I hope that the Government will be prepared to move in a positive way for the first time and show that they want genuinely to ensure that the Water Bill protects our environment in a better way than it does at present.

Mr. Robert Adley (Christchurch) : I hope that the hon. Member for Burnley (Mr. Pike) will forgive me if I do not follow him, but I want to be brief. In principle, I am relaxed and fairly happy about the Bill. One of my constituents wrote to me yesterday, accusing the Government of being about to poison him through the Bill. What he did not seem to realise was that he is, and always has been, a customer of a private water company. I was thus able to reassure him that, whatever the problems about the legislation, he could rest easy. I support new clause 1. I have a reasonable track record on pollution and I believe that we must be seen to be serious in the Bill about giving the National Rivers Authority the teeth and powers to ensure that pollution is controlled. In 1979, when the Merchant Shipping Bill was in Committee, I managed to persuade Committee members of all parties to amend the Bill so that when dealing with oil pollution at sea the owner of the oil rather than the carrier of the oil would be made responsible for

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any pollution at sea. That concentrated the minds of the oil companies no end, but because of the collapse of the Government led by the present Lord Callaghan, I was threatened that we might lose the entire Bill if I was not willing to withdraw the amendment at the truncated Report stage on the Floor of the House. The proposition that pollution must be paid for by those who create it is thus a long-held view of mine. I hope that, even if my right hon. Friend the Secretary of State cannot accept the amendments, he will consider as the Bill proceeds whether to accept any reasonable proposal that comes forward to ensure--

Mr. Ridley : I am delighted to meet my hon. Friend's point. The two points contained in new clause 1 are already amply and fully covered in the Bill. New clause 1 is wholly unnecessary, so my hon. Friend can vote against it with complete equanimity.

Mr. Adley : I am grateful to my right hon. Friend, but I told the Chief Whip some weeks ago that I was especially concerned about the National Rivers Authority, so he would be disappointed if I did not vote in favour of new clause 1. I do not want to detain the House indefinitely, but I must point out that from time to time my right hon. Friend and I have taken common cause on certain issues. However, I had better do as I said and vote in favour of new clause 1, while registering the fact that, in principle, I am happy with most of the other provisions of the Bill.

Mr. Wigley : The contributions made by Conservative Members have been much more encouraging on Report than in Committee. I suspect that there was careful selection of those chosen to serve on the Committee. There has been a breath of fresh air in the speeches made by the hon. Members for Christchurch (Mr. Adley) and for Torbay (Mr. Allason). The matter of concern to them and to all of us is how to upgrade standards on pollution. Those of us who represent maritime constituencies are very much aware of the large distance that we have to go to reach EC standards. The fact that they are European standards is neither here nor there because we ought to be insisting on them ourselves. As we come to the end of the 20th century, our standards should be well ahead of their present levels.

The Secretary of State tried to give assurances that those points were met by the Bill, but had he been in Committee he would know that week after week we were far from convinced that the Bill was sufficiently rigorous and, more fundamentally, that we were far from convinced that adequate financial resources would be provided to undertake the job that is so desperately needed.

The hon. Member for Copeland (Dr. Cunningham) spoke about the proportion of sewage outfalls in Wales--he said that it was 65 per cent.--discharging untreated sewage. That caused considerable concern in the Select Committee on Welsh Affairs when we looked into the question a couple of years ago. That Committee produced a far-reaching report which was supported by hon. Members of all parties, but regrettably the overwhelming majority of its main recommendations have still not been implemented. Many of them come back to the question of finance. What was disturbing to the Committee was to understand that when the implications of the Bill were hitting home to those who might have to find the finance

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for privatisation, the doubts began to emerge--so much so that the leading story in the Financial Times on Monday 6 February, under the headline :

"Water privatisation rules make industry less attractive' ", said :

"The Government's water privatisation plans were in disarray last night as ministers faced threats of increases in charges of up to 50 per cent. from statutory water companies. Industry leaders also warned of a significant drawback in privatisation legislation that would make the water authorities much less attractive to investors. The industry's problems, which are becoming a major embarrassment to the Government, flow from the huge capital investment programme required to meet the increasingly stringent European Commission Regulations on drinking water quality, cleaner beaches and more effective sewage treatment."

That is the guts of the case.

Obviously, as hon. Members have pointed out, costs will be involved in improvements. Last Thursday, at Prime Minister's Question Time, the Prime Minister and the Leader of the Opposition acknowledged the extent of those costs. The question is whether the costs can be met from the privatisation structure. On 28 November 1988, the Secretary of State said that water charges might increase by between 7.5 per cent. and 12.5 per cent. in real terms in the decade following privatisation. It is not credible that increases of up to 12.5 per cent. over 10 years would generate sufficient resources to undertake the capital investment programme needed to upgrade our sewage treatment and water outfalls. Conservative Members taunt the Opposition by saying that we do not face up to the cost of our demands, but we do. All Opposition Members face up to that cost. We are prepared to see that cost funded either from general taxation or from public sector borrowing, whichever may be more appropriate.

Mr. Tim Boswell (Daventry) : What would the basic rate of income tax have to be to fund any proportion of the environmental programme that has been suggested by the hon. Gentleman and his hon. Friends? 8 pm

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