House of Commons Hansard Debates for 22 Mar 1989

(b) either party may apply within twenty one days of receiving the notice to the Secretary of State for a review of the decision to terminate and any such notice shall not come into effect until the Secretary of State has published the outcome of the review and (

(c) in carrying out the review the Secretary of State shall have regard to the benefit accruing to consumers as a result of the proposed termination and the financial consequences of termination on the parties to the arrangements.'.

No. 126, in clause 73, page 83, line 34 at end insert--

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(1A) The Director shall lay before Parliament in each year in which charges are fixed under this section a report setting out those charges together with such information as he may consider to be relevant in relation to those charges.'.

No. 148, in page 84, line 5 at end insert--

(3A) When a water main or sewer is requisitioned or a connection is made in accordance with the provisions of this Act or section 34 of the Public Health Act 1936 the undertaker shall be entitled to charge the person or body making the requisition or requiring the connection in respect of each dwelling a sum (the connection charge) to cover the costs of any additional works required to ensure compliance with sections 37 and 67 of this Act.'.

No. 136, in clause 76, page 87, line 29 at end insert--

(2A) Notwithstanding the generality of subsection (2) above, or of Schedule 10, regulations may not impose any right on a water undertaker or sewerage undertaker to require any person to make any payment for the connection or maintenance or repair of a water meter installed at the undertaker's request or insistence.'.

No. 125, in page 87, line 46 at end insert--

(dd) provide for optional arrangements for payments by instalments'.

Government amendments Nos. 43 to 48.

Dr. Cunningham : Amendment No. 1 is an excellent amendment and has the additional merit of being quite simply understood, even by those hon. Members who have paid only fleeting attention to the work of the Standing Committee. The effect of the amendment is to remove from the Bill the whole process of privatising the water industry. Amendment No. 1 is part of a large group, which includes several other amendments in my name and in the names of my hon. Friends. Amendments Nos. 122 and 123 would require the Bill to include drinking water quality standards that met the provisions of the European Community directive. Amendment No. 126 is an important amendment, which would require the director general to give Parliament an annual report on pricing in the water industry. Amendment No. 125 is a small but significant proposal, which would allow people to pay their bills by instalments. Amendments Nos. 127, 128 and 131 deal with local authority sewerage agency arrangements. We also have an interest in the significant amendments tabled by the hon. Member for Macclesfield (Mr. Winterton)-- amendments Nos. 102 to 109--which would have important implications for references to the Monopolies and Mergers Commission and other aspects of takeovers in the water industry.

It is well known that the Labour party is totally and irrevocably opposed to the idea of privatising water--the nation's most fundamental natural resource. Privatisation has always been a bad idea, as is recognised increasingly widely. The two most comprehensive opinion surveys have been conducted by the BBC. The survey conducted by the Derek Jameson show--

Mr. Edward Leigh (Gainsborough and Horncastle) : Oh yes ; quality stuff.

Dr. Cunningham : That is an interesting reaction. Clearly, the hon. Gentleman does not like the idea of the British people expressing their views. No doubt Mr. Jameson and his listeners will be interested to hear of the contempt expressed by Conservative Members. I am not surprised that Conservative Members do not want to hear

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what happened as 36,068 people recorded their opinion, of whom 96.4 per cent. said that they were opposed to the whole idea of privatisation. More recently, on the "Open Air" programme, about 10, 000 people responded, and 96 per cent. of them expressed opposition to the idea of privatising the water industry.

Mr. Howard : Is the hon. Gentleman suggesting that the Derek Jameson show will be the touchstone of the policies of any future Labour Government? Is the bold cry of the Opposition, "We offer you government by the Derek Jameson show"?

Dr. Cunningham : Of course not. I am entertained by the contempt in which Conservative Members hold the opinions of the British people and by the dismissive--[ Hon. Members-- : "No."] Conservative Members seemed to laugh contemptuously at the opinions of the British people. They may laugh on the other side of their faces before too long because, as the arrangements unfold, a significant and steady trend of opinion can be seen that is opposed to the Government's proposals.

Miss Emma Nicholson (Torridge and Devon, West) : The test of British opinion is in the ballot box, and the Conservative party is consistently returned to government by the British public. Surely the hon. Gentleman does not have the face to put forward misleading surveys by semi-qualified people broadcast on the Derek Jameson programme. Non-viable surveys are irrelevant and should form no part of a properly prepared and presented Opposition argument against the Bill.

Dr. Cunningham : If the hon. Lady prefers, I can read into the record the results of the Gallup poll, the MORI poll-- [Interruption.]

Miss Nicholson : I am quoting the hon. Gentleman's figure of 96 per cent.

Dr. Cunningham : All the other opinion polls, too, show a trend against the Government. I agree that it is slightly smaller, being in the mid-70s. Is the hon. Lady saying that she is content with 76 per cent. opposition to the Government's proposals?

Mr. Alistair Burt (Bury, North) rose--

Dr. Cunningham : I shall give way in a moment ; I have given way twice already.

It is well established that British public opinion is implacably opposed to the idea that the nation's most fundamental essential resource should be a matter of profit-taking by private enterprise monopolies. I believe that the public will remain opposed to that proposal.

Mr. Burt rose--

Dr. Cunningham : I shall give way in a moment.

In almost 19 years in the House, I have never seen so much adverse press and public condemnation of a proposal. No doubt we shall hear that leading articles and editorials in the Financial Times, The Guardian, The Independent and The Daily Telegraph do not matter either. However, we believe that those and other newspapers are expressing genuine concern about, and in some cases are showing outright opposition to, the implications of the proposals. The Guardian showed its concern in an editorial headed, "Wet and worrying." I do not know whether the

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Minister would describe himself as wet in the political sense--certainly not. He is, however, in a certain amount of deep water on this issue.

The Times had the heading, "Flotation is heading into deeper water" ; The Independent, "The wrong way to sell water" ; the Daily Mail, "Why water charges are overflowing" ; the Financial Times, "Water sale in a muddle" ; The Daily Telegraph, "Privatisation water torture" ; and The Observer, "Risk of drowning in water sell-off".-- [Interruption.] They are all very recent. The Financial Times said "Costly water, rotten eggs". That is absolutely ringing condemnation of the very idea of privatising the nation's water resources.

Mr. Burt : All this is very amusing, and I take the hon. Gentleman's point. It is amusing, because it reminds the House of the Opposition's reliance on ephemeral opinion. Will he think back to the considerable opposition at the time of the introduction of the measures to privatise the telephone service and British Gas and to deregulate the buses, which at the time brought tremendous opposition in much the same way as the hon. Gentleman has described? However, their success has now been proved. Does the hon. Gentleman not agree that that will happen with this measure?

Dr. Cunningham : That is a matter of opinion. I would not say that the majority of people think that the privatisation of the telephone service was a wonderful success, or some of the other inadequate privatisations. People in the rural area that I represent do not consider that bus deregulation has been a roaring success, because they do not have a bus service any more. That is hardly success for those people. That is typical of what has happened in the rural areas. The suggestion of this being some kind of ephemeral public opinion is, too, a matter of opinion and remains to be seen. However, the evidence over the past two years has been that the public are implacably opposed to the idea.

Mr. Mullin : Does my hon. Friend recall that, when it was said in Committee that 96 per cent. of more than 30,000 people who telephoned a radio show were against privatisation, the hon. Member for Bury, North (Mr. Burt) was overheard to remark that, if that was calculated on the same basis as under the Housing Act, it would constitute a majority in favour?

6.15 pm

Dr. Cunningham : It would be typical of the Government and their supporters to construe something like that as a victory rather than a defeat. Indeed, on the basis of some of their earlier legislation, that might be their intention.

Privatisation has little, if any, support outside the House. I do not believe either that it has an honest majority in favour inside the House.

Mr. Burt : What does that mean?

Dr. Cunningham : It means that there is a whipped, arm-twisted, bullied and cajoled majority for it. [Interruption.] I shall tell the hon. Member for Penrith and The Border (Mr. Maclean) that I would be happy to have a free vote on the issue, but would he? Of course he would not. I suggest that, before he makes sedentary interventions like that again, he thinks about the implications of what he is saying.

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Mr. Peter Thurnham (Bolton, North-East) : The free vote that matters is that of the electors at the polling stations. If the hon. Gentleman is paying so much attention to what the papers and opinion polls say, he should know that they have always said that they would much rather have this Government in charge of the country's affairs. The reason why the Opposition were thrown out of government in 1979 was their completely inefficient management of the economy--including the water industry, where investment was cut by one third.

Dr. Cunningham : It is a blinding statement of the obvious that the Conservative party won the last general election. However, I do not believe that such issues as water privatisation and the sell-off of our national parks played a significant part in that general election. I wish they had. However, they will play a significant part in the next general election, and they will not be helpful to the hon. Gentleman's cause.

Mr. Knapman rose--

Dr. Cunningham : I shall not give way for the moment.

The public are already paying an unnecessary and heavy price for this dogma -driven idiocy, as the recent increases imposed by the statutory water companies have made clear. The Minister of State has huffed, puffed, bellowed and cajoled about the matter. He said that he could not see any reason why consumers should pay more than a 10 per cent. increase in the coming financial year. We always believed that that was nonsense. I remember his right hon. Friend the Secretary of State saying during Second Reading that our predictions about the effect of this on prices were "absolute nonsense". Within months, our arguments have been proved right and those of the Secretary of State proved wrong. The forlorn and bedraggled attempts of the Minister of State to resurrect the Government's credibility from the fiasco--not to protect the public--have come to naught. He has tried to make a virtue of the fact that the average price increase for 12 million consumers will be 22 per cent. in the coming financial year.

The Minister of State looks somewhat puzzled. He looks as though all this is new to him. An increase of 22 per cent. is three times the rate of inflation. There has been an attempt to present this debacle of policy as a great victory for consumers.

Mr. Howard rose--

Dr. Cunningham : I shall give way in a moment.

I wrote to the right hon. Lady the Prime Minister about the connection between privatisation and increased charges. The Secretary of State got into a bit of a lather today and said that what I was saying in that letter was not true. I was, however, quoting the West Kent water company. The management of that statutory company--one of those paragons of rectitude often paraded from the other side of the House as role models for how to manage the water industry--told every one of its consumers that a 21p in the pound increase was being dunned on them as a direct consequence of the Government's privatisation proposals.

Mr. Howard : Does the hon. Gentleman not recognise that that reinforces the need for the regulatory structure that we are providing in the Bill? Does he not recognise

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that those companies operate under an out- of-date system, with inadequate regulation that was untouched by the Opposition when they were in power?

Dr. Cunningham : Yes, of course it was untouched, because those companies were not levying increases of 42 per cent. For the Minister of State to propose that private enterprise is necessary for the regulation of prices is the most incredibly stupid argument for the market that I have ever heard. To say that we must have private enterprise so that we can have price controlsis economic illiteracy. As an act of kindness to the Minister, I suggest that he would do far better to keep his head down and keep quiet about this.

I have the Daily Mail with me, which is the most implacably loyal supporter of the Conservative Government through thick and thin whatever happens, but it says of the Minister of State and his huffing and puffing and bluster about price increases :

"Ministerial anger over this is bluster and humbug."

Mr. Howard : Never mind what the Daily Mail says ; does the hon. Gentleman appreciate that, if one has monopolies in the private sector, they should be properly regulated? Part of that proper regulation should be price control of precisely the kind that we shall put in place as a result of the Bill's provisions.

Dr. Cunningham : But the point is that we should not have private monopolies in the first place. What is the possible justification for leaving consumers to the mercy of private, cosseted, protected monopoly power?

Miss Emma Nicholson rose--

Dr. Cunningham : No, I shall not give way.

We shall be faced with private monopolies with unprecedented powers in the British economy, from which consumers will have no escape. They will have no choice, unless, of course, they take the advice of the Secretary of State who said, "Yes of course they have a choice--they can buy Perrier." I cannot see people in Durham watering their leeks with Perrier or washing their greyhounds in it or anybody bathing their grandma in it. Of course consumers have no choice ; the Minister knows that full well. Public Finance and Accountancy of 17 March was right to describe privatisation--I forgive it the pun--in this way :

"Sluice gates open for water charges."

That is the consequence for consumers of the Government's proposals and the Minister knows it.

It is bad enough that water consumers should be taxed in this way to pay for Conservative party dogma in the face of all reasonable and reasoned arguments, but the environment too will pay a heavy price as a consequence of privatisation.

We believe that the whole idea of water privatisation is nonsense, and I believe that the public share our view. Water is inevitably a natural monopoly, essential to life, to health and to well-being. It should not be an object for profiteering. The Prime Minister's comparison between the water supply and the food industry is offensive.

People have no choice about needing water and they have no option about from where they get it, but they have all sorts of choices and options about where they can buy their food--they can even grow it themselves. It is insulting to millions of people throughout the country to say that the things are the same and that therefore there is

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a case for making water the subject of profit taking and private monopoly powers. The private monopolies will not face any market forces, and there will be no competition in the sense that people talk about private enterprise creating such competition. There will be no private enterprise, because the private monopoly will be protected from the market simply because no market will exist. The Government's notion of comparative competition is a half-baked idea which has been dreamed up to try to give the privatisation some cloak of respectability, but no one has any difficulty in seeing through it.

Mr. Nicholas Baker (Dorset, North) : The hon. Gentleman has spoken about private monopoly. Why then did the Labour Government do nothing about the statutory private water companies from which I and many other people draw their water supply? Their prices were not controlled by the Labour Government, but the hon. Gentleman appeared to suggest that those prices were not put up enough. How does he suggest that a Labour Government would get the required investment? In Committee, he accepted that a large amount of new investment is necessary, but who would he get to pay for it?

Dr. Cunningham : I do not want to be discourteous to the hon. Gentleman, but his compendium interventions with multiple questions are difficult to answer in total. I do not like Conservative Members' allusions to "private" water companies. They are not private enterprise water companies, but statutory, regulated water companies. We did not do anything about them--to paraphrase what the hon. Gentleman has said--because we did not believe there was a significant problem. They supply about 25 per cent. of consumers and, in the circumstances that then prevailed, they did a reasonable job. The hon. Gentleman is aware that I recognise that major investment is required to improve drinking water quality, to protect and enhance the environment and to eliminate pollution. The hon. Gentleman was upstairs with us for weeks on end, and he knows that there was no argument about that. The argument is whether such improvements are best controlled, directed and planned as part of a national policy, which is open and accountable, with national objectives under Government and public control, or whether it is better done by private enterprise monopoly power exercised in secret, with the public having little or no impact on the matter. In that case, the public would have little say in what happens and nowhere else from which to receive their water. There is a wide gulf of opinion about the way in which such things are managed, but there is no argument about the need for investment.

We believe that we are far more likely to achieve sustained, coherent, strategically planned and co-ordinated investment if such matters are subject to public policy rather than to private enterprise policy. That is the great political difference between the opposition parties and those who support the Bill. I am sorry that I rehearsed all of that again at some length, but--

Mr. Howard : Was it part of such a coherent, planned strategic policy that investment in sewerage was cut by 50 per cent. by the previous Labour Government?

Dr. Cunningham : We had numerous exchanges about this in Committee. I read the figures into the record last

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night. Total capital investment in the water industry during the Labour Government's period of office was, on a yearly average, higher than the yearly average during the nine years of this Government's office. That investment was made in different economic circumstances. Expenditure was not cut and the Minister need only look at the water statistics published by the Water Authorities Association to see that.

Mr. Howard : The hon. Gentleman has not answered the question.

Dr. Cunningham : That does answer the question. The hon. and learned Gentleman is wrong.

Mr. Howard rose --

Dr. Cunningham : I have given way to the Minister three or four times.

Mr. Howard : The hon. Gentleman has not answered the question.

Dr. Cunningham : I have answered the question, and I will not give way again. The Minister can no doubt use different figures to try to prove his point. I am talking about total capital investment over a five-year period in the water industry.

6.30 pm

The Government have argued that, by passing the nation's water resources into the hands of protected private monopolies, efficiency will improve. Let us test that claim. The arguments for the market and for private enterprise have been that competition and market forces--the need to be in the lead, and the challenge of other providers of goods and services--drive efficiency. None of those will exist in the circumstances that the Government are creating in this case. That is clear beyond doubt, so none of the alleged creators of efficiency in a free market will impinge on the private water monopolies. The Government claim does not stand up.

It is argued that water authorities will not only be able to borrow freely but that they will invest more when they are privatised. In fact, it is cheaper for the regional water authorities to borrow from the national loans fund than it will be for them to borrow in the open market. Immediately, therefore, it will be more expensive for them to borrow to finance their investment.

The Secretary of State has said, not once but often, that these protected private monopolies will be given immunity from prosecution if they pollute the environment. Hence, pressure on them to invest and improve and be more protective of the environment is being knocked away before they even exist. From where will the efficiency come? How will there be a drive for greater investment? What will direct, control and motivate all of that?

These protected private monopolies will face a dilemma. They will have to keep their shareholders and investors happy and achieve the necessary returns and dividends, and pay the directors' fees and all the other paraphernalia of additional expense, and at the same time invest in long- term matters of environmental protection and pollution control, on which the pay-back periods will stretch far into the future. We think we know where their final choice will rest. It will be to keep their shareholders happy and pay dividends at the expense of consumers and at the expense of investment to protect the environment.

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It is argued that the new system of regulation will protect consumers, but the director general will have no part in the initial price-fixing, and it will take at least 10 years for his system to have any significant effect. Privatisation, it is argued, will release the industry from political control. Yet the Secretary of State will fix the original prices, and thereafter they may be reviewed after five years.

The Government will try to palm off the shares to a few million people whom they believe will want to take them up. I do not think there will be a very positive response to a flotation of the water industry, because people already see the difficulties and contradictions in the Government's position. The privatisation proposals in the Bill are a triumph of ideology over reason and common sense. They are costly, messy and deeply unattractive proposals.

It has been suggested that involved in all this is the selling off of public assets worth about £27 billion--assets built up over years out of the rates and public investment--for between £5 billion and £7 billion. That sale will be challenged in the courts by a number of local authorities, and understandably so. That is another negative factor for the flotation, if it ever reaches that stage.

We are seeing a great deal of public investment and assets being sold at a knock-down price. I have said many times that much of our priceless natural heritage and environment is being sold off in this way. I defy the Minister to tell me of any other national Government of any political persuasion who are putting large tracts of their national parks on the market, up for grabs. It is not happening in the United States, in the Federal Republic of Germany or in Scandinavia, France, Portugal, Spain or anywhere other than in Britain. That fact is deeply offensive to millions of people who are horrified at the prospect.

We believe that the Government are proposing to ease this privatisation by writing off £2 billion to £3 billion of the total accrued debt of the industry, which is standing now at about £5.2 billion. We believe that they intend just to write it off. It will be another huge cost to the taxpayer. It is happening almost without a word. Indeed, I do not recall one word of protest by Conservative Members when that matter has been discussed. Do Conservative Members call that protecting the interests of the taxpayer? They have been silent on this issue, as they are now.

It has become an accepted fact of life that privatisation and Government dogma is enough justification for these huge write-offs to take place at the public expense, and apparently another one is on the way. That will be necessary to give the industry some semblance of the sensible capital structure that it will need to be even remotely attractive to investors.

Adding debt to relatively debt-free companies, such as Thames Water, to create the level playing field necessary to maintain the charade of competition is apparently to be another facet of all this. It means that customers of Thames Water, whose charges over the years have funded investment rather than it being financed through borrowing, will have to pay again. Thames Water consumers will have an additional tax placed on them. They will be allocated some debt. That will be their prize for privatisation. They do not have much debt now, but they will be given some. There is no real justification for that action. The justification is simply the Government's dogma-driven ideology, and that is the only reason why the Bill remains before the House in its present form.

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The proposals are about guaranteeing a rate of profit to the industry to ensure that investments are made, irrespective of whether any commercial risks are involved and irrespective of management competence. We cannot get much further from market forces and private enterprise. That is a signal feature of what Ministers are asking the House to accept. We are to have increasing prices to finance profit, dividend, corporation tax and investment up front rather than ensuring that the generators who benefit will have to pay. The Government's proposals are about the creation of cosseted, protected private monopoly power over captive consumers on a scale and of a nature unprecedented in Britain. There is to be immunity from prosecution and from market forces. These bodies will be protected even against takeovers for the first few years of their existence, regardless of competence and performance. In 19 years in the House I have never seen such a miserable, pathetic collection of incoherent proposals. If it has any sense, the House will throw them out now.

Mr. Nicholas Winterton (Macclesfield) : I am grateful, Mr. Speaker. I appreciate the importance of the delay before you called me to participate in the debate.

I intend to support the Opposition on amendment No. 1. I see it as my duty as a Back Bencher to seek to improve a fundamentally flawed, unpopular and unnecessary Bill. One way of improving it would be to leave out part II. That has been dealt with adequately by the hon. Member for Copeland (Dr. Cunningham).

I wish to direct my remarks to other amendments. The purpose of amendment No. 102 is to prevent an appointment being made to a new plc where a reference is outstanding to the Monopolies and Mergers Commission. I am widely supported in my view that we should introduce a pause while the MMC reports on mergers which are in progress after 11 January this year and before the new companies are appointed as undertakers.

Amendments Nos. 103, 104 and 105 have an important purpose. They would delete the provision for, and all references to, the asset limit of £30 million below which references to the MMC are not made automatically. Since all water undertakings are monopolies, as has been pointed out already in the debate, it should make no difference in principle whether a company is large or small when determining the reasons for a referral to the MMC.

Amendments Nos. 106, 107 and 108 also have an important purpose. They would add to the duty of the MMC to examine a merger in the light of its impact on comparative competition an equal duty to examine it in the light of its impact on the interests of consumers or other industries. Amendment No. 109, which might be described as an optional amendment, would have the effect of ring-fencing the assets of the industry at transfer for the purpose of a reference to the MMC.

Privatisation of the water industry will place in private hands the 10 regional monopolies that dominate the industry. The 100 per cent. of consumers whose sewerage services are provided by water authorities, and the 75 per cent. of consumers whose water is supplied by them, are to join the 25 per cent. of water consumers presently supplied by private water companies. All consumers, whether currently supplied by water authorities or by the statutory water companies, will have supplies regulated on a different basis from that which obtains at present. All consumers have an interest in the Bill. I seek on this side

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of the House to represent the genuine concern and confusion of people up and down the country who are deeply worried about the Bill and its implications.

The Bill will transform an industry which is a vital component of everyday life. All consumers, therefore, have an interest in seeing that the Bill is made right. That is what I am seeking to do at this late stage. There is much in the Bill which seeks to protect the interests of consumers--price controls, environmental controls and regulation by the Director General of Water Services. In the long term, it is the control imposed upon the creation and ownership of the monopolies which comprise the industry that will underpin the system and perhaps dictate whether the legislation--if it ever reaches the statute book--is a success.

That control will determine the general approach that the monopolies take to business. It is intended to ensure that companies interested only in exploiting the potential position of monopolies to increase prices while cutting the quantity and quality of services, rather than those interested in providing a genuinely effective and efficient service, are kept out of the industry. That is the purpose of some of the amendments. It is thus essential that the parts of the Bill dealing with the acquisition and extension of monopoly powers are got right in the House. It is because of fears that the Bill as it stands has not got it right that I have tabled the amendments. 6.45 pm

My amendments would have three effects. First, the Secretary of State would be required to refer to the Monopolies and Mergers Commission all takeovers and mergers in the industry rather than just those involving companies with water or sewerage assets in excess of £30 million. Secondly, the companies which would be deemed relevant for the purpose of such a referral would include all those which develop out of the industry as it currently stands, not just those which are water and sewerage undertakers.

Thirdly, and most important, the amendments would require the Monopolies and Mergers Commission to have an equal regard for the interests of consumers and for other parts of the wider economy, as it would have to be used to maintain the system of comparative competition when making a recommendation on any case referred to it by the Secretary of State.

The questions giving rise to the amendments were touched on briefly in Committee. At its 29th sitting, and at the end of the day, the Standing Committee found time to spend just 45 minutes discussing these issues. Because of the briefness and inconclusiveness of that discussion, the matter requires an airing before the full House. Without such an airing, the chance to put right a fundamental omission from the Bill, which would have serious and unwarranted long-term consequences, would be lost.

The first matter is relatively straightforward. Amendments Nos. 103, 104 and 105 propose the removal of the exemption on referrals of takeovers and mergers where the relevant assets of either company are under £30 million. The Bill already embodies a concession : if the assets of either company involved, rather than those of the object of the bid, exceed £30 million, a referral is automatic. That concession is warmly welcomed. My amendments propose to take the matter to its logical

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