House of Commons Hansard Debates for 22 Mar 1989

Column 1139

conclusion and extend to all consumers the protection that investigation of bids and mergers by the MMC is supposed to afford. The need for such protection is already evinced by the Bill--hence the requirement for referral where assets exceed £30 million. It is already admitted that the possession of monopoly powers involves such risks to consumers that their investigation is warranted by referral. Yet for those whose water is provided by statutory water companies with assets of less than £30 million there will be no automatic protection.

The Parliamentary Under-Secretary of State and other Ministers have defended the position by saying that the operation of comparative competition, whatever that might be, will give consumers all the protection that they need. I ask my hon. and learned Friend whether that assurance can be relied upon. Comparative competition is a relatively new concept-- untested and untried except in the local authority sector, with which the water industry is not comparable. Further, it is to be operated by a directorate staffed by only 80 people. That is hardly a sufficient complement to police 39 companies, given the other duties that the directorate has. In any case, were it to operate effectively, the customers of those companies would still be afforded less protection than those of other companies. Yet the last two years suggest that it is these customers who are, in fact, in need of protection, for it is the smaller statutory water companies that have been the object of the most sustained interest from what I can describe only as foreign predators. Surely it is in precisely those circumstances that the protection afforded by an MMC investigation is most needed, since foreign predators are those about whose track record and intention the least is known in this country. I hope that my hon. Friend will accept the validity of what I am saying, particularly in the light of evidence that I have about the extent of French interest in the water industry of this country--the French having bought into some 16 of the private water companies already, and having increased the value of their shareholding dramatically.

Miss Emma Nicholson rose --

Mr. Winterton : I shall give way in a moment. I suspect that I shall be tempting the right hon. Lady--I should say the hon. Lady, though perhaps it is only a matter of time--in a few moments. The second matter--that of extending the investigatory role of the MMCs to the entire industry as it currently exists, rather than just to the water and sewerage subsidies of successor holding companies following privatisation--may be less straightforward, but in my view it is no less necessary. Throughout the discussion of this Bill--indeed, since it was first mooted back in 1986-- there has been much public concern about what will happen to the assets of the industry. We are not talking just about the distribution and supply of water, or about effluent disposal, but about an industry that has immense, rich assets, which were built up over many decades, being paid for by ratepayers and users of the services throughout the country. They now total between 400,000 acres and 500,000 acres, much of which is not, strictly speaking, necessary for operational purposes and, as the Bill stands, will in many cases be outside public scrutiny after privatisation. There will be nothing to stop unscrupulous

Column 1140

predators--by which, of course, I mean the French, among others--from taking over part of the industry and, while giving a perfectly good account of themselves so far as the water and sewerage undertakings are concerned, will use their acquisitions as an excuse to asset-strip other companies in the groups to which the undertakers belong.

The rights of access and the leisure and recreational facilities that have been developed over many years will, in my view, be severely jeopardised. I speak with a deep interest, as there are in my own area of Macclesfield many hundreds of acres, owned by the North West water authority, which are widely used by the people of my constituency and--yes--by the people of Greater Manchester as well, for recreation and leisure.

Sir Anthony Grant (Cambridgeshire, South-West) rose

Mr. Winterton : I will give way in a moment.

I am deeply concerned, despite some of the assurances that my hon. and learned Friend the Minister gave in earlier debates both in Committee and on the Floor of the House. I should say that in my view no Minister in Her Majesty's Government could more adequately, competently and intelligently promote the Bill--I have said that publicly--but the problem is that my hon. and learned Friend can present a good case only when there is a case to put. In this instance, there is no case whatsoever. That is perhaps a backhanded compliment, but it is intended very sincerely none the less.

Sir Anthony Grant : On the point that my hon. Friend made so powerfully, I know his area and I know how beautiful some parts of it are. Does he agree, however, that there is a body--presumably known as the Macclesfield planning authority, or something similar--which no doubt shares his views and has the power to preserve the beauty of that amenity?

Mr. Winterton : I shall be coming to that in a moment, but I will tell my hon. Friend now that I do not believe that the local planning authority has the necessary power to ensure that that land is not exploited or developed in ways which are undesirable to the area and are certainly not in the interests of conservation or the environment. In my view, the rights of access and the leisure and recreation facilities that have been developed over the years will be jeopardised.

Nor is this just a fear of the more unusual groups--those whom many of my hon. Friends would describe as the bearded weekend ramblers-- [Interruption.] I make that point merely to strengthen the views that I am expressing.

Mr. Knapman : My hon. Friend may rest assured that the bearded ramblers in the Opposition ramble only when they are speaking.

Mr. Winterton : I am glad that my hon. Friend did not accuse me of rambling.

That fear is shared by many organisations. One of them is the National Trust, of which I am a member. Dare I say that it is shared also by the Country Landowners Association--not a notoriously Socialist-oriented body-- and the Countryside Commission? The amendment would subject to the scrutiny of the Monopolies and

Column 1141

Mergers Commission the takeover of any assets currently within the water industry and would thus afford protection against those fears being realised.

The third and final matter--that of extending the remit of the MMC's investigation to include consideration of the effect of mergers and takeovers on consumers and on other parts of the economy--is perhaps the most important point covered by this group of amendments. As the Bill currently stands, cases referred to the Monopolies and Mergers Commission are investigated by it in the light of the usual remit of potential detriment to the public interest.

Above and beyond that remit will be a duty to examine the impact of a merger or takeover on the operation of comparative competition. That consideration stands above all others. That provision is, however, naive. It results from a blinkered view of how the industry may develop and what its links with other sectors of the economy are. Comparative competition may be well and good in theory but, as has been made clear, it is untried and untested in any comparable industry in this country. In theory it would provide a check on the abuse of monopoly power--but only in theory. It is in the nature of natural monopoly that one cannot be sure of the counterfactualisation against which it is to be measured. Comparing one natural monopoly with another can guarantee only that neither abuses its position more than the other ; it cannot guarantee that abuse does not take place. [Interruption.] It is therefore illogical to make the maintenance of comparative competition a primary consideration to the exclusion of all others.

Mr. Nicholas Bennett (Pembroke) : Will my hon. Friend give way?

Mr. Winterton : My hon. Friend should perhaps show a little more respect to one who has been in the House rather longer than he. This happens to be a very technical matter, and if I am referring to notes rather more frequently than I should, it is because I want to get it right. I can only say that I believe that in this instance I am reflecting the views of a dammed sight more people than he is.

Mr. Bennett : Will my hon. Friend give way?

Mr. Winterton : I will give way when I have finished this paragraph.

The first purpose of the amendment, therefore, is to give equal importance to the examination of consumer interests. I trust that we on the Conservative side of the House are interested in consumer interests. [Interruption.] I will give way in a moment. It is entirely correct that the MMC should take an inside view of the industry, but it needs also to take an outside view.

Mr. Bennett : Can my hon. Friend tell me first what he put in his own election address in 1987, when water privatisation was a clear commitment in the Conservative manifesto? What did he tell his electors then? Secondly, what is the role of the Director General of Water Services?

Mr. Winterton : The subject did not appear anywhere in my election address.

Mr. Bennett : Is that why the hon. Gentleman's majority went down?

Column 1142

Mr. Winterton : My majority is satisfactory-- [Interruption.] Mr. Bennett rose --

7pm

Mr. Winterton : No, I will not give way on a trivial, pathetic point which should not feature as part of this important debate. I only hope that my hon. Friend will continue to enjoy any kind of majority in his constituency.

Miss Emma Nicholson : I am concerned about the position of the Macclesfield planning authority. I invite my hon. Friend to put forward his plans for new, revolutionary and even more democratic planning authorities. I do not know where he expects planning decisions to be made. Personally, I believe that they should be made as close as possible to the people who will suffer the effects. I am delighted to have two outstanding planning authorities in my constituency--Torridge and West Devon. In addition, we have the Dartmoor national park committee. I do not imagine that it will be better to pluck those decisions away and to have them made here or by the parish council, the county council or even, for example, by Macclesfield town council. I am confused-- [Interruption.] I wonder whether the hon. Gentleman, with his keen and burning interest in the Bill, was here last night to hear the splendid amendments that were tabled and accepted by the Government and by my hon. and learned Friend the Minister, whose virtues the hon. Gentleman has so adequately lauded. Those amendments have been accepted. I believe that the hon. Gentleman fusses too much.

Mr. Winterton : There are times when I should not give way and that was undoubtedly one of them.

Without such a view being taken, situations could arise in which companies may buy their way into the industry at no damage to the operation of comparative competition, but at considerable risk to consumers. A management with aims other than that of providing a public service at a reasonable rate of return may take over the industry. Performance would still be competitive, but it would also be worsened. In the long term, the director general's exercise of his powers could--perhaps even would-- restore the situation, but in the short term a continual see-saw would be created in which standards would alternatively rise and fall.

The task of the director general--this was one of the questions asked by the hon. Member for Pembroke (Mr. Bennett)--would become like the economist's pursuit of equilibrium. It would always be aimed at, but never achieved. Therefore, just as the economist goes for the pursuit of "second best", knowing that the holistic benefit is greater than that of equilibrium, so the remit of the MMC must be shaped with an acceptance that the market is not in a perfect state. By giving the MMC an equal duty to examine the impact of mergers and takeovers on the consumer interest, that can be achieved. That would prevent the entry of firms which have no track record in the industry, or those whose track record was poor. It would change the remit from one in which there was a presumption in favour of entry--on the assumption that if problems arose the director general could put them right afterwards--to one where there was a presumption against entry unless it could be shown that problems would be

Column 1143

unlikely to arise in the first place. In many industries this would be unnecessary, but in one so vital to public health it is not the case.

Firms which may have a tougher attitude to disconnections or which may be lax about health and safety or unused to the market in England and Wales should be weeded out before they are allowed to cause problems. It will be no consolation to consumers who may otherwise be adversely affected that the director general, in whom so many people seem to put so much trust, will have the power to close the stable door after the horse has bolted.

Mr. Tim Boswell (Daventry) : My hon. Friend has been making a most eloquent case but it seems that, whether he intends to or not, he is directing his case almost entirely to the one moment of consideration in advance of clearance. Surely he agrees that it is better to have the continuing regulation of the director general and the safeguards established under the Bill for the continuing conduct of the privatised authorities than to have one moment or gateway in which the Monopolies and Mergers Commission could be invited to speculate on some hypothetical future conduct of a privatised water undertaking.

Mr. Winterton : I am not unsympathetic to the views that my hon. Friend has just advanced. My amendments go along with that. There is an ongoing role for the director general in just the way that my hon. Friend has described. I am trying to ensure that we do not allow undesirable companies into the industry in the first place. That is the reason for some of the amendments to which I am referring. There is, however, a second reason for amending the remit of the MMC--to give it a duty to have regard to the impact of mergers and takeovers on other sectors of the economy. For such a requirement to be made explicit may seem unusual, but it is a measure of the extent to which one needs to be on one's guard. The past 18 months have seen an unusual flurry of takeover activity among the statutory water companies. The French have been buying in and paying up to 10 times the market capitalisation for companies whose financial performance has always, to say the least, been a little predictable.

One has to ask, and I do ask my hon. and learned Friend the Minister, why that is so. It cannot simply be because those companies see an opening to increase prices and thus increase profitability. That is part of the story, as the statutory companies average price increase of 22 per cent. shows, but the high prices paid for the companies suggests that that is not the whole story.

One does not have to search far to find the other reasons for those takeovers. It is by now widely realised that the water industry is asset- rich but cash-hungry. Indeed, my hon. and learned Friend the Minister has said so himself on several occasions. It has many non-operational assets which could be sold off and many which, though operational, could be simultaneously developed to purchase additional profits. In Standing Committee the Minister said that that should cause no problems for consumers, and that the normal planning process would guard against unwanted development, but assurance requires concrete form. It should be incumbent upon the MMC to weed out what I can only describe as the asset- strippers. My right hon. Friend Lord Young and the

Column 1144

Government did that recently in respect of Elders IXL and Scottish and Newcastle Breweries. I hope that they can do the same again in the future.

Beyond that, the French firms pose a further threat that we must guard against. As my hon. and learned Friend the Minister knows all too well, those firms are not only--or even primarily--water and sewerage undertakers. Their subsidiaries cover chemicals, construction and civil engineering. What is more--I say this especially to Opposition Members-- they cover many functions currently performed by local authorities, but which are shortly to be put out to tender in the compulsory tendering process. It is those areas on which the French have their eye as much as on the water industry. In the run-up to 1992 they will expand into civil engineering and municipal services.

Mr. James Pawsey (Rugby and Kenilworth) rose --

Mr. Winterton : I will give way in a moment.

That may not necessarily be a bad thing and to some extent it is inevitable, but it must be guarded against lest we end up with markets handed over to French cartels interested in promoting uncompetitive practices for their own sole and exclusive benefit.

Mr. Leigh : That is pathetic.

Mr. Winterton : It is not pathetic--it is a real threat to this country. It could be well outside the remit of the director general, to whom reference has already been made several times, to examine the issue. It should therefore rightly be the duty of the MMC to consider it.

Mr. Hawkins rose--

Mr. Winterton : I will give way to my hon. Friend the Member for High Peak (Mr. Hawkins), who is my neighbour and my colleague.

Mr. Hawkins : I put this kindly to my hon. Friend, to whom I am grateful for giving way. I believe that he is giving an impression that he would not wish to give in saying that French firms are building a bridgehead here and when he talks about "undesirable investors". British firms are building a bridgehead in Europe for 1992. Can my hon. Friend say how the Monopolies and Mergers Commission would define "undesirable investors" in a water company if the people concerned were obeying the law of the land? I do not believe that my hon. Friend wants to give the impression that the French are unwelcome. The Perrier company bought Buxton Water in my constituency, and transformed it into a household name. I greatly welcome that.

Mr. Winterton : It is sad that Buxton Water was unable to make itself a household name when it was independent-- [Interruption.] It was in our household, among others. I trust, however, that I am not giving the House the impression that my hon. Friend sought to imply by his intervention. I am concerned that, unlike British firms which buy companies in America openly and honourably for the purpose for which they exist, the French seek to come here and take advantage in other ways, by the back door. The Minister understands what I am saying. Rightly or wrongly, the people of this country are sincerely worried about that.

The amendments are designed to give teeth to the controls which will be placed on the industry after

Column 1145

privatisation. I am not trying to destroy the Bill but to put meaningful, rational controls on it so that if it proceeds to the statute book it will provide the correct solutions. Controls may seem contrary to the concept of bringing market forces to bear on state-owned utilities, but it is not market forces which are being brought to bear on the water industry. It is private monopoly forces-- precisely those which encourage bad practice and inefficiency.

Mr. Barry Porter (Wirral, South) rose --

Mr. Winterton : I shall not give way because I am about to sit down.

It is amazing that the Government, who worship at the door of Adam Smith, are doing precisely what he advised against--exchanging a public monopoly for a private monopoly. He did not believe that it would work, and neither do I. The electorate are well aware of that. Strong controls of the kind that I have proposed must be put in place to convince the public that the Bill is not an ideological measure with no regard for their interests.

I hope that my hon. and learned Friend the Minister will seek to respond to my speech, not to destroy the Bill, but to make it better so that when the Conservative party comes to fight the general election in 1991 it will not be faced with the dire consequences of the Bill, but the legislation will be in force and working properly. That will happen only if the kind of proposals that I have put to the House today are incorporated in the Bill.

Mr. Deputy Speaker (Mr. Harold Walker) : Order. Obviously, many hon. Members wish to take part in this debate. I should remind the House that the debate is guillotined and that long speeches are made only at the expense of other speakers.

7.15 pm

Mr. Eric S. Heffer (Liverpool, Walton) : I certainly do not want to make a long speech. I wish to draw to the attention of the House the fact that a document has arrived in my hands called "Supplement to The Engineer" , dated 15 July 1892. The document is about Lake Vyrnwy and the Vyrnwy water supply to Liverpool, which was inaugurated on 14 July 1892 by His Royal Highness the Duke of Connaught. It contains an article by George F. Deacon, M. Inst. C.E. Engineer.

I draw the House's attention to this document because on 14 July 1892 Lake Vyrnwy was handed over to Liverpool city council's water committee, which was a publicly owned body. Incidentally, Lake Vyrnwy is still one of the main water supplies to Liverpool. The article states :

"During the last census period the rate of increase in population" --in Liverpool--

"was not quite so great as in the immediately preceding decades, but no less than 518,000 people within the city boundaries and 801, 000 people within the area of distribution are now supplied with water by the Corporation of Liverpool. Such a population will, at the rate of, say, 30 gallons per head, require over 24,000,000 gallons per day, and to meet this demand the existing and extensive water supply works have become insufficient."

The article then explains why the supply should be extended.

Column 1146

I considered the document carefully and discovered that Liverpool city council, in relation to water supplies, goes back even further than 1892. The first Act of Parliament was in 1847. This is all about public ownership. When did that public ownership fail the people of Liverpool in regard to their water supply? People in Liverpool, including Conservative city councillors, have never argued that the Liverpool water supply was not good enough and ought to be privatised. That is a figment of the imagination of the Secretary of State for the Environment and the Minister who, for some reason, have developed a crackpot idea in their heads that they ought to introduce water privatisation even when there is no demand for it among the people who are perfectly satisfied with the present water supply and who have been quite happy for local authorities--mainly Conservative controlled since 1847--to supply Liverpool's water. I do not understand what this Government are about, except that they want to get hold of the land surrounding Lake Vyrnwy in order to sell it off at what they believe to be a profit.

I sat on the water committee in Liverpool--until I did so I did not know much about the water supply. However, I then realised the great things that have been achieved over the years, many of them absolutely magnificent. All sorts of facilities have been granted so that youngsters from Liverpool who had never seen such things could visit lakes and participate in water sports and other activities connected with the lake. What do the Government intend to do with that land--sell it off to their mates and friends? Is that what this is about? The people of Liverpool are not arguing for that. I could continue to speak about this document, which is truly magnificent. I am glad that it came into my hands and I shall repeat the details. It is the supplement to The Engineer, dated 15 July 1892, and contains many lovely pictures depicting how water was brought to Liverpool--including the route, which was a great engineering feat

Mr. Thurnham : I thought perhaps the hon. Gentleman would allow me to intervene, as I am an engineer myself. I am sure that, in harking back to 1892, he will find that engineering then was nothing like engineering today. Does not the Bill adapt the structure of the water supply industry to the needs of modern society, rather than try to sit with all the old- fashioned stuff? If the hon. Gentleman were an engineer, I expect that he would try to introduce engineering that was designed in 1892.

Mr. Heffer : The hon. Gentleman may be aware that I worked on construction sites all my life until I came into the House. There are engineers and engineers. For example, once when I went to do a job in an office, the office manager said to me as I was hanging a door, "Joiners are not like they used to be." I said, "How the hell do you know? Could you hang that door?" He did not know what it was about. I knew, because I was a trained carpenter and joiner. All joiners are not great ; neither are all engineers.

The document that I have shows what a magnificent feat of engineering this was to Liverpool. Is the hon. Member for Bolton, North-East (Mr. Thurnham) suggesting that the engineers of that day did not do a great job? We have some of the best and purest water supplies in the whole country, and we should be proud of those engineers. They worked for Conservative city councils,

Column 1147

which also built the docks in Liverpool. The councillors tried to further the interests of the people of the area so that, once they had the basic services under their control, they could expand private enterprise. The hon. Member for Bolton, North-East does not seem to understand this.

Certain public services should never be privatised. As the hon. Gentleman knows, I do not agree with private ownership of many things. I accept that some can be privatised and opened up to competition, but the basic services of this country, such as water, should never be privatised. There is no rational argument for privatisation--there are only ideological arguments emanating from the likes of the hon. and learned Gentleman.

Mr. Howard : The hon. Gentleman has spoken of the drinking water that is supplied to the city of Liverpool. Is he aware that, to this day, 75 per cent. of the sewage from the city is untreated? Does he regard that as an adequate testament to the record of the public sector in this industry?

Mr. Heffer : Just because it is said that is so it does not mean that we have to privatise water. The Minister knows full well that that is a separate issue that can be dealt with separately. Over the years, the water committee on which I served asked the Government for financial support to develop the sewage works, but we never got the full support that we needed--

Dr. Cunningham : I should like to ask my hon. Friend to suggest that the Minister write to the Prime Minister to tell her that 75 per cent. of Liverpool's sewage goes out into the Irish sea untreated. She says that no untreated sewage goes into the sea around Britain. Perhaps the Minister will tell the Prime Minister that she is wrong.

Mr. Heffer : My hon. Friend knows that the Minister will not tell the Prime Minister that if he wants to keep his job for long. Saying boo to the goose leads to one being dealt with quickly--

Mr. Leigh : That is what happened to the hon. Gentleman.

Mr. Heffer : I made a principled stand on an issue, and I am not ashamed of having been sacked from a Government for doing so. Most Conservative Ministers never seem to make a principled stand on anything ; it is left to Back Benchers such as the hon. Member for Macclesfield (Mr. Winterton) to do that. The day when we see a principled stand by a Minister I shall be delighted. It will give me new faith in the House of Commons and in the idea of Ministers standing up for what they believe in. However, I doubt whether it will happen.

There is no case for privatisation, and no one can argue there is. The hon. Member for Macclesfield made a first-class speech against it, and I did not disagree with most of his arguments. The Minister, with his steamroller majority, will roll the Bill through, but he had better understand that the people of this country do not want it. Whatever criticisms I may have of the way in which Labour is conducting itself, I believe that the people of this country will roll the Government over and get them out at the next general election.

Mr. Thurnham : The speech of the hon. Member for Liverpool, Walton (Mr. Heffer) harked back magnificently to all the great features of the past, of which he himself is a magnificent relic. His thinking is stuck in the past and its

Column 1148

great works ; he does not look ahead to how we should adapt the structure of the water industry to the needs of a modern society in which one can separate the function of providing water from the function of regulating how it should be provided. That is the principle behind the Bill, and it is why I oppose the Opposition amendments and cannot support the amendments of my hon. Friend the Member for Macclesfield (Mr. Winterton).

Mr. Allan Roberts (Bootle) : If the purpose of the Bill is to separate the regulation of the water industry from the running of it, why is the National Rivers Authority going to sub-contract work back to the privately-owned water companies, thereby recreating the problem that the hon. Gentleman claims is being destroyed--that of the gamekeeper and the poacher being one and the same?

Mr. Thurnham : I am satisfied that the National Rivers Authority will be a well-constituted body of 6,500 employees. That does not mean to say that it will be incapable of calling on resources from anywhere that it wants. The authority will properly execute its functions and if it wants to call on the services of others, so it should. It is only dogma on the part of the Opposition that would prevent it from calling on the services of other bodies, private or public sector.

I must oppose amendments in the spirit of those tabled by the Opposition which strike at the heart of the Bill. My only criticism of the Government is that we have not been able to privatise the water industry earlier. Because we did not privatise water in our first or even second Parliament, a myth may have developed in the minds of the public that for some reason the industry could not be privatised. That is why public opinion is still showing so much inertia. Now that we are arguing that the industry can be privatised, it will take time for people to accept the idea.

I do not accept any criticism of my hon. and learned Friend the Minister or of my right hon. Friend the Secretary of State about all the work they have done on the Bill. It has been magnificent. If there is inertia in public opinion, it existed long before they came along to do the job that they are now doing.

Dr. Cunningham : First, the hon. Gentleman must have heard the Prime Minister say that the Bill has not been well presented. Secondly, there is no inertia in public opinion : it is moving steadily against the proposal.

Mr. Thurnham : Criticisms of presentation arise purely out of the ignorance, superstition and nonsense that are evident in the attitudes that we heard expressed by the relic from Walton, who is stuck in the past. If the public are fed the sort of misinformation that has come from the Opposition--

Mr. Heffer : The hon. Gentleman's past is already behind him.

Mr. Thurnham : Conservatives can look forward to the future. It is only the Opposition who worry about the past, because they have nothing to look forward to.

At the time of the outstandingly successful privatisation of the National Freight Corporation, the trade unions were so opposed to it that their Leeds branch persuaded all the employees of the corporation there to burn their applications for shares on a bonfire. I do not think that the work force in Leeds has ever forgiven the trade unions for that ; it has cost them dear. That is the sort of attitude that

Column 1149

we are fighting on the Water Bill and it is indicative of how public opinion can be wrongly influenced by misinformation from the Opposition.

It is said that we should not privatise water because it is a vital commodity. I remember that that was said about British Sugar. We were told that we could not privatise British Sugar because sugar was such a basic commodity. I have not heard anyone mention any problems about privatising British Sugar. Food and clothes are as vital as water, but we do not hear comments about privatisation in those areas. The Opposition want to ditch their clause four, but they can do that only by ditching it into a privatised drain and they do not like that idea.

Mr. Nigel Spearing (Newham, South) : Will the hon. Gentleman give way?

Mr. Thurnham : I want to make progress.

7.30 pm

Before British Telecom was privatised, there were endless complaints about telephone boxes. People are now very pleased that they can use telephone boxes. British Telecom is far better now than it was in the public sector. Mercury exists as a competitor to British Telecom now. The pricing formula- -RPI minus X--is working very satisfactorily for British Telecom. When we talk about RPI plus K for the water industry, we should not forget minus E where E is the efficiency factor which should work in exactly the same way as it has for British Telecom.

The hon. Member for Copeland (Dr. Cunningham) is an example of the new designer Socialist who wants to ditch what was wrong and unacceptable with Socialist policies, but is not sure where to ditch it or what he wants to pick up instead. He seems to believe that a public monopoly is all right, but he cannot accept that a private monopoly should work as well. That is the difference between us. There must be confidence in the regulatory mechanisms in the Bill which will enable the water industry to operate much more efficiently in future.

Mr. Spearing : The British Sugar Corporation was formed as a private company, although the majority of the shares were held by the public. As an engineer, will the hon. Gentleman tell us how he reacts to the idea that all the sewers--their bricks, pumping stations and filtration plants--in Bolton might be owned by a private company, which, as far as I know, and unless the Minister can deny it, can be traded and controlled on the New York, Tokyo and Johannesburg stock exchanges?

Mr. Thurnham : The thrust of the Bill is that we need more investment which can be conducted more efficiently by the private sector, and the costs of that investment can be spread over several years.

The fundamental problem about investment in the public sector is that the Treasury seems to count current expenditure and investment as coming from one pot which must be recovered or accounted for in the year in which it occurs. I am confident that the work which needs to be done in Bolton will be better funded as resources will be available from the financial world in this country and abroad. The key factor is that the costs can be spread over several years and funded by the workings of the RPI plus K formula rather than all the investment being recovered

Column 1150

in the year that it occurs. That is why investment has been so restricted in the past and why the Labour Government had to slash investment. That is why investment in the sewers and drains in Bolton was cut under the Labour Government. They did not know how to fund the industry. They were in a desperate crisis with the IMF knocking at the door, and the country was bankrupt. The Labour Government did not understand how we could gain the efficiency that we needed by spreading investment over several years and by having a management which was accountable to the people who provided the investment and which ensured an efficient return on it.

I have great confidence in the Bill. To appease public anxiety we must be very careful to set up regulatory structures which will function efficiently. The public wants to see that happen. It would be nice if we could do it step by step, because one of the fundamental improvements in the British economy has been the way in which industrial relations have been transformed through step-by-step legislation.

However, it would be impractical to have a step-by-step privatisation of the water authorities. It might be very nice to start with the North West water authority, but it would not be practical to privatise one water authority one year and another two years later. If we are going to do it, we should get on with it. As I argued at the beginning of my speech, we should have privatised water years ago. We have allowed a myth to develop that the industry is a sacred cow which cannot be privatised. However, there is every reason for getting on with privatisation.

This is complex legislation and we should not rush it. That is why the Government have taken their time to privatise the industry. I have every confidence about the way in which it is being done and in the work carried out by my hon. and learned Friend the Minister. I am sure that the Bill will reach the statute book without any more undue delays. I am sure that the public will invest their savings in this basic utility with every confidence. I am sure that those who use water and will be accountable if they pollute it will also benefit in every way possible from the Bill.

Next Section

Home Page