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Mr. Livsey : This is a vast series of amendments, 38 as far as I can see, and they cover a huge area. I congratulate the hon. Member for Macclesfield (Mr. Winterton) on making a speech, like the hills behind Macclesfield, of true grit and determination. He put forward constructive ideas to the Minister who I hope will take note of some very constructive criticism of the Bill.
This legislation gives rise to immense questions. I support amendment No. 1 which removes part II of the Bill. That would result in no privatisation of water and would be particularly constructive. The private monopoly which the Bill creates is inexcusable. There will be no competition as a result of the legislation. It seems that the Cabinet consists of the "Monopoly" generation. Clearly Ministers must have played too much "Monopoly" in their youth. They are obsessed with producing private monopolies under which there will be no competition.
Privatisation will increase costs as a result of the legislation's duality. Prices will inevitably rise because shareholders will have to be satisfied while consumers pay more. The need to introduce higher standards in the industry will also create massive expenditure. It appears at the moment that consumers will have to pay the lion's
Column 1151share of that expenditure. Why are the Government or the Treasury not prepared to shell out some of that money to create the necessary investment to raise standards?
Mr. Collins on "Panorama" on Monday estimated the cost of privatisation to be £842 million. Who will pay that sum? Will the consumers have to pay? The argument is that the statutory water companies represent 25 per cent. of the water industry, and those companies are already in the private sector. However, that argument does not stand up when it is subjected to close examination. Those companies are regulated and statutory. I believe that the Prime Minister does not understand the basis of the statutory water companies.
The water prices in the statutory water companies have been kept low. They have been kept 25 per cent. lower than those of the water authorities because of their statutory functions. As a result of this legislation, prices will rise between 30 and 50 per cent. because the basis of the statutory water companies is being fundamentally undermined.
Mr. Porter : Missing from the hon. Gentleman's argument is any understanding that what is required in the water and sewage industry is investment, which has been lacking under Governments of both parties for the past quarter of a century. The purpose of the exercise, as I understand it, is to ensure that private capital is available. My hon. Friend the Member for Macclesfield (Mr. Winterton) reckoned that with all the regulations concerning price, quality, and the rest, the City will not be particularly attracted to investing in the new plcs. We shall see. If the City does not wish to invest, I am sure that the Treasury Bench will think again. In any event, the Bill is not about competition but about capital investment and where it can be found. It cannot be denied that investment has been unavailable from the public sector in the past.
Mr. Livsey : We all agree that investment is necessary to improve standards, but investment can be made equally well if water remains in the public sector. Yesterday, the Secretary of State himself admitted that billions of pounds must be spent to put matters right. Why has the Treasury not been prepared to sanction such expenditure, and why have the Government adhered to such policies? The Government failed to make sufficient investment in the public sector of the kind that the hon. Gentleman seeks. That is a basic flaw in Government philosophy.
Water is essential for life itself and is a fundamental necessity. It is a natural public utility and should remain so. The concept of privatisation is wrong, and the Prime Minister has admitted that its presentation has been inadequate. However, one cannot present a bad idea well, and privatisation is a rotten idea.
A number of the amendments address the subject of charges, which will depend on the investment that will be required of the water plcs, which will, in turn, depend on measures taken by the European Community to enforce acceptance of its drinking water standards. That issue is one which cannot be dodged. Those standards are based on clear scientific principles and ought to be accepted by the Government as being right and proper in ensuring the health of the consumer. The Secretary of State told the House that billions of pounds must be spent to provide clean, wholesome drinking water. Some estimates put the figure at £3 billion, while others put it at £6 billion. If the flotation of the water companies raises £7 billion to £10
Column 1152billion, the Government's friends in the City may ask whether that is a reasonable deal for investors. I think not. The public cannot be expected to pay the whole bill, and some of that expense should surely be met from general taxation.
Here is the rub. The Bill as drafted enables water plcs to fleece consumers, regardless of their ability to pay, to meet the cost of an investment programme that should be a public duty. The RPI plus K formula and the K calculation for price increases incorporate efficiency savings and a cost pass-through factor for consumers relating to additional expenses. That factor will be deducted from inflation but there will still be an additional amount to pay, and no one can argue otherwise. The prices resulting from those calculations could double every seven years, and, by the application of the RPI plus K formula, water charges could rise by 150 per cent. by the end of the century rather than by the 12.5 per cent. that the Secretary of State anticipates.
The flaw in the formula is that efficiency is assessed only in relation to other companies, which are in any case monopolies, so any notion of comparative competition is a fallacy. One cannot have competition between monopolies that vary so much in nature--from Thames Water, with 10 million consumers and about 6,000 miles of pipeline to Welsh Water with only 3 million consumers but about 24, 000 miles of pipeline.
Mr. Livsey : Companies will not be competitive in their own areas because they are ring-fenced and competition will not exist. One will not have six taps in one's house, with Perrier water coming from one of them and west country water, or whatever, coming from another. Particular groups of people will find themselves discriminated against as a consequence of privatisation, particularly in respect of disconnections. Last year, there were 9,000 disconnections, 2,000 of them in Wales. After privatisation, private water companies will be licensed. I hope that the Minister can assure the House that the original draft licence has been altered in some respects, as it allows the plcs to draw up their own codes of practice. I know that the Minister has drawn up a code of practice on disconnection and has consulted on it, but the protection it gives is not sufficient for poorer members of the community.
Water is such an essential commodity that no one's supply should be disconnected by a private company. The only way of ensuring adequate consumer protection is by requiring the granting of a court order ; the Minister has partially accepted that view. There should be a three-week cooling off period before the court acts, because of the suffering that could be created if a water supply is summarily disconnected, particularly to pensioners, families in which there are young children, and the disabled.
That problem will be exacerbated by the need of some people to pay water rates out of their supplementary benefits, particularly as water prices will rise after privatisation. It is essential that we consider the human aspects of privatisation as it affects the poorer members of
Column 1153the community. I hope that the Government will take that consideration on board, as well as the other points that I have made.
Mr. Burt : I agree with the concluding remarks of the hon. Member for Brecon and Radnor (Mr. Livsey) about disconnections. As my hon. and learned Friend knows, in Committee I made a strong plea for use of the court before disconnection can be authorised. He was receptive and sympathetic, and offered to consider that proposal. I am still of the opinion that such a provision would be very helpful to the general presentation of the Bill.
I always enjoy listening to the hon. Member for Liverpool, Walton (Mr. Heffer)--as much as to my hon. Friend the Member for Macclesfield (Mr. Winterton). Although I do not always agree with the views of either of them, they represent a strand of opinion that is strongly held and sincere, and gives a contrary view to that presented by the Government. I also enjoy listening to the hon. Members for Burnley (Mr. Pike), for Manchester, Withington (Mr. Bradley) and for Wakefield (Mr. Hinchliffe), who have raised similar arguments. I do not always agree with them, but the strand of thought which produced their arguments exists in the country at present and needs to be considered by the Government. I do not treat the straw polls of the Derek Jameson show with contempt, as I recognise that they tell the Government something. They tell the Government not that they are wrong, but that their message is not reaching people yet and more work needs to be done.
We start from a consensus, which was recognised in Committee by the hon. Member for Barnsley, West and Penistone (Mr. McKay) who said that Conservative Members were just as keen as Labour Members on environmental quality and the need to protect a clean, cheap, safe water supply. Everyone knows that we all share that view and want to maintain water quality. We differ as to how we wish to ensure a clean, safe water supply that is as cheap as possible. The fears that are abroad in the country have been expressed by my hon. Friend the Member for Macclesfield (Mr. Winterton). It is certainly possible to be worried by yet another privatisation. Some months ago I would have sympathised with my hon. Friend's arguments, but since I have been on the Committee considering the Bill I have been converted and I now realise that the quality improvements in the water supply that we all seek cannot be achieved without privatisation. That goes to the heart of the argument of the hon. Member for Walton, as I shall explain in a moment.
For my constituents, the bottom line is a good quality service. They are not bothered about who provides that service, but they are concerned about the service that they will eventually receive. The arguments about water are clouded by the idea that who provides the service is more important than the service itself. I and my constituents want a water supply that works and that provides clean water that is as cheap as possible. I am more worried about that than about who provides it.
Mrs. Ann Winterton (Congleton) : I have been listening very carefully to my hon. Friend's arguments. Does he represent any rural areas? He said that he wanted the highest quality water for all his constituents. Does he agree that the cost of that water should be the same for all his
Column 1154constituents, whether they live in rural areas or in towns? He will probably be aware that, in addition to the increased costs of water brought about by privatisation, and by improvements in the quality of water, there may well be additional costs in rural areas to people living at the wrong end of a supply pipeline. Does he agree that in other privatisations, such as British Telecom and that of electricity, which is going through the House, the status quo is maintained and the same charge is levied on constituents living in rural and urban areas? Surely that is a fair point.
Mr. Burt : I represent more town than rural areas, and the rural parts of my constituency are not far from major towns and cities. I believe that pricing policy is a matter for the water companies, as it is for the water authorities at the moment. But I am certain that the highest-quality water will be produced at the cheapest possible cost for everyone. My hon. Friend will be able to make her own arguments about water quality later.
Some time ago, I would have been sympathetic to the arguments of the hon. Member for Copeland (Dr. Cunningham). He takes the cosy view that we can have improvements in the regulation and quality of water supply without affecting the way in which the service is supplied. In a sense, he takes a lazy view--that we can have the best of everything without changing the structure of the industry. But that is not a fair compromise and it does not work. Only privatisation, the key to freeing investment, can possibly supply the improvements in quality that we need. That is why the amendments moved by the hon. Member for Copeland are wrong.
I do not believe that the crux of the matter has been correctly perceived by Opposition Members, some Conservative Members and the public. They do not understand the connection between privatisation and the changes to regulation and quality control in the industry. Privatisation is vital because it will free the water companies and allow them to attract investment. It will free the companies from the political control previously exercised upon them. I pray in aid the views of the chairmen of the Water Authorities Association in a letter to all Members of Parliament about water privatisation : "Is it also the way to avoid the constraints on necessary capital investment which we have experienced under Governments of different political complexions over the 15 years or so since the formation of the Authorities."
Mr. Elliot Morley (Glanford and Scunthorpe) : Is it not the case that the chairmen of the water authorities are political appointees, and that, contrary to the views of their employees and their commercial and private customers, they have supported water privatisation, even to the extent that every water authority has a contact point with a Tory Member of Parliament? They have been having cosy little dinners and wining and dining their contacts. The letter was a completely political statement. The chairmen of the water authorities stand to do very nicely out of privatisation, unlike their customers.
Mr. Burt : During the proceedings on the Bill, we have been lobbied by a variety of different groups, each expressing its own point of view. The hon. Gentleman can take whatever view he wishes about the chairmen of the water authorities, but they are responsible for the authorities at the moment and are as entitled to express their views as other interests are entitled to lobby
Column 1155Opposition Members who have quoted them strongly during the debate. I am as entitled to quote other points of view as the Opposition are.
The case for privatisation is clearly made when we consider the investment in the water industry in recent years. We have debated time and again the investments made by previous Labour Governments and by the present Government. I wish to draw attention to the trend in water investment under the last Labour Government and under this Government. When the Labour party was in office, it started much higher investment and continually ran it down. Opposition Members have consistently quoted the average level of investment, but the trend was that the level of investment continued to drop steeply and only under this Government have the tables been turned and investment has started to rise. While investment was falling, consumers were receiving some remarkable demands in increased charges. In 1975-76, when investment was falling steeply, the average rise in water rates throughout the authorities, not only the statutory water companies, was an astonishing 43 per cent. As investment was declining, charges were shooting up. At present, investment is rising.
Mr. Allan Roberts : One of the reasons why revenue costs increased, causing increased water rates, was that under this Government water authorities have been forced to fund capital expenditure from revenue because how much they could borrow for capital purposes was restricted by the Government.
Mr. Burt : The hon. Gentleman makes my point. As long as investment for the water industry is in the hands of Government, of whatever complexion, and subject to Treasury control, there will probably never be as much investment as is necessary.
Mr. Burt : The hon. Gentleman says, "Rubbish." With the best will in the world, the Labour Government would have liked to do more for the water industry, but because of the way in which they managed the economy and had to use the International Monetary Fund, investment fell so dramatically and severely that it almost irreparably damaged the capital structure of the industry. We are only now picking up that bill. It is vital to free the industry from such constraint and to allow it the money it needs to put into effect the repairs and improvements in water quality that we all want. That is why I believe there is a fundamental link between the privatisation of the supply of the industry and improvements in quality through regulation. It is important that the public should understand that the springboard of privatisation has challenged the myth that everything is better in the public sector. It has led to important new initiatives that will help consumers in the future.
Concern has been expressed that private monopoly companies will abuse their control, so the National Rivers Authority has been introduced. Everyone agrees that it is a good idea, but no Government put it forward before. It was encouraged only by the spur of privatisation. It is because people are concerned that there might be abuse of prices that a Director General of Water Services has been appointed. It is because people are worried about the
Column 1156introduction of private companies that the consumer's charter has been introduced. All those benefits and improvements would not have been obtained without privatisation.
The improvements to regulate quality which have been demanded by all of us would not have occurred without a change in the regime for the supply side of the industry. That is why I believe that there is a fundamental link between privatisation and regulatory controls. Privatisation will provide the funding that has been so woefully lacking from Government investment over the years. When people understand that fundamental link, they will believe that this measure will be good for the consumer, the environment and the country.
Mr. Keith Bradley (Manchester, Withington) : Following the speech of the hon. Member for Bury, North (Mr. Burt), in which I am sure he convinced himself of his arguments, the slogan at the next election will be, "We come to bury Burt, not to praise him."
On the second day of the Report stage, the farce has continued of Conservative Back Benchers trying to digest the propaganda being put out by No. 10 Downing street. They tried to re-present the arguments to the public for privatisation, but re-presentation of the arguments will not work.
I should say how much we support the hon. Member for Macclesfield (Mr. Winterton), who expressed the clear views of thousands, if not millions, of Tory voters. I have received letter after letter from constituents who were not previously supporters of the Labour party but who have said that the Bill marks a clear change in how they will vote in future. The hon. Member for Macclesfield represents those views.
We regard part II as the evil of the Bill. It must be stressed that, although we support the National Rivers Authority, it will not be as effective as the national environmental protection agency that the next Labour Government will set up. We must consider the pollution not only of rivers but of land and air in an integrated approach. We must not destroy the concept of integrated river basin management that we have under the current water authorities. Although under amendment No. 1 we are not ruling out the NRA, we must continue to express our concern that, without proper staffing and resources, even this part of the Bill will not be worth supporting.
Time is short, so I shall deal briefly with three issues that arise under part II of the Bill--comparative competition, pricing policy and disconnections. My hon. Friend the Member for Copeland (Dr. Cunningham) devastatingly exposed the Government's arguments for part II of the Bill. It would be folly to try to compete with his excellent speech, which destroyed the Government's credibility, but it is worth reinforcing some of the issues about which we are especially concerned.
We have clearly shown the flaws in the concept of comparative competition. There is no validity in the Government trying to compare competition in the food industry with that in the water industry. If people want to change the place where they buy their food they can move from shop or supermarket to obtain the lowest prices. No such choice will exist for water. It is a natural monopoly, and after privatisation the public will have no choice about which water plc they buy their water from.
We clearly showed in Committee that the only way in which comparative competition would have any reality for
Column 1157the consumer would be if a tap from each plc were installed in every house and people could use the tap providing the cheapest water. We know that that is a farce and will not happen. In future, there will have to be not only taps from the 10 new water plcs but one running through the Channel tunnel from French water companies. In his more manic utterings, the Secretary of State clearly told the public that there was choice not because of the water companies but because they can buy bottled water or Perrier water instead of using water from the tap. That is nonsense to the people of Manchester who struggle to choose what food or fuel they can afford. As usual, the hon. Member for Gainsborough and Horncastle (Mr. Leigh) is holding his face in pain when an hon. Member is talking about poor, low-income families in Manchester. Yesterday, yet again we saw him trying to impersonate Alan B'stard--or was it the other way round?--when he was discussing the NRA. He showed that he has no grasp of the real world. He does not represent the views of real people. The Director General of Water Services is meant to consider comparative competition. We must consider the position in different water authorities and the problems facing water authorities such as those in the north-west, the problems of huge debt and inadequate investment. No comparative competition indicators, whether they are devised by the Director General of Water Services, the Audit Commission or whichever body the Government choose to set up, will ensure competition between companies. People will be tied to the problems, debts and investment problems of the water company in their area. [Interruption.] Does the hon. Member for Crawley (Mr. Soames) want to intervene?
Mr. Bradley : Throughout the deliberations in Committee, the Government advanced no credible argument to show that prices will not have to rise massively. They will have to rise massively to meet the investment required by the industry and to meet the potential investors' wish for a quick buck. They will need to make a quick buck if they are seriously to consider investing. When they see other privatisations, such as electricity, coming along, they will make choices, and when they see that there is no money to be made out of water, they will wait for the other privatisations.
When we discussed the price rise with the Minister, he said that it would be between 7.5 per cent. and 12.5 per cent. above that already in the investment plans of the water authorities. He has not been able to say how much is already included in the forward plans of those companies. When we pressed him in Committee, he said : "The programmes, to which the Secretary of State referred when he gave that estimate, are already out of date. That cost will be met by a mixture of charging and borrowing. Therefore, we cannot make a sensible estimate of the cost of these programmes. We have given the cost of the additional programmes as explained by the Secretary of State."-- [Official Report, Standing Committee D, 21 February 1989 ; c. 1207.]
The Government can give no estimate of the real price increases required. We have only to study the increases in the charges of the private water companies to see that the new water plcs will put prices up by as much as 30 per cent.
Column 1158to 40 per cent. to meet the investment required and to ensure that investors will make a quick profit on their investment.
Disconnections are an issue of crucial importance. When we consider consumers in constituencies such as Manchester, Withington, we must consider the thousands of low-income families, low-income pensioners and low-income people with handicaps and disabilities who have to manage on meagre benefits. We have to ask the Government pertinent questions about how they will handle the hardship that may be caused by such dramatic price increases. We have to ask the Government how people on income support or housing benefit will deal with the dramatic increases in prices. Benefits such as child benefit--a crucial support to low-income families--have been frozen. Prices will not be frozen ; they will rise. Low-income families need to be assured that they will be able to afford the water coming through their taps in future.
We need to ask the Government some specific questions tonight about disconnections. We need to ask, as the hon. Member for Brecon and Radnor (Mr. Livsey) pointed out, why there has already been a dramatic increase in disconnections and how those disconnections will relate to the price increases after privatisation, if it goes ahead. If families are disconnected, how long will the Government expect them to survive without an adequate water supply to their homes? If there are disconnections, how long will the Government be prepared to let the community suffer from the increased public health hazard of families being disconnected? That will place an increased demand on an already overstretched National Health Service.
We must ask the Government whether, if metering is to be the preferred option of the new private companies, the cost of metering, estimated at £1.3 billion, will be passed directly to consumers by being included in future charges. There will be an extra demand for water from families with children, families with handicapped or disabled members or families which have a large number of elderly members. Will the extra demand for water in such families, reflected through the meter, cause the Government to reconsider the pricing policy?
If families are disconnected, as we fear, will there be any penalty on neighbours and friends who care for those people supplying water to them to ensure that they do not become a health hazard and to ensure that they have healthy, clean water coming into their homes? Should not the code of practice be a statutory code which covers all water companies and does not allow each separate water company to devise its own system, which will mean different regimes for disconnection in different parts of the country?
Cities such as Manchester have a proud heritage of investment in their water industries. As other hon. Members have pointed out, it was the ratepayers of such cities who paid for the water industry and who were in the forefront of public health legislation to ensure proper water supplies in their homes. Such cities will not have those assets passed to the water authorities without a fight and without any element of compensation for taking away assets that have previously been paid for by the ratepayers. The legal challenge will come from cities such as Manchester to ensure that the assets that belong to local people are retained by those people.
Column 1159We must look at campaigns against privatisation, such as that in Manchester, which join together individuals, groups representing consumer interests, groups representing pensioners' interests, groups representing conservation and environmental issues and the Ramblers Association. They are all joining together to say to the Government that they are not going to have this privatisation. Such campaigns will be successful. This Bill will be the Government's Achilles' heel, unless they decide tonight to support our amendments or the amendment tabled by the hon. Member for Macclesfield. The Government should think again, because if they do not, they will be forced into submission by 1991.
Mr. Knapman : I am extremely grateful for the chance to catch your eye, Mr. Deputy Speaker, because I sat here for most of yesterday and have done so again for most of today. I appreciate your difficulty, as so many of my hon. Friends want to demonstrate their support for this excellent Bill. For that reason, I shall be brief.
My right hon. Friend the Secretary of State said yesterday that of four Opposition amendments under discussion two were unnecessary and two were undesirable. I hesitate to suggest that perhaps it is good that my right hon. Friend is not here tonight, but I do not know what he would make of the collection of Opposition amendments before us. Amendment No. 1 seeks to delete the whole of part II--clauses 10 to 98. I hope that the Government will not be tempted to accept those deletions, because they would make some little difference to the Bill, which was considered in detail in Committee.
I should have thought that all hon. Members would welcome the creation of the National Rivers Authority. It is a giant step forward because it will be a far more effective regulatory body than any we have had before and will be guided by clear and comprehensive codes of practice. However, the Opposition amendments seek only to achieve two things--to dot the i's twice and to cross the t's twice. That would be not a step forward, but a recipe for inaction and would strangle the National Rivers Authority with red tape. The authority's success will not be measured in the tons of annual reports that the Opposition wish them to produce. The authority should be in a position to produce a quick response to problems as they arise. Having listened to Opposition Members, I fail to understand why there is any need for them to support the National Rivers Authority. I listened with interest to the hon. Member for Burnley (Mr. Pike). In the first sitting of the Committee, he welcomed the creation of a National Rivers Authority. He was always good value in Committee and I believe that he also mentioned that he was a member of the Select Committee on the Environment, which recommended the creation of the National Rivers Authority. He spoke of that with some pride and had every reason to do so. But I do not understand what value the National Rivers Authority has for the Opposition, because they oppose privatisation.
The Government rightly say that we need to separate the gamekeeper from the poacher--in this case, the provider or water plc. Perhaps there is no particular reason why the National Freight Corporation should be a hundred times more profitable and efficient than British Road Services, but it is, and that is a fact. In the same way, the water plcs will be a great deal more efficient than the
Column 1160existing water authorities. The Bill provides for the separation of the poacher from the gamekeeper or regulator, the National Rivers Authority.
Conservative Members seek a clear-cut division of
responsibility--this is the crux of the matter--whereas the Opposition want to retain water authorities in public ownership. That is not a poacher- gamekeeper relationship ; it is a two gamekeepers relationship, which is neither satisfactory nor practical. If the Opposition had their way, we would have two Government bodies exchanging correspondence. The two gamekeepers would soon get to know each other's ways and each other's foibles, and with all the red tape and reports that the system would entail, it would be a recipe for inaction. The buck would stop nowhere.
Mr. Morley : I have been listening carefully to the hon. Gentleman's argument, but I find it hard to understand why the National Rivers Authority should not be as effective when dealing with water companies in the public sector. Are not public health inspectors effective in their inspections of public abattoirs? Are not Her Majesty's inspectors of pollution effective in overseeing industries in the public sector? It seems to me that they are equally effective--there have been no complaints--so I do not understand the hon. Gentleman's argument.
Mr. Knapman : I am grateful to the hon. Gentleman for raising that point. He served on the Standing Committee and will have listened to his hon. Friends the Members for Copeland (Dr. Cunningham) and for Dewsbury (Mrs. Taylor) talking at length about the importance of the Camelford incident. They were entirely right about that. It has been pointed out to them time and again that such incidents happen under the present system precisely because the poacher is not separated from the gamekeeper. That is the whole point of the Bill. I hope that my hon. Friend the Minister will actively consider the amendment tabled by my hon. Friend the Member for Dorset, North (Mr. Baker). I realise that he has much to consider, but it seems to me that my hon. Friend's amendment is worthy of detailed examination.
Mr. Pawsey : My hon. Friend properly referred to a system involving two gamekeepers. Can he say a little more about the additional safeguards built into the Bill--for example, the director general, who is the consumers' white knight? Will my hon. Friend draw Opposition Members' attention to the effect of the other safeguards in the Bill and agree with me that, under the Bill, consumers will have more, rather than fewer, powers?
Mr. Knapman : I am obliged to my hon. Friend, who has made those points a great deal better than I could. Whereas the consumer has few rights at present, the Bill provides a code of practice that not only describes the product that must be provided--wholesome water--but allows fines to be imposed when it is not provided. I find it extraordinary that Opposition Members should argue so forcefully in favour of high standards when they know very well that there is no chance of such standards being reached under the existing system of public ownership.
Mr. Knapman : The 1973 reorganisation produced integrated river basin management, and I do not see how the geographical base of that--which is the important part--is altered by the Bill, under which the 10 areas are to be retained. The Bill merely seeks to separate the poacher from the gamekeeper. The Water Act 1973 was valuable because it brought together hundreds of small water companies. It is well understood that, with the increasing demands in both the drainage and water supply sectors, it was necessary to have larger blocks of authorities. I do not seek to detract from the importance of the 1973 provisions, but I would still argue that there is justice in separating the poacher from the gamekeeper, rather than having two gamekeepers, as Opposition Members would suggest.
Mr. Dafydd Wigley (Caernarfon) : We come to the guts of the Bill. We should certainly be much happier to live with the Bill if we succeeded in removing part II. It has been suggested that the alternative to water supplied through the tap is Perrier water. Advertisements on the television showing droves of milk floats delivering hundreds of bottles of water to hundreds of doorsteps bring home to us the lack of choice. The Welsh advertising campaign brings home to us the fact that the chair of the National Rivers Authority, the former Secretary of State for Wales, is also a director of HTV and reminds us that the chairman of Welsh Water has also been made a director of HTV. One must have misgivings about the heavy use of advertising to try to sell a product which is clearly not sellable.
Wales does not want the Bill. We have seen the effects of the Government's water policies in recent years. It is interesting to note that the average domestic water bill in Wales, which was £49.08 in 1979-80, had increased to £122.61 by 1987-88 ; in other words, it nearly trebled. Over the same period, the required rate of return has increased from 0.3 per cent.--the going rate in 1980-81--to 2.35 per cent. in 1987-88. As the rate of return has been pushed up by the Government to increase the capital formation of Welsh Water, so the charges landing on the ratepayer have increased substantially. Similarly, we shall face enormous increases in charges for our water when the Bill is enacted because a return of 2.35 per cent. will not attract the capital necessary for the programmes that have been referred to. To achieve even a modest return of 8, 9 or 10 per cent., as Ministers have suggested, will require substantially greater charges to be levied for water.
The average equated water rate in Wales in the financial year 1988-89 is 108p in the pound as compared with 50.95p for Severn-Trent, 58.50p for North West and 33.54p in the Thames area. We already pay twice to three times the amount that those in other water authority areas pay. We dread to think what will happen to water prices in future years ; it is a grim prospect for the Welsh water ratepayer. We accept that we need to pay for the work that has to be undertaken, but we want a fairer method of payment than that proposed in the Bill. As long ago as the debate on the Queen's Speech, the Secretary of State said :
"the necessary investment might increase prices by between 7.5 per cent. and 12.5 per cent. in real terms by the end of the century."--[ Official Report, 28 November 1988 ; Vol. 142, c. 450.]
He was referring to the investment in a programme for environmental improvement, for cleaner beaches, drinking water quality and improvement of sewage treatment works and it seems that that is over and above the other inevitable increases.
Column 1162The Secretary of State was very honest in his response to me yesterday. He said :
"That is equivalent to an extra 7.5 per cent. to 12.5 per cent. in real terms in financial costs over the next 10 years. That is little more than 1 per cent. per year in real terms. As I have said, that is over and above the increases that would have been required without those additional programmes."--[ Official Report, 21 March 1989 ; Vol. 149, c. 1012.]
In other words, we are facing a substantial increase. The Prime Minister said :
"we shall need increases in water charges."
She claimed that it was
"not for privatisation but to provide the capital to spend on the required increased quality."--[ Official Report, 16 March 1989 ; Vol. 149, c. 528.]
That is what we need, but what we are saying is that the water charges will go up astronomically because of this part of the Bill. It will not just be 12.5 per cent. plus a little more, but in real terms 50, 60 or 70 per cent. The Government are acknowledging that between the lines of such answers as those given by the Secretary of State yesterday and the Prime Minister on Thursday, but that is directly contrary to the publicity campaign that was launched in Wales earlier this month. A statement released in the Committee corridor by the Minister of State, Welsh Office led to the Western Mail having the banner headline on the front page saying : "25 off--The hope for Wales's water bills."
That statement was directly engineered by the Minister of State, Welsh Office to give the impression that the legislation would lead to a 25 per cent. reduction in the price of water for Wales. That is absolutely disgraceful. I call on the Minister of State to tell the House that that statement--that leak was also given to the Daily Post on the same day--was unfounded, misleading and the people of Wales should take no notice of it. That is based, of course, on the statement that
"The Government is planning to write off £460m of Welsh Water debts to make the authority more attractive to private investors and city institutions."
If that debt was written off now, water rates in Wales could be at a reasonable level instead of at the levels that we have suffered over recent years.
The Government must come clean about where they stand on the matter of the writing-off of debts. How will that be managed? Was the hon. Member for Copeland (Mr. Cunningham) right when he suggested that it would be equated between all areas? Has the matter been properly discussed? Will that be spelt out clearly in the prospectus? If we look at what was said in Committee we see that the Under-Secretary clearly had no answers to those points. He said :
"A decision will be made on the amount of equity for each company that will be offered for sale. My hon. and learned Friend the Minister for Water and Planning made it clear this morning that the Government intend that 100 per cent. will be floated. How we achieve that will be decided closer to the time in the interests of the taxpayer and of maximising the flotation."
The Bill will leave the Commons without our having an inkling of the direction in which we are moving. The Under-Secretary continued :
"I cannot tell the hon. Gentleman whether the equity will be 51 per cent., 71 per cent., 91 per cent., or 100 per cent. I cannot tell him whether the shares will be paid for in one go or, as with other privatisations, by part payments. I
Column 1163cannot make those decisions now or say how much income will be generated."--[ Official Report, Standing Committee D, 23 February 1989 ; c. 1326.]
In other words, we are being asked to vote for a pig in a poke. We do not know what we will be getting. All we know is that the costs will be substantially higher and those will push water charges in Wales to an astronomical level.
Privatisation is supposed to provide certain benefits. One of the benefits is said to be greater efficiency. We have not yet heard where that efficiency will come from, how many redundancies there will be, what slimming down there will be, or what services will not be provided. Privatisation is supposed to provide a great attraction for capital. That will not happen without the scale of charges that I have mentioned. Without those high charges, the capital will not be there. Privatisation is supposed to provide a better service for customers because of competition. However, many hon. Members--in fact, more Conservative Members than Opposition Members--have said that that competition is not there. It is a monopoly and one which cannot in any way be effective in the market place.
We have been told that privatisation will lead to better quality. When the main criterion will be profitability, I wonder what effect that will have on the quality of water and, indeed, on public health.
We have been told that there will be better protection for the environment, yet there is a real danger that the plc will sell its assets to raise capital that it will be unable to raise in the market place. We have been told that individuals will be more involved and that they can be shareholders. However, we know that the large institutional shareholders are likely to move in, especially with the low returns that will be available. There will be no democratic answerability and no mechanism to raise questions in the House. We have been told that there may be a fairer charging system. Certainly, water rates can be very unfair under the present system, but will metering be fairer when someone old and incontinent will use more than the average 9,000 gallons per annum? There have been no mechanisms to allow rebates in the past. I cannot see that metering will be fairer.
We have been told that possibly there will be better co-ordination of the industry, but I wonder, when the question of the use of reservoirs and land arises and there is an opportunity to make money, whether the amenity value of the land will go out of the window. What effect will there be on industry? The increased charges may make many industries, such as the chemical industry, uncompetitive. The Department of Industry advertised at one time the attraction of water charges as an incentive for industry. I wonder whether it could put out the same booklet as it did in 1981 and 1982. Will there be any greater stability, as we have seen companies that have been taken over having to rely on the whims of the market place? All those factors fill us with foreboding.
I tabled amendment No. 136 which refers to the need to have an absolute assurance written into this part of the Bill that there will not be any charges passed on with the introduction of meters. We welcome the Government's move on the amendments regarding disablement. Amendment No. 53, which has not been selected, deals with metering and disabled people. The Government may be able to reconsider that aspect in another place, because