House of Commons Hansard Debates for 22 Mar 1989

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in comparable Bills, such as the one for gas, a provision has already been written in. Perhaps the Minister will consider that at an appropriate time.

We are fearful of the effects of privatisation. Privatisation by a Government who do not have a mandate is not wanted by Wales. I hope that even at this late stage they will change their minds.

Miss Emma Nicholson : The speeches today have had a valedictory ring. The utterances from the Opposition resembled those of professional mourners at a funeral burying the corpse of nationalisation. I do not believe that they will ever be able to exhume that corpse and rattle its bones again. It is like a pavane for a dead doll because nationalisation has shrunk to that size. The hon. Member for Macclesfield (Mr. Winterton) has been the chief pall bearer. Speeches from other Conservative Members, however, had the ring of a job well done--a task completed and a polished performance--and were more like a march triumphant.

It is relevant that we should be discussing the Water Bill in the round, especially the retention of part II. In 1977, the United Nations declared the 1980s to be the decade of international drinking water supply and sanitation. The goal was to meet the needs of everyone world wide by 1990. The Bill ensures that in the United Kingdom we shall do just that with an innovative, imaginative and highly effective piece of legislation which will bring immeasurable benefits to the consumer.

As it enters its last year, the present decade has many notable achievements to its credit. The principal one is the establishment beyond doubt of the relationship between ill health, dirty water and poor sanitation. I remind the House that every day 30,000 people die from water- related diseases. In that context, and thinking especially of the developing world, it is interesting to note that every human being needs five gallons per diem for washing and drinking, but in the developed countries we use about 25 to 40 gallons. We are profligate with a natural resource. Water metering may help us there.

In the months in which we have been debating this major piece of legislation, we have had food scares, food and health scares and, in Committee, water scares. Unwarranted, unjustified and unscrupulous attacks have been made on the purity of unbottled British drinking water. All the medical experts of the United Kingdom have declared that water to be of excellent quality, and more of our rivers have a higher water quality than many of those in Europe.

In Committee we were threatened with Alzheimer's disease if we drank British water. The threat has been flourished with seeming relish, as though the disease would be caught by anyone drinking tap water in Britain. The chief medical officer's verdict has been wholly ignored by the Opposition. He does not believe that there is any perceived link, although he is continuing serious and proper studies.

The Opposition have based their scare stories on an invalid extrapolation from data about kidney patients undergoing dialysis and ingesting water in an abnormal way to cleanse their kidneys, with distressing but preventable side effects. As a result of that scare story, acute unhappiness has been caused to widows and widowers whose partners have died of Alzheimer's disease.

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People ask me whether they were wrong to move to Devon and whether they did a terrible thing which caused their spouses to die.

Mr. Heffer : I shall not take up the last point because I am not competent to do so and I do not know whether any such problems have been caused. The hon. Lady and the Government should make up their minds. On the one hand we are told that if we privatise we shall improve the quality of water--that is the essence of the argument. The hon. Lady then says that the quality of water is better than that in most of the advanced world. I do not disagree with that. I do not agree with those who say that our water is bad. Having visited Italy regularly, particularly after the war, I remember that if one went south of Milan one was damned careful not to drink the water around Rome, and so on. We all knew what could happen. The fact is that our water is good water, so why do we need to privatise it?

Miss Nicholson : I thank the hon. Gentleman for his excellent and highly intellectual intervention based on his experience of Italian and British drinking water. The circle can be properly squared because the public are rightly becoming more environmentally conscious and calling upon us to improve the quality of our water still further. I invite the hon. Gentleman to visit my constituency, where he will discover an appalling history of poor quality water supply. The new mechanism for investment and for attracting money will improve beyond belief the appalling water that we have suffered in Bideford, Launceston and Tavistock for many years. Under the new South West Water chairman, all is being rapidly improved. That did not happen under the Labour Government appointee. With an irresponsible and heartless Opposition Front Bench team playing most meanly upon people's fears, we certainly need the Bill. It is as well that, in this context, Britannia is the clean woman of Europe.

Mr. Allan Roberts : If our drinking water is of such a high standard, why do 11 million people drink water that is below EEC standards?

Miss Nicholson : Our drinking water is only 95 per cent. perfect. We still have 5 per cent. to go.

As water scares have been promoted by the Opposition, public education is the key. We need a strong and resilient group of customer service committees with powers to call for evidence from companies outside their normal remit and with the ability to challenge those companies with their findings and to put those findings to the director general. As those customer service committees will serve the public, it is most important that their meetings should be held in public. I have never understood the idea of a body that is meant to represent the public holding its meetings in private. In that context, I commend amendments Nos. 25 and 96 to my hon. and learned Friend the Minister and to the House. They will give us that strong and outward-looking public body to educate, inform and serve the customer.

8.45 pm

Mr. Morley : The hon. Member for Torridge and Devon, West (Miss Nicholson) said that perhaps we are mourning a dog's funeral, but I believe that the Bill is more like a dog's breakfast.

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The way in which the Bill has been presented is a total shambles, and the arguments have been contradictory. Amendment No. 1 seeks to discover what the Government are trying to get out of privatisation. There may be a case for a separate regulatory body, the National Rivers Authority. That is fair enough. If we delete part II we can go ahead and set up an NRA that will have the powers to regulate water quality, do something about our river quality and ensure that our sewerage standards are improved. All that could be done without everything being moved to the private sector.

The question posed by the public, which the Government must answer, is what are the advantages from putting the water and sewerage undertakers into the private sector? So far they have not come up with any convincing arguments in favour of such a move. The evidence suggests that it will be a great deal more expensive for the consumer if such a move goes ahead. They have also not told the public why a natural monopoly should be put into the hands of the private sector when its natural place should be in the public sector, where control and accountability can be exercised.

The Minister may argue that, together with passing control over to the private sector, a whole range of regulations will be introduced to prevent abuse by any private owner. That is the argument in favour of the price control mechanism. If that is the case, it makes nonsense of the argument of the Water Authorities Association that, by moving into the private sector, water companies and authorities will be free of Government interference. Given the regulations that will accompany the Bill--I accept there is a need for them--there will be more Government interference in the water companies than at present.

It is also argued that everything will be more efficient in the private sector, but that does not automatically follow. I am not suggesting that private sector companies are not efficient--many are--but if they were all efficient, there would be no bankruptcies or fraud cases. Such things happen all the time because there are good and bad companies. By making something private it does not follow that everything will be more efficient.

It is clear that the move into the private sector will be more expensive. The Secretary of State will not produce figures to show what it will mean for the public, because he dare not. If we are to achieve the necessary investment in our sewerage works, the sewage outfalls and the associated infrastructure, the necessary money must be raised. Raising such money through a privatised water company, however, will be more expensive than raising it through the public sector. Private water companies will not have access to the lower rates of interest that are available in the public sector and they may not have access to various European grants currently available. The shareholders' dividend will be an extra element that must go on top of the distribution charges.

Opposition Members have already pointed out that, if those companies are to attract private capital, there must be a decent return on it. Most companies in the private sector believe that the minimum return on capital invested is 10 per cent.

Under the present pricing regime, there is nothing like a 10 per cent. return on capital. The implication is that water charges will rise dramatically to meet that return and leave sufficient to invest in the infrastructure. Apart from some Conservative Members, nobody denies that. Even

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stockbrokers in the City have given a cool response to this privatisation because they know the investment difficulties that will have to be faced.

Mr. Wigley : Is my hon. Friend aware that, in an unguarded moment towards the end of last year, the Secretary of State admitted that other factors would be involved, including what he described as the higher cost of private sector capital? The Government have shied away from putting a figure to it. Perhaps the Minister will give a figure tonight.

Mr. Morley : I am obliged to my hon. Friend for that intervention. People who think about these issues impartially recognise the logic of what I am saying. By putting the industry into the private sector, the Government are being responsible for dramatically increasing charges. Water charges for industry will also go up. That will have an effect on our ability to compete with the Europeans, especially after 1992.

Apart from the fact that it has not been proved that the industry will be more efficient in private hands, we must remember that the water authorities are part of our natural heritage. They control some areas of outstanding natural beauty, including important nature reserves and areas of leisure and recreation.

Considering the restraints that will be placed on private water companies and the fact that they will be in a financial straitjacket, having little room for growth in their core services, they will inevitably look towards the land assets that will be given to them on a plate by the Government. They will be inclined to develop those land assets, and that could have a detrimental effect not only on the conservation role of that land but in terms of access by the public and the maintenance of areas of natural beauty.

It is nonsense to suggest that the existing planning controls give sufficient protection. The Countryside Commission, a Government quango, has said that the present planning regime is not adequate to prevent the despoliation of areas of outstanding natural beauty. Anglian Water has put up its charges this year by 12 per cent., double the rate of inflation. That is an early indicator of the way in which charges will rocket under privatisation. The private statutory companies have already said that their astronomical increases in charges are due mainly to privatisation and not to necessary investment in the infrastructure. Indeed, one has said that the infrastructure element represented only 4 per cent. of its increase and that the rest was due to privatisation.

Some of the amendments in this series deal with extending the role of agencies with sewerage functions. I hope that the Minister will reconsider some of the arguments that were adduced in Committee about the problem of private sewers that have not been adopted by local authorities because those sewers are not up to standard.

I have that problem in my constituency, in Winchester avenue in Bottesford, Scunthorpe. When that development was constructed, the sewers were not put down to an adequate standard, and the local water authority, understandably, refused to adopt them. The residents of the area are anxious because the developer of the estate blames the builder who put down the sewers and the builder claims that it is the developer's responsibility. The only people who are suffering are the residents because the

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roads have not been adopted, the street lights have not been connected and the grass verges cannot be laid out, all because the sewers under the roads are in need of repair.

If we are to make changes, we should introduce into the Bill a provision by which the new water plcs have power by law to go in, to do the job, to bring the sewers up to standard and to recover the cost from the company which laid them in the first place. That would cut through the circle of complaint, with the buck constantly being passed between developers and builders. I hope that the Minister will examine that matter. Several hon. Members, including Conservative Members, raised in Committee similar problems affecting their constituencies and we should take the opportunity of this measure to tackle that problem.

The Bill will do nothing to improve the efficiency of the water companies. The restraints from which they have been suffering are artificial. If the Government want to improve our rivers and water standards and wish to make sure that various aspects of the infrastructure receive the necessary investment, they should remove those restraints and allow water authorities to borrow on the open market and have freedom to invest.

By all means establish the NRA, create more regulatory powers and introduce a more efficient code of conduct, but all of that could be done by deleting part II of the Bill and making sure that part I goes through.

Sir Anthony Grant : The 12 per cent. increase to which the hon. Member for Glanford and Scunthorpe (Mr. Morley) referred in the Anglian water authority area is in line with the forecast made by the Secretary of State for the Environment on Second Reading. The Cambridge water authority, which supplies water to me and my constituents, recently had to announce an increase. It was not the 43 per cent. rise which some authorities have had to announce, but it was sufficiently high at 29 per cent. It made it clear that the money was required for the replacement of old plant and for other engineering necessities and had nothing to do with privatisation. The Bill has not been adequately explained. That is undoubtedly why Mr. Derek Jameson and his telephone pollsters misunderstand the situation. I acquit the Minister of State entirely in that respect ; he was bogged down in Committee, giving massive attention to detail--a task which he performed with his usual forensic skill--but it is now necessary to concentrate on the two fundamental points in the Bill. If that is done, we shall be able to disregard straw polls conducted by straw men.

The first point concerns the setting up of the NRA to deal with standards and quality. The Opposition may want the NRA to be strengthened in certain respects, but it is agreed in all parts of the House that the basic principles of the body are right. We debated this subject at length yesterday, so at this stage I will simply say that the principles involved in establishing the NRA are right, that the fears that have been expressed about dangers to our beautiful countryside are wildly exaggerated and that we can have the highest respect for our erstwhile colleague, Lord Crickhowell, who will chair that body.

Secondly, while we are demanding higher standards, we should appreciate that our water is extremely good compared with that in some countries. Nevertheless, we and Europe want it to be better. In my constituency there is a great fuss about nitrates. We have the highest concentration of nitrates in the soil, although even that

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concentration is wildly exaggerated. I pointed out in the House recently that, while nitrates are said to cause stomach cancer, the highest incidence of stomach cancer is in Wales, where there are the lowest amounts of nitrates, and the lowest incidence of stomach cancer are to be found in East Anglia, where we have the highest concentration of nitrates. That must be borne in mind before people become hysterical over this issue.

If we want higher standards, they have to be paid for. The Opposition have proposed a wrecking amendment. If we accept their arguments we shall simply stay in the same miserable circumstances as we had between 1974 and 1979, and subsequently, with the water industry standing docilely in a queue at the Treasury, trying to get the necessary investment. The water industry was not the only one to suffer between 1974 and 1979. Hospitals, nurses and everyone suffered in times of economic difficulty. The same could happen again. If the water industry is in the queue behind Ministers who are clamouring for more money for pensions, hospitals, defence and education, we will be back to square one.

9 pm

I agree with my hon. Friend the Member for Macclesfield (Mr. Winterton). Part II of the Bill provides the opportunity for competition, although not in the commercial sense as we know it. No one can say, "I do not like Anglian Water so I will go to Thames Water because it is better or cheaper." That is not what we are talking about. By their efficiency and the way in which they conduct themselves, water authorities will be able to apply to a wider circle of investors to raise funds. They will be liberated from the constraints that have caused the difficulties up to now. That is fundamental and one of the main purposes of the Bill. We must hammer that home and explain it to the people in simple terms.

Much nonsense is talked about the French taking over things. I am not so xenophobic as some hon. Members and I do not worry particularly about that. In 1992, if Anglian Water plc is efficient enough and keen enough, it may take over the French. When we were negotiating to go into the Common Market the Prime Minister, my right hon. Friend the Member for Old Bexley and Sidcup (Mr. Heath), told me that Pompidou was complaining bitterly that the British had taken over the French food industry, which they had. There is no reason why the water industry should not do the same. We should not be frightened of competition and we should not talk xenophobic nonsense.

I will conclude by quoting from a letter to The Times by the chairman of Anglian Water, Mr. Bernard Henderson, who has put it as well as anyone could. He said :

"For too long the United Kingdom water industry has been starved of the funds needed to carry out these improvements as it wanted to do. This has got to cease. Stop-go policies have left the water industry frustrated and underfunded time and time again.

The present Bill offers the chance to revolutionise this situation. The powers of the secretary of state and the National Rivers Authority will ensure the remedial work is carried out. The director general will oversee the maintenance of standards and impose a price control which should encourage further efficiency gains, whilst allowing for the necessary work to be financed. And the privatised companies in turn will, for the first time, have the freedom to operate outside the constraints of public expenditure policies."

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Mr. Henderson has got to the root of the problem. We should forget the other nonsense and put that message forward. We should reject amendment No. 1. The sooner the Bill is on the statute book the better for everyone.

Mr. Pike : I shall be extremely brief because there is a guillotine and other hon. Members want to speak. Important issues are involved in this large group of amendments. If time permitted, I would take to task the hon. Member for Bolton, North-East (Mr. Thurnham) for some of his comments about other privatised industries ; he said that they had done extremely well but he did not give a true picture of the position. Many of them have created additional top-tier jobs which have benefited those at the top, but they have not done much good for the consumer. At the end of the day we should judge things by the results for the consumer. Many times during the debate the hon. Member for Torridge and Devon, West (Miss Nicholson) has claimed to be a champion of consumer interests, but when she supported the main drift of the Bill she showed that she is no friend of the consumer. The hon. Member for Stroud (Mr. Knapman) referred to the Select Committee report. The Minister also made an intervention about it, referring again to the chart, as he has done so many times. The Conservative Government have been in power for almost 10 years, and they must be judged on their record. The simple fact is that, in true comparative terms, the Government investment in the water industry in 1989 is lower than it was in the mid 1970s. The chart does not give the latest figures, but what I have said is correct. The Government have failed miserably.

There is some truth in the statement by the hon. Member for Stroud that the National Rivers Authority originated in the proposals of the Select Committee. While the Select Committee accepted that there was a need for a regulatory body, and a separation of the poacher and gamekeeper functions, it did not say that the industry should be privatised to achieve that objective. It stated clearly that the problems in the water industry arose not from ownership but because the Government controlled capital investment and interfered too much. There is no reason why the Government, if they wished, could not remove the PSBR from water authorities and allowed them to borrow on the open market, perhaps even involving some private sector finance. We do not need to go along the road of privatisation.

If the House does not accept amendment No. 1 to delete part II which deals with privatisation, we have grave doubts that the Bill will deliver the goods. Whatever regulatory powers are provided, at the end of the day the industry has to have profit as its prime motive. We know that the Government have to fiddle the figures and wipe out debt. They will have to make provisions for derogations and extending the period for water authorities to meet the requirements for river and water quality, and for the improvement of beaches. If they do not, the industry will not pay.

The hon. Member for Bolton, North-East said that in other privatised industries the regulatory control for price increases was RPI minus X but that in this case it would be RPI plus K. The important difference is the plus rather then the minus.

My hon. Friend the Member for Glanford and Scunthorpe (Mr. Morley) made an important point about sewers of existing properties not being up to an acceptable standard. The Minister should recognise that it is still

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possible for properties to be constructed with sewers that are not of the required standard to be taken over by water authorities. That will continue. This may not be the appropriate Bill to cover it--the Local Government and Housing Bill might be better--but the Government should do something about the problem which exists even on estates built in post-war years. The Government must accept responsibility to prevent that happening in future.

I have known the hon. Member for Macclesfield (Mr. Winterton) for many years. Indeed, I worked as a full-time Labour party organiser in the 1971 by-election that brought him to this House. He made a very bold, constructive and important speech. He recognises very clearly that, while the Government, with their majority, may win the votes in Committee and in this House, they are not winning the debate, either in Committee or in the House. But, even more important, they are not winning the debate in the nation. The people recognise that in this industry comparative competition and all that kind of nonsense is absolutely unrealistic. This will be a private monopoly. The consumers will have to pay, and if there is metering the poorer sections of the community will be penalised. If time permitted, I would go into detail on that matter.

The Government must recognise that there are important issues involved in these amendments. The latest Select Committee report on toxic waste says that the Government should make the National Rivers Authority the basis of an environmental protection agency. As I have said to the Minister before, if the Government were to drop this nonsense of privatisation and made the National Rivers Authority an environmental protection agency, they would be doing a lot more to serve the nation.

Mr. Leigh : I have now sat through five hours of Second Reading debate, 150 hours of Committee debate, and countless hours of Report stage debate.

Mr. Paul Boateng (Brent, South) : Do you want a medal?

Mr. Leigh : The hon. Member for Brent, South (Mr. Boateng) shared those labours with me.

I am pleased that the Minister has accepted several of my amendments. The one that I have down this evening concerns due diligence, but I shall not delay the House by talking about that, as there is already considerable correspondence about it. In the two or three minutes available to me--I want to give other hon. Members a chance to take part in this debate--I shall try to boil down some of the arguments. Unless we can put over our case very simply, in a couple of minutes, we really are in serious trouble. But I think we can do so.

I hope that hon. Members opposite, who may not agree with everything I say, will at least accept that I have tried to study the Bill with reasonable care. It seems to me that we are all agreed--this is the view of the people who work in the water industry : not just the chairmen of the water authorities, but people at all levels--that there is a large measure of historical under-investment in the industry. It is accepted throughout the industry that, if it were to remain in public ownership, it simply would not get the investment it needs, given the fact that it would have to compete for scarce resources. That is not a party political point. I am not making an attack on past Labour

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Governments ; perhaps I am attacking the records of all Governments on this issue. There simply are no votes in sewerage. That is the first point.

Mr. Boateng : Will the hon. Gentleman give way?

Mr. Leigh : No, because I intend to speak for only two or three minutes.

The second point is that it is in the very nature of this Bill that the regulatory functions of water quality are split from the actual provision of water and sewerage. As a result, the Government and Government agencies such as the NRA are allowed to get on with the job that they do best, which is regulation, while the private sector is allowed to get on with the job that it does best, which is providing the service. That is the very essence of the Bill. 9.15 pm

I think that we can get the argument across in the country if we inform people that these private sector companies will not be like other private sector companies. It seems that people out in the country think that they will operate for profit in an entirely free market. In fact, they will be tightly controlled by the Director General of Water Services, operating under the K factor. They will be operating within a tightly regulated framework, and will be much more akin to private contractors working for Government Departments than to private companies. It is not so much a question of privatising something for profit margin ; what we are doing is splitting up an unhealthy relationship, in which secretive water authorities have both provided the service and regulated themselves. We are creating something much more healthy--a healthy tension between Government agencies regulating, and tightly regulated private companies providing the service.

The people in the water industry to whom I have talked are actually looking forward to being let off the leash of Government control, of chopping and changing, as was mentioned in the letter from the chairman of the Anglian water authority--let off the leash of the Treasury, allowed to invest, allowed to attract private capital. That is what people in the water industry are saying. They look forward to providing a service. There may be price increases, but they will be the result of historic under-investment. The only way we can get real improvements really quickly is by privatising this industry, and to that end this amendment must be rejected.

Mr. David Hinchliffe (Wakefield) : The hon. Member for Torridge and Devon, West (Miss Nicholson) talked about this Bill representing a march triumphant. I would argue that it is a march that tramples the poor and disadvantaged into the ground. The Bill constitutes a serious attack on the rights and interests of low-paid and disadvantaged people. The hon. Lady talked about scare stories. It is no scare story to look at the record of the present Government in water charges and the hardship that those have caused in the run-up over the past few years to privatisation. In 1984, the average bill was £76 ; now it is £107. It is no scare story to say that the Water Authorities Association itself said that that increase was the direct result of the Government's move towards privatisation. That is not a scare story.

Nor is it a scare story to suggest that Gordon Jones, the chairman of that association and of Yorkshire Water, has said that bills will effectively double to £200 per year by 1993. These are not scare stories. It is not a scare story to

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talk about the private companies and the figures that they put forward. The Minister proudly announced that he had got the increases down to 22 per cent.--three times the rate of inflation. These are not scare stories ; they are facts, truths, that the hon. Lady conveniently forgot.

Amendments 126 and 125 are intended to help the interests of the poor if this Bill goes through its parliamentary processes. They respond to the growing trend of disconnections. Over the past few years we have seen an average of 2,000 extra disconnections each year. The hon. Member for Brecon and Radnor (Mr. Livsey) referred to a figure of 9,000 disconnections this year. That so many people are deprived of such a basic commodity as water is an appalling indictment of this Government. They must be very proud of their record. We heard in Committee the Tory view of wilful non-payers--the clear distinction between the deserving poor and the undeserving poor-- concepts which, as my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) said when he was discussing measures that have been brought in in Liverpool, take us back to the last century. I am deeply concerned about what will happen under this Bill to those families who cannot afford to meet their bills now, let alone when we have the huge increases that will be brought about by privatisation. It is vital to understand the seriousness of the situation in which families will find themselves when their water supply is cut off. I have listened to all the speeches that have been delivered since 6 o'clock this evening. Not one hon. Member opposite--not even the hon. Member for Macclesfield (Mr. Winterton)-- mentioned the position of the poor, the position of the disadvantaged, the position of the disabled, the position of those people who will be, and those who have been, deprived of a water supply.

I am sure that all hon. Members have received representations and information from the citizens advice bureau nationally about the evidence it has received. It has referred to a case in Lichfield where its client, a woman who is a single parent with a three-week-old baby, had her water supply cut off without her knowledge after she had actually paid the bill. I repeat that a three-week-old baby was deprived of its water supply.

I have also referred to a family that I went to see while we were considering the Bill in Committee. The family has five children, one a nine -week-old baby, and it too was deprived of its water supply. Can any hon. Member who supports the legislation defend a nine-week-old baby being deprived of water? How on earth can people care for a child of that age without a water supply? It is a disgrace that the Bill will add to the misery of families such as the one I visited which told me--I mentioned this in Committee--that one of the children--

Miss Emma Nicholson rose--

Mr. Hinchliffe : I am sorry but, with respect to the hon. Lady, I shall not give way to her because I am limited to only a few minutes before the wind-up speeches.

I mentioned in Committee the condition of one of the children in that family--a five-year-old child who had diarrhoea. When there was no water supply that child refused to use the toilet because it could not be flushed so the child went to the toilet in the garden. That is the sort of situation that there will be with the privatisation of

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water. This country will be taken back 100 years to the conditions of the last century. I am sure that the Secretary of State, who has now just turned up, will be proud of that record.

The Bill adds to the problems that are being faced by the poor as a direct result of Government policy. The Government have hammered the poor by their discontinuation of water rates allowances and by the way in which direct payments of water rates have been scrapped and by the way in which the benefit system has not reflected the huge increase in water rates.

I am being looked at by my Whips so I shall sit down in a moment. I have sat here from 6 o'clock and I have had a couple of minutes in which to get this off my chest. Let us remember the poor, the disadvantaged and the deprived, not those who will make a fast buck out of the legislation.

Mr. Nicholas Baker : The hon. Member for Wakefield (Mr. Hinchliffe) spoke with feeling, as he did in Committee, and we respect him for it. I am only sorry that the hon. Member for Brent, South (Mr. Boateng) has been muzzled in this debate.

I shall be brief, but I must advise my hon. Friends--and, especially, the hon. Member for Copeland (Dr. Cunningham)--that the more I go round my part of the country and my constituency to explain the case for the Bill, the more it is understood and the more support it receives. People appreciate that the need for substantial investments is urgent. They appreciate that there is a need to define the functions of regulation and the supply of services. They appreciate also the need to raise environmental standards, even if the hon. Member for Bootle (Mr. Roberts) does not. They appreciate too that there is a need for a well-managed water industry that is capable of improving services and exporting its services, free from political control, to the Third world. They appreciate that all that is urgent.

I wish to make a point that I made in Committee on amendment No. 148, which has been tabled by my hon. Friends the Members for Daventry (Mr. Boswell), for Stroud (Mr. Knapman), for Gainsborough and Horncastle (Mr. Leigh), for Torridge and Devon, West (Miss Nicholson) and for Rugby and Kenilworth (Mr. Pawsey) and which has the support of my hon. Friend the Member for Pudsey (Sir G. Shaw), who is a former Minister and about whose knowledge of the water industry no one should feel anything but respect.

There is a need for a connection charge because of the inadequate provision made in the Bill for paying for the improvements to the infrastructure that are required to service new developments. As my hon. and learned Friend the Minister knows, the problem at the moment arises in the following way. New dwellings are connected to public water supplies and sewerage systems and they impose a demand on the existing capacity of all elements of the water and sewerage structure. The water supply elements include source works, treatment works, pumps, trunk pipelines, treated water reservoirs and distribution pipes.

The capital costs involved in new developments are high. At the moment, improvements have to be funded by cross-subsidy from existing customers and at the moment the section 52 arrangements are time-consuming and result in uncertainty for developers and water undertakers. Treatment works have to run at the limit of their capacity

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to justify contributions, which results in a serious risk of failure. There is also inequity between early and late developers of buildings.

After privatisation, the problems are likely to be worse. The costs of meeting the needs of new developments will put an upward pressure on K. The contributions currently obtained from developers by section 52 planning agreements will reduce significantly after privatisation because planning authorities are bound to be less co-operative with private sector companies than they are at the moment.

The problems of cross-subsidy and pressure on K can be overcome by introducing a statutory requirement for developers to pay a connection charge. It would be a capital sum for each dwelling and would be paid before commencement of building works. The charge would be fixed at a standard rate to reflect the average cost of meeting the development needs in each water undertaking area. Application of the charge would be policed by the director general. The introduction of the charge would streamline the planning process and give developers more certainty about their commitments and enable the water undertakers to use sensible and cost- effective planning horizons to remove inequities. The whole basis for the charge is that there should be equity.

My hon. and learned Friend has said that he will look at this issue and, indeed, his officials are considering it. I hope that he can say something in his reply about his attitude to the charge. It is important for equity and would be an important element in the post-privatisation process between the water undertakers and the regulators. My hon. Friends and I look forward to my hon. and learned Friend's reply.

Mr. Howard : Last night we were treated to the extraordinary spectacle of the Labour party pressing to a vote at midnight an amendment that would not have changed the Bill's effect by one iota. Tonight Opposition Members apparently intend to press to a Division amendment No. 1 which would delete the whole of part II and in so doing deny to the people of this country the considerable improvements in drinking water standards which we wish to see, the control over prices which the Director General of Water Services will exert and the new and unprecedented rights for customers that the Bill provides. Even by their own attitudes and standards, the Opposition's approach is incomprehensible. I shall return to that point later, but first I want to deal with some of the many other points that have been raised during this extremely interesting and wide- ranging debate.

I shall begin with the speech of my hon. Friend the Member for Macclesfield (Mr. Winterton)--as I suspect that he would expect me to. I am grateful to him for the kind remarks that he made about me, although he will understand that I approach them with a degree of caution. He made a characteristically forceful speech in which he urged the provision of a water merger control regime that would apply to all 39 water undertakers to be appointed under the Bill and would extend it in certain other respects.

The purpose of our special water merger provisions is to ensure that the director general has access to all the information that he needs so that he can compare the performance of different companies and make sure that the standards of the most efficient spread to the rest of the industry and that the customer benefits as a result. That exercise will provide a clear incentive to more efficient

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management and will be a key factor in effective regulation of the industry. The ability to make these comparisons is an advantage available to the Director General of Water Services which has not been available to the regulator of any previously privatised industries. It is one of the main reasons why we can be confident that the customer will benefit from greater efficiency in the industry in future.

9.30 pm

However, for that to be achieved, it is not necessary that all mergers in the industry should automatically be referred to the Monopolies and Mergers Commission--as my hon. Friend would like to see. It is not necessary for this purpose to preserve all 39 water undertakers in independent ownership. To do so would be to tend to freeze the existing pattern of ownership in the industry, and there is no reason to suppose that the existing pattern is necessarily the best or most efficient. My hon. Friend also wanted, in mergers that were referred to the commission, account to be taken of matters such as the interests of consumers and other sectors of the economy. The commission would be able to take those matters into account under existing arrangements.

My hon. Friend referred to French investment in the industry. The really important point about French investment is that French companies are showing us what can be achieved in this industry by independent private sector companies taking advantage of the opportunities that are available. There is a huge worldwide market for water services--as my hon. Friend the Member for Gainsborough and Horncastle (Mr. Leigh) pointed out. The French have a large share of it. We will never be able to compete with them so long as the British water industry is a collection of nationalised industries, operating under all the constraints which are an inevitable consequence of that status. I want the British water industry to compete with the French in world markets to obtain a big share of the business that is available, and I am absolutely confident that when the industry is in the private sector that is exactly what it will achieve.

My hon. Friend the Member for Dorset, North (Mr. Baker) described the effect of amendment No. 148 which stands in his name and the names of a number of my hon. Friends. We debated it in Committee and it proved to be one of the most interesting debates of our entire proceedings. As I explained to my hon. Friend, we are still looking carefully at the evidence. We have been provided with a good deal of information which needs careful examination and I am afraid that I cannot yet announce the outcome of our study of these matters. My hon. Friend knows that I have some sympathy with the points that he makes, but I hope that he will understand that I cannot go further tonight.

Sir Giles Shaw : I fully understand my hon. and learned Friend's position. Is it still his intention to resolve this issue during the passage of the Bill, even if in another place?

Mr. Howard : If it can be so resolved, I should be very happy to resolve it in that time scale.

Government amendments Nos. 94, 95, 141 and 142 arise out of a commitment given by my hon. Friend the Parliamentary Under-Secretary in Committee to consider the possibility of deleting the references to commercial interests in clause 161, which requires the Secretary of State to lay directions made before Parliament, unless to

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do so would prejudice national security. We have looked very carefully at the effect of the clause since our discussion in Committee, are satisfied that the references to commercial interests serve no useful purpose and have introduced amendments to give effect to that conclusion.

Government amendment No. 25 provides for customer service committees to have a duty to keep under review all matters affecting the interests of customers and to make representations as well as to consult the companies allocated to them about such matters. It follows an undertaking given by my hon. Friend the Parliamentary Under-Secretary to my hon. Friend the Member for Torridge and Devon, West (Miss Nicholson) in Committee, who asked for clarification of this point.

My hon. Friend the Member for Torridge and Devon, West also spoke to her amendment No. 96, the purpose of which is to provide for public access to meetings of customer service committees. We have carefully considered the matter and I am delighted to say that we have come to the conclusion that amendment No. 96, should be accepted.

Opposition amendments Nos. 122 and 123 deal with drinking water. The Bill establishes a comprehensive, new system for regulating and safeguarding the quality of drinking water. It represents the greatest legislative advance on this subject that we have ever seen. The proposals in the Bill fully incorporate the provisions in the European Community's drinking water directive and go beyond it in a number of important instances. This will be the first time that drinking water quality standards have been laid down directly in United Kingdom law.

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