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(b) modify any such provision as is mentioned in sub-paragraph (2) above ;

(c) in the case of regulations made after the transfer date, require provision contained in the regulations to be treated as if it came into force on that date.

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(4) No requirement shall be imposed on any company by any regulations under sub-paragraph (2) above made after the company has ceased to be wholly owned by the Crown ; but a company's ceasing to be wholly owned by the Crown shall not affect any requirement imposed on it by any regulations under that sub-paragraph made before the company ceased to be so wholly owned.

(5) It shall be the duty of the Secretary of State to pay the Authority out of money provided by Parliament all such sums as the Authority may require for fulfilling requirements imposed on it by regulations under sub- paragraph (2) above.

(6) The reference in sub-paragraph (2) above to the payment of pensions, allowances or gratuities includes a reference to the payment of compensation for loss of office or of any such compensation as is payable to or in respect of an officer or employee for any other reason.'.

No. 22, in page 310, line 37, leave out from beginning to in' in line 39 and insert--

(4) On and after the transfer date subsection (6A) of section 70 of this Act shall apply, as it applies in relation to the sums mentioned in that subsection,'.

No. 60, in page 319, line 20, at end insert

; and no licence may be granted by virtue of this paragraph in relation to any waters to which section 131 of the 1963 Act applies (waters owned or managed by the British Waterways Board) unless-- (

(a) the application for the licence was accompanied by the prescribed evidence that notice of the application was served on the British Waterways Board ; and

(b) the Authority has considered any representations or objections made by that Board within the period of twenty-eight days beginning with the day on which the application was made or such longer period as the Authority may allow.'.

No. 77, in page 320, line 24, after sections', insert

and Part II of the said Act of 1965'.

No. 30, in page 321, line 40, at end insert--

. The repeal by this Act of the Drought Act 1976 shall not affect--

(a) any order under that Act which is in force immediately before the transfer date ;

(b) any power to make an order under that Act on an application (whether made before, on or after that date) of which notice was given before that date ; or

(c) the operation of the provisions of that Act in relation to any such order or application ;

but, in relation to any time on or after that date, that Act and anything done under it shall have effect by virtue of this paragraph as if references to a water authority were references to the successor company of that water authority.'.

No. 7, in page 323, line 25, at end insert--

(4) Nothing in this Act shall be construed as preventing so much of any order under section 28(3) of the Salmon and Freshwater Fisheries Act 1975 or of any licence under Part I of Schedule 3 to that Act as--

(a) is in force immediately before the transfer date ; and (

(b) has the effect for the purposes of section 6 of that Act (prohibition on placing and use of unauthorised fixed engines) of authorising the placing or use of any fixed engine,

from continuing to have that effect on and after that date.'. No. 87, in page 327, line 33 at end insert--

Transitory provision relating to rating .--(1) In relation to the period beginning with the transfer date and ending with 31st March 1990, the provisions of section 31 of and Schedule 4 to the General Rate Act 1967 (valuation of water hereditaments) shall have effect--

(a) as if references in those provisions to any statutory water undertakers or to their undertaking included references to a water undertaker or to the undertaking of a water undertaker ;

(b) as if the successor company of a water authority were the same person in law as the water company ; and

(c) as if any hereditament which--

(i) is occupied on and after that date by the Authority ; and (

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(ii) was occupied, immediately before that date, by a water authority for the purposes of their functions with respect to the supply of water,

were a water hereditament occupied by that water authority's successor company for the purposes of the company's functions (as a water undertaker) with respect to the supply of water.

(2) Where any hereditament allocated to the Authority by a scheme under Schedule 2 to this Act will fall on and after the transfer date to be treated for the purposes of the provisions mentioned in sub-paragraph (1) above as occupied by a successor company, that scheme may require the Authority to make payments to the successor company, of such amounts and at such time as may be determined in accordance with the scheme, by way of contributions in respect of any liability of the successor company in consequence of those provisions.

(3) In relation to the period mentioned in sub-paragraph (1) above, section 43 of the said Act of 1967 (exemption of property of certain authorities) shall have effect, subject to that sub-paragraph, as if the references in that section to a water authority and to a drainage authority included references, respectively, to the Authority and to an internal drainage board.'.-- [Mr. Ridley.]

Schedule 24


Amendments made : No. 8, in page 339, line 33, column 3, leave out 5,' and insert 1 to'.

No. 38, in page 346, leave out lines 26 to 30.-- [Mr. Ridley.] Order for Third Reading read.-- [ Queen's Consent, on behalf of the Crown, and Prince of Wales's consent, on behalf of the Duchy of Cornwall, signified. ]

6.12 pm

The Secretary of State for the Environment (Mr. Nicholas Ridley) : I beg to move, That the Bill be now read the Third time.

Out of the three days for the remaining stages of this Bill, the Opposition have chosen to use a quarter of the time on the Third Reading. On this occasion I think they were right : they completely failed to fault the Bill in Committee and the details were found to be correct. My hon. Friends, the two Ministers of State and the two Under-Secretaries of State, totally dominated the argument throughout the Committee stage. On Third Reading, we come back to the big issue of principle : the advantages of privatising the water supply and sewerage industries.

We had scare stories and diversionary tactics galore--everything from turnstiles on national park walks to my alleged row with my right hon. Friend the Prime Minister ; from our proposals for price control for water companies that were alleged to be leading to huge monopoly price rises, to the cost of environmental improvements that the hon. Member for Copeland (Dr. Cunningham) alleged was due to privatisation. They were all nonsense-- fictitious fig leaves to disguise the real reason for opposing the Bill : which is the lingering spirit of clause 4, the Labour party's antagonism to private enterprise, the pain and despair at seeing the Socialist state not only demolished but debunked in argument.

The hon. Member for Dewsbury (Mrs. Taylor) gave the game away a fortnight ago today when I intervened to ask her, if she wanted to see a major clean- up of our rivers, why she opposed the Bill? She did not have an answer, she fumbled and could only repeat her opposition to privatisation. The Committee stage has proved that there is no reason for opposing this Bill, other than the

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emotional one that somehow water is different, that it is vital to life, and is provided by the Almighty. I shall therefore spend a few minutes discussing that incontrovertible observation.

Yes, water is vital to life ; but so is food, and housing and clothing, and many other things, too. Yet nobody suggests we should emulate the Russian system of collective farming and state food shops, which is the way the public sector provides for that staple of life which is food. Primitive man privatised food supplies, and so does civilised man. I will not attempt to answer for Ashdown man who has taken no part in the debates.

Nor do I recommend the Socialist clothing shops to those aspiring countrymen of ours who clearly prefer Marks and Spencer. Nor do I recommend the Socialist provision of state housing. Even the Labour party knows that people prefer home ownership. But clothing and housing are staples of life, far better provided--does anyone disagree?--by the private sector.

So what is so special about water? It is a natural monopoly, yes, but that is catered for in the regulatory arrangements that we are making. I would remind the House that it is not the water itself which we are proposing to privatise, but the impounding, piping, pumping, treatment, maintenance and billing of it--the industrial activity essential for its provision. Morever, we mortals dirty it. It has to be taken from our houses and purified, treated, pumped, piped and finally disposed of. Listening to Opposition Members, I sometimes think that they believe that it is the Tories who create sewage. I plead guilty to the fact that Tories do create 44 per cent. of it--our latest opinion poll rating--but that means that 40 per cent. is Labour, 12 per cent. Liberal/SDP and 4 per cent. do not know.

Mr. Paul Boateng (Brent, South) : Will the Secretary of State reflect on the fact that 96 per cent. of those who took part in a recent opinion poll on water privatisation and who assist in the production of sewage were against his Government's proposals?

Mr. Ridley : I cannot accept that figure. The poll that I have quoted is the one the hon. Gentleman should bear in mind, instead of making such an unfelicitous intervention.

The fact is that 42,000 people are employed in the provision of our water and sewerage services. Unfortunately, the Almighty does not pay their wages ; nor does He provide the capital for the massive increase in environmental standards which this Bill will usher in. That is why water is not free, and never can be.

The question is, how can this massive human enterprise be best motivated ; and how can this large amount of other people's savings best be harnessed to the improvement works that everyone wants to see?

Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak) : Does my right hon. Friend accept that many of us agree with him that we dislike state monopolies, which is why many of us voted for much of the privatisation that has taken place throughout this Government's period in office? If I dislike state monopolies, which in the end are controlled by the State, why should I like private monopolies that in the end are often against the public interest? What is so good about a private monopoly and what is so awful about a state monopoly, as with water where people have nowhere else to go to, as there is only one supplier?

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Mr. Ridley : I do not know whether my hon. Friend supported the Government when they privatised the airports, British Telecom and British Gas--

Mr. Beaumont-Dark : Yes.

Mr. Ridley : Those are all monopolies, too.

Mr. Beaumont-Dark : They are not.

Mr. Ridley : They are. There is no way of coming to London without going to Heathrow or Gatwick, which are both under the same ownership.

These are the questions that are relevant to the Bill and which the Opposition shirk. I shall give them the answers. The whole country knows that people work more effectively if there is every opportunity for them to better themselves by better performance. In the private sector, water managers, foremen and employers will profit from success, and I hope that they will own shares which will then rise in value as these people succeed. In the private sector, capital which is borrowed from the market or from shareholders will be invested with all the efficiency and skill that those who are responsible to their shareholders have to demonstrate. Moreover, that capital will not be rationed as it is in public sector industries : it will be allocated by the market, if a water company can show a proper rate of return.

We all know what happens with capital rationing in the state sector. Under the Opposition, capital spending was cut by a third, and investment in sewerage within that by a half. That is the albatross of which the Labour party will never be able to rid itself in these debates, and it continues powerfully to make the case for privatisation.

Mr. Nigel Spearing (Newham, South) : Talking of capital and shares, will the right hon. Gentleman confirm something with which I charged him on Second Reading and which I believe still stands? This capital will be available for diversification virtually without limitation. It will be open to the worldwide capital market, and the water companies can be controlled, bought and sold on that market without the control of the Government. Will the Minister confirm that that is true?

Mr. Ridley : I was talking about loan capital, but I presume that the hon. Gentleman is referring to equity. I very much hope that the world loan markets will be available. That will mean that we can obtain the cheapest loan money for the environmental improvements that are required.

As to shares limitations, the hon. Gentleman knows perfectly well what we have said will be the position in relation to golden shares. He also knows perfectly well what we have said will be our policy towards mergers and monopolies. That policy was discussed in Committee, and I believe it to be right.

The hon. Member for Copeland (Dr. Cunningham) said a fortnight ago :

"I am willing to set out all the answers to all those questions in a speech which I shall be making in a few weeks time."

He is waiting until the debate is over before telling us his policy. "I agree that these things will cost money, and a great deal of money, and that the British people will need to pay. I also believe, that, overwhelmingly, they are willing to pay. It is not necessary to sell off the nation's water resources to achieve these objectives."-- [Official Report, 21 March 1989 ; Vol. 149, c.969.]

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I agree with the first part, but it is necessary to sell off the nation's water resources to achieve these objectives.

The truth is, as Labour proved for us when in power, that the person who regulates an industry must be separate and different from the person who provides the service--hence the National Rivers Authority, which will be able to ensure proper standards without financial penalty to itself. It provides a far more satisfactory framework for setting national standards for the industry than has even been achieved while the industry has been owned by the public sector.

The Opposition have only to look at the proposals for customer service standards and price control, and for quality of drinking water, and at the framework for setting and achieving higher standards for river and coastal water. Those standards were never set, let alone achieved, when they were in office.

As a result of the Bill, standards will, for the first time, be clear, public, objective and measurable. The industry will have no option but to comply with them, because to do otherwise can lead to fines and, in the last analysis, to loss of appointment. When compliance cannot be achieved immediately, there will be a clear and explicit understanding of the steps to be taken to achieve compliance. The Bill is the biggest step forward for the environment since the time when the Opposition were only a gleam in Keir Hardie's eye. The creation of the NRA and the privatisation of the utilities is the only way to secure the environmental improvements to water quality and to the beaches and rivers that we all want. This will be coupled with a system of price regulation which will protect the consumer from exploitation by the monopoly.

Mr. A. J. Beith (Berwick-upon-Tweed) : The Minister has spoken of the great price benefits for consumers of privatisation. Will he explain why the existing private statutory water companis have increased their prices by so much and attributed the increase to privatisation? Will he explain how it can be that his former hon. Friend Lord Elliott of Morpeth has told me in a letter that one of the three reasons for the 18.5 per cent. increase by the Newcastle and Gateshead water company is privatisation legislation, because it will change its financial regime from that of a statutory company to that of a plc? Surely the noble Lord is telling the truth?

Mr. Ridley : I do not accept for one moment that the reason for the increase in water companies' charges, which averages 22 per cent., is necessarily right and justified--I do not have the bill. Secondly, I am certain the increases have nothing to do with privatisation--

Mr. Beith : The companies say that they have.

Mr. Ridley : Without the powers in the Bill enabling the director general to examine the books and to set a limit on price rises, and to check that they are due to environmental improvements, how can anyone possibly say whether these prices rises were justified? Secondly, there is no way in which the privately owned statutory water companies can be privatised, so the increases cannot be due to privatisation, whatever the noble Lord says.

Thirdly, it is true that the existing structure of control of dividends and of that which can be put to reserve has starved those private companies of equity capital and forcing them to rely far too much on loan capital. On the

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basis of that analysis, they have been failing to renew their assets and get their acts right. They would inevitably have to make changes as a result of moving to a proper balance sheet structure.

Dr. John Cunningham (Copeland) : Does the Secretary of State recall holding up the statutory water companies as paragons of virtue on Second Reading and describing them as examples of how the water industry should be managed, operated and run? Why, now that this has all blown up in his face, are the companies overwhelmingly, if not universally, blaming the Bill for large increases in water prices? Is he calling them dishonest? What has happened?

Mr. Ridley : What the hon. Gentleman said was not true ; he should consult Hansard before making those accusations. I did not hold up the companies as paragons of financial virtue. I said that they had supplied water in the private sector to 25 per cent. of the population for many decades, and the hon. Gentleman had never noticed or objected.

Secondly, I made it clear that the environmental improvements and the change in capital structures required for this massive investment would apply to all water companies as well as the water authorities. I have never disguised for one moment that the effect of the environmental improvements which the whole House wants will be an increase in prices.

Mr. Allan Roberts : Will the Secretary of State give way?

Mr. Ridley : I have just given way to the hon. Gentleman's hon. Friend, but I shall give way for the last time.

Mr. Roberts : On what environmental improvements will the statutory water companies spend such large amounts after privatisation which they are not spending money on now--bearing in mind that they will still have no responsibility for sewage?

Mr. Ridley : I cannot tell the hon. Gentleman until the Director General of Water Supplies is in place--the hon. Gentleman voted against part II, which sets up the office of director general. How can anybody know how to regulate a price if there are not the powers to obtain the necessary information?

The attitude of the hon. Gentleman is absurd. He might like to know that the Director General of Water Services, whose appointment I announced today, will do more to promote efficiency and customer interest than was ever achieved when this monopoly was in the public sector.

So why do the Opposition oppose it? That is the question which the Opposition cannot answer and I will tell them why they cannot answer it. It is because at least one half of the Labour party have painfully, unhappily, belatedly come to realise that we are right. I quote from the second leak of the Labour party's policy in The Times of yesterday :

"Under proposals which will be fought by left-wing unions and politicians only British Telecom, of all the utilities privatised by the Conservatives, would be taken back into public ownership under a Labour government."

[Interruption.] Wait for it ; the hon. Gentleman has a gem coming here.

"Instead, the gas, water and electricity industries would be subjected to a tighter regulatory framework than at present

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imposed on gas and Telecom. Plans to take permanent government stakes in strategic companies have also been shelved."

Since this Bill contains that tighter regulatory framework which they seek, the Opposition have conceded the principle both of part I and of part II of the Bill. There is nothing left for them to stand on. I rest my case there. There is no longer any reason for Labour Members to stay even until 10 o'clock. The Opposition are not going to vote against this--but I hope that my hon. Friends will stay on until 10 o'clock, just in case. I am happy to assure hon. Gentlemen that their own party policy, which I am sorry that they have not been told about, utterly supports the Bill. I therefore commend it to the House.

6.34 pm

Dr. Cunningham : The Secretary of State began with what appeared to be a joke when he described what had been happening in the Water Bill Committee for the last four months. He is either a victim of the Minister for Water and Planning's doctoring of the reports from the Department of the Environment or he simply has not been reading the newspapers during that time. If he blissfully believes that his ministerial colleagues have won all the arguments and convinced the British public of the effectiveness of his proposals he is living in cloud-cuckoo-land. Judging by the remainder of his speech, that is exactly where he has been for the last four months.

The Bill has been under scrutiny in debate since last December. It remains largely unchanged--that at least is true--but our fundamental criticisms remain, and public antipathy to the proposals continues to increase. The issues have been widely reported in the media and there has been huge public interest in our discussions. The response of the public, the press and the media generally has been overwhelmingly and heavily critical of the right hon. Gentleman's Bill. The Bill remains fundamentally weak, confused and, indeed, incoherent, and the ideas that he had cobbled together fell apart during examination in Committee.

That is not surprising. The Secretary of State began by trying to hide a bad idea by claiming bogus environmental advantages for his Bill, but those bogus claims sank in a sea of his own confusion. Let us take the right hon. Gentleman's treatment of the pollution issue as a case in point. He said in parliamentary answers that he did not hold centrally information about pollution of our beaches. He could not tell us, he said, how many sewerage works discharged untreated raw sewage into the sea. The Secretary of State for Wales told us that the information was held centrally and he could provide it. That was on 14 March. On 22 March, the Secretary of State was able to tell the House that about 14 per cent. of sewage from England and Wales was discharged into the seas untreated. Miraculously, in two weeks, this information, which he said was not held centrally, had suddenly appeared.

Mr. Ridley rose--

Dr. Cunningham : In a moment. I am referring to the right hon. Gentleman's comments in column 1081 of the Official Report of Wednesday 22 March. The Prime Minister, in the meantime, goes on television and tells the British public that no untreated sewage is discharged into the seas around Britain.

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Here we have the kind of confusion about these issues that is rampant in the Government. The Secretary of State for Wales contradicts the Secretary of State for the Environment ; the Secretary of State for the Environment contradicts himself ; and the Prime Minister contradicts everybody.

Mr. Ridley : The hon. Gentleman has made an awful mess of this one. The first question that he asked was how many outfalls there were in England. We do not have that information. Some of them are tiny. They do not have that information in Wales. That is the first point. When the hon. Gentleman asked a sensible question to which I had the answer--the 14 per cent.--I gave it to him immediately. He must not get mixed up between the two things.

Dr. Cunningham : The Secretary of State is further confused, because it was not I who asked the second question ; it was another hon. Member. It is passing strange that the Secretary of State says that he does not know how many outfalls pass untreated sewage into the sea, but he can give a percentage figure of how much sewage goes untreated into the sea. How does he arrive at the calculation? How has he come to that conclusion?

The Secretary of State caused further confusion when he publicly abandoned his statutory duty to protect the environment by promising, on the record, that the cosseted private monopolies he wants to create would have immunity from prosecution if they polluted the water environment. The Secretary of State has tried to disguise the scale and nature of the problems by hiding the truth, as I have shown by the example I have just given. One week he cannot tell us the facts and the next week, when it suits his purpose, he has some facts.

Let us come to the issue of the land assets, which has been such a bone of contention throughout our discussions. We know that the potential development and sale of 500,000 acres of land is one of the sweeteners which the Secretary of State is pushing towards the City and purchasers. The Minister for Water and Planning made that clear in his letter of 6 February to Mr. Jack Jeffery of the statutory water companies, when he said that the water companies, after privatisation, should offset costs by "proceeds of asset sales"--in other words, by selling their land.

What is happening now, in anticipation of all this? I have here a copy of an advertisement by the Mid Southern water company explaining its reasons for increasing charges to its consumers. It says quite candidly that it had been seeking planning permission for some of its land and with such permission could have raised £1 million, which could have been used to offset price increases. Unhappily for the company--but happily for us and for the environment--planning permission was refused.

When we debated all these matters in committee we were told by the Under- Secretary and the Minister for Water and Planning on several occasions that there were some "good arguments here". The Secretary of State replied to these matters recently when he was in Thirlmere in Cumbria in the Lake district. He claimed in his statement that his proposals would protect our national heritage. A newspaper report said :

"The Council for National Parks said yesterday that Mr. Ridley's measures simply did not go far enough to be effective.

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