Column 66statutory instrument as an area in relation to which this section should apply as if it were in a National Park, the Broads or an area of outstanding beauty.'.
Lords amendments Nos. 171 and 172.
Lords amendment No. 14 places a duty on the director general to secure something for water consumers from the profits made from the sale of protected land. Amendments (a) and (b) offer the Government two choices : first, that 50 per cent. of the proceeds should be given to the consumer, which would be in line with a statement made by the Minister for Water and Planning and Ministers in another place but which was not written into the legislation ; and, secondly, that 100 per cent. of the proceeds from the sale of such land should be given to the consumer.
Lords amendment No. 158 is a new clause relating to land disposals and introduces new procedures for land
Column 67sales in national parks, areas of outstanding natural beauty, sites of special scientific interest and the Norfolk broads. Amendments (a), (b) and (c) introduce an important measure of consultation into the land proposals and reinstate a provision for the Secretary of State to designate other areas as though the categories apply.
It never fails to astonish people here and abroad when they learn that a British Government are offering tracts of our national parks for sale. The idea behind the creation of national parks was to establish areas that should be given the utmost protection in law by the Government. Until the Government introduced the Bill, that was the generally agreed procedure, whatever party was in office.
Huge areas of our national parks, areas of oustanding natural beauty and other sensitive ecosystems are now up for sale. I readily accept that currently they are not all publicly owned and controlled, but they are strenuously and, in some cases, rigorously controlled. The Bill clears the way for not only the sale of such land but its potential exploitation, about which there is legitimate and widespread concern.
Dr. Cunningham : The Secretary of State says, "That is wrong." If he has read today's newspapers he will be aware that the director general of the National Trust agrees not with him but with us. In a letter that appeared in today's newspapers he said :
"The Government's retreat from its own measure means that a significant proportion of outstanding fine countryside could be under threat if, as seems likely, the new water companies decide to sell." That is exactly the point that Labour Members are making, and the director general of the National Trust shares our view.
Mr. Howard : Does the hon. Gentleman appreciate that, far from sharing his view, the director general of the National Trust is seeking an extension to further areas of the protection that the Bill provides for areas of outstanding natural beauty, national parks and sites of special scientific interest? The hon. Gentleman has just suggested that those areas would be up for grabs as a result of the legislation. He does not even understand the letter written by the director general of the National Trust.
Dr. Cunningham : Of course, I understand. I also understand the Council for the Protection of Rural England which has said : "Third Reading in the House of Lords saw the Government reneging on previous commitments in a quite remarkable way. Amendments introduced by the Government only two weeks previously at Report Stage were turned on their heads as the Government apparently had second thoughts. These actions cause CPRE to seriously question the Government's commitment to protecting the environmental quality of the water industry's land assets."
It is no good the Minister saying that the Labour party does not understand. We have understood from the outset. On Second Reading and during a long Committee stage that same Minister told us that no changes to the Bill were necessary. In Committee he told us that all the
Column 68amendments were irrelevant. He said that the Bill was perfect as it stood and that there was no question of weakness in respect of safeguarding our national heritage and environment, but then in the House of Lords his right hon. and noble Friends changed their minds. The Government then moved amendments, but subsequently went back on some of those very amendments.
Mr. Howard : The hon. Gentleman is wrong again. Clearly he has a dim recollection of what transpired in Committee, but I invite him to recall that I always said that we would listen to the arguments advanced on this matter and that we would introduce further protections if they were required. Given that the hon. Gentleman has been wrong in the past five minutes, will he now answer the question that I put to him a moment ago on the proper understanding of the letter in today's papers from the director general of the National Trust?
Dr. Cunningham : I understand that letter and I also understand what the CPRE has said. It is not good enough for Ministers always to come to the House, as they did on Second Reading and in Committee, and say that the Opposition always fail to understand. Every time Government legislation is criticised, apparently that criticism is never valid and is never borne out by the evidence. The answer always given is that the Opposition do not understand. The Minister's problem is that we understand only too well. So do the British people ; that is his difficulty.
My memory is at least as good as the Minister's and better than that of the hon. Member for Delyn (Mr. Raffan) who was ranting earlier and could not even remember the date of the previous general election. We understood the proceedings in Committee and--
Dr. Cunningham : I have answered the question. If the Minister goes back and reads the record, he will see that all the arguments that he dismissed in Committee were suddenly conceded in the House of Lords.
Mr. Ridley : The hon. Gentleman must be made to come to the point instead of flapping and wriggling. Earlier he said that large parts of the national parks and areas of outstanding natural beauty would be up for sale to anyone who wished to exploit them. That is not what the director general of the National Trust said. He commended the system of protection in the national parks and he said that he wanted it to be extended to areas other than the specified areas. The hon. Gentleman should withdraw his allegation that large parts of the national parks will be up for grabs. That is not true and he knows it. For once he should make an honest man of himself and withdraw that remark.
Dr. Cunningham : It is not flannel to state a fact. I did not think that anyone would dispute that the regional water authorities own about 500,000 acres of land, much of it in the national parks, in areas of outstanding natural beauty--in sites of special scientific interest and in fragile
Column 69ecosystems. That is not a Labour party view ; it is fact. As a result of the proposals, that land is for sale. Its future well-being is also outwith the direct control of those proposals as that consideration will not be part of the so-called "core activities". That was the argument on Second Reading eight months ago. The Secretary of State cannot run away from the facts. That is why we have argued about those issues since the Bill was published. Mr. Ridley indicated dissent.
Dr. Cunningham : No matter how hard the Secretary of State shakes his head that is why almost all environmental groups, including anglers, ramblers, the Open Space Society and the National Trust, have persistently bombarded Parliament and his Department for much tighter controls and safeguards. No matter what he says, the Secretary of State cannot get away from that.
We believe that the Government's amendments are something of a victory for the energetic way in which the issues have been pursued, notably by the Ramblers Association and the CPRE. I read in one newspaper article that the Government's advisers had said that the Bill as it originally stood was not good enough. The Countryside Commission and the Royal Society for the Protection of Birds were also at the forefront in pressing for more safeguards. I also suggest that my hon. Friends and our colleagues in the other place deserve a little of the credit for the changes that are being made, although I know that the Secretary of State would not concede that for a moment.
On Second Reading we raised the issue of the land held by the water authorities and we have continued to do so because, from day one, we have said that the land--our national heritage--was in danger and represented a deliberate sweetener in the Bill. We warned that taxpayers were in danger of being ripped off.
During the Bill's proceedings the Government have huffed and puffed and they have insisted that the environment, recreation and conservation duties in the Bill apply to the land even when transferred to a subsidiary. The Ramblers Association has obtained two legal opinions to show that the Minister has simply got it wrong. One legal opinion stated :
"I can find nothing in the Bill that so provides. The duty does not attach to the land and does not automatically pass with the transfer of the land."
We believe that the Government amendments--incidentally, they were not even introduced until the penultimate stage of the Bill's proceedings in the other place--are a limited and belated recognition of the dangers. In that sense, they are welcome. We are also aware, however, that some people in the City believe that restricting the opportunities for potential development will obviously make the assets less attractive as a purchase. Those views were highlighted again in the Harris poll in The Observer which found that more than 80 per cent. of fund managers were concerned that any legislation that curbed the water authorities' ability to make profits from their sizeable land and property portfolios would reduce the investment attractions.
Ministers are in a dilemma. They are trying to grab some vestige of public confidence by seeming to protect the land and the taxpayer, given that the scandal of the Royal Ordnance sale is still fresh in people's minds, while saying to the City and those who see land as the only possible money- spinner, "It is all right. We will not make it too difficult for land assets to be stripped and sold for profit".
Mr. Peter L. Pike (Burnley) : My hon. Friend may be interested in the answer given to me today by the Minister to a written question which says that all nine water authorities in England have property or estate managers whose responsibilities include the disposal of surplus land. The function of those officers who are studying land disposal to make the profits to which my hon. Friend referred has concerned the Ramblers Association and others.
Dr. Cunningham : My hon. Friend is right. Had the Government wanted to give safeguards and tough protection, they would have had far more rigorous proposals in the Bill from the outset. We now have a fudge. We had a ministerial statement to tell the public that the Government recognise that much land might be sold, but that if it was consumers would have perhaps 50 per cent. of the proceeds of the sale. However, there is no guarantee of that in the Bill and that is why we have tabled amendments (a) and (b).
There is no guarantee either that the House or the public will know the value of that land. We have fresh in our minds the experience of the sale of Royal Ordnance, which was heavily criticised some months ago by the Public Accounts Committee and more recently by the Comptroller and Auditor General. The hon. Member for Eastbourne (Mr. Gow), who is not in his place at present, said of that experience : "Whether a going concern or not, surely the vendor of any business must pay full regard to the potential for appreciation in the value of the land as a result of the granting of planning permission?" The taxpayer lost millions of pounds as a result of the Royal Ordnance sale. Taxpayers are in danger of losing hundreds of millions of pounds from this sale, which is a potential scandal. As far as we know, there will be no public statement of the assessment of the value of all this land to the taxpayer, even though we know that the Government have just instructed their advisers, Schroder Wagg, to produce such a land valuation report. Why is that report not before the House? Why cannot the public and Parliament be told the exact value of our assets before they are disposed of? That is a germane question.
The proposals of the Secretary of State would carry a little more force if he were more open and honest about what is at stake. Everyone understands that the 500,000 acres to which we refer were bought, established, maintained and nurtured over decades at public expense and are a huge public asset. People would rightly argue that in many cases they are a priceless public asset. The House and the public are entitled to know exactly what the land is worth. If it is to be sold and if we are to try to safeguard the interests of the taxpayer and the consumer, the legislation should refer specifically to the benefit.
As everyone knows, I and my hon. Friends do not want the land to be sold at all. But if it is to be sold, should not the public have a guarantee about the benefit? As the Bill stands, they have no guarantee. Perhaps the Minister will tell us why it cannot be written into the Bill that a minimum of 50 per cent.--or, better still, 100 per cent.--of the proceeds will go to consumers. After all, it is our land. Why should we not have the proceeds from its sale?
The Government's concession on the land deal has been to introduce a new consent mechanism for land disposal, whereby the Secretary of State has powers to introduce
Column 71various conditions on land sales including, for some areas, an option for conservation organisations to purchase and for the imposition of management agreements. That is fine as far as it goes, but it does not go far enough. In some respects, it obscures rather than illuminates the position and there are some serious defects, to which other people have referred, too.
The powers given to the Secretary of State are powers, not a duty to exercise those powers. He will have no statutory obligation to exercise them. He only has to make conditions on disposals that he "considers appropriate." The Ramblers Association believes that that is court-proof, legally sanitised wording. As the Bill stands, Ministers do not even have to announce that the land is up for sale in the first place. The transactions could go ahead without anyone knowing what is happening. If that were to be challenged, the Secretary of State would fall back on the Act and say that he had made conditions that he considered appropriate. Parliament would not be involved and there would be no proper discussion on the merits or otherwise of what was happening. Everything would be done quietly behind closed doors.
Mr. Boswell : Surely it is at that point that the obligations the Minister assumes under his general duty to protect the environment, among other considerations, would come into play. He could be tested in the exercise of the power of withholding consent to disposal.
There is no provision for public consultation on or notification of land disposal proceedings at any stage. That is an extraordinary omission and raises the possibilities of everything being done secretly. Our amendments provide for full consultation. If the Government want to be taken seriously on the issue, they should accept the amendments before it is too late.
The Secretary of State will also have discretion to designate areas as sites of special scientific interest or areas of outstanding natural beauty, such as the Broads. However, once again, it is at the discretion of the Secretary of State. Organisations such as the Council for the Protection of Rural England and the Countryside Commission consider the power to designate essential for the 200,000 acres of land that will not be covered by the new clause. The Government have tried to make much of the last-minute addition of SSSIs to the clause, which replaces the power to designate, but we and the conservation bodies consider it inadequate. It is an attempt, apparently, to deal with the problem while removing a potentially vital additional power. It is a sleight of hand and our view is widely shared outside the House.
Our discussions on the land issue are affected by a further major reservation. Under any other Secretary of State, and certainly under a Labour Secretary of State, the powers could and almost certainly would be exercised to give far tougher and more meaningful protection to land. I say that now so that no one can be in any doubt about our intentions. However, under the present Secretary of State, who has a laissez-faire attitude not only to these issues but to planning generally, the Government's
Column 72amendments are simply an attempt to pay lip service to the notion of needing to give more rigorous protection to our land. They introduce, over and above the current flawed planning system, a mechanism for the Secretary of State, if he wishes, to slip through land sales to anyone he wishes, in any circumstances he wishes, without the necessity of public notification, public consultation or a public right of appeal. That is wholly unsatisfactory and that is why we have tabled our amendments.
Barnes itself is only seven miles from Westminster and still possesses a village atmosphere in an ever-more frenetic world. Although it is blighted by incessant aircraft noise, few residents know of a more pleasant urban environment. We fiercely hold on to our metropolitan open land and, despite high-density housing, relief is at hand in the natural environment, with the river Thames on two sides, Barnes common to the south and Barn Elms reservoir to the east.
Barn Elms comprises nearly 70 acres of reservoir, split into four almost equal quarters. There are approximately 80 acres of surrounding land, including filter beds, allotments and recreational open land. One major problem of the site, and the source of its main threat, is that its status as a site of special scientific interest, granted by the Nature Conservancy Council in June 1985, has recently been lifted. Although there is some argument about whether SSSI status has legally been removed when that status is lifted, it is obvious that removing the cast-iron SSSI status poses an additional threat to that part of London. Because of its proximity to the centre of London, the potential value of the land to a developer is exceptionally high. It must be a gleam in the eye of some official at Thames Water.
I ask my hon. and learned Friend the Minister to consider what Barnes might be like if a large housing estate were built on the site at Barn Elms. The only exit from Barnes to the north is Hammersmith bridge, which has a severely restricted weight limit. Two new crossings over the Thames would be needed to deal with what would be a doubling of the size of the population of Barnes. At the moment one has to wait upwards of half an hour to cross Hammersmith bridge in the morning. If the population of Barnes were doubled, the environmental considerations would be absolutely grotesque--
Mr. Mullin : I have considerable sympathy with the case outlined by the hon. Gentleman, but I invite him to raise his horizons slightly and to recognise that we are talking not only about Barn Elms reservoir--important though that may be to his constituents--but, as my hon. Friend the Member for Copeland (Dr. Cunningham) has said, about 500,000 acres of some of our prime land.
Mr. Hanley : I readily accept that. However, it is up to each hon. Member to address those general problems in any way that he or she chooses. This matter is of urgent consideration to the people of Barnes and is symptomatic of the general position. Therefore, in choosing this particular area of difficulty caused by the legislation, I am addressing the more general points--
Mr. Mullin rose --
Mr. Mullin rose --
Mr. Mullin : I am grateful to the hon. Gentleman for giving way again. I suspect that this is an example of the phenomenon known as "not in my back yard". It is distasteful to those of us who oppose the Bill root and branch to see special pleading from hon. Members who represent constituencies that are a good deal more leafy than those that many Opposition Members represent.
Mr. Hanley : In a strange way I am grateful for the hon. Gentleman's intervention. I can now point out to my constituents that the hon. Member for Sunderland, South (Mr. Mullin) believes that hon. Members should not fight fiercely for the interests of their constituents. The hon. Gentleman is saying that I should not care about my own back yard. That is disgraceful--
Mr. Hanley : In a debate on Barn Elms reservoir on 29 July 1988, my hon. Friend the Under-Secretary of State for the Environment, the hon. Member for Surrey, South-West (Mrs. Bottomley), stated, on her very first day as a Minister :
"I assure him"--
that is, me--
"that that is a very premature fear at this stage, although it is entirely understandable and right that people living in or near areas of wildlife interest wish those areas to be properly protected and looked after. That is especially true in urban areas, where opportunities to see and enjoy wildlife are greatly valued If the water authority decides that Barn Elms reservoir is no longer required for operational purposes, it could still be managed positively for wildlife benefit by the local authority or a conservation group. The NCC is well able to assist with such arrangements as a result of its expertise and professionalism. Whatever the future ownership of the site, any proposals for a change in its current use would have to be considered in accordance with the guidance given in circular 27/87 entitled Nature Conservation'. That reinforces the advice given to local authorities that they should take full account of the needs of nature conservation not only in determining individual planning applications but in formulating general planning policies. An awareness of conservation should be built into the whole range of their activities affecting the use of land.
I hope that I have been able to reassure my hon. Friend that, even if the site should eventually be de-notified as an SSSI, there are a number of other ways of protecting its wildlife interest".--[ Official Report, 29 July 1988 ; Vol. 138,c. 860-63.]
That view was reinforced by my hon. and learned Friend the Minister for Water and Planning who, in a letter to me dated 8 June 1989, stated that the amendments that we are discussing
"will ensure that the conservation and recreation duties will apply to the management of all land owned by water companies even if they no longer need it for their statutory
Column 74functions. If such land is disposed of in areas of environmental importance the Secretary of State will have wide powers under the Bill to impose, as a condition of sale, any measures necessary to ensure continued protection of special conservation and amenity features of the land. These will include an obligation that the land be first offered to a conservation body, or that it is indefinitely protected by covenants or management agreements with National Parks authorities or local authorities. These provisions have been warmly welcomed by the Council for the Protection of Rural England." Towards the end of the letter he stated :
"It is worth stressing that local authorities which prepare up to date local plans in line with regional guidance can decide where development shall and shall not take place. We have made it clear that we will be guided by them on appeal if developers ignore such plans."
That last sentence is crucial because it shows that, contrary to some of the rumours circulating in my area, it is up to the local authorities to decide whether metropolitan open land is used for building. I am asking my hon. Friend to give an assurance to my constituents that if the local authority decides that the metropolitan open land should remain as such, the Department of the Environment will not try to maximise any benefit for the consumers of Thames Water and decide to overturn the local authority's decision. In the various guidelines that it has issued, the Department has said that it wants to protect metropolitan open land even more stringently than that land has been protected in the past. The draft guidance further protects such property.
There are two major reasons why the rumours of the dangers to this site have been given credence. The first is that Thames Water has apparently said to Richmond upon Thames council that its plans for the disposal of Thames Water, by giving it to the Wildfowl Trust at Slimbridge, have had to be abandoned because of these amendments. The money allocated by the Metropolitan water board for the establishment of a wildfowl trust in the area can no longer be used for that purpose ; it must now be used for the benefit of the consumer. In other words, Thames Water was providing cash to set up a wildfowl trust but now believes that it cannot do so because the money must be given to Thames Water consumers. That is a wrong interpretation of the current position and I call on my hon. Friend to give an assurance on that point.
The other main reason why the rumour has been circulating is as follows. The Minister for Water and Planning said in his letter : "The Government has also asked Debenham Tewson and Chinnocks to conduct a thorough valuation of water authority land. Sites which are surplus to requirement or likely to become so within the next 5 years have been identified. Few of these have planning permission for alternative use which could, if secured, significantly increase their present open market value. This exercise will ensure that the valuation of the companies contained in individual prospectuses includes a reasonable amount for land holdings."
A valuation of Barn Elms has produced a high hope value, as it is known. That must imply a strong possibility that the land will be used for housing, and that high hope value will affect the value of Thames Water in the prospectus. If my hon. Friend the Under-Secretary of State says that there is a great likelihood that metropolitan open land will remain as metropolitan open land and will not be used for high-density housing, the high hope value for Barn Elms is inaccurate and the value to be given to Thames Water in the prospectus will therefore be exaggerated.
Column 75I seek an assurance that the Government will carefully consider the amenity value of the area and the unique nature of the wildlife, which includes more than 40 different types of bird, in an area that would otherwise be entirely built-up urban environment. I ask the Government to continue to ensure that such areas are valued and protected, for the benefit of our constituents and local residents and the population of London in general.
Several Hon. Members rose --
Mr. Richard Livsey (Brecon and Radnor) : I support the amendments. Amendments (a) and (b) would ensure that half the proceeds and 100 per cent. of the proceeds of land sales, respectively, would go to the consumer. There is no doubt that that is right, although it is regrettable that it has been necessary to table such amendments. We are witnessing the land sale of the century. Unfortunately, in the other place, the Government reneged on their previous commitments by removing the discretionary powers of the Secretary of State and thus made a mockery of their previous promises.
I am especially concerned about what will happen in Wales. My constituency contains two thirds of the land holdings of Welsh Water--21,000 acres in the Brecon Beacons national park and 45,000 acres in the Elan valley. Both locally and nationally it is feared that that land will be sold off. The Council for the Protection of Rural England has said that at least 15 per cent. of the Elan valley--7,000 acres--is in danger as a result of the exclusion of a number of exceptional landscape areas from possible protection. Those areas need to be protected, but it is feared that they will be exploited and farmers in the Elan valley already see signs to suggest that their rents will escalate.
The land should be properly valued. Amendments were tabled in Committee to involve district valuers in the valuation of the land and to prevent the involvement of too many commercial interests. We can only hope for a fair valuation and that we shall all know what the valuation is and when and where land is to be sold. The process should not take place behind closed doors.
I draw the attention of the House to the fact that on 23 March 12 merchant bankers were helicoptered around Wales to look at the real estate for sale. Obviously, they did not know where the land was, so they decided to take a look at it. I think that some of them want to get their hands on it, although according to a report about the attractions of the sale for the City, which appeared in The Observer yesterday, some of them are not so keen as they were before. I believe that there is skulduggery afoot.
An interesting advertisement appeared in The Daily Telegraph on 1 June. A managing director of Welsh Water Enterprises was sought, at an annual salary of £40,000 plus bonus, car and benefit, the location to be Cardiff or Brecon. The advertisement said :
"Welsh Water is looking for a Managing Director for Welsh Water Enterprises, intended to be one of four subsidiary companies of the proposed new group."
We do not know what the four subsidiary companies will do, but I bet my bottom dollar that some of them will be
Column 76involved in the sale and exploitation of land. That is what this part of the Bill is all about, and that is why I support the amendments.
Mr. Elliot Morley (Glanford and Scunthorpe) : I wish to refer to land sales and the way in which they will be conducted. I share other hon. Members' concern that, although the Lords amendment would extend the arrangements for the protection of land and in that sense is welcome, the protection needs to be taken very much further. In particular, we should deal with extensions of notification of sites of special scientific interest and the potential damage that might be done to them. We should also incorporate the code of environmental practice in the water undertakers' licence. Those important issues were not dealt with adequately in the other place. They are not especially controversial, and I hope that the Minister will deal with them when he winds up the debate.
Amendment (b) would require the transfer of 100 per cent. of the assets from land sales to the water companies for reinvestment in infrastructure. That is both sound and sensible. If the Government are convinced of the need for more money to be raised to provide for investment in infrastructure, they should accept our amendment. If they do not, they will be acknowledging the fact that they are handing over the proceeds of land sales to private speculators. If that happens, the benefits of the sales will not go to consumers or--more important--to improve the infrastructure to the necessary standard.
The Parliamentary Under-Secretary of State for the Environment (Mr. Colin Moynihan) : I shall deal first with Lords amendments Nos. 14, 41, 43, 157, 158, 171 and 172, and then with the Opposition amendments. I shall be brief because I know that hon. Members on both sides wish to speak in this short debate. The Lords amendments achieve two purposes--to ensure that the special environment quality of much of the land in water authority ownership can be indefinitely protected, and to ensure that the customers of the appointed water and sewerage undertakers share the benefit of any disposals of surplus land.
It is a distinctive feature of this privatisation that the water authorities have very extensive landholdings--more than 430,000 acres--the majority of which lie in national parks, areas of outstanding natural beauty and sites of special scientific interest. The amendments meet various concerns about the future of this land. The Government listened carefully to all that was said, in this House and in another place, and by conservation and other bodies outside this House. That is reflected in the amendments which now come for the approval of the House, and which we believe provide a full answer to the concerns that have been expressed.
Amendment No. 14 would impose an additional duty on the Secretary of State and the Director General of Water Services to ensure that the interests of customers are protected in the application of proceeds from disposals of protected land. Protected land is defined in amendment No. 172. Amendments Nos. 41, 42 and 43 make it possible to entrench certain conditions of appointment relating to disposals of land.
The new clause is the centrepiece of this group of proposals. Water and sewerage companies will be able to dispose of their protected land and interests in that land only with the consent of the Secretary of State, or in
Column 77accordance with a general authorisation given by him. There is a consent requirement for the National Rivers Authority as well, but that applies only to compulsorily acquired land.
The consent mechanism serves three important purposes. First, it will enable the Secretary of State to require that the Crichel Down rules are observed when there are disposals of land which was compulsory acquired. The rules are designed to protect the interests of the former owners of land. They require that when any land which was acquired by compulsory purchase is to be sold, it should be offered first to the person from whom it was acquired. Disposals to former owners under these arrangements will be at a price reflecting current market value, as determined by the district valuer. The second purpose of the consent provisions relates to the new duty concerning the proceeds from land disposals in amendment No. 14. The intention is to enable customers to benefit from the net receipts from future disposals or land, while preserving incentives for land to be released or developed. It is essential that the arrangements ensure that customers are not prejudiced by two-stage disposals via sister companies, with the sister company realising all of the development gains. This is where the consent mechanism in amendment No. 158 plays a part.
My right hon. Friend the Secretary of State intends to give the Director General of Water Services a role in disposals through a consent procedure which will be constructed to allow as much self-policing as possible. There will in effect be three categories of disposal. In the first, directors of appointed companies will be able to provide the director with a certificate that the disposal is an arm's length disposal, with no continuing interest in the land by the appointed company or any related company, and that the best price reasonably obtainable has been obtained.
Where such a certificate cannot be provided, but the disposal is below a certain threshold fixed in relation to the value or area of the land concerned, the company will need a certificate from an independent valuer approved by the director general that the best price has been obtained. The independent valuers will report in particular on any prospect that the value of the land may be enhanced by a future planning permission.
In the third category involving disposals above the threshold which are not arm's length disposals, a specific consent will be needed. As a last resort, the director would be able to block inappropriate disposals at less than the best consideration reasonably obtainable, especially where sister companies are involved.
The consent requirements are designed to make sure that the best price is realised by the appointed company. There will be conditions of appointment determining how that value is to be taken into account in price control, so that customers share the benefit of proceeds. The intention is to set a target allowance for disposals when the RPI plus K price control formula is first set. This will be discussed with each authority and company, but it is proposed that it should reflect 100 per cent. of the open market value of identified surplus sites. Where actual receipts vary from the forecast amount a further adjustment of K will be made reflecting 50 per cent. of the excess or shortfall.
Companies will therefore have an incentive to dispose of their surplus land, and to the extent that they can