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Water Bill

[1st Allotted Day]

Lords amendments considered.

Clause 2

Regional rivers advisory committees

Lords amendment : No. 1, in page 2, line 34, after "committees" insert,

"consisting of persons who are not members of the Authority," 4.47 pm

The Minister for Water and Planning (Mr. Michael Howard) : I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker (Sir Paul Dean) : With this it will be convenient to take Lords amendments Nos. 2, 146 and 147.

Mr. Howard : The amendments are concerned with the membership of the National Rivers Authority's three regional committees--the rivers advisory committee, the flood defence committee and the fisheries advisory committee --and ensure that the membership of the NRA board will not overlap with the membership of those committees.

Question put and agreed to.

Lords amendment No. 2 agreed to.

Clause 4

Transfer of the water authorities' functions etc.

Lords amendment : No. 3, in page 4, line 10, leave out subsections (2) and (3) and insert--

"(3) The Secretary of State shall, by order made before the transfer date, nominate a company in relation to each water authority as that authority's successor company ; but a company shall not be so nominated unless it is a limited company and, at the time when the order is made, is wholly owned by the Crown."

Mr. Howard : I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker : With this it will be convenient to take Lords amendments Nos. 7 to 9, 11, 12, 36, 37, 56, 60, 61, 65 to 74, 78, 81 to 85, 88, 97, 98, 128, 129, 133, 137 to 144, 153, 154, 162 to 165, 167 to 170, 173 to 175, 179 to 181, 185, 186, 189, 191, 192, 206, 207, 211, 212, 229 to 232, 241 to 248, 278 to 282, 284, 287 to 289, 291, 292, 294, 297 to 301, 303 to 311, 313 to 316, 321, 322, 324 to 333, 335 to 341.

Mr. Howard : The amendments in this group are purely technical. I am sure that the House would not wish me to dwell on them, although I should be happy to answer any points which hon. Members might wish to raise.

Question put and agreed to.

Clause 6

Customer service committees

Lords amendment : No. 4, in page 5, line 20, leave out subsection (1).

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Mr. Howard : I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker : With this it will be convenient to take Lords amendments Nos. 5 and 6.

Mr. Howard : The purpose of the amendments is to make it absolutely clear that it is a duty of the director general to establish and maintain customer service committees and to allocate companies to those committees. I commend the amendments to the House.

Question put and agreed to.

Lords amendments Nos. 5 to 9 agreed to.

Clause 7

General duties with respect to water supply and sewerage services

Lords amendment : No. 10, in page 6, line 33, leave out "or 71" and insert

", 71 or (duty to move pipes etc, in certain cases)

Mr. Howard : I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker : With this it will be convenient to take Lords amendment No. 161.

Mr. Howard : This new clause, after clause 155 and the consequential amendment to clause 7, will require a water and sewerage undertaker to alter or to remove its pipes in response to a reasonable request by any person with an interest in the land where the pipe is installed or adjacent land. The person may require the pipes to be altered or moved if that is necessary to develop the land in question. The new clause therefore goes a long way to ensuring that the presence of undertakers' pipes on private land does not unreasonably hinder development. An undertaker will be able to recover from the person any expenses reasonably incurred in carrying out the works involved. I commend the amendment to the House. Question put and agreed to.

Lords Amendments Nos. 11 and 12 agreed to.

Lords amendment : No. 13, in page 7, line 12, after "particular," insert

"that the interests of customers and potential customers in rural areas are so protected and"

Read a Second time.

Mrs. Ann Taylor (Dewsbury) : I beg to move, as an amendment to the Lords amendment, amendment (a), to leave out second and' and insert such that charges for domestic consumers are at the same level for the same level of service throughout the area supplied or serviced by any undertaker, and'.

As I understand it, Lords amendment No. 13 is a concession which arises from the debate in another place when some of my noble Friends and also some Conservative peers expressed concern about the possibility of differential charging for rural consumers. An amendment was moved in the other place and lost by only two votes. It would have ensured that charges to consumers in rural areas were the same as those for consumers in urban areas. The amendment, which was so narrowly lost, is similar in terms to amendment (a).

Amendment No. 13 falls short of ensuring that prices will be standard in any one area, merely placing the director general under a duty to take account of the interests of rural consumers when assessing whether there

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has been any undue discrimination between consumers in a proposed charging scheme by an undertaker. The words "take account" are not strong enough to guarantee that the interests of rural consumers or other consumers are properly safeguarded.

Ministers in another place repeated pledges given to us in Committee that there should be no discrimination at all against one type of consumer, be it a rural consumer or any other consumer. The Minister made it clear, however, that the present concession in amendment No. 13 did not represent a standard charge for a standard level of service--hence our amendment (a) to tighten the matter up and to ensure that the principle of equity is followed in the charging policy.

Opposition Members believe that the supply of water and the disposal of sewage is important not only for individuals and families but for all of us. It is in everyone's interests that we should all have proper services, for obvious public health reasons, and it is particularly important to establish principles of fairness in charging. We know what is likely to happen to prices generally as a result of privatisation. Everyone, except Ministers speaking in public--I suspect that some are franker when speaking in private--accepts that prices will rise as a result of privatisation. Ministers have often sought to give assurances about what will happen to prices following privatisation. For example, we have been told that the Director General of Water Services will decide everything and will look after the consumer, and that the new theory of comparative competition will ensure that the consumer gets a fair bill. I should happily give way to the junior Minister--the Minister with responsibility for sport--were he here, so that he could give us another entertaining session. His struggles to define the theory of comparative competition are about as convincing as the Secretary of State's assurances that prices will rise no more than 7.5 per cent. to 12.5 per cent. by the end of the century. That is what the Secretary of State told us last year on Second Reading.

Of course, that was before we had the latest round of increases in water authority charges--increases that averaged 10 per cent., in many instances, concealing much higher increases. For example, in Yorkshire not only was the average increase nearly 33 per cent. higher than that, which was hard to disguise, but the balance of charging is changing in many water authority areas. Those with a lower rateable value property have seen increases far higher than those with high rateable values. As in Yorkshire, there have been additional increases--increases in standing charges of about 33 per cent. It is easy to see where the sting is and where the real hardship will be caused because of the increases already in the pipeline.

Mr. Chris Mullin (Sunderland, South) : Has my hon. Friend seen recent reports in the Isle of Wight, where bills are now being delivered as a result of metering tests being conducted there and elsewhere? Bills that are two, three and four times the previous size are now hitting the doormats. It is a pity that the hon. Member for Isle of Wight (Mr. Field), who intervened in a vitriolic and trivial way, is not present to explain that to his constituents.

Mrs. Taylor : The whole House would have enjoyed the comments of the hon. Member for Isle of Wight (Mr. Field) explaining the impact of metering in his constituency. All the information on metering that we

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have had so far shows that we were right to move our amendment in Committee, saying that there should be no compulsory metering of anybody's property. The metering experiments currently taking place do not take account of all the heavy fixed charges associated with metering. Many people are in for a severe shock when they realise what they will have to pay if metering is introduced.

Mr. Dafydd Wigley (Caernarfon) : The hon. Lady mentioned the substantially increased charges that may be incurred through the introduction of metering. Given that the legislation has stated that there is a responsibility for charges to reflect costs, is there not a real danger that if an authority decides to have cost centres which subdivide its area, areas with the highest costs will lead to a higher charge? That is the very reason why we need the amendment.

Mrs. Taylor : The hon. Member for Caernarfon (Mr. Wigley) is quite right. That is one of the dangers of the legislation and the proposals on how things will work after privatisation. There is also the possibility that investment will not take place in areas which have the greatest problems. That could also affect the level of later charges and discrimination in charges.

I am glad that the Minister for Water and Planning is here to reply to the debate. During the earlier part of the year we had a most entertaining few weeks with the Minister telling us--with as near straight a face as he could manage--that he was appalled by the increases in water charges being proposed by statutory water companies. He firmly told us that he intended to stop them, that he would lay down the law and act the bully to tell statutory water companies what they should do. As it worked out, meetings took place and the Minister saw some of the chairmen of the statutory water companies. They not only told him where to get off but they clearly told the public that the severity of the price increases that they were imposing was a straightforward result of the privatisation proposals. Far from the water companies being savaged by the Minister, we saw the Minister squirming in his attempt to prove that increases of up to 42 per cent. could have been even worse but for his intervention. It is no wonder that the Prime Minister has said that the matter has been badly dealt with.

Mr. Howard : Is it because the hon. Lady thought that the increases levied by the statutory water companies were so admirable that her party voted for them to be the model for privatisation in another place?

5 pm

Mrs. Taylor : The Minister well knows that what was said in another place was that that was not our preferred option. It would, however, have meant the end of the privatisation proposals. We made no bones about the fact that we did not like the proposal, but anything that would have scuppered the Bill was worthy of support.

Mr. Edward Leigh (Gainsborough and Horncastle) : That is an interesting question which we should look into further. Does not the very ease with which the statutory water companies put up their charges prove that that is not a model that we should follow, whatever our views on the rightness or wrongness of the Bill? Will the hon. Lady comment on that?

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Mrs. Taylor : It is not the ideal model to follow, but the reason why the statutory water companies put up their prices by such significant amounts was the reason that they made clear to their consumers and to the public. It was because of the consequences of the Government's privatisation proposals. It is clear that what has happened with the statutory water companies so far this year will happen to other water consumers as time goes by if the water authorities are pushed into the private sector.

It is important to have that background to the starting point of prices in the water industry. We have seen significant increases this year, but there is far worse to come for all of us as water consumers. One reason why the amendment is important is that it will ensure at least some fairness in the treatment of consumers. One interesting aspect of working on the Bill during the last year has been the amount of interest in the legislation from many different quarters. That is why, when it comes to estimating the impact of the legislation or its cost, we have an impressive array of advice, some of which my hon. Friend the Member for Copeland (Dr. Cunningham) has quoted. One recent report on the financial impact of privatisation which I recommend to hon. Members has been prepared by an independent expert--an accountant--who has worked in the industry for many years. Mr. Stanley William Hill's work, which has been widely acknowledged by the City and financial journalists, shows clearly that the cost of privatisation alone will add at least 27 per cent. to water charges across the board immediately on privatisation.

That cost includes several items that outraged the public, not least the completely inept and ridiculously expensive advertising campaign upon which, at the Government's insistence, the water authorities have embarked. It is outrageous for Ministers still to claim that that water advertising campaign has nothing to do with them. I do not believe that one person in the country would accept as a coincidence the fact that the water authorities have spent as much in one four-week period on television advertising as Coca-Cola, Nescafe and Renault together--what a coincidence that that should happen just when the Government are putting through their privatisation proposals.

Mr. Allan Roberts (Bootle) : It is our money.

Mrs. Taylor : As my hon. Friend said, it is our money. At the moment, the water authorities are still in the public sector. Yet they are behaving as though they were answerable to shareholders and as though they might sell more water as a result of their advertisements.

Mr. Hill's estimate ties in very much with other estimates which have been given in another place. The Conservative peer, Lord Nugent, estimated that the first year increases in prices as a result of privatisation would be between 30 and 40 per cent. That was the estimate of a Conservative peer, not of any Labour spokesman. All that is before we take into account the costs of investment to improve the service, whether as a result of EEC directives, which we shall be discussing later, or of the backlog of problems and liabilities being faced by the industry.

The backcloth of prices is not optimistic. The increases that we shall be facing may fall more harshly on certain types of consumer. I have mentioned the pricing policy adopted this year by Yorkshire Water. There are also the

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problems with metering and the possibility of discrimination against rural consumers or, indeed, any consumers in high- cost areas. Those may include regions which have a large backlog of liabilities and may be forced to pay disproportionately for improvements within their areas.

The Minister could tell us a lot about pricing post-privatisation. I expect that we shall get all the critical announcements on prices once the legislation has gone through and, possibly, only once the House has risen for the summer recess. The Minister could tell us now the basis for K for the next 10 years if he chose to do so. All the discussions have taken place and recommendations have been made and discussed with the existing water authorities. I hope that the Minister will be forthcoming during our debate and tell us what the likely levels of K will be. We spent some time in Committee talking about K, but I hope that the Minister will tell us more about how cost pass-through will operate, because that is just as important. As the Bill is written, and as we have discussed it on several occasions, cost pass-through should be allowed only for new and unforeseen circumstances, not for existing liabilities which have not been met. Yet in an answer to me recently the Minister made it clear that the Director General of Water Services could take into account with regard to cost pass- through our existing commitments to the EEC, simply because those liabilities have not yet been budgeted or accounted for and plans have not been made. That would be an abuse of cost pass-through, but I believe that the Government are looking to move in that direction to disguise the real level of K that is necessary to go ahead with the Government's plans.

One other issue that I hope the Minister will deal with is very relevant to the amendment that he will be moving, because it concerns potential consumers. Amendment No. 13 refers to existing and potential consumers. I hope that the Minister will tell us a little more about his plans for the connection charge for water services after privatisation. On 11 May, after the Bill had left the House, the Minister announced that a new scheme of connection charges was to be drawn up. That is a completely new scheme which has not been discussed in the House. We have not as yet seen the full details of the scheme, and we do not know--nor do the builders involved know--when payments will have to be made, whether they will have to be made when the builder applies for a service for a particular site or after the houses have been built. I hope that the Minister will tell us what the likely connection charges will be. In the initial statement, it was said that the connection charge would be about £800 on average, but investigations have shown that some water authorities are thinking of charging an average of about £2,000, or even more in certain circumstances. That would obviously have an impact either on the price of housing or on the production of houses, if builders found it difficult to absorb that cost.

Mr. Nicholas Baker (Dorset, North) : I think that the hon. Lady is in danger of misinforming the House. We discussed the scheme in Committee because I tabled and moved an amendment bearing on it. The hon. Lady is clearly right to say that my hon. and learned Friend the Minister did not put the scheme forward to take account

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of her argument. Does she agree that it is fair that the developer, rather than existing water consumers, should pay a one-off charge to cover capital costs?

Mrs. Taylor : The hon. Gentleman said that I was wrong to suggest that the scheme had not been discussed. He then acknowledged that I was right to suggest that it had not been discussed. I accept that he raised the issue in Committee, but at that stage--not surprisingly--the Minister chose not to give us any information. Instead, he held a press conference, or issued a press release, at a later stage. I cannot talk about the details of the scheme because the Minister has not been forthcoming with the details. I am only asking the Minister, for once, to clarify what he is proposing. People who are not necessarily the natural allies of the Labour party--for instance, the Building Employers Confederation--are extremely worried about what the Minister is proposing and would like more information. Local authorities and housing associations which are still trying to build homes, despite the difficulties put in their way by the Government, would like to know what is to happen about connection charges. The Minister has said that there will be full consultation, but, as I understand it, there has been little consultation so far. Even the Building Employers Confederation is extremely worried about the Government's proposals.

Mr. Nicholas Baker rose --

Mrs. Taylor : No, I shall not give way. We are running short of time and I must get on.

I hope that the Minister will tell us whether the Government intend to add new sums to the local authorities' capital allocation programme and to the funding of housing associations to take account of the new costs which will fall especially heavily on first-time buyers and purchasers of small properties. If we are talking about £2,000 as an addition to the cost of a small terraced house in Yorkshire, that will be a significant proportion of the final price. I hope that the Minister can tell us that more money will be made available to local authorities if they are to be faced with costs of that kind.

The public are well aware that privatisation of the water industry is likely to lead to a reduction in standards and an increase in charges. All that has happened in the past year points in that direction, as does every financial survey and economic study of the industry. Privatisation will cost ordinary consumers a great deal of money. We want a water industry which is accountable to consumers, not one which is accountable to shareholders. I hope that the Minister will reconsider his position.

Mr. Howard : I invite the House to agree with Lords amendments Nos. 13 and 15 and to reject amendment (a). Before I explain the effect of the amendments which were passed in another place and the reasons why I think that it would be unwise to accept the Opposition's amendment, it is important that we all understand the context in which the amendments fall to be considered.

The unavoidable fact, much though the hon. Member for Dewsbury (Mrs. Taylor) would like to avoid it and much though she wriggled in answer to my questions and those of my hon. Friend the Member for Gainsborough and Horncastle (Mr. Leigh), is that when the Bill was being considered in another place the Opposition voted for the removal of all price control measures. It avails the Opposition nothing to pretend today to be the friend of

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consumers when they voted in another place for the removal of the price control measures which afford consumers safeguards for the pricing of water and for the circumstances in which services are to be provided by the new water companies from which consumers will benefit greatly.

5.15 pm

Mrs. Ann Taylor : The Minister is coming up with a remarkable answer to what happened in another place. Had the relevant amendment secured a majority in that place, the Government would have been defeated and would have dropped the Bill. I can think of no better service to consumers than to kill the entire Bill.

Mr. Howard : I do not know how the hon. Lady can speculate on what the Government's reaction would have been if the amendment had been passed. It is clear from what she has said that, if there is any hope of defeating the Government in a Division, any protection for the consumer will go out of the window along with any sensible measure of price control. Apparently the Opposition will vote for anything if they think that it will lead to some embarrassment for the Government. That is a scandalous admission. It says more about the irresponsibility of the Labour party than volumes of pretended concern for consumers who will be anxious to obtain the services of the industry under the improved terms and conditions that will result from the Bill.

I turn to the amendments. My right hon. Friend the Secretary of State and the Director General of Water Services have a general duty under clause 7(3)(a) to use their regulatory powers under part I of chapter II so as to ensure that customers' interests in respect of charges are protected and that, in particular, there is no undue discrimination or undue preference shown by undertakers in fixing charges. That duty already provides the basis for a robust framework of consumer protection. Amendment No. 13 supplements the duty by requiring that, in particular, the interests of customers in rural areas are to be protected.

Mr. Wigley : As I said in an intervention in the speech of the hon. Member for Dewsbury (Mrs. Taylor), under this Bill a company could reasonably argue that it was not discriminating against rural areas if the ratio of the cost of provision of service to the charge was the same in a rural area as in an urban area. That could lead to a gross difference in the charges being levied. Will the Minister apply himself to that?

Mr. Howard : The point of amendment No. 13 is that, should any company come forward with any proposition of that sort in future, the director general would have to consider it against the general duty to prevent discrimination. I understand the hon. Gentleman's argument that, in the way in which he formulated the approach, the general duty to prevent discrimination conceivably might not be enough to defeat such a proposition. The effect of the amendment is that the director general will have a duty, in addition, to protect the interest of rural consumers. It is against that background that any proposition of the sort referred to by the hon. Gentleman would have to be considered. A direct consequence of the amendment is a substantial additional reinforcement for consumers in rural areas. I have no

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doubt that it would be regarded as especially relevant by the director general in the context of any approach such as that to which the hon. Gentleman has referred.

Amendment No. 15 would require the Secretary of State and the director general, in the exercise of their duty, to protect customers under clause 7 and to take into account the particular interests of those who are disabled or of pensionable age in respect of the quality of any services provided by a company in the course of carrying out the functions of a water or sewerage undertaker. I commend the amendments to the House.

Amendment (a), which has been tabled by the Labour party, would add a further gloss to amendment No. 13. It would require my right hon. Friend the Secretary of State and the director general, when carrying out their duties under clause 7, to ensure that charges for domestic customers in rural areas are at the same level for the same level of service throughout the area supplied or serviced by any undertaker. The amendment is both defective and undesirable. What does the same charge for the same level of service actually mean? Does it mean that every customer who receives the same quantity of water at the same pressure should pay the same charge? If so, the water industry would have to introduce very quickly an elaborate water metering system to measure both volume and pressure, in addition to an equally elaborate tariff. The hon. Member for Caernarfon (Mr. Wigley), with his usual perspicacity, no doubt appreciates the force of that point. At the other extreme, does the phrase mean that undertakers would have to introduce a flat-rate, unmeasured charging system for all their domestic customers, regardless of the consumption of each customer? The Opposition's amendment could have an adverse effect on many customers of water authorities that have adopted a policy of differential charging to alleviate the impact of the anomalies of the domestic rating system. To take just one example, Thames Water makes a rateable value-based sewerage charge at 8.9p per pound of rateable value in the inner area of north London but 19.5p per pound in its western division. That difference of 119 per cent. is intended to allow for the differences in rateable values of similar properties in the two areas to ensure that broadly comparable bills will result. That might well fall foul of amendment (a). The thinking behind amendment (a) is characteristically confused. It would be unworkable and it would not lead to the result that I think the hon. Member for Dewsbury intended.

The hon. Lady raised a number of other matters, with which I shall deal briefly. She referred to some of the consequences of metering, but she knows that metering is not a consequence of either this legislation or of privatisation. It is necessary that water undertakers devise an alternative method of charging for water services on the abolition of domestic rateable values. They have been given up to the year 2000 to come up with an alternative method. Many may wish to consider metering. Indeed, we introduced metering trials because we thought it important that the undertakers should have the advantage of such experience before reaching decisions.

The correspondence pages of newspapers have disclosed widely differing experiences. Many people think metering to be an excellent system, while others have reservations. I do not doubt that the undertakers will

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carefully consider the results of those trials before reaching any final decisions about an alternative method of charging.

Mrs. Ann Taylor : If the Minister accepts that there are differences of opinion on the benefits or otherwise of metering, why did he turn down our amendment to ensure that there was no compulsory metering?

Mr. Howard : At the end of the day, the undertakers will have to decide upon an alternative method of charging to the current system, which is based on domestic rateable values. They might decide that metering is the fairest and most sensible system to adopt and they would then need powers to introduce compulsory metering in their areas. That is such an obvious point that I am astonished that the hon. Lady questioned it.

Mr. Allan Roberts : Water authorities already have the necessary powers to introduce compulsory water metering ; they were introduced in the paving legislation. Water authorities, such as the North-West water authority, are using those powers for new dwellings.

Mr. Howard : It is true that the undertakers can already use those powers, and they are sensibly doing so for new dwellings. However, they will want to consider the results of the trials before deciding whether metering should be introduced compulsorily throughout the whole of their areas.

Mr. Mullin : The Minister speaks of metering as though it were an academic exercise. In fact, metering has been introduced in a dozen or so areas and the bills are now hitting the doormats. We do not need to speculate : we know that many people are receiving bills two, three or four times higher than their previous bills. How does that square with the Minister's repeated assurances in Committee about the legislation's effect on prices?

Mr. Howard : As I have already said, metering is not a consequence of privatisation ; it is an alternative method of charging to that based on domestic rateable value, which is being abolished. Experimental metering is taking place in several parts of the country and we shall benefit from the experience. It is by no means self-evident that water should be treated differently from food, for example, which is paid for on the basis of the amount consumed. Opposition Members appear to regard it as absolutely self- evident that there should be a system of charging for each and every commodity that has absolutely nothing to do with the amount consumed. There is no self-evident rule of law, justice or morals that suggests that people should not pay for such commodities according to the quantities consumed, provided that proper arrangements are made for the least-well-off members of the community. Such arrangements should be made through the social security system and not through some arbitrary method of charging that does not attempt to correlate use and cost.

The hon. Lady referred to some estimates of the likely effect of water privatisation on the prices charged. The estimates are erroneous--as the hon. Lady will realise, no doubt to her acute disappointment, when the prices are announced. She will have to wait a little longer before being given that information.

Mrs. Ann Taylor : What about cost pass-through?

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Mr. Howard : Costs will not simply be arbitrarily shifted to cost pass-through. The arrangements for cost pass-through are set out in detail in the licence, which has been available in the Library for some days. It is clear that it is not possible for cost pass-through to be used to deal with matters that were foreseeable from the outset. In some instances the obligation will not have been foreseeable. In some instances, no doubt, the cost of meeting the obligation will not have been foreseeable. Both cost pass-through and benefit pass-through--the mechanism that will give to the companies and their customers a proportion of the proceeds from the disposal of their assets--are intended to deal with unforeseen circumstances. The detailed provisions for that are set out in the draft licence. The hon. Lady's final point related to connection charges. The introduction of that measure was a typical example of what I referred to during my speech in the guillotine debate earlier--of the Government listening to reasonable and sensible amendments put forward while the Bill was proceeding through Parliament. It was not the Government's intention to introduce that measure, but the arguments put forward in Committee by my hon. Friend the Member for Dorset, North (Mr. Baker) and others of my hon. Friends were so sensible that I was persuaded that it would improve the Bill. One of my most enjoyable memories of the Committee stage was the sight of the hon. Member for Cardiff, South and Penarth (Mr. Michael)--the leading Opposition spokesman--in a state of exquisite equivocation as he wondered what on earth to say in response to the sensible proposals put forward by my hon. Friends. The hon. Gentleman could not decide what to say or what to do. His was a remarkable speech in a remarkable Committee. We have set out our responses and conclusions, and we are holding consultations before the detailed regulatory arrangements are finalised. We shall of course take into account the views of bodies such as the House- Builders Federation that have a direct interest before final regulations are made. I invite the House to reject the Opposition's amendment as being undesirable and unworkable, and I commend Lords amendments Nos. 13 and 15.

5.30 pm

Mr. Paul Boateng (Brent, South) : In his opening remarks, the Minister charged the House--as though addressing a recalcitrant and incredulous jury--that it should take into account the context in which the Lords amendments fall to be considered. My right hon. and hon. Friends want to take the context into account, because it is one in which the City of London has given water privatisation what one respected financial columnist described over the weekend as a "thumbs down". That is the context in which we should consider the Lords amendments and the Minister's rejection of the Opposition amendment to protect and to preserve equity as between the rural and the urban consumer. The Government have brought forward their own sham amendments relating to pricing because they know that the share issue can be successful only if the Government create a situation in which the water industry can exploit its monopoly control over prices to make the flotation attractive to prospective investors.

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It is worth while considering the state in which the Government find themselves in relation to their friends in the City. A recent survey by Harris revealed that 59 per cent. of fund managers believe that the domestic water industry should not be privatised before it meets European standards. More than half the fund managers polled expect the dividend yield to exceed 7 per cent., which compares with a current average equity yield of only 4.4 per cent. Meanwhile, 91 per cent. of respondents to the Harris poll have not even set aside specific funds to invest in water. That is the context in which the Lords amendments are presented by the Government and in which they oppose our amendment. The Government are in a blind funk.

Mr. Nicholas Soames (Crawley) : A blind what?

Mr. Boateng : The hon. Member for Crawley (Mr. Soames) mutters and moans in his usual sedentary and stultifying manner. I repeat that Government Members are in a blind funk over what will happen when the water industry is privatised and they seek to float that offer. They do not know what is about to hit them. In their desperation they attempt to preserve a pricing mechanism that will maximise the yield to shareholders.

The great mischief and evil about the Bill is the way in which, in a natural monopoly, it sets the shareholder against the consumer. The Bill creates a situation in which consumer interests in respect of health, safety and water quality will be subordinated to the greed and avarice of shareholders.

Mr. Leigh : Nonsense.

Mr. Boateng : It is no use the hon. Gentleman shouting "Nonsense" because I have described the reality of the position. The Government's amendments are designed to avoid the fiasco that is in store for them.

The Minister can take one crumb of comfort from the Harris opinion poll. I suspect from the glimmer of recognition in his eyes, which those of us who served in Committee came to know all too well, that he has been feasting on that crumb--as well he might. The crumb is that when people were asked to identify the politician responsible for water privatisation, 18 per cent. identified the Secretary of State for the Environment, and only 3 per cent. identified the Minister for Water and Planning. That must be a great comfort to him--certain, as he must be, that his vocation and the Bill are an unmitigated disaster. Only 3 per cent. of the population will blame the Minister, but unfortunately for him it is not the people of this country who will determine his fate in the near future--although they may do so in the medium term. It is her upstairs who will determine the Minister's fate, and she has both him and the Secretary of State for the Environment well in her sights because of the consequences of the disastrous privatisation of the water industry.

Mr. Tim Boswell (Daventry) : I am sure that the hon. Gentleman feels better now that he has got that little joke off his chest. The hon. Gentleman referred to a lack of a sense of identity as between shareholders and consumers. How much sense of identity was there between the public authorities, with the Labour Government behind them, and consumers when water prices were bumped up by 40 per cent. in a single year in the 1970s? Is the official view that he is peddling today that the water industry will be

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