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'143A.--(1) In making a charges scheme under section 143 above, a relevant undertaker shall have regard to any guidance issued by the Secretary of State in relation to the matters listed in subsection (2) below.
(2) For the purposes of subsection (1) above, the Secretary of State may issue guidance relating to the following--
(a) the factors to be taken into account in relation to the fixing, calculating and imposing of charges;
(b) the making available to consumers of alternative bases of charging; and
(c) the taking into account of the problems faced by the aged, ill and disabled.
(3) The Secretary of State shall arrange for any guidance given by him under subsection (2) above to be published in such a manner as he considers appropriate.'.

Mr. Deputy Speaker: With this, it will be convenient to discuss amendment No. 29, in page 3, leave out lines 41 to 47 and insert--

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'(a) prescribe in relation to any premises charged by reference to the volume of water supplied the classes of person for whom special provision is to be made by reference either to the financial circumstances of the consumer and the number of the consumer's dependent children or any person who has their home in such premises and who has a medical condition which requires the consumption of a volume of water in excess of a normal household level;'.

Mrs. Spelman: In Committee, more of the Government's thinking on the regulation of the water industry came to light. We were disquieted by the Government giving themselves enhanced powers. The force of the amendments is directed at what we see as a retrograde step in restoring more centralised control to a previously deregulated industry.

I stress that the amendments are in no way intended to lessen a proper degree of protection for vulnerable groups in society. The Government have said that special protection should be available for customers with a metered supply who, regrettably, suffer from certain medical conditions that require a high consumption of water--some of which are quite common, such as incontinence--and for large families on low incomes who, as any mother knows well, have a water consumption just short of that of a small Chinese laundry.

In an ideal world, the benefits system or the health service would be sufficiently sophisticated to deal with the essential needs of such people, but that seems unlikely at present. The Office of Water Services' national customer council believes that the majority of customers would not be opposed to a modest cross-subsidy within water companies' charging schemes to assist the most vulnerable groups of customers.

Amendment No. 29 merely restricts the Secretary of State's powers to those for whom special provision must be made in company's charges schemes. It represents simply a finesse of the Government's intentions, as a constructive Opposition might well be expected to produce.

However, amendment No. 26 reflects our serious concern about the enhancement of the Secretary of State's powers to make regulations as he or she sees fit. We take issue with the rather glib view that the Under-Secretary of State for the Environment, Transport and the Regions, the hon. Member for Mansfield (Mr. Meale), expressed in Committee that

Surely that depends a great deal on what playing a role means. Those enhanced powers are a potential area of conflict with the industry's regulator.

The avoidance of conflict would seem to be possible only if the power and influence of the regulator is diminished in relation to the influence of the state. In case the Minister thinks that I am reading too much into the clause, I quote his defence of the enhanced powers. He said that they were necessary

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That, too, can be found in column 68 of Hansard.

It being Ten o'clock, the debate stood adjourned.

Motion made, and Question put forthwith, pursuant to Standing Order No. 15 (Exempted business),

Question agreed to.

Not amended (in the Standing Committee), again considered.

Question again proposed, That the amendment be made.

Mrs. Spelman: The Bill as drafted means that companies' charging schemes must comply with regulations set out by the Secretary of State. That represents a fundamental shift in the nature of United Kingdom utility regulation. Essentially, it makes the Secretary of State the regulator. The United Kingdom model of utility regulation is based on the principle of regulatory independence and is pioneering in the utilities market. That ensures that a regulator's objectives and duties, as well as those of the regulated companies, are those explicitly given by Parliament through primary legislation.

The Government's position, as stated in the Bill, appears to be at variance with their conclusion to the first stage of their own review of utility regulation, which was concluded last autumn. They stated that regulators should continue to be independent while having "regard" to the guidance that Secretaries of State could issue on social and environmental matters. Ironically, our amendment better reflects the Government's conclusion than the Bill.

I digress slightly to pick up an important point that was made when we were debating an amendment tabled by the Welsh National party, which relates to the question of which Secretary of State we are discussing. We learned a new piece of information about the Secretary of State's role in regulating the industry when reference was made to prescribing regulations during our discussion of new clause 1. We learned, to the surprise of Conservative Members, that the Secretary of State in question was the Secretary of State for Wales.

That is a major constitutional point, and we did not get an answer to the question from the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands), who asked whether that transfer of power would be governed by a concordat. I am reliably informed by my hon. Friend the Member for West Dorset (Mr. Letwin) that the Minister's clarification was inaccurate in that this Bill post-dates the transfer of functions under the Government of Wales Act 1998 and is not covered by it. The Minister may wish to revisit that issue in his reply.

Clause 5, if unamended, would fly in the face of the Government's declared regulatory principles and it represents a backward step in utility regulation. It will make companies' charging schemes comply with regulations issued by the Secretary of State. Such regulations will impose on companies and regulators objectives other than those determined by Parliament. That is yet another example of the Government taking back central control and showing their disregard for Parliament.

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The Parliamentary Under-Secretary of State for the Environment, Transport and the Regions (Mr. Alan Meale): Not surprisingly, I begin by saying that the Government are against the amendments, which we believe would restrict the protection of vulnerable consumers provided by the Bill. We have made it clear that we intend to specify in regulations vulnerable groups of people with high essential water use that should--as the hon. Member for Meriden (Mrs. Spelman) pointed out--be given protection when they face the prospect of a measured water bill. We have also made clear which groups we intend to protect: large families with low incomes and those with medical conditions requiring high water use.

We have good reason not to agree with the amendments. Amendment No. 26 would replace the Secretary of State's regulation-making power under clause 5 with a power to give guidance to water companies on the contents of charges schemes. We do not believe that that would lead to a better system of regulation. Indeed, it would not be better for customers because we would not be able to assure vulnerable customers that they would be protected from hardship.

Of course, as the hon. Member for Meriden said, we could give the water companies guidance about the sort of assistance that they should provide. However, as my hon. Friend the Member for Milton Keynes, North-East (Mr. White) warned, the companies would then decide how, and how far, to implement such guidance. That could well lead to a patchwork of different entitlements and systems of protection throughout the country. For instance, companies might choose to offer no assistance to those groups at all. Such an outcome would clearly not be acceptable. Nor do we believe that it would be better for the water companies. We have made it clear that we believe that, where the Government involve themselves in charging matters to achieve particular aims, they must operate as transparently as possible.

As drafted, clause 5 would provide the industry with a clear framework of essential requirements in which to work. The proposed amendment could lead to precisely the opposite, as companies seek to interpret the non-binding guidance and set out plans in the light of their interpretations. Therefore, the Government continue to believe strongly that the Secretary of State should have regulation-making powers in relation to charging schemes and we ask hon. Members not to press that amendment.

Amendment No. 29 would restrict the use that might be made of the Secretary of State's powers to assist vulnerable groups so that protection could be narrowly focused only on those groups and that situation, which the Government have already announced that we intend to protect. Household income, the number of dependent children and a medical condition requiring higher-than-average water use are crucial factors that identify those people who might be particularly vulnerable to a charge based on the volume of water used. The amendment would prevent any other target group being protected on other grounds. We would be unable to offer further protection to the elderly, the sick or the disabled if that turned out to be necessary. On the face of it, that is inconsistent with the raft of amendments tabled by the Opposition to protect a wide variety of groups from water disconnection.

Furthermore, it is unduly restrictive to say that the factors listed in the amendment are the only criteria on which it would be proper to identify those in need of help.

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The regulations, on which we will consult fully with the regulator, companies, customer representatives and other interested groups, will provide for the details of the scheme to protect vulnerable customers. Clause 5(3)(a) provides the overall framework within which the regulations will be prepared. The framework must provide sufficient flexibility for Ministers to respond promptly if it appears that charging arrangements are causing severe hardship to new groups of consumers.

In contrast, the amendment would limit special provision to those people who are paying on a measured basis. That would prevent the Government from providing any protection if, for example, some future unmeasured basis of charging by the water companies turned out to cause severe hardship to some classes of consumer. Under present charging arrangements, for instance, we do not propose to provide protection to customers paying unmeasured bills, but, in that and other areas, it is important to provide flexibility to respond through regulation if hardship occurs.

However, like my right hon. Friend the Minister for the Environment, I can offer some reassurance about the use of those powers to identify groups for special concessions. The Government are conscious of the fact that every concession enabling a vulnerable customer to pay a lower water charge than he or she would otherwise face can be funded only from the generality of charges paid by all other customers of that company. For that reason, we are determined not to adopt a scatter-gun approach to help for vulnerable groups. With a highly targeted approach, we can ensure that the impact of water charges can be softened to a worthwhile extent where it is most needed without imposing noticeable burdens on other water customers.

I hope that the hon. Member for Meriden will agree that the amendment is unduly restrictive and withdraw it.

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