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Mr. Lidington: For once, I agree completely with the hon. Gentleman.
Mr. Redwood: My hon. Friend has been remarkably patient with the minority view in this country, which has been expressed too loudly in the House, that fluoride must be forced upon us. I am delighted that he is so robust. Many of us are with him and I urge Labour Members to join us if they do not want their view on the subject to be as unpopular as that on herbal medicines.
Mr. Lidington: I thank my right hon. Friend for his intervention.
The Government's course entails some genuine practical difficulties. Little, if anything, in the Bill suggests how strategic health authorities are supposed to gauge public opinion. It is unclear what will happen if public opinion, having perhaps first favoured fluoride, were subsequently to switch, through, for example, the production of new scientific evidence. Would fluoridation be ended? The hon. Member for Stroud (Mr. Drew) made that point earlier.
What happens if communities with different health authorities, but served by the same water company and therefore the same network of pipes, reach different conclusions about fluoridation? In those circumstances, it would be impractical for the water undertakers or suppliers to send fluoridated water to one set of customers and unfluoridated water to the other. They would have to choose which set of customers to disappoint.
The basic problem with the Bill is its failure to provide a coherent strategy to deal with the challenges that face the water industry and its customers. For all the slogans and spin about sustainable development and joined-up government, water policy is still too often decided in a disjointed or piecemeal fashion.
I agreed with the Minister's comment that we need to strike a balance between the interests of the environment and those of not only water companies but their industrial and domestic consumers.
Dr. Phyllis Starkey (Milton Keynes, South-West): Will the hon. Gentleman give way?
Mr. Lidington: No, I wish to make progress and I am conscious that many hon. Members wish to speak.
As the Minister acknowledged, the Government have recently signed up to the European water framework directive, which will be effected later this year. It has enormous financial and regulatory implications for the Government, the water industry and water users. Until the House of Lords defeated the Government over what is now clause 2, the directive was not mentioned in the Bill. Clause 2 does little more than state what the Secretary of State will be legally obliged to do under the directive.
The directive's requirements appear certain to affect the regulatory regime that the measure embodies. For example, let us consider water management. The directive requires water policy to be framed in river basin management plans, which are drawn up on a six-year cycle. However, the Government have given no clear account of how the six-year cycle will relate to the five-year cycle of periodic reviews that determine the investments that companies should make and how much they should be allowed to charge their customers. The Bill contains no proposal to synchronise those two timetables, yet without such synchronisation, it is difficult to understand how we can form a coherent policy for water management in the United Kingdom.
The directive is sure to require new investment. Water UK, to which the hon. Member for Sherwood (Paddy Tipping), alluded, talks about expenditure of £20 million. Yet the Government's regulatory impact assessment, which was published last month, gave figures for costs of up to £4.2 billion for sewage companies. Paragraph D.141 of the same document states that the directive may lead to the imposition of stricter limits on abstraction and make it more expensive. I presume that if abstraction becomes more expensive, the extra expenses are likely to be passed on to water consumers.
Lord Whitty said on 8 April in column GC 16 of the Lords Hansard that some investment schemes might need funding not in the distant future but between 2005 and 2010. That period is covered by the review, which, according to the Minister, is currently under way. The Bill is silent about the directive's impact on abstraction policy. A question mark remains over the Bill's compatibility with the directive. My reading suggests that the directive requires all abstraction licences to be subject to some sort of review. However, the Bill assumes that licences granted in perpetuity will continue without any such review or time limit.
I hope that we will not take primary legislation through this House to do one thing and then find that the rules have been changed by the back door as a result of regulations to implement a directive with which the Government had previously assured us their Bill was compliant. There may be the need under the directive for
a draconian use of the controls applied by the Bill to meet the environmental standards that the directive requires.As has been pointed out, the Bill does not tackle the total lack of co-ordination between planning policy and water and flood management. The Government are currently proposing—perhaps "instructing" would be a more accurate description—that half a million new houses should be built in the most arid parts of England. Yet the Deputy Prime Minister's policy document—laughably entitled "Sustainable Communities"—did not mention water. The Environment Agency told an inquiry by the relevant Select Committee into the Thames gateway project that it had not been consulted by the Deputy Prime Minister about the impact of his plans on water conservation, or on the risk of flooding. The Government appear to have woken up to this after they published their plans and issued their edicts to local authorities.
The Environment Agency may now find itself having to use ever tighter restrictions on abstraction—using the powers that the Bill proposes should be given to it—and doing so at a real cost to consumers to mitigate the harm being wrought by the Government's perverse housing policies.
We are worried also about the centralising direction of some of the measures in the Bill, which contains a host of additional powers for the Secretary of State and the Environment Agency, many of which we shall want to explore in greater detail in Committee and on Report. By contrast, powers are removed from local flood defence committees and from local authorities. For example, we see powers for the Secretary of State to insist on changes to water resources management and drought plans.
I am disappointed that the Government have thrown away the opportunity to consider and, perhaps, introduce pilot projects for economic measures that might work to bring about water conservation and better water management from the bottom up, rather than being wedded so much to a top-down approach. The Bill does not address the possibility of tradeable permits for discharges or differential charging for abstraction rights, even though the Environment Agency is reported be considering those issues and even though the Bill includes a mechanism for transferring discharge consents.
A market-led approach—piloting approaches based on differential pricing—might, for example, provide a greater incentive for worthwhile conservation measures such as trickle irrigation, giving them a market advantage over other methods of using water in agriculture and horticulture.
I want to deal briefly with the question of water bills, which are already a heavy burden on consumers, especially pensioners and others on low or fixed incomes. As the hon. Member for Sherwood pointed out, the industry says that it would need a £15 annual increase in bills to meet its obligations under the water framework directive. That £15 is an average figure; there would be wide variations in the increases proposed between different regions of the country. The Bill's proposals on abstraction could end up making the cost to consumers higher still.
The six or 12-year limits on abstraction licences that were debated in the House of Lords would mean those licences lasting for a much shorter period than the investments for which they were supposed to provide water. The costs would have to be recovered from consumers over a shorter period unless the investment programme was to be scrapped entirely. The logical consequence of that is that we will see even sharper increases in water charges as a result of the policy of time-limiting over the relatively short period that the Government are proposing.
During the Bill's future stages, I will want Parliament to explore further the opportunity that the Government rejected in the House of Lords at least to relate the time given to a particular licence to the lifetime and economic importance of the investment that that abstraction supports.
Mr. Jonathan Djanogly (Huntingdon): The Minister said that the 12 years was an adaptable period, but companies that have spoken to the Environment Agency have been told clearly that the 12 years will be a fixed period other than in very exceptional circumstances. To that extent, what the Minister said was slightly wide of the mark.
Mr. Lidington: My hon. Friend's intervention reinforces the need for us to look more closely in Committee at the balance between industry and the environment.
Mr. Peter Ainsworth: Has my hon. Friend noticed that the Government's own regulatory impact assessment of the competition proposals in the Bill—together with the opinion of the water industry—is that this measure could lead to consumer prices going up even if prices for large companies go down?
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