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Mr. Wiggin: I am sympathetic to the hon. Lady's fears, because the new clause is long and complex. However, does she agree that the reason it is weighted towards market share is to give due consideration to the consumer? I know that she is keen on supporting consumers, so I suggest that she looks again at the new clause. As I said, I sympathise with her fears, but they should be allayed on the basis that it is important for consumers to gain proper weighted representation. That provision is built into the new clause.

5.15 pm

Sue Doughty: I understand what the hon. Gentleman says and I have considerable sympathy with his view of consumers. It is one way of looking at the issue, but it

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also puts disproportionate weight on businesses. I believe that the authority should act on behalf of consumers—that is what it is there to do. My fear is that the water companies, as businesses, would benefit disproportionately. Consumers might benefit sometimes, but otherwise business considerations are paramount.

Sadly, on balance, we cannot support the new clause. We believe that, in the end, the authority should have a written statement of policy and maintain independence.

Mr. Simon Thomas (Ceredigion): Before I speak to amendments Nos. 29, 30 and 31, I want to support the amendments moved by the hon. Member for South Cambridgeshire (Mr. Lansley) on best practice within what could be called "corporate social responsibility" in the widest context. His point about the separation of powers between the chief executive and the chair of the authority is important. Several hon. Members made that point in Committee and I look forward to hearing the Minister's views on it tonight, so that we may have a better idea of how the Government think the authority should be run according to best practice.

My amendments are simple, though quite far-reaching. They would ensure that the two statutory bodies established by the Bill—the water services regulation authority and the consumer council for water—have among their membership a representative not only from Wales but directly appointed by the National Assembly for Wales. I want to explain in just a couple of minutes why I believe that that is important.

Under the Bill as it stands, members of the important statutory regulation authority will be appointed after the Secretary of State has consulted the National Assembly for Wales. That amounts to consultation, but the National Assembly for Wales has no right directly to make appointments. I dare say that it could suggest names, but it could not ensure that its favoured person sat on the board of the authority, because it is for the Secretary of State to make the appointment.

In respect of the consumer council for water, consultation with the National Assembly applies only to appointment of the chairman, but there will also be a member on the body who is directly appointed by the National Assembly, so a twin level of devolution is going on there.

The Government have accepted that it is important, in view of devolution and the water industry's importance to Wales—or, I should say, because there are cross-boundary issues, within the areas covered by Dwr Cymru, Welsh Water—that Welsh consumers have someone on the consumer council directly appointed by the National Assembly. However, the wider regulatory framework allows only consultation with the Assembly rather than allowing it to appoint directly to the board.

A similar process—I accept that what we are dealing with here is indeed consistent with it—applied to the office of communications. When Ofcom was established, similar processes were taking place and I recall hearing the hon. Member for South Cambridgeshire make similar arguments about the regulatory framework. We examined the issue of users or consumers having representation from Wales, but the

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Secretary of State made appointments to the statutory or regulatory body on the basis of a different level of consultation with the National Assembly.

The point behind the amendments is simple. Now that devolution is bedding down and the National Assembly is becoming a mature body that is able to take strategic decisions, and given that water is so important to Wales, should there not be a mature relationship of equality between Westminster and Cardiff? When we consider England and Wales provisions—water in Scotland is outwith the Bill—it is not too much to ask that the Assembly have the right to make a direct nomination to the authority. That non-contentious suggestion would not create any problems. However, the Government might have difficulty with it if it set a precedent for other regulatory frameworks, such as communications and broadcasting, which I mentioned earlier. Considering the importance of Welsh water to both England and Wales, I doubt whether such a right would be a problem. I accept that the Government's approach is not to hurry devolution, but if I would like it to move a little quicker, that is not an unacceptable position for a member of Plaid Cymru.

Although my amendments are buried in a group of amendments and we will not have the opportunity to vote on them, I hope that the Minister will take the opportunity to expand a little on what he said in Committee about the relationship between the National Assembly, the authority, the consumer council and the Secretary of State in making the appointments. I want to hear a description of how the relationship will work when the appointments are made, and how the National Assembly Government will be involved in them. I would also like to know how the Assembly will be able to relate to the authority over time and make its views clear on priorities for Wales, which will also affect many English water users, and their context in the work of the authority.

The amendments are straightforward. They touch on larger issues, but we need to have the context for the consumer council and the services authority set out.

Mr. Redwood: I rise in support of new clause 5 and some of the other amendments before us. The Bill is a wasted opportunity. I strongly believe that the successful introduction of competition into the water industry would improve the service and the level of investment, and lower prices. I am disappointed that schedule 4 is still unamended, with a 50-megalitre threshold for the introduction of competition and a ban on any competition in the household sector. I have declared my interests in the register, and they include owning a household for which I would like to have a competitive water supply. I see that I shall have to await another Bill and another day to see that ambition fulfilled.

In new clause 5, I welcome the requirement that

However, the authority will find that difficult, because it will experience conflicting pressures. As I suggested in an intervention, some will seek to challenge the existing incumbents in the industry and will claim that they could deliver water for 10, 15 or 20 per cent. less than the

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current prices. They will claim that they could do that universally, if they were given access to the water resources; if they were allowed to tap into the rising water tables; if they were able to extract from rivers with sufficient to extract; and if they were allowed to route their product, in part or wholly, through the pipelines of the existing monopolists. The regulator will have to take that into account and the challengers will certainly present an interesting proposition. The incumbents in the industry will say that it is unrealistic. When companies offer to undercut prices at the higher end of the market, the incumbents will claim that those companies will not sort out the problems of the existing network, solve the investment backlog or offer such prices to all users. Under this legislation, that will never be tested, because competition will be so restricted.

New clause 5 is hopeful, but I would like some reassurance from my hon. Friend the Member for Leominster (Mr. Wiggin)—and from the Minister, if he intends to accept it—that the authority, when preparing and publishing its statement of policy, would give due influence to what a competitive market could provide and would not merely consider the claims of the incumbents that they need a certain percentage increase in prices regularly in order to make good the defects of the current structure.

The industry was nationalised for all too long. During that time, it got itself into a position in which about a quarter of its product disappeared between its collection in a reservoir and its routing to a household or business premises. That was a most remarkable degree of waste. I do not think that competitive food companies would accept the loss of 25 per cent. of food products between farm and shop or in the lorries that transport them around the country; yet, until recently, we lived, apparently comfortably, with the idea that a quarter of the product could go missing. That is the kind of issue that the regulator should take into account under new clause 5 when reaching a determination about the efficiency of businesses and a sensible price.

I am pleased that new clause 5 contains the possibility that matters can be referred to the Competition Commission for review. That gives some cause for hope. There is a case for doing just that, given current prices and efficiency in the industry. All too often pressure is low in relatively warm conditions, and we are now hearing, once again, warnings from the industry that, because we had a longish period this summer of not much rainfall, there could be problems ahead. It beggars belief that we find it difficult to guarantee a plentiful supply of water at all times in an island that is regularly soaked with rain.

From some people, we hear that it is somehow not environmentally friendly to want rising water use. Yet anyone who understands the water cycle knows that we do no damage by using water. We use it, it passes through and it is returned to the environmental system. All we need is regulation to make sure that it is taken out in the right way and put back in the right way. Let us use it as often as possible. In a growingly prosperous society, we should expect rising water demand. I trust that the regulator will take account of the growing popularity of water when reaching his or her determination under new clause 5, if it is passed, and under the Bill in general.

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I have some sympathy with new clause 10. My hon. Friend the Member for South Cambridgeshire (Mr. Lansley) is right to say that we need impact assessments. I was pleased to hear that he thinks that those must also refer to competition assessments and must try to deal with the cruel dilemma that competition may point in one direction on price while the claims of the incumbents may point in another.

We should understand that price is the crucial issue. Water is the exception to the rule in being a utility that was privatised without our introducing competition. As one would expect, it has rising prices while those utilities that were privatised with the introduction of competition showed very sharp declines in prices over a short period. That is true of gas and electricity, as well as the telephone industry to which my hon. Friend referred. In each case, we were warned when we started to introduce competition that it was quite inconceivable that prices would go down. In each case, the monopolist told us that having businesses coming in and creaming the best business from them would increase their costs and make it difficult for them to invest and survive. In each case, that was quite wrong. In each case, competition made the overall market grow and, in spite of falling prices, produced better profitability for, in most cases, the incumbents as well as the challengers. I am glad that my hon. Friend has tried to open that argument by requiring, in new clause 10, that proper impact assessments be carried out and all those issues be considered.

My hon. Friend also tabled amendments in Committee and on Report to try to encourage best corporate practice in the regulator. I did not approach that idea with an immediate spring in my step; as my hon. Friend knows, I am not someone who would have too many public sector posts. If I thought one could get away with one person instead of two, three or five, I would normally welcome that greatly.

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