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Westminster Hall

Wednesday 16 March 2005

[Mr. Frank Cook in the Chair]

Water Charging (Northern Ireland)

Motion made, and Question proposed, That the sitting be now adjourned.—[James Purnell.]

9.30 am

Mr. Deputy Speaker : I warn hon. Members that I feel it appropriate that we should apply the new ruling of Mr. Speaker on debates that centre on an area or region that Opposition winding-up speeches be limited to five minutes each. Those speeches will therefore commence 20 minutes before the conclusion of the debate at the latest.

Mr. Peter Robinson (Belfast, East) (DUP): I am grateful for the opportunity to raise the expected impact of water charging in Northern Ireland. In the absence of devolved government, there is unquestionably a democratic deficit, and people feel it most acutely on issues such as this. Few issues in recent years have generated more interest and concern among the people of Northern Ireland than the proposal to introduce water charging. The public reaction, as reflected at public meetings, in the press and in the attitude of people throughout the community, has been universally critical—albeit to varying degrees—of the Government's approach and the way in which they intend to move forward. No one will be more aware of that than the Minister. As I shall show later, I have some sympathy for him in one respect, in that he picked up a ball that was left for him by the pro-agreement parties in the Executive. However, he did run with it with great enthusiasm.

For all sides in the debate, it is important that the subject is debated openly and honestly. I fear that the Government are in too much of a hurry, and many will accuse Northern Ireland Office Ministers of allowing themselves to be bullied by the Chancellor of the Exchequer and, as a result, of not approaching the consultation process with as open a mind as they should have done. Tangentially may I say, Mr. Cook, that the Minister, as he presses ahead with his wider water reform agenda, should perhaps learn the lesson of that? I strongly advise him not to rush ahead with the project. The issue is not remotely close to having been sufficiently ventilated in public. The debate should continue and further debate and discussion will bring about a better outcome.

It is important that water charging is placed in its proper context: the under-investment in infrastructure over the past 30 years and the approach taken by the last Executive. My party has sought over many years to warn people of the consequences of the course that the Government have followed and to educate people in the evolving debate. We have published policy papers and proposals. In "Water Charging: Exposing the Government's tax-raising agenda—An alternative way forward" and our "Triple Tax Threat" policy document, we set out our position on those matters. We have dealt with the issue responsibly and constructively.
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The Government, however, seem intent on proceeding with their plans regardless of the views of the people of Northern Ireland. A return to devolution will not necessarily result in any easy answers or solutions, but at least we would have an opportunity to make our own decisions and take responsibility for the choices that we make. At the moment, Mr. Cook, the debate—

Mr. Deputy Speaker : Order. I hesitate to stop the flow of the hon. Gentleman's speech. However, I would be remiss in my duty if I did not remind hon. Members that in establishing this parallel Chamber, the House consciously took the decision—in its wisdom or otherwise—that when the Chair in Westminster Hall was occupied by one of the four senior members of the Speaker's Panel, they should be addressed as Deputy Speaker.

Mr. Robinson : Thank you, Mr. Deputy Speaker.

I was saying that the debate is characterised on one hand by a Government who are free to propose as they please, without fear of any electoral consequences, and on the other by local parties that can oppose as they please without the fear of having to take any responsibility. That is not a healthy situation in a democracy, and nor is it likely to lead to the best debate or the best decisions.

I have no doubt that the best way to deal with the situation is an early return to devolution to allow locally elected politicians to sort it out. Some have suggested that parties in Northern Ireland are happy to see direct-rule Ministers taking such difficult decisions so that if and when devolution returns, we can claim that our hands are clean. Let me make it clear, at least on behalf of my party, that that is not the case.

If I were in government today, I would take the same approach that I advocated publicly and privately when I dealt with the issue as a Minister in the Department for Regional Development. I say that because it is interesting to see how some parties are now taking a rather different approach from the one that they took during devolution. Revisionism has been taken to a new level and transformed into an art form by some of them, but I shall come back to that point.

Whatever the nature of the debate about water charging, there can be no doubt—nor, I suggest, any argument—about the need for significant investment in water services. Investment is vital for both the provision of water and the treatment of waste water. When I became a Minister, I was appalled by the state of the infrastructure, which was a consequence of it having been starved of funds for decades. Without the necessary investment, serious health issues will arise and environmental damage will inevitably be caused.

Investment is required to meet European directives and prevent massive fines for the UK, although I rather suspect that the Treasury would remove such money from the Northern Ireland block. Northern Ireland Ministers would probably then reduce DRD spending, so the cycle would continue. We also require investment for the developments that must proceed. We have already heard discussion in the Department for Environment, Food and Rural Affairs about curbs on development as a result of the waste water problems in the Province. The consequences of that would be
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massive for jobs in the construction industry, so the matter must be tackled with a view to the massive investment needed.

We should also remember the circumstances that brought about the infrastructure deficit in Northern Ireland. There were 30 years of terrorism—you need not concern yourself, Mr. Deputy Speaker, because I am not going down that road. However, it needs to be said that much-needed resources were directed to the fight against terrorism and away from vital infrastructure. Given the responsibility of direct-rule Administrations over that period, it is unreasonable to ask the people of Northern Ireland to make up the shortfall.

A significant element of any water charge will go towards upgrading infrastructure, which is required because of the lack of investment in the past. People in Northern Ireland undoubtedly feel aggrieved at having to pay to put right a situation that others allowed to deteriorate. People especially resent having to pay twice for their water. People in Northern Ireland will recall that in the decade before 1999, water services were funded from the regional rate through an hypothecated charge. The pro-agreement parties in the Executive bear a significant responsibility for the position in which we now find ourselves. The Minister will be aware that the break in the linkage was contrary to the advice given by the Department when I was in charge of it—indeed, when I was performing his role in July 2000.

David Burnside (South Antrim) (UUP): Is there any problem facing Northern Ireland that is not linked to the failure of the Belfast agreement?

Mr. Robinson : Save the weather, probably not. I will look closely to see whether there are any other issues. The agreement had a massive impact on the way in which the Government operated. That was why we made critical changes to structures, especially regarding accountability.

Mr. David Trimble (Upper Bann) (UUP): Not one word was changed.

Mr. Robinson : The right hon. Member for Upper Bann (Mr. Trimble) is talking about the Belfast agreement. We were in the business of burying it, not changing it. He wants it to continue in its original form. However, I shall not be dragged in that direction.

The Minister will be aware that in July 2000, my permanent secretary, Ronnie Spence, and I met the then Minister of Finance and Personnel, Mr. Mark Durkan. We argued that the linkage between water and the regional rate should be retained. The DFP Minister and pro-agreement members of the Executive did not take my advice, as a result of which there was no identifiable way to show that the householders of Northern Ireland were paying for their water, and of course the Chancellor pounced. If the link had been maintained, the Treasury could not have ambushed us.

The short-term implication of the Treasury's decision was to remove any clear justification for an above-average increase in the rates, and the longer-term consequence was to allow the Chancellor to step in and
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press for water charging in Northern Ireland that was additional to the regional rate. At the meeting with Mark Durkan, I argued strongly against breaking the link for those reasons. I advanced such an argument on numerous occasions thereafter while I was in office, including directly with the then First Minister on 10 June 2002. I also put my views on the public record. My position today is the position that I took privately and publicly and advocated while in office.

It is hardly surprising that people believe that they continue to pay for water through the regional rate, given that there was no reduction in the regional rate when the link was broken. That leads to the inescapable conclusion that, despite the visible link having been broken, people continue to pay for water services through their rates. Indeed, as there is no Barnett provision for water, the regional rate must bear the burden for water services.

When I was a Minister at the DRD, my view was straightforward, as my position on taxation has been throughout my political career. I have been in favour of the lowest possible taxes in exchange for quality services. I have followed such a policy at local government level and in the Northern Ireland Assembly. Indeed, my record at Castlereagh borough council and the DRD speaks for itself. I was opposed to the break between the regional rate and the funding of water services. When the Treasury demanded that Northern Ireland should have a separate water charge and become self-financing, I argued that that could be done by identifying, reflecting and separating the contributions towards water services that were already paid within the existing rates bill and reducing the remaining segment accordingly. Any increase would be required only to fund additional investment, which could be offset by the savings that officials told me were possible in the Water Service and the introduction of a developer's contribution.

It is interesting to see how some parties that took an opposing view at the time have repositioned themselves—resistance to higher taxation appears to be infectious for some when not in government, especially at election times. Only a few years ago, when wearing a different hat, someone who now voices opposition to higher taxation talked about

That was a statement by Mark Durkan in 2001. Others pointed out that we would have no credibility with the Treasury

That is an Executive paper from the then First and Deputy First Ministers and the Minister of Finance and Personnel in 2002.

In a policy document on the subject, the Ulster Unionist party stated:

It will not be a surprise to note that that policy document seems to have been removed from the Ulster Unionist party website, for one reason or another.
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The Social Democratic and Labour party, whose members are going around the Province campaigning against water charges, took a very different approach when it was in office. The SDLP Minister of Finance and Personnel, Sean Farren, spelled out his position in April 2002 when he said:

There is some merit in putting on public record the advice that I offered the Executive on this matter in May 2002:

In such circumstances, there would be no substantial increase in local taxes, and the existing arrangements would be appropriate for assessing water charges.

Some local parties have been disingenuous about their approach, but I do not believe that the Government have been entirely straightforward on the issue, either. In support of the introduction of water charges, they put forward a number of arguments that, on examination, cannot be defended. The first is that people in Northern Ireland do not pay for their water. From my remarks earlier, it is clear that this argument cannot be sustained. Given that, to all intents and purposes, no money is given to fund water services in Northern Ireland by the Treasury, the only way that it can be paid for is by people in Northern Ireland through regional rates. The Government may argue that insufficient money is then spent on other public services in Northern Ireland, but they cannot argue that people do not pay for water.

The second Government argument is that this measure is required by EU law. That contention does not withstand scrutiny if one looks at the relevant EU directive, the water framework directive of 2000, which states:

In the absence of compulsory metering, the Government's proposal does not provide adequate incentives to use water resources more efficiently. Indeed, if the water charge is based on the value of a person's home, there is no incentive whatever to use water efficiently, so it is clear that that cannot possibly be a real argument for bringing forward the type of charging suggested. I would ask the Government to reflect on the matter; the Republic of Ireland complies, or purports to deal, with the directive in a much more flexible way, as I think the Minister would agree.

The third argument that the Government put forward is that people in Northern Ireland do not pay enough in local taxes. In my opinion that contention entirely misses the point. The level of local taxes in Northern
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Ireland has no impact on the rest of the United Kingdom. Self-evidently, the higher the local taxes, the more local spending power is available. Different council tax levels and varying levels of service apply in neighbouring councils in Great Britain, so why should there be some over-riding reason for the Government to decide this matter for the people of Northern Ireland?

Rate-capping may have been a feature in the past in Great Britain, but the notion of a minimum level seems somewhat novel; in fact, it is absurd. Where else would central Government be asking politicians to increase local taxes and shun efficiency? I have consistently argued, both in office and since then, that savings and efficiencies are a much better way to free-up resources for vital spending than unnecessarily raising rates and taxes.

All the arguments advanced by the Government are fundamentally misconceived. The only argument for a separate water charge turns on the implications of the new system of resource accounting. That was highlighted in the letter from the Chief Secretary to the Treasury to the Secretary of State for Northern Ireland in July 2002. The implications of not signing up to self-financing water services are likely, due to technical rules, to be damaging to our spending power in Northern Ireland. However, that is not an argument for higher taxation overall; it is only an argument for dividing and administering the existing level of payments differently.

Unless the Northern Ireland Executive make a commitment to self-financing arrangements for water services, Northern Ireland will lose spending power, beginning with tens of millions of pounds each year and leading to hundreds of millions. I have always believed that it is important that the choices, and implications of those choices, should be put before the people of Northern Ireland. Indeed, as the Minister responsible I wrote as early as March 2002 to Sean Farren, the then Finance Minister, and stressed the importance of setting out the context and implications of the choice.

Mr. Trimble : I am glad to hear the hon. Gentleman refer to the impact of resource assessment budgeting. He is right to say that that is a significant factor. However, as I understand it, he is arguing that one digs out the hitherto hypothecated water element in the rates and brings it to a level that will provide self-sufficiency in water services. Does he accept that the implication of that is that the money hitherto raised through the regional rate that went into other services will no longer be available and he will find himself with less money for other services, or having to raise more money through the regional rate to fill the shortfall?

Mr. Robinson : No, I certainly do not. That is a bogus argument. The right hon. Gentleman clearly does not have an accounting degree. If the money is already paying for water and sewerage services in Northern Ireland, it is not paying for other services. Identifying that amount of money, which is already being used for that purpose, does not take it away from any other service; it simply identifies and administers the process differently.

Although the manner in which any water charge is applied is important for those who will have to pay it, the size of the overall burden is an even greater issue.
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These issues cannot be viewed in isolation from other changes in local taxation in Northern Ireland. Some in Northern Ireland are campaigning under the banner of "Can't pay, won't pay." My slogan and my argument are different: I say that we are paying and should not pay twice. We should reclassify existing local taxes, identify the water charge element, uncouple it from the regional rate and present it as a separate charge, and reduce the regional rate accordingly.

However, in the circumstance that the Government face us with, we can either keep our purity and opt out of discussing the new arrangements that they have suggested or we can take advantage of the legal practice of pleading in the alternative. Taking that position, I must conclude that defining the fairest method of payment to employ is not simple.

My colleagues and I have suggested that people should have a choice between basing the charge on the value of their home or opting for voluntary metering. Contrary to some newspaper letters that are being mysteriously orchestrated at the present time, we put forward that position before, even, the Northern Ireland Assembly elections and it is contained in our policy document. That position allows householders to choose what is best for them in the circumstances in which they find themselves.

The General Consumer Council for Northern Ireland has done a lot of good work assessing the impact of water charging and has produced statistics that have helped to inform this debate. To the Government argument that people in Northern Ireland pay less in local taxes than those in Great Britain, the GCC points out that householder expenditure already forms 12 per cent. more of gross household income than the UK average—without adding the expected higher rates and water charges.

Rev. Martin Smyth (Belfast, South) (UUP): The hon. Gentleman was talking a few moments ago about "Can't pay, won't pay." Does he distinguish between those who have been developing that campaign along the lines that they have done in the past and those who have been living in moderate housing that was bought when they were working in ordinary employment? The value of such houses has gone up tremendously. With the increase in rates and now their water rate such people would find it utterly impossible to pay.

Mr. Robinson : I am not being critical of those who campaign under the slogan "Can't pay, won't pay," I just believe that it is misconceived and that they are already paying. As for people in deprived backgrounds, the statistics produced by the GCC strongly support the argument that the hon. Gentleman advances. Indeed, an average water charge of £340 would increase weekly expenditure to £389.34, which means that it would equate to 86.9 per cent. of gross household income and would widen the gap with the rest of the United Kingdom.

Mr. Nigel Dodds (Belfast, North) (DUP): My hon. Friend raises an extremely important point. Is it not a fact that the Government have referred to the increased expenditure on businesses in Northern Ireland in terms
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of energy and insurance costs, and so on, but have not paid any attention to the higher costs for domestic ratepayers and householders? That is one of the issues that he rightly highlights.

Mr. Robinson : Yes, of course, I agree with that. It is somewhat unusual, is it not, for a Labour Government to be championing the cause of business against the individual consumer? Perhaps the fact that there are no Labour candidates in Northern Ireland has some impact on that position.

To return to the point I was making, essential weekly household expenditure would equate to 47.8 per cent., which would again widen the gap with the rest of the United Kingdom. The figures I have provided give a much more realistic sense of the impact of water charges than the bald comparisons of local tax levels. The GCC estimates that 169,926—or one in four—households in Northern Ireland are at risk of water-affordability and poverty problems. I hope that the Minister takes in that statistic and understands the hardship and anguish that it represents; one in four will suffer from water poverty.

Of even greater concern is the fact that 27 per cent. of households that are on housing benefit and receive rate rebate, which are currently protected from the cost of water in their rate bill, will have to pay water charges, albeit at a slightly reduced level. Whereas those people could escape the water charge while it was included in the regional rate, they cannot escape it under the Minister's proposals. Before the Government go much further with their current plan, it is critical that they think again about the impact of water charges on householders in Northern Ireland. To fail to do so would have serious consequences for Northern Ireland householders as well as for the workability of the proposals.

Before Christmas, while the other parties posed and moaned about water charging and the threat of increased taxation, my colleagues and I attempted to do something about it. During the talks process leading to the Government's paper on a comprehensive agreement, we sought to address the issue on the basis that I set out earlier. Although the Government were not flexible on some aspects of our proposal, we were working towards an outcome that would have led to the Treasury agreeing to allow Northern Ireland to continue accessing the reinvestment and reform initiative borrowing facility while pegging the regional rate for the phasing-in period of the water charge.

The deal, which was in the final stages of negotiation but not completed, would have saved householders hundreds of pounds over the next few years, and involved freezing the regional rate, reducing the district rate by applying Barnett consequentials, and leaving the new Executive to apply whatever level of a resource element they determined to reduce further the district rate. In addition, we sought to lengthen from three to five years the phasing in of water charging. That would have further reduced its impact. The matter was still under negotiation when Sinn Fein, unable to adapt to democratic politics, walked away from the table. That meant that the conditions in which the Government would have activated the proposal were not realised.

Along with the proposal to set up a £1 billion fund to tackle the ageing infrastructure, the Executive would have been well placed, after introducing efficiencies and
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developer contributions, to produce a much more acceptable way forward. It might not have been ideal in every respect, but within the constraints set by the Treasury, it represented a significantly better deal than the one presently being served up. I urge the Minister and the Government to pick up on those elements of our discussions, and I hope that rather than foisting this unbearable burden on the people of Northern Ireland, they might revise their existing plans.

David Burnside rose—

Mr. Deputy Speaker : Order. With Mr. Speaker's regional rule in place, 37 minutes remain for Back-Bench contributions before the first of the two Opposition winding-up speeches. If a similar situation pertains after the next contribution, I shall review that rule and perhaps revert to the original.

10.3 am

David Burnside (South Antrim) (UUP): I look forward to taking part in this debate under your chairmanship, Mr. Deputy Speaker. I am sure that you and all hon. Members are looking forward to the Minister responding to some of the questions and points that will be raised in the debate, unlike his ministerial colleague, the Under-Secretary of State for Northern Ireland, the hon. Member for Brent, North (Mr. Gardiner), who appears to think that one does not have to answer questions raised in Adjournment debates.

As the hon. Member for Belfast, East (Mr. Robinson) has already pointed out, there is great concern about the Government's proposals for the reform of water and sewerage charges. Unfair is not a word that I usually use in politics, but the proposal is unfair for the general population of Northern Ireland. If I may, I will open my remarks not with the words of right-wing David Burnside, Unionist Orange bigot from South Antrim, but with those of the equality impact assessment that was commissioned by the General Consumer Council for Northern Ireland. It stated that a property-based charge based on capital value will have a negative impact on Protestants, Unionists, married couples, the elderly and their carers. It continued that Protestants are likely to bear a disproportionately greater burden of the domestic and sewerage bill than their representation in the wider Northern Ireland community would indicate. Unionists are also likely to bear a disproportionately greater burden of the domestic and sewerage bill than their representation in the wider Northern Ireland community would indicate. There will be a negative impact on the elderly and those with elderly dependants. Perhaps the Minister would comment on that.

No allowance has been made in the Government's proposals for the most vulnerable in our society. What about pensioners who survive on low incomes but remain in their family home? What about families in receipt of family tax credit? How will they afford to pay for water charges under the new proposals? The Government's proposed 25 per cent. discount for low-income households in Northern Ireland is inadequate to address affordability issues. Will the Minister acknowledge that it would cost £40 million per year to provide full protection for the most vulnerable households? Will he therefore give an undertaking to go
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back to the drawing board and to come back with a fairer, more affordable suggestion that will not put additional pressure on already vulnerable ratepayers?

We all realise that Northern Ireland's rates, with their different historical background, are considerably less than the equivalent in England, Scotland and Wales but, as the hon. Member for Belfast, East has already pointed out, the income and expenditure profile in Northern Ireland is entirely different. Our household expenditure forms 12 per cent. more of our gross household income than the UK average. If water charges were added, at an average of £340, equating to £6.54 per week, it would increase our weekly household expenditure to £389.34. That would mean that household expenditure equated to 86.9 per cent. of gross household income, widening the gap with the rest of the UK.

Moreover, ratepayers in Northern Ireland face an additional significant hike in their household bills over the next few years. The regional rate, currently at 55 per cent. of the rates bill, will increase by 9 per cent., 9 per cent. and 6 per cent. respectively over the next three years and district rates are also likely to increase with the impact of waste management costs on local councils. The Government must therefore take into account the question of affordability. It is widely recognised that there is growing customer debt. It is estimated that a quarter of county court judgments in England and Wales are for water companies pursuant to water arrears.

Water arrears are currently at £893 million in England and Wales. The cost of the debt burden adds an average £10 to water bills, a further penalty for those who pay. There is something badly wrong with the system. If that were transferred to Northern Ireland on a pro rata basis, it would equate to arrears of at least £29 million. That would have to be borne by higher bills for those customers who can afford to pay. Some 169,926 households—one in four—will be at risk of water poverty.

What is the Government's current estimate of the administrative cost of recovering bad debt through the courts? These are questions that the Government seem never to have answered before. It is expected that many consumers will contest or appeal their new valuation. The Water Service will become the unofficial appeals mechanism for rates, imposing additional burden and costs on it, which, again, will inevitably be passed on to consumers. Who will pay for the administrative burden and delay in collecting water charges?

The only time limit is from the EU directive, which stipulates 2010. Given the obvious implementation problems, why are the Government rushing these proposals through by 2006? No health impact assessment has been conducted, despite the obvious links between poverty, debt and poor health, including stress and mental health factors, which are clearly identified in the Government's own "Investing for Health" strategy. Why not?

There are alternatives. As the General Consumer Council for Northern Ireland eloquently said, they must be "fair, affordable and sustainable". The Treasury has refused to extend to Northern Ireland the so-called green dowry—I suppose that that is something given away on St. Patrick's day—that was given to water
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companies in Great Britain prior to privatisation. The Treasury should pay to bring Northern Ireland's water and sewerage infrastructure up to the standard of its modern equivalents, instead of the burden of the cost being passed on to local ratepayers. It should fill the gap where the necessary infrastructure and capital investment was not made in the past. The cost of road drainage should not be embedded in a domestic water charge; road users should assume the cost. Further developers could pick up the costs of additional development and infrastructure, instead of existing consumers.

Metering is an open subject in this debate. What consideration have the Government given to it? It appears to have been all but ruled out before any assessment has been made about how it could affect local people. Further discussion is needed on the possibility of introducing a metering system with built-in protection of water allowances to protect those who cannot afford to pay.

I own a farm in north Antrim, and I wish briefly to address how farmers will be affected. We already have meters on our agricultural land, and farmers are going to lose their domestic allowance. I would like the Minister to comment on that increased cost to them.

The Minister of State, Northern Ireland Office (Mr.   John Spellar) : In order to assist me in my reply, may I ask the hon. Gentleman whether he is proposing voluntary or universal metering? Also, what basis does he want there to be for the charging under metering? Is he proposing marginal cost or average cost for differentiating between those who are metered and those who are not?

David Burnside : My personal view is that optional metering would be the fairest system. Provision could be made for metering to be possible in all new-build housing in Northern Ireland. However, allowances would have to apply, regardless of whether there is a metering system.

Mr. Spellar : May I press the hon. Gentleman? Should there be average costing, so that if someone uses 50 per cent. less water, they pay 50 per cent. less, or should the marginal cost of delivering the extra water be the measure?

David Burnside : The costing would have to be pro rata. There is no way of rating other than to have a pro rata system.

The water reform proposals currently under debate in the Province have not won either a consensus of political support, or support from consumer organisations or representative bodies. We are not time-limited. We need more debate, more information and more clarity, so that we can consider all the issues and try to come to an agreement as to the way forward. The matter was not agreed when the Executive were operational at Stormont; no progress was made then. I believe that it is sometimes right in politics not to rush ahead and make radical changes that will be regretted in years to come. We are limited by the EU directive to 2010. Let us have a longer and broader debate. There are options.
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The Government's current proposals will not provide a secure financial basis for future funding without imposing additional increases on consumers, and subsequently increasing the numbers of those who cannot afford to pay. The water reform programme mistakenly places costs on consumers only. It ignores the "polluter pays" principle, as well as the Government's social responsibility to provide adequate protection to those who are vulnerable, as they have done in the recent rating review relief proposals. The Government must go back to the drawing board and look again fundamentally at their proposals.

Mr. Jeffrey M. Donaldson (Lagan Valley) (DUP) rose—

Mr. Deputy Speaker : Order. Any Member seeking to contribute to the debate now should be well informed on what has gone before. If that is the case, I will call Jeffrey Donaldson.

10.14 am

Mr. Jeffrey M. Donaldson (Lagan Valley) (DUP): I appreciate the opportunity to speak, and I am sorry that I was not here for the beginning of the debate but my flight from Belfast was delayed. I congratulate my hon. Friend the Member for Belfast, East (Mr. Robinson) on securing the debate on an issue that is very important to the Democratic Unionist party and, I know, to my constituents. As I have been going around in recent months talking to people, I have no doubt that there is widespread concern within the community about the introduction of water charges in Northern Ireland. We have debated the origins of that, but let me be absolutely clear in echoing what my hon. Friend said—that the DUP has consistently opposed the introduction of water charges in Northern Ireland. At no stage have we given our support to such a proposition, and we have very real concerns about the Government's proposals and the manner in which the Minister intends to implement the water charging system.

I was interested in what the hon. Member for South Antrim (David Burnside) said about the introduction of pro rata charging. When he was pressed by the Minister, he said that it would be based primarily on cost. I would point out to the hon. Gentleman that 80 per cent. of the cost is on infrastructure, and only 20 per cent. of the cost is on actual usage. We should be careful about going down that particular route, because we would end up with most of the water charge being a fixed-rate charge based on infrastructure and a very minimal percentage of the charge based on householders' actual usage.

As I talk to people about water charges, a number of concerns arise. I talk to pensioners living on their own, for example, who are very concerned about how they will be able to afford the additional levy. The Department has shown a degree of subterfuge in suggesting that it is time that Northern Ireland started paying for its water, like the rest of the United Kingdom. However, the reality is that we in the Province pay for our water through both the domestic and regional rate system. It is not correct to suggest that Northern Ireland does not pay for its water: we pay for actual usage by a distinct charge measured within the rates, and for the infrastructure through the regional rating system. Will there be a compensatory offset against the regional rate
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for the element that we already contribute for our water system in the Province if the Government proceed with the water charge against the will of the people of Northern Ireland and the wishes of Northern Ireland's political parties?

I accept that there is a need to invest in the water distribution system; there is no doubt that, over the years, the system has been neglected. A figure that is often quoted is that some 40 per cent. of the water supply leaks out of the system. Something should be done about that, and there will be a cost for it. However, I and the DUP are far from convinced that the Government's proposals in the form of water charging are the best, most effective or efficient way of charging.

Returning to the issue of householders, I mentioned pensioners living on their own. They are concerned that they will have to pay a water charge that will be equivalent, for example, to that paid by a family of three or four people living next door. There is a degree of unfairness about the Government's approach to water charging. Unless there is some means of measuring usage, it is very difficult to assess what individuals and households will actually use, and what a fair distribution of the cost will be. That is why water charges are not the best means of addressing the problem, if the problem is the need to invest in infrastructure, because they create inequalities and people feel that they are being treated unfairly.

Huw Irranca-Davies (Ogmore) (Lab): The hon. Gentleman rightly puts forward his party's opposition to the charges. Is his party also engaged in the consultation that is currently taking place to try to learn from the experience of the UK, where we have seen increases in water charges and the whole question of affordability has arisen? Is he engaged in that consultation with the Department for Environment, Food and Rural Affairs, Ofwat, Water Voice and Water UK to try to deal with the question of affordability? There is a window of time in which Northern Ireland can learn from the experience of the UK, where water affordability has become a serious problem.

Mr. Donaldson : I thank the hon. Gentleman for his intervention. Unfortunately the Department in Northern Ireland is just pressing ahead; it is keen to impose the water charge on Northern Ireland as quickly as possible. There has been some consultation, but I do not believe that we have taken adequate time to learn from the experience of the rest of the UK. I believe that we could learn from that experience.

Recently, Mr. Deputy Speaker, I had the opportunity under your chairmanship to raise an issue about education in an Adjournment debate. I made the point then that we could learn from the experience of England and Wales in terms of our education system. I believe that we could also learn from the experience of England and Wales in terms of the imposition of water charges.

There is another good reason for delay. I believe that the issue is too important to be dealt with under direct rule, and that it should be put on hold until such time as the Assembly is reinstated. I hope that that will happen quickly, with a voluntary coalition comprising those democratic parties that are committed to peaceful means, and that that coalition can then address this
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issue, in a way that is more reflective of what people in Northern Ireland want and that is in the best interests of Northern Ireland. I urge the Minister to hold back rather than push the measure through and impose it on Northern Ireland against the wishes of the people. We should look at other examples, and at best practice, and we should examine situations where those measures have not worked and the costs have increased for the consumer.

Mr. Peter Robinson : For many years, the Department has been looking at examples, such as Glas Cymru. In fact, during my time in office, we brought over the Scottish regulator. I am sure that the current Minister has continued with those contacts, all of which showed that significant savings could be made within the system in Northern Ireland. Is that not what should be done? The costs should be reduced by efficiencies rather than the Government forcing up the cost of local taxes in Northern Ireland.

Mr. Donaldson : I thank my hon. Friend for his intervention. He will be aware that during the negotiations before Christmas we proposed the establishment of an efficiency commission in Northern Ireland that would look at public expenditure across the whole ambit of public services in the Province, identify where savings could be made, and then apply those savings to infrastructure improvements. That is why I believe that the Government are putting the cart before the horse; they are spending the money before we have saved the money and, instead of looking for efficiencies, they are imposing another tax on ratepayers in Northern Ireland that people feel is unfair and unjust.

Huw Irranca-Davies : The reason why I made my earlier point is that Water Voice and the other representative consumer organisations in the UK are arguing not against water charges per se, although there are questions about the rapid rises that have occurred, but for joined-up thinking to be rapidly developed between them and the Government to address the question of affordability. Water UK makes the point that although we rightly focus on affordability,

who can afford it—

It is right that we focus on those who cannot afford to pay, but it is also right that we chase those who choose to escape payment. Does the hon. Gentleman agree?

Mr. Donaldson : I thank the hon. Gentleman for that information. He will appreciate that we in Northern Ireland are coming at things from a different perspective. If we had 10 or 20 years' experience of water charges, we would be considering how to improve the system. Perhaps if the hon. Gentleman were in our position of not having water charges, he might look at the matter from our perspective, from which we are asking, "Do we need these water charges? Is there not a more effective and efficient way to raise the funding
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required for infrastructure improvements, without creating a new tax and putting an extra burden on the ratepayer?"

The hon. Gentleman is right. I believe that the situation will lead to further debt, which is a huge problem in Northern Ireland, as it is in the rest of the United Kingdom. Do we really want people's tax burden and debt to increase yet again—particularly in respect of those on low incomes, the elderly, pensioners, and so on? Will the Government increase the old-age pension to take account of the increased water charge? I doubt it.

Mr. Gregory Campbell (East Londonderry) (DUP): On the issue of affordability and those who are least able to pay, will my hon. Friend comment on the fact that a disproportionate number of people on low incomes are in social housing? Those people find that a significant amount of their rent and rates—usually all of it—is paid through housing benefit. However, under the proposed water charge they will still have to pay 75 per cent., unlike the other charge. More people in the lower income bracket will be in debt as a result of the implementation of the water charge.

Mr. Donaldson : I thank my hon. Friend for his helpful intervention.

We are a party of low taxation. We do not believe that taxation is the best means, on every occasion, of raising money for investment in infrastructure. I urge the Minister to think again about the proposal, because there is not widespread support for it in Northern Ireland. The Minister, who wears another hat and has responsibility for political development, has always upheld the principle that if we are to have something in Northern Ireland—whether in the political realm, or otherwise—there should be widespread community support for it. However, this Government continually impose on Northern Ireland policy initiatives, commissions and all kinds of things that are not representative of the community, do not reflect its views and are against people's wishes.

I urge the Minister to hold back, put the proposal on hold, allow the Assembly to consider the matter at greater length when it is reinstated, consider other areas where the water issue has been addressed, and see whether greater efficiencies can be made in Government, leading to savings that could be invested in our infrastructure, including the water distribution network. It is wrong to proceed in this manner. I have no doubt that this issue will be prominent in Northern Ireland as we face a general election. The DUP's position is clear. We oppose the water charges and believe that the Minister should think again.

10.28 am

Mr. Nigel Dodds (Belfast, North) (DUP): It is a pleasure to follow my hon. Friend the Member for Lagan Valley (Mr. Donaldson). I endorse heartily what he said.

I congratulate my hon. Friend the Member for Belfast, East (Mr. Robinson) on securing this debate on an important topic, which is the subject of considerable
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debate, anxiety and concern among many of our constituents. They face the prospect of higher regional and district rate bills and now the imposition of water charges, which will combine to bring about a massive increase in household taxation in the coming years. It is right that we should press the Minister again on these matters and raise the concerns of our constituents.

My hon. Friend the Member for Lagan Valley made a general point about the Government's approach to such major issues in Northern Ireland. I am struck by the fact that time and again, when I meet direct-rule Ministers and take delegations to meet them, I am told that it is difficult to move things forward or take decisions about specific matters because they are awaiting the restoration of devolved institutions and the Assembly and because it is right and proper that elected representatives in Northern Ireland should take such decisions. In general, that is a rational and sensible approach, but on certain policy areas it completely goes out of the window. Instead of saying that it is right and proper for locally elected politicians to take some decisions, they impose decisions against the wishes of not just the majority of politicians, but politicians and elected representatives right across the community. We can cite several examples of that.

Recently, a higher education order was rejected on a cross-party basis—all parties except Sinn Fein voted against it. It was defeated in the Northern Ireland Grand Committee, yet the Government continue to proceed with it.

Another example is the matter before us today: there is large-scale, cross-party and cross-community opposition to, and concern about, the Government's proposed imposition of water charges. However, they are proceeding by setting aside that opposition and imposing the new regime. I entirely concur with my hon. Friend the Member for Lagan Valley that the headlong rush to introduce such charges should stop and that time should be taken to consider some of the proposals and ideas that have been put forward today by hon. Members, not least my hon. Friend the Member for Belfast, East. In his detailed and excellent speech, he outlined several options available to the Government.

The General Consumer Council for Northern Ireland indicated in its submissions that it is right to take time to consider the matter. I urge the Minister to give a degree of hope to the hard-pressed ratepayers and householders of Northern Ireland that he will take time to study the matter further, rather than proceeding by ignoring the collective voice of Northern Ireland Members.

Lady Hermon (North Down) (UUP): Will the hon. Gentleman reflect on one aspect of the situation that is especially important in North Down, where there are a number of farmers? He referred to the General Consumer Council's submission to the Department for Regional Development on water metering, so he will know that the council highlighted the significant and damaging effect that water charging will have on rural communities, and especially farmers. They already have a low income and have been hard-pressed for many years. Does he agree with the Ulster Unionist party that farmers would be hit especially hard by water charging?
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Mr. Dodds : Since most of those hard-pressed farmers are supporters of the Democratic Unionist party, I am more than delighted to hear that the hon. Lady agrees with us on the matter—on that basis, we can certainly agree to agree.

Reference has been made to a number of sectors of the population that will be more hard-hit than others, but generally what struck me about the GCC report was the fact that there will be swingeing increases across the board in Northern Ireland when one takes into account not only the impact of higher water charges, but the increases in the regional rate and the fact that district rates will have to go up by a considerable amount to take account of the greater costs of waste management. Some of the figures given in the report indicate that by 2008–09, not taking into account the increase in district rates, the rates bill of a terraced house in the constituency of my hon. Friend the Member for Belfast, East could have increased by 88 per cent.. In south Belfast, rates for a semi-detached house could go up by 77 per cent. In Hollywood and Strabane, rates for terraced houses could go up by 263 per cent. and 127 per cent. respectively.

It would be unacceptable to impose such increases on the people of Northern Ireland. I cannot believe that any hon. Member from any part of the United Kingdom would accept for one moment that their constituents should have to face that triple whammy: increases in the regional rate due to the review that is taking place; increases in the district rates due to increased charges for waste management; and the imposition of water charges.

All that amounts to a looming financial crisis for many households in Northern Ireland, particularly if the valid point made by my hon. Friend the Member for East Londonderry (Mr. Campbell) is taken into account. He said that the most vulnerable households—those in the poorest category—will still have to pay 75 per cent. of the water charges under the Minister's proposals. Under current procedures and regulations, a large proportion of their rents and rates is taken care of, so such people do not face large bills for them. However, people in the poorest category will have to pay 75 per cent. of the water charges under the proposals, which will cause untold difficulties and hardship for many of them.

Fuel poverty is a major problem in Northern Ireland. As the Minister has responsibility for social development, he is trying to address the problem, although I and many others believe that he should go a bit further and put more resources into it. It is incredible that although many people in Northern Ireland—far too large a proportion of our population—are in fuel poverty, if the Minister has his way, the Government will deliberately impose a regime that will result in many people being put into water poverty. That simply cannot be allowed to stand.

In conclusion, I urge the Minister to delay, take stock of what has been said and come forward with proposals that will not lead to swingeing increases in domestic household bills that people will simply not be able to pay.

Lembit Öpik (Montgomeryshire) (LD) rose—

Mr. Deputy Speaker : Lembit Öpik, give me five.
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10.37 am

Lembit Öpik (Montgomeryshire) (LD): I certainly shall, Mr. Deputy Speaker.

I congratulate the hon. Member for Belfast, East (Mr. Robinson) on securing this debate and support the contributions made by the hon. Members for South   Antrim (David Burnside), for Lagan Valley (Mr. Donaldson) and for Belfast, North (Mr. Dodds).

It is ironic that the Government spend so much time seeking consensus in Northern Ireland and then ignore it when they find it. It is disgraceful, for example, that tuition fees are being imposed despite the unanimous opposition from Opposition parties and all right hon. and hon. Members from Northern Ireland. The fact that the Government lost the vote on that issue in the Northern Ireland Grand Committee but carried on forcing tuition fees on the Province makes people feel that the Government are more interested in imposing their political dogma than in listening to the democratic wishes of politicians and the public in Northern Ireland.

It seems that we are faced with exactly the same problem when it comes to water charging. Water privatisation in Northern Ireland is proving as iniquitous as the poll tax. As the Northern Ireland Assembly is suspended, Ministers in Westminster seem intent on introducing additional charges for water and sewerage services. As we have already heard, ratepayers in Northern Ireland already pay for water and sewerage services through their rates. The new charges would come on top of the payments made through the regional rate.

For all the reasons already outlined, it is obviously grossly unfair to expect the people of Northern Ireland to pay twice for the same services. They are being asked to pay for the decades of under-investment in the infrastructure under direct rule. Ratepayers are not responsible for the diversion of funds and the under-investment in infrastructure for 30 years.

Huw Irranca-Davies : Will the hon. Gentleman give way?

Lembit Öpik : I have very limited time.

Mr. Spellar : Go on, give way.

Lembit Öpik : Okay, briefly.

Huw Irranca-Davies : There is consensus on the Opposition Benches—it is in opposing any charges on any one of their constituents, and I might do the same in opposition. However, in other UK regions there has been massive investment in infrastructure and it has paid dividends. The question must be about affordability as opposed to the principle of where the charges should go, because people will have to pay them.

Lembit Öpik : While investment in water and sewerage services is crucial, the people in Northern Ireland are not responsible for the under-investment. The Government's consultation has been a charade—a farce—that had a predetermined outcome. I do not accept the hon. Gentleman's position, because nobody in Northern Ireland is happy with what one could call the tap tax. It is unfair and will lead to some of the most vulnerable in
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society being unable to afford a basic human necessity. In direct response to him, I would say that the Government have tried to make a false comparison between what households in Northern Ireland pay and what those in Great Britain pay.

The Government tell people that the average English household pays a certain amount for its water, but they do not tell people that that is for privatised water and that the Government spent millions of pounds of taxpayers' funds to upgrade the system before selling it off. They ignore several facts. Household income in Northern Ireland is 19 per cent. below the UK average, nearly twice as many households there rely on benefit than in the rest of the UK—21 per cent. of households, compared with 12 per cent.—and Northern Ireland households also pay 26 per cent. more for fuel, light and power than the rest of the UK.

There need to be built-in safeguards to protect people whose water consumption is necessarily high. Under the Water Act 2003, the Secretary of State has a duty to protect the consumer interest and specifically to have regard to disabled people, the chronically sick, the elderly, the poor and those residing in rural areas.

I accept the need for improved water and sewerage services, but the ratepayers of Northern Ireland are not to blame for historic under-investment. Home owners have paid their rates. It would be a cruel injustice if they were expected to pay twice—first through their regional rate contribution and secondly through new charges—for those essential services. The present proposals are completely unfair, and the Liberal Democrats will resist any attempt by the Government to introduce them.

Mr. David Lidington (Aylesbury) (Con) rose—

Mr. Deputy Speaker : David Lidington, give me five.

10.42 am

Mr. David Lidington (Aylesbury) (Con): I congratulate the hon. Member for Belfast, East (Mr. Robinson) on securing this debate. I agree very much with what he said about this matter being an illustration of the democratic deficit in Northern Ireland. As he pointed out, it would be to everyone's advantage if people directly elected by voters in Northern Ireland were in a position to take responsibility for the complex and difficult decisions that must be made about the future of the water industry in the Province.

It seems as if there is unanimity in the Chamber about at least one point: there will have to be a great deal more capital expenditure on water provision in Northern Ireland. There are three drivers to that. The first is the decrepit nature of much of the current water network. The second is the forecast increase in demand as people become more prosperous, as lifestyles change and more water is consumed, and as we have a greater number of households in Northern Ireland for a largely static population. The third is the directives coming from the European Union that will force Northern Ireland, along with the rest of the United Kingdom, to improve the environmental quality of water discharges and the treatment of water through the sewerage system. The money must be found from somewhere.
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My questions to the Minister will follow up some of the points made by the hon. Gentleman about the nature of the reform proposed by the Government and the likely impact that it will have on particular parts of Northern Ireland society. Will the Minister comment on the Government's time scale? They have always said that they will start to introduce water charges from 2006. That is surely dependent on their having available a robust database of property values derived from the revaluation that has been going on. There have been various reports in the Northern Ireland media that the Government may be contemplating deferring the introduction of water charges. It would be helpful if the Minister would say whether that is the case.

The hon. Gentleman put to the Minister an alternative model for funding the water service: in effect, a hypothecated taxation system. When I looked at page 21 of the Government's assessment of the proposals, it seemed to me that that option was ruled out primarily because they believed that it would lead to increased costs to customers, but that that conclusion depended on the existing budgetary rules from the Treasury remaining in place. We have seen in recent weeks that Treasury rules can suddenly become very flexible over the classification of road maintenance when that suits the Government's convenience, so I ask the Minister to spell out in more detail why the Government have rejected the alternative option.

I go along with the hon. Gentleman and other Northern Ireland Members in saying that the more savings that one can find from the Water Service and elsewhere in Government to offset the costs of capital investment, the better. Some significant savings in the Water Service are built into the Government's plans, but could there be more? Similarly, as the Government are talking about a developers' charge through the Office of the Deputy Prime Minister and the Department for Environment, Food and Rural Affairs, are they contemplating that proposal for Northern Ireland too?

On the level of charges, have the Government thought enough about certain groups? I am thinking of pensioners who are above the housing benefit level but on fixed incomes, and of large industrial users of water, such as the textile industry and food processors. They will be very vulnerable to foreign competition as a result of any increase in their costs. For them, the competitiveness test in the Government's assessment seems to be a bit of a joke, because it expressly rules out of the definition of competitiveness any assessment of the impact of new charges on their competition with external competitors; it considers only whether there will be an effect on new entrants to the existing domestic market. In addition, what is the position of hospitals? The Government's assessment states that hospitals can expect significant increases in their bills, but I have seen no quantified estimate published anywhere. I hope that one will be published soon.

I shall make two brief points in conclusion. First, how will charges be enforced against non-payers? There is an increasing problem of bad debt in Great Britain. I can think of some parts of Northern Ireland where enforcement will be difficult. How does the Minister propose to deal with that? Secondly, why is he not using either Ofwat or the Scottish regulator in his consideration of the regulation of Northern Ireland's water system, as it seems, on the basis of the
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Government's documentation, that it is only the matter of legislative time that stands in the way of applying that existing store of expertise to the Province?

10.48 am

The Minister of State, Northern Ireland Office (Mr.   John Spellar) : The hon. Member for Aylesbury (Mr. Lidington) raised a number of detailed points with which I shall try to deal, but I may have to reply to some in correspondence. I welcome the opportunity to respond to this Adjournment debate and I congratulate the hon. Member for Belfast, East (Mr. Robinson) on securing it.

When devolution was suspended in October 2002, we made clear our determination to bring about an early return of devolved government to Northern Ireland. However, that has not, as yet, been possible. One of the most difficult issues that we inherited from the Executive was the need to find a better way to finance water and sewerage services—that is one thing on which I think everyone can agree. An incoming Assembly and Executive would be in a position to change their minds, but not the arithmetic, as I hope to show during my response.

This year, water and sewerage services in Northern Ireland are costing more than £380 million—more than £1 million every day. I have not put much weight in my arguments over the last couple of years on the framework directive but, across Europe, higher standards are being introduced to improve the quality of the water that we drink and to reduce pollution in our rivers, on our beaches and in the sea. That imposes costs on the system while, at the same time, increasing demands are being placed on services in Northern Ireland. The modern lifestyle, as has already been mentioned, requires greater use of water. In addition, the welcome increase in demand for housing in Northern Ireland means that we have to cater for about an extra 200,000 homes that are expected to be built in Northern Ireland over the next 20 years.

All of that is costly. In 2003, it was estimated that the water and sewerage infrastructure would need £3 billion worth of investment over the 20 years until 2023. Some of that investment is already taking place. The spending proposals contained in the budget published by the Secretary of State in December 2004 allocated £735 million for investment in the water and sewerage infrastructure between 2005–06 and 2007–08. That will mean that about £1.1 billion will have been invested in the infrastructure in the five-year period up to 2007–08, and that more than a third of the £3 billion investment that I identified will have been provided before domestic consumers are asked to pay the full water charge.

It is worth re-emphasising the need to sustain investment. Water and sewerage services need sustained and reliable investment over long periods, which is difficult to achieve while the Water Service is within central Government and subject to the normal three-year financial planning periods. It has been accurately shown elsewhere in the UK that the water industry needs long-term planning and reliable revenue streams if it is to be efficient and effective.

The problem in Northern Ireland has been that the Water Service has had to compete for public funds with health, education and transport, unlike in England,
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Scotland and Wales. That may explain why there has been a legacy of under-investment in water and sewerage infrastructure, as several hon. Members have noted. Let me address the suggestion that that legacy should be financed by the central Exchequer. It is true that there has been under-investment in infrastructure, but that has been a feature of all regions in England and Wales, and not only in the water industry. We have all been living off the Victorian legacy.

It has also been mentioned that when English water companies were privatised in 1989–90 they received what was known as the green dowry. That was off-set in large part by the proceeds of privatisation—some £6   billion—which provided a benefit to all UK taxpayers. The Northern Ireland Water Service was not privatised, so the green dowry arrangements did not apply. However, Northern Ireland's spending power was increased by some £50 million a year to compensate for the fact that privatisation meant that water and sewerage services would, from that time on, be outside the scope of the Barnett regime.

It is also true to say that although there may have been under-investment in the water and sewerage infrastructure throughout the 1990s and up to the present date, Northern Ireland's share of public expenditure has been higher per person than in England, Scotland and Wales.

Lembit Öpik : I find it curious that the Minister is defending the policies enacted during the privatisation of water, whereas I clearly remember the Labour party being fiercely opposed to those privatisation plans in exactly the same way expressed by Members representing Northern Ireland today. Why the 180° U-turn?

Mr. Spellar : I am in no way defending the situation; I am describing it and the position that we are in now. Hon. Members need to say why they believe that UK taxpayers should pay for Northern Ireland's under-investment, when the UK taxpayer did not pay for the legacy of under-investment in England and Wales. I almost detected the implication from the hon. Gentleman that he thought that the voters of Montgomeryshire should pay for that under-investment, or perhaps the voters of Scotland or England. I am not sure that that would be acceptable.

That dilemma was recognised, if not by the hon. Gentleman, certainly by the Northern Ireland Executive before suspension in 2002. They reached the conclusion that there was no realistic prospect of the Treasury providing additional expenditure on the necessary scale. Indeed, it is worth quoting exactly what the Executive said in their rating policy review document, published in May 2002. They concluded that there was

They went on to say that it was not

in Northern Ireland—

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That was a recognition of the reality, so I give full marks to those who try to change that reality, but we cannot do so, and it has not changed.

As an incentive to introduce self-financing arrangements, the Treasury offered to treat the non-cash costs of water services as fully additional to Northern Ireland's normal allocation of money for public services, thereby removing the responsibility for funding those costs from the Northern Ireland departmental expenditure limit, managed by the Executive. The Executive considered that before suspension, and it is worth noting that the draft budget for 2003–04 to 2005–06 that they presented to the Assembly in September 2002 did not make provision for the non-cash costs that would have been necessary had the Executive rejected the Treasury's offer. So, although it is true that the Executive had not made a firm commitment to introducing water charges, that was one of a number of signals that clearly showed the general direction in which they were heading.

We have to give careful consideration to how we might best develop and maintain the water and sewerage services that Northern Ireland needs for the 21st century. Having examined the limited alternatives, we are satisfied that the Executive were on the right course, and that water and sewerage services should become self-financing.

I am mindful of the time, so I shall move on quickly to the second issue: where should those costs fall? One question is in which area. In line with practice both in Scotland and in England and Wales—although there are variations between the two—we have taken the value of property to be the best indicator. That will
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mean that those who live where property is more valuable will end up paying more; that is the essence of any rateable system.

Metering is important, too, because that also determines where costs fall. About 80 per cent. of the cost of delivering water to households is fixed, irrespective of how much water is delivered. Only 20 per cent. is variable, depending on the amount delivered. That is particularly the case in Northern Ireland because it does not have the situation that prevails in, say, parts of eastern England, where additional reservoirs and new facilities may need to be provided. If we have a pro rata reduction, as suggested by the hon. Member for South Antrim (David Burnside), those in better-off households will effectively receive a subsidy from those in poorer households. However we cut the amount of money, we come to the point when someone has to pay, and it is really a case of where the costs fall.

On the question asked about rateable value, we are clear that we will have in place the mechanism for sending out bills and collecting money by October 2006. The rateable values are due to be published. We will be working from the common database, so no one in the Northern Ireland Water Service will be in the firing line on appeals and so on. Those values will be published in April 2006. We will also have to get the necessary enabling legislation through, in order to ensure that the Government company and new framework are in place. We believe that we can do that in the timetable that I set out.

We believe that we have taken the right decision. We are following the principles enunciated by the previous Assembly and Executive, and we believe that what we are doing is necessary for delivering a proper water service for Northern Ireland.
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