Draft Water and Sewerage Services (Northern Ireland) Order 2006

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Lady Hermon: Will the Minister give way?
David Cairns: One last time, because I am just about finished.
Lady Hermon: I am genuinely grateful to the Minister. Will he confirm two things? Will he invite the Consumer Council to the next available meeting slot that he has in his diary, to rebuild their fractured relationship? There are huge tracts of rural land in Northern Ireland, as he knows, so will he guarantee that pensioners will be given meters?
David Cairns: Yes, I give that guarantee.
Before closing, I want to deal with the important issue of the environment. Friends of the Earth and Northern Ireland Environmental Link broadly welcomed the measures in the draft order, which will improve the environmental compliance of water and sewerage services. They, like me, recognise the need for a change to the current arrangements, whereby the Government effectively act as administrator, service deliverer, regulator and provider of finance for water and sewerage services. The quality of water in Northern Ireland is not as good as in Scotland, England and Wales, and we lag behind in our environmental commitments to rivers and beaches. However, when there is sustained investment over a longer period, all will benefit, water quality will improve, people will see a return on their payments and the investment will make our rivers and beaches better.
The Government have taken a long time to develop their policies on the reform of and investment in water and sewerage services to which the draft order gives effect. It represents a fundamental pillar of public service reform in Northern Ireland, and it lays the basis for sustained capital investment not only in water and sewerage services, but in health, education and other public expenditure priorities. Without moving the delivery of water and sewerage services out of central Government and without introducing new charges, as the order provides for, Northern Ireland could lose up to £500 million for its public services every year from the end of the decade.
The order will ensure that we improve the quality of our water, secure long-term investment in our infrastructure and enhance the rights of the public in Northern Ireland.
5.2 pm
Mr. Laurence Robertson (Tewkesbury) (Con): I, too, welcome you to the Committee, Mr. Caton.
We are in Committee for yet another statutory instrument dealing with yet another important matter. Once again, I open my remarks by saying how unfortunate it is that we are legislating in this way. We have been saying that for a long time. We have passed one deadline after which the Secretary of State said that the Assembly would be up and running, or the salaries ended and the Assembly dissolved. We have passed that deadline without reforming the way in which we govern Northern Ireland. That is very unsatisfactory. The Government have made promises to the House, and they have been broken.
We are now told that the Assembly deadline is 26 March. As the Secretary of State is so confident, I should have thought it worth leaving matters as controversial and important as rating, water, education and reorganisation of local government to the Assembly. The Government say that the investment is essential, and that if there are no water charges, there will be a black hole in the Northern Ireland economy. However, I rather think that is up to the people of Northern Ireland to decide which is preferable. Do they think that paying water charges is preferable to taking money out of the budget? It is important to allow the Assembly to make those decisions.
If the order is not agreed to, what will happen? Will that investment in water in Northern Ireland go ahead? I would like the Minister to answer those questions because he rightly said how important the investment is. There is European pressure—not that I usually give much credence to that—and pressure generally to improve the quality of water and its delivery in Northern Ireland. I repeat my questions. What will happen if we do not pass the order today or if the House does not endorse it? Will that investment still go ahead? It would be interesting to hear the answer to those questions.
Because we are rushing this measure, we have the problem that there is no support for it in Northern Ireland. The debate so far has largely been about the consultation period. That matter went to court, which said that the consultation was not exactly as it should have been, and we have had a declaration made to the Committee today. The problem is that despite the massive consultation there does not seem to be much support for the measure in Northern Ireland. On one hand, we went to court about the consultation and, on the other hand, we had massive consultation, but in the end that is not important because the Government ignore it anyway. That seems to be the problem.
I shall quote not a political party—representatives of political parties are present today and can speak for themselves far better than I could speak for them—but the Institute of Directors. It is a very quotable quote which gets to the heart of the issue. I have a problem with the order, partly for the reasons that I have given and partly for reasons that I shall come to. The institute said:
“We continue to object strongly to a charging system based to any degree on the capital value of property which implies, wrongly, that there is an inevitable link between property value, the use of water and sewerage and/or the ability to pay, and which embodies no discipline of restraint in the use of resources and services”.
That states the position well.
I am always in a difficult position when attacking the Government because Ministers and their officials are helpful in briefing me. I do not have the benefit of civil servants and the Government are always generous in allowing me access to them and they are always willing to meet me and to talk to me about such issues. I have a problem because I feel that it is not good form to attack the Government, but I have a job to do.
The Government say that the amount of money from water charges in the first year would be in the region of £90 million to £100 million. However, there must inevitably be a consequent drop in the disposable income of people throughout Northern Ireland. One problem that we have debated many times is the size, or lack of it, of the private sector in Northern Ireland. We want to increase the private sector, which means people having more money to spend on goods and services. That is how the economy works. If we take, for example, £300 from the disposable income of a household, that cannot have a positive effect on the private sector in Northern Ireland. I leave that point with the Minister.
I want to raise an issue that I do not thoroughly understand and the more I look into it, the more confusing it gets. The Minister did not quote the figures today, but it has been said that under the old rating system in general, taking rates and water into account, a household in Northern Ireland paid around £650 compared with around £1,300 in Great Britain. As far as I can tell, the rating system change will not change that because the Government have told us that it is revenue neutral. According to the Government, the disparity will not change or be reduced. Even if the average water charge per household is £300, that brings the £650 up to £950, which according to my calculation still leaves Northern Ireland an awfully long way short of the amount paid in Great Britain. My question is how accurate is the Government’s claim that the rating system change is revenue neutral? I am concerned because one of their stated reasons for the change is to bring the amount that is paid in Northern Ireland roughly up to that paid in Great Britain. This measure will not achieve that, so there is something wrong; I have a problem with it. If that is not the reason for the change, I would ask the Government to stop citing it as such.
I also have a concern about basing charges on the discrete value of houses. We have discussed this before, in the rating debate. I cannot believe that each house can be assessed independently and consistently across the Province. It seems highly unrealistic to say, “This house has modern windows and that one has PVC; this house has oil-fired central heating and that one has gas-fired.” All those matters are factors in the assessment of the value of a house. Are we saying that that can be done consistently across goodness knows how many houses? I sincerely doubt it.
We Conservatives have to find our own position. As hon. Members are well aware, making a critical speech is easy, but coming to a conclusion on behalf of one’s party is not so simple. We accept that it is necessary to invest in water and sewerage in Northern Ireland. We also accept the need to make the services ultimately self-financing and agree that there should be parity among both domestic and non-domestic users across the United Kingdom with regard to cost. However, we remain concerned about introducing such a controversial system through the blunt instrument of a statutory instrument—I am sorry, that was rather badly worded. We object to using a blunt instrument to introduce it, as has been done, and we remain concerned about the link to capital values rather than, by and large, to actual water usage. We are concerned about the ability to pay and the knock-on effect that that must have on the private sector economy in Northern Ireland. We are, therefore, sympathetic to the background feeling. I have discussed the issue with a number of people in Northern Ireland, and I know where the Government are trying to go, but I regret the way in which they are going about it, for the reasons that I have given. I am looking forward to listening to the debate. I am sure that it will be interesting and that hon. Members from Northern Ireland will put their cases forcefully.
5.13 pm
Mark Durkan: It is a pleasure to serve under your chairmanship, Mr. Caton, even if the issue before us is not the most palatable. The order contains some 308 articles spread over more than 250 pages and another 50 pages containing 13 schedules, and we have only a couple of hours in which to dispose of it. Some of the issues that it addresses have been the subject of judicial review and, apart from the judgment, some interesting issues arose in the context of that court case. The attitude of some hon. Members might be a little different if they were aware of those issues—such as the sorts of discussion that went on inside Government and the attempts that were made to hide from public view and public understanding serious public policy issues that go to the heart of the matter—all in the Government’s attempt to scramble the legislation through prior to the restoration of devolution.
The hon. Member for Bolsover believes that this matter should be dealt with by people in the devolved Assembly, and I agree. The Programme of Government Committee, which has been established since the St. Andrews agreement, agrees as well. It has written to the Secretary of State asking that this order be deferred, and that the future of the Water Service, water reform and wider revenue matters including the rates be left for the devolved Executive and the devolved Assembly to address.
We are capable of addressing those questions and making the hard choices. We are capable of making better choices that protect the public interest of the people who we represent in Northern Ireland.
Mr. Skinner: Quite frankly, although the hon. Gentleman talks about things being deferred, we have already heard the Minister say that this matter was on the agenda when the decision to dissolve the Assembly was taken. I do not know whether my hon. Friend was one of the members of the Northern Ireland Assembly; perhaps he will tell me. They could have given all the money to Farepak, or something like that, but, of course, they have not done that; they have put it in their pockets and for four years they have been laughing all the way to the bank. Then my hon. Friend comes here complaining that an order four years old has landed in Parliament and there has been no time to consider it. He could have considered it at leisure. He and his colleagues could have had days and days—not two and a half hours—and dealt with it on their own. The truth is, they dodged the column, took the money and ran off.
Mark Durkan: I can tell my hon. Friend that the SDLP dodged nothing and contributes nothing to creating or prolonging suspension. The hon. Gentleman might very well have that argument with the Democratic Unionist party and Sinn Fein, which kept on sustaining suspension in various stand-offs and failed negotiations. He might take it up with the Government, who refused to accept proposals made by the SDLP to restore the Assembly and face people with the responsibility of turning in and making the institutions work—otherwise, salaries off, lights out. We made those proposals more than two years ago, but the Government refused and thought that it was better to continue the litany of side-deals, which just led to more backsliding and getting nowhere. Meanwhile, the real public interest and the real public policy issues that need to be addressed in Northern Ireland, such as the future of the Water Service, have been neglected.
The point that we are making to the Government is that MLAs were still discharging a role. I never lobbied for the proportion of salaries paid to be increased from 50 per cent. to 70 per cent., as a previous Secretary of State did; that came on no approach or representation from the SDLP. When the Government indicated that they would be cutting salaries, the SDLP made no representations. At St. Andrews, when questions on the continuity arrangements were asked, the SDLP did not even raise the issue of salaries, allowances or anything else. My hon. Friend might want to check what, if anything, other parties did.
Mr. Skinner: Did you take the money?
Mark Durkan: In taking devolution forward, we want to take all the major decisions that are needed to protect public services in Northern Ireland. The Water Service did not enjoy the scale or rate of investment that it needed over many years, which is why there are major issues. The Executive and the Assembly were addressing those issues during the previous period of devolution—not on the basis of moving towards privatisation of the Water Service or on the basis of imposing water charges in the way that the Government have done. The Executive agreed, in the context of a public consultation on rate reform, to consider revenue for the Water Service as well. One option, which was specifically written into that public consultation just a few months before suspension, was clearly linking the regional rate to the Water Service. That linkage used to be there. It was abolished by direct rule and we were looking at restoring it, but in a much clearer and more specific way than ever before. That is the position of a number of parties in Northern Ireland.
We want to make transparent and visible our water revenues, so people cannot say, as the Minister has today, that people in Northern Ireland do not pay for their water. Most people in Northern Ireland assumed that they were paying for their water through their rates bill. We would have favoured arrangements that would have made that even clearer, even if it might also, at the same time, have made that burden somewhat heavier. People cannot pretend that those of us who are seeking a deferral of the order are trying to duck the underlying issues and questions.
We need to be clear that a number of issues arise that are not covered by the order. I can accept that hon. Members representing constituencies throughout Great Britain assume that the order must just about cover everything; the fact is that it does not. This is only one part of a much bigger and more complicated jigsaw. There will be the whole question of the operating licence. That is still work in progress—we do not know about it, so we are being asked to legislate on it in the blind. We understand that the Strategic Investment Board is working with the Water Service on the capital works programme, but that is not available for public consultation, and it may not be for some while yet.
There is the whole question of governance. Again, that is work in progress. It is like the strategic business plan—unavailable for any of us to scrutinise or to give feedback or input on. Where is the asset management plan? Where is the estate management plan? We are told that they are still being worked on and that they are still in the offing. There is no clear asset inventory for the Water Service, and it will be not be available until after the legislation has come into force.
I ask my hon. Friends whether they would legislate for their own constituents in the absence of key details that will influence the effective working of a public service—determine whether the GoCo works or collapses into a crisis that will then be used to justify its rushed privatisation as the best way of taking the liability off the public hands. Those issues will determine the bills that consumers will be asked to pay by the company. Those issues will determine whether the consumer interest is protected in the way that the Minister has represented.
Some people have been able to glean from the plans to date that there are strong concerns about whether the business plan is sustainable and whether there are unsound or inappropriate assumptions. If those concerns are valid, there is a huge future liability for Northern Ireland consumers and a potential liability for the taxpayer in general. Hon. Members are very conscious of the taxpayers that they represent. They should remember that in Northern Ireland we had the experience of electricity privatisation, which was completely botched by the Government to the cost of the consumers, who have been paying more than they should have ever since. The taxpayer lost out as well as a result of the poor terms of the privatisation. The same applies to Belfast International airport. On the basis of that experience, hon. Members from Northern Ireland want to ensure that we are not lining up for more of the same. The Minister has said that the water service is not just an important issue in its own right; the choices will affect other services and their funding, and there will be other consequences. Northern Ireland Members are only trying to be vigilant on such issues.
I say to hon. Members representing British constituencies that the same attitude and approach that has been shown by the ministerial team and the civil service on this order could come to a Department near them, on issues that are far closer to their constituents. We would be hearing a very different tone if that happened, and much sharper levels of concern. Hon. Members would be concerned at the way in which policy was driven if it happened to them.
A major issue centres on some sort of agreement between the Secretary of State and the Treasury made in 2005. We still do not have the terms of that agreement, and they are not known. When some of us went to meet the Chancellor recently we asked the Department of Finance and Personnel and the Office of the First Minister and Deputy First Minister whether they could inform us of the terms. Obviously, they are relevant, and we want to know what assumptions are in effect, not just on water but on wider public expenditure. Again, that is unknown.
We must also be concerned by the fact that the order allows for the introduction of private sector ownership of the new water company without any public consultation. Do my hon. Friends really think that it is sound to provide for a GoCo—a publicly owned company—and legislate so that it can take on private sector ownership without any public consultation? I would be surprised if they agreed to do that lightly to public services nearer their own constituencies.
The privatisation threat is not distant. There was a strategic financial review involved in this whole exercise, conducted by a consortium led by the UBS investment bank. It pointed overwhelmingly towards privatisation, and it was clear that private sector involvement would be the main driver in the control of the water service rather than it being a matter of ownership percentages. Options were identified in the report for raising private sector finance and for going further towards privatisation. Let us be clear: Ministers must be aware of all that, because it emerged in the court case that there were emails between civil servants and a special adviser. One of the questions that came up was,
“can you clarify why you do not want to commit to consultation before the sale of shares by this administration? Is this because you do not want to give the impression that the government has any plans to sell shares? Our line up to now has been that privatisation has been ruled out for the foreseeable future and you have also said (helpfully) that if necessary we can go further and say categorically that this ministerial team will not privatise”—
fair play to them—
“(we have not deployed this publicly yet). However, as you’ll know, Treasury are pressing us to review whether there would be benefits from greater private sector participation ... in 2008 ... Such a review could conclude that there would be advantages to bringing in a private equity partner which would mean selling a minority shareholding.”
That was the real agenda going on inside Government, but it was not put in the explanatory notes or into the public domain. I ask my hon. Friends to consider whether they might think twice about simply nodding the order through.
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Prepared 29 November 2006