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Lord Stanley of Alderley: Perhaps I should declare an interest. I am an abstractor. Unless I am mistaken, the NRA has powers to take environmental measures. I should have thought that those powers would be transferred to the agency. Therefore I do not see any need for the amendment. While on the subject of abstraction, perhaps I should mention irrigation. I know that irrigation is hated by many because it is thought that it increases yield. Actually that is not its main purpose. If farmers are not allowed to irrigate, none of the supermarkets will take our produce. One may think that that is wrong. I think that it is wrong, but that is the fact of the matter. Therefore we will have imported substitutes for what we can produce ourselves. I cannot see the necessity for the amendment.

Baroness Hilton of Eggardon: I wish to speak in general in support of the amendments spoken to both from the Liberal Democrat Benches and by my noble friend Lady Nicol. Water is one of the essential elements of life, not just for ourselves but also for many wetland plants and animals. It is becoming an increasingly scarce resource, and not just in this country. However, one would not think that that was the case given the current floods in northern Europe. However, it is thought that in the next century countries will fight over water rather than oil. Therefore the more rigorous we can be in preserving water and in ensuring that it is not wasted and that abstraction levels are kept at a minimum, the better placed we will be to cope with shortages and with droughts. I support this group of amendments.

Lord Gisborough: The NRA is surely already responsible for the protection of water and is able to revoke licences. That power is being handed to the agency. Therefore surely the amendment is not necessary.

3.30 p.m.

Viscount Ullswater: In replying to this amendment I am speaking also to Amendments Nos. 203, 204, 205, 207, 222, 377A, 378ZA and 378ZB. The amendments are concerned with changing the powers of the Secretary of State to make drought orders on environmental grounds. Amendment No. 191C introduced by the noble Lord, Lord Beaumont, seeks to permit drought orders to be made to provide means of protecting the aquatic environment by extending the grounds on which drought orders can be made. Amendment No. 205 introduced by the noble Baroness, Lady Nicol, similarly seeks to permit drought orders to be made to provide means of protecting the environment as well as on the present grounds of a threat to public water supplies. Amendment No. 378ZA in the names of my noble friends Lord Crickhowell and Lord Mills is similar to Amendment

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No. 191C in that it seeks to widen the grounds under which a drought order can be made to include protection of the aquatic environment.

At Second Reading my noble friend Lord Crickhowell drew attention to the absence of any such provision in spite of frequent requests from the NRA for it. We are now faced with no fewer than three attempts to rectify the matter. Experience has shown that it can be necessary to take action to preserve aquatic environments during droughts. However, the department is advised that the present wording of Section 73(1) of the Water Resources Act 1991 does not permit a drought order to be made for the preservation of an aquatic environment: the trigger is,

    "a serious deficiency of supplies of water,"

which, in the general context of the 1991 Act, has to be taken to refer to the activity of supplying water. Amendment No. 205 is defective in that it would not have the intended effect but would probably limit the making of any drought orders to cases where both public supplies and an SSSI were threatened. While I am sympathetic to the idea behind the amendments I would hope that, in asking noble Lords not to pursue them they will take some comfort in my undertaking to further consider the amendment of my noble friend Lord Crickhowell which goes some way towards our requirements on the issue.

Amendment No. 378ZB also seeks to make changes to the powers for dealing with drought orders in that it seeks to give the new agency powers to issue drought permits. A high proportion (about 60 per cent.) of drought orders made are in effect temporary substitutes for licences to abstract water or temporary amendments of the conditions of such licences. Those powers would allow the agency to issue drought permits under similar circumstances as currently apply to the making of ordinary drought orders. They would allow the agency to authorise changes to compensatory abstraction and discharge conditions affecting mainly either rivers or reservoirs. We have already published our intention to bring forward changes of this nature and are broadly in agreement with the amendment. The Government are therefore happy to give it further consideration.

I now come to the second tranche of amendments in the group concerned with changing the system of licensing the abstraction of water from surface waters and ground water.

Amendment No. 203 introduced by the noble Baroness, Lady Nicol, aims to give English Nature and its Welsh counterpart the power to seek the review by the agency of any water abstraction licence where they think this necessary.

At present the agency will inherit from the NRA full discretion to undertake a review of any licence, either on its own initiative or at the request of anyone else, and to propose any variation that it thinks appropriate. Given its duty to conserve the aquatic environment, it would seem necessary for it to take seriously any request from a statutory nature conservation body. Furthermore, the Secretary of State will continue to be able to direct the agency to carry out such a review. If

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English Nature is dissatisfied with the response from the agency it can ask my right honourable friend to intervene.

We therefore see no reason for legislation to restate what is already the case. We think that it would be retrograde to do so by specifying a requirement for the agency to act on a request from a statutory conservation body since that might be used by a licence holder to justify objections to doing so at the request of a non-statutory body such as the RSPB.

The second amendment on water abstraction licences tabled by the noble Baroness, Lady Nicol, (Amendment No. 204) seeks to pre-empt any such applications from the conservation agencies by requiring the agency to review all existing licences of right. The noble Baroness asked whether the Government had considered that.

The suggested duty to review all licences of right within five years seems to us undesirable. First, the proposal would require the agency to review a very high proportion of all licences. There were initially just under 50,000 licences of right: there are still only just over 50,000 licences in total. Few of those licences seem likely to give grounds for serious anxiety. Such a review would therefore impose substantial costs not merely on the agency but also on the licence holders. Secondly, such a blanket approach would cut across the more selective system set up by the NRA. That programme requires the NRA to inspect about 2,000 highly critical licences and about 13,000 critical licences every year. If those inspections show grounds for concern negotiations for change can take place and, in the last resort, proposals for compulsory change can be developed. It seems far better to concentrate the available resources on licences identified as critical, rather than to look at those that merely have a particular history.

Amendment No. 377A in the names of my noble friends Lord Crickhowell and Lord Mills would correct the confusion caused by the 1991 consolidation over succession to water abstraction licences. We have already said that it was our intention to correct that inadvertent change to the legislation, caused as a result of the 1991 consolidation, as soon as the legislative opportunity arose. While the amendment affords the ideal opportunity, at this stage I can only undertake to give it further careful consideration.

Amendment No. 207 would permit the setting of mandatory leakage targets for water undertakers. Leakage control targets need to be set at a level which is the lowest reasonably achievable, not for the water company as a whole but in each water supply zone. The Ofwat consultation paper Paying for Growth emphasises that it will in general require an assessment to be carried out by a water company of the relative merits of demand management measures, including leakage control, before taking new resource development into account in setting price limits. The NRA has also made it clear that it will not normally grant further abstraction licences for additional water to a water company unless leakage levels in the supply area are at the lowest level that is economically reasonable. Persistent failure to deal with leakage levels might even result in a review of existing

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licences. Finally, the actual working of the non-domestic rating system as applied to water companies provides a significant economic incentive to reduce leakage. I suggest that such steps, which are already being taken within the existing legislation—and which are already resulting in substantial reductions in leakages—are better than a new system requiring universal setting of an overall target for the whole of a company.

Finally in this group of amendments, Amendment No. 222 in the name of the noble Baroness, Lady Nicol, would enable the agency to promote a charging scheme for water abstraction which would allow charges to be more than is required to recover the costs of running the licensing system, and would enable the Secretary of State to direct the agency to consider terminating or reviewing the water abstraction charging scheme.

The second proposal in the amendment is clearly otiose: the general power of direction in Clause 38 would cover this. The first proposal is, however, much more interesting. In effect, it would allow the agency, with the approval of the Secretary of State, to introduce an economic instrument to regulate the allocation of water rights.

This raises major questions. There has always been a close link between property rights and rights to use water. A water abstraction charge that did more than recover the costs of administering the system could be represented as charging people for the use of their own property. That is not to say that there may not be arguments for such a charge, but they would have to be considered very carefully before it was introduced. We do not think that it would be proper to leave decisions on the form which it might take to the agency: it raises questions which go much wider than its interests. The Government have undertaken to publish a consultation paper on the use of economic instruments to regulate both discharges into water and the abstraction of water. I suggest that it would be better to wait until that paper is available and we have had the benefit of comments from all those interested before we take a decision on the proper form of an economic instrument in this field. Therefore, I ask the noble Baroness to withdraw that amendment, together with all the others.

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