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Lord Renton: In examining the matter further will my noble friend consider the possibility of replacing "costs" and "benefits" with "advantages" and "disadvantages"?

Viscount Ullswater: I shall certainly consider everything that has been said today and take further legal advice on the matter.

Viscount Mills: I am encouraged by the remarks of my noble friend the Minister, particularly with respect to Amendment No. 213. I shall read carefully in Hansard all the comments made by Members of the Committee. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 211 to 214 not moved.]

On Question, Whether Clause 37 shall stand part of the Bill?

Baroness Hamwee: The Minister has taken a little wind out of my sails with his final comment about reconsidering the use of the terms "costs" and "benefits". Nevertheless, it is important that at this stage we should have a short general debate on the place in the Bill of a provision for cost-benefit analysis.

The more we talk about the new agencies the more I see them as not merely regulatory bodies. Therefore, I accept that they will have a function in assessing relevant criteria in the decisions that they take. However, I join with those who doubt whether the balance within the clause is correct, and in particular the relationship between subsection (1) and subsection (2).

Subsection (2) states that the duty imposed on the new agency to consider costs and benefits does not affect its obligation to discharge its duties. In other words, there is a distinction between its duties and its powers. That was a point which the noble Lord, Lord Elton, mentioned earlier this afternoon. However, how is the agency to perform a duty if its power to perform that duty is limited?

Subsection (2) overrides subsection (1). That being so, what meaning is to be given to the cost-benefit provisions of subsection (1)? Subsection (1) must have a meaning; subsection (2) must also have a meaning. I am not yet convinced as to which is secondary.

In his evidence before the Environment Committee of another place, the Secretary of State put cost benefit in the context of sustainable development. He said that it gives a real reference to the meaning of sustainable development. It will not have escaped the Committee's attention that we have not defined that clause. Indeed, some will quarrel with his exposition on the term and his acceptance that there is a need for growth.

The Secretary of State also indicated before the Environment Committee that the subject will be a matter for guidance and that draft guidance in that specific area would be available by Committee stage in another place. He indicated that there will be a dialogue with the new agency and others. From that dialogue a guidance will emerge. That is to be welcomed.

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The noble Lord, Lord Marlesford, has stressed that the issue might be more safely dealt with by guidance. However, I wonder whether cost benefit is an appropriate tool, with the assessment of costs on the one hand and advantages or disadvantages of benefits on the other. One has to ask: what costs, and to whom? The Minister has indicated the Government's further consideration of whether environmental and human costs come within the term. I had approached the issue on the basis that they could not do so because that seemed to be the way in which the Bill was to be read. However, that is perhaps not the only issue. The central issue relates to how one assesses the cost on the one hand and the value on the other of achieving or not achieving an aim. I refer to the protection of a geographical area or a specific species of flora or fauna. Such matters are probably the central issue. I do not believe that society has sufficiently advanced the dialogue regarding how one assesses the cost when considering the loss of a species or the threat to a geographical area.

In considering the provision, I have asked: the cost to whom? A small undertaking required by the agency to clean up its act may incur considerable costs. Those costs would be considerable to that small undertaking. They might indeed lead to its liquidation. The costs would be proportionate to the small business's expenditure but, proportionately, a small environmental cost considered globally in absolute terms. I have difficulty regarding how the impact on different sizes of organisations and on the environment as a whole is to be assessed.

The noble Lord, Lord Marlesford, reminded us of the legal fragility (if I may use that term) of the provision—that it may be open to challenge. Constant legal challenge from powerful industries would compromise the agency's effectiveness and make it consider whether it has the means, funded by government, and indeed the will, to resist the big guns of big business. (I hope that I am not too pejorative.) I note that Ofwat supports the clause. I do not believe that it lies well in the mouth of that industry to comment on the costs of environmental protection given the profits earned in the water industry. Even if there is no major challenge, it must be likely that the agency will become bogged down on the wrong issues. After all, it has much to do.

Reference has also been made to the fact that whether or not there is such a provision, public bodies cannot simply take wild decisions. Such bodies are always open to challenge by the courts if they are clearly acting unreasonably given the state of knowledge at a specific time. Without that provision, I do not believe that the agencies would be free to impose clearly impossible and unreasonable costs on society.

Article 130(r) of the Treaty on European Union prioritises the following principles: the precautionary principle; the preventative principle; and the polluter pays principle. It states that costs and benefits are to be "considered". I am interested in the advance—if it is an advance—that the Government consider should be made in the Bill.

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I hope that the Minister can explain in some detail the best practicable environmental option, and the best available techniques not entailing excessive costs, matters to which he has already referred. There is now a good deal of literature on BATNEEC and BPEO. I had thought that the principle of BATNEEC was supported by Government. I do not understand the relationship between those and the provisions of Clause 37; perhaps the Committee does. It would be helpful to understand them.

Clause 37 gives the wrong balance. It will require the agency to compromise itself. We must ask ourselves whether cost, as defined in terms which are normally used with regard to costs to individual businesses, is a cost to be put on the environment.

Baroness Hilton of Eggardon: I echo much of what has been said. I welcome what the Minister said, although it confirmed some of our worst fears: that the term "cost" tends to be measured only in financial terms. That is our specific anxiety about Clause 37.

It has been interesting to note that briefing material which has flowed in has been sharply divided between the industries' interests on the one side—I refer to the CBI, Ofwat and the Institute of Directors, which are all much in favour of the clause—and the environmental groups which are much opposed to it. For some of the reasons just given, industry clearly sees the provision as a means of avoiding the imposition of anti-pollution measures—measures which will support the environment. The environmental groups fear that that is what will happen.

We are all in favour of efficiency and the BATNEEC principle. As the noble Lord, Lord Marlesford, said, ridiculous costs should not be imposed on our society. As the noble Lord said, it would be sensible if the issue were subject to ministerial guidance as opposed to being on the face of the Bill. Our anxieties are that there is no purpose laid down for the agency. Its aims and objectives are not laid down in the Bill. Those are subject to ministerial guidance and are therefore much weaker. For some mysterious reason the duty relating to cost-benefit analysis has been written on the face of the Bill.

There is a reference, too, in Clause 37 to the objectives and aims of the agencies, but those are not spelt out in the Bill. There seems an imbalance in favour of considering the costs of any environmental measure as opposed to the other duties, aims and objectives of the agency which are merely subject to ministerial guidance and are not written into Clause 1 of the Bill as its overriding, overarching purpose.

That is our specific concern about the clause. It is not that one is opposed to the idea that the expense of any proposed measure should be part of the assessment as to whether that measure should be put into effect but rather that the agency's position in pursuing environmental objectives is considerably weakened by Clause 37.

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It is interesting to note that the CBI's briefing on this issue refers to aims and objectives of the agencies as though those were clearly laid out and we all knew what they were. It opens by saying:

    "Clause 37 provides a significant move forward in ensuring that the new Agencies will take action proportionate to their objectives".

But as the Bill does not lay down any aims, objectives or purpose for the agency, one cannot agree that the balance has been correctly struck. It is precisely for that reason that we have considerable doubts about having Clause 37 in the Bill when the agency has not been given clear directions and powers elsewhere.

It is not my intention that Clause 37 should necessarily be removed from the Bill, but it should be balanced by a clear purpose for the agency elsewhere in the Bill. That is something to which we propose to return at Report stage.

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