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Baroness Nicol: My Lords, I welcome Amendment No. 276, which fulfils the aims of an amendment that I put forward at an earlier stage. I particularly welcome the noble Earl's interpretation of the provisions which will mean that water metering will not be compulsorily imposed on customers.

However, I have one niggle. All the emphasis is placed on the efficient use of water by customers. Why should we not include the efficient use of water by water companies? The mains which supply water to customers have been leaking with a 25 per cent. loss throughout the time that I have discussed the subject as a Member of your Lordships' House. Despite the work they have done recently, I understand that that figure is still

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roughly the same. It seems to me that the water companies should be included in the need to make efficient use of water, but, apart from that, I welcome the amendment.

Baroness Thomas of Walliswood: My Lords, I wish to make some comments and ask the Minister some questions about Amendments Nos. 276 and 277. I have given the Minister notice, and I am grateful to him for outlining the contents of Amendment No. 276 so that I do not have to explain how my queries fit into that in any great detail.

I welcome the duty now proposed to be laid upon the undertakers to provide new sewerage systems, in effect, for residential premises in their area, but it is not clear in practice what the local authorities' role will now be in requisitioning new or extended sewerage schemes in rural areas. I would be grateful if the Minister could explain how, in practice, he envisages the new system working with the old.

There has been a marked decline in the number of new sewerage systems in recent years, although I think that I was mistaken in the note I sent the Minister when I said that that was especially since the Water Industry Act 1991. I do not believe that that was true. Given the undertakers' reluctance, acting under the present legislation, does the Minister anticipate that more rural sewerage schemes will be built as a result of the Bill, as amended by this schedule, coming into force? Such improved drainage is still urgently required in many rural areas, even though everyone will recognise that not every house can reasonably be expected to be connected to a main sewerage scheme.

A further point relates to what considerations should be taken into account when determining whether it is appropriate for the new sewerage scheme to be provided. That comes under new Section 101A(3). As I understand it, local authorities retain their duty to ensure that private drainage systems do not pollute groundwater or damage local amenities. Will the undertakers be able to defend themselves from a request for a new or extended sewerage scheme by saying that the local authority should exercise those powers rather than attempt to requisition a new scheme? Is that what is intended by new Section 101A(3) (e)?

I move now to new Section 101A(4) which relates to the guidance which will be issued by the Secretary of State. It can often be cheaper, and yet environmentally acceptable, to build small local treatment plants to provide main sewerage to a village community; that is to say, to do that rather than connect such communities to distant existing schemes. Yet a sewerage undertaker can frustrate a scheme by imposing engineering proposals to make the scheme financially unviable to the district council or to the residents, whomsoever is the requisitioner. Will the Government guidance indicate when the option of local treatment schemes will be acceptable?

The powers of the environment agency to determine disputes between property owners, occupiers and the undertakers, on matters other than cost (new Section 101A(7)) are welcome, but will those powers enable also such small local schemes to be put in place where they are environmentally acceptable?

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On the matter of the settling of disputes, it is my understanding that in disputes between a requisitioning local authority and an undertaker, the local authority can seek arbitration only on matters of cost. That, at any rate, seems to be the current interpretation of Section 99(6) of the Water Industry Act 1991. Is it possible for the Government, through their guidance, to extend the scope of that arbitration to cover whether the undertaker has proposed a means of providing sewerage in the most economical or cost-effective way?

That brings me to my final point, which is related to Amendment No. 277. Part of the amendment proposes the repeal of Section 151 of the 1991 Act; that is the discontinuance of the government grant to support local authorities' repayments to the undertakers. I am sure that I do not need to explain that at present the requisitioning local authority proposes that the undertaker does the work and then the local authority pays the amount back over a 12-year period. Let us suppose that the Government still see a role for local authorities in requisitioning sewerage schemes. Will the Minister consider extending the repayment period beyond the existing 12 years to a period which more closely reflects the life of the asset created by the new or extended scheme? Such an amendment or guidance would be some compensation to local authorities for their loss of grant.

I am grateful to the Minister for enabling me to ask those questions.

Lord Wise: My Lords, I am somewhat dismayed by the fact that Amendment No. 317 abolishes the government grants being paid to farmers towards first-time connections to the mains water supply and sewerage. I appreciate that much progress has been made during the past few years but, nevertheless, there are cases in which the continued availability of grants would provide a valuable incentive for farmers to connect to the mains. For example, that may be desirable in cases in which tougher environmental standards dictate that mains connection is desirable in substitution for private supplies and also the means of disposal. I am saddened that the grants will be removed. They are a great incentive and I would like to see them remain.

Earl Ferrers: My Lords, I am grateful to the noble Baroness, Lady Nicol, for her welcome of Amendment No. 276 because it met the points about which she was anxious. She said that she was glad that the meters would not be compulsory. I must say that I have a sneaking sympathy in sharing that view too. There is a forceful argument about meters. The fact is that if supplies are metered people use less and that if people use more one must pay for the construction of reservoirs, filtering plants and heaven knows what else. All of these are expensive and so up go the water rates. Therefore, there is a sound argument for saying that people should pay for what they use and they should be encouraged not to waste water.

The noble Baroness said that it was fine to say that customers should not waste water but what about the companies which waste water all over the place—

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Lord Williams of Elvel: My Lords, I am sorry to interrupt the Minister. He appeared to imply that he was sympathetic to the idea of compulsory water metering. I hope that even at this late stage he will reiterate his personal view and the view of the Government; that they are against compulsory water metering.

Earl Ferrers: My Lords, it is too late to be put on the spot by the noble Lord, Lord Williams. I was merely trying to explain to the noble Baroness, Lady Nicol, that I too had a certain amount of sympathy with her view. However, there is the other side to the issue. It is a question of, on the one hand, this and, on the other hand, that. I thought that I was travelling a narrow course. I was saying that there are arguments for compulsory metering but that compulsory metering is not on the menu at the moment.

The noble Baroness was concerned about the fact that consumers appear to be encouraged to save water but not the companies. Section 37 places a duty on water companies to provide an efficient and economic system of water supply. They would not do that if they wasted their water in an unsatisfactory way.

The noble Baroness, Lady Thomas of Walliswood, was kind enough to give me notice of some of the questions which she asked and I am deeply grateful to her for that.

She referred to the continuing role of local authorities in requisitioning. I can assure the noble Baroness that they will continue to be able to requisition the provision of sewers in rural areas. The second part of Amendment No. 276 imposes a new duty on sewerage undertakers to provide public sewers where there are environmental problems and public sewers are the most appropriate solution in all the circumstances.

She was concerned about whether there would be more rural sewerage schemes as a result of this Bill. It is possible that, overall, there will be more rural sewerage schemes since the new arrangements will have to provide sewers where there are environmental problems which cannot be dealt with satisfactorily by existing systems such as cesspits and septic tanks.

She asked whether sewerage undertakers would try to avoid their obligations by suggesting that local authorities should instead use their powers. It is not intended that Section 101A(3) (e) should be used to allow a sewerage undertaker to pass the responsibility to the local authority to deal with environmental problems. Each case for connection under the new duty will be looked at on its merits. Section 101A(3) (e) is intended to allow consideration of the practicality of alternatives to public sewerage such as the maintenance or repair of existing cesspits or septic tanks and to decide on which is the most cost effective solution.

She was concerned also about small local treatment plants. Once it has been agreed or determined under the new arrangements that the undertaker has a duty to provide a public sewer, it will be for the undertaker to decide which method of disposal and treatment should be used to carry out its existing duty under Section 94 of the Water Industry Act to make the necessary provision for the disposal of sewage. The guidance under the new provisions will not deal with specific options for sewage disposal.

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The noble Baroness asked whether the agency would be able to determine that small local schemes should be used. Again, where it has been agreed or determined under the new provisions that it is appropriate to provide a public sewer—in other words, where there are environmental problems and that is the best solution in all the circumstances—the decision on the type of system will be for the undertaker. The agency will be able to make non-binding recommendations about that.

The noble Baroness asked whether the Government would extend the scope of arbitration under the requisitioning provisions and would consider extending the existing 12-year repayment period for those who requisition, for example, local authorities. Both those matters concern the requisitioning provisions in Section 99 of the Act which are not the subject of the amendments which we are considering this evening. Those amendments introduce a new duty to provide sewers where there are environmental problems and mains sewerage is the most appropriate solution.

My noble friend Lord Wise said that he is sorry that grants to farmers are being stopped and that it was better for farmers to be connected to the mains rather than using private supplies. I understand his feelings in that regard but we feel that grants have outlived their usefulness. The number of properties not connected to the mains has reduced significantly since grants were first introduced and a more practical solution for the remaining properties is now required. If a householder's sewerage is causing problems, that can be rectified without the need for it to be connected to the mains, such as by renewing the cesspit, and that is the most cost-effective solution. It is considered that the taxpayer's money should not be used to meet those costs.

I hope that your Lordships are satisfied with regard to the points that have been raised and I commend the amendments.

On Question, Motion agreed to.

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