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Baroness Hayman: My Lords, the Government have already set something of an example through the Government Car Service and its use of alternative fuels and in the announcement recently made by the Prime Minister of the creation of a cleaner vehicles task force. That will set up a new partnership between government and industry to promote the production and sales of cleaner vehicles. Encouraging the uptake of more fuel-efficient and greener cars will be, as the noble Lord pointed out, an important contribution towards reducing CO 2 emissions from road transport, not just in this country but--I take his point--world-wide.

It is important that we take the lead in respect of the environment and so that we have the opportunity to exploit our own technology in this area and create business opportunities. We must examine the use of fuel cells. The Government are doing that in collaboration with industry, supporting research on fuel cell technology through the DTI's Advanced Fuel Cell Programme, and examining the alternative role which fuel gases might play.

Lord Moran: My Lords, were there any signs at Kyoto that China and India, whose roles in this area will be immensely important in the near future, will be prepared to restrict their emissions in due course?

Baroness Hayman: My Lords, the framework set in 1995 for Kyoto was about the contribution of the developed nations. Industrial nations have been the major cause of rising global temperatures during the past 100 years and must take the lead in tackling climate change.

However, the noble Lord is right because we need to look for an increasingly global solution to a global problem in respect of which the players will change over time. That is why during the next few years we will be working to involve developing countries more closely in international efforts to cut emissions. We will do so in a way which recognises a common, if differentiated, responsibility on all countries to act in this field. It was recognised at Kyoto that progress in the developing countries will be important in ensuring that the US ratifies the protocol.

Lord Hardy of Wath: My Lords, while recognising that the agreement is bound to be greeted with doubt and pessimism, would it not be appropriate for this House to applaud both the reference to the role of trustee and also to pay tribute to the efforts of Her Majesty's Government in the vital role which they pursued in Kyoto?

Is it not regrettable that the previous Government ceased to encourage research in clean coal technology, which was making great strides? Could that be resumed? Will the Government accept that if Britain is to take a reasonable share of the new markets they might take some initiative to bring industry together in order to

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ensure that, having given a lead and having set an example, we have a reasonable share in any forthcoming commercial advantages?

Baroness Hayman: My Lords, I am grateful to my noble friend for his comments about the UK's role, in particular to the role played by my right honourable friend the Deputy Prime Minister, who was a key figure in ensuring that the agreement was reached.

The Government attach considerable importance to the development of clean coal technology, particularly for application overseas where the main market for the technology in the next decade will be. We are currently undertaking a detailed review of the UK's clean coal technology requirements in consultation with industry. We are continuing to support the R&D programme aimed at developing clean coal technology. The DTI is actively encouraging industry and universities to work together to maintain UK expertise and know-how.

Lord Naseby: My Lords, do Her Majesty's Government believe that the decisions taken at Kyoto will prevent a further rise in sea levels, particularly in relation to the importance of that problem to the Maldives, where a six foot rise would see the end of that relatively new member of the Commonwealth?

Baroness Hayman: My Lords, the noble Lord is right to draw attention to that threat to the island nations. Kyoto presented an opportunity for stabilisation where otherwise there would have been enormous increases in emissions with the consequent effect on sea levels which we have seen. It is difficult to predict exactly what will happen. That is why it is important to continue monitoring the effects of climate change while taking measures which will ensure that we do not have the unbridled increases in emissions of the past.

Lord Carver: My Lords, as chairman of the sub-committee of your Lordships' Science and Technology Committee which reported on the greenhouse effect some years ago, I support the Government's achievements at Kyoto. I do so despite all my reservations, which were expressed by the noble Lord, Lord Bowness.

As the principle of tradeable permits has been accepted--I have great reservations about America picking up credits from Russia--will the Government consider introducing them in respect of emissions in this country? I must admit that our committee's report did not support that proposal. Furthermore, as nuclear power is the most suitable method of producing electricity as regards the greenhouse effect, will the Government do more to encourage its development?

Baroness Hayman: My Lords, the programme and measures which we introduce in this country must be framed in the light of decisions taken within the EU in developing policies post-Kyoto and of our legally binding targets. However, I note the noble and gallant Lord's comments about the possibility of tradeability in emissions within this country rather than internationally.

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In 1996, nuclear power generated about 30 per cent. of the UK's electricity. Increased capacity and improved productivity have helped the UK to limit its emissions of greenhouse gases. Provided that high standards of safety and environmental protection can be maintained, we believe that it should continue to do so.

However, the amount of nuclear power in the UK's energy mix is essentially a matter for the electricity generators. We believe that at present there is no case for government intervention in favour of the construction of new nuclear power stations.

Lord Allen of Abbeydale: My Lords, must the United States Government obtain the concurrence of the Senate before they can ratify the protocol? If so, is there a belief that that concurrence will be obtained?

Baroness Hayman: My Lords, the clear view which came out of Kyoto is that the US administration were fully committed to the deal which was agreed. The next two to three years will give us a window of credibility for ensuring the meaningful participation of developing countries and developing rules for the implementation of mechanisms allowed for in the agreement. Those two aspects will be crucial in ensuring that the US is in a position to ratify the protocol. That will be the key. If we can get those aspects right we are confident that the US administration will ratify the protocol.

Scottish Water Industry Review

4.8 p.m.

The Parliamentary Under-Secretary of State, Scottish Office (Lord Sewel): My Lords, with the leave of the House, I will repeat a Statement which has been made in another place by my right honourable friend the Secretary of State for Scotland. The Statement is as follows:

    "With permission, Madam Speaker, I wish to make a Statement about the outcome of the Government's review of the Scottish water and sewerage industry.

    "As honourable Members will know, our manifesto contained a commitment to return the Scottish water industry to local democratic control. In my Answer of 5th June, I said that I had asked my officials to conduct a review of the water industry and to report to me by November, which they have done. The review team had extensive consultations with the three water authorities, CoSLA and the Scottish Water and Sewerage Customers Council. We also issued a public consultation paper, which produced 91 responses. I am very grateful to all who responded so constructively, and I shall place their responses in the library of St. Andrew's House. The review team also held discussions with a variety of other interests and commissioned research into water industry models across the world. We listened very carefully to what has been said before reaching our conclusions.

    "In conducting the review we were guided by a number of important principles. Apart from the central theme of improving democratic

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    accountability, we also wanted to facilitate investment, promote efficiency, ensure continuity of public water supplies, protect public health and minimise disruption to the industry. The importance of these principles, and the importance the industry has for all of us in our day-to-day lives, has been demonstrated only too dramatically by events in recent days in the West of Scotland. These events are very serious, not least in terms of the severe dislocation caused to everyday life for some 60,000 people. I can announce today that Mr. Robert Fraser, a distinguished figure in the water industry and until recently Director of Water and Drainage for Borders Regional Council, will lead an exhaustive enquiry into the circumstances. I have asked Mr. Fraser to address the following points: first, to review the causes, nature and extent of the disruption to public water supplies in the area served by Burncrooks water treatment works, including the impact on the vulnerable sectors of the population, food industries and other water users; secondly, to review West of Scotland Water Authority's response to the incident; thirdly, to consider the lessons to be learned for the future from such an event. In particular, whether advice to the public needs to be given at an earlier stage, whether better arrangements need to be made for the provision of alternative supplies of drinking water, and whether improved arrangements are required for co-ordination within the public authorities, and with the media; and, fourthly, report and make recommendations.

    "I fully understand the great public concern and the sense of irritation over this incident. I have spoken personally to both the Chief Executive and Chairman of West of Scotland Water today. Contamination levels are falling steadily, and I understand that 17,000 out of the 22,000 households originally affected now have clean water. I have been assured that lessons will be learnt, but I shall want to look hard at Mr. Fraser's report. Because of the urgency of getting the facts and learning the lessons, I am anxious to have a tight but realistic timetable, and have therefore asked for the report to be completed by the end of March. I shall not make judgments before I see the report, but if further action is required I shall not hesitate to take it.

    "This episode does, nevertheless, serve to remind us that the water industry faces two immediate and major problems. First, there is the question of water purity, with the stark fact being that the purity of Scottish water is far down the UK league; indeed, the three authorities are in the bottom five when comparisons are made across the UK. The second is the chronic need for investment, especially in sewerage, to meet the requirements of European directives. The fact is that while the period of local authority control is looked back on as a period when the ownership of the industry was most generally acceptable, we have to accept that the infrastructure, often Victorian, was allowed to decay, and the consequences now mean that very great sums are required to bring the industry to a satisfactory level.

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    We have to consider how we can best assist the industry in the task it has to meet the real demands ahead.

    "I turn now to the various options which emerged during the review. We looked carefully at a wide range of proposals for the industry. Splitting the three authorities up between the 32 separate unitary councils was quickly ruled out. It is clear that disturbing the three authority structure would have disproportionate costs.

    "A leading option, however, was to seek to improve accountability by transferring responsibility for water and sewerage services to joint boards of local authorities. Joint boards can be an effective way of providing strategic services, and the water authorities undoubtedly provide a vital public service. However, the water authorities are also large businesses with massive investment requirements, and just three authorities cover Scotland's 32 local authorities. I have therefore had to reject this approach. The last local government reorganisation made these options virtually impossible.

    "We also carefully considered the imaginative case advanced by some consultees to convert the public water authorities into private, non-profit distributing companies such as mutuals. Such bodies would be freed from the capital controls of the public sector. But at a cost. That cost would be freeing them from answerability to any democratic body. I do not believe that is what the Scottish people want. It would be entirely outside the public sector--effectively it would be privatised. A mutual would be nominally controlled by its membership, but how effective control over the boards would operate is much less clear. I am also not convinced that a mutual, monopoly water authority would be under sufficient pressure to be efficient, as all experience tells us that individual customers would not be motivated to protect their interests. Nor am I convinced that unwelcome pressures to demutualise could be avoided. In the short term it would be very disruptive for the industry. I have therefore also had to reject this way forward.

    "Despite this, it is clear to me that, if the investment needs of the Scottish water industry are to be met at a cost the consumer can afford, we shall need to harness private capital and expertise, within a framework of continuing public accountability. Let me first deal with the crucial issue of accountability.

    "Since we launched the review, the Scottish people have given a resounding endorsement to the parliament. Our White Paper on Scotland's parliament made clear our concerns about the number of public bodies in Scotland being run without clear democratic oversight. It said that we saw the new parliament as the means of bringing them under strengthened democratic accountability. Responsibility for the water and sewerage industry will pass to the Scottish parliament. In the longer term it may wish to look again at some of the arrangements for change, but these could not and should not be

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    options for today and tomorrow. In any event, I would expect that it will wish to allow the system to settle and perform before considering any further options.

    "The Scottish parliament will be able to bring the water authorities under the proper level of scrutiny that a modern democracy demands through its oversight of the Scottish executive. This is the best way of delivering the will of the Scottish people for their water industry to remain unambiguously in public ownership and to be clearly democratically accountable.

    "As well as becoming more accountable, I wish to see the water authorities become more responsive at a local level. As part of developing local responsiveness I shall ask the water authorities to build further on their links with the local authorities and community councils in their areas, which will be helped by the community planning system we are shortly to introduce. I also look to the water authorities to get closer to their customers and to other important local stakeholders including environmental interests. I shall very shortly issue a direction to the water authorities to review their systems for involving local interests, particularly local authorities, and to improve and strengthen these systems. I also propose to place a statutory duty on the water authorities to consult with the local authorities whose electors would be affected by major decisions. This should improve the water authorities' responsiveness to the concerns of local communities.

    "Moreover, I can today announce new appointments to the water authority boards. Ian Preston and John Robertson, chairmen of the East and North Water Authorities respectively, will demit office at the end of March. I am very grateful to both of them for their good work and public service. In the east, Councillor Robert Cairns will take over, and in the north, Councillor Colin Rennie. John Jameson remains chairman of the west authority. In addition to the two new chairmen, I am appointing as new members in the east Councillor Jeanette Burness, Councillor Thomas Dair, David Bleiman, and John Broadfoot; new members in the west are Councillor Gerald Carroll, Councillor David Munn and Jane McKay; and in the north I am appointing Nigel Hawkins as a new member. I am also reappointing a total of seven current members to the boards. These appointments bring the number of local councillors on boards up to 16 out of the 33 members, excluding chief executives--i.e. roughly half the total. Of these 16, six are Labour councillors. I have made full details of the appointments available in the Library.

    "One aspect of local responsiveness I wish to explore further is how best to help with the problems of water supply and sewerage faced in many of our remoter rural areas. I have therefore asked officials to review whether or not there is a case for reintroducing rural grants to help with such problems.

    "As I have already said, the water industry review has again emphasised that the industry is in need of very substantial investment if the Scottish people are to have the quality of water industry that they deserve.

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    But that investment will have to be paid for. Put simply, this means that all of us who are water consumers will have to pay more in the years ahead. Let me be quite clear. This investment is needed to bring the quality of our water up to the standards south of the border, to protect our beaches, rivers and seas, and to renew the infrastructure gifted us by previous generations which more recent generations have neglected.

    "The private finance initiative is paying off by helping us to acquire additional resources to meet EC environmental deadlines, and in identifying innovatory ways of making savings in the capital and operating cost of projects. The water authorities have substantial plans for PFI projects, amounting to some £600 million, to help meet their investment needs in the years ahead. This Government are committed to developing opportunities for public private partnerships. I encourage the water authorities to be innovative with such partnerships while working within the framework of strengthened democratic control I have outlined.

    "The Scottish people will need safeguards to ensure that money raised is well spent. There was consensus amongst the major consultees that the current division between price regulation by the customers council and efficiency regulation by the Scottish Office has proved untenable. I propose to create a new position of a regulator responsible for all aspects of economic regulation and for promoting the customer interest.

    "The water authorities will be under legitimate democratic oversight, but they are still monopolies, and the new regulator will have operational independence to ensure that the customer gets the best possible deal. The regulator will be accountable to the Scottish parliament through the Scottish executive. To safeguard the independence of the regulator's role, the position will be established in statute.

    "The functions of the current customers council will be transferred to the new unified regulator, and the council in its current form wound up. However, it is essential that customers continue to have a strong independent voice. I therefore propose to develop the role of the three customers council area committees as the champion of the individual customer. These committees in their developed form will be accountable to the new regulator, and will provide a point of contact for the public.

    "I have also listened carefully to representations made about the damaging uncertainty for the industry of the current one year time horizon for price and EFL decisions. I therefore propose that there should be a longer-term pricing framework, and we should aim to ensure as stable a borrowing framework as possible, despite changing circumstances in successive public spending plans.

    "Finally, I have also listened carefully to the views expressed to us during the review about the contribution that people with business experience have made to the boards of the new public authorities, alongside councillors. As will be clear from the appointments I am announcing I judge it essential that

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    we continue to draw on the expertise that the private sector can offer to ensure well balanced and effective boards.

    "In sum, my proposals represent real local responsiveness, and real democratic control. They show that we have listened very carefully and thoughtfully to what has been said during our extensive consultations. We are seizing the opportunities created by the Scottish parliament to have more democratic control of the industry, and to find the best way forward given the particular sensitivities of this industry. We shall not play politics with Scottish water.

    "My proposals to change the system of regulation will require legislation, and the Government will look for an appropriate opportunity to legislate. I am also publishing today a factual document that I asked the review team to prepare setting out in more detail the outcome of the review. Copies will be available from the Printed Paper Office".

My Lords, that concludes the Statement.

4.25 p.m.

Lord Mackay of Ardbrecknish: My Lords, I am grateful to the noble Lord, Lord Sewel, for repeating the Statement made by his right honourable friend Donald Dewar in the other place. I must say that the 16 minutes of Statement could perhaps be encapsulated in two words, "about turn", because that is exactly what this Statement is.

Before I turn to the "about turns" perhaps I may welcome the part of the Statement which is slightly aside from the framework for Scottish water; that is, the appointment of Mr. Robert Fraser to inquire into the circumstances surrounding the problem of the water supply in north-west Glasgow and the Bearsden area, and so on, where diesel was spilt into the supply system. That has meant that a number of people have discovered that water is an essential part of our everyday life. We have come to take it very much for granted. I am therefore extremely pleased to hear that the Secretary of State is setting up an inquiry because, without going over the issue at all and pre-judging it, there seems to have been something of a time lapse between the incident happening and consumers being warned that their water may well not be drinkable due to contamination by diesel.

The second small point with which I shall deal now is the question of the regulator. Towards the end of the Statement, the Minister announced the creation of the position of regulator. I presume that is rather similar to the Ofwat appointment that we made when we privatised water in England. To that extent, I welcome the Government's conversion to the importance of regulation. I believe that that indicates that they do not have a great deal of faith in democratic accountability by councillors, which is what they preached before the election. Indeed, it is the contrast between this Statement and what the Government were saying before the election which struck me most as I sat listening to the Minister.

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I remind your Lordships of some of the things that were said before the election by the party opposite. In 1995 the Scottish Labour Party's manifesto for the Scottish unitary party elections stated:

    "The next Labour government will return water to directly elected control. Labour will not nominate people to serve on these new water boards unless plans are changed so that they are run by elected councillors".

In a speech that year to the Scottish Labour Party Conference at Inverness, George Robertson, the then shadow Secretary of State--I suspect well out of the way, probably in a tank with the hatches battened down in an exercise in some far off land at this very moment--said:

    "I make this clear pledge to the Scottish people. On my first day in St. Andrew's House I will end this undemocratic farce. All the Water Quango Appointees--whoever they are--will be told to clear their desks, and I won't take no for an answer. Labour will then replace them with locally-elected councillors, chosen by their locally elected councils. Scotland's water will be back where it always should be--in local democratic control".

Just to show that it is not just history, earlier this year the 1997 Labour Party manifesto stated:

    "We will return Scotland's water services to local democratic control".

Of course, we all remember that in 1994 the party opposite, egged on and helped by its friends in the Strathclyde region, conducted a referendum, at great public expense to those of us who are council taxpayers in Strathclyde, on whether the people approved of the three water authorities then being set up by the Conservative Government. The poll was fairly overwhelmingly against the then government's plans--97.2 per cent. against and 2.8 per cent. in favour. Now that there has been this great turnabout and the structure is to be kept, I wonder whether the Government will fund another referendum in Strathclyde so that we can all have an opportunity to see what people think about the new structure. It really is amazing. It is not long since the position of the party opposite in Scotland was that frankly nothing was more for the best in the best of all possible worlds than local government control of water. Certainly in comparison to all the horrors of privatisation, Scotland was in an enviable position--or was it?

Is the Minister really able to read out the words in the Statement with a straight face? First, he said, on the question of water purity,

    "with the stark fact being that the purity of Scottish water is far down the UK league; indeed the three authorities are in the bottom five when comparisons are made across the UK"

--and I thought that the privatised water authorities in England were the absolute pits so far as the Labour Party was concerned. It would appear that they are a great deal better and have been a great deal better than the local authority-driven water authorities in Scotland. A chronic need for investment was referred to, especially in regard to sewage. Anybody who walks along some Scottish beaches will know that is the case.

Then came what I thought was the gem: the Minister managed to say with a straight face:

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    "while the period of local authority control is looked back on as a period when the ownership of the industry was most generally acceptable, we have to accept that the infrastructure, often Victorian, was allowed to decay"--

and this under the control of the blessed local authorities! It is no wonder that we are doing an about-turn today and the Government are accepting that the water authority situation in Scotland set up by the previous government is the best way to deliver water services to the people of Scotland.

We go further. The Government are now saying that, thanks to the under-investment by local authorities in all the years they ran water, water consumers will to have to pay a great deal more in the years ahead. Let me be quite plain with the Minister: this investment is needed to bring the quality of our water up to the standards south of the Border. And south of the Border is where water is privatised, and it is supposed to be awful. So in fact the Government are accepting--and their English colleagues ought to be accepting also--that water privatisation has been a success. I wonder why they did not think about this in Scotland--after all, New Labour, new ideas.

Is the Minister now satisfied that, even returning it to semi-local authority control--or 16 out of 33, which seems to me a long way short of what they originally said they were going to do--this would actually precipitate the water authorities back into the position which he himself has said was totally unsatisfactory, with the infrastructure allowed to decay? I notice with interest that he has rejected any return to local authority control as such; and I think that is gratifying. However, will he now say that the Labour Party's position in 1994, when it instigated the referendum I mentioned earlier, was entirely wrong and that it was wrong to attack the proposals then being made by the previous government? That is in fact what this Statement is saying today. So they are either wrong now in keeping the three authorities or they were wrong then in opposing them. I must say that a number of my colleagues and ex-colleagues will be gratified today to have this ringing endorsement of the policy of having three water authorities.

Turning to the question of the appointments, I am interested to see that people with business experience have made a contribution to the boards. That was not what the party opposite said when the people of business experience were being appointed to the boards in 1994. But we will leave that to one side. Perhaps the Minister will tell me this. If people with business experience have a lot to contribute, why have two eminent Scottish businessmen like Ian Preston and John Robertson been removed from chairmanship of their two boards? Perhaps he will also tell us what are the business qualifications--I know they are councillors--of Mr. Robert Cairns and Mr. Colin Rennie that make them suitable to be chairman of these two very big industries on which all of us in Scotland depend. Perhaps he will explain that.

Coming lastly to the question of the Scottish parliament, I could not quite understand that. Is there just a suggestion here that the Scottish parliament may well take over control from the water authorities and in

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fact run Scotland on an all water authority basis? That possibility exists. Does it not in fact keep the very uncertainty that the Minister later in the Statement said he wanted to avoid?

The Minister freely admits in the Statement again--surprise, surprise--that private finance will be needed to improve Scottish water and sewerage. That is another welcome conversion. He might point out to one or two of his colleagues in the ministerial team that they ought to stop their antagonism to the private finance that built the Skye Road Bridge if they are actually going to embrace private finance when it comes to the water industry.

The final piece--and I think the Minister deserves a prize today--was to listen to him reading out with a straight face the words:

    "We shall not play politics with Scottish water".

What was the Labour Party doing in 1994 with its referendum in Strathclyde? What was it doing at the Labour Party Conference? What was it doing in the manifesto? I welcome the Labour Party to its new realisation that indeed you cannot play politics with Scottish water. It is the Labour Party which has been playing politics with Scottish water, and we welcome its conversion to having three water authorities and its at least partial conversion to the fact that businessmen have a significant role to play in the delivery of water services in Scotland.

4.36 p.m.

The Earl of Mar and Kellie: My Lords, I thank the noble Lord, Lord Sewel, for repeating the Statement made in another place and I had better declare an interest in that I am not just an East of Scotland water customer. I also receive wayleave payments from that board.

The Scottish water industry may have been expecting a rather more vigorous shake-up than what is actually going to happen, but I suppose this has to be good for continuity. Ultimately the question must be about the ability to deliver services to the right quality, to the current standards and with appropriate efficiency and safeguards. The three authorities have a considerable duty to the 98 per cent. of Scots who receive water services and to the 95 per cent. who use the public sewers. The ability to invest in infrastructure is clearly critical. That opportunity to replace and develop infrastructure is limited by the ability to borrow. The Statement describes the limited borrowing opportunities which will be allowed. These seem to be less than the water charges paid by consumers would stand.

The noble Lord, Lord Sewel, outlined how local democratic control will be re-instituted. I am grateful for the assurance about continued public ownership. I welcome the opportunity for more elected local councillors to be on the three authorities, although they do remain quangos. I am glad that Labour councillors have now got over their squeamishness about sitting on quangos and I hope that the new members will be well acquainted with the needs of the water industry.

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On these Benches we would have preferred the option of three joint boards drawn from all the councils covered by the joint board areas and constituted proportionately. That way accountability for water and sewerage would be at the ballot box. The creation of a Scottish water regulator will bring together the supervisory powers of the Scottish Office and the Scottish Water and Sewerage Customer Council.

Clearly, the three monopolies--and after all that is what they have to be--need to be regulated. I welcome the promised creation of the three area consumer councils which are to champion the interests of local consumers. The measures intended to deal with the ongoing west of Scotland diesel and water problem are welcomed, and I wish Mr. Ronald Fraser well with his inquiries. Water is such a fundamental commodity that this is a most regrettable event. Clearly, this will be an incident for a regulator to deal with. Penultimately, the attention which will be given to the remoter rural areas is welcomed, particularly the possibility of rural grant aid. I am glad that that has been included in the considerations. Finally, I am glad to hear that the Scottish parliament will supervise the Scottish water industry and possibly reshape it as required in the near future.

4.40 p.m.

Lord Sewel: My Lords, the noble Lord, Lord Mackay of Ardbrecknish, has had his bit of fun. I do not begrudge him that at all. However, we have done what we said we would do. We said in the manifesto clearly and absolutely without any reservation that we would return Scotland's water authorities to local democratic control, and that is what we have done. I am afraid that the noble Lord still does not understand the basis and the whole emphasis that the Scottish parliament will have in the public life of Scotland. It is through the Scottish parliament and through accountability to a Scottish parliament that we have addressed the democratic deficit that was established by the previous administration in setting up water authorities which were completely lacking in any form of democratic accountability within Scotland. We have put that right and we have done it through the Scottish parliament. I hope that the noble Lord opposite will finally recognise the constructive role that the Scottish parliament can play in bringing about and enhancing democratic accountability in the institutions of government in Scotland.

As I said, we considered bringing the water authorities back under joint boards. If we had been in the situation that the noble Lord, Lord Mackay of Ardbrecknish, described prior to local government reorganisation, a strong case could have been made for that because we had a limited number of regional councils which had previously been water and sewerage authorities. The re-organisation of Scottish local government which created a plethora of smaller authorities made that option impossible because when you sat down and decided what the composition of those joint boards would be in order to recognise the population weight of the constituent authorities, you finished up with large and unmanageable boards. We did not think that that was a way forward in terms of

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good and effective management. The noble Lord, Lord Mackay of Ardbrecknish, sang long and loud the claims of privatised water. Do I take it that it is now his policy to advocate the privatisation of the Scottish water industry? I think we deserve clarification.

I turn to the points made by the noble Earl, Lord Mar and Kellie, on the composition of the authorities. I wish to stress that all those who applied for membership of the authorities, and indeed those who indicated a wish to serve as chairmen of the authorities, were subject to the full rigour of the Nolan procedures. There can be no claim that those people who are now serving on the water authorities do not deserve to be there and do not measure up to the task; they do, and I am sure that they will do a good job.

4.43 p.m.

Lord Monro of Langholm: My Lords, as the Minister responsible for the water section of a local government Bill, I remind the noble Lord that I spent hour after hour after hour in Committee listening to Members of his Front Bench--mainly George Robertson and Mr. McLeish--saying exactly what they were going to do the day after the election, and how they were going to return to the situation of 12 local authorities managing water. That is very different to the democratic method that the Minister is trying to promote in the proposals he has mentioned today. I congratulate the Minister on doing a complete U-turn with regard to what Members of his Front Bench said in the run-up to the election and during the Committee stage of the Bill.

Does he also agree that we were absolutely clear--I was clear about it throughout all stages of the Bill--that we were not privatising water in Scotland but we were providing the opportunity for investment in the water and sewerage industry which was absolutely essential? I am glad that what we proposed and what we carried out has proved to be so successful. I am glad that the present Government are following our lead.

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