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Baroness Miller of Hendon: I wish to speak to Amendment No. 6, grouped with Amendments Nos. 4 and 5 which have been spoken to by the noble Baroness, Lady Hamwee. The noble Lord, Lord Elliott of Morpeth, is in hospital at the moment and, although the amendment stands also in his name, he regrets that he is not able to speak to it today.

At this stage, this is a probing amendment, but one to which we feel it may be necessary to return at a later stage depending on the response from the Minister. My honourable friend the Member for Meriden raised a similar issue in the other place, but the Government's response was unconvincing, to say the least. I hope that they will either produce a more convincing reply today or, alternatively and preferably, having had longer to consider the matter, they will now concede the point.

The Secretary of State or, by delegation, the director general, has power to set the terms of an undertaker's appointment--in other words, his licence to do business--by virtue of Section 6 of the 1991 Act. This includes the general basis of an undertaker's charging scheme. Section 143 gives the undertaker wide rights to produce a charging scheme, but that is subject to the terms of his appointment by the Secretary of State or, by delegation, by the Director General of Water Services. There is a model instrument of appointment which includes a specific obligation to ensure that a charging scheme is in force, especially in relation to domestic supplies, drainage and infrastructure. All those existing powers should be entirely sufficient. No evidence has been proffered that the existing arrangements are not working satisfactorily.

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Clause 5 inserts a new section, Section 143A, in the Water Industry Act 1991, giving the Secretary of State power to make any regulations--I stress the word "any"--in relation to the provisions of charging schemes. No adequate reason has been given for that proposed shift of powers from the director back to the Secretary of State.

Subsection (1) of the new clause gives the Secretary of State absolutely unlimited power as to the regulations, subject to one small restriction in subsection (4) to which I shall refer. Subsections (2) and (3) add to the already unrestricted powers of the Secretary of State, specifying the matters in relation to which he may issue regulations. But I stress that that is in addition to the wide powers that the Secretary of State will already have under subsection (1). The small restriction in subsection (4) to which I referred is that the Secretary of State's regulatory powers may not be used to limit the total revenues of the water companies, fixed in accordance with approved charging schemes. In other words, the only restriction that the Secretary of State offers on the new, sweeping powers that he seeks is that the total income of water companies may not be reduced by him, but the sources of income can be shuffled around between different categories of consumer.

The water industry is supposed to be deregulated, industry, with the public interest being protected by a totally independent regulator. This clause, particularly subsection (1), gives the Secretary of State overriding powers that are so wide that one wonders what future function the regulator will perform, except to stand in the firing line when anything goes wrong with the day-to-day operations of the industry.

The short and simple amendment that I propose simply prevents the Secretary of State, in exercising the powers that he seeks under Clause 5, from interfering with any charging scheme validly approved by the director. The powers in the 1991 Act to impose conditions on the original licence or appointment of an undertaker are not affected.

As I said, a differently worded amendment, but one to similar effect, was proposed by my honourable friend the Member for Meriden in the other place. The amendment replaced the draconian power to make regulations in relation to charging schemes with one requiring an undertaker to have regard to guidance as regards the various elements of any charging scheme. In other words, the Secretary of State was not to be able to move the goal-posts, either in relation to existing schemes or for future schemes which it is deemed should be identical. I commend my amendment to the Committee.

4.15 p.m.

Lord Whitty: It may be helpful if I outline the system of protection that is reflected in Clause 5. The protection will be aimed at two groups: large families on low incomes, and those with medical conditions requiring a high use of water. It will take the form of eligibility for a bill based on average measured use.

We propose that protection should be available for, in the first protected group, families with three or more children in receipt of specified benefits; in the second

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group, we propose that protection should be offered to those with particular medical conditions. We wish to ensure that the same protection applies right across England and within Wales, so that we do not end up with a patchwork of different entitlements. That has implications for the regulations, which will enable Ministers to ensure that the right arrangements are in place and that the same protection will indeed be available. It has implications also for the less prescriptive guidance.

Turning to the amendments, the requirement is for a director-general to have regard to such guidance in carrying out his responsibilities. In relation to the first amendment, I assure the Committee that the Government would not want to provide for a conflicting approach between regulations and guidance. And of course the Government will be working closely with the regulator, Ofwat, to ensure that the introduction and operation of the new arrangements spelt out in the Bill go as smoothly as possible and that that relationship will continue.

One effect of the amendment tabled by the noble Baroness, Lady Hamwee, would be to prevent the Secretary of State from issuing regulations to apply to a charges scheme that had already been approved. I understand the anxiety expressed, but I assure the Committee that we have no intention of making regulations which would, for example, come into force in the middle of a charging year. Such a course of action would clearly not be helpful. That may be the kind of situation that lies behind this amendment.

I also assure the Committee that we are concerned about the question of affordability. Since privatisation in 1989, customers have seen water bills in England and Wales rise by over a third. The House will no doubt be aware that we have recently told water companies and their regulators that an ambitious programme of environmental improvement needs to be accompanied by a significant reduction in average bills. We shall certainly wish to consider the principle of affordability in relation to customers' charges. Indeed, it is already an important principle behind our proposals for regulations. I assure noble Lords that we share their concerns about affordability. We have demonstrated that we have already gone further than merely expressing concern and are taking steps to make water bills affordable.

Nevertheless, we believe that it would be unduly prescriptive to make the change that is suggested in the amendment. It would unnecessarily narrow the scope of regulations that could be laid under the provision. While recognising the importance of affordability, other factors must always be taken into account in calculating and imposing charges. I refer, for example, to the effect of changes in the environment, the impact on sustainable development and other issues. I do not therefore believe that this amendment would be the best way of carrying forward the concerns that lie behind it.

The effect of Amendment No. 6 would clearly be to shift administration of the scheme to protect the vulnerable groups of which I have spoken and charge the costs to the Government. There is clearly a role for

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government in this area. I have already spoken about the need for uniformity. But water companies also have a major role to play. Companies reflect more closely their customers' concerns than the Government can. They send out information about charges and charging methods; they know who their customers are; they know the basis on which customers pay their bills.

The noble Baroness asked for an indication of how we envisage the system of protection working. We have explained previously whom we expect to be covered by the protection. We shall expect water companies to ensure that such groups are aware of the protection to be afforded under regulations. Water companies, with their closer contact with customers, are in a better position than the Government to ensure that customers are aware of all the charging options open to them. Customers having been made aware of the protection, we should then expect those who are eligible for it to apply to the water company. The checking procedures that are to be carried out by the companies will be set out in regulations that are under preparation.

It would be neither possible nor appropriate for the Government to identify all the various individuals who are eligible for protection. For example, there is no central record of all those suffering from particular medical conditions. Meeting the costs of protecting vulnerable customers must be an essential part of the new water charging system proposed under the Bill. It is not an optional extra, but a key measure to protect customers from severe hardship. It is therefore right that the costs of the scheme should be met by water companies. We are keen to keep to an absolute minimum the bureaucracy involved in the proposals; for example, by identifying pre-existing documentation, which should make eligibility easier to establish. Also, the proposed protection--a bill based on average measured use--is easy to administer.

We shall continue to work closely with the water industry and others to ensure that the arrangements for offering protection fit as effectively as possible with existing water charging administration and so minimise the costs to all concerned. But I do not think it would be right to pass the costs on to the taxpayer and away from the water charge payer.

I hope that that goes some way towards making clearer the intentions of the clause and the regulations that we would issue under it. I hope that, at least at this stage, the two noble Baronesses who moved and spoke to the amendments will feel able to withdraw them.

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