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Lord Whitty: That is an absurd conclusion to reach from what I have said. I have said that it would not be reasonable for the Environment Agency to act against a water company if the sleeper licences—if one wants to call them that—were part of a water company's plan. A condition of its licence might be to have the kind of water plan to which the noble Baroness refers. Therefore, the Environment Agency would be managing that licence—if you like—which is held by the water industry in this case, in line with the duties of the Environment Agency on the one hand, but also with the statutory duties of the water company to ensure security of supply of water.

In those circumstances, there would be no reasonable intervention by the Environment Agency. We are talking here about all abstractions of water—all abstraction licences. There must be a right to intervene for unnecessary non-use of a licence that causes damage or uncertainty in the management of that water. That is all that does. The change is to reduce the period from seven to four years.

Baroness Byford: I thank the Minister for explaining the Government's position. I think he accepts the obvious need to conserve water. Water companies cannot supply people if they do not have a water supply themselves. I wonder whether it would be helpful to the Minister if we took this issue away and perhaps returned with an amendment, or the Government might like to come back with an amendment. Water companies, which are the suppliers of other people, should be protected, much more so than individual businesses that might not use it in the way that the Minister suggests. I am uncertain as to how to proceed. Water companies are hugely important. Without them, none of us—whether individuals or businesses—will be able to draw upon that water. It would be immensely helpful if the Minister could consider the matter.

Lord Whitty: We have spoken about the circumstances in which this situation would arise. The point is that at the moment these powers arise under existing legislation after seven years. The only new provision is a four-year one.

I would not be able to give the undertaking the noble Baroness refers to, but I could write down some of the considerations that I have enunciated. I could also consult with my colleagues in order to explain the issue more clearly and to make it clear that the kind of situation the noble Baroness refers to would not be a cause to intervene and revoke a licence in this way.

[The Sitting was suspended for a Division in the House from 5.20 p.m. to 5.28 p.m.]

The Duke of Montrose: I now understand that the licence is primarily for a purpose and secondarily for

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a quantity. The noble Baroness, Lady O'Cathain, was talking about the sleeper licences that water companies have. Because of the wording of the Bill, if a sleeper licence has not been used for four years, the rights of that licence will be subject to review by the Environment Agency, unless the water company decides to draw a bit of water off under each licence every year.

Lord Whitty: All I am saying is that the intervention is a power in certain circumstances to be exerted reasonably and with due regard to all the other duties and powers in the Bill by the Environment Agency. Most of the discussion seems to suggest that it would be almost an automatic revocation in those circumstances. That is not the intention. It is a power for the agency to deal with particular situations in which the abstractor was behaving unreasonably by not using the abstraction rights.

Baroness O'Cathain: I thank the Minister very much and I thank all those who have taken part in the debate. We have had two interruptions for Divisions, so we are somewhat confused at the end of it. I have some feeling that we might be all right without the amendment being on the face of the Bill, but on the other hand we are talking about deeply concerned water companies that have to produce their long-term plans for water resources management. They feel quite threatened by the provision. I shall take the amendment away, but I cannot promise that I shall not come back to it on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Miller of Chilthorne Domer moved Amendment No. 68:

    Page 31, line 3, leave out "conditions" and insert "condition"

The noble Baroness said: Clause 25 allows the Secretary of State to vary abstraction licences without paying compensation for the sake of protecting water availability. We believe that the spirit of the clause is good, but we wish to explore whether the conditions that would be on the face of the Bill, should my amendments not be included, will undermine its effectiveness.

The clause does not apply to any abstraction licences that currently exist. It will apply only to new licences granted after the Bill becomes law. In other words, it does not apply retrospectively to existing licences. My concern is that licences granted after the Bill comes into effect will not be on a level playing field with those that exist now. The Bill may provide for too long a period during which the variation of licences cannot take place. That may allow unsustainable abstractions to continue at a time when they would be better varied.

Again, we are in an area of difficult balance. In some circumstances we want long licences so that businesses, water companies and individuals can have certainty when they have abstraction licences. However, variation and flexibility are important. The amendment would deal with those longer licences and

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allow a variation so that the lower limit of water that could be abstracted can be brought into force before the end of the period that the licence has to run for. I beg to move.

Lord Whitty: As I understand them, the amendments would make it easier to intervene with long-term licences by reducing the notice period for variation from six years to four years. The whole point of subsection (3) is to provide the ability to have long-term licences that would be longer than the 12 years. They would relate to developments in which the abstractor would need the confidence that they would have access to the water and a reasonable degree of stability in the conditions for abstracting it.

The six-year period of notice in the Bill is tied into the review frequency of abstraction management strategies. Those strategies would therefore throw up the information on which any variation might be based. It is therefore not particularly logical to reduce that to four years in terms of the basis on which any variation would be proposed. It would increase the uncertainty and the number of licences that could be subject to variation in that way. It is almost the opposite argument to those that have been put on stability and certainty in previous debates. We do not see a reason for it, as the review system is on a six-year cycle.

Baroness Miller of Chilthorne Domer: I thank the Minister for his reply. I am not sure that I am quite clear as to why the conditions apply only to licences granted after the Bill comes into effect. I should be grateful if the Minister could reassure me on that detail.

Lord Whitty: The six-year review applies to all licences. The terms of pre-existing licences will not include this condition, so we are dealing with new types of licence provision rather than retrospectively dealing with old licences.

Baroness Miller of Chilthorne Domer: I thank the Minister for his reply. I shall read it closely in Hansard. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 69 to 71 not moved.]

Clause 25 agreed to.

Clause 26 [Recovery of compensation from new licence-holder]:

Lord Dixon-Smith moved Amendment No. 72:

    Page 31, line 33, at end insert—

"( ) the holder of licence A has been informed of the extra efficiencies which would accompany the granting of licence B, has been given 60 working days to devise a means of matching them and thereafter has been unable to convince the Agency of their viability"

The noble Lord said: The clause deals with the recovery of compensation from a new licence holder. The clause envisages that the new licence holder would pay any compensation that was due to the previous

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licence holder indirectly through the agency—or, at least, the agency would pay the compensation and then recover it from the new licence holder.

This is a probing amendment to explore exactly the process that is going on. Sections 52 to 54 of the Water Resources Act 1991 set up a system for modifying a licence at the agency's request. Any objections of the Secretary of State can be catered for.

The clause refers to complete revocation and sets up a new ground for revoking a licence, relating to,

    "greater efficiency in the use of water resources".

We are talking about a water undertaker, not somebody slinging his hook into a river to extract water for irrigation. We are talking about a serious enterprise. We want to probe what is the exact process. I could envisage a situation in which another water undertaker could devise a zero sum game and, in effect, recycle all the water back into use from the used side back into the supply side. We know that that has happened to a considerable extent and on a number of occasions in some parts of the country. Let us suppose that somebody spots a gap in a particular area and sees that he can do this and as a result reduces the abstraction rate by, let us say, 15 per cent, which might give grounds for the revision of the licence.

What is the process? If a person with a much more economical process tells the Environment Agency that he is making an application for a particular area because he can reduce the abstraction rate, what then happens? Does the Environment Agency get into a discussion with the existing licence holder? It is an extremely delicate situation. If it does not, does the existing licence holder hold no rights? He might have held the licence and been the water undertaker for 50 years and given perfectly satisfactory service. Does he have no consideration in the process?

With that background in mind, I thought that we should table the amendment to try to find out whether there is an element of negotiation and if there is, how far it goes and how far it is a negotiation. It might run some danger of getting into conflict with commercial interests that ought otherwise to be private. It is quite a delicate area.

I have no difficulty with the principle enunciated in the Bill, which is that in that situation, if the agency was required to pay compensation to the previous licence holder, it should reimburse them and the charge would go through the system. I have no difficulty with that, but I am slightly concerned about the process. I wonder whether we are creating vulnerability for water undertakers that is perhaps a little too severe and might give them a degree of uncertainty that we might wish they did not have to suffer. I beg to move.

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