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Lord Whitty: My overall reaction to this rather lengthy amendment is that it is far too prescriptive and not something that we should include on the face of the Bill, because it greatly limits the flexibility with which the independent regulator can operate. In certain circumstances it is also counter-productive. We need to allow the regulator to find innovative ways to carry out its duties.
Essentially the amendment has two aspects. It would require the authority to prepare and publish a statement of policy about changes in periodic reviews. It would also give undertakers the right to oppose the policy of the authority.
It is certainly important for there to be constructive dialogue between the authority and undertakers, but I do not believe that the mechanism of the second of those provisions is right. The proposal for a statement of policy, and especially the procedures surrounding it, would be somewhat bureaucratic and would not improve the conduct of periodic reviews. Following the last periodic review, the Environmental Audit Committee recommended that the process should be made shorter. This amendment would require the authority to consult on a statement of policy at least 18 months before the periodic review, which would definitely prolong the process.
The same extended process would also apply to revisions of the statement of policy. The effect of that would be to make it more difficult for the authority's policies to keep up with the need for change. In keeping people informed of change there is already provision in the Bill for the authority to prepare and publish a code of practice and a forward programme. They must cover the discharge of all its functions, not merely those of price-setting.
I have some concern about other effects of the proposal; for example, the idea that undertakers should be able to oppose and block the policy of the authority even before it is made. Undertakers can already appeal against price determinations once they have been made, and there is also referral to the Competition Commission.
We need to remember that the authority must exercise its functions in the manner best calculated to satisfy a number of aims, including the consumer objective and the financial stability of an undertaker. Companies therefore already have the advantage over consumers, as consumers cannot appeal against price determinations. But the amendment seeks to go further and to give companies the right to obstruct any statement of policy with which they do not agree. Consumer bodies would have only limited rights to participate. So the balance that is struck—both the balance of judgment as to pricing decisions against other decisions that the regulator has to make, and the balance of influence between the companies and consumers—would be disturbed if this amendment were to be adopted in its literal form. The influence that undertakers would have over the authority's policy would detract from its duty to balance all of its duties as an independent regulator.
As far as the companies are concerned, they already have a chance to make representations. Ofwat consults on its periodic review and its methodology, and many informal discussions with the companies take place. There is already a much more constructive approach to establishing an agreed approach than is implied by the slightly confrontational implications of the amendment. While I understand some of the
motivation behind the amendment, I do not believe that it would be helpful, and it would greatly restrict the ability of the regulator to do its job.
Baroness Byford: I thank the Minister. I do not necessarily agree with his assumption that the amendment is too prescriptive and that it would necessarily reduce the flexibility of the regulator. I shall consider that point.
With regard to including all its duties, we have discussed trying to ensure early representation and the chance for oral representations to be made. The Minister did not touch on that point in his response. I should have thought that the Government would welcome any proposal that would enable early discussions to take place. If the industry feels at present that it needs a further provision on the face of the Bill—because it is not sufficiently clear that there is a good line of communication—I should have thought that the Minister might feel able to accept such a proposal. That said, I will re-examine the point.
On the statement of policy, I heard what the Minister said, but I do not necessarily agree with him. I shall read his remarks carefully in Hansard. I shall make no further comment at this stage; I shall take the matter away and reflect on it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Byford moved Amendment No. 102:
- After Clause 39, insert the following new clause—
The noble Baroness said: This amendment deals with co-ordinated regulation. As it is not quite so long as the previous one, I hope that the Minister may deal slightly more sympathetically with it.
It is important that co-ordination between regulators is established early. It should be reliable and transparent, and should bring forward everything that we seek to establish.
Each regulator has different, and potentially conflicting, responsibilities. Currently, no binding statutory framework is proposed in the Bill to ensure that regulators work together in an integrated and co-ordinated manner. Water companies and other organisations could find themselves having to juggle different interpretations and priorities, possibly resulting in inappropriate, unfair and costly regulation. That has been recognised in recent
The Water Environment and Water Services (Scotland) Bill—I believe I am right in saying that the Bill has not yet completed its passage—contains, on page 2, a specific provision to that effect. So the Scottish Parliament considers such a provision to be important. Under the heading "The general duties", subsection (4)(c) includes the provision that,
In proposed new Section 5A(2), we ask that a direction for co-ordination should be placed on the face of the Bill. We believe that such a provision is important. That is why we have tabled the amendment. I beg to move.
"COORDINATED REGULATION
After section 5 of the WIA there is inserted— "PART 1A
COORDINATED REGULATION
5A COORDINATED REGULATION
(1) In this section—
(a) the Agency, the Authority, the Chief Inspector of Drinking Water and (if and while separately appointed) the Chief Inspector of Drinking Water for Wales and the Consumer Council for Wales shall together be referred to as "the regulators";
(b) water undertakers, sewerage undertakers, licensed water suppliers, and all other persons engaged in water supply, or the drainage or disposal of sewage, shall together be referred to as "the water industry" or "water industry bodies";
(c) "final price determinations" means final price determinations issued by the Authority pursuant to periodic reviews carried out by it under all or any of the instruments of appointment of companies as water or sewerage undertakers;
(d) "the consultees" means the persons that the Secretary of State is required to consult under subsection (3) below;
(e) under subsections (2), (6), (9) and (11) below—
(i) the duties of the Assembly shall relate to water industry bodies whose areas are wholly or mainly in Wales; and
(ii) the duties of the Secretary of State shall relate to all other water industry bodies.
(2) The Secretary of State, the Assembly and the regulators shall exercise all their statutory powers and duties, which relate to or may affect the water industry, in a coordinated manner.
(3) To that end, the Secretary of State and the Assembly shall from time to time (and so often as may be necessary for the purposes of subsection (6) below) consult each other and the regulators, the Council, representatives of the water industry, and such other persons as they consider appropriate, for the purpose set out in subsection (4) below.
(4) The purpose referred to in subsection (3) above is the consideration of—
(a) the policies that should be pursued by the water industry in the long term interests of consumers;
(b) the costs and benefits of those policies;
(c) the times within which those policies should be implemented; and
(d) accordingly how those policies should be funded.
(5) Without prejudice to the generality of subsection (4) above, in considering the matters referred to in that subsection, the Secretary of State, the Authority and consultees shall take into account—
(a) the duties imposed on the Secretary of State, the Assembly and the Authority under sections 2 and 2A of the WIA;
(b) all other statutory duties and Community obligations imposed on the Secretary of State, the Assembly and the regulators which relate to or may affect the water industry; and
(c) all statutory and regulatory duties, and Community obligations, imposed on the water industry.
(6) The Secretary of State and the Assembly shall, at least twelve months before each occasion on which the Authority is due to issue final price determinations, issue a direction to the regulators on the matters listed under subsection (4) above, taking into account the matters listed under subsection (5) above.
(7) The Secretary of State and the Assembly shall, in formulating such direction, take into account the consultations carried out under subsection (3) above.
(8) The Authority shall give to the Secretary of State, the Assembly, the other regulators, the Council and the water industry at least eighteen months prior written notice of the date on which he will issue any final price determination referred to under subsection (6) above.
(9) The Secretary of State, the Assembly and the regulators—
(a) shall exercise all their statutory powers and duties, including their powers to issue directions and guidance (other than that contained in subsection (6) above), in accordance with the direction from time to time issued under subsection (6) above; and
(b) to that end, and for the purpose of meeting the requirement set out in subsection (2) above, shall consult and cooperate with one another in relation to the exercise of their respective powers and duties.""
XScottish Ministers . . . and the responsible authorities must . . . so far as practicable, adopt an integrated approach by co-operating with each other with a view to co-ordinating the exercise of their respective functions".
That seems a very sensible thing to do. Subsection (5) states:
XWithout prejudice to subsections (1) to (4), the Scottish Ministers and every public body and office-holder must, in exercising any functions, have regard to the desirability of protecting the water environment".
In requesting co-ordinating regulation to be included in the Water Bill, our amendment is a matter of common sense. I hope that the Minister will be able to accept it.
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