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Lord Borrie: My Lords, I oppose this amendment. As the noble Baroness knows, I did so in Grand Committee. I do not rely on the point with which she is quarrelling, as it were, with the Minister. Of course, I accept her point that there is a great difference in the water world compared to the energy world where, as she rightly said, if a customer is dissatisfied he can switch supplier. In the water world, ordinary consumers cannot switch suppliers although, to a limited degree, commercial consumers can.

However, it is important to say that the water consumer council, or WaterVoice, should it continue to call itself that—I think it a very good name—has a great deal more to do in terms of representing the consumer, as it has done so well for many years nationally, locally and regionally. Its work is well recognised, particularly by the Government in this Bill. I am sure that the noble Baroness welcomes that it is given a degree of independence in the Bill that it did not have previously.

The Bill establishes the consumer council for water, or WaterVoice, firmly as a representative of the consumer. One could use the word partisan. It is entitled to be partisan on behalf of the consumer. But to do the job of being partisan and representative would be very difficult if it involved also, from time to time, adjudicating upon a complaint made by a consumer against a water company and trying to judge impartially the arguments on both sides. It is very likely that lawyers would have to be involved; it is very likely that there would have to be a panel, or whatever, to do that particular job because the noble Baroness is suggesting that considerable penalties should be imposed. Water companies will not just go along with that without argument. I doubt that the noble Baroness expects them to do so. The jobs of adjudication and imposing penalties are very different from being representative. To try to do both would not be a good idea.

Lord Whitty: My Lords, my noble friend Lord Borrie has by and large made my arguments for me. The point is that we cannot confuse the role of advocate with the role of judge and jury. The council exists to represent the views of consumers in their widest sense. It cannot therefore adjudicate between consumers and undertakers or licensees. To do so would be to unbalance the situation. The alternative approach would be to give it some duty in relation to undertakers, but that is not its role. Its role is a representational role. In pursuit of that representational role it can make approaches to the water

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companies. Without formal powers, the present structure has led to a number of binding mediation agreements, but the consumer council is not actually doing the arbitration.

The council can also revert complaints to Ofwat to enforce against a company using its existing powers. For the consumer council to have enforcement powers is not only unprecedented, it would also greatly confuse its role. Normally the Liberal Democrats are great advocates of separation of powers. In this context, the logic of the position of my noble friend Lord Borrie and mine would eventually persuade them that this is not a sensible course to pursue.

Baroness Miller of Chilthorne Domer: My Lords, I thank the Minister for his reply and for the contribution made by the noble Lord, Lord Borrie. I welcome the fact that the Bill gives the consumer council a degree of independence. I can see that the Bill, as drafted, does not give it the role of adjudicator although, of course, it could have chosen to do so. I know that I am barking up a tree on which the Government are not minded to give in. At this stage, I am content to look to the future and see how the consumer council for water works. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 92 not moved.]

Lord Whitty moved Amendments Nos. 93 to 98:

    Page 55, line 27, after "Wales" insert "or to services provided by a licensed water supplier using the supply system of a water undertaker whose area is wholly or mainly in Wales"

    Page 55, line 28, leave out from "State," to end of line 29 and insert "in any other case."

    Page 55, line 41, at end insert "or the licensed water supplier"

    Page 55, line 42, after "undertaker" insert "or the licensed water supplier"

    Page 56, line 4, after "undertaker" insert "or the licensed water supplier"

    Page 56, line 11, after "undertaker" insert "or the licensed water supplier"

On Question, amendments agreed to.

Clause 46 [Investigations by the Council]:

Lord Whitty moved Amendment No. 99:

    Page 56, line 36, leave out from first "consumers" to end of line 37.

On Question, amendment agreed to.

[Amendments Nos. 100 to 102 not moved.]

Lord Whitty moved Amendment No. 102A:

    Page 60, line 28, at end insert—

"( ) The power of the Secretary of State to make an order under subsection (11) above shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament."

The noble Lord said: My Lords, Amendment No. 102A in a sense is in response to Amendment No. 103. It relates to the power to make an order for determining a company's turnover, which is the means of limiting the penalty which may be imposed. We

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always intended that this power would be exercised through the negative resolution procedure. I am grateful to the noble Baroness for drawing it to our attention that the Bill, as drafted, does not achieve this. For technical reasons the provision needs to make reference to the order being a statutory instrument and the amendment that I have tabled does this. I shall respond to the noble Baroness's amendments where appropriate. I beg to move.

Baroness Byford: My Lords, I am grateful to the Minister for having listened to our arguments in Committee and for tabling the amendment. As I explained earlier, between Committee and Report it is necessary to table amendments, as the noble Lord knows so well. On this occasion, the amendment moved by the Minister is slightly longer than ours—usually it is the other way around. I am grateful to him for coming back with Amendment No. 102A and should like to record my thanks.

I turn now to Amendments Nos. 104, 105 and 106. Amendment No. 104 proposes that we include slightly greater protection in that the imposition of a penalty was based on an error of law or fact and that the amount of penalty was unreasonable. Because this is Report and not Committee obviously I cannot come back again. If the Minister is unable to accept, I hope that he will give full reasons for the reluctance of the Government to accept these reasonable amendments.

Amendments Nos. 105 and 106 return to an issue which I raised in Committee. I found the Minister's response to this amendment in Committee intriguing. He said:

    "The Bill is drafted so that the court will be able to set the level of interest".

He continued:

    "The effect of the amendment would be that the court would be tied to the same decision whenever there was a successful appeal, regardless of the seriousness of the company's failure or of the merits of the case".—[Official Report, 8/4/03; col. GC 55.]

It was my impression that the debate we had on penalties of up to 10 per cent of turnover hinged on the seriousness of the company's failure. The interest charge relates to the interest to be charged on a charged penalty—it gets a bit tongue-tying. It does not matter which party has to pay, the rate should be uniform. That is what we are trying to establish.

From the Minister's explanation, we may infer that as the Bill stands the courts might award interest to water undertakers at rates below bank rate, but where fault is proven against them at rates well above bank rate. That action could be the result of rulings from other departments, notably the Home Office. We bring this issue back to your Lordships today, it is to be hoped, to take it a little further.

7 p.m.

Lord Whitty: My Lords, in responding to the noble Baroness I shall continue speaking to the lead amendment, unless other noble Lords wish to speak.

Lord Livsey of Talgarth: My Lords, I want to respond to Amendments Nos. 105 and 106. I was

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intrigued by what the noble Baroness, Lady Byford, said about the Minister's response in Committee. I would like clarification as to whether there is a difference in penalties in relation to the severity of the offence. New Section 22E(6) on appeals states:

    "Where the court substitutes a penalty of a lesser amount it may require the payment of interest on the substituted penalty at such rate, and from such date, as it considers just and equitable".

The Minister and the noble Baroness may prove me wrong, but it seems better for the court to decide rather than for there to be a fixed rate. I ask the Minister if there is no difference between the severity of the offence on the one hand—as the noble Baroness said, in quoting from Committee—or whether different levels of penalty will be applied in relation to the severity of different types of offence. I am not clear about that point, but if there is a substantial difference between the severity of the offences and penalties are applied accordingly, surely the court should decide. If what the noble Baroness said is correct, maybe she has a point.

Lord Whitty: My Lords, there seems to be a consensus in favour of my Amendment No. 102A. I want to comment on Amendments Nos. 104, 105 and 106. Amendment No. 104 is unnecessary. It deals with the reasons why a court can quash or reduce a financial penalty on grounds of either error of law or fact, or of unreasonableness. But both those criteria are built into the Bill.

The enforcement authority has power under new Section 22A to impose a penalty only as is reasonable and it must act in accordance with the law. There is also notice before a penalty can be imposed, so there is an opportunity to point out an error of fact or law, or to contend unreasonableness given all the circumstances. The enforcement authority is required to consider such representations. If it fails to do so, then there is authority for it to be overturned.

I turn to interest. We are dealing with a case where the court has substituted a different penalty to that imposed by the regulator. It may impose interest as it considers just and equitable, as currently drafted. The noble Baroness, Lady Byford, seeks to restrict that provision in relation to the bank rate. My view, which I believe is shared by the noble Lord, Lord Livsey, is that the issues must be left to the court, as they would be in other circumstances, to consider the reason for the modification of the penalty, the severity of the offence and the circumstances of the company and the complainant. Therefore it is important that we leave that discretion with the courts rather than attempt to set down a rigid formula in statute.

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