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Grand Committee

Tuesday, 6 April 2010.

Flood and Water Management Bill

Bill Main Page
Copy of the Bill
Explanatory Notes

Committee (3rd Day)

3.30 pm

The Deputy Chairman of Committees (Lord Geddes): My Lords, in the unlikely event that there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.

Clause 35 : Provision of infrastructure

Amendment 98

Moved by Lord Taylor of Holbeach

98: Clause 35, page 18, line 32, at end insert-

"(1A) This section shall only apply to the provision of infrastructure which (in the opinion of the Minister) may pose a significant risk to the undertaker's ability to carry out its duties.

(1B) In exercising an assessment of risk as set out in subsection (1A), the Minister must have regard to-

(a) the financial commitment of the infrastructure provision compared with the turnover of an undertaker, and

(b) the technical complexity of the provision of infrastructure."

Lord Taylor of Holbeach: My Lords, I hope that we can treat this as a quiet oasis. On a day of great excitement, we can at least have the therapy of engaging ourselves in this Bill, which, along with all noble Lords, we welcome.

Amendments 98 and 99 concern the regulation of the provision of infrastructure. Under the proposals in Clause 35, providers of services, such as water companies, would not be able to bid for a large-scale infrastructure project. I understand the reasoning behind this but I would like to probe the mechanics further. We are dealing with large, often complex and expensive construction projects where, if I have understood the Government's thinking, should things go belly up, if I might use that phrase, there is a risk that customers all the way down the supply chain will suffer-for example, through higher prices for their water supply.

I have some sympathy for that position but we should be careful not to exclude the very companies that have the skills, the expertise and the experience from participating in the work at which they might be very good. Surely there is also a risk that if a major infrastructure provider is not able to tender a bid for a project because it is a service provider, the work may have to be done by a company or companies with less skill and experience. The risk of project overruns, escalating costs and expensive mistakes would therefore not be diminished.

What protection is there for consumers in a scenario such as that? Does the protection lie in a contractual cushion so that the losses are absorbed at a level above the consumer? If that is so, could a contract involving

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a service provider doing its own construction not be framed in a similar way, perhaps guaranteed through the involvement of Ofwat?

I am happy to hear the Government's no doubt exhaustive research into this area, but I am also wary of losing the skills of water companies that would, if everything goes according to plan, make the process easier, quicker and cheaper in order to protect against a worst-case scenario where everything goes wrong. Is there a more flexible approach? Amendment 98 is therefore an explicit requirement to apply these new provisions only to cases where the Minister considers that there is a significant risk to consumers, which would perhaps catch only the most complex of cases.

Amendment 99 would allow water and sewerage companies, and companies associated with them, to bid in the tendering process. I hope to explore with that how the accumulated expertise of these companies can be harnessed to facilitate the construction of major infrastructure projects. I beg to move.

Lord Faulkner of Worcester: My Lords, I welcome the opening remarks of the noble Lord, Lord Taylor, with which we entirely concur.

Clause 35 provides for a new regulatory regime designed to cover exceptional high-risk infrastructure projects. An important part of the regulatory regime is the requirement to put such projects out to competitive tender. Currently there is no requirement, but incumbent water companies do this. The new regime will also enable such projects to be designed, built, owned and operated by newly regulated third parties.

During debate in the other place concerns were expressed that the original drafting of the clause did not make it clear that the application of new regulations would be limited to exceptional high-risk infrastructure projects and that other water and sewerage infrastructure would continue to be deliverable by the incumbent water companies under Ofwat's well-known existing regulatory framework. In response, and in close consultation with the industry through its representative, Water UK, the Bill was amended by the Government to make this limitation explicit. The amendment can be found on page 19 of the Bill, at lines 8 to 16. Therefore, Amendment 98 in the name of the noble Lord, Lord Taylor, has been addressed through the government amendment.

Amendment 99, to which the noble Lord also spoke, would modify the new regulatory regime's prohibition on undertaker involvement in delivering exceptional high-risk infrastructure projects. The aim of this new regulatory regime is to mitigate customers' exposure to the potentially severe financial consequences of delivery problems regarding these exceptional projects whereby delays and cost overruns may be significant. Allowing undertakers to bid on these projects, as Amendment 9 would allow, is thus directly at odds with the overall aim of this new regime.

The regulations will, however, have to specify also the extent to which an affiliate of the undertaker may bid for such work. Although the involvement of affiliates has not been completely ruled out, when we draw up our regulations we will need further to consider, in

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consultation with stakeholders, the extent to which it may be possible for affiliates to participate without undermining the policy objectives of the regime.

In addition, I emphasise that these provisions do not exclude the undertaker from directly delivering the parts of such projects that are less risky. We should also make it clear that the prohibition on undertaker involvement relates to the undertaker for the service area that will benefit from the infrastructure in question. An undertaker serving a different geographic area would not automatically be prevented from bidding for or delivering the infrastructure and being designated as an infrastructure provider under these regulations.

We recognise the considerable achievements of the water industry over the past two decades, and we will continue to rely on its expertise to deliver low-risk infrastructure and, crucially, to manage the tender process for higher-risk infrastructure. However, the second amendment would undermine the overall policy objective of the new regime, which is to ensure that customers are adequately protected from risks in respect of these exceptional high-risk projects and that customers ultimately receive value for money.

I hope that, with that explanation, the noble Lord will feel able to withdraw the amendment.

Lord Taylor of Holbeach: My Lords, I am grateful to the Minister for his explanation, which, as he described, represents a wise precaution. I can understand the Government's desire to protect consumers, as indeed we would seek to do. I hope that the Minister will bear in mind that these regulations should not be drafted in a way such that some of the expertise which is rife is excluded. We are dealing with companies whose ownership and make-up may be extremely complex. They have specialist divisions that can contribute enormously to all sorts of infrastructure projects-particularly some of these high-risk ones. Finding a way of regulating, controlling and providing a cushion for consumers will be key to this. I hope that the Minister will bear that in mind in his discussions on the regulations. I beg leave to withdraw the amendment.

Amendment 98 withdrawn.

Amendment 99 not moved..

Clause 35 agreed.

Clause 36 : Water use: temporary bans

Debate on whether Clause 36 should stand part of the Bill.

Lord Taylor of Holbeach: I oppose Clause 36 standing part of the Bill not because I have any great problem with it but for the purpose of initiating a general debate on hosepipe bans. I indicated at Second Reading that I had been approached by members of the horticultural trade about the problem of blanket hosepipe bans and the deleterious effects that they may have. I am a member of the Horticultural Trades Association, an interest I declared at the commencement of the Committee stage, and a professional horticulturalist.

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The HTA has been very active in this area. The industry recognises-as we all do-that when there are water shortages during drought conditions, the use of water needs to be restricted. However, it is important that gardens are maintained during drought conditions through the sensible use of water, while banning wasteful use. In order to allow users to act responsibly and sensibly during water shortages, there are good reasons for supporting a clear and consistent code of practice-to be adopted across all water companies in the UK-in regard to restrictions on use; otherwise, water companies will be able to take differing approaches to the introduction of temporary bans.

There is a deep concern among members of the industry that water companies can bring in blanket bans instead of phased introductions of restrictions. These could include watering only at the beginning or the end of the day, or on alternate days, which, from my experience, is what happens in France when droughts are declared. Without a proportional and clear code, the actions of water companies can unnecessarily and negatively impact on domestic gardeners and the horticultural industry alike.

During the drought of 2006, confusion was caused among residents in drought areas over where and when gardens could be watered. This confusion was a result of inconsistencies in the orders issued by the various neighbouring water companies on how people could or could not water their gardens. This problem was augmented by the fact that in certain areas with similar geographical profiles and water conditions, a number of small water providers each introduced differing restrictions. As there was no consistency across the companies, many people received conflicting advice.

This, in turn, put people off gardening-specifically buying plants and planting them in their gardens-which negatively impacted on the environment and the health benefits of gardening. For many people-particularly for the elderly-gardening is a significant form of exercise. My wife will laugh if she hears this contribution.

The halt on gardening due to this confusion led to a downturn in sales at garden centres, thereby significantly affecting their business. Garden retailers in the south-east were particularly affected by these measures as it is often the area where droughts hit hardest. It was estimated that their income loss reached around £12 million as a result of the 2006 bans. Each retailer reported a 10 to 30 per cent sales loss, which led to significant staff redundancies. The garden retail sector brought in £5.35 billion of sales in 2008, but this included a 10 per cent increase over the previous year in grow-your-own products. Under a hosepipe ban, grow-your-own products are vulnerable. An omnibus survey conducted by the HTA in 2006 revealed that almost one in three households said that they would reduce their expenditure on plants and gardening products as a result of hosepipe bans being introduced.

The HTA gave an example of one member's experience-a business which supplies hanging baskets to a chain of public houses-where orders were placed and preparation for production was made in January 2006. However, in May, a water company informed the chain that public houses would not be able to use watering systems to irrigate hanging baskets. The chain

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promptly cancelled the order, causing extreme difficulties for the member. However, as public houses are commercial properties they are not affected by hosepipe bans and the situation should never have arisen. Although this may seem a trifling point to some, the risk of confusion can lead to considerable loss of income, which is an especially acute problem during times of economic hardship.

The Bill provides a useful opportunity-I am sure that members of the HTA and many others would appreciate this-for the Minister to provide clarification and an assurance that the code of practice, which has been with the Government for some time now, is on the verge of being adopted.

3.45 pm

Lord Greaves: My Lords, I do not have the horticultural experience, expertise or involvement of the noble Lord, Lord Taylor. Indeed, we have an extremely small garden and I have absolutely nothing to do with it as a matter of principle. However, like the Conservatives, we have had interesting discussions with the Horticultural Trades Association. I will not repeat everything that the noble Lord has just said on its behalf, but there appears to be a strong case for water restrictions being both clearer and more sophisticated in how they operate. I, too, will be interested to hear the Minister's response.

Baroness Fookes: My Lords, I support most strongly the very strong case put by my noble friend Lord Taylor. I, too, have been approached by the Horticultural Trades Association but my only interest is as a keen but very amateur, as opposed to professional, gardener. My noble friend Lord Taylor has already indicated the great difficulties that occurred during the drought of 2006, but I will concentrate this afternoon on the code.

The Horticultural Trades Association has put forward three clear principles on which the code should be based. First, it should be fair and proportionate to the difficulties involved-that is, the extent of the water shortage. Secondly, it should be consistent, particularly where the circumstances are the same but there may be different water companies operating to a different schedule. Thirdly, consumers should be made clearly aware of whatever restrictions there may be. I cannot stress that too strongly. Many of the difficulties in 2006 arose because consumers did not know what the situation was. I know that stabs at the code-if I may put it that way-have already taken place, but I am not sure that, so far, they have been altogether satisfactory.

My plea to the Minister this afternoon is for urgent attention to be given to making that code more sophisticated and appropriate. It is extremely important for a sector of the industry in England which is often overlooked. It is important to address its interests and those of all the amateur gardeners such as myself, who want to co-operate when there is a water shortage but, at the same time, want to see that things are dealt with fairly and in a way which is adapted to the situation. My noble friend has indicated the ways in which this might happen, including watering every other day and watering only in the evening. Also, what may or may not be watered? I think newly sown lawns have been suggested as a priority, whereas there is no point in

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watering established lawns. However yellow they look, they recover when the rains come. In times of shortage, watering them is not appropriate. My real request this afternoon, given that there is no way in which a very complicated amendment could be put before us in the time available, is for the Minister to take urgent steps to look at the code as it presently exists to improve on it and bring it into force.

The Earl of Selborne: My Lords, I, too, declare an interest as a commercial horticulturalist. I support my noble friend in his proposal. I chaired the House of Lords Select Committee on Science and Technology's report on UK water management in 2005-06. We took evidence from Australia. We thought it would be instructive to see what happened to a country which had a 10-year drought-the "big dry"-and how it reacted to it and managed its own water supply issues. In many ways, while it was impressive to see how aware Australians are and how well the bills describe their comparative situation with other households, the one area in which I thought they failed lamentably was in adapting their horticulture to cope with the big drought. In other words, throughout Australia, in cities such as Melbourne and Canberra, you see gardens which would not look out of place in Surrey.

The message that I would give my fellow horticulturalists is that, given that periodic droughts and therefore temporary water pipe bans are going to be a fact of life, the horticultural trades should be urged to look at this as an opportunity rather than a threat. After all, many horticultural systems do not make heavy use of water. You can use things such as mulches rather than irrigating, and you can of course go for succulents and suchlike if that is your idea of a beautiful garden. However, I suggest that there are opportunities to reduce water use in gardens without making such dramatic changes to what we would consider to be a normal English garden.

Having said that, I entirely agree with my noble friend that codes of conduct which allow people to recognise the practicalities of their gardening systems and of the production systems in their gardens and which do not criminalise people for acting in a way that protects a very important asset-in other words, acting in a reasonable way-would be enormously helpful. At the moment, there is a danger that the very rough justice imparted by blanket bans will criminalise whole sections of society, and that surely cannot be right.

Baroness Byford: My Lords, I support my noble friend's opposition to the clause standing part. I speak perhaps on behalf of all those who increasingly try to grow their own food. As the Minister knows very well, even this Government-some of us might say belatedly-have come to recognise that food security is very important. Whereas in recent years it was declining, there is now a keen and growing interest in allotments, and many families are trying to grow more in their gardens, even if only on patio areas.

I shall not repeat what my colleagues said about professional gardeners, because that is another matter. However, the most important thing that we have heard from today's contributions is that, where two different

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water companies within the same area are dealing with the same problem in the same climatic conditions, they should be given a very clear steer as to how that might be approached. Clearly, the situation in Cumbria would be different from that in the south-west, and even more so in the south-east, and in Lincolnshire and East Anglia. However, even in those areas, water companies will sometimes overlap. I hope that the Minister will be able to give us an indication as to when these codes of conduct will be produced. Ideally they should be produced before the Bill passes but I presume that that will not be possible with Parliament proroguing very shortly.

I conclude by adding my support for my noble friend's contribution-particularly the way that he approached the question of using water at different times and in different ways. I know that when the water Bill went through the House about five years ago, we had quite a long debate in this Room about the whole question of how irrigation could be used and about the way that traditionally businesses had been able to draw water, which will obviously be more restricted in future. I think that this is the first legislation on this matter since that time and we need to ensure that we get it right.

Lord Faulkner of Worcester: My Lords, this has been a very interesting debate and I am sure that the horticultural industry will be heartened by the very eloquent speeches made in defence of its interests. There are very few Members of your Lordships' House who know more about this matter than the noble Lord, Lord Taylor of Holbeach, and I bow to his superior knowledge of the industry.

This clause replaces the existing provisions in relation to hosepipe bans in Section 76 of the Water Industry Act 1991. The clause lists the uses of water which a water company may temporarily ban under its own powers, extending existing provisions which enable water companies temporarily to ban the watering of private gardens and the washing of private vehicles by hosepipe or similar apparatus. This is in order to manage actual or anticipated serious shortages in public water supplies.

The noble Lord, Lord Taylor, referred to the problems of the 2004-06 drought. The existing powers, which allow water companies to restrict the watering of private gardens and the washing of private motor cars by hosepipe or similar apparatus, gave rise to much criticism of the water companies by their customers. The focus of the powers was seen as unfair and unreasonable, since very heavy uses of water, such as the filling of private swimming pools, were able to continue. The powers had not been updated since they were originally enacted in 1945 and no longer reflected modern, non-essential uses of water.

Widening the scope of the existing hosepipe ban legislation would therefore enable water companies to conserve more water for the public water supply at an earlier stage during a drought, thus helping to ensure that public water supplies for essential needs can be maintained whatever the severity and duration of the drought. It could also help defer or avoid the need for non-essential-use drought order powers, which impact

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more widely on businesses such as the horticultural industry. Ultimately, emergency drought order powers, which would have significant cost for domestic customers, businesses and the environment, could be avoided as well.

A number of your Lordships referred to a statutory code of practice on restrictions. I point out to the noble Lord, Lord Taylor, that a voluntary industry code has already been adopted; it sets out broad principles of consistency, transparency and so on, but it is not right to set it out in prescriptive detail in the Bill. However, discussions with the horticultural industry are already under way. My honourable friend the Minister in the other place, Huw Irranca-Davies, met representatives of the HTA and Waterwise on 23 February to hear their concerns about the code of practice. He undertook at that meeting to work with the water companies, through the statutory drought planning process, to ensure that their revised drought plans set out clearly how they anticipate using their powers, including their broad priorities for conserving water and the types of concession or phasing that they propose to introduce, and to ensure that they took account of stakeholder and customer views of the sort which we have heard reported in the Committee today. The Minister suggested that, by way of a first step, and following Royal Assent-but not, I am afraid, before it-he meet water companies to explore how they could work together and with stakeholders when developing a framework for managing the flexibility that these powers could give them to manage water shortages, and how they could best communicate their draft and final proposals to stakeholders and customers and obtain their views. That meeting will follow immediately after Royal Assent to ensure agreement on the sort of code of practice which we think should be in place.

Baroness Byford: Will it be a formal consultation or just an informal discussion?

Lord Faulkner of Worcester: It is an informal discussion, but one which the Minister has given an undertaking will take place.

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