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17 May 2011 : Column GC27



17 May 2011 : Column GC27

Grand Committee

Tuesday, 17 May 2011.

Arrangement of Business

Announcement

3.30 pm

The Deputy Chairman of Committees (Viscount Ullswater): My Lords, before the Minister moves that the first statutory instrument be considered, could I remind noble Lords that in the case of each statutory instrument the Motion before the Committee will be that the Committee do consider the statutory instrument in question? I should perhaps make it clear that the Motions to approve the statutory instruments will subsequently be moved in the Chamber in the usual way.

If there is a Division in the House the Committee will adjourn for 10 minutes.

By agreement of the usual channels, the Committee will adjourn after the debate on the Greenhouse Gas Emissions Trading Scheme (Nitrous Oxide) Regulations 2011. The Committee will resume at 4.45 pm and it is expected, subject to the agreement of the Committee, that consideration of the Regulation of Investigatory Powers (Monetary Penalty Notices and Consents for Interceptions) Regulations 2011 will be postponed until the end of business-that is, until after the Committee has completed its consideration of the Water Industry (Schemes for Adoption of Private Sewers) Regulations 2011.

Debt Relief (Developing Countries) Act 2010 (Permanent Effect) Order 2011

Considered in Grand Committee

3.31 pm

Moved By Lord Sassoon

The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, the draft order before us today makes permanent the effect of the Debt Relief (Developing Countries) Act 2010. Perhaps it will assist the Grand Committee if I briefly explain the background to this order.

The Debt Relief (Developing Countries) Act 2010 prevents creditors of heavily indebted poor countries-the so-called HIPCs-recovering in UK courts an amount of debt in excess of that consistent with the HIPC initiative. The 2010 Act contains a sunset clause, which means that it will expire on 7 June 2011 unless an order is made to extend it. The Government support the order for two reasons. First, making the 2010 Act permanent will help achieve our aims for international development. Secondly, evidence suggests that the 2010 Act has had some benefit on HIPCs and no evidence has been found of unintended adverse effects.



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The Government are committed to debt relief for the poorest countries. The coalition programme for government states that the coalition will accelerate the process of relieving HIPCs of their debt and review what action can be taken against vulture funds.

The HIPC initiative aims to ensure that no poor country faces a debt burden it cannot manage. Multilateral, bilateral and commercial creditors are all expected to provide the debt relief required to restore external debt sustainability to HIPCs. The majority of creditors provide debt relief consistent with the HIPC initiative. The 2010 Act tackles the problem of the small minority of commercial creditors that free-ride on the relief, litigating and recovering the full value of their debts plus accumulated interest and any associated charges owed to them. This behaviour is inequitable and economically inefficient. The resources implicitly siphoned off by such creditors include the debt cancellation and development assistance funded by UK taxpayers.

The sunset clause was added to the Act because there was a degree of uncertainty about the impact of the legislation. This inclusion was important given the lack of parliamentary time to scrutinise the Bill when it was passed last year and the lack of available evidence at that time about its likely impacts. I should pay tribute at this point to the noble Baroness, Lady Quin, for her sponsorship of the Bill last year. I am delighted to be opposed by her for the first time this afternoon-although I hope that her opposition will not run to opposing the draft order before us. I am grateful to her for indicating that it will not.

It is important that we have had, and have taken, the opportunity to assess the impact of the Act. The Government have consulted a wide range of organisations, including many of those that contributed to the 2009 public consultation-representatives of the international financial institutions, HIPC country Governments, the financial services sector, lawyers and civil society. There is no information to suggest that the Act has adversely affected the availability and cost of lending to HIPCs or other low-income countries. The tightly defined and limited scope of the legislation seems to have prevented this. Additionally, no evidence has been presented to the Government to suggest that the legislation has had an adverse impact on the UK as a centre for financial services or that it has resulted in changes in the choice of law and jurisdiction for financial contracts. However, evidence suggests that the 2010 Act has benefited HIPCs. This is illustrated by the recent case of Liberia.

In June 2010, Liberia received substantial debt relief under the HIPC initiative, including 100 per cent cancellation from the UK. Most of its commercial creditors also provided debt relief, assisted by a buy-back operation of commercial debt under the World Bank's debt reduction facility in April 2009. In November 2009, the High Court gave judgment for $20 million against Liberia in a claim brought by two commercial creditors that had not participated in the debt buy-back operation. This allowed them to seek to enforce full repayment in the UK of an amount that was then equivalent to about 5 per cent of Liberia's national budget. However, one year later, by which time the 2010 Act was in place, the two remaining commercial creditors agreed to a second World Bank debt buy-back

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operation. Consequently, Liberia will have to pay back only 3 per cent of the amount owed-an amount consistent with the HIPC initiative. It seems clear that the 2010 Act was one factor that prompted this settlement.

The order that we are debating makes permanent the effect of the Debt Relief (Developing Countries) Act 2010. Making the legislation permanent will help to achieve the Government's aims for international development. As I explained, the 2010 Act has already been shown to have had a positive impact on HIPCs, preventing the diversion of resources provided through debt relief, which are intended to support development and poverty reduction; and no evidence has been found that it has had unintended adverse effects on low-income countries or on the UK. I therefore commend it to the Committee.

Lord Roberts of Llandudno: My Lords, it is a pleasure for me on behalf of the Liberal Democrats to welcome the order and to thank those whose foresight brought it about. The Debt Relief (Developing Countries) Act 2010 had a sunset clause, as we have heard, which is now removed. The Act will become permanent, as it should.

In the original discussion on the 2010 Act, it was noted that it was a victory over the "vultures"-the private companies that bought bad debts and then demanded interest that ensnared poor countries in even greater poverty. They lost the battle; I am delighted about that. I will give one example. Donegal International bought $15 million-worth of Zambia's debt for $3.3 million. It then demanded $55 million in the United Kingdom courts. It was eventually awarded $15.5 million. Even that was a profit of $12 million. However, this now will end. I pay tribute to the Jubilee Debt Campaign and to the churches, which all gave tremendous support for this debt relief step. The end of the sunset clause is in many ways the beginning of removing the threat from heavily indebted poor countries. Now possibly they will be able to breathe a little more freely and more hopefully. Once again I say that we are delighted to support the order.

Baroness Quin: My Lords, I am very pleased on behalf of the Opposition to welcome the order and to give it our wholehearted support. As the Minister noted, our support is unsurprising given that the Bill that became the Act began as a Private Member's Bill in another place. It was sponsored by Andrew Gwynne, the Labour MP for Denton and Reddish. The Bill had the support of the Treasury, and both the Minister in the other place and my noble friend Lord Myners in this House spoke strongly in support of it in debates. I pay tribute also to Sally Keeble, the former Member for Northampton North, who worked hard on the Bill in the absence of Andrew Gwynne through illness. I worked closely with her in presenting the Bill in this House. Following the noble Lord, Lord Roberts of Llandudno, I, too, pay tribute to those individuals and bodies outside Parliament who pushed for the legislation and provided material in support of it. In particular, I thank the Jubilee Debt Campaign, which has played a significant role.

Obviously, since I was the Member in this House who took over the Bill when it reached this place, I am

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glad to be able to welcome it today. I was delighted, although surprised, when it reached the statute book in the wash-up, particularly since it had previously encountered some opposition from Conservative Members in another place. I accept that, as part of the wash-up, it was somewhat frustrating to have to deal with the Bill at breakneck speed. At the time, all of us regretted the fact that we were not able to scrutinise it more effectively. Indeed, those who supported the Bill agreed to facilitate its passage by the inclusion of the sunset clause, which the Minister has mentioned, and which allowed the legislation to be reviewed after a year and thus provided an opportunity for its effects to be evaluated. However, although we accepted the sunset clause at the time, as strong supporters of the Bill we were uneasy that the legislation might cease to have effect after one year. This unease was particularly heightened by the opposition to it on the part of some Members in another place. I am therefore doubly delighted that the Government have decided to bring forward this order which will give permanent effect to the legislation.

At the time, some of the concerns related to unintended consequences and possible adverse effects which the Bill might have. These concerns were expressed to a certain extent by the noble Baroness, Lady Noakes, when she spoke to the Bill on behalf of the then Opposition. She talked about her concern that the Bill would be likely to reduce the availability of private sector involvement in debt for heavily indebted countries in the future, and expressed her concern that it might involve a premium for the risk involved in dealing with those countries, and therefore might be more expensive. I am glad to say that the Treasury and the Government have now assured themselves that these fears have turned out to be unjustified. The example of Liberia, which the Minister quoted to us today, and which his colleague in another place quoted yesterday, is an interesting one because Liberia had been harmed by the operation of vulture funds and it seems that this legislation has had the effect of reducing Liberia's debt burden in a way which does not seem to have threatened other countries. For that we ought to be very grateful and very pleased indeed.

The Bill, when it came through your Lordships' House, had strong support from the noble Earl, Lord Sandwich, and others on the Cross Benches, and indeed from the Liberal Democrat Benches, which has been reflected by the noble Lord, Lord Roberts, today. I accept the explanation that the Minister has given us today which sets out the reasons why the Government now wish to make this provision permanent in an Act. It will protect 40 of the world's poorest countries from the actions of a minority of unscrupulous commercial creditors-although the Minister rightly stressed that it is a minority. It also helps to ensure that the debt relief and development aid provided by the UK and other donor countries, and therefore by our taxpayers, goes to help tackle poverty rather than provide profits for investors. That is something about which we should also express our satisfaction.

Given that the order is part of our overall strategy towards aid and development and of our relationship with some of the poorest countries in the world, the

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Minister might not be surprised if I allude to the story of the day about the Government's aid policy-the question mark apparently raised by the Secretary of State for Defence about the Government's commitment to reaching the aid target of 0.7 per cent of GDP. It would be good to get a very firm commitment from the Minister today that that commitment remains and that there is no slackening or weakening of the position.

Specifically on the order, my honourable friend Chris Leslie also asked about the cost of the consultation and the cost involved in bringing the order forward, to which there was no reply. I therefore wonder whether the Minister can give us an estimate of that. Chris Leslie's point, which I think is fair, was that, given that the measure was initially blocked in another place by Conservative Members, if we had had more discussion on the Bill earlier and allowed the issues to be more fully explored, the sunset clause, the consultation and other costs involved might have been averted.

However, I assure noble Lords that in asking those questions I do not want the Minister or anyone else to be in any doubt about how much we welcome the order. I conclude by once again thanking him and the Government and expressing the Opposition's pleasure that the measure is to become permanent.

3.45 pm

Lord Sassoon: My Lords, I welcome the constructive, focused and brief discussion that we have had this afternoon. Let me address the points that have been raised. First, I thank my noble friend Lord Roberts of Llandudno, particularly because he did not ask me any questions, which makes my life easy.

I again pay tribute to the noble Baroness, Lady Quin, for having brought the legislation forward. She referred again to the questions that my noble friend Lady Noakes asked last year. It was right that my noble friend raised those questions; they were absolutely the right questions to ask about the Bill. The consultation process has addressed and targeted getting answers to those questions and has come up with absolutely the right answer. The cost of the consultation is all taken up in the time of Treasury officials within the existing team that deals with those matters, so there is no material incremental cost as a result of the consultation. As the noble Baroness recognises, if we had not had the consultation process now, it would probably have needed to be substituted by additional time to bottom out those questions a year or more ago, so there has been no material additional cost; it has been absorbed within the Treasury's normal expenditure.

On the noble Baroness's other question about the Government's commitment to the 0.7 per cent aid target, a few minutes ago in the Chamber, I heard my noble friend Lady Browning being asked that precise question and giving a vigorous and unequivocal answer that the Government remain absolutely committed to the target, and I can only repeat what she said.

In closing, I believe that it is important that the order is approved today, and I am grateful for the Committee's support. The order makes permanent the effect of the Debt Relief (Developing Countries) Act 2010. It will ensure that creditors of HIPCs cannot recover an amount of debt in excess of that consistent

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with the HIPC initiative. That will prevent the diversion of resources provided through debt relief which, as I said in my opening speech, are intended to support development and poverty reduction. We must retain our focus on those critical matters. I therefore commend the Motion to the Committee.

Motion agreed.

Greenhouse Gas Emissions Trading Scheme (Nitrous Oxide) Regulations 2011

Considered in Grand Committee

3.49 pm

Moved By Lord Taylor of Holbeach

Lord Taylor of Holbeach: My Lords, these regulations have already been debated in the other place and were fully supported by the Opposition. I hope that noble Lords will reach the same consensus today.

The regulations will extend the EU emissions trading system, the EU ETS, to include nitrous oxide emissions in the UK as soon as possible this year. Currently the EU ETS focuses primarily on tackling carbon dioxide emissions through the use of a cap-and-trade mechanism. This puts a price on greenhouse gas emissions in order to incentivise the most cost-effective emission reductions. By extending the coverage of the EU ETS to include nitrous oxide, we will be providing incentives to reduce an extremely potent greenhouse gas with a global warming potential 310 times that of carbon dioxide.

The production of nitric acid during industrial processes to make fertiliser is a major source of nitrous oxide emissions. Within the UK there is significant potential within the nitric acid production sector for dramatic reductions of nitrous oxide. For this potential to be realised, however, business requires the incentive that a carbon price can provide.

The regulations will use a provision in the ETS directive that enables member states to opt-in additional greenhouse gases and sectors. While all member states will include nitrous oxide emissions from nitric acid production in the EU ETS in its third phase, starting in 2013, there are strong environmental and business incentives for the UK to move early.

The regulations will apply in practice only to the UK's largest fertiliser manufacturer, GrowHow UK Ltd. GrowHow is already investing £10.5 million in nitrous oxide abatement technology. This early investment in green technology is being incentivised by the UK's early opt-in of nitrous oxide emissions into the EU ETS. By opting-in nitrous oxide emissions two years ahead of the rest of Europe, the UK will save the equivalent of around 1.6 megatonnes of carbon dioxide over 2011 and 2012. This will also provide increased certainty for the UK in meeting its national carbon

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budgets. As we are using trading allowances for the opt-in previously allocated to closed installations, we are not increasing the overall EU ETS emissions cap and can maintain the environmental integrity of the system.

The instalment of cutting-edge abatement technology by GrowHow will protect up to 80 full-time jobs within the nitric acid production sector. These are important steps in building a low-carbon modern manufacturing sector within the UK and will improve the competiveness of UK industry.

I am particularly pleased to inform noble Lords that these benefits can be achieved without imposing a significant burden on industry. This is particularly the case as GrowHow is already covered by the EU ETS, so minimal additional administrative work will be required. We have consulted closely and constructively with GrowHow on getting the details of this opt-in right, and it has been fully supportive of our proposals. We have further minimised the cost impact for the UK by setting the same benchmarks for emission reductions as those set by Austria and the Netherlands. These are the other member states that have also opted-in their nitrous oxide emissions into phase 2 of the EU ETS.

In summary, this policy has clear benefits in reducing emissions of a potent greenhouse gas and protecting jobs in British manufacturing, and is stimulating early investment in low-carbon technologies in the UK. I commend the regulations to the Committee.

Baroness Smith of Basildon: My Lords, first I thank the Minister for the detail that he has provided on the regulations before us, and for outlining the considerable benefits of reducing nitrous oxide emissions. Along with our colleagues in the Commons, we support the regulations. We know that the emissions are highly potent and that, as he indicated, the global warming potential is more than 300 times greater than that of carbon dioxide. Clearly there will be great benefit from accepting the proposals.

We also know that reducing nitrous oxide emissions alongside carbon dioxide emissions by extending the EU ETS will become mandatory in the EU in 2013. As the Minister indicated, we are not the first country to seek early implementation to include nitrous oxide emissions. The Minister said that the Netherlands and Austria had taken action. I understand that Norway, too, has taken action, perhaps more recently. The regulations before us should provide incentives for early reduction, as well as lower long-term costs for the company involved.

I have a few questions which I was able to notify the Minister of, and which I hope he will answer. We share his optimism that the regulations will reduce emissions, and, we hope, much more quickly. It would be helpful if he described briefly the monitoring procedures that will be in place or are in place already. The Minister was very helpful in outlining the consultation with GrowHow UK Ltd, which is directly affected. Was there any consultation with anyone else, and were there any other responses to the consultation?

In conclusion, I will briefly ask the Minister about trading security. I am sure that he is aware of the cyberattacks earlier this year on European trading

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registers. The Government are confident of the security of the UK trading register, but are they confident that other countries have now achieved the same level of security, or will be able quickly to achieve that level of security? It would be helpful to know what discussions the Government have had to date with other European countries on the issue. In February the Government issued a Written Statement that stated:

"While it is important to ensure a minimum level of security now to ensure the opening of the registries, the UK will continue to press the European commission to ensure that registry security across Europe is raised above this level".-[Official Report, Commons, 3/2/11; col. 50WS.]

It would be helpful to know what progress has been made since then. The Minister will understand that we have concerns about market confidence, and any reassurance that he can give about progress on European-wide security issues would be welcome.

I entirely concur with the Minister that there are economic benefits to these regulations. They make environmental sense and they have our support.

Baroness Parminter: We, too, welcome the inclusion of nitrous oxide in the EU Emissions Trading Scheme. As the noble Baroness said, nitrous oxide is a highly potent greenhouse gas. Its use in fertiliser accounts for a large share of our agricultural emissions, and agricultural emissions account for around one-third of all greenhouse gas emissions worldwide.

I have one question and one comment. The question concerns the impact on local air quality. The statement provided by the department states:

"It has not been possible at this stage to quantify any wider environmental impacts this option would have on ambient air quality".

While the release of laughing gas into the local community may sound like a topic of fun, I would like to be reassured by the Minister that local communities will not suffer any degradation in their air quality once the abatement technology is introduced.

My comment is slightly off the point, so please forgive me if I stray too far. In recent months the Government have made it clear that great steps will be needed if we are to feed a growing world population. Therefore, the use of fertiliser in agriculture will increase substantially. This is very good news for this company and shows that the Government are right to tackle the problem now. However, it is not only the use of fertiliser in agriculture that results in our nitrous oxide emissions; it is also how we store our livestock. I refer to the storage of manure in intensively reared systems, and the urine and manure that the animals produce. Given that we have taken this very welcome step today to reduce our nitrous oxide emissions, will the Minister ensure that Defra, in looking at how we as a Government seek to meet the growing challenge of feeding the world population, tackles the problem of intensive livestock farming, which is a far greater contributor to our nitrous oxide emissions than the chemical industry?

4 pm

The Duke of Montrose: My Lords, I congratulate my noble friend and the Government on bringing in the regulation before it is compulsory-really at the

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earliest opportunity-to limit nitrogen oxide production in the production of nitric acid. I must declare an interest as someone with an interest in agriculture, because it will be very helpful to agriculture for this assistance to be given to the fertiliser industry.

Following the same lines as my noble friend Lady Parminter, I do not know whether there is scope in the course of the Minister's reply to consider the question that anthropogenic NO2 emissions are doubling the amount expected from natural microbial action. In the whole agricultural scene, emissions of that gas are serious. One would like to know whether the Government are pursuing suitable protocols to determine emission levels of nitrogen dioxide and what can be done to limit them.

Lord Taylor of Holbeach: My Lords, I thank all noble Lords who have participated in this useful and productive debate-in particular, the noble Baroness, Lady Smith of Basildon, for advising me in advance of what she was particularly interested in. I am happy to be able to address those issues.

What has been very satisfying has been the support that the measure has and the acknowledgement that this is the right way in which the Government and industry can work together for the benefit of the United Kingdom economy in general and United Kingdom investment.

The noble Baroness asked about the monitoring system. The installations covered by EU ETS are required to monitor and report emissions. At the end of each year, they are required to surrender allowances to account for their installations' actual emissions. The annual emissions figure must be approved by an independent third-party verifier. That operates not just in this area but across the EU ETS scheme. That is part of GrowHow's existing commitment in its carbon reduction programme.

The noble Baroness also asked about the consultation process. We used the shorter consultation process. As there was a single manufacturer involved, we felt that it was unnecessary to have a protracted consultation period. In fact, there were three other consultees: Scottish and Southern Energy, Scottish Power and the Chemical Industries Association. All were generally supportive of the N2O opt-in. Concerns were raised by the Chemical Industries Association about the proposal, included in the consultation, to place a legal requirement on nitric acid producers to return the allowance if they reduced levels of nitric acid production-the partial closure rule-but the Government have agreed that partial closure is unnecessary and we will not be insisting on that in the regulations.

The noble Baroness also asked about the obvious concern, given the hiatus in the market earlier this year, on EU ETS registry security. The UK registry is widely recognised as one of the most secure registries in Europe, but, EU-wide, the Commission has issued a draft regulation to address those security issues, and we are engaging with the Commission and other member states on that. Our aim is higher levels of security in the registries while ensuring that we still have a liquid and well functioning market. The Government are well aware of our role as a leading member and are

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working closely with France, Germany and Spain to try to ensure that the standards throughout Europe are maintained at a high level to reduce that risk.

My noble friend Lady Parminter asked about air quality. That is a very reasonable question to ask. There is no degradation in air quality as a result of those operations. The measure reduces nitrous oxide emissions so, if anything, there should be an improvement, but we could not quantify that exactly. She then asked, as did my noble friend the Duke of Montrose, about the relationship of the regulations to the policy of carbon reduction and nitrous oxide reduction for agriculture in general and about what progress had been made on that front. I cannot answer that question directly, but it is interesting. I will ask my noble friends in Defra to write to put noble Lords in the picture on that.

Meanwhile, if I may, I commend the regulations for approval.

Motion agreed

4.06 pm

Sitting suspended.

4.45 pm

Regulation of Investigatory Powers (Monetary Penalty Notices and Consents for Interceptions) Regulations 2011

Considered in Grand Committee

Motion

Moved by Baroness Verma

Motion agreed.

Water Industry (Schemes for Adoption of Private Sewers) Regulations 2011

Considered in Grand Committee

4.46 pm

Moved By Lord De Mauley:



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Lord De Mauley: My Lords, I welcome the opportunity to introduce these draft regulations to your Lordships. Their purpose is to effect the transfer of private sewers and lateral drains to the statutory water and sewerage companies. Under similar arrangements, sewers constructed prior to October 1937 were, under the Public Health Act 1936, automatically adopted as public sewers and are maintained by the water and sewerage companies. However, since then adoption has been undertaken on a voluntary basis. While it was the likely intention of the 1936 Act and subsequent legislation that sewers should be adopted, for various reasons that has not happened on a universal basis. Even where adoption agreements were reached and new sewers constructed to the requisite standards, the adoption process was not always followed through.

The result is a legacy of unadopted private sewers and drains that has accumulated since 1937. Very often, the owners of these assets-typically householders-are unaware of their responsibilities and liabilities. The repair and maintenance of private sewers can be very expensive for individual householders. Where drainage arrangements are shared, it can be difficult to recover costs from those who use the sewers but are unaffected by any problems. Private sewers may run beneath a neighbour's land or a highway, such that access is both difficult and costly.

While many private sewers function satisfactorily, the disparate ownership of these assets, which are essential to everyday life and important to public health, means that they are not always maintained in an economic and integrated way to a consistent, high standard. Many of us are aware of examples of persistent sewerage problems that require attention. In addition, there is the inequity that private sewer owners pay not only for the maintenance of their sewers but also, through their sewerage charges, for the upkeep of pre-1937 sewers, which are maintained by the water and sewerage companies. The transfer proposed in the regulations will place the owners of post-1937 private sewers on a similar footing to those with pre-1937 sewers. Successive consultations have concluded that an overnight transfer to the water and sewerage companies is the preferred approach.

Not all sewers will be transferred. Those which carry only surface water and do not discharge to a public sewer will not be transferred. The same will apply to sewerage systems that serve a single, centrally managed site or cartilage, as for example might be the case with a shopping mall or industrial estate. Systems that drain to private treatment facilities or to septic tanks and the like are also excluded.

Action is necessary to redress the failures of the 1936 Act. The objective is to ensure better maintenance of what are currently private sewers, resulting in less environmental pollution, the minimising of threats to public health, fewer complaints from householders and businesses about what is perceived to be a costly and unfair burden, and fewer disputes requiring local authority intervention. In the longer term, an integrated approach will achieve a better managed sewerage system that will have lower maintenance costs and will be more resilient and effective. The water and sewerage companies which already have a sewer maintenance capability are well placed to take this on.



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The impact assessment estimates that additional costs will add to water bills an average of £5 per annum from 2011, rising to £8 per annum by 2019, with a range from £3 to £14 across the companies. While increases in charges can never be welcome, at up to a little over £1 a month, these relatively modest annual increases are to be preferred to a system in which costs fall unequally across water charge payers or unfairly on individuals. Overall, they represent a sound investment in the future maintenance of essential assets. The transfer exercise does not itself trigger major expenditure on those parts of the system that are currently working satisfactorily; it will be for the water and sewerage companies to assess and prioritise what is essential short-term maintenance, repair or replacement.

The draft regulations provide, at Regulation 3, for the Secretary of State and Welsh Ministers to make schemes for the transfer of private sewers and private lateral drains to the statutory water and sewerage undertakers. Sewers are defined as all drains that are shared. Lateral drains are those which serve a single property but lie outside the boundary of that property. Pumping stations which form part of the system will also be transferred. In order to qualify for transfer, private sewers and lateral drains must be connected to the public system on 1 July 2011. The transfer itself will take place on 1 October 2011, with the exception of pumping stations, which may be transferred individually or in groups at any time before 1 October 2016. As I have said, sewers and related equipment that carry surface water only and do not discharge to a public sewer will not be transferred. Sewers constructed after 1 October will be the subject of separate proposals for mandatory adoption arrangements that are not under consideration today, but which should be the subject of consultation shortly.

Regulation 4 makes provision for the Secretary of State and Welsh Ministers to make supplementary schemes for transfer. Private sewers and lateral drains which are connected to a public sewer between 1 July and the commencement of Section 42 of the Floods and Water Management Act 2010, currently planned for 1 October 2011, will neither qualify for transfer on 1 July nor be subject to new-build arrangements for adoption which will be effective upon commencement of Section 42. Unfortunately, it was not possible to synchronise the dates: therefore it is necessary to introduce a supplementary transfer scheme to cater for sewers connected between these dates. Supplementary transfer is planned for 1 April 2012.

Regulation 5 makes provision for certain exemptions, including for railway land which would present operational difficulties for water and sewerage companies, and for Crown land, where the arrangement is for sewers to be transferred unless relevant land is "opted out" of transfer. Regulation 6 makes provision for sewerage undertakers to make a declaration to vest private sewers by publishing notice in the London Gazette and the local press, and by sending individual notices to the owners of private sewers. Regulation 7 provides that where there are existing declarations, the provisions of the regulations shall not apply. Regulations 8 and 9 provide that outstanding appeals will be discontinued and that Section 104 adoption agreements that have

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been executed will cease. Where a sewer remains to be built or connected, a Section 104 agreement will remain valid. Existing legislation provides for a right of appeal to Ofwat against transfer of assets for both the owners of private sewers and third parties through whose land a drain may pass or who may be disadvantaged by the transfer.

Finally, the regulations are relatively short-lived in that they are subject to a sunset clause effective in 2016. They provide for a once-and-for-all transfer of private sewers, lateral drains and associated private pumping stations. Once the transfer is complete, by 2016 for pumping stations, the regulations will serve no further purpose and will be repealed automatically. I hope that noble Lords will accept them.

Lord Knight of Weymouth: My Lords, I apologise that I was not here for the opening of the Minister's speech. I had not been made aware that today's running order had changed, and I worked off the business papers rather than today's list. It is just one of those things.

I should say at the outset that we very much welcome the regulations. They reflect the work that we did in government. If you are one of those people who live on an estate with private sewers and you are impatient for them to be adopted by the sewerage undertaker, you might be asking why it has taken so long. We had a consultation in 2003, another one in 2007, a third one in August last year, and now finally we have the legislation needed for this to take effect from October this year.

Certainly some of my former constituents in Shepherd's Croft in Portland will be delighted. They live in former prison officers' accommodation where the Crown used to be the owner of the estate and the housing. They are responsible for the sewerage, which was never brought up to the standard at which the water company was willing to take it on. There remained a whole series of problems about who would pay, the Crown or the residents, when sewage was bubbling up in people's gardens. I do not think any of us wants to see that. It will be a relief to them and to many others around the country that a way forward has now been found. That very much informs my fulsome support for what is being done here.

I have a couple of questions for the Minister. I have read the accompanying papers, which are very helpful and complete. Indeed, the completeness is probably the reason why I might not have grasped some of the detail. Once I got on to the latter pages, the details might have passed me by, and I can only apologise if my questions are answered in the detail. It appears that over the long term there are good net benefits to be had from making this change. My reading was that after 32 years the net benefit would start to accrue. Obviously that is welcome, but it is important to ask about the short-term costs being borne by the sewerage undertakers. If my reading of the notes is right, the costs are around £1 billion which then has to be absorbed by customers because ultimately the sewerage undertakers, the water companies, will seek to recoup those costs from their customers. The analysis shows that the cost to individual customers of recouping them would be between £3 and £14 per annum.



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I am interested in finding out more about how that might break down. I know that this is difficult to anticipate, but I am sure that the department will be in communication with Ofwat about how this is going to be regulated to ensure that customers are treated fairly. For example, it will be interesting to know the difference between business customers and domestic customers. In the announcements that have been made about South West Water customers, and how their situation might be improved given the high water bills paid by domestic users in that region, there is a proposal that business customers should pay more so that domestic customers pay less. That raises a legitimate question not only for the water companies, the sewerage undertakers, but also for businesses across the country about whether they will be the ones asked to pay the bulk of the costs of dealing with the legacy of private sewerage and drainage systems. Alternatively, will they be applied evenly across domestic customers as well?

There is a also question about whether the geographic distribution of these costs will be evenly spread or whether, because of regional variation-in the case of the south-west, the large extent of the coast and the cost of sewerage treatment in that area is high-each undertaker will have effectively to wash their face. Questions will be raised with regard to South West Water in particular, which I know has been very active given the Walker report and other things. Will South West Water's customers end up losing the benefit of the announcement made by the Chancellor in the Budget if they have to pay extra costs because of the particular liabilities in that region?

My only other question concerns the exemption in Clause 5 of the statutory instrument for private sewers and exempt private lateral drains on Crown land. This goes back to my experience as a constituency MP in Dorset, where prison officers' houses were built on Crown Estate land and subsequently have been sold on. Where the lease to such properties has been passed on but the freehold remains in Crown ownership, will homes in those circumstances be exempt from this transfer because they are on Crown land or will the transfer go ahead, allowing them to benefit from the sewers being maintained and the possibility of the roads then being adopted as well? I know that this is a big issue for some residents. Having made those comments, I am happy to support the regulations.

5 pm

Lord Greaves: My Lords, on behalf of the Liberal Democrats I, too, am very happy to support the regulations, which are long overdue and welcome. The Explanatory Memorandum suggests that up to 50 per cent of properties are connected to private sewers in one form or other-which is a very large number. Under the regulations, 220,000 kilometres of private lateral drains and sewers will become the responsibility of the water and sewerage companies. At a guess, that is five times the circumference of the earth. I do not know how far it is to the moon, but 220,000 kilometres is a long distance. Therefore, this is not a trivial measure; it is extremely important and welcome.



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I share some of the concerns of the noble Lord, Lord Knight, about the impact of the costs. It is clear that they will impact mainly on property owners whose drains and sewers are already the responsibility of the water and sewerage companies under the 1936 Act. I would like a reassurance that the regulations being discussed today will solve the problem once and for all and that the problem will not start again after the regulations lapse in 2018. This must be a permanent solution. Future regulations that apply to new developments through the other Act, which we discussed before the election, will sort this out. We should not need to come back in 30 years' time to try and solve another 30 years' worth of problems. I think I know the answer, but it would be helpful to have that reassurance on the record.

I am not sure-clearly I have missed something or perhaps I have not understood it-what the relationship is between the lapsing of the regulations at the end of June 2018 and the date of 2016 to which the Minister referred. Perhaps he will explain that. In particular, in the years between 2011 and 2016 or 2018, what is Government's timetable for bringing in the schemes for each of the water and sewerage companies? Will they all come in at the same time or will they differ? How long will it take? Clearly, the quicker this can be done, the better.

The other questions I want to ask are complicated but crucial. How will the new schemes apply to local properties? I have before me a plan of some properties which it would be nice to distribute to Members of the Grand Committee, but I am not allowed to do that, so I shall have to try to explain it. I apologise to the Minister for not giving him advance notice of these questions, but I have only just received this submission from an interested party.

How will property boundaries be defined? If you buy a property which is served by an adopted highway and the lateral drain of what is at the moment a private sewer goes into the adopted highway, I presume that anything under the adopted highway will be assumed not to be within the property boundary, even though the deeds of that property may state that the property owner owns that part of the adopted highway. Because it is a highway maintainable at public expense, I assume that it would not be included. Therefore, if a private lateral drain goes straight out of a property on to a public highway and then joins the public sewer-the sewer that is already vested in the sewerage undertaker, say, along the middle of the road-the section of the lateral drain which is under the highway will now be vested in the water and sewerage company, whereas the section in the front garden will not. I assume that that is fairly straightforward.

What is the position if the public highway is unadopted? A section of it is likely to belong to the property from which the drain comes out. It may well have a sewer along it which is the responsibility of the sewerage undertaker. Will sewers under unadopted highways now be the responsibility of the undertaker? I assume that they will, because they will be in the same position as private sewers which serve more than one property.

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What is the position in relation to the lateral drain coming out of the property? Will it still be the responsibility of the property owner until it plumbs the sewer, which may go down the centre of the road?

I hope that what I am asking is clear. I think it is, but I am looking at a plan which makes it all very clear. This is a question about unadopted public highways-not their relationship to a sewer that serves more than one property, which will now be the responsibility of the undertaker-but what happens if it is a lateral drain serving only one house? I have been involved in these things at the local level in the past, and I am afraid that it lives with me. That is my basic question, because I think I understand how the rest of it will work at the local level. Having asked these technical questions, once again I would like to say that the regulations are extremely welcome in general. A lot of people around the country will be grateful that the Government are bringing them in.

Lord De Mauley: My Lords, I thank the noble Lord, Lord Knight, and my noble friend Lord Greaves for taking part in this debate and for the warm welcome they have given these regulations. I acknowledge the work of the previous Government in getting us a long way down the track towards them. The principal issues raised were as follows. The noble Lord, Lord Knight, referred to the lengthy time spent in consultation before the regulations were produced, and no one can disagree with that. One can only hope that as a result, as my noble friend asked, the regulations will indeed be effective and stand the test of time.

The noble Lord, Lord Knight, raised a question about the recovery of costs, how much they will be and who they will affect. Before he arrived for the debate, I had explained that the water and sewerage companies will obviously recover their costs through charges to customers for sewerage services. I indicated that it is estimated that transfer will add an average of £5 to £8 per annum to water bills up to 2018, in a range from £3 to £14. While increases in charges are never welcome, they will be up to or a little over £1 a month. Those are relatively modest annual increases, which is to be preferred to a system in which the costs fall unequally across water charge payers or unfairly on individuals. Overall, they represent a sound investment in the future maintenance of essential assets.

The transfer exercise does not itself trigger major expenditure on those parts of the system that are working satisfactorily, and it is for the water and sewerage companies to assess and prioritise what is essential short-term maintenance, repair or replacement. I understand that everyone will pay within the range of £3 to £14, and that there is no difference between business and domestic customers.

The noble Lord, Lord Knight, raised the issue of the south-west, which is of course particularly important. We are looking at the somewhat complex issues around affordability in the region. The particular issues regarding private sewers have not affected our thinking in this respect, and the Government are committed to supporting households facing water affordability pressures. On 5 April, we published our consultation on water

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affordability, including recommendations in relation to the south-west region. It invites views on options to reduce the bills of all household customers of South West Water as well as options for providing additional assistance to low-income households. As pledged in the Budget, additional assistance will be provided through public expenditure and our proposals will be set out in the water White Paper due in the autumn. The noble Lord asked about Crown leasehold land and transfer there. Leasehold arrangements in respect of Crown land will not result in exclusion from transfer.

My noble friend Lord Greaves made some important points. I certainly agree with him that this is not by any means a trivial matter. He asked whether the regulations will solve the problem once and for all. We believe them to be a permanent solution; that is the basis on which we are going into this. He also asked about conflicting dates and was quite right to do so. The correct date is 2018.

My noble friend also asked a couple of questions about boundaries. Guidance on the regulations is being prepared and is expected to be published during the summer, in time for transfer on 1 October. I take to heart his comments, which will be considered in the preparation of that guidance. It is intended that property boundaries should be at the junction with the street-the back edge of the pavement. I can also tell him that sewers under unadopted roads will be transferred.

Where points have been raised in the debate to which I have not responded, I will of course write to noble Lords. To conclude, the transfer is intended to put right the anomaly that, subsequent to the Public Health Act 1936, even where adoption agreements were reached, the adoption process was not concluded. Transfer will relieve individuals of the burden and expense of maintaining private sewers where access and cost recovery can be difficult. It will achieve a better integrated and more consistently managed sewerage system that is more resilient and better able to adapt to future challenges-for example, climate change.

With regard to costs, the relatively modest annual increases that are estimated to arise from the transfer, fairly shared among water charge payers, are, as I have said, a sound investment in the maintenance of vital assets. Transfer will remove the unfair cost subsidy whereby pre-1937 drains are maintained by statutory sewerage undertakers while the owners of post-1937 drains are obliged to contribute to this upkeep through sewerage charges but, in addition, are responsible for the upkeep of their own private sewers. It will place those with post-1937 sewers on a similar footing to those with pre-1937 sewers.

The regulations will provide the reassurance that companies will work to minimum standards of service and costs, regulated by Ofwat. Parliamentary approval of these transfer regulations will mean that transfer can go ahead as planned on 1 October. I beg to move.

Motion agreed.



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Regulation of Investigatory Powers (Monetary Penalty Notices and Consents for Interceptions) Regulations 2011

Considered in Grand Committee

5.17 pm

Moved by Baroness Verma

Baroness Verma: My Lords, the Government are pleased to bring forward these regulations which, through amendments to the Regulation of Investigatory Powers Act 2000, will provide additional protection for the users of electronic communications. The regulations address concerns expressed by the European Commission that the UK had failed adequately to transpose EU law requirements concerning the confidentiality of electronic communications, specifically concerning the interception of communications.

RIPA provides that interception of communications can be lawfully undertaken either in accordance with a warrant signed by the Secretary of State or, in other specified circumstances, without a warrant. The changes brought about by these regulations will impact on interception without a warrant.

Communications service providers may lawfully and legitimately intercept communications when it is necessary for them to do so-for example, in order to manage their networks. Where businesses choose to carry out interception to provide value-added services, an activity that is carried out at the discretion of service providers, RIPA requires the consent of both the sender and the recipient of the communications that will be intercepted. RIPA also provides for criminal sanctions against the intended, unlawful interception of communications.

However, to address deficiencies in the statutory regime identified by the European Commission, these regulations amend RIPA in two significant respects. First, they create a civil sanction for the unlawful interception of electronic communications that does not constitute an offence under Section 1 of RIPA. In other words, we are establishing a sanction for unintentional and unlawful interception of electronic communications. Fines of up to £50,000 can be imposed, together with a requirement that activity that has been determined to be unlawful under these regulations must stop. Secondly, the regulations clarify the nature of the consent that must be given by a party consenting to the interception of a communication in order to render that interception lawful. Reasonable grounds for believing that consent has been obtained will no longer be sufficient.

Under the regulations, the administration of the new civil sanction will be undertaken by the Interception of Communications Commissioner, whose expertise

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and independence will ensure that the new requirements are rigorously and fairly applied. He will be able to draw on technical assistance from Ofcom as and when required.

The regulations also provide for a comprehensive appeals process to the first tier tribunal. This will deal with appeals against the imposition of either monetary penalties or a requirement to stop an activity that the commissioner has determined is unlawful. The regulations reinforce and clarify the statutory regime under which interception of communications can be carried out lawfully and with proper respect for a person's right to a private life. When interception is carried out unlawfully, appropriate penalties will be imposed. The regulations address the two main concerns raised during the consultation on these issues with communications service providers, civil liberties groups and others. They provide for an appropriate maximum monetary penalty for the new civil sanction and ensure that the scope of the sanction is sufficiently broad to cover all instances of relevant unlawful interception.

We expect any business impact on communications service providers to be minimal. The regulations will not stop activities that providers wish to undertake-for example, providing value-added services to their customers. However, when such activity amounts to the interception of communications, the regulations strengthen the requirement that the interception must be consensual and that there must be evidence of the consent of those affected. This will provide welcome reassurance to customers that their privacy is being properly respected, together with greater clarity to the industry on how to ensure that its activities are lawful.

We have worked constructively with the European Commission to ensure that its concerns have been addressed. The regulations will provide confidence that interception of communications is in all circumstances carried out lawfully and with due respect for fundamental rights. Where such respect is not observed and interception is unlawful, appropriate penalties can be imposed. I commend the regulations to the Committee.

Lord Rosser: My Lords, first I thank the Minister for explaining in detail the regulations and their purpose. The main reason for this instrument, and for the stronger wording and stiffer penalties that it provides, appears to be the desire to meet the concerns of the European Commission that the United Kingdom has failed to incorporate properly into national law the European Union's privacy and electronic communications directive. It has been claimed that concerns were prompted by complaints received by the Commission from BT customers after it conducted unannounced, targeted advert trials through a software company that used its technology to intercept and monitor the web activity of BT customers to match adverts to the interests of users.

The Crown Prosecution Service recently decided not to proceed with action against BT and the software company as it did not consider that there was enough evidence to convict. However, last September the Commission referred the United Kingdom to the

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European Court of Justice, citing concerns that our laws did not adequately protect against intrusion into personal privacy. The concerns were that we had not created a sanction for all unlawful interception, only for intentional interception; that we had not created an independent authority responsible for the supervision of all interception activities; and that we had wrongly made it lawful to intercept a communication where the interceptor had a reasonable belief in the other party's consent to the interception.

On the basis of what the Minister said, the Government acknowledged the first and third points, but not the second on the independent authority. Perhaps the Minister will comment on that. Perhaps she could also say whether the Government regard the provisions in this regulation are likely to bring to an end any proceedings at the European Court of Justice.

The Government proposed amendments to the Regulation of Investigatory Powers Act last November, and the outcome of the consultation showed strong support among the 39 respondents for the adoption of what were described as "unambiguous measures", making it clear that users have to grant consent before companies can intrude on their communications, and that it should no longer be sufficient to maintain that including relevant information within the general terms and conditions of privacy policies would allow for a sufficient expression of consent. We note that guidance will be provided by the office of the Interception of Communications Commissioner and we understand the reasons for this statutory instrument. I also take it from the words used by the Minister that the Government are perfectly happy to proceed with this revision of the Act. They do not regard it as an example of what they would describe as unnecessary bureaucracy and regulation, and they do not regard themselves as having to do this simply because the European Commission has told them they ought to do it. I had the impression from what the noble Baroness said that the Government themselves believe that this is the appropriate action to take. I would be grateful if she would confirm what I believe she said in her introductory comments.

I conclude by asking when the guidance will be provided by the office of the Interception of Communications Commissioner. Will she also confirm that the anticipated additional workload and costs on the public purse is effectively nil?

Lord Shipley: My Lords, I, too, thank my noble friend for proposing this statutory instrument. I do so because it strengthens the rights of the individual and is therefore most welcome. However, it is not clear why the privacy directive produced in 2003 was not put in place correctly at the time. It is now some eight years since that occurred. If the Minister is in a position to say a little more about why it has taken so long to put this right, that would be welcome.

Two of the three issues raised by the European Commission have now been addressed. Those are, first, the introduction of unintentional as well as intentional interception; and, secondly, the requirement for positive consent by an individual for interception. But a question remains around the role of the independent

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authority. I would like to be clear about this because the European Commission raised three concerns, the second of which was that:

"The UK had failed to create an independent authority responsible for the supervision of all interception activities as required by Article 28 of the Data Protection Directive".

The Explanatory Notes to the regulations state simply that:

"The Government has not conceded the alleged defective transposition [from the directive] identified".

It is not clear to me quite why the Government have not conceded that.

That takes me on to the issue of the Information Commissioner, as distinct from the Interception of Communications Commissioner. The office of the Information Commissioner submitted a lengthy response to the consultation to this RIPA regulation, from which I will quote from paragraph 1.5:

"If personal data is intercepted unlawfully under section 1(1) of RIPA this may also constitute a breach of the first data protection principle. It will be important therefore to draft the legislation in a way which allows the ICO to work with the IoCC once it has been established if an interception is unintentionally unlawful".

The question is this: is the Office of the Information Commissioner satisfied with the result of the consultation and the statutory instrument?

I have two final points on which I would appreciate guidance from the Minister. First, are we clear on how consent will be given to the monitoring of communications? In other words, how the opt-in is taken by an individual is extremely important. Secondly, how soon might we review this statutory instrument? A year or two from now, will there be a further review to assess whether what we have proposed in meeting the European directive has been achieved?

5.30 pm

Baroness Verma: I am grateful to noble Lords for their thoughtful consideration of and warm welcome for the regulations. The regulations will provide additional protection by ensuring that users consent to the interception of their communications if obtained in circumstances where such consent is required. I will elaborate a little further. A new sanction for the unintentional unlawful interception of electronic communications will provide an important and additional reassurance to users that their privacy will be respected.

I will try to respond to some of the questions that noble Lords have asked. The noble Lord, Lord Rosser, asked if we were forced by the EU to take on this extra instrument to protect users. We agree that we had to correct the transposition of the privacy and data protection directives in two respects. We have welcomed the opportunity to be able to provide members of the public with that additional protection.

The noble Lord asked when guidance would be produced. The Interception Commissioner is producing guidance, and we understand that it will be ready in approximately three weeks' time.

The noble Lord asked why we did not accept that Article 28 of the data protection directive required us to establish an independent supervisory body to deal

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with unlawful interception. We are confident that the Interception Commissioner's new role will provide oversight of unlawful interception and-excuse me, I am trying to read my official's writing; I told them to write big because I cannot see-that this will satisfy the Commission.

I thank my noble friend Lord Shipley for giving me prior notice of his questions. He asked why the regulations had taken so long. It is because they are complex and we wanted to make sure that they fulfilled the transposition of the EU directives correctly. Furthermore, not only were we in discussion with the European Commission, we carried out a consultation to ensure that we listened to parties likely to be affected by these regulations.

Noble Lords asked whether the Information Commissioner was happy with the regulations and the consultation. He concluded in his response to the consultation that he recognised the need to make these changes to the legislation and welcomed the proposed amendments. He added:

"It is hoped these will provide some much needed clarification of the nature of consent required for lawful interceptions".

Noble Lords should be assured that the Information Commissioner is very much satisfied and on side with the regulations and the powers that they undertake to ensure that the protection of users is at the forefront of what we are trying to achieve.

What form of consent was required by users? We have deleted the reference in RIPA to reasonable grounds for believing that users' consent has been obtained. It will now be necessary for CSPs to satisfy themselves that they have required consent. Therefore, a greater onus is on them to ensure that they have met all the necessary safeguards to ensure that they are not breaking the law. The EU privacy directive requires that consent should be freely given, specific and informed.

The noble Lord, Lord Rosser, asked: what are the additional costs to the commissioner's office? They are likely to be minimal and, in the first instance, we do not expect there to be any requirement for additional resources.

Noble Lords asked whether I can confirm that infraction issues have been resolved to the satisfaction of the Commission. The Commission referred the UK to the European Court in September 2010. We have been in dialogue with the Commission to resolve those matters, and we believe that we have done all that is required to ensure that the effective transposition of the relevant EU directives has taken place.

If I have failed to answer noble Lords' questions, because this is a hugely technical issue, I turn to my officials while I promise that we will write to noble Lords, but the regulations will ensure that we responsibly meet our obligations under EU law. I thank noble Lords for their warm words about the regulations, and I put on record my appreciation to my officials-who let me down slightly at the last minute with their small writing-who have shown me great patience and skill in helping me to navigate incredibly difficult, complex and technical details. I commend the Motion.

Motion agreed.

Committee adjourned at 5.37 pm.


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