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Water Industry (Financial Assistance) Bill

My Lords, I thank all noble Lords who are here and who have contributed to this debate at an unsociable hour, although that has not affected the quality of the contributions, nor the vigour with which they have been presented. I just say to the noble Lord, Lord Knight, that there seemed to be a bit of an inconsistency between the case that he presented and the case where he was listening to the judgment of the noble and absent Lord, Lord Berkeley, on this issue. I welcome his broad support for the Bill. Clearly, he recognises that the Government have to act. We are under pressure from the Commission to clean up our act, as were the previous Government. If that is time-sensitive, then the Government have done the right thing by bringing the Bill forward to enable this project to go ahead at the first available opportunity. The quality of the debate has not been affected by the lateness of the hour. It reflects well on this House that it is capable of scrutinising legislation at any hour. I have here a fistful of sheaves from the Bill team and I shall do my best to answer all the points that have been raised. The noble Lord, Lord Grantchester, was in a particularly interrogative mood, as he often is. If I miss out any points, I hope that noble Lords will forgive me, and I shall certainly ask the Bill team to write to noble Lords on particular issues if I fail to address them. The noble Lord, Lord Grantchester, mentioned the water White Paper and said that there was a missing chapter on water efficiency. I would not like him to think that that was the case because water conservation is covered in every chapter of the water White Paper. In particular, chapter 6 covers our plans for water efficiencies in homes and businesses. It is a very important part of our strategy for dealing with the ever increasing demands for water in this country. He asked questions about whether there could be some abuse of these financial powers in, say, an election year. Any financial assistance would inevitably be the cause of much debate. There can be no disposition of government money without Parliament being very much on the alert. We know in the case of the particular move to fund the south-west that there had been years of campaigning and an independent water review to address this matter. We consulted publicly and made an announcement in the Budget specifying who could benefit from financial assistance, the duration and the reason why the Government were making the payment. Noble Lords have asked why there is no sunset clause. We made it clear that we should leave it open for the Government to have the flexibility to offer similar support to future projects, should the case be strong, but such support could not be given without proper scrutiny in Parliament. I can give that commitment. What about the rest of the commitments to legislate that the Government made in the water White Paper? We intend to publish a draft Bill, as I said in my opening remarks. We have made considerable progress in drafting the Bill. It is important to get the legislation right. The advantage of a draft Bill is that we have an opportunity for further scrutiny before the Bill comes before the House. This will be a strategic shift in the water industry, in which I think Parliament will want to be fully engaged. I make no apology for what has been suggested that there has been an unnecessary delay in the implementation of the water White Paper. I turn to particular points that have been made about South West Water and the welcome by my noble friend Lady Miller of Chilthorne Domer and my noble friend and namesake Lord Taylor of Goss Moor. The independent Walker review examined the situation in the south-west and suggested a number of different models by which government should address the issue. We sought advice from Ofwat on the most effective way of dealing with it and considered all the other options in detail. The particular method has been chosen because it will be the most effective in dealing with the inequity that the whole measure is designed to address. My noble friend Lord Taylor asked again about how the funding might continue, which came up in a number of speeches. The Treasury has agreed that Defra can, if necessary, make a call on reserve to fund this policy through the current spending round. Defra will then need to bid for funding for the next spending review in the usual way. Several noble Lords called on us to review social tariffs. As noble Lords will know, the matter is in the hands of individual water companies. The reasoning behind this is that companies know the most effective way to deliver a social tariff policy in their area. The noble Lord, Lord Grantchester, asked about this, and there were questions from my noble friend Lord Taylor on the same subject. I turn to the question of the Thames tunnel, which is the second part of the issue. The noble Lord, Lord Grantchester, asked whether CLG or Defra would take the decision on planning. CLG is the planning authority under the Planning Act, but decisions on development consent for wastewater infrastructure of national significance may be taken jointly by the Secretaries of State for CLG and Defra, based on Planning Inspectorate recommendations. In this case that would seem the most likely process, but I cannot give a categorical assurance. Questions were asked about state aid. Contingent financial support will need to be state aid compliant—and it is contingent finance to support investment that we are offering. Investors will want to know this before they invest. Our initial analysis of state aid rules is that this contingent support may require us to notify the European Commission. If appropriate, we will make the necessary state aid notification this summer. There was much talk of the infraction risk, and of how much any fines were likely to be. The noble Lord, Lord Knight, speaking the words of the noble and absent Lord, Lord Berkeley, was very exercised about this. I understand that it is a serious matter, and that there is a case that we must be able to answer. We are working with the Commission. It is in our interest and that of the Commission to make sure that by building the Thames tunnel we will ensure that London's river is clean and pollution-free. That is the purpose of the exercise. We are working with the Commission to make sure that it is aware of our commitment to achieve that. The noble Lord, Lord Wigley, rightly wanted assurances about the devolved position of Wales. There have been no discussions about the construction or enlargement of any reservoirs in Wales. Indeed, none of the water companies, which all produce a 25-year outlook, includes any construction programme for a new reservoir in Wales. I do not suppose that the noble Lord is volunteering their construction; his questioning was not along those lines. However, I assure him that no English company at this stage anticipates this construction—and clearly any such arrangement would have to be approved by the Welsh devolved authorities. I hope that devolution will make these matters better between the two Governments, and between water companies and the Welsh Government. I would hope that that is the future, and it must be one of the benefits of devolution which can protect the interests of the Welsh and the English in their relationships on this matter. My noble friend Lord Jenkin talked about the transport of supplies for the construction of the Thames tunnel. I know that the noble Lord, Lord Berkeley, asked me a Question on this matter, so I know that he is also interested. This House may have been one of the instruments that has reinforced this view on Thames Water because it is considering how it can limit the impact of construction traffic. The company intends to use the river wherever practical. We should remember that not all the construction sites are on the river, but quite a large number of them are. Barges can be very efficient. It is certainly the Government's view that the river should be used. My noble friend referred to Blackfriars Bridge. That is entirely a riverside construction. It is not just the 406 million tonnes of excavated material that have to be moved; it is also the construction materials that need to be brought on to site. The Thames tunnel briefing, which I hope my noble friend has had a chance to see, makes Thames Water's intentions about the transport of freight quite clear. My noble friend Lord Fowler expressed particular concern about the Carnwath Road site and the change from the Barn Elms site to Carnwath Road. It is a planning matter. As he will know, planning prefers brownfield sites, such as Carnwath Road, as opposed to Barn Elms, which is not a brownfield site, but it will be considered by the Planning Inspectorate. Thames Water will need to justify this choice of site and the route of the tunnel as part of its application. It will need to submit an environmental statement describing aspects of the environment significantly affected. I hope that helps my noble friend, although it does not give him a reversal of the decision. My noble friend Lord Selborne has considerable experience on this matter and expressed a number of concerns. I would like to address particularly his concern about costs, which were echoed in what the noble Lord, Lord Knight, had to say. Inevitably, there will be some variation in cost. It is rare for projects to come in on price and on time. This is a complex and extremely large project. Ernst & Young is currently employed by the department to provide financial advice on the most suitable and appropriate financing mechanism to deliver the proposed Thames tunnel that is fair to customers of Thames Water and to UK taxpayers. Ernst & Young is advising on structuring incentives into the financial mechanisms that will help drive desirable behaviours by those delivering the project to help ensure the effective management of project costs. My noble friend Lord Selborne asked how the Environment Agency decided which combined sewer overflows were unsatisfactory. The EA assessed all 57 CSOs that discharge into the River Thames to identify which were having an adverse environmental effect. It looked at the frequency and volume of discharges, whether they were close to recreational areas, the number of complaints and the reports from other organisations operating on the Thames. Thirty-six were classed as unsatisfactory and therefore need to be addressed, and 34 discharge directly into the middle and upper reaches of the Thames in London. My noble friend Lord Selborne and the noble Lord, Lord Grantchester, asked what a tunnel would deliver. It would reduce the number of these spills from about 50 to 60 times a year to just three or four times a year, and the estimated volume of discharges from about 18 million cubic metres to just over 2 million cubic metres, improving water quality, with benefits for wildlife and river users. It would also ensure that we continue to meet the UK's obligations under the urban waste water directive. The noble Lord, Lord Smith of Finsbury—I nearly called him my noble friend—welcomed this project. The Environment Agency, with which he is very much engaged, is part and parcel of the team that is hoping to bring about the Thames tunnel project. I am very grateful for his support this evening, and for the contribution of my noble friend Lord Selsdon, whose experience in this matter I had not been aware of until he made his contribution to this debate. There was some concern about the money getting to the right customers. South West Water is very much aware of the need to take account where metering and use are not necessarily directly connected because of multiple occupation or other situations. The money is designed to be per household and South West Water is intending to do that. I have done my best to run through the questions asked. I hope noble Lords will understand if I did not pick them all up. I will do my best to address those that I have failed to do so by letter. Meanwhile, this may be an appropriate moment to thank all the staff and the Bill team for their support in seeing this debate through. We expect to have to work all hours. We have to share that expectation with a great many other people, and I am very grateful to them and I am sure the House will share in that regard. Bill read a second time. Committee negatived. Standing Order 46 having been dispensed with, the Bill was read a third time and passed.