Qualisation Levies Payable by Certain Water Authorities

Orders of the Day — Water Charges Equalisation Bill – in the House of Commons at 12:00 am on 16th March 1977.

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11.30 p.m.

Photo of Dr Edmund Marshall Dr Edmund Marshall , Goole

I beg to move Amendment No. 1, in page 1, line 6, leave out "number of premises"and insert" weighted number of hereditaments".

Photo of Sir Arthur Irvine Sir Arthur Irvine , Liverpool Edge Hill

With this it will be convenient to take the following amendments:

No. 3, in page 2, line 9, at end insert— '(3) Any reference in this Act to the weighted number of hereditaments in the area of a water authority is a reference to the figure produced by adding together—

  1. (a) the total rateable value of hereditaments in the area of the water authority to which a supply of water is provided by the authority on an unmeasured basis, and
  2. (b) the total number of such hereditaments multiplied by the total rateable value of hereditaments in England and Wales to which a supply of water is provided by water authorities on an unmeasured basis and are divided by the number of such hereditaments in England and Wales'.
No. 4, in page 2, line 16, leave out the total number of premises and insert twice the total rateable value of hereditaments". No. 5, in page 2, line 26, leave out "number of premises "and insert" weighted number of hereditaments".

No. 8, in Clause 2, page 3, line 7, leave out "number of premises"and insert" weighted number of hereditaments".

Photo of Dr Edmund Marshall Dr Edmund Marshall , Goole

These five amendments together make one change in the Bill—namely, a change in the basis on which equalisation is to be operated between the water supply charges levied in different water authority areas of England and Wales. I apologise to the House for the wording of the amendments, particularly Amendment No. 3, being complex. It is a form of mathematics written in legal language, so it may be of assistance to the House if I explain exactly what the amendments are intended to do.

As the Bill stands at present, the equalisation proposed is based on the actual average payments made by domestic ratepayers for water supply. The overall figure which is used to start the calculation of average payments is the historic debt which was incurred by the water authorities before a specific date. This is then averaged out among all the domestic ratepayers in the water authority area to produce an average payment.

A number of my hon. Friends and I were not satisfied that this was the fairest basis for equalisation. Therefore, in Committee we tabled amendments that had the effect of changing the equalisation scheme from being based on average payments for water supply to being based on average poundages levied by the water authorities for water supply. That group of amendments was discussed in Committee but not accepted. The amendments that we have now tabled on Report are intended to be an exact compromise between what is in the Bill and what would have been effected had the amendments moved in Committee been accepted. In other words, these amendments are a halfway house between equalisation based on the average money payments for water supply and equalisation based on the rate poundages levied by water authorities for domestic water supply in their areas.

Why is it that my hon. Friends and I who have tabled these amendments are not happy with the basis for equalisation that is now proposed in the Bill, the basis of calculating how different regions vary in the average payments that domestic ratepayers are required to make for their water supply? In the first place, it has to be emphasised that the law as it stands requires water authorities to levy water supply charges not in terms of a flat-rate payment which all domestic ratepayers have to make, as an equal payment right through the whole of the water authority area, but in terms of a rate poundage. Therefore, throughout a water authority's area different householders will pay different amounts in water charges because their properties have different rateable values.

Where equalisation has already been started within water authority areas, it is equalisation based on equalising rate poundages, not on equality of payments throughout the area. If Ministers who were saying earlier that one good reason for national equalisation was that equalisation was already taking place within many water authority areas are to be consistent they must accept that equalisation within a water authority area which is based on rate poundages should also be the kind of system applied nationally—in other words, a system of equalisation of rate poundages.

Without amendment, the Bill will be subsidising ratepayers whose properties have high rateable values at the expense of those with low rateable values. Many people pay high water supply charges because they live in big houses. In effect, we shall be asking people in poorer property to subsidise people in larger property. I find it difficult to believe that a Labour Government would press for such a move, asking poorer people to subsidise richer people.

Photo of Mr Robin Maxwell-Hyslop Mr Robin Maxwell-Hyslop , Tiverton

Would the hon. Gentleman explain the proposition? Since the rateable value of a property is in no way related to the income of the person living in it, why is it the case that a property with a lower rateable value is inhabited by a poorer person? I do not think he has established the connection.

Photo of Dr Edmund Marshall Dr Edmund Marshall , Goole

I accept the point completely. I was trying to say that, under the Bill as it stands, we are asking people who live in poorer property to subsidise those who live in more opulent property. I accept that the property is not necessarily related to the financial means of the ratepayer.

Photo of Mr Michael Morris Mr Michael Morris , Northampton South

In what way does the hon. Gentleman relate rateable value to consumption of water? Consumption is the basis of the Act which led to this Bill. One does not necessarily use less water in a smaller house.

Photo of Dr Edmund Marshall Dr Edmund Marshall , Goole

That is the next point was going to make. I disagree with the hon. Gentleman's last comment. It seems to me that there is more likelihood of there being more water outlets in a larger house, with toilets upstairs and downstairs—

Photo of Mr Robin Maxwell-Hyslop Mr Robin Maxwell-Hyslop , Tiverton

One would not go more often.

Photo of Dr Edmund Marshall Dr Edmund Marshall , Goole

—and perhaps two or three bathrooms or showers. There might be two garages for two cars. That would imply greater use of water in washing one's car. A bigger property might have a bigger garden and, therefore, an outside water supply. There might be more people living in a bigger property and, therefore, using more water.

Thus, irrespective of how much water is used, the basis of equalisation proposed in the Bill means asking people in poorer property to subsidise people in richer property. That is totally contrary to what a Labour Government should be attempting to achieve.

Photo of Mr Terence Higgins Mr Terence Higgins , Worthing

The hon. Member's initial explanation was less than clear. He is not distinguishing between the situation in the area that will have the levy raised upon it and the situation in the area receiving the money. Might not a large property be occupied by an elderly couple who, as a result of inflation, may be poor and would be subsidising richer people in the recipient area? The area that would have the levy raised upon it might contain small houses and a large number of better-off people.

Photo of Dr Edmund Marshall Dr Edmund Marshall , Goole

The hon. Gentleman has made the same sort of point as was made by the hon. Member for Tiverton (Mr. Maxwell-Hyslop), that there is no relation between the rateable value of a property and the financial resources of the person living in it. It seems strange that by having a system in the Bill of trying to equalise by comparing average payments by ratepayers in each of the water authority areas there will be a large number of people in small houses subsidising people living in larger houses. As a result of the Bill a person living in a colliery village in Yorkshire could be subsidising a person living in a mansion in East Anglia with large rooms, a large garden and many garages.

Photo of Mr David Penhaligon Mr David Penhaligon , Truro

As last year the average person in the South-West paid £20·70 in water rates and in the Thames area the figure was £13·70, is the hon. Gentleman arguing that incomes in Devon and Cornwall are currently that much larger than those in the Thames area or that, on average the houses in the South-West are bigger?

Photo of Dr Edmund Marshall Dr Edmund Marshall , Goole

If the Bill had been operated this year—although we now understand that that will not be the case—the South-West would have gained about £1·7 million from the common pool. Under my amendment the South-West would gain even more—about £2 million.

One interesting fact is that of the 10 water authority areas in England and Wales seven would gain something as a result of the amendment and only three would not. I leave it to the Minister to tell us which those three are.

The basis of the equalisation proposed in the Bill is rough and ready. It does not contain a really just system. It is something that has been thought up quickly. The real effect of it on people up and down the country has not been properly thought out. I should have preferred the kind of amendment that was proposed in Committee, but I accept that that is not possible. Therefore, the amendments that I am now proposing are exactly a compromise. They are a halfway house between what is in the Bill and what would have been the effects of the amendments proposed in Committee.

11.45 p.m.

Photo of Mr Denis Howell Mr Denis Howell , Birmingham Small Heath

The description of the amendment as an ingenious attempt by the Yorkshire Water Authority to change the method of calculating unit costs was accurate. I know that many hon. Members have doubts about the wisdom of introducing computers into the water industry, but the Yorkshire Authority must have had access to a computer to deal with this interesting mathematical problem and produce more figures for my hon. Friend the Member for Goole (Dr. Marshall) on the effect of the amendment.

The method that we have adopted for calculating unit costs, which are fundamental to the Bill, is based on the concept of historic debt. It is calculated, under the Bill, by, first, identifying the relevant financing costs of historic debt and, secondly, dividing that figure by the number of properties affected—thereby producing the average unit cost. My hon. Friend has given a good outline of his proposals, which would involve dividing the first figure not by the number of properties affected but by rateable poundage.

The Bill is a modest measure and is not the appropriate place to try to reform the rating system on water equalisation charges. I do not think that we can even go so far as to try to change the method of water charging. Perhaps we may move away from calculating water charges on rateable value in future, but it would require a great deal of thought and a great deal of consultation with water authorities and local authorities before that could be done.

The House will not be surprised to know that the principal beneficiary of the new proposal is the Yorkshire Water Authority—which is, no doubt, why my hon. Friend produced it.

Photo of Dr Edmund Marshall Dr Edmund Marshall , Goole

Under the amendments, the principal beneficiary will still be Wales.

Photo of Mr Denis Howell Mr Denis Howell , Birmingham Small Heath

Comparing, pro rata, the situation that by hon. Friend seeks to achieve with the situation in the Bill, I am justified in saying that the principal beneficiary will be the Yorkshire Water Authority. Wales will still benefit considerably, but the turnround will mean that Yorkshire instead of having to pay £1·13 million into the central kitty, would receive £1·21 million. That is a very big change.

It is true that a number of authorities would gain, but the two authorities that would suffer adversely are the Anglian Authority and, even more so, the Thames Authority. The Thames Authority, which under the Bill will pay £3·972 million into the central equalisation fund, would have to pay the astronomical sum of £10·77 million. The proposals emanating from the amendment total £12·43 million.

It is ludicrous that the whole of the water equalisation proposals should be borne mainly by the Thames Authority and also by the Anglian Authority. That is monstrously unfair. Whatever arguments may be deployed about people living in large houses or small ones, or about how many bathrooms are involved, the fact that a sum of £10·77 million is to be imposed on the working population of London and Anglia is totally unjustified, and the small householders in those areas would regard that as an unreasonable share of the burden. It would bring the whole scheme into contempt. I hope that my hon. Friend will not press his amendment, which is totally unacceptable to the Government.

Photo of Mr Terence Higgins Mr Terence Higgins , Worthing

Will the Minister clarify one point? It is true to say that the whole scheme is held in contempt in many parts of the country. Do the Government expect the Bill to come into operation next year, or will other legislation supersede it?

Photo of Mr Denis Howell Mr Denis Howell , Birmingham Small Heath

I answered that question in Committee every day for about 10 days, but I shall answer the hon. Gentleman again. This measure will come into effect next year. I hope to introduce a major Bill next year, but since I cannot guarantee that the Opposition will assist in placing that legislation on the statute book, this Bill has to come in at this stage.

There are large-scale beneficiaries under the Bill. One sees the justice of the matter when one examines to wide range of costs which we are seeking to alleviate. It will bring help to people in Wales, the South-West and the counties of Anglia, and particularly to people in Northumberland, Durham and so on. It is wrong that people should have to bear charges of 40 or 46 per cent., which are so excessively above the national average. The main justification for the Bill is to bring the matter down to an acceptable situation. I hope that my hon. Friend will not press the matter.

Amendment negatived.

Photo of Mr Arthur Jones Mr Arthur Jones , Daventry

I beg to move Amendment No. 2, in page 1, line 8, after 'authority', insert ' and other statutory water undertakers '. This amendment seeks to deal with the question that was left oustanding in Committee—namely, the position of the private water companies. This matter was touched upon in the Second Reading debate on 24th January, at column 1010, when notice was given of the fact that we thought that the private water companies should be included in a scheme of equalisation. This is a matter that we pursued in Committee. The private water companies supply 12 ½ million persons with water, some 22 per cent. of the total supply, covering 11,000 square miles and 19 per cent. of the area of England and Wales. It seems extraordinary that the private water companies were not included in the equalisation scheme—

Photo of Mr Arthur Jones Mr Arthur Jones , Daventry

The hon. Gentleman talks about nationalisation but that is not within the context of the Bill. That is what the Government proposed later. Their timing was wrong. That was their unfortunate experience. We found in Committee that the companies had never been consulted. That was an extraordinary development.

The Minister tried to protect himself by saying that the companies had been consulted, but that was on the consultative document, not on the proposals in the Bill. Perhaps there was a misunderstanding when we discussed the matter in Committee but, clearly, the out-turn was that the private companies had never been asked for their opinion on the Bill's contents. Indeed, they have never been consulted althought they are major suppliers. As I have said, they supply 22 per cent. of the total supply. The Minister expected the companies to say that they did not want to be included. The right hon. Gentleman said that that is what they did say.

Photo of Mr Arthur Jones Mr Arthur Jones , Daventry

The right hon. Gentleman is talking about the consultations under the consultative document. He is not talking about the Bill's contents. In that context the companies were not consulted. The right hon. Gentleman confirmed that. His exact phrase in Committee was "Certainly not".

Photo of Dennis Canavan Dennis Canavan , Stirlingshire West

Why do the so-called private water companies have the right to be consulted? If we believe in God, the water comes from God. If we do not believe in God, the water comes from the sky. By what right does it belong to these silly private companies? What right do they have to be consulted by a democratically elected Socialist Government?

Photo of Mr Arthur Jones Mr Arthur Jones , Daventry

The hon. Gentleman is entering into some sort of philosophical argument. His remarks could equally have been directed to the Government Front Bench when referring to interference with the natural supply of resources.

In Committee the Minister said that the private companies had not been consulted. In column 307 he said that he would be happy to talk to the companies about the matter. Since then we understand that negotiations have been taking place. At the conclusion of our proceedings on the morning of 17th February the right hon. Gentleman said: While we have been having these exciting discussions"— I do not know why he should get excited about them— this morning I authorised my officials to make contact with the appropriate water companies and I can inform the Committee that we have arranged a meeting for Monday next. He said later: I shall report at a later stage how the discussions have progressed".—[Official Report, Standing Committee B, 17th February 1977; c. 318.] I understand that there have been meetings fairly recently. I understand that there was a meeting on 15th March. The right hon. Gentleman will be able to give us an up-to-date report on what has been taking place with the companies. I understand that there is a difficulty and that a major point is at issue between those who are acting for the private companies' association and the Department. That concerns the question of depreciation. It will be interesting to hear about the progress of those discussions. This amendment was put down for the purpose of ascertaining what progress has been made in that respect.

12 midnight.

Photo of Mr Alec Jones Mr Alec Jones , Rhondda

I take the point that this is basically a probing amendment to ascertain how the discussions are progressing. Doubt was expressed in Committee whether the water companies wanted to come into the scheme and whether they had been consulted. My right hon. Friend made it clear that he had consulted the water companies on the consultative document. The hon. Member for Daventry (Mr. Jones) at least conceded that point.

The fact is that the scheme outlined in the Bill is basically the scheme which was outlined in the consultative document. The views expressed by the water companies, which my right hon. Friend repeated in Committee on 17th February, were that they were not very keen on this kind of scheme. Therefore, it was reasonable to assume that if they were not very keen on the scheme in the consultative document, they would not be keen on a near-identical scheme in the Bill. In those circumstances, it is unfair to pursue the argument whether the water companies were consulted.

In Committee my right hon. Friend agreed that if it was possible to bring in the water companies he would like to do so and would set about instituting discussions to see whether that could be done.

The hon. Member for Daventry knows that meetings have taken place. The latest meeting was held yesterday, as he correctly said. These meetings will have to continue. All that I can say at the moment is that yesterday's meeting was reasonably satisfactory. However, it is not possible at this stage to give a firm undertaking whether it will prove to be possible to bring the companies into the scheme. Some of the practical and legal difficulties now look capable of solution, but serious problems still remain to be ironed out.

At the end of the day, whether the water companies are brought into the scheme will depend on our being able to clear the technical difficulties and being sure that, as a result of bringing them in, we achieve a degree of equalisation which is important to our future water supplies.

I repeat the undertaking that was given in Committee that if it proves practicable to adapt the scheme to the companies in such a way as to continue to equalise the Government will consider moving amendments in another place.

I cannot go any further than that. We are continuing our discussions. We are somewhat more hopeful than we were, but it is still too early to say what the result of the discussions will be. Those discussions are continuing and are hopeful and helpful. I trust that the hon. Gentleman will not, therefore, press the amendment.

Photo of Mr Arthur Jones Mr Arthur Jones , Daventry

I am grateful to the Minister for that updating of the circumstances. I welcome the assurance that, if it is possible and practicable, the Government intend to incorporate the private water companies within the scheme. I am sure that hon. Members on both sides of the House recognise that it is desirable that they should be incorporated. The private water companies are agreeable and are co-operating with the Department in an endeavour to find ways and means by which it can be done.

Photo of Mr Robin Hodgson Mr Robin Hodgson , Walsall North

I rise to support the amendment because if it is not carried it strikes at the heart of what the Government are claiming to try to carry out in the Bill.

I quote the words of the Minister when moving the Second Reading of the Bill. He said in Column No. 989: The Bill is based upon the need for more equitable charges, without which it would be extremely difficult if not impossible to develop a national strategy for water and the national ownership of water as forecast in the Green Paper published last year. Leaving aside whether such a national strategy or, indeed, equalisation of charges is desirable or possible, I think this is a bad Bill. It is full of muddled thinking, chiefly because it confuses income items with capital items instead of concentrating on the need for realistic compensation, certainly for the people of Wales, whose land has been compulsorily purchased. Instead the Bill submerges the whole question in a tide of pseudo-egalitarianclauses.

However, the Minister used the words the need for more equitable charges". The practical result for the West Midlands will be that in equalities will be increased. In my own constituency, and in the area round about, consumers receive their water from two sources, either from the Severn-Trent Water Authority or from the South Staffs Water Works Company. The Severn-Trent Water Authority falls within the Bill but the South Staffs Water Company does not. We shall, therefore, have the ridiculous situation that people on one side of the street are paying an increased levy while people on the other side of the street are not.

I quote again from what the Minister said: There is another reason why the Government have thought it right to proceed in this matter. On the day that the 1973 Act became law we had not only 10 regional water authorities but almost 200 different water charges to domestic households. It was an absolute jungle. Later he added: I know that hon. Members possibly have objected to it—we had some objections last year—but the regions certainly cannot object to the principle of equalisation in the regions. The position in my region, which is in the area of the mammoth Severn-Trent Water Authority, raises the question:— Mr. Canavan: On a point of order, Mr. Deputy Speaker. Is it permitted to read an elongated speech such as this? Surely it is against the Standing Orders of the House, and an abuse of the House, for this man to be reading it.

Photo of Sir Arthur Irvine Sir Arthur Irvine , Liverpool Edge Hill

The hon. Gentleman, who has been making observations from a sedentary position throughout the evening, is the last person to raise a point of order.

Photo of Dennis Canavan Dennis Canavan , Stirlingshire West

Nevertheless, it is true.

Photo of Mr Robin Hodgson Mr Robin Hodgson , Walsall North

I am quoting from the Minister in an effort to point out how the amendment will help achieve the objectives set by the Minister on Second Reading. I conclude the quotation: if it is right to equalise charges between Birmingham and Nottingham, why is it wrong to equalise charges between Birmingham and Cardiff?"—[Official Report. 24th January, 1977; Vol. 924, Cols. 989–993.] Leaving aside the question of equalisation between Birmingham and Nottingham and Cardiff, the charges are not going to be equalised within Birmingham itself because of the presence of the private water companies. We shall have a situation where inequalities will increase. A large number of people are affected. Within the Severn-Trent area, which the Minister will know well, 83 per cent. of the supplies come from the Authority. Therefore, only 83 per cent. will be facing higher charges. The other 17 per cent., whose supplies come from the water companies, will not be facing any higher charges. In an area where there are millions of consumers, 17 per cent. represents several hundred thousand people.

I draw the Minister's attention to a further defect which arises from treating statutory water undertakings on a different basis from the regional water authorities. The private water companies act as the authorities' agents for the supply of water in their areas. The regional water authority is responsible for the control and development of the water resources of the region, including those on which the companies depend. In other words, the strategic plan for the region covered by the regional water authority will be affected by the equalisation levy, but the tactical supply of specific areas covered by statutory water undertakings will not be affected.

In conclusion, the Government have claimed that by the Bill they seek to equalise water charges, but unless the amendment is carried they will fail dismally to do so. Instead of disparities between regions, there will be disparities between streets because of the differences in sources of supply. Instead of co-ordinating and balancing the supply of water at the strategic or regional level, there will be the invidious effect that tactical or local water supplies will not be affected, thus enabling those undertakings to get cheaper water without charging the customers on the basis that the Minister has laid down. This cannot be sensible. It cannot be fair to different classes of consumers living in entirely different geographical situations. That is why I support the amendment.

Photo of Mr Arthur Jones Mr Arthur Jones , Daventry

I am grateful to my hon. Friend the Member for Walsall, North (Mr. Hodgson) for stating that issue of the Bill so clearly. [HON. MEMBERS: "What about asking for leave?"] By leave of the House, Mr. Deputy Speaker

Hon. Members:

No.

Photo of Sir Arthur Irvine Sir Arthur Irvine , Liverpool Edge Hill

An hon. Member does not need the leave of the House to speak again on Report.

Photo of Mr Alec Jones Mr Alec Jones , Rhondda

Thank you, Mr. Deputy Speaker. I thought that false voices were giving me counsel. How right I was to think that that was so.

I was saying that I am grateful to my hon. Friend the Member for Walsall, North for putting so clearly the points that have been discussed on a number of previous occasions. We would have benefited greatly if he had been with us in Committee. I am sure that the Minister would have been glad of his assistance. He is always one to admire straightforward advocacy and the presentation of a case in as succinct a manner as possible.

I shall not let this occasion pass without correcting the Minister about the question of consultation with the private water companies. He cannot get away with what he said. I shall now take up the question that I put to the right hon. Gentleman on 17th February— was the Water Companies Association consulted on the Government's proposals in the Bill? The right hon. Gentleman replied: Certainly not."—[Official Report, Standing Committee B, 17th February 1977; c. 278.] That is conclusive evidence that in fact the Water Companies Association was not consulted about the terms of the Bill. It is no use those on the Government Front Bench trying to hedge on that as they did in Committee. The facts are there perfectly clearly, and the right hon. Gentleman was correct to make that statement.

There is nothing to be gained now in regard to the position of the private water companies. Clearly, the advice that the Opposition have given the Government in this respect has been accepted by both the Government and the private water companies and I think there is a willingness on both sides to search for ways and means by which the private water companies can be brought within the proposals in this equalisation measure. In those circumstances, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Mr Arthur Jones Mr Arthur Jones , Daventry

I beg leave to move Amendment No. 6, in page 2, line 30, at end insert: (2) Provision for depreciation shall be subject to a direction by the Secretary of State after consultation with the Water Council and shall be calculated on a uniform basis as between both the water authorities and the statutory undertakers.' This amendment relates to another question which was left very much in the air and was most inadequately dealt with in Committee. I know that it is an involved question—[HON. MEMBERS: "Hear, hear."—which is perhaps beyond the ability of some to follow. Those of us who have attempted to do so have tried to bring our judgment to bear on it. We hope to carry others with us, if there is a willingness to follow the argument. Of course, there may not be such a willingness.

Evidence has been presented to the Government on several occasions about the inclusion of the domestic element of rate support grant arrangements for the higher level of water charges in Wales. That is something the right hon. Gentleman has denied, and although evidence is continually being presented to him we still get a negative response. Time and time again he and his colleagues have said that there was no relation between the rate support grant domestic element and—

12.15 a.m.

Photo of Mr Denis Howell Mr Denis Howell , Birmingham Small Heath

On a point of order, Mr. Deputy Speaker. Could I draw your attention and that of the hon. Gentleman to the fact that he is addressing himself to the next amendment, and not Amendment No. 6. This amendment is about depreciation, and not the rate support grant.

Photo of Mr Alec Jones Mr Alec Jones , Rhondda

But I think that the rate support grant arrangements are tied up with depreciation. It will be interesting to hear the Minister deny that, as he has denied so many other things in the past. When it comes to the domestic element of the rate support grant I Jo not put any denial past him. I have heard him say on previoust occasions from the Dispatch Box that he did not understand it. I do not think he is alone in that.

On Amendment No. 6 and the question of depreciation, this matter was discussed at length, and my hon. Friend the Member for Worthing (Mr. Higgins) dealt with the question of historic values, investment values and capital resources available to the companies. We tried to persuade the Minister that there were better ways and means of ensuring equalisation by dealing with depreciation charges on a common basis. This flows from the problems that the private water companies are experiencing. We hoped that the Minister would find it possible not to leave the options as far open as they are to the Secretary of State, but that there would be requirements placed en both the regional water authorities and the private water companies for some common policies on depreciation. It is difficult to understand why that has not been done.

It is reflected generally in the terms of the Bill that a great deal of latitude is left to the Secretary of State to make adjudications that may be inescapable because of the complexities. Some of us share the view that this legislation was rather hurriedly introduced, and perhaps it did not get the careful thought due to such a complicated measure. But I hope that there may be some movement in the Department on these difficult and involved financial calculations.

At the end of the day they are mainly book-keeping entries but they do help significantly in administrative terms. The private water companies and the regional water authorities will know much better where they are placed if definite guidelines and requirements are laid down for accountancy purposes. I hope that the Minister will move towards this to some extent.

Photo of Mr Denis Howell Mr Denis Howell , Birmingham Small Heath

I am glad that we got the hon. Member for Daventry (Mr. Jones) back on the right lines before he had gone too far.

This is an involved matter. The method by which depreciation is calculated, both by regional water authorities and by private companies, is different in almost every case. This has arisen because their historic debt commitments and their methods of accountancy are different in almost every case, although since the passing of the Act and the establishment of the regional authorities there is far more common ground than there used to be.

We discussed this involved technical question in Committee, when a similar amendment was not carried. As I said then, the suggestion of common depreciation practice had been examined. There is nothing hurried about this Bill. It follows a working party of officials which sat for one year and a ministerial working party which sat for almost a year. It has been extremely well thought out. But, because it is so involved, I do not claim that there is in every clause the crystal clarity that one likes to see.

Nevertheless, when we consulted the water authorities some said that they would like to see a common depreciation practice but more were against the idea, for reasons which I have given. Since equalisation is intended to equalise, it is important that the scheme should operate on real factors—the real historic debt—rather than on notional factors. The water authorities have not managed to agree, and with 10 separate water authorities there seems to be merit in not asking them all to agree, to absolute uniformity in their accountancy practices.

We see no reason to curtail inter-authority discussion of the matter by imposing standard financial practice at this stage, especially as equalisation transfers in the Bill will account for less than 2 per cent. of the authorities' total revenue. It is important, however, for the future to prevent water authorities adjusting their depreciation factors. It is important, as we are equalising from a certain date, that we freeze whatever are the existing accountancy practices in relation to depreciation. Therefore, we are taking power in the Bill to ensure that the Secretary of State can do just that. In other words, no one will be able to adjust his accountancy practice to gain benefit from the terms of the Bill, for that wound be fundamentally wrong.

Photo of Mr Robin Hodgson Mr Robin Hodgson , Walsall North

The right hon. Gentleman talks about the need to freeze accountancy practices for depreciation, but is it not possible that each water authority will then adopt capital expenditure plans to benefit from the freezing of accountancy practices?

Photo of Mr Denis Howell Mr Denis Howell , Birmingham Small Heath

The hon. Member for Walsall, North (Mr. Hodgson), whom we welcome to our deliberations, is an extraordinary Member. He has great courage. He is, I think, the first Member for a long time to urge the Government to impose increased charges on his constituents. He did so in his speech on the last amendment, when he said that 17 per cent. of the people in the Severn-Trent Water Authority's area are not being asked to make a contribution. A large number of them are his constituents. As I spent some time there listening to his election campaign—he was elected on the issue of increasing prices—I find his interventions this evening remarkable, to say the least. However, the House does strange things to new Members, and we take note of the effect on him.

The short answer to the hon. Gentleman is that it would be ludicrous to suggest that a regional water authority would adjust its large capital programme to take advantage of the very small benefit which this equalisation measure would give. I do not think that that is a reasonable proposition.

Let me now say a word about the water companies, because they are involved in the amendment. We had discussions with the water companies last week. The House has heard that on the whole those talks went better than we thought they would, but there are still formidable difficulties. One of the difficulties, which has obviously come to the fore, is that the depreciation practices of the private companies are almost all different from those of the regional water authorities. Therefore, if they are to come under the Bill, to equate their depreciation practices with those of the authorities is one of the continuing difficulties that we shall have to examine, and that we are doing.

For that reason, if for no other, it is not possible to proceed with this amendment this evening. But I repeat the assurance that if the discussions reach a satisfactorily mutually acceptable conclusion we shall seek to achieve the objective in another place.

Photo of Dennis Canavan Dennis Canavan , Stirlingshire West

I rise briefly to support my right hon. Friend in opposing the amendment for several reasons. First, I think that the amendment is clearly designed to extend the interests of the private water companies. I am shocked to hear that there is still such a thing as a private water company. Water is such a basic natural resource and is so essential to humanity that it shocks me to think that in this day and age there should be such a thing as a private water company.

May I also ask my right hon. Friend in his capacity as Minister for Sport please to ban the Scotland versus Chile football match, and please to give me at least two tickets for the Scotland versus England international at Wembley?

Photo of Mr Arthur Jones Mr Arthur Jones , Daventry

I think that I sense a little special pleading in the contribution by the hon. Member for West Stirlingshire (Mr. Canavan).

I take the point that the Minister has kindly made about depreciation allowances. I am interested to hear from him about the wide variety of mechanisms that exists within the private water companies, and I agree that it makes this matter more difficult. I would have thought, however, that these practices were mainly book-keeping entries, and that they could all be brought into line.

Fortunately for the Minister, he has months ahead of him in which to make the necessary dispositions and inquiries. I hope that the intervening period will be put to good use. I accept his assurance, and I therefore beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.