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Water and Sewerage Services (Northern Ireland) Order 2006

– in the House of Lords at 3:11 pm on 11th December 2006.

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Photo of Lord Rooker Lord Rooker Minister of State (Sustainable Farming and Food), Department for Environment, Food and Rural Affairs, Minister of State (Department for Environment, Food and Rural Affairs) (Sustainable Farming and Food), The Minister of State, Northern Ireland Office

My Lords, this is the second of two orders which started life under the elected devolved Administration in Northern Ireland. I apologise in advance if my speech is longer than I would normally make on such an order but, given its history and importance, it is necessary to put a fair bit on the record before the debate starts.

Although I did not say this when speaking to the first order, it would have been much better if the devolved Assembly had been back in November as planned and it had carried on with this work. That is by far the best place for it to happen. In the absence of that, the Government are continuing with the reform programme. I shall give further detail on why that is the case.

The order puts in place the legislative framework required to improve the quality of the water we drink and to regulate how the waste water we produce is treated. It also better safeguards the environment and radically improves the delivery of water and sewerage services to consumers. The arrangements which it introduces will ensure that the ongoing capital investment programme in the water and sewerage infrastructure is sustained into the future without impacting on the funding needed for other priority public services.

The draft order's main elements are: establishment of a company, Northern Ireland Water Ltd, under 100 per cent government ownership but functioning on a commercial basis to supply water and sewerage services; a definition of the duties and powers of the company to supply water and sewerage services; the establishment of a modern regulatory system for the water utility by widening the remit of the current energy regulator in Northern Ireland to include water issues; the imposition of duties on the company and the regulator to deal with consumer interests while also broadening the role of the consumer council to include water and sewerage issues; setting up a framework for charging that will guarantee that the direct charges for water and sewerage services will be fair and reasonable with safeguards for the most vulnerable and low-income households through a reduced tariff; and modernisation of the environmental regulatory regime within which water and sewerage services will be provided.

The policies that the draft order gives effect to have been subject to a wide-ranging impact assessment and public consultation over the past three and a half years. Indeed, over this period some 13 separate consultation or impact assessment documents have been published. Latterly, the draft order was issued for consultation over a 12-week period. The 46 responses to the consultation have been published on the Department for Regional Development's water reform website. The Government are grateful to those who have made substantive submissions regarding the order.

I will make some general observations on the response to water reform. The Government appreciate that the introduction of new charges is never popular—that is a plain statement of the obvious. However, I hope that there is now a universal appreciation in modern society that water—clean, safe, drinkable water—is not free, and the disposal of our waste water cannot possibly be a free good. Hundreds of millions of pounds are required each year to provide water to our homes and to treat appropriately the waste water that we produce. Billions of pounds of continuing investment are needed to sustain and improve those services. So far, the Government have not received a viable alternative to the introduction of domestic charges that will ensure that this necessary future investment can occur, let alone continuing the existing investment that is ongoing and of a very substantial rate indeed.

For the elucidation of that, I have brought a few figures with me. In the past three years to 2006-07, there has been some £629 million of investment and 26 projects have been completed. They vary from costing £122 million to as little as £400,000. Those 26 projects have been completed. There are 11 projects under construction at present, at a total cost of £448 million. There is substantial investment going on by any stretch of the imagination in Northern Ireland. In the three years up to 2006-07, there have been 1,130 km of new and replaceable water mains, and 140 km of new and replaced sewers. The idea that there has been no investment in water by the Government is simply not on. The figures are there, and the new plants are there, to show that that is the case.

An argument has been made that it would have been better for the difficult and contentious issues raised by water reform to be addressed by a devolved Administration. Indeed, as I have indicated, the devolved Administration were already grappling with the issues in 2002. That is where this work started. The previous Government here at Westminster tried and failed to introduce reform in the 1990s, so even the devolved Assembly's attempt was not the first to grapple with what was known to be a serious problem. Unlike our predecessors, we have not failed to tackle the issues. The devolved Administration may well have tackled them, but sadly it has taken us three and a half years to get to a position where there is a realistic prospect of devolution.

Now, at the last minute, the parties are telling us to stop and let them deal with it. They had their chance. If this was the single most important issue, as some of them claim it is, that Assembly would have been back on 24 November, no messing about. It clearly was not the single most important factor, because the Assembly is not back. They have no plan to tell us when they would deal with it. Looking at the procedural timescale, there would have to be a ministerial proposal, which requires executive endorsement; the Assembly would have to put through the legislation, and so on. We are looking at a minimum delay of two years in introducing these reforms. That is a two-year hit. This is not a threat; it would be a two-year hit on other public services. There would be two years' lack of investment, and we would be two years closer to not meeting the GB standards in terms of water, which are not met in Northern Ireland at present. It would be two years closer to infraction fines from the European Union, which is why we must proceed now.

Let us look briefly at the political realities. If we have devolved government by 26 March next year, as we sincerely hope we will, when the new Ministers will take the pledge of office, the Assembly could repeal this legislation. It will have the power to amend it as it wants. It will be within its ownership. But no Administration, even a devolved one of whatever shape, can avoid the inevitable need to invest in these essential services. By proceeding with this order, we are giving the parties the option of addressing reform now. If the order is defeated today by those who recognise the need for change, but fear their unpopularity, the option will be lost. It is as simple as that. It will be to the long-term detriment of Northern Ireland's public finances and services.

No one wants to pay additional charges; I have not come here to argue that people do. I was in Northern Ireland at the weekend as duty Minister. I saw the adverts on the television and the posters. No one came up to me and said, "By the way, the water charges are a good idea and I really want to pay more". People did say that something had to be done, but that we are always doing it the wrong way; however, they did not come up with viable alternatives. We know that people do not want to pay additional charges.

There is a popular misconception in Northern Ireland that people already pay for water through the rates. In fact, there is no direct connection between the regional rates and the cost of supplying water and sewerage services. It is also suggested sometimes—indeed, many times in my experience—that any legacy of underinvestment should be addressed before charges are introduced. I have just pointed out the level of investment that has taken place in the past three to five years and which is ongoing. The fact is that Northern Ireland's position is no different from that of anywhere else in the UK in that respect—and that ignores the investment of over £1 billion in the past five years.

The reality that must be confronted is that the average household payment for services in Northern Ireland is approximately half that made by households in Great Britain. The truth is that Northern Ireland households need to make a greater contribution. We think that that is only fair. Some people say that the Government need to consider the relative poverty or higher costs in Northern Ireland, and I freely admit that some things are more expensive, while other things are cheaper. But a variety of indicators demonstrate clearly that Northern Ireland is not the most deprived region in the UK. People sometimes automatically assume that it is; but I can give examples, including average disposable weekly incomes, unemployment and nominal growth, that demonstrate that Northern Ireland is not the worst region in the UK. There are places in the UK where average weekly disposable incomes are less than in Northern Ireland; namely, the north-east and Wales. That tells you something about equality and fairness. Unemployment in Northern Ireland from May to June this year was 4.4 per cent, compared with the national average of 5.5 per cent. Northern Ireland had the second lowest unemployment out of 12 regions. So, on a variety of indicators, Northern Ireland is not the worst-off region.

We are simply asking households in Northern Ireland to make a fair contribution. I shall provide some illumination on that, although I do not want to spend all my time quoting figures. For the avoidance of doubt, regarding the average level of household taxation in 2006-07, the average property charge per household in England and Wales is £1,043, in Scotland it is £958 and in Northern Ireland it is £668. For England and Wales, the average direct water and sewerage charge, in addition to the property charge, is £294 and in Scotland is £295. The total for property charges and direct water and sewerage in England and Wales is thus £1,337, in Scotland it is £1,253 and in Northern Ireland £668. That looks unfair, bearing in mind that some areas in the UK are less prosperous than Northern Ireland. It is a fact that Northern Ireland receives a higher share of public expenditure than anywhere else in the UK and the lowest share of local taxes and charges.

The water charges will consist of a standing charge and a variable element based on capital values. The Government freely admit that no system is perfect, but we believe that the proposed arrangements will balance customers' ability to pay and their use of water and sewerage services. In very general terms, capital value direct charges to more affluent areas are more likely to produce lower bills for the less well off.

We have also developed an affordability tariff. This is unique to Northern Ireland. It is designed to guarantee that no low-income householders need spend more than 3 per cent of their income on the new charges. Approximately 200,000 of the 650,000 households—30 per cent of households in Northern Ireland—will benefit from these measures, which will be funded by the Government and not the other water customers. I want to make that absolutely clear: this subsidy will be funded by the Government and not by the general customer base. The new rate relief was designed to help those not eligible for housing benefit but who were just above the new rating system threshold; it is to help poor people just above eligibility. Anyone in receipt of housing benefit, rate rebate and the new rate relief will receive categorised charges ranging from £90 to £180 per annum, depending on the value of their property. However, the charges will be phased in over three years. Therefore, the maximum bills for these people in 2007 and 2008 will range between £30 and £60 per annum. That is the reality.

The order does not limit the duration of the affordability tariff—it is phased in over three years—and the Government are confident that a devolved Administration will have the necessary flexibility to deal with these matters in future. The poorest person in the cheapest house in Northern Ireland will pay £30 in that first year, £60 in the second and £90 in the third. The poorest person in the most expensive house will pay £60 in the first year and up to £180 in the third year. Those are the affordability tariff figures.

The Government are committed to a long-term, managed transition to widespread metering. That is also a reality elsewhere in the UK; it is not compulsory, but this issue comes up in your Lordships' House from time to time. We want to do this as soon as possible, so we get to a situation where every household will have the option to select whether a metered tariff is best for them. It would be unfeasible, on logistical and economic grounds, to establish universal metering overnight. I had my ears bent about this over the weekend—that we would like to have a meter but the pensioners have got to come first. Initially, it will be targeted at pensioner households that request installation, and it will be installed in all new-build dwellings. The installation of the meter will, of course, be free of charge.

One issue that has been raised in respect of this order is that the Government have a secret plan for privatising water. It has been suggested that the government company being established to deliver water and sewerage—referred to as the GoCo—is a preparation for privatisation. I want to be absolutely clear about this: the Government have ruled out the privatisation of water and sewerage services in Northern Ireland for the foreseeable future. Furthermore, the order specifically provides that the Department for Regional Development—the company shareholder, owning 100 per cent of the shares—cannot take action which would result in a change of control without the approval of the Assembly. Hence any change in the future status of the company will rest fully within the control of local elected representatives.

In effect, this is a triple lock. This is because the company would have a view, and the devolved Minister in charge of that department would have a view and take any proposal to the Executive, who would have to agree; the Assembly would have to agree on cross-party, cross-community voting. Therefore, if any change took place in that way, it would be with the full-hearted consent of the elected, devolved Government in Northern Ireland. We have no plan for this. The argument that this is a pre-runner for privatisation that we the Westminster Government are going to push through does not bear examination.

The legislation's aim is to enable water and sewerage services to be provided in the most economical way possible. The company will be held to account by the regulator in delivering an exceptionally demanding programme of efficiency improvements so that charges are as low as possible. Performance is currently worse than it was in England and Wales 16 years ago, so there is some way to go.

Before I move on to the regulatory arrangements, it might be appropriate to raise some other issues. I want the House to be able to debate this matter with as much information as possible available. One issue is the business plan. This is not going to work; I shall stick to the speech that I was intending to make and I can come back to this later if need be.

With regard to the regulatory arrangements, we think that the draft order provides a robust system of governance. It reflects best practice in up-to-date utility regulation and is beyond all comparison with the current arrangements, under which central Government are effectively the sole service deliverer and regulator. The position in Northern Ireland is completely unlike that in Great Britain.

With regard to land disposal, we have been accused of not allowing independent regulation, but I want to make it clear that that is not the case. Article 217 of the draft order says that land disposal by the company—that is, the government company—is subject to departmental control. However, it allows us to give a general authorisation on disposal and, indeed, we will give that authorisation, making decisions on disposal entirely a matter for the independent regulator. There will be exceptions to accommodate the role of the environmental regulator, who covers environmental and heritage services, and land which was originally acquired compulsorily. But the department will not interfere and therefore there will be no conflict with its role as the shareholder in the government company.

The proceeds of any disposal will be retained by the government company—that is, the water company—subject only to regulatory control. The fine detail is contained in the licence, on which we are consulting at present, but I give a commitment to look very sympathetically at any issues of regulatory independence that are raised in regard to disposal. I make it absolutely clear that the Government will be handing over to the regulators decisions on whether to dispose of assets.

Photo of Lord Trimble Lord Trimble Crossbench 3:30 pm, 11th December 2006

My Lords, can the Minister make it absolutely clear when that will come into force? Will it be immediately—in 2007—or, as I think is currently the case under the licence, not until 2010?

Photo of Lord Rooker Lord Rooker Minister of State (Sustainable Farming and Food), Department for Environment, Food and Rural Affairs, Minister of State (Department for Environment, Food and Rural Affairs) (Sustainable Farming and Food), The Minister of State, Northern Ireland Office

My Lords, there are two aspects to that question, and I shall try to answer it from memory. With regard to land, I think that it will happen straightaway. As we understand it, regulators mainly regulate price. However, as I said, because the Government will subsidise the first three years at government cost, clearly the regulator will not regulate price for three years, so there is a dislocation between the timing of the regulator's powers coming into force on price and when they come in on other matters. The price is subsidised for three years, and I have explained how the Government have arranged that with the affordability tariff and a phasing-in over three years. That cost is carried by the Government, so the regulator will have nothing to do in that respect.

Photo of Baroness O'Cathain Baroness O'Cathain Conservative

My Lords, what, then, does the regulator do for three years?

Photo of Lord Rooker Lord Rooker Minister of State (Sustainable Farming and Food), Department for Environment, Food and Rural Affairs, Minister of State (Department for Environment, Food and Rural Affairs) (Sustainable Farming and Food), The Minister of State, Northern Ireland Office

My Lords, as I explained, the order sets out other areas where the regulator will have work. The regulator is regulating more than price—for example, I have just dealt with land disposal and other matters where the regulator will be involved.

Having dealt with land regulation, I shall say a few words about general regulation. We believe that the policy set out in the document is consistent with the overall approach of ensuring independent regulation. We have already said that, where there is a choice between the department and the regulator as regards who does what, the regulator will exercise all enforcement powers from day one. However, there is no choice for the regulator with regard to price because the Government are subsidising it for three years—otherwise, it would make no sense for the Government to propose what they are doing. The only significant departure from the position in England and Wales concerns price controls during those three years. Otherwise the regulator will have all the powers that the water regulators have here. We will be subsidising consumer bills in that period and, by and large, the average bill of £100, rather than £300 because of this constraint, will be well worth having. The Government will subsidise for three years rather than have a free-for-all and let the regulator regulate, which would mean higher prices.

We are committed to independent price regulation after the subsidised phasing-in period. After that, the regulator will take over. We shall not make the same mistake as we believe that the previous Government made with the Northern Ireland electricity industry. We have clearly tried to learn from that. I am not apportioning blame on a party matter. We have just learnt from the experience of electricity regulation in Northern Ireland. We will not set up the same sort of long-term contracts which have had the effect of locking down tariffs in a way in which the regulator cannot touch. The regulator will be free to operate once the charging powers go to him.

The draft order introduces new rights for water consumers in Northern Ireland, guaranteeing standards on vital issues such as pressure and constancy. It also allows schemes to be made to compensate consumers where standards are not met. As in other areas, the regulator will take the lead there.

On environmental matters, it has been broadly acknowledged that the draft order will improve the environmental compliance of water and sewerage services. Environmental groups have some specific concern about enforcement. Any measure to protect the company while it finds its feet will be limited in scope and duration. There is no comparison with the current situation in which Crown immunity limits effective action. It is important to ensure that the ongoing capital investment programme in new or improved treatment works and systems is delivered on the ground as soon and as effectively as possible.

I fully accept that water reform is controversial. As noble Lords will know, it has been the subject of judicial review. I shall not read out the judgment, although others may wish to, as that would take quite a long time. Sixteen counts were taken before the judge, who declared that the applicant for judicial review failed on 15 of the 16 counts on which the Government were challenged. I can give a brief summary of each of the 15 if required to do so. There were grounds for success on the 16th ground, slender though they may be. But in relation to the discussion that took place after the judicial review about how it would be dealt with by the courts—in other words the remedy—the judge simply agreed a declaration, which has been placed before your Lordships' House, setting out three of the points he wanted to raise.

He also made a key point in the final paragraph that the court had issued the declaration to draw the narrow matters—I think I am entitled to say that—to the attention of Parliament so that Parliament may determine, as it sees fit, the appropriate action to take in relation to processing the draft order. The declaration confirms that the court has not invalidated anything which occurred up to and including the laying of the draft order on 9 October. However, I fully accept that it is controversial. I have not come here to say that this is a cheap and easy answer. If the order is not carried, that will put a hole in the budget for next year—2007-08—of £85 million to £90 million, which would be serious. These issues have remained unresolved for too long and we need the sustained capital investment in the infrastructure without drawing funding from other priority public services, such as health, education and transport. Those are the areas from which the money would come.

Furthermore, if the order were not passed, it is likely—I put it no higher than that—that Northern Ireland would lose the right to the borrowing power won by the First and Deputy First Ministers in 2002, which currently provides up to £200 million of investment every year for Northern Ireland's public services. That is not to be sniffed at. I beg to move.

Moved, That the draft order laid before the House on 9 October be approved.—(Lord Rooker.)

Photo of Lord Trimble Lord Trimble Crossbench

rose to move, as an amendment to the above Motion, to leave out all the words after "that" and insert "this House, having regard to the declaration of the High Court of Justice in Northern Ireland that the draft order has not been subject to full consultation, and the repeated request of the Committee on the Programme for Government of the Northern Ireland Assembly that the legislation should be deferred, declines to approve the Water and Sewerage Services (Northern Ireland) Order 2006".

Photo of Lord Trimble Lord Trimble Crossbench

My Lords, I want to make clear what this amendment is not about. It would perhaps have considerably shortened the Minister's speech had I been able to say this to him before he started. My amendment does not indicate opposition to reform of the water service in Northern Ireland, nor does it in any way indicate opposition to the payment of charges. Both reform and payment are necessary. The Minister acknowledged that this started under the Administration whom I had the honour to head. We knew that it was a serious issue. I am sure Mark Durkan shares my view that one of the most significant things we did in office was to put in place the reinvestment and reform initiative—which the Minister referred to at the end of his remarks—which created a borrowing power for the Northern Ireland Administration designed to deal with this. Of course, we knew that the borrowing would have to be paid for by charges.

Unfortunately, we did not get the chance to carry it much further. Privatisation was not in our mind, but we were conscious of the examples in Scotland and Wales, where water services operate commercially without being fully privatised. We would have looked closely at those examples. Speaking entirely for myself, I would have wanted to move towards metering as rapidly as possible, if for no other reason than general grounds of conservation. I am sure that, had the Administration remained in place, the issue could then have been dealt with. We would have carried this through and had it completely done and dusted by now—three and a half years have been lost since suspension.

The Minister also referred to the legal action of the consumer council. I am glad that he did so, because a veil of silence was drawn over this in another place which did not, to my mind, pay due respect to the judgment of the court. I am delighted that the Minister has put that court judgment and declaration before Members of the House. If the Minister does not mind, I shall say that I think that he was misleading the House ever so slightly by trying to indicate that he had won 15:1 on the points. A better indication of success or otherwise is the court's order as to costs: it awarded 80 per cent of the costs against the department, so the consumer council won 4:1. That is a more balanced judgment on the matter.

The court's declaration contained a reference to the Government's decision not to bring this matter before a Grand Committee. As a result of a discovery during the court action, it came up that the Government decided not to proceed with a Grand Committee hearing because they said that it would only involve the "repetition of entrenched views". I do not know where they would be. Maybe the Government were thinking of their own entrenched views, rather than those which we would have brought to the matter. We certainly do not have entrenched views on this.

Leaving procedural issues aside for the moment, we have some serious concerns about the substance of the matter. The Minister touched on one when he referred to land disposal and privatisation. I intervened, asking him to make the power of the regulator absolutely clear from the word go. I am sorry to say that I had difficulty following his answer. I think he was saying that the regulator would have immediate power over disposals, but want him to come back to that in his wind-up. It was not clear to me from what he was saying.

On privatisation, one of the advantages of the consumer council's legal action was what came up in discovery. I heard what the Minister said; it was very familiar. I shall read from an e-mail sent by a senior civil servant to the Secretary of State's political adviser in September. It starts exactly as the Minister said in his speech:

"Our line up to now has been that privatisation has been ruled out for the foreseeable future".

It goes on—as the Minister also helpfully said—to state:

"If necessary, we can go further and say categorically that this ministerial team will not privatise. (We have not deployed this publicly yet.) However, as you will know, the Treasury are pressing us to review whether there would be benefits from greater private sector participation in 2008. Such a review could conclude that there would be advantages to bringing in a private equity partner, which would mean selling a minority shareholding".

So while the formal position of the Government is that they are not going to privatise, there is recognition of Treasury pressure in that direction and that, even as soon as 2008, we would see a partial privatisation. Selling a minority shareholding would get in underneath the safeguard that the Minister emphasised, so that safeguard regarding disposing of control of the company will not bite on what the Treasury is going to bring pressure to bear to do. As noble Lords well know, the Treasury has a habit of getting its way on these matters. It is therefore fair to say that while the present position of the Government is understandable for the foreseeable future—however long that may be—when we see the permanent position of the Government, it quickly opens the door to partial privatisation and who knows what beyond that. There is considerable concern.

One of the reasons for the procedural concern is that this is a major piece of legislation. It is a couple of hundred pages long. There has been a certain amount of consultation about it, but the most important questions are about matters that are not in the legislation, such as the licence. A draft licence was published only last Monday. Some people have been able to read it, but I have not. I have been given some information about it, but I doubt there are many noble Lords here today who have heard of or read the licence. It was not available for the proceedings in another place, although it has been published in time for the proceedings here.

The strategic business plan has not been published. The consumer council received a draft in September, which I hope has been superseded. The expert advice we received was concerned about its viability. I do not know whether that concern is justified because nobody has seen the strategic business plan. Can the Minister tell the House whether it will be published, when it will be published and what opportunity will there be for people to comment on it? If there are confidential matters in it, as I dare say there might be, will there be an independent review? Can the Minister tell the House whether the consumer council will be able to conduct an independent review of it? That would build confidence. At the moment, we do not know what the strategic business plan is. There is also a governance letter that nobody has seen.

These matters are crucial to whether the operation will succeed. I understand that the target is for the water undertaking to be commercially viable by 2010. That is very ambitious because everything the Minister said about the poor state of the water undertaking in Northern Ireland is absolutely true, and infraction proceedings are lurking in the background. Indeed, I recollect that a letter from the European Commission came out in the legal proceedings and that it stated that the present legislation in Northern Ireland on water is not compliant with European directives. I think that this legislation is also not compliant. I understand that the Commission and the Government are corresponding on this matter, and that it is not concluded. That also raises considerable concern.

Photo of Lord Trimble Lord Trimble Crossbench

My Lords, I thank the noble Lord for giving us that information. On regulation generally, some of what the Minister has said about the powers of the regulator give a little comfort. There is still real concern about the regulation. Again, I would like the Minister to comment on that in his winding-up speech.

My understanding is that the regulator's powers are derived solely from the licence, which the Government have issued for consultation, and there is no power in the legislation. For a regulator to be genuinely independent there must be some statutory basis for his activity rather than being dependent on a licence issued by the department, which can be changed by that department without the same formalities as would apply in other matters.

The noble Lord made much reference to the affordability tariff. It is good to see it there. He said that it was being funded by the Government, which is nice to see, but it is only funded up to 2010. He said that he was sure that after 2010 the Assembly would want to continue to do that. If the Assembly is there, perhaps it will, perhaps it will not; perhaps it will have the finances to do so, perhaps it will not. The noble Lord is clearly indicating that if he and his colleagues have anything to do with it, the affordability tariff will not continue after 2010.

My amendment calls for this matter to be deferred to the Assembly. I do not accept that that would involve a two-year delay. It would involve the Assembly having to make some decisions and address some of the issues that I mentioned. At least it would ensure that the community in Northern Ireland discovered what were the financial plans, the strategic business plan, the governance letter and so on, and that decisions were taken. It would be very good for the Assembly to have quickly to address this very difficult issue because it will not find its feet and develop properly unless it does.

I should parenthetically point out that the reference in my amendment to the Programme for Government Committee of the Assembly sounds curious but it is in substance the shadow Executive. The committee was reconstituted in November, precisely as the Executive would have been: containing only those parties that would be in an Executive, according to the number of ministerial departments that each would hold. We had a briefing by the Secretary of State, Peter Hain, here a few weeks ago. He accepted that the Programme for Government Committee was the shadow Executive—so we have reached the point in Northern Ireland where there is a shadow Executive considering policy matters. The committee wrote again last Monday, I think, to the Secretary of State, asking for the matter to be deferred to it. We should have regard to that request.

By way of conclusion, I want to emphasise one further matter. Within the financial structures for the new undertaking there is provision for a dividend to be paid to the Treasury from the Water Service in Northern Ireland. It is set at 5.8 per cent. In England the equivalent figure is 5.1 per cent and in Scotland it is 4.1 per cent. I am sorry that the noble Lord, Lord Barnett, is not here because I would be delighted to point out to him that he and his formula are not to blame for that. Those are decisions taken entirely by the Treasury, and we can only speculate why it is so generous to Scotland. I would not like to speculate on the reason for that. I will not take Scotland as a comparator for these matters, but quite seriously—I want to press the Minister strongly on this—there should be parity between the return charge to England and that to Northern Ireland.

The Minister made many comparisons between England and Northern Ireland. Consequently, he ought to accept this comparison. That would go a long way towards easing the difficult adjustment that there will be for people in Northern Ireland in having to pay significantly more than they have done in the past. They will have to pay more, and that will not be popular, but it would help the Government enormously in gaining popular acceptance if they could say that they were treating people in Northern Ireland in just the same way as people in England in terms of the rate of return to the Treasury. The current provision is most unfair and I want the Minister to dwell on that—ideally, to do more than dwell on it. I beg to move.

Moved, as an amendment to the above Motion, to leave out all the words after "that" and insert "this House, having regard to the declaration of the High Court of Justice in Northern Ireland that the draft order has not been subject to full consultation, and the repeated request of the Committee on the Programme for Government of the Northern Ireland Assembly that the legislation should be deferred, declines to approve the Water and Sewerage Services (Northern Ireland) Order 2006".—(Lord Trimble.)

Photo of Lord Glentoran Lord Glentoran Shadow Minister, Northern Ireland

My Lords, I thank the noble Lord, Lord Rooker, for moving the Motion so succinctly. Perhaps I should also thank the noble Lord, Lord Trimble, for making his case so elegantly and clearly. Her Majesty's Government have put us in a pretty intolerable situation. They have brought legislation before your Lordships' House which, in anyone's language, is a significant and sizeable Bill but, because it happens to be Northern Ireland legislation, has to be treated as a statutory instrument.

The Government have made the situation more complicated because the order is very controversial, as the noble Lord, Lord Rooker, said. To complicate it even more, the Secretary of State has said that he will call a general election in Northern Ireland—on 30 January, I think. Although it may not be very significant, the Conservative Party has a region in Northern Ireland which will be putting forward candidates for seats in the Assembly. That makes it even more ridiculous because those in my party—I think, in all parties, as the noble Lord, Lord Trimble, said—accept the need for charging for water and sewerage in Northern Ireland. No one has denied that water rates and the whole water and sewerage service infrastructure in Northern Ireland need serious attention. Certain parts of Northern Ireland still boast the worst-polluted beaches, thanks to sewerage breakdown and failure.

Her Majesty's Government, in their wisdom, have prevented us doing what Oppositions ought to do in your Lordships' House: take a government Bill and attempt to improve it, amend it and shape it—sometimes, if I can be so I unkind, to bring it from cuckoo land to reality and make it of practical use. That is our job in this place. This time, because it concerns Northern Ireland, we cannot do that. All we can do is defeat the order and tell the Government to go away. In so doing, we will defeat something that we believe is necessary. I find that appalling.

However, to compound the matter, the Government have a very reasonable way out: they believe, and I would like to believe, that we will have devolved government in Northern Ireland in three and a half months. They already started this process three and a half years ago, as the noble Lord, Lord Trimble, said. They know what they are on about. The history is already there and the plans are probably already there somewhere, covered in dust. It just seems unreal to me that we should be put into this ridiculous position of having to vote down an order that we want to be passed because we cannot amend it.

Having said all that, I believe that the Government have moved quite a long way towards helping us, thanks to the meetings that my colleagues and I have been able to have with the Minister and his officials. The Minister's clarity when presenting the order and the things that he covered reinforced my thoughts along that line. Had I wanted to amend the Bill as opposed to giving a straight yes or no, the first thing that I would have said, wearing my businessman's hat and my Northern Ireland inhabitant's hat, was that I was not happy with how the order was going to proceed—if I am repeating things that the noble Lord, Lord Trimble, said, it is probably because we have been meeting the same people, reading the same briefs and drawing more or less the same conclusions. There was not enough clarification, even though there was a judicial review which helped to provide some. It was quite clear that all sorts of things were going on that made people suspicious. We are suspicious of how much money will go directly to the Treasury. We all know that the Treasury's hands are ready to grab anything that might be coming; as we have heard, it very often pushes government departments to create more wealth for it. We therefore wanted some assurance about how the whole process will work financially.

I, for one, attempted to run a sizeable business in Northern Ireland in the 1970s, 1980s and 1990s, but suffered by paying the highest price for energy in the whole of Europe, thanks to my own party's incompetence. I have said that before quite loudly to the person concerned. I am delighted to hear that the Minister has committed the Government to not making that mistake again and to looking to the future. However, much boils down to the debate that we have had so far on what powers the regulator will have, when those powers will commence and how clear and visible the business process of the GoCo—government-owned company—will be. I hate those acronyms.

I want to ask one or two questions similar to those of the noble Lord, Lord Trimble. First, on regulation, I received a letter with annexes from the Department for Regional Development, for which I thank the Minister and his officials. Will the Minister be good enough to place annexe A of the covering letter to me, dated 8 December, from Mr John Mills, acting director of the policy and legislation division, in the Library, because there is a lot of detail in it and, for those who are interested, it clarifies quite a number of issues about which I was concerned?

Following on from that, I will repeat a few questions that the noble Lord, Lord Trimble, repeated. Will the draft strategic business plan and its underlying assumptions be made available for public scrutiny before the Minister signs it off? I have an addendum to that question: I accept that any business plan will have business confidentiality clauses, which I would not expect to be shown. Secondly, how much money will be collected from domestic consumers and how much of the total dividend will go back to the Treasury from Northern Ireland each year from 2007 to 2010? Thirdly—this may be asking a lot—will the government company have broken even by 2010, when it becomes self-financing?

Finally, I want to repeat another point made by the noble Lord, Lord Trimble. Why should poor, little Northern Ireland have to pay 5.8 per cent interest against 5.1 per cent in England and 4.1 per cent in Scotland? That is totally unjust and I shall be very interested to hear whether the Treasury has come up with a wonderful ruse on why interest rates in Northern Ireland are so much higher than anywhere else. Having said that, I await the Minister's speech on where the Government are going before I decide whether to support the order.

Photo of Lord Smith of Clifton Lord Smith of Clifton Spokesperson in the Lords, Northern Ireland Affairs 4:00 pm, 11th December 2006

My Lords, I wish to reinforce what the noble Lord, Lord Glentoran, said about the Minister's speech and that of the noble Lord, Lord Trimble. The Minister's speech brought him back on form since our rates order debate. It was interesting because it was comprehensive and acknowledged many noble Lords' reservations. Had the Government adopted that mode in the other place, they would not have aroused the suspicions that were aroused in parts of your Lordships' House. I commend him for that change of manner and for the comprehensiveness with which he has attempted to answer many of the reservations. In its own way, this is a mini case study of how representations can be made and how Governments can seek to accommodate them in the various stages of legislation, which I commend to future textbook writers.

The noble Lord, Lord Trimble, presented a very cogent case in support of his amendment, although he, too, recognised that much of what the Minister had said allayed some of our worst suspicions. There are some specific issues still, particularly in relation to the GoCo, on precisely the assumptions and built-in elements in the business plan. I endorse the request made by the noble Lord, Lord Glentoran, for greater glasnost on that and I will certainly await the Minister's reply. It is quite impossible for us to be asked to give a free hand, sight unseen to the Government.

The noble Lord, Lord Glentoran, has reinforced what I have been saying for a very long time. Northern Ireland legislation is most undemocratic and unparliamentary. The lack of amendability, which I know the noble Lord, Lord Rooker, has acknowledged in the past, makes it extremely difficult for us to nod these things through because we are faced with no opportunity to change the legislation.

I follow very much the point by the noble Lord, Lord Trimble, that this issue should be dealt with by representatives of the Assembly rather than imposed by Westminster. If the Government are confident that the devolved institutions will be restored by March, after the lengthy period of failure to address the problems of water supply and sewerage in Northern Ireland, three months is neither here nor there; in legislative time it is petty cash.

Like the noble Lord, Lord Glentoran, I will wait to hear how the Minister addresses those problems in his winding-up speech. I will not look forward to a number of orders coming forward in the new year, before we know about the restoration of the Assembly and the Executive, if we are always going to have these arguments and be told that the orders have to go through. The Government would be advised to be very parsimonious in the number of orders they bring here before the spring, otherwise they will attract increasing opposition if they use these arguments time and again to push through unamendable Orders in Council. I shall await the Minister's response before deciding what we will do regarding this amendment.

Photo of Baroness O'Cathain Baroness O'Cathain Conservative

My Lords, will the Minister explain a couple of points? I acknowledge that he is one of the most deeply concerned in this House about climate change and its impact on sustainability. Why, therefore, when he uses the words "fair contribution" with regard to pricing and to ensuring that pensioner households would be the first group to be offered the choice of a meter, is he tying the Assembly's hands behind its back so that it will not be able to introduce meters generally in Northern Ireland? That would solve the problems brought about by the sustainability argument apropos of climate change. It is such a backward step when we all know that in England, Wales and Scotland, if we were starting from scratch, we would make sure that every household had a meter. We now have a great opportunity to do so. At the same time it will look affordable and fair—the very words used were "fair contribution". However, how can the Minister square the fair contribution argument with the statement,

"all households will pay a direct charge for water and sewerage services received, consisting of a standing charge and a variable element based on the discrete capital value of each property", and not based on whatever drop of water they consume?

I am really concerned about this. The order has been brought forward by people who have a much shorter-term vision and strategy for the country as a whole than us here in the House of Lords. They are obviously worried about the next general election, but we can think about the elements the Minister is so concerned about: the impact of climate change, and sustainability. I do not want to put him on the spot, but why oh why are they not taking the opportunity to allow meters to be introduced generally?

Photo of Baroness Harris of Richmond Baroness Harris of Richmond Spokesperson in the Lords, Northern Ireland Affairs, Spokesperson in the Lords (Police), Home Affairs, Whip

My Lords, I echo what the noble Baroness, Lady O'Cathain, has suggested. In fact, that was going to be my point. Why can householders who are not pensioners or in newly built houses not have water meters fitted during the early period of charging? Do the Government not think it would be a good idea to provide the meter free and let people install them at their own expense? That would demonstrate good faith. As the order suggests in Chapter II of Part V, "Promotion of the efficient use of water":

"It shall be the duty of every water undertaker to promote the efficient use of water by its customers".

It would show good faith on the part of the Government if they were to provide meters and let people install them at their own expense.

Photo of Lord Browne of Belmont Lord Browne of Belmont DUP

My Lords, it is clear that the water and sewerage infrastructure in Northern Ireland needs to be brought up to modern-day health standards. We all agree that it has to be paid for, but at a time when direct Ministers are trying to restore democratic institutions in Northern Ireland, it is regrettable that they continue to implement policies that contradict entirely the agreement of the people, their political representatives, the trade unions, the business community and other interested bodies.

The Minister referred to the judicial review held in Belfast High Court on 22 November. The General Consumer Council for Northern Ireland had a victory because it was agreed that a full consultation process had not taken place. I agree with the council's concern about the lack of consumer protection contained in the order comparable to the gas and electricity industries. That is regrettable as well. The order places the water service as a government-owned company—GoCo—and while the Government will remain the overall shareholder, the option is available for the company to be passed into private hands. That led to a £1 billion loss to consumers when the electricity sector in Northern Ireland was privatised.

It is a false proposition to suggest that the people of Northern Ireland do not pay and have never paid for water through their rates. Despite the disproportionate costs Northern Ireland consumers face for other amenities and services compared with the rest of the United Kingdom, water was first an identifiable component part of householders' rates before being subsumed into an overall rate, which is still the case.

In addition to the large increases in the regional rate that householders will face next year—which, prior to the St Andrews agreement, was uncapped—the additional expenditure to meet water costs will place an inordinate burden, whatever the additional charge upon householders who already suffer hardship and poverty. Indeed, the Government's estimates predict the highest rate for water rising from around £260 to £800 by 2009-10, with the average charge in the region of £334.

Although the actual consumption of water is a minimal element of the overall water service, the option of metering will initially be available only to new householders and pensioners. That is a wholly inequitable basis on which to administer a water charging system. If there is merit in the provision of metering, it should be open to all at the initial stages.

It is about time that such decisions were deferred so that democratically accountable representatives in Northern Ireland can take them once devolution is restored.

Photo of Lord Morrow Lord Morrow DUP 4:15 pm, 11th December 2006

My Lords, I apologise for my late arrival in the House—I was in attendance at the Northern Ireland Assembly. The noble Lord, Lord Trimble, said that there was an Executive-in-waiting in the Northern Ireland Assembly; as one who is a Member of that Assembly, I did not recognise that when I was there today. However, I find myself generally in agreement with many of the things he said on this issue.

The order is a classic example of the Government doing the wrong thing at the wrong time. Any justification for them proceeding in the way they intend surely must have been removed as a result of the declaration by the High Court in Belfast last week. Apart from the substance of the order, we believe that there are several underlying reasons why the Government should not be proceeding in this manner. First, the Government lack a mandate in Northern Ireland for their proposals. It is clear from the positions taken by all the political parties and others in Northern Ireland that there is widespread opposition to the Government's proposals. Indeed, my own party, the DUP, won a mandate in the 2005 Westminster election on the basis of a manifesto commitment to oppose the Government's proposals for water charging. There is therefore no support in Northern Ireland for the Government's plans.

Secondly, the order is not subject to sufficient parliamentary scrutiny. This is one of the most important issues affecting Northern Ireland to come before Parliament this Session. However, due to the process by which Northern Ireland legislation is dealt with at Westminster, the order will receive scant attention with no possibility of amendment. For what amounts to a Bill with 308 clauses and 13 schedules, that is a constitutionally outrageous position. The pre-legislative consultation process does not make up for this inadequacy.

Thirdly, decisions should be left until the return of devolution. Although there are significant accounting issues in relation to the question of whether water services in Northern Ireland should be self-financing, the existence of, or detail of, water charges should ultimately be a matter for the people of Northern Ireland to determine. There are clearly implications for spending in Northern Ireland of not proceeding with water charges, but these choices should not be made by people here.

In addition to the general considerations set out above, there are a number of specific objections to the Government's proposals. First, government proposals do not take account of the contribution already made to the provision of water services. Although not specifically related to the detail of the order, no account has been taken of the fact that a contribution is already being made to the cost of water services through the regional rate. This proposal will inevitably increase the average water charge and will make the introduction of water charges more unacceptable than would otherwise have been the case. It is one thing to pay for water—it is quite another to pay for it twice.

Secondly, the Government were disingenuous in relation to the justification for water charges. They sought to justify water charges on the basis that they were addressing the water framework directive, yet they then devised a system that did not even meet the requirements of the directive.

Thirdly, the Government have used water charges as a mechanism to increase the level of local taxation in Northern Ireland. In reality, water charges have been used as a cover to massively increase the level of taxation in Northern Ireland. At the same time, there has been a significant increase in the regional rate and a new rating valuation system. While there may be justifications for a separate charging mechanism for water services, that does not necessarily mean that there need to be significant increases in the overall tax burden.

Fourthly, the Government have reneged on proposals in relation to the reinvestment and reform initiative. As originally proposed, water charges were to be regarded as qualifying revenue when considering the capacity to avail of the borrowing power under the RRI. Since then, however, the Government have changed the rules and, as a result, there is no advantage, in borrowing terms, of water charges. When compared with the overall Northern Ireland budget, water charges make up a very small percentage of local spending. In essence, a significant additional burden on the householder of water charges makes very little difference to what can be done in spending terms.

My party continues to be opposed to the privatisation of the water service in Northern Ireland and believes that any future change in the status of the water service should come about only in circumstances in which there was widespread support in Northern Ireland.

It is totally unreasonable to expect householders to pay for roads drainage. This cost should be attributed elsewhere.

The option of water-metering, with appropriate consideration being given to the infrastructure costs, should be available for all Northern Ireland consumers. We reject universal metering as being too costly and no metering as being too unfair. The capital value of a person's home is too inaccurate as a proxy for ability to pay to be the only reliable method for assessing water charges. The argument that only the better off would opt for metering could be negated by setting the fixed-cost element at an appropriate level. Ultimately, the wider the availability of water-metering, the greater is the potential for encouraging conservation of water. While we welcome the option of water-metering being made available to certain groups under the Government's proposals, it should not be limited to them. It is not clear that vulnerable groups will benefit from metering. Therefore, the metering alternative, as presently proposed, may prove to be an empty gesture.

Northern Ireland has faced many greater challenges than other parts of the United Kingdom during the past three decades. I do not have to go into what those challenges have been. However, Northern Ireland is also less able to pay water charges than other parts of the United Kingdom. In these circumstances, the average water charge should be no higher than that in England and Wales, with a maximum fixed at this level. This would act as an appropriate balance between requiring Northern Ireland consumers to make a greater contribution towards the cost of water and not punishing Northern Ireland householders for a lack of government investment.

The Government's proposals to deal with vulnerable groups were one of the more welcome aspects of the overall package. However, such protections should continue to exist into the future and should not be limited to a particular time period. We oppose this legislation and urge your Lordships' House to do likewise.

Photo of Lord Glentoran Lord Glentoran Shadow Minister, Northern Ireland

My Lords, if I understood the noble Lord correctly, he referred rather disparagingly to the Executive. Will he enlighten us as to when he thinks that that Executive might be able to pass this sort of legislation?

Photo of Lord Morrow Lord Morrow DUP

My Lords, I thank the noble Lord. We all know the problems that surround the Assembly and Executive. One party aspires to be in government, yet withholds its support from the police. It has to make a decision about which side it is on. Is it on the side of law and order or on the side of democracy? The call is not with the democrats; it is with those who have trouble in supporting the police.

Photo of Baroness Blood Baroness Blood Labour

My Lords, I shall not go over matters which other Peers have already gone into in some depth. The people of Northern Ireland believe in paying their way. We are not spongers, as we were once famously called by a previous Prime Minister. We realise that updating the water and sewerage system has to take place and has to be paid for. The objection to this order is the fact that proper consultation did not take place. This leads people in Northern Ireland to reason why not. As has already been said, it is feared that this order is being rushed through to facilitate privatisation. My noble friend Lord Rooker said that the Assembly could revoke the order if it came into being. So what is the hurry if the Assembly is going to revoke it in three months' time?

We have been given certain assurances about privatisation. It may not take place this year or next year, but the feeling in Northern Ireland is that that is where it will end up. As has been said, we pay more in Northern Ireland for electricity and gas. The new water charges will be just another problem, particularly for younger people who are buying homes for the first time.

The Secretary of State for Northern Ireland, Peter Hain, said recently that we need fewer policy bouncers and more consultation and inclusiveness. Why does this not apply to Northern Ireland, where we are not being properly consulted? I will support the amendment of the noble Lord, Lord Trimble, if it is put to the vote.

Photo of Lord Rooker Lord Rooker Minister of State (Sustainable Farming and Food), Department for Environment, Food and Rural Affairs, Minister of State (Department for Environment, Food and Rural Affairs) (Sustainable Farming and Food), The Minister of State, Northern Ireland Office 4:30 pm, 11th December 2006

My Lords, I am very grateful for the contributions. At the outset I should say that many good and valid points were made. However, we are now in December 2006 and we have a budget plan and a start-up date for April 2007. I do not say that with the intention of ramming the measure through the House; I am in no position to ram it through the House. How can I be? The Government have only 30 per cent of the votes in this place. But that is not the point. We have heard no viable alternatives but we have heard many calls for delay. However, that is not an answer to the problem with which the Government are faced in December 2006.

I do not disagree with some of the points that were made. I shall try to answer as many as I can although I shall do so briefly given time pressures. However, I would rather be accused of taking a bit longer than of not answering questions when I have an answer on, for example metering. It is unsatisfactory. People ought to have a better choice. There are practical reasons why that is not the case. The aim is to have metering. It is not as if there is not a long-term aim and a plan, but it cannot be done that quickly.

I fully respect where the noble Lord, Lord Morrow, is coming from as a representative of the majority party in Northern Ireland. However, he did not hear all the good points and statistics that I gave in my opening speech. I shall not repeat them as that would not be fair. A legitimate question to ask is whether it is the policy to repeal the legislation. From my point of view that is a legitimate question because, as I said, once the Assembly is back and an Executive are in place they will own the issue. They will own the policy and the legislation. They can do with it as they wish and make the decisions according to their judgment. I fully admit that the present situation is unsatisfactory.

I respond to an issue on which I have a standard line, which is now buried under all my other notes. I take the point of what was said, particularly by the noble Lord, Lord Smith of Clifton. I repeat that the present procedure of Orders in Council is unsatisfactory. It is not democratic in the sense that we generally understand the word. We have given a clear commitment from which I do not resile. There is no plan to come forward with a sheaf of other Orders in Council. I do not say that there will not be any but there is no plan to load Orders in Council between now and the end of March just because we have given a commitment that if the Assembly is not back we will change the process. That commitment remains. We hope that the parties will be back. They can then take up their responsibilities and take the decisions. If that is not the case and they do not agree to return, we are committed to introduce practical measures quickly to reform the process. Those will be discussed and agreed through the usual channels. There is no question of our having a veto on this. We are seeking to implement the St Andrews agreement. We want to concentrate on the date of 26 March in that regard.

I cannot answer the points in the order in which they were raised. However, I say to the noble Lord, Lord Trimble, and others who raised this point that I have a timetable which illustrates the implications of possible primary legislation. If the Assembly abolished the measure or the order is not carried, in April 2007 the Assembly would certainly have to scope the policy. In May 2007 the policy development would have to be reviewed. There is no question about that. Policy consultation clearance would take place in June 2007. In September to November 2007 there would be policy consultation, finalisation of policy and policy clearance through the Executive. Final drafting would take place not before January 2008. Then you would have to get clearance for the legislation. Legislation consultation would take us up to May 2008. Legislation finalisation— the way the process works—would take us up to July 2008. Bill clearance would be in August 2008. There would be the introduction and second stage of the legislation in September 2008; the Committee stage in December 2008; in January to March 2009 there would be further consideration and Royal Assent, and April 2009 would be the operative date. That is two years. I can go through those dates; none is unreasonable in a considered, mature process of legislation, which is what a devolved Assembly would want.

I covered some of the points that the noble Lord, Lord Morrow, made in my opening speech. There is a leaflet, Water Charges Made Clear, being put through every door in Northern Ireland, and I bet someone will stand up and say that they have not got one. There is a paragraph on page 5 that says:

"Once charges are fully introduced in 2009/2010, the lowest charge will be around £90 a year, the highest charge will be around £800 a year and the average charge will be £334".

That is virtually in line with what we estimate will be the proposed averaged charge in England, Wales and Scotland at that time. As I said earlier, it is around £294 or £295 at present, and we have no plan to have charges in Northern Ireland higher and disproportionately out of kilter with Great Britain. That is in the document that we have published. Page 6 covers the issue of property value, from £20,000 up to £450,000 plus. In the first year, anyone living in the biggest, most expensive house in Northern Ireland, with a massive income, will pay £257. That is £5 a week in the first year; that is what they will pay. I have given the figures for the reduced tariff; I will not go over that again. The full amount without phasing—the Government will subsidise this—will be £770 for a £450,000 dwelling. The average charge will be £334. It is not massive. After that, there is bound to be a review of the legislation.

I do not accept the issue of the double charge. As everyone knows, I had not set foot on the island of Ireland until May 2005. The money to run the water would take, from memory, about 80 per cent of the current rates bill. That would not leave any money for anything else. The water charges both for getting clean, wholesome water that is safe to drink and for disposing of our waste water are not paid for by the rates. That is paid for out of general taxation. That is the issue, whatever might have happened in the past.

Providing meters at the outset could not be delivered by April 2007. There is a practical issue here; we are talking about 650,000 dwellings. The capacity is not there to install the meters by then. I was asked about the disruption. As I think I told the House, installing my meter in London, from the knock on the door to signing the paper to installation to driving away, took less than 10 minutes. It is not always possible to do that; it depends on what is fitted in the pavement and how easy it is to put in the meter. That is what happened for me. I freely admit that I am over 65, so I am not getting something that they would not get in Northern Ireland. I do not go for the disruption argument, but it would be an immense job. The cost would be in excess of £100 million. That would be the capital cost to the Water Service of the metering if we went for it. It is an impractical suggestion to do it straight away. In England and Wales, one company is doing it and it would take up to 10 years. It is a large process. Therefore, we had to set a priority, and the priority was new dwellings—that is fairly easy to put on and it has been the case in England for some years now—and pensioners. Not all pensioners are poor, but you have to make a category that is sensible and easy to understand. That is why we did it that way.

The noble Lord, Lord Browne, criticised the legislation on the grounds of consumer representation. The order has been developed on the well precedented and established template provided by the Water Industry Act 1991. I suspect that I definitely voted against that Act in the other place, but we have come a long way since then. It has been amended by the 2002 Act, and it follows the approach of the Utilities Act 2000. Consideration was given to the Energy (Northern Ireland) Order 2003. This order reflects the best practice in up-to-date utility regulation, enshrining the protection of consumer interests and securing the extension of the consumer council's powers to include water and sewerage services. So, we cannot accept that consumers are not protected and that the consumer council does not have a bigger involvement—it does. Consumers are no less protected than in England and Wales, and that is the key point.

I think that I have met the point made by the noble Baroness, Lady O'Cathain, on climate change. There is an issue and she is right to ask the question. I am uncomfortable regarding the central part of the answer but I am comfortable with regard to the practicalities of the timescale. One would have wished that metering had been carried out earlier and that there had been a better plan for it. That did not happen, but it is the future plan. We will all be metered in the not too distant future and we will pay for what we use.

I was asked how much money we were collecting from domestic customers in 2007-08 compared with 2008-09. In round terms, the contribution will be: in 2007-08, some £60 million; the following year about £130 million; and in 2009-10 it will be about £200 million.

Photo of Lord Glentoran Lord Glentoran Shadow Minister, Northern Ireland

My Lords, before the noble Lord leaves that subject, what percentage of that money will go back to the Treasury?

Photo of Lord Rooker Lord Rooker Minister of State (Sustainable Farming and Food), Department for Environment, Food and Rural Affairs, Minister of State (Department for Environment, Food and Rural Affairs) (Sustainable Farming and Food), The Minister of State, Northern Ireland Office

My Lords, I think that part of the deal we did was that none of that goes back to the Treasury. However, I do not see any nods of approval there—which is very helpful.

As for the water company's self-financing and breaking even, we have to fund the capital charges. Some £1 billion of capital is being invested in the water industry by the general taxpayer—by people from England, Scotland and Wales as well as Northern Ireland. Massive amounts are going into the infrastructure well before any of these provisions come into effect. I have described chapter and verse the length of the new sewers and pipelines and the projects that are under way. Some £448 million of work is taking place now, while 26 projects have been completed in the past three years, over which time there has been some £629 million of investment.

There is no secret plan for privatisation. I take the point made by the noble Lord, Lord Trimble. It is true that the Secretary of State has agreed with the Chief Secretary to the Treasury, who conducted the negotiations on how the GoCo would be set up, its initial dowry, the size of its capital and the rate of return, all of which are key figures. The order before us is the result of that. The e-mail to which the noble Lord, Lord Trimble, referred commented on the 2008 review. It is wrong to suggest that any decision has been made. That is not to say that a decision could not be made in future. On the issue of the rate of return, although I cannot conduct negotiations at the Dispatch Box, there is a good case for having another look at that again within government. It is part of the package. I am not sure of all the details but part of that return affected the amount of capital provided, and therefore a balance will have to be struck in the charges that have to be put on the customers. I am happy to give a commitment that we will go back and look at that.

The answers to specific questions raised on behalf of the consumer council have been put in front of me at the last minute. I was asked whether the strategic business plan would be available for public scrutiny. It will not be published as it will be an internal, commercially sensitive document, and noble Lords have accepted that. The Water Service will publish as full a summary as possible of the plan when it is finalised before April 2007. The maximum amount of information that does not affect commercial sensitivities will be put into the public domain before the new charges begin.

I was also asked how much money would be collected from domestic customers. I have answered that. As for how much of total dividends will go back to the Treasury in each year from 2007 to 2010, there are constraints on local Ministers as a direct consequence of the UK public expenditure system being a reserved matter. The money to run Northern Ireland—the £5 billion transfer to fund it—comes from somewhere. The Treasury is responsible for fixing those figures. There is a budget of £9 billion for Northern Ireland. The Treasury is involved there and it is a reserved matter. It has policy responsibility. That is absolutely clear and I do not believe that anyone could sensibly argue with it.

The system requires that holding assets or investments has a cost—that is what the water company will be doing. It should be transparent and reflected in the budgets. The Treasury has determined the cost of these investments in the GoCo, which should be at a rate of 5.8 per cent of the value of the investment, so the amount will be a charge on the public expenditure in Northern Ireland every year. That is the starting point from which Northern Ireland Ministers have virtually no discretion. That does not mean it cannot be discussed within government. As that cost arises, I presume, for water and sewerage, it is reasonable that those who receive the service—both domestic and non-domestic—should pay it. I do not think anybody should mention non-domestic cases today, so I will not answer any questions on it, but they are equally involved in this.

Any and all amounts paid by way of dividends are available for investment in the public service in Northern Ireland. The money will be retained in Northern Ireland—that is what the investment is all about. We are prepared to raise again within government the figure of 5.8 per cent compared with 5.1 per cent. There is probably a really good accountancy Treasury reason for that, but it is a reasonable question to be asked by the average person on the street in Northern Ireland, who is being asked to pay for something that they thought they already paid for but did not—it is an extra charge over which they pay now. It brings them somewhere near the charges in England, Scotland and Wales, because they are, massively, double the amount of household charges. Therefore, I think it behoves us to go back into government and at least raise the question again.

The noble Lord, Lord Glentoran, asked about the regulator's powers. Certainly the annexe—indeed, the whole letter that was issued to him on Friday, I hope, and, if not, at the weekend—will be put in the Library, because it sets out clearly the powers of the regulator and where the authority is. In respect of the question from, I think, the noble Lord, Lord Trimble, the regulator's powers are enshrined in the legislation; they do not derive from the licence. It is very important to note that. The details of the GoCo's appointments are in the licence, but the powers are enshrined in legislation, so that cannot be mucked about with in the licence—not that we intend to do so.

Another important point, because the regulator has work to do, is that the order makes provisions for the enforcement of the GoCo's duties and obligations. The department will provide the authority with a general authorisation to exercise its full enforcement of the undertaker's statutory duties from 1 April 2007, or as soon as practicable. I am not sure what day of the week 1 April is, but the regulator will start work straightaway, from day one or as soon as is practicable, with those powers.

It is true that the draft licence was issued for consultation on 4 December. We believe that a lot of time has been spent on it—seven months, through an engagement with key stakeholders. We believe it builds on the best regulatory practice and provides the means by which the regulator can ensure that Northern Ireland Water is focused on efficiency and consumer service. It protects the interest of customers through robust regulatory scrutiny while setting the appropriate framework. Importantly, the draft licence would improve on the licences in place in England and Wales by, for example, requiring Northern Ireland Water to submit an estate management plan to ensure high visibility of any plans to sell surplus land. In an early part of my speech I described the rules for disposing of land or not. Some land may have been acquired by compulsory purchase. Land may be acquired in the future, and one has to look at the position, but certainly the regulators have got to have a key power in that.

The regulator's powers are important and can be dealt with only at some length, but are nevertheless dealt with in the annexe in the letter that I sent to the noble Lord, Lord Glentoran. In respect of enforcement, a wide range of powers go to the regulator or to the authority on authorisation by the government department. But from 1 April, the department will issue a general authorisation to the regulator to carry out enforcement where there is a choice between it and the department. That annexe, which will be placed in the Library, sets out where the power is clearly for the authority, or where it is the department or the authority. We have said that, where there is a choice between the regulator and the department as to who does what, the regulator will exercise the powers. I cannot be clearer than that. We have protected the poorest people in Northern Ireland.

I genuinely apologise that this measure is in the form of an Order in Council, because it has not been subject to the scrutiny that a proper Bill would receive in this or the other place. Although I do not want to upset the noble Lords sitting behind me to my right, I repeat that, if the Assembly had reconvened last week or the week before, the order would have been its responsibility. In fact, it is the Assembly's responsibility—it should not be ours. We have repeatedly made it clear that, while the politicians of Northern Ireland, of whatever party and for whatever reason, refuse to take up their responsibilities, we will not stop the reform programme for the people of Northern Ireland, in whatever area—be it local government or rates reform.

Local government in Northern Ireland benefits from this order as extra money can flow to the public services. If the measure is not carried, it puts at risk the £200 million a year borrowing power secured previously by the respected former First Minister. With the order, more money can flow into public services in Northern Ireland and, above all, Northern Ireland can get a water service which is at least equal to that in England and Wales. As I said, at the moment the quality and parameters of the service are like those in England and Wales 16 years ago. It is time to move on. The costs are not onerous either for the poorest or the wealthiest in Northern Ireland. I simply ask for support for the order.

Photo of Lord Trimble Lord Trimble Crossbench 4:45 pm, 11th December 2006

My Lords, I shall try not to take too much time in responding. However, I have to observe that the Minister spent a lot of time on the amount of the charge as though it was being opposed here, which it is not. It was not necessary for him to spend so much time on that, either when he first introduced the order or in his response. I make the same comment about the detail in which he went through the slow-motion legislative timetable, which is not relevant to this matter. The Assembly and its Members are familiar with the issues here, and I am confident that, if it went to the Assembly, they could deal with it in half, or perhaps less, the time stated in the timetable read out by the Minister.

I turn to the matters of substance. There was a fear of privatisation or partial privatisation. I read out an e-mail and, in response to that, the Minister said that no decision had been made. The e-mail did not say that a decision had been made but it pointed very clearly in a certain direction. All of us who are familiar with the situation know precisely the direction in which the Treasury intends things to go.

The order is detailed and complex in respect of regulation, and I am not sure that I agree entirely with what the Minister said. However, I am at a slight disadvantage. The noble Lord, Lord Glentoran, let me glance at the letter that he had received but I did not have the opportunity to study it. The Minister did not think of sending a letter to me, although he might have thought that that was of some importance. I certainly thought that it was, but I am biased on the matter. Not having received or studied the letter, I am not in a position to sign off what the Minister might have said. I did not find what he said particularly clear as I listened to him this afternoon, but that might have been down to his delivery or my understanding.

On the matter with which I concluded when I spoke earlier—namely, the rate of return—the Minister made two comments. He said there was a case for looking at it again and that it behoved him to go back and ask the question again. While that may be an indication of good intent, it is not a matter of any great substance on which I can base a decision.

I thank other noble Lords who spoke in support. I particularly welcome the comment of the noble Lord, Lord Morrow, on the reform and reinvestment initiative that we undertook.

Finally, I commend to the House the words of the noble and learned Lord the Lord Chancellor last week. He referred to the excellent report by the Joint Committee chaired by the noble Lord, Lord Cunningham, on the conventions of the House—and indeed it is excellent. In commending it to the House, the Lord Chancellor will also have commended the Joint Committee's recommendation that the House should exercise its powers to vote down Orders in Council in appropriate cases. I think that this is an appropriate case. I would like to test the opinion of the House.

On Question, Whether the said amendment shall be agreed to?

Their Lordships divided: Contents, 83; Not-Contents, 158.

Division number 1 Private Parking: Ports and Trading Estates — Water and Sewerage Services (Northern Ireland) Order 2006

Aye: 81 Members of the House of Lords

No: 156 Members of the House of Lords

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

Resolved in the negative, and amendment disagreed to accordingly.

Motion agreed to.