Clause 17 - General consideration of licence applications

Water Bill [Lords] – in a Public Bill Committee at 10:15 am on 18 September 2003.

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Photo of Bill Wiggin Bill Wiggin Shadow Minister (Environment, Food and Rural Affairs) 10:15, 18 September 2003

I beg to move amendment No. 225, in

clause 17, page 20, line 10, at end insert—

'(2A) After subsection (2) there is inserted—

''(2A) The Secretary of State shall make a code of practice for the purpose of providing guidance to the Authority in respect of licence applications, including the considerations that should be applied to the renewal and revocation of licences.

(2B) Before making the code the Secretary of State must consult with such persons as he considers appropriate including representatives of persons whose business interests are likely to be affected.''.'.

Photo of Sir David Amess Sir David Amess Conservative, Southend West

With this it will be convenient to discuss the following amendments: No. 226, in

clause 17, page 20, line 15, at end add—

'(4) For subsection 3(b) there shall be substituted—

''(b) the reasonable requirements of the applicant, including, in relation to businesses, the existing and planned commitment of resources.''.'.

No. 227, in

clause 17, page 20, line 15, at end add—

'(5) At the end of subsection (3) there is inserted—

''(c) any code of practice made by the Secretary of State under subsection (2A) of this section.''.'.

Photo of Bill Wiggin Bill Wiggin Shadow Minister (Environment, Food and Rural Affairs) 10:30, 18 September 2003

I am extremely grateful to the National Farmers Union for its assistance with the amendments and for providing me with briefing material. The intention behind amendment No. 225 is to develop statutory guidelines to the issuing authority in the form of a code of practice. It would also place a duty on the Secretary of State to consult the industry representatives in the production of such a code. I know that the Minister will welcome that.

Photo of Andrew Lansley Andrew Lansley Shadow Secretary of State for Health

It may be that I am asking my hon. Friend a question that is properly for the Minister, who may also pick up the point when he replies. When reading my hon. Friend's amendment, I was slightly confused about who ''the Authority'' would be in the circumstances. I looked at the clause and how it would be consolidated into the Water Resources Act 1991 and it reads curiously. It ends up saying ''the Authority'' throughout what would be section 38, whereas in previous clauses we have discussed ''the Agency''. Who is ''the Authority'' in this instance—presumably the Environment Agency? The words ''the Authority'' actually refer to the National Rivers Authority, whose powers have been assumed by the Environment Agency. If that is the case, why, where on each occasion the legislation previously said the National Rivers Authority, have we gone to the trouble of inserting the words ''the Agency''? Clearly it does not mean the Water Services Regulatory Authority, which appears later in the legislation. It does not mean ''the appropriate authority'' as in clause 5(12), which we considered earlier. In this instance, it must mean the Environment Agency, so why not say ''the Agency''?

Photo of Bill Wiggin Bill Wiggin Shadow Minister (Environment, Food and Rural Affairs)

I am extremely grateful to my hon. Friend for that intervention. As he pointed out, that is one for the Minister. I am not going to adjust the way that ''the Authority'' has been used in the amendments, obviously because it is too late, but also because if the Minister has a sensible reply to that point, I am sure that we will hear it shortly.

The Environment Agency has issued guidelines on the presumption of renewal for time-limited licences, but many of us remain convinced that a more robust code of practice should be developed to protect the access to water for those agricultural and horticultural businesses whose survival depends on that resource. In the event of an appeal to the Secretary of State by an applicant against a decision of the Environment Agency, it is important that the application and decision-making process are clearly understood and can be shown to have been properly completed. The present description of guidelines does not provide that assurance.

The intention of amendment No. 227 is to bring the code of practice into the list of activities laid down under section 38(3) of the Water Resources Act 1991, which must be considered by the authority when making a decision on the grant of a licence. Amendment No. 226 would extend the definition of ''reasonable requirements'' and specifically highlights the present and future plans of a business so that they are considered within the subsection. Crops requiring irrigation in both agriculture and horticultural industries are often those with a high production cost, which is generally rewarded with a high-value product. To retain the quality of production necessary for achieving that high standard, growers need to invest in technologically advanced irrigation equipment. It is essential for any grower to be able to justify such expenditure, and to obtain the best financing possible for his investments.

The time-limiting of abstraction licences to the—Environment Agency—proposed period of 12 years reduces the period over which a lender would be willing to extend credit for those projects. Although the agency has made it clear that it will be willing to consider longer licences in certain circumstances, it has said that that will not be a frequent occurrence; it will be in exceptional circumstances only. We now come to the presumption of renewal. I look forward to hearing what the Minister says.

Photo of Paddy Tipping Paddy Tipping Labour, Sherwood

I have some sympathy with the hon. Gentleman's points. Clearly, people who will be affected by changes in the abstraction licence should know where they stand. The hon. Gentleman has prescribed a clear code of practice in the amendments. There is, of course, another approach. Farmers in north Nottinghamshire, for example, extract water from the Bunter sandstone. Over the years this has depleted and there is a problem. Rivers have run dry—Dover beck and Rainworth water, for example—and there is an effect on the environment. As environmentalists and careful land managers, farmers want to avoid that.

The alternative approach to that which the hon. Gentleman advocated is to ensure that farmers and landowners, as important stakeholders, are involved in the process, which was a point that he made.

I have found the Environment Agency to be extremely open on the issue. For example, it is about to hold a big meeting in Nottinghamshire with the farmers involved to discuss the new abstraction process. If that is to succeed, all the stakeholders need to be involved. It is therefore important that the Environment Agency take a positive step at an earlier stage. The Minister said that it needed to be sensitive and realistic, and meetings of the kind that I am outlining will help that approach.

Photo of Bill Wiggin Bill Wiggin Shadow Minister (Environment, Food and Rural Affairs)

The hon. Gentleman is making an important speech and a vital point. Does he also accept that the Environment Agency of today, which is inclusive and consulting, may consist of a different group of people in 12 years' time, and that the Bill should therefore include something to secure that good behaviour?

Photo of Paddy Tipping Paddy Tipping Labour, Sherwood

I accept that the Environment Agency will be a different group of people, but with the water framework directive, which has occupied the Committee, it will be an even more sensitive group of people, because the changes in water management that we are advocating and moving towards will lead to an open, honest, transparent approach. In that context, everyone says to me that if we understand the scale of the problem—localise it in order to understand what is happening in our environment and landscape—people will be willing to work together. We are talking about relatively long time scales of 12 years. Land managers can do lots of things to reduce water demand. I spoke previously about the work of Tony and Mark Strawson, who won a joint National Farmers Union-Environment Agency conservation award.

The hon. Gentleman made an important point about investment. High-quality, well-researched and adequate irrigation systems are expensive. During the course of the discussions that must take place between land managers and the Environment Agency in any area, those questions must be considered.

There is generally a presumption in favour of going forward. Land managers are in a strong position. The hon. Gentleman makes important points, but the alternative, better approach is to ensure that the Environment Agency is active on the ground and explores the problems with the stakeholders so that they jointly come up with local solutions that meet the local problem.

Photo of George Osborne George Osborne Opposition Whip (Commons), Shadow Minister (Treasury)

I want to make a couple of points on the amendment that stem from a visit that I made recently to Hanson Aggregates, which has a quarry in my constituency at Mere Farm. Concerns were expressed to me that I am sure will be familiar to the Minister, since they are those of the Quarry Products Association and the quarrying industry.

I shall not go into the principal concern of the quarrying industry and other industries, which is the question whether extracting licences should run to the same length as the planning permissions to which they relate, as we can discuss that on other clauses. However, I should like to raise two points. First, will the Minister scotch a rumour that the Environment Agency will renew licences only once, or, as the Quarry Products Association puts it, that it will grant licences only for a maximum of two cycles of the CAMS planning periods of six years? In other words, applicants will get a licence for 12 years only, after which it will be withdrawn or not renewed.

Photo of George Osborne George Osborne Opposition Whip (Commons), Shadow Minister (Treasury)

Indeed. Compensation is an issue that we can discuss later.

A code of practice could make it clear that the Environment Agency could not have a rule of thumb that it could renew a licence only once. I believe that the Minister has already given assurances to the industry on that matter in private meetings, but it would be useful if he could confirm that in public in the Committee.

Secondly, I should like the Minister to comment on a more general concern. The amendment would require the Secretary of State to

''consult with such persons as he considers appropriate including representatives of persons whose business interests are likely to be affected.''

That makes the point about the need to balance our obvious concern to protect the environment with other concerns. Environmental protection must always be balanced by consideration of the needs of economic growth. I am concerned that the Environment Agency will consider only one issue—the impact of water abstraction on the water table and on the environment—whereas it should take other considerations into account, such as local employment, and the provision of essential minerals, quarry products, or agricultural products to the wider economy. Environmental judgments should be made in conjunction with economic judgments, and the amendment would require the Secretary of State, in drawing up a code of practice, to consult with other interests and to take into account those other issues.

Photo of Elliot Morley Elliot Morley Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs

Let me scotch the rumour immediately, as I was invited to do, and make it clear that licences for quarry operators or other groups will be renewed as long as a need can be demonstrated. In determining whether such a need has been demonstrated, the economic points that the hon. Gentleman made will be taken into account. It is made clear in the Bill that the only time that a licence will be withdrawn is when environmental damage is being caused.

I will also say at this point, although I am sure that we will discuss quarry dewatering later, that nothing in the Bill changes the situation of quarry operators and other operators who hold licences in perpetuity. Their licences will continue in perpetuity. If there is environmental damage, the compensation arrangements will change, but in that case operators can choose to switch to time-limited licences, for which the compensation arrangements are still in place.

The effect of the measures has been somewhat overstated, because if a quarry or other business can demonstrate a continuing need, and no environmental damage is being caused, the licences will continue or will be renewed. There is a presumption of renewal.

On Second Reading, I said in response to a question from the right hon. Member for Skipton and Ripon (Mr. Curry) that there was

''a presumption of renewal in the Bill.''—[Official Report, 8 September 2003; Vol. 410, c. 59.]

I will take this opportunity to make it clear that that is not the case, because I do not want inadvertently to mislead right hon. and hon. Members. The presumption of renewal is implicit in the Bill, subject to the caveats that I mentioned earlier, but is not written into it.

Photo of George Osborne George Osborne Opposition Whip (Commons), Shadow Minister (Treasury)

Why does the Minister not want to make that explicit in the Bill? Perhaps he could table an amendment to make it explicit.

Photo of Elliot Morley Elliot Morley Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs

I would not want to do that, because that would remove the flexibility from water resource management. It is a presumption: the conditions for

granting and renewing licences are clearly laid down in the Bill and are linked with that presumption. If that presumption were to be included in the Bill, that would have many implications that would limit flexibility in water management. I am sure that there will be more opportunity to discuss that matter later on.

The agency has the duty to take into account costs and benefits in relation to a licence application, as well as the impact on rural communities. I can reassure the hon. Gentleman on that point.

I can also tell the hon. Gentleman that ''authority'' does mean the Environment Agency. The word ''authority'' is an amendment issue; it does not affect the principle of the Bill.

I understand the points made by hon. Members. My hon. Friend the Member for Sherwood (Mr. Tipping) made a sensible and reasonable point about the importance of the agency working with local stakeholders; farms, of course, are big stakeholders in water abstraction licences. My hon. Friend has strong connections with farmers in his constituency and he will discuss these matters with them.

The arguments for the amendments are not unreasonable. However, amendments Nos. 225 and 227 would require the Secretary of State to draw up a code of practice for the agency, which would have to have regard to it. But we already have the powers under the Environment Act 1995 to issue directions or statutory guidance to the agency should it become necessary to do so. As my hon. Friend said, we have confidence in the agency's ability to develop its own policies for the sustainable management of water resources and to maintain high standards for the operation of the licensing system. Of course, it is important that local views are taken into account and that there is an opportunity for stakeholders to comment on the development of those strategies.

The agency document ''Managing Water Abstraction'' already exists and has been developed in consultation with stakeholders. Its draft guidance on time limiting, for example, will be varied in light of comments made during the consideration of the Bill and changes deriving from it. The agency is already going to liaise with interested parties, and DEFRA, too, will be consulted about the draft before the guidance is finalised. Following our discussions during the passage of the Bill, the agency will update ''Managing Water Abstraction'' and consult the relevant stakeholders on it. That will be the involvement for which hon. Members have asked and which I fully support.

Amendment No. 226 would amend the test of reasonable requirements which the agency conducts in determining the licence, but that is not necessary. Applicants can provide a business case, including investment and resource implications, when applying for a new licence. If the agency fails to take into account the relevant considerations, including business investment issues, its decision will be open to challenge, and there will be a right of appeal for licences that are turned down.

Photo of Hugo Swire Hugo Swire Opposition Whip (Commons) 10:45, 18 September 2003

If a licence is revoked, or is the subject of an appeal, would a company be able to operate during the appeal? What is involved in the appeal process and how long will it take?

Photo of Elliot Morley Elliot Morley Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs

I am sure that the company can continue to operate pending an appeal. The measures in the process apply over long time scales and it is very clear when they come into effect. There will be adequate notice to abstractors in the case of a licence being revoked , which is unlikely to be common. Revocations will be issued only as a last resort, when serious damage is being caused. Even before a licence was revoked the agency would attempt, with the abstractor, to put in place a management plan to deal with the environmental problems, which would not necessarily mean revoking the licence. Revocation would be the end of the procedure; there would be an appeal process, and the operator would continue to use the licence while the appeal was going through.

Photo of Ian Liddell-Grainger Ian Liddell-Grainger Conservative, Bridgwater

The Minister is making some interesting points. A plant in my constituency that produces ammunition extracts a lot of water. Occasionally there have been problems, but it has worked with the agency to deal with them. Can the agency consider matters retrospectively? If it is allowed to take past problems into account there is potential for challenges from organisations and even NGOs and others, which could push back the licence. The Minister says that the revocation would not come into force straight away because the licence would run concurrently with the appeal process, but the agency would still have to listen to the cases of many of the stakeholders in a plant.

Photo of Elliot Morley Elliot Morley Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs

The test is whether damage is being caused. The agency has a responsibility to act reasonably. That would include taking into account any mitigating measures that had been applied in the past. Its best course of action would be to sit down with the licensee to look at ways that the damage could be mitigated. The abstraction rates could be reduced, or water efficiency measures could be put in place. A range of different things could be done to mitigate the problems of abstraction before taking the final step of revoking the licence.

Photo of George Osborne George Osborne Opposition Whip (Commons), Shadow Minister (Treasury)

What the Minister is saying sounds reassuring: the agency would revoke a licence only as a last step; it would first sit down with the company, the farmer or whoever to try to sort things out. One would hope that that would happen, but there is no guarantee. If we inserted into the Bill the Secretary of State's code of practice, which the agency would be required to follow, that would be a fall-back mechanism. We would hope that it would not be necessary, but it would ensure that the agency acted reasonably in those circumstances.

Photo of Elliot Morley Elliot Morley Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs

I have already stated that the agency has a duty to act reasonably, and it can be challenged. If it has not acted reasonably that will be a factor in any appeal process. I mentioned that it has already produced the document ''Managing Water Abstraction'', which sets out the procedures that it follows. There is not much difference between that and a code of practice, apart from the fact that it has a bit more effect than a code of practice.

Photo of Ian Liddell-Grainger Ian Liddell-Grainger Conservative, Bridgwater

I have a nuclear power station in my constituency, as the Minister knows. If it were challenged, where would that leave the agency? Everything on a nuclear power station is challenged. If it were shut down and told that it could not extract, there would be a fundamental problem. Certain stakeholders do not want to see that sort of plant anywhere in this country, and they will try to cause problems along those lines. The agency rightly has a duty of care, but it also has a duty of responsibility to something as fundamental as a nuclear power station.

Photo of Elliot Morley Elliot Morley Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs

That is absolutely right. In some circumstances different groups might approach the agency and demand that it take action on an abstraction, but they would have to be able to demonstrate the case for doing so. We are back to the point that the agency must be able to demonstrate that there is an environmental problem, and it must go through that process of trying to find other ways to deal with the problem. Ultimately, if a licence is withdrawn, the licence holder can go to appeal, where all those points will be examined, and if there is no evidence of a need to withdraw, the licence will not be withdrawn.

Safeguards are in place, but it is a question of evidence; it must be demonstrated that there is a problem. It is fair to say that there have been problems throughout the country. That is why we are introducing the Bill, which gives powers for dealing with those problems. I want to make it clear that dealing with the problem does not necessarily, in all cases, mean revoking the licence.

Photo of Norman Baker Norman Baker Liberal Democrat, Lewes

The Minister said, in response to an earlier intervention, that an abstraction that was subject to proposed revocation could continue, subject to an appeal being heard. Can he clarify whether that will always be the case, or are there circumstances in which the agency would decide that the abstraction was so damaging to the environment that it would stop it?

Photo of Elliot Morley Elliot Morley Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs

That would be an extreme case. In the very rare circumstance where severe damage was clearly taking place—particularly on certain sites that have special protection, or where we have international obligations—the agency might seek to stop the abstraction immediately, if there was a case for it to do so. The hon. Gentleman has returned to the point that I made: there must be evidence, and a case for revocation. If there is evidence of extreme damage, the agency can stop the abstraction.

Photo of Norman Baker Norman Baker Liberal Democrat, Lewes

I do not necessarily disagree with the agency having that power in extreme circumstances, but the Minister will appreciate the potential injustice. If the agency takes action that proves subsequently to be unjustified, someone will have had to stop his or her business activities. Where in the Bill is that power of the agency set out?

Photo of Elliot Morley Elliot Morley Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs

The powers for an extreme case is not set out in the Bill. The powers already exist because action would take place through an enforcement notice on environmental damage.

The Bill is about resource management. Good water resource management is good for water users in

the same way that it is good for the environment. We have environmental responsibilities, and I am sure that the hon. Gentleman would not want to weaken the Bill so that there is no range of actions that can be taken in extreme cases of severe damage. There are checks and balances in the Bill and in the procedure that we must follow. The code of practice is dealt with in the agency's document, ''Managing Water Abstraction'', and will be updated in light of the Bill. It will involve local stakeholders through consultation, listening to their views and explaining the reasons for choices. That is right and proper.

Photo of Bill Wiggin Bill Wiggin Shadow Minister (Environment, Food and Rural Affairs)

Why, given that all that will take place, could it not form part of the Bill?

Photo of Elliot Morley Elliot Morley Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs

We have come back to the way in which legislation is established. We consult on the principles—a new process, I think. Then we legislate on them, and then there is separate consultation on the details of the regulations that implement the Bill. That is a fairly normal practice. The guidance in ''Managing Water Abstraction'' exists now. It will have to be updated, and I would like stakeholders to be involved in consultation on that; the agency will see to that. My hon. Friend the Member for Sherwood has a copy of the document.

Photo of Norman Baker Norman Baker Liberal Democrat, Lewes 11:00, 18 September 2003

Without wanting to labour my point, I accept that there must be circumstances in which the agency can stop something immediately; that must be right in extreme circumstances. To take the power of planning law as an example, which the Minister is quite keen on this morning, let us imagine that a council issues a stop notice to prevent activity from continuing. Subsequently, that stop notice is challenged and the council is seen to have acted improperly or unjustifiably. The person on whom the notice has been served can claim compensation for loss of business or earnings during the period in which the notice was in force. Can the Minister confirm that if, in a parallel situation, the agency stops abstraction in extreme circumstances, and subsequently that action is successfully challenged, the person on whom the notice was served is equally able to claim compensation for the interruption to his business?

Photo of Elliot Morley Elliot Morley Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs

I do not claim to be a legal expert, but I imagine that if it was established on appeal that an action by the agency was unreasonable, it would be open to a claim for damages. That legal process applies in every case. I should also make it clear that an enforcement notice can be applied if the abstractor is abstracting outside the terms of its licence. That can be immediate. If it is considered that the damage is being caused within the terms of the licence, the processes outlined in the Bill will apply. I think that I am right in saying that there may not be an immediate shutdown because, as we established earlier, if a notice of revocation is served, that can be appealed, and—

Photo of Sir David Amess Sir David Amess Conservative, Southend West

Order. I have been rather lax and we have gone wide of the mark. Enforcement notices come under clause 32. I do not wish to be discourteous to the Minister, but we should stick to the amendments.

Photo of Elliot Morley Elliot Morley Minister of State (Environment and Agri-Environment), Department for Environment, Food and Rural Affairs

You are right, Mr. Amess. I was responding to questions from members of the Committee, but we have gone away from clause 17 and the amendments, and there will be opportunities to discuss all these issues in due course.

There is a risk that referring to specific matters in the way proposed in amendment No. 226 would relegate other important considerations, such as environmental matters, to a lower level when dealing with applications. Again, we return to the balance in the Bill, which I think is right. I do not disagree with the principle behind a code of practice, but that is addressed in the agency's own codes of practice, which it produced through ''Managing Water Abstraction'' and which will involve consultation.

Photo of Bill Wiggin Bill Wiggin Shadow Minister (Environment, Food and Rural Affairs)

I am grateful to the Minister. I am somewhat calmed to know that the powers already exist and that the consultation will be so full and complete that the Government will deliver a proper code of conduct to the Environment Agency. However, he has touched a nerve. The agency has a priority to put the environment before the interests, perhaps, of people. I urge him to keep an eye on that, but in the interests of making progress, and because we may revisit the issue on Report, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 17 ordered to stand part of the Bill.