TUESDAY 30 JANUARY 2001

ALAN DAVIS, RODNEY ANDERSON AND RICHARD VINCENT

  63. Can I welcome you to the third session this morning, and can I ask you to identify yourselves for the record, please?

  (Mr Davis) Thank you, Chairman. My name is Alan Davis. I am Director of Water and Land in the Department of the Environment, Transport and the Regions. On my left is Rodney Anderson, who is Head of the Water Supply and Regulation Division in my Directorate; and on my right is Richard Vincent, who is the Team Leader of that part of Mr Anderson's Division responsible for Water Resource Management and Abstraction.

  64. Do you want to say anything by way of introduction, or are you happy for us to go straight to questions?
  (Mr Davis) Could I say two short things. The first is to apologise that both Mr Anderson and I have colds, so we will endeavour to speak clearly and not cough and spread the germs. The second is just a brief comment, I think, on the question of whether we should have published the Bill in its incomplete state, as the other witnesses have referred to it. I suspect Ministers would take the view that they would have been damned if they did and they would have been damned if they did not. This Select Committee had some criticism last year about our failure to make progress on the abstraction licensing reforms we had announced; there have been more general comments about the lack of certainty about what was going to happen, having removed the water provisions from the Utility Bill. There is a feeling that there had been little real discussion of those provisions during the preparation of that Bill. So I think the view was that, it would be useful to publish the Water Bill and have a better debate on the utility provisions specific to water, being clear the extent to which the consistency argument should win, or the extent to which the `water is different' argument should win. So the Government decided it would help to publish clauses as drafted so far, with a very clear indication in the consultation paper that there was more work to be done and there were other provisions to be added, particularly in relation to competition, but also other areas. The Bill has 61 clauses, so it is not insubstantial. We do not expect that the further work to be done on other parts of the Bill will have a significant impact on the clauses in the Bill, but clearly that remains to be judged as that further work is carried forward. If we had waited until the whole Bill was ready we would then either have had to delay introduction of the Bill while we could have a draft Bill discussion of this kind, or we would have had to do without that; so the Government decided it would publish. I think we would argue that the many detailed comments we have received on what is in the draft Bill, as well as the points about what needs to be added, shows that people think it is useful to be able to comment on the detail.

  65. So, if there was to be a Queen's Speech in June, would the proposals on competition be ready for that?
  (Mr Davis) We are working towards an early announcement on conclusions on competition. Until Ministers take their decisions, I do not think I want to speculate on how long it will then take to draft the clauses that will deal with that.

  66. Would you like to define `early' for us, in departmental terms?
  (Mr Davis) I think `early' is all that Ministers have said so far, and I do not think I want to add to that at the moment.

  67. Could you give just a hint to this Committee? By the time we are actually pursuing the end of our inquiry, is there any chance that we will know any more about competition?
  (Mr Davis) Could you give me an indication of how long your inquiry will last, Chairman?

  68. By the middle of March, we are going to have to be producing a report, are we not?
  (Mr Davis) According to the press, at least, we are heading for a general election quite soon; no doubt the Labour Party and other parties will be considering whether water competition is something they want to feature in manifestos, and Ministers will want to decide whether it would be helpful before the manifestos are published to say something on competition or not, but they have not taken a view on that yet.

  69. On the question of abstraction, one of the problems with getting a logical position about abstraction is that we do not know what is going to happen about competition. Now do you really think that the whole abstraction provisions in the Bill can be sorted out while there is still, as you have just indicated, a big question-mark about competition?
  (Mr Davis) Our judgement is, yes; unless potential competitors can get access to water, it is hard for them to compete in its supply, and the provisions are aimed to make it easier for licences to be moved around. They are also aimed at major deregulation of small abstractions, particularly by farmers; they are aimed at bringing all forms of abstraction under control. So a lot of the elements of abstraction reform do not really relate to competition, and our judgement was that we are unlikely to have to change the draft clauses significantly in the light of what Ministers decide to do on competition.

  70. You have heard what Dr Helm said earlier, and he is Chairman of your Academic Advisory Panel in the Department; you have had the evidence and advice from Water UK, submitted to you in the course of the Utilities Bill, last year, they say they are disappointed that their comments then did not appear to have been included in the current proposals around abstraction licensing. Why is it that you do not appear to have taken those views into account; have you now discarded both the views of Dr Helm and Water UK, in terms of taking this forward?
  (Mr Davis) In relation to abstraction licensing?

  71. Let us start with abstraction, yes. Supposedly, we are having an open consultation process before the publication of the Bill, you have had time to listen to Dr Helm's advice on the wider issues and you have had time to take into account Water UK's advice, none of which appears to have had much impact on the proposals you are putting forward. Has that advice now been discarded?
  (Mr Davis) All the comments that were received in the consultation on abstraction were carefully considered before the decisions on abstraction were announced, in the document `Taking Water Responsibly'. A lot of the comments now are about the way the Agency runs the system, rather than about the primary legislation which controls what the Agency does; so there may be some further tinkering to be done, as a result of the publication of the actual draft clauses in this Bill. But I think we would feel that we have dealt adequately with the Water UK concern about long-term supply of water for public water supplies, through the arrangements that we have described for different time limits for different uses of water.

  72. How do you respond to their concern that you are putting at risk the long-term security of the public water supply?
  (Mr Davis) May I invite Mr Vincent to comment on that point.
  (Mr Vincent) Thank you. I think Water UK are concerned on two particular fronts. One relates to the fate of the so-called `sleeper licences', licences which are held but under which no abstraction is made; and the Bill contains a provision which would reduce from seven years to four years the period after which such a licence could be revoked without compensation being payable. But I think it is very important to emphasise that this would be an extension of the power available to the Agency, not a duty, and it has been clearly understood, and documents which the Department has put out, I trust, have made it fairly plain, that there would be no question of these sleeper licences being revoked if they are being held for valid, emergency, standby purposes.

  73. Why do you need to reduce this from seven years to four?
  (Mr Vincent) Simply in order to get a better grip upon sleeper licences which are held for rather less honourable purposes.

  Chairman: Why not three years, rather than four?

  74. Or one?
  (Mr Vincent) There has to be a balance, I think. Particularly where agriculture abstractions are concerned then three years is probably an agricultural cycle, if you like; not to use an abstraction licence within that period of time might not be uncommon. But it is a balance, and the proposals are there for further consultation. Might I move on to the other aspect, which is—

  75. Can I just interrupt, on that point, and ask you, is not that tempting people, like an agricultural abstractor, perhaps then to make sure that he grows a crop where he needs to do the abstraction, just to keep his licence running, rather than necessarily to make the best profit out of whatever he is growing?
  (Mr Vincent) If a beneficial use is being made of the water then there is no question of that licence being regarded as a sleeper—it is abstraction within the terms of the licence.

  76. So it might encourage people to abstract water when it is not absolutely necessary, just to keep the licence running?
  (Mr Vincent) If they have a valid use for it; but licences, very often, will prescribe the purpose of use of the water, and some may also have conditions about the way in which the water is used. So there are various safeguards in place against wanton, if I may put it that way, use.

  77. Have you got a lot of evidence of a problem with sleeper licences?
  (Mr Vincent) The Environment Agency estimates, I believe, that there may be some 2,000 sleeper licences in existence, that is out of a total of some 50,000.

  78. Yes, that is the number of sleeper licences; but have you any evidence of problems with them?
  (Mr Vincent) No. I believe, and you are seeing the Environment Agency in two weeks' time, I think, that there is no great evidence of a difficulty at the present time.
  (Mr Davis) If I might make one comment. One of the issues is providing water for potential competitors, and, clearly, if there is a sleeper licence the Agency cannot give that licence to somebody else, and so part of this is to do with opening up and moving licences around.

  79. So it is really clearing competition; this is the theory behind it, not that there is a problem with sleeper licences but that it actually is a barrier should you wish to rejig the licences?
  (Mr Davis) I think there is a problem with sleeper licences, in that, in order to have proper water resource management, you do not want licences around which might suddenly be used.