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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.
Lord Morrow: 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
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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.
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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.
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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.
Lord Glentoran: 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?
Lord Morrow: 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.
Baroness Blood: 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.
4.30 pm
Lord Rooker: 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.
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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
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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
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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.
Lord Glentoran: My Lords, before the noble Lord leaves that subject, what percentage of that money will go back to the Treasury?
Lord Rooker: 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.
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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.
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