Water Bill

Debate between Baroness Parminter and Lord Marks of Henley-on-Thames

Tuesday 8th April 2014 Lords Chamber

[Baroness Parminter (LD)]

I rise to speak to Amendment 13, which is in this group. It is tabled in my name and that of my noble friends Lady Bakewell of Hardington Mandeville and Lord Marks of Henley-on-Thames.

I think my views on retail exit are well known in this House. I am not in principle against it, but I have concerns that it is a complex issue and therefore one should not legislate in haste. The amendments the Government have introduced today, at this late stage, give broad-ranging powers to the Secretary of State to implement changes to allow voluntary retail exit from the non-household market. Given the nature of these powers and the need to get the details of retail exit right, I believe the fullest consultation and parliamentary scrutiny are required. Only this will ensure that retail exit is introduced in a way which delivers improvements in services to all customers.

The Delegated Powers and Regulatory Reform Committee argued yesterday that,

“the opportunity for discussion in Parliament of the extent of the powers and the manner in which they are likely to be exercised has been seriously curtailed”.

It went on to argue that,

“the powers to make exit regulations should require a strengthened affirmative procedure on their first exercise”,

and outlined what procedure it had in mind for that. I agree with the committee. My amendment does what it called for yesterday, which the Government sadly chose not to table.

Why is this important? It is because we need wide stakeholder engagement and strong parliamentary scrutiny to ensure that the real concerns about retail exit can be addressed and taken into account. It is because we need to make sure that retail exit proposals protect the rights of customers, both affected non-household customers and household customers who remain with incumbent providers who cannot divest them. Given that the retail exit is for business customers only, householders could be left with a water company that has signalled a lack of interest in providing customer services. We must ensure a good level of service for effectively stranded customers. As it stands, water companies take ownership of the provision of clean drinking water from source to tap and plan with their customers to deliver that efficiently and safely. Aggregating water retail apart from water provision means we will not necessarily have water providers working with retailers to help customers manage water efficiently. Major water-saving initiatives have been driven by robust planning by water companies which know the supply constraints and want to work with customers through their retail operation to manage that supply for the long term. We need to ensure retail exit is not done in such a way as to hinder that incredibly valuable objective.

Let us also not forget that there is no consensus in the water industry that retail exit is the best way forward, as Water UK makes clear. Indeed, the only vocal advocate among water companies is Thames Water, or more precisely Macquarie, which is one of Thames Water’s major investors. The paper it produced is about selling off customers to extract maximum value for its investors. That blatant self-interest is in stark contrast to the needs of those investing in the industry for the long term. They want stability in the sense of predictability, no surprises and carefully thought-through, outcome-based, long-term logic. We need to ensure that retail exit is done in such a way as not to unsettle the wider investment community whose investment we need to deliver long-term water resilience.

The Government’s amendments show that they are alive to these concerns. For example, they propose a requirement to consult customers prior to an application to exit, and an application can be refused on the grounds that it is not in the interest of household or non-household customers. Equally, the Government are proposing further dialogue with the industry, regulators, customers and others in advance of laying a proposed regulatory framework before Parliament, and a consultation is proposed later this year. This is all welcome, but it does not go far enough. We need a process with full consultation and then the opportunity for Parliament to scrutinise any draft proposals before regulations are put to the House, at which point they cannot be amended.

My amendment would deliver what the Delegated Powers Committee asked for and ensure that any proposed framework for non-household retail exit receives the widest consultation and full parliamentary scrutiny. That way we can be sure that retail exit improves customer service, gives investors confidence and delivers the long-term water resilience we need.

[Lord Marks of Henley-on-Thames (LD)]

My Lords, I support Amendment 13, which was spoken to by my noble friend Lady Parminter and to which I have added my name. I do so as a member of the Delegated Powers and Regulatory Reform Committee of which the noble Lord, Lord Haskel, who has already spoken, is also a member—other members are in their places today—to explain why that committee takes the strong view that a strengthened procedure, often called the super-affirmative resolution procedure, is important, at least on first exercise in the case of these regulations.

The context in which these amendments fall to be considered is that they are a wide-ranging set of amendments which represent a radical change of direction in the Bill. The Bill itself introduces considerable change in the way that the water industry operates, that industry being of great importance to the UK economy as a whole and to individuals. Although these amendments on retail exit are concerned with non-household supplies, as my noble friend has already stated, they are nevertheless of wide public importance.

The noble Lords, Lord De Mauley and Lord Moynihan, and my noble friend Lady Parminter have all explained the political context and impact of these amendments. I will confine what I say to the three reasons why a strengthened procedure is so important. First, there has been very limited time for the consideration of this scheme as a whole, as the noble Lord, Lord De Mauley, frankly recognised. The amendments are introduced in this House at Third Reading in response to amendments introduced earlier, notably by the noble Lords, Lord Moynihan, Lord Whitty and Lord Grantchester. However, in legislative terms, the amendments come, in this House at least, not even at the 11th hour: it is a minute to midnight. It is not, I suggest, satisfactory, and it is certainly not desirable, for nearly 11 pages of amendments to be introduced at such a late stage in the passage of the Bill without the time for lengthy and informed scrutiny of the detail of the proposed scheme. The amendments are complex and demand detailed scrutiny after all interested parties have had ample opportunity to consider them and to comment on them. The timing of their introduction has simply not permitted this to happen and the use of a simple affirmative procedure, as is proposed, would be likely to lead to a draft set of exit regulations being laid before Parliament for approval in unamendable form.

Secondly, quite regardless of the issue of timing, this is, I suggest, a case for a super-affirmative procedure in any event. The amendments would introduce into the Bill the power to make regulations which would effectively amount to an entire new legal framework to enable relevant undertakers to withdraw from the new market arrangements. If those provisions become part of the Bill without a super-affirmative procedure, then Parliament will have, as your Lordships well know, no opportunity to consider and report on the individual details of the proposed regulations and, in practical terms, no opportunity to invite detailed revision of their provisions. With the super-affirmative procedure set out in our amendment, there will be an opportunity for a committee of either House to consider the draft regulations in detail and to recommend changes to the draft for the Secretary of State to consider. The procedure proposed is similar to that in Section 102 of the Local Transport Act 2008, which the Delegated Powers and Regulatory Reform Committee recommended as a model. There is no rush to introduce these exit regulations, particularly not when they are potentially of such importance. They should not be the subject of delegated legislation without a full opportunity for Parliament to consider their detail.

Thirdly—this was touched on by the noble Lord, Lord Haskel—our committee was extremely concerned by the degree to which the amendments establish, not a list of requirements to which the Secretary of State must adhere in presenting the regulations, but a menu from which he can largely pick and choose at will. I have no objection to the fact that the power to make regulations in the first place, in subsection (1)(a) of the new clause proposed in Amendment 1, is permissive and not mandatory. It may be that the Secretary of State decides against exercising the power to make such regulations at all, although that is of course unlikely. However, if he makes such regulations, it is surely right that he should be required to incorporate all the safeguards of which the noble Lord, Lord De Mauley, spoke, which are essential to protect customers, to ensure proper consultation with interested parties, to safeguard the public interest and to secure appropriate parliamentary scrutiny. Yet the amendments as drafted are almost entirely permissive in respect of such matters.

I will trespass on your Lordships’ time for a moment or two to look at a couple of examples. Amendment 1 provides that exit regulations,

“may include provision for protecting customers”,

affected by a relevant undertaker’s withdrawal. Amendment 2 provides that:

“Provision under subsection (1)(a) may require a relevant undertaker … to consult”.

Amendment 4 states that:

“Exit regulations about the transfer of a part of a relevant undertaker’s undertaking may include provision for the making of a scheme to transfer property”.

These are all matters on which this House would wish to be given the opportunity for detailed consideration.

General directions are of general application. I will address two points on Amendment 9. Subsection (1) states:

“Exit regulations may make provision for the Secretary of State to publish … a statement setting out general directions for the”,

regulators. Subsection (4) states:

“Exit regulations may make provision for the Secretary of State, before publishing a statement under the regulations, to consult”.

These are all matters which I would expect, and I suggest your Lordships would expect, to be requirements. They are matters which concerned the Delegated Powers and Regulatory Reform Committee. The list goes on. The central point is that it is vital for Parliament to have the opportunity to consider the proposed exit regulations individually and to recommend changes to particular regulations before they become law without being restricted by the limitation inherent in a simple affirmative resolution procedure.