I have selected the amendment standing in the name of the Prime Minister.

I beg to move,

That this House notes the deplorable record of the privatised water companies in England and Wales who have been allowed to use their monopoly position to drive up prices, profits and the pay and perks of directors while reducing investment, wasting water and harming the environment; and calls upon the Government not to proceed with setting up water agencies in Scotland which are clearly precursors of the same things happening in Scotland and to abandon its secret agenda to force metering on every household.

Every week, 721 million gallons of water leak from the pipes owned and operated by Yorkshire Water, yet Yorkshire Water has been spending just £211,000 a week to identify and mend these leaks. Recently Yorkshire Water has been forced to spend about £3 million a week tankering water into West Yorkshire to make up for the water that is leaking away. It is spending 14 times as much on tankering as it is on stopping leaks. Nothing could better illustrate the wasteful short termism of Yorkshire Water. It is having to cough up £3 million a week for tankering because it did not spend enough on plugging leaks and did not have the forethought to prepare for the crisis that occurred in West Yorkshire last summer, which still continues.

It is not only in Yorkshire that the bosses of the privatised water monopolies have been mismanaging the country's water supplies and ripping off the public for the benefit of their shareholders and themselves. It has been happening everywhere. We could not expect anything better. Water privatisation has been a rip-off from start to finish.

Let us consider the basic facts. For a start, the Government gave the industry away to its new owners. When the Government sold the shares they obtained £5.2 billion for the taxpayer. But they gave the new owners much more than that in exchange. The new owners were given a debt write-off worth £5 billion and a green dowry worth £1.5 billion. In exchange for the £5.2 billion that they paid in, they received £6.5 billion of taxpayers' money plus the capital assets of the industry, a highly skilled and dedicated work force and a guaranteed income stream from being monopoly suppliers of water, something which none of their customers can do without.

What has happened since then? Prices have increased. The main reason for that has been charging customers more so that more and more can be paid out to shareholders. The average delivered cost of water—

Will the hon. Gentleman give way?

I shall give way to the hon. Gentleman provided that he asks a sensible question. If he does not, I shall not give way again.

I wish to ask the hon. Gentleman a simple question. Does he expect that the charges for water will be less under a Labour Government?

In real terms, yes.

The average delivered cost of water is made up of three factors: first, the cost of operations; secondly, the cost of capital maintenance; and, thirdly, the return on capital. The average delivered cost to customers of a cubic metre of water has risen by 14 per cent. from 55p to 62.8p in the past three years. That is not the result of massive increases in the cost of operations, which has increased by only 3.8 per cent. Nor is it the result of capital maintenance costs, which have increased by 8.3 per cent. The massive change is because the return on capital has shot up by 32 per cent. In other words, customers are paying extra because more of their money is being siphoned off to the shareholders.

That disgraceful situation does not seem to have been noticed by the regulator or the Government. If they have noticed, they must approve of it, because they have done nothing about it. But, of course, that is true about practically everything else to do with the water industry. The water companies have been allowed to get away with practically anything. Just look at the profits. The profits of the 10 privatised water companies have shot up to almost £2 billion a year. Average dividends to shareholders have shot up by no less than 55 per cent. There are some even more startling individual performances and pay-outs. Northumbrian Water's profits have almost doubled. They have increased by 91 per cent. No wonder it was targeted by the French, who wanted to buy it.

Just as startling is South West Water, where profits have fallen but dividends have shot up by 41 per cent.

Will the hon. Gentleman give way?

How lucky for the shareholders that South West Water is not on performance-related pay-outs.

In view of Yorkshire Water's appalling performance, not just now but over several years, its customers will find it hard to stomach the 60 per cent. increase in dividend that it paid out.

rose—

I shall not give way to the hon. Gentleman.

Then, of course, there is the massive increase in pay and perks that water company directors have paid themselves. The best paid boss in each water company is now paid more than three times as much as when the companies were owned by the public. A really breathtaking example of boardroom greed is that of Thames Water. Before privatisation, the chief executive was paid £41,000 a year. The present chief executive, Mr. Mike Hoffman, is paid £371,000 a year—a cool 806 per cent. increase.

If it is such a terrible thing, why does the union that sponsors the hon. Gentleman have a large shareholding in Thames Water, take the profits and use it to pay for the hon. Gentleman's research and his agent?

Will the right hon. Gentleman withdraw half of what he said? [Laughter.] I am in favour of accuracy when these accusations are being thrown around. The RMT, I am glad to say, pays part of the costs of my agent. The RMT makes no contribution to anyone doing research in my office, and I now expect the Secretary of State to get up and withdraw that allegation.

I am happy to withdraw the second part if the hon. Gentleman will answer the main claim—that the RMT has money in a former nationalised industry called Thames Water, which, the hon. Gentleman said, was ripping off the public for the benefit of its shareholders. Its shareholders in this case are the RMT, which sponsors the hon. Gentleman. He says one thing and does another. It is hypocrisy again.

I expect the RMT—and I say this without consulting anybody—if it is a direct shareholder to make representations at the next annual meeting to reduce the dividends and to reduce the pay of this overpaid chief executive, because that is what it should do.

Will the hon. Gentleman give way?

I shall give way to Donald in a minute, because he is a sensible person, but when we get to Yorkshire Water.

At North West Water, the chairman's pay shot up by 667 per cent. from £47,000 to £360,000, although the present chairman is always quick to point out that he is not the same man. He certainly would not have turned out for just £47,000 a year.

If North. West Water is as bad as that, why does Labour-controlled Derbyshire county council have very large shareholdings in North West Water? Why does it also have very large shareholdings in South West Water, which is nowhere near Derbyshire?

I simply do not know the details of the case [Interruption.] Whatever the Secretary of State may do, for example flinging false accusations against me, I do not try to comment on matters about which I do not know the detail. What is fairly likely—although I do not know—is that Derbyshire county council has a pension scheme for its staff and its pensions advisers say, "You get a lot of money if you invest in these things," and that is what they have done.

Let us be quite clear about the position. Four things have shot up since privatisation: profits, dividends for shareholders, bosses' pay and bosses' perks. All those increases have been paid for by another increase—the rise in water prices that customers have been forced to pay. Last year, the water industry made the highest profits since privatisation, while investment fell to its lowest level since privatisation.

The Government claimed that investment had gone up, and it did at first, but it has fallen by 10 per cent. since 1990–91. That, of course, is the average; over that period, North West Water cut investment by 19 per cent., Thames Water by 29 per cent. and Northumbrian Water by 30 per cent. Almost inevitably, Yorkshire Water out-performed the rest, cutting its investment by 34 per cent. That is indefensible behaviour, but it is worse than that: it is a fraud on the customers.

rose—

I will finish this paragraph, Donald, and then I will give way.

Order. The hon. Gentleman has now addressed the hon. Member for Calder Valley (Sir D. Thompson) as "Donald" on two occasions.

I am sorry, Madam Speaker.

I accept the hon. Gentleman's apology. I am sure that he will see that it does not happen again.

I will indeed, Madam Speaker.

As I was saying, that cutting of investment is a fraud on the customers. Part of the price formula agreed by the regulator allowed the companies to charge customers more to fund investment in maintaining the system. Needless to say, they have been allowed to charge the customers, but have not got round to spending all the takings. Anyone else who did that would be open to the charge of obtaining money by false pretences, but the regulator and the Government do not seem to mind, so the companies have got away with it.

I will now give way to the hon. Member for Calder Valley (Sir D. Thompson).

The hon. Gentleman is on a good point, and I thank him for his courtesy in giving way. He and I share a photocopying machine. As I passed it this afternoon, I saw a huge wodge of Labour water documents. Who will be paying for those? Will the hon. Gentleman be sending money to the Serjeant at Arms, or will he be writing to you, Madam Speaker, with an apology? We all use photocopiers for one or two documents, but, as the hon. Gentleman is highlighting the problem of fraud, may I ask who will pay for that huge wodge?

I must tell the hon. Gentleman—if it is appropriate to say this to a former butcher—that what is sauce for the goose is sauce for the gander.

On a point of order, Madam Speaker. I am a butcher, but the hon. Gentleman has the tripe. [Laughter.]

I see that that was enjoyed by Opposition Front Benchers, but it was not a point of order.

It was funnier than most points of order, I must admit.

The Government also claim that the water industry is paying a lot of tax. That is not true either. The total mainstream corporation tax paid in the five years since privatisation is just £106 million; over the same period, the companies have made profits of more than £7,838 million. That is a tax rate of 1.3 per cent. The companies have paid another £580 million in advance corporation tax, but that can be set off against their future liabilities.

The cumulative effect is that the water companies are rolling in money. One sure sign of that is the takeovers, and the rumours of takeovers. The cash in the coffers of the water companies makes them both potential predators and potential victims. They are rolling in money, so they are worth taking over; alternatively, they are rolling in money and so can afford to mount a takeover.

Northumbrian Water fell into the first category. It was worth so much, both in terms of assets and as an "income stream", that Lyonnaise des Eaux took it over to combine it with North East Water, which it already owned. So what is happening now? More than 3,000 hard-working staff from two companies face losing their jobs, while the boss of Northumbrian Water receives a payoff in excess of £1 million.

Then there is North West Water. That is the company that managed to spend millions of pounds on a computerised billing system that did not work. It is the company that leaks most water—158 million gallons every day. It is the company that can only manage to find £8 million, spread over five years, to combat those leaks. Yet North West Water was so swilling in money that it could find no less than £1.7 billion to buy up Norweb. It has tried to tell me that none of that money comes from its water customer, but if you believe that you will believe anything. North West Water has water company assets, including real estate, that it got for nothing after privatisation, together with the guaranteed monopoly income stream from its water customers. Without that capital and guaranteed income behind it, every penny of which was paid for by people and businesses in the north-west, it would not have been able to afford the takeover.

One of the ways in which companies have saved money has been to get rid of staff, and it shows in the constituency of the hon. Member for Calder Valley, the tripe merchant. Some of Yorkshire's problems were caused by reservoirs silting up and the channels that feed the reservoirs getting blocked because the company had got rid of the maintenance staff who used to clean them out. After the freeze and the thaw in the north-east, water companies there could not respond quickly enough because they too had reduced staff numbers in the name of efficiency.

Talking of North West Water brings me back to the matter of leaks. As the National Rivers Authority stated:

"Leakage is an area where in expertise the UK is without doubt a world leader".

How true. No one is more expert than North West Water and Yorkshire Water, which waste about one third of their whole supply. Wessex Water, South West Water, Severn Trent and Thames Water lose one quarter of theirs.

Not Anglian Water.

No, not Anglian Water.

All that water has been collected and purified, ready for use by domestic customers and industry, so customers have paid for all that process—they are just not getting the water.

For a long time, the Government told the House that customers wasted more water than the companies. The only possible explanation for that was ignorance or lying. On average, companies are responsible for 78 per cent. of all the water that is leaked—on average, customers leak 22 per cent. If people are looking for a water waster, they need look no further than the nearest water company. Yorkshire Water, almost inevitably, is the worst, wasting 87 per cent. of its water supply, while careful Yorkshire customers lose only 13 per cent. Either Ministers did not know or they tried to mislead the House and the public. We are entitled to know why from the Secretary of State, especially as Conservative Ministers have mocked both myself and several of my parliamentary colleagues when we have said, truthfully, that it was companies that wasted most water.

That suited the Government's secret policy agenda, which they share with the regulator. They want to push for everyone to have a meter. Apparently, again, either they do not know or do not want to know that it would cost between £4 billion and £5 billion to install meters in every home, and an extra £500 million a year to run the new billing system. Apparently, they do not care about the consequences of forcing meters on poor families and pensioners, and they cannot say that they know about that because it has never been studied, not even in the pilot scheme on the Isle of Wight. They are just obsessed with the idea of introducing metering.

The Government always try to blame customers. They gave the industry, when it was privatised, a code of practice for leaks. It refers only to customers' leaks. In the last Environment Bill, they slipped through a late amendment to require water companies to promote the efficient use of water, but not by the companies, only by their customers. It is all part of the push for compulsory metering.

I thought I heard the hon. Gentleman say a minute ago that Yorkshire Water had reported that 87 per cent. of its water was wasted due to leakage. I do not believe I heard the right figure. Would he like to rephrase what he said? Secondly, he must understand that a number of water companies, such as the York Waterworks company in my constituency, have been private companies for many years. It has been a private company for 150 years and it has an excellent record to report.

There are two points there. First, I think that the hon. Gentleman must have misheard me. I said that, of the water that is leaked in the Yorkshire Water region, 87 per cent. is leaked by the water company's pipes. As he would expect in Yorkshire, only 13 per cent. is leaked by folks who are rather careful and do not want leaks on their premises. Secondly, he is right: there are statutory water companies. They have existed for more than a century and they have provided a good service, generally speaking. They have proved to be infinitely more efficient at their jobs than were the privatised water companies, and, I must say, they pay their directors a hell of a lot less than do the privatised companies. Last summer, we revealed—for the first time in figures that people can understand—the scale of the leakage. The water companies leaked 826 million gallons a day, or 500,000 gallons a minute. We called for action to cut the leaks and to protect customers from the drought, but the industry's response was a statement by the Water Services Association which said:

"Frank Dobson is not treating customers seriously—customers want the facts."

The trouble for the water companies was that, for the first time, customers were getting the facts, and they did not like them.

The water industry and the Government then issued a briefing, off the record, to the effect that the industry was investing £4 billion to deal with leaks. That was simply not true, so we put out more facts which showed what the companies were really spending on leaks. They were based on figures that we received from each company apart from Southern Water and South West Water, which either could not or would not tell us. The total amount spent in England was £86 million, which is rather a long way short of the £4,000 million that the Government had originally claimed.

At that point, the Secretary of State organised a photo-opportunity, said that he was very impressed by what the water companies had done and told us all to stop moaning and say what wonderful weather we were having. After an interval that the Daily Mail described as

"10 Days that shook John Selwyn Gummer",

the Secretary of State published a document that acknowledged the need to conserve water. As usual, however, he put the onus on the customers. A week later, he boldly stated that he might have to take action, but that he could not make up his mind until he had seen the National Rivers Authority report.

Two months later, the NRA published its report. It vindicated our campaign and said that cutting company leaks was twice as useful as installing meters, and that the water regulator was not doing enough to require the companies to reduce their own leaks. Soon afterwards, even the water companies admitted that leakage levels were unsatisfactory, but said that they would set their own targets for reducing the leaks. The hapless Secretary of State agreed and said that he would not set mandatory targets. On the instructions of the Tory chairman, he still did not dare criticise the companies because that would be to admit that the Tory sacred cow of water privatisation was suffering from its own version of mad cow disease.

Everyone now realises that the water companies are letting people down. Customers and businesses realise that they have been let down. The NRA has criticised them and, though a little late in the day, so has the water regulator.

I am sure that the hon. Gentleman wants to paint a fair picture of the industry. If so, is he aware that, as well as improving water quality by 34 per cent., Anglian Water has in the past five years spent no less than £1.715 billion on improving water and sewage services? That is why customers in the Anglian Water area are receiving a much better deal, a fact with which I am sure the hon. Gentleman would agree.

It has to be said that the average bill for people in the Anglian Water area is considerably more than that for other people. However, in fairness to Anglian Water, customers receive a fair bit in return. My only objection to Anglian Water is that it is absolutely obsessed with the idea of water metering and wants everyone forced on to a meter.

The chairman of Yorkshire Water has decided that he is giving up; the chief executive of South West Water has decided to give up; and the boss of Wessex Water, after his rather harrowing year as chairman of the Water Services Association, has taken his company out of that association because he no longer wants to be tarnished and tormented by the scandalous record of most of the other companies, in particular North West Water and Yorkshire Water. The boss of Northumbrian Water has, of course, disappeared altogether—which brings me back to Yorkshire Water.

Yorkshire Water's record on leaks is the worst in the country, as is its record on practically everything else. Even before this year, it had 69,000 unplanned interruptions of supply compared with the next highest number of interruptions, which was the 32,000 imposed by Thames Water. However, those figures do not give the full flavour of Yorkshire Water's gross incompetence. It has shown that it is simply not up to the job. The people of Yorkshire know that, and so do the businesses in Yorkshire. I suspect that the bosses of Yorkshire Water know that it is not up to the job, hence the premature but unlamented departure of Gordon Jones, the chairman.

Yorkshire Water has been seeking drought orders to give it the right to abstract more water and cut off supplies to customers. After the most recent inquiry, the Government inspector said:

"I listened to many experienced and qualified people on the likely effects of confirming this…order. These embrace such topics as health, emergency services, education, tourism and leisure, the implementation and operation of the Order, the effect on individuals, and particularly vulnerable members of society, and the implications for other primary legislation. One thing became clear. No-one felt able to predict with confidence or even appreciate the extent of the damage to the fabric of life and society if rota cuts were imposed. That public health would be threatened, education lost, employment opportunities denied, the vulnerable and public placed at increased risk and emergency services unable to fill their obligations were not matters of particular dispute."

Everybody present accepted that

"the lack of quantities of potable water for even those uses such as hospitals, together with the individual needs of dialysis patients adds to the concern."

The Government inspector criticised Yorkshire Water not only for not knowing the answers to those questions, but for not having even addressed them before they were raised at the inquiry by the other people making representations. Having received the report, he eventually sent a letter to the Secretary of State on the matter. Despite that, the Secretary of State—ever complacent—has decided that because the drought order applications have been withdrawn for the winter,

"it would serve no useful purpose to go further into these questions."

The only person who does not seem to realise that Yorkshire Water is not up to the job is the Secretary of State. At the outset, he praised the company, saying that it was deploying its expertise in China and north America—not a popular line in my native county. Yorkshire people seem to think that to live up to its name, Yorkshire Water must first and foremost deploy its expertise in ensuring that Yorkshire people get the water that they need and have paid for.

May I advise my hon. Friend that there are still restrictions on the use of water in my constituency and the Yorkshire area even though the orders have been withdrawn? Those restrictions apply to all water users in certain areas, regardless of whether they have meters or not. So there is no advantage in this case of water metering.

I certainly take note of that. In recent times anyway, the supply of water to people in Yorkshire has been restricted more often that it has not been restricted.

Before my hon. Friend leaves the point about the Secretary of State's complacency, may I ask him whether he is aware that the reservoirs supplying the Calder valley, Halifax and Kirklees are only one third full, even though they should be up to about 80 per cent. full at this time of year? Is he also aware that the £100 million that Yorkshire Water is belatedly going to spend on pipes is no long-term solution? We could be faced with exactly the same problem next summer. Nothing has changed, yet the Secretary of State does not seem to realise it.

My hon. Friend, who together with my hon. Friend the Member for Sheffield, Hillsborough (Mrs. Jackson) has campaigned a great deal on this issue to the great benefit of the people of Yorkshire, makes exactly the point that I was about to make. Before I do so, I return to the question of Yorkshire folks and money. They want the services that they have paid for. They would like all that water that has been cleaned and shifted around the county and that is leaking away, and they would like it without having to pay anything extra for it.

The other thing that Yorkshire people do not like is seeing the money that they have paid for water being invested abroad, or in shopping malls in Leeds or refuse tips in Doncaster. They think that the money they pay should be spent on ensuring that Yorkshire people get water. That may be a rather old-fashioned point of view, but I certainly share it.

I warn the Secretary of State today that Yorkshire Water's problems seem far from over. There are still restrictions and, as my hon. Friend the Member for Halifax (Mrs. Mahon) has said, the reservoirs in Halifax and Bradford should be almost full at this time of year. At the moment some contain less than 30 per cent. of their full capacity. Next summer there could be even more serious trouble than last year, unless Yorkshire Water is forced to act. Clearly it will not take adequate action voluntarily.

In view of what has been happening in Yorkshire, my right hon. Friend and hon. Friends from Scotland are right to try to resist water privatisation there. In England and Wales we need a new system, with a water industry regulated effectively in the interests both of customers and of the environment. But we shall not get that until there is a Labour Government.

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:

"welcomes the higher water quality, the improved standards of service to consumers, the increased availability of information and the increased exports which have been achieved as a result of substantially higher levels of investment and the removal from political control of the water industry through privatisation in England and Wales; looks forward to improved services in Scotland from the new public water authorities; and contrasts this with the arbitrary cuts from the investment plans of the nationalised water companies by the last Labour Government, including the six month moratorium on the letting of new construction contracts.".

We have now heard a great deal about Yorkshire Water, so it would be helpful to make some comparisons. We could look back to how the water industry was run before privatisation, and compare that with what happened afterwards.

Before privatisation, the water industry was starved of capital. It invested less than half the sum now being invested. When the hon. Member for Holborn and St. Pancras (Mr. Dobson) talks about leakage in Yorkshire, he is talking about pipes and infrastructure that Yorkshire Water inherited from the many years when the water industry was starved of capital. That happened not after privatisation but before, especially when there was a Labour Government.

When Mr. Healey had to turn round in his taxi and come back because Britain was in such a mess, what did he do? He cut the already ludicrously low investment in the water industry so much that there had to be a six-month moratorium, during which nothing was spent on water infrastructure. That is the story of water in the public sector.

My right hon. Friend will recall that for a time I was the Minister responsible for water in Northern Ireland, where water is still in state ownership. One of the problems that confronted me was exactly the one that my right hon. Friend mentioned. During the 1970s there had been a moratorium on investment for some time. As a result, great sums needed to be invested, and if water was not to be privatised in Northern Ireland, because some concern had been expressed there, that money had to be found from somewhere by the taxpayer. The difference is that the privatised water companies can invest private sector money, whereas in Scotland and Northern Ireland the money still comes from the taxpayer.

My right hon. Friend is right. One must consider exactly what the sums would be. As the water companies are investing twice as much as before privatisation, if a Labour Government were to find that money somewhere else they would have to find £1.5 billion. Would it come from the schools programme, or from some other aspect of government?

The Labour party must decide what it really means. If it wants investment, that can come only from the private sector; otherwise the money would have to be taken from other areas, and if Labour were in power it would find that impossible. The first question that we must ask the Labour party is: if it were in government, would it renationalise the water industry? I notice that the hon. Member for Holborn and St. Pancras did not answer that question. He has not been able to say, "Yes, we would renationalise" or "No, we would not renationalise."

rose—

Will the hon. Gentleman tell us which he would do?

Since I took over this job I have said on innumerable occasions that, like most people in this country, I would rather like to take the water industry back into public ownership, but that the money to buy it back is not there, so we need a properly regulated system.

rose—

While I am on my feet, I shall ask the Secretary of State a question, if I may. May I remind him that it was not the Labour party that nationalised the water industry in the first place? It was owned and operated successfully by our big cities and towns. The Tory party nationalised water in 1973—and the Secretary of State voted for that.

I have talked to my right hon. and noble Friend Lord Howell—then Denis Howell—about what happened next, and he tells me that he went to the Treasury—

Order. I am sorry to interrupt the hon. Gentleman, but I would have stopped him by now if he were a Back Bencher as his intervention has been too long. What is good enough for Back Benchers should be good enough for Front Benchers.

We now know where we are. The water industry would not be nationalised under Labour, but it would be regulated in such a way as it to make it unable to raise the investment necessary to do the job. The hon. Gentleman says that he would politicise the water industry so that it would be under the control of a Labour Government, but what does the leader of the Labour party say? He says clearly that Governments cannot run companies. That is true of the water industry, too.

The hon. Gentleman is offering the worst of every world. The industry would not be nationalised, but it would not be in private ownership either. It would not be able to raise money, and it would not be able to invest. It would not be able to replace pipes or stop leaks. It would not be able to offer higher standards, or do any of the other things that the hon. Gentleman knows must be done. The industry would be in real trouble because the hon. Gentleman would not he able to read the balance sheet to understand what was going on. When he explains how the finances work, it is clear that he cannot read a balance sheet. [Interruption.] The hon. Member for North-West Durham (Ms Armstrong) is leaving because she cannot read a balance sheet either, but she does not like to be told about it. It is not surprising for someone who cannot read a balance sheet to get the figures wrong.

Let us consider investment.

Will the Secretary of State give way?

I shall finish this point first.

In the years immediately after privatisation, investment was particularly high because it had been so low before privatisation. The rules of the European Union and the Government were such that they demanded immediate investment to meet bathing water directives—

On a point of order, Madam Deputy Speaker. Earlier, Madam Speaker instructed hon. Members to speak into the microphone. The Secretary of State is not at the London Palladium, and we would like him to address the Opposition.

The hon. Gentleman is not quite right. The instruction was that all hon. Members should remember that they are addressing the occupant of the Chair.

Thank you, Madam Deputy Speaker.

A considerable amount of investment was made to meet demands to improve water standards, some of which came from this Government and some from measures to which we had rightly agreed in the European Union. We have now met most of those demands, but a further £24 billion of investment is needed between now and 2005. Under the previous system, that investment would not have been made and we would not have been able to meet either our own requirements or those of the EU. We can meet them only because of the present high investment, which is twice as high in real terms as under Labour.

Will my right hon. Friend give way?

Will the Secretary of State give way?

I shall continue my argument.

It is a question of not just investment but of what happens if there is no investment. Without investment, we will have dirty beaches. Labour Members object to dirty beaches, but when we say that we must pay to get rid of the muck they do two things: first, they suggest that we do not have to pay for it, and, secondly, they pretend that it is not their fault that the beaches are so dirty. Treating problems with beaches in the south-west is costing so much because, under Labour, there was no investment, and raw sewage went into the sea.

On a point of order, Madam Deputy Speaker. The Secretary of State has had his back to you for quite a long time—

Order. This matter can be left in my hands. I have noted when the Secretary of State's back has been turned to me, but it has not been for a long time. The right hon. Gentleman has swung about a little bit, and I take this opportunity to remind him that he must address me as the Deputy Speaker.

I apologise for my natural athleticism, Madam Deputy Speaker, and I shall do my best to ensure that it is curbed.

The necessary investment would not occur under Labour, and it did not occur when the industry was in public ownership. Labour knows very well that it cannot suggest that the industry should be taken back into public ownership—not for the reason the hon. Member for Holborn and St. Pancras advanced but for a wholly different reason. It is because it would result in dirty beaches, lower-quality water and a failure to improve the infrastructure and to repair all leaks.

Will my right hon. Friend give way?

Will the Secretary of State give way?

I shall give way first to the hon. Lady, and then to my hon. Friend.

Is the Secretary of State really suggesting that there were no investment plans for the water and sewerage industry before 1990? What credit does he give the countless people who served on and chaired water boards for nothing in the years before privatisation? Those people planned investment, read the balance sheets and understood every figure.

Before privatisation, investment was half its present level and, under a Labour Government, it would stop entirely. Some of the hon. Lady's friends may have sat on water boards, for which I honour them. They will have seen what the balance sheets said and will know that a Labour Government will not provide the money. They also know that, under Labour, the money will be stopped altogether.

Will my right hon. Friend give way?

Will the Secretary of State give way?

I will not give way to the hon. Gentleman, as I have already said that I will give way to my hon. Friend the Member for Teignbridge (Mr. Nicholls).

Is my right hon. Friend aware that when the hon. Member for Holborn and St. Pancras (Mr. Dobson) was asked whether water charges would fall under Labour, he said, "Yes"? Therefore, the investment that is clearly still necessary will have to be raised from general taxation. The hon. Gentleman did not give me the opportunity to ask him by how much tax would have to go up under Labour, but perhaps he has already given that information to my right hon. Friend.

The hon. Gentleman has not yet given that information to me, but I was coming to precisely that point. Labour says that the industry would not be renationalised, but that it would be put under political control and that prices would fall. Therefore, none of the investment that we are debating would be made—certainly not at current levels. Labour would decide whether one beach or another was cleaned up, and whether there would be leakage controls or not. It would make those decisions by pushing down prices and investment. The hon. Member for Holborn and St. Pancras has explained to us precisely why the Leader of the Opposition said that Governments cannot run companies; I would add only that Labour Governments cannot run anything.

Why must the Government privatise the water industry in England to get private investment, but not in Scotland, where the industry—which is not being privatised—is to raise private money? Why is it impossible to cap price increases in England, when the Secretary of State for Scotland has just capped the increase in water prices for next year at 6 per cent.?

I am interested to hear that, because the price increase cap in England has been reduced from 4 per cent. to 1.4 per cent. The hon. Gentleman is wrong: it is perfectly possible for the regulator to reduce the cap for the privatised water companies. Labour is in favour of devolution, which evidently means that Scotland can do something that England does not and vice versa. It seems perfectly reasonable for Scots to make their own decisions. All I can say is that in England, before privatisation, investment was half what it has been since. The sadness is that Labour thinks that there is something odd about that, although it will not pledge itself to renationalise the industry.

Will the Secretary of State give way?

No, I will not give way to the hon. Gentleman.

Will the Secretary of State give way?

I will give way to the hon. Gentleman as he always puts his foot in it.

Will the Secretary of State confirm figures from his Department and from Ofwat showing that, taking public and private ownership together, average investment in the five years of the previous Labour Government was the same as the average investment since this Government have been in power? Will he further confirm that investment under Labour during those five years was higher on average than when the industry was in public ownership under this Government? If he says no, he will be misleading the House. I wish to help him not to do so.

I am interested that the hon. Gentlemen has to mix a period of public ownership with a period of private ownership to make his figures stand up. We are making a clear statement that, under Labour and Conservative Governments, public ownership meant lower investment than private ownership, and that, under a Labour Government, for six months public ownership meant no investment whatever. The Opposition cannot take that; they always have to find a situation in which privatisation can be blamed.

I noticed, for example, that recently the Opposition rushed to say that the privatised water companies in the north-east were responsible for the fact that between 50,000 and 75,000 people were without water because of burst pipes. They did not mention that many more people in Scotland and Northern Ireland, where there are no private water companies, suffered in that way. I am not blaming that on public ownership; I am merely saying that the Opposition will blame everything, includeing the cold weather, on privatisation.

Will my right hon. Friend give way?

I must move on, but I will come back to my hon. Friend in a moment.

The hon. Member for Holborn and St. Pancras spoke an awful lot about the water companies, but he did not answer the real questions. Those companies are now not only much more able to obtain investment but are much more efficient than they were. They are not efficient enough, but they are much more efficient than they were—those of us who are Members of Parliament in the Anglian Water region can see that from our postbags. Since privatisation, the number of complaints about Anglian Water has fallen dramatically. The service is immensely better, and investment is considerably higher.

My constituency waited year after year under Labour and Conservative Governments to have sewage in Felixstowe properly treated. Felixstowe is a major holiday resort and we wanted to do something about our beaches. We now have a major sewage scheme because of privatisation, and we recognise that we pay the cost of that in our bills. We are prepared to do so because we want the quality. In fact, the scheme will not just reach the quality asked of us by the European Union—although we enthusiastically accept that—but that which we need to cater for holiday makers in our area.

We are also pleased that privatisation has been a success story abroad. Britain is now earning considerable wealth throughout the world because of the expertise of our water companies. [Interruption.] The hon. Member for Holborn and St. Pancras obviously thinks that that is very funny as he has given one of his inimitable giggles, but I am talking about hundreds of millions of pounds of money coming back and bringing wealth to this country.

We are now using our expertise in Malaysia, Mexico, Adelaide and Shanghai. Why? Because those countries see that our water companies are doing the job so much better than any others. There are only two countries in the world of which that can be said. The British and French are the only two countries whose water companies can command universal support for the work that they are doing at home, and therefore win contracts abroad. That must be good for the United Kingdom, but as usual the hon. Member for Holborn and St. Pancras and his friends attack the United Kingdom and try to destroy our major companies that are winning orders throughout the world.

It is surprising that the Opposition do that when one sees just how many of their friends invest in those companies. I have mentioned, although I know that it makes them uncomfortable, the position of the sponsoring union of the hon. Member for Holborn and St. Pancras.

It does not make me uncomfortable.

It may not, but it jolly well should. The hypocrisy of the hon. Gentleman would make me very uncomfortable. He says one thing and belongs to a union that is doing the opposite. If I was a Labour Member in Derbyshire, I would want to know what Derbyshire county council is doing and defending.

Derbyshire county council's pensions board.

Oh! The hon. Gentleman says that it is merely its pensions board. The chairman of the pensions board, a Labour councillor, explained that he did it because he thought it was best for the pensioners, and so it was. But the hon. Gentleman said that the company was ripping off the public for the benefit of its shareholders. That is hypocrisy—saying one thing and doing the other.

Will the Secretary of State give way?

No, I will not give way to the hon. Lady, and I will tell her why. I dissociate her from the hypocrisy of her Front-Bench colleagues. She is an honourable woman on this matter. I disagree with her, but I have never found her to say one thing and do something else. That is the difference.

Resign.

The hon. Gentleman says that she ought to resign. Evidently, members of the Labour party must resign if they are not hypocritical. Now we understand. The hon. Gentleman has called on the hon. Member for Sheffield, Hillsborough (Mrs. Jackson) to resign for lack of hypocrisy.

On a point of order, Madam Deputy Speaker. Is it in order for the Secretary of State to make comparisons of that nature in the House in a debate on such an important issue? He said that I am in some way more honourable that my hon. Friends on the Front Bench. That is an extraordinary thing to say.

The occupant of the Chair is not responsible for the utterances of hon. Members. All I would suggest is that the best standards prevail.

Thank you, Madam Deputy Speaker. I am that sorry the hon. Member for Hillsborough took my comments amiss, because I have genuinely accepted—

Will the Secretary of State give way?

No. I wish to dissociate her from what I have just said and I will give way to her later when we have moved well away from this subject.

Will my right hon. Friend give way?

No, I must move on, but I will come back to my hon. Friend, as I have promised.

Privatisation has a number of great advantages for the public. For a start, it ensures that the people who control and police the companies and set targets do not own the companies. When the water companies were nationalised, that is precisely what happened. The Government owned the companies and set the standards, so of course they did not set high standards because they did not have the money to meet them. The Government set the standards that they thought they could meet. Under privatisation, we set up an independent regulator to set standards.

During Environment questions earlier, the hon. Member for Wakefield (Mr. Hinchliffe) was very concerned about drinking water and he highlighted the need for very strict standards. I think that he was surprised to learn that there were no such standards before privatisation. When the companies were privatised, we set those standards and gave powers to the drinking water inspectorate to ensure that the standards were met. We also ensured that the National Rivers Authority had both the expertise and the duty to control those aspects of water production that were in its remit.

The Secretary of State waited for the report.

Yes, I waited for the NRA to produce its report. I would have looked rather silly if I had acted before an independent advisory committee produced its report. I can guess who would have been the first person to demand why I had acted without the information from the NRA. The hon. Gentleman must be more sensible about the issues of control and setting standards.

The hon. Member for Holborn and St. Pancras made comments—rather surprisingly, I thought—about the independent regulator which would be very difficult to make outside the House without clearly bringing the regulator's reputation and independence into discussion. There is no doubt that the whole industry, and those outside it, know that the regulator seeks to do his job as effectively as possible. As a result, he has been able to reduce significantly the amounts by which the companies have been able to raise bills.

Will the Secretary of State give way?

No, when I give way, I shall do so to my hon. Friend the Member for North-West Surrey (Sir M. Grylls). I wish to move on to the subject of profits.

To the best of my knowledge, I have never said anything in this Chamber that I was not prepared to say outside. I do criticise the regulator. He has not done a good job on behalf of the customer—I will say so publicly and privately and I will continue to say so.

I wonder whether the hon. Gentleman would be prepared to say outside what he clearly said in the House, which was that the regulator did not understand the figures. The hon. Gentleman said that he could not have understood them; otherwise, he would have done something different. That is a serious thing to say to a professional man who understands the figures, particularly when it comes from a man who does not understand them and never has, which leads me to the subject of profits.

The Labour party has been saying that the City would be safe with a Labour Government because the Labour party is new and has changed—it is not the same. Yet, when the Opposition talk about profit, we discover that they are precisely the same and have not changed at all. First, profits are bad. Secondly, the Opposition appear to have no idea that 40 per cent. of what they call profits are invested in the very infrastructure that they want to improve. They do not appear to understand that the profits also pay for investment. It is also true that, because of the profits, the companies are worth more and are able to borrow, so that the cost of present investment can be spread over the people who will benefit from those investments.

All those things are possible only if the companies make profits, but the Opposition do not like profits. They would regulate the industry so that there would not be any. If there were no profits, there would not be any investment.

As always, that brings us back to the fact that the Opposition want the investment but will never be prepared to pay the price. They know that investment is valuable and that is why their friends invest in the companies, but in the end they go back to the old Labour view of hating profits, and I will tell you, Madam Deputy Speaker, why. It is because the hon. Member for Holborn and St. Pancras has never made a profit in his life. He has never created a job and has never been able to make the kind of wealth that is possible for people in Britain because of what the water industry has been able to achieve throughout the world. All he can do is cavil and complain.

Not every water company is good. Anglian is extremely good and has done very well indeed. Much of the work done by Thames Water is particularly good. That is why I am so pleased that the RMT has invested in it. As I drink Thames Water's product here, I am pleased with its quality. Some other water companies have done many extremely good things, but I would not have shared a public relations agency with Yorkshire Water in the past year. One or two things could have been put much better and I know that they will be because the water industry is in private hands.

Is my right hon. Friend aware that Yorkshire Water has invested and is investing a huge amount of money to rectify the difficult situation of the summer? It has also stated that it will not pass those costs to the consumer next year. Will he encourage the company not to pass the cost to the consumer the following year, as that is not clear?

I thank my hon. Friend for that intervention. I shall certainly be keeping a close eye on Yorkshire Water. Although it has not starred as some other water companies, such as Anglian, have starred, there is no doubt that Yorkshire has been much better served by that company than by the nationalised industry. The company has invested and is investing and it is now subject to public control. Privatisation subjects companies to public control. If a company is owned by the public, they expect both the rate of investment and the rules.

My right hon. Friend is doing the House a great service in unravelling the extraordinary tangled web of Labour's policy on the water industry. The more the Opposition try to explain it and my right hon. Friend unravels it, the clearer it becomes that orderly regulation, which is what we have, would be replaced, under Labour, with disorderly interference by ministerial fiat, which is what ruined so many of the nationalised industries and made them such failures.

We should give some credit where it is due. The hon. Member for Holborn and St. Pancras, who speaks for the Labour party on these matters, once led Camden council, so he has experience of disorderly organisation. If there were someone who could run something with political abandon, the hon. Gentleman is that man. I just do not want my water to be in his hands. We will do much better with water in the hands of the professionals and with standards set independently by those who are able to set them without being concerned about the costs of implementation, apart from cost-effectiveness.

Will the right hon. Gentleman give way?

I will not give way again as I want to get to the end of my speech. This is a short debate and I must say one or two more things that will help the hon. Member for Birmingham, Northfield (Mr. Burden) when he speaks.

First, I must thank the Opposition for this opportunity. Last year, not one of their Supply days was on the environment. They have no environmental policies and they did not raise a single environmental policy on the Floor of the House. That chimes with something else. I was pleased to answer Environment questions today, but we used to have an hour of questions—Environment is almost the largest Department in the Government and it had an hour for 25 years. To celebrate the 25th anniversary of the Department of the Environment, the Labour party asked whether we could have a shorter Question Time and whether it could be cut to 40 minutes. I wonder why. It is because the Opposition lose every time. Every time they ask a question, they get an answer and they do not like the answers. Every time they ask a question, they discover that they have got it wrong.

That is what the Opposition discovered today. They have had to admit, first, that they would not nationalise the water companies; secondly, that they would go in for political interference; thirdly, that they would not be able to provide the necessary investment; fourthly, that they would have water companies in which their friends would no longer want to invest; and, fifthly, that they do not understand the balance sheets of the water companies or of any other company. That is what the hon. Member for Holborn and St. Pancras has had to explain, and it is good that he has come to the House to give us this opportunity.

I ask the hon. Member for Holborn and St. Pancras to help us again. I hope that we can have a debate on housing on the next Opposition Supply day. I would like him to outline Labour policy on housing because we did not hear it yesterday. I also hope that we can debate environmental matters. I look forward to hearing his views of the ozone layer and how he would deal, were he ever in a position to do so, with the big international environmental issues.

Order. I hope that we can return to the subject in hand.

Today, Madam Deputy Speaker, we have been allowed to speak only about water and the hon. Member for Holborn and St. Pancras has failed completely. He has shown that, under privatisation, we are investing twice as much in infrastructure and we have higher standards than ever before. This country has become the country to which other nations turn for advice on water and pay for the advice, which brings wealth to this nation. Under privatisation, water standards have risen as they never did before. We have been able to set standards, which never happened before. The hon. Gentleman shows that he is not fit to be part of a Government and that his party could not form a Government at any time.

We have just seen a performance that would have been better at the Palladium than in the House of Commons. It is a great pity that the Secretary of State did not address himself to the motion.

I shall be brief, as many of my colleagues want to outline what has been happening with water in their areas. North West Water has its headquarters in Warrington, and my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson), the Opposition Front-Bench spokesman, was right to say that North West Water loses more water between the reservoir and the tap than any other company in Britain. I believe it to be the most inefficient water company, although it has to compete with Yorkshire Water. Each day, just over 158 million gallons of water leak away, or 109,871 gallons a minute. If that leakage was stopped, 5,528,077 consumers could be supplied. That is the scale of the company's inefficiency.

Despite the company's inefficiency, profits and dividends have gone through the roof since privatisation. Annual profits in 1990–91 were £215 million; in 1994–95, they were up by 32 per cent. to £284 million—or £540 per minute. My hon. Friend the Member for Holborn and St. Pancras mentioned that over the past five years, it has spent only £8 million on trying to reduce leaks. It is boasting that it will do something about them, yet even now it will spend only £65 million a year on reducing leaks. The modest target that it has set itself is to reduce leaks by the year 2000 from 30 to 24 per cent. By the year 2000, 24 per cent. of the north-west's water will still be flowing away in leaks.

The cost of delivering water in the north-west has gone up by 21 per cent. since 1992. One would think that the people responsible for that sad state of affairs would be sacked. Not a bit of it. Instead of being sacked, they have been feathering their nests. The company has been a seat of power for the fat cats.

Let us examine what has happened to the chairman of North West Water. In 1989–90, when the company was in public hands, he was paid £47,000 a year, and that is far too much. The same chairman, Dennis Grove, in the year before privatisation pushed up his salary to £97,000 a year, again far too much for the job that he was doing. It contrasts with the people who, when the industry was in public hands, gave their services for nothing. However, that is nothing compared with Sir Desmond Pitcher, who has pushed his salary up in 1994–95 to £360,000 a year—an increase of more than 300 per cent.—at the same time as the company is being run so inefficiently.

There is also the case of the former chief executive, Bob Thian, who was paid £1 million to leave the company. I see that the Secretary of State has left the Chamber.

indicated dissent.

I had not noticed the right hon. Gentleman. I apologise.

The right hon. Gentleman boasts that the water companies are going for contracts all over the world—in Argentina and Australia. That was certainly true of North West Water. However, those companies are doing nothing about the sad state of affairs in which water is leaking away at home and there is nothing for the benefit of people in the north-west.

The same chief executive not only initiated that mistaken policy, but was the person responsible for the installation in the new head offices in Warrington of a computer that has cost millions of pounds and been difficult to get right. What did he get when he left the company? He got £1 million in compensation for all the mistakes that he had made. We never heard any condemnation of those people from the Secretary of State. All we had was the knockabout stand-up comic act that we have had from him before.

We can contrast the £1 million that was paid to Mr. Thian with the redundancy money paid to the thousands of staff who lost their jobs to keep up profits and pay the salaries of the fat cats at the top. Because of their inefficiency and the way in which they have allowed water to leak away in the north-west—we admit that last summer was a dry one, but it followed one of the wettest winters that we have ever had—we had a hosepipe ban last summer in most of the region. They also decided, at the height of the driest summer for many years and despite the drought, to empty three reservoirs in the north of the region. When there was a public outcry about that, they emptied only one reservoir—Poaka Beck in Cumbria. How stupid to empty a reservoir at the height of a drought to undertake maintenance. That is the sort crazy thing that happened.

Even worse, the highly inefficient North West Water was allowed to take over Norweb, the region's electricity company, against advice from even the weak regulators in the electricity and water industries. Their advice was ignored. I was one among many who wrote to the President of the Board of Trade to ask him to refer that to the Monopolies and Mergers Commission. He did nothing about it and the merger was allowed. We in the region are paying a high price for that.

The company is now called United Utilities, but it is really North West Water because most of the directors of Norweb left. I need not say that they did not leave empty-handed but with handsome pay-offs. A subsidiary called Vertex was set up to run telesales, customer services, meter reading and billing. Again, thousands of jobs will be lost.

To push the job losses through, the company is going to derecognise the trade unions, when industrial relations in both the water and electricity industries have been very good. Recognition will be removed, so that thousands of people can lose their jobs. When they lose their jobs—and those employees have served both companies faithfully and well for many years—they will not get the £1 million that was paid to Mr. Thian or the handsome pay-offs given to the directors of Norweb. That shows the stupidity of not referring the matter to the MMC. It has put at risk not only the jobs of employees but the interests of consumers. It was a great blunder to put an inefficient company, with its present chairman, Sir Desmond Pitcher, in charge not only of water, but of electricity.

A monopoly is being created in the north-west. Consumers cannot move from using North West Water or the electricity that is now supplied by the same company. It is an inadequately regulated monopoly. When we come to power, we must give attention to that and ensure that both those industries are properly regulated, in the interests of consumers and of the people who work in them.

I also welcome the fact that the Opposition have been kind enough, and, perhaps, candid enough, to have a debate on this subject. I look forward to other Opposition Supply days when we can debate education, defence and taxation, so that we can explore across the range the difference between what the Labour party says and what it does.

Ministers will not be surprised to hear me talking about water again. As a west country Member, I must have talked more about that subject than about any other since 1990. I shall look back at what has caused some of the water problems in the west country over the past six years or so and suggest one or two amendments.

I have sometimes heard it said that South West Water has invested millions, if not billions, of pounds on cleaning up the waters around the west country. That is somewhat loose language. Millions, if not billions, have certainly been invested, but that investment has been made by the water charge payers in the south-west. It is the fault of nobody in the House that the European Community decided to identify 455 sub-standard beaches in the United Kingdom and that 30 per cent. of those were in south-west England. The south-west has a relatively small population, many of whom are of retirement or near-retirement age, so it is bizarre that a relatively small number of relatively impoverished people found themselves responsible for cleaning up 30 per cent. of the nation's coastline. That clean-up was done and financed—painfully—by the people of the south-west. The fact that it had to be done is neither here nor there.

Unlike the Secretary of State, the hon. Gentleman has attempted to blame the European Union for the directives on cleaning up our beaches, yet the British Government had adopted the regulations of the urban waste water directive before they were adopted by the European Community.

The hon. Gentleman speaks as a representative of the most "federast" party in the United Kingdom.

indicated dissent.

The hon. Gentleman shakes his head. He should go away and read some of his party's literature. The Liberal party does not have a firm policy on much, but it has a very firm policy on complete and total integration into the European Community. I agree that, at times, the Government have found themselves being moved at a pace and in a manner that I would not choose, but it is a direct consequence of having to play our part in the European Community. The only party in the House that has always been consistently pro-European, and is therefore not in a position to make that point, is the Liberal Democrat party. If it were ever to play a part in the government of this country, there would be no question of trying to negotiate with our European partners on directives and other such matters. It would simply be told when to jump and the only question that it could ask would be, "How high?"

South West Water plc has sometimes been criticised, not because it has had to clean up the coastline in that way, but because of the thoroughly insensitive way in which it has been done. There was a time when my postbag was full of letters complaining about the hike in water charges in the south-west. I pay tribute to South West Water for the courtesy and attention with which it has always dealt with my queries, but it was insensitive to how people in the west country felt about price rises. On one glorious occasion, the chairman of South West Water gave an interview in the Western Morning News to the effect that people in the west country were well off and therefore able to pay. That judgment must have been framed by the fact that he had been looking in the mirror at the time. Some people in the south-west are paid a great deal of money and can therefore take that attitude to water charges.

If hon. Members think that I am being slightly unfair to South West Water, I shall make a further point. As a result of efforts made by west country Members of Parliament and Ministers—I pay full tribute to my right hon. Friend the Member for South Ribble (Mr. Atkins)—the regulator imposed a regime on South West Water, which meant that charges were capped at approximately the rate of inflation. That should have been the subject of great rejoicing in the west country, but South West Water immediately announced that it could not fulfil its statutory functions if its charges were pegged in that way, and it appealed. It took a whole year for the appeals procedure to go through.

I have never been able to get to the bottom of the fact that South West Water paid about £1 million to present a case to the Monopolies and Mergers Commission showing that it simply could not manage on the moneys that it had. In a sense, that was correct and, ultimately, the MMC varied its position slightly. It said that, on some relatively minor aspects, the regulator had been too generous to South West Water and it imposed a slightly tighter regime on South West Water. There is no longer talk of South West Water being unable to carry out its statutory functions.

People in the south-west are still faced with extremely high combined water and sewerage payments, but at least when they look into the future, they no longer see stretching before them extremely high year-on-year increases. That has been brought about not by the efforts of South West Water, but by the combined pressure of west country Members of Parliament and Ministers.

That is the recent history of why this subject matters so much to people in the west country. Another reason why this debate is so important is that politics is about choices. When deciding which party to vote for, most people make the decision not because they think that one party is perfect and another is not, but on the balance of choice. They compare the parties' policies. Some people are probably saying, "We know what the Conservatives' position is on this; let us see what the Labour party has to offer us." They could do worse than look at the motion that the Labour party has tabled today. It is splendid stuff, with marvellously volcanic phrases about

"the deplorable record of the privatised water companies".

It goes on to talk about

"prices, profits…pay and perks".

If those marvellous alliterations do not get one salivating sufficiently, one can look at today's press wire, where the Labour party makes a great attack on water companies. One might reasonably think that, if the Labour party were to get into office, it would immediately put those fat cats to the sword and do away with all the profits. The difficulty is that one must always compare what the Labour party says with what it does.

It is interesting to see what the Labour party does when it is in power. Labour local authorities, such as Islington in north London, Nottinghamshire and Derbyshire, have all acquired substantial shareholdings in water companies and other privatised utilities. The leader of the Labour party lives in Islington, although he does not send his children to school there. Islington council has shares in 17 privatised firms and last year it bought £240 million-worth of pension funds and 24,700 shares in R. J. Budge (Mining). That name should make Labour Members shudder as if someone had trodden on their graves, because last year that company took over most of Britain's coal mines. That is the sort of company that Labour councillors are more than happy to invest in.

Not all Labour Members are happy about that. Some realise that there may be a slight contradiction between their principles and their practices. I pay tribute to the hon. Member for Nottingham, South (Mr. Simpson)— I am sorry that he is not here today—who said:

"The party is skewered if we buy shares, having attacked privatisation, and then just sit back and accept the cash."

That is a marvellous thing to have said, although the hon. Gentleman will not say it here today as he will have been sandbagged outside.

Let us see what has happened at Labour party conferences when the utilities have been debated. In 1994, a splendid motion was put down by the Labour party in Amber Valley, where people know a bit about privatisation and the iniquity of water supplies, because Derbyshire county council has a £700 million pension fund with 800,000 shares in water firms.

The hon. Member for Holborn and St. Pancras (Mr. Dobson) was kind enough to mention the plight of the south-west. He might have drawn to the House's attention the fact that Derbyshire county council owns 500,000 shares in North West Water and 300,000 in South West Water.

Will the hon. Gentleman give way?

I shall give way to the hon. Gentleman, but he must be patient.

We need not fear or doubt that the next Labour Government will keep the water companies privatised. You must be joking—the Labour party nearly owns the water industry already.

I am not sure whether the hon. Gentleman has had any experience in local government; I assume that he has at some time in his career. He may be aware—I certainly am—that local government investment in pension funds is strictly controlled. I was chairman of the investment panel of Northumberland county council in 1981, at a time when I did not want pension fund money to be invested in South Africa. We were not permitted to refuse to invest there; we were obliged to invest in South Africa. Similarly, now, local authorities must invest in companies that they are advised give the best return. They have no choice.

I am grateful to the hon. Gentleman for putting it in that way. I do have experience in local government and I am also a lawyer. If the hon. Gentleman is seriously suggesting that those poor Labour-controlled authorities were bullied, or pressurised by law, into investing in companies that they describe as indulging in excess profits, rip-offs and so on, I reply that those Labour, left-wing-controlled authorities were able to exercise a choice. They did exercise a choice and, as is so often the case with the Labour party, they exercised a choice in one direction and then preached an entirely different message.

I wonder whether the hon. Gentleman would be interested to know of the way in which Yorkshire Water—I believe, on the advice and suggestion of the regulator and possibly the Government—treated local authority pension fund shareholders and individual shareholders. When those shareholders went to an annual general meeting to express their point of view, which was their right as shareholders, they were treated with the utmost contempt. Their points of view were not even allowed to be heard and considered properly by that meeting. That is the way in which water companies treat shareholders when they do not agree with the policy of the water company.

I accept that, if the hon. Lady or I were to buy a share in a water company and attend an annual general meeting to try to make an argument or gather people on our side, it would be extremely difficult—even with the combined megaphone diplomacy of the hon. Lady and me—to argue our point.

However, we are not discussing poor, humble little hon. Members with one share apiece. Large, Labour-controlled local authorities do not buy only the occasional share. They buy 300,000 shares in South West Water or 500,000 shares in North West Water, or are prepared to invest in a company such as R. J. Budge (Mining), which has committed what one would suppose to be the ultimate heresy for the Labour party, of buying up the privatised coal industry. If the hon. Lady wants to consider that, she should have a word with the hon. Member for Nottingham, South, who said:

"The party is skewered if we buy shares, having attacked privatisation, and then just sit back and accept the cash."

I had hoped that the debate would enable my constituents to make a choice. I had hoped that they would be able to listen to the hon. Member for Holborn and St. Pancras and suddenly understand that an alternative might exist. What alternative was mentioned? None at all. Did we hear from the hon. Gentleman whether, under a Labour Government, the water industry would contribute less to environmental protection? Not a word. Would water charges be less? Oh yes, you bet they would, Madam Deputy Speaker, but where was the money coming from? The hon. Gentleman did not know.

Judging by the number of people in the Gallery and the number of people in the Chamber, it might be supposed that the subject of the debate is not desperately exciting. It might be supposed that the debate will not yield facts that would be useful for a hypocrisy watch. It might be supposed that the debate is uninteresting compared with some of our recent debates about education matters.

But as you know, Madam Deputy Speaker, there are universal principles. One of them is that one must be tough on cant and tough on the causes of cant. The debate is worth listening to, if only for one reason. If the Government ever decided to introduce a new charter mark, they might do a great deal worse than to introduce a charter mark on hypocrisy; and in deciding who would be a worthy recipient of that award, they might take a look at the Opposition Benches.

The contributions to the debate bear out my suspicion that there is not much agreement across the Floor of the House. I hope that, in spite of that, there can be general agreement on the principle that access to an affordable, available and adequate source of water is one of the bases of a civilised society. I believe that the Conservative Government's privatisation of the water industry, and the way in which they have failed to regulate it adequately, have placed that in jeopardy. Water privatisation and the regulatory system have failed to provide an equitable and affordable deal for consumers in terms of costs, water provision and the environment.

I shall discuss three aspects; first, the rosy picture painted by Conservative Ministers at the time of water privatisation; secondly, the way in which the regulatory system has placed private interests before the interests of the consumer, creating a huge and unaffordable burden for domestic water users and for the environment; finally, the ways in which the Government can start to tackle the problems caused by water privatisation.

At the time of privatisation—as now—Conservative Ministers emphasised that they believed that privatisation was the best way to proceed. They argued that privatisation would give water companies a chance to raise capital in the market place, which the companies would invest in revitalising the water system and improving the environment while providing an affordable service. In reality, the monster that the Government created was what the National Consumer Council has described as

"a monopoly supplier of an essential service to a captive market."

I expressed that anxiety during the debate on privatisation, when I argued:

"I do not believe that privatisation is best for the water industry. Also, one must consider whether, in privatising, one is giving adequate power to consumers and meeting environmental concerns. In any privatisation, the first consideration should be the ordinary men and women of this country, whereas the Government's primary consideration has been maximising the return to the Treasury"— [Official Report, 8 December 1988; Vol. 143, c. 534.].

The Government cannot argue, therefore, that the problems could not be predicted. On the contrary, Liberal Democrat anxieties have proved well founded. The regulatory system has shown itself to be incapable of adequately protecting the consumer. In practice, water privatisation has meant that the consumer has suffered while the private water companies, their bosses and their shareholders have flourished.

Instead of raising capital for investment in the marketplace, the water companies have raised prices, forcing the consumer to pay a large proportion of the costs of investment in infrastructure and the environment. According to the National Consumer Council, domestic water bills have increased on average by two-thirds since privatisation, while profits accumulated by the water companies have increased by 20 per cent. a year from 1989–90 to 1992–93, and shareholders have made huge and increasing returns.

That is obviously inequitable, and it is one of the fundamental factors that the Secretary of State failed to address in his claim that privatisation gave the water companies access to what he described as private finance, but which the hon. Member for Teignbridge (Mr. Nicholls) more accurately described as consumers' pockets. The water companies have not primarily relied on raising capital by means of, for example, further share issues, which would have diluted the return to the owners and managers of those companies; they have primarily relied on raising money from the revenue stream—direct from their captive consumers. The Government cannot argue that those problems could not have been predicted.

The regulatory system has obviously failed in that regard. If the industry had been priced and regulated properly, those problems might have been kept under greater control. Indeed, water prices could and should have been kept significantly lower if the Government and the regulator had demanded that capital should be raised for investment, instead of customers being used as a source of direct revenue.

Why did Ministers not ensure that stronger action was taken on that? Presumably, they failed to do so in order to protect the returns of the large institutional shareholders who, when they bought into the privatisation, were given assurances on rates of return.

The result of that weak regulatory system has been an increasing and unaffordable burden on water consumers—a burden that Conservative Ministers have failed to cut even if the rate of increase has been reduced in the past couple of years from what it was previously under privatisation.

The burden of paying for water has fallen particularly heavily on low-income families, pensioners and those who live alone. Using Ofwat figures, the National Consumer Council calculated that a household on income support would spend 3.2 per cent. of its disposable income on water in 1994–95, compared with 2.5 per cent. in 1989–90. The burden has increased for those who are least able to afford it.

In my part of the south-west, the burden is even more apparent. People in Cornwall and Devon are paying the highest water bills in the country. The average bill is more than £300 and many are paying bills of £600 or more. A pensioner living alone in the south-west may spend more than 9 per cent. of his or her income on water bills. Bill Fraser, the managing director of South West Water, announced his retirement yesterday. I hope that, with a change in leadership, the company will also take a change in direction and step up the pressure on Government to tackle the problem rather than relying on consumer payments.

The hon. Gentleman is a fair man, so I hope that he will make it clear in his speech that there was no painless way of raising money to do what had to be done. Whatever we may think about the way in which it was done, it is misleading to suggest that there was a painless way of doing it.

I hope that the hon. Gentleman is not seriously trying to suggest that it was not the combined efforts of west country Members of Parliament and Ministers who were prepared to take our side that persuaded the regulator that charges should be pegged. That was no mean achievement, bearing in mind that many of the hon. Gentleman's supporters did not believe that charges could be pegged, let alone reduced.

The hon. Gentleman is correct in one respect: political pressure counts. The Government are aware of the pressure that they are under in the west country as a result of the increasing water bills and they expect to lose seats as a consequence. That political pressure—which is echoed in Conservative Members' concern that they will lose their seats at the same time as the pressure is intensified by Liberal Democrats who expect to gain those seats—clearly had an impact on the Minister.

Prior to the preparations for privatisation, the cost of cleaning up our coastline was spread across the country—however inadequately—through an equalisation scheme, which relates to the point that the hon. Member for Teignbridge raised. Privatisation imposed a huge extra burden on the people of the south-west who were required to pay for a greatly expanded clean-up without any proper system to distribute the costs—some 3 per cent. of the population were left to pay for cleaning up 33 per cent. of the nation's beaches. A national asset became a regional burden.

That cost was emphasised last year by the chair of the South West Water consumers committee, who said that if the cost of environmental improvements—they are future improvements which are not yet in the pipeline—continues to fall solely on South West Water consumers, it will add £150 per year to their average bill. However, if the cost of the same clean-up were spread nationally and if everyone paid a fair portion of the cost of the national clean-up programme, it would add just £15 to the average bill.

The hon. Gentleman advanced that argument in debate on the Environment Bill in Committee. I asked him then—and I do so again now—how his right hon. and hon. Friends who represent seats in other parts of the country, such as the erstwhile Treasury spokesman, the right hon. Member for Berwick-upon-Tweed (Mr. Beith), would feel about inviting their constituents to pay more in order to clean up the beaches in the hon. Gentleman's constituency?

The short answer is that it is party policy. It is not difficult to argue that we should have clean beaches and clean water if it adds £15 to people's bills across the nation. It is more difficult to say the same thing to consumers in the south-west while adding £150 to their water bills. I would find it easier to argue the case for a £15 increase in Yorkshire than the hon. Gentleman would to argue the case for a £150 increase in the south-west. [Interruption.] If that is what the hon. Member for Teignbridge believes, that message will be relayed to all of his constituents come the general election.

The Government cannot argue that there is no precedent for sharing the burdens. Indeed, the green dowry explicitly recognised the need to spread the cost of the clean-up. However, the levels were set far too low before the environment regulations were finally agreed, and they were never increased in response to the Government's decision to raise environmental standards. As I said earlier, the decision on environmental standards was taken by the British Government in advance of the European Community determination.

The burden that the decisions have placed on the consumer is highlighted by the number of water disconnections. Higher water charges increase the likelihood of disconnection for low income families. With that in mind, at the time of privatisation I sought a guarantee from the Minister that the 9,000 disconnections of the previous year would not be increased after privatisation. Unfortunately, the number of disconnections has increased. According to a study by the British Medical Association, there was a 48 per cent. increase in the number of domestic water disconnections between 1989 and 1994—little wonder, in view of the increasing bills that I have outlined.

More worrying still is the fact that the number of disconnections may rise if plans to encourage budget metering go ahead. Low-income families with cards or keys for meters who cannot afford to charge them up will effectively disconnect themselves. Those disconnections will not show up in the official figures, and therefore will remain unaddressed. There will certainly be no room for the existing customer protection measures. I cannot accept that there is a need for those disconnections, when it was shown that there was no need for them in Scotland.

I cannot forgive the fact that, in full knowledge of the burden on consumers that I have described, the Government have failed to reassess the charging system for water—despite having an opportunity to do so only six months ago. In an extraordinary decision last Easter, Ministers announced that charging for water would continue to be based on the outdated rates system. That system was abandoned for local government in the 1980s' as it was considered outmoded and unfair and based on valuations made in the 1970s. If it was considered unfair and outdated for use by councils in the 1980s, it cannot be acceptable for water charging by private companies in the 1990s. How can Ministers justify charges in the next century based on valuations from the 1970s?

In addition, the valuations bring with them a system which, despite the rising prices that I have mentioned, gives no relief to those on the lowest incomes or those who live alone. That means that in high charging areas such as the south-west there is no help for people who are literally unable to pay their water bills. I remind the House that pensioners in my region may spend 9 per cent. of their annual pension paying their water bills.

Despite that situation, Conservative Ministers have continued to disclaim any responsibility. In a letter to south-west Liberal Democrat Members of Parliament, the Secretary of State argued:

"responsibility for water charges rests with the Director General of Water Services".

Yet Mr. Byatt confirmed in the Western Morning News that price limits were based on environmental obligations laid down by the Government and that he had little room to manoeuvre.

In addition to announcing that water bills would continue to be based on the rates system for the time being, Ministers argue in favour of introducing compulsory water metering as a new system of charging. I shall turn briefly to that issue. Metering creates huge problems for families on low incomes, as revealed by a recent Save the Children report entitled, "Water tight. The impact of water metering on low income families". Families with children are most likely to use more water for basic needs, and therefore have higher water bills. According to the report, under metering, families face huge pressure to cut their water bills and they try to save money by

"sharing baths, taking fewer baths or showers, washing clothes less often and flushing the toilet less".

We have reached a worrying situation when a respondent to the Save the Children survey can say:

"You have to bath the kids, but some people are afraid to bath them as it costs too much".

Imagine what it will mean in the south-west, where families face higher than average bills under compulsory metering. Extra environmental burdens are to be imposed upon them and the water companies continue to take their ever-increasing cut. The risks posed to those families by cutting water use is not imagined or exaggerated. The British Medical Association has said that families who economise on water over a long period are at risk from a number of diseases.

Water metering has its advantages, but Ministers must not contemplate it without the Government's first addressing the needs of the poor and the huge extra cost of introducing a compulsory system for every household. The Government do not answer those questions; they simply hope to blame the privatised companies for problems which they cannot bring themselves even to acknowledge. Meanwhile, the Government continue with the existing out-of-date, unfair rating system.

Having set out my concerns about the charging system for water and the need for more effective regulation, let me consider for a moment last summer's drought and its environmental implications. The water companies emphasise the need for domestic water users to cut consumption. Although that is desirable, it is not the main issue. A report by the Parliamentary Office of Science and Technology points out that leakage from water company distribution pipes remains more than four times higher than that from customers' supply pipes. That backs up figures from the Royal Society for the Protection of Birds that 500,000 gallons of water are lost through leakage every minute of the day. The combination of rising demand and leakage is putting huge pressure on our rivers and wildlife. Before we discuss cutting the amount of water that families use, let us cut the amount that water companies waste.

Since the summer, water companies have committed themselves to an accelerated leakage control programme which will double the current rate of improvement, but as the current rate is only 1.2 per cent. per year it will be too little and too slow. The Secretary of State for the Environment has simply accepted the water companies' argument that that is the most efficient approach, leaving the water companies to take measures to minimise their total costs, including those of leakage, under the regulatory system. That may well be the best answer for shareholders, but it is unlikely to be the best answer for customers suffering water shortages or for an environment that is literally drying up.

I come now to the measures that the Liberal Democrats believe would solve the problems facing water consumers and the environment. We have repeatedly proposed long-term and transitional solutions to cut bills and help consumers.

It is widely understood that Environment Ministers accepted that the burden fell too hard on the south-west and asked the Treasury for more resources, but the Treasury turned them down. Frankly, the only reasonable solution is fairer national distribution of the burden of the clean-up. It is not viable for the present system to continue. It is certainly not viable to seek continuing increases in the context of the present charging system, which offers no help to the poor or those living alone.

Increased national investment would ensure that environmental improvements could be made without the burden falling unfairly on people in particular parts of the country. Our coastline is a national asset. It must be part of a national policy, not neglected as a regional problem.

Does my hon. Friend accept that if that were the case, there would also be an opportunity to draw down funds from the European Union as other countries do?

That is right. When the industry was privatised, I said that privatisation would block much of the potential European funding that is available to the public sector, but not to private companies.

It is significant that neither Conservative Members nor Labour Front Bench spokesmen are willing to take action for my region. They all want to protect their voters outside the south-west. Let me remind the House that if the burden of the next round of environmental clean-up is distributed unfairly, as at present, it will add £150 to the average bill in the south-west. Yet if it is distributed evenly across the country, it will add just £15. That change will have to be made. Conservative and Labour must recognise that people in the south-west cannot afford to pay their bills.

In addition, we could help poorer customers right away by replacing the old rateable value system as the basis for charging for water with the up-to-date council tax system. That more modern system would allow the Government to help low-income families and those living alone who are faced with unaffordable water bills. Disconnections from water supplies should be illegal, as they are in Scotland. There are many ways to get money out of people. We do not need to deny their children water.

Both those moves should be combined with a tougher regulatory system. At present there is no way of penalising water companies for failing to meet agreed standards of service. Such penalties would encourage companies to raise their standards. Water companies must be encouraged to raise more funds for investment through private sector capital finance rather than directly from customers. Finally, to address the problem of future droughts and leakages, the Government must bite the bullet and introduce mandatory leakage targets.

It is time that the Government put a fair deal for consumers above protecting the water bosses and their shareholders. If not, in the south-west in particular, the Government's time will soon be up.

I shall not follow the hon. Member for Truro (Mr. Taylor) to the south-west, where he expects my constituents to pay £15 a head to re-elect him. We have to look after our own beaches in Yorkshire.

I have received more correspondence on this subject than I have on the community charge and the Child Support Agency put together. All summer, correspondence about Yorkshire Water rolled into my office. The Calder Valley, Halifax, Bradford and the old woollen areas were always self-sufficient in water. The waterways, the reservoirs and people's houses were supplied by the system that was established by the woollen manufacturers. Consequently, we have no national grid and no way of fetching water into my constituency other than its falling from heaven. Yorkshire Water's predecessors must have known that for generations; yet they did nothing about it.

I am convinced that, had there still been a nationalised industry or a water board industry, we would have been in the same position as 15 or 20 years ago, when we relied on standpipes. It did not come to that; none the less, Yorkshire Water was slow to spot the difficulties and abysmally slow with its public relations. It did not even attempt to bring water to west Yorkshire by other methods. At one time there was a call for Yorkshire Water to use the Army. It could also have asked the oil companies and other corporations that are accustomed to moving liquids for assistance. Ultimately, it had to resort to tankering and I am grateful for that.

The response to people who objected to the tankers roaring past their homes was as insensitive as it was to my constituents, to industry, and to various parts of the community throughout the crisis. Dentists, for instance, faced special difficulties. Their premises are often in residential streets where the water was cut off. They found the prospect of rota cuts on alternate days terrifying, not simply because there would not be water on alternate days, but because on those days when water could be delivered, it would have to be boiled. That possibility was averted, but not without having the effect of terrifying firms which were encouraged, not very subtly, to manufacture elsewhere, or old people, who were worried.

Yorkshire Water put up the backs of the people who wanted to help. My constituents are renowned for their common sense. They sent me here, so they must have common sense. They knew that it had not rained all summer and they would have helped Yorkshire Water. Eventually, they must have been tempted to leave the taps running on purpose, although they did not do so because they had too much common sense. Yorkshire Water threw away every chance of good public relations time after time.

The only time the chairman of Yorkshire Water wrote directly and unprompted to me was when I asked a question in the House and it was reported in the Financial Times the following day. That put a rocket under the chairman, but letters from my constituents seemed not to stir Yorkshire Water. The chairman of Yorkshire Water and I had clashed before. In years gone by, he had an untidy site at a place that my constituents know as Lowfields, which is now an industrial estate. I had to use the procedures of the House to make him relinquish Lowfields and bring it back into proper use.

Yorkshire people know that they can get nothing for nothing. They want Yorkshire Water to make a profit, but they are disgusted that the company should retreat first into the unregulated areas of its business before putting right all the damage and neglect that had occurred before privatisation.

The Government could not at first believe that Yorkshire Water could be so slow or so insensitive and pedantic towards its customers. We must help Yorkshire Water to regain the confidence of consumers, including my constituents and business generally. If we are to have the investment that has been urged, Yorkshire Water must regain the confidence of the City. As things stand, I do not believe that anyone in the City would say, "It is a good bet to put your money on Yorkshire Water." Unless it attracts investors, my constituents will be badly served.

The problem will be back with us next year. It is not Yorkshire Water's fault, of course, that it has not rained. Similarly, it is not the Government's fault that the reservoirs are not filling at the usual rate. But that means that the problem will return next year. Accordingly, the Government must maintain pressure on Yorkshire Water. They must keep pushing. On behalf of our constituents, we must nag the Government as well as Yorkshire Water and its directors. We must ensure that the company recognises that the mistakes of last year are not repeated this year.

Last year, when it became obvious to everyone in West Yorkshire, apart from those holed up at Yorkshire Water's headquarters and perhaps Ministers, that we were faced with almost certain cut-offs if appropriate action was not taken, I wrote to the Prime Minister. I did so in August. I wrote also to the Secretaries of State for the Environment and for Health. I asked for intervention and help.

The Prime Minister took five weeks to reply. When the Secretary of State for the Environment replied, he tried to defend the indefensible. The Secretary of State for Health adopted a similar approach. It was left to the people—I concede what the hon. Member for Calder Valley (Sir D. Thompson) said—and to local Members, local authorities and interested bodies to do all the shouting and pressurising. The Government abandoned us.

The water industry should never have been privatised. We know that water is vital to life. The privatisation of the industry has been a spectacular failure by any measure, especially in Yorkshire.

We hear much about hypocrisy these days. The hon. Member for Teignbridge (Mr. Nicholls) has been chided by some of my hon. Friends for being two-faced, but I think that he has 10 faces. He was one of the many Tory Members who wandered enthusiastically into the Government Lobby to support the Government throughout consideration of the privatisation Bill. At that stage, Labour Members were warning of disasters. If we are talking about hypocrisy and double standards, the hon. Gentleman provides a classic example.

On 9 January, Yorkshire Water announced that tankering would cease. No one was more pleased than hundreds of my constituents who lives had been seriously disrupted by the 24-hour operation. Janet Parsons, the secretary of the pensioners' association in Halifax, has been a doughty campaigner to keep the taps flowing. Janet told me that when she saw the tankers driving through narrow roads, up hills and in difficult areas in Halifax with "Water for Halifax" written on them, she thought that that was not life in a first-world country; she told me that it was like being in the third world, somewhere in the middle of the Sahara or in some other desert-like country.

It could be argued, however, that the tankering should not have been stopped. It was costing the water company £3 million a week, but I am still not sure that the operation should have ended. We were glad, of course, when we were told that 24-hour cut-offs would be withdrawn for the time being. We were pleased also when Yorkshire Water announced that it would spend another £100 million on new pipes and pumps. It would be a mistake, however, to assume that the crisis is over. Nothing could be further from the truth.

The Halifax Courier, a newspaper which is read by the hon. Member for Calder Valley and by me, made it clear last night through its "Water Watch" that reservoir stocks in Calderdale stand at only a third of capacity. They should be about 80 per cent., but they are only 27.4 per cent. We are halfway through the winter and our reservoirs are only a third full. It does not take a genius to work out that we shall be in trouble unless there is massive rainfall or unless Yorkshire Water commits itself to doing something to take account of the long-term problem.

The Minister should know that the people of Halifax and the surrounding areas, after the way in which they have been treated, despise Yorkshire Water. If he wants to do anything to help to improve the Government's poor electoral chances, he should stop digging when in a hole. The people all blame Yorkshire Water's mismanagement, but they know that at the root of the problem is the disastrous privatisation of a precious utility. There is no doubt that, if further cut-offs take place, there will be a disaster. It seems that even the Minister accepts that now. It took some time for the message to sink in.

At the beginning of the crisis, Dr. Chris Worth, the public health director for West Yorkshire health authority, spelt out the consequences. He drew the attention of the Dewsbury inquiry to them, when he said that

"the health of thousands of Calderdale and Kirklees elderly, frail and mentally ill people would be threatened, and I can foresee a situation regrettably where lives may be lost."

The Minister should try to get that message through to the Prime Minister. The people of West Yorkshire demand that the Government concentrate on the health and well-being of those in the area. They should concentrate also on their jobs.

The Government must abandon the stupid diversionary tactics in which they have been engaged over the past few weeks. The silly stunt of the chairman of the Conservative party will not bring a drop of water through taps in Halifax or anywhere else. The Deputy Prime Minister's manic outbursts will not move Yorkshire Water into action. Only the Government can ensure that action is taken, and that is the Government's responsibility.

My hon. Friend the Member for Sheffield, Hillsborough (Mrs. Jackson) should be congratulated on playing a superb role in monitoring the privatised water companies. She has drawn attention to their pathetic and awful actions. She had the support of hundreds of Members when she called on the Secretary of State, through an early-day motion, to use his emergency powers to take over the running of Yorkshire Water. I challenge the right hon. Gentleman to do so. If he cannot or if he will not, let him give the House a copper-bottomed guarantee that no authority or household will run short of water because of Yorkshire Water's mismanagement.

It is not only Labour Members who are criticising Yorkshire Water. Local Tory Members, who voted for privatisation, are now taking it to task. In addition, local chambers of commerce have been active, both in Calderdale and in Kirklees. They have warned that, even if there are limited cut-offs, 3,000 jobs could be put at risk. They have warned that businesses would close. Indeed, much damage has already been done by the antics and bizarre public relations of Yorkshire Water.

What business man or woman in his or her right mind would want to invest in an area where the water supply cannot be guaranteed? I cannot think of a greater disincentive. The Government have no idea—if they have, they do not care—of the long-term consequences. They do not appreciate the damage that a privatised company has done to business confidence in west Yorkshire. They have put ideology and dogma before people.

The Government's policy has not been supported by the majority of people. There was an excellent article in The Guardian this week on the privatised utilities, and on Yorkshire Water in particular. It is worth quoting Brian Rhodes, a Keighley business man, who said that

"when water was privatised they"—

his company—

"installed a bore hole to supply their own water needs".

He explained that

"we knew a private-water monopoly would create havoc. But still they sent us that silly letter telling us to save water"

and to relocate. "Silly sods", he concludes. Although I am quoting, I must agree with that. He went on:

"We've just got £19m out of the Government to promote manufacturing industry in this area—but Yorkshire Water's done more in one summer to destroy any chance of bringing jobs here".

We all know about the scandal of leakages. I shall not repeat what my hon. Friend the Member for Hillsborough said, but it is worth noting that, out of the massive profits that Yorkshire Water made, just £11 million was set aside—

Will my hon. Friend give way on that point?

Certainly.

I am grateful to my hon. Friend. Before she leaves the question of leakages, does she agree that a 10 per cent. reduction in the leakage of 100 million gallons a day would have prevented the problems that were experienced in Yorkshire this summer?

Absolutely. My hon. Friend is right, but because of time I shall not repeat the points that she made earlier. That is a good point. The truth is that Yorkshire Water is at the top of the national league for wasting water supplies—103 million gallons a day are lost through leaks. That is gross incompetence and mismanagement.

Yorkshire Water sacked half its work force—the people who understand about managing the industry. It is not accountable to anybody. It still has a leakage detection team, but only just. Before the crisis, Yorkshire Water had proposed bringing in a scheme called Operation 2000, which was to be implemented in October, which would have abolished the leakage detection teams. Yorkshire Water was going to sack the people who do all the valuable work up on the moors. Those people find out where the leaks are occurring and then gangs of locally employed people go along to mend them. Now we have wastage on the moors. Reservoirs are silted up from 30 ft to 100 ft. Often, the reservoir keepers are now responsible not just for one reservoir but for 10. Two years ago, Yorkshire Water also considered replacing all its skilled workers with Securicor employees. That is the level of neglect that we have had from Yorkshire Water. Never again should it be allowed to bring the health and well-being of people in my constituency and in West Yorkshire to the point that it did. Sir Gordon Jones is going, but others should follow him.

As for Labour councils and the RMT buying shares, I wish that they could buy the lot and then we would have some public accountability. I do not think that the Government really appreciate the anger in West Yorkshire. If we have cut-offs, I think that there would be a public order problem, because people blame Yorkshire Water and detest it for its actions. The fact that it is funding and setting up its own inquiry will not do; we want an independent public inquiry, as my hon. Friend said.

Yorkshire Water said that it will invest another £100 million in pipes. We should look carefully at what that investment means. It means going to the already depleted rivers and taking even more water out of them. That will lead to a disaster in the environment. There should be a massive investment programme now, perhaps to get water from Kielder water. It is possible to go across deserts, so I do not want any nonsense about having to go up hills and down dales; it should not be beyond comprehension to do that now.

What Yorkshire Water says that it will invest is too little too late. We do not trust it. We do not trust the Government with this precious resource which we all need. We want a general election, and then the people of West Yorkshire can show the Government exactly what they think about them and their privatisation.

I am grateful for the fact that the Opposition included the privatised water industries as a subject for debate. I must declare that I was, until March 1995, a non-executive director of Yorkshire Water. Since then, I have been a consultant on corporate and marketing affairs. I have lodged details in the Register of Members' Interests. I must also take great care that I do not operate in the debate as an advocate for Yorkshire Water, as that is clearly against the spirit of the debate. Having heard the generality of comments, including those of the hon. Member for Halifax (Mrs. Mahon), I suspect that even my courage will fail in the task of advocacy, because clearly Yorkshire Water is the spectre at this feast that the Opposition are quite enjoying.

If ever there were an annus horribilis for Yorkshire Water, it was 1995. When I left in March, the reservoirs were full, it was a bright spring and there was not a cloud in the sky—but the falling percentage of rainfall led to an exceptional drought. It is not for me to go through the history of the matter, as that has been well established. I understand and most deeply regret the way in which Yorkshire Water managed to achieve, through a range of public relations propositions, letters to industry or other public observations, a series of gaffes which thoroughly damaged its credibility with its customers and, indeed, with others.

Will the hon. Gentleman give way?

Forgive me, but, because of the time, I must press on.

Added to that was the increasing public backlash against private utilities as a whole—which the Opposition have so well developed—aided and abetted by the media campaign about fat cats. I note that the media are somewhat shy about their own salary structures. No doubt they are seeking to protect their own sources, as is their wont. Yorkshire Water was vilified or satirised in the press—despised by some of its public and ostracised by most. That is not a welcome position for a public limited company to be in only six years after privatisation.

Nevertheless, as my hon. Friend the Member for Calder Valley (Sir D. Thompson) said, and as the hon. Member for Halifax just recognised, the fact is that, after all the trauma, not a house, hospital, retirement home, school, small firm or large firm was disconnected from supply or suffered a serious shortage of water. One of the reasons was that the area that was affected was extremely small, although the Yorkshire region is vast and the company has responsibility for distribution in the whole region. The area is crucial but very small in relation to total Yorkshire demand and provision.

As my hon. Friend made clear, it was geographically and historically separated from the rest of the arrangements. Yorkshire has had grids for many years. The main grid, which runs from rivers in the north and east of Yorkshire, particularly the River Derwent, and across to Sheffield, was put in subsequently. Sheffield takes water from Ladybower reservoir. With a massive effort, the staff ensured, by working night and day, that everything was finally put in place. It moved resources by pipe transfer or road tanker and managed to maintain supply.

The trauma was substantial for the company, for the people who were affected and, indeed, for the people in Yorkshire as a whole. It is very important that lessons are learned and not just in Yorkshire itself. I am happy to be able to reassure the hon. Lady that the emergency investment that is now taking place, where some £100 million is being spent to connect 10 pumping stations so that the grid can deliver 300,000 cu m of water a day into Leeds, Bradford, Calderdale and Kirklees, will make a huge difference to the problem. That is a short-term arrangement. Arrangements for the longer term depends on a review of resources and on longer-term decisions which have yet to be made.

I now come to the lessons for the industry as a whole, as that is equally important. If the water industry is no longer to plan for events that are expected to occur once in 100 years, and ignores events that are expected to occur only once in 200 or 250 years, as occurred in relation to the extreme water shortage in the portion of the Pennine catchment to which the hon. Member for Halifax and my hon. Friend the Member for Calder Valley referred, there will be a very major shift in what water companies must do to maintain supply.

My right hon. Friend the Secretary of State—who, unfortunately, is not present now—has said that no eventuality, however rare, should result in a shortage of public water supply, and certain other hon. Members have said the same. The structure of water resource management must therefore shift markedly. The present industry—as defined in relation to what may occur once in 100 years—is not structured to meet such change.

There must be a public debate about whether we should create more water resources. For instance, should we construct further reservoirs? That might involve problems in a beautiful region such as Yorkshire. Should there be more reservoirs in the dales, or in the Lake district? Should there be more reservoirs on Dartmoor? None of those propositions seems feasible, but they must be considered.

Alternatively, should we take more powers to abstract from rivers or to move volumes of water through the river system? The hon. Member for Sheffield, Hillsborough (Mrs. Jackson) was anxious about abstraction, but we currently waste huge amounts of water through our river system. If we are to ensure that the public have priority in terms of supply, we ought to be able to act at certain times of the year. We should never go beyond the permitted amount of abstraction, and never infringe low levels of supply, but there is a case for saying that, with Yorkshire's massive rivers—largely located in the east of the region—abstraction could serve as a useful way of saving water.

Another option is to require less control on the maintaining of river flows by releasing reservoir waters. Yorkshire Water already has to take such action in drought conditions. Again—this idea is no doubt dear to the hearts of Opposition Members—we could try to reduce leakage rates. I feel that that should definitely be tried during what ought to be an attempt to recover economic costs. In fact, the reason why leakage has never posed a serious threat to the viability of water supply is the astronomical cost of recovery, which has been estimated at approximately £400 million for a 1 per cent. leakage reduction. If such a figure must be contemplated, there will be major repercussions in the industry.

Leakages are prevalent in areas containing many miles of piping. Yorkshire contains more than 30,000 km, going in and out of huge Pennine ranges, distributed up hill and down dale; heavy pumping is used in an attempt to enable the water to reach its destination.

Finally, perhaps we should accept that 1995 is symptomatic of a pattern of climate change that will permanently alter the rainfall conditions that we may expect in the future. It may be a little early to take that view, but it must be taken into account.

All those are big issues, affecting not just the structure of the industry but the terms under which it was privatised, and the terms under which the regulator ensures that certain standards of supply, abstraction and discharge are imposed on the 10 water companies. Water supply currently costs an average of 29p or 30p a day in my area, perhaps a little more; but, quite apart from that cost, we may have to look again at the general question of how the supply is to be costed and paid for. That will lead to numerous questions. Essential fuels such as gas and electricity carry an understandably high price when delivered to the consumer, as opposed to the cost of water, which can be measured in pence. The high price of energy, and the fact that fuels carry a safety hazard, make it essential for closed systems to supply households by means of meters.

Water metering, however, is a vexed issue among the public, although it is the regulator's preferred option. I believe that Yorkshire Water conducted a substantial public consultation exercise, as a result of which it accepted the public's view that imposed metering was not acceptable but that metering should remain an alternative. It must be accepted that the industry should have proper regard for consumer wishes, and the lessons of 1995 clearly suggest that the idea of wholesale metering should be abandoned. I do not think that it is acceptable to consumers.

Unlike gas and electricity, the water industry is responsible for the maintenance of a huge slice of our natural environment—hence the heavy legislative load on discharges from sewage works, and the gradual improvement of rivers under the obligations laid down by the National Rivers Authority as well as the EU. I am delighted to learn that, during the past week, a salmon was found way up the River Don, having apparently succeeded not only in travelling so far upstream but in spawning. There have been genuine improvements in our aquatic environment.

Supporting access to reservoirs and catchment areas imposes an entirely different responsibility, which does not relate to the commercial supply of potable water. Water companies must recognise such obligations, which play an important part in establishing relationships with the public in the regions.

All those issues are raised by the spectre of continuing water shortage, and of permanent damage to the cycle of replenishment through autumn, winter and spring. I do not feel that that is likely to happen as a result of events in 1995. In Yorkshire, although the eastern slopes of the Pennines were severely affected, many other parts of the region suffered less; even the aquifers that are so important to Hull and Humberside were able to continue unimpaired.

Nevertheless, I suggest to Ministers that the problems of 1995 should be assessed, given the possibility that they will occur elsewhere, even in the near future. It would surely be wise to conduct the fullest possible analysis of the recent past. There should also be better forecasts of whether the current conditions represent a trend, or whether—in economic parlance—we are merely experiencing a blip on the meteorological graphs. Given the availability of such evidence, industry, regulators and Government should reach a consensus on the extent to which the lessons learned in 1995 should fashion their policies for the future.

May I try to correct some misapprehensions that were created earlier? The hon. Member for Teignbridge (Mr. Nicholls) spoke of Labour authorities' investments in water authorities. As I tried to make clear to him, there was no choice. A local authority with an investment panel must take the advice of pension fund advisers; if it does not, and makes a mistake, it can be surcharged.

The water industry was never nationalised; it was regionalised. That was one of the problems. I was a member of a water authority in my region when Kielder was built—when, incidentally, it was under regional control rather than privatised. One of the country's main problems is the fact that we do not have a proper water system. We have grids for electricity and gas, but no grid for water. It makes no difference whether the industry is nationalised or privatised: both electricity and gas have been privatised, but they have grids. We should aim to create such a system for water in the future. Yorkshire would not have experienced the problems that it experienced this year if the water from Kielder had been piped through rather than carried by tankers. That could easily have been done.

It was suggested in 1973 that a lake should be built from Kielder to Yorkshire, because Yorkshire would need the water by the early 1990s. The lake was never built, however.

A pipeline already takes water from Kielder down to the Tees; it is halfway there.

I want to concentrate on the effect of privatisation on my constituency, and on events that took place early in January, when 50,000 of my constituents had their water cut off for four days. Briefly, the problem arose because, apparently—the water authority there has just discovered this—the reservoir that feeds my constituency is the highest in the region. During a series of bursts and leaks, in the Tyneside area in particular, all the water drained out of the system and the reservoir feeding my constituency was left, one may say, high and dry. We had no water for four days. The water authority story's was that that was necessary because it had to maintain the water supply to Tyneside.

We had two water authorities in my constituency then: Northumbrian Water and North East Water, which is owned by the French company Lyonnaise des Eaux. Northumbrian Water was a free-standing company at that time. The pipeline feeding my constituency was owned by North East Water but operated jointly by Northumbrian Water. The water was maintained on Tyneside—I have no criticism of that—at the expense of my constituency and, I think, because North East Water was the dominant partner in the arrangement. It maintained the supply to Tyneside at the expense of my constituents.

The real problem is the weakness in the system, which has now been identified but which, apparently, could not be identified before. If one has to live for a prolonged period without water, or at least with a limited supply provided by tankers at street corners, one quickly begins to appreciate the value of this basic need which is often taken for granted. I personally must declare an interest as my home was one of those affected.

From the water companies' own information, it was apparent that a potentially serious situation was developing between Christmas and new year's day. The companies claimed that the deep frost, followed by a thaw, and their staff being on holiday, contributed to the position. It seems that they were unaware that it turns colder in the winter and that the risk of water mains bursting increases during these months.

Even when those companies were aware of the emergency, little information was given to consumers. Householders, commercial premises and some industrial units learned of the loss of their supply when they tried to turn on their taps. Hot water and central heating systems, and commercial and industrial operators were seriously affected.

Total confusion reigned. People were not made aware of the emergency or informed adequately of the emergency provisions, limited though they were.

Although Northumbrian Water admitted that it had mobile loudspeaker equipment, it was not used. After people had been obtaining from tankers and bowsers for some days, they were advised by postcard to boil the water. The whole exercise was an example of incompetence or, possibly, a lack of interest in consumer welfare.

After the emergency and pressure from me and from other community representatives, the companies decided to offer £40 to each householder, £80,000 to Wansbeck district council and a belated £13,000 to Castle Morpeth borough council, both of which are in my constituency. Commercial premises, however, such as shops, pubs and the numerous social clubs in my constituency were advised by the water companies to claim from the insurers. Some insurers are refusing to pay out, claiming that the loss of the water supply was a deliberate act by the water companies—an argument with which I agree. Business was lost because of the actions of the water companies.

Coincidentally, as the massive problems were arising, Northumbrian Water, in this free market system, was taken over by Lyonnaise des Eaux, making all the water and sewerage industry in north-east England a monopoly. Last week, it announced the inevitable reorganisation of management, with probable job losses associated with the takeover on the agenda.

The most significant happening was the decision of Northumbrian Water's chief executive, David Cranston, to quit. He leaves after receiving a salary of £189,000 a year for 1994–95—I understand that that is to be paid for the next two years as well. That has increased by 232 per cent. since privatisation. He realised between £800,000 and £1.2 million from shares and share options after the sale of Northumbrian Water.

Last October, Mr. Cranston sought and obtained a meeting with a northern group of Labour Members to plead for our support against the takeover. That was a nice pay-back for his efforts in giving financial advice to the Government on how to process the privatisation of the industry. His reward is greater than the total sum paid to my constituents and the local authorities put together.

When the industry was privatised, Labour Members often warned that the consumer would suffer. My constituents paid a high price. Capital investment by Northumbrian Water fell from £110 million in 1990–91 to £77 million in 1994–95—a 30 per cent. reduction. Sustained investment could have been used to correct the fundamental fault in the supply system to my constituency. That is a prime example of profit before people.

This has been an interesting and lively debate. It could almost have been completely about Yorkshire Water had it not been for the fact that my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) made sure that the inequities in other parts of the privatised water industry were also drawn to the House's attention.

It is remarkable that, contrary to custom and practice, the Cabinet member who is responsible for the matter raised in the Opposition motion—the Secretary of State for Scotland—is away from the House in some other part of the country. There was a day when that convention and courtesy mattered.

He is in Scotland.

The Secretary of State may be in Scotland—so could I be—but some of us believe that the House comes first and that, if there is a debate on a subject that is in his province, he should be here, and he knows that. In Stirling yesterday, at the meeting of the Scottish Grand Committee, a great song and dance was made about the fact that I did not speak from the Dispatch Box, but I was there—as I have been at all that Committee's meetings. The Secretary of State chooses not to be here tonight, and for two and a half hours or more no one from the Scottish National party was here either.

We have now been left in charge. The Minister dubbed by the Scottish Daily Record the "big drip" will—appropriately—answer on behalf of Her Majesty's Government on the subject of the water industry. He has been landed with a real problem. The animated little Secretary of State for the Environment is not sitting beside him, and no wonder because he left a sizeable grenade in the Minister's pocket.

During his leaping around at the Dispatch Box, the Secretary of State told the House à propos the water industry that, in England and Wales, the investment would not be forthcoming in the public sector, but the hapless Scottish Office Minister with responsibility for the water industry will have to come to the Dispatch Box and tell us that Scottish water will remain in the public sector. He, presumably, is going to find all the investment that the Secretary of State for the Environment said would be absent if a different model had been chosen for England.

Many of my hon. Friends have made much of Yorkshire Water's performance during the summer, and I am not surprised. A level of anger built up in that part of the world about the lamentable performance of that privatised water company. My hon. Friends the Members for Halifax (Mrs. Mahon) and for Sheffield, Hillsborough (Mrs. Jackson) have put their finger on a saga of incompetence, failure and waste which will go down in the history of the water industry as unsurpassed.

The Minister, if he dares move across the border and into English territory, will have a job putting up a defence, although the hon. Member for Pudsey (Sir G. Shaw), who told us that he was not going to act as an advocate for Yorkshire Water, managed to read out what was preciously close to a press release for that beleaguered company.

The debate has highlighted what has happened in England and Wales since privatisation. It is a salutary warning for those of us in Scotland who see the prospect of privatisation looming on the horizon. It is a tale of waste, fat cats, inefficiency, bloated profits, personal aggrandisement and of course, at times, pure farce—all occurring simultaneously at a time of declining investment in a vital industry.

The Government's intention has always been to privatise the Scottish water industry. That ambition lives on in the hearts of many people, including the new Secretary of State for Scotland. The Government were prevented from privatising it only by the sheer force of public opinion in Scotland. A Labour-led campaign and a violent upsurge in public opinion stopped the Government in their tracks and prevented them from doing in Scotland what they have already done in England.

In eight weeks' time, Scotland's water and sewerage services will leave locally elected control for the first time in 150 years and be handed over to three super-quangos staffed by handpicked people who are ready to do the Government's bidding and who are accountable only in the loosest possible sense to the public.

In 15 months' time, however, there will be a general election. I have no doubt, and the people of Scotland have no doubt, that if the Tories were somehow to get back into power, their secret agenda to privatise the Scottish water industry would remain.

The Government's private agenda is already under way. Privatisation is happening, drip by drip, in the unique form of the private financing package that the Government have carefully designed to get the private sector into the water industry with minimum risk and maximum profit—it is feather-bedding of the private sector in a crucial sphere.

Before the hon. Gentleman makes any more thoroughly irresponsible statements about water privatisation, I have to ask whether his conscience does not prick him a little because his campaign began on a totally incorrect basis. The decision to go to a public water authority was made long before he started his campaign against privatisation.

I should like to pay tribute to the right hon. Gentleman, who has come into the Chamber at the end of the debate specifically to hear my speech. I believe that he does not want Scotland's water to be in the private sector. It was he who agreed, under pressure, that a ban on disconnections should be included in the Local Government etc. (Scotland) Act 1994, for which I pay him due tribute. I do not think that he has any intention of seeing Scotland's water industry in the private sector because he knows the dangers that would follow.

The right hon. Member for Dumfries is retiring at the next election, and there will not be a Conservative Member of Parliament for Dumfries after that. He cannot trust Ministers any more than we can. If he trusts the Secretary of State for Scotland with Scotland's water, it will probably be the first time in his life that he has trusted him. The right hon. Gentleman should take his plaudits and go away into happy retirement, but he should certainly not leave the NHS and the water industry in the hands of people who might conceivably still be here after the next election.

The Government have designed this type of private financing specifically to ensure that their friends do well out of it. However, it is hard to think of a better way for the Government to reduce their public standing than by threatening the water industry. It is small wonder that they now have an 11 per cent. approval rating in the opinion polls, which I believe is 8 per cent. less than the Canadian Tories received in the general election when they were reduced to two seats in the federal Parliament.

The emperors in the Scottish Office arrogantly dismiss public opinion with a flick of their wrists, ignoring and rejecting the fine, long history of locally elected water authorities in Scotland, which have been efficient, reliable, safe and cheap. The Government reject the logic of keeping a direct line of accountability to the people who use and depend on public water supplies. They reject even the revolutionary public health record that, a century ago, was the justification for municipal control of water and sewerage services. They reject it all in the name of a purely ideological obsession with centralisation and the hoarding of control.

The Government's secret agenda is still to put Scotland's water industry into the same fat cat system that the Government have inflicted on water consumers in England and Wales. However, the emperors of the Scottish Office have been found to have no clothes. Isolated, remote and doomed, they sit wasting their last few days in office.

The contention that people have in relation to what the Government are doing with the Scottish water industry has not been invented by the Opposition. In March 1994, Strathclyde regional council, having taken all the legal advice that was available, put the question to the people of Strathclyde—half the population of Scotland—in a referendum. The council took its courage in its hands and issued ballot papers throughout the region. The turnout for the referendum was 71.5 per cent., which exceeded everyone's expectations—it was certainly more than I had warned the council that it might expect—and 97 per cent. of those who voted said no to the quangoisation of the water industry. Those are the facts; that is the truth and the evidence.

Will the hon. Gentleman confirm that the publicity put out by the Labour party in Strathclyde did not merely say no to water quangos, but said no to privatisation? Is not that a total distortion of the facts as that is not what we have done in Scotland?

It was open to the Tory party to put out its own propaganda. The ballot paper, which was read and understood by the people who answered, asked whether people agreed with the Government's proposal for the future of water and sewerage services in Scotland. The ballot paper was legally drawn up, and people understood it. Even in the Tory heartland—in Eastwood, in the west of Scotland—95 per cent. of the people voted no in the referendum. I suppose the Minister is saying that all those people read the leaflet and were confused, taken in and mystified by it—that that can be the only explanation for 95 per cent. of the people voting no. The people spoke in that referendum, but the Government chose to ignore the popular view.

I see that the unacceptable face of the Scottish Office, the Under-Secretary of State for Scotland, the hon. Member for Aberdeen, South (Mr. Robertson) has joined us in the Chamber. I can assure you, Mr. Deputy Speaker, that the noise level will rise, but the quality of the contributions to the debate will decline markedly.

Why should we suspect that the Government want to privatise the water industry? We have only to look to what the Prime Minister said in March 1993. He said:

"Privatisation means a better, more efficient service for the consumer and no more subsidies from the taxpayer. I have no reason to doubt that water privatisation in Scotland will be effective and efficient, as elsewhere."—[Official Report, 9 March 1993; Vol. 220, c. 783.]

Those are the words of the Prime Minister, blundering into something that he did not understand, but giving away the underlying case.

In the consultative document on water, 15 lines were devoted to describing the scheme which the Government ultimately chose, but 216 lines were devoted to describing the privatisation option. Anyone who believes that the new Secretary of State for Scotland, who was on television only a few weeks ago saying that Thatcherism has a lot to offer Scotland, is going to stand back and say, like the right hon. Member for Dumfries, "I won't touch the water industry. It can remain in public hands", must be living in a dream world.

The Government have chosen a completely new system to finance new investment in Scotland's water industry. The Chemical bank, in an independent report, said that the system did not pass

"any reasonable value for money test",

and that the "build, own and operate" schemes will privatise Scotland's water industry "drip by drip". The schemes are little more than sweetheart deals to get the private sector into the water industry with minimum risk and maximum profit.

The Chemical bank report went on to say:

"The guidelines are misconceived. Their use imposes an excessive and unnecessary burden on ratepayers. There are other ways in which the private sector can finance public projects at a cost comparable with the use of the public funds."

Labour would not hesitate to use the private sector in schemes to help with new investment in the water industry, but we will not choose schemes that mean privatisation by stealth or privatisation by the back door. Scotland's water industry has an impeccable record in public hands. Investment in the water industry is possible in the public sector, and it can be done well. There is no need, no rationale, no justification for going ahead with the quangoisation and, ultimately, privatisation of water in Scotland. At the next election—the sooner it comes, the better—the people of Scotland will teach the Government a lesson for what they have done so far.

This has been an exceedingly interesting debate. I have learnt a lot about Labour policy on water. I have learnt a lot that confirms that the Labour party does not understand the slightest thing about running business. [Interruption.]

Opening the debate, the hon. Member for Holborn and St. Pancras (Mr. Dobson) gave many figures relating to the privatised water companies. He talked about everything and nothing. The one thing that he did not really talk about, however, was investment. We all know that the water industry requires significant investment. My right hon. Friend the Secretary of State for the Environment described very clearly the remarkable success that has been achieved south of the border through the privatisation of water companies.

Hon. Members on both sides of the House have referred to Yorkshire Water. I have also learnt that, although Yorkshire Water is clearly not one of the stars of the privatisation process, many of its problems, as I understand them, have been brought about by the extremely severe drought in the summer. It would be unreasonable of any hon. Member not to accept that there was exceedingly severe weather and that lessons must be learnt from the experience. I know that my right hon. and hon. Friends have taken steps to obtain independent reports to confirm that the actions of Yorkshire Water are indeed all there—[Interruption.]—and that it is taking sensible measures to ensure that the problems do not arise again.

Many hon. Members have referred to leaks. The Government obviously take the problem of water leaks extremely seriously and we have made it perfectly clear that losses from pipes in some water company areas are too high. We expect water companies to set and fulfil demanding targets for reducing leaks. Indeed, water service companies have given a commitment to achieve within 10 years the lowest levels that best international practice suggests. Some companies have already announced their plans. Others will do so in the next few months. The Director General of Water Services will consider whether the targets are sufficiently rigorous. If they are not, legislation is already in place to set mandatory levels where necessary.

Many hon. Members, especially Labour Members, were unreasonable about the conditions that Yorkshire Water had—and still has—to face, and their observations were in contrast to the very thoughtful and responsible comments of my hon. Friend the Member for Pudsey (Sir G. Shaw).

The hon. Member for Truro (Mr. Taylor) made points about European support for privatised companies. I can confirm that, as I understand it, provided the relevant criteria are met, privatised and publicly owned water companies have exactly the same access to European support. He also referred to methods of charging. We think that charging by volume is important to ensure sustainable use of water in the long term. The Government—certainly south of the border—encourage companies and customers to switch to meters, but are not forcing them to do so.

Since I was able to obtain a press release issued by the hon. Member for Hamilton (Mr. Robertson) before he stood up, his speech was nothing short of what I expected—[Interruption.]

Order. I am having great difficulty hearing what the Minister is saying. He has the right to a fair hearing, as was given to the Opposition spokesman.

I was referring to the press release on the speech of the hon. Member for Hamilton which I managed to obtain. In it, he persisted with scare stories and distortion, which he is more than capable of, as he has shown throughout the discussion of the future of water in Scotland. Unfortunately, like his hon. Friend the Member for—[Interruption.] I cannot remember his constituency, which goes to show I have been attending too many Scottish Grand Committees and have become better on Scottish constituencies than those south of the border.

That leads me comfortably to the fact that my right hon. Friend the Secretary of State for Scotland is in Shetland with the leader of the Liberal Democrats in Scotland on official engagements. At least my right hon. Friend has deigned to lead the debates on law and order and education in the Scottish Grand Committee. The hon. Member for Hamilton seems to put those matters below water privatisation south of the border.

During the debate, the hon. Member for Hamilton referred to several issues concerning whether the Government intend to privatise water north of the border. I repeat quite clearly once and for all that the Government have no intention of privatising water north of the border.

The reorganisation of water in Scotland became necessary for several reasons. First, as south of the border, we faced the problem of having to achieve significant investment in, the industry over the next 10 to 15 years. Secondly, we have reorganised local government, and it would be ridiculous to put water into the hands of the 32 new authorities. Doing that would have resulted in very small water authorities which would not have had the benefits of economies of scale necessary to attract investment.

I therefore regard the creation of three new water authorities as the most sensible way forward, having recognised the very strong feelings of the people of Scotland. There were about 5,000 responses to the consultation document that was put out in 1992. The Government paid attention to those responses and went for a route that kept water in the public sector in Scotland.

Is it not the case that some of the criticism that applied to Yorkshire Water, especially recently after the cold spell, applied to an even greater extent in Scotland, where many people's supplies were cut off? Was not water in the hands of local authorities?

My hon. Friend makes a valid point.

The hon. Member for Hamilton referred to the Chemical bank report, but that is of course —unfortunately—not the whole story. The hon. Gentleman fails to understand that the private finance initiative is much more than simply getting funding from either the private sector or the public sector. It is about trying to get the innovation and design skills of the private sector into public sector projects.

In the Chemical bank report, there was indeed a capital project, which—I think—in public sector terms was valued at about £145 million. At the last count, I understand that the private sector had quoted a value of about £60 million for it. Significantly reduced capital costs put a totally different complexion on the arguments in that report.

The hon. Member for Hamilton has clearly stated that he does not believe that he should not be using the private sector; he simply believes that he should be using it for funding rather than for bringing in private sector skills. I strongly dispute his assertion and argue that he will not find cheaper finance by that route. Indeed, he will have a problem in Scotland. Not only will he have to fund his new local government structure with a tartan tax, he will have to introduce a special tax to fund the future of the water industry.

The one thing that we have learnt in this debate is that the Labour party south of border has committed itself to a very distinct policy on water in England and Wales. The hon. Member for Holborn and St. Pancras clearly stated that he would not renationalise the privatised companies, but that he foresaw their being brought back under political control. He also said that he would bring about a reduction in prices in real terms south of the border, but he did not say how he would fund that policy. Even at this late stage in the debate, I challenge him to say whether he would put taxes up, or whether he would reduce services in the NHS or in education. If not, how would he fund it?

We shall reduce the outrageous profits that those companies make, and the outrageous pay that the bosses give themselves.

The hon. Gentleman does not recognise the basic facts of financial life—that those profits were made in order to invest in the water industry. The sooner he looks at the investment figures and realises that investment is now more than double what it was when the Labour party was in power, the better for him. If his financial policies ever have to be put into practice, God help the country. I strongly urge the House to support the amendment.