asked Her Majesty's Government:

My Lords, the main items discussed were: the width of refrigerated vehicles; road haulage tariffs; procedures for checking recording equipment used in road haulage vehicles; and road haulage drivers' hours and related matters; charging transport infrastructure costs to heavy goods vehicles; access to the market for the carriage of goods by road between member states; and the weights and dimensions of commercial vehicles. Reports and statements included one by my right honourable friend the Secretary of State for Transport pressing for progress on shipping cabotage. Two secondary items were not taken.

My Lords, is the Minister aware that it seems quite incredible that air matters were not discussed at this meeting? Is he further aware that it is difficult to comprehend that no time, however inadequate it might be, was found to discuss competition rules, fares, capacity or access? Can he tell the House whether these matters will be raised at the informal meeting of the Council on 25th and 26th April, or do we have to wait until 20th and 21st June?

Can I furthermore ask him whether he recalls telling the House on 3rd March that he understood that Air Europe would be filing its Paris application shortly? Has that been done?

My Lords, there are other transport matters that have to be discussed by the Transport Ministers' Council. Aviation has been discussed extensively over the last few years. We finally had agreement to the package only last December. While we still remain committed to making further progress, and we have a commitment from the Transport Ministers' Council to make progress by 1990, other matters sometimes have to be dealt with.

Whether further discussions on aviation will take place at either the informal meeting in April or at the June Council I cannot yet say. It is of course up to the presidency to formulate the agenda.

On Air Europe's application, that is not a matter for the Transport Ministers' Council. However, I understand that Air Europe is still considering its fare structure for the Paris route.

My Lords, I am glad that the Minister mentioned the word "package". Is he aware that the four items I mentioned that were not discussed are all included in, and indeed are the main part of, that package?

Perhaps I may ask about one other matter that I hope will be of interest to the House. Is the Minister aware that this morning I spent a long time with his department discussing whether the point concerning any items on the agenda not being discussed could be answered as they were in my Question? I was told that it was not possible to give any response to that because to do so would have extended the length of the Answer beyond 100 words. Is he further aware that I told whoever I was talking to that I was not prepared to be bound by such Civil Service red tape, if he was, and if the matter was not put right I should raise it in the House today. May I ask the Minister—

No, no!

Yes, yes!

My Lords, may I ask the Minister—

My Lords, on a point of order, did not the House only the other day pass a resolution supporting the Procedure Committee in saying that supplementary questions should be limited to two points only?

Hear, hear!

My Lords, I am on the continuation of my second point. Perhaps I may ask the Minister this. In connection with the last part of his remarks today which stated that two secondary items were not discussed, why would it have been longer to say that two items, X and Y, were not discussed?

My Lords, we have a convention that replies should not be longer than 100 words, I think it is, in order not to take up too much of your Lordships' time at Question Time. However, I am happy to tell the noble Baroness and the House the two secondary items that were not taken. When the House hears them, perhaps it will not feel that they were of such great importance.

They were the questions raised by the Belgian, Irish and Netherlands delegations concerning the Community quota for carriage of goods by road between member states. They were concerned with quota allocation among member states. There was also a Commission report on overcapacity in inland waters. The Commission is not yet ready to report.

My Lords, perhaps I may ask the Minister who made the rule that an Answer should be no more than 100 words.

The House!

My Lords, the House made the rule, I understand, but I merely try to adapt to the wishes of the House.

My Lords, in the light of what the Minister said about other important matters that the Transport Ministers' Council has to consider, perhaps I may ask him two questions in his very important role as Minister responsible for shipping. In a very detailed Written Answer on 3rd March his right honourable friend the Secretary of State stated that last October he wrote to the shipping ministers of 10 other European countries proposing co-operation on ferry safety. Can I ask whether that subject was intended to be considered at the last meeting of the Transport Ministers' Council or whether there was any intention that it should be on the agenda of a very early meeting?

My Lords, we are involved in discussions with other European countries on ferry safety. That extends beyond our EC partners. It involves two countries which are not members of the EC. It is not therefore a matter that was on the agenda for the Transport Ministers' Council, but I can assure the noble Lord that we are still talking with those European countries that have ferry services between ourselves and them.

My Lords, perhaps I may ask one question on an issue that is raised in the main Question. Can the noble Lord expand his Answer on the subject of cabotage? The present position seems to be a long way from that which is necessary if Europe is to be united. Do we not need to progress much further?

My Lords, I could not agree more with the noble Viscount. The Government's views on this are quite straightforward. My right honourable friend notified his colleagues of his intention to seek an enabling power in the Merchant Shipping Bill currently before another place to introduce a test of establishment for shipping companies which engage in cabotage trades in United Kingdom coastal waters. He also urged colleagues to find a formula for the liberalisation of cabotage trades so that agreement could be reached on this subject at a subsequent council. I understand that considerable part of the June Council will be devoted to this and other outstanding shipping matters.

My Lords, would it not be possible to send the noble Baroness, Lady Burton, to Strasbourg? She would drive them all frantic!

My Lords, I do not think that I can give any undertaking on that. It is not a matter for me.

My Lords, is the Minister aware that it will be within the recollection of the House that a great many ministerial answers, I am sure for most excellent reasons, are considerably longer than 100 words? Is he further aware that although I ask a lot of questions they are concise and call for only a concise answer?

My Lords, that is the point. I try to give a concise answer. If I expanded into matters I am asked to go on to deal with, my answers certainly would not be concise.

asked Her Majesty's Government:

My Lords, Milton Keynes Development Corporation has spent £2,020,000 in developing Willen Park as a public amenity. Willen Lake was constructed as a balancing lake for flood control purposes, funded by the Anglian Water Authority.

My Lords, I thank the Minister for that Answer. Can he say what further public expenditure will be incurred by the development corporation in destroying much of the amenity in constructing the H5 Portway Road extension across the centre of Willen Lake against the expressed wishes of more than 9,000—

Reading!

local inhabitants?

My Lords, the proposed road link to which the noble Lord, Lord Perry, refers was first planned in 1971 and planning permission was granted for it in 1978. It has always been part of the plan for Milton Keynes from before the origination of the park. When planning permission was originally granted in 1978, it was well known that the park was also going to be there.

My Lords, is the Minister aware that most people in north Buckinghamshire regard Milton Keynes as a great success story, not least because of the efforts of the noble Lord, Lord Perry of Walton, in establishing the Open University so successfully there? Also, is he aware of the vast amount of both domestic and foreign investment in commercial and industrial enterprises? Can the Minister tell the House how much private investment has been made in Milton Keynes?

My Lords, until the end of March 1987 the total investment in Milton Keynes was £1,002 million. Accumulative public sector capital expenditure was some £853 million. The interesting figure for 1986–87 is that public investment was a net £8 million compared with £155 million of private investment.

My Lords, in view of the volume of public protest is the Minister willing to request the development corporation to delay what I understand is the imminent beginning to construction of the road, so that alternative arrangements can now be looked at? Is he aware that the change of attitude in Milton Keynes is already very great?

My Lords, when the road was envisaged in 1971 it was considered important. With the growth of traffic and the success of Milton Keynes, I do not think delay will be possible.

asked Her Majesty's Government:

My Lords, a provision which will make it unlawful to possess indecent photographs, films or videos of children under the age of 16 has been added to the Criminal Justice Bill this week. This will help to reduce the exploitation of children for the making of child pornography. It is also likely to help to protect potential victims of child abuse. A provision to enable trading standards officers to enforce the Video Recordings Act has also been added to the Criminal Justice Bill today.

My Lords, I thank my noble friend for his really useful reply. Is he aware that the NSPCC is extremely anxious that the availability of child pornography should be curtailed as much as possible? Does he not agree that although we enjoy liberty, we must not allow the edges of decency to be eroded into licentiousness? Does he also not agree with the NSPCC that access to child pornography for children should be curtailed as much as possible and also the use of films? Does he not further agree—

Only two questions!

My Lords, I am grateful to my noble friend for pointing out the views of the NSPCC. I agree entirely with her that the availability of child pornography is totally obnoxious. That is why we are endeavouring, with our amendments to the Criminal Justice Bill, to make it an offence to possess, as opposed to just to trade in, pornography. I agree with my noble friend that the availability of pornography to children encourages those children unwittingly to become involved in pornography.

My Lords, is the noble Earl aware that he has the full support of Members on the Opposition Benches in regard to the clause that he mentioned? Indeed it was with pleasure that we agreed to this clause being added in the Commons, even though it did not appear in the Bill here in the Lords despite an undertaking to the contrary.

My Lords, I am most grateful to the noble Lord, Lord Mishcon, for that most helpful intervention. I hope that all other amendments which the Government intend to introduce, not only on this Bill but on all others, will have the sympathetic consideration of the Labour Benches.

My Lords, is the noble Earl aware that he is the greatest optimist in this House?

My Lords, that is a happy position in which to be and in which I shall continue to be.

My Lords, in view of the fact that much of the child pornography on sale in this country comes from the Netherlands, can the Government put any pressure on the Dutch Government to try to curb the trade?

My Lords, I do not think this is a question of a government putting pressure on another government. It is a matter of the law being such that infringement of it can be enforced.

My Lords, may I ask the Minister whether there has been any research or any survey carried out into the exact effect of pornographic literature, films and books upon children?

My Lords, such research is always very difficult to quantify. I can tell my noble friend—this is not entirely the answer to her question—that in the last two years 42 people have been prosecuted for offences under the Protection of Children Act and 35 of them have been found guilty. In that respect, the amount concerned is not very large. I cannot tell my noble friend of the total effect throughout the country.

My Lords, is my noble friend aware that one of the most obnoxious aspects of child pornography is the circulation of material among paedophiles and that it is therefore of vital importance to see that this is completely suppressed?

My Lords, I am grateful to my noble friend, Lord Nugent. I entirely agree with him. That is the reason why we believe that the additions to the Criminal Justice Bill will help a great deal. It will now be an offence for anyone to possess any such material and not just to trade in it.

My Lords, may I ask my noble friend whether the Government are satisfied with the workings of the Indecent Displays Act?

That, my Lords, is a totally different question. I should be perfectly happy to answer a separate Question if my noble friend would be good enough to take that course.

asked Her Majesty's Government:

My Lords, the Government are satisfied with the effectiveness of the Tidy Britain Group, as it is now called, although the group itself would accept that there is always room for improvement.

My Lords, as the Government have had this problem in mind for several years, will the noble Earl hazard a guess as to how long it will take before Oxford Street or the King's Road are as clean as all the streets in Singapore, Copenhagen or Moscow?

No, my Lords, I should not like to hazard a guess. But we have asked the director general of the group to review the group's strategy. We are considering with him the best way forward for the future.

My Lords, is my noble friend aware that if one drives down any street in Britain the amount of "gunge" on the side of it is quite disgusting? Is my noble friend also aware—I am mindful of the two supplementary questions I am allowed to ask—that if the Oregon bottle law (which means that a deposit is paid on any container) had been introduced into this country, then the urge to throw things on the side of the road would be curtailed and the urge to pick them up and claim the money back would be enhanced, thus making the countryside and the roads much tidier? I have confined myself, I think, to two supplementary questions and one sentence.

My Lords, I am sure that none of us can be unaware of the litter problem. Had it not been for the community environment programme on which the Tidy Britain Group is working, the problem could be worse because some of the local authorities which have benefited have shown a reduction in litter of up to 30 per cent.

My Lords, on a previous occasion the Minister was kind enough to invite me to visit the flow country of Caithness and Sutherland. I should now like to invite him to visit Oxford Circus, which is where I work and where we are frequently ankle deep in litter. Will the Minister consider the degree of support which the Government could give to Westminister City Council in its proposals for a fixed-penalty ticket for dropping litter?

My Lords, I do not know whether the noble Lord has accepted my offer to visit the flow country but I have already been to Oxford Circus and seen the situation for myself.

My Lords, I should like to support what the noble Lord said. Is it not right that the best and most immediate solution to the litter problem would be on-the-spot fines for anyone dropping litter in the street?

My Lords, I know that that view is strongly held by many people including my noble friend. However, there are problems and practical difficulties such as the accounting procedure for fines collected; the risk involved in the police or anyone else carrying substantial cash receipts; and how to deal with offenders who do not have funds available for on-the-spot fines.

My Lords, as someone who for many years has been connected with the Tidy Britain Group, I should like to express my appreciation for the kind remarks made by the noble Earl about the activities of the group. Does he not agree that of the many initiatives that it has launched, its community environment initiative and the schools initiative are two especially deserving of support to ensure that local authorities have a clear and defined objective to remove litter and that school children are aware of the problem?

My Lords, I am grateful to the noble Lord for his remarks. I agree that the community environment programme and the education programme, through which 31,000 primary training kits and science kits have been provided for schools and education authorities, are a good sign of the work of the Tidy Britian Group.

My Lords, the Minister said that he was satisfied with some of the results. Can he pinpoint an area where one could see the results, because I have not seen any?

My Lords, I said that I was satisfied with some of the results because of the reduction in litter experienced by local authorities. Had it not been for the action taken we should now be facing an increased litter problem.

My Lords, will my noble friend remind British Railways that the tracks running through railway stations are part of Britain and they could be kept tidier and cleaner than they are at present?

My Lords, I hear what my noble friend has said and I shall pass on his comments to British Rail. However, I am sure that it will read with interest what has been said by noble Lords in respect of this matter.

My Lords, does the Minister agree that extremely high penalties, whether imposed on the spot or otherwise, are an admirable example set by Singapore, and that because it is easy to avoid dropping litter such high penalties rarely need to be imposed in practice?

My Lords, the maximum fine under the Litter Act 1983 is £400 and there were 1,500 prosecutions in 1985. It is the duty of us all not to drop litter and there should be no necessity for a fine although it exists.

My Lords, does the noble Earl agree that a personal appeal in the form of a public appeal in all appropriate quarters from Mr. Richard Branson, who was appointed by the Prime Minister to head a tidy-up Britain campaign, might have a powerful effect on millions of people who admire his adventurous exploits, some of whom are not among the most tidy in Britain?

My Lords, there is still a misunderstanding about the role of Richard Branson and the UK 2000 Group, which was established to carry out a wide range of environmental improvement projects. Litter abatement is often an element of the project and, where it is, the Tidy Britain Group, as a participant in UK 2000, has taken the lead on the litter element.

My Lords, in view of the number of people putting forward suggestions to the Department of Education and Science as regards which subjects should be included in the core curriculum, does the Minister agree that this subject should be added to the list?

My Lords, I am sure that my right honourable friend the Secretary of State will look forward to receiving the noble Lord's letter.

My Lords, is it worth while the Government considering what is done in Germany, where the owner of a property is responsible for the cleanliness of the pavement outside that property?

My Lords, that suggestion has been made, but difficulties arise in our law and primary legislation would be required.

My Lords, will my noble friend answer my question about deposit moneys on bottles and so forth?

My Lords, I did not answer but I shall take the question away and look at it.

My Lords, is the noble Earl aware that after Derby Day Epsom Downs looks as though it has been hit by a snowstorm whereas no comparable litter problem arises in the park at Longchamp after the Prix de 1'Arc de Triomphe? Is that not another example of how far we must go in order to catch up with other civilised countries?

My Lords, yes, but that only serves to prove that there is so much more that we as individuals can do about the problem.

My Lords, at a convenient moment after 3.30 this afternoon, my noble friend Lord Lyell will, with the leave of the House, repeat a Statement that is to be made in another place on the Belfast funerals incident.

It may be for the convenience of the House if I announce that the Committee stage of the Public Utility Transfers and Water Charges Bill will be adjourned at approximately 7 p.m. for approximately one hour and that during this adjournment the Second Reading of the Dartford-Thurrock Crossing Bill will be taken.

My Lords, it may also be for the convenience of the House to know that the House will adjourn for the Easter Recess on Thursday, 31st March and return on Monday, 11th April. The House will sit at 11.00 a.m. on Thursday, 31st March.

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

moved amendment No. 1:

Page 1, line 6, after ("time") insert ("prior to 1st January 1990").

In supporting this amendment proposed by my noble friend, perhaps I may say that I believe this raises a matter of principle. I do not believe that legislation which comes through this Chamber should give any government unlimited power. If the Government propose to undertake certain measures, they should not only identify the measures but identify the time-span within which they want to take those measures.

This question of being able to introduce the measures indicated at any time does not seem to me to be in line with the normal legislative approach that we should take, and therefore I strongly support the amendment.

This amendment moved by the noble Lord, Lord Diamond, and supported by the noble Lord, Lord Ezra, brings us to the first of a series of amendments designed to modify or in some cases to achieve explanation of the provisions of Clause 1, which I believe is probably the most difficult clause in the Bill.

The noble Lord, Lord Diamond, was quite right to concentrate on this particular point of the time period, because at a later stage, when dealing with other amendments, we shall come to the nature and status of the proposals. We also believe that Clause 1 gives very wide powers and we believe that in some cases those powers need to be curtailed but certainly clarified. We support the two noble Lords who have put their names to this amendment. We believe that there should be a time-limit to the powers in the Bill, because if there is no time-limit on the face of the Bill there is no mechanism in the Bill—unless the noble Earl can explain where there is one—for putting a stop to the powers if, for one reason or another, the privatisation measures do not go ahead. That seems to be a good reason for having a timetable in the Bill.

As the noble Lord, Lord Diamond, said, this amendment seeks to impose a deadline of the end of the calendar year 1989 beyond which the powers to prepare for our proposals, which Clause 1 confers upon the electricity supply industries, would no longer be available. I appreciate the spirit of the amendment, which in effect is telling us, as the noble Lord put it, to get on with the job quickly. That is exactly what we want to do.

We are committed to the restructuring and privatisation of both industries. We intend to introduce the necessary legislation in both cases at the earliest opportunity. If that is during the next Session of Parliament—and we can of course have no certainty of that in advance of the Queen's Speech—then we expect to see the implementation of our proposals under way before the end of 1989. Nevertheless, while we are fully committed to making the best possible progress towards the restructuring and privatisation of these industries, we do not want to reduce the flexibility of this provision by including what would amount to an expiry date which is proposed by this amendment.

The noble Earl referred to a timetable which the Government have in mind. Perhaps he would like to suggest some date other than that mentioned by the noble Lord, Lord Diamond.

We seek to bring in at the earliest opportunity the Bills which will result from this one. As the noble Lord, Lord Diamond, will know from his experience, I cannot predict whether or not it will be in the Queen's Speech. We hope it will be at an early stage, but we believe that the Bill as drafted gives the Secretary of State the necessary flexibility. However, I assure the Committee that it is something that we wish to get on with quickly.

The Minister has not really answered the point. Are the powers to be unlimited in time or does the Minister accept that there must be a limit even if the limit quoted here is not the right one?

In view of what I said, I do not believe it necessary that there should be a time-limit.

This is a very unfortunate situation. Both sides of the Committee are entirely agreed that certain proposals on which the Government have set their heart should proceed. Indeed, both sides entirely agree that these proposals should proceed with due speed. We ask the Government, "How long do you think it is all going to take?" Perhaps they wish to add on a year or two years, but there must be time-limit.

The Government cannot come before this Committee and ask for powers which will extend to the next government but four, if necessary, with regard to proposals which the present Government have in mind. That is totally unreasonable. Some calculation must be made of what is needed. The Government can add on any possible contingency allowance for time and put that in the Bill, but to say,

"Where the Secretary of State is at any time proposing"

is an affront to the Committee. We are not here to give the Government blank cheques. We are here in order to improve the Bill and to get the business of the Government through. I appeal to the noble Earl to give the matter further thought.

moved Amendment No. 2:

Page 1, line 6, after ("proposing") insert ("to Parliament").

I have some sympathy for the noble Lord, Lord Williams, on this amendment. My problem arises from the fact that the first line of subsection (1) is so uncertain in its expression and effect. It reads:

"Where the Secretary of State is at any time proposing that any property or functions of a relevant public utility should be transferred",

and so on. One wonders to whom the proposing is to take place. Is it to the Secretary of State himself? Is it to his department? Is it to the "relevant public utility" mentioned in the second line of the subsection? Is it to Parliament? Is it to the nation? To whom is it made? We should be given some idea. The noble Lord may have hit the nail on the head but we shall not know until we hear from the Minister.

The amendment proposed by the noble Lord, Lord Williams of Elvel, ties in with the previous amendment, which has been rejected by the Committee; namely, that we want to know from this side of the Committee where we stand. The Government are taking such very wide powers under this clause that we feel that some definition is required. Surely it is not unreasonable to suggest under our due processes that the proposal that the Secretary of State might have at any time should be submitted for debate to Parliament. I very much hope that the noble Earl will be able to agree to this amendment.

I too should like to fully support this amendment. I am very interested in the comments that have come from the other side of the Chamber. Naturally, we pay more attention to those and I expect that the Government do too. So far as I am aware the only time in which the word "proposing" is used without an object is when the proposer is on his knees with a bunch of flowers and he is making a proposal. I do not know whether that is a further alternative that might be included in the definition of those words. We are all making the same point that the whole of this clause is drafted so widely as to include anything under the sun. We really ought to have some control of it, and the control proposed in this amendment is the natural and obvious one of parliamentary control.

I should like to thank the noble Lord, Lord Williams of Elvel, and also the noble Baroness, Lady Nicol, for the way in which they have put down these amendments at an early date. Some of his amendments are perhaps more relevant to future legislation and some strike at the very heart of the Bill. The noble Lord said at Second Reading that he dislikes this Bill. These amendments are therefore not surprising. This amendment itself strikes at a fundamental principle of the Bill. The noble Lord, Lord Williams of Elvel, said that it is not sophisticated. If it is not sophisticated, it is done with great charm and it is an absolutely deadly amendment.

The reason why the Bill comes before the Committee is that doubts have been expressed about the powers of the water authorities and the electricity supply industry to co-operate now with the Government as we develop our proposals for privatisation and restructuring. There is a great deal to do in relation to both water and electricity, if the main legislative proposals are to come before Parliament in good order and in good time. We need to be sure that there is no inhibition on the two industries in helping us to draw up that legislation, and in doing so, to anticipate the effects of that legislation. Furthermore, there are matters outside the legislative field where it is important that the industries should be given immediate attention if the privatisation process is to go smoothly and in accordance with our timetable. For example, detailed attention will need to be paid at an early stage to the drawing-up of long-form reports, as a preliminary to preparing prospectuses, well in advance of our introducing the relevant legislation. This will involve expenditure, and quite possibly the exercise of the powers in this Bill.

This amendment is aimed at preventing any co-operation on the drawing up of legislation. It is also aimed at stopping any of the other work from happening until our main legislation is in Parliament. If we were to suppose that the relevant legislation was to be introduced later this year—I said in relation to the last amendment that I cannot anticipate the contents of next session's Queen's Speech—the effect of this amendment would be to delay the planning process on the part of the two industries by some eight or nine months. That would not be acceptable to the Government.

The "proposing" as identified by my noble friend Lord Renton, is proposing to anyone, in particular the utilities. I have given an explanatory statement abut the principle of the Bill which is to clarify the law so that this can proceed. The Committee will know that this was not necessary with the privatisation of other works such as British Telecom and British Gas. Such a Bill was not necessary. It seems that the requirement of this amendment would only seek to delay the process quite unnecessarily.

My noble friend says that the object is to clarify the law. In doing so, should we not ensure that the law is clear? In view of the statement made by my noble friend that it is not appropriate to insert the words of the amendment—namely, "to Parliament", between now and Report stage—perhaps the Minister would consider the possibility of inserting after the word, "proposing" the words, "to any utility or body corporate". That seems to be what the noble Lord has in mind.

Perhaps I may answer the point raised by my noble friend. Of course one of the great strengths of the Committee is to make legislation clear. That is something I am keen to do with this piece of legislation which is now before us. I will take away my noble friend's comments and look at them between now and another stage.

I am glad that the noble Earl has been impressed by the arguments of the noble Lord, Lord Renton. I also hope that he is going to be impressed by some of the arguments that I am going to make. I do not necessarily believe that the formulation put forward by the noble Lord is the exclusive one. We need to have clear laws, as the noble Lord said. We need to know what a proposal is and not merely to know to whom it is made, with great respect to the noble Lord, Lord Renton. We also need to know in what form it is made and how it is made. Then we can say, "This is a proposal under the Public Utility Transfers and Water Charges Act." If the noble Earl is going to look at the suggestion put forward from his Benches, perhaps he will look at the suggestion of introducing some kind of formulation to describe how we can identify a proposal which is under this Bill. If the Minister can give us that assurance I am quite happy.

The noble Lord, Lord Williams, is being increasingly ingenious in trying to get me to make commitments and to give assurances to the Committee. What I said to my noble friend was that I would look at the point he was making in order to see whether it needs to be clarified. If so, I would then consider how best to do it. In doing that, I shall bear in mind what the noble Lord says. Of course what I have said is without commitment.

I am grateful to the noble Earl for going, I suppose, half-a-step down the road which I believe both the noble Lord, Lord Renton, and I and others would wish him to go. Let us hope that in the course of his reflections between now and Report stage that he can go further along the way. I hope he recognises that there is a major problem. As the noble Lord said, if we are going to clarify the law let us at least try to make it clear. We from this side would certainly wish to have a clear definition of what constitutes a proposal under this particular Bill. I hope that the noble Earl will be able to come up with one before the Report stage. In the meantime, I beg leave to withdraw this amendment.

moved Amendment No. 3:

Page 1, line 6, after ("that") insert ("as part of a scheme of privatisation").

In supporting my noble friend's amendment, I should like to say that we are doing the very task that we have to do in relation to legislation. We are trying to make absolutely certain that what passes through our Chamber is clearly and indubitably understood by those who have to carry out the law. Clause 1 of this Bill is very unclear in many respects. The amendments so far moved have been an attempt to introduce clarity. What my noble friend has just said is precisely devoted to that end. Is this; intended to be a move towards privatisation, or is it not? If it is, what is wrong with saying so? We would then all know where we stand.

I should like to support the amendment. I would have spoken on the other two amendments but that was not necessary because my noble friend stated the case so well. This is a frightening piece of legislation. Apparently so simple, it will give the Government great powers. I notice use of the "in" word, "corporate". We are told that everything is corporate and that a body is corporate. There is nothing in the definition clause to say what a "body corporate" is. It obviously comes under "etc.". If the Government are to hand over our water authorities and electricity boards to the private sector, they should at least have the courage to state it in the Bill. That would spell out exactly what this small and apparently innocent Bill is all about.

I fully understand the thinking that lies behind this amendment which the noble Lord, Lord Diamond, has moved with his usual clarity. Perhaps I may begin by assuring the Committee that the Bill had its origin in our intention to privatise the water industry and the electricity supply industry and the need as we saw it to confer explicit powers on those industries to co-operate with us in developing our privatisation proposals. That is the purpose of Clause 1, and its purpose will be fulfilled, I have no doubt, within the lifetime of this Parliament. Once the industries become plcs there will no longer be—and I quote—"relevant public utilities" within the meaning of Clause 1, so these powers will have become redundant.

I would, however, emphasise that our proposals for the water industry also include proposals to set up a National Rivers Authority. This proposal has a validity in its own right. I fully accept that it had its origins in our thinking about privatisation. When we concluded that it was not possible for one private body to regulate another we were moving inexorably in the direction of having to establish a National Rivers Authority or something like it.

However, we have also, independently, come to the view that it is becoming more and more difficult to justify the continuing role of the water authorities as one of the polluters and also the regulators of our river system. This is sometimes described as combining the roles of poacher and gamekeeper. The results of the river quality survey, carried out in 1985, show that the long-term improvement in the quality of our rivers and water courses has faltered, and in some cases gone into reverse. I am certainly not blaming the water authorities entirely for that. However, the institutional separation of regulatory from utility roles will help combat present difficulties. That separation, I repeat, has a validity in its own right.

Subsection (1) is drafted to encompass proposals for the transfer of property and functions of the utilities to other corporate bodies which may be in the private or public sectors. In the case of the water industry these transfers will be to successor companies which will be privatised and to the NRA, a public sector body. The establishment of the NRA is not part of the privatisation proposals but part of the proposals for restructuring the industry. The effect of the amendment would be to confine the preparatory powers of the water authorities to the transfer of water supply and sewerage functions to successor companies and to prevent them from preparing for the transfers of property and their remaining functions to the NRA.

I do not know where the noble Lords, Lord Diamond and Lord Ezra, stand in regard to their thoughts on the NRA, but we believe that it is necessary and is a move in the right direction in view of the poacher-gamekeeper position in which the water authorities find themselves. That is why the clause is drafted as it is and that is why the noble Lord's amendment is so restrictive.

We are grateful to the Minister for expanding his brief on the intentions behind the legislation. Indeed, he said more or less what the noble Lord, Lord Belstead, said at Second Reading. It is perfectly proper that he should repeat what the noble Lord said. However, if I may say so with the greatest respect, that has nothing to do with the problems raised by the proposed amendment.

If the Government do not accept this or a similar amendment we are left with the Bill as drafted which gives the Secretary of State power for an indeterminate period, without further recourse to Parliament, to act in relation to proposals, to propose (perhaps by lying in his bath and proposing to a dog; we do not know how he will propose) that certain things will be done and that powers will be given for acts to be done by other people for unspecified purposes. That is the point we have reached in the Bill and that is why we dislike this formulation. Between now and Report stage I hope that the noble Earl will think about what I and the noble Lord, Lord Diamond, have said because it is a problem for us if we are to act as a House of Parliament.

Before my noble friend replies to that point I should like to raise a further matter arising from the short speech he has made justifying the very broad terms in which Clause 1 is drafted. He told us that he will set up the National Rivers Authority. Indeed, he has published a document about it. It would seem to me that the Bill is the natural place in which to take powers to do so. Yet the National Rivers Authority rates a mention only in the Explanatory and Financial Memorandum.

We are told that this is to happen. But when and how will it happen? We know, or we think we know, that in the next Session of Parliament there will be major legislation which will set up the new privatised structure of the industry. However, it would hardly seem appropriate that the National Rivers Authority should be part of such legislation, especially as my noble friend is relying on the soon-to-become National Rivers Authority to justify part of his position now. It seems to me that he has some obligation to explain where the powers to set it up will come from. People are most interested in the authority. It is going to be responsible for regulatory, environmental and conservation functions which affect the whole community. We should all like to know just how my noble friend intends to set up this organisation, who the people will be who will run it, how they will do it and what will its constitution be.

It is true that there is a broad outline of those functions in the admirable pamphlet which my noble friend has published, but that has to be put into legislative form before it can become a reality. I should stress that I intended to raise this point on Clause 10 stand part, but as my noble friend has been good enough to give me a hook on which to hang my short point by mentioning the National Rivers Authority and what he intends to do about it, I think that now is the appropriate time to ask him how he proposes to set up the NRA and when he will show those proposals to the world in a piece of legislative machinery.

I should like to follow up the rather important point just raised by my noble friend Lord Nugent of Guildford. When we have a Bill which needs to have a good deal read into it between the lines, as it were, as happens with Clause 1, it is only right and proper that we should refer to the Explanatory Memorandum, although we have no power over its contents. However, I think in this case we should take note of exactly what the Explanatory Memorandum says in its first sentence. I ask the Committee to take note of the following important words:

"The Bill ensures that water authorities in England and Wales, and the electricity supply industry in England, Wales and Scotland have adequate powers to prepare for".

It then goes on to mention two matters. The first is "privatisation"; the second is:

"for the creation of a National Rivers Authority".

Therefore we are in the rather odd position of being asked to prepare for the creation of something which does not exist; it is not on the statute book or in the Bill. I find that situation rather strange and no doubt my noble friend will wish to turn his very diligent attention to it.

Before the Minister replies, perhaps he could clarify one point. In his speech he rather concentrated on water, using the example of the poacher and gamekeeper; dealing with pollution on the one hand and polluting on the other. How would he apply that argument to electricity? Surely an electricity authority does not pollute at the same time as supply. In my view any comment he makes is tied up with those two matters right throughout the Bill. They may in fact be separated in the Explanatory Memorandum but each clause refers, on each occasion to the two matters with which we are concerned: water on the one hand and electricity on the other. Can he explain the poacher and gamekeeper argument in relation to electricity?

We are most grateful to the noble Earl for what he said by way of explanation but, unfortunately, there is a lot more explaining to be done. I should like to clear the following point straight away because it may help in the argument. He asked where we stood on the NRA. The answer is that we think it is a very good idea, subject to seeing the details of it. The National Rivers Authority is not a piece of privatisation; it is a reconstruction of a public body as part of a scheme of privatisation. That scheme of privatisation has been made clear by the Government and appears, as the noble Lord, Lord Renton, has just reminded us, in the Explanatory Memorandum as the second of two main objects of the Bill.

I must stress that nowhere in the Bill are the words "National Rivers Authority"—at least, certainly not in this clause—and yet it is an essential part of what is contemplated by the powers being sought under the clause. Nowhere in fact is it mentioned. It is of fundamental importance because the Bill is mainly concerned with giving utility companies the powers to prepare for something definite. They know that something will happen to their industry and they had better get on with preparing for it. I have no objection to that. But what are they to prepare for? No doubt they will assume that they are to prepare for what is described in the statements issued by the Government, but there is nothing in the Bill about that aspect. They can only act wisely and cover themselves with regard to the expenditure they incur if they are preparing for matters for which they have power under the Bill.

Let us then examine a little more closely what has happened so far with regard to water to see whether it might happen in respect of electricity. As regards water, what the Government first proposed—to use the important word in this clause—was complete privatisation; that is, everything owned by the water companies was to be privatised and transferred to plcs. However, they then decided to withdraw all their proposals and subsequently decided to re-introduce such proposals in a very different form because they were not to be entirely for privatisation.

It was proposed that certain very important functions should not be privatised but that they should be retained in the public sector under a new body to be called the National Rivers Authority. We think that that was a very wise alteration of plan, but it was a complete alteration of what was in the Government's mind. I ask the Committee to bear in mind that we are talking about an amendment which proposes a scheme of privatisation—not privatisation in the round—so that the public utilities will know what it is that they are intended to do.

I turn now to electricity. At present the Government's plans—I say at present because they may well change them—are to privatise all the electricity functions. We know that one of the important and essential functions of the CEGB is electricity generation. We also know that there is a great argument taking place as to whether its powers should be privatised or retained as a single entity under some public body, serving what would then be privatised industries.

It may be that, just as the Government have changed their mind with regard to the National Rivers Authority, they may subsequently change their mind with regard to electricity generation. Then, because there has been no scheme for privatisation, all the expenditure that these utility companies have incurred in preparing for the privatisation of electricity will to some extent be wasted because there is some different proposal for which they have to prepare. Surely they are entitled to have a scheme of privatisation put before them so that they will know where they are. The proper place for that, I repeat, is not in the Explanatory Memorandum; it is in the Bill itself.

While we are on this, I seek the assistance of the Government on how to deal with the problem of the rubric, which talks about power to act in relation to proposals for privatisation. Unless the Government accept this amendment or something like it which talks about a scheme of privatisation, this is a very misleading rubric. It tells the nation that the Bill is about something when there is not a word in the clause itself to justify it. What if we do not like that? What if the Committee decides that it is not right and proper for a Bill to go from this Chamber which gives a totally misleading impression in a rubric? I do not know how one alters a rubric; I have never had to put down an amendment on one. I have always understood that a rubric just followed the pattern of the Bill. We should certainly want to know a great deal more, if the Government are not going to accept an amendment which justifies the rubric, as to why the rubric should appear.

Will the noble Lord give way? I think the difficulty which he has expressed and which my noble friend Lord Nugent and I also expressed earlier could be overcome by there being a purpose clause at the beginning of the Bill. It would come before Clause 1 and its substance would be very much what is in the first paragraph of the Explanatory Memorandum. On the Legal Aid Bill recently the Lord Chancellor himself introduced a purpose clause. He had one drafted which helped very much in the interpretation of the Bill. I certainly think that the same solution could well be applied to this Bill.

I am grateful to the noble Lord, Lord Renton, who is very well informed on these matters of legislation and procedure. It may be that that is an alternative which will suggest itself to the Government. We do not mind in the slightest whether it is done in the form of this amendment, which has stood the test so far in the discussion which has gone on. It has indicated that what we all need is a scheme of privatisation which shows exactly what is proposed. We do not mind whether it is done in this form or in an intentions clause, which is another way round it.

At all events, under either alternative we want something in the Bill which we can read and know has legislative effect. So I hope that the noble Earl will give this matter very careful consideration and bear in mind our great anxieties about this misleading rubric and also about powers being granted in this way without at any time referring to Parliament for something which may be privatisation or—although it is not likely—nationalisation, both covered by the Bill in just the same way. If the Government want to introduce schemes of nationalisation I dare say they could summon a certain amount of support from all sides of the Chamber. That is what this clause gives them power to do. I am sure I have made my point sufficiently clear. I hope the Government will respond to it.

I understand the concern of noble Lords and the noble Baroness on this matter. What the clause is designed to do is to permit my right honourable friend the Secretary of State and the utility companies to start work in preparation for privatisation. The noble Lord, Lord Diamond, knows full well that when those proposals have finally been prepared and submitted they will have to come before Parliament. Again, it is a point which I mentioned earlier that matters such as the exact form of the NRA are for the main Bill. If we were to put a reference to privatisation or to the NRA in the main body of the Bill, it would have to be precise in bringing forward what our proposals will do.

I am sorry to interrupt the noble Earl. A moment ago he referred to proposals coming before Parliament in the form of the main legislation. Are we to understand that the word "proposal" as used in this clause means the main legislation when it comes before Parliament and that is the proposal which the Secretary of State will make?

That is how it will end up. However, until one can have the powers to start discussions formally with the authorities or with the electricity industry on what is going to happen, it is a chicken and egg situation. When we have presented our proposals and worked them up, we can then present a Bill to Parliament. At the moment we cannot do that. It is a problem with the NRA. It is very much a chicken and egg situation. If it were to be written onto the face of the Bill, we should have to be very precise about what was to be privatised and what was to be the NRA. We cannot do that because we do not have the proposals which this clause enables us to put forward.

If the noble Earl will allow me to intervene, perhaps I may say that I am getting rather puzzled. It seems to me that the principle is that somebody on this side of the Committee is saying that the powers accorded to the Secretary of State in this Bill are not specific and they could be applied to situations other than privatisation. That is what is being said on this side of the Committee. What the Minister has to do is to satisfy the Committee that these proposals are a paving Bill only for privatisation and the establishment of the National Rivers Authority. That is the issue.

If the Minister will address himself to that and tell the Committee that the powers in the Bill are specific to those two objects, perhaps we shall be satisfied. At the moment the Minister has got nowhere near understanding the point, let alone replying.

I am very grateful for that invervention. The noble Lord, Lord Sefton of Garston, has hit the nail on the head. It is in order to bring forward proposals, but not all the proposals necessarily include privatisation. This is for the restructuring of the two industries, but until we get the powers to enable us formally to discuss that we cannot discuss the proposals with the electricity industry or the water industry. That is what is delaying matters. It is a chicken and egg situation.

That makes it worse. If I understand the Minister rightly, he is now saying that the powers may not just be accorded in the Act for privatisation which is contemplated by the Government and there may be something else. If this Bill allows the Government to do something else, it may be that if the Government found undue difficulty in getting somebody to buy the water authority or the electricity authority they would want to change their mind and go for a reorganisation. Under this Bill they would be able to do it and start the procedure for that reorganisation. If they were to do that, I am sure that this Committee would want to know what kind of reorganisation it was. So the Minister must satisfy us that it is specific to those powers.

That is exactly the point of the main Bill. It will come before noble Lords.

Why cannot the Minister say, if this is what he is trying to convey to us, that the proposals to be brought to Parliament are for privatisation and the establishment of a National Rivers Authority? Why cannot he put that in, and then we shall know what he is talking about?

That is one of the difficulties. Until we get the authority to make the proposals, what we have suggested is that the National Rivers Authority should be set up. But, as the noble Baroness knows, there are two White Papers on the electricity industry, one by my right honourable friend the Secretary of State for England and Wales and the other by my right honourable friend the Secretary of State for Scotland. Some of the thoughts in the White Paper may be changed in view of comments, but this clause and the Bill are what enable us to take matters a stage further in order to bring the main Bill before noble Lords. That will be the moment for the Chamber to decide whether or not what the Government propose as a result of the powers conferred in this Bill is acceptable.

I was interested in what my noble friend Lord Renton said on the intention clause. I should like to look into that to see if it is possible to bring that into this legislation given the fact that as I understand it, this matter is slightly different from the Legal Aid Bill. This is a chicken and egg situation. That is one of the points I should like to look at between now and the next stage of the Bill.

To be absolutely clear to the Committee I should say that we are seeking powers in order to enable my right honourable friend the Secretary of State to start discussions in order to bring forward the main proposals.

I never expected the Government to bring forward as a reason for this Bill and for the wording of this Bill the fact that they are not ready to put their privatisation proposals to the nation. That has happened once already and the proposals were all withdrawn. We all know that that happened with regard to water.

If the Government are not ready to put forward a scheme for the privatisation of water they should say so and wait until they are ready. It is wholly irresponsible when the Government are not ready to invite the utility companies concerned to incur any expenditure which they like and which the Government wish them to incur and to give them the powers to examine proposals which the Government have not yet clarified in their own mind and which may turn out to be quite different. It is quite wrong that that should happen.

I shall try once again to get the message through to the noble Lord, Lord Diamond. He would be the first to criticise the Government and the water authorities if there were not a long-term prospectus for the privatisation. He would be the first to get up and say, "This is absolutely wrong. It goes against all the Companies Acts". The noble Lord, Lord Williams of Elvel, would he very close on the noble Lord's heels to tell me that. This clause enables us to fulfil those kinds of requirements.

To put it politely, I find it very difficult indeed to accept what the noble Earl has just said. The noble Earl has said a number of things. He has said that it is impossible for the Government to start discussions with the utility companies on the details of the proposals. I find that very difficult to understand. I cannot see why the Government should not go and start discussions with the utility companies here and now. They have the full powers to do that.

Is the noble Earl telling us in one sentence that the main purpose of the privatisation of the electricity industry is to stop government interference—as the Government call it—and at the same time telling us that the Government have no power to talk to the electricity industry about their plans for privatisation? I am afraid that that really is just not tenable. The clear situation as we now find it is that the Government do not have the foggiest idea of what they propose to do. If that be so, that is all right; they should give the matter further examination. It is not the first time that the Government have found themselves in this position. It is the second time. That is all right. The Government should give the matter further examination but in the meantime they should take the matter away. The Government should not come to the Chamber with a Bill which is intended to give powers in relation to proposals for precise privatisation schemes for the water industry and the electricity industry when they do not have the foggiest idea of what they want to do.

I repeat what I said previously: we are very unhappy indeed about the rubric and we shall seek to support the noble Lord, Lord Renton, in his examination of this matter and in his proposal that some kind of addition to this Bill should be made, possibly at the start, so that the Bill tells the nation what the Government are intending to do and does not conceal it from the nation.

A number of suggestions have been made. The noble Earl was good enough to say that the suggestion made by his noble friend Lord Renton would be looked at. I think that it is so self-evident that something more should be done that the Government, when they think about this quietly, will come to the conclusion that this clause should be clarified. In the hope of that and on the understanding of what was said by the noble Earl and without putting any additional words into his mouth with regard to the noble Lord, Lord Renton, I beg leave to withdraw the amendment.

I beg to move that the House do now resume for the Statement.

My Lords, with the permission of your Lordships, I shall repeat a Statement that is currently being made in another place by my right honourable friend the Secretary of State for Northern Ireland. The Statement is as follows:

My Lords, we thank the Minister for repeating the Statement. We are grateful to the Secretary of State for taking the earliest possible opportunity to express his outright condemnation of the appalling atrocity which was committed in Milltown Cemetery, Belfast, yesterday. We also wish to convey our sympathy to the families and friends of those who were killed, to those who were wounded and to the bereaved who wished to bury their dead in dignity.

Sadly, the paramilitary elements in both communities think that they know what is best for the Province. They believe that their aims can only be achieved by mounting fury and violence upon violence. Yesterday's tragedy in Milltown Cemetery may be seen by the Unionist paramilitary forces in Northern Ireland as retaliation in kind or revenge for the atrocity committed by the IRA at the Enniskillen war memorial. But violence from either community is no answer to the problems of Northern Ireland. It is no answer because violence upon violence breeds further violence. Indeed, over time the cycle of violence can eventually lead to the death and become the grave of Ulster itself.

Over the next few days many questions will be asked about yesterday's tragic events. Today, I have only two questions for the Minister. First, while it is appreciated that the RUC and the security forces had been requested by the leaders of the Catholic and nationalist community to adopt a low profile during the funerals—and it appears that they so responded—did the RUC or the security forces have any indication at all that any Protestant paramilitary force or any individuals intended to embark on a course of violence which could in any way disturb the funerals? Secondly, while accepting, as we readily acknowledge, that the problem of Northern Ireland appears to be intractable, do the Government—or indeed both Governments—intend to take any initiative which could bring the cycle of killing and wounding to an end?

Finally, we can only hope with the Secretary of State that all sections of the community in the Province will respond to the earnest appeals from Church leaders on both sides of the divide for a period of calm and avoidance of further recrimination.

My Lords, first I wish to associate all my friends and colleagues on these Benches with the outrage expressed in the Statement and with the sympathy for the bereaved and the wounded which the Secretary of State and the noble Lord, Lord Prys-Davies, have expressed. Secondly, I wish success to the RUC and the army in their duties, which become more difficult and dangerous with each hateful atrocity committed first by one side and then by the other.

Over the last 12 years, I have had to respond to all too many accounts of atrocities in Northern Ireland. However, this is surely the least excusable, the most inexcusable and the least forgiveable atrocity, even including Enniskillen. I have no questions to ask the Minister. But I stand squarely behind the Secretary of State's brief but powerful statement made over the wireless last night when he appealed to everybody to restrain themselves from the appalling cycle of repeated violence.

That sentiment was gallantly echoed this morning by the mother of one of the dead, as I have seen on the tape this afternoon. She said:

"Please, please, let there be, for once, no acts of revenge, no escalation of these senseless cruelties. Let the ordinary people of Northern Ireland shame their paramilitary factions on both sides into a proper respect for human life".

My Lords, the words of sympathy which have been expressed by both noble Lords who have spoken for the bereaved, the dead and the wounded as a result of this appalling incident will be passed to all those concerned. I am sure that those words will be of comfort to everyone in Belfast.

The noble Lord, Lord Prys-Davies, asked if we had had any indication of what might happen and whether it could have been prevented in any way. He also asked whether there was any possibility of an initiative by either the Government of the United Kingdom or that of the Republic of Ireland.

So far as we are aware now, the perpetrator of that appalling deed is presently in hospital and under police guard. The police have been unable to obtain much information from him which is of any use. Nor was there any indication of what might happen. Perhaps it will help the House if I stress that, following assurances that there would be no paramilitary displays at yesterday's funerals, the RUC deliberately kept its distance and did not enter the cemetery. I believe that the House will accept that it is entirely hypocritical of all those who have been loudest in their criticism of the police for the handling of previous funerals to now seek to place the blame for what took place yesterday on the RUC. From the information that we have, there is no indication of how the perpetrator of that foul deed came into the cemetery. However, our inquiries are still continuing.

As regards the second point raised by the noble Lord, Lord Prys-Davies, the Anglo-Irish Agreement is still very much in place. I think that your Lordships will wish to know of the helpful statement which came from the Taoiseach. It was much appreciated. He issued his statement at approximately 4.30 p.m. yesterday. Among other things, he stated:

"The anger which this savage attack will cause should not lead to further violence and I appeal to the nationalist people of Belfast and to all the people of Northern Ireland to respond with calm to this outrage and to take no action which might heighten tension or lead to further loss of life.".

Those were the words of the Taoiseach, which I believe should go some way to answering the second point made by the noble Lord, Lord Prys-Davies.

We are grateful for the comments of the noble Lord, Lord Donaldson. I shall see that his kind remarks on the work of the army and the Royal Ulster Constabulary are passed on to the relevant quarters.

My Lords, I do not think that anyone has so far mentioned that this is 17th March, St. Patrick's Day. Is it not possible that the deep sense of shock which all Christians must feel that St. Patrick's Day should be the day upon which we have to record events of this kind and those of the past three weeks could be utilised to bring an end to this appalling reign of hatred and violence?

My Lords, my noble and learned friend puts into eloquent words what is felt in your Lordships' House on this day that is so special to Irishmen in Ireland and all over the world, who will feel very much what has been expressed by my noble and learned friend. I am grateful to him for putting that into words. I am sure that it will be noted, not just in your Lordships' House but in Ireland and further afield.

My Lords, is there any evidence as to the provenance of the grenades used in the cemetery attack? Is there not considerable suspicion that the Libyans have been supplying arms to both sides in the conflict?

My Lords, we have no definite information about the provenance nor the types of the weapons that were used in the cemetery. I understand that further inquiries are being carried out by the RUC, but we do not have any definite information on the provenance of those dreadful weapons. They could have come from anywhere.

moved Amendment No. 4:

Page 1, line 7, after ("transferred") insert ("at fair value").

Perhaps I may expand on what the noble Lord, Lord Williams of Elvel, has referred to. I do so without detracting from what he said; I support his sentiments completely.

It is evident that the market will have regard not merely to the value placed upon the assets and to past profit and loss accounts but also to the anticipated return on any investment made by the market. In that connection the market will want to know the extent to which these companies will be allowed to make profits. That in turn will depend on the rules made by the Government at the time of privatisation with regard to the control of prices and other matters that have an effect on profits. I speak here of the profits after privatisation, to which the market will have some regard.

When the Minister is good enough to answer the questions posed by the noble Lord, Lord Williams of Elvel, on balance sheets at the time of transfer to the bodies corporate, which in the main are to be plcs, perhaps he would tell the Committee what is in the Government's mind with regard to the profit potentials of the companies.

The noble Lord. Lord Williams of Elvel, in introducing the amendment mentioned that it was in his name and in that of his noble friend Lady Nicol. We are sad that the noble Baroness is not in her usual place. I ask the noble Lord to take our good wishes to his noble friend. We look forward to seeing her back in her place fit and well again to participate in other debates.

The amendment seeks to influence our proposals for the restructuring and privatisation of the water authorities. Of course, noble Lords should, and will, have the opportunity to debate those proposals, and to seek to change them, when they come before us in the context of the main legislation. This Bill, however, does not give effect to our proposals. It simply gives an express power to the water authorities, and to the electricity supply industry, to take such steps as they consider appropriate to prepare for our proposals.

Nonetheless, if we look for a moment at the implications of this amendment for our proposals, we can see that the attempt to import the notion of fair value into the proposed transfer of property and functions is misplaced. Let us consider the water industry. There would be considerable difficulties in attempting to establish the value, let alone the fair value, of each of the functions whose transfer we propose. How does one put a value, for example, on maintaining the environmental quality of our rivers?

On the other hand, it is both inappropriate and unnecessary to apply the notion of fair value to transfers of property. It is inappropriate in so far as transfers will take place from one public sector body to another—from a water authority to the National Rivers Authority—since, in accordance with normal practice, there will be no consideration given by the receiving public sector body. The noble Lord referred to this point in regard to the 1973 transfers. It is unnecessary in regard to transfers to successor bodies which will be privatised since the interests of the public purse will rightly be protected by the payment of flotation proceeds into the Exchequer for the benefit of the country as a whole.

The noble Lord, Lord Williams of Elvel, spoke of the difficulty that he foresaw for the preparation of the accounting information that would be required for the prospectuses for the sale of water services plcs. We are, of course, well seized of the importance of the providing of accurate financial information in the flotation prospectuses, and the accountant advisers to be retained for these privatisations will have this as their objective. We are not less committed to ensuring that we obtain value in transferring utility businesses to the private sector. That value will relate to the business as a whole and will be established by reference to market conditions at the appropriate time, which I understand to be flotation.

I am sure the noble Lord will agree that it would be wrong to seek to settle the value in advance of that moment, but I assure him that we are fully cognisant of the requirements under the Financial Services Act in order to prepare a legal prospectus.

Perhaps I may pursue the argument a little. I think that the noble Earl has not fully grasped what I said. There is of course no intention to set a flotation price at the time of transfers. That would be absurd. I hope that I did not appear to suggest that. Transfers between the public sector bodies— for no consideration, of course as the noble Earl rightly says, are matters that do not require a particular accounting expertise, although a certain expertise is involved.

The point I am endeavouring to get across is that there are two kinds of value. Let us consider a private company—leaving aside flotation—which we want to sell. There are various methods of valuing it: this is not something to sell on the market, but a company that is to be sold from a willing seller to a willing buyer. There are various methods of valuing it. In general, and in normal practice, there is a valuation of the assets—a valuation of the property. There is an audit. As the noble Lord mentioned earlier, there is a long form report, a projection of earnings, and a number of matters which are all wrapped up together. In the end some kind of value is arrived at.

The basis for any valuation that may be arrived at as a result of negotiation between parties is a balance sheet and a profit and loss account. The long form report sets up a balance sheet for the last period—a photograph of the operation as at a certain date—and the setting up of a series of profit and loss accounts over the previous five years. That creates the basis on which the sale can take place. In this instance that will create the basis on which the flotation can take place, and the value, decided by the market, as the noble Earl quite rightly points out. In order to get the latter process right one has to get the former process right. In other words, one has to have a proper balance sheet, with a proper profit and loss account set up according to accounting principles which are clearly understood.

The point that I was making and that I did not get across was that that procedure will be set up under the terms of this Bill inevitably at the point of transfer. It is at the point of transfer that one will have the water authority—less that portion which goes to the National River Authority—going into a plc ready for flotation, with a balance sheet and a profit and loss account which have been set up according to certain accounting principles. That will form the basis of the valuation which will subsequently take place on flotation.

The noble Earl argues that one cannot put values on environmental liabilities. But that is what auditors do. There are certain costs associated with this which have to be taken into account. They have been taken into account in the past because water authorities have spent money on these functions. No doubt when they come to make some earnings projections along the lines that the noble Lord, Lord Diamond, has outlined, as they surely will, analysts will seek to include in their earnings projection a cost for the environmental duties that these water authority pies may well have.

The point remains, however, that the initial balance sheet at the point of transfer, and the initial series of profit and loss accounts at the point of transfer, have to be set up according to accounting principles which are understood, and with a register of assets and a register of earnings which are clearly and easily identifiable. It is all very well for the Government to say. "We shall appoint accountants who are fully familiar with these problems". I have talked to a number of accountants who are familiar with these problems. Everyone knows that it is nearly impossible to produce a water authority's balance sheet, even in its present form, before you detach part of the activities to the NRA, because one does not know where a lot of the underground assets are, and the method of accounting, of calculating the depreciation of the assets, is a matter of great controversy in the accounting profession at the moment.

Accepting that these matters have to be resolved at the point of transfer—which is what we are dealing with here—what accounting principles are going to be used? How will all this be established? At the end of the day that is what will affect the fair value at the time of flotation. I hope that the second time around I have made myself clear.

My noble friend must surely be right on this point, for two very good reasons. The noble Earl said that these matters can be dealt with when we have the Bill. We passed a Gas Bill and we tried to set out these matters correctly in the Gas Act. We failed miserably in spite of seven long-drawn-out days and nights when we tried to persuade the Government that they should ensure that the taxpayer received a fair and proper price for the assets transferred by the Gas Act. In spite of all our efforts, we made no impression. That is why my noble friend is trying to have an instruction put into this Bill in order that the draftsmen of the next Bill will know exactly what they have to do. That is why my noble friend, with great foresight, is trying to write this provision into this Bill.

He is right to do so (is he not?) because today I believe that the price of a British Gas share stands at 142p for a payment by the shareholder of 95p. Therefore the assets of the gas industry were undervalued to the tune of 50 per cent. I feel sure that the Government do not want that to happen. That is why they should take heed of what my noble friend has said this afternoon.

Another reason that we should have these industries correctly valued is that— unlike any other industry which has been nationalised so far—they are both virtually life support industries. There is no way in which people can do without water; and in a modern society there is no way in which they can do without electricity. Civilisation without either would virtually collapse. Those businesses create for private individuals a situation that is virtually unheard of. Whatever happens they are bound to be able to sell their commodity. It is therefore right that the taxpayer should receive a proper and reasonable price for those assets, and for the considerable benefit that will be bestowed on the new owners.

I hope that those comments have been helpful to the Minister in reconsidering his reply to my noble friend. I hope that he will be convinced that there is great merit in this amendment. I should have thought that the least he should do is agree to take it away and reconsider the position.

Perhaps I may make one further point before the Minister replies, lest he should be tempted to give us the same reply as last time—that all this can be dealt with in the main legislation.

I am not considering that point, and I am sure that the noble Lord, Lord Williams, is not either. We are asking this. At what stage is it right to trigger off the mechanisms by which utility companies can start preparing for privatisation in the way in which the Government want it done? We are saying that it is no good leaving major questions at large until one is considering the main Bill. One has to know at this stage whether the proposed terms are such as would be considered fair by a vast body of opinion, in particular by parliamentary opinion, before the Government can state with any reliability that they have a scheme which will receive public and parliamentary aproval and that it is therefore appropriate that the utility companies should start preparing for that privatisation scheme.

The noble Lord, Lord Williams, has made it absolutely clear—I am bound to confirm what he said from my minimal professional knowledge—that there are great differences of opinion as to how the assets in balance sheets should be valued in cases such as this. There is enormous difficulty about it. The difference between one extreme of value and the other is enormous. It is one of the major issues—I would not say that it is the whole issue—which has to be taken into account in fixing the price and therefore enabling people to determine whether it is a fair value in terms of the amendment.

The Government should therefore have given great consideration to this and should have decided what kind of basis to use. With the greatest possible respect, in this case as on the previous amendment, if the Government are not ready to do that they are not ready to bring in a Bill inviting public utility companies to go to great expense and upheaval to prepare for a scheme which is not a fair scheme and which therefore might not receive approval.

It is the Government's duty to know—not to the last dot on the "i" and cross on the "t"—in fair detail the important parts of the scheme that they are proposing. What the noble Lord has put forward in the amendment is a very important part. I should be grateful if the noble Earl will say whether the Government have given this full consideration and have reached a fairly precise conclusion.

I agree with the noble Lord, Lord Diamond, that it is important for the Government to know. That is precisely why we seek the powers in the Bill to enable us to know, so that when we bring forward the main Bill—I return to that because that is when the proposals will be laid before Parliament—following the powers under this legislation, we shall be able to bring before noble Lords how the reconstruction is to take place and how the values will be arrived at. However I accept that at vesting the physical separation of assets will be determined as the noble Lord, Lord Williams, suggested.

Accounting for the transfer will be complex but will have as its starting point the accounting procedures which already exist in the water authorities' balance sheet for these assets. When the main Bill comes before Parliament noble Lords will be able to consider it fully, because the proposals in the main Bill will affect the value for the transfer. As a valuer myself, I should tell the noble Lord that to put the word "fair" here is totally inappropriate, if I may humbly say so—

Surely the noble Lord has heard of a true and fair view, which is the normal audit report?

But that is a combination of valuations of different types. As I have said to the noble Lord, how does one put a value, for example, on maintaining the environmental quality of rivers, let alone a fair value. He carefully listed all the points on which I agreed with him about buying and selling a company where the balance sheets and the profit and loss account are important. The projected earnings are important too because they determine the final value. But we are well aware of our duty to bring the right amount of value by means of money into the Exchequer for the public benefit and for the country as a whole, as we shall seek to do. Much of it cannot be done until we get the main Bill.

I am sorry to return to this. We are beginning to realise that the Government put a totally different interpretation on the word "proposal" from our understanding. In fact I would go so far as to say that the noble Earl has misdirected himself in relation to the meaning of the word "proposal".

The noble Earl has said that the Government need these powers to find out all sorts of information so that they can then make a proposal. Not at all. The Government have to make proposals before those powers become effective. The Bill says,

"Where the Secretary of State is at any time proposing".

The Secretary of State is making proposals at this time. It is now that he is asking for those powers under the Bill. It is no use the Secretary of State saying that he would like to go on a voyage of discovery to find out what proposals he can bring back to Parliament in a year's time affecting these two public utility industries. He has to make them now and I should be glad if the Minister will direct his mind to that point.

I do not know where we are going in this discussion. The noble Lord, Lord Diamond, has put his finger on the difficult point that we do not quite know what the proposals are. The noble Earl is saying that he cannot make proposals until the Bill is passed. Yet the Bill specifies that the Secretary of State shall make proposals. In these circumstances I do not know what we mean by the word "proposals".

I make a modest suggestion to the noble Earl. Will he tell us, either now or at Report Stage, what principle of accounting— whether renewal accounting, historic cost accounting or current cost accounting—will be used by the water authorities when they are transferred into water authority public limited companies? I start with that simple and basic question.

As I said, the starting point for the accounting procedure will be that which already exists in the water authorities.

In other words, historic accounting with an addition of current cost accounting. Is that what the noble Earl is saying?

On that precise point perhaps at Report Stage I shall be able to let the noble Lord know, or even before that time.

Will the noble Earl take my word for it that that is what the water authorities do now? Will he recognise that in historic cost accounting the historic costs which water authorities use in their balance sheets are the historic costs at the time of transfer under the Water Act 1973? Will he also take my word for it that the accounting profession as a whole believes that those historic costs—I will not say that they were mythological or invented—had very litttle to do with the historic costs of the assets being transferred? Will he further take my word for it that the Financial Services Act, no less, will require that if historic cost accounting is to be used, a proper historic cost has to be set up for the assets of the business; otherwise, it will be a misleading document?

Will the noble Earl comment on those few questions?

This is very interesting, but it brings me back to the comment I made that we are well seized of the importance of providing accurate financial information for the flotation procedures. We are aware of these difficulties.

We shall have to return to this at a later stage. I hope that in the meantime the noble Earl will have given a great deal of thought to what we have said this afternoon. As I interpret the mind of the noble Lord, Lord Diamond, and as I know my own mind, I am determined to return to this at a later stage because I am entirely dissatisfied with what the noble Earl has said, however elegantly and courteously he replies. I do not think the content very serious, if I may say so. I believe that before he goes much further the noble Earl and the Government will have to think very hard about the matter. Perhaps the noble Earl will refer to his noble friend sitting on the Conservative Privy Council Bench who probably knows more about water authorities than anybody else and also what historic costs mean in the context of the water industry. I am sure that he will receive benefit and very useful advice. I beg leave to withdraw the amendment.

moved Amendment No. 5:

Page 1, line 8, after ("corporate") insert ("in such a way that the value of the nation's net assets is maintained in one form or another").

Although I believe that most Members of the Committee will understand the intention of the noble Lord, Lord Diamond, in moving the amendment, with which most of us would agree, I am afraid that he has used a terribly wide phrase. The net assets of the nation are a very large concept and include the gold reserves, the buildings in Whitehall and every pair of boots worn by every private soldier in the armed forces. It is a vast concept and I do not think that such a wide phrase is suitable for use in the context of this subsection. I cannot contemplate my noble friend's acceptance of the amendment.

It is not for me to suggest an alternative, but one was raised in the previous amendment by the noble Lord, Lord Williams of Elvel, to which I thought my noble friend gave a satisfactory reply. I hope that the Committee will not take up too much time in considering Amendment No. 5.

The disposal of assets in this way is a subject which we have discussed on previous occasions. I agree that it is difficult to define the nation's assets. However, in the case of the proposed privatisation of the electricity industry in particular, a vastly greater amount of money will be realised than on any previous occasion. Therefore it is not unreasonable to have an indication of how the matter will be dealt with, whether it be the form of words represented by my noble friend or in some other way.

It is not unreasonable for the Committee to state that this transaction is quite exceptional, and therefore the shareholders in the enterprise should be given more of an indication of what will be done with the vast amount of money which will flow as a result of the operation.

In his amendment the noble Lord, Lord Diamond, has challenged the use to which privatisation proceeds may be put by the Exchequer. I am surprised that he did so. He will know far better than I that this matter is not within my departmental responsibility but that it is for my right honourable friend the Chancellor of the Exchequer. I am sure that the noble Lord will be the first to congratulate my right honourable friend on the use to which he has put the proceeds of privatisation for the benefit of this country. As my noble friend Lord Renton has said, the amendment includes a wide-ranging phrase which covers everything which is owned by the country. It is for those reasons that the country is now so much more prosperous than it was nine years ago.

I should like to ask the indulgence of the Committee while I wipe the dust from my eyes so that I can see the position more clearly. I have rarely had more dust thrown in my eyes than by the speech made by the noble Earl. Of course I realise the position. It is that ever since this Government came to power they have underprovided by way of capital expenditure for the maintenance of the nation's assets in their variety of forms. That can be seen by anyone using his eyes and common sense when walking through any city and seeing the ways in which it and its infrastructure are run down wherever he looks.

I do not know what the noble Earl was referring to when he spoke of his right honourable friend the Chancellor of the Exchequer. The figures have been published in the Green Book, where every month in the abstract of statistics one can see what the Government have spent. Year after year the Government have spent less than sufficient in order to maintain the nation's assets in the public sector. The excuse sometimes has been that we should look at how well the private sector is doing. That has nothing to do with it. Through the Government, the public own these assets.

If I may say to the noble Lord, Lord Renton, there is no difficulty about definition. There are accounting procedures and accepted definitions for all the matters he mentioned. I can perhaps say by way of illustration that boots are revenue expenditure and not capital expenditure; that is accepted. When you want to compare one country with another, you must have the same definitions. It is for those purposes that these accounting formulae have been agreed.

It is a new proposal that the Government should be introducing a Bill which is not the responsibility of one Minister in particular. That is an entirely novel idea. The Bill only bears the responsibility of the Chancellor of the Exchequer and not the Government as a whole. That is a new idea to me. I am sure that the noble Earl—when he comes to think about this matter again—will decide that he should not insist on that point. It is no use saying that it is simply a matter for the Chancellor of the Exchequer. It is a simple matter for the honour of the Government. Before the Government trigger off the mechanism in the Bill and before the powers are granted to public utility companies to undertake activities and expenditure of that kind, are the Government going to make it quite clear that they are proposing that the assets will be used to maintain the net asset position of the Government? As my noble friend Lord Ezra said, the assets of these two public utility industries are of such magnitude that these issues merit reconsideration. Otherwise, the Government must stand committed of wasting the nation's assets.

I am staggered by the noble Lord, Lord Diamond. He talked about the Government not maintaining the public estate, if I understood him correctly. While at the Home Office, I learnt with great dismay of the reductions in real terms that the Labour Government had made in spending on prisons and with delight how much that spending had increased in real terms under the Conservative Government.

Let us turn to the present and to the water authorities. Perhaps the noble Lord is not aware that between 1980–81 and 1987–88 investment by the water authorities increased in volume terms by over 40 per cent. whereas it declined under the Labour Government. I am sure that I do not need to remind the noble Lord that under the Labour Government it declined by a third.

I am surprised that the noble Earl makes the point about the water industry. Indeed, to a greater extent it is true of electricity. The capital value of these industries has been built up by the industries concerned using their monopoly position, usually at the behest of government. With regard to electricity, one now pays an annual tax contribution as well. The capital is paid by the consumers. No other industry expects its consumers to finance capital development. That usually takes place as a result of loans which are paid off over the years.

As regards the electricity industry uniquely, all its capital has been financed by the consumer. If the industry is not to remain a public utility, then the least the Government could do is to give the shares to the consumer and not put them up for sale.

Does the noble Lord not agree that a very large part of the magnificent development which the electricity industry, on both the generation and the distribution sides, has carried out over the last 20 years has resulted from successive governments giving consent to their public borrowing powers?

My recollection is that those industries borrowed very little and that they have been obliged by governments to finance themselves out of charges. I believe this is a very unnecessary Bill in every respect.

My noble friend is absolutely right in relation to the electricity supply industry. By the year 1990 or before it will be completely free of debt charges. It has paid a lot of money into the Exchequer.

I am surprised that the noble Earl should go back and criticise the Labour Government's record regarding prison building. That is irrelevant to the amendment proposed by the noble Lord, Lord Diamond. We differ slightly perhaps from the noble Lord in our approach. As my noble friend Lord Williams of Elvel rightly pointed out at Second Reading, the Labour Party is diametrically opposed to government policy in relation to selling off the electricity supply and water industries. We believe that these great industries, which are life support and monopoly industries, should remain in the public sector. That is the best place for them; the consumer will receive the best service from the public sector.

Having said that and having reiterated Labour Party policy, perhaps I could go further. The noble Lord, Lord Diamond, makes a very important point. He asks the Government: when you sell these assets—and the electricity supply industry alone is worth £27 billion—what will be done with the assets? Are the Government going to build up new assets which will bring in at least as much from trading activities to the Government? Or are the Government going to spend the money, perhaps over a period of five years, in reductions in taxation with the population using the proceeds to buy imports from abroad which we can only afford at present because of high oil revenue? The noble Lord, Lord Diamond, is saying, if I understand him correctly, that if the Government sell these industries they ought to build up our industry to meet the day when we shall no longer be able to buy abroad the goods which we can now buy through having great assets in North Sea oil. That revenue will begin to slide away after 1995.

The noble Lord, Lord Diamond, is absolutely correct. I believe that at this stage the Government should give some indication of what they are going to do with these huge sums of money. Used wrongly, they could have a catastrophic effect on our whole economy. We already see that the economy is overheating. The Chancellor has had to take certain measures today. Let us think of the overheating which would occur if the Government pushed those vast amounts from those particular industries into day-to-day expenditure. I believe we are entitled to a serious answer from the noble Earl.

This is where we have a complete difference of opinion between the two sides of the Committee. We believe these industries will do better for the consumer in the private sector. However, how the proceeds of the disposal to the private sector are dealt with is rightly a matter for my right honourable friend the Chancellor of the Exchequer.

When the water privatisation Bill comes before this Chamber it will be a matter for my department but the proceeds are rightly a matter for my right honourable friend the Chancellor of the Exchequer. The noble Lord, Lord Stoddart of Swindon, was absolutely right to say that there is a complete difference in philosophy as to where the benefit lies. We believe that the benefit for the consumer lies in privatisation of both electricity and water.

We have got absolutely nowhere. The Minister has not understood the arguments at all. We are not arguing for or against privatisation. On these Benches we are prepared to consider every privatisation issue on its merits. We are not impressed by the argument from the particular to the general, which is what the noble Earl contented himself with on his last intervention when he said "look at this" and "look at that". He gave two examples and said that perhaps I was not aware of the amount spent by the water industry on leaking pipes, or something to that effect.

That does not prove what is the totality of the figures, and the noble Earl knows that full well. We are concerned with the totality. There is no dispute about the figures and the noble Earl should get himself informed about this. We are concerned about how this huge sum of money will be used by his right honourable friend the Chancellor of the Exchequer. Will it be used in current expenditure via tax cuts or in maintaining the nation's assets? It is a simple issue and we shall certainly have to come back to it when we come to the main Bill. We shall try to raise the matter again at a later stage in the hope that the arguments we have put forward will have been considered with a little more care and understanding than they have been given at present.

I have tried to alert the noble Earl to the fact that we consider this a matter of the honour of the Government in their actions regarding assets of which the Government are trustees on behalf of the nation as a whole. That is the issue. How do the Government intend to deal with those assets? Will they deal with them by fully maintaining the body of assets or by dissipating assets and using the money for current expenditure?

I know that at this time of the night the Government will not welcome a Division so I shall not press the matter at this stage. I beg leave to withdraw the amendment.

moved Amendment No. 6:

Page 1, line 8, after ("corporate") insert ("in such a way that the environment and wildlife are permanently protected").

I make one comment which might give some comfort to the noble Lord, Lord Diamond. The concept of a National Rivers Authority will be to safeguard the future. We hope that will be the case but it remains to be seen just how that body will be constituted. However, if it is constituted in the way that we expect, it will have statutory obligations under the Prevention of Pollution Act 1974, which are considerable.

Additionally, there is a range of EC directives for the protection of the environment which we have a legal obligation to observe. Therefore, for the water industry it seems that the safeguards will be substantial and that the new water plcs which will operate the supply and disposal industries will have obligations on standards, and on river quality objectives in particular, which the NRA will be monitoring and will have the power to enforce. The prospects for the conservation of what we already have and its continuing improvement will therefore be greatly strenghtened by this structure when it comes into being.

Perhaps the noble Lord will permit me to intervene. The noble Lord knows that I always listen with the greatest care to what he says, and with the greatest respect, especially in this area where his knowledge is deep and wide. I agree that the NRA will be a very helpful body. However, the trouble is that nowhere in this Bill is there a single mention of the NRA.

I sympathise with the noble Lord, Lord Diamond, on that point. I, too, should like to see the NRA mentioned in the Bill. However, I believe and trust my noble friends that we shall see it enacted in due course and that the NRA will perform the functions that we expect of it. Therefore, the points that the noble Lord rightly emphasises will be adequately catered for.

I just add one footnote, going back to the previous amendment when the noble Lord, Lord Williams, with his great and expert knowledge pointed to the difficulties of valuation. When future purchasers of the water industry try to assess what the cost of the environmental obligations may be in the future—there are always fresh problems arising with regard to pollution—it will be another considerable question as to what the private shareholder is prepared to pay. That situation does not arise here. So far as concerns the noble Lord, Lord Diamond, and the amendment he has tabled, it is really copper-bottomed and far better than in the past. I believe that my noble friend Lord Caithness has a good answer to this.

I am sure the whole Committee will sympathise with the thrust of the amendment moved by the noble Lord, Lord Diamond. We certainly do. I recognise what the noble Lord, Lord Nugent, has said about the future arrangements for controlling the environment in respect of the water industry and related matters such as sewage. Nevertheless, the Bill covers not only the water industry but the electricity industry as well. Lord Diamond's amendment will embrace both. The electricity industry gives rise to a whole host of environmental problems, and only recently we have had very direct experience with one example. Perhaps I may speak parochially for a moment and mention the subject of Welsh sheep. The explosion of Chernobyl affected us particularly badly in that respect.

It is in this area where I believe the noble Lord has his most serious point. The Government have to take quite a clear stand. The environment and wildlife—perhaps I may also bring Welsh sheep into the amendment—must be properly protected by any measure that the Government make to change the ownership of these particular industries. That is why I support the amendment tabled by the noble Lord, Lord Diamond.

This Chamber is noted for the concern which it has always shown for the protection of the natural environment in this country, and in particular for wildlife and other conservation. Those members of the Committee who recall the passage of the Wildlife and Countryside Bill in 1981 will recognise the truth of that point. From what the noble Lord, Lord Diamond, said it seemed that he had forgotten some of the powers that the Government have under that Act. It is therefore with some reluctance that I cannot accept this amendment on behalf of the Government. As a Minister for the environment I am very concerned about this area. I fully recognise that the noble Lord has the best of intentions in moving it. But my simple point is that this is not the place to debate this issue. The time to do that will be when the main legislation privatising and restructuring these two major industries comes before the Committee. The functions of the water industry are of considerable environmental importance. It is already subject to tough statutory duties in respect of protecting the environment.

My noble friend Lord Nugent of Guildford mentioned the Control of Pollution Act of 1974. I also draw the attention of the Committee to Section 22 of the Water Act 1973, as amended by Section 48 of the Wildlife and Countryside Act 1981, to which I have already referred. Ministers, water authorities and internal drainage hoards are under a duty to exercise their functions, when they formulate or consider any proposals, as to

"further the conservation of flora, fauna and geological or physiological features of special interest".

There are related duties about protecting buildings and so on, taking into account the effect of proposals on natural beauty or amenity and protecting areas of special scientific interest.

I can tell the Committee that it is our intention to retain these duties, and to impose them on the successor plcs and indeed on the National Rivers Authority. We have indicated, in a paper produced in 1986 entitled The Water Environment: The Next Steps, various ways in which we intend to improve protection of the water environment. In particular, we intend to produce a code of practice dealing with conservation as well as recreation matters which will provide more specific obligations on the plcs and the NRA. We are in continuing discussion with the Nature Conservancy Council, the Countryside Commission and others about the preparation of this code. I am pleased to tell the noble Lord, Lord Williams of Elvel, that the Government also recognise the responsibility of the electricity supply industry towards the environment.

I am sure he will have noted with satisfaction that the White Paper Privatising Electricity stated that standards of safety and environmental protection are vigorously enforced now and will be no less vigorously enforced in the future.

I do not believe that anyone in this Committee would wish to detract from the statement which the Minister has given. He said that he was concerned about the environment. That has nicely wrapped up the question of water. I have no doubt that the noble Earl is satisfied that the National Rivers Authority will look after that problem which may arise from privatisation. I am not satisfied. Does that lead us to the conclusion that when the main Bill comes before this Chamber that the Minister will support the idea of a body similar to the river authority and responsible for the protection of the environment in regard to the electricity industry?

If the Minister can give us that assurance, I am sure that all noble Lords in this Chamber would be very happy. I know such an assurance would not be included in any brief which he receives from his advisers. If the Minister is genuine about his desire to improve the environment (in view of the problems of fly ash and pylons and other factors which arise from the electricity industry) will he give his personal support to the establishment in the Bill of a body responsible for protecting the environment arising from the privatisation of the electricity industry?

There is a major difference between the water industry and the electricity industry. I am one of many people in this Committee who is keen to improve the environment. On Monday I go to Brussels to discuss the large plants' directive. It is the emission from power stations that is of concern throughout the whole of Europe. I believe that the water industry is very different. The reason why we have set up the NRA is because not only is the water used by consumers extracted from rivers or reservoirs, but the water is then put back into the rivers or the sea. That is very different from the electricity industry.

I know all about water and of course it is very different from electricity. We are trying to impress on the Minister what our views are. He should not come back and tell us what we have already told him. In view of some of the rumours circulating about the attempt to demolish the shire counties following on the abolition of the metropolitan counties, that means this country will be faced with a situation where there will be no locally elected bodies responsible for the environment over wider areas. With that situation it is important that there should be a body which is given the responsibility of overlooking any damage to the environment arising from the privatisation of the electricity supply.

I make no apologies for putting the question directly to the Minister. Will he give his personal support to the contention that there should be that kind of body responsible for looking after the environment following the privatisation of electricity? I ask the Minister not to come back and talk about water because we are talking about electricity. There is a body responsible for the environment in the water proposals. Will the Minister lend his support to a body similar to that but applicable to the electricity industry?

I support the proposals that my right honourable friend the Secretary of State has put forward and the commitment that is in the White Paper. Those will be to the benefit of the environment.

I thank the noble Earl for what he has said about the environment. There is only one difference between us now. The question is whether the appropriate time and place for dealing with it is on this occasion and in respect of this Bill or during the passage of the later Bill. That distinction is not of such great importance provided we have the same government. We shall take that as one of the unfortunate probabilities; namely, that the same government will be in power in the next few months while it introduces the new Bill. That being so, it is of considerable satisfaction to hear from his own mouth how anxious he is about protecting the environment and wildlife and all the powers that already exist.

There are one or two small points that I would ask him to bear in mind before I seek permission to withdraw the amendment. First, the noble Earl said that the Government were going to be good enough to insist on these responsibilities being taken over by the successor companies. I am grateful for that most important statement.

I was also seeking to impress upon the Minister that we are concerned not only about the successor companies but about the successors to those successor companies. I recognise that the Government can impose terms which affect the immediate successor companies, but once they are in the private sector they will have freedom to move around (if I may put it that way) to change their ownership, to amalgamate, to sub-divide, and so on. Therefore it is essential that those responsibilities, which the Minister himself has said the successor companies should undertake, should be of such a form as to be permanent or as near permanent as the law can provide. I am asking him to be good enough to take that point on hoard in considering all these matters.

The Minister heard what the noble Lord, Lord Nugent of Guildford, said about the shareholders perhaps having to consider all the costs of protecting the environment. That is why it is appropriate that it should have been brought in at this stage when it is intended that commercial incentives and the attitudes that go with them shall replace public holdings. It is this drive for maximisation of profits, which is a perfectly proper activity in the commercial sector, that militates against incurring expenditure on maintaining wildlife and the environment. That is why it is so important that at this juncture special attention should be given to that point.

I conclude by repeating my thanks to the noble Earl. He has taken on hoard the main thrust of this amendment and made it clear that he is very interested in seeing that the environment is fully protected. In those circumstances, I beg leave to withdraw the amendment.

moved Amendment No. 7:

Page 1, line 9, after ("Wales") insert ("which takes full account of the long-term interests of the British coal industry").

We support the thrust of the noble Lord's amendment. In my Second Reading speech I made certain comments about the South of Scotland Electricity Board and its apparent desire to ask for tenders for supplies from foreign coal producers. If those tenders were accepted by the South of Scotland Electricity Board the remaining part of the Scottish coal industry could be put out of business, with a consequential serious loss of jobs.

If it turned out that foreign coal was cheaper for a time and then became more expensive, as the noble Lord, Lord Ezra, will know far better than I, one cannot recreate a coal industry once it has shut down and the mines have tilled in. If an industry such as the electricity generating industry—be it in Scotland or England and Wales—is privatised there may be a temptation to try to reduce the short-term input costs in the hope of making a short-term profit, and in that way damage could be caused to the long-term interests of another great industry in the United Kingdom.

I argued in my Second Reading speech that the proper way for coal-consuming utilities such as the electricity generating industry to behave is to base their input costs on long-term marginal costs rather than short-run marginal costs. My worry and the worry of the noble Lord, Lord Ezra, is that on privatisation there would be a concentration on short-run marginal costs at the expense of long-run marginal costs to the detriment of the British coal industry. That would be a complete disaster. I hope very much that the Government accept that it would be a complete disaster. In either accepting the amendment or by taking some equivalent action I hope that the Government will accept the case made by the noble Lord, Lord Ezra.

I should like to add one or two words in support of what my noble friend, with his deep knowledge of the coal industry, has already said. We are concerned with the transfer of assets from the public sector to the private sector. In the public sector it is proper to take account of a variety of costs. For example, it is proper to set down the cost of a public corporation buying coal at a greater price than need otherwise have been the case. It is proper to take into account in that same assessment what would have to be paid in unemployment relief to miners who were thrown out of work if mines were closed down as a result of going, as the noble Lord, Lord Williams of Elvel, said, for the cheapest temporary price.

It is proper for those considerations to be taken into account when they are all in the public sector. A country can sensibly carry on a coal industry which at the time is not producing coal quite as cheaply as it is being produced abroad because it can set off against that what would otherwise be the cost to the public purse of paying unemployment relief to miners, quite apart from the human misery of unemployment itself.

Under the Government's proposals the cost of paying unemployed miners would fall on the public purse but the benefit of paying cheaper prices for coal would enure to the shareholder in the private sector. Where you now have that distinction you can no longer set one saving against another additional cost; in other words, it will all be additional cost and the saving would be to the public sector and to the Government. The plc—the privatised electricity industry—would say, "Why should I take account of the cost of paying unemployed miners the wherewithal to live? It is no part of my responsibility. I owe a duty to my shareholders to provide them with a maximum profit and therefore to provide my customers with the cheapest possible coal. I have no interest whatsoever in the cost falling on the public purse—it is nothing to do with my shareholders." So one will get into that difficulty.

Therefore it is right that at this point in time the Government should make it absolutely clear that they take account of the long-term interests of the coal industry, in just the same way as if it were still the case that both industries—the coal industry and the electricity industry—were in the public sector and the same accounting rules applied. Therefore it is for the Government to say, as it has broadly indicated, although it has not come absolutely clean—this. They propose to wash their hands of any responsibility in regard to the future price of coal; that they will leave it for the future privatised owner of the electricity industry to buy coal at the cheapest price and, if the coal industry cannot meet that price, then it is just too bad: "We will buy it elsewhere, without taking account of what is a cost falling on the nation, because we have a public and a private sector which cannot be offset one against the other." I asked questions about this when a recent Statement was made from the Government Front Bench. This is a very serious point and I hope that the Government will make it absolutely clear that they support the amendment.

I should like to make one short point. The long-term interests of the coal industry are of course very much bound up with the security of supply in the electricity industry. One has to have an assured supply of fuel in the electricity industry and that, as the Government recognise, is going to be coal in the foreseeable future. As I have understood it throughout my lifetime, an assured supply of electricity in this country is dependent upon an equally assured supply of coal.

If one starts closing coal mines and thereby reduces the capacity of the coal mines to below, say, 75 million tonnes of coal a year, then one no longer has security of supply; security of supply depends not on activities in this country but on activities abroad, and perhaps the activities of shipping companies. Therefore security of supply is of the utmost importance and in my view it can only be assured providing we have a secure supply of coal.

The question I should like to ask the noble Earl is this: at what point would the Government intervene if the privately-owned generating companies decided to buy their coal abroad? When would the Government say, "Well, now it is our duty, as a Government, to ensure the supply of a life-support service which is electricity."? I have already mentioned that civilisation would be gone without electricity. Furthermore, how many million tonnes would the British coal industry have to decline to before the Government would intervene? Those are important questions which I hope the noble Earl will be able to answer.

I hope I may briefly intervene on this particular amendment in the light of the insidiously attractive arguments advanced by the noble Lords, Lord Ezra and Lord Diamond. There may be a case for supporting the coal industry as a whole and even a case for supporting an individual pit on social grounds, but I shall not detain the House by debating the merits of that particular proposition. However, what I do suggest to the Committee is that it would be quite wrong that a major subsidy such as has been suggested—either in the coal industry as a whole or to an individual pit—should be borne by the electricity industry by means of an uneconomic pricing policy.

I disregard for the moment the argument put forward by the noble Lord, Lord Stoddart of Swindon, because I can see that there may well be a case for paying a slightly enhanced price for British coal if it is going to secure a long-term supply. Whether it is true in this particular case is of course a different argument and one which I shall not pursue, although I recognise the merits of it. But so far as saddling the electricity supply industry with the cost of subsidising either the coal industry as a whole, or a particular part, I believe that that is quite wrong. However, if the government of the day—whatever particular complexion—feels on social, economic or on any other ground that a particular form of social or economic activity should be supported, then it should be by a clearly identified public subsidy. We can then debate the merits of it.

Over the years, the public sector's performance has been bedevilled by the fact that too many of those concealed social and political costs have been built in. I believe that that has damaged the performance of the public, and to a degree the private sector. For example, the private sector may have had to purchase coal at a price which has been determined by other than economic factors. Therefore I hope that my noble friend, when he replies, will in fact reject those arguments—insidiously attractive though they may be—and perhaps on another occasion we can debate the merits of supporting the coal industry in a more direct and open way, when social factors can be taken into account and the economical performance of the coal industry can be judged with greater clarity.