My Lords, in the unlikely event that there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.

Clause 35 : Provision of infrastructure

Amendment 98

My Lords, I hope that we can treat this as a quiet oasis. On a day of great excitement, we can at least have the therapy of engaging ourselves in this Bill, which, along with all noble Lords, we welcome.

Amendments 98 and 99 concern the regulation of the provision of infrastructure. Under the proposals in Clause 35, providers of services, such as water companies, would not be able to bid for a large-scale infrastructure project. I understand the reasoning behind this but I would like to probe the mechanics further. We are dealing with large, often complex and expensive construction projects where, if I have understood the Government’s thinking, should things go belly up, if I might use that phrase, there is a risk that customers all the way down the supply chain will suffer—for example, through higher prices for their water supply.

I have some sympathy for that position but we should be careful not to exclude the very companies that have the skills, the expertise and the experience from participating in the work at which they might be very good. Surely there is also a risk that if a major infrastructure provider is not able to tender a bid for a project because it is a service provider, the work may have to be done by a company or companies with less skill and experience. The risk of project overruns, escalating costs and expensive mistakes would therefore not be diminished.

What protection is there for consumers in a scenario such as that? Does the protection lie in a contractual cushion so that the losses are absorbed at a level above the consumer? If that is so, could a contract involving a service provider doing its own construction not be framed in a similar way, perhaps guaranteed through the involvement of Ofwat?

I am happy to hear the Government’s no doubt exhaustive research into this area, but I am also wary of losing the skills of water companies that would, if everything goes according to plan, make the process easier, quicker and cheaper in order to protect against a worst-case scenario where everything goes wrong. Is there a more flexible approach? Amendment 98 is therefore an explicit requirement to apply these new provisions only to cases where the Minister considers that there is a significant risk to consumers, which would perhaps catch only the most complex of cases.

Amendment 99 would allow water and sewerage companies, and companies associated with them, to bid in the tendering process. I hope to explore with that how the accumulated expertise of these companies can be harnessed to facilitate the construction of major infrastructure projects. I beg to move.

My Lords, I welcome the opening remarks of the noble Lord, Lord Taylor, with which we entirely concur.

Clause 35 provides for a new regulatory regime designed to cover exceptional high-risk infrastructure projects. An important part of the regulatory regime is the requirement to put such projects out to competitive tender. Currently there is no requirement, but incumbent water companies do this. The new regime will also enable such projects to be designed, built, owned and operated by newly regulated third parties.

During debate in the other place concerns were expressed that the original drafting of the clause did not make it clear that the application of new regulations would be limited to exceptional high-risk infrastructure projects and that other water and sewerage infrastructure would continue to be deliverable by the incumbent water companies under Ofwat’s well-known existing regulatory framework. In response, and in close consultation with the industry through its representative, Water UK, the Bill was amended by the Government to make this limitation explicit. The amendment can be found on page 19 of the Bill, at lines 8 to 16. Therefore, Amendment 98 in the name of the noble Lord, Lord Taylor, has been addressed through the government amendment.

Amendment 99, to which the noble Lord also spoke, would modify the new regulatory regime’s prohibition on undertaker involvement in delivering exceptional high-risk infrastructure projects. The aim of this new regulatory regime is to mitigate customers’ exposure to the potentially severe financial consequences of delivery problems regarding these exceptional projects whereby delays and cost overruns may be significant. Allowing undertakers to bid on these projects, as Amendment 9 would allow, is thus directly at odds with the overall aim of this new regime.

The regulations will, however, have to specify also the extent to which an affiliate of the undertaker may bid for such work. Although the involvement of affiliates has not been completely ruled out, when we draw up our regulations we will need further to consider, in consultation with stakeholders, the extent to which it may be possible for affiliates to participate without undermining the policy objectives of the regime.

In addition, I emphasise that these provisions do not exclude the undertaker from directly delivering the parts of such projects that are less risky. We should also make it clear that the prohibition on undertaker involvement relates to the undertaker for the service area that will benefit from the infrastructure in question. An undertaker serving a different geographic area would not automatically be prevented from bidding for or delivering the infrastructure and being designated as an infrastructure provider under these regulations.

We recognise the considerable achievements of the water industry over the past two decades, and we will continue to rely on its expertise to deliver low-risk infrastructure and, crucially, to manage the tender process for higher-risk infrastructure. However, the second amendment would undermine the overall policy objective of the new regime, which is to ensure that customers are adequately protected from risks in respect of these exceptional high-risk projects and that customers ultimately receive value for money.

I hope that, with that explanation, the noble Lord will feel able to withdraw the amendment.

My Lords, I am grateful to the Minister for his explanation, which, as he described, represents a wise precaution. I can understand the Government’s desire to protect consumers, as indeed we would seek to do. I hope that the Minister will bear in mind that these regulations should not be drafted in a way such that some of the expertise which is rife is excluded. We are dealing with companies whose ownership and make-up may be extremely complex. They have specialist divisions that can contribute enormously to all sorts of infrastructure projects—particularly some of these high-risk ones. Finding a way of regulating, controlling and providing a cushion for consumers will be key to this. I hope that the Minister will bear that in mind in his discussions on the regulations. I beg leave to withdraw the amendment.

I oppose Clause 36 standing part of the Bill not because I have any great problem with it but for the purpose of initiating a general debate on hosepipe bans. I indicated at Second Reading that I had been approached by members of the horticultural trade about the problem of blanket hosepipe bans and the deleterious effects that they may have. I am a member of the Horticultural Trades Association, an interest I declared at the commencement of the Committee stage, and a professional horticulturalist.

The HTA has been very active in this area. The industry recognises—as we all do—that when there are water shortages during drought conditions, the use of water needs to be restricted. However, it is important that gardens are maintained during drought conditions through the sensible use of water, while banning wasteful use. In order to allow users to act responsibly and sensibly during water shortages, there are good reasons for supporting a clear and consistent code of practice—to be adopted across all water companies in the UK—in regard to restrictions on use; otherwise, water companies will be able to take differing approaches to the introduction of temporary bans.

There is a deep concern among members of the industry that water companies can bring in blanket bans instead of phased introductions of restrictions. These could include watering only at the beginning or the end of the day, or on alternate days, which, from my experience, is what happens in France when droughts are declared. Without a proportional and clear code, the actions of water companies can unnecessarily and negatively impact on domestic gardeners and the horticultural industry alike.

During the drought of 2006, confusion was caused among residents in drought areas over where and when gardens could be watered. This confusion was a result of inconsistencies in the orders issued by the various neighbouring water companies on how people could or could not water their gardens. This problem was augmented by the fact that in certain areas with similar geographical profiles and water conditions, a number of small water providers each introduced differing restrictions. As there was no consistency across the companies, many people received conflicting advice.

This, in turn, put people off gardening—specifically buying plants and planting them in their gardens—which negatively impacted on the environment and the health benefits of gardening. For many people—particularly for the elderly—gardening is a significant form of exercise. My wife will laugh if she hears this contribution.

The halt on gardening due to this confusion led to a downturn in sales at garden centres, thereby significantly affecting their business. Garden retailers in the south-east were particularly affected by these measures as it is often the area where droughts hit hardest. It was estimated that their income loss reached around £12 million as a result of the 2006 bans. Each retailer reported a 10 to 30 per cent sales loss, which led to significant staff redundancies. The garden retail sector brought in £5.35 billion of sales in 2008, but this included a 10 per cent increase over the previous year in grow-your-own products. Under a hosepipe ban, grow-your-own products are vulnerable. An omnibus survey conducted by the HTA in 2006 revealed that almost one in three households said that they would reduce their expenditure on plants and gardening products as a result of hosepipe bans being introduced.

The HTA gave an example of one member’s experience—a business which supplies hanging baskets to a chain of public houses—where orders were placed and preparation for production was made in January 2006. However, in May, a water company informed the chain that public houses would not be able to use watering systems to irrigate hanging baskets. The chain promptly cancelled the order, causing extreme difficulties for the member. However, as public houses are commercial properties they are not affected by hosepipe bans and the situation should never have arisen. Although this may seem a trifling point to some, the risk of confusion can lead to considerable loss of income, which is an especially acute problem during times of economic hardship.

The Bill provides a useful opportunity—I am sure that members of the HTA and many others would appreciate this—for the Minister to provide clarification and an assurance that the code of practice, which has been with the Government for some time now, is on the verge of being adopted.

My Lords, I do not have the horticultural experience, expertise or involvement of the noble Lord, Lord Taylor. Indeed, we have an extremely small garden and I have absolutely nothing to do with it as a matter of principle. However, like the Conservatives, we have had interesting discussions with the Horticultural Trades Association. I will not repeat everything that the noble Lord has just said on its behalf, but there appears to be a strong case for water restrictions being both clearer and more sophisticated in how they operate. I, too, will be interested to hear the Minister’s response.

My Lords, I support most strongly the very strong case put by my noble friend Lord Taylor. I, too, have been approached by the Horticultural Trades Association but my only interest is as a keen but very amateur, as opposed to professional, gardener. My noble friend Lord Taylor has already indicated the great difficulties that occurred during the drought of 2006, but I will concentrate this afternoon on the code.

The Horticultural Trades Association has put forward three clear principles on which the code should be based. First, it should be fair and proportionate to the difficulties involved—that is, the extent of the water shortage. Secondly, it should be consistent, particularly where the circumstances are the same but there may be different water companies operating to a different schedule. Thirdly, consumers should be made clearly aware of whatever restrictions there may be. I cannot stress that too strongly. Many of the difficulties in 2006 arose because consumers did not know what the situation was. I know that stabs at the code—if I may put it that way—have already taken place, but I am not sure that, so far, they have been altogether satisfactory.

My plea to the Minister this afternoon is for urgent attention to be given to making that code more sophisticated and appropriate. It is extremely important for a sector of the industry in England which is often overlooked. It is important to address its interests and those of all the amateur gardeners such as myself, who want to co-operate when there is a water shortage but, at the same time, want to see that things are dealt with fairly and in a way which is adapted to the situation. My noble friend has indicated the ways in which this might happen, including watering every other day and watering only in the evening. Also, what may or may not be watered? I think newly sown lawns have been suggested as a priority, whereas there is no point in watering established lawns. However yellow they look, they recover when the rains come. In times of shortage, watering them is not appropriate. My real request this afternoon, given that there is no way in which a very complicated amendment could be put before us in the time available, is for the Minister to take urgent steps to look at the code as it presently exists to improve on it and bring it into force.

My Lords, I, too, declare an interest as a commercial horticulturalist. I support my noble friend in his proposal. I chaired the House of Lords Select Committee on Science and Technology’s report on UK water management in 2005-06. We took evidence from Australia. We thought it would be instructive to see what happened to a country which had a 10-year drought—the “big dry”—and how it reacted to it and managed its own water supply issues. In many ways, while it was impressive to see how aware Australians are and how well the bills describe their comparative situation with other households, the one area in which I thought they failed lamentably was in adapting their horticulture to cope with the big drought. In other words, throughout Australia, in cities such as Melbourne and Canberra, you see gardens which would not look out of place in Surrey.

The message that I would give my fellow horticulturalists is that, given that periodic droughts and therefore temporary water pipe bans are going to be a fact of life, the horticultural trades should be urged to look at this as an opportunity rather than a threat. After all, many horticultural systems do not make heavy use of water. You can use things such as mulches rather than irrigating, and you can of course go for succulents and suchlike if that is your idea of a beautiful garden. However, I suggest that there are opportunities to reduce water use in gardens without making such dramatic changes to what we would consider to be a normal English garden.

Having said that, I entirely agree with my noble friend that codes of conduct which allow people to recognise the practicalities of their gardening systems and of the production systems in their gardens and which do not criminalise people for acting in a way that protects a very important asset—in other words, acting in a reasonable way—would be enormously helpful. At the moment, there is a danger that the very rough justice imparted by blanket bans will criminalise whole sections of society, and that surely cannot be right.

My Lords, I support my noble friend’s opposition to the clause standing part. I speak perhaps on behalf of all those who increasingly try to grow their own food. As the Minister knows very well, even this Government—some of us might say belatedly—have come to recognise that food security is very important. Whereas in recent years it was declining, there is now a keen and growing interest in allotments, and many families are trying to grow more in their gardens, even if only on patio areas.

I shall not repeat what my colleagues said about professional gardeners, because that is another matter. However, the most important thing that we have heard from today’s contributions is that, where two different water companies within the same area are dealing with the same problem in the same climatic conditions, they should be given a very clear steer as to how that might be approached. Clearly, the situation in Cumbria would be different from that in the south-west, and even more so in the south-east, and in Lincolnshire and East Anglia. However, even in those areas, water companies will sometimes overlap. I hope that the Minister will be able to give us an indication as to when these codes of conduct will be produced. Ideally they should be produced before the Bill passes but I presume that that will not be possible with Parliament proroguing very shortly.

I conclude by adding my support for my noble friend’s contribution—particularly the way that he approached the question of using water at different times and in different ways. I know that when the water Bill went through the House about five years ago, we had quite a long debate in this Room about the whole question of how irrigation could be used and about the way that traditionally businesses had been able to draw water, which will obviously be more restricted in future. I think that this is the first legislation on this matter since that time and we need to ensure that we get it right.

My Lords, this has been a very interesting debate and I am sure that the horticultural industry will be heartened by the very eloquent speeches made in defence of its interests. There are very few Members of your Lordships’ House who know more about this matter than the noble Lord, Lord Taylor of Holbeach, and I bow to his superior knowledge of the industry.

This clause replaces the existing provisions in relation to hosepipe bans in Section 76 of the Water Industry Act 1991. The clause lists the uses of water which a water company may temporarily ban under its own powers, extending existing provisions which enable water companies temporarily to ban the watering of private gardens and the washing of private vehicles by hosepipe or similar apparatus. This is in order to manage actual or anticipated serious shortages in public water supplies.

The noble Lord, Lord Taylor, referred to the problems of the 2004-06 drought. The existing powers, which allow water companies to restrict the watering of private gardens and the washing of private motor cars by hosepipe or similar apparatus, gave rise to much criticism of the water companies by their customers. The focus of the powers was seen as unfair and unreasonable, since very heavy uses of water, such as the filling of private swimming pools, were able to continue. The powers had not been updated since they were originally enacted in 1945 and no longer reflected modern, non-essential uses of water.

Widening the scope of the existing hosepipe ban legislation would therefore enable water companies to conserve more water for the public water supply at an earlier stage during a drought, thus helping to ensure that public water supplies for essential needs can be maintained whatever the severity and duration of the drought. It could also help defer or avoid the need for non-essential-use drought order powers, which impact more widely on businesses such as the horticultural industry. Ultimately, emergency drought order powers, which would have significant cost for domestic customers, businesses and the environment, could be avoided as well.

A number of your Lordships referred to a statutory code of practice on restrictions. I point out to the noble Lord, Lord Taylor, that a voluntary industry code has already been adopted; it sets out broad principles of consistency, transparency and so on, but it is not right to set it out in prescriptive detail in the Bill. However, discussions with the horticultural industry are already under way. My honourable friend the Minister in the other place, Huw Irranca-Davies, met representatives of the HTA and Waterwise on 23 February to hear their concerns about the code of practice. He undertook at that meeting to work with the water companies, through the statutory drought planning process, to ensure that their revised drought plans set out clearly how they anticipate using their powers, including their broad priorities for conserving water and the types of concession or phasing that they propose to introduce, and to ensure that they took account of stakeholder and customer views of the sort which we have heard reported in the Committee today. The Minister suggested that, by way of a first step, and following Royal Assent—but not, I am afraid, before it—he meet water companies to explore how they could work together and with stakeholders when developing a framework for managing the flexibility that these powers could give them to manage water shortages, and how they could best communicate their draft and final proposals to stakeholders and customers and obtain their views. That meeting will follow immediately after Royal Assent to ensure agreement on the sort of code of practice which we think should be in place.

Will it be a formal consultation or just an informal discussion?

It is an informal discussion, but one which the Minister has given an undertaking will take place.

Clause 36 provides an enabling power to allow the United Kingdom Government and the Welsh Assembly Government, through affirmative resolution order, to add further uses of water to, or remove them from, the list of water uses that could be prohibited or restricted in these circumstances. The flexibility is important, and is one way in which we can help industries which are most concerned about the provisions. This will allow the two Governments—the United Kingdom Government and the Welsh Assembly Government—to keep under review the most effective mix of water uses that water companies should be allowed to restrict, taking into account a whole range of criteria, including costs and benefits, changing patterns of water use and the impacts of climate change.

My Lords, I thank the Minister for that explanation and for the development of the thinking behind this clause. The water section of the Bill has indeed been somewhat reduced because of the truncated time available in this shorter Session of Parliament to bring legislation forward. It is useful to know that the Government take the view that there is ongoing discussion to be had on this subject, which is very important. Not just horticulture but business in general has learnt the importance of preserving and safeguarding water. It is certainly true that householders, too, have learnt the lessons of the summer of 2006. In some ways, the informal arrangements that people have made to collect their water in butts are probably the most effective things that they could do.

I am grateful for the Minister’s explanation and the seriousness with which he has taken what was, after all, a probe on this clause. I thank him for that.

My Lords, unlike in the previous debate, I oppose the Question that Clause 38 should stand part of the Bill not as a probing exercise but because we would have a better Bill if it were removed. Clauses 38 and 39 are twins. They both allow for flooding or coastal erosion to take place, provided that certain conditions have been met. That, at first glance, appears to be something of an oddity in a Bill which is designed to manage, curtail or prevent flooding or coastal erosion. However, I suspect—and I have not heard or seen anything to counter my suspicions—that the Government saw the Bill as a convenient, though not necessarily crucial, vehicle for these clauses and decided to make use of it.

My reason for saying that is because Clauses 38 and 39 have less to do with managing flooding and everything to do with managing the environment—specifically, with meeting targets under the European Union’s habitats directive, which requires a certain amount of land to be returned to a state in which it supports wildlife. Whether the directive is right or wrong, whether it makes the right or wrong demands on land, is not strictly relevant today, although I am sure noble Lords have views on that. The directive is a reality. The issue that I am raising is not about whether, but how, environmental targets should be achieved. I am not proposing, as some have feared, to do away with the power to allow some farmland to flood or erode for the benefit of the environment. I am, however, challenging the right as to who may take the decision to allow that to happen.

I said at the outset that Clauses 38 and 39 are twins. Both grant powers to permit work which causes land to flood or erode, if that work is in the interests of nature conservation, the preservation of cultural heritage or people’s enjoyment of the environment or cultural heritage, and if the benefits of the work outweigh the harmful consequences. Both clauses have those criteria at their heart. The difference between the clauses is, of course, that under Clause 38 the Environment Agency is the body which will make these judgments, weigh up the arguments and make a decision—against which there is no appeal.

Under Clause 39, the body making the decision is the local authority. The primary difference is democratic. One body is elected; the other is a quango—no matter how respected it is, it is still a quango. It is my firm view that decisions such as these, which will not be universally popular and which may impact on property prices and the character of local areas, should be made ultimately by a body which is accountable to the community it serves. That accountability is, when boiled down, one of the fundamental points of local democracy.

As to the argument that the Environment Agency must be involved because of its strategic overview, expertise and money, I agree that the Government in their wisdom have drafted a neat clause in Clause 39 such that if we were to drop Clause 38 altogether, the Environment Agency would nevertheless be ensconced in the process. Under Clause 39, the local authority cannot make a decision unless it has consulted the Environment Agency. The local authority must go the agency and I cannot see anything which would prevent the agency coming forward unbidden with advice. It need not be an entirely passive player.

Under Clause 39(8), the local authority can arrange for the Environment Agency to carry out the proposed work. Under subsection (10) the agency may make grants to local authorities for the work to be done. In other words, if we excise Clause 38 but retain Clause 39, we retain the strategic benefits of the Environment Agency and access to its skills and expertise, and to its financial wherewithal. What we would lose is the right for an accountable agency to make decisions on whether harm outweighs benefit. The executive power stays with local authorities where it rightly belongs. I am grateful that the Government have drafted such a thoughtful clause, because that has convinced me that Clause 38, as well as being wrong in principle, is superfluous to what this part of the Bill seeks to achieve.

As I have said previously, we have a good Bill. If the Government agree to remove Clause 38, we will have a better Bill.

My Lords, I should declare an interest as an ex-chief executive of the Environment Agency, before I speak against the proposition that Clause 38 disappear from this Bill. It seems slightly strange that the Environment Agency, as a flood authority, wants to flood things but often needs to take account of where water is best placed. As the noble Lord, Lord Taylor, outlined, it also has other responsibilities under the framework directive and nature conservation legislation, including the habitats directive. Much of the work that the Environment Agency will be trying to undertake under this clause is to take account of the effects of the reduction in flood risk on habitats and to replace that habitat elsewhere in a way that takes account of the fact that damage had been caused by flood defence activities. However, on occasion, it might simply also be in the process of improving the environment for wildlife and people. I am somewhat bemused that Clause 39 has gained favour while Clause 38, which, as the noble Lord, Lord Taylor, said, is its mirror image, has not.

Several times during our deliberations on the Bill we have discussed the roles of the Environment Agency and local authorities. The Environment Agency’s role is to have responsibility for riverine and coastal flooding and to take account of national and local issues in dealing with those two sources of flooding. The role of local authorities is to deal with flooding from ordinary water courses and surface and ground water. Therefore, if this clause were to disappear, the Environment Agency’s role, which, as set out throughout the Bill, is to work on a basis bigger than that of a single local authority and to deal with issues relating to main river and coastal flooding and erosion on a scale bigger than that of an individual local authority, would be severely compromised.

The Environment Agency, as the lead water management agency, has responsibility to improve the water environment for the benefit of local communities and wildlife, and it has legal obligations under the water framework directive and nature conservation legislation. However, that will not cut much ice if the real concern is not whether those objectives are pressed forward. Clause 39 is aimed at pressing forward those objectives but has not gained opprobrium from the noble Lord, Lord Taylor, so what is the difference between Clauses 38 and 39? The noble Lord mentioned democratic accountability but we have to recognise that, like it or not, the Environment Agency is a government agency and, with all the responsibilities placed on it by this Flood and Water Management Bill, it will never be a democratic organisation. However, in exercising its duties under this clause, it is so hedged around by controls, checks and balances that I hope I can persuade the noble Lord that it will be unable to act other than responsibly—not that it would act irresponsibly—and therefore I hope that he is reassured.

Is this clause anti-landowner? I do not think that it is. In many cases in the past, the Environment Agency has supported environmentally friendly land management. It has worked with landowners and other partners to improve local environments and has helped farmers and landowners to qualify for agri-environmental subsidies in their ongoing management of the land. Often, this has been poorer-quality land which, frankly, would not be of benefit for mainstream, high-profit farming activities and where getting some agri-environmental, higher-tier payments has been quite beneficial. In the past, the Environment Agency has worked with local landowners to ensure that that has happened. The Somerset levels are a key example of where, over many years, the agency has worked with local farmers to gain subsidies for them. The management of the broader levels for farming, wildlife and flood control has been an example of such partnership, and this clause allows the Environment Agency a bit more flexibility to get these things to happen in the right place—often, as I said, in areas of low agricultural productivity.

If the Environment Agency can create habitats only in very close association with, and as a slightly clandestine part of, flood-risk management schemes, which is basically what it does at the moment, then it is looking at land close to a flood-risk management scheme which may not be best either for the landowner or for wildlife or flood control. Therefore, this clause gives the agency much more flexibility.

The other worry is that the Environment Agency would come in with hobnailed wellies or waders and act unilaterally in this matter. However, I think that the safeguards surrounding the use of the powers under this clause involve not just belts and braces but string and Velcro as well. The Clause 38 powers are exercisable only under strict conditions and following full consultation. Most of the habitat creation schemes already delivered by the Environment Agency are, and in the future would be, subject to planning permission from local authorities, under which communities and stakeholders are consulted and there is a formal appeals process. Therefore, the planning legislation would lock in and control the thuggish nature of the Environment Agency if it were ever to get to that point, which under the leadership of the noble Lord, Lord Smith, would be unthinkable.

My Lords, when I first considered the Bill and the implications of these two clauses—which are essentially identical but refer to different authorities—I wondered whether, in order to provoke a debate, we should table amendments which would set out in the Bill the circumstances in which the Environment Agency might act and in which local authorities might act. I worked on some amendments which would make sense—to me, at least, if to no one else—and I found it very difficult. I came to the view that, other than using vague words—such as “small” and “large” or “less significant” and “more significant” and so on—it was impossible. I thought it was a waste of time and so I did not do it.

However, this clause stand part debate, initiated by the noble Lord, Lord Taylor, is useful because it provides the Minister with an opportunity to answer the questions I was trying to sort out in my own mind. I shall be interested to hear what the Minister has to say about the nature and scale of schemes in which the Environment Agency might want to get involved directly and the ones it will leave to the local authority. I say “leave to the local authority” but it may well be the local authority that is promoting a scheme. I mean schemes in which the local authority will act.

The noble Lord, Lord Taylor, appeals to my localist instincts by saying that it must always be the local authority, but I can see circumstances in which the Environment Agency might well be the better organisation to do it, with the consent of people locally and the local authority. The local authority may well prefer the Environment Agency to undertake a project, rather than doing it itself, particularly if it was on a larger scale—I will come to that in a moment—or if it was an important project under the habitats directive, or the kind of thing that the noble Baroness, Lady Young, was talking about.

I apologise for interrupting and am grateful to the noble Lord for giving way. If he reads Clause 39 carefully he will see that the Environment Agency is anticipated as properly being the delivery agency and the funder of these projects. Those are exactly the circumstances that I think the noble Lord is describing. I am trying to win him over to my point of view because I know he does not like sitting on the fence and is a localist at heart. If any noble Lord in this Room is a localist, it is the noble Lord, Lord Greaves.

I am not sure that at this stage of a Parliament personal flattery will do the noble Lord any good. Nevertheless, I agree with him. Both clauses are written in such a way that the organisations concerned can work in tandem and engage with each other. It is clear that successful schemes will in any case have to be done on the basis of a great deal of local consultation and discussion, even if there is not absolute agreement at the end of the day.

The noble Baroness said that many of the schemes would be on relatively poor land from a farming point of view, particularly those where conservation—the habitats directive—is the driving force behind them. Nevertheless, we all know that if sea levels rise as some—or, I think, most—of us think they will, there will be serious problems of coastal erosion, particularly on parts on the east coast of England. In some of those areas, where it may well be thought desirable for managed coastal retreat to take place, the land affected is agricultural land of high quality and value. There is no getting away from that. Such schemes, when introduced, might well have beneficial effects for wildlife and so on, but will certainly not have beneficial effects for the farming industry and agricultural production of this country.

Under those circumstances, the view that has been put forward by the noble Baroness—that everything in the garden is rosy and the Environment Agency will be seen as a wholly benevolent organisation that is not thuggish—will just not be the case. There will be a great deal of heated debate because there are and will be important vested interests on all sides. However, if it is thought necessary and in the wider national interest for that kind of managed coastal retreat to take place, there is an argument that, in some circumstances, the Environment Agency probably has to be the lead body. Getting local consensus will be almost impossible. There are interesting discussions to be had and interesting arguments on both sides.

I was just remembering our long and happy hours talking about the Essex coastal defences and trying to think of a circumstance in which this clause would be the key to resolving some of the noble Lord’s concerns. Without this clause, the Environment Agency will be restricted in its ability to defend particular parts of the coast; if it holds the line, as it were, and therefore loses some wildlife habitat because the sea comes up against a harder defence—that is generally what happens when you hold the line—a corresponding habitat will have to be created elsewhere to compensate, under the habitats directive. Without this clause, my understanding is that the agency would not be able to do that. There is therefore more likelihood that it would be forced into inflexibilities over what to do about coastal erosion than would otherwise be the case. Defra might tell me that I am wrong, but my understanding is that that is one of the ways in which this clause gives the flexibility to allow such decisions to be made about what is going to happen on the coast in consultation with local people and local authorities, because there is some means of saying, “We are going to put a hard defence here because we can recreate the habitat that has been lost somewhere else”.

I should declare an interest: I am chairman of the fundraising committee for the Great Fen, which no one, even under the most extreme climate change scenario, will ever regard as being close to the coast—I hope. Nevertheless, it is possible to see that creating wetland habitat in association with the Great Fen could replace habitat that was being lost on the coast that otherwise would mean that it was not possible to make a hard defence and therefore would save prime agricultural land. It is about flexibility and having lots of ways of dealing with it. I am sorry, I am going on now and getting enthusiastic.

My Lords, I am grateful to the noble Baroness. I think that she and I are agreeing with each other. I am trying to point out that there are two different things here that the clause will apply to: first, the habitats directive stuff, trying to provide more good habitats for wildlife and replacement habitats where habitats are lost, and, secondly, defending the coast. If it becomes difficult to defend the existing line of the coast, particularly in parts of eastern England but in other places too, decisions will have to be made at a wider level than just one local authority.

Which parts of the coast to defend, on which parts to install and maintain the hard defences that the noble Baroness talked about, and which ones can be sacrificed, if that is the word, so that a managed coastal retreat can take place, are not matters of pure science where the answer is obvious. It is a matter of making decisions about which areas have to be defended, for whatever reason. The obvious example is where there is a town that would otherwise be flooded—you have to try to defend that town if you possibly can. However, even where the coast is in countryside, if I may use that term, there are choices to be made, and when they are, they will be made on a bigger scale than one local authority.

I do not believe that this process can be implemented by the Environment Agency or any other national body simply imposing a scheme willy-nilly. That will not happen. Instead, there will be a huge public debate between all the different organisations, bodies and elected authorities from national to local level, and sooner or later decisions will have to be made.

In both Clauses 38 and 39, a number of safeguards are set out that will probably ensure that unless there is a broad consensus on the larger-scale schemes—it will not be 100 per cent in many cases—they will be impossible to implement. Apart from anything else, under subsection (8) orders have to come as affirmative orders to Parliament. I know that the Conservatives do not treat affirmative orders in this House as importantly as some of us do, but I will not pursue that subject again until we come to the next big one.

Both these clauses probably are necessary although, as I say, I have considerable sympathy with the noble Lord. We would like to see them stay but to some extent that will be determined by the answers the Minister gives.

My Lords, perhaps I may intervene briefly. It is very important to recognise that it is not in doubt that managed retreat or measures that might cause coastal erosion have to be taken by the relevant authorities and that inevitably the Environment Agency, with a strategic overview of flood management, must have an important role. The question that my noble friend Lord Taylor posed is: should there be democratic accountability in this process? I find the argument very convincing. I cannot conceive of how the Environment Agency would be able to impose its wish, if it so desired, and the noble Baroness assured us that it would always act reasonably. Nevertheless, the idea that the Bill should, in theory at least, give the Environment Agency the ability to impose its wish in the face of opposition from a lead local flood authority—and that is conceivable—seems untenable. Therefore, I hope that this clause can be omitted.

When we come to Clause 39, it will be helpful to strengthen the requirement for the local authority to consult the Environment Agency and effectively to ensure that, if the Environment Agency thinks the local flood authority has it wrong, it in turn can ensure that the measures do not go ahead. However, the idea that the Environment Agency could be empowered to take these measures and forget about agricultural land— which is always raised as though that is the issue, although one should think about the retirement bungalow on the edge of the coast—will be controversial, as the noble Lord, Lord Greaves, said. This is clearly something where local democracy should play a part. Local people should be expected at least to have the ability to participate in decisions, and for that reason I support my noble friend Lord Taylor.

My Lords, before the Minister responds, I, too, should like to support my noble friend on this very important amendment. I go back to the contribution made by the noble Baroness, Lady Young of Old Scone, who said that, on the whole, the powers in the clause would not enable the agency to take away class 1 ground. At earlier sittings of this Committee, I referred to the consultation that is going on around the Morecambe Bay area, which clearly does take away—

I hope that we do not get confused here. This clause is aimed at three primary purposes: nature conservation, preservation of the cultural heritage, and people’s enjoyment of the natural heritage. It is not intended to determine what happens when the Environment Agency makes a decision about a flood risk management scheme around the coast. That is dealt with in other parts of the legislation that surrounds flood risk management. Therefore, whether or not a broader scheme, such as the Morecambe Bay scheme and some of the Essex setback schemes, goes ahead is determined on the basis of its flood risk management requirements. This clause simply refers to enabling the Environment Agency to make things wetter for nature conservation, for heritage or for enjoyment, but not for the basic purpose of flood risk management, which is covered elsewhere in legislation.

Indeed, but the clause could still be used for the same purpose. That, however, is a minor point, to which we shall return.

The noble Baroness said that compulsory purchase has not been used, but that does not stop it being used in the future. We need to ensure that whoever makes those decisions should be democratically accountable. The Environment Agency, well led by the noble Baroness in her time, does not fall into that category—I think that even she would agree with that. Where the Environment Agency and a local authority have between them to decide the best way to go ahead, the ultimate decision must surely fall to the Minister. As I understand it, the buck must stop with the Government of the day. I am unhappy with the clause, because, as other noble Lords have suggested, it gives great powers to the Environment Agency, which is not democratically responsible to anybody.

The Committee, I am sure, is very grateful to the noble Lord, Lord Taylor, for initiating this interesting and important debate on Clause 38 and the role of the Environment Agency. I thank all noble Lords who have spoken, particularly those who support the Government’s position, including the noble Baroness, Lady Young, and, I think, in the end, the noble Lord, Lord Greaves. I hope that I shall be able to reassure the noble Earl, Lord Selborne, the noble Baroness, Lady Byford, and the noble Lord, Lord Taylor, that the clause is important and should be part of the Bill.

The clause allows the Environment Agency to carry out works to manage flooding, coastal erosion or water levels for the benefit of the environment, including the conservation of nature and landscape, the preservation of cultural heritage and people’s enjoyment of the environment or cultural heritage.

However, before carrying out such works, the Environment Agency would be required to be satisfied that the benefits of the works outweighed any potentially harmful consequences and consult—the list is quite long—the lead local flood authority for the area in which the work was to be carried out, the district council for that area, if any, the internal drainage board, if any, whose area the work was in, and the owners and occupiers of land likely in the opinion of the agency to be affected by the works.

In carrying out works, the Environment Agency must have regard also to both the national and local flood and coastal erosion risk management strategies, and any guidance issued on the application of those strategies. The local strategy will be led by the lead local flood authority, which must involve the Environment Agency, other local authorities and internal drainage boards in its creation. I hope that the noble Earl, Lord Selborne, will agree that that answers one of the important points that he made; it is a reply also to the noble Baroness, Lady Byford.

Furthermore, any project which involves any material change in the use of land will require planning permission, with all the related public and democratic processes that that implies. Taking all this together, I would describe the position as one in which both local democratic organisations and wider processes of consultation play a full part in the decisions on the use of the power. It is hard to sustain an argument to the contrary.

Deleting the clause would seriously affect the Environment Agency’s capacity to manage water in an integrated fashion and carry out projects which would harness the positive effects of flooding and erosion. We are accustomed to thinking of flooding and erosion as destructive forces, as they often are, but they can also have enormously constructive effects. In the face of uncertainty around the magnitude of the impact of climate change, we must retain the capacity to manage flood waters in an integrated and beneficial way as well as reducing the potentially harmful effects.

The new definition of flood and coastal erosion risk management in the Bill permits authorities to use their functions to take action to reduce the potentially harmful effects of flooding or erosion. However, it does not allow them to do things solely to gain the beneficial effects of those processes. That is why we need Clause 38.

There was much debate in the other place about the need to manage flood risk in an integrated way at a landscape scale, through working with natural processes. This approach is strongly supported by the National Trust, the Royal Society for the Protection of Birds and the wildlife trusts which have recently written a joint letter to Ministers expressing their concern at the possible removal of this clause. They also state in their letter to the Minister that they have written to Nick Herbert—known to the noble Lord, Lord Taylor—in the other place,

“outlining why these powers are vital to the continued functioning of water level management schemes that protect some of our most cherished and wildlife rich landscapes, such as the Norfolk Broads and Somerset Levels and Moors. We also highlighted why they are vital if the Environment Agency is to continue delivering wetland creation in partnership with farmers, allowing them to adapt their business in areas that are no longer economic to defend”.

The final paragraph of the letter refers to the process of wash-up, on which we are embarking tomorrow, and the trusts state their hope that Clause 38 will survive that process. That is not a matter for me today, but I should like to put it on record that the letter supports the inclusion of the clause. This concept was also promoted by Sir Michael Pitt in his review of the 2007 floods when he recognised that it is important to ensure that water is in the right place at the right time and that it should be kept away from areas where it can be destructive.

Clause 39, to which a number of your Lordships referred, provides the same powers for internal drainage boards and local authorities. We believe that those bodies should have those powers and be able to play their part in this integrated approach. It would be strange for the Environment Agency, our principal national water management body, not to have similar powers. Indeed, I remind the noble Lord, Lord Taylor, that in Committee on 17 March, in relation to an amendment on Clause 7, he said:

“We will deal later with the relationship between local and national strategies but, for the purpose of this debate, we are broadly content with the twin-track approach”.

From that, I understood him to be supporting the role of the Environment Agency and the local authorities, but perhaps he would—

I must inform the Minister that I was correctly quoted and that I was trailing the debate that we would have today. Indeed, the model of this twin-track arrangement is extremely clever—so clever that we can afford to do without Clause 38.

That was fine until the noble Lord’s final few words. He did indeed say that the construction of the Bill reflected,

“the reciprocity of national and local obligations”.—[Official Report, 17/3/10; col. GC 268.]

He also found that to be pleasing, and I agree with him. It would be surprising therefore if this twin-track approach was not also reflected in the powers to provide for wider benefits from flooding and coastal erosion. For example, the Environment Agency is the competent authority for meeting the water quality objectives which we are required to meet under the water framework directive. While much can be achieved by local authorities and internal drainage boards, they do not have the competency or capacity of the Environment Agency to manage whole catchments, main rivers and the coast; and we will often need the agency to play a leading role to avoid increasing the burdens upon the local authorities and drainage boards.

The agency makes an enormous contribution, through its flood management works, to many of our most attractive areas, a number of which have been referred to in the debate, such as the Broads, the north Norfolk coast, the Yorkshire Derwent and the Somerset Levels. Some of this work would continue purely for the purposes of reducing the harmful effects of flooding. However, if the agency were not given powers to continue to do these things for their beneficial effects, or if such work could be led only by a local authority, that would seriously impair the agency’s capacity to act in an integrated and efficient fashion.

This new power will not divert resources from flood and coastal erosion risk management. It will, however, enable the agency to act, subject to being able to raise the funds to support environmentally friendly land management. This includes carrying out flood and water level management work, which will allow farmers to maintain habitats and so be eligible for agri- environment payments.

I thank the Minister for his response to this debate, which has been a good one. To some extent, it is about how individual noble Lords view the democratic process and the degree to which they are committed to seeing through an environmental policy based on local democracy. I hope that no one doubts my commitment to the environment. I am aware of the communications from the World Wildlife Fund and the Wildlife Trusts. I hope that they know my position on these matters. The key to this lies in local democracy, which does not remove the central role of the Environment Agency. Indeed, I reassure my noble friend Lord Selborne that, under subsection (4), Condition 3 is that the authority should have consulted the Environment Agency. If the work affects a main river—which it will in almost every circumstance—the Environment Agency should have consented to it. I cannot imagine any scheme that would not affect a main river in some way.

I remind noble Lords that the description of local authorities means not only the lead local flood authority but a district council for an area in which there is no unitary authority and an internal drainage board. All these authorities are able to play a part in initiating schemes of this sort but they do so on the basis of community consent being at the heart of the matter. That is the first ingredient of the process. That is why this is an important debate and why it is right that the Grand Committee should consider my proposition. There will be later stages of the Bill where this matter can be considered. In the mean time, I leave the matter as it is.

My Lords, Amendment 100 seeks simply to raise the question of how the utility companies can play their part in contributing towards flood management. It proposes that the Secretary of State may, by order, require utility companies to report on how resilient their infrastructure is to withstand flooding. I accept that the Bill has been constructed so that stakeholders will be consulted on the national strategies, but I raise this point as an opportunity to debate what interaction there will be with the utility companies. Plainly, we must look at the water companies and sewerage undertakers as they will, necessarily, be involved in any flood planning or post-flood considerations.

We must—as I am sure the strategies will—consider the effects of leakage from water supply pipes and how saturated the ground around them can become, which of course lessens the absorbent capacity of the soil in the event of high levels of rain or groundwater. That will have an impact, of course, and it will be essential to know whether the water and sewerage infrastructure, much of which is Victorian, is holding up, before and after flooding. One presumes that if it was discovered that there had been damage to a major sewer or drain, that would mean a change in priorities for the authorities and it would be important for that to be reported.

As well as the obvious utilities such as water and sewerage, my amendment is also intended to cover gas and electricity. As a result of flooding, it is possible that there will be a loss of power in wide swathes of the country, at considerable cost and inconvenience. It is important for the resilience of power lines, gas pipes and other utilities essential for the smooth running of a modern economy to be assessed and for information about their general health to be made available to the authorities, which will then be able to make decisions based on the reports’ findings.

I accept that the Minister may not wish to accept the amendment in the form in which it has been tabled, but I hope that he will find the suggestions useful and that, in turn, he may be able to give assurance on the record that such concerns will be taken into consideration. I beg to move.

I commend the sentiment raised in the noble Earl’s amendment. I declare an interest as a member of the Climate Change Adaptations Sub-Committee. The noble Earl may be reassured to know—I am sure the Minister will tell him—that under the Climate Change Act many of the utilities are already required to report on their readiness for the impacts of climate change, including flooding and other pressures. That may reassure him that the amendment is not required in this form in the Bill.

However, there is one glaring error and anomaly in the reporting requirement laid down under the Climate Change Act—that the communications companies are not required to be resilient against flooding and the other impacts of climate change. We tried nobly during the passage of the Digital Economy Bill to get that remedied. I hope that your Lordships will note for some future occasion that there is a need to make sure that when we increasingly face floods, droughts, heat waves and the other impacts of climate change, our communications networks are not immediately knocked out. We will not know whether that will be the case because the only thing in place at the moment is the beginnings of an informal agreement with the communications companies.

I commend the sentiments that the noble Earl has put forward but the amendment needs to be more comprehensive.

My Lords, I thank the noble Earl for introducing the amendment. The new clause on safeguarding critical infrastructure is identical to one that was discussed in the other place. The Government have set up a new Cabinet Office team to ensure that critical infrastructure sites—for example, water treatment works and electricity sub-stations—are resilient to flooding. The Welsh Assembly Government are also engaged in this work.

The Cabinet Office team is co-ordinating the efforts of the lead government departments across all sectors to assess the vulnerability to flooding of their most critical sites. This analysis and supporting evidence is helping to produce the sector resilience plans. We take the view that utility companies should take full account of the present climate in developing their infrastructure, and the first versions of the sector resilience plans demonstrate that those companies have responded to the need to improve resilience to flooding, supported by the economic regulators. A summary of those plans will be made publicly available.

As the noble Baroness, Lady Young, said, there are also powers in Sections 62 and 67 of the Climate Change Act 2008 for the Secretary of State and the Welsh Ministers to require reports from reporting authorities, including utilities, assessing the effect of climate change on their operations and explaining what their policies and proposals are for dealing with it.

The noble Baroness raised the question of communications companies, which, she said, were left out of this process. They will be covered by the Civil Contingencies Act enhancement programme, which is effectively a review of that Act, and phase two of that process will consider whether additional duties are needed for all sectors. That could include the communications companies.

There has already been a significant amount of action under the natural hazards programme. For example, flood defences have been provided for the east Hull and west Hull sewage pumping schemes; there is a critical site in Exeter where the electricity distributor has replaced switchgear at a substation and installed a new installation above the level of potential floodwaters; Humberside fire and rescue service has raised IT and communications equipment 1.5 metres above ground level to ensure continuity of service in future flood events; and National Grid has invested more than £1 million in flood defence capabilities.

We take the view that the reports that will come in from the reporting authorities, including the utilities, will consider a range of hazards. Together with the sector resilience plans, they will be much more useful than individual reports from individual utility companies, which we feel would present only a limited picture and could impose a bureaucratic burden on those companies and indeed divert them from the main effort. I hope that, with that explanation, the noble Earl will feel able to withdraw his amendment.

My Lords, I thank the Minister for setting out how utility companies must consider and report on resilience to flooding, and I thank the noble Baroness, Lady Young, for her support for the sentiments behind my amendments and for confirming that this already happens for climate change adaptation. I beg leave to withdraw the amendment.

My Lords, these three amendments address the question of the automatic right to connect privately built drains to the public sewerage system, which can be a cause of flooding.

The right to automatic connection was identified by Pitt as a contributor to flood risks and ought to be brought to an end. Clause 42 provides that all future lateral drains and sewers that are to be connected to the public sewerage system must be constructed to standards to be prescribed by Ministers, known as the universal build standards, and provides for transfers to the water companies by requiring developers to enter into agreements with water companies under Section 104 of the Water Industry Act 1991. However, Clause 42 also provides that water companies cannot refuse connection of drains and sewers to the public sewerage system on the grounds that new drains and sewers do not meet the prescribed standards or otherwise comply with the Section 104 agreement. The Government’s thinking behind this provision is that, in future, there ought not to be any private lateral drains or sewers, but as the Bill stands it is less a requirement and more of an aspiration.

My Lords, Amendment 101 would specify in the Bill a number of issues that would otherwise have to be included in agreements for the adoption of new foul sewers and lateral drains by statutory sewerage undertakers. It would also remove the requirement that a mandatory build standard published by the Secretary of State and by Welsh Ministers be followed unless the parties to the agreement agreed to a different approach. We are committed to preventing problems of private sewers connecting to the public system. Clause 42 therefore requires adoption agreements to be in place and for the sewers then built to be adopted.

When we were developing this policy, stakeholders advised us to retain the agreements under Section 104 of the Water Industry Act 1991 as the vehicle for adoption. Such agreements are flexible enough to include whatever detail the parties may agree, and Ofwat can resolve disputes. We therefore have only three requirements: first, an agreement must be in place; secondly, it must have an agreed build standard; and, thirdly, there must be provisions for adoption.

We think it is right to promote innovation and enable the needs of a particular site to be reflected, and therefore we do not wish to constrain agreements by making further requirements in the Bill. This flexibility is supported by both the House Builders Federation and Water UK. This approach will ensure that all new sewers which connect to the public network are adopted and do not become a burden on householders, and that all such sewers are built properly so that undertakers do not end up adopting a liability.

The water companies and developers also support a mandatory build standard. Developers want a transparent standard and sewerage undertakers want to be sure that what they have to adopt is fit for purpose. The mandatory build standard gives them this, and both developers and sewerage undertakers are helping to draft a build standard, which will be consulted on over the summer. Without such a standard, Section 104 agreements might routinely take longer to put in place, putting undue burdens on small developers who do not currently use the adoption process and delaying developments. However, where site-specific standards and innovative approaches to drainage may be useful, Clause 42 also allows the agreement to depart from the mandatory standards. The Bill enables us to place further requirements on these agreements if needs be, but we hope not to use that power and wish to retain the flexibility of the current provision.

The new clause proposed by Amendment 102 will, in our view, impose a costly and disproportionate new burden on the Environment Agency compared with any real benefit and will duplicate work already done on costs. In July 2007, the Government consulted on whether to do an audit of private sewers and lateral drains by requiring water and sewerage companies to establish pilot schemes to assess their extent and condition. Seventy per cent of those who responded rejected the idea and only 21 per cent supported it. The stakeholder steering group for Defra’s review of private sewers agreed with that result.

The latest estimate from UK Water Industry Research of the costs of a full mapping and surveying exercise is in excess of £1 billion. Even pilot schemes would be extremely expensive, and that is all before a penny is spent on the cost of repair. Such an approach would also duplicate work already done. The companies’ cost estimates have been reviewed by Ofwat and were set out in the impact assessment that accompanied the Government’s announcement on 15 December 2008 of their decision to proceed with the transfer. The estimate was of over £1 billion in one-off capital costs, average annual operating costs of £133 million and an increase in customers’ bills of between £4 and £12 per year. An updated impact assessment will accompany our consultation on the regulations for the transfer when they are published. I do not believe that pilots would produce enough useful information to warrant the cost or the delay in bringing the benefits of transfer to householders. In practice, the costs of an audit would be better spent dealing with the real problems that exist in relation to private sewers. In the light of this, we therefore see little value in the approach proposed in this new clause.

Turning to the other new clause in this grouping, proposed in Amendment 103, the noble Earl referred to Sir Michael Pitt’s recommendation in his review of the 2007 floods. I repeat what the noble Earl said:

“The automatic right to connect surface water drainage of new developments to the sewerage system should be removed”.

The Bill achieves this by requiring proposals for surface water drainage from new development to be approved by the SUDS approving body in accordance with national standards before any residual connection to the public sewer is allowed. The relevant provision is paragraph 16 of Schedule 3 to the Bill, which inserts a provision into the Water Industry Act which says that the right to connect under Section 106(1) of that Act, in respect of surface water, may be exercised only if a drainage system was approved under Schedule 3 to this Bill and the approved drainage system provided for such a connection. I hope that answers the noble Earl’s point.

Water and sewerage companies will be statutory consultees in this process. Surface water cannot, in any event, be connected to public foul-only sewers unless the water and sewerage company gives its permission. The ability to connect foul drainage to the public sewerage system will remain, but subject to the requirement under Clause 42 for a Section 104 agreement, as I have already explained. Foul-water flows and connections are, in themselves, not the primary cause of foul sewer flooding. They are usually stable and predictable. Most sewer flooding occurs when rainstorms lead to excess levels of surface water in the public sewer. For reasons of public health, foul sewage should be taken away for treatment and the right to connect remain. Water and sewerage companies have a statutory duty effectually to drain their areas, and it is for them to finance their investment programmes, which should already make provision for improving the capacity of their infrastructure in response to local development plans. If a local planning authority thinks additional capacity is needed earlier than planned to enable a development to proceed to a certain timescale, it can already seek a contribution to the financing of that investment from the developer. It may also refuse planning permission where it is not satisfied that the necessary infrastructure can be put in place.

This amendment would undermine the balance that we have sought to achieve between the needs of developers, water companies and local authorities. We know, therefore, that it is of some concern to the House Builders Federation. While I sympathise with the general aim of the new clause, the provisions contained in the Bill, together with the existing provisions of town and country planning legislation and the Water Industry Act 1991, already provide a regime that protects against unrestricted burdens being imposed on new development. I hope that, with these explanations on the three amendments to which I have spoken, the noble Earl will feel able not to press them.

My Lords, I thank the Minister for putting on record his very full response to my amendments, for stating the Government’s commitment to preventing problems and for explaining the adoption agreements which must be in place before connection. On Amendment 102, the pilot scheme was a suggestion. I am sorry that the Minister rejected it, but I suppose I accept his reasons for doing so. I particularly thank him for clarifying Pitt’s Recommendation 10 that the automatic right to connect should be removed, and for explaining that I should find it in paragraph 16 of Schedule 3 and putting that on record. With that, I withdraw the amendment.

My Lords, after what seems like a long gap, we now return to the issues which were raised in relation to voluntary groups and the welcome concessionary charges for community groups contained in Clause 43. Basically, Amendment 104 seeks to take the language used in Clause 44 on social tariffs and include it in Clause 43.

This may be thought a little extreme in that it moves from merely the provision of public goods to the provision of a basic utility of life for individuals but, if you take into account that voluntary groups provide very necessary social benefits to all parts of society, it would be a logical step to ensure that these amendments are in place and that these charges cannot be expanded to cause them difficulty. We should bear in mind the history behind this and the great problems we had when voluntary groups in certain parts of the country were faced with a huge expansion of charges that threatened to destroy them or effectively make many of them unviable. I suggest that slightly stronger concessions than the Government have given would reassure these groups, which provide and support the aims that virtually everyone else involved has endorsed.

I ask the Government how Amendment 105, in the name of the noble Lord, Lord Davies of Oldham, can achieve the aims outlined in the amendment standing in my name and that of my noble friend. I look forward with interest to the noble Lord’s reply. I beg to move.

My Lords, I welcome the opportunity to discuss social tariffs and I hope that the Minister will allow me to anticipate his proposals in Amendment 105.

We welcome the introduction of the social tariffs clause; indeed, my party has raised the issue for some time. My honourable friends Nick Herbert and Anne McIntosh have publicly spoken about their concerns that certain groups—the Scouts among others—would find themselves at a terrible disadvantage if they were responsible for the so-called rain tax. As the noble Lord, Lord Addington, mentioned, it seems an awfully long time since he trailed this issue. He is an experienced parliamentarian and, if I remember correctly, he managed to achieve a debate on this issue early on by including it in the glossary of other definitions under Clause 6. We have therefore had plenty of time to think of the implications. The Government have not been deaf to such concerns and have included their amendment in this grouping.

However, we regret that they have simply plucked out one part of the Walker report. As noble Lords, know, we would like a White Paper to consider both the Walker Report and the Cave review in the round—particularly the former in relation to metering and affordability.

The Minister said that the Government’s new Clause 22 was an opportunity to give Ofwat a role in approving or rejecting the charging scheme and ensuring that decisions are commensurate with the guidance he will publish. Will noble Lords see a copy of that guidance? What consultation has there been on it? What direct consultation has there been with Ofwat? It would be useful to know the answers to those three questions as they clearly relate to the background against which the guidance will be issued.

I should also raise a point made to me by one of the water companies. The Government are farming out the decision on judging who is to benefit from the reduced tariff. That places social policy in the hands of utility companies, which I think even the Minister would consider strange. Can he give assurances that the guidance will leave decisions in the hands of the Minister?

My Lords, I, too, congratulate the noble Lord, Lord Addington, on his ingenuity in returning to the subject in this way. The group of amendments relates to Clause 43 on concessionary drainage charges for community groups and to the relationship between Clause 43 and Clause 44 on social tariffs for individuals.

Amendment 104 proposes to make two changes to Clause 43 that would bring it more into line with the approach taken in Clause 44. It would mean that cross- subsidy is allowed for in concessionary schemes for community groups, and that while Ofwat's powers in connection with the approval of charges schemes still apply, they are subject to the provisions in subsection (1) and the new subsection (1A) proposed by this amendment.

Concessionary charges for community groups will involve only extremely small amounts of cross-subsidy by other customers. On the other hand, the cross-subsidy involved in social tariffs for individuals could potentially be much larger, running into several pounds rather than just a few pence. Furthermore, the first part of the amendment would provide that concessionary schemes can include subsidisation by other organisations and businesses. This does not need to be set out in the Bill. Including it could infer that non-domestic customers were expected to pick up the tab. The Government’s view is that it is for undertakers to set their charges schemes in a way that ensures a fair breakdown of charges between domestic and non-domestic customers. Ofwat ensures that this is the case. For these reasons the amendment is unnecessary.

I recognise that there is a legitimate question about who should provide the subsidy to community groups. I refer noble Lords to paragraph 3.11 of the draft guidance that has been circulated to noble Lords. It proposes that both domestic and non-domestic customers are best placed to share the cost of the cross-subsidy to community groups. It states:

“Undertakers will need to decide whether the cross-subsidy that community groups will receive is met only by non-household customers or by the undertaker’s customer base as a whole”.

Government Amendment 105—and I thank noble Lords for their welcome for it—enables water and sewerage undertakers to operate concessionary schemes for community groups for surface water drainage charges. It enables the Secretary of State and Welsh Ministers to issue guidance to undertakers; and undertakers are required to have regard to this guidance. Our view is that Ofwat would also have to have regard to this guidance by virtue of its responsibility as the independent economic regulator responsible for approving undertakers’ charges schemes.

However, concerns were raised during Second Reading around whether Ofwat would have regard to our guidance, particularly as Clause 44 on social tariffs makes it explicit that both Ofwat and undertakers must have regard to the guidance issued under Clause 44. The purpose and effect of the government amendment is therefore to make it explicit that Ofwat as well as undertakers must have regard to guidance on concessionary schemes that may be issued by the Secretary of State and Welsh Ministers. The noble Lord’s Amendment 106 is virtually identical to government Amendment 105 and I hope, therefore, that the noble Lord will be satisfied with ours.

On the question of publication of the draft guidance, it was made available to noble Lords at the start of the Committee stage. The final version will be available later this year. I should make it clear that the guidance will set a clear framework, and companies, as I have said, will have to have regard to it. The draft guidance provides at paragraph 4.2 a clear statement of the groups which we believe should benefit, including faith groups, scout groups, community amateur sports clubs and so on.

We are aware that, in some parts of the country, particular water companies have got into difficulties with charges for community groups. I would like to put on record that we are pleased that United Utilities, after a sticky start, has agreed to extend its moratorium for 2010-11 to include village halls and community centres where these are owned or leased by community groups. They were not included in the 2009-10 moratorium but will now enjoy the same concessions as properties owned by scout and guide associations, faith buildings and community amateur sports clubs. These were the groups that were most disadvantaged by the switch to site-area charging for surface water drainage. I understand that any other group that is experiencing financial hardship can discuss this directly with United Utilities, which may be willing to provide assistance through its hardship fund.

I hope that with these explanations, the noble Lord will feel that his amendments are unnecessary and that he will feel able to withdraw them.

My Lords, I thank the Minister for his reply. I had a series of questions but I thought I should wait until I heard what the Minister felt the Government’s amendment achieved before I asked them. Most of those questions have been at least partially answered but one that does not seem to have been is this: is there going to be a standard that the Government expect Ofwat to be able to judge by with regard to fair and reasonable charges? Do the Government expect that to be part of the final code of conduct? An answer to that would be helpful. How about seeking a review? If we can get a definitive yes to that, many of the concerns behind these amendments would finally be put to bed—if not totally, then at least they would be sent upstairs with their cocoa. If we could get that on the record at this point, it would help.

The question of what is an affordable charge, which is I think what the noble Lord is asking, will be an issue for consultation. It is difficult at this point to say exactly what the affordable charge would be. To quote the example of another water company, Severn Trent Water currently runs a concessionary scheme for community groups that has worked well. Under the scheme, organisations that benefit from the concession tend to pay on average around £100. However, it will be for companies to decide what charge to levy on community groups, based on an impact assessment and the consultation within their own customer bases. That will enable them to reflect local circumstances and characteristics within their own operating areas.

I realise that I am not giving the noble Lord a complete answer because we cannot be specific about amounts, but we are edging our way towards an affordable charge structure that will meet the demands that he is making.

I hope that I have not missed an answer on this point. One of the concerns expressed earlier was that in certain areas water companies might deal with these issues in different ways—in other words, water company A could be much more sympathetic than water company B. I was not certain whether this had been reflected in the Government’s amendment.

I assure the noble Baroness that that matter will be covered in the guidance.

My Lords, I thank the Minister for his reply and I thank everyone in his department who has tried to clear this up. The cock-up school of history is alive and well and functioning, which is why we ended up having to move these amendments in the first place. I think that the Minister has addressed as much as one can reasonably expect from the Treasury Bench at this juncture. I always distinguish between what I think will be a government answer and a straightforward political answer. We have a good answer, if not a perfect one, and it is something that can be built on. I beg leave to withdraw the amendment.

Amendment 107 would insert a new clause setting up a scheme of affordable charges. To a certain degree, this is a reprise of the debate that took place in the House of Commons but I have one or two questions to add. Forming the background to this amendment are the 2007 floods, which cost homeowners and businesses more than £2 billion. The average cost per flooded home was between £23,000 and £30,000, and one-quarter of homeowners were not fully covered by insurance. Thirty per cent of householders were forced to relocate to temporary accommodation, one-third of whom had to stay there for more than a year, and the average cost per flooded business was between £75,000 and £112,000, with 95 per cent covered by insurance. Those figures are well known but, as I said, they are the background to the amendment.

In the aftermath of those floods, many people found that large insurance companies in particular were extremely helpful, but some found that some of the smaller companies hiked up premiums, introducing excessive excess charges for homes that had never previously flooded, and the postcode nature of the charge calculation was so broad that even owners of homes that were not flooded experienced problems in finding an affordable premium. Many of us are aware that many insurance companies do not have sufficiently detailed local knowledge to be able to exclude all the homes that are not at risk of flooding.

One example that my honourable friend Martin Horwood raised was a household in his constituency of Cheltenham faced with an excess charge of £20,000 in the event of a flood. As he pointed out, that is not insurance and it is not an amount that people can generally afford to pay. The Association of British Insurers, the ABI, has said that one-third of the 3 million new homes that the Government want to see by 2020—a target that will not now be met but nevertheless is still in place—will be built on flood plains. Whether or not those particular houses are at real risk of flooding, the fact that they are on flood plains will raise alarm bells with many insurance companies and will affect the premiums that they charge. Therefore, the amendment puts forward a scheme for affordable charging so that customers are protected from the whims of insurers, who obviously, and not unreasonably from their point of view, are acting in the interests of their companies and shareholders.

This is essentially the same amendment that my honourable friends moved in the House of Commons. I think that it is slightly more elegantly worded, although whether other people will agree I do not know. It was debated substantially and put to the vote, which was lost, on Report in the House of Commons. In private meetings with my honourable friends, the Minister, Huw Irranca-Davies, was receptive to discussing the idea but thought that the existing arrangements with insurance companies were sufficient. However, he did say that on the back of the Bill he would look to meeting the ABI and the National Flood Forum to deal with the insurers’ and their customers’ issues.

My specific questions are: have any such meetings already taken place; what was their outcome; and can the Minister give us more information and assurances that discussions are taking place to ensure that insurance for people affected by flooding, while reasonable from the insurers’ point of view, is possible and practicable from the point of view of the people who need to be insured? If a large number of people in the country cannot get affordable insurance for their properties, that makes the prospects for those areas rather dire. I look forward to hearing the Minister’s comments.

My Lords, the noble Lord, Lord Greaves, has raised the important issue—and painted the picture well—of insurance premiums for householders living in flood risk areas. As the noble Lord said, it is a matter of great concern to many householders who face paying what are effectively flood level premiums even though they have never before been flooded. That means that many people cannot or will not pay home insurance and, therefore, could be left terribly exposed if the worst came to the worst.

I believe that around one-quarter of the homes flooded in the floods of 2007 were not covered by insurance. This is a matter of great and ongoing concern. My honourable friend Nick Herbert was right when he said in another place that we are sympathetic to concerns and that our party is prepared to work with the Government and the Liberal Democrats to see if we can find some workable proposals that will both protect householders and have the support of the insurance industry.

I am slightly wary about supporting this particular amendment because it would oblige the Minister to interfere in the insurance market without setting clear parameters for doing so, beyond sharing risk equitably. I accept that the noble Lord cannot push his amendment at this stage and has tabled it to enable debate. I welcome that. I would like to hear from the Minister what the Government are doing to address this problem, where premiums are unaffordable but the consequences of being uninsured are even more so. What work have they done with the insurance industry, in particular, the co-operation of which will be very important? There is a great deal of work to be done. The noble Lord has asked some interesting questions and we would support any efforts to speed up matters.

My Lords, I agree that this is an important subject. It is a matter of enormous concern to the people who are affected when they are seeking to insure their house, particularly after suffering from flood damage when they are seeking to get new cover. The issue of affordable insurance cover for flood risk concerns many Members of the House and indeed people outside.

The noble Lord’s Amendment 107 calls for a system based on the principles of equity and shared risk, which is indeed a desirable system in cases where we do not know who will need to make a claim. The National Health Service is a good example of shared risk; most of the time none of us knows when we will need its expert care, and we all benefit at one time or another, so it is fair that we all pay towards its costs.

Flood risk, however, is different. With increasing confidence we know where flooding will occur and even, on average, how frequently. While pooling together is important and fair for those facing similar levels of risk, it seems unfair for the five out of six homeowners not at risk to pay higher insurance bills to subsidise the few very high-risk homeowners, particularly when there are steps that can be taken to minimise the risk.

For those most at risk, we need insurers to provide the incentive to make properties resistant to flooding—for example, with flood gates—and resilient to flood water. If homes are fitted with rugs instead of carpets and have raised electricity sockets and waterproof plaster, for example, householders can be back in their homes within weeks as opposed to months and any insurance claim will be much lower than otherwise, thereby minimising any rise in premiums and excesses.

The Government currently have a voluntary agreement with the insurance industry called the “statement of principles”, and the Welsh Assembly Government have a similar agreement. These mean that cover against flooding is widely available as a standard part of buildings and contents policies. Insurers are obliged to offer cover, even to those at significant risk, if there are plans in place to reduce it within five years. The voluntary approach means that we can safeguard the benefits and efficiency of a competitive market, which I think is of concern to the noble Lord, Lord Taylor, without the need to add bureaucracy at a time when in general we are trying to reduce it.

However, we know that flood risk will increase with climate change. The Environment Agency states that investment will need almost to double in real terms during the next 25 years just to avoid more homes becoming at significant risk. The best way of safeguarding affordable insurance in the long term is to invest in risk management. Every pound that the Environment Agency spends on new and improved defences prevents £8 in future costs.

We have improved our understanding of flood risk through the publication of the national flood risk assessment in June 2009. That is available to insurers and to the public through the Environment Agency’s website. It is in all our interests—of government, insurers, home and business owners, community groups and authorities—for there to be more investment in risk management, but the questions are how much more, who should pay and who should decide what level of risk people should have to live with. These are questions neither for the Bill nor for government alone. That is why my honourable friend the Minister in the other place, Huw Irranca-Davies, has already met MPs and the ABI to plan a flood summit. That will be held later in the year and take a comprehensive look at flood insurance.

We think that there will be a series of meetings in which we expect the following groups to participate: the National Flood Forum, the Association of British Insurers, the British Insurance Brokers Association, the Local Government Association, interested MPs, insurance and social inclusion experts from the Treasury, the Department of Communities and Local Government and the Department for Work and Pensions. The summit will discuss how we can safeguard affordable insurance in the long term, taking account of the investment challenge due to climate change highlighted in the long-term strategy. We do not believe that government intervention in the insurance market to safeguard those few households who struggle to get insurance through a risk-pooling scheme is a workable solution, but we want to continue with the dialogue. As I have said, that will be going on later in the year.

I hope that, with that explanation, the noble Lord will feel able to withdraw his amendment.

My Lords, I shall certainly withdraw my amendment—in a minute. I am grateful to the Minister for that comprehensive explanation of where things stand. I hope that the summit to which the Minister referred and which sounds like a useful initiative—it will no doubt be held on a summit so that it is not flooded—survives the general election. We look forward to hearing about the discussions that take place and, one hopes, some progress. My only quibble with the Minister is in his describing the number of people who are finding it difficult or impossible to get adequate, affordable insurance as “few”. It all depends on what one means by “few”. I suppose that, as a proportion of the total, they are perhaps few, but the number of people concerned is growing. In the areas concerned, quite a lot of people—I was going to say “in this boat”, but that is the wrong metaphor yet again—would not consider it satisfactory to be dismissed as “few”. I do not think that the Minister was dismissing them; he was accepting that for a growing number of people, it is a real problem. On that basis, I beg leave to withdraw the amendment.

My Lords, this is a fairly minor amendment which the Government have bettered with their own amendment, and I shall not detain the Grand Committee for long. The point was brought up by the Delegated Powers and Regulatory Reform Committee in its sixth report of the Session. The problem in essence was that Clause 47 allows the Secretary of State to amend any water Acts by order, with a view to making them compatible ahead of any consolidation of the legislation. The committee suggested, not unreasonably, that this power should be used only if a consolidation Bill is at least on the horizon. Both amendments do just that and we are grateful to the Government for introducing their own amendment on this point. I beg to move.

I hardly need to reply to that speech and I shall be very brief. I should begin by expressing my gratitude to the noble Duke for the way that he moved the amendment. As he said, it is very similar to government Amendment 109. Both would make the order-making power under Clause 47 to make pre-consolidation amendments subject to a requirement that a consolidation Bill has been presented to either House of Parliament. These amendments respond to the Delegated Powers and Regulatory Reform Committee report which noted that such a requirement was not included in the clause as drafted.

Since the only reason for making pre-consolidation amendments is to pave the way for a consolidation Bill, we are happy to respond to the Committee by providing that a consolidation Bill should be presented to Parliament before an order for pre-consolidation amendments is made. This change also provides more consistency with similar pre-consolidation provisions in other legislation. I hope therefore that the noble Duke will agree to withdraw his amendment and support our Amendment 109.

I am most grateful to the Minister and I beg leave to withdraw the amendment.

My Lords, we are almost at the end of the Committee stage. Clause 49(3) contains provisions at paragraphs (a) and (b) to allow certain provisions in the Bill to be brought into force separately for England, by the order of the Secretary of State, and for Wales, by order of the Welsh Ministers.

The government amendments extend these differential provisions to apply also to the new social tariffs provisions in Clause 44, which allow undertakers to reduce charges for individuals who have difficulty paying, and the new bad-debt provisions in Clause 45 which incentivise landlords to identify their tenants to water companies to enable recovery of water charges. Clauses 44 and 45 are relatively late additions that occurred during the course of the parliamentary stages. The government amendment updates Clause 49 to take account of this. I beg to move.

I shall speak only because we have reached the conclusion of the Committee stage, and I thank the Minister for ending on such a positive note. The number 43 is rather unusual—it is a prime number whose digits when added together also come to a prime number, but a rather boring one. The number 45 is much more interesting and useful, and I am very happy that the Minister has proposed such a change.

I thank the Minister also for the way in which he has handled the business today. I thank the noble Lord, Lord Davies of Oldham, for his work during this stage of the Bill. Tomorrow we will consider other stages in a slightly less conventional form than is usual. This may therefore be an opportune moment to thank the Bill team for its work. We have of course, in the main, supported the Bill throughout and I hope that tomorrow or the day after it will be brought into law.

In the momentary absence of my noble friend Lord Greaves—who can pick his moments and would, I am sure, wish to do so if he were here—I extend his thanks, my own and my colleagues’ to the Minister, the noble Lord, Lord Davies of Oldham, and the Bill team for an interesting, productive and, on the whole, friendly exchange. I think the next stages of the Bill will be on Thursday, rather than tomorrow. No doubt, by the end of the day we will have passed a Bill which will truly contribute to the welfare of the nation.

My Lords, I certainly do not intend to delay the Committee at this stage. I thank the noble Lords, Lord Tope and Lord Taylor of Holbeach, for their very kind words. I express my own thanks to the Bill team, which has supported me on my own today. I found it a daunting prospect when I was told I would be doing it. I should bring to the Committee the apologies of my noble friend Lord Davies of Oldham, but if your Lordships look at the Monitor you will see that he is, as we speak, in action in the Chamber on the main debate of the day. I enjoyed being his apprentice for the first two days and I very much appreciate the kindness of all noble Lords, who have been very gentle with me today, in seeing through the final stages of the Committee. I think I am obliged to move the amendment to conclude.