Water Act 2003 (Consequential and Supplementary Provisions) Regulations 2005

My Lords, I thank the Minister for explaining the orders so clearly and I hope that I shall do the same. I, too, shall take them together. He stated that large users will now have the opportunity to seek different water suppliers. The noble Lord was not in his current office when we took the Bill through the House. Perhaps I may gently remind him that we had a long discussion on the whole question of water suppliers coming into the market. We were concerned that if 2,000 larger users were able to move outside the current system, the fact that they would have to take less than 50 megalitres was not the problem, but the result would be that cherry picking would arise among those already taking supplies from water undertakers. I have to say to the noble Lord that it was one argument we did not win, but I still think that our concern is realistic. I am also aware that when we were taking the Bill through its stages, it was made clear that it would not apply to domestic users. I have no argument with that, but if 2,000 large non-domestic users are taken out of the system, the result will be a reduction of income for the undertakers, income they had formerly enjoyed. I do not think that the Government will argue the point; it is a fact. This may jeopardise some smaller users, be they business users or otherwise—and I do not include domestic users—even under the conditions applying today. When the Minister responds, I would be grateful for clarification of this point. I know, too, that my honourable friend Bill Wiggin put the same question earlier today at the other end. The Explanatory Memorandum to the order states that:"““No regulatory impact assessment has been prepared in respect of this Order””." So I looked at the regulatory assessments available in the Library, but I was not enormously encouraged. The Explanatory Memorandum policy background states at paragraph 7.2 that:"““The Government believes that properly managed competition should lead to greater efficiencies, keener prices, innovation and better services, to the benefit of customers. The potential benefits of competition must at the same time be balanced against the Government’s wider objectives to protect public health, protect and improve the environment, meet the Government’s social goals, and to safeguard services to customers””." That links in closely with what I said earlier. Since the regulatory impact assessment was completed, can he give us any figures on the costs that will accrue as a result? I ask that because clearly there will be costs. Paragraph 3.2.3 of the regulatory assessment states:"““We expect that there will be some increased costs to administer the guidance. There is a danger that where guidance is not completely prescriptive, parties to an access agreement might not be able to agree all issues and so refer the dispute to us””." The paragraph refers to the commission."““This could increase our costs as more resources could be needed to deal with a large number of disputes. However, we expect that as our experience of dealing with disputes develops, and precedents are set, our costs for this area of work would decrease””." Again, I would be glad of a response on those statements. Earlier I referred to our concerns about cherry picking. I draw the attention of the Minister to the contribution made by my noble friend Lord Elliott of Morpeth at the Second Reading of the Bill. He has been involved with water undertakers for many years. In his speech he stated that,"““they will attract large customers from the incumbent company in each area. Large customers are always important to every company. Water is a regulated, price-capped industry with income set in advance. Therefore, if large users leave a company, prices for domestic customers will rise””.—[Official Report, 6/3/03; col. 982.]" I give due credit to Philip Fletcher, the Director General of Water Services on his responsible handling of the economic regulation of the water industry. We pay tribute to him for his very good work. The Minister referred earlier to the fact that the percentage of licence holders who may object to the   collective modifications may be up to 20 per cent. If the percentage of objections is 15 per cent, is the provision so rigid that only the 20 per cent figure will activate the modifications? If a percentage lower than 20 per cent, but close to it, were to object, that might be of concern to the Government. Will he explain why this percentage was chosen? It may be that it proved to be the common denominator when this went out for consultation. I do not know, and I seek clarification on the point. Obviously we want a settled and regular future for the industry. I have already referred to the consequential and supplementary provisions in the 2005 regulations. I am sure that we all believe in an open market—I have acknowledged that the legislation does not affect the domestic market—but obviously the water companies prepare their budgets and set their prices for something like five years in advance. Does the Minister recognise that there are likely to be repercussions for some water undertakers? What is the Government’s view on that? Under these new circumstances—and if my suggestion that cherry-picking will be reflected in price increases in future years proves to be accurate—how will the voice of the consumer be dealt with? What is the Government’s view on how to keep such costs down to the minimum? While we welcome the order and the regulations, I have raised one or two particularly important issues. When we debated the legislation previously, my noble friend Lady O’Cathain, who is a director of South East Water, commented that she felt the arrangements in the statutory instrument were cumbersome, overly bureaucratic and potentially very costly. I come back to the costs. I hope that the Government can convince and reassure us that the charges laid out here will be beneficial to both the water industry and the people of Britain, who are the consumers of the water, and improve the quality and supply of our water. As regards the point that was raised earlier this week, given the new building programme that is to take place in the south and south-east and the great stress that that will place on the water supply, and given the forecast water shortages, is the Minister confident that the water companies will be able to fulfil their obligations, as has been suggested by his colleagues? That matter is also very much tied up with these regulations. I thank the Minister for introducing the legislation. I look forward to his answers to my questions.