Examination of witnesses (Questions 80-99)|
TUESDAY 30 JANUARY 2001
80. Controlled; yes, I accept. All I am trying
to get at is the reasoning behind it?
(Mr Davis) It is about proper water resource management
as well as about access for competition reasons.
81. Can I move on to the issue of compensation.
How much compensation do you expect to have to be paid for revoked
abstraction licences between the coming into force of the Act
(Mr Vincent) There is no firm estimate of the amount
of compensation, but it presupposes that the circumstance will
arise in which compensation is payable. The draft Bill is founded
upon the existing provisions in the Water Resources Act 1991,
which provide for payment of compensation by the Environment Agency,
in the event that a licence has to be revoked or varied, at the
direction of the Secretary of State, that is to say, after appeal;
only at that point does compensation become payable. And there
has been no instance of such compensation arising so far.
82. How many have been revoked so far?
(Mr Vincent) Quite a number of licences have been
revoked, very often on a voluntary basis. In terms of what we
might call enforced revocation, I can think of no instance where
this has arisen so far. So if the situation arises then only after
the appeals process has been exhausted and the Secretary of State
has upheld the Agency's wish to revoke a licence would compensation
be payable, and it would then have to be determined, preferably
by negotiation between the Agency and the licence holder; but
the legislation provides for settlement of disputes by the Lands
Tribunal. The draft Water Bill contains a clause which would bring
to an end the availability of compensation in that circumstance,
if licence revocation is necessary to protect the environment,
and it would be brought to an end after 15 July 2012, a long period
83. Are you allowed to confiscate assets simply
with a long period of notice, which is what it is?
(Mr Vincent) Yes. This, of course, raises issues under
human rights legislation.
84. So you are not confident this Bill could
actually get the required endorsement by the Secretary of State
to say it complies?
(Mr Vincent) Our advice is that, in this respect,
it is a balance to be struck between the public interest, which
might be construed in terms of environmental protection, and the
rights of, in this case, the licence holder. The view is that,
by signalling its intention considerably in advance of this provision
taking any effect, the Government is making it plain that this
is its intention, and that any abstractor who feels
85. So the fact that you intend to steal somebody's
assets, with a long period of notice, makes it alright, does it?
(Mr Vincent) There is a period of, from where we are
now, 12 years in which any abstractor, who feels that he might
be vulnerable, in that sense, can determine ways in which he can
ameliorate any damage.
86. How is abstraction different from something
like a house; it is property, is it not, in a sense, so why should
it be different? Everyone would be appalled if someone's house
was taken away without compensation, so why should they feel differently
about their rights to take water?
(Mr Davis) Ministers have taken the view that water
is a finite resource, that we need proper water resource management
systems, which will make it possible to make sure that where water
is scarce it is used for the things that best benefit the country.
So Ministers decided that they wanted to get all abstraction licences
time-limited, and the effect of the announcement, made back in
1997, which is 15 years to 2012, is to allow a 15-year period
during which negotiations can take place between abstractors and
the Agency about time-limiting licences. The documents make clear,
i.e. the Government's policy makes clear, there is an expectation
of renewal, but the licences will not be renewed if there are
strong environmental reasons for that. But the Government has
decided that 15 years is a reasonable period of notice to give
for this resource, which many people regard as a public asset
as much as a private asset.
87. So this will be something for the lawyers
to get their teeth into, in due course. Can I ask you about trickle
irrigation, because people who abstract for trickle irrigation
are going to be brought within the remit of requiring a licence.
And there is, for example, a very successful farm in north Norfolk
which employs up to 850 casual workers in the summer, 70 full-time
workers, that is going to require a licence, and the understanding
is now that it may well not get a licence; that, presumably, would
be a wholly unwelcome consequence of this Bill, would it not?
(Mr Vincent) The Bill, indeed, contains this provision.
We have yet to determine the nature of the transitional provisions,
but the document `Taking Water Responsibly' said that such abstractors
would have a period of at least two years in which to apply to
the Environment Agency for a licence, and that the Environment
Agency would then proceed to determine each application on its
merits. In some parts of the country there is particular pressure
on water resources, and the Environment Agency would need to take
the overall water resources position into account in determining
the licence application.
88. But if you have been running a highly successful
business and you have just invested £4 million into that
business, on the basis of the assets you already own and use,
and indeed you have reduced your own water usage by very advanced
ways of, in this case, looking after their crops, if they are
going to be put out of business by this Bill, presumably, they
will be owed compensation?
(Mr Vincent) That would be a matter to be determined
in the event that such a circumstance arises.
89. Therefore it should be on the face of the
Bill. If you are going to require licences to be required for
trickle irrigation, which have not required licences for abstraction
before, surely, if the consequence of that is that substantial
businesses are no longer able to operate, they should receive
compensation, that should be on the face of the Bill, should it
(Mr Vincent) I think this would be a matter which
would come within the remit of transitional provisions, which,
as I have said, we have yet to design in detail.
90. But, in general, you would regard trickle
irrigation as being preferable to the extraction of large amounts
of water; it is a logical way of targeting the use of water, and
most people would expect that that was an advantage, rather than
a disadvantage, it actually provides a benefit to those water
authorities, rather than the other way round?
(Mr Vincent) Quite. Generally speaking, trickle irrigation
is seen as a very efficient form of irrigation, and I believe
that the Environment Agency would take that fully into account
in determining the overall position.
91. Why should businesses like this even be
imperilled by putting it within the remit of the Environment Agency?
(Mr Davis) I think there are two points there, really.
Two propositions have been put to us; one is in relation to compensation
if this should arise, the other is that these people should be
given 15-year licences straightaway, like everybody else has who
has had a licence for a long time. So we will need to consider
this very carefully; clearly, we need to talk to the NFU and the
other trade associations representing these bodies. We expect
the Agency to manage water resources sensibly. These people have
been taking water out of the environment for some time, and so
the current position reflects their abstractions; the fact they
are going to have a licence for it does not, of itself, change
the overall position, in terms of the water environment in the
areas concerned. If it needs to reduce abstractions in a particular
area, we would expect the Agency to look at the case for reducing
it on the part of trickle irrigators, or anybody else taking water
from the environment, and make a judgement about which of those
is best; there are appeals to the Secretary of State against any
of these changes, so there are safeguards there. We would expect
the Agency to behave responsibly in this, but, clearly, we need
to have further thought, in the light of comments that we have
received on this issue.
92. When would you like to come up with an answer?
(Mr Davis) Certainly, before the Bill is introduced.
Chairman: But, obviously, for this particular
farmer, who has put in evidence to us, and for other farmers who
are thinking of moving to trickle irrigation, the sooner the better,
is it not?
93. Surely, no-one is going to move to trickle
irrigation now, are they, until it is clear what the legislation
is going to be?
(Mr Davis) There are two choices, in a way, spray
irrigation, which is subject to control, or trickle irrigation,
which is not subject to control. If the only way that people can
get hold of water for their farms is trickle irrigation currently
not subject to control, they may move to that, despite the threat
in the future; but they may not make significant capital investments
in relation to that until the position is clarified.
94. Why has the Government decided that the
regulator should remain as an individual, rather than perhaps
a commission or an authority?
(Mr Davis) If we go back, just briefly, to the aim
of regulatory reform, as set out by the Government in `A Fair
Deal for Consumers', it was to put consumers at the heart of regulation
and to make regulation more open, accountable and predictable;
so we judge any changes that are proposed against those aims.
I think there are three main arguments for setting up boards.
One is to depersonalise the regulatory system; the second is for
workload reasons; and the third is to get better decision-making,
because you can have a range of expertise, you can have a range
of people involved in decision-making. The main arguments against
having a board are that it could slow decision-making, it could
reduce accountability and transparency, it could increase regulatory
uncertainty, and it could increase the cost of the regulator.
I would say that, even with a board, you would need a strong chairman,
and the Secretary of State for Trade and Industry has appointed
Callum McCarthy and David Edmonds as two regulators, both of whom
could be said to have strong personalities. So the aim of depersonalising
actually is hard to achieve, if you are going to have a strong
chairman, and, in a way, the only way one can depersonalise is
to have three Ian Byatts, or three Philip Fletchers, they would
have to be as powerful as each other in those three posts. So,
as I say, it is difficult. The workload of the Director-General
for Water Services, in our view, is not as great as that of the
workload of the Director-General of Ofgem or Oftel, there are
fewer companies, the regulatory role is very different, competition
is at a very different stage of development. We already have three
regulatory bodies for water, so that the checks and balances that
a board might provide are already built into the regulatory structure.
The Government's view is that it is better to have arguments about
the balance to be struck between price increases or decreases,
environmental improvement, greater public health protection, in
public rather than in a board of the regulator. So, on balance,
Ministers decided it was best to retain a single regulator; these
decisions are on balance, but Ministers' view is that there is
a significant difference between water and the other sectors where
boards have been created.
95. Is this a turf war between the Department
of Trade and Industry and the Department of the Environment, Transport
and the Regions?
(Mr Davis) I do not think so. I think, when the Department
of the Environment, Transport and the Regions asserts that water
is different, we have to show the ways in which it is different,
and others will be sceptical until we show those things, but I
think we have shown those differences to other parts of Whitehall.
The proposals in this Bill were agreed interdepartmentally.
96. The Committee have been advised that the
status of the Water Advisory Panel is very unclear, and the Secretary
of State will establish a committee. Can you tell the Committee,
is it to be an independent body, a new, non-departmental, public
body, a departmental committee, or a committee of Ofwat; what
is the status of the Water Advisory Panel?
(Mr Davis) I will ask Mr Anderson to comment.
(Mr Anderson) Thank you very much. I will try to do
so between coughs. The proposal to set up the Advisory Panel was
actually announced in July last year; the Panel, as you say, is
going to be appointed by the Secretary of State. The intention
behind it is that it will bring together a range of experience
and will be able to consider issues which are relevant to the
Director-General's functions. It will also be a forum for independent
advice, and what we have got to remember is that, as the Director-General
has pointed out this morning, he has no shortage of advice, but
that advice is almost invariably partisan. Now I am not suggesting
that the members of the Advisory Panel will be divorced from their
particular interests, but it will be a collective responsibility
to advise. The Panel will be set up in consultation with the Director-General,
and the Secretary of State will be able to prescribe those areas,
or matters, in which the Panel should advise the Director-General;
and, in addition to that, the Director-General will be able to
refer any other matter to the Panel. As to the precise technical
status, as to whether or not there will be an advisory NDPB, or
a departmental committee, or what have you, frankly, we have still
to sort out that fine-grained difference, but I suggest, actually,
97. Why do you say it is a fine-grained difference,
I would have thought it would be fundamental to the work and the
role of the Panel?
(Mr Anderson) What I would suggest is that at the
heart of it is what the Panel is for and what it is there to do,
and in terms of prescribing that then the rest tends to fall into
place, it is a technical definition.
98. Are you saying you are going to have a Panel
and then we are going to find something to cobble onto it?
(Mr Anderson) No. I am not suggesting that. What I
had hoped I had actually described was that the Panel will have
an advisory role, and it will be no more or less than that; they
are not going to be, as, I think, some commentators suggest, a
super regulator, they are not going to be a court of appeal, they
are going to be an advisory group. Now the animal, the beast,
looks a little like an advisory NDPB at the moment.
99. An NDPB?
(Mr Anderson) A quango.
(Mr Davis) A non-departmental public body, a quango,
in normal terms.
Mr Olner: I thought we were not going to have
any more of those.
Mrs Dunwoody: This is a quango by another name.