Select Committee on Environment, Transport and Regional Affairs Minutes of Evidence


Examination of witnesses (Questions 80-99)

TUESDAY 30 JANUARY 2001

ALAN DAVIS, RODNEY ANDERSON AND RICHARD VINCENT

  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.

Mr Blunt

  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 and 2012?
  (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.

Chairman

  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 How many have been revoked so far?
  (Mr Vincent) Quite a number of licences have been revoked, very often on a voluntary basis.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 of notice.

Mr Blunt

  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.

Chairman

  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.

Mr Blunt

  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 not?
  (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.

Mrs Dunwoody

  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.

Mr Blunt

  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.

Chairman

  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?

Mr Blunt

  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.

Mr Cummings

  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.

Chairman

  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.

Mr Cummings

  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.

Mrs Dunwoody

  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.


 
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