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Baroness Miller of Chilthorne Domer: I shall explain it in a different way. Perhaps sauce for the goose, sauce for the gander would be a simpler and well-known way of putting it. If we can have one body that has multiple functions as friend/critic/enforcer/adjudicator, that could be the precedent for another body having the same powers. The Minister said that the Environment Agency has those roles on a statutory basis. In tabling these amendments, that is exactly what I am arguing that the consumer council for water should have. The Minister can hardly say that my amendments are not relevant when I am trying simply to give the statutory basis, as he said, that the Environment Agency has. It has crept in because I am drawing a parallel, as I am sure that he actually knows.

However, I shall consider what the Minister said and keep his remarks in mind. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 144 to 153 not moved.]

Clause 45 agreed to.

Clause 46 [Investigations by the Council]:

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[Amendments Nos. 154 to 157 not moved.]

Clause 46 agreed to.

Clause 47 [Financial penalties]:

The Duke of Montrose moved Amendment No. 158:


    Page 59, line 9, leave out "(1) or"

The noble Duke said: In speaking to Amendment No. 158, I speak also to Amendments Nos. 159, 160, 161 and 161A. Again, this is perhaps a slightly varied menu and I hope that it helps warm the cockles of the heart of the noble Baroness and the noble Lord on the other side that we are getting through so many items. These amendments all concern penalties. Under subsection (1) only the authority has a right to impose a penalty, so there should be no question of the Secretary of State or the Assembly doing so.

Amendment No. 159 is a probing amendment. The period of 42 days is almost certainly intended to be six weeks, but the Bill does not say so. Company accounts departments usually work a five day week, excluding bank holidays. This wording might throw them out, unless it is made clear in the Bill as to what is intended.

Turning to Amendment No. 160, perhaps the Minister can tell us on what the 10 per cent is based. Does he regard 10 per cent as the anticipated annual profit of a water company? Ten per cent of the turnover of Severn Trent is a vast sum. Moreover, a sizeable proportion of its turnover is derived from activities other than that of a water undertaker. Will such a penalty cover all activities? There are also small water undertakers for whom the loss of 10 per cent of turnover would be a death blow. Will the Secretary of State set out safeguards to stop this happening? If a company was generating only 2 per cent profit, it would put the company into loss for five years running.

As regards Amendment No. 161, reference to provision and final orders is contained in the Water Industry Act, Sections 18 to 20. From these it appears that the only way that the Secretary of State can avoid making at least a provisional order is if she decides that the contravention is trivial and has been corrected. Will the Minister explain in what circumstances the enforcement authority will impose a penalty without first having issued a provisional order?

That is particularly important as the company may appeal only to the enforcement authority itself over the timing of payment of penalties, there being, apparently, no independent body allowed for. If the company wishes to dispute the amount of a penalty, up to 10 per cent of turnover, it must go to the High Court. Is it reasonable that any company, but especially a small one, should be faced by a penalty of up to 10 per cent of turnover, imposed without an order 12 months after the contravention or failure? Is it fair that that company's only recourse should then be to the High Court?

I turn now to Amendment No. 161A. On page 61, lines 23 and 24, reference is made to charging interest at the rate specified in Section 17 of the Judgements Act of 1838. Will that same rate apply to this section? If not, will the Minister state whether the rate to be

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specified by the court will be above or below the rate applied by the enforcement authority when no appeal is involved? I beg to move.

Lord Whitty: I am not particularly taken with any of these amendments but for different reasons.

As regards Amendment No. 158, I am not entirely sure, even after the noble Duke has spoken, what the intention of the amendment is. However, its effect would be that the authority would not have to issue a notice of the proposed penalty and would not have to consider any representations or objections. I cannot see that that is an improvement in the situation from anyone's point of view. It would certainly be contrary to what we intend to do in the regulatory procedure as a whole.

Amendment No. 159 deals with the question of days. The use of the term "days" is common in statute, and it is accepted as having a common-sense meaning. There is nothing in these provisions that would suggest that this period of 42 days, itself a multiple of weeks, is anything other than calendar days. Therefore, I am not sure why we need to change it.

On Amendment No. 160, the amendment would reduce the maximum level of a penalty that an enforcement authority could impose from 10 per cent to 1 per cent of turnover. The noble Duke asked what was the turnover on which the penalty would be calculated. Although there are established bases of turnover, the definition will need to be the subject of consultation and detailed regulation. The amendment proposes to reduce the figure from 10 per cent to 1 per cent.

The figure of 10 per cent does not make its first appearance in this Bill. It already appears in the Competition Act 1998 as the limit to a penalty for restrictive agreements or for abuse of dominant position. There is also a 10 per cent limit in the Utilities Act 2000. That was introduced at Report stage in this Chamber in response to cross-party lobbying led by the noble friends of the noble Duke on the Opposition Benches.

Reducing the maximum penalty to 1 per cent would be out of kilter with the provisions in those pieces of legislation and would limit the enforcement authorities' ability to deal with companies that breach their conditions of appointment or other statutory duties. We must also bear in mind the significant public health or environmental damage that might result from a breach of such duties.

Amendment No. 161 would delete references to the time limits that apply to financial penalties where no final or provisional enforcement order has been made. The effect of the amendment would be absolutely to prohibit the enforcement authority from being able to impose a financial penalty in such circumstances.

It is surely appropriate that financial penalties can be imposed in circumstances such as the breach of a condition of appointment, where it may not be appropriate to go through the full enforcement order process.

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The Bill as drafted includes a 12-month time limit on the ability of the enforcement authority to start within a year a free-standing process of imposing a penalty. This gives companies the ability to have a clearer expectation of what might happen so that they are able to plan ahead.

I turn to Amendment No. 161A. The Bill is drafted so that the court will be able to set the level of interest. It is appropriate for the court to have this flexibility to deal with appeals on a case-by-case basis. The effect of the amendment would be that the court would be tied to the same decision whenever there was a successful appeal, regardless of the seriousness of the company's failure or of the merits of the case. I do not believe that it would be appropriate to tie the hands of the court in such a way.

The noble Duke also raised the question of whether the Secretary of State should be able to set the level of penalties. That provision is only an extension of the existing enforcement procedure. It appears in the Bill, in the Water Industry Act and in other pieces of legislation. Drinking water quality is the responsibility of the Drinking Water Inspectorate which is part of the apparatus of the Secretary of State. That is why there is a specific reference to financial penalties being set by the Secretary of State in that context.

The Duke of Montrose: I thank the Minister for his various replies. In some ways Amendment No. 158 was a probing amendment. It seems to me that what the Bill is trying to say is that the authority can impose penalties under subsection (1) and the Secretary of State can impose penalties under subsection (2). The fact that they are run together looks slightly strange. However, I pass that by.

I was grateful to hear the Minister mention maintaining flexibility. That is a good idea as regards penalties. In view of what the Minister said on all the other matters, I shall take away the amendments and reconsider them. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 159 to 161A not moved.]

Clause 47 agreed to.

Clause 48 [Enforcement of certain provisions]:

The Duke of Montrose moved Amendment No. 161B:


    Page 63, line 7, leave out subsection (2).

The noble Duke said: In moving Amendment No. 161B, I wish to speak also to Amendment No. 161C.

In the 1991 Act the Secretary of State or the director has to be satisfied that the company has transgressed and is likely to do so again. The requirement for satisfaction has not altered, only now it is not necessary for wrongdoing already to have occurred.

How will the Secretary of State, the Assembly or the authority be satisfied that a company is likely to contravene a condition? Unless, that is, the condition

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or requirement is inherently unreasonable or some set of circumstances has arisen that will mean that the company is bound to be in difficulty.

I turn to Amendment No. 161C. This is beginning to read like a vendetta on water and sewerage companies. First, they no longer have to have transgressed to find themselves in serious difficulty. Now they have 21 days instead of 28 to make representations against what may be both a harsh and wholly unjustified charge. Will the Minister lay out a believable scenario which explains why the Government have thought it necessary to write these provisions into the Bill? I beg to move.


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