Lord Lansley (Con)

My Lords, I intervene in this group to flag up a couple of points. I thank my noble friend Lord Gascoigne for introducing Amendment 59, which makes an interesting point. In response to the noble Baroness, Lady Grender, the size and complexity threshold test is about assessing whether an infrastructure project is of such size or complexity that the water undertaking cannot manage it or, if it attempts to manage it, it might prejudice its financial ability to meet its obligations to customers. Actually, under current circumstances, we have reached the point where many water undertakers may not have the capacity to undertake infrastructure projects in the way we expected in the past. We know that there was a substantial period when they did manage investment and they increased investment in the water industry, but in more recent years they have not done so and there is considerable risk to their ability to undertake the infrastructure projects we are looking for. We should not be surprised that that is the case. Take Anglian Water, which is not among the most prejudiced of the water companies at the moment. I was very interested to attend a presentation about Anglian Water’s proposals for the Fens reservoir. It was fascinating, positive and optimistic. Then, in response to a question, Anglian Water mentioned that it is not going to own it. Somebody else will own it, and we do not know who. So we have to be aware that there is substantial uncertainty about how we will fund much of this infrastructure, but the most important thing was mentioned by my noble friend Lord Gascoigne in moving Amendment 59. The amendment is about which projects should go out to competitive tender. That is all it really tells us. The answer ought to be: if it will secure value for money—indeed, if there is potential for independent financing which, as he said, can be more cost-effectively delivered, and we know that the risk premium on the water undertakings themselves is making their borrowing more expensive than what may well be available through other sources of financing —then we should go down that path. The size and complexity threshold test is unhelpful, gets in the way and creates serious impediments to getting on with infrastructure projects. Of course, the amendment is not deliverable. It does not deliver the objective in its own right. One would have to substantially change Section 36 and other sections of the Water Act 1991 to achieve the objective, because the regulation derives its power from the primary legislation. We need to look at the Water Act 1991 in substance to achieve that on Report. What my noble friend Lord Lucas’s amendment says is helpful. When one looks at what it is that governs the delivery of reservoirs, as far as I can tell the Reservoirs Act 1975 basically says that it ought to be done by an appropriately approved construction engineer. That is pretty much it. There is a great deal that should be added to what is required in order to secure reservoir development. I have two other points to make. The first is that Amendment 62 from the noble Baroness, Lady McIntosh, raises a more significant point than the amendment itself says. We are aiming to secure what we need in terms of water supply. I remind noble Lords of my interests in the Cambridgeshire Development Forum and the Oxfordshire Development Forum, which of course means that two reservoirs—the Fens reservoir and the Lincolnshire reservoir—are relevant, as well as the Grand Union Canal project and related activity to try to supply the east of England. We are in a position at the moment where, by 2050, we will have a deficit in water supply equivalent to a third of our present use. That is the degree of stress that we are looking at and therefore need demand management to be substantially improved and the supply to be improved.