§ Mr. Robert B. Jones
To ask the Secretary of State for the Environment what effect the legal action by local authorities against the water and sewerage plcs will have on the flotation of the companies.
§ Mr. Howard
My hon. Friend the Parliamentary Under-Secretary of State for Wales and I put before Parliament on 1 November departmental minutes describing indemnities which the Government proposed to grant to the water and sewerage companies. Under these, the companies would be indemnified against any material additional expenditure incurred as a result of legal claims, of the kind understood to be planned by a consortium of local authorities against the proceeds of sales of assets which cease to be used for water and sewerage functions.
Having considered the writs, it is clear that the indemnity proposed earlier does not cover a second component of the local authority claims, for compensation of an unspecified amount for the assets transferred under 4W statute in 1974 from the pre-1974 local authorities to the water authorities. It is the view of leading counsel that there is no foundation for these claims either.
We believe, therefore, that such indemnities are extremely unlikely to be called upon. But we nevertheless feel duty bound to protect the interests of taxpayers by securing flotation on the basis that Parliament intended. We have therefore put further minutes before Parliament describing indemnities which will ensure beyond doubt that the flotation is unaffected by these local authority actions. The writs were issued shortly after Parliament prorogued on 16 November, and today is the earliest day on which I could announce this to Parliament. The offer period for water shares opens today and closes on 6 December; in order to minimise any uncertainty for potential investors, the minute is designed to allow the indemnity to be signed early next week.
The Government will defend the claims on behalf of the water services companies.