(1)Subject to subsection (2) below and to such conditions as the Treasury may determine, the Secretary of State, in any case in which it appears to him to be desirable to do so, may undertake to make a contribution out of money provided by Parliament towards the expenses incurred—
(a)by a water undertaker in providing a supply of water in a rural locality or in improving an existing supply of water in such a locality;
(b)by a sewerage undertaker in making adequate provision for the sewerage of a rural locality or for the disposal of such a locality’s sewage.
(2)The Secretary of State shall not undertake to make a contribution under this section towards the expenses of making provision for the sewerage of a rural locality, or for the disposal of such a locality’s sewage, unless he is satisfied that the need for making the provision is due to anything done or proposed to be done—
(a)to supply water in pipes in that locality; or
(b)to increase the supply of water in pipes in that locality.
(3)An undertaking given by the Secretary of State under this section shall provide for the making of the contribution in the form of such lump sum payment or payments, or such periodical payments towards revenue expenditure, as may appear to the Secretary of State to be appropriate.
(4)The Secretary of State may withhold, or reduce the amount of, any contribution which he has undertaken to make towards the expenses incurred by a relevant undertaker in respect of any works or transaction, if it appears to him either—
(a)that any of the works have been carried out in an unsatisfactory manner;
(b)that—
(i)the effectiveness of any of the works is substantially less than as estimated in the proposals submitted to him by the relevant undertaker; and
(ii)the difference is due to any default, for which the undertaker is responsible, in the formulation of the proposals;
or
(c)that there has been any default in the carrying out of the transaction.