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Water Management: S&T Report

rose to move, That this House takes note of the report of the Science and Technology Committee on Water Management (8th Report, HL Paper 191). The noble Earl said: My Lords, it has been a great privilege to chair the sub-committee that conducted this inquiry and a privilege to introduce the debate today. I am delighted that we shall be hearing from the noble Lord, Lord Crisp, today, who will be making a maiden speech. I start by thanking those who have contributed to our deliberations, particularly our Clerk, Tom Wilson, and our specialist adviser, Professor Richard Ashley and his colleagues. They have given us much sound advice and support to all members, who I know would all wish me to thank them. On the publication of this report there was a gratifying amount of public interest, which is perhaps not surprising because it was a topical issue in a summer of regional hosepipe bans, warnings in certain areas of water shortages and interest as always in water leakage rates and the profits of water companies, as well as a concern about house building proposals in water shortage areas. All that helped to give the report some media exposure—rather more, perhaps, than one normally expects for a Select Committee report. For those who have read the 150 pages of the report, however—and the immediate response from the media meant that they would not have had an opportunity to do so—it will be evident that instant solutions, as favoured in at least some parts of the media, are unrealistic. Many people immediately jumped to the conclusion that a national water grid may be the solution to all our problems, or desalination plants. They look for unrealistic levels of reduction of water leakage rates, and there is always a cry for universal water metering. All those aspects of the topic may well be relevant in certain areas, but they are not by themselves quick fixes. The realistic timescale for water resource development is up to 25 years. We saw that as we travelled around and looked at water transfer schemes and some of the planning requirements to get these schemes and the required infrastructure into place. Our planning system in this country, perhaps rightly, is drawn out and protracted—convoluted, some would say—so that when you are building a water transfer scheme, or perhaps even a water treatment plant or a new reservoir, the process will take a long time and will require an awful lot of consultation. The period I mentioned of 25 years is perfectly realistic. The problem is that 25 years does not match the reality of regional planning strategies. You cannot expect a Government to be able to put all their plans in place and stick to them for 25 years. That is just not the way Governments work. Then there is the further complication of predicting the nature and impact of European Union legislation. What has already come our way—including the habitats directive, the water framework directive and the priority substance directive, to name just three—might well impact to a certain degree, or heavily, on water management regulation. In other words, the water companies have to respond to these legislative changes. The water companies are now required by Ofwat, I think rightly, to produce water resource plans showing how each company plans to maintain security of supply over the next 25 years. That is much to be encouraged, but inevitably this long-term planning is made more problematic if the assumptions on which they are operating change, and indeed if there is inadequate transparency and consultation, or if the criteria operated by the regulatory authorities for funding, for example, are not fully understood or spelt out. The water companies have a grievance that in many ways the lack of transparency in inclusiveness and consultation has been inadequate. In many respects the problems were much worse before the privatisation of water in 1989, and thatwas caused by chronic underinvestment in capital expenditure. By the 1980s, due to successive Governments putting a cap on public expenditure, investment had fallen to between a quarter and a half of what it had been only 10 years before. Not surprisingly, despite the recent much increased investment under the new regime, we find ourselves trying to catch up. The position is complicated, of course, by droughts, which appear to be becoming more common—perhaps that is an aspect of climate change, though that is not clear—and by this lack of investment. Our report returns time and again to what we see as a lack of transparency and openness and of sharing agreed methodology for forecasting demand. There has been a failure, I suspect, of both the Government and the regulators to work successfully together in forecasting water demand and making clear the optimal water policies, as well as a failure to follow best practice in sharing their developing regional water strategies with the water industry. Anyone who has read Appendix 4 of our report—the comments of Professor McDonald on the Government’s response to the Barker review of housing supply—or indeed the Government’s response to our report, and the paragraphs that specifically refer to these issues, will recognise that, whatever you make of the various cases that we put forward and that Professor McDonald tries to elaborate, the Government response is opaque, to say the least. It is not at all clear what methodology the Government have adopted in trying to determine the water requirements to meet the increased targets for housing supply. The very fact that we felt it was clear that the Minister himself, when he gave evidence, had not fully grasped the implications of these figures demonstrates that whatever we have here, we have not got inclusiveness, transparency and openness. I was disappointed, therefore, with the Government’s response to our recommendations in paragraphs 428 to 430. On this occasion, frankly, it would have been more honest for the Government to acknowledge that the consultation process, as I have already said, will be complicated due to the different timescales involved, and to put their hands up and say, ““Look, this has not been an exercise in best practice in consultation””. Having made that point, however, I recognise that the Government are making belated attempts to improve the sharing of information and their projections, and there has been some real progress over the past 18 months to two years. The revised housing growth plans have still not adequately been factored into the water companies’ long-term plans, though. I am talking here only of those areas with increased housing requirements, which happen also to be the drier areas. There is much to do to catch up, and the Environment Agency, Ofwat, the Government and the water companies all have to engage in this long-term planning with some degree of urgency. On pages 26 to 28 we refer to the ““twin-track”” approach. The term ““twin-track”” should be fairly obvious—you try to reconcile resource development with demand management. The problem is that there are very different interpretations of what that means in practice. We give the Government’s interpretation: their twin-track approach for water supply requires demand management options, such as fostering behavioural change, use of new technologies and controlling leakage, to be fully deployed before new supply side measures are adopted. That is not twin-track—it is consecutive—and that is the problem. You can understand the Environment Agency—whose job it is, after all, to protect the environment—wanting to be satisfied, before you put in new reservoirs or new infrastructure, that all other options have been exhausted. You go through this great process and end up finding that you are way behind the curve in terms of time management because of this approach, which is instinctive in Government, that ““we won’t allow anything until we are quite sure that every other alternative has been explored””. The record of supply management in recent years, with the winter drought and the added complication of climate change, has been inadequate. We are probably now seeing the evidence of the drought orders and the hosepipe bans. It may be only a one-in-30 event, but nevertheless I think the country instinctively feels that we have been inadequate in planning our water resource development. We draw attention to the fact that as you increase your infrastructure, and indeed the indebtedness of the companies, the cost of water goes up; that is inevitable. It is also inevitable that if these problems are to be addressed, the cost of water will continue to go up. That raises the problem of affordability, which is an increasingly serious issue for low-income households. If we move to greater acceptance of metering, which I suggest is desirable in principle, that will increase the bills for larger households still further. As we set out in the report, there are regulations for vulnerable groups, but frankly they are not working. They are not adequately assisting low-income families. We give the figure of 9,217 successful applicants throughout England and Wales throughout 2004-05. That clearly demonstrates what we were advised by the Consumer Council for Water and others: that the system is just too bureaucratic and opaque, and it is not working. Again, the Government response was inadequate in this respect. I simply say that if this system is not working, and we clearly do not want too complicated a scheme, let us just ask someone to go back and rethink the whole exercise. The other issue with paying bills is not those who cannot afford, but those who will not. We draw attention to the quite remarkable figures of outstanding debt. South East Water, for example, gave us a figure of £15 million at the end of the financial year on a turnover of £100 million. A lot of those people have a good credit rating, but since the Water Industry Act 1999, the Government—for all the right, but I suspect rather misguided, intentions—made it illegal to disconnect for health and safety reasons. In Australia we saw a rather more robust approach to these ““won’t payers”” comprising partial disconnection and a tamper-proof device. I again earnestly ask the Government to help the water industry and, indeed other consumers, who pay surcharges to meet the costs of the non-payers, to reconsider the use of tamper-proof devices. Water meters are clearly helpful in making people understand and ““buy into”” the issues involved in water consumption. If you cannot see your meter and do not know what your consumption is, it is very difficult to engage adequately in that process. As we spell out in our report, smart meters and new more detailed bills systems will help people in that regard. I was slightly surprised by Ofwat’s rather negative response that smart meters could be effective only if meters were read more frequently than is currently the case. I am not convinced about that. But however long it will take to introduce these measures—it will not happen overnight—we must all agree that the more information you can give the consumer, the more helpful it will be. We should urge that to be undertaken. Perhaps remote reading will be introduced soon. All debate about water comes back quickly to leakages. Understandably, the average member of the public is outraged at seeing water leaking out of water company pipes. They are no so outraged at their own leakages occurring between the meter and the house, but when they see water pouring down the road they question how on earth they can take seriously requests to use water responsibly. However, if you look at the figures, you will see that some water companies have respectable records on leaks. In some areas leakage rates have improved to an acceptable level, but not in all. Thank goodness that Ofwat has got much tougher with two or three of the worst offenders. However, one of the concepts that the public do not understand is that of the economiclevel of leakage. I am delighted that the Minister,Mr Pearson, has now asked Ofwat to rethink the matter. Ofwat says that an economic level of leakage includes other areas of sustainable consumption, but that is not the perception. The Minister is absolutely right to say that this can be made much simpler. People would then understand how leakage ratesare set. I give another example of why you must have inclusiveness and transparency. We suggested in the report that regional boards should be set up. After all, they will be required under the water framework directive, which stipulates water catchment management plans, which will involve, among others, land managers and farmers. You need to engage people at all levels of debate. Leakage or, indeed, investment in infrastructure are other examples of that. Perhaps the idea of statutory regional boards, which we saw as a consultation exercise between the Environment Agency, Ofwat, the Government, consumers and others, including the Consumer Council for Water, was seen as yet another layer of bureaucracy. That is certainly not what we intend. All we want to do is to make it compulsory for everyone to be consulted and not in any way to take away Ofwat or the Environment Agency’s statutory responsibilities. I say again that we have a lot more to learn about what we mean by transparency and consultation in terms of sustainable development. It is part of the formula which I am not sure is entirely understood. I have spoken for too long. I should have liked to say a little more about the national grid, desalination and the recycling of storm water. As regards the recycling of storm water, we heard much from the Government about the Northstone development on Ministry of Defence land. That initiative is likely to reduce consumption by 50 per cent. However, it is not mentioned in the Government’s response. I hope that the Minister will tell us whether that is still on target. I should be interested also to hear the Minister comment on the priority substances directive, which could impose heavy costs on the water industry. That is the fault not of the European Commission but of the European Parliament, which tried to prove its green credentials. Has that been firmly kicked into touch? I believe that Defra is doing a good job on that, but I should like the Minister to respond to that point. I hope that other members of the committee will fill the gaps in my speech. I have rushed through and not perhaps done adequate service to some parts of the report. Nevertheless, I am pleased to commend it. I beg to move. Moved, That this House takes note of the report of the Science and Technology Committee on Water Management [8th Report, HL Paper 191].—(The Earl of Selborne.)