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Water Management: S&T Report

My Lords, it was a privilege to serve on this committee under the noble Earl, Lord Selborne. I thank our Clerk and our special adviser for their excellent work. Those who served on this committee saw this report as a sequel to earlier reports that we produced on energy efficiency and renewable energy because the key issue in this report and the earlier reports was security of supply. As the noble Lord, Lord Mitchell, said, it seems madness that in a country renowned for its rainfall there should be any question about security of supply in relation to water. The report makes clear that, at the moment, there is no issue in relation to northern or western areas of the UK, but, as this summer has shown with its hosepipe pans and drought orders, there is a serious issue in the south and east of the country where water resources are already stretched to the limit. We spell out the main co-ordinates of the problem in Chapter 4 of the report. Over the next 25 years, the population of England and Wales—not that of the United Kingdom as a whole—is expected to rise by7 million people, from 53 million to 60 million. Those people are expected to settle disproportionatelyin the south and east, where the jobs are. The average consumption of water in this country is already150 litres per day per person. Although the report states that there is some flexibility about the figure, it is nevertheless an average of 150 litres per day per person and rising. Today’s Guardian, which is celebrating the fact that the United States now has a population of over 300 million, notes that average water consumption in the United States is 350 litres per person per day, which is almost 2.5 times what we consume. As we get richer, we use more water: we take more baths; we wash more clothes more frequently; we spend more money on the plants in our gardens; and we want to water them more frequently. Also, as we get richer, we tend to break down into nuclear households. As Professor Adrian McDonald points out in his interesting appendix, although larger households proportionately do not increase their demand for water—obviously larger households demand more—the break-up of households into small units increases the demand for water. If we look 25 years ahead, a population increaseof 7 million will mean that we will need an extra1,000 million litres of water per day. The tables on page 44 show that that is roughly the total consumption of the north-west of England: it means a whole new region. That population will disproportionately be settling in the south and east. The maps on pages 56 and 57 of the report make clear that in the south and east of England present levels of demand for surface water and ground water are unsustainable. We are abstracting more from the rivers and aquifers in the dry months than we are putting back in the rainy months. Climate change is not going to make this problem any easier because we shall have more dry months in the summer and more heavy storms in the winter and what fills the aquifers is the steady drip, drip, drip of what was a typical rainy day in Britain. If we think that we have got problems, other countries have problems too. On Tuesday, the Guardian published an article by George Monbiot, in which he states: "““In India, for example, some 250 cubic kilometres (a cubic kilometre is a billion cubic metres or a trillion litres) are extracted for irrigation every year, of which about 150 are replaced by the rain. ‘Two hundred million people [are] facing a waterless future. The groundwater boom is turning to bust and, for some, the green revolution is over’.""““In China, 100 million people live on crops grown with underground water that is not being refilled: water tables are falling fast all over the north China plain””." Therefore, it is not just a problem that we face. It is a problem that the Government have not made any easier for us, as the noble Earl, Lord Selborne, mentioned. It became very clear in our discussions that the Government embarked on their sustainable communities plan in 2003 and then took up Kate Barker’s suggestions for further housing increases in new housing development in the south east of some 200,000 units a year without due consultation with either the Environment Agency or the water companies. Although, as the noble Earl mentioned, things have improved and much more consultation is now going on, there is still a long way to go before we have the openness and the consultation that is really necessary. It seems from the Government's response mentioned by the noble Lord, Lord Dixon-Smith, that there is still far too much complacency. Our report endorses the broad strategy that has emerged in both government and the Environment Agency and Ofwat, which is termed the twin-tack approach, although, as we point out, people have slightly different interpretations of what twin-track means. Essentially it means that we have to work on both supply and demand at the same time—at least we feel very strongly that it must be at the same time. On the supply side that means building new reservoirs or extending old ones, transferring waters from one river basin to another—the point raised by the noble Lord, Lord Dixon-Smith; and we were very impressed indeed by the work undertaken by Anglian Water in this respect—and tackling leakage. It possibly involves in the future desalination plants, although we were doubtful about whether that was really justified at the moment. Incidentally, we should bear in mind that the leakage from Thames Water—1,050 million litres per day—is just about what we need for that7 million rise in population. All these issues, including leakage, require capital expenditure. One of the key issues that came out of our investigations was that in order to finance capital expenditure the water companies have to borrow, and if they are going to borrow they must have enough resources to pay for that borrowing. There was clear tension with Ofwat about whether they were being given enough leeway to raise the money they needed to raise the investment they needed. To some degree the constant plea from the water companies was that they were not getting enough money for those investments. I slightly share the view taken by the noble Lord, Lord Mitchell, that—as Mandy Rice-Davies put it—““They would say that, wouldn’t they?””. The Evening Standard noted when our report was published that the four water companies with the largest percentage of leakage—and that is over 25 per cent of their water supply—leaking out of the system, were also those with the largest profits. If you are a regulator there is a very nice question on how far you go in terms of allowing extra profits when you have a monopoly supplier; and domestic water supply is a monopoly at the moment. I think we were sometimes a little too kind to the water companies in our report. Ofwat have a very real issue in balancing the two questions. We clearly need to make more investment. The companies must have enough money to make that investment. But how do you squeeze those companies to ensure that they are not putting that money into the pockets of their shareholders or into the pockets of their management? That is a nice question. It is not easy to answer, but I have some sympathy with Ofwat in terms of squeezing the companies. It is encouraging that in their responses both Ofwat and the Government have accepted the points we made about the need to look to the future. I am extremely pleased about that. More generally, and this comes through our report, the whole governance and planning framework of the industry lacks coherence, is much too complicated and from the consumer’s point of view it needs to be simplified. I know that we are perhaps suggesting another layer of bureaucracy, but at least in a sense it links to the consumer more directly in terms of linking the area they live with the supply of water. I will talk a little about the issues on the supply side. The key issue is metering. As the noble Earl mentioned, metering is not a panacea for everything. At the moment only 28 per cent of households in the country are metered. That is lower than elsewhere. Those who do not have meters are charged a lump sum every year. That lump sum is somewhat arbitrary because it is based on the old pre-1989—is it?—rateable values of those houses, which get increasingly out of line with the use of water that necessarily comes out of that. The more we can extend metering the better because people pay the price. If you pay a lump sum you say ““I might as well use everything””, but if you pay a price then you look at what you are paying. It is important for us to try to push forward metering as far as we can. But we need smart metering. We do not want a meter stuck somewhere down in the front garden where you cannot see it. You need to be able to look at a meter in your house, just as we argued with electricity and gas, so you can see how much you are consuming at that time and how much you have consumed over the past day or so. We want smart billing that will show people how much they use in comparison with previous years and how much others of the same sized household use. Figure 5 on page 79 gives a very telling example of what a smart bill might look like. We need smart tariffs. We recommend the rising block tariffs, although we must be careful about suggesting that those who use more water should pay more it you do not at the same time catch large households. We also need to look at the demand side for water. Of those 150 litres only 10 per cent is required for drinking or for preparing food that we eat—for potable uses; 25 per cent goes down the lavatory, which is why dual-flush systems are important. Others have told me that there are siphon systems, which use, instead of the seven litres that you flush down the lavatory, only something like two litres. So it is vitally important for us to try to develop ways to economise on the water we use. Thirty-three per cent of water goes on personal washing. Here there is the whole question that power showers do not actually save anything over baths. Can we develop showers, and other countries have managed to do this, which are more efficient? Twenty per cent goes on clothes and dish washing. Modern machines can be much less efficient, but why do the Government suggest that it is impossible to have some kind of scheme that labels these machines just as we have with energy efficiency? They seem to suggest that it is impossible; that we will have to start from scratch. We already have a very good scheme on energy efficiency. In terms of garden use, why cannot we do like the Australians and make far more use of rain water? The example we quote from Australia shows that above all where there is a will there is a way. Sadly, what emerges from the Government and Ofwat’s response to our recommendations is that we have yet to find the will. As the energy sector has shown already so clearly, once awareness is raised people respond to incentives and, indeed, often to community pressures. At present, both the Government and Ofwat seem to be far too complacent about the potential risks of water shortage and not prepared to take the necessary lead in raising awareness.