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Water Management: S&T Report

My Lords, I, too, begin by recognising the contribution of our special adviser, Professor Richard Ashley, and our Clerk, Tom Wilson. I pay particular tribute to our chairman, the noble Earl, Lord Selborne, for the good humour and dexterity with which he guided our deliberations. I also congratulate my noble friend Lord Crisp on his eloquent and, if I may say so, highly apposite maiden speech. In the 18th and 19th centuries, civil engineering was responsible for enormous health improvements in our cities. Clean supplies of fresh water and the disposal of sewage in closed sewers simply transformed public health. The engineers of the day did this so successfully that for nearly a century it was easy for us to forget the enormity of their achievements. Over the intervening years, we have taken this infrastructure and the abundance of water that it provided so much for granted that we have failed to make the investment in maintenance and renewal that common sense would have dictated. In recent decades, three factors have rather sharply drawn it to our attention that we have been living in a fool’s paradise. First, and most obviously, the Victorian water mains and sewers that had been so well constructed that we unconsciously assumed that they would last for ever began to fail. Secondly, a succession of summer droughts and low-rainfall winters in the south-east made it all too apparent that the abundant rainfall that we had taken for granted could not be relied on. Indeed, this may well be the beginning of a drying trend associated, as various noble Lords have pointed out, with a change in climate. Finally, there has been an increase in the level of personal water use and, in the south, increased water demand from a growing population in a part of the country that is already water-stressed. Together, these considerations mean that not only do we have a water infrastructure that is failing through historic lack of investment but it is rapidly becoming inadequate in the south-east because of changes in climate and increases in water demand. Available water resources are finite, and if we draw on them too heavily we risk lasting damage to the environment. I have sketched this picture to make it clear that we are entering, in the 21st century, uncharted territory. For that reason, it is particularly unfortunate that, as we point out in our report, water companies have great difficulty in finding money to pay for research programmes which would help them to do their job better and deal with new and unfamiliar situations. In recent years, the annual expenditure by water companies on research and development has been around £20 million. That figure may be compared with an annual turnover of around £7 billion and, for that matter, the annual total of unpaid water bills of around £1 billion. Our committee regarded this level of research expenditure as inadequate. That view was shared by some of the companies, which drew attention to the pressure from the regulator to keep down near-term water prices to consumers. Frankly, this is a false economy. Some research is carried out by water companies, but most is carried out or commissioned by UK Water Industry Research, funded jointly by the companies. This is a very satisfactory approach, but it seems that programmes are limited by both the overall level of funding and uncertainty about its continuity. It is worth considering some of the areas in which research can bring substantial benefits. Given that management and containment of leaks is one of the major challenges facing the industry, high on the list should be technologies for remotely inspecting pipework, the detection of leaks and lining of pipes. Work in areas such as these can be undertaken in collaboration with universities or industrial partners. One of the most obvious approaches to water shortages is to make better use of the water that we have. This can involve purification and re-use of water. The committee visited one public building, in Melbourne, which, by employing this technology, would use only one one-tenth of the normal consumption for a building of this size. Water purification technologies have been around for many years, but the challenge is to treat large volumes quickly and cost-effectively. This whole area is being transformed by the development of membranes that can be tailored to remove particular chemical species from the water that passes through. The other challenge is to do this at minimum energy cost. This means that the membrane must be able to pass permitted species easily, without high pumping pressures. These same technologies can be used to purify salt or brackish water. These are all areas of active and important research. Water networks tend to be both extensive and complex and may receive water from a variety of sources. For reasons of both public health and security, it is important for water to be tested regularly to see whether it contains chemical impurities or pathogenic organisms. It is now becoming possible to carry out such tests remotely and for the results to be sent by telemetry to water management centres, where action may be taken quickly to respond to any problem. Developments such as those which I have described have the potential, along with many others, to make water supplies safer, more reliable and, in the long term, they are likely to save expense, as shown by work carried out by Yorkshire Water. It is very important that water companies have access to these technologies. However, to do so cost effectively, they must be able to act as intelligent customers. That means having in-house expertise to recognise and evaluate new developments and to see how they may be best adapted to their particular needs. This can be done by working closely with UK Water Industry Research and with other external bodies, but it costs money. I am afraid that the replies of both the Government and of Ofwat suggest that neither properly appreciates either the practical difficulties in setting up and conducting research, the importance of continuity, or the importance of research to an industry such as the water industry, facing the challenges that it does today. Expenditure on research should be seen as an investment for the future rather than as an in-year cost. Regardless of whether the funding mechanism for research suggested in our report is the most appropriate, it is essential that the industry should have every incentive to innovate. The fiscal regime within which the companies operate should be designed to encourage research in a positive way and to ensure that research projects can continue overat least two funding periods; that is, over at least10 years. Given the time that it takes to set up a project properly, the present regime makes it virtually impossible to consider projects that extend beyond two or, at the most, three years. It would be helpful for Ofwat to consult the Government’s director-general for research and innovation, or the Chief Scientific Adviser, on appropriate means to ensure that the funding structure for research is appropriate for the water challenges that lie ahead. I hope that they will do so.