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Water Strategy

That is the right approach. The policy is supported by Government, but also by non-governmental organisations and, at least in theory, by the industry. The change in approach will mean a move away from expensive, energy-intensive, temporary end-of-pipe treatment measures and towards less intrusive catchment management, in which water companies will develop working relationships with landowners, farmers and other stakeholders to prevent the quality of water from being lowered before it enters the water companies' systems, so that we do not need to tackle issues such as nitrates afterwards. Adopting catchment management methodology, if it is delivered effectively, enables water companies to lower their expenditure on end-of-pipe treatment without the risk of compromising water quality or safety. Lower capital investment will then benefit the customer by lowering water bills in the long run. Furthermore, ending the need for end-of-pipe treatments will lower companies' carbon footprint and increase their environmental sustainability. It is a long-term solution, whereas capital investment needs constant renewal and expenditure. Page 51 of ““Future Water”” says:"““We also encourage water companies to work with farmers to tackle pollution at source, for example where this is more cost effective than treating raw drinking water at the point of abstraction.””" I could not agree more. Unfortunately—so far, at least—Ofwat could not agree less. That is a fundamental problem, and it is the reason for the debate. Ofwat said in its PR09 consultation:"““Water companies may see opportunities to address drinking water issues by encouraging changes to land management in the catchments””," which is good. However, it went on to say:"““we would not wish water consumers to offer a cross-subsidy to address third party pollution issues””," and, specifically, that any proposals for expenditure would be considered only if the company owned the land. Assuming that Ofwat does not want water companies to buy up agricultural land in every catchment and around every river, its fundamental criteria effectively block the very measures that the Government say are necessary, the water framework requires of water companies and many NGOs and water companies themselves accept are necessary. Ofwat is directly contradicting the Government view. That is clearly nonsensical, especially given that such measures are meant to reduce customer bills in the long run. I do not believe that customers in the south-west are saying, ““We want a worse environment and higher bills, please””, so why is the water regulator, which is charged with protecting customers' interests, standing in the way of such measures? The answer is that it has a very narrow, old-fashioned approach to the issues. The traditional means of dealing with such problems have been expensive, but the alternatives can be cheaper. The water industry estimates that, since 1990, it has spent £1 billion on pesticide removal alone. Projects under way in the water supply areas of Bristol and Wessex Water show that working with farmers can reduce nitrate and pesticide pollution in ground-water. In northern England, upland moors and bogs are being restored over tens of thousands of acres to purify the water before it enters the system. South West Water is planning a number of such catchment management projects in PR09, with the support of organisations across the south-west, including national parks, the Environment Agency, the Royal Society for the Protection of Birds and a broad swathe of environmental organisations, but not, it seems, of Ofwat. Other countries are doing it. New York state experimented on the relative value between water treatment and forestry and found that the latter provided better treatment at a much lower cost. So why is the regulator here standing in the way? Natural England, which carried out work on the subject for the Government, concluded from its study on the options raised by them that agriculture requires regulation changes, advice and incentives. If the water companies are not acting, whose responsibility is it to drive things forward? Who is going to provide the incentive to stakeholders, such as landowners and farmers, to change their practices? If the Government or Ofwat have a better idea, they should tell us. There is no doubt that if we are successfully to adopt a more catchment-based approach to water resource management, we need to determine the payment mechanism and how to fund it in the long term. Water quality trading is one idea. However, those discussions need to take place now, while the Government and others are setting the agenda for the next five or 20 years. We cannot keep ducking the issue; it is time to make changes. The fundamental premise of any future water charging system should be that water companies can demonstrate to Ofwat that they are proposing the most efficient solution to deliver a specific outcome. It should be irrelevant whether that is a soft engineering solution, such as a wetland to improve water retention and remove pollutants, or a traditional capital intensive project. We should start from a level playing field. The Government, non-governmental organisations, such as Wildlife and Countryside Link, which covers all the major NGOs, and Natural England all appear, to differing degrees, to agree that such upstream thinking and working with the environment is the way to go. The water framework requires a solution, but so far Ofwat seems to be offering nothing but roadblocks, although it told me at the weekend that it is reviewing its position, which I hope is true. I hope that following this debate and ministerial discussions, Ofwat will change its negative position. The best reason to favour such schemes is that they are the cheapest way in which to achieve the required level of performance, which is entirely consistent with water sector regulatory incentives. To be fair to Ofwat, the PR09 consultation opens that possibility: it produced its 25-year strategic direction statement, to replace the five-year plans, which proved so inadequate; it is encouraging water companies to adopt a longer-term perspective; and it is offering water companies the ability to offer alternative strategies alongside their business plans to show how things could be done differently. The vast majority of water companies have published their SDSs—only a couple are still to come—and they all talk about such holistic approaches. However, it is up to the Government and the regulator to ensure that their words are translated into action. Most companies, frankly, are paying lip service to the issues and not offering practical solutions, although that is not the case with all of them. I am delighted that for once we can boast about water companies, rather than complain: Wessex Water and Anglian Water are planning catchment solutions. However, they still do not know if Ofwat will simply block them, and certainly most water companies are not yet committed to such new approaches. We must move beyond platitudes, warm words and ministerial reviews, and actually take action. Publication of the Government's strategy is helpful and the Ofwat review is the time to take action. Let us change things now before water customers suffer further unnecessary rises in bills and the environment continues to deteriorate.