Good governance a must

Anna Walker's independent review of water charging for Defra tells authorities that they need more than just technical expertise to satisfy customers and the public, writes Barrie Clarke

In every business conference ‘keynote address’ and policy paper, you will learn that we are “facing new challenges”. This is code for “I have a plan you would do well to adopt”.

We, more or less, accept this because:

  1. there is usually some truth in it,
  2. we are disposed to respect the author’s knowledge and motives (not too different from our own), and
  3. we have been well brought up.

Anna Walker’s review of charging for water services* is no exception to the rule: new challenges appear on page 1 of 239. But, in other respects, the paper lives up to its independent billing.

A view from outside the sector is timely after two decades of the current system and at the beginning of a new, leaner period. On operational and regulatory issues, Anna Walker tells it like it is.

This should not be interpreted as approval for all 70 recommendations, however. Many are spot-on; a few are, well, implausible. Variability is not surprising given that so much is covered – who should pay, metering, tariffs, sewerage, debt and affordability, water efficiency, customer relationships and prices in South-west England. It does not reduce the value. Plain English and a clear way of dealing with technical matters are great strengths.

Signs of the times

For me, Ms Walker’s most enduring contribution is likely to be one she never declares but which is obvious in every line. Before explaining, let me indicate signs of the times from two other activities.

A ‘sustainable water sector’ seminar in November looked at 50-year scenarios. The operators and regulators taking part were notable for their expertise, yet their main anxiety was how to get customers and the public to have greater trust.

The Foresight Land Use Futures project (report due this month) is reviewing every imaginable use and impact on land before providing policy options. Yet the consistent concern of the experienced people advising the project has been land and property governance.

These cases prove what professionals in every sector have been absorbing for years – technical expertise is essential in shaping and implementing public policy but, on its own, no longer enough. The

challenge now is as much about governance and trust.

This is where Walker scores, starting with a commitment to sustainability and fairness that informs thinking throughout. The approach is clearest in chapters on paying for water, metering, affordability, and putting customers first. Together they reveal a strong belief in the values of good governance.

Clarity and transparency

Proposals are made on the basis of looking separately at the four industry services in light of a discussion of public and private goods. In summary, Walker believes that water supply, foul sewerage and surface water drainage are correctly charged to water customers. With highway drainage, it recommends a transfer of costs to highway authorities and a duty on them to find ways of reducing run-off.

These conclusions take account of an analysis of the ‘polluter pays’ principle leading to proposals that “government and the Environment Agency should do all they can to incentivise reduction or elimination of (diffuse) pollution at source”, and that, if customers are to go on paying for environmental improvements related to water supply and sewage disposal, they must be informed and consulted. The alternative is a risk that people see the charges as unfair and ‘stealth taxes’.

Leadership and engagement

The review states that meters are the fairest way to pay, but recognises that they have a cost. Its proposal, that leadership is essential to hold costs down, is sensible, and who better than the economic regulator for such a role?

Ms Walker investigates affordability from every angle and concludes that support for customers on low incomes is necessary. The choice of who pays (water customers or taxpayers) is, correctly, left to government, but various support packages (with costings) are provided for consideration.

If customers were to pay, the level of cross-subsidy between different groups would be more than research shows is generally acceptable. But the review opens up an issue that is now a fixture on the industry agenda.

Walker underlines the importance of engaging customers and proposes a formal consultation mechanism. There are doubts here about whether a new bureaucracy, or better transparency and accountability, would be the best way to involve customers. But again Walker moves the governance

cause forward by raising the question.

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* The Independent Review of Charging for Household Water and Sewerage Services, Anna Walker, December 2009 (available from Defra website)

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