How much is that river in the window?

Following a disagreement over abstraction, the River Kennet was valued at £700,000 and £13.6 million. RAJ Arthur examines the Kennet situation and asks what could this mean for other rivers.

In a July subsequently found to the hottest on record, rival groups lobbied ministers on an issue of growing environmental concern. Environment Minister Michael Meacher had outlined new proposals on licences, a main point being that where abstraction was causing environmental damage, a licence could be revoked without compensation.

River Kennet in 1976 below Marlbrough STW

Competition for water intensified through the summer with each month of exceptional warmth. The connecting thread was a dispute over a river, increasingly seen as a symbol for the fate of many. Back in February, an inspector’s evaluation of the River Kennet had prompted people to ask whether an English river could really be worth no more than the price of a good-sized house. In the small print of the debates was an argument to the effect that even the very large investment needed to bring a polluted, low class river back to pristine condition would be counterbalanced by the rising property value of houses along its banks. if this was true, it did not quite seem to make sense that a river should be so cheap.

In fact, the much headlined figure of £300,000 referred only to the Kennet’s non-use value, the environmental part of the calculation. The inspector’s total valuation stood at £700,000 – a somewhat larger house. The Environment Agency’s (EA’s) figure of £13.6 million made an interesting contrast. Even stranger was the fact that it had been derived by the same technique of cost-benefit analysis (CBA) as the other. The effect of this discrepancy has been to spotlight the uses of CBA – is it a game with an infinite number of goalpost positions?

It began in 1995 when Thames Water decided to challenge a National Rivers Authority (NRA) decision to cut the amount of water it could abstract at Axford in Wiltshire. A PHABSIM study had convinced the Authority that abstraction was changing fish habitats. Held in Newbury in the autumn of 1996, the Kennet inquiry lasted 22 days. Not until February this year did the news break that Secretary of State John Prescott had upheld the inspector’s decision to allow the Thames Water appeal, though with some reduction in the terms of the licence. By then the EA was well forward with its policy document “A price worth paying”, stating the case for a forthcoming expenditure of around £10 billion to give the environment the protection which in the EA’s view it needs. The upgrading of rivers plays a large part.

For the EA the inspector’s decision came as an unpleasant surprise. The reasons given threw doubt on the Agency’s interpretation of CBA valuation procedures. it was a daunting setback also for local campaigners, organised as Action for the River Kennet and other conservation groups.

Mr Prescott, in backing the inspector, had not considered it necessary to give his reasons.

The EA policy document was due for release in 14 May. On 5 May, Lord de Ramsey asked for urgent discussions with the DETR to ask how best to present information on the costs and benefits of environmental improvements. Of the inspector’s valuation he said: “It appears to me that his approach, if replicated elsewhere, would leave few of our rivers and wetlands safe from over-abstraction by water companies.”

When the “A price worth paying” document appeared, it was easy to see the reason for the EA’s concern. This was a document which to some extent had been torpedoed in advance. Going ahead with it in the circumstances marked the Agency’s determination to fight, and fight it must, for on the very date of publication the Kennet issue had reached the House of Commons.

Michael Ancram, Conservative MP for Devizes, implored the Government to think again. “To a simple countryman, the fact is that the River Kennet is declining.” The waters of the river, “the epitome of a crystal-clear chalk stream, bringing quality of life to the community through which it passes,” were going to feed developments outside the catchment area. All the concern and anxiety of country people was “just brushed aside,” and he lamented “the river’s virtual disappearance to the west of Marborough in the summer.”

Of the inspector’s decision on the method of calculating non-use benefit, he said: “The Agency believes that the decision has blown a hole in the wider strategy that it is pursuing on behalf of the Government, and will seriously hamper its work on other rivers and wetlands. We are not talking about a peripheral judgement on methodology. The decision on the CBA strikes at the heart of the environmental argument.” By endorsing the lowest basis for calculation, he said, the Government was in danger of undermining the importance of the environment in such disputes. When Under Secretary Angela Eagle replied, it became clear that even at this late stage there was no agreement on the cause of low flow, apart from the reduction in rainfall and runoff. The Minister reiterated the expert opinion cited in the inspector’s report that the Axford abstraction accounted for only 3cm of difference in river level. Low flow was attributed mainly to dredging and weed loss, in line with the view Thames Water had always maintained. She welcomed the fact that the EA and the company were working together to reduce phosphorus levels. In the Government’s view, the case made by the objectors was just not strong enough.

Talks to resolve some of the difficulties went on through the summer, and are still continuing. On 18 June, the argument between Ofwat and the EA reached a level of some acrimony. The water regulator complained that the environmental programme would cost considerable sums of money for little benefit. The EA disagreed, and hit back with reference to shareholder profit.

The technicalities on which the Kennet inquiry hinged were now also the subject of intense debate. On 7 July, the EA’s chief economist Ronan Palmer set up a seminar in Church House, Westminster, at which various experts outlined the background issues involved in CBA. The presence of a moral philosopher and a psychologist underlined the wide-ranging scope of the seminar, which also included environmental campaigners. CBA has been at the centre of academic debate in recent years and some experts have expressed doubts of its ability to protect the environment. The Kennet has provided a focus for issues raised in this wider debate.

The Council for the protection of Rural England are frankly sceptical of the more extended claims made for CBA. Not everything, in its view, can be quantified. There must be a strategy based on appraisal, but financial appraisal is not environmental appraisal.

The closer to the river, the stiffer the opposition to CBA. Some campaigners on the spot deplore the methodology of a system that allows farmers to pour chemicals into the ground on the banks of a river classed as a SSSI in an area of outstanding natural beauty.

The Kennet has the not very common ecology of an English chalk stream. The angler’s complaint against low flow is the danger to brown trout. Ranunculus (crowfoot) also figured in the inquiry because it has visibly suffered. The inspector acknowledged the fine character of the Kennet, and made it the basis of his decision to allow some reduction in the terms of the abstraction licence. The inspector’s judgement had hinged on taking a much narrower population base than the EA in assessing benefit to non-users of the river. His assessment was based only on local population, which he put at 100,000.

The factual arguments on the Kennet continue. Local objectors point to the fact that, whereas the use value of the river had been costed as only £0.4 million, Thames Water claimed it would cost them £6.2 million to find an alternative if abstraction rights at Axford were reduced. Thames Water sticks to its guns on dredging as the cause of low flow, but refuses to point a finger of blame, saying the dredging was historical. Its sewage treatment works at Marlborough causes phosphorus reduction and it is working with the EA to establish what impact that has on the river.

The inspector’s view, in an 143 page report, has been allowed to stand. The expertise of hydrologists is opposed to the perception of Mr Ancram and the local campaigners – the Ministers concerned have robustly defended it, ending the Kennet dispute for the time being.

The interest broadens to the disputed issue of rivers in general, on which the EA now stands at a distinct disadvantage. Its policy document clearly spells out what it perceives to be at stake. The pressures on the Kennet, which is typical of many rivers in the South and East, are from two sides at once, the climatic effect of a reduction in winter rainfall, and the impact of housing development, reflecting population increase.

To be confronted by two sharply conflicting community needs is a test for Mr Prescott. It is easy to line up major scientific support behind either side in this debate. Not surprisingly, his public statements have shown sympathy for the low income water consumer. In this way, Ofwat’s demand for a price cut is more likely to catch his ear.

With the inspector’s decision and the strong Government backing for it, the die has been cast in favour of housing development. If this remains the policy throughout a period of natural low flow, some decline in the state of the environment seems inevitable. Whether or not there is enough money for the “improvements,” which in practice can often be translated to mean avoidance of further decline, there is certainly not enough water for all the demands being made on it.

In Annex 2 of “A price worth paying,” the EA lists 69 non-SSSI sites affected by excessive abstraction, but in which the abstraction does not exceed the licensed quantity – hence the relevance of Mr Meacher’s new control plan. Water UK has already reacted sharply to proposals that could leave it high and dry on investment tied to existing licences. These disregard give some idea of the dilemma facing policy-makers.

Action inspires action. Stay ahead of the curve with sustainability and energy newsletters from edie