Knowing your worth
However sophisticated the economics, the value of some things cannot be calculated. And water may be one of them, writes Barrie Clarke of Water UK
The tricky issue of value is just below the surface, so to speak, of many water policy debates. Environmentalists tend to think that policy undervalues water given “its importance in sustaining life, the economy and the environment” (1). Consumer groups beg to differ. They point to water affordability as a problem for a worryingly large number of households.
Inevitably, such judgments depend heavily on your point of view. Water, like reputation, is in some senses beyond value.
If this sounds like mere whimsy or semantics, read the National Audit Office – not known for being starry-eyed – on the subject. Its analysis of current needs in England and Wales is brisk and practical: it is 36Ml/d split 8-8-16-4 between households, process industry, power generation, and irrigation.
Using a ballpark £2M as the replacement cost of 1Ml/d, the NAO works out that
the value of abstracted water to licence holders is a remarkable £72B. But the watchdog’s conclusion is less precise. “Clearly, water use is of such importance that its value to the economy as a whole is incalculable.” (2)
A similar view will be found in a new edition of Water UK’s Value of Water pamphlet due next month. It admits the difficulty of putting a financial cost on many of the benefits water provides.
“An economist might therefore think of them as ‘unpriced’ while recognising that they could also be described as ‘priceless’.” This is not to raise doubts about current water prices or the price-setting process; just to note that, however sophisticated the economics, the value of some things cannot easily be tied down. And not just airy-fairy things.
For the past few weeks, an impressive demonstration of the role of water in urban regeneration has been on display at the London Building Centre. Waterfront London exhibited nearly 50 projects that will add significantly to the capital’s living, working and recreational opportunities. (3)
The organisers describe a development that will be familiar in Birmingham, Leeds, Newcastle, Manchester, Liverpool, Cardiff, Glasgow, Belfast and many other centres.
“For years London turned its back on its canals and waterways,” they say, “burying its rivers and turning them into sewers. Now we are beginning to properly regard water as one of our major amenities.”
They report that residential developers can expect a10% uplift on housing that overlooks water. And here is the point for the water industry. That premium has many causes, but none more important than the billions invested in wastewater treatment over recent decades.
It is hard to get a handle on the range and potential of benefits showcased in the Waterfront London exhibition – transport, retail, education, biodiversity are all featured and bear testament to the value of clean water. For just a taste, listen to evidence from one sector – food service – and Nicholas Lander, the restaurateur who advises management at one of the most famous of all waterfronts, Thames Southbank. (4)
A food desert for many years, Southbank now offers a wide range of styles, cuisines and prices. Among the chain outlets “the units on the river have become the busiest sites of each respective business, with Wagamama serving more than 8,000 customers a week”.
Lander also says that the Southbank chief executive, who came to London after running the Sydney Opera House and “who therefore fully appreciates the pleasure of eating by the water” sees that “these cafes are inevitably going to increase the already enormous appeal of the Southbank”.
Appeal, premium, uplift, benefit – the language of added value. It may not be precisely measurable, but it certainly exists and if we are wise as a sector we will claim a share of the credit.
1) Water resources strategy consultation. Environment Agency. July 2007
2) Environment Agency – Efficiency in water resource management. National Audit Office. June 2005
3) Waterfront London. The Building Centre. To February 23 2008
4) The restaurant insider. Financial Times. June 2/3 2007