Not far enough

Jacob Tompkins of industry body Water UK sets out its position on the government's environmental funding policy in the latest Water Pricing Round

After much to-ing and fro-ing at the highest levels of government, the ministerial guidance on the Water Pricing Review has been published. It is a well-crafted piece of politics that has done enough to assuage the greatest fears on all sides and dampen debate for the present. The government has walked the high wire of sustainability and come out triumphant, neither leaning too far to the environmental side or too far to the customer side. Prices will be low, but not too low and the environment will be protected and enhanced, but not at any great price.
The government has accepted the bulk of the water companies’ draft business plans. There has been a nod to the need for long-term planning, an acceptance of the problems posed by nitrate pollution and encouragement for catchment-based approaches to diffuse pollution. The tone of the guidance is that DEFRA would be happy to see some innovative thinking on environment and water quality issues. This has led to a positive welcome from all parties and in particular the green groups.
Similarly, the water companies have given a cautious welcome to the guidance with its support for the maintenance of underground assets and moderate improvements in other areas. The government appears to have taken a prudent and balanced approach based on the companies’ submissions and recommendations.

However, there is a concern that the guidance has pleased everyone by delaying hard choices to a later date. For instance there is a lack of clarity on issues such as odour from treatment works, the full implications of the Bathing Waters Directive, the potential impact of the Priority Hazardous Substances Directive and the implementation of the Integrated Pollution Prevention and Control Directive. These issues have been avoided, but the deferred costs may mean prices will have to rise further in the coming five years.

The environment programme is actually larger than the guidance suggests and at some point there must be a wider debate about how the environment programme is funded in the future.

Likewise, the guidance pushes action on the Water Framework Directive back for another five years. And while it makes positive noises about other players taking action on diffuse pollution, unless DEFRA actually takes action this will not happen. In other parts of Europe, governments are committing resources and support to help companies tackle diffuse pollution and encourage integrated catchment management, this is not the case in England and Wales.

The fundamental problem

The problem is that the periodic review is not a suitable vehicle for delivering wider catchment aims and until government accepts this, the noble aims of the guidance will have no impact whatsoever. The support for the land-based projects of United Utilities and Northumbrian is very welcome, but in the absence of a wider policy they will be the exception not the norm.

The fundamental problem is that water companies in England and Wales are funded to deliver water and sewerage services, but expected to deliver social and environmental services – this mismatch of funding and duties cannot continue. The key point is that someone always pays for water and the current cost of supplying water and sewerage services, meeting European environmental requirements and maintaining the water infrastructure is not being met in the long-term. This simply means that the current approach to pricing is unsustainable – it is not wise to defer things like the Water Framework Directive to the next review, as we will have to pay more in the end.

We must all remember that customers are neither cash cows nor only interested in price. It is essential that the debate is lifted above the level of the price versus environment argument and a more holistic approach to water sector funding is developed.

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