Select Committee on Environment, Transport and Regional Affairs Second Report


  221. The Water Act 1989 abolished the public Water Authorities and disposed of their functions to private companies and non­governmental organisations. Under the provisions of this Act, now amalgamated with other legislation relating to the water industry, functions relating to water supply and sewerage provisions were transferred to Water Service Companies. To regulate the industry and protect environmental and public interests, two bodies were established: it was decreed that the National Rivers Authority (now incorporated into the Environment Agency) would be the environmental regulator, and the Office of Water Services (OFWAT) would be the financial regulator. The Department of the Environment (now the Department of the Environment, Transport and the Regions) would be responsible for national policy and relations with the EU. As Mr Alan Davis from the DETR told the inquiry in oral evidence, "it is a complicated picture with a lot of players".[501]

  222. A view of the whole arrangement was put forward by the British Medical Association who recommended that local communities should be involved in "discussions and strategies" for sewerage services, and that an integrated environmental health impact assessment should be included in the UK's National Environmental Health Action Plan: this should itself be revised to include mechanisms for local consultation as part of the planning process.[502] A more specific point was raised in oral evidence by the Soil Survey and Land Research Centre, who reported that not only had the Environment Agency not been given any responsibility for soil, but that there was "confusion" over which government department should lead in matters relating to soil (the gap and the confusion arose from the same, semantic, source: that is, that two terms could be applied to the same referent - "soil" which implies an environmental resource, and "land" which implies an economic resource).[503] Several planning issues were also raised, along with specific criticisms of the various `players'.

Planning Issues

  223. A few witnesses raised planning issues in relation to the way the system works at present. Water Watch were concerned about the revocation of sewerage agency agreements with Local Authorities. Since privatisation, several companies have cancelled sewerage agency agreements with Local Authorities and taken the work in­house. Agency agreements date back to the period prior to regionalisation of the water industry in 1973: they meant that Local Authorities carried out design and project management on small sewerage schemes. This matter has already been raised in paragraph above where we discussed problems of rat­infested sewers, and reported that the Robens Centre was concerned that, unless Local Authorities have an agency agreement with the local water company, they cannot gain access to the sewers to set bait for the rats.

  224. Water Watch pointed out that they have some sympathy with the companies in wishing to end these agreements, but there are drawbacks. One such is the loss of local knowledge, another the loss of local consultation. The biggest drawback is the loss of access to information. When agency agreements are ended, they told us, all information, including maps of sewerage mains, pumping stations and CSOs, will be transferred to CD­ROM. Anyone - even Local Authorities - wishing to retrieve this information may be charged[504] by the companies although the information is needed by highway and planning departments, and for the monitoring of local development plans. In Bradford, Water Watch alleged, planning permission for 150 homes was granted "with only minor modifications to the downstream sewerage system". They reported that Yorkshire Water had assured the Local Authority the drainage infrastructure was satisfactory and refused to allow the Planning Department access to the relevant drainage area plan on the grounds of commercial confidentiality; but when councillors finally gained access to the plan after the houses had been built, they identified three unsatisfactory CSOs. The Water Industry Act 1991 places a duty on sewerage undertakers to provide Local Authorities with copies of relevant particulars of sewers and sewer­modifications, but companies "far too often" claim commercial confidentiality as a way of circumventing these requirements.[505] We agree with Water Watch's Mr Bowler, who stressed in his oral evidence that "we have to start dismantling this notion that somehow commercial confidentiality exists on these things".[506]

  225. Other planning issues were brought to the attention of the inquiry by Mr M.A. Jones.[507] One such was the fact that, though planning permission is needed for the construction of new sewage treatment works, it is not required for the erection of plant at existing works or for the installation of pipelines. Pipelines pose a risk of environmental damage if they cross vulnerable areas especially, Mr Jones told us, along the coastal margins. Though "in most cases" planning authorities are "aware of" any proposed pipeline routes, the water companies are not obliged to consult with anybody before installing them.[508] Water Watch also pointed out that water companies have powers of compulsory purchase for land needed for new or replacement sewage works or for pipes. They fear that companies may purchase new sites in order to free existing land for development. "In the case of pipelines," they told us, "there are no requirements for environmental assessments, no independent valuations and no quality control studies. Wildflower meadows have been damaged, drystone walls badly replaced and planning laws flouted".[509]

Regulatory Structure


  226. The Government told the inquiry that the aim of the Department of the Environment, Transport and the Regions (DETR) is "to create and sustain an effective policy and legislative framework" so that the Agency may "successfully protect and enhance the freshwater and marine environment". Ministers also advise the Director General of OFWAT about what the water companies' priorities for investment should be and "seek to promote efficiency by the water companies in all their activities". At EU level, the DETR represents UK interests; at home, it seeks to ensure that, once implemented, EU Directives are properly complied with.[510]

  227. The UK position to date has been that water policy should be based on sound science and guided by risk analysis and a cost­benefit approach. Since coming into office, the present Government has been reviewing a number of aspects of policy, including water quality, but Ministers are still considering what stance they want to adopt in the long term.[511]

  228. The DETR is not without its critics, especially within the water industry. Some of the dissatisfaction centres on what is perceived as a lack of clear guidance. Severn Trent Water, for example, complain that they do not get "clear and timely" advice about environmental policy so "inconsistencies" can arise which "adversely impact on the stability of the investment planning process".[512] The Water Services Association reported that the water industry needs "a stable, long-term regulatory environment to develop its strategies", so the most important contribution the Government can make is to provide a clear long-term framework for pollution control generally and sewage treatment specifically. Consequently, they look to the DETR to give guidance about how regulations should be interpreted and applied so that they can comply with them; to clarify practical interpretive issues so that appeals can be avoided; and to make quick decisions on any appeals that do arise.[513]

Ministry of Agriculture, Fisheries and Food/Department of Health

  229. The Ministry of Agriculture, Fisheries and Food (MAFF) is responsible for advising on the safety of food, especially for queries relating to the use of sewage sludge in agriculture. The Department of Health provides advice to both DETR and MAFF on public health aspects of sewage treatment and disposal.[514]

The Environment Agency

  230. The Government told the inquiry that, under the terms of the Environmental Protection Act 1995, the Environment Agency was established as an independent body bringing together the functions of the former National Rivers Authority, the Pollution Inspectorate and the 83 local Waste Regulation Authorities in England and Wales.[515] Among other duties, it is required to preserve or improve the quality of rivers, estuaries and coastal waters. It also has specific duties arising from a number of EU Directives on water quality, and is a statutory advisor to the Secretary of State. Its brief is to minimise the effects of sewage disposal to land, sea and air. There are distinct limits to its remit.

  231. Firstly, its remit does not include the regulation of smell nuisance, which remains a Local Authority function.[516] Secondly, though it has power to control the release of dangerous substances from point sources, it has only limited powers to control discharges from diffuse sources.[517] Thirdly, though responsible for implementing health criteria set by the DETR in consultation with MAFF and DoH, its public health powers and responsibilities are both limited and somewhat confused.

  232. Where environmental regulatory decisions have health implications, there are statutory consultative mechanisms in place so that the Agency gets the right advice. Oddly, however, relevant EU Directives do have a human health component, and it is the Environment Agency that has the responsibility for delivering the requirements of the Directives in this country. The matter is further complicated by the fact that the concept of "harm", including human harm, is included in the Environmental Protection Act 1990 with regard to the control of major industrial processes under the IPPC,[518] but the Act does not apply directly to sewage discharges.[519] The British Medical Association concludes - unsurprisingly - that the Agency's own view of its role as regards health is "ambiguous" and that its remit should be extended so that it is "explicitly clear" that Agency responsibilities towards the environment include addressing the health implications of the wider environment.[520]

  233. The Agency has, however, begun to address some issues which, while perhaps primarily germane to the wider environment, impact on human health through the food chain. It has developed a measure of pollution called a "Direct Toxicity Assessment" (DTA) that is aimed at controlling dangerous substances (heavy metals, chlorinated solvents, pesticides and other organic substances). The DTA will not measure individual substances in effluents; rather it will seek to control the impact of effluents as a whole. The Agency has developed a protocol for using the DTA to control the toxicity of wastewater discharges, along with suitable tests and methodologies: the proposal was circulated in the summer of 1996. As a result, it has been decided to undertake a demonstration programme, which is due to report at the end of 1999.[521]

  234. Many specific criticisms were aimed at the Environment Agency by witnesses to this inquiry. Most of them focused either on the slowness with which appeals were resolved, or on questioning the Agency's willingness and/or ability to monitor effectively and prosecute infringements of the regulations. On the appeals procedures, Anglian Water reported that the average time for issuing a consent is 125 days, but the system is considerably more protracted if a case goes to appeal.[522] Appeals against discharge consents are often referred to Environment Agency Headquarters and then to the DETR.

  235. By June 1997 there was a total of 836 outstanding appeals,[523] 168 in one region alone (Yorkshire).[524] In oral evidence, a representative of the Environment Agency estimated the number of outstanding appeals as "about 1,000",[525] 82 of which "quite possibly" date back to 1991.[526] The water companies complain that the delay makes it impossible for them to plan their investment: environmentalists complain that, while the appeals are pending, the water companies continue to discharge effluent at what the Environment Agency has already decided is an inadequate standard. The backlog of appeals should be dealt with both immediately and expeditiously to avoid these anomalies.

  236. On the other question relating to the Environment Agency's willingness to monitor and prosecute, the issues were discussed above in paragraphs and will not be repeated here. The Environment Agency's defence against such criticisms is that they do more than the statutory minimum in some cases, and that their function is to monitor compliance with the Directives, not to take responsibility for health or other issues. When asked whether the Agency could guarantee the safety of bathers and other recreational water users, Mr Chris Chubb said that "the crucial thing is that we monitor for compliance with the Directive and not for beach management purposes":[527] health is the responsibility of Local Authority Environmental Health Departments, not theirs.[528] Either this is an example of a minimalistic and legalistic approach to the duties of an Environment Agency, or it is an example of the gaps in public protection that open up because the system of control and management is a ramshackle Heath Robinson affair. In either case, we do not find it reassuring.

  237. In addition, there are allegations that the Environment Agency fails to prosecute failures and infringements. The Campaign Against Sewage in the Sea at Sunderland, for example, claimed that "there have been no prosecutions of [Northumbrian Water] ... even when ... sewage waste has been blowing across cliffs and major roads in the region".[529] CASSS would like to see the Environment Agency proactive in environmental matters and prosecuting "clear failures".[530] The Aire Valley Conservation Society alleged that there are 14 sewage works in the Yorkshire region alone which do not comply with discharge consents and "the Agency fails to prosecute".[531]

  238. The Environment Agency believe that they are "demonstrating a robustness towards the water industry in terms of enforcement and in terms of standards". They reported that they are currently prosecuting a water company "at least once every ten days for offences" and "not shirking from the enforcement activity".[532] Surfers Against Sewage quoted figures relating to the prosecution rates of the various regional Environment Agencies from an ENDS Report 25 April 1996,[533] which we reproduce here:
Region   Prosecutions 1996-97
Prosecutions since 1989
Anglian   8
Northumbrian   0
North West   0
Severn Trent   5
Southern   5
South West   2
Thames   3
Welsh   7
Wessex   0
Yorkshire   0
  TOTAL:   30

The Minister's concern was not so much the rate of prosecution as the seriousness accorded to such cases in the courts. He told us that "the courts in many cases do not award penalties that are justified by some of the offences" and in particular, that heavier penalties should be exacted from serial offenders.[534] We would encourage him, therefore, to pursue his concerns in a constructive way.

  239. Specific questions were raised which we found disturbing. Water Watch reported that they had learned that sewerage undertakers could "buy" variations to discharge consents whilst work was being carried out at sewage treatment works. "An example of this practice," they said "relates to a STW in West Yorkshire. An officer of the Agency agreed a £500 payment for a variation of 18 months duration. The decision appears to have been taken by a single officer".[535] Another disturbing instance was the case raised by Mr David Davies of the Shellfish Association of Great Britain when the Environment Agency waived a discharge consent without telling the local shellfish farmers.[536] "They would never have let us know," he told the inquiry, "we would not have known, other than it was our shellfish monitoring that picked it up".[537] Something similar was mentioned by Water Watch's Pete Bowler, who told us in oral evidence that he had "discovered only last week ... that there is a cold weather exemption for discharge consents" and "a lying snow exemption".[538]

  240. We cannot possibly say whether any of the accusations in the foregoing paragraphs have any substance, but we are concerned that they are being made. In oral evidence, the Environment Agency's Dr Martin Griffiths said that "the public need to be assured that there is adequate environmental protection".[539] Sadly, we have concluded that the attitude of the Environment Agency does not give such reassurance. When asked if there should be a more open and public debate about environmental protection, Dr Mance commented that there might "be a difficulty of there being too much information on this in the public domain";[540] a suggestion which appears to us flippant and condescending. We contrast this statement with the repeated emphasis of the Institute of Wastes Management, that the Agency needs to put information "on to a public record for people to see" far more quickly than it does at present.[541] The IWM suggested that, since there is a requirement on industry to report to the Agency within certain timescales, there should be a similar requirement on the Agency to report to the public: this seems reasonable to us.[542]

  241. Another aspect that does not reassure us is the Agency's preoccupation with costs. Listening to their oral evidence, one could be forgiven sometimes for imagining that the Environment Agency is a sub­branch of OFWAT. For example, in answer to a question concerning what environmental obligations the Agency would be likely to lay on the water companies in the next price review, Dr Geoff Mance replied that: "at present [it] is not stating a list of obligations ... What it is doing is putting out into the public domain ... a document clearly stating all the things it requires them to cost so the Director General can indicate the price implications";[543] and "It is for the Secretary of State then to guide us ... as to the pace of environmental improvement he believes is acceptable given the potential impact on prices".[544]

  242. Similarly, in its written evidence the Agency reported that their "precautionary" approach to endocrine disrupters in sewage effluent (potentially a very high profile concern in the future) should involve "a number of specific preventative actions taking account of relative costs and benefits".[545] Added to the fact that the Government seem to be playing the same game - announcing, for example, that "there is a cost benefit issue" involved in trying to protect recreational water users other than those who can be strictly defined as "bathers",[546] we are deeply concerned that no public body interprets its responsibilities as actively, and solely, campaigning for health and environmental protection.

  243. Depicted above are a number of areas in which the Agency has been found wanting. It must seek to rectify these problems if public trust is to be gained and justified. However it may be that some problems - such as outstanding appeals on consents - will require an injection of resources to enable a prompt resolution. While the Minister's loyalty to his colleagues forbade him saying so, we detect in his words a tacit admission that the Agency, like the PHLS, has been under-resourced.[547] We understand that ways to address the imbalance of resources between the regulator and the water companies, at least, are being discussed.[548] We hope that these talks come to a swift and successful conclusion.


  244. The water and sewerage industry's financial regulator is the Office of Water Services (OFWAT), a non­ministerial government department. The Government told us that the Director General's duties are laid down in Section 2 of the Water Industry Act 1991: his primary duty is "to ensure that water and sewage companies can carry out and finance the functions specified in the Act. Subject to that he has to `protect customers, promote efficiency and facilitate competition'... He does not control company profits or dividends".[549]

  245. OFWAT's method of operating, as described in the Director General's written evidence,[550] is quite complex. The Director General sets limits on the annual price rises ("K" factor) and initiates periodic reviews:[551] companies must produce Asset Management Plans which detail how they intend to invest their profits and meet their environmental obligations. Preparations are currently in hand for the third periodic review (AMP3), which will cover the years 2000­2010.[552] The Director General draws upon advice from independent "reporters" (usually professional consulting engineers) to help challenge the water companies' estimates of costs. He also receives information from the Environment Agency each year about companies' progress in delivering the improvements for which customers are paying; and the companies send him annual "July returns". Using this information, he analyses and reports on aspects of company performance. If the "July returns" give rise to concern about company performance, he can conduct an investigation of that company. "The Director's role, therefore," he reported, "is exercised both at a periodic review of prices and annually through active monitoring".[553]

  246. It is not to be expected that OFWAT, alone of the other bodies, would escape criticism. We might have expected that most of the critics would have been arguing that the Director General had failed to keep bills down. However, the most common arguments were (from the water companies) that his demands were preventing them meeting legitimate public expectations, and (from campaigning organisations) that he was failing to control water company profits or failing to ensure profits are reinvested in improvement, or both. Both groupings believe that standards should be improved and they must be paid for: it is just a question of how these improvements are to be funded. The Director General's view is that improvements can be funded from operating efficiencies; other bodies, as we noted above in paragraphs 216-219, do not necessarily agree.

  247. OFWAT's role was the subject of some criticism. The most common complaint about Mr Byatt was that his demands were preventing companies from meeting a legitimate public demand for a better service. According to Water Watch, "future investment ... is threatened by OFWAT's current approach to environmental improvement investment within the current price review".[554] Several SSSIs, they said, are affected by pollution from sewage works or CSOs. "One conservation body," they say, "has already taken legal advice which suggests that OFWAT could be subject to Judicial Review if it fails to ensure adequate capital is available to prevent damage to SSSIs".[555] The Water Services Association said that the duty of OFWAT should be to "maintain and improve existing assets, secure high levels of service to customers [and] achieve the environmental and public health objectives set by Government and enforced by the Environment Agency"; doing this "may involve increases in charges above the prevailing rate of inflation," they said, "particularly since the prospect of further efficiency gains ... is diminishing".[556]

  248. The Director General has chosen to interpret his duty to customers only as protecting their pockets. We regret that he does not interpret his obligation as extending to ensuring that they get the best possible service - the service which they want - for the money they pay. He has also neglected to extend his sphere of influence to other duties which the 1991 Act laid on him: according to written evidence from the Government, under Section 3 of the Act he has a duty "to further the conservation, enhancement of flora, fauna and geological or physiographical (landscape) features of special interest".[557] However, he has repeatedly insisted that his job is price­control and that it is up to the DETR to decide environmental policy.

  249. From the beginning of his discussion with us he was at pains to emphasise that the environmental obligations placed on the companies in 1994 were nothing to do with him;[558] he explained to us that "the benefits which the environment is getting ... are very considerable" and that "the proper carrying out of functions as far as environmental improvements is concerned is a matter for the Secretary of State".[559] While he, personally, would like to see environmental improvements,[560] he described his role in relation to policy formulation as "to remind ministers about costs"[561] and summed up his position thus: "I have always said that if environmental aspirations move too fast then prices will go up ... I am the person who drew attention to this issue right at the beginning several years ago and I have not changed my position on that one".[562] We deduce from his words that his object in denying any responsibility for the environment is to protect himself from blame if prices rise. For example, he reasoned: "if the Government brings in a new policy then that may result in some increase in prices ... It will be quite clear to the public, and it seems to me absolutely right that these things should be clear, that is what is going on".[563] Fortunately, perhaps, as we have previously noted, we do not consider that price rises will be necessary.[564]

  250. Our chief regret is that he has not consulted adequately with Government departments, the Environment Agency or with other specialist bodies before taking decisions, so that gaps have opened up in the regulatory structure. The consequence is, in the words of Water Watch, "we are faced with the possibility of water companies hiding behind the skirts of one regulator to avoid the requirements of another".[565]

  251. Much of the evidence presented in our discussion of the regulators' performance raises questions as to the accountability of the water companies and of the regulators themselves. It is important that both the environment and consumer interests are properly represented and that the representatives act in a wholly transparent way. We raise two suggestions which may go part of the way to improving the situation: firstly, that consideration should be given to the role of the proposed regional chambers in securing a proper dialogue between the regulators, local water companies and communities; secondly, that `league tables' providing easily comprehensible information upon the companies' relative performance should be published upon the Internet and advertised in newspapers in the same way that the schools' tables are published. The information required would be upon performance in the core business and upon investment in addition to the existing levels of service indicators.

501  Q2. Back

502  Ev p.9. Back

503  Q209. Back

504  Ev pp.106-7; Q341. Back

505  Ev p.107. Back

506  Q342. Back

507  Ev p.141. Back

508  Ev pp.141-42. Back

509  Ev p.107. Back

510  Ev p.130. Back

511  Ev. p.132. Back

512  Ev p.110. Back

513  Ev p.125. Back

514  Ev p.131. Back

515  Ev p.131. Back

516  Ev p.60. Back

517  Ev p.73. Back

518  Q67. Back

519  Ev p.66. Back

520  Ev p.9. Back

521  Ev p.73. Back

522  Ev p.23. Back

523  Ev p.23. Back

524  Ev p.94. Back

525  Q84. Back

526  Q85. Back

527  Q94. Back

528  Q95. Back

529  Ev p.30. Back

530  Ev p.31. Back

531  Ev p.94. Back

532  Q108. Back

533  Ev p.44. Back

534  Q914. Back

535  Ev p.106. Back

536  See above paragraphs 73-77. Back

537  Q299. Back

538  Q343. Back

539  Q62. Back

540  Q65. Back

541  Q781, also Q844. Back

542  Q781. Back

543  Q86. Back

544  Q86. Back

545  Ev p.73. Back

546  Q32. Back

547  QQ 919, 865. Back

548  Q919. Back

549  Ev p.131. Back

550  Ev p.114. Back

551  Ev p.131. Back

552  Ev p.61. Back

553  Ev p.115. Back

554  Ev p.106. Back

555  Ev p.105. Back

556  Ev p.125. Back

557  Ev p.131. Back

558  Q715. Back

559  QQ719, 723 also 725. Back

560  Q755. Back

561  Q751. Back

562  Q753. Back

563  Q756. Back

564  See paragraph 216. Back

565  Ev p.105. Back

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