Examination of Witnesses (Questions 220
- 224)
WEDNESDAY 3 NOVEMBER 2004
BARONESS YOUNG
OF OLD
SCONE AND
DR ANDREW
SKINNER
Q220 Paddy Tipping: You have told
us about the Thames scheme.
Dr Skinner: Mr Roberts mentioned
the Daveyhulme scheme and the Manchester Ship Canal. That is a
scheme which is linked inexorably to the fulfilment of the obligation
of the Fresh Water Fish Directive. This is an obligation which
is, I might say, the Thames Tideway of the North-West. The scheme
in our view is necessary to meet that obligation. It is not just
our view. We are relying upon the principal guidance given by
Mrs Beckett and Elliot Morley this time last year, none of which
has been rescinded in the final guidance a month ago, and so it
is not just our judgement about what are the statutory drivers;
they are there in the principal guidance which we have received
and which we will work to in our regulatory activities over the
next five years.
Baroness Young of Old Scone: To
give you another example, I am always deeply angst-ridden about
the Fylde coast which used to fail the Bathing Water Directive
with alarming regularity, and we really bust a gut to get it to
pass. There is a remaining storm sewerage discharge from Preston
which really could well lead us back into infraction again and
we have not got that scheme in, so the Fylde coast is looking
a bit iffy.
Q221 Chairman: You have sparked me
off now! The Fylde coast does raise a very important and interesting
issue. When one looks at the amount of money that has been spent,
I am going to hazard a guess that over time we have probably spent
three-quarters of a billion pounds on a coastal clean-up programme.
The investment to one direct sewerage discharge into the sea off
Fleetwood cost half a billion in its own right. If the end result
was to achieve in this case the European environmental requirements,
for the sake of one additional component, the value of all of
that other investment is not being allowed to come to fruition.
That does seem to be a classic, very small part of the dog's tail
wagging the whole dog. I cannot, in all honesty, think that that
is right. There is a further economic knock-on to that: whilst
there is a blight over the Fylde coast through not having this
programme completed—not that there are many brave souls
who would wish to venture into the water, and I have ventured
in and it is on record in the local paper that I have taken my
clothes off and ventured in—I put that in the context that
if you are looking at encouraging tourism by saying that the beaches
are safe and all that goes with that, the little missing part
of the programme is holding up a potential series of other gains.
I am not clear whether in fact the regulator, in coming to conclusions
as highlighted by that part of your evidence, has weighed the
totality of the impact of not proceeding with this one part in
the whole picture.
Baroness Young of Old Scone: I
obviously cannot comment for the economic regulator. We should
make one caveat on the Fylde coast and that is that it is not
just this sewerage treatment works, it is not just one straw that
will break the camel's back; there is still quite an issue of
pollution from land management that needs to be dealt with as
well. Yes, I am sure that the wider issues of the economic value
in tourism, recreation and regeneration are not issues that are
taken into the cost-benefit equation when we are looking at the
clean-up benefits of the water improvement programme.
Q222 Chairman: I want to draw our
questioning to a conclusion and to wrap a couple of themes up
in one question. There is going to be, as I think witnesses have
indicated, a review of this process once it is concluded. I am
sure you will be involved in that. If that is the case, how do
you think we should tackle the long-term issues of some of the
big ticket expenditures like the water framework, other environmental
issues, issues of long-term water security, the massive potential
implications of climate change, which have big numbers and long
timescales against the background of a current pricing review
which is of five years duration? Where there are questions now,
particularly in the case of climate change? Is it "fair"
or not for the consumer as it impacts area by area to have to
bear that cost when in actual fact it is the result of global
events well beyond their and their water suppliers' influence?
In fact, I think that in WaterVoice's evidence they conjectured
that there may be a need for general taxation to be involved in
addressing that kind of issue. In conclusion, your comments on
that would be of assistance.
Baroness Young of Old Scone: I
think Dr Skinner will want to come in on this. May I simply say
that at least we have now begun to get a handle on what these
longer term issues are and so we can put successive price reviews
into that framework, which is a major step forward. One particular
longer term issue which we think has been under valued is the
need to get integrated sewerage strategies. At the moment, I think
both the short-term way in which the price round deals with sewerage
and the fact that we really do not have agreed longer term sewerage
strategies is an issue that we also need to put into your mix.
Before I hand over to Andrew, one last point is: as yet, we have
never managed to get a price round to deal with a really big ticket
or huge investment item. It has always flunked those so far because
it is not easy to put a really big investment programme into any
single price round. That is something that we are going to have
to overcome. I know that Dr Skinner has been thinking about his
retirement job, which is going to be looking on our behalf at
what we would want out of the price review for the future.
Q223 Chairman: That sounds like a
new career, not retirement!
Dr Skinner: In a couple of words;
I think the answer is: basin plans. The Framework Directive is
the vehicle by which all your questions can be answered. It is
comprehensive in respect of the issues from sectors. These are
required to be assessed against targets over a long time. There
is a mechanism for prioritising and staging what one does. Longer
term goals like climate change impacts can be assessed. The much
vaunted Framework Directive has got potentially all the planning
and decision-making concepts built into it. The problem is that
these things will not happen for nothing. If you look at it in
terms of a basic plan which integrates water industry issues,
agricultural issues, mining issues, urban management issues, only
one of those has actually got a means of funding, which is called
the periodic review price round. There are challenges in working
out how the price round can operate over a longer timescale and
pick up big things like Thames Tideway or the next reservoir which
will span more than one five-year period. Secondly, it should
make sure that the water industry, the only bit of the cycle that
has a funding mechanism, is not penalised and asked to meet environmental
obligations which should fall elsewhere. For me, that is where
the question about specific customer costs as against general
taxation comes in because if you are going to have the really
integrated and publicly supported basic plan, then it is going
to have to find ways of dealing with the other sectors.
Baroness Young of Old Scone: May
I just make the point that Andrew has already made and that is
that this stuff will not happen on thin air. The reality is that
water customers and taxpayers are pretty well one and the same
folk at the end of the day; they just pay in different ways. We
must maintain the overview that says that if we are going to achieve
the Water Framework Directive challenges, and I suspect that we
are going to achieve them rather more slowly than we are supposed
to, there is going to be some sort of money coming out of people's
back pockets through some mechanism or other.
Q224 Chairman: I think there is one
missing element and that is that quite often with these large-scale
environmental programmes, such as in the case of the Fylde coast,
you could define to the water customers, say of United Utilities,
what the gains were. It was very simple to understand and it was
visible, but in the case of water framework, it is not so easy
to see. What I think is missing is any kind of public education
programme—not consultations, there is plenty of those—to
explain to people why Europe as a collective has taken the decision
to have this improvement and what it will actually mean for them.
Otherwise, you are going to be selling potential increases in
cost to a group of people who are saying, "Why are we doing
this?" I think there is a real challenge there.
Baroness Young of Old Scone: May
I make one last point? First, we have the pilot project on the
Ribble, which you know well, but it will need resources if we
are going to have a proper engagement with the community around
these very real improvements that can be quite charismatic for
them; and, secondly, we must not leave you with the view that
the Water Framework Directive is just about cost and nothing else
because some of the things that are going to be delivered through
the Water Framework Directive are about doing things smarter,
not doing things more expensively.
Chairman: I concur with that and I think
it should be part of a much bigger public discussion, but there
we are. That is slightly beyond the scope of this particular inquiry.
Thank you very much for your patience in waiting to give evidence
and again, Barbara, for coming twice before the Committee in one
shape or another this week. Thank you very much indeed.
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