Conclusions and recommendations
Local authority funding
1. We
believe that councils should aim to give flood protection work
the same level of priority that the Government has spelt out in
the Coalition Agreement. We recommend that Defra and the Department
for Communities and Local Government review local authorities'
spend on flood management work in April 2012. (Paragraph 14)
Sustainable drainage systems
2. We
support the development of sustainable drainage systems (SUDs)
for new properties and their retro-fitting where feasible since
they are a cost-effective, environmentally beneficial method of
providing drainage. In implementing the SUDs provisions in the
Flood and Water Management Act 2010, Defra must take into account
the diversity of views as to who should be responsible for SUDs
maintenance and the strong concerns many local authorities have
about securing long-term funding for this. We are concerned that
Defra's calculation of the level of resources it expects to be
available to councils as a result of the transfer of private sewers
is not based on robust data and that councils will therefore not
be adequately recompensed for their new duties on SUDS. We recommend
that Defra undertakes further work on its model for the ownership
and funding of SUDs, including the extent of the potential for
local authorities to recover costs from developers. (Paragraph
22)
Fire and Rescue Authorities' flood duties
3. We
welcome the launch of Exercise Watermark and the additional £2
million of funding from Defra towards emergency services' flood
rescue work but recognise that this represents only a fraction
of the potential costs to these authorities of preparing for and
responding to flood events. We are concerned that the lack of
a statutory duty for Fire and Rescue Authorities could jeopardise
their flood preparation and response work, given pressures on
them to direct their limited funding towards fulfilling non-discretionary
duties. We recommend that the Government places a duty on Fire
and Rescue Authorities to undertake specified flood rescue preparation
and response work, and that provision of adequate resources for
this work is included under the funding formulae applied to emergency
services. (Paragraph 26)
Funding for flood defences
4. We
are concerned about the future adequacy of funding for flood defences
given the need to increase investment in order simply to maintain
the current level of protection in the face of flood threats which
may be increasing as a result of climate change. We note the priority
Defra places on protecting flood defence work and welcome its
provision of more than £2 billion over the next four years
for such work. We welcome the focus on improving procurement to
deliver 15% efficiency savings in Environment Agency flood defence
budgets which was designed to help to deliver improved protection
to 145,000 properties by 2015. However, it is an inescapable fact
that the CSR funding settlement represents a cut to flooding budgets.
This is against a background where funding for flood defences
has been judged to be inadequate. (Paragraph 35)
5. Given the considerable
sums of capital spending being invested into flood defences in
the UK, we believe it is essential that Defra regularly reviews
the evidence base on which projections of increased flood risk
are based. No model projecting changes in sea level or changing
weather patterns can ever be perfect for all time and if future
evidence were to emerge which conflicted with the original projection
or, for instance, suggested that the pace at which sea levels
were rising was starting to slow, then the Department should take
account of such evidence. (Paragraph 36)
6. Whilst Defra's
recently published consultation document on the future funding
of flood and coastal erosion risk management gives substance to
the debate as to how to ensure that beneficiaries provide a higher
proportion of the funding for flood defences, proposals are at
an early stage of development. We conclude that it is right that
beneficiaries such as developers should help fund new schemes,
but it is by no means certain that any shortfall in central Government
funding will be made up at this stage by contributions from other
sectors, particularly the local government sector which is already
contributing to funding many local flood defence projects. Clear
principles and methods must be agreed urgently amongst all interested
parties to secure funding from all sources to meet the Government's
flood defence objectives in the next few years since timely investment
in flood defences provides significant economic and social returns.
We note Defra's assurance that public funding will be focussed
on those communities at greatest risk who are least able to protect
themselves and recommend that Ministers spell out in their consultation
response how such communities will be identified and how their
protection will be achieved in practice. (Paragraph 37)
7. We recommend that
the Environment Agency provides the Committee with an update in
May 2011 on how the allocation of Defra's CSR funding will impact
on its flood programmes and by the end of 2011 on how its efficiency
programme has impacted on its flood defence work. (Paragraph 38)
Flood insurance
8. There
is an urgent need for the Government to reach agreement with the
insurance industry on the provision of flood insurance to millions
of homes and businesses in flood risk areas since the current
'Statement of Principles' is set to expire in 2013. The renewed
agreement should ensure that investment in flood resilience measures
by householders is reflected in the insurance premiums they pay.
Defra should provide the Committee with an update on progress
on this within six months. (Paragraph 41)
Agriculture and flood defences
9. While
the evidence suggests that the impact of flooding on agriculture
is not as costly as on other sectors, greater recognition of the
value of flood defence works undertaken by agricultural landowners
is needed. The Water White Paper and Natural Environment White
Paper must fully reflect the potential role of agricultural practices
in assisting the achievement of flooding objectives. Where agricultural
land is used for flood defence and mitigation purposes, the owners
and farmers should be properly compensated. (Paragraph 45)
10. We note with concern
that final arrangements have yet to be made for administering
payments under the Rural Development Programme for England after
the abolition of the Regional Development Agencies. Defra should
set out clearly in its response to this report how it will manage
the transitional arrangements in order to ensure that this inter-regnum
does not hinder work to encourage landowners to implement measures
to support water management and flood defence work. (Paragraph
46)
Planning to mitigate flood risk
11. We
recommend that the Water White Paper set out a clear framework
for planning for new developments in flood risk areas, building
on existing planning policy, including principles for the apportionment
between public agencies and private beneficiaries of the costs
of providing flood defences for new developments. (Paragraph 49)
Internal Drainage Boards
12. Internal
Drainage Boards are already seeking to maximise the impact of
their work including through implementing improvements to their
structure. However, the broader question as to the necessity or
otherwise of more substantial reform of IDBs was left unresolved
at the time of the last election. We favour a localised, incremental
approach to any reform as opposed to a "one size fits all"
model imposed centrally. We recommend that the Water White Paper
set out the broad principles for the evolution of the relationship
between IDBs and other agencies with drainage functions over the
next 5 years, allowing for local implementation according to the
specific needs of each area. Defra should consider allowing IDBs
to retain levy money currently paid to the Environment Agency
for maintenance of river courses so that IDBs can use their skills
and equipment to undertake these functions directly where appropriate
to local circumstances. (Paragraph 53)
Customer engagement
13. Despite
successes in securing a good deal for customers, there is considerable
scope for better integrating customer views within the price setting
process. We recommend that the Water White Paper puts at its heart
the strengthening of customer representation, and should include
proposals for a regulatory mechanism which better links customer
priorities with regulatory outcomes. In determining the final
structures of organisations such as the Consumer Council for Water,
the Government should recognise the value of an independent body
that is able to challenge the regulator's approaches. (Paragraph
64)
Social tariffs
14. Social
tariffs can help to ameliorate the impact of rising bills on low
income customers, however opinion is divided as to whether such
assistance should be funded through a levy on water customers'
bills or from central taxation as part of the welfare and benefits
system. We consider that if social tariffs are to be funded from
water bills, the desirability of helping individuals must be balanced
with the interests of other customers who pay their full bills
plus the additional costs of providing such assistance. The Water
White Paper must spell out clearly the extent to which the Government
envisages that national social tariffs will be used to address
problems low income customers face in affording their water bills.
(Paragraph 66)
Metering
15. Metering
has a key role to play in helping to reduce water demand. Such
reduction is essential given increasing pressure on water resources
in some parts of the country. The current approach of introducing
metering in a piecemeal manner means that the charging system
is under stress, with those on unmetered supplies bearing a progressively
higher proportion of costs. A comprehensive, robust and fair charging
system for the future is needed with higher levels of metering
forming the central pillar. (Paragraph 71)
16. More widespread
introduction of metering will mean there are winners and losers
and some, including groups of vulnerable customers, could see
significant rises in their bills. It is therefore important that
the costs of metering be kept to a minimum, and this can best
be achieved through a planned, area-based programme of introduction.
Variable tariffs to incentivise more efficient use of water could
help to keep bills down for many customers. We recommend that
the Water White Paper set out a clear strategy for implementation
of metering and for variable tariffs to help spur water efficiency.
(Paragraph 72)
Regional price variations
17. We
would not wish to see a solution to water prices in the South
West region which merely redistributes the costs among customers
within the region, nevertheless Ministers must ensure that any
solutions help to protect low-income customers across the country.
Although the South West region presents the most immediate problem,
large-scale capital investment is likely to be needed in a number
of regions in coming years to meet environmental requirements
with consequent impacts on bills for many other customers. We
recommend that the Water White Paper set out a sustainable, long-term
set of principles for determining how the costs of nationally
significant environmental projects should be paid for in future.
To balance the needs of those in regions with disproportionately
high water bills with the need to be fair to other customers elsewhere
in the country, the solution could lie in a number of options
which include some form of hybrid option applied nationally which
has elements of social tariff to help those in greatest need but
which is weighted to recognise the substantial regional variance
in bills when compared to the national average. (Paragraph 82)
Bad debt
18. We
recommend that the Water White Paper set out proposals to fortify
the ability of water companies to recover debts from those able
to pay. These could encompass measures such as enabling water
companies to secure tenant information from landlords of all types
of property (not just residencies), enabling water companies to
pursue debtors through Magistrates courts and instituting a contractual
basis for household water supply which defines enforceable customer
responsibilities. (Paragraph 86)
Competition and innovation: the Cave Review
19. Increasing
competition in water supply will not solve all the problems of
rising water prices, but we note the strength of support for the
view that benefits are to be had by a measured introduction of
competition into the water industry in England. Although the structure
of the water industry in Scotland is very different, we were impressed
by the benefits delivered to customers through competitive pressures
on the industry. However, the water industry has legitimate concerns
that changes to the regulatory and competitive regime could incur
costs which outweigh savings, particularly if uncertainty over
changes were to increase companies' cost of capital. It is therefore
vital that competition in the water industry is introduced at
a measured pace. The Water White Paper must set out clearly how
greater competition will be balanced with maintaining confidence
by investors in the future structure of, and regulatory controls
over, the industry. (Paragraph 94)
20. There is a short
time during which changes to the regulatory regime can be made
if price-setting processes are not to be disrupted with consequent
costly uncertainty for the water supply industry. We are concerned
about the potential for slippage in the timetable for any water
legislation necessary to implement the Water White Paper proposals,
particularly in respect of proposals to change the structure of
the water supply industry. We recommend that the Government sets
out how its timetable for introducing necessary statutory provisions
will enable key provisions to be in place in time to allow a smooth
transition to the next price control period starting in 2015.
(Paragraph 96)
Environmental and economical sustainability of
water supply
21. Defra
and the Department for Communities and Local Government should
consider further the potential for the planning system to ensure
that new developments do not jeopardise water supplies in areas
of water stress, for example by placing a statutory requirement
on all those making applications for developments consisting of
more than 10 homes or on sites larger than 1 hectare to consult
water and sewerage companies. (Paragraph 98)
Abstraction regime reform
22. Future
challenges for water supply in some parts of the UK include the
impact of climate change, population growth and new development
on water availability. To ensure adequate, clean and affordable
water supplies in the long-term, the UK must place sustainability
at the heart of its water policies. The previous Government's
policy documents included laudable ambitions in this respect but
insufficient progress has been made in putting in place specific
mechanisms to achieve these aims in practice. The forthcoming
Water White Paper must set out specific measures that will enable
the wider value of water to be reflected in policies and charges.
It should include proposals for amending the regulatory framework
for determining prices so that demand-side measures can be better
incentivised. The White Paper must also set out a clear programme
for reform of the abstraction licensing regime, with a long-term
aim of introducing water trading. This must explain how a fair
transition to any new regime is managed, including recognition
of the rights of those with existing abstraction licences. (Paragraph
104)
Water and energy efficiency
23. Water
saving through greater efficiency of use will become increasingly
important, especially in parts of the country where climate change
and population growth will lead to significant constraints in
supply. We consider that the regulatory framework under which
water prices are set must be reformed to include stronger water
efficiency targets for water supply companies. We recommend that
regulatory bodies work more closely together than they have to
date to ensure that energy-saving and water-saving initiatives
are not developed in isolation. The regulators and industries
should grasp the opportunities to learn from each other's experiences
and develop joint approaches which might most effectively engage
customers. (Paragraph 108)
Water quality
24. The
UK is in danger of missing the Water Framework Directive's (WFD)
challenging targets for water quality. Urgent action is required
not just from the water supply industry, but from a range of individuals
and organisations including rural and urban landowners and industries.
The WFD's methodology for measuring water quality is problematic
and could be imposing costs which are out of proportion to the
level of environmental benefit delivered. We recommend that the
UK Government initiates a review within the EU of the scope to
achieve the environmental improvement aims of the Water Framework
Directive and Urban Waste-Water Treatment Directive in a more
cost-effective manner. (Paragraph 113)
25. The Water White
Paper should set out proposals, with a costed timetable, as to
how current EU water quality targets could be met and who will
bear the costs, including measures to engage landowners and industries
from all sectors in addressing diffuse water pollution. (Paragraph
114)
Connections to the public sewerage system and
misconnected drains
26. Water
and sewerage companies are responsible for managing the public
sewerage system in their areas so it is vital that they have adequate
powers to permit or disallow connections, particularly where they
will incur additional costs as a result of connections from new
developments. Defra should give water and sewerage companies a
statutory right to be consulted over planning applications for
new developments where these include connection to the public
sewerage system. Defra should also produce guidance within three
months of regulations being made under the Flood and Water Management
Act to enable water and sewerage companies to make early use of
agreements on the adoption of new drainage systems. (Paragraph
116)
27. The current legislative
framework does not give water and sewerage companies adequate
powers to put right problems with drains and sewers that have
been incorrectly connected. Given the significant contribution
of such misconnections to water pollution, water and sewerage
companies need strengthened rights so that they can rectify connection
problems without having to involve third parties. We recommend
that the measures included in the consultation on the draft Flood
and Water Management Bill be brought forward for legislation at
the earliest opportunity. (Paragraph 118)
Private sewers and lateral drains transfer
28. The
transfer of private sewers is a technical issue that might have
passed below the radar of many water customers even though it
could cost them an additional £5-£14 a year. What concerns
us more, however, is the lack of certainty about the potential
costs of the transfer since no detailed assessment has been made
as to the scale and condition of the infrastructure affected.
We would not wish to see the proposed transfer delayed. However,
Ofwat must explain when and how further clarity will be provided
on the costs companies will pass on to their customers and the
safeguards in place to protect customers from unreasonable increases
in charges. The regulator must also ensure that water and sewerage
companies explain clearly to their customers the reasons for the
charges and how these have been calculated. (Paragraph 122)
Conclusions
29. We
welcome the focus that the Government is giving to the vital policy
area of water and flood management. The recommendations in this
report will assist Defra in developing proposals for the Water
White Paper and Natural Environment White Paper to be published
in the first half of 2011. (Paragraph 123)
30. The Flood and
Water Management Act 2010 is the focus of a number of our recommendations
on flood policy. Commencement of the Act's provisions which have
not yet been brought into effect must be a priority. We have made
a number of recommendations about the implementation of specific
measures in the Act, such as those relating to sustainable drainage
systems. Defra must address more general concerns about how public
bodies under tight budgetary constraints can fulfil their leadership
and strategic roles on flooding. To cut back significantly on
flood defence infrastructure spending could be a classic example
of short-term savings leading to much greater long-term costs.
Future flood defence work must be sufficiently resourced in accordance
with a balanced approach to risk management. (Paragraph 124)
31. A number of our
recommendations relate to aspects of water management which the
forthcoming Water White Paper should address, and where legislative
measures might be needed. In particular the White Paper should
develop proposals to implement the findings of the Walker Review
on charging for household water and sewerage services and the
Cave Review on competition and innovation in water supply. It
should also include specific, practical proposals to ensure that
the price of water captures the full range of externalities, particularly
those relating to sustainability and environmental protection,
in order to drive the right investment decisions by the water
industry and the most beneficial behaviours by customers. This
will entail a range of measures in areas such as metering, charging
for household water supply and water trading. (Paragraph 125)
32. The Ofwat review
is central to the development of many sustainable water management
policies, and it is clear from the evidence we received that the
regulatory regime needs to be sharpened to enable it to respond
better to the challenges of the future. The Water White Paper
provides the opportunity to reform regulation to provide a stable
basis for the long-term future of the water industry and we look
forward to the Government bringing forward comprehensive legislation
during 2011, to reach the statute books by 2012, well in advance
of the next review of water prices. We would wish to further consider
issues raised in this report in the light of proposals contained
in any such legislation. (Paragraph 126)
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