Environment, Food and Rural Affairs CommitteeWritten evidence submitted by Water UK

Introduction

The Natural Environment White Paper, “The Natural Choice” provides an innovative framework which will help to begin the process of placing a value on the many public goods—good water quality among them—that our environment provides.

The water industry has been at the forefront of developing partnerships with farmers and conservation groups to help provide water quality benefits for both customers and the environment. We are pleased that this work is recognised by the White Paper, and was mentioned specifically by the Secretary of State in her speech to launch the document.

The industry looks forward to working with government, regulators and other partners on the proposals that the White Paper sets out.

Specific Points

1. We look forward to working with the Government in developing a strategy to identify and address the most significant diffuse sources of water pollution from non-agricultural sources. (2.71)

2. We welcome the commitment to review older directives and applying the principles of better regulation to new legislation. We believe there is scope to bring directives such as the Urban Waste Water Treatment Directive up to date by the inclusion of more developed disproportionate cost tests.

3. Water companies will be working with Defra and the Environment Agency on establishing ten catchment-level partnerships to develop and implement plans for creating and maintaining healthy water bodies. (2.73)

4. The industry has been involved in helping the process of catchment management farming. Some companies have found that the catchment sensitive farming model (CSF) has brought enormous benefits. Companies have discovered it takes time, resources and an open mind to make a strong case which has community support, but the rewards have been great. CSF is, however, not perfect. It cannot be applied to certain, specific parts of the country and the regulations on grants are sometimes inflexible. But the industry, with its place at the heart of the natural environment, is well placed to advise on a better model. Companies are also aware of the need to develop new guidance on river basin management planning, and are working with regulators and Defra to this end. We would point out, however, that the current application of the Water Framework Directive puts a heavy burden on the water industry. According to the RSPB, using Defra figures, the water industry bears 82.4% of the costs; agriculture and land management bears 0.1%. We need to restore the balance. This is an issue we need to address in the next phase of WFD. If it remains unaddressed until phase 3, the emphasis will switch to end of pipe solutions. We would be happy to work with the Environment Agency on what we see as this increasingly urgent and time sensitive issue. (2.75)

5. We are currently working with Defra and regulators to consider ways of reforming the abstraction regime. (2.77)

6. We look forward to the forthcoming Water White Paper which will consider ways to encourage the retrofit of SuDS (2.82)

7. Whilst we all agree the value of water is huge, we would welcome a more robust and flexible mechanism for calculating what that value is in order to ensure that future schemes, for example for catchment management, are working from a basis upon which all parties can agree. Expressing the true value of water as a monetary value may ultimately be unachievable and we would encourage policy makers to consider both monetised and non-monetised benefits. Through their abstraction and discharge activities, water companies inevitably have an impact on the biodiversity of the aquatic environment. In planning existing activities, and managing future ones, it is critical both to understand the totality of this impact and to be able to value it appropriately. In this way, companies can recognise biodiversity impacts in their decision making and seek both to limit any adverse impact and, where possible, enhance biodiversity—where the benefit of doing so both outweighs the cost, has the support of our regulators, and is affordable to the customer. In the industry’s blueprint for policy action “Meeting Future Challenges”, we say: “Companies and regulators need to ensure a measured pace to improvements with a focus on the issues that matter to customers, so that prices remain acceptable.” We support the principle behind valuing the full suite of services the environment provides and eagerly await the forthcoming guidance on how to measure these components. However we remain concerned there is much work to be done before the value of the environment can be accurately valued with a high degree of risk that this new approach could lead to wildly misleading assessments until it is fully developed. The need for agreed tools and methodologies is critical to this area. (3.7)

8. We will be interested to see the results of the Natural Capital Committee’s work. The Efra Select Committee may wish to explore the proposed membership, the policy framework within which it will operate, the level of staffing and the importance that will be given to the work of the Natural Capital Committee within Government.(3.11)

9. We are pleased to see that the Government has recognised the work done by water companies through catchment management initiatives which provide multiple benefits for the consumer and for the environment. However, there must be a demonstrable business benefit from environmental improvements, which stacks up against the cost, and which must be cost-effective to the customer. Many companies spend time and resources talking to local communities and engaging in wider society—for example, the Water for Wildlife project. The last price review demonstrated customers’ desire for environmental improvements, and we are aware of the importance and value of talking to local action groups; however, we need to get the balance right between their concerns and the needs of the wider consumer base within the strategic context of water company operations. (3.25 and 3.26)

10. We support the Government’s proposals on CAP reform. We support these farming reforms but would like to see more specific reference to water quality improvement outcomes being included in Stewardship schemes as well as biodiversity outcomes. Our support for catchment control and other source control initiatives is dependent upon agreement from the economic regulator, Ofwat, to include such schemes within price limits. We believe that, if farmers are helped strategically and financially to achieve good quality water, air and soil, a host of benefits will follow, to the environment, to agriculture and to wider communities—in terms of, for example, increased flood resilience. The Efra Select Committee may wish to explore how feasible a flexible Pillar 2 may be in the face of possible future financial constraints.(5.20)

21 June 2011