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Lord Dixon-Smith: My Lords, I am immensely grateful to my noble friend Lady Byford for stepping into the breach when my noble friend Lord Trefgarne unfortunately failed to appear at the appropriate moment. I sympathise with him, and am very glad that my noble friend Lady Byford took on the task. As always, she covered the subject with great authority and in considerable detail.

I have an interest to declare: I am a farmer, and in 1962 I constructed a major winter storage reservoir on my farm, so of course I have a water abstraction licence. Much of what I say will be the consequence of what I learnt from that experience. One of the things I learnt gives me a frisson of terror at the state we find ourselves in today. Regrettably, as water management has in a sense become more centralised, it has become more and more short term. I wish to go right back to what has been happening to the water environment.

As my noble friend Lord Lyell said, it is only five years ago that we were discussing major flooding across parts of the south-east. All the talk then was about the need for flood protection and the dangers and difficulties that that presented. Here we are, five years later, discussing the complete opposite—the
 
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problem of drought. The British climate is reliable in its unreliability. I do not know what we will be discussing in a year or two, but it may well be something rather different. Let us look back to the beginning of the 20th century. All our major and minor rivers had along their entire length water mills which relied on water for power. As a consequence, water was retained in the rivers, giving it more time to soak into subterranean watercourses.

In the third quarter of the 20th century, we drained our agricultural land very effectively and efficiently. As a result, the water, instead of soaking down into the substrata, runs off the land with remarkable speed. When I was rather more engaged in farming than I am now, I could see water coming out of the pipes that I had put in—with some aid from the government—within a couple of hours of a good rain.

When I was born, the population of this country was 45 million. After the war, when I entered public life, it was 55 million. Now it is 65 million. The increasing urbanisation that has resulted allows no water to penetrate into the sub-soil strata. All the rain that falls runs straight off the top, with the possible exception of London, where, as has already been mentioned, massive leakage takes place. London is one of those rare places in the country where the water table has been rising. How far leakage from the ancient mains—a sinking fund should have been built into the water supply system when it was created, but it was not—contributes to the rise in the water table, I do not know, but it must be a factor. I merely make the observation that when water leaks out of the mains, it is not lost—it goes into the ground and it is available for recycling and re-use.

It is important to remember that our water environment today is very different from that in the past. If we clear water off the surface of the ground, it follows as night follows day that storage and management measures, if they are required, will inevitably be surface measures.

There have also been major structural changes in the way in which we look after our water. When I was a young man, all our water authorities were local. For most of the country, companies were small and dealt with small, local problems, although it became a massive system in the metropolis as it had to do. As companies ran into increasing problems, we developed regional water authorities, which were subsequently put into private hands and became private monopolies. As a consequence we developed a regulatory regime, with Ofwat supervising the private utilities to prevent improper profiteering, and being remarkably successful in doing so. Its policy seems always to have been very strongly consumer-oriented to keep the price of water down. When water utilities factor that into the calculations of what they can do, they come up with restrictions on investment. Under the regime which existed before all the organisational changes came about, major reservoirs were still being constructed in this country. In Essex, we benefit from a river basin transfer scheme which successfully keeps us supplied most of the time—Essex is one of the driest areas of the country, so it is needed. However, under
 
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the new regime, it is a matter of regret that new reservoirs have not been factored in, although they are beginning to be looked at because of the increasing difficulties that we face with our water supplies.

I come from one of those parts of Essex which would compete to be one of driest spots in England. A number of us in Essex like to enter that competition. I have to say, to my regret, that mine is no more than one of the drier spots of Essex; there are others which are far worse off. However, a study carried out in 2004 by Anglia Polytechnic University of the East Anglian region, which is the driest region of the country in all normal circumstances, showed that in a normal year only 20 per cent of rainfall was utilised. In a drought year, that proportion rose to 65 per cent. All the rest of it went out to sea. In other regions of the country, the situation is generally better: there is more rainfall and more run-off. Some regions in the west country and the north have three or even four times as much rainfall as Essex.

What still causes me difficulty when we discuss this subject is that we have plenty of water, but we do not manage that water. Whether a national water grid or, as a friend of mine proposed 30 or 40 years ago, a canal running down the 300-foot contour of this country from north to south is a possible solution to this problem, I do not know, but the Ely Ouse scheme which transfers water to Essex is an example that we shall have increasingly to follow whether we like it or not. How far are measures such as this really to be factored in? Even if they are factored in, we shall still have an acute short-term problem, as Members have constantly pointed out today, because of the commercial development attractions in the south-east of England which do not arise elsewhere. Other parts of the country have problems with water supply for the same reason; namely, under-investment in conservation and storage. This will be a factor across the country. The noble Baroness, Lady Shephard, rightly mentioned cost. Yes, there is a cost, but cost is higher today—or tomorrow, because some of the schemes will not come about for another five or 10 years—because we failed to invest in the past. It gives me no pleasure to say it, but I do so with some authority.

There are no easy answers to this problem. Compulsory metering, which is advocated, must be a part of the solution, because there is no incentive to look at the use of water by households which pay for it on the basis of rates. The suggestion of the noble Baroness, Lady Miller, that everyone should be made to install the most water-economical systems during a house renovation, is quite correct, but another difficulty is that most house renovations do not require permission from anyone. Perish the thought that we should get into the business of yet more regulation of what people can or cannot do in their own homes. It is a problem. Of course the market solution would be to increase the price of water. That may be an uncomfortable reality. I do not begin to know what the answer is. What I know is that regrettably over the past 10 years the situation has grown worse without
 
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the Government beginning to consider the issue seriously and proposing solutions. I accept that this is not an easy area today because ultimately we are dealing with an industry that is now in private hands. While, thankfully, that gets it out of the dead hand of the Treasury's financial controls it means that we have to find more market-oriented solutions to the problems, and need to recognise that they will have a cost.

If we start on that matter now we may begin to improve the situation in 10 or 15 years' time if we are lucky. For the interim, we shall live on the knife-edge that has been described so ably by so many noble Lords.

1.01 pm

The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Bach): My Lords, I congratulate the noble Lord, Lord Trefgarne, on securing the debate and thank him warmly for his typically gracious apology for his absence earlier this morning. The whole House knows that these things happen and I thank him for the way in which he put his point. I also congratulate the noble Baroness, Lady Byford. She and I have sat opposite one another a great deal recently and I constantly admire her virtuosity. To move from closer to opener with such ease and charm is not easily done, but I congratulate her. It has been a fascinating debate with a great deal of expertise, although the idea of revolution in Kensington and Chelsea, to which the noble Baroness, Lady Hanham, referred, still strikes me as slightly unusual—certainly in Chelsea, anyway.

The drought in the south-east is a subject of topical concern, but of course it is a long-term issue. I want to talk about government policy across the board. That will mean that I will not answer every question, but I would like to write a collective letter, as it were, on those points that I do not touch on in my answer. Water supply is a devolved matter, so I will confine my comments to England and Wales, which use the same regulatory frameworks. I understand that the current drought in the south-east has caused attention to be focused on the ability of the current water management arrangements to ensure security of supply. I will have something to say about drought later in my speech.

It is worth pointing out that since the noble Lord proposed the debate it seems to have done nothing but rain in the south-east of England, so perhaps he should propose more and more such debates. Anyone who follows football will know that the Portsmouth-Arsenal game last week was called off because of a waterlogged pitch. But none of us is so naive as to believe that a bit of rain solves the dilemma that we all face.

It is important to remember that droughts occurred before climate change came to the fore, and before the privatisation of water companies. Over the past 200 years there have been 10 multi-year droughts, including the current one here in the south-east. Our approach to dealing with drought has to be considered
 
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in the context of our medium to longer-term policies for sustainable water resource management. Five of the Environment Agency regions had received more rainfall than usual for the first two weeks in March. Monthly mean river-flows to date have increased and are normal or above normal at over half the indicated sites, although the majority in south-east England remain below average. Reservoir storage increased to 92 per cent for England and Wales overall, with just the Bewl reservoir in our southern region being exceptionally low for this time of year.

The Government are committed to promoting measures to help improve sustainable water resources management in England and Wales, and we have introduced a number of important changes in recent years. Indeed, one of the main subjects of the 1997 water summit was a 10-point plan for action that included actions to reduce leakage, to improve water conservation and water efficiency, and to review the abstraction licensing system and the ways that water companies plan. The Water Act 2003, to which the noble Baroness, Lady Miller, referred, delivered the changes proposed by that 10-point plan that required new legislation.

Let me say a word about the regulatory systems now in place. In England and Wales we have a private sector water industry, which means that companies are in the front line with statutory responsibility for delivering our water supplies. These companies are overseen by independent regulators, which operate without government interference. The economic regulator, Ofwat, oversees company business plans, sets price limits and ensures that customers pay no more than is necessary. It also has enforcement powers that can be used when and where appropriate.

The Environment Agency is the environment regulator. It has a statutory duty to secure the proper use of our water resources. The 2001 publication by the agency was a key part of the framework of integrated water resources planning, which is carried out by the agency and water users, particularly the water companies. That publication considered both national and regional water resource strategies and progress is reviewed annually. These strategies set out pressures on water resources and how the Environment Agency expects those to be managed over the next 25 years.

We believe that the Water Act 2003 has strengthened the Environment Agency's powers to encourage the sustainable management of water resources. To ensure that abstractions are sustainable and that the environment is protected, it is responsible for issuing and administrating abstraction licences. On 1 April—in two days' time—a revised abstraction and impounding licensing regime comes in updating and modernising a system that dates from the early 1960s, when the noble Lord, Lord Dixon-Smith, was a boy. That is a reference to his speech, by the way.

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