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Lord Dixon-Smith: My Lords, if it was a reference to my speech I must apologise to the House: I was not a boy in the 1960s. I wish I were.

Lord Bach: My Lords, I was flattering the noble Lord rather than telling a deliberate untruth.
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I turn to long-term water resources planning and the mains water supply. The water companies have statutory duties to maintain adequate supplies of water. In 1997 we asked them to take account of the need to protect the environment in fulfilling those duties and to help to promote the sustainable use of water resources. Since then, water companies have prepared 25-year water resource plans. They describe how each company aims to achieve a sustainable supply-demand balance for the public water supply. The plans complement the Environment Agency's own 25-year strategies.

We decided to strengthen those arrangements, and under the 2003 Act the provision of water resources management plans are to become a statutory requirement, although there will be an opportunity for the public and stakeholder groups to have their say. A consultation on proposed regulations is in progress. Water resource plans are intended to evolve in response to further and better information as it becomes available on the implications not only of climate change, but in relation to demographic change and increased pressure on housing—I have a little more to say about that. They should also reflect the Government's twin-track approach to managing water resources, which is based on, first, demand management and, secondly, developing sustainable resources where needed. We believe that demand management, including water efficiencies, should be fully explored and should be at the centre of water resource plans.

Leakage reductions were referred to in the debate, with the noble Lord, Lord St John of Bletso, the first to mention them. They have made and will continue to make a significant contribution to the supply-demand balance. Since we asked Ofwat to set annual leakage reduction targets for each company, total industry leakage in England and Wales has reduced from 4,530 megalitres per day in 1996–97 to 3,608 megalitres per day. That is a reduction of some 20 per cent. Targets are set in relation to the economic level of leakage, which is the level at which it costs more to fix leaks than to produce water from another source. That approach provides consumers with a cost-effective approach to leakage management.

Most companies in England and Wales are operating at their target economic levels. During the recent quinquennial review of water price limits, Ofwat assessed those levels in the light of a best practice standard drawn up in 2002 and then defined targets for 2005-10. Various options are available to the regulator when companies fail to meet their targets. Ofwat will consider the severity of the company's leakage problem and its previous performance against targets. The most common measures used are interim reporting and extra progress reports, but in the worst-case scenario Ofwat can fine a water company that is not complying with its duties or is exposing customers to worsening security of water supplies by failing to achieve cost-effective levels of leakage.
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Two companies only missed their 2004–05 leakage targets—Thames Water and United Utilities. There are action plans in place for both companies, and agreed with Ofwat, to reduce their leakage to economic levels, and it is for Ofwat to decide whether any further measures are needed. We know that Thames Water is undertaking a major upgrade of its water distribution network in London, which involves replacing more than 1,200 kilometres of water mains over five years at an estimated cost of £0.5 billion.

Water companies are under a statutory duty to promote the efficient use of water by their customers. The Water Act introduced provision for new duties to further water conservation. Advice from water companies, audits of premises, supply, pipe leakage repairs, increased metering and so on all have a role to play in furthering water conservation, but companies can go further if necessary. They can apply to the Secretary of State for water scarcity status. At the beginning of this month, my right honourable friend the Secretary of State approved the first ever water scarcity application, made by Folkestone and Dover Water Services. The company was the first to apply under the provisions in the 1999 regulations and can now compulsorily meter its customers. The company expects its metering programme to take about 10 years. The decision was of course reached only after careful examination and should not be taken to mean that we advocate a move to compulsory metering throughout England and Wales. Obviously, any further applications will be treated on their own merits.

The Government are also involved in a wide range of activities designed to encourage more sustainable water use. The noble Lord, Lord St John of Bletso, mentioned the Envirowise programme, which provides practical environmental advice and assistance to help businesses to reduce their water consumption. There is also an enhanced capital allowance scheme and water fittings regulations. We are currently assessing the feasibility of a product-labelling scheme to help consumers and building designers to identify water-efficient fittings and appliances.

It is clear, as the House would agree, that reducing the demand for water is achieved most effectively through a combination of measures, including promotion of best practice, advances in technology and, when necessary, regulation. Of course we recognise that there are genuine concerns about our plans for significant household building in the south-east, and those plans may have an adverse impact on supply and demand for water in the area. That additional demand has generally been factored in to water companies' water resource plans, but those plans will need to be updated as more detailed information on housing numbers and locations becomes available. The additional demand for water from new development will also depend on the extent to which water-efficiency measures are incorporated into the new building.
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Defra and the ODPM will undertake a joint consultation on options for further regulation to secure that water efficiency. My honourable friend the Minister for the Environment, Elliot Morley, has established the Water Saving Group, fulfilling a manifesto commitment. Many departments and other bodies are on that group, which is chaired by my honourable friend. The group aims to encourage the efficient use of water in households and is defining, monitoring, carrying out and reviewing projects and work streams dealing with targets, the evidence base, best practice, education and policy.

To manage national water resources more effectively—and here I come to a point raised by the noble Baroness, Lady Shephard—it has been proposed that we construct a national water grid. A good deal of water is already transferred within water companies' areas of operation to give individual companies greater flexibility to meet local shortages, but there would be objections if a full national grid were developed. First, there would be major environmental concerns, due to widespread excavations; secondly, there would be cost concerns, with expensive energy consumption in pumping water around the grid. None the less, the Environment Agency has been asked to do further analysis on the possible viability of such a national water grid.

Building desalination plants is another option that water companies may want to consider. One is being built by South East Water in Newhaven. However, other companies proposing such plants will need to be able to demonstrate their sustainability.

I have dealt with long-term planning, and I shall come to droughts in the last few minutes of my speech, but now I shall try to answer one or two questions. As for Thames Water reducing pressure to reduce leakage, companies have duties to maintain a minimum water pressure. Reduction from historic pressures does reduce leaks. The noble Baroness, Lady Shephard, asked about car washing in Oxford; the noble Baroness, Lady Byford, also asked about that. Hosepipe bans apply to car washing, but hand-washing can continue under a hosepipe ban. That is a little bit of good news.

The noble Baroness, Lady Byford, asked whether water companies should bear the cost of repairing or renewing water mains. We believe that it is right that companies should meet the necessary costs of repairing or renewing water mains. They are best placed to plan and execute that work, and we have Ofwat to scrutinise companies' business plans to ensure that that work is necessary and sufficient.

The noble Baroness, Lady Hanham, asked about the Thames desalination plant, and joined that with a comment or two about the Mayor of London. She will have heard this before from Ministers, I am sure, but I have to say that this decision by the Mayor is subject to an appeal, so I am not in a position to comment. I am sorry that I cannot do better on that.

The issue of agriculture and water resources has been raised by a number of noble Lords, including the noble Baronesses, Lady Miller and Lady Byford.
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Agriculture uses about 2 per cent of our water nationally, but that is of course seasonal and—to use the modern jargon—spatial. In East Anglia, on which the noble Baroness, Lady Shephard, is an expert, in the summer agriculture can take as much as the public supply in that part of England. The noble Lord, Lord St John of Bletso, was interested in that as well. Spray irrigation using more than 20 cubic metres per day requires an abstraction licence; other forms of irrigation are currently exempt from licence control, but that exemption will be ended under the Water Act 2003. Compensation will be available if non-granted licences result in loss.

The noble Baroness, Lady Miller, asked me about Bassin in France. A number of winter storage reservoirs have been funded under the socio-economic measures of the current ERDP. In the successor programme we will continue to provide funding for social and economic development in rural areas. The responsibility for delivery will be transferred to rural development agencies, which intend to introduce new funding arrangements.

The importance of companies' drought plans has been highlighted by the current drought in the south-east. Originally prepared voluntarily, the production and maintenance of drought plans became a statutory requirement last October. The first sets of statutory plans are due to be submitted to my right honourable friend the Secretary of State this week. The plans contain various measures that may be introduced depending on the length and severity of the drought. They range from hosepipe bans to emergency drought orders.

In its recent report to Ministers, the Environment Agency advised that we may have the worst drought in the past 100 years. But droughts are not new; they are in fact normal events that vary in intensity and duration. They can lead to some severe local conditions, as in the south-east at present, and an often patchy impact on water resources and the water-dependent environment. It is a natural phenomenon, and the steps we have taken mean we are now much better able to deal with the consequences of drought.

In the south-east, most of the water companies are following their voluntary drought plans. They have imposed restrictions on the use of hosepipes and sprinklers. Mid-Kent Water, Southern Water and Sutton and East Surrey Water have also applied to the Secretary of State for drought orders to restrict further the non-essential use of water. Decisions on those applications are pending. Other companies may of course follow suit.

While hosepipe bans and restrictions on non-essential use are unwelcome, the cost to a water company—and thus ultimately to its customers—of avoiding the need for such controls during a prolonged drought would be very high. It is far more cost-effective, and potentially less environmentally damaging, to manage demand and impose some restrictions to conserve water through the use of hosepipe bans and occasional drought orders and permits. Of course any restrictions on non-essential
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water use will be maintained only as long as the drought persists, and that is evidently dependent on the weather.

In conclusion, the current drought is highlighting what a precious resource water is for us all. We have put in place the measures necessary to respond to periodic water shortages and promote the full sustainability of water resources and supplies in England and Wales. In particular, the statutory water resources plans will set out how water companies will secure water supplies in the medium to longer term. Statutory drought plans detail how they will respond in the shorter term to these periodical shortages, and public consultation will be the order of the day.

It goes without saying that the solutions require a partnership that includes government, water regulators, the water companies and, not least, communities working together. That is crucial if we are to ensure sufficient supplies of water to meet demand both now and in the future. Once again I congratulate the noble Lord on securing the debate.

1.23 pm

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