When I first joined Governement I met with John Beddington, Defra’s chief scientist who set out the ‘Perfect Storm’ in terms of future energy, food and water shortage. It’s important that we can look over the horizon, well past the electoral cycle in order to solve these challenges.
I have been in Government for 5 months. In that time I have had to get ‘up to speed’ as Civil Servants put it on water issues in particular as well as a range of other tecky subjects under my brief, I have had to get my head around.
It’s quite a good time to reflect on how the system works and perhaps to be frank about it how it doesn’t.
You all live and breathe this industry that you know and care about. Some of you will have been there since privatisation - and before - and can talk without notes for ages about the details of water efficiency - the structure of your individual companies - competition - regulation - bad debt provision - the effects of climate change, factors you’re dealing with every day.
What you want from a Minister is yes an understanding of the details. Yes, a willingness to listen to those in the industry, NGOs and the consumers.
But also a willingness to act. Far from being arrogant and rail-roading through half formed ideas - and this isn’t a political comment - I sense that Government has until now adopted a overly cautious approach.
It has often been less Education, Education, Education and more -
Consultation! Consultation! Consultation!
I hope you feel that this Government, while listening and yes, consulting to a point, will also be one that is prepared to take action.
Trusting partners such as those in this room to do the right thing for - the infrastructure - the environment - the customer - the investor.
- All of these elements underpin the framework that needs to be established to tackle the challenges presented by climate change to water matters.
- There are those who still don’t believe that climate change is happening, even though most of us accept it, we need to move on from the debate now and address it.
- Water availability is likely to become more variable, with resources in the south eastern part of this country predicted to be under particular stress.
- Under climate change scenarios, summer and autumn river flows could reduce by 50% or more, while average flows could reduce by up to 15%. The implications are massive.
- As a result the number of water bodies with access to reliable water could fall by almost half with a significant increase in damage to the environment.
- Meanwhile, under worst case climate change scenarios, water demand by consumers could increase by 55%, industrial demand by 10% and agricultural demand by 180%, the last meaning that significantly more irrigation could be required.
- So facing changes in water availability countrywide, compounded by variable weather patterns in the future and the increasing temperature of river water. Our rivers and wetlands, and the ecology they support, could change substantially.
- The recent hosepipe ban in Cumbria preceded by severe storm in November of last year - just one example of variable weather, we must get used to.
- Through PR09, Ofwat agreed to over 100 catchment management schemes and investigations. There are good examples of water companies taking action to address the problem at source rather than at treatment works. South West Water estimates that over 30 years, the cost ratio benefit of addressing problems at source would be 65:1.
- As well as climate change water supplies will face other pressures.
- An increasing population
- More single households
- Changing land use and increasing need for agricultural irrigation - to produce more food.
- Pressure on our resources across the piece.
- In response water companies will have to find more innovative ways to bring about land management improvements which reduce costs.
- Consider how to tackle the historical legacy of environmental damage from unsustainable water abstraction as effectively and efficiently as possible.
- and how to promote green economic growth
- Water efficiency will become increasingly important as we adapt to the consequences of climate change
- Consumers need to value water and have a better appreciation of the consequences of excessive or wasteful use.
- Progress has been made in increasing the role that demand management can play in meeting the supply/demand balance.
- Further action is required to reduce household water consumption in a variety of ways eg education.
- I would like to acknowledge some of the work water companies are doing in schools.
- This gives you an idea of some of the environmental, social and economic challenges that face us.
- Important we have plans in place to tackle these issues head on.
- Water companies are an example of a sector where planning for climate change is under way. Looking forward to their reports under the Climate Change Act which will be submitted in January.
Water White Paper
- Our Water White paper will set out a clear and stable direction for the water industry and consider how we respond to the challenge of managing our water resources in the face of climate change and growing demand.
- This will reflect this Government’s commitment to building a strong economy - aiming to ensure water is available to support economic growth.
- The figure we should be shouting about is the £85 billion has been invested in the industry since privatisation and over £21 billion will be invested under Price Review 09.
- I recognise the need for continued investment in the industry - for maintenance of current infrastructure and new build. Have heard a clear message that a stable policy and regulatory framework is essential for the water industry to remain attractive to the investment community. That does not mean no change - but decisions around industry reform must and will be taken carefully, with a full understanding of the many implications.
- There are some challenging issues for the White Paper to address:
- How to meet the water resource challenges of the future and adapt to climate change.
- How to improve our water efficiency and reduce demand.
- How to minimise burdens - increase consumer choice - drive innovation - improve customer service and value.
- Ensuring secure and resilient water resources for the future is a particular challenge.
- How do we make sure water is available to meet demand - and reduce that demand where we can?
- We may need to think about how to be smarter about managing demand when water is in short supply - not just when we have droughts. One option could be seasonal tariffs.
- We will need to engage with customers in a more sophisticated manner so they understand the need for demand management in the face of climate change.
- We also need a more responsive abstraction management regime to avoid increased impacts on our rivers from the substantially lower water flows in late summer as predicted.
- The current system has evolved over the last 40 or so years, it has limited flexibility to respond to these challenges.
- The vast majority of our water is not covered by ‘hands off flow’ requirements.
- The system needs reform. For us to do this we need to consider our options:
- How do we make more water available to new abstractors while protecting the environment?
- How do we reduce the barriers to abstraction licence trading?
- Should we use prices to incentivise the reduction of unacceptable environmental impacts?
- If we use social tariffs we would need to get the balance right.
- As we develop the Water White Paper we can’t move forward in isolation.
- We need to work in close consultation with you and others in the industry. We also need to work with other water users and those who have an impact environmentally to come up with innovative sustainable solutions.
- While at the same time finding more innovative ways to help bring about land management improvements which reduce water company costs.
- I’m also looking for your input on a number of issues:
- The public consultation on draft guidance on surface water drainage charges closes next week. - many of you have given your thoughts already.
- We plan to issue the final guidance to companies by the end of the year. This will help those community groups facing unaffordable water bills.
- The Ofwat review, is the call for evidence closing at the end of this month. It’s an important review and I would encourage you to submit your thoughts.
- We will also be consulting on issues raised in Anna Walker’s review later this year - on metering and affordability and the relationship to water efficiency.
- Metering can unlock the potential for a step change in conserving water.
- So should the Government grasp the nettle and require compulsory metering where the benefits outweigh the costs, as recommended by Anna Walker?
- How do we ensure that large households on modest incomes can still afford their bills under compulsory metering? Particularly during a time of austerity - Anna Walker’s recommendations on affordability come at a high price.
- Southern Water is already taking steps to meet these challenges as it starts to roll out universal metering. What I like about Southern’s approach is the way that it is linking affordability advice and support with water and energy audits for those impacted the most by compulsory metering.
- The Walker consultation will also help to shape our guidance on company social tariffs which we will consult on after we’ve published the White Paper.
So you can see there’s a number of challenges ahead. We need to make sure we are in the best shape to meet these challenges.
The quality and availability of the water we use is paramount to the quality of life we lead. It’s imperative we secure and maintain this valuable resource. A resource not only vital to the environment and people’s health but to the prosperity of our country.
Above all its important that together we get all of this right, so we will consult, listen and act and put the water sector on a strong footing for generations to come.
I welcome your contributions to this debate. It’s a huge opportunity for everyone here to influence the way we go forward to make a difference and ensure we have a sound and robust system in place for years to come.