[Mr. Christopher Chope in the Chair]

FW 01 Andrew Sheerman-Chase

FW 02 Local Government Flood Forum

FW 03 City of London Corporation

FW 04 Association of Drainage Authorities

FW 05 Association of British Insurers

FW 06 Ofwat

FW 07 RSPB

FW 08 Water UK

FW 09 National Farmers Union

FW 10 Consumer Council for Water

FW 11 Woodland Trust

FW 12 LGA Group

The Committee deliberated in private.

On resuming—

Good afternoon everybody. Thank you very much for coming along to give evidence to the Committee. Can each witness introduce himself, starting with Dr. Johnston?

Dr. Andy Johnston: Good afternoon, my name is Dr. Andy Johnston and I am head of the Centre for Local Sustainability at the Local Government Information Unit.

Councillor Barry Dare: I am Barry Dare, chairman of the Local Government flood forum and leader of Gloucestershire county council.

David Rooke: I am David Rooke, head of strategy and engagement with the Environment Agency.

Councillor Gary Porter: I am Gary Porter, chairman of the Local Government Association environment board.

Thank you. As you realise, the evidence session cannot go on beyond 2 o’clock. To ensure that we get the maximum benefit, I hope that you will keep your responses succinct. I am sure that I do not need to urge hon. Members to keep their questions similarly succinct.

Q 1616

First, I thank the witnesses for braving the elements and being with us today. I would like to address my question specifically to David Rooke, but the others may want to  participate. The responsibilities that the Environment Agency is being given under the flood and coastal erosion risk management provisions are far-reaching, prescriptive and require a lot of what is probably an already very stretched resource. Will there be a right of appeal or a possibility of reviewing any decision? What comeback will the interested parties have? Can you give us an honest overview? In one Government response to the Pitt review there was a table that showed that most of the resources you will require to implement Pitt and the provisions of the Bill have to come from your existing resources. Will you be in the position of having to stop doing things to fund the provisions? Do you believe that you will have sufficient resources at your disposal?

Linking that, if I may, to how the new responsibilities under the Bill pan out, are you satisfied that the measure will lead to the end of the automatic right to connect? I am talking about major new developments. We saw a lot of flooding in 2007, particularly sewerage flooding, where the foul water overflow of new developments overspilt from the connection pipe. One way around that is to end properly the automatic right to connect. I do not know if the Environment Agency has a view on private sewers and their funding, and whether local authorities are going to make savings. The local authority representatives may want to chip in on that. My understanding is, and it may be an erroneous understanding, that private sewers are precisely that—private. It falls to the householder to pay the costs of maintaining and repairing those sewers, so I am hard pressed to see where the savings will come from.

Finally, would the Environment Agency be minded to support greater clarification on sustainable drainage systems—SUDS—in the Bill? It is leading to a great deal of confusion because they have hitherto been known as sustainable urban drainage systems and most of them, apart from highways ones, apply to urban areas. Would it be useful to have one definition for the whole country?

David Rooke: If I take the Bill overall, we welcome it and are very pleased with the provisions that the Government have published. While there are some new responsibilities in the Bill, they apply mostly to local authorities, as well as to ourselves and other drainage bodies, such as internal drainage boards. While they are far-reaching in some respects, we believe that they are necessary to implement in full the recommendations in the Pitt report. There will, of course, need to be some national direction, which is why we are pleased that the Bill includes a provision for a national strategy so that the Secretary of State can approve it to give that overall direction. There is also provision for local strategies, which lead local authorities can develop, publish and implement, for dealing with local flood risk in their areas.

On whether there should be an appeal against any of the powers that any of the operating authorities have, including the Environment Agency, we do not believe that it is necessary. We are not aware of appeal provisions for other public bodies exercising their powers and it would make it extremely difficult for us if, on every decision we take and every activity we undertake, we have someone with a right of appeal. In existing legislation, although not in the Bill, there are already significant safeguards for rights of appeal.

When we are carrying out new works generally, we need planning permission and the permission of the local planning authority to go ahead, and there are appeals provisions and public consultations within that. There are statutory instruments in relation to land drainage works that require environmental impact assessments. Where there are not, there is a safeguard in the Secretary of State if there are unresolved objections. We believe that there is enough opportunity in existing statutory instruments and legislation to render further appeal provisions unnecessary.

On resources, the table was published by the Government and it contained the comprehensive spending review settlement for flood and coastal risk management. The Department for Environment, Food and Rural Affairs has allocated some money to us to help implement the Pitt recommendations, and our current funding is based on that CSR settlement. Within that, we believe that we can start to implement not only Pitt, with the extra support from DEFRA, but the provisions in the Bill.

The explanatory notes published alongside the Bill comment on whether the Environment Agency should have additional resources. There will be a transfer of some of our powers to local authorities, so there will be a saving to the Environment Agency from that. We would divert that resource to dealing with the new strategic overview that is given to us under the measure. We believe that within the current CSR there will be sufficient funds, and of course future CSRs are a matter for future Governments, but we did publish last year a long-term investment strategy that set out a number of policy options for different responses to managing floods, what those would cost, what the benefits are and what the residual risks are. We would hope that future Governments would take that into account in determining our funding levels in the future.

On the automatic right to connect, it is our understanding that the drafting in the Bill would lead to stopping that. That is certainly the Government’s policy position and certainly ours, but if the drafting doesn’t achieve it, we’re very willing to look at that with the Government.

The transfer of private sewers is a matter for the Government, not the Environment Agency. We support the provisions for SUDS. We believe that the current drafting will deliver the policy aim, which is about sustainable urban drainage, but again, if there is an issue, we will have to look at that.

Do any of the others wish to comment?

Councillor Gary Porter: The LGA doesn’t have any problem with the national strategy being developed through the Environment Agency, provided that there is no mission creep. The tendency in the past has been for a national strategy to start looking further—beyond its own reach. We’ve seen it recently with the Tenant Services Authority—another piece of work we were working on. We also share Anne’s views about the financial savings in relation to transferring private sewers. Clearly, we’ve made the case. It was seven-year-old information, based on a very small sample at the time. I think everybody, apart from the Minister, has accepted that that was actually out of date and that it was probably wrong to use it as a baseline.

David has just made a point about transferring some of those powers to local authorities. He’s made the case again for us. He’s going to be making those savings, but  if he’s making savings, we must be picking up costs we’re not currently picking up. Again, I hope that you could bear that in mind.

Q 17

Does Councillor Dare wish to comment on the resource issue?

Councillor Barry Dare: Yes, I think it’s the centre of the whole problem. My colleague has just been talking about the transfer of responsibilities. Consistently, we in local government have been required to undertake additional responsibilities without central Government financial support. This seems to me to be yet one more spend where we are likely to be put under severe pressure. The reality is that the only place we can go to plug any gap is the council tax payer, and we all know what view they take about rising council tax, and we also know central Government’s view of capping, so we really are between a very hard rock and a hard place.

Q 18

May I ask a straight question of David Rooke? Clearly, the Environment Agency’s prime responsibility is coastal and riverine flooding, yet we know we’re looking increasingly at ground and surface water flooding. To what extent do you have the skills and the resources, certainly working in local government, to be able to reorient yourself, if that is what you think you should be doing?

David Rooke: No, we will concentrate on main rivers and coastal flooding. The Bill also provides for our powers to be extended to cover coastal erosion. Where local authorities may not want to do that, we will now have the powers in the Bill to do it. We see local flood risk, which involves surface water, ground water and ordinary watercourses, being managed by lead local authorities or in partnership with internal drainage boards and district councils where there is a two-tier system. We believe we currently have the skills and the resources to deliver on main rivers and the sea. The extra resource that we would need is for the strategic overview role, which is about giving direction and guidance, and we would use the savings from the transfer of some responsibilities to local authorities to fund that.

We accept that there is a skills issue for the industry as a whole, which is why we’ve been promoting our foundation degree course at the university of the West of England. We are pleased that the Department for Environment, Food and Rural Affairs has now provided some funding to help local authorities put students through that foundation degree course, which is already under way. We have had some engineers graduate from that course already. We accept that we are going to have to work more closely with local authorities to help them, and I think this joint initiative on the foundation degree course is a good example of how that is going forward, to get the skills that the industry needs to tackle all the problems.

Q 19

May I bring in Barry and Councillor Porter on this question, which is linked to the one David has just asked? There are two dimensions to it. One is, do you think the Bill as it stands is sufficiently clear about who is responsible for what now? I think that when many of us imagined this national oversight role for the Environment Agency,  we had not envisaged that it was only for main rivers and specific types of national flooding, and that there were other types of flooding that were not going to be the responsibility of the Environment Agency but would principally be for local authorities. We imagined, I guess, a kind of horizontal split, where you had a national oversight for all flooding, and local authorities had lead local responsibility for all types of flooding.

What we seem to have ended up with in this Bill is a vertical split, which is slightly strange, seems to run the risk again of having this confusion about who is responsible exactly for what, and is, I would suggest, pretty illogical, because, as we discussed in the evidence session this morning, when the water is flowing down the streets you cannot determine what kind of flooding it is, and you need somebody at local level to take the lead and somebody with national oversight to be advising on all types of flooding. That clarity was what we were aiming for, and what I thought Sir Michael Pitt was aiming for. Are you clear that that is what we have in the Bill?

David Rooke: Yes, we are clear. We will have the oversight for all types of flooding. We will be able to draft the strategy for the Secretary of State to approve, and the national strategy will then be implemented by the Environment Agency and the other operating bodies. So there is clarity of responsibility for that strategic overview role in the Bill.

We work on a catchment basis and look after what are called main rivers, which have been approved by the Secretary of State and marked on a map to show that we can then exercise our powers. If you think of it in terms of transport, those main rivers are the motorways—the trunk roads—and we are the equivalent of the Highways Agency. We are looking after the national network of rivers. Water does not respect political boundaries, so we can take water from the catchments to the sea very effectively and efficiently. Local flood risk can be dealt with locally, and the clear recommendation from Pitt was that local authorities should have the lead on local flood risk. We believe that the Bill provides that clarity and that in practice we will all make it work because we will liaise and work closely together. In fact, the Bill puts a duty on us to force us to work together, but we would want to do that anyway. We believe it will provide the clarity that we all seek.

Councillor Barry Dare: May I comment on that? Clearly, the forum and local authorities generally welcome the initiative as set out in this Bill, but despite the reassurances that we have just had, I think there are ownership difficulties. I think there are grey areas that need to be fairly carefully solidified, so that we all know who is responsible for what. Going back to my earlier point, the main problem is that the proposals as they stand appear to be uncosted. We are actually being asked to sign a blank cheque. We local authorities are going to take responsibility under the new regime, yet we do not know what the largest, best, broad-brush estimate is likely to be of the cost implications, or how those costs are going to be met.

Councillor Gary Porter: There is a case for saying that the Bill is far too prescriptive already, so I think we would probably disagree with the suggestion that it is not prescriptive enough in terms of putting the Environment Agency at the top of the hierarchy.

The difficulty that we face in reality, as has already been said, is that flooding does not respect boundaries and it does not necessarily stick to the right political groups, even with their best endeavours to keep flood water away from their own authorities. As we have mentioned several times, we are happy to take on the responsibility that we are given, but we must have the resources to deal with it. Nobody wants to be the person who has to take the blame for it going wrong. We need the tools to fix the problem.

Q 20

What I was trying to get at was whether the Division of responsibility in the Bill is correct and logical.

Councillor Gary Porter: I think we all accepted that the Bill would be pretty much decimated before it got to you guys anyway because of the length of time it has taken to get this far. From what we can see, this is the best cobbling together of what is likely to get through in a reasonable time. If you started to create a full turf war between the Environment Agency and every other flood agency and local flood board, you would never get this through in the parliamentary time available.

I think Dr. Johnston wants to say something on this.

Dr. Andy Johnston: Thank you. We have talked about responsibility a great deal in the flood forum. At the highest level, there is clarity about responsibilities, as has been described. That is one side. The difficulty is how you square off those responsibilities in implementing any solutions when actual work needs to happen and money needs to be spent. That is where the difficulty comes through. That is why a lot of our discussions have been about the ability to self-organise at the local level so that the different bodies who have the different responsibilities are locked into meaningful, formal decision-making structures. The EA and local authorities can then share resources and be in some kind of joint decision-making structure so that we do not have to worry about what type of water is coming down the high street because a body is in place that manages flooding in its entirety at the local level.

Q 21

Councillor Dare touched on an issue I was about to raise. The county council will be the lead local flood authority with the responsibility for developing, maintaining, applying and monitoring the strategy. As you rightly say, how on earth do you know what that is going to cost until you have developed it? Given that uncertainty, is there not a danger that up and down the country, lead local flood authorities might water down their strategy in the fear that they would not get the funding for it?

Since two and a half years ago, the problem has been identifying who is responsible for what. This is not meant to be a criticism of the county; I am also referring to other agencies. When you finally get to the level of who is responsible, you have to persuade them to carry out the work that is needed. The reply has always come back, “We’ve not got the money to do that.” There is no point in having the strategy if you are not going to be able to implement it. You obviously have a fear about that. Could you expand on it a little?

Councillor Barry Dare: As you rightly pointed out, two and a half years ago, your constituency and my county were badly affected. I was badly affected personally and was flooded for several weeks. I think there are severe misgivings. The reality is that in July 2007, it was the county council in Gloucestershire that took the lead and addressed the pressing problems. However, those were tactical problems such as how to get people into caravans and evacuate people from island sites. The Bill is concerned with the strategic way forward. I go back to what I said at the beginning: the principle is taken on board totally by all of us, but the pound sign worries me and my colleagues enormously because we do not see any clear indication that there will be financial support from anywhere except our council tax payers. Frankly, that will be unacceptable in the current climate.

Q 22

From your experience in other areas, how would this work? Would you prepare your strategy and go to the Government to say that it will cost x, and receive a reply such as, “We will give you x minus 20 per cent.”?

Councillor Barry Dare: In other areas, it works in a very simplistic way. A prescription is passed down from Whitehall and Westminster and we are expected to pay for it—it is a non-negotiable set of requirements. I read in this Bill yet another shopping list of prescriptive requirements, without any clear indication of from where the funds will flow in order to meet them. Some elements look a bit bureaucratic, if I may say so. A requirement to “write everything down” is acceptable in theory, but in practice somebody has to pay for that. I am sure you all read with interest the survey that we undertook of members of the Local Government Flood Forum. The indications are that there are severe misgivings: we have not, as a whole, persuaded “them out there” that this is the way in which their problems will be solved; it is often seen as the way in which some of our problems will be solved, and that is not the way forward.

Q 23

I want to follow up some of Mr. Horwood’s comments. I think it would be an enormous help to the Committee if we could move on beyond the issue of resources. We know the points that you are making and the political context in which you are making them, but what I and my constituents really want to know is whether the Bill has got it right—are we setting up the right local and national structures for dealing with flood risk management? It would be enormously helpful if you tried to answer that question directly, so that we are clear about whether the Bill is right in that regard.

I would also appreciate it if the LGIU made a specific comment. I know that you made comments about the draft Bill being too centralising, so it would be helpful if we heard from you about whether the Bill now has sufficient checks and balances to stop that over-centralising tendency. I make that plea to the panel. Could you please give us a straight answer to Mr. Horwood’s question?

Councillor Barry Dare: I shall go first, as is usual on these sorts of things. The answer to your first question is: maybe. I think we are into uncharted waters—frankly, we just do not know what the solution will be. I go back to what I have said before: this is better than not having it.

Dr. Andy Johnston: On structures, we are encouraged by clauses 9 and 29. Clause 9 is about co-operation and agreements between bodies and the ability to share tasks and so on, and clause 29 is about the Secretary of State’s ability to restructure things. What we would like to see is a bit more recognition that, rather than the restructuring being some sort of top-down process, local government bodies and other key stakeholders in a particular geographical area might decide that the best way to manage flooding is some sort of either extremely formal or informal type of structure in which responsibilities are shared between certain organisations. They are then able to point out to the Secretary of State, “We have a much better way of running things here, so would you please allow us to restructure ourselves at the local level in order to do that?” In terms of clause 29 and the restructuring measure, we would like an element within those provisions that allows local government and local stakeholders to be the catalyst for that reorganisation.

We all know that the same decision-making structures and the same geographical boundaries will not work for the whole of England and Wales. Local solutions will be required, depending upon certain circumstances. So the best way is definitely bottom-up, from that point of view. The Bill’s current wording does not stop that happening, but it does not encourage it as much as I would like. That, I think, is the bottom line on that.

As for the centralising tendency within the Bill, the Bill has changed since the Environment, Food and Rural Affairs Committee expressed its concern about that. Most of our concerns have been addressed, but a lot of the concerns are booted off into further guidance about how certain structures will work. A question was asked this morning about local authority representation on regional flood and coastal committees. The Government’s response was that they have no intention to centralise, which is good to hear, but the Bill does not say what the mechanism will be to ensure that it does not happen. There is a lot of secondary guidance and legislation that will sort out the details on that.

There is encouraging stuff on the use of scrutiny and the consultation arrangements. We have made the point that encouraging the Environment Agency, other bodies and local government to consult is a good thing, but in fact, under existing local government legislation, such bodies have a duty to involve the public and to co-operate with each other, which is a step beyond mere consultation on certain documents. It would be good if the Bill recognised that in reality such bodies will have to work together much more closely that it currently suggests.

Councillor Gary Porter: Broadly, it is a better Bill now than it was in its first draft, when people started to play with it.

Financing is not a party political point. You can have the best Bill in the world, but if you are not prepared to put in the resources that are needed, it will not work. It does not matter what you write. If you do not pay the cheque, it will not work. Do not take the funding issue as the Conservatives taking a pop at the Labour Government. It is not. If our guys had come up with a Bill without the resources, we would be saying the same thing. We must have the resources to deliver on it. We think it is a great Bill. We think the public really want it.  They want somebody to be accountable. We are ready to be accountable, but we need the tools to be able to be accountable.

Q 24

We have heard several speakers refer to overall responsibility and to who is responsible for what. Could I ask David Rooke initially how he sees the fire and rescue service fitting in, in practical terms, on the ground and in the chain of command in emergency flood situations, rather than in the initial planning?

David Rooke: We see it fitting in under the current arrangements, which are largely governed by the Civil Contingencies Act 2004. Local resilience forums have been set up across England and Wales, involving local authorities, all the emergency services, ourselves, the voluntary sector and others, and they manage an emergency. They manage emergency planning on a day-to-day basis through the county council emergency planning officers. In an emergency, so-called gold, silver and bronze commands are set up and the police, the fire service and others have specific responsibilities set out in that legislation. The Cabinet Office co-ordinates all that and we are pleased and confident that the system works. It has been tested time and again, most recently during the Cumbria floods just a few weeks ago and it was not found wanting.

Q 25

Are you saying that in an emergency situation there is no confusion about who has overall strategic control over the various statutory bodies who assist in the emergency?

David Rooke: None at all. It is dealt with by the gold commander.

Q 26

May pick up on the point about responsibilities in the context of water catchment areas not respecting county council boundaries, nor the boundary between England and Wales? The Bill contains clauses that require councils in England to do certain things, councils in Wales to do certain things and Ministers in the Assembly Government to do certain things. Are you confident that it is clear what will happen in what could be called the interim phase, when something has been passed in this Bill, but the Assembly part is not done? How will you work with colleagues on both sides of the border to deal with complex areas, such as the Severn? Have you got that worked out?

David Rooke: We currently make it work. One advantage is that the Environment Agency covers England and Wales. We manage catchments across the England and Wales boundary on an operational basis. We will make it work if the legislation in England is implemented at a different time to legislation in Wales. Obviously, we would like to see the legislation implemented in Wales and England at the same time because the Bill will bring improvements to people, their lives and their property. Any delay in implementation or any confusion caused by the law applying differently in England and Wales would not be good for people who rely on the service that we and others provide.

Q 27

On the Isle of Wight, which is my Constituency, it is simple: we do not affect what happens on the mainland and  what happens there does not affect us. That means we can get money direct from the Government. Will we get money from the Government?

David Rooke: I can speak only for the Environment Agency. We fund works on the Isle of Wight through our grants system and the block grant that we get from DEFRA. There will be funding that is allocated through our southern regional flood defence committee. It will be allocated in consultation with the proposed regional flood and coastal committees under the Bill. There will be funding. That is allocated on a national, prioritised basis and so it will depend on the needs of the Isle of Wight compared with the needs elsewhere across England. That will come from the overall funding the Government provides for us, as it currently does.

Q 28

What happens to local authorities, including on the Isle of Wight?

David Rooke: For local authority capital schemes on ordinary watercourses, we administer the grant. They are considered on an equal basis with internal drainage board capital schemes and Environment Agency capital schemes. If they meet the criteria we have agreed with the Government for funding, funding is provided on a capital basis through 100 per cent. capital grants for local authorities. Colleagues from the LGA will have to respond about the revenue side.

Q 29

Thank you for leading into that, Andrew. I am interested in the Bill’s impact on the cost-benefit analyses that different organisations will undertake with regard to particular capital funds. We know from the Gloucestershire case that we have heard from Barry that we have had quite a lot of mapping and a number of potential schemes have been worked through. The real crunch is who decides, between the EA and local authorities, whether those capital schemes go ahead and whether we also look wider afield at the impact on other areas if those schemes go ahead.

David Rooke: The Bill makes no change at all to policy in relation to cost-benefit analysis. It makes no difference in terms of funding, apart from broadening the local levy that is collected by our committees and spent locally for local benefit into coastal erosion. The cost-benefit analysis and the prioritisation of capital schemes stay the same. The Government set the outcome they would like to see for the investment they are providing and there are targets associated with the outcomes. We undertake a process to assess each scheme against the other schemes to see what would be their contribution to the overall targets we need to deliver for the Government with the money provided. That will not change and schemes from local authorities, internal drainage boards and us will be dealt with on an equitable basis. For the capital side, there is no change as a consequence of the Bill.

Councillor Barry Dare: I have nothing to add to that. We are expecting no change.

Dr. Andy Johnston: Obviously, what happens as a result of this Bill is that we have a whole new type of flooding that becomes somebody’s responsibility to manage. Until this point, it has been a poorly understood new type of flooding. In Gloucestershire they have pulled together what they call a surface water management plan, which is the first attempt to find out what needs to  happen to prevent flooding in an area as a result of surface water. One of the unexpected outcomes, I think, of this is that once you do that detailed work you end up with a multi-million pound bill. I think that people started this process thinking that it would just be a case of some gully cleaning and a bit of maintenance here and there, but actually, doing surface water management properly costs an enormous amount of money. That money currently does not exist within financial calculations, nor within the existing funding mechanism. The implication, therefore, is that local authorities themselves have to try to find a way of paying for all this.

Q 30

I shall address my question first to David Rooke. I am afraid to burden you more—you are the popular one of this panel perhaps—but I am sure the others will have reflections. I shall start with a quick scare story from Norfolk, not from my Constituency but the county more broadly. A couple of years ago, Mr. Rooke’s colleagues in Natural England rather sadly managed to leak a report that suggested that you let six villages go into the sea in north Norfolk. Of course, that created enormous anxiety and threw house prices into turmoil in the immediate term. I understand that the report was later not published.

One of the things we would like to be assured of in this process is the aspect of public consultation, and I would be interested to hear your vision in particular, under Clause 7(3), of what you think that consultation might look like, whereby you would undertake a duty to consult the lead local authorities in England and the public. We heard from the Minister this morning that it would be the standard 12-week job. We would be interested to hear your vision of that, and then perhaps the other three, if you have a view, could say if you think that is correct or if there is anything that should be added or taken away.

David Rooke: Consultation is a key part of all the work that we do, and building trust with local communities and sharing a problem with them and involving them in the solutions is a way that we are now advocating right across the Environment Agency. We have learned some of our lessons from the past, when we perhaps announced a solution and then consulted on it. We now announce a problem and involve the community in that solution. While the Bill does put this duty on us, it is something that we have done in the past, and it is something that we are doing at the moment and will continue to do. We will also look to improve the way that we do it. There will be full and proper consultation, with a real dialogue over what solutions we can or cannot provide to communities.

Q 31

Would that come on a regular basis? Perhaps others could enlighten me as to whether we are looking at a yearly strategy that then has a yearly consultation attached to it. Are we at that level of detail?

David Rooke: It would depend on what activities we were carrying out and the particular needs of a local community, but certainly where there was any capital investment envisaged there would be full and ongoing dialogue over that capital investment proposal.

Do others want to comment on this, or not? I know Mr. Williams wants to ask a supplementary question—fire away.

Q 32

On that particular part of the Bill and the need to consult, it seems a bit strange that you do not have a duty to consult with Natural England in terms of England, and the Countryside Council for Wales in terms of Wales, because the duties that are given to Natural England and the Countryside Council for Wales have an immediate impact on the purpose of drawing up the strategy.

David Rooke: We would consult with CCW and Natural England as a matter of course, and we do so on a daily basis, both at the local level and at a national level. So that is already happening.

Q 33

So there is no need to put it in the Bill.

David Rooke: We do not believe so.

Dr. Andy Johnston: I support that comment. As I mentioned earlier, the requirements in the Local Democracy, Economic Development and Construction Act around the duty to involve and the duty to co-operate already go, in my view, a step further than the relatively basic consultation that is envisaged here. Having said that, moving to that involvement from consultation does bring up something we have been talking about quite a lot this afternoon—resource issues for the parties involved. I do not think it is reasonable to expect the Environment Agency to do huge involvement exercises with the whole of the UK, on particular flood schemes for example. It simply does not have the resources to do that. However, when the involvement and co-operation processes are taken forward, it has to be the Environment Agency, Natural England and local government, with central Government support, working together on that one, rather than individual bodies doing their own thing.

Q 34

You have already indicated the public in general, although I am not sure how you would define that. As a member of the public, I could get up and say that you never consulted me on a particular strategy. Do you think that including the public, rather than people with a specific interest in the issue, is a hostage to fortune?

Dr. Andy Johnston: I think it matches the general trend of where we are going with local democracy in the UK. You couldn’t not put it in, in my view.

Q 35

May I press David Rooke further on my earlier question? In an emergency flood situation there might be in attendance the fire and rescue service, the local authority, the police, possibly St. John Ambulance and groups of volunteers, all trying to help in what are unavoidably chaotic circumstances. How is it established who is in overall charge of the situation in practical terms on the ground?

David Rooke: My understanding is that at the site level a bronze command is set up and that the fire and rescue service has control of what is called the cordon, so it controls what goes in and out of that controlled area, be it a flooding situation, a train or aeroplane crash or whatever. The police chair the silver command, which is the tactical response. The police also chair the gold command, which is the strategic response, generally at a county level. The police are chairing the gold command, with all the organisations involved at a strategic  level, and the silver command for tactical response, and the fire brigade controls the cordon around the site for the site response.

Q 36

Does that mean there would be a senior police officer on site who was physically in charge of what was going on?

David Rooke: Yes.

Councillor Barry Dare: Could I chip in to say that it works very well on the ground? I know that because I was part of the operation in July and August 2007, and the gold command in Gloucestershire was under the specific command of the chief constable. We in the local authority and other agencies, and other operations, such as the water companies and the electricity suppliers, all worked in co-ordination under the command of a single person. It worked extremely effectively. As Mr. Robertson will be able to confirm, in a seriously threatened area of Gloucestershire the emergency services and the support services, including social services, cut in instantaneously and saved lives, as we effectively had no fatalities.

We only have seven more minutes, and Martin Horwood is next.

Q 37

I would like to echo what Barry has just said about the effectiveness of gold command working with the other authorities, although in saying that I should declare an interest, because my wife was on it.

Councillor Barry Dare: Yes, of course. I had forgotten.

That is an example of it going well. Clearly, there will be times when flood risk management is not done so well. I will shift the discussion briefly in the time we have left to the teeth behind the Bill and this strategy. Clauses 19 and 20 set out the power for local authorities, but interestingly not the Environment Agency, to launch investigations. It includes ministerial direction powers, but no real powers for local authorities to ask other local flood risk management authorities, such as water companies, to do what they think is necessary, and there are no particular powers anywhere, it seems to me, for the Environment Agency, despite the fact that it is given a national oversight role. Is there something not very coherent or missing in those teeth in the Bill? Is it a bit gap-toothed?

David Rooke: No, because there is the provision for Ministers to direct either us or others to do works that are not being carried out by others.

Q 38

Would you expect to be advising him or her to do that?

David Rooke: Certainly we would be giving advice if we felt that responsibilities were not being undertaken. There is also provision in the Bill for authorities to work together and for each other. Again, we are very supportive of that provision, particularly in relation to internal drainage boards, because under the Bill, they will be able to do work for each other and work in consortiums and provide a very effective and efficient service as they do so to the people who benefit from the work that they do. We believe that those two provisions provide sufficient safeguard if authorities are not carrying out their responsibilities.

Q 39

You do not have responsibility for investigation, so how would you be able to advise the Minister to direct a flood risk management authority to do something? How would you know?

David Rooke: We have powers to enable us to investigate, but we would only carry out our investigations in relation to main rivers and the sea. The thrust of the Bill, following Sir Michael Pitt’s recommendation, is that local authorities accept responsibility for local flood risk, so they would initially undertake investigations in their area. Our strategic overview role, if they were failing, would enable us to advise Ministers whether they should be exercising the powers that are provided in the Bill on direction.

Q 40

I have a question on the earlier issue of ending automatic right to connect. How would the councillors and the Environment Agency feel about allowing water companies to have the right to refuse planning permission and to become genuinely statutory consultees on the same basis as the Environment Agency on major new developments? Also, how would they feel about allowing the Association of Drainage Authorities to be consulted on the same basis on what might be inappropriate developments in their area? Would that, in effect, end the automatic right to connect if we achieve that in the Bill? I ask Councillor Dare first.

Councillor Barry Dare: I do not know.

Q 41

But you would have no objection to water companies being given the statutory right?

Councillor Barry Dare: I do not think that I would want to come up with a black-and-white answer off the cuff on that. I would like to go away and think about it. I will come back to you on it.

Q 42

Councillor Porter?

Councillor Gary Porter: I cannot commit us to what we have not discussed.

Q 43

Mr. Rooke, do you think that it would close the gap? You said that the Government’s intention was to end the automatic right to connect.

David Rooke: We are very supportive of ending the automatic right to connect. That is our clear position.

Q 44

Again, on the automatic right to connect and sustainable urban drainage, is there sufficient strength in the Bill, given the situation of a county simply being a statutory consultee, for the district actually giving planning permission to face up to any kind of legal challenge? Is the necessary modelling available to you as counties to make sure that everything is watertight in terms of your representations to the planning authorities?

Councillor Barry Dare: I think there is always potential conflict between the planning authority at the next tier and the county authority, which is the subject of our discussion this afternoon. This is not unique. It applies, of course, to highways in particular at the moment.

For the most part, after being involved in this for many years, I have found that potential collisions are ironed out quite sensibly behind the scenes before an agreed position is taken by both authorities. That does  not mean to say that it always happens, and it may well not happen on a universal basis under the arrangements that we are discussing, but I am confident that these problems can be overcome by partnership working.

Q 45

Mr. Rooke, how do you feel Clause 2 enables you to identify what a flood risk area is? It strikes me as being very, very unclear. How would you assess what a flood risk area is?

David Rooke: We will assess what a flood risk area is along with local authorities and the flood risk regulations. The requirements of the EU floods directive have been made law by the European Communities Act and came into force last month. It sets out very clearly what risk assessments need to be done and who needs to do them. We will certainly have a role in quality assuring that, so we will follow the requirements set out in the directive.

Thank you very much. I am afraid that we have got to 2 o’clock. Thank you for your attendance. We now invite the next set of witnesses to take their places.

Thank you very much for coming. Will each of the witnesses, starting with Dr. Venables, introduce themselves? Laurence Waterhouse, the chairman of the National Flood Forum, was on our list of invitees and had intended to come, but unfortunately he cannot be with us this afternoon due to the weather conditions.

Dr. Jean Venables: I am Jean Venables and I run the Association of Drainage Authorities. Members of our organisation operate water level management organisations. We are important because we operate our water level management across one tenth of the country. That is the role we play.

I think that is enough. We are not having introductory statements; I just want you to tell us who you are for the record, so that people who are listening know who is here.

Robert Cunningham: My name is Robert Cunningham and I head a water policy team in the Royal Society for the Protection of Birds.

Nick Starling: My name is Nick Starling and I am director of general insurance and health at the Association of British Insurers.

Fran Hitchinson: My name is Fran Hitchinson and I am the policy lead for water in the Woodland Trust.

Jenny Bashford: I am Jenny Bashford and I am the water policy adviser with the National Farmers Union, based in Warwickshire.

Q 46

Again, I welcome the witnesses and thank them for braving the elements. I would like to declare an interest: I am vice-president of the Association of Drainage Authorities, a position of which I am extremely proud.

I would like to open by asking Dr. Venables a number of questions, which she might want to respond to all together. How do the IDBs currently raise their funds and how do you believe the Bill will affect their ability to raise them in the future? What is the current status of the regional flood and coastal committees in relation to  IDBs? What is the interrelationship between IDBs and the present regional flood and coastal committees, and how will that change under the Bill? You currently have very specific levying powers for IDBs. How do you feel they might be compromised or changed by the Bill, particularly in relation to your current ability to find local solutions to local problems? Also, how does your composition reflect democratic accountability? Do you believe it will be just as easy to secure the role of councillors under the Bill?

The memorandum with which we were provided notes that the IDBs are concerned about the definition of drainage systems and in particular that a watercourse is one thing, but an engineered watercourse is another. Do you believe that there is scope to clarify that within the Bill?

Dr. Jean Venables: I will condense my answer. The IDBs are statutory bodies. They levy on those people who benefit from the drainage in their area, so they can exercise a levy on the beneficiaries who then pay for the service. The Bill does not affect them in that case, but it is extremely important that they continue to have that levy-raising power. The democratic basis is that there is a voting majority on the board on each IDB of local authorities who contribute to the funding.

On the memorandum that we put in, it is extremely important when you look at the SUDS. The Bill defines a drainage system as a structure designed to receive rain water, except a public sewer or a natural watercourse. We think that we need to add on to that those watercourses that are not natural but are constructed as part of drainage systems within the country. It is therefore extremely important that that is added on as a difference. We would suggest that we use the terms that the water framework directive uses, which are the heavily modified or the artificial water bodies, because a lot of the fens drainage and a lot of the Somerset levels were constructed watercourses and we don’t think that they should be kept within the system of drainage systems. We do not think that is the intention of the Bill and we would like to see that added on to the exceptions.

Q 47

You raise an interesting point in your memorandum about resilience—I should like to question the ABI about this. We are all very vexed that the Vale of York is probably 65 per cent. flood plain and at any one time any household could be at potential risk of flooding. A number of houses are still at risk of flooding. Would it not make sense, to take up one of the points that ADA has raised, that when someone re-enters their home after being severely flooded, the home is made as resilient to future floods as possible? I know that there is resistance to that. I have seen it locally in north Yorkshire, particularly in Pickering—an area adjacent to me—where people feel they won’t be able to sell their houses if it looks as though the carpets have been pulled up and the electricity plugs have been put up the wall. If you are going to be able to reinsure that house at a rate that is affordable both in terms of premium and excess, you are in a very powerful position to insist on that when someone reoccupies their home after a major flood.

Nick Starling: All our members will offer resistant, resilient repair after a flood. In fact, we are about to issue a new leaflet that will be sent specifically to  householders in Cumbria about their options for resilient repair—we will let the Committee have a copy when it is done.

Two things are important here. It is a matter of choice. Some aspects of resilient repair are more expensive than normal repair, and they would have to be met by the policyholder. Some have no additional cost, such as putting plugs halfway up the wall, but some, such as resilient materials in kitchens, are more expensive and they have to be paid for. The second is the point that you mentioned. We know that there is customer resistance to this. Basically, people are shocked when they are flooded. They want the house to be back like it was before. There is sometimes concern that if it is obvious that there has been flood resilient repair, the house will be more difficult to sell. We are keen to encourage that and, as I said, we are about to issue a new leaflet on it that will be given to policyholders so that they know what the options are.

Q 48

I should like to ask the NFU a question. The NFU obviously has a position on reservoir safety, and if you could share that with us, it would be really helpful.

Jenny Bashford: I’d be delighted. Our main fear, if you mull over this, is the counterbalancing of arguments. One the one hand, farmers are being incentivised to put in planning permissions for reservoirs in an attempt to militate against climate change. One the other hand, under the measures in the Bill, there is the potential for that to inhibit people from going ahead and making planning applications, once they realise the implications—or the potential implications—for those measures with regard to the risk assessment, panel engineers’ requirements, annual assessments and so on. The potential for onerous liabilities in going ahead and taking action in the farming community bybuilding reservoirs could potentially put people off building reservoirs under this legislation. On the other hand, through the rural development programme for England, we are trying to encourage them to do that.

Q 49

I have one last question. You also mentioned food security, which is something that we have tried to explore both in the context of the Select Committee report and through other mechanisms. If main rivers were recognised as suitable for being maintained, and if it was stated that that should be a priority for the Environment Agency, that would move us some way. Do you believe that there should be scope in the Bill to amend the outcomes and ensure that food security and the protection of farmland could proceed in that way?

Jenny Bashford: Yes.

Q 50

Would you be keen to do that?

Jenny Bashford: Very much so. It is something that seems to be very much missing, and I understand why some of that would happen. It is not, as yet, a target-driven society where we have a food security target, but that should be embedded in the Bill as one of the things to be considered when looking at the area of flood defence.

Q 51

I understand the aspect of burdens put on farmers, particularly in building new reservoirs, but I presume that at least a new reservoir would be up to standard. I am also concerned about existing facilities.  Are there burdens on people with existing facilities that might not be up to standard and would be required to take more work? Could that lead to some facilities being taken out of use?

Jenny Bashford: There is the potential for that. Earlier, I referred quite a lot to the potential implications of the measures in the Bill. Our understanding of the Bill is that it is enabling, and it is about what those powers enable other people to do without coming back and consulting on it, and what that means. We should not lose sight of the fact that there are other mechanisms and systems where people do not do something just because they have got those panel engineers. They have to go through planning permissions; there are other systems that they will have had to have gone through before building those reservoirs in the first place. We should not lose sight of that fact.

Q 52

I have a question for Nick of the ABI. Insurance is clearly a big issue relating to floods. It was raised by Mr. Robertson and many of us on Second Reading. The ABI has been quite positive in getting some of its slightly less co-operative members to do the right thing by local residents, but there is clearly still a problem with punitively high premiums and excess charges that go up so high that people might as well not bother, as it will not really count as insurance. There are people who are being rather unfairly excluded from having flooding insured as a risk at all, especially when they are transferring, which is outside the current voluntary agreement that you have with the Government. Would you support addressing that issue in the Bill? That would at least provide a level playing field for your members and prevent you from having to play referee among them.

Nick Starling: The first thing to say is that the United Kingdom is pretty unique in the world in having flood insurance wrapped up in home insurance. That is a position that we all want to maintain and is something that we are proud of. This Bill is a very important part of maintaining that position, because we think that the deal is that members continue to provide the insurance while the other side of that bargain is to take a grip on water, as this Bill is doing, with leadership planning, accountability and so forth, and wider issues such as funding.

It is important to remember that flooding is an extremely expensive business. The average cost of a domestic flood is £25,000. The 2007 floods cost something like £3 billion to the insurance industry. The current cost of the floods in Cumbria is around £185 million, although we expect that figure to go up, and that must be balanced by the premiums that come in.

What we want is to have a situation where as many people as possible can get affordable insurance. There will always be some cases where the risks are so high that it will be difficult to cover people, or if you do cover them they must have a high excess or relatively high premium.

I think that the answer to your question is that I don’t think that you can put anything into a Bill that forces insurers to write business that would not come under what is commercially acceptable in their business model. The importance of the Bill is providing a framework for risk management that will enable insurers to understand and price the risk for as many people as possible.

Q 53

But there is a bit more of an issue than that, is there not? I say that because the natural tendency for any business will be, broadly speaking, to try to sell as much insurance as possible to those who are at as little risk as possible, and to try to exclude the people who are at more and more risk. Any logical business will try to go down that path, but obviously that is not really a very socially responsible outcome.

I have an example of somebody who, even in the great flood of 2007, was not flooded in Cheltenham. However, he is now being told that, because of his postcode, he cannot get flood insurance, and he is in a house that has never flooded, as far as he is aware, even in the great floods.

So, there are clearly problems with insurance companies. Would it not be simpler for you if we had a level playing field set out in legislation, so that at least your members knew where they were? That is accepting that there will be some extreme examples of places that flood every year, which we know about in Gloucestershire very well. Obviously, they could not be endlessly underwritten by everybody else.

Nick Starling: In fact, insurers insure a great number of people at a level that is probably below the cost of what the insurance should really be and in circumstances where it is difficult to see how the risk is being managed. The statement of principles, which we have with the Government, means that our members take on a risk where there is a promise of mitigating that risk in the future. I think that that is a big business debt that our members are prepared to take and I think that it is to their great credit that they do that. It would be much easier to withdraw. Given that we have something like 500,000 households at very high risk of flooding, the fact that the number of people who actually cannot get insurance is extremely low is a credit to insurers’ social responsibilities.

I am not entirely clear what you mean by the Bill creating a “level playing field”, because if the Bill says that insurers must cover everyone—I am sorry, perhaps I do not fully understand the question.

Q 54

I said explicitly that that would not be the case. However, the Bill could, for example, instruct the Secretary of State to draw up a scheme for a more equitable insurance regime. There are precedents for that. We used to have a situation where insurers would not underwrite anyone who had taken an HIV test against developing AIDS. That was stopped because it was seen as being not socially responsible.

Nick Starling: From our members’ point of view, an equitable insurance regime is one where you can price according to the risk. The principle of insurance is that there is a risk pool, but you pay the price for the risk you bring to it. Now, at the moment you might argue that flood insurance is not equitable, because a lot of people are almost certainly paying substantially below the risk that they present and insurers choose to smooth the risk across the piece.

I think that what we all want to achieve, via this Bill and other measures, is a situation where there is a much better understanding of the risk and a much better understanding of the management of that risk. That is in terms of the leadership of the Environment Agency, a requirement for local authorities to have plans, a  long-term funding arrangement, proper control of planning and data so that insurers can understand the data and the risk that is there.

Q 55

So would you be in favour of publishing the surface water inundation maps?

Nick Starling: Oh, yes—there should be as much data in the public domain as there possibly can be. I think that that is extremely important.

Q 56

Even if that had the effect of destroying people’s house prices?

Nick Starling: Well, I think that if there is data there that can be used to assess risk, it should be made available so that people can use it. If you get a better understanding that there are parts of the country where flood insurance is going to be extremely expensive, that is the time to sit down and say, “What can we do about that? How do we manage that residual risk?”

Q 57

The ABI was extremely helpful during the floods, and indeed has been since, but there are one or two questions that I would like to put to Mr. Starling if I may. Even now, and I consider it will go on for quite a while, people come to me to complain about their insurance premiums and their excesses, to which Mr. Horwood referred. They cannot understand why both have gone up. If the excess goes up to as much as £20,000, which I have known, that effectively takes them out of insurance. If they flood, they will effectively pay for it themselves, so why has the premium gone up? They cannot understand why both have gone up. They can probably understand why one or the other goes up. Or is the increased premium paying off the £3 billion? What are your thoughts on that?

Nick Starling: In a situation where there is high risk, insurers have a choice. They can increase the premium or they can increase the excess. Technically speaking, the excess is the amount that someone pays towards their claim. I have a couple of things to say about that. We have done some analysis with our members. The great majority of the excesses are £5,000 or less. There are some exceptional ones, which might be more. They tend to be high-value properties. Even if you have an excess of £5,000, flood claim average is £25,000. It pays the great majority that claim. It is not necessarily the case that if you are flooded you have to fork out that £5,000. You can discuss it with your insurer. It may be that you can do some of the repair or decoration yourself, so it does not actually mean that people are not effectively insured. It means that they are taking a little bit more of the risk. What insurance companies try to do is balance the premium. People have the choice of a huge premium and a small excess, or the other way round. Sometimes, as you pointed out, it can be a little bit of both.

Q 58

Are the increased premiums paying for the past, though?

Nick Starling: Insurance is quite a simple game. The amount of premiums that come in has got to cover the amount that is paid out in claims. You have to balance those premiums across the piece. As I said earlier, your premium depends on the risk that you are bringing to the pool. It tries to balance what an insurer thinks is your risk in terms of coming to the pool.

Q 59

How would you assess risk? There is a concern, to which Mr. Horwood referred, particularly if you have a GL20 postcode, which means more or less around the town of Tewkesbury. Is the postcode put in a computer that flashes something back? Is it more scientific than that? In some ways more worryingly, if work is carried out in an area, theoretically it will reduce the flood risk in that area, but does it draw the attention of your members to that area and do they say, “Well, it’s flooded once; they need to spend this amount of money on it. It is bound to flood again.” How would they assess the risk to each householder?

Nick Starling: Insurers use a whole range of measures. They use the Environment Agency data, postcodes, their own data, their own mapping. They all have different models. That is what happens in a competitive market. They will have different means of doing so. I am not aware that they find out that some flood defences have been put up and they say, “Wait a minute. Must be a flood risk.” I do not think that it works in that way. It comes back to my point about data. They like to have the data and they like to know when risk has been ameliorated, either by a local authority or by the Environment Agency or indeed by a home owner who has put their own measures in place.

Q 60

It can be difficult for individuals to assess that and to provide that information. It is not easy for them to do that.

Nick Starling: It can be. I would urge them in those circumstances to talk to the insurance company before they embark on doing a lot of work. They should talk and see what might be acceptable and what might work.

Q 61

It is important that data are accurate, for your purposes and also for planning in terms of inundation. Some of your members come forward with maps that differ from those of other members and the Environment Agency. It causes huge amounts of confusion in the insurance industry and in planning. Is there a role set out in this legislation to get a set of data and maps that are universally agreed on, so that this confusion does not arise?

Nick Starling: This comes back to how insurers look at risk. The key data here has got to be Environment Agency data, and making that as good, resilient and accurate as possible. One of the things that we have been talking to the Environment Agency about is having some feedback of insurer data into its data, so that it can use some of our own insurers’ experience, because they do their own mapping, and so forth. All of them are going to have different assessments of risk and different appetites for risk, if I can put it that way, that they will want to take on. I think it comes down to the fact that the key data has got to be national data—in this case Environment Agency data—or, in the case of surface water flooding, some of the issues around what local authorities keep.

Q 62

Mr. Starling, may I thank you for all the work you and your members have done in Cumbria—west Cumbria in particular—which has been noticeable and welcome? I have just a few questions.

Based on something else that you have given already to colleagues, do you envisage that it is credible that, in the not-too-distant future, entire regions will effectively be uninsurable for flood damage?

Nick Starling: Well, it hasn’t happened so far. But that all depends on what happens over the next few years. We have this arrangement with Government, as I said, which says that we all carry on with this insurance, but there has to be delivery on the other side. That delivery is in terms of a long-term plan for flood defence spending, good data, which we’ve talked about, and getting control of water.

What is encouraging about the Bill is that it gives the Environment Agency leadership, so that people understand the risk and what’s going on there. It is about getting a grip on planning, and we all know about the silly planning decisions that have happened in recent years, so that a Government of whatever stripe—I’m pleased that there seems to be a lot of unity on this—can commit to those things and you’ll have a situation where insurers can understand risk and you aren’t going to get whole areas that cannot be insured. If that’s not delivered, the flood risk with climate change is going to grow and the problems will grow.

Q 63

Do you think the Bill helps provide those measures that you and your members have called for?

Nick Starling: It’s a big step. There are things we would like to have more of. We would like it to have some targets. It would be great if it had physical targets for reducing risk, for example. It’s silent about funding. Funding is a sensitive issue at the moment, but it is obviously important for future flood defence spending, and so forth.

We have been calling for this Bill and we think it’s a great first step, and we’re supportive of it.

Q 64

Finally, what level of risk are your members carrying at the moment, with regard to flood insurance? Do you think that the burden of risk is being carried by your members?

Nick Starling: They’re carrying a huge burden of risk. Flood risk is the key environmental risk in this country. We know it’s going to increase, because the biggest impact with climate change on the UK is flood risk. On our calculations, you’re talking about something like at least a 40 per cent. and 25 per cent. increase in flood risk. Floods are expensive in terms of insurance and in terms of much wider disruption.

So they are carrying a big risk, but they want to do that. They’ve always covered flood risk and they want to continue to do it. It’s a deal, as I said, between the private sector providing that flood risk cover, which in most other countries in Europe would be covered by the state, and the state—local authorities and so forth—doing its bit in terms of controlling that risk.

Q 65

I did say “finally”, Mr. Chope; but Mr. Starling, you’ve really put your finger on a point I wanted to ask about. You mentioned other countries and the role of the state with regard to this matter. Do you think the Government should underwrite flood insurance in this country, for either domestic or industrial purposes?

Nick Starling: No, I don’t think they should and I don’t think they would want to. I think you’ve got to consider what you do about extreme circumstances where it’s impossible to underwrite flood risk, but I think it would be a retrograde step if that were to happen. I imagine that if Government did it, they would want to control the risk and have some control of liability in exactly the same way as our member companies do.

I think Nia wanted to ask something about coterminosity.

Not specifically. I think that there are still a couple of issues on insurance. Are you happy with what you have asked?

Very happy.

Q 66

Obviously, you are in a lot of dialogue with Government about insurance. Do you feel that the statutory consultation that will be given to counties to feed into districts will be sufficient to help you insure future homes?

Nick Starling: In terms of planning?

Yes. They can say, “Look, this drainage has got to be done like this; otherwise, it’s going to cause flooding.” Do you think that there is enough in the planning to help for future insurance requests?

Nick Starling: Huge steps have been made in terms of planning. I am not entirely sure what the Bill adds to that, but we have seen a dramatic reduction in the number of planning permission consents given in high-risk areas, so we want to see that continue. I do not have a specific answer to your question about whether your Bill goes far enough; I can comment specifically on that, if it would be helpful.

Q 67

If we move now to considering areas such as the Severn estuary between England and Wales and the border areas, perhaps colleagues could comment on whether they think that the Bill’s wording—it requires the Welsh Assembly Government and the county councils on both sides of the border to do certain things—will work out well in practice, or whether they see ways that things need tightening up so that it works smoothly across all areas.

Dr. Jean Venables: I will start on the answering, if I may. We have a concern. Clearly, water must be managed on a catchment basis, and what is being proposed is that county councils and local authorities should take on that lead role. They will have to work very effectively with each other. I think that it comes into sharp focus when you come across the England-Wales and England-Scotland boundaries.

I believe that we must be careful, because we tend to talk about having national policies when in fact we really ought to be talking about having an English policy. Perhaps we ought to tighten up some of the wording in that respect. In the earlier session, you talked about having a national policy when in fact it was an English policy. The Welsh Assembly Government do their own policy. You have two different policies, yet you are operating the same river system.

As David Rooke said, we make it happen—the Environment Agency and the internal drainage boards make it happen—but we get dilemmas of how to operate the two different policies. I think that an even bigger problem will come when the solution to one side of the boundary lies on the other side. That will throw into sharp focus funding, planning and how we solve it. There is a great need for good co-operation, and I think that it is important to put a duty on county councils and Governments to co-operate.

Q 68

This question is for Jenny Bashford from the NFU and relates to your comments that the Environment Agency is power-heavy and perhaps duty-light. In your view, how far does the Bill address those concerns, and what more would you like to be done?

Jenny Bashford: In a word, no. We do not think that it goes far enough in giving accountability to the Environment Agency. As I have said, this is very much an enabling Bill: “We’ve got to move forward on this stuff; there are a lot of things happening at the moment.” We represent the largest land area of the country, bearing in mind that we are a countryside organisation, yet very few duties are placed on the Environment Agency as to how it goes about forming its strategy. It says a little bit about what should be included in the strategy and what is not said.

For instance—although I probably could not give a comprehensive answer on exactly what we do; we need to come back on that—it does not say where they should be consulting within the process. Given a blank sheet of paper, if I am the Environment Agency I can just say, “I’ll come out to you and I’m consulting, what do you think about this national strategy we want to do?” as opposed to me producing a draft, sharing it with you and asking you for your comments. I think it is quite important. There is a huge difference there about stipulating where the Environment Agency needs to make its consultation.

There are various elements like that in the Bill that need to be pinned down. We agree that the Environment Agency is in the right position; they are the right people to take the national strategy forward, but they also need to be made accountable for some of the decisions that they may make without any requirement to come back to Parliament. That was the reasoning behind some of the comments we made. For instance, where there is an enabling piece of legislation, we would like to see, in the Bill, the accountability for them to come back and have a consultation and consult with people about how they will implement that particular part.

Q 69

For clarity—there is a need for consultation with people, broadly, and with Parliament.

Jenny Bashford: Yes, and stipulating where in the process, because that makes a lot of difference to the quality. Consulting is not just ticking a box; it is about quality consultation to ensure that local needs are taken into consideration, as well as national needs. If you stipulate where in the process they are to consult, that will bring a much greater degree of quality to the consultation, rather than the experiences that perhaps you have had in the past.

Q 70

I want to ask a very simple question. I think it is probably for Jean Venables to answer, but others may want to chip in. I have always been a great  fan of IDBs. I am interested in how the Bill will work on the ground, particularly how we can get local actions to deal with local problems, often to do with maintenance and simple repair work. Is this Bill right for purpose and will it help?

Dr. Jean Venables: We would like to make some changes. As regards working effectively on the ground, it is important that we have some exemptions about permissions to do work for things such as culverts. There is the detail on that in the submission that I made to you. But then that needs to be a de minimis exemption, otherwise we are going to get very bureaucratic, and work on the ground will be held up, so there is an amendment we would like to see there.

We would like to see the definition of flooding in the Bill looked at, because at the moment the definition of flooding is when water appears on the surface where it would not otherwise be. However, flood damage starts when you get water to within a certain depth of the surface. That is acknowledged at the moment; there is a damage benefit when water is removed from that distance from the surface. I have concern that it will not be helpful in the future to define flooding as starting actually on the surface.

Robert Cunningham: Without going into detail about the local action, one of the things the Bill does is this: when the DEFRA flood risk management strategy, “Making Space for Water”, came out, it talked about enabling a wider portfolio of responses. By recasting from flood defence to flood risk management and giving a much broader definition of what flood risk management entails, it legitimises a much broader range of actions, which might be those actions that are identified locally as being how we are going to mitigate flood risk for a community. So I think it is very positive in that sense. That is certainly one of the things we support in the Bill.

Q 71

My question is directed mainly at Robert and Fran, although others may want to comment. There is an argument for shifting the approach to water management much more on to a landscape scale—not having things that are, for instance, particularly restricted to one local authority, but addressing a whole catchment area, a whole landscape—for using the landscape as part of water management, looking at upland land use, natural woodland and things like that, and having an altogether more ecologically sustainable approach to water management. Do you think that that is a good thing? I can sort of guess your answer, but do you think that the Bill does it and do you think that the Bill takes us in that direction at all, or sufficiently?

Robert Cunningham: That harks back to the comment I just made. One of the things that the Bill definitely does is to talk about natural processes in the definition of flood risk management. It clears up the ambiguity whereby those who want to do more imaginative things to manage flood risk work their way around existing flood legislation, and those who are not interested in doing those more imaginative things hide behind the language of the existing flood defence and drainage legislation. So it gives a much clearer steer that those things are to be considered. Again, when we are looking at the national flood risk management strategy and the local flood risk management strategy, there is a steer to consider a much broader range of actions within that.

The answer does not lie entirely in the Bill; it also lies within the regulations that enact the floods directive. While I do not want to get too far into the detail of that, within that directive, there is a requirement to look at actions at a catchment scale. The plans that subsequently come out of the regulations should, if they are done properly, give us a much better idea about how things work at a catchment scale and the kind of actions or measures you might wish to take.

The key here is that the Bill helps us not to be limited by definitions. We should be considering all options and looking at the most sustainable. In some circumstances, the most sustainable thing might be to put a wall in the centre of a town, but what has happened in the past is that that is what people have immediately jumped to. The Bill helps us think much more widely than that and encourages people to do that.

Fran Hitchinson: I very much echo Rob’s comments. We are very supportive of the addition of natural processes within the Bill—it gives us that extra option. As Rob was saying, in the past, it has been very much focused on hard engineering solutions, whereas we know now from the Pitt review and all the other evidence that has been accumulating over the past 10, 15 or 20 years, that natural processes and working with habitats and land management solutions can have a huge impact on flood mitigation—slowing down flood water and letting it infiltrate back into the land, rather than flowing over the land. We know that that can have a massive impact.

Obviously, from our own perspective at the Woodland Trust and from the modelling research that has been done, we know that trees and woods can have a huge impact on slowing down floods, either on a small scale or on a large scale when they are targeted on flood plains. As Rob says, using those kinds of solutions in tandem with perhaps engineering solutions downstream—using those solutions together—would have a huge impact. We really think it is great that the Bill is recognising that. It is giving us the opportunity to look into those solutions and work with those in the future.

Q 72

I could cite local examples of where that simply is not happening at the moment, and I am not sure that I can see anything in the Bill that particularly shifts that. This morning, Mr. Robertson mentioned the issue of spatial planning and development. I have seen flood risk maps with large blue areas up hill of housing estates, and we are about to build flood defences on the housing estate and build on the green space above it. There is nothing in the Bill that seems to stop that process. That is the very reverse of the kind of approach you are describing, isn’t it?

Fran Hitchinson: We are hoping that, through the Bill, people will be able to consider much more of those natural processes. I understand that it is not happening at the moment, but we are hoping that, through the Bill, people will be able to consider it more. Does that answer your question?

It shows that you’re hopeful.

Fran Hitchinson: We’re hopeful and there is more evidence being accumulated. Through that and the enabling powers within this, that should give us a much stronger platform to work from.

Robert Cunningham: There are two issues—this has been a source of debate in discussions around the Bill. How much is a Bill about just removing legislative  barriers and how much is it about steering the cultural barriers? There are cultural barriers around how you manage flood risk, and that is what I was trying to get at. Some people’s imagination is restricted to the very immediate—there are people who are working within the existing flood risk management legislative framework to do very imaginative things and to examine upland restoration, woodland planting and all of those things. They are really pushing hard to do that. There were some DEFRA pilot projects that looked at those.

There are other people who leap immediately to the legislation and say, “Oh no, this is what flood defence means; this is what land drainage means. We can’t possibly consider any of those things,” and they hide behind it. The legislation as it stands opens the door for people to do more, but it does not force them to. That poses a legitimate question: how much should we say, “You must consider these things and set out why you are not adopting them.”? One would hope that PPS25 does that job for development on flood plains.

Jenny Bashford: The NFU’s position on this is that we tend to suffer from pendulumitis. We have had hard defences in place for years. It now seems to us that in a way, the Bill goes too far the other way. There is a difference between what is written down and what culture there is. I think Rob is right that there is a time lag between the two. Nevertheless, our concern is over what is written. The culture of many agencies and the Government at the moment is to move much more towards soft defences at the expense of hard defences. It is either/or, whereas we feel that there should be a balance between the two. The issue is getting that balance right and how you can encourage people, including those on the engineering front, to make sensible, qualified decisions about what is the best form of flood management and what flood management you are managing with that particular aspect.

From the scientific side of things, I honestly believe that the jury is out. Not enough is known about this. Not enough is known about the impact on agricultural land, which is the land that will be most affected. We referred earlier to our food security. Sitting at the back of that, of course, are the habitat and recreation targets, which will be somewhat of a concern if we are not careful.

All the NFU wants is for hard and soft defences to be used in balance and to complement each other, rather than this pendulumitis.

I think Dr. Venables and Mr. Starling want to make short contributions on that.

Dr. Jean Venables: I just want to emphasise the need to look at and manage the whole catchment for all our water needs. One person’s flood water is somebody else’s water resource. In future, we have to look harder at managing the water in the whole catchment to meet the sustainable needs of everybody in it.

Nick Starling: Our members are interested in outcomes, but they have no difficulty in defining what flooding is: it is when something comes into someone’s house or business. There are two key things. First, we do not want a situation in which someone’s flood risk management just dumps the problem on someone else. The Bill goes some way towards ensuring that that does not happen. We must not forget that flood defences do work. You  have only to speak to people in Carlisle who did not suffer again as they did in 2005 to know that, whatever else you do in flood risk management, hard defences work.

Q 73

I will move on to the part of the Bill on the designation of features. When listening to Robert and Fran talk about conserving important aspects of the landscape to promote flood mitigation, I was having difficulty wondering what a feature was. The Bill says it is

“a natural or man-made feature of the environment.”

Although neither of your organisations could in any way designate it, presumably it would be up to any organisation to put forward a particular feature that they believed could have some effect. I leave that with you for a second.

I want to move on to the NFU. I should have declared an interest at the beginning by saying that I am a member of the NFU, so I hope we do not have to start again. The part on designation is in some ways probably overburdensome because it seems to be easy to designate something, but difficult to appeal against that or have it cancelled. Perhaps I can put that to the conservation organisations first and have a word from the NFU afterwards.

Robert Cunningham: We own and manage quite a lot of land. When I looked at this, I thought it probably would be a burden for the RSPB because our land is defended by flood defences and we have flood banks. Our Otmoor reserve is a good example of that. It could well be a burden for us.

I thought it could be an opportunity.

Robert Cunningham: When I looked at this, it was not just about what we can do to other people, it was also about what this means to the bottom line of our business, because we have to raise money and pay for things. So, if this becomes an unwieldy burden, it will become a problem for us. I hadn’t really thought of it in the context of “can you designate a flood plain?”, but that sounds quite interesting. If it was a feature with a demonstrable effect on downstream flooding, one would imagine that that might be possible.

Fran Hitchinson: When I read the Bill, I had similar thoughts and thought it could be an opportunity in those respects. It does talk about a natural feature and we thought, if the plains have an effect on downstream flooding or you can demonstrate that a woodland has an impact on downstream flooding, it would make sense to protect that feature as you would a hard feature. That seems an opportunity. If that feature is also going to have other wider landscape benefits for habitat, recreation and biodiversity in other ways, then by protecting that feature for flooding, you are also protecting all those other public benefits. That seems to me to be a win-win scenario.

Jenny Bashford: First, I am glad we have a member on the Committee, which is excellent.

That is absolutely right and we have made a note in the representations we have made on this that they do seem quite onerous and quite difficult to see what the register of features actually means. This goes back to the earlier question that was raised about the duties and responsibilities. Throughout the Bill there seems to be a  lack of challenge. We have got this emergency now with the flooding. We need to get some flood-risk management in place, to have an overall strategic role and to see how that is going to hit the ground as it were and what that actually means. It is very important that, going forward, this has a number of appeals mechanisms built within it, so that people are allowed to challenge on the basis of stopping the law of unintended consequences. A fundamental weakness of the Bill seems to be that there is very little challenge. I do not know whether you put that in through a mechanism that is called an appeals process on individual parts, but there needs to be a mechanism throughout the Bill on the various aspects so that people have the right to challenge what is being proposed by the Environment Agency. We have looked into this in some detail and said, yes, there is an appeals process that allows you to appeal against the notice, but there is no ability for appeal against what is in the notice. That is actually what people want to do. You might have all sorts of things being designated as features that you can do nothing about.

Q 74

I was very taken by what Jean Venables said about the definition of flooding. If she could elaborate a bit more, how would she like to see that further defined?

Dr. Jean Venables: I have a concern about the fact that flooding is defined as when water appears on the surface, yet we know that damage occurs when water reaches within a certain distance—say, 0.3 metres—below the surface. That damages roads, railways, properties and foundations. That is recognised in the benefits of flood systems, so I would want to see that term amended or have reassurance that it does not affect existing practice. I have a real concern about it.

Q 75

Am I correct in understanding that there used to be regional engineers attached to DEFRA to do some of the maintenance work? Where have they gone and what was their relationship to the Environment Agency?

Dr. Jean Venables: DEFRA had a team of engineers who, as you said, were regionally based and extremely knowledgeable about local circumstances. They assessed the schemes that came forward. They were disbanded and the duties were taken over by the Environment Agency, so there is very little engineering expertise within DEFRA at the moment, as a result of that group going.

Q 76

My question is for Jenny from the NFU. It continues from Roger’s points about flood alleviation. Although I know we have a problem with security of food supplies, I have long believed that farmland in some cases is sensibly usable for holding water. On the Environment, Food and Rural Affairs Committee, we battled for a long time to formalise that single farm payment. It does happen, but it is not widespread. I wonder what your views are and whether you think that this Bill should be a vehicle for forcing that funding issue to the surface, so that we can legitimise what I think is an appropriate way in which we use land at least to stop property from flooding inexorably?

Jenny Bashford: To some extent, you are right. The NFU position is that it is up to individuals to make decisions on the best way to take their businesses forward. I also think that you are right that that kind of valuation  work needs to be done in order for people to make informed decisions and to take their businesses forward. It is another weakness of an enabling Bill that there is very little on the funding and financing side of this. Yes, at least in principle, we agree with what you are saying.

Robert Cunningham: I just want to say that there has to be a clear distinction between funding for the active use of land for flood alleviation and the unintended or natural flooding of land. There are a number of schemes, some of which have nature reserves in them and some of which are continuously farmed, where the Environment Agency manages a reservoir that fills periodically, lopping off the flood peak. Those schemes exist, and they will either own the land or have some agreement with the farmer.

The other issue is when land that is either currently defended or undefended becomes covered in water under natural circumstances, which in itself acts as a storage capacity for water in an extreme event. It is more difficult to say how you would compensate for those natural flooding events. We can enter into agreements for re-routing land, agri-environment schemes and what have you, but one of the difficulties arises when you have fragmented land ownership. How do you get neighbouring landowners to manage things in one ideological unit? What if one landowner in that ideological unit does not want to enter into an agreement to accept floodwater and that creates problems?

Dr. Jean Venables: I would like to add that there is an awful lot of infrastructure that is absolutely vital to our daily civilised life that is underneath and alongside farmers’ lands, which means that flooding the land would be very detrimental to the infrastructure.

Q 77

My question is for Miss Bashford. As I understand it, there is already legislation that requires riparian owners to maintain waterways. It quite often does not happen. Is there a need for this Bill to revisit that legislation, or do you think that the legislation is strong enough but is just not applied? How would you assess it?

Jenny Bashford: River maintenance is another big issue that we have brought up in our representations on this Bill. There are certain obligations on the Environment Agency to do a certain amount of riparian maintenance, which simply is not happening. It is one of those cases where if the organisation that is representing the Government is not seen to be doing their job it does nothing to encourage anybody else to do theirs, so there is a bit of a circular problem going on here. It would be very helpful if there was something in the Bill that put an obligation on the agency—going back to that question about the obligations and responsibilities of the agency—to do some riparian maintenance.

Q 78

It is quite often individuals who are riparian owners. That includes farmers—it is not entirely farmers but it does include them. Again, I have seen evidence where that has not happened, where they have not done what they are supposed to have done in terms of maintenance and repair. Sometimes councils have an obligation to ensure that they do it, but in some cases, it is simply not working. Do you think we should revisit it?

Jenny Bashford: Again, there has to be a balance. It would be very unfair to put an onus on individual members—whether that be farmers, smallholders or whoever is on the small rivers system—and not give an obligation to the Environment Agency to maintain the main rivers. When we look at the scale of impact, it is pointless to have someone doing something on a small stream in the uplands somewhere, when downstream, it is causing an enormous blockage because of lack of maintenance by the Environment Agency. If it is going to be revisited, I think we would be happy for it all to be revisited, not just one part without the other.

I am afraid that we have reached 3 o’clock, and we must end this evidence session. I thank you all for coming. I now invite the next set of witnesses to take the stand.

Good afternoon. Thank you very much for coming along. Can each of you briefly introduce yourselves, please?

Tony Smith: I am Tony Smith, from the Consumer Council for Water. We represent water customers in England and Wales.

Phillip Mills: I am Phillip Mills, deputy chief executive at Water UK, which is the organisation that represents the water-and-sewerage and water-only companies in England and Wales, Scotland and Northern Ireland.

Keith Mason: I am Keith Mason. I am from Ofwat, the economic regulator for all the water companies in England and Wales.

Q 79

I thank the experts for being with us and braving the elements this afternoon. I would like to start with Mr. Mills, but Tony Smith may want to comment on this matter. In the way that some of the roles and resources are allocated under the Bill, do you consider, especially in terms of sustainable drainage systems, that it is more appropriate for water companies ultimately to become responsible, particularly new ones? If the systems flood and cause a spillage from the sewerage system, water companies are more likely to have the expertise to prevent and deal with flooding.

Related to that point, with regard to the public sewerage system and linking infrastructure from major new developments, when such developments apply for planning permission, would it be beneficial for water companies to be statutory consultees, on a similar basis as the Environment Agency, so that they could either reject outright or withhold permission for such developments to go ahead, particularly if the existing infrastructure was considered incapable of taking the waste water from such developments to connect to the sewerage system? We are ultimately trying to find a way in the Bill to end once and for all the automatic right to connect, and I do not think that we are quite there yet on the systems. Obviously, Ofwat will have a view on this. Would the water companies, if they were agreeable to our suggestions, look to Ofwat to review the regulatory mechanism to allow them to raise funds for these responsibilities?

Phillip Mills: May I take the questions in reverse order? You mentioned the automatic right to connect. Certainly one of the Pitt recommendations is that there should be an end to the automatic right to connect to  the public sewerage system and we fully support that, but the Bill as it stands does not deliver it. Certainly for SUDS, if the SUDS are constructed in accordance with standards that we have not seen, the developer can connect them to the sewerage system, and the SUDS-approving body just has to consult the water and sewerage company. We do not know what “consult” means in that case, but we are concerned that a third-party body—the SUDS-approving body—has authority to allow connection to the public sewers, but does not have the accountability or the responsibility to deal with the implications of that decision.

There are similar clauses later in the Bill, which allow developers to connect directly to the public sewerage system if there is an agreement in place, but there is nothing in that agreement that allows water companies to specify the location or even object to the connection, so they are far from happy with the Bill as far as it goes on ending the automatic right of connection, because it basically does not.

As for SUDS ownership, that could address some of those issues, but local authorities also have responsibilities for grounds maintenance and public open space maintenance, which is where most of these SUDS would sit. At the moment, there is a variation of views among water companies about whether local authorities or water and sewerage companies are more appropriate as owners. There is major concern though about funding, maintenance and resources, which I think was discussed this morning. There is concern that local authorities may not be sufficiently funded or may not have the resources to maintain SUDS features, and if the features are not maintained they may not continue to serve the function for which they are designed. As I think you implied, that could have significant implications for the sewerage system, with the water coming into the SUDS being discharged at the same rate, which could lead to downstream foul flooding of properties; SUDS should be designed to minimise that.

Q 80

In that regard, would you consider water companies to be better placed than local authorities to become the approving body? To me, the role of the local authorities should be to grant planning permission, and I do not see that they will have anything like the expertise needed, just in terms of engineering capability. They do not currently undertake on a massive scale these types of projects, and I know that at the moment we do not seem to know where many of these SUDS are. The exception to that, I believe, are the SUDS in relation to main roads, in that the county councils probably have the expertise. Would the water companies that form your membership be willing to step into the breach, and would you look to raise the funds to enable you to do so?

Phillip Mills: On the SUDS that are associated with highways, the highways authority manages those, but I do not think we are talking about those. What are really concerning are SUDS that are part of new housing or commercial developments. You are right that water and sewerage companies—rather than local authorities—which employ sewerage engineers have those skills and resources, so you could make that argument. As I said, some water and sewerage companies see themselves better placed to manage SUDS features, but other water and sewerage companies at the moment do not share that view, so there is a split view.

You are right—local authorities don’t have the skills or the expertise to decide what can be discharged and where a discharge can be made to the public sewerage system. They must get that information from the water and sewerage company. The Bill says that they must consult. We don’t think that is sufficient. There is nothing in the Bill about their having to take note of what the sewerage company or the water and sewerage company says. If the SUDS feature discharges to a watercourse, which it could do, rather than to the public sewer, then the SUDS-approving body or the developer would, I believe, require a discharge consent from the Environment Agency. We feel there should be something similar for a SUDS discharge to provisions for a public sewer. There should be a discharge consent which sets out the conditions of that discharge, and that would include the requirement to maintain the SUDS feature.

Q 81

Mr. Mason, would Ofwat be agreeable to considering a review of the regulatory mechanism to allow water companies to take on these additional responsibilities? We clearly heard from the local authorities earlier this afternoon that they are going to be hard pressed to fulfil the new responsibilities. My concern is that, if we proceed with the powers in the Bill as they currently stand, we are not going to resolve the flooding that could arise from SUDS or from the fact that there will be no end to the automatic connection. Would you look favourably on that?

Keith Mason: I think we would have to consider the proposals. The Bill as it stands has some difficulties, as Phillip outlined. If the water companies were to have control and they could decide whether something could be connected, it would be important. It may well help with another of their difficulties with the Bill about the long-term maintenance of SUDS. We would need to consider the quality of the things that were adopted. Similar points come up with the adoption of private sewers about whether the SUDS were fit for purpose when they were adopted. There is a quite a lot to think about, but the suggestion might have some advantages and would certainly deal with some of the difficulties in the current proposals.

Q 82

I have one last point on water companies. I understand that the Bill as currently drafted would exclude water companies from tendering for major infrastructure projects. I am not quite clear how these projects are currently defined. Would it not be more acceptable if you were at least allowed to tender, as you in the water companies probably have more expertise on how deliverable these major infrastructure projects will be?

Phillip Mills: The short answer is yes. Water companies have delivered £85 billion-worth of investment in infrastructure since 1980. They have delivered it very successfully, generally on time and to budget. That is part of the current regulatory framework. The new proposals seem to exclude water companies from bidding for certain types of infrastructure, which have not been specified. Our concern is twofold. First, the type of infrastructure to which the Bill refers needs to be identified. That should be specified by the Government or the Minister and should be subject to consultation.

Secondly, water companies, because of their successful track record, and/or any group or joint venture companies that they may form, should be allowed to bid for such  work. There should be a level playing field. Otherwise we are denying potential benefits to customers and to the environment by excluding them.

Tony Smith: May I comment on the sustainable drainage question? We are very much in favour of sustainable drainage solutions, but it is important that the ownership is clear. We would be concerned about water companies stepping into the breach if that were seen in any sense as a substitute for other bodies not having either the resources or the skills to do what is rightly their responsibility. We would be very concerned if we thought that water customers in some way were paying beyond what they should rightfully be paying as a result of that.

Q 83

May I just clarify that the role of the SUDS is to retain water to prevent future flooding? With the greatest of respect, what does a council understand about that, as opposed to a water company with its engineering expertise?

Tony Smith: Well, they do have responsibility for quite a lot of the causes of water problems. I think that one of the problems with SUDS in the past is that they have not made enough progress because a lot of players have got to play their part. So it is not obvious who should own sustainable solutions—I agree with that. We certainly would not be totally against the idea, but if there was any sense in which water companies, which have resources and skills, were substituting for others, I think that water customers would be concerned about that.

Keith Mason: I just wanted to comment on the large infrastructure projects, if I may. I think that the intention, and it was probably only for a very small number of very large projects, is to get the lowest possible and most advantageous price. One of the difficulties that could arise if the water companies were allowed to tender is that they might skew the market, because an infrastructure project will be providing services to the incumbents. If you then allow the incumbents to be part of the tendering process, people may well think, “What is the point in us tendering for this?”, because you have not got a level playing field.

I think the regulations were looking to assume that associate companies were participating, so we were not ruling out entirely participation by the owners of water companies, but it may look a bit strange that the water companies themselves were allowed to tender for something that would then be providing services back to them.

Q 84

But are they not best placed? I will put the counter-argument to you—presumably, if you take a major project like anything to do with the sewerage system and the ancient sewers in London, if the incumbent does not improve that system, they could be sued for not providing a system that was fit for purpose and you, as Ofwat, would be the first to say that they had failed in their duty to provide a proper sewerage service.

Keith Mason: I think that it would depend on the type of project. Again, quite a lot of the capital works are already outsourced to other people who provide the work. The importance of the Bill is to give clarity about what the responsibilities are in respect of that piece of infrastructure or non-infrastructure that we are talking about. If you are talking about a reservoir, or perhaps  the Thames tideway, the responsibilities of the infrastructure service provider and of the incumbents would need to be clear, certainly in terms of the consultation to which Phillip referred.

Tony Smith: I just want to make a quick comment on large infrastructure projects. We can see the potential value of introducing an element of competition into the process and I agree that the wider the range of potential competitors the better, in that sense. However, we have some concerns, in the sense that if it meant that you might have a higher cost of capital and therefore a higher price for customers, you might not necessarily get best value out of such a deal.

Secondly, we would look very closely at such deals, because it may be that there are risks left with water customers that would not arise if you acted through the conventional routes that water companies normally use. So we have slightly different concerns, but I think that the scope of the range of competitive input is important.

Q 85

May I move us on to the potentially thorny subject of social tariffs? I have a slightly different question for each of you.

To Phillip from Water UK, I know that several of your companies have tried to introduce social tariffs, or at least expressed a desire to do so, especially Thames Water in London, where that is a very big issue. How many of your member companies would like to introduce social tariffs, if they were given the opportunity, beyond the current WaterSure tariff?

May I ask all three of my questions? You could then perhaps answer me in turn. This one is to Ofwat: Keith, we have always had the reply back from Ofwat that it was not within your remit to allow what I think Regina described as the transfer of money from one group of customers to another. As I said, this sounds rather like the high-water mark of Thatcherism hanging over us, but other regulators have managed to do it. I accept that you believe that you need something to change before you can do that. To change that remit, would primary legislation be needed, as in the Bill—or, rather, as is not in the Bill—or is there another way of changing your remit to allow you to permit social tariffs? Finally, to Tony at the Consumer Council for Water, would you support that?

Phillip Mills: To my knowledge, there are five companies that have some form of social tariff—Wessex Water, South West Water, Anglian Water, Welsh Water and United Utilities—although those may be on a trial or pilot basis. I cannot confirm how many other companies have put forward proposals to Ofwat in their charger scheme.

Q 86

Let us get this clear, because I understood that beyond the limited WaterSure scheme you were not allowed to have a social tariff that effectively subsidised one group of customers but not another.

Phillip Mills: The WaterSure scheme is a separate scheme that is linked to the vulnerable groups regulations, and all companies have to provide that. There are some pilot social tariffs, effectively, that those companies have in place at the moment, but I think that they are probably for a fixed term, and presumably they are linked to the current charging scheme and will have a finite period. I think that there probably needs to be  more work on the costs and benefits derived from those schemes. It could be argued that introducing social tariffs at this moment may be premature, because it could pre-empt the recommendations, or any legislation that would enact the recommendations, from the recent Walker review, which has a number of recommendations on affordability and debt, and those are not covered.

Q 87

It would not exactly be pre-empting, as Walker supported that.

Phillip Mills: Yes, but you would potentially need legislation to bring in some of those recommendations.

Q 88

This is legislation; that is the point. This is probably the only bit of legislation on the subject that we will get for several years.

Phillip Mills: Well, we think that it is very important that some legislation should be brought in now, through the Bill, to address the major problem of debt that results from people not paying their water bills. The debt currently stands at £1.2 billion, and half of that is due to tenants in rented properties. We have been working with the Walker team and the three landlord associations—the Residential Landlords Association, the British Property Federation and the National Landlords Association—to develop a set of principles that would see landlords responsible for water charges for rented properties, but they could discharge that responsibility by providing information. That has been picked up by Anna Walker, whose team we have worked with on that. Her recommendations state that legislation should be changed as a matter of priority, so we would really like to see that change introduced by the Bill. I believe that we have support on that from our colleagues at Ofwat and the Consumer Council for Water.

Q 89

The debt issue is a slightly different thing.

Keith Mason: You are right, in that we would not want to see any extension of cross-subsidy between groups. As Phillip mentioned, we have allowed pilot schemes on social tariffs, which companies are working through. That is in addition to the WaterSure scheme. One of the key aspects of that—it is linked to the debt issue—is that companies, as part of the pilots, are able to show that the collection rates from those different types of tariffs are better, hence the reduction or lack of increase in bad debts. That means that those sorts of tariffs do not increase the amount of cross-subsidy, so groups of customers are not paying to support other groups. We would therefore look to legislation, and to the Government in particular, to be quite clear about which groups would be the recipients of such cross-subsidy, so that it was clear that the Government had decided that that is what they wanted to see. That could then be implemented through tariffs. We are encouraging companies to come forward with social tariffs that pay for themselves, and to try them out through pilots.

Q 90

So let us be clear: if we take the dangerous position that we actually want to help poor people and that that is a good thing to do, even if it increases some other people’s water Bills slightly, you think that at the moment you cannot do that without primary legislation.

Keith Mason: I think it would be clearer if that was the will of the Government. We could then implement that and be very clear that the tariffs that we approved had the backing of Parliament.

Q 91

May I push you further on that before we move on? Are you saying that, at present, you can allow some pilot schemes, and can allow something if it does not involve cross-subsidy? I am not sure how you allow a social tariff without incurring some sort of cross-subsidy; the subsidy must come from somewhere. Are you saying that, at the moment, you can only do that, and that you cannot do anything that has a more overt form of cross-subsidy?

Keith Mason: At the moment, we would not like to increase the amount of cross-subsidy from one set of groups to another.

Are you saying that you actually cannot do it?

Keith Mason: We may feel that it is discriminatory against some of the powers and duties that we have to increase the amount of cross-subsidy. Again, to be perfectly clear, there is already an existing cross-subsidy with some of the other tariffs, particularly the rateable value tariff, when compared with metered tariffs. What we would not want to do is extend it. We do not think that it is our job or remit to say which social groups should benefit at the expense of others.

Coming back to the pilots, companies have said that there will be no increase in cross-subsidy, because—Phillip alluded to this—the generality of customers pay for the bad debts of others. The extent to which the bad debts record is improved for certain social groups if these tariffs are introduced means that the net new cross-subsidy is zero. At the moment, bad debts are a form of cross-subsidy, because people who do pay are paying for the bills of people who either cannot or will not pay.

Q 92

Are you saying that the fact that there is no existing legislation would cause you to have to make decisions that you feel are not yours to make? Therefore, are you actually saying that you need some form of detailed, prescriptive legislation to be able to progress on social tariffs?

Keith Mason: Yes. I think it would be much clearer for all concerned if Parliament made it clear that there were particular social groups that we wished to increase the cross-subsidy for. If the Government did that, we could implement it.

Q 93

And you see legislation as the best way forward?

Keith Mason: Yes.

Tony Smith: I agree entirely that there is an urgent need to address the issue of water affordability. There is a problem with water affordability now, particularly in some areas of the country, and it will only get worse as the switch to metering causes some customers, particularly larger families, big increases in their bills.

We have pressed companies and Ofwat quite hard to carry out a number of these pilots. Will the pilots address the issue of affordability? I do not think so. They might help with debt, and they may help customers save water and therefore save money, but I do not think that they will address the issue of affordability.

As the Anna Walker review pointed out, there is a range of possibilities to address the problem. The crucial issues are what the right set of recommendations are and who should pay, because customers are concerned about potentially cross-subsidising other customers through social tariffs. We certainly are very much in favour of Government, through legislation, introducing a set of proposals that require them either to act themselves or at least to specify what should happen, and what Ofwat and water companies should do about it.

Should this legislation do that? Our concern is that we know from our research of customers who have been affected by flooding that there is an urgent need to address the issue. We would certainly not want to see this Bill held up at the expense of customers, in terms of flooding, to address the issue of affordability, but that issue definitely needs to be addressed very urgently.

Q 94

I have a question for all of you. It is a plea for advice as much as anything else and I hope that you can help me put something to bed one way or the other. I recently walked around my Constituency during and immediately after the floods in west Cumbria and the neighbouring constituency in south Keswick, Cockermouth, Workington and so on, and there was an overriding public chuntering, which may or may not be founded—that is why I am seeking help—on the water drainage network in this country and the perception that it has got significantly worse since privatisation. I make no ideological point—private ownership can be very good in some circumstances, public in others. However, is there any evidence either way—for or against—to suggest that the water and drainage infrastructure in this country has got significantly worse since privatisation? That’s the first question.

Secondly, Mr. Mason, Ofwat has said, I think, that it sees this Bill as the first step in a wider review of legislation in the water and sewerage sectors. What might the other steps be? I would be very interested in that.

The final question is to Mr. Mills. From a layperson’s perspective, an awful lot of the flooding that we see in this country and I’ve seen over the past 10 or so years has occurred in semi-rural or rural areas. That gives rise to another suspicion. Again, it’s not an allegation on my part; it’s a suspicion that I’m hoping to be able to get to the bottom of. Do your member companies—I would have thought that this would be standard business practice—invest more heavily in the high-yield, urban areas where there are more customers, at the expense of the more rural, lower-yield areas such as Gloucester, west Cumbria and so on? We can name a lot of places.

Tony Smith: I would be interested in Ofwat’s and water companies’ views on the hard data to either agree with you or not agree with you. As far as customers are concerned, what we see is that actually things have improved quite significantly for customers, in the sense that crucial things for them like the performance of the sewerage system to avoid sewer flooding has significantly improved over the last few years. We’ve been encouraging water companies and Ofwat to address these problems each five years when the prices are reset. Certainly in the price review that has just finished, there’s a programme of well over £1 billion on sewer flooding alone. That has happened in the past, too. So as far as the consumers are concerned on the issue of sewer flooding, the effect on them has significantly reduced.

In relation to other aspects of the service, consumers recognise the performance is actually very high. We do customer research to find out their views on the performance of companies and their satisfaction with the service, and it is extremely high. It’s actually much higher than for energy companies, telecoms companies and local authorities. So in the customer sense, the news is pretty good. It’s not perfect. The companies still make mistakes. There are still issues, as you’ve just been pointing out, but in the round, it has improved dramatically over the last few years.

I am really pleased to hear that. You’re the first person to give me a detailed answer of some kind to that question after months of asking. Mr. Mills?

Phillip Mills: I could say I rest my case, but there are hard, detailed data. Keith can probably explain better than I can that companies return data annually to Ofwat—the June return. I guess we’re talking about drainage infrastructure here. It will include details on that. Ofwat will seek to ensure the serviceability of that infrastructure—that it’s working effectively, it’s not deteriorating and it is maintained. It will allow for that in the price limits. If there’s deterioration there, that’s reflected in the incentives to the particular company.

You talked about high-yield areas—about urban and rural areas. Companies have statutory obligations, and that’s irrespective of urban and rural differentiation. Obviously, it can cost more to service customers in rural areas because of the physical lengths involved and getting people out there, but if we’re talking about, for example, sewer flooding, which Tony just mentioned, yes, there’s over £1 billion being identified of the spend in the next period, starting in April. Almost £1 billion was spent over the last five years. Ofwat quite rightly insists on this: there has to be a cost-benefit analysis and prioritisation of the sewer flooding schemes. Certain schemes in urban areas may be more cost-effective because more customers will benefit for £0.5 million there than would in a rural area. So there could be some favouring of more densely populated areas, because more customers will benefit from the pounds spent.

Q 95

I have a question for all of you. It is a plea for advice as much as anything else and I hope that you can help me put the matter to bed. I walked around my Constituency during and immediately after the floods in west Cumbria and the neighbouring constituency in south Keswick, Cockermouth, Workington and so on. There was an overriding public chuntering, which may or may not be well founded—that is why I am seeking help—about the water drainage network in this country and the perception that it has got significantly worse since privatisation. I make no ideological point—private ownership can be very good in some circumstances, public in others. However, is there any evidence either way—for or against—to suggest that the water infrastructure, the drainage infrastructure, in this country has become significantly worse since privatisation? That is the first question.

Secondly, Mr. Mason, Ofwat has said that it sees this Bill as the first step in a wider review of legislation in the water and sewerage sectors. What might the other steps be? I would be very interested in that.

The final question is to Mr. Mills. From a layperson’s perspective, an awful lot of the flooding that we have seen in this country over the past 10 or so years has  occurred in semi-rural or rural areas. That gives rise to another suspicion. Again, it is not an allegation on my part, but a suspicion that I hope to be able to get to the bottom of. Do your member companies—I would have thought that this would be standard business practice—invest more heavily in the high-yield, urban areas where there are more customers, at the expense of the more rural, lower-yield areas such as Gloucester, west Cumbria and so on? I could name a lot of places.

Tony Smith: I would be interested in Ofwat’s and water companies’ views on the hard data either agreeing or not agreeing with you. As far as customers are concerned, what we see is quite significant improvements, in the sense that crucial things for customers, such as the performance of the sewerage system to avoid sewer flooding, have significantly improved over the past few years. We encourage water companies and Ofwat to address those problems every five years when the prices are reset. In the price review that has just finished, there is a programme of well over £1 billion for sewer flooding alone. That has happened in the past, too. For consumers, the effect of sewer flooding has been significantly reduced.

In other aspects of the service, consumers recognise that performance is very good. We do customer research to find out their views on the performance of companies and their satisfaction with the service, and it is extremely high—much higher than for energy companies, telecoms companies and local authorities. In the customer sense, the news is pretty good. It is not perfect—the companies still make mistakes and there are still problems, as you have been pointing out—but in the round, the service has improved dramatically over the past few years.

Q 96

I am really pleased to hear that. You are the first person to give me a detailed answer of some kind after months of asking that question. Mr. Mills?

Phillip Mills: I could say I rest my case, but there are hard, detailed data. Keith can probably explain better than I can that companies return data annually to Ofwat, in the June return. I guess we are talking about drainage infrastructure here, and details of that are included. Ofwat will seek to ensure the serviceability of that infrastructure—that it is working effectively, is not deteriorating and is maintained. It will allow for that in the price limits. If deterioration has taken place, that is reflected in the incentives to the individual company.

You talked about high-yield areas—about urban and rural areas. Companies have statutory obligations, irrespective of urban and rural differentiation. Obviously, it can cost more to service customers in rural areas because of the physical distances involved in getting people out there, but if we are talking about, for example, sewer flooding, which Tony just mentioned, yes, more than £1 billion of spend has been identified in the next period, starting in April, and almost £1 billion has been spent over the past five years. Ofwat quite rightly insists on a cost-benefit analysis and prioritisation of sewer flooding schemes. Certain schemes in urban areas may be more cost-effective because more customers will benefit from £500,000 spent there than would from that sum being spent in a rural area. There could be some favouring of more densely populated areas, because more customers will benefit from the pounds spent.

Keith Mason:I think there have been improvements since privatisation. In terms of the amount of money spent by the water companies: there is a figure of  £80 billion with which a number of people will be familiar as the investment that companies will have made by 2010, and we have just set price limits that allow a further £22 billion.

A significant proportion of that was to do with improving water and effluent quality, but a rising proportion—over 50 per cent.— particularly in the years 2010 to 2015, will be to do with capital maintenance, which is about maintaining asset networks such as water mains, sewerage and the above-ground kit that the companies have, and that is increasingly important. Tony spoke about reductions in sewer flooding, and you could quantitatively measure the reductions in pressure problems since privatisation, so I think that there has been significant improvement.

Overlaying that—to talk a little about why we think that further change is needed—is the impact of climate change. It is coming along incrementally, but it will come along and it will have a significant impact. Some of the flooding incidents and the more frequent, heavy storms that we have seen could well be due to climate change. Equally, population growth is a factor. There will be more people in the country—we have seen demographic increases coming along quite a lot.

It is those things that we see as the next steps after this Bill, in particular the things that we have talked a little bit about: the implications of the Walker review and the Cave review that are not part of the Bill. We would like to see them included in legislation as soon as possible. That is where we see the next steps, particularly the newish challenges of climate change and population growth.

Q 97

Those sums are generally impressive—there should be no doubt about that. Is Ofwat absolutely clear that water users and customers in rural areas are receiving the same service from water companies as those in urban areas?

Keith Mason: The duties that the water companies have apply to rural customers as they do to urban customers. Some companies will say that they have more problems in urban areas than they do in rural areas, and other companies will say the reverse. We want all customers to be protected equally, whether they be urban or rural.

Given the size of companies, the measures that we look at are, to some extent, averages across the areas used by the water companies, so it would be much more difficult for us to say, yes, that area is particularly difficult. However, as companies improve their knowledge of their systems and their water zones, they can pinpoint more of the difficulties in particular areas. Again, there is variation across companies in the size of the zones, but the knowledge that companies are gaining is improving greatly day by day, and certainly year by year.

Q 98

I would like to press you on that one more time. It may not be Ofwat’s problem—it may be that the regulatory framework is insufficient—but surely, given engineering efficacy and the economies of scale in the investments required in urban areas, urban customers get a better service from water companies when it comes to water drainage than rural customers get.

Keith Mason: I do not have any quantitative evidence to say that. I cannot say that there is anything to substantiate that, or that that is the case.

Tony Smith: I should like to put some flesh on the bones. One of the things that we do is look for the areas where there are problems—hot spots, as we call them. Part of our job is to bring pressure to bear on water companies, the regulator and anybody else who needs that pressure. It is true to say that there are hot spots in the country. For example, there might be areas where the water quality, or at least the taste of the water, is not up to the standard elsewhere, and it is our job to bring pressure on the water company concerned and on Ofwat at the time of regulatory reviews. So there are hot spots around the country and areas where provision is far from perfect, but it is not necessarily to do with rural environments. Some problems with the sewerage system actually happen more in urban areas than in rural areas. I would not classify it as a rural-urban problem, but there are hot spots to fix.

Q 99

Have you examined the places with 100 per cent. charging rather than the alternative? What is your verdict on considering those compared with the ones that have rates for the cost of water?

Tony Smith: Sorry, could you repeat the question?

In my Constituency, everyone has a meter. I do not know if there is anywhere else where that applies. Have you compared the two types of area?

Tony Smith: Yes, we have. Companies vary quite a lot in how many meters they have, as you rightly said. The Isle of Wight is unique. There are big differences in how customers are charged and in the resulting effects on different customers. It is true that, in the long term, charging for water on a meter is probably a good thing for customers; the problem is that the transition causes some customers problems.

If the transition is made compulsory—in other words, if customers are forced to have a meter—the people who lose out tend to be people with large families who cannot easily reduce the amount of water they use and may be in a low rateable value home. They are likely to get a big hit. In an area where people can opt for meters, the people who will benefit most opt for a meter, leaving other people with increasingly high bills. That is a problem in some areas of the country—particularly in the south-west and, to an extent, in the Anglian areas—where companies have fairly large percentages of metering but not everybody has yet switched to a meter.

Q 100

So are you saying that mandatory introduction would be fair, but non-mandatory would not?

Tony Smith: No, I am not really saying that. I am saying that whatever way you choose to make the transition from non-metered to metered, some customers will benefit a lot and some customers will not benefit at all; it will have a big impact on them. That goes back to the point about affordability. That is one crucial reason why water affordability is so important. Various areas of the country—particularly the south, obviously—are moving towards metering, either compulsorily or optionally, and it is having a big impact on some customers.

Q 101

Would it surprise you if I said that very few people had complained over almost the past 10 years?

Tony Smith: No, it would not. If you implement metering over a period of time, you can take customers with you. They become aware of water meters through word of mouth, which encourages them. There is a way to implement metering while taking customers with you, but a lot of it is about the speed of implementation, how it is communicated and protection for customers who really cannot do anything to reduce the amount of water that they use. That is the challenge for the water industry in future: to implement metering effectively without alienating customers.

Q 102

Do you know what happened when it was introduced? I do not know when that was.

Tony Smith: It was long before my time. I do not know whether any of my colleagues can comment.

Phillip Mills: I was working in the industry, but not with Southern Water. I was with a water company, and we had smaller trials. There were one or two issues with people, as Tony mentioned, who had to use large volumes of water for health problems. That is taken care of currently through the WaterSure vulnerable groups regulations. Again, it is something identified by Anna Walker in her report.

Q 103

Can we clarify the situation on critical infrastructure? I include reservoirs within that, although technically they are different. First, does the Bill clarify that there is now a clear steer away from new provision in flood risk areas? I know that that will link with planning, but how does the Bill interact with planning? Secondly, what additional encouragement does the Bill give water companies to re-site some of those facilities in due course? I know there is no immediate imposition upon them, but do you see the Bill as encouraging that?

Phillip Mills: The civil contingency secretariat is doing some work on that. Its national hazards team is creating a national resilience plan, so there will be nine sector plans. That is separate from the Bill. They are being drawn up by the different Departments—DEFRA is drawing one up for the water sector. The water companies have quite a number of the critical and national infrastructure identified sites. I understand, reading from my notes, that they have completed the first draft of that resilience plan, and they now have to stitch the nine plans together. There has been a delay because of the interdependency of the different sectors.

As you realise, the water sector is very much dependent on energy, both for pumping treated water, sewage treatment works and sewage pumping. To some extent, the energy sector is dependent on the water supplies, but getting to the nub of that is taking time. We can look at Mythe—obviously, we are all familiar with the floods of 2007—which was ultimately lost, but even if it had been protected and saved but the local substations had gone down, it would have been difficult to maintain supplies. There needs to be a co-ordinated plan between energy and water sectors and, of course, between transport sectors as well, because companies would need to get to those sites. That is a little further down the line at the moment, but we understand that it is being addressed.

There is also a consultation out at the moment on the strategic framework around the critical infrastructure. I do not think that in the Bill there are medium drivers  for companies looking at moving sites. Keith mentioned the PR09 process, and we are just setting the final determinations for the next five years. Companies have put in schemes and they have worked with Ofwat as part of the price review, to look at criteria or the framework of developing resilience schemes. Quite a bit of funding has been agreed over the next five years for improving the resilience of assets.

Q 104

Keith, do you want to give Ofwat’s perspective on this?

Keith Mason: In the review of pricing, the industry has just said that there is a lot of money for resilience. In the Bill, there are no particular clauses that go directly to that. Some are tangential in terms of the co-ordination of dealing with flooding and the responsibilities for that. There is a clause on reservoirs, but it is certainly not going to re-site reservoirs. There will be a risk assessment of reservoirs, and SUDS might defer the construction of more infrastructure. Apart from that, it could be tangential.

Q 105

Would you want to see that in the Bill? Do you want greater clarity in the legal framework?

Keith Mason: I think it is a question of waiting to see what these national resilience plans look like when they come out and the extent to which things have been identified by the security services. They have all been funded in the pricings.

Tony Smith: My perspective is a customer’s perspective. We did some research at the time of the floods in Gloucestershire and again in Hull. The issue of water companies and electricity companies and other crucial service providers protecting or moving the infrastructure was a high priority for customers. Certainly, we are encouraged by the work on the critical infrastructure, but the question is whether it goes far enough. In areas where it would not be classified as critical infrastructure, there might be vulnerability, and we need to look at that.

Q 106

This is another price review-related question, first to Mr. Mills, although others may wish to comment. A lot of your member companies spend a great deal of money on what could broadly be termed environmental measures, but include things such as reducing leakage, which we all agree is a good thing, even though we might grumble when our Bills go up slightly as a result. With the experience of PR09 just behind you, do you think that the current regulatory regime is too tight? Has it unduly restricted environmental measures by your member companies? By implication, do we need to look Ofwat’s remit in the environmental respect as well?

Phillip Mills: Companies have, as I said earlier, statutory duties that can cover environmental remits and they will be funded through the regulatory process. You mentioned leakage, and Ofwat has decided on a certain level for addressing leakage. You are probably aware that, certainly for London, the leakage level was less than the incumbent water company wanted to spend, but that is part and parcel of the periodic review process. I do not necessarily think that there need to be changes to the regulatory framework to address environmental spend.

Keith Mason: We have allowed in price limits the bulk of the things that companies want to do in respect of the environment. I cite in particular catchment management  schemes: there are more than 100 catchment management schemes at this price review compared with the last price review in 2004.

Something else from the price review that is perhaps overlooked is that we have taken away the incentive for companies to increase the amount of water that they sell to customers, particularly their metered customers, by saying that, based on the assumption that we make about revenues, if customers use less water, water companies will not miss out because we will allow them to recoup the revenue they have lost. There is a stronger incentive now in the water efficiency measures for companies to encourage their customers to use less water, whereas in past reviews there was not. If a drought encouraged companies to use more water, that would be billed and they would get greater revenue. There is now no incentive in this review for companies to do that because that money would just get clawed back.

Q 107

One point that I do not think has been discussed is Water UK’s concern about the hosepipe provisions in the draft Bill. Could you give us some guidance on how those could be clarified?

Phillip Mills: Obviously, during the last drought there was a lot of confusion about how customers could and could not use water. We are slightly disappointed that the Bill does not take that forward. It still only specifies or prohibits the watering of private gardens using a hosepipe and the washing of motorcars using a hosepipe. That is the same as the current legislation. We think that other uses should be specified. People’s habits and practices have moved on since that legislation came out. We think there should be a range of other activities such as cleaning patios and drives, cleaning the external surfaces of buildings and operating ornamental fountains. Those are all domestic activities. We think they should be specified in the Bill so that there is absolute clarity about what is covered and what is not. If there is a real impact on people’s livelihoods or the economy, such as in horticulture, carwashes and window cleaning, we accept that there would need to be a drought order or non-essential use ban. We think that there should be more clarity in the Bill.

There is concern about the time scales and the requirement to advertise in two local papers. It could take up to two weeks before companies could introduce  restrictions. There is also an issue about representation. If it was just for hosepipe bans and such domestic activities, we think it could be overly bureaucratic and further delay the process for the restrictions, which would be necessary to maintain critical supplies to customers. Yes, there are areas of particular water uses and temporary bans where we feel the Bill falls short of what it should be saying.

Q 108

That is helpful. Reverting to something that we discussed earlier, I have some sympathy with the Minister’s comment that we should wait, but we are committed to publishing a white paper and a major Bill if there are any changes after the General Election. As for social tariffs, it would probably be for the wider Bill to absorb the conclusions of Walker and Cave. I found some of the comments that have been made interesting, but I do not believe that it is necessarily the right time or place for that—similarly for metering.

As regards bad debt, I think that there was some urgency because of Fuel Poverty. However, I am taken by the fact that you, as water companies, are disadvantaged compared with other utility companies. If there was scope to include that in the Bill, where would it be best placed? I realise that it is not your Bill, but where do you believe it would be best?

Phillip Mills: Obviously, it will have to go in the water management section of the Bill. There is a clause that covers concessionary charges for community groups, which obviously has been included for a reason. I think that a clause covering bad debt and a requirement to provide information to water companies by landlords to discharge their responsibility for the charge could follow the concessionary charges clause. It is not directly linked, but it is about charges.

That is helpful. Thank you.

We are finishing three minutes early. I thank the witnesses.

Ordered, That further consideration be now adjourned. —(David Wright.)

Adjourned till Tuesday 12 January at half-past Ten o’clock.