Why the UK needs fresh ideas to keep the taps on-printed in the New Statesman October 2018
After the hottest and driest summer for over 40 years questions are rightly being asked about the resilience of our water infrastructure. For too long we have taken access to clean, safe water for granted, assuming as we do that the UK endures too much wet weather to ever be seriously at risk of water shortage. But the statistics say otherwise. The National Infrastructure Commission has established that by 2050 England alone will require an additional capacity of 2,700 to 3,000 litres a day, just to maintain resilience at today’s levels.
Forecast population growth and climate change are the forces driving this challenge. A 25% increase in the population of the south-east of England is predicted, for example, by 2050, and at the same time we expect changing weather patterns to create a greater risk of flood and drought.
It is in this context that we need to place the current debate about the future of the water industry. Quite understandably, there has been a focus on the corporate behaviour of the nine regional water companies, and in particular on the financial engineering by some which has in recent years done so much to damage their reputation. But in an era of populist politics this has led to siren calls for renationalization, which in themselves risk taking us back to the stale old arguments of the 1970s.
The old, tribal lines of left and right do nothing to contribute to the serious thinking needed if we are to meet the challenges facing the country as far as water is concerned. If it is accurate to say that the water companies haven’t always covered themselves in glory then it is also true to say that under the old nationalized model the water industry suffered a chronic lack of investment, in a period when public borrowing limits were growing ever stricter and strengthened environmental and water quality regulation was forcing up standards.
A progressive way forward recognizes the potential for using the regulatory mechanism to ensure that the industry is focused firmly on delivering the investment needed if we are to secure water resilience; the National Infrastructure Commission has developed clear recommendations based on a mix of new supply infrastructure, transfer capacity and measures to reduce demand, including increased metering and reductions in leakage.
Reviewing OFWAT, as recommended by the Chartered Institution for Environmental and Water Management, would identify whether or not it has the powers and resources necessary to do this. One good example of where change is needed is the current rule under which OFWAT is barred from varying the licensing conditions for water companies unless it has agreement from all of them to do so; giving it more control over this key regulatory mechanism would be an important step in the process of rebuilding trust and confidence in the industry.
There is, though, another forceful argument for looking in more detail at how OFWAT works. A key role of the regulator is to protect consumers from the absence of competition which quite obviously characterizes the water industry. But the need for new infrastructure, both in terms of supply and transfer capacity, creates opportunities for bringing new operators into play. New transfer capacity in particular offers the prospect of innovation in both ownership and delivery of services; it also highlights the need for robust regulation and transparency in procurement. If OFWAT gets this right, we can look forward to a more challenging and potentially more competitive environment for water services.
In the end, what matters is the consumer and the public interest. I wonder, though, whether progressive politics has the courage to think beyond its usual horizons by recognizing that this imperative is not always best met by a dogmatic belief in an outdated ideology?
Printed in the New Statesman October 2018