This interim report is published today, following a total of 50,114 responses to the calls for evidence.
The following five areas come under scrutiny:
• Long term direction from government, including through the planning process.
• The creation of a simplified legislative framework, which could include new objectives around public health.
• Regulation but “a fundamental strengthening and rebalancing of Ofwat’s regulation is needed”, it is argued.
• Transparency and accountability within private water firms.
• The management of water industry assets, including pipework.
Note the terms of reference preclude any consideration of re-nationalisation.
Here is how the Chair Sir Jon Cunliffe summarises it in the Times:
“What has become increasingly clear as we have listened to the views — and heard the anger — on all sides of the debate is that there is no simple, single change, no matter how radical, that will deliver the safe, plentiful water and clean water environment that we need now and in the future.
We have heard of deep-rooted, systemic and interlocking failures — failure in government’s strategy and planning for the future, failure in regulation to protect both the bill payer and the environment and failure by many water companies and their owners to act in the public, as well as their private, interest. At the same time the demands on our water systems have grown.
On Wednesday, the commission is publishing an interim report setting out the direction of the fundamental changes we believe are necessary and show the scale of change required in how we plan, legislate, regulate and provide water, our most vital resource.
We have one set of water systems — our rivers, aquifers and coasts — but many different and often conflicting demands upon them. We want clean and healthy waterways and we need to manage the pressures from water companies, agriculture, industry, housing and others who all use our water. Setting the high-level priorities for water over the long term and balancing different objectives, including cost, is a job only government can do. It is not done effectively at present.
Our water systems are regional and need to be better managed at regional and local “catchment” level. Whether it’s how pollution sources are tackled, where new houses are built or how water shortages are addressed, the system is not working well and the local voice gets lost. Our conclusion is that stronger regional and local “system planning” is needed so decisions on a regional water system are made closer to its communities.
At the heart of public anger is the failure of the regulators to ensure that private water companies act in the public interest and the manifest failures of some companies to do so. Rebuilding trust will require a fundamental change in approach.
Akin to the “supervisory” approach seen in financial services, we believe Ofwat needs to depend far more on closer, more expert and judgment-based engagement with individual companies. A deeper understanding of their circumstances, finances and challenges will enable early intervention before issues arise. And it will inform price-setting to help poor performers improve and avoid the spiral of failure we have seen in some instances. Alongside this, we need a stronger voice in the system for consumers.
The capacity and capability of the environmental regulators falls a long way short of the public’s expectations for protection of our waterways. And environmental regulation has become too risk-averse and hesitant to enable innovative solutions that might deliver greater all-round environmental benefit. We need a more capable, intelligence-led regulator alongside legislative change to enable greater flexibility.
Beyond that, we need smarter as well as stronger regulators. Much friction, incoherence and cost in the system comes from the way regulators with very different remits interact. Radical streamlining and alignment of regulators is now essential.
In a system of private regulated water companies, effective regulation will always be the key line of defence for the public interest. But the ownership, governance and management of water companies can also have a big impact on whether companies deliver the public goods that society demands, which is why we are looking at these issues further.
The water industry should attract and retain owners and investors that are looking for low-risk and low return over the longer term and that are prepared to make the investment needed for the future. Achieving this will require restoring the confidence that has been lost in the predictability and stability of the regulatory system. We will make detailed recommendations in all of these areas in our final report later this summer.
“Resetting” our water sector is a problem not a puzzle. There is no single, simple answer. It will require a wide range of actions and sustained commitment. It will not happen overnight, but it can be done. And it needs to be done.”
More later
East Devon Watch 