Environmental Audit Committee

6 May 2004 Environmental spending is too easy a target

6 May 2004 Environmental spending is too easy a target

The environmental programme is too easy a target for those attempting to reduce the cost of water, even though any cuts would only result in a minimal impact on prices to customers, and there are other, more serious, issues that need to be addressed.

This is one of the main conclusions of the report published today by the Environmental Audit Committee, Water: The Periodic Review 2004 and the Environmental Programme, HC 416, Fourth Report of Session 2003-4. The report examined the review of water prices currently underway and the implications this will have for spending on the environment by water companies.

Commenting on the publication of the Report, the Chairman of the Environmental Audit Committee, Peter Ainsworth MP, said today:

"It is deeply concerning that the environmental programme, which is only part of the spending proposals put forward by water companies, and which plays such a vital part in ensuring that the UK meets many of its statutory obligations and has such a beneficial impact on the water environment in this country, has come under serious threat and been the focus of departmental wrangling, simply because that is the only way the Government can exert any direct influence over water prices."

"The announcement by DEFRA that the programme will be implemented almost in full is very welcome. However the events of the last few months highlight the need seriously to consider the timing and structure of future reviews."

Other Key Messages of the Report

•  "Overall we were disappointed to find that despite the concerns expressed by Government, Ofwat and water companies about the unpalatability of increasing water prices more is not being done by all of them to reduce costs to customers, particularly those less able to pay. The issues of diffuse pollution, customer debt and affordability need to be seriously addressed as they all add significantly to water customers' bills. Dealing with these will have a greater impact on the cost of water to customers than attempting to cut spending on the environmental programme, which would reduce the majority of water customers' bills by a few pounds at most."

• "Water prices are going to continue to rise for the foreseeable future. As result there will be an increasingly large proportion of the population on lower incomes that will find it difficult to pay water bills. If the Regulator is to continue to price water realistically, as is his duty, the Government is going to have to address this issue seriously."

• "The emphasis of the Review and the Regulator's analysis should be on what the proposed new price limits will mean to customers in individual water company regions not on a national average price rise, which gives little indication to customers of the likely changes to their water bills."

• "It is important that when the final guidance is issued in September 2004 we do not see the environmental programme again under renewed threat."

• "We do not believe it is the role of the Regulator to decide what should or should not be included in the environmental programme."

• "In the light of recent events, which have highlighted the conflicting duties of the Regulator, we believe it is vital that the new [Water Services Regulation] Authority should have a specific duty to report on how sustainable development is incorporated into its other regulatory duties. The Government should use its powers to require this."

Notes for Editors

The Committee announced its inquiry into Water: The Periodic Review 2004 and the Environmental Programme in a press release on 4th February  2004.  Details of all the Committee's press releases and inquiries, together with its Reports, oral evidence and other publications, are available on the Committee's Internet home page.