Rebuilding Trust: At What Cost?

As the General Election draws ever closer, we continue with the discussions on our cross-party panel at the UK River Summit including around where the money is going to come from and how trust will be rebuilt…

Lucy Young Photos

James Wallace: “So a very obvious next question is who pays? Now, as I'm sure everyone here is well aware if you weren't before today, the message to sell to bill payers is going to be a very, very tough one to say; “oh we're really sorry, we've run off with your money and we haven't delivered sewage treatment, we haven't secured water for yourselves and future generations. Oh and by the way, it's going to cost at least 40p more over the next period.”

Now, I'd like to start with you this time Tim. How are the Lib Dems going to sell that to us?”

Tim Farron: “Well, so first of all, if you are able to retain more, brackets all, of the money in the system rather than it leaking out into shareholders' pockets, suddenly you've created a reservoir of money for investment in the system and it's important to remember that. But it's also important not to pretend that this is in the end going to be paid for by us all.

We shouldn't be where we are now, but nevertheless, the fact that at the moment you've got money leaking out in dividends, in huge profits and in enormous bonuses, that is a pot of money, a very large pot of money, that can be then directed into infrastructure enhancement and that's critical. This is a major thing, and this is where getting the details right on changing the structure of the water companies in the future is so important.  I agree with Toby, I would want us not to be in a situation where the water companies were in private hands, but they are and the cash asked to bring them back in doesn't feel like the best use of money at a time like this. It's not money we're going to be spending on infrastructure for one thing. But if we are clever, given that the water companies generally are structured in the terms of operating company and a holding company, if we're clever we could leave the debt with the holding company and therefore the bill payer and the country doesn't take the debt as we move forward into a new system whereby the water companies are in a different form of hands. They are community benefit companies. But yeah, I think there's got to be some public investment, partnership investment, you talked about reservoirs, the really big infrastructure that will help to make us resilient in the years to come. I think, you know, public sector investment alongside public benefit corporations that we can trust for the long term is something the taxpayer would consider to be a good deal.

Doing arrangements with companies who you know are financing everything on huge debt and are siphoning cash off left, right and centre is not. So it's about being intelligent, it's about being honest and not saying you can solve it overnight but you start on day one, restructuring, making sure you ring fence the money that comes from water for water. That's key.

So another way of putting it is to rebuild trust. We spent a lot of the first session today on the freshwater emergency talking about that subject. Unfortunately we've all lost trust in both, dare I say it, the government, the regulators and the industry.”

James Wallace: ‘Toby?’

Toby Perkins: ‘Well, so in terms of rebuilding trust that has to be done.

James Wallace: “And who pays?”

Toby Perkins: ‘Right, so in terms of rebuilding trust, you rebuild trust by changing the outcomes. If, you know, the greater transparency that was being spoken about by the Environment Agency and others is fine up to a point, but if the transparency proves that you have massive pollution, that you have illegal pollution, that you have dishonesty from water companies like United Utilities, then it's not a PR exercise to rebuild the trust. What you have to do is change the outcome.

So fundamentally we need a regulator that stops self-monitoring, that stops the water companies marking their own homework, that finds them instantly if they break the law and holds them criminally liable. And that would be likely to actually change the outcome. And if you change the outcome, then you're changing people's trust in the water companies. So I think that's the way round of doing it, rather than thinking that what we need to do is communicate better. We need to actually change the reality for our consumers. In terms of enforcing the law.

We need to enforce the law, absolutely. But we know that even Welsh Water, who are a sole purpose company that work to a non-profitable model have been involved in illegal water spills. This isn't purely about the profit motive. But then the next part of that is that in terms of PR24 we have to see what that reports but it needs to make sure there is proper investment.

I think that people are willing to pay the price of what water costs, and if it's comparable with other countries, in the event that they're seeing high standards of water. But if you're unable to drink water in the South West, as we've seen shockingly in the last few weeks, if you know that your rivers and seas are being polluted, then there's no way you can persuade consumers they should be paying more for it. So we've got to change the outcome, change the reality and then we can start having a conversation with consumers about how much they use, how much they pay for it.”

James Wallace: “So, and coming to you Kat, we're aware that there's been pretty much flatlining in water pricing, probably something that's determined at the government level and then enforced by Ofwat, which means that our prices haven't raised in line even with inflation, which has given arguably an unrealistic expectation for cheap water for all of us in the room and everyone we know around us. So again, to the Greens, how would you break that to your voters and to the paying public?”

Kat Foxhall: “I think water is symptomatic of a national problem and a national crisis and that includes widening income inequality. So one of the Green Party's key positions is that we tax wealth. And when we talk about, I mean, I am in a wealthy part of the country, I talk to a lot of people with big houses. I'm not talking about taxing people with big houses.

We are talking about extreme wealth. So you tax extreme wealth in order to bring a huge amount of money back into the national pot to spend on things like infrastructure. When it comes to water itself, I think we've already heard from speakers earlier about how we have a false impression of the true cost of food and we have a false impression of the true cost and value of water. And I think these are difficult conversations, but I think there's loads and loads of examples all around the world of tiered pricing structures, which I've already mentioned, and we've seen also that tiered pricing has an almost immediate effect in reducing demand by between 16 and 37 percent, I think, depending on which case study you look at. So there's loads of evidence that says that tiered pricing works in bringing in revenue and also in reducing demand. And the point about tiered pricing is that you make the necessary water that we all need as consumers, as voters, as parents, you make that very cheap, the price is very low for that, but then it is rapidly subsidized, so your top tier of water costs five, six times as much as the lowest tier. So your first, say we're trying to get to 110 litres a day per person, which is the amount that is recommended. That should be our target for the average use per person per day, 110 litres. At the moment we're using something like 147 litres. I think Thames Water's proposal is they try and get demand down to 123. If you price that first 100 or so litres a day low, that gives everybody a fair price for their necessary water. Then when you start talking about filling up swimming pools or using huge amounts of water for your golf courses or whatever, that water, that is not necessary water. That is, you know, if you wanted to go out to luxury water, I don't know however you want to talk about it, that starts to become more expensive. And those very high prices then help subsidize the necessary water that everybody needs. So it then becomes, for ordinary people, about not asking them to pay 40% more, which is what we're hearing from the water companies at the moment.

They're asking us to pay 40% more in order to clear up the mess. And they talk about, and this is the thing that really concerns me, and this also comes from reading Dieter Helm, which I think we've all been doing a lot of recently. We talk about, or we hear the water companies talk about investment. They're not talking about investment. What they're talking about is making up for the basic maintenance that should have been done for the last 30 or 40 years. That's not investment. That's clearing up a mess.

So we've got to talk about what does genuine investment mean in water, and again, that comes back to that point I was making earlier about catchments. Genuine investment in water is also about the communities who use water. It's about the nature that relies on water.

It's about the environments that surround water that virtually everybody in this room is so passionate about and understand so much. So it's about eels and native crayfish and fish and trout and salmon. It's about all of those as well as the swimmers and the kayakers, the scuba divers, all of us who, you know, the parents and the dog walkers who don't want their dogs to get poisoned or indeed our children. Thank you.”

Our Special Guest…

James Wallace: “So we have a special guest today who is going to turn around and face everyone, if you don't mind, and we're four sitting down. This is Natalie Prosser, who is the Chief Executive of the regulator called the Office for Environmental Protection, and she's very kindly offered, having just published a report that many of you may have read, to share some of your thoughts, and with a view to it very much from a political with a small p perspective, share your wisdom, if you wouldn't mind, with our amazing panellists here, and then we're going to turn to the floor and ask for a couple of questions. So, Natalie, if you'd like to share some of your observations, particularly pertaining to this subject of water scarcity, and what you would like to see from an elected government and the other parties.”

Natalie Prosser: “Thank you, James, for putting me entirely on the spot today. I'm sure this wonderful audience will bear with me, having not expected to be on panel, but here we go. As James said, my name is Natalie, I'm the CEO of the Office for Environmental Protection. We're a relatively new organisation set up under the Environment Act. And we have an oversight role. You called us a regulator, we don't like being called a regulator.

James Wallace: “You made that. Regulator of regulators.”

Natalie Prosser: “You might say that. I'm not going to comment. But we have very recently published a report as part of our oversight of the implementation of environmental law. I'm going to be quite geeky. If you're a lawyer or a scientist, you probably talk our language. Trying to communicate some of the technical work we do more broadly is one of the challenges we face all the time. But in essence, as part of our oversight role, we took a deep dive into the implementation of the Water Framework Directive regulations, and they trip off the tongue. But if I was to take it to its highest level, and this would be our message, it is our message to the current government, it would be our message to any future government, regardless of their political favor, our job as an institution is to survive and push through electoral cycles and be that guardian for the environment. It was a sobering review, James, to be candid.

There are ambitions to have our waters in good ecological status, 77% of our water bodies, that's our rivers, our lakes and our coastal waters as well, 77% by 2027 and I'm afraid our assessment is that there really is no prospect of achieving that ambition. And there are a few reasons for that and again I'm going to be really geeky here. One of the things that we find at the OEP, I think in my view, that the biggest challenge that any government has to grapple with, and we call it governance, I just call it being really organised, and it's about having a plan that is transparent, that sets out for all of government, and that's central government, all the arms-length bodies who have a depth of expertise and knowledge, they really do, for our ENGOs, for our local government and for our communities, what role they need to play to achieve the ambitious targets that our government has set. Now we think those targets are pretty good, we think having an environmental improvement plan, picking up on the 25-year environment plan is pretty good, we would like to see continuity of that because we're getting on with it as a government, as a nation, we are getting on with it. But the detail of that plan just isn't there. And that was exemplified in our review of the Water Framework Directive regulations which just showed just not enough had been done, not enough specific plans had been put in place to deal with the catchment pressures on our different water bodies, not enough investment had been made and there's not enough coherence between those broader plans and that specific target.

So the message is we've said to government is that you need a plan and you need to scale up that plan. You need to speed up that plan. You need to make sure that plan stacks up and what that means is, and we've heard the themes today from many speakers, that all the different people who need to play their part understand that and probably more importantly can contribute to it as well. So speed up, scale up, make sure it stacks up and then get on with it. And that's our message to any government and we're going to continue delivering that message. Our next report is due out early in the new year. It will probably land on the the desk of the same message.

Thank you.”