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Water Management: S&T Report

Volume 685: debated on Friday 13 October 2006

rose to move, That this House takes note of the report of the Science and Technology Committee on Water Management (8th Report, HL Paper 191).

The noble Earl said: My Lords, it has been a great privilege to chair the sub-committee that conducted this inquiry and a privilege to introduce the debate today. I am delighted that we shall be hearing from the noble Lord, Lord Crisp, today, who will be making a maiden speech. I start by thanking those who have contributed to our deliberations, particularly our Clerk, Tom Wilson, and our specialist adviser, Professor Richard Ashley and his colleagues. They have given us much sound advice and support to all members, who I know would all wish me to thank them.

On the publication of this report there was a gratifying amount of public interest, which is perhaps not surprising because it was a topical issue in a summer of regional hosepipe bans, warnings in certain areas of water shortages and interest as always in water leakage rates and the profits of water companies, as well as a concern about house building proposals in water shortage areas. All that helped to give the report some media exposure—rather more, perhaps, than one normally expects for a Select Committee report.

For those who have read the 150 pages of the report, however—and the immediate response from the media meant that they would not have had an opportunity to do so—it will be evident that instant solutions, as favoured in at least some parts of the media, are unrealistic. Many people immediately jumped to the conclusion that a national water grid may be the solution to all our problems, or desalination plants. They look for unrealistic levels of reduction of water leakage rates, and there is always a cry for universal water metering. All those aspects of the topic may well be relevant in certain areas, but they are not by themselves quick fixes.

The realistic timescale for water resource development is up to 25 years. We saw that as we travelled around and looked at water transfer schemes and some of the planning requirements to get these schemes and the required infrastructure into place. Our planning system in this country, perhaps rightly, is drawn out and protracted—convoluted, some would say—so that when you are building a water transfer scheme, or perhaps even a water treatment plant or a new reservoir, the process will take a long time and will require an awful lot of consultation. The period I mentioned of 25 years is perfectly realistic.

The problem is that 25 years does not match the reality of regional planning strategies. You cannot expect a Government to be able to put all their plans in place and stick to them for 25 years. That is just not the way Governments work. Then there is the further complication of predicting the nature and impact of European Union legislation. What has already come our way—including the habitats directive, the water framework directive and the priority substance directive, to name just three—might well impact to a certain degree, or heavily, on water management regulation. In other words, the water companies have to respond to these legislative changes.

The water companies are now required by Ofwat, I think rightly, to produce water resource plans showing how each company plans to maintain security of supply over the next 25 years. That is much to be encouraged, but inevitably this long-term planning is made more problematic if the assumptions on which they are operating change, and indeed if there is inadequate transparency and consultation, or if the criteria operated by the regulatory authorities for funding, for example, are not fully understood or spelt out. The water companies have a grievance that in many ways the lack of transparency in inclusiveness and consultation has been inadequate.

In many respects the problems were much worse before the privatisation of water in 1989, and thatwas caused by chronic underinvestment in capital expenditure. By the 1980s, due to successive Governments putting a cap on public expenditure, investment had fallen to between a quarter and a half of what it had been only 10 years before. Not surprisingly, despite the recent much increased investment under the new regime, we find ourselves trying to catch up. The position is complicated, of course, by droughts, which appear to be becoming more common—perhaps that is an aspect of climate change, though that is not clear—and by this lack of investment.

Our report returns time and again to what we see as a lack of transparency and openness and of sharing agreed methodology for forecasting demand. There has been a failure, I suspect, of both the Government and the regulators to work successfully together in forecasting water demand and making clear the optimal water policies, as well as a failure to follow best practice in sharing their developing regional water strategies with the water industry.

Anyone who has read Appendix 4 of our report—the comments of Professor McDonald on the Government’s response to the Barker review of housing supply—or indeed the Government’s response to our report, and the paragraphs that specifically refer to these issues, will recognise that, whatever you make of the various cases that we put forward and that Professor McDonald tries to elaborate, the government response is opaque, to say the least. It is not at all clear what methodology the Government have adopted in trying to determine the water requirements to meet the increased targets for housing supply. The very fact that we felt it was clear that the Minister himself, when he gave evidence, had not fully grasped the implications of these figures demonstrates that whatever we have here, we have not got inclusiveness, transparency and openness.

I was disappointed, therefore, with the Government’s response to our recommendations in paragraphs 428 to 430. On this occasion, frankly, it would have been more honest for the Government to acknowledge that the consultation process, as I have already said, will be complicated due to the different timescales involved, and to put their hands up and say, “Look, this has not been an exercise in best practice in consultation”. Having made that point, however, I recognise that the Government are making belated attempts to improve the sharing of information and their projections, and there has been some real progress over the past 18 months to two years.

The revised housing growth plans have still not adequately been factored into the water companies’ long-term plans, though. I am talking here only of those areas with increased housing requirements, which happen also to be the drier areas. There is much to do to catch up, and the Environment Agency, Ofwat, the Government and the water companies all have to engage in this long-term planning with some degree of urgency.

On pages 26 to 28 we refer to the “twin-track” approach. The term “twin-track” should be fairly obvious—you try to reconcile resource development with demand management. The problem is that there are very different interpretations of what that means in practice. We give the Government’s interpretation: their twin-track approach for water supply requires demand management options, such as fostering behavioural change, use of new technologies and controlling leakage, to be fully deployed before new supply side measures are adopted. That is not twin-track—it is consecutive—and that is the problem. You can understand the Environment Agency—whose job it is, after all, to protect the environment—wanting to be satisfied, before you put in new reservoirs or new infrastructure, that all other options have been exhausted. You go through this great process and end up finding that you are way behind the curve in terms of time management because of this approach, which is instinctive in Government, that “we won’t allow anything until we are quite sure that every other alternative has been explored”.

The record of supply management in recent years, with the winter drought and the added complication of climate change, has been inadequate. We are probably now seeing the evidence of the drought orders and the hosepipe bans. It may be only a one-in-30 event, but nevertheless I think the country instinctively feels that we have been inadequate in planning our water resource development.

We draw attention to the fact that as you increase your infrastructure, and indeed the indebtedness of the companies, the cost of water goes up; that is inevitable. It is also inevitable that if these problems are to be addressed, the cost of water will continue to go up. That raises the problem of affordability, which is an increasingly serious issue for low-income households. If we move to greater acceptance of metering, which I suggest is desirable in principle, that will increase the bills for larger households still further.

As we set out in the report, there are regulations for vulnerable groups, but frankly they are not working. They are not adequately assisting low-income families. We give the figure of 9,217 successful applicants throughout England and Wales throughout 2004-05. That clearly demonstrates what we were advised by the Consumer Council for Water and others: that the system is just too bureaucratic and opaque, and it is not working. Again, the government response was inadequate in this respect. I simply say that if this system is not working, and we clearly do not want too complicated a scheme, let us just ask someone to go back and rethink the whole exercise.

The other issue with paying bills is not those who cannot afford, but those who will not. We draw attention to the quite remarkable figures of outstanding debt. South East Water, for example, gave us a figure of £15 million at the end of the financial year on a turnover of £100 million. A lot of those people have a good credit rating, but since the Water Industry Act 1999, the Government—for all the right, but I suspect rather misguided, intentions—made it illegal to disconnect for health and safety reasons. In Australia we saw a rather more robust approach to these “won’t payers” comprising partial disconnection and a tamper-proof device. I again earnestly ask the Government to help the water industry and, indeed other consumers, who pay surcharges to meet the costs of the non-payers, to reconsider the use of tamper-proof devices.

Water meters are clearly helpful in making people understand and “buy into” the issues involved in water consumption. If you cannot see your meter and do not know what your consumption is, it is very difficult to engage adequately in that process. As we spell out in our report, smart meters and new more detailed bill systems will help people in that regard. I was slightly surprised by Ofwat’s rather negative response that smart meters could be effective only if meters were read more frequently than is currently the case. I am not convinced about that. But however long it will take to introduce these measures—it will not happen overnight—we must all agree that the more information you can give the consumer, the more helpful it will be. We should urge that to be undertaken. Perhaps remote reading will be introduced soon.

All debate about water comes back quickly to leakages. Understandably, the average member of the public is outraged at seeing water leaking out of water company pipes. They are not so outraged at their own leakages occurring between the meter and the house, but when they see water pouring down the road they question how on earth they can take seriously requests to use water responsibly. However, if you look at the figures, you will see that some water companies have respectable records on leaks. In some areas leakage rates have improved to an acceptable level, but not in all. Thank goodness that Ofwat has got much tougher with two or three of the worst offenders. However, one of the concepts that the public do not understand is that of the economiclevel of leakage. I am delighted that the Minister,Mr Pearson, has now asked Ofwat to rethink the matter. Ofwat says that an economic level of leakage includes other areas of sustainable consumption, but that is not the perception. The Minister is absolutely right to say that this can be made much simpler. People would then understand how leakage ratesare set.

I give another example of why you must have inclusiveness and transparency. We suggested in the report that regional boards should be set up. After all, they will be required under the water framework directive, which stipulates water catchment management plans, which will involve, among others, land managers and farmers. You need to engage people at all levels of debate. Leakage or, indeed, investment in infrastructure are other examples of that. Perhaps the idea of statutory regional boards, which we saw as a consultation exercise between the Environment Agency, Ofwat, the Government, consumers and others, including the Consumer Council for Water, was seen as yet another layer of bureaucracy. That is certainly not what we intend. All we want to do is to make it compulsory for everyone to be consulted and not in any way to take away Ofwat or the Environment Agency’s statutory responsibilities. I say again that we have a lot more to learn about what we mean by transparency and consultation in terms of sustainable development. It is part of the formula which I am not sure is entirely understood.

I have spoken for too long. I should have liked to say a little more about the national grid, desalination and the recycling of storm water. As regards the recycling of storm water, we heard much from the Government about the Northstone development on Ministry of Defence land. That initiative is likely to reduce consumption by 50 per cent. However, it is not mentioned in the Government’s response. I hope that the Minister will tell us whether that is still on target. I should be interested also to hear the Minister comment on the priority substances directive, which could impose heavy costs on the water industry. That is the fault not of the European Commission but of the European Parliament, which tried to prove its green credentials. Has that been firmly kicked into touch? I believe that Defra is doing a good job on that, but I should like the Minister to respond to that point.

I hope that other members of the committee will fill the gaps in my speech. I have rushed through and not perhaps done adequate service to some parts of the report. Nevertheless, I am pleased to commend it. I beg to move.

Moved, That this House takes note of the report of the Science and Technology Committee on Water Management [8th Report, HL Paper 191].—(The Earl of Selborne.)

My Lords, I commend the report. I declare an interest as a professor of climate modelling at University College and as chairman of the advisory committee of the Centre for Ecology and Hydrology, which features in the report.

Water management covers the supply of water, dealing with used water, dangers associated with water and what to do about those matters, including all the governmental and public dimensions of these issues. While the document urges changes in personal habits at, for example, paragraph 8.36, it does not come out with a strong statement, which we might begin with—that, currently, use of clean water is profligate. Probably less than 5 per cent of the water that we use is needed for drinking. The rest is used for many other purposes, which do not require such clean water. I recall that when the noble Lord, Lord Jenkin, was a Minister he talked about sharing a bath with a friend.

My Lords, I am grateful to the noble Lord but that was not me. It was the south-east electricity authority.

My Lords, it was of the noble Lord’s vintage, was it not? Nevertheless, our use of water in the UK is still less than that in the United States and I believe that it is less than it was in ancient Rome. However, the problem with ancient Rome was that they did not have any taps. It is important that when we consider this policy, and as we want to encourage responsibility for the matter to be taken at local and national level, we should think about international figures. I am disappointed that we do not have them here. Perhaps the Government could help us in that respect, at least with regard to the European dimension.

The document discusses the use of grey water and new schemes to push that through, which are very important. However, it is not clear who will be responsible for those. I believe that in a British way, as it were, a series of agencies and organisations will be involved, some of which will be stimulated by individual bodies. I endorse the important developments at BedZED, a local housing scheme referred to in the report. Some local authorities have also developed extraordinary innovations in the use of water and water technology. Woking comes to mind as a city that realised the importance of the economical use of water connected to energy. It is also interesting to note that a number of United States companies are working with local authorities and local water boards in Britain. I heard at a seminar in the United States that those companies find it a lot easier to deal with UK bureaucracy than United States bureaucracy. We should congratulate ourselves on that.

The other important way in which we shall get new developments and reduce use of water is through Government. The noble Earl, Lord Selborne, referred to the Ministry of Defence’s innovation. It has now ceased to be socialism but has apparently become standard policy that the Government should introduce innovation through their procurement policy. Given the enormous government schemes for hospitals, prisons, barracks and housing, all these new and much more efficient methods should not only be introduced but enable British industry to become world standard with regard to such developments.

The report emphasises the need to have more water resources as well as protecting the environment and the issue of climate change. As someone who studies that matter, I confirm that the report’s modelling predictions on the rise in global and regional temperature and temperature changes between day and night are reasonably accurate. The historical record is accurate. However, precipitation modelling is extremely difficult. One of the reasons for that concerns gradients of pressure. It is always more difficult to predict a gradient than an absolute value. In the summer the UK has continental air, but in the winter we have south-westerly air streams. The waters around the UK are getting warmer, which might cause a slight increase in rainfall. On the other hand, the dryer continent will reduce that.

Another feature highlighted by the report is that when the precipitation comes in such situations, which might be associated with dust in the atmosphere, we may experience much stronger bursts of rain. That is extremely difficult to deal with in terms of flooding, agricultural run-off and so on. The conclusion is that there is a level of uncertainty regarding the precipitation aspects of climate change. Therefore, we need risk analysis by all organisations that deal with the various aspects that affect them; we need continual monitoring and continual public information.

As noble Lords will be aware, the variation of rainfall in the UK is astonishing. In Devon, which I know well, it is 24 inches a year on the coast; three miles inland it is 44 inches and a further three miles in the figure is 77 inches. Such areas will experience great variations with climate change. It is important to encourage organisations, people, farmers, monks and everyone who measures rainfall to continue to do that and inform us so that we can observe the patterns.

The committee concluded that there was no universal panacea for transporting water from one area of the UK to another, despite the media interest, as the noble Earl, Lord Selborne, mentioned, but we need to keep that under review. Maybe our canals and rivers need to be used more effectively in that respect.

The report pointed out that we need a holistic approach to water. That is important and is also the view of the Environment Agency. We need to consider not only water resources, but the danger of flooding and rising sea levels. We also have to keep in mind that one of the biggest dangers to London would be if the large reservoirs at Heathrow were put at risk. That point was made by experts who were concerned about water in London—and perhaps I may advertise a book from the House of Lords Library, London’s Environment, in which London’s water system is covered effectively.

Coastal planning, urban planning and the ecology of our countryside is intimately connected to our water resources, the environment, leisure activities and the growth of such areas. One complex issue pointed out by the report is that there is no democratic body that can handle such matters. The report stresses that, because the future position will be unlike the past, there must be an important democratic dimension to those discussions. We probably do not need new bodies, but we need the bodies that are dealing with such issues to be open and informative about what is going on. I endorse the fact that schools and other community bodies need to be involved. Schoolchildren need to learn much more about how to use water and our profligate use of water.

Finally, particularly as this is a Science and Technology Committee report, I endorse the comments that research is essential, both for policy and for designing water systems—especially holistic systems in which the universities involved in such research, supported by the Natural Environment Research Council and the Centre for Ecology and Hydrology’s laboratories, play an important role. They are undertaking complex research and advising Government and perhaps it should be emphasised that those bodies need to have a public role.

I should like to assure the House that NERC looks carefully at the proposed efficiency measures, focusing CEH research in a few centres, and I strongly endorse the plans, which do not preclude the continuing work to survey the environment around the whole of the UK.

It is important also to look at our European colleagues. I often go as a visiting professor to the Netherlands, where more work is being done than anywhere else in Europe by computer simulation, and where demonstrations of excellent systems show local government how flooding and other water-resource issues are changing. I very much endorse this report. I hope that the Government will take it seriously and, most importantly, find the funds in Defra’s research and applications budgets to take these issues forward.

My Lords, I congratulate the committee on its report and the noble Earl, Lord Selborne, on his introduction, which covered many facets of water resources. The House will not be surprised if I approach this matter from the perspective of being a Member hailing from and who lives in Wales. I am anxious to contribute because water plays a great part in my life—in the streams and rivers, which seem to flow like life itself.

There are many reservoirs, too, not far from where I live. They have resulted in loss of communities, people and farmhouses—even Shelley’s house was drowned. Massive reservoirs were constructed in the Elan valley, Tryweryn—in spite of great opposition—and Lake Vyrnwy. There were victories also—the Senni valley was not dammed and drowned, although reservoirs have been built successfully, including Claerwen at the top of the Elan valley, the Usk and Llyn Briane.

A lot of buffeting is going on in Wales in relation to water. It is a big political issue which causes loss of community, loss of environment, loss of the best land, loss of culture, and disruption of river ecologies and river flows. It should not be forgotten that water flows from Wales down the River Dee, the Severn and the Wye and from many reservoirs. I do not understand why, for some reason, no evidence was taken from Wales for this report. I can understand that reticence, due to devolution and other factors. However, the Government of Wales Act 2006, recently passed by this House, gives the Secretary of State over-arching powers in relation to water quality in Wales, as well as England, and he may intervene. The Welsh Assembly Government have very little power and accountability in that respect, which was a sore point when the Bill was being considered.

The impact of privatisation was a major factor. I took part in the debates on the then Water Bill in 1989. We had 208 hours of debate in Committee and 532 amendments, of which only two were accepted. I attempted to put down a marker for not-for-profit companies; 25 per cent of water supply at that time came from such companies, but I was told by the Minister—then the Member for Folkestone—that that was not possible.

That has been done in the past five years by Glas Cymru, the over-arching company that supplies capital for Dwr Cymru Welsh Water. It is interesting that Glas Cymru’s chairman—the noble Lord, Lord Burns—is a colleague of the noble Baroness, Lady Thatcher. He has been successful in helping to bring about much more investment as a result of Dwr Cymru surpluses, and I believe that there is a schism between the necessity of water companies to ensure that their shareholders have sufficient return and ensuring that the infrastructure receives sufficient investment.

For those reasons, I was doubtful at the time of the Water Bill about the privatisation of water. However, I would not deny, as the noble Earl said, that there has been greater investment as a result of privatisation. Some factors have certainly caused me concern, such as inadequate compensatory river flows on river systems and the effect that that has on ecologies. I will not go into the details of the sale of the century of public assets in 1989; suffice it to say that they were valued at £27 billion but sold at £7.5 billion. However, that is all history now and we have to go on from here, and this report assists us greatly in ensuring that we can have a better management system.

I will just point out the following facts that were given in a recent BBC “Panorama” programme on water. Leaks account for 5 billion litres per day; indeed, 20 per cent of water in all the companies is lost through leaks. One should look at this in the context of the four most profitable companies, whose profitability totals £1.7 billion. Perhaps I should refer to not-for-profit companies again, but the lack of investment has resulted in the continuation of a lot of leaks, which is not satisfactory. The report addresses that problem. I believe that we must not waste this water and I am pleased that the report does not propose a water grid, because until we do something about the leakage problem we will not be using our resources properly. A massive amount of water is being lost and that problem needs to be addressed immediately. I just mention in passing that Dwr Cymru has halved the amount of leaks in the past five years, since it has been a not-for-profit company.

The report’s executive summary addresses strategy, regulation, metering, the social impact, and research and development. I agree with the summary word for word about the strategy. On regulation, the report proposes boards for river areas, for example. That is all right as long as the boards are accountable, but I am not sure whether the proposal would ensure that. My other concern relates to the proposal that the remits of the Energy Saving Trust and the Carbon Trust be extended to cover water efficiency. I should like to know more about how that can be achieved, as I am not sure how it could be.

The statement in the summary about leakage is good and I fully endorse the conclusion on metering—it is easier for companies to impose meters in the driest parts of the county. The social factors and the affordability question are thoroughly addressed. The proposals to follow the State of Victoria in Australia on disconnections are controversial because of the social impact. There could be a mix-up between those who can afford to pay but do not and those who genuinely cannot pay. That needs to be sorted out.

Research and development is very important. According to my observation of the climate in the first nine months of this year—I have checked this with the Met Office—we in south Wales have had far less rainfall than normal. As in the whole of southern Britain, that reduction is very serious. We have had only 82 per cent of our usual rainfall. The impact of climate change is crucial for the planning process, which we must take into account. The report contains pointers in the right direction but, as it says, we have a long way to go to co-ordinate planning and to produce quality water efficiently and in sufficient quantities for an increasing population. That issue, especially in the context of housing in the south-east, needs serious attention.

My Lords, I am very pleased to have the opportunity to make this maiden speech on an issue of such importance and one that ties in with a whole range of my interests, including the environment, science and, of course, health. I may also mention international development, not purely because water and the disposal of waste are matters of life and, all too often, death in the developing world, but because we are joined together due to climate change. There is a further international dimension, which I will come back to in a moment.

In making this maiden speech, I also take the opportunity to say thank you for the welcome and friendliness that I have received from all parts of your Lordships’ House, as well as from the officers of the House and all the staff. It is very good to have one’s simple and ignorant questions answered with such tact and friendliness and very nice to be welcomed at the door of the Chamber in such a friendly manner.

In researching this speech, I also had the opportunity to make use of the Library for the first time. I asked the staff about previous times when water management was an issue of national importance. I am not going to talk about sewers and Bazalgette, despite the obvious health interest, but in the information that I was given I was struck by the fact that the drainage of the fens took over 1,000 years, caused economic and environmental damage as well as benefits and was highly contentious. I was given an extract from the 1911 edition of Encyclopaedia Britannica, which said that the drainage of Whitham fen was finally concluded,

“although not without much rioting and lawlessness”.

I imagine that we can learn something from history, but perhaps the main point here is to urge all parties that we should make progress as quickly as possible with the least economic and ecological damage and with the least contention.

Let me make three points about this excellent report, which I think will stand the test of time in drawing out the important questions and pointing to the important directions to be taken over the next few years. The first point has already been made and concerns transparency and the importance of engaging people, as there are many parties here, including the public. I was pleased to hear what was said about the economic level of leakage and the changes that have been made. Although what has been done may be a useful technical measure, I imagine that this sounds to some parts of the public like a rather slippery way of describing waste. Of course, the public are also involved in connection with the point that the noble Lord made about profligacy in the use of water. Many parties need to be brought together for us to have a coherent picture of what we are trying to achieve, and as yet that has not happened—the story is not yet told.

My second point, which the report makes strongly, concerns the fact that there are many official parties, each with their own purposes, with some overlap and with some conflicting incentives. There needs to be change if we are to see decisions made in the longer term about what is needed. As the report says, there is a great need for a much more holistic approach.

All of that brings me to my final point. As I read the report, I was struck by two things. The first is the level of innovation. There is an enormous amount of innovation, whether in recycling, the handling of waste or the technology of the materials that are used. That relates to my international point. This issue affects everybody around the world—in some parts more than perhaps here—and there is a question about whether we in Britain are learning from what works elsewhere in the world and whether we are hearing and understanding those lessons. It seems to me that over the next five years, let us say, we will see some significant changes. We will see more innovation. Some of the standing conditions that the report talks about may have shifted. We may have seen the weather getting worse in the way referred to earlier by a noble Lord. But we may also see the balance of the economy and the environment change over this period so that decisions may be different.

My first observation on the report is the level of innovation and how fast it is moving. But my second observation is the inability to make the long-term decisions. We do not have the framework, as the report describes, to make the long-term decisions that are needed. In commending and congratulating the noble Earl and members of the Select Committee on providing such a good, wide-ranging report, I come to my final conclusion that while the report sets out all those issues, the challenge is for all parties, not just for Government, to determine how to make use of the innovation that we see everywhere and how to make the decisions that are needed so that there is not a long period of economic and environmental damage and a great deal of contention.

My Lords, I offer my congratulations, and those of your Lordships' House, to the noble Lord, Lord Crisp, on his maiden speech. The noble Lord has had a distinguished career in the National Health Service, and he has a wealth of knowledge and expertise that will benefit us all. As chief executive of the NHS, he managed the first half of a 10-year plan. Sometimes we lose perspective of the sheer size of the NHS and the job involved. At one point, it employed 3 million people—the biggest employer in Europe; some 60 million potential customers; the largest civilian IT project in the world; and an accumulative five-year budget, approaching £0.5 trillion, which is bigger than the GDP of most medium-sized countries. Your Lordships’ House will be a better place with the noble Lord, Lord Crisp, among us, and we welcome him.

I, too, express my thanks to the noble Earl, Lord Selborne, for the inspired way in which he chaired this sub-committee. He did what a good chairman should do—he defined the project right from the start, kept his eye on the ball and pulled us back when we were straying from the point. I very much enjoyed being part of his team, and I believe that we have produced a magnificent report.

I also thank two other people—Professor Ashley for his knowledge, his incisiveness and his skill in formulating this report, and Tom Wilson, our Clerk, who kept us all in good order and who played a crucial role in developing the topic as we progressed.

We certainly got our timing spot on. We reported to your Lordships’ House just before the Summer Recess; at a time when water and drought were on everyone’s mind. Here in the south-east we were banned from watering our gardens and from washing our cars. It appears that we were only days away from additional powers being granted to several water companies.

Like many other noble Lords, I, too, had to suffer the indignity of being ribbed and teased by foreign friends who simply could not believe that London had a water problem. And to be frank, I still cannot believe it. My family has a house in Umbria in Italy. We have a large garden and a swimming pool that evaporates throughout the summer. The summers are hot; the rain is infrequent; yet our property is irrigated and the squirters go on every other night. Our water comes from the mains and a well, and there is not even a hint of a water usage ban.

The Select Committee spent a week in another hot country—Australia. We saw a nation versed in water conservation where from childhood everyone understands that water is a precious commodity. But even after six years of drought in the Sydney region, people are still permitted to water their gardens, albeit between 10 pm and 4 am. There they succeed, even in that arid climate, in making their beautiful gardens look like gardens in Surrey.

So when my friends tease me, I am shamefaced to admit that in my city—the greatest city in Europe—with its reputation for grey skies and constant rain, we face a major crisis in our water supply. I ask myself why? Is it because it does not rain enough? Well, that has to be partially true. Is it because of climate change? Well, that, too, has some relevance. Is it because of regulation and government interference? Well, it would be nice to say yes to that, but it cannot really be the answer. Or is it because of mismanagement? Of course, the sad reply is yes, it is.

The title of this report refers to water management, but my interest has been in water managers. We visited some brilliant water companies. Yorkshire Water in this country turned a disastrous situation into one for which it has twice been awarded the prize for the number one public utility in the country—and it shows. Water leakage in the Yorkshire region has been reduced dramatically. If you travel around Yorkshire you do not see roadworks caused by burst water mains. And why not? Because there the company deals with such incidents on an emergency basis. That is somewhat different from the chaos that happens in this capital city.

We visited Yarra Valley Water in Melbourne, which is right at the cutting edge of using and reusing water, where office buildings have their own reprocessing units, and townships where grey water is recycled to provide a stunning environment. The Melbourne water authorities should be studied by all UK water utilities. Finally, we visited Sydney Water where drought has become a permanent way of life, yet where people have learnt to live successfully with it and to adapt to the problem.

The Australians showed us how they recycle water and how they have persuaded their population to install new and efficient shower-heads and dual flush toilets, and encouraged almost universal use of rain butts to collect roof and garden run-off. Australia makes every drop of water count.

There is a common thread that draws together each of these successful Australian and British water authorities. Unsurprisingly, it is good management—business managers who have clear vision, precise guidelines and a determined focus on meeting their targets. How lucky they are, and how unlucky are we who live in London and the south-east.

I am by nature an inveterate capitalist and a serial entrepreneur to boot. I understand how business works. I understand very clearly the relationship between risk and reward. In my days, I have enjoyed some reasonable successes, but I have also suffered some pretty painful failures. I know the rules of the game. But Thames Water, and some of the other water companies in the south of the country, leave me speechless. They seem to play by different rules. The worse the service gets, the more they are rewarded. They under-invest. They have the highest percentage of leakages in the UK. They are slow to fix burst water mains and a third of the water simply disappears. Yet I and millions like me have been banned from watering our gardens. They have achieved record profits and they pay their top management outrageous salaries; yet I and millions like me have to pay inflated bills to compensate for their mismanagement. They are now up for sale and private equity companies are circling them like vultures, offering their shareholders billions upon billions; yet I and millions like me have been made to feel like criminals if we use a hose to wash our cars.

Thames Water is a shambles. And do not let any of us fall for the bleating about its legacy of ancient pipes and sewers. Its inability to repair emergency leaks with any sense of urgency is ample testimony of a company that is badly managed and oblivious to its customers’ requirements. What is the solution? Perhaps competition. We should be able to buy our water from other authorities much the same as we can buy electricity from other electricity companies.

Having ranted about Thames Water, may I be permitted to raise one hobbyhorse not quite on the theme of water management, but not quite off it either? I am just about to come to the end of my stint on your Lordships’ Select Committee on Science and Technology. I have loved every minute of it and I thank your Lordships for appointing me. I have served on at least six Select Committees. I believe that this Select Committee has done some magnificent work. We have called on the very highest level of witnesses and have travelled far and wide in our investigations. We have produced excellent work, which we have submitted to your Lordships’ House.

But what happens after our submissions? The reports go off to Government and we wait for a reply, which eventually comes. In my experience, in every case, the Government’s reply has been underwhelming and—dare I say?—grudging. Or at least that is how it feels. Take this particular report: we have been staggered by the poor quality of the Government’s unenthusiastic response. This highly talented sub-committee has prepared an excellent report on an important subject. We have made a series of well reasoned recommendations, and what is the response? Nothing—nothing that we did not know, and nothing that we had not considered.

Would it not be wonderful, just for once, if they were to say, “We think the committee has made a valid point and would like to pursue it further”? To me, it feels like the departments regard the Select Committee investigations as a total pain in the neck: an intrusion and an inconvenience, interfering with the very busy and, I am sure, important schedule of the officials concerned.

This report on water management was a clear case in point: an uninspired response to an excellent report. This House deserves better.

My Lords, my first obligation this afternoon is to declare an interest. I am a farmer in north Essex. I have an abstraction licence which I use to fill a reservoir which holds 12 million gallons of water. I have no rivers on the farm. In a normal summer, no water leaves my farm. My average annual rainfall is a shade over 18 inches. When I built that reservoir more than 40 years ago, it took just over three weeks to fill it in an area where, anywhere else in the world, the rainfall would make it semi-desert. This somewhat colours my views on the problems.

I am immensely grateful to my noble friend for introducing this report, and to the committee for all its work. It has highlighted issues, raising the scale of topicality and significance over the past few years. One difficulty which we must all face and deal with today is that there is and always will be a conflict between good water management and the environment. I seriously suggest that we also need to bear in mind that the United Kingdom environment in its widest sense is certainly not natural, and has not been for many centuries. It has been created by man, and we must recognise that. I am afraid that we must be able to go on adapting the environment as necessary, to deal both with the changing circumstances of the nation and a particular aspect which very much affects us in the south-east: population growth.

Of course, population growth does not affect only the south-east. When I was a boy the populationof this country was about 45 million and now it is60 million: 30 per cent higher. You cannot service people without producing the resources they require. That puts greater pressure on the natural environment, a risk we must face. To mention an unmentionable subject, the population issue is not just one of a United Kingdom context, but a global context. It will have to climb rapidly up the ladder of topicality. To go back to global warming, there will be no solution to that problem unless we manage to get our global population numbers under control. That has all sorts of political and religious connotations, which are not appropriate here. It is, however, appropriate to remind ourselves of that background.

The corollary of having no population policy is that we have an obligation to make the resources available if it can be done. It can be done. The difficulty we have had for a number of years is whether there is sufficient intention to overcome the difficulties I have outlined in this conflict between the environmental interest and the resource implications of growing population numbers.

I highlight that from a slightly different perspective, because it is not exclusively our problem. We have heard about the European water directive, and we have European conservation directives. To bring the water and global warming issues together, part of the global warming issues, from a UK perspective, could be solved by getting hold of much more green electricity. We could get a large chunk of that from the Severn estuary, which has such environmental protection from Brussels that it would very difficult to get a barrage across it. At some point, we and other countries will find ourselves asking the Brussels Commission whether its priority is to bring global warming under control or to “preserve the environment”—particularly knowing that if we unleash rising sea levels on these coastal areas, they, in turn, will destroy the existing environment as we know it. That is another dilemma we must face.

I found an issue in the report slightly odd. The Consumer Council for Water made a comment tothe effect that water customers were paying for the demand created by society. I found myself saying, “Hang on, what is the difference between water customers and society?”. We are society. I do not know anybody who does not use water, so I did not understand that rather strange comment. One cannot help but feel that that sort of attitude pressures people. I am not sure whether there is any evidence that society, as is apparently predicted, is concerned about the costs of water and prefers the low prices of today to the possible high cost of ensuring supplies for the future. Yet it is clear that there is a concern in the committee’s report that the water regulators have been driven by a priority for the current low prices at the expense of future water security. I was not sure whether this was regulatory, societal or government prejudice; I suspect it was the latter. That is all very well but, at some point, we will have to be much more positive about the need to serve society.

The next question is whether we manage our water well. Reading the Government’s response to the report, as far as I can make out, all is for the best in the best of all possible worlds; it was very complacent indeed. It makes clear the depth, complexity and length of the consultation process required to do anything in water management. This must be tackled with great urgency. I am aware that the Government are looking at the planning process in other fields, but they must also consider it in this context. One must seriously ask whether a 20-year process to take you from the conception to the construction of a major water facility is reasonable. I cannot help wondering, slightly cynically, whether we shall have a 20-year consultation on how we must improve the planning system, because that is also highly controversial.

The answer to the question of whether we manage our water well in this country has to be, “No, we don’t”. We use only about 10 per cent of the precipitation that we receive. There are lands in other parts of the world that use a vastly higher percentage of their available water. Unlike everybody who wishes to knock Thames Water, I wish to pay it one important compliment. I acknowledge that it has all sorts of deficiencies, but it must have about the best water cleaning process in the world because the water we use in London is recycled five times between Teddington weir and Beckton. The reports on Essex and Australia mention the yuck factor, which means that when water is recycled, it is necessary to put it back in the river to make it acceptable to the people who consume it. I have not heard anybody in London complain about the yuck factor of drinking recycled water. I suspect that that may well be because the vast majority of people do not know it is being done, which is a serious compliment to the system that makes it possible. It also makes me wonder how many of the obstacles that we have to put in the way of progress through this immensely complex and sophisticated consultation process are, in effect, purely psychological barriers. I feel that the Government in particular and we politicians in general need to be much more robust about the need to promote essential infrastructure that will make life worth living for our successors.

I was delighted to get to the final pages of the report for one reason; it reported on a visit to my region. There is a ray of sunshine; some really serious work is being undertaken on river basin transfer. Essex is one of the driest counties in the country, if not the driest. We had no water shortage this year because 30 years ago a river basin transfer scheme was put in place. That facility can be made available everywhere, if need be. It is not a question of building a national water main or of transferring all the water for certain individuals to certain places, as the Minister once said, but of producing a system that can take care of the marginal deficiencies in particular areas. That is what we are talking about, and that can be done. The Government must look carefully at how they can ensure that those who have the responsibility can better balance the pressure of the present with the needs of the future.

My Lords, it was a privilege to serve on this committee under the noble Earl, Lord Selborne. I thank our Clerk and our special adviser for their excellent work. Those who served on this committee saw this report as a sequel to earlier reports that we produced on energy efficiency and renewable energy because the key issue in this report and the earlier reports was security of supply. As the noble Lord, Lord Mitchell, said, it seems madness that in a country renowned for its rainfall there should be any question about security of supply in relation to water. The report makes clear that, at the moment, there is no issue in relation to northern or western areas of the UK, but, as this summer has shown with its hosepipe pans and drought orders, there is a serious issue in the south and east of the country where water resources are already stretched to the limit.

We spell out the main co-ordinates of the problem in Chapter 4 of the report. Over the next 25 years, the population of England and Wales—not that of the United Kingdom as a whole—is expected to rise by7 million people, from 53 million to 60 million. Those people are expected to settle disproportionatelyin the south and east, where the jobs are. The average consumption of water in this country is already150 litres per day per person. Although the report states that there is some flexibility about the figure, it is nevertheless an average of 150 litres per day per person and rising. Today’s Guardian, which is celebrating the fact that the United States now has a population of over 300 million, notes that average water consumption in the United States is 350 litres per person per day, which is almost 2.5 times what we consume. As we get richer, we use more water: we take more baths; we wash more clothes more frequently; we spend more money on the plants in our gardens; and we want to water them more frequently. Also, as we get richer, we tend to break down into nuclear households. As Professor Adrian McDonald points out in his interesting appendix, although larger households proportionately do not increase their demand for water—obviously larger households demand more—the break-up of households into small units increases the demand for water.

If we look 25 years ahead, a population increaseof 7 million will mean that we will need an extra1,000 million litres of water per day. The tables on page 44 show that that is roughly the total consumption of the north-west of England: it means a whole new region. That population will disproportionately be settling in the south and east. The maps on pages 56 and 57 of the report make clear that in the south and east of England present levels of demand for surface water and ground water are unsustainable. We are abstracting more from the rivers and aquifers in the dry months than we are putting back in the rainy months. Climate change is not going to make this problem any easier because we shall have more dry months in the summer and more heavy storms in the winter and what fills the aquifers is the steady drip, drip, drip of what was a typical rainy day in Britain.

If we think that we have got problems, other countries have problems too. On Tuesday, the Guardian published an article by George Monbiot, in which he states:

In India, for example, some 250 cubic kilometres (a cubic kilometre is a billion cubic metres or a trillion litres) are extracted for irrigation every year, of which about 150 are replaced by the rain. ‘Two hundred million people [are] facing a waterless future. The groundwater boom is turning to bust and, for some, the green revolution is over’.

In China, 100 million people live on crops grown with underground water that is not being refilled: water tables are falling fast all over the north China plain”.

Therefore, it is not just a problem that we face.

It is a problem that the Government have not made any easier for us, as the noble Earl, Lord Selborne, mentioned. It became very clear in our discussions that the Government embarked on their sustainable communities plan in 2003 and then took up Kate Barker’s suggestions for further housing increases in new housing development in the south east of some 200,000 units a year without due consultation with either the Environment Agency or the water companies. Although, as the noble Earl mentioned, things have improved and much more consultation is now going on, there is still a long way to go before we have the openness and the consultation that is really necessary. It seems from the Government's response mentioned by the noble Lord, Lord Dixon-Smith, that there is still far too much complacency.

Our report endorses the broad strategy that has emerged in both government and the Environment Agency and Ofwat, which is termed the twin-tack approach, although, as we point out, people have slightly different interpretations of what twin-track means. Essentially it means that we have to work on both supply and demand at the same time—at least we feel very strongly that it must be at the same time. On the supply side that means building new reservoirs or extending old ones, transferring waters from one river basin to another—the point raised by the noble Lord, Lord Dixon-Smith; and we were very impressed indeed by the work undertaken by Anglian Water in this respect—and tackling leakage. It possibly involves investment in the future desalination plants, although we were doubtful about whether that was really justified at the moment. Incidentally, we should bear in mind that the leakage from Thames Water—1,050 million litres per day—is just about what we need for that7 million rise in population.

All these issues, including leakage, require capital expenditure. One of the key issues that came out of our investigations was that in order to finance capital expenditure the water companies have to borrow, and if they are going to borrow they must have enough resources to pay for that borrowing. There was clear tension with Ofwat about whether it was being given enough leeway to raise the money it needed to raise the investment they needed. To some degree the constant plea from the water companies was that they were not getting enough money for those investments.

I slightly share the view taken by the noble Lord, Lord Mitchell, that—as Mandy Rice-Davies put it—“They would say that, wouldn’t they?”. The Evening Standard noted when our report was published that the four water companies with the largest percentage of leakage—and that is over 25 per cent of their water supply—leaking from the system were also those with the largest profits. If you are a regulator there is a very nice question on how far you go in terms of allowing extra profits when you have a monopoly supplier; and domestic water supply is a monopoly at the moment. I think we were sometimes a little too kind to the water companies in our report.

Ofwat has a very real issue in balancing the two questions. We clearly need to make more investment. The companies must have enough money to make that investment. But how do you squeeze those companies to ensure that they are not putting that money into the pockets of their shareholders or into the pockets of their management? That is a nice question. It is not easy to answer, but I have some sympathy with Ofwat in terms of squeezing the companies.

It is encouraging that in their responses both Ofwat and the Government have accepted the points we made about the need to look to the future. I am extremely pleased about that. More generally, and this comes through our report, the whole governance and planning framework of the industry lacks coherence, is much too complicated and from the consumer’s point of view it needs to be simplified. I know that we are perhaps suggesting another layer of bureaucracy, but at least in a sense it links to the consumer more directly in terms of linking the area they live with the supply of water.

I will talk a little about the issues on the supply side. The key issue is metering. As the noble Earl mentioned, metering is not a panacea for everything. At the moment only 28 per cent of households in the country are metered. That is lower than elsewhere. Those who do not have meters are charged a lump sum every year. That lump sum is somewhat arbitrary because it is based on the old pre-1989—is it?—rateable values of those houses, which get increasingly out of line with the use of water that necessarily comes out of that. The more we can extend metering the better because people pay the price. If you pay a lump sum you say “I might as well use everything”, but if you pay a price then you look at what you are paying. It is important for us to try to push forward metering as far as we can.

But we need smart metering. We do not want a meter stuck somewhere down in the front garden where you cannot see it. You need to be able to look at a meter in your house, just as we argued with electricity and gas, so you can see how much you are consuming at that time and how much you have consumed over the past day or so. We want smart billing that will show people how much they use in comparison with previous years and how much others of the same sized household use. Figure 5 on page 79 gives a very telling example of what a smart bill might look like. We need smart tariffs. We recommend the rising block tariffs, although we must be careful about suggesting that those who use more water should pay more it you do not at the same time catch large households.

We also need to look at the demand side for water. Of those 150 litres only 10 per cent is required for drinking or for preparing food that we eat—for potable uses; 25 per cent goes down the lavatory, which is why dual-flush systems are important. Others have told me that there are siphon systems, which use, instead of the seven litres that you flush down the lavatory, only something like two litres. So it is vitally important for us to try to develop ways to economise on the water we use. Thirty-three per cent of water goes on personal washing. Here there is the whole question that power showers do not actually save anything over baths. Can we develop showers, and other countries have managed to do this, which are more efficient? Twenty per cent goes on clothes and dish washing. Modern machines can be much less efficient, but why do the Government suggest that it is impossible to have some kind of scheme that labels these machines just as we have with energy efficiency? They seem to suggest that it is impossible; that we will have to start from scratch. We already have a very good scheme on energy efficiency.

In terms of garden use, why cannot we do like the Australians and make far more use of rain water? The example we quote from Australia shows that above all where there is a will there is a way. Sadly, what emerges from the Government and Ofwat’s response to our recommendations is that we have yet to find the will. As the energy sector has shown already so clearly, once awareness is raised people respond to incentives and, indeed, often to community pressures. At present, both the Government and Ofwat seem to be far too complacent about the potential risks of water shortage and not prepared to take the necessary lead in raising awareness.

My Lords, first, I thank the noble Earl, Lord Selborne, for the excellent way in which he chaired the committee. It was indeed a great pleasure to be a member of such a committee with such efficiency being projected. In addition, I pay tribute to the Clerk of the inquiry, Tom Wilson, who gave a very effective summary and report of the complex deliberations involved in the inquiry. We were very fortunate to have the expert advice of Professor Ashley, whose experience in water matters is very extensive and appropriate to the study.

I also take this opportunity to say welcome to my noble friend Lord Crisp. His speech was absolutely bang-on and I look forward to the opportunity of seeing him in operation when he can be a little more controversial on some topics for which I am sure that he has deep feeling.

I became involved in the problems of water management when I chaired the Royal Commission on Environmental Pollution from 1986 to 1988. The topic was water purity. Many of the problems discussed by the committee were very similar to those that we encountered in the present study. It is pleasing to see how much has been accomplished in this area during the past 20 years, but some of the difficulties identified 20 years ago are still with us, especially problems associated with diffuse sources of water pollution from both agriculture and urban sources.

The major development in the water industry was privatisation in 1989, which, as has been discussed by the noble Earl, has led to a great increase in investment in the water industry—which, I may say, has been necessary. The present report indicates that one of the significant problems now facing the water industry is water shortage, which appears to have occurred in many parts of the country. However, that is mainly a localised problem and must be dealt with on a local rather than a national basis. The problem of water shortage is often associated with specific areas of the country and may vary from year to year. The variation in location may be attributed to a variety of factors, including rainfall, geological effects and population density and growth.

The south-east is of particular concern as that area is under stress for water supply and—as has been said by several Members—is attracting a projected growth of the order of about a million new homes. That position has been further accentuated by a decrease in the average household size and an increased usage of water-intensive appliances in the household, as well as the leakage problem, which we have discussed. In a recent report by University College in London, it was estimated that, by 2006, 38 per cent of UK housing will be single occupancy. On average, a decrease in occupancy from two to one increases the water demand per capita by 40 per cent. So, within a static population, there will be a significant increase in water demand.

I now refer to the latest statistics, which appeared yesterday, on population growth during the next 25 years. The population growth for London will be roughly 20 per cent. It is interesting to note that the density of population in England is 383 people per square kilometre, while the corresponding figure for Europe is 117. That accentuates the London problem. It is also important to recognise that rainfall—I understand the remarks of the noble Lord, Lord Hunt, about the dangers of interpolation of rainfall data—is projected to fall by 60 per cent by 2080.

The recent analysis of water requirements carried out by the Government for additional houses, which are mainly to be built in the south-east of England, does not appear to include some of those points. I remind the House that the analysis noted that the extra increase of 200,000 houses, to which the noble Baroness, Lady Sharp, just referred, would increase demand by only 0.1 per cent because they would not be occupied by “new people”. That appears to ignore the effect of the increase in the population, its relocation and the decrease in the size of house occupancy.

The reticence of the Government directly to involve water companies in the housing developments is difficult to understand and is certainly counter to all advice offered by external bodies, as we heard in our discussion. A worrying feature of any water-management problem is the general public’s view that there is a constant supply of water, when the English and Welsh have less water per person per year than do most residents of Mediterranean countries. Although many parts of the country are suffering from water shortages, this is not true for the whole country, and it is sometimes difficult to enthuse the public about a problem that is so variable, often localised and very often seasonal.

The water demand in England and Wales is expected to increase by 12 per cent by 2030, and will place further pressure on water companies. In part, to solve this water crisis, companies, particularly in the south-east, are projected to build five new reservoirs and extend three of the existing ones in the next 25 years. There is also a plan to build two desalination plants, but, as the noble Earl has remarked, this is more controversial. Building these, however, would lead to only a 6 per cent increase in water availability—still leaving us with this balance of 6 per cent to be found. As we discuss in the report, it is clear that efforts must be made to lower water consumption, and, as approximately half is consumed in the domestic sphere, the use of water-efficient fixtures and fittings in homes, the reuse of water and the metering of water supplies must be given top priority in any government measures to deal with this problem.

It is interesting to note that, in the OECD area, only two countries—Ireland and the UK—do not go in for universal metering. I find that very surprising. In a section on water problems in a recent Sustainable Development Commission review, which was authored by Professor Anne Power of University College—it is interesting to note that a large number of reviews on water are now appearing—attention was drawn to the fact that the bulk of the consideration on saving in water is applied to new buildings, with little research or policy activity on water consumption in existing buildings. As new buildings are roughly only 5 per cent of the total build, a major problem lies with the older stock.

The article claims that savings in water usage of about 30 per cent may be achieved in old houses. It points out, for example, that kitchens and bathrooms are refitted every seven to 15 years. These rooms contain the majority of water-consuming appliances, and some form of regulation on water-efficient replacements could reduce water usage considerably. The use of such appliances could be encouraged by fiscal incentives such as reduced rates of VAT on efficient fittings and appliances. Some form of labelling indicating the water efficiency of appliances, as the noble Baroness, Lady Sharp, suggested, should also be implemented. As she pointed out, such a system applies to energy but, for some reason that I find incomprehensible, it does not apply to water as a whole.

It is pleasing to note that the water industry has instituted a new independent body called waterwise, which will offer advice on water conservation and efficiency. The main emphasis on savings in water consumption in buildings is currently being directed at the domestic scene, and although it is true that it accounts for 50 per cent of water consumption, significant savings can also be made in the industrial sector. Demand by industry for water has decreased in most parts of the UK because of the decline in industrial activity, and certain companies have recognised the economics of limiting water usage. Similarly, there has been a decrease in agriculture’s demands for water. There is still, however, a big opportunity for saving water in both these areas. A recent report by Envirowise, an organisation that is designed to provide industry and business with advice on environmental matters—the Government very much had a hand in building this up—indicates that industry as a whole, which accounts for a third of the water used in the UK, is using three times more than it actually needs. We are talking about a vast amount of water here. Envirowise is clearly in favour of metering water supplies.

I agree in general terms with the sentiment expressed in particular by the noble Lord, Lord Mitchell, that the government reply to the report is rather negative. With the exception of the metering problem, which admittedly they now seem to be taking on board, they do not appear to have given very favourable responses to the bulk of the recommendations.

Finally, I am concerned about what appears to be the attitude of Defra, at least as it is expressed in the environmental press, to the next development in water management. This is the one proposed by the European Union in the Water Framework Directive. The directive requires member states to achieve good ecological status in all water bodies by 2015 and is based on a river basin analysis of water management focusing on the delivery of an integrated approach between the various water management priorities. It is not a new concept for water management and, indeed, was a suggestion put forward by the royal commission in the 1980s, based on the deliberations of the then National Rivers Authority for management of water distribution on an integrated river basin management or catchment system. To me that is a much more logical way of looking at water problems.

The directive permits member states to adopt alternative objectives that may delay improvement until 2027. A guidance publication on river basin planning issued this September by Defra states that the agency should make full use of this alternative in the directive—that is, delay until 2027. But the European Commission has warned the Environment Agency and the water industry not to rely on receiving extensions allowing more time to meet the directive. The completion date should be viewed as 2015 rather than 2027 other than for exceptional problems. There is no doubt that the directive poses some large problems, but it is important that the Government should attempt to attain completion on the projected timescale and are not seen to be dragging their feet on the date for completion by encouraging the Environment Agency to consider delaying until 2027.

My Lords, I join in the congratulations which have been heaped on the heads of the noble Earl, Lord Selborne, our Clerk and our adviser, as well as my colleagues on the committee. I especially enjoyed the speech made by my noble friend Lord Mitchell a short time ago. I am delighted to see such a self-confessed unrepentant capitalist sitting on this side of the House. Our party has perhaps moved further than I had thought since I joined it around 50 years ago. I also enjoyed his company on our visit to Australia last February. It was the height of the Australian summer so I took my lightest clothing because I expected great heat. During the week we were there, it rained every day except one—not heavily, but it rained. That may have explained the gardens, which so impressed my noble friend.

This is a good report and I endorse almost all of it, but I am going to depart from the general mood of the debate by mildly dissenting on two or possibly three items. Again, I dissent mildly because I think the report is good. First, I make a pedantic point, which may come from my being a lapsed Presbyterian. We harp on about drought. We do not have a drought in this country. You have droughts in places like the Kalahari desert or in Oklahoma in the late 1930s. What we have is a serious water shortage in some parts of country and adequate supplies in others. For instance, 10 or so days ago I was on the Island of Mull, where they do not have a water shortage. I am told that the soft highland rain makes your hair curl; it does not seem to work. “Drought” excites journalists, but they over-estimate its effects and so perhaps we should talk about “water shortages”.

I mildly dissent from the committee in that I think we were unduly dismissive of the possibilities of a water grid. People have been pushing water around for domestic and commercial purposes for centuries. For instance, Hammurabi, who invented my profession of civil engineering in Mesopotamia in the 7th century BC, built dams, water canals and so on to drive water for Babylon and Baghdad, which were then the greatest cities in the world. So there is no technical problem about building a pipeline, which would probably be combined with tunnel and canal. Fifty-odd years ago, when I was a young civil engineer in Glasgow, I designed a pipeline to bring water to a tin mine in Malaya, as it then was. So if I could handle it, I am quite sure almost anyone else could. The water in southern California comes from the Rocky Mountains in Nevada, hundreds of miles away.

People tell us that water is heavy stuff—which it is; I think a cubic metre of water weighs about a tonne—and that when it has to be pumped it requires energy and so on. Oil is not as heavy as water—it floats on water because it is lighter—but it is pumped and piped from Alaska to the northern mid-west states in the United States, and from Russia to western Europe. So the feasibility of a water grid as a technical exercise is perfectly within the capabilities of the construction industry that we have in this country.

The Environment Agency does not like it, but the Environment Agency does not like very much of this kind. We are not surprised that the Environment Agency does not like it; perhaps we should pay less heed to what it says.

The other item with which I dissent—albeit mildly—is that I think we were far too dismissive of the possibilities of desalination. I believe there are half-a-dozen schemes under consideration in this country and we know that there are at least 30 or so in Saudi Arabia which have been in operation for quite a long time. It seems to me that in the cases of both the grid and desalination we were over-impressed by thoughts of their effect on the environment, on energy use and on CO2 emissions.

I agree entirely with what the noble Lord, Lord Dixon-Smith, said about the environment in his extremely interesting contribution to the debate. We have to remember that this country’s contribution to global CO2 emissions is 2 per cent. Theoretically, if we could get rid of the whole of that, it would do two things: it would wreck our economy and make very little difference to global emissions. It is true that increased emissions would result from producing a pipeline or a desalination station, but they would be very small compared with the global problem. At a time when the Government are hoping to reduce our contribution to global emissions from 2 per cent to perhaps 1.5 per cent—that is not a target but an estimate of what they are likely to achieve—it would not matter terribly if they achieved 1.6 per cent rather than 1.5 per cent. That would be the likely effect of the increase resulting from desalination.

I think we were too timid there, but that did not prevent us producing a thoroughly worthwhile report, which deserved a much better response from the Government than it got.

My Lords, I, too, begin by recognising the contribution of our special adviser, Professor Richard Ashley, and our Clerk, Tom Wilson. I pay particular tribute to our chairman, the noble Earl, Lord Selborne, for the good humour and dexterity with which he guided our deliberations. I also congratulate my noble friend Lord Crisp on his eloquent and, if I may say so, highly apposite maiden speech.

In the 18th and 19th centuries, civil engineering was responsible for enormous health improvements in our cities. Clean supplies of fresh water and the disposal of sewage in closed sewers simply transformed public health. The engineers of the day did this so successfully that for nearly a century it was easy for us to forget the enormity of their achievements. Over the intervening years, we have taken this infrastructure and the abundance of water that it provided so much for granted that we have failed to make the investment in maintenance and renewal that common sense would have dictated.

In recent decades, three factors have rather sharply drawn it to our attention that we have been living in a fool’s paradise. First, and most obviously, the Victorian water mains and sewers that had been so well constructed that we unconsciously assumed that they would last for ever began to fail. Secondly, a succession of summer droughts and low-rainfall winters in the south-east made it all too apparent that the abundant rainfall that we had taken for granted could not be relied on. Indeed, this may well be the beginning of a drying trend associated, as various noble Lords have pointed out, with a change in climate. Finally, there has been an increase in the level of personal water use and, in the south, increased water demand from a growing population in a part of the country that is already water-stressed.

Together, these considerations mean that not only do we have a water infrastructure that is failing through historic lack of investment but it is rapidly becoming inadequate in the south-east because of changes in climate and increases in water demand. Available water resources are finite, and if we draw on them too heavily we risk lasting damage to the environment.

I have sketched this picture to make it clear that we are entering, in the 21st century, uncharted territory. For that reason, it is particularly unfortunate that, as we point out in our report, water companies have great difficulty in finding money to pay for research programmes which would help them to do their job better and deal with new and unfamiliar situations.

In recent years, the annual expenditure by water companies on research and development has been around £20 million. That figure may be compared with an annual turnover of around £7 billion and, for that matter, the annual total of unpaid water bills of around £1 billion. Our committee regarded this level of research expenditure as inadequate. That view was shared by some of the companies, which drew attention to the pressure from the regulator to keep down near-term water prices to consumers. Frankly, this is a false economy. Some research is carried out by water companies, but most is carried out or commissioned by UK Water Industry Research, funded jointly by the companies. This is a very satisfactory approach, but it seems that programmes are limited by both the overall level of funding and uncertainty about its continuity.

It is worth considering some of the areas in which research can bring substantial benefits. Given that management and containment of leaks is one of the major challenges facing the industry, high on the list should be technologies for remotely inspecting pipework, the detection of leaks and lining of pipes. Work in areas such as these can be undertaken in collaboration with universities or industrial partners.

One of the most obvious approaches to water shortages is to make better use of the water that we have. This can involve purification and re-use of water. The committee visited one public building, in Melbourne, which, by employing this technology, would use only one one-tenth of the normal consumption for a building of this size.

Water purification technologies have been around for many years, but the challenge is to treat large volumes quickly and cost-effectively. This whole area is being transformed by the development of membranes that can be tailored to remove particular chemical species from the water that passes through. The other challenge is to do this at minimum energy cost. This means that the membrane must be able to pass permitted species easily, without high pumping pressures. These same technologies can be used to purify salt or brackish water. These are all areas of active and important research.

Water networks tend to be both extensive and complex and may receive water from a variety of sources. For reasons of both public health and security, it is important for water to be tested regularly to see whether it contains chemical impurities or pathogenic organisms. It is now becoming possible to carry out such tests remotely and for the results to be sent by telemetry to water management centres, where action may be taken quickly to respond to any problem.

Developments such as those which I have described have the potential, along with many others, to make water supplies safer, more reliable and, in the long term, they are likely to save expense, as shown by work carried out by Yorkshire Water. It is very important that water companies have access to these technologies. However, to do so cost effectively, they must be able to act as intelligent customers. That means having in-house expertise to recognise and evaluate new developments and to see how they may be best adapted to their particular needs. This can be done by working closely with UK Water Industry Research and with other external bodies, but it costs money.

I am afraid that the replies of both the Government and Ofwat suggest that neither properly appreciates either the practical difficulties in setting up and conducting research, the importance of continuity, or the importance of research to an industry such as the water industry, facing the challenges that it does today. Expenditure on research should be seen as an investment for the future rather than as an in-year cost.

Regardless of whether the funding mechanism for research suggested in our report is the most appropriate, it is essential that the industry should have every incentive to innovate. The fiscal regime within which the companies operate should be designed to encourage research in a positive way and to ensure that research projects can continue overat least two funding periods; that is, over at least10 years. Given the time that it takes to set up a project properly, the present regime makes it virtually impossible to consider projects that extend beyond two or, at the most, three years. It would be helpful for Ofwat to consult the Government’s director-general for research and innovation, or the Chief Scientific Adviser, on appropriate means to ensure that the funding structure for research is appropriate for the water challenges that lie ahead. I hope that they will do so.

My Lords, once more, as in the case of our recent inquiry into energy efficiency, members of the Science and Technology Select Committee found themselves considering an issue that was as much a matter of public knowledge and understanding as it was of science and technology. The Government need urgently to show stronger leadership in informing the people about the critical issues of water management. As many people have said, there is no fundamental shortage of waterin this country but there are problems of storage, distribution and inefficiency of use. The understanding of the public is poor by international and European standards. This ignorance leads to waste and to the inability of people to participate effectively in the debate about which of the alternative solutions to adopt. Indeed, it seems that it is almost the Government’s policy to minimise consumer participation.

As we have all said, the sub-committee was fortunate in its chairman, the noble Earl, Lord Selborne, whose extensive knowledge of the subject, so apparent in his excellent opening speech, and his outstanding skills as a chairman, enabled us to get to the roots of the problem and to come up with constructive recommendations. I also compliment our specialist adviser, Professor Richard Ashley, whose international expertise was especially valuable, and our Clerk, Tom Wilson, with the assistance of Michael Collon and our specialist assistant,Dr Jonathan Radcliffe, on their efficient organisation of the meetings and visits and their clear and accurate drafting of the report. I also compliment all noble Lords who have spoken, and especially the noble Lord, Lord Crisp, on his eloquent maiden speech.

I shall concentrate on the related issues of public understanding, metering and billing, all of which have been mentioned already several times but which I nevertheless feel will bear repetition. The majority of consumers believe that our supply shortages can be rectified simply by having the water companies mend the leaks in the distribution system but, as the noble Earl, Lord Selborne, and others have said, the problems are much more complex than this suggests. However, I support strongly the cry of the noble Lord, Lord Mitchell, for improved management in some of our water companies and the introduction of increased competition. I also disagree with the water companies’ claim that the reduction of leakage below what has been called the “economic level” of leakage would lead only to an unacceptable increase in cost and that it is better to increase supply. We think that that is simplistic and does not adequately take into account environmental issues.

As our chairman has already said, we recommend that Ofwat replace the concept of an economical level of leakage with a broader concept of a sustainable level of leakage. As we have said, that would take into account but place more emphasis on the environmental and social consequences than on cost and providing additional supply. It would lead to lower levels of leakage and go a long way to persuading the public that the water companies are behaving responsibly. In turn, more people would be inclined to support the companies’ request to provide additional supply through building new reservoirs or desalination plants. This is a critical matter of long-range planning on which we feel there is insufficient attention.

There is also the issue of the contribution that people can make themselves to conserving water. As with electricity, a large number of people have little idea of how much water they use or of the relative importance of the different ways in which they use it. Much of that ignorance is a consequence of inadequate, or a complete absence of, metering.

Our systems of monitoring water usage and billing are primitive—years out of date by the standards of best practice in the western world. As we have said in the report and mentioned today, we saw much more intelligent and advanced methods being practised in Australia, quite coincidentally in Melbourne, where I happen to have spent most of my youth. Residents of Melbourne receive a water bill that outlines in detail their present and past usage of water, and how much it is costing them. If they do not pay their bill, the suppliers have the right to limit their supply—not disconnect them—by placing a constriction in their supply pipe. It is interesting to reflect that, in those days long ago when I grew up in Melbourne, there was little concern about water supply. But Australians have realised that their modern way of life, their prosperity and climate change together place demands upon the water supply that are many times more severe than they were in the first half of the 20th century.

Things have changed dramatically, and it is well past the time when we should have realised that our case is similar and modified our behaviour. We are in the bizarre situation where people will pay as much for a litre of bottled water as they will for a litre of petrol, and yet a significant minority of the same people refuse to pay their water bills when the water, in most cases, is of the same quality and purity as that of the bottled variety, and yet costs one-thousandth as much. Never has public ignorance been more expensive to the public.

The Government should ensure that systems are put in place that better inform people of the genuinely high quality of tap water and, more importantly, of their responsibilities to use this precious substance sparingly. Meters should be provided for everyone, not the diminutive 28 per cent who have them at present, and the meters should be both accessible and prominent. Consumers should be provided with bills that show their usage and how it relates to the consumption of others and to their previous usage.

Of all the countries in the world, Britain should not be precipitating itself into a water crisis. The problems can all be solved by modifying our behaviour, and, in a few cases, carefully planned increases in supply. But we have to act now and be proactive and creative, as the noble Lord, Lord Oxburgh, has just said. It was extremely disappointing that the Government’s response to our report was largely a defensive reiteration of the status quo.

My Lords, from these Benches I warmly thank the noble Earl, Lord Selborne, and members of the committee for giving us the opportunity to debate these important issues of water, which we have debated less in your Lordships’ House in the last few years than the issue of energy, yet water is absolutely vital.

Noble Lords have spoken mostly today of the demand end of water—what comes out of the pipe and consumers use—but of course that is just the end of the process. It is important that we look at water management as applying to the whole natural hydrological process. Rain falls on ground that is compacted, tarmacked and polluted. It runs off too fast, causing flooding and taking the pollution with it, so the groundwater becomes polluted and there is a lack of refill for the aquifers, on which my noble friend Lady Sharp spoke. However, there is a different way. If we have the soil in the right condition, do not cover the ground with tarmac—something the Government started to address through the sustainable urban drainage programme—and have absorbent, vegetation-rich soil, the rain can run slowly into streams or groundwater, any pollution begins to be naturally filtered out and we have a very different system.

It was with that natural hydrological cycle in mind that I read the report. Having a close relationship with that cycle comprises the perfect solution that we are looking for. The noble Lord, Lord Crisp, said that there must not be disagreement over these water-management issues. Those were wise words. I very much enjoyed his speech and I look forward to hearing from him again.

It was striking that those who gave evidence saw one mechanism as the tool for solving many of the problems. I refer to the water industry, the water companies, environmental NGOs, government agencies and the European Commission. I make no apology for quoting the comments of different bodies, as that will prove the extent of their agreement on the solution to the problem. Pamela Taylor of Water UK, representing the industry, said:

“We have been disappointed that too many organisations who ought to be playing a major part in the Water Framework Directive are too far behind the pace in England and Wales. In Scotland we are seeing better strides…there is…a feeling that the Water Framework Directive brings problems. It does not; the problems are already there. What the Water Framework Directive does…is provide the tools for addressing those problems…the slower we are to implement the Water Framework Directive, the more we will be dependent on end of pipe solutions, the more that will cost society, the more it will cost our customers, and the less successful we will be because they are not sustainable options”.

That is the industry’s view. Your Lordships might think that it would be very different from that of others. Dr Alastair Burn, head of water and wetlands at English Nature, states that,

“the Water Framework Directive provides the pre-eminent mechanism to tackle things at the catchment-wide level…it offers the opportunity for a much more holistic approach, if implemented properly”.

The industry is frustrated because the measure is being implemented too slowly. English Nature is frustrated because it is not being implemented properly. Devon Wildlife Trust wrote to me—this is not from the evidence but is its comment on the report, which it very much appreciated—stating that the water framework directive should be the benchmark for all discussions about water, not merely a bit player. I could mention other quotes.

The Water Act 2003 gave the Government an opportunity to implement the water framework directive properly, but they did not take that opportunity. They are implementing it in a piecemeal way and very slowly. I thoroughly agree with the forceful comments of the noble Lord, Lord Lewis of Newnham, on the matter although, unfortunately, he did not have time to go into it thoroughly. It is much more expensive to fix the problems later than to solve them through the water framework directive. The measure concentrates on natural rather than heavy engineering solutions. The noble Lord, Lord Howie, referred to water grids and desalination plants. I refer to flood defences. I believe that the noble Lord, Lord Oxburgh, referred to heavy engineering solutions. Those served us well in the 19th century when sewerage systems and flood defences that we would recognise today were introduced. Modern thinking on these matters embraces the filtration systems that he so eloquently discussed, a far softer approach of managed retreat for coastal systems and, as I said, soil and wet woodland systems that absorb flood water. It is important for the Minister to ensure that the water framework directive is implemented in this country in such a way that it is very much part of the process that I am discussing.

I am sure that other Members who have spoken in this debate will have received a brief from the National Farmers’ Union on these issues. I was perturbed by its comment that it felt very much excluded from UK TAG, the technical advisory group that is advising the Government on how the process should be implemented. The NFU feels it will be excluded until the group has reached its conclusions, when of course it will be consulted, along with the rest of us, local authorities and whoever.

That is the wrong way round. We should not have a closed-door process. It is very much a matter of involving as many stakeholders and interested parties as possible as early as possible. When the Minister replies, I am sure that he will say that the Environment Agency is creating the liaison panels for the river basins. Of course it is, but those are made up of only 10 people per region of England and among them are all the usual suspects—the Environment Agency and so on—and the process has not been widened out one bit. I must declare an interest. My husband is chair of his local flood defence committee and a member of one of the liaison panels; I hope he does not take my last comment as a criticism, and he was not aware that I was going to make it. However, we need to widen out the process and ensure that it is as inclusive as possible.

The frustration that is being built up aboutthe fact that such a useful mechanism and tool is being squandered by the Government is reflected by the fact that a wide coalition of groups, including conservation groups, the RSPB, angling and consumer organisations, will shortly launch a water manifesto. It recognises that the water framework directive represents a once-in-a-generation opportunity to address long-term threats to our freshwater resources and environment and that more focus should be paid on what society wants as the outcome for the WFD. The groups say that they want solutions that produce the best possible outcome for society, the economy and the environment as a whole, and not just the aquatic environment. Every time the Government seem to address the water framework directive, they imply that it is just about the aquatic environment. A gentle criticism of the Select Committee’s report is that not until page 90 does it properly address the water framework directive, although I note that the chairman, in his questioning of witnesses, states that the WFD is critical in setting the agenda for the entire discussion about water, so I know that he is aware of that issue.

It is imperative that the Government get a grip on this, not because it is a European directive, nor because we have to do what it says—although we will pay dearly if we do not bring our water environment up to a good standard financially—but because it makes common sense in every way to work with the directive as the means to solve all the problems. We would want to do that even if the directive was not there. I look forward to a more positive reply than we had in the Government’s response to this issue, which, in common with other noble Lords, I found extremely disappointing.

My Lords, before I start to speak on the topic of the debate, I congratulate the Science and Technology Committee—in particular, its chairman, my noble friend Lord Selborne—on this excellent report. It is not only a sizeable and solid work of great merit but also the committee’s eighth report in this Session. The level of commitment and application that that represents fills me with admiration. I am delighted that many other noble Lords who were members of the committee have taken part in the debate. I also congratulate the noble Lord, Lord Crisp, on his excellent maiden speech and we look forward to hearing him shortly in many other debates.

As was made clear when my noble friend set the scene for the report, there are many aspects to this issue. The report highlighted the difficulties and made definite suggestions. There is no clear line of responsibility; there is a lack of accountability. There is also a lack of funding and a lack of resource development. The report considered ways in which we could look in greater depth at water efficiency. It looked at bills and affordability, and at housing and planning. In particular, it considered the ODPM’s failure to take water seriously enough. I believe that that issue is essential. If you are planning millions of new houses, the number one key must be where the water is to come from, how we can best use it and how we can make those houses more energy efficient in their use of water.

Noble Lords have touched on climate change. The issue is not just climate change per se; in different areas, things are changing in different ways. Scotland and the west remain wetter. In the east, my noble friend Lord Dixon-Smith and I both have problems, because there is a great shortage of water. Those who farm in the east certainly have different problems from those who farm on the west side.

Households, businesses and agriculture all have an effect on the future of our wildlife and biodiversity. Many noble Lords have said that the Government’s response to this very worthwhile report is at best disappointing and at worst complacent. I do not envy the Minister on this and would not like to be in his shoes when he responds.

The water framework directive has been mentioned. When we took through the Water Act in 2003—it was before the Minister took up his new post—we had long debates on the best use of water. The noble Baroness, Lady Farrington, will well remember our exchanges. We talked about the individual contributions that we can make. When we turn on the tap to brush our teeth, why leave it running? Why not switch it off? There are many different ways in which we as individuals, business and society can preserve our scarce and precious water.

Water is a commodity that we have taken for granted. It is like when we go into a room and just switch on a light. Water is not always there and has to be used wisely. Somebody said to me the other day, “But rain is free; water is free”. I said to them, “My goodness. Think of how we use our rainwater. It is clearly not free and we must preserve it”.

I was concerned that, as some noble Lords have mentioned, the report suggests that regional boards should be set up in addition to what is already there. I have great reservations about that, as I cannot help feeling that such boards would simply be expensive devices for removing responsibility for making difficult decisions from those who are or should be paid to make them. Surely Ofwat is competent to decide on the balance in any area of the four elements: resource development; leakage reduction; network renewal; and demand management. Waterwise should also be there to help and encourage the public to have a better understanding of their responsibilities.

The Water Act was passed in 2003 and my question to the Minister is when we will have any of the regulations that should have come out of it. To date, I do not think that we have had any. That is another example of words but no action, when we certainly need action.

On those who pay and those who do not pay for their water, I divide the issue into two. I understand that 40 per cent of the don’t-pays could afford to pay, which leaves only a small number of people who cannot afford to pay. There has been £490 million of uncollected revenue in the past 12 months. Surely we should be able to introduce a system in which we can assess who cannot afford to pay and who can afford to pay. The Government might think about the example that is given of where water is restricted for those who could pay but refuse to pay.

I am quite appalled—I mentioned this when we took the Water Bill through before it became an Act—that the CAB, for example, when it sees people with debt problems, puts the water bill a long way down the list. Water will never be cut off. I am not suggesting that it should be, but why should it be so low down in priorities when other things are paid, which may include mobile phones, the lack of which would not be life-threatening by any stretch of the imagination? There are ways of looking at that issue, including partial disconnection and smart meters. We have meters on our property.

The noble Lord, Lord Hunt, clearly said that we are moving to a situation where we shall have more floods and droughts. The climate certainly seems to be moving in that way. Some areas have to cope with flooding while other areas try to ensure that there is sufficient water for our needs. Long-term planning is certainly needed.

The noble Lord, Lord Mitchell, may sit on that side of the Chamber, but I totally reiterate his reflection of the Government’s response to this excellent report. I cannot think of anybody who has not said that the Government could or should be doing more. My noble friend Lord Dixon-Smith referred to the conflict between water use and the environment, which is key in some of our areas, and we have to look at that carefully.

I, too, had briefings from the National Farmers’ Union, which is well aware of its responsibilities. I declare again that I am a farmer and am reliant on water. We do not irrigate, but we are reliant on water. Farmers’ use of water is only 2 per cent of the total, which is something about which the public are not aware. I am pleased and congratulate the Government that on 11 October Defra announced that its proposed capital grant scheme will be under way to deliver catchment sensitive farming delivery initiatives. While the budget of £5 million for those works remains, the CSFO will be undertaking preparatory work for the launch of the scheme in April 2007. I understand that applicants will have until 30 September to apply and four months until the end of January 2008 to complete these works. These are very useful practical initiatives and they are indeed welcome. Is the Minister confident that in the £200 million reduction that Defra has to find this will not be yet another scheme that will be threatened? We would like to have clarity on that.

From our discussions today and the excellent contributions, we are all agreed. We know that we as individuals have a great role to play in trying to use our water in a sensible and conservatory manner. In our neck of the woods we have water butts and try to collect rainwater to use on the gardens. I cannot think why more people do not do that because plants do better from rainwater than from tap water. But that is a minor issue.

On demand management, we need to build more water efficiency into our new homes. I know that that is happening. We also need to encourage the white goods manufacturers to develop new ways for our appliances that are less water-intensive, and also, as other noble Lords have done, stress the importance of labelling.

We need better water supply. Water companies and planning authorities should work more closely together so that where new homes are built they will ensure that the available water resource is there and supports the infrastructure. It is only recently that the Government have said that the Environment Agency should be part of any new developments when undertaking basic research on that. Perhaps the Minister will confirm that, but I think I read that recently, and it has to be welcomed.

In the south-east, there should be investigations on the scope for better interconnection between local supply networks. My noble friend Lord Dixon-Smith referred to that. Essex has an exchange and drawing- off of its neighbouring system, which is immensely important. Again, the flood risk management must be part of a new management and resource system.

We have spoken about agriculture and its role only briefly, and then in terms of pollution, of which the industry is well aware. We have spoken of business and industry itself and their responsibilities. Along with raising consumer awareness, I would like to try to take this message not only to every family in the country, but also into our schools. It is in our schools that we can try to give the next generation a greater understanding of their responsibility in the better use of water.

It is a good and important report. I am, again, grateful to all noble Lords who took part. They have given the Government a great challenge. It is not an issue we can keep talking about; some action must happen. When the Minister responds, he must give us answers to the questions posed.

My Lords, in beginning my response on behalf of the Government, I congratulate the noble Lord, Lord Crisp, on his maiden speech. It is no mean thing. It is some five years since I gave mine and, listening to two maiden speeches today, I was thinking back to those days. I took lots of advice as well—in a slightly different situation, it is true. Once it is over, however, you feel a lot better about it, and it gives you that extra confidence to get stuck in. That is to be welcomed, and the noble Lord is certainly a welcome addition to this House with his vast life experience.

I have a set piece I want to do, and I will do my best to respond to individual comments. I must say, however, as part of the history and themes, two comments were noteworthy. One was from the noble Lord, Lord Oxburgh, who was the only one to mention that we have basically been dining out on the Victorians for so long, in the way that he did. We have been living on a legacy, with an endemic lack of investment and infrastructure in this country over decades. The other was the contribution of the noble Lord, Lord Broers, who has probably forgotten that he once gave me a little tour of some of the research work in Cambridge—before I got the sack through John Smith having come up with a different way of funding higher education—for which I was ever grateful. He mentioned the public understanding of both science and infrastructure and how things work: where your food comes from, how water comes out of the tap or the fact that the lights come on when you flick the switch. That is absolutely crucial and something we are lacking in this country. There is a lot of work to be done there.

There has been a general lack of welcome to the Government’s response to the report, which I reject. Nevertheless, a lot of positive points have been made. There is no question but that it has been a very useful debate for the Government. The issues raised in the report need answering in a practical way with action, rather than just ministerial Statements. It is important, because the report will stand the test of time for a while. There is no question but that it is a comprehensive report. I pay tribute to the chairmanship of the noble Earl, Lord Selborne, and his introductory speech. We have made our formal response, which is in the public domain on the Select Committee’s website.

When the sub-committee began its inquiry in July last year, the drought in the south-east had entered its ninth month. The droughts continued up to and beyond the publication of the report on 6 June. We are now planning for the possibility of a third dry winter and the drought stretching into next year, using the tools that the Government have put in place. The overarching view of the Select Committee’s recommendations, expressed in its report, is that the existing system of water management is dispersed and unclear. We consider that assessment unfounded, and that the water management measures we have introduced will secure a sustainable use of water both now and in the future.

A bit of history, now, for which I apologise, but it is important to get these things on the record. Since 1997, one of the Government’s priorities has been to establish a transparent and coherent regulatory system that promotes and supports the sustainable use of water in the short, medium and long term.

We have, and continue to put in place, measures to ensure that companies plan adequately for drought and for long-term water resources needs. The provisions of the Water Act 2003 have facilitated a range of important changes to further the sustainable use of water resources, including modernising the abstraction licensing system, making water company drought plans and water resource managementplans a statutory requirement and promoting water conservation. The Act has strengthened the voiceof water consumers through the creation of the Consumer Council for Water, introduced improvements to the regulatory system and increased the opportunity for competition in the supply of water.

In October 2005, it became a statutory duty for water companies to prepare and maintain drought plans. The first set of statutory plans has been submitted to the Secretary of State and the National Assembly for Wales. In response to the point raised by the noble Lord, Lord Livsey, it will be for other people to answer why the committee did not visit or mention Wales. We do not yet know whether we will have a third dry winter. The Met Office winter outlook shows an even chance of wetter or drier-than-average conditions—that is called hedging your bets—which makes the provision of drought plans of critical importance in planning for the various possible rainfall scenarios. Drought plans detail how water companies intend to balance their duty to maintain public water supplies with the need to avoid or minimise any potential damage to the environment.

Water resource management plans will become a statutory requirement in April 2007. The plans describe how each company aims to achieve a sustainable supply-demand balance for the public water supply over a 25-year period, take account of the best available projections for planned new house build and consider the implications of climate change. An important consequence of making drought and water resource management plans a statutory requirement is that water companies will now have to complete a public consultation on their draft plans and respond to any representation received before publishing their final plans.

We established the Water Saving Group last year, fulfilling a government manifesto commitment. The group brings government, regulators and the industry together to promote the efficient use of water in households. It meets every six months to drive progress on its ambitious action plan, consisting of five work streams to be completed within two years. Each work stream is led by a different organisation, with Defra additionally having a co-ordination role. Good progress is being made. Important research on customers’ perceptions and attitudes to water and its use was commissioned this summer by the Consumer Council for Water, and its findings will underpin the group’s future work. Waterwise is undertaking projects to fill identified gaps in the evidence base on water-demand management, including pilot projects with water companies. The Environment Agency is working on a definition of water-stressed areas and on targets and benchmarks for water efficiency. Ofwat is developing a good practice register of water efficiency projects and is looking at the possibility of providing incentives to developers to install water-efficient devices by linking the infrastructure charges that developers pay to buildings’ level of water efficiency. Defra is leading on work on the policy and regulatory framework.

A water meeting was held by the Secretary of State for the Environment and the Minister for the Environment on 1 June with representatives from across the water industry to discuss the provision of water resources over the short, medium and long term. A further meeting is planned for early December to review progress on the issues discussed at the meeting. There was unanimous agreement at the water meeting that a national water grid was not feasible due to its disproportionate and unjustifiable cost for the environment and for water bills compared with its possible benefits. That view was endorsed in the Environment Agency report, Do we need large-scale water transfers for south east England?, which was published in September. It estimated that to build five pipelines carrying 1,100 megalitres of water per day from the northern Pennines to London would cost up to £15 billion, with a unit cost of £8 million to £14 million per megalitre per day of supply capacity. That is at least four times the unit cost of building new reservoirs to increase supplies locally. So, like the committee—unlike my noble friend Lord Howie—we agree that a national grid is not viable. My noble friend mentioned oil, but oil is pumped and is of course much more valuable than water, and the economics are very different. I have expressed a personal view—

My Lords, I am not saying that it is any less important than oil, but that comparison is not viable in economic terms. I was about to say that I had expressed a personal view before from this Dispatch Box. There is no question but that the population and resources in this country are spread very unevenly. There is something immoral about taking a resource from other areas of the country to the south-east. Rather than build a water grid, it would be much better to move the population and centres of government and reconfigure the country more fairly to where there are resources. Water is just as much an economic resource to the north, the Midlands, the north-west, the north-east, Scotland and Wales as, indeed, London is the engine of the economy. The economics do not make sense anyway.

The committee raised the issue of affordability. The Government take affordability seriously and recognise that some customers, not always with the lowest incomes, may find it difficult to pay bills. The regulations on vulnerable groups help people who might otherwise be afraid to limit their use of water, possibly compromising on health and the health of others. I was reminding officials today that in the late 1970s or early 1980s I took myself off—MPs get invited to all kinds of things—to a lecture at Guy’s Hospital about public health. A scientist showed us grids of all the great diseases that kill millions of people and showed how over the years the number of people killed was falling. Then he put on the grid the point at which we found a cure, and we found that cure almost before we had eradicated the diseases. The one common factor of eradicating most diseases was a wholesome supply of clean water. Public health was the key. Frankly, any Government who seek to compromise that are heading for trouble. Therefore, we have to take this issue incredibly seriously, notwithstanding that we cannot have freeloaders not paying for water. I fully accept that, but public health is a crucial factor.

The vulnerable groups regulations aim to strike a delicate balance, giving assistance to people who not only need essential use of water but who also receive income-related benefits or tax credits. We are always looking at ways to address affordability, and we are following up the recommendations of a 2004 review on water affordability.

A pilot study in the south-west is looking at how benefit entitlement checks, switching to meters and water efficiency measures could help low-income households with their water bills. Another project is looking at the distributional effects of a range of tariffs, including social tariffs on customers.

Revenue owed to water companies has increased in line—they are high figures and I accept what has been given here today and what is in the report—with the general growth of consumer debt. It is not just a water issue. Nevertheless, we are dealing with water today. There are big variations in debt levels in different companies, some of which have a similar customer base. It is clear, then, that some water companies deal with debt more effectively than others, and we are keen to see that debt is well managed throughout the industry. There are good practices to be learnt. We can identify those and then share them around.

Ofwat and the Consumer Council for Water are working together with the companies to ensure that their debt management approaches are tailored to collect outstanding revenues effectively. Using disconnections as a way of enforcing payment was discussed during the 1999 review on water charging. At that time the Government concluded that the prohibition of disconnections was vital to protect public health and hygiene, for the reasons I have just given. Devices which reduce the flow of water to a trickle were banned at the same time, as they posed a similar risk to health.

The Government are pursuing a number of initiatives to improve water efficiency. I have looked at the report. I would be misleading the House if I said I had read every word, but I looked at the visits the committee made. It is very important that visits are made. A visit to Sandwell local authority in the West Midlands would have paid great dividends. When I was a Minister in the Office of the Deputy Prime Minister, my experience with some of its projects for grey water and getting economic efficiency inside old houses to modern standards was that it is second to no other local authority in the country. In fact, Professor Dalton, the scientific adviser for Defra, will make a visit in the near future.

Initiatives include the market transformation programme, considering technologies that could reduce water consumption by things mentioned in the report and in the debate today—harvesting rain water and reusing grey water for baths and showers. A project was started this year to develop the necessary evidence, economic base, feasibility, and performance and quality standards for water and a policy action plan and impact scenarios. We must determine that to make it viable. You have to explain to people that it is worth doing. One reason that people understand that it is worth doing is that it saves them money. People need the pound sign over their so-called free good. Water is not a free good. Next week, I will be introducing to this House the water regulations for Northern Ireland, where there are no water charges, no water rates and everyone thinks that it is free rain. There is modernisation still to be done. We need to know the cost, but we also need to consider the best use of rain water and grey water technologies.

Defra and the Department for Communities and Local Government—formerly the ODPM, which has been much slagged off during this debate, a point I shall return to in a moment—are to undertake a joint consultation on options for further regulation to secure improved water efficiency in homes and buildings. In addition, the new code for sustainable housing, which is to be introduced later this year, will include a commitment to secure water efficiency savings. I understand that that will all be included in the energy part of the home information packs to be introduced next year.

I am trying to address the committee's key concerns, including product labelling, which has come up in the debate. The introduction of a mandatory EU labelling scheme for all household water-using products, similar to that for the energy-efficiency labelling scheme, with which I think many people are now familiar would, we think, be complicated. The situation with water and energy is not comparable. The fact that all energy users are metered, together with the higher cost of energy than water, means that the uptake of water-efficient projects would notbe comparable with energy-efficient projects. A mandatory EU labelling scheme would require agreement by EU states to a new directive. That may not be straightforward, as the difference in water availability in different member states means that the cost/benefit case is different in each case. It will be difficult to get a decision there.

The Government are considering the feasibility of a voluntary labelling scheme and evaluating the costs and benefits of such a scheme to develop the evidence base. Focus groups with retailers, consumers and specifiers took place this summer and the report will be published later this year. The research that the Consumer Council for Water undertook this summer on consumers’ attitudes and behaviour will also provide useful information on the way forward.

There has been much mention of leakage—not as much as I thought there would be, but there is an underlying assumption that this issue must be dealt with. The figures are quite appalling. To reduce leakage across the water supply system, the Government extended Ofwat’s powers to act against companies that do not meet their performance standards. We are concerned that the current framework for setting leakage targets has neither the understanding nor the confidence of the public and does not take proper account of the full range of costs and benefits, especially environmental and social costs.

We would prefer a methodology for setting leakage targets that is fit for purpose and can be explained to customers in a way that attracts credibility and confidence. That goes back to the point made by the noble Lord, Lord Broers: if there is no understanding by the public—the consumers—of the issue because it does not matter what the Government do or what exhortations are made, we will not get the change in behaviour that we so urgently require. A review of the methodology for setting leakage targets is now under way, led by Ofwat in conjunction with Defra, the National Assembly for Wales, the Environment Agency and the Consumer Council for Water.

Water metering stands at a pathetic 28 per cent. I freely declare an interest. I asked earlier this year whether I could have a meter in both my homes. I must say for Thames Water—much maligned—that the time taken between the knock on the front door and the guy driving away, including everythingto be done, paperwork and the lot, was less than10 minutes. I cannot knock that taking less than10 minutes. I have still to hear from Severn Trent, though, I must say. So Thames Water is not all bad, although we understand that those who need to drive around London cannot do so because their long-delayed attempts to fix leaks are causing chaos elsewhere. I certainly note the criticisms. As the noble Lord, Lord Dixon-Smith, said, it has a second-to-none performance in getting clean water to come out of the taps, bearing in mind the number of times it has been used. We must be balanced about the issues.

Nevertheless, 28 per cent is pretty poor. The water companies have plans to lift that to 47 per cent by 2014, which is not that far away, and to two-thirds—66 per cent—by 2029. They have a range of plans for doing that, including using their existing power to require customers who move to another house to have a meter when they apply to a water supplier as a tenant or owner-occupier, even if nothing has changed in the house except the customer. New dwellings have meters, which is our problem: we have housing stock of 25 million houses, but we build and replace only 150,000 to 180,000 a year. That is pathetic. We will wait forever for meters, whether for energy or for water. However, 2 million houses are marketed each year in England, of which about 1.5 million are actually sold, so there is potential there if the water companies can use their powers.

I have already used up my time, for which I apologise, because I have a whole sheaf of issues to cover and I will have to be the worst nightmare for civil servants as a Minister and reply to Members in a billet doux. There is, however, one point that I must put on the record. I take none of this personally, but, as I have said before, I invite any committee, whether of this House or the other House, to hold an inquiry on the sustainable communities plan. The myths about this plan that are perpetuated in almost all debates—whether on housing, the energy supply, the infrastructure, or water, which we have had again today—are massive. Unless they are rebutted, they will keep being repeated. First, the plan did not come out of nowhere in 2003. The four growth areas of the south-east were identified as far back as 2000-01. There was consultation along the line. The communities plan is a vision document; it does not set out where developments will be. All developments are subject to the normal planning laws. The water companies have five-year plans, which they look at each year, and a 25-year distribution-requirement plan. The water companies and the Environment Agency are fully engaged. None of them can say that the communities plan was a surprise. I fully admit that some areas of the country were asleep, even after it was published. They said that they did not understand what was planned in the growth areas.

I fully accept that there is sometimes some confusion in the public prints—this is mentioned in the report—about the figure of 200,000, which happens to be used in two different contexts. There are not 200,000 more homes in the south-east, but an extra 1.1 million, because 900,000 were already delineated in the plan, although they do not have specific planning permission because they are for particular locations. Everyone already knew about them. The communities plan came along with the aim of lifting that vision over the specified period to1.1 million homes—an extra 200,000 homes. Kate Barker said quite separately that the replacement and rebuilding programme in the country was pathetic. It always has been; every home in this country must last for an average of 1,000 years. Even to say that shows how stupid it is. In Germany and France, average homes are recycled about every 100 years; here, it is every 1,000 years. It is barmy even to say it, but that is the reality of the number of demolitions of old dwellings and the number of new dwellings in this country. We do need an uplift in our output. Kate Barker used the figure of 200,000, which has sometimes got into the lexicon as 200,000 homes for the south-east, but she was talking about England as a whole. It was a national figure for annual production.

There are many issues involving the planning system, the 25-year water-infrastructure plans, Ofwat’s five-yearly price reviews, the water companies, the Environment Agency and individual planning applications. Ashford was a case in point. It is one of the four growth areas, albeit the smallest. There was a real problem with the water supply both in and out of Ashford, but it has been settled to everyone’s satisfaction. It slowed nothing down, and was a surprise to no one.

The water companies, the Environment Agency and the builders are more than happy with the outcome. They are on course to deliver a visionary international city, if we can get the trains stopping and starting there again. It was dealt with adequately in the context of the Sustainable Communities Plan. It is not as though a plan was imposed for all these houses which no one knew about and then it was realised that there was not enough water. That was not the case. All those issues were known to a greater or lesser degree. Anyone who said, “It was a surprise: we did not know about it”, frankly was not doing their job, which applies equally to everyone, whether they were in the water companies, the Environment Agency or anywhere else. There was a full discussion.

The communities plan arrived almost three years after the growth areas were set out in the 2001 plan. We were putting a greater vision on the flesh and making the point—on page 47—that none of this growth would take place unless the infrastructure was put in. Nor was it just physical infrastructure: it was social infrastructure, including police stations and doctors’ surgeries—I agree that these all use water—as well as housing, roads and the odd prison or two, which are also part of the social infrastructure and have to be mentioned. It would not take place unless the infrastructure was there. It is not a question of forcing growth irrespective of the supply of electricity, water, further utilities and other issues. It is set out for anyone to read.

I have said to this House and to committees elsewhere that if they want to do an inquiry into the Sustainable Communities Plan, they should do it, but they should read it first. Now I will give way to the noble Baroness.

My Lords, I am grateful to the Minister. My question follows what he was saying: At what stage—is it before there is any concept of it?—in the planning of big, new housing complexes are those organisations to which he referred involved? Is it before the planning is completed and when it is just an idea at the back of someone’s mind? He is right. There is great confusion and I would be glad for some clarity.

My Lords, there need not be confusion, but I will not go into great detail. Delivery vehicles have been set up in all the growth areas, some of which are statutory, like the development corporations, while others are voluntary, sometimes led by the local authority and involving all the players. All of the four particular growth areas have to go through a public examination when they have decided where, broadly, growth will take place. So there is a full examination in public by independent inspectors who do not come from the department. The department has to give its evidence to the public examination. There is a full, transparent and open process.

When a planning application for an individual site is submitted by a developer, whether it is the development corporation or an individual developer, the normal planning process kicks in, whether that is done by the local authority, or, in the case of a statutory body, the statutory development corporation. There are no shortcuts in the normal planning process. Moreover, along with full planning consideration, long-term discussions are going on into a 25-year scenario for the growth areas. But these myths come about and are borne about by some people—I do not say anyone in this House—who basically do not want the houses built in the first place. That is what it is really about: not accommodating houses for local people so that their children and grandchildren have to disappear to other regions of the country. That is because most of the growth in the south-east comes from indigenous growth.

I have done less than justice to colleagues’ speeches, but I hope that I have got the message of the debate. The Government certainly have. We find the report very valuable except for one or two points. Some of the criticisms might be unfounded, but we are at one when we say that water management is a serious issue. The Government cannot do it all. We need to work with our partners. We have a legacy of poor investment and a legacy of poor understanding which we have to address, but on a whole range of issues I am fairly confident that action is being taken and we can make progress. I would be more than happy if, in the fullness of time, the committee wanted to revisit the issue. That is what needs to happen. The checks and balances on government by way of scrutiny by Select Committees should not just be one-off reports. Eighteen months or two years down the line, the committees should ask how much progress has been made. That is where real parliamentary accountability comes from.

I will try to distil the points raised which I have not been able to touch on and write a general note to noble Lords.

My Lords, it only remains for me to thank all noble Lords who have participated in the debate. We have heard from noble Lords on all sides of the House, including a memorable maiden speech. We recognise that as a country we need to do better on water management. That is not just for the Government but across the whole range, and we have heard much advice from all sides on how that should be achieved. I thank the Minister for his vigorous response on behalf of the Government and while I cannot speak for the rest of the committee, I can give a personal assurance that I will visit Sandwell. I would be very interested to see the recycling plant there.

The Minister also suggested that the committee should revisit this issue. I think we will take him up on that; indeed, we intended to do it anyway. Some interesting issues have been raised both in the debate and in the Minister’s response and we would certainly want to come back on those in a year or two. I thank all who have participated.

On Question, Motion agreed to.