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House of Lords Hansard
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National Policy Statement for Water Resources Infrastructure 2018
11 April 2019
Volume 797

Motion to Take Note

Moved by

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That this House takes note of the draft National Policy Statement for Water Resources Infrastructure 2018.

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My Lords, plentiful water is vital for securing reliable drinking water supplies, for growing food, for energy production and other industry, and to sustain biodiversity. Securing a sufficient supply of water in the future will be more challenging as pressure from a growing population and climate change impact on us. We will also have to reduce current levels of abstraction from some sources to protect the environment.

The National Policy Statement for Water Resources Infrastructure forms part of a wider framework that the Government have established to deliver two of the goals of the 25-year environment plan: clean and plentiful water and reducing the risk from natural hazards such as drought. The purpose of the national policy statement is to summarise government policy on nationally significant water resource infrastructure in England, including setting out the need for that infrastructure.

The national policy statement draws on a number of reports looking ahead to 2050 to quantify the expected deficit in terms of water available for supply. The most recent was published last year by the National Infrastructure Commission, which was established to provide independent expert advice to government on the nation’s future infrastructure needs. It suggests that immediate action is needed to close a gap of 3.3 billion litres per day to maintain current levels of resilience. This compares to the 15 billion litres per day currently put into the public supply. We need to tackle this challenge on two fronts, reducing demand and increasing supply through a twin-track approach.

In the decade or so after privatisation, the water industry took action to reduce leaks, and levels today are down by one-third compared to 1994. However, in recent years progress has stalled and still around one-fifth of the supply is lost—around 3 billion litres per day. The National Infrastructure Commission calculates that some 1.4 billion litres per day could be saved by halving leaks by 2050. Furthermore, the Secretary of State has made it clear that a step change to reduce leaks is needed and that the industry should deliver the commission’s recommendation. For the next round of business plans, the industry has committed to an average 16% reduction by 2025; a good first step towards the 2050 target. This long-term goal is stretching, but we must be ambitious, given the challenge that we face.

We must also act to reduce our demand for water. More efficient appliances can help, but it is also about how we behave and how we value water. The water companies can help by supporting their customers to reduce the amount they use each day and they have committed to do this in their draft business plans. Levels of consumption have reduced from around 150 litres per person per day in 1999 to around 140 litres per person per day now. Actions such as revising building standards in 2015 to allow local authorities to set a higher efficiency target of 110 litres per person per day compared to the normal 125 litres per person per day for new developments, will help progress. We estimate that this standard has been adopted by around 25% of local authorities. It means that people living in new developments meeting this standard use around 30 litres per day less than those living in existing housing stock. However, I am sure we all agree that more needs to be done.

In the coming weeks we plan to launch a call for evidence on setting an ambitious target for per capita consumption. This will establish a target against which we can measure the progress of the Government and the water industry. Alongside the call for evidence, we will consult on the policy options required to reach our consumption target, such as labels providing information on the efficiency of water-using products, improving building standards and the future role of metering. We know that metering can be an important part of changing behaviour. Customers with a meter use on average 33 litres less each day than those without. The level of metering varies between companies but now stands at around 50% nationally. Action set out in draft water resource management plans would increase this to 83% by 2045. So there is much more we can do to reduce demand.

However, even with considerable ambition, fixing leaks and reducing the amount each of us consumes, there is more we must do. The gap remaining by 2050 after action to reduce demand will be around 1 billion litres per day. We also therefore need to focus on providing additional supplies. This means new or upgraded infrastructure that might transfer water across a company’s area or between companies. It might mean a new reservoir, or it could come from other solutions such as desalination or the treatment and reuse of sewage effluent. Each of these options has pros and cons. There are choices to be made as to the best balance of different infrastructure types.

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I thank the Minister for giving way. This issue of new reservoirs is absolutely central to the debate about new infrastructure for water. The Minister said that there might be a need for new reservoirs, but paragraph 2.6.7 of the Draft National Policy Statement says:

“New reservoirs are likely to play an important role in securing resilient supplies”.

That comes before the passage on water transfers, and raises the very big issue in water infrastructure of whether we have a national system of water transfer to enable water to be distributed from the north, where there is a surplus, to the south, where there is a shortage. It does not say whether the Government’s intention is to place a higher priority on new infrastructure for water transfers than on reservoirs. What the Minister has just said about how there “might” be reservoirs rather than this being “likely” will, if he does not mind my saying so, create further uncertainty in the wider public. Is it “might” or “likely”? What is the hierarchy in the Government’s planning between new reservoirs and new infrastructure for water transfer?

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I think that the noble Lord is speaking in the gap, but perhaps I could address those points now. In that passage of the speech, I was taking your Lordships through what may be the range. It may be that I will have to address the crispness of language, but I assure the noble Lord and your Lordships that I will turn in a substantial part of my remarks to the need for further reservoirs. That passage was to say that there will be a range; we will have to assess what its elements will be as we gain more water, as I hope the noble Lord will understand, given his experience on these infrastructural issues. I can fairly confidently say that the next passages of my speech will talk about the fact that, yes, we will need new reservoirs. I hope that that is helpful.

The assessment of options and the choice of the best solutions are made as part of the statutory water resource management planning process. Every five years, the water industry looks ahead at least 25 years into the future to work out how much water will be needed to maintain supplies to customers. Water companies then evaluate all the options, including testing them with customers through consultation, before deciding on the best combination to deliver what is needed. These plans are then assessed by the Environment Agency before publication is approved by the Secretary of State. The most recent round of the process is coming to a conclusion and, despite more ambitious action to reduce demand, it is clear that in the coming decade more infrastructure will need to be built. In total, the infrastructure need in current draft plans broadly meets the deficit of 1 billion litres identified by the National Infrastructure Commission.

The Government, regulators and industry continue to improve the water resource management planning process and are strengthening the national and regional dimension through the Environment Agency’s national framework and the regional group of water companies. Ofwat’s recently established regulatory alliance for progressing infrastructure development will further supplement co-ordination between companies and the identification of appropriate projects.

Some infrastructure schemes will be large enough to qualify as nationally significant and will need to be considered using the national policy statement. The national policy statement itself identifies the national need for schemes of this nature, so it does not need to be demonstrated again through the planning process. This is where one of the main benefits of the Planning Act 2008 regime comes into play, streamlining the planning process for nationally significant infrastructure projects and ensuring timely delivery of schemes that will be vital for securing water supplies.

The national policy statement will apply to certain types of infrastructure that meets criteria set out in the Planning Act 2008. Some of your Lordships may recall that an order amending the Act was debated and agreed in November last year. The national policy statement will apply to infrastructure to facilitate water transfers, desalination plants and reservoirs with a deployable output of 80 million litres per day. Additionally, reservoirs with a physical volume of 30 million cubic metres would be included.

The Government have consulted on the development of this Draft National Policy Statement—a process that was described as exemplary by some of the witnesses who appeared before the EFRA Select Committee. We consulted on our initial approach in November 2017 and on more detailed proposals around the size and type of infrastructure that should be covered in April 2018. In November 2018 we launched a consultation on the Draft National Policy Statement as we laid the document in Parliament. Those responding to the consultation included: water companies; environmental groups, such as Blueprint for Water; local authorities; and organisations that provide advice on planning and infrastructure projects. There was broad support for the need for the statement and its relationship with water resource management plans. We will take into account the responses from consultation and any recommendations that emerge from parliamentary scrutiny when we produce the final national policy statement by the autumn. We will explain how we have done this in the formal government statement of response.

As required by the Planning Act 2008, an appraisal of sustainability has been carried out on the national policy statement alongside a habitat regulations assessment. This significant piece of work formed part of the first consultation in November 2017, incorporating feedback, including that from statutory consultees such as Natural England and the Environment Agency. The national policy statement has incorporated and will continue to be informed by recommendations from the appraisal. The final appraisal is published alongside the final national policy statement.

Having set out the need for infrastructure and the relationship with water resource management plans, the national policy statement sets out assessment principles to guide the examination of applications and more detailed guidance on the construction and operational impacts of the infrastructure types meeting the criteria of the Planning Act 2008. When deciding whether to make an order granting development consent to nationally significant water resources infrastructure projects, the Secretary of State must have regard to the national policy statement. The planning issues set out in the national policy statement that need to be considered in relation to nationally significant infrastructure align with those in the—

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I apologise for interrupting my noble friend’s flow. I declare an interest as chair of the Cambridgeshire Development Forum. As my noble friend will know, Cambridgeshire is the driest place in the country, but none the less it has probably the fastest rate of housing growth. I want to ask a question before he moves to the nationally significant infrastructure projects. It seems that the national policy statement, in talking about shaping water resource management plans, was not quite specific enough about taking account of spatial strategies in so far as these are produced by combined authorities, in our case, or local planning authorities. There continues to be an issue about ensuring that the necessary investment is in place to supply water to development projects and not to lead to any delay, as we want to build houses and build out, and doing so is one of the Government’s objectives. That can be because the investment ahead of need criterion sometimes applies, as interpreted by the regulator. Can my noble friend perhaps look at this so that, through the water resource management plans and Water Resources East, for example, we can ensure that not just the nationally significant infrastructure projects but some of the more regional and local projects are incorporated into the water companies’ investment plans, and the regulator enables them to support some of that investment, which they currently tend to treat as speculative?

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My noble friend has engaged in something that clearly is part of the reason why we need to be thinking about a range of things. The noble Lord, Lord Adonis, in quizzing my perhaps imprecise language, pointed to the need for a balance of work that will need to be done. I live in Suffolk—Cambridgeshire, Suffolk and many parts of the east are dry and will have increases in population. Part of the responsibility, working collaboratively across the piece, is to ensure that in building these houses we ensure resilience of water supply. This is precisely why a lot of work is going into this. A lot of work needs to be done in increasing supply and reducing demand.

My noble friend raises an issue that is an enormous part of the challenge. We need to supply more houses in some of the driest parts of the country. That is why I deliberately stressed in setting out the challenges that we may need to use a range of options to deal with the elements in different parts of the country. I do not want to go into desalination, because I probably do not know enough about it. However, one can imagine that there may eventually be parts of the country where this is a viable or commercial option. For the future, with a growing population—we know that there could be another 4 million in England by the end of the decade—we will need to find more water and reduce demand. My noble friend raises an absolutely acute point, certainly in relation to Cambridgeshire.

I want to emphasise a point that came up in our debate last November. When decisions are made at the national level, the Planning Act 2008 and regulations made under it set out the consultation requirements for development consent order applications, which include extensive pre-application consultation and engagement with those affected by the proposals. Furthermore, members of the public can participate in the examination process by registering their interest, thus ensuring that local views can be heard. I think that we would all agree with that.

The national policy statement is an essential piece of work to ensure that our nation has sufficient water supply and that we use it wisely. It forms part of a wider framework, which will deliver on our goals in the 25-year environment plan. Our current estimate is that up to three nationally significant projects—all reservoirs—are likely to come forward in the next five to 10 years to provide sufficient infrastructure. Looking to 2050 and beyond, more are likely to be required.

I look forward to hearing from noble Lords on these essential matters. I can assure your Lordships that the Government and their agencies are working on this matter with rigour. A number of questions may be posed and I will endeavour to answer as many as I can. However, the Government and I are most interested in assessing your Lordships’ further commentary on this matter so that we can use parliamentary scrutiny to the best benefit. I beg to move.

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My Lords, I am delighted to follow the Minister. I listened to his comments with great interest and thank him for the inclusive way in which he presented this document and his arguments to the House. I accept, in general, the logic of his presentation, although it triggers some worrying questions, to which I will return in a moment.

I recognise that the statement applies primarily to England. I am glad to participate, because it has a huge significance to Wales. The whole subject of water resources has been said to be a burning issue in Wales from time to time—it certainly has been a difficult one. The question of the framework within which policy is developed and executed in relation to the transfer of water from Wales to English conurbations certainly comes into the ambit of what we are discussing today.

I hardly need to remind noble Lords of the background to this: our bitter experiences of the previous century, encapsulated in the Tryweryn Valley saga. Briefly, that entailed Liverpool Corporation, after failing to secure either of two sites in north-west England, identifying the Tryweryn Valley near Bala in Gwynedd as a suitable location for its purposes. In Westminster, legislation was driven through against the combined opposition of all but one of Wales’s 36 MPs to flood the village of Capel Celyn and purloin the farms there to create a reservoir. The purpose of that project was to supply and sell industrial water on Merseyside. Liverpool Corporation ran the whole project to make money for itself and refused to pay a reasonable extraction charge for water it secured from the Tryweryn reservoir. This was a massive political hot potato. That experience colours all our considerations in Wales of issues relating to the supply of water to English conurbations.

I say this by way of context to the debate. As the Minister referred to in his opening comments, it was widely reported earlier this year that demand for water, particularly for south-east England, is likely to increase massively over the next two decades. Clearly, where possible, it makes good sense to reduce leakages, to encourage self-limitation on water use, to develop techniques such as desalination, to recycle where appropriate and to mitigate any negative implications of climate change.

The document before us recognises that planning consent for water resources infrastructure projects in Wales is a matter for the Welsh Government. Paragraph 1.2.3 on page 3 states that consideration must be given to,

“the potential socio-economic and environmental impacts of nationally significant infrastructure related to water resources infrastructure in Wales and Scotland, given their borders with England”.

I would be grateful if the Minister could spell out what exactly is meant by that in practice. Paragraph 2.2.6 highlights the impact of population growth, such as the estimation that,

“the population of England will grow by … 9.6 million by 2040”.

To some extent, that may occur largely in south-east England. It will exacerbate the water deficiency that already exists there. We know from publications over three decades that much thought has been, and is being, given to water transfer schemes, such as creating linkages to supply water from the River Severn to the Thames Valley. Clearly, that has implications for water storage and its release into Welsh rivers.

In this content, paragraph 4.1.3 emphasises the need to work with the devolved Administrations, on which I want to focus my concluding remarks. Given the politically explosive nature of these matters in Wales, good sense dictates that there should be some form of standing dialogue structures between the Department for Environment, Food and Rural Affairs on the one hand and the appropriate people from the Welsh Government on the other. This should be operational at both a political and technical level. Of course, the technical level should include environmental and biodiversity dimensions as well as planning and resource considerations.

Any new proposals with cross-border implications should be highlighted at the earliest possible opportunity and discussion triggered through the procedures I just mentioned. The concept of exploratory consent in principle should be developed, and it should be accepted that no proposal can be taken forward unless there is formal agreement in principle on both sides. Does the national strategy project’s approach, which the Minister mentioned earlier, potentially involve projects in Wales? If so, does it overrule the planning powers given to the National Assembly? If so, that could trigger a strong reaction and create the sort of problems we need so much to avoid.

I recognise that the document refers, where appropriate, to the need for consultation where cross-border issues arise. What I am calling for goes way beyond consultation. There is a need for a mutuality of approach, and for a solution not to be imposed cross-border unless there is a genuine acceptance on cross-border issues. Incidentally, that approach should be taken on matters such as dredging and marine management too, not just water abstraction.

Finally, in terms of the use of water abstracted or provided via reservoirs in Wales, there should be reasonable payments made. If Liverpool Corporation was entitled to create an income stream from water obtained from Wales, surely we in Wales should be entitled to some financial benefit. If projects that are needed to meet water shortages in some parts of England require water from Wales, there are two ways of going about it. First, there is the unfortunate approach of Liverpool Corporation in the 1950s. The alternative is to recognise that any cross-border project must have quantifiable benefits for Wales as well as England. If that approach is taken, there is no reason why, in future, we should not be able to have a harmonious relationship on these matters, unlike our experience in the Tryweryn Valley saga.

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My Lords, I welcome this debate and am delighted to follow the noble Lord, Lord Wigley. I declare my interests on the register. I co-chair the All-Party Parliamentary Water Group with the honourable Member Angela Smith in the other place. I also do some excellent work with the water regulator for Scotland—the Water Industry Commission for Scotland—and, through that, with WAREG. I am vice-president of the Association of Drainage Authorities and I am the recently appointed president of the NEA.

I am extremely proud of the work I have done with the Water Industry Commission for Scotland, through which we managed to achieve a contract for technical assistance with the Romanian equivalent regulator, under the auspices of the EU. Through WICS, I have worked with WAREG—the European association of water regulators—and have seen first-hand the importance of sharing best practice both between member states and between existing member states and applicant countries to the European Union.

I congratulate the Minister and the Government on producing this draft national policy statement and, in particular, on the collaborative way that they have worked with the water sector in producing it. It plugs the gap to boost water efficiency, originally as set out in the Walker review. It is interesting that it has taken this long for water efficiency to become the order of the day, but I welcome the recent initiative shown by the Environment Agency in this regard. Successive Governments have implemented the recommendations of the Cave review on competition and, in large part, the recommendations set out in the Pitt review for flood and water management.

I echo the importance that my noble friend has attached to infrastructure and resilience in that regard. I have a passion for SUDS, or sustainable drainage systems, which I hope my noble friend will share, and also for the building of more reservoirs. That begs a question, given that it is one of the remaining issues from the legislation that was set out between 2010 and 2015. I urge the Government to deal with the de minimis rule that is currently discouraging the greater use of reservoirs on farms, golf clubs and caravan parks. I notice that, both in the document and in the Minister’s remarks, the focus is especially—and, probably, quite rightly—on nationally significant infrastructure projects in the next three to five years. I urge the Minister and the department to look at the importance of smaller reservoirs, too, particularly in areas of increasing water stress, where the environmental impact will surely be much less—both in the building of reservoirs and their maintenance.

I entirely endorse the remarks that my noble friend made about leakage. About seven years ago, Yorkshire Water, under measures it signed up to during the last price review, invested in setting up a highly commendable leakage programme. The programme was set back by three days of sub-zero temperatures reaching minus 17 degrees. I defy anyone to be able to protect pipes from freezing at that temperature. I hope that the Minister and the regulator will look kindly on companies that operate under the additional burden of sub-zero temperatures. As I say, it is impossible to protect against leaks in such circumstances.

As we have heard, water companies face increasing challenges of water stress from population growth, housebuilding, global warming and climate change. I recognise that, of all the challenges they face, surface water flooding is one of the greatest and most recent. I welcome the Government’s catchment management approach, which brings together all the relevant partners, but if it is to succeed, one body within each catchment area must be identified as the lead organisation. They must decide which organisation should take the lead, and that will differ from area to area. However, the approach may fail if no one actually takes ownership of the catchment. In many areas, it may be the water company, while in others it may be the drainage board. This needs to be identified in order to enhance the excellent work that is being done on catchment management.

Natural capital is becoming increasingly significant in government policy, yet it remains nebulous, hazy, vague and indistinct. I urge the Government to put more meat on the current bare bones. I refer to the report, Bricks & Water, co-authored by the honourable Angela Smith MP and myself, which has been published under the auspices of the Westminster Sustainable Business Forum and Policy Connect. If my noble friend Lord Gardiner has not received a copy, I will make sure that one is dispatched to him. The report puts forward a number of specific proposals to local authorities, including that they should consider carefully how planning permission for major developments can best be delivered, ideally with the use of SUDS going forward and possibly meeting the even bigger challenge of retrofitting SUDS to historic drainage systems. Also, one of my pet wishes is to end the automatic right to connect to the water supply. This is one of the key recommendations in the Pitt review, but we have still not actually taken it on board.

I welcome the Government’s commitment to reduce per capita consumption, and we have seen how that can be delivered in part through Building Regulations. I hope that my noble friend will look at other jurisdictions, in particular Scandinavian countries like Denmark, where loos are specifically designed to limit the amount of water that is released with each flush. That, along with the use of grey water, must be considered going forward in order to improve resilience and encourage the greater use of innovation.

My noble friend referred—as does the draft national policy statement—to the importance of transfers between water companies and, as the noble Lord, Lord Adonis, has said, the potential for creating a national grid. I would look no further than to congratulate Yorkshire Water, which I believe is the first water company to make a significant investment, delivering a 31,500 kilometre network of underground pipes to ensure that, in times of stress in one area or another, one company can supply water by transferring it from one area in the region with plentiful supplies to another which is suffering from a shortage at a particular time. I welcome similar investments which are being planned from 2020—under the 2019 price review—by companies such as Anglia Water, which has also planned a multi-million pound development.

All major housing developments must pass the test of being built in appropriate places using appropriate infrastructure. We must stop building on functional flood plains, and we need to end the right to connect. I commend the use of natural flood management and defence schemes. My noble friend will be familiar with pilot flood defence improvement schemes such as the Slowing the Flow at Pickering programme, where the planting of trees and the creating of bunds, mini-dams and peat bogs, which take 200 years to develop, is being undertaken. It is a long-term project, but it has already prevented any further flooding in Pickering, a town which used to flood every two or three years. I would place much greater emphasis—I hope I can persuade my noble friend to do so—on natural flood defences rather than on elaborate engineering projects. There is scope for much more rewarding schemes for public good under the environmental land management schemes that Defra imagined going forward. I hope this can encourage the use of such natural flood defence schemes.

Innovation was recognised for the first time in PR14, which encouraged investment in innovation, and as water consumers we have reaped rewards from that. PR19 focuses much more on outcome delivery, with a greater focus on pay against performance. A debate yet to be had is on the role of competition as opposed to regulation, but this is possibly for another day. I would argue that the question of ownership of the water sector and water companies—whether they should be in public or private hands—is a debate we are going to have, possibly at the next general election. However, I would commend the level of investment we have seen in the last 30 years through privatised water companies investing in improvements in water quality on our beaches, in our drinking water and in our rivers.

I conclude by asking my noble friend a number of short questions. When might we expect the environment protection Bill, and when will the office for environmental protection be up and running? What role will abstraction play in the draft NPS, amid competing uses and an ever-decreasing supply of water? I urge his department to use its best endeavours to ensure that SUDS are used in every major housing development going forward. I make an urgent plea that we end the automatic right to connect. In this regard, will he look favourably on using his good offices to confer the status of statutory consultee on water companies in the planning application process? Finally, what greater clarity does my noble friend the Minister intend to give—

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The noble Baroness says we should end the automatic right to connect, but would that not create severe problems for new enterprises if they cannot be sure that essential infrastructure for them to operate will be available when they go about their lawful and proper activities? How does she see this issue being resolved if there is not an automatic right?

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I refer the noble Lord—who, given his previous roles, is much more knowledgeable on these matters—to the Pitt review.

How can we ask water companies already in areas of national stress—whether the north-east, where there are pockets of national stress, or the south-east and East Anglia, where we have heard that there are specific problems of water stress—to supply water and take wastewater away safely if they are not consulted and do not have the wherewithal? I have seen first-hand in areas such as Filey that new developments are built on fields that take displaced water—flood-water, essentially —and that water then goes into existing developments. I do not think future home owners should put up with that. Developers go in, build projects where there have been no sustainable drainage systems in place and walk away. We are creating something that I would like to see fixed once and for all—I am not discouraging new enterprises—by giving water companies the tools to do the job. Let us ensure that they are heard. Have we not seen that, once the Environment Agency secured the status of statutory consultee, its advice has been heeded much more rigorously than was ever the case in the past? I rest my case.

Finally, I urge my noble friend the Minister to give greater clarity to natural capital, what is meant by natural capital and what greater role it might play in water policy going forward.

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My Lords, the noble Baroness raised a number of very pertinent questions and the Minister will wish to address them. I congratulate the Minister on his opening remarks, which set out the issues involved. As a former chairman of the National Infrastructure Commission, I wrestled with these issues myself.

My concern is that the draft national policy statement we are debating today is essentially a list of considerations that need to be addressed in the development of a national strategy for dealing with water infrastructure. It does not set out a strategy. Look at all of the key issues: what should be the policy going forward on water metering, which is crucial? Will we move towards water metering and, if so, when? The Minister said that the Government would come forward with a consultation on that. What will be the policy in respect of new infrastructure? Will we commit to new reservoirs or not? Will we have a national water grid or not? The Minister did not offer any clear way forward on any of those issues and neither does the document, which simply lays out a number of considerations. I am very glad that it pays tribute to the work of the National Infrastructure Commission, and I pay tribute to my colleagues there who wrestled long and hard with these issues. But it does not appear to take the debate forward.

As soon as one gets into the actual issues at stake, they are very controversial. The issue of whether water metering will be mandatory is controversial because it will impose new requirements on householders, many of whom do not want mandatory water metering partly because it imposes the potential of real additional costs for the consumption of water.

The noble Lord, Lord Wigley, referred to the Tryweryn Valley saga, which alongside the building of airports and the closing of railways is one of the great infrastructure controversies of the last generation. I add another controversy to the list: the Abingdon reservoir saga of the proposal to build the first new reservoir in the past 30 years in Abingdon. It was proposed by Thames Water and went to public inquiry. It was reviewed by Ofwat which then ruled against it after a very long controversial planning saga and the reservoir was not built. There is still a big debate about whether that was a huge missed opportunity.

The document itself does not actually say anything about new reservoirs. I probed the Minister on that and he very elegantly said that the plans coming forward would address that issue. But on the questions of whether we will or will not be building new reservoirs, will or will not have a national water grid or will or will not have mandatory water metering—three absolutely critical issues in terms of a water infrastructure plan—the Government have ducked them all so far and have simply kicked them forward. The vogue phrase at the moment is kicking the can down the road. I say gently to the Minister that this draft national policy statement kicks the can down the road.

I raise that because if the can is kicked down the road and this becomes the national policy statement, the onus will in fact be on the water companies to come forward with plans that will then go to Ofwat to go through a regulatory and economic assessment with the Government having the reserve power to intervene or not. I simply say to the Minister—I need to be brief because I am intervening in the gap—that that will not work when it comes to taking controversial decisions. We have been there and it has not worked in the past. That is what the Abingdon reservoir saga shows us. The only way that you will get controversial new infrastructure built is by the Government taking the lead with a government infrastructure plan.

My underlying concern about the draft national policy statement is that it could turn out to be a complete irrelevance. If we need to go into the era of building significant new infrastructure, which we might well need to do, it will have to be at the behest of the Government. It cannot come from private water companies and this does not resolve the issue of how the Government will take forward plans for significant new national infrastructure.

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My Lords, this is a very important subject and I thank the Minister for his extensive introduction. Water resources and ensuring that there is a sufficient supply to meet the needs of the nation are extremely important, as every speaker has said. It is life-saving. This is a reasonable piece of legislation and has some significant steps forward, but it is not perfect. I have three concerns to flag up. The first is around demand management. The second is on the need to tackle climate change if we are to have sufficient water into the future; and the third is the need to ensure that all infrastructure development achieves a high net gain for the environment.

Turning first to the important issue of demand management, this NPS does not make it clear how demand management can be prioritised before allowing hard infrastructure solutions. Paragraph 3.5 outlines a need to assess alternatives. This sounds like a box-ticking exercise after a decision has been made, rather than a determination by the Government to ensure that small-scale demand management or green schemes are prioritised. Disappointingly, the objectives set out in paragraph 1.10 do not refer to the need for demand management and its role in minimising the need for additional hard infrastructure and in meeting the Government’s sustainability goals.

The Liberal Democrats have long argued that, instead of focusing solely on new infrastructure, the priority should be lowering demand in the first place. The role that demand management can play in helping reduce demand, and consequently what this means for the scale of need for nationally significant water infrastructure projects, has not been made clear in this NPS. How will the Government prioritise demand management in order to drive down the need for new, expensive infrastructure?

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Does the noble Baroness’s party support mandatory water metering? I am curious to know.

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The noble Lord asks a question to which unfortunately I do not have the answer at my fingertips. I will write to him and let him know.

The draft NPS suggests that,

“maintaining the current level of resilience in future will require at least an additional 3,300 Ml/d of additional capacity in the water supply system by 2050”,

yet there is no indication of how much capacity could be gained from demand management. In its excellent report on water, the National Infrastructure Commission suggested that aiming for additional capacity of 4,000 Ml/d will require a minimum of 1,300 Ml/d additional supply infra- structure by 2030, in addition to around 1,400 cubic metres being met through leakage reduction and 1,500 cubic metres being met through efficiency and metering. The relationship between the two is not iterated in the NPS.

Although we acknowledge the need for supply infrastructure, it is important that the NPS does not result in perverse incentives against small schemes and schemes that do not meet the NSIP criteria, such as effluent reuse. For example, there remains a total lack of incentives to encourage developers and water companies to work together on projects such as greywater and rainwater recycling. This could help in areas identified by the noble Lord, Lord Lansley. Another example is the potential role of natural flood management in increasing resilience to dry weather and providing storage. What support is available to promote small-scale schemes and green infrastructure projects, as mentioned by the noble Baroness, Lady McIntosh?

Just as dealing with water leaks varies hugely across water companies, so ambition around demand management varies widely across the country. Some companies are working hard on this, but not all. There is also much variation in per capita consumption targets. On PR19 Southern leads the way on PCC with its target of 100, but only five other companies are still aiming for less than 120 litres per person per day by 2040 to 2045. That is fewer than half of all water companies. Water leakages are around 20%, and the National Infrastructure Commission has said that halving water leakage by 2050 could deliver one-third of the additional capacity required—so leakages are key. What are the Government doing about putting pressure on water companies to deliver on that and avoid the need for one-third of future infrastructure water resource projects, which cause huge disquiet where they are sited?

Page 13 of the NPS states:

“The Government is also exploring other options for reducing consumption’.

Will the Minister spell out exactly what the Government have in mind? When the Water Bill was going through Parliament, these Benches supported compulsory water metering, with reduced tariffs for those in particular need. France has this scheme but the UK does not. Could the Minister say whether the Government are specifically considering this?

Secondly, climate change should be a big driver for the need for new water resource infrastructure. The Government should be leading the way on this issue. Paragraph 2.2.7 sets out clearly that climate change will lead to water shortages. Green NGOs, such as WWF, have argued that all NSIPs covered by this NPS should aim for carbon neutrality, given the long-term nature of the infrastructure and the need for significant reductions in energy use. This may be particularly difficult in relation to desalination plants, which are very energy intensive as fossil fuels currently fuel the plants. However, it is not impossible to reduce the impact, given developing technology and offsetting. I suggest that the Government adopt a hierarchy approach, with developments required to look first at energy efficiency, followed by green energy provision and use, with carbon offsetting as a backstop. Does the Minister agree with this?

Lastly, we support the proposed requirement for a scheme to achieve net environmental gain. However, it should be made clear that net environmental gain must require, first and foremost, a biodiversity net gain, as the noble Lord, Lord Wigley, said. This is similar to that proposed for development under the National Planning Policy Framework. In addition, we support the requirement for an environment statement. This should play a valuable role in understanding the environmental trade-offs and overall approach taken by the developer.

This is a welcome NPS. I look forward to the Minister’s comments and agree with many of the comments that have already been made.

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My Lords, I am grateful to the Minister for introducing this debate and to all noble Lords who have contributed. As the debate has gone on, it has become increasingly clear that it is a common misconception that the UK is a damp country. In reality, we are in the lower quartile globally of available water resource per capita.

Extreme weather changes from climate change, coupled with an increasing population, as the Minister said, especially in the drier southern and eastern areas, has put our water system under severe pressure, which is likely only to get worse. Across England, there is now a one in four chance of a level 4 serious drought between now and 2050. If that were to happen, it would lead to huge enforceable water consumption limits, on a scale that the current population has never experienced and would find very difficult to tolerate. To ensure resilience of water provision, we would need an extra 4 billion litres every day by 2050.

Across the UK, an increasing number of areas are undergoing “water stress”. In 2007, the south-east of England was designated as being in “serious water stress” by the Environment Agency. The latest projections show that there will be 4.1 million more people living in the south-east region by 2045, an increase of 21%. By 2080, there could be an extra 10 million. Projections show that if no action is taken, most areas will simply not be able to meet water demand by 2050, with significant water shortages, particularly in the south-east of England.

Adapting to climate change means that we cannot continue with a situation where water companies are losing 20% of water to leaks—2.9 billion litres per day. At the same time, it is imperative that we improve the quality of our freshwater resources as well as tackling drought and unsustainable abstraction. Historically, relationships between water companies, housebuilders and local authorities have been complex and disjointed, without a clear sense of overriding priorities.

There has been a short-term focus on climate change at a local level and as a result insufficient progress is being made, particularly locally. For example, only 43% of local authorities plan at least 15 years ahead. Local authority planning budgets have almost halved since 2010, and over a third of planning policy staff have been lost. Only 42% of local authorities have any kind of climate change strategy. Local authorities are not resourced or geared up to the challenge ahead. They need the help, the guidance and the structure that this kind of report will give them for making decisions.

In this context, the publication of this NPS for water resource infrastructure goes some way towards giving clarity and purpose. However, I agree with my noble friend Lord Adonis that very difficult and often controversial decisions need to be taken, and this document is not sufficiently clear on how those decisions will be taken and who will be making them when the chips are down. It is not just a local authority decision; ultimately, decisions will need to be taken at the national level. There are difficult decisions ahead, and we need further clarity on how they will be handled.

We agree with the priorities set out in the draft document. Obviously, securing long-term resilience and protecting customers is vital, but we also need to ensure that any reforms are affordable and do not have adverse socio-economic impacts. We need to ensure that future policies prioritise sustainability, not profits. The noble Lord, Lord Wigley, illustrated that point extremely well. It is becoming clear that water—which we used to take for granted as being free—has an increased value, and a commercial value. We need to be clear about the ownership and decision-making structures when water sources are being raided.

This also means making some bold decisions about how we can focus back on to protecting our environment, which is not simply nice to have, but absolutely crucial and underpins the decisions that we make. We need healthy rivers and wetlands, combined with protected groundwater levels, to sustain the increasing population. It has always been thought that environment was a nice extra, but it must be put centre stage in the whole planning process. It is particularly crucial because we know that the current levels of water abstraction are unsustainable. As the WWF has reported, nearly a quarter of all rivers in England are at risk because of the vast amount of water being removed for use by farms, businesses and homes. Therefore, we need to be clear that any increase in nationally significant projects and expanded local developments of the kind talked about by the noble Lord, Lord Lansley, who I see is not in his place, is in danger of leading to more overlicensed and overabstracted rivers, which is simply not sustainable. We need to support proposals to measure future planning applications against the environmental impact assessment and the habitats regulations assessment. We welcome the fact that this has been flagged up in the document.

I agree with the noble Baroness, Lady McIntosh, that the concept of SUDS should also be written into and underpin the document. Again, all too often we have seen that the consequence for local developments where that has not happened and for the people who subsequently live in those properties can be catastrophic. Ultimately, there has to be a clear demonstration of environmental net gain, which is fundamental to the planning process for all the reasons we have outlined, and for the ongoing sustainability of our water supply.

The document also rightly identifies the cost of waste and leaks. We need urgent action to reduce water leaks, with demanding and enforceable targets for action by water companies, year on year. This must be combined with greater consumer awareness of the value and potential scarcity of water, so that we all play our part in water conservation. That point was well made by the Minister.

While we support the overarching themes of the proposals, I have some specific questions for the Minister. First, one of the two main priorities listed in the NPS is the protection of customers—ensuring every home and business can depend on a resilient water industry. Unfortunately, this is not the case at present. The House might remember that, in March last year, thousands of homes went without supply for over four days straight. What steps are Ministers taking to ensure that water companies do not leave households without a water supply for prolonged periods?

Secondly, the NPS highlights flood risk—not only how climate change will lead to an increased risk in areas susceptible to flooding, but also the implications for other areas not thought of as being at risk. As the Government consider flood defences, what plans do they have to introduce integrated water management, so that water trapped by flood defences can be used in other water-stressed areas?

Thirdly, it is clear that the changes that need to be made to the infrastructure will come at considerable cost. The NPS points to the conclusions made by the National Infrastructure Commission that the cost to maintain current levels of resilience—relying on emergency measures for more severe droughts—will be between £25 billion and £40 billion to 2050. With these costs anticipated, can the Minister justify the high pay of water executives, especially in light of Ofwat’s comments that this high pay has damaged customer trust?

Finally, it is clear that we must all look towards new technologies to cope with increasing demand on the supply of water in years to come. What assessments have the Government made of rainwater harvesting technology and other future technology applications, such as advanced recycling techniques? How are they being funded and what actions are the Government taking to bring the best ideas to fruition in the shortest time?

We welcome this document, but it is only one in the package needed to shape the future of our water supply and its control. As we go forward, it is important to make the interrelation between these different planning documents clear. My noble friend Lord Adonis asked where the ultimate decisions will be taken and whether we can be sure they will be bold, because we face a severe challenge in the road ahead.

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My Lords, my predictions were correct. We have had great experience, much more than mine, displayed across the House on these matters. I therefore emphasise that I do not have all the answers. The intention was not for me to deliver a diktat on what the Government have decided on an important matter. It is our responsibility. We are having this debate and the consultations because one of the great responsibilities of Government is to supply one of the most essential components, not only of our lives, but of the whole ecosystem. I have made a careful note of all the questions and will not be replying to each in serried ranks, because much will unfold in the further response. I take on board what your Lordships, in their experience, have thrown into the pot, as an important resource to consider.

We have all identified the undoubted challenges that we need to address to make sure there is enough water to supply businesses and homes, and—as mentioned by all noble Lords, but specifically the noble Baroness, Lady Jones of Whitchurch—to protect the environment. This is at the core of our lives.

I turn to the noble Lord, Lord Wigley, who set out some of the historical mistakes and how one should not do things. England has always welcomed water from Wales. I was not quite as convinced when it was in flood in the Severn, but he made the point that there are ways to address these matters. We would all say that what happened before was not the finest hour of bureaucratic rule. The geographic features of Great Britain dictate considerable cross-border flows, as I have mentioned, and undoubted water dependencies between England and Wales.

To safeguard water resources, water supply and water quality, and minimise the potential for risk in this area of the Administrations’ respective responsibilities, the Secretary of State and the Welsh Ministers agreed the Intergovernmental Protocol on Water Resources, Water Supply and Water Quality, which came into force on 1 April last year. Planning systems are devolved in the UK, so any infrastructure elements of cross-border schemes require all relevant permissions from the relevant authorities within those jurisdictions. The guidance on water resource management plans sets out that a company should consult the Welsh Government for sites that affect Wales. Nothing in the Planning Act 2008 overrules the relationship with Wales with regard to water resources.

A number of other points were raised by my noble friend Lady McIntosh of Pickering. I fully intended to talk of Slowing the Flow at Pickering, but quite rightly she got there first. This is a prime example of natural capital. I think that we would all agree to the use of natural capital alongside—when we have to use it—hard engineering in certain towns, including some of those in Cumbria. We need to slow the flow above but we also need to invest in hard engineering in certain places. The most important part of what we have been learning—my goodness, we needed to learn about it—is that natural capital is a resource as well as supplying a much-needed element of our ecosystem.

A number of your Lordships, including the noble Baroness, Lady Bakewell, raised the issue of small reservoirs. Whether they are on farms or are to supply part of our national water supply, the decisions remain with local planning authorities. The Environment Agency’s national framework and regional groups will consider the whole need in a region, not just public water supply. This should help to meet the needs of smaller users, where appropriate. In the future, particularly in the agricultural sector, marshalling of water through farm reservoirs may be much more common than it already is in certain parts, particularly the eastern counties.

My noble friend Lady McIntosh and the noble Baroness, Lady Jones of Whitchurch, mentioned floods, which clearly are also important. Defra is spending £2.6 billion to protect the country better from flooding. This involves 1,000 flood defence schemes, with the intention of protecting 300,000 homes by 2021. In terms of real-terms increase, the figures reflect the fact that we need to do something and have needed to do something about flood protection and investment for quite a long time.

The noble Lord, Lord Adonis, from his previous position, particularly in terms of infrastructure, will know these matters much more intricately. We need to ensure that government and all the water regulators work together and challenge industry on its ambitions about leaks and customer consumption, and on how the needs of neighbouring companies are taken into account. We want companies to build on this in the next five years. Ofwat’s regulatory alliance and the Environment Agency’s national framework are intended to and will support the maturing regional water company groups, making sure that large water resource options that come forward for development have been adequately evaluated and are the best to meet both national and regional need, as well as that of individual companies.

I was at a meeting with the water companies about this winter’s issues, to which I think the noble Baroness, Lady Jones, referred. I had better be careful and diplomatic with my words, but the Secretary of State was correct, polite and robust in saying that matters had to be attended to. The water companies were in no doubt of the need to address some of the points made, and that it was not acceptable for customers to be without water. However, having had frozen pipes, I recognise what my noble friend Lady McIntosh said about those who work for water companies and who were out and about dealing with water pipes at a time of extreme weather. There is a balance to these matters.

In response to my noble friend Lady McIntosh on the environment Bill, someone has to say the following words from the Dispatch Box: “We wish to introduce the Bill in the summer. We have consulted on a range of changes to water legislation which may be included”. I am sorry that that is what I have to say, but I hope it is sufficient to indicate that we clearly wish to make progress on this matter.

I agree that we want further uptake of SUDS in planning and building regulations. Defra, the Environment Agency and MHCLG are working on this matter; it is an important force for good. A number of noble Lords, including the noble Baroness, Lady Bakewell, and my noble friend Lady McIntosh raised the issue of net gain. The noble Baroness, Lady Jones of Whitchurch, rightly described it as “crucial”. Paragraph 3.4 of the statement concerns environmental net gain. This means achieving biodiversity net gain first, then going further to achieve wider benefits, to deliver ecosystem services and make schemes with wider beneficial impacts on natural capital. Defra has consulted, and will continue to consult, on how best to incorporate natural capital into the planning system. It is extraordinary that we are having to discuss these matters as if we had discovered them. Working with nature seems to me an obvious consideration.

The noble Baroness, Lady Bakewell, raised resilience. It looks as though we are going to have changes in rainfall due to climate change. This could mean droughts and severe rainfall. How do we capture it so that, when we have to endure floods, we can work the system to use that water appropriately and to best advantage? This is going to be a vital element of protecting the environment. As all noble Lords said, we need to reduce demand as part of the process. We have to engage with ourselves, as well as with everyone outside this Chamber, on reducing our consumption of water. We should be looking at how other countries are dealing with the demands of increasing populations, perhaps climate change and using water wisely.

The National Infrastructure Commission sets out very good arguments for increasing resilience further. As the Environment Agency develops its national framework, we expect to test what is needed and what it would cost to increase to prepare from a one in 200-year drought to a one in 500. The current draft national policy statement alludes to this but, assimilating what your Lordships’ and others will say, the final draft can make this particularly clear. The noble Lord, Lord Adonis, intervened on the contributions of the noble Baroness, Lady Bakewell, and my noble friend Lady McIntosh about mandatory metering.

Where the Environment Agency has designated a water company as “water stressed” it can consider mandatory metering if appropriate. We will be consulting in coming weeks on further changes. It is very interesting to see the statistics from water companies on proposals for leakages and on metering numbers. We need to look at the evidence: the evidence for metering is self-evident if we are all to reduce our water consumption, but we also need to be mindful in that arena that some vulnerable parts of the community probably need a disproportionate amount of water compared to others.

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What the Minister just said is very significant: he said that the Government will be consulting on further changes. Will the options for further changes include national mandatory metering?

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The noble Lord is rigorous in his questioning and I will be opaque in this answer: I would not want to pre-empt anything that may come up. Noble Lords have made some interesting comments, but I am not in a position to give the range of choices because I have not got that before me. I think it is always unwise to make policy on the hoof, but the noble Lord has made an important point.

The noble Baroness, Lady Bakewell, raised leakages, something we all feel very strongly about. Ofwat expects companies to justify their leakage performance commitments relative to the minimum level of leakage achievable and expects those companies with the worst records on leakage to go further. There is no doubt about it: Ofwat set out draft determinations for three fast-track companies: Severn Trent, South West Water and United Utilities. All three water companies had proposed a 15% reduction in leakage, but United Utilities is one of the companies with relatively high leakage. As part of the process, for instance, United Utilities has agreed to increase the reduction to 20% over the period 2020 to 2025. I know that this is an area the public feels very strongly about: we need to ensure that water is used wisely and that we reduce leakages very strongly.

The noble Baroness, Lady Jones of Whitchurch, raised water abstraction and the protection of the environment. As I said in my opening remarks, current levels of water abstraction from some sources will need to be reduced, because it is clear that the environment in some parts of the country is being jeopardised. That is in line with the water abstraction plan published in 2017 and river basin management plans. Clearly, we need to work with all parties to ensure that we get the right result for the environment, but yes, as I think the noble Lord, Lord Adonis, referred to, water is important for enterprise and for ensuring that this country has an economic heartbeat, so it is important that we get this right. Going back to the reason we are having this debate, we will need to invest in major infrastructure projects: that is at the heart of all the issues we have rightly discussed today. We must reduce demand but also have to attend to increasing supply. We want to go further in protecting the water environment because that is of prime importance. The noble Baroness also referred to loss of supply. The Government expect companies to increase their investment in water and sewerage in order to maintain a resilient network, fix leaks and prepare for severe weather. That is part of their responsibilities.

Looking through the key points that your Lordships raised, I hope that I have attended to quite a lot of them. I am certainly not seeking to kick any can down the road: in fact, that is not my style of words. I say to the noble Lord, Lord Adonis, that that sounds as if I am about to drop litter, which of course I have a passionate phobia about. This piece of work—and today’s debate—is absolutely not about kicking this essential matter down the line. It is about having parliamentary scrutiny and consulting organisations that have a stake in getting this right for us all. I will reflect on Hansard, because key points have been raised on demand, climate change, net gain and—I have referred to this—support. We recognise that we will need both big national infrastructure projects and small-scale projects, which is part of what I have described in lay language as the balance of how we are good custodians of our water supply.

The noble Lord, Lord Adonis, and the noble Baroness, Lady Jones, spoke of difficult decisions. I agree. The whole purpose of this debate, and for taking this matter forward, is that difficult decisions have to be taken for the national interest. If everyone is to have water, that will mean that we may well, provided it is done properly, courteously and correctly, have to ask parts of the country about this—the busy south-east and other parts of the country where reservoirs, for instance, and other infrastructure projects will be not only in the national interest but probably in the local interest as well.

I shall read Hansard again and assure your Lordships that all the points that have been made, particularly given the experience of many noble Lords, will be very important in bringing policy forward. If any of your Lordships would like to have discussions and further meetings at any stage, I would be very pleased to accommodate that.

Motion agreed.