This first instalment of guidance specifies all the policy areas that the Government expect to affect water and sewerage companies' obligations in the years 2005–2010. In particular, it sets out a number of potential improvements that companies may be expected to make in their water resources policies, on drinking water quality and to help environmental water quality.

The guidance is about ensuring regulators and water companies take account of future policies affecting the water and sewerage industries, be they environmental, social or economic. Previous periodic reviews have produced ambitious and successful programmes of improvement in water and environmental quality. The Government will expect these gains to be maintained and, where possible, further improvements to be made.

In deciding how far and how fast to take improvement programmes the Government will also take account of the effects on customers. The guidance identifies some of the themes that will be of increased importance in this review. First, there will be greater attention paid to the existing water and sewerage system, including issues of asset maintenance, leakage and sewer flooding. Second, the Government wish to see some further improvements in the water environment, based on sound information. Thirdly, policy choices must give due weight to the economic and social effects of water policies, especially on those who are most vulnerable.

The water companies and regulators should next work together to design and cost the measures that would be necessary to deliver the possible range of policies set out in the guidance. This work should include consideration of the cost-benefit and cost-effectiveness of measures.

Many of these policies will arise from European or other statutory obligations, but there are still many policy choices to be made. In the light of further advice from the regulators in the second half of 2003 on the benefits of policies and their potential impacts on customers' water bills, I will take decisions on what policies should proceed. I will then issue my principal guidance on this early in 2004.

Ultimately, the people who matter most in this review process are the customers and it is their interests which most forcefully inform the policies contained in the guidance. Customers are concerned with more than simply paying their water bills, but also in being able to enjoy the benefits of clean water through the tap and in the environment, and it is important that our policies strike the right balance in their interests.

The BFI undertook a first inspection of Rotherham metropolitan borough council in October 1999, and the report was extremely critical of the council's housing benefits service.

This follow-up report finds that the council has failed to implement the majority of the BFI main recommendations from the first inspection. The council has not implemented a prosecution policy and no sanctions have been applied. There is still no management-checking regime and the council has failed to introduce the verification framework despite having plans to do so after our first inspection.

While there are some improvements in overpayment work, the lack of management information meant that BFI could not report in any detail on this area.

The council has developed an action plan for improvement. It has also completed a performance standards self-assessment of all areas and drafted a prosecution policy, which has been approved by Members. However, the council's track record raises doubts as to whether improvement will be achieved within a reasonable timescale.

In 2001–02, Rotherham metropolitan borough council administered approximately £56.5 million in housing benefits. This is approximately 13 per cent of its total gross revenue expenditure.

The report makes recommendations to help the council address the remaining weaknesses and to further improve the administration of housing benefit and council tax benefit, as well as counter-fraud activities.

My right hon. Friend the Secretary of State is now considering the report and will be asking the council for its proposals in response to the findings and recommendations of the BFI.

Our immediate task is to give assurance to students and the wider community that the existing system is stable and effectively managed—this remains our short term priority.

In the medium term, we will make practical changes to introduce more flexibility and choice so that students' programmes can be better tailored to their needs and aptitudes.

For the longer term, we need to discuss and implement reform that will put in place a system that is fit for 21st Century needs.

THE SHORT TERM

Mike Tomlinson's two reports following his independent inquiry into last summer's A-level problems provide a sound basis for restoring confidence in the A-level system. In his final report, he offered an assurance, which we accepted, that the actions he has recommended would secure the standards and integrity of the 2003 examinations. The QCA and the relevant awarding bodies are urgently taking forward those recommendations to secure the effective delivery of this year's examinations and to ensure that the problems of last summer cannot be repeated.

NEXT STEPS FOR THE MEDIUM TERM

We will make changes to the curriculum, which will give students greater freedom to choose programmes of study that better meet their needs and strengths. We will reduce the number of compulsory subjects in key stage 4 to English, mathematics, science and ICT, with an entitlement to study another language, design and technology, an arts and a humanities subject. We announced our broader conclusions on modern foreign languages in our language strategy in December. All 14–16 year-olds will learn about work and enterprise, and will also continue to be taught citizenship, religious education, sex education, careers education and physical education. Students will be entitled to study literacy, numeracy and ICT up to age 19 until they have achieved a level 2 award (equivalent to a good GCSE). But we have decided not to proceed for the present with our proposal to introduce a new A "with distinction" grade at A-level, preferring rather to support advanced extension awards.

We will further improve the choices open to young people by developing "hybrid" GCSEs that combine traditional general subjects with their vocational applications. We will discard the unhelpful distinction between "vocational" and "academic" GCSEs and A-levels. We intend to improve and expand modern apprenticeships so that by 2004 28 per cent. of young people will be able to enter them.

We will develop a consistent approach to teaching and learning across the whole 11–19 age range in schools and colleges. We will pilot a range of measures, building on the proposals set out in "Schools: achieving success and Success for All", drawing on existing best practice and the opportunities presented by e-learning.

These reforms will be delivered through local innovation and partnership, bringing together different learning institutions and employers. The Green Paper proposed a programme of 14–19 pathfinders to test local delivery in a range of settings. We have announced the first 25 year one pathfinders across all regions in a variety of local circumstances to expand collaboration in innovative ways, building on the increasingly distinctive specialisms of local schools, colleges and training providers. We expect all of them to be in place by the end of January 2003. We will shortly be inviting expressions of interest for a second round of pathfinders to begin in September 2003. We will introduce a range of measures to support local delivery of the 14–19 agenda, including practical changes in inspection and performance management arrangement and funding flexibilities.

REFORM FOR THE LONGER TERM

These measures will help to improve participation and achievement while avoiding further major upheaval in a system that has undergone substantial recent change. We are clear that, in the longer term, further changes must address:

the need for a much stronger vocational offer;

the requirement for more manageable assessment, which recognises all of a young person's achievements;

the aim of broadening choice and stretching students, with a unified framework of qualifications designed to provide opportunities for young people of all abilities.

We will appoint a working group for 14–19 reform, under the chairmanship of Mike Tomlinson and with its membership drawn from those with direct experience of 14–19 education, higher education and industry, to consider and make recommendations on these longer term issues. We have asked Mike Tomlinson to report the group's interim conclusions within one year, with a view to finalising its work within 18 months.

Together these immediate and longer term reforms will help us realise our vision of a 14–19 phase of flexible, yet structured provision, delivered by schools, colleges and others working innovatively together to meet the needs of all learners and of the economy.