Water Services (Hansard, 19 October 1993)

§ Mr. Gummer

In our document "Water Charges: the Quality Framework", my right hon. Friend the Secretary of State for Wales and I have today responded to the Director General of Water Services' request for our perspective on the policy context of the review of water company price limits which he intends to complete next summer.

Our safety and environmental standards are already high, but it is right that where necessary they should be further improved to achieve sustainable use of our water. Our privatised companies are already investing £3 billion a year to this end. Their charges are low compared with elsewhere in Europe.

Charges will have to rise to finance further improvements. But they must also be sustainable. We expect that the water companies will continue to make significant efficiency improvements, and the law requires the Director General to be rigorous in identifying the scope for reduced costs.

But we must also strike the right balance between the pace of quality improvements and costs, so that people do not face excessive increases in bills in the short term. In Europe and at home, we have to ask whether our priorities are right, whether benefits justify costs, and whether today's consumers are being asked unnecessarily to pay for long-term benefits.

For our part, we shall look hard at costs in deciding how and when we place further obligations on water companies. We propose to make it a duty for the Environment Agency to do this. Meanwhile we expect the National Rivers Authority and the drinking water inspectorate to do so when they are not legally precluded from taking costs into account.

The Government are also inviting their EC partners to re-examine priorities, for example, in the detailed implementation of the urban waste water treatment directive, so as to focus on the most immediate environmental concerns. The European Commission has already begun a much-needed review of the drinking water directive and we welcome its assurance that its proposals will be fully costed in relation to the likely benefits.

The Director General sought certainty about the obligations that water companies would have to meet in the period 1995–2005. Such certainty facilitates efficiency and cost-reduction. But it is not reasonable to expect society to place itself under a 10-year moratorium on health, safety and environmental improvements: if, for example, a serious risk to health comes to light, we could not take 198W immediate action. But price limits do not need to take account of possible obligations which have not yet been decided upon.

A copy of the response has been placed in the Library.