§ Mr. Burgon
To ask the Secretary of State for the Environment, Transport and the Regions what further guidance he has given the Director General of Water Services in the context of his periodic review of water company price limits. 
§ Mr. Meacher
The Director General of Water Services, Ian Byatt, is currently engaged in a periodic review of water company price limits in England and Wales between April 2000 and March 2005. As part of the review, the Director General sought guidance from Ministers on the environmental and drinking water quality requirements to be placed on water companies during this period. This is an essential element in establishing the extent of companies' investment programmes and in turn enabling the Director General to fulfil his statutory duty to set price limits which enable the companies to finance the proper carrying out of their functions.
In September 1998, the Government published "Raising the Quality", which set the strategic framework of environmental and quality standards for each of the main areas of investment. In March of this year, the Environment Agency and the Drinking Water Inspectorate published material which had been endorsed by Ministers, setting out detailed requirements for each company at the level of individual investment schemes. In July, the Director General published draft price determinations and 168W set out the assumptions on which these were based, including the size of the investment programme in each company.
One area which has been the subject of subsequent debate is the size and phasing of the environmental programme. I have looked again at the programmes of each of the nine large water and sewerage companies in England. In the case of seven of these companies (Anglian, Northumbrian, North West, Severn Trent, Thames, Wessex and Yorkshire Water) I have reconfirmed my original guidance that the entire agreed investment programme should be completed by March 2005. This encompasses work on improving rivers and unsatisfactory intermittent discharges and in upgrading coastal sewerage and sewage treatment systems. For Southern Water, I have again reconfirmed my earlier guidance that the agreed investment programme should be completed by March 2005, save for a small proportion of the programme to improve rivers.
The size of the investment programme for South West Water deserves special consideration, given the level of water bills in comparison to the remainder of the country and the scale of the environmental requirements which are necessary or desirable, particularly for coastal sewerage discharges. I have considered carefully the investment package which underlay the draft determination proposed by the Director General and have concluded that this strikes the appropriate balance between the pace of environmental improvements and the burden on water bill payers. I have also accepted the Director General's advice that a large scheme proposed by Wessex Water, designed to address low flow problems in the Hampshire Avon area deserves further study to identify the most cost-effective solution. A scheme will need to go ahead in the pricing period to address the environmental problems, once the studies are complete.
I have asked the Director General, in his final determinations, to phase the investment programmes sensibly, taking into account my stated environmental priorities, such as the early improvement of large continuous coastal sewage discharges, together with schemes to benefit key bathing and shellfish waters, within the constraints presented by the need to ensure efficient financing and practical delivery. Further discussions will be necessary between water companies and the Environ ment Agency before the timings of individual schemes are finalised.
The Director General also identified 63 of over 550 schemes designed to improve the quality of rivers, which he recommended should receive further study in terms of their costs and benefits before they go ahead. The Environment Agency has advised that for 14 of these schemes, the evidence suggests that no investment is necessary during the pricing period, given the current performance of the treatment works involved, while a significantly less expensive option has already been identified for one more scheme. On this basis I plan to instruct the Agency to take these 15 schemes forward. I intend to ask the Environment Agency to explore in more detail the benefits of the remaining schemes and to set them out in a way which will allow Ministers to judge these against improved information on costs from Ofwat and the companies concerned.169W
Improvement of the water environment is an urgent priority. This package demonstrates the Government's firm commitment to protecting the environment and delivery the objectives of sustainable development, including recognising the burden placed on water bill payers. The focus now shifts to the Environment Agency and water companies as they work together to deliver these improvements.
This programme confirms my intention to press ahead with an unprecedented water quality programme which will make England's water—whether for drinking, recreation or for the support of biodiversity—cleaner and purer than it was ever before.
I have written to the Chairman of the Environment Agency today with further details of the agreed environmental improvement programme. A copy of my letter has been placed in the Library of the House.
The Director General of Water Services will announce his final price determinations for the period 2000–05 on 25 November.