HC Deb 21 January 2003 vol 398 cc5-6WS
the Secretary of State for Environment, Food and Rural Affairs (Margaret Beckett)

I have today issued initial guidance to the Director General of Water Services setting out the Government's water policies in England for Ofwat's 2004 periodic review of water price limits. The review will produce price limits, set by Ofwat, for the years 2005–2010. The Government will assist the review with policy guidance at key stages.

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.