We haven't always got it right but the cost of inaction is huge
The water industry stands at a crossroads. Today, all water companies in England and Wales will submit their five-year investment plans to the regulator, Ofwat, for consideration. Combined this amounts to a £96 billion programme of investment in our water infrastructure – the biggest in the sector’s history and an enormous 90% increase on the current period. This level represents about 40% of the rest of Europe combined and is designed to put on a firm footing the security of our water supplies and to start making significant inroads into tackling some of the environment challenges we face. These plans will also create more than 30,000 new jobs, a near 50 per cent increase in the current workforce, as well as 4,000 apprenticeships right across the country.
We know that the industry has not got this right in the past. Over the past thirty years since privatisation, investment has risen by 84 per cent and we now have among the cleanest and safest drinking water in the world, pipes now leak over a third less water than they used to, and the proportion of beaches rated excellent has risen seven-fold. But to be clear, much of our infrastructure dates from the Victorian era and is nearing the end of its useful life. Despite the fact that investment rose significantly, it did not keep pace with the challenges from an ageing infrastructure, population growth and climate change. Nor did it meet public expectations on the environment.
The facts speak for themselves. Our population has grown 18 per cent since the 1990s. Since then, no reservoir has opened, and sewage treatment has not expanded fast enough. With less investment than we needed, we have had the benefit of relatively low water bills. They have fallen by nearly 20 per cent in real terms since 2010.
Bill rises are never welcome, but in keeping bills low, the environment and the security of our water supply has been paying the price. Those issues now need to be confronted head-on.
The regulatory process has been designed to be rigorous, ensuring that any investment proposed is money that is used wisely. Ofwat will be pouring over the plans before determining what is allowed, and at what price, before announcing its conclusions in the run-up to Christmas 2024.
And people will rightly want to see results from any increase in bills that Ofwat allow. That is what the proposals aim to deliver. For example, if approved, they will allow the development of up to ten new reservoirs and up to nine new desalination plants. New cross-country pipes will carry water from the wetter North to the drier South. And in England, companies aim to triple the current level of investment to reduce storm overflows of sewage into waterways. Not only that. If approved by Ofwat, the health of England’s rivers will improve enormously, with 90% less phosphorous from water companies by 2027 than in the 1990s, in line with the Environment Act’s ambitious targets for the most damaging pollutants. These are the kinds of new projects that companies want to deliver, the country needs and the public rightly expects.
Importantly, the independent regulator will ensure bills are no higher than needed to fund each improvement and will only approve them if they agree they are new, necessary and represent value for money. If improvements aren’t delivered, bills will automatically be reduced.
And water companies are determined that nobody is left behind. I can announce today that water companies in England will provide more than two million additional households with help on bills, more than double the current number, with packages of support ranging from reduced tariffs to payment breaks to help with debt.
The need for investment to upgrade and expand our system is true across the UK. Whether the infrastructure is owned by the state, as it is in Scotland or Northern Ireland, or by a regulated company, as it is in England and Wales, the picture is the same.
As an industry, we have apologised for not acting quickly enough on sewage spills and are planning our largest ever investment to put it right. Ultimately, it is up to the regulator and to our politicians to determine the level of investment they will allow and the extent to which they too are willing to reflect the public’s concerns. We cannot afford to shirk these difficult decisions any longer.
This article first appeared in The Times on the 2 October 2023.