The plans will take full account of the planned housing development that is necessary, particularly in the south east of England.
'This is an important time for water policy.
The current drought has reminded us all of the importance of providing a sustainable water supply system capable of meeting the essential needs of consumers both now and in the future.
As you would expect I have been keeping a close eye on the drought situation, as has the press of late. The Environment Agency considers the current drought in the South East to be the worst for 30 years.
A pretty depressing August has helped but we are not out of the woods yet.
Water companies in the South East are currently following their drought plans. Most have imposed hosepipe and sprinkler bans.
The Secretary of State has granted Drought Orders to Mid Kent Water, Southern Water, and Sutton and East Surrey Water to further restrict non-essential uses of water. Only the latter has had to be implemented.
The first thing I have to say is that people have responded well to both hosepipe restrictions and the general media campaign to save water. Companies have reported a demand saving of between 5-15%
Drought Order powers if they need to be used, should be used sensitively and progressively. We do not want small businesses relying upon water to suffer unnecessarily, but we must remember that the public supply is there for domestic customers first and businesses second. We believe this is right in terms of government policy.
While hosepipe bans and restrictions on non-essential use of water may be unwelcome, the cost to a water company, and ultimately its customers, of avoiding the need for such controls during a prolonged drought would be extremely high. It is far more cost-effective, and potentially less environmentally damaging, to manage demand and impose some restrictions to conserve water through the use of hosepipe bans and occasional drought orders and permits.
Of course, the water companies know that effective planning is essential if they are to meet future demand for water brought about by climate change, population growth and the increasing pressure for housing. This has been amply demonstrated by the drought.
In October last year we made drought plans, produced previously on a voluntary basis, a statutory requirement. The first set of drought plans were submitted to the Secretary of State at the end of March.
The current focus of the drought is planning against the prospect of another dry winter. The companies will be updating myself and the Secretary of State on this when we meet them again in early December.
We also intend to make the long-term 25 year water resource management plans statutory in the autumn. After consultation earlier this year our aim is for the legislation to come intoforce by next April.
Water resource management plans detail how each company aims to achieve a sustainable supply-demand balance for the public water supply. For the first time water resource management plans will be subject to public consultation. The plans will set out the assumptions made by the companies in terms of frequency of restrictions - such as once every ten years for hosepipe bans - that may be necessary during drought to protect the environment and the public from excessive bills. The public will be able to comment on those assumptions. The plans will take full account as well of the planned housing development that is necessary, particularly in the south east. The Secretary of State will be able to direct changes to the plans in light of the responses to the consultation.
Because of the current drought, there has been much speculation in the press about the possibility of a 'national grid' for water. Today the Environment Agency published its report on the case for major transfers of water into the south east.
The report concludes that 'there is no new evidence of a need for large-scale transfers of water to south east England from the north of England or from Wales'.
The Agency has estimated that constructing a pipeline to transfer water from the northern Pennines to London would cost at least four times more than the new and enlarged reservoirs planned in the south east.
The Agency has also looked at recently published proposals by the Institute of Civil Engineers for increased transfers of water from Wales to the south east. It concludes that river transfers between the Severn and Thames' catchments would present significant environmental issues: the acidity of water in the Severn would be expected to be damaging to the ecology in the Thames.
The drought has also highlighted the importance of leakage - indeed
this has been a large part of the media coverage. I congratulate
the majority of water companies who have increased their efforts and met their annual leakage targets. However, I remain concerned that a small number of water companies have failed to meet their targets in successive years. I certainly expect to see Ofwat take robust and effective steps to ensure that future targets are met.
When we are urging consumers to use less water during periods of drought it is essential that water companies set an example by managing their pipe networks effectively and meeting their leakage targets.
I am also concerned that the current framework used to set leakage targets to reflect economic levels of leakage commands neither the understanding nor the confidence of the public. I am not yet satisfied that the present approach takes proper account of the full range of costs and benefits, especially environmental and social costs.
That is why Government has proposed a review of the way leakage targets are set, which is being led by Ofwat in conjunction with Defra, the National Assembly for Wales, the Environment Agency and the Consumer Council for Water. I want to see a methodology for setting leakage targets that is fully fit for purpose. I also want the review to improve on the reporting of leakage management, enabling the public to better understand the extent and funding of repairs and mains replacement.
There is an important role for water customers to play in achieving the efficient use of water.
Government is already helping water efficiency. Envirowise for instance provides free, practical environmental advice to UK businesses.
The Government introduced the Enhanced Capital Allowance Scheme for sustainable water technologies in 2003. We are also assessing the feasibility of a voluntary water product labelling scheme.
Earlier this year, following a consultation on a Code for Sustainable Homes, Yvette Cooper announced that there would be mandatory minimum standards for water efficiency and energy efficiency in new homes. A project was set up to look at effective, enforceable ways of encouraging the efficient use of water in new homes, existing homes and commercial buildings.
We haven't reached definitive conclusions yet, but work is well advanced and we expect to consult on a range of options by the end of the year. It is a topic on which many people I know have strong views and we look forward to giving everyone an opportunity to contribute to the debate.
I genuinely believe it is important that we all work together to halt the trend of rising water consumption by domestic households. That is why the Water Saving Group was set up and chaired by my predecessor Elliot Morley.
This Group brings together Government, regulators and the industry to promote water efficiency.
The group has adopted an action plan covering customer perceptions and awareness, best practice in promoting water efficiency, information gaps, priorities and funding, the policy and regulatory framework; and measuring success, including targets.
I certainly note that the IPPR report is strongly in favour of water efficiency targets. The Environment Agency is leading work for the Water Saving Group looking at investigating possible benchmarks and targets for water efficiency in households and also the quantity of water put into supply. The Water Saving Group will be considering the outcome of this work carefully and I would certainly want to take into account the report that IPPR have produced.
Metering is one way to encourage households to use water more carefully, but as a long term demand management tool, not a response to short term resource considerations.
The Water Saving Group's action plan includes targeted action for increasing metering in water stressed areas, and improving the understanding and delivery of metering generally.
Currently 28% of households are metered, and this number is growing at 2% a year. The water industry estimates that the savings made from metering are around 10% for a typical household. The way I see it, while metering is growing, so is support for wider-scale metering, particularly in areas of water stress.
Recently the House of Lords Science and Technology select committee recommended making it easier for water companies in water stressed areas to obtain water scarcity status and therefore impose compulsory metering.
Folkestone and Dover Water Services were the first company and so far the only company to be granted Water Scarcity Status. The company can now compulsorily meter its customers, and plans to go from 40% to 90% of households metered in ten years. We certainly want to work closely with the company to learn lessons from what they are doing.
The Water Saving Group's view is that a compulsory change to universal metering is not justified on water resource grounds. Its proposal is that in water stressed areas, companies would be expected to include in their draft water resource management plans a business case for the possible contribution to demand management from compulsory metering. The Environment Agency would identify the areas of water stress.
This proposal would incorporate the current provisions allowing compulsory metering in 'water scarce areas' into the water companies'
resource management plans.
I am pleased that IPPR support these proposals. I think it will be widely seen as sensible and justified to target metering where we particularly need to save water and expect companies to examine the business case for metering alongside alternative and complementary measures including leakage and water efficiency. It also seems sensible to bring the possibility of compulsory metering into the 25-year strategic framework of the water resource management plans.
Metering is not an answer in itself, but it is a tool that should be available as part of the strategic planning of water supply and demand.
I very much welcome the Water Saving Group's collaborative approach and its metering proposal. It is not in doubt that metering saves water. The Water Saving Group has highlighted a strong case for metering in water stressed areas. The Government is doing further work in this area and will respond to this proposal in due course.
Of course in developing any policy related to charging we must consider the effect on customer bills, especially for vulnerable groups. In particular it will be important to consider how best the choice of the right metered tariff can deliver both the desired outcomes we want - water saving and fair water charges.
The Government is leading action on responding to both the short term and long-term issues in ensuring a sustainable water supply. In the short term we support the action of companies and regulators to see us through this present drought. We are leading contingency work on the possibility of a third dry winter and we are looking to modernise the regulatory approach to hosepipe bans and drought orders against future water shortages.
In the longer term we are pressing on several fronts - leakage, water efficiency, metering, customer awareness and a new integrated strategic planning approach to water resources. Much of this work is being taken forward by the Water Saving Group. On many of these fronts we could do a lot better. There is no room for complacency. We need all of these measures, not just some of them. We also need to keep our eye on the issues, even after the short-term media focus moves on from the current interest in drought. I can assure you that as the Minister responsible for the water industry that I will not lose my focus on ensuring a sustainable water supply for the future.'