Regulation expert warns public anger warrants a new model for water sector

Professor Sir Dieter Helm banged the drum for the integrated catchment model he has long championed – but with renewed urgency in the light of current public anger about water – in a new paper, Time to pull the plug on the water privatisation model.

Characterising the situation today, Helm said: “What has gone wrong? Pretty much all that could. There is too much pollution, too little investment, too high returns, and grossly excessive executive salaries. All this and no clear efficiency advances over most of the European public sector comparators.”

He prescribed the following to address the problems:

• a clear and unambiguous statement of objectives from government;

• actions by water companies to secure a social licence to operate, including “reasonable salaries and rewards; no financial engineering; simple corporate structures; transparent third-party reporting; and executive accountability of failures”;

• integrated catchment plans to achieve the objectives at least cost via competitive cross-sector bidding for delivery work – this requires a catchment planner, which should be in the public sector and should integrate funding pots; and

• a recasting of regulatory institutions to deliver the objectives on a catchment basis.

On the last point Helm argued for:

• the abolition of Ofwat;

• the Environment Agency should morph into an Environmental Protection Agency (EPA), with a slimmed-down format, merge with the Office for Environmental Protection and focus on enforcing environmental legislation, inspecting, monitoring, advising, and fining where there are serious breaches;

• new bodies should regulate the main catchments, empowered with licence obligations that are transferred to them – they should integrate farming environmental land management scheme subsidies where appropriate. and flood defence works should be split off; and

• -water companies should be regulated via the requirement, as a condition of gaining contracts to carry out work, to meet certain standards of conduct. “This could include reasonable remuneration, clear and transparent reporting and monitoring, and so on.”

Helm dismissed Defra’s new Plan for water: “The objectives are vague and ill defined, the policies are not up to the tasks, they are not integrated, and the 16 organisations involved that are listed out in the annexes are mostly siloed. None is actually in charge of delivering the integrated catchment approach that Defra’s 'policy plan' claims to be pursuing.”

He had a little more time for Labour’s idea to merge Ofwat and the EA (minus its flood defence activities) as a step in the right direction, but said this was just a “better sticking plaster” and did not go far enough.

Helm concluded: “The sheer scale of public anger is a once-in-a-30-year opportunity to put it right, reform properly and create a new model that lasts. This is what is not only needed, but practical. Time to pull the plug on the existing model, and move to a model that is fit-for- purpose.”