Coffey defends DEFRA record on sewage infrastructure investment

The environment secretary defended Ofwat during a heated evidence session held on Wednesday as part of an inquiry into the water regulator, where the chair of the Industry and Regulators Committee (IRC) accused DEFRA of leaving consumers “up shit creek” over under investment into sewage infrastructure.

Thérèse Coffey (pic: UK Parliament)

The aim of the inquiry, which was launched last May, is to review Ofwat’s performance in meeting its statutory objectives as the economic regulator of the water sector in England and Wales, and how well it works with other regulators and authorities, primarily the Environment Agency and the Drinking Water Inspectorate.

The start of the meeting saw a heated exchange between Thérèse Coffey and the Labour chair of the IRC, Lord Hollick, over the scope of the inquiry, as Coffey shot down a number of questions on how pollution is measured. He continued: “It is disappointing that you're not able to give us your explanation as to why DEFRA has been so ineffective and taken action”.

In response, Coffey disagreed, and said: “I don’t think DEFRA has been ineffective, it has taken action, we are seeing change, we’ve actually opened up the spotlight, it's made it transparent.

“In terms of how the government operates, the relationship between the regulators is there. There's that process. The process has been opened up for more investments. And that's what's happening.”

Hollick picked up on this, and raised concerns about the trade off between water bills and levels of investment, adding that there have been growing concerns about the “spectacular” profits made by water companies and dividends given to water bosses. He said that if that trade off for clean water “puts at risk the health of the environment and the health of the population” then it is a “bad” one.

He said: “That's a trade off that can only be made by DEFRA. To be blunt, as far as I can see, DEFRA has left consumers, to coin a phrase, up shit creek, with little prospect of actually doing anything or any remediation over the next 20 or 30 years because there is a lack of investment.”

Coffey said: “I don't think that's true”. She pointed at the storm overflow reduction plan, and the water industry national environment programme (WINEP). She added that she understood the chair might want that to happen “at a quicker pace”.

Coffey said that a £170 billion investment has been made into water since privatisation in 1989. She noted that in response to dividends, Ofwat’s powers have been increased and said: “Ofwat identified that they thought there was an issue. The government agreed and we've acted.”

As per the current storm overflow reduction plan, all storm overflows must stop discharging untreated sewage outside of severe rainfall by 2050, which attendees of the evidence session described as too late.

Coffey admitted she “would want it done more quickly”, but noted that high costs would be passed on to consumers.

In terms of water companies having the monopoly, to the detriment of a competitive market, Coffey said: “By and large I think there’s a fair balance”.

She also added that she doesn’t anticipate direct government funding will go to water companies to further incentivise investment, saying she believes there is already “sufficient carrot”. She said: “If a company is delivering the outcomes it says efficiently it will generate the profit, and if it doesn’t it will get the penalty.”

Coffey also noted the announcement made in November last year that money from fines imposed on water companies will be reinvested into schemes that benefit the environment, rather than going to the Treasury.

In the face of challenges facing water supply after last summer’s drought, Coffey suggested that more information will come with the publication of a new National Policy Statement setting out planning regulations on reservoirs. On a question about whether such an important long term issue should be left to water companies, Coffey said: “I think the approach that we take is fine. Otherwise we'll have to get shedloads of water engineers into work as civil servants of the government.”

Coffey also told the committee that she  is considering whether DEFRA’s research budget can be used in collaborative projects to improve the current state of the water system.

Ofwat is also being investigated by the Office of Environmental Protection, who launched their investigation in June.