Recommendation 27

HM Government Acknowledged

In the Strategic Policy Statement for Ofwat, the Government has made clear its expectation that Ofwat will support an increase in the use of nature-based solutions where appropriate and act in the interests of the environment and customers. recommendation to incentivise the use of nature-based solutions. The sector faces multiple challenges, and to be able to meet them, will need to deliver sustainable solutions. In its strategy, Ofwat stated that it will encourage companies to make more use of nature-based solutions, including Sustainable Drainage Systems (SuDS). For the 2020–25 period, we allowed funding for investment in a substantial amount of wastewater assets and nature-based solutions, and Ofwat will continue to support investment where it is needed. For example, the Green Recovery package (totalling an additional £2.8 billion of environmental investment) allowed £100 million of funding for investment in catchment management and nature-based solutions. In the 2014 price review, Ofwat introduced a total expenditure (‘totex’) framework. A totex framework allows companies to choose between capital and operating solutions, helping to improve incentives for companies to bring forward nature-based solutions. Nature-based solutions can require ongoing management and operating expenditure, relative to conventional treatment solutions which tend to be capital expenditure. As part of PR24 Ofwat is actively considering whether we can do more to incentivise nature-based and other operating expenditure-based solutions and encourage a substantial increase in investment in this type of solution. In their engagement with stakeholders on the design of the next price review, Ofwat is explicitly asking for views on how they can further encourage companies to collaborate and work in partnership with others, such as on nature-based solutions, to achieve better outcomes for customers and the environment. Ofwat is also a driving force, alongside Defra and the Environment Agency, behind the Water Industry National Environment Programme (WINEP) taskforce. An outcome of the taskforce is to ensure that from now on, nature-based solutions are truly on a level playing field with other solutions and that they are considered ‘by default’. With Defra, the Environment Agency, the Drinking Water Inspectorate and Natural England, Ofwat has been part of the nature-based solutions regulatory group which was set up to explicitly look at any regulatory barriers that may stand in the way of greater adoption. The work is now being taken forward by the Catchment Based Approach (CaBA) group and Ofwat is working with its members to achieve the step change we need to see with the uptake of nature-based solutions