Source · Select Committees · Public Accounts Committee
Recommendation 26
26
Acknowledged
Lack of formal mechanism to balance environmental improvements with water sector affordability and investment.
Conclusion
We asked whose responsibility it is to balance environmental need with affordability. Ofwat told us that there is no formal basis for making trade-offs between affordability and making improvements, nor was there in previous price reviews.87 Defra acknowledged that there had been “deep under-investment” leading to a big jump up now.88 Water UK told us that a former minister had turned down a reservoir application in the past on the basis of “no immediate need”. It also told us that it would have been cheaper to start infrastructure projects when interest rates were lower.89 First Economics told us that the previous price review was a “lost opportunity” to do more investment, and this was a collective failure on the part of the regulators, Government and companies.90 The role of the independent Water Commission
Government Response Summary
The government states that Ofwat has a statutory duty to ensure that water companies can finance their functions while protecting customers, and that Defra sets the overall policy framework and environmental objectives.
Government Response
Acknowledged
HM Government
Acknowledged
Ofwat has a statutory duty to ensure that water companies can finance their functions, including investment in infrastructure and environmental improvements, whilst protecting customers. It is for water companies to propose investment programmes that deliver the required outcomes for customers and the environment within an affordable bill. Ofwat assesses these proposals to ensure they represent value for money and are efficient and proportionate. Defra sets the overall policy framework and environmental objectives for the water sector, including the balance between environmental need and affordability.