In an opinion piece for Waterbriefing, Gavin Shuker MP, Shadow Water Minister is calling on the Government to go back to the drawing board and think again on its proposals for the water sector to avoid repeating the worst mistakes of water privatisation, describing its plans for upstream competition as half-baked.

Gavin Shuker MP;

"Our work to reform the water sector strengthened it. This government’s changes could undermine the progress that was made.

A little over a year ago at the University of Leeds, I laid down a challenge to both the water industry and Tory-led government. Since privatisation, a consensus has emerged - that a highly regulated but privately owned industry has bought benefits to households and allowed the sector to grow. Significant investment has come to the UK and improved our natural environment. In government, and now in opposition, it has been a consensus that Labour has accepted.

My challenge was that this broad consensus could break down if action wasn’t taken to ensure affordability and surety of supply for all consumers. Since then we’ve had drought, floods and two Secretaries of State. With the publication of the draft water bill, it is now clear to see they have failed to live up to that challenge.

Retail Competition

 The last Labour government commissioned the Martin Cave to review competition and innovation in water markets. He concluded that ‘introduced in the right way, competition and co-operation between companies... can encourage innovation and the delivery of lower prices, a better service and improved environmental outcomes.’

That is why we have welcomed the extension of choice of water supplier for businesses and public sector organsiations across the UK - one of Cave’s key recommendations. These reforms should receive all party support if the government announces them in the next session of parliament. And it will need it, given how tight the timescales involved are. An Anglo-Scottish market meant to be up and running by 2017.

Upstream Competition

 But Martin Cave was also right to say competition would drive down costs if ‘introduced in the right way’. Delivered in the wrong way, fragmenting the industry and undoing environmental strides that have been made, it could be deeply counter-productive.

A rise of 1% on the cost of capital would add £20 to an average household bill and upstream competition is the area where the cost of capital risks are concentrated. Which is a problem because the government’s changes to upstream are half-baked.

Water UK noted the ‘upstream reform proposals have potentially serious implications for customer bills and for national resilience’. Consumer Council for Water Chief Executive Tony Smith has said he ‘would be concerned if anything caused the cost of capital to rise.’

The cross-party Environment, Food and Rural Affairs select committee, tasked with scruitinising the legislation, concluded: ‘we do not believe that the case for these reforms has yet been fully made out.’

Missing and misguided

 The draft bill doesn’t detail a new abstraction regime, or give a primary environmental responsibility to the regulator Ofwat, or implement outstanding measures to respond to the threat of flooding. It doesn’t deal with bad debt, or sustainable drainage, or even tighten regulations on reservoirs. It doesn’t even provide a fig leaf to cover the huge embarrassment of government inaction on achieving affordable flood insurance for households and businesses.

Government should be setting national standards for water social tariffs to help the growing number of people in water poverty, and signing up more households to special tariffs to ensure they can meet their payments. Instead Ministers are pursuing an ideologically driven shake-up of the water industry that could mean higher bills, and serious environmental damage.

To avoid repeating the worst mistakes of water privatisation, Ministers must now go back to the drawing board, and think again."