1.  The Asset Management Programme, abbreviated to AMP, is a non-statutory procedure the objective function of which is to maximise non-compliance with European water quality directives. In this process the Environment Agency ("EA") plays a role in deleting from water company capital programmes schemes designed to achieve higher water quality standards. However, the available evidence suggests that the positions and policies advanced by EA in this process are the positions and policies of the Department of Environment, Transport and the Regions ("DETR"), and EA is in practice unable to adopt its own interpretations of European legislation which are more favourable to the protection of the environment than those of the DETR.

  2.  These somewhat startling conclusions, it is suggested, follow from an objective analysis of the evidence.

  3.  It is a truism of European law that member states having adopted environmental legislation in the form of directives are deemed to have accepted the costs which will be incurred in complying with their terms.

  4.  Further, in order to determine the extent of the obligations of a member state in relation to a particular Directive, it is necessary as a matter of European law, to construe the Directive purposively, in the light of what the Directive seeks to achieve. It follows that to make a determination based on purely economic, or non-environmental criteria, is unlawful; thus the determination by the UK of the boundaries of the estuaries of the Severn and Humber at the bridges was struck down by the UK courts.

  5.  During the period 1979-1985, the practice was established in the UK that Directives would be interpreted by Ministers in a way which occasioned the minimum of capital expenditure on the part of the then regional water authorities. Working groups were set chaired by Department of Environment to co-ordinate how this purpose would be achieved. This is illustrated by the minutes of the Shellfish Waters Directive ("SWD") Working Group which are now in the public domain.

  6.  However, from immediately prior to privatisation, the AMP process achieves a similar effect by the co-ordinated activities of a number of agencies party to the process. The first determinations were made by DoE in 1989 for the period from 1990-1995, on the basis of programmes prepared by the then regional water authorities.

  7.  The only statutory part of the process is the periodic determination of sewerage and water charges limits, from 1990 on by the Director-General of Water Services.

  8.  The perspective of OFWAT, simply stated, is to minimise the charges payable by customers. OFWAT sees part of its role in persuading the European Community not to adopt water quality legislation which involve capital costs to the water industry, and seeking to explore every possibility of deferring or avoiding capital expenditure designed to achieve compliance with existing legislation.

  9.  OFWAT has fixed, and wishes to continue to fix, water and sewerage charges limits by reference to a capital programme which complies with existing European environmental legislation, but does not more than comply, and does not comply earlier than the last date permitted under the legislation for compliance.

  10.  OFWAT does not itself take a view as to what the content of European environmental obligations are. Prior to the 1994 determination, OFWAT sought "guidance" from DoE as to whether certain capital schemes were required to comply with the Bathing Waters Directive ("BWD"): on 10 June 1994 a letter from Neil Summerton to Ian Byatt stated that Ministers were of the opinion that the relevant dates for compliance were those of the Urban Waste Water Treatment Directive ("UWWTD") ie 2000 and 2005, rather than 1995. OFWAT then regarded that as determinative of the issue. South West Water ("SWW"), four of whose bathing water schemes were deferred, has stated to members of parliament and others that they were instructed to defer and/or not to accept tenders for those schemes.

  11.  In the current round, OFWAT received numerous bids from the water companies to carry out environmental improvements. The draft determinations published on 27 April reveal that, again, numerous schemes have been "rephased" to be completed in the last few months before 31 December 2005, ie under the UWWWTD, rather than being carried out earlier. The phrase used by OFWAT in relation to schemes omitted is that they were not "supported by the EA".

  12.  What is "supported" by the EA is expressed in terms of a non-statutory programme of works described this time as the "National Environmental Programme", which has been approved by DETR and transmitted by EA regions to water companies.

  13.  The converse is of course that unless EA endorses a particular project as essential to comply with a European environmental obligation, the project will not be funded from sewerage charges, and will not be executed (unless very exceptionally from discretionary expenditure).

  14.  The construction of European environmental obligations by EA is peculiar. A few examples from current AMP are given:

(a)  member states are not subject to any limitation as to the time period within which they seek to achieve a guide value under a European Directive.

(b)  member states can take into account issues of cost/benefit when determining the extent to which schemes are designed to meet guide standards.

(c)  endeavouring to meet a standard intermediate between imperative and guide standards ("an Operational Standard") can fulfil the obligation to seek to achieve the guide standard.

(d)  member states can locate discharge points in the most damaging locations to the environment provided that the wastes are in EA's opinion adequately treated.

(e)  there is no obligation to carry out schemes to endeavour to meet guide standards when a scheme has been implemented to meet the imperative standards.

(f)  a member state can fix an arbitrary frequency of spills from CSOs as consistent with the obligation to seek to achieve standards under water quality directives, even where it is established that the purpose of the directive is to protect public health.

  None of these propositions can be reconciled with the terms of the BWD, the SWD, the Fresh Water Fishwaters Directive ("FWFWD") or the UWWTD, and, in the last case, with the principles of European law adopted in the Dutch Dykes case.

  15.  Some positions adopted by the EA and set out above, appear not to be supported by SEPA. Some are not supported by the water industry itself: for example Southern Water in their Main Quality Cost Submission suggested spill frequencies to comply with the SWD should be no more than 1 in 5 years. EA proposes to adopt 10 in 1 year average as the criterion.

  16.  The use of the term "proposes" raises a curious issue. EA in fact denies that the "guidance" which it gives OFWAT constitutes EA policy, but is merely guidance on costing. This leads to the interesting proposition that the programme of works approved by Ministers is not EA policy.

  17.  The "National Environmental Programme" and its constituent schemes must be regarded as the programmes of works required to be adopted by the UK for the purposes of achieving compliance with the SWD, the FWFWD, and the Directive on Surface Water intended for Drinking, and the "necessary measures" for the BWD. The fact that it is a non-statutory document is probably a breach of Directive obligation in itself. AMP must be regarded as part fulfilment of the member state's responsibility to finance those programmes under the Treaty.

  18.  The common elements in the six propositions of law cited above are:

(a)  that they represented a highly restricted view of UK environmental obligations under the Directives.

(b)  that they are views which have been developed by, or in association with, the DETR.

  19.  We have asked the EA to provide legal authority for the propositions: they have declined. We found it curious that the 10 spill principle should be applied by EA as part of the implementation of the SWD, as it had not appeared in EA's consultation document on SWD. We requisitioned the scientific information on the basis of which the 10 spill principle was adopted. EA after a lengthy delay firstly denied that it was adopted (which conflicts with specific assurances given at Falmouth in connection with the scheme there where protections were reduced by EA from 3 spills to 10 spills) and secondly stated that it was derived from MAFF correspondence. It became apparent to us from correspondence that the 10 spill criterion was developed as a result of correspondence between DETR and MAFF, not EA.

  20.  It is also significant that the 10 spill criterion only appears in that section of the National Environmental Programme which relates to SWW. This may be connected with the proposition pursued by the DETR that there could be regional differences in implementation of policies which could respond to cost pressures in those regions. We have criticised this approach as unlawful in that it is specifically applied in "Raising the Quality" DETR's advice to OFWAT for AMP(3) in September 1998 to fresh waters which are, or should have been, designated under the FWFWD.

  21.  The position of DETR in the AMP guidance "Raising the Quality" illustrates another difficulty of the EA, in that DETR has announced the intention not to designate further waters under FWFWD. This position is clearly untenable upon any objective analysis of the UK's record, yet the EA does not consider itself able to apply European standards to consenting in waters to which Directives have direct effect, but are not applied by DETR. The reverse is the position under non-statutory domestic RQOs for non-water company dischargers. While the EA's discretion under part II of the Water Resources Act 1991 is unlimited, and it therefore has a duty to apply relevant European law, it is constrained by the non-statutory AMP(2) not to do so.

  22.  The response from the EA to the DETR's consultation of July 1998 on the SWD indicated that EA regarded the setting of Operational Standards as very difficult, and dubiously cost-effective. This response also suggested a very positive response to the Directive. By contrast, the position now adopted by EA in relation to Operational Standards on faecal coliforms (which appear nowhere in the Directive) in particular fully reflects a view of the DETR. That view in turn was developed from correspondence between DETR and MAFF's CEFAS. If the views in this consultation response reflect the views of EA, then its views are not reflected in its public positions in relation to AMP(3).

  23.  A full appraisal of EA's role is difficult to achieve because of the lack of transparency which still bedevils the AMP process. This is further obstructed by a defensive attitude by EA which delays or bars the release of information which might be useful in showing that there has been a default in compliance with European environmental law, for example, the crucial paper on policy on disinfection which was approved by the NRA Board late in 1995. The alleged openness of EA is apparent rather than real. Again, this continues a tradition of secrecy which surrounded eg the implementation group meetings on the SWD, which enabled Ministers to mislead the House in suppressing the reversal of the policy on SWD announced in Pollution Paper 22 in response to RCEP Tenth Report in 1984.

  24.  We are aware that the areas of environmental regulation with which we deal are matters which are sensitive politically. Internal investigations by EA into complaints from ourselves that information has been withheld and delayed have accepted that headquarters and regional staffs have been unhelpful, and have sought to minimise information released. Information has also been supplied to us by EA which has been found to be untrue. We have encountered interference by DoE in the past in the supply of information by other bodies, and the DETR was the major objector to the release by SWW of the correspondence we have supplied to the Committee on the AMP(2) round.

  25.  We nevertheless believe it is instructive to analyse the way in which the AMP process was carried on in the 1994 round ("AMP(2)") and consider to what extent the substance of the procedure in AMP(3) has changed, and to what extent the role of the EA in AMP(3) differs from that of the NRA in AMP(2), and that robust conclusions can be drawn.

  26.  We start from the correspondence between DoE and SWW which was obtained by the writer from SWW in July of this year in legal proceedings brought under Directive 90/313/EEC and the Environmental Information Regulations 1992. Copies of this correspondence has been provided to the Committee to highlight the discrepancies between the information and the statements made by Mr John Gummer to this Committee in December 1994 in its enquiry on environmental information.

  27.  The main thrust of the DoE/SWW correspondence is that the water company was representing that the programme it was putting forward was necessary and legally required in order to comply with its obligations under domestic and European law, while DoE was putting severe pressure on the company to find every possible means of reducing capital expenditure in the short term, at whatever cost in environmental terms. The correspondence makes transparent the relentless search by DoE for less sensitive areas under the UWWTD, and for schemes designed to comply with the BWD which could be downgraded or deferred by being cosmetically relabelled as UWWTD schemes. Emphasis is, disturbingly, placed on the practicability of reclassifying BWD schemes which had not been notified to the European Commission.

  28.  From other correspondence we have been informed by Ed Gallagher that the National Rivers Authority ("NRA") was not party to this correspondence, or to the meetings held between DoE and SWW, and that NRA was only informed of the discussions in two meetings, and was not consulted.

  29.  Complaints from SWW are referred to in the correspondence that EA South West Region was being unnecessarily zealous in its interpretation of the requirements of the Bathing Waters Directive. The response from Neil Summerton at DoE was to telephone Ed Gallagher: the outcome, it may be deduced, was that the SW Region of NRA became more compliant with DoE in interpreting the BWD restrictively.

  30.  In summary, in AMP(2) the politically motivated merciless destruction of the marine environment programme in the South West by DoE was executed without the NRA as a party, and the evidence supports the proposition that elements of water company programmes to comply with the BWD were deleted by informal, even unwritten, instructions from Ministers. This subverts the framework of the Water Industry Act 1991 where directions to companies must be in writing: it also subverts ministerial responsibility to the House, in that not only were DETR and its ministers' actions not reviewable by Parliament, but they were specifically denied both by Ministers and their civil servants.

  31.  In AMP(3) an extensive programme of works was prepared by EA South West Region, and passed to SWW for pricing to OFWAT. This anticipated designation of shellfish waters, but that schemes would only be necessary where shellfish harvesting area classification fell below "B"—the standard required to be sought to be achieved under the Directive is equivalent to "A" classification.

  32.  Notwithstanding, the programme was further pruned in the course of the work carried out by DETR, following special pleading by OFWAT in an unprogrammed open letter in January 1999 to Ministers asking them to find further means of reducing expenditure. OFWAT's draft determinations of charge limits of 27 July 1999 states that further guidance was received from Ministers in a letter dated March 1999, not yet in the public domain. It is assumed to represent confirmation by Ministers to OFWAT that schemes could be postponed or downgraded, rather in the same way as indicated in the letter of 10 June 1994 in AMP(2).

  33.  The National Environmental Programme is generally stated to have been approved by Ministers. Effectively we believe it is determined by DETR, not by the EA. The EA became the post box to the water companies.

  34.  While therefore the EA has the appearance of having a greater role in the determination of the five year programme of works to comply with European water quality obligations in the period 2000-2005 than the NRA in relation to 1995-2000, we are not aware that EA has played a significant role in determining or interpreting those obligations, or in determining which schemes should go forward and the timing of them to meet those obligations.

  35.  In European law, EA has a duty to exercise its functions so as to comply with the relevant Directive obligations interpreted from the environmental purpose of the Directive, regardless of the views of any other UK emanation. In some instances completely, in others partially, those obligations have been imposed in UK law.

  36.  However, as a matter of objective fact, the EA appears to be constrained within the views of DETR which in turn are derived from interpretations of European environmental law which are driven by perceptions of cost, and the political implications of cost. The fact that national programmes of works for compliance with European water quality directives are determined within the charge setting framework of the AMP round, for example, drives compliance to the last possible date. If these directives are to be applied correctly according to a purposive interpretation, this could only be done by an independent EA, and that probably outside the process of charge setting.

  37.  We suspect that an examination of the records will show that DETR has called in few (if any) applications by water undertakers for consent to discharge which EA has proposed to consent, notwithstanding cogent representations which we and others have made that proposed decisions are in breach of European obligations. This implies that EA decisions, even at Falmouth, are within parameters of decision acceptable to DETR, if not complete identity of views.

  38.  Another area which would benefit from investigation is the practice in relation to appeals by water undertakers against discharge consent conditions. The water undertakers are aware that the EA's position as regards conditions on consents to discharge is weaker than that of the NRA, in that appeals are now suspensive of appealed conditions. The water companies appeals take years on average to resolve, usually through discussions between DETR and the water industry. Where the NRA did have an opinion of its own, as in relation to Kinnersley conditions, DETR did not in the end support the NRA view, and conceded to the water companies. An ongoing series of appeals is still outstanding in relation to disinfection, and in relation to dangerous substances conditions. We are not aware that the EA has nailed its colours to the mast on consent issues on sewerage discharges in the way that the NRA attempted to.

  39.  However, the fact that the National Environmental Programme is determined by the Minister, and that before the commencement of the five year period of the programme, cannot but affect the consideration of applications for consents to discharge by the EA subsequently. The Minister is the authority which will deal with any appeal from the EA's decision to refuse or impose conditions on an application from the sewerage undertakers, and the same civil servants will deal with the appeal who in the AMP round have caused it to be deleted or deferred it. A decision by EA which caused a scheme to be reinserted would be an embarrassment to EA, the Minister, and to the whole position of the UK on the directive(s) in question. All EA can hope for, and its policy documents indicate this, is judicial review to upset the Minister's position. Thus NRA/EA was not able to revisit enterovirus until Harrison J characterised the UK government's position as non-compliant in the Tenby case. The EA cannot publicly dissent.

  40.  Further, the mentality which has developed in EA and its predecessor is that the AMP process determines a fixed budget of public funding for the undertakers, and that it will not impose requirements on the undertakers which would in EA's perspective entail the diversion of resources from other projects of arguably greater cost-benefit.

  41.  Therefore, through the five year review in the privatisation mechanism, the unlawful methodology of interpreting Directive obligations from a necessarily political perspective of cost and sewerage charge prejudices, perhaps fatally, fulfilment of obligations of EA to determine discharge consents in the light of EA's own current interpretation of European Directive obligations.

  42.  At the present time, we perceive that the EA's role as a quango is controlled within strict limits by DETR, that EA is used by DETR to give the appearance that DETR is not determining which schemes proceed, and that Ministers' role in relation to the AMP programme is one of insisting on improvement programmes, rather than achieving their deletion or deferral, in effect as was done in 1993/4.

  43.  It must be a matter of concern that DETR maintains, despite its input into the AMP process in determining the content of UK programmes to comply with European obligations, the position John Gummer stated to your Committee in relation to the deferral of the four BWD schemes in 1994 ie DETR's input represents the advice of ministers and does not, c.f. Mr Summerton's 25 November 1994 letter to us, derogate from the responsibilities of any other body. We believe, on a correct analysis of the role of DETR in AMP process, that position statement was, and remains, untrue.

  44.  That position alleges that it is in practice open to the EA to form its own view of what a European obligation requires, either generally or in a specific location, and to exercise its powers under the Water Resources Act 1991 to consent discharges, and its duties under the SWD and FWFWD Directions in relation to programmes, to a higher standard than Ministers are minded should apply.

  45.  In practice that option appears not to be open to EA. It will only be open, we suggest, if EA is made independent of DETR, as the Bank of England of the Treasury, and required and enabled at least for European law issues to determine compliance programmes on a statutory basis, outside a forum dominated by cost and political considerations.

P G Scott

August 1999