TUESDAY 6 FEBRUARY 2001

DR GEOFF MANCE, MR MARTIN GRIFFITHS AND MR GWYN WILLIAMS

  240. I know you were sitting in the room when Water UK gave evidence. How do you respond to their concerns regarding the proposed changes to the licence regime?
  (Dr Mance) I was quite concerned by both their written and oral evidence in that it showed they had not adjusted their thinking to the framework that has been put in place of drought contingency plans and water resource plans for each company, which we have clearly flagged and stated, with ministerial support, will be the framework for future licence decision-making. We will not, therefore, be treating isolated licence reviews, revocations or changes in total absence from consideration of impact on the company's position in terms of water supply security and their ability to cope with a major drought. That would clearly be irresponsible of us and has not been flagged or intended. The whole purpose of those plans is to enable us to have that long-term framework for decision-making.

  241. Do you think there should be any clarity in the Bill regarding the reform in the abstraction licence so it perhaps differentiates between water needed for domestic purposes, ie, cooking, drinking, washing and sanitation, over the other non-domestic uses, ie, lawn sprinkling and what-have-you. Do you think within that Bill there should be some differentiation?
  (Dr Mance) I am not sure it would be sensible to try and categorise in the Bill use within the household into essential and less essential, if you like. I think we would prefer to see that addressed through a more effective exercise in the existing statutory duty on the companies to promote the efficient use of water by their customers, by tariff regimes and by extending that duty to both Ofwat and other abstractors. A lot of focus has been on domestic customer and leakage, but there are a range of other users around, and we would like all of them to have regard to the efficient use of water. We think that should be a general issue and would probably be the best way of addressing it, rather than, in statute, trying to categorise particular narrow bounds. Being candid, if climate change goes as rapidly as some of the more extreme scenarios, we could have part of the country in East Anglia becoming semi-arid in fifty years which would take you into a totally different arrangement for managing water, and the more that is fixed in primary legislation, the more difficult it is to respond flexibly to change in circumstance.

  242. On the question of compensation, have you advised ministers how much you have calculated compensation claims will come to between the Act coming into force and 2012?
  (Dr Mance) As you will be aware from previous inquiries, we have made the comment that we have not so far forced revocation and therefore have not been into compensation through the Lands Tribunal. We have not established, therefore, if you like, a market value for compensation.

  243. Has that been deliberate?
  (Dr Mance) Yes, it has been deliberate in as much as we have managed to deal with some of the worst circumstances resulting from abstraction and damage to the environment so far by voluntary change, persuasion, cajoling and doing deals in the sense of withdrawing licence capacity there and acknowledging that licence capacity is available elsewhere. Much of that has been funded through the price review for the water companies. If you look at the recent price settlement for water companies, about 100 environmental sites affected badly by over-abstraction in one form or another, all of it licensed—so legal—was costing about £130 million to correct, so that is just over a million pounds per site to cover the cost of change and provide alternative sources of water. I think that gives you some measure of the likely scale. If you use that as a yardstick, that implies anything up to about half a billion as the total cost of dealing with revocations.

  244. But you do not intend to use the Lands Tribunal procedure if you can avoid it?
  (Dr Mance) It is a difficult and cumbersome process, not very efficient to follow. In terms of going through the whole process, prior to going to the Tribunal, there is a round of appeal with the Secretary of State by the licence holder. That can take us into planning inquiry before we even get to Tribunal, so it is complicated and that is why so far we have sought to do it by persuasion, an element of trading to negotiate a change on the ground which avoids us getting bogged down in what is a cumbersome bureaucracy.

  245. At the end of the day, if compensation has to be paid, where will that come from?
  (Dr Mance) There are two options. Under the present legislation, it will be paid for through the existing charging scheme by existing abstractors. The other alternative, if one went for radical change would be central taxation, but that is not provided for in the present legislation.

  246. Would that be central taxation on money given to your Agency, ring-fenced, or just for you to take out of the blocks of money when it comes to you?
  (Dr Mance) It could be akin to, say, the contaminated land grant system where there is a block of money allocated each year by government where we would put forward proposals as to where that would be used to deal with removing licence capacity. It could be as a direct grant to us, ring-fenced for us to use: there are a number of ways. There was a basic issue to start with as to whether it should be charged on the existing abstraction licensing base or come from what appears to be the only viable alternative in the form of central taxation.

  247. Are you satisfied that the provisions as set out at the moment strike the right balance between abstractors, customers and protection of the environment?
  (Dr Mance) I think if you take account of the framework of duties we have, and I flagged particularly the one with regard to water undertakers earlier, plus the fact that there is no intention to remove the rights of appeal to the Secretary of State on our decisions, then I believe the framework is sound and robust. I think what is important is to establish a regime that can cope with systematic change in rainfall patterns and availability of water. Having a system introduced in 1963 with many licences of right which are almost untouchable is clearly not a rational basis for moving into a period of basic change of both where water is available and the quantity it is available in.

  248. On that point, do you not think it would be better, if money is to be made available for capital investment and compensation, to have the money spent on incentives and on restructuring and maybe trans-shipment, because then you have semi-arid areas compared with very wet areas? What is your comment?
  (Dr Mance) We would love to see the charging base we operate for abstractions to move beyond cost recovery into incentive chargings. We have flagged that previously to the Committee, and the whole issue of being constrained to cost recovery. However, it does move us into the territory of hypothecation of income, which then moves into being, effectively, taxation rather than a cost recovery charge, and that is an area which it has always proved extremely difficult to make progress in, given some existing Treasury dogma.

  249. Unless there are other ways of doing it. Is the Agency already telling existing trickle irrigators in areas of pressure that they will not get licences?
  (Mr Williams) We have given that advice in some areas because, under the proposals, it could well be the case that we would have to consider refusing licences. The difficulty is the trickle irrigators, because they are not licensed, have developed sources which are derogating existing licensed sources, and we have a duty in the current legislation not to grant licences which cause derogation. There is also clear evidence that they are causing environmental damage.

  250. Where is this clear evidence? I am interested in this because trickle irrigation is used in many countries, as you know. It is not only a more efficient way of using water but certainly, in the countries that I know well, there is no evidence that it has this effect presumably on land use. Is that what you are saying?
  (Mr Williams) There are cases where trickle irrigation has gone ahead in areas where we have already said we would not grant licences for spray irrigation.

  251. That is slightly different. What I am saying is, firstly, trickle irrigation has been known to produce very good results.
  (Dr Mance) We do not disagree with that. The difficulty we have at the moment is that we have a regime where, if a farmer wants to spray irrigate he requires a licence. He can approach us for a licence and be told there is no capacity available in the water course; that to issue a licence would adversely affect downstream abstractors with existing licences and damage the environment. They then turn to trickle irrigation because they do not require a licence and there is no control on it; they remove the water; adversely affecting downstream abstractors who are dependent upon spray irrigation. We have at least one instance where a business has gone out of operation as a consequence having become insolvent because it has lost its water supply as an upstream trickle irrigator has removed the flow from the stream.

  252. With respect, that was not what I asked you. One of the reasons you gave was that it was contributing to a problem presumably in earth terms, in erosion?
  (Mr Williams) In terms of impact on the environment, I am talking about impact on the water environment and reduction in flows in rivers, which in turn affect the way in which—

  253. But you are giving the impression that you have singled out this one particular form of irrigation as opposed to saying that, where there is a problem already with the supply of water, this added problem is not acceptable. I think you have to differentiate between whether you are saying, "We want trickle irrigation brought within some kind of mandatory control" which is acceptable and one can understand, in the circumstances that you outline, that may be necessary, but simply to give the impression that trickle irrigation itself is not an efficient way of using water and perhaps not even preferable to other forms seems to me to be short-sighted.
  (Dr Mance) If we gave that impression that was not the intent. Our concern is that we have competing demands for water in areas of scarcity and one of them is outwith control and, therefore, even where we have clearly flagged to the operation that there is no water available without damage to existing abstractors or to the environment, they still proceed with trickle irrigation causing that damage.

  254. If they are on mains water, would you take a different attitude?
  (Dr Mance) That would then be an issue of part of the water company's water resources plan and whether the company could cope with the quantities.

  255. But you would still be involved to a extent, would you not?
  (Dr Mance) To a much lesser extent.

  256. So, for clarity, we have an example here of a fruit farmer in Norfolk. Is this the real hotspot? Is it East Anglia we are talking about? Is there a geology and rainfall pattern in the rest of the UK that would be as contentious, in your view?
  (Dr Mance) I believe most of the environmental and abstractor conflict situations that exist already giving demonstrable harm are primarily in the south east corner—Kent and Sussex.

  257. So from Kent to Norfolk?
  (Dr Mance) Yes. In Kent we have several water courses which are dry because of the activities of the trickle irrigators removing all the water.

  258. So there is a real conflict between traditional farming and the expectations of the farming industry, and the reality of water supply there and the geology and rainfall?
  (Dr Mance) Yes.

  259. Would the Agency welcome trickle irrigators being offered an automatic time-limited licence or some other form of temporary protection powers?
  (Dr Mance) In terms of transition arrangements, where we have got clear adverse impact on the environment, we would not want long-term transition arrangements; we would want to deal with the environmental problem relatively rapidly. Balancing that is clearly the need to look at the impact of that on the existing trickle irrigation operation and what could be done to mitigate the fact that they are brought within control and whether that limits the amount of water that they could take from a stream without, say, winter storage being available to them. They might need a year or two to put that in but providing a long period of transition means environmental damage or adverse impact on other licensed abstractors downstream would continue.