Building Resilience in UK Water Services: Part 2

In Part 1, I argued that like the USA, the UK needs to think again about renewing and upgrading its water infrastructure. I pointed out that whilst the US Congress passed useful legislation in 2014, it had yet to appropriate any funding for it. The current political impasse in Congress has helped create a climate of inaction in many areas, including critical infrastructure renewal.

Whilst similar challenges of water infrastructure renewal exist in the UK, governance structures are different in ways that may make progress both easier and harder for us.

The first key difference is that whereas US water services are provided by a complex network of public, private and joint venture enterprises, similar services in the UK are provided overwhelmingly by water companies privatised in 1989. The two exceptions are Scotland and Wales, where services are provided by single national-scale and publicly-owned companies (Scottish Water and Dŵr Cymru). The fact that most water companies are private and (even in Scotland and Wales) separate from government means that access to finance for infrastructure investment is different. Indeed, one of the key justifications for privatisation in 1989 was that it would open up access to private investment capital. This has certainly been achieved, particularly through waves of buy-outs and mergers within the sector since privatisation. But while this does make private investment capital much more potentially available, it also means that requirements for return on investment are much more important – and potentially contentious – in the UK water sector.  Water customers are often quite sceptical about profit-taking by private investors as the idea of water services as public goods still has strong hold of the public imagination.

The second key difference is that in the UK governance structure there is no real equivalent to the US state, making central authority much stronger. As a consequence water governance in the UK is much more centrally-driven, with few worries about challenge from lower tiers of government. Because of the devolution settlements for Scotland and Wales, water policies for England (and Northern Ireland) are set in Whitehall, whilst those for Wales are set in Cardiff by the Welsh Assembly and for Scotland are set in Edinburgh by the Scottish Parliament. This should make coherent policy-making, and follow-though on that policy-making, easier. The Brexit vote on 23 June 2016 complicates this picture however, with water sector experts expressing concern that leaving the EU could negatively impact on:

  • access to long term investment sources including the European Investment Bank.
  • sector stability, especially if the EU Water Framework Directive (2000) is torn up.
  • access to so-called ‘structural funds’ – that is, funds given by the EU for regional investment including infrastructure.

Of course the impacts of Brexit will not emerge quickly, and not really before the triggering of Article 50 of the Lisbon Treaty (which formally starts the 24 month period of exit negotiations) so there is currently much uncertainty, which is itself unhelpful.

A third key difference is the relative lack of directly elected mayors in UK cities. Despite the move in parts of the UK towards directly elected mayors, there are currently only 16 in all of the UK. This makes a difference because oftentimes, in the US (and elsewhere, e.g. France) it is often the local mayor who agitates most powerfully for investment in infrastructure. With cabinet-type urban governance prevailing in the UK, ‘infrastructure’ and ‘environment’ (the two most relevant portfolios) are often held by different elected councillors, who may be relatively well (or poorly) informed, relatively powerful (or weak), and relatively permanent (or temporary) in post. Thus, it is rare for UK local governments to successfully lobby for large scale investment in water infrastructure. Bristol, where UWE is located, is one of the cities in the UK with a directly elected mayor (since 2012). Whilst Bristol’s first mayor (George Ferguson, 2012-2016) was quite keen on environmental issues generally, it is hard to put one’s finger on mayoral achievements of particular significance to local water services.

I would like to conclude this blog on ‘building resilience’ with a few thoughts on potential development pathways for British cities, and for Bristol in particular. First, given that water companies are private enterprises in the UK, it seems less likely that any level of government will directly champion their needs or aspirations. When the mayor of Tucson, Arizona declares the need for greater public investment in water services for that city, they are championing a local public utility. Maybe Bristol’s new mayor can be convinced to champion the goal of urban water security? Second, finance for water infrastructure renewal is a key issue, and it is therefore disappointing that the 2014 Infrastructure Act seems to rely mostly on private investment for water services infrastructure – there may be public money for flood defence measures, but none at all for water supply or sewerage. UK water companies often use quite sophisticated techniques for asset maintenance so that high cost renewal is not the only option to deliver resilience, though as time goes on this approach becomes more and more difficult to manage and achieve. A new approach may be needed.