Public water supply and sanitation in England and Wales has been characterised by universal access and generally good service quality. In both England and Wales, water companies became privatised in 1989, although Dwr Cymru operates as a not-for-profit organisation. Whilst independent assessments place the cost of water provision in Wales and England as higher than most major countries in the EU between 1989 and 2005, the government body responsible for water regulation, together with the water companies, have claimed improvements in service quality during that period.
The economic regulator of water companies in England and Wales is the Water Services Regulation Authority (Ofwat). The Drinking Water Inspectorate (DWI) provides independent reassurance to consumers that water supplies in England and Wales are safe and that drinking water is of acceptable quality.
Since Welsh devolution began, further powers over water have been devolved to the Senedd. The Government of Wales Act 2006 (GoWA) devolved multiple water policy powers including water supply, management of water resources including reservoirs, water quality, consumer representation, management of flood risk and coastal protection. The GoWA 2006 was changed by the Wales Act 2017 which includes devolution of water and sewerage powers, and in 2013 Natural Resources Wales became independently responsible for managing water resources in Wales. In 2018, secretary of state for Wales' intervention powers over cross-border water matters were repealed and replaced by the water protocol.
History of joint England and Wales operations (up to 2013)
Local government service provision (before 1973) Before 1973 water and sanitation services were provided by water undertakings and sewerage and sewage disposal authorities respectively. Until the 1950s there existed over a thousand water undertakings, with administrative boundaries similar to those of local government boundaries. By the early 1970s their number had been reduced to 198 by a gradual consolidation process aimed at achieving economies of scale. Out of the 198 water undertakings 64 were run by individual local government authorities, 101 by joint boards comprising several local government authorities, and 33 were statutory privately owned water companies, some of which date back to the Victorian era. At the same time there were over 1,300 sewerage and sewage disposal authorities, most of them run by individual local government authorities. The sector thus was highly fragmented.
Water resources management was entrusted to 29 river authorities created in 1965. Their responsibilities included water conservation, land drainage, fisheries, control of river pollution and, in some cases, navigation.Vickers, John and George Yarrow: Privatization:An Economic Analysis, MIT Press, 1988, Chapter 11: The Water Industry, p. 389-393
Public regional companies (1973–1989) Through the Water Act 1973 the government established ten regional water authorities in order to achieve even greater economies of scale, especially in sanitation, compared to the prior gradual consolidation of water undertakings. The reform was also aimed at putting in practice the principle of integrated river basin management, especially concerning the planning of investments in wastewater treatment. Given the small size of many river basins in England and Wales, in practice the area covered by each of the regional water authorities typically contained more than one river basin.
The regional water authorities were not only in charge of water supply and sanitation, but also of water resources management, thus opening the possibility of conflicts of interest since the same institution was in charge of abstracting water and discharging wastewater on the one hand, and controlling these same abstractions and discharges on the other hand. The Water Act left open the possibility to contract out water supply and sanitation services to local authorities. However, in practice this did not happen, and substantial assets were transferred from local governments to the new water authorities. Since the transfer was internal to the public sector, no compensation was paid to local authorities. Local authorities also initially held a majority of the board seats of the new organisations. The private statutory water companies, which provided water to 25% of the population, escaped reorganisation and were left to operate as before.
With the election of Margaret Thatcher in 1979 the water and sanitation sector initially remained public, but the government attempted to make the enterprises operate more along commercial lines. As a result, the number of employees in the sector declined from 61,000 in 1976 to 52,000 in 1985, real operating costs declined, tariffs were increased above the inflation rate and the share of self-financing of investments increased. However, government regulators also cut back on investments. While the industry became profitable, the rate of return on assets based on replacement cost values remained low at less than 2%. As part of the attempt to commercialise the service providers, the Water Act 1983 reduced the number of board members of the water authorities. However, it also eliminated the local government representation on the Boards and made all Board members appointed by Ministers, thus further centralising the sector.
Privatisation (1989)
In 1989 the government privatised the ten public regional water authorities through divestiture (sale of assets). The authorities' functions related to water resources management were separated and retained by the public sector. At the same time the regulatory agency OFWAT was created, following the model of infrastructure regulatory agency set up in other sectors such as telecommunications and energy.
Water Industry Act 1999 The Water Industry Act 1999 made several important clarifications and amendments to legislation regarding the power and responsibilities of the privatised water and sewerage companies. These include:
Removing the right of a water company to disconnect customers on the basis of outstanding unpaid bills. Clarifying that water companies can continue to charge customers using rateable value where no water meter has been installed at a property. Allowing consumers to request a water meter, and obliging the local water company to install a meter unless the installation is not reasonably practical or would incur an unreasonable expense.
Operations
Water resources and uses The amount of water available in England and Wales to meet the needs of people and to sustain the water environment varies greatly between different places and seasons, and from one year to another. Parts of Wales and the English Lake District are well endowed with water, while water is scarce in parts of Eastern and Southeastern England. Parts of England were affected by severe drought in 1976, 1995 and 2005-2007.BBC:Drought in EnglandEnvironment Agency:Water resources in England and Wales - current state and future pressures , December 2008
Household water use in England and Wales stood at about 145 litres/capita/day in 2008/09.Environment Agency:Household water use in England and Wales, 1998/99 to 2008/09 , accessed on October 14, 2010 Total water supply for domestic and commercial customers in England and Wales was 14.5 million cubic metres per day in 2009.
Quality of service In 2008, the quality of water and sanitation services in England and Wales was regularly and comprehensively monitored by the economic regulator, OFWAT. OFWAT statistics show that service quality has improved since the early 1990s, i.e. shortly after services were privatised. For example, the number of unplanned interruptions, properties at risk of low pressure, the share of complaints that were not answered within five days and combined sewer overflows have all declined, while sewage treatment works compliance has increased and river water quality has improved.OFWAT: Water industry facts and figures , June 2008, accessed on September 23, 2010
Drinking water quality is also universally high, although isolated incidents where quality falls have occurred. For example, in June 2008 about 250,000 people in Northamptonshire were being told to boil tap water for drinking after routine tests by Anglian Water found cryptosporidiumBBC:Sickness bug found in tap water, 25 June 2008
Infrastructure In 2008, physical assets of private water and sanitation companies in England and Wales include 1,000 reservoirs, over 2,500 water treatment works and 9,000 sewage treatment works. More than 700,000 kilometres of mains and sewers are buried beneath the ground – that’s enough to stretch to the moon and back, or a distance 200 times greater than the UK’s entire motorway network.Water UK Water services in the UK , accessed on October 14, 2010
Financial aspects Tariff level. Water and sanitation tariffs in England and Wales increased by 44% in real terms between 1989 and 2008–09 and are among the highest in the world. The average household water and sewage bill in England and Wales was £330 in 2008-09.OFWAT. 2008. Water industry facts and figures According to a 2006 survey by NUS Consulting Group, the average water tariff (price) without sewerage in the U.K. for large consumers was the equivalent of US$1.90 per cubic metre, the third-highest tariff among the 14 mostly OECD countries covered by the report.NUS Consulting A study commissioned by the German industry association BGW in 2006 compared the average household water and sanitation bill (as opposed to the tariff per cubic metre that the NUS study used as a comparator) in four EU countries. This study showed that water bills in England and Wales were the highest among the four countries. Average water bills (excluding sanitation) were 295 euro per year in England and Wales, higher than in Germany, France (85 euro) or Italy (59 euro). From April 2023, household bills in England and Wales were to rise to an average of £448 a year, the largest increase in almost 20 years.
Comparison of annual water and sanitation bills in four EU countries, 2006:
Water tariff Sewer tariff Total Germany €85 €111 €196 England and Wales €95 €93 €188 France €85 €90 €175 Italy €59 €40 €99
Source: Metropolitan Consulting Group: VEWA - Vergleich europaeischer Wasser- und Abwasserpreise, 2006, p. 7 of the executive summaryMetropolitan Consulting Group:Comparison of European Water and Wastewater Prices , May 2006, accessed on September 23, 2009
Taking into account differences in subsidies and service quality, the cost of supplying water at an equalised service level would be 84 euros in Germany, 106 euro in both France and England/Wales, and 74 euro in Italy. Concerning sanitation, unequalised tariffs are the highest in Germany at 111 euro per year, 93 euro in England and Wales, €90 in France and only €40 in Italy. Equalised costs net of subsidies are, however, highest in England and Wales with €138, followed by France (€122), Germany (119 euro) and Italy (85 euro).