Water - Dieter Helm

Price setting in regulated utilities and the potential application to the BBC
The determination of the BBC’s licence fee is the outcome of an opaque and non-transparent...

Some notes about Water

Recent floods have galvanised government to try to “do something”. As so often, the immediate concerns tend to dominate longer-term thinking, but at least the issues get aired. In addition to working out how to avoid a further crisis next winter – and in the period up to the next election – by showing that the government is spending more money on flood defence, there are more profound lessons that need to be learnt about the causes of floods and the management of river catchments.

Lesson one is obvious – and nevertheless often ignored. If more houses are built on the flood plains, these new houses and the existing houses already on the flood plain will be vulnerable to future floods.

Lesson two is that is the upper parts of river catchments are ploughed up and crops open to soil erosion are planted in these sensitive areas, rivers will silt up.

Lesson three is that concrete solutions, straightening rivers and digging ditches can often make matters worse by speeding up the flow of rivers and getting the water into the areas vulnerable to flooding much faster.

None of these have been learned. The proposals to take insurance policies across the economy to subsidise flood insurance in vulnerable areas creates a perverse incentive. FloodRe, the government backed scheme, does this, and worse still is the tax on all insurance policies to pay for immediate flood defences. Agriculture subsidies continue to support the planting of maize and similar crops in sensitive areas, whilst the environmental schemes within the CAP do not robustly capture flood risk considerations. Indeed, even worse, farmers are to be allowed to do their own dredging, which too often gets the water off their land faster and into the flood zones quicker. Finally, the removal of weirs, the facilitation of natural meanders and payments to land mangers to hold the water rather than allow it to run off quickly are at best slow and inadequate.

We can do much better. River catchments need to be managed on a system wide basis. They need a system operator – analogous to the system operator function for the electricity networks. Catchment natural capital plans; catchment natural capital accounts, and the integration of flood management with water companies and farmers incentives could produce a much better answer at lower total cost.

Latest publication

July 24, 2018

Water Publication

Who owns the water companies? Are publicly quoted companies better than private equity and infrastructure owned companies? Does it really matter? All sorts of claims are being made, and the merit of the discussion is that it asks very good questions...

Publications

Publication Water Water Prices: Memorandum to House of Commons Environment, Food and Rural Affairs Committee
October 17, 2003

The water periodic review currently under way has raised substantive issues about the nature of the regulatory regime, as well as the appropriateness of proposed price increases, and its impact on current and future customers. This memorandum summarises t

Publication Water Whither Water Regulation?
August 1, 2003

In D.R.Helm (ed.), Water, Sustainability and Regulation, published by The Oxera Press, August 2003, pp. 1-12. As the water industry and its regulators prepare for the next round of price setting, there is an opportunity to set out a stable regulatory regi

Publication Water Water, Sustainability and Regulation
August 1, 2003

Edited by Dieter Helm, published August 2003 by The Oxera Press. This volume, published in the early stages of preparation for the 2004 water periodic review, contains contributions from political and regulatory representatives, industry experts and the c

Publication Water Environmental Audit Committee Inquiry into Water Pricing and the Environment
May 25, 2000

Memorandum of Evidence submitted to the House of Commons Environmental Audit Committee's Inquiry into Water Prices and the Environment. This memorandum focuses on: the institutional context of the water periodic review, the quadripartite process, the role

Publication Water Inquiry into Water Price Limits for 1999-2005: Costing the Environment
May 25, 2000

Memorandum of Evidence submitted to the Environmental Audit Committee. This memorandum focuses on: the institutional context of the water periodic review, the quadripartite process, the role and incentives of the water companies, and the ways in which the