Targeting and accelerating investment

In addition to clearer strategic direction to regulators on the outcomes government expects the water sector to deliver, government should also improve the process for determining how decisions about investment are made in a way that is faster, more flexible and more responsive to local environments. To better target investment, we recommend:  

• The UK and Welsh governments improve the industry’s strategic planning regime, including by nominating a ‘lead organisation’ (such as Defra) to oversee the delivery of the plans, frameworks and their interaction with funding decisions. The regime should take a much greater cue from long term delivery strategies to ensure the whole sector is planning and investing for the long-term.
• The UK government devolves power to catchments to give local groups more power over setting priorities and how they should be delivered. Government should support the development of existing river catchment partnerships and give consumers a say on the development and delivery of water company plans.  
• The UK government establish a National Water Grid for England to act as a system planner to optimise delivery between regions, set certain assumptions related to water security (including to allow for more investment ahead of need), find ways to accelerate regulatory processes, and to monitor and communicate risks and delivery.
   

We need to reform the system of economic regulation so that it is quicker, easier and cheaper to build new infrastructure. The regulatory framework should be set up to support growth in demand for water and wastewater services that is driven by housebuilding, and business expansion, as well as building resilience to climate change and external threats. To accelerate investment, we recommend the following reforms to economic regulation: 

• Facilitate agility by creating a new pipeline and separate treatment of ‘enhancement’ programmes, so that major projects can be approved and delivered far more quickly.
• Refocus markets on the delivery of new infrastructure through the creation of more options for rapidly procuring the delivery of major infrastructure where that is demonstrated to add value and speed up delivery.  
• Explore a ‘supervisory’ model of regulation, whereby new supervisory teams would be empowered to really understand each individual business and what it requires in the long-term interests of customers. Comparative regulation would be retained, with performance incentives based on delivery and relative performance.
• Attract investment through a long-term investability framework that requires the regulator to restore the sector’s credit rating to ‘triple A’, increasing stability and reducing customer bills.