Opinion: Our water industry in Sussex – whose fault is it anyway?

“Chichester residents are increasingly concerned about the state of our harbours, chalk streams and coastal waters. We want to provide a factual account of the recent history of the water industry without any hysteria or political bias to allow the public to make their own judgment,” said Libby Alexander, who founded the Save our South Coast Alliance in 2018.

“Our explainer is based on facts and evidence provided by the government appointed regulator Ofwat and government data,” according to SOSCA.

According to Ofwat, in 1945 there were some 2,400 separate companies dealing with water supply and sewerage in the UK. Post war legislation sought to consolidate the industry under local authorities with the 1963 Water Resources Act co-ordinating water resource and drainage and introducing an abstraction permit system. The 1973 Water Act established 10 new regional water authorities to supply water and sewerage services on a fully integrated basis. The Act required regional water authorities to operate on a cost recovery basis, with capital to meet investment requirements raised by borrowing from central government and revenue from services provided. Central government set financial constraints and performance aims for each authority.

The 1983 Water Act reduced the role of local government in decision making and gave the authorities scope to access private capital markets. But ‘in practice these changes failed to deliver the requirements for the necessary capital investment programme and a significant number of pollution incidents continued to occur’, according to Ofwat. During the 1980s the Treasury restricted the amount of money the water authorities could invest, resulting in little improvement in infrastructure and Britain gaining a reputation as the Dirty Man of Europe.

By 1989 the water industry had been totally privatised. This involved the transfer of assets and personnel of the 10 water authorities into limited companies, the raising of capital on the markets, a one-off injection of public capital, the write-off of significant government debt and the provision of capital tax allowances, according to Ofwat. Independent bodies were set up to regulate the activities of the water and sewerage companies. Over the years these oversight bodies have become the Environment Agency and Ofwat.

The 1991 Water Industry Act made it a legal duty for water companies to connect new properties. This has been the source of much concern lately with many residents, including around Chichester’s coastal plain, complaining that new homes are being built in areas where drainage capacity is already failing to cope. In December 2022, more than 35 experts including the CEOs of Water UK, the Consumer Council for Water, Flood Re and the Chartered Institution of Water and Environmental Management wrote to Prime Minister Rishi Sunak asking him to replace the automatic right to connect new development to existing sewer and drainage networks with a conditional one. No action has yet been taken to remove the legal obligation on water companies to allow new connections.

During the 1990s EU legislation was introduced to tackle water pollution across Europe. This included the Water Framework Directive to improve water quality, the Urban Wastewater Treatment Directive to protect the water environment from being damaged by urban wastewater and industrial discharges, the Bathing Water Directive to protect public health and the environment by keeping coastal and inland bathing waters free from pollution, and the Drinking Water Directive which set quality standards for drinking water with requirements for monitoring and reporting.

The Water Framework Directive came into force in December 2000, requiring all inland and coastal waters to reach "good status" by 2015, unless there are well justified reasons for delays or lower environmental objectives. In 2021 the status of Chichester Harbour was declared “unfavourable declining” by Natural England, while the status of Pagham Harbour is still awaiting review by Natural England.

According to the UK’s 1994 Urban Wastewater Treatment Regulations, water companies in England and Wales could only release untreated wastewater, including sewage, into waterways through storm overflows under permits granted by the Environment Agency, in compliance with EU directives. The EA was responsible for controlling and monitoring the discharges. In 2002 there were nearly 1,500 'significant' permitted discharges from sewage treatment works or industrial sites,

The 2021 UK Environment Act is the new legal framework set up to replace all UK legislation based on EU directives. The Act removed restrictions on water companies to release untreated sewage only in exceptional circumstances and under licence from the Environment Agency. After public outcry, the House of Lords introduced the ‘Duke of Wellington’ amendment which placed a legal duty on water companies to reduce untreated sewage discharges and to “take all reasonable steps” to avoid using combined sewer outflows. Government Ministers rejected the House of Lords amendment and introduced their own clause placing a legal duty on water companies to “progressively reduce the impacts of sewage pollution from storm overflows.” Water companies claim that they need to use storm overflows to avoid sewage backing up in streets and in people’s homes.

In 2023 discharges of untreated sewage into rivers and coastal waters totalled 464,056 spills over 3.6 million hours, an increase of 54%, according to the Environment Agency. This totalled an average of 1,271 spills a day compared with 825 a day in 2022.

Since privatisation of the water companies in 1989, £52 billion has been paid out to shareholders in dividends while some £200 billion has been invested in water infrastructure, according to Ofwat. Meanwhile, the debt now owed by the water companies has increased from zero in 1989 to £60.3 billion.

In January 2024 DEFRA (the Department for Environment, Food and Rural Affairs) issued new legislation updating the regime governing water companies, providing more options for special administrators to restructure companies unable to repay their debts and making renationalisation of the water companies less likely.

In April 2024 the government introduced a new Statutory Instrument, known as the “Growth Duty” requiring any regulator to consider the impact on economic growth before imposing a fine or action on a company.“Certain enforcement actions, and other activities of the regulator, can be particularly damaging to growth. These include, for example, enforcement actions that limit or prevent a business from operating; financial sanctions; and publicity, in relation to a compliance failure that harms public confidence,” the regulation states. Some campaigners have argued that this weakens Ofwat’s powers.

In 2023, 89% of all coastal bathing waters and 79% of all inland bathing waters throughout the European Union were classified as excellent by the European Environment Agency. According to the UK Environment Agency, 66.4 % of UK bathing sites were classified as excellent, dropping to the levels of 2017 while the number of Poor bathing waters in the UK rose to the highest level since 2015.