The Water Act was granted Royal Assent yesterday. The Water Act 2003 builds upon existing legislation to:

• further the sustainable use of water resources;
• strengthen the voice of water consumers;
• increase the opportunity for competition in the supply of water; and
• promote water conservation

Welcoming the Act Environment Minister, Elliot Morley, said:

"The Act links with other Government initiatives to carry forward our commitment to sustainable water policy. Like many of the resources that we rely on, water is not in infinite supply and increasingly supply struggles to meet demand.

"If we are serious about sustainable development then we need to be willing to make changes to the way we use water.

"We will continue to face challenges in the future, all of which cannot be dealt with here and now by this Act, but the Water Act moves us in the right direction."

The Act links water abstraction licensing to local water resource availability. It moves from a licensing scheme based on purpose of use to one based on volume consumed. And time-limited licences will increase flexibility to make changes to abstraction rights in the face of climate change and increased demand.

The Act provides a new regulatory framework for the water industry to improve quality of service. It strengthens regulatory consistency and transparency by replacing the Director General of Water Services with a Regulatory Authority. The Act also places consumers at the heart of water regulation by setting up an independent Consumer Council for Water.

The Act gives new entrant water suppliers the opportunity to supply water to large commercial and industrial consumers. This signals a new approach to competition in the water industry.

The Act also enables local communities to decide whether they wish to have their water fluoridated. It makes Strategic Health Authorities responsible for decisions on fluoridation based on their assessment of local opinion following wide ranging consultations.

Mr Morley stressed that the Government's approach to water fluoridation had not changed.

"Fluoridation of water is capable of reducing inequalities in oral health, but the Government is not seeking to put in place a centrally directed, national fluoridation programme.

"Local communities will have the right to choose."

Notes for editors

1. There are a number of measures to facilitate the sustainable management of our water resources.

First, the water abstraction and impounding regime has been revised in that:

• most licensing exemptions currently given on grounds of use will be removed; * a threshold of 20 cubic metres per day will be established, above which an abstractor needs a licence; this will take about 20,000 small-scale abstractors out of the licensing system; this threshold will be able to be modified according to local water resources availability
• the process of licence application and modification, licence transfer and succession arrangements will be simplified;
• all new abstraction licences will be time-limited;
• the Environment Agency will be able to revoke an abstraction licence without compensation if it has not been used for four years;
• the right to compensation will be removed, from 15 July 2012, if the Secretary of State (or the National Assembly for Wales) directs that a licence without a time limit should be curtailed on the grounds that the abstraction causes significant environmental damage;
• and the Environment Agency will be given powers to require abstractors to enter into water management arrangements with any abstractor. Other measures include:
• water companies will be given a duty to agree drought and water resource management plans with the Secretary of State (or the National Assembly) and to make them publicly available;
• water companies will be placed under an enforceable duty to further water conservation;

2. In addition to establishing the Water Services Regulation Authority (the "Authority") and a Consumer Council for Water, the Act will introduce changes to the regulatory system in that:

• a duty to protect the interests of consumers is made central for the Authority;
• the Authority and the Consumer Council are given a duty to exercise and perform their powers and duties in the manner which they consider is best calculated to contribute to the achievement of sustainable development;
• the Authority must take account of guidance on social and environmental matters issued by the Secretary of State or the National Assembly;
• the Authority, Secretary of State and National Assembly shall be empowered to fine a company up to 10% of its turnover, if it fails to meet appointment conditions, standards of performance or other obligations;
• water and sewage companies will be required to disclose any links between directors' pay and company performance;
• the Competition Commission will be given the discretion to fairly allocate costs of price determination appeals between customers and shareholders;
• a system to licence new entrants to supply water services to large non-household users will be established. There will be an eligibility threshold set initially at an annual consumption of 50 megalitres; and
• the licensing system will regulate the relationship between the new entrant and the appointed undertakers, and ensure continuing standards for drinking water and coherent water resource planning.

3. Part 3 contains a number of provisions to amend the regulatory system:

• there will be stronger powers for the Drinking Water Inspectorate to institute proceedings and for magistrates to impose higher fines where water companies supply unfit water or fail to provide information;
• the Authority is given the power to offer greater financial protection to persons paying for water or sewerage services provided with the help of (but not by) a water or sewerage company;
• changes will be made to legislation to facilitate streamlined arrangements for flood defence organisation and funding;
• water companies will be required to pay for replacement fire hydrants that they remove during mains renewal/refurbishment work;
• there will be new powers for the Coal Authority to take action to prevent and clean up mine water pollution from abandoned coal mines;
• there will be changes to the definition of contaminated land, in relation to water pollution, to ensure that minor cases are not subject to inappropriate requirements;
• there are measures to facilitate the process of transferring a discharge consent from an existing consent holder to a new holder;
• there will be a new power for the Secretary of State to make regulations which clarify and make minor improvements to the trade effluent consenting regime;
• there will be provisions to allow for new lateral drains (between the curtilage of the property and the main sewer) to be built to an adoptable standard;
• organisations (essentially developers) will be able to enter an agreement with water undertakers to lay water mains and communication pipes in accordance with standards set by the undertaker;
• the local Strategic Health Authorities will be given the power to decide if fluoride should be added to local water in consultation with local communities;
• there will be provision for the Secretary of State to make regulations to place a duty on sewerage undertakers to exercise their existing powers, under Section 102 of the Water Industry Act 1991, to adopt private sewers under defined circumstances;
• there will be a duty on the Secretary of State to take appropriate steps to encourage water conservation and to report to Parliament on progress every three years; and
• all public authorities will have a duty to have regard to water conservation.

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