The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley) (Con)
My Lords, this has been a most interesting and informative debate, with a good exchange of views on many aspects of the Thames tunnel project. I thank the noble Lord, Lord Berkeley, for his assiduousness in pressing the Government on this subject. I will try to address as many of the issues raised as I can, but before I do that, I also thank the noble Lord, Lord Stoddart, for his thoughtful contribution, but no one do I thank more than the noble Lord, Lord Grantchester, for confirming that the Opposition support the project.
I believe that there is widespread acceptance that it is unacceptable for a leading European city in the 21st century to have a major river flowing through it that is increasingly taking on some of the characteristics of an open sewer. However, this situation in London is not new. We have known about it for well over 10 years. In that time, there has been much consideration and study of possible solutions to the problem, from all angles by a range of experts.
The noble Lord, Lord Berkeley, asked what assessment the Government have made of the proposals for the Thames tideway tunnel. A tunnel-based solution first emerged from the Thames tideway strategic study. That group, which was established in 2001 and reported in 2005, comprised the Greater London Authority, Defra, Thames Water, the Environment Agency and Ofwat, in an observer capacity, with an independent chairman. The group considered a range of alternative solutions, drawing on the technical expertise of numerous bodies and professional advisers, before arriving at its conclusion that a full-length tunnel was the preferred solution for reducing the number of combined sewer overflow spills and meeting the environmental objectives for the river.
In 2007, the then Government published a regulatory impact assessment of sewage collection and treatment for London which examined these and a range of other proposed options. The overall conclusion was that only a full-length tunnel would provide a cost-effective solution that met the tideway environmental objectives for the river within a reasonable timescale. Accordingly, the then Government asked Thames Water to proceed with developing detailed proposals for a tunnel. Since then, Thames Water has refined its proposals and consulted extensively on them.
Defra officials are working closely with Ofwat and Thames Water to ensure that the costs are tightly controlled, so that customer bill increases over time to pay for the financing of the tunnel are kept as low as possible and provide value for money. In addition, in November 2011 Defra published an updated assessment of the proposed options to address sewage in the Thames and an updated cost-benefit assessment. These were entitled Creating a River Thames Fit for our Future—A Strategic and Economic Case for the Thames Tunnel and Costs and Benefits of the Thames Tunnel.
In 2012, Parliament considered and approved the Government’s National Policy Statement for Waste Water, with debates in both Houses. This set out the need for major wastewater infrastructure, compared the alternative solutions for the Thames, and concluded that a tunnel was the preferred solution. The National Policy Statement for Waste Water will be used by the Planning Inspectorate in considering Thames Water’s current application for a development consent order for the tunnel. In 2012, my department also published its Thames Tunnel evidence assessment, to ensure that due consideration had been given to the full range of evidence available on all the proposed options to address the problem of sewage pollution in the River Thames. This included an annex listing all 36 of the relevant supporting studies and reports.
Earlier this year, in view of representations being made by the noble Lord, Lord Berkeley, among others, that some US cities were implementing sustainable urban drainage systems, or SUDS, and green infrastructure to address their overflow problems, we asked the Environment Agency to carry out an assessment of the evidence on whether SUDS could deliver the environmental standards set for the River Thames. The review, published last week, concluded that all the available evidence, comprising more than 70 relevant studies, shows that SUDS alone could not achieve this.
The noble Lord, Lord Berkeley, referred to Philadelphia. If I may, I will dwell for a moment on what some major US cities are doing, because the US has federal standards which are not dissimilar to those set by EU law. Washington DC has just started boring a deep five-mile tunnel of similar dimensions to the Thames tideway tunnel. This is part of a 12-mile tunnel system that aims to reduce combined sewer overflows by 96%, a similar standard to that proposed for the Thames tideway tunnel.
Major storage and transplant tunnels are also a key feature of solutions put in place to tackle combined sewer overflows in Milwaukee and Wisconsin. Pittsburgh is attempting to achieve a similar standard through the 25-year implementation of sustainable drainage systems. In Portland, Oregon, SUDS have been used to remove approximately 8 million cubic metres of storm water a year. This is 35% of its total sewer overflow volume, but tunnels still prove necessary to meet the required levels of control. Philadelphia aims to tackle 85% of its sewer overflow discharges using SUDS over a 25-year period. The work has been going on for five years now, but a tunnel solution may still be necessary to meet the required environmental standards.
Unlike London, Philadelphia and Portland have a geology which is suitable for SUDS. The soils underlying the cities’ SUDS areas are more porous and more able to soak up excess rainwater. The main point is that each solution reflects the particular building density, geology, rainfall patterns and existing sewer system of that city.
There does not therefore appear to be any case to revisit the case for the tunnel as it is set out in the national policy statement. I have also seen compelling recent evidence of the scale of the problem with wastewater discharges into the Thames, and I am advised that the serious rainfall event last weekend resulted in more than 1 million tonnes of wastewater being discharged into the river over a very short period of time. A tunnel would have captured these discharges, and transferred them for treatment in time to handle any subsequent heavy rainfall events. I do not believe that supporters of SUDS as an alternative to the tunnel have demonstrated how they would handle events of this type.
The noble Lord, Lord Berkeley, also referred to the work of Professor Binnie. We believe that the environmental criteria set in 2007 remain robust, are not gold-plated, and should not be downgraded. Alternatives such as a shorter western tunnel combined with SUDS would not meet the environmental objectives for the Thames tideway in an acceptable timeframe or at lower cost than the full-length tunnel.
A further important factor is the 2012 European Court of Justice ruling that the UK was in breach of the urban waste water treatment directive in London, which means that there is an increased likelihood of very significant infraction fines if we do not comply within a reasonable period of time. The risk of fines has been reinforced by the very recent fines ruling against Belgium for not complying quickly enough with a previous adverse court judgment with regard to waste water collection and treatment.
The noble Lord, Lord Berkeley, asked what the tunnel solution will deliver. The Thames tideway tunnel would reduce the frequency of spills from the 34 combined sewer overflows in London intended to be caught by the proposed tunnel from around 50 to 60 to just three or four times a year during extreme rainfall events, with the estimated overflow volume falling from around 18 million to 2.5 million tonnes. That would improve water quality, with benefits for wildlife and river users. It will also ensure that we continue to meet the UK’s obligations under the urban waste water treatment directive and the water framework directive. We are clear that the overflow volume to be addressed by the tunnel is 18 million tonnes, not the 39 million stated by the noble Lord, Lord Berkeley, as quoted by Thames.
The noble Lord, Lord Berkeley, also asked about the financing of the project. The Government believe that the private sector can and should finance this project. Although the Government can provide financial assistance in any form in relation to the tunnel, we have stated that this will be contingent financial support for exceptional project risks, to help ensure the cost of financing the project is kept to a minimum and offers best value for money for customers and taxpayers. However, we will want to be assured, when offering this contingent support, that the taxpayer is appropriately protected by measures that minimise the likelihood of these exceptional risks materialising.
The noble Lord, Lord Stoddart, asked about customers outside London paying for the tunnel. It is worth saying that London customers have helped to finance major sewerage investments outside the capital that serve a much smaller population. When improvements are needed, for example, in rural Oxfordshire, the cost is spread among all customers of sewerage services, including those living in London. This approach, which is supported by Ofwat, is standard across England and Wales and is the fairest way of apportioning the costs of investment in water and sewerage services.
The noble Lord, Lord Stoddart, suggested that Thames Water should pay for the tunnel from existing funds. Paying for the project from any accumulated reserves would neither reduce the cost to customers nor remove the requirement for some type of government support. This is a major tunnelling project and has a risk profile significantly beyond that typically expected of a water and sewerage company. That is why the tunnel is expected to be financed and delivered by an independent infrastructure provider with its own licence from Ofwat and backed by some form of government support related to exceptional project risks.
The Government believe that the private sector can and should finance the project but accept that there are some risks that are not likely to be borne by the private sector at an acceptable cost. The Government are therefore willing, in principle, to provide contingent financial support for exceptional project risks where that offers best value for money for customers and taxpayers.
Lord De Mauley
My Lords, I am sure I will in a minute. We will want to be assured that when offering contingent support, taxpayers’ interests remain a top priority. The taxpayer must be appropriately protected by measures that minimise the likelihood of these exceptional risks. We are working on the detail with Ofwat, Infrastructure UK, Her Majesty’s Treasury and Thames Water to ensure that there is a minimal likelihood of contingent government support ever being called on.
The noble Lord, Lord Grantchester, asked about the status of planning. Given that Ministers have a quasi-judicial role in the planning process, I hope the noble Lord does not expect me to go into detail at the moment.
The noble Lord, Lord Stoddart, asked about bill increases. We have always made it clear that the estimate of £70 to £80 is, indeed, only an estimate and should not be used, as it was in a recent paper, to reverse engineer a notional investor return. If the project is delivered through an infrastructure provider, the actual figure that appears on Thames bills will be set following the competition for the financing of the project. That will ensure best value for money for customers and keep bill increases as small as possible.
The noble Lord, Lord Berkeley, asked just now what contingent financial support really means. The support will occur in the case of unlikely events such as severe debt market disruption, significant cost overruns due to extreme tunnelling conditions and any caps on commercially available insurance.
Over the past 10 years, the Government have undertaken lengthy and thorough assessments of the Thames tideway tunnel project and alternatives. They have concluded that the tunnel represents the most cost-effective, timely and comprehensive solution to the problem of sewage pollution in the River Thames in London.