Question to the Department for Environment, Food and Rural Affairs:

To ask the Secretary of State for Environment, Food and Rural Affairs, what assessment she has made of the implications for her policies of the report by the National Audit Office, The economic regulation of the water sector, HC487; and what steps her Department is taking to ensure that customers benefit from water companies' unexpected financial gains.

We accept the recommendation that we should develop further our assessments of the affordability and cost-effectiveness of environmental improvements. The Environment Agency has recently published the most comprehensive cost-benefit appraisal ever conducted for improving the water environment in England.

The remaining recommendations of the report are for Ofwat, the independent economic regulator of the water sector. Its independence is crucial to ensure stable economic regulation to keep investment costs down and customer bills low. The Government does not intervene in any regulatory decisions made by the regulator.