Tories warn water bosses

THE Government yesterday made its first public threat to the water companies, as ministers braced themselves for an outcry over the privatised utilities' huge projected profits.

With no sign of water shortages abating, John Gummer, Secretary of State for the Environment, threatened to legislate to force the companies to repair leaking pipes.

The hardening of Mr Gummer's language is likely to cause friction with senior Cabinet colleagues, who are split over how to handle the growing water crisis.

Mr Gummer has been under pressure from Brian Mawhinney, chairman of the Conservative Party, to stick with a robust defence of privatisation and lay off the water companies. But Mr Gummer is worried the public will think he is siding with privatised utility bosses against the consumer.

Ministers now concede that a full-blown crisis could develop if the dry weather continues well into September. They are preparing new contingency plans to encourage consumers to save water - largely through control of the use of hosepipes and reduction in car-washing. These will be discussed with the water companies, the regulator, and the National Rivers Authority, which reports that, in some rivers, the flow is already down to 10 per cent of what is normally expected.

Longer-term strategy is likely to be directed at the reduction of leaks, as well as an examination of the cost and feasibility of the construction of more reservoirs.

A document published by the Department of the Environment last week said water companies should set targets for reducing leaks, but that these should not be compulsory.

Yesterday Mr Gummer at first defended the water companies, which, he said, had invested pounds 4bn in improving systems and tackling leaks, with a further pounds 4bn yet to be spent.

But he also told Radio 4's Today programme: "I have insisted that companies set targets to reduce leakage, and if the targets are not good enough, I will impose mandatory targets to raise the speed with which they improve their performance with the pipes they inherited from their nationalised past."

Mr Gummer said if acceptable standards were not reached, he would raise them "by law".

Ministers are frustrated that the crisis, which, in their view, was caused by exceptional weather, isbeing blamed on privatisation. Mr Gummer is concerned that forthcoming announcements of water profits - likely to reach a record level of more than pounds 2bn - will add to political damage.

Forecasts contained in the Estimates Directory issued by Edinburgh Financial Publishing (which average the projections made by leading City houses), say profits of the 10 privatised water companies will rise from pounds 658m in 1989-90, the year of the sell-off, to pounds 1.747bn for last year and a forecast pounds 2.07bn next April.

More damaging for the Government is the prospect that big sums levied from consumers for infrastructure improvements may not have been invested. Last year pounds 398m fell into this category and Labour front-benchers believe this year's figure, likely to surface this week, may be higher.

Frank Dobson, Labour's environment spokesman, yesterday described Mr Gummer's position as an ineffectual U-turn.

"It is all flannel. He has not done anything about it, he has said in his document last week that he was not going to do anything about it, and now he says he is," Mr Dobson said .

"Three weeks ago he was prancing around a lake saying we should all be enjoying the good weather. Now he looks like Jonesy, the character in Dad's Army going around shouting, `Don't panic.' "

So far restrictions have been limited to the imposition of hosepipe bans. Yorkshire Water, in whose area standpipes have been installed, is considering the prospect of rationing by rotation.

Gummer profile, page 15

Inside Story, pages 16-17