Leading Article: Let them drink Perrier

THE Director-General of Water Services, the person who is in charge of regulating the privatised industries on behalf of Parliament, has issued a warning that water bills may rise, on average, by 50 per cent in real terms before the end of the millennium. This implies much larger rises in some parts of the country. The greater part of these costs would arise from increasing the purity of water in accordance with directives laid down in Brussels.

These directives do not add materially to the safety of the water we drink. The proposed standard for pesticides, to take one example, demands a concentration 20,000 times smaller than that which is allowed under EC regulations in some vegetables. The water companies could spend fortunes, and recoup them from their customers, producing water whose pesticide content became 20,000 times greater every time a legal and safe potato was boiled in it.

Carried to such lengths, the quest for purity becomes a metaphysical programme rather than an uncontroversial matter of public hygiene that can safely be left to bureaucrats. What consumers of water are willing to pay for is safety, reliable delivery and decent taste, not absolute purity.

The water companies are already hugely unpopular as a result of the gigantic pay increases awarded to their senior management after privatisation. Their prices are already rising at a rate of 5 per cent a year in real terms, partly as a result of a large investment programme to replace decaying sewers and the like. But there is also upward pressure on prices arising from purity obligations already agreed to. Added to this are the pressures resulting from directives to which the Government has yet to agree and to which it should refuse to agree, such as the one on lead. There is no reason to suppose that consumers of water should pay the extra pounds 6bn, even spread over 10 years, that it would cost to eliminate lead piping from the water systems.

The trouble is that consumers have no choice where they turn their taps on. In any normal market they could vote with their wallets on whether they wanted water so pure that it might have come from a plastic bottle, or water that was merely drinkable. But water, even privatised, remains a natural monopoly. That is why we have a Director-General of Water Services. But he can enforce only what Parliament has told him to enforce. When Ian Byatt, the Director-General, called for a public debate on the matter, he was being slightly disingenuous. What the consumers say or want can only be effective, in this market, at one remove, when enacted by politicians.

Mr Byatt's warning was directed against the possibility that the present regulatory system is unable to keep prices down to the consumers' satisfaction. All he can do is to announce how much the water companies may raise their prices above the level of inflation to allow them to invest without profiteering. If their obligations to fulfil uncosted and irresponsible directives demand that they spend more and therefore charge more, Mr Byatt can do nothing without the support of politicians. The Government should attend to his unspoken warning, and invoke the principle of subsidiarity to reject any further pressure from Brussels for purity that has no practical value.