In an Expert Focus article for WaterBriefing, Daniel Freiman, Partner at law firm Eversheds Sutherland and Stephen Jefferson, Senior Associate discuss how the designation of the long-awaited Water National Policy Statement is an important step to enabling the consenting and delivery of water resources infrastructure that is so plainly required.

Photo: Daniel Freiman & Stephen Jefferson

Daniel Freiman & Stephen Jefferson:

Introduction

Last summer, a combination of record temperatures and low rainfall caused drought conditions and led to hosepipe bans in many parts of the country. With a further potential drought expected this summer, there will naturally be an increasing political focus on ensuring the resilience of water supplies.

The recent publication by the Department for Environment, Food and Rural Affairs (Defra) of the National Policy Statement for Water Resources Infrastructure (Water NPS) represents a major and much-needed step forward in the delivery of strategic water infrastructure.

NSIP Regime

The Planning Act 2008 (PA 2008) introduced a consenting regime for various types of large-scale nationally significant infrastructure projects (NSIPs). In the field of water, the PA 2008 currently identifies three types of project which will be NSIPs if they meet specified thresholds:

• the construction or alteration of dams or reservoirs;
• development relating to the transfer or water resources;
• and the construction or alteration of desalination plants.

There are mechanisms for other projects to be brought within the NSIP regime. The Secretary of State can amend the list of NSIPs under the PA 2008 to add a new type of project or vary an existing one, as occurred in 2019 for desalination plants and indeed for the Thames Tideway Tunnel. The Secretary of State also has the power to give a direction for development to be treated as an NSIP (known as a ‘section 35 direction’).

Those water projects which are or become NSIPs will require a development consent order (DCO) to be granted under the PA 2008. The Secretary of State is responsible for deciding whether to grant a DCO following an examination process conducted by one or more planning inspectors. A DCO, if granted, will not only give planning consent but can also include a wide range of other legal powers and consents that may be required to deliver the project, for example powers to compulsorily acquire land and to alter highway arrangements and so on.

The Water NPS will be central to the determination of DCO applications for water NSIPs. It reaffirms Government policy on the need for water resources infrastructure and sets the policy framework in which DCO applications for water NSIPs will be examined and decided.

Whilst water infrastructure projects have formed part of the PA 2008 regime since its introduction in 2008, until now there has not been a designated Water NPS providing the underpinning policy framework for decisions on those projects. Defra consulted on a draft of the Water NPS back in 2018, but publication of the final version has been a long time coming.

Committee Report

In March this year, the House of Lords Industry and Regulators Committee published its report (the ‘Committee report’) into the regulation of the water industry, following an inquiry launched in 2022.

The Committee report addressed various aspects of water industry regulation, however one of the most striking aspects of the report was what is said about the need for new water supply infrastructure. It highlighted evidence given by the Environment Agency that, without intervention, in 20 years the UK will not have enough water to match demand.

The Committee report emphasised that, under present plans, the UK will not have built a single new major reservoir between 1991 and 2029 and that failure to deliver more reservoirs “will result in a less resilient, secure water supply that risks leaving households without water during extreme weather conditions that are becoming more frequent due to climate change”.

As was highlighted by the water industry regulator Ofwat in its evidence to the Committee, one of the challenges to the delivery of this much-needed infrastructure is the ability of large water infrastructure projects to gain planning permission.

It is unsurprising then that the Committee recognised the need to accelerate the planning process for delivering large-scale water infrastructure projects and that one of its key recommendations was the urgent designation of the Water NPS to provide a certain policy framework for such projects.

The Water NPS

The Committee did not have to wait long for its recommendation to be implemented. Within a month of the Committee report having been released, Defra designated the Water NPS.

Like other NPSs, the Water NPS sets out a wide range of assessment principles and detailed policies that a DCO application for a water NSIP will be expected to comply with. Promoters of large-scale water schemes will need to pay close attention to those requirements when carrying out pre-application activities and in preparing their DCO applications.

The Water NPS also helpfully makes clear that it applies to projects that meet the PA 2008 thresholds and also to those that are brought into the NSIP regime by a section 35 direction, unless the direction states otherwise. This is a notable change from the 2018 draft which had provided that the Water NPS “may be a material consideration” to the determination of section 35 direction projects.

In England, the Water NPS may also be a material consideration for planning applications made to the local planning authority for water resources infrastructure (for example under the Town and Country Planning Act 1990). Whether, and to what extent the NPS is a material consideration, will need to be judged on a case-by-case basis.

An important aspect of the Water NPS is what it says about the interaction between the consenting process and statutory water resources management plans (WRMPs) prepared by water companies to set out how they will manage demand and develop water resources to meet their supply obligations. The Water NPS indicates that if an NSIP is included in a water company’s final WRMP, then the ‘need’ for that scheme will have been demonstrated in line with government policy and would not be expected to be revisited in the determination of the DCO application. If, however, a section 35 direction is made for a project that is not present in a WRMP, then the promoter will need to make out the ‘need’ case for the project. Whilst this is helpful clarification, promoters will need to carefully consider how this policy statement should be applied when considering scheme options and alternatives and any necessity test within that context. The misapplication of a similar policy in the National Networks NPS resulted in the Stonehenge A303 DCO decision being held unlawful.

Another notable feature of the Water NPS is the section on “environmental net gain”. The Water NPS notes that water resources infrastructure projects have the potential to deliver significant benefits and enhancements beyond biodiversity net gain, resulting in wide environmental net gains. In addition, it states that developments may deliver wider environmental gains relevant to the local area, and to national policy priorities, such as reductions in greenhouse gas emissions, reduced flood risk, improvements to air or water quality, or increased access to natural greenspace. Applications for development consent will need to be accompanied by a statement demonstrating how opportunities for delivering wider environmental net gains have been considered, and where appropriate, incorporated into the design.

A potentially troubling aspect of the Water NPS is its requirement that an applicant for a water NSIP should include, as part of the DCO application, a statement with planned financial arrangements explaining how the proposed infrastructure delivers value for money by reference to the analysis in the water resources management plan. This appears to be different to the funding statement required to accompany a DCO application. It crosses over into the territory of economic regulation and could potentially lead to a whole range of non-planning considerations being raised in the DCO process. It will be interesting to see how applicants and examining inspectors approach this aspect of the Water NPS but in principle a clear distinction should be maintained between economic regulation and the development consent process.

Conclusion

Designation of the long-awaited Water NPS is an important step to enabling the consenting and delivery of water resources infrastructure that is so plainly required.

As noted in the Committee report “water is one of earth’s most precious resources. It is essential for human life, agriculture, and industry”. It will be crucial that the planning system plays its part in ensuring a resilient future supply.

One thing is for certain: another dry summer will inevitably ensure this remains an area of ever-increasing political focus.