*Shadow environment secretary Nick Herbert tells Annabel Andrews the Conservatives will end the fragmentation and muddle the industry has had to endure under Labour.*

Nick Herbert only took on the shadow Environment, Food and Rural Affairs brief in January. Looking at the water industry from this fresh perspective, the conservative MP for Arundel and South Downs has plenty of ideas about how things could be done differently.

"I would characterise the current process as very fragmented," he says. He thinks the sector is full of "dislocated initiatives", with various reviews (Martin Cave's, Anna Walker's and Ofwat's into competition, metering and charging and prices for the next five years). Herbert says that what is needed is "to draw all of these threads together and produce a coherent policy", because "I don't think you can look at each of these issues in isolation."

*Industry needs certainty*

Because of this, an elected Conservative government would publish a water white paper early in its term of office, because the "industry needs certainty". That said, Herbert stresses: "I don't think we can jump straight to legislation without having consultation."

He is dismissive of the idea that the Floods and Water Management Bill, currently wending its way through the draft stage, will pull all the threads together and give the industry the certainty it craves. He thinks it likely that a number of key measures will be dropped from the bill before it is ever put to the vote. "If it does get on to the statute books before the election, it will largely only contain the floods measures, so that will leave outstanding the water industry issues that will need legislating for," he says.

He says the current government's inconsistency with the water sector has been damaging. "The government is very often not saying what it wants to do, it's not showing its hands, it's being indecisive," he explains.

*Drainage charging*

Take surface area drainage charging. A ferocious row kicked off over this after churches and other community groups found their sewerage bills soared following a charging policy change. Ofwat and the companies said that legislation forbade them from offering concessionary charges. At the Labour Party conference, environment secretary Hilary Benn announced that this would change as part of the upcoming Water Bill, something Herbert says was lifted from earlier Tory policy.

"I think there has been unnecessary delay while ministers sat on their hands and were not heeding the pleas from voluntary groups about the impact of all of this," he says. "It was a relatively straightforward decision that needed to be taken at the political level to give Ofwat a lead."

Herbert rejects the charge that this change is placing the financial wishes of customers over the environmental imperative of reducing surface water run-off. "I don't think there would have been a significant environmental gain. All that it was doing was placing a completely unrealistic burden on voluntary organisations," he says.

*Incentives for directives*

On other environmental measures driving up costs, Herbert argues that too much European Union legislation is automatically signed. He says he is "severely critical of the absence of proper cost-benefit analysis in much of the environmental legislation that's been passed". He thinks too many EU directives rely too much on absolute standards. "I think we need to start thinking more about getting an incentives-based approach, and not always looking for a regulatory approach," he explains.

He says "it's not carrots instead of sticks" but a combination of the two. One incentive he has spoken of is allowing water companies to use money saved in reduced treatment costs to pay upstream farmers to maintain water quality by using less fertiliser.

Nor does Herbert believe we should have to choose between clean water and clean air. He thinks big carbon-intensive solutions to raise water quality should give way to "slow water solutions". He suggests far-reaching measures to make that move. "That's why I've said we need to re-regulate the industry," he says. That re-regulation would include looking at whether Ofwat's remit should be broadened to include issues of affordability and sustainability. He argues that the cost-benefit analysis needs to take into account "the whole environmental cost".

*Valuable asset*

Underpinning the re-regulation and cost-benefit analyses, he says, is getting the value of water right. "You have to move towards treating water as a valuable asset, which means pricing it properly. It's only if you get proper pricing that you get the resource being valued at all points in the chain," he argues. The idea of valuing water is also central to his vision for a virtual water grid, revealed last week.

On regulating to ensure affordability, Herbert says it is important to "have an eye on the overall issue of affordability", but he does not offer any specific policy on what the vulnerable customer safety net should look like. "Water is an essential resource and we have to make sure that the poorest households are able to afford water. There are lots of different ways you could do that," he says. He points to differential tariffs and the tax and benefits system as options. He says specific proposals will be in the white paper.

*Competition*

On competition, Herbert largely endorses the recommendations put forward by Cave in his review of competition. "I certainly wouldn't rule out further extension of competition, but we should take it one stage at a time," he says. He echoes Cave when he says "the value of competition is unlocking innovation".

He notes also that opening the way for consolidation in the industry could be beneficial. "The liberalising agenda... would also remove a barrier to restructuring in the industry, which would address historic geographical arrangements of the water companies that don't necessarily make environmental sense," he says.

Herbert clearly has big ideas for the water industry and does not want to jeopardise any of the gains made over the past decade or so. "We've seen a huge investment in improving water in the years since privatisation at no cost to the taxpayer," he says. "In that sense, privatisation has been a success story, and we want to make sure it stays that way."

*Devil in the detail*

But it is hard to judge exactly how this vision will play out in practice because Herbert is reluctant to be drawn on the detail of his proposals. He says: "I don't think it makes sense to try and write this white paper in opposition. I think this is the kind of detail that government needs to set out."

It is clear that he hopes that come the spring, it will be his government setting out that detail. However, when it comes to the water industry, he may discover - as many have before - that the devil is in the detail.