During questioning from the public accounts committee this week, the regulator’s chief said: “The decision that the tunnel is necessary—as I understand it, was primarily to comply with the urban waste water treatment directive – taken by the government.”
Ross agreed that the project, which was given the go-ahead by the Labour Government in 2007 and endorsed by the coalition in 2010, was a question of policy.
“Exactly, and our job is to make sure that the solution is delivered most efficiently and brings the greatest value for money for customers. That is what we are doing,” she said.
Asked why the cost of the tunnel was not funded through taxation, Ross agreed that this could have been an alternative way of funding the project but said that the government had already made a decision, which Ofwat would scrutinise.
“The decision was taken by the Government that this was needed, and that it was going to be provided using the infrastructure provider vehicle and private finance. That is why we are involved in it, to make sure that it delivers the best value for customers,” she said.
The chair of the committee Margaret Hodge, described the tunnel as “a gold-plated solution that will lumber London water tax payers with an £80-a-year extra bill”.
However, Nick Fincham, director of Strategy and Regulation, at Thames Water, said the tunnel was crucial because London’s antiquated sewer system was developed in the 1860s and was only designed to cope with a four million population, which has now risen to eight million.
Asked why the estimated cost of the project had risen from £1.7 billion to £4.1 billion, Ross said Ofwat was confident with the cost of the project.
“We are, at the moment, satisfied that £4 billion represents a robust cost estimate,” she said.