Water companies should align their environmental spending with the UK’s post-Brexit farm subsidy regime, a new report has recommended.

The From blue to green: How to get the best for the environment from spending on water study, published by the Green Alliance, says that linking funding in this way could improve catchment management and deliver cleaner water that requires less treatment.

The report estimates that 84 per cent of England’s waters currently fail to meet environmental standards, around a third of which is the result of agriculture and land management practices.

It says “Between 2015 and 2017 there has been no improvement in water body status, with 84 per cent of surface waters failing to be close to their natural state”.

While the government paid £36.6 billion in basic subsidy payments to farmers between 1995 and 2015, water companies spent £20 billion over the same period on environmental improvements to water.

Much of this was spent on cleaning up pollution from fertilisers, manures and pesticides, the report says.

When designing the new environmental land management system, which will replace the common agricultural policy in England, the government should explore creating new mechanisms that will enable the blending of funding from water companies and state payments to farmers. This will support delivery of ecosystem enhancing land and water management projects, such as restoring wetlands, which would reduce the amount of pollution entering rivers.

It would in turn cut the cost of treating water over the long term by reducing the need for nitrate and pesticide removal plants.

The report says: “Delaying further action could make it necessary to invest in expensive hard infrastructure in the short term to deal with pollution.

“But better value catchment management would render this infrastructure redundant in the medium-term and reduce operational and capital costs of running and replacing existing infrastructure.”

The report recommends that the goals of the EU’s water framework directive should be incorporated in the new Environment Bill.

And it urges Ofwat, the Environment Agency and the Drinking Water Inspectorate to support large scale catchment management pilot programmes by water companies during the industry’s next funding period, enabling full scale adoption of this approach after 2025.

Responding to the report, Michael Roberts, chief executive of Water UK, said: “Water companies believe passionately in a healthier, greener nation and the positive contribution we make to it. Before privatisation, the water industry in England was starved of funding and damaging the environment – a key driver in why the industry was privatised.

“By 2020, the water industry will have spent around £25 billion on environmental work since 1995 to improve the quality of our waterways – and we want to go even further.  That’s why water companies, always striving to do more in the public interest, are proposing major new environmental investment which will help improve 8,000km of rivers.”

He added: “This new report sets out clearly not just what has been achieved but how much more still needs to be done, and rightly draws attention to the importance of continued high levels of investment in the natural environment.

“Water companies are playing their part in planning, funding and delivering the vital improvements which need to be made in the future. But if that future also sees the water industry in England taken into government hands, there’s a danger that environmental standards will suffer again as they did in the past due to a shortage of government spending.”

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