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Country Land and Business Association column: Abstract thinking - going with the flow on licences

06:00 12 January 2014

A dry river bed

A dry river bed

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There are a number of problems with the current water abstraction licensing system, writes CLA head of environment Derek Holliday.

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CLA head of environment Derek HollidayCLA head of environment Derek Holliday

For example, where abstraction is not closely linked to water availability or flows, taking water during low flows can cause environmental damage.

In future, climate change is likely to make this situation worse.

Any new system must ensure abstraction is better linked to water availability, providing environmental protection at low flows and making better use of water during higher flows.

It should also ensure that it is easier for abstractors to trade with each other so that those who have more than they need can share water with those who have less than they need.

A charging system could also provide an incentive to use less water because you would pay according to usage.

So a consensus is building that the old system really must be replaced.

The case for change is there because we need to make sure we have a system that is fair to all water abstractors and licence holders, but particularly here in East Anglia where pressure on water is so much greater.

Reform will inevitably mean winners and losers. A major issue is likely to be the lack of fair compensation for the loss of some or all of a particular business’s abstraction rights. Compensation is important because water rights are part of the value of a particular property.

In some catchments businesses’ allocations have already been reduced and in any new system it is likely that new allocations would also be reduced.

This means they would have to go to the market place to buy more volume, competing with other sectors that may have greater buying power just to maintain the same level of production.

Two years ago a Government White Paper argued the current water abstraction system was not up to scratch and the licensing process should be simplified while encouraging more trading of water rights. It seemed obvious to the CLA at the time that a fair allocation of water for agriculture and the land-based sector would be an essential part of any reform of the system.

The Department for the Environment, Food and Rural Affairs (DEFRA) launched its Abstraction Reform consultation just before Christmas, and it sets out in detail the options that have been proposed: streamlining the system or replacing it with something that allocates shares (entitlements) to water.

The current regime is made up of a mix of time limited and permanent licences (known as licenses of right).

Almost a third of all abstraction licences are time limited.

A fixed annual licence fee calculated according to the amount of water the abstraction licence allows you to take is also charged on all licences.

Many fixed abstraction limits could potentially allow too much abstraction during periods of low flow; other licences work in a different way – when flows reduce to a pre-determined threshold, the terms of the licence mean the abstractor must stop taking water.

Another difficulty is that although some abstraction licences are not currently being used at all, their existence underpins the value of the business and they are taken into consideration in business plans and mortgage lending.

Those who hold these licences have already been told by the Government that they will not receive a new allocation or be compensated.

The CLA believes it is wrong to introduce a system that redistributes water without recognising existing rights or that land values will be blighted by the change, and that businesses may be priced out of the market if they lose their existing right to water.

No one is denying that we need a system that is fit for the future – it is the transition from the old to the new that is causing concern.

Views are continuing to be sought from our members and the CLA will lobby hard, where necessary, for fair allocation, fair compensation, and fair implementation so as not to blight rural businesses.

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