Leading article: We need to treat water as a precious resource

For those involved, there must have been something wearily familiar about yesterday's government "water summit". The Deputy Prime Minister, John Prescott, hosted an almost identical gathering of industry regulators, water company executives and consumer groups nine years ago. Bold promises were made at the time about how Britain's water-delivery infrastructure would be brought up to date. But we have seen little progress since. And the present drought in the south east of England has exposed just how stubbornly deficient the system remains.

The privatised water companies must accept a good deal of blame for the lack of progress. They continue to oversee a scandalous amount of waste. Last year, Ofwat, the industry regulator, revealed that more than 3 billion litres of water were being lost each day through broken and leaking pipes. That is one-fifth of the 15 billion litres supplied to the UK water system daily.

The time has come for financial penalties to be imposed on those water companies that persistently waste water on an unreasonable scale, similar to the system that sees privatised rail companies fined if they consistently run late trains. Given that two water companies announced record profits yesterday, it can hardly be argued that the sector would find this unaffordable.

The Government should also demand greater investment by southern water companies in new reservoirs. One of the reasons the drought is more severe in the south east is that southern companies rely heavily on aquifers, which are less efficient than reservoirs at capturing rain water. Yet it would be wrong to place all the blame for the present situation on water companies and toothless regulation. Supply may have faltered, but demand has increased. Greater London exerts huge pressure on south-eastern water resources. This is partly due to the capital's vast population. But the capital's residents are also using more water than the rest of Britain. The typical Londoner uses an average of 165 litres of water every day, compared with 150 litres in the rest of the country.

This north-south discrepancy should not be overemphasised. Even outside London, consumption has increased hugely in recent decades, as the country has become wealthier and we acquire more water-intensive appliances such as dishwashers. The difference is that London is becoming richer faster. In this context, it is hard to argue against a rapid extension of metering for the consumption of water. Charging customers by volume - rather than a flat rate - will be a vital tool in encouraging conservation.

There are other ways in which central and local authorities should be encouraging conservation. Labour's pre-1997 promise to "encourage the use of 'water-efficient' devices in the home" has come to very little. It has been left to the Conservatives and the London Mayor, Ken Livingstone, to fill the gap with their sensible suggestion that all new homes should be built to capture rain from roofs and recycle "grey water" from baths.

When considering this problem, we must also be careful not to downplay the severity of the present drought. We have had two exceptionally dry winters in a row. Even if the water companies had made dramatic improvements, there would still have been enormous pressure on resources in the region. This is no local problem. Spain and Portugal are in exceptional difficulties. Australia is experiencing its worst drought in a century. Hundreds of thousands are at risk of starvation in the Horn of Africa because of a lack of rainfall. The intensification of global warming means that our planet will face more water shortages. And Britain will not be immune. Water has always been recognised as a precious resource in the developing world. If Britain is to overcome its present difficulties, we need to adopt a similar mindset.