ABSTRACT
Compared to other public services, water
and sewerage networks are very capital inten-
sive. A large share of their finance needs to be
invested in infrastructure that, provided it is
maintained, will yield benefits for decades or
more. Indeed, many Londoners rely on sewers
constructed more than a century ago. In the long
run, piped water and drainage networks are
usually the least expensive means per person
served to deliver and dispose of adequate quanti-
ties of water for urban populations. But it is
usually difficult, and often impossible, to get
prospective users to cover the investment costs
up front. Consumers and local taxpayers are far
more likely to be able and willing to pay for
water and drainage networks as part of the
service cost – in much the same way as with
other goods and services. If water and sanitation
infrastructure are costed on the basis of the
initial investment plus maintenance plus the cost
of supplying the water, with a view to getting the
capital costs back over ten years, the weekly or
monthly costs per household for good quality
systems are actually relatively low; the kinds of
innovations described in Chapter 4 such as
‘component sharing’ and simplified sewers can
further reduce these.2 Thus, some form of borrow-
ing, or its economic equivalent, is usually
necessary in order to finance these networks. In
principle this might seem to be a simple financial
transaction. In practice, however, financing
investment in the water and sanitation systems
of small urban centres is often highly constrained
and fraught with problems, particularly where
average incomes are low. Moreover, financing
problems may not only delay investment, but may
also result in inappropriate and costly invest-
ments that make it all the harder to develop a
sound basis for future investments.
