Who will meet these costs? Most of it will fall on the water companies as they seek to make improvements in water quality demanded by the Directive.

Speaking at the Future Water 2010 conference, Benyon outlined how he thought this might happen using a case study of United Utilities.

The company uses their ownership of an important agricultural area of moorland in the North West. It is a water catchment area because of peat's ability to store rainwater.

However, he said, it's also "an area that also had problems with soil erosion, and run-off from farming." So United Utilities developed a Sustainable Catchment and Management Project with local farmers, land managers and the RSPB.

"SCaMP, as it is affectionately known," he said, "has provided funding to improve the way farmers manage the land through simple measures like restoring bogs, peat and woodland habitats."

The result has been a reduction in water treatment costs and "is the type of thing I want to see become synonymous with good practice in the farming sector".

It was unfortunate for the minister that in the same week, the Environment Agency has prosecuted United Utilities over a pollution incident in the same area, at Walverden Water, Lancashire, proving that regulation does work.

The conference looked at such partnership ways in which the "command and control" former method of top-down management could be avoided, while meeting European targets.

But in the context of droughts in some parts of the country, which is putting an extra burden on the environment and water companies, industry representatives were muttering that water charges would have to rise to meet the costs.

Benyon said the Government is to produce a Water White Paper in early summer next year in which these issues will be thrashed out – twenty years after privatisation of the industry.

The review will synthesise the results of Anna Walker's review published last December, of charging for household water and sewerage services, the Cave Review of competition and innovation in water markets and the five-year Ofwat Water Charging and Price Review.