After a short distance you will slip down a slope. Push the crate at the bottom to the right, leaving it in line with the gap in the platform above (see picture).
Position the crate in roughly this position.
You can then pull the lever on the right. This will cause the water level to rise, so climb up the ladder to escape. Once at the top, pull on the platform to the left to open a path through for our crate. Get on board. As it nears the top you will see a spiky ceiling, so jump to the left once you draw up alongside the ladder, and climb up. Immediately head right, as the water is still rising.
Pull the crate here out into the open so that it is not far from the edge of the ledge above. Stand on it and wait for the water to rise. This crate has a hole in it, so is unstable. You need to stand directly in the middle to stop it from tipping over, and it also slowly sinks, so jump off as soon as you are in range of the ledge.
Manipulate the water to move through the level
Head right and jump down onto the slope and hop onto the second platform you pass on your slide downwards. Pull on the platform to the right on this level to open another gap. This will allow a balloon to come popping up. Stay attached to the hook on the platform so that you can shut it quickly as soon as the balloon shoots through. You should then push the balloon to the right so it begins to roll down the slope.
Climb the ladder going up to the top floor. Stand on top of the crate near where the balloon is rising. The balloon will enter the crate and begin to raise it up, bringing you near to the ledge above (make sure you stand in a sensible position on the box so as not to fall off because it is another unstable platform). Jump to it.
Balance on the crate.
Head right and pull the lever. Wait for the water to rise above you, then push the lever back into its original position (this is important to ensure the next section works as planned). Climb the ladder and jump onto the crate in the water. Continue to the next platform and pull the lever. This will lower a box into the water and allow you to cross. Use the crate on the right to reach the level above.