Memorandum submitted by Unison
PAYING FOR
WATER (ENGLAND
AND WALES)
1. This report from UNISON is concerned
with how everyone in the UK pays for their water and sanitation
services. It reviews the present arrangements and considers various
alternatives. The report concludes by calling on Government to
launch a public consultation exercise to explore the options for
replacing the present arrangements with a new system for paying
for water that is fairer and that takes account of the needs of
low income households.
UNISON'S VIEW
2. At the 2004 Annual UNISON Water and Environment
Conference the following resolution was carried.
"UNISON recognises that a new basis for
paying for water services should be found to replace the existing
outdated rateable value based system. UNISON believes that any
new system has to ensure that sufficient income is generated to
maintain a properly trained and adequately resourced workforce.
UNISON further recognises that consumers will
expect a new system to be fair and reasonable with proper provisions
to deal with socially excluded and financially disadvantaged people.
UNISON notes that unlike other essential public
services, little or no public money is provided by Government
for investment in water and sewerage infrastructure.
UNISON therefore calls on the Government to publish
a consultative paper on the options for Paying for Water that
takes full account of, among other things, the views of UNISON
on behalf of the employees in the UK Water Industry."
In addition, UNISON's policy is against the
compulsory installation of domestic water meters.
THE EXISTING
ARRANGEMENTS
3. Domestic water consumers pay for their
water and sanitation services in one of two ways. Traditionally
water charges were based on the rateable value of the property
they occupied. This basis of payment has its historic roots in
the municipal provision of water services and was retained by
the water authorities in 1973 and again by the privatised water
companies from 1989. 76% of domestic customers still pay for their
water services using this system.
4. The level of charge actually paid by
a consumer varies from one company to another dependent upon the
price determination by OFWAT. Consequently consumers living in
accommodation with the same rateable value in different parts
of the country will pay a different charge. In 2004-05 a customer
in Severn Trent would pay on average about £250 per annum
while in the Southwest they would pay on average £442 per
annum. Moreover these charges take no account of the consumer's
rate of consumption.
5. Customers can elect to pay by water meter
but just 24% of domestic customers do so. Consumers living in
properties with a high rateable value may be better off paying
by water meter. Certainly small households in properties with
a high rateable value with just one or two residents are generally
better off with a water meter. In 2004/05 in Severn Trent the
average metered bill was £200 as opposed to an average of
£250 for an unmeasured service. In the Southwest the difference
was much larger with metered customers paying on average £273
compared to £442 for an unmeasured service. In effect unmeasured
consumers are subsidising metered consumers and because better
off consumers are more likely to exercise their choice to have
a water meter it is the least well off that subsidise the better
off.
6. Because of the municipal public service
heritage of water services and charges there is no contractual
relationship between a customer and the water service supplier—the
water company. There is a public service obligation on water companies
to provide water and sanitation services to all domestic households.
These households are represented in a variety of forms including
owner occupied dwellings, rented houses, blocks of owner occupied
flats, blocks of rental flats and multi occupied houses and blocks
of flats. It is not always clear to the water companies who exactly
is using the water services and who is liable to pay. According
to Water UK some 13% of water debt is owed by 6% of customers
in multiple occupation dwellings.
7. Water debt is a growing problem. However,
UNISON is a strong supporter of the Government's decision in 1999
to outlaw water cut-offs. UNISON believes that water is an essential
public service and to deny access to water and sanitation services
on economic grounds would severely compromise not just the health
and well being of the consumers concerned but of society at large.
By 2003 the annual non-recoverable debt was £164 million—equivalent
to 700,000 households not paying their bills. According to OFWAT
based on 2001-02 figures the average debt per customer was £156.
Watervoice reckons that the current outstanding revenue is £893
million of which £527 million is over 12 months old. Some
water companies make donations to charitable trusts set up to
help consumers pay off their water debt. However according to
OFWAT these donations have declined by 20% since 1999 and in 2001-02
the industry contributed just £3.5 million to charitable
trusts. The Government, through the Ministry for Work and Pensions
operates the Water Direct scheme whereby water charges are taken
directly from benefit payments, but the consensus in the water
industry is that this scheme is ineffective and needs to be replaced
by some alternative scheme. This view is also shared by Watervoice.
8. The whole of water companies' expenditure
on both operational maintenance and capital investment is financed
almost totally from charges to consumers, supplemented only by
each company's management of its equity and debt portfolios. The
Government although recognising the strategic importance of the
water industry's contribution towards environmental improvements
makes no direct contribution towards the huge costs involved and
seems content to leave matters with OFWAT to wrestle with the
conflicting interests of consumers and environmentalists.
THE ISSUES
TO BE
ADDRESSED
9. It is not difficult to recognise that
the present regime for paying for water and sanitation services
is arcane, outdated, unfair and ultimately unsustainable. The
main issues of concern can be summarised as follows:
There exists considerable anxiety if not outright
opposition to the idea of wholesale domestic metering. As far
as it is possible to tell this view is based on fears that water
metering would lead to higher costs for those most in need. These
are often characterised as households that use more than the average
amount of water, such as young families with children, single
parent families on low income and multi-occupied dwellings. It
is argued that for such groups an unmeasured system of charging
is best. However this argument is not directed against meters
per se, but the basis for charging. It is not difficult,
technically, to design a tariff structure for use with meters
that recognises the needs of low income households. It is interesting
to note that the South African Government has agreed what they
call a "life line tariff" that provides all citizens
with a minimum supply of water at no cost. Consumption in excess
of that is charged for.
This is but one example of how a tariff structure
can be designed on a "step" basis to govern the consumption
of water. There is also a strong water resource argument in favour
of meters. They can act as a deterrent against wasteful use and
they can assist with leakage control and the measurement of consumption.
One difficulty that would need to be overcome is the identity,
or lack of it, of who the water consumers are and what their individual
circumstances are. Moreover the installation costs for domestic
meters would need to continue to be borne by the water companies.
Although there are persuasive reasons to justify an element of
public subsidy from general taxation in recognition of the general
social benefits of universal water metering.
Having regard to the essential nature of water
and sanitation it is curious that so little government support
is given towards meeting the costs of investment in water infrastructure.
Cleaning up rivers and estuaries, eliminating sewer flooding,
replacing ageing sewers and water pipes—all this and more
is paid for by water consumers through their water bills. Other,
arguably, less essential services like energy, public transport
and leisure receive massive amounts of public subsidy from government.
Why not water? Because water consumers are not coterminous with
taxpayers there is an argument that the cost of socially and legislatively
required investment might be more equitably funded from the taxpayer
than the water consumer. If this was achieved then the price of
water to the consumers in the Southwest could be substantially
reduced as much of the investment there is directed at coastal
improvements for the benefit of holiday makers.
The extent of water debt is clear and unless
action is taken the problem will get worse. In theory there is
a distinction between the "can't pays" and the "won't
pays" but because consumer information held by companies
is incomplete, such social categorisation is difficult to apply
and the criteria would need to be universally agreed across the
water industry. Leaving assistance in the hands of voluntary efforts
by the water companies is not acceptable as it is patchy and insufficiently
resourced. Government seems best placed to develop a scheme to
operate alongside a new water charging system that can direct
its assistance to those most in need like the elderly and low
income households, possibly by means of a revitalised vulnerable
groups system of support.
CONCLUSION
10. The purpose of this report is not to
identify a preferred option for change but merely to convince
Government and other stakeholders that some urgent thinking is
needed to develop a new system for charging for water services
that can command the support of most if not all stakeholders.
That is why UNISON believes the Government should publish a consultation
exercise now as a prelude to the introduction of a new water charging
regime fit for the 21st century.
2 November 2004
| 
