House of Commons - Environment, Food and Rural Affairs

Select Committee on Environment, Food and Rural Affairs First Report

5 Affordability

33. The question of how great an increase in their water and sewerage bills customers are willing to pay and can afford is a crucial one. Water Voice said "customers' willingness to pay more for water and sewerage services should not be assumed" and that "there is high satisfaction with both drinking water quality and sewerage services and general satisfaction with the water environment".[36]

34. There is a growing debt problem for water consumers. The Public Utilities Access Forum told us that between two and four million householders in England and Wales cannot afford their water charges.[37] Dr Noel Olsen told us that for many people in Devon and Cornwall water and sewerage charges "have reached a point where their affordability has become a threat to public health" and that "a poor diet and social isolation are inevitable if debt is to be avoided and an excessive charge absorbed out of a standard pension income"[38] There is a need for much more investigation of the level and implications of poverty exacerbated by water charges.

35. Growing consumer debt is also a problem for companies. Ofwat says

Current measures to address water poverty

36. At present, people facing difficulties paying their water bill are helped through the benefits and tax credits system, via the Vulnerable Groups Regulations and by charities. However, none of the measures intended to address water poverty has been very effective and none addresses the large regional differences in water charges.[40]

37. The National Consumer Council (NCC) believes that the tax credit and benefit system fails to address water affordability because the "notional element of income support intended to cover water bills has not kept pace with actual water bills … [and] the size of water bills varies hugely … yet the amount of means-tested benefit does not".[41]

38. The Water Industry (Charges) Vulnerable Groups Regulations, which came into force on 1 April 2000, allow for assistance, in the form of a capped bill, to certain low-income households with water meters who need to use a lot of water for essential household purposes. To qualify, a household must be in receipt of an income-related benefit, and contain either a large family, or a person who has special water needs because of a medical condition. The current definition of a large family is three or more children under the age of 16 years, while a medical condition is defined in the regulations. The regulations only apply to companies in England.

39. The NCC criticises the Vulnerable Groups regulations for being narrowly drawn and told us "the scheme has been a failure with only a 1.4 percent take up among eligible customers in 2001/2". The NCC alleges that the scheme costs more to administer than is paid out to customers.[42]

40. Defra has accepted that there may be some room to extend the scheme and issued a consultation document containing proposals for amending the regulations in February 2003.[43] Defra published a summary of responses to the consultation in August 2003 and said that in would respond to the consultation in 'due course'.[44]

What should be done?

41. Fixing bills at the level that the poorest in society can afford to pay would jeopardise the improvements in services and quality that have undoubtedly been made and would fail to emphasise that water is a valuable resource. But the difficulties some consumers face in paying their water bills are a matter of great concern to the Committee. Measures to help vulnerable customers do not appear to have been effective.

42. People suffering from serious difficulty in paying their bills should be helped through the benefits and tax credits system. The Government should review the way in which poorer households are helped with their water and sewerage charges. It should ensure that mechanisms to help people pay their water bills take account of the regional variation in those bills.

43. The Government should also issue its response to the Vulnerable Groups Consultation as soon as is practicable. It should advise the Committee of its response to the National Consumer Council's charge that the scheme reached only 1.4% of eligible consumers and cost more to administer than was paid out. If the charge is correct, the Government should inform the Committee how the proposed amendments to the Regulations will resolve the problem and by what date we can expect a more effective scheme to be in place.

44. We encourage the Government and water companies further to examine ways of managing and reducing the usage of water and the leakage of water from the system.

36 Ev 67, para 31 Back

37 Ev 77, para 1 Back

38 Ev 104 Back

39 Ofwat Press Notice 34/03 of 18 September 2003 Paying for water research: Insights into how customers juggle water and sewerage bills in household budget. Back

40 Ev 78, para 13 Back

41 Ev 76, para 17 Back

42 Ev 76, para 16 Back