Memorandum submitted by UNISON
SUMMARY
If the outcome of the next periodic review of
water charges is price increases for customers a balance will
have to be struck between the needs of consumers, shareholders
and the wider community (ie the environment).
Affordability is a key issue especially for
low-income consumers. The Government should consider whether further
assistance is required for low-income domestic customers.
The Government and Ofwat should also ensure
that employees are not expected to provide the sole source of
efficiency savings given that there is already evidence of skill
shortages in the sector.
A wider consideration of how water charges are
levied, the role of metering and the needs of low-income families
is merited.
SUBMISSION
1. UNISON is the largest trade union in
the United Kingdom and represents several thousand employees of
the water companies and the Environment Agency. We also represent
over one million public service workers in local government, the
NHS, police and education authorities, energy companies and transport.
2. The majority of our members are low paid
women, many of whom work part-time. UNISON is therefore acutely
aware of the need to ensure that the price of an essential public
service like water is reasonable and that there are adequate measures
to protect the position of low-income customers.
3. UNISON therefore welcomes the Committee's
decision to enquire into this issue. The recent indicative price
rises which the water companies announced have caused understandable
concern among consumer groups, MPs and others. However, as the
Committee will be well aware, there are several more important
steps in the periodic review process before final price increases
are determined.
4. Since the water industry was privatised
in 1989 unmeasured water charges have increased, excluding inflation,
in England and Wales by 21% and measured charges by 21.7%, according
to Ofwat's data. These are considerable increases especially since
the last periodic review reduced prices by 12% overall.
5. Despite these increases average household
bills for water and sewerage charges compare favourably with other
major household bills eg electricity, gas and the council tax
although there are significant variations in water bills between
companies and regions of England.
6. On the plus side however, the increased
revenue has, according to WaterVoice, financed £50 billion
of new investment in the water and sewerage infrastructure. Additionally,
the Government penalised the water companies for their excessive
profits with the windfall tax, which was channelled into the New
Deal project.
7. This long overdue but welcome investment
has helped to raise standards in the water and sewerage industry
considerably. The end of discharging raw sewage into the sea,
improved beaches and rivers and the highest ever drinking water
standards are the result of this investment and the skill of the
employees who deliver the service and protect our environment.
8. However, water companies still need to
make further, major investment to meet the requirements of European
regulations including the Water Framework Directive and
to renew our ageing water and sewerage infrastructure despite
the welcome improvement in standards already achieved.
9. They also may face additional costs for
maintaining and renewing the system if the Government goes ahead
with proposals to introduce lane rental charges The increased
costs have to be shared fairly between the industry's customers
and shareholders. It is acknowledged that shareholders are entitled
to a return on their investment, which they find acceptable or
they may decide to invest elsewhere. However the rate of return
should reflect the low risk nature of the water and sewerage businesses
and their monopoly position.
10. Ofwat and DEFRA have to ensure that
that the right balance is struck between the parties while allowing
much needed investment and affordable bills. They also need to
ensure that the water companies have the right numbers of skilled
staff to deliver both core services and customer service functions,
like debt management.
11. Following the last review many companies
reduced their workforce and began to rely increasingly on outsourcing.
Dwr Cymru has outsourced all its operational, engineering, IT
and customer service activities. Other companies have outsourced
major functions or activities.
12. We acknowledge that there is an increasing
problem of indebtedness among domestic consumers, which needs
to be addressed in a humane and sensitive way. The Government
was right to make disconnection from the water supply illegal
and it is also right that water meters should not be installed
compulsorily. However there is growing support for meters on environmental
grounds, particularly concerning water resources.
13. Interestingly, the recent research by
Accent for WaterVoice, Water UK and Ofwat revealed that most consumers
do not know that they cannot be disconnected. This suggests that
the number of "won't pay" customers is not the major
cause of the rise in debt levels. The price of the product is
obviously a factor but other issues like payment methods, flexible
debt repayment schemes and Government assistance are important.
Perhaps this is an area where further research would be merited.
14. Accent invited water companies to examine
whether they have enough appropriately trained staff to deal with
customers who want to talk to someone about paying their bill.
Moreover while most companies support non-profit trusts set up
to help poor customers much more needs to be done to inform the
public about the types of assistance they offer. We strongly support
the view that customers should be able to talk directly to a trained
member of staff about their bills and hope that this requirement
is not undermined by the current trend to outsource customer service
work abroad.
15. It is also important that water companies
recruit and maintain suitably qualified staff to their core clean
and wastewater operations. In tight labour markets, the companies
need to be attractive to potential new entrants to replace their
increasingly ageing workforce. Good terms and conditions, regard
for the employee's health, safety and welfare, rigorous policies
to achieve equality of opportunity for all staff and a reputation
for ethical business practices are essential.
16. Equally important is ensuring that managers
concentrate on delivering safe and secure operations. In our view
outsourcing can undermine this as the experience of Rail Track/Network
Rail demonstrates. The report on the October storms which lead
to thousands of electricity customers being without electricity
for up to 10 days in the worst cases also demonstrates what can
happen when basic but essential work like pruning trees by power
lines is neglected.
17. Research by the Gas and Water Industry
National Training Organisation, now part of the Energy and Utilities
Sector Skills Council, reveals growing skill shortages in the
water sector. Filling the vacancies will not be helped if labour
standards are undermined because water companies are unable to
finance reasonable pay, pensions and other conditions.
18. Water UK has done some excellent work
on sustainability criteria to sit alongside the key performance
indicators set by Ofwat. We believe that Ofwat should submit its
price determination to an employment sustainability test ie what
will the effect of our proposals have on employment.
19. All this leads us to conclude that increase
in water prices have to be sufficient to ensure that the companies
are able to recruit and retain suitably qualified staff.
20. We accept that Ofwat must submit the
company's expenditure plans to the most rigorous scrutiny and
that they should have regard to the overall affordability of water
and sewerage bills. Perhaps some environmental improvements could
be introduced over longer timescales where this is consistent
with EU requirements.
21. There is also a growing view among many
organisations representing customers and consumers that the present
system of water charges in England and Wales—based on rateable
values—is not sustainable. Although metering raises many
difficult issues and is not the only alternative to rateable values,
it may be the most sustainable option in the long term. Under
no circumstances however should water companies be allowed to
install pre-payment meters, which would undermine the ban on disconnection.
22. The key consideration with meters is
the tariff structure attached to them. It is perfectly possible
to design a tariff that takes into account the needs of the poorest,
while at the same time providing water suppliers with important
data on water consumption. This would enable water resources to
be managed more effectively and would also help to identify leakages
and falls in water pressure.
23. Further measures to assist lower income
households with their water and sewerage bills may be necessary
especially given the low take up of existing measures.
3 October 2003
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