Memorandum submitted Dr. Noel D.L. Olsen,
MSc, FRCP, FFPHM.
WATER AND SEWAGE CHARGES—A FAILURE
OF SOCIAL JUSTICE
Over the last couple of years I have chaired
WaterVoice in the South West, where average water and sewage charges
are currently around 10% of a state pension. For negligible public
health benefit and questionable environmental benefits water customers
are again destined to see their bills rise substantially over
the next five years. As a public health doctor I have been involved
professionally with the links between poverty and health for many
years, and I felt that I should add a personal contribution to
the formal evidence you will be receiving from WaterVoice and
others on the impacts of high water charges on poor, vulnerable
people. I am particularly concerned at the inequity caused by
current Defra and Ofwat policies and the resultant adverse effect
on social justice.
For many people in Devon and Cornwall water
and sewage charges are a nightmare. They have reached a point
where their affordability has become a threat to public health.
Unlike fuel poverty, the government has failed to set a target
level for reduction of "water poverty" and there has
been no public funding for programmes to alleviate the resulting
hardship in areas with exceptionally high water and sewage charges.
There has been a failure to recognise that some costs are cumulative
on very poor people. If avoiding falling into debt is to be achieved,
a concern amongst many elderly, vulnerable people, water, energy,
council tax, some basic transport facilities and housing costs
have to be paid before any residual income can be used for food
and other priorities. In all other policy areas government makes
some social welfare or public spending provision for high unavoidable
costs. For example, railways and roads are massively subsidised
from the public purse. Our heritage is respected and partially
supported; museums and art galleries in London are supported by
taxation but beaches in Cornwall, another national asset are not.
Fuel poverty has been a major concern of government and is the
subject off major initiatives. But water customers are expected
to pay all the water company costs and the effects of regulation
and quality improvements even if they are not affordable. State
pensions and other benefits are paid at a standard national rate
which does not reflect local costs, leading to major problems
for those with far higher but unavoidable costs such as water
and sewage charges in Cornwall. 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. In the "illustrative
case histories" appended the impact of water charges on living
standards are shown.
Cornwall has the lowest wage economy in England,
the highest charges for water, and a high proportion of the population
are not on mains gas so there is an added component to fuel poverty.
Public transport infrastructure is poor and for many people in
rural areas there is no choice but to run a car, leading to the
permanent residents running some of the oldest and most inefficient
vehicles in the UK. Because of the superb environment the area
is attractive to second home owners so house prices have been
pushed to levels unattainable to the local population. The people
with second homes come to enjoy the tremendous environmental benefits
of the region, make great use of the surfing beaches, and tend
to use their homes at peak (high cost) times. This uneven use
has required higher capital investment in water and sewage services
so that peak summer use can be met.
In effect occasional metered summer residents
receive a subsidy from local pensioners and others for sewage
infrastructure and the resultant clean beaches and rivers because
Ofwat's (and Minister's?) policies do not distribute the cost
of the vast capital infrastructure in an equitable way. For bureaucratic
convenience Ofwat have decided that the cost of capital infrastructure,
(48% of the total bill in Devon and Cornwall) should be apportioned
either by rateable value or on the basis of the metered volume
of water used. There might once have been some social justice
or relevance in rateable value, but the system is now flawed and
out of date. Volume going through a meter is not a valid proxy
for cost on its own without a substantial standing charge which
Ministers and Ofwat have repeatedly rejected. Added volume through
the sewerage system does add some marginal costs, but as with
owning a car or a house many of the costs are fixed and extra
use comes at marginal cost provided the infrastructure is adequate.
With about half of the total water and sewage cost due to infrastructure
capital costs, those who enjoy the amenity of a connection and
the clean rivers and beaches but use relatively little metered
water end up paying little towards the benefit. Thus an added
burden falls inequitably on others, particularly families who
inevitably consume a lot of water and pensioners who would usually
be well advised to go onto a meter. Many old people while sparing
in their use of water are unaware or afraid of meters and have
not shifted over. If they all did there is cause for concern that
the shift might bring forward the collapse of the financial systems
of the water industry which are already stretched. This is demonstrated
in the enclosed "illustrative case histories" to try
to simplify some of the issues.
"Objective one" status has recognised
the economic problems of the region, but unlike the rest of Europe,
this money has not been used to fund water and sewage infrastructure
because technically these assets belong to a private company as
a result of water privatisation. Lack of imagination on all sides
has meant that solutions have not been sought, for example, the
investment could be funded by Europe, the facility "owned"
by a public sector organisation and then operated on a cost plus
basis by South West Water. When water was privatised the SW peninsula
was given far less than its fair share of the "green dowry"
to fund the necessary infrastructure. While this is a fundamental
cause of the present difficulties, I recognise that no Chancellor
will now intervene to correct that historic injustice.
A sustainable approach requires a concern for
current affordability and some sense of social justice. While
no doubt desirable in absolute terms, some of the wish list from
the water quality regulators (Environment Agency, Drinking Water
Inspectorate and English Nature) will, in my view, add an unjustifiable
cost burden to vulnerable people and thereby create public health
problems, not alleviate them. In terms of DALY's (disability adjusted
life years—a WHO method for assessing the economic benefit
of health procedures), removing nitrates to the level now being
proposed is not justifiable on public health grounds. Yet the
cost of removing them will fall on water customers, not on agriculture
which is responsible for most "diffuse" pollution. This
is a failure of the "polluter must pay principle". Methaemoglobinaemia
in babies, the major public health justification for reducing
nitrite levels, is not a risk even at current levels—there
have never been cases at these levels. Indeed the only cases (?2)
over many decades in the UK have come from unregulated private
water supplies at vastly higher levels. Compare these "public
health benefit" costs and their DALY's with the probable
knock on effects on nutrition, and particularly fruit consumption,
caused by high water bills and you see the fallacy of the so called
DWI "public health justification" for action. Public
health, like politics, requires a balancing act over priorities.
I am not aware of any public health organisations or significant
sources of balanced public health argument that would see further
reductions in nitrate levels justifiable if much of the cost has
to be borne by the poorest in the community with resulting increase
in the health effects of poverty. Many would question if there
is any value at all.
Our long and beautiful coastline is enjoyed
by people from all over the UK, but 3% of the population have
to fund 30% of the nationally recognised "bathing water directive"
beaches. Tourism is a major and important driver to the economy,
but it brings few benefits to most pensioners surviving on state
benefits. Indeed in many aspects it detracts from their standard
of living.
What is needed is a change of policy. There
are a number of ways in which greater social justice could be
achieved. At national level, a top-up voucher system could be
introduced so that pensioners and/or all those on benefits could
be subsidised to the level of the average water bill in the UK.
If paid to water companies rather than to the beneficiaries it
could be cheap to administer. The winter fuel payment is another
precedent. The cost could either come from a redistributed national
water levy or from general taxation. In view of the strong regulation
that Ofwat exerts, the effect on company profits and efficiency
and therefore shareholder value could be at whatever level the
Chancellor decided. It would at least introduce a measure of equity
to those on the lowest income who are dependent on state welfare
alone.
At a local level Ofwat could also change its
policies. It would be entirely feasible to add a standing charge
to reflect the proportion of the cost which is attributable to
infrastructure and pay at a marginal additional rate for the water
consumed. Alternatively, the standing charge could fund the average
annual water requirements of a pensioner or pensioner couple,
and all those using more would pay at an appropriate additional
rate. Managing change would be difficult and those who have done
well out of the present system would be annoyed. But to take no
action is to continue an inequitable system for ever and sooner
or later there is a danger that water charges will become the
focus of "poll tax like" resentment. That can be in
nobody's interest and the effect could be devastating on the water
companies. The charging structure is largely imposed on them by
Ofwat and they have little room for manoeuvre but it is demonstrably
inequitable, and water companies have to take most of the blame
from consumers.
I am sending a personal copy of this paper to
those MPs representing SW constituencies and to Phillip Fletcher,
the Director General of Ofwat. I would be happy to expand on any
of the issues and provide any further interest you would like.
18 October 2003
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