Memorandum submitted by the Consumer Council
for Water
INTRODUCTION
1. The Consumer Council for Water (CCWater)
is a non-departmental public body representing water and sewerage
consumers in England and Wales. It took over from WaterVoice on
1 October 2005. CCWater operates through nine committees in England
and a committee in Wales. Its duties include representation of
current and future consumers.
2. CCWater is independent of both the water
industry and the regulator. Details of our planned activities
and what we are seeking to achieve are set out in our Draft Forward
Work Programme 2005-08, which was published for consultation on
29 November. This explains how CCWater proposes to meet its duty
to contribute to the achievement of sustainable development including
issues associated with financial inclusion such as water affordability.
CCWater intends to be active in lobbying for a fairer deal for
low income and other vulnerable groups.
3. Over the last year CCWater (and its predecessor
WaterVoice) has co-ordinated and led lobbying activities by consumer
bodies Age Concern England, Citizens Advice, Help the Aged, National
Consumer Council, Public Utilities Access Forum, Public Utilities
Reform Group and UNISON to persuade the Government to introduce
measures to address water affordability. We have also worked with
Water UK and the energy sector to look for opportunities to use
financial inclusion initiatives to assist low income consumers
in managing payment of their utility bills.
4. Consumer organisations are united in
their view that greater flexibility in the operation of the third
party deduction scheme by the Department for Work and Pensions
(outlined at paragraph 6 below) would strengthen financial inclusion.
We believe this scheme falls within the consideration of the Treasury
Committee as part of the sixth area identified in the terms of
reference for this inquiry—the benefits of financial inclusion
and the extent to which financial inclusion measures can contribute
to combating poverty and reducing barriers to employment. As part
of the joint lobbying activities the National Consumer Council
has produced a briefing note "Briefing on third party deduction
reform for John Hutton MP, Secretary of State for Work and Pensions"
setting out the case for reform (attached). (Not printed)
THE BENEFITS
OF FINANCIAL
INCLUSION AND
THE EXTENT
TO WHICH
FINANCIAL INCLUSION
MEASURES CAN
CONTRIBUTE TO
COMBATING POVERTY
AND REDUCING
BARRIERS TO
EMPLOYMENT
5. Much of the Government's financial strategy
centres on bank accounts and the potential savings to be made
through access to direct debit payments. At present only a handful
of water companies offer direct debit discounts and these are
for negligible amounts. Discounts range from £2-£5 per
year. Welsh Water offers a 1.5% discount for prompt up-front payment
of annual charges. These schemes do not provide assistance to
low income customers.
6. The Department for Work and Pensions
operates a direct payment system that allows deductions to be
made from benefit and paid to a creditor, known as third party
direct deductions. It allows particular creditors to make an application
to recover certain debts from income-based benefits. This system
of debt recovery is limited to creditors that provide specific
services and includes local authorities and utility suppliers.
Water and sewerage charges and fuel bills are included in the
scheme. The scheme has consistently been welcomed by consumers
as providing assistance and support in budgeting.
7. Innovation within the third party direct
deductions scheme could enable individual claimants to make choices
about payment methods based on their financial circumstances,
rather than those presented by Government. A more flexible approach
is required which is consistent with financial inclusion.
8. We have therefore concluded that there
is a need for improvement and expansion of the third party deductions
scheme. The current system is unnecessarily restrictive and unhelpful
to consumers. We believe it should be available to all consumers
on all benefits and tax credits at the outset of their claim.
This is key to wider financial inclusion policies which could
be met by the following:
— Use of the third party deductions
scheme as a budgeting tool by offering it as a payment option
of choice not as a repayment arrangement of last resort.
— Allow consumers to join the scheme
and remain on the scheme when they are not in arrears so that
they do not build up debt.
— Extend the scheme to include all
income replacement benefits (including working tax credits) to
widen the numbers.
— Allow consumers who move from one
benefit to another to remain on the scheme to encourage continuing
bill payment.
9. Research undertaken during 2003 (Accent's
"Paying for Water" for WaterVoice/Ofwat) indicated
that customers who face difficulties in meeting their utility
bills would welcome the choice of joining the third party deduction
scheme. However, awareness of the scheme was very low. We have
pressed the Government to do more to promote the scheme to raise
awareness among potential beneficiaries and provide a greater
choice in payment methods which is consistent with the principle
of financial inclusion.
January 2006
| 
