Memorandum submitted by Angela Smith MP,
Minister of the Third Sector (Ofwat 27)
EFRA OFWAT PRICE
REVIEW 2009
Having recently taken up my position as Minister
of the Third Sector, I have been disappointed to learn of the
difficulties that some third sector organisations have been experiencing
in relation to increased water charges.
You are no doubt fully aware of the huge and sudden
increases in bills that some third sector organisations, churches,
faith buildings and Scouts and Guides, have found themselves facing
as a result of the introduction of area-based charging for surface
water drainage.
I recognise that OFWAT has a duty to ensure that
charging systems implemented by all water companies are fair to
different customers, and understand that this is what led to their
guidance to water companies to introduce area-based charging.
I also understand that there is a need for both domestic and non-domestic
customers to take a sustainable attitude to both water usage and
disposal.
Viewed in this way, implementation of the new
charging systems may seem equitable in principle, but the reality
is that the types of organisation mentioned above simply cannot
afford such huge increases in charges. It does not seem equitable
that third sector organisations, set up to help their communities,
reliant on committed volunteers and possibly diminishing donations,
are paying the same or even higher bills as the business next
door turning over a respectable profit each year.
In my view, OFWAT has a duty to ensure not only
that the charging systems themselves are equitable, fair, and
do not place an unreasonable pressure on any customers' survival
In the present economic climate, third sector organisations are
experiencing huge increases in demand for their services which
they are coping with admirably; providing debt advice, giving
support to families and individuals coping with difficult times,
or offering volunteering opportunities to people out of work.
These generate a huge amount of social benefit
in all our communities, but do not generate profits in the same
way as a commercial operation does. Therefore I would question
how businesses and third sector organisations can be charged in
the same way?
Going on to the issue of sustainability in water
usage and disposal, this is an important matter and will become
more so as time goes on. However, the measures that OFWAT and
water companies have been encouraging organisations to implement
to mitigate charges, such as rainwater recycling systems or installation
of a "soakaway", are prohibitively expensive for many
third sector organisations. Additionally if the work is done outside
of the timescale for normal major works, it represents a large
capital investment that many do not have. In the case of some
water companies' implementation of these charges, there is no
way that third sector organisations could have possibly planned
for such huge increases in bills, let alone finding the kind of
money needed for mitigation measures.
As we know, area based charging has been implemented
by only 4 water companies in England and Wales so far. I would
urge that the inquiry and OFWAT is able to learn for the future
from good examples set like that of Severn Trent Water, which
has worked within existing government guidelines, and existing
OFWAT guidance, to create a "community tariff" that
sensibly limits the amount that community organisations can be
charged. This approach is also sensible in its definition of organisations
eligible for exemption.
By contrast, United Utilities (UU) have had
serious problems with the implementation of the charges overall
The moratorium introduced by them to address this issue has also
not addressed the problem as it only applies to churches and faith
buildings, community amateur sports clubs, and Scout and Guide
huts. As far as I am concerned, UU have not offered sufficient
reasoning behind the reason for excluding many other third sector
organisations from the moratorium such as village halls, community
centres and others. The question that I find difficult to answer
is if UU extend this moratorium for the longer term, where does
this leave the rest of the third sector? Also, how can this represent
equitable water charging systems across the country?
An equitable and fair charging system is not
the same as "one size fits all". OFWAT and the water
companies already have the ability to charge in ways appropriate
to their different customers, without resorting to new legislation.
I hope that OFWAT will take these concerns seriously as they move
towards the launch of their new pricing structure.
The Office of the Third Sector would be happy
to provide further evidence of the potentially serious and detrimental
impact on the strength and sustainability of every single community
in England and Wales. We will continue to work closely with the
sector and also with Defra on this issue.
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