Radical action from water companies and the government is needed to lift five million households in England and Wales out of water poverty, according to a new report published this week by UNISON.
The report – produced for UNISON by the New Policy Institute – looks at the help that the water industry gives its low income customers, the wages it pays its staff, and its financial set up for tax purposes to assess the industry’s social responsibility credentials.
The research finds that almost a quarter (22 per cent) of households in England and Wales struggle to pay their water bills.
According to OFWAT, the industry regulator, families and individuals who suffer from water poverty are those who spend three per cent or more of their income on water bills. Almost one in ten (eight per cent) of households spend more than five per cent of their income on water.
Water and sewerage bills in England and Wales have skyrocketed by 40 per cent in real terms since the industry was privatised 25 years ago, with the average annual household bill now standing at £385, says UNISON.
The report reveals that customers face a postcode lottery with their average annual bills, which vary from £330 per year for Severn Trent to £482 for South West.
Households on unmetered water bills, which are more likely to be on low incomes, pay at least £60 a year more on average than people who receive metered bills.
Lone parent families are the least likely to have a meter (32 per cent) and just 33 per cent of social rented sector tenants have a meter.
Prior to April 2015, only 8 of the largest 18 water companies offered a social tariff* to help customers struggling to pay their bills. Although there are now 14 companies offering such tariffs, those available do little to deal with the rise in water affordability problems, says UNISON.
While 22 per cent of customers face problems paying their water bills, only between 0.4 and 4 per cent of customers are covered by social tariffs, and that’s largely depending on where they live. Some schemes even exclude households that don’t have meters, says the report.
The Government must also take its share of the blame for the poor coverage of social tariff schemes, says UNISON. DEFRA guidance to water companies is highly prescriptive in stating companies should seek ‘customer endorsement’ of particular social tariff schemes. However, some companies have followed this guidance more slavishly than others.
The research also calls into question the lack of accountability and competition in the water industry, which is 50 per cent owned by private equity firms. These often have complex company structures both in the UK and abroad, creating opportunities to legally reduce their tax liabilities. UNISON is calling on water profits earned in England and Wales to be taxed here so that the companies pay their fair share of tax.
When it comes to how they treat their staff, the report finds that only two water companies – South East Water and Yorkshire Water – are accredited living wage employers. Yet with wages only a small share of industry costs – around 17 per cent – the water companies are well placed to pay at least the living wage rates to employees and sub-contractors, says UNISON.
UNISON General Secretary Dave Prentis said: “The water industry has been holding consumers to ransom and riding roughshod over the Exchequer for far too long. Half the industry’s profits go to private equity firms, raising serious questions over their accountability and the amount of tax they pay.
“The social tariffs that the water companies offer to customers are merely a drop in the ocean and do little to reverse the disproportionate amount that people are paying for their water bills each year.
“Water companies need to step up to the mark when it comes to tackling water poverty. Radically expanding the coverage of social tariff schemes is one part of that. If they won’t do it voluntarily, we need a government that is prepared to force them.”
NPI director and report co-author Peter Kenway added: “Water companies in England and Wales are in a privileged position and need to start taking their social responsibilities seriously. That means helping the millions of customers with affordability problems, paying the living wage and paying taxes on profits earned here to the UK government.
Notes to editors
* Social tariffs can include a discount on bills, reductions on a certain amount of metered use, or rebates, normally based on income or receipt of certain benefits. Every water company is covered by a means-tested scheme that applies to certain vulnerable customers in metered households, which normally caps annual water bills at the average metered bill for the region. Water companies can also establish their own social tariff scheme, but this is not compulsory.
The report analyses the ten water and sewerage companies, and the eight largest water-only companies that make up the bulk of the water industry in England and Wales (there are another six water-only companies but these are tiny and are often omitted from industry statistics).
The three per cent threshold for water poverty is determined by an independent advisory group set up the industry regulator, OFWAT. http://www.ofwat.gov.uk/future/customers/metering/affordability/prs_inf_afford.pdf
A household income that is 60 per cent or less of the average (median) British household income in that year is classified as a poor household.
According to the 2010-11 census, there were 23.4m households in England and Wales.
