Ministers and under-fire water companies are facing renewed pressure to introduce a single social tariff to support vulnerable households as struggling consumers face an “unfair postcode lottery” when paying their bills.
At present, water companies in England and Wales all offer their own social tariffs, which provide discounts to hard-up consumers. However, some schemes are far more generous than others.
The Consumer Council for Water (CCW) on Sunday argued that a “fairer and more consistent” scheme with a central pot of funding – contributed to by all water companies – would help a greater number of people.
The cost of living crisis has put pressure on every element of household finances, from groceries to energy bills. Water bills are expected to rise over the next five years as companies tap consumers to recoup investment to improve crumbling infrastructure.
Analysis shows up to 2m households could benefit from the introduction of a standardised scheme to cut water bills for consumers in poverty. The CCW argued that such a move would eradicate water poverty, which is defined as anyone spending 5% or more of their household income on water bills after housing costs.
Water companies are preparing to submit their business plans for 2025 to 2030 to the industry regulator, Ofwat, early next month. Ofwat will then examine the plans to determine how much water suppliers can charge customers, and publish its final decision on the “price review” in December 2024.
It had been hoped a single social tariff could be introduced before the price review was complete. That now appears unlikely. Industry sources said the government had cooled on the idea – which had the backing of most water companies – since moves to examine how it could be implemented began last year.
The water industry is under intense scrutiny over a series of issues, including sewage dumping, leaks, executive pay and debt levels.
It is understood that some companies resisted a uniform social tariff as it would effectively mean subsidising companies in other regions that need to make larger investments.
Separately, calls for social tariffs in the energy industry have received support from campaign groups, regulators and suppliers but the government appears to have abandoned the idea.
Andy White, senior leader for social policy at the CCW, told the Guardian: “Customers want to see investment from water companies but that has got to come hand in hand with a stronger safety net for low-income households that will not be able to afford these looming [bill] increases.
“A fairer and more consistent single scheme with a central funding pot would allow financial support to flow to where it’s needed and not be constrained by water company boundaries. The existing postcode lottery is unfair and unsustainable and it should not be for water company boardrooms to determine financial assistance for an essential utility where people have no choice over their supplier.”
A study by economics consultancy CEPA showed that 12% of customers served by supplier Hafren Dyfrdwy, which covers north-east and mid Wales, are in water poverty, with 10.5% for United Utilities, which covers north-west England. Thames Water, the heavily indebted supplier to London and its surrounding area, had 3.6%.
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Last week, Lord Hollick, chair of the industry and regulators committee in the House of Lords, said members of the committee were “disappointed” that the government had not advanced plans for a single social tariff.
In a letter to the environment secretary, Thérèse Coffey, he said the current system meant that the differences between social tariffs offered by water firms meant that “support remains a postcode lottery at a time when financial pressures on households are increasing”.
Hollick said the committee was “concerned” that “the government will only be providing standardisation through guidance, especially given low levels of public trust in water companies”. He urged the government to announce its proposals on social tariffs “as soon as possible”.
A Defra spokesperson said: “Water companies should assist customers through social tariffs and other measures and we’re working with industry to explore options to make improvements, including on consistency and fairness across existing regional social tariff schemes.
“We have also been clear with water companies that we expect them to deliver the necessary improvements to tackle pollution and secure supplies for the future, without unduly impacting customers’ bills.”
