Water bills: affordability and support for household customers
This House of Commons Library Briefing Paper examines the issue of water affordability. It includes statistics and analysis of the cost of customer bills; discussion of affordability and vulnerability; and information on the help that is available for customers struggling to pay. It also discusses the economic regulation of the industry as well as actions of the UK Government since 2009.
- There has been a 40% real terms rise in household water bills since privatisation in 1989; but a 5% real terms decrease in bills is expected between 2015 and 2020 (NAO).
- In 2014-15, 24% of households spent more than 3% of their income on water bills (Ofwat).
- In 2016-17, the forecast average household water bill is £389 (Water UK).
- Since privatisation in 1989, water companies have invested more than £116 billion in infrastructure assets and services (Ofwat).
- Around 760,000 people benefit from some sort of financial support from their water company and this is forecast to increase by 1 million by 2020 (UK Government).
Access to clean water and sanitation is a basic human right, but some people can find that water bills are unaffordable. Problems with affordability mean that bills can go unpaid, or customers cut back on water use or other essentials in order to afford their bills.
Water companies in England and Wales are not legally allowed to disconnect or restrict a household customer’s water supply if a bill is unpaid.
Bad debt - unpaid billsIn 2014-15, the total amount outstanding from unpaid customers’ bills was about £.2.2 billion. Costs associated with recovering and writing off this debt (known as bad debt) adds the equivalent of about £21 a year to each household customer’s bill.
What help is there for those struggling to pay their bills?The Department for Environment, Food and Rural Affairs is the lead Government Department in this area and sets the policy and legislative framework for the water industry. In May 2016, the Secretary of State summarised the Government’s approach on water affordability as follows:
More social tariffs are being introduced right across the country, but the key point is that everybody is seeing a reduction in their water bills overall, because we have a good regulator and an efficient industry, and we are introducing further competition.
WaterSure, WaterDirect and social tariffsThe UK Government supports the WaterSure and WaterDirect schemes in England, which provide payment support to customers in receipt of certain benefits.
The Government has also legislated to allow water companies to provide social tariffs which address wider affordability issues in their regions. As at July 2016, 19 water companies have social tariff schemes in place. However, uptake of new social tariffs has not met initial targets and a number of challenges around customer engagement and awareness have been identified.
Details of current social tariffs are available on the CCWater webpage: lower bills for customers struggling to pay.
Other forms of assistanceWater companies also provide other forms of assistance to help customers who struggle to pay, including referral to charitable trusts, flexible payment plans and water efficiency advice. In 2015-16, water companies provided a package of measures worth more than £40 million to help customers who were struggling to pay. Details of specific funding and assistance schemes available can be found on individual company websites.
Scope and further readingThis is a devolved area and as such this Briefing Paper covers household customers in England only, unless otherwise specified. Briefings on Wales, Scotland and Northern Ireland are available on request by MPs and their staff. Some links to useful resources are included in this Briefing Paper in Section 7.