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Households in the wetter north of England could end up subsidising those in the drier south as part of a proposed scheme to support people struggling to pay their water bills.
A proposed national social tariff being considered by the government could be paid for via taxes or through an addition to water bills. The move is aimed at addressing water poverty and removing the “postcode” lottery, whereby some people have to pay much higher bills for an essential resource because of where they live.
The idea of a national social tariff was one of the recommendations in a report on reforming the water sector by Sir Jon Cunliffe, former deputy governor of the Bank of England, published in July. His report said that support should “involve distributional decisions between bill payers nationally” rather than within water companies.
Although water companies already have social tariff schemes, the eligibility and level of support vary widely between regions and uptake can be poor because of the process involved in applying for discounts.
One in five households is already struggling to pay their water bills and the numbers are expected to grow as people in England and Wales face a record 36 per cent increase in bills over the five years to 2030, the largest since privatisation. Some of the average increases are already close to, or in excess, of 50 per cent once inflation is added.
The Competition and Markets Authority has provisionally agreed to let five companies — Anglian, Northumbrian, Southern Water, South East Water and Wessex Water — raise bills even higher than those already allowed by regulator Ofwat. The utilities argued that the existing increases would not cover upgrades to ailing infrastructure.
In the drier south of England most water bills are already higher than in the wetter north, and companies argue they need to spend large sums to prevent future water shortages. The utilities also face other costs, including having to raise debt at more expensive rates than before.
Additional projects such as building reservoirs will be funded through a separate surcharge on customer bills, similar to the model used for the new Tideway sewer under the river Thames in central London.
The call for a national social tariff has widespread backing. Citizens Advice, the consumer lobby group, will this week urge the government to set up a national automatic enrolment scheme for households struggling with water, energy and broadband bills.
CA says the support should be targeted at households with an average weekly income of £300 and below, or those who spend more than 5 per cent of their income after housing costs on water. CA argues that an average annual discount of £273 would lift 580,000 households out of water poverty and that the subsidies should be paid via water bills rather than by taxpayers.
Dame Clare Moriarty, chief executive of Citizens Advice, said: “Nobody should be unable to afford essentials like energy or water. The government must act now.”
Ofwat declined to comment.
Earlier this year the Department for Environment, Food and Rural Affairs select committee wrote to Emma Hardy, the water minister, and called on her to “urgently” press forward with a national scheme.
A Defra spokesperson said: “This government is taking decisive action to protect families from massive bill hikes and clean up England’s rivers, lakes, and seas.
“Every water company should offer support to vulnerable households, and we are working closely with industry to keep support schemes under review.”