Change in the pipeline but more to be done

Eleanor Gill, Chief Executive of the General Consumer Council, reviews progress in limiting the impact of water charges on vulnerable customers and calls for further measures to increase the fairness of the system and long term sustainability of water services.

The introduction of water charging in April next year is the biggest consumer issue to affect Northern Ireland consumers for decades. It will impact everyone from individual households to farmers and big businesses. The Consumer Council is especially concerned about the impact this new charge will have on those less able to afford it. As the total household bill continues to spiral, the consumer purse is being stretched further and further. The government’s announcement last year did address the issue and there are hopeful signs that the most vulnerable consumers will receive better assistance than originally planned.
Having called for a delay, the Consumer Council was pleased the reform programme was postponed to allow further time to review the proposals. The minister responded by extending the programme by one year; this allowed time to examine the affordability proposals, establish a fairer price and progress the debate on metering. So what does it all mean for Northern Ireland?

The government’s original proposals suggested a minimum capped charge of £150, which could have put one in four households at risk of water poverty. The proposed 25 per cent discount still represented a 75 per cent additional charge for people already struggling to make ends meet. The Consumer Council believed this was unacceptable. The new proposal should ensure that water poverty is avoided by providing a unique income-based scheme that means no eligible low-income household should spend more than three per cent of its income on water. This is pegged at the level of the Single Pension Credit. The most vulnerable households are protected with lower caps of 1.5 per cent and 2.25 per cent depending on the value of the home. This package will extend to more households than ever and mirror the new Northern Ireland Special Rates Relief Scheme. Some examples are in the table below.

This is also good news for all consumers because they are no longer expected to pick up the bill for those who cannot afford to pay. Instead, a unique government-funded £30 million pro-tection scheme for vulnerable consumers removes cross-subsidy and effectively reduces bills for everyone. There will also be a concerted campaign to increase benefit take-up so that everyone who is entitled to relevant benefits receives them and therefore qualifies for protection under this scheme.

While the government’s efforts on affordability are to be applauded, there is still some way to go on metering and the wider issues of sustainability. The main commitment from the government is to link metering to the core protection policy so that pensioners who do not get any passport benefits will get meters. Meters will also be installed in all new properties and first time connections. Although these small steps are welcome, the Consumer Council wants to see Northern Ireland brought into line with businesses and most other developed countries with the introduction of widespread domestic metering.

Unfortunately, for most consumers the current proposed charge is still automatically unfair because it combines a fixed charge with a charge based on the capital value of their home. People in lower value houses will pay disproport-ionately more in fixed charges and it will penalise older people whose house value has grown but whose fixed income has stayed the same.

The Organisation for Economic Co-operation and Development (OECD), an international organisation helping governments tackle the economic, social and governance challenges of a globalised economy, has highlighted that a similar system in England and Wales, based on rateable values, has a higher proportional impact on the poor than in nine countries surveyed, other than Mexico. Our research shows that consumers want meters and believe them to be the only fair way to pay for water. What is fair about a single person with no children paying the same as their neighbour with a family of four? Every house has an electricity or gas meter, so why not have one for water?

In terms of sustainability, the Consumer Council accepts the need to comply with the EU Water Framework Directive but the new proposals do not fully meet European legislation in premise or spirit. A fixed average water and sewerage bill will not encourage people to use water wisely and the unsustainably high level of leakage will not be effectively addressed. Experience of water shortages in the South East of England this year should serve as a reminder that our resources can never be taken for granted. The OECD has also stated that efficient and effective water pricing systems should provide incentives for efficient water use and that the ‘metering of water consumption is a prerequisite for the application of efficient water pricing policies’.{footnote}OECD Environment Directorate, ‘Pricing Water’ by Tom Jones 19 March 2003{/footnote} There is no guarantee this will occur under current government proposals.

The government has missed an opportunity to make us value our water by not introducing widespread metering. Such a scheme could provide suitable protection through water allowances for vulnerable groups. Instead of following their own lead and introducing a unique and progressive system for protection, they were too hidebound by the Great Britain experience. So, what we now have is a vague, long-term commitment to widespread metering. What we need is a clearer debate on metering that puts the consumer centre-stage.

The original proposals suggested an average bill of £365. This has now been pegged to be in line with the England and Wales average which means many households will see their bills reduce by eleven per cent. While this is a welcome move, we are concerned that this bill will rise because of inefficiencies in the system. What if the Water Service misses its efficiency targets – who will pay for that? Consumers need reassurance that they will not foot the bill.

Government proved it could listen to consumer concerns about paying for water and the new Affordability Tariff is a welcome development. More work needs to be done on sustainability and consumers need reassurance and information to allow them to judge if they are getting value for their money.