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The burden of water system costs should be shared fairly

by Gail Walker, Water policy manager at CAS.

NB This article was first published in the Herald newspaper on 29 April 2020.

How often do you think about water? I don’t mean just the substance itself, but the whole network of systems and structures that makes it available in your life at the turn of a tap. I’m guessing not very often. To most people water is just the stuff that makes up our pretty rivers and lochs, falls from the air sometimes and flows from our taps when we want it.

But if COVID-19 has brought us anything, it’s the opportunity to step back and think about the things we take for granted. I’m going to suggest that water should be one of these.

Water, after all, affects our daily lives as much as anything, impacting our health, environment, housing, communities and economy. So how do we keep the systems and structures that constitute water management in Scotland fit for purpose? And crucially, is the cost of maintaining them spread fairly?

Providing water (and removing wastewater) across Scotland requires a vast infrastructure of pipes, pumping stations and treatment works, not to mention a small army of staff and a large supply chain. Since 2002, Scottish Water has serviced this network from the Borders to the Shetland Isles, responding to the challenges of topography, remoteness, weather patterns and general wear and tear of those assets.

Every six years, industry stakeholders review customer charges and agree on how much the industry needs to deliver water and sewerage services. The latest review period is just concluding.

Future challenges for Scottish Water include achieving net-zero emissions by 2040, building resilience to deal with greater rainfall during winter and less in the summer, and population shift from the west of Scotland to the east. None of this will come cheaply. Indeed industry stakeholders have accepted that customer prices during 2021-27 will have to rise beyond inflation. So how are these costs split across households?

We pay our water charges along with our Council Tax. So what you pay for your water and sewerage depends on which Council Tax band you are in. Financial assistance is available for those who are vulnerable, but the current policy for allocating this assumes that lower income households will live in lower band properties: so the lower the band, the less you pay. Additionally, if you receive Council Tax Reduction, you automatically qualify for a reduction in your water charges, up to a maximum of 25%.

At Citizens Advice Scotland, we have a statutory role in monitoring all this, with a specific brief to protect the consumer interest. Our research has revealed that household income, not Council Tax banding, is a more accurate proxy for identifying those that may struggle to pay for their water charges. The relationship between income and Council Tax band is weak; low incomes don’t only exist in lower Council Tax banded households. There are also cash poor, asset rich households in higher Council Tax bands.

We have identified those who pay over 3% of their income on water charges as those most in need of support. And currently, only 21% of this group in Scotland qualifies for any reduction. If in future, water charges increase above any growth in their income, then more than 70% of the lowest income households will pay more of their weekly income on water charges. Just one more bill they can’t afford.

However, consumers have also told us that they support investment to tackle climate change and to ‘future proof’ water infrastructure and service delivery.

So how do we reconcile the need to generate enough income for Scottish Water in the longer term to improve customer services and protect the environment, whilst protecting low income households? How do we achieve a just transition to net-zero? Is it fair to ask low income households to pay for the decarbonisation of the water industry, or should we be looking for a way to ensure it is funded by those who can afford to pay?

There are two possible ways to support low income households. The current system, basing affordability purely on Council Tax banding, can be improved by linking the reduction scheme for water and sewerage charges to any increase in customer bills, particularly above inflation prices. This would help ensure that low income households are not left out of pocket. 

In the longer term, however, we would support a new system that links a household’s weekly income or wealth with their Council Tax band when determining who should receive assistance. This would better target support to those who need it most.

It is generally accepted that life after COVID-19 will look very different to life before it. Many areas of public policy and practice will need to be looked at, including the way we fund our water services. There is an opportunity to design more robust measures that will protect low income households on a more permanent basis.

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