Middle-class families could face higher water bills to subsidise poorer households

Telegraph

a day ago

Middle-class families could face higher water bills under new plans to subsidise the costs of low income households.
Labour ministers will be urged to introduce a nationwide scheme that would see poorer families given huge discounts on their charges.
The recommendation on creating a national social tariff will be presented to Sir Keir Starmer in a Government-ordered review of the water industry on Monday.
The money to reduce water bills for poorer households would be most likely to be found by increasing bills for everyone else.
Kevin Hollinrake, the shadow housing secretary, said: 'Family homes across middle England face soaring water bills under the Labour Government, thanks to the triple whammy of above-inflation hikes, higher tariffs on multi-person households, and robbing Peter to pay Paul to fund tariffs for those on welfare benefits.
'This is on top of council tax bills going through the roof, and pay packets being squeezed due to Labour's jobs tax.
'We can't just keep increasing taxes and charges – record taxes are already making life too hard for people. The Government should be standing up for the makers, not the takers.'
The scheme would replace a current patchwork of subsidy programmes put in place by individual suppliers to help poorer customers. Consumer groups have suggested unifying the level of support across England could lead to an extra two million people getting money off their bills.
Ministers are not expected to decide immediately whether to accept the recommendation, given the complexity of introducing such a policy. The previous Tory government rejected similar proposals on the grounds that punishing middle-class households would prove politically unpopular.
Earlier this year Labour ministers asked Sir Jon Cunliffe, a former deputy governor of the Bank of England, to lead a review into reform of the water sector. He published interim findings last month, in which he said he would bring forward proposals to 'strengthen' the system of social tariffs.
The report found that the fragmented nature of support resulted in 'people in similar circumstances receiving significantly different levels of support, depending on what part of the country they live in'.
'Regulation has failed customers'
Sir John wrote: 'The commission is looking at how to more effectively support customers who are struggling to pay their bills. This includes looking at options to strengthen social tariffs and to tailor water bills to better reflect household consumption.'
He is expected to recommend that the Government introduces a nationwide social tariff in his final report, which will be published on Monday.
Steve Reed, the Environment Secretary, is expected to respond to the publication of Sir John's report by saying: 'Regulation has failed customers and the environment. We will introduce root and branch reform so hard-working British families will never again face huge shock hikes to their bills like we saw last year.'
It comes after Labour ministers passed legislation through the Commons that quietly paved the way for such a reform.
The Water (Special Measures) Act included provisions that allow water companies to pool the cash they raise to subsidise poorer households into one pot. It also authorised increased data-sharing between the Government and suppliers which could underpin auto-enrolment of customers onto social tariffs.
Currently, the nine water companies in England offer their own individual social tariff schemes, which are subsidised by wealthier households. Because the programmes are localised, firms can only raise money from their own areas and must consult customers on how much they are willing to pay.
The proportion of households on social tariffs has soared in recent years as a result of rising water bills and pressure on suppliers to do more to tackle poverty.
Figures from Ofwat show that, across the country, one in 10 people are now receiving such support, with the resulting cross-subsidies costing £26 per customer. But that masks huge regional differences, resulting from both the level of support suppliers provide and the criteria they set for qualifying households.
South West Water has the lowest proportion of customers on social tariffs, at five per cent, whilst United Utilities, which covers the North West, has the highest at 15 per cent. Customers of Portsmouth Water pay only £2 each in subsidy costs, whereas the bill at scandal-hit Thames Water has soared to £55 per person.
Water UK, the industry body for suppliers, has lobbied for the introduction of a single social tariff to end what it calls the 'postcode lottery' of support.
The Consumer Council for Water, a quango that acts as a consumer champion, has also encouraged ministers to introduce such a scheme. It has estimated that two million people who are entitled to support with their bills are losing out because the current system is too complex.
Critics have said creating a national social tariff would lead to a flood of new customers eligible for support, meaning higher bills for everyone else. But industry sources said the eligibility criteria could be set so that subsidies are better targeted, limiting the need to raise more cash.