Water meters and waste targets 'must be made compulsory'

Influential think-tank calls for new initiatives to cut consumption but experts warn that household bills will rise

A report by a leading Labour think-tank will argue tomorrow that millions of households, particularly in the south-east of England, should be forced to have water meters installed as part of a shake-up of the industry.

The report, by the influential Institute for Public Policy Research (IPPR), is aimed at reducing water consumption in the UK.

As well as compulsory meters, the IPPR calls for water companies to bear the cost of installing water butts, efficient flushing toilets and spray taps in homes.

It also wants the Government to introduce compulsory targets for companies to reduce customer consumption.

The current regulatory regime rewards the industry for selling more water rather than less. Between 2002 and 2005, companies in the South-east spent an average of just 11.5p per person each year on increasing water efficiency in the home. Thames Water, which is being sold for £7bn by its German owner RWE, has come in for particularly harsh criticism for the level of leaks in its network, for imposing a drought order and for its parent paying out £2.6m to former chief executive Bill Alexander.

The IPPR says that metered homes use more than a tenth less water. Experts warn, however, that meters will lead to a hike in bills in the short term.

Currently, companies can only force homes to have meters if water supplies are scarce. Only the Folkestone and Dover group has done this and it has been widely criticised over the expected short-term increase in bills that will pay for their installation. The IPPR, however, wants the Government to make it easier to impose water meters.

Liz Barber, an audit partner at accountants Ernst & Young, said the new rules would not only affect the water companies' billing systems, but could put those customers required to have a meter in an unfair position.

"That, in the short term at least, has the potential to lead to a rise in the average price of water bills, even if water consumption is reduced," she commented.

The past two dry winters and the summer drought have highlighted the UK's dwindling water resources. Bills are also set to rise by almost a fifth over the next four years to pay for new reservoirs and pipes.

The water supply for the already densely populated South-east will also come under increasing strain due to a big construction programme.

The Deputy Prime Minister, John Prescott, has announced that 200,000 new homes will be built over the next decade.