Water meters 'would cut bills for the poor': Report fuels debate over changes in charging methods

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POOR people and those living alone would see their water bills fall if metering was introduced while middle-income households would lose out, a report by the Institute for Fiscal Studies claims.

It is certain to fuel the heated debate on how consumers should pay for water when charges based on the rateable values of buildings are abandoned at the end of the decade.

The findings contradict charges by the Labour Party that meters would disadvantage many on low incomes. However, the institute's findings were dubbed 'purely theoretical' by the Water Services Association, and the National Consumer Council said they amounted to 'an interesting intellectual exercise' and warned that they could be misleading.

The institute said that the poorest 20 per cent of households would see bills fall slightly if water charges were based on metering or on the number of occupants in a home.

Pensioners and single-person households would benefit particularly, and could expect to pay at least a fifth less.

However, the institute said that if water companies decided to base charges on property banding or a blanket licence fee - other options under consideration - low-income households would see bills rise by 10 per cent or 19 per cent respectively.

With metering, middle-income households would suffer an 8 per cent increase in charges, but the very rich would be better off with metering than with the rateable value system in use today.

The institute's analysis assumed that the top and bottom income homes were dominated by small households that would have low levels of water consumption.

Owfat, the water industry watchdog, welcomed the report, describing it as a useful contribution to the debate on future charging. But the National Consumer Council argued that the institute's findings were removed from reality and went against earlier work by Ofwat.

The Social Impact of Metering, an Ofwat report based on trials of people using meters, showed that 18 per cent felt they needed more water than they could afford to use. This figure rose to 62 per cent for those with medical conditions.

Among a sample of people who were on social security benefits, 80 per cent had cut down on baths and showers and more than half had been forced to reduce washing their clothes and flushing the toilet.

However, Ofwat pointed out yesterday that the social report also said that most households had no problem with metering or with paying metered bills.

John Ward, acting director of the National Consumer Council, criticised the insitute's report for failing to reflect the true cost of different options for charging and, in particular, the high cost of installing and maintaining meters.

'A meter can cost up to pounds 250 to install, needs regular maintenance and eventually has to be replaced. The exclusion of any figures for installation and maintenance will dramatically underestimate the real cost of metering to consumers,' he said.

Water companies are divided over the relative benefits of meters. The Water Services Association, while it noted the institute's report, said that it preferred not to take a stance until the outcome of a three-year trial, due for publication next month.

'That will be based on practical experience and may show different results,' a spokesman said.

Ofwat, while it believes metering to be a fair option in theory, also said that widespread metering was not economically feasible in the short term. It wanted companies to install meters gradually and selectively - for example, where there was shortage of supply, where there were new buildings and where homes were very large with large gardens.