Water companies set up trusts to play Santa to the poor

THREE water companies are attempting a metamorphosis from Scrooge to Santa by creating and financing charitable trusts to help some of their poorest, most indebted customers who cannot pay their bills.

South Staffordshire, Anglian, and drought-hit, leak-prone Yorkshire say they have set up the charities, or are in the process of doing so, because some customers are too poor ever to get out of debt. They feel other water companies and utilities should follow their lead.

The trusts give grants to the "deserving poor" with substantial water debts - those judged to be facing the greatest deprivation and also sincere about staying in the black once they have been helped.

The decisions are made by unpaid trustees who mostly have no connection with the water companies - they are local council members and officers, Citizens Advice Bureau (CAB) workers and debt counsellors.

Hardship cases are referred to them by social services, CABs, social workers and doctors. Applicants fill in forms detailing their debts and circumstances. The state benefits system will not help these debtors and they have no prospect of earning enough to break free.

There are advantages for the companies beyond mere public relations. It slightly reduces their exposure to bad debt. They would also much prefer arm's-length trustees to choose whose debts should be cleared, rather than company staff getting involved in the complex business of deciding whether to write off the debts of some impoverished customers.

The debt pay-offs help them reduce the number of disconnections, but all three point out that the number of people they cut off has been falling rapidly in recent years in any case.

There is also a tax advantage, although the sums involved are trivial compared with the profits the firms make and the corporation tax they pay.

South Staffordshire's trust was set up in 1993, followed by Yorkshire whose own began work in July this year. Anglian is now advertising for a paid director for its own trust, to be launched in 1996.

South Staffordshire chairman John Harris, one of the trustees, said: ``You can call it social engineering if you like, but we started this because we realised that some customers just couldn't pay their debts. We look to each family's circumstances, and we want to see that they are taking a responsible approach."

For all three companies, the money that finances their charities comes not from the customers who do pay their bills, but out of profits that would otherwise be distributed among shareholders in dividends. The two other companies also finance their trusts this way.

The South Staffs charity paid out just under pounds 31,000 in the financial year ended last March to 123 customers - an average grant of some pounds 250. That is trifling compared with pre-tax profits last year of pounds 14m, but enough to make a substantial dent in the pounds 300,000 burden of bad debts the company carries.

Pat Church, a non-executive Yorkshire Water director who chairs that company's trust, said: "We've helped in some really awful cases - a single parent whose baby died, a pensioner who had to have a leg amputated and is very isolated."

But the trustees have been able to reject some applications very easily - like the one from a family of four, all in work, who asked for pounds 28 towards a watering can.

Since the launch in July, the Yorkshire trust has paid out more than pounds 20,000 to 70 households, and in February expects to approve 104 more grants. The names are not given to the trustees "so people can apply with dignity".

The company has put up pounds 100,000 for the first year, with the promise of more if the demand is there. Pre-tax profits this year were pounds 142m.

The trust has helped three customers in debt to a neighbouring company, York Waterworks. "It's within our remit," said Ms Church, a businesswoman with her own company.

She added: "I think other utilities ought to look seriously at what we're doing." She points out that the people the trusts help are usually multiple debtors.

Anglian has chosen to put pounds 2m into its trust as an initial endowment, out of pre-tax profits of pounds 216m. An Anglian spokesman said: "If they are looking for more, they can approach us just as they can approach anyone else."