New research shows unpaid water bills are an increasing problem in England and Wales, with companies needing to do more to prevent it and help customers struggling to afford their bill.
Ofwat’s ‘Affordability and debt’ report’, published today, shows that between 2010 and 2015 the number of customers at risk of struggling to pay their water bill has remained stable.3 Yet in that time there has been a big increase in unpaid bills. The cost associated with unpaid bills is around £21 a year for every household – an increase from £17 in 2009/10.4 And £2.2 billion unpaid revenue is now outstanding.
The report shows that low-income households, working-age adults living alone, lone parents and single pensioners are more likely to have problems paying their bills, and are more likely to be in debt.
This rise in debt over the last five years comes despite below-inflation rises in average bills, and Ofwat’s latest price review will result in a further five per cent real terms fall by 2020. The report recognises that even if water bills are being kept down, changes in income and the cost of other essential services going up has put added pressure on households’ budgets.
According to the debt charity StepChange, the number of people needing help to manage their debts has risen by 56% since 2012. And the proportion of customers contacting National Debtline with issues related to water bill debt has increased by almost 10% in the last five years.
Ofwat has already challenged companies to do more to help those struggling to pay bills. This led in 2014 to companies committing to more than double the number of people benefiting from financial support to around 1.8 million by 2020. Yet the report shows that the availability and quality of help for customers varies significantly across companies.
Some companies have made progress in establishing more support and getting smarter at targeting customers who need help. And awareness of support is generally rising. Yet most companies have not achieved their initial targets for customers signing up for their new social tariffs, which offer cheaper bills to customers who are struggling to afford their bill.3
Cathryn Ross, Ofwat Chief Executive said:
“Ofwat’s priority is to protect customers’ interests and clearly customers who struggle to pay get the help they need. This important research highlights that while three quarters of customers think their water services are good value there is a growing problem that more customers are not paying their bill.
“Some companies need to get better at collecting unpaid bills from those customers who can pay but don’t. Yet this report is clear that many households are feeling the squeeze and need support. While some companies are improving how they respond to these customers, others have to get better at identifying those at risk and helping those who are genuinely struggling.
“This is not only the right thing to do, but benefits everyone as it will bring down the cost to everyone of unpaid bills and increase trust and confidence in the provision of these vital public services.”
Notes for Editors
- The Water Services Regulation Authority (Ofwat) is the economic regulator of water and sewerage companies in England and Wales. Its role is to help the sector build trust and confidence with customers and wider society. It exercises its powers in a way that it judges will protect the interests of consumers, promote value and safeguard future resilient water and sewerage services by allowing efficient companies to carry out their functions properly, and finance them.
- Ofwat’s Affordability and debt 2014-15 report is intended to help inform companies, policy and decision-makers from across the sector and in Government in the work they do to address water affordability issues and water debt for household customers in England and Wales
- The assessment of customers most at risk of struggling to pay their bill is based on the proportion of income, after housing costs have been taken into account, spent on water bills. In 2014/15 around 24% of households spent more than three per cent of their income on water, and 11% spent more than five per cent.
- The costs associated with unpaid bills of £17 and £21 are both in 2014/15 prices. Although companies can pass through some of the costs of bad debt to customers, Ofwat challenges companies to make sure inefficient bad debt costs are not passed on. This means that some companies may have to absorb some of the costs associated with bad debt. For example, in 2013 Thames Water submitted an application to increase its price limits. This included a £75 million claim for increased bad debt costs associated with the recession. We rejected Thames Water’s request following a review which included an assessment of the efficiency of the company’s bad debt management. This meant that the company – not customers – had to absorb these extra costs.
- In 2012, the UK Government published guidance on social tariffs, which allowed water companies to offer tariffs that other customers subsidise. The Welsh Government published its guidance in 2013. Fourteen out of the eighteen largest monopoly water companies have introduced social tariffs, while the remaining four companies are considering or developing their tariffs.
- Media enquiries to Ofwat Press Office on:
Benedict Fisher 0121 644 7642 / [email protected]
James Sheward 0121 644 7644 / [email protected]