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A socially responsible water industry? A case to answer in 2015

Commissioned by: UNISON

  • Published 30th Apr 2015
  • Authors: Peter Kenway, , Adam Tinson,
  • Category: Services

A socially responsible water industry?

Our last report on the water industry in England and Wales for UNISON, published in 2013, concluded by asking a wide-ranging set of questions about this essential yet now very peculiar industry. Little has changed since then and all those matters are just as pertinent today. What this report does is to delve further into just some of them.

The matters it leaves aside are the more economic ones, about investment and debt. This doesn’t mean they are not important: on the contrary, their very importance demands more attention than we can give them here.

The matters it takes up are those to do with social responsibility. The question this report asks is what would it take for the water industry to start to merit the label “socially responsible”?

Key findings

  • Water and sewerage bills in 2014-15 are some 40% higher in real terms (after inflation) than they were in 1989-90, when water was privatised. Between now and 2020, water bills will rise in line with the index of inflation (CPI) that the government thinks should be used to measure real growth in incomes.
  • Bills vary between regions, the South West having the highest average (£482 per year). The average in Scotland (£346), partly due to public ownership, is among the lowest.
  • Bills also vary within regions in ways unrelated to usage. Although unmetered customers are more likely to be on a low income, average unmetered bills are at least £60 a year higher than average metered bills.
  • 22% of households face water affordability problems (3% or more of income spent on water bills) (see Figure 1). Unmetered households are more likely to face such problems (24%) than metered households (18%). 8% of households face deep affordability problems (5% or more of income spent on water bills).
  • By April 2015, 14 of the 18 largest companies will offer a social tariff. There is great variation among the eight in operation before then. Even the most generous of them (to cover 4%) falls far short of the scale of the affordability problem (22%). Two of the eight exclude unmetered customers.
  • Half of the water industry by turnover is now ultimately owned by private equity consortia. The exact form and complexity of private ownership matters because of what they mean for transparency, accountability and tax revenues. It is not that rules are being broken; rather that the rules are wrong.
  • Just 17% of income generated in the water industry goes to wages. Thanks to this very low wage share, water would be well able to ensure that the lowest paid people working for it, directly or indirectly, were paid the living wage. Yet only two water companies are accredited living wage employers.
Figure 1. Households facing problems of water affordability, 2012-13
 

water_affordability_graph.png

Conclusions
The focus of this report is on what it would take for this vital industry to meet the minimum standards for social responsibility. There are three elements to it:

  • Address the problems of water unaffordability. With approaching one quarter of households facing such a problem, social tariffs benefiting 0.4% or even 4% of customers are nowhere near enough.
  • Pay the living wage. With its incredibly low wage share of total income and lack of competition, no industry is better placed than water to pay the living wage, both to direct employees and subcontractors.
  • Pay taxes where the income is earned; be transparent. Profits on water in England and Wales are earned here; taxes on them should be paid here. In an industry without competition, this industry should be a model of transparency.

These proposals add up to no more than a minimum standard for social responsibility. If not in the water industry, where?