8 December 2009

The final report of the review by Anna Walker about the charging for water and sewerage bills for households in England and Wales has just been published. My focus is on the part of the review about the various options for altering the charges in the southwest.

The review explains very well in chapter 14 how we got here and why our bills are so much higher than other people’s. Briefly, at water privatisation the infrastructure in the southwest was poor; the EU demanded improvement of the sewage disposal arrangements and of the water quality; the infrastructure upgrading has led to the large bills paid by South West Water’s customers.

The review usefully suggests several possible ways of righting this inequity but does not recommend one rather than another. Again briefly, the suggestions fall into two categories which I now summarise.

(1) Transfer of funds to the southwest
A large one-off payment to the South West Water company by the UK government to level the historic costs (see section 14.2.3 and table 7 in the review for an explanation of this suggestion, the cost of which would illustratively be £650 million). This suggestion addresses the historic inequity that the Conservatives ignored when they privatised the industry and is probably the least unfair. Other review ideas are an annual subsidy for southwest customers from water customers elsewhere in England and Wales; or an annual subsidy from the UK government directly to the water company.

(2) Redistribution among southwest customers
South West Water customers to pay higher summer charges, some of these costs presumably being met from higher holiday accommodation prices; or, by various ways, helping low-income customers, other South West Water customers meeting these costs.

The review suggests Ofwat should be asked for its view on the review ideas.

Thus, a useful survey and useful suggestions but not the definite and decisive recommendation(s) for implementation that politicians and customers in the southwest were probably looking for. What follows this review is probably a period of reflection by Ofwat, then its observations, and then finally a government decision.

I am not sure anything will happen soon. This is a complex issue and fairness is not simply a question of being fair only to people in the southwest but of being fair to people elsewhere in England and Wales too. I do not see any government in a recession and with a vast deficit handing over £650 million to a water company. I just don’t see that it is practical politics or necessarily fair for any government to ask customers elsewhere to subsidise people in the southwest by paying more. The ideas in the review about affordability for low-income customers will probably be examined more sympathetically.

Previous post:
Water bills in Cornwall

The waters of comfort Psalm 23 in the Book of Common Prayer