Utility Week

Utility Week 4th October 2013

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Comment Utility Week expert view Karma Ockenden "When it comes to water affordability, the Labour party wants to be seen to be doing something rather than doing the right thing" R ed Ed rode to the rescue of hard-pressed consumers last week with a pledge to freeze energy prices until 2017, should Labour win the next election. Or something like that. In a quieter room a little further along Brighton's seafront, shadow water minister Gavin Shuker also stood up for the underdog at Labour's annual conference, with a call for a "social responsibility" clause to be added to the Water Bill. The clause would, he said, compel water companies to offer social tariffs, manage their tax affairs transparently and report on the employment of apprentices – in one fell swoop helping struggling consumers, the put-upon taxpayer, and the young unemployed. What such a clause would actually do is enshrine in law the current government's abdication of responsibility for water affordability. Instead, that responsibility would be transferred full-square to the water industry – and inevitably therefore to its (struggling) customers. The key plank of any social responsibility clause would be compulsory social tariffs, based on what most customers say they are willing to pay to support the poorest. Shuker said it was "inexplicable" that water companies had so far been left to introduce these voluntarily. What is truly inexplicable is that Labour will seek to legislate for an inherently inadequate solution rather than pressing for water affordability to be tackled fairly, nationally, through the tax and benefits system – as the government should already have done. A solution that is dependent on customers at large volunteering to pay higher water bills so the needy (variously defined) can pay less is never going to touch the sides of water affordability problems in a depressed economy where even bedrooms are being taxed. It is no surprise that the water industry has dragged its heels since the government provided final guidance on social tariffs in 2012. Most are still in the "research" phase. It is a hard sell for water company administrators to ask most customers to pay more so a few can pay less. What's more, Utility Week's own research last year showed that even potential recipients were not keen on the idea. They said they would feel guilty, burdensome and embarrassed. Similar sentiment causes thousands of free school meals to go unclaimed. If politicians want water companies to "do something" on water affordability, how about helping them reduce the existing £15 we all pay through our bills to cover the cost of bad debt? Give them access to benefits data so they can target help at the worst-off and chase up the chancers. Make landlords hand over information on tenants who rack up debt. Better still, rethink social tariff policy altogether and revisit solutions based on the tax and benefits system. What of the other elements of Shuker's social responsibility clause? These also look to be attempts to make water companies appear responsible for issues not of their making. Want water companies to pay more corporation tax? Then reform the system that provides for generous capital allowances. And having allowed many companies to slip from the ranks of the listed and gear up to the eyeballs, don't bleat about interest payment deductions from tax liability. As for apprentices, we'd all like to see more. But is it right to pressure water companies to take on more trainees when youth unemployment is hardly of their making? The twist, of course, is that water companies are unlikely to publicly complain. Many already run apprenticeship schemes and corporate social responsibility initiatives of various sorts – voluntarily. A few have even got social tariffs up and running. Until this year, Wessex Water's Assist tariff, which offers a banded discount system based on ability to pay, has been self-financing. The annual £450,000 cost has been more than offset by the fact that Assist customers, many of whom wouldn't have paid anything for their water under normal circumstances, contributed £200 a year on average, or £1.6 million in total. Pioneering Wessex has just introduced a cross- subsidy of 50p per customer per year to extend the scheme from 8,000 customers to 18,000. Moreover, encouraged by both new regulatory incentives and fear of the pariah status that is currently afflicting energy suppliers, the industry is desperate to keep its stock with customers. We have already seen a number of companies pledge to cap bill rises at the rate of inflation in 2015-20 – a clear attempt to demonstrate they have listened and responded to the sound of household budgets stretching. Calling for a social responsibility clause to be added to the Water Bill smacks of a politically convenient way to be seen to be doing something rather than doing the right thing. It implies water companies are responsible for problems that are not of their making. And in the case of social tariffs, it risks adding to the bills of the majority, regardless of how deep individual pockets are. Ed Miliband said "Britain can do better than this" more than 17 times in his keynote party speech. Surely Labour can do better than this clause. UTILITY WEEK | 4th - 10th October 2013 | 7

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