Coffey has dealt ‘body blow to social tariffs’

The idea of a nationwide social tariff for water bills has garnered near universal support from industry, consumer bodies, regulators and government - until now. Therese Coffey's bombshell comments that this is no longer Defra's preferred approach has left the sector "surprised and bitterly disappointed". Utility Week gauges the reactions of sector experts.

Last week the water sector was dealt “a body blow” by comments from the secretary of state for environment, food and rural affairs (Defra) that suggested a cooling in government appetite for a single social tariff for water bills.

Therese Coffey appeared before the House of Lords Industry and Regulators Committee on Wednesday as part of its inquiry into the work of Ofwat and was asked about progress of the proposed national scheme to address water poverty.

The single tariff was a recommendation from CCW in May 2021 after it carried out an independent review into affordability on behalf of governments in England and Wales.

Defra made a clear commitment to consult on affordability following CCW’s review, which it stressed it has not moved away from.

However, Coffey said last week she was “more minded not to have one tariff nationally, but to have consistency water company-by-water company” instead of a single tariff funded by billpayers across the country.

“It’s a matter of social policy, and should be mandated by government not something decided by board rooms,” Emma Clancy, chief executive of CCW, told Utility Week.

CCW’s recommendation enjoyed the support of George Eustice when he was secretary of state, environment minister Rebecca Pow and the then government, Clancy explained. “This very much seems to be a decision by the incoming secretary of state, Therese Coffey.”

As part of the independent review a working group of experts examined how to address affordability, CCW said, but could not collectively find a way of delivering help to the people who need it without a central funding pot.

Coffey told peers she favoured an approach such as WaterSure, where an eligibility criteria to receive bill support is set – something she described as “very valid”.

Drawbacks to regional models

Consumer groups warned that implementing consistent criteria without shared funding would face the challenge that areas with higher levels of deprivation would have fewer people able to fund the regional scheme.

“Even if eligibility criteria was the same for each company’s scheme, the regional funding would mean the support people could be provided with wouldn’t be the same,” said Jess Cook, water poverty lead at the National Energy Action. “A household might be eligible for the scheme wherever they live but they might receive a much bigger discount in one area than another purely down to the amount of funding a company has available through their willingness to pay research. That central funding element is really key to ensuring people have consistent support.”

“That was the fundamental point the independent working group couldn’t find a way through,” Clancy said. “Which led to CCW’s recommendation in the first place.” She said affordability support without a shared financial pot would be “a body blow to social tariffs in water”.

Cook echoed this and said the principles of fairness and consistency at the heart of the project would be in jeopardy without a centralised fund.

“I struggle to see how we can achieve it with a regional approach,” Cook told Utility Week. “We have a regional approach now and we haven’t achieved fairness and consistency.”

She said the NEA was extremely disappointed with the change in direction after initial positive reception to the proposal to end the postcode lottery.

In the energy sector, the prospect of a social tariff is gathering pace and support after being proposed by Ofgem.

Balancing investment with affordability

Clancy and Cook both stressed their organisations would continue to engage constructively on the important matter of water poverty but Clancy pointed out it was “very hard to find a way through and make the progress we need”.

Since the recommendation was made to develop a tariff by 2025, hardship levels have risen and more billpayers face water poverty while the bill impacts for environmental improvements – including the WINEP – look set to be many multiples the investment need of previous programmes.

“There’s a real risk we are putting in danger the environmental improvements the sector so desperately needs because we don’t have that consistent affordability support in place,” Clancy warned. “If bills go up by £200, for a family living in an area of high deprivation and support is not there, I don’t know what’s going to happen now.”

In terms of policy development, Coffey told the Lords committee that CCW would guide Defra, but added it was not her “top priority”, however she instructed Pow to lead on developing policy.

Given the urgency of investment needed, and the Treasury’s position that it would not supplement company spending, Coffey was asked by the committee why it was not a priority to provide a safety net for low income billpayers through policy. She said there already was a safety net through regional support offers and added the department was “still in policy development” on plans for the future.

Committed to ending water poverty

After the initial reception of CCW’s recommendation, a development group was formed to progress the tariff. It has been meeting for over a year in which time it carried out modelling for what the tariff could look like and agreed a set of principles the scheme must meet to satisfy aspects of fairness and consistency.

“We have a group of committed and dedicated people to working towards the goal of ending water poverty who all want that work to not be wasted,” Cook said.

Defra made a clear commitment to consult, which it has not stepped away from. However CCW raised a fear that the work may be less impactful than previously hoped.

“It would be tragic if that consultation was inadequate or not meaningful given where the country is with water poverty and the spectre of rising bills in the future,” Clancy said.

The consumer group will work constructively with whatever the promised consultation is on, Clancy told Utility Week, “But we are surprised and bitterly disappointed at where we find ourselves at this time.”

The organisation will ramp up its campaigning with a wide range of stakeholders to make sure its voice is heard on behalf of financially vulnerable consumers. This will include working to get the tariff on other parties’ manifestos in the future.

“Our policy will not change, we strongly believe this is the right way forward and we will be working with partners to push this very clearly and passionately up the agenda.”

Defra said: “We are working with the Consumer Council for Water (CCW), Ofwat, charities and water companies to explore the recommendations from CCW’s Affordability Review, to further support households who are struggling to pay their water bills.

“This includes exploring options to improve our existing social tariff arrangements and our intention is to implement any amendments to align with the start of the next price review – 1 April 2025.

“Government expects all companies to make sure customers are aware of the schemes available if they need support to pay their bills. That includes bill discount schemes, payment holidays, adjusting payment plans and getting support for customers on managing their personal finances.”