Consumers on lower incomes need to be safeguarded from future rises in water bills, the statutory body for consumers in Scotland has said.
Consumer Scotland is recommending both an increase in the threshold of the existing Water Charges Reduction Scheme (WCRS) to limit rises in water poverty in future - as well as consideration of new proposals to target consumers who currently miss out on support.
Consumer Scotland analysis reveals around one in ten Scottish households are
currently in water poverty, and around one in 20 are in severe water poverty – facing charges for water and sewerage that exceed 5% of their disposable income.
The future level of water bills for the six year period from 2027/28 to 2032/33 will be considered by the Strategic Review of Charges which involves the Scottish Government, the Water Industry Commission for Scotland and Scottish Water.
The review will look at ensuring sufficient income is raised from customer charges to adequately fund existing services and invest in the infrastructure required for the future - as well as ensuring charges don’t unfairly burden consumers.
However, Scottish consumers are likely to face above-inflationary increases to respond to the twin challenges posed by the climate crisis and ageing water infrastructure.
Without action, this will result in increases in the number of Scottish households in water poverty.
A new Consumer Scotland report has concluded the most cost-effective way of
mitigating the impact of rising bills on low-income consumers in the short term is to increase the WCRS by start of the 2027/28–2032/33 charge period.
Currently those who qualify receive a reduction on their water bills of up to 35% depending on their council tax status, but Consumer Scotland recommends the upper limit is increased to 50% throughout the next charging period.
This would reduce water poverty for the equivalent of some 13,000 households at a cost of around £22 million. It would also improve the affordability of bills for the almost 500,000 households who receive the reduction.
However, our analysis suggests that a significant number of households in water poverty do not receive the WCRS. In addition therefore, Consumer Scotland is recommending the Scottish Government considers a new temporary ‘by-application’ scheme, also by 2027.
This would allow customers in water poverty, but who are not covered by the WCRS, to apply for support.
Because neither of these schemes would in themselves target everyone who may experience water poverty, comprehensive long-term reform is also required.
Consumer Scotland Director of Research and Analysis David Eiser said:
"Increasing the level of discount available under the WCRS represents a cost-effective way of helping to keep bills affordable for many households in the short term.
"We recommend that the sector, coordinated by the Scottish Government, begins work to implement this enhanced rate of discount so it is in place when new charge levels come into effect in 2027.
"The design of an additional by-application scheme would help customers who fall through the gaps of existing affordability support mechanisms and we think this is also worthy of consideration.
"Progressing these recommendations would provide additional protection for those on low incomes while the sector explores more comprehensive reform to the structure of water charges in the coming years."
Scottish Water provides water and wastewater services to around 2.6 million dwellings in Scotland.
The average charge per household to deliver these services was £410 in 2023/24, generating revenues for Scottish Water of just over £1bn.
Background
Affordability of water and sewerage charges
Water charges in the six-year period covered by the Strategic Review of Charges are determined by a series of decisions and guidance by Ministers, the Water Industry Commission for Scotland and Scottish Water.
Low-income households can have their charge reduced through the Water Charges Reduction Scheme (WCRS) which currently benefits around 460,000 households.
Increasing the WCRS to 50% would reduce water poverty by a further 0.5 percentage points (13,000 households) at a cost of around £22m.
The costs of increasing the WCRS would tend to be funded by higher charges on customers more generally. Increasing the WCRS from 35% to 50% would imply an additional £8 annually on all bills.
Consumer Scotland is the statutory body for consumers in Scotland which was
established by the Consumer Scotland Act 2020.
As the levy-funded advocacy body for the water sector in Scotland we work to ensure the affordability of water charges while also supporting the investment required to adapt to climate change.