Consumer Scotland is warning that water poverty in Scotland is projected to rise significantly over the next few years unless action is taken.
The current Strategic Review of Charges (SRC), during which future domestic water and sewerage charges are set, could see bills increase in real terms by as much as 26.5% between 2027-2028 and 2032-2033.
Whilst the actual figures will not be finalised for several months, the proposed increases set out in Scottish Water’s current draft business plan would see bills rise annually by up to 4% plus CPI inflation across the charging period.
These proposed new increases follow a cumulative real terms rise in water bills of almost 8% during the past five years.
The increases are necessary to fund essential investment in ageing infrastructure, climate resilience and regulatory compliance. However, Consumer Scotland is warning that the impact on household affordability is a major concern.
Recent analysis by Consumer Scotland shows that water poverty - defined as households spending more than 3% of disposable income on water and sewerage charges - fell below 10% in 2023-2024.
However, given the current proposed increases water poverty is projected to rise above 14% by 2029-2030 and could reach 16% by the end of the SRC period if charges increase as proposed - levels not seen for two decades.
On the basis of our analysis, Consumer Scotland is calling for urgent action to mitigate the impact of rising charges with a range of recommendations including:
- An increase to the Water Charges Reduction Scheme (WCRS) discount to 50% to offset the impact of real-terms bill increases for over 400,000 households, most of whom are on lower incomes
- The establishment of a by-application Water Hardship Fund to support households who do not qualify for WCRS but still face affordability challenges
- Improved targeting of affordability support in future charging periods by developing mechanisms for automatic eligibility and reducing barriers to access
Consumer Scotland Director of Research and Analysis David Eiser said:
“Water is an essential service and we understand the need for increased investment to address significant challenges in the water sector including climate change, demographic shifts, evolving regulatory requirements and replacement of ageing infrastructure.
“However, while bills are set to increase, affordability must remain at the heart of charging policy and without action, rising charges will push thousands more households into water poverty.
“Consumer Scotland has set out a range of measures that will alleviate the potential rise in water poverty over the next few years as well as longer term solutions.
“We recognise these measures cannot fully eliminate water poverty, but we believe they represent a pragmatic and impactful approach within the constraints of the current system.”
Consumer Scotland’s analysis examines how changes to the structure of reductions and discounts could mitigate the impacts of rising water charges on water poverty. The analysis considers who gains and who loses from such changes, taking into account that further bill reductions for some consumers could imply additional increases for others.
Background
Affordability of water and sewerage charges
Over 2026, Scottish Water will finalise its Business Plan alongside scrutiny by regulator the Water Industry Commission for Scotland (WICS). This will establish the annual increment in water charges permitted during the next SRC period.
Simultaneously, the Scottish Government will consult on, and finalise, the Principles of Charging which will culminate in an agreed system of discounts and reductions.
Consumer Scotland is working closely with Scottish Water and the Scottish Government to inform these processes and ensure that water charging policy works in the best interests of all consumers.
In the longer-term, Consumer Scotland recommends that a new scheme of affordability support, that more effectively targets water poverty, should be introduced by the start of the 2033 regulatory period.
Consumer Scotland is the statutory body for consumers in Scotland.
Notes to editors
Consumer Scotland's full recommendations are:
Recommendation 1: Consumer Scotland recommends to the Scottish Government that the WCRS is increased to 50% in SR27. The policy would offset the impact of real terms bill increases for over 400,000 households, the vast majority of whom are in the lower part of the income distribution. If the policy could not be funded ‘externally’ (e.g. through an increase in Scottish Water borrowing), then it could be funded by a one-off increase of two percentage points on bills generally. This policy leaves many households at risk of water poverty who do not qualify for or receive WCRS. There is a case for developing a water hardship fund which could provide support for families with incomes below the thresholds for water poverty and who do not qualify for WCRS.
Recommendation 2: Consumer Scotland recommends the establishment of a water hardship fund. The fund could provide support for families with incomes below the thresholds for water poverty but who do not qualify for WCRS. In the longer term, policy should move toward a fairer and more targeted charging system. However, given the constraints of the 2027-2033 period, fundamental reform is unlikely to be feasible. Improvements to affordability policy must therefore be pragmatic and workable within the existing system. An enhanced WCRS, supplemented by a ‘by-application’ safety net, represents a practical and impactful approach worthy of serious consideration.
Recommendation 3: During SR27, the Scottish Government and Scottish Water should undertake further work to identify suitable mechanisms to improve the automatic targeting of affordability support in the following charging period.