Response to Scottish Water SR27 Draft Business Plan - Investing in Scotland's Future

Strategic Review of Charges 2027-33: Draft Business Plan Submission

Consumer Scotland welcomes the opportunity to respond to Scottish Water’s Draft Business Plan. We acknowledge the considerable effort invested in developing the main document and its appendices within constrained timescales. 

Consumer Scotland is committed to working closely with Scottish Water throughout the 2027–2033 regulatory period to strengthen partnerships with consumers, including households, communities, and businesses, and enable the delivery of positive outcomes that meet the needs of consumers now and in the future.

Our feedback on the Draft Business Plan prioritises the following key areas:

• Affordability: Ensuring financially vulnerable consumers are protected from price increases above the Consumer Price Index (CPI) and harmful debt recovery practices
• Inspiring and empowering consumers: Emphasising the importance of embedding a culture of partnership with customers and communities, supported by investment in consumer engagement
• Consumer trust and confidence: Promoting transparency in service delivery and performance

Affordability of water and sewerage charges and debt recovery practice

Affordability

We support the necessity of Scottish Water having  adequate financing to maintain and improve essential assets and services which deliver the water and sewerage services that consumers require, now and in the future. We recognise that growing pressures on assets and infrastructure – especially from climate change – will require substantial investment during 2027-33 to maintain acceptable service quality and deliver acceptable outcomes for consumers.

We are concerned, however that the reference charging scenario of CPI +4% set out in the Draft Business Plan for 2027-2033 would have a very significant impact on consumer bills, and could present real affordability challenges for those on low incomes.

Consumer Scotland’s research indicates that 11% of households in Scotland currently experience water poverty—defined as spending more than 3% of disposable income on water and sewerage charges. Our previous work on this issue highlighted that existing affordability measures are insufficiently targeted and often fail to provide adequate support. The majority of those in water poverty do not qualify for financial support measures.

Further analysis shows the charging pathway proposed in the Draft Business Plan reference scenario could result in water poverty increasing to above 15% of Scottish households by the end of the charging period, unless mitigated by increases in household incomes, or by further affordability measures to protect low income consumers from the impact of increased charges.

Such a scenario would come at a time when consumers in Scotland are already facing significant financial pressures across many other markets. People are spending more on some essential goods and services but are receiving less in return. The average level of arrears for indebted GB household gas accounts almost doubled between 2021 and 2024, whilst Consumer Scotland data shows that around 15% of Scottish households were in energy debt last winter. A number of surveys show that consumers are under financial strain, with many having to cut back on essential services[1].

In light of the pressures facing the sector, it is essential that all key water sector stakeholders in Scotland work collaboratively ahead of the Final Determination to ensure that any increases to water and sewerage charges during 2027-33 are fully justified. Additional affordability measures should be considered to protect consumers least able to higher charges for water and sewerage services.

To help achieve these objectives, we anticipate that actions by stakeholders across the sector before the Final Determination, should include:

• The systematic review of the Draft Business Plan by sector regulators - WICS, SEPA and DWQR – should test the necessity and cost-effectiveness of all proposed investments. This will help ensure alignment with Ministerial Objectives and regulatory requirements, while identifying opportunities for financial savings that could reduce the impact on consumer charges.
• Robust scrutiny and challenge by WICS, as the economic regulator, to ensure the Draft Business Plan is maximising the efficient delivery of services by Scottish Water, including through deployment of new technologies and innovations.
• Further consideration by the Scottish Government of Consumer Scotland’s previous recommendations to improve the affordability of water and sewerage for low income households. While this is a policy decision, it has implications for the financing of the Business Plan. Our recommended actions are:

• • • The level of discount provided through the Water Charge Reduction Scheme should be increased from 35% to 50% in April 2027, and maintained at that level throughout the duration of the 2027-2033 period.
    • Consideration by the Scottish Government of a ‘by-application’ mechanism to offer reductions in charges for customers who fall through the gaps of existing affordability support mechanisms.
• Consideration by the Scottish Government of whether the current borrowing limits for Scottish Water achieve the right balance between funding being raised from current consumers and from those in the future.
• Comprehensive assessment of alternative funding routes, such as developer contributions, may identify opportunities to generate additional financial resources. This could help support the Final Business Plan, and reduce pressure to increase customer charges.

Debt recovery

Households struggling to afford essential services, including water and sewerage charges, often fall into debt. When these charges go unpaid, the debt is often treated as part of Council Tax arrears and falls under the jurisdiction of local authorities for recovery. This process can trigger three key mechanisms:

1. Water Direct – This scheme allows for deductions to be made directly from a claimant’s benefits to cover water debt. While it ensures payment continuity, it is frequently applied without thorough affordability assessments, potentially exacerbating financial hardship for vulnerable households.
2. Summary Warrant – In cases where debts remain unresolved, local authorities may pursue a Summary Warrant through the local Sheriff Court. This legal action can lead to additional fees and enforcement measures, further increasing the financial burden on already struggling households.
3. Full year payment – In some cases, missed payments can result in households being required to pay the full year’s water and sewerage charges upfront. For many, this significantly worsens financial pressures and can make recovery from debt more difficult.

These mechanisms, while designed to recover public funds, raise significant concerns around fairness, transparency, and the adequacy of support for low-income consumers. The lack of affordability checks in particular risks pushing households deeper into poverty and undermines trust in public service providers.

Improved debt recovery practices are needed to ensure they are proportionate and responsive to individuals’ circumstances. Early intervention—such as clearer communication with those entering the benefits system of an ongoing liability to pay a proportion of water and sewerage charges, affordability checks, and promotion of support schemes like Council Tax Reduction and the Water Charges Reduction Scheme—is essential.

We encourage Scottish Water to work with local authorities to incentivise good debt recovery practices and strengthen protections for Scottish Water’s financially vulnerable customers. This collaborative approach would demonstrate further progress in fulfilling a Consumer Duty and reinforce trust in how Scottish Water supports those most at risk.

Inspiring and empowering consumers

The Final Business Plan should more clearly articulate Scottish Water’s recognition of the distinct and valuable roles that both customers and communities play in achieving sector outcomes. We encourage Scottish Water to demonstrate leadership by fostering active, reciprocal engagement that goes beyond informing the public, and instead focuses on co-creating solutions and shared outcomes. This approach should be embedded within the business plan, not treated as an ancillary initiative. For example, involving communities in the co-design of capital investment projects can cultivate a sense of ownership and empowerment. Strengthening the narrative around this cultural shift will be essential to building trust and achieving long-term success.

Given the proposed consumer bill increases set out in the Draft Business Plan, it will be important that there is a clear, tailored plan for consumer communications, to ensure that consumers understand why charges are increasing, what their money is being spent on and the tangible benefits that the investments will deliver for them. Involving consumers in project design and delivery can help to foster their understanding, support for and ownership of the investments being made.

We welcome Scottish Water’s commitment to delivering high-quality water and wastewater services. However, we acknowledge that investment timelines may not always align with consumer expectations for service improvements. While the Draft Business Plan highlights areas where Scottish Water outperforms counterparts in England and Wales, we encourage greater transparency regarding areas where service delivery falls short. Acknowledging these challenges and inviting collaborative solutions—such as addressing household leaks and promoting water stewardship—can enhance public trust and engagement.

We also welcome the establishment of a Customer Service Directorate and are optimistic that this will enhance Scottish Water’s capacity to empower consumers and communities. Achieving consistent, high-quality public engagement will require a clear strategy, measurable outcomes, and appropriate resourcing.

Consumer trust and confidence

Value for money

The Draft Business Plan references value for money. From a consumer perspective, value for money encompasses perceived worth, including price, quality, and performance. We recommend that the Final Business Plan provides a consumer-centric definition of value for money to ensure alignment with public expectations and strengthened consumer outcomes.

Annual customer bills fund water and wastewater services, yet some consumers continue to experience unacceptable service levels, such as recurring sewer flooding. We recognise the financial constraints within which Scottish Water operates, particularly regarding non-mandatory investment. However, prioritisation decisions can result in unequal service improvements across regions and households, leaving some important services competing for funding. Emerging mandatory requirements can also result in the de-prioritisation of service offerings. This creates ‘winners and losers’ where services will improve for some consumers but not others, which does not align well with the core consumer principle of fairness.

Consumer Scotland recommends Scottish Water consider the following in its Final Business Plan:

• explore the impact on consumer charges of having sufficient funds to areas address persistent service failures, such as internal and external sewer flooding
• explain how targeted investment can drive significant improvements in core services, such as interruptions to supplies, ensuring they are fit for purpose and deliver value for the consumers who fund them
• demonstrate efficiency and value for money in mandatory investment areas to safeguard discretionary service improvements
• explore alternative financing mechanisms to support essential but non-mandatory service enhancement

Publication of complaints

Scottish Water should publish a comprehensive annual report on customer complaints as part of its annual report and accounts. This should detail the nature and volume of issues raised, along with actions taken to address them. Doing so would strengthen consumer trust and confidence in how service-related issues are handled, and highlight where unresolved complaints may be linked to funding constraints.

Consumers in vulnerable circumstances

Building trust and confidence in Scottish Water among Scotland’s consumers in vulnerable circumstances is essential. Providing services to this group in a way that meets their needs will require a clear and robust strategy – one that demonstrates insight and commits to targeted outcomes. This means beyond operational delivery to actively prioritise inclusion, accessibility, and protection.

A key component of this strategic approach should be accelerated progress towards a comprehensive Priority Services Register, enabling Scottish Water to identify and support consumers with specific needs. This would allow for tailored communications, additional support during service disruptions, and safeguards to ensure vulnerable households are not disproportionately affected by service failures.

Ofgem’s Consumer Vulnerability Strategy[2], published in April, sets out a framework to improve outcomes for consumers in vulnerable situations, including those struggling to pay bills. Similarly, water companies in England and Wales have published vulnerability strategies aligned with Ofwat’s objectives and minimum expectations[3].

We urge Scottish Water to prioritise the development of a dedicated vulnerability strategy, ensuring that the needs of consumers in vulnerable circumstances are recognised, addressed, and embedded within its service planning and delivery.

Consumer Scotland appreciates Scottish Water’s openness to stakeholder feedback and remains available to discuss or elaborate on any of the points raised in this response.

Yours sincerely

Douglas White

Director of Policy and Advocacy