We need a new approach to water bills – a rising block tariff would be transformative
3 min read
Our water system is at a tipping point. Water infrastructure is in urgent need of an upgrade to address the dual pressures of record demand and a volatile climate.
The prospect looms of more hosepipe bans and even supply shortfalls as early as 2036 if we don’t act to reduce demand and invest in infrastructure. This crisis isn’t just environmental – it’s social. Almost 1.5m households are already struggling with water poverty, and with the landmark Cunliffe review now scrutinising the sector’s deep-rooted issues, the call for a resilient and equitable water future has never been louder.
In short, we need to ensure water continues to be affordable, while also encouraging water-saving behaviour. Changing the way we charge water bills is a powerful way of achieving exactly this.
Crucially, an RBT can be adjusted for factors that may increase water bills unfairly, such as high medical use
The difficulty is that for a substantial 40 per cent of households, water charges are disconnected from actual consumption. While 60 per cent of all homes built are metered, including all homes built since 1990, the remainder are billed using an outdated “rateable value” – a calculation based on rental values frozen since 1990. Though this historical system once loosely correlated higher bills with wealthier households, it now fosters a postcode lottery. Consequently, identical properties can face vastly different charges. And with bills static regardless of water consumption, the incentive to conserve this precious resource simply evaporates.
Homes with meters installed have a greater incentive to save water as they are charged by consumption at a flat rate per cubic metre. The more water you use, the more you pay. But this has a limit. For wealthier households, who can afford to cover the costs, a higher bill is not necessarily going to strongly incentivise them to reduce demand.
Universal metering would have some impact on demand reduction, but for more substantial change, we can and should go further by reforming the fundamental structure of water pricing. At the Social Market Foundation, we’ve concluded that the best option for England and Wales would be to move to a rising block tariff (RBT), where water is charged in blocks, with the price per unit increasing with each block.
As a pricing system, it is easy to communicate with consumers and provides a clear signal to reduce water use. Crucially, an RBT can be adjusted for factors that may increase water bills unfairly, such as high medical use, and can easily incorporate a ‘social tariff’ to provide discounts for financially vulnerable households.
Introducing an RBT is not simple, however. Water meter penetration is still too low, and smart water meter penetration lower still. There is ineffective data-sharing between government departments and water companies, making accounting for household information – like on incomes and medical needs – incredibly difficult. Making metering mandatory for everyone, not just water-stressed areas, and using the Digital Economy Act to enable data-sharing will be necessary for an RBT to be successfully rolled out, and for households to benefit.
Despite these challenges, if the government does opt to introduce universal water metering and a rising block tariff, the results could be transformative: a new approach to water bills that provides clearer signals to households to cut down on water consumption and a chance to ensure the long-term funding needed to revitalise our water infrastructure – but with fairness at its heart.
Niamh O Regan and Sam Robinson are senior researchers at the Social Market Foundation
