Scottish Water price choice kept 40,000 households out of water poverty

Scottish Water’s decision not to price up to the regulatory cap in 2022-3 and 2023-4 prevented 40,000 households entering water poverty, according to analysis by Consumer Scotland. However, the watchdog noted that there was a flip side in terms of reduced investment, and urged that “serious consideration needs to be given to the balance between investment and consumer charges” as work gets underway for the 2027-33 Strategic Review of Charges.

The information was among the findings of a new report, Consumer outlook 2024-5, which tracked challenges for Scottish customers.

Consumer Scotland highlighted that Scottish Water increased charges by 4.2% and 5% in April 2022 and April 2023, when it could have upped bills by 6.2% and 13.1% respectively, if it had implemented the CPI+2% basis for annual charge increases that WICS had permitted. The watchdog said there had been “no significant increase in water poverty during the cost of living crisis itself” as a result of the action. “Had water charges increased by CPI+2% during the cost of living crisis, an additional 40,000 households in Scotland would be in water poverty.” (See chart).

However, Scottish Water’s revenue was reduced by £90m each year, lowering investment in infrastructure. Consumer Scotland noted that there is some ‘catch-up’ in 2024-5; charges have been increased by 8.8%, significantly more than the relevant inflation figure of 4.6%.

The watchdog argued that getting the balance between bills and investment “is becoming increasingly challenging in several markets – notably energy and water – where increasing levels of investment are required to fund the upgrading of infrastructure needed”.

The report also noted the cost of living crisis has disproportionately affected low-income households and that more consumers are falling behind with utility bills due to historically high energy costs. This included water. “Scottish Water data indicates that the number of households behind with water bills exceeded 350,000 in 2021/22, a record high, with average debt of £140 per household.”