Scottish Government

Paying for Water Services 2006-2010
QUALITATIVE RESEARCH SUMMARY

Scotland's Water Services February 2005

mruk research

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The Scottish Executive commissioned mruk research to carry out a research project to supplement the responses to its consultation paper 'Paying for Water Services 2006-2010'. The aim of the research project was to gather qualitative information about a range of water customers' views on the issues raised and proposals made in the consultation paper. Participants were recruited to represent the range of Scottish Water's domestic and non-domestic customers.

Main Findings

• Most participants agreed that Scottish Water's costs should be met through charges made to customers.

• About half of participants supported the principle of charges being made as affordable as possible for people on a low income, while the other half opposed in principle the idea of certain customers subsidising others.

• There was strong support for the same category of customer to pay the same rate for the same service, regardless of geographical location, and for the proposed principle that any charge increases should be introduced gradually.

• Participants were sceptical about the possible existence of cross-subsidies and how they should be dealt with; uncertain about how cross-subsidies might be identified and unhappy with the idea that they might face significant charge increases as a consequence of cross-subsidies being removed.

• The great majority of participants supported the abolition of the current 50% second-home discount as a means of generating a fund for a low-income discount. However, many participants strongly opposed the proposed abolition of the current 25% discount for single adult households.

• Participants generally agreed that enhancements to water services provision should be funded through the combination of charges and borrowing proposed in the paper.

• Participants (non-domestic) agreed with the proposal to calculate surface drainage charges on the basis of surface area drained rather than by a premises' rateable value.

• Participants (non-domestic) also supported the proposal for charges to unmetered non-domestic properties to be made on the basis of bandings reflecting likely consumption levels, rather than on the basis of rateable value.

• Most participants supported the proposal for developers to fund those parts of additional local capacity on the public networks that were required solely to enable their development to proceed.

Background and Aims

From July to October 2004, the Scottish Executive ran a public consultation, 'Paying for Water Services 2006-2010', which sought views on how Scottish Water's customers should contribute to the costs of the services they receive.

The aim of the consultation exercise was to inform Ministers' decisions, as part of the Strategic Review of Charges 2006-2010 (SRC), about how different types of customers are to be charged in the period 2006-2010. The SRC is the process by which the economic regulator, the Water Industry Commissioner for Scotland (WIC), determines how much revenue Scottish Water needs in customer charges to enable it to meet Ministers' objectives for it. Ministers' decisions about how different types of customer are to be charged will determine how Scottish Water's costs are shared among customers.

To supplement the responses to the consultation exercise, the Scottish Executive commissioned mruk research to carry out an additional research project, to gather further qualitative information about water customers' views on the issues raised and proposals made in the consultation paper on water services charging. Participants were recruited to represent the range of Scottish Water's domestic and non-domestic customers.

Methodology

The project aimed chiefly to obtain the views of domestic customers, who are harder to reach through the traditional consultation process and who tend to have fewer organised groups representing their interests. The project therefore involved a majority of domestic customer participants (twelve groups of around ten people each), whose views were elicited through facilitated group discussions. In addition, ten individual in-depth interviews were conducted to gather information about the views of non-domestic customers.

The twelve extended group discussions with domestic customers were carried out with a sample broadly reflective of the Scottish population, including specific groups comprising single adult occupants and second home owners, as there were proposals in the consultation paper relating specifically to these types of water customer. The table below shows the groups which were recruited, reflecting a range of ages, lifestages, socio-economic groups and geographic locations.

Both the discussion groups and the in-depth interviews were carried out with a moderator providing explanations of the consultation points to participants. This deliberative method ensured that it was possible to correct any misunderstandings and that participants had a clear understanding of each point in the consultation before they were asked for their views.

Research Findings - More Detail

Scottish Water should Pass all Costs to Customers through Charges

The proposed principle that Scottish Water should pass all costs to customers through charges prompted a good deal of discussion, including frequent mention of metering or taxation. Once participants understood the costs associated with metering, this approach to charging was rejected. Taxation was generally seen as penalising those who were in employment rather than charging people for the service they received. Therefore, most domestic and non-domestic participants accepted after discussion that costs should be passed to customers through charges.

Charges should be as Affordable as Possible for Low-Income Households

The idea that charges should be as affordable as possible for low-income households led to much debate also. Participants acknowledged that there was a precedent for this in society, and about half of domestic and business participants were in support. However, the other half strongly disagreed and did not want to subsidise anyone. These participants resented 'supporting' others.

Cross-subsidies

Consultation point three about 'possible cross-subsidies and how to deal with them' led to some confusion and scepticism amongst participants. Moderators explained that at the moment some businesses may be paying over the odds and households may be paying too little and that this was being evaluated by independent consultants. Although participants thought that any unfairness in calculating charges was undesirable, there was a high degree of concern that achieving the right balance could lead to big charge increases for domestic customers. They said that small increases would be tolerated, but significant increases would result in dissatisfaction and resentment.

Discounts

Consultation point four proposed abolishing the 25% single adult household discount and the 50% second home discount in order to fund a new discount for low-income households. Participants discussed the idea that a single adult discount did not take ability to pay into consideration. Abolishing the single adult and second home discounts were seen by most as an acceptable and logical means of generating a fund for a new low income discount (even if they disagreed with the idea of the discount itself). However, working single adult occupants expressed high levels of dissatisfaction with the idea of abolishing the single adult discount.

Drainage Charges and Charges to Unmetered Non-domestic Customers

Only non-domestic participants were asked for their views on the proposals in relation to unmetered non-domestic charges and to surface drainage charges. Both of these charges are currently calculated on the basis of rateable value, which can mean that two premises which place a similar strain on the system are required to pay very different charges. Participants felt that the current system was unfair and agreed with the proposals for banded charges to be introduced for water and wastewater, based on usage bands. They also agreed that drainage charges should be made on the basis of surface area.

Borrowing Provision

Most participants (especially non-domestic) were supportive of enhancements to water services being funded through a combination of charges and borrowing, as set out in the consultation paper. In this way it was felt that the cost of the improvements would be shared amongst current and future users, i.e. all of those who would benefit.

Paying for Increased Local Capacity

The last point in the consultation proposed that developers be required to make a financial contribution to funding additional capacity when their developments meant that this extra capacity was needed. Participants saw this as fair and logical, although some customers were also happy to contribute to developments for the general good of society, e.g. social housing.

If you would like further copies of this summary please contact:

Scottish Executive Water Services Division
Area 1-H (north)
Victoria Quay
Edinburgh
EH6 6QQ
Email: waterservices@scotland.gsi.gov.uk
Telephone: 0131 244 5099

Further information is also available on the Scottish Executive website at: www.scotland.gov.uk/Topics/Environment/Water

The views expressed in this summary are those of the researchers and do not necessarily represent those of the Department or Scottish Ministers

©Crown copyright 2005
Limited extracts from the text may be produced provided the source is acknowledged.