Water Direct

Background

The Department of Works and Pensions (DWP) administers a Third Party Deduction Scheme (TPD) which is available to claimants of certain benefits, namely Income Support, income-based Job Seekers Allowance, Employment and Support Allowance or Pension Credit.  If the scheme is used to repay water debt/charges it is known as Water Direct.

How does Water Direct work:

• To make payments through the scheme the person in receipt of the benefit must also have a debt for water charges.
• There is no minimum debt needed before applicants can be considered for the scheme although there is a need to consider that joining the scheme is in the interests of the family.
• In addition to the deductions to clear an outstanding debt DWP will also take payment for the current charges to prevent any further debt accruing.
• There is no need for the customer to give consent to direct deductions unless the total direct deductions exceed 25% of the family’s income.  This is to make sure that people who qualify to use the scheme do so rather than risking disconnection, court action or getting into more debt.  Currently water companies advise us that approximately 175,000 customers are using Water Direct.
• Water Direct is described by Department of Works and Pensions as a last resort protective mechanism to shield from hardship a minority of the most vulnerable customers who have been unable to budget and where there is no alternative course of action.  It is designed to help people manage their debts. It has confirmed that it has no plans to reduce or remove the TPD scheme but equally there is no plan to extend the scheme to any other benefits. 

Our Position

Along with Water UK, we have lobbied to extend Water Direct to a much wider group of customers on low incomes who struggle to make ends meet.  Defra also suggested in its Cross Government Review of Water Affordability in 2004 that the “DWP should work with stakeholders, including water companies, Ofwat, Ofgem, to explore proposals for possible changes / extensions to the TPD scheme, including Water Direct”.
This was picked up again by the House of Commons Treasury Committee in 2006 in Banking the unbanked: banking services, the Post Office Card Account and financial inclusion: “In the near term changes to the TPD scheme could provide an easy way of improving the ability of those on benefits to manage bill payment. We recommend that the DWP carry out a full review of this scheme with a view to its expansion.”

The Anna Walker Charging Review final report recommended that ‘DWP should consider the scope for widening the third-party deduction scheme to keep more customers on the scheme once a debt has been repaid. DWP should consult with companies on ways to improve the scheme and how companies can contribute to the costs of administering the scheme’

 It also recommended ‘that it would be beneficial to customers and companies if central and local government passed on information to the water companies on vulnerable customers on benefits’. This would help companies identify customers who might be eligible for Water Direct.

Facts and Figures

The latest research from UKWIR shows not only how helpful Water Direct is, but also how much more beneficial it would be if it was extended to those on a wider range of benefits and not just to those in debt.  For example:
•The majority of respondents (91%) said they found the scheme useful as a way of managing their household finance.
•Once on the DWP Water Direct scheme, 82% stated that they were able to manage better or much better.
•88% of respondents indicated that the scheme was useful or very useful in helping them to clear the debt arrears owed to their water company.
•86% of respondents strongly agreed that the scheme should be made available to customers who are in receipt of one of three benefits mentioned (Income Support, Jobseeker’s Allowance or Pension Credit) but who do not have arrears on their water bill.
•78% of respondents thought the DWP Water Direct payments should be able to be collected from other benefits, widening both the appeal and ease of collection from customers in arrears.

Barbara Leech has responsibility for this area – 01325 464222

Last updated: 23/02/2010