Examining the Relationship Between Debt and Deprivation in the UK Water Industry

The level of consumer debt or 'revenue outstanding' in the UK Water Industry has increased substantially in recent years, from 785 pound m in 2004 to 1,225 pound m in 2008 (Ofwat, 2009). It is anticipated that with increasing energy bills and the effect of the credit crunch upon customers' ability and willingness to pay, the debt position will get worse over the next few years. It has been argued that there is a relationship between levels of customer indebtedness and levels of household deprivation. Previous studies of this relationship have been restricted to analysis at the overall Water Company level. In this paper we examine this relationship at the small area level linking individual household data on debt with the Index of Multiple Deprivation at the Lower Super Output Area level. We have developed 2 new measures of debt: debt intensity (the average level of debt per indebted property) and debt penetration (the percentage of households that are in debt). We found strong correlations between these indicators and the IMD although the picture varies around the country. These findings refute earlier work of Ofwat, demonstrate the importance of undertaking analysis at the small geographical scale and have important policy implications