Water companies should have to pay for the water they take, says a Middlesex University academic. And they should install water-saving devices free of charge in their customers' homes.

This would solve water shortage problems that metering will never solve, according to Colin Green, environmental economist at the university's Flood Hazard Research Centre.

The key problem with water organisation in the UK is that water companies make no extra profit either by selling more water or by failing to sell water, he said. Such an economic incentive should be built in for a privatised company to work properly.

Given that water conservation will become increasingly important, companies should have incentives to ensure the most effective use of water resources at the lowest possible cost and least environmental damage, he said.

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"If you hit a water consultant on the knee then he will say 'water metering'," said Mr Green. "The thing that upsets me about metering is that it is inefficient." Metering, which could cost Pounds 4 billion to implement, dominates government and water industry watchdog body Ofwat discussions about the way forward.

Mr Green thinks water companies should pay for water, either by buying river and ground water from a body such as the National Rivers Authority or by paying a green tax. This would give an incentive which could even lead them to install water-conserving gadgets in houses for free, a move which could turn out to be much cheaper than mending leaking pipes.

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"Water companies in the United States have found that paying customers to replace their existing toilet cisterns and taps by more efficient ones is a more certain and cheaper way of reducing water consumption than metering," he said.

Thirty per cent of household water is flushed down the toilet, while 20 per cent is used to clean our bodies.