Brent Council will pay up to £7.2 million in water bill refunds to tenants after charging them the full amount despite receiving a discount from suppliers.

Its cabinet today (Tuesday, April 6) agreed to pay those living in council housing between 2003 and 2021 who lost out under the scheme – with the average amount expected to be more than £450.

The council acknowledged it is “highly likely” it would be seen as a “water reseller” if taken to court after it entered an agreement with Thames Water Utilities and Affinity Water that allowed it to purchase water for its properties at a discounted rate before placing a full commission on tenants’ bills.

In 2016, a judge ruled against Southwark Council for carrying out this practice while a bid by Kingston Council in 2019 to clear itself of similar actions – supported by other local authorities including Brent – was dismissed.

To avoid this situation, councillors agreed to reimburse those affected – officers noted this could total £7.2 million with the average individual payout anticipated to be around £466.

A report presented to the council’s cabinet explained those using Thames Water between 2003 and 2017 would be entitled to a refund, while those under Affinity between 2005 and 2021 would also benefit.

Payments to current tenants will be placed in their rent accounts – if they are in credit, this can be transferred to a bank account – while former eligible tenants can seek a refund within the two-year application period set by the council.

Cllr Eleanor Southwood (Lab, Queens Park), who is responsible for housing and welfare reform at Brent Council, said there was “no suggestion” residents had been “overcharged”.

However, since they did not benefit directly from the arrangement, she acknowledged it needed “sorting out”.

Cllr Muhammed Butt (Lab, Tokyngton), leader of Brent Council, said this was the “sensible” approach that would allow it to “tackle the issue”.

The report explained the problem was first addressed in relation to Thames Water in 2017, which explains that refund cut-off date, where the council introduced a variation to its contract to mitigate any additional costs for tenants.

It sought a similar variation for its agreement with Affinity Water but noted a “delay” meant things ran until 30 March 2021, which, based on current estimates, will ultimately cost an extra £400,000 in refunds.