□  Who is the subsidy targeted towards?

If the objective is to support the poorest groups and households, then municipalities need to design mechanisms for identifying who those recipients should be (for instance, through agreed poverty indicators) and for administering a carefully targeted programme. Increasingly, attempts are being made to target subsidies at the poor rather than depending on rising block tariffs that provide cheap water to all (including the non-poor) in the first block. The well-known example of the Chilean voucher system (see Box 7.20) is particularly informative for municipalities seeking to focus the subsidies on the poorest and to ensure others are not explicitly or implicitly capturing the benefits. In particular it illustrates the trial and error of improving targeting.