But the Campaign for Water Justice called the plans a travesty", saying the poor would be hit hardest.

The agency also says there should be rewards for water companies that reduce the amount of water they provide.

Its water strategy sets out measures it thinks should be implemented to protect resources up to 2050.

The agency, responsible for water policy in England and Wales, also says there needs to be a complete review of the way the industry is regulated.

Rainfall changes

Ian Barker, head of water resources at the Environment Agency, said: "We need to use what we have more carefully because the sources on which we currently rely will become less reliable in the future."

He said not all the messages about reducing water use in the home were getting through.

WATER FACTS Every individual in England and Wales uses a ton of of water per week 40% of domestic energy bills go on heating water for washing dishes and clothes, bathing and showering Water companies are obliged to provide free meters to customers on request Homes with meters used on average 10-15% less water than those without By 2050, river flow in late summer and early autumn could be reduced by up to 80%

"Having an incentive by paying per volume is the fairest way to pay," he said.

"Clearly there's a real concern which we share which is people who will struggle to pay their water bills and it's important there are safeguards for disadvantaged groups."

But overall, he said meters made it easier to manage water bills and suggested that reduced water use could also mean lower energy bills.

The installation of meters was practical in about 90% of homes and customers could request free meters from their water company, Mr Barker added.

However, Neil Fishpool, from the Campaign for Water Justice, said the Environment Agency should be putting more pressure on the water companies to put their act in order, before tackling the consumers.

"Water is an absolutely essential commodity. We can all do without gas or electricity at some stages. But you try living without water," he said.

"To meter everybody regardless of their circumstances or how many children they have is absolutely a recipe for disaster."

The report points out that 25 million people in England and Wales are already living in areas where there is less water available per person than in Spain or Morocco.

One of the worst affected areas is south-east England, which has some of the driest weather and a dense population.

And the situation will worsen as the climate changes, report authors say.

The pressures on water resources and the water environment mean that careful planning is essential Lord Smith, Environment Agency chairman

For example, they say they have recently assessed how potential changes in rainfall could affect average river flows at different times of the year by 2050.

The report says: "The work shows that by 2050 river flows in winter may increase by 10% to 15%.

"However, river flows in the late summer and early autumn could reduce by over 50%, and as much as 80% in some places.

"These patterns would result in a drop in total annual average river flow of up to 15%."

They say that, along with an increasing population, this will put even greater pressure on the country's limited water supplies.

The report says water metering should be accompanied by suitable tariffs to protect vulnerable groups and make reducing water use more attractive.

'Serious challenges'

The agency makes a number of other recommendations to ensure water supplies are managed. It says new and existing homes and buildings should be more water efficient, leakage from mains and supply pipes should be reduced, and water resources should be allocated efficiently and shared in regions where there are areas of surplus.

Environment Agency chairman Lord Smith said: "The pressures on water resources and the water environment mean that careful planning is essential to ensure there is sufficient water for society and the economy, as well as the environment.

"There are a number of areas where action is required, such as the need to allocate water resources more effectively in the future.

"This document identifies the actions we believe are necessary, and in particular those that are needed to deal with the serious challenges of growth and climate change."

But he concedes there is "no single, easy solution".

Ministers have set up an independent review of household water charges, with a report expected to be published later this year.