Yeah, there are incentives each way. The net outcome might still be reduction in uses, but that also needs to be balanced against other pros and cons of metering such as putting extra costs for one of lifes necessities on those who cannot afford it.
With meters, perhaps exponentially incentivise low consumption with a sliding tariff. I would favour one something along the lines of the following. The figures are applied per person, per household, and are for purely illustrative purposes
1,000 litres/person/month 100% tariff. The tariff would slide according to variance to the 100% allowance. For example:
1,100 litres/person/month would increase the tariff by 10%; 900 litres/person/month would decrease the tariff by 10%.
If the 100% tariff is, say, £30/month, and there are three people in the household, and the total consumed by the household for the month is 1,500 litres (an average of 500 litres/person = 50% of standard tariff):
(50%) = £30 x (0.5^2) x 3 = £22.50/month (household)
Same, except total consumed is 800 litres (per person) = 80% of standard tariff:
(80%) = £30 x (0.8^2) x 3 = £57.60/month (household)
Same, except total consumed is 1,000 litres (per person) = 100% of standard tariff:
(100%) = £30 x (1^2) x 3 = £90.00/month (household)
Same, except total consumed is 1,200 litres (per person) = 120% of standard tariff:
(120%) = £30 x (1.2^2) x 3 = £129.60/month (household)
Same, except total consumed is 1,500 litres (per person) = 150% of standard tariff:
(150%) = £30 x (1.5^2) x 3 = £202.50/month (household)
Same, except total consumed is 2,000 litres (per person) = 200% of standard tariff:
(200%) = £30 x (2^2) x 3 = £360.00/month (household)
Same, except total consumed is 3,000 litres (per person) = 300% of standard tariff:
(300%) = £30 x (3^2) x 3 = £810.00/month (household)
Same, except total consumed is 5,000 litres (per person) = 500% of standard tariff:
(500% - lunatics) = £30 x (5^2) x 3 = £2,250.00/month (household)
The reason I like this system is that those who save water not only pay for fewer litres, but the cost of each of those litres decreases with each litre they save. They save twice! And, conversely, those who over consume are penalised twice (pay for more litres and at an ever increasing rate for each extra litre).
You will note that those who use 500% of tariff compared with those who pay 50% of tariff do not pay ten times as much, but 100 times as much!
We could also vary the 100% tariff according to economic circumstances of the household - similar incentives would hold true.