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Planned water bill rises ‘unaffordable’ for most customers, says UK watchdog

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The water consumer watchdog has warned that companies’ plans to raise customer bills by up to 70 per cent over the next five years are “unaffordable” for most households in England and Wales.

Just 16 per cent of people believe the proposed increase in water bills is manageable, according to an analysis of water company business plans, which includes affordability research, by the Consumer Council for Water.

“The majority of people said that their bill is either unaffordable now; will be in the future; or they don’t know if they will be able to afford it,” said Mike Keil, CCW chief executive.

“It’s a serious concern that such a small percentage of customers consider what the companies are proposing to be affordable,” he added.

The findings come as economic regulator Ofwat weighs requests by water companies to raise bills by up to 70 per cent, factoring in an annual inflation rate of 2 per cent, by 2030. This would take some payments to more than £800 a year, according to the CCW.

Water companies have pushed for the bill increases to pay for maintenance and investment as well as to service their debt, encourage investors to inject equity and underpin future borrowings. Without them, ambitious plans to improve the creaking sewage and water network could be put in doubt.

Colm Gibson, managing director of Berkeley Research Group, said that “companies will need material bill increases to deliver the improvements in the sewage and water networks promised”.

Several companies, including the largest, Thames Water, which serves 15mn people in London, face mounting concerns over their financial stability. More than half of water company debt is inflation-linked, and the cost of borrowing has risen sharply in line with price rises in recent years.

The proposed bill increases come amid widespread anger against water companies for high leakage rates and for tipping unknown quantities of raw sewage and storm water into the sea, lakes and rivers.

The CCW warned that if customers failed to see tangible improvements in the infrastructure in exchange for higher bills, trust, which is already at a 12 -year low, “would be further eroded”. 

Thames Water has lobbied regulators to let it increase bills by 40 per cent by 2030. The figure would rise to 56 per cent if an estimated 2 per cent annual inflation is factored in, taking household bills in London from £471 per household on average in 2025 to £733 a year by 2030.

Southern Water has asked for the biggest increase, a 70 per cent rise including inflation from £479 a year to £816 by 2030, according to the CCW. The company services an area that includes popular swimming beaches at Herne Bay, Whitstable and Brighton.

Katy Taylor, Southern Water’s chief customer officer, said: “We share everyone’s concerns about rising payments in the face of a cost of living crisis.

“The water needs of our region pose a unique set of challenges, which require significant investment” to reduce the use of storm overflows, safeguard supplies and protect the environment.

Research by the National Institute for Economic and Social Research think-tank has shown that falling real wages and rising bills and debt levels have hit households in the bottom half of the income distribution hardest.

Although water companies have social tariff schemes designed to lower bills for struggling households, they rely on public consultations that ask wealthier customers to agree to subsidise the less well-off.

The CCW said it hoped to see more companies using funds from their own investors, shareholders or parent companies to support struggling customers.

Water UK, which represents the industry, said: “While increasing bills is never welcome there is an urgent need to invest in our country’s infrastructure to ensure the security of our water supply and reduce overflow spills into rivers and seas as fast as possible.

“To achieve this water companies have proposed a record £96bn of investment — a near-doubling of current levels.”

Ofwat said: “Our scrutiny of business plans is ongoing, and we will ensure that any increase in bills is justified, efficient and delivers significant improvements for customers and the environment.” 

Data visualisation by Ella Hollowood

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