Household water bills in England and Wales will increase by an average £31 a year over the next five years, regulator Ofwat has announced. The increase is significantly higher than the expected average rise of around £20 a year per household, outlined in the regulator’s draft proposals in July.
Ofwat said the increase would pay for a £104 billion upgrade of the water sector to deliver “substantial, lasting, improvements for customers and the environment”.
However, despite the average £31 a year increase figure, households will face a heavy average hike of £86 or 20% in the next year, excluding inflation, with smaller percentage increases in each of the next four years.
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The average bill will rise by a total of £157 or 36% over the next five years.
You can find out how your bill is changing here.
Ofwat chief executive David Black said: “Today marks a significant moment. It provides water companies with an opportunity to regain customers’ trust by using this £104 billion upgrade to turn around their environmental record and improve services to customers. Water companies now need to rise to this challenge, customers will rightly expect them to show they can deliver significant improvement over time to justify the increase in bills.
“Alongside the step up in investment, we need to see a transformation in companies’ culture and performance. We will monitor and hold companies to account on their investment programmes and improvements. We recognise it is a difficult time for many, and we are acutely aware of the impact that bill increases will have for some customers. That is why it is vital that companies are stepping up their support for customers who struggle to pay.
“We have robustly examined all funding requests to make sure they provide value for money and deliver real improvements, while ensuring the sector can attract the levels of investment it needs to meet environmental requirements. This has seen us remove £8bn of unjustified costs compared with companies most recent requests. In addition, our approach to setting a rate of return has saved customers £2.8 billion.”
Environment Secretary Steve Reed blamed the 14 years of Conservative government for the state of the water industry after the regulator announced bills would increase on average by more than a third over the next five years. He said: “Under the Conservatives, our sewage system crumbled. They irresponsibly let water companies divert customers’ money to line the pockets of their bosses and shareholders.
“The public are right to be angry after they have been left to pay the price of Conservative failure. This Labour Government will ringfence money earmarked for investment so it can never be diverted for bonuses and shareholder payouts. We will clean up our rivers, lakes and seas for good.”
Ofwat’s draft decisions released in July allowed water companies to increase bills by an average of 21% starting from April next year, but water companies subsequently asked to increase bills by even more than they originally requested.
The average increase will now be around 36% – costing an average of £615 per year.
Consumer groups have expressed concern that many households will not be able to afford a sharp rise in water bills, and urged water companies to provide more support.
Mike Keil, chief executive of the Consumer Council for Water (CCW), said: “Our research shows at least two in five households will find these future bill rises difficult to afford, which is why we need greater ambition from some water companies in providing help to those who are going to struggle.
“Companies’ existing plans fall short of meeting the commitment they previously made to end water poverty in England by 2030 and Ofwat should push them harder to deliver on this.”
Tom MacInnes, director of policy at Citizens Advice, said: “Our water systems need investment, and unfortunately that means higher bills are likely here to stay. Every day our advisors see people struggling to afford their water bills who will find paying higher prices impossible. It’s essential that these people are shielded from these extra costs.
“We believe the key way to achieve this is by ensuring there’s a comprehensive social tariff for water, which is available and accessible to those that need it. Though social tariffs currently exist, there’s a complicated postcode lottery and people often either don’t know about the tariffs, or face hurdles applying for them.
“The priority now is for the government and suppliers to work together to end this postcode lottery and ensure people receive the support they need.”
Industry body Water UK has estimated that water bills would be £110 or 25% higher today had they kept pace with inflation.
A spokeswoman said: “Water companies want to invest a record £108 billion to support economic growth, build more homes, secure our water supplies and end sewage entering our rivers and seas. We await Ofwat’s decision tomorrow and hope they give us the green light so we can get on with it.
“However, we understand increasing bills is never welcome. To protect vulnerable customers, companies have proposed increasing the number of households receiving support with their bills to three million over the next five years.”