Political pressure over spiralling water bills
Ending the era of spiralling water bills that has punished Westcountry households over the last 25 years is to be a major political battleground in the coming months.
The three major political parties are currently fighting for the upper hand over energy charges amid Labour’s promise of a price freeze and Tory attacks on “green” energy taxes.
But they are certain to turn their attention to the water industry as MPs claim utilities are making “excess profits” while charging customers too much, and one senior Whitehall figure indicated “automatic” annual price hikes could soon stop.
The pain felt by South West Water bill payers following botched industry privatisation in the 1980s is the reason the coalition Government gives each household in the region a £50 a year subsidy. But the average charge is still £499 – £111 above the national average.
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Reports suggest ministers will use the Autumn Statement next month to introduce measures to get water companies paying more tax.
At the same time, the Water Bill will make its way through Parliament with the aim that households get a “fair” deal as water companies benefit from lower borrowing costs.
Labour, which sparked the “cost of living crisis” debate, could yet spike the Government’s guns as is it is anxious to build on the success of its energy bills policy.
At the heart of the tough new approach is Ofwat, the water industry regulator, which has already indicated it is willing to use more of its muscle under the chairmanship of Jonson Cox, who was appointed earlier this year.
Ofwat refused Thames Water’s request to raise its bills by 8% – well above the rate of inflation – and has said it expects bills to fall up to 10% in real terms over the five years from 2015 to 2020. South West Water is due to file its price submission for the period shortly.
The Water Bill will bring forward laws to end the water industry’s regional monopolies – for businesses and the public sector, though not households – but could inject competition to drive bills down for all.
Ofwat will get greater powers to fine companies if they are found to be over-charging customers.
One Government source told the Western Morning News: “Water companies should be expecting this. They have been enjoying lower borrowing costs. What we want is for price rises to be limited or not go up at all. If they want to put up prices they will have to justify it. We don’t want there to be the automatic price rises we have seen year-on-year.”
To underline mounting political anger, backbench MPs last week pushed for a full Commons debate before the Water Bill comes before the House. Robert Buckland, Conservative MP for Swindon South, said: “Water bills are rising. They have increased by 40% over the last few years. There is falling real investment in the industry by the water companies.
“There is tax avoidance by the water companies, many of whom do not pay any tax at all. Excess profits are being made by them. There are excessive boardroom pay rises and there is excessive debt leveraging. Many are now 100% mortgaged which makes the industry a risky prospect for further investment and is a vicious circle.
Maria Eagle, Labour’s Shadow Environment Secretary, said ministers have “stubbornly refused for three years to admit that rising bills are contributing to the cost-of-living crisis”.
But a Defra spokesman said: “We want to make sure that water bills remain affordable and help those who are struggling to pay their water bills.
“That is why we are encouraging water companies to introduce social tariffs and crack down on bad debt.”