Water bills set to rise by a fifth as government calls for ‘complete reset’ of sector

Water bills are set to rise by at least 21 per cent as the government slams a “failure of regulation and governance” within the sector.

Average annual charges are expected to increase by £100 over the next five years as regulator Ofwat prepares to reveal on Thursday how much bills will rise from April.

Water firms are asking for permission to hike bills by billions of pounds to pay for upgrades to ageing infrastructure and give higher returns to their investors. Bills could rise by an average of 40 per cent to £615 a year by 2030 under industry proposals.

Ofwat has been locked in negotiations with water providers since provisionally announcing in July that they would be allowed to spend £88bn through bill increases capped at an average of £94. Firms had asked to spend £104.5bn by hiking bills to £144.

Southern Water, supplying Kent, Sussex and Hampshire, wants to be allowed to rise charges by 84 per cent. Thames Water, which is struggling under a roughly £15bn debt pile, has asked for 53 per cent.

Labour’s first Budget piled further pressure on the 11 water firms in England and Wales. They have reportedly submitted calculations to Ofwat forecasting a combined £400m hit from a rise in employers’ national insurance contributions over the next five years.

The government has argued that some increases in bills are needed to rectify years of under-investment and neglect. Without fresh investment, it has warned that rationing could be needed within 15 years.

“No one wants to see these bills rise,” environment secretary Steve Reed told the Observer.

“I share people’s anger that this will be happening. We don’t know what the final figure will be, but the higher bills people will be seeing are because of the Conservatives’ failure over the last 14 years to invest in improving the water infrastructure.

“It’s got crumbling infrastructure, it’s got bursting pipes, and we’ve got the highest level of sewage ever recorded. People up and down the country are furious about the level of sewage pollution in our rivers, lakes and seas.”

He added that a “complete reset” of the industry was needed after the Conservatives allowed firms to spend money on excessive shareholder payouts and £41m in bonuses to executives since 2020.

Labour has pledged reforms to ensure companies ring-fence money from bills to spend on upgrades like new reservoirs and pipes, while cash not spent on infrastructure would return to customers via discounts on their bills.

The government also plans to make reporting of sewage leaks mandatory in legislation that would see water bosses face up to two years in prison for refusing to cooperate with regulatory investigations.

Shadow environment secretary Victoria Atkins commented: “Labour spent years making promises to the public about improving waterways yet, six months after the election, all they do is talk about the Conservatives. Labour’s lack of energy and action will not wash when bills rise on their watch.

“The Conservatives began the crucial reform to ensure that in the long-term Britain’s water system is clean and sustainable – that requires billions of pounds of private of investment if bill-payers are to be protected.”