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Water bills expected to rise by a third to tackle leaking sewage problem

Households are expected to pay up to 73% increases on their water bills to raise money to repair “crumbling infrastructure” and cope with record sewage overflows.

On Thursday, water regulator Ofwat will decide on water companies’ demand for £100bn of investment over the next five years to build reservoirs, upgrade sewerage facilities and other new infrastructure.

Approving the full amount would see the average annual bill in England and Wales rise by 33 per cent to £584.74 between 2025 and 2030.

Labour ministers believe regulators have no choice but to step up their bill but will put forward a series of “mitigation” measures designed to ensure money is not diverted to bonuses and dividends.

Customers in Kent, Sussex, Hampshire and the Isle of Wight Southern Water faces the highest increases after asking for a 73% increase, while Northumbrian Water has the lowest proposed increase of 14%.

Ofwat will likely reduce overall investment but this is unlikely to make a big difference to the expected bill increases.

The Times Clean it Up campaign has made it clear that bills need to be increased to improve waterways and that protection must be provided for vulnerable customers. Such a price increase could have been avoided if the government and Ofwat had supported smaller increases over the past decade. Instead, bills have remained stable or fallen in real terms.

Ministers want the clean-up fund to be specially protected, meaning it cannot be spent on bonuses or dividends

Ministers want the clean-up fund to be specially protected, meaning it cannot be spent on bonuses or dividends

MAUREEN MCLEAN/ALAMY

The decision comes after new Environment Secretary Steve Reed called a meeting of 16 water company bosses on Thursday to discuss four urgent reforms for the sector.

Chief executives will be told they must change their companies’ constitutions to put the environment and customers at the heart of their goals. Companies will also have to give new powers to “customer panels” to allow them to call in board members for questioning.

Double compensation in problem areas

Reed has written to Ofwat asking it to ensure that infrastructure funding to clean rivers and provide new water sources is earmarked to prevent money being spent on bonuses, dividends and pay rises. Reed promises that any unspent money will be returned to customers.

Finally, compensation will be doubled for households experiencing issues such as water cuts. Eligibility requirements for compensation will also be widened, making payments such as the ‘boil water notices’ recently issued by South West Water a legal requirement rather than voluntary.

“The previous government turned a blind eye to water bosses pumping record levels of sewage into our rivers, lakes and seas while pocketing millions of dollars in bonuses,” Reed said.

“We will never look the other way while water companies pour sewage into our rivers, lakes and seas. This unacceptable destruction of our waterways should never have been allowed, but change has started now so it can never happen again.”

New environment minister Steve Reed

New environment minister Steve Reed

PHIL NOBLE/REUTERS

Labour blames the Conservatives for the state of Britain’s rivers and seas and therefore the need for huge water bills.

“This is essentially the culmination of 14 years of failure under the Conservatives, who have weakened regulation, allowed water companies to pump out record levels of sewage and at the same time caused our infrastructure to collapse,” a source close to Reed said.

Reset, not nationalisation

Reed is expected to discuss a “reset” of relations with water bosses, forming partnerships and bringing in private sector investment to improve infrastructure.

Chief executives include Chris Weston of the over-indebted Thames Water, which has investment plans that will increase bills by 44%. This week the company warned that an unfavourable deal with Ofwat could lead to defaults at its lenders.

Labour is unwilling to nationalise Thames Water, Britain’s largest water company, but could appoint special administrators if the company collapses.

South East Water, which supplies water to 2.3 million customers, said this week it needed a cash injection to stay afloat. The company’s £1.9 billion investment plan will see water bills rise by 22%.

Reed’s first four reforms are the first steps in his plan to get tough on the water sector. He must also work with Ofwat in the coming months to set out rules to ban bonuses for bosses of overly polluting water companies.

How are new water bills calculated?

Thursday’s decision on water company investments is in draft form, with a final decision coming from Ofwat before Christmas and coming into effect in April. If companies are unhappy with their deals – for example if they claim the regulator has restricted their spending plans too much – they can launch legal challenges through the Competition and Markets Authority this year.

None of Ofwat’s temporary bill increases include inflation. When future inflation estimates are included, the Consumer Water Council expects Thames Water customers to pay 59% more by 2030, and Southern Water households 91% more.

Nick Measham, chief executive of charity WildFish, said polluted rivers were a “grim reality” that needed to be addressed. “For too long, investors and owners of water companies have reaped the rewards of failed regulation. Now we all have to pay the price – through increased bills or taxation,” he said.

Ofwat is also setting eight new performance targets for water companies on Thursday, including reducing sewage leaks from outfalls, improving biodiversity and improving bathing water quality. Firms will be financially rewarded or penalised based on the targets.

Water sector body Water UK said: “This is a critical time for the water sector and we have shown that we are ready for change.”

A Conservative Party spokesman said: “Labour, now in power and realising that the sums they have raised do not add up, have clearly returned to the same old blame game.”

The Times is calling for faster action to improve the nation’s waterways. Learn more Clean campaign.