Water bills will rise by 35pc in biggest hike ever to fix sewage crisis

The industry is under pressure to fix infrastructure failings that cause hundreds of spills every day
The industry is under pressure to fix infrastructure failings that cause hundreds of spills every day - Dan Kitwood/Getty Images Europe

Household water bills will rise more than £150 a year as the industry brings in major new investment to fix the sewage crisis.

Spending plans covering 2025 to 2030 to be announced by water companies on Monday will be the most ambitious ever as the industry comes under pressure to fix ailing infrastructure.

It is the highest increase ever, amounting to an average bill rise of 35 per cent by 2030.

Under the plans, average water bills will be £7 per month higher by 2025 rising to £13 per month more by 2030.

The plans will be presented to Ofwat, the industry’s economic regulator, which will review them and may ask for changes before giving final sign-off next year.

The total £96 billion investment will be the largest in the industry’s history.

‘Plans are both ambitious and vital’

David Henderson, the chief executive of Water UK, said: “While increasing bills is never welcome, this investment in our country’s infrastructure is essential to ensure the security of our water supply.

“Water companies are seeking regulatory approval to reduce overflow spills into rivers and seas as fast as possible and to doubling the number of households receiving support to pay their bills.

“Ofwat now needs to back these plans that are both ambitious and vital. Approving the plans is necessary so that we can provide the highest quality drinking water for a growing population, ensure the security of our water supply in the future and reduce the use of storm overflows as much as possible.”

Mike Keil, the chief executive of the Consumer Council for Water, said: “Customers want to see investment in improving their services and enhancing the environment but any proposed substantial bill rises will add to the worries of many struggling households.

“Investment on this scale must come hand in hand with fairer and more consistent support for the nearly one in four households who say they are already struggling to pay their water bill.

“We also want to see evidence in these plans that more water companies are putting their hand in their own pocket to fund a step change in financial support for struggling customers.”

Support for lower income households

The industry is under pressure to fix infrastructure failings that cause hundreds of sewage spills into England’s rivers and seas every day, contributing to almost all being in a poor ecological state.

Under the plan, £11 billion will be invested to reduce sewage spills as the water industry brings infrastructure in line with new laws.

Water companies have faced scrutiny over executive pay and bonuses, as well as dividend payouts amid growing public anger over the sewage crisis.

Earlier this year the industry issued an apology for not acting quickly enough to resolve the sewage issue and promised to put it right.

But the industry has maintained that bill increases are the only way to pay for the necessary investments to stem sewage spills and secure future water supplies.

On Friday, Severn Trent, which serves 4.6m customers in the west of the country, said that bills would rise by 37 per cent by 2030 to pay for its £12.5 billion investment plan.

An increase of two million lower income households will be given expanded support, bringing the total to 3.2 million.

Proposals for 10 new reservoirs will be included in water company plans, including one at Havant Thicket, which is being built by Portsmouth Water and will become the first major reservoir to be built in the country in 30 years.

Desalination plants and water recycling facilities are also expected to feature in the plans, as water companies work to secure supplies in coming decades.

‘Industry needs to deliver step change’

The Environment Agency has warned that parts of the country, particularly London and the South-East, could run dry within 25 years.

The regulator said that it would be looking to ensure customers “only pay for future investment, not past company mistakes”, to stop water companies billing twice for work it has already promised to carry out.

Its latest annual report criticised water companies for not spending money raised via bill hikes on improvements in the current economic period, which runs until 2024.

David Black, the CEO of Ofwat, said: “The water industry needs to deliver a step change in investment and performance to clean up our rivers and seas, while also helping to ensure that we can meet the challenge of climate change.

“Company business plans are an important first step in the price review process. Ofwat’s role is to forensically scrutinise their proposals, to ensure any increase in bills is justified, efficient and delivers significant improvements in river and bathing water quality.

“We will assess how companies are helping customers to afford any bill increase.”

Feargal Sharkey, the musician and clean rivers activist, said on Monday that water companies should not need to increase bills to pay for the work.

“Ofwat has acknowledged it, we’ve paid them all the money they needed. They’ve confirmed that. They had the money.

“So the question we need to be asking is: what happened to our money? Where’s it gone? When are we going to get a refund?” he said on BBC Radio4’s Today programme.

In a letter to industry chief executives in 2021, Ofwat said all companies have been allowed funding, via household bills, to comply with their legal obligations.

Asked repeatedly: “Where is our money?”, David Henderson, chief executive of industry body Water UK, told Today: “Since privatisation, £200 billion has been invested, almost double the rate before privatisation... So it’s not true to say we haven’t been investing, we have been investing and this is now the next great challenge.”

Mr Henderson defended the payment of dividends to shareholders in water companies.

He said: “If we want to attract investment, there needs to be a return. This investment could go elsewhere, if we want it to come in to fix our ageing and very large infrastructure we need investors to generate a return.”