Misleading Ofwat promise won’t stop water prices rising

Added inflation means that prices will continue to rise for consumers.

Added inflation means that prices will continue to rise for consumers

The seemingly inexorable rise in the cost of living looks set to continue, as the Consumer Council for Water warns that water companies can add on inflation that means consumers will pay more, even as bills fall in real terms.

The warning follows publication of Ofwat’s decision to cut household bills by five per cent, a move which has been hailed as good news in the struggle for affordable utilities. All water companies were told to cut their bills in real terms.

This includes a cut of 10 per cent by Anglian, five per cent by Welsh Water Dwr Cymru, eight per cent by Southern and three per cent by Yorkshire.

But the new prices were calculated before inflation. Tony Smith, the Chief Executive of the CCW said today that:

“Customers need to be aware that water companies are allowed to add inflation to bills each year which means charges are still likely to rise from what they are now.”

Earlier this year, Ofwat’s chairman Jonson Cox criticised water companies for talking about bills ‘in real terms’, which he said was misleading for customers.

Companies add inflation as measured by RPI, but most customer’s incomes are not even close to rising by the same index.

Figures from the House of Commons Library show that last year, the water industry made over £2 billion in profits while paying just £78 million in tax. In 2012 the government introduced a ‘social tariff’ which would allow water companies to voluntarily reduce bills for their most vulnerable customers. However, only six companies chose to sign up to the scheme.

Maria Eagle, the shadow secretary of state for Environment, Food and Rural Affairs, said today:

“The truth is that the water industry isn’t working for consumers and David Cameron has done nothing to address it. It’s unacceptable that some companies paid no tax last year while millions of customers are struggling with the cost-of-living crisis.”

She promised that Labour would reform the water industry by creating a national affordability scheme which would force companies to create cheaper tariffs for people struggling to pay their bills.

She also pledged to give the regulator new powers to cut bills and make sure that water companies ‘put customers first’.

Labour have set out plans today for greater transparency in the water industry, pledging to ensure that water companies publish information about their corporate structure, taxation and dividends paid to shareholders.

Ruby Stockham is a staff writer at Left Foot Forward. Follow her on Twitter

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